AMERICAN MUNICIPAL TERM TRUST INC, PRE 14A, 1998-06-03

AMERICAN MUNICIPAL TERM TRUST INC
PRE 14A, 1998-06-03

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

(AMENDMENT NO.____)

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12

American Municipal Term Trust Inc.
American Municipal Term Trust Inc.--II
American Municipal Term Trust Inc.--III
Minnesota Municipal Term Trust Inc.
Minnesota Municipal Term Trust Inc.--II
American Municipal Income Portfolio Inc.
Minnesota Municipal Income Portfolio Inc.
------------------------------------------------
(Name of Registrant as Specified in its Charter)

(specify)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a96(i)(4) and O-11.
(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction :

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(5) Total fee paid:

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[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE>

[PRELIMINARY COPY]

AMERICAN MUNICIPAL TERM TRUST INC.
AMERICAN MUNICIPAL TERM TRUST INC.--II
AMERICAN MUNICIPAL TERM TRUST INC.--III
MINNESOTA MUNICIPAL TERM TRUST INC.
MINNESOTA MUNICIPAL TERM TRUST INC.--II
AMERICAN MUNICIPAL INCOME PORTFOLIO INC.
MINNESOTA MUNICIPAL INCOME PORTFOLIO INC.

222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804

June __, 1998

Dear Shareholder:

On behalf of the Board of Directors of American Municipal Term Trust
Inc., American Municipal Term Trust Inc.--II, American Municipal Term Trust
Inc.--III, Minnesota Municipal Term Trust Inc., Minnesota Municipal Term Trust
Inc.--II, American Municipal Income Portfolio Inc. and Minnesota Municipal
Income Portfolio Inc. (the "Funds"), we are pleased to invite you to the annual
meeting of shareholders. The meeting will be held at the offices of the Funds on
August 10, 1998 at 10:30 a.m. central time at 222 South Ninth Street, 11th
floor, Minneapolis, Minnesota.

At the meeting you will be asked to (1) approve an interim
investment advisory agreement between your Fund and Piper Capital Management
Incorporated ("Piper Capital"), (2) approve a new investment advisory agreement
between your Fund and U.S. Bank National Association ("U.S. Bank"), (3) elect a
Board of Directors, and (4) ratify the selection of KPMG Peat Marwick LLP as
independent public accountants for your Fund. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE TO APPROVE EACH PROPOSAL.

The merger of Piper Jaffray Companies Inc. and U.S. Bancorp resulted
in the automatic termination of each Fund's investment advisory agreement with
Piper Capital. To avoid disruption of the investment advisory services provided
to the Funds, the Board approved interim investment advisory agreements between
each Fund and Piper Capital, which went into effect on the date of the merger.
The terms of these interim advisory agreements are substantially identical to
the terms of the Funds' previous advisory agreements. At the upcoming meeting,
you will be asked to approve the interim advisory agreement for your Fund. By
approving this agreement, you also will be approving the receipt of investment
advisory fees by Piper Capital under the agreement. These fees are currently
being held in escrow.

You will also be asked to approve a new investment advisory
agreement between your Fund and U.S. Bank. If this agreement is approved, it
will take the place of the interim advisory agreement between your Fund and
Piper Capital. The new investment advisory agreement is required because
management of U.S. Bancorp intends to merge Piper Capital into U.S. Bank. Thus,
Piper Capital will not be able to continue as your Fund's advisor. However, your
Fund's portfolio managers will be employed by U.S. Bank after this merger, and
they will continue to act as your Fund's portfolio managers under the new
investment advisory agreement. U.S. Bank currently acts as the investment
adviser to 32 mutual funds (the "First American Funds"). As of December 31,
1997, U.S. Bank, acting

<PAGE>

through its First American Asset Management group, managed more than $55 billion
in assets, including approximately $20.5 billion in assets of the First American
Funds.

An additional item on which you will be asked to vote is the
election of directors. One nominee is a member of your Fund's current Board of
Directors. The remaining nominees currently serve as directors of the First
American Funds.

Finally, you will be asked to ratify the selection of KPMG Peat
Marwick LLP as your Fund's independent public accountants.

The formal Notice of Annual Meeting, Proxy Statement and a Proxy
Ballot are enclosed. If you own shares in more than one Fund, more than one
Proxy Ballot accompanies these proxy materials.

YOUR VOTE IS VERY IMPORTANT TO US. WHETHER OR NOT YOU PLAN TO ATTEND
THE SPECIAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY
BALLOT PROMPTLY, USING THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY ALSO HAVE
YOUR VOTE RECORDED BY TELEPHONE BY CALLING EITHER THE NUMBER INDICATED ON YOUR
BALLOT OR __________.

The proposals on which you are being asked to vote are discussed in
detail in the enclosed materials, which you should read carefully. If you have
any questions, please do not hesitate to call Piper Capital Mutual Fund Services
toll free at (800) 866-7778.

Very truly yours,

Paul A. Dow
President

<PAGE>

[PRELIMINARY COPY]

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 10, 1998

NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
American Municipal Term Trust Inc., American Municipal Term Trust Inc.--II,
American Municipal Term Trust Inc.--III, Minnesota Municipal Term Trust Inc.,
Minnesota Municipal Term Trust Inc.--II, American Municipal Income Portfolio
Inc. and Minnesota Municipal Income Portfolio Inc. (individually, a "Fund" and
collectively, the "Funds") will be held at 10:30 a.m., Central Time, on Monday,
August 10, 1998, on the eleventh floor of the Piper Jaffray Tower, 222 South
Ninth Street, Minneapolis, Minnesota. The purposes of the meeting are as follow:

1. To approve an interim investment advisory agreement between
each Fund and Piper Capital Management Incorporated ("Piper
Capital"), and the receipt of investment advisory fees by
Piper Capital under such agreement.

2. To approve a new investment advisory agreement between each
Fund and U.S. Bank National Association ("U.S. Bank").

3. To elect a Board of Directors.

4. To ratify the selection of KPMG Peat Marwick LLP as
independent public accountants of each Fund for the current
fiscal year.

5. To transact such other business as may properly come before
the meeting.

EACH FUND'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF
EACH ITEM LISTED ON THIS NOTICE OF ANNUAL MEETING OF SHAREHOLDERS.

Shareholders of record as of the close of business on June 12, 1998
are entitled to notice of, and to vote at, the meeting or any adjournment(s)
thereof.

SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED
BY THE BOARD OF DIRECTORS OF THE FUNDS. THIS IS IMPORTANT TO ENSURE A QUORUM AT
THE MEETING. SHAREHOLDERS MAY ALSO HAVE THEIR VOTES RECORDED BY TELEPHONE.
PLEASE CALL __________ FOR MORE INFORMATION. PROXIES MAY BE REVOKED AT ANY TIME
BEFORE THEY ARE EXERCISED BY SUBMITTING TO THE RESPECTIVE FUND A WRITTEN NOTICE
OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE MEETING AND
VOTING IN PERSON. HOWEVER, ATTENDANCE AT THE MEETING WILL NOT BY ITSELF SERVE TO
REVOKE A PROXY.

Kathleen L. Prudhomme
Secretary
________, 1998

<PAGE>

[PRELIMINARY COPY]

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS--AUGUST 10, 1998

The enclosed proxy is solicited by the Board of Directors of
American Municipal Term Trust Inc. ("AXT"), American Municipal Term Trust
Inc.--II ("BXT"), American Municipal Term Trust Inc.--III ("CXT"), Minnesota
Municipal Term Trust Inc. ("MNA"), Minnesota Municipal Term Trust Inc.--II
("MNB"), American Municipal Income Portfolio Inc. ("XAA") and Minnesota
Municipal Income Portfolio Inc. ("MXA") (individually, a "Fund" and
collectively, the "Funds") in connection with each Fund's annual meeting of
shareholders to be held August 10, 1998, and any adjournments thereof. The costs
of solicitation, including the cost of preparing and mailing the Notice of
Meeting of Shareholders and this Proxy Statement, will be allocated among and
borne by the Funds, except that any costs in excess of those incurred by the
Funds in connection with their 1998 annual meeting of shareholders will be borne
by U.S. Bancorp. Mailing of the Notice of Meeting of Shareholders and this Proxy
Statement will take place on approximately June 29, 1998. Representatives of
Piper Capital Management Incorporated ("Piper Capital"), the current investment
adviser and administrator of each Fund, may, without cost to the Funds, solicit
proxies on behalf of management of the Funds by means of mail, telephone or
personal calls. Piper Capital has engaged Shareholder Communications Corporation
("SCC") to assist in the solicitation. Representatives of SCC may telephone
shareholders who have not voted, encouraging them to vote. The estimated cost of
engaging SCC is $______. The address of the Funds and Piper Capital is 222 South
Ninth Street, Minneapolis, Minnesota 55402.

A proxy may be revoked before the meeting by giving written notice
of revocation to the Secretary of the Funds, or at the meeting prior to voting.
Unless revoked, properly executed proxies in which choices are not specified by
the shareholders will be voted "for" each item for which no choice is specified,
in accordance with the recommendation of the applicable Fund's Board of
Directors. In instances where choices are specified by the shareholders in the
proxy, those proxies will be voted or the vote will be withheld in accordance
with the shareholder's choice. With regard to the election of directors, votes
may be cast in favor or withheld. Abstentions may be specified on all proposals
other than the election of directors. Abstentions and votes withheld with
respect to the election of directors will be counted as present for purposes of
determining whether a quorum of shares is present at the meeting with respect to
the item on which the abstention is noted, and will have the same effect as a
vote "against" such item. Under the Rules of the New York Stock Exchange, if a
proposal is considered "non-discretionary," then brokers who hold Fund shares in
street name for customers are not authorized to vote on such proposal on behalf
of their customers who have not furnished the broker specific voting
instructions. If a broker returns a "non-vote" proxy, indicating a lack of
authority to vote on a proposal, then the shares covered by such non-vote shall
not be counted as present for purposes of calculating the vote with respect to
such proposal. So far as the Board of Directors is aware, no matter other than
those described in this Proxy Statement will be acted upon at the meeting.
Should any other matters properly come before the meeting calling for a vote of
shareholders, it is the intention of the persons named as proxies in the
enclosed proxy to act upon such matters according to their best judgment.

Only shareholders of record of each Fund on June 12, 1998 may vote
at the meeting or any adjournment thereof. As of that date, there were issued
and outstanding common and preferred shares, each with a par value of $.01, of
each Fund as follow:

<PAGE>

FUND COMMON SHARES PREFERRED SHARES
---- ------------- ----------------

AXT
BXT
CXT
MNA
MNB
XAA
MXA

Each shareholder of a Fund is entitled to one vote for each share held. None of
the matters to be presented at the meeting will entitle any shareholder to
cumulative voting or appraisal rights. No person, to the knowledge of Fund
management, was the beneficial owner of more than 5% of any class of voting
shares of any Fund as of June 12, 1998.

In the event that sufficient votes are not received for the adoption
of any proposal, an adjournment or adjournments of the meeting may be sought.
Any adjournment would require a vote in favor of the adjournment by the holders
of a majority of the shares present at the meeting (or any adjournment thereof)
in person or by proxy. In such circumstances, the persons named as proxies will
vote all shares that have voted for the proposal in favor of adjournment; shares
voted against the proposal will be voted against adjournment.

A COPY OF EACH FUND'S MOST RECENT ANNUAL REPORT IS AVAILABLE TO
SHAREHOLDERS UPON REQUEST. IF YOU WOULD LIKE TO RECEIVE A COPY, PLEASE CONTACT
THE FUNDS AT 222 SOUTH NINTH STREET, MINNEAPOLIS, MINNESOTA 55402-3804, OR CALL
800-866-7778, EXTENSION 6786, AND ONE WILL BE SENT, WITHOUT CHARGE, BY
FIRST-CLASS MAIL WITHIN THREE BUSINESS DAYS OF YOUR REQUEST.

BACKGROUND

On May 1, 1998, pursuant to an Agreement and Plan of Merger dated as
of December 14, 1997 (the "Merger Agreement"), U.S. Bancorp acquired Piper
Jaffray Companies Inc. ("Piper Jaffray") and its direct and indirect
subsidiaries (including Piper Capital) by merging Cub Acquisition Corporation
(the "Merger Subsidiary") with and into Piper Jaffray, with Piper Jaffray as the
surviving corporation (the "Holding Company Merger"). The Merger Subsidiary was
a wholly owned subsidiary of U.S. Bancorp, organized for the purpose of
participating in the Holding Company Merger. On the date and at the time when
the Holding Company Merger became effective (the "Effective Time"), the Merger
Subsidiary merged into Piper Jaffray with Piper Jaffray as the surviving
corporation and a wholly-owned subsidiary of U.S. Bancorp.

At the Effective Time, each issued and outstanding share of the
common stock, $1.00 par value, of Piper Jaffray common stock other than treasury
shares and dissenters' shares was converted into the right to receive $37.25 in
cash, without interest thereon. Shares of Piper Jaffray common stock held by
Piper Jaffray or any of its subsidiaries and shares of Piper Jaffray common
stock the holders of which perfected their dissenters' rights to payment under
Delaware law immediately prior to the Effective Time, were excluded from this
conversion.

As a result of the Holding Company Merger, Piper Capital, the
investment adviser to the Funds, became an indirect wholly-owned subsidiary of
U.S. Bancorp. In accordance with the terms of the then current investment
advisory agreements between Piper Capital and each Fund (the "Old Advisory
Agreements"), and consistent with the requirements of the Investment Company Act
of 1940, as amended (the "1940 Act"), this change in control of Piper Capital
resulted in the automatic and immediate termination of the Old Advisory
Agreements.

<PAGE>

To better ensure that the Holding Company Merger and these automatic
terminations would not disrupt the investment advisory services provided to the
Funds, Piper Capital and the Funds filed an exemptive application with the
Securities and Exchange Commission (the "SEC") on March 12, 1998. This
application requested that the SEC permit Piper Capital, after termination of
the Old Advisory Agreements as a result of the Holding Company Merger, to enter
into new investment advisory agreements between Piper Capital and each Fund (the
"Interim Advisory Agreements") prior to obtaining shareholder approval. The
application also requested that the SEC permit Piper Capital to receive fees
(which are currently held in escrow) under the respective Interim Advisory
Agreements, subject to approval of such agreements by the shareholders of the
respective Funds at a meeting to be held within 120 days after May 1, 1998 (the
"Interim Period"). The requested exemptive order (the "Order") was granted by
the SEC on April 21, 1998.

The Board of Directors now is proposing that the shareholders of
each Fund ratify and approve their Fund's Interim Advisory Agreement. Details of
the proposal are set forth below under "Proposal One--Approval of Interim
Advisory Agreements."

Although Piper Capital continues to exist as an indirect
wholly-owned subsidiary of U.S. Bancorp, management of U.S. Bancorp intends
eventually to merge Piper Capital into U.S. Bank National Association ("U.S.
Bank"), a wholly owned subsidiary of U.S. Bancorp. U.S. Bank currently acts as
the investment adviser to 32 mutual funds (the "First American Funds"). As of
December 31, 1997, U.S. Bank, acting through its First American Asset Management
group, managed more than $55 billion in assets, including approximately $20.5
billion in assets of the First American Funds. Because of the anticipated merger
of Piper Capital into U.S. Bank, the Board of Directors has approved new
investment advisory agreements between each Fund and U.S. Bank (the "New
Advisory Agreements") and has recommended that the shareholders of each Fund
approve their Fund's New Advisory Agreement. The New Advisory Agreements will go
into effect upon or shortly after their approval by shareholders, and will take
the place of the Interim Advisory Agreements.

In addition, shareholders of all Funds are being asked to elect
eight members to each Fund's Board of Directors, including one director from the
current Boards who has been nominated for reelection. The remaining nominees
serve as directors of the First American Funds. See "Proposal Three--Election of
Directors." Finally, shareholders of all Funds are being asked to ratify the
selection of KPMG Peat Marwick LLP as each Fund's independent public
accountants. See "Proposal Four--Ratification of Independent Public
Accountants."

PROPOSAL ONE
APPROVAL OF INTERIM ADVISORY AGREEMENTS

INTRODUCTION. As discussed above, Piper Capital, the investment
adviser to the Funds, became an indirect wholly-owned subsidiary of U.S. Bancorp
as a result of the Holding Company Merger. In accordance with the terms of the
Old Advisory Agreements and consistent with the requirements of the 1940 Act,
this change in control of Piper Capital resulted in the automatic and immediate
termination of the Old Advisory Agreements.

The table below sets forth for each Fund the date of such Fund's Old
Advisory Agreement, the rate of compensation payable under such Agreement,
advisory fees paid by the Fund for its last fiscal year and the Fund's net
assets at March 31, 1998. Each Fund has also entered into an Administration
Agreement with Piper Capital under which Piper Capital earns administration fees
equal, on an annual basis, to 0.15% of such Fund's average weekly net assets.
Administration fees paid by each Fund for its last fiscal year are also set
forth in the table below. No advisory or administration fees were waived during
any Fund's last fiscal year. Each Fund's Old Advisory Agreement was adopted by
the sole shareholder of such Fund prior to commencement of operations.

<PAGE>

<TABLE>
<CAPTION>
DATE OF NET ASSETS
ADVISORY RATE OF ADVISORY ADMINISTRATION OF FUND
AGREEMENT COMPENSATION* FEES PAID FEES PAID AT 3/31/98
--------- ------------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
AXT 3/1/91 0.25% $ 349,298 $ 209,579 $ 139,841,247

BXT 9/19/91 0.25% $ 303,974 $ 182,385 $ 122,336,938

CXT 11/19/92 0.25% $ 213,481 $ 128,088 $ 87,133,705

MNA 9/19/91 0.25% $ 232,454 $ 139,472 $ 93,556,967

MNB 4/16/92 0.25% $ 136,726 $ 82,036 $ 55,358,957

XAA 6/18/93 0.35% $ 440,183 $ 188,650 $ 129,140,552

MXA 6/18/93 0.35% $ 316,499 $ 135,642 $ 92,825,478

</TABLE>

- --------------------
* As a percentage of average weekly net assets.

In accordance with the Order, and to better ensure that the
automatic termination of the Old Advisory Agreements would not disrupt the
investment advisory services provided to the Funds, the Board of Directors
approved the Interim Advisory Agreements, which became effective on May 1, 1998,
the date of the Holding Company Merger. The Board of Directors is proposing that
the shareholders of each Fund ratify and approve the Fund's Interim Advisory
Agreement. Pending such ratification and approval, in accordance with the
conditions of the Order, all fees payable by the Funds under the Interim
Advisory Agreements are being held in escrow. Such escrowed fees attributable to
a Fund will be released to Piper Capital only if the Interim Advisory Agreement
applicable to such Fund is ratified and approved by the shareholders of such
Fund. If ratified and approved, the Interim Advisory Agreements will continue in
effect for an initial period of two years and thereafter for successive one-year
terms, subject to certain annual approval requirements, or until the New
Advisory Agreements (discussed below under "Proposal Two--Approval of New
Advisory Agreements") are approved by shareholders, whichever occurs earlier. In
the event an Interim Advisory Agreement is not ratified and approved with
respect to a Fund, in accordance with the conditions of the Order, the escrowed
fees payable by that Fund will be returned to the Fund.

TERMS OF THE INTERIM ADVISORY AGREEMENTS. The terms of the Interim
Advisory Agreements, which are more fully described below, are substantially
identical to the terms of the Old Advisory Agreements, except for (i) the
effective date, (ii) the termination date, and (iii) inclusion of a provision
requiring that all fees payable by each Fund under the particular Interim
Advisory Agreement be held in escrow until the Agreement is approved by the
applicable Fund's shareholders. The advisory fee rates payable under the Interim
Advisory Agreements are identical to those payable under the corresponding Old
Advisory Agreements. A form of Investment Advisory and Management Agreement
(which sets forth the terms of both the Interim Advisory Agreements and the New
Advisory Agreements as discussed under Proposal Two) is attached to this Proxy
Statement as Exhibit A. The following summary of the Interim Advisory Agreements
is qualified in its entirety by reference to this exhibit.

Pursuant to the Interim Advisory Agreements, Piper Capital agrees,
subject to the supervision of the Board of Directors, to furnish the Funds with
investment advice and to supervise the management and investment programs of the
respective Funds. Under such Agreements, Piper Capital furnishes at its own
expense all necessary services, office space, equipment and clerical personnel
for servicing the investments of the Funds. Piper Capital also provides
investment advisory facilities and executive and supervisory personnel for
managing the investments and effecting the portfolio transactions of the Funds.
In addition, Piper Capital pays the salaries and fees of all officers and
directors of the Funds who are affiliated with Piper Capital.

Each Interim Advisory Agreement provides that, unless sooner
terminated, it will continue in effect for an initial period of two years and
thereafter for successive annual terms, provided that such successive terms are
specifically approved at least annually (a) by a vote of a majority of those
members of the Board of Directors who are not parties to the Agreement or
"interested persons" (as

<PAGE>

defined in the 1940 Act) of any party to the Agreement, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the vote
of a majority of the Board Directors or a vote of a majority of the outstanding
shares of the Fund.

Each Interim Advisory Agreement provides that it will terminate
automatically in the event of its assignment. In addition, each Interim Advisory
Agreement is terminable at any time, without penalty, by the Board of Directors
or by a vote of a majority of the Fund's outstanding voting securities on 60
days' written notice to Piper Capital, and by Piper Capital on 60 days' written
notice to the Fund.

BOARD DELIBERATIONS. As described above, the Old Advisory Agreements
that were previously in effect for the Funds automatically terminated on May 1,
1998 as a result of the Holding Company Merger. In anticipation of this
termination, and in order to minimize any potential disruption of the advisory
services provided to the Funds, on January 21, 1998 the Piper Board authorized
the filing with the SEC of the exemptive application described above in order to
permit Piper Capital to act as investment adviser to the Funds on and after May
1, 1998 but prior to obtaining shareholder approval. In addition, at a meeting
held April 13, 1998, the Piper Board, including all of the Directors who are not
"interested persons" (as that term is defined in the 1940 Act) of Piper Capital
(the "Non-Interested Directors"), approved each Interim Advisory Agreement with
Piper Capital, all of which became effective upon the consummation of the
Holding Company Merger on May 1, 1998. If approved by shareholders of the
respective Funds at the Meeting, these agreements will continue in effect either
(i) for an initial period of two years from the effective date of such
agreements and thereafter for successive one-year terms, subject to certain
annual approval requirements, or (ii) until shareholder approval of new
investment advisory agreements between the Funds and U.S. Bank, as described
below under "Proposal Two--Approval of New Advisory Agreements."

In considering whether to approve the Interim Advisory Agreements
and submit them to shareholders for their approval, the Board of Directors
considered the following factors: (i) the representation of Piper Capital that
it would provide investment advisory and other services to the Funds of at least
the scope and quality previously provided by it to the Funds; (ii) the
substantially identical terms and conditions contained in the Interim Advisory
Agreements as compared to the corresponding Old Advisory Agreements; and (iii)
the representation of Piper Capital that in the event of any material change in
personnel providing services under an Interim Advisory Agreement during the
Interim Period, the Board of Directors would be consulted for the purpose of
assuring themselves that the services provided would not be diminished in scope
or quality. Additionally, the Board of Directors considered the benefits that
would be obtained by the Funds in maintaining continuity of investment advisory
services for the Funds during the Interim Period, and determined that such
continuity was advantageous to the Funds as it would minimize any potential
disruption in the advisory services provided to the Funds resulting from the
Holding Company Merger.

Based on the foregoing factors, the Board of Directors concluded
that approval of the Interim Advisory Agreements was in the best interests of
the Funds and their shareholders. The Board of Directors considered the
confluence of all the factors mentioned above in arriving at its decision to
approve the Interim Advisory Agreements and no one factor was given any greater
weight than any of the others. The Board further concluded that entering into
the Interim Advisory Agreements would be appropriate and fair considering that
(i) the fees to be paid, and the services to be provided therefor, would be
unchanged from the Old Advisory Agreements; (ii) the fees would be maintained in
an interest-bearing escrow account until payment was approved or disapproved by
shareholders of the Funds; (iii) because of the relatively short period for the
consummation of the Holding Company Merger, there was insufficient time to seek
prior shareholder approval of the Interim Advisory Agreements; and (iv) the
non-payment of investment advisory fees during the Interim Period would be an
unduly harsh result to Piper Capital in view of the services provided by Piper
Capital to the Funds, and the expenses incurred in connection with such
services, under the Interim Advisory Agreements.

<PAGE>

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF EACH FUND
RATIFY AND APPROVE THEIR FUND'S INTERIM ADVISORY AGREEMENT AND THE RECEIPT OF
INVESTMENT ADVISORY FEES BY PIPER CAPITAL FOR THE PERIOD FROM MAY 1, 1998
FORWARD. Each Fund will vote separately with respect to the approval of the
Interim Advisory Agreement applicable to such Fund. Ratification and approval of
the proposal requires the favorable vote of a majority of the outstanding shares
of each Fund, as defined in the 1940 Act, which means the lesser of the vote of
(a) 67% of the shares of the Fund present at a meeting where more than 50% of
the outstanding shares are present in person or by proxy, or (b) more than 50%
of the outstanding shares of the Fund. The preferred shareholders and the common
shareholders vote together as a single class. Unless otherwise instructed, the
proxies will vote for the approval of the Interim Advisory Agreements and the
receipt of advisory fees by Piper Capital.

PROPOSAL TWO
APPROVAL OF NEW ADVISORY AGREEMENTS

As discussed above, although Piper Capital continues to exist as a
wholly-owned subsidiary of U.S. Bancorp, management of U.S. Bancorp intends
eventually to merge Piper Capital into U.S. Bank, a wholly owned subsidiary of
U.S. Bancorp. U.S. Bank currently acts as the investment adviser to the 32 First
American Funds. As of December 31, 1997, U.S. Bank, acting through its First
American Asset Management group, managed more than $55 billion in assets,
including approximately $20.5 billion in assets of the First American Funds. See
"Supplemental Information About U.S. Bank" below. Because of this anticipated
merger, the Board of Directors has approved new investment advisory agreements
between each Fund and U.S. Bank (the "New Advisory Agreements") and has
recommended that the shareholders of each Fund approve their Fund's New Advisory
Agreement. If the New Advisory Agreements are approved by shareholders, they
will go into effect upon or shortly after such approval, and will take the place
of the Interim Advisory Agreements.

THE NEW ADVISORY AGREEMENTS. The terms of the New Advisory
Agreements are substantially identical to the terms of the Old Advisory
Agreements and Interim Advisory Agreements, except for (i) the identity of the
investment adviser, (ii) the effective date, and (iii) the termination date. In
addition, there is no need for the inclusion of an escrow provision similar to
that included in the Interim Advisory Agreement because the New Advisory
Agreements will not go into effect until they have been approved by
shareholders. The advisory fee rates payable under the New Advisory Agreements
are identical to those payable under the corresponding Old Advisory Agreements
and Interim Advisory Agreements. For a description of the terms of the New
Advisory Agreements, see the description of the Interim Advisory Agreements set
forth above under "Proposal One--Approval of Interim Advisory Agreements" and
the form of Investment Advisory and Management Agreement (which sets forth the
terms of both the Interim Advisory Agreements and the New Advisory Agreements)
attached to this Proxy Statement as Exhibit A.

The Glass-Steagall Act generally prohibits banks from engaging in
the business of underwriting, selling or distributing securities and from being
affiliated with companies principally engaged in those activities. In addition,
administrative and judicial interpretations of the Glass-Steagall Act prohibit
bank holding companies and their bank and nonbank subsidiaries from organizing,
sponsoring or controlling registered open-end investment companies that are
continuously engaged in distributing their shares. Bank holding companies and
their bank and nonbank subsidiaries may serve, however, as investment advisers
to registered investment companies, subject to a number of terms and conditions.

Although the scope of the prohibitions and limitations imposed by
the Glass-Steagall Act has not been fully defined by the courts or the
appropriate regulatory agencies, U.S. Bank has received an opinion from counsel
that U.S. Bank and its affiliates are not prohibited from performing the types
of services contemplated by the New Advisory Agreements. In the event of changes
in federal or state statutes or regulations or judicial and administrative
interpretations or decisions pertaining to permissible activities of bank
holding companies and their bank and nonbank subsidiaries, U.S. Bank

<PAGE>

and its affiliates might be prohibited from continuing these arrangements. In
that event, it is expected that the Fund's Boards of Directors would make other
arrangements and that shareholders would not suffer adverse financial
consequences.

BOARD DELIBERATIONS. In considering whether to approve the New
Advisory Agreements and submit them to shareholders for their approval, the
Board of Directors reviewed, among other things: (i) the investment management
capabilities of U.S. Bank; (ii) the systems capabilities of U.S. Bank to provide
shareholder servicing, reporting and systems integration with related programs
for Fund shareholders; (iii) the level, scope and quality of the advisory
services to be provided by U.S. Bank; and (iv) the substantially identical terms
and conditions contained in the New Advisory Agreements as compared to the
corresponding Interim Advisory Agreements and Old Advisory Agreements. The Board
also noted that each Fund's current portfolio managers, Ronald R. Reuss and
Douglas J. White, will be employed by U.S. Bank after the merger of Piper
Capital into U.S. Bank, and will continue to act as the Funds' portfolio
managers under the New Advisory Agreements. Based on the foregoing factors, the
Board of Directors concluded that approval of the New Advisory Agreements was in
the best interests of the Funds and their shareholders. The Board of Directors
considered the confluence of all the factors mentioned above in arriving at its
decision to approve the New Advisory Agreements and no one factor was given any
greater weight than any of the others.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF EACH FUND
RATIFY AND APPROVE THEIR FUND'S NEW ADVISORY AGREEMENT. Each Piper Fund will
vote separately with respect to the approval of the New Advisory Agreement
applicable to such Fund. Ratification and approval of the proposal requires the
favorable vote of a majority of the outstanding shares of each Fund, as defined
in the 1940 Act, which means the lesser of the vote of (a) 67% of the shares of
the Fund present at a meeting where more than 50% of the outstanding shares are
present in person or by proxy, or (b) more than 50% of the outstanding shares of
the Fund. The preferred shareholders and the common shareholders vote together
as a single class. Unless otherwise instructed, the proxies will vote for the
approval of the New Advisory Agreements.

PROPOSAL THREE
ELECTION OF DIRECTORS

Listed below are the nominees for director to be elected by the
shareholders of each Fund. Such individuals have been nominated for election by
the current disinterested directors of the Funds. Current members of each Fund's
Board of Directors are David T. Bennett, Jaye F. Dyer, William H. Ellis, Karol
D. Emmerich, Luella G. Goldberg, David A. Hughey and George Latimer. Such
individuals (other than Mr. Bennett) will resign in connection with the Holding
Company Merger, effective upon the election of their successors.

Under normal circumstances, each Fund's preferred shareholders are
entitled to elect two of such Fund's Directors, and the remaining Directors are
to be elected by the preferred shareholders and the common shareholders, voting
together as a single class. The nominees for Director to be elected by the
preferred shareholders are David T. Bennett and Leonard W. Kedrowski. The
remaining nominees listed below are to be elected by the preferred shareholders
and the common shareholders, voting together.

It is intended that the enclosed proxy will be voted for the
election of the persons named below as Directors of each Fund unless such
authority has been withheld in the proxy. The term of office of each person
elected will be until the next annual meeting of shareholders or until his or
her successor is duly elected and shall qualify. Pertinent information regarding
each nominee for at least the past five years is set forth following his or her
name below. Mr. Bennett has been a director of each Fund since its inception.
Messrs. Dayton, Gibson, Hunter, Kedrowski, Spies and Strauss and Ms. Stringer
are currently directors of each registered investment company in the First
American Funds family.

<PAGE>

NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DURING PAST 5 YEARS
- ------------ ----------------------------------------------------------------
<S> <C>
David T. Bennett (age 56) Director of each open-end and closed-end investment company for
which Piper Capital acts as investment adviser; of counsel to the
law firm of Gray, Plant, Mooty, Mooty & Bennett P.A.,
Minneapolis, Minnesota; chairman of a group of privately held
companies and member of the board of directors of a number of
non-profit organizations.

Robert J. Dayton (age 54) Director of First American Investment Funds, Inc. ("FAIF") since
September 1994, of First American Funds, Inc. ("FAF") since
December 1994 and of First American Strategy Funds, Inc.
("FASF") since June 1996; Chairman (1989-1993) and Chief
Executive Officer (1993-present), Okabena Company (private
family investment office).

Roger A. Gibson (age 51) Director of FAF, FAIF and FASF since October 1997; Vice
President of North America-Mountain Region for United Airlines
since June 1995; prior to his current position, served most recently
as Vice President, Customer Service for United Airlines in the
West Region in San Francisco, California and the Mountain Region
in Denver, Colorado; employed at United Airlines since 1967.

Andrew M. Hunter III (age 49) Director of FAIF, FAF and FASF since January 1997; Chairman of
Hunter, Keith Industries, a diversified manufacturing and
management services company, since 1975.

Leonard W. Kedrowski (age 55) Director of FAIF and FAF since November 1993 and of FASF since
June 1996; President and owner of Executive Management
Consulting, Inc., a management consulting firm; Vice President,
Chief Financial Officer, Treasurer, Secretary and Director of
Anderson Corporation, a large privately-held manufacturer of
wood windows, from 1983 to October 1992.

*Robert L. Spies (age 62) Director of FAIF, FAF and FASF since January 1997; employed by
First Bank System, Inc. and subsidiaries from 1957 to January
1997, most recently as Vice President, First Bank National
Association.

Joseph D. Strauss (age 56) Director of FAF since 1984, of FAIF since April 1991 and of FASF
since June 1996; Chairman of FAF's and FAIF's Boards from 1993
to September 1997 and of FASF's Board from June 1996 to
September 1997; President of FAF and FAIF from June 1989 to
November 1989; Owner and President, Strauss Management
Company, since 1993; Owner and President, Community Resource
Partnerships, Inc., a community business retention survey
company, since 1992; attorney-at-law.

Virginia L. Stringer (age 52) Director of FAIF since August 1987, of FAF since April 1991 and of
FASF since June 1996; Chair of FAIF's, FAF's and FASF's Boards
since September 1997; Owner and President, Strategic
Management Resources, Inc. since 1993; formerly President and
Director of The Inventure Group, a management consulting and
training company, President of Scott's, Inc., a transportation
company, and Vice President of Human Resources of The
Pillsbury Company.
</TABLE>

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

<PAGE>

* DENOTES DIRECTORS WHO ARE CONSIDERED TO BE "INTERESTED PERSONS" (AS DEFINED
BY THE 1940 ACT) OF THE FUNDS.

As of June 12, 1998, the current officers, Directors and nominees
for Director of each Fund as a group beneficially owned less than 1% of each
class of outstanding shares of such Fund. No Director or nominee for Director of
the Funds has any material interest in any material transaction in which Piper
Capital, U.S. Bank or any of their affiliates is a party.

The Board of Directors of each Fund has established an Audit
Committee which currently consists of Mr. Hughey, Ms. Goldberg and Ms. Emmerich,
who serves as its chairperson. The Funds do not currently have nominating or
compensation committees. If the nominees named above are elected, it is expected
that new members of the Audit Committee will be elected at the first meeting of
the Board of Directors following such election, and that nominating and
compensation committees will be formed. The Audit Committee met two times during
the most recently ended fiscal year for each Fund.

The functions to be performed by the Audit Committee are to
recommend annually to the Board a firm of independent certified public
accountants to audit the books and records of each Fund for the ensuing year; to
monitor that firm's performance; to review with the firm the scope and results
of each audit and determine the need, if any, to extend audit procedures; to
confer with the firm and representatives of each Fund on matters concerning the
Funds' financial statements and reports including the appropriateness of its
accounting practices and of its financial controls and procedures; to evaluate
the independence of the firm; to review procedures to safeguard portfolio
securities; to review the purchase by each Fund from the firm of non-audit
services; to review all fees paid to the firm; and to facilitate communications
between the firm and the Funds' officers and Directors.

For the most recently ended fiscal year of each Fund, there were
____ meetings of the Board of Directors. The only nominee for Director at this
meeting, Mr. Bennett, attended all meetings of the Board of Directors and of
committees of which he was a member that were held while he was serving on the
Board of Directors or on such committee.

No compensation is paid by the Funds to any Director who is an
officer or employee of Piper Capital or any of its affiliates. The Funds,
together with all closed-end investment companies managed by Piper Capital,
currently pay each of the other Directors an aggregate quarterly retainer of
$5,000, which is allocated among the Funds and such other investment companies
on the basis of each company's net assets. In addition, each Fund pays each such
Director a fee for each in-person meeting of the Board of Directors he or she
attends. Such fee is based on the net asset value of the Fund 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 Piper
Capital receive $1,000 per meeting attended ($2,000 for the chairperson of such
Committee) with such fee being allocated among all closed- and open-end
investment companies managed by Piper Capital on the basis of relative net asset
values. In addition, each Director who is not affiliated with Piper Capital is
reimbursed for expenses incurred in connection with attending meetings.

The following table sets forth the compensation received by each
Director from each Fund for its most recent fiscal year, as well as the total
compensation received by each Director from the Funds and all other open-end and
closed-end investment companies managed by Piper Capital (the "Fund Complex")
for the twelve-months ended December 31, 1997. Mr. Ellis did not receive any
such compensation and is not included in the table.

<PAGE>

FUND BENNETT DYER EMMERICH GOLDBERG HUGHEY LATIMER
- ---- ------- ---- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
AXT $ $ $ $ $ $
BXT $ $ $ $ $ $
CXT $ $ $ $ $ $
MNA $ $ $ $ $ $
MNB $ $ $ $ $ $
XAA $ $ $ $ $ $
MXA $ $ $ $ $ $
Total
Compensation
from Fund Complex* $ 59,000 $ 55,000 $ 59,000 $ 57,000 $ 57,000 $ 55,000

</TABLE>

- --------------------
* Currently consists of 20 open-end and closed-end investment companies managed
by the Adviser, including the Funds.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE IN
FAVOR OF ALL NOMINEES TO SERVE AS DIRECTORS. For each Fund, (i) the vote of a
majority of the preferred shares represented at the meeting is sufficient for
the election of Mr. Bennett and Mr. Kedrowski, provided at least a quorum (a
majority of the outstanding preferred shares) is represented in person or by
proxy, and (ii) the vote of a majority of the preferred shares and common shares
represented at the meeting, voting together as a single class, is sufficient for
the election of each of the other nominees, provided at least a quorum (a
majority of the outstanding preferred shares and common shares) is represented
in person or by proxy. Unless otherwise instructed, the proxies will vote for
all nominees. In the event any of the above nominees are not candidates for
election at the meeting, the proxies will vote for such other persons as the
Board of Directors may designate. Nothing currently indicates that such a
situation will arise.

PROPOSAL FOUR
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS

The Investment Company Act of 1940 (the "1940 Act") provides that
every registered investment company shall be audited at least once each year by
independent public accountants selected by a majority of the directors of the
investment company who are not interested persons of the investment company or
its investment adviser. The 1940 Act requires that the selection be submitted
for ratification or rejection by the shareholders at their next annual meeting
following the selection.

The Directors, including a majority who are not interested persons
of Piper Capital or the Funds, have selected KPMG Peat Marwick LLP to be the
Funds' independent public accountants for each Fund's current fiscal year. KPMG
Peat Marwick LLP has no direct or material indirect financial interest in the
Funds or in Piper Capital, other than receipt of fees for services to the Funds.
KPMG Peat Marwick LLP also serves as the independent public accountants for each
of the other investment companies managed by Piper Capital and has been the
independent public accountants for the Funds since commencement of operations.

Representatives of KPMG Peat Marwick LLP are expected to be present
at the meeting. Such representatives will have the opportunity to make a
statement to shareholders if they choose to do so and are expected to be
available to respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE IN
FAVOR OF THE RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP. For each
Fund, the vote of a majority of the shares represented at the meeting is
sufficient for the ratification of the selection of the independent public
accountants, provided at least a quorum (a majority of the outstanding shares)
is represented in person or by proxy. The preferred shareholders and the common
shareholders vote together as a single class. Unless otherwise instructed, the
proxies will vote for the ratification of the selection of KPMG Peat Marwick LLP
as each Fund's independent public accountants.

<PAGE>

SUPPLEMENTAL INFORMATION ABOUT PIPER CAPITAL

In addition to acting as the investment adviser for the Funds, Piper
Capital also serves as investment adviser to a number of other investment
companies, both closed-end and open-end, and to various other concerns,
including pension and profit-sharing funds, corporate funds and individuals.
Piper Capital is registered as an investment adviser under the Investment
Advisers Act of 1940 and is an indirect wholly-owned subsidiary of U.S. Bancorp,
601 Second Avenue South, Minneapolis, Minnesota 55480. U.S. Bancorp is a
multi-state bank holding company headquartered in Minneapolis, Minnesota with a
geographic service area spanning 17 states. As of March 31, 1998, Piper Capital
had approximately $12.8 billion under management. The address of Piper Capital
is 222 South Ninth Street, Minneapolis, Minnesota 55402.

Piper Capital serves as the investment adviser to the following
open-end investment company series which have investment objectives similar to
those of one or more of the Funds, and is entitled to receive advisory fees from
such series or companies as set forth below. Piper Capital has not waived,
reduced or otherwise agreed to reduce its advisory fees for either of the funds
in the table.

NET ASSETS AS OF ADVISORY FEE (AS A %
NAME OF FUND MARCH 31, 1998 OF AVERAGE NET ASSETS)
- ------------ -------------- ----------------------

National Tax-Exempt Fund $ 0.50%*

Minnesota Tax-Exempt Fund $ 0.50%*

- -----------------
* Payable on the first $250,000,000 in net assets. The fee is reduced to 0.45%
of average net assets on the next $250,000,000 and 0.40% on average net
assets over $500,000,000.

The names and principal occupations of the principal executive
officer and each director of Piper Capital are set forth below. The address of
all individuals is that of the Funds. The officers and directors of Piper
Capital had no interest in the Holding Company Merger other than as a result of
their ownership of shares of Piper Jaffray common stock.

NAME PRINCIPAL OCCUPATION
- ---- --------------------

Paul A. Dow Chief Executive Officer, Chief Investment Officer and
Director of Piper Capital

Robert H. Nelson Director and Senior Vice President of Piper Capital

The following officers of the Funds are also officers or employees
of Piper Capital. No directors or nominees for director of the Funds are
officers, directors or employees of Piper Capital.

NAME POSITION WITH FUNDS POSITION WITH PIPER CAPITAL
- ---- ------------------- ---------------------------

Paul A. Dow President See table above

Robert H. Nelson Vice President and Treasurer See table above

As investment adviser to the Funds, Piper Capital receives research
services from broker-dealers that execute portfolio transactions for the Funds.
In selecting brokers to execute portfolio transactions for the Funds, Piper
Capital seeks to obtain the best price and execution of orders. When consistent
with these criteria, business may be placed with broker-dealers who furnish
investment research services to Piper Capital. Such research services are used
by Piper Capital in carrying out its investment management responsibilities with
respect to its client accounts generally, but not necessarily in connection with
the Funds.

<PAGE>

AFFILIATED BROKER COMMISSIONS. During each Fund's most recently
ended fiscal year, the Fund paid brokerage commissions to Piper Jaffray Inc., an
affiliate of Piper Capital, in connection with purchases and sales of portfolio
securities, in the amounts set forth in the following table.

BROKERAGE COMMISSIONS
FUND PAID TO PIPER JAFFRAY INC.
---- --------------------------
AXT $
BXT $
CXT $
MNA $
MNB $
XAA $
MXA $

SUPPLEMENTAL INFORMATION ABOUT U.S. BANK

U.S. Bank, a wholly owned subsidiary of U.S. Bancorp, currently acts
as the investment adviser to 32 mutual funds (the "First American Funds"). As of
December 31, 1997, U.S. Bank, acting through its First American Asset Management
group, managed more than $55 billion in assets, including approximately $20.5
billion in assets of the First American Funds.

U.S. Bank serves as the investment adviser to the following open-end
investment company series which have investment objectives similar to those of
one or more of the Funds and is entitled to receive advisory fees from such
series as follows:

<TABLE>
<CAPTION>
CONTRACTUAL ACTUAL ADVISORY
ADVISORY FEE FEE AFTER WAIVERS
NET ASSETS AS OF (AS A PERCENTAGE (AS A PERCENTAGE OF
NAME OF FUND MARCH 31, 1998 OF AVERAGE NET ASSETS) AVERAGE NET ASSETS)*
- ------------ -------------- ---------------------- --------------------
<S> <C> <C> <C>
Intermediate Tax Free Fund $ 0.70% 0.47%
California Intermediate Tax $ 0.70% 0.29%
Free Fund
Colorado Intermediate Tax Free Fund $ 0.70% 0.49%
Minnesota Insured Intermediate
Tax Free Fund $ 0.70% 0.50%
Oregon Intermediate Tax Free Fund $ 0.70% 0.31%

</TABLE>

- ----------------
* Advisory fees paid during the fiscal year ended September 30, 1997.

The address of U.S. Bank is 601 Second Avenue South, Minneapolis,
Minnesota 55402. The names and principal occupations of the principal executive
officer and each director of U.S. Bank are set forth below. The address of all
individuals is that of U.S. Bank. The officers and directors of U.S. Bank had no
interest in the Holding Company Merger.

<PAGE>

NAME POSITIONS AND OFFICES WITH U.S. BANK OTHER POSITIONS AND OFFICES
- ---- ------------------------------------ ---------------------------
<S> <C> <C>
John F. Grundhofer Chairman, President and Chief Chairman, President and Chief
Executive Officer Executive Officer of U.S. Bancorp

Richard A. Zona Director and Vice Chairman--Finance Vice Chairman--Finance of U.S.
Bancorp

Philip G. Heasley Director and Vice Chairman Vice Chairman and Group Head of the
Retail Product Group of U.S. Bancorp

J. Robert Hoffman Director, Executive Vice President Executive Vice President and Chief
and Chief Credit Officer Credit Officer of U.S. Bancorp

Lee R. Mitau Director, Executive Vice President, Executive Vice President, Secretary and
General Counsel and Secretary General Counsel of U.S. Bancorp

Susan E. Lester Director, Executive Vice President Executive Vice President and Chief
and Chief Financial Officer Financial Officer of U.S. Bancorp

Robert D. Sznewajs Director and Vice Chairman Vice Chairman of U.S. Bancorp

Gary T. Duim Director and Vice Chairman Vice Chairman of U.S. Bancorp

</TABLE>

No officer or director of the Funds is an officer, employee,
director, general partner or shareholder of U.S. Bank or any of its affiliates
(other than of Piper Capital as described above under "Supplemental Information
About Piper Capital").

As investment adviser to the Funds, U.S. Bank will receive research
services from broker-dealers that execute portfolio transactions for the Funds.
In selecting brokers to execute portfolio transactions for the Funds, U.S. Bank
will seek to obtain the best price and execution of orders. When consistent with
these criteria, business may be placed with broker-dealers who furnish
investment research services to U.S. Bank. Such research services will be used
by U.S. Bank in carrying out its investment management responsibilities with
respect to its client accounts generally, but not necessarily in connection with
the Funds.

EXECUTIVE FUND OFFICERS

Information about each executive officer's position and term of
office with the Funds and business experience during the past five years is set
forth below. Unless otherwise indicated, all positions have been held more than
five years.

NAME AGE POSITION/TERM OF OFFICE/BUSINESS EXPERIENCE
- ---- --- -------------------------------------------

William H. Ellis 56 Chairman of the Boards of Directors. Retired in
September 1997; prior thereto, President of Piper
Jaffray Companies Inc., President Director and
Chairman of the Board of Piper Capital and Director
of Piper Jaffray Inc.

Paul A. Dow 47 President since 1996. Senior Vice President and Chief
Investment Officer of the Adviser.

Robert H. Nelson 34 Vice President since 1996 and Treasurer since 1995.
Senior Vice President of the Adviser since 1993.
Previously, Vice President of the Adviser from 1991
to 1993.

<PAGE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based on Fund records and other information, the Funds believe that
all SEC filing requirements applicable to their Directors and officers, Piper
Capital and companies affiliated with Piper Capital, pursuant to Section 16(a)
of the Securities Exchange Act of 1934, with respect to each Fund's fiscal year
end were satisfied, except _________________.

SHAREHOLDER PROPOSALS

Any proposal by a shareholder to be considered for presentation at
the next Annual Meeting must be received at the Funds' offices, Piper Jaffray
Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402, no later than
_______, 1999.

Kathleen L. Prudhomme
Dated: _________, 1998 Secretary

<PAGE>

Exhibit A

FORM OF INTERIM INVESTMENT
ADVISORY AND MANAGEMENT AGREEMENT

This AGREEMENT, made this _______day of _____________ 1998, by and
between [FUND], a Minnesota corporation (the "Fund") and [Piper Capital
Management Incorporated - for Interim Agreement] [U.S. Bank National Association
- - for New Agreement] (the "Adviser").

1. Investment Advisory and Management Services. The Fund hereby
engages the Adviser, and the Adviser hereby agrees to act as investment adviser
for, and to manage the affairs, business and the investment of the assets of the
Fund.

The investment of the assets of the Fund shall at all times be
subject to the applicable provisions of the Articles of Incorporation, Bylaws,
Registration Statement on Form N-2 and any representations contained in the
Prospectus of the Fund and shall conform to the policies and purposes of the
Fund as set forth in such Registration Statement and Prospectus and (i) as
interpreted from time to time by the Board of Directors of the Fund and (ii) as
may be amended from time to time by the Board of Directors and/or the
shareholders of the Fund as permitted by the Investment Company Act of 1940, as
amended (the "1940 Act"). Within the framework of the investment policies of the
Fund, the Adviser shall have the sole and exclusive responsibility for the
management of the Fund's assets and the making and execution of all investment
decisions for the Fund. The Adviser shall report to the Board of Directors of
the Fund regularly at such times and in such detail as the Board may from time
to time determine to be appropriate, in order to permit the Board to determine
the adherence of the Adviser to the investment policies of the Fund.

The Adviser shall, at its own expense, furnish the Fund suitable
office space, and all necessary office facilities, equipment and personnel for
servicing the investments of the Fund. The Adviser shall arrange, if requested
by the Fund, for officers, employees or other Affiliated Persons (as defined in
Section 2(a)(3) of the 1940 Act and the rules, regulations and releases relating
thereto) of the Adviser to serve without compensation from the Fund as
directors, officers or employees of the Fund if duly elected to such positions
by the shareholders or directors of the Fund.

The Adviser hereby acknowledges that all records necessary in the
operation of the Fund, including records pertaining to its shareholders and
investments, are the property of the Fund, and in the event that a transfer of
management or investment advisory services to someone other than the Adviser
should ever occur, the Adviser will promptly, and at its own cost, take all
steps necessary to segregate such records and deliver them to the Fund.

2. Compensation for Services. In payment for all services,
facilities, equipment and personnel, and for other costs of the Adviser
hereunder, the Fund shall pay to the Adviser a monthly investment advisory fee.
Such monthly fee shall be 1/12 of the per annum rate of [.25 of 1% for AXT, BXT,
CXT, MNA, MNB] [.35 of 1% for XAA, MXA] and shall be based upon the Fund's
average weekly net assets during each month, calculated as described below.

For purposes of the calculation of such fee, average weekly net
assets shall be determined on the basis of the Fund's average net assets for
each weekly period ending during the month. The net assets for each weekly
period are determined by averaging the net assets on the last day of such weekly
period with the net assets on the last day of the immediately preceding weekly
period. When the last day of a weekly period is not a business day for the Fund,
then the calculation will be based on the Fund's net assets on the immediately
preceding Fund business day. Such fee shall be payable on the fifth day of each
calendar month for services performed hereunder during the preceding month. If
this Agreement becomes effective after the beginning of a month or terminates
prior to the end of a month,

<PAGE>

such fee shall be prorated according to the proportion which such portion of the
month bears to the full month.

Pursuant to the terms of an order of exemption granted by the
Securities and Exchange Commission in PIPER FUNDS INC., ET AL., Investment
Company Act Rel. No. 23120 (April 21, 1998), all fees payable under this
Agreement shall be payable to an independent escrow agent to be maintained in an
interest-bearing escrow account until this Agreement is approved by shareholders
of the Fund in accordance with the provisions of Section 5 of this Agreement. If
shareholders of the Fund fail to approve this Agreement, the escrow agent will
pay to the Fund the applicable escrowed amounts (including interest earned). The
escrow agent will release the escrowed funds only upon receipt of a certificate
from officers of the Fund stating whether the escrowed funds are to be delivered
to the Adviser or the Fund. [This paragraph is to be included only in the
Interim Agreement.]

3. Allocation of Expenses. In addition to the fees described in
Section 2 hereof, the Fund shall pay all its expenses which are not assumed by
the Adviser in its capacity as the Fund's investment adviser or in its capacity
as the Fund's administrator. These Fund expenses include, by way of example, but
not by way of limitation, (i) brokerage and commission expenses; (ii) Federal,
state, local and foreign taxes, including issue and transfer taxes incurred by
or levied on the Fund; (iii) interest charges on borrowings; (iv) the Fund's
organizational and offering expenses, whether or not advanced by the Adviser;
(v) the cost of other personnel providing services to the Fund; (vi) fees and
expenses of registering the Fund's shares under the appropriate Federal
securities laws and qualifying the Fund's shares under applicable state
securities laws; (vii) fees and expenses of listing and maintaining the listing
of the Fund's shares on the principal securities exchanges where listed, or, if
the Fund's shares are not so listed, fees and expenses of listing and
maintaining the quotation of the Fund's shares on the principal over-the-counter
market where traded; (viii) expenses of printing and distributing reports to
shareholders; (ix) costs of shareholders' meetings and proxy solicitation; (x)
charges and expenses of the Fund's Administrator, custodian and registrar,
transfer agent and dividend disbursing agent; (xi) compensation of the Fund's
officers, directors and employees that are not Affiliated Persons or Interested
Persons (as defined in Section 2(a)(19) of the 1940 Act and the rules,
regulations and releases relating thereto) of the Adviser; (xii) legal and
auditing expenses; (xiii) cost of certificates representing common shares of the
Fund; (xiv) costs of stationery and supplies; (xv) insurance expenses; and (xvi)
association membership dues.

4. Freedom to Deal with Third Parties. The Adviser shall be free to
render services to others similar to those rendered under this Agreement or of a
different nature except as such services may conflict with the services to be
rendered or the duties to be assumed hereunder.

5. Effective Date, Duration and Termination of Agreement. The
effective date of this Agreement shall be the date first set forth above.
Wherever referred to in this Agreement, the vote or approval of the holders of a
majority of the outstanding shares of the Fund shall mean the vote of the lesser
of (i) 67% or more of the shares represented at a meeting at which more than 50%
of the outstanding shares of the Fund are present in person or by proxy or (ii)
more than 50% of the outstanding shares of the Fund.

Unless sooner terminated as hereinafter provided, this Agreement
shall continue in effect for a period of two years from the date of its
execution, and thereafter shall continue in effect only so long as such
continuance is specifically approved at least annually (a) by the Board of
Directors of the Fund or by a vote of the holders of a majority of the Fund's
outstanding shares, and (b) by the vote of a majority of the directors who are
not parties to this Agreement or Interested Persons of the Adviser or of the
Fund cast in person at a meeting called for the purpose of voting on such
approval.

This Agreement may be terminated at any time without the payment of
any penalty by the vote of the Board of Directors of the Fund or by the vote of
the holders of a majority of the outstanding shares of the Fund, or by the
Adviser, upon sixty (60) days written notice to the other party. Any such

<PAGE>

termination may be made effective with respect to both the investment advisory
and management services provided for in this Agreement or with respect to either
of such kinds of services. This Agreement shall automatically terminate in the
event of its assignment as defined in the 1940 Act and the rules thereunder.

6. Amendments to Agreement. No material amendment to this Agreement
shall be effective until approved by vote of the holders of a majority of the
outstanding shares of the Fund.

7. 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 Fund and the Adviser have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.

[FUND]

By
-------------------------------
Its
---------------------------

[PIPER CAPITAL MANAGEMENT
INCORPORATED - INTERIM AGREEMENT]
[U.S. BANK NATIONAL ASSOCIATION -
NEW AGREEMENT]

By
-------------------------------
Its
---------------------------

<PAGE>

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TIME:
MONDAY, AUGUST 10, 1998
AT 10:30 A.M.

PLACE:
Piper Jaffray Tower, Eleventh Floor
222 South Ninth Street
Minneapolis, Minnesota

IMPORTANT:
Please date and sign your
proxy card and return it promptly
using the enclosed reply envelope.

<PAGE>

[NAME OF FUND]
COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT

The undersigned appoints Paul A. Dow, Robert H. Nelson and Kathleen L.
Prudhomme, and each of them, with power to act without the other and with the
right of substitution in each, the proxies of the undersigned to vote all shares
of [INSERT NAME OF FUND] (the "Fund"), held by the undersigned at the annual
meeting of shareholders of the Fund to be held on August 10, 1998, and at any
adjournments thereof, with all the powers the undersigned would possess if
present in person. All previous proxies given with respect to the meeting are
revoked.

THE PROXIES ARE INSTRUCTED:

1. To vote: FOR _____ AGAINST _____ ABSTAIN _____ approval of an interim
investment advisory agreement between the Fund and Piper Capital Management
Incorporated ("Piper Capital") and the receipt of investment advisory fees by
Piper Capital under such agreement.

2. To vote: FOR _____ AGAINST _____ ABSTAIN _____ approval of a new investment
advisory agreement between the Fund and U.S. Bank National Association.

3. To vote:
____FOR all nominees listed below (except as marked to the contrary below)
____WITHHOLD AUTHORITY to vote for all nominees listed below

NOMINEES: Robert J. Dayton, Roger A. Gibson, Andrew M. Hunter III, Robert
L. Spies, Joseph D. Strauss amd Virginia L. Stringer. (Instruction: To withhold
authority to vote for any individual nominee, write that nominee's name on the
line provided below.)

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

4. To vote: FOR _____ AGAINST _____ ABSTAIN _____ ratification of the selection
of KPMG Peat Marwick LLP as independent public accountants for the Fund.

In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any adjournments or
postponements thereof.

THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE ABOVE MATTERS. IT IS
UNDERSTOOD THAT, IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ALL
ITEMS. UPON ALL OTHER MATTERS THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST
INTERESTS OF THE FUND. RECEIPT OF NOTICE OF MEETING AND PROXY STATEMENT IS
ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY. SIGN, DATE, AND RETURN IN THE
ADDRESSED ENVELOPE-NO POSTAGE REQUIRED. PLEASE MAIL PROMPTLY TO SAVE THE FUND
FURTHER SOLICITATION EXPENSE.

Dated:____________________________, 1998

________________________________________

________________________________________
IMPORTANT: Please date and sign this
Proxy. If the stock is held jointly,
signature should include both names.
Executors, administrators, trustees,
guardians, and others signing in a
representative capacity should give
their full title as such.

<PAGE>

[NAME OF FUND]
PREFERRED STOCK
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT

THE PROXIES ARE INSTRUCTED:

2. To vote: FOR _____ AGAINST _____ ABSTAIN _____ approval of a new investment
advisory agreement between the Fund and U.S. Bank National Association.

3. To vote:
____FOR all nominees listed below (except as marked to the contrary below)
____WITHHOLD AUTHORITY to vote for all nominees listed below

NOMINEES: David T. Bennett, Robert J. Dayton, Roger A. Gibson, Andrew M.
Hunter III, Leonard W. Kedrowski, Robert L. Spies, Joseph D. Strauss amd
Virginia L. Stringer. (Instruction: To withhold authority to vote for any
individual nominee, write that nominee's name on the line provided below.)

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

4. To vote: FOR _____ AGAINST _____ ABSTAIN _____ ratification of the selection
of KPMG Peat Marwick LLP as independent public accountants for the Fund.

In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any adjournments or
postponements thereof.

Dated:____________________________, 1998

________________________________________