<PAGE>
1933 Act Registration No.: 33-48299
1940 Act Registration No.: 811-06046
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 18, 1997
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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.
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Post-Effective Amendment No. 9
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AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
(Registration No. 811-06046)
Amendment No. 10
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(Check appropriate box or boxes)
PIPER GLOBAL FUNDS INC.
(Exact Name of Registrant as Specified in Charter)
Piper Jaffray Tower
222 South Ninth Street, Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 342-6387
(Registrant's Telephone Number, including Area Code)
Paul A. Dow
222 South Ninth Street
Minneapolis, Minnesota 55402
(Name and Address of Agent for Service)
COPY TO:
Kathleen L. Prudhomme, Esq.
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
X immediately upon filing pursuant to paragraph (b) of rule 485
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on (specify date) pursuant to paragraph (b) of rule 485
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75 days after filing pursuant to paragraph (a) of rule 485
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60 days after filing pursuant to paragraph (a) of rule 485
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The Registrant has registered an indefinite number or amount of common stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. A Rule 24f-2 Notice was filed by the Registrant on
November 28, 1996.
<PAGE>
PIPER GLOBAL FUNDS INC.
Registration Statement on Form N-1A
-----------------------
Cross Reference Sheet
Pursuant to Rule 481(a)
-----------------------
Item No. Prospectus Heading
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1. Cover Page. . . . . . . . . . . . . . . Cover Page (no caption)
2. Synopsis. . . . . . . . . . . . . . . . Introduction; Fund Expenses
3. Condensed Financial Information . . . . Financial Highlights
4. General Description of Registrant . . . Introduction; Investment
Objectives and Policies;
Special Investment Methods
5. Management of the Fund. . . . . . . . . Management
6. Capital Stock and Other Securities. . . General Information; Introduction;
Dividends and Distributions; Tax
Status
7. Purchase of Securities Being Offered. . Dividends and Distributions; How to
Purchase Shares/How to Invest; How
to Purchase Class A Shares/How to
Purchase Class B Shares; Reducing
Your Sales Charge; Valuation of
Shares
8. Redemption or Repurchase. . . . . . . . How to Redeem Shares
9. Pending Legal Proceedings . . . . . . . General Information
Statement of
Heading 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
<PAGE>
14. Management of the Fund. . . . . . . . . Directors and Executive Officers
15. Control Persons and Principal
Holders of Securities . . . . . . . . . Capital Stock and Ownership
of Shares
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>
PROSPECTUS DATED FEBRUARY 18, 1997
PACIFIC-EUROPEAN GROWTH FUND
EMERGING MARKETS GROWTH FUND
Series of Piper Global Funds Inc.
Piper Jaffray Tower
222 South Ninth Street, Minneapolis, Minnesota 55402-3804
(800) 866-7778 (toll free)
Pacific-European Growth Fund ("Pacific-European Fund") and Emerging Markets
Growth Fund ("Emerging Markets Fund") each has an investment objective of
long-term capital appreciation. Current income is incidental to this objective.
Pacific-European Fund seeks to achieve its investment objective through
investments primarily in Common Stock (as herein defined) of companies in the
Pacific Basin or in Europe (including Eastern Europe). Up to 25% of the Fund's
total assets may be invested in other areas of the world to the extent
significant opportunities for long-term capital appreciation outside of the
Pacific Basin and Europe become available. Emerging Markets Fund seeks to
achieve its investment objective through investments primarily in Common Stock
of issuers in the world's emerging securities markets. The Funds do not invest
in Common Stock of U.S. companies. No assurance can be given that the Funds'
investment objectives will be achieved.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. SAFETY OF
PRINCIPAL IS NOT GUARANTEED. INVESTMENT IN THE FUNDS INVOLVES CERTAIN RISKS AND
REQUIRES CONSIDERATION OF FACTORS NOT TYPICALLY ASSOCIATED WITH INVESTMENT IN
SECURITIES OF U.S. ISSUERS. SEE "RISK FACTORS."
This Prospectus concisely describes the information about the Funds that you
should know before investing. Please read the Prospectus carefully before
investing and retain it for future reference.
A Statement of Additional Information about the Funds dated February 18,
1997 is available free of charge. Write to the Funds at Piper Jaffray Tower, 222
South Ninth Street, Minneapolis, Minnesota 55402-3804 or telephone (800)
866-7778 (toll free). The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated in its entirety
by reference in this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
INTRODUCTION
Pacific-European Growth Fund ("Pacific-European Fund") is a diversified
series and Emerging Markets Growth Fund ("Emerging Markets Fund") is a
non-diversified series of Piper Global Funds Inc. ("Piper Global"), an open-end
management investment company, or mutual fund, the shares of which can be
offered in more than one series. Each series in effect represents a separate
fund with its own investment objective and policies. The investment objective of
each Fund is long-term capital appreciation. Current income is incidental to
this objective.
THE INVESTMENT ADVISER
The Funds are managed by Piper Capital Management Incorporated (the
"Adviser"), a wholly owned subsidiary of Piper Jaffray Companies Inc.
Pacific-European Fund pays the Adviser a basic management fee calculated and
paid monthly at an annual rate of 1% on net assets up to $100 million, with the
fee scaled downward as assets increase in size (the "Basic Fee"). The Basic Fee
(as a percentage of net assets) is higher than that paid by most other mutual
funds. The Basic Fee may be increased or decreased by up to a maximum, on an
annual basis, of .25% of Pacific-European 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 Index (the "EAFE-SM- Index").
Emerging Markets Fund pays the Adviser a monthly management fee at an annual
rate of 1% of the Fund's average daily net assets. This fee is higher than that
paid by most other mutual funds. See "Management--Investment Adviser."
THE SUB-ADVISER
Edinburgh Fund Managers plc acts as each Fund's sub-adviser (the
"Sub-Adviser") under agreements with the Adviser. The Sub-Adviser is a public
limited company that was incorporated in 1969. For its services to
Pacific-European Fund, the Sub-Adviser is paid a fee by the Adviser equal to 65%
of the Basic Fee plus or minus 90% of the performance fee adjustment. 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 Fund. For its services
to Emerging Markets Fund, the Sub-Adviser is paid a fee by the Adviser equal, on
an annual basis, to .50% of the Fund's average daily net assets. See
"Management--Sub-Adviser."
THE DISTRIBUTOR
Piper Jaffray Inc. ("Piper Jaffray" or the "Distributor"), a wholly owned
subsidiary of Piper Jaffray Companies Inc. and an affiliate of the Adviser,
serves as Distributor of the Funds' shares.
CERTAIN RISK FACTORS TO CONSIDER
An investment in the Funds is subject to certain risks, as set forth in
detail under "Investment Objectives and Policies," "Special Investment Methods"
and "Risk Factors." As with other mutual funds, there can be no assurance that
either Fund will achieve its objective. Because the Funds invest in foreign
securities, an investment in either Fund requires consideration of certain risk
factors that are not typically associated with investing in securities of U.S.
companies. These factors include risks relating to adverse currency
fluctuations, potential political and economic instability of certain countries,
limited liquidity and volatile prices of certain securities of non-U.S.
companies, and foreign taxation. These risks are particularly significant for
the Emerging Markets Fund. Investing in emerging markets involves exposure to
economic structures that are
2
<PAGE>
generally less diverse and mature than, and to political systems that can be
expected to have less stability than, those of developed countries. The Emerging
Markets Fund is a non-diversified fund, which means that it may invest a greater
portion of its assets in securities of individual issuers than a diversified
fund. As a result, changes in the market value of a single issuer could cause
greater fluctuations in share value than would occur in a more diversified fund.
In addition, the Funds may engage in the following investment practices which
involve certain special risks: entering into currency exchange transactions,
forward foreign currency exchange transactions and foreign currency futures and
options, entering into options transactions on securities in which the Funds may
invest, the use of repurchase agreements, entering into futures contracts and
options on futures contracts, the purchase of securities on a "when-issued"
basis and the purchase or sale of securities on a "forward commitment" basis.
The use of these investment practices may increase the volatility of a Fund's
net asset value.
CHOOSING A SHARE CLASS
You may purchase either Class A or Class B shares of a Fund. Each class has
its own cost structure, allowing you to choose the one that best meets your
requirements. Through a separate Prospectus, Pacific-European Fund also offers
Class Y shares, which have their own expense structure (including elimination of
all sales charges) and are available only to investors making an initial
investment of $1 million or more. To obtain more information about Class Y
shares, call the Funds at the telephone number that appears on the cover of this
Prospectus.
Class A shares have the following features:
- An initial sales charge of 4% on purchases of less than $100,000. The
sales charge is reduced for purchases of $100,000 or more. See "How to
Purchase Class A Shares."
- Lower annual expenses than Class B shares. Class A shares are subject to
Rule 12b-1 fees of up to 0.50%, on an annual basis, of the average daily
net assets of the Class A shares. The Distributor has voluntarily limited
these fees to 0.33% of average daily net assets during fiscal 1997. See
"Distribution of Fund Shares."
Class B shares have the following features:
- No initial sales charge; all your money goes to work for you right away.
- A contingent deferred sales charge ("CDSC") if you redeem your shares
during the calendar year in which they are purchased, or in any of the
next five full calendar years. The CDSC declines from 4% during the
calendar year in which you purchase the shares to 1% during the fifth full
calendar year following the year of purchase. See "How to Purchase Class B
Shares."
- Higher annual expenses than Class A shares. Class B shares are subject to
Rule 12b-1 fees equal, on an annual basis, to 1.00% of the average daily
net assets of the Class B shares. See "Distribution of Fund Shares."
- Automatic conversion to Class A shares at the beginning of the sixth full
calendar year following the year of purchase, thus reducing future annual
expenses. See "How to Purchase Class B Shares-- Conversion Feature."
MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS
The minimum initial investment for each Fund is $250. There is no minimum
for subsequent investments. See "How to Purchase Shares--Minimum Investments."
3
<PAGE>
EXCHANGES
You may exchange your shares for shares of the same class of any other
mutual fund managed by the Adviser (a "Piper fund") that offers its shares in
multiple class. In addition, Class A shares may be exchanged for shares of any
Piper fund that offers only one class of shares. All exchanges are subject to
the minimum investment requirements and other applicable terms set forth in the
prospectus of the fund whose shares you acquire, and such shares must be
eligible for sale in your state of residence. See "Shareholder Services--
Exchange Privilege."
REDEMPTION PRICE
Shares of the Funds may be redeemed at any time at their net asset value
next determined after a redemption request is received by your Piper Jaffray
Investment Executive or other broker-dealer, less any applicable contingent
deferred sales charge. See "How to Redeem Shares." Each Fund reserves the right,
upon 30 days written notice, to redeem an account if the net asset value of the
shares falls below $200. See "How to Redeem Shares--Involuntary Redemption."
SHAREHOLDER INQUIRIES
Any questions or communications regarding a shareholder account should be
directed to your Piper Jaffray Investment Executive or, in the case of shares
held through another broker-dealer, to IFTC at (800) 874-6205. General inquiries
regarding the Funds should be directed to the Funds at the telephone number set
forth on the cover page of this Prospectus.
4
<PAGE>
FUND EXPENSES
<TABLE>
<CAPTION>
PACIFIC-EUROPEAN FUND EMERGING MARKETS FUND
--------------------------------------- ---------------------------------------
CLASS A CLASS B CLASS A CLASS B
------------------ ---------- ------------------ ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)...... 4.00% None 4.00% None
Maximum Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable)...... None* 4.00% None* 4.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees............................ .90% .90% 1.00% 1.00%
Rule 12b-1 Fees (after voluntary limitation
for Class A shares)**.................... .33% 1.00% .33% 1.00%
Other Expenses (after voluntary expense
reimbursement for Emerging Markets
Fund)**.................................. .43% .43% .67% .67%
------ ------ ------ ------
Total Fund Operating Expenses (after
voluntary limitations and expense
reimbursements)**........................ 1.66% 2.33% 2.00% 2.67%
</TABLE>
- ------------------------
*A contingent deferred sales charge of 1.00% is imposed on certain redemptions
of Class A shares that were purchased without an initial sales charge as part
of an investment of $500,000 or more. See "How to Purchase Class A Shares."
**Without voluntary limitations, Rule 12b-1 Fees for the Class A shares would be
.50% for both Funds. Without voluntary expense reimbursements, Other Expenses
for Emerging Markets Fund would be 2.59% for the Class A and Class B shares.
Without any fee limitations or, in the case of Emerging Markets Fund, expense
reimbursements, Total Fund Operating Expenses would be 1.83% and 2.33%,
respectively, for the Class A and Class B shares of Pacific-European Fund and
4.09% and 4.59%, respectively, for the Class A and Class B shares of Emerging
Markets Fund.
EXAMPLE
At the end of the periods shown, you would have paid the following expenses
on a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
PACIFIC-EUROPEAN FUND EMERGING MARKETS FUND
----------------------------------------- -----------------------------------------
CLASS B* CLASS B*
---------------------------- ----------------------------
REDEMPTION AT REDEMPTION AT
CLASS A END OF PERIOD NO REDEMPTION CLASS A END OF PERIOD NO REDEMPTION
----------- ------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
One year...................................... $ 56 $ 64 $ 24 $ 59 $ 67 $ 27
Three years................................... $ 90 $ 103 $ 73 $ 100 $ 113 $ 83
Five years.................................... $ 127 $ 145 $ 125 $ 143 $ 161 $ 141
Ten years..................................... $ 229 $ 235 $ 235 $ 263 $ 269 $ 269
</TABLE>
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*Assumes that 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.
5
<PAGE>
The purpose of the above Fund Expenses table is to assist you in
understanding the various costs and expenses that investors in the Funds will
bear directly or indirectly. THE EXAMPLE CONTAINED IN THE TABLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
The information set forth in the table for Pacific-European Fund, other than
Rule 12b-1 fees, is based on actual expenses incurred by the Class A shares of
the Fund during the fiscal period from March 1 through September 30, 1996.
Pacific-European Fund did not offer Class B shares during such fiscal period.
The Rule 12b-1 fees for Class A shares set forth in the table reflect a
voluntary limitation by the Distributor of amounts payable to it under the
Fund's Rule 12b-1 Plan to .33% of average daily net assets attributable to Class
A shares for the fiscal year ending September 30, 1997. For the fiscal period
ended September 30, 1996, the Distributor voluntarily limited Rule 12b-1
payments to .31% of average daily net assets.
The information set forth for Emerging Markets Fund is based on the
Adviser's undertaking to reimburse Total Fund Operating Expenses in excess of
2.00% of the Fund's average daily net assets attributable to Class A shares and
2.67% of the Fund's average daily net assets attributable to Class B shares for
the fiscal year ending September 30, 1997. The table also reflects a voluntary
limitation by the Distributor of the fee payable to it under the Fund's Rule
12b-1 Plan to .33% of average daily net assets attributable to the Fund's Class
A shares.
Voluntary limitations and reimbursements for the Funds may be revised or
terminated at any time after September 30, 1997. The Adviser may or may not
assume additional expenses of the Funds from time to time, in its discretion,
while retaining the ability to be reimbursed by the Funds for expenses assumed
during a fiscal year prior to the end of such year. The foregoing policy will
have the effect of lowering a Fund's overall expense ratio and increasing yield
to investors when such amounts are assumed or the inverse when such amounts are
reimbursed.
Pacific-European Fund's management fees for fiscal 1997 may be more or less
than those set forth in the table to the extent that the Fund outperforms or
underperforms the EAFE Index. For the seven months ended September 30, 1996, the
performance fee adjustment resulted in a reduction of management fees for
Pacific-European Fund by 0.05% of average daily net assets. Absent such
reduction, management fees would have been 0.95% of average daily net assets.
See "Management--Investment Adviser."
A portion of the Rule 12b-1 fee paid with respect to both Class A and Class
B shares is considered an asset-based sales charge. As a result of the payment
of such asset-based sales charge, long-term shareholders of the Funds may pay
more than the economic equivalent of the maximum 6.25% front end sales charge
permitted under the rules of the National Association of Securities Dealers,
Inc. For additional information, including a more complete explanation of
management and Rule 12b-1 fees, see "Management--Investment Adviser" and
"Distribution of Fund Shares."
6
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights show certain per share data and selected
information for a Class A share of capital stock outstanding during the
indicated periods for each Fund. This information has been audited by KPMG Peat
Marwick LLP, independent auditors and should be read in conjunction with the
financial statements of each Fund contained in its annual report. No Class B
shares were outstanding during the indicated periods. Class A shares are subject
to sales charges and fees that may differ from those applicable to Class B
shares. An annual report of each Fund is available without charge by contacting
the Funds at 800-866-7778 (toll free). In addition to financial statements, the
Funds' annual reports contain further information about the performance of the
Funds.
Effective with the close of business on June 21, 1996, Emerging Markets 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 Fund had no assets or
liabilities prior to the acquisition. Consequently, the information presented
for Emerging Markets Fund prior to June 21, 1996 represents the financial
history of Hercules Latin American Value Fund.
PACIFIC-EUROPEAN FUND
<TABLE>
<CAPTION>
PERIOD
FROM PERIOD
3/1/96 FROM
TO YEAR ENDED 4/27/90(a)
9/30/96 ------------------------------------------------- TO
PER SHARE DATA (f) 2/29/96 2/28/95 2/28/94 2/28/93(e) 2/29/92 2/28/91
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 13.86 12.73 15.44 10.81 10.53 10.18 10.97
-------- -------- -------- -------- -------- ------- -------
Operations:
Net investment income (loss)............. 0.07 0.05 (0.03) (0.03) -- 0.06 0.20
Net realized and unrealized gains
(losses)............................... (0.28 ) 2.03 (1.63) 4.72 0.28 0.37 (0.79)
-------- -------- -------- -------- -------- ------- -------
Total from operations................ (0.21 ) 2.08 (1.66) 4.69 0.28 0.43 (0.59)
-------- -------- -------- -------- -------- ------- -------
Distributions to shareholders:
From net investment income............... -- (0.05) -- -- -- (0.06) (0.20)
Tax return of capital.................... -- -- -- -- -- (0.02) --
From net realized gains on investments... (0.71 ) (0.90) (1.05) (0.06) -- -- --
-------- -------- -------- -------- -------- ------- -------
Total distributions to
shareholders....................... (0.71 ) (0.95) (1.05) (0.06) -- (0.08) (0.20)
-------- -------- -------- -------- -------- ------- -------
Net asset value, end of period............. $ 12.94 13.86 12.73 15.44 10.81 10.53 10.18
-------- -------- -------- -------- -------- ------- -------
-------- -------- -------- -------- -------- ------- -------
SELECTED INFORMATION
Total return (c)........................... (1.66 )% 16.70 % (11.09)% 43.45 % 2.66 % 4.44 % (5.03)%
Net assets at end of period (in
millions)................................ $ 172 163 154 166 60 36 34
Ratio of expenses to average daily net
assets (d)............................... 1.64 %(b) 1.55 % 1.76 % 1.81 % 2.25 % 1.92 % 1.77 %(b)
Ratio of net investment income (loss) to
average daily net assets (d)............. 0.29 %(b) 0.36 % (0.19)% (0.29)% 0.03 % 0.60 % 2.36 %(b)
Average brokerage commission rate (g)...... $0.0173 n/a n/a n/a n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities)................... 49 % 65 % 57 % 52 % 59 % 69 % 10 %
</TABLE>
- ------------------------------
(a) Commencement of operations.
(b) Adjusted to an annual basis.
(c) Total return is based on the change in net asset value during the period,
assumes reinvestment of all distributions and does not reflect a sales
charge.
(d) During the periods reflected above, the Adviser and Distributor voluntarily
waived fees and/or reimbursed expenses. Had the Fund paid all expenses and
the maximum distribution fee been in effect, the ratios of expenses and net
investment income (loss) to average daily net assets would have been as
follows: 1.83%/0.10% for the period from March 1, 1996 to September 30, 1996,
1.73%/0.18%, 1.98%/ (0.41%), 2.01%/(0.49%) and 2.59%/(0.31%) in fiscal years
1996, 1995, 1994 and 1993, respectively. Beginning in fiscal 1996, the
expense ratio reflects the effect of gross expenses paid indirectly by the
Fund. Prior period expense ratios have not been adjusted.
(e) The Fund converted from a closed-end investment company to an open-end
investment company on August 31, 1992. 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.
(f) On June 21, 1996, the Fund acquired the net assets of Hercules European
Value Fund and Hercules Pacific Basin Value Fund via a tax-free
reorganization.
(g) Beginning in the seven month period ended September 30, 1996, the Fund is
required to disclose an average brokerage commission rate. The rate is
calculated by dividing total brokerage commissions paid on purchases and
sales of portfolio securities by the total number of related shares purchased
and sold. The comparability of this information may be affected by the fact
that commission rates per share vary significantly among foreign countries.
7
<PAGE>
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
PERIOD PERIOD
FROM FROM
7/1/96 YEAR ENDED 11/9/93(b)
TO -------------------- TO
9/30/96 6/30/96(a) 6/30/95 6/30/94
-------- -------- -------- -------
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period....... $ 8.84 $ 7.20 $ 9.14 $10.00
-------- -------- -------- -------
Operations:
Net investment income.................... -- 0.01 -- 0.01
Net realized and unrealized gains
(losses)............................... 0.01 1.63 (1.94) (0.87)
-------- -------- -------- -------
Total from operations................ 0.01 1.64 (1.94) (0.86)
-------- -------- -------- -------
Net asset value, end of period............. $ 8.85 $ 8.84 $ 7.20 $ 9.14
-------- -------- -------- -------
-------- -------- -------- -------
SELECTED INFORMATION
Total return (c)........................... 0.11 % 22.8 % (21.23)% (8.60)%
Net assets at end of period (in
millions)................................ $ 14 $ 14 $ 23 $ 28
Ratio of expenses to average daily net
assets (e)............................... 2.00 %(d) 2.00 % 2.00% 2.00 %(d)
Ratio of net investment income (loss) to
average daily net assets (e)............. 0.26 %(d) 0.15 % (0.03)% 0.14 %(d)
Average brokerage commission rate (f)...... $0.0009 n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities)................... 0 % 140 % 161% 78 %
</TABLE>
- ------------------------
(a) Emerging Markets Growth Fund commenced operations and acquired the net
assets of Hercules Latin American Value Fund on June 21, 1996, 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 June 21, 1996 represents the financial
history of Hercules Latin American Value Fund. As a result of the
reorganization, the Fund's sub-adviser changed from Bankers Trust Company to
Edinburgh Fund Managers plc. On July 18, 1995, shareholders approved a change
in the Fund's investment manager from Hercules International Management LLC
to the Adviser.
(b) Commencement of operations of Hercules Latin American Value Fund.
(c) Total return is based on the change in net asset value during the period,
assumes reinvestment of all distributions and does not reflect a sales
charge.
(d) Adjusted to an annual basis.
(e) During the periods reflected above, the Adviser and Distributor voluntarily
waived fees and/or reimbursed expenses. Had the Fund paid all expenses, the
annualized ratios of expenses and net investment income (loss) to average
daily net assets would have been 4.09%/(1.83)% for the period from July 1,
1996 to September 30, 1996, 3.54%/(1.39%) for the fiscal year ended June 30,
1996, 3.47%/(1.50%) for the fiscal year ended June 30, 1995 and 3.10%/(0.96%)
for the fiscal period ended June 30, 1994.
(f) Beginning in the three month period ended September 30, 1996, the Fund is
required to disclose an average brokerage commission rate. The rate is
calculated by dividing total brokerage commissions paid on purchases and
sales of portfolio securities by the total number of related shares purchased
and sold. The comparability of this information may be affected by the fact
that commission rates per share vary significantly among foreign countries.
8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
PACIFIC-EUROPEAN FUND
Pacific-European Fund's investment objective is long-term capital
appreciation. Current income is incidental to this objective. Pacific-European
Fund seeks to achieve its investment objective through investments primarily
(under normal circumstances, at least 65% of its total assets) in Common Stock
of companies in the Pacific Basin or in Europe (including Eastern Europe).
"Common Stock" means common stock and foreign equity securities which are
substantially similar to common stock in the U.S. and does not include preferred
stock or convertible debt securities (such foreign equity securities may have
voting and distribution rights which differ from those of common stock in the
U.S.). The Pacific Basin is generally defined as those countries bordering the
Pacific Ocean. Pacific-European Fund may invest in the following countries
within the region: Malaysia, Pakistan, Sri Lanka, the Philippines, Singapore,
South Korea, Thailand, India, Indonesia, Hong Kong, Japan, Taiwan, Australia and
New Zealand. In addition, to the extent that suitable investment opportunities
become available, the Fund may invest in any other country within the region,
including, but not limited to, China. For purposes of this Prospectus, unless
otherwise indicated, Europe consists of Austria, Belgium, Denmark, Germany,
Finland, France, Greece, the Republic of Ireland, Italy, the Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland, Turkey and the United Kingdom
(together, "Western Europe"), plus Albania, Bulgaria, the Czech and Slovak
Republics, Hungary, Poland, Romania, the successor states to the former
Yugoslavia, and the Commonwealth of Independent States (formerly, the Union of
Soviet Socialist Republics) (together, "Eastern Europe"). As the securities
markets of additional continental European countries develop, such countries may
be considered part of the Fund's definition of Europe and appropriate countries
for investment by the Fund.
As of September 30, 1996, approximately 58% of Pacific-European Fund's
investments were in companies in the Pacific Basin (including Japan) and
approximately 35% were in companies in Europe. While the Fund has no specific
policy or restriction on the allocation of its funds between Europe and the
Pacific Basin, the Adviser and the Sub-Adviser (collectively, "Management")
believe that the opportunities for long-term capital appreciation in the Pacific
Basin are generally superior to those currently available in the economically
more mature areas of the world. The relative emphasis of the Fund's investments
between the Pacific Basin and Europe may change over time to the extent
Management identifies greater investment opportunities in Europe as a result of
more attractive values, recent developments in Eastern Europe, the removal of
most intra-European trade barriers as a result of the adoption of the Single
European Act in 1992 or other factors. In normal market conditions, the Fund's
investments will be allocated among at least three different countries in the
Pacific Basin and/or Europe. For additional information regarding the allocation
of Fund investments, see "Investment Objectives and Policies--Allocation Among
Countries" in the Statement of Additional Information.
A company is considered to be in the Pacific Basin or in Europe, as the case
may be, if (a) it is organized under the laws of a country within the Pacific
Basin or in Europe (including the United Kingdom); (b) at least 50% of its
assets are located in the Pacific Basin or in Europe; (c) it derives at least
50% of its total revenues from goods produced, sales made, services performed or
investment in companies in the Pacific Basin or in Europe; or (d) its securities
are traded principally on stock exchanges in a Pacific Basin or European
country. The Fund's definition of companies in the Pacific Basin or in Europe
may include companies that reflect economic and market forces applicable to
other regions as well as the Pacific Basin or Europe. Nevertheless, Management
believes that investment in such companies is appropriate in light of the Fund's
investment objective because Management selects among such companies those
which, in its view, have sufficiently strong exposure to economic and market
forces in the Pacific Basin or in Europe, as the case may be, such that the
value of the securities of such companies will tend to reflect Pacific Basin or
European developments
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to a greater extent than developments in other regions. With respect to the
investment by the Fund in companies that receive 50% or more of their revenues
from investments in companies located in the Pacific Basin or Europe (e.g.,
investment companies and trusts), the Fund believes that securities of such
companies will similarly reflect the development of the region in which it
invests and, in addition, the purchase of such securities is currently one of
the few mechanisms through which the Fund may invest in securities of South
Korean, Taiwanese and Indian companies.
In selecting individual securities within a country, emphasis is placed on
identifying securities of companies believed to be undervalued in the
marketplace in relation to such factors as the company's assets, earnings and
growth potential or which are believed best positioned within a particular
industry to take advantage of specific economic and political factors likely to
result in growth for such industry. Pacific-European Fund does not, however,
concentrate its investments in companies of a particular asset size or in a
particular industry, but instead selects its investments based on the
characteristics of the particular markets and economies of the countries in
which it invests.
Up to 25% of Pacific-European Fund's total assets may be invested in other
areas of the world to the extent significant opportunities for long-term capital
appreciation outside of the Pacific Basin and Europe become available. The Fund
currently invests a portion of its assets in certain countries in Latin America,
including Mexico, Brazil, Argentina, Chile, Peru, Venezuela, Colombia and
Ecuador. The Fund may invest in other Latin American countries as opportunities
develop. As of September 30, 1996, approximately 5% of the Fund's investments
were in companies in Latin America. The Fund does not invest in Common Stock of
U.S. companies.
The investment objective of the Fund is not fundamental and may be changed
without shareholder approval. If there is a change in investment objective,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs. No assurance can be
given that the Fund's investment objective will be achieved.
EMERGING MARKETS FUND
Emerging Markets Fund's investment objective is long-term capital
appreciation. Current income is incidental to this objective. Emerging Markets
Fund seeks to achieve its investment objective through investments primarily
(under normal circumstances, at least 65% of its total assets) in Common Stock
(as defined above) of issuers in the world's emerging securities markets.
Emerging securities markets can be found in regions such as Latin America, Asia,
Eastern Europe, the Middle East, Southern Europe and Africa. The Fund's
investment objective is fundamental and cannot be changed without shareholder
approval.
In attempting to achieve the Fund's investment objective, Management will
focus primarily on asset allocation among selected emerging markets and,
secondarily, on issuer selection within those markets. Because the Emerging
Markets Fund is the successor to the Hercules Latin American Value Fund (see
"General Information") the Fund's portfolio consisted primarily of securities of
Latin American issuers as of the date of this Prospectus. This may cause the
Fund's performance to be more volatile than that of a more geographically
diversified fund. See "Risk Factors" for a discussion of the risks of
investments in Latin America. As investment opportunities arise, however,
Management expects to allocate new investments among emerging markets in other
geographic areas of the world.
The Fund's assets will be allocated among emerging markets in accordance
with Management's judgment as to where the best investment opportunities exist.
Criteria for determining the appropriate distribution of investments among
various countries and regions include the prospects for relative growth among
the countries, expected levels of inflation, government policies influencing
business conditions, the outlook for
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currency relationships and the range of alternative opportunities available to
international investors. Criteria for selection of individual securities within
an emerging market include the issuer's competitive position, prospects for
growth, managerial strength, earnings quality, underlying asset value, relative
market value and overall marketability. The Fund may invest in securities of
companies having various levels of net worth, including smaller companies whose
securities generally are more volatile than securities offered by larger
companies with higher levels of net worth.
Countries with emerging markets include those that have an emerging stock
market as defined by the International Finance Corporation, those with low- to
middle-income economies according to the International Bank for Reconstruction
and Development (the World Bank), and those listed in World Bank publications as
developing. The Fund will emphasize countries with relatively low gross national
product per capita compared to the world's major economies, and with the
potential for rapid economic growth. An issuer in an emerging market is defined
as a company: (1) the principal securities trading market for which is an
emerging market; (2) which is organized under the laws of an emerging market
country; or (3) which derives a significant proportion (at least 50%) of its
revenues or profits from goods produced or sold, investments made, or services
performed in the emerging market country or which has at least 50% of its assets
situated in such a country.
The Fund currently intends to select its investments from the following
countries with emerging markets:
<TABLE>
<S> <C>
Asia: China, India, Indonesia, Korea, Malaysia, Pakistan,
Phillipines, Sri Lanka, Taiwan, Thailand
Europe: Czech Republic, Greece, Hungary, Poland, Portugal
Latin America: Argentina, Brazil, Chile, Colombia, Mexico, Peru,
Venezuela
Africa: Nigeria, South Africa, Zimbabwe
Middle East: Jordan, Turkey
</TABLE>
The foregoing list of emerging markets is not exhaustive; the Fund may
invest in countries other than those listed above when such investments are
consistent with the Fund's investment objective and policies. The Fund will at
all times, except during defensive periods, maintain investments in at least
three countries having emerging markets.
Developing or emerging markets tend to be in less economically developed
regions of the world. General characteristics of developing market countries
also include lower degrees of political stability, a high demand for capital
investment, a high dependence on export markets for their major industries, a
need to develop basic economic infrastructures, and rapid economic growth.
Management believes that investments in Common Stock of companies in emerging
markets offer the opportunity for significant long-term investment returns.
However, these investments involve certain risks. See "Risk Factors" below.
TYPES OF SECURITIES IN WHICH THE FUNDS MAY INVEST
The Funds invest primarily in Common Stock. In addition, up to 10% of each
Fund's assets may be invested in rights, options or warrants to purchase Common
Stock. In addition to investing directly in Common Stock, the Funds may invest
in American Depository Receipts ("ADRs") and European Depository Receipts
("EDRs"). Generally, ADRs in registered form are U.S. dollar denominated
securities designed for use in the U.S. securities markets, which represent and
may be converted into the underlying foreign security. The Funds do not
currently intend to invest in ADRs sponsored by persons other than the
underlying issuers. EDRs are typically issued in bearer form and are designed
for use in the European securities markets. The
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Funds also may purchase shares of investment companies or trusts which invest
principally in securities in which the Funds are authorized to invest. The
purchase of investment company stock currently is one of the few mechanisms
through which the Funds may invest in securities of companies located in a
number of countries. For a discussion of the risks of investing in investment
companies, see "Risk Factors--Investment and Repatriation Restrictions."
For temporary defensive purposes, the 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 rated AA or better by
Standard & Poor's Ratings Services or be of comparable quality as determined by
the Adviser. For an explanation of ratings, see Appendix A to the Statement of
Additional Information.
SPECIAL INVESTMENT METHODS
The following discussion describes some of the investment management
practices that the Funds may employ from time to time to facilitate portfolio
management and mitigate risk. Certain of these practices could be considered
"derivative" transactions. The term "derivatives" has been used to identify a
variety of financial instruments; there is no discrete class of instruments that
is covered by the term. A "derivative" is commonly defined as a financial
instrument whose value is based upon, or derived from, an underlying index,
reference rate (e.g., interest rates or currency exchange rates), security,
commodity or other asset. Forward currency transactions, options on securities,
futures contracts, options on futures contracts and when-issued securities
transactions are derivative contracts. These derivative contracts involve
varying degrees and types of risk as set forth below.
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 (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities denominated in that
foreign currency.
If conditions warrant, the 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
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at a future time at a rate or rates that may be higher or lower than the spot
rate. Foreign currency futures contracts are standardized exchange-traded
contracts and have margin requirements.
For transaction hedging purposes, the 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.
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 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" in the Statement of
Additional Information.
For additional information regarding foreign currency transactions, see
"Investment Objectives and Policies--Foreign Currency Transactions" in the
Statement of Additional Information.
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 Piper Global.
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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 high grade liquid debt
securities in a segregated account with its custodian. A put option written by a
Fund is "covered" if the Fund maintains cash and high grade liquid debt
securities with a value equal to the exercise price in a segregated account with
its custodian, or else holds a put on the same security and in the same
principal amount as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written. The premium paid
by the purchaser of an option will reflect, among other things, the relationship
of the exercise price to the market price and volatility of the underlying
security, the remaining term of the option, supply and demand and interest
rates.
In purchasing a call option, 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 the 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 to the Statement of Additional Information for a
further discussion of the use, risks and costs of option trading.
The exchanges have established position limits governing the maximum number
of options which may be written by an investor or group of investors acting in
concert. Similarly, the Commodities Futures Trading Commission and the Chicago
Board of Trade have established futures position limits for an investor or group
of investors acting in concert. (A discussion of the 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
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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 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 for 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 upon
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 to the Statement of
Additional Information 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" in the Statement of Additional
Information.
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. At the time a Fund enters into a
transaction on a when-issued or forward commitment basis, a segregated account
consisting of cash or liquid securities equal to the value of the when-issued or
forward commitment securities will be established and maintained with the
custodian and will be marked to the market daily. On the delivery date, the Fund
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will meet its obligations from securities that are then maturing or sale of the
securities held in the segregated asset account and/or from then available cash
flow. If a Fund disposes of the right to acquire a when-issued security prior to
its acquisition or disposes of its right to deliver or receive against a forward
commitment, it can incur a gain or loss due to market fluctuation.
There is always a risk that the securities may not be delivered and that a
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. The purchase of
securities on a when-issued or forward commitment basis can result in increased
volatility of a Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. Settlements in the
ordinary course, which may take substantially more than three business days for
non-U.S. securities, are not treated by the 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.
REPURCHASE AGREEMENTS
Each Fund may enter, without limitation, into repurchase agreements
pertaining to the securities in which it may invest with securities dealers or
member banks of the Federal Reserve System. A repurchase agreement arises when a
buyer such as a Fund purchases a security and simultaneously agrees to resell it
to the vendor at an agreed-upon future date, normally one day or a few days
later. The resale price is greater than the purchase price, reflecting an agreed
upon interest rate which is effective for the period of time the buyer's money
is invested in the security and which is related to the current market rate
rather than the coupon rate on the purchased security. Such agreements permit a
Fund to keep all of its assets at work while retaining "overnight" flexibility
in pursuit of investments of a longer-term nature. A Fund requires continual
maintenance by its custodian for its account in the Federal Reserve/Treasury
Book Entry System of collateral in an amount equal to, or in excess of, the
resale price. In the event a vendor defaults on its repurchase obligation, a
Fund might suffer a loss to the extent that the proceeds from the sale of the
collateral are less than the repurchase price. In the event of a vendor's
bankruptcy, a Fund might be delayed in, or prevented from, selling the
collateral for the Fund's benefit. The Board of Directors has established
procedures, which are periodically reviewed by the Board, pursuant to which the
Adviser will monitor the creditworthiness of the dealers and banks with which
the Funds enter into repurchase agreement transactions.
ILLIQUID SECURITIES
Neither Fund will invest more than 15% of its net assets in illiquid
securities. For Pacific-European Fund, this 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 Funds, and thus may be
changed without shareholder approval. However, the Securities and Exchange
Commission currently limits a non-money market fund's investments in illiquid
securities to 15% of net assets. 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.
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"Restricted securities" are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933
(the "1933 Act"). Such securities generally have been considered illiquid, since
they may be resold only subject to statutory restrictions and delays or if
registered under the 1933 Act. In 1990, however, the Securities and Exchange
Commission adopted Rule 144A under the 1933 Act, which provides a safe harbor
exemption from the registration requirements of the 1933 Act for resales of
restricted securities to "qualified institutional buyers," as defined in the
rule. The result of this rule has been the development of a more liquid and
efficient institutional resale market for restricted securities. Thus,
restricted securities are no longer necessarily illiquid. The 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 or by the Adviser or
Sub-Adviser subject to the oversight of and pursuant to procedures adopted by
the Board of Directors. See "Investment Objectives and Policies--Illiquid
Securities" in the Statement of Additional Information. Similar determinations
may be made with respect to commercial paper issued in reliance on the so-called
"private placement" exemption from registration under Section 4(2) of the 1933
Act.
BORROWING
Each Fund may borrow money only from banks for temporary or emergency
purposes in an amount up to 10% of the value of the Fund's total assets,
provided that reverse repurchase agreements entered into by the Fund are not
subject to such limitation. Reverse repurchase agreements are subject, however,
to the asset coverage requirements of the Investment Company Act of 1940 (the
"1940 Act") and to certain segregated account requirements. The Funds have not
entered into reverse repurchase agreements in the past and have no current
intention of entering into such agreements in the future. See "Investment
Objectives and Policies--Reverse Repurchase Agreements" in the Statement of
Additional Information. Interest paid by a Fund on borrowed funds will decrease
the net earnings of that Fund. A Fund will not purchase portfolio securities
while outstanding borrowings (other than reverse repurchase agreements) exceed
5% of the value of such Fund's total assets. Each Fund may mortgage, pledge or
hypothecate its assets only to secure such temporary or emergency borrowing. The
policies set forth in this paragraph are fundamental and may not be changed
without shareholder approval.
PORTFOLIO TURNOVER
The Funds intend to acquire and hold securities for long-term capital
appreciation and normally do not intend to trade in securities for short-term
gains; however, securities may be purchased and sold at such times as Management
deems to be in the best interests of a Fund and its shareholders. A higher
turnover rate may result in higher expenses for a Fund. The method of
calculating portfolio turnover rate is set forth in the Statement of Additional
Information under "Investment Objectives and Policies--Portfolio Turnover."
Portfolio turnover rates for the Funds are set forth in "Financial Highlights."
INVESTMENT RESTRICTIONS
The Funds have adopted certain fundamental and nonfundamental investment
restrictions in addition to those set forth above. Fundamental investment
restrictions which may not be changed without shareholder approval include the
following: (1) With respect to 75% of its total assets, Pacific-European Fund
will not invest more than 5% of the value of its total assets in any one issuer,
or own more than 10% of the outstanding voting securities of any one issuer.
(These restrictions do not apply to securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof. For purposes of these
restrictions, the government of any country (other than the U.S.), including its
governmental subdivisions, is each considered a single issuer.) (2) The Funds
will not invest 25% or more of the value of their total assets in the same
industry. (This restriction does not apply to securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities.) In addition, as a
nonfundamental investment restriction which may be changed at any time without
shareholder approval, the Funds will not invest more than 5% of their net assets
17
<PAGE>
in warrants. A complete list of each Fund's fundamental and nonfundamental
investment restrictions is set forth in the Statement of Additional Information.
RISK FACTORS
Investment in foreign securities requires consideration of factors not
typically associated with investment in securities of U.S. issuers. Those
include the following:
CURRENCY FLUCTUATIONS. The value of a Fund's portfolio securities computed
in U.S. dollars will vary with increases and decreases in the exchange rate
between the currencies in which the Fund has invested and the U.S. dollar. A
decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of a Fund's holdings of securities
denominated in such currency and, therefore, will cause an overall decline in
the Fund's net asset value and net investment income and capital gains, if any,
to be distributed in U.S. dollars to shareholders by the Fund.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the price of oil, the pace of activity in the industrial
countries, including the United States, and other economic and financial
conditions affecting the world economy.
POLITICAL AND ECONOMIC RISKS. Investing in securities of non-U.S. companies
may entail additional risks. Nationalization, expropriation or confiscatory
taxation, currency blockage, political changes, government regulation, social
instability or diplomatic developments could affect adversely the economy of a
country or a Fund's investment in such country. The Funds may also be adversely
affected by exchange control regulations.
CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION. Non-U.S.
companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory requirements comparable to
those applicable to U.S. companies. Thus, there may be less available
information concerning non-U.S. issuers of securities held by a Fund than is
available concerning U.S. companies. Applicable accounting and financial
reporting standards in emerging markets may be substantially different from U.S.
accounting standards and, in certain emerging markets, no reporting standards
currently exist. Consequently, substantially less information on emerging
markets companies is available to investors and the information that is
available may not be conceptually comparable to, or prepared on the same basis
as that available in more developed capital markets, which may make it difficult
to assess the financial status of particular companies. However, in order to
become attractive to Western international investors such as the Funds, some
emerging markets companies may submit to reviews of their financial condition
conducted in accordance with accounting standards employed in Western countries.
Management believes that such information, together with the application of
other analytical techniques, can provide an adequate basis on which to assess
the financial viability of such companies.
MARKET CHARACTERISTICS. Securities of many non-U.S. companies may be less
liquid and their prices more volatile than securities of comparable U.S.
companies. In addition, securities of companies traded in many countries outside
the U.S., particularly those of emerging securities markets, may be subject to
further risks due to the inexperience of local brokers and financial
institutions in less developed markets, the possibility of permanent or
temporary termination of trading, and greater spreads between bid and asked
prices for securities. The typically small size of the markets for securities
issued by issuers located in emerging markets and the possibility of a low or
nonexistent volume of trading in those securities may also result in a lack of
liquidity and in price volatility of those securities. Non-U.S. stock exchanges
and brokers are subject to less governmental supervision and regulation than in
the U.S. and non-U.S. stock exchange transactions
18
<PAGE>
are usually subject to fixed commissions, which are generally higher than
negotiated commissions on U.S. transactions. In addition, there may in certain
instances be delays in the settlement of non-U.S. stock exchange transactions.
INVESTMENT AND REPATRIATION RESTRICTIONS. Some countries, particularly
emerging markets, restrict, to varying degrees, foreign investments in their
securities markets. Government and private restrictions take a variety of forms,
including (a) limitations on the amount of funds that may be introduced into or
repatriated from the country (including limitations on repatriation of
investment income and capital gains); (b) prohibitions or substantial
restrictions on foreign investment in certain industries or market sectors, such
as defense, energy and transportation; (c) restrictions (whether contained in
the charter of an individual company or mandated by the government) on the
percentage of securities of a single issuer which may be owned by a foreign
investor; (d) limitations on the types of securities which a foreign investor
may purchase; and (e) restrictions on a foreign investor's right to invest in
companies whose securities are not publicly traded. In some circumstances, these
restrictions may limit or preclude investment in certain countries or may
increase the cost of investing in securities of particular companies.
The governments of some countries may require that a governmental or
quasi-governmental authority act as custodian of a Fund's assets invested in
such countries. These authorities may not be qualified to act as foreign
custodians under the 1940 Act and, as a result, the Funds will not be able to
invest in these countries in the absence of exemptive relief from the Securities
and Exchange Commission. In addition, the risk of loss through government
confiscation may be increased in such countries.
FOREIGN TAXES. Each Fund's interest and dividend income from foreign
issuers may be subject to non-U.S. withholding taxes. Each Fund also may be
subject to taxes on trading profits in some countries. In addition, some
countries have a transfer or stamp duties tax on certain securities
transactions. The imposition of these taxes will increase the cost to a Fund of
investing in any country imposing such taxes. For U.S. tax purposes, U.S.
shareholders may be entitled to a credit or deduction to the extent of any
foreign income taxes paid by a Fund. See "Tax Status."
RISKS OF INVESTMENTS IN EMERGING MARKETS. Investing in securities of
issuers in emerging markets involves exposure to economic structures that are
generally less diverse and mature than, and to political systems that can be
expected to have less stability than, those of developed countries. Other
characteristics of emerging markets that may affect investment in their markets
include certain national policies that may restrict investment by foreigners and
the absence of developed legal structures governing private and foreign
investments and private property. The typically small size of the markets for
securities issued by issuers located in emerging markets and the possibility of
a low or nonexistent volume of trading in those securities may also result in a
lack of liquidity and in price volatility of those securities. In addition,
issuers in emerging markets typically are subject to a greater degree of change
in earnings and business prospects than are companies in developed markets.
Included among the emerging markets in which both Funds may invest are the
formerly communist countries of Eastern Europe and the People's Republic of
China. Emerging Markets Fund may also invest in the Commonwealth of Independent
States (formerly the Soviet Union). (These countries are referred to
collectively as the "Communist Countries.") Upon the accession to power of
Communist regimes approximately 40 to 70 years ago, the governments of a number
of Communist Countries expropriated a large amount of property. The claims of
many property owners against those governments were never finally settled. There
can be no assurance that any Fund investments in Communist Countries would not
also be expropriated, nationalized or otherwise confiscated. In the event of
such expropriation, nationalization or other confiscation, a Fund could lose its
entire investment in the country involved. In addition, any change in
19
<PAGE>
the leadership or policies of Communist Countries may halt the expansion of or
reverse the liberalization of foreign investment policies now occurring and
adversely affect existing investment opportunities.
RISKS OF INVESTMENTS IN LATIN AMERICA. Because the Emerging Markets Fund is
the successor to the Hercules Latin American Value Fund (see "General
Information") the Fund's portfolio consisted primarily of securities of Latin
American issuers as of the date of this Prospectus. Many of the currencies of
Latin American and certain other emerging market countries have experienced
steady devaluations relative to the U.S. dollar, and major devaluations have
historically occurred in certain countries. Devaluations in the currencies in
which Emerging Markets Fund's portfolio securities are denominated may have a
detrimental impact on the Fund.
Some Latin American countries also may have managed currencies which are not
free-floating against the U.S. dollar. In addition, there is a risk that certain
Latin American and other emerging market countries may restrict the free
conversion of their currencies into other currencies. Further, certain
currencies issued by Latin American countries may not be internationally traded.
Most Latin American countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain Latin American
countries.
Many Latin American governments have exercised and continue to exercise a
significant influence over many aspects of the private sector. Government
actions concerning the economy could have a significant effect on market
conditions and prices and/or yields of securities in which Emerging Markets Fund
invests. For more information on investment in Latin American and other emerging
market countries, see "Investment Objectives and PoliciesAdditional Risks of
Investments in Latin America" in the Statement of Additional Information.
OTHER INVESTMENT PRACTICES. The Funds may engage in investment practices
which involve certain special risks. These include foreign currency
transactions, purchasing and selling options on securities, entering into
futures contracts, purchasing and selling put and call options on futures
contracts, and the purchase and sale of securities on a "when-issued" or
"forward commitment" basis, all of which could be considered "derivative
transactions," the use of repurchase agreements, the lending of portfolio
securities, investing in illiquid securities, and borrowing from banks (but only
for temporary or emergency purposes in an amount up to 10% of the value of a
Fund's total assets). The use of these techniques may increase the volatility of
a Fund's net asset value. See "Special Investment Methods" for a discussion of
the risks involved with these investment practices.
DIVERSIFICATION STATUS
Pacific-European Fund operates as a "diversified" management investment
company, 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 Fund is "non-diversified" and,
accordingly, will be able to invest more than 5% of the value of its assets in
the obligations of a single issuer, subject to the diversification requirements
of subchapter M of the Internal Revenue Code of 1986, as amended. To the extent
that Emerging Markets 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.
20
<PAGE>
MANAGEMENT
BOARD OF DIRECTORS
The Board of Directors of Piper Global has the primary responsibility for
overseeing the overall management of Piper Global and electing its officers.
INVESTMENT ADVISER
Piper Capital Management Incorporated (the "Adviser") has been retained
under an Investment Advisory and Management Agreement (the "Advisory Agreement")
with Piper Global to act as each Fund's investment adviser subject to the
authority of the Board of Directors.
In addition to acting as the investment adviser for the Funds, the Adviser
serves as investment adviser to a number of other open-end and closed-end
investment companies and to various other concerns, including pension and profit
sharing funds, corporate funds and individuals. As of January 31, 1997, the
Adviser rendered investment advice regarding approximately $9 billion of assets.
The Adviser is a wholly owned subsidiary of Piper Jaffray Companies Inc., a
publicly held corporation which is engaged through its subsidiaries in various
aspects of the financial services industry. The address of the Adviser is Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-3804.
The Adviser supervises, directs and monitors the day to day operations of
the Funds in accordance with each Fund's investment objective, policies and
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 Fund in any
country outside of the Pacific Basin or Europe and (b) any investment by the
Sub-Adviser which would result in reallocation of in excess of 5% of
Pacific-European 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.
PACIFIC-EUROPEAN FUND. Under the Advisory Agreement, Pacific-European 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 upon 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
investment record of the EAFE Index. The Basic Fee for each month may be
increased or decreased by up to .25% (on an annualized basis) of the Fund's
average daily net assets depending upon the extent (as set forth below) by which
the 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.
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<PAGE>
The following table illustrates the full range of permitted increases or
decreases to the Basic Fee on an annualized basis:
<TABLE>
<CAPTION>
ADJUSTMENT TO
PERFORMANCE OF CLASS A SHARES OF THE FUND RELATIVE TO EAFE BASIC FEE
INDEX (ANNUALIZED)
- -------------------------------------------------------------- ---------------
<S> <C>
+5 Percentage Points or more.................................. +.25
+4............................................................ +.20
+3............................................................ +.15
+2............................................................ +.10
+1............................................................ +.05
0............................................................ 0
- -1............................................................ -.05
- -2............................................................ -.10
- -3............................................................ -.15
- -4............................................................ -.20
- -5 Percentage Points or more.................................. -.25
</TABLE>
The Basic Fee, plus or minus the performance adjustments calculated as
described herein, is paid monthly. The applicable performance period is a
rolling 12-month period consisting of the most recent calendar month plus the
immediately preceding 11 months.
In calculating the investment performance of the Class A shares of
Pacific-European 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 upon 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
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 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 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.
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<PAGE>
EMERGING MARKETS FUND. Emerging Markets Fund pays the Adviser a monthly
management fee at an annual rate of 1% of the Fund's average daily net assets.
This fee is higher than that paid by most other mutual funds.
SUB-ADVISER
Edinburgh Fund Managers plc, Donaldson House, 97 Haymarket Terrace,
Edinburgh, Scotland EH12, 5HD, is the Sub-Adviser for each Fund under an
agreement with the Adviser (the "Sub-Advisory Agreement"). The Sub-Adviser is
responsible for the investment and reinvestment of the Funds' assets and the
placement of brokerage transactions in connection therewith. For its services to
Pacific-European Fund, the Sub-Adviser is paid a fee by the Adviser equal to 65%
of the Basic Fee plus or minus 90% of the performance fee adjustment described
above. Such fee is paid over the same time periods and calculated in the same
manner as the investment advisory fee described above under "--Investment
Adviser." 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
Fund. For its services to Emerging Markets Fund, the Sub-Adviser is paid a fee
by the Adviser equal, on an annual basis, to .50% of the Fund's average daily
net assets.
The Sub-Adviser is a public limited company that was incorporated in 1969.
The British Investment Trust PLC, a Scottish closed-end investment company
founded in 1889 for which the Sub-Adviser serves as investment manager and
adviser, is a controlling shareholder of the Sub-Adviser. The Sub-Adviser, an
investment adviser registered under the Investment Advisers Act of 1940,
currently furnishes investment management services, directly or through
subsidiaries, to 10 closed-end investment companies, 18 open-end investment
companies, 13 pension plans, 4 charitable organizations and 13 other
individual/corporate clients. As of January 31, 1997, the Sub-Adviser managed
approximately $12 billion of assets.
PORTFOLIO MANAGEMENT
Richard D. Muckart is primarily responsible for the day-to-day management of
each Fund's portfolio. Mr. Muckart has been primarily responsible for the
management of Pacific-European Fund since December 1996 and of Emerging Markets
Fund since June 1996, when the Sub-Adviser's management of the Emerging Markets
Fund commenced. Mr. Muckart is an investment director and the head of emerging
markets investing for the Sub-Adviser. He joined the Sub-Adviser in March 1996
in connection with the Sub-Adviser's acquisition of Dunedin Fund Managers
Limited, where Mr. Muckart had been Investment Director since August 1995. Prior
to that, he had been with Ivory and Sime since 1983 and had served most recently
as Global Investment Director. He has 24 years of financial experience.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND CUSTODIAN
First Trust National Association, 180 East Fifth Street, St. Paul, Minnesota
55101, serves as Custodian for Pacific-European Fund's portfolio securities and
cash. Investors Fiduciary Trust Company ("IFTC"), 127 West Tenth Street, Kansas
City, Missouri 64105, serves as Custodian for Emerging Markets Fund and serves
as each Fund's Transfer Agent and Dividend Disbursing Agent.
Rules adopted under the 1940 Act permit the Funds to maintain securities and
cash in the custody of certain eligible banks and securities depositories. The
Funds' foreign securities are held by its sub-custodians who are approved by the
directors in accordance with such rules. Such determination is made pursuant to
such rules following a consideration of a number of factors including, but not
limited to, the reliability and financial stability of the institution; the
ability of the institution to perform custodial services for the Funds; the
reputation of the institution in its national market; the political and economic
stability of the country in which the institution is located; and the risks of
potential nationalization or expropriation of Fund assets.
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<PAGE>
Piper Global has entered into Shareholder Account Servicing Agreements with
the Distributor and Piper Trust Company, an affiliate of the Distributor and the
Adviser. Under these agreements, the Distributor and Piper Trust Company provide
transfer agent and dividend disbursing agent services for certain shareholder
accounts. For more information, see "Investment Advisory and Other
Services--Transfer Agent and Dividend Disbursing Agent" in the Statement of
Additional Information.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Adviser and Sub-Adviser select brokers and futures commission merchants
to use for the Funds' portfolio transactions. In making its selection, the
Adviser may consider a number of factors, which are more fully discussed in the
Statement of Additional Information, including but not limited to, research
services, the reasonableness of commissions and quality of services and
execution. A broker's sales of shares of the Funds may also be considered a
factor if the Adviser or Sub-Adviser is satisfied that a Fund would receive from
that broker the most favorable price and execution then available for a
transaction. Portfolio transactions for a Fund may be effected through the
Distributor on a securities exchange in compliance with Section 17(e) of the
1940 Act. For more information, see "Portfolio Transactions and Allocation of
Brokerage" in the Statement of Additional Information.
DISTRIBUTION OF FUND SHARES
Piper Jaffray acts as the principal distributor of each Fund's shares. Each
Fund has adopted a Distribution Plan (the "Plan") as required by Rule 12b-1
under the 1940 Act. Under each Fund's Plan, the Distributor is paid Rule 12b-1
fees for servicing the Fund's shareholder accounts and for providing
distribution related services to the Fund. With respect to the Class A shares of
Pacific-European Fund, the Distributor is reimbursed quarterly for its actual
expenses in an amount not to exceed, on an annualized basis, .50% of the average
daily net assets of the Fund attributable to the Class A shares. With respect to
the Class B shares of Pacific-European Fund, the Distributor is paid a fee equal
to 1.00%, on an annualized basis, of the Fund's average daily net assets
attributable to the Class B shares. With respect to Emerging Markets Fund, the
Distributer is paid a fee which is equal, on an annualized 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. The Distributor
has voluntarily agreed to limit each Fund's Rule 12b-1 fees payable with respect
to Class A shares to .33% of the Fund's average daily net assets attributable to
such shares. This limitation may be revised or terminated at any time after
fiscal 1997 year end. The Distributor does not intend to limit Rule 12b-1 fees
payable with respect to either Fund's Class B shares. Rule 12b-1 fees are
calculated daily and paid quarterly.
Rule 12b-1 fees paid by each Fund are categorized as either "distribution
fees" or "servicing fees." Distribution fees are intended to compensate the
Distributor for its expenses incurred in connection with the sale of Fund
shares, and servicing fees are intended to compensate the Distributor for
ongoing servicing and/ or maintenance of shareholder accounts. 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.
Except with respect to Pacific-European Fund's Class A shares, payments
under the Plans are not tied exclusively to expenses actually incurred by the
Distributor and may exceed such expenses. The Adviser and
24
<PAGE>
the Distributor, out of their own assets, may pay for certain expenses incurred
in connection with the distribution of shares of the Funds. In particular, the
Adviser may make payments out of its own assets to Piper Jaffray Investment
Executives and other broker dealers in connection with their sales of shares of
the Funds. See "How to Invest--Sales Compensation." Further information
regarding the Plans is contained in the Statement of Additional Information.
The Distributor uses a portion of its Rule 12b-1 fee to make payments to
Investment Executives of the Distributor and broker-dealers which have entered
into sales agreements with the Distributor. If shares of a Fund are sold by a
representative of a broker-dealer other than the Distributor, the broker-dealer
is paid .30% of the average daily net assets of such Fund attributable to shares
sold by the broker-dealer's representative. If shares of a Fund are sold by an
Investment Executive of the Distributor, compensation is paid to the Investment
Executive in the manner set forth in a written agreement, in an amount not to
exceed .30% of the average daily net assets of such Fund attributable to shares
sold by the Investment Executive.
25
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING
HOW TO INVEST
GENERAL
The Funds' shares may be purchased at the public offering price from the
Distributor and from other broker-dealers who have sales agreements with the
Distributor. The address of the Distributor is that of the Funds. The
Distributor reserves the right to reject any purchase order. You should be aware
that, because the Funds do not issue stock certificates, Fund shares must be
kept in an account with the Distributor or with IFTC. All investments must be
arranged through your Piper Jaffray Investment Executive or other broker-dealer.
CHOOSING A SHARE CLASS
You may purchase either Class A or Class B shares of a Fund. Each class has
its own cost structure, allowing you to choose the one that best meets your
requirements. Pacific-European Fund also offers Class Y shares, which have their
own expense structure and are available only to investors making an initial
investment of $1 million or more. To obtain more information about Class Y
shares, call the Funds at the telephone number that appears on the cover of this
Prospectus.
If you purchase Class A shares, you will pay a sales charge at the time of
purchase. As a result, Class A shares are not subject to any charges when they
are redeemed (except for sales of $500,000 and over, which are not subject to an
initial sales charge, but are subject to a contingent deferred sales charge
under certain circumstances). The initial sales charge may be reduced or waived
for certain purchases. Class A shares of each Fund are subject to Rule 12b-1
distribution and servicing fees equal, on an annual basis, to 0.50% of the
average daily net assets of the Class A shares. The Distributor has voluntarily
limited these fees to 0.33% of average daily net assets during fiscal 1997. See
"Fund Expenses" and "Distribution of Fund Shares."
If you purchase Class B shares, you will not pay an initial sales charge,
but you will pay a contingent deferred sales charge of up to 4% if you redeem
your shares during the calendar year in which they are purchased, or in any of
the next five full calendar years. Class B shares are also subject to higher
Rule 12b-1 fees than Class A shares. For each Fund, Class B shares are subject
to Rule 12b-1 distribution and servicing fees equal, on an annual basis, to
1.00% of the average daily net assets of the Class B shares. Class B shares
automatically convert into Class A shares at the beginning of the sixth full
calendar year following the year of purchase. Class B shares put all of your
money to work for you right away. However, they will have higher annual expense
ratios due to their higher Rule 12b-1 fees and, as a result, generally will pay
lower ordinary income dividends than the Class A shares. See "Fund Expenses" and
"Distribution of Fund Shares."
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. You
should consider whether, over the time you expect to maintain your investment,
the accumulated Rule 12b-1 fees and any applicable contingent deferred sales
charges on Class B shares prior to conversion would be less than the initial
sales charge and accumulated Rule 12b-1 fees on Class A shares purchased at the
same time, and to what extent the differential would be offset by the higher
dividends on the Class A shares. If you are making an investment that qualifies
for a reduced sales charge as described below, an investment in Class A shares
will normally be more beneficial. Accordingly, orders for Class B shares for
$250,000 or more will be treated as orders for Class A shares. In addition,
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.
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SHAREHOLDER GUIDE TO INVESTING
MINIMUM INVESTMENTS
A minimum initial investment of $250 is required. There is no minimum for
subsequent investments. The Distributor, in its discretion, may waive the
minimum.
SALES COMPENSATION
The Distributor and other broker-dealers who sell Fund shares receive
compensation from different sources. A portion of this compensation is typically
passed along to your Piper Jaffray Investment Executive or other sales
representative. Compensation will differ for selling Class A and Class B shares.
The Distributor receives the sales charge that you pay upon purchasing Class
A shares, and reallows a portion of this to other broker-dealers who sell Fund
shares. See "How to Purchase Class A Shares-- Purchase Price" below. If the
Class A share purchase is not subject to an initial sales charge, the
Distributor may receive a fee (equal to a percentage of the purchase price) from
the Adviser in connection with the purchase. The Distributor also receives any
contingent deferred sales charges that may be imposed on redemptions of certain
Class A shares that were not subject to an initial sales charge and on
redemptions of Class B shares. The Distributor pays a sales commission equal to
a percentage of the amount invested to its Investment Executives and to other
broker-dealers who sell Class B shares.
The Distributor also receives the Rule 12b-1 fees that are paid out of each
Fund's assets. As discussed above, the Rule 12b-1 fee rates vary by class. See
"Distribution of Fund Shares." The Distributor pays a portion of these fees to
broker-dealers who sell Fund shares.
In addition to the types of compensation discussed above, the Distributor or
the Adviser, at their own expense, provide promotional incentives to Investment
Executives of the Distributor and to broker-dealers who have sales agreements
with the Distributor in connection with sales of shares of the Funds, other
series of the Company and other mutual funds for which the Adviser acts as
investment adviser. In some instances, these incentives may be made available
only to certain Investment Executives or broker-dealers who have sold or may
sell significant amounts of such shares. The incentives may include payment for
travel expenses, including lodging at luxury resorts, incurred in connection
with sales seminars.
HOW TO PURCHASE CLASS A SHARES
PURCHASE PRICE
You may purchase Class A shares of the Funds at the net asset value per
share next calculated after receipt of your order by your Piper Jaffray
Investment Executive or other broker-dealer, plus a front-end sales charge as
follows:
<TABLE>
<CAPTION>
SALES CHARGE
SALES CHARGE AS A PERCENTAGE
AS A PERCENTAGE OF NET ASSET
AMOUNT OF TRANSACTION AT OFFERING PRICE OF OFFERING PRICE VALUE
- --------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Less than $100,000....................................... 4.00% 4.17%
$100,000 but less than $250,000.......................... 3.25% 3.36%
$250,000 but less than $500,000.......................... 2.50% 2.56%
$500,000 and over........................................ 0.00% 0.00%
</TABLE>
CONTINGENT DEFERRED SALES CHARGE ON PURCHASES OF $500,000 OR MORE
If you make a purchase of $500,000 or more (including purchases made under a
Letter of Intent), a contingent deferred sales charge ("CDSC") will be assessed
in the event you redeem shares within 24 months following the purchase. This
charge will be equal to 1% of the lesser of the net asset value of the shares at
the
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SHAREHOLDER GUIDE TO INVESTING
time of purchase or at the time of redemption. The CDSC does not apply to
amounts representing an increase in the value of Fund shares due to capital
appreciation or to shares acquired through reinvestment of dividend or capital
gain distributions. In determining whether a CDSC is payable, Class A shares
that are not subject to any CDSC will be redeemed first, and other Class A
shares will then be redeemed starting with the shares most recently purchased.
LETTER OF INTENT. If you purchased your Class A shares under a Letter of
Intent, as described below under "Reducing Your Sales Charge--Letter of Intent,"
the 24-month period begins on the date the Letter of Intent is completed.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC on redemptions of
Class A shares will be waived under the same circumstances as will the CDSC on
redemptions of Class B shares. See "How to Purchase Class B Shares--Waiver of
Contingent Deferred Sales Charge" below.
EXCHANGES. If you exchange your shares for shares of another Piper Fund, no
CDSC will be imposed. However, the charge will apply if you subsequently redeem
the new shares within 24 months of the purchase of the original Fund shares.
REINSTATEMENT PRIVILEGE. If you elect to use the Reinstatement Privilege
(please see "Shareholder Services" below), any CDSC you paid will be credited to
your account (proportional to the amount reinvested). Please see "Redemption of
Shares" in the Statement of Additional Information for more details.
REDUCING YOUR SALES CHARGE
You may qualify for a reduced sales charge on Class A shares through one or
more of several plans. You must notify your Piper Jaffray Investment Executive
or broker-dealer at the time of purchase to take advantage of these plans. For
purposes of determining whether your sales charge may be reduced through any of
the following plans, and for purposes of the reinstatement, exchange and
directed dividends privileges discussed below under "Shareholder Services,"
shares of a Piper fund that does not offer multiple classes of shares will be
considered Class A shares.
AGGREGATION. Initial sales charges on Class A shares may be reduced or
eliminated by aggregating your purchase with purchases of certain related
personal accounts. In addition, purchases made by members of certain organized
groups will be aggregated for purposes of determining sales charges on Class A
shares. Sales charges are calculated by adding the dollar amount of your current
purchase to the higher of the cost or current value of Class A shares of any
Piper fund sold with a sales charge that are currently held by you and your
related accounts or by other members of your group.
You may group purchases in the following personal accounts together:
- Your individual account.
- Your spouse's account.
- Your children's accounts.
- Your employee benefit plan accounts if they are exclusively for your
benefit. This includes accounts such as IRAs, individual 403(b) plans or
single-participant Keogh-type plans but does not include plans that cover
more than one participant.
- A trust or trusts created for the primary benefit of you, your spouse or
your children.
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SHAREHOLDER GUIDE TO INVESTING
Additionally, purchases of Class A shares 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 result in economy of sales effort or
expense.
An organized group does not include a group of individuals whose sole
organizational connection is participation as credit card holders of a company,
policyholders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser.
RIGHT OF ACCUMULATION. Sales charges for purchases of Class A 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 Piper fund that was sold with
a sales charge. For other broker-dealer accounts, you should notify your
Investment Executive at the time of purchase of additional Piper fund shares you
may own.
LETTER OF INTENT. Your sales charge on Class A shares may be reduced by
signing a non-binding Letter of Intent. This Letter of Intent will state your
intention to invest $100,000 or more in Class A shares of any of the Piper funds
that are sold with a sales charge over a 13-month period, beginning not earlier
than 90 days prior to the date you sign the Letter. You will pay the lower sales
charge applicable to the total amount you plan to invest over the 13-month
period. Part of your shares will be held in escrow to cover additional sales
charges that may be due if you do not invest the planned amount. Please see
"Purchase of Shares" in the Statement of Additional Information for more
details. You may contact your Piper Jaffray Investment Executive or other
broker-dealer for an application.
PURCHASES NOT SUBJECT TO A SALES CHARGE
If you fall within one of the categories summarized below, you may buy Class
A shares of the Funds without incurring an initial or contingent deferred sales
charge. For more information, contact your Piper Jaffray Investment Executive or
other broker-dealer.
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.
- Investment Executives and their spouses.
- Children, grandchildren, parents 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.
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SHAREHOLDER GUIDE TO INVESTING
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 also may buy Class A shares of the Funds 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 mutual fund 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 Class A 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 any calendar quarter, any other employee benefit plan of such
employer that is a qualified plan under Section 401(a) of the Code also
may purchase Class A shares of the Funds during such quarter without
incurring a sales charge. For this purpose, shares of a series of the
Company that offers only one class of shares will be considered Class A
shares.
HOW TO PURCHASE CLASS B SHARES
PURCHASE PRICE
Class B shares are sold at net asset value without any 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 full calendar years, you will have to pay
a CDSC according to the following schedule:
<TABLE>
<CAPTION>
IF REDEEMED DURING THE CDSC
- -------------------------------------------------------------------------------------- -----------
<S> <C>
Calendar year of the 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%
</TABLE>
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SHAREHOLDER GUIDE TO INVESTING
It is important to note that your CDSC is based upon the calendar years in
which the purchase and redemption occur, rather than the number of years you
have held your shares. For example, if you buy shares on December 31, 1997 and
redeem them on January 2, 1999, a 3% CDSC will apply, even though you have held
the shares for just over one year.
The CDSC is based upon the lesser of the net asset value of the shares at
the time of purchase or at the time of redemption. There is no CDSC on shares
acquired through reinvestment of dividends or capital gains distributions. To
keep your CDSC as low as possible, Class B shares that are not subject to any
CDSC will be redeemed first, and other Class B shares will then be redeemed in
the order purchased, starting with the shares that you have held the longest. If
you exchange your Class B shares for Class B shares of another Piper fund and
later redeem the "new" Class B shares, the date you purchased your Class B
shares of the original Fund will be used for determining your CDSC. (This date
will also be used for purposes of determining when your new Class B shares
convert to Class A shares. See "Conversion Feature.")
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The CDSC on Class B shares will be waived in the event of:
- The death or disability (as defined in Section 72(m)(7) of the Code) of
the shareholder. (This waiver will be applied to shares held at the time
of death or the initial determination of disability of either an
individual shareholder or one who owns the shares as a joint tenant with
the right of survivorship or as a tenant in common.)
- Systematic withdrawals from any such plan or account if the shareholder is
at least 59 1/2 years old.
- A tax-free return of the excess contribution to an individual retirement
account under Section 408(a) of the Code.
- Involuntary redemptions effected pursuant to the right to liquidate
shareholder accounts having an aggregate net asset value of less than
$200.
CONVERSION FEATURE
Your Class B shares (except for shares purchased through the reinvestment of
distributions) will automatically convert to Class A shares on January 1 of the
sixth calendar year following the year in which you purchased the shares. This
conversion will be made on the basis of the relative net asset values of the two
classes. Whenever any of these Class B shares convert to Class A shares, a
proportionate number of your Class B shares purchased through the reinvestment
of distributions will also convert.
HOW TO REDEEM SHARES
NORMAL REDEMPTION
You may redeem all or a portion of your shares on any day that a Fund values
its shares. (Please refer to "Valuation of Shares" below for more information.)
Your shares will be redeemed at the net asset value next calculated after the
receipt of your instructions in good form by your Piper Jaffray Investment
Executive or other broker-dealer, less any applicable CDSC.
PIPER JAFFRAY INC. ACCOUNTS. To redeem your shares, please contact your
Piper Jaffray Investment Executive with an oral redemption request.
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SHAREHOLDER GUIDE TO INVESTING
OTHER BROKER-DEALER ACCOUNTS. To redeem your shares, you may either contact
your broker-dealer with an oral request or send a written request directly to
the Funds' transfer agent, IFTC. This request should contain: the dollar amount
or number of shares to be redeemed, the class of shares, your Fund account
number and either a social security or tax identification number (as
applicable). You should sign your request in exactly the same way the account is
registered. If there is more than one owner of the shares, all owners must sign.
A signature guarantee is required for redemptions over $25,000. Please contact
IFTC or refer to "Redemption of Shares" in the Statement of Additional
Information for more details.
PAYMENT OF REDEMPTION PROCEEDS
After your shares have been redeemed, the cash proceeds will normally be
sent to you or your broker-dealer within three business days. In no event
will payment be made more than seven days after receipt of your order in good
form, except that payment may be postponed or the right of redemption
suspended for more than seven days under unusual circumstances, such as when
trading is not taking place on the New York Stock Exchange. Payment of
redemption proceeds may also be delayed if the shares to be redeemed were
purchased by a check drawn on a bank which is not a member of the Federal
Reserve System, until such checks have cleared the banking system (normally
up to 15 days from the purchase date).
INVOLUNTARY REDEMPTION
Each Fund reserves the right to redeem your account at any time the net
asset value of the account falls below $200 as the result of a redemption or
exchange request. You will be notified in writing prior to any such redemption
and will be allowed 30 days to make additional investments before the redemption
is processed.
SHAREHOLDER SERVICES
AUTOMATIC MONTHLY INVESTMENT PROGRAM
You may arrange to make additional automated purchases of shares of the
Funds or certain other Piper funds. You can automatically transfer $100 or more
per month from your bank, savings and loan or other financial institution to
purchase additional shares. In addition, if you hold your shares in a Piper
Jaffray account you may arrange to make such additional purchases by having $25
or more automatically transferred each month from any of the money market fund
series of the Company. You should contact your Piper Jaffray Investment
Executive or IFTC to obtain authorization forms or for additional information.
REINSTATEMENT PRIVILEGE
If you have redeemed Class A shares of a Fund, you may be eligible to
reinvest in the Class A shares of any Piper fund without payment of an
additional sales charge. The reinvestment request must be made within 30 days of
the redemption. If you have redeemed Class B shares and elect within 30 days to
reinvest in Class B shares of a Piper fund, any CDSC you paid will be credited
to your account (proportional to the amount reinvested). The reinstatement
privilege is subject to the eligibility of share purchases in your state as well
as the minimum investment requirements and any other applicable terms in the
prospectus of the fund being acquired.
EXCHANGE PRIVILEGE
If your investment goals change, you may prefer a fund with a different
objective. If you are considering an exchange into another Piper fund, you
should carefully read the appropriate prospectus for additional
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information about that fund. A prospectus may be obtained through your Piper
Jaffray Investment Executive, your broker-dealer or the Distributor. To exchange
your shares, please contact your Piper Jaffray Investment Executive, your
broker-dealer or IFTC.
You may exchange your Class A shares for Class A shares of any other Piper
fund. Similarly, you may exchange your Class B shares for Class B shares of any
Piper fund that offers such shares. However, not all Piper funds offer Class B
shares. Exchanges are made on the basis of the net asset values of the funds
involved, except that investors exchanging their Class A shares into a fund
which has a higher front-end sales charge must pay the difference. Investors
exchanging their Class B shares into Class B shares of Money Market Fund (a
series of Piper Funds Inc.) should be aware that these Money Market Fund shares
have higher expenses than are typical for a money market fund.
All exchanges are subject to the eligibility of share purchases in your
state as well as the minimum investment requirements and any other applicable
terms in the prospectus of the fund being acquired. The Company reserves the
right to change or discontinue the exchange privilege, or any aspect of the
privilege, upon 60 days' written notice.
TELEPHONE TRANSACTION PRIVILEGES
PIPER JAFFRAY INC. ACCOUNTS. If you hold your shares in a Piper Jaffray
account, you may telephone your Investment Executive to execute any transaction
or to apply for many shareholder services. In some cases, you may be required to
complete a written application.
OTHER BROKER-DEALER ACCOUNTS. If you hold your shares in an account with
your broker-dealer or at IFTC, you may authorize telephone privileges by
completing the Account Application and Services Form. Please contact your
broker-dealer or IFTC (800-874-6205) for an application or for more details. The
Funds will employ reasonable procedures to confirm that a telephonic request is
genuine, including requiring that payment be made only to the address of record
or the bank account designated on the Account Application and Services Form and
requiring certain means of telephonic identification. A Fund employing such
procedures will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. If a Fund does not employ
such procedures, it may be liable for any losses due to unauthorized or
fraudulent telephone transactions. It may be difficult to reach the Funds by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests. If you cannot reach the Funds by telephone,
you should contact your broker-dealer or issue written instructions to IFTC at
the address set forth herein. See "Management--Transfer Agent, Dividend
Disbursing Agent and Custodian." The Funds reserve the right to suspend or
terminate their telephone services at any time without notice.
DIRECTED DIVIDENDS
You may direct income dividends and capital gains distributions to be
invested in the same class of shares of another Piper fund (other than a money
market fund) that is offered in your state. This investment will be made at net
asset value. It will not be subject to a minimum investment amount except that
you must hold shares in such fund (including the shares being acquired with the
dividend or distribution) with a value at least equal to such fund's minimum
initial investment amount.
SYSTEMATIC WITHDRAWAL PLAN
If your account has a value of $5,000 or more, you may establish a
Systematic Withdrawal Plan for either Fund. This plan will allow you to receive
regular periodic payments by redeeming as many shares from your account as
necessary. As with other redemptions, a redemption to make a withdrawal is a
sale for
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SHAREHOLDER GUIDE TO INVESTING
federal income tax purposes. Payments made under a Systematic Withdrawal Plan
cannot be considered as actual yield or income since part of the payments may be
a return of capital.
A request to establish a Systematic Withdrawal Plan must be submitted in
writing to your Piper Jaffray Investment Executive or other broker-dealer. There
are no service charges for maintenance; the minimum amount that you may withdraw
each period is $100. You will be required to have any income dividends and any
capital gains distributions reinvested. You may choose to have withdrawals made
monthly, quarterly or semiannually. Please contact your Piper Jaffray Investment
Executive, other broker-dealer or IFTC for more information.
Establishing a Systematic Withdrawal Plan for Class B shares that are
subject to a CDSC may be inadvisable. Additional investments in an account that
has an active Systematic Withdrawal Plan also may be inadvisable due to sales
charges and tax liabilities. Please refer to "Redemption of Shares" in the
Statement of Additional Information for additional details.
ACCOUNT PROTECTION
If your Fund shares are held in a Piper Jaffray account, they are protected
in the unlikely event of Piper Jaffray's financial failure. Piper Jaffray is a
member of the Securities Investor Protection Corporation ("SIPC"), whose primary
purpose is to protect the customers of its members against losses of up to
$500,000 ($100,000 on claims for cash) in the event of a member's liquidation.
In addition to the $500,000 SIPC protection, Piper Jaffray clients have
additional protection provided by Aetna Casualty and Surety Company. Your
investments in the Funds held in a Piper Jaffray PRIME or PAT Plus account are
protected up to $49.5 million beyond the coverage provided by SIPC, for total
account protection of $50 million. Investments held in all other Piper Jaffray
accounts are protected up to $24.5 million beyond the coverage provided by SIPC,
for total account protection of $25 million. This protection does not cover any
declines in the net asset value of Fund shares.
CONFIRMATION OF TRANSACTIONS AND REPORTING OF OTHER INFORMATION
Each time there is a transaction involving your Fund shares, such as a
purchase, redemption or dividend reinvestment, you will receive a confirmation
statement describing that activity. This information will be provided to you
from either Piper Jaffray, your broker-dealer or IFTC. In addition, you will
receive various IRS forms after the first of each year detailing important tax
information and each Fund is required to supply annual and semiannual reports
that list securities held by the Fund and include the current financial
statements of the Fund.
HOUSEHOLDING. If you have multiple accounts with Piper Jaffray, you may
receive some of the above information in combined mailings. This will not only
help to reduce Fund expenses, it will help the environment by saving paper.
Please contact your Piper Jaffray Investment Executive for more information.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income, if any, will be paid annually. Net
realized capital gains, if any, will be distributed at least once annually by
each Fund.
Dividends paid by the Funds, if any, with respect to Class A and Class B
shares will be calculated in the same manner, at the same time, on the same day
and will be in the same amount, prior to the deduction of expenses. The Rule
12b-1 fees attributable to a class of shares will be borne exclusively by that
class. In
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SHAREHOLDER GUIDE TO INVESTING
addition, to the extent they can reasonably be identified as relating to a
particular class, transfer agent fees will be allocated to that class. Class B
shareholders generally will receive lower per share dividends than Class A
shareholders because of the higher expenses applicable to Class B shares.
BUYING A DIVIDEND. 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 ("buying a dividend"), you will pay the full price
for the shares and then receive a portion of the price back as a taxable
distribution.
DISTRIBUTION OPTIONS. All net investment income dividends and net realized
capital gains distributions for a Fund generally will be payable in additional
shares of the same class of that Fund at net asset value ("Reinvestment
Option"). If you wish to receive your distributions in cash, you must notify
your Piper Jaffray Investment Executive or other broker-dealer. You may elect
either to receive income dividends in cash and capital gains distributions in
additional shares of the same class of the Fund at net asset value ("Split
Option"), or to receive both income dividends and capital gains distributions in
cash ("Cash Option"). You may also direct income dividends and capital gains
distributions to be invested in another mutual fund managed by the Adviser. See
"Shareholder Services--Directed Dividends" above. The taxable status of income
dividends and/or net capital gains distributions is not affected by whether they
are reinvested or paid in cash.
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VALUATION OF SHARES
The Funds compute their net asset value on each day the New York Stock
Exchange (the "Exchange") is open for business. The calculation is made as of
the regular close of the Exchange (currently 4:00 p.m. New York time) after the
Funds have declared any applicable dividends. In valuing each Fund's assets, all
securities for which market quotations are readily available are valued under
normal circumstances at the last sales price prior to the time of determination,
or if no sale is reported at that time, the mean between the closing asked price
and the closing bid price. If no bid and asked prices are available, then the
Adviser will use quotations obtained from broker-dealers or a widely used
quotation system. With respect to a security which is listed or traded on more
than one exchange, a Fund normally looks to the exchange on which trading is
more extensive. In instances where market quotations are not readily available
and in certain other circumstances, fair value is determined according to
methods selected in good faith by the Board of Directors. Short-term investments
having a maturity of 60 days or less are valued at cost with any premium
amortized or discount credited over the period remaining until maturity. Options
will be valued at market value or fair value, as determined in good faith by or
under the direction of the Board of Directors, if no market exists. Futures
contracts will be valued at the settlement price established each day by the
board of trade or exchange on which they are traded. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Directors.
Any assets or liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars by the pricing service retained by a Fund or,
to the extent that an exchange rate is not available through such pricing
service, at the mean of current bid and asked prices of such currencies against
the U.S. dollar last quoted by a major bank that is a regular participant in the
foreign exchange market. The Funds have been advised that the pricing service
translates foreign currencies into U.S. dollars on the basis of the official
exchange rate or by taking into account the quotes provided by a number of major
banks that are regular participants in the foreign exchange market. Trading in
securities on foreign securities exchanges and in over-the-counter markets is
normally completed well before the close of business on each business day. In
addition, foreign securities trading generally or in a particular country or
countries may not take place on all business days in New York. Furthermore,
trading takes place in various foreign markets on days which are not business
days of the Funds and on which the Funds' net asset values are not calculated.
Therefore, the net asset value of a Fund might be significantly affected on days
when the investor has no access to the Fund. The Funds calculate net asset value
per share as of the close of the regular trading session on the Exchange. Such
calculation does not take place contemporaneously with the determination of the
prices of the majority of the portfolio securities used in such calculation. If
events materially affecting the value of such securities occur between the time
when their price is determined and the time when a Fund's net asset value is
calculated, such securities will be valued at fair value as determined in good
faith by or under the direction of the Board of Directors.
Although the methodology and procedures for determining net asset value are
identical for all classes of shares, the net asset values per share of Class A,
Class B and, if applicable, Class Y shares of the same Fund may differ because
of the differing Rule 12b-1 fees and transfer agent fees charged to such
classes.
TAX STATUS
Each Fund qualified as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended, during its last taxable year and
intends to qualify as a regulated investment company during the current taxable
year. If so qualified, a Fund will not be liable for federal income taxes to the
extent it distributes its taxable income to shareholders.
36
<PAGE>
Distributions by the Funds are generally taxable to the shareholders,
whether received in cash or additional shares of a Fund (or shares of another
mutual fund managed by the Adviser). Distributions of net capital gains
(designated as "capital gain dividends") are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder has
held shares of the Fund.
A shareholder will recognize a capital gain or loss upon the sale or
exchange of shares in a Fund if, as is normally the case, the shares are capital
assets in the shareholder's hands. This capital gain or loss will be long-term
if the shares have been held for more than one year.
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 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.
If a Fund has more than 50% of its assets invested in the stock or
securities of foreign corporations at the end of the Fund's taxable year, the
Fund may make an election to allow shareholders either to claim U.S. foreign tax
credits with respect to foreign taxes paid by the Fund or to deduct such amounts
as an itemized deduction on their tax return. In the event such an election is
made, shareholders would have to increase their taxable income by the amount of
such taxes and the Fund would not be able to deduct such taxes in computing its
taxable income.
The foregoing relates to federal income taxation as in effect as of the date
of this Prospectus. For a more detailed discussion of the federal income tax
consequences of investing in shares of the Funds, see "Taxation" in the
Statement of Additional Information. Before investing in the Funds, you should
check the consequences of your local and state tax laws.
PERFORMANCE COMPARISONS
Advertisements and other sales literature for the Funds may refer to a
Fund's "average annual total return" and "cumulative total return." Total return
will be computed separately for each class of shares of a Fund. All such total
return quotations are based upon historical earnings and are not intended to
indicate future performance. The return on and principal value of an investment
in either Fund will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Average annual return is the average annual compounded rate of return on a
hypothetical $1,000 investment made at the beginning of the advertised period.
Cumulative total return is calculated by subtracting a hypothetical $1,000
payment to 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. In calculating average annual and cumulative total return, the
maximum sales charge imposed on Class A shares or the contingent deferred sales
charge imposed on Class B shares is deducted from the hypothetical investment
and all dividends and distributions are assumed to be reinvested. Such total
return quotations may be accompanied by quotations which do not reflect initial
or contingent deferred sales charges, and which thus will be higher.
Comparative performance information also may be used from time to time in
advertising the Funds' shares. For example, advertisements may compare the
Funds' performance to that of various unmanaged market indices, or may include
performance data from Lipper Analytical Services, Inc., Morningstar, Inc. or
other entities or organizations which track the performance of investment
companies.
37
<PAGE>
For additional information regarding the calculation of average annual total
return and cumulative total return, see "Performance Comparisons" in the
Statement of Additional Information.
GENERAL INFORMATION
Piper Global was organized under the laws of the State of Minnesota in 1990
as a closed-end investment company and converted into an open-end investment
company on August 31, 1992. At that time, Pacific-European Fund was the only
outstanding series of Piper Global. The Board of Directors designated a second
series of Piper Global, Emerging Markets Fund, in April 1996. Effective with the
close of business on June 21, 1996, Emerging Markets 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 Fund had no assets or liabilities prior to the acquisition.
The Board of Directors is empowered under the Company's 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 more additional classes of shares within each Fund, as
well as within any series of Piper Global created in the future. See "Capital
Stock and Ownership of Shares" in the Statement of Additional Information.
All shares of the Funds, when issued, will be fully paid and nonassessable
and will be redeemable. 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.
The different classes of shares of a Fund have the same rights and are
identical in all respects except that (a) expenses related to the distribution
of each class of shares are borne solely by such class; (b) 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; (c) each class has
exclusive voting rights with respect to approvals of any Rule 12b-1 distribution
plan related to that specific class (although Class B shareholders will have the
right to vote on any distribution fees imposed on Class A shares as long as
Class B shares convert into Class A shares); (d) only Class B shares carry a
conversion feature; and (e) each class has different exchange privileges.
Each share of a series has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset values of the series'
shares. On some issues, such as the election of directors, all shares of Piper
Global vote together as one series. On an issue affecting only a particular
series or class, the shares of the affected series or class vote separately.
Cumulative voting is not authorized. This means that the holders of more than
50% of the shares voting for the election of directors can elect 100% of the
directors if they choose to do so, and, in such event, the holders of the
remaining shares will be unable to elect any directors.
The Bylaws of Piper Global provide that shareholder meetings need be held
only with such frequency as required under Minnesota law. Minnesota corporation
law requires only that the Board of Directors convene shareholders meetings when
it deems appropriate. In addition, Minnesota law provides that if a regular
meeting of shareholders has not been held during the immediately preceding 15
months, a shareholder or shareholders holding 3% or more of the voting shares of
Piper Global may demand a regular meeting of shareholders by written notice
given to the chief executive officer or chief financial officer of Piper Global.
Within 30 days after receipt of the demand, the Board of Directors shall cause a
regular meeting of shareholders to be called, which meeting shall be held no
later than 90 days after receipt of the demand, all at the expense of Piper
Global. In addition, the 1940 Act requires a shareholder vote for all amendments
to fundamental investment policies and restrictions, for all amendments to
investment advisory contracts and for certain amendments to Rule 12b-1
distribution plans.
38
<PAGE>
PENDING LEGAL PROCEEDINGS
Complaints have been brought against the Adviser and the Distributor
relating to several other investment companies for which the Adviser acts or has
acted as investment adviser or subadviser. These lawsuits do not involve the
Funds. The Adviser and the Distributor also are subject to regulatory inquiries
related to various funds or assets managed by the Adviser. Certain regulatory
inquiries have been settled, including inquiries by the National Association of
Securities Dealers, Inc. and the State of Minnesota. See "Pending Litigation" in
the Statement of Additional Information. The Adviser and the Distributor do not
believe that any outstanding complaint, action in arbitration or regulatory
inquiry will have a material adverse effect on their ability to perform under
their agreements with Piper Global or a material adverse effect on the Funds.
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS (AND/OR IN THE STATEMENT OF ADDITIONAL INFORMATION REFERRED TO ON THE
COVER PAGE OF THIS PROSPECTUS) AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR PIPER JAFFRAY INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
39
<PAGE>
PROSPECTUS DATED FEBRUARY 18, 1997
PACIFIC-EUROPEAN GROWTH FUND
A SERIES OF PIPER GLOBAL FUNDS INC.
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET, MINNEAPOLIS, MINNESOTA 55402-3804
(800) 866-7778 (TOLL FREE)
PACIFIC-EUROPEAN GROWTH FUND has an investment objective of long-term
capital appreciation. Current income is incidental to this objective. The Fund
seeks to achieve its investment objective through investments primarily in
Common Stock (as herein defined) of companies in the Pacific Basin or in Europe
(including Eastern Europe). Up to 25% of the Fund's total assets may be invested
in other areas of the world to the extent significant opportunities for
long-term capital appreciation outside of the Pacific Basin and Europe become
available. The Fund does not invest in Common Stock of U.S. companies. No
assurance can be given that the Fund's investment objective will be achieved.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. SAFETY OF
PRINCIPAL IS NOT GUARANTEED. Investment in the Fund involves certain risks and
requires consideration of factors not typically associated with investment in
securities of U.S. issuers. See "Risk Factors."
This Prospectus concisely describes the information about the Funds that you
should know before investing. Please read the Prospectus carefully before
investing and retain it for future reference.
A Statement of Additional Information about the Funds dated February 18,
1997 is available free of charge. Write to the Funds at Piper Jaffray Tower, 222
South Ninth Street, Minneapolis, Minnesota 55402-3804 or telephone (800)
866-7778 (toll free). The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated in its entirety
by reference in this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
INTRODUCTION
Pacific-European Growth Fund (the "Fund") is a diversified series of Piper
Global Funds Inc. ("Piper Global"), an open-end management investment company,
or mutual fund, the shares of which are currently offered in two series. This
Prospectus provides information regarding the Class Y shares of the Fund. Class
Y shares are available only to investors making an initial investment of $1
million or more. The Fund also offers Class A and Class B shares through a
separate prospectus. To obtain more information on the Fund's Class A and Class
B shares, call the Fund at the telephone number that appears on the cover of
this Prospectus.
THE INVESTMENT ADVISER
The Fund is managed by Piper Capital Management Incorporated (the
"Adviser"), a wholly owned subsidiary of Piper Jaffray Companies Inc. The Fund
pays the Adviser a basic management fee calculated and paid monthly at an annual
rate of 1% on net assets up to $100 million, with the fee scaled downward as
assets increase in size (the "Basic Fee"). The Basic Fee (as a percentage of net
assets) is higher than that paid by most other mutual funds. The Basic Fee may
be increased or decreased by up to a maximum, on an annual basis, of .25% of the
Fund's average daily net assets depending upon the extent to which the Fund's
Class A shares outperform or underperform the Morgan Stanley Capital
International European, Australian and Far East Index (the "EAFE-SM- Index").
THE SUB-ADVISER
Edinburgh Fund Managers plc acts as the Fund's sub-adviser (the
"Sub-Adviser") under an agreement with the Adviser. The Sub-Adviser is a public
limited company that was incorporated in 1969. For its services to the Fund, the
Sub-Adviser is paid a fee by the Adviser equal to 65% of the Basic Fee plus or
minus 90% of the performance fee adjustment. 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 the Fund. See "Management -- Sub-Adviser."
THE DISTRIBUTOR
Piper Jaffray Inc. ("Piper Jaffray" or the "Distributor"), a wholly owned
subsidiary of Piper Jaffray Companies Inc. and an affiliate of the Adviser,
serves as Distributor of the Fund's shares.
CERTAIN RISK FACTORS TO CONSIDER
An investment in the Fund is subject to certain risks, as set forth in
detail under "Investment Objective and Policies," "Special Investment Methods"
and "Risk Factors." As with other mutual funds, there can be no assurance that
the Fund will achieve its objective. Because the Fund invests in foreign
securities, an investment in the Fund requires consideration of certain risk
factors that are not typically associated with investing in securities of U.S.
companies. These factors include risks relating to adverse currency
fluctuations, potential political and economic instability of certain countries,
limited liquidity and volatile prices of certain securities of non-U.S.
companies, and foreign taxation. In addition, the Fund may engage in the
following investment practices which involve certain special risks: entering
into currency exchange transactions, forward foreign currency exchange
transactions and foreign currency futures and options, entering into options
transactions on securities in which the Fund may invest, the use of repurchase
agreements, entering into futures contracts and options on futures contracts,
the purchase of securities on a "when-issued" basis and the purchase or sale of
securities on a "forward commitment" basis. The use of these investment
practices may increase the volatility of the Fund's net asset value.
2
<PAGE>
OFFERING PRICE
Class Y shares of the Fund are sold at net asset value without any initial
or deferred sales charges, and are not subject to any Rule 12b-1 fees. See "How
to Purchase Shares -- Purchase Price."
MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS
The minimum initial investment is $1 million. There is no minimum for
subsequent investments. See "How to Purchase Shares -- Minimum Investments."
EXCHANGES
You may exchange your shares for Class Y shares of any other mutual fund
managed by the Adviser that offers such shares and is eligible for sale in your
state of residence. All exchanges are subject to the minimum investment
requirements and other applicable terms set forth in the prospectus of the fund
whose shares you acquire. See "Shareholder Services -- Exchange Privilege."
REDEMPTION PRICE
Shares of the Fund may be redeemed at any time at their net asset value next
determined after a redemption request is received by your Piper Jaffray
Investment Executive or other broker-dealer. The Fund reserves the right, upon
30 days written notice, to redeem your account if the net asset value of your
Class Y shares falls below $1 million as a result of a redemption or exchange
request. See "How to Redeem Shares."
SHAREHOLDER INQUIRIES
Any questions or communications regarding a shareholder account should be
directed to your Piper Jaffray Investment Executive or, in the case of shares
held through another broker-dealer, to IFTC at (800) 874-6205. General inquiries
regarding the Fund should be directed to the Fund at the telephone number set
forth on the cover page of this Prospectus.
3
<PAGE>
FUND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases....................................... None
Maximum Deferred Sales Charge................................................... None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees................................................................. .90%
Rule 12b-1 Fees................................................................. None
Other Expenses.................................................................. .43%
---------
Total Fund Operating Expenses................................................... 1.33%
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming a 5%
annual return and redemption at the end of each time period:
<TABLE>
<S> <C>
1 year.............................................................. $ 14
3 years............................................................. $ 42
5 years............................................................. $ 73
10 years............................................................. $ 160
</TABLE>
The purpose of the above Fund Expenses table is to assist you in
understanding the various costs and expenses that investors in the Fund will
bear directly or indirectly. The information set forth in the table is based on
actual expenses incurred by Class A shares of the Fund during the fiscal period
from March 1 through September 30, 1996, except that it reflects the fact that
Class Y shares will not pay any Rule 12b-1 fees. The Fund did not offer Class Y
shares during such fiscal period. THE EXAMPLE CONTAINED IN THE TABLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE GREATER OR LESSER THAN THOSE SHOWN.
The Fund's management fees for fiscal 1997 may be more or less than those
set forth in the table to the extent that the Fund outperforms or underperforms
the EAFE Index. For the seven months ended September 30, 1996, the performance
fee adjustment resulted in a reduction of management fees for Pacific-European
Fund by 0.05% of average daily net assets. Absent such reduction, management
fees would have been 0.95% of average daily net assets. See "Management --
Investment Adviser."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights show certain per share data and selected
information for a Class A share of capital stock outstanding during the
indicated periods. This information has been audited by KPMG Peat Marwick LLP,
independent auditors and should be read in conjunction with the financial
statements of the Fund contained in its annual report. No Class Y shares were
outstanding during the indicated periods. Class A shares are subject to sales
charges and fees that may differ from those applicable to Class Y shares. An
annual report of the Fund is available without charge by contacting the Funds at
800-866-7778 (toll free). In addition to financial statements, the Fund's annual
report contains further information about the performance of the Fund. The
information presented below relates to fiscal periods ended both before and
after the conversion of the Fund from a closed-end to an open-end fund on August
31, 1992.
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
3/1/96 TO -----------------------------------------------------------------
9/30/96 (f) 2/29/96 2/28/95 2/28/94 2/28/93 (E) 2/29/92
------------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period............................ $ 13.86 12.73 15.44 10.81 10.53 10.18
------------- ----------- ----------- ----------- ------ -----------
Operations:
Net investment income (loss)...... 0.07 0.05 (0.03) (0.03) -- 0.06
Net realized and unrealized gains
(losses)........................ (0.28) 2.03 (1.63) 4.72 0.28 0.37
------------- ----------- ----------- ----------- ------ -----------
Total from operations........... (0.21) 2.08 (1.66) 4.69 0.28 0.43
------------- ----------- ----------- ----------- ------ -----------
Distributions to shareholders:
From net investment income........ -- (0.05) -- -- -- (0.06)
Tax return of capital............. -- -- -- -- -- (0.02)
From net realized gains on
investments..................... (0.71) (0.90) (1.05) (0.06) -- --
------------- ----------- ----------- ----------- ------ -----------
Total distributions to
shareholders.................. (0.71) (0.95) (1.05) (0.06) -- (0.08)
------------- ----------- ----------- ----------- ------ -----------
Net asset value, end of period...... $ 12.94 13.86 12.73 15.44 10.81 10.53
------------- ----------- ----------- ----------- ------ -----------
------------- ----------- ----------- ----------- ------ -----------
SELECTED INFORMATION
Total return (c).................... (1.66)% 16.70 % (11.09)% 43.45 % 2.66% 4.44 %
Net assets at end of period (in
millions)......................... $ 172 163 154 166 60 36
Ratio of expenses to average daily
net assets (d).................... 1.64% (b) 1.55 % 1.76 % 1.81 % 2.25% 1.92 %
Ratio of net investment income
(loss) to average daily net assets
(d)............................... 0.29% (b) 0.36 % (0.19)% (0.29)% 0.03% 0.60 %
Average brokerage commission rate
(g)............................... $ 0.0173 n/a n/a n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities)............ 49 % 65 % 57 % 52 % 59 % 69%
<CAPTION>
PERIOD FROM
4/27/90 (a)
TO 2/28/91
-------------
<S> <C>
PER SHARE DATA
Net asset value, beginning of
period............................ 10.97
------
Operations:
Net investment income (loss)...... 0.20
Net realized and unrealized gains
(losses)........................ (0.79)
------
Total from operations........... (0.59)
------
Distributions to shareholders:
From net investment income........ (0.20)
Tax return of capital............. --
From net realized gains on
investments..................... --
------
Total distributions to
shareholders.................. (0.20)
------
Net asset value, end of period...... 10.18
------
------
SELECTED INFORMATION
Total return (c).................... (5.03)%
Net assets at end of period (in
millions)......................... 34
Ratio of expenses to average daily
net assets (d).................... 1.77 %(b)
Ratio of net investment income
(loss) to average daily net assets
(d)............................... 2.36 %(b)
Average brokerage commission rate
(g)............................... n/a
Portfolio turnover rate (excluding
short-term securities)............ 10 %
</TABLE>
- ------------
(a) Commencement of operations.
(b) Adjusted to an annual basis.
(c) Total return is based on the change in net asset value during the period,
assumes reinvestment of all distributions and does not reflect a sales
charge.
(d) During the periods reflected above, the Adviser and Distributor voluntarily
waived fees and/or reimbursed expenses. Had the Fund paid all expenses and
the maximum distribution fee been in effect, the ratios of expenses and net
investment income (loss) to average daily net assets would have been as
follows: 1.83%/0.10% for the period from March 1, 1996 to September 30,
1996, 1.73%/0.18%, 1.98%/(0.41%), 2.01%/(0.49%) and 2.59%/(0.31%) in fiscal
years 1996, 1995, 1994 and 1993, respectively. Beginning in fiscal 1996,
the expense ratio reflects the effect of gross expenses paid indirectly by
the Fund. Prior period expense ratios have not been adjusted.
(e) The Fund converted from a closed-end investment company to an open-end
investment company on August 31, 1992. 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.
(f) On June 21, 1996, the Fund acquired the net assets of Hercules European
Value Fund and Hercules Pacific Basin Value Fund via a tax-free
reorganization.
(g) Beginning in the seven month period ended September 30, 1996, the Fund is
required to disclose an average brokerage commission rate. The rate is
calculated by dividing total brokerage commissions paid on purchases and
sales of portfolio securities by the total number of related shares
purchased and sold. The comparability of this information may be affected
by the fact that commission rates per share vary significantly among
foreign countries.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term capital appreciation. Current
income is incidental to this objective. The Fund seeks to achieve its investment
objective through investments primarily (under normal circumstances, at least
65% of its total assets) in Common Stock of companies in the Pacific Basin or in
Europe (including Eastern Europe). "Common Stock" means common stock and foreign
equity securities which are substantially similar to common stock in the U.S.
and does not include preferred stock or convertible debt securities (such
foreign equity securities may have voting and distribution rights which differ
from those of common stock in the U.S.). The Pacific Basin is generally defined
as those countries bordering the Pacific Ocean. Pacific-European Fund may invest
in the following countries within the region: Malaysia, Pakistan, Sri Lanka, the
Philippines, Singapore, South Korea, Thailand, India, Indonesia, Hong Kong,
Japan, Taiwan, Australia and New Zealand. In addition, to the extent that
suitable investment opportunities become available, the Fund may invest in any
other country within the region, including, but not limited to, China. For
purposes of this Prospectus, unless otherwise indicated, Europe consists of
Austria, Belgium, Denmark, Germany, Finland, France, Greece, the Republic of
Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland,
Turkey and the United Kingdom (together, "Western Europe"), plus Albania,
Bulgaria, the Czech and Slovak Republics, Hungary, Poland, Romania, the
successor states to the former Yugoslavia, and the Commonwealth of Independent
States (formerly, the Union of Soviet Socialist Republics) (together, "Eastern
Europe"). As the securities markets of additional continental European countries
develop, such countries may be considered part of the Fund's definition of
Europe and appropriate countries for investment by the Fund.
As of September 30, 1996, approximately 58% of the Fund's investments were
in companies in the Pacific Basin (including Japan) and approximately 35% were
in companies in Europe. While the Fund has no specific policy or restriction on
the allocation of its funds between Europe and the Pacific Basin, the Adviser
and the Sub-Adviser (collectively, "Management") believe that the opportunities
for long-term capital appreciation in the Pacific Basin are generally superior
to those currently available in the economically more mature areas of the world.
The relative emphasis of the Fund's investments between the Pacific Basin and
Europe may change over time to the extent Management identifies greater
investment opportunities in Europe as a result of more attractive values, recent
developments in Eastern Europe, the removal of most intra-European trade
barriers as a result of the adoption of the Single European Act in 1992 or other
factors. In normal market conditions, the Fund's investments will be allocated
among at least three different countries in the Pacific Basin and/or Europe. For
additional information regarding the allocation of Fund investments, see
"Investment Objectives and Policies -- Allocation Among Countries" in the
Statement of Additional Information.
A company is considered to be in the Pacific Basin or in Europe, as the case
may be, if (a) it is organized under the laws of a country within the Pacific
Basin or in Europe (including the United Kingdom); (b) at least 50% of its
assets are located in the Pacific Basin or in Europe; (c) it derives at least
50% of its total revenues from goods produced, sales made, services performed or
investment in companies in the Pacific Basin or in Europe; or (d) its securities
are traded principally on stock exchanges in a Pacific Basin or European
country. The Fund's definition of companies in the Pacific Basin or in Europe
may include companies that reflect economic and market forces applicable to
other regions as well as the Pacific Basin or Europe. Nevertheless, Management
believes that investment in such companies is appropriate in light of the Fund's
investment objective because Management selects among such companies those
which, in its view, have sufficiently strong exposure to economic and market
forces in the Pacific Basin or in Europe, as the case may be, such that the
value of the securities of such companies will tend to reflect Pacific Basin or
European developments to a greater extent than developments in other regions.
With respect to the investment by the Fund in
6
<PAGE>
companies that receive 50% or more of their revenues from investments in
companies located in the Pacific Basin or Europe (e.g., investment companies and
trusts), the Fund believes that securities of such companies will similarly
reflect the development of the region in which it invests and, in addition, the
purchase of such securities is currently one of the few mechanisms through which
the Fund may invest in securities of South Korean, Taiwanese and Indian
companies.
In selecting individual securities within a country, emphasis is placed on
identifying securities of companies believed to be undervalued in the
marketplace in relation to such factors as the company's assets, earnings and
growth potential or which are believed best positioned within a particular
industry to take advantage of specific economic and political factors likely to
result in growth for such industry. The Fund does not, however, concentrate its
investments in companies of a particular asset size or in a particular industry,
but instead selects its investments based on the characteristics of the
particular markets and economies of the countries in which it invests.
Up to 25% of the Fund's total assets may be invested in other areas of the
world to the extent significant opportunities for long-term capital appreciation
outside of the Pacific Basin and Europe become available. The Fund currently
invests a portion of its assets in certain countries in Latin America, including
Mexico, Brazil, Argentina, Chile, Peru, Venezuela, Colombia and Ecuador. The
Fund may invest in other Latin American countries as opportunities develop. As
of September 30, 1996, approximately 5% of the Fund's investments were in
companies in Latin America. The Fund does not invest in Common Stock of U.S.
companies.
The investment objective of the Fund is not fundamental and may be changed
without shareholder approval. If there is a change in investment objective,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs. No assurance can be
given that the Fund's investment objective will be achieved.
SPECIAL INVESTMENT METHODS
The following discussion describes some of the investment management
practices that the Fund may employ from time to time to facilitate portfolio
management. Certain of these practices could be considered "derivative"
transactions. The term "derivatives" has been used to identify a variety of
financial instruments; there is no discrete class of instruments that is covered
by the term. A "derivative" is commonly defined as a financial instrument whose
value is based upon, or derived from, an underlying index, reference rate (e.g.,
interest rates or currency exchange rates), security, commodity or other asset.
Options on securities, futures contracts, options on futures contracts and
when-issued securities transactions are derivative contracts. These derivative
contracts involve varying degrees and types of risk as set forth below.
FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in currency exchange transactions in connection with the
purchase and sale of their investments. Currency exchange transactions are
necessary to enable the Fund to purchase securities denominated in a foreign
currency and to convert interest and dividend payments or sales proceeds paid in
a foreign currency into U.S. dollars or into another currency. In addition, the
Fund may engage in forward foreign currency exchange transactions and foreign
currency futures and options transactions to protect against uncertainty with
respect to future currency exchange rates. Forward currency exchange and futures
and options transactions are used only for hedging and not for speculation. The
Fund conducts 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.
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The Fund may engage in "transaction hedging" to protect against a change in
the foreign currency exchange rate between the date on which the Fund contracts
to purchase or sell the security and the settlement date or to "lock in" the
U.S. dollar equivalent (or other foreign currency equivalent to the extent
needed for purposes of purchasing securities) of a dividend or interest payment
in a foreign currency. For that purpose, the Fund may purchase or sell a foreign
currency on a spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities denominated in that
foreign currency.
If conditions warrant, the Fund may also enter into contracts to purchase or
sell foreign currencies at a future date ("forward contracts") and purchase or
sell foreign currency futures contracts as a hedge against changes in foreign
currency exchange rates between the trade and settlement dates on particular
transactions and not for speculation. A foreign currency forward contract is a
negotiated agreement to exchange currency at a future time at a rate or rates
that may be higher or lower than the spot rate. Foreign currency futures
contracts are standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, the Fund may also purchase exchange-listed
and over-the-counter call and put options on foreign currency futures contracts
and on foreign currencies. A put option on a futures contract gives the Fund the
right to assume a short position in the futures contract until expiration of the
option. A put option on currency gives the Fund the right to sell a currency at
an exercise price until the expiration of the option. A call option on a futures
contract gives the Fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives the
Fund the right to purchase a currency at the exercise price until the expiration
of the option.
The Fund may engage in "position hedging" to protect against a decline in
the value relative to the U.S. dollar of the currencies in which portfolio
securities are denominated or quoted (or an increase in the value of currency
for securities which the Fund intends to buy, when it holds cash reserves and
short-term investments). For position hedging purposes, the Fund may purchase or
sell foreign currency futures contracts and foreign currency forward contracts,
and may purchase put or call options on foreign currency futures contracts and
in foreign currencies on exchanges or over-the-counter markets. In connection
with position hedging, the Fund may also purchase or sell foreign currency on a
spot basis.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency. In addition, hedging transactions involve costs and may result in
losses. The Fund may write covered call options on foreign currencies to offset
some of the costs of hedging those currencies. The Fund will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of the Adviser, the pricing mechanism
and liquidity are satisfactory and the participants are responsible parties
likely to meet their contractual obligations. The Fund's ability to engage in
hedging and related option transactions may be limited by tax considerations.
See "Taxation -- Consequences of Certain Fund Investments" in the Statement of
Additional Information.
For additional information regarding foreign currency transactions, see
"Investment Objectives and Policies -- Foreign Currency Transactions" in the
Statement of Additional Information.
HEDGING
The Fund may engage in various futures and put and call transactions
(collectively, "Hedging Transactions"). Hedging Transactions may be used to
attempt to protect against possible declines in the market value
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of the Fund's portfolio, to protect the Fund's unrealized gains in the value of
its portfolio securities, to facilitate the sale of such securities for
investment purposes or to establish a position in the securities markets as a
temporary substitute for purchasing particular securities. Any or all of these
techniques may be used at any time. There is no overall limitation on the
percentage of the Fund's portfolio securities which may be subject to a hedge
position. There is no particular strategy that requires use of one technique
rather than another. Use of any Hedging Transaction is a function of market
conditions. The Hedging Transactions that the Fund may use are described below.
Additional Hedging Transactions may be used by the Fund in the future as they
are developed to the extent deemed appropriate by the Board of Directors of
Piper Global.
OPTIONS ON SECURITIES. In seeking to reduce fluctuations in net asset
value, the Fund may write (i.e., sell), covered put and call options and
purchase put and call options on the securities in which it may invest. Such
options are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets.
A put option gives the buyer of such option, upon payment of a premium, the
right to deliver a specified amount of a security to the writer of the option on
or before a fixed date at a predetermined price. A call option gives the
purchaser of the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a fixed date, at
a predetermined price. A call option written by the Fund is "covered" if the
Fund owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if the Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Fund in cash and high grade liquid debt
securities in a segregated account with its custodian. A put option written by
the Fund is "covered" if the Fund maintains cash and high grade liquid debt
securities with a value equal to the exercise price in a segregated account with
its custodian, or else holds a put on the same security and in the same
principal amount as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written. The premium paid
by the purchaser of an option will reflect, among other things, the relationship
of the exercise price to the market price and volatility of the underlying
security, the remaining term of the option, supply and demand and interest
rates.
In purchasing a call option, the Fund would be in a position to realize a
gain if, during the option period, the price of the security increased above the
call option price by an amount in excess of the cost of the option. Otherwise,
it would realize a loss. In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the price of the
security declined below the put option price by an amount in excess of the cost
of the option. Otherwise, it would realize a loss. If a put or call option
purchased by the Fund were permitted to expire without being sold or exercised,
its premium would be lost by the Fund.
If a put option written by the Fund were exercised, the Fund would be
obligated to purchase the underlying security at the exercise price. If a call
option written by the Fund were exercised, the Fund would be obligated to sell
the underlying security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value of the
underlying security caused by rising interest rates or other factors. If this
occurred, the option could be exercised and the underlying security would then
be sold to the Fund at a higher price than its current value. The risk involved
in writing a call option is that there could be an increase in the market value
of the underlying security caused by declining interest rates or other factors.
If this occurred, the option could be exercised and the underlying security
would then be sold by the Fund at a lower price than its current market value.
These risks could be reduced by entering into a closing transaction as described
in Appendix B to the Statement of Additional Information. The Fund retains the
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premium received from writing a put or call option whether or not the option is
exercised. See Appendix B to the Statement of Additional Information for a
further discussion of the use, risks and costs of option trading.
The exchanges have established position limits governing the maximum number
of options which may be written by an investor or group of investors acting in
concert. Similarly, the Commodities Futures Trading Commission and the Chicago
Board of Trade have established futures position limits for an investor or group
of investors acting in concert. (A discussion of the Fund's ability to invest in
futures contracts and options thereon is set forth below.) The position limits
may restrict the Fund's ability to purchase or write options on a particular
security or to enter into futures contracts. It is possible that the Fund and
other clients of the Adviser, including closed-end and other open-end investment
companies managed by the Adviser, may be considered to be a group of investors
acting in concert. Thus, the number of options or futures transactions which the
Fund may enter into may be affected by options or futures transactions of other
investment advisory clients of the Adviser.
Over-the-counter options are purchased or written by the Fund in privately
negotiated transactions. Such options are illiquid and it may not be possible
for the Fund to dispose of an option it has purchased or terminate its
obligations under an option it has written at a time when the Adviser believes
it would be advantageous to do so.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may enter into
contracts for the purchase or sale for future delivery of securities or
contracts based on financial indices including any index of securities in which
the Fund may invest ("futures contracts") and may purchase and write put and
call options to buy or sell futures contracts ("options on futures contracts").
A "sale" of a futures contract means the acquisition of a contractual obligation
to deliver the securities called for by the contract at a specified price on a
specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made. Options on futures contracts to be written or purchased by the Fund
will be traded on exchanges or over-the-counter. These investment techniques are
used only to hedge against declines in the value of the Fund's portfolio
securities or increases in the prices of securities which the Fund intends to
purchase at a later date. The successful use of such instruments relies upon
Management's experience with respect to such instruments. Should prices move in
an unexpected manner, the Fund may not achieve the anticipated benefits of
futures contracts or options on futures contracts or may realize losses and
would thus be in a worse position than if such strategies had not been used. In
addition, the correlation between movements in the price of futures contracts or
options on futures contracts and movements in the prices of the securities
hedged or used for cover will not be perfect. See Appendix B to the Statement of
Additional Information for further discussion of the use, risks and costs of
futures contracts and options on futures contracts.
The Fund limits its activities in options and futures contracts to the
extent necessary to prevent disqualification of the Fund as a regulated
investment company under the Internal Revenue Code. For a discussion of the tax
treatment of futures contracts and options on futures contracts, see "Taxation
- -- Consequences of Certain Fund Investments" in the Statement of Additional
Information.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
The Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. The Fund may make such
purchases in order to lock-in the purchase price of a security which Management
believes will appreciate in value. There is always the risk, however, that the
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security will decrease in value prior to its delivery. When such transactions
are negotiated, the price is fixed at the time the commitment is made, but
delivery and payment for the securities take place at a later date, which can be
a month or more after the date of the transaction. At the time the Fund makes
the commitment to purchase securities on a when-issued or forward commitment
basis, it will record the transaction and thereafter reflect the value of such
securities in determining its net asset value. At the time the Fund enters into
a transaction on a when-issued or forward commitment basis, a segregated account
consisting of cash or liquid securities equal to the value of the when-issued or
forward commitment securities will be established and maintained with the
custodian and will be marked to the market daily. On the delivery date, the Fund
will meet its obligations from securities that are then maturing or sale of the
securities held in the segregated asset account and/or from then available cash
flow. If the Fund disposes of the right to acquire a when-issued security prior
to its acquisition or disposes of its right to deliver or receive against a
forward commitment, it can incur a gain or loss due to market fluctuation.
There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. The purchase of
securities on a when-issued or forward commitment basis can result in increased
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. Settlements in the
ordinary course, which may take substantially more than three business days for
non-U.S. securities, are not treated by the Fund as when-issued or forward
commitment transactions and, accordingly, are not subject to the foregoing
limitations even though some of the risks described above may be present in such
transactions.
REPURCHASE AGREEMENTS
The Fund may enter, without limitation, into repurchase agreements
pertaining to the securities in which it may invest with securities dealers or
member banks of the Federal Reserve System. A repurchase agreement arises when a
buyer such as the Fund purchases a security and simultaneously agrees to resell
it to the vendor at an agreed-upon future date, normally one day or a few days
later. The resale price is greater than the purchase price, reflecting an agreed
upon interest rate which is effective for the period of time the buyer's money
is invested in the security and which is related to the current market rate
rather than the coupon rate on the purchased security. Such agreements permit
the Fund to keep all of its assets at work while retaining "overnight"
flexibility in pursuit of investments of a longer-term nature. The Fund requires
continual maintenance by its custodian for its account in the Federal
Reserve/Treasury Book Entry System of collateral in an amount equal to, or in
excess of, the resale price. In the event a vendor defaults on its repurchase
obligation, the Fund might suffer a loss to the extent that the proceeds from
the sale of the collateral are less than the repurchase price. In the event of a
vendor's bankruptcy, the Fund might be delayed in, or prevented from, selling
the collateral for the Fund's benefit. The Board of Directors has established
procedures, which are periodically reviewed by the Board, pursuant to which the
Adviser will monitor the creditworthiness of the dealers and banks with which
the Fund enters into repurchase agreement transactions.
ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities. This a fundamental investment restriction that may not be changed
without the approval of a majority of the Fund's shares. 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
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<PAGE>
exchanges or in the over-the-counter markets. The Fund may be restricted in its
ability to sell such securities at a time when the Adviser or Sub-Adviser deems
it advisable to do so. In addition, in order to meet redemption requests, the
Fund may have to sell other assets, rather than such illiquid securities, at a
time which is not advantageous.
"Restricted securities" are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933
(the "1933 Act"). Such securities generally have been considered illiquid, since
they may be resold only subject to statutory restrictions and delays or if
registered under the 1933 Act. In 1990, however, the Securities and Exchange
Commission adopted Rule 144A under the 1933 Act, which provides a safe harbor
exemption from the registration requirements of the 1933 Act for resales of
restricted securities to "qualified institutional buyers," as defined in the
rule. The result of this rule has been the development of a more liquid and
efficient institutional resale market for restricted securities. Thus,
restricted securities are no longer necessarily illiquid. The Fund may therefore
invest in Rule 144A securities and treat them as liquid when they have been
determined to be liquid by the Board of Directors or by the Adviser or
Sub-Adviser subject to the oversight of and pursuant to procedures adopted by
the Board of Directors. See "Investment Objectives and Policies -- Illiquid
Securities" in the Statement of Additional Information. Similar determinations
may be made with respect to commercial paper issued in reliance on the so-called
"private placement" exemption from registration under Section 4(2) of the 1933
Act.
BORROWING
The Fund may borrow money only from banks for temporary or emergency
purposes in an amount up to 10% of the value of its total assets, provided that
reverse repurchase agreements entered into by the Fund are not subject to such
limitation. Reverse repurchase agreements are subject, however, to the asset
coverage requirements of the Investment Company Act of 1940 (the "1940 Act") and
to certain segregated account requirements. The Fund has not entered into
reverse repurchase agreements in the past and has no current intention of
entering into such agreements in the future. See "Investment Objectives and
Policies -- Reverse Repurchase Agreements" in the Statement of Additional
Information. Interest paid by the Fund on borrowed funds will decrease the
Fund's net earnings. The Fund will not purchase portfolio securities while
outstanding borrowings (other than reverse repurchase agreements) exceed 5% of
the value of its total assets. The Fund may mortgage, pledge or hypothecate its
assets only to secure such temporary or emergency borrowing. The policies set
forth in this paragraph are fundamental and may not be changed without
shareholder approval.
PORTFOLIO TURNOVER
The Fund intends to acquire and hold securities for long-term capital
appreciation and normally does not intend to trade in securities for short-term
gains; however, securities may be purchased and sold at such times as Management
deems to be in the best interests of the Fund and its shareholders. A higher
turnover rate may result in higher expenses for the Fund. The method of
calculating portfolio turnover rate is set forth in the Statement of Additional
Information under "Investment Objectives and Policies -- Portfolio Turnover."
Portfolio turnover rates for the Fund are set forth in "Financial Highlights."
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental and nonfundamental investment
restrictions in addition to those set forth above. Fundamental investment
restrictions which may not be changed without shareholder approval include the
following: (1) With respect to 75% of its total assets, the Fund will not invest
more than 5% of the value of its total assets in any one issuer, or own more
than 10% of the outstanding voting securities of any one issuer. (These
restrictions do not apply to securities issued or guaranteed by the U.S.
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government or any agency or instrumentality thereof. For purposes of these
restrictions, the government of any country (other than the U.S.), including its
governmental subdivisions, is each considered a single issuer.) (2) The Fund
will not invest 25% or more of the value of its total assets in the same
industry. (This restriction does not apply to securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities.) In addition, as a
nonfundamental investment restriction which may be changed at any time without
shareholder approval, the Fund will not invest more than 5% of its net assets in
warrants. A complete list of the Fund's fundamental and nonfundamental
investment restrictions is set forth in the Statement of Additional Information.
RISK FACTORS
Investment in foreign securities requires consideration of factors not
typically associated with investment in securities of U.S. issuers. Those
include the following:
CURRENCY FLUCTUATIONS. The value of the Fund's portfolio securities
computed in U.S. dollars will vary with increases and decreases in the exchange
rate between the currencies in which the Fund has invested and the U.S. dollar.
A decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of the Fund's holdings of securities
denominated in such currency and, therefore, will cause an overall decline in
the Fund's net asset value and net investment income and capital gains, if any,
to be distributed in U.S. dollars to shareholders by the Fund.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the price of oil, the pace of activity in the industrial
countries, including the United States, and other economic and financial
conditions affecting the world economy.
POLITICAL AND ECONOMIC RISKS. Investing in securities of non-U.S. companies
may entail additional risks. Nationalization, expropriation or confiscatory
taxation, currency blockage, political changes, government regulation, social
instability or diplomatic developments could affect adversely the economy of a
country or the Fund's investment in such country. The Fund may also be adversely
affected by exchange control regulations.
CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION. Non-U.S.
companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory requirements comparable to
those applicable to U.S. companies. Thus, there may be less available
information concerning non-U.S. issuers of securities held by the Fund than is
available concerning U.S. companies.
Applicable accounting and financial reporting standards in emerging markets
may be substantially different from U.S. accounting standards and, in certain
emerging markets, no reporting standards currently exist. Consequently,
substantially less information on emerging markets companies is available to
investors and the information that is available may not be conceptually
comparable to, or prepared on the same basis as that available in more developed
capital markets, which may make it difficult to assess the financial status of
particular companies. However, in order to become attractive to Western
international investors such as the Fund, some emerging markets companies may
submit to reviews of their financial condition conducted in accordance with
accounting standards employed in Western countries. Management believes that
such information, together with the application of other analytical techniques,
can provide an adequate basis on which to assess the financial viability of such
companies.
MARKET CHARACTERISTICS. Securities of many non-U.S. companies may be less
liquid and their prices more volatile than securities of comparable U.S.
companies. In addition, securities of companies traded in
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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 in less developed markets, the possibility of
permanent or temporary termination of trading, and greater spreads between bid
and asked prices for securities. The typically small size of the markets for
securities issued by issuers located in emerging markets and the possibility of
a low or nonexistent volume of trading in those securities may also result in a
lack of liquidity and in price volatility of those securities. Non-U.S. stock
exchanges and brokers are subject to less governmental supervision and
regulation than in the U.S. and non-U.S. stock exchange transactions are usually
subject to fixed commissions, which are generally higher than negotiated
commissions on U.S. transactions. In addition, there may in certain instances be
delays in the settlement of non-U.S. stock exchange transactions.
INVESTMENT AND REPATRIATION RESTRICTIONS. Some countries, particularly
emerging markets, restrict, to varying degrees, foreign investments in their
securities markets. Government and private restrictions take a variety of forms,
including (a) limitations on the amount of funds that may be introduced into or
repatriated from the country (including limitations on repatriation of
investment income and capital gains); (b) prohibitions or substantial
restrictions on foreign investment in certain industries or market sectors, such
as defense, energy and transportation; (c) restrictions (whether contained in
the charter of an individual company or mandated by the government) on the
percentage of securities of a single issuer which may be owned by a foreign
investor; (d) limitations on the types of securities which a foreign investor
may purchase; and (e) restrictions on a foreign investor's right to invest in
companies whose securities are not publicly traded. In some circumstances, these
restrictions may limit or preclude investment in certain countries or may
increase the cost of investing in securities of particular companies.
The governments of some countries may require that a governmental or
quasi-governmental authority act as custodian of the Fund's assets invested in
such countries. These authorities may not be qualified to act as foreign
custodians under the 1940 Act and, as a result, the Fund will not be able to
invest in these countries in the absence of exemptive relief from the Securities
and Exchange Commission. In addition, the risk of loss through government
confiscation may be increased in such countries.
FOREIGN TAXES. The Fund's interest and dividend income from foreign issuers
may be subject to non-U.S. withholding taxes. The Fund also may be subject to
taxes on trading profits in some countries. In addition, some countries have a
transfer or stamp duties tax on certain securities transactions. The imposition
of these taxes will increase the cost to the Fund of investing in any country
imposing such taxes. For U.S. tax purposes, U.S. shareholders may be entitled to
a credit or deduction to the extent of any foreign income taxes paid by the
Fund. See "Tax Status."
RISKS OF INVESTMENTS IN EMERGING MARKETS. Investing in securities of
issuers in emerging markets involves exposure to economic structures that are
generally less diverse and mature than, and to political systems that can be
expected to have less stability than, those of developed countries. Other
characteristics of emerging markets that may affect investment in their markets
include certain national policies that may restrict investment by foreigners and
the absence of developed legal structures governing private and foreign
investments and private property. The typically small size of the markets for
securities issued by issuers located in emerging markets and the possibility of
a low or nonexistent volume of trading in those securities may also result in a
lack of liquidity and in price volatility of those securities. In addition,
issuers in emerging markets typically are subject to a greater degree of change
in earnings and business prospects than are companies in developed markets.
Included among the emerging markets in which the Fund may invest are the
formerly communist countries of Eastern Europe and the People's Republic of
China. (These countries are referred to collectively
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as the "Communist Countries.") Upon the accession to power of Communist regimes
approximately 40 to 70 years ago, the governments of a number of Communist
Countries expropriated a large amount of property. The claims of many property
owners against those governments were never finally settled. There can be no
assurance that any Fund investments in Communist Countries would not also be
expropriated, nationalized or otherwise confiscated. In the event of such
expropriation, nationalization or other confiscation, the Fund could lose its
entire investment in the country involved. In addition, any change in the
leadership or policies of Communist Countries may halt the expansion of or
reverse the liberalization of foreign investment policies now occurring and
adversely affect existing investment opportunities.
OTHER INVESTMENT PRACTICES. The Fund may engage in investment practices
which involve certain special risks. These include foreign currency
transactions, purchasing and selling options on securities, entering into
futures contracts, purchasing and selling put and call options on futures
contracts, and the purchase and sale of securities on a "when-issued" or
"forward commitment" basis, all of which could be considered "derivative
transactions," the use of repurchase agreements, the lending of portfolio
securities, investing in illiquid securities, and borrowing from banks (but only
for temporary or emergency purposes in an amount up to 10% of the value of the
Fund's total assets). The use of these techniques may increase the volatility of
the Fund's net asset value. See "Special Investment Methods" for a discussion of
the risks involved with these investment practices.
MANAGEMENT
BOARD OF DIRECTORS
The Board of Directors of Piper Global has the primary responsibility for
overseeing the overall management of Piper Global and electing its officers.
INVESTMENT ADVISER
Piper Capital Management Incorporated (the "Adviser") has been retained
under an Investment Advisory and Management Agreement (the "Advisory Agreement")
with Piper Global to act as the Fund's investment adviser subject to the
authority of the Board of Directors.
In addition to acting as the investment adviser for the Fund, the Adviser
serves as investment adviser to a number of other open-end and closed-end
investment companies and to various other concerns, including pension and profit
sharing funds, corporate funds and individuals. As of January 31, 1997, the
Adviser rendered investment advice regarding approximately $9 billion of assets.
The Adviser is a wholly owned subsidiary of Piper Jaffray Companies Inc., a
publicly held corporation which is engaged through its subsidiaries in various
aspects of the financial services industry. The address of the Adviser is Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-3804.
The Adviser supervises, directs and monitors the day to day operations of
the Fund in accordance with the Fund's investment objective, policies and
restrictions, as well as the implementation of investment programs formulated by
the Sub-Adviser. The Adviser 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 Fund's assets in any country outside of the
Pacific Basin or Europe and (b) any investment by the Sub-Adviser which would
result in reallocation of in excess of 5% of the Fund's total assets. The
Adviser determines the broker-dealers which are eligible to execute transactions
on behalf of the Fund. The Adviser furnishes at its own expense all necessary
administrative services, office space, equipment and clerical personnel for
providing the foregoing services. In addition, the Adviser pays the salaries and
fees of all officers and directors of the Fund who are affiliated with the
Adviser. The Adviser is liable to the Fund for
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losses resulting from willful misconduct, bad faith or gross negligence in the
performance of its duties or from its reckless disregard of its duties under the
Advisory Agreement.
Under the Advisory Agreement, the Fund pays the Adviser a monthly management
fee. The fee is paid at an annual rate of 1% on average daily net assets up to
$100 million, .875% on net assets over $100 million and up to $200 million, and
.75% on net assets over $200 million (the "Basic Fee"), and is subject to
adjustment as described below. The adjustment is based upon the investment
performance of the 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
investment record of the EAFE Index. The Basic Fee for each month may be
increased or decreased by up to .25% (on an annualized basis) of the Fund's
average daily net assets depending upon the extent (as set forth below) by which
the 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:
<TABLE>
<CAPTION>
ADJUSTMENT TO
PERFORMANCE OF CLASS A SHARES OF THE FUND RELATIVE TO EAFE BASIC FEE
INDEX (ANNUALIZED)
- -------------------------------------------------------------- ---------------
<S> <C>
+5 Percentage Points or more.................................. +.25
+4............................................................ +.20
+3............................................................ +.15
+2............................................................ +.10
+1............................................................ +.05
0............................................................. 0
- -1............................................................ -.05
- -2............................................................ -.10
- -3............................................................ -.15
- -4............................................................ -.20
- -5 Percentage Points or more.................................. -.25
</TABLE>
The Basic Fee, plus or minus the performance adjustments calculated as
described herein, is paid monthly. The applicable performance period is a
rolling 12-month period consisting of the most recent calendar month plus the
immediately preceding 11 months.
In calculating the investment performance of the Class A shares of the 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 upon 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).
16
<PAGE>
The EAFE Index is a market capitalization weighted index containing (as of
September 30, 1996) 1,100 companies representing approximately 60% of the market
capitalization of each of the following 20 countries: Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
The Netherlands, New Zealand, Norway, Singapore, Malaysia, Spain, Sweden,
Switzerland and the United Kingdom. The EAFE Index is an unmanaged index of
common stocks, whereas the Fund, under normal circumstances, may invest up to
35% of its assets in securities other than common stock. Additionally, the
largest percentages of the EAFE Index are currently represented by the Japanese
and United Kingdom markets, which currently represent approximately 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. The 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.
SUB-ADVISER
Edinburgh Fund Managers plc, Donaldson House, 97 Haymarket Terrace,
Edinburgh, Scotland EH12, 5HD, is the Sub-Adviser for the Fund under an
agreement with the Adviser (the "Sub-Advisory Agreement"). The Sub-Adviser is
responsible for the investment and reinvestment of the Fund's assets and the
placement of brokerage transactions in connection therewith. For its services to
the Fund, the Sub-Adviser is paid a fee by the Adviser equal to 65% of the Basic
Fee plus or minus 90% of the performance fee adjustment described above. Such
fee is paid over the same time periods and calculated in the same manner as the
investment advisory fee described above under "-- Investment Adviser." 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 the Fund.
The Sub-Adviser is a public limited company that was incorporated in 1969.
The British Investment Trust PLC, a Scottish closed-end investment company
founded in 1889 for which the Sub-Adviser serves as investment manager and
adviser, is a controlling shareholder of the Sub-Adviser. The Sub-Adviser, an
investment adviser registered under the Investment Advisers Act of 1940,
currently furnishes investment management services, directly or through
subsidiaries, to 10 closed-end investment companies, 18 open-end investment
companies, 13 pension plans, 4 charitable organizations and 13 other
individual/corporate clients. As of January 31, 1997, the Sub-Adviser managed
approximately $12 billion of assets.
PORTFOLIO MANAGEMENT
Richard D. Muckart has been primarily responsible for the day-to-day
management of the Fund since December 1996. Mr. Muckart is an investment
director and the head of emerging markets investing for the Sub-Adviser. He
joined the Sub-Adviser in March 1996 in connection with the Sub-Adviser's
acquisition of Dunedin Fund Managers Limited, where Mr. Muckart had been
Investment Director since August 1995. Prior to that, he had been with Ivory and
Sime since 1983 and had served most recently as Global Investment Director. He
has 24 years of financial experience.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND CUSTODIAN
First Trust National Association, 180 East Fifth Street, St. Paul, Minnesota
55101, serves as Custodian for the Fund's portfolio securities and cash.
Investors Fiduciary Trust Company ("IFTC"), 127 West Tenth Street, Kansas City,
Missouri 64105, serves as the Fund's Transfer Agent and Dividend Disbursing
Agent.
17
<PAGE>
Rules adopted under the 1940 Act permit the Fund to maintain securities and
cash in the custody of certain eligible banks and securities depositories. The
Fund's foreign securities are held by its sub-custodians who are approved by the
directors in accordance with such rules. Such determination is made pursuant to
such rules following a consideration of a number of factors including, but not
limited to, the reliability and financial stability of the institution; the
ability of the institution to perform custodial services for the Fund; the
reputation of the institution in its national market; the political and economic
stability of the country in which the institution is located; and the risks of
potential nationalization or expropriation of Fund assets.
Piper Global has entered into Shareholder Account Servicing Agreements with
the Distributor and Piper Trust Company, an affiliate of the Distributor and the
Adviser. Under these agreements, the Distributor and Piper Trust Company provide
transfer agent and dividend disbursing agent services for certain shareholder
accounts. For more information, see "Investment Advisory and Other Services --
Transfer Agent and Dividend Disbursing Agent" in the Statement of Additional
Information.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Adviser and Sub-Adviser select brokers and futures commission merchants
to use for the Fund's portfolio transactions. In making its selection, the
Adviser may consider a number of factors, which are more fully discussed in the
Statement of Additional Information, including but not limited to, research
services, the reasonableness of commissions and quality of services and
execution. A broker's sales of Fund shares may also be considered a factor if
the Adviser or Sub-Adviser is satisfied that the Fund would receive from that
broker the most favorable price and execution then available for a transaction.
Portfolio transactions for the Fund may be effected through the Distributor on a
securities exchange in compliance with Section 17(e) of the 1940 Act. For more
information, see "Portfolio Transactions and Allocation of Brokerage" in the
Statement of Additional Information.
18
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SHAREHOLDER GUIDE TO INVESTING
HOW TO PURCHASE SHARES
GENERAL
Class Y shares of the Fund may be purchased from the Distributor and from
other broker-dealers who have sales agreements with the Distributor. The address
of the Distributor is that of the Fund. The Distributor reserves the right to
reject any purchase order. You should be aware that, because the Fund does not
issue stock certificates, Fund shares must be kept in an account with the
Distributor or with IFTC. All investments must be arranged through your Piper
Jaffray Investment Executive or other broker-dealer.
PURCHASE PRICE
You may purchase Class Y shares of the Fund at net asset value without any
initial or deferred sales charge. The purchase price will be equal to the net
asset value per share next calculated after receipt of your order by your Piper
Jaffray Investment Executive or other broker-dealer.
The Adviser makes ongoing payments out of its own assets to Piper Jaffray
Investment Executives and other broker-dealers who have sold Class Y shares of
the Fund. In addition, the Distributor or the Adviser, at their own expense,
provide promotional incentives to investment executives of the Distributor and
to broker-dealers who have sales agreements with the Distributor in connection
with sales of shares of the Fund and other mutual funds for which the Adviser
acts as investment adviser. In some instances, these incentives may be made
available only to certain Investment Executives or broker-dealers who have sold
or may sell significant amounts of such shares. The incentives may include
payment for travel expenses, including lodging at luxury resorts, incurred in
connection with sales seminars.
MINIMUM INVESTMENTS
A minimum initial investment of $1 million is required to purchase Class Y
shares of the Fund. There is no minimum for subsequent investments.
HOW TO REDEEM SHARES
NORMAL REDEMPTION
You may redeem all or a portion of your Class Y shares on any day that the
Fund values its shares. (Please refer to "Valuation of Shares" below for more
information.) Your shares will be redeemed at the net asset value next
calculated after the receipt of your instructions in good form by your Piper
Jaffray Investment Executive or other broker-dealer as explained below.
PIPER JAFFRAY INC. ACCOUNTS. To redeem your shares, please contact your
Piper Jaffray Investment Executive with an oral redemption request.
OTHER BROKER-DEALER ACCOUNTS. To redeem your shares, you may either contact
your broker-dealer with an oral request or send a written request directly to
the Fund's transfer agent, IFTC. This request should contain: the dollar amount
or number of Class Y shares to be redeemed, your Fund account number and either
a social security or tax identification number (as applicable). You should sign
your request in exactly the same way the account is registered. If there is more
than one owner of the shares, all owners must sign. A signature guarantee is
required for redemptions over $25,000. Please contact IFTC or refer to
"Redemption of Shares" in the Statement of Additional Information for more
details.
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SHAREHOLDER GUIDE TO INVESTING
PAYMENT OF REDEMPTION PROCEEDS
After your shares have been redeemed, the cash proceeds will normally be
sent to you or your broker-dealer within three business days. In no event will
payment be made more than seven days after receipt of your order in good form,
except that payment may be postponed or the right of redemption suspended for
more than seven days under unusual circumstances, such as when trading is not
taking place on the New York Stock Exchange. Payment of redemption proceeds may
also be delayed if the shares to be redeemed were purchased by a check drawn on
a bank which is not a member of the Federal Reserve System, until such check has
cleared the banking system (normally up to 15 days from the purchase date).
INVOLUNTARY REDEMPTION
The Fund reserves the right to redeem your Class Y share account at any time
if the net asset value of the account falls below $1 million as the result of a
redemption or exchange request. You will be notified in writing prior to any
such redemption and will be allowed 30 days to make additional investments
before the redemption is processed.
SHAREHOLDER SERVICES
AUTOMATIC MONTHLY INVESTMENT PROGRAM
You may arrange to make additional automated purchases of Class Y shares of
the Fund. You can automatically transfer $100 or more per month from your bank,
savings and loan or other financial institution to purchase additional shares.
In addition, if you hold your shares in a Piper Jaffray account you may arrange
to make such additional purchases by having $25 or more automatically
transferred each month from any of the money market fund series of Piper Funds.
You should contact your Piper Jaffray Investment Executive or IFTC to obtain
authorization forms or for additional information.
EXCHANGE PRIVILEGE
If your investment goals change, you may prefer a fund with a different
objective. If you are considering an exchange into another mutual fund managed
by the Adviser, you should carefully read the appropriate prospectus for
additional information about that fund. A prospectus may be obtained through
your Piper Jaffray Investment Executive, your broker-dealer or the Distributor.
To exchange your shares, please contact your Piper Jaffray Investment Executive,
your broker-dealer or IFTC.
You may exchange your Class Y shares for Class Y shares of any other mutual
fund managed by the Adviser that offers such shares. All exchanges are subject
to the eligibility of share purchases in your state as well as the minimum
investment requirements and any other applicable terms in the prospectus of the
fund being acquired. Exchanges are made on the basis of net asset values of the
funds involved.
Piper Global reserves the right to change or discontinue the exchange
privilege, or any aspect of the privilege, upon 60 days' written notice.
TELEPHONE TRANSACTION PRIVILEGES
PIPER JAFFRAY INC. ACCOUNTS. If you hold your shares in a Piper Jaffray
account, you may telephone your Investment Executive to execute any transaction
or to apply for many shareholder services. In some cases, you may be required to
complete a written application.
OTHER BROKER-DEALER ACCOUNTS. If you hold your shares in an account with
your broker-dealer or at IFTC, you may authorize telephone privileges by
completing the Account Application and Services Form.
20
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
Please contact your broker-dealer or IFTC (800-874-6205) for an application or
for more details. The Fund will employ reasonable procedures to confirm that a
telephonic request is genuine, including requiring that payment be made only to
the address of record or the bank account designated on the Account Application
and Services Form and requiring certain means of telephonic identification. If
the Fund employs such procedures, it will not be liable for following
instructions communicated by telephone that it reasonably believes to be
genuine. If the Fund does not employ such procedures, it may be liable for any
losses due to unauthorized or fraudulent telephone instructions. It may be
difficult to reach the Fund by telephone during periods when market or economic
conditions lead to an unusually large volume of telephone requests. If you
cannot reach the Fund by telephone, you should contact your broker-dealer or
issue written instructions to IFTC at the address set forth herein. See
"Management -- Transfer Agent, Dividend Disbursing Agent and Custodian." The
Fund reserves the right to suspend or terminate its telephone services at any
time without notice.
DIRECTED DIVIDENDS
You may direct income dividends and capital gains distributions to be
invested in Class Y shares of any other mutual fund managed by the Adviser that
offers such shares, provided such shares are eligible for purchase in your
state. This investment will be made at net asset value. It will not be subject
to a minimum investment amount except that you must hold shares in such fund
(including the shares being acquired with the dividend or distribution) with a
value at least equal to such fund's Class Y share minimum initial investment
amount.
SYSTEMATIC WITHDRAWAL PLAN
You may establish a Systematic Withdrawal Plan that allows you to receive
regular periodic payments by redeeming as many shares from your account as
necessary, provided you maintain a minimum account balance of $1 million. As
with other redemptions, a redemption to make a withdrawal is a sale for federal
income tax purposes. Payments made under a Systematic Withdrawal Plan cannot be
considered as actual yield or income since part of the payments may be a return
of capital.
A request to establish a Systematic Withdrawal Plan must be submitted in
writing to your Piper Jaffray Investment Executive or other broker-dealer. There
are no service charges for maintenance; the minimum amount that you may withdraw
each period is $100. You will be required to have any income dividends and any
capital gains distributions reinvested. You may choose to have withdrawals made
monthly, quarterly or semi-annually. Please contact your Piper Jaffray
Investment Executive, other broker-dealer or IFTC for more information.
You should be aware that additional investments in an account that has an
active Systematic Withdrawal Plan may be inadvisable due to tax liabilities.
Please refer to "Redemption of Shares" in the Statement of Additional
Information for additional details.
ACCOUNT PROTECTION
If your Fund shares are held in a Piper Jaffray account, they are protected
in the unlikely event of Piper Jaffray's financial failure. Piper Jaffray is a
member of the Securities Investor Protection Corporation ("SIPC"), whose primary
purpose is to protect the customers of its members against losses of up to
$500,000 ($100,000 on claims for cash) in the event of a member's liquidation.
In addition to the $500,000 SIPC protection, Piper Jaffray clients have
additional protection provided by Aetna Casualty and Surety Company. Your
investments in the Fund held in a Piper Jaffray PRIME or PAT
21
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
Plus account are protected up to $49.5 million beyond the coverage provided by
SIPC, for total account protection of $50 million. Investments held in all other
Piper Jaffray accounts are protected up to $24.5 million beyond the coverage
provided by SIPC, for total account protection of $25 million. This protection
does not cover any declines in the net asset value of Fund shares.
CONFIRMATION OF TRANSACTIONS AND REPORTING OF OTHER INFORMATION
Each time there is a transaction involving your Fund shares, such as a
purchase, redemption or dividend reinvestment, you will receive a confirmation
statement describing that activity. This information will be provided to you
from either Piper Jaffray, your broker-dealer or IFTC. In addition, you will
receive various IRS forms after the first of each year detailing important tax
information and the Fund is required to supply annual and semi-annual reports
that list securities held by the Fund and include the current financial
statements of the Fund.
HOUSEHOLDING. If you have multiple accounts with Piper Jaffray, you may
receive some of the above information in combined mailings. This will not only
help to reduce Fund expenses, it will help the environment by saving paper.
Please contact your Piper Jaffray Investment Executive for more information.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income and distributions of net realized
capital gains, if any, will be payable to Fund shareholders at least once
annually. Class Y shareholders generally will receive higher per share dividends
than Class A or Class B shareholders because Class Y shareholders are not
subject to Rule 12b-1 fees.
BUYING A DIVIDEND. 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 record date ("buying a dividend"), you will pay the full price for
the shares and then receive a portion of the price back as a taxable
distribution.
DISTRIBUTION OPTIONS. All net investment income dividends and net realized
capital gains distributions for the Fund generally will be payable in additional
Class Y shares of the Fund at net asset value ("Reinvestment Option"). If you
wish to receive your distributions in cash, you must notify your Piper Jaffray
Investment Executive or other broker-dealer. You may elect either to receive
income dividends in cash and capital gains distributions in additional Class Y
shares of the Fund at net asset value ("Split Option"), or to receive both
income dividends and capital gains distributions in cash ("Cash Option"). You
may also direct income dividends and capital gains distributions to be invested
in Class Y shares of another mutual fund managed by the Adviser that offers such
shares. See "Shareholder Services -- Directed Dividends" above. The taxable
status of income dividends and/or net capital gains distributions is not
affected by whether they are reinvested or paid in cash.
22
<PAGE>
VALUATION OF SHARES
The Fund computes its net asset value on each day the New York Stock
Exchange (the "Exchange") is open for business. The calculation is made as of
the regular close of the Exchange (currently 4:00 p.m. New York time) after the
Fund has declared any applicable dividends. In valuing the Fund's assets, all
securities for which market quotations are readily available are valued under
normal circumstances at the last sales price prior to the time of determination,
or if no sale is reported at that time, the mean between the closing asked price
and the closing bid price. If no bid and asked prices are available, then the
Adviser will use quotations obtained from broker-dealers or a widely used
quotation system. With respect to a security which is listed or traded on more
than one exchange, the Fund normally looks to the exchange on which trading is
more extensive. In instances where market quotations are not readily available
and in certain other circumstances, fair value is determined according to
methods selected in good faith by the Board of Directors. Short-term investments
having a maturity of 60 days or less are valued at cost with any premium
amortized or discount credited over the period remaining until maturity. Options
will be valued at market value or fair value, as determined in good faith by or
under the direction of the Board of Directors, if no market exists. Futures
contracts will be valued at the settlement price established each day by the
board of trade or exchange on which they are traded. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Directors.
Any assets or liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars by the pricing service retained by the Fund or,
to the extent that an exchange rate is not available through such pricing
service, at the mean of current bid and asked prices of such currencies against
the U.S. dollar last quoted by a major bank that is a regular participant in the
foreign exchange market. The Fund has been advised that the pricing service
translates foreign currencies into U.S. dollars on the basis of the official
exchange rate or by taking into account the quotes provided by a number of major
banks that are regular participants in the foreign exchange market. Trading in
securities on foreign securities exchanges and in over-the-counter markets is
normally completed well before the close of business on each business day. In
addition, foreign securities trading generally or in a particular country or
countries may not take place on all business days in New York. Furthermore,
trading takes place in various foreign markets on days which are not business
days of the Fund and on which the Fund's net asset value is not calculated.
Therefore, the net asset value of the Fund might be significantly affected on
days when the investor has no access to the Fund. The Fund calculates net asset
value per share as of the close of the regular trading session on the Exchange.
Such calculation does not take place contemporaneously with the determination of
the prices of the majority of the portfolio securities used in such calculation.
If events materially affecting the value of such securities occur between the
time when their price is determined and the time when the Fund's net asset value
is calculated, such securities will be valued at fair value as determined in
good faith by or under the direction of the Board of Directors.
Although the methodology and procedures for determining net asset value are
identical for all classes of shares, the net asset value per share of the Class
A, Class B and Class Y shares of the Fund may differ because of the differing
Rule 12b-1 fees and transfer agent fees charged to such classes.
TAX STATUS
The Fund qualified as a regulated investment company during its last taxable
year and intends to qualify as a regulated investment company during the current
taxable year. If so qualified, the Fund will not be liable for federal income
taxes to the extent it distributes its taxable income to shareholders.
23
<PAGE>
Distributions by the Fund are generally taxable to the shareholders, whether
received in cash or additional shares of the Fund (or shares of another mutual
fund managed by the Adviser). Distributions of net capital gains (designated as
"capital gain dividends") are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has held shares of the
Fund.
A shareholder will recognize a capital gain or loss upon the sale or
exchange of shares in the Fund if, as is normally the case, the shares are
capital assets in the shareholder's hands. This capital gain or loss will be
long-term if the shares have been held for more than one year.
The Fund's investments may be subject to taxes in foreign countries which
would reduce the total return on such investments. In addition, if the Fund is
deemed to be a resident of the United Kingdom for United Kingdom tax purposes or
if the Fund is treated as being engaged in a trading activity through an agent
in the United Kingdom, there is a risk that the United Kingdom will attempt to
tax all or a portion of the Fund's gains or income. In light of the structure of
the Fund and the terms and conditions of the Advisory and Sub-Advisory
Agreements, the Adviser believes that any such risk is minimal.
If the Fund has more than 50% of its assets invested in the stock or
securities of foreign corporations at the end of the Fund's taxable year, the
Fund may make an election to allow shareholders either to claim U.S. foreign tax
credits with respect to foreign taxes paid by the Fund or to deduct such amounts
as an itemized deduction on their tax return. In the event such an election is
made, shareholders would have to increase their taxable income by the amount of
such taxes and the Fund would not be able to deduct such taxes in computing its
taxable income.
The foregoing relates to federal income taxation as in effect as of the date
of this Prospectus. For a more detailed discussion of the federal income tax
consequences of investing in shares of the Fund, see "Taxation" in the Statement
of Additional Information. Before investing in the Fund, you should check the
consequences of your local and state tax laws.
PERFORMANCE COMPARISONS
Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." Total return
will be computed separately for each class of the Fund's shares. All such total
return quotations are based upon historical earnings and are not intended to
indicate future performance. The return on and principal value of an investment
in the Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
Average annual return is the average annual compounded rate of return on a
hypothetical $1,000 investment made at the beginning of the advertised period.
Cumulative total return is calculated by subtracting a hypothetical $1,000
payment to the Fund from the redeemable value of such payment at the end of the
advertised period, dividing such difference by $1,000 and multiplying the
quotient by 100. In calculating average annual and cumulative total return for
Class Y shares, all dividends and distributions are assumed to be reinvested.
Comparative performance information also may be used from time to time in
advertising the Fund's shares. For example, advertisements may compare the
Fund's performance to that of various unmanaged market indices, or may include
performance data from Lipper Analytical Services, Inc., Morningstar, Inc. or
other entities or organizations which track the performance of investment
companies.
For additional information regarding comparative performance information and
the calculation of average annual total return and cumulative total return, see
"Performance Comparisons" in the Statement of Additional Information.
24
<PAGE>
GENERAL INFORMATION
Piper Global was organized under the laws of the State of Minnesota in 1990
as a closed-end investment company and converted into an open-end investment
company on August 31, 1992. At that time, Pacific-European Fund was the only
outstanding series of Piper Global. The Board of Directors designated a second
series of Piper Global, Emerging Markets Fund, in April 1996.
The Board of Directors is empowered under the Company's 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 more additional classes of shares within each Fund, as
well as within any series of Piper Global created in the future. See "Capital
Stock and Ownership of Shares" in the Statement of Additional Information.
All shares of the Fund, when issued, will be fully paid and nonassessable
and will be redeemable. 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.
The different classes of the Fund's shares have the same rights and are
identical in all respects except that (a) expenses related to the distribution
of each class of shares are borne solely by such class; (b) 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; (c) each class has
exclusive voting rights with respect to approvals of any Rule 12b-1 distribution
plan related to that specific class (although Class B shareholders will have the
right to vote on any distribution fees imposed on Class A shares as long as
Class B shares convert into Class A shares); (d) only Class B shares carry a
conversion feature; and (e) each class has different exchange privileges.
Each share of a series has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset values of the series'
shares. On some issues, such as the election of directors, all shares of Piper
Global vote together as one series. On an issue affecting only a particular
series or class, the shares of the affected series or class vote separately.
Cumulative voting is not authorized. This means that the holders of more than
50% of the shares voting for the election of directors can elect 100% of the
directors if they choose to do so, and, in such event, the holders of the
remaining shares will be unable to elect any directors.
The Bylaws of Piper Global provide that shareholder meetings need be held
only with such frequency as required under Minnesota law. Minnesota corporation
law requires only that the Board of Directors convene shareholders meetings when
it deems appropriate. In addition, Minnesota law provides that if a regular
meeting of shareholders has not been held during the immediately preceding 15
months, a shareholder or shareholders holding 3% or more of the voting shares of
Piper Global may demand a regular meeting of shareholders by written notice
given to the chief executive officer or chief financial officer of Piper Global.
Within 30 days after receipt of the demand, the Board of Directors shall cause a
regular meeting of shareholders to be called, which meeting shall be held no
later than 90 days after receipt of the demand, all at the expense of Piper
Global. In addition, the 1940 Act requires a shareholder vote for all amendments
to fundamental investment policies and restrictions, for all amendments to
investment advisory contracts and for certain amendments to Rule 12b-1
distribution plans.
PENDING LEGAL PROCEEDINGS
Complaints have been brought against the Adviser and the Distributor
relating to several other investment companies for which the Adviser acts or has
acted as investment adviser or subadviser. These lawsuits do not involve the
Fund. The Adviser and the Distributor also are subject to regulatory inquiries
related to various funds or assets managed by the Adviser. Certain regulatory
inquiries have been settled, including inquiries by the National Association of
Securities Dealers, Inc. and the State of Minnesota. See "Pending
25
<PAGE>
Litigation" in the Statement of Additional Information. The Adviser and the
Distributor do not believe that any outstanding complaint, action in arbitration
or regulatory inquiry will have a material adverse effect on their ability to
perform under their agreements with Piper Global or a material adverse effect on
the Fund.
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS (AND/OR IN THE STATEMENT OF ADDITIONAL INFORMATION REFERRED TO ON THE
COVER PAGE OF THIS PROSPECTUS) AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
PIPER JAFFRAY INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
26
<PAGE>
PART B
PACIFIC-EUROPEAN GROWTH FUND
EMERGING MARKETS GROWTH FUND
Series of Piper Global Funds Inc.
STATEMENT OF ADDITIONAL INFORMATION
February 18, 1997
Table of Contents
Page
----
Introduction 2
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . 2
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . 8
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . 10
Investment Advisory and Other Services . . . . . . . . . . . . . . . . . 14
Portfolio Transactions and Allocation of Brokerage . . . . . . . . . . . 22
Capital Stock and Ownership of Shares. . . . . . . . . . . . . . . . . . 25
Net Asset Value and Public Offering Price. . . . . . . . . . . . . . . . 25
Performance Comparisons. . . . . . . . . . . . . . . . . . . . . . . . . 26
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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 two Prospectuses, each dated
February 18, 1997. One Prospectus relates to the Class A and Class B shares of
Pacific-European Growth Fund and Emerging Markets Growth Fund and the other to
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.
1
<PAGE>
INTRODUCTION
The shares of Piper Global Funds Inc. (the "Company") are currently offered
in two series: Pacific-European Growth Fund ("Pacific-European Fund") and
Emerging Markets Growth Fund ("Emerging Markets Fund") (sometimes referred to
herein as a "Fund" or, collectively, as the "Funds"). On June 21, 1996,
Emerging Markets 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 Fund had no
assets or liabilities prior to the acquisition. Certain financial and
performance information for Emerging Markets Fund set forth herein represents
historical information of Hercules Latin American Value Fund.
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.
ALLOCATION AMONG COUNTRIES.
For each Fund, investment is made in those countries where Management
believes 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 Fund) or in emerging markets (with
respect to Emerging Markets 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 Fund) or having emerging markets (with respect to Emerging
Markets 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 located in emerging market countries may
entail risks relating to the potential political and economic instability of
those countries and 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
2
<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 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.
ADDITIONAL RISKS OF INVESTMENTS IN LATIN AMERICA
Because the Emerging Markets Fund is the successor to the Hercules Latin
American Value Fund (see "General Information" in the Prospectus), the portfolio
consisted primarily of securities of Latin American issuers as of the date of
this Statement of Additional Information. In addition, the Pacific-European
Fund currently invests a portion of its assets in certain countries in Latin
America. The economies of individual countries in Latin America may differ
favorably or unfavorably from the U.S. economy in such respects as the rate of
growth of gross domestic product, the rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments positions. Certain Latin
American countries have experienced high levels of inflation which can have a
debilitating effect on an economy. Furthermore, certain Latin American
countries may impose withholding taxes on dividends payable to the Fund at a
higher rate than those imposed by other foreign countries. This may reduce the
Fund's investment income available for distribution to shareholders.
Although a number of Latin American countries are currently experiencing
lower rates of inflation and higher rates of real growth in gross domestic
product than they have in the past, other such countries continue to experience
significant problems, including high inflation rates and high interest rates.
Capital flight has proven a persistent problem and external debt has been
forcibly rescheduled. Political turmoil, high inflation, capital repatriation
restrictions and nationalization have further exacerbated conditions.
Governments of many Latin American countries have exercised and continue to
exercise substantial influence over many aspects of the private sector through
the ownership or control of many companies, including some of the largest in
those countries. As a result, government actions in the future could have a
significant effect on economic conditions which may adversely affect prices of
certain portfolio securities. Political, economic or social instability or
other similar developments, such as military coups, have occurred in the past
and could also adversely affect the Fund's investments in these countries.
3
<PAGE>
Changes in political leadership, the implementation of market oriented
economic policies, such as privatization, trade reform and fiscal and monetary
reform are among the recent steps taken to renew economic growth in Latin
American countries. External debt is being restructured and flight capital
(domestic capital that has left home country) has begun to return. Inflation
control efforts have also been implemented. Free Trade Zones are being
discussed in various areas in Latin America, the most notable being a free zone
between Mexico and the U.S. Latin American equity markets can be extremely
volatile and in the past have shown little correlation with the U.S. market.
Currencies are typically weak, but most are now relatively free floating, and it
is not unusual for the currencies to undergo wide fluctuations in value over
short periods of time due to changes in the market.
FOREIGN CURRENCY TRANSACTIONS
As discussed in the prospectus, the Funds engage in currency exchange
transactions in connection with the purchase and sale of their investments. A
forward foreign currency exchange 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 enter
into foreign currency futures contracts solely for hedging or other appropriate
risk management purposes as defined in CFTC regulations.
Forward foreign currency exchange 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
4
<PAGE>
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.
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. 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.
5
<PAGE>
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,
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.
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 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
6
<PAGE>
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.
ILLIQUID SECURITIES
As discussed in the prospectus, each Fund may invest no more than 15% of
its net assets in illiquid securities. "Restricted securities" are securities
which were originally sold in private placements and which have not been
registered under the Securities Act of 1933 (the "1933 Act"). Such securities
generally have been considered illiquid, since they may be resold only subject
to statutory restrictions and delays or if registered under the 1933 Act. In
1990, however, the Securities and Exchange Commission adopted Rule 144A under
the 1933 Act, which provides a safe harbor exemption from the registration
requirements of the 1933 Act for resales of restricted securities to "qualified
institutional buyers," as defined in the rule. The result of this rule has been
the development of a more liquid and efficient institutional resale market for
restricted securities. Thus, restricted securities are no longer necessarily
illiquid. The 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 (as discussed below).
Similar determinations may be made with respect to securities issued in reliance
on the so-called "private placement" exemption from registration under Section
4(2) of the 1933 Act.
Under the procedures adopted by the Board of Directors, 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 (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). With respect to Rule 144A securities, investing in such 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.
7
<PAGE>
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 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 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
8
<PAGE>
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.
(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 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 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.
9
<PAGE>
(c) Each Fund will not invest more than 5% of its net assets in warrants,
valued at the lower of cost or market.
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 and officers, other than Mr. Watt and Mr. Balfour, also serves as a
director or officer of various closed-end and open-end investment companies
managed by the Adviser.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION WITH DURING THE PAST FIVE YEARS
NAME AND ADDRESS (AGE) THE COMPANY AND OTHER AFFILIATIONS
- ---------------------- ------------- --------------------------
<S> <C> <C>
William H. Ellis* (54) Chairman of President of Piper Jaffray Companies
Piper Jaffray Tower the Board of Inc.; Director and Chairman of the
222 South Ninth Street Directors Board of Piper Capital Management
Minneapolis, MN 55402 Incorporated (the "Adviser") and
President of the Adviser since 1994;
Director of Piper Jaffray Inc.
David T. Bennett (56) Director Of counsel to the law firm of Gray,
3400 City Center Plant, Mooty, Mooty & Bennett, P.A.,
33 South Sixth Street located in Minneapolis. Mr. Bennett
Minneapolis, MN 55402 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 (69) Director President of Dyer Management
4670 Norwest Center Company, a private management
90 South Seventh Street company, since 1991; prior thereto,
Minneapolis, MN 55402 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
Northwestern National Life Insurance
Company, The ReliaStar Financial
Corp. (the holding company of
Northwestern National Life Insurance
Company) and various privately held
and nonprofit corporations.
Karol D. Emmerich (47) Director President of The Paraclete Group,
7302 Claredon Drive a consultant to nonprofit
Edina, MN 55439 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 (59) Director Ms. Goldberg serves on the board of
directors of
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION WITH DURING THE PAST FIVE YEARS
NAME AND ADDRESS (AGE) THE COMPANY AND OTHER AFFILIATIONS
- ---------------------- ------------- --------------------------
<S> <C> <C>
7019 Tupa Drive Northwestern National Life Insurance Company
Edina, MN 55435 (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.
David A. Hughey (65) Director Trustee of Bentley College; formerly
134 Powers Road Executive Vice President and Chief
Meredith, NH 03253 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 (61) Director Chief Executive Officer of National Equity
754 Linwood Fund, Chicago, Illinois since November 1995;
St. Paul, MN 55105 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.
Iain A. Watt* (51) Director Executive Chairman of the Sub-Adviser since
Edinburgh Fund Managers plc 1995; prior thereto, Managing Director of the
Donaldson House Sub-Adviser since 1991. Mr Watt is also a
97 Haymarket Terrace director of Edinburgh Dragon Trust plc,
Edinburgh, EH12 5HD Edinburgh New Tiger Trust plc, Edinburgh Unit
Trust Managers Limited, Edinburgh Oil
Management Limited and Private Fund Managers
Limited.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION WITH DURING THE PAST FIVE YEARS
NAME AND ADDRESS (AGE) THE COMPANY AND OTHER AFFILIATIONS
- ---------------------- ------------- --------------------------
<S> <C> <C>
Michael W. Balfour* (36) Director Chief Investment Director since January 1995
Edinburgh Fund Managers plc and Joint Managing Director since July 1995
Donaldson House of the Sub-Adviser; prior thereto, Director
97 Haymarket Terrace of Overseas Investments of the Sub-Adviser
Edinburgh, EH12 5HD from 1992 -1995 and assistant director and
head of the Pacific Department of the
Sub-Adviser from 1988 to 1992. Mr. Balfour is
also a director of Edinburgh Inca Trust plc,
Edinburgh Java Trust plc, DFM Holdings
Limited and Dunedin Fund Managers Limited.
Paul A. Dow (45) President Chief Investment Officer and Senior Vice
Piper Jaffray Tower President of the Adviser.
222 South Ninth Street
Minneapolis, MN 55402
Robert H. Nelson (33) Vice President Senior Vice President of the Adviser since
Piper Jaffray Tower and Treasurer 1993; prior thereto he had been a Vice
222 South Ninth Street President of the Adviser from 1991 to 1993.
Minneapolis, MN 55402
Susan S. Miley (39) Secretary Senior Vice President and General Counsel of
Piper Jaffray Tower the Adviser since 1995 and Secretary of the
222 South Ninth Street Adviser since 1996; prior to which Ms. Miley
Minneapolis, MN 55402 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.
</TABLE>
* Directors who are "interested persons," as defined in the 1940 Act, of
Piper Capital and the Funds.
Two of the Fund's directors, Mr. Balfour and Mr. Watt, reside outside of
the United States and substantially all of the assets of such persons are
located outside of the United States. Neither Mr. Balfour nor Mr. Watt has
appointed an agent for service of process in the United States. It may not be
possible, therefore, for investors to effect service of process within the
United States upon such persons or to enforce against them, in the United States
courts or foreign courts, judgments obtained in the United States courts
predicated upon the civil liability provisions of the federal securities laws of
the United States. In addition, it is not certain that a foreign court would
enforce, in original actions, liabilities against such persons predicated solely
upon United States securities laws.
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
12
<PAGE>
process, reviews audit results and recommends annually to the Company a firm of
independent certified public accountants.
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 Sub-Adviser or any of their 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 who are not affiliated with
the Adviser or Sub-Adviser 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 for the indicated periods, 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
13
<PAGE>
year ended December 31, 1995. Directors who are officers or employees of the
Adviser or Sub-Adviser or any of their affiliates did not receive any such
compensation and are not included in the table. No other individuals
received compensation from the Company during the indicated periods. Mr.
Bennett and Mr. Hughey became directors of the Company on August 9, 1996 and
September 3, 1996, respectively.
<TABLE>
<CAPTION>
Compensation from Compensation from
Pacific-European Fund Emerging Markets Fund Total
------------------------------ ------------------------------ Compensation
Seven-Months Year Ended Three-Months Year Ended from Fund
Director Ended 09/30/96 02/29/96 Ended 09/30/96 06/30/96* Complex**
- --------------------- -------------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Jaye F. Dyer $906 $2,023 $125 $738 $67,700
Karol D. Emmerich 906 2,023 125 738 67,700
Luella G. Goldberg 938 2,046 125 761 70,700
George Latimer 875 2,000 125 714 64,700
David T. Bennett 0 0 0 714 61,700
David A. Hughey 0 0 0 0 0
</TABLE>
- ---------
* Includes compensation received from Hercules Latin American Value Fund.
** Currently consists of 20 open-end and closed-end investment companies
managed by the Adviser, including the Company. During the 1995 calendar
year, the Fund Complex consisted of up to 27 such investment companies,
managed by the Adviser or an affiliate of the Adviser, several of which
were merged or consolidated during the year. 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
14
<PAGE>
agreement, or interested persons of any such party, other than as directors of
the Company) and the shareholders of the Funds.
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.
Pursuant to the Investment Advisory and Management Agreement, Pacific-
European Fund pays the Adviser monthly advisory fees as set forth in the
prospectus. Adjustments to the Basic Fee are made by comparison of the
investment performance of Pacific-European Fund's Class A shares for the
applicable period with the investment record of the EAFE Index. The Basic Fee
for each month may be increased or decreased by up to .25% (on an annualized
basis) of the Fund's average daily net assets depending upon the extent by which
the performance of the Fund's Class A shares varies from the EAFE Index over the
applicable performance period. For each percentage point by which the
investment performance of the Fund's Class A shares exceeds that of the EAFE
Index for the applicable performance period, the Basic Fee is increased by .05%
(on an annualized basis) of the Fund's average daily net assets, and for each
percentage point amount by which the Fund's Class A shares underperform the EAFE
Index, the Basic Fee is decreased by .05% (on an annualized basis) of the Fund's
average daily net assets. The maximum monthly increase for performance is 1/12
of .25% of the Fund's average daily net assets and will be payable if the
investment performance of the Fund's Class A shares exceeds that of the EAFE
Index by five or more percentage points for the performance period, and the
maximum decrease for performance is 1/12 of .25% of the Fund's average daily net
assets, which will occur if the Fund's Class A shares underperform the EAFE
Index by five or more percentage points for the 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 advisory fees paid by Pacific-European Fund for
the fiscal years ended February 28, 1994 and 1995 and
15
<PAGE>
February 29, 1996 and the seven-month fiscal period ended September 30, 1996
were $1,068,330, $1,731,719, $1,216,305 and $898,235, respectively.
Pursuant to the Investment Advisory and Management Agreement, Emerging
Markets 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 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 Fund. Advisory fees paid under such agreement for the
fiscal period from November 9, 1993 (commencement of operations to June 30, 1994
(fiscal year end) and for the fiscal years ended June 30, 1995 and 1996 and the
three-month fiscal period ended September 30, 1996 were $133,200, $280,401,
$188,400, and $34,087, 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 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 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 Fund, the Sub-
Adviser is paid a monthly fee by the Adviser equal to .50% of the Fund's average
daily net assets. For each Fund, the fee received by the Sub-Adviser will be
reduced by a portion of the excess, if any, of certain of such Fund's annual
expenses over the expense limitations set by California law, as described above,
and any other applicable state expense limitations. The Sub-Adviser's fee shall
be reduced by an amount which bears the
16
<PAGE>
same ratio to the fee reductions absorbed by the Adviser under the Investment
Advisory and Management Agreement as the sub-advisory fees which the
Sub-Adviser would otherwise be entitled to receive bear to the advisory fees
which the Adviser would be entitled to receive had such Fund not exceeded
state expense limitations.
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 Fund.
The fees paid by the Adviser to the Sub-Adviser for Pacific-European 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, 1994 and 1995 and February 29, 1996 and the seven-month
fiscal period ended September 30, 1996 were $691,438, $1,149,751, $706,276 and
$570,444, respectively. In addition, for the fiscal year ended February 29,
1996 and the seven-month fiscal period ended September 30, 1996, the Sub-Adviser
paid $155,359 and $95,187, 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 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 period from November 9, 1993 (commencement of operations)
to June 30, 1994 and the fiscal years ended June 30, 1995 and 1996 were $66,600,
$140,200 and $92,822.
From the commencement of operations of Emerging Markets Fund on June 22,
1996 through June 30, 1996, the Adviser paid the Sub-Adviser fees of $1,378.
For the three-month fiscal period ended September 30, 1996, fees paid by the
Adviser to the Sub-Adviser for Emerging Markets Fund were $17,044.
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
17
<PAGE>
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 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
18
<PAGE>
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 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 Fund for any one
year exceed the 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 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 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.
As described in the relevant Prospectus, 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
19
<PAGE>
compensation for ongoing servicing and/or maintenance of shareholder accounts
with respect to such Fund ("Shareholder Servicing Costs"). 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 Fund under its Distribution Plan for the
fiscal years ended February 28, 1994 and 1995 and February 29, 1996 and for the
seven-month fiscal period ended September 30, 1996, were $323,166, $476,639,
$514,242 and $311,253, respectively. There were no Class B shares outstanding
during such periods. During these periods, the Distributor voluntarily agreed
to limit amounts paid under the Plan to annual rates of .30%, .28%, .32% and
.31% of average daily net assets for fiscal years 1994, 1995 and 1996 and the
seven-month fiscal period ended September 30, 1996, respectively. Of the Rule
12b-1 fees paid for the fiscal year ended February 29, 1996, the Distributor
used $489,784 for compensation to underwriters (fees to investment executives)
and $24,458 for advertising. Of the Rule 12b-1 fees paid for the seven-month
fiscal period ended September 30, 1996, the Distributor used $301,213 for
compensation to underwriters (fees to investment executives) and $10,040 for
advertising.
The amount paid by Emerging Markets Fund under its Distribution Plan for
the three-month fiscal period ended September 30, 1996, was $10,567. There were
no Class B shares outstanding during such period. During this period, the
Distributor voluntarily agreed to limit amounts paid under the Plan to an annual
rate of .31% of average daily net assets. Of the Rule 12b-1 fees paid for the
three-month fiscal period ended September 30, 1996, the Distributor used $10,226
for compensation to underwriters (fees to investment executives) and $341 for
advertising, printing and mailing of prospectuses to other than current
shareholders.
Prior to its acquisition by Emerging Markets 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 period
from
20
<PAGE>
November 9, 1993 (commencement of operations) to June 30, 1994 and the fiscal
years ended June 30, 1995 and 1996 were $93,240, $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 $66,600 for fiscal 1994, $140,200 for
fiscal 1995 and $93,573 for fiscal 1996. The Distributor used all of the
Rule 12b-1 fees paid for the fiscal year ended June 30, 1996, for
compensation to underwriters (fees to investment executives)
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 Fund shares during the fiscal years ended February 28,
1994 and 1995 and February 29, 1996 and the seven-month fiscal period ended
September 30, 1996 were $556,904, $459,632, $400,830 and $164,075,
respectively, and the Distributor retained underwriting commissions of
$323,004, $459,632, $400,766 and $163,384, respectively. Prior to its
acquisition by Emerging Markets 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
Fund during the three-month fiscal period ended September 30, 1996 were
$23,154, all of which 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
21
<PAGE>
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 Fund paid $120,739 and
$57,518 to the Distributor and $15,139 and $11,252 to Piper Trust for the
fiscal year ended February 29, 1996 and the seven-month fiscal period ended
September 30, 1996 and Emerging Markets Fund paid $6,431 to the Distributor
and $0 to Piper Trust during the three-month fiscal period ended September
30, 1996. 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
22
<PAGE>
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 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
23
<PAGE>
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 Fund paid brokerage commissions for the fiscal years
ended February 28, 1994 and 1995 and February 29, 1996 and the seven-month
fiscal period ended September 30, 1996 of $735,400, $683,910, $940,635 and
$557,103, 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 Fund paid brokerage commissions for the fiscal
period from November 9, 1993 (commencement of operations) to June 30, 1994
and the fiscal years ended June 30, 1995 and 1996 and the three-month fiscal
period ended September 30, 1996 of $160,209, $217,281, $185,521 and $1,424,
respectively. Of such amounts, $4,208, $10,523, $0 and $0, respectively,
were paid to affiliated brokers which was equal to 3%, 4.84%, 0% and 0%,
respectively, of total brokerage commissions. The total dollar amount of
transactions involving commissions paid to an affiliate were $1,661,720 (3%),
$3,105,766 (6.28%), $0 and $0, respectively.
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 June 30, 1996 and the three-month fiscal period ended
September 30, 1996 no such securities were acquired by Emerging Markets Fund
and during the fiscal year ended February 29, 1996 and the seven-month
fiscal period ended September 30, 1996, no such securities were acquired by
Pacific-European 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.
24
<PAGE>
CAPITAL STOCK AND OWNERSHIP OF SHARES
-------------------------------------
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.
As of February 11, 1997, no shareholder owned of record or was known by
the Funds to own beneficially 5% or more of the outstanding shares of either
Fund except that Piper Trust Company Trustee, FBO Piper Jaffray Companies
401(k) Plan, 222 South Ninth Street, Minneapolis, Minnesota owned 1,815,632
shares (7.34%) of Emerging Growth Fund. The directors and officers of the
Company as a group owned less than 1% of the outstanding shares of each Fund
as of such date. All of the foregoing ownership information relates to the
Class A shares of the Funds. There were no Class B or Class Y shares
outstanding as of such date.
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, 1996, the net asset values per Class A share of each Fund were
calculated as follows:
Pacific-European Fund
---------------------
Net Assets ($172,453,670) = Net Asset Value Per Share ($12.94)
-------------------------------
Shares Outstanding (13,329,471)
25
<PAGE>
Emerging Markets Fund
---------------------
Net Assets ($13,771,898) = Net Asset Value Per Share ($8.85)
------------------------------
Shares Outstanding (1,555,403)
There were no Class B or Class Y shares outstanding as of September 30,
1996.
PERFORMANCE COMPARISONS
-----------------------
Advertisements and other sales literature for the Funds may refer to
"average annual total return" and "cumulative total return."
Average annual total return figures are computed by finding the average
annual compounded rates of return over the periods indicated in the
advertisement that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = 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, 1996.
There were no Class B or Class Y shares of the Funds outstanding during such
periods.
Average Annual Total Returns
----------------------------
1 Year 5 Years Since Inception
------ ------- ---------------
Pacific-European Fund 0.75% 9.05% 5.73%*
Emerging Markets Fund *** 16.52% N/A (5.44)%**
- -----------
* Inception date: 4/27/90
** Inception date: 11/9/93
*** Results are based on historical performance of Hercules Latin American
Value Fund, but deduct the 4% maximum sales charge applicable to Emerging
Markets Fund.
26
<PAGE>
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, 1996, for the Funds would have been:
Average Annual Total Returns
----------------------------
(Absent voluntary expense waivers)
1 Year 5 Years Since Inception
------ ------- ---------------
Pacific-European Fund 0.59% 8.83% 5.56%*
Emerging Markets Fund *** 14.67% N/A (6.90)%**
- -----------
* Inception date: 4/27/90
** Inception date: 11/9/93
*** Results are based on historical performance of Hercules Latin American
Value Fund, but deduct the 4% maximum sales charge applicable to Emerging
Markets Fund.
Cumulative total return is computed by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would
equate the initial amount invested to the ending redeemable value, 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.
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 the
Class A shares of the Funds for the periods from inception to September 30,
1996. There were no Class B or Class Y shares of the Funds outstanding
during such periods.
27
<PAGE>
Cumulative Total Returns
Cumulative (absent voluntary
Total Returns expense waivers)
------------- ------------------------
Pacific-European Fund 43.07% 41.63%
(inception date: 4/27/90)
Emerging Markets Fund * (14.94)% (18.69)%
(inception date: 11/9/93)
- -----------
* Results are based on historical performance of Hercules Latin American
Value Fund, but deduct the 4% maximum sales charge applicable to Emerging
Markets 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
------------------
An investor may qualify for a reduced sales charge on Class A shares by
signing a nonbinding Letter of Intent stating the investor's intention to
invest within a 13-month period, beginning not earlier than 90 days prior to
the date of execution of the Letter, a specified amount which, if made at one
time, would qualify for a reduced sales charge. Reinvested dividends will be
treated as purchases of additional Class A shares. 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
28
<PAGE>
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.
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.
REINSTATEMENT PRIVILEGE
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
29
<PAGE>
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 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.
30
<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); (b) generally derive in
each taxable year less than 30% of its gross income from gains from the sale
or other disposition of securities, options, futures or forward contracts
held for less than three months; and (c) 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).
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
31
<PAGE>
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 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.
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 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. 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.
32
<PAGE>
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.
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.
33
<PAGE>
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
-------------------
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 "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 Fund and Emerging
Markets Fund dated September 30, 1996, 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.
34
<PAGE>
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.
Two additional complaints relating to the Institutional Government
Income Portfolio remain pending. These complaints were brought by investors
who requested exclusion from the settlement class and are based on claims
similar to those asserted in the consolidated Class Action complaint. The
first pending complaint was brought on April 11, 1995, and filed in the
Minnesota State District Court, Hennepin County. This action was removed to
United States District Court, District of Minnesota. The plaintiff, Frank R.
Berman, Trustee of Frank R. Berman Professional CP Pension Plan Trust, sued
individually and not on behalf of any putative class. Defendants are the
Distributor, Piper Funds Inc., Morton Silverman and Worth Bruntjen. A second
pending complaint relating to the Institutional Government Income Portfolio
was filed on June 22, 1995 in the Montana Thirteenth Judicial District Court,
Yellowstone County by Beverly Muth against the Distributor and Teresa L.
Darnielle. In addition to the above complaints, a number of actions have
been commenced in arbitration by some of individual investors who requested
exclusion from the settlement class in the IN RE: PIPER FUNDS INC. action.
A complaint was filed by Herman D. Gordon on October 20, 1994, in the
United States District Court, District of Minnesota, against American
Adjustable Rate Term Trust Inc.--1998, American Adjustable Rate Term Trust
Inc.--1999, the Adviser, the Distributor, Piper Jaffray Companies Inc.,
Benjamin Rinkey, Jeffrey Griffin, Charles N. Hayssen and Edward J. Kohler. A
second complaint was filed by Frank Donio, I.R.A. and other plaintiffs on
April 14, 1995, in the United States District Court, District of Minnesota,
against American Adjustable Rate Term Trust Inc.--1996, American Adjustable
Rate Term Trust Inc.--1997, American Adjustable Rate Term Trust Inc.--1998,
American Adjustable Rate Term Trust Inc.--1999, the Adviser, the Distributor,
Piper Jaffray Companies Inc. and certain associated individuals. Plaintiffs
in both actions filed a Consolidated Amended Class Action Complaint on May
23, 1995 and by Order dated June 8, 1995, the Court consolidated
35
<PAGE>
the two putative class actions. The consolidated amended complaint, which
purports to be a class action, alleges certain violations of federal and
state securities laws, breach of fiduciary duty and negligent
misrepresentation. On August 23, 1996, the Court granted final approval to
the parties' agreement to settle all outstanding claims of the purported
class action. The Effective Date of the Settlement Agreement was September
23, 1996. The Settlement Agreement provides for $14 million in principal
payments consisting of $500,000 which was paid upon the Court's preliminary
approval, $1.5 million which was paid on the Effective Date of the Settlement
Agreement, and payments of $3 million on each anniversary of the Effective
Date for the next four years, with accrued interest payments of up to $1.8
million. A number of actions have been commenced in arbitration by individual
investors in the American Adjustable Rate Term Trusts.
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, 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
36
<PAGE>
Consumer Protection Act. The named plaintiffs and defendants have reached an
agreement-in-principle on a proposed settlement. If approved by the Court, a
settlement agreement consistent with the terms of the agreement-in-principle
would provide $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.
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 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,
37
<PAGE>
1994. Plaintiffs filed an Amended and Restated Complaint on July 19, 1995.
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 named
plaintiff and defendants have reached an agreement-in-principle on a proposed
settlement. If approved by the Court and a sufficiently large percentage of
the putative class members, a settlement agreement consistent with the terms
of the agreement-in-principle would provide to class members up to a total of
$1.5 million collectively from The Managers Funds, L.P. and the Adviser on
the effective date of the settlement. A third complaint relating to both the
Managers Intermediate 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 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.
38
<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.
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.
A-1
<PAGE>
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:
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."
A-2
<PAGE>
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 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.
B-1
<PAGE>
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 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
B-2
<PAGE>
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.
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
B-3
<PAGE>
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 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.
B-4
<PAGE>
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 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-5
<PAGE>
PART C
PIPER GLOBAL FUNDS INC.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited financial statements are incorporated by reference to the
Registrant's Annual Report for the seven-months ended September 30, 1996
for Pacific-European Fund and the three-months ended September 30, 1996
for Emerging Markets Growth Fund.
(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 (7)
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
<PAGE>
- ---------------
(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.
(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) 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 February 11, 1997, the following Class A Common Shares were
outstanding. There were no Class B shares or Class Y shares outstanding.
Number of
Title of Class Record Holders
-------------- --------------
Pacific-European Growth Fund Common Shares 13,203
Emerging Markets Growth Fund Common Shares 3,180
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
2
<PAGE>
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, 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
---- -----
William H. Ellis President, Director and Chairman of
the Board
Charles N. Hayssen Director
Bruce C. Huber Director
David E. Rosedahl Director
Momchilo Vucenich Director
Paul A. Dow Senior Vice President and
Chief Investment Officer
Susan S. Miley Senior Vice President, General Counsel
and Secretary
Worth Bruntjen Senior Vice President
Michael C. Derck Senior Vice President
Richard W. Filippone Senior Vice President
John J. Gibas Senior Vice President
Marijo A. Goldstein Senior Vice President
Mark R. Grotte Senior Vice President
3
<PAGE>
Jerry F. Gudmundson Senior Vice President
Robert C. Hannah Senior Vice President
Lynne Harrington Senior Vice President
Kim Jenson Senior Vice President
Lisa A. Kenyon Senior Vice President
Mark S. Lee Senior Vice President
Thomas S. McGlinch Senior Vice President
Curt D. McLeod Senior Vice President
Steven V. Markusen Senior Vice President
Paula Meyer Senior Vice President
Robert H. Nelson 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
John K. Schonberg Senior Vice President
Sandra K. Shrewsbury Senior Vice President
David M. Steele Senior Vice President
Robert H. Weidenhammer Senior Vice President
John G. Wenker Senior Vice President
Douglas J. White Senior Vice President
Cynthia K. Castle Vice President
Richard Daly Vice President
Molly Destro Vice President
Julie Deutz Vice President
Joyce A. K. Halbe Vice President
Joan L. Harrod Vice President
Mary M. Hoyme Vice President
Amy K. Johnson Vice President
Russell J. Kappenman Vice President
Kimberly F. Kaul Vice President
John D. Kightlinger Vice President
Wan-Chong Kung Vice President
Steven Meyer Vice President
Thomas Moore Vice President
Chris Neuharth Vice President
Paul D. Pearson Vice President
Eric L. Siedband Vice President
Catherine M. Stienstra Vice President
Shaista Tajamal Vice President
Jill A. Thompson Vice President
Jane K. Welter Vice President
Marcy K. Winson Vice President
Fong P. Woo Vice President
Principal occupations of Messrs. Ellis, Dow, Nelson and Ms. Miley are set
forth in the Statement of Additional Information under the heading "Directors
and Officers."
4
<PAGE>
MR. HAYSSEN is a Director of the Adviser and has been Chief Information Officer
of Piper Jaffray Companies Inc. since January 1996 and a Managing Director of
Piper Jaffray Inc. ("Piper Jaffray") since 1986, prior to which he was a
Managing Director of Piper Jaffray Companies Inc. from 1987 to 1995, Chief
Financial Officer of Piper Jaffray from 1988 to 1995, Chief Financial Officer of
the Adviser from 1989 to 1995 and Chief Operating Officer of the Adviser from
1994 to 1995. MR. HUBER has been a Director of the Adviser since 1985 and a
Managing Director of Piper Jaffray since 1986. MR. ROSEDAHL is a Director of
the Adviser and Managing Director and Secretary for Piper Jaffray and Managing
Director, Secretary and General Counsel for Piper Jaffray Companies Inc. MR.
VUCENICH has been a Director of the Adviser since 1994 and a Managing Director
of Piper Jaffray Inc. since 1993.
MR. BRUNTJEN has been a Senior Vice President of the Adviser since 1988.
MR. DERCK has been a Vice President of the Adviser since November 1992, prior to
which he had been a manager of Advisory Accounts Services with the Adviser since
April 1992 and, before that, an Assistant Vice President at First Trust since
1976. MR. FILIPPONE has been a Senior Vice President of the Adviser since 1991.
MR. GIBAS has been a Senior Vice President of the Adviser since 1992, prior to
which he had been a Vice President of the Adviser from 1987 to 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, prior to which he had
been a Vice President of the Adviser from 1988 to 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. 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. 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. MS. KENYON has been a Senior Vice
President of the Adviser since 1992, prior to which she had been a financial
adviser for a private family in Los Angeles. 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. LEE has been a Senior Vice President of the
Adviser since 1995, prior to which he had been a Vice President of the Adviser
since 1990. 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 and,
prior thereto, he had been a specialty products trader at FBS Investment
Services from 1990 to 1992. MR. MCLEOD has been a Senior Vice President of the
Adviser since 1995, prior to which he had been an analyst at the Adviser since
1988. 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. MS. MEYER has been a Senior Vice
President of the Adviser since 1994, prior to which she had been a Vice
President of Secura Insurance, Appleton, Wisconsin from 1988 to 1994. 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
5
<PAGE>
President of the Adviser since 1989. MR. SALVOG has been a Senior Vice
President of the Adviser since 1992, prior to which he had been a portfolio
manager at Kennedy & Associates in Seattle, Washington from 1984 to 1992. MR.
SCHONBERG has been a Senior Vice President of the Adviser since 1995, prior to
which he was a Vice President of the Adviser from 1992 to 1995 and a portfolio
manager for the Adviser since 1989. 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, and a Vice President of Piper Jaffray
since 1990. MR. STEELE has been a Senior Vice President of the Adviser since
1992, prior to which he had been a portfolio manager at Kennedy & Associates in
Seattle, Washington from 1987 to 1992. MR. WEIDENHAMMER has been a Senior Vice
President of the Adviser 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, and prior thereto, the Director of
Revitalization Resources of the Minneapolis Community Development Agency from
1990 to 1992. MR. WHITE has been a Senior Vice President of the Adviser since
1991.
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. MR. DALY
has been a Vice President of the Adviser since 1992, prior to which he was an
Assistant Vice President of the Piper Jaffray since 1990 and a broker with Piper
Jaffray from 1987 to 1992. MS. DESTRO has been aVice 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. DEUTZ has been a
Vice President of the Adviser since September 1995, prior to which she was an
Assistant Vice President at Daiwa Bank, Ltd. from 1992 to September 1995 and a
manager of financial reporting at The Churchill Companies from 1991 to 1992.
MS. HALBE has been a Vice President of the Adviser since 1996, prior to which
she was a Vice President at First Asset Management since 1990. MS. HARROD has
been a Vice President of the Adviser since 1992 and has been a trader for the
Adviser since 1989. MS. HOYME has been a Vice President of the Adviser since
1996, prior to which she had been a Vice President at First Asset Management
since 1989. MS. JOHNSON has been aVice 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. MR. KAPPENMAN has been a Vice
President of the Adviser since 1991. MS. KAUL has been a Vice President and
Director of Corporate Communications of the Adviser since 1991. MR. KIGHTLINGER
has been a Vice President of the Adviser since 1991. 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. 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, prior to which he was a Portfolio Manager at Alpine Capital Management
from 1990 to 1992 and a broker at Hanifen Capital Management from 1990 to 1992.
MR. NEUHARTH has been a Vice President of the Adviser since 1996, prior to which
he had been a senior mortgage trader at FBS Mortgage since 1995, and prior
thereto, a fixed income portfolio manager at Fortis Financial since 1987. 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. SIEDBAND has been a Vice President of the Adviser
6
<PAGE>
since 1992. MS. STIENSTRA has been a Vice President of the Adviser since
November 1995 and a municipal bond trader of the Adviser since June 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. THOMPSON has been a Vice President of the
Adviser since 1994, prior to which she had been a Vice President at First Asset
Management since 1991. 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 Adviser from 1990 to 1993. MS.
WINSON has been a Vice President of the Adviser since November 1993, prior to
which she was an Assistant Vice President of the Adviser since March 1993 and an
educator from 1990 to 1992. 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 and a credit specialist at a commercial trading firm from 1991 to
1992.
The officers and directors of the Sub-Adviser and their titles are as
follow:
Name Title
---- -----
Iain A. Watt Chairman
Peter A.K. Arthur Joint Managing Director
Michael W. Balfour Joint Managing Director
Lloyd A. Beat Executive Director
Graham M. Brock Executive Director
Graham C. Campbell Executive Director
Alistair M.T. Currie Executive Director
David W. Currie Executive Director
Alex J. Gowans Executive Director
William S. Johnstone Executive Director
David McCraw Executive Director
Robert G.H. McGeorge Executive Director
Ian E. Massie Executive Director
Ken McKenna Executive Director
Catherine C.J. Miller Executive Director
Richard D. Muckart Executive Director
Colin F. Peters Executive Director
Principal occupations of Mr. Watt and Mr. Balfour are set forth in the
Statement of Additional Information under the heading "Directors and Executive
Officers." Messrs. Beat, Brock, A. Currie, D. Currie and McKenna and Ms. Miller
have no other principal occupations other than as executive directors of the
Sub-Adviser. MR. ARTHUR currently serves as a director of Edinburgh Fund
Managers plc, Edinburgh Oil Management Limited, Drayton Asia Finance Limited,
DFM Holdings Limited and Dunedin Fund Managers Limited. MR. JOHNSTONE currently
serves as a director of Edinburgh Fund Managers plc and Broadgate Marketing
Limited. MR. CAMPBELL currently serves as a director of Edinburgh Fund Managers
plc and Scottish Judo Federation. MR. GOWANS currently serves as a director of
Edinburgh Fund Managers plc, Edinburgh Income Trust
7
<PAGE>
plc and Edinburgh Small Companies Trust plc. MR. JOHNSTONE currently serves as
a director of Edinburgh Fund Managers plc and Broadgate Marketing Limited. MR.
MASSIE currently serves as a director of Edinburgh Fund Managers plc and Dunedin
Fund Managers Limited. MR. MCCRAW currently serves as a director of Edinburgh
Fund Managers plc, Dunedin Fund Managers Limited and DFM Holdings Limited. MR.
MCGEORGE currently serves as a director of Edinburgh Fund Mangers plc, Dunedin
Fund Managers Limited, Dunedin Pension Fund Managers Limited, Dunedin Financial
Services Limited, Dunedin Portfolio Managers Limited and Trustcto Finance plc.
MR. MUCKART currently serves as a director of Edinburgh Fund Managers plc,
Dunedin Fund Managers Limited, DFM Holdings Limited and LTS International
Limited. MR. PETERS currently serves as a director of Edinburgh Fund Managers
plc, Dunedin Fund Managers Limited and Taytem Nominees Limited.
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., the
shares of which are currently offered in twelve series, Piper Funds Inc. -- II
the shares of which are currently offered in one series and Piper Institutional
Funds Inc., the shares of which are currently offered in one 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
Ralph W. Burnet Member of the Board None
of Directors
William H. Ellis Member of the Board None
of Directors
John L. McElroy, Jr. 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
8
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
James J. Bellus Managing Director None
AnnDrea M. Benson Managing Director and None
General Counsel
Lloyd K. Benson Managing Director None
Gary J. Blauer Managing Director None
Karen M. Bohn Managing Director None
Sean K. Boyea Managing Director None
Ronald O. Braun Managing Director None
Jay A. Brunkhorst Managing Director None
Kenneth S. Cameranesi Managing Director None
Stephen M. Carnes 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
David P. Crosby Managing Director None
Mark A. Curran Managing Director None
George S. Dahlman Managing Director None
Jack C. Dillingham Managing Director None
Mark T. Donahoe Managing Director None
9
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
Darci L. Doneff Managing Director None
Andrew S. Duff Managing Director None
Andrew W. Dunleavy Managing Director None
Richard A. Edstrom 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
G. Richard Ferguson Managing Director None
Paul Ferry Managing Director None
Mark E. Fisler Managing Director None
Michael W. Follett 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
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
10
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
Charles E. Howell Managing Director None
Bruce C. Huber Managing Director None
Elizabeth A. Huey Managing Director None
John R. Jacobs 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
Richard G. Kiss Managing Director None
Gordon E. Knudsvig Managing Director None
Jerome P. Kohl Managing Director None
Eric W. Larson Managing Director None
Dan L. Lastavich Managing Director None
Robert J. Magnuson Managing Director None
Robert E. Mapes Managing Director None
Peter T. Mavroulis Managing Director None
Michael P. McMahon Managing Director None
G. Terry McNellis Managing Director None
Thomas A. Medlin Managing Director None
Darryl L. Meyers Managing Director None
Joseph E. Meyers Managing Director None
John V. Miller Managing Director None
11
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
Dennis V. Mitchell Managing Director None
Edward P. Nicoski Managing Director None
Barry J. Nordstrand Managing Director None
Benjamin S. Oehler Managing Director None
Brooks G. O'Neil Managing Director None
John P. O'Neill Managing Director None
John Otterlei Managing Director None
Robin C. Pfister 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
Robert P. Rinek Managing Director None
Wesley L. Ringo Managing Director None
Jim M. Roane Managing Director None
Deborah K. Roesler Managing Director None
Russ E. Rogers Managing Director None
David E. Rosedahl Managing Director None
and Secretary
Terry D. Sandven Managing Director None
Thomas P. Schnettler Managing Director None
Steven R. Schroll Managing Director None
12
<PAGE>
Joyce Nelson Schuette Managing Director None
Lawrence M. Schwartz, Jr. Managing Director None
Morton D. Silverman Managing Director None
Linda E. Singer Managing Director None
David P. Sirianni Managing Director None
Arch C. Smith Managing Director None
Robert L. Sonnek Managing Director None
Thomas E. Stanberry Managing Director None
DeLos V. Steenson Managing Director None
D. Greg Sundberg Managing Director None
Robert D. Swerdling Managing Director None
William H. Teeter Managing Director None
Ann C. Tillotson Managing Director None
Marie 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
Stephen W. Woodard Managing Director None
Mark Wren Managing Director None
13
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
Saul Yaari Managing Director None
Beverly J. Zimmer Managing Director None
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 Pacific-European Fund's securities may
be maintained by it custodian, First Trust National Association, 180 East Fifth
Street, St. Paul, Minnesota 55101, and certain documents related the custody of
Emerging Markets Fund's securities may be maintained by its custodian, Investors
Fiduciary Trust Company, 127 West Tenth Street, Kansas City, Missouri 64105.
Investors Fiduciary Trust Company may also maintain documents for each Fund in
its capacity as Transfer and Dividend Disbursing Agent.
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 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 14th day of February 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 February 14, 1997
- ---------------------------------- executive officer)
Paul A. Dow
/s/ Robert H. Nelson Treasurer (principal February 14, 1997
- ---------------------------------- financial and
Robert H. Nelson accounting officer)
Michael W. Balfour* Director
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
Iain A. Watt* Director
*By /s/ William H. Ellis February 14, 1997
-----------------------------
William H. Ellis, Attorney-in-Fact
<PAGE>
CERTIFICATE OF DESIGNATION
OF
CLASS A, CLASS B AND CLASS Y COMMON SHARES
OF
SERIES A
AND OF
CLASS A AND CLASS B COMMON SHARES
OF
SERIES B
OF
PIPER GLOBAL FUNDS, INC.
The undersigned duly elected Secretary of Piper Global Funds, Inc., a
Minnesota corporation (the "Corporation"), hereby certifies that the
following is a true, complete and correct copy of resolutions duly adopted by
a majority of the directors of the Board of Directors of the Corporation on
November 15, 1996:
WHEREAS, the total authorized number of shares of the Corporation is
one hundred billion, all of which shares are common shares, par value $.01
per share, as set forth in the Corporation's Restated Articles of
Incorporation (the "Articles");
WHEREAS, two billion of such shares have been designated in the
Articles as Series A Common Shares and two billion have been designated as
Series B Common Shares.
WHEREAS, pursuant to Article 5 of the Articles, the Board of Directors
may classify and reclassify any remaining unissued common shares into one
or more additional or other classes or series as may be established from
time to time by setting or changing in any one or more respects the
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of stock.
NOW, THEREFORE, BE IT RESOLVED, that of the two billion shares
designated in the Articles as Series A Common Shares, 800 million are
hereby designated as Series A, Class A Common Shares, 400 million are
hereby designated as Series A, Class B Common Shares, 200 million are
hereby designated as Series A, Class Y Common Shares, the remaining 600
million Series A Common Shares shall remain undesignated as to class, and
the Series A Common Shares which are outstanding on the date hereof are
hereby redesignated as Series A, Class A Common Shares.
FURTHER RESOLVED, that of the two billion shares designated in the
Articles as Series B Common Shares, 800 million are hereby designated as
<PAGE>
Series B, Class A Common Shares, 400 million are hereby designated as
Series B, Class B Common Shares, the remaining 800 million Series B Common
Shares shall remain undesignated as to class, and the Series B Common
Shares which are outstanding on the date hereof are hereby redesignated as
Series B, Class A Common Shares.
FURTHER RESOLVED, that each class of Common Shares designated by these
resolutions may be subject to such charges and expenses (including, by way
of example but not by way of limitation, such front-end and deferred sales
charges as may be permitted under the Investment Company Act of 1940 (the
"1940 Act") and the rules of the National Association of Securities
Dealers, Inc., and expenses under Rule 12b-1 plans, administration plans,
service plans or other plans or arrangements, however designated) adopted
from time to time by the Board of Directors of the Corporation in
accordance, to the extent applicable, with the 1940 Act, which charges and
expenses may differ from those applicable to another class, and all of the
charges and expenses to which a class is subject shall be borne by such
class and shall be appropriately reflected in determining the net asset
value and the amounts payable with respect to dividends and distributions
on, and redemptions or liquidation of, such class.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Designation on behalf of the Corporation this 29th day of January 1997.
/s/ Susan S. Miley
---------------------------------------
Susan S. Miley, Secretary
<PAGE>
AMENDMENT
TO
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Amendment to Investment Advisory and Management Agreement, made as
of the 18th day of February, 1997, by and between Piper Global Funds Inc., a
Minnesota corporation (the "Company"), on behalf of the Pacific-European
Growth Fund series of the Company (the "Fund"), and Piper Capital Management
Incorporated, a Delaware corporation (the "Adviser").
WHEREAS, the Company has entered into an Investment Advisory and
Management Agreement with the Adviser dated August 28, 1992 (the "Advisory
Agreement") whereby the Company engaged the Adviser to act as investment
adviser for, and to manage the affairs, business and investment of the assets
of, the Fund.
WHEREAS, under the terms of the Advisory Agreement, the Company is
required to pay to the Adviser a Basic Fee, as defined in the Advisory
Agreement, subject to adjustment based on a comparison of the investment
performance of the Fund for the applicable performance period to the
investment record of the Morgan Stanley Capital International EAFE Index
("EAFE").
WHEREAS, effective February 18, 1997, the shares of the Fund will be
issued in multiple classes.
WHEREAS, the Board of Directors of the Company has determined that it
would be in the best interests of shareholders for the Basic Fee to be
subject to adjustment based on a comparison of the investment performance of
the Class A shares of the Fund for the applicable performance period to the
investment record of EAFE.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, Section 2 of the Advisory Agreement is
hereby amended to read as follows:
2. COMPENSATION FOR SERVICES. In payment for all services,
facilities, equipment and personnel, and for other costs of the Adviser
hereunder, the Company shall pay to the Adviser, from the assets of the
Fund, a monthly investment advisory fee determined by applying the annual
rate of 1.00% to the Fund's average daily net assets up to $100 million,
the annual rate of .875% to such assets between $100 million and $200
million, and the annual rate of .75% to such assets in excess of $200
million and multiplying such amount by 1/12 (the "Basic Fee"). The Basic
Fee shall be subject to adjustment based on a comparison of the investment
performance of the Class A shares of the Fund for the applicable
performance period to the investment record of
<PAGE>
the Morgan Stanley Capital International EAFE-sm- Index ("EAFE").
For purposes of calculating such performance adjustment, the
applicable performance period shall be a rolling 12-month period
comprised of the most recent calendar month and the 11 immediately
preceding calendar months. The Basic Fee, plus or minus the
performance adjustment, shall be calculated and paid to the Adviser
monthly. The monthly performance adjustment shall be calculated as
follows: (a) for each percentage point by which the investment performance
of the Fund's Class A shares exceeds that of EAFE (subject to a maximum of
5 percentage points), the Basic Fee shall be increased by an amount equal
to the product of .05% of the Fund's average daily net assets and 1/12, and
(b) for each percentage point by which the investment performance of the
Fund's Class A shares is exceeded by that of EAFE (subject to a maximum of
5 percentage points), the Basic Fee shall be decreased by an amount equal
to the product of .05% of the Fund's average daily net assets and 1/12.
RANGE OF PERMITTED INCREASES OR DECREASES
TO THE BASIC FEE ON AN ANNUALIZED BASIS
Percentage Point Difference
Between Performance of Adjustment
Class A Shares of Fund to Basic Fee
and % Change in EAFE Index (Annualized)
----------------------------- -------------
+5 percentage +.25%
points or more
+4 +.20
+3 +.15
+2 +.10
+1 +.05
+0 0
-1 -.05
-2 -.10
-3 -.15
-4 -.20
-5 percentage -.25
points or more
In comparing the investment performance of the Fund's Class A shares
to the investment record of the EAFE, dividends and other distributions of
the Fund's Class A shares and dividends and other distributions reported
with respect to component securities of the EAFE during the performance
period will be treated as having been reinvested. Investment performance
of the Fund's Class A shares will be calculated based on the total return
of such
2
<PAGE>
shares for the applicable period, which consists of the total net
asset value of such 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 recorded to the nearest whole point (to
the higher whole point if exactly one-half).
For purposes of the calculation of such fee, "average daily net
assets" for a particular period shall be determined on the basis of the
Fund's net assets as determined as of the close of each business day of the
month pursuant to the currently effective prospectus of the Fund. Such fee
shall be payable on the fifth day of each calendar month for services
performed hereunder during the preceding month. If this Agreement
terminates prior to the end of a month, such fee shall be prorated
according to the proportion which such portion of the month bears to the
full month.
IN WITNESS WHEREOF, the Company and the Adviser have caused this
Amendment to be executed by their duly authorized officers as of the day and
year first above written.
PIPER GLOBAL FUNDS INC.
By /s/ William H. Ellis
---------------------------------------
Its Chairman
------------------------------------
PIPER CAPITAL MANAGEMENT
INCORPORATED
By /s/ Robert H. Nelson
---------------------------------------
Its Senior Vice President
---------------------------------------
3
<PAGE>
AMENDMENT
TO
SUB-INVESTMENT ADVISORY AGREEMENT
This Amendment to Sub-Investment Advisory Agreement, made as of the 18th
day of February, 1997, by and between Piper Capital Management Incorporated,
a Delaware corporation (the "Adviser") and Edinburgh Fund Managers plc, a
Scottish corporation (the "Sub-Adviser").
WHEREAS, Piper Global Funds Inc. (the "Company"), on behalf of the
Pacific-European Growth Fund series of the Company (the "Fund"), has entered
into an Investment Advisory and Management Agreement with the Adviser dated
August 28, 1992 (the "Advisory Agreement") whereby the Company engaged the
Adviser to act as investment adviser for, and to manage the affairs, business
and investment of the assets of, the Fund.
WHEREAS, the Adviser has entered into a Sub-Investment Advisory
Agreement with the Sub-Adviser dated August 28, 1992 (the "Sub-Advisory
Agreement") whereby the Adviser retained the Sub-Adviser to assist the
Adviser in furnishing an investment program to the Fund.
WHEREAS, under the Sub-Advisory Agreement, the Sub-Adviser is entitled
to compensation equal to 65% of the Basic Fee payable to the Adviser pursuant
to the Advisory Agreement, adjusted by an amount equal to 90% of the
performance adjustment received by the Adviser under such Agreement.
WHEREAS, under the terms of the Advisory Agreement and the Sub-Advisory
Agreement, such performance adjustment is based on a comparison of the
investment performance of the Fund for the applicable performance period to
the investment record of the Morgan Stanley Capital International EAFE Index
("EAFE").
WHEREAS, effective February 18, 1997, the shares of the Fund will be issued
in multiple classes.
WHEREAS, the Board of Directors of the Company has determined that it would
be in the best interests of shareholders for the Basic Fee to be subject to
adjustment based on a comparison of the investment performance of the Class A
shares of the Fund for the applicable performance period to the investment
record of EAFE.
WHEREAS, the Advisory Agreement is being amended simultaneously herewith to
reflect such determination.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, Section 8 of the Sub-Advisory Agreement is
hereby amended to read as follows:
8. For the services to be rendered under this Agreement, and the
facilities to be furnished for each fiscal year of the Fund, the Adviser
shall pay to the Sub-Adviser a monthly management fee of 65% of the basic
fee payable to the Adviser pursuant to the Advisory Agreement with respect
to such month (the "Basic Fee"), subject to adjustment based on a
comparison of the investment performance of the Class A shares of the Fund
for the applicable performance period to the investment record of the
Morgan Stanley Capital International EAFE-sm- Index ("EAFE"). The Basic Fee
for each month shall be adjusted by an amount equal to 90% of the
performance adjustment, if any, received by the Adviser with respect to
such month pursuant to the Advisory Agreement (as described below). For
purposes of calculating such performance adjustment, the applicable
performance period shall be a rolling 12-month period comprised of the most
recent calendar month and the 11 immediately preceding calendar months.
Pursuant to the Advisory Agreement, the Company pays the Adviser
monthly, from the assets of the Fund, a basic fee at the per annum rate of
1.00% of the Fund's average daily net assets up to $100 million, .875% of
such assets between $100 million and $200 million, and .75% on such assets
in excess of $200 million. The Basic Fee received by the Adviser shall be
increased or decreased, as the case may be, by .05% (on an annualized
basis) of the Fund's average daily net assets for each percentage point by
which the investment performance of the Fund's Class A shares over the
applicable performance period varies from the EAFE up to a maximum increase
or decrease of .25% (on an annualized basis).
2
<PAGE>
RANGE OF PERMITTED INCREASES OR DECREASES
TO THE BASIC FEE PAYABLE TO THE INVESTMENT ADVISER
(ON AN ANNUALIZED BASIS)
Percentage Point Difference
Between Performance of Adjustment
Class A Shares of Fund to Basic Fee
and % Change in EAFE Index (Annualized)
----------------------------- -------------
+5 percentage +.25%
points or more
+4 +.20
+3 +.15
+2 +.10
+1 +.05
+0 0
-1 -.05
-2 -.10
-3 -.15
-4 -.20
-5 percentage -.25
points or more
In comparing the investment performance of the Fund's Class A shares
to the investment record of the EAFE, dividends and other distributions of
the Fund's Class A shares and dividends and other distributions reported
with respect to component securities of the EAFE during the performance
period will be treated as having been reinvested. Investment performance
of the Fund's Class A shares will be calculated based on the total return
of such shares for the applicable period, which consists of the total net
asset value of such 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).
For purposes of calculation of the fee payable hereunder, the "average
daily net assets" of the Fund for a particular period shall be determined
on the basis of the Fund's net assets as determined as of the close of each
business day of the month pursuant to the currently effective prospectus of
the Fund.
3
<PAGE>
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Amendment to be executed by their duly authorized officers as of the day and
year first above written.
PIPER CAPITAL MANAGEMENT
INCORPORATED
By /s/ Robert H. Nelson
------------------------------------
Its Senior Vice President
--------------------------------
EDINBURGH FUND MANAGERS plc
By /s/ Iain A. Watt
-----------------------------------
Its Executive Chairman
-------------------------------
4
<PAGE>
PIPER GLOBAL FUNDS, INC.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 18th day of February,
1997, by and between Piper Global Funds Inc., a Minnesota corporation (the
"Company"), for and on behalf of each series of the Company (each series is
referred to hereinafter as a "Fund"), and Piper Jaffray Inc., a Delaware
corporation (the "Distributor"). This Agreement shall apply to each class of
shares offered by the following Funds: Pacific-European Growth Fund and
Emerging Markets Growth Fund.
WITNESSETH:
1. UNDERWRITING SERVICES
The Company, on behalf of each Fund, hereby engages the Distributor, and
the Distributor hereby agrees to act, as principal underwriter for each Fund
in the sale and distribution of the shares of each class of such Fund to the
public, either through dealers or otherwise. The Distributor agrees 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.
2. SALE OF SHARES
The shares of each Fund are to be sold only on the following terms:
(a) All subscriptions, offers, or sales shall be subject to acceptance
or rejection by the Company. Any offer for or sale of shares shall be
conclusively presumed to have been accepted by the Company if the Company
shall fail to notify the Distributor of the rejection of such offer or sale
prior to the computation of the net asset value of such shares next following
receipt by the Company of notice of such offer or sale.
(b) No share of a Fund shall be sold by the Distributor for any
consideration other than cash or, pursuant to any exchange privilege provided
for by the applicable currently effective Prospectus or Statement of
Additional Information (hereinafter referred to collectively as the
"Prospectus"), shares of another Fund or of a series of another investment
company for which the Distributor acts as the principal underwriter. All
shares of a Fund shall be sold at the public offering price per share, which
shall be determined in accordance with the applicable currently effective
Prospectus, provided that, with respect to a class of shares that is sold
with a front-end sales charge, the Distributor may sell at a discount from
said public offering price to broker-dealers that have entered into sales
agreements with the Distributor, which discount shall be no greater than the
front-end sales charge set forth in the applicable currently effective
Prospectus.
(c) In connection with certain sales of shares, a contingent deferred
sales charge will be imposed in the event of a redemption transaction
occurring within a certain period of time following such a purchase, as
described in the applicable currently effective Prospectus.
(d) The front-end sales charge, if any, for any class of shares of a
Fund may, at the discretion of the Company and the Distributor, be reduced or
eliminated as permitted by the Investment Company Act of 1940, and the rules
and regulations thereunder, as they may be amended from time to time (the
"1940 Act"), provided that such reduction or elimination shall be set forth
in the Prospectus for such class, and provided that the Company shall in no
event receive for any shares sold an amount less than the net asset value
thereof. In addition, any contingent deferred sales charge for any class of
shares of a Fund may, at the discretion of the Company and the Distributor,
be reduced or eliminated as permitted by the 1940 Act, provided that such
reduction or elimination shall be set forth in the Prospectus for such class
of shares.
<PAGE>
3. REGISTRATION OF SHARES
The Company agrees to make prompt and reasonable efforts to effect and
keep in effect, at its expense, the registration or qualification of each
Fund's shares for sale in such jurisdictions as the Company may designate.
4. INFORMATION TO BE FURNISHED TO THE DISTRIBUTOR
The Company agrees that it will furnish the Distributor with such
information with respect to the affairs and accounts of the Company (and each
Fund or class thereof) as the Distributor may from time to time reasonably
require, and further agrees that the Distributor, at all reasonable times,
shall be permitted to inspect the books and records of the Company.
5. ALLOCATION OF EXPENSES
During the period of this Agreement, the Company shall pay or cause to
be paid all expenses, costs and fees incurred by the Company which are not
assumed by the Distributor or Piper Capital Management Incorporated (the
"Adviser"). The Distributor agrees to provide, and shall pay costs which it
incurs in connection with, ongoing servicing and/or maintenance of
shareholder accounts with respect to each Fund (such costs are referred to as
"Shareholder Servicing Costs"). Shareholder Servicing Costs include, but are
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 regarding their ownership of Fund shares or their accounts
with a Fund, or who provide other administrative services not otherwise
required to be provided by the applicable Fund's investment adviser or
transfer agent. The Distributor shall also pay all costs of distributing the
shares of each Fund ("Distribution Expenses"). Distribution Expenses
include, but are not limited to, initial and ongoing sales compensation (in
addition to sales loads) paid to investment executives of the Distributor and
to other broker-dealers in respect of sales of shares of a Fund and other
advertising and promotional expenses in connection with the distribution of
shares of a Fund. These advertising and promotional expenses include, by way
of example and not by way of limitation, costs of printing and mailing
prospectuses, statements of additional information and shareholder reports to
prospective investors; expenses of preparation and distribution of sales
literature; expenses of advertising of any type; an allocation of the
Distributor's overhead and other expenses related to the distribution of
shares of a Fund; interest expenses incurred in connection with financing the
distribution of Class B shares; and payments to, and expenses of, officers,
employees or representatives of the Distributor, of other broker-dealers,
banks or other financial institutions, and of any other persons who provide
support services in connection with the distribution of shares of a Fund,
including travel, entertainment and telephone expenses. The Adviser, rather
than the Distributor, may bear the expenses referred to in this section, but
the Distributor shall be liable for such expenses until paid.
6. COMPENSATION TO THE DISTRIBUTOR
As compensation for all of its services provided and its costs assumed
under this Agreement, the Distributor shall receive the following forms and
amounts of compensation:
(a) The Distributor shall be entitled to receive or retain any
front-end sales charge imposed in connection with sales of shares of each
Fund, as set forth in the applicable current Prospectus. Up to the entire
amount of such front-end sales charge may be reallowed by the Distributor to
broker-dealers in connection with their sale of Fund shares. The amount of
the front-end sales charge (if any) may be retained or deducted by the
Distributor from any sums received by it in payment for shares so sold. If
such amount is not deducted by the Distributor from such payments, such
amount shall be paid to the Distributor by the Company not later than five
business days after the close of any calendar quarter during which any such
sales were made by the Distributor and payment received by the Company.
2
<PAGE>
(b) The Distributor shall be entitled to receive or retain any
contingent deferred sales charge imposed in connection with any redemption of
shares of each Fund, as set forth in the applicable current Prospectus.
(c) Pursuant to the Plans of Distribution adopted by the Funds in
accordance with Rule 12b-1 under the 1940 Act (the "Plan"):
(i) Class A of Emerging Markets Growth Fund is obligated to pay the
Distributor a total fee in connection with the servicing of shareholder
accounts of such class or Fund and in connection with distribution-related
services provided in respect of such class or Fund, calculated daily and
payable quarterly, at the annual rate of .50% of the value of the average
daily net assets of such Class. Class A of Pacific-European Growth Fund is
obligated to reimburse the Distributor on a quarterly basis for expenses
incurred in connection with the servicing of shareholder accounts of such
Class and in connection with distribution-related services provided in
respect of such Class, in an amount not to exceed, on an annualized basis,
.50% of the average daily net assets of such Class. For each Fund, all or
any portion of the amount payable hereunder may be payable as a Shareholder
Servicing Fee designed to cover Shareholder Servicing Costs, and all or any
portion of such amount may be payable as a Distribution Fee designed to
cover Distribution Expenses, as determined from time to time by the
Company's Board of Directors. Until further action by the Board of
Directors, a portion of such amount equal to .25% per annum of the average
daily net assets of the applicable Class shall be designated and payable as
a Shareholder Servicing Fee and the remainder of such amount shall be
designated as a Distribution Fee.
(ii) Class B of each Fund is obligated to pay the Distributor a total
fee in connection with the servicing of shareholder accounts of such class
and in connection with distribution-related services provided in respect of
such class, calculated daily and payable quarterly, at the annual rate of
1.00% of the value of the average daily net assets of such class. All or
any portion of such total fee may be payable as a Shareholder Servicing
Fee, and all or any portion of such total fee may be payable as a
Distribution Fee, as determined from time to time by the Company's Board of
Directors. Until further action by the Board of Directors, a portion of
such total fee equal to .25% per annum of Class B's average daily net
assets shall be designated and payable as a Shareholder Servicing Fee and
the remainder of such fee shall be designated as a Distribution Fee.
(iii) Average daily net assets shall be computed in accordance with
the applicable currently effective Prospectus.
(iv) Amounts payable to the Distributor under the Plan relating to the
Class A shares of Pacific-European Growth Fund shall be equal to the
Distributor's actual Distribution Expenses and Shareholder Servicing Costs
with respect to such shares, provided that, in the event such Distribution
Expenses and Shareholder Servicing Costs exceed the maximum amount
reimbursable pursuant to the Plan, the Distributor shall be solely
responsible for the payment of any such excess and Pacific-European Growth
Fund and the Company shall have no responsibility therefor. All other
amounts payable to the Distributor under the Plan may exceed or be less
than the Distributor's actual Distribution Expenses and Shareholder
Servicing Costs. In the event such Distribution Expenses and Shareholder
Servicing Costs exceed amounts payable to the Distributor under the Plan,
the Distributor shall not be entitled to reimbursement by the Company.
(d) In each year during which this Agreement remains in effect, the
Distributor will prepare and furnish to the Board of Directors of the Company,
and the Board will review, on a quarterly basis, written reports complying with
the requirements of Rule 12b-1 under the 1940 Act that
3
<PAGE>
set forth the amounts expended under this Agreement and the Plan, on a class
by class basis as applicable, and the purposes for which those expenditures
were made.
7. LIMITATION OF THE DISTRIBUTOR'S AUTHORITY
The Distributor shall be deemed to be an independent contractor and,
except as specifically provided or authorized herein, shall have no authority
to act for or represent either Fund or the Company.
8. SUBSCRIPTION FOR SHARES--REFUND FOR CANCELED ORDERS
The Distributor shall subscribe for the shares of a Fund only for the
purpose of covering purchase orders already received by it or for the purpose
of investment for its own account. In the event that an order for the
purchase of shares of a Fund is placed with the Distributor by a customer or
dealer and subsequently canceled, the Distributor shall forthwith cancel the
subscription for such shares entered on the books of the Fund, and, if the
Distributor has paid the Fund for such shares, shall be entitled to receive
from the Fund in refund of such payment the lesser of:
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of cancellation by the
Distributor.
9. INDEMNIFICATION OF THE COMPANY
The Distributor agrees to indemnify each Fund and the Company against
any and all litigation and other legal proceedings of any kind or nature and
against any liability, judgment, cost, or penalty imposed as a result of such
litigation or proceedings in any way arising out of or in connection with the
sale or distribution of the shares of such Fund by the Distributor. In the
event of the threat or institution of any such litigation or legal
proceedings against any Fund, the Distributor shall defend such action on
behalf of the Fund or the Company at the Distributor's own expense, and shall
pay any such liability, judgment, cost, or penalty resulting therefrom,
whether imposed by legal authority or agreed upon by way of compromise and
settlement; provided, however, the Distributor shall not be required to pay
or reimburse a Fund for any liability, judgment, cost, or penalty incurred as
a result of information supplied by, or as the result of the omission to
supply information by, the Company to the Distributor, or to the Distributor
by a director, officer, or employee of the Company who is not an "interested
person," as defined in the provisions of the 1940 Act, of the Distributor,
unless the information so supplied or omitted was available to the
Distributor or the Adviser without recourse to the Fund or the Company or any
such person referred to above.
10. FREEDOM TO DEAL WITH THIRD PARTIES
The Distributor shall be free to render to others services of a nature
either similar to or different from those rendered under this contract,
except such as may impair its performance of the services and duties to be
rendered by it hereunder.
11. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
(a) The effective date of this Agreement is set forth in the first
paragraph of this Agreement. Unless sooner terminated as hereinafter
provided, this Agreement shall continue in effect with respect to each Fund
(and class thereof) for a period of one year after the date of its execution,
and from year to year thereafter, but only so long as such continuance is
specifically approved at least annually (i) by a vote of the Board of
Directors of the Company or by the vote of a majority of the outstanding
voting securities of the applicable Fund (or class thereof), and (ii) by the
vote of a majority of the directors who are not "interested persons" (as
defined in the provisions of the 1940 Act) of the
4
<PAGE>
Company and have no direct or indirect financial interest in the operation of
the Plan or in any agreement related to the Plan (including, without
limitation, this Agreement), cast in person at a meeting called for the
purpose of voting on this Agreement.
(b) This Agreement may be terminated at any time with respect to either
Fund or any class thereof, without the payment of any penalty, by the vote of
a majority of the members of the Board of Directors of the Company who are
not "interested persons" (as defined in the provisions of the 1940 Act) of
the Company and have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan (including,
without limitation, this Agreement), or by the vote of a majority of the
outstanding voting securities of such Fund (or class thereof), or by the
Distributor, upon 60 days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
"assignment" (as defined by the provisions of the 1940 Act).
(d) Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities of a Fund (or
class thereof) shall mean the lesser of (i) the vote of 67% or more of the
voting securities of such Fund (or class thereof) present at a regular or
special meeting of shareholders duly called, if more than 50% of the Fund's
(or class's, as applicable) outstanding voting securities are present or
represented by proxy, or (ii) the vote of more than 50% of the outstanding
voting securities of such Fund (or class thereof).
12. AMENDMENTS TO AGREEMENT
No material amendment to this Agreement shall be effective until
approved by the Distributor and by vote of a majority of the Board of
Directors of the Company who are not interested persons of the Distributor.
13. NOTICES
Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Company and the Distributor have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
PIPER GLOBAL FUNDS INC.
By /s/ William H. Ellis
---------------------------------------
Its Chairman
-----------------------------------
PIPER JAFFRAY INC.
By /s/ Andrew S. Duff
---------------------------------------
Its President
-----------------------------------
5
<PAGE>
SHAREHOLDER ACCOUNT SERVICING AGREEMENT
THIS AGREEMENT, made as of the 18th day of November, 1996, by and between
Piper Global Funds Inc., a Minnesota corporation (the "Company"), on behalf of
each series of the Company's common stock (such series are referred to herein
individually as a "Fund" and collectively as the "Funds"), and Piper Trust
Company, a Minnesota corporation ("Piper Trust").
WITNESSETH:
WHEREAS, the Company has entered into an Agency Agreement with Investors
Fiduciary Trust Company ("IFTC") pursuant to which IFTC was appointed as
Transfer Agent and Dividend Disbursing Agent for the Funds; and
WHEREAS, management of the Company has determined that it would be in the
best interests of each Fund and its shareholders to maintain with IFTC certain
omnibus accounts, with each such account representing the accounts of a number
of individual shareholders who maintain accounts with Piper Trust, and to have
Piper Trust provide transfer agent and dividend disbursing agent services for
such underlying individual shareholder accounts.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. SCOPE OF APPOINTMENT.
(a) Subject to the conditions set forth in this Agreement, the Company
hereby appoints Piper Trust to perform certain transfer agent and dividend
disbursing agent services, and Piper Trust accepts such appointment.
(b) Such services shall be provided with respect to all individual
shareholder accounts encompassed within the omnibus accounts referenced above,
except as set forth in Section 1(c) of this Agreement.
(c) Certain individual shareholder accounts encompassed within the omnibus
accounts referenced above are the subject of an Administrative Services
Agreement dated September 1, 1996, by and among DCA, Inc., the Company, Piper
Funds Inc., Piper Funds Inc.--II, Piper Institutional Funds Inc. and Piper
Trust. With respect to such individual shareholder accounts, DCA, Inc. will
provide certain recordkeeping, reporting and processing services, and Piper
Trust shall be required to perform only those services described in subsection
(e) below that are not performed by DCA, Inc.
<PAGE>
(d) Piper Trust agrees to provide the necessary facilities, equipment and
personnel to perform its duties and obligations hereunder in accordance with
industry practice.
(e) Piper Trust agrees to perform the usual and ordinary services of
transfer agent and dividend disbursing agent not performed by IFTC with respect
to the shareholder accounts outlined in Section 1(b), 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 12b-1 purposes; withholding
taxes on non-resident 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 Fund shares
and other transactions in shareholder accounts for which confirmations are
required; recording reinvestments of dividends and distributions in Fund shares;
recording redemptions of Fund shares; and preparing and mailing checks for
payments upon redemption and for disbursements to withdrawal plan holders.
(f) Piper Trust shall perform all services relating to shareholder
transactions, share redemptions and maintaining shareholder accounts on the same
business day as the request for the transaction is received. Piper Trust shall
perform all services relating to payouts of monies no later than three business
days following the date of receipt of the request for the transaction. Piper
Trust shall perform all services relating to the provision of confirmations no
later than three business days following the transaction. Any activities not
enumerated will be fulfilled no later than the time required by applicable law.
In each case the time standards will be adjusted to meet any applicable
requirements of law. The time frames above include not only the performance of
the activity, but the appropriate quality control and mailing of the related
checks, confirms, letters or other documents.
Piper Trust will maintain records of its performance, available to the
Company for inspection upon reasonable notice.
2. COMPENSATION. As compensation for the services to be provided by Piper
Trust hereunder, each Fund will pay to Piper Trust an annual per-account fee as
set forth in Exhibit A hereto. Such fee shall not be payable, however, with
respect to those individual shareholder accounts specified in Section 1(c) of
this Agreement. Such fee shall be payable on a monthly basis at a rate of
1/12th of the annual per-account charge, with payment being made within ten
business days following the end of the month covered by such payment. Such fee
covers all services outlined in Section 1(d) with the exception of preparing
shareholder meeting lists and mailing shareholder reports and prospectuses.
These services, along with proxy processing
2
<PAGE>
(if applicable) and other special service requests, will be billable as
performed at a mutually agreed upon fee in addition to the annual fee as
noted, 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.
3. RECORDS.
(a) Piper Trust will maintain customary records in connection with its
agency appointment hereunder, and in particular will maintain those records
required to be maintained pursuant to subparagraph 2(iv) of paragraph (b) of
Rule 31a-1 under the Investment Company Act of 1940, as amended (the "1940
Act").
(b) To the extent required by Section 31 of the 1940 Act and the rules and
regulations thereunder, Piper Trust agrees that all records maintained by Piper
Trust relating to the services to be performed by it under this Agreement are
the property of the Company and will be preserved in accordance with Rule 31a-2
under the 1940 Act and will be surrendered promptly to the Company upon request.
4. COMPLAINTS AND REGULATORY ACTIONS. Piper Trust and the Company shall
cooperate fully in any securities regulatory investigation or proceeding or
judicial proceeding with respect to Piper Trust, the Company, their affiliates
(as defined in the 1940 Act) and/or their agents, representatives or employees
to the extent that such investigation or proceeding is in connection with the
services subject to this Agreement. Without limiting the foregoing, the parties
shall notify each other promptly of the receipt of notice of any such
investigation or proceeding and of any customer complaint relating to or learned
of in the course of the provision of services subject to this Agreement.
In the case of any such customer complaint, Piper Trust and the Company and
their affiliates shall cooperate in investigating such complaint. Any response
to a customer complaint relating to the Company must be approved in writing by
the Company prior to it being sent to the customer or any regulatory authority.
The Company agrees to review any such response to such substantive complaint
prepared by Piper Trust within three (3) business days of its receipt by the
Company, except that, if a more prompt response is required, the Company shall
review such response within the required shorter time period. Any response by
Piper Trust to a customer complaint which relates to Piper Trust or its
affiliates shall be provided to the Company no later than the time it is
provided to the customer or any regulatory authority.
3
<PAGE>
5. INDEMNIFICATION.
(a) Piper Trust will not be responsible for, and the Company will hold
harmless and indemnify Piper Trust from and against, any loss by or liability to
the Company or a third party, including attorneys' fees, in connection with any
claim or suit asserting any such liability arising out of or attributable to
actions taken by Piper Trust pursuant to this Agreement, unless Piper Trust has
acted negligently or in bad faith. Without limitation of the foregoing:
(i) at any time Piper Trust may apply to any officer of the Company
for instructions, and may consult with legal counsel for the Company or its
own legal counsel at the expense of the Company, with respect to any matter
arising in connection with its agency, and Piper Trust will not be liable
for any action taken or omitted by it in good faith reliance upon such
instructions or upon the opinion of such counsel; and
(ii) Piper Trust may rely upon and will be protected in acting upon
any paper or document reasonably believed by it to be genuine and to have
been signed by the proper person or persons and will not be held to have
notice of any change of authority of any person until receipt of written
notice thereof from the Company.
(b) Piper Trust will hold harmless and indemnify the Company from and
against any loss or liability arising out of Piper Trust's failure to comply
with the terms of this Agreement or arising out of Piper Trust's negligence,
misconduct or bad faith.
6. INTERPRETATION; GOVERNING LAW. This Agreement shall be subject to and
interpreted in accordance with all applicable provisions of law, including,
without limitation, the 1940 Act and the rules and regulations promulgated
thereunder. To the extent the provisions herein contained conflict with any
such applicable provisions of law, the latter shall control. The laws of the
State of Minnesota shall otherwise govern the construction, validity and effect
of this Agreement.
7. EFFECTIVE DATE; DURATION; TERMINATION.
(a) This Agreement shall be effective as of the date first set forth
above.
(b) Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect from year to year but only so long as such continuance is
specifically approved at least annually by the Board of Directors of the
Company, including a majority of the Directors who are not parties to this
Agreement or "interested persons" of any such party (as defined in the 1940
Act), by vote cast in person at a meeting called for the purpose of voting on
such approval.
4
<PAGE>
(c) This Agreement may be terminated at any time without the payment of
any penalty by either party upon not less than 60 days' written notice to the
other party. Upon the effective termination date, Piper Trust shall make
available to the Company or its designated record keeping successor all of the
records of the Company maintained under this Agreement then in Piper Trust's
possession.
(d) This Agreement shall automatically terminate in the event of its
assignment (as defined by the provisions of the 1940 Act) unless such assignment
is approved in advance by the Board of Directors, including a majority of the
directors of the Company who are not parties to this Agreement or "interested
persons" of any such party (as defined in the 1940 Act).
8. AMENDMENTS. No material amendment to this Agreement shall be effective
until approved by Piper Trust and by a vote of the Board of Directors of the
Company, including a majority of the Directors who are not parties to this
Agreement or "interested persons" of any such party (as defined in the 1940
Act).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
ATTEST: PIPER GLOBAL FUNDS INC.
/s/ By /s/ William H. Ellis
- ---------------------------- ------------------------
Its Chairman
--------------------
ATTEST: PIPER JAFFRAY INC.
/s/ By /s/ E. Peter Gillette
- ---------------------------- ------------------------
Its President
--------------------
5
<PAGE>
EXHIBIT A TO SHAREHOLDER ACCOUNT SERVICING AGREEMENT
SCHEDULE OF CHARGES
PER ACCOUNT CHARGE FOR EACH FUND
$6.00 per active account
$1.60 per closed account
An active account is defined as an account that has a balance of shares. A
closed account is defined as an account that does not have a balance of shares
but has had activity within the past 12 months.
6
<PAGE>
SHAREHOLDER ACCOUNT SERVICING AGREEMENT
THIS AGREEMENT, made this 21st day of June 1996, by and between Piper
Global Funds Inc., a Minnesota corporation (the "Company"), on behalf of each
series of the Company's common stock (such series are referred to herein
individually as a "Fund" and collectively as the "Funds"), and Piper Jaffray
Inc., a Delaware corporation ("Piper Jaffray").
WITNESSETH:
WHEREAS, the Company has entered into an Agency Agreement with Investors
Fiduciary Trust Company ("IFTC") pursuant to which IFTC was appointed as
Transfer Agent and Dividend Disbursing Agent for the Funds; and
WHEREAS, management of the Company has determined that it would be in the
best interests of each Fund and its shareholders to maintain with IFTC certain
omnibus accounts, with each such account representing the accounts of a number
of individual shareholders who maintain accounts with Piper Jaffray, and to have
Piper Jaffray provide transfer agent and dividend disbursing agent services for
such underlying individual shareholder accounts.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. SCOPE OF APPOINTMENT.
(a) Subject to the conditions set forth in this Agreement, the Company
hereby appoints Piper Jaffray to perform certain transfer agent and dividend
disbursing agent services, and Piper Jaffray accepts such appointment.
(b) Such services shall be provided with respect to all individual
shareholder accounts encompassed within the omnibus accounts referenced above.
(c) Piper Jaffray agrees to provide the necessary facilities, equipment
and personnel to perform its duties and obligations hereunder in accordance with
industry practice.
(d) Piper Jaffray agrees to perform the usual and ordinary services of
transfer agent and dividend disbursing agent not performed by IFTC with respect
to the shareholder accounts outlined in Section 1(b), 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 12b-1 purposes; withholding
taxes on non-resident alien and foreign corporation accounts; preparing and
mailing checks for disbursement of income dividends and capital gains
distributions; preparing and filing U.S. Treasury
<PAGE>
Department Form 1099 for all shareholders; preparing and mailing confirmation
forms to shareholders and dealers with respect to all purchases, exchanges
and liquidations of Fund shares and other transactions in shareholder
accounts for which confirmations are required; recording reinvestments of
dividends and distributions in Fund shares; recording redemptions of Fund
shares; and preparing and mailing checks for payments upon redemption and for
disbursements to withdrawal plan holders.
(e) Piper Jaffray shall perform all services relating to shareholder
transactions, share redemptions and maintaining shareholder accounts on the same
business day as the request for the transaction is received. Piper Jaffray
shall perform all services relating to payouts of monies no later than three
business days following the date of receipt of the request for the transaction.
Piper Jaffray shall perform all services relating to the provision of
confirmations no later than three business days following the transaction. Any
activities not enumerated will be fulfilled no later than the time required by
applicable law. In each case the time standards will be adjusted to meet any
applicable requirements of law. The time frames above include not only the
performance of the activity, but the appropriate quality control and mailing of
the related checks, confirms, letters or other documents.
Piper Jaffray will maintain records of its performance, available to the
Company for inspection upon reasonable notice.
2. COMPENSATION. As compensation for the services to be provided by Piper
Jaffray hereunder, each Fund will pay to Piper Jaffray an annual per-account fee
as set forth in Exhibit A hereto. Such fee shall be payable on a monthly basis
at a rate of 1/12th of the annual per-account charge, with payment being made
within ten business days following the end of the month covered by such payment.
Such fee covers all services outlined in Section 1(d) 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, will be billable as performed at a mutually
agreed upon fee in addition to the annual fee as noted, 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.
3. RECORDS.
(a) Piper Jaffray will maintain customary records in connection with its
agency appointment hereunder, and in particular will maintain those records
required to be maintained pursuant to subparagraph 2(iv) of paragraph (b) of
Rule 31a-1 under the Investment Company Act of 1940, as amended (the "1940
Act").
2
<PAGE>
(b) To the extent required by Section 31 of the 1940 Act and the rules and
regulations thereunder, Piper Jaffray agrees that all records maintained by
Piper Jaffray relating to the services to be performed by it under this
Agreement are the property of the Company and will be preserved in accordance
with Rule 31a-2 under the 1940 Act and will be surrendered promptly to the
Company upon request.
4. COMPLAINTS AND REGULATORY ACTIONS. Piper Jaffray and the Company shall
cooperate fully in any securities regulatory investigation or proceeding or
judicial proceeding with respect to Piper Jaffray, the Company, their affiliates
(as defined in the 1940 Act) and/or their agents, representatives or employees
to the extent that such investigation or proceeding is in connection with the
services subject to this Agreement. Without limiting the foregoing, the parties
shall notify each other promptly of the receipt of notice of any such
investigation or proceeding and of any customer complaint relating to or learned
of in the course of the provision of services subject to this Agreement.
In the case of any such customer complaint, Piper Jaffray and the Company
and their affiliates shall cooperate in investigating such complaint. Any
response to a customer complaint relating to the Company must be approved in
writing by the Company prior to it being sent to the customer or any regulatory
authority. The Company agrees to review any such response to such substantive
complaint prepared by Piper Jaffray within three (3) business days of its
receipt by the Company, except that, if a more prompt response is required, the
Company shall review such response within the required shorter time period. Any
response by Piper Jaffray to a customer complaint which relates to Piper Jaffray
or its affiliates shall be provided to the Company no later than the time it is
provided to the customer or any regulatory authority.
5. FUND SHARES HELD ON BEHALF OF PIPER JAFFRAY CLIENTS. Fund shares held
by Piper Jaffray on behalf of a client of Piper Jaffray shall be carried in a
custody account for the exclusive benefit of clients of Piper Jaffray and shall
not be subject to any right, charge, security interest, lien or other claim
against Piper Jaffray in favor of the Company or any Fund.
6. INDEMNIFICATION.
(a) Piper Jaffray will not be responsible for, and the Company will hold
harmless and indemnify Piper Jaffray from and against, any loss by or liability
to the Company or a third party, including attorneys' fees, in connection with
any claim or suit asserting any such liability arising out of or attributable to
actions taken by Piper Jaffray pursuant to this Agreement, unless Piper Jaffray
has acted negligently or in bad faith. Without limitation of the foregoing:
3
<PAGE>
(i) at any time Piper Jaffray may apply to any officer of the Company
for instructions, and may consult with legal counsel for the Company or its
own legal counsel at the expense of the Company, with respect to any matter
arising in connection with its agency, and Piper Jaffray will not be liable
for any action taken or omitted by it in good faith reliance upon such
instructions or upon the opinion of such counsel; and
(ii) Piper Jaffray may rely upon and will be protected in acting upon
any paper or document reasonably believed by it to be genuine and to have
been signed by the proper person or persons and will not be held to have
notice of any change of authority of any person until receipt of written
notice thereof from the Company.
(b) Piper Jaffray will hold harmless and indemnify the Company from and
against any loss or liability arising out of Piper Jaffray's failure to comply
with the terms of this Agreement or arising out of Piper Jaffray's negligence,
misconduct or bad faith.
7. INTERPRETATION; GOVERNING LAW. This Agreement shall be subject to and
interpreted in accordance with all applicable provisions of law, including,
without limitation, the 1940 Act and the rules and regulations promulgated
thereunder. To the extent the provisions herein contained conflict with any
such applicable provisions of law, the latter shall control. The laws of the
State of Minnesota shall otherwise govern the construction, validity and effect
of this Agreement.
8. EFFECTIVE DATE; DURATION; TERMINATION.
(a) This Agreement shall be effective as of the date first set forth
above.
(b) Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect from year to year but only so long as such continuance is
specifically approved at least annually by the Board of Directors of the
Company, including a majority of the Directors who are not parties to this
Agreement or "interested persons" of any such party (as defined in the 1940
Act), by vote cast in person at a meeting called for the purpose of voting on
such approval.
(c) This Agreement may be terminated at any time without the payment of
any penalty by either party upon not less than 60 days' written notice to the
other party. Upon the effective termination date, Piper Jaffray shall make
available to the Company or its designated record keeping successor all of the
records of the Company maintained under this Agreement then in Piper Jaffray's
possession.
(d) This Agreement shall automatically terminate in the event of its
assignment (as defined by the provisions of the 1940 Act) unless such assignment
is
4
<PAGE>
approved in advance by the Board of Directors, including a majority of the
directors of the Company who are not parties to this Agreement or "interested
persons" of any such party (as defined in the 1940 Act).
9. AMENDMENTS. No material amendment to this Agreement shall be effective
until approved by Piper Jaffray and by a vote of the Board of Directors of the
Company, including a majority of the Directors who are not parties to this
Agreement or "interested persons" of any such party (as defined in the 1940
Act).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
ATTEST: PIPER GLOBAL FUNDS INC.
/s/ Brian L. Patterson By /s/ Robert H. Nelson
- ----------------------------- ---------------------------
Its Senior Vice President
-----------------------
ATTEST: PIPER JAFFRAY INC.
/s/ Brian L. Patterson By /s/ Dan L. Lastavich
- ----------------------------- ---------------------------
Its Managing Director
-----------------------
5
<PAGE>
EXHIBIT A TO SHAREHOLDER ACCOUNT SERVICING AGREEMENT
SCHEDULE OF CHARGES
MONEY MARKET FUND ACCOUNTS
$9.00 per active account
$6.00 per inactive account
DAILY DIVIDEND ACCRUAL FUND ACCOUNTS (NOT INCLUDING MONEY MARKET FUNDS)
$7.50 per active account
$1.60 per closed account
NON-DAILY ACCRUAL FUND ACCOUNTS
$6.00 per active account
$1.60 per closed account
For Money Market Fund Accounts: An active account is defined as an account that
has a balance of shares and requires a statement for the current month. An
inactive account is defined as an account that has a balance of shares but does
not require a statement for the current month.
For Non-Money Market Fund Accounts: An active account is defined as an account
that has a balance of shares. A closed account is defined as an account that
does not have a balance of shares but has had activity within the past 12
months.
6
<PAGE>
[Letterhead]
Piper Global Funds Inc.
222 South Ninth Street
Minneapolis, Minnesota 55402
Ladies and Gentlemen:
We have acted as counsel to Piper Global Funds Inc., a Minnesota
corporation (the "Fund"), in connection with a Registration Statement on Form
N-1A (File No. 33-48299) (the "Registration Statement") relating to the sale by
the Fund of an indefinite number of Class A, Class B and Class Y shares of the
Fund's Series A common stock and of Class A and Class B shares of the Fund's
Series B common stock, each with a par value of $.01 per share (collectively,
the "Shares").
We have examined such documents and have reviewed such questions of
law as we have considered necessary and appropriate for the purposes of our
opinions set forth below. In rendering our opinions set forth below, we have
assumed the authenticity of all documents submitted to us as originals, the
genuineness of all signatures and the conformity to authentic originals of all
documents submitted to us as copies. We have also assumed the legal capacity
for all purposes relevant hereto of all natural persons and, with respect to all
parties to agreements or instruments relevant hereto other than the Fund, that
such parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Fund and of public officials. We have also
assumed that the Shares will be issued and sold as described in the Registration
Statement.
Based on the foregoing, we are of the opinion that the Shares have
been duly authorized by all requisite corporate action and, upon issuance,
delivery and payment therefore as described in the Registration Statement, will
be validly issued, fully paid and nonassessable.
Our opinions expressed above are limited to the laws of the State of
Minnesota.
<PAGE>
Piper Global Funds Inc.
February 17, 1997
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Counsel" on the back cover of the Prospectus constituting part of the
Registration Statement.
Dated: February 17, 1997
Very truly yours,
/s/ Dorsey & Whitney LLP
Dorsey & Whitney LLP
KLP
<PAGE>
[Letterhead]
Independent Auditors' Consent
-----------------------------
The Board of Directors
Piper Global Funds Inc.:
We consent to the use of our report dated October 18, 1996 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
February 17, 1997
<PAGE>
PIPER GLOBAL FUNDS INC.
PACIFIC-EUROPEAN GROWTH FUND
AMENDED PLAN OF DISTRIBUTION
EFFECTIVE FEBRUARY 18, 1997
This Amended Plan of Distribution (the "Plan") is adopted pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (as amended, the
"1940 Act") by Piper Global Funds Inc., a Minnesota corporation (the
"Company"), for and on behalf of its series Pacific-European Growth Fund (the
"Fund"). The Fund may issue its shares in one or more classes (a "Class" or
"Classes"), subject to the terms and conditions set forth herein.
1. COMPENSATION
Class A of the Fund is obligated to reimburse the principal distributor of
the Fund's shares (the "Distributor") on a quarterly basis for expenses incurred
in connection with the servicing of shareholder accounts of such Class and in
connection with distribution-related services provided in respect of such Class,
in an amount not to exceed, on an annualized basis, .50% of the average daily
net assets of such Class.
A portion of such total amount payable to the Distributor will be payable
as a Servicing Fee and a portion will be payable as a Distribution Fee, as
determined from time to time by the Company's Board of Directors. Until further
action by the Board of Directors, a portion of such total amount equal to .25%
per annum of Class A's average daily net assets shall be designated and payable
as a Servicing Fee and the remainder of such total amount shall be designated as
a Distribution Fee.
Class B of the Fund is obligated to pay the Distributor a total fee in
connection with the servicing of shareholder accounts of such Class and in
connection with distribution-related services provided in respect of such Class,
calculated daily and payable quarterly, at the annual rate of 1.00% of the value
of the average daily net assets of such Class. A portion of such total fee will
be payable as a Servicing Fee and a portion will be payable as a Distribution
Fee, as determined from time to time by the Company's Board of Directors. Until
further action by the Board of Directors, a portion of such total fee equal to
.25% per annum of Class B's average daily net assets shall be designated and
payable as a Servicing Fee and the remainder of such fee shall be designated as
a Distribution Fee.
Class Y of the Fund is not obligated to make any payments to the
Distributor under this Plan.
2. EXPENSES COVERED BY THE PLAN
(a) The Servicing Fee may be used by the Distributor to cover all
expenses incurred by the Distributor in connection with the ongoing
servicing and/or maintenance of shareholder accounts with the Fund. Such
expenses include, but are not limited to, an allocation of the Distributor's
overhead and payments made to persons, including employees of the
Distributor, and institutions who respond to inquiries of shareholders of the
Fund regarding their ownership of shares or their accounts with the Fund or
who provide other administrative services not otherwise required to be
provided by the Fund's investment adviser, transfer agent or other agents of
the Fund.
(b) The Distribution Fee may be used by the Distributor to provide initial
and ongoing sales compensation to its investment executives and to other broker-
dealers in respect of sales of Fund shares and to pay for other advertising and
promotional expenses in connection with the distribution of Fund shares. These
advertising and promotional expenses include, by way of example but not by way
of limitation, costs of printing and mailing prospectuses, statements of
additional information and shareholder reports to prospective investors;
preparation and distribution of sales literature; advertising of any type; an
allocation of overhead and other expenses of the Distributor related to the
distribution of Fund shares; interest expenses incurred in connection with
financing the distribution of Class B shares; and payments to, and expenses of,
officers, employees or representatives of the Distributor, of other broker-
dealers, banks or other financial institutions, and of any other persons who
<PAGE>
provide support services in connection with the distribution of Fund shares,
including travel, entertainment, and telephone expenses.
(c) Payments under the Plan relating to Class A shares are tied to the
expenses for shareholder servicing and distribution related activities with
respect to such Class actually incurred by the Distributor. In the event such
expenses exceed the maximum amount reimbursable pursuant to this Plan, the
Distributor shall be solely responsible for the payment of any such excess and
the Fund and the Company shall have no responsibility therefor. Payments under
the Plan relating to Class B shares are not tied exclusively to the expenses for
shareholder servicing and distribution related activities with respect to such
Class actually incurred by the Distributor, so that such payments may exceed
expenses actually incurred by the Distributor. The Company's Board of Directors
will evaluate the appropriateness of the Plan and its payment terms on a
continuing basis and in doing so will consider all relevant factors, including
expenses borne by the Distributor and amounts it receives under the Plan.
3. ADDITIONAL PAYMENTS BY ADVISER AND THE DISTRIBUTOR
The Company's investment adviser and the Distributor may, at their option
and in their sole discretion, make payments from their own resources to cover
the costs of additional distribution and shareholder servicing activities.
4. APPROVAL BY DIRECTORS
Neither the Plan nor any related agreements will take effect until approved
by a majority vote of both (a) the full Board of Directors of the Company and
(b) those Directors 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 it (the "Independent Directors"), cast in person at a
meeting called for the purpose of voting on the Plan and the related agreements.
5. CONTINUANCE OF THE PLAN
The Plan will continue in effect from year to year so long as its
continuance is specifically approved annually by vote of the Company's Board of
Directors in the manner described in Section 4 above.
6. TERMINATION
The Plan may be terminated at any time with respect to the Fund, or any
Class thereof, without penalty, by vote of a majority of the Independent
Directors or by a vote of a majority of the outstanding voting securities of the
Fund or such Class.
7. AMENDMENTS
The Plan may not be amended to increase materially the amount of the fees
payable pursuant to the Plan by either Class, as described in Section 1 above,
unless the amendment is approved by a vote of at least a majority of the
outstanding voting securities of that Class (and, if the other Class is
affected, such Class), and all material amendments to the Plan must also be
approved by the Company's Board of Directors in the manner described in Section
4 above.
8. SELECTION OF CERTAIN DIRECTORS
While the Plan is in effect, the selection and nomination of the Company's
Directors who are not interested persons of the Company will be committed to the
discretion of the Directors then in office who are not interested persons of the
Company.
2
<PAGE>
9. WRITTEN REPORTS
In each year during which the Plan remains in effect, the Distributor and
any person authorized to direct the disposition of monies paid or payable by the
Company pursuant to the Plan or any related agreement will prepare and furnish
to the Company's Board of Directors, and the Board will review, at least
quarterly, written reports, complying with the requirements of the Rule, which
set out the amounts expended under the Plan, on a Class by Class basis if
applicable, and the purposes for which those expenditures were made.
10. PRESERVATION OF MATERIALS
The Company will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 10 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of the Plan, agreement or report.
11. MEANING OF CERTAIN TERMS
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act and the rules and regulations under the 1940
Act, subject to any exemption that may be granted to the Company under the 1940
Act by the Securities and Exchange Commission.
3
<PAGE>
PIPER GLOBAL FUNDS INC.
EMERGING MARKETS GROWTH FUND
AMENDED PLAN OF DISTRIBUTION
EFFECTIVE FEBRUARY 18, 1997
This Amended Plan of Distribution (the "Plan") is adopted pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (as amended, the
"1940 Act") by Piper Global Funds Inc., a Minnesota corporation (the
"Company"), for and on behalf of its series the Emerging Markets Growth Fund
(the "Fund"). The Fund may issue its shares in one or more classes (a "Class"
or "Classes"), subject to the terms and conditions set forth herein.
1. COMPENSATION
Class A of the Fund is obligated to pay the principal distributor of the
Fund's shares (the "Distributor") a total fee in connection with the servicing
of shareholder accounts of such Class and in connection with distribution-
related services provided in respect of such Class, calculated daily and
payable quarterly, at an annual rate equal to .50% of the average daily net
assets of such Class.
A portion of such total fee will be payable as a Servicing Fee and a
portion will be payable as a Distribution Fee, as determined from time to time
by the Company's Board of Directors. Until further action by the Board of
Directors, a portion of such total fee equal to .25% per annum of Class A's
average daily net assets shall be designated and payable as a Servicing Fee and
the remainder of such fee shall be designated as a Distribution Fee.
Class B of the Fund is obligated to pay the Distributor a total fee in
connection with the servicing of shareholder accounts of such Class and in
connection with distribution-related services provided in respect of such Class,
calculated daily and payable quarterly, at the annual rate of 1.00% of the value
of the average daily net assets of such Class. A portion of such total fee will
be payable as a Servicing Fee and a portion will be payable as a Distribution
Fee, as determined from time to time by the Company's Board of Directors. Until
further action by the Board of Directors, a portion of such total fee equal to
.25% per annum of Class B's average daily net assets shall be designated and
payable as a Servicing Fee and the remainder of such fee shall be designated as
a Distribution Fee.
2. EXPENSES COVERED BY THE PLAN
(a) The Servicing Fee may be used by the Distributor to cover all
expenses incurred by the Distributor in connection with the ongoing
servicing and/or maintenance of shareholder accounts with the Fund. Such
expenses include, but are not limited to, an allocation of the Distributor's
overhead and payments made to persons, including employees of the
Distributor, and institutions who respond to inquiries of shareholders of the
Fund regarding their ownership of shares or their accounts with the Fund or
who provide other administrative services not otherwise required to be
provided by the Fund's investment adviser, transfer agent or other agents of
the Fund.
(b) The Distribution Fee may be used by the Distributor to provide initial
and ongoing sales compensation to its investment executives and to other broker-
dealers in respect of sales of Fund shares and to pay for other advertising and
promotional expenses in connection with the distribution of Fund shares. These
advertising and promotional expenses include, by way of example but not by way
of limitation, costs of printing and mailing prospectuses, statements of
additional information and shareholder reports to prospective investors;
preparation and distribution of sales literature; advertising of any type; an
allocation of overhead and other expenses of the Distributor related to the
distribution of Fund shares; interest expenses incurred in connection with
financing the distribution of Class B shares; and payments to, and expenses of,
officers, employees or representatives of the Distributor, of other broker-
dealers, banks or other financial institutions, and of any other persons who
provide support services in connection with the distribution of Fund shares,
including travel, entertainment, and telephone expenses.
<PAGE>
(c) Payments under the Plan are not tied exclusively to the expenses for
shareholder servicing and distribution related activities actually incurred by
the Distributor, so that such payments may exceed expenses actually incurred by
the Distributor. The Company's Board of Directors will evaluate the
appropriateness of the Plan and its payment terms on a continuing basis and in
doing so will consider all relevant factors, including expenses borne by the
Distributor and amounts it receives under the Plan.
3. ADDITIONAL PAYMENTS BY ADVISER AND THE DISTRIBUTOR
The Company's investment adviser and the Distributor may, at their option
and in their sole discretion, make payments from their own resources to cover
the costs of additional distribution and shareholder servicing activities.
4. APPROVAL BY DIRECTORS
Neither the Plan nor any related agreements will take effect until approved
by a majority vote of both (a) the full Board of Directors of the Company and
(b) those Directors 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 it (the "Independent Directors"), cast in person at a
meeting called for the purpose of voting on the Plan and the related agreements.
5. CONTINUANCE OF THE PLAN
The Plan will continue in effect from year to year so long as its
continuance is specifically approved annually by vote of the Company's Board of
Directors in the manner described in Section 4 above.
6. TERMINATION
The Plan may be terminated at any time with respect to the Fund, or any
Class thereof, without penalty, by vote of a majority of the Independent
Directors or by a vote of a majority of the outstanding voting securities of the
Fund or such Class.
7. AMENDMENTS
The Plan may not be amended to increase materially the amount of the fees
payable pursuant to the Plan by either Class, as described in Section 1 above,
unless the amendment is approved by a vote of at least a majority of the
outstanding voting securities of that Class (and, if the other Class is
affected, such Class), and all material amendments to the Plan must also be
approved by the Company's Board of Directors in the manner described in Section
4 above.
8. SELECTION OF CERTAIN DIRECTORS
While the Plan is in effect, the selection and nomination of the Company's
Directors who are not interested persons of the Company will be committed to the
discretion of the Directors then in office who are not interested persons of the
Company.
9. WRITTEN REPORTS
In each year during which the Plan remains in effect, the Distributor and
any person authorized to direct the disposition of monies paid or payable by the
Company pursuant to the Plan or any related agreement will prepare and furnish
to the Company's Board of Directors, and the Board will review, at least
quarterly, written reports, complying with the requirements of the Rule, which
2
<PAGE>
set out the amounts expended under the Plan, on a Class by Class basis if
applicable, and the purposes for which those expenditures were made.
10. PRESERVATION OF MATERIALS
The Company will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 10 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of the Plan, agreement or report.
11. MEANING OF CERTAIN TERMS
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act and the rules and regulations under the 1940
Act, subject to any exemption that may be granted to the Company under the 1940
Act by the Securities and Exchange Commission.
3
<PAGE>
PIPER GLOBAL FUNDS INC.
POWER OF ATTORNEY
Each of the undersigned, a duly elected director and/or officer of Piper
Global Funds Inc. (the "Fund") hereby constitutes and appoints Paul A. Dow,
William H. Ellis, Robert H. Nelson and Susan S. Miley, and each of them, his or
her true and lawful attorneys-in-fact and agents, each acting alone, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments to
the Fund's Registration Statement on Form N-1A, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission or any other regulatory authority as may be
desirable or necessary, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or the
substitutes for such attorneys-in-fact and agents, may lawfully do or cause to
be done by virtue hereof.
Signature Title Date
- ---------------------- ---------- ------------------
/s/ Paul A. Dow President November 15, 1996
- ----------------------
Paul A. Dow
/s/ Rober H. Nelson Treasurer November 15, 1996
- ----------------------
Robert H. Nelson
/s/ David T. Bennett Director November 15, 1996
- ----------------------
David T. Bennett
/s/ Jaye F. Dyer Director November 15, 1996
- ----------------------
Jaye F. Dyer
/s/ William H. Ellis Director November 15, 1996
- ----------------------
William H. Ellis
/s/ Karol D. Emmerich Director November 15, 1996
- ----------------------
Karol D. Emmerich
/s/ Luella G. Goldberg Director November 15, 1996
- ----------------------
Luella G. Goldberg
/s/ David A. Hughey Director November 15, 1996
- ----------------------
David A. Hughey
/s/ George Latimer Director November 15, 1996
- ----------------------
George Latimer
/s/ Iain A. Watt Director November 15, 1996
- ----------------------
Iain A. Watt
/s/ Michael W. Balfour Director November 15, 1996
- ----------------------
Michael W. Balfour
<PAGE>
PIPER FUNDS, INC.
PIPER GLOBAL FUNDS INC.
MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3
ADOPTED NOVEMBER 15, 1996
I. PREAMBLE
Each of the funds listed below (each a "Fund," and collectively the
"Funds"), series of either Piper Funds Inc. or Piper Global Funds Inc., as
indicated, has elected to rely on Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act") in offering multiple classes of shares in each
Fund:
Series of Piper Funds Inc. Classes Offered
------------------------- --------------------------
Small Company Growth Fund Class A and Class B
Emerging Growth Fund Class A, Class B and Class Y
Growth Fund Class A and Class B
Growth and Income Fund Class A, Class B and Class Y
Balanced Fund Class A and Class B
Intermediate Bond Fund Class A and Class Y
Money Market Fund Class A and Class B
Series of Piper Global
Funds Inc. Classes Offered
---------------------- -------------------------
Emerging Markets
Growth Fund Class A and Class B
Pacific-European
Growth Fund Class A, Class B and Class Y
This Plan sets forth the differences among classes of shares of the Funds,
including distribution and shareholder servicing arrangements, expense
allocations, conversion features, exchange privileges and voting rights. Each
class of a Fund represents a pro rata interest in the same portfolio of
investments and differs from the other classes of the Fund only to the extent
outlined below.
II. ATTRIBUTES OF NON-MONEY MARKET FUND SHARE CLASSES
The Funds may offer up to three classes of shares. The attributes of such
classes for each of the Funds other than Money Market Fund are as follows:
CLASS A
- Front-End Sales Charge: Maximum front-end sales charge of 4% of the
offering price (2% in the case of Intermediate Bond Fund). This sales charge
will be subject to reduction or waiver in various circumstances, as set forth in
the then current prospectus of the respective Fund.
<PAGE>
- Contingent Deferred Sales Charge ("CDSC"): None, except that, in
connection with purchases of $500,000 or more, on which there is no initial
sales charge, a CDSC may be imposed, as set forth in the then current prospectus
of the respective Fund. Subject to Board approval, a CDSC also may be assessed
from time to time in connection with other purchases on which there is no
initial sales charge, such as purchases made during a special "no-load
promotion."
- Rule 12b-1 Fees: Class A shares will be subject to Rule 12b-1
distribution and shareholder servicing fees equal, on an annual basis, to .50%
of a Fund's average daily net assets (.30% in the case of Intermediate Bond
Fund) attributable to Class A shares. (For Pacific-European Growth Fund, the
Distributor will be entitled to reimbursement for its actual expenses incurred
in connection with servicing of the Fund's shareholder accounts and in
connection with distribution related services provided with respect to the Fund
in an amount not to exceed, on an annualized basis, .50% of the average daily
net assets attributable to the Class A shares of the Fund.)
- Conversion Features: None.
- Exchange Privileges: Class A shareholders may exchange their shares for
shares of any Piper Fund that is not issuing multiple classes of shares, and for
Class A shares of any Piper Fund that is issuing multiple classes of shares.
Such exchanges will be made at net asset value, provided that investors
exchanging into a Fund that has a higher sales charge must pay the difference.
CLASS B
- Front-End Sales Charge: None.
- Contingent Deferred Sales Charge: A CDSC of up to 4% will be imposed if
shares are redeemed within six years of purchase. For this purpose, years are
calculated on a calendar-year basis. The CDSC will decrease according to the
following schedule:
CDSC as a %
If Redeemed During the of Amount Redeemed
- ---------------------------------- --------------------
Calendar year of the 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%
Thus, if a shareholder bought shares on December 30, 1996 and redeemed them on
January 2, 1998, the 3% CDSC would apply.
2
<PAGE>
The CDSC will be based upon the lesser of the net asset value of the shares at
the time of purchase or at the time of redemption. The charge does not apply to
amounts representing an increase in share value due to capital appreciation and
shares acquired through the reinvestment of dividends or capital gains
distributions. In determining whether a CDSC is payable, redemptions of Class B
shares are processed on a first in, first out basis, to result in the lowest
possible sales charge. The CDSC may be subject to reduction or waiver in various
circumstances, as set forth in the then current prospectus of the respective
Fund.
- Conversion Features: On January 1 of the sixth calendar year after a
purchase, Class B shares will automatically convert to Class A shares. This
conversion will be on the basis of the relative net asset values of the two
classes. Class B shares purchased through the reinvestment of distributions paid
on such shares are, for purposes of conversion, considered to be held in a
separate sub-account. Each time Class B shares convert to Class A shares, a
proportionate number of the shares of the same class in the sub-account converts
to Class A. Effecting of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel to the effect that the conversion of shares does not constitute a
taxable event under the Internal Revenue Code.
- Rule 12b-1 Fees: Class B shares will be subject to Rule 12b-1
distribution and shareholder servicing fees equal, on an annual basis, to 1.00%
of a Fund's average daily net assets attributable to Class B shares.
- Exchange Privileges: Class B shareholders may exchange their shares
only for Class B shares of other Piper Funds. Thus, Class B shares may not be
exchanged for shares of Piper Funds that are not issuing multiple classes of
shares. Exchanges will be made at net asset value. No CDSC will be imposed
upon exchanges, but the new shares acquired in the exchange will be treated as
if purchased on the date of the original shares for purposes of calculating any
future CDSC payments and for purposes of determining the conversion date.
CLASS Y
- Front-End Sales Charge: None.
- Contingent Deferred Sales Charge: None.
- Rule 12b-1 Fees: None.
- Conversion Features: None.
- Exchange Privileges: Class Y shares may be exchanged at net asset value
for Class Y shares of another Fund, provided the Class Y minimum investment
amount for such other Fund is met.
3
<PAGE>
III. ATTRIBUTES OF MONEY MARKET FUND SHARE CLASSES
The Money Market Fund offers two classes of shares. The attributes of such
classes are as follows:
CLASS A
- Front-End Sales Charge: None
- Contingent Deferred Sales Charge: None.
- Rule 12b-1 Fees: Class A shares will be subject to Rule 12b-1
distribution and shareholder servicing fees equal, on an annual basis, to .30 of
a Fund's average daily net assets attributable to Class A shares.
- Conversion Features: None.
- Exchange Privileges: New purchases of Money Market Fund are only
allowed into Class A. Holders of these new Class A Money Market Fund shares are
allowed to exchange their shares for Class A shares of any of the other Funds
(in which case the applicable front-end sales charge will be imposed) or for
Class Y shares at net asset value (provided that the Class Y minimum investment
amount is met and the shareholder is otherwise eligible to purchase such
shares). Class A Money Market Fund shares cannot be exchanged into Class B
shares of another Fund. Instead, there must be a redemption of the Class A
Money Market Fund shares, followed by a purchase of the Class B shares of the
other Fund. Class B shares of another Fund cannot be exchanged into Class A
Money Market Fund shares, but must be exchanged for Class B Money Market Fund
shares.
CLASS B
The attributes of the Money Market Fund Class B shares are the same as
those of the non-Money Market Fund Class B shares.
IV. EXPENSE ALLOCATIONS
Expenses of the existing classes of the existing Funds shall be allocated
as follows:
A. Rule 12b-1 distribution and shareholder servicing fees relating to the
respective classes of shares, as set forth above, shall be borne
exclusively by the classes of shares to which they relate. In addition, to
the extent they can reasonably be identified as relating to a particular
class, transfer agent fees shall be allocated to such class.
4
<PAGE>
B. Except as set forth in A above, expenses of the Funds shall be borne at
the Fund level and shall not be allocated on a class basis. Such expenses
shall be allocated to each class based on such class's pro rata share of a
Fund's net assets.
The foregoing allocations shall in all cases be made in a manner consistent
with the Funds' private letter ruling from the Internal Revenue Service with
respect to multiple classes of shares.
V. VOTING
Each class shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement for shareholder services and
the distribution of securities and shall have separate voting rights on any
matter submitted to shareholders in which the interests of one class differ from
the interests of any other class. Class B shareholders shall have voting rights
with respect to material increases in expenses that are submitted separately to
Class A shareholders for their approval.
VI. AMENDMENT AND REVIEW OF PLAN
A. NEW FUNDS AND NEW CLASSES. With respect to any new Fund created after
the date of this Plan and any new class of shares of the existing Funds created
after the date of this Plan, the Board of Directors of the Funds, including a
majority of the independent directors, shall approve amendments to this Plan
setting forth the attributes of the classes of shares of such new Fund or of
such new class of shares.
B. MATERIAL AMENDMENTS AND REVIEW OF PLAN. The Board of Directors of the
Funds, including a majority of the independent directors, shall review this Plan
for its continued appropriateness as necessary and shall approve any material
amendment of this Plan.
5
