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[LOGO]
HERCULES FUNDS INC.
HERCULES LATIN AMERICAN
VALUE FUND
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
May 17, 1996
Dear Shareholder:
A special meeting of shareholders of Hercules Latin American Value Fund (the
"Fund") will be held at the offices of Hercules Funds Inc. on June 18, 1996 at
10 a.m. central time at 222 South Ninth Street, 3rd floor, Minneapolis,
Minnesota.
This meeting has been called to seek shareholder approval to reorganize the
Hercules Latin American Value Fund into the Emerging Markets Growth Fund, a
newly-formed series of Piper Global Funds Inc. If approved, shareholders would
receive shares of Emerging Markets Growth Fund with a value equal to the value
of their Fund shares.
This reorganization is part of a larger proposal to eliminate Hercules as a
separate family of funds, as we believe the funds are unlikely to grow to a size
which is economically viable. If you are a shareholder in more than one Hercules
fund, you will receive separate mailings of proxy materials for each fund.
PLEASE RETURN A COMPLETED PROXY CARD FOR EACH FUND IN WHICH YOU ARE INVESTED.
We urge you to read all of the enclosed materials carefully but direct your
attention to the following important points:
- The Board of Directors of the Company has unanimously approved the
reorganization and recommends that you vote FOR the reorganization.
- Shareholders will not incur any commissions, sales loads or other charges
in connection with the reorganization and Piper Capital, the investment
manager for both funds, has agreed to pay for all direct expenses
including the proxy solicitation.
- The two funds have similar investment objectives and invest according to
similar policies and restrictions, although Emerging Markets Growth Fund
invests in a broader range of emerging markets countries.
- The reorganization would enable Fund shareholders to enjoy an expanded
range of mutual fund investment options, including 16 other open-end Piper
Funds. Shareholders who receive Emerging Markets Growth Fund shares in the
reorganization would have exchange privileges within the Piper family of
funds.
- Total expenses for Emerging Markets Growth Fund are lower than the Fund's
expenses after discounting voluntary waivers and reimbursements which are
currently in effect for the Fund. Piper Capital and the Fund's distributor
do not presently intend to continue waiving expenses for the Fund after
June 30, 1996.
- The reorganization will not result in any federal taxable income to the
Fund or its shareholders.
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PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE,
AS YOUR PROMPT RESPONSE WILL ELIMINATE THE NEED FOR ADDITIONAL MAILINGS. A
postage-paid envelope is enclosed with each proxy mailing for your convenience.
As the meeting date approaches, if you haven't voted you may receive a telephone
call reminding you to vote.
The enclosed QUESTION AND ANSWER sheet provides more detailed information about
the proposal. Also enclosed are the formal Notice of Special Meeting and Proxy
Statement/Prospectus documents. If you have additional questions, please contact
your investment professional or call Piper Capital at 1 800 866-7778 and press
2.
Sincerely,
[SIG]
William H. Ellis
President
<PAGE>
SHAREHOLDER Q&A
MAY 17, 1996
- --------------------------------------------------------------------------------
ON FEBRUARY 6, 1996, PIPER CAPITAL MANAGEMENT INCORPORATED RECOMMENDED TO THE
BOARD OF DIRECTORS OF HERCULES FUNDS INC. THAT IT ELIMINATE HERCULES AS A
SEPARATE FUND FAMILY BECAUSE THE FUNDS ARE TOO SMALL TO BE ECONOMICALLY VIABLE.
THE BOARD UNANIMOUSLY AGREED THAT IT WOULD BE IN THE BEST INTEREST OF
SHAREHOLDERS TO REORGANIZE THE HERCULES EQUITY FUNDS INTO APPROPRIATE PIPER
FUNDS AND TO LIQUIDATE THE WORLD BOND FUND. THESE PROPOSALS ARE SUBJECT TO
SHAREHOLDER APPROVAL.
WHAT WILL HAPPEN TO THE VARIOUS HERCULES FUNDS?
Piper Capital is proposing the following changes:
- Hercules North American Growth and Income Fund will be reorganized into
Growth and Income Fund, a series of Piper Funds Inc.
- Hercules European Value Fund and Hercules Pacific Basin Value Fund will be
reorganized into Pacific-European Growth Fund, a series of Piper Global
Funds Inc.
- Hercules Latin American Value Fund will be reorganized into Emerging
Markets Growth Fund, a newly-created series of Piper Global Funds Inc.
- Hercules World Bond Fund will be liquidated and net assets distributed to
shareholders.
WHAT ABOUT HERCULES MONEY MARKET FUND?
We expect that shareholders will redeem out of Hercules Money Market Fund as a
result of Piper Capital's decision to discontinue the fund's 1% expense
limitation effective July 1, 1996.
WHY WERE THESE CHANGES RECOMMENDED?
The Hercules funds have not been able to attract sufficient assets to make them
economically viable to operate and prospects for future growth appear remote. If
the changes are approved, we believe shareholders will benefit from:
- A potential increase in operating efficiencies and therefore a reduction
in expense ratios
- The potential for greater investment diversification and more flexibility
in portfolio management because Emerging Markets Growth Fund can invest in
a broader range of countries
- The advantages of ownership within a larger fund family, including
flexibility to transfer between funds in the Piper funds complex at net
asset value
WILL SHAREHOLDERS PAY A SALES LOAD WHEN THEY MOVE INTO THE PIPER FUNDS?
No. Even though Hercules shareholders paid no front-end sales charges, the
maximum 4% front-end load on Piper fund shares acquired in the reorganizations
will be waived if the proposal is approved.
WILL THE HERCULES CONTINGENT DEFERRED SALES CHARGE (CDSC) BE WAIVED?
Yes. Shareholders subject to a CDSC (those who purchased shares after June 19,
1995) will not pay a CDSC if they exchange into the respective Piper fund
through the reorganization.
WILL SHAREHOLDERS BE ABLE TO EXCHANGE OR TRANSFER TO OTHER PIPER OPEN-END FUNDS
AT NET ASSET VALUE?
Yes. After Hercules fund shares are reorganized into the applicable Piper fund,
shareholders will then be able to exchange or transfer into other Piper funds at
net asset value.
HOW MANY OTHER PIPER OPEN-END FUNDS ARE AVAILABLE?
The enclosed brochure lists the 16 other funds available in Piper's family of
open-end funds.
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WHAT PERCENTAGE OF SHAREHOLDERS MUST VOTE "YES" FOR THE PROPOSAL TO PASS?
For each fund, shareholders representing a majority of the outstanding shares
must vote yes in order for the proposed reorganization or liquidation of that
fund to occur.
IF APPROVED, HOW WILL THE REORGANIZATIONS BE ACCOMPLISHED?
The reorganizations would be accomplished by combining substantially all of the
assets of each fund with the corresponding Piper fund and distributing shares of
the Piper fund with a value equal to the value of each Hercules shareholder's
fund holdings.
WHO WILL PAY FOR THE REORGANIZATION?
Piper Capital has agreed to pay all direct costs associated with the proposed
reorganizations and liquidation including the costs of proxy solicitation. No
commission, sales loads or other charges will be incurred by shareholders. Also,
we anticipate the proposed reorganizations will be completed on a tax-free
basis.
HOW DOES HERCULES LATIN AMERICAN VALUE FUND COMPARE WITH THE EMERGING MARKETS
GROWTH FUND?
Here are a few comparisons of fund characteristics. Please review the Proxy
Statement/Prospectus for a complete comparison:
<TABLE>
<CAPTION>
HERCULES LATIN PIPER EMERGING
AMERICAN VALUE MARKETS GROWTH
<S> <C> <C>
Investment objective Long-term capital Long-term capital
appreciation and, to a appreciation. Current income
lesser extent, current is incidental to this
income objective
Investment policies 65% minimum in Latin 65% minimum in emerging
American countries markets countries
Country allocation At least three different At least three different
countries in Latin America emerging markets countries
Net assets as of 3/31/96 $16,336,370 (Not yet commenced
operations)
Adviser/Sub-advisers Piper Capital/Bankers Trust Piper Capital/Edinburgh Fund
Managers plc
</TABLE>
<PAGE>
HERCULES FUNDS INC.
Hercules Latin American Value Fund
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402-3804
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1996
---------------------
TO THE SHAREHOLDERS OF HERCULES LATIN AMERICAN VALUE FUND,
A SERIES OF HERCULES FUNDS INC.
Notice is hereby given that a Special Meeting (the "Meeting") of
shareholders of Hercules Latin American Value Fund (the "Fund"), one of six
portfolios of Hercules Funds Inc. (the "Company"), will be held in the office of
the Company, 222 South Ninth Street, 3rd Floor, Minneapolis, MN 55402-3804, on
June 18, 1996 at 10:00 a.m. central time. Piper Capital will validate parking at
the Energy Center Ramp located at the corner of South Ninth Street and Third
Avenue South. Please bring your parking ticket to the Meeting for validation.
The purposes of the Meeting are:
I. To consider and vote upon an Agreement and Plan of Reorganization, dated
as of , 1996 (the "Plan"), by and between the Company, on behalf
of the Fund, and Piper Global Funds Inc. ("Piper Global"), on behalf of
Emerging Markets Growth Fund ("Emerging Markets Fund"), pursuant to
which substantially all of the assets of the Fund will be acquired by
Emerging Markets Fund and shareholders of the Fund will become
shareholders of Emerging Markets Fund receiving shares of Emerging
Markets Fund with a value equal to the value of their holdings in the
Fund. A vote in favor of the Plan will be considered a vote in favor of
an amendment to the articles of incorporation of the Company required to
effect the reorganization as contemplated by the Plan.
II. To consider and act upon such other matters as may properly come before
the Meeting or any adjournment thereof.
YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE
IN FAVOR OF THE ABOVE PROPOSAL.
The attached Proxy Statement/Prospectus describes the above proposal in
detail and is being sent to shareholders of record as of the close of business
on April 25, 1996, who are the shareholders entitled to notice of and to vote at
the Meeting. Please read the Proxy Statement/Prospectus carefully before telling
us through your proxy or in person how you wish your shares to be voted.
By Order of the Board of Directors
SUSAN SHARP MILEY
SECRETARY
May 17, 1996
IMPORTANT
THE BOARD OF DIRECTORS URGES YOU TO MARK, SIGN AND RETURN THE ENCLOSED
PROXY AS SOON AS POSSIBLE WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING IN PERSON. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO
POSTAGE AND IS PROVIDED FOR YOUR CONVENIENCE.
<PAGE>
EMERGING MARKETS GROWTH FUND
A Series of Piper Global Funds Inc.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402-3804
(800) 866-7778 (toll free)
------------------------
Acquisition of the Assets of Latin American Value Fund
A Series of Hercules Funds Inc.
By and in Exchange for Shares of Emerging Markets Growth Fund
A Series of Piper Global Funds Inc.
------------------------
This Proxy Statement/Prospectus is being furnished to shareholders of
Hercules Latin American Value Fund (the "Fund"), a series of Hercules Funds Inc.
(the "Company"), in connection with an Agreement and Plan of Reorganization
dated as of April 15, 1996 (the "Plan") pursuant to which substantially all of
the assets of the Fund will be acquired by Emerging Markets Growth Fund
("Emerging Markets Fund"), a series of Piper Global Funds Inc. ("Piper Global"),
in exchange for shares of Emerging Markets Fund. As a result of this
transaction, shareholders of the Fund will become shareholders of Emerging
Markets Fund and will receive shares of Emerging Markets Fund with a value equal
to the value of their holdings in the Fund as of the date of the transaction.
The terms and conditions of this transaction are more fully described in this
Proxy Statement/Prospectus and in the Plan, attached hereto as EXHIBIT A.
Emerging Markets Fund is a non-diversified series of Piper Global, an
open-end management investment company, the shares of which can be offered in
more than one series. The investment objective of Emerging Markets Fund is
long-term capital appreciation. Current income is incidental to this objective.
Emerging Markets Fund seeks to achieve its investment objective by investing
primarily in Common Stock (as herein defined) of issuers in the world's emerging
securities markets. Emerging Markets Fund does not invest in Common Stock of
U.S. companies.
This Proxy Statement/Prospectus sets forth concisely information about
Emerging Markets Fund that shareholders of the Fund should know before voting on
the Plan. This Proxy Statement also constitutes a Prospectus of Emerging Markets
Fund filed with the Securities and Exchange Commission (the "Commission") as
part of its Registration Statement on Form N-14. A Statement of Additional
Information relating to the reorganization described in this Proxy
Statement/Prospectus (the "Additional Statement") dated May 9, 1996, has also
been filed with the Commission as part of the Registration Statement and is
incorporated herein by reference. Also incorporated herein by reference are the
Company's Prospectus dated August 29, 1995, the Company's Annual Report for its
fiscal year ended June 30, 1995 and the Company's Semi-Annual Report for the six
months ended December 31, 1995. Such documents are available without charge, as
noted under "Available Information" below.
INVESTORS ARE ADVISED TO READ AND RETAIN THIS PROXY STATEMENT/PROSPECTUS FOR
FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT/PROSPECTUS
<TABLE>
<CAPTION>
Page
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<S> <C>
INTRODUCTION............................................................................................... 1
General.................................................................................................. 1
Record Date; Share Information........................................................................... 1
Proxies.................................................................................................. 1
Expenses of Solicitation................................................................................. 2
Vote Required............................................................................................ 2
SYNOPSIS................................................................................................... 2
The Reorganization....................................................................................... 3
Fee Table................................................................................................ 3
Tax Consequences of the Reorganization................................................................... 5
Dissenting Shareholders' Rights of Appraisal............................................................. 5
Comparison of the Fund and Emerging Markets Fund......................................................... 5
PRINCIPAL RISK FACTORS..................................................................................... 7
THE REORGANIZATION......................................................................................... 8
Background............................................................................................... 8
The Board's Consideration................................................................................ 9
The Plan................................................................................................. 10
Tax Aspects of the Reorganization........................................................................ 11
Dissenters' Rights....................................................................................... 13
Description of Shares.................................................................................... 13
Capitalization Table (unaudited)......................................................................... 13
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............................................. 13
Investment Objectives and Policies....................................................................... 13
Investment Restrictions.................................................................................. 15
Interest of Certain Persons.............................................................................. 15
ADDITIONAL INFORMATION ABOUT THE FUND AND EMERGING MARKETS FUND............................................ 15
General.................................................................................................. 15
Financial Information.................................................................................... 15
Management............................................................................................... 15
Description of Securities and Shareholder Inquiries...................................................... 16
Dividends, Distributions and Taxes....................................................................... 16
Purchases and Redemptions................................................................................ 16
Pending Legal Proceedings................................................................................ 16
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE................................................................ 16
FINANCIAL STATEMENTS AND EXPERTS........................................................................... 16
LEGAL MATTERS.............................................................................................. 16
AVAILABLE INFORMATION...................................................................................... 16
OTHER BUSINESS............................................................................................. 17
EXHIBIT A-- Agreement and Plan of Reorganization, dated as of April 15, 1996 by and between the Company, on
behalf of the Fund, and Piper Global, on behalf of Emerging Markets Growth Fund................. A-1
APPENDIX A to Proxy Statement/Prospectus--Additional Information Regarding Emerging Markets Growth Fund....
</TABLE>
i
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------------------------
PROXY STATEMENT/PROSPECTUS
Hercules Latin American Value Fund
Special Meeting of Shareholders
to be held June 18, 1996
------------------------
INTRODUCTION
General
This Proxy Statement/Prospectus is being furnished to shareholders of
Hercules Latin American Value Fund (the "Fund"), a non-diversified series of
Hercules Funds Inc. ("the Company"), an open-end management investment company,
in connection with the solicitation by the Board of Directors of the Company
(the "Board") of proxies to be used at the Special Meeting of Shareholders of
the Company to be held at the office of the Company, 222 South Ninth Street, 3rd
Floor, Minneapolis, Minnesota 55402-3804 on June 18, 1996 at 10:00 a.m. central
time and any adjournments thereof (the "Meeting"). It is expected that the
mailing of this Proxy Statement/Prospectus will be made on or about May 17,
1996.
At the Meeting, Fund shareholders will consider and vote upon an Agreement
and Plan of Reorganization, dated as of April 15, 1996 (the "Plan"), by and
between the Company, on behalf of the Fund, and Piper Global Funds Inc. ("Piper
Global"), on behalf of Emerging Markets Growth Fund ("Emerging Markets Fund"),
pursuant to which substantially all of the assets of the Fund will be acquired
by Emerging Markets Fund in exchange for shares of Emerging Markets Fund. As a
result of this transaction, shareholders of the Fund will become shareholders of
Emerging Markets Fund and will receive shares in Emerging Markets Fund equal to
the value of their holdings in the Fund on the date of such transaction (the
transactions described above are referred to as the "Reorganization"). The
shares to be issued by Emerging Markets Fund pursuant to the Reorganization
("Emerging Markets Fund Shares") will be issued at net asset value without a
sales charge. Further information relating to Emerging Markets Fund is set forth
in Appendix A hereto. A vote in favor of the Plan will be considered a vote in
favor of an amendment to the articles of incorporation of the Company required
to effect the Reorganization as contemplated by the Plan.
The information concerning the Fund contained herein has been supplied by
the Company and the information concerning Emerging Markets Fund contained
herein has been supplied by Piper Global.
Record Date; Share Information
The Board has fixed the close of business on April 25, 1996 as the record
date (the "Record Date") for the determination of the holders of shares of the
Fund entitled to notice of, and to vote at, the Meeting. As of the Record Date,
there were 1,900,904 shares of the Fund issued and outstanding. The holders of
record on the Record Date of shares of the Fund are entitled to one vote per
share held and a fractional vote with respect to fractional shares on each
matter submitted to a vote at the Meeting. The holders of 10% of the shares
outstanding and entitled to vote will constitute a quorum at the Meeting.
To the knowledge of the Board, as of the Record Date, no person owned of
record or beneficially 5% or more of the outstanding shares of the Fund. As of
the Record Date, the directors and officers of the Company, as a group, owned
less than 1% of the outstanding shares of the Fund.
As of the Record Date, there were no outstanding shares of Emerging Markets
Fund.
Proxies
The enclosed form of proxy, if properly executed and returned, will be voted
in accordance with the choice specified thereon. The proxy will be voted in
favor of the Plan unless a choice is indicated to vote against or to abstain
from voting on the Plan. The Board knows of no business, other than that set
forth in
1
<PAGE>
the Notice of Special Meeting, to be presented for consideration at the Meeting.
However, the proxy confers discretionary authority upon the persons named
therein to vote as they determine on other business, not currently contemplated,
which may come before the Meeting.
Abstentions will be included for purposes of determining whether a quorum is
present at the Meeting and for purposes of calculating the vote but shall not be
deemed to have been voted in favor of such matters. Broker non-votes are shares
held in street name for which the broker indicates that instructions have not
been received from the beneficial owners or other persons entitled to vote and
for which the broker does not have discretionary voting authority. Broker
non-votes will be included for purposes of determining whether a quorum is
present at the Meeting, but will not be deemed to be represented at the Meeting
for purposes of calculating whether matters to be voted upon at the Meeting have
been approved. Because approval of the Plan requires an affirmative vote by a
majority of the outstanding shares, abstentions and broker non-votes all have
the same effect as a negative vote.
If a shareholder executes and returns a Proxy Card but fails to indicate how
the votes should be cast, the proxy will be voted in favor of the Plan. The
proxy may be revoked at any time prior to the voting thereof by: (i) delivering
written notice of revocation to the Secretary of the Company at 222 South Ninth
Street, Minneapolis, Minnesota 55402-3804; (ii) attending the Meeting and voting
in person; or (iii) signing and returning a new Proxy Card (if returned and
received in time to be voted). Attendance at the Meeting will not in and of
itself revoke a proxy.
In the event that sufficient votes to approve the Plan are not obtained by
the Meeting date, or, subject to approval of the Board, for other reasons, an
adjournment or adjournments of the Meeting may be sought. Any adjournment would
require a vote in favor of the adjournment by the holders of a majority of the
shares present at the Meeting (or any adjournment thereof) in person or by
proxy. The persons named as proxies will vote all shares represented by proxies
which they are required to vote in favor of the Plan, in favor of an
adjournment, and will vote all shares which they are required to vote against
the Plan, against an adjournment. Approval of the Plan will be deemed approval
of the amendment to the articles of incorporation of the Company attached to the
Plan.
Expenses of Solicitation
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement/ Prospectus, will be borne by Piper Capital
Management Incorporated ("Piper Capital"), investment manager to the Company and
Piper Global. In addition to the solicitation of proxies by mail, proxies may be
solicited by officers and regular employees of the Company, Piper Capital,
and/or the Fund's distributor, without compensation other than regular
compensation, personally or by mail, telephone, telegraph or otherwise.
Brokerage houses, banks and other fiduciaries may be requested to forward
soliciting material to the beneficial owners of shares and to obtain
authorization for the execution of proxies. For those services, if any, they
will be reimbursed by Piper Capital for their reasonable out-of-pocket expenses.
In addition, arrangements have been made with Shareholder Communications
Corporation, an independent shareholder communication firm, to assist in the
solicitation of proxies.
Vote Required
Approval of the Plan by the Fund's shareholders requires the affirmative
vote of a majority (I.E., more than 50%) of the outstanding shares of the Fund.
If the Plan is not approved by shareholders, the Fund will continue in existence
and the Board will consider alternative actions.
SYNOPSIS
THE FOLLOWING IS A SYNOPSIS OF CERTAIN INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. THIS SYNOPSIS IS ONLY A SUMMARY
AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND THE PLAN.
SHAREHOLDERS SHOULD CAREFULLY REVIEW THIS PROXY STATEMENT/ PROSPECTUS AND THE
PLAN IN THEIR ENTIRETY AND, IN PARTICULAR, INFORMATION REGARDING EMERGING
MARKETS FUND CONTAINED IN APPENDIX A HERETO.
2
<PAGE>
The Reorganization
The Plan provides for the transfer of substantially all of the assets of the
Fund, subject to stated liabilities, to Emerging Markets Fund in exchange for
Emerging Markets Fund Shares. The aggregate net asset value of Emerging Markets
Fund Shares issued in the exchange will equal the aggregate value of the net
assets of the Fund received by Emerging Markets Fund. On or after the closing
date scheduled for the Reorganization (the "Closing Date"), the Fund will
distribute Emerging Markets Fund Shares received by the Fund to holders of
shares of the Fund issued and outstanding as of the Valuation Date (as
hereinafter defined) in complete liquidation of the Fund. If all other series of
the Company effect similar reorganizations, or otherwise liquidate, the Company
will take all necessary steps to effect its dissolution as a Minnesota
corporation and its deregistration under the Investment Company Act of 1940, as
amended (the "1940 Act"). As a result of the Reorganization, each Fund
shareholder will receive that number of full and fractional Emerging Markets
Fund Shares equal in value to such shareholder's shares of the Fund. The Board
has determined that the interests of existing Fund shareholders will not be
diluted as a result of the Reorganization.
For the reasons set forth below under "The Reorganization--The Board's
Consideration," the Board, including all of the directors who are not
"interested persons" of the Company, as that term is defined in the 1940 Act
("Independent Directors"), has unanimously concluded that the Reorganization is
in the best interests of the Fund and its shareholders and recommends approval
of the Plan.
Fee Table
The funds each pay a variety of expenses for management of their assets,
distribution of their shares and other services, and those expenses are
reflected in the net asset value per share of each of the Fund and Emerging
Markets Fund, respectively. The following table sets forth the expenses and fees
for the Fund during its most recent fiscal year and the expenses and fees
estimated for Emerging Markets Fund, which has not yet commenced operations.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Emerging
Markets
Fund Fund
--------- -----------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)
(1)............................................................................... 0% 4.00%
Maximum Deferred Sales Charge (2).................................................. 2.00% 0%
Exchange Fee (3)................................................................... $ 0 $ 0
</TABLE>
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS
<TABLE>
<CAPTION>
Emerging
Markets
Fund Fund
--------- -----------
<S> <C> <C>
Management Fees.................................................................... 1.00% 1.00%
12b-1 Fees (after voluntary fee limitation) (4).................................... 0.50% 0.32%
Other Expenses (after voluntary expense reimbursement) (5)......................... 0.50% 0.68%*
Total Fund Operating Expenses (after voluntary fee limitation and expense
reimbursement) (5)................................................................ 2.00% 2.00%
</TABLE>
- ---------
* Estimated
(1) No sales charge will be imposed on Emerging Markets Fund Shares acquired in
the Reorganization. On unrelated purchases, the front end sales charge of
4.00% applies to purchases of less than $100,000 and scales down to 0% on
purchases of $500,000 or more.
(2) The Fund's maximum contingent deferred sales charge ("CDSC") is 2.00% on
redemptions during the first 365 days after purchase; the charge declines to
1% during the next 365 days after purchase, reaching zero thereafter. In
connection with purchases of Emerging Markets Fund of $500,000 or more, on
which no front-end sales charge is imposed, a 1.00% CDSC will be imposed on
redemptions
3
<PAGE>
occurring within 24 months of purchase. No CDSC will be imposed on
shareholders acquiring Emerging Market Fund Shares in the Reorganization.
See "Comparison of the Fund and Emerging Markets Fund--Purchases,
Redemptions and Exchanges."
(3) There is a $50 fee for each exchange in excess of 12 exchanges per year for
the Fund. There is a $5 fee for each exchange in excess of 4 exchanges per
year for Emerging Markets Fund.
(4) A portion of the 12b-1 fee equal to 0.25% of average daily net assets is
characterized as a service fee within the meaning of the National
Association of Securities Dealers, Inc. ("NASD") guidelines. 12b-1 fees for
the Fund are currently limited voluntarily to 0.50% by Piper Jaffray Inc.,
the distributor for the Fund and Emerging Markets Fund (the "Distributor").
The Distributor will voluntarily limit 12b-1 fees for Emerging Markets Fund
to 0.32%. Absent such fee limitations, 12b-1 fees may not exceed 0.70% and
0.50% per annum of the average daily net assets of the Fund and Emerging
Markets Fund, respectively.
(5) For the Fund's current fiscal year, Piper Capital has agreed to voluntarily
reimburse the Fund so that Total Fund Operating Expenses on a per annum
basis do not exceed 2.00% of average daily net assets of the Fund. As a
result, certain "Other Expenses" of the Fund are borne by Piper Capital.
Without such reimbursements and the 12b-1 fee limitations discussed above,
Other Expenses would have been 1.77% and Total Fund Operating Expenses would
have been 3.47% of average daily net assets of the Fund for the fiscal year
ended June 30, 1995. Piper Capital and the Distributor do not presently
intend to continue these voluntary limitations beyond the Fund's fiscal year
ending June 30, 1996. As noted above, Emerging Markets Fund has not yet
commenced operations. However, as is the case currently for the Fund, Piper
Capital will limit Total Fund Operating Expenses on a per annum basis to
2.00% of average daily net assets until at least June 1997. Accordingly,
shareholders will experience no change in Total Fund Operating Expenses as a
result of the Reorganization. Without such reimbursements and the 12b-1 fee
limitations discussed above, Other Expenses are estimated to be 1.77% and
Total Fund Operating Expenses for Emerging Markets Fund are estimated to be
3.27% of average daily net assets.
EXAMPLE
To attempt to show the effect of these expenses on an investment over time,
the example shown below has been created. The expenses set forth in the example
below may increase if the fee limitations and expense reimbursements discussed
above are removed. As noted above, Emerging Markets Fund charges a maximum 4.00%
front-end sales charge on new purchases. The expenses shown below have been
calculated as if no such sales charge were imposed because Fund shareholders who
receive Emerging Markets Fund Shares in the Reorganization will not pay the
front-end sales charge with respect to those shares. Assuming that an investor
makes a $1,000 investment in either the Fund or Emerging Markets Fund, that the
annual return is 5.00% and that the Total Fund Operating Expenses are the ones
shown in the chart above, if the investment was redeemed at the end of each
period shown below, the investor would incur the following expenses by the end
of each period shown:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- -------- --------
<S> <C> <C> <C> <C>
The Fund................................ $40 $63 $108 $233
Emerging Markets Fund*.................. $20 $63 $108 $233
</TABLE>
If such investment was not redeemed, the investor would incur the following
expenses:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- -------- --------
<S> <C> <C> <C> <C>
The Fund................................ $20 $63 $108 $233
Emerging Markets Fund*.................. $20 $63 $108 $233
</TABLE>
- ---------
*Expenses for shares of Emerging Markets Fund purchased subject to the maximum
front-end sales charge would be: $59, $100, $143 and $263 for the one-, three-,
five- and ten-year periods shown, respectively.
The above example should not be considered a representation of past or
future expenses or performance. Actual operating expenses may be greater or less
than those shown.
4
<PAGE>
Long-term shareholders of either fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
Tax Consequences of the Reorganization
As a condition to the Reorganization, the Fund will receive an opinion of
the law firm Gordon Altman Butowsky Weitzen Shalov & Wein to the effect that the
Reorganization will constitute a tax-free reorganization for Federal income tax
purposes, and that no gain or loss will be recognized by the Fund or the
shareholders of the Fund for Federal income tax purposes as a result of the
Reorganization. For further information about the tax consequences of the
Reorganization, see "The Reorganization--Tax Aspects of the Reorganization"
below.
Dissenting Shareholders' Rights of Appraisal
Although under Minnesota law shareholders of a company acquired in a
reorganization who do not vote to approve the reorganization generally have
"appraisal rights" (where they may elect to have the "fair value" of their
shares (determined in accordance with Minnesota law) judicially appraised and
paid to them), the Division of Investment Management of the Commission has taken
the position that Rule 22c-1 under the 1940 Act preempts appraisal provisions in
state statutes. This rule provides that no open-end investment company may
redeem its shares other than at net asset value next computed after receipt of a
tender of such security for redemption. For further information about rights of
appraisal, see "The Reorganization--Dissenters' Rights."
Comparison of the Fund and Emerging Markets Fund
INVESTMENT OBJECTIVES AND POLICIES. The Fund and Emerging Markets Fund have
similar investment objectives. The Fund's objectives are long-term capital
appreciation and, to a lesser extent, current income. The investment objective
of Emerging Markets Fund is long-term capital appreciation. Current income is
incidental to this objective. The investment objectives of both the Fund and
Emerging Markets Fund are fundamental and, accordingly, may not be changed
without shareholder approval.
The Fund seeks to achieve its investment objectives by investing, under
normal circumstances, at least 65% of its total assets in securities of issuers
located in Latin America. Emerging Markets Fund seeks to achieve its investment
objective by investing, under normal circumstances, at least 65% of its total
assets in Common Stock (as herein defined) of issuers in the world's emerging
securities markets. The initial portfolio of Emerging Markets Fund will be
comprised exclusively of the portfolio securities of the Fund acquired by
Emerging Markets Fund in the Reorganization. Accordingly, Emerging Markets Fund
will be initially invested entirely in Latin America. It is anticipated that
over time, as new opportunities arise, investments will be allocated among a
variety of regions. Accordingly, the principal difference between the two Funds
is that, whereas the Fund invests primarily in Latin America, Emerging Markets
Fund will invest in additional emerging markets countries with no expected
emphasis on Latin America. In addition, although emphasis is placed on
investments in equity securities, the Fund may invest without limitation in
investment grade debt securities of governmental and private issuers (including
bonds, notes, debentures, Brady Bonds, mortgage-backed securities and
asset-backed securities), whereas Emerging Markets Fund will invest in debt
instruments solely for temporary defensive purposes.
The Fund and Emerging Markets Fund may invest in American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and in other investment
companies (up to the limits prescribed in the 1940 Act.) The Fund may invest up
to 20% of its assets in ADRs sponsored by persons other than the underlying
issuers ("unsponsored ADRs"). The Emerging Markets Fund does not currently
intend to invest in unsponsored ADRs. The Fund may also invest up to 10% of its
total assets in foreign index linked instruments and in loan participations and
assignments; however, Emerging Markets Fund may not invest in these types of
securities.
The Fund may purchase and sell put and call options, futures contracts and
options on futures contracts with respect to financial instruments, stock and
interest rate indexes and foreign currencies. Futures and options may be used to
facilitate allocation of the Fund's investments among asset classes, to
5
<PAGE>
generate income or to hedge against declines in securities prices or increases
in prices of securities proposed to be purchased. Emerging Markets Fund may, for
hedging purposes only, buy or sell put and call options on the securities in
which it may invest and enter into futures contracts and options on futures
contracts for securities or based on financial indexes including any index of
securities in which it may invest. Both funds may buy or sell options, futures
or options on futures that are traded on U.S. or foreign exchanges or over-
the-counter. In addition, both funds may enter into currency exchange
transactions (including forward foreign currency exchange contracts and futures
and options contracts on foreign currencies), as a hedge against fluctuations in
foreign exchange rates.
Both funds may purchase securities on a when issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis. Both
funds may invest in warrants up to 5% of their respective net assets. Both funds
may enter into repurchase agreements subject to certain procedures designed to
minimize risks associated with such agreements. Although both funds may enter
into reverse repurchase agreements, neither fund has entered into nor does
Emerging Markets Fund have any current intention of entering into such
agreements in the future. The Fund may invest in zero coupon bonds, deferred
interest bonds and bonds on which the interest is payable in kind ("PIK Bonds").
Emerging Markets Fund may not invest in these types of investments.
For a more detailed comparison of the investment objectives and policies of
the Fund and Emerging Markets Fund, see "Comparison of Investment Objectives,
Policies and Restrictions," below.
INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. The Fund and Emerging
Markets Fund have the same Board of Directors. In addition, the Fund and
Emerging Markets Fund both obtain management services from Piper Capital. For
each fund, fees are payable monthly based on the average net asset value of the
respective fund as of the close of business each day. Both funds pay a
management fee at an annual rate of 1.00% of their respective average daily net
asset values.
With respect to the Fund, Piper Capital has retained the services of Bankers
Trust Company ("Bankers Trust") as sub-adviser to manage the portfolio. As
compensation for its services, Piper Capital pays Bankers Trust monthly
compensation, calculated in the same manner as the investment advisory fee, of
0.50% of net assets of the Fund. With respect to Emerging Markets Fund, Piper
Capital will retain the services of Edinburgh Fund Managers plc ("EFM") as
sub-adviser to manage the portfolio. As compensation for its services, as is the
case for the Fund, Piper Capital will pay EFM monthly compensation, calculated
in the same manner as the investment advisory fee, of 0.50% of net assets of
Emerging Markets Fund.
Both the Fund and Emerging Markets Fund have adopted distribution plans
(each a "12b-1 Plan") pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the
Fund's 12b-1 Plan, the Distributor is compensated on a monthly basis for
shareholder account servicing and distribution-related services. This fee is not
tied exclusively to expenses actually incurred by the Distributor and may exceed
such expenses. Payments under Emerging Markets Fund's 12b-1 Plan will be made to
the Distributor on a monthly basis to compensate the Distributor for servicing
of the Emerging Markets Fund's shareholder accounts and in connection with
distribution-related services provided with respect to the Emerging Markets Fund
12b-1 Plan. This fee is not tied exclusively to expenses actually incurred by
the Distributor and may exceed such expenses. Payments under the 12b-1 Plan may
not exceed 0.70% of average daily net assets in the case of the Fund and 0.50%
in the case of Emerging Markets Fund. The Distributor has voluntarily limited
reimbursements under the Fund's 12b-1 Plan to 0.50%. The Distributor does not
presently intend to continue this voluntarily limitation beyond the Fund's
fiscal year ending June 30, 1996. The Distributor has agreed to voluntarily
limit reimbursements under Emerging Markets Fund's 12b-1 Plan to 0.32% of
average daily net assets through at least Emerging Markets Fund's fiscal year
ending June 30, 1997.
OTHER SIGNIFICANT FEES. Both the Fund and Emerging Markets Fund pay
additional fees in connection with their operations, including legal, auditing,
transfer agent and custodial fees. See "Fee Table" above for the percentage of
average net assets represented by such Other Expenses.
PURCHASES, REDEMPTIONS AND EXCHANGES.
PURCHASES. The Fund and Emerging Markets Fund each continuously issue their
shares to investors at a price equal to net asset value at the time of such
issuance. Investors in Emerging Markets Fund, however,
6
<PAGE>
also pay a front-end sales charge of 4.00% on purchases of less than $100,000
scaled down to 0% on purchases of $500,000 and above. Shareholders of the Fund
who acquire Emerging Market Fund Shares in the Reorganization will not pay the
front-end sales charge on such shares; however, such sales charge will be
applied to additional purchases of Emerging Markets Fund. Shares of the Fund and
Emerging Markets Fund are distributed by the Distributor and other
broker-dealers who have entered into selected broker-dealer agreements with the
Distributor. Purchase orders for shares of the Fund will not be accepted after
the date on which the Plan is approved by shareholders.
REDEMPTIONS. Shareholders of the Fund and Emerging Markets Fund may redeem
their shares for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable contingent deferred sales charge ("CDSC"). In most circumstances,
redemptions of Fund shares made within two years of purchase are subject to a
CDSC, scaled down from 2.00% to 1.00% of the amount redeemed. No CDSC will be
applied to shares of the Fund at the time of the Reorganization or to Emerging
Markets Fund Shares acquired in the Reorganization on redemption of such shares.
With respect to Emerging Markets Fund, shareholders who invested more than
$500,000 and, accordingly, paid no front-end sales charge, are, in most
circumstances, subject to a CDSC if shares are redeemed within 24 months. The
charge is equal to 1.00% of the lesser of the net asset value of the shares at
the time of purchase or at the time of redemption. Emerging Markets Fund offers
a reinstatement privilege whereby a shareholder whose shares have been redeemed,
may, within thirty days after the date of redemption, invest any portion or all
of the proceeds thereof in another fund managed by Piper Capital and receive a
pro rata credit for any CDSC paid in connection with such redemption. The Fund
and Emerging Markets Fund may redeem involuntarily, at net asset value, accounts
valued at less than $200.
EXCHANGES. Each of the Fund and Emerging Markets Fund makes available to
its shareholders exchange privileges allowing exchange of shares for shares of
certain other funds. Shares of the Fund may be exchanged for shares of any of
the five other series of the Company. Emerging Markets Fund Shares may be
exchanged for shares of any of the 15 other funds open to new investors that are
advised by Piper Capital. Both the Fund and Emerging Markets Fund provide
telephone exchange privileges to their shareholders.
For a more detailed discussion of purchasing, redeeming and exchanging
Emerging Markets Fund Shares, see "Shareholder Guide to Investing--How to
Purchase Shares", "--How to Redeem Shares" and "--Shareholder Services" in
Appendix A attached hereto.
DIVIDENDS. Dividends from both the Fund's and Emerging Markets Fund's
anticipated net investment income are declared and paid annually and net
short-term capital gains and long-term capital gains distributions, if any, are
paid annually. Dividends and capital gains distributions of both the Fund and
Emerging Markets Fund are automatically reinvested in additional shares at net
asset value unless the shareholder elects to receive cash.
PRINCIPAL RISK FACTORS
The Fund and Emerging Markets Fund each pursue their respective investment
objectives through investment in foreign securities. Accordingly, they are both
subject to the same general risks associated with international investing. These
risks include: risks relating to adverse currency fluctuations, potential
political and economic instability of certain countries, less information about
issuers due to different corporate disclosure standards and governmental
regulation, limited liquidity and greater volatility of prices as compared to
U.S. securities, investment and repatriation restrictions, and foreign taxation.
The Fund invests primarily in Latin American countries, including Mexico, which
have special risks. Although the Fund has the ability to invest up to 35% of its
total assets outside of Latin America, the Fund has not invested outside of
Latin America to date. This may cause the Fund's performance to be more volatile
than that of a fund which is invested in a broader variety of regions. Emerging
Markets Fund will invest in emerging markets in countries located anywhere in
the world. Accordingly, Emerging Markets Fund will be subject to the risks of
emerging markets outside of Latin America whereas the Fund is not subject to
such risks. It should be noted, however, that because Emerging Markets Fund's
portfolio will initially consist solely of the Fund's portfolio securities
(I.E., solely of Latin American issuers), Emerging Markets Fund will initially
be subject to the risks of a fund which is not invested in a broad variety of
regions. Another difference between the two funds is
7
<PAGE>
that although the Fund emphasizes investment in equity securities, it may also
pursue its investment objective through investment in investment grade debt
securities and may invest without limitation in such securities. By contrast,
Emerging Markets Fund currently intends to invest in debt securities solely for
temporary defensive purposes. Accordingly, although the Fund has primarily
invested in equity securities, the Fund may be subject to the risks associated
with investments in debt securities (E.G., credit risk, interest rate risk) to a
greater extent than Emerging Markets Fund.
While both funds may participate in the futures and options markets for
hedging purposes, and the risks of such participation are similar, the Fund may
also enter into such transactions for speculative purposes to generate income.
In addition, as discussed above, the Fund may invest in zero coupon bonds,
deferred interest bonds and PIK Bonds and Emerging Markets Fund may not engage
in such transactions. According, Emerging Markets Fund will not be subject to
the risks associated with these transactions.
The foregoing discussion is a summary of the principal risk factors. For a
more complete discussion of the risks of each fund, see "Special Risk
Considerations" in the Fund's Prospectus and "Risk Factors" in Appendix A
attached hereto.
THE REORGANIZATION
Background
The Company was managed initially through a joint venture ("Hercules")
between Piper Jaffray Companies, Inc. ("Piper Jaffray") and Midland Walwyn
Capital Corporation ("Midland") pursuant to which the parties agreed to jointly
promote, distribute and manage a family of international funds in the United
States and Canada. The Company's shares were first offered to the public in the
United States on November 9, 1993.
The Company's shares, including shares of the Fund, were originally offered
for sale with no front-end or back-end sales charge. In lieu of a sales charge
paid by investors, Hercules and each sub-adviser retained by Hercules to manage
the portfolio of each series of the Company, advanced to broker-dealers a sales
commission (except with respect to the Money Market Fund) in the aggregate of
2.00% of the net asset value of shares purchased. If a shareholder redeemed in
less than two years, all or a portion of the advanced commission was charged
back to the broker-dealer. If a shareholder exchanged among the series within
the same two year period, the sub-advisers paid, or were paid, as the case may
be, a portion of the commission advance that had not yet been recovered. While
initially the Company, including the Fund, experienced positive growth, a trend
of net redemptions commenced in November 1994 which has yet to be reversed.
In April 1995, Piper Jaffray and Midland announced their mutual agreement to
terminate the joint venture arrangement and to dissolve Hercules. After
requisite shareholder approval was obtained in July 1995, Piper Capital assumed
the role of manager and investment adviser for the Company.
After becoming manager to the Company, Piper Capital focused on the
structure, pricing and marketing of the various Hercules funds in the United
States in an attempt to promote asset growth in the funds and reverse the trend
of net redemptions. In particular, it invested considerable time and financial
resources to develop a distribution network with broker-dealers in addition to
Piper Jaffray because Piper Capital believed that the development of an external
distribution system was critical to the successful distribution of the Hercules
funds.
As part of this effort, a change in the pricing structure was implemented in
June 1995 incorporating a CDSC. Implementation of the CDSC was intended to
eliminate the need to recoup from the broker-dealer through whom the shares were
sold the commissions advanced to it by Piper Capital and the applicable sub-
adviser in the event of a redemption within two years of purchase. In lieu
thereof, shareholders would be required to pay a declining CDSC if shares were
redeemed within two years of purchase. It was believed that this pricing
structure would prove attractive to broker-dealers as well as to future
investors. The implementation of the CDSC did not, however, have the desired
effect on growth. Rather, the trend of net redemptions continued. Latin American
Value Fund and Money Market Fund are the only Hercules funds which have had even
one month since October 1994 where shareholder purchases exceeded redemptions.
Moreover, sales through broker-dealers other than Piper Jaffray remained
minimal.
8
<PAGE>
The continuing inability to achieve asset growth in the Hercules funds
prompted a further review by Piper Capital of the future prospects of the funds.
Ultimately, Piper Capital concluded that it is unlikely that the Hercules funds
will, in the foreseeable future, grow to a sufficient size to be economically
viable. Accordingly, Piper Capital recommended to the Board of Directors of the
Company that the Hercules funds be eliminated as a free standing family of funds
and that instead each Hercules fund be combined with an appropriate fund within
the Piper family of funds (or, in the case of World Bond Fund and Money Market
Fund, that the fund be liquidated).
The Board's Consideration
At meetings of the Board of Directors held on February 6, 1996 and April 8,
1996, Piper Capital reviewed for the Board the basis for its recommendation. It
detailed the efforts that have been made since inception of the Hercules Funds
to promote and market the funds, the continuing inability to reverse the trend
of net redemptions that has continued since November, 1994 despite these
efforts, and the basis for its pessimistic view respecting the Company's future
prospects.
At its meeting on February 6, 1996, the Board, including all of the
Independent Directors, unanimously approved the Reorganization and on March 29,
1996, approved the Plan and determined to recommend that shareholders of the
Fund approve the Plan.
In determining whether to recommend that shareholders of the Fund approve
the Plan, the Board, with the advice and assistance of independent legal
counsel, inquired into a number of matters. In particular, the Board considered
the Company's prospects for future growth and the effect upon shareholders
should assets remain at current levels or continue to be reduced further. The
Board considered in this regard that since the commencement of operations, Piper
Capital (or Hercules) has voluntarily limited total expenses of the Fund and the
Distributor has voluntarily limited its 12b-1 fees payable by the Fund and that
they do not presently intend to continue these limitations beyond the Fund's
fiscal year ending June 30, 1996. The Board noted that absent such assumption of
expenses and waiver of fees, the expense ratio of the Fund for the most current
fiscal year would have been considerably higher and total return lower.
The Board carefully considered the compatibility of the investment
objectives, policies, restrictions and portfolios of the Fund and Emerging
Markets Fund. The Board noted that the two funds are similar to the extent each
invests in emerging markets countries. The Board also considered the fact that
Emerging Markets Fund will have over time a broader geographic focus than Latin
America. The Board noted, in this regard, Piper's view that an emerging markets
fund which can pursue, to an unlimited extent, opportunities anywhere in the
world, would prove more attractive to investors and the Piper distribution
network than the Fund which invests primarily in Latin America and, therefore,
would have a greater likelihood of growing to a size to be more economically
viable than the Fund. These issues are discussed more fully below in "Comparison
of Investment Objectives, Policies and Restrictions--Investment Objectives and
Policies."
The Board also considered the fact that the sub-adviser for the Fund is
Bankers Trust whereas EFM will be the sub-adviser for Emerging Markets Fund.
Accordingly, the Reorganization would, from the standpoint of Fund shareholders,
result in a change of sub-advisers. The Board evaluated the nature, scope and
quality of the investment advisory services provided by EFM relative to those
provided by Bankers Trust and concluded that the change would be in the best
interest of shareholders of the Fund.
In addition, the Board considered the comparative expenses currently
incurred in the operation of the Fund and the expenses of Emerging Markets Fund,
the terms and conditions of the proposed Reorganization, Piper Capital's
undertaking to pay all the direct costs (E.G., proxy solicitation) of the
Reorganization and the indirect costs (E.G., brokerage) likely to be incurred by
the Fund in the Reorganization. In recommending the Reorganization to the
shareholders of the Fund, the Board considered that the Reorganization would
have the following benefits for shareholders of the Fund:
1. Without giving effect to voluntary waivers and reimbursements
currently in effect for the Fund, which Piper Capital and the Distributor do
not presently intend to continue beyond the Fund's fiscal year ending June
30, 1996, estimated Total Fund Operating Expenses for Emerging Markets
9
<PAGE>
Fund are lower than the Total Fund Operating Expenses for the Fund. In
addition, if the Reorganization is approved, the Distributor will waive a
portion of its fee and Piper Capital will limit expenses of Emerging Markets
Fund so that Total Fund Operating Expenses do not exceed 2.00% of average
daily net assets (the expense cap currently in effect for the Fund) through
at least Emerging Markets Fund's fiscal year ending June 30, 1997.
2. Shareholders of the Fund will be able to acquire shares of Emerging
Markets Fund, which are otherwise subject to a maximum 4.00% front-end sales
charge, at net asset value and pursue a similar investment objective in a
potentially more economically viable fund without having to sell their
shares. Moreover, shareholders will be able to redeem the shares so acquired
at net asset value without any CDSC being imposed and will not pay any CDSC
on Fund shares converted in the Reorganization.
3. The Fund's shareholders would retain the capabilities and resources
of Piper Capital and its affiliates in the areas of operations, management,
distribution, shareholder servicing and marketing.
4. Edinburgh Fund Managers plc, an experienced international investment
manager, is the sub-adviser to Emerging Markets Fund.
5. The two funds have similar investment objectives and invest pursuant
to similar policies and restrictions, although Emerging Markets Fund will
invest in a broader range of emerging markets countries.
6. The Reorganization would enable the Fund's shareholders to enjoy an
expanded range of mutual fund investment options. The Piper Funds complex,
of which Emerging Markets Fund will be a part, includes 15 mutual fund
portfolios that will be available for exchange by Fund shareholders who
receive Emerging Markets Fund Shares in the Reorganization.
7. The Reorganization will constitute a tax-free reorganization for
Federal income tax purposes, and no gain or loss will be recognized by the
Fund or its shareholders for Federal income tax purposes as a result of the
Reorganization.
8. The Board of Directors of the Fund, including all of the Independent
Directors, has determined that the Reorganization is in the best interest of
the Fund and that the interest of existing shareholders of the Fund will not
be diluted as a result thereof.
The Board of Directors of Emerging Markets Fund, including all of the
Independent Directors, has also determined that the Reorganization is in the
best interest of Emerging Markets Fund. The transaction will enable Emerging
Markets Fund to acquire investment securities which are consistent with its
objective without the brokerage costs attendant to the purchase of such
securities in the market.
The Plan
The terms and conditions under which the Reorganization would be consummated
are set forth in the Plan and are summarized below. This summary is qualified in
its entirety by reference to the Plan, a copy of which is attached as Exhibit A
to this Proxy Statement/Prospectus.
The Plan provides that (i) the Fund will transfer all of its assets,
including appropriate portfolio securities, cash, cash equivalents, securities,
commodities, futures and dividend and interest receivable, to Emerging Markets
Fund on the Closing Date in exchange for the assumption by Emerging Markets Fund
of the Fund's stated liabilities, including all expenses, costs, charges and
reserves, as reflected on an unaudited statement of assets and liabilities of
the Fund prepared by the Treasurer of the Company as of the Valuation Date in
accordance with generally accepted accounting principles consistently applied
from the prior audited period, and the delivery of Emerging Markets Fund Shares;
(ii) such Emerging Markets Fund Shares will be distributed to the shareholders
of the Fund on the Closing Date or as soon as practicable thereafter; and (iii)
the Company shall be dissolved as a Minnesota corporation and deregistered as an
investment company under the 1940 Act, promptly following the making of all
distributions and the reorganization or liquidation of each other series of the
Company. In most cases, reorganization or liquidation of the other series is
contingent on obtaining the approval of shareholders of the series.
10
<PAGE>
For technical reasons, certain of the Fund's existing investment limitations
may be deemed to preclude the Fund from consummating the Reorganization to the
extent that the Reorganization would involve the Fund holding all of its assets
as shares of Emerging Markets Fund until such shares are distributed to the
Fund's shareholders. By approving the Plan, the Fund's shareholders will be
deemed to have agreed to waive each of these limitations. It is anticipated that
the distribution of Emerging Markets Fund Shares to the Fund's shareholders will
occur on the Closing Date or as soon as practicable thereafter.
The number of Emerging Markets Fund Shares to be delivered to the Fund will
have an aggregate net asset value equal to the value of the Fund assets acquired
by Emerging Markets Fund (net of stated liabilities assumed by Emerging Markets
Fund); these values will be calculated as of the close of business of the New
York Stock Exchange on a business day not later than the fifth business day
following the receipt of the requisite approval of the Plan by the shareholders
of the Fund or at such other time as the Fund and Emerging Markets Fund may
agree (the "Valuation Date"). These Emerging Market Fund Shares will be
distributed to the former Fund shareholders, with each such shareholder
receiving Emerging Market Fund Shares with a value equal to the value of their
holdings in the Fund.
Emerging Markets Fund will cause its transfer agent to credit and confirm an
appropriate number of Emerging Markets Fund Shares to each Fund shareholder.
Neither the Fund nor Emerging Markets Fund issues stock certificates.
The Closing Date will be the next business day following the Valuation Date
or at such other time as the Fund and Emerging Markets Fund may agree. The
consummation of the Reorganization is contingent upon the approval of the
Reorganization by the shareholders of the Fund and the receipt of the other
opinions and certificates set forth in Sections 6, 7 and 8 of the Plan and the
occurrence of the events described in those Sections, certain of which may be
waived by the Fund or Emerging Markets Fund. The Plan may be amended in any
mutually agreeable manner, except that no amendment may be made subsequent to
the Meeting which would detrimentally affect the value of the shares of Emerging
Markets Fund to be distributed. Piper Capital will bear all direct costs
associated with the Reorganization including preparation, printing, filing and
proxy solicitation expenses incurred in connection with obtaining requisite
shareholder approval of the Reorganization.
The Plan may be terminated and the Reorganization abandoned at any time,
before or after approval by the Fund's shareholders, by mutual consent of the
Fund and Emerging Markets Fund. In addition, either party may terminate the Plan
upon the occurrence of a material breach of the Plan by the other party or if,
by September 15, 1996, any condition set forth in the Plan has not been
fulfilled or waived by the party entitled to its benefits.
The effect of the Reorganization is that shareholders of the Fund who vote
their shares in favor of the Plan are electing to sell their shares of the Fund
(at net asset value on the Valuation Date) and reinvest the proceeds in Emerging
Markets Fund at net asset value and without recognition of taxable gain or loss
for Federal income tax purposes. Prior to the Valuation Date, the Fund will
declare and pay a dividend to distribute all of its accumulated investment
company taxable income and net capital gain, if any. The proceeds of such
distribution may be taxable to Fund shareholders. See "Tax Aspects of the
Reorganization" below. All contracts entered into by or on behalf of the Fund
will terminate upon consummation of the Reorganization.
Shareholders of the Fund will continue to be able to redeem their shares at
net asset value (subject to any applicable CDSC) next determined after receipt
of the redemption request until the close of business on the business day next
preceding the Closing Date. Redemption requests received by the Fund thereafter
will be treated as requests for redemption of shares of Emerging Markets Fund.
Tax Aspects of the Reorganization
At least one but not more than 20 business days prior to the Valuation Date,
the Fund will declare and pay a dividend or dividends which, together with all
previous such dividends, will have the effect of distributing to the Fund's
shareholders all of the Fund's investment company taxable income for all periods
11
<PAGE>
since inception of the Fund through and including the Valuation Date (computed
without regard to any dividends paid deduction), and all of the Fund's net
capital gain, if any, realized in such periods (after reduction for any capital
loss carry-forward).
The Reorganization is intended to qualify for Federal income tax purposes as
a tax-free reorganization under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"). The Company and Piper Global have represented
that, to their best knowledge, there is no plan or intention by Fund
shareholders to redeem, sell, exchange or otherwise dispose of a number of
Emerging Markets Fund Shares received in the transaction that would reduce the
Fund shareholders' ownership of Emerging Markets Fund Shares to a number of
shares having a value, as of the Closing Date, of less than 50% of the value of
all of the formerly outstanding Fund shares as of the same date. The Company and
Piper Global have each further represented that, as of the Closing Date, the
Fund and Emerging Markets Fund will qualify as regulated investment companies.
In addition, Piper Global has further represented that Emerging Markets Fund
will qualify as a regulated investment company for its current fiscal year.
As a condition to the Reorganization, the Fund and Emerging Markets Fund
will receive an opinion of the law firm Gordon Altman Butowsky Weitzen Shalov &
Wein that, based on certain assumptions, facts, the terms of the Plan and
additional representations set forth in the Plan or provided by the Company and
Piper Global:
1. The transfer of substantially all of the Fund's assets in exchange
for Emerging Markets Fund Shares and the assumption by Emerging Markets Fund
of certain stated liabilities of the Fund followed by the distribution by
the Fund of Emerging Markets Fund Shares to the Fund Shareholders in
exchange for their Fund shares will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code, and the Fund and Emerging Markets
Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code;
2. No gain or loss will be recognized by Emerging Markets Fund upon the
receipt of the assets of the Fund solely in exchange for Emerging Markets
Fund Shares and the assumption by Emerging Markets Fund of the stated
liabilities of the Fund;
3. No gain or loss will be recognized by the Fund upon the transfer of
the assets of the Fund to Emerging Markets Fund in exchange for Emerging
Markets Fund Shares and the assumption by Emerging Markets Fund of the
stated liabilities or upon the distribution of Emerging Markets Fund Shares
to the Fund's shareholders in exchange for their Fund shares;
4. No gain or loss will be recognized by the Fund shareholders upon the
exchange of the shares of the Fund for Emerging Markets Fund Shares;
5. The aggregate tax basis for Emerging Markets Fund Shares received by
each of the Fund's shareholders pursuant to the reorganization will be the
same as the aggregate tax basis of the shares in the Fund held by each such
shareholder of the Fund immediately prior to the Reorganization;
6. The holding period of Emerging Markets Fund Shares to be received by
each shareholder of the Fund will include the period during which the shares
in the Fund surrendered in exchange therefor were held (provided such shares
in the Fund were held as capital assets on the date of the Reorganization);
7. The tax basis of the assets of the Fund acquired by Emerging Markets
Fund will be the same as the tax basis of such assets to the Fund
immediately prior to the Reorganization; and
8. The holding period of the assets of the Fund in the hands of
Emerging Markets Fund will include the period during which those assets were
held by the Fund.
The Reorganization will be treated as a "change in ownership" under Section
382 of the Code. It is not anticipated that any resulting limitations on the use
of any capital loss carryovers of the Fund will be material. In addition, the
economic benefit of any capital loss carryovers of the Fund would be available
to shareholders of the combined entity with a resulting benefit to Emerging
Markets Fund shareholders. It is not anticipated that any such benefit will be
material.
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<PAGE>
Shareholders of the Fund should consult their tax advisers regarding the
effect, if any, of the proposed transaction in light of their individual
circumstances. Because the foregoing discussion only relates to the Federal
income tax consequences of the proposed transaction, shareholders of the Fund
should also consult their tax advisors as to state and local tax consequences,
if any, of the proposed transaction.
Dissenters' Rights
Pursuant to Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act (the "MBCA Sections"), record holders of shares of the Company
are entitled to assert dissenters' rights in connection with the Reorganization
and obtain payment of the "fair value" of their shares, provided that such
shareholders comply with the requirements of the MBCA Sections. Notwithstanding
the provisions of the MBCA Sections, the Division of Investment Management of
the Commission has taken the position that adherence to state appraisal
procedures by a registered investment company issuing redeemable securities
would constitute a violation of Rule 22c-1 under the 1940 Act. This rule
provides that no open-end investment company may redeem its shares other than at
net asset value next computed after receipt of a tender of such security for
redemption. It is the view of the Division of Investment Management that Rule
22c-1 preempts appraisal provisions in state statutes.
In the interests of ensuring equal valuation of all interests in the Fund,
the Company will determine dissenters' rights in accordance with the Division's
interpretation. It should be emphasized that Fund shareholders may sell their
shares at net asset value (subject to any applicable CDSC) at any time prior to
the Closing Date.
Description of Shares
Shares of Emerging Markets Fund to be issued pursuant to the Plan will, when
issued, be fully paid and non-assessable by Emerging Markets Fund and
transferable without restrictions and will have no preemptive or conversion
rights.
Capitalization Table (unaudited)
The following table sets forth the capitalization of the Fund as of March
31, 1996.
<TABLE>
<CAPTION>
Shares
Net Assets Outstanding Net Asset
(000s (000s Value Per
omitted) omitted) Share
----------- ----------- ---------
<S> <C> <C>
$16,336 2,057 $ 7.94
</TABLE>
Emerging Markets Fund has not yet commenced operations. If the
Reorganization is approved, upon closing, the net assets, number of shares
outstanding and net asset value per share of Emerging Markets Fund will be that
of the Fund.
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Investment Objectives and Policies
The Fund and Emerging Markets Fund have similar investment objectives. The
Fund's objectives are long-term capital appreciation and, to a lesser extent,
current income. The investment objective of Emerging Markets Fund is long-term
capital appreciation. Current income is incidental to this objective. The
investment objectives of the Fund and Emerging Markets Fund are fundamental and,
accordingly, may not be changed without shareholder approval.
The Fund seeks to achieve its investment objectives by investing, under
normal circumstances, at least 65% of its total assets in securities issued by
issuers in Latin America. Under normal market conditions, the Fund's investments
will be allocated among at least three different countries in Latin America
(defined as Mexico, Central America and South America). Although it is permitted
to invest up to 35% of its total assets anywhere in the world, the Fund has not
invested outside of Latin America to date. Emphasis is placed on investment in
equity securities; however, the Fund may invest without limit in investment
grade debt securities (including notes, debentures, Brady Bonds, mortgage-backed
securities and asset-backed securities) of Latin American countries. Emerging
Markets Fund seeks to achieve its investment objective by
13
<PAGE>
investing, under normal circumstances, at least 65% of its total assets in
Common Stock of issuers in the world's emerging securities markets. "Common
Stock" means common stock and foreign equity securities which are substantially
similar to common stock in the U.S. and does not include preferred stock or
convertible debt securities. Emerging securities markets can be found in regions
such as Latin America, Asia, Eastern Europe, the Middle East, Southern Europe
and Africa. Emerging Markets Fund invests in debt securities solely for
temporary defensive purposes. As discussed above, the principal difference
between the two funds is that the Fund invests primarily in Latin America,
whereas Emerging Markets Fund invests in emerging markets countries with no
emphasis on Latin America. In addition, the Fund may invest without limit in
investment grade debt securities, whereas Emerging Markets Fund invests in debt
securities solely for temporary defensive purposes.
The initial portfolio of Emerging Markets Fund will be comprised exclusively
of the portfolio securities of the Fund acquired by Emerging Markets Fund in the
Reorganization. Accordingly, Emerging Markets Fund will be initially invested
entirely in Latin America. It is anticipated that over time, as new investment
opportunities arise, the portfolio will be invested among a variety of regions.
Both the Fund and Emerging Markets Fund may invest part or all of their
respective assets in U.S. dollar- or foreign currency-denominated cash or
domestic or foreign high-quality money market instruments to maintain a
temporary defensive posture, when, in the opinion of the investment adviser, it
is advisable to do so because of market conditions.
The Fund and Emerging Markets Fund may invest in American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and in other investment
companies (up to the limits prescribed by the 1940 Act). The Fund may also
invest up to 10% of its total assets in foreign index linked instruments and in
loan participations and assignments; Emerging Markets Fund does not invest in
these types of securities.
The Fund may purchase and sell put and call options, futures contracts and
options on futures contracts with respect to financial instruments, stock and
interest rate indexes and foreign currencies. Futures and options may be used to
facilitate allocation of the Fund's investment among asset classes, to generate
income or to hedge against declines in securities prices or increases in prices
of securities proposed to be purchased. Emerging Markets Fund may, for hedging
purposes only, buy or sell put and call options on the securities in which it
may invest and enter into futures contracts and options on futures contracts on
securities or based on financial indexes including any index of securities in
which it may invest. Both funds may buy or sell options, futures and options on
futures that are traded on U.S. or foreign exchanges or over-the-counter. In
addition, both funds may enter into currency exchange transactions (including
forward foreign currency exchange contracts and futures and options contracts on
foreign currencies), as a hedge against fluctuations in foreign exchange rates.
Both the Fund and Emerging Markets Fund may purchase securities on a
when-issued or delayed delivery basis and may purchase or sell securities on a
forward commitment basis. Both funds may invest in warrants up to 5% of their
respective net assets. Included within this amount, but not to exceed 2% of the
value of its net assets, may be warrants that are not listed on the New York or
American Stock Exchange. Warrants are, in effect, options to purchase equity
securities at a specific price, during a specific period, and have no voting or
other rights with respect to the corporation issuing them and pay no dividends.
Both funds may enter into repurchase agreements subject to certain procedures
designed to minimize risks associated with such agreements. Although both funds
may enter into reverse repurchase agreements, neither fund has, nor does
Emerging Markets Fund have any current intention of entering into such
agreements in the future. The Fund may invest in zero coupon bonds, deferred
interest bonds and PIK Bonds; Emerging Markets Fund does not invest in these
types of instruments.
The investment policies of both the Fund and Emerging Markets Fund are
non-fundamental and may be changed by their respective Boards of Directors
unless otherwise noted herein. The foregoing discussion is a summary of the
investment policies of the funds. For a more complete discussion of the Fund's
policies see "Investment Objectives and Policies" in its Prospectus and
"Investment Objectives and Policies" in the Fund's Statement of Additional
Information. For a more complete discussion of the policies of Emerging
14
<PAGE>
Markets Fund see "Investment Objective, Policies and Restrictions" in Appendix A
hereto and "Investment Objectives and Policies" in Appendix A to the Statement
of Additional Information relating to this Proxy Statement/Prospectus.
Investment Restrictions
The investment restrictions adopted by the Fund and Emerging Markets Fund as
fundamental policies appear under the caption "Investment Restrictions" in the
Prospectus and Statement of Additional Information of the Fund and "Special
Investment Methods--Investment Restrictions" and "Investment Objective, Policies
and Restrictions" in Appendix A hereto. A fundamental investment restriction
cannot be changed without the vote of a majority of the outstanding voting
securities of a fund, as defined in the 1940 Act. The material differences are
as follows: While both funds are prohibited from making short sales, the Fund is
subject to such limitation on a non-fundamental basis. As a fundamental
restriction, both the Fund and Emerging Markets Fund may not purchase real
estate or interests therein other than securities backed by mortgages and
similar investments, however, the Fund may purchase readily marketable interests
in real estate investment trusts or readily marketable securities of companies
that invest in real estate. In addition, the Fund has a fundamental restriction
prohibiting the purchase of real estate limited partnership interests whereas
Emerging Markets Fund is subject to the same limitation on a non-fundamental
basis. Additionally, the Fund has a fundamental restriction prohibiting more
than 15% of its net assets from being invested in illiquid securities whereas
Emerging Markets Fund is subject to the same limitation on a non-fundamental
basis.
Interests of Certain Persons
The following persons affiliated with the Fund and Emerging Markets Fund
receive payments from the Fund and Emerging Markets Fund for services rendered
pursuant to contractual arrangements with both funds: (i) Piper Capital, as the
investment adviser and manager to each fund, and (ii) the Distributor, as the
distributor of shares of each fund. In addition, with respect to Emerging
Markets Fund only, Piper Trust Company, an affiliate of Piper Capital and the
Distributor, and the Distributor provide transfer agent and dividend disbursing
agent services for 401(k) Plan accounts and all other shareholder accounts,
respectively.
ADDITIONAL INFORMATION ABOUT THE FUND
AND EMERGING MARKETS FUND
General
For a discussion of the organization and operation of the Fund, see
"Management," "Investment Objectives and Policies," "Investment Restrictions"
and "General Information" in its prospectus. For a discussion of the
organization and operation of Emerging Markets Fund, see "Introduction,"
"Management,""Investment Objective and Policies" and "General Information" in
Appendix A hereto.
Financial Information
For certain financial information about the Fund, see "Financial Highlights"
and "Performance Comparisons" in its prospectus. Emerging Markets Fund has not
yet commenced operations and, accordingly, does not yet have assets.
Management
For information about the Fund's Board of Directors, investment manager and
distributor, see "Management" and "Distribution of Fund Shares" in its
prospectus. For corresponding information about Emerging Markets Fund, see
"Management" and "Distribution of Fund Shares" in Appendix A hereto.
Description of Securities and Shareholder Inquiries
For a description of the nature and most significant attributes of shares of
the Fund and information regarding shareholder inquiries, see "General
Information" and "Introduction--Shareholder Inquiries" in its prospectus. With
respect to Emerging Markets Fund, this information may be found in "General
Information" and "Introduction -- Shareholder Inquiries" in Appendix A hereto.
15
<PAGE>
Dividends, Distributions and Taxes
For a discussion of the Fund's policies with respect to dividends,
distributions and taxes, see "Dividends, Distributions and Tax Status" in its
prospectus. For a discussion of Emerging Markets Fund's policies with respect to
dividends, distributions, and taxes, see "Dividends and Distributions" and "Tax
Status" in Appendix A hereto.
Purchases and Redemptions
For a discussion of how the Fund's shares may be purchased and redeemed, see
"Purchase of Shares" and "Redemption of Shares" in its prospectus. For a
discussion of how Emerging Markets Fund's shares may be purchased and redeemed,
see "Shareholder Guide to Investing" in Appendix A hereto.
Pending Legal Proceedings
For a discussion of pending legal proceedings see "Pending Litigation" in
the Fund's prospectus and, with respect to Emerging Markets Fund, "General
Information--Pending Legal Proceedings" in Appendix A hereto.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For management's discussion of the Fund's performance, see the Company's
Annual Report for its fiscal year ended June 30, 1995, which is incorporated
herein by reference. The Company's Annual Report is available without charge, as
noted under "Available Information" below. Emerging Markets Fund has not yet
commenced operations.
FINANCIAL STATEMENTS AND EXPERTS
The annual financial statements of the Fund incorporated by reference in the
Statement of Additional Information relating to the Registration Statement on
Form N-14 of which this Proxy Statement/Prospectus forms a part have been
audited by KPMG Peat Marwick LLP, independent accountants, for the periods
indicated in its report thereon. Such financial statements have been
incorporated by reference in reliance upon such report given upon the authority
of KPMG Peat Marwick LLP as experts in accounting and auditing. Emerging Markets
Fund has not yet commenced operations.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Emerging Markets
Fund will be passed upon by Dorsey & Whitney LLP, Minneapolis, Minnesota.
AVAILABLE INFORMATION
Additional information about the Fund and Emerging Markets Fund is
available, as applicable, in the following documents which are either part of
this Proxy Statement/Prospectus or are incorporated herein by reference: (i)
Appendix A hereto which forms a part of this Proxy Statement/Prospectus; (ii)
Appendix A to the Statement of Additional Information relating to this Proxy
Statement/Prospectus; (iii) the Company's Prospectus dated August 29, 1995,
which Prospectus forms a part of Post-Effective Amendment No. 6 to the Company's
Registration Statement on Form N-1A (File Nos. 33-67016; 811-7936); (iv) the
Company's Statement of Additional Information dated August 29, 1995 and (v) the
Company's Annual Report for the fiscal year ended June 30, 1995; and (vi) the
Company's Semi-Annual Report for the six months ended December 31, 1995. The
foregoing documents may be obtained without charge upon request from Shareholder
Services, Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota
55402-7778.
The Company and Piper Global are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and in accordance therewith,
file reports and other information with the Commission. Proxy material, reports
and other information about the Fund and Piper Global which are of public record
can be inspected and copied at public reference facilities maintained by the
Commission at Room 1204, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and certain of its regional
16
<PAGE>
offices, and copies of such materials can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, D.C. 20549.
OTHER BUSINESS
Management of the Company knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not known
at the time of the solicitation may come before the Meeting, the proxy as
solicited confers discretionary authority with respect to such matters as
properly come before the Meeting, including any adjournment or adjournments
thereof, and it is the intention of the persons named as attorneys-in-fact in
the proxy to vote this proxy in accordance with their judgment on such matters.
By Order of the Board of Directors,
SUSAN SHARP MILEY
SECRETARY
May 17, 1996
17
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
Hercules Latin American Value Fund and Emerging Markets Growth Fund
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
15th day of April, 1996, by and between Hercules Funds Inc. ("Hercules
Company"), on behalf of its series Hercules Latin American Value Fund ("Hercules
Fund"), and Piper Global Funds Inc. ("Piper Company"), on behalf of its series
Emerging Markets Growth Fund ("Piper Fund"). Hercules Company and Piper Company
are Minnesota corporations. As used in this Agreement, the terms "Piper Fund"
and "Hercules Fund" shall be construed to mean, respectively, 'Piper Company on
behalf of Piper Fund' and 'Hercules Company on behalf of Hercules Fund', where
necessary to reflect the fact that a corporate series is generally considered
the beneficiary of corporate level actions taken with respect to the series and
is not itself recognized as a person under law.
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Treas. Reg. 1.368-2(g), for a
reorganization under Section 368(a) (1) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization ("Reorganization") will consist of the
transfer to Piper Fund of substantially all of the assets of Hercules Fund in
exchange for the assumption by Piper Fund of all stated liabilities of Hercules
Fund and the issuance by Piper Fund of shares of common stock, par value $0.01
per share ("Piper Fund Shares"), to be distributed, after the Closing Date
hereinafter determined, to the shareholders of Hercules Fund in liquidation of
Hercules Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement. The distribution of Piper Fund Shares to Hercules
Fund shareholders and the retirement and cancellation of Hercules Fund shares
will be effected pursuant to an amendment to the Articles of Incorporation of
Hercules Company in the form attached hereto as Exhibit 1 (the "Amendment"), to
be adopted by Hercules Company in accordance with the Minnesota Business
Corporation Act.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF HERCULES FUND
1.1 Subject to the terms and conditions set forth herein and in the
Amendment and on the basis of the representations and warranties contained
herein, Hercules Fund agrees to assign, deliver and other-wise transfer the
Hercules Fund Assets (as defined in paragraph 1.2(a)) to Piper Fund and Piper
Fund agrees in exchange therefor to assume all stated liabilities of Hercules
Fund on the Closing Date (as defined in paragraph 3.1) as set forth in paragraph
1.3 and to deliver to Hercules Fund Shareholders (as defined in paragraph 1.5)
the number of Piper Fund Shares, including fractional Piper Fund Shares,
determined in accordance with paragraph 2.2. Such transactions shall take place
at the closing provided for in paragraph 3.1 ("Closing").
1.2(a) The "Hercules Fund Assets" shall consist of all property
including, without limitation, all cash, cash equivalents,
securities, commodities, futures, and dividend and interest
receivables owned by Hercules Fund, and any deferred or prepaid
expenses shown as an asset on Hercules Fund's books, on the
Valuation Date (as defined in paragraph 2.1).
(b) Hercules Fund reserves the right to sell any of the securities in
its portfolio but will not, from the date on which the Proxy
Materials (as defined in paragraph 4.3) are mailed to Hercules
Fund shareholders, acquire without the prior approval of Piper
Fund, any additional securities or other instruments other than
securities or instruments of the type in which Piper Fund is
permitted to invest and in amounts agreed to by Piper Fund. In the
event that Hercules Fund holds any assets that Piper Fund is not
permitted to hold, Hercules Fund will dispose of such assets on or
prior to the Valuation Date. In addition, if it is determined that
the portfolios of Hercules Fund and Piper Fund, when aggregated,
would contain investments exceeding certain percentage limitations
imposed upon Piper Fund with respect to such investments
(including, among others, percentage limitations
A-1
<PAGE>
necessary to satisfy the diversification requirements of the
Code), Hercules Fund if requested by Piper Fund will, on or prior
to the Valuation Date, dispose of and/or reinvest a sufficient
amount of such investments as may be necessary to avoid violating
such limitations as of the Closing Date.
1.3 Hercules Fund will endeavor to discharge all of its liabilities and
obligations on or prior to the Valuation Date. Piper Fund will assume all stated
liabilities, which include, without limitation, all expenses, costs, charges and
reserves reflected on an unaudited Statement of Assets and Liabilities of
Hercules Fund prepared by the Treasurer of Hercules Fund as of the Valuation
Date in accordance with gen-erally accepted accounting principles consistently
applied from the prior audited period ("Valuation Date Statement").
1.4 In order for Hercules Fund to comply with Section 852(a)(1) of the
Code and to avoid having any investment company taxable income or net capital
gain (as defined in Sections 852(b)(2) and 1222(11) of the Code, respectively)
in the taxable year ending with its dissolution, Hercules Fund will on or before
the Valuation Date (a) declare a dividend in an amount large enough so that it
will have declared dividends of all of its investment company taxable income and
net capital gain, if any, for such taxable year (determined without regard to
any deduction for dividends paid) and (b) distribute such dividend.
1.5 On the Closing Date or as soon as practicable thereafter, pursuant to
paragraph 1.1 hereof and the Amendment, Hercules Fund will distribute Piper Fund
Shares received by Hercules Fund pro rata to its shareholders of record
determined as of the close of business on the Valuation Date ("Hercules Fund
Shareholders"). Thereafter, no additional shares representing interests in the
Hercules Fund shall be issued. Such distribution will be accomplished by an
instruction, signed by Hercules Fund's Secretary, to transfer Piper Fund Shares
then credited to Hercules Fund's account on the books of Piper Fund to open
accounts on the books of Piper Fund in the names of the Hercules Fund
Shareholders and representing the respective pro rata number of Piper Fund
Shares due each such Hercules Fund Shareholder. All issued and outstanding
shares of Hercules Fund simultaneously will be canceled on Hercules Fund's
books. No Hercules Fund Shareholder will be charged any contingent deferred
sales charge described in Hercules Fund's current or then-current prospectus as
a result of the conversion of Hercules Fund holdings into Piper Fund Shares
described in this paragraph.
1.6 Ownership of Piper Fund Shares will be shown on the books of Piper
Fund's transfer agent. Piper Fund Shares will be issued in the manner described
in Piper Fund's then current Prospectus and Statement of Additional Information,
except no front-end sales charges will be incurred by Hercules Fund Shareholders
in connection with Piper Fund Shares received in the Reorganization.
1.7 Any transfer taxes payable upon issuance of Piper Fund Shares in a
name other than the registered holder of Hercules Fund Shares on Hercules Fund's
books as of the close of business on the Valuation Date shall, as a condition of
such issuance and transfer, be paid by the person to whom Piper Fund Shares are
to be issued and transferred.
1.8 Any reporting responsibility of Hercules Fund is and shall remain the
responsibility of Hercules Fund up to and including the date on which Hercules
Fund is dissolved and deregistered pursuant to paragraph 1.9.
1.9 Hercules Company shall be dissolved as a Minnesota corporation and
deregistered as an invest-ment company under the Investment Company Act of 1940,
as amended ("1940 Act"), promptly following the making of all distributions
pursuant to paragraph 1.5 and the reorganization or liquidation of each of its
series, such that no shares of Hercules Company remain issued and outstanding.
1.10 All books and records maintained on behalf of Hercules Fund will be
delivered to Piper Fund and, after the Closing, will be maintained by Piper Fund
or its designee in compliance with applicable record retention requirements
under the 1940 Act.
2. VALUATION
2.1 The "Valuation Date" shall be no later than the 5th business day
following the receipt of the requisite approval of this Agreement by
shareholders of Hercules Fund or such other date after such
A-2
<PAGE>
shareholder approval as may be mutually agreed upon. The value of the Hercules
Fund Assets shall be the value of such assets computed as of 4:00 p.m., Eastern
time, on the Valuation Date, using the valuation pro-cedures set forth in Piper
Fund's then current Prospectus and Statement of Additional Information.
2.2 The net asset value of a Piper Fund Share shall be the net asset
value per share computed on the Valuation Date, using the valuation procedures
set forth in Piper Fund's then current Prospectus and Statement of Additional
Information.
2.3 The number of Piper Fund Shares (including fractional shares, if any)
to be issued here-under shall be determined by dividing the value of the
Hercules Fund Assets, net of the liabilities of Hercules Fund assumed by Piper
Fund pursuant to paragraph 1.1, determined in accordance with paragraph 2.1, by
the net asset value of a Piper Fund Share determined in accordance with
paragraph 2.2.
2.4 All computations of value shall be made by Piper Capital Management
Incorporated ("PCM") in accordance with its regular practice in pricing Piper
Fund. Piper Fund shall cause PCM to deliver a copy of its valuation report at
the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing shall take place on the Valuation Date as of 5:00 p.m.,
Eastern time, or at such other day or time as the parties may agree (the
"Closing Date"). The Closing shall be held in a location mutually agreeable to
the parties hereto. All acts taking place at the Closing shall be deemed to take
place simultaneously as of 5:00 p.m., Eastern time, on the Closing Date unless
otherwise provided.
3.2 Portfolio securities held by Hercules Fund (together with any cash or
other assets) shall be delivered by Hercules Fund to Investors Fiduciary Trust
Company (the "Custodian"), as custodian for Piper Fund, for the account of Piper
Fund on or before the Closing Date in conformity with applicable custody
provisions under the 1940 Act and duly endorsed in proper form for transfer in
such condition as to constitute good delivery thereof in accordance with the
custom of brokers. The portfolio securities shall be accompanied by all
necessary federal and state stock transfer stamps or a check for the appropriate
purchase price of such stamps. Portfolio securities and instruments deposited
with a securities depository (as defined in Rule 17f-4 under the 1940 Act) shall
be delivered on or before the Closing Date by book-entry in accordance with
customary practices of such depository and the Custodian. The cash delivered
shall be in the form of a Federal Funds wire, payable to the order of "Investors
Fiduciary Trust Company, Custodian for Piper Growth and Income Fund, a series of
Piper Funds, Inc."
3.3 In the event that on the Valuation Date, (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such Exchange or elsewhere shall be
disrupted so that, in the judgment of both Piper Fund and Hercules Fund,
accurate appraisal of the value of the net assets of Piper Fund or the Hercules
Fund Assets is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed
without restriction or disruption and reporting shall have been restored.
3.4 At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4. COVENANTS OF PIPER FUND AND HERCULES FUND
4.1 Except as otherwise expressly provided herein with respect to
Hercules Fund, Piper Fund and Hercules Fund each will operate its business in
the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and other distributions.
4.2 Piper Company will prepare and file with the Securities and Exchange
Commission ("Com-mission") a registration statement on Form N-14 under the
Securities Act of 1933, as amended ("1933 Act"), relating to Piper Fund Shares
("Registration Statement"). Hercules Company will provide Piper Company with the
Proxy Materials as described in paragraph 4.3 below, for inclusion in the
Registration
A-3
<PAGE>
Statement. Hercules Company will further provide Piper Company with such other
information and documents relating to Hercules Fund as are reasonably necessary
for the preparation of the Registration Statement.
4.3 Hercules Fund will call a meeting of its shareholders to consider and
act upon this Agreement and the Amendment and to take all other action necessary
to obtain approval of the transactions contemplated herein, including, if
necessary, the waiver of any existing investment limitations that might
otherwise preclude Hercules Fund from holding all of its assets as Piper Fund
Shares until such shares are distributed to Hercules Fund shareholders. Hercules
Company will prepare the notice of meeting, form of proxy and proxy statement
(collectively, "Proxy Materials") to be used in connection with such meeting.
Piper Company will furnish Hercules Company with a currently effective
prospectus relating to Piper Fund Shares for inclusion in the Proxy Materials
and with such other information relating to Piper Fund as is reasonably
necessary for the preparation of the Proxy Materials.
4.4 Subject to the provisions of this Agreement, Piper Fund and Hercules
Fund will each take, or cause to be taken, all action, and do or cause to be
done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
4.5 As soon after the Closing Date as is reasonably practicable, Hercules
Company (a) shall prepare and file all federal and other tax returns and reports
of Hercules Fund required by law to be filed with respect to all periods ending
on or before the Closing Date but not theretofore filed and (b) shall pay all
federal and other taxes shown as due thereon and/or all federal and other taxes
that were unpaid as of the Closing Date, including without limitation, all taxes
for which the provision for payment was made as of the Closing Date (as
represented in paragraph 5.2(k)).
4.6 Piper Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state blue sky and securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
5. REPRESENTATIONS AND WARRANTIES
5.1 Piper Company represents and warrants to Hercules Company as follows:
(a) Piper Fund is a series of Piper Company. Piper Company is a
corporation validly existing and in good standing under the laws
of Minnesota with corporate power to carry on its business as
presently conducted;
(b) Piper Company is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its
shares under the 1933 Act are in full force and effect;
(c) All of the issued and outstanding shares of common stock of Piper
Fund have been offered and sold in compliance in all material
respects with applicable registration requirements of the 1933 Act
and state securities laws. Shares of Piper Fund are registered in
all jurisdictions in which they are required to be registered
under state securities laws and other laws, and Piper Company is
not subject to any stop order and is fully qualified to sell Piper
Fund shares in each state in which such shares have been
registered;
(d) The current Prospectus and Statement of Additional Information of
Piper Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(e) Piper Fund is not in, and the execution, delivery and performance
of this Agreement will not result in a, material violation of any
provision of Piper Company's Articles of Incorporation or By-Laws
or of any agreement, indenture, instrument, contract, lease or
other undertaking to which Piper Fund is a party or by which it is
bound;
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(f) Other than as disclosed in Piper Fund's currently effective
prospectus, no material litigation or administrative proceeding
or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against Piper
Company or Piper Fund or any of its properties or assets which,
if adversely determined, would materially and adversely affect
its financial condition or the conduct of its business; and Piper
Fund knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject
to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects, or
is reasonably likely to materially and adversely affect, its
business or its ability to consummate the transactions herein
contemplated;
(g) Piper Fund's Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial
Highlights as of Piper Fund's most recent fiscal year-end, and for
the year then ended, certified by KPMG Peat Marwick LLP (copies of
which have been furnished to Hercules Fund), fairly present, in
all materials respects, Piper Fund's financial condition as of
such date in accordance with generally accepted accounting
principles, and its results of operations, changes in its net
assets and financial highlights for such period, and as of such
date there were no known liabilities of Piper Fund (contingent or
otherwise) not disclosed therein that would be required in
accordance with generally accepted accounting principles to be
disclosed therein;
(h) Since the date of the most recent audited financial statements,
there has not been any material adverse change in Piper Fund's
financial condition, assets, liabilities or business, other than
changes occurring in the ordinary course of business, or any
incurrence by Piper Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except
indebtedness incurred in the ordinary course of business. For the
purpose of this subparagraph (h), neither a decline in Piper
Fund's net asset value per share nor a decrease in Piper Fund's
size due to redemptions by Piper Fund shareholders shall
constitute a material adverse change;
(i) All issued and outstanding Piper Fund shares are, and at the
Closing Date will be, duly and validly issued and outstanding,
fully paid and nonassessable with no personal liability attaching
to the ownership thereof. Piper Fund does not have outstanding
any options, warrants or other rights to subscribe for or
purchase any of its shares, nor is there outstanding any security
convertible to any of its shares;
(j) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of Piper
Company, and this Agreement constitutes a valid and binding
obligation of Piper Fund enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other laws
relating to or affecting creditors rights and to general equity
principles. No other consents, authorizations or approvals are
necessary in connection with Piper Fund's performance of this
Agreement, except such as have been obtained under the 1933 Act,
the 1934 Act and the 1940 Act and such as may be required under
state securities laws;
(k) Piper Fund Shares to be issued and delivered to Hercules Fund, for
the account of the Hercules Fund Shareholders, pursuant to the
terms of this Agreement will at the Closing Date have been duly
authorized and, when so issued and delivered, will be duly and
validly issued Piper Fund Shares, and will be fully paid and
nonassessable with no personal liability attaching to the
ownership thereof;
(l) All material federal and other tax returns and reports of Piper
Fund required by law to be filed on or before the Closing Date
have been filed and are correct, and all federal and other taxes
shown as due or required to be shown as due on said returns and
reports have been paid or provision has been made for the payment
thereof, and to the best of Piper Fund's
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knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any such return and
there are no facts that might form the basis for such
proceedings;
(m) For each taxable year since its inception, Piper Fund has met the
requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company" and neither the
execution or delivery of, nor the performance of its obligations
under, this Agreement will adversely affect, and no other events,
to the best of Piper Fund's knowledge, are reasonably likely to
occur which will adversely affect, the ability of Piper Fund to
continue to meet the requirements of Subchapter M of the Code;
(n) Since Piper Fund's most recent fiscal year-end, there has been no
change by Piper Fund in accounting methods, principles, or
practices, including those required by generally accepted
accounting principles;
(o) The information furnished or to be furnished by Piper Fund for use
in registration statements, proxy materials and other documents
which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material
respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto; and
(p) The Proxy Materials to be included in the Registration Statement
(only insofar as they relate to Piper Fund) will, on the effective
date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
such statements were made, not materially misleading.
5.2 Hercules Company represents and warrants to Piper Company as follows:
(a) Hercules Fund is a series of Hercules Company. Hercules Company is
a corporation validly existing and in good standing under the laws
of Minnesota.
(b) Hercules Company is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its
shares under the 1933 Act are in full force and effect;
(c) All of the issued and outstanding shares of common stock of
Hercules Fund have been offered and sold in compliance in all
material respects with applicable registration requirements of the
1933 Act and state securities laws. Shares of Hercules Fund are
registered in all jurisdictions in which they are required to be
registered under state securities laws and other laws, and
Hercules Company is not subject to any stop order and is fully
qualified to sell Hercules Fund shares in each state in which such
shares have been registered;
(d) The current Prospectus and Statement of Additional Information of
Hercules Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(e) Hercules Fund is not in, and the execution, delivery and
performance of this Agreement will not result in a, material
violation of any provision of Hercules Company's Articles of
Incorporation or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which Hercules
Fund is a party or by which it is bound;
(f) Other than as disclosed in Hercules Fund's currently effective
prospectus, no material litigation or administrative proceeding
or investigation of or before any court or governmental body is
presently pending or, to its knowledge, threatened against
Hercules
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Fund or any of its properties or assets which, if adversely
determined, would materially and adversely affect its financial
condition or the conduct of its business; and Hercules Fund knows
of no facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body
which materially and adversely affects, or is reasonably likely
to materially and adversely affect, its business or its ability
to consummate the transactions herein contemplated;
(g) Hercules Fund's Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial
Highlights of Hercules Fund as of June 30, 1995 and for the year
then ended, certified by KPMG Peat Marwick LLP (copies of which
have been or will be furnished to Piper Fund) fairly present, in
all material respects, Hercules Fund's financial condition as of
such date, and its results of operations, changes in its net
assets and financial highlights for such period in accordance with
generally accepted accounting principles, and as of such date
there were no known liabilities of Hercules Fund (contingent or
otherwise) not disclosed therein that would be required in
accordance with generally accepted accounting principles to be
disclosed therein;
(h) Since the date of the most recent audited financial statements,
there has not been any material adverse change in Hercules Fund's
financial condition, assets, liabilities or business, other than
changes occurring in the ordinary course of business, or any
incurrence by Hercules Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as
otherwise disclosed in writing to and acknowledged by Piper Fund
prior to the date of this Agreement and prior to the Closing Date.
All liabilities of Hercules Fund (contingent and otherwise) are
reflected in the Valuation Date Statement. For the purpose of this
subparagraph (h), neither a decline in Hercules Fund's net asset
value per share nor a decrease in Hercules Fund's size due to
redemptions by Hercules Fund shareholders shall constitute a
material adverse change;
(i) Hercules Fund has no material contracts or other commitments
(other than this Agreement) that will be terminated with
liability to it prior to the Closing Date;
(j) All issued and outstanding shares of Hercules Fund are, and at
the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof. Hercules Fund does
not have outstanding any options, warrants or other rights to
subscribe for or purchase any of its shares, nor is there
outstanding any security convertible to any of its shares. All
such shares will, at the time of Closing, be held by the persons
and in the amounts recorded by Hercules Fund's transfer agent;
(k) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all
necessary action on the part of Hercules Company, and subject to
the approval of Hercules Fund's shareholders, this Agreement
constitutes a valid and binding obligation of Hercules Fund
enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws relating to or affecting
creditors rights and to general equity principles. No other
consents, authorizations or approvals are necessary in connection
with Hercules Fund's performance of this Agreement, except such as
have been obtained under the 1933 Act, the 1934 Act and the 1940
Act and such as may be required under state securities laws;
(l) All material federal and other tax returns and reports of
Hercules Fund required by law to be filed on or before the
Closing Date shall have been filed and are correct and all
federal and other taxes shown as due or required to be shown as
due on said returns and reports have been paid or provision has
been made for the payment thereof, and to the best of
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Hercules Fund's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to any
such return and there are no facts that might form the basis for
such proceedings;
(m) For each taxable year since its inception, Hercules Fund has met
all the requirements of Subchapter M of the Code for qualification
and treatment as a "regulated investment company" and neither the
execution or delivery of, nor the performance of its obligations
under, this Agreement will adversely affect, and no other events,
to the best of Hercules Fund's knowledge, are reasonably likely to
occur which will adversely affect the ability of Hercules Fund to
continue to meet the requirements of Subchapter M of the Code;
(n) At the Closing Date, Hercules Fund will have good and valid title
to the Hercules Fund Assets, subject to no liens (other than the
obligation, if any, to pay the purchase price of portfolio
securities purchased by Hercules Fund which have not settled prior
to the Closing Date), security interests or other encumbrances,
and full right, power and authority to assign, deliver and
otherwise transfer such assets hereunder, and upon delivery and
payment for such assets, Piper Fund will acquire good and
marketable title thereto, subject to no restrictions on the full
transfer thereof, including any restrictions as might arise under
the 1933 Act;
(o) On the effective date of the Registration Statement, at the time
of the meeting of Hercules Fund's shareholders and on the Closing
Date, the Proxy Materials will (i) comply in all material respects
with the provisions of the 1933 Act, the Securities Exchange Act
of 1934, as amended ("1934 Act") and the 1940 Act and the
regulations thereunder and (ii) not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading. Neither Hercules Fund nor Hercules Company shall be
construed to have made the foregoing representation with respect
to portions of the Proxy Materials furnished by Piper Fund. Any
other information furnished by Hercules Fund for use in the
Registration Statement or in any other manner that may be
necessary in connection with the transactions contemplated hereby
shall be accurate and complete and shall comply in all material
respects with applicable federal securities and other laws and
regulations thereunder;
(p) Hercules Fund has maintained or has caused to be maintained on its
behalf all books and accounts as required of a registered
investment company in compliance with the requirements of Section
31 of the 1940 Act and the Rules thereunder; and
(q) Hercules Fund is not acquiring Piper Fund Shares to be issued
hereunder for the purpose of making any distribution thereof other
than in accordance with the terms of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF HERCULES FUND
The obligations of Hercules Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by Piper Fund of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of Piper Fund contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the be Closing Date.
6.2 Piper Fund shall have delivered to Hercules Fund a certificate of its
President and Treasurer, in a form reasonably satisfactory to Hercules Fund and
dated as of the Closing Date, to the effect that the representations and
warranties of Piper Company made in this Agreement are true and correct at and
as of the a Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as Hercules Company
shall reasonably request.
6.3 Hercules Company shall have received a favorable opinion from Dorsey &
Whitney LLP, counsel to Piper Fund, dated as of the Closing Date, to the effect
that: (a) Piper Company is a validly existing
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Minnesota corporation and has the corporate power to own all of the properties
and assets of Piper Fund and, to the knowledge of such counsel, to carry on its
business as presently conducted; (b) Piper Company is a duly registered,
open-end, management investment company, and, to the knowledge of such counsel,
its registration with the Commission as an investment company under the 1940 Act
is in full force and effect; (c) this Agreement has been duly authorized,
executed and delivered by Piper Fund and, assuming that the Registration
Statement complies with the 1933 Act, the 1934 Act and the 1940 Act and
regulations thereunder and assuming due authorization, execution and delivery of
this Agreement by Hercules Fund, is a valid and binding obligation of Piper Fund
enforceable against Piper Fund in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws relating to or affecting creditors rights and to
general equity principles; (d) Piper Fund Shares to be issued to Hercules Fund
Shareholders as provided by this Agreement are duly authorized and, assuming
receipt of the consideration to be paid therefor, upon such delivery will be
validly issued and outstanding and fully paid and nonassessable, and, to the
knowledge of such counsel, no shareholder of Piper Fund has any preemptive
rights to subscription or purchase in respect thereof; (e) the execution and
delivery of this Agreement did not, and the consummation of the transactions
contemplated hereby will not, violate Piper Company's Articles of Incorporation
or By-Laws; and (f) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or any state is required for the consummation by Piper Fund of the
transactions contemplated herein, except such as have been obtained under the
1933 Act, the 1934 Act and the 1940 Act and such as may be required under state
securities laws.
6.4 As of the Closing Date, there shall have been no material change in
the investment objective, policies and restrictions, nor any increase in the
investment management fees or annual fees payable pursuant to Piper Fund's 12b-1
plan of distribution, from those described in the Prospectus and Statement of
Additional Information of Piper Fund in effect on the date of this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PIPER FUND
The obligations of Piper Fund to complete the transactions provided for
herein shall be subject, at its election, to the performance by Hercules Fund of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of Hercules Company contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
7.2 Hercules Fund shall have delivered to Piper Fund at the Closing a
certificate of its President and its Treasurer, in form and substance
satisfactory to Piper Fund and dated as of the Closing Date, to the effect that
the representations and warranties of Hercules Fund made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as Piper Fund shall reasonably request.
7.3 Hercules Fund shall have delivered to Piper Fund a statement,
certified by the Treasurer of Hercules Company, of the Hercules Fund Assets and
its liabilities, together with a list of Hercules Fund's portfolio securities
and other assets showing the respective adjusted bases and holding periods
thereof for income tax purposes, such statement to be prepared as of the Closing
Date and in accordance with generally accepted accounting principles
consistently applied.
7.4 Piper Fund shall have received at the Closing a favorable opinion from
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Hercules Fund, dated as
of the Closing Date to the effect that: (a) Hercules Company is a validly
existing Minnesota corporation and has the corporate power to own all of the
properties and assets of Hercules Fund and, to the knowledge of such counsel, to
carry on its business as presently conducted (Minnesota counsel may be relied
upon in delivering such opinion); (b) Hercules Company is a duly registered,
open-end management investment company under the 1940 Act, and, to the knowledge
of such counsel, its registration with the Commission as an investment company
under the 1940 Act is in full force and effect; (c) this Agreement has been duly
authorized, executed and delivered by
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Hercules Fund and, assuming that the Registration Statement complies with the
1933 Act, the 1934 Act and the 1940 Act and the regulations thereunder and
assuming due authorization, execution and delivery of this Agreement by Piper
Fund, is a valid and binding obligation of Hercules Fund enforceable against
Hercules Fund in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
other laws relating to or affecting creditors rights and to general equity
principles; (d) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, violate Hercules
Company's Articles of Incorporation or By-Laws; and (e) to the knowledge of such
counsel, no consent, approval, authorization or order of any court or
governmental authority of the United States or any state is required for the
consummation by Hercules Fund of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and
such as may be required under state securities laws.
7.5 On the Closing Date, the Hercules Fund Assets shall include no assets
that Piper Fund, by reason of Piper Company's Articles of Incorporation
limitations or otherwise, may not properly acquire.
8 FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF PIPER FUND AND HERCULES FUND
The obligations of Hercules Fund and Piper Fund hereunder are each
subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the Amendment and the transactions contemplated
herein and therein shall have been approved by the requisite vote of the holders
of the outstanding shares of Hercules Fund in accordance with the provisions of
Hercules Company's Articles of Incorporation, and certified copies of the
resolutions evidencing such approval shall have been delivered to Piper Fund.
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state blue sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by Piper Fund or Hercules Fund to permit
consummation, in all material respects, of the transactions contemplated herein
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve risk of a material adverse effect on the assets or
properties of Piper Fund or Hercules Fund.
8.4 The Registration Statement shall have become effective under the 1933
Act, no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
8.5 On or prior to the Valuation Date, Hercules Fund shall have declared
and paid a dividend or dividends and/or other distribution or distributions
that, together with all previous such dividends or distributions, shall have the
effect of distributing to its shareholders all of Hercules Fund's investment
company taxable income (computed without regard to any deduction for dividends
paid) and all of its net capital gain (after reduction for any capital loss
carry-forward and computed without regard to any deduction for dividends paid)
for all taxable years ending on or before the Closing Date.
8.6 The parties shall have received a favorable opinion of the law firm of
Gordon Altman Butowsky Weitzen Shalov & Wein (based on such representations as
such law firm shall reasonably request), addressed to Piper Company and Hercules
Company, which opinion may be relied upon by the shareholders of Hercules Fund,
substantially to the effect that, for federal income tax purposes:
(a) The transfer of substantially all of Hercules Fund's assets in
exchange for Piper Fund Shares and the assumption by Piper Fund of
certain stated liabilities of Hercules Fund followed by the
distribution by Hercules Fund of Piper Fund Shares to the Hercules
Fund Shareholders
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in exchange for their Hercules Fund shares will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the
Code, and Hercules Fund and Piper Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by Piper Fund upon the receipt
of the assets of Hercules Fund solely in exchange for Piper Fund
Shares and the assumption by Piper Fund of the stated liabilities
of Hercules Fund;
(c) No gain or loss will be recognized by Hercules Fund upon the
transfer of the assets of Hercules Fund to Piper Fund in exchange
for Piper Fund Shares and the assumption by Piper Fund of the
stated liabilities of Hercules Fund or upon the distribution of
Piper Fund Shares to the Hercules Fund Shareholders as provided
for in this Agreement;
(d) No gain or loss will be recognized by the Hercules Fund
Shareholders upon the exchange of the Hercules Fund shares for
Piper Fund Shares;
(e) The aggregate tax basis for Piper Fund Shares received by each
Hercules Fund Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Hercules Fund shares
held by each such Hercules Fund Shareholder immediately prior to
the Reorganization;
(f) The holding period of Piper Fund Shares to be received by each
Hercules Fund Shareholder will include the period during which
the Hercules Fund shares surrendered in exchange therefor were
held (provided such Hercules Fund Shares were held as capital
assets on the date of the Reorganization);
(g) The tax basis of the assets of Hercules Fund acquired by Piper
Fund will be the same as the tax basis of such assets to Hercules
Fund immediately prior to the Reorganization; and
(h) The holding period of the assets of Hercules Fund in the hands of
Piper Fund will include the period during which those assets were
held by Hercules Fund.
Notwithstanding anything herein to the contrary, neither Piper Fund nor
Hercules Fund may waive the condition set forth in this paragraph 8.6.
8.7 The Amendment shall have been filed in accordance with applicable
provisions of Minnesota law.
9. FEES AND EXPENSES
9.1 (a) PCM shall bear all direct expenses incurred in connection with
entering into and carrying out the provisions of this Agreement,
including expenses incurred in connection with the preparation,
printing, filing and solicitation of proxies to obtain requisite
shareholder approvals.
(b) In the event the transactions contemplated herein are not
consummated by reason of Hercules Fund's being either unwilling or
unable to go forward (other than by reason of the nonfulfillment
or failure of any condition to Hercules Fund's obligations
specified in this Agreement), PCM's obligations, on behalf of
Hercules Fund, shall be limited to reimbursement of Piper Fund for
all reasonable out-of-pocket fees and expenses incurred by Piper
Fund in connection with those transactions.
(c) In the event the transactions contemplated herein are not
consummated by reason of Piper Fund's being either unwilling or
unable to go forward (other than by reason of the nonfulfillment
or failure of any condition to Piper Fund's obligations specified
in the Agreement), Piper Fund's only obligation hereunder shall be
to reimburse Hercules Fund for all reasonable out-of-pocket fees
and expenses incurred by Hercules Fund in connection with those
transactions.
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10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 This Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated herein, except
that the representations, warranties and covenants of Hercules Fund hereunder
shall not survive the dissolution and complete liquidation of Hercules Fund in
accordance with Section 1.9.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Hercules Company and Piper
Company;
(b) by either Piper Company or Hercules Company by notice to the
other, without liability to the terminating party on account of
such termination (providing the terminating party is not otherwise
in material default or breach of this Agreement) if the Closing
shall not have occurred on or before September 15, 1996; or
(c) by either Piper Fund or Hercules Fund, in writing without
liability to the terminating party on account of such termination
(provided the terminating party is not otherwise in material
default or breach of this Agreement), if (i) the other party shall
fail to perform in any material respect its agreements contained
herein required to be performed on or prior to the Closing Date,
(ii) the other party materially breaches any of its
representations, warranties or covenants contained herein, (iii)
the Hercules Fund shareholders fail to approve this Agreement at
any meeting called for such purpose at which a quorum was present
or (iv) any other condition herein expressed to be precedent to
the obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
11.2 (a) Termination of this Agreement pursuant to paragraphs 11.1 (a) or
(b) shall terminate all obligations of the parties hereunder and
there shall be no liability for damages on the part of Piper Fund
or Hercules Fund or the directors or officers of Piper Fund or
Hercules Fund, to any other party or its directors or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1 (c) shall
terminate all obligations of the parties hereunder and there shall
be no liability for damages on the part of Piper Fund or Hercules
Fund or the directors or officers of Piper Fund or Hercules Fund,
except that any party in breach of this Agreement shall, upon
demand, reimburse the non-breaching party for all reasonable
out-of-pocket fees and expenses incurred in connection with the
transactions contemplated by this Agreement, including legal,
accounting and filing fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties; PROVIDED, HOWEVER, that
following the meeting of Hercules Fund's shareholders called by Hercules Fund
pursuant to paragraph 4.3, no such amendment may have the effect of changing the
provisions for determining the number of Piper Fund Shares to be issued to the
Hercules Fund Shareholders under this Agreement to the detriment of such
Hercules Fund Shareholders without their further approval.
13. MISCELLANEOUS
13.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
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13.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
13.5 The obligations and liabilities of Piper Company hereunder are solely
those of Piper Fund. It is expressly agreed that no shareholder, nominee,
director, officer, agent, or employee of Piper Fund shall be personally liable
hereunder. The execution and delivery of this Agreement have been authorized by
the directors of Piper Company and signed by authorized officers of Piper
Company acting as such, and neither such authorization by such directors nor
such execution and delivery by such officers shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally.
13.6 The obligations and liabilities of Hercules Company hereunder are
solely those of Hercules Company. It is expressly agreed that no shareholder,
nominee, director, officer, agent, or employee of Hercules Fund shall be
personally liable hereunder. The execution and delivery of this Agreement have
been authorized by the directors of Hercules Company and signed by authorized
officers of Hercules Company acting as such, and neither such authorization by
such directors nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by a duly authorized officer.
HERCULES FUNDS INC., on behalf of
Hercules Latin American Value Fund
By: /s/ William H. Ellis
--------------------------------------
Name: William H. Ellis
Title: President
PIPER GLOBAL FUNDS INC., on behalf of
Emerging Markets Growth Fund
By: /s/ Robert H. Nelson
--------------------------------------
Name: Robert H. Nelson
Title: Senior Vice President
A-13
<PAGE>
EXHIBIT 1 TO AGREEMENT AND PLAN OF REORGANIZATION
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
HERCULES FUNDS INC.
The undersigned officer of Hercules Funds Inc. ("Hercules Company"), a
corporation subject to the provisions of Chapter 302A of the Minnesota Statutes,
hereby certifies that Hercules Company's (a) Board of Directors, by written
action dated March 29, 1996, and (b) shareholders, at a meeting held June 18,
1996, adopted the resolutions hereinafter set forth; and such officer further
certifies that the amendments to Hercules Company's Articles of Incorporation
set forth in such resolutions were adopted pursuant to Chapter 302A.
WHEREAS, Hercules Company is registered as an open-end management investment
company (I.E., a mutual fund) under the Investment Company Act of 1940 and
offers its shares to the public in several series, each of which represents a
separate and distinct portfolio of assets; and
WHEREAS, it is desirable and in the best interest of the holders of the
Hercules Latin American Value Fund ("Hercules Fund"), a series of Hercules
Company, that the assets belonging to such series, subject to its stated
liabilities, be sold to Emerging Markets Growth Fund ("Piper Fund"), a series of
Piper Global Funds Inc. ("Piper Company"), a Minnesota corporation and an
open-end management investment company registered under the Investment Company
Act of 1940, in exchange for shares of Piper Fund; and
WHEREAS, Hercules Company wishes to provide for the PRO RATA distribution of
such shares of Piper Fund received by it to holders of shares of Hercules Fund
and the simultaneous cancellation and retirement of the outstanding shares of
Hercules Fund; and
WHEREAS, Hercules Company and Piper Company have entered into an Agreement
and Plan of Reorganization providing for the foregoing transactions; and
WHEREAS, the Agreement and Plan of Reorganization requires that, in order to
bind all shareholders of Hercules Fund to the foregoing transactions, and in
particular to bind such shareholders to the cancellation and retirement of the
outstanding shares of Hercules Fund, it is necessary to adopt an amendment to
Hercules Company's Articles of Incorporation.
NOW, THEREFORE, BE IT RESOLVED, that Hercules Company's Articles of
Incorporation be, and the same hereby are, amended to add the following Article
5D immediately following Article 5 thereof:
5D. (a) For purposes of this Article 5D, the following terms shall have the
following meanings:
"HERCULES COMPANY" means the corporation.
"PIPER COMPANY" means Piper Global Funds Inc., a Minnesota
corporation.
"ACQUIRED FUND" means Hercules Company's Hercules Latin American
Value Fund, the Series D Shares of the Corporation.
"ACQUIRING FUND" means Piper Company's Emerging Markets Growth Fund.
"VALUATION DATE" means the day established in the Agreement and Plan
of Reorganization, as the day upon which the value of the Acquired Fund's
assets is determined for purposes of the reorganization.
"CLOSING DATE" means 9:00 a.m. on the next business day following the
Valuation Date or such other date and time set forth in the pertinent
plan of reorganization or liquidation, as the case may be, for the
consummation of the reorganization or liquidation.
(b) At the Closing Date, the assets belonging to the Acquired Fund, the
Special Liabilities associated with such assets, and the General Assets and
General Liabilities allocated to the Acquired Fund, shall be sold to and
assumed by the Acquiring Fund in return for Acquiring Fund shares, all
A-14
<PAGE>
pursuant to the Agreement and Plan of Reorganization. For purposes of the
foregoing, the terms "assets belonging to", "Special Liabilities", "General
Assets", and "General Liabilities" have the meanings assigned to them in
Article 7(b), (c), and (d) of Hercules Company's Articles of Incorporation.
(c) The number of Acquiring Fund shares to be received by the Acquired
Fund and distributed by it to the Acquired Fund shareholders shall be
determined as follows:
(i) The value of the Acquired Fund's assets and the net asset value
per share of the Acquiring Fund's shares shall be computed as of the
Valuation Date using the valuation procedures set forth in the Acquiring
Fund's then-current Prospectus and Statement of Additional Information,
and as may be required by the Investment Company Act of 1940, as amended
(the "1940 Act").
(ii) The total number of Acquiring Fund shares to be issued
(including fractional shares, if any) in exchange for assets and
liabilities of the Acquired Fund shall be determined as of the Valuation
Date by dividing the value of the Acquired Fund's assets, net of its
stated liabilities on the Closing Date to be assumed by the Acquiring
Fund, by the net asset value of the Acquiring Fund's shares, each as
determined pursuant to (i) above.
(iii) On the Closing Date, or as soon as practicable thereafter, the
Acquired Fund shall distribute PRO RATA to its shareholders of record as
of the Valuation Date the full and fractional Acquiring Fund shares
received by the Acquired Fund pursuant to (ii) above.
(d) The distribution of Acquiring Fund shares to Acquired Fund
shareholders provided for in paragraph (c) above shall be accomplished by an
instruction, signed by Hercules Company's Secretary, to transfer Acquiring
Fund shares then credited to the Acquired Fund's account on the books of the
Acquiring Fund to open accounts on the books of the Acquiring Fund in the
names of the Acquired Fund shareholders in amounts representing the
respective PRO RATA number of Acquiring Fund shares due each such
shareholder pursuant to the foregoing provisions. All issued and outstanding
shares of the Acquired Fund shall simultaneously be canceled on the books of
the Acquired Fund and retired.
(e) From and after the Closing Date, the Acquired Fund shares canceled
and retired pursuant to paragraph (d) above shall have the status of
authorized and unissued Shares of Hercules Company, without designation as
to series.
IN WITNESS WHEREOF, the undersigned officer of Hercules Company has executed
these Articles of Amendment on behalf of Hercules Company on , 1996.
HERCULES FUNDS INC.
By ___________________________________
Its __________________________________
A-15
<PAGE>
APPENDIX A TO
PROXY STATEMENT/PROSPECTUS
ADDITIONAL INFORMATION REGARDING
EMERGING MARKETS GROWTH FUND
Series of Piper Global Funds Inc.
Piper Jaffray Tower
222 South Ninth Street, Minneapolis, Minnesota 55402-3804
(800) 866-7778 (toll free)
Emerging Markets Growth Fund ("Emerging Markets Fund" or the "Fund")) is a
newly formed series of Piper Global Funds Inc. ("Piper Global"), an open-end
mutual fund. Currently, shares of one series, Pacific-European Growth Fund (not
discussed herein) are offered. Emerging Markets Fund is a non-diversified mutual
fund. The investment objective of the Fund is long-term capital appreciation.
Current income is incidental to this objective. Emerging Markets Fund seeks to
achieve its investment objective through investments primarily in Common Stock
of issuers in the world's emerging securities markets. The Fund does not invest
in Common Stock of U.S. companies. No assurance can be given that the Fund's
investment objective will be achieved.
Investment in the Fund involves certain risks and requires consideration of
factors not typically associated with investment in securities of U.S. issuers.
See "Risk Factors."
This Appendix concisely describes information about the Fund including
applicable sales and distribution fees.
<PAGE>
INTRODUCTION
Emerging Markets Growth Fund is a non-diversified series of Piper Global
Funds Inc. ("Piper Global"), an open-end management investment company, or
mutual fund. The investment objective of the Fund is long-term capital
appreciation. Current income is incidental to this objective.
The Investment Adviser
The Fund is managed by Piper Capital Management Incorporated (the
"Adviser"), a wholly owned subsidiary of Piper Jaffray Companies Inc.
Emerging Markets Fund pays the Adviser a monthly management fee at an annual
rate of 1% of the Fund's average daily net assets. This fee is higher than that
paid by most other mutual funds. See "Management--Investment Adviser."
The Sub-Adviser
Edinburgh Fund Managers plc acts as the Fund's sub-adviser (the
"Sub-Adviser") under an agreement with the Adviser. The Sub-Adviser is a public
limited company that was incorporated in 1969. It is controlled by The British
Investment Trust PLC, a Scottish closed-end investment company founded in 1889,
for which the Sub-Adviser serves as investment manager and adviser. The British
Investment Trust PLC owns % of the Sub-Adviser. For its services to Emerging
Markets Fund, the Sub-Adviser is paid a fee by the Adviser equal, on an annual
basis, to .50% of the Fund's average daily net assets. See
"Management--Sub-Adviser."
The Distributor
Piper Jaffray Inc. ("Piper Jaffray" or the "Distributor"), a wholly owned
subsidiary of Piper Jaffray Companies Inc. and an affiliate of the Adviser,
serves as Distributor of the Fund's shares. Pursuant to the Fund's distribution
plan pursuant to Rule 12b-1 (the "12b-1 Plan") under the Investment Company Act
of 1940, as amended (the "1940 Act"), Emerging Markets Fund reimburses the
Distributor each month at the rate of 0.50% of average daily net assets of the
Fund. The Distributor has agreed to voluntarily limit reimbursements under the
Fund's 12b-1 Plan to 0.32% of average daily net assets through at least the
fiscal year ending June 30, 1997.
Offering Price
Shares of the Fund are offered to the public at the next determined net
asset value after receipt of an order by a shareholder's Piper Jaffray
Investment Executive or other broker-dealer plus a maximum sales charge of 4% of
the offering price (4.17% of the net asset value) on purchases of less than
$100,000. The sales charge is reduced on a graduated scale on purchases of
$100,000 or more. In connection with purchases of $500,000 or more, there is no
initial sales charge; however, a 1% contingent deferred sales charge will be
imposed in the event of a redemption transaction occurring within 24 months
following such a purchase. See "How to Purchase Shares--Public Offering Price."
Minimum Initial and Subsequent Investments
The minimum initial investment for the Fund is $250. There is no minimum for
subsequent investments. See "How to Purchase Shares--Minimum Investments."
Exchanges
You may exchange your shares for shares of any other mutual fund managed by
the Adviser which is open to new investors and eligible for sale in your state
of residence. All exchanges are subject to the minimum investment requirements
and other applicable terms set forth in the prospectus of the fund whose shares
you acquire. Exchanges are made on the basis of the net asset values of the
funds involved, except that investors exchanging into a fund which has a higher
sales charge must pay the difference. You may make four exchanges per year
without payment of a service charge. Thereafter, there is a $5 service charge
for each exchange. See "Shareholder Services--Exchange Privilege."
Redemption Price
Shares of the Fund may be redeemed at any time at their net asset value next
determined after a redemption request is received by your Piper Jaffray
Investment Executive or other broker-dealer. A contingent deferred sales charge
will be imposed upon the redemption of certain shares initially purchased
<PAGE>
without a sales charge. See "How to Redeem Shares--Contingent Deferred Shares
Charge." The Fund reserves the right, upon 30 days written notice, to redeem an
account if the net asset value of the shares falls below $200. See "How to
Redeem Shares--Involuntary Redemption."
Certain Risk Factors to Consider
An investment in the Fund is subject to certain risks, as set forth in
detail under "Investment Objectives and Policies," "Special Investment Methods"
and "Risk Factors." As with other mutual funds, there can be no assurance that
the Fund will achieve its objective. Because the Fund invests in securities of
emerging market countries, an investment in the Fund requires consideration of
certain risk factors that are not typically associated with investing in
securities of U.S. companies. These factors include risks relating to adverse
currency fluctuations, potential political, social and economic instability of
emerging market countries, limited liquidity and volatile prices of securities
traded on emerging securities markets, and foreign taxation. The Emerging
Markets Fund is a non-diversified fund, which means that it may invest a greater
portion of its assets in securities of individual issuers than a diversified
fund. As a result, changes in the market value of a single issuer could cause
greater fluctuations in share value than would occur in a more diversified fund.
The Fund may also engage in the following investment practices which involve
certain special risks: entering into currency exchange transactions, forward
foreign currency exchange transactions and foreign currency futures and options,
entering into options transactions on securities in which the Fund may invest,
the use of repurchase agreements, the lending of portfolio securities, entering
into futures contracts and options on futures contracts, the purchase of
securities on a "when-issued" basis and the purchase or sale of securities on a
"forward commitment" basis. The use of these investment practices may increase
the volatility of the Fund's net asset value. The Fund may invest in illiquid
securities which will involve greater risk than investments in other securities
and may increase Fund expenses.
Shareholder Inquiries
Any questions or communications regarding a shareholder account should be
directed to your Piper Jaffray Investment Executive or, in the case of shares
held through another broker-dealer, to IFTC at (800) 874-6205. General inquiries
regarding the Fund should be directed to the Fund at the telephone number set
forth on the cover page of this Appendix.
<PAGE>
FUND EXPENSES
<TABLE>
<CAPTION>
Emerging
Markets
Fund
-----
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price) (1).............................................. 4.00%
Maximum Deferred Sales Charge (2)................................. 0%
Exchange Fee (3).................................................. $0
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees................................................... 1.00%
Rule 12b-1 Fees (4) (after voluntary limitations)................. 0.32%
Other Expenses (after voluntary expense reimbursement) (5)........ 0.68%
-----
Total Fund Operating Expenses (after voluntary limitations and
expense reimbursements)....................................... 2.00%
</TABLE>
- ---------
(1) No sales charge will be imposed on Shares in the Reorganization (as defined
in the Proxy Statement/ Prospectus of which this Appendix is a part). On
unrelated purchases, the front end sales charge of 4.00% applies to
purchases of less than $100,000 and scales down to 0% on purchases of
$500,000 or more.
(2) A contingent deferred sales charge ("CDSC") of 1.00% will be imposed on
redemptions occurring within 24 months of purchase. No CDSC will be imposed
on shareholders who acquire shares in the Reorganization.
(3) There is a $5.00 fee for each exchange in excess of four exchanges per year.
See "How to Purchase Shares-Exchange Privilege."
(4) A portion of the 12b-1 fee equal to 0.25% of average daily net assets is
characterized as a service fee within the meaning of the National
Association of Securities Dealers, Inc. ("NASD") guidelines. Pursuant to the
Fund's 12b-1 Plan, the Distributor is reimbursed monthly by the Fund at the
rate of 0.50% of average daily net assets of the Fund. The Distributor has
agreed to voluntarily limit 12b-1 fees to 0.32% per annum of the Fund's
average daily net assets.
(5) Piper Capital has agreed to voluntarily reimburse the Fund so that Total
Fund Operating Expenses do not exceed 2.00% of average daily net assets at
least through June 30, 1997. Without such reimbursements, Other Expenses
would have been 1.77% of average daily net assets. Total Fund Operating
Expenses after voluntary limitations and expense reimbursements are limited
to 2.00% of average daily net assets at least through June 30, 1997. Without
such reimbursements and the voluntary limitation discussed above, Total Fund
Operating Expenses are estimated to be 3.27% of average daily net assets.
Example
You would pay the following expenses on a $1,000 investment assuming a 5%
annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerging
Markets
Fund
--------
<S> <C>
1 year............. $ 20
3 years............ $ 63
5 years............ $ 108
10 years............ $ 233
</TABLE>
The purpose of the above Fund Expenses table is to assist you in
understanding the various costs and expenses that investors in the Fund will
bear directly or indirectly. The Example contained in the table should not be
considered a representation of past or future expenses. Actual expenses may be
greater or lesser than those shown. Expenses for shares of the Fund purchased
subject to the maximum front-end sales charge are: $59, $100, $143 and $263 for
the one-, three-, five- and ten-year periods shown, respectively.
The information set forth in the table for the Fund is based on expenses
expected to be incurred by the Fund during the first year of operations. The
expenses reflect a voluntary limitation by Piper Capital to limit Total Fund
Operating Expenses to 2.00% of average daily net assets. Absent such
reimbursement and 12b-1 limitation, estimated Total Fund Operating Expenses for
Emerging Markets Fund for the fiscal period ended
<PAGE>
June 30, 1996 would be 3.27% of average daily net assets. These voluntary
limitations may be revised or terminated at any time after the fiscal year
ending June 30, 1997. The Adviser may or may not assume additional expenses of
the Funds from time to time, in its discretion, while retaining the ability to
be reimbursed by the Funds for expenses assumed during a fiscal year prior to
the end of such year. The foregoing policy will have the effect of lowering the
Fund's overall expense ratio and increasing yield to investors when such amounts
are assumed or the inverse when such amounts are reimbursed.
As a result of the Fund's payment of its Rule 12b-1 fee, a portion of which
is considered an asset-based sales charge, long-term shareholders of the Funds
may pay more than the economic equivalent of the maximum 6.25% front end sales
charge permitted under the rules of the National Association of Securities
Dealers, Inc. For additional information, including a more complete explanation
of management and Rule 12b-1 fees, see "Management--Investment Adviser" and
"Distribution of Fund Shares."
It is expected that the performance history and financial information of the
Emerging Markets Fund, upon consummation of the Reorganization, will be that of
its predecessor, Hercules Latin American Value Fund.
INVESTMENT OBJECTIVE AND POLICIES
Emerging Markets Fund's investment objective is long-term capital
appreciation. Current income is incidental to this objective. Emerging Markets
Fund seeks to achieve its investment objective through investments primarily
(under normal circumstances, at least 65% of its total assets) in Common Stock
(as defined above) of issuers in the world's emerging securities markets.
Emerging securities markets can be found in regions such as Latin America, Asia,
Eastern Europe, the Middle East, Southern Europe and Africa. The Fund's
investment objective is fundamental and cannot be changed without shareholder
approval. In attempting to achieve the Fund's investment objective, Management
will focus primarily on allocation of assets among selected emerging markets
and, secondarily, on issuer selection within those markets. Because the Emerging
Markets Fund is the successor to the Hercules Latin American Vaue Fund (see
"General Information") the portfolio will initially consist solely of securities
of Latin American issuers. This may cause the fund's performance to be more
volatile than that of a more geographically diversified fund. See "Risk Factors"
for a discussion of the risks of investment in Latin America. As investment
opportunities arise, however, Management expects to allocate new investments
among emerging markets in other geographic areas of the world. The Fund will at
all times, except during defensive periods, maintain investments in at least
three countries having emerging markets.
The Fund's assets will be allocated among emerging markets in accordance
with Management's judgment as to where the best investment opportunities exist.
Criteria for determining the appropriate distribution of investments within an
emerging market include the prospects for relative growth among the countries,
expected levels of inflation, government policies influencing business
conditions, the outlook for currency relationships and the range of alternative
opportunities available to international investors. Criteria for selection of
individual securities include the issuer's competitive position, prospects for
growth, managerial strength, earnings quality, underlying asset value, relative
market value and overall marketability. The Fund may invest in securities of
companies having various levels of net worth, including smaller companies whose
securities generally are more volatile than securities offered by larger
companies with higher levels of net worth.
Countries with emerging markets include those that have an emerging stock
market as defined by the International Finance Corporation, those with low- to
middle-income economies according to the International Bank for Reconstruction
and Development (the World Bank), and those listed in World Bank publications as
developing. The Fund will emphasize countries with relatively low gross national
product per capita compared to the world's major economies, and with the
potential for rapid economic growth. An issuer in an emerging market is defined
as a company: (1) the principal securities trading market for which is an
emerging market; (2) which is organized under the laws of an emerging market
country; or (3) which derives a significant proportion (at least 50%) of its
revenues or profits from goods produced or sold, investments made, or services
performed in the emerging market country or which has at least 50% of its assets
situated in such a country.
<PAGE>
The Fund currently intends to select its investments from the following
countries with emerging markets:
<TABLE>
<S> <C>
Asia: China, India, Indonesia, Korea, Malaysia, Pakistan, Philippines, Sri
Lanka, Taiwan, Thailand
Europe: Czech Republic, Greece, Hungary, Poland, Portugal
Latin
America: Argentina, Brazil, Chile, Colombia, Mexico, Peru, Venezuela
Africa: Nigeria, South Africa, Zimbabwe
Middle East: Jordan, Turkey
</TABLE>
The foregoing list of emerging markets is not exhaustive; the Fund may
invest in countries other than those listed above when such investments are
consistent with the Fund's investment objective and policies. The Fund will at
all times, except during defensive periods, maintain investments in at least
three countries having emerging markets. General characteristics of developing
market countries also include lower degrees of political stability, a high
demand for capital investment, a high dependence on export markets for their
major industries, a need to develop basic economic infrastructures, and rapid
economic growth. Management believes that investments in Common Stock of
companies in emerging markets offer the opportunity for significant long-term
investment returns. However, these investments involve certain risks. See "Risk
Factors" below.
Types of Securities in Which the Funds May Invest
The Fund invests primarily in Common Stock. In addition, up to 10% of the
Fund's assets may be invested in rights, options or warrants to purchase Common
Stock. In addition to investing directly in Common Stock, the Fund may invest in
American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs").
Generally, ADRs in registered form are U.S. dollar denominated securities
designed for use in the U.S. securities markets, which represent and may be
converted into the underlying foreign security. EDRs are typically issued in
bearer form and are designed for use in the European securities markets. The
Fund does not currently intend to invest in ADR's sponsored by persons other
than the underlying issuers. The Fund also may purchase shares of investment
companies or trusts which invest principally in securities in which the Fund is
authorized to invest. The purchase of investment company stock currently is one
of the few mechanisms through which the Fund may invest in securities of
companies located in a number of countries. For a discussion of the risks of
investing in investment companies, see "Risk Factors--Investment and
Repatriation Restrictions."
For temporary defensive purposes, the Fund may invest without limitation in
U.S. dollar denominated or foreign currency denominated cash or in high quality
debt securities with remaining maturities of one year or less. Such securities
may include commercial paper, certificates of deposit, bankers' acceptances and
securities issued by the U.S. or a foreign government, their agencies or
instrumentalities. All securities in which the Fund invests for defensive
purposes (other than securities issued or guaranteed by the U.S. or a foreign
government, their agencies or instrumentalities) must be rated AA or better by
Standard & Poor's Ratings Services or be of comparable quality as determined by
the Adviser. For an explanation of ratings, see Exhibit A to Appendix A to the
Statement of Additional Information relating to the Proxy Statement/ Prospectus.
SPECIAL INVESTMENT METHODS
The following discussion describes some of the investment management
practices that the Fund may employ from time to time to facilitate portfolio
management and mitigate risk.
Foreign Currency Transactions
The Fund may engage in currency exchange transactions in connection with the
purchase and sale of its investments. Currency exchange transactions are
necessary to enable the Fund to purchase securities denominated in a foreign
currency and to convert interest and dividend payments or sales proceeds paid in
a foreign currency into U.S. dollars or into another currency. In addition, the
Fund may engage in forward foreign currency exchange transactions and foreign
currency futures and options transactions to protect against uncertainty with
respect to future currency exchange rates. Forward currency exchange and futures
<PAGE>
and options transactions are used only for hedging and not for speculation. The
Fund conducts currency exchange transactions either on a spot (cash) basis at
the rate prevailing in the currency exchange market or through entering into
forward or futures contracts to purchase or sell foreign currencies.
The Fund may engage in "transaction hedging" to protect against a change in
the foreign currency exchange rate between the date on which the Fund contracts
to purchase or sell the security and the settlement date or to "lock in" the
U.S. dollar equivalent (or other foreign currency equivalent to the extent
needed for purposes of purchasing securities) of a dividend or interest payment
in a foreign currency. For that purpose, the Fund may purchase or sell a foreign
currency on a spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities denominated in that
foreign currency.
If conditions warrant, the Fund may also enter into contracts to purchase or
sell foreign currencies at a future date ("forward contracts") and purchase or
sell foreign currency futures contracts as a hedge against changes in foreign
currency exchange rates between the trade and settlement dates on particular
transactions and not for speculation. A foreign currency forward contract is a
negotiated agreement to exchange currency at a future time at a rate or rates
that may be higher or lower than the spot rate. Foreign currency futures
contracts are standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, the Fund may also purchase exchange-listed
and over-the-counter call and put options on foreign currency futures contracts
and on foreign currencies. A put option on a futures contract gives the Fund the
right to assume a short position in the futures contract until expiration of the
option. A put option on currency gives the Fund the right to sell a currency at
an exercise price until the expiration of the option. A call option on a futures
contract gives the Fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives the
Fund the right to purchase a currency at the exercise price until the expiration
of the option.
The Fund may engage in "position hedging" to protect against a decline in
the value relative to the U.S. dollar of the currencies in which portfolio
securities are denominated or quoted (or an increase in the value of currency
for securities which the Fund intends to buy, when it holds cash reserves and
short-term investments). For position hedging purposes, the Fund may purchase or
sell foreign currency futures contracts and foreign currency forward contracts,
and may purchase put or call options on foreign currency futures contracts and
in foreign currencies on exchanges or over-the-counter markets. In connection
with position hedging, the Fund may also purchase or sell foreign currency on a
spot basis.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency. In addition, hedging transactions involve costs and may result in
losses. The Fund may write covered call options on foreign currencies to offset
some of the costs of hedging those currencies. The Fund will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of the Adviser, the pricing mechanism
and liquidity are satisfactory and the participants are responsible parties
likely to meet their contractual obligations. The Fund's ability to engage in
hedging and related option transactions may be limited by tax considerations.
See "Taxation--Consequences of Certain Fund Investments" in Appendix A to the
Statement of Additional Information relating to this Proxy Statement/Prospectus.
For additional information regarding foreign currency transactions, see
"Investment Objectives and Policies--Foreign Currency Transactions" in Appendix
A to the Statement of Additional Information relating to this Proxy
Statement/Prospectus.
Hedging
The Fund may engage in various futures and put and call transactions
(collectively, "Hedging Transactions"). Hedging Transactions may be used to
attempt to protect against possible declines in the market value of the Fund's
portfolio, to protect the Fund's unrealized gains in the value of its portfolio
securities, to facilitate the sale of such securities for investment purposes or
to establish a position in the securities markets as a temporary substitute for
purchasing particular securities. Any or all of these techniques may be
<PAGE>
used at any time. There is no overall limitation on the percentage of the Fund's
portfolio securities which may be subject to a hedge position. There is no
particular strategy that requires use of one technique rather than another. Use
of any Hedging Transaction is a function of market conditions. The Hedging
Transactions that the Fund may use are described below. Additional Hedging
Transactions may be used by the Fund in the future as they are developed to the
extent deemed appropriate by the Board of Directors of Piper Global.
OPTIONS ON SECURITIES. In seeking to reduce fluctuations in net asset
value, the Fund may write (i.e., sell), covered put and call options and
purchase put and call options on the securities in which it may invest. Such
options are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets.
A put option gives the buyer of such option, upon payment of a premium, the
right to deliver a specified amount of a security to the writer of the option on
or before a fixed date at a predetermined price. A call option gives the
purchaser of the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a fixed date, at
a predetermined price. A call option written by the Fund is "covered" if the
Fund owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if the Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Fund in cash and high grade liquid debt
securities in a segregated account with its custodian. A put option written by
the Fund is "covered" if the Fund maintains cash and high grade liquid debt
securities with a value equal to the exercise price in a segregated account with
its custodian, or else holds a put on the same security and in the same
principal amount as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written. The Fund will
not write puts if, as a result, more than 50% of the Fund's assets would be
required to be segregated. The premium paid by the purchaser of an option will
reflect, among other things, the relationship of the exercise price to the
market price and volatility of the underlying security, the remaining term of
the option, supply and demand and interest rates.
In purchasing a call option, the Fund would be in a position to realize a
gain if, during the option period, the price of the security increased above the
call option price by an amount in excess of the cost of the option. Otherwise,
it would realize a loss. In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the price of the
security declined below the put option price by an amount in excess of the cost
of the option. Otherwise, it would realize a loss. If a put or call option
purchased by the Fund were permitted to expire without being sold or exercised,
its premium would be lost by the Fund.
If a put option written by the Fund were exercised, the Fund would be
obligated to purchase the underlying security at the exercise price. If a call
option written by the Fund were exercised, the Fund would be obligated to sell
the underlying security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value of the
underlying security caused by rising interest rates or other factors. If this
occurred, the option could be exercised and the underlying security would then
be sold to the Fund at a higher price than its current value. The risk involved
in writing a call option is that there could be an increase in the market value
of the underlying security caused by declining interest rates or other factors.
If this occurred, the option could be exercised and the underlying security
would then be sold by the Fund at a lower price than its current market value.
These risks could be reduced by entering into a closing transaction as described
in Appendix B to the Statement of Additional Information. The Fund retains the
premium received from writing a put or call option whether or not the option is
exercised. See Exhibit B to Appendix A to the Statement of Additional
Information relating to this Proxy Statement/Prospectus for a further discussion
of the use, risks and costs of option trading.
The exchanges have established position limits governing the maximum number
of options which may be written by an investor or group of investors acting in
concert. Similarly, the Commodities Futures Trading Commission and the Chicago
Board of Trade have established futures position limits for an investor or group
of investors acting in concert. (A discussion of the Fund's ability to invest in
futures contracts and options thereon is set forth below.) The position limits
may restrict the Fund's ability to
<PAGE>
purchase or write options on a particular security or to enter into futures
contracts. It is possible that the Fund and other clients of the Adviser,
including closed-end and other open-end investment companies managed by the
Adviser, may be considered to be a group of investors acting in concert. Thus,
the number of options or futures transactions which the Fund may enter into may
be affected by options or futures transactions of other investment advisory
clients of the Adviser.
Over-the-counter options are purchased or written by a Fund in privately
negotiated transactions. Such options are illiquid and it may not be possible
for the Fund to dispose of an option it has purchased or terminate its
obligations under an option it has written at a time when the Adviser believes
it would be advantageous to do so.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may enter into
contracts for the purchase or sale for future delivery of securities or
contracts based on financial indices including any index of securities in which
the Fund may invest ("futures contracts") and may purchase and write put and
call options to buy or sell futures contracts ("options on futures contracts").
A "sale" of a futures contract means the acquisition of a contractual obligation
to deliver the securities called for by the contract at a specified price on a
specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made. Options on futures contracts to be written or purchased by the Fund
will be traded on exchanges or over-the-counter. These investment techniques are
used only to hedge against declines in the value of the Fund's portfolio
securities or increases in the prices of securities which the Fund intends to
purchase at a later date. The successful use of such instruments relies upon
management's experience with respect to such instruments. Should prices move in
an unexpected manner, the Fund may not achie the anticipated benefits of futures
contracts or options on futures contracts or may realize losses and would thus
be in a worse position than if such strategies had not been used. In addition,
the correlation between movements in the price of futures contracts or options
on futures contracts and movements in the prices of the securities hedged or
used for cover will not be perfect. See Exhibit B to Appendix A to the Statement
of Additional Information relating to this Registration Statement on Form N-14
for further discussion of the use, risks and costs of futures contracts and
options on futures contracts.
Futures contracts and options on futures contracts are used only as a hedge
and not for speculation. In addition, the Fund does not enter into any futures
contracts or options on futures contracts if immediately thereafter the amount
of initial margin deposits on all the futures contracts of the Fund and premiums
paid on options on futures contracts would exceed 5% of the market value of the
total assets of the Fund. This restriction will not be changed by the Board of
Directors without considering the policies and concerns of the various
applicable federal and state regulatory agencies.
The Fund limits its activities in options and futures contracts to the
extent necessary to prevent disqualification of the Fund as a regulated
investment company under the Internal Revenue Code. For a discussion of the tax
treatment of futures contracts and options on futures contracts, see "Taxation--
Consequences of Certain Fund Investments" in Appendix A to the Statement of
Additional Information relating to this Proxy Statement/Prospectus.
When-Issued and Forward Commitment Securities
The Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. The Fund may make such
purchases in order to lock-in the purchase price of a security which Management
believes will appreciate in value. There is always the risk, however, that the
security will decrease in value prior to its delivery. When such transactions
are negotiated, the price is fixed at the time the commitment is made, but
delivery and payment for the securities take place at a later date, which can be
a month or more after the date of the transaction. At the time the Fund makes
the commitment to purchase securities on a when-issued or forward commitment
basis, it will record the transaction and thereafter reflect the value of such
securities in determining its net asset value. At the time the Fund enters into
a transaction on a when-issued or forward commitment basis, a segregated account
consisting of cash or high grade liquid debt securities equal to the value of
the when-issued or forward commitment securities will be established and
maintained with the custodian and will be marked to the market daily. On the
<PAGE>
delivery date, the Fund will meet its obligations from securities that are then
maturing or sale of the securities held in the segregated asset account and/or
from then available cash flow. If the Fund disposes of the right to acquire a
when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it can incur a gain or loss due
to market fluctuation.
There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. The purchase of
securities on a when-issued or forward commitment basis can result in increased
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. Settlements in the
ordinary course, which may take substantially more than three business days for
non-U.S. securities, are not treated by the Fund as when-issued or forward
commitment transactions and, accordingly, are not subject to the foregoing
limitations even though some of the risks described above may be present in such
transactions.
Repurchase Agreements
The Fund may enter, without limitation, into repurchase agreements
pertaining to the securities in which it may invest with securities dealers or
member banks of the Federal Reserve System. A repurchase agreement arises when a
buyer such as the Fund purchases a security and simultaneously agrees to resell
it to the vendor at an agreed-upon future date, normally one day or a few days
later. The resale price is greater than the purchase price, reflecting an agreed
upon interest rate which is effective for the period of time the buyer's money
is invested in the security and which is related to the current market rate
rather than the coupon rate on the purchased security. Such agreements permit
the Fund to keep all of its assets at work while retaining "overnight"
flexibility in pursuit of investments of a longer-term nature. The Fund requires
continual maintenance by its custodian for its account in the Federal
Reserve/Treasury Book Entry System of collateral in an amount equal to, or in
excess of, the resale price. In the event a vendor defaults on its repurchase
obligation, the Fund might suffer a loss to the extent that the proceeds from
the sale of the collateral are less than the repurchase price. In the event of a
vendor's bankruptcy, the Fund might be delayed in, or prevented from, selling
the collateral for the Fund's benefit. The Board of Directors has established
procedures, which are periodically reviewed by the Board, pursuant to which the
Adviser will monitor the creditworthiness of the dealers and banks with which
the Fund enters into repurchase agreement transactions.
Lending of Securities
In order to facilitate achievement of its investment objective, the Fund may
from time to time lend securities from its portfolio to brokers, dealers and
financial institutions and receive collateral in the form of cash or U.S.
government securities. Securities lending may be used to generate income to
cushion the Fund against declines in stock prices without requiring the Fund to
sell portfolio securities which it believes will appreciate in value. As with
other extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of the securities fail financially.
However, the Fund will enter into loan arrangements only with brokers, dealers
or financial institutions which the Adviser has determined are creditworthy
under guidelines established by the Board of Directors. In addition, collateral
for such loans must be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities (including interest on
the loaned securities). The interest accruing on the loaned securities will be
paid to the Fund and the Fund will have the right, on demand, to call back the
loaned securities. The Fund may pay fees to arrange the loans. The Fund will not
lend portfolio securities in excess of 30% of the value of its total assets
(including such loans), nor does the Fund lend its portfolio securities to any
officer, director, employee or affiliate of the Fund or the Adviser or
Sub-Adviser.
Illiquid Securities
The Fund will not invest more than 15% of its net assets in illiquid
securities. This restriction is non-fundamental and thus, may be changed without
shareholder approval. A security is considered illiquid if it cannot be sold in
the ordinary course of business within seven days at approximately the price at
which it is valued. Illiquid securities may offer a higher yield than securities
which are more readily marketable, but they may not always be marketable on
advantageous terms.
<PAGE>
The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts and other selling expenses than
does the sale of securities eligible for trading on national securities
exchanges or in the over-the-counter markets. The Fund may be restricted in its
ability to sell such securities at a time when the Adviser or Sub-Adviser deems
it advisable to do so. In addition, in order to meet redemption requests, the
Fund may have to sell other assets, rather than such illiquid securities, at a
time which is not advantageous.
"Restricted securities" are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933
(the "1933 Act"). Such securities generally have been considered illiquid,
because they may be resold only subject to statutory restrictions and delays or
if registered under the 1933 Act. In 1990, however, the Securities and Exchange
Commission adopted Rule 144A under the 1933 Act, which provides a safe harbor
exemption from the registration requirements of the 1933 Act for resales of
restricted securities to "qualified institutional buyers," as defined in the
rule. The result of this rule has been the development of a more liquid and
efficient institutional resale market for restricted securities. Thus,
restricted securities are no longer necessarily illiquid. The Fund may therefore
invest in Rule 144A securities and treat them as liquid when they have been
determined to be liquid by the Board of Directors or by the Adviser or
Sub-Adviser subject to the oversight of and pursuant to procedures adopted by
the Board of Directors. See "Investment Objectives and Policies--Illiquid
Securities" in Appendix A to the Statement of Additional Information relating to
this Proxy Statement/Prospectus. Similar determinations may be made with respect
to commercial paper issued in reliance on the so-called "private placement"
exemption from registration under Section 4(2) of the 1933 Act.
Borrowing
The Fund may borrow money only from banks for temporary or emergency
purposes in an amount up to 10% of the value of the Fund's total assets,
provided that reverse repurchase agreements entered into by the Fund are not
subject to such limitation. Reverse repurchase agreements are subject, however,
to the asset coverage requirements of the Investment Company Act of 1940 (the
"1940 Act") and to certain segregated account requirements. The Fund has not
entered into reverse repurchase agreements in the past and has no current
intention of entering into such agreements in the future. See "Investment
Objectives and Policies-- Reverse Repurchase Agreements" in Appendix A to the
Statement of Additional Information relating to this Proxy Statement/Prospectus.
Interest paid by the Fund on borrowed funds will decrease the net earnings of
the Fund. The Fund will not purchase portfolio securities while outstanding
borrowings (other than reverse repurchase agreements) exceed 5% of the value of
the Fund's total assets. The Fund may mortgage, pledge or hypothecate its assets
only to secure such temporary or emergency borrowing. The policies set forth in
this paragraph are fundamental and may not be changed without shareholder
approval.
Portfolio Turnover
The Fund intends to acquire and hold securities for long-term capital
appreciation and normally does not intend to trade in securities for short-term
gains; however, securities may be purchased and sold at such times as Management
deems to be in the best interests of the Fund and its shareholders. The method
of calculating portfolio turnover rate is set forth in Appendix A the Statement
of Additional Information relating to this Proxy Statement/Prospectus under
"Investment Objectives and Policies--Portfolio Turnover." It is expected that
the portfolio turnover rate of the Fund will not exceed 60%.
Investment Restrictions
The Fund has adopted certain fundamental and nonfundamental investment
restrictions in addition to those set forth above. Fundamental investment
restrictions which may not be changed without shareholder approval include the
following: The Fund will not invest 25% or more of the value of its total assets
in the same industry. (This restriction does not apply to securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities.) In
addition, as nonfundamental investment restrictions which may be changed at any
time without shareholder approval, the Fund will not invest more than 5% of its
net assets in warrants or more than 5% of its total assets in the securities of
issuers which, with their predecessors, have a record of less than three years'
continuous operation. A list of the fundamental and nonfundamental investment
restrictions is set forth in Appendix A to the Statement of Additional
Information relating to this Proxy Statement/Prospectus.
<PAGE>
RISK FACTORS
Investment in emerging markets countries' securities requires consideration
of factors not typically associated with investment in securities of U.S.
issuers. Those include the following:
CURRENCY FLUCTUATIONS. The value of the Fund's portfolio securities
computed in U.S. dollars will vary with increases and decreases in the exchange
rate between the currencies in which the Fund has invested and the U.S. dollar.
A decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of the Fund's holdings of securities
denominated in such currency and, therefore, will cause an overall decline in
the Fund's net asset value and net investment income and capital gains, if any,
to be distributed in U.S. dollars to shareholders by the Fund.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the price of oil, the pace of activity in the industrial
countries, including the United States, and other economic and financial
conditions affecting the world economy.
POLITICAL AND ECONOMIC RISKS. Investing in securities of non-U.S. companies
may entail additional risks. Nationalization, expropriation or confiscatory
taxation, currency blockage, political changes, government regulation, social
instability or diplomatic developments could affect adversely the economy of a
country or the Fund's investment in such country. The Fund may also be adversely
affected by exchange control regulations.
CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION. Non-U.S.
companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory requirements comparable to
those applicable to U.S. companies. Thus, there may be less available
information concerning non-U.S. issuers of securities held by the Fund than is
available concerning U.S. companies.
Applicable accounting and financial reporting standards in Eastern Europe
may be substantially different from U.S. accounting standards and, in certain
Eastern European countries, no reporting standards currently exist.
Consequently, substantially less information on Eastern European companies is
available to investors and the information that is available may not be
conceptually comparable to, or prepared on the same basis as that available in
more developed capital markets, which may make it difficult to assess the
financial status of particular companies. However, in order to become attractive
to Western international investors such as the Fund, some Eastern European
companies may submit to reviews of their financial condition conducted in
accordance with accounting standards employed in Western European countries.
Management believes that such information, together with the application of
other analytical techniques, can provide an adequate basis on which to assess
the financial viability of such companies.
MARKET CHARACTERISTICS. Securities of many non-U.S. companies may be less
liquid and their prices more volatile than securities of comparable U.S.
companies. In addition, securities of companies traded in many countries outside
the U.S., may be subject to further risks due to the inexperience of local
brokers and financial institutions in less developed markets, the possibility of
permanent or temporary termination of trading, and greater spreads between bid
and asked prices for securities. The typically small size of the markets for
securities issued by issuers located in emerging markets and the possibility of
a low or nonexistent volume of trading in those securities may also result in a
lack of liquidity and in price volatility of those securities. Non-U.S. stock
exchanges and brokers are subject to less governmental supervision and
regulation than in the U.S. and non-U.S. stock exchange transactions are usually
subject to fixed commissions, which are generally higher than negotiated
commissions on U.S. transactions. In addition, there may in certain instances be
delays in the settlement of non-U.S. stock exchange transactions.
INVESTMENT AND REPATRIATION RESTRICTIONS. Some countries, particularly
emerging markets, restrict, to varying degrees, foreign investments in their
securities markets. Government and private restrictions take a variety of forms,
including (a) limitations on the amount of funds that may be introduced into or
repatriated from the country (including limitations on repatriation of
investment income and capital gains); (b) prohibitions or substantial
restrictions on foreign investment in certain industries or market sectors, such
as defense, energy and transportation; (c) restrictions (whether contained in
the charter of an individual company or mandated by the government) on the
percentage of securities of a single issuer which may be owned by a foreign
investor; (d) limitations on the types of securities which a foreign investor
may
<PAGE>
purchase; and (e) restrictions on a foreign investor's right to invest in
companies whose securities are not publicly traded. In some circumstances, these
restrictions may limit or preclude investment in certain countries or may
increase the cost of investing in securities of particular companies.
The governments of some countries may require that a governmental or
quasi-governmental authority act as custodian of the Fund's assets invested in
such countries. These authorities may not be qualified to act as foreign
custodians under the 1940 Act and, as a result, the Fund will not be able to
invest in these countries in the absence of exemptive relief from the Securities
and Exchange Commission. In addition, the risk of loss through government
confiscation may be increased in such countries.
FOREIGN TAXES. Each Fund's interest and dividend income from foreign
issuers may be subject to non-U.S. withholding taxes. The Fund also may be
subject to taxes on trading profits in some countries. In addition, some
countries have a transfer or stamp duties tax on certain securities
transactions. The imposition of these taxes will increase the cost to the Fund
of investing in any country imposing such taxes. For U.S. tax purposes, U.S.
shareholders may be entitled to a credit or deduction to the extent of any
foreign income taxes paid by the Fund. See "Tax Status."
RISKS OF INVESTMENTS IN EMERGING MARKETS. Investing in securities of
issuers in emerging markets involves exposure to economic structures that are
generally less diverse and mature than, and to political systems and social
environments that can be expected to have less stability than, those of
developed countries. Other characteristics of emerging markets that may affect
investment in their markets include certain national policies that may restrict
investment by foreigners and the absence of developed legal structures governing
private and foreign investments and private property. The typically small size
of the markets for securities issued by issuers located in emerging markets and
the possibility of a low or nonexistent volume of trading in those securities
may also result in a lack of liquidity and in price volatility of those
securities. In addition, issuers in emerging markets typically are subject to a
greater degree of change in earnings and business prospects than are companies
in developed markets.
Included among the emerging markets in which the Fund may invest are the
formerly communist countries of Eastern Europe and the People's Republic of
China. Emerging Markets Fund may also invest in the Commonwealth of Independent
States (formerly the Soviet Union). (These countries are referred to
collectively as the "Communist Countries.")
Upon the accession to power of Communist regimes approximately 40 to 70
years ago, the governments of a number of Communist countries expropriated a
large amount of property. The claims of many property owners against those
governments were never finally settled. There can be no assurance that any Fund
investments in Communist Countries would not also be expropriated, nationalized
or otherwise confiscated. In the event of such expropriation, nationalization or
other confiscation, the Fund could lose its entire investment in the country
involved. In addition, any change in the leadership or policies of Communist
Countries may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring and adversely affect existing investment
opportunities.
RISKS OF INVESTMENTS IN LATIN AMERICA. Because the Fund will be the
successor to the Hercules Latin American Value Fund, the portfolio will
initially consist solely of securities of Latin American issuers as of the date
of the Proxy Statement/Prospectus. Many of the currencies of Latin American and
certain other emerging market countries have experienced steady devaluations
relative to the U.S. dollar, and major devaluations have historically occurred
in certain countries. Devaluations in the currencies in which the Fund's
portfolio securities are denominated may have a detrimental impact on the Fund.
Some Latin American countries also may have managed currencies which are not
free-floating against the U.S. dollar. In addition, there is a risk that certain
Latin American and other emerging market countries may restrict the free
conversion of their currencies into other currencies. Further, certain
currencies issued by Latin American countries may not be internationally traded.
Most Latin American countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain Latin American
countries.
Many Latin American governments have exercised and continue to exercise a
significant influence over many aspects of the private sector. Government
actions concerning the economy could have a significant effect on market
conditions and prices and/or yields of securities in which the Fund invests. For
more information on investment in Latin American and other emerging market
countries, see "Investment
<PAGE>
Objectives and Policies--Special Risk Considerations--Additional Risks
Applicable to Investment in Countries in Latin America" in Appendix A to the
Statement of Additional Information relating to this Proxy Statement/Prospectus.
Non-Diversified Status
The Fund is "non-diversified" and, accordingly, will be able to invest more
than 5% of the value of its assets in the obligations of a single issuer,
subject to the diversification requirements of subchapter M of the Internal
Revenue Code of 1986, as amended. To the extent that the Fund invests a
relatively high percentage of its assets in obligations of a limited number of
issuers, the Fund may be more susceptible than more widely diversified funds to
any single economic, political or regulatory occurrence or to changes in an
issuer's financial condition or in the market's assessment of the issuers.
<PAGE>
MANAGEMENT
Board of Directors
The Board of Directors of Piper Global has the primary responsibility for
overseeing the overall management of Piper Global and electing its officers.
Investment Adviser
Piper Capital Management Incorporated (the "Adviser") has been retained
under an Investment Advisory and Management Agreement (the "Advisory Agreement")
with Piper Global to act as the Fund's investment adviser subject to the
authority of the Board of Directors.
In addition to acting as the investment adviser for the Fund, the Adviser
serves as investment adviser to a number of other open-end and closed-end
investment companies and to various other concerns, including pension and profit
sharing funds, corporate funds and individuals. As of , 1996, the
Adviser rendered investment advice regarding approximately $ billion of
assets. The Adviser is a wholly owned subsidiary of Piper Jaffray Companies
Inc., a publicly held corporation which is engaged through its subsidiaries in
various aspects of the financial services industry. The address of the Adviser
is Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota
55402-3804.
The Adviser supervises, directs and monitors the day to day operations of
the Fund in accordance with the Fund's investment objective, policies and
restrictions, as well as the implementation of investment programs formulated by
the Sub-Adviser. The Adviser determines the broker-dealers which are eligible to
execute transactions on behalf of the Fund. The Adviser furnishes at its own
expense all necessary administrative services, office space, equipment and
clerical personnel for providing the foregoing services. In addition, the
Adviser pays the salaries and fees of all officers and directors of the Fund who
are affiliated with the Adviser. The Adviser is liable to the Fund for losses
resulting from willful misconduct, bad faith or gross negligence in the
performance of its duties or from its reckless disregard of its duties under the
Advisory Agreement. The Fund pays the Adviser a monthly management fee at an
annual rate of 1% of the Fund's average daily net assets. This fee is higher
than that paid by most other mutual funds.
Sub-Adviser
Edinburgh Fund Managers plc, Donaldson House, 97 Haymarket Terrace,
Edinburgh, Scotland EH12, 5HD, is the Sub-Adviser for the Fund under an
agreement with the Adviser (the "Sub-Advisory Agreement"). The Sub-Adviser is
responsible for the investment and reinvestment of the Fund's assets in non-U.S.
securities and the placement of brokerage transactions in connection therewith.
For its services to the Fund, the Sub-Adviser is paid a fee by the Adviser
equal, on an annual basis, to 0.50% of the Fund's average daily net assets.
The Sub-Adviser is a public limited company that was incorporated in 1969.
The British Investment Trust PLC, a Scottish closed-end investment company
founded in 1889, for which the Sub-Adviser serves as investment manager and
adviser, is a controlling shareholder of the Sub-Adviser. The Sub-Adviser, an
investment adviser registered under the Advisers Act, currently furnishes
investment management services, directly or through subsidiaries, to 10
closed-end investment companies, 18 open-end investment companies (which
includes 18 open-end investment companies serving United Kingdom tax-exempt
institutional clients), 13 pension plans, 4 charitable organizations and 13
other individual/corporate clients. As of January 31, 1996, the Sub-Adviser
managed approximately $5.3 billion of assets.
Portfolio Management
The day-to-day management of the Fund is primarily the responsibility of the
Sub-Adviser. The Fund is managed by Michael Balfour and Lloyd Beat. Mr. Balfour
is a director of Piper Global, has been director of overseas investments for the
Sub-Adviser since 1992, and was previously the assistant director and head of
the Pacific Department of the Sub-Adviser from 1988 to 1992. Mr. Beat joined the
Sub-Adviser in 1987 and is currently an assistant director of the Sub-Adviser.
He is head of the Sub-Adviser's Investment Strategy Department and a member of
the Asset Allocation Committee.
Transfer Agent, Dividend Disbursing Agent and Custodian
First Trust National Association, 180 East Fifth Street, St. Paul, Minnesota
55101, serves as Custodian for the Fund's portfolio securities and cash.
Investors Fiduciary Trust Company ("IFTC"), 127 West Tenth Street, Kansas City,
Missouri 64105, serves as Transfer Agent and Dividend Disbursing Agent for the
Fund.
<PAGE>
Rules adopted under the 1940 Act permit the Fund to maintain securities and
cash in the custody of certain eligible banks and securities depositories. The
Fund's portfolios of emerging market securities are held by its sub-custodians
who are approved by the directors in accordance with such rules. Such
determination is made pursuant to such rules following a consideration of a
number of factors including, but not limited to, the reliability and financial
stability of the institution; the ability of the institution to perform
custodial services for the Fund; the reputation of the institution in its
national market; the political and economic stability of the country in which
the institution is located; and the risks of potential nationalization or
expropriation of Fund assets.
Piper Global has entered into Shareholder Account Servicing Agreements with
the Distributor and Piper Trust Company, an affiliate of the Distributor and the
Adviser. Under these agreements, the Distributor and Piper Trust Company, an
affiliate of the Distributor and the Adviser, provide transfer agent and
dividend disbursing agent services for certain shareholder accounts. For more
information, see "Investment Advisory and Other Services--Transfer Agent and
Dividend Disbursing Agent" in Appendix A to the Statement of Additional
Information relating to this Proxy Statement/Prospectus.
Portfolio Transactions and Brokerage Commissions
The Adviser and Sub-Adviser select brokers and futures commission merchants
to use for the Funds' portfolio transactions. In making its selection, the
Adviser may consider a number of factors, which are more fully discussed in
Appendix A to the Statement of Additional Information relating to this Proxy
Statement/Prospectus, including but not limited to, research services, the
reasonableness of commissions and quality of services and execution. A broker's
sales of Fund shares may also be considered a factor if the Adviser or
Sub-Adviser is satisfied that the Fund would receive from that broker the most
favorable price and execution then available for a transaction. Portfolio
transactions for the Fund may be effected through the Distributor on a
securities exchange in compliance with Section 17(e) of the 1940 Act. For more
information, see "Portfolio Transactions and Allocation of Brokerage" in
Appendix A to the Statement of Additional Information relating to this Proxy
Statement/Prospectus.
DISTRIBUTION OF FUND SHARES
Piper Jaffray acts as the principal distributor of the Fund's shares. The
Fund has adopted a Distribution Plan (the "Plan") as required by Rule 12b-1
under the 1940 Act. The Distributor is paid a total fee in connection with the
servicing of the Fund's shareholder accounts and in connection with distribution
related services provided with respect to the Fund. This fee is calculated and
paid monthly at an annual rate equal to 0.50% of the average daily net assets of
the Fund. Payments under the Fund's Plan are not tied exclusively to expenses
actually incurred by the Distributor and may exceed such expenses.
The Adviser and the Distributor, out of their own assets, may pay for
certain expenses incurred in connection with the distribution of shares of the
Fund. In particular, the Adviser may make payments out of its own assets to
Piper Jaffray Investment Executives and other broker dealers in connection with
their sales of shares of the Fund. See "How to Purchase Shares--Purchase Price."
Further information regarding the Distribution Plans is contained in Appendix A
to the Statement of Additional Information relating to this Proxy
Statement/Prospectus.
A portion of the Rule 12b-1 payments equal to .25% of average daily net
assets is categorized as a servicing fee intended to reimburse or compensate the
Distributor for the ongoing servicing and/or maintenance of shareholder
accounts. The remainder is categorized as a distribution fee intended to
reimburse or compensate the Distributor for its expenses incurred in connection
with the sale of Fund shares. The Distributor has voluntarily agreed to limit
the total fee payable under the Fund's Plan to .32% of average daily net assets.
This limitation may be revised or terminated at any time after the Fund's fiscal
year ending June 30, 1997. The Distributor uses all or a portion of its Rule
12b-1 fee to make payments to Investment Executives of the Distributor and
broker-dealers which have entered into sales agreements with the Distributor. If
shares of the Fund are sold by a representative of a broker-dealer other than
the Distributor, the broker-dealer is paid 30% of the average daily net assets
of such Fund attributable to shares sold by the broker-dealer's representative.
If shares of the Fund are sold by an Investment Executive of the Distributor,
compensation is paid to the Investment Executive in the manner set forth in a
written agreement, in an amount not to exceed 30% of the average daily net
assets of the Fund attributable to shares sold by the Investment Executive.
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SHAREHOLDER GUIDE TO INVESTING
HOW TO PURCHASE SHARES
General
Fund shares may be purchased at the public offering price from the
Distributor and from other broker-dealers who have sales agreements with the
Distributor. The address of the Distributor is that of the Fund. The Distributor
reserves the right to reject any purchase order. You should be aware that,
because the Fund does not issue stock certificates, Fund shares must be kept in
an account with the Distributor or with IFTC. All investments must be arranged
through your Piper Jaffray Investment Executive or other broker-dealer.
Purchase Price
You may purchase shares of the Fund at the net asset value per share next
calculated after receipt of your order by your Piper Jaffray Investment
Executive or other broker-dealer, plus a front-end sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge Sales Charge
as a Percentage as a Percentage
of of
Amount of Transaction at Offering Price Offering Price Net Asset Value
- --------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Less than $100,000....................................... 4.00% 4.17%
$100,000 but less than $250,000.......................... 3.25% 3.36%
$250,000 but less than $500,000.......................... 2.50% 2.56%
$500,000 and over........................................ 0.00% 0.00%
</TABLE>
This table sets forth total sales charges or underwriting commissions. The
Distributor may reallow up to the entire sales charge to broker-dealers in
connection with their sales of shares. These broker-dealers may, by virtue of
such reallowance, be deemed to be "underwriters" under the 1933 Act.
The Distributor will make certain payments to its Investment Executives and
to other broker-dealers in connection with their sales of Fund shares. See
"Distribution of Fund Shares," above. In addition, the Distributor or the
Adviser, at their own expense, provide promotional incentives to investment
executives of the Distributor and to broker-dealers who have sales agreements
with the Distributor in connection with sales of shares of the Fund and other
mutual funds for which the Adviser acts as investment adviser. In some
instances, these incentives may be made available only to certain Investment
Executives or broker-dealers who have sold or may sell significant amounts of
such shares. The incentives may include payment for travel expenses, including
lodging at luxury resorts, incurred in connection with sales seminars.
Purchases of $500,000 or More
If you make a purchase of $500,000 or more (including purchases made under a
Letter of Intent), a 1% contingent deferred sales charge will be assessed in the
event you redeem shares within 24 months following the purchase. This sales
charge will be paid to the Distributor. For more information, please refer to
the Contingent Deferred Sales Charge section of "How To Redeem Shares." The
Distributor currently pays its Investment Executives and other broker-dealers
fees in connection with these purchases as follows:
<TABLE>
<CAPTION>
Fee as
a Percentage
of Offering
Amount of Transaction Price
- ----------------------------------------------------------------------------- ---------------
<S> <C>
First $1,000,000............................................................. 1.00%
Next $2,000,000.............................................................. 0.75%
Next $2,000,000.............................................................. 0.50%
Next $5,000,000.............................................................. 0.25%
Above $10,000,000............................................................ 0.15%
</TABLE>
Piper Jaffray Investment Executives and other broker-dealers generally will
not receive a fee in connection with purchases on which the contingent deferred
sales charge is waived. However, the Distributor, in its discretion, may pay a
fee out of its own assets to its Investment Executives and other broker-dealers
in connection with purchases by employee benefit plans on which no sales charge
is imposed. Please see the Special Purchase Plans section of "Reducing Your
Sales Charge."
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
Minimum Investments
A minimum initial investment of $250 is required.There is no minimum for
subsequent investments. The Distributor, in its discretion, may waive the
minimum.
REDUCING YOUR SALES CHARGE
You may qualify for a reduced sales charge through one or more of several
plans. You must notify your Piper Jaffray Investment Executive or broker-dealer
at the time of purchase to take advantage of these plans.
Aggregation
Front-end or initial sales charges may be reduced or eliminated by
aggregating your purchase with purchases of certain related personal accounts.
In addition, purchases made by members of certain organized groups will be
aggregated for purposes of determining sales charges. Sales charges are
calculated by adding the dollar amount of your current purchase to the higher of
the cost or current value of shares of any Piper fund sold with a sales charge
that are currently held by you and your related accounts or by other members of
your group.
QUALIFIED GROUPS. You may group purchases in the following personal
accounts together:
- Your individual account.
- Your spouse's account.
- Your children's accounts (if they are under the age of 21).
- Your employee benefit plan accounts if they are exclusively for your
benefit. This includes accounts such as IRAs, individual 403(b) plans or
single-participant Keogh-type plans.
- A single trust estate or single fiduciary account if you are the trustee
or fiduciary.
Additionally, purchases made by members of any organized group meeting the
requirements listed below may be aggregated for purposes of determining sales
charges:
- The group has been in existence for more than six months;
- It is not organized for the purpose of buying redeemable securities of a
registered investment company; and
- Purchases must be made through a central administration, or through a
single dealer, or by other means that result in economy of sales effort or
expense.
An organized group does not include a group of individuals whose sole
organizational connection is participation as credit card holders of a company,
policyholders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser.
Right of Accumulation
Sales charges for purchases of Fund shares into Piper Jaffray accounts will
be automatically calculated taking into account the dollar amount of any new
purchases along with the higher of current value or cost of shares previously
purchased in any other mutual fund managed by the Adviser. For other
broker-dealer accounts, you should notify your Investment Executive at the time
of purchase of additional Piper fund shares you may own.
Letter of Intent
Your sales charge may be reduced by signing a non-binding Letter of Intent.
This Letter of Intent will state your intention to invest $100,000 or more in
any of the mutual funds managed by the Adviser that are sold with a sales charge
over a 13-month period, beginning not earlier than 90 days prior to the date you
sign the Letter. You will pay the lower sales charge applicable to the total
amount you plan to invest over the 13-month period. Part of your shares will be
held in escrow to cover additional sales charges that may be
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
due if you do not invest the planned amount. Please see "Purchase of Shares" in
Appendix A to the Statement of Additional Information relating to this Proxy
Statement/Prospectus for more details. You can contact your Piper Jaffray
Investment Executive or other broker-dealer for an application.
SPECIAL PURCHASE PLANS
For more information on any of the following special purchase plans, contact
your Piper Jaffray Investment Executive or other broker-dealer.
Purchase by Piper Jaffray Companies Inc., its Subsidiaries and the Sub-Adviser
Piper Jaffray Companies Inc., its subsidiaries and the Sub-Adviser may buy
shares of the Fund without incurring a sales charge. The following persons
associated with such entities also may buy Fund shares without paying a sales
charge:
- Officers, directors and partners.
- Employees and retirees.
- Sales representatives.
- Spouses or children under the age of 21 of any of the above.
- Any trust, pension, profit-sharing or other benefit plan for any of the
above.
Purchases by Broker-Dealers
Employees of broker-dealers who have entered into sales agreements with the
Distributor, and spouses and children under the age of 21 of such employees, may
buy shares of the Fund without incurring a sales charge.
Purchases by Other Individuals Without a Sales Charge
The following other individuals and entities also may buy Fund shares
without paying a sales charge:
- Clients of the Adviser buying shares of the Fund in their advisory
accounts.
- Discretionary accounts at Piper Trust Company and participants in
investment companies exempt from registration under the 1940 Act that are
managed by the Adviser.
- Trust companies and bank trust departments using funds over which they
exercise exclusive discretionary investment authority and which are held
in a fiduciary, agency, advisory, custodial or similar capacity.
- Investors purchasing shares through a Piper Jaffray Investment Executive
if the purchase of such shares is funded by the proceeds from the sale of
shares of any non-money market open-end mutual fund. This privilege is
available for 30 days after the sale.
Purchases by Employee Benefit Plans and Tax-Sheltered Annuities
- Shares of the Fund will be sold at net asset value, without a sales
charge, to employee benefit plans containing an actively maintained
qualified cash or deferred arrangement under Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code") (a "401(k) Plan").
In the event a 401(k) Plan of an employer has purchased shares in the Fund
or in any other mutual fund managed by the Adviser (other than a money
market fund) during any calendar quarter, any other employee benefit plan
of such employer that is a qualified plan under Section 401(a) of the Code
also may purchase shares of the Fund during such quarter without incurring
a sales charge.
- Custodial accounts under Section 403(b) of the Code (known as
tax-sheltered annuities) also may buy shares of the Fund without incurring
a sales charge.
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
HOW TO REDEEM SHARES
Normal Redemption
You may redeem all or a portion of your shares on any day that the Fund
values its shares. (Please refer to "Valuation of Shares" below for more
information.) Your shares will be redeemed at the net asset value next
calculated after the receipt of your instructions in good form by your Piper
Jaffray Investment Executive or other broker-dealer as explained below.
PIPER JAFFRAY INC. ACCOUNTS. To redeem your shares, please contact your
Piper Jaffray Investment Executive with an oral request to redeem your shares.
OTHER BROKER-DEALER ACCOUNTS. To redeem your shares, you may either contact
your broker-dealer with an oral request or send a written request directly to
the Fund's transfer agent, IFTC. This request should contain: the dollar amount
or number of shares to be redeemed, your Fund account number and either a social
security or tax identification number (as applicable). You should sign your
request in exactly the same way the account is registered. If there is more than
one owner of the shares, all owners must sign. A signature guarantee is required
for redemptions over $25,000. Please contact IFTC or refer to "Redemption of
Shares" in Appendix A to the Statement of Additional Information for more
details relating to this Proxy Statement/Prospectus.
Contingent Deferred Sales Charge
If you invest $500,000 or more and, as a result, pay no front-end sales
charge, you may incur a contingent deferred sales charge if you redeem within 24
months. This charge will be equal to 1% of the lesser of the net asset value of
the shares at the time of purchase or at the time of redemption. This charge
does not apply to amounts representing an increase in the value of Fund shares
due to capital appreciation or to shares acquired through reinvestment of
dividend or capital gain distributions. In determining whether a contingent
deferred sales charge is payable, shares that are not subject to any deferred
sales charge will be redeemed first, and other shares will then be redeemed in
the order purchased.
LETTER OF INTENT. In the case of a Letter of Intent, the 24-month period
begins on the date the Letter of Intent is completed.
SPECIAL PURCHASE PLANS. If you purchased your shares through one of the
plans described above under "Special Purchase Plans," the contingent deferred
sales charge will be waived. In addition, the contingent deferred sales charge
will be waived in the event of:
- The death or disability (as defined in Section 72(m)(7) of the Code) of
the shareholder. (This waiver will be applied to shares held at the time
of death or the initial determination of disability of either an
individual shareholder or one who owns the shares as a joint tenant with
the right of survivorship or as a tenant in common.)
- A lump sum distribution from an employee benefit plan qualified under
Section 401(a) of the Code, an individual retirement account under Section
408(a) of the Code or a simplified employee pension plan under Section
408(k) of the Code.
- Systematic withdrawals from any such plan or account if the shareholder is
at least 59 1/2 years old.
- A tax-free return of the excess contribution to an individual retirement
account under Section 408(a) of the Code.
- Involuntary redemptions effected pursuant to the right to liquidate
shareholder accounts having an aggregate net asset value of less than
$200.
EXCHANGES. If you exchange your shares, no contingent deferred sales charge
will be imposed. However, the charge will apply if you subsequently redeem the
new shares within 24 months of the original purchase.
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
REINSTATEMENT PRIVILEGE. If you elect to use the Reinstatement Privilege
(please see "Shareholder Services" below), any contingent deferred sales charge
you paid will be credited to your account (proportional to the amount
reinvested). Please see "Redemption of Shares" in Appendix A to the Statement of
Additional Information relating to this Proxy Statement/Prospectus for more
details.
Payment of Redemption Proceeds
After your shares have been redeemed, the cash proceeds will normally be
sent to you or your broker-dealer within three business days. In no event will
payment be made more than seven days after receipt of your order in good form.
However, payment may be postponed or the right of redemption suspended for more
than seven days under unusual circumstances, such as when trading is not taking
place on the New York Stock Exchange. Payment of redemption proceeds may also be
delayed if the shares to be redeemed were purchased by a check drawn on a bank
which is not a member of the Federal Reserve System, until such check has
cleared the banking system (normally up to 15 days from the purchase date).
Involuntary Redemption
The Fund reserves the right to redeem your account at any time if the net
asset value of the account falls below $200 as the result of a redemption or
exchange request. You will be notified in writing prior to any such redemption
and will be allowed 30 days to make additional investments before the redemption
is processed.
SHAREHOLDER SERVICES
Automatic Monthly Investment Program
You may arrange to make additional automated purchases of shares of the Fund
or certain other mutual funds managed by the Adviser. You can automatically
transfer $100 or more per month from your bank, savings and loan or other
financial institution to purchase additional shares. In addition, if you hold
your shares in a Piper Jaffray account you may arrange to make such additional
purchases by having $25 or more automatically transferred each month from any of
the money market fund series of Piper Funds. You should contact your Piper
Jaffray Investment Executive or IFTC to obtain authorization forms or for
additional information.
Reinstatement Privilege
If you have redeemed shares of the Fund, you may be eligible to reinvest in
shares of any fund managed by the Adviser without payment of an additional sales
charge. The reinvestment request must be made within 30 days of the redemption.
This privilege is subject to the eligibility of share purchases in your state as
well as the minimum investment requirements and any other applicable terms in
the prospectus of the fund being acquired.
Exchange Privilege
If your investment goals change, you may prefer a fund with a different
objective. If you are considering an exchange into another mutual fund managed
by the Adviser, you should carefully read the appropriate prospectus for
additional information about that fund. A prospectus may be obtained through
your Piper Jaffray Investment Executive, your broker-dealer or the Distributor.
To exchange your shares, please contact your Piper Jaffray Investment Executive,
your broker-dealer or IFTC.
You may exchange your shares for shares of any other mutual fund managed by
the Adviser that is open to new investors. All exchanges are subject to the
eligibility of share purchases in your state as well as the minimum investment
requirements and any other applicable terms in the prospectus of the fund being
acquired. Exchanges are made on the basis of net asset values of the funds
involved, except that investors exchanging into a fund which has a higher sales
charge must pay the difference.
You may make four exchanges per year without payment of a service charge.
Thereafter, you will pay a $5 service charge for each exchange. Piper Global
reserves the right to change or discontinue the exchange privilege, or any
aspect of the privilege, upon 60 days' written notice.
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
Telephone Transaction Privileges
PIPER JAFFRAY INC. ACCOUNTS. If you hold your shares in a Piper Jaffray
account, you may telephone your Investment Executive to execute any transaction
or to apply for many shareholder services. In some cases, you may be required to
complete a written application.
OTHER BROKER-DEALER ACCOUNTS. If you hold your shares in an account with
your broker-dealer or at IFTC, you may authorize telephone privileges by
completing the Account Application and Services Form. Please contact your
broker-dealer or IFTC (800-874-6205) for an application or for more details. The
Funds will employ reasonable procedures to confirm that a telephonic request is
genuine, including requiring that payment be made only to the address of record
or the bank account designated on the Account Application and Services Form and
requiring certain means of telephonic identification. A Fund employing such
procedures, will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. If the Fund does not employ
such procedures, it may be liable for any losses due to unauthorized or
fraudulent telephone instructions. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests. If you cannot reach the Fund by telephone,
you should contact your broker-dealer or issue written instructions to IFTC at
the address set forth herein. See "Management--Transfer Agent, Dividend
Disbursing Agent and Custodian." The Fund reserves the right to suspend or
terminate its telephone services at any time without notice.
Directed Dividends
You may direct income dividends and capital gains distributions to be
invested in any other mutual fund managed by the Adviser (other than a money
market fund) that is offered in your state. This investment will be made at net
asset value. It will not be subject to a minimum investment amount except that
you must hold shares in such fund (including the shares being acquired with the
dividend or distribution) with a value at least equal to such fund's minimum
initial investment amount.
Systematic Withdrawal Plan
If your account has a value of $5,000 or more, you may establish a
Systematic Withdrawal Plan for the Fund. This plan will allow you to receive
regular periodic payments by redeeming as many shares from your account as
necessary. As with other redemptions, a redemption to make a withdrawal is a
sale for federal income tax purposes. Payments made under a Systematic
Withdrawal Plan cannot be considered as actual yield or income since part of the
payments may be a return of capital.
A request to establish a Systematic Withdrawal Plan must be submitted in
writing to your Piper Jaffray Investment Executive or other broker-dealer. There
are no service charges for maintenance; the minimum amount that you may withdraw
each period is $100. You will be required to have any income dividends and any
capital gains distributions reinvested. You may choose to have withdrawals made
monthly, quarterly or semi-annually. Please contact your Piper Jaffray
Investment Executive, other broker-dealer or IFTC for more information.
You should be aware that additional investments in an account that has an
active Systematic Withdrawal Plan may be inadvisable due to sales charges and
tax liabilities. Please refer to "Redemption of Shares" in Appendix A to the
Statement of Additional Information relating to this Proxy Statement/ Prospectus
for additional details.
Account Protection
If you purchased your shares of the Fund through a Piper Jaffray Investment
Executive, you may choose from several account options. Your investments in the
Fund held in a Piper Jaffray account (except for non-"PAT" accounts) would be
protected up to $25 million. Investments held in non-"PAT" Piper Jaffray
accounts are protected up to $2.5 million. In each case, the Securities Investor
Protection Corporation ("SPIC") provides $500,000 of protection; the additional
coverage is provided by The Aetna Casualty & Surety Company. This protection
does not cover any declines in the net asset value of Fund shares.
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
Confirmation of Transactions and Reporting of Other Information
Each time there is a transaction involving your Fund shares, such as a
purchase, redemption or dividend reinvestment, you will receive a confirmation
statement describing that activity. This information will be provided to you
from either Piper Jaffray, your broker-dealer or IFTC. In addition, you will
receive various IRS forms after the first of each year detailing important tax
information and the Fund is required to supply annual and semi-annual reports
that list securities held by the Fund and include the current financial
statements of the Fund.
HOUSEHOLDING. If you have multiple accounts with Piper Jaffray, you may
receive some of the above information in combined mailings. This will not only
help to reduce Fund expenses, it will help the environment by saving paper.
Please contact your Piper Jaffray Investment Executive for more information.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income and distributions of net realized
capital gains, if any, will be payable to Fund shareholders on an annual basis.
BUYING A DIVIDEND. On the record date for a distribution, the Fund's share
price is reduced by the amount of the distribution. If you buy shares just
before the record date ("buying a dividend"), you will pay the full price for
the shares and then receive a portion of the price back as a taxable
distribution.
DISTRIBUTION OPTIONS. All net investment income dividends and net realized
capital gains distributions for the Fund generally will be payable in additional
shares of the Fund at net asset value ("Reinvestment Option"). If you wish to
receive your distributions in cash, you must notify your Piper Jaffray
Investment Executive or other broker-dealer. You may elect either to receive
income dividends in cash and capital gains distributions in additional shares of
the Fund at net asset value ("Split Option"), or to receive both income
dividends and capital gains distributions in cash ("Cash Option"). You may also
direct income dividends and capital gains distributions to be invested in
another mutual fund managed by the Adviser. See "Shareholder Services--Directed
Dividends" above. The taxable status of income dividends and/or net capital
gains distributions is not affected by whether they are reinvested or paid in
cash.
VALUATION OF SHARES
The Fund computes its net asset value on each day the New York Stock
Exchange (the "Exchange") is open for business. The calculation is made as of
the regular close of the Exchange (currently 4:00 p.m. New York time) after the
Fund has declared any applicable dividends. In valuing the Fund's assets, all
securities for which market quotations are readily available are valued under
normal circumstances at the last sales price prior to the time of determination,
or if no sale is reported at that time, the mean between the closing asked price
and the closing bid price or, if no bid and asked prices are available, at the
most recent available sales price. With respect to a security which is listed or
traded on more than one exchange, the Fund normally looks to the exchange on
which trading is more extensive. In instances where market quotations are not
readily available and in certain other circumstances, fair value is determined
according to methods selected in good faith by the Board of Directors.
Short-term investments having a maturity of 60 days or less are valued at cost
with any premium amortized or discount credited over the period remaining until
maturity. Options will be valued at market value or fair value, as determined in
good faith by or under the direction of the Board of Directors, if no market
exists. Futures contracts will be valued at the settlement price established
each day by the board of trade or exchange on which they are traded. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors.
Any assets or liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars by the pricing service retained by the Fund or,
to the extent that an exchange rate is not available through such pricing
service, at the mean of current bid and asked prices of such currencies against
the U.S. dollar last quoted by a major bank that is a regular participant in the
foreign exchange market. The Fund has been advised that the pricing service
translates foreign currencies into U.S. dollars on the basis of the official
exchange rate or by taking into account the quotes provided by a number of major
banks that are regular
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
participants in the foreign exchange market. Trading in securities on foreign
securities exchanges and in over-the-counter markets is normally completed well
before the close of business on each business day. In addition, foreign
securities trading generally or in a particular country or countries may not
take place on all business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days of the Fund and on
which the Fund's net asset value is not calculated. Therefore, the net asset
value of the Fund might be significantly affected on days when the investor has
no access to the Fund. The Fund calculates net asset value per share as of the
close of the regular trading session on the Exchange. Such calculation does not
take place contemporaneously with the determination of the prices of the
majority of the portfolio securities used in such calculation. If events
materially affecting the value of such securities occur between the time when
their price is determined and the time when the Fund's net asset value is
calculated, such securities will be valued at fair value as determined in good
faith by or under the direction of the Board of Directors.
TAX STATUS
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended, during its
current taxable year. If so qualified, the Fund will not be liable for federal
income taxes to the extent it distributes its taxable income to shareholders.
Distributions by the Fund are generally taxable to the shareholders, whether
received in cash or additional shares of the Fund (or shares of another mutual
fund managed by the Adviser). Distributions of net capital gains (designated as
"capital gain dividends") are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has held shares of the
Fund.
A shareholder will recognize a capital gain or loss upon the sale or
exchange of shares in the Fund if, as is normally the case, the shares are
capital assets in the shareholder's hands. This capital gain or loss will be
long-term if the shares have been held for more than one year.
The Fund's investments may be subject to taxes in foreign countries which
would reduce the total return on such investments. In addition, if the Fund is
deemed to be a resident of the United Kingdom for United Kingdom tax purposes,
or if the Fund is treated as being engaged in a trading activity through an
agent in the United Kingdom, there is a risk that the United Kingdom will
attempt to tax all or a portion of the Fund's gains or income. In light of the
structure of the Fund and the terms and conditions of the Advisory and
Sub-Advisory Agreements, the Adviser believes that any such risk is minimal.
If the Fund has more than 50% of its assets invested in the stock or
securities of foreign corporations at the end of the Fund's taxable year, the
Fund may make an election to allow shareholders either to claim U.S. foreign tax
credits with respect to such foreign taxes paid or to deduct such amounts as an
itemized deduction on their tax return. In the event such an election is made,
shareholders would have to increase their taxable income by the amount of such
taxes and the Fund would not be able to deduct such taxes in computing its
taxable income.
The foregoing relates to federal income taxation as in effect as of the date
of this Proxy Statement/ Prospectus. For a more detailed discussion of the
federal income tax consequences of investing in shares of the Fund, see
"Taxation" in Appendix A to the Statement of Additional Information relating to
this Proxy Statement/Prospectus. Before investing in the Fund, you should check
the consequences of your local and state tax laws.
PERFORMANCE COMPARISONS
Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." All such
total return quotations are based upon historical earnings and are not intended
to indicate future performance. The return on and principal value of an
investment in the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
Average annual return is the average annual compounded rate of return on a
hypothetical $1,000 investment made at the beginning of the advertised period.
Cumulative total return is calculated by subtracting a hypothetical $1,000
payment to the Fund from the redeemable value of such payment at the end of the
advertised period, dividing such difference by $1,000 and multiplying the
quotient by 100. In calculating average annual and cumulative total return, the
maximum sales charge is deducted from the hypothetical investment and all
dividends and distributions are assumed to be reinvested.
In addition to advertising total return, comparative performance information
may be used from time to time in advertising the Fund's shares including data
from Lipper Analytical Services, Inc. and other entities or organizations which
track the performance of investment companies. Performance of the Fund may be
compared to the Lipper Emerging Markets Fund Average.
For additional information regarding the calculation of average annual total
return and cumulative total return, see "Performance Comparisons" in Appendix A
to the Statement of Additional Information relating to this Proxy
Statement/Prospectus.
GENERAL INFORMATION
Piper Global was organized under the laws of the State of Minnesota in 1990
as a closed-end investment company and converted into an open-end investment
company on August 31, 1992. At that time, Pacific-European Growth Fund was the
only series of Piper Global. The Board of Directors designated the second
series, i.e., the Fund, in April, 1996. Piper Global is authorized to issue a
total of 100 billion shares of common stock, with a par value of $.01 per share.
These shares can be issued in more than one class or series. Each designated
series of stock will represent a separate portfolio of investments, each with a
different investment objective. The Board of Directors has authorized two
billion shares to be issued as Series A Common Shares and two billion shares to
be issued as Series B Common Shares, which are the shares of common stock of
Pacific-European Fund (not discussed herein) and Emerging Markets Fund,
respectively.
The Board of Directors is empowered under the Company's Articles of
Incorporation to issue additional series of common stock without shareholder
approval. The Board of Directors may, without shareholder approval, create and
issue one or more additional classes of shares within each Fund, as well as
within any series of Piper Global created in the future. See "Capital Stock and
Ownership of Shares" in Appendix A to the Statement of Additional Information
relating to this Proxy Statement/Prospectus.
All shares, when issued, will be fully paid and nonassessable and will be
redeemable. All shares have equal voting rights. They can be issued as full or
fractional shares. A fractional share has pro rata the same kind of rights and
privileges as a full share. The shares possess no preemptive or conversion
rights.
Each share of a series has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset value of the series'
shares. On some issues, such as the election of directors, all shares of Piper
Global vote together as one series. On an issue affecting only a particular
series, the shares of the affected series vote separately. Cumulative voting is
not authorized. This means that the holders of more than 50% of the shares
voting for the election of directors can elect 100% of the directors if they
choose to do so, and, in such event, the holders of the remaining shares will be
unable to elect any directors.
The Bylaws of Piper Global provide that shareholder meetings need be held
only with such frequency as required under Minnesota law. Minnesota corporation
law requires only that the Board of Directors convene shareholders meetings when
it deems appropriate. In addition, Minnesota law provides that if a regular
meeting of shareholders has not been held during the immediately preceding 15
months, a shareholder or shareholders holding 3% or more of the voting shares of
Piper Global may demand a regular meeting of shareholders by written notice
given to the chief executive officer or chief financial officer of Piper Global.
Within 30 days after receipt of the demand, the Board of Directors shall cause a
regular meeting of shareholders to be called, which meeting shall be held no
later than 90 days after receipt of the demand, all at the expense of Piper
Global. In addition, the 1940 Act requires a shareholder vote for all amendments
to fundamental investment policies and restrictions and for all amendments to
investment
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
advisory contracts and Rule 12b-1 distribution plans. The 1940 Act also provides
that directors of Piper Global may be removed by action of the record holders of
two-thirds or more of the outstanding shares of Piper Global. The directors are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any director when so requested in writing by the record
holders of at least 10% of Piper Global's outstanding shares.
Pending Legal Proceedings
Complaints have been brought against the Adviser and the Distributor
relating to several other investment companies for which the Adviser acts or has
acted as investment adviser or subadviser. These lawsuits do not involve the
Fund and the Adviser and Distributor do not believe that the lawsuits will have
a material adverse effect upon their ability to perform under their agreements
with the Fund. A number of complaints have been brought in federal and state
court against the Institutional Government Income Portfolio ("PJIGX") series of
Piper Funds Inc., the Adviser, the Distributor, and certain individuals
affiliated or formerly affiliated with the Adviser and the Distributor. In
addition, complaints have been filed in federal court relating to an number of
closed-end investment companies managed by the Adviser and two open-end
investment companies for which the Adviser has acted as sub-adviser. The
compaints, which ask for recission of plaintiff shareholders' purchases or
compensatory damages, plus interest, costs and expenses, generally allege, among
other things, certain violations of federal and/or state securities laws,
including the making of materially misleading statements in prospectuses
concerning investment policies and risks. See "Pending Litigation" in the
Statement of Additional Information.
A settlement agreement has been reached with respect to one of the
complaints involving PJIGX. An Amended Consolidated Class Action Complaint,
which represents a consolidation of claims previously brought by 11 persons or
entities, was filed on October 5, 1994 in the United States District Court,
District of Minnesota. The named plaintiffs in this putative class action (the
"PJIGX action") purport to represent a class of individuals and groups who
purchased shares of PJIGX during the period from July 1, 1991 through May 9,
1994. The named plaintiffs and defendants have entered into a settlement
agreement which has received preliminary approval from the Court. The terms of
the settlement are set forth in a Settlement Agreement dated July 20, 1995 (as
modified by an Addendum filed on July 28, 1995). The Settlement Agreement
contained a provision which would have permitted the defedants to cancel the
Agreement if shareholders who had incurred a cumulative "loss" (as defined under
the Agreement) of more than 10% of the loss sustained by the entire class had
opted out. The October 2, 1995 deadline for requesting exclusion from the class
has passed, and the loss sustained by persons requesting exclusion is less than
10%. If granted final approval by the Court, the settlement agreement would
provide up to $70 million to class members in payments scheduled over
approximately three years. Such payments would be made by Piper Jaffray
Companies and the Adviser and would be an obligation of Piper Funds, Inc.,
another investment company in the Piper Funds complex. Six additional complaints
have been brought and a number of actions have been commenced in arbitration
relating to PJIGX. The complaints generally have been consolidated with the
PJIGX action for pretrial purposes and the arbitrations and litiagations have
been stayed pending entry of an order by the Court permitting those class
members who have requested exclusion to proceed with their actions.
The Adviser and the Distributor to not believe that the PJIGX settlement or
any outstanding complaint or action in arbitration will have a material adverse
effect on their ability to perform under their agreements with Piper Global or a
material adverse effect on the Funds, and they intend to defend such lawsuits
and actions vigorously.
<PAGE>
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<PAGE>
HERCULES FUNDS INC.
HERCULES LATIN AMERICAN VALUE FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD June 18, 1996
The undersigned shareholder of Hercules Latin American Value Fund ("Latin
American Value Fund"), a series of Hercules Funds Inc. (the "Company"), does
hereby appoint WILLIAM H. ELLIS, ROBERT H. NELSON and SUSAN SHARP MILEY and each
of them, as attorneys-in-fact and proxies of the undersigned, each with the full
power of substitution, to attend the Special Meeting of Shareholders of Latin
American Value Fund to be held on June 18, 1996, at Piper Jaffray Tower, 222
South Ninth Street, Third Floor, Minneapolis, Minnesota at 10 a.m., Central
time, and at all adjournments thereof and to vote the shares held in the name of
the undersigned on the record date for said meeting for the Proposal specified
on the reverse side hereof. Said attorneys-in-fact shall vote in accordance with
their best judgment as to any other matter.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE PROPOSAL LISTED ON THE REVERSE SIDE HEREOF. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO
CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return it
promptly in the accompanying envelope, which requires no postage if mailed in
the United States.
<PAGE>
Please mark boxes / / or /X/ in blue or black ink.
The Proposal:
Approval of the Agreement and Plan of Reorganization, dated as of April 15,
1996 (the "Plan"), by and between the Company, on behalf of Latin American Value
Fund, and Piper Global Funds Inc., on behalf of Emerging Markets Growth Fund
("Emerging Markets Fund"), pursuant to which substantially all of the assets of
Latin American Value Fund will be acquired by Emerging Markets Fund and
shareholders of Latin American Value Fund will become shareholders of Emerging
Markets Fund receiving shares of Emerging Markets Fund with a value equal to the
value of their holdings in Latin American Value Fund. A vote in favor of the
Plan will be considered a vote in favor of an amendment to the articles of
incorporation of the Company required to effect the reorganization as
contemplated by the Plan.
FOR / / AGAINST / / ABSTAIN / /
Dated: ________________________, 1996
(Month) (Day)
_____________________________________
Signature(s)
_____________________________________
Signature(s)
Please read both sides of this
ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR
NAME(S) APPEAR HEREON.
When signing as custodian, attorney,
executor, administrator, trustee,
etc., please give your full title as
such. All joint owners should sign
this proxy. If the account is
registered in the name of a
corporation, partnership or other
entity, a duly authorized individual
must sign on its behalf and give his
or her title.
