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[LOGO]
HERCULES FUNDS INC.
HERCULES PACIFIC BASIN VALUE
FUND
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
May 17, 1996
Dear Shareholder:
A special meeting of shareholders of Hercules Pacific Basin 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 combine the assets
of the Fund with assets of Pacific-European Growth Fund, a series of Piper
Global Funds Inc. If approved, Fund shareholders would become shareholders of
Pacific-European Growth Fund and would receive shares 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.
- Edinburgh Fund Managers plc, an experienced international investment
manager, is the subadviser to Pacific-European Growth Fund.
- The expense ratio for Pacific-European Growth Fund is lower than the
Fund's expense ratio. While waivers and reimbursements currently keep the
Fund's expense ratio artificially low, Piper Capital and the Fund's
distributor do not presently intend to continue waiving expenses for the
Fund after June 30, 1996.
- 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 Pacific-European Growth Fund shares in the
reorganization would have exchange privileges within the Piper family of
funds.
- 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
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SHAREHOLDER Q&A
MAY 17, 1996
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ON FEBRUARY 6, 1996, PIPER CAPITAL MANAGEMENT INCORPORATED RECOMMENDED TO THE
BOARD OF DIRECTORS OF HERCULES FUNDS INC. THAT IT ELIMINATE HERCULES AS A
SEPARATE FUND FAMILY BECAUSE THE FUNDS ARE TOO SMALL TO BE ECONOMICALLY VIABLE.
THE BOARD UNANIMOUSLY AGREED THAT IT WOULD BE IN THE BEST INTEREST OF
SHAREHOLDERS TO REORGANIZE THE HERCULES EQUITY FUNDS INTO APPROPRIATE PIPER
FUNDS AND TO LIQUIDATE THE WORLD BOND FUND. THESE PROPOSALS ARE SUBJECT TO
SHAREHOLDER APPROVAL.
WHAT WILL HAPPEN TO THE VARIOUS HERCULES FUNDS?
Piper Capital is proposing the following changes:
- Hercules North American Growth and Income Fund will be reorganized into
Growth and Income Fund, a series of Piper Funds Inc.
- Hercules European Value Fund and Hercules Pacific Basin Value Fund will be
reorganized into Pacific-European Growth Fund, a series of Piper Global
Funds Inc.
- Hercules Latin American Value Fund will be reorganized into the Emerging
Markets Growth Fund, a newly-created series of Piper Global Funds Inc.
- Hercules World Bond Fund will be liquidated and net assets distributed to
shareholders.
WHAT ABOUT HERCULES MONEY MARKET FUND?
We expect that shareholders will redeem out of Hercules Money Market Fund as a
result of Piper Capital's decision to discontinue the fund's 1% expense
limitation effective July 1, 1996.
WHY WERE THESE CHANGES RECOMMENDED?
The Hercules funds have not been able to attract sufficient assets to make them
economically viable to operate and prospects for future growth appear remote. If
the changes are approved, we believe shareholders will benefit from:
- A potential increase in operating efficiencies and therefore a reduction
in expense ratios
- The potential for greater investment diversification and more flexibility
in portfolio management because the existing corresponding Piper funds
have a larger asset base
- The advantages of ownership within a larger fund family, including
flexibility to transfer between funds in the Piper funds complex at net
asset value
WILL SHAREHOLDERS PAY A SALES CHARGE WHEN THEY MOVE INTO THE PIPER FUNDS?
No. Even though Hercules shareholders paid no front-end sales charges, the
maximum 4% front-end load on Piper fund shares acquired in the reorganizations
will be waived if the proposal is approved.
WILL THE HERCULES CONTINGENT DEFERRED SALES CHARGE (CDSC) BE WAIVED?
Yes. Shareholders subject to a CDSC (those who purchased shares after June 19,
1995) will not pay a CDSC if they exchange into the respective Piper fund
through the reorganization.
WILL SHAREHOLDERS BE ABLE TO EXCHANGE OR TRANSFER TO OTHER PIPER OPEN-END FUNDS
AT NET ASSET VALUE?
Yes. After Hercules fund shares are reorganized into the applicable Piper fund,
shareholders will then be able to exchange or transfer into other Piper funds at
net asset value.
HOW MANY OTHER PIPER OPEN-END FUNDS ARE AVAILABLE?
The back side of the enclosed brochure lists the 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 would be completed on a tax-free
basis.
HOW DOES THE HERCULES PACIFIC BASIN VALUE FUND COMPARE WITH THE PACIFIC-EUROPEAN
GROWTH FUND?
Here are a few comparisons of fund characteristics. Please review the Proxy
<TABLE>
<CAPTION>
Statement/Prospectus for a complete comparison:
<S> <C> <C>
HERCULES PACIFIC BASIN PACIFIC-EUROPEAN GROWTH
Investment objective Long-term capital Long-term capital
appreciation and, to a appreciation. Current income
lesser extent, current is incidental.
income
Investment policies Primarily investments in the Primarily investments in the
Pacific Basin Pacific Basin and Europe
Country allocation as of 100% Pacific Basin 67% Pacific Basin, 28%
2/29/96 Europe, 5% Latin America
Net assets as of 2/29/96 $26.4 million $163.3 million
Fund registration Non-diversified Diversified
Adviser/Subadviser Piper Capital/Edinburgh Fund Piper Capital/Edinburgh Fund
Managers Managers
</TABLE>
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HERCULES FUNDS INC.
HERCULES PACIFIC BASIN VALUE FUND
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1996
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TO THE SHAREHOLDERS OF HERCULES PACIFIC BASIN VALUE FUND,
A SERIES OF HERCULES FUNDS INC.
Notice is hereby given that a Special Meeting (the "Meeting") of
shareholders of Hercules Pacific Basin Value Fund (the "Fund"), one of six
portfolios of Hercules Funds Inc. (the "Company"), will be held in the office of
the Company, 222 South Ninth Street, 3rd Floor, Minneapolis, MN 55402, on June
18, 1996 at 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 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
Pacific-European Growth Fund ("Pacific-European Fund"), pursuant to
which substantially all of the assets of the Fund will be acquired by
Pacific-European Fund and shareholders of the Fund will become
shareholders of Pacific-European Fund receiving shares of
Pacific-European Fund with a value equal to the value of their holdings
in the Fund. A vote in favor of the Plan will be considered a vote in
favor of an amendment to the articles of incorporation of the Company
required to effect the reorganization as contemplated by the Plan.
II. To consider and act upon such other matters as may properly come before
the Meeting or any adjournment thereof.
YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE
IN FAVOR OF THE ABOVE PROPOSAL.
The attached Proxy Statement/Prospectus describes the above proposal in
detail and is being sent to shareholders of record as of the close of business
on April 25, 1996, who are the shareholders entitled to notice of and to vote at
the Meeting. Please read the Proxy Statement/Prospectus carefully before telling
us through your proxy or in person how you wish your shares to be voted.
By Order of the Board of Directors
SUSAN SHARP MILEY
SECRETARY
May 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.
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PACIFIC-EUROPEAN GROWTH FUND
A SERIES OF PIPER GLOBAL FUNDS INC.
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804
(800) 866-7778 (TOLL FREE)
ACQUISITION OF THE ASSETS OF HERCULES PACIFIC BASIN VALUE FUND
A SERIES OF HERCULES FUNDS INC.
BY AND IN EXCHANGE FOR SHARES OF PACIFIC-EUROPEAN GROWTH FUND
A SERIES OF PIPER GLOBAL FUNDS INC.
This Proxy Statement/Prospectus is being furnished to shareholders of
Hercules Pacific Basin Value Fund (the "Fund"), a series of Hercules Funds Inc.
(the "Company"), in connection with an Agreement and Plan of Reorganization
dated as of April 15, 1996 (the "Plan") pursuant to which substantially all of
the assets of the Fund will be combined with those of Pacific-European Growth
Fund ("Pacific-European Fund"), a series of Piper Global Funds Inc. ("Piper
Global"), in exchange for shares of Pacific-European Fund. As a result of this
transaction, shareholders of the Fund will become shareholders of
Pacific-European Fund and will receive shares of Pacific-European Fund with a
value equal to the value of their holdings in the Fund as of the date of the
transaction. The terms and conditions of this transaction are more fully
described in this Proxy Statement/Prospectus and in the Plan, attached hereto as
EXHIBIT A.
Pacific-European Fund is a diversified series of Piper Global, an open-end
management investment company the shares of which can be offered in more than
one series. The investment objective of Pacific-European Fund is long-term
capital appreciation. Current income is incidental to this objective.
Pacific-European Fund seeks to achieve its investment objective by investing
primarily in Common Stock (as herein defined) of companies in the Pacific Basin
or in Europe (including Eastern Europe). Up to 25% of Pacific-European Fund's
total assets may be invested in other areas of the world to the extent
significant opportunities for long-term capital appreciation outside of the
Pacific Basin and Europe become available. Pacific-European Fund does not invest
in Common Stock of U.S. companies.
This Proxy Statement/Prospectus sets forth concisely information about
Pacific-European Fund that shareholders of the Fund should know before voting on
the Plan. This Proxy Statement also constitutes a Prospectus of Pacific-European
Fund filed with the Securities and Exchange Commission (the "Commission") as
part of its Registration Statement on Form N-14. A copy of the Prospectus for
Pacific-European Fund dated April 28, 1995, is attached to this Proxy
Statement/Prospectus and is incorporated herein by reference. Also enclosed and
incorporated by reference is Piper Global's Annual Report for the fiscal year
ended February 29, 1996. A Statement of Additional Information relating to the
reorganization described in this Proxy Statement/Prospectus (the "Additional
Statement") dated May 2, 1996, has been filed with the Commission and is also
incorporated herein by reference. Also incorporated herein by reference are the
Company's Prospectus dated August 29, 1995, the Company's Annual Report for its
fiscal year ended June 30, 1995 and the Company's Semi-Annual Report for the six
months ended December 31, 1995. Such documents are available without charge, as
noted under "Available Information" below.
INVESTORS ARE ADVISED TO READ AND RETAIN THIS PROXY STATEMENT/PROSPECTUS FOR
FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
PROXY STATEMENT/PROSPECTUS
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PAGE
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INTRODUCTION............................................................................................... 1
General.................................................................................................. 1
Record Date; Share Information........................................................................... 1
Proxies.................................................................................................. 2
Expenses of Solicitation................................................................................. 2
Vote Required............................................................................................ 3
SYNOPSIS................................................................................................... 3
The Reorganization....................................................................................... 3
Fee Table................................................................................................ 4
Tax Consequences of the Reorganization................................................................... 6
Dissenting Shareholders' Rights of Appraisal............................................................. 6
Comparison of the Fund and Pacific-European Fund......................................................... 6
PRINCIPAL RISK FACTORS..................................................................................... 9
THE REORGANIZATION......................................................................................... 9
Background............................................................................................... 9
The Board's Consideration................................................................................ 10
The Plan................................................................................................. 12
Tax Aspects of the Reorganization........................................................................ 13
Dissenters' Rights....................................................................................... 14
Description of Shares.................................................................................... 15
Capitalization Table (unaudited)......................................................................... 15
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............................................. 15
Investment Objectives and Policies....................................................................... 15
Investment Restrictions.................................................................................. 17
Interest of Certain Persons.............................................................................. 17
ADDITIONAL INFORMATION ABOUT THE FUND AND PACIFIC-EUROPEAN FUND............................................ 17
General.................................................................................................. 17
Financial Information.................................................................................... 17
Management............................................................................................... 18
Description of Securities and Shareholder Inquiries...................................................... 18
Dividends, Distributions and Taxes....................................................................... 18
Purchases and Redemptions................................................................................ 18
Pending Legal Proceedings................................................................................ 18
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE................................................................ 18
FINANCIAL STATEMENTS AND EXPERTS........................................................................... 18
LEGAL MATTERS.............................................................................................. 18
AVAILABLE INFORMATION...................................................................................... 18
OTHER BUSINESS............................................................................................. 19
EXHIBIT A -- Agreement and Plan of Reorganization, dated as of April 15, 1996 by and between the Company,
on behalf of the Fund, and Piper Global, on behalf of Pacific-European Fund............................... A-1
EXHIBIT B -- PROSPECTUS OF PACIFIC-EUROPEAN FUND, dated April 28, 1995
</TABLE>
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PROXY STATEMENT/PROSPECTUS
HERCULES PACIFIC BASIN VALUE FUND
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1996
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INTRODUCTION
GENERAL
This Proxy Statement/Prospectus is being furnished to shareholders of
Hercules Pacific Basin Value Fund (the "Fund"), a non-diversified series of
Hercules Funds Inc. ("the Company"), an open-end management investment company,
in connection with the solicitation by the Board of Directors of the Company
(the "Board") of proxies to be used at the Special Meeting of Shareholders of
the Company to be held at the office of the Company, 222 South Ninth Street, 3rd
Floor, Minneapolis, Minnesota 55402-3804 on June 18, 1996 at 10:00 a.m. central
time and any adjournments thereof (the "Meeting"). It is expected that this
Proxy Statement/Prospectus will be mailed 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 Pacific-European Growth Fund ("Pacific-European Fund"),
pursuant to which substantially all of the assets of the Fund will be combined
with those of Pacific-European Fund in exchange for shares of Pacific-European
Fund. As a result of this transaction, shareholders of the Fund will become
shareholders of Pacific-European Fund and will receive shares in
Pacific-European Fund equal to the value of their holdings in the Fund on the
date of such transaction (the transactions described above are referred to as
the "Reorganization"). The shares to be issued by Pacific-European Fund pursuant
to the Reorganization ("Pacific-European Fund Shares") will be issued at net
asset value without a sales charge. Further information relating to
Pacific-European Fund is set forth in the current Prospectus of Pacific-European
Fund attached to this Proxy Statement/Prospectus and is incorporated herein by
reference. A vote in favor of the Plan will be considered a vote in favor of an
amendment to the articles of incorporation of the Company required to effect the
reorganization as contemplated by the Plan.
The information concerning the Fund contained herein has been supplied by
the Company and the information concerning Pacific-European Fund contained
herein has been supplied by Piper Global.
RECORD DATE; SHARE INFORMATION
The Board has fixed the close of business on April 25, 1996 as the record
date (the "Record Date") for the determination of the holders of shares of the
Fund entitled to notice of, and to vote at, the Meeting. As of the Record Date,
there were 2,196,653 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.
1
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To the knowledge of Piper Global's Board of Directors, as of the Record Date
no person owned of record or beneficially 5% or more of the outstanding shares
of Pacific-European Fund. As of the Record Date, the directors and officers of
Piper Global, as a group, owned less than 1% of the outstanding shares of
Pacific-European Fund.
PROXIES
The enclosed form of proxy, if properly executed and returned, will be voted
in accordance with the choice specified thereon. The proxy will be voted in
favor of the Plan unless a choice is indicated to vote against or to abstain
from voting on the Plan. The Board knows of no business, other than that set
forth in the Notice of Special Meeting, to be presented for consideration at the
Meeting. However, the proxy confers discretionary authority upon the persons
named therein to vote as they determine on other business, not currently
contemplated, which may come before the Meeting.
Abstentions will be included for purposes of determining whether a quorum is
present at the Meeting and for purposes of calculating the vote but shall not be
deemed to have been voted in favor of such matters. Broker non-votes are shares
held in street name for which the broker indicates that instructions have not
been received from the beneficial owners or other persons entitled to vote and
for which the broker does not have discretionary voting authority. Broker
non-votes will be included for purposes of determining whether a quorum is
present at the Meeting, but will not be deemed to be represented at the Meeting
for purposes of calculating whether matters to be voted upon at the Meeting have
been approved. Because approval of the Plan requires an affirmative vote by a
majority of the outstanding shares, abstentions and broker non-votes all have
the same effect as a negative vote.
If a shareholder executes and returns a Proxy Card but fails to indicate how
the votes should be cast, the proxy will be voted in favor of the Plan. The
proxy may be revoked at any time prior to the voting thereof by: (i) delivering
written notice of revocation to the Secretary of the Company at 222 South Ninth
Street, Minneapolis, Minnesota 55402-3804; (ii) attending the Meeting and voting
in person; or (iii) signing and returning a new Proxy Card (if returned and
received in time to be voted). Attendance at the Meeting will not in and of
itself revoke a proxy.
In the event that 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 or the
Fund's distributor, without compensation other than regular compensation,
personally or by mail, telephone, telegraph or otherwise. Brokerage houses,
banks and other fiduciaries may be requested to forward soliciting material to
the beneficial owners of shares and to obtain authorization for the execution of
proxies. For those services, if any, they will be reimbursed by Piper Capital
for their reasonable out-of-pocket expenses. In addition, arrangements have been
made with Shareholder Communications Corporation, an independent shareholder
communication firm, to assist in the solicitation of proxies.
2
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VOTE REQUIRED
Approval of the Plan by the Fund's shareholders requires the affirmative
vote of a majority (I.E., more than 50%) of the outstanding shares of the Fund.
If the Plan is not approved by shareholders, the Fund will continue in existence
and the Board will consider alternative actions.
SYNOPSIS
THE FOLLOWING IS A SYNOPSIS OF CERTAIN INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. THIS SYNOPSIS IS ONLY A SUMMARY
AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND THE PLAN.
SHAREHOLDERS SHOULD CAREFULLY REVIEW THIS PROXY STATEMENT/PROSPECTUS AND THE
PLAN IN THEIR ENTIRETY AND, IN PARTICULAR, THE CURRENT PROSPECTUS OF
PACIFIC-EUROPEAN FUND WHICH IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AND
WHICH IS INCORPORATED HEREIN BY REFERENCE.
THE REORGANIZATION
The Plan provides for the transfer of substantially all of the assets of the
Fund, subject to stated liabilities, to Pacific-European Fund in exchange for
Pacific-European Fund Shares. The aggregate net asset value of Pacific-European
Fund Shares issued in the exchange will equal the aggregate value of the net
assets of the Fund received by Pacific-European Fund. On or after the closing
date scheduled for the Reorganization (the "Closing Date"), the Fund will
distribute Pacific-European Fund Shares received by the Fund to holders of
shares of the Fund issued and outstanding as of the Valuation Date (as
hereinafter defined) in complete liquidation of the Fund. If all other series of
the Company effect similar reorganizations or otherwise liquidate, the Company
will take all necessary steps to effect its dissolution as a Minnesota
corporation and its deregistration under the Investment Company Act of 1940, as
amended (the "1940 Act"). As a result of the Reorganization, each Fund
shareholder will receive that number of full and fractional Pacific-European
Fund Shares equal in value to such shareholder's shares of the Fund. A similar
reorganization is being proposed to shareholders of Hercules European Value
Fund. If shareholders of that fund approve a similar reorganization,
substantially all of the assets of that fund, subject to stated liabilities,
will also be transferred to Pacific-European Fund. The Board has determined that
the interests of existing Fund shareholders will not be diluted as a result of
the Reorganization.
FOR THE REASONS SET FORTH BELOW UNDER "THE REORGANIZATION -- THE BOARD'S
CONSIDERATION," THE BOARD, INCLUDING ALL OF THE DIRECTORS WHO ARE NOT
"INTERESTED PERSONS" OF THE COMPANY, AS THAT TERM IS DEFINED IN THE 1940 ACT
("INDEPENDENT DIRECTORS"), HAS UNANIMOUSLY CONCLUDED THAT THE REORGANIZATION IS
IN THE BEST INTERESTS OF THE FUND AND ITS SHAREHOLDERS AND RECOMMENDS APPROVAL
OF THE PLAN.
3
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FEE TABLE
The funds each pay a variety of expenses for management of their assets,
distribution of their shares and other services, and those expenses are
reflected in the net asset value per share of each of the Fund and
Pacific-European Fund. The following table sets forth the expenses and fees that
shareholders of the Fund and Pacific-European Fund incurred during the twelve
months ended February 29, 1996. The Pro Forma Combined fees reflect what the fee
schedule would have been at February 29, 1996, if the Reorganization and the
proposed reorganization of Hercules European Value Fund into Pacific-European
Fund (discussed above) had occurred 12 months prior to that date. If the
proposed reorganization of Hercules European Value Fund into Pacific-European
Fund does not occur, the expenses set forth in the Pro Forma Combined column
would not be materially different from those presented below.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
PACIFIC-
EUROPEAN PRO FORMA
FUND FUND COMBINED
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Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) (1)................................................. 0% 4.00% 4.00%
Maximum Deferred Sales Charge (2).................................... 2.00% 0% 0%
Exchange Fee (3)..................................................... $ 0 $ 0 $ 0
</TABLE>
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS
<TABLE>
<CAPTION>
PACIFIC-
EUROPEAN PRO FORMA
FUND FUND COMBINED
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Management Fees (4).................................................. 1.00% 0.75% 0.72%
12b-1 Fees (after voluntary fee limitation) (5)(6)................... 0.50% 0.32% 0.32%
Other Expenses (after voluntary expense reimbursement) (6)........... 0.50% 0.48% 0.48%
Total Fund Operating Expenses (after voluntary fee limitation and
expense reimbursement) (6).......................................... 2.00% 1.55% 1.52%
</TABLE>
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(1) No sales charge will be imposed on Shares acquired in the Reorganization. On
unrelated purchases, the front end sales charge of 4.00% applies to
purchases less than $100,000 and scales down to 0% on purchases of $500,000
or more.
(2) The maximum 2.00% contingent deferred sales charge on shares of the Fund
applies to redemptions during the first 365 days after purchase; the charge
declines to 1.00% during the next 365 days after purchase, reaching zero
thereafter. No CDSC is imposed on shares purchased prior to June 19, 1995.
In connection with purchases of Pacific-European Fund of $500,000 or more,
on which no front-end sales charge is imposed, a 1.00% CDSC will be imposed
on redemptions occurring within 24 months of purchase. See "Comparison of
the Fund and Pacific-European Fund -- Purchases, Redemptions and Exchanges."
(3) There is a $50 fee for each exchange in excess of 12 exchanges per year for
the Fund. There is a $5 fee for each exchange in excess of 4 exchanges per
year for Pacific-European Fund.
(4) With respect to Pacific-European Fund and the Pro Forma Combined fund,
Management Fees may be more or less than those set forth in the table to the
extent that Pacific-European Fund and the Pro Forma Combined fund
outperforms or underperforms the EAFE Index (as defined herein). For the
fiscal year ended February 29, 1996, the performance fee adjustment resulted
in a reduction of Management Fees of 0.21% of average daily net assets.
Absent such reduction, Management Fees for Pacific-European Fund and the Pro
Forma Combined fund would be 0.95% and 0.93% of average daily net assets,
respectively. See "Comparison of the Fund and Pacific-European Fund --
Investment Management and Distribution Plan Fees."
4
<PAGE>
(5) 12b-1 fees for the Fund and Pacific-European Fund are currently limited
voluntarily by the Fund's distributor, Piper Jaffray Inc. (the
"Distributor"). Absent such fee limitation, the Rule 12b-1 fees may not
exceed 0.70% and 0.50% per annum of the average daily net assets for the
Fund and Pacific-European Fund, respectively. A portion of the 12b-1 fee
equal to 0.25% of average daily net assets is characterized as a service fee
within the meaning of the National Association of Securities Dealers, Inc.
("NASD") guidelines.
(6) Piper Capital has voluntarily limited total expenses of the Fund on a per
annum basis to 2.00% of average daily net assets. As a result, certain Other
Expenses are currently borne by Piper Capital. Absent such limitations, for
the 12 months ended February 29, 1996, Other Expenses would have been 1.17%
of the average daily net assets for the Fund. Without such limitations and
the 12b-1 fee limitations discussed above, Total Fund Operating Expenses for
the 12 months ended February 29, 1996, as a percentage of average daily net
assets, would have been 2.87%, 1.73% and 1.70% for the Fund,
Pacific-European Fund and the Pro Forma Combined column, respectively.
Pacific-European Fund's limitations may be revised or terminated at any time
subsequent to the end of its fiscal year. Piper Capital and the Fund's
distributor do not presently intend to continue any limitations for the Fund
beyond the Fund's fiscal year ending June 30, 1996.
EXAMPLE
To attempt to show the effect of these expenses on an investment over time,
the example shown below has been created. The expenses set forth in the example
below may increase if the fee limitations and expense reimbursements discussed
above are removed. As noted above, Pacific-European Fund charges a maximum 4.00%
front-end sales charge on new purchases. The expenses shown below have been
calculated as if no such sales charge was imposed because Fund shareholders who
receive Pacific-European Fund Shares in the Reorganization will not pay the
front-end sales charge with respect to those shares. Assuming that an investor
makes a $1,000 investment in either the Fund or Pacific-European Fund or on a
Pro Forma Combined basis, that the annual return is 5.00% and that the Total
Fund Operating Expenses are the ones shown in the chart above, if the investment
was redeemed at the end of each period shown below, the investor would incur the
following expenses by the end of each period shown:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
The Fund................................................. $ 40 $ 63 $ 108 $ 233
Pacific-European Fund*................................... $ 16 $ 49 $ 84 $ 185
Pro Forma Combined**..................................... $ 15 $ 48 $ 83 $ 181
</TABLE>
If such investment was not redeemed, the investor would incur the following
expenses:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
The Fund................................................. $ 20 $ 63 $ 108 $ 233
Pacific-European Fund*................................... $ 16 $ 49 $ 84 $ 185
Pro Forma Combined**..................................... $ 15 $ 48 $ 83 $ 181
</TABLE>
- ------------------------
* Expenses for shares of Pacific-European Fund purchased subject to the
maximum front end sales charge are: $55, $87, $121 and $217 for the one-,
three-, five-, and ten-year periods shown, respectively.
** Expenses for shares of Pacific-European Fund on a Pro Forma Combined basis
purchased subject to the front-end sales charge are: $55, $86, $120 and $214
for the one-, three-, five-, and ten-year periods shown, respectively.
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL OPERATING EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
Long-term shareholders of either fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
5
<PAGE>
TAX CONSEQUENCES OF THE REORGANIZATION
As a condition to the Reorganization, the Fund will receive an opinion of
the law firm Gordon Altman Butowsky Weitzen Shalov & Wein to the effect that the
Reorganization will constitute a tax-free reorganization for Federal income tax
purposes, and that no gain or loss will be recognized by the Fund or the
shareholders of the Fund for Federal income tax purposes as a result of the
Reorganization. For further information about the tax consequences of the
Reorganization, see "The Reorganization -- Tax Aspects of the Reorganization"
below.
DISSENTING SHAREHOLDERS' RIGHTS OF APPRAISAL
Although under Minnesota law shareholders of a company acquired in a
reorganization who do not vote to approve the reorganization generally have
"appraisal rights" (where they may elect to have the "fair value" of their
shares (determined in accordance with Minnesota law) judicially appraised and
paid to them), the Division of Investment Management of the Commission has taken
the position that Rule 22c-1 under the 1940 Act preempts appraisal provisions in
state statutes. This rule provides that no open-end investment company may
redeem its shares other than at net asset value next computed after receipt of a
tender of such security for redemption. For further information about rights of
appraisal, see "The Reorganization -- Dissenters' Rights".
COMPARISON OF THE FUND AND PACIFIC-EUROPEAN FUND
INVESTMENT OBJECTIVES AND POLICIES. The Fund and Pacific-European Fund have
similar investment objectives. The Fund's objectives are long-term capital
appreciation and, to a lesser extent, current income. The investment objective
of Pacific-European Fund is long-term capital appreciation. Current income is
incidental to this objective. The investment objective of the Fund is
fundamental and may not be changed without shareholder approval. The investment
objective of Pacific-European Fund is non-fundamental and, accordingly, it may
be changed without shareholder approval.
The Fund seeks to achieve its investment objective by investing, under
normal circumstances, at least 65% of its total assets in the securities of
issuers located in the Pacific Basin. Pacific-European Fund seeks to achieve its
investment objective by investing, under normal circumstances, at least 65% of
its total assets in Common Stock (as defined herein) of companies in the Pacific
Basin or in Europe (including Eastern Europe). Up to 25% of Pacific-European
Fund's total assets may be invested in other areas of the world to the extent
significant opportunities for long-term capital appreciation outside of the
Pacific Basin and Europe become available. Accordingly, the principal difference
between the two funds is that Pacific-European Fund invests primarily in
countries that comprise the Pacific Basin and Europe and may invest up to 25% of
its assets in other areas of the world, whereas the Fund invests primarily in
the Pacific Basin. In addition, although emphasis is placed on investments in
equity securities, the Fund may invest without limitation in investment grade
debt securities of governmental and private issuers (including bonds, notes,
debentures, Brady Bonds, mortgage-backed securities and asset-backed
securities), whereas Pacific-European Fund invests in debt instruments solely
for temporary defensive purposes.
The Fund and Pacific-European Fund may invest in American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and in other investment
companies (up to the limits prescribed by the 1940 Act). The Fund may also
invest up to 10% of its total assets in foreign index linked instruments and in
loan participations and assignments; Pacific-European Fund does not invest in
these types of securities.
The Fund may purchase and sell put and call options, futures contracts and
options on futures contracts with respect to financial instruments, stock and
interest rate indexes and foreign currencies. Futures and options may be used to
facilitate allocation of the Fund's investment among asset classes, to generate
income or to hedge against declines in securities prices or increases in prices
of securities proposed to be purchased. Pacific-European Fund may, for hedging
purposes only, buy or sell put and call options on the securities in which it
may invest and enter into futures contracts and options on futures contracts
based on financial indices including any index of securities in which the
6
<PAGE>
Fund may invest. Both funds may buy or sell options, futures or options on
futures that are traded on U.S. or foreign exchanges or over-the-counter. In
addition, both funds may enter into currency exchange transactions (including
forward foreign currency exchange contracts and futures and options contracts on
foreign currencies), as a hedge against fluctuations in foreign exchange rates.
Both the Fund and Pacific-European Fund may purchase securities on a
when-issued or delayed delivery basis and may purchase or sell securities on a
forward commitment basis. Both funds may invest in warrants up to 5% of its net
assets. Both funds may enter into repurchase agreements subject to certain
procedures designed to minimize risks associated with such agreements. Although
both funds may enter into reverse repurchase agreements, neither fund has, nor
does Pacific-European Fund have any current intention of entering into such
agreements in the future. The Fund may invest in zero coupon bonds, deferred
interest bonds and bonds on which the interest is payable in kind ("PIK Bonds");
Pacific-European Fund does not invest in these instruments.
In addition, the Fund is a non-diversified investment company, within the
meaning of the 1940 Act, whereas Pacific-European Fund is a diversified
investment company.
For a more detailed comparison of the investment objectives and policies of
the Fund and Pacific-European Fund, see "Comparison of Investment Objectives,
Policies and Restrictions," below.
INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. The Fund and
Pacific-European Fund have the same Board of Directors. In addition, the Fund
and Pacific-European Fund obtain management services from Piper Capital. For
each fund, fees are payable monthly based on the average net asset value of such
fund as of the close of business each day. The Fund pays a management fee at an
annual rate of 1.00% of its average net asset value. Pacific-European Fund pays
a management fee at an annual rate of 1.00% of the portion of daily net assets
up to $100 million, 0.875% of such assets between $100 million and $200 million
and 0.75% of the portion of daily net assets exceeding $200 million (the "Basic
Fee"), and is subject to adjustment as described below. The adjustment is based
upon the investment performance of Pacific-European Fund in relation to the
investment record of the Morgan Stanley Capital International European,
Australian and Far East Index (the "EAFE-SM- Index"). The EAFE Index is an
unmanaged market capitalization weighted index containing (as of February 29,
1996) 1,109 companies representing approximately 60% of the market
capitalization of each of the following 20 countries or territories: Australia,
Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy,
Japan, The Netherlands, New Zealand, Norway, Singapore, Malaysia, Spain, Sweden,
Switzerland and the United Kingdom. The Basic Fee for each month may be
increased or decreased by up to 0.25% (on an annualized basis) of
Pacific-European Fund's average daily net assets depending upon the extent by
which Pacific-European Fund's performance varies from the EAFE Index over the
applicable performance period. For a more detailed discussion of the performance
component of the advisory fee for Pacific-European Fund, see "Management --
Investment Adviser" in Pacific-European Fund's current Prospectus.
Edinburgh Fund Managers plc ("EFM") is the sub-adviser of the Fund and of
Pacific-European Fund. With respect to the Fund, as compensation for its
services Piper Capital pays EFM monthly compensation, calculated in the same
manner as the investment advisory fee, of 0.50% of net assets of the Fund. With
respect to Pacific-European Fund, as compensation for its services, Piper
Capital pays EFM monthly compensation, calculated in the same manner as the
investment advisory fee, of 65% of the Basic Fee plus or minus 90% of the
performance fee adjustment described above. EFM has entered into an expense
reimbursement agreement with Piper Capital under which it pays Piper Capital a
monthly fee equal to 10% of the Basic Fee. This 10% fee is a reimbursement to
Piper Capital for certain expenses it bears in connection with the
administration of Pacific-European Fund.
Both the Fund and Pacific-European Fund have adopted distribution plans
(each, a "12b-1 Plan") pursuant to Rule 12b-1 under the 1940 Act. Pursuant to
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 Pacific-European Fund's 12b-1 Plan are made to the
Distributor each
7
<PAGE>
month to reimburse the Distributor for its actual expenses incurred in
connection with servicing of Pacific-European Fund's shareholder accounts and in
connection with distribution-related services provided with respect to
Pacific-European Fund's 12b-1 Plan. 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 Pacific-European Fund. The Distributor has voluntarily limited reimbursements
under each 12b-1 Plan to 0.50% in the case of the Fund and 0.32% in the case of
Pacific-European Fund. In the case of Pacific-European Fund, this limitation may
be revised or terminated at any time after its fiscal year end. In the case of
the Fund, Piper Capital and the Distributor do not presently intend to continue
these limitations beyond the Fund's current fiscal year.
OTHER SIGNIFICANT FEES. Both the Fund and Pacific-European Fund pay
additional fees in connection with their operations, including legal, auditing,
transfer agent and custodial fees. See "Fee Table" above for the percentage of
average net assets represented by such Other Expenses.
PURCHASES, REDEMPTIONS AND EXCHANGES.
PURCHASES. The Fund and Pacific-European Fund each continuously issue their
shares to investors at a price equal to net asset value at the time of such
issuance. Investors in Pacific-European Fund, however, also pay a front-end
sales charge of 4.00% on purchases of less than $100,000 scaled down to 0% on
purchases of $500,000 and above. Shareholders of the Fund who acquire Pacific-
European Fund Shares in the Reorganization will not pay the front-end sales
charge on such Shares; however, such sales charge will be applied to additional
purchases of Pacific-European Fund. Shares of the Fund and Pacific-European Fund
are distributed by the Distributor and other broker-dealers who have entered
into selected broker-dealer agreements with the Distributor. Purchase orders for
shares of the Fund will not be accepted after the date on which the Plan is
approved by Fund shareholders.
REDEMPTIONS. Shareholders of the Fund and Pacific-European Fund may redeem
their shares for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable contingent deferred sales charge ("CDSC"). In most circumstances,
redemptions of Fund shares made within two years of purchase are subject to a
CDSC, scaled down from 2.00% to 1.00% of the amount redeemed. No CDSC will be
applied to shares of the Fund at the time of the Reorganization or to
Pacific-European Fund Shares acquired in the Reorganization on redemption of
such Shares. With respect to Pacific-European Fund, shareholders who invested
more than $500,000 and accordingly paid no front-end sales charge, are in most
circumstances subject to a CDSC if shares are redeemed within 24 months. The
charge is equal to 1.00% of the lesser of the net asset value of the shares at
the time of purchase or at the time of redemption. Pacific-European Fund offers
a reinstatement privilege whereby a shareholder whose shares have been redeemed
may, within thirty days after the date of redemption invest any portion or all
of the proceeds thereof in another fund managed by Piper Capital (other than
portfolios of the Company) without payment of an additional sales charge, or if
such redemption was subject to a CDSC, a pro rata credit will be given for such
CDSC. The Fund and Pacific-European Fund may redeem involuntarily, at net asset
value, accounts valued at less than $200.
EXCHANGES. Each of the Fund and Pacific-European Fund makes available to
its shareholders exchange privileges allowing exchange of shares for shares of
certain other funds. Shares of the Fund may be exchanged for shares of any of
the five other series of the Company. Pacific-European Fund Shares may be
exchanged for shares of any of the 15 other funds open to new investors that are
advised by Piper Capital. Both the Fund and Pacific-European Fund provide
telephone exchange privileges to their shareholders.
For a more detailed discussion of purchasing, redeeming and exchanging
Pacific-European Fund shares, see "Shareholder Guide to Investing -- How to
Purchase Shares," "-- How to Redeem Shares" and "-- Shareholder Services" in
Pacific-European Fund's current Prospectus.
DIVIDENDS. Dividends from both the Fund's and Pacific-European Fund's
anticipated net investment income are declared and paid annually and net
short-term capital gains and long-term
8
<PAGE>
capital gains distributions are paid at least once annually. Dividends and
capital gains distributions of both the Fund and Pacific-European Fund are
automatically reinvested in additional shares at net asset value unless the
shareholder elects to receive cash.
PRINCIPAL RISK FACTORS
The Fund and Pacific-European Fund each pursue their respective investment
objectives through investment in foreign securities. Accordingly, they are both
subject to the same general risks associated with international investing. These
risks include: risks relating to adverse currency fluctuations, potential
political and economic instability of certain countries, limited liquidity and
greater volatility of prices as compared to U.S. securities, investment and
repatriation restrictions, and foreign taxation. Their risks differ to the
extent that Pacific-European Fund invests in both the Pacific Basin and Europe
and may invest up to 25% of its assets anywhere in the world, whereas the Fund
invests primarily in the Pacific Basin.
Another difference between the two funds is that although the Fund
emphasizes investment in equity securities, it may also pursue its objective
through investment in investment grade debt securities and may invest without
limitation in such securities. By contrast, Pacific-European Fund may invest in
debt securities solely for defensive purposes. Accordingly, the Fund may be
subject to the risks associated with investments in debt securities (E.G.,
credit risk, interest rate risk) to a greater extent than Pacific-European Fund.
While both Funds may participate in the futures and options markets for
hedging purposes, and the risks of such participation are similar, the Fund may
also enter into such transactions for speculative purposes to generate income.
In addition, as discussed above, the Fund may invest in zero coupon bonds,
deferred interest bonds and PIK Bonds and Pacific-European Fund does not engage
in such transactions. Accordingly, Pacific-European Fund is not subject to the
risks associated with these transactions.
In addition, as discussed above, the Fund is a non-diversified investment
company under the 1940 Act, whereas Pacific-European Fund is a diversified
investment company. As a result, the Fund may invest a higher percentage of its
assets in a more limited number of issuers than Pacific-European Fund.
The foregoing discussion is a summary of the principal risk factors. For a
more complete discussion of the risks of each fund, see "Special Risk
Considerations" in the Fund's Prospectus and "Risk Factors" in Pacific-European
Fund's Prospectus.
THE REORGANIZATION
BACKGROUND
The Company was managed initially through a joint venture ("Hercules")
between Piper Jaffray Companies, Inc. ("Piper Jaffray") and Midland Walwyn
Capital Corporation ("Midland") pursuant to which the parties agreed to jointly
promote, distribute and manage a family of international funds in the United
States and Canada. Shares of the Company were first offered to the public in the
U.S. on November 9, 1993.
The Company's shares, including shares of the Fund, were originally offered
for sale with no front-end or back-end sales charge. In lieu of a sales charge
paid by investors, Hercules and each sub-adviser retained by Hercules to manage
the portfolio of each series of the Company, advanced to broker-dealers a sales
commission (except with respect to the Money Market Fund) in the aggregate of
2.00% of the net asset value of shares purchased. If a shareholder redeemed in
less than two years, all or a portion of the advanced commission was charged
back to the broker-dealer. If a shareholder exchanged among the series within
the same two year period, the sub-advisers paid, or were paid, as the case may
be, a portion of the commission advance that had not yet been recovered. While
initially the Company, including the Fund, experienced positive growth, a trend
of net redemptions commenced in November of 1994 which has yet to be reversed.
9
<PAGE>
In April 1995, Piper Jaffray and Midland announced their mutual agreement to
terminate the joint venture arrangement and to dissolve Hercules. After
requisite shareholder approval was obtained in July 1995, Piper Capital assumed
the role of manager and investment adviser for the Company.
After becoming manager to the Company, Piper Capital focused on the
structure, pricing and marketing of the various Hercules funds in the United
States in an attempt to promote asset growth in the funds and reverse the trend
of net redemptions. In particular, it invested considerable time and financial
resources to develop a distribution network with broker-dealers in addition to
Piper Jaffray because Piper Capital believed that the development of an external
distribution system was critical to the successful distribution of the Hercules
funds.
As part of this effort, a change in the pricing structure was implemented in
June 1995 incorporating a CDSC. Implementation of the CDSC was intended to
eliminate the need to recoup from the broker-dealer through whom the shares were
sold the commissions advanced to it by Piper Capital and the applicable
sub-adviser in the event of a redemption within two years of purchase. In lieu
thereof, shareholders would be required to pay a declining CDSC if shares were
redeemed within two years of purchase. It was believed that this pricing
structure would prove attractive to broker-dealers as well as to future
investors. The implementation of the CDSC did not, however, have the desired
effect on growth. Rather, the trend of net redemptions continued. Latin American
Value Fund and Money Market Fund are the only Hercules funds which have had even
one month since October 1994 where shareholder purchases exceeded redemptions.
Moreover, sales through broker-dealers other than Piper Jaffray remained
minimal.
The continuing inability to achieve asset growth in the Hercules funds
prompted a further review by Piper Capital of the future prospects of the funds.
Ultimately, Piper Capital concluded that it is unlikely that the Hercules funds
will, in the foreseeable future grow to a sufficient size to be economically
viable. Accordingly, Piper Capital recommended to the Board of Directors of the
Company that the Hercules funds be eliminated as a free standing family of funds
and that instead each Hercules fund be combined with an appropriate fund within
the Piper family of funds (or, in the case of World Bond Fund and Money Market
Fund, that the fund be liquidated).
THE BOARD'S CONSIDERATION
At a meeting of the Board of Directors held on February 6, 1996, Piper
Capital reviewed for the Board the basis for its recommendation. It detailed the
efforts that have been made since inception of the Hercules Funds to promote and
market the funds, the continuing inability to reverse the trend of net
redemptions that has continued since November 1994 despite these efforts, and
the basis for its pessimistic view respecting the Company's future prospects.
At its meeting on February 6, 1996, the Board, including all of the
Independent Directors, unanimously approved the Reorganization and on March 29,
1996 approved the Plan and determined to recommend that shareholders of the Fund
approve the Plan.
In determining whether to recommend that shareholders of the Fund approve
the Plan the Board, with the advice and assistance of independent legal counsel,
inquired into a number of matters. In particular, the Board considered the
Company's prospects for future growth and the effect upon shareholders should
assets remain at current levels or continue to be reduced further. The Board
considered in this regard that since the commencement of operations, Piper
Capital (or Hercules) has voluntarily limited total expenses of the Fund and the
Distributor has voluntarily limited its 12b-1 fees payable by the Fund but they
do not presently intend to continue these limitations beyond the Fund's fiscal
year ending June 30, 1996. The Board noted that absent such assumption of
expenses and waiver of fees, the expense ratio of the Fund for the most current
fiscal year would have been higher and total return lower.
The Board carefully considered the compatibility of the investment
objectives, policies, restrictions and portfolios of the Fund and
Pacific-European Fund. In particular the Board focused on the
10
<PAGE>
differences in the investment policies of the Fund and Pacific-European Fund.
The most significant difference between the two, as discussed more fully below
in "Comparison of Investment Objectives, Policies and Restrictions -- Investment
Objectives and Policies," is that the Fund invests primarily in the Pacific
Basin whereas Pacific-European Fund invests primarily in the Pacific Basin as
well as Europe (including Eastern Europe). In considering the suitability of
Pacific-European Fund for shareholders of the Fund given Pacific-European Fund's
broader geographic focus, the Board evaluated information provided by Piper
Capital that indicated that a significant percentage of shareholders of the Fund
were also shareholders of the Hercules European Value Fund and therefore were
investors who sought exposure to the Pacific Basin and Europe. In addition, the
Board considered information provided by Piper Capital that over 60% of
Pacific-European Fund's assets were currently invested in the Pacific Basin.
The Board also considered the comparative expenses currently incurred in the
operation of the Fund and Pacific-European Fund, the terms and conditions of the
proposed Reorganization, the comparative performance of the funds, Piper
Capital's undertaking to pay all direct costs (E.G., proxy solicitation) of the
Reorganization, and the indirect costs (E.G., brokerage) likely to be incurred
by the Fund in the Reorganization. In recommending the Reorganization to the
shareholders of the Fund, the Board considered that the Reorganization would
have the following benefits for shareholders of the Fund:
1. The total expenses borne by shareholders of the combined fund should
be lower on a percentage basis than the total expenses per share of the
Fund. The Fund's expense ratio for its fiscal year ended June 30, 1995 was
2.00%, giving effect to waivers and expense reimbursements which Piper
Capital and the Distributor intend to discontinue after the Fund's fiscal
year ending June 30, 1996. Absent such waivers and reimbursements, expenses
would have been 2.53%. By contrast, the expense ratio for Pacific-European
Fund for its fiscal year ended February 28, 1995 was 1.76%, giving effect to
the Distributor's voluntary limitation. Absent such limitation expenses
would have been 1.98%. The Distributor has voluntarily agreed to limit the
12b-1 fee to an annual rate of 0.32% of Pacific-European Fund's average
daily net assets for its current fiscal year. (Advisory fees for
Pacific-European Fund could, in the future, be more or less than that
incurred during its last fiscal year because the fee is subject to a
performance based adjustment upward or downward of up to 0.25%.) In
addition, Pacific-European Fund's advisory fee scales down as asset levels
increase, because Pacific-European Fund is much larger than the Fund, and
there is the opportunity to benefit from economies of scale, greater
investment diversification and facilitation of portfolio management. In
fact, subsequent to the Reorganization (and the proposed reorganization of
Hercules European Value Fund into Pacific-European Fund, as discussed above)
advisory fees for Pacific-European Fund may be reduced, as a percentage of
net assets, due to increased net assets of the combined funds.
2. Shareholders of the Fund will be able to acquire shares of
Pacific-European Fund, which are otherwise subject to a maximum 4.00%
front-end sales charge, at net asset value and pursue a similar investment
objective in a larger and more economically viable fund without having to
sell their shares. Moreover, shareholders will be able to redeem the shares
so acquired at net asset value without any CDSC being imposed 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. The Fund's shareholders would retain the capabilities and resources
of EFM, an experienced international investment manager and sub-adviser to
Pacific-European Fund.
11
<PAGE>
5. The Reorganization would enable the Fund's shareholders to enjoy an
expanded range of mutual fund investment options. The Piper Funds complex,
of which Pacific-European Fund is a part, includes 15 mutual fund portfolios
that will be available for exchange by Fund shareholders who receive
Pacific-European Fund Shares in the Reorganization.
6. The Reorganization will constitute a tax-free reorganization for
Federal income tax purposes, and no gain or loss will be recognized by the
Fund or its shareholders for Federal income tax purposes as a result of the
Reorganization.
Based on the foregoing, the Board determined that the Reorganization is in
the best interests of the shareholders of the Fund and that the interests of
Fund shareholders will not be diluted as a result thereof.
The Board of Directors of Pacific-European Fund, including all of the
Independent Directors, has also determined that the Reorganization is in the
best interests of Pacific-European Fund and that the interests of existing
shareholders of Pacific-European Fund will not be diluted as a result thereof.
The transaction will enable Pacific-European Fund to acquire investment
securities which are consistent with its objectives without the brokerage costs
attendant to the purchase of such securities in the market. Also, the addition
of the Fund's assets should result in some cost savings to the extent that fixed
expenses can be spread over a larger asset base. A larger asset base could also
lead to reduced management fees as a result of "breakpoints" in the management
fees payable by Pacific-European Fund.
THE PLAN
The terms and conditions under which the Reorganization would be consummated
are set forth in the Plan and are summarized below. This summary is qualified in
its entirety by reference to the Plan, a copy of which is attached as EXHIBIT A
to this Proxy Statement/Prospectus.
The Plan provides that (i) the Fund will transfer all of its assets,
including appropriate portfolio securities, cash, cash equivalents, securities,
commodities, futures and dividend and interest receivables to Pacific-European
Fund on the Closing Date in exchange for the assumption by Pacific-European Fund
of the Fund's stated liabilities, including all expenses, costs, charges and
reserves, as reflected on an unaudited statement of assets and liabilities of
the Fund prepared by the Treasurer of the Company as of the Valuation Date in
accordance with generally accepted accounting principles consistently applied
from the prior audited period, and the delivery of Pacific-European Fund Shares;
(ii) such Pacific-European Fund Shares will be distributed to the shareholders
of the Fund on the Closing Date or as soon as practicable thereafter; and (iii)
the Company shall be dissolved as a Minnesota corporation and deregistered as an
investment company under the 1940 Act, promptly following the making of all
distributions and the reorganization or liquidation of each other series of the
Company. In most cases, reorganization or liquidation of the other series is
contingent on obtaining the approval of shareholders of the series.
For technical reasons, certain of the Fund's existing investment limitations
may be deemed to preclude the Fund from consummating the Reorganization to the
extent that the Reorganization would involve the Fund holding all of its assets
as shares of Pacific-European Fund until such shares are distributed to the
Fund's shareholders. By approving the Plan, the Fund's shareholders will be
deemed to have agreed to waive each of these limitations.
The number of Pacific-European Fund Shares to be delivered to the Fund will
be determined by dividing the value of the Fund assets acquired by
Pacific-European Fund (net of stated liabilities assumed by Pacific-European
Fund) by the net asset value of a Pacific-European Fund Share; these values will
be calculated as of the close of business of the New York Stock Exchange on a
business day not later than the fifth business day following the receipt of the
requisite approval by the shareholders of the Fund of the Plan or at such other
time as the Fund and Pacific-European Fund may agree (the "Valuation Date"). The
net asset value of a Pacific-European Fund Share shall be the net asset value
per share computed on the Valuation Date, using the valuation procedures set
forth in Pacific-
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European Fund's then current Prospectus and Statement of Additional Information.
As an illustration, if on the Valuation Date the Fund were to have securities
with a market value of $95,000 and cash in the amount of $5,000, the value of
the assets which would be transferred to Pacific-European Fund would be
$100,000. If the net asset value per share of Pacific-European Fund were $10 per
share at the close of business on the Valuation Date, the number of shares to be
issued would be 10,000 ($100,000 DIVIDED BY $10). These 10,000 shares of
Pacific-European Fund would be distributed to the former shareholders of the
Fund. This example is given for illustration purposes only and does not bear any
relationship to the dollar amounts or shares expected to be involved in the
Reorganization. Pacific-European Fund will cause its transfer agent to credit
and confirm an appropriate number of Pacific-European Fund Shares to each Fund
shareholder. Neither the Fund nor Pacific-European Fund issues stock
certificates.
The Closing Date will be the next business day following the Valuation Date,
or at such other time as the Fund and Pacific-European Fund may agree. The
consummation of the Reorganization is contingent upon the approval of the
Reorganization by the shareholders of the Fund and the receipt of the other
opinions and certificates set forth in Sections 6, 7 and 8 of the Plan and the
occurrence of the events described in those Sections, certain of which may be
waived by the Fund or Pacific-European Fund. The Plan may be amended in any
mutually agreeable manner, except that no amendment may be made subsequent to
the Meeting which would detrimentally affect the value of the shares of Pacific-
European Fund to be distributed. Piper Capital will bear all direct costs
associated with the Reorganization including preparation, printing, filing and
proxy solicitation expenses incurred in connection with obtaining requisite
shareholder approval of the Reorganization.
The Plan may be terminated and the Reorganization abandoned at any time,
before or after approval by the Fund's shareholders, by mutual consent of the
Fund and Pacific-European Fund. In addition, either party may terminate the Plan
upon the occurrence of a material breach of the Plan by the other party or, if
by September 15, 1996, any condition set forth in the Plan has not been
fulfilled or waived by the party entitled to its benefits.
The effect of the Reorganization is that shareholders of the Fund who vote
their shares in favor of the Plan are electing to sell their shares of the Fund
(at net asset value on the Valuation Date and reinvest the proceeds in
Pacific-European Fund at net asset value and without recognition of taxable gain
or loss for Federal income tax purposes. 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. Such gain, to the extent not
offset by capital loss carry-forwards, will be distributed to shareholders prior
to the Closing Date and will be taxable to shareholders as capital gain. See
"Tax Aspects of the Reorganization" below. 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 Pacific-European Fund.
TAX ASPECTS OF THE REORGANIZATION
At least one but not more than 20 business days prior to the Valuation Date,
the Fund will declare and pay a dividend or dividends which, together with all
previous such dividends, will have the effect of distributing to the Fund's
shareholders all of the Fund's investment company taxable income for all periods
since inception of the Fund through and including the Valuation Date (computed
without regard to any dividends paid deduction), and all of the Fund's net
capital gain, if any, realized in such periods (after reduction for any capital
loss carry-forward).
The Reorganization is intended to qualify for Federal income tax purposes as
a tax-free reorganization under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"). The Company and Piper Global have represented
that, to their best knowledge, there is no plan or
13
<PAGE>
intention by Fund shareholders to redeem, sell, exchange or otherwise dispose of
a number of Pacific-European Fund Shares received in the transaction that would
reduce the Fund shareholders' ownership of Pacific-European Fund Shares to a
number of shares having a value, as of the Closing Date, of less than 50% of the
value of all of the formerly outstanding Fund shares as of the same date. The
Company and Piper Global have each further represented that, as of the Closing
Date, the Fund and Pacific-European Fund will qualify as regulated investment
companies. In addition, Piper Global has further represented that
Pacific-European Fund will qualify as a regulated investment company for its
current fiscal year.
As a condition to the Reorganization, the Fund and Pacific-European Fund
will receive an opinion of Gordon Altman Butowsky Weitzen Shalov & Wein that,
based on certain assumptions, facts, the terms of the Plan and additional
representations set forth in the Plan or provided by the Company and Piper
Global:
1. The transfer of substantially all of the Fund's assets in exchange
for Pacific-European Fund Shares and the assumption by Pacific-European Fund
of certain stated liabilities of the Fund followed by the distribution by
the Fund of Pacific-European Fund Shares to the Fund Shareholders in
exchange for their Fund shares will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code, and the Fund and Pacific-European
Fund will each be a "party to a reorganization" within the meaning of
Section 368 (b) of the Code;
2. No gain or loss will be recognized by Pacific-European Fund upon the
receipt of the assets of the Fund solely in exchange for Pacific-European
Fund Shares and the assumption by Pacific-European Fund of the stated
liabilities of the Fund;
3. No gain or loss will be recognized by the Fund upon the transfer of
the assets of the Fund to Pacific-European Fund in exchange for
Pacific-European Fund Shares and the assumption by Pacific-European Fund of
the stated liabilities or upon the distribution of Pacific-European Fund
Shares to the Fund's shareholders in exchange for their Fund shares;
4. No gain or loss will be recognized by the Fund shareholders upon the
exchange of the shares of the Fund for Pacific-European Fund Shares;
5. The aggregate tax basis for Pacific-European Fund Shares received by
each of the Fund's shareholders pursuant to the reorganization will be the
same as the aggregate tax basis of the shares in the Fund held by each such
shareholder of the Fund immediately prior to the Reorganization;
6. The holding period of Pacific-European Fund Shares to be received by
each shareholder of the Fund will include the period during which the shares
in the Fund surrendered in exchange therefor were held (provided such shares
in the Fund were held as capital assets on the date of the Reorganization);
7. The tax basis of the assets of the Fund acquired by Pacific-European
Fund will be the same as the tax basis of such assets to the Fund
immediately prior to the Reorganization; and
8. The holding period of the assets of the Fund in the hands of
Pacific-European Fund will include the period during which those assets were
held by the Fund.
The Reorganization will be treated as a "change in ownership" under Section
382 of the Code. It is not anticipated that any resulting limitations on the use
of any capital loss carryovers of the Fund will be material. In addition, the
economic benefit of any capital loss carryovers of the Fund would be available
to shareholders of the combined entity with a resulting benefit to
Pacific-European Fund shareholders. It is not anticipated that any such benefit
will be material.
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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 Pacific-European Fund to be issued pursuant to the Plan will, when
issued, be fully paid and non-assessable by Pacific-European Fund and
transferable without restrictions and will have no preemptive or conversion
rights.
CAPITALIZATION TABLE (UNAUDITED)
The following table sets forth the capitalization of Pacific-European Fund
and the Fund as of February 29, 1996 and on a pro forma combined basis as if the
Reorganization (and the proposed reorganization of Hercules European Value Fund
into Pacific-European Fund, as discussed above) had occurred on that date:
<TABLE>
<CAPTION>
SHARES
NET ASSETS OUTSTANDING NET ASSET
(000S (000S VALUE
OMITTED) OMITTED) PER SHARE
------------- ------------- -----------
<S> <C> <C> <C>
Fund......................................................... $ 26,429 2,627 $ 10.06
Pacific-European Fund........................................ $ 163,312 11,783 $ 13.86
Sub-total (assumes only the Fund approves the
Reorganization)......................................... $ 189,741 13,690 $ 13.86
Hercules European Value Fund................................. $ 13,871 1,270 $ 10.92
Pro Forma Combined........................................... $ 203,612 14,691 $ 13.86
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES AND POLICIES
The Fund and Pacific-European Fund have a similar investment objective. The
Fund's objectives are long-term capital appreciation and, to a lesser extent,
current income. The investment objective of Pacific-European Fund is long-term
capital appreciation. Current income is incidental to this objective. The
investment objective of the Fund is fundamental and may not be changed without
shareholder approval. The investment objective of Pacific-European Fund is
non-fundamental and, accordingly, it may be changed without shareholder
approval. If there is a change in investment objective of Pacific-European Fund,
shareholders would need to consider whether Pacific-European Fund remains an
appropriate investment in light of their then current financial position and
needs.
The Fund seeks to achieve its investment objective by investing, under
normal circumstances, at least 65% of its total assets in the securities of
issuers located in the Pacific Basin. Emphasis is placed
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<PAGE>
on investment in equity securities; however, the Fund may invest without limit
in investment grade debt securities of governmental and private issuers
(including notes, debentures, Brady Bonds, mortgage-backed securities and
asset-backed securities). Pacific-European Fund seeks to achieve its investment
objective by investing, under normal circumstances, at least 65% of its total
assets in Common Stock of companies in the Pacific Basin or in Europe (including
Eastern Europe). "Common Stock" means common stock and foreign equity securities
which are substantially similar to common stock in the U.S. and does not include
preferred stock or convertible debt securities). Up to 25% of Pacific-European
Fund's total assets may be invested in other areas of the world to the extent
significant opportunities for long-term capital appreciation outside of the
Pacific Basin and Europe become available. Pacific-European Fund invests in debt
securities solely for temporary defensive purposes. As discussed above, the
principal difference between the two funds is that Pacific-European Fund invests
in countries that comprise the Pacific Basin (namely, Malaysia, Pakistan, Sri
Lanka, the Philippines, Singapore, South Korea, Thailand, India, Indonesia, Hong
Kong, Japan, Taiwan, Australia and New Zealand) and Europe (including Eastern
Europe), whereas the Fund invests primarily in the Pacific Basin.
As of February 29, 1996, approximately 67% of Pacific-European Fund's
investments were in companies in the Pacific Basin (including Japan) and
approximately 28% were in companies in Europe. While Pacific-European Fund has
no specific policy or restriction on the allocation of its funds between Europe
and the Pacific Basin, Piper Capital and EFM believe that the opportunities for
long-term capital appreciation in the Pacific Basin are generally superior to
those presently available in the economically more mature areas of the world.
The relative emphasis of Pacific-European Fund's investments between the Pacific
Basin and Europe may change over time.
Both the Fund and Pacific-European Fund may invest part or all of their
respective assets in U.S. dollar-or foreign currency-denominated cash or
domestic or foreign high-quality money market instruments to maintain a
temporary "defensive" posture, when, in the opinion of the investment adviser,
it is advisable to do so because of market conditions.
The Fund and Pacific-European Fund may invest in American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and in other investment
companies (up to the limits prescribed by the 1940 Act). The Fund may also
invest up to 10% of its total assets in foreign index linked instruments and in
loan participations and assignments; Pacific-European Fund does not invest in
these types of securities.
The Fund may purchase and sell put and call options, futures contracts and
options on futures contracts with respect to financial instruments, stock and
interest rate indexes and foreign currencies. Futures and options may be used to
facilitate allocation of the Fund's investment among asset classes, to generate
income or to hedge against declines in securities prices or increases in prices
of securities proposed to be purchased. Pacific-European Fund may, for hedging
purposes only, buy or sell put and call options on the securities in which it
may invest and enter into futures contracts and options on futures contracts
based on financial indices including any index of securities in which the Fund
may invest. Both funds may buy or sell options, futures or options on futures
that are traded on U.S. or foreign exchanges or over-the-counter. In addition,
both funds may enter into currency exchange transactions (including forward
foreign currency exchange contracts and futures and options contracts on foreign
currencies), as a hedge against fluctuations in foreign exchange rates.
Both the Fund and Pacific-European Fund may purchase securities on a
when-issued or delayed delivery basis and may purchase or sell securities on a
forward commitment basis. Both funds may invest in warrants up to 5% of its net
assets. Included within this amount, but not to exceed 2% of the value of its
net assets, may be warrants that are not listed on the New York or American
Stock Exchange. Warrants are, in effect, options to purchase equity securities
at a specific price, during a specific period, and have no voting or other
rights with respect to the corporation issuing them and pay no dividends. Both
funds may enter into repurchase agreements subject to certain procedures
designed to minimize risks associated with such agreements. Although both funds
may enter into
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<PAGE>
reverse repurchase agreements, neither Fund has, nor does Pacific-European Fund
have any current intention of entering into such agreements in the future. The
Fund may invest in zero coupon bonds, deferred interest bonds and PIK Bonds;
Pacific-European Fund does not invest in these types of instruments.
In addition, the Fund is a non-diversified investment company within the
meaning of the 1940 Act, whereas Pacific-European Fund is a diversified
investment company. A non-diversified investment company may invest a greater
portion of its assets in the securities of a single issuer than a diversified
investment company. To the extent that a relatively high percentage of a
non-diversified fund's assets may be invested in the securities of a limited
number of issuers, such fund may be more susceptible to any single economic,
political or regulatory occurrence than the portfolio securities of a
diversified investment company.
The investment policies of both the Fund and Pacific-European Fund are
non-fundamental and may be changed by their respective Boards of Directors
unless otherwise noted herein. The foregoing discussion is a summary of the
principal differences and similarities between the investment policies of the
funds. For a more complete discussion of each fund's policies see "Investment
Objective and Policies" in each fund's respective Prospectus and "Investment
Objectives and Policies" in the Fund's Statement of Additional Information and
"Investment Objective, Policies and Restrictions" in Pacific-European Fund's
Statement of Additional Information.
INVESTMENT RESTRICTIONS
The investment restrictions adopted by the Fund and Pacific-European Fund as
fundamental policies appear under the caption "Investment Restrictions" in the
Prospectus and Statement of Additional Information of the Fund and "Special
Investment Methods -- Investment Restrictions" in Pacific-European Fund's
Prospectus and "Investment Objective, Policies and Restrictions" in Pacific-
European Fund's Statement of Additional Information. A fundamental investment
restriction cannot be changed without the vote of a majority of the outstanding
voting securities of a fund, as defined in the 1940 Act. The material
differences are as follows: As a diversified investment company, Pacific-
European Fund may not, as a matter of fundamental policy, with respect to 75% of
its total asset, invest more than 5% of the value of its total assets in the
securities of any one issuer or own more than 10% of the outstanding voting
securities of any one issuer (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities). The Fund is subject to a
similar non-fundamental limitation only with respect to 50% of its assets. While
both funds are prohibited from making short sales, the Fund is subject to such
limitation on a non-fundamental basis. As a fundamental restriction, both the
Fund and Pacific-European Fund may not purchase real estate or interests therein
other than securities backed by mortgages and similar investments; however, the
Fund may purchase readily marketable interests in real estate investment trusts
or readily marketable securities of companies that invest in real estate. In
addition, the Fund has a fundamental restriction prohibiting the purchase of
real estate limited partnership interests whereas Pacific-European Fund is
subject to the same limitation on a non-fundamental basis.
INTERESTS OF CERTAIN PERSONS
The following persons affiliated with the Fund and Pacific-European Fund
receive payments from the Fund and Pacific-European Fund for services rendered
pursuant to contractual arrangements with both funds: (i) Piper Capital, as the
investment adviser and manager to each fund, and (ii) the Distributor, as the
distributor of shares of each fund. In addition, with respect to
Pacific-European Fund only, Piper Trust Company, an affiliate of Piper Capital
and the Distributor, and the Distributor provide certain transfer agent and
dividend disbursing agent services for certain shareholder accounts.
17
<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUND
AND PACIFIC-EUROPEAN FUND
GENERAL
For a discussion of the organization and operation of the Fund, see
"Management," "Investment Objectives and Policies", "Investment Restrictions"
and "General Information" in its prospectus. For a discussion of the
organization and operation of Pacific-European Fund, see "Introduction,"
"Management," Investment Objective and Policies" and "General Information" in
its prospectus.
FINANCIAL INFORMATION
For certain financial information about Pacific-European Fund and the Fund,
see "Financial Highlights" and "Performance Comparisons" in their respective
prospectuses.
MANAGEMENT
For information about Pacific-European Fund's and the Fund's Board of
Directors, investment manager and distributor, see "Management" and
"Distribution of Fund Shares" in their respective prospectuses.
DESCRIPTION OF SECURITIES AND SHAREHOLDER INQUIRIES
For a description of the nature and most significant attributes of shares of
the Fund and Pacific-European Fund, and information regarding shareholder
inquiries, see "General Information" and "Introduction -- Shareholder Inquiries"
in their respective prospectuses.
DIVIDENDS, DISTRIBUTIONS AND TAXES
For a discussion of the Fund's policies with respect to dividends,
distributions and taxes, see "Dividends, Distributions and Tax Status" in its
prospectus. For a discussion of Pacific-European Fund's policies with respect to
dividends, distributions, and taxes, see "Dividends and Distributions" and "Tax
Status" in its prospectus.
PURCHASES AND REDEMPTIONS
For a discussion of how the Fund's shares may be purchased and redeemed, see
"Purchase of Shares" and "Redemption of Shares" in its prospectus. For a
discussion of how Pacific-European Fund's shares may be purchased and redeemed,
see "Shareholder Guide to Investing" in its prospectus.
PENDING LEGAL PROCEEDINGS
For a discussion of pending legal proceedings, see "Pending Litigation" in
the Fund's prospectus and "General Information - Pending Legal Proceedings" in
Pacific-European Fund's prospectus.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For management's discussion of Pacific-European Fund's performance as of its
fiscal year ended February 29, 1996, see Piper Global's Annual Report for such
fiscal year accompanying this Proxy Statement/Prospectus and incorporated herein
by reference. For management's discussion of the Fund's performance, see the
Company's Annual Report for its fiscal year ended June 30, 1995, which is
incorporated herein by reference. The Company's Annual Report is available
without charge, as noted under "Available Information" below.
FINANCIAL STATEMENTS AND EXPERTS
The annual financial statements of Pacific-European Fund and the Fund
incorporated by reference in the Additional Statement have been audited by KPMG
Peat Marwick LLP, independent accountants, for the periods indicated in its
respective reports thereon. Such financial statements have been incorporated by
reference in reliance upon such reports given upon the authority of KPMG Peat
Marwick LLP as experts in accounting and auditing.
18
<PAGE>
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Pacific-European
Fund will be passed upon by Dorsey & Whitney LLP, Minneapolis, Minnesota.
AVAILABLE INFORMATION
ADDITIONAL INFORMATION ABOUT THE FUND AND PACIFIC-EUROPEAN FUND IS
AVAILABLE, AS APPLICABLE, IN THE FOLLOWING DOCUMENTS WHICH ARE INCORPORATED
HEREIN BY REFERENCE: (I) PACIFIC-EUROPEAN FUND'S PROSPECTUS DATED APRIL 28,
1995, ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS, WHICH PROSPECTUS FORMS A PART
OF POST-EFFECTIVE AMENDMENT NO. 4 TO PIPER GLOBAL'S REGISTRATION STATEMENT ON
FORM N-1A (FILE NOS. 33-33534; 811-06046); (II) PACIFIC-EUROPEAN FUND'S
STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 28, 1995; (III) PIPER GLOBAL'S
ANNUAL REPORT FOR ITS FISCAL YEAR ENDED FEBRUARY 29, 1996 ACCOMPANYING THIS
PROXY STATEMENT/PROSPECTUS; (IV) THE COMPANY'S PROSPECTUS DATED AUGUST 29, 1995,
WHICH PROSPECTUS FORMS A PART OF POST-EFFECTIVE AMENDMENT NO. 6 TO THE COMPANY'S
REGISTRATION STATEMENT ON FORM N-1A (FILE NOS. 33-67016; 811-7936); (V) THE
COMPANY'S STATEMENT OF ADDITIONAL INFORMATION DATED AUGUST 29, 1995; (VI) THE
COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 1995; AND (VII) THE
COMPANY'S SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED DECEMBER 31, 1995. THE
FOREGOING DOCUMENTS MAY BE OBTAINED WITHOUT CHARGE UPON REQUEST FROM SHAREHOLDER
SERVICES, PIPER JAFFRAY TOWER, 222 SOUTH NINTH STREET, 55402-3804, (800)
866-7778.
The Company and Piper Global are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and in accordance therewith,
file reports and other information with the Commission. Proxy material, reports
and other information about the Fund and Pacific-European Fund which are of
public record can be inspected and copied at public reference facilities
maintained by the Commission at Room 1204, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and certain of its regional offices, and copies of
such materials can be obtained at prescribed rates from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, D.C. 20549.
OTHER BUSINESS
Management of the Company knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not known
at the time of the solicitation may come before the Meeting, the proxy as
solicited confers discretionary authority with respect to such matters as
properly come before the Meeting, including any adjournment or adjournments
thereof, and it is the intention of the persons named as attorneys-in-fact in
the proxy to vote this proxy in accordance with their judgment on such matters.
By Order of the Board of Directors,
SUSAN SHARP MILEY
SECRETARY
May 17, 1996
19
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
HERCULES PACIFIC BASIN VALUE FUND AND PACIFIC-EUROPEAN GROWTH FUND
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
15th day of April, 1996, by and between Hercules Funds Inc. ("Hercules
Company"), on behalf of its series Hercules Pacific Basin Value Fund ("Hercules
Fund"), and Piper Global Funds Inc. ("Piper Company"), on behalf of its series
Pacific-European Growth Fund ("Piper Fund"). Hercules Company and Piper Company
are Minnesota corporations. As used in this Agreement, the terms "Piper Fund"
and "Hercules Fund" shall be construed to mean, respectively, 'Piper Company on
behalf of Piper Fund' and 'Hercules Company on behalf of Hercules Fund', where
necessary to reflect the fact that a corporate series is generally considered
the beneficiary of corporate level actions taken with respect to the series and
is not itself recognized as a person under law.
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Treas. Reg. 1.368-2(g), for a
reorganization under Section 368(a) (1) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization ("Reorganization") will consist of the
transfer to Piper Fund of substantially all of the assets of Hercules Fund in
exchange for the assumption by Piper Fund of all stated liabilities of Hercules
Fund and the issuance by Piper Fund of shares of common stock, par value $0.01
per share ("Piper Fund Shares"), to be distributed, after the Closing Date
hereinafter determined, to the shareholders of Hercules Fund in liquidation of
Hercules Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement. The distribution of Piper Fund Shares to Hercules
Fund shareholders and the retirement and cancellation of Hercules Fund shares
will be effected pursuant to an amendment to the Articles of Incorporation of
Hercules Company in the form attached hereto as Exhibit 1 (the "Amendment"), to
be adopted by Hercules Company in accordance with the Minnesota Business
Corporation Act.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF HERCULES FUND
1.1 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 otherwise transfer the
Hercules Fund Assets (as defined in paragraph 1.2(a)) to Piper Fund and Piper
Fund agrees in exchange therefor to assume all stated liabilities of Hercules
Fund on the Closing Date (as defined in paragraph 3.1) as set forth in paragraph
1.3 and to deliver to Hercules Fund Shareholders (as defined in paragraph 1.5)
the number of Piper Fund Shares, including fractional Piper Fund Shares,
determined in accordance with paragraph 2.2. Such transactions shall take place
at the closing provided for in paragraph 3.1 ("Closing").
1.2 (a) The "Hercules Fund Assets" shall consist of all property including,
without limitation, all cash, cash equivalents, securities, commodities,
futures, and dividend and interest receivables owned by Hercules Fund, and any
deferred or prepaid expenses shown as an asset on Hercules Fund's books, on the
Valuation Date (as defined in paragraph 2.1).
(b) Hercules Fund reserves the right to sell any of the securities in its
portfolio but will not, from the date on which the Proxy Materials (as defined
in paragraph 4.3) are mailed to Hercules Fund shareholders, acquire without the
prior approval of Piper Fund, any additional securities or other instruments
other than securities or instruments of the type in which Piper Fund is
permitted to invest and in amounts agreed to by Piper Fund. In the event that
Hercules Fund holds any assets that Piper Fund is not permitted to hold,
Hercules Fund will dispose of such assets on or prior to the Valuation Date. In
addition, if it is determined that the portfolios of Hercules Fund and Piper
Fund, when aggregated, would contain investments exceeding certain percentage
limitations imposed upon
A-1
<PAGE>
Piper Fund with respect to such investments (including, among others, percentage
limitations necessary to satisfy the diversification requirements of the Code),
Hercules Fund if requested by Piper Fund will, on or prior to the Valuation
Date, dispose of and/or reinvest a sufficient amount of such investments as may
be necessary to avoid violating such limitations as of the Closing Date.
1.3 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 generally 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 investment company under the Investment Company Act of 1940,
as amended ("1940 Act"), promptly following the making of all distributions
pursuant to paragraph 1.5 and the reorganization or liquidation of each of its
series, such that no shares of Hercules Company remain issued and outstanding.
1.10 All books and records maintained on behalf of Hercules Fund will be
delivered to Piper Fund and, after the Closing, will be maintained by Piper Fund
or its designee in compliance with applicable record retention requirements
under the 1940 Act.
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2. VALUATION
2.1 The "Valuation Date" shall be a business day not later than the 5th
business day following the receipt of the requisite approval of this Agreement
by shareholders of Hercules Fund or such other date after such shareholder
approval as may be mutually agreed upon. The value of the Hercules Fund Assets
shall be the value of such assets computed as of 4:00 p.m., Eastern time, on the
Valuation Date, using the valuation procedures set forth in Piper Fund's then
current Prospectus and Statement of Additional Information.
2.2 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 hereunder shall be determined by dividing the value of the Hercules
Fund Assets, net of the liabilities of Hercules Fund assumed by Piper Fund
pursuant to paragraph 1.1, determined in accordance with paragraph 2.1, by the
net asset value of a Piper Fund Share determined in accordance with paragraph
2.2.
2.4 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.
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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 ("Commission") a registration statement on Form N-14 under the
Securities Act of 1933, as amended ("1933 Act"), relating to Piper Fund Shares
("Registration Statement"). Hercules Company will provide Piper Company with the
Proxy Materials as described in paragraph 4.3 below, for inclusion in the
Registration Statement. Hercules Company will further provide Piper Company with
such other information and documents relating to Hercules Fund as are reasonably
necessary for the preparation of the Registration Statement.
4.3 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;
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(d) The current Prospectus and Statement of Additional Information of
Piper Fund conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the regulations thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(e) Piper Fund is not in, and the execution, delivery and performance of
this Agreement will not result in a, material violation of any provision of
Piper Company's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which Piper
Fund is a party or by which it is bound;
(f) Other than as disclosed in Piper Fund's currently effective
prospectus, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or, to its knowledge, threatened against Piper Company or Piper Fund
or any of its properties or assets which, if adversely determined, would
materially and adversely affect its financial condition or the conduct of
its business; and Piper Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to
materially and adversely affect, its business or its ability to consummate
the transactions herein contemplated;
(g) Piper Fund's Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial Highlights as
of Piper Fund's most recent fiscal year-end, and for the year then ended,
certified by KPMG Peat Marwick LLP (copies of which have been furnished to
Hercules Fund), fairly present, in all materials respects, Piper Fund's
financial condition as of such date in accordance with generally accepted
accounting principles, and its results of operations, changes in its net
assets and financial highlights for such period, and as of such date there
were no known liabilities of Piper Fund (contingent or otherwise) not
disclosed therein that would be required in accordance with generally
accepted accounting principles to be disclosed therein;
(h) Since the date of the most recent audited financial statements,
there has not been any material adverse change in Piper Fund's financial
condition, assets, liabilities or business, other than changes occurring in
the ordinary course of business, or any incurrence by Piper Fund of
indebtedness maturing more than one year from the date such indebtedness was
incurred, except indebtedness incurred in the ordinary course of business.
For the purpose of this subparagraph (h), neither a decline in Piper Fund's
net asset value per share nor a decrease in Piper Fund's size due to
redemptions by Piper Fund shareholders shall constitute a material adverse
change;
(i) All issued and outstanding Piper Fund shares are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof.
Piper Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of its shares, nor is there outstanding any
security convertible to any of its shares;
(j) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of Piper Company, and
this Agreement constitutes a valid and binding obligation of Piper Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
and other laws relating to or affecting creditors rights and to general
equity principles. No other consents, authorizations or approvals are
necessary in connection with Piper Fund's performance of this Agreement,
except such as have been obtained under the 1933 Act, the 1934 Act and the
1940 Act and such as may be required under state securities laws;
(k) Piper Fund Shares to be issued and delivered to Hercules Fund, for
the account of the Hercules Fund Shareholders, pursuant to the terms of this
Agreement will at the Closing Date
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have been duly authorized and, when so issued and delivered, will be duly
and validly issued Piper Fund Shares, and will be fully paid and
nonassessable with no personal liability attaching to the ownership thereof;
(l) All material federal and other tax returns and reports of Piper Fund
required by law to be filed on or before the Closing Date have been filed
and are correct, and all federal and other taxes shown as due or required to
be shown as due on said returns and reports have been paid or provision has
been made for the payment thereof, and to the best of Piper Fund's
knowledge, no such return is currently under audit and no assessment has
been asserted with respect to any such return and there are no facts that
might form the basis for such proceedings;
(m) For each taxable year since its inception, Piper Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a "regulated investment company" and neither the execution or delivery of,
nor the performance of its obligations under, this Agreement will adversely
affect, and no other events, to the best of Piper Fund's knowledge, are
reasonably likely to occur which will adversely affect, the ability of Piper
Fund to continue to meet the requirements of Subchapter M of the Code;
(n) Since Piper Fund's most recent fiscal year-end, there has been no
change by Piper Fund in accounting methods, principles, or practices,
including those required by generally accepted accounting principles;
(o) The information furnished or to be furnished by Piper Fund for use
in registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto; and
(p) The Proxy Materials to be included in the Registration Statement
(only insofar as they relate to Piper Fund) will, on the effective date of
the Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially
misleading.
5.2 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;
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(e) Hercules Fund is not in, and the execution, delivery and performance
of this Agreement will not result in a, material violation of any provision
of Hercules Company's Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which Hercules Fund is a party or by which it is bound;
(f) Other than as disclosed in Hercules Fund's currently effective
prospectus, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or, to its knowledge, threatened against Hercules Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business; and
Hercules Fund knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to
materially and adversely affect, its business or its ability to consummate
the transactions herein contemplated;
(g) Hercules Fund's Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial Highlights of
Hercules Fund as of June 30, 1995 and for the year then ended, certified by
KPMG Peat Marwick LLP (copies of which have been or will be furnished to
Piper Fund) fairly present, in all material respects, Hercules Fund's
financial condition as of such date, and its results of operations, changes
in its net assets and financial highlights for such period in accordance
with generally accepted accounting principles, and as of such date there
were no known liabilities of Hercules Fund (contingent or otherwise) not
disclosed therein that would be required in accordance with generally
accepted accounting principles to be disclosed therein;
(h) Since the date of the most recent audited financial statements,
there has not been any material adverse change in Hercules Fund's financial
condition, assets, liabilities or business, other than changes occurring in
the ordinary course of business, or any incurrence by Hercules Fund of
indebtedness maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed in writing to and acknowledged by
Piper Fund prior to the date of this Agreement and prior to the Closing
Date. All liabilities of Hercules Fund (contingent
and otherwise) are reflected in the Valuation Date Statement. For the
purpose of this subparagraph (h), neither a decline in Hercules Fund's net
asset value per share nor a decrease in Hercules Fund's size due to
redemptions by Hercules Fund shareholders shall constitute a material
adverse change;
(i) Hercules Fund has no material contracts or other commitments (other
than this Agreement) that will be terminated with liability to it prior to
the Closing Date;
(j) All issued and outstanding shares of Hercules Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the ownership
thereof. Hercules Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of its shares, nor is there
outstanding any security convertible to any of its shares. All such shares
will, at the time of Closing, be held by the persons and in the amounts
recorded by Hercules Fund's transfer agent;
(k) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on
the part of Hercules Company, and subject to the approval of Hercules Fund's
shareholders, this Agreement constitutes a valid and binding obligation of
Hercules Fund enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws relating to or affecting creditors
rights and to general equity principles. No other consents, authorizations
or approvals are necessary in connection with Hercules Fund's performance of
this Agreement, except such as have been obtained under the 1933 Act, the
1934 Act and the 1940 Act and such as may be required under state securities
laws;
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(l) All material federal and other tax returns and reports of Hercules
Fund required by law to be filed on or before the Closing Date shall have
been filed and are correct and all federal and other taxes shown as due or
required to be shown as due on said returns and reports have been paid or
provision has been made for the payment thereof, and to the best of Hercules
Fund's knowledge, no such return is currently under audit and no assessment
has been asserted with respect to any such return and there are no facts
that might form the basis for such proceedings;
(m) For each taxable year since its inception, Hercules Fund has met all
the requirements of Subchapter M of the Code for qualification and treatment
as a "regulated investment company" and neither the execution or delivery
of, nor the performance of its obligations under, this Agreement will
adversely affect, and no other events, to the best of Hercules Fund's
knowledge, are reasonably likely to occur which will adversely affect the
ability of Hercules Fund to continue to meet the requirements of Subchapter
M of the Code;
(n) At the Closing Date, Hercules Fund will have good and valid title to
the Hercules Fund Assets, subject to no liens (other than the obligation, if
any, to pay the purchase price of portfolio securities purchased by Hercules
Fund which have not settled prior to the Closing Date), security interests
or other encumbrances, and full right, power and authority to assign,
deliver and otherwise transfer such assets hereunder, and upon delivery and
payment for such assets, Piper Fund will acquire good and marketable title
thereto, subject to no restrictions on the full transfer thereof, including
any restrictions as might arise under the 1933 Act;
(o) On the effective date of the Registration Statement, at the time of
the meeting of Hercules Fund's shareholders and on the Closing Date, the
Proxy Materials will (i) comply in all material respects with the provisions
of the 1933 Act, the Securities Exchange Act of 1934, as amended ("1934
Act") and the 1940 Act and the regulations thereunder and (ii) not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. Neither Hercules Fund nor Hercules Company shall be
construed to have made the foregoing representation with respect to portions
of the Proxy Materials furnished by Piper Fund. Any other information
furnished by Hercules Fund for use in the Registration Statement or in any
other manner that may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with applicable federal securities and other laws and
regulations thereunder;
(p) Hercules Fund has maintained or has caused to be maintained on its
behalf all books and accounts as required of a registered investment company
in compliance with the requirements of Section 31 of the 1940 Act and the
Rules thereunder; and
(q) Hercules Fund is not acquiring Piper Fund Shares to be issued
hereunder for the purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF HERCULES FUND
The obligations of Hercules Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by Piper Fund of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
6.1 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
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correct at and as of the a Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters as
Hercules Company shall reasonably request.
6.3 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 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.
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7.4 Piper Fund shall have received at the Closing a favorable opinion from
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Hercules Fund, dated as
of the Closing Date to the effect that: (a) Hercules Company is a validly
existing Minnesota corporation and has the corporate power to own all of the
properties and assets of Hercules Fund and, to the knowledge of such counsel, to
carry on its business as presently conducted (Minnesota counsel may be relied
upon in delivering such opinion); (b) Hercules Company is a duly registered,
open-end management investment company under the 1940 Act, and, to the knowledge
of such counsel, its registration with the Commission as an investment company
under the 1940 Act is in full force and effect; (c) this Agreement has been duly
authorized, executed and delivered by Hercules Fund and, assuming that the
Registration Statement complies with the 1933 Act, the 1934 Act and the 1940 Act
and the regulations thereunder and assuming due authorization, execution and
delivery of this Agreement by Piper Fund, is a valid and binding obligation of
Hercules Fund enforceable against Hercules Fund in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other laws relating to or affecting
creditors rights and to general equity principles; (d) the execution and
delivery of this Agreement did not, and the consummation of the transactions
contemplated hereby will not, violate Hercules Company's Articles of
Incorporation or By-Laws; and (e) to the knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental authority of the
United States or any state is required for the consummation by Hercules Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required under
state securities laws.
7.5 On the Closing Date, the Hercules Fund Assets shall include no assets
that Piper Fund, by reason of Piper Company's Articles of Incorporation
limitations or otherwise, may not properly acquire.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF PIPER FUND AND HERCULES FUND
The obligations of Hercules Fund and Piper Fund hereunder are each
subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the Amendment and the transactions contemplated
herein and therein shall have been approved by the requisite vote of the holders
of the outstanding shares of Hercules Fund in accordance with the provisions of
Hercules Company's Articles of Incorporation, and certified copies of the
resolutions evidencing such approval shall have been delivered to Piper Fund.
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and permits
of federal, state and local regulatory authorities (including those of the
Commission and of state blue sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by Piper Fund or Hercules Fund to permit
consummation, in all material respects, of the transactions contemplated herein
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve risk of a material adverse effect on the assets or
properties of Piper Fund or Hercules Fund.
8.4 The Registration Statement shall have become effective under the 1933
Act, no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
8.5 On or prior to the Valuation Date, Hercules Fund shall have declared and
paid a dividend or dividends and/or other distribution or distributions that,
together with all previous such dividends or
A-10
<PAGE>
distributions, shall have the effect of distributing to its shareholders all of
Hercules Fund's investment company taxable income (computed without regard to
any deduction for dividends paid) and all of its net capital gain (after
reduction for any capital loss carry-forward and computed without regard to any
deduction for dividends paid) for all taxable years ending on or before the
Closing Date.
8.6 The parties shall have received a favorable opinion of the law firm of
Gordon Altman Butowsky Weitzen Shalov & Wein (based on such representations as
such law firm shall reasonably request), addressed to Piper Company and Hercules
Company, which opinion may be relied upon by the shareholders of Hercules Fund,
substantially to the effect that, for federal income tax purposes:
(a) The transfer of substantially all of Hercules Fund's assets in
exchange for Piper Fund Shares and the assumption by Piper Fund of certain
stated liabilities of Hercules Fund followed by the distribution by Hercules
Fund of Piper Fund Shares to the Hercules Fund Shareholders in exchange for
their Hercules Fund shares will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code, and Hercules Fund and Piper Fund
will each be a "party to a reorganization" within the meaning of Section
368(b) of the Code;
(b) No gain or loss will be recognized by Piper Fund upon the receipt of
the assets of Hercules Fund solely in exchange for Piper Fund Shares and the
assumption by Piper Fund of the stated liabilities of Hercules Fund;
(c) No gain or loss will be recognized by Hercules Fund upon the
transfer of the assets of Hercules Fund to Piper Fund in exchange for Piper
Fund Shares and the assumption by Piper Fund of the stated liabilities of
Hercules Fund or upon the distribution of Piper Fund Shares to the Hercules
Fund Shareholders as provided for in this Agreement;
(d) No gain or loss will be recognized by the Hercules Fund Shareholders
upon the exchange of the Hercules Fund shares for Piper Fund Shares;
(e) The aggregate tax basis for Piper Fund Shares received by each
Hercules Fund Shareholder pursuant to the Reorganization will be the same as
the aggregate tax basis of the Hercules Fund shares held by each such
Hercules Fund Shareholder immediately prior to the Reorganization;
(f) The holding period of Piper Fund Shares to be received by each
Hercules Fund Shareholder will include the period during which the Hercules
Fund shares surrendered in exchange therefor were held (provided such
Hercules Fund Shares were held as capital assets on the date of the
Reorganization);
(g) The tax basis of the assets of Hercules Fund acquired by Piper Fund
will be the same as the tax basis of such assets to Hercules Fund
immediately prior to the Reorganization; and
(h) The holding period of the assets of Hercules Fund in the hands of
Piper Fund will include the period during which those assets were held by
Hercules Fund.
Notwithstanding anything herein to the contrary, neither Piper Fund nor
Hercules Fund may waive the condition set forth in this paragraph 8.6.
8.7 The Amendment shall have been filed in accordance with applicable
provisions of Minnesota law.
9. FEES AND EXPENSES
9.1 (a) PCM shall bear all direct expenses incurred in connection with
entering into and carrying out the provisions of this Agreement, including
expenses incurred in connection with the preparation, printing, filing and
solicitation of proxies to obtain requisite shareholder approvals.
(b) In the event the transactions contemplated herein are not consummated by
reason of Hercules Fund's being either unwilling or unable to go forward (other
than by reason of the nonfulfillment
A-11
<PAGE>
or failure of any condition to Hercules Fund's obligations specified in this
Agreement), PCM's obligations, on behalf of Hercules Fund, shall be limited to
reimbursement of Piper Fund for all reasonable out-of-pocket fees and expenses
incurred by Piper Fund in connection with those transactions.
(c) In the event the transactions contemplated herein are not consummated by
reason of Piper Fund's being either unwilling or unable to go forward (other
than by reason of the nonfulfillment or failure of any condition to Piper Fund's
obligations specified in the Agreement), Piper Fund's only obligation hereunder
shall be to reimburse Hercules Fund for all reasonable out-of-pocket fees and
expenses incurred by Hercules Fund in connection with those transactions.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 This Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated herein, except
that the representations, warranties and covenants of Hercules Fund hereunder
shall not survive the dissolution and complete liquidation of Hercules Fund in
accordance with Section 1.9.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Hercules Company and Piper Company;
(b) by either Piper Company or Hercules Company by notice to the other,
without liability to the terminating party on account of such termination
(providing the terminating party is not otherwise in material default or
breach of this Agreement) if the Closing shall not have occurred on or
before September 15, 1996; or
(c) by either Piper Fund or Hercules Fund, in writing without liability
to the terminating party on account of such termination (provided the
terminating party is not otherwise in material default or breach of this
Agreement), if (i) the other party shall fail to perform in any material
respect its agreements contained herein required to be performed on or prior
to the Closing Date, (ii) the other party materially breaches any of its
representations, warranties or covenants contained herein, (iii) the
Hercules Fund shareholders fail to approve this Agreement at any meeting
called for such purpose at which a quorum was present or (iv) any other
condition herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will
not or cannot be met.
11.2 (a) Termination of this Agreement pursuant to paragraphs 11.1 (a) or
(b) shall terminate all obligations of the parties hereunder and there shall be
no liability for damages on the part of Piper Fund or Hercules Fund or the
directors or officers of Piper Fund or Hercules Fund, to any other party or its
directors or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1 (c) shall
terminate all obligations of the parties hereunder and there shall be no
liability for damages on the part of Piper Fund or Hercules Fund or the
directors or officers of Piper Fund or Hercules Fund, except that any party in
breach of this Agreement shall, upon demand, reimburse the non-breaching party
for all reasonable out-of-pocket fees and expenses incurred in connection with
the transactions contemplated by this Agreement, including legal, accounting and
filing fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties; PROVIDED, HOWEVER, that
following the meeting of Hercules Fund's shareholders called by Hercules Fund
pursuant to paragraph 4.3, no such amendment may
A-12
<PAGE>
have the effect of changing the provisions for determining the number of Piper
Fund Shares to be issued to the Hercules Fund Shareholders under this Agreement
to the detriment of such Hercules Fund Shareholders without their further
approval.
13. MISCELLANEOUS
13.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
13.5 The obligations and liabilities of Piper Company hereunder are solely
those of Piper Fund. It is expressly agreed that no shareholder, nominee,
director, officer, agent, or employee of Piper Fund shall be personally liable
hereunder. The execution and delivery of this Agreement have been authorized by
the directors of Piper Company and signed by authorized officers of Piper
Company acting as such, and neither such authorization by such directors nor
such execution and delivery by such officers shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally.
13.6 The obligations and liabilities of Hercules Company hereunder are
solely those of Hercules Company. It is expressly agreed that no shareholder,
nominee, director, officer, agent, or employee of Hercules Fund shall be
personally liable hereunder. The execution and delivery of this Agreement have
been authorized by the directors of Hercules Company and signed by authorized
officers of Hercules Company acting as such, and neither such authorization by
such directors nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally.
A-13
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by a duly authorized officer.
HERCULES FUNDS INC., on behalf of
Hercules Pacific Basin Value Fund
By: /S/ WILLIAM H. ELLIS______________
Name: William H. Ellis
Title: President
PIPER GLOBAL FUNDS INC., on behalf of
Pacific-European Growth Fund
By: /S/ ROBERT H. NELSON______________
Name: Robert H. Nelson
Title: Senior Vice President
A-14
<PAGE>
EXHIBIT 1 TO AGREEMENT AND PLAN OF REORGANIZATION
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
HERCULES FUNDS INC.
The undersigned officer of Hercules Funds Inc. ("Hercules Company"), a
corporation subject to the provisions of Chapter 302A of the Minnesota Statutes,
hereby certifies that Hercules Company's (a) Board of Directors, by written
action dated March 29, 1996, and (b) shareholders, at a meeting held June 18,
1996, adopted the resolutions hereinafter set forth; and such officer further
certifies that the amendments to Hercules Company's Articles of Incorporation
set forth in such resolutions were adopted pursuant to Chapter 302A.
WHEREAS, Hercules Company is registered as an open-end management investment
company (I.E., a mutual fund) under the Investment Company Act of 1940 and
offers its shares to the public in several series, each of which represents a
separate and distinct portfolio of assets; and
WHEREAS, it is desirable and in the best interest of the holders of the
Hercules Pacific Basin Value Fund ("Hercules Fund"), a series of Hercules
Company, that the assets belonging to such series, subject to its stated
liabilities, be sold to Pacific-European Growth Fund ("Piper Fund"), a series of
Piper Global Funds Inc. ("Piper Company"), a Minnesota corporation and an
open-end management investment company registered under the Investment Company
Act of 1940, in exchange for shares of Piper Fund; and
WHEREAS, Hercules Company wishes to provide for the PRO RATA distribution of
such shares of Piper Fund received by it to holders of shares of Hercules Fund
and the simultaneous cancellation and retirement of the outstanding shares of
Hercules Fund; and
WHEREAS, Hercules Company and Piper Company have entered into an Agreement
and Plan of Reorganization providing for the foregoing transactions; and
WHEREAS, the Agreement and Plan of Reorganization requires that, in order to
bind all shareholders of Hercules Fund to the foregoing transactions, and in
particular to bind such shareholders to the cancellation and retirement of the
outstanding shares of Hercules Fund, it is necessary to adopt an amendment to
Hercules Company's Articles of Incorporation.
NOW, THEREFORE, BE IT RESOLVED, that Hercules Company's Articles of
Incorporation be, and the same hereby are, amended to add the following Article
5C immediately following Article 5 thereof:
5C. (a) For purposes of this Article 5C, the following terms shall have the
following meanings:
"HERCULES COMPANY" means the Corporation.
"PIPER COMPANY" means Piper Global Funds Inc., a Minnesota corporation.
"ACQUIRED FUND" means Hercules Company's Hercules Pacific Basin Value
Fund, the Series C Shares of the Corporation.
"ACQUIRING FUND" means Piper Company's Pacific-European Growth Fund.
"VALUATION DATE" means the day established in the Agreement and Plan of
Reorganization, as the day upon which the value of the Acquired Fund's
assets is determined for purposes of the reorganization.
"CLOSING DATE" means 9:00 a.m. on the next business day following the
Valuation Date or such other date and time set forth in the pertinent plan
of reorganization or liquidation, as the case may be, for the consummation
of the reorganization or liquidation.
(b) At the Closing Date, the assets belonging to the Acquired Fund, the
Special Liabilities associated with such assets, and the General Assets and
General Liabilities allocated to the Acquired Fund, shall be sold to and assumed
by the Acquiring Fund in return for Acquiring Fund shares, all
<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 __________________________________
2
<PAGE>
EXHIBIT B
PACIFIC-EUROPEAN GROWTH FUND
A SERIES OF
PIPER GLOBAL FUNDS INC.
Supplement dated January 25, 1996 to
Prospectus dated April 28, 1995
The section of the prospectus on page 24 entitled "Special Purchase
Plans--Purchases by Other Individuals Without a Sales Charge" is amended by
adding the following paragraph:
American Government Term Trust Inc. ("AGT"), a closed-end fund which
was managed by the Adviser, recently dissolved and distributed its net
assets to shareholders. Former AGT shareholders may invest the
distributions received by them in connection with such dissolution in
shares of the Fund without payment of a sales charge. (Any such sales
are subject to the eligibility of Fund share purchases in the
shareholder's state as well as the minimum investment requirements and
other applicable terms set forth in this Prospectus).
PJPEX-05A
<PAGE>
PROSPECTUS DATED APRIL 28, 1995
PACIFIC-EUROPEAN GROWTH FUND
A SERIES OF PIPER GLOBAL FUNDS INC.
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET, MINNEAPOLIS, MINNESOTA 55402-3804
(800) 866-7778 (TOLL FREE)
Pacific-European Growth Fund (the "Fund") is a diversified series of Piper
Global Funds Inc. ("Piper Global"), an open-end management investment company
the shares of which can be offered in more than one series. The Fund is the only
series of Piper Global currently outstanding. The investment objective of the
Fund is long-term capital appreciation. Current income is incidental to this
objective. The Fund seeks to achieve its investment objective through
investments primarily in Common Stock (as herein defined) of companies in the
Pacific Basin or in Europe (including Eastern Europe). Up to 25% of the Fund's
total assets may be invested in other areas of the world to the extent
significant opportunities for long-term capital appreciation outside of the
Pacific Basin and Europe become available. The Fund does not invest in Common
Stock of U.S. companies. No assurance can be given that the Fund's investment
objective will be achieved.
Investment in the Fund involves certain risks and requires consideration of
factors not typically associated with investment in securities of U.S. issuers.
See "Risk Factors."
This Prospectus concisely describes the information about the Fund that you
should know before investing. Please read the Prospectus carefully before
investing and retain it for future reference.
A Statement of Additional Information about the Fund dated April 28, 1995 is
available free of charge. Write to the Fund at Piper Jaffray Tower, 222 South
Ninth Street, Minneapolis, Minnesota 55402-3804 or telephone (800) 866-7778
(toll free). The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated in its entirety by
reference in this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
INTRODUCTION
Pacific-European Growth Fund (the "Fund") is a diversified series of Piper
Global Funds Inc. ("Piper Global"), an open-end management investment company,
or mutual fund, the shares of which can be offered in more than one series. Each
series in effect represents a separate fund with its own investment objectives
and policies. The Fund is the only series of Piper Global currently outstanding.
Piper Global was organized under the laws of the State of Minnesota in 1990 as a
closed-end investment company and converted to an open-end investment company on
August 31, 1992. The investment objective of the Fund is long-term capital
appreciation. Current income is incidental to this objective.
THE INVESTMENT ADVISER
The Fund is managed by Piper Capital Management Incorporated (the
"Adviser"), a wholly owned subsidiary of Piper Jaffray Companies Inc. The Fund
pays the Adviser a basic management fee calculated and paid monthly at an annual
rate of 1.00% on net assets up to $100 million, with the fee scaled downward as
assets increase in size (the "Basic Fee"). The Basic Fee (as a percentage of net
assets) is higher than that paid by most other mutual funds. The Basic Fee may
be increased or decreased by up to a maximum, on an annual basis, of .25% of the
Fund's average daily net assets depending upon the extent to which the Fund
outperforms or underperforms the Morgan Stanley Capital International European,
Australian and Far East Index (the "EAFE-SM- Index"). See
"Management--Investment Adviser."
THE SUB-ADVISER
Edinburgh Fund Managers plc acts as the Fund's sub-adviser (the
"Sub-Adviser") under an agreement with the Adviser. The Sub-Adviser is a public
limited company that was incorporated in 1969. It is a majority-owned subsidiary
of The British Investment Trust PLC, a Scottish closed-end investment company
founded in 1889, for which the Sub-Adviser serves as investment manager and
adviser. For its services, the Sub-Adviser is paid a fee by the Adviser equal to
65% of the Basic Fee plus or minus 90% of the performance fee adjustment. See
"Management--Sub-Adviser."
THE DISTRIBUTOR
Piper Jaffray Inc. ("Piper Jaffray" or the "Distributor"), a wholly owned
subsidiary of Piper Jaffray Companies Inc. and an affiliate of the Adviser,
serves as Distributor of the Fund's shares.
OFFERING PRICE
Shares of the Fund are offered to the public at the next determined net
asset value after receipt of an order by a shareholder's Piper Jaffray
investment executive or other broker-dealer plus a maximum sales charge of 4% of
the offering price (4.17% of the net asset value) on purchases of less than
$100,000. The sales charge is reduced on a graduated scale on purchases of
$100,000 or more. FUND SHARES ARE BEING OFFERED TO THE PUBLIC WITHOUT AN INITIAL
OR DEFERRED SALES CHARGE THROUGH JUNE 30, 1995. In connection with purchases of
$500,000 or more, there is no initial sales charge; however, a 1% contingent
deferred sales charge will be imposed in the event of a redemption transaction
occurring within 24 months following such a purchase. See "How to Purchase
Shares--Public Offering Price."
MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS
The minimum initial investment for the Fund is $250. There is no minimum for
subsequent investments. See "How to Purchase Shares--Minimum Investments."
EXCHANGES
You may exchange your shares for shares of any other mutual fund managed by
the Adviser which is open to new investors and eligible for sale in your state
of residence. All exchanges are subject to the minimum investment requirements
and other applicable terms set forth in the prospectus of the fund whose shares
you acquire. You may make four exchanges per year without payment of a service
charge. Thereafter, there is a $5 service charge for each exchange. See
"Shareholder Services--Exchange Privilege."
2
<PAGE>
REDEMPTION PRICE
Shares of the Fund may be redeemed at any time at their net asset value next
determined after a redemption request is received by your Piper Jaffray
investment executive or other broker-dealer. A contingent deferred sales charge
will be imposed upon the redemption of certain shares initially purchased
without a sales charge. See "How to Redeem Shares--Contingent Deferred Shares
Charge." The Fund reserves the right, upon 30 days written notice, to redeem an
account if the net asset value of the shares falls below $200. See "How to
Redeem Shares--Involuntary Redemption."
CERTAIN RISK FACTORS TO CONSIDER
An investment in the Fund is subject to certain risks, as set forth in
detail under "Investment Objective and Policies," "Special Investment Methods"
and "Risk Factors." As with other mutual funds, there can be no assurance that
the Fund will achieve its objective. Because the Fund invests in foreign
securities, an investment in the Fund requires consideration of certain risk
factors that are not typically associated with investing in securities of U.S.
companies. These factors include risks relating to adverse currency
fluctuations, potential political and economic instability of certain countries,
limited liquidity and volatile prices of certain securities of non-U.S.
companies, and foreign taxation. In addition, the Fund may engage in the
following investment practices which involve certain special risks: entering
into currency exchange transactions, forward foreign currency exchange
transactions and foreign currency futures and options, entering into options
transactions on securities in which the Fund may invest, the use of repurchase
agreements, the lending of portfolio securities, entering into futures contracts
and options on futures contracts, the purchase of securities on a "when-issued"
basis and the purchase or sale of securities on a "forward commitment" basis.
These techniques involve certain special risks and may increase the volatility
of the Fund's net asset value. The Fund may invest in illiquid securities which
will involve greater risk than investments in other securities and may increase
Fund expenses.
SHAREHOLDER INQUIRIES
Any questions or communications regarding a shareholder account should be
directed to your Piper Jaffray investment executive or, in the case of shares
held through another broker-dealer, to IFTC at (800) 874-6205. General inquiries
regarding the Fund should be directed to the Fund at the telephone number set
forth on the cover page of this Prospectus.
3
<PAGE>
FUND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price).................................................. 4.00%
Exchange Fee*..................................................... $0
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fee.................................................... 1.03%
Rule 12b-1 Fees (after voluntary limitation)...................... .32%
Other Expenses.................................................... .45%
-----
Total Fund Operating Expenses (after voluntary limitation).... 1.80%
</TABLE>
- ---------
*There is a $5.00 fee for each exchange in excess of four exchanges per
year. See "How to Purchase Shares--Exchange Privilege."
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming a 5%
annual return and redemption at the end of each time period:
<TABLE>
<S> <C>
1 year............. $ 58
3 years............ $ 94
5 years............ $134
10 years............ $243
</TABLE>
The purpose of the above Fund Expenses table is to assist you in
understanding the various costs and expenses that investors in the Fund will
bear directly or indirectly. THE EXAMPLE CONTAINED IN THE TABLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
The information set forth in the table is based on actual expenses incurred
by the Fund during the fiscal year ended February 28, 1995, except that the Rule
12b-1 fees and total fund operating expenses have been restated to reflect a
change in the Distributor's voluntary Rule 12b-1 fee limit for fiscal 1996. The
Fund has adopted a Rule 12b-1 Plan under which the Fund is required to reimburse
the Distributor for shareholder servicing costs and distribution costs in an
amount not to exceed, on an annualized basis, .50% of the average daily net
assets of the Fund. Of such amount, the Distributor may be paid shareholder
servicing fees of up to .25% of the average daily net assets of the Fund to
cover shareholder servicing costs, and distribution fees of a like amount to
cover distribution costs. The Distributor has voluntarily agreed to limit the
fee to an annual rate of .32% of the Fund's average daily net assets. This
voluntary limitation may be revised or terminated at any time after fiscal year
end. The Adviser may or may not assume additional expenses of the Fund from time
to time, in its discretion, while retaining the ability to be reimbursed by the
Fund for expenses assumed during a fiscal year prior to the end of such year.
The foregoing policy will have the effect of lowering the Fund's overall
expenses ratio and increasing yield to investors when such amounts are assumed
or the inverse when such amounts are reimbursed. During the fiscal year ended
February 28, 1995, the Distributor voluntarily limited Rule 12b-1 fees to .28%
of average daily net assets, resulting in total operating expenses equal to
1.76% of average daily net assets. Absent any Rule 12b-1 fee limitation, total
Fund operating expenses for the fiscal year ended February 28, 1995, would have
been 1.98% of average daily net assets. The management fees for fiscal 1996 may
be more or less than those set forth in the table to the extent that the Fund
outperforms or underperforms the EAFE Index. See "Management-- Investment
Adviser." As a result of the Fund's reimbursement of its distribution costs,
which payments are considered asset-based sales charges, long-term shareholders
of the Fund may pay more than the economic equivalent of the maximum 6.25% front
end sales charge permitted under the rules of the National Association of
Securities Dealers, Inc. For additional information, including a more complete
explanation of management and Rule 12b-1 fees, see "Management--Investment
Adviser" and "Distribution of Fund Shares."
FINANCIAL HIGHLIGHTS
The information presented in this section relates to fiscal periods ended
both before and after the conversion of Piper Global from a closed-end
investment company to an open-end investment company on August 31, 1992. The
following financial highlights have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon appears in the Statement of
Additional Information. This
4
<PAGE>
information should be read in conjunction with the financial statements and the
related notes thereto appearing in the Statement of Additional Information. The
table sets forth for the Fund per-share data for a share of capital stock
outstanding throughout each fiscal period and selected information for such
periods.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28, PERIOD FROM
----------------------------------------- 4/27/90*
1995 1994 1993 1992 TO 2/28/91
------- ------- ------ ------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 15.44 $ 10.81 $10.53 $10.18 $10.97
------- ------- ------ ------ -----------
Operations:
Investment income (loss)--net................... (0.03) (0.03) -- 0.06 0.20
Net realized and unrealized gains (losses) on
investments................................... (1.63) 4.72 0.28 0.37 (0.79)
------- ------- ------ ------ -----------
Total from operations......................... (1.66) 4.69 0.28 0.43 (0.59)
------- ------- ------ ------ -----------
Distributions from net investment income.......... -- -- -- (0.06) (0.20)
Return of capital distributions................... -- -- -- (0.02) --
Distributions from net realized gains............. (1.05) (0.06) -- -- --
------- ------- ------ ------ -----------
Total distributions........................... (1.05) (0.06) -- (0.08) (0.20)
------- ------- ------ ------ -----------
Net asset value, end of period.................... $ 12.73 $ 15.44 $10.81 $10.53 $10.18
------- ------- ------ ------ -----------
------- ------- ------ ------ -----------
Total return +.................................... (11.09)% 43.45% 2.66% 4.44% (5.03)%
Net assets, end of period (000s omitted).......... 154,393 165,655 59,791 35,680 34,492
Ratio of expenses to average daily net assets
++............................................... 1.76% 1.81% 2.25% 1.92% 1.77%**
Ratio of net investment income (loss) to average
daily net assets ++.............................. (0.19)% (0.29)% 0.03% 0.60% 2.36%**
Portfolio turnover rate (excluding short-term
securities)...................................... 57% 52% 59% 69% 10%
</TABLE>
* Commencement of operations.
** Adjusted to an annual basis.
+ Total return is based on the change in net asset value during the period,
assumes reinvestment of all distributions and does not reflect a sales charge.
++ During 1995 and 1994, the Fund's Rule 12b-1 fee was voluntarily limited by
the Distributor to .28% and .30%, respectively, of average daily net assets. Had
the maximum fee of .50% been in effect, the ratios of expenses and net
investment income (loss) would have been 1.98%/(.41%) and 2.01%/(.49%),
respectively. During 1993, various fees and expenses were voluntarily limited or
absorbed by the Adviser and the Distributor. Had the Fund paid all 1993
expenses, the ratios of expenses and net investment income (loss) to average
daily net assets would have been 2.59% and (.31)%. Included in 1993 gross
expenses were expenses of approximately .32% of average daily net assets that
related to converting to an open-end investment company.
Further performance information pertaining to the Fund is contained in the
annual report to shareholders which may be obtained without charge by calling or
writing the Fund at the address and telephone number listed on the cover.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Fund's investment objective is long-term capital appreciation. Current
income is incidental to this objective. The Fund seeks to achieve its investment
objective through investments primarily (under normal circumstances, at least
65% of its total assets) in Common Stock of companies in the Pacific Basin or in
Europe (including Eastern Europe). "Common Stock" means common stock and foreign
equity securities which are substantially similar to common stock in the U.S.
and does not include preferred stock or convertible debt securities (such
foreign equity securities may have voting and distribution rights which differ
from those of common stock in the U.S.). The Pacific Basin is generally defined
as those countries bordering the Pacific Ocean. The Fund may invest in the
following countries within the region: Malaysia, Pakistan, Sri Lanka, the
Philippines, Singapore, South Korea, Thailand, India, Indonesia, Hong Kong,
Japan, Taiwan, Australia and New Zealand. In addition, to the extent that
suitable investment
5
<PAGE>
opportunities become available, the Fund may invest in any other country within
the region, including, but not limited to, China. For purposes of this
Prospectus, unless otherwise indicated, Europe consists of Austria, Belgium,
Denmark, Germany, Finland, France, Greece, the Republic of Ireland, Italy, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey and the United
Kingdom (together, "Western Europe"), plus Albania, Bulgaria, the Czech and
Slovak Republics, Hungary, Poland, Romania, the successor states to the former
Yugoslavia, and the Commonwealth of Independent States (formerly, the Union of
Soviet Socialist Republics) (together, "Eastern Europe"). As the securities
markets of additional continental European countries develop, such countries may
be considered part of the Fund's definition of Europe and appropriate countries
for investment by the Fund. For a discussion of the economies of the Pacific
Basin and Europe, see "Investment Objective, Policies and
Restrictions--Investment Background" in the Statement of Additional Information.
As of March 31, 1995, approximately 64% of the Fund's investments were in
companies in the Pacific Basin (including Japan) and approximately 26% were in
companies in Europe. While the Fund has no specific policy or restriction on the
allocation of its funds between Europe and the Pacific Basin, the Adviser and
the Sub-Adviser (collectively, "Management") believe that the opportunities for
long-term capital appreciation in the Pacific Basin are generally superior to
those presently available in the economically more mature areas of the world.
The relative emphasis of the Fund's investments between the Pacific Basin and
Europe may change over time to the extent Management identifies greater
investment opportunities in Europe as a result of more attractive values, recent
developments in Eastern Europe, the removal of most intra-European trade
barriers as a result of the adoption of the Single European Act in 1992 or other
factors. In normal market conditions, the Fund's investments will be allocated
among at least three different countries in the Pacific Basin and/or Europe. For
additional information regarding the allocation of Fund investments, see
"Investment Objective, Policies and Restrictions--Investment
Background--Allocation of Investments Between the Pacific Basin and Europe" in
the Statement of Additional Information.
A company is considered to be in the Pacific Basin or in Europe, as the case
may be, if (a) it is organized under the laws of a country within the Pacific
Basin or in Europe (including the United Kingdom); (b) at least 50% of its
assets are located in the Pacific Basin or in Europe; (c) it derives at least
50% of its total revenues from goods produced, sales made, services performed or
investment in companies in the Pacific Basin or in Europe; or (d) its securities
are traded principally on stock exchanges in a Pacific Basin or European
country. The Fund's definition of companies in the Pacific Basin or in Europe
may include companies that reflect economic and market forces applicable to
other regions as well as the Pacific Basin or Europe. Nevertheless, Management
believes that investment in such companies is appropriate in light of the Fund's
investment objective because Management selects among such companies those
which, in its view, have sufficiently strong exposure to economic and market
forces in the Pacific Basin or in Europe, as the case may be, such that the
value of the securities of such companies will tend to reflect Pacific Basin or
European developments to a greater extent than developments in other regions.
With respect to the investment by the Fund in companies that receive 50% or more
of their revenues from investments in companies located in the Pacific Basin or
Europe (e.g., investment companies and trusts), the Fund believes that
securities of such companies will similarly reflect the development of the
region in which it invests and, in addition, the purchase of such securities is
currently one of the few mechanisms through which the Fund may invest in
securities of South Korean, Taiwanese and Indian companies.
Up to 25% of the Fund's total assets may be invested in other areas of the
world to the extent significant opportunities for long-term capital appreciation
outside of the Pacific Basin and Europe become available. The Fund currently
invests a portion of its assets in certain countries in Latin America, including
Mexico, Brazil, Argentina, Chile, Peru, Venezuela, Colombia and Ecuador. The
Fund may invest in other Latin American countries as opportunities develop. As
of March 31, 1995, approximately 2% of the Fund's investments were in companies
in Latin America. The Fund does not invest in Common Stock of U.S. companies. No
assurance can be given that the Fund's investment objective will be achieved.
The investment objective of the Fund is not fundamental and may be changed
without shareholder approval. If there is a change in investment objective,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs.
6
<PAGE>
TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST
The Fund invests primarily in Common Stock. In addition, up to 10% of the
Fund's assets may be invested in rights, options or warrants to purchase Common
Stock. In addition to investing directly in Common Stock, the Fund may invest in
American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs").
Generally, ADRs in registered form are U.S. dollar denominated securities
designed for use in the U.S. securities markets, which represent and may be
converted into the underlying foreign security. EDRs are typically issued in
bearer form and are designed for use in the European securities markets. The
Fund also may purchase shares of investment companies or trusts which invest
principally in securities in which the Fund is authorized to invest. The
purchase of investment company stock currently is one of the few mechanisms
through which the Fund may invest in securities of Indian and Taiwanese
companies. For a discussion of the risks of investing in investment companies,
see "Risk Factors-- Investment and Repatriation Restrictions."
For temporary defensive purposes, the Fund may invest without limitation in
U.S. dollar denominated or foreign currency denominated cash or in high quality
debt securities with remaining maturities of one year or less. Such securities
may include commercial paper, certificates of deposit, bankers' acceptances and
securities issued by the U.S. or a foreign government, their agencies or
instrumentalities. All securities in which the Fund invests for defensive
purposes (other than securities issued or guaranteed by the U.S. or a foreign
government, their agencies or instrumentalities) must be rated AA or better by
Standard & Poor's Corporation or be of comparable quality as determined by the
Adviser. For an explanation of ratings, see Appendix A to the Statement of
Additional Information.
SPECIAL INVESTMENT METHODS
The following discussion describes some of the investment management
practices that the Fund may employ from time to time to facilitate portfolio
management and mitigate risk.
FOREIGN CURRENCY TRANSACTIONS
The Fund engages in currency exchange transactions in connection with the
purchase and sale of its investments. Currency exchange transactions are
necessary to enable the Fund to purchase securities denominated in a foreign
currency and to convert interest and dividend payments or sales proceeds paid in
a foreign currency into U.S. dollars or into another currency. In addition, the
Fund may engage in forward foreign currency exchange transactions and foreign
currency futures and options transactions to protect against uncertainty with
respect to future currency exchange rates. Forward currency exchange and futures
and options transactions are used only for hedging and not for speculation. The
Fund conducts its currency exchange transactions either on a spot (cash) basis
at the rate prevailing in the currency exchange market or through entering into
forward or futures contracts to purchase or sell foreign currencies.
The Fund may engage in "transaction hedging" to protect against a change in
the foreign currency exchange rate between the date on which the Fund contracts
to purchase or sell the security and the settlement date or to "lock in" the
U.S. dollar equivalent (or other foreign currency equivalent to the extent
needed for purposes of purchasing securities) of a dividend or interest payment
in a foreign currency. For that purpose, the Fund may purchase or sell a foreign
currency on a spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities denominated in that
foreign currency.
If conditions warrant, the Fund may also enter into contracts to purchase or
sell foreign currencies at a future date ("forward contracts") and purchase or
sell foreign currency futures contracts as a hedge against changes in foreign
currency exchange rates between the trade and settlement dates on particular
transactions and not for speculation. A foreign currency forward contract is a
negotiated agreement to exchange currency at a future time at a rate or rates
that may be higher or lower than the spot rate. Foreign currency futures
contracts are standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, the Fund may also purchase exchange-listed
and over-the-counter call and put options on foreign currency futures contracts
and on foreign currencies. A put option on a
7
<PAGE>
futures contract gives the Fund the right to assume a short position in the
futures contract until expiration of the option. A put option on currency gives
the Fund the right to sell a currency at an exercise price until the expiration
of the option. A call option on a futures contract gives the Fund the right to
assume a long position in the futures contract until the expiration of the
option. A call option on currency gives the Fund the right to purchase a
currency at the exercise price until the expiration of the option.
The Fund may engage in "position hedging" to protect against a decline in
the value relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of currency
for securities which the Fund intends to buy, when it holds cash reserves and
short-term investments). For position hedging purposes, the Fund may purchase or
sell foreign currency futures contracts and foreign currency forward contracts,
and may purchase put or call options on foreign currency futures contracts and
in foreign currencies on exchanges or over-the-counter markets. In connection
with position hedging, the Fund may also purchase or sell foreign currency on a
spot basis.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency. In addition, hedging transactions involve costs and may result in
losses. The Fund may write covered call options on foreign currencies to offset
some of the costs of hedging those currencies. The Fund will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of the Adviser, the pricing mechanism
and liquidity are satisfactory and the participants are responsible parties
likely to meet their contractual obligations. The Fund's ability to engage in
hedging and related option transactions may be limited by tax considerations.
See "Taxation--Consequences of Certain Fund Investments" in the Statement of
Additional Information.
For additional information regarding foreign currency transactions, see
"Investment Objective, Policies and Restrictions--Foreign Currency Transactions"
in the Statement of Additional Information.
HEDGING
The Fund may engage in various futures and put and call transactions
(collectively, "Hedging Transactions"). Hedging Transactions may be used to
attempt to protect against possible declines in the market value of the Fund's
portfolio, to protect the Fund's unrealized gains in the value of its portfolio
securities, to facilitate the sale of such securities for investment purposes or
to establish a position in the securities markets as a temporary substitute for
purchasing particular securities. Any or all of these techniques may be used at
any time. There is no overall limitation on the percentage of the Fund's
portfolio securities which may be subject to a hedge position. There is no
particular strategy that requires use of one technique rather than another. Use
of any Hedging Transaction is a function of market conditions. The Hedging
Transactions that the Fund may use are described below. Additional Hedging
Transactions may be used by the Fund in the future as they are developed to the
extent deemed appropriate by the Board of Directors of the Fund.
OPTIONS ON SECURITIES. In seeking to reduce fluctuations in net asset
value, the Fund may write (i.e., sell), covered put and call options and
purchase put and call options on the securities in which it may invest. Such
options are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets.
A put option gives the buyer of such option, upon payment of a premium, the
right to deliver a specified amount of a security to the writer of the option on
or before a fixed date at a predetermined price. A call option gives the
purchaser of the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a fixed date, at
a predetermined price. A call option written by the Fund is "covered" if the
Fund owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if the Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or
8
<PAGE>
less than the exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is maintained by the Fund
in cash and high grade liquid debt securities in a segregated account with its
custodian. A put option written by the Fund is "covered" if the Fund maintains
cash and high grade liquid debt securities with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the
same security and in the same principal amount as the put written where the
exercise price of the put held is equal to or greater than the exercise price of
the put written. The Fund will not write puts if, as a result, more than 50% of
the Fund's assets would be required to be segregated. The premium paid by the
purchaser of an option will reflect, among other things, the relationship of the
exercise price to the market price and volatility of the underlying security,
the remaining term of the option, supply and demand and interest rates.
In purchasing a call option, the Fund would be in a position to realize a
gain if, during the option period, the price of the security increased above the
call option price by an amount in excess of the cost of the option. Otherwise,
it would realize a loss. In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the price of the
security declined below the put option price by an amount in excess of the cost
of the option. Otherwise, it would realize a loss. If a put or call option
purchased by the Fund were permitted to expire without being sold or exercised,
its premium would be lost by the Fund.
If a put option written by the Fund were exercised, the Fund would be
obligated to purchase the underlying security at the exercise price. If a call
option written by the Fund were exercised, the Fund would be obligated to sell
the underlying security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value of the
underlying security caused by rising interest rates or other factors. If this
occurred, the option could be exercised and the underlying security would then
be sold to the Fund at a higher price than its current value. The risk involved
in writing a call option is that there could be an increase in the market value
of the underlying security caused by declining interest rates or other factors.
If this occurred, the option could be exercised and the underlying security
would then be sold by the Fund at a lower price than its current market value.
These risks could be reduced by entering into a closing transaction as described
in Appendix B to the Statement of Additional Information. The Fund retains the
premium received from writing a put or call option whether or not the option is
exercised. See Appendix B to the Statement of Additional Information for a
further discussion of the use, risks and costs of option trading.
The exchanges have established position limits governing the maximum number
of options which may be written by an investor or group of investors acting in
concert. Similarly, the Commodities Futures Trading Commission and the Chicago
Board of Trade have established futures position limits for an investor or group
of investors acting in concert. (A discussion of the Fund's ability to invest in
futures contracts and options thereon is set forth below.) The position limits
may restrict the Fund's ability to purchase or write options on a particular
security or to enter into futures contracts. It is possible that the Fund and
other clients of the Adviser, including closed-end and other open-end investment
companies managed by the Adviser, may be considered to be a group of investors
acting in concert. Thus, the number of options or futures transactions which the
Fund may enter into may be affected by options or futures transactions of other
investment advisory clients of the Adviser.
Over-the-counter options are purchased or written by the Fund in privately
negotiated transactions. Such options are illiquid and it may not be possible
for the Fund to dispose of an option it has purchased or terminate its
obligations under an option it has written at a time when the Adviser believes
it would be advantageous to do so.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may enter into
contracts for the purchase or sale for future delivery of securities or
contracts based on financial indices including any index of securities in which
the Fund may invest ("futures contracts") and may purchase and write put and
call options to buy or sell futures contracts ("options on futures contracts").
A "sale" of a futures contract means the acquisition of a contractual obligation
to deliver the securities called for by the contract at a specified price on a
specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally
9
<PAGE>
struck. No physical delivery of the securities underlying the index is made.
Options on futures contracts to be written or purchased by the Fund will be
traded on exchanges or over-the-counter. These investment techniques are used
only to hedge against declines in the value of the Fund's portfolio securities
or increases in the prices of securities which the Fund intends to purchase at a
later date. The successful use of such instruments relies upon the Adviser's
experience with respect to such instruments. Should prices move in an unexpected
manner, the Fund may not achieve the anticipated benefits of futures contracts
or options on futures contracts or may realize losses and would thus be in a
worse position than if such strategies had not been used. In addition, the
correlation between movements in the price of futures contracts or options on
futures contracts and movements in the prices of the securities hedged or used
for cover will not be perfect. See Appendix B to the Statement of Additional
Information for further discussion of the use, risks and costs of futures
contracts and options on futures contracts.
Futures contracts and options on futures contracts are used only as a hedge
and not for speculation. In addition, the Fund does not enter into any futures
contracts or options on futures contracts if immediately thereafter the amount
of initial margin deposits on all the futures contracts of the Fund and premiums
paid on options on futures contracts would exceed 5% of the market value of the
total assets of the Fund. This restriction will not be changed by the Fund's
Board of Directors without considering the policies and concerns of the various
applicable federal and state regulatory agencies.
The Fund limits its activities in options and futures contracts to the
extent necessary to prevent disqualification of the Fund as a regulated
investment company under the Internal Revenue Code. For a discussion of the tax
treatment of futures contracts and options on futures contracts, see "Taxation--
Consequences of Certain Fund Investments" in the Statement of Additional
Information.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
The Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. The Fund may make such
purchases in order to lock-in the purchase price of a security which Management
believes will appreciate in value. There is always the risk, however, that the
security will decrease in value prior to its delivery. When such transactions
are negotiated, the price is fixed at the time the commitment is made, but
delivery and payment for the securities take place at a later date, which can be
a month or more after the date of the transaction. At the time the Fund makes
the commitment to purchase securities on a when-issued or forward commitment
basis, it will record the transaction and thereafter reflect the value of such
securities in determining its net asset value. At the time the Fund enters into
a transaction on a when-issued or forward commitment basis, a segregated account
consisting of cash or high grade liquid debt securities equal to the value of
the when-issued or forward commitment securities will be established and
maintained with the custodian and will be marked to the market daily. On the
delivery date, the Fund will meet its obligations from securities that are then
maturing or sale of the securities held in the segregated asset account and/or
from then available cash flow. If the Fund disposes of the right to acquire a
when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it can incur a gain or loss due
to market fluctuation.
There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. The purchase of
securities on a when-issued or forward commitment basis can result in increased
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. Settlements in the
ordinary course, which may take substantially more than three business days for
non-U.S. securities, are not treated by the Fund as when-issued or forward
commitment transactions and, accordingly, are not subject to the foregoing
limitations even though some of the risks described above may be present in such
transactions.
REPURCHASE AGREEMENTS
The Fund may enter, without limitation, into repurchase agreements
pertaining to the securities in which it may invest with securities dealers or
member banks of the Federal Reserve System. A repurchase agreement arises when a
buyer such as the Fund purchases a security and simultaneously agrees to resell
it to the vendor at an agreed-upon future date, normally one day or a few days
later. The resale price is greater than the purchase price, reflecting an agreed
upon interest rate which is effective for the period of time the
10
<PAGE>
buyer's money is invested in the security and which is related to the current
market rate rather than the coupon rate on the purchased security. Such
agreements permit the Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature. The
Fund requires continual maintenance by its custodian for its account in the
Federal Reserve/Treasury Book Entry System of collateral in an amount equal to,
or in excess of, the resale price. In the event a vendor defaults on its
repurchase obligation, the Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral are less than the repurchase price. In
the event of a vendor's bankruptcy, the Fund might be delayed in, or prevented
from, selling the collateral for the Fund's benefit. The Fund's Board of
Directors has established procedures, which are periodically reviewed by the
Board, pursuant to which the Adviser will monitor the creditworthiness of the
dealers and banks with which the Fund enters into repurchase agreement
transactions.
LENDING OF SECURITIES
In order to facilitate achievement of its investment objective, the Fund may
from time to time lend securities from its portfolio to brokers, dealers and
financial institutions and receive collateral in the form of cash or U.S.
government securities. Securities lending may be used to generate income to
cushion the Fund against declines in stock prices without requiring the Fund to
sell portfolio securities which it believes will appreciate in value. As with
other extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of the securities fail financially.
However, the Fund will enter into loan arrangements only with brokers, dealers
or financial institutions which the Adviser has determined are creditworthy
under guidelines established by the Fund's Board of Directors. In addition,
collateral for such loans must be maintained at all times in an amount equal to
at least 100% of the current market value of the loaned securities (including
interest on the loaned securities). The interest accruing on the loaned
securities will be paid to the Fund and the Fund will have the right, on demand,
to call back the loaned securities. The Fund may pay fees to arrange the loans.
The Fund does not lend portfolio securities in excess of 30% of the value of its
total assets (including such loans), nor does the Fund lend its portfolio
securities to any officer, director, employee or affiliate of the Fund or the
Adviser or Sub-Adviser.
ILLIQUID SECURITIES
As a fundamental investment restriction that may not be changed without the
approval of a majority of the Fund's shares, the Fund will not invest more than
15% of its net assets in illiquid securities. A security is considered illiquid
if it cannot be sold in the ordinary course of business within seven days at
approximately the price at which it is valued. Illiquid securities may offer a
higher yield than securities which are more readily marketable, but they may not
always be marketable on advantageous terms.
The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts and other selling expenses than
does the sale of securities eligible for trading on national securities
exchanges or in the over-the-counter markets. The Fund may be restricted in its
ability to sell such securities at a time when the Adviser or Sub-Adviser deems
it advisable to do so. In addition, in order to meet redemption requests, the
Fund may have to sell other assets, rather than such illiquid securities, at a
time which is not advantageous.
"Restricted securities" are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933
(the "1933 Act"). Such securities generally have been considered illiquid, since
they may be resold only subject to statutory restrictions and delays or if
registered under the 1933 Act. In 1990, however, the Securities and Exchange
Commission adopted Rule 144A under the 1933 Act, which provides a safe harbor
exemption from the registration requirements of the 1933 Act for resales of
restricted securities to "qualified institutional buyers," as defined in the
rule. The result of this rule has been the development of a more liquid and
efficient institutional resale market for restricted securities. Thus,
restricted securities are no longer necessarily illiquid. The Fund may therefore
invest in Rule 144A securities and treat them as liquid when they have been
determined to be liquid by the Board of Directors of the Company or by the
Adviser or Sub-Adviser subject to the oversight of and pursuant to procedures
adopted by the Board of Directors. See "Investment Objective, Policies and
Restrictions--
11
<PAGE>
Illiquid Securities" in the Statement of Additional Information. Similar
determinations may be made with respect to commercial paper issued in reliance
on the so-called "private placement" exemption from registration under Section
4(2) of the 1933 Act.
BORROWING
The Fund may borrow money only from banks for temporary or emergency
purposes in an amount up to 10% of the value of the Fund's total assets,
provided that reverse repurchase agreements entered into by the Fund are not
subject to such limitation. Reverse repurchase agreements are subject, however,
to the asset coverage requirements of the Investment Company Act of 1940 (the
"1940 Act") and to certain segregated account requirements. The Fund has not
entered into reverse repurchase agreements in the past and has no current
intention of entering into such agreements in the future. See "Investment
Objective, Policies and Restrictions--Reverse Repurchase Agreements" in the
Statement of Additional Information. Interest paid by the Fund on borrowed funds
will decrease the net earnings of the Fund. The Fund will not purchase portfolio
securities while outstanding borrowings (other than reverse repurchase
agreements) exceed 5% of the value of the Fund's total assets. The Fund may
mortgage, pledge or hypothecate its assets only to secure such temporary or
emergency borrowing. The policies set forth in this paragraph are fundamental
and may not be changed without the approval of a majority of the Fund's shares.
PORTFOLIO TURNOVER
The Fund intends to acquire and hold securities for long-term capital
appreciation and normally does not intend to trade in securities for short-term
gains; however, securities may be purchased and sold at such times as Management
deems to be in the best interests of the Fund and its shareholders. The method
of calculating portfolio turnover rate is set forth in the Statement of
Additional Information under "Investment Objective, Policies and
Restrictions--Portfolio Turnover." Portfolio turnover rates for the Fund are set
forth in "Financial Highlights."
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental and nonfundamental investment
restrictions in addition to those set forth above. Fundamental investment
restrictions which may not be changed without shareholder approval include the
following: (1) With respect to 75% of its total assets, the Fund will not invest
more than 5% of the value of its total assets in any one issuer, or own more
than 10% of the outstanding voting securities of any one issuer. (These
restrictions do not apply to securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof. For purposes of these
restrictions, the government of any country (other than the U.S.), including its
governmental subdivisions, is each considered a single issuer.) (2) The Fund
will not invest 25% or more of the value of its total assets in the same
industry. (This restriction does not apply to securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities.) In addition, as
nonfundamental investment restrictions which may be changed at any time without
shareholder approval, the Fund will not invest more than 5% of its net assets in
warrants or more than 5% of its total assets in the securities of issuers which,
with their predecessors, have a record of less than three years' continuous
operation. A list of the Fund's fundamental and nonfundamental investment
restrictions is set forth in the Statement of Additional Information.
RISK FACTORS
Investment in foreign securities requires consideration of factors not
typically associated with investment in securities of U.S. issuers. Those
include the following:
CURRENCY FLUCTUATIONS. The value of the Fund's portfolio securities
computed in U.S. dollars will vary with increases and decreases in the exchange
rate between the currencies in which the Fund has invested and the U.S. dollar.
A decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of the Fund's holdings of securities
denominated in such currency and, therefore, will cause an overall decline in
the Fund's net asset value and net investment income and capital gains, if any,
to be distributed in U.S. dollars to shareholders by the Fund.
12
<PAGE>
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the price of oil, the pace of activity in the industrial
countries, including the United States, and other economic and financial
conditions affecting the world economy.
POLITICAL AND ECONOMIC RISKS. Investing in securities of non-U.S. companies
may entail additional risks. Nationalization, expropriation or confiscatory
taxation, currency blockage, political changes, government regulation, social
instability or diplomatic developments could affect adversely the economy of a
country or the Fund's investment in such country. The Fund may also be adversely
affected by exchange control regulations.
Certain additional risks are involved in investing in the securities of
Eastern European issuers. Although the Fund has the ability to invest in such
securities, because of current political instability and military conflict in
Eastern Europe, the Fund does not currently hold any such securities and does
not intend to purchase any such securities until a more favorable political
climate exists.
Upon the accession to power of Communist regimes approximately 50 years ago,
the governments of a number of Eastern European countries expropriated a large
amount of property. The claims of many property owners against those governments
were never finally settled. There can be no assurance that any Fund investments
in Eastern Europe would not also be expropriated, nationalized or otherwise
confiscated. In the event of such expropriation, nationalization or other
confiscation, the Fund could lose its entire investment in the country involved.
In addition, any change in the leadership or policies of Eastern European
countries, or any change in the leadership or policies of the Commonwealth of
Independent States (formerly, the Union of Soviet Socialist Republics) that
exercises a significant influence over those countries, may halt the expansion
of or reverse the liberalization of foreign investment policies now occurring
and adversely affect existing investment opportunities.
Most Eastern European countries have had a centrally planned, socialist
economy since shortly after World War II. The governments of a number of Eastern
European countries currently are implementing reforms directed at political and
economic liberalization, including efforts to decentralize the economic decision
making process and move towards a market economy. There can be no assurance that
these reforms will continue or, if continued, will achieve their goals. In
addition, favorable economic developments in Eastern Europe may not continue or
may be reversed by unanticipated political events that could adversely affect
the Fund if it were invested in the securities of Eastern European issuers.
Investing in the securities of Eastern European issuers involves certain
considerations not usually associated with investing in securities of issuers in
more developed capital markets such as the United States, Japan or Western
Europe, including (a) political and economic considerations, such as greater
risks of expropriation, confiscatory taxation and nationalization and less
social, political and economic stability; (b) the small current size of the
markets for such securities and the currently low or nonexistent volume of
trading, resulting in lack of liquidity and in price volatility; (c) certain
national policies which may restrict the Fund's investment opportunities,
including, without limitation, restrictions on investing in issuers or
industries deemed sensitive to relevant national interests; and (d) the absence
of developed legal structures governing private or foreign investments and
private property.
CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION. Non-U.S.
companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory requirements comparable to
those applicable to U.S. companies. Thus, there may be less available
information concerning non-U.S. issuers of securities held by the Fund than is
available concerning U.S. companies.
Applicable accounting and financial reporting standards in Eastern Europe
may be substantially different from U.S. accounting standards and, in certain
Eastern European countries, no reporting standards currently exist.
Consequently, substantially less information on Eastern European companies is
available to investors and the information that is available may not be
conceptually comparable to, or prepared on the same basis as that available in
more developed capital markets, which may make it difficult to assess the
financial status of particular companies. However, in order to become attractive
to Western
13
<PAGE>
international investors such as the Fund, some Eastern European companies may
submit to reviews of their financial condition conducted in accordance with
accounting standards employed in Western European countries. Management believes
that such information, together with the application of other analytical
techniques, can provide an adequate basis on which to assess the financial
viability of such companies.
MARKET CHARACTERISTICS. Securities of many non-U.S. companies may be less
liquid and their prices more volatile than securities of comparable U.S.
companies. In addition, securities of companies traded in many countries outside
the U.S., particularly those of emerging countries in the Pacific Basin, may be
subject to further risks due to the inexperience of local brokers and financial
institutions in less developed markets, the possibility of permanent or
temporary termination of trading, and greater spreads between bid and asked
prices for securities. Non-U.S. stock exchanges and brokers are subject to less
governmental supervision and regulation than in the U.S. and non-U.S. stock
exchange transactions are usually subject to fixed commissions, which are
generally higher than negotiated commissions on U.S. transactions. In addition,
there may in certain instances be delays in the settlement of non-U.S. stock
exchange transactions.
INVESTMENT AND REPATRIATION RESTRICTIONS. Several of the countries in the
Pacific Basin and certain European countries restrict, to varying degrees,
foreign investments in their securities markets. Government and private
restrictions take a variety of forms, including (a) limitations on the amount of
funds that may be introduced into or repatriated from the country (including
limitations on repatriation of investment income and capital gains); (b)
prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation; (c)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor; (d) limitations on the types of
securities which a foreign investor may purchase; and (e) restrictions on a
foreign investor's right to invest in companies whose securities are not
publicly traded. In some circumstances, these restrictions may limit or preclude
investment in certain countries or may increase the cost of investing in
securities of particular companies.
The governments of certain Eastern European countries may require that a
governmental or quasi-governmental authority act as custodian of the Fund's
assets invested in such countries. These authorities may not be qualified to act
as foreign custodians under the 1940 Act and, as a result, the Fund will not be
able to invest in these countries in the absence of exemptive relief from the
Securities and Exchange Commission. In addition, the risk of loss through
government confiscation may be increased in such countries.
The Fund may make direct investments in Taiwan if it adheres to certain
government restrictions or may invest in Taiwanese stocks quoted elsewhere.
However, the Fund currently intends to invest in Taiwan through the purchase of
shares of investment funds organized under the laws of Taiwan and through
Euromarket Instruments. The Fund currently may not make direct investments in
India. However, the laws regarding investments in India by foreigners have
recently changed and the Fund will most likely apply to the authorities in India
for permission to invest directly in that country. The return on the Fund's
investments in investment companies will be reduced by the operating expenses,
including investment advisory and administrative fees, of such companies. The
Fund's investment in an investment company may require the payment of a premium
above the net asset value of the investment company's shares, and the market
price of the investment company thereafter may decline without any change in the
value of the investment company's assets. The Fund, however, will not invest in
any investment company or trust unless it is believed that the potential
benefits of such investment are sufficient to warrant the payment of any such
premium. Under the 1940 Act, the Fund may not invest more than 10% of its assets
in investment companies or more than 5% of its total assets in the securities of
any one investment company, nor may it own more than 3% of the outstanding
voting securities of any such company.
FOREIGN TAXES. The Fund's interest and dividend income from foreign issuers
may be subject to non-U.S. withholding taxes. The Fund also may be subject to
taxes on trading profits in some countries. In addition, many of the countries
in the Pacific Basin have a transfer or stamp duties tax on certain securities
transactions. The imposition of these taxes will increase the cost to the Fund
of investing in any country imposing such taxes. For U.S. tax purposes, U.S.
shareholders may be entitled to a credit or deduction to the extent of any
foreign income taxes paid by the Fund. See "Tax Status."
14
<PAGE>
MANAGEMENT
BOARD OF DIRECTORS
The Board of Directors of Piper Global has the primary responsibility for
overseeing the overall management of Piper Global and electing its officers.
INVESTMENT ADVISER
Piper Capital Management Incorporated (the "Adviser") has been retained
under an Investment Advisory and Management Agreement (the "Advisory Agreement")
with Piper Global to act as the Fund's investment adviser subject to the
authority of the Board of Directors.
In addition to acting as the investment adviser for the Fund, the Adviser
serves as investment adviser to a number of other open-end and closed-end
investment companies and to various other concerns, including pension and profit
sharing funds, corporate funds and individuals. As of March 31, 1995, the
Adviser rendered investment advice regarding approximately $10.2 billion of
assets. The Adviser is a wholly owned subsidiary of Piper Jaffray Companies
Inc., a publicly held corporation which is engaged through its subsidiaries in
various aspects of the financial services industry. The address of the Adviser
is Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota
55402-3804.
The Adviser supervises, directs and monitors the day to day operations of
the Fund in accordance with the Fund's investment objective, policies and
restrictions, as well as the implementation of investment programs formulated by
the Sub-Adviser. The Adviser is responsible for investing the portion of the
Fund's portfolio maintained in cash and short-term high quality debt securities.
The Adviser reviews investment and allocation determinations of the Sub-Adviser.
In addition, the Sub-Adviser must obtain the Adviser's approval prior to (a) any
investment of the assets of the Fund in any country outside of the Pacific Basin
or Europe, and (b) any investment by the Sub-Adviser which would result in
reallocation of in excess of 5% of the Fund's total assets. The Adviser
determines the broker-dealers which are eligible to execute transactions on
behalf of the Fund. The Adviser furnishes at its own expense all necessary
administrative services, office space, equipment and clerical personnel for
providing the foregoing services. In addition, the Adviser pays the salaries and
fees of all officers and directors of the Fund who are affiliated with the
Adviser. The Adviser is liable to the Fund for losses resulting from willful
misconduct, bad faith or gross negligence in the performance of its duties or
from its reckless disregard of its duties under the Advisory Agreement.
Under the Advisory Agreement, the Fund pays the Adviser a monthly management
fee. The fee is paid at an annual rate of 1.00% on average daily net assets up
to $100 million, .875% on net assets over $100 million and up to $200 million,
and .75% on net assets over $200 million (the "Basic Fee"), and is subject to
adjustment as described below. The adjustment is based upon the investment
performance of the Fund in relation to the investment record of the Morgan
Stanley Capital International EAFE-SM- Index (the "EAFE Index"). The Basic Fee
is higher than fees paid by most other investment companies.
Adjustments to the Basic Fee are made by comparison of the Fund's investment
performance for the applicable period with the investment record of the EAFE
Index. The Basic Fee for each month may be increased or decreased by up to .25%
(on an annualized basis) of the Fund's average daily net assets depending upon
the extent (as set forth below) by which the Fund's performance varies from the
EAFE Index over the applicable performance period. For purposes of calculation
of the performance adjustment, average daily net assets are equal to the Fund's
average daily net assets during the month for which the calculation is being
made.
15
<PAGE>
The following table illustrates the full range of permitted increases or
decreases to the Basic Fee on an annualized basis:
<TABLE>
<CAPTION>
ADJUSTMENT
TO BASIC FEE
PERFORMANCE OF FUND RELATIVE TO EAFE INDEX (ANNUALIZED)
- -------------------------------------------------------------------------------- -------------
<S> <C>
+5 Percentage Points or more................................................... +.25
+4............................................................................. +.20
+3............................................................................. +.15
+2............................................................................. +.10
+1............................................................................. +.05
0............................................................................. 0
- -1.............................................................................. -.05
- -2.............................................................................. -.10
- -3.............................................................................. -.15
- -4.............................................................................. -.20
- -5 Percentage Points or more.................................................... -.25
</TABLE>
The Basic Fee, plus or minus the performance adjustments calculated as
described herein, is paid monthly. The applicable performance period is a
rolling 12-month period consisting of the most recent calendar month plus the
immediately preceding 11 months.
In calculating the investment performance of the Fund as compared with the
investment record of the EAFE Index, dividends and other distributions of the
Fund and dividends and other distributions made with respect to component
securities of the EAFE Index during the performance period are treated as having
been reinvested. The investment performance of the Fund is calculated based upon
the total return of the Fund for the applicable period, which consists of the
total net asset value of the Fund at the end of the applicable period, including
reinvestment of dividends and distributions, less the net asset value of the
Fund at the commencement of the applicable period divided by the net asset value
of the Fund at the commencement of the applicable period. Fractions of a
percentage point are rounded to the nearest whole point (to the higher whole
point if exactly one-half).
The EAFE Index is a market capitalization weighted index containing (as of
March 31, 1995) 1,113 companies representing approximately 60% of the market
capitalization of each of the following 20 countries: Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
The Netherlands, New Zealand, Norway, Singapore, Malaysia, Spain, Sweden,
Switzerland and the United Kingdom. The EAFE Index is an unmanaged index of
common stocks, whereas the Fund, under normal circumstances, may invest up to
35% of its assets in securities other than common stock. Additionally, the
largest percentages of the EAFE Index are currently represented by the Japanese
and United Kingdom markets, which currently represent approximately 44% and 16%,
respectively, of the EAFE Index. Consequently, the extent to which the EAFE
Index increases or decreases in any one year will be affected significantly by
the performance of these markets. The Fund currently has approximately 33% and
9%, respectively, of its total assets invested in Japan and the United Kingdom.
Because the Fund's weighting in these two markets is not as significant as that
of the EAFE Index, the performance of the other markets in which the Fund
invests, as compared to that of the Japanese and United Kingdom markets, will
affect to a significant degree whether the Fund outperforms or underperforms the
EAFE Index.
SUB-ADVISER
Edinburgh Fund Managers plc, Donaldson House, 97 Haymarket Terrace,
Edinburgh, Scotland EH12, 5HD, is the Sub-Adviser for the Fund under an
agreement with the Adviser (the "Sub-Advisory Agreement"). The Sub-Adviser is
responsible for the investment and reinvestment of the Fund's assets in non-U.S.
securities and the placement of brokerage transactions in connection therewith.
For its services, the Sub-Adviser is paid a fee by the Adviser equal to 65% of
the Basic Fee plus or minus 90% of the performance fee adjustment described
above. Such fee is paid over the same time periods and calculated in the same
manner as the investment advisory fee described above under "--Investment
Adviser."
16
<PAGE>
The Sub-Adviser is a public limited company that was incorporated in 1969.
It is a majority-owned subsidiary of The British Investment Trust PLC, a
Scottish closed-end investment company founded in 1889, for which the
Sub-Adviser serves as investment manager and adviser. The Sub-Adviser, an
investment adviser registered under the Advisers Act, currently furnishes
investment management services, directly or through subsidiaries, to ten
closed-end investment companies, twenty-six open-end investment companies (which
includes four open-end investment companies serving United Kingdom tax-exempt
institutional clients), twenty-one pension plans, four charitable organizations
and four other individual/corporate clients. As of March 31, 1995, the
Sub-Adviser managed approximately $5.7 billion of assets. Approximately 20% of
such assets were invested in the Pacific Basin and 62% of such assets were
invested in Europe.
PORTFOLIO MANAGEMENT
The day-to-day management of the Fund is primarily the responsibility of the
Sub-Adviser. The following individuals employed by the Sub-Adviser co-manage the
Fund: Iain A. Watt, Michael W. Balfour, Jamie Sandison, Christian Albuisson,
David Currie and Gavin Grant. Mr. Balfour, who is a director of the Fund, has
been director of overseas investments for the Sub-Adviser since 1992, and was
previously the assistant director and head of the Pacific Department of the
Sub-Adviser from 1988 to 1992. Mr. Watt, who is a director of the Fund, has been
the managing director of the Sub-Adviser since 1991, prior to which he had been
a director of the Sub-Adviser since 1986. Mr. Sandison has been a portfolio
manager in the Pacific Department since January 1994 and was previously an
investment manager with Ivory and Sime plc from 1990 to 1994. Mr. Albuisson has
been a portfolio manager in the European Department of the Sub-Adviser since
February 1990 and was previously an investment manager with British Linen Fund
Managers from June 1988 to February 1990. Mr. Currie was appointed assistant
director of the Sub-Adviser in 1993 and head of the Japanese Department in 1992,
prior to which he had been a portfolio manager in that department since 1991 and
a fund manager in the UK Department from October 1988 to January 1991. Mr. Grant
was appointed assistant director of the Sub-Adviser in 1995 and head of the
Latin American Department in 1994, prior to which he had been a portfolio
manager in that department since 1991. Messrs. Watt, Balfour, Albuisson and
Currie have been co-managers of the Fund since its inception. Messrs. Sandison
and Grant have been co-managers of the Fund since 1994 and 1992, respectively.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND CUSTODIAN
First Trust National Association, 180 East Fifth Street, St. Paul, Minnesota
55101, serves as Custodian for the Fund's portfolio securities and cash.
Investors Fiduciary Trust Company ("IFTC"), 127 West Tenth Street, Kansas City,
Missouri 64105, serves as Transfer Agent and Dividend Disbursing Agent for the
Fund.
Rules adopted under the 1940 Act permit the Fund to maintain its securities
and cash in the custody of certain eligible banks and securities depositories.
The Fund's portfolio of Pacific Basin and European issuers is held by its
sub-custodians who are approved by the directors in accordance with such rules.
Such determination is made pursuant to such rules following a consideration of a
number of factors including, but not limited to, the reliability and financial
stability of the institution; the ability of the institution to perform
custodial services for the Fund; the reputation of the institution in its
national market; the political and economic stability of the country in which
the institution is located; and the risks of potential nationalization or
expropriation of Fund assets.
Piper Global has entered into a Shareholder Account Servicing Agreement with
the Distributor. Under this agreement, the Distributor provides certain transfer
agent and dividend disbursing agent services for shareholder accounts held at
the Distributor. For more information, see "Investment Advisory and Other
Services--Transfer Agent and Dividend Disbursing Agent" in the Statement of
Additional Information.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Adviser and Sub-Adviser select brokers and futures commission merchants
to use for the Fund's portfolio transactions. In making its selection, the
Adviser may consider a number of factors, which are more fully discussed in the
Statement of Additional Information, including but not limited to, research
services, the reasonableness of commissions and quality of services and
execution. A broker's sales of Fund
17
<PAGE>
shares may also be considered a factor if the Adviser or Sub-Adviser is
satisfied that the Fund would receive from that broker the most favorable price
and execution then available for a transaction. Portfolio transactions for the
Fund may be effected through the Distributor on a securities exchange in
compliance with Section 17(e) of the 1940 Act. For more information, see
"Portfolio Transactions and Allocation of Brokerage" in the Statement of
Additional Information.
DISTRIBUTION OF FUND SHARES
Piper Jaffray acts as the principal distributor of the Fund's shares. Piper
Global has adopted a Distribution Plan (the "Plan") as required by Rule 12b-1
under the 1940 Act. Under the Plan, the Distributor is entitled to reimbursement
each month for its actual expenses incurred in connection with servicing of the
Fund's shareholder accounts and in connection with distribution related services
provided with respect to the Fund, in an amount not to exceed, on an annualized
basis, .50% of the average daily net assets of the Fund.
The Distributor is reimbursed under the Plan for its expenses incurred in
connection with the sale of Fund shares ("Distribution Expenses") and for its
costs in connection with the ongoing servicing and/or maintenance of shareholder
accounts ("Shareholder Servicing Costs"). Of the .50% of average daily net
assets reimbursable under the Plan, .25% may be reimbursed to cover Shareholder
Servicing Costs and .25% may be reimbursed to cover Distribution Expenses. The
Distributor has voluntarily agreed to limit reimbursements under the Plan to
.32% of the Fund's average daily net assets. This limitation may be revised or
terminated at any time after fiscal 1996 year end. The Adviser and the
Distributor, out of their own assets, may pay for certain expenses incurred in
connection with the distribution of shares of the Fund. In particular, the
Adviser may make payments out of its own assets to Piper Jaffray investment
executives and other broker dealers in connection with their sales of shares of
the Fund. See "How to Purchase Shares--Purchase Price." Further information
regarding the Plan is contained in the Statement of Additional Information.
The Distributor's Shareholder Servicing Costs include payments to investment
executives of the Distributor and broker-dealers which have entered into sales
agreements with the Distributor. If shares of the Fund are sold by a
representative of a broker-dealer other than the Distributor, the broker-dealer
is paid .30% of the average daily net assets of the Fund attributable to shares
sold by the broker-dealer's representative. If shares of the Fund are sold by an
investment executive of the Distributor, compensation is paid to the investment
executive in the manner set forth in a written agreement, in an amount not to
exceed .30% of the average daily net assets of the Fund attributable to shares
sold by the investment executive. Of such payments, an amount equal to .25% of
average daily net assets of the Fund is considered a Shareholder Servicing Cost
under the Plan and the remainder is considered ongoing sales compensation
reimbursable as a Distribution Expense under the Plan.
18
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING
HOW TO PURCHASE SHARES
GENERAL
The Fund's shares may be purchased at the public offering price from the
Distributor and from other broker-dealers who have sales agreements with the
Distributor. The address of the Distributor is that of the Fund. The Distributor
reserves the right to reject any purchase order. You should be aware that,
because the Fund does not issue stock certificates, Fund shares must be kept in
an account with the Distributor or with IFTC. All investments must be arranged
through your Piper Jaffray investment executive or other broker-dealer.
PURCHASE PRICE
You may purchase shares of the Fund at the net asset value per share next
calculated after receipt of your order by your Piper Jaffray investment
executive or other broker-dealer, plus a front-end sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A PERCENTAGE AS A PERCENTAGE
OF OF
AMOUNT OF TRANSACTION AT OFFERING PRICE OFFERING PRICE NET ASSET VALUE
- --------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Less than $100,000....................................... 4.00% 4.17%
$100,000 but less than $250,000.......................... 3.25% 3.36%
$250,000 but less than $500,000.......................... 2.50% 2.56%
$500,000 and over........................................ 0.00% 0.00%
</TABLE>
This table sets forth total sales charges or underwriting commissions. The
Distributor may reallow up to the entire sales charge to broker-dealers in
connection with their sales of shares. These broker-dealers may, by virtue of
such reallowance, be deemed to be "underwriters" under the 1933 Act.
FUND SHARES ARE BEING OFFERED TO THE PUBLIC WITHOUT AN INITIAL OR DEFERRED
SALES CHARGE THROUGH JUNE 30, 1995. The Distributor will pay its investment
executives and other broker-dealers selling Fund shares a fee equal to 2.00% of
the net asset value of any shares sold during this period. These payments will
be an expense of the Distributor; they will not be reimbursed by the Fund under
its Rule 12b-1 Plan.
The Distributor will make certain payments to its investment executives and
to other broker-dealers in connection with their sales of Fund shares. See
"Distribution of Fund Shares," above. In addition, the Distributor or the
Adviser, at their own expense, provide promotional incentives to investment
executives of the Distributor and to broker-dealers who have sales agreements
with the Distributor in connection with sales of shares of the Fund and other
mutual funds for which the Adviser acts as investment adviser. In some
instances, these incentives may be made available only to certain investment
executives or broker-dealers who have sold or may sell significant amounts of
such shares. The incentives may include payment for travel expenses, including
lodging at luxury resorts, incurred in connection with sales seminars.
PURCHASES OF $500,000 OR MORE
If you make a purchase of $500,000 or more (including purchases made under a
Letter of Intent), a 1% contingent deferred sales charge will be assessed in the
event you redeem shares within 24 months following
19
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING
the purchase. This sales charge will be paid to the Distributor. For more
information, please refer to the Contingent Deferred Sales Charge section of
"How To Redeem Shares." The Distributor currently pays its investment executives
and other broker-dealers fees in connection with these purchases as follows:
<TABLE>
<CAPTION>
FEE AS
A PERCENTAGE
OF OFFERING
AMOUNT OF TRANSACTION PRICE
- ----------------------------------------------------------------------------- ---------------
<S> <C>
First $1,000,000............................................................. 1.00%
Next $2,000,000.............................................................. 0.75%
Next $2,000,000.............................................................. 0.50%
Next $5,000,000.............................................................. 0.25%
Above $10,000,000............................................................ 0.15%
</TABLE>
Piper Jaffray investment executives and other broker-dealers generally will
not receive a fee in connection with purchases on which the contingent deferred
sales charge is waived. However, the Distributor, in its discretion, may pay a
fee out of its own assets to its investment executives and other broker-dealers
in connection with purchases by employee benefit plans on which no sales charge
is imposed. Please see the Special Purchase Plans section of "Reducing Your
Sales Charge."
MINIMUM INVESTMENTS
A minimum initial investment of $250 is required.There is no minimum for
subsequent investments. The Distributor, in its discretion, may waive the
minimum.
REDUCING YOUR SALES CHARGE
You may qualify for a reduced sales charge through one or more of several
plans. You must notify your Piper Jaffray investment executive or broker-dealer
at the time of purchase to take advantage of these plans.
AGGREGATION
Front-end or initial sales charges may be reduced or eliminated by
aggregating your purchase with purchases of certain related personal accounts.
In addition, purchases made by members of certain organized groups will be
aggregated for purposes of determining sales charges. Sales charges are
calculated by adding the dollar amount of your current purchase to the higher of
the cost or current value of shares of any Piper fund sold with a sales charge
that are currently held by you and your related accounts or by other members of
your group.
QUALIFIED GROUPS. You may group purchases in the following personal
accounts together:
- Your individual account.
- Your spouse's account.
- Your children's accounts (if they are under the age of 21).
- Your employee benefit plan accounts if they are exclusively for your
benefit. This includes accounts such as IRAs, individual 403(b) plans or
single-participant Keogh-type plans.
- A single trust estate or single fiduciary account if you are the trustee
or fiduciary.
Additionally, purchases made by members of any organized group meeting the
requirements listed below may be aggregated for purposes of determining sales
charges:
- The group has been in existence for more than six months;
- It is not organized for the purpose of buying redeemable securities of a
registered investment company; and
20
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING
- Purchases must be made through a central administration, or through a
single dealer, or by other means that result in economy of sales effort or
expense.
An organized group does not include a group of individuals whose sole
organizational connection is participation as credit card holders of a company,
policyholders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser.
RIGHT OF ACCUMULATION
Sales charges for purchases of Fund shares into Piper Jaffray accounts will
be automatically calculated taking into account the dollar amount of any new
purchases along with the higher of current value or cost of shares previously
purchased in the Piper funds that were sold with a sales charge. For other
broker-dealer accounts, you should notify your investment executive at the time
of purchase of additional Piper fund shares you may own.
LETTER OF INTENT
Your sales charge may be reduced by signing a non-binding Letter of Intent.
This Letter of Intent will state your intention to invest $100,000 or more in
any of the Piper funds sold with a sales charge over a 13-month period,
beginning not earlier than 90 days prior to the date you sign the Letter. You
will pay the lower sales charge applicable to the total amount you plan to
invest over the 13-month period. Part of your shares will be held in escrow to
cover additional sales charges that may be due if you do not invest the planned
amount. Please see "Purchase of Shares" in the Statement of Additional
Information for more details. You can contact your Piper Jaffray investment
executive or other broker-dealer for an application.
SPECIAL PURCHASE PLANS
For more information on any of the following special purchase plans, contact
your Piper Jaffray investment executive or other broker-dealer.
PURCHASE BY PIPER JAFFRAY COMPANIES INC., ITS SUBSIDIARIES AND THE SUB-ADVISER
Piper Jaffray Companies Inc., its subsidiaries and the Sub-Adviser may buy
shares of the Fund without incurring a sales charge. The following persons
associated with such entities also may buy Fund shares without paying a sales
charge:
- Officers, directors and partners.
- Employees and retirees.
- Sales representatives.
- Spouses or children under the age of 21 of any of the above.
- Any trust, pension, profit-sharing or other benefit plan for any of the
above.
PURCHASES BY BROKER-DEALERS
Employees of broker-dealers who have entered into sales agreements with the
Distributor, and spouses and children under the age of 21 of such employees, may
buy shares of the Fund without incurring a sales charge.
PURCHASES BY OTHER INDIVIDUALS WITHOUT A SALES CHARGE
The following other individuals and entities also may buy Fund shares
without paying a sales charge:
- Clients of the Adviser buying shares of the Fund in their advisory
accounts.
- Discretionary accounts at Piper Trust Company and participants in
investment companies exempt from registration under the 1940 Act that are
managed by the Adviser.
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- Trust companies and bank trust departments using funds over which they
exercise exclusive discretionary investment authority and which are held
in a fiduciary, agency, advisory, custodial or similar capacity.
- Investors purchasing shares through a Piper Jaffray investment executive
if the purchase of such shares is funded by the proceeds from the sale of
shares of any non-money market open-end mutual fund. This privilege is
available for 30 days after the sale.
PURCHASES BY EMPLOYEE BENEFIT PLANS AND TAX-SHELTERED ANNUITIES
- Shares of the Fund will be sold at net asset value, without a sales
charge, to employee benefit plans containing an actively maintained
qualified cash or deferred arrangement under Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code") (a "401(k) Plan").
In the event a 401(k) Plan of an employer has purchased shares in the Fund
or in any other mutual fund managed by the Adviser (other than a money
market fund) during any calendar quarter, any other employee benefit plan
of such employer that is a qualified plan under Section 401(a) of the Code
also may purchase shares of the Fund during such quarter without incurring
a sales charge.
- Custodial accounts under Section 403(b) of the Code (known as
tax-sheltered annuities) also may buy shares of the Fund without incurring
a sales charge.
HOW TO REDEEM SHARES
NORMAL REDEMPTION
You may redeem all or a portion of your shares on any day that the Fund
values its shares. (Please refer to "Valuation of Shares" below for more
information.) Your shares will be redeemed at the net asset value next
calculated after the receipt of your instructions in good form by your Piper
Jaffray investment executive or other broker-dealer as explained below.
PIPER JAFFRAY INC. ACCOUNTS. To redeem your shares, please contact your
Piper Jaffray investment executive with an oral request to redeem your shares.
OTHER BROKER-DEALER ACCOUNTS. To redeem your shares, you may either contact
your broker-dealer with an oral request or send a written request directly to
the Fund's transfer agent, IFTC. This request should contain: the dollar amount
or number of shares to be redeemed, your Fund account number and either a social
security or tax identification number (as applicable). You should sign your
request in exactly the same way the account is registered. If there is more than
one owner of the shares, all owners must sign. A signature guarantee is required
for redemptions over $25,000. Please contact IFTC or refer to "Redemption of
Shares" in the Statement of Additional Information for more details.
CONTINGENT DEFERRED SALES CHARGE
If you invest $500,000 or more and, as a result, pay no front-end sales
charge, you may incur a contingent deferred sales charge if you redeem within 24
months. This charge will be equal to 1% of the lesser of the net asset value of
the shares at the time of purchase or at the time of redemption. This charge
does not apply to amounts representing an increase in the value of Fund shares
due to capital appreciation or to shares acquired through reinvestment of
dividend or capital gain distributions. In determining whether a contingent
deferred sales charge is payable, shares that are not subject to any deferred
sales charge will be redeemed first, and other shares will then be redeemed in
the order purchased.
LETTER OF INTENT. In the case of a Letter of Intent, the 24-month period
begins on the date the Letter of Intent is completed.
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SPECIAL PURCHASE PLANS. If you purchased your shares through one of the
plans described above under "Special Purchase Plans," the contingent deferred
sales charge will be waived. In addition, the contingent deferred sales charge
will be waived in the event of:
- The death or disability (as defined in Section 72(m)(7) of the Code) of
the shareholder. (This waiver will be applied to shares held at the time
of death or the initial determination of disability of either an
individual shareholder or one who owns the shares as a joint tenant with
the right of survivorship or as a tenant in common.)
- A lump sum distribution from an employee benefit plan qualified under
Section 401(a) of the Code, an individual retirement account under Section
408(a) of the Code or a simplified employee pension plan under Section
408(k) of the Code.
- Systematic withdrawals from any such plan or account if the shareholder is
at least 59 1/2 years old.
- A tax-free return of the excess contribution to an individual retirement
account under Section 408(a) of the Code.
- Involuntary redemptions effected pursuant to the right to liquidate
shareholder accounts having an aggregate net asset value of less than
$200.
EXCHANGES. If you exchange your shares, no contingent deferred sales charge
will be imposed. However, the charge will apply if you subsequently redeem the
new shares within 24 months of the original purchase.
REINSTATEMENT PRIVILEGE. If you elect to use the Reinstatement Privilege
(please see "Shareholder Services" below), any contingent deferred sales charge
you paid will be credited to your account (proportional to the amount
reinvested). Please see "Redemption of Shares" in the Statement of Additional
Information for more details.
PAYMENT OF REDEMPTION PROCEEDS
After your shares have been redeemed, the cash proceeds will normally be
sent to you or your broker-dealer within five business days (three business days
after June 3, 1995). In no event will payment be made more than seven days after
receipt of your order in good form. However, payment may be postponed or the
right of redemption suspended for more than seven days under unusual
circumstances, such as when trading is not taking place on the New York Stock
Exchange. Payment of redemption proceeds may also be delayed if the shares to be
redeemed were purchased by a check drawn on a bank which is not a member of the
Federal Reserve System, until such check has cleared the banking system
(normally up to 15 days from the purchase date).
INVOLUNTARY REDEMPTION
The Fund reserves the right to redeem your account at any time if the net
asset value of the account falls below $200 as the result of a redemption or
exchange request. You will be notified in writing prior to any such redemption
and will be allowed 30 days to make additional investments before the redemption
is processed.
SHAREHOLDER SERVICES
AUTOMATIC MONTHLY INVESTMENT PROGRAM
You may arrange to make additional automated purchases of shares of the Fund
or certain other mutual funds managed by the Adviser. You can automatically
transfer $100 or more per month from your bank, savings and loan or other
financial institution to purchase additional shares. In addition, if you hold
your shares in a Piper Jaffray account you may arrange to make such additional
purchases by having $25 or
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SHAREHOLDER GUIDE TO INVESTING
more automatically transferred each month from any of the money market fund
series of Piper Funds. You should contact your Piper Jaffray investment
executive or IFTC to obtain authorization forms or for additional information.
REINSTATEMENT PRIVILEGE
If you have redeemed shares of the Fund, you may be eligible to reinvest in
shares of any fund managed by the Adviser without payment of an additional sales
charge. The reinvestment request must be made within 30 days of the redemption.
This privilege is subject to the eligibility of share purchases in your state as
well as the minimum investment requirements and any other applicable terms in
the prospectus of the fund being acquired.
EXCHANGE PRIVILEGE
If your investment goals change, you may prefer a fund with a different
objective. If you are considering an exchange into another mutual fund managed
by the Adviser, you should carefully read the appropriate prospectus for
additional information about that fund. A prospectus may be obtained through
your Piper Jaffray investment executive, your broker-dealer or the Distributor.
To exchange your shares, please contact your Piper Jaffray investment executive,
your broker-dealer or IFTC.
You may exchange your shares for shares of any other mutual fund managed by
the Adviser that is open to new investors. All exchanges are subject to the
eligibility of share purchases in your state as well as the minimum investment
requirements and any other applicable terms in the prospectus of the fund being
acquired. Exchanges are made on the basis of net asset values of the funds
involved, except that investors exchanging into a fund which has a higher sales
charge must pay the difference.
You may make four exchanges per year without payment of a service charge.
Thereafter, you will pay a $5 service charge for each exchange. The Fund
reserves the right to change or discontinue the exchange privilege, or any
aspect of the privilege, upon 60 days' written notice.
TELEPHONE TRANSACTION PRIVILEGES
PIPER JAFFRAY INC. ACCOUNTS. If you hold your shares in a Piper Jaffray
account, you may telephone your investment executive to execute any transaction
or to apply for many shareholder services. In some cases, you may be required to
complete a written application.
OTHER BROKER-DEALER ACCOUNTS. If you hold your shares in an account with
your broker-dealer or at IFTC, you may authorize telephone privileges by
completing the Account Application and Services Form. Please contact your
broker-dealer or IFTC (800-874-6025) for an application or for more details. The
Fund will employ reasonable procedures to confirm that a telephonic request is
genuine, including requiring that payment be made only to the address of record
or the bank account designated on the Account Application and Services Form and
requiring certain means of telephonic identification. If the Fund follows such
procedures, it will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. If the Fund does not employ
such procedures, it may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
DIRECTED DIVIDENDS
You may direct income dividends and capital gains distributions to be
invested in any other mutual fund managed by the Adviser (other than a money
market fund) that is offered in your state. This investment will be made at net
asset value. It will not be subject to a minimum investment amount except that
you must hold shares in such fund (including the shares being acquired with the
dividend or distribution) with a value at least equal to such fund's minimum
initial investment amount.
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SHAREHOLDER GUIDE TO INVESTING
SYSTEMATIC WITHDRAWAL PLAN
If your account has a value of $5,000 or more, you may establish a
Systematic Withdrawal Plan. This plan will allow you to receive regular periodic
payments by redeeming as many shares from your account as necessary. As with
other redemptions, a redemption to make a withdrawal is a sale for federal
income tax purposes. Payments made under a Systematic Withdrawal Plan cannot be
considered as actual yield or income since part of the payments may be a return
of capital.
A request to establish a Systematic Withdrawal Plan must be submitted in
writing to your Piper Jaffray investment executive or other broker-dealer. There
are no service charges for maintenance; the minimum amount that you may withdraw
each period is $100. You will be required to have any income dividends and any
capital gains distributions reinvested. You may choose to have withdrawals made
monthly, quarterly or semi-annually. Please contact your Piper Jaffray
investment executive, other broker-dealer or IFTC for more information.
You should be aware that additional investments in an account that has an
active Systematic Withdrawal Plan may be inadvisable due to sales charges and
tax liabilities. As a result, you will not be allowed to make additional
investments of less than $5,000 or three times the annual withdrawals while you
have the plan in effect. Please refer to "Redemption of Shares" in the Statement
of Additional Information for additional details.
ACCOUNT PROTECTION
If you purchased your shares of the Fund through a Piper Jaffray investment
executive, you may choose from several account options. Your investments in the
Fund held in a Piper Jaffray account (except for non-"PAT" accounts) would be
protected up to $25 million. Investments held in non-"PAT" Piper Jaffray
accounts are protected up to $2.5 million. In each case, the Securities Investor
Protection Corporation ("SPIC") provides $500,000 of protection; the additional
coverage is provided by The Aetna Casualty & Surety Company. This protection
does not cover any declines in the net asset value of Fund shares.
CONFIRMATION OF TRANSACTIONS AND REPORTING OF OTHER INFORMATION
Each time there is a transaction involving your Fund shares, such as a
purchase, redemption or dividend reinvestment, you will receive a confirmation
statement describing that activity. This information will be provided to you
from either Piper Jaffray, your broker-dealer or IFTC. In addition, you will
receive various IRS forms after the first of each year detailing important tax
information. The Fund is required to supply annual and semi-annual reports that
list securities held by the Fund and include the current financial statements of
the Fund.
HOUSEHOLDING. If you have multiple accounts with Piper Jaffray, you may
receive some of the above information in combined mailings. This will not only
help to reduce Fund expenses, it will help the environment by saving paper.
Please contact your Piper Jaffray investment executive for more information.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income and distributions of net realized
capital gains, if any, will be payable to Fund shareholders on an annual basis.
BUYING A DIVIDEND. On the record date for a distribution, the Fund's share
price is reduced by the amount of the distribution. If you buy shares just
before the record date ("buying a dividend"), you will pay the full price for
the shares and then receive a portion of the price back as a taxable
distribution.
DISTRIBUTION OPTIONS. All net investment income dividends and net realized
capital gains distributions for the Fund generally will be payable in additional
shares of the Fund at net asset value ("Reinvestment Option"). If you wish to
receive your distributions in cash, you must notify your Piper Jaffray
investment executive or other broker-dealer. You may elect either to receive
income dividends in cash
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and capital gains distributions in additional shares of the Fund at net asset
value ("Split Option"), or to receive both income dividends and capital gains
distributions in cash ("Cash Option"). You may also direct income dividends and
capital gains distributions to be invested in another mutual fund managed by the
Adviser. See "Shareholder Services--Directed Dividends" above. The taxable
status of income dividends and/or net capital gains distributions is not
affected by whether they are reinvested or paid in cash.
VALUATION OF SHARES
The Fund computes its net asset value on each day the New York Stock
Exchange (the "Exchange") is open for business. The calculation is made as of
the regular close of the Exchange (currently 4:00 p.m. New York time) after the
Fund has declared any applicable dividends. In valuing the Fund's assets, all
securities for which market quotations are readily available are valued under
normal circumstances at the last sales price prior to the time of determination,
or if no sale is reported at that time, the mean between the closing asked price
and the closing bid price or, if no bid and asked prices are available, at the
most recent available sales price. With respect to a security which is listed or
traded on more than one exchange, the Fund normally looks to the exchange on
which trading is more extensive. In instances where market quotations are not
readily available and in certain other circumstances, fair value is determined
according to methods selected in good faith by the Board of Directors.
Short-term investments having a maturity of 60 days or less are valued at cost
with any premium amortized or discount credited over the period remaining until
maturity. Options will be valued at market value or fair value, as determined in
good faith by or under the direction of the Board of Directors, if no market
exists. Futures contracts will be valued at the settlement price established
each day by the board of trade or exchange on which they are traded. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors.
Any assets or liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars by the pricing service retained by the Fund or,
to the extent that an exchange rate is not available through such pricing
service, at the mean of current bid and asked prices of such currencies against
the U.S. dollar last quoted by a major bank that is a regular participant in the
foreign exchange market. The Fund has been advised that the pricing service
translates foreign currencies into U.S. dollars on the basis of the official
exchange rate or by taking into account the quotes provided by a number of major
banks that are regular participants in the foreign exchange market. Trading in
securities on European and Pacific Basin securities exchanges and in
over-the-counter markets is normally completed well before the close of business
on each business day of the Fund. In addition, European or Pacific Basin
securities trading generally or in a particular country or countries may not
take place on all business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days of the Fund and on
which the Fund's net asset value is not calculated. Therefore, the net asset
value of the Fund might be significantly affected on days when the investor has
no access to the Fund. The Fund calculates net asset value per share as of the
close of the regular trading session on the Exchange. Such calculation does not
take place contemporaneously with the determination of the prices of the
majority of the portfolio securities used in such calculation. If events
materially affecting the value of such securities occur between the time when
their price is determined and the time when the Fund's net asset value is
calculated, such securities will be valued at fair value as determined in good
faith by or under the direction of the Board of Directors.
TAX STATUS
The Fund qualified as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended, during its last taxable year and
intends to qualify as a regulated investment company during the current taxable
year. If so qualified, the Fund will not be liable for federal income taxes to
the extent it distributes its taxable income to shareholders.
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Distributions by the Fund are generally taxable to the shareholders, whether
received in cash or additional shares of the Fund (or shares of another mutual
fund managed by the Adviser). Distributions of net capital gains (designated as
"capital gain dividends") are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has held shares of the
Fund.
A shareholder will recognize a capital gain or loss upon the sale or
exchange of shares in the Fund if, as is normally the case, the shares are
capital assets in the shareholder's hands. This capital gain or loss will be
long-term if the shares have been held for more than one year.
The Fund's investments may be subject to taxes in foreign countries which
would reduce the total return on such investments. In addition, if the Fund is
deemed to be a resident of the United Kingdom for United Kingdom tax purposes or
if the Fund is treated as being engaged in a trading activity through an agent
in the United Kingdom, there is a risk that the United Kingdom will attempt to
tax all or a portion of the Fund's gains or income. In light of the structure of
the Fund and the terms and conditions of the Advisory and Sub-Advisory
Agreements, the Adviser believes that any such risk is minimal.
If the Fund has more than 50% of its assets invested in the stock or
securities of foreign corporations at the end of the Fund's taxable year, the
Fund may make an election to allow shareholders either to claim U.S. foreign tax
credits with respect to such foreign taxes paid or to deduct such amounts as an
itemized deduction on their tax return. In the event such an election is made,
shareholders would have to increase their taxable income by the amount of such
taxes and the Fund would not be able to deduct such taxes in computing its
taxable income.
The foregoing relates to federal income taxation as in effect as of the date
of this Prospectus. For a more detailed discussion of the federal income tax
consequences of investing in shares of the Fund, see "Taxation" in the Statement
of Additional Information. 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.
Average annual return is the average annual compounded rate of return on a
hypothetical $1,000 investment made at the beginning of the advertised period.
Cumulative total return is calculated by subtracting a hypothetical $1,000
payment to the Fund from the redeemable value of such payment at the end of the
advertised period, dividing such difference by $1,000 and multiplying the
quotient by 100. In calculating average annual and cumulative total return, the
maximum sales charge is deducted from the hypothetical investment and all
dividends and distributions are assumed to be reinvested.
In addition to advertising total return, comparative performance information
may be used from time to time in advertising the Fund's shares including data
from Lipper Analytical Services, Inc. and other entities or organizations which
track the performance of investment companies. Performance of the Fund may be
compared to the EAFE Index and to the performance of International Funds as
reported by Lipper.
For additional information regarding the calculation of average annual total
return and cumulative total return, see "Calculation of Performance Data" in the
Statement of Additional Information.
GENERAL INFORMATION
Piper Global is authorized to issue a total of 100 billion shares of common
stock, with a par value of $.01 per share. These shares can be issued in more
than one class or series. Each designated series of stock
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will represent a separate portfolio of investments, each with a different
investment objective. The Board of Directors has authorized two billion shares
to be issued as Series A Common Shares, which are the shares of common stock of
the Fund. Currently, Series A is the only outstanding series of shares of Piper
Global.
In addition, the Board of Directors may, without shareholder approval,
create and issue one or more additional classes of shares within the Fund, as
well as within any series of Piper Global created in the future. All classes of
shares in the Fund would be identical except that each class of shares would be
available through a different distribution channel and certain classes might
incur different expenses for the provision of distribution services or the
provision of shareholder services or administration assistance by institutions.
Shares of each class would share equally in the gross income of the Fund, but
any variation in expenses would be charged separately against the income of the
particular class incurring such expenses. This would result in variations in net
investment income accrued and dividends paid by and in the net asset value of
the different classes of the Fund. This ability to create multiple classes of
shares within the Fund will allow Piper Global in the future the flexibility to
better tailor its methods of marketing, administering and distributing shares of
the Fund to the needs of particular investors and to allocate expenses related
to such marketing, administration and distribution methods to the particular
classes of shareholders of the Fund incurring such expenses.
All shares, when issued, will be fully paid and nonassessable and will be
redeemable. All shares have equal voting rights. They can be issued as full or
fractional shares. A fractional share has pro rata the same kind of rights and
privileges as a full share. The shares possess no preemptive or conversion
rights.
Each share has one vote (with proportionate voting for fractional shares).
Cumulative voting is not authorized. This means that the holders of more than
50% of the shares voting for the election of directors can elect 100% of the
directors if they choose to do so, and, in such event, the holders of the
remaining shares will be unable to elect any directors.
On an issue affecting only a particular series, the shares of the affected
series vote separately. An example of such an issue would be a fundamental
investment restriction pertaining to only one series. In voting on the
Investment Advisory and Management Agreement (the "Agreement"), approval of the
Agreement by the shareholders of a particular series would make the Agreement
effective as to that series whether or not it had been approved by the
shareholders of any other series.
If Piper Global issues shares in additional series, the assets received by
Piper Global for the issue or sale of shares of each series, and all income,
earnings, profits and proceeds thereof, subject only to the rights of creditors,
will be allocated to such series, and constitute the underlying assets of such
series. The underlying assets of each series are required to be segregated on
the books of account, and are to be charged with the expenses in respect to such
series and with a share of the general expenses of Piper Global. Any general
expenses of Piper Global not readily identifiable as belonging to a particular
series shall be allocated among the series based upon the relative net assets of
the series at the time such expenses were accrued.
The Bylaws of Piper Global provide that shareholder meetings need be held
only with such frequency as required under Minnesota law. Minnesota corporation
law requires only that the Board of Directors convene shareholders meetings when
it deems appropriate. In addition, Minnesota law provides that if a regular
meeting of shareholders has not been held during the immediately preceding 15
months, a shareholder or shareholders holding 3% or more of the voting shares of
Piper Global may demand a regular meeting of shareholders by written notice
given to the chief executive officer or chief financial officer of Piper Global.
Within 30 days after receipt of the demand, the Board of Directors shall cause a
regular meeting of shareholders to be called, which meeting shall be held no
later than 90 days after receipt of the demand, all at the expense of Piper
Global. In addition, the 1940 Act requires a shareholder vote for all amendments
to fundamental investment policies and restrictions and for all amendments to
investment advisory contracts and Rule 12b-1 distribution plans. The 1940 Act
also provides that directors of Piper Global may be removed by action of the
record holders of two-thirds or more of the outstanding shares of
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Piper Global. The directors are required to call a meeting of shareholders for
the purpose of voting upon the question of removal of any director when so
requested in writing by the record holders of at least 10% of Piper Global's
outstanding shares.
PENDING LEGAL PROCEEDINGS
Complaints have been filed in U.S. District Court against the Adviser and
the Distributor relating to several other investment companies for which the
Adviser acts as investment adviser or subadviser. These lawsuits do not involve
the Fund and the Adviser and Distributor do not believe that the lawsuits will
have a material adverse effect upon their ability to perform under their
agreements with the Fund. An agreement in principle has been reached to settle
one such lawsuit. The Adviser and Distributor intend to defend the other
lawsuits vigorously. See "Pending Legal Proceedings" in the Statement of
Additional Information.
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS (AND/OR IN THE STATEMENT OF ADDITIONAL INFORMATION REFERRED TO ON THE
COVER PAGE OF THIS PROSPECTUS) AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
PIPER JAFFRAY INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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--
PACIFIC-EUROPEAN GROWTH FUND
A Series of Piper Global Funds Inc.
INVESTMENT ADVISER
Piper Capital Management Incorporated
SUB-ADVISER
Edinburgh Fund Managers plc
DISTRIBUTOR
Piper Jaffray Inc.
CUSTODIAN
First Trust National Association
TRANSFER AGENT
Investors Fiduciary Trust Company
LEGAL COUNSEL
Dorsey & Whitney P.L.L.P.
Table of Contents
<TABLE>
<CAPTION>
PAGE
<S> <C>
Introduction......................... 2
Fund Expenses........................ 4
Financial Highlights................. 4
Investment Objective and Policies.... 5
Special Investment Methods........... 7
Risk Factors......................... 12
Management........................... 15
Distribution of Fund Shares.......... 18
SHAREHOLDER GUIDE TO
INVESTING
How to Purchase Shares........... 19
Reducing Your Sales Charge....... 20
Special Purchase Plans........... 21
How to Redeem Shares............. 22
Shareholder Services............. 23
Dividends and Distributions...... 25
Valuation of Shares.................. 26
Tax Status........................... 26
Performance Comparisons.............. 27
General Information.................. 27
</TABLE>
PGPEX-05
<PAGE>
HERCULES FUNDS INC.
HERCULES PACIFIC BASIN VALUE FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1996
The undersigned shareholder of Hercules Pacific Basin Value Fund ("Pacific
Basin Value Fund"), a series of Hercules Funds Inc. (the "Company"), does hereby
appoint WILLIAM H. ELLIS, ROBERT H. NELSON and SUSAN SHARP MILEY and each of
them, as attorneys-in-fact and proxies of the undersigned, each with the full
power of substitution, to attend the Special Meeting of Shareholders of Pacific
Basin Value Fund to be held on June 18, 1996, at Piper Jaffray Tower, 222 South
Ninth Street, Third Floor, Minneapolis, Minnesota at 10:00 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 /X/ 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 Pacific Basin Value
Fund, and Piper Global Funds Inc., on behalf of Pacific-European Growth Fund
("Pacific-European Fund"), pursuant to which substantially all of the assets of
Pacific Basin Value Fund acquired by Pacific-European Fund and shareholders of
Pacific Basin Value Fund will become shareholders of Pacific-European Fund
receiving shares of Pacific-European Fund with a value equal to the value of
their holdings in Pacific Basin Value Fund. A vote in favor of the Plan will be
considered a vote in favor of an amendment to the articles of incorporation of
the Company required to effect the reorganization as contemplated by the Plan.
FOR / / AGAINST / / ABSTAIN / /
Dated: ___________________________, 1996
(Month) (Day)
________________________________________
Signature(s)
________________________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S)
APPEAR HEREON. When signing as custodian,
attorney, executor, administrator,
trustee, etc., please give your full
title as such. All joint owners should
sign this proxy. If the account is
registered in the name of a corporation,
partnership or other entity, a duly
authorized individual must sign on its
behalf and give his or her title.
