PIPER GLOBAL FUNDS INC /MN, 485BPOS, 1997-11-24

PIPER GLOBAL FUNDS INC /MN
485BPOS, 1997-11-24

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<PAGE>

1933 Act Registration No.: 33-48299
1940 Act Registration No.: 811-06046

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 24, 1997
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Registration No. 33-48299)
Pre-Effective Amendment No.
----
Post-Effective Amendment No. 13
----
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
(Registration No. 811-06046)
Amendment No. 14
-------
(Check appropriate box or boxes)

PIPER GLOBAL FUNDS INC.
-----------------------

(Exact Name of Registrant as Specified in Charter)

Piper Jaffray Tower, 222 South 9th Street, Minneapolis, MN 55402
----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: (6l2) 342-6384
--------------
Paul A. Dow
Piper Capital Management Incorporated
Piper Jaffray Tower
222 South 9th Street, Minneapolis, Minnesota 55402
--------------------------------------------------
(Name and Address of Agent for Service)

Copy to:
Kathleen L. Prudhomme
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402

It is proposed that this filing will become effective (check box):

X immediately upon filing pursuant to paragraph (b) of rule 485
- -------
on (specify date) pursuant to paragraph (b) of rule 485
- -------
75 days after filing pursuant to paragraph (a) of rule 485, unless
- ------- effectiveness is accelerated by the staff of the Securities and
Exchange Commission
on (specify date) pursuant to paragraph (a) of rule 485
- -------

<PAGE>

PIPER GLOBAL FUNDS INC.
Registration Statement on Form N-1A
--------------------------

Cross Reference Sheet
Pursuant to Rule 481(a)
--------------------------

Item No. Prospectus Heading
- -------- ------------------
1. Cover Page. . . . . . . . . . . . . . Cover Page (no caption)

2. Synopsis . . . . . . . . . . . . . . Fund Descriptions

3. Condensed Financial Information . . . Fund Descriptions

4. General Description of Registrant . . Fund Descriptions

5. Management of the Fund. . . . . . . . Fund Descriptions

6. Capital Stock and Other Securities. . Managing Your Investment--Holding
Shares

7. Purchase of Securities Being Offered. Managing Your Investment--Buying Shares

8. Redemption or Repurchase. . . . . . . Managing Your Investment--Selling
Shares

9. Pending Legal Proceedings . . . . . . General Information

Heading Statement of Additional Information
- ------- -----------------------------------
10.Cover Page. . . . . . . . . . . . . . Cover Page (no caption)

11.Table of Contents . . . . . . . . . . Table of Contents

12.General Information and History . . . General Information; Pending
Litigation

13.Investment Objectives and Policies. . Investment Objectives and Policies;
Investment Restrictions

14.Management of the Fund. . . . . . . . Directors and Executive Officers

15.Control Persons and Principal
Holders of Securities . . . . . . . . Capital Stock and Ownership of Shares

<PAGE>

16.Investment Advisory and Other
Services . . . . . . . . . . . . . . Investment Advisory and Other Services

17.Brokerage Allocation and Other
Practices . . . . . . . . . . . . . . Portfolio Transactions and Allocation
of Brokerage

18.Capital Stock and Other Securities. . Capital Stock and Ownership of Shares

19.Purchase, Redemption and Pricing
of Securities Being Offered . . . . . Net Asset Value and Public Offering
Price; Redemption of Shares

20.Tax Status. . . . . . . . . . . . . . Taxation

21.Underwriters. . . . . . . . . . . . . Investment Advisory and Other
Services; Portfolio Transactions and
Allocation of Brokerage

22.Calculations of Performance Data. . . Performance Comparisons

23.Financial Statements. . . . . . . . . Financial Statements

<PAGE>

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Prospectus - International Growth Funds
- --------------------------------------------------------------------------------

PROSPECTUS

November 24, 1997

[LOGO]

INTERNATIONAL
GROWTH FUNDS

EMERGING MARKETS GROWTH FUND (Class A and Class B Shares)
- --------------------------------------------------------------------------------

PACIFIC-EUROPEAN GROWTH FUND (Class A and Class B shares)
- --------------------------------------------------------------------------------

BEFORE YOU INVEST:

PLEASE READ THIS PROSPECTUS CAREFULLY, AND KEEP IT FOR FUTURE REFERENCE. IT
CONTAINS IMPORTANT INFORMATION ABOUT THE FUNDS, INCLUDING INFORMATION ON
INVESTMENT POLICIES, RISKS AND FEES.

AS WITH ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION (SEC) OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

[LOGO]

CONTENTS
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INVESTING IN PIPER INTERNATIONAL GROWTH FUNDS. .1

FUND DESCRIPTIONS
- --------------------------------------------------------------------------------
EMERGING MARKETS GROWTH FUND . . . . . . . . . .2 Investment objectives and
PACIFIC-EUROPEAN GROWTH FUND . . . . . . . . . .4 policies, risk
considerations, portfolio
managers, shareholder
expenses and financial
highlights

PORTFOLIO OVERVIEW
- --------------------------------------------------------------------------------
INVESTMENT SECURITIES AND TECHNIQUES . . . . . .6 An overview of securities
and
RISK FACTORS . . . . . . . . . . . . . . . . . .8 investment techniques that
may be used by the funds
and their risks

MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
BUYING SHARES . . . . . . . . . . . . . . . . .10 Practical information to
help you manage your
Choosing a Share Class investment in Piper Funds
Calculating Your Purchase Price
Reducing the Front-End Sales Charge
Investing Automatically
HOLDING SHARES . . . . . . . . . . . . . . . .12
Receiving Dividends and Other
Distributions
Taxing of Dividends and Other
Distributions
Exchanging Shares
Conducting Transactions by Phone
Staying Informed
SELLING SHARES . . . . . . . . . . . . . . . . 14
Receiving the Proceeds
Paying the Contingent Deferred Sales
Charge
Taking Systematic Withdrawals
Reinvesting After a Sale

- --------------------------------------------------------------------------------
GENERAL INFORMATION . . . . . . . . . . . . . .15

<PAGE>

INVESTING IN PIPER
- -------------------------------------------------------------------------------

INTERNATIONAL GROWTH FUNDS
- -------------------------------------------------------------------------------

PIPER INTERNATIONAL GROWTH FUNDS SEEK TO PROVIDE YOU WITH LONG-TERM GROWTH OF
CAPITAL BY INVESTING IN COMMON STOCKS OF COMPANIES LOCATED BEYOND U.S. BORDERS.
EMERGING MARKETS GROWTH FUND AND PACIFIC-EUROPEAN GROWTH FUND ARE ADVISED BY
PIPER CAPITAL MANAGEMENT INCORPORATED.

BEFORE YOU INVEST:

KNOW YOUR GOALS
- --------------------------------------------------------------------------------
One or both of these funds may be appropriate for your investment portfolio if:

- - You want to diversify your portfolio with international investments.

- - You have a long-term investment horizon and are targeting capital
appreciation.

- - You are willing to accept substantial volatility in the value of your
shares.

If you want to avoid fluctuations in the value of your principal -- or if you
have a short-term investment horizon -- you should consider other investment
vehicles. Piper International Growth Funds were not designed to meet these
goals.

UNDERSTAND THE RISKS
- --------------------------------------------------------------------------------
While mutual funds are a convenient and potentially rewarding way to invest,
they do not always meet their objectives. Please remember: You could lose money
with these investments. Safety of principal is not guaranteed. Risks associated
with these funds are outlined in the following pages.

USE YOUR PROSPECTUS
- --------------------------------------------------------------------------------
Please read this prospectus carefully and keep it on file for future reference.
More detailed information about the funds is contained in their statement of
additional information, which can be obtained from the funds at the address and
phone number on the back cover. Further information is also available from your
broker or by calling Piper Capital at 800 866-7778.

- --------------------------------------------------------------------------------
1 Prospectus - International Growth Funds

<PAGE>

FUND DESCRIPTIONS

EMERGING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
EMERGING MARKETS GROWTH FUND PURSUES ITS OBJECTIVE OF LONG-TERM CAPITAL
APPRECIATION BY INVESTING PRIMARILY IN COMMON STOCK FROM EMERGING MARKETS.

INVESTMENT POLICIES
- --------------------------------------------------------------------------------

Under normal market conditions, Emerging Markets Growth Fund invests at least
65% of its total assets in common stock from the world's emerging securities
markets. Common stock includes foreign equity securities which are substantially
similar to common stock in the U.S. It does not include convertible debt
securities or foreign equity securities which are substantially similar to
preferred stock in the U.S. Emerging securities markets include regions such as
Latin America, Asia, Eastern Europe, the Middle East and Africa. The fund will
maintain investments in at least three countries having emerging markets, except
during defensive periods.

When making investment decisions, management first allocates assets among
emerging markets. Considerations include prospects for relative growth among
countries, expected levels of inflation, government policies influencing
business conditions, the currency outlook and the range of opportunities
available to international investors. Next, management looks at individual
issuers within the selected markets, giving consideration to the issuer's
competitive position, prospects for growth, managerial strength, underlying
asset value, relative market value, earnings quality, and overall marketability.

In addition to investing directly in common stock, the fund may invest in
American, European and Global Depository Receipts and in shares of investment
companies or trusts which invest principally in securities in which the fund is
authorized to invest. The fund may also invest in convertible debt securities.
Up to 10% of the fund's assets may be invested in rights or warrants to purchase
common stock.

For temporary defensive purposes, the fund may invest without limitation in U.S.
dollar denominated or foreign currency denominated cash or in short-term money
market securities. To facilitate portfolio management and mitigate risk, the
fund may engage in foreign currency, options and futures transactions, purchase
or sell securities on a when-issued or forward commitment basis, and enter into
repurchase agreements. Use of these practices may increase the volatility of the
fund's net asset value.

RISK CONSIDERATIONS
- --------------------------------------------------------------------------------
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. Stocks may decline significantly in price over short
or extended periods of time. Price changes may affect the market as a whole, or
they may affect only a particular company, industry or sector of the market. See
pages 8-9 for more information on market risk, company risk and sector risk.

INVESTING IN EMERGING MARKETS GENERALLY INVOLVES EXPOSURE TO ECONOMIC
STRUCTURES THAT ARE LESS DIVERSE AND MATURE AND POLITICAL SYSTEMS THAT
ARE LESS STABLE THAN THOSE OF DEVELOPED COUNTRIES.

See pages 6-9 for more information about the risks of foreign investing and
other risks associated with this fund. See "Non-Diversification Risk" on page 9
for an explanation of additional risks which apply because the fund is not
diversified.

PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
RICHARD MUCKART is investment director and head of emerging markets investing
for Edinburgh Fund Managers plc, Scotland, sub-advisor to
the fund.

- --------------------------------------------------------------------------------
SHAREHOLDER EXPENSES
- --------------------------------------------------------------------------------
As a shareholder, you pay expenses both directly and indirectly. Figures below
show expenses for the past year.

SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
---------------------
Maximum front-end sales charge on purchases. . . . . . . 4.00% none
(AS A % OF OFFERING PRICE)
Maximum deferred sales charge. . . . . . . . . . . . . . none(1) 4.00%
(AS A % OF NET ASSET VALUE AT PURCHASE
OR REDEMPTION, WHICHEVER IS LESS)

FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management fee(2). . . . . . . . . . . . . . . . . . . . 1.00% 1.00%
12b-1 fee (after class A share fee limitation)(3,4). . . 0.33% 1.00%
Other expenses (after expense reimbursements)(4) . . . . 0.67% 0.64%
----- -----
Total operating expenses
(after fee limitation and expense reimbursements)(4) . 2.00% 2.64%

(1) Except for investments of $500,000 or more. See "Paying the Contingent
Deferred Sales Charge," page 14.

(2) Includes a sub-advisor fee. See "How the Funds Are Managed," page 15.

(3) Due to the 12b-1 fee, long-term shareholders may indirectly pay more than
the equivalent of the maximum permitted front-end sales charge.

- --------------------------------------------------------------------------------
EXPENSES ON A $1,000 INVESTMENT
- --------------------------------------------------------------------------------
The example below shows the expenses you would pay on a $1,000 investment over
various time periods. It assumes you reinvested all distributions and received a
5% annual return. PLEASE NOTE: THIS IS ONLY AN EXAMPLE AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES COULD
VARY.

CLASS A CLASS B CLASS B
Assuming redemption Assuming no
at end of period redemption
-------------------------------------------
1 year . . . . . . . . . . $59 $67 $27
3 years. . . . . . . . . . $100 $112 $82
5 years. . . . . . . . . . $143 $160 $140
10 years . . . . . . . . . $263 $268(5) $268(5)

(4) If Piper Jaffray and Piper Capital had not voluntarily limited fees and
reimbursed expenses, the class A share 12b-1 fee would have been 0.50%,
other expenses would have been 1.84% for class A shares and 1.39% for class
B shares, and total operating expenses would have been 3.34% for class A
shares and 3.39% for class B shares. Fee limitations and expense
reimbursements reflected in the table may be discontinued at any time
after fiscal 1998 year end.

(5) Assumes class B shares are purchased on January 1 and convert to class A
shares at the beginning of the sixth full calendar year following the year
of purchase.

- -------------------------------------------------------------------------------
2 Prospectus - International Growth Funds

<PAGE>

FUND DESCRIPTIONS

EMERGING MARKETS GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS The following information has been audited by KPMG Peat
Marwick LLP, independent auditors.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Period from Period from
CLASS A SHARES Year ended 7/1/96 to Year ended 11/9/93(1) to
9/30/97 9/30/96 6/30/96(2) 6/30/95 6/30/94
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period . . . . . . . . . . . . . . $ 8.85 $8.84 $7.20 $9.14 $10.00
------ ----- ----- ----- ------
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . 0.02 -- 0.01 -- 0.01
Net realized and unrealized gains (losses) on investments . . 2.10 0.01 1.63 (1.94) (0.87)
------ ----- ----- ----- ------
Total from operations . . . . . . . . . . . . . . . . . . . . 2.12 0.01 1.64 (1.94) (0.86)
------ ----- ----- ----- ------
Distributions to shareholders:
From net investment income . . . . . . . . . . . . . . . . . . (0.01) -- -- -- --
------ ----- ----- ----- ------
Net asset value, end of period . . . . . . . . . . . . . . . . . $10.96 $8.85 $8.84 $7.20 $9.14
------ ----- ----- ----- ------
------ ----- ----- ----- ------

SELECTED INFORMATION

Total return(3)[BAR GRAPH] . . . . . . . . . . . . . . . . . . . 23.91% 0.11% 22.78% (21.23%) (8.60%)

Net assets, end of period (in millions). . . . . . . . . . . . . $17 14 14 23 28
Ratio of expenses to average daily net assets. . . . . . . . . . 2.00% 2.00%(4) 2.00% 2.00% 2.00%(4)
Ratio of net investment income (loss) to average
daily net assets . . . . . . . . . . . . . . . . . . . . . . . 0.17% 0.26%(4) 0.15% (0.03%) 0.14%(4)
Average commission rate paid on portfolio transactions(5). . . . $0.0007 $0.0009 -- -- --
Portfolio turnover rate (excluding short-term securities). . . . 105% 0% 140% 161% 78%
Ratios before waivers by the advisor and distributor:
Of expenses to average daily net assets. . . . . . . . . . . . 3.34% 4.09%(4) 3.54% 3.47% 3.10%(4)
Of net investment loss to average daily net assets . . . . . . (1.17%) (1.83%)(4) (1.39%) (1.50%) (0.96%)(4)

- ------------------------------------------------------------------------------------------------------------------------------------

CLASS B SHARES Period from
2/18/97(6) to
9/30/97
------------
PER SHARE DATA
Net asset value, beginning of period . . . . . . . . . . . . . . $10.13
------
Operations:
Net realized and unrealized gains on investments. . . . . . . . 0.73
------
Net asset value, end of period . . . . . . . . . . . . . . . . . $10.86
------
------
SELECTED INFORMATION
Total return(3). . . . . . . . . . . . . . . . . . . . . . . . . 7.21%
Net assets, end of period (in thousands) . . . . . . . . . . . . $310
Ratio of expenses to average daily net assets. . . . . . . . . . 2.64%(4)
Ratio of net investment income to average
daily net assets . . . . . . . . . . . . . . . . . . . . . . . 0.03%(4)
Average commission rate paid on portfolio transactions(5). . . . $0.0007
Portfolio turnover rate (excluding short-term securities). . . . 105%
Ratios before waivers by the advisor:
Of expenses to average daily net assets . . . . . . . . . . . 3.39%(4)
Of net investment loss to average daily net assets . . . . . . (0.72%)(4)
</TABLE>

(1) Commencement of operations of Hercules Latin American Value Fund.

(2) The fund commenced operations and acquired the net assets of Hercules Latin
American Value Fund on 6/21/96 via a tax-free reorganization. Emerging
Markets Growth Fund had no assets or liabilities prior to the acquisition.
Consequently, the information presented for Emerging Markets Growth Fund
prior to 6/21/96 represents the financial history of the Hercules fund. As
a result of the reorganization, the fund's sub-advisor changed from Bankers
Trust Company to Edinburgh Fund Managers plc. On 7/18/95, shareholders
approved a change in the fund's investment manager from Hercules
International Management LLC to the advisor.

(3) Total return assumes reinvestment of distributions and does not reflect a
sales charge.

(4) Annualized.

(5) Disclosed in accordance with guidelines adopted in 1996. The comparability
of this information may be affected by the fact that commission rates per
share vary significantly among foreign countries.

(6) Commencement of offering of class B shares.

- --------------------------------------------------------------------------------
3 Prospectus - International Growth Funds

<PAGE>

FUND DESCRIPTIONS

PACIFIC-EUROPEAN GROWTH FUND
- --------------------------------------------------------------------------------
PACIFIC-EUROPEAN GROWTH FUND PURSUES ITS OBJECTIVE OF LONG-TERM CAPITAL
APPRECIATION BY INVESTING PRIMARILY IN COMMON STOCK OF COMPANIES LOCATED IN THE
PACIFIC BASIN OR IN EASTERN OR WESTERN EUROPE.

INVESTMENT POLICIES
- --------------------------------------------------------------------------------

Under normal market conditions, Pacific-European Growth Fund invests at least
65% of its total assets in common stock of companies located in at least three
countries of the Pacific Basin or Europe. Common stock includes foreign equity
securities which are substantially similar to common stock in the U.S. It does
not include convertible debt securities or foreign equity securities which are
substantially similar to preferred stock in the U.S. The fund's assets will be
allocated between the Pacific Basin and Europe based on management's views of
the opportunities for long-term capital appreciation in those regions.

When selecting securities within a country, management emphasizes companies
which appear undervalued in the marketplace in relation to such factors as their
assets, earnings and growth potential. Management also seeks companies that are
positioned to take advantage of specific economic and political factors which
are likely to result in growth for their industries.

Up to 25% of the fund's total assets may be invested in other areas of the world
as opportunities for long-term capital appreciation become available. The fund
does not invest in stocks of U.S. companies.

In addition to investing directly in common stock, the fund may invest in
American, European and global depository receipts, and in shares of investment
companies or trusts which invest principally in securities in which the fund is
authorized to invest. The fund may also invest in convertible debt securities.
Up to 10% of the fund's assets may be invested in rights or warrants to purchase
common stock.

RISK CONSIDERATIONS
- --------------------------------------------------------------------------------
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. Stocks may decline significantly in price over short
or extended periods of time. Price changes may affect the market as a whole, or
they may affect only a particular issuer, industry or sector of the market. See
pages 8-9 for more information on market risk, company risk and sector risk.

International investing involves risks not typically associated with U.S.
investing. These include adverse currency fluctuations, potential political and
economic instability, limited liquidity and volatile prices of non-U.S.
securities, limited availability of information regarding non-U.S. companies,
investment and repatriation restrictions, and foreign taxation. The risks of
foreign investing are higher in emerging markets, a category that includes many
Pacific Basin, Eastern European and other countries in which the fund may
invest. Investing in emerging markets generally involves exposure to economic
structures that are less diverse and mature and political systems that are less
stable than those of developed countries. For more information about the risks
of foreign investing, see pages 8-9.

The investment securities and techniques used by this fund present other risks
as well. See pages 6-9 for more information.

PORTFOLIO MANAGER
- --------------------------------------------------------------------------------

RICHARD MUCKART is investment director and head of emerging markets investing
for Edinburgh Fund Managers plc, Scotland, sub-advisor to
the fund.

FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management fee(2). . . . . . . . . . . . . . . . . . . . 0.75% 0.75%
12b-1 fee (after class A share fee limitation)(3,4). . . 0.33% 1.00%
Other expenses . . . . . . . . . . . . . . . . . . . . . 0.64% 0.69%
----- -----
Total operating expenses (after fee limitation)(4) . . . 1.72% 2.44%

EXPENSES ON A $1,000 INVESTMENT
- --------------------------------------------------------------------------------
The example below shows the expenses you would pay on a $1,000 investment over
various time periods. It assumes you reinvested all distributions and received a
5% annual return. PLEASE NOTE: THIS IS ONLY AN EXAMPLE AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES COULD
VARY.

CLASS A CLASS B CLASS B
Assuming redemption Assuming no
at end of period redemption
---------------------------------------------

1 year . . . . . . . . . . $57 $65 $25
3 years. . . . . . . . . . $92 $106 $76
5 years. . . . . . . . . . $130 $150 $130
10 years . . . . . . . . . $235 $244(5) $244(5)

(1) Except for investments of $500,000 or more. See "Paying the Contingent
Deferred Sales Charge," page 14.

(2) Includes a sub-advisor fee. See "How the Funds Are Managed," page 15.

(3) Due to the 12b-1 fee, long-term shareholders may indirectly pay more than
the equivalent of the maximum permitted front-end sales charge.

(4) If Piper Jaffray had not voluntarily limited fees, the class A share 12b-1
fee would have been 0.50% and total operating expenses for class A shares
would have been 1.89%. Voluntary 12b-1 fee limitations may be discontinued
at any time after fiscal 1998 year end.

(5) Assumes class B shares are purchased on January 1 and convert to class A
shares at the beginning of the sixth full calendar year following the year
of purchase.

- --------------------------------------------------------------------------------
4 Prospectus - International Growth Funds

<PAGE>

PACIFIC-EUROPEAN GROWTH FUND (continued)
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS The following information has been audited by KPMG Peat
Marwick LLP, independent auditors.
- --------------------------------------------------------------------------------

Period from Period from
CLASS A SHARES Year ended 3/1/96 to Year ended 4/27/90(1) to
9/30/97 9/30/96(3) 2/29/96 2/28/95 2/28/94 2/28/93(2) 2/29/92 2/28/91
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period . . . . . . . $12.94 $13.86 $12.73 $15.44 $10.81 $10.53 $10.18 $10.97
------ ------ ------ ------ ------ ------ ------ ------
Operations:
Net investment income (loss). . . . . . . . . (0.04) 0.07 0.05 (0.03) (0.03) -- 0.06 0.20
Net realized and unrealized gains (losses)
on investments. . . . . . . . . . . . . . . 0.95 (0.28) 2.03 (1.63) 4.72 0.28 0.37 (0.79)
------ ------ ------ ------ ------ ------ ------ ------
Total from operations . . . . . . . . . . . . 0.91 (0.21) 2.08 (1.66) 4.69 0.28 0.43 (0.59)
------ ------ ------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income. . . . . . . . . . (0.03) -- (0.05) -- -- -- (0.06) (0.20)
From net realized gains on investments. . . . (0.32) (0.71) (0.90) (1.05) (0.06) -- -- --
Tax return of capital . . . . . . . . . . . . -- -- -- -- -- -- (0.02) --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders:. . . . . (0.35) (0.71) (0.95) (1.05) (0.06) -- (0.08) (0.20)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period . . . . . . . . . . $13.50 $12.94 $13.86 $12.73 $15.44 $10.81 $10.53 $10.18
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------

SELECTED INFORMATION

Total return(4) [BAR GRAPH]. . . . . . . . . . . . 7.25% (1.66%) 16.70% (11.09%) 43.45% 2.66% 4.44% (5.03%)

Net assets, end of period (in millions). . . . . . $79 $172 $163 $154 $166 $60 $36 $34
Ratio of expenses to average daily net assets. . . 1.72% 1.64%(5) 1.55% 1.76% 1.81% 2.25% 1.92% 1.77%(5)
Ratio of net investment income (loss) to
average daily net assets. . . . . . . . . . . . (0.28%) 0.29%(5) 0.36% (0.19%) (0.29%) 0.03% 0.60% 2.36%(5)
Average commission rate paid on portfolio
transactions(6) . . . . . . . . . . . . . . . . $0.0212 $0.0173 -- -- -- -- -- --
Portfolio turnover rate (excluding
short-term securities) . . . . . . . . . . . . . 32% 49% 65% 57% 52% 59% 69% 10%
Ratios before waivers by the advisor and distributor:
Of expenses to average daily net assets . . . 1.89% 1.83%(5) 1.73% 1.98% 2.01% 2.59% NA NA
Of net investment income (loss) to average
daily net assets . . . . . . . . . . . . . (0.45%) 0.10%(5) 0.18% (0.41%) (0.49%) (0.31%) NA NA
</TABLE>

CLASS B SHARES Period from
2/18/97(7) to
9/30/97
------------
PER SHARE DATA
Net asset value, beginning of period . . . . . . . $12.55
------
Operations:
Net investment loss . . . . . . . . . . . . . (0.01)
Net realized and unrealized gains
on investments. . . . . . . . . . . . . . . 0.94
------
Total from operations . . . . . . . . . . . . 0.93
Distributions to shareholders:
From net investment income. . . . . . . . . . (0.01)
------
Net asset value, end of period . . . . . . . . . . $13.47
------
------
SELECTED INFORMATION
Total return(4). . . . . . . . . . . . . . . . . . 7.40%
Net assets, end of period (in thousands) . . . . . $55
Ratio of expenses to average daily net assets. . . 2.44%(5)
Ratio of net investment loss to
average daily net assets. . . . . . . . . . . . (0.24%)(5)
Average commission rate paid on portfolio
transactions(6) . . . . . . . . . . . . . . . . $0.0212
Portfolio turnover rate (excluding
short-term securities). . . . . . . . . . . . . 62%

(1) Commencement of operations.

(2) The fund converted from a closed-end investment company to an open-end
investment company on 8/31/92. Information for periods prior to conversion
are based on the fund's operations as a closed-end fund. Fiscal 1993
expenses include 0.32% related to the conversion.

(3) On 6/21/96, the fund acquired the net assets of Hercules European Value
Fund and Hercules Pacific Basin Value Fund via a tax-free reorganization.

(4) Total return assumes reinvestment of distributions and does not reflect a
sales charge.

(5) Annualized.

(6) Disclosed in accordance with guidelines adopted in 1996. The comparability
of this information may be affected by the fact that commission rates per
share vary significantly
among foreign countries.

(7) Commencement of offering of class B shares.

- -------------------------------------------------------------------------------
5 Prospectus - International Growth Funds

<PAGE>

PORTFOLIO OVERVIEW

INVESTMENT SECURITIES AND TECHNIQUES
- -------------------------------------------------------------------------------
THIS TABLE LISTS INVESTMENT SECURITIES AND TECHNIQUES USED BY THE FUNDS AND
NOTES ANY INVESTMENT LIMITATIONS AS A PERCENTAGE OF PORTFOLIO ASSETS. IT ALSO
LISTS THE PRINCIPAL RISK FACTORS RELATED TO THEIR USE, WHICH ARE EXPLAINED IN
GREATER DETAIL ON THE FOLLOWING PAGES.

10 MAXIMUM PERCENT OF TOTAL ASSETS
/10/ MAXIMUM PERCENT OF NET ASSETS
y PERMITTED WITHOUT LIMITATION

<TABLE>
<CAPTION>
EMERGING MARKETS PACIFIC-EUROPEAN
GROWTH FUND GROWTH FUND
INVESTMENT SECURITIES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AMERICAN DEPOSITORY RECEIPTS (ADRs) . . . . . . . . . . . . . . . . . . . . . y y
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. Company, Currency, Foreign Securities Markets, Foreign Tax,
Information, Investment and Repatriation, Market, Political and Economic, Sector

COMMON STOCKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y y
are securities that represent a share of ownership in a corporation. Common
stocks include foreign equity securities which are substantially similar to
common stocks in the U.S. Such foreign equity securities may have voting and
distribution rights which differ from those of common stocks in the U.S.
Company, Foreign Securities Markets, Foreign Tax, Information, Investment and
Repatriation, Market, Political and Economic, Sector

CONVERTIBLE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 35
are corporate debt securities that can be converted, at the option of the owner,
into the common stock of the issuer. Company, Foreign Securities Markets,
Foreign Tax, Information, Interest Rate, Investment and Repatriation, Market,
Political and Economic, Sector

EUROPEAN AND GLOBAL DEPOSITORY RECEIPTS (EDRs, GDRs) . . . . . . . . . . . . . y y
are U.S. dollar denominated securities, designed for use in European and other
non-U.S. securities markets, which represent and may be converted into the
underlying foreign security. Company, Currency, Foreign Securities Markets,
Foreign Tax, Information, Investment and Repatriation, Market, Political and
Economic, Sector

FOREIGN CURRENCY CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . y y
are negotiated agreements to purchase or sell a given amount of foreign currency
at a specified price and future date. They are generally used by a fund to hedge
currency risk. Credit, Currency, Hedging , Leverage, Liquidity, Market

FUTURES CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y(1) y(1)
require the holder to buy or sell securities or foreign currencies at a
specified price on a specified date. Some are contracts to make a cash
settlement on a future date in an amount determined by the value of a financial
index (such as the S&P 500 Index) on the last day of the contract. A fund
generally buys or sells futures as protection against fluctuations in the value
of its portfolio without actually buying or selling securities. Currency,
Hedging, Leverage, Market

OPTIONS ON FUTURES CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . y(1) y(1)
give the holder the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time
prior to the expiration date of the option. A fund generally uses these for
the same purposes as futures contracts. Currency, Hedging, Leverage,
Market

ILLIQUID SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . /15/ /15/
cannot be sold in the ordinary course of business within seven days at
approximately the price at which they are valued. Liquidity
- -------------------------------------------------------------------------------
6 Prospectus - International Growth Funds

<PAGE>

PORTFOLIO OVERVIEW

INVESTMENT SECURITIES AND TECHNIQUES (CONTINUED)
- --------------------------------------------------------------------------------

OPTIONS ON SECURITIES AND FOREIGN CURRENCIES . . . . . . . . . . . . . . . . . y y
are contracts which give the holder the right, in return for the premium paid,
to buy or sell securities or foreign currencies prior to the expiration of the
option, at the option exercise price. The writer of the option is then obligated
to either deliver or purchase the securities or currency. Company, Credit,
Currency, Hedging, Market, Leverage, Liquidity, Sector

RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10(2) 10(2)
are short-term options to buy stock at a fixed price issued to existing
shareholders. Company, Foreign Securities Markets, Foreign Tax, Information,
Investment and Repatriation, Market, Political and Economic, Sector

SHORT-TERM MONEY MARKET SECURITIES . . . . . . . . . . . . . . . . . . . . . . 35(3) 35(3)
include short-term securities issued by the U.S. or a foreign government, their
agencies or instrumentalities, time deposits, bank certificates of deposit,
bankers' acceptances, high-grade commercial paper and other money market
instruments. Credit, Interest Rate

WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10(2) 10(2)
are long-term options to buy stock at a fixed price, sometimes attached to the
sale of a new stock or bond issue to make the issue more attractive. Company,
Foreign Securities Markets, Foreign Tax, Information, Investment and
Repatriation, Market, Political and Economic, Sector

INVESTMENT TECHNIQUES
- --------------------------------------------------------------------------------

BORROWING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10
is permitted for temporary or emergency purposes only. Interest paid on borrowed
funds reduces earnings. Each fund's policy on borrowing cannot be changed
without shareholder approval. Leverage

CURRENCY TRADING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y y
The direct trading or holding of foreign currencies as an asset. Currency

REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . y y
The fund purchases securities on the condition that the seller will buy them
back at a set time and price, plus interest. Each fund may enter into repurchase
agreements for securities issued or guaranteed as to payment of principal and
interest by the U.S. government or its agencies or instrumentalities. Credit,
Interest Rate

WHEN ISSUED AND FORWARD COMMITMENTS . . . . . . . . . . . . . . . . . . . . . y y
The purchase or sale of a security at a future date for a predetermined price.
Securities may decrease in value prior to their delivery. Company, Leverage,
Market, Sector
</TABLE>

MANY OF THE SECURITIES IDENTIFIED ABOVE ARE CONSIDERED DERIVATIVE SECURITIES. A
DERIVATIVE IS A FINANCIAL INSTRUMENT WHOSE VALUE IS BASED ON ANOTHER SECURITY,
INDEX, REFERENCE RATE (FOR EXAMPLE, INTEREST OR CURRENCY EXCHANGE RATE) OR OTHER
ASSET. THESE SECURITIES HAVE VARYING TYPES AND DEGREES OF RISK, AS DESCRIBED
ABOVE.

(1) A fund's use of futures contracts and options on futures contracts
will be limited by regulations of the Commodity Futures Trading
Commission.

(2) A fund may invest up to 10% of its total assets, in the aggregate, in
rights or warrants to purchase common stocks.

(3) A fund may invest without limitation in these securities for temporary
defensive purposes. Time deposits are considered illiquid and subject
to each fund's limitation on investing in illiquid securities.

- --------------------------------------------------------------------------------
7 Prospectus - International Growth Funds
<PAGE>

PORTFOLIO OVERVIEW

RISK FACTORS
- -------------------------------------------------------------------------------
A SUMMARY OF THE PRINCIPAL RISKS WHICH APPLY TO EACH FUND IS PROVIDED IN "FUND
DESCRIPTIONS." MORE DETAIL REGARDING THESE AND OTHER RISKS ASSOCIATED WITH
INVESTMENT SECURITIES AND TECHNIQUES USED BY PIPER INTERNATIONAL GROWTH FUNDS IS
PROVIDED BELOW.

COMPANY RISK

Individual stocks can perform differently than the overall market. This may be a
result of specific factors such as changes in corporate profitability due to the
success or failure of specific products or management strategies, or it may be
due to changes in investor perceptions regarding a company.

CREDIT RISK

The issuer of a security or the other party to a contract, such as a repurchase
agreement, could default on its financial obligation causing a loss in a fund's
portfolio.

CURRENCY RISK

The value of a fund's securities in U.S. dollars will vary with increases and
decreases in the exchange rate. 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 securities denominated in that currency. That will, in turn, cause a decline
in the fund's net asset value, net investment income, and capital gains, if any.
The exchange rate between the U.S. dollar and other currencies is determined by
many factors, including the supply and demand for particular currencies, central
bank efforts to support currencies, the movement of interest rates, the price of
oil, the pace of economic activity in industrial countries, and other economic
and financial conditions affecting the world economy.

FOREIGN SECURITIES MARKET RISK

Securities of many non-U.S. companies may be less liquid and their prices more
volatile than securities of comparable U.S. companies. Securities of companies
traded in many countries outside the U.S., particularly those of emerging
securities markets, may be subject to further risks due to the inexperience of
local brokers and financial institutions, the possibility of permanent or
temporary termination of trading, and greater spreads between bid and asked
prices for securities. In addition, non-U.S. stock exchanges and brokers are
subject to less governmental regulation, and commissions may be higher than in
the U.S. Also, there may be delays in the settlement of non-U.S. stock exchange
transactions.

FOREIGN TAX RISK

Each fund's income from foreign issuers may be subject to non-U.S. withholding
taxes. In some countries, the funds also may be subject to taxes on trading
profits and, on certain securities transactions, transfer or stamp duties tax.
To the extent foreign income taxes are paid by a fund, U.S. shareholders may be
entitled to a credit or deduction for U.S. tax purposes. See the statement of
additional information for details.

HEDGING RISK

Successful use of a hedging instrument depends on the advisor's or
sub-advisor's ability to correctly forecast the direction of market
movements. In the case of an incorrect market forecast, the use of a hedging
instrument will reduce or eliminate gains. In addition, changes in the price
of a hedging instrument may not correlate perfectly with changes in the
market value of the securities subject to that hedge. As a result, even a
correct market forecast could result in an unsuccessful hedging transaction.

INFORMATION RISK

Non-U.S. companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory requirements comparable to
those which apply to U.S. companies. As a result, less information may be
available concerning non-U.S. issuers or securities held by a fund. Accounting
and financial reporting standards in emerging markets may be especially lacking.

INTEREST RATE RISK

Generally, rising interest rates cause a decline in market prices of existing
debt securities, because investors may purchase new debt securities at a higher
rate of interest. Falling interest rates generally cause market prices of
existing debt securities to rise.

INVESTMENT AND REPATRIATION RESTRICTION RISK

Some countries, particularly emerging markets, restrict to varying degrees
foreign investments in their securities markets. 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.

LEVERAGE RISK

Leverage is a speculative technique that involves the use of a relatively small
amount of money to produce a potentially large gain or loss. Securities or
practices (such as borrowing) that can multiply small index or market movements
into large changes in value involve leverage risk.

- --------------------------------------------------------------------------------
8 Prospectus - International Growth Funds

<PAGE>

PORTFOLIO OVERVIEW

RISK FACTORS (CONTINUED)
- --------------------------------------------------------------------------------

LIQUIDITY RISK

A fund may not be able to sell an illiquid security at the desired time and
price. It may have to accept a lower price or sell other securities instead at a
time when the sale of those securities might not be advantageous. The sale of
illiquid securities often requires more time and results in higher selling
expenses than the sale of liquid securities.

Each fund may invest without limitation in certain types of securities which
have historically been considered illiquid, but only if they are determined to
be liquid under procedures adopted by the board of directors. These include
unregistered securities which can be resold, without registration, to qualified
institutional buyers (Rule 144A securities). Investing in Rule 144A securities
could have the effect of increasing the level of fund illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.

MARKET RISK

All stocks are subject to price movements due to changes in general economic
conditions, changes in the level of prevailing interest rates, changes in
investor perceptions of the market, or the outlook for overall corporate
profitability.

NON-DIVERSIFICATION RISK

Because the Emerging Markets Growth Fund is not diversified, it may invest a
relatively high percentage of its assets in the securities of a limited number
of issuers. This involves an increased risk of loss to the fund if the fair
market values of such securities decline.

POLITICAL AND ECONOMIC RISK

Investing in securities of non-U.S. companies exposes the funds to additional
risks. Nationalization, expropriation or special taxation, currency blockage,
political changes, government regulation, social instability or diplomatic
developments could adversely affect the economy of a country or a fund's
investment in that country.

SECTOR RISK

The stocks of companies within specific industries or sectors of the economy can
periodically perform differently than the overall stock market. This can be due
to changes in such things as the regulatory or competitive environment or to
changes in investor perceptions of a particular industry or sector. Large
concentrations in specific industries will increase sector risk. No fund will
invest 25% or more of its total assets in any one industry.

- --------------------------------------------------------------------------------
9 Prospectus - International Growth Funds

<PAGE>

MANAGING YOUR INVESTMENT

BUYING SHARES
- --------------------------------------------------------------------------------
YOU MAY BECOME A SHAREHOLDER IN PIPER FUNDS WITH AN INITIAL INVESTMENT OF $250
OR MORE. ADD TO YOUR EXISTING INVESTMENT WITH ANY AMOUNT, AT ANY TIME. SIMPLY
CALL YOUR PIPER JAFFRAY INVESTMENT EXECUTIVE OR ANOTHER AUTHORIZED BROKERAGE
FIRM.

CHOOSING A SHARE CLASS
- --------------------------------------------------------------------------------
You may purchase class A shares or class B shares of Piper International Growth
Funds. Each class has its own cost structure, allowing you to choose the one
that best meets your requirements. The amount of your purchase and the length of
time you expect to hold your shares will be factors in determining which class
of shares is best for you.

CLASS A SHARES

If you are making an investment that qualifies for a reduced sales charge, class
A shares may be best for you. Class A shares feature:

- - A front-end sales charge, as described below.

- - Lower annual expenses than class B shares.
(See "Fund Descriptions.")

CLASS B SHARES

If you want to avoid a front-end sales charge because you want all your money to
go to work immediately, you may prefer class B shares. Class B shares feature:

- - No front-end sales charge.

- - Higher annual expenses than class A shares.

- - A contingent deferred sales charge if you redeem your shares within five
years after the calendar year of purchase.

- - Automatic conversion to class A shares at the beginning of the sixth year
following the calendar year of purchase, thereby reducing future annual
expenses.

CLASS Y (INSTITUTIONAL) SHARES

Through a separate prospectus, Pacific-European Growth Fund also offers class Y
shares, available to investors making an initial investment of $1 million or
more. Class Y shares feature:

- - No sales charges.

- - Lower annual expenses than class A or B.

For more information, call your broker or Mutual Fund Services
at 800 866-7778.

NOTE:

If your investment qualifies for a reduced sales charge as
described below, class A shares will normally be the better choice. For that
reason:

- - Orders for class B shares for $250,000 or more will be treated as orders
for class A shares.

- - Orders for class B shares by an investor eligible to purchase class A
shares without a front-end sales charge will be treated as orders for class
A shares.

- - For Pacific-European Growth Fund, orders for either class A or class B
shares for $1 million or more will be treated as orders for class Y shares.

CALCULATING YOUR PURCHASE PRICE
- --------------------------------------------------------------------------------
Your purchase price will be based on the next net asset value of your shares
calculated after your broker receives your purchase order. The net asset value
of each share is equal to the market value of the fund's investments and other
assets, less any liabilities, divided by the number of fund shares.

CLASS A SHARES

Your purchase price is typically the net asset value of your shares, plus a
front-end sales charge. Sales charges vary depending on the amount of your
purchase. Piper Jaffray receives the sales charge you pay and, if you purchased
shares through another brokerage firm, reallows a portion of the sales charge to
that firm.

Sales Charge Maximum
Paid by Investors Reallowance
-------------------------------------------------------
(as a % of (as a % of (as a % of
Purchase amount purchase price) net asset value) purchase price)
- ------------------------------------------------------------------------------
Up to $100,000 . . . . . . .4.00%. . . . . . . .4.17%. . . . . . . .3.75%
$100,000-249,999 . . . . . .3.25%. . . . . . . .3.36%. . . . . . . .3.00%
$250,000-499,999 . . . . . .2.50%. . . . . . . .2.56%. . . . . . . .2.25%
$500,000 and more. . . . . None*. . . . . . . None* . . . . . . .0.00%*

* A contingent deferred sales charge will be assessed if you redeem within 24
months. See "Selling Shares," page 14. Although you pay no front-end sales
charge, Piper Jaffray and other brokerage firms receive fees for these sales of
up to 1%.

CLASS B SHARES

Class B shares are sold at net asset value with no initial sales charge.
However, if you redeem your shares during the calendar year in which they are
purchased, or in any of the next five calendar years, you will pay a contingent
deferred sales charge. See "Selling Shares," page 14.

- --------------------------------------------------------------------------------
10 Prospectus - International Growth Funds

<PAGE>

MANAGING YOUR INVESTMENT

BUYING SHARES (CONTINUED)
- --------------------------------------------------------------------------------

REDUCING THE FRONT-END SALES CHARGE
- --------------------------------------------------------------------------------
You may reduce, or even eliminate, the front-end sales charge on class A shares
through the following purchase plans. For details, please consult your broker or
the statement of additional information.

ACCUMULATION PRIVILEGE

Prior purchases of class A shares of any Piper fund (except a money market fund)
will be factored into your sales charge calculation. For example, let's say
you're making a $10,000 investment. If the current value or the original cost of
all other Piper fund class A shares that you hold is $90,000 or greater, your
current sales charge is reduced.

COMBINED PURCHASE PLAN

The accumulation privilege described above also applies to prior purchases of
class A Piper fund shares in certain other accounts, such as your spouse's or
child's account or your IRA. Qualified groups that invest as a unit may also
combine purchases of class A shares to reduce sales charges.

LETTER OF INTENT

If you plan to invest $100,000 or more over a 13-month period in class A shares
of any Piper fund, you may reduce your sales charge by signing a non-binding
letter of intent. (If you do not fulfill the letter of intent, you must pay the
applicable sales charge.)

SPECIAL PURCHASE PLANS

Class A shares may be purchased without a sales charge by:

- - Investors in 401(k) or certain other qualified plans that offer Piper
Funds.

- - Investors purchasing shares through Piper Jaffray's Advantage program or
other qualified wrap-fee accounts.

- - Investors using the proceeds from the sale of any mutual fund not in the
Piper Funds family, excluding money market funds. (This privilege is
available for 30 days after the sale.)

- - Piper Capital clients purchasing shares for their advisory accounts.

- - Employees, directors, or retirees of Piper Jaffray Companies or any of its
subsidiaries, as well as certain relatives of these persons. Trust,
pension, profit-sharing or other benefit plans for these individuals also
may qualify.

- - Employees of brokerage firms that have sales agreements with Piper Jaffray,
their spouses and minor children.

- - Trust companies or bank trust departments investing for discretionary
accounts.

- - Piper Jaffray Companies and its subsidiaries.

INVESTING AUTOMATICALLY
- --------------------------------------------------------------------------------

AUTOMATIC MONTHLY INVESTMENT PROGRAMS

To purchase class A or class B shares as part of a savings discipline, you may
automatically transfer $100 or more each month to any Piper fund from your bank,
savings and loan, or other financial institution. Or transfer $25 or more per
month from any of the Piper money market funds.

CROSS-REINVESTMENT OF DISTRIBUTIONS

To help you diversify your portfolio, you may automatically invest your income
and capital gain distributions in the same class of shares of another Piper fund
(excluding money market funds) at net asset value, provided you hold the
required minimum balance in that fund.

- --------------------------------------------------------------------------------
11 Prospectus - International Growth Funds
<PAGE>

MANAGING YOUR INVESTMENT

HOLDING SHARES
- --------------------------------------------------------------------------------

RECEIVING DIVIDENDS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
Dividends from a fund's net investment income, if any, will be paid annually.
Any capital gains are distributed at least once each year.

On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend." You will pay the full price for the
shares and then receive a portion of that price back as a taxable distribution.

Dividend and capital gain distributions will be reinvested in additional shares
of the fund, invested in shares of a different Piper fund, or distributed in
cash. Any reinvestments must be in the same class of shares. Please tell your
broker which distribution method you prefer. Otherwise distributions
automatically will be reinvested in additional shares of the same fund.

CLASS B SHAREHOLDERS GENERALLY WILL RECEIVE LOWER DIVIDENDS FROM NET
INVESTMENT INCOME THAN CLASS A SHAREHOLDERS BECAUSE OF THE HIGHER
EXPENSES APPLICABLE TO CLASS B SHARES.

TAXING OF DIVIDENDS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
Each fund has qualified, and intends to continue qualifying, for taxation as a
regulated investment company. As long as a fund continues to qualify, it will
not be subject to federal income tax to the extent its income is distributed to
shareholders.

Dividends and distributions you receive from a fund are generally taxable
whether you reinvest them or take them in cash. Distributions of long-term
capital gains are taxable as long-term gains, regardless of how long you have
held your shares (except that, under recent amendments to the tax code, the
funds will be required to designate certain capital gain distributions as mid-
term capital gain distributions, to be treated by individual shareholders as
mid-term capital gains). Dividends from a fund's net investment income and
short-term capital gain distributions are taxable as ordinary income.

The sale or exchange of fund shares will be a taxable event for you and may
result in a capital gain or loss. Under recent amendments to the tax code, the
gain or loss will be considered long-term if you have held your shares for more
than 18 months and mid-term if you who have held your shares more than one year
but not more than 18 months. The gain or loss on shares held for one year or
less is considered short-term and is taxed at the same rates as ordinary income.

If a fund has more than 50% of its total assets invested in the stock or
securities of foreign corporations at the end of its taxable year, the fund may
make an election that will permit you either to claim a foreign tax credit with
respect to foreign taxes paid by the fund or to deduct those amounts as an
itemized deduction on your tax return. If a fund makes this election, you will
be notified and provided with sufficient information to calculate your foreign
tax credit.

EXCHANGING SHARES
- --------------------------------------------------------------------------------

If your investment goals or your financial needs change, you may move from one
Piper fund to another, if the shares of that fund are legally available in your
state. There is no fee to exchange shares.

You may exchange your class A shares for class A shares and your class B shares
for class B shares. However, please note that not all Piper funds offer class B
shares.

Exchanges are generally made based on the net asset value per share of each fund
at the time of the exchange. However, if your new fund has a higher sales charge
- - for example if you move from an income fund to a growth fund - you must pay
the difference.

You may also move your class A international growth fund assets into a Piper
money market fund. If you later exchange those money market fund shares for
class A shares of another Piper fund, that exchange will be treated as an
exchange from the class A shares of the international growth fund for purposes
of determining your sales charge. Class B shares may be exchanged for class B
shares of Piper Money Market Fund. However, please note that class B Money
Market Fund shares have higher expenses than are typical for money market funds.

Before exchanging into any fund, be sure to read its prospectus carefully. A
fund may change or cancel its exchange policies at any time, upon 60 days'
notice to shareholders.

CONDUCTING TRANSACTIONS BY PHONE
- --------------------------------------------------------------------------------
You may buy or sell shares over the phone by calling your broker. If you hold
your shares with Investors Fiduciary Trust Company (IFTC) or with a brokerage
firm other than Piper Jaffray, you may also buy or sell shares by calling IFTC
at 800 874-6205, provided you have authorized telephone privileges in your
Account Application and Services form.

For your protection, IFTC will attempt to verify your identity by asking for
your account number, social security number or other form of personal
identification. If reasonable care is taken to identify you as the caller,
neither IFTC nor the funds will be liable for losses to your account resulting
from an unauthorized telephone transaction. Payments which result from telephone
transactions will be made only to the address of record or the bank account
designated on your Account Application and Services form.

- --------------------------------------------------------------------------------
12 Prospectus - International Growth Funds
<PAGE>

MANAGING YOUR INVESTMENT

HOLDING SHARES (CONTINUED)
- --------------------------------------------------------------------------------

STAYING INFORMED
- --------------------------------------------------------------------------------
Piper Capital offers a variety of resources to help keep you informed. If you
would like more information, please contact your broker or call Mutual Fund
Services at 800 866-7778. As a shareholder, you automatically receive the
following:

SHAREHOLDER REPORTS

Shareholder reports are mailed twice a year, in November and May. They include
financial statements and performance information on the funds, a message from
your portfolio manager, and, on an annual basis, the auditors' report.

To reduce shareholder costs and help eliminate duplication, only one report is
sent to each address that lists one or more shareholders with the same last
name. If you would like additional reports mailed to your address, please
contact Mutual Fund Services.

STATEMENTS AND CONFIRMATIONS

Statements summarizing activity in your account are mailed monthly (quarterly if
your account has no activity). Confirms are mailed following each purchase or
sale of fund shares.

- --------------------------------------------------------------------------------
13 Prospectus - International Growth Funds

<PAGE>

MANAGING YOUR INVESTMENT

SELLING SHARES
- --------------------------------------------------------------------------------

YOU MAY SELL ANY OR ALL OF YOUR SHARES FOR THEIR NET ASSET VALUE (LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGES) ON ANY DAY WHEN THE NEW YORK STOCK
EXCHANGE IS OPEN. SIMPLY CALL YOUR BROKER. YOUR REQUEST WILL BE EXECUTED AT THE
NEXT NET ASSET VALUE CALCULATED AFTER YOUR BROKER RECEIVES YOUR REQUEST.

RECEIVING THE PROCEEDS
- --------------------------------------------------------------------------------
If you are a Piper Jaffray client with a signed Piper Automated Transfer (PAT)
agreement, proceeds from a sale of shares usually will be transferred to your
account the next business day. Otherwise, proceeds will be sent to you or your
broker, generally within three business days. If you sell shares that were
recently purchased by check, payment may be delayed until the check has cleared
(normally up to 15 days from the purchase date).

As noted above, you may sell shares by calling your broker. If you work with a
broker from a firm other than Piper Jaffray, you also may sell your shares by
submitting a written request to the funds' transfer agent, IFTC. Call IFTC at
800 874-6205 for instructions.

Remember to keep at least $200 in your account. If your account falls below $200
due to a sale of shares or an exchange request, your account may be liquidated
following 30 days written notice.

PAYING THE CONTINGENT DEFERRED SALES CHARGE
- --------------------------------------------------------------------------------

CLASS A SHARES

If you invest $500,000 or more in class A shares and, as a result, pay no front-
end sales charge, you may incur a contingent deferred sales charge (CDSC) if you
sell your shares within 24 months. The CDSC is equal to 1% of the value of the
shares at the time of purchase or at the time of sale, whichever is less. This
charge does not apply to shares you acquired by reinvesting your dividend or
capital gain distributions.

To help you lower your costs, class A shares that are not subject to a CDSC will
be sold first. Other shares will then be sold in an order that minimizes your
CDSC.

LETTER OF INTENT

If you sell your class A shares within 24 months of fulfilling a letter of
intent, you will be charged a CDSC.

EXCHANGES

No CDSC is charged if you exchange class A shares that were originally purchased
without a sales charge, unless you sell your new class A shares within 24 months
of your original purchase.

CLASS B SHARES

If you sell your class B shares during the calendar year in which they were
purchased or in any of the following five calendar years, you will pay a CDSC
based on the value of your shares at the time of purchase or at the time of
sale, whichever is less. The charge does not apply to shares you acquired by
reinvesting your dividend or capital gain distributions.

If sold during this period the CDSC would be
(as a % of net asset value)
- --------------------------------------------------------------------------------
Calendar year of purchase. . . . . . . . . . . . . . . . . . . . 4%
First calendar year after purchase . . . . . . . . . . . . . . . 4%
Second calendar year after purchase. . . . . . . . . . . . . . . 3%
Third calendar year after purchase . . . . . . . . . . . . . . . 2%
Fourth calendar year after purchase. . . . . . . . . . . . . . . 2%
Fifth calendar year after purchase . . . . . . . . . . . . . . . 1%

Your CDSC is based on the calendar years in which you purchase and sell shares,
rather than on the number of years you have held shares. For example: If you buy
shares on December 31, 1997, and sell them on January 1, 1999, you will pay a 3%
CDSC, even though you have held the shares for just over one year. Shares will
be sold in an order that minimizes your CDSC.

CONVERSION FEATURE

Your class B shares will automatically convert to class A shares on January 1 of
the sixth calendar year following the year in which you purchased your shares.
The conversion will be based on the net asset values of the two classes.
Whenever any of your class B shares convert to class A shares, a proportionate
number of class B shares purchased by reinvested distributions will also
convert.

CDSC WAIVERS

For class A shares, if you purchased your shares through a Special Purchase
Plan, the CDSC will be waived.

For both class A and class B shares, the CDSC will be waived:

- - Due to death or disability of the shareholder.

- - To allow a lump-sum distribution from a qualified employee benefit plan.

- - To allow systematic withdrawals from a qualified employee benefit plan, if
you are at least 59 1/2 years old.

- - To allow for a tax-free return of an excess contribution to your IRA.

- - If your account balance falls below $200 and your account is liquidated.

TAKING SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
If your account has a value of $5,000 or more, you can make automatic
withdrawals from your account. You may withdraw $100 or more monthly, quarterly,
or semiannually by authorizing the sale of the appropriate number of shares on a
periodic basis. To set up systematic withdrawals, contact your broker.

You should not make systematic withdrawals if you plan to continue investing in
the fund, due to sales charges and tax liabilities.

REINVESTING AFTER A SALE
- --------------------------------------------------------------------------------
If you sell class A shares, you may reinvest in class A shares of that fund or
another Piper fund within 30 days without a sales charge. If you sell class B
shares, or other shares subject to a CDSC, that charge will be credited to your
account and the reinvested shares will continue to be subject to the CDSC.

- --------------------------------------------------------------------------------
14 Prospectus - International Growth Funds

<PAGE>

GENERAL INFORMATION
- --------------------------------------------------------------------------------

HOW THE FUNDS ARE ORGANIZED
- --------------------------------------------------------------------------------
Emerging Markets Growth Fund and Pacific-European Growth Fund are series of
Piper Global Funds Inc., an open-end investment company. Pacific-European Growth
Fund is a diversified fund. Emerging Markets Growth Fund is non-diversified,
which means it may invest its assets in the securities of a limited number of
issuers.

VOTING RIGHTS

Although the funds are not required by law to hold annual meetings, they may
hold shareholder meetings from time to time on important matters. In addition,
shareholders have the right to call a meeting under certain circumstances. When
your fund holds a meeting, you will receive a proxy statement requesting your
vote. You have one vote for each share you own.

RIGHTS OF DIFFERENT CLASSES

The different classes of shares of a fund have the same rights and are identical
in all respects except that:

- - Expenses related to the distribution of each class of shares are borne
solely by that class.

- - To the extent they can reasonably be identified as relating to a particular
class of shares, transfer agent fees will be allocated to that class.

- - Each class has exclusive voting rights with respect to approval of any
12b-1 distribution plan related to that class. However, as long as class B
shares convert into class A shares, class B shareholders will have the
right to vote on any distribution fees imposed on class A shares.

- - Only class B shares carry a conversion feature.

- - Each class has different exchange privileges.

FUND OBJECTIVES

The investment objective of Emerging Markets Growth Fund is fundamental and may
be changed only with shareholder approval. The investment objective of Pacific-
European Growth Fund is not fundamental and may be changed without shareholder
approval. The funds' investment policies and techniques may be changed without
shareholder approval, unless otherwise noted.

HOW THE FUNDS ARE MANAGED
- --------------------------------------------------------------------------------
The funds are governed by a board of directors, which is responsible for
protecting the interests of shareholders. Directors meet periodically throughout
the year to oversee the funds' activities, review their performance and review
the actions of the funds' advisor. Although the board may include individuals
who are affiliated with the advisor, the majority of board members must be
independent. The board has retained the following companies to manage the funds'
operations.

INVESTMENT ADVISOR

Piper Capital Management Incorporated
222 South Ninth Street
Minneapolis, MN 55402-3804

As investment advisor, Piper Capital manages the funds' business and investment
activities, subject to the authority of the board of directors. Each fund pays
Piper Capital a monthly management fee for providing investment advisory
services.

For managing Pacific-European Growth Fund, Piper Capital receives a basic
management fee equal, on an annual basis, to 1% of the fund's average daily net
assets up to $100 million, with the fee scaled downward as assets increase in
size. This fee may be increased or decreased by up to a maximum, on an annual
basis, of 0.25% of the fund's average daily net assets, depending upon the
extent to which the fund's class A shares outperform or underperform the Morgan
Stanley Capital International European, Australian and Far East (EAFE) Index.

For managing Emerging Markets Growth Fund, Piper Capital receives a management
fee equal, on an annual basis, to 1% of the fund's average daily net assets.

Piper Capital also is investment advisor to other Piper open-end funds, to a
number of closed-end investment companies and to various institutions,
corporations and individuals. Piper Capital has approximately $12 billion under
management and is a wholly owned subsidiary of Piper Jaffray Companies Inc., a
full-service investment company.

SUB-ADVISOR

Edinburgh Fund Managers plc
Donaldson House
97 Haymarket Terrace
Edinburgh, Scotland EH12, 5HD

The sub-advisor is responsible for the investment and reinvestment of the funds'
assets and the placement of brokerage transactions. Edinburgh, a public limited
company that was incorporated in 1969, manages approximately $12 billion in
assets.

For each fund, the advisor pays the sub-advisor a fee for providing sub-advisory
services. For Pacific-European Growth Fund, Piper Capital pays Edinburgh a fee
equal to 65% of the basic management fee plus or minus 90% of the performance
adjustment. Under an expense reimbursement agreement, Edinburgh pays Piper
Capital a monthly fee equal to 10% of the basic management fee to reimburse
Piper Capital for expenses it incurs in administering Pacific-European Growth
Fund. For Emerging Markets Growth Fund, the fee is equal, on an annual basis, to
0.50% of the fund's average daily net assets.

- --------------------------------------------------------------------------------
15 Prospectus - International Growth Funds

<PAGE>

GENERAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------

DISTRIBUTOR

Piper Jaffray Inc.
222 South Ninth Street
Minneapolis, MN 55402-3804

Piper Jaffray is the principal distributor of the funds' shares. Other brokerage
firms that have a sales agreement with Piper Jaffray may also sell fund shares.
Piper Jaffray is a wholly owned subsidiary of Piper Jaffray Companies and an
affiliate of Piper Capital.

CUSTODIAN

Bankers Trust Company
130 Liberty Street
New York, NY 10006

The funds' custodian holds each fund's portfolio securities, settles trades,
holds and processes cash, and collects interest and dividends.

ACCOUNTING AGENT

Investors Fiduciary Trust Company
801 Pennsylvania Avenue
Kansas City, MO 64105-1307

As the funds' accounting agent, IFTC collects the data needed to calculate net
asset values, maintains the funds' general ledgers and provides other record-
keeping services.

TRANSFER AND DIVIDEND DISBURSING AGENTS

Investors Fiduciary Trust Company
1004 Baltimore Avenue
Kansas City, MO 64105-1802

Piper Jaffray (address listed above)

Piper Trust Company
222 South Ninth Street
Minneapolis, MN 55402-3804

IFTC provides transfer agent services and pays dividends and other distributions
for the funds. Piper Jaffray and Piper Trust provide these services for
shareholders whose accounts they maintain.

PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
RICHARD MUCKART, investment director and head of emerging markets investing for
Edinburgh Fund Managers, has managed Emerging Markets Growth Fund since June
1996 and Pacific-European Growth Fund since December 1996. He joined the sub-
advisor in March 1996 in connection with its acquisition of Dunedin Fund
Managers Limited, where he had been investment director since 1995. Prior to
that, he had been with Ivory and Sime since 1983, serving most recently as
global investment director. He has 25 years of financial experience.

HOW DEALERS ARE COMPENSATED
- --------------------------------------------------------------------------------
Piper Jaffray and other brokerage firms which sell fund shares receive
compensation in several ways. A portion of this compensation is typically passed
along to your broker.

SALES COMMISSIONS

Piper Jaffray receives the sales charge that you pay when you purchase class
A shares. If you purchased your shares from another brokerage firm, that firm
retains a portion of the sales charge (their "reallowance"). If your purchase
of class A shares was not subject to a front-end sales charge, Piper Jaffray
or the other participating brokerage firm may receive a fee from Piper
Capital of up to 1% of the purchase price. Piper Jaffray also receives any
CDSC imposed when you sell your class A or class B shares. From time to time
Piper Jaffray pays a sales commission of up to 4% of the amount invested to
its Investment Executives and to other brokerage firms which sell class B
shares. Piper Jaffray and/or Piper Capital may pay Investment Executives and
other brokerage firms an additional commission of up to 1% of the amount
invested in connection with sales of class B shares.

12b-1 FEES

Piper Jaffray receives 12b-1 fees from each fund for providing distribution-
related services and for servicing shareholder accounts. Fees are established
under each fund's 12b-1 plan, which is approved by the board, and vary by class.
Class A and class B shares of each fund pay 12b-1 fees quarterly at annual rates
equal to 0.50% and 1%, respectively, of average daily net assets. Piper Jaffray
is currently voluntarily limiting the 12b-1 fees it receives from class A shares
to 0.34% of average daily net assets.

For each fund, Piper Jaffray pays a portion of its 12b-1 fee to brokerage firms
which have sold shares of that fund. Firms receive an annual fee equal to 0.30%
of the fund's average daily net assets attributable to shares sold by the firm's
brokers. Piper Jaffray may also use 12b-1 fees to pay other distribution
expenses and shareholder servicing costs, such as printing and promotional
costs.

PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
When deciding which brokers to use for the funds' portfolio transactions, the
advisor or sub-advisor may consider whether brokers have sold shares of these or
any other Piper funds. The advisor or sub-advisor may place trades through Piper
Jaffray in compliance with Investment Company Act of 1940 rules.

- --------------------------------------------------------------------------------
16 Prospectus - International Growth Funds

<PAGE>

GENERAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------

NET ASSET VALUE
- --------------------------------------------------------------------------------

Net asset value per share is calculated by dividing the total market value of a
fund's investments and other assets, less any liabilities, by the number of fund
shares. The values of securities within a fund's portfolio are determined as
follows:

- - By an independent pricing service, or

- - Through market quotations obtained from one or more dealers who make a
market in the securities or from a widely used quotation system.

- - Occasionally, if prices are not available from the above sources or are
determined to be unreliable, securities will be priced at "fair market
value" according to procedures approved by the board of directors.

Net asset value is calculated as of the close of regular trading on the New York
Stock Exchange (typically 4 p.m. Eastern Time) on each day the exchange is open
for trading. Trading takes place in various foreign markets on days which are
not business days of the funds and on which the funds' net asset values are not
calculated. Therefore, a fund's net asset value might be significantly affected
on days when you have no access to the fund.

REGULATORY PROCEEDINGS
- --------------------------------------------------------------------------------
Piper Capital and Piper Jaffray are subject to an investigation by the
Securities and Exchange Commission which began February 21, 1995, related to
various funds and assets managed by Piper Capital.

- --------------------------------------------------------------------------------
17 Prospectus - International Growth Funds

<PAGE>

Prospectus - International Growth Funds

FOR MORE INFORMATION
- --------------------------------------------------------------------------------

ANNUAL/SEMIANNUAL REPORTS
Shareholder reports include financial statements and performance information on
the funds, a message from your portfolio manager, and, on an annual basis, the
auditors' report.

STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the funds. A current SAI has
been filed with the SEC and is incorporated by reference into this prospectus.

To order free copies, please write or call:

Piper Capital Management
Attn: Mutual Fund Services
222 South Ninth Street
Minneapolis, MN 55402-3804

800 866-7778

No dealer, sales representative or other person has been authorized to give any
information or make any representations other than those contained in this
prospectus or in the SAI. You should not rely upon any such information or
representation as having been authorized by the funds or Piper Jaffray.

- --------------------------------------------------------------------------------
[LOGO] PIPER FUNDS 222 South Ninth Street
Minneapolis, MN 55402-3804

#30100 11/1997 219-97
<PAGE>

- --------------------------------------------------------------------------------
Prospectus - Pacific-European Growth Funds
- --------------------------------------------------------------------------------

NOVEMBER 24, 1997

[LOGO]

PACIFIC-EUROPEAN
GROWTH
FUND

CLASS Y SHARES
- --------------------------------------------------------------------------------

BEFORE YOU INVEST:

PLEASE READ THIS PROSPECTUS CAREFULLY, AND KEEP IT FOR FUTURE REFERENCE. IT
CONTAINS IMPORTANT INFORMATION ABOUT THE FUND, INCLUDING INFORMATION ON
INVESTMENT POLICIES, RISKS AND FEES.

<PAGE>

[LOGO]

CONTENTS
- --------------------------------------------------------------------------------
INVESTING IN PACIFIC-EUROPEAN GROWTH FUND. . . . 1

FUND DESCRIPTION
- --------------------------------------------------------------------------------
PACIFIC-EUROPEAN GROWTH FUND . . . . . . . . . . 2 Investment objective and
policies, risk
considerations,
portfolio manager
information, shareholder
expenses and financial
highlights

PORTFOLIO OVERVIEW
- --------------------------------------------------------------------------------
INVESTMENT SECURITIES AND TECHNIQUES . . . . . . 4 An overview of
RISK FACTORS . . . . . . . . . . . . . . . . . . 6 securities and
investment techniques
that may be used by the
fund and their risks

MANAGING YOUR INVESTMENT
- --------------------------------------------------------------------------------
BUYING SHARES. . . . . . . . . . . . . . . . . . 8 Practical information to
Calculating Your Purchase Price help you manage your
Investing Automatically investment in Piper
Funds
HOLDING SHARES . . . . . . . . . . . . . . . . . 9
Receiving Dividends and Other Distributions
Taxing of Dividends and Other Distributions
Exchanging Shares
Conducting Transactions by Phone
Staying Informed
SELLING SHARES . . . . . . . . . . . . . . . . .10
Receiving the Proceeds
Taking Systematic Withdrawals

- --------------------------------------------------------------------------------
GENERAL INFORMATION. . . . . . . . . . . . . . .11

<PAGE>

INVESTING IN
- --------------------------------------------------------------------------------
PACIFIC-EUROPEAN GROWTH FUND
- --------------------------------------------------------------------------------
PACIFIC-EUROPEAN GROWTH FUND SEEKS TO PROVIDE YOU WITH LONG-TERM GROWTH OF
CAPITAL BY INVESTING IN COMMON STOCKS OF COMPANIES LOCATED BEYOND U.S. BORDERS.
THE FUND IS ADVISED BY PIPER CAPITAL MANAGEMENT INCORPORATED.

BEFORE YOU INVEST:

KNOW YOUR GOALS
- --------------------------------------------------------------------------------
This fund may be appropriate for your investment portfolio if:

- - You want to diversify your portfolio with international investments.

- - You have a long-term investment horizon and are targeting capital
appreciation.

- - You are willing to accept substantial volatility in the value of your
shares.

If you want to avoid fluctuations in the value of your principal -- or if you
have a short-term investment horizon -- you should consider other investment
vehicles. Pacific-European Growth Fund was not designed to meet these goals.

UNDERSTAND THE RISKS
- --------------------------------------------------------------------------------
While mutual funds are a convenient and potentially rewarding way to invest,
they do not always meet their objectives. Please remember: You could lose money
with this investment. Safety of principal is not guaranteed. Risks associated
with this fund are outlined in the following pages.

USE YOUR PROSPECTUS
- --------------------------------------------------------------------------------
Please read this prospectus carefully and keep it on file for future reference.
More detailed information about the fund is contained in its statement of
additional information, which can be obtained from the fund at the address and
phone number on the back cover. Further information is also available from your
broker or by calling Piper Capital at 800 866-7778.

- --------------------------------------------------------------------------------
1 Prospectus - Pacific-European Growth Fund

<PAGE>

FUND DESCRIPTION

INVESTMENT POLICIES
- --------------------------------------------------------------------------------
Under normal market conditions, Pacific-European Growth Fund invests at least
65% of its total assets in common stock of companies located in at least three
countries of the Pacific Basin or Europe. Common stock includes foreign equity
securities which are substantially similar to common stock in the U.S. It does
not include convertible debt securities or foreign equity securities which are
substantially similar to preferred stock in the U.S. The fund's assets will be
allocated between the Pacific Basin and Europe based on management's views of
the opportunities for long-term capital appreciation in those regions.

For temporary defensive purposes, the fund may invest without limitation in
U.S. dollar denominated or foreign currency denominated cash or in short-term
money market securities. To facilitate portfolio management and mitigate
risk, the fund may engage in foreign currency, options and futures
transactions, purchase or sell securities on a when-issued or forward
commitment basis, and enter into repurchase agreements. Use of these
practices may increase the volatility of the fund's net asset value.

RISK CONSIDERATIONS
- --------------------------------------------------------------------------------
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. Stocks may decline significantly in price over short
or extended periods of time. Price changes may affect the market as a whole, or
they may affect only a particular issuer, industry or sector of the market. See
market risk, company risk and sector risk on pages 6-7 for more information.

The investment securities and techniques used by this fund present other risks
as well. See pages 4-7 for more information.

PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
RICHARD MUCKART, investment director and head of emerging markets investing for
Edinburgh Fund Managers, has managed the fund since December 1996. He joined the
sub-advisor in March 1996 in connection with its acquisition of Dunedin Fund
Managers Limited, where he had been investment director since 1995. Prior to
that, he had been with Ivory and Sime since 1983, serving most recently as
global investment director. He has 25 years of financial experience.

SHAREHOLDER TRANSACTION EXPENSES

Maximum front-end sales charge on purchases. . . . . . . . . none
Maximum deferred sales charge. . . . . . . . . . . . . . . . none

FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management fee(1). . . . . . . . . . . . . . . . . . . . . . 0.75%
12b-1 fee. . . . . . . . . . . . . . . . . . . . . . . . . . none
Other expenses . . . . . . . . . . . . . . . . . . . . . . . 0.64%
-----
Total operating expenses . . . . . . . . . . . . . . . . . . 1.39%

- --------------------------------------------------------------------------------
EXPENSES ON A $1,000 INVESTMENT

- --------------------------------------------------------------------------------
The example below shows the expenses you would pay on a $1,000 investment over
various time periods. It assumes you reinvested all distributions and received a
5% annual return. PLEASE NOTE: THIS IS ONLY AN EXAMPLE AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES COULD
VARY.

1 year . . . . . . . . . . . . . . . . . . . $ 14
3 years. . . . . . . . . . . . . . . . . . . $ 44
5 years. . . . . . . . . . . . . . . . . . . $ 76
10 years . . . . . . . . . . . . . . . . . . $167

(1) Includes a sub-advisor fee. See "How the Funds Are Managed," page 15.

- --------------------------------------------------------------------------------
2 Prospectus - Pacific-European Growth Fund

<PAGE>

FUND DESCRIPTION
- --------------------------------------------------------------------------------

PACIFIC-EUROPEAN GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS The following information has been audited by KPMG Peat
Marwick LLP, independent auditors. Because of the limited history of Class Y
share operations, information is also presented for the fund's class A shares.
Class A shares have higher expense than class Y shares.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS Y SHARES Period from
2/18/97(7) to
9/30/97
-------------
PER SHARE DATA
<S> <C>
Net asset value, beginning of period . . $12.55
------
Operations:
Net investment income . . . . . . . . 0.07
Net realized and unrealized
gains on investments. . . . . . . . . 0.94
------
Total from operations. . . . . . . . . 1.01
Distributions to shareholders:
From net investment income . . . . . . (0.01)
------
Net asset value, end of period . . . . . $13.55
------
------

SELECTED INFORMATION
Total return(4). . . . . . . . . . . . . 8.03%
Net assets, end of period (in millions). $ 15
Ratio of expenses to average
daily net assets . . . . . . . . . . . 1.42%(5)
Ratio of net investment income to
average daily net assets. . . . . . . 0.77%(5)
Average commission rate paid on
portfolio transactions(6). . . . . . . $0.0212
Portfolio turnover rate
(excluding short-term securities). . . 62%

- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Period from Period from
CLASS A SHARES Year ended 3/1/96 to Year ended 4/27/90(1) to
9/30/97 9/30/96(3) 2/29/96 2/28/95 2/28/94 2/28/93(2) 2/29/92 2/28/91
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period . . $12.94 $13.86 $12.73 $15.44 $10.81 $10.53 $10.18 $10.97
------ ------ ------ ------ ------ ------ ------ ------
Operations:
Net investment income (loss) . . . . . (0.04) 0.07 0.05 (0.03) (0.03) -- 0.06 0.20
Net realized and unrealized gains
(losses) on investments. . . . . . . . 0.95 (0.28) 2.03 (1.63) 4.72 0.28 0.37 (0.79)
------ ------ ------ ------ ------ ------ ------ ------
Total from operations. . . . . . . . . 0.91 (0.21) 2.08 (1.66) 4.69 0.28 0.43 (0.59)
------ ------ ------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income . . . . . . (0.03) -- (0.05) -- -- -- (0.06) (0.20)
From net realized gains on investments (0.32) (0.71) (0.90) (1.05) (0.06) -- -- --
Tax return of capital. . . . . . . . . -- -- -- -- -- -- (0.02) --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders: . (0.35) (0.71) (0.95) (1.05) (0.06) -- (0.08) (0.20)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period . . . . . $13.50 $12.94 $13.86 $12.73 $15.44 $10.81 $10.53 $10.18
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------

SELECTED INFORMATION

Total return(4). . . . . . . . . . . . . 7.25% (1.66%) 16.70% (11.09%) 43.45% 2.66% 4.44% (5.03%)

Net assets, end of period (in millions). $79 $172 $163 $154 $166 $60 $36 $34
Ratio of expenses to average daily
net assets . . . . . . . . . . . . . . 1.72% 1.64%(5) 1.55% 1.76% 1.81% 2.25% 1.92% 1.77%(5)
Ratio of net investment income (loss) to
average daily net assets. . . . . . . (0.28%) 0.29%(5) 0.36% (0.19%) (0.29%) 0.03% 0.60% 2.36%(5)
Average commission rate paid on
portfolio transactions(6). . . . . . . $0.0212 $0.0173 -- -- -- -- -- --
Portfolio turnover rate
(excluding short-term securities). . . 32% 49% 65% 57% 52% 59% 69% 10%
Ratios before waivers by the
advisor and distributor:
Of expenses to average daily net
assets. . . . . . . . . . . . . . . . 1.89% 1.83%(5) 1.73% 1.98% 2.01% 2.59% na na
Of net investment income (loss)
to average daily net assets . . . . . (0.45%) 0.10%(5) 0.18% (0.41%) (0.49%) (0.31%) na na
</TABLE>

(1) Commencement of operations.

(3) On 6/21/96, the fund acquired the net assets of Hercules European Value
Fund and Hercules Pacific Basin Value Fund via a tax-free reorganization.

(4) Total return assumes reinvestment of distributions and does not reflect a
sales charge.

(5) Annualized.

(7) Commencement of offering of class Y shares.

- --------------------------------------------------------------------------------
3 Prospectus - Pacific-European Growth Fund

<PAGE>

PORTFOLIO OVERVIEW

INVESTMENT SECURITIES AND TECHNIQUES
- --------------------------------------------------------------------------------

THIS TABLE LISTS INVESTMENT SECURITIES AND TECHNIQUES USED BY THE FUND AND NOTES
ANY INVESTMENT LIMITATIONS AS A PERCENTAGE OF PORTFOLIO ASSETS. IT ALSO LISTS
THE PRINCIPAL RISK FACTORS RELATED TO THEIR USE, WHICH ARE EXPLAINED IN GREATER
DETAIL ON THE FOLLOWING PAGES.

10 MAXIMUM PERCENT OF TOTAL ASSETS
/10/ MAXIMUM PERCENT OF NET ASSETS
y PERMITTED WITHOUT LIMITATION

INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

<S> <C>
AMERICAN DEPOSITORY RECEIPTS (ADRS) . . . . . . . . . . . . . . . . . . . . . . . . y
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. Company, Currency, Foreign Securities Markets, Foreign Tax,
Information, Investment and Repatriation, Market, Political and Economic, Sector

COMMON STOCKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y
are securities that represent a share of ownership in a corporation. Common
stocks include foreign equity securities which are substantially similar to
common stocks in the U.S. Such foreign equity securities may have voting and
distribution rights which differ from those of common stocks in the U.S.
Company, Foreign Securities Markets, Foreign Tax, Information, Investment and
Repatriation, Market, Political and Economic, Sector

CONVERTIBLE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
are corporate securities that can be converted, at the option of the owner, into
the common stock of the issuer. Company, Foreign Securities Markets, Foreign
Tax, Information, Interest Rate, Investment and Repatriation, Market, Political
and Economic, Sector

EUROPEAN AND GLOBAL DEPOSITORY RECEIPTS (EDRS, GDRS) . . . . . . . . . . . . . . . . y
are U.S. dollar denominated securities, designed for use in European and other
non-U.S. securities markets, which represent and may be converted into the
underlying foreign security. Company, Currency, Foreign Securities Markets,
Foreign Tax, Information, Investment and Repatriation, Market, Political and
Economic, Sector

FOREIGN CURRENCY CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y
are negotiated agreements to purchase or sell a given amount of foreign currency
at a specified price and future date. They are generally used by a fund to hedge
currency risk. Credit, Currency, Hedging , Leverage, Liquidity, Market

FUTURES CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y(1)
require the holder to buy or sell securities or foreign currencies at a
specified price on a specified date. Some are contracts to make a cash
settlement on a future date in an amount determined by the value of a financial
index (such as the S&P 500 Index) on the last day of the contract. The fund
generally buys or sells futures as protection against fluctuations in the value
of its portfolio without actually buying or selling securities. Currency, Hedging,
Leverage, Market

OPTIONS ON FUTURES CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . y(1)
give the holder the right, in return for the premium paid, to assume a position
in a futures contract at a specified exercise price at any time prior to the
expiration date of the option. The fund generally uses these for the same
purposes as futures contracts. Currency, Hedging, Leverage, Market

ILLIQUID SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . /15/
cannot be sold in the ordinary course of business within seven days at
approximately the price at which they are valued. Liquidity

- --------------------------------------------------------------------------------
4 Prospectus - Pacific-European Growth Fund

<PAGE>

PORTFOLIO OVERVIEW

INVESTMENT SECURITIES AND TECHNIQUES (CONTINUED)
- --------------------------------------------------------------------------------

OPTIONS ON SECURITIES AND FOREIGN CURRENCIES . . . . . . . . . . . . . . . . . . . . y
are contracts which give the holder the right, in return for the premium paid,
to buy or sell securities or foreign currencies prior to the expiration of the
option, at the option exercise price. The writer of the option is then obligated
to either deliver or purchase the securities or currency. Company, Credit,
Currency, Hedging, Market, Leverage, Liquidity, Sector

RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
are short-term options to buy stock at a fixed price issued to existing
shareholders. Company, Foreign Securities Markets, Foreign Tax, Information,
Investment and Repatriation, Market, Political and Economic, Sector

SHORT-TERM MONEY MARKET SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 353
include short-term securities issued by the U.S. or a foreign government, their
agencies or instrumentalities, time deposits, bank certificates of deposit,
bankers' acceptances, high-grade commercial paper and other money market
instruments. Credit, Interest Rate

WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
are long-term options to buy stock at a fixed price, sometimes attached to the
sale of a new stock or bond issue to make the issue more attractive. Company,
Foreign Securities Markets, Foreign Tax, Information, Investment and
Repatriation, Market, Political and Economic, Sector

INVESTMENT TECHNIQUES
- --------------------------------------------------------------------------------------------

BORROWING . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
is permitted for temporary or emergency purposes only. Interest paid on borrowed
funds reduces earnings. The fund's policy on borrowing cannot be changed without
shareholder approval. Leverage

CURRENCY TRADING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y
The direct trading or holding of foreign currencies as an asset. Currency

REPURCHASE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . y
The fund purchases securities on the condition that the seller will buy them
back at a set time and price, plus interest. The fund may enter into repurchase
agreements for securities issued or guaranteed as to payment of principal and
interest by the U.S. government or its agencies or instrumentalities. Credit,
Interest Rate

WHEN ISSUED AND FORWARD COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . . . y
The purchase or sale of a security at a future date for a predetermined price.
Securities may decrease in value prior to their delivery. Company, Leverage,
Market, Sector
</TABLE>

(1) The fund's use of futures contracts and options on futures contracts will
be limited by regulations of the Commodity Futures Trading Commission.

(2) The fund may invest up to 10% of its total assets, in the aggregate, in
rights or warrants to purchase common stocks.

(3) The fund may invest without limitation in these securities for temporary
defensive purposes. Time deposits are considered illiquid and subject to
the fund's limitation on investing in illiquid securities.

- --------------------------------------------------------------------------------
5 Prospectus - Pacific-European Growth Fund

<PAGE>

PACIFIC-EUROPEAN GROWTH FUND

PORTFOLIO OVERVIEW

RISK FACTORS
- --------------------------------------------------------------------------------

A SUMMARY OF THE PRINCIPAL RISKS WHICH APPLY TO THE FUND IS PROVIDED IN "FUND
DESCRIPTION." MORE DETAIL REGARDING THESE AND OTHER RISKS ASSOCIATED WITH
INVESTMENT SECURITIES AND TECHNIQUES USED BY PACIFIC-EUROPEAN GROWTH FUND IS
PROVIDED BELOW.

COMPANY RISK

CREDIT RISK

The issuer of a security or the other party to a contract, such as a repurchase
agreement, could default on its financial obligation causing a loss in the
fund's portfolio.

CURRENCY RISK

The value of the fund's securities in U.S. dollars will vary with increases and
decreases in the exchange rate. 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 securities denominated in that currency. That will, in turn, cause a decline
in the fund's net asset value, net investment income, and capital gains, if any.
The exchange rate between the U.S. dollar and other currencies is determined by
many factors, including the supply and demand for particular currencies, central
bank efforts to support currencies, the movement of interest rates, the price of
oil, the pace of economic activity in industrial countries, and other economic
and financial conditions affecting the world economy.

FOREIGN SECURITIES MARKET RISK

FOREIGN TAX RISK

The fund's income from foreign issuers may be subject to non-U.S. withholding
taxes. In some countries, the fund also may be subject to taxes on trading
profits and, on certain securities transactions, transfer or stamp duties tax.
To the extent foreign income taxes are paid by the fund, U.S. shareholders may
be entitled to a credit or deduction for U.S. tax purposes. See the statement of
additional information for details.

HEDGING RISK

Successful use of a hedging instrument depends on the advisor's or sub-
advisor's ability to correctly forecast the direction of market movements. In
the case of an incorrect market forecast, the use of a hedging instrument
will reduce or eliminate gains. In addition, changes in the price of a
hedging instrument may not correlate perfectly with changes in the market
value of the securities subject to that hedge. As a result, even a correct
market forecast could result in an unsuccessful hedging transaction.

INFORMATION RISK

Non-U.S. companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory requirements comparable to
those which apply to U.S. companies. As a result, less information may be
available concerning non-U.S. issuers or securities held by the fund. Accounting
and financial reporting standards in emerging markets may be especially lacking.

INTEREST RATE RISK

INVESTMENT AND REPATRIATION RESTRICTION RISK

LEVERAGE RISK

- --------------------------------------------------------------------------------
6 Prospectus - Pacific-European Growth Fund

<PAGE>

PORTFOLIO OVERVIEW

RISK FACTORS (CONTINUED)
- --------------------------------------------------------------------------------

LIQUIDITY RISK

The fund may not be able to sell an illiquid security at the desired time and
price. It may have to accept a lower price or sell other securities instead at a
time when the sale of those securities might not be advantageous. The sale of
illiquid securities often requires more time and results in higher selling
expenses than the sale of liquid securities.

The fund may invest without limitation in certain types of securities which have
historically been considered illiquid, but only if they are determined to be
liquid under procedures adopted by the board of directors. These include
unregistered securities which can be resold, without registration, to qualified
institutional buyers (Rule 144A securities). Investing in Rule 144A securities
could have the effect of increasing the level of fund illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.

MARKET RISK

POLITICAL AND ECONOMIC RISK

Investing in securities of non-U.S. companies exposes the fund to additional
risks. Nationalization, expropriation or special taxation, currency blockage,
political changes, government regulation, social instability or diplomatic
developments could adversely affect the economy of a country or the fund's
investment in that country.

SECTOR RISK

The stocks of companies within specific industries or sectors of the economy can
periodically perform differently than the overall stock market. This can be due
to changes in such things as the regulatory or competitive environment or to
changes in investor perceptions of a particular industry or sector. Large
concentrations in specific industries will increase sector risk. The fund will
not invest 25% or more of its total assets in any one industry.

- --------------------------------------------------------------------------------
7 Prospectus - Pacific-European Growth Fund

<PAGE>

MANAGING YOUR INVESTMENT

BUYING SHARES
- --------------------------------------------------------------------------------

YOU MAY PURCHASE CLASS Y SHARES OF THE FUND WITH AN INITIAL INVESTMENT OF $1
MILLION OR MORE. ADD TO YOUR EXISTING INVESTMENT WITH ANY AMOUNT, AT ANY TIME.
SIMPLY CALL YOUR PIPER JAFFRAY INVESTMENT EXECUTIVE OR ANOTHER AUTHORIZED
BROKERAGE FIRM.

CALCULATING YOUR PURCHASE PRICE
- --------------------------------------------------------------------------------
Class Y shares are sold without any initial or deferred sales charges. Your
purchase price will be equal to the next net asset value of your shares
calculated after your broker receives your purchase order. The net asset value
of each share is equal to the market value of the fund's investments and other
assets, less any liabilities, divided by the number of fund share.

INVESTING AUTOMATICALLY
- --------------------------------------------------------------------------------

AUTOMATIC MONTHLY INVESTMENT PROGRAMS

To purchase class Y shares as part of a savings discipline, you may
automatically transfer $100 or more each month to any Piper fund offering class
Y shares from your bank, savings and loan, or other financial institution. Or
transfer $25 or more per month from any of the Piper money market funds.

CROSS-REINVESTMENT OF DISTRIBUTIONS

SHARE CLASSES

PACIFIC-EUROPEAN GROWTH FUND ALSO OFFERS CLASS A AND CLASS B SHARES
THROUGH A SEPARATE PROSPECTUS. YOU CAN OBTAIN MORE INFORMATION ON THE
FUND'S CLASS A AND CLASS B SHARES BY CALLING THE FUND AT THE PHONE NUMBER
ON THE BACK COVER.

- --------------------------------------------------------------------------------
8 Prospectus - Pacific-European Growth Fund

<PAGE>

MANAGING YOUR INVESTMENT

HOLDING SHARES
- --------------------------------------------------------------------------------

RECEIVING DIVIDENDS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
Dividends from the fund's net investment income, if any, will be paid annually.
Any capital gains are distributed at least once each year.

On the ex-dividend date for a distribution, the fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend." You will pay the full price for the
shares and then receive a portion of that price back as a taxable distribution.

Class Y shareholders generally will receive higher dividends from net investment
income than class A or class B shareholders because class Y shareholders are not
subject to Rule 12b-1 fees.

TAXING OF DIVIDENDS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
The fund has qualified, and intends to continue qualifying, for taxation as a
regulated investment company. As long as the fund continues to qualify, it will
not be subject to federal income tax to the extent its income is distributed to
shareholders.

Dividends and distributions you receive from the fund are generally taxable
whether you reinvest them or take them in cash. Distributions of long-term
capital gains are taxable as long-term gains, regardless of how long you have
held your shares (except that, under recent amendments to the tax code, the fund
will be required to designate certain capital gain distributions as mid-term
capital gain distributions, to be treated by individual shareholders as mid-term
capital gains). Dividends from the fund's net investment income and short-term
capital gain distributions are taxable as ordinary income.

The sale or exchange of fund shares will be a taxable event for you and may
result in a capital gain or loss. Under recent amendments to the tax code, the
gain or loss will be considered long-term if you have held your shares for more
than 18 months and mid-term if you who have held your shares more than one year
but not more than 18 months. A gain or loss on shares held for one year or less
is considered short-term and is taxed at the same rates as ordinary income.

If the fund has more than 50% of its total assets invested in the stock or
securities of foreign corporations at the end of its taxable year, the fund may
make an election that will permit you either to claim a foreign tax credit with
respect to foreign taxes paid by the fund or to deduct those amounts as an
itemized deduction on your tax return. If the fund makes this election, you will
be notified and provided with sufficient information to calculate your foreign
tax credit.

EXCHANGING SHARES
- --------------------------------------------------------------------------------
If your investment goals or your financial needs change, you may move from one
Piper fund to another, if the shares of that fund are legally available in your
state. There is no fee to exchange shares.

You may exchange your class Y shares only for class Y shares of another Piper
fund. However, please note that not all Piper funds offer class Y shares.

Exchanges are made based on the net asset value per share of each fund at the
time of the exchange.

Before exchanging into any fund, be sure to read its prospectus carefully. The
fund may change or cancel its exchange policies at any time, upon 60 days'
notice to shareholders.

For your protection, IFTC will attempt to verify your identity by asking for
your account number, social security number or other form of personal
identification. If reasonable care is taken to identify you as the caller,
neither IFTC nor the fund will be liable for losses to your account resulting
from an unauthorized telephone transaction. Payments which result from telephone
transactions will be made only to the address of record or the bank account
designated on your Account Application and Services form.

SHAREHOLDER REPORTS

Shareholder reports are mailed twice a year, in November and May. They include
financial statements and performance information on the fund, a message from
your portfolio manager, and, on an annual basis, the auditors' report.

STATEMENTS AND CONFIRMATIONS

Statements summarizing activity in your account are mailed monthly (quarterly if
your account has no activity). Confirms are mailed following each purchase or
sale of fund shares.

- --------------------------------------------------------------------------------
9 Prospectus - Pacific-European Growth Fund

<PAGE>

MANAGING YOUR INVESTMENT

SELLING SHARES
- --------------------------------------------------------------------------------

YOU MAY SELL ANY OR ALL OF YOUR SHARES FOR THEIR NET ASSET VALUE ON ANY DAY
WHEN THE NEW YORK STOCK EXCHANGE IS OPEN. SIMPLY CALL YOUR BROKER. YOUR REQUEST
WILL BE EXECUTED AT THE NEXT NET ASSET VALUE CALCULATED AFTER YOUR BROKER
RECEIVES YOUR REQUEST.

As noted above, you may sell shares by calling your broker. If you work with a
broker from a firm other than Piper Jaffray, you also may sell your shares by
submitting a written request to the fund's transfer agent, IFTC. Call IFTC at
800 874-6205 for instructions.

If your account falls below $1 million due to a sale of shares or an exchange
request, your account may be liquidated following 30 days written notice.

TAKING SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
You can make automatic withdrawals from your account provided you maintain a
minimum account balance of $1 million. You may withdraw $100 or more monthly,
quarterly, or semiannually by authorizing the sale of the appropriate number of
shares on a periodic basis. To set up systematic withdrawals, contact your
broker.

You may not want to make systematic withdrawals if you plan to continue
investing in the fund, due to tax liabilities.

- --------------------------------------------------------------------------------
10 Prospectus - Pacific-European Growth Fund

<PAGE>

GENERAL INFORMATION
- --------------------------------------------------------------------------------

HOW THE FUND IS ORGANIZED
- --------------------------------------------------------------------------------
Pacific-European Growth Fund is a diversified series of Piper Global Funds Inc.,
an open-end investment company.

VOTING RIGHTS

Although the fund is not required by law to hold annual meetings, it may hold
shareholder meetings from time to time on important matters. In addition,
shareholders have the right to call a meeting under certain circumstances. When
the fund holds a meeting, you will receive a proxy statement requesting your
vote. You have one vote for each share you own.

RIGHTS OF DIFFERENT CLASSES

The different classes of shares of the fund have the same rights and are
identical in all respects except that:

- - Expenses related to the distribution of each class of shares are borne
solely by that class.

- - To the extent they can reasonably be identified as relating to a particular
class of shares, transfer agent fees will be allocated to that class.

- - Each class has exclusive voting rights with respect to approval of any
12b-1 distribution plan related to that class (except that class B
shareholders generally have the right to vote on any distribution fees
imposed on class A shares).

- - Only class B shares carry a conversion feature.

- - Each class has different exchange privileges.

FUND OBJECTIVE

The investment objective of the fund is not fundamental and may be changed
without shareholder approval. The fund's investment policies and techniques also
may be changed without shareholder approval, unless otherwise noted.

HOW THE FUND IS MANAGED
- --------------------------------------------------------------------------------
The fund is governed by a board of directors, which is responsible for
protecting the interests of shareholders. Directors meet periodically throughout
the year to oversee the fund's activities, review its performance and review the
actions of the fund's advisor. Although the board may include individuals who
are affiliated with the advisor, the majority of board members must be
independent. The board has retained the following companies to manage the fund's
operations.

INVESTMENT ADVISOR

Piper Capital Management Incorporated
222 South Ninth Street
Minneapolis, MN 55402-3804

As investment advisor, Piper Capital manages the fund's business and investment
activities, subject to the authority of the board of directors. The fund pays
Piper Capital a monthly management fee for providing investment advisory
services. Piper Capital receives a basic management fee equal, on an annual
basis, to 1% of the fund's average daily net assets up to $100 million, with the
fee scaled downward as assets increase in size. This fee may be increased or
decreased by up to a maximum, on an annual basis, of 0.25% of the fund's average
daily net assets, depending upon the extent to which the fund's class A shares
outperform or underperform the Morgan Stanley Capital International European,
Australian and Far East (EAFE) Index.

SUB-ADVISOR

Edinburgh Fund Managers plc
Donaldson House
97 Haymarket Terrace
Edinburgh, Scotland EH12, 5HD

The sub-advisor is responsible for the investment and reinvestment of the fund's
assets and the placement of brokerage transactions. Edinburgh, a public limited
company that was incorporated in 1969, manages approximately $12 billion in
assets.

The advisor pays the sub-advisor a fee for providing sub-advisory services equal
to 65% of the basic management fee plus or minus 90% of the performance
adjustment. Under an expense reimbursement agreement, Edinburgh pays Piper
Capital a monthly fee equal to 10% of the basic management fee to reimburse
Piper Capital for expenses it incurs in administering the fund.

- --------------------------------------------------------------------------------
11 Prospectus - Pacific-European Growth Fund

<PAGE>

GENERAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------

DISTRIBUTOR

Piper Jaffray Inc.
222 South Ninth Street
Minneapolis, MN 55402-3804

Piper Jaffray is the principal distributor of the fund's shares. Other brokerage
firms that have a sales agreement with Piper Jaffray may also sell fund shares.
Piper Jaffray is a wholly owned subsidiary of Piper Jaffray Companies and an
affiliate of Piper Capital.

CUSTODIAN

Bankers Trust Company
130 Liberty Street
New York, NY 10006

The fund's custodian holds the fund's portfolio securities, settles trades,
holds and processes cash, and collects interest and dividends.

ACCOUNTING AGENT

Investors Fiduciary Trust Company
801 Pennsylvania Avenue
Kansas City, MO 64105-1307

As the fund's accounting agent, IFTC collects the data needed to calculate net
asset values, maintains the fund's general ledgers and provides other
record-keeping services.

TRANSFER AND DIVIDEND DISBURSING AGENTS

Investors Fiduciary Trust Company
1004 Baltimore Avenue
Kansas City, MO 64105-1802

Piper Jaffray (address listed above)

Piper Trust Company
222 South Ninth Street
Minneapolis, MN 55402-3804

IFTC provides transfer agent services and pays dividends and other distributions
for the fund. Piper Jaffray and Piper Trust provide these services for
shareholders whose accounts they maintain.

HOW DEALERS ARE COMPENSATED
- --------------------------------------------------------------------------------
Piper Jaffray Investment Executives and other brokerage firms who sell class Y
shares receive ongoing fees from Piper Capital which equal, on an annual basis,
up to 0.35% of the fund's average daily net assets attributable to such shares.

PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
When deciding which brokers to use for the fund's portfolio transactions, the
advisor or sub-advisor may consider whether brokers have sold shares of this or
any other Piper fund. The advisor or sub-advisor may place trades through Piper
Jaffray in compliance with Investment Company Act of 1940 rules.

NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value per share is calculated by dividing the total market value of
the fund's investments and other assets, less any liabilities, by the number of
fund shares. The values of securities within the fund's portfolio are determined
as follows:

- - By an independent pricing service, or

- - Through market quotations obtained from one or more dealers who make a
market in the securities or from a widely used quotation system.

Net asset value is calculated as of the close of regular trading on the New York
Stock Exchange (typically 4 p.m. Eastern Time) on each day the exchange is open
for trading. 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 fund's net asset value might be significantly
affected on days when you have no access to the fund.

- --------------------------------------------------------------------------------
12 Prospectus - Pacific-European Growth Fund

<PAGE>

- --------------------------------------------------------------------------------
Prospectus - Pacific-European Growth Fund
- --------------------------------------------------------------------------------

FOR MORE INFORMATION
- --------------------------------------------------------------------------------

ANNUAL/SEMIANNUAL REPORTS
Shareholder reports include financial statements and performance information on
the fund, a message from your portfolio manager, and, on an annual basis, the
auditors' report.

STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the fund. A current SAI has
been filed with the SEC and is incorporated by reference into this prospectus.

To order free copies, please write or call:

PIPER CAPITAL MANAGEMENT
ATTN: MUTUAL FUND SERVICES
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804

800 866-7778

- --------------------------------------------------------------------------------
[LOGO] PIPER FUNDS 222 South Ninth Street
Minneapolis, MN 55402-3804

#30122 11/1997 033-98
<PAGE>

PART B

PACIFIC-EUROPEAN GROWTH FUND
EMERGING MARKETS GROWTH FUND

Series of Piper Global Funds Inc.

STATEMENT OF ADDITIONAL INFORMATION

November 24, 1997

Table of Contents

Page
----
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Objectives and Policies . . . . . . . . . . . . . . . 2
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . 15
Directors and Executive Officers . . . . . . . . . . . . . . . . 17
Investment Advisory and Other Services . . . . . . . . . . . . . 21
Portfolio Transactions and Allocation of Brokerage . . . . . . . 31
Capital Stock and Ownership of Shares. . . . . . . . . . . . . . 33
Net Asset Value and Public Offering Price. . . . . . . . . . . . 35
Performance Comparisons. . . . . . . . . . . . . . . . . . . . . 36
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . 38
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . 42
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
General Information. . . . . . . . . . . . . . . . . . . . . . . 47
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 48
Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . 48
Appendix A - Corporate Bond, Preferred Stock and
Commercial Paper Ratings . . . . . . . . . . . . . . . . . . . A-1
Appendix B - General Characteristics and Risks of
Options and Futures. . . . . . . . . . . . . . . . . . . . . . B-1

This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the following two Prospectuses
each dated November 24, 1997: (1) Prospectus for the Class A and Class B shares
of Pacific-European Growth Fund and Emerging Markets Growth Fund, and (2)
Prospectus for the Class Y shares of Pacific-European Growth Fund. This
Statement of Additional Information should be read in conjunction with each
applicable Prospectus. Copies of these Prospectuses may be obtained from the
Funds at Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota
55402-3804.

3010-1

<PAGE>

INTRODUCTION

The shares of Piper Global Funds Inc. (the "Company") are currently offered
in two series: Pacific-European Growth Fund and Emerging Markets Growth Fund
(sometimes referred to herein as a "Fund" or, collectively, as the "Funds"). On
June 21, 1996, Emerging Markets Growth Fund acquired the assets and assumed all
identified liabilities of Hercules Latin American Value Fund, a series of
Hercules Funds Inc., in a tax-free reorganization by issuing new shares.
Emerging Markets Growth Fund had no assets or liabilities prior to the
acquisition. Certain financial and performance information for Emerging Markets
Growth Fund set forth herein represents historical information of Hercules Latin
American Value Fund.

The investment adviser for the Funds is Piper Capital Management
Incorporated (the "Adviser"). Edinburgh Fund Managers plc (the "Sub-Adviser")
acts as each Fund's sub-adviser.

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives and policies of the Funds are set forth in the
Prospectus. Certain additional investment information is set forth below.

PACIFIC-EUROPEAN GROWTH FUND

Pacific-European Growth Fund seeks to achieve its investment objective
through investments primarily in common stock of companies in the Pacific Basin
or in 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
convertible debt securities or foreign equity securities which are substantially
similar to preferred stock in the U.S. (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. Pacific-European Growth Fund may invest in the following
countries within the region: Malaysia, Pakistan, Sri Lanka, the Philippines,
Singapore, North Korea, Thailand, India, Indonesia, Hong Kong, Japan, Taiwan,
Australia and New Zealand. In addition, to the extent suitable investment
opportunities become available, the Fund may invest in any other country within
the region, including, but not limited to, China.

Europe is defined as consisting 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

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<PAGE>

the Fund's definition of Europe and appropriate countries for investment by the
Fund.

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.

EMERGING MARKETS GROWTH FUND

Emerging Markets Growth Fund seeks to achieve its investment objective
through investments primarily in common stock of issuers in the world's emerging
securities markets. "Common stock" means common stock and foreign equity
securities which are substantially similar to common stock in the U.S. and does
not include preferred stock or convertible debt securities (such foreign equity
securities may have voting and distribution rights which differ from those of
common stock in the U.S.).

Emerging securities markets can be found in regions such as Latin America,
Asia, Eastern Europe, the Middle East, Southern Europe and Africa. Countries
with emerging markets include those that have an emerging stock market as
defined by the International Finance Corporation, those with low- to middle-
income economies according to the International Bank for Reconstruction and
Development (the World Bank), and those listed in World Bank publications as
developing. The Fund will emphasize countries with relatively low gross
national product per capita compared to the world's major economies, and with
the potential for rapid economic growth. An issuer in an emerging market is
defined as a company: (a) the principal securities trading market for which is
an emerging market; (b) which is organized under the laws of an emerging market
country; or (c) which derives a significant proportion (at least 50%) of its
revenues or profits from goods produced or sold, investments made or services
performed in the emerging market country or which has at least 50% of its assets
situated in such a country.

The Fund currently intends to select its investments from the following
countries with emerging markets:

Asia: China, India, Indonesia, Korea, Malaysia, Pakistan,
Philippines, Sri Lanka, Taiwan, Thailand

Europe: Czech Republic, Greece, Hungary, Poland, Portugal

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<PAGE>

Latin America: Argentina, Brazil, Chile, Colombia, Mexico, Peru,
Venezuela

Africa: Nigeria, South Africa, Zimbabwe

Middle East: Jordan, Turkey

The foregoing list of emerging markets is not exhaustive; the Fund may
invest in countries other than those listed above when such investments are
consistent with the Fund's investment objective and policies.

ALLOCATION AMONG COUNTRIES

For each Fund, investment is made in those countries where the Adviser and
Sub-Adviser (collectively, "Management") believe that economic and political
factors, including currency movements, are likely to produce above average
investment returns. There is no limitation on the percentage of either Fund's
assets that may be invested at any one time in securities of companies in one or
more of the countries in the Pacific Basin or Europe (with respect to Pacific-
European Growth Fund) or in emerging markets (with respect to Emerging Markets
Growth Fund), except insofar as each Fund is limited in its ability to invest in
other investment companies; provided, however, that in normal market conditions
each Fund's investments will be allocated among at least three different
countries in the Pacific Basin and/or Europe (with respect to Pacific-European
Growth Fund) or having emerging markets (with respect to Emerging Markets Growth
Fund). To the extent a Fund invests a significant portion of its assets in any
one country, it will be more susceptible to factors adversely affecting issuers
in such country than would a comparable fund having a lesser percentage of its
assets so invested.

ADDITIONAL RISKS OF INVESTMENTS IN EMERGING MARKETS

Investing in securities of issuers in emerging markets involves exposure to
economic structures that are generally less diverse and mature than, and to
political systems that can be expected to have less stability than, those of
developed countries. Other characteristics of emerging markets that may affect
investment in their markets include certain national policies that may restrict
investment by foreigners and the absence of developed legal structures governing
private and foreign investments and private property. Investing in securities
of issuers located in emerging market countries may entail the risks of
expropriation, nationalization, confiscation or the imposition of restrictions
on foreign investment and on repatriation of capital invested. In the event of
expropriation, nationalization or other confiscation by any country, a Fund
could lose its entire investment in any such country.

The securities markets of emerging market countries are substantially
smaller, less developed, less liquid and more volatile than the major securities
markets in the United States. Disclosure and regulatory standards are in many

4
<PAGE>

respects less stringent than U.S. standards. Furthermore, there is a lower
level of monitoring and regulation of the markets and the activities of
investors in such markets.

The limited size of many emerging market securities markets and limited
trading volume in the securities of emerging market issuers compared to the
volume of trading in the securities of U.S. issuers could cause prices to be
erratic for reasons apart from factors that affect the soundness and
competitiveness of the issuers. For example, limited market size may cause
prices to be unduly influenced by traders who control large positions. Adverse
publicity and investors' perceptions, whether or not based on in-depth
fundamental analysis, may decrease the value and liquidity of portfolio
securities. In addition, issuers in emerging markets typically are subject to a
greater degree of change in earnings and business prospects than are companies
in developed markets.

Included among the emerging markets in which both Funds may invest are the
formerly communist countries of Eastern Europe and the People's Republic of
China. Emerging Markets Growth Fund may also invest in the Commonwealth of
Independent States (formerly the Soviet Union). (These countries are referred
to collectively as the "Communist Countries.") Upon the accession to power of
Communist regimes approximately 40 to 70 years ago, the governments of a number
of Communist Countries expropriated a large amount of property. The claims of
many property owners against those governments were never finally settled.
There can be no assurance that any Fund investments in Communist Countries would
not also be expropriated, nationalized or otherwise confiscated. In the event
of such expropriation, nationalization or other confiscation, a Fund could lose
its entire investment in the country involved. In addition, any change in the
leadership or policies of Communist Countries may halt the expansion of or
reverse the liberalization of foreign investment policies now occurring and
adversely affect existing investment opportunities.

INVESTMENTS FOR TEMPORARY DEFENSIVE PURPOSES

For temporary defensive purposes, the Funds 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 Funds invest for
defensive purposes (other than securities issued or guaranteed by the U.S. or a
foreign government, their agencies or instrumentalities) must be rate AA or
better by Standard & Poor's Ratings Services or be of comparable quality as
determined by the Adviser. See Appendix A for an explanation of ratings.

5
<PAGE>

FOREIGN CURRENCY TRANSACTIONS

The Funds may engage in currency exchange transactions in connection with
the purchase and sale of their investments. Currency exchange transactions are
necessary to enable the Funds 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
Funds 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 Funds conduct 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 Funds may engage in "transaction hedging" to protect against a change
in the foreign currency exchange rate between the date on which a 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 Funds may purchase or sell a
foreign currency on a spot (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 Funds 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.

A foreign currency forward contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract as agreed by the parties, at a price set at the
time of the contract. In the case of a cancelable forward contract, the holder
has the unilateral right to cancel the contract at maturity by paying a
specified fee. The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. A foreign currency futures
contract is a standardized contract for the future delivery of a specified
amount of a foreign currency at a future date at a price set at the time of the
contract. Foreign currency futures contracts traded in the United States are
designated by and traded on exchanges regulated by the Commodity Futures Trading
Commission ("CFTC"), such as the New York Mercantile Exchange. The Funds

6
<PAGE>

enter into foreign currency futures contracts solely for hedging or other
appropriate risk management purposes as defined in CFTC regulations.

Foreign currency forward contracts differ from foreign currency futures
contracts in certain respects. For example, the maturity date of a forward
contract may be any fixed number of days from the date of the contract agreed
upon by the parties, rather than a predetermined date in any given month.
Forward contracts may be in any amounts agreed upon by the parties rather than
predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A
forward contract generally requires no margin or other deposit.

At the maturity of a forward or futures contract, a Fund may either accept
or make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected
on a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.

Positions in foreign currency futures contracts may be closed out only on
an exchange or board of trade which provides a secondary market in such
contracts. Although the Funds purchase or sell foreign currency futures
contracts only on exchanges or boards of trade where there appears to be an
active secondary market, there is no assurance that a secondary market on an
exchange or board of trade will exist for any particular contract or at any
particular time. In such event, it may not be possible to close a futures
position and, in the event of adverse price movements, a Fund would continue to
be required to make daily cash payments of variation margin.

For transaction hedging purposes, the Funds may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives a Fund the right to assume a short position in the futures contract until
expiration of the option. A put option on currency gives a 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 a Fund the right to assume a long position in
the futures contract until the expiration of the option. A call option on
currency gives a Fund the right to purchase a currency at the exercise price
until the expiration of the option.

Options on foreign currencies operate similarly to options on securities,
and are traded primarily in the over-the-counter market, although options on
foreign currencies have recently been listed on several exchanges. Options
traded in the over-the-counter market are illiquid and it may not be possible
for a 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.

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<PAGE>

Options on foreign currencies are affected by all of those factors which
influence foreign exchange rates and investments generally.

The value of a foreign currency option is dependent upon the value of the
foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign debt security. Because foreign currency
transactions occurring in the interbank market involve substantially larger
amounts than those that may be involved in the use of foreign currency options,
investors may be disadvantaged by having to deal in an odd-lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots. There is no
systematic reporting of last sale information for foreign currencies and there
is no regulatory requirement that quotations available through dealers or other
market sources be provided on a timely basis. Available quotation information
is generally representative of very large transactions in the interbank market
and thus may not reflect relatively smaller transactions (less than $1 million)
where rates may be less favorable. The interbank market in foreign currencies
is a global, around-the-clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that cannot be reflected in the options markets.

Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based upon the difference between prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to a Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to resell that currency to the dealer.

The Funds may engage in "position hedging" to protect against a decline in
the value relative to the U.S. dollar of the currencies in which portfolio
securities are denominated or quoted (or an increase in the value of currency
for securities which a Fund intends to buy, when it holds cash reserves and
short-term investments). For position hedging purposes, the Funds 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 Funds 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 Funds own or intend 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 Funds may write covered call options on foreign currencies to
offset some of the costs of hedging those currencies. The Funds will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in

8
<PAGE>

the opinion of the Adviser, the pricing mechanism and liquidity are satisfactory
and the participants are responsible parties likely to meet their contractual
obligations. Each Fund's ability to engage in hedging and related option
transactions may be limited by tax considerations. See "Taxation--Consequences
of Certain Fund Investments".

HEDGING

The Funds 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 a Fund's
portfolio, to protect a 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 a 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 Funds may use are described below. Additional Hedging
Transactions may be used by the Funds in the future as they are developed to the
extent deemed appropriate by the Board of Directors of the Company.

OPTIONS ON SECURITIES. In seeking to reduce fluctuations in net asset
value, the Funds may write (I.E., sell) covered put and call options and
purchase put and call options on the securities in which they 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 a 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 a Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Fund in cash and liquid securities in a
segregated account with its custodian. A put option written by a Fund is
"covered" if the Fund maintains cash and liquid 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 premium paid by the

9
<PAGE>

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, a 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, a 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 a Fund were permitted to expire without being sold or exercised,
its premium would be lost by the Fund.

If a put option written by a Fund were exercised, the Fund would be
obligated to purchase the underlying security at the exercise price. If a call
option written by a 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 this Statement of Additional Information. A Fund retains the
premium received from writing a put or call option whether or not the option is
exercised. See Appendix B 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 Funds' ability to invest
in futures contracts and options thereon is set forth below.) The position
limits may restrict a Fund's ability to purchase or write options on a
particular security or to enter into futures contracts. It is possible that the
Funds 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 a Fund may enter into may be affected by options or futures
transactions of other investment advisory clients of the Adviser.

Over-the-counter options are purchased or written by a Fund in privately
negotiated transactions. Such options are illiquid and it may not be possible
for a Fund to dispose of an option it has purchased or terminate its obligations
under an

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<PAGE>

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 Funds may enter
into contracts for the purchase or sale of future delivery of securities or
contracts based on financial indices including any index of securities in which
the Funds may invest ("futures contracts") and may purchase and write put and
call options to buy or sell futures contracts ("options on futures contracts").
A "sale" of a futures contract means the acquisition of a contractual obligation
to deliver the securities called for by the contract at a specified price on a
specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made. Options on futures contracts to be written or purchased by the Funds
will be traded on exchanges or over-the-counter. These investment techniques
are used only to hedge against declines in the value of a Fund's portfolio
securities or increases in the prices of securities which a Fund intends to
purchase at a later date. The successful use of such instruments relies on
Management's experience with respect to such instruments. Should prices move in
an unexpected manner, a 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 for further discussion of
the use, risks and costs of futures contracts and options on futures contracts.

The Funds limit their activities in options and futures contracts to the
extent necessary to prevent disqualification of a 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".

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements with respect to the
securities in which it may invest. A repurchase agreement involves the purchase
by a Fund of securities with the condition that after a stated period of time
the original seller (a member bank of the Federal Reserve System or a recognized
securities dealer) will buy back the same securities ("collateral") at a
predetermined price or yield. Repurchase agreements involve certain risks not
associated with direct investments in securities. In the event the original
seller defaults on its obligation to repurchase, as a result of its bankruptcy
or otherwise, the Fund will seek to sell the collateral, which action could
involve costs or delays. In such case, the Fund's ability to dispose of the
collateral to recover such investment may be restricted or delayed. To the
extent proceeds from the sale of collateral were less than the

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<PAGE>

repurchase price, a Fund would suffer a loss. Repurchase agreements maturing in
more than seven days are considered illiquid and subject to each Fund's
restriction on investing in illiquid securities.

The Funds' custodian will hold the securities underlying any repurchase
agreement or such securities will be part of the Federal Reserve Book Entry
System. The market value of the collateral underlying the repurchase agreement
will be determined on each business day. If at any time the market value of the
collateral falls below the repurchase price of the repurchase agreement
(including any accrued interest), the respective Fund will promptly receive
additional collateral (so the total collateral is an amount at least equal to
the repurchase price plus accrued interest).

The Funds have received from the Securities and Exchange Commission an
exemptive order permitting the Funds, along with the other series of the
Company, closed-end and other open-end investment companies currently managed by
the Adviser, and all future series of the Company and all future investment
companies advised by the Adviser or its affiliates, to deposit uninvested cash
balances into a large single joint account to be used to enter into one or more
large repurchase agreements.

REVERSE REPURCHASE AGREEMENTS

Each Fund may enter into reverse repurchase agreement transactions with the
same parties with whom it may enter into repurchase agreements. However, the
Funds do not currently enter into or intend to enter into such transactions
during the coming year. Under a reverse repurchase agreement, a Fund sells
securities and agrees to repurchase them at a mutually agreed date and price.
Because certain of the incidents of ownership of the security are retained by a
Fund, reverse repurchase agreements are considered a form of borrowing by the
Fund from the buyer, collateralized by the security. At the time a Fund enters
into a reverse repurchase agreement, it will establish and maintain a segregated
account with an approved custodian containing liquid securities having a value
not less than the repurchase price (including accrued interest). Reverse
repurchase agreements involve the risk that the market value of the securities
retained in lieu of sale by a Fund may decline below the price of the securities
a Fund has sold but is obligated to repurchase. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, such buyer or its trustee or receiver may receive an extension of
time to determine whether to enforce a Fund's obligation to repurchase the
securities and a Fund's use of the proceeds of the reverse repurchase agreement
may effectively be restricted pending such decisions. Reverse repurchase
agreements will be used as a means of borrowing for investment purposes. This
speculative technique is referred to as leveraging. Leveraging may exaggerate
the effect on net asset value of any increase or decrease in the market value of
a Fund's portfolio. Money borrowed for leveraging will be subject to interest
costs which may or may not be recovered by income from or appreciation of the
securities purchased. The Company's Board of Directors has established
procedures, which are periodically reviewed by the Board,

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<PAGE>

pursuant to which the Adviser and Sub-Adviser will monitor the creditworthiness
of the dealers and banks with which the Funds enter into reverse repurchase
agreement transactions.

The Securities and Exchange Commission views reverse repurchase agreement
transactions as collateralized borrowings by a Fund. Therefore, pursuant to the
Investment Company Act of 1940 (the "1940 Act"), each Fund must maintain
continuous asset coverage (that is, total assets including borrowings, less
liabilities exclusive of borrowings) of at least 300% of the amount borrowed.

ILLIQUID SECURITIES

Neither Fund will invest more than 15% of its net assets in illiquid
securities. For Pacific-European Growth Fund, this is a fundamental investment
restriction that may not be changed without the approval of a majority of the
Fund's shares. The restriction is non-fundamental for Emerging Markets Growth
Fund, and thus may be changed without shareholder approval. A security is
considered illiquid if it cannot be sold in the ordinary course of business
within seven days at approximately the price at which it is valued. Illiquid
securities may offer a higher yield than securities which are more readily
marketable, but they may not always be marketable on advantageous terms.

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. A 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, a
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 SEC 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 Funds 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. Under these procedures, factors taken into account in determining
the liquidity of a security include (a) the frequency of trades and quotes for
the security; (b) the number of dealers willing to purchase or sell the security
and the number of other potential purchasers; (c) dealer undertakings to make a
market in the security; and

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<PAGE>

(d) the nature of the security and the nature of the marketplace trades (e.g.,
the time needed to dispose of the security, the method of soliciting offers and
the mechanics of transfer). 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.

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES

Each Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. The Funds 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 a 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. When a Fund purchases securities
on a when-issued or forward commitment basis, it will maintain in a segregated
account with its custodian cash or liquid securities having an aggregate value
equal to the amount of such purchase commitments until payment is made; such
Fund will likewise segregate securities it sells on a forward commitment basis.

The purchase of securities on a when-issued or forward commitment basis
exposes the Funds to risk because the securities may decrease in value prior to
their delivery. Purchasing securities on a when-issued or forward commitment
basis involves the additional risk that the return available in the market when
the delivery takes place will be higher than that obtained in the transaction
itself. A Fund's purchase of securities on a when-issued or forward commitment
basis while remaining substantially fully invested increases the amount of the
Fund's assets that are subject to market risk to an amount that is greater than
the Fund's net asset value, which could result in increased volatility of the
price of the Fund's shares. Settlements in the ordinary course, which may take
substantially more than three business days for non-U.S. securities, are not
treated by the Funds 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.

LENDING PORTFOLIO SECURITIES

Each Fund may lend its portfolio securities. However, neither Fund has
done so in the past, nor do the Funds currently intend to do so. In order to
facilitate achievement of their investment objectives, the Funds may from time
to time lend securities from their portfolios 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 a Fund
against declines in stock

14
<PAGE>

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, a Fund will enter into
loan arrangements only with brokers, dealers or financial institutions which the
Adviser has determined are creditworthy under guidelines established by the
Board of Directors. In addition, collateral for such loans must be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities (including interest on the loaned securities). The
interest accruing on the loaned securities will be paid to the Fund and the Fund
will have the right, on demand, to call back the loaned securities. A Fund may
pay fees to arrange the loans. Each Fund will not lend portfolio securities in
excess of 30% of the value of its total assets (including such loans), nor does
a Fund lend its portfolio securities to any officer, director, employee or
affiliate of the Fund or the Adviser or Sub-Adviser.

DIVERSIFICATION STATUS

Pacific-European Growth Fund operates as a "diversified" fund, as defined
in the 1940 Act, which means that with respect to at least 75% of its total
assets, it 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. Emerging Markets Growth Fund is "non-diversified" and, accordingly,
will be able to invest more than 5% of the value of its assets in the
obligations of a single issuer, subject to the diversification requirements of
subchapter M of the Internal Revenue Code of 1986, as amended. To the extent
Emerging Markets Growth Fund invests a relatively high percentage of its assets
in obligations of a limited number of issuers, the Fund may be more susceptible
than more widely diversified funds to any single economic, political or
regulatory occurrence or to changes in an issuer's financial condition or in the
market's assessment of the issuers.

PORTFOLIO TURNOVER

Portfolio turnover is the ratio of the lesser of annual purchases or sales
of portfolio securities to the average monthly value of portfolio securities,
not including securities maturing in less than 12 months. A 100% portfolio
turnover rate would occur, for example, if the lesser of the value of purchases
or sales of portfolio securities for a particular year were equal to the average
monthly value of the portfolio securities owned during such year. Portfolio
turnover rates are set forth in "Financial Highlights" in the Prospectus.

INVESTMENT RESTRICTIONS

In addition to the investment objectives and policies set forth in the
Prospectus, each Fund is subject to certain fundamental and nonfundamental
investment restrictions, as set forth below. Fundamental investment
restrictions may not be changed without the approval of the holders of a
majority of a Fund's outstanding voting securities (defined in the 1940 Act as
the lesser of (a) more than

15
<PAGE>

50% of the outstanding shares or (b) 67% or more of the shares represented at a
meeting where more than 50% of the outstanding shares are represented). All
other investment policies or practices are considered by the Funds to be
nonfundamental and, accordingly, may be changed without shareholder approval.
If a percentage restriction on investment or use of assets set forth below is
adhered to at the time a transaction is effected, later changes in percentage
resulting from changing market values will not be considered a deviation from
policy.

As fundamental investment restrictions:

(1) With respect to 75% of its total assets, Pacific-European Growth Fund
may not invest more than 5% of the value of its total assets (taken at market
value at the time of purchase) in the outstanding securities of any one issuer,
or own more than 10% of the outstanding voting securities of any one issuer, in
each case other than securities issued or guaranteed by the United States
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) No Fund may invest 25% or more of the value of its total assets in the
securities of issuers in the same industry, provided that this limitation does
not apply to securities issued or guaranteed by the United States government or
its agencies or instrumentalities.

(3) No Fund may borrow money (provided that the Funds may enter into
reverse repurchase agreements) except from banks for temporary or emergency
purposes. The amount of such borrowing may not exceed 10% of the value of a
Fund's total assets. A Fund will not purchase portfolio securities while
outstanding borrowing exceeds 5% of the value of the Fund's total assets. The
Funds will not borrow money for leverage purposes (provided that the Funds may
enter into reverse repurchase agreements for such purposes).

(4) No Fund may pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure issuances or borrowings permitted by restriction 3
above (collateral arrangements with respect to reverse repurchase agreements or
to margin for future contracts and options are not deemed to be pledges or other
encumbrances for purposes of this restriction).

(5) No Fund may make loans of money or property to any person, except
through loans of portfolio securities, the purchase of debt obligations in which
the Fund may invest consistently with the Fund's investment objective and
policies or the acquisition of securities subject to repurchase agreements.

(6) No Fund may underwrite the securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities or the
sale of its own shares a Fund may be deemed to be an underwriter.

16
<PAGE>

(7) No Fund may invest for the purpose of exercising control over
management of any company.

(8) No Fund may purchase real estate or interests therein other than
securities backed by mortgages and similar instruments.

(9) No Fund may purchase or sell commodities or commodity contracts except
for hedging purposes.

(10) No Fund may make any short sales of securities.

(11) No Fund may issue any senior securities (as defined in the 1940 Act),
other than as set forth in restriction number 3 above and except to the extent
that using options and futures contracts or purchasing or selling securities on
a when-issued or forward commitment basis may be deemed to constitute issuing a
senior security.

(12) Pacific-European Growth Fund may not invest more than 15% of the value
of its net assets in illiquid securities.

In addition, the following are non-fundamental investment restrictions of
the Funds which may be changed without shareholder approval:

(a) Emerging Markets Growth Fund will not invest more than 15% of the
value of its net assets in illiquid securities.

(b) The Funds will not purchase any securities on margin except to obtain
such short-term credits as may be necessary for the clearance of transactions
and except that the Funds may make margin deposits in connection with futures
contracts.

Any investment restriction or limitation referred to above or in a Fund's
Prospectus which involves a maximum percentage of securities or assets, except
the borrowing policy and the Fund's policy with respect to investing in illiquid
securities, shall not be considered to be violated unless an excess over the
percentage occurs immediately after an acquisition of securities or utilization
of assets and such excess results therefrom.

DIRECTORS AND EXECUTIVE OFFICERS

The directors and officers of the Company and their principal occupations
during the past five years are set forth below. Unless otherwise indicated, all
positions have been held for more than five years. Each of the Company's
directors

17
<PAGE>

and officers also serves as a director or officer of various closed-end and
open-end investment companies managed by the Adviser.

PRINCIPAL OCCUPATIONS
POSITION WITH DURING THE PAST FIVE YEARS
NAME AND ADDRESS (AGE) THE COMPANY AND OTHER AFFILIATIONS
- ---------------------- ------------- --------------------------

William H. Ellis* (55) Chairman of Retired. Prior to September,
Piper Jaffray Tower the Board of 1997, President of Piper
222 South Ninth Street Directors Jaffray Companies Inc.,
Minneapolis, MN 55402 President, Director and
Chairman of the Board of Piper
Capital Management
Incorporated (the "Adviser")
and Director of Piper Jaffray
Inc.

David T. Bennett (57) Director Of counsel to the law firm of
3400 City Center Gray, Plant, Mooty, Mooty &
33 South Sixth Street Bennett, P.A., located in
Minneapolis, MN 55402 Minneapolis. Mr. Bennett is
chairman of a group of
privately held companies and
serves on the board of
directors of a number of
nonprofit organizations.

Jaye F. Dyer (70) Director President of Dyer Management
4670 Norwest Center Company, a private management
90 South Seventh Street company, since 1991; prior
Minneapolis, MN 55402 thereto, Mr. Dyer was
President and Chief Executive
Officer of Dyco Petroleum
Corporation, a Minneapolis
based oil and natural gas
development company he
founded, from 1971 to March 1,
1989, and Chairman of the
Board until December 31,
1990. Mr. Dyer serves on the
board of directors of various
privately held and nonprofit
corporations.

Karol D. Emmerich (48) Director President of The Paraclete
7302 Claredon Drive Group, a consultant
Edina, MN 55439 to nonprofit organizations,
since 1993; prior thereto, Ms.
Emmerich was Vice President,
Chief Accounting Officer and
Treasurer of Dayton Hudson
Corporation from 1980 to 1993.
Ms. Emmerich is an Executive
Fellow at the University of
St. Thomas Graduate School of
Business and serves on the
board of directors of a number
of privately held and
nonprofit corporations.

Luella G. Goldberg (60) Director Ms. Goldberg serves on the
7019 Tupa Drive board of directors of
Edina, MN 55435 Northwestern National Life
Insurance Company (since
1976), The ReliaStar Financial
Corp. (since 1989), TCF Bank
Savings fsb (since 1985), TCF
Financial Corporation (since
1988) and Hormel Foods Corp.
(since 1993). Ms. Goldberg
also serves as a Trustee of
Wellesley College and as a
director of a number of other
organizations, including the
University of Minnesota
Foundation and the Minnesota
Orchestral Association. Ms.
Goldberg was Chairman of the
Board of Trustees of Wellesley
College from 1985 to 1993 and
acting President from July 1,
1993 to October 1, 1993.

18
<PAGE>

PRINCIPAL OCCUPATIONS
POSITION WITH DURING THE PAST FIVE YEARS
NAME AND ADDRESS (AGE) THE COMPANY AND OTHER AFFILIATIONS
- ---------------------- ------------- --------------------------

David A. Hughey (66) Director Trustee of Bentley College;
134 Powers Road formerly Executive Vice
Meredith, NH 03253 President and Chief
Administrative Officer of Dean
Witter InterCapital Inc., Dean
Witter Services Company Inc.
and Dean Witter Distributors
Inc., Director, Executive Vice
President and Chief
Administrative Officer of Dean
Witter Trust Company, Vice
President of Dean Witter
Family of Funds and TCW/DW
Family of Funds, and Director
of ICI Mutual Insurance
Company.

George Latimer (62) Director Chief Executive Officer of
754 Linwood National Equity Fund, Chicago,
St. Paul, MN 55105 Illinois since November 1995;
prior thereto, Mr. Latimer was
Director, Special Actions
Office, Office of the
Secretary, Department of
Housing and Urban Development
since 1993, and prior thereto,
he had been Dean of Hamline
Law School, Saint Paul,
Minnesota, from 1990 to 1993.
Mr. Latimer serves on the
board of directors of Digital
Biometrics, Inc. and Payless
Cashways, Inc.

Paul A. Dow (46) President Chief Investment Officer of
Piper Jaffray Tower the Adviser and Chief
222 South Ninth Street Executive Officer of the
Minneapolis, MN 55402 Adviser (since 1997), prior to
which he was a Senior Vice
President of the Adviser.

Robert H. Nelson (34) Vice President Senior Vice President of the
Piper Jaffray Tower and Treasurer Adviser since 1993; prior
222 South Ninth Street thereto he had been a Vice
Minneapolis, MN 55402 President of the Adviser from
1991 to 1993.

Susan S. Miley (40) Secretary Senior Vice President and
Piper Jaffray Tower General Counsel of the Adviser
222 South Ninth Street since 1995 and Secretary of
Minneapolis, MN 55402 the Adviser since 1996; prior
to which Ms. Miley was counsel
for American Express Financial
Advisors, Minneapolis, from
1994 to 1995 and an attorney
at Simpson Thatcher &
Bartlett, New York, New York
from 1984 to 1992.

- ---------------------------------
* Directors who are "interested persons," as defined in the 1940 Act, of Piper
Capital and the Funds.

Ms. Emmerich, Ms. Goldberg and Mr. Hughey are members of the Audit
Committee of the Board of Directors. Ms. Emmerich acts as the chairperson of
such committee. The Audit Committee oversees the Company's financial reporting
process, reviews audit results and recommends annually to the Company a firm of
independent certified public accountants.

19
<PAGE>

The Board of Directors also has a Committee of the Independent Directors,
consisting of Mr. Bennett, who serves as chairperson, Messrs. Dyer, Hughey and
Latimer, Ms. Emmerich and Ms. Goldberg, and a Derivatives Subcommittee
consisting of Ms. Emmerich, who serves as chairperson, Ms. Goldberg and Mr.
Dyer.

The functions of the Committee of the Independent Directors are: (a)
recommendation to the full Board of approval of any management, advisory,
sub-advisory and/or administration agreements; (b) recommendation to the full
Board of approval of any underwriting and/or distribution agreements; (c) review
of the fidelity bond and premium allocation; (d) review of errors and omissions
and any other joint insurance policies and premium allocation; (e) review of,
and monitoring of compliance with, procedures adopted pursuant to certain rules
promulgated under the 1940 Act; and (f) such other duties as the independent
directors shall, from time to time, conclude are necessary or appropriate to
carry out their duties under the 1940 Act. The functions of the Derivatives
Subcommittee are: (a) to oversee practices, policies and procedures of the
Adviser in connection with the use of derivatives; (b) to receive periodic
reports from management and independent accountants; and (c) to report
periodically to the Committee of the Independent Directors and the Board of
Directors.

The directors of the Company who are officers or employees of the Adviser
or any of its affiliates receive no remuneration from the Company. Each of the
other directors currently receives a quarterly retainer of $3,625 that is
allocated among the Funds and all other open-end funds managed by the Adviser on
the basis of the total assets of each such fund. In addition, each director
receives a fee from the Company for each regular quarterly and in-person special
meeting of the Board of Directors attended. Such fee is based on the net asset
value of the Company and ranges from $250 (net assets of less than $200 million)
to $1,500 (net assets of $5 billion or more). Members of the Audit Committee
receive $1,000 for each Audit Committee meeting attended ($2,000 for the
chairperson of the Committee), and the chairperson of the Committee of the
Independent Directors receives $1,000 for each meeting of such committee
attended, with such fees being allocated evenly between the Company and all
other closed-end and open-end investment companies managed by the Adviser.
Members of the Committee of the Independent Directors and the Derivatives
Subcommittee (other than the chairperson of the Committee of the Independent
Directors) currently receive no additional compensation. In addition, each
Director who is not affiliated with the Adviser is reimbursed for expenses
incurred in connection with attending meetings.

The following table sets forth the aggregate compensation received by each
director from the Funds during the fiscal year ended September 30, 1997, as well
as the total compensation received by each director from the Company and all
other registered investment companies managed by the Adviser or affiliates of
the Adviser during the calendar year ended December 31, 1996. Directors who are
officers or employees of the Adviser or any of its affiliates did not receive
any such compensation and are not included in the table. Mr. Bennett and Mr.
Hughey

20
<PAGE>

became directors of the Company on August 9, 1996 and September 3, 1996,
respectively.

Aggregate Compensation Total Compensation
Director from the Company from Fund Complex*
- -------- ---------------------- -------------------
Jaye F. Dyer $ 2,812 $ 58,750
Karol D. Emmerich $ 3,062 $ 58,750
Luella G. Goldberg $ 2,937 $ 60,750
George Latimer $ 2,812 $ 56,750
David T. Bennett $ 3,062 $ 56,250
David A. Hughey $ 2,234 $ -0-
- ---------------

* Currently consists of 20 open-end and closed-end investment companies managed
by the Adviser, including the Company. Each director included in the table
serves on the board of each such open-end and closed-end investment company.

INVESTMENT ADVISORY AND OTHER SERVICES

GENERAL

The investment adviser for the Funds is Piper Capital Management
Incorporated (the "Adviser"). Its affiliate, Piper Jaffray Inc. (the
"Distributor"), acts as the Funds' distributor. The Sub-Adviser for the Funds
is Edinburgh Fund Managers plc (the "Sub-Adviser"). Each of the Adviser and
Sub-Adviser acts as such pursuant to written agreements which are periodically
approved by the directors or the shareholders of the Funds. The address of both
the Adviser and the Distributor is Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota 55402-3804. The address of the Sub-Adviser is Donaldson
House, 97 Haymarket Terrace, Edinburgh, Scotland, EH12 5HD.

CONTROL OF THE ADVISER, THE SUB-ADVISER AND THE DISTRIBUTOR

The Adviser and the Distributor are both wholly owned subsidiaries of Piper
Jaffray Companies Inc., a publicly held corporation which is engaged through its
subsidiaries in various aspects of the financial services industry. The Sub-
Adviser is a public limited company incorporated in 1969. The British
Investment Trust plc, a Scottish closed-end investment company, for which the
Sub-Adviser serves as investment manager and adviser, is a controlling
shareholder of the Sub-Adviser.

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

The Adviser acts as the investment adviser of the Funds under an Investment
Advisory and Management Agreement which has been approved by the Board of
Directors (including a majority of the directors who are not parties to the
agreement, or interested persons of any such party, other than as directors of
the Company) and the shareholders of the Funds.

The Adviser supervises, directs and monitors the day-to-day operations of
the Funds in accordance with each Fund's investment objective, policies and

21
<PAGE>

restrictions, as well as the implementation of investment programs formulated by
the Sub-Adviser. 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 Pacific-European Growth
Fund in any country outside of the Pacific Basin or Europe and (b) any
investment by the Sub-Adviser which would result in reallocations of in excess
of 5% of Pacific-European Growth Fund's total assets. The Adviser determines
the broker-dealers which are eligible to execute transactions on behalf of the
Funds. 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 Funds who are affiliated with the Adviser. The
Adviser is liable to the Funds for losses resulting from willful misconduct, bad
faith or gross negligence in the performance of its duties or from its reckless
disregard of its duties under the Advisory Agreement.

The Investment Advisory and Management Agreement will terminate
automatically in the event of its assignment. In addition, the agreement is
terminable at any time, without penalty, by the Board of Directors of the
Company or by vote of a majority of the Company's outstanding voting securities
on not more than 60 days' written notice to the Adviser, and by the Adviser on
60 days' written notice to the Company. The agreement may be terminated with
respect to a particular Fund at any time by a vote of the holders of a majority
of the outstanding voting securities of such Fund, upon 60 days' written notice
to the Adviser. Unless sooner terminated, the agreement shall continue in
effect for more than two years after its execution only so long as such
continuance is specifically approved at least annually by either the Board of
Directors or by a vote of a majority of the outstanding voting securities of the
Company, provided that in either event such continuance is also approved by a
vote of a majority of the directors who are not parties to such agreement, or
interested persons of such parties, cast in person at a meeting called for the
purpose of voting on such approval. If a majority of the outstanding voting
securities of either Fund approves the agreement, the agreement shall continue
in effect with respect to such approving Fund whether or not the shareholders of
the other Fund approve the agreement.

Under the Advisory Agreement, Pacific-European Growth Fund pays the
Adviser a monthly management fee. The fee is paid at an annual rate of 1% 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 on the investment performance of the Class A shares of the Fund in
relation to the investment record of the Morgan Stanley Capital International
EAFESM 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 investment
performance of the Fund's Class A shares for the applicable period with the

22
<PAGE>

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 on the extent (as set forth below) by which
the performance of the Fund's Class A shares 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.

The following table illustrates the full range of permitted increases or
decreases to the Basic Fee on an annualized basis:
Adjustment
Performance of Class A Shares of to Basic Fee
the Fund Relative to EAFE Index (Annualized)
- -------------------------------- ------------
+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

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 Class A shares of
Pacific-European Growth Fund as compared with the investment record of the EAFE
Index, dividends and other distributions made to the Fund's Class A shareholders
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's Class A shares is
calculated based on the total return of such shares for the applicable period,
which consists of the total net asset value of the Fund's Class A shares at the
end of the applicable period, including reinvestment of dividends and
distributions, less the net asset value of such shares at the commencement of
the applicable period divided by the net asset value of such shares 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
September 30, 1996) 1,100 companies representing approximately 60% of the market

23
<PAGE>

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 Pacific-European Growth 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 37% and 17.5%, 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.
Pacific-European Growth Fund had approximately 46% and 10%, respectively, of its
total assets invested in Japan and the United Kingdom as of September 30, 1996.
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.

The advisory fees paid by Pacific-European Growth Fund for the fiscal years
ended February 28, 1995 and February 29, 1996, the seven-month fiscal period
ended September 30, 1996 and the fiscal year ended September 30, 1997 were
$1,731,719, $1,216,305, $898,235 and $936,677, respectively.

Pursuant to the Investment Advisory and Management Agreement, Emerging
Markets Growth Fund pays the Adviser a monthly advisory fee equal on an annual
basis to 1.00% of average daily net assets. This fee is higher than fees paid
by most other investment companies. Emerging Market Growth Fund commenced
operations on June 21, 1996, on which date it acquired the assets of Hercules
Latin American Value Fund, which was also managed by the Adviser. The
investment advisory fee paid by Hercules Latin American Value Fund under its
investment advisory agreement with the Advisor was calculated at the same rate
and in the same manner as the fee for Emerging Markets Growth Fund. Advisory
fees paid under such agreement for the fiscal years ended June 30, 1995 and
1996, the three-month fiscal period ended September 30, 1996 and the fiscal year
ended September 30, 1997 were $280,401, $188,400, $34,087 and $160,956,
respectively.

Under the Investment Advisory and Management Agreement, the Adviser
provides each Fund with advice and assistance in the selection and disposition
of that Fund's investments. All investment decisions are subject to review by
the Board of Directors of the Company. The Adviser is obligated to pay the
salaries and fees of any affiliates of the Adviser serving as officers or
directors of the Funds.

The same security may be suitable for both Funds and/or other funds or
private accounts managed by the Adviser, the Sub-Adviser or their affiliates.
If and when two or more funds or accounts simultaneously purchase or sell the
same security, the transactions will be allocated as to price and amount in
accordance with

24
<PAGE>

arrangements equitable to each fund or account. The simultaneous purchase or
sale of the same securities by a Fund and other funds or accounts may have a
detrimental effect on the Fund, as this may affect the price paid or received by
that Fund or the size of the position obtainable or able to be sold by that
Fund.

SUB-ADVISORY AGREEMENT

The Adviser has entered into Sub-Investment Advisory Agreements with
respect to each Fund. Under such agreements, the Sub-Adviser is responsible for
the investment and reinvestment of the respective Fund's assets and the
placement of brokerage transactions in connection therewith. For its services
to Pacific-European Growth Fund, the Sub-Adviser is paid a fee by the Adviser,
payable over the same time periods and calculated in the same manner as the
Adviser's fee, equal to 65% of the Adviser's Basic Fee plus or minus 90% of the
performance fee adjustment. For its services to Emerging Markets Growth Fund,
the Sub-Adviser is paid a monthly fee by the Adviser equal to .50% of the Fund's
average daily net assets.

The Adviser and Sub-Adviser also have entered into an Expense Reimbursement
Agreement pursuant to which the Sub-Adviser pays the Adviser a monthly fee equal
to 10% of the Basic Fee to reimburse the Adviser for certain expenses it bears
in connection with the administration of Pacific-European Growth Fund.

The fees paid by the Adviser to the Sub-Adviser for Pacific-European Growth
Fund (such amounts are payable out of the advisory fees received by the Adviser
for the same periods and are not in addition to such amounts) for the fiscal
years ended February 28, 1995 and February 29, 1996, the seven-month fiscal
period ended September 30, 1996 and the fiscal year ended September 30, 1997
were $1,149,751, $706,276, $570,444 and $516,943, respectively. In addition,
for the fiscal year ended February 29, 1996, the seven-month fiscal period ended
September 30, 1996, and the fiscal year ended September 30, 1997, the Sub-
Adviser paid $155,359, $95,187 and $123,254, respectively, to the Adviser under
the Expense Reimbursement Agreement.

Bankers Trust ("Bankers Trust") Company, a New York banking corporation and
a wholly owned subsidiary of Bankers Trust New York Corporation, acted as the
Sub-Adviser to Hercules Latin American Value Fund prior to its acquisition by
Emerging Markets Growth Fund. Bankers Trust was paid monthly compensation, over
the same time periods and calculated in the same manner as the investment
advisory fee, of .50% of net assets of such Fund. Fees paid by the Adviser to
Bankers Trust for the fiscal years ended June 30, 1995 and 1996 were $140,200
and $92,822, respectively.

From the commencement of operations of Emerging Markets Growth Fund on
June 22, 1996 through June 30, 1996, for the three-month fiscal period ended
September 30, 1996, and for the fiscal year ended September 30, 1997, fees paid
by the

25
<PAGE>

Adviser to the Sub-Adviser for Emerging Markets Growth Fund were $1,378, $17,044
and $80,718, respectively.

Each Sub-Investment Advisory Agreement will terminate automatically in the
event of its assignment. In addition, each Sub-Investment Advisory Agreement is
terminable at any time, without penalty, by the Board of Directors on 60 days'
written notice to the Adviser and the Sub-Adviser or by a vote of the holders of
a majority of the outstanding shares of the respective Fund. Unless sooner
terminated, each Sub-Investment Advisory Agreement shall continue in effect
until two years from the date of its execution and thereafter from year to year
provided it is specifically approved at least annually by either the Board of
Directors or by a vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the respective Fund, provided that, in either
event, such continuance is also approved by a vote of a majority of the
Directors who are not parties to such Sub-Investment Advisory Agreement, or
interested persons of such parties, cast in person at a meeting called for the
purpose of voting on such approval.

EXPENSES

The expenses of each Fund are deducted from their income before dividends
are paid. These expenses include, but are not limited to, organizational costs,
fees paid to the Adviser, fees and expenses of officers and directors who are
not affiliated with the Adviser, taxes, interest, legal fees, transfer agent,
dividend disbursing agent and custodian fees, audit fees, brokerage fees and
commissions, fees and expenses of registering and qualifying the Funds and their
shares for distribution under federal and state securities laws, expenses of
preparing prospectuses and statements of additional information and of printing
and distributing prospectuses and statements of additional information annually
to existing shareholders, the expenses of reports to shareholders, shareholders'
meetings and proxy solicitations, distribution expenses pursuant to the Fund's
Rule 12b-1 plan, and other expenses which are not expressly assumed by the
Adviser under the Investment Advisory and Management Agreement. Any general
expenses of the Company that are not readily identifiable as belonging to either
Fund will be allocated between each Fund based upon the relative net assets of
each Fund at the time such expenses were incurred.

DISTRIBUTION PLAN

Rule 12b-1(b) under the 1940 Act provides that any payments made by the
Funds in connection with financing the distribution of their shares may only be
made pursuant to a written plan describing all aspects of the proposed financing
of distribution, and also requires that all agreements with any person relating
to the implementation of the plan must be in writing.

Rule 12b-1(b)(1) requires that such plan be approved by a majority of a
Fund's outstanding shares, and Rule 12b-1(b)(2) requires that such plan,
together with any related agreements, be approved by a vote of the Board of
Directors and of the Directors who are not interested persons of the Company and
who have no direct or

26
<PAGE>

indirect interest in the operation of the plan or in the agreements related to
the plan, cast in person at a meeting called for the purpose of voting on such
plan or agreement. Rule 12b-1(b)(3) requires that the plan or agreement
provide, in substance:

(a) that it shall continue in effect for a period of more than one
year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner
described in paragraph (b)(2) of Rule 12b-1;

(b) that any person authorized to direct the disposition of moneys
paid or payable by the Company pursuant to the plan or any related
agreement shall provide to the Company's Board of Directors, and the
directors shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made; and

(c) in the case of a plan, that it may be terminated at any time by a
vote of a majority of the members of the Board of Directors of the Company
who are not interested persons of the Company and who have no direct or
indirect financial interest in the operation of the plan or in any
agreements related to the plan or by a vote of a majority of the
outstanding voting securities of a Fund.

Rule 12b-1(b)(4) requires that such a plan may not be amended to increase
materially the amount to be spent for distribution without shareholder approval
and that all material amendments of the plan must be approved in the manner
described in paragraph (b)(2) of Rule 12b-1.

Rule 12b-1(c) provides that the Company may rely upon Rule 12b-1(b) only if
the selection and nomination of the Company's disinterested directors are
committed to the discretion of such disinterested directors. Rule 12b-1(e)
provides that the Company may implement or continue a plan pursuant to Rule
12b-1(b) only if the directors who vote to approve such implementation or
continuation conclude, in the exercise of reasonable business judgment and in
light of their fiduciary duties under state law, and under Sections 36(a) and
(b) of the 1940 Act, that there is a reasonable likelihood that the plan will
benefit the Company and its shareholders. The Board of Directors has concluded
that there is a reasonable likelihood that each Fund's Rule 12b-1 plan
("Distribution Plan") will benefit such Fund and its shareholders.

Pursuant to the provisions of their respective Distribution Plans, each
Fund pays a quarterly fee to the Distributor for servicing of the Fund's
shareholder accounts and providing distribution-related services to the Funds.
With respect to the Class A shares of Pacific-European Growth Fund, the
Distributor is reimbursed quarterly for its actual expenses in an amount not to
exceed, on an annual basis, .50% of the average daily net attributable to Class
A shares. In the event expenses for the Class A shares of Pacific-European
Growth Fund for any one year exceed the

27
<PAGE>

maximum reimbursable under the Plan, such expenses may not be carried forward to
the following year. With respect to the Class B shares of Pacific-European
Growth Fund, the Distributor is paid a fee which is equal, on an annual basis,
to 1.00% of the average daily net assets attributable to Class B shares. With
respect to Emerging Markets Growth Fund, the Fund pays a monthly fee to the
Distributor equal, on an annual basis, to .50% of the Fund's average daily net
assets attributable to Class A shares and 1.00% of the Fund's average daily net
assets attributable to Class B shares.

A portion of each Fund's total fee is paid as a distribution fee and will
be used by the Distributor to cover expenses that are primarily intended to
result in, or that are primarily attributable to, the sale of shares of such
Fund ("Distribution Expenses"), and a portion of the fee is paid as a
shareholder servicing fee and will be used by the Distributor to provide
compensation for ongoing servicing and/or maintenance of shareholder accounts
with respect to such Fund ("Shareholder Servicing Costs"). The .50% Rule 12b-1
fee paid by each Fund with respect to its Class A shares is comprised of (a) a
servicing fee equal to .25% of the Fund's average daily net assets attributable
to Class A shares and (b) a distribution fee equal to .25% of the Fund's average
daily net assets attributable to Class A shares. The 1.00% Rule 12b-1 fee paid
by each Fund with respect to its Class B shares is comprised of (a) a servicing
fee equal to .25% of the Fund's average daily net assets attributable to Class B
shares and (b) a distribution fee equal to .75% of the Fund's average daily net
assets attributable to Class B shares.

Distribution Expenses under the Plan include, but are not limited to,
initial and ongoing sales compensation (in addition to sales charges) paid to
Investment Executives of the Distributor and to other broker-dealers; interest
expenses; expenses incurred in the printing of prospectuses, statements of
additional information and reports used for sales purposes; expenses of
preparation and distribution of sales literature; expenses of advertising of any
type; an allocation of the Distributor's overhead; and payments to and expenses
of persons who provide support services in connection with the distribution of
Fund shares. Shareholder Servicing Costs include all expenses of the
Distributor incurred in connection with providing administrative or accounting
services to shareholders, including, but not limited to, an allocation of the
Distributor's overhead and payments made to persons, including employees of the
Distributor, who respond to inquiries of shareholders of the Funds regarding
their ownership of shares or their accounts with the Funds, or who provide other
administrative services not otherwise required to be provided by the Funds'
Adviser or transfer agent.

Amounts paid by Pacific-European Growth Fund under its Distribution Plan
for the fiscal years ended February 28, 1995 and February 29, 1996, for the
seven-month fiscal period ended September 30, 1996 and for the fiscal year ended
September 30, 1997 were $476,639, $514,242, $311,253 and $381,430, respectively.
During these periods, the Distributor voluntarily agreed to limit amounts paid
under the Plan to annual rates of .28%, .32% and .31% of average daily net
assets for fiscal years 1995 and 1996 and the seven-month fiscal period ended
September 30, 1996, respectively. For the fiscal year ended September 30, 1997,
the Distributor

28
<PAGE>

voluntarily limited amounts payable under the Plan with respect to the Fund's
Class A shares to .33% of average daily net assets. The Distributor did not
limit amounts payable under the Plan with respect to the Fund's Class B shares.
Of the Rule 12b-1 fees paid for the fiscal year ended September 30, 1997, the
Distributor used $346,776 for compensation to underwriters (fees to investment
executives) and $34,654 for advertising.

The amounts paid by Emerging Markets Growth Fund under its Distribution
Plan for the three-month fiscal period ended September 30, 1996 and the fiscal
year ended September 30, 1997 were $10,567 and $53,654, respectively. The
Distributor voluntarily agreed to limit amounts paid under the Plan to annual
rates of .31% of average daily net assets for the fiscal period ended
September 30, 1996 and, for the fiscal year ended September 30, 1997, .33% of
average daily net assets with respect to the Fund's Class A shares. The
Distributor did not limit amounts payable under the Plan with respect to the
Fund's Class B shares. Of the Rule 12b-1 fees paid for the fiscal year ended
September 30, 1997, the Distributor used $48,860 for compensation to
underwriters (fees to investment executives) and $4,794 for advertising,
printing and mailing of prospectuses to other than current shareholders.

Prior to its acquisition by Emerging Markets Growth Fund on June 21, 1996,
Hercules Latin American Value Fund had a Rule 12b-1 Plan under which the Fund
paid a monthly fee to the Distributor at the annual rate of up to .70% of the
Fund's average daily net assets in order to reimburse the Distributor for actual
expenses incurred in the distribution and promotion of the Fund's shares. Rule
12b-1 fees incurred by Hercules Latin American Value Fund for the fiscal years
ended June 30, 1995 and 1996 were $196,280 and $131,002, respectively. However,
the reimbursement was voluntarily limited to .50% per annum of average daily net
assets during each of these fiscal periods. The amounts actually paid by the
Fund were $140,200 for fiscal 1995 and $93,573 for fiscal 1996.

UNDERWRITING AND DISTRIBUTION AGREEMENT

Pursuant to an Underwriting and Distribution Agreement, the Distributor has
agreed to act as the principal underwriter for the Funds in the sale and
distribution to the public of shares of the Funds, either through dealers or
otherwise. The Distributor has agreed to offer such shares for sale at all
times when such shares are available for sale and may lawfully be offered for
sale and sold. As compensation for its services, in addition to receiving fees
pursuant to the Distribution Plan discussed above, the Distributor receives the
initial sales charge on sales of Class A shares of the Funds and any contingent
deferred sales charge imposed on redemptions of Class B shares of the Funds and
redemption of certain Class A shares of the Funds that were not subject to an
initial sales charge, as set forth in the respective Prospectus. The total
underwriting commissions paid in connection with sales of Pacific-European
Growth Fund shares during the fiscal years ended February 28, 1995 and
February 29, 1996, the seven-month fiscal period ended September 30, 1996 and
the fiscal year ended September 30, 1997 were $459,632, $400,830, $164,075 and
$32,063, respectively, and the Distributor retained

29
<PAGE>

underwriting commissions of $459,632, $400,766, $163,384 and $24,046,
respectively. Prior to its acquisition by Emerging Markets Growth Fund on
June 21, 1996, Hercules Latin American Value Fund did not charge an initial
sales charge, and therefore, no underwriting commissions were paid in prior
fiscal periods. The total underwriting commissions paid in connection with
sales of Emerging Markets Growth Fund during the three-month fiscal period ended
September 30, 1996 and the fiscal year ended September 30, 1997 were $23,154 and
$23,084, of which $16,580 was retained by the Distributor.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Investors Fiduciary Trust Company ("IFTC"), the transfer agent for the
Company, maintains certain omnibus shareholder accounts for each Fund. Each
such omnibus account represents the accounts of a number of individual
shareholders of a Fund. The Company has entered into Shareholder Account
Servicing Agreements with the Distributor and Piper Trust Company ("Piper
Trust"), pursuant to which they provide certain transfer agent and dividend
disbursing agent services for the underlying individual shareholder accounts
held at the Distributor or Piper Trust, as applicable. Pursuant to such
Agreements, the Distributor and Piper Trust have agreed to perform the usual and
ordinary services of transfer agent and dividend disbursing agent not performed
by IFTC with respect to the respective underlying individual shareholder
accounts, including, without limitation, the following: maintaining all
shareholder accounts, preparing shareholder meeting lists, mailing shareholder
reports and prospectuses, tracking shareholder accounts for blue sky and Rule
l2b-1 purposes, withholding taxes on nonresident alien and foreign corporation
accounts, preparing and mailing checks for disbursement of income dividends and
capital gains distributions, preparing and filing U.S. Treasury Department Form
1099 for all shareholders, preparing and mailing confirmation forms to
shareholders and dealers with respect to all purchases, exchanges and
liquidations of series shares and other transactions in shareholder accounts for
which confirmations are required, recording reinvestments of dividends and
distributions in series shares, recording redemptions of series shares, and
preparing and mailing checks for payments upon redemption and for disbursements
to withdrawal plan holders. As compensation for such services, the Distributor
and Piper Trust are paid annual fees of $6.00 per active shareholder account
(defined as an account that has a balance of shares) and $1.60 per closed
account (defined as an account that does not have a balance of shares, but has
had activity within the past 12 months). Such fees are payable on a monthly
basis at a rate of 1/12 of the annual per-account charge. Such fees cover all
services listed above, with the exception of preparing shareholder meeting lists
and mailing shareholder reports and prospectuses. These services, along with
proxy processing (if applicable) and other special service requests, are
billable as performed at a mutually agreed upon fee in addition to the annual
fee noted above, provided that such mutually agreed upon fee shall be fair and
reasonable in light of the usual and customary charges made by others for
services of the same nature and quality. Under such Agreements, Pacific-European
Growth Fund paid $83,724 to the Distributor and $12,727 to Piper Trust for the
fiscal year ended September 30, 1997

30
<PAGE>

and Emerging Markets Growth Fund paid $19,896 to the Distributor and $-0- to
Piper Trust during such fiscal year. Hercules Latin American Value Fund was not
a party to similar agreements with the Distributor and Piper Trust.

PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE

Transactions on stock exchanges involve the payment of brokerage
commissions. In transactions on stock exchanges in the United States,
commissions are negotiated whereas on many foreign stock exchanges, commissions
are fixed, often at levels higher than those available in the United States. In
the case of securities traded on the over-the-counter markets, there is
generally no stated commission but the price usually includes a commission paid
by the issuer to the underwriters. Commissions are paid with respect to the
purchase of certain other securities in which the Funds may invest, and with
respect to options on securities, futures contracts and options on futures
contracts purchased by the Funds. Subject to the general supervision of the
Directors of the Company, the Adviser and the Sub-Adviser are responsible for
the investment decisions and the placing of the orders for portfolio
transactions for the Funds.

The Funds have no obligation to enter into transactions in portfolio
securities with any dealer, issuer, underwriter or other entity. The Funds do
not purchase securities from, or sell securities to, the Adviser, the Sub-
Adviser or their respective affiliates acting as principal. In placing orders,
it is the policy of the Funds to obtain the best price and execution for its
transactions. Where best price and execution may be obtained from more than one
broker-dealer, the Adviser or the Sub-Adviser may, in their discretion, purchase
and sell securities through broker-dealers who provide research, statistical and
other information to the Adviser or the Sub-Adviser, as the case may be. The
Funds will not purchase at a higher price or sell at a lower price in connection
with transactions effected with a dealer, acting as principal, who furnishes
research services to the Adviser or Sub-Adviser than would be the case if no
weight were given by the Adviser or Sub-Adviser, as the case may be, to the
dealer's furnishing of such services.

The supplemental information received from a broker-dealer is in addition
to the services required to be performed by the Adviser under the Advisory
Agreement, and by the Sub-Adviser under the respective Sub-Advisory Agreement,
and the expenses of the Adviser and/or the Sub-Adviser will not necessarily be
reduced as a result of the receipt of such information. Consistent with the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
and subject to seeking the best price and execution, the Funds may consider
sales of shares of the Funds as a factor in the selection of broker-dealers to
enter into portfolio transactions with the Funds.

The investment information provided to the Adviser or the Sub-Adviser, as
the case may be, is of the types described in Section 28(e)(3) of the Securities
Exchange Act of 1934 and is designed to augment the Adviser's or the Sub-
Adviser's own internal research and investment strategy capabilities. Research
and statistical

31
<PAGE>

services furnished by brokers through which the Funds effect securities
transactions are used by the Adviser or the Sub-Adviser in carrying out its
investment management responsibilities with respect to all its client accounts,
but not all such services may be used by the Adviser or the Sub-Adviser in
connection with the Funds.

Certain other clients of the Adviser and/or the Sub-Adviser may have
investment objectives and policies similar to those of the Funds. The Adviser
and/or the Sub-Adviser may, from time to time, make recommendations that result
in the purchase or sale of a particular security by its other clients
simultaneously with a Fund. ("Security" is defined for these purposes to
include options, futures contracts and options on futures contracts.) If
transactions on behalf of more than one client during the same period increase
the demand for securities being purchased or the supply of securities being
sold, there may be an adverse affect on price or quantity. In addition, it is
possible that the number of options or futures transactions that a Fund may
enter into may be affected by options or futures transactions entered into by
other investment advisory clients of the Adviser. It is the policy of the
Adviser and the Sub-Adviser to allocate advisory recommendations and the placing
of orders in a manner that is deemed equitable by the Adviser or the Sub-Adviser
to the accounts involved, including the Funds. When two or more of the clients
of the Adviser or Sub-Adviser (including the Funds) are purchasing or selling
the same security on a given day from the same broker-dealer, such transactions
may be averaged as to price.

Transactions in securities, options on securities, futures contracts and
options on futures contracts may be effected through Piper Jaffray Inc. if the
commissions, fees or other remuneration received by Piper Jaffray Inc. are
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers or other futures commission merchants in connection with
comparable transactions involving similar securities or similar futures
contracts or options thereon being purchased or sold on an exchange or contract
market during a comparable period of time. In effecting portfolio transactions
through Piper Jaffray Inc., the Funds intend to comply with Section 17(e)(1) of
the 1940 Act.

Pacific-European Growth Fund paid brokerage commissions for the fiscal
years ended February 28, 1995 and February 29, 1996, the seven-month fiscal
period ended September 30, 1996 and the fiscal year ended September 30, 1997 of
$683,910, $940,635, $557,103 and $661,025, respectively. No commissions were
paid to affiliates of the Fund, the Adviser or the Sub-Adviser, or to affiliates
of such affiliates during such periods. Emerging Markets Growth Fund paid
brokerage commissions for the fiscal years ended June 30, 1995 and 1996, the
three-month fiscal period ended September 30, 1996 and the fiscal year ended
September 30, 1997 of $217,281, $185,521, $1,424 and $135,776, respectively. Of
such amounts, $10,523, $0, $0 and $0, respectively, were paid to affiliated
brokers which was equal to 4.84%, 0%, 0% and 0%, respectively, of total
brokerage commissions. The total dollar amount of transactions involving
commissions paid to an affiliate were $3,105,766 (6.28%), $0, $0 and $0,
respectively.

32
<PAGE>

From time to time the Funds may acquire the securities of their regular
brokers or dealers or affiliates of such brokers or dealers. During the fiscal
year ended September 30, 1997, no such securities were acquired by Emerging
Markets Growth Fund or Pacific-European Growth Fund, respectively.

OPTION TRADING LIMITS

The writing by the Funds of options on securities will be subject to
limitations established by each of the registered securities exchanges on which
such options are traded. Such limitations govern the maximum number of options
in each class which may be written by a single investor or group of investors
acting in concert, regardless of whether the options are written on the same or
different securities exchanges or are held or written in one or more accounts or
through one or more brokers. Thus, the number of options which the Funds may
write may be affected by options written by other investment companies managed
by and other investment advisory clients of the Adviser and the Sub-Adviser. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.

CAPITAL STOCK AND OWNERSHIP OF SHARES

The Company was organized under the laws of the State of Minnesota in 1990
as a closed-end investment company and converted into an open-end investment
company on August 31, 1992. At that time, Pacific-European Growth Fund was the
only outstanding series of the Company. The Board of Directors designated a
second series of the Company, Emerging Markets Growth Fund, in April 1996.
Effective with the close of business on June 21, 1996, Emerging Markets Growth
Fund acquired the assets and assumed all identified liabilities of Hercules
Latin American Value Fund, a series of Hercules Funds Inc., in a tax-free
exchange by issuing new shares. Emerging Markets Growth Fund had no assets or
liabilities prior to the acquisition.

Each Fund's shares constitute a separate series of the Company's common
stock. The assets received by the Company 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, are 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 the Company. Any general expenses of the Company 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 Board of Directors is empowered under the Articles of Incorporation to
issue additional series of common stock without shareholder approval. In
addition, the Board of Directors may, without shareholder approval, create and
issue one or

33
<PAGE>

more additional classes of shares within each Fund, as well as within any series
of the Company created in the future.

All shares, when issued, will be fully paid and nonassessable and will be
redeemable. All shares have equal voting rights. They can be issued as full or
fractional shares. A fractional share has pro-rata the same kind of rights and
privileges as a full share. The shares possess no preemptive or conversion
rights.

Each share of a series has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset value of the series'
shares. On some issues, such as the election of directors, all shares of the
Company vote together as one series. On an issue affecting only a particular
series, the shares of the affected series vote separately. Cumulative voting is
not authorized. This means that the holders of more than 50% of the shares
voting for the election of directors can elect 100% of the directors if they
choose to do so, and, in such event, the holders of the remaining shares will be
unable to elect any directors.

As of November 14, 1997, shareholders who owned of record or were known by
the Funds to own beneficially 5% or more of the outstanding shares of any class
of any of the Funds are listed below. The directors and officers of the Company
as a group owned less than 1% of the outstanding shares of each Fund, and of
each class thereof, as of such date.

Pacific-European Growth Fund--Class B shares: Mark Dillenburg, 3030 Sumter
Avenue North, Crystal, MN 55427, 605 shares (14.30%); Piper Jaffray Companies,
222 S. 9th Street, Minneapolis, MN 55402, 797 shares (18.85%); Piper Jaffray,
custodian for the benefit of Rowena M. Caratao SEP, 1114 N. K Street, Aberdeen
WA 98520, 408 shares (9.64%); Piper Jaffray, custodian for the benefit of Nancy
Rae Cohen Pension, 12330 E. Sutter Mill Street, Tuscon, AZ 85749, 227 shares
(5.38%); Piper Jaffray, custodian for the benefit of Shanta Shenoy IRA, 430 C
Costa Mesa Terrace, Sunnyvale, CA 94086, 316 shares (7.46%) and David N. and
Julie A. Glass, 360 NW 338th, Hillsboro, OR 97124, 395 shares (9.33%). Pacific-
European Growth Fund--Class Y shares: Piper Trust Company, trustee for the
benefit of Burnet Realty 401(k) Plan, 222 S. 9th Street, Minneapolis, MN 55402,
77,364 shares (7.84%), Piper Trust Company, trustee for the benefit of Piper
Jaffray Companies Inc. ESOP Plan, 222 S. 9th Street, Minneapolis, MN 55402,
50,203 shares (5.09%), Piper Trust Company, trustee for the benefit of Piper
Jaffray Companies Inc. ESOP Plan, 222 S. 9th Street, Minneapolis, MN 55402,
480,205 shares (48.66%) and Piper Trust Company, trustee for the benefit of
Piper Jaffray Companies Inc. 401(k) Plan, 222 S. 9th Street, Minneapolis, MN
55402, 379,787 shares (38.49%).

Emerging Markets Growth Fund--Class B shares: Michael O'Brien, 14519
Rocksborough Road, Minnetonka, MN 55345, 1,998 shares (6.74%), Piper Jaffray,
custodian for the benefit of John S. Beckmann, 405 5th Street SW, Austin, MN
55912, 1,650 shares (5.57%), Christian P. and Melanie K. Schmidt, 122 Grassy
Hills Lane, Grand Forks, ND 58201, 1,858 shares (6.27%), Elaine W. Raleigh, 2341
Benton Avenue, Richland, WA 99352, 4,746 shares (16.01%), Piper Jaffray,
custodian for the

34
<PAGE>

benefit of Larry D. Stevens IRA, 321 W. Thornberry Drive, Boise, ID 83702,
2,647 shares (8.93%), Max W. Berg, trustee for the Max W. Berg Trust, P.O. Box
1468, Provo, UT 84603, 1,795 shares (6.05%) and Piper Jaffray, custodian for the
benefit of McRay Magleby SEP, 226 S. 1920 W., Provo, UT 84601, 1,607 shares
(5.42%).

NET ASSET VALUE AND PUBLIC OFFERING PRICE

The method for determining the public offering price of Fund shares is
summarized in the prospectus in the text following the headings "How to Purchase
Shares -- Public Offering Price" and "Valuation of Shares." The net asset value
of each Fund's shares is determined on each day on which the New York Stock
Exchange is open, provided that the net asset value need not be determined on
days when no Fund shares are tendered for redemption and no order for Fund
shares is received. The New York Stock Exchange is not open for business on the
following holidays (or on the nearest Monday or Friday if the holiday falls on a
weekend): New Year's Day, Presidents' Day, Good Friday, Memorial Day, July 4th,
Labor Day, Thanksgiving and Christmas.

The portfolio securities in which the Funds invest fluctuate in value, and
hence the net asset value per share of the Funds also fluctuates. On September
30, 1997, the net asset values per share of each Fund were calculated as
follows:

Pacific-European Growth Fund--Class A Shares
--------------------------------------------
Net Assets ($78,802,319) = Net Asset Value Per Share ($13.50)
---------------------------------
Shares Outstanding (5,836,071)

Pacific-European Growth Fund--Class B Shares
--------------------------------------------
Net Assets ($55,489) = Net Asset Value Per Share ($13.47)
---------------------------------
Shares Outstanding (4,120)

Pacific-European Growth Fund--Class Y Shares
--------------------------------------------
Net Assets ($15,061,169) = Net Asset Value Per Share ($13.55)
---------------------------------
Shares Outstanding (1,111,928)

Emerging Markets Growth Fund--Class A Shares
--------------------------------------------
Net Assets ($16,998,380) = Net Asset Value Per Share ($10.96)
---------------------------------
Shares Outstanding (1,551,058)

Emerging Markets Growth Fund--Class B Shares
--------------------------------------------
Net Assets ($309,762) = Net Asset Value Per Share ($10.86)
---------------------------------
Shares Outstanding (28,531)

35
<PAGE>

PERFORMANCE COMPARISONS

Advertisements and other sales literature for the Funds may refer to
"average annual total return" and "cumulative total return." All such total
return quotations are based on historical earnings and are not intended to
indicate future performance. The return on and principal value of an investment
in either of the Funds will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.

Average annual total return is the average annual compounded rate of return
on a hypothetical $1,000 investment made at the beginning of the advertised
period. Average annual total return figures are computed according to the
following formula:

n
P(1+T) = ERV

Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period
of a hypothetical $1,000 payment made at the
beginning of such period.

This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.

The following table sets forth the average annual total returns for the
Class A shares of each Fund for various periods ended September 30, 1997 and for
the Class B shares of the Funds and the Class Y shares of Pacific-European
Growth Fund for the period from inception through September 30, 1997.

Average Annual Total Returns--Class A Shares
--------------------------------------------
1 Year 5 Years Since Inception
------ ------- ---------------
Pacific-European Growth Fund 2.96% 9.90% 5.93%*
Emerging Markets Growth Fund *** 18.95% N/A 1.33%**
- ----------------
* Inception date: 4/27/90
** Inception date: 11/9/93
*** Results prior to June 21, 1996 are based on historical performance of
Hercules Latin American Value Fund, but deduct the 4% maximum sales charge
applicable to Emerging Markets Growth Fund.

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<PAGE>

Total Return Since Inception*
-----------------------------
Class B Shares Class Y Shares
-------------- --------------
Pacific-European Growth Fund 3.40% 3.71%
Emerging Markets Growth Fund 3.21% N/A
- ---------------------
* Inception date: 2/18/97

The Adviser has waived or paid certain expenses of the Funds, thereby
increasing total return and yield. These expenses may or may not waived or paid
in the future in the Adviser's discretion. Absent any voluntary expense
payments or waivers, the average annual total returns for the Class A shares of
the Funds for one year, five years and since inception for the period ended
September 30, 1997, and for the Class B shares of the Funds and the Class Y
shares of Pacific-European Growth Fund for the period from inception through
September 30, 1997, would have been:

Average Annual Total Returns
----------------------------
(absent voluntary expense waivers)
1 Year 5 Years Since Inception
------ ------- ---------------
Pacific-European Growth Fund 2.73% 9.65% 5.76% *
Emerging Markets Growth Fund *** 4.21% N/A 0.05%**
- ---------------------

* Inception date: 4/27/90
** Inception date: 11/9/93
*** Results prior to June 21, 1996 are based on historical performance of
Hercules Latin American Value Fund, but deduct the 4% maximum sales charge
applicable to Emerging Markets Growth Fund.

Total Return Since Inception*
-----------------------------
(absent voluntary expense waivers)
Class B Shares Class Y Shares
-------------- --------------

Pacific-European Growth Fund 3.40% 3.71%
Emerging Markets Growth Fund 2.52% N/A
- ---------------------
* Inception date: 2/18/97

Cumulative total return is calculated by subtracting a hypothetical $1,000
payment to a 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. Cumulative total return is computed according to the following
formula:

CTR = (ERV-P) 100
-----
P

Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period
of a hypothetical $1,000 payment made at the
beginning of such period; and
P = initial payment of $1,000.

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<PAGE>

This calculation assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.

The following table sets forth the cumulative total returns for each Fund
from inception to September 30, 1997:

Cumulative Total Returns
(absent voluntary fee
Cumulative Total Returns waivers and expense payments)
------------------------ -----------------------------
Class A Class B Class Y Class A Class B Class Y
------- ------- ------- ------- ------- -------
Pacific-European
Growth Fund* 53.45% 3.40% 3.71% 51.63% * *
Emerging Markets
Growth Fund** 5.27% 3.21% N/A 0.18% 2.52% N/A
- ---------------------
* No fees waived.
** Inception date: 4/27/90 (Class A shares), 2/18/97 (Class B shares and Class
Y shares).
*** Inception date: 11/9/93 (Class A shares), 2/18/97 (Class B shares).
Results prior to June 21, 1996 are based on the historical performance of
Hercules Latin American Value Fund, but deduct the 4% maximum sales charge
applicable to Emerging Markets Growth Fund.

In addition to advertising total return, comparative performance
information may be used from time to time in advertising the Funds' shares,
including data from Lipper Analytical Services, Inc. ("Lipper"), Morningstar,
other industry publications and other entities or organizations which track the
performance of investment companies. Performance information for the Funds also
may be compared to various unmanaged indices. Unmanaged indices do not reflect
deductions for administrative and management costs and expenses. The Funds may
also include in advertisements and communications to Fund shareholders
evaluations of a Fund published by nationally recognized ranking services and by
financial publications that are nationally recognized, such as BARRON'S,
BUSINESS WEEK, FORBES, INSTITUTIONAL INVESTOR, INVESTOR'S DAILY, MONEY,
KIPLINGER'S PERSONAL FINANCE MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, THE NEW
YORK TIMES, USA TODAY and THE WALL STREET JOURNAL.

PURCHASE OF SHARES

For Class A shares of the Funds, an investor may qualify for a reduced
sales charge through one or more of several plans. An investor must notify his
or her Piper Jaffray Investment Executive or broker-dealer at the time of
purchase to take advantage of these plans.

COMBINED PURCHASE PLAN

An investor may reduce or eliminate front-end or initial sales charges by
aggregating his or her 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 the investor's current purchase to the
higher of the cost

38
<PAGE>

or current value of Class A shares of any Piper fund sold with a front-end sales
charge that are currently held by the investor and the investor's related
accounts or by other members of the organized group.

QUALIFIED GROUPS. Purchases in the following personal accounts may be
grouped together:

- The investor's individual account.
- The account of the investor's spouse.
- Accounts of the investor's children.
- The investor's employee benefit plan accounts if they are exclusively
for his or her benefit. This includes accounts such as IRAs, individual
403(b) plans or single-participant Keogh-type plans but does not include
plans that cover more than one participant.
- A trust or trusts created for the primary benefit of the investor, his
or her spouse or his or her children.

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.
- Purchases must be made through a central administration, or through a
single dealer, or by other means that results 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.

ACCUMULATION PRIVILEGE

Initial sales charges for purchases of Class A 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
Class A shares previously purchased in any other mutual fund managed by the
Adviser, provided such shares were sold with an initial sales charge. For other
broker-dealer accounts, an investor should notify his or her Investment
Executive at the time of purchase of additional Piper fund shares the investor
owns.

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<PAGE>

LETTER OF INTENT

An investor's initial sales charge may be reduced by signing a non-binding
Letter of Intent, which the investor can obtain by contacting his or her Piper
Jaffray Investment Executive or other broker-dealer. This Letter of Intent will
state the investor's intention to invest $100,000 or more in Class A shares of
any of the mutual funds managed by the Adviser that are sold with an initial
sales charge over a 13-month period, beginning not earlier than 90 days prior to
the date the investor signs the Letter. The investor will pay the lower sales
charge applicable to the total amount he or she plans to invest over the 13-
month period.

Any redemptions made during the term of the Letter of Intent will be
subtracted from the amount of purchases in determining whether the Letter of
Intent has been completed. During the term of a Letter of Intent, IFTC will
hold shares representing 5% of the amount that the investor intends to invest
during the 13-month period in escrow for payment of a higher sales charge if the
full amount indicated in the Letter of Intent is not purchased. Dividends on
the escrowed shares will be paid to the shareholder. The escrowed shares will
be released when the full amount indicated has been purchased. If the full
indicated amount is not purchased within the 13-month period, the investor will
be required to pay, either in cash or by liquidating escrowed shares, an amount
equal to the difference in the dollar amount of sales charge actually paid and
the amount of sales charge the investor would have paid on his or her aggregate
purchases if the total of such purchases had been made at a single time.

SPECIAL PURCHASE PLANS

Class A shares of the Funds are available without a sales charge in the
following situations:

PURCHASES BY PIPER JAFFRAY COMPANIES, INC., ITS SUBSIDIARIES AND ASSOCIATED
PERSONS

Piper Jaffray Companies Inc. and its subsidiaries may buy Class A shares of
the Funds without incurring a sales charge. The following persons associated
with such entities also may buy Class A Fund shares without paying a sales
charge:

- Officers, directors and their spouses.
- Employees, retirees and their spouses.
- Sales representatives and their spouses.
- Children, grandchildren, parents, grandparents or siblings of any of the
above, or spouses of any of these persons.
- Any trust, pension, profit-sharing or other benefit plan for any of the
above.

All persons in the first four groups set forth above may continue to add to
their accounts even after their company relationships have ended.

40
<PAGE>

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 Class A shares of the Funds without incurring a sales charge.

PURCHASES BY OTHER INDIVIDUALS WITHOUT A SALES CHARGE

The following other individuals and entities may also buy Class A Fund
shares without paying a sales charge:

- Clients of the Adviser buying shares of the Funds in their advisory
accounts.
- Trust companies, including Piper Trust Company, and bank trust
departments using funds over which they exercise 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 fund that is not managed by
the Adviser. This privilege is available for 30 days after the sale.
- Former shareholders of American Government Term Trust Inc. may invest
the distributions received by them in connection with the dissolution of
such fund in shares of the Funds without payment of a sales charge.
- Investors purchasing shares through a wrap fee account established by
the Distributor or by another broker-dealer who has entered into a
selected dealer agreement with the Distributor.

PURCHASES BY EMPLOYEE BENEFIT PLANS

Class A shares of the Funds 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 Class A shares in the Funds or any
other series of the Company (other than a money market fund) during a 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 Class A shares of the
Funds during such quarter without incurring a sales charge.

41
<PAGE>

REDEMPTION OF SHARES

GENERAL

Redemption of shares, or payment, may be suspended at times (a) when the
New York Stock Exchange is closed for other than customary weekend or holiday
closings, (b) when trading on said Exchange is restricted, (c) when an emergency
exists, as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable, or it is not reasonably practicable for a Fund
fairly to determine the value of its net assets, or (d) during any other period
when the Securities and Exchange Commission, by order, so permits, provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist.

Shareholders who purchased Fund shares through a broker-dealer other than
the Distributor may redeem such shares either by oral request to such broker-
dealer or by written request to IFTC at the address set forth in the Prospectus.
To be considered in proper form, written requests for redemption should indicate
the dollar amount or number of shares to be redeemed, refer to the shareholder's
Fund account number, and give either a social security or tax identification
number. The request should be signed in exactly the same way the account is
registered. If there is more than one owner of the shares, all owners must
sign. If shares to be redeemed have a value of $10,000 or more or redemption
proceeds are to be paid to someone other than the shareholder at the
shareholder's address of record, the signature(s) must be guaranteed by an
"eligible guarantor institution," which includes a commercial bank that is a
member of the Federal Deposit Insurance Corporation, a trust company, a member
firm of a domestic stock exchange, a savings association or a credit union that
is authorized by its charter to provide a signature guarantee. IFTC may reject
redemption instructions if the guarantor is neither a member of nor a
participant in a signature guarantee program. Signature guarantees by notaries
public are not acceptable. The purpose of a signature guarantee is to protect
shareholders against the possibility of fraud. Further documentation will be
requested from corporations, administrators, executors, personal
representatives, trustees and custodians. Redemption requests given by
facsimile will not be accepted. Unless other instructions are given in proper
form, a check for the proceeds of the redemption will be sent to the
shareholder's address of record.

REINVESTING AFTER A SALE

A shareholder who has redeemed Class A shares of a Fund may reinvest all or
part of the redemption proceeds in Class A shares of any fund managed by the
Adviser within 30 days without payment of an additional sales charge. If the
shareholder paid a contingent deferred sales charge ("CDSC") in connection with
such redemption of Class A shares, the Distributor will refund a proportional
amount of such CDSC. Similarly, a shareholder who has redeemed Class B shares
of a Fund may reinvest all or a part of the redemption proceeds in the Class B
shares of any fund managed by the Adviser within 30 days of such redemption and
the

42
<PAGE>

Distributor will refund a proportional amount of the CDSC paid on such
redemption. Such refund will be based upon the ratio of the net asset value of
shares purchased in the reinvestment to the net asset value of shares redeemed.
Reinvestments will be allowed at net asset value (without the payment of an
initial sales charge in the case of Class A shares), irrespective of the amounts
of the reinvestment, but shall be subject to the same pro rata CDSC that was
applicable to the earlier investment; however, the period during which the CDSC
shall apply on the newly issued shares shall be the period applicable to the
redeemed shares extended by the number of days between the redemption and the
reinvestment dates (inclusive).

SYSTEMATIC WITHDRAWAL PLAN

To establish a Systematic Withdrawal Plan for a Fund and receive regular
periodic payments, an account must have a value of $5,000 or more ($1 million or
more in the case of Class Y shares). A request to establish a Systematic
Withdrawal Plan must be submitted in writing to an investor's Piper Jaffray
Investment Executive or other broker-dealer. There are no service charges for
maintenance; the minimum amount that may be withdrawn each period is $100.
(This is merely the minimum amount allowed and should not be interpreted as a
recommended amount.) The holder of a Systematic Withdrawal Plan will have any
income dividends and any capital gains distributions reinvested in full and
fractional shares of the same Class at net asset value. To provide funds for
payment, the appropriate Fund will redeem as many full and fractional shares as
necessary at the redemption price, which is net asset value. Redemption of
shares may reduce or possibly exhaust the shares in your account, particularly
in the event of a market decline. As with other redemptions, a redemption to
make a withdrawal payment is a sale for federal income tax purposes. Payments
made pursuant to a Systematic Withdrawal Plan cannot be considered as actual
yield or income since part of such payments may be a return of capital.

A confirmation of each transaction showing the sources of the payment and
the share and cash balance remaining in the account will be sent. The plan may
be terminated on written notice by the shareholder or the Fund, and it will
terminate automatically if all shares are liquidated or withdrawn from the
account or upon the death or incapacity of the shareholder. The amount and
schedule of withdrawal payments may be changed or suspended by giving written
notice to your Piper Jaffray Investment Executive or other broker-dealer at
least seven business days prior to the end of the month preceding a scheduled
payment.

43
<PAGE>

TAXATION

GENERAL

Each Fund qualified during its last taxable year and intends to qualify in
the future as a regulated investment company for federal income tax purposes.
In order to so qualify, a Fund must meet certain requirements imposed by the
Code as to the sources of the Fund's income and the diversification of the
Fund's assets. A Fund must, among other things, (a) derive in each taxable year
at least 90% of its gross income from dividends, interest, payments with respect
to loans of securities, gains from the sale or other disposition of securities
or other income derived with respect to its business of investing in such
securities (including, but not limited to, gains from options, futures or
forward contracts); and (b) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the value of the Fund's assets is
represented by (A) cash, United States government securities or securities of
other regulated investment companies, and (B) other securities that, with
respect to any one issuer, do not represent more than 5% of the value of the
Fund's assets or more than 10% of the voting securities of such issuer, and
(ii) not more than 25% of the value of the Fund's assets is invested in the
securities of any issuer (other than United States government securities or the
securities of other regulated investment companies) or two or more issuers
controlled by the Fund and determined to be engaged in the same trade or
business.

If a Fund qualifies as a regulated investment company and satisfies a
minimum distribution requirement, the Fund will not be subject to federal income
tax on income and gains to the extent that it distributes such income and gains
to its shareholders. The minimum distribution requirement is satisfied if a
Fund distributes at least 90% of its net investment income (including tax-exempt
interest and net short-term capital gains) for the taxable year. Although each
Fund intends to satisfy the above minimum distribution requirement, it may elect
to retain its remaining net investment income. A Fund would be subject to
corporate tax (at rates up to 35%) on any undistributed income. In addition, a
Fund may in the future decide to retain all or a portion of its net capital
gain, as described under "Federal Tax Treatment of Shareholders -- Distributions
to Shareholders," below.

Each Fund will be subject to a nondeductible 4% excise tax to the extent
that it does not distribute by the end of each calendar year (or is not
subjected to regular corporate tax in such year on) an amount equal to the sum
of (a) 98% of the Fund's ordinary income for such calendar year; (b) 98% of the
excess of capital gains over capital losses for the one-year period ending on
October 31 of each year; and (c) the undistributed income and gains from the
preceding years (if any).

Each Fund's investments may be subject to taxes in foreign countries which
would reduce the total return on such investments. In addition, if a Fund is
deemed to be a resident of the United Kingdom for United Kingdom tax purposes or
if a 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

44
<PAGE>

portion of such Fund's gains or income. In light of the structure of the Funds
and the terms and conditions of the Advisory and Sub-Advisory Agreements, the
Adviser believes that any such risk is minimal.

FEDERAL TAX TREATMENT OF SHAREHOLDERS

DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders attributable
to a Fund's net investment income (including interest income and net short-term
capital gains) are taxable as ordinary income whether paid in cash or reinvested
in additional shares of the Fund. It is not anticipated that any of the Funds'
distributions will qualify for the dividends received deduction for corporate
shareholders.

Distributions of any net capital gain (I.E., the excess of net long-term
capital gain over net short-term capital loss, if any) that are designated as
capital gain dividends generally are taxable as long-term capital gains, whether
paid in cash or additional shares of a Fund, regardless of how long the shares
have been held. However, as discussed in the Prospectus under "Holding Shares --
Taxing of Dividends and Other Distributions," it is expected that IRS
regulations issued pursuant to the Taxpayer Relief Act of 1997 will provide that
the Funds must notify shareholders who are individuals, estates or trusts as to
whether they must treat capital gain dividends that they receive as mid-term or
long-term capital gains.

Each Fund may elect to retain all or a portion of its net capital gain and
be taxed at the corporate tax rate for such capital gains, which is currently
35%. In such event, the Fund would most likely make an election that would
require each shareholder of record on the last day of the Fund's taxable year to
include in income for tax purposes his proportionate share of the Fund's
undistributed net capital gain. If such an election is made, each shareholder
would be entitled to credit his proportionate share of the tax paid by a Fund
against his federal income tax liabilities and to claim refunds to the extent
that the credit exceeds such liabilities. In addition, the shareholder would be
entitled to increase the basis of his shares for federal tax purposes by an
amount equal to 65% of his proportionate share of the undistributed net capital
gain.

Dividends and distributions by each Fund are generally taxable to the
shareholders at the time the dividend or distribution is made (even if
reinvested in additional shares of the Fund). However, any dividend declared by
a Fund in October, November or December of any calendar year which is payable to
shareholders of record on a specified date in such a month will be treated as
received by the shareholders on December 31 of such year if the dividend is paid
during January of the following year. The realization by a Fund of original
issue or market discount will increase the investment income of such Fund and
the amount required to be distributed.

FOREIGN TAX CREDIT ELECTION. Each Fund may be subject to taxes on its
income imposed by foreign countries. If at the end of a Fund's fiscal year more
than 50% of

45
<PAGE>

its total assets consist of securities of foreign corporations, such Fund will
be eligible to file an election with the Internal Revenue Service pursuant to
which shareholders of the Fund will be required to include their respective pro
rata portions of such foreign taxes as gross income, treat such amounts as
foreign taxes paid by them, and deduct such amounts in computing their taxable
incomes or, alternatively, use them as foreign tax credits against their federal
income taxes.

SALE OF SHARES. In general, if a share of common stock is sold or
exchanged, the seller will recognize gain or loss equal to the difference
between the amount realized in the sale or exchange and the seller's adjusted
basis in the share of common stock. For corporate shareholders, any gain or
loss realized upon a sale or exchange of shares of common stock will be treated
as long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. For shareholders who
are individuals, estates, or trusts, the gain or loss will be considered long-
term if the shareholder has held the shares for more than 18 months or mid-term
if the shareholder has held the shares for more than one year but not more than
18 months, and otherwise as short-term capital gain or loss. Further, if such
shares are held for six months or less, loss realized by a shareholder will be
treated as long-term capital loss to the extent of the total of any capital gain
dividend received by the shareholder. In addition, any loss realized on a sale
or exchange of shares of common stock will be disallowed to the extent the
shares disposed of are replaced within a period of 61 days beginning 30 days
before and ending 30 days after disposition of the shares. In such case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.

BACKUP WITHHOLDING. Each Fund may be required to withhold federal income
tax at the rate of 31% of all taxable distributions payable to shareholders who
fail to provide such Fund with their correct taxpayer identification number or
to make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Corporate
shareholders and certain other shareholders specified in the Code are generally
exempt from such backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against the shareholder's federal
income tax liability.

OTHER TAXES. Distributions may also be subject to state, local and foreign
taxes depending on each shareholder's particular situation.

FOREIGN SHAREHOLDERS. The foregoing discussion relates solely to United
States federal income tax law as applicable to "U.S. persons,"I.E., U.S.
citizens and residents and U.S. domestic corporations, partnerships, trusts and
estates. Shareholders who are not U.S. persons should consult their tax advisers
regarding the U.S. and non-U.S. tax consequences of ownership of shares of the
Funds, including the fact that such a shareholder may be subject to U.S.
withholding tax at a rate of 30% (or at a lower rate under an applicable U.S.
income tax treaty) on amounts constituting ordinary income from U.S. sources,
including ordinary dividends paid by the Funds.

46
<PAGE>

CONSEQUENCES OF CERTAIN FUND INVESTMENTS

The Funds engage in various hedging transactions. Under various provisions
of the Code, the result of such transactions may be to change the character of
recognized gains and losses, accelerate the recognition of certain gains and
losses, and defer the recognition of certain losses. The extent to which a Fund
may be able to use such hedging techniques may be limited by the requirement
that generally less than 30% of a Fund's gross income consist of gains from the
sale or disposition of certain assets held for less than three months.

Under Section 988 of the Code, all or a portion of gains and losses from
certain transactions is treated as ordinary income or loss. These rules
generally apply to transactions in certain securities denominated in foreign
currencies, forward contracts in foreign currencies, futures contracts in
foreign currencies that are not "regulated futures contracts," certain unlisted
options and foreign currency swaps. The rules under Section 988 may also affect
the timing of income recognized by the Fund.

Each Fund may be subject to U.S. taxes resulting from holdings in a passive
foreign investment company ("PFIC"). A foreign corporation is a PFIC when 75%
or more of its gross income for the taxable year is passive income or 50% or
more of the average value of its assets consists of assets that produce or could
produce passive income. The Funds have no current intention to invest in PFICs.

GENERAL INFORMATION

The Bylaws of the Company provide that shareholder meetings be held only
with such frequency as required under Minnesota law. Minnesota corporation law
requires only that the Board of Directors convene shareholder 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
a corporation may demand a regular meeting of shareholders by written notice
given to the chief executive officer or chief financial officer of the
corporation. 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
the corporation. In addition, the 1940 Act requires a shareholder vote for all
amendments to fundamental investment policies and restrictions, for all
amendments to investment advisory contracts and for certain amendments to Rule
12b-1 distribution plans.

Minnesota has enacted legislation which authorizes corporations to
eliminate or limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of the fiduciary duty of "care"
(the duty to act with the care an ordinarily prudent person in a like position
would exercise under similar circumstances). Minnesota law does not, however,
permit a corporation to eliminate or limit the liability of a director (a) for
any breach of the director's duty of

47
<PAGE>

"loyalty" to the corporation or its shareholders (the duty to act in good faith
and in a manner reasonably believed to be in the best interest of the
corporation), (b) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (c) for authorizing a
dividend, stock repurchase or redemption or other distribution in violation of
Minnesota law or for violation of certain provisions of Minnesota securities
laws, or (d) for any transaction from which the director derived an improper
personal benefit. Minnesota law does not permit elimination or limitation of a
director's liability under the 1933 Act or the Securities Exchange Act of 1934,
and the 1940 Act prohibits elimination or limitation of a director's liability
for acts involving willful malfeasance, bad faith, gross negligence or reckless
disregard of the duties of a director. The Articles of Incorporation of the
Company limit the liability of directors to the fullest extent permitted by
Minnesota law and the 1940 Act.

FINANCIAL STATEMENTS

The audited financial statements of Pacific-European Growth Fund and
Emerging Markets Growth Fund dated September 30, 1997, as set forth in the
Funds' Annual Report, are incorporated by reference into this Statement of
Additional Information. The audited financial statements are provided in
reliance on the report of KPMG Peat Marwick LLP, 4200 Norwest Center,
Minneapolis, Minnesota 55402, independent auditors of the Funds, given on the
authority of such firm as experts in accounting and auditing.

PENDING LITIGATION

Complaints have been brought in federal and state court relating to one
open-end and twelve closed-end investment companies managed by the Adviser and
to two open-end funds for which the Adviser has acted as sub-adviser. On
February 13, 1996, a Settlement Agreement became effective for the consolidated
class action lawsuit, titled IN RE: PIPER FUNDS INC. INSTITUTIONAL GOVERNMENT
INCOME PORTFOLIO LITIGATION. The Amended Consolidated Class Action Complaint
was filed on October 5, 1994, in the United States District Court, District of
Minnesota, against Institutional Government Income Portfolio (a series of Piper
Funds Inc.), the Adviser, the Distributor, William H. Ellis and Edward J.
Kohler, and had alleged the making of materially misleading statements in the
prospectus, common law negligent misrepresentation and breach of fiduciary duty.
The Settlement Agreement will provide approximately $67.5 million, together with
interest earned, less certain disbursements and attorney fees, to class members
in payments scheduled over approximately three years. Such payments will be
made by Piper Jaffray Companies Inc. and the Adviser and will not be an
obligation of Piper Funds Inc.

A complaint was filed by Gary E. Nelson on June 28, 1995 in the United
States District Court for the Western District of Washington at Seattle against
American Strategic Income Portfolio Inc. -- II ("BSP"), the Adviser, the
Distributor, Piper Jaffray Companies Inc., Worth Bruntjen, Charles N. Hayssen,
Michael Jansen,

48
<PAGE>

William H. Ellis and Edward J. Kohler. A second complaint was filed by the same
individual in the same court on July 12, 1995 against American Opportunity
Income Fund Inc. ("OIF"), the Adviser, the Distributor, Piper Jaffray Companies
Inc., Worth Bruntjen, Charles N. Hayssen, Michael Jansen, William H. Ellis and
Edward J. Kohler. On September 7, 1995, Christian Fellowship Foundation Peace
United Church of Christ, Gary E. Nelson and Lloyd Schmidt filed an amended
complaint purporting to be a class action in the United States District Court
for the District of Washington. The complaint was filed against American
Government Income Portfolio, Inc. ("AAF"), American Government Income Fund Inc.
("AGF"), American Government Term Trust, Inc., American Strategic Income
Portfolio Inc. ("ASP"), American Strategic Income Portfolio Inc. -- II, American
Strategic Income Portfolio Inc. -- III ("CSP"), American Opportunity Income Fund
Inc., American Select Portfolio Inc., Piper Jaffray Companies Inc., the
Distributor, the Adviser and certain associated individuals. By Order filed
October 5, 1995, the complaints were consolidated. Plaintiffs filed a second
amended complaint on February 5, 1996 and a third amended complaint on June 4,
1996. The third amended third complaint alleges generally that the prospectus
and financial statements of each investment company were false and misleading.
Specific violations of various federal securities laws are alleged with respect
to each investment company. The complaint also alleges that the defendants
violated the Racketeer Influenced and Corrupt Organizations Act, the Washington
State Securities Act and the Washington Consumer Protection Act. The Court has
granted final approval to a Settlement Agreement which became effective on
September 20, 1997. The Settlement Agreement provides $15.5 million to class
members in payments by Piper Jaffray Companies Inc. and the Adviser over the
next four years. The settlement also includes an agreement that each of OIF,
AAF, and AGF would offer to repurchase up to 25% of their outstanding shares
from current shareholders at net asset value. If the discounts between net asset
value and market price of these funds do not decrease to 5% or less within
approximately two years after the effective date of the settlement, the fund
boards may submit shareholder proposals to convert these funds to an open-end
format. Finally, the agreement stipulates that each of ASP, BSP, CSP and SLA
would offer to repurchase up to 10% of their outstanding shares from current
shareholders at net asset value. Shareholders received notice of the offers to
repurchase in October 1997, and the offers to repurchase expired on November 17,
1997.

Four additional complaints are pending which involve the funds named as
defendants in the Nelson/Christian Fellowship Consolidated Action and are based
on claims similar to that action. The first additional complaint was filed
against the Distributor and Richard Tallent in Montana State District Court,
Silver Bow County on November 1, 1995 by plaintiff John Darlington. The second
complaint was filed against the Distributor and Richard Tallent on April 11,
1996 in Montana State District Court, Silver Bow County by plaintiff Kenneth
Schneider. The third complaint was filed against the Distributor and Richard
Tallent on April 11, 1996 in Montana State District Court, Silver Bow County by
plaintiff Margaret Nagel. The fourth complaint was filed against the
Distributor on August 7, 1996 by plaintiff Kenneth Gennerman as Trustee of the
Nicole Bowlin Trust in Wisconsin Circuit

49
<PAGE>

Court, Waukesha County. In addition to the above complaints, a number of
arbitrations have been commenced by individual investors in the funds named as
defendants in the Nelson/Christian Fellowship Consolidated Action.

Complaints have also been filed relating to two open-end funds for which
the Adviser has acted as sub-adviser, Managers Intermediate Mortgage Fund and
Managers Short Government Fund. A complaint was filed on September 26, 1994 in
the United States District Court, District of Connecticut, by Florence R. Hosea,
Bobby W. Hosea, Getrud B. Dale and Peter M. Dale, Andrew Poffel and Diane Poffel
as tenants by the Entireties, Myrone Sarone, Donna M. DiPalo, Bernard B. Geltner
and Gail Geltner and Paul Delman. The complaint was filed against The Managers
Funds, The Managers Funds, L.P., Robert P. Watson, the Adviser, the Distributor,
an individual associated with the Adviser, Evaluation Associates, Inc. and
Managers Intermediate Mortgage Fund. The complaint, which is a putative class
action, alleges certain violations of federal securities laws, including the
making of false and misleading statements in the prospectus, and alleges
negligent misrepresentation, breach of fiduciary duty and common law fraud. A
similar complaint was filed as a putative class action in the same court on
November 4, 1994. The complaint was filed by Karen E. Kopelman against The
Managers Fund, The Managers Funds, L.P., Robert P. Watson, the Adviser, the
Distributor, Worth Bruntjen, Evaluation Associates, Inc. and Managers
Intermediate Mortgage Fund. The two putative class actions were consolidated by
court order on December 13, 1994. Plaintiffs filed an Amended and Restated
Complaint on July 19, 1995. The named plaintiffs and defendants have entered
into a settlement agreement which is subject to approval by the court and a
sufficiently large percentage of class members. Pursuant to the terms of the
settlement agreement, defendants collectively have agreed to pay a total amount
of up to $6,942,733.66. The Piper defendants have agreed to pay up to
$4,592,220.59, consisting of up to $923,930.23 in cash and three notes, each
bearing interest of six percent per annum, to be paid as follows: $1,199,908.06
six months from the settlement effective date; $1,097,058.80 to be paid twelve
months from the effective date; and $1,371,323.50 to be paid eighteen months
from the effective date. The settlement of this putative class action is
contingent on the settlement of related actions involving claims by First
Commercial Trust Company, an investor in Managers Intermediate and other funds.
A complaint relating to the Managers Short Government Fund was filed on
November 18, 1994 in the United States District Court, District of Minnesota.
The complaint was filed by Robert Fleck as a putative class action against The
Managers Funds, The Managers Funds, L.P., the Adviser, the Distributor, Worth
Bruntjen, Evaluation Associates, Inc., Robert P. Watson, John E. Rosati, William
M. Graulty, Madeline H. McWhinney, Steven J. Pasggioli, Thomas R. Schneeweis and
Managers Short Government Fund, F/K/A/ Managers Short Government Income Fund.
The complaint alleges certain violations of federal securities laws, including
the making of false and misleading statements in the prospectus, and negligent
misrepresentation. The Court granted final approval to a settlement agreement
which will provide to class members up to a total of $1.5 million collectively
from The Managers Funds, L.P. and the Adviser. The effective date of the
settlement was September 2, 1997. A third complaint relating to both the
Managers Intermediate

50
<PAGE>

Mortgage Fund and the Managers Short Government Fund was filed on October 26,
1995 in Connecticut State Superior Court, Stamford/Norwalk District. The
complaint was filed by First Commercial Trust Company, N.A. against the Managers
Funds, Managers Short Government Fund, Managers Intermediate Mortgage Fund,
Managers Short and Intermediate Bond Fund, The Managers Funds, L.P., EAIMC
Holdings Corporation, Evaluation Associates Holding Corporation, EAI Partners,
L.P., Evaluation Associates, Inc., Robert P. Watson, William W. Graulty,
Madeline H. McWhinney, Steven J. Paggioli, Thomas R. Schneeweis, William J.
Crerend, the Adviser, Piper Jaffray Companies Inc., Worth Bruntjen, Standish,
Ayer & Wood, Inc., TCW Funds Managements, Inc., and TCW Management Company. The
complaint alleges claims under Connecticut common law and violation of the
Connecticut Securities Act and the Connecticut Unfair and Deceptive Trade
Practices Act. The parties have entered into a settlement agreement to resolve
this matter. Pursuant to the settlement agreement, the share of the settlement
to be paid by the Piper defendants is a total of $1,995,968.75 consisting of
$314.259.10 in cash and three notes, bearing simple interest of six percent per
annum, to be paid as follows: $550,091.95 to be paid six months from the
effective date; $502,941.20 to be paid 12 months from the effective date;
$628,676.50 to be paid 18 months from the effective date. The settlement of
this matter is contingent on the settlement of the related Hosea/Kopelman
Consolidated Action and the settlement will not be effective until the effective
date of the settlement in the Hosea/Kopelman Consolidated Action.

The Adviser and Distributor do not believe that the settlements described
above, or any of the above lawsuits and arbitrations, will have a material
adverse effect upon their ability to perform under their agreements with the
Company, and they intend to defend the remaining lawsuits vigorously.

51
<PAGE>

APPENDIX A
CORPORATE BOND, PREFERRED STOCK AND
COMMERCIAL PAPER RATINGS

COMMERCIAL PAPER RATINGS

STANDARD & POOR'S RATINGS SERVICES. Commercial paper ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues assigned the A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are further
refined with designation 1, 2 and 3 to indicate the relative degree of safety.
The "A-1" designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus sign designation.

MOODY'S INVESTORS SERVICE, INC. Moody's commercial paper ratings are
opinions of the ability of the issuers to repay punctually promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation that such obligations are exempt from registration under
the Securities Act of 1933, nor does it represent that any specific note is a
valid obligation of a rated issuer or issued in conformity with any applicable
law. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:

Prime-1 Superior capacity for repayment of short-term
promissory obligations

Prime-2 Strong capacity for repayment of short-term promissory
obligations

Prime-3 Acceptable capacity for repayment of short-term
promissory obligations

CORPORATE BOND RATINGS

STANDARD & POOR'S RATINGS SERVICES. Standard & Poor's ratings for
corporate bonds have the following definitions:

Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.

A-1
<PAGE>

Debt rated "A" has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

MOODY'S INVESTORS SERVICE, INC. Moody's ratings for corporate bonds
include the following:

Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.

Bonds which are rated "A" possess many favorable attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

PREFERRED STOCK RATING

STANDARD & POOR'S RATINGS SERVICES. Standard & Poor's ratings for
preferred stock have the following definitions:

A-2
<PAGE>

An issue rated "AAA" has the highest rating that may be assigned by
Standard & Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.

A preferred stock issue rated "AA" also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA."

An issue rated "A" is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.

An issue rated "BBB" is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.

MOODY'S INVESTORS SERVICE, INC. Moody's ratings for preferred stock
include the following:

An issue which is rated "aaa" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.

An issue which is rated "aa" is considered a high grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.

An issue which is rate "a" is considered to be an upper medium grade
preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.

An issue which is rated "baa" is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.

A-3
<PAGE>

APPENDIX B
GENERAL CHARACTERISTICS AND RISKS
OF OPTIONS AND FUTURES

OPTIONS ON SECURITIES

The Funds may write covered put and call options and purchase put and call
options on the securities in which it may invest that are traded on U.S. and
foreign securities exchanges and in over-the-counter markets.

The writer of an option may have no control over when the underlying
securities must be sold, in the case of a call option, or purchased, in the case
of a put option; the writer may be assigned an exercise notice at any time prior
to the termination of the obligation. Whether or not an option expires
unexercised, the writer retains the amount of the premium. This amount, of
course, may, in the case of a covered call option, be offset by a decline in the
market value of the underlying security during the option period. If a call
option is exercised, the writer experiences a profit or loss from the sale of
the underlying security. If a put option is exercised, the writer must fulfill
the obligation to purchase the underlying security at the exercise price which
will usually exceed the then market value of the underlying security.

The writer of an option that wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously purchased. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.

Effecting a closing transaction in the case of a written call option will
permit a Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both, or in the case of
a written put option will permit a Fund to write another put option to the
extent that the exercise price thereof is secured by deposited cash or short-
term securities. Also, effecting a closing transaction will permit the cash or
proceeds from the concurrent sale of any securities subject to the option to be
used for other Fund investments. If a Fund desires to sell a particular
security from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale of the
security.

A Fund will realize a profit from a closing transaction if the price of the
transaction is less than the premium received from writing the option or is more
than the premium paid to purchase the option; a Fund will realize a loss from a

B-1
<PAGE>

closing transaction if the price of the transaction is more than the premium
received from writing the option or is less than the premium paid to purchase
the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by a Fund.

An option position may be closed out only where there exists a secondary
market for an option of the same series. If a secondary market does not exist,
it might not be possible to effect closing transactions in particular options
with the result that a Fund would have to exercise the options in order to
realize any profit. If a Fund is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market include the following: (i)
there may be insufficient trading interest in certain options, (ii) restrictions
may be imposed by a national securities exchange ("Exchange") on opening
transactions or closing transactions or both, (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities, (iv) unusual or unforeseen
circumstances may interrupt normal operations on an Exchange, (v) the facilities
of an Exchange or the Options Clearing Corporation may not at all times be
adequate to handle current trading volume, or (vi) one or more Exchanges could,
for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that Exchange (or in that class or series
of options) would cease to exist, although outstanding options on that Exchange
that had been issued by the Options Clearing Corporation as a result of trades
on that Exchange would continue to be exercisable in accordance with their
terms.

The Funds may purchase put options to hedge against a decline in the value
of its portfolio. By using put options in this way, a Fund will reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and by transaction costs.

The Funds may purchase call options to hedge against an increase in the
price of securities that the Fund anticipates purchasing in the future. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by a Fund upon exercise of the option, and, unless the
price of the underlying security rises sufficiently, the option may expire
worthless to the Fund.

FUTURES CONTRACTS

The Funds may, for hedging purposes, enter into contracts for the purchase
or sale for future delivery of securities or foreign currencies, or contracts
based on securities or financial indices including any index of the types of
securities in which the Fund may invest. U.S. futures contracts have been
designed by exchanges which

B-2
<PAGE>

have been designated "contracts markets" by the Commodity Futures Trading
Commission and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market. Futures
contracts trade on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange.

At the same time a futures contract is purchased or sold, a Fund must
allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1-1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day a Fund would
provide or receive cash that reflects any decline or increase in the contract's
value.

At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.

Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is fulfilled
before the date of the contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is accomplished by buying
(or selling, as the case may be) on a commodities exchange an identical futures
contract calling for delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation to make or take
delivery of the securities. Since all transactions in the futures market are
made, offset or fulfilled through a clearing house associated with the exchange
on which the contracts are traded, a Fund will incur brokerage fees when it
purchases or sells futures contracts.

The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by Management may still not
result in a successful transaction.

B-3
<PAGE>

In addition, futures contracts entail risks. Although Management will only
enter into futures contracts if it believes that use of such contracts will
benefit a Fund, if Management's investment judgment about the general direction
of securities prices is incorrect, a Fund's overall performance would be poorer
than if it had not entered into any such contract. For example, if a Fund has
hedged against the possibility of a decrease in securities prices which would
adversely affect the price of securities held in its portfolio and securities
prices increase instead, a Fund will lose part or all of the benefit of the
increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
a Fund has insufficient cash, it may have to sell securities from its portfolio
to meet daily variation margin requirements. Such sales of securities may be,
but will not necessarily be, at increased prices which reflect the rising
market. A Fund may have to sell securities at a time when it may be
disadvantageous to do so.

OPTIONS ON FUTURES CONTRACTS

The Funds may purchase and write options on futures contracts for hedging
purposes. The purchase of a call option on a futures contract is similar in
some respects to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the underlying debt
securities, it may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of futures
contracts, when a Fund is not fully invested it may purchase a call option on a
futures contract to hedge against an anticipated increase in securities prices.

The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security which is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is below the exercise price, a Fund will retain the full amount of the
option premium which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. The writing of a put option on a
futures contract constitutes a partial hedge against increasing prices of the
security which is deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is higher than the exercise price, a
Fund will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which the Fund intends to
purchase. If a put or call option a Fund has written is exercised, the Fund
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions, a
Fund's losses from existing options may to some extent be reduced or increased
by changes in the value of portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a

B-4
<PAGE>

Fund may purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of a decline in securities prices.

The amount of risk a Fund assumes when it purchases an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.

The Funds' ability to engage in the options and futures strategies
described above will depend on the availability of liquid markets in such
instruments. Markets in options and futures with respect to many types of
securities in which the Funds invest are relatively new and still developing.
It is impossible to predict the amount of trading interest that may exist in
various types of options or futures. Therefore no assurance can be given that a
Fund will be able to utilize these instruments effectively for the purposes set
forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Taxation--Consequences
of Certain Fund Investments."

ADDITIONAL RISKS OF OPTIONS ON SECURITIES AND OPTIONS ON FUTURES CONTRACTS

Options on securities may be traded over-the-counter. In an over-the-
counter trading environment, much of the protection afforded to exchange
participants will not be available. For example, there are no daily price
fluctuation limits, and adverse market movements could therefore continue to an
unlimited extent over a period of time. Although the purchaser of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, the option writer could lose
amounts substantially in excess of its initial investment, due to the margin
requirements associated with such positions.

In addition, options on securities, futures contracts and options on
futures contracts may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in or the prices
of foreign currencies or securities. The value of such positions also could be
adversely affected by (a) other complex foreign political and economic factors;
(b) lesser availability than in the United States of data on which to make
trading decisions; (c) delays in the Fund's ability to act upon economic events
occurring in foreign markets during nonbusiness hours in the United States; (d)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the United States; and (e) lesser trading volume.

FUTURE DEVELOPMENTS

The Funds may, following written notice thereof to its shareholders, take
advantage of opportunities in the area of options and futures contracts and
options on futures contracts which are not currently contemplated for use by the
Funds or

B-5
<PAGE>

which are not currently available but which may be developed, to the extent such
opportunities are both consistent with a Fund's investment objective and legally
permissible for a Fund. Such opportunities, if they arise, may involve risks
which exceed those involved in the options and futures activities described
above.

B-6

<PAGE>

PART C

PIPER GLOBAL FUNDS INC.

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial statements are incorporated by reference to the Registrant's
Annual Reports previously filed with the Commission.

(b) Exhibits:
1.1 Articles of Incorporation (2)
1.2 Articles of Amendment to Articles of Incorporation (4)
1.3 Certificate of Designation of Series B (5)
1.4 Certificate of Designation of Class A, Class B and Class Y of Series
A and of Class A and Class B of Series B (7)
2.1 Amended and Restated Bylaws (4)
2.2 Amendment to the Bylaws (7/6/95) (5)
2.3 Amendment to the Amended and Restated Bylaws (4/8/96) (5)
3. Not applicable
4. Not applicable
5.1 Investment Advisory and Management Agreement (4)
5.2 Supplement to Investment Advisory and Management Agreement (5)
5.3 Amendment to Investment Advisory and Management Agreement (7)
5.4 Sub-Investment Advisory Agreement (Series A) (4)
5.5 Sub-Advisory Agreement (Series B) (5)
5.6 Amendment to Sub-Investment Advisory Agreement (7)
6. Distribution Agreement (dated 2/18/97) (7)
7. Not applicable
8.1 Custody and Investment Accounting Agreement (6)
9.1 Shareholder Account Servicing Agreement with Piper Trust Company (7)
9.2 Shareholder Account Servicing Agreement with Piper Jaffray Inc. (7)
10.1 Opinion and Consent of Dorsey & Whitney LLP with respect to Series B
(5)
10.2 Opinion and Consent of Dorsey & Whitney LLP with respect to Class A,
Class B and Class Y of Series A and Class A and Class B of Series B
(7)
11. Consent of KPMG Peat Marwick LLP (8)
12. Not applicable
13. Not applicable
14. Not applicable
15.1 Amended Plan of Distribution (effective 2/18/97) (Series A) (7)
15.2 Amended Plan of Distribution (effective 2/18/97) (Series B) (7)
16. Computation of Performance Quotations (1)
17. Power of Attorney (7)
18. Plan pursuant to Rule 18f-3 under the Investment Company
Act of 1940 (7)
- ---------------------------
(1) Previously filed.
(2) Incorporated by reference to the Registrant's Registration Statement on
Form N-2, filed February 16, 1990, File No. 33-33534.

1
<PAGE>

(3) Incorporated by reference to Amendment No. 2 to the Registrant's
Registration Statement on Form N-2, filed April 19, 1990, File No. 33-
33534.
(4) Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A filed June 28, 1993.
(5) Incorporated by reference to Post-Effective Amendment No. 6 to the
Registrant's Registration Statement on Form N-1A filed July 1, 1996.
(6) Incorporated by reference to Registrant's Registration Statement on Form
N-14 filed April 6, 1996.

(7) Incorporated by reference to Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on Form N-1A filed February 18, 1997.
(8) Filed herewith.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

No person is directly or indirectly controlled by or under common control
with the Registrant.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

As of November 14, 1997, the number of record holders of each class of
Common Shares was:
Number of Record Holders
------------------------
Class A Class B Class Y
------- ------- -------
Pacific-European Growth Fund 8,547 25 5
Emerging Markets Growth Fund 2,872 52 *

* Class of shares not offered.

ITEM 27. INDEMNIFICATION

The Articles of Incorporation and Bylaws of the Registrant provide that the
Registrant shall indemnify such persons for such expenses and liabilities, in
such manner and under such circumstances, to the full extent permitted by
Section 302A.521, Minnesota Statutes, as now enacted or hereafter amended,
provided that no such indemnification may be made if it would be in violation of
Section 17(h) of the Investment Company Act of 1940, as now enacted or hereafter
amended. Section 302A.521 of the Minnesota Statutes, as now enacted, provides
that a corporation shall indemnify a person made or threatened to be made a
party to a proceeding of the person against judgments, penalties, fines,
settlements, and reasonable expenses, including attorneys' fees and
disbursements, incurred by the person in connection with the proceeding if, with
respect to the acts or omissions of the person complained of in the proceeding,
the person has not been indemnified by another organization for the same
judgments, penalties, fines, settlements, and reasonable expenses incurred by
the person in connection with the proceeding with respect to the same acts or
omissions; acted in good faith, received no improper personal benefit and the
Minnesota Statutes dealing with directors' conflicts of interest, if applicable,
have been satisfied; in the case of a criminal proceeding, had no reasonable
cause to believe that the conduct was unlawful; and reasonably believed that the
conduct was in the best interests of the corporation or,

2
<PAGE>

in certain circumstances, reasonably believed that the conduct was not opposed
to the best interests of the corporation.

Insofar as the indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

The Registrant will comply with the indemnification requirements of
Investment Company Act Releases 7221 (June 9, 1972) and 11330 (September 2,
1980).

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Information on the business of the Adviser is described in the section of
the Prospectus, incorporated by reference in this Registration Statement,
entitled "Management -- Investment Adviser."

The officers and directors of the Adviser and their titles are as follow:

Name Title
---- -----
Paul A. Dow Chief Executive Officer and
Chief Investment Officer
E. Peter Gillette, Jr. Director
Deborah K. Roesler Director
Paula Meyer President and Director of Marketing
Susan S. Miley Senior Vice President, General Counsel and
Secretary
Richard Daly Senior Vice President
Michael C. Derck Senior Vice President
John J. Gibas Senior Vice President
Marijo A. Goldstein Senior Vice President
Mark R. Grotte Senior Vice President
Jerry F. Gudmundson Senior Vice President
Joyce A. K. Halbe Senior Vice President
Robert C. Hannah Senior Vice President
Gregory Hanson Senior Vice President
Lynne Harrington Senior Vice President
Douglas Hedberg Senior Vice President
Mary M. Hoyme Senior Vice President
Kim Jenson Senior Vice President

3
<PAGE>

Jeffrey Johnson Senior Vice President
Russell J. Kappenman Senior Vice President
Kimberly F. Kaul Senior Vice President
Thomas S. McGlinch Senior Vice President
Steven V. Markusen Senior Vice President
Robert H. Nelson Senior Vice President
Chris Neuharth Senior Vice President
William Nimmo Senior Vice President
Gary Norstrem Senior Vice President
Nancy S. Olsen Senior Vice President
Ronald R. Reuss Senior Vice President
Bruce D. Salvog Senior Vice President
Sandra K. Shrewsbury Senior Vice President
Eric L. Siedband Senior Vice President
David M. Steele Senior Vice President
Jill A. Thompson Senior Vice President
John G. Wenker Senior Vice President
Douglas J. White Senior Vice President
Mark Austin Vice President
Cynthia K. Castle Vice President
Molly Destro Vice President
Rochelle B. Gonzo Vice President
Joan L. Harrod Vice President
James Jenson, Jr. Vice President
Amy K. Johnson Vice President
Wan-Chong Kung Vice President
David Luebke Vice President
Jane C. Longueville Vice President
Yedda Marks Vice President
Brent D. Mellum Vice President
Steven Meyer Vice President
Thomas Moore Vice President
Paul D. Pearson Vice President
Scott Richter Vice President
Catherine M. Stienstra Vice President
Shaista Tajamal Vice President
Jane K. Welter Vice President
Fong P. Woo Vice President

Principal occupations of Messrs. Dow and Nelson and Ms. Miley are set forth
in the Statement of Additional Information under the heading "Directors and
Officers." MR. GILLETTE has been a Director of the Adviser since 1997 and
President and Chairman of Piper Trust since 1995, prior to which he was a
Commissioner with the State of Minnesota since 1991. MS. MEYER has been
President and Director of Marketing of the Adviser since 1997, prior to which
she was a Senior Vice President of the Adviser since 1994, and prior thereto a
Vice President of Secura Insurance, Appleton, Wisconsin from 1988 to 1994. MS.
ROESLER has been a Director of the Adviser since 1997 and Chief Financial
Officer/Treasurer of Piper Jaffray Companies Inc. since 1989.

4
<PAGE>

MR. DALY has been a Senior Vice President of the Adviser since November
1996, prior to which he had been a Vice President of the Adviser from 1992 to
1996. MR. DERCK has been a Vice President of the Adviser since 1992. MR. GIBAS
has been a Senior Vice President of the Adviser since 1992. MS. GOLDSTEIN has
been a Senior Vice President of the Adviser since 1993, prior to which she was a
Vice President of the Adviser from 1991 to 1993. MR. GROTTE has been a Senior
Vice President of the Adviser since 1992. MR. GUDMUNDSON has been a Senior Vice
President of the Adviser since 1995, prior to which he was an Executive Vice
President at Resource Capital Advisers from 1991 to 1995. MS. HALBE has been a
Senior Vice President of the Adviser since 1997, prior to which she was a Vice
President from 1996 to 1997, and prior thereto she was a Vice President at First
Asset Management since 1990. MR. HANNAH has been a Senior Vice President of the
Adviser since 1995, prior to which he was manager of Craig and Associates in
Seattle, Washington from 1993 to 1994, and prior thereto, he was manager of
Exvere in Seattle from January 1993 to August 1993 and a registered
representative at Geneva in Irvine, California from 1991 to 1992. MR. HANSON
has been a Senior Vice President and Portfolio Manager of the Adviser since
1997, prior to which he was employed at Washington Square Advisers, Minneapolis
since 1979, most recently as a Senior Vice President and Portfolio Manager. MS.
HARRINGTON has been a Senior Vice President of the Adviser since 1995, prior to
which she was a Managing Director at Piper Jaffray Inc. in the Public Finance
Department. MR. HEDBERG has been a Senior Vice President and Portfolio Manager
of the Adviser since 1997, prior to which he was employed at Washington Square
Advisers, Minneapolis, since 1981, most recently as an Executive Vice President,
Managing Director and Portfolio Manager. MS. HOYME has been a Senior Vice
President of the Adviser since 1997, prior to which she was a Vice President of
the Adviser from 1996 to 1997, and prior thereto, she had been a Vice President
at First Asset Management since 1989. MS. JENSON has been a Senior Vice
President of the Adviser since 1996, prior to which she was a Managing Director
at Piper Trust since 1991. MR. JOHNSON has been a Senior Vice President and
Portfolio Manager of the Adviser since 1997, prior to which he was a Vice
President at First Asset Management since 1991. MR. KAPPENMAN has been a Senior
Vice President of the Adviser since 1996, prior to which he was a Vice President
of the Adviser from 1991 to 1996. MS. KAUL has been a Senior Vice President of
the Adviser since 1996 and Director of Corporate Communications of the Adviser
since 1991. MR. MCGLINCH has been a Senior Vice President of the Adviser since
1995, prior to which he had been a Vice President of the Adviser since 1992.
MR. MARKUSEN has been a Senior Vice President of the Adviser since 1993, prior
to which had been a senior vice president of Investment Advisers, Inc., in
Minneapolis, Minnesota from 1989 to 1993. MR. NEUHARTH has been a Senior Vice
President of the Adviser since 1997, prior to which he was a Vice President of
the Adviser from 1996 to 1997, and prior thereto he had been a senior mortgage
trader at FBS Mortgage since 1995. MR. NIMMO has been a Senior Vice President
of the Adviser since 1997, prior to which he was a Vice President of the Adviser
from 1996 to 1997, and prior thereto, a Vice President of Washington Square
Capital Management since 1991. MR. NORSTREM has been a Senior Vice President of
the Adviser since 1993, prior to which he was Treasurer of the City of Saint
Paul, Minnesota for twenty-eight years. MS. OLSEN has been a Senior Vice
President of the Adviser since 1991. MR. REUSS has been a Senior Vice President
of the Adviser since 1989. MR. SALVOG has been a Senior Vice President of the
Adviser since 1992. MS. SHREWSBURY has been a Senior Vice President of the
Adviser since 1993, prior to which she had been a Managing Director of Piper
Jaffray since 1992. MR. SIEDBAND has been a Senior Vice President of the
Adviser since November 1996, prior to which he was a Vice President of the
Adviser

5
<PAGE>

from 1992 to 1996. MR. STEELE has been a Senior Vice President of the Adviser
since 1992. MS. THOMPSON has been a Senior Vice President of the Adviser since
November 1996, prior to which she was a Vice President of the Adviser from 1994
to 1996, and prior thereto, a Vice President of Piper Jaffray since 1991.
MR. WENKER has been a Senior Vice President of the Adviser since 1993, prior to
which he had been a Managing Director of Piper Jaffray from 1992 to 1993. MR.
WHITE has been a Senior Vice President of the Adviser since 1991.

MR. AUSTIN has been a Vice President of the Adviser since 1997, prior to
which he was an Assistant Vice President of the Adviser since 1994, and prior
thereto, an associate in institutional marketing at Investment Advisers Inc.
from 1992 to 1994. MS. CASTLE has been a Vice President of the Adviser since
1994, prior to which she was a client service associate of the Adviser since
1990. MS. DESTRO has been a Vice President of the Adviser since 1994, prior to
which she was an Accounting Manager from 1993 to 1994 and mutual fund accountant
from 1991 to 1993 with the Adviser. MS. GONZO has been a Vice President of the
Adviser since 1996, prior to which she was a communications manager of the
Adviser since 1993, and prior thereto, a senior financial communications
specialist at Minnesota Mutual in St. Paul, Minnesota from 1986 to 1993. MS.
HARROD has been a Vice President of the Adviser since 1992. MR. JENSON has been
a Vice President of the Adviser since 1997, prior to which he was employed at
Norwest Investment Services, Minneapolis, since 1989, most recently as a Vice
President and Director of Product Management/Wholesaler. MS. JOHNSON has been a
Vice President of the Adviser since 1994, prior to which she was an Accounting
Manager from 1993 to 1994 and mutual fund accountant from 1991 to 1993 with the
Adviser. MS. KUNG has been a Vice President of the Adviser since 1993, prior to
which she had been a Senior Consultant at Cytrol Inc. from 1989 to 1992. MR.
LUEBKE has been a Vice President and Intermediate Equity Analyst of the Adviser
since 1997, prior to which he was employed at First Bank System since 1986, most
recently as a Vice President. MS. LONGUEVILLE has been a Vice President of the
Adviser since November 1996, prior to which she was an Assistant Vice President
since 1995, and prior thereto, a communications manager at the Adviser. MS.
MARKS has been a Vice President of the Adviser since 1997, prior to which she
worked in the derivatives department of Piper Jaffray Companies since 1994. MR.
MELLUM has been a Vice President of the Adviser since 1996, prior to which he
was an Assistant Vice President of the Adviser since 1995, and prior thereto, a
credit analyst at the Adviser since 1993, and prior to that he was a student.
MR. MEYER has been a Vice President of the Adviser since 1994 and manager of
Systems Integration for the Adviser since 1991. MR. MOORE has been a Vice
President of the Adviser since 1992. MR. PEARSON has been a Vice President of
the Adviser since 1995, prior to which he was Mutual Funds Accounting Manager of
the Adviser from 1994 to 1995 and prior thereto, Director of Fund Operations at
Norwest Bank, Minneapolis from 1992 to 1994. MR. RICHTER has been a Vice
President and Assistant General Counsel of the Adviser since 1997, prior to
which he was an attorney at Popham Haik Schnobrich & Kaufman since 1982. MS.
STIENSTRA has been a Vice President and a municipal bond trader of the Adviser
since 1995, prior to which she was an assistant analyst of the Adviser from 1991
to 1994. MS. TAJAMAL has been a Vice President of the Adviser since 1995 and a
portfolio manager of the Adviser since 1993, prior to which she was a money
market analyst of the Adviser from 1990 to 1993. MS. WELTER has been a Vice
President of the Adviser since 1994, prior to which she was a client service
associate of the Adviser since 1993 and a mutual fund accountant with the

6
<PAGE>

Adviser from 1990 to 1993. MR. WOO has been a Vice President of the Adviser
since 1994, prior to which he was a municipal credit analyst of the Adviser
since 1992.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) Piper Jaffray Inc. acts as principal underwriter for the Registrant
and also for three other open-end investment companies, Piper Funds Inc. -- II,
the shares of which are currently offered in one series, Piper Institutional
Funds Inc., the shares of which are currently offered in one series and Piper
Global Funds Inc., the shares of which are currently offered in two series.
Piper Jaffray has acted as principal underwriter in connection with the initial
public offering of shares of 23 closed-end investment companies.

(b) The name, positions and offices with Piper Jaffray Inc., and positions
and offices with the Registrant of each director and officer of Piper Jaffray
Inc. are as follow:

Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ------------------ -------------------------- ---------------------

Addison L. Piper Chairman of the Board of None
Directors and Chief Executive
Officer

Andrew S. Duff President None

Ralph W. Burnet Member of the Board None
of Directors

Christopher E. Clouser Member of the Board None
of Directors

Susan E. Engel Member of the Board None
of Directors

Kathy Halbreich Member of the Board None
of Directors

Robert S. Slifka Member of the Board None
of Directors

David Stanley Member of the Board None
of Directors

James J. Bellus Managing Director None

AnnDrea M. Benson Managing Director and None
General Counsel

David E. Rosedahl Managing Director None
and Secretary

7
<PAGE>

Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ------------------ -------------------------- ---------------------

Darren L. Acheson Managing Director None

Jeffrey C. Adamson Managing Director None

Mark D. Appelbaum Managing Director None

Jack M. Armstrong Managing Director None

Lynda M. Babcock Managing Director None

James J. Bellus Managing Director None

Lloyd K. Benson Managing Director None

Christopher P. Bessette Managing Director None

Gary J. Blauer Managing Director None

Karen M. Bohn Managing Director None

Eric A. Borg Managing Director None

Ronald O. Braun Managing Director None

Jay A. Brunkhorst Managing Director None

Edward M. Caillier Managing Director None

Kenneth S. Cameranesi Managing Director None

Joseph V. Caruso Managing Director None

Antonio J. Cecin Managing Director None

Joyce E. Chaney Managing Director None

Kenneth P. Clark Managing Director None

Linda A. Clark Managing Director None

Stephen B. Clark Managing Director None

John P. Clausen Managing Director None

Carol L. Collias Managing Director None

8
<PAGE>

Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ------------------ -------------------------- ---------------------

Mark Copman Managing Director None

David P. Crosby Managing Director None

Mark A. Curran Managing Director None

George S. Dahlman Managing Director None

Michael D. Deede Managing Director None

Joel R. Denney Managing Director None

Jack C. Dillingham Managing Director None

Mark T. Donahoe Managing Director None

Darci L. Doneff Managing Director None

Stephen M. Dragos Managing Director None

Andrew S. Duff Managing Director None

Michael D. Duffy Managing Director None

Andrew W. Dunleavy Managing Director None

John O. Eaton Managing Director None

William H. Ellis Managing Director None

Fred R. Eoff, Jr. Managing Director None

Richard D. Estenson Managing Director None

Francis E. Fairman IV Managing Director None

John R. Farrish Managing Director None

James D. Fehrenbach Managing Director None

Gordon R. Ferguson Managing Director None

Paul Ferry Managing Director None

Mark E. Fisler Managing Director None

9
<PAGE>

Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ------------------ -------------------------- ---------------------

Michael W. Follett Managing Director None

Steven T. Frisbie Managing Director None

Daniel P. Gallaher Managing Director None

Peter M. Gill Managing Director None

Kevin D. Grahek Managing Director None

Paul D. Grangaard Managing Director None

Thomas J. Gunderson Managing Director None

James S. Harrington Managing Director None

Charles N. Hayssen Managing Director None

William P. Henderson Managing Director None

Allan F. Hickok Managing Director None

Richard L. Hines Managing Director None

David B. Holden Managing Director None

Charles E. Howell, Jr. Managing Director None

Bruce C. Huber Managing Director None

John R. Jacobs Managing Director None

Kim R. Jenson Managing Director None

Earl L. Johnson Managing Director None

Richard L. Johnson Managing Director None

Nicholas P. Karos Managing Director None

Paul P. Karos Managing Director None

Lisa A. Kenvon Managing Director None

Richard G. Kiss Managing Director None

10
<PAGE>

Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ------------------ -------------------------- ---------------------

Gordon E. Knudsvig Managing Director None

Jerome P. Kohl Managing Director None

Michael J. Lanigan Managing Director None

Eric W. Larson Managing Director None

Michael L. Libera Managing Director None

Marina M. Lyon Managing Director None

Michael R. Mach Managing Director None

Robert E. Mapes Managing Director None

Peter T. Mavroulis Managing Director None

Robert B. McClanahan Managing Director None

Michael P. McMahon Managing Director None

Gregory T. McNellis Managing Director None

Joseph E. Meyers, Jr. Managing Director None

Davil L. Midgley Managing Director None

Dennis V. Mitchell Managing Director None

Edward P. Nicoski Managing Director None

Barry J. Nordstrand Managing Director None

Brooks G. O'Neil Managing Director None

John P. O'Neill Managing Director None

Benjamin S. Oehler Managing Director None

Timothy J. Oswald Managing Director None

John Otterlei Managing Director None

William O. Patterson Managing Director None

11
<PAGE>

Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ------------------ -------------------------- ---------------------

Robin C. Pfister Managing Director None

Daniel J. Phillips Managing Director None

Addison L. Piper Managing Director None

Laurence S. Podobinski Managing Director None

Steven J. Proeschel Managing Director None

Rex W. Ramsay Managing Director None

Brian J. Ranallo Managing Director None

Roger W. Redmond Managing Director None

Stacey R. Rickert Managing Director None

Robert P. Rinek Managing Director None

Wesley L. Ringo Managing Director None

Jim M. Roane Managing Director None

Deborah K. Roesler Managing Director None

Ross E. Rogers Managing Director None

Jeanne R. Rosengren Managing Director None

Maxine D. Rossini Managing Director None

Terry D. Sandven Managing Director None

Thomas P. Schnettler Managing Director None

Steven R. Schroll Managing Director None

Joyce Nelson Schuette Managing Director None\

David P. Sirianni Managing Director None

Arch C. Smith Managing Director None

Robert L. Sonnek Managing Director None

12
<PAGE>

Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ------------------ -------------------------- ---------------------

Sandra G. Sponem Managing Director None

Thomas E. Stanberry Managing Director None

DeLos V. Steenson Managing Director None

Richard J. Stream Managing Director None

Robert A. Stuber Managing Director None

D. Greg Sundberg Managing Director None

Robert D. Swerdling Managing Director None

Garey T. Symington, Jr. Managing Director None

William H. Teeter Managing Director None

Ann C. Tillotson Managing Director None

John F. Turner Managing Director None

Marie A. Uhrich Managing Director None

Momchilo Vucenich Managing Director None

Charles M. Webster, Jr. Managing Director None

Darrell L. Westby Managing Director None

David R. Westcott Managing Director None

Douglas R. Whitaker Managing Director None

James H. Wilford Managing Director None

Cindy L. Witt Managing Director None

Stephen W. Woodard Managing Director None

Mark E. Wren Managing Director None

Bradley F. Zilka Managing Director None

Beverly J. Zimmer Managing Director None

13
<PAGE>

The principal business address of each of the individuals listed above is Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-3804.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

The physical possession of the accounts, books, and other documents
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and Rules 3la-1 to 3la-3 promulgated thereunder is maintained by the Registrant
at Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-
3804, except that the physical possession of certain accounts, books and other
documents related to the custody of the Registrant's securities is maintained by
Investors Fiduciary Trust Company, 127 West Tenth Street, Kansas City, Missouri
64105.

ITEM 31. MANAGEMENT SERVICES

Not applicable.

ITEM 32. UNDERTAKINGS

(a) Not applicable.

(b) Not applicable.

(c) Each recipient of a prospectus of any series of the Registrant may
request the latest Annual Report of such series, and such Annual Report will be
furnished by the Registrant without charge.

14
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement on Form N-1A
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Minneapolis and State of Minnesota on
the 24th day of November 1997.

PIPER GLOBAL FUNDS INC.
(Registrant)

By /s/ Paul A. Dow
-----------------------------
Paul A. Dow, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:

/s/ Paul A. Dow President (principal November 24, 1997
- ------------------------ executive officer)
Paul A. Dow

/s/ Robert H. Nelson Treasurer (principal November 24, 1997
- ------------------------ financial and
Robert H. Nelson accounting officer)

David T. Bennett* Director

Jaye F. Dyer* Director

William H. Ellis* Director

Karol D. Emmerich* Director

Luella G. Goldberg* Director

David A. Hughey* Director

George Latimer* Director

*By /s/ William H. Ellis November 24, 1997
------------------------
William H. Ellis, Attorney-in-Fact

<PAGE>

[KPMG LETTERHEAD]

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Piper Global Funds Inc:

We consent to the use of our report dated November 7, 1997 incorporated by
reference herein and to the references to our Firm under the headings "FINANCIAL
HIGHLIGHTS" in Part A and "FINANCIAL STATEMENTS" in Part B of the Registration
Statement.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Minneapolis, Minnesota
November 24, 1997