AMERICAN MUNICIPAL TERM TRUST INC, DEF 14A, 1998-06-24

AMERICAN MUNICIPAL TERM TRUST INC
DEF 14A, 1998-06-24

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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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] 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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[ ] 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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<PAGE>

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 22, 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 March 31, 1998, U.S. Bank, acting through its
First American Asset Management group, managed more than $65 billion in assets,
including approximately $24 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.

<PAGE>

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 1-800-733-8481, ext. 487.

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 1-800-866-7778.

Very truly yours,

Paul A. Dow
President

<PAGE>

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 increase the number of members of the Board of Directors to
eight and 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 THE NUMBER INDICATED ON YOUR BALLOT OR CALL 1-800-733-8481, ext. 487 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
June 22, 1998 Secretary

<PAGE>

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 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 $1,500 for each
Fund. 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:

<TABLE>
<CAPTION>
AXT BXT CXT MNA MNB XAA MXA
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Common Shares 8,455,000 7,355,820 5,300,000 5,732,710 3,460,000 5,756,267 4,146,743
Preferred Shares 1,700 1,480 1,064 1,152 694 1,740 1,244

</TABLE>

<PAGE>

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 May 31, 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, 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.

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.

<PAGE>

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 March 31, 1998,
U.S. Bank, acting through its First American Asset Management group, managed
more than $65 billion in assets, including approximately $24 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. For each Fund, advisory fees are based on the Fund's
net assets, including assets attributable to any outstanding preferred stock.
Each Fund also paid administration fees to Piper Capital during its last fiscal
year equal, on an annual basis, to 0.15% of such Fund's average weekly net
assets. Such administration fees 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.

DATE OF NET ASSETS
ADVISORY RATE OF ADVISORY ADMINISTRATION OF FUND
AGREEMENT COMPENSATION* FEES PAID FEES PAID AT 3/31/98
------- ---- -------- -------- ------------
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
- --------------------
* As a percentage of average weekly net assets (computed by subtracting
liabilities, which exclude preferred stock, from total assets).

<PAGE>

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 and become effective,
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 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

<PAGE>

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.

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 an
indirect wholly-owned subsidiary of U.S. Bancorp, management of U.S. Bancorp
intends eventually to merge Piper Capital into

<PAGE>

U.S. Bank, a wholly owned subsidiary of U.S. Bancorp. 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 Agreements 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.

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

At the meeting, shareholders of each Fund will be asked to elect the
members of that Fund's Board of Directors. The Bylaws of each Fund provide that
the shareholders have the power to establish the number of Directors (subject to
the authority of the Board of Directors to increase or decrease the number as
permitted by law). The Directors recommend that the size of the Board of
Directors of each Fund be increased to eight.

<PAGE>

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.

PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
NAME AND AGE DURING PAST 5 YEARS
- ------------ --------------------------------------------
David T. Bennett, 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, 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, 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, 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, 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.

<PAGE>

PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
NAME AND AGE DURING PAST 5 YEARS
- ------------ --------------------------------------------
*Robert L. Spies, 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, 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, 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.
- ---------------
* 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 a nominating committee
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 four
meetings of the Board of Directors (five meetings with respect to MXA and XAA).
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

<PAGE>

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.

<TABLE>
<CAPTION>
BENNETT DYER EMMERICH GOLDBERG HUGHEY LATIMER
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
AXT $ 2,031 $ 1,906 $ 2,031 $ 1,969 $ 1,969 $ 1,906
BXT $ 2,031 $ 1,906 $ 2,031 $ 1,969 $ 1,969 $ 1,906
CXT $ 2,031 $ 1,906 $ 2,031 $ 1,969 $ 1,969 $ 1,906
MNA $ 2,031 $ 1,906 $ 2,031 $ 1,969 $ 1,492 $ 1,906
MNB $ 2,031 $ 1.906 $ 2,031 $ 1,969 $ 1,492 $ 1,906
XAA $ 2,031 $ 1,906 $ 2,031 $ 1,969 $ 1,969 $ 1,906
MXA $ 2,031 $ 1,906 $ 2,031 $ 1,969 $ 1,969 $ 1,906
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 Piper Capital, 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

<PAGE>

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.

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
NAME OF FUND MARCH 31, 1998 RATE OF COMPENSATION
- ------------ -------------- --------------------
National Tax-Exempt Fund $ 46,228,028 Annual rate of .50% on first $250
million; .45% on next $250 million;
and .40% on average daily net
assets over $500 million.
Minnesota Tax-Exempt Fund $ 129,289,061 Same as National Tax-Exempt Fund
above.

The names and principal occupations of the principal executive officer
and each director of Piper Capital are set forth below. The address of each
individual 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, President, Chief Investment
Officer and Chairman of the Board of Directors of
Piper Capital
Robert H. Nelson Director, Treasurer and Senior Vice President of
Piper Capital
Sandra K. Shrewsbury Director and Senior Vice President of Piper Capital

<PAGE>

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.

AFFILIATED BROKER COMMISSIONS. None of the Funds paid brokerage
commissions to Piper Jaffray Inc., an affiliate of Piper Capital, in connection
with purchases and sales of portfolio securities during each Fund's most recent
fiscal year.

SUPPLEMENTAL INFORMATION ABOUT U.S. BANK

U.S. Bank, a wholly owned subsidiary of U.S. Bancorp, currently acts as
the investment adviser to the 32 First American Funds. As of March 31, 1998,
U.S. Bank, acting through its First American Asset Management group, managed
more than $65 billion in assets, including approximately $24 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>
NET ASSETS AS OF CONTRACTUAL RATE ACTUAL ADVISORY
NAME OF FUND MARCH 31, 1998 OF COMPENSATION* FEE AFTER WAIVERS**
- ------------ ---------------- ---------------- -------------------
<S> <C> <C> <C>
Intermediate Tax Free Fund $ 458,962,833 .70% .47%
California Intermediate Tax $ 34,818,718 .70% .29%
Free Fund
Colorado Intermediate Tax Free Fund $ 59,367,233 .70% .49%
Minnesota Intermediate Tax Free Fund $ 315,684,517 .70% .50%
Oregon Intermediate Tax Free Fund $ 179,938,187 .70% .31%

</TABLE>
- --------------
* As a percentage of average daily net assets.
** Fees paid (as a percentage of average daily net assets) during the fiscal
year ended 9/30/97.

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.

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

</TABLE>

<PAGE>

NAME POSITIONS AND OFFICES WITH U.S. BANK OTHER POSITIONS AND OFFICES
- ---- ------------------------------------ ---------------------------
<S> <C> <C>
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. Chief Executive Officer,
President, Chief Investment Officer and Chairman of the
Board of Directors of Piper Capital.
Robert H. Nelson 34 Vice President since 1996 and Treasurer since 1995.
Senior Vice President of Piper Capital since 1993.
Previously, Vice President of Piper Capital from 1991 to
1993.

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 that William H. Ellis and Ronald R. Reuss (for XAA)
and Russell J. Kappenman, Gregory Hanson, Ronald R. Reuss, John G. Wenker and
Momchilo Vucenich (for MXA) each failed to timely file a Form 4. The required
Form was subsequently filed.

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 March 1,
1999.

Kathleen L. Prudhomme
Dated: June 22, 1998 Secretary

<PAGE>

Exhibit A

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

<PAGE>

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 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.

<PAGE>

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.

Book 1
Cusip Numbers:
027652-10-6 027652-20-5
027653-10-4 027653-20-3
027654-10-2 027654-20-1
604065-10-2 604065-20-1
604066-10-0 604066-20-9
027649-10-2 027649-20-1
604062-10-9 027649-300

<PAGE>

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

The undersigned appoints Paul A. Dow, Robert H. Nelson and Amy K.
Johnson, 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 and 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:

NOMINEES: David T. Bennett, Robert J. Dayton, Roger A. Gibson, Andrew
M. Hunter III, Leonard W. Kedrowski, Robert L. Spies, Joseph D. Strauss and
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

____________________________________________