<PAGE>
ANNUAL REPORT
[LOGO]
JUNE 30, 1995
PIPER
INSTITUTIONAL
FUNDS
MINNEAPOLIS
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402
612 342-6402
SEATTLE
1200 FIFTH AVENUE
SEATTLE,WA 98101
206 287-8862
DENVER
1050 17TH STREET
DENVER, CO 80265
303 820-5885
<PAGE>
TABLE OF CONTENTS
INSTITUTIONAL MONEY MARKET FUND
LETTER TO SHAREHOLDERS........... 1
FINANCIAL STATEMENTS AND NOTES... 5
INVESTMENTS IN SECURITIES........15
INDEPENDENT AUDITORS' REPORT.....17
FEDERAL TAX INFORMATION..........18
Institutional Money Market Fund seeks maximum current income consistent with
preservation of capital and maintenance of liquidity. To realize its objective,
the fund invests in securities that are issued or guaranteed as to payment of
principal and interest by the U.S. government, its agencies or
instrumentalities, and repurchase agreements backed by such securities. The U.S.
government securities held by the fund, not the fund shares, are guaranteed as
to payment of principal and interest. An investment in the fund is neither
insured nor guaranteed by the U.S. government. There can be no assurance the
fund will be able to maintain a stable net asset value of $1 per share.
INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
LETTER TO SHAREHOLDERS........... 3
FINANCIAL STATEMENTS AND NOTES... 5
INVESTMENTS IN SECURITIES........16
INDEPENDENT AUDITORS' REPORT.....17
FEDERAL TAX INFORMATION..........18
Institutional Government Adjustable Portfolio seeks high current income
consistent with low principal volatility. The fund invests primarily (at least
65% of its total assets under normal market conditions) in adjustable rate
mortgage-backed securities (ARMs) that are issued or guaranteed by the U.S.
government, its agencies or its instrumentalities. The fund also may invest in
privately issued ARMs, mortgage-backed securities other than ARMs, including
derivative mortgage-backed securities, other types of U.S. government
securities, Canadian government securities, structured securities including
foreign index linked securities and corporate debt securities. The fund may also
purchase securities through the sale-forward (dollar-roll) program. Use of this
investment technique and the fund's investment in certain types of securities
such as derivative mortgage-backed securities and foreign index linked
securities may cause the fund's net asset value (NAV) to fluctuate to a greater
extent than would be expected from interest rate movements alone. As with other
mutual funds, there can be no assurance the fund will achieve its objective.
Since the fund's inception on February 2, 1993, it has had a credit rating of
AAAf by Standard and Poor's Corporation (S&P).*
ENHANCED 500 FUND
FINANCIAL STATEMENTS AND NOTES... 6
INDEPENDENT AUDITORS' REPORT.....17
FEDERAL TAX INFORMATION..........18
Enhanced 500 Fund ceased operations on June 29, 1995. The fund's objective was
to achieve a total investment return (dividend income plus capital gain) greater
than the return of the aggregate U.S. stock market, as measured by the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index").
*THE FUND IS RATED AAAF, WHICH MEANS INVESTMENTS IN THE FUND HAVE AN OVERALL
CREDIT QUALITY OF AAA. CREDIT QUALITIES ARE ASSESSED BY STANDARD AND POOR'S
MUTUAL FUNDS RATINGS GROUP. S&P DOES NOT EVALUATE THE MARKET RISK OF AN
INVESTMENT WHEN ASSIGNING A CREDIT RATING. SEE STANDARD AND POOR'S CORPORATE AND
MUNICIPAL RATINGS DEFINITIONS FOR AN EXPLANATION OF AAA. THE FUND HAS ALSO BEEN
GIVEN A MARKET RISK RATING BY S&P, WHICH WE CANNOT PUBLISH DUE TO NASD
REGULATIONS. RISK RATINGS EVALUATE VARIOUS INVESTMENT RISKS THAT CAN AFFECT THE
PERFORMANCE OF A BOND FUND AND INDICATE THE FUND'S OVERALL STABILITY AND
SENSITIVITY TO CHANGING MARKET CONDITIONS. THESE RATINGS ARE AVAILABLE BY
CALLING S&P AT 1-800-424-FUND.
THIS REPORT IS INTENDED FOR SHAREHOLDERS OF INSTITUTIONAL MONEY MARKET FUND AND
INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO, BUT IT MAY ALSO BE USED AS SALES
LITERATURE IF PRECEDED OR ACCOMPANIED BY A PROSPECTUS. THE PROSPECTUS GIVES
DETAILS ABOUT THE CHARGES, INVESTMENT RESULTS AND OPERATING POLICIES OF THE
FUNDS.
<PAGE>
INSTITUTIONAL MONEY MARKET FUND
PORTFOLIO COMPOSITION
JUNE 30, 1995
[GRAPHIC]
August 15, 1995
Dear Shareholders:
IN RESPONSE TO ECONOMIC REPORTS INDICATING THE U.S. ECONOMY HAD STARTED TO SLOW,
THE FEDERAL RESERVE BOARD EASED CREDIT AT ITS JULY FEDERAL OPEN MARKET COMMITTEE
MEETING, LOWERING THE FEDERAL FUNDS RATE FROM 6.0% TO 5.75%. By the end of June,
it was apparent that the economy had slowed substantially since the beginning of
the year and inflation, although higher than a year ago, remained under control.
This rate cut came just six months after the Fed had raised the federal funds
rate by 0.25% to 6.0% in an effort to help slow the U.S. economic growth rate,
which was still well above the Fed's target of 2.5%.
OVER THE PAST SIX MONTHS, INSTITUTIONAL MONEY MARKET FUND'S SEVEN-DAY CURRENT
YIELD INCREASED TO 5.67% AS OF JUNE 30, 1995, UP FROM 5.59% ON DECEMBER 31,
1994. We anticipated the reduction in short-term interest rates and positioned
the fund to benefit from such a move. Due to the reports of a slowing economy,
we lengthened the average weighted maturity of the fund in the second quarter of
1995 by investing more heavily in longer-term (10- to 13-month) maturities. The
fund's average weighted maturity moved from 28 days at the end of March to 68
days at the end of June.
THE RECENTLY RELEASED JUNE ECONOMIC DATA HAS BEEN MIXED, WITH COMPELLING
ARGUMENTS FOR BOTH A STRONG ECONOMY AND A MODERATELY WEAK ECONOMY. Given the
uncertainty regarding the economy, we believe the Fed will not make any interest
rate changes for a few months until they see more economic data, although there
is a slight possibility the Fed may ease credit in September at its Federal Open
Market Committee meeting. We believe that later this year or early next year we
will see more strength in the economy with short-term interest rates
increasing.
NANCY S. OLSEN,
IS PRIMARILY RESPONSIBLE FOR THE MANAGEMENT OF INSTITUTIONAL MONEY MARKET FUND.
SHE HAS 18 YEARS OF FINANCIAL EXPERIENCE.
SHAISTA TAJAMAL,
ASSISTS WITH THE MANAGEMENT OF INSTITUTIONAL MONEY MARKET FUND. SHE HAS NINE
YEARS OF FINANCIAL EXPERIENCE.
*PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE RETURN OF AN INVESTMENT
WILL FLUCTUATE. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1 PER SHARE.
1
<PAGE>
INSTITUTIONAL MONEY MARKET FUND
GIVEN OUR INTEREST RATE OUTLOOK, WE HAVE CHANGED THE STRUCTURE OF THE PORTFOLIO,
MOVING FROM A "BARBELL" STRUCTURE TO A MORE "LADDERED" STRUCTURE. Our "barbell"
portfolio structure emphasized securities primarily with short-term (seven- to
30-day) maturities and, to a lesser extent, long-term (10- to 13-month)
maturities and de-emphasized securities with intermediate-range maturities. This
barbell structure benefitted the fund this year as the yield curve flattened
(when shorter-term maturities yielded as much as longer-term maturities). Our
new "laddered" portfolio structure invests in all maturities across the yield
curve. Based upon our belief that short-term interest rates will be generally
stable in the next few months with the yield curve steepening somewhat, the
"laddered" portfolio structure should provide the most competitive returns.
Given our new portfolio structure, the fund's average weighted maturity
shortened slightly to 59 days as of August 15, 1995.
DURING THE PAST SIX MONTHS, WE DECREASED THE FUND'S HOLDINGS OF FLOATING RATE
AGENCY SECURITIES, WHICH HAVE VARIABLE COUPON RATES THAT RESET PERIODICALLY. As
short-term interest rates increased during the first few months of 1995, these
securities aided the fund's performance as their coupons reset to the higher
rates. However, as economic reports began to indicate that the economy was
slowing, we began to reduce our position in these securities given the
likelihood that short-term rates would decrease. As of June 30, 12% of the
fund's total assets were invested in floating rate agency securities, and we
will add to this position if we see indications that the economy is starting to
rebound.
WITH SAFETY AS OUR PRIMARY CONSIDERATION IN MANAGING THE FUND, WE PROVIDE YOU
WITH A CONSERVATIVE ALTERNATIVE FOR YOUR SHORT-TERM CASH. As of the end of June,
all of the fund's investments were in repurchase agreements and securities
issued or guaranteed by the U.S. government or its agencies or
instrumentalities. We add value to the portfolio by active positioning on the
yield curve, security selection and, most importantly, by managing the average
weighted maturity of the fund based on our interest rate forecast. Additionally,
the fund's low expense ratio contributes to its competitive performance. If you
have any questions about your investment in Institutional Money Market Fund,
please contact your investment professional.
Sincerely,
/s/ Nancy S. Olsen
Nancy S. Olsen
Portfolio Manager
2
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INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
PORTFOLIO COMPOSITION
JUNE 30, 1995
[GRAPHIC]
August 15, 1995
Dear Shareholders:
REPORTS OF SLOWING U.S. ECONOMIC GROWTH WITH LOW TO MODERATE INFLATION HAVE
SPARKED A RALLY IN THE BOND MARKET THIS YEAR. The rally was given an additional
boost in early July when the Federal Reserve Board reduced
the federal funds rate from 6.0% to 5.75%. Institutional Government Adjustable
Portfolio performed favorably during this falling interest rate environment with
a 5.96% total return (from the beginning of 1995 through June 30, 1995).
THE FUND'S TOTAL RETURN FOR THE ONE-YEAR PERIOD ENDED JUNE 30, 1995, WAS 5.26%.*
(The fund's performance assumes distributions were reinvested but does not
reflect the fund's sales charge.) The fund's performance was well above the
Lipper Adjustable Rate Mortgage Funds Average return of 1.53%; however, the fund
underperformed the Lehman Brothers Adjustable Rate Mortgage Index return of
7.85% for the same period. The index's higher return is due to its inclusion of
securities that are more sensitive to interest rate movements than the fund's
holdings. Given our current portfolio structure, the fund should typically
underperform the Lehman index in a falling interest rate environment and
outperform the index in a rising interest rate environment.
THE ADJUSTABLE RATE MORTGAGE SECURITIES (ARMS) IN THE PORTFOLIO HAVE INCREASED
IN VALUE AS THEIR YIELDS HAVE CAUGHT UP TO PREVAILING MARKET RATES. Last year,
the sharp increases in short-term interest rates depressed the prices of ARMs
because the ARMs could not fully adjust to market rates due to the lag time
between their resets and, in some cases, their periodic caps. This year,
however, interest rates have come down and are closer to current ARM coupons.
OUR PORTFOLIO STRUCTURE HAS BECOME MORE DEFENSIVE OVER THE PAST SIX MONTHS.
We have not used borrowing (through reverse repurchase agreements) or the
sale-forward program in the fund since February. These strategies are used to
enhance the portfolio's income; however, currently they would not provide
sufficient income to offset the increase in volatility they create in the
fund's net asset value. In addition, our investment in U.S. agency ARMs, all
of which have a 2% annual reset cap, has increased as a percentage of net
assets. ARMs with 2% reset caps are better able to respond to changes in
market rates and generally experience less price fluctuation than ARMs with
lower caps.
WE HAVE MAINTAINED OUR 9% POSITION (OF THE FUND'S NET ASSETS) IN A CANADIAN
FIXED-RATE, MORTGAGE-BACKED SECURITY. This Canadian dollar-denominated security,
which is backed by an agency of the Canadian government, has experienced
currency losses due to the decline in the value of the Canadian dollar. Despite
the weakness in the Canadian dollar, this security is currently yielding
slightly more than a comparable U.S. Treasury security. Recently, the Canadian
dollar has strengthened somewhat, improving the value of this holding, and we
expect the value to remain stable over the next few months given our economic
outlook for Canada.
THOMAS S. MCGLINCH, CFA
IS PRIMARILY RESPONSIBLE FOR THE MANAGEMENT OF INSTITUTIONAL GOVERNMENT
ADJUSTABLE PORTFOLIO. HE HAS 14 YEARS OF FINANCIAL EXPERIENCE.
*PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE OF FUND SHARES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
3
<PAGE>
INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
[GRAPHIC]
IF YOU HAD INVESTED $100,000 IN INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO IN
FEBRUARY 1993 AND HELD THE FUND THROUGH JUNE 30, 1995, REINVESTING ALL
DISTRIBUTIONS, YOUR INVESTMENT WOULD BE WORTH $105,516. IN COMPARING THE FUND TO
THE INDEX AND THE LIPPER AVERAGE, KEEP IN MIND THAT THE FUND'S PERFORMANCE
REFLECTS THE MAXIMUM SALES CHARGE OF 1%, WHILE NO SUCH CHARGES ARE REFLECTED IN
THE INDEX OR AVERAGE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
AVERAGE ANNUAL TOTAL RETURNS+
(THROUGH 6/30/95; INCLUDES 1% SALES CHARGE)
One-Year...................... 4.21%
Since Inception (2/2/93)...... 2.26%
+DURING SOME PERIODS, PIPER CAPITAL MANAGEMENT WAIVED OR PAID CERTAIN FUND
EXPENSES WHICH MAY OR MAY NOT BE WAIVED IN THE FUTURE. OTHERWISE, THE AVERAGE
ANNUAL TOTAL RETURNS FOR THE ONE-YEAR AND SINCE INCEPTION PERIODS ENDED JUNE 30,
1995, WOULD HAVE BEEN 4.17% AND 2.22%, RESPECTIVELY.
SOME OF THE PAST MONTHS' DIVIDENDS WERE RECLASSIFIED AS A RETURN OF CAPITAL FOR
TAX PURPOSES. Due to the sale and maturity of some of the fund's
foreign-denominated securities within the past year, we recognized foreign
currency losses. Tax regulations require that certain foreign currency losses be
treated as ordinary losses and be offset against net investment income when
determining taxable ordinary income. As a result, some of the interest income
the fund distributed to investors was classified as a return of capital. A
return of capital means that the distribution is not reported as taxable income
but can be used to reduce the investor's cost basis in the fund. It will,
therefore, affect the capital gain or loss calculation upon the investor's sale
of the fund's shares. Your tax adviser can provide more information about how
this will affect you in your tax reporting. If we were to sell our remaining
Canadian dollar-denominated security, and subsequently recognize a foreign
exchange loss, some future dividend payments would also be reclassified as a
return of capital.
FOR THE REMAINDER OF 1995, WE ANTICIPATE THAT BOTH SHORT- AND LONG-TERM INTEREST
RATES WILL BE GENERALLY STABLE. We believe the fund is well positioned for the
coming months since the ARMs in the portfolio are already at prevailing market
rates and will be better able to respond to any interest rate changes. If you
have any questions about your investment in Institutional Government Adjustable
Portfolio, please contact your investment professional.
Sincerely,
/s/ Tom McGlinch
Tom McGlinch
Portfolio Manager
4
<PAGE>
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FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1995**
<TABLE>
<CAPTION>
Institutional Institutional
Money Government
Market Adjustable
Fund Portfolio
------------- -------------
<S> <C> <C>
ASSETS:
Investments in securities at market value*
(including repurchase agreements of $15,215,000 and $359,000,
respectively) (note 2) ......................................... $ 52,445,582 14,927,181
Cash in bank on demand deposit ..................................... 101,326 25,053
Organizational costs (note 6) ...................................... 41,371 23,292
Accrued interest receivable ........................................ 109,558 167,516
------------- -------------
Total assets ................................................... 52,697,837 15,143,042
------------- -------------
LIABILITIES:
Dividends payable to shareholders ($0.0038 and $0.0417 per share,
respectively) .................................................... 197,733 67,035
Payable for fund shares redeemed ................................... -- 100,000
Accrued investment management fee .................................. 5,317 3,758
Other accrued expenses ............................................. 5,925 2,476
------------- -------------
Total liabilities .............................................. 208,975 173,269
------------- -------------
Net assets applicable to outstanding capital stock ................. $ 52,488,862 14,969,773
------------- -------------
------------- -------------
REPRESENTED BY:
Capital stock - authorized 100 billion shares of $0.01 par value for
Institutional Money Market Fund and 10 billion shares of $0.01 par
value for Institutional Government Adjustable Portfolio;
outstanding, 52,488,862 and 1,585,696 shares, respectively (note
1) ............................................................. $ 524,889 15,857
Additional paid-in capital (notes 1 and 2) ......................... 51,963,973 18,609,599
Distributions in excess of net investment income (note 2) .......... -- (198,326)
Accumulated net realized loss on investments (notes 2 and 7) ....... -- (3,291,023)
Unrealized depreciation of investments ............................. -- (166,334)
------------- -------------
Total - representing net assets applicable to outstanding
capital stock ............................................... $ 52,488,862 14,969,773
------------- -------------
------------- -------------
Net asset value per share of outstanding capital stock ............. $ 1.00 9.44
------------- -------------
------------- -------------
* Investments in securities at identified cost ..................... $ 52,445,582 15,093,515
------------- -------------
------------- -------------
** ENHANCED 500 FUND WAS LIQUIDATED ON JUNE 29, 1995.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
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FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995*
<TABLE>
<CAPTION>
Institutional Institutional
Money Government Enhanced
Market Adjustable 500
Fund Portfolio Fund
------------- ------------- -------------
<S> <C> <C> <C>
INCOME:
Dividends (net of foreign withholding taxes of $1,514 for
Enhanced 500 Fund) ................................... $ -- -- 345,737
Interest (net of interest expense of $100,182 for
Institutional Government Adjustable Portfolio) ......... 1,883,849 1,357,128 24,380
Fee income (note 2) ...................................... -- 67,119 --
------------- ------------- -------------
Total investment income .............................. 1,883,849 1,424,247 370,117
------------- ------------- -------------
EXPENSES (NOTE 5):
Investment management fee ................................ 51,262 70,330 67,550
Custodian, accounting and transfer agent fees ............ 52,028 42,678 32,134
Registration fees ........................................ 19,847 19,773 19,484
Reports to shareholders .................................. 751 614 5,322
Amortization of organization costs ....................... 14,166 7,975 6,903
Directors' fees .......................................... 2,988 2,919 2,610
Audit and legal fees ..................................... 18,552 21,675 16,696
Other expenses ........................................... 8,441 8,641 5,471
------------- ------------- -------------
Total expenses ....................................... 168,035 174,605 156,170
Less expenses waived or absorbed by the adviser ...... (48,438) (45,667) (88,105)
------------- ------------- -------------
Total net expenses ................................... 119,597 128,938 68,065
------------- ------------- -------------
Net investment income ................................ 1,764,252 1,295,309 302,052
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain (loss) on investments (note 3) ......... -- (2,287,699) 1,898,638
Net realized gain on closed futures contracts ............ -- 78,612 45,106
------------- ------------- -------------
Net realized gain (loss) on investments ................ -- (2,209,087) 1,943,744
Net change in unrealized appreciation or depreciation of
investments ............................................ -- 1,791,630 129,975
------------- ------------- -------------
Net gain (loss) on investments ......................... -- (417,457) 2,073,719
------------- ------------- -------------
Net increase in net assets resulting from
operations ........................................ $ 1,764,252 877,852 2,375,771
------------- ------------- -------------
------------- ------------- -------------
* ENHANCED 500 FUND WAS LIQUIDATED ON JUNE 29, 1995.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
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FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
Institutional
Government
Adjustable
Portfolio
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and fee income ................................ $ 1,424,247
Net expenses ............................................. (128,938)
-------------
Net investment income ................................ 1,295,309
-------------
Adjustments to reconcile net investment income to net cash
provided by operating activities:
Change in accrued interest receivable .................. 829,339
Discount and premium amortization - net ................ 6,607
Change in accrued fees and expenses .................... (19,063)
-------------
Total adjustments .................................... 816,883
-------------
Net cash provided by operating activities ............ 2,112,192
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ....................... 40,748,859
Purchases of investments ................................. (15,834,301)
Net sales of short-term securities ....................... 2,708,000
Net margin deposit receipts for futures contracts ........ 13,768
-------------
Net cash provided by investing activities ............ 27,636,326
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net redemption of fund shares ............................ (19,467,974)
Net payments for reverse repurchase agreements ........... (8,940,000)
Distributions paid to shareholders ....................... (1,340,956)
-------------
Net cash used by financing activities ................ (29,748,930)
-------------
Net decrease in cash ..................................... (412)
Cash at beginning of year ................................ 25,465
-------------
Cash at end of year ................................ $ 25,053
-------------
-------------
Supplemental disclosure of cash flow information:
Cash paid for interest on reverse repurchase
agreements ........................................... $ 117,665
-------------
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
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FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Institutional Money Institutional Government
Market Fund Adjustable Portfolio Enhanced 500 Fund
---------------------------- ---------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended Period Ended Year Ended
6/30/95 6/30/94 6/30/95 6/30/94 6/29/95* 6/30/94
------------- ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income ......... $ 1,764,252 957,426 1,295,309 2,829,171 302,052 389,833
Net realized gain (loss) on
investments ................... -- -- (2,209,087) (1,490,316) 1,943,744 (184,211)
Net change in unrealized
appreciation or depreciation of
investments ................... -- -- 1,791,630 (1,839,944) 129,975 (365,575)
------------- ------------- ------------ ------------- ------------- -------------
Net increase (decrease) in net
assets resulting from
operations .................. 1,764,252 957,426 877,852 (501,089) 2,375,771 (159,953)
------------- ------------- ------------ ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ...... (1,764,252) (957,426) (1,105,594) (2,732,979) (360,053) (413,468)
Tax return of capital ........... -- -- (148,061) -- -- --
------------- ------------- ------------ ------------- ------------- -------------
Total distributions ........... (1,764,252) (957,426) (1,253,655) (2,732,979) (360,053) (413,468)
------------- ------------- ------------ ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE
4):
Proceeds from sales ............. 168,842,836 106,945,014 875,301 71,703,075 2,531,987 2,360,299
Shares issued for reinvestment of
distributions ................. 1,434,995 947,427 983,642 2,384,204 359,882 412,701
Payments for shares redeemed
(note 1) ...................... (152,763,914) (113,167,702) (21,423,001) (77,252,367) (23,035,630) (696,716)
------------- ------------- ------------ ------------- ------------- -------------
Increase (decrease) in net
assets from capital share
transactions ................ 17,513,917 (5,275,261) (19,564,058) (3,165,088) (20,143,761) 2,076,284
------------- ------------- ------------ ------------- ------------- -------------
Total increase (decrease) in
net assets ................ 17,513,917 (5,275,261) (19,939,861) (6,399,156) (18,128,043) 1,502,863
Net assets at beginning of
period .......................... 34,974,945 40,250,206 34,909,634 41,308,790 18,128,043 16,625,180
------------- ------------- ------------ ------------- ------------- -------------
Net assets at end of period (note
1) ............................ $ 52,488,862 34,974,945 14,969,773 34,909,634 -- 18,128,043
------------- ------------- ------------ ------------- ------------- -------------
------------- ------------- ------------ ------------- ------------- -------------
Undistributed (distributions in
excess of) net investment
income ........................ $ -- -- (198,326) (24,754) -- 64,252
------------- ------------- ------------ ------------- ------------- -------------
------------- ------------- ------------ ------------- ------------- -------------
* ENHANCED 500 FUND WAS LIQUIDATED ON JUNE 29,
1995.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Piper Institutional Funds Inc. (the company)
was incorporated on September 24, 1992, and is
registered under the Investment Company Act of
1940 (as amended) as a diversified open-end
management investment company and currently
includes a series of two individual
diversified funds including Institutional
Money Market Fund and Institutional Government
Adjustable Portfolio (the funds). Enhanced 500
Fund ceased operations and liquidated all its
net assets on June 29, 1995. The company's
articles of incorporation permit the board of
directors to create additional funds in the
future.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
INVESTMENTS IN SECURITIES
For Institutional Money Market Fund, pursuant
to Rule 2a-7 of the Investment Company Act of
1940 (as amended), securities are valued at
amortized cost, which approximates market
value, in order to maintain a constant net
asset value of $1 per share.
For Institutional Government Adjustable
Portfolio and Enhanced 500 Fund, investments
in securities traded on a national securities
exchange or on the NASDAQ National Market
System are valued at the last sales price
prior to the time when assets are valued;
securities traded in the over-the-counter
market, listed securities for which no sale
was reported on that date and open short
positions are valued at the mean of the bid
and asked prices. Exchange-listed options are
valued at the last sales price and open
financial futures contracts are valued at the
last settlement price. When market quotations
are not readily available, securities are
valued at fair value according to methods
selected in good faith by the board of
directors. Such fair values are determined
using pricing services or prices quoted by
independent brokers. Short-term securities
with maturities of 60 days or less are valued
at amortized cost which approximates market
value.
Securities transactions are accounted for on
the date the securities are purchased or sold.
Realized gains and losses are calculated on
the identified cost basis. Dividend income is
recognized on the ex-dividend date and
interest income, including amortization of
bond discount and premium computed on a level
yield basis, is accrued daily.
OPTION TRANSACTIONS
For hedging purposes, the funds (with the
exception of Institutional Money Market Fund)
may buy and sell put and call options, write
covered call options on portfolio securities,
write cash-secured puts and write call options
that are not covered for cross-hedging
purposes. The risk in writing a call option is
that the funds give up the opportunity for
profit if the market price of the security
increases. The risk in writing a put option is
that the funds may incur a loss if the market
price of the security decreases and the option
is exercised. The risk in buying an option is
the funds pay a premium whether or not the
option is exercised. The funds also have the
additional risk of not being able to enter
into a closing transaction if a liquid
secondary market does not exist. The funds
also may write over-the-counter options where
the completion of the obligation is dependent
upon the credit standing of the other party.
Option contracts are valued daily and
unrealized appreciation or depreciation is
recorded. The funds will realize a gain or
loss upon expiration or closing of the option
transaction. When an option is exercised, the
proceeds on the sale of a written call option,
the purchase cost for a written put option, or
the cost of a security for purchased put and
call options is adjusted by the amount of
premium received or paid.
9
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
FUTURES TRANSACTIONS
In order to gain exposure to or protect
against changes in the market, the funds (with
the exception of Institutional Money Market
Fund) may buy and sell financial futures
contracts and related options. Risks of
entering into futures contracts and related
options include the possibility there may be
an illiquid market and that a change in the
value of the contract or option may not
correlate with changes in the value of the
underlying securities.
Upon entering into a futures contract, the
funds are required to deposit either cash or
securities in an amount (initial margin) equal
to a certain percentage of the contract value.
Subsequent payments (variation margin) are
made or received by the funds each day. The
variation margin payments are equal to the
daily changes in the contract value and are
recorded as unrealized gains and losses. The
funds recognize a realized gain or loss when
the contracts are closed or expire.
INTEREST RATE TRANSACTIONS
Institutional Government Adjustable Portfolio,
to preserve a return or spread on a particular
investment or portion of its portfolio or for
other non-speculative purposes, may enter into
various hedging transactions such as interest
rate swaps and the purchase or sale of
interest rate caps and floors. Interest rate
swaps involve the exchange of commitments to
pay or receive interest, e.g., an exchange of
floating-rate payments for fixed rate
payments. The purchase of an interest rate cap
entitles the purchaser, to the extent that a
specified index exceeds a predetermined
interest rate, to receive payments of interest
on a contractually based notional principal
amount from the party selling the interest
rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent
that a specified index falls below a
predetermined interest rate, to receive
payments of interest on a contractually based
notional principal amount from the party
selling the interest rate floor.
If forecasts of interest rates and other
market factors are incorrect, investment
performance will diminish compared to what
performance would have been if these
investment techniques were not used. Even if
the forecasts are correct, there is risk that
the positions may correlate imperfectly with
the asset or liability being hedged. Other
risks of entering into these transactions are
that a liquid secondary market may not always
exist, or that the other party to the
transaction may not perform.
For interest rate swaps, caps and floors, the
fund accrues weekly, as an increase or
decrease to interest income, the current net
amount due to or owed by the fund. Interest
rate swaps, caps and floors are valued from
prices quoted by independent brokers. These
valuations represent the present value of all
future cash settlement amounts based upon
implied forward interest rates.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have
been purchased by Institutional Government
Adjustable Portfolio on a forward-commitment
or when-issued basis can take place a month or
more after the transaction date. During this
period, such securities do not earn interest,
are subject to market fluctuation and may
increase or decrease in value prior to their
delivery. The fund maintains, in a segregated
account with its custodian, assets with a
market value equal to the amount of its
purchase commitments. The purchase of
securities on a when-issued or
forward-commitment basis may increase the
volatility of the fund's NAV to the extent the
fund makes such purchases while remaining
substantially fully invested. As of June 30,
1995, Institutional Government Adjustable
Portfolio had no outstanding when-issued or
forward commitments.
10
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
In connection with its ability to purchase
securities on a when-issued or forward-
commitment basis, Institutional Government
Adjustable Portfolio may enter into mortgage
"dollar rolls" in which the fund sells
securities for delivery in the current month
and simultaneously contracts with the same
counterparty to repurchase similar (same type,
coupon and maturity) but not identical
securities on a specified future date. As an
inducement to "roll over" its purchase
commitments, the fund receives negotiated
fees. For the year ended June 30, 1995, such
fees earned by the fund amounted to $67,119.
FEDERAL TAXES
Each fund within the company is treated as a
separate entity for federal income tax
purposes. The funds intend to comply with the
requirements of the Internal Revenue Code
applicable to regulated investment companies
and not be subject to federal income tax.
Therefore, no income tax provision is
required. On a calendar-year basis each fund
intends to distribute substantially all of its
taxable income and realized gains, if any, and
the funds will therefore not be subject to
federal excise taxes.
Net investment income and net realized gains
(losses) may differ for financial statement
and tax purposes primarily because of the
recognition of certain foreign currency gains
(losses) as ordinary income for tax purposes,
losses deferred due to "wash sale"
transactions and the timing of recognition of
income on certain interest-only and
principal-only securities. The character of
distributions made during the year from net
investment income or net realized gains may
therefore differ from their ultimate
characterization for federal income tax
purposes. In addition, due to the timing of
dividend distributions, the fiscal year in
which amounts are distributed may differ from
the year that the income or realized gains
(losses) were recorded by the fund.
Enhanced 500 Fund will elect to utilize
equalization debits, by which a portion of the
costs of redemptions which occurred during the
period ended June 29, 1995, will reduce
undistributed net investment income and
accumulated net realized gains for tax
purposes. On the Statements of Assets and
Liabilities, as a result of permanent
book-to-tax differences, reclassification
adjustments have been made as follows:
<TABLE>
<CAPTION>
Institutional Enhanced
Gov't ARM 500
----------- ----------
<S> <C> <C>
Increase distributions in excess of net investment
income ................................................ $ 215,226 6,251
Increase (decrease) accumulated net realized loss on
investments ............................................. (366,740) 1,549,305
----------- ----------
Increase (Decrease) additional paid in capital ......... $ (151,514) 1,555,556
----------- ----------
----------- ----------
</TABLE>
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net
investment income for Institutional Money
Market Fund and Institutional Government
Adjustable Portfolio are declared daily and
payable monthly in cash or reinvested in
additional shares. For Enhanced 500 Fund,
dividends from net investment income are
declared and paid on a quarterly basis.
Distributions from net realized gains, if any,
will be made on an annual basis for all funds.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with
certain broker-dealers, the funds, along with
other affiliated registered investment
companies, may transfer uninvested cash
balances into an individual, joint or
tri-party trading account, the daily aggregate
of which is invested in repurchase agreements
secured by U.S. government and agency
obligations. Securities pledged as collateral
for all individual and joint repurchase
11
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
agreements are held by the funds' custodian
bank until maturity of the repurchase
agreement. Securities pledged as collateral
for all tri-party repurchase agreements are
held by a third party custodian until maturity
of the repurchase agreement. Procedures for
all agreements ensure that the daily market
value of the collateral is in excess of the
repurchase amount in the event of default.
(3) INVESTMENT
SECURITY
TRANSACTIONS
Purchases of securities and proceeds from
sales, other than temporary investments in
short-term securities (for Institutional
Government Adjustable Portfolio and Enhanced
500 Fund), for the year ended June 30, 1995
(period ended June 29, 1995 for Enhanced 500
Fund) were as follows:
<TABLE>
<CAPTION>
Sales
Purchases Proceeds
------------- -------------
<S> <C> <C>
Institutional Money Market Fund ................... $ 1,597,269,865 1,579,767,264
Institutional Government Adjustable Portfolio ..... $ 10,916,756 40,748,859
Enhanced 500 Fund ................................. $ 6,849,750 26,304,175
</TABLE>
During the year ended June 30, 1995,
Institutional Government Adjustable Portfolio
paid Piper Jaffray Inc., an affiliated broker,
brokerage commissions of $2,550.
(4) CAPITAL SHARE
TRANSACTIONS
Transactions in shares of each fund for the
years ended June 30, 1995 (period ended June
29, 1995 for Enhanced 500 Fund) and June 30,
1994, were as follows:
<TABLE>
<CAPTION>
Institutional
Institutional Government
Money Market Adjustable Enhanced 500
1995 Fund Portfolio Fund
-------------- ----------- -------------
<S> <C> <C> <C>
Sold .................................. 168,842,836 95,422 247,207
Issued for reinvested distributions ... 1,434,995 104,898 34,818
Redeemed .............................. (152,763,914) (2,304,441) (2,128,713)
-------------- ----------- -------------
Increase (decrease) ................. 17,513,917 (2,104,121) (1,846,688)
-------------- ----------- -------------
-------------- ----------- -------------
<CAPTION>
1994
<S> <C> <C> <C>
Sold .................................. 106,945,014 7,161,793 225,572
Issued for reinvested distributions ... 947,427 239,012 40,200
Redeemed .............................. (113,167,702) (7,825,403) (67,969)
-------------- ----------- -------------
Increase (decrease) ................. (5,275,261) (424,598) 197,803
-------------- ----------- -------------
-------------- ----------- -------------
</TABLE>
(5) FEES AND EXPENSES
The funds have entered into an investment
advisory and management agreement with Piper
Capital Management (Piper Capital) under which
Piper Capital manages each fund's assets and
furnishes related office facilities,
equipment, research and personnel. The
agreement requires each fund to pay Piper
Capital a monthly fee based on average daily
net assets. The fees for Institutional Money
Market Fund are equal to an annual rate of
0.15%. The fees for Institutional Government
Adjustable Portfolio are equal to 0.30%. The
fees for Enhanced 500 Fund were equal to
0.50%.
In addition to the investment advisory and
management fees, each fund is responsible for
paying most other operating expenses including
outside directors' fees and expenses,
custodian fees, registration fees, printing
and shareholder reports, transfer agent fees
and expenses, legal, auditing and accounting
services, organization costs, insurance,
interest, taxes and other miscellaneous
expenses. For the year ended June 30, 1995,
Piper Capital voluntarily limited total fees
and expenses, excluding interest and tax
expense, to not more than 0.35%, 0.55% and
0.50% of average daily net assets on an annual
basis for Institutional Money Market Fund,
Institutional Government Adjustable Portfolio
and Enhanced 500 Fund, respectively.
12
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(6) ORGANIZATION COSTS
Organization costs were incurred in connection
with the start up and initial registration of
the funds. These costs are being amortized
over 60 months on a straight-line basis. If
any or all of the shares representing initial
capital of each fund are redeemed by any
holder thereof prior to the end of the
amortization period, the proceeds will be
reduced by the unamortized organization cost
balance in the same proportion as the number
of shares redeemed bears to the number of
initial shares outstanding immediately
preceding the redemption.
(7) CAPITAL LOSS
CARRYOVER
For federal income tax purposes, Institutional
Government Adjustable Portfolio had capital
loss carryovers in the amount of $3,291,023 at
June 30, 1995, which, if not offset by
subsequent capital gains, will expire in
2002-2004. It is unlikely the board of
directors will authorize a distribution of any
net realized capital gains until the available
capital loss carryovers have been offset or
expired.
(8) FINANCIAL
HIGHLIGHTS
Per-share data for a share of capital stock
outstanding throughout each period and
selected information for each period are as
follows:
INSTITUTIONAL MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Period from
Ended Year Ended 2/2/93* to
6/30/95 6/30/94 6/30/93
------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period ...................................... $ 1.00 1.00 1.00
----- ----- -----
Operations:
Net investment income ..................................................... 0.05 0.03 0.01
----- ----- -----
Total from operations ................................................... 0.05 0.03 0.01
----- ----- -----
Distributions from net investment income .................................... (0.05) (0.03) (0.01)
----- ----- -----
Net asset value, end of period ............................................ $ 1.00 1.00 1.00
----- ----- -----
----- ----- -----
Total return+ ............................................................... 5.26% 3.23% 1.24%
Net assets, end of period (in millions) ................................... $ 52 35 40
Ratio of expenses to average daily net assets++ ............................. 0.35% 0.35% 0.35%**
Ratio of net investment income to average daily net assets++ ................ 5.17% 3.26% 3.02%**
<FN>
* COMMENCEMENT OF OPERATIONS.
** ADJUSTED TO AN ANNUAL BASIS.
+ TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT A SALES
CHARGE.
++ VARIOUS INSTITUTIONAL MONEY MARKET FUND FEES AND EXPENSES WERE VOLUNTARILY
WAIVED OR ABSORBED BY PIPER CAPITAL DURING THE PERIODS REFERRED TO ABOVE.
HAD INSTITUTIONAL MONEY MARKET FUND PAID ALL EXPENSES, THE RATIOS OF
EXPENSES AND NET INVESTMENT INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE
BEEN AS FOLLOWS: 0.49%/5.03% AND 0.61%/3.00% IN FISCAL YEARS 1995 AND
1994, RESPECTIVELY.
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(8) FINANCIAL
HIGHLIGHTS
(CONTINUED)
<TABLE>
<CAPTION>
INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
Year Year Period from
Ended Ended 2/2/93* to
6/30/95 6/30/94 6/30/93
------- ------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period ......................................... $ 9.46 10.04 10.00
------- ------- ------
Operations:
Net investment income ........................................................ 0.52 0.49 0.18
Net realized and unrealized gains (losses) on investments .................... (0.04) (0.57) 0.04
------- ------- ------
Total from operations ...................................................... 0.48 (0.08) 0.22
------- ------- ------
Distributions to shareholders:
From net investment income ................................................... (0.41) (0.50) (0.18)
Tax return of capital ........................................................ (0.09) -- --
------- ------- ------
Total distributions ........................................................ (0.50) (0.50) (0.18)
------- ------- ------
Net asset value, end of period ............................................... $ 9.44 9.46 10.04
------- ------- ------
------- ------- ------
Total return+ .................................................................. 5.26% (0.91%) 2.18%
Net assets, end of period (in millions) ...................................... $ 15 35 41
Ratio of expenses to average daily net assets++ ................................ 0.55% 0.55% 0.74%**
Ratio of net investment income to average daily net assets++ ................... 5.54% 5.13% 4.73%**
Portfolio turnover rate (excluding short-term securities) ...................... 43% 110% 26%
<FN>
* COMMENCEMENT OF OPERATIONS.
** ADJUSTED TO AN ANNUAL BASIS.
+ TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
++ VARIOUS INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO FEES AND EXPENSES
WERE VOLUNTARILY WAIVED OR ABSORBED BY PIPER CAPITAL DURING THE PERIODS
REFERRED TO ABOVE. HAD INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO PAID
ALL EXPENSES, THE RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE
DAILY NET ASSETS WOULD HAVE BEEN AS FOLLOWS: 0.75%/5.34% AND 0.60%/5.08%
IN FISCAL YEARS 1995 AND 1994, RESPECTIVELY.
</TABLE>
ENHANCED 500 FUND
<TABLE>
<CAPTION>
Period Year Period from
Ended Ended 2/2/93* to
6/29/95 6/30/94 6/30/93
------- ------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period ......................................... $ 9.82 10.08 10.00
------- ------- ------
Operations:
Net investment income ........................................................ 0.48 0.26 0.09
Net realized and unrealized gains (losses) on investments .................... 1.84 (0.29) 0.03
------- ------- ------
Total from operations ...................................................... 2.32 (0.03) 0.12
------- ------- ------
Distributions from net investment income ....................................... (0.51) (0.23) (0.04)
Payments upon liquidation of the fund .......................................... (11.63) -- --
------- ------- ------
Net asset value, end of period ............................................... $ -- 9.82 10.08
------- ------- ------
------- ------- ------
Total return+ .................................................................. 24.23% (0.38%) 1.20%
Net assets, end of period (in millions) ...................................... $ -- 18 17
Ratio of expenses to average daily net assets++ ................................ 0.49% 0.50% 0.50%**
Ratio of net investment income to average daily net assets++ ................... 2.20% 2.11% 2.49%**
Portfolio turnover rate (excluding short-term securities) ...................... 58% 83% 20%
<FN>
* COMMENCEMENT OF OPERATIONS.
** ADJUSTED TO AN ANNUAL BASIS.
+ TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
++ VARIOUS ENHANCED 500 FUND FEES AND EXPENSES WERE VOLUNTARILY WAIVED OR
ABSORBED BY PIPER CAPITAL DURING THE PERIODS REFERRED TO ABOVE. HAD
ENHANCED 500 FUND PAID ALL EXPENSES, THE RATIOS OF EXPENSES AND NET
INVESTMENT INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN AS FOLLOWS:
1.14%/1.55%, 1.10%/1.51% AND 0.90%/2.09% IN FISCAL YEARS 1995, 1994 AND
1993, RESPECTIVELY.
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
INSTITUTIONAL MONEY MARKET FUND
JUNE 30, 1995
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT AND AGENCY SECURITIES (68.4%):
FEDERAL FARM CREDIT BANK DISCOUNT NOTES (5.5%):
5.82%, 8/28/95 ...................................... $ 450,000 445,781
5.90%, 7/11/95 ........................................ 1,550,000 1,547,460
5.95%, 7/13/95 ........................................ 900,000 898,214
----------
2,891,455
----------
FEDERAL FARM CREDIT COUPON NOTES (1.9%):
6.67%, 7/5/95 ......................................... 1,000,000 1,000,052
----------
STUDENT LOAN MARKETING ASSOCIATION FLOATING RATE NOTES
(B) (9.0%):
5.72%, 12/20/96 ....................................... 2,000,000 2,000,000
6.13%, 6/30/97 ........................................ 1,000,000 999,167
6.08%, 7/1/96 ......................................... 1,700,000 1,700,186
----------
4,699,353
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION COUPON NOTES
(2.8%):
6.60%, 4/29/96 ........................................ 1,500,000 1,500,000
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES
(24.4%):
5.49%, 1/29/96 ........................................ 1,000,000 967,670
5.50%, 2/1/96 ......................................... 1,000,000 967,153
5.76%, 9/12/95 ........................................ 2,000,000 1,976,640
5.81%, 8/29/95 ........................................ 3,995,000 3,957,287
5.83%, 9/25/95 ........................................ 2,000,000 1,972,146
5.86%, 9/7/95 ......................................... 1,000,000 988,931
5.88%, 11/13/95 ....................................... 1,000,000 977,950
5.90%, 10/13/95 ....................................... 1,000,000 982,955
----------
12,790,732
----------
FEDERAL HOME LOAN BANK DISCOUNT NOTES (11.2%):
5.74%, 9/28/95 ........................................ 380,000 374,608
6.02%, 7/3/95 ......................................... 5,000,000 4,998,329
6.13%, 8/15/95 ........................................ 500,000 496,169
----------
5,869,104
----------
FEDERAL FARM CREDIT FLOATING RATE NOTES (B) (3.8%):
6.08%, 5/24/96 ........................................ 2,000,000 1,998,768
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION DISCOUNT NOTES
(9.8%):
5.73%, 8/28/95 ........................................ 1,025,000 1,015,538
5.85%, 8/2/95 ......................................... 1,425,000 1,417,590
5.95%, 7/17/95 ........................................ 675,000 673,215
5.95%, 7/20/95 ........................................ 895,000 892,189
6.00%, 7/5/95 ......................................... 1,150,000 1,149,233
----------
5,147,765
----------
Total U.S. Government and Agency Securities
(cost: $35,897,229) ................................. 35,897,229
----------
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
OTHER GOVERNMENT AGENCIES (2.5%):
Downey Savings & Loan, LOC Federal Home Loan Bank,
6.05%, 7/17/95 ..................................... $ 350,000 349,059
Downey Savings & Loan, LOC Federal Home Loan Bank,
6.08%, 10/2/95 ....................................... 1,000,000 984,293
----------
Total Other Government Agencies
(cost: $1,333,352) .................................. 1,333,352
----------
REPURCHASE AGREEMENTS (29.0%):
Repurchase agreement with First Boston, collateralized
by U.S. government agency securities, acquired on
4/20/95, accrued interest at repurchase date of
$30,100, 6.02%, 7/19/95 .............................. 2,000,000 2,000,000
Repurchase agreement with Goldman Sachs in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 6/30/95, accrued interest at
repurchase date of $1,984, 6.24%, 7/3/95 ............. 3,815,000 3,815,000
Repurchase agreement with Morgan Stanley in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 5/30/95, accrued interest at
repurchase date of $24,676, 5.97%, 7/31/95 ........... 2,400,000 2,400,000
Repurchase agreement with Morgan Stanley in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 6/26/95, accrued interest at
repurchase date of $4,729, 6.08%, 7/3/95 ............. 4,000,000 4,000,000
Repurchase agreement with Morgan Stanley in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 6/28/95, accrued interest at
repurchase date of $3,529, 6.05%, 7/5/95 ............. 3,000,000 3,000,000
----------
Total Repurchase Agreements
(cost: $15,215,000) ................................. 15,215,000
----------
Total Investments in Securities (99.9%)
(cost: $52,445,582)(c) .............................. 52,445,582
----------
Other assets in excess of liabilities (0.1%) ......... 43,280
----------
Net assets (100.0%) ................................ $ 52,488,862
----------
----------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) INTEREST RATE VARIES TO REFLECT CURRENT MARKET CONDITIONS; RATE SHOWN IS
THE EFFECTIVE RATE ON JUNE 30, 1995. THE MATURITY DATE SHOWN REPRESENTS
FINAL MATURITY. HOWEVER, FOR PURPOSES OF RULE 2A-7, MATURITY IS NEXT
INTEREST RATE RESET DATE.
(C) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES.
15
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
JUNE 30, 1995
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT SECURITIES (5.5%):
U.S. Treasury Note, 7.25%, 2/15/98
(cost: $806,804) .................................. $ 800,000 826,400
----------
MORTGAGE-BACKED SECURITIES (83.1%):
U.S. AGENCY ADJUSTABLE-RATE MORTGAGES (76.5%):
7.25%, FHLMC, 1/1/17 ................................. 2,052,120 2,075,514
7.76%, FNMA, 3/1/28 .................................. 3,109,613 3,200,693
7.64%, FNMA, 11/1/18 ................................. 1,830,283 1,894,764
7.71%, FNMA, 9/1/22 .................................. 2,367,965 2,439,856
7.93%, FNMA, 2/1/22 .................................. 1,791,418 1,843,602
----------
11,454,429
----------
U.S. AGENCY FIXED-RATE MORTGAGES (6.6%):
7.50%, FNMA, 2/1/10 .................................. 962,720 978,653
----------
Total Mortgage-Backed Securities
(cost: $12,495,449) ................................ 12,433,082
----------
CANADIAN SECURITIES (8.7%):
Household Trust, 7.50%, 12/1/97
(cost: $1,432,262) .................................. 1,801,019(b) 1,308,699
----------
SHORT-TERM SECURITIES (2.4%):
Repurchase agreement with Goldman Sachs in a joint
trading account collateralized by U.S. government
agency securities, acquired on 6/30/95, interest
accrued at repurchase date of $186, 6.22%, 7/3/95
(cost: $359,000) .................................... 359,000 359,000
----------
Total Investments in Securities (99.7%)
(cost: $15,093,515)(c) ............................. 14,927,181
----------
Other assets in excess of liabilities (0.3%) ........ 42,592
----------
Net assets (100.0%) ............................... $ 14,969,773
----------
----------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) PRINCIPAL AMOUNT IS IN CANADIAN DOLLARS.
(C) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS BASED ON THIS COST
WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 76,526
GROSS UNREALIZED DEPRECIATION ...... (242,860)
----------
NET UNREALIZED DEPRECIATION .... $ (166,334)
----------
----------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PIPER INSTITUTIONAL FUNDS INC.:
We have audited the accompanying statements of
assets and liabilities, including the
schedules of investments in securities, of
Institutional Money Market Fund, Institutional
Government Adjustable Portfolio and Enhanced
500 Fund (funds within Piper Institutional
Funds Inc.) as of June 30, 1995, the related
statements of operations and statement of cash
flows (Institutional Government Adjustable
Portfolio only) for the year then ended (June
29, 1995 for Enhanced 500 Fund) and the
statements of changes in net assets for the
two years ended June 30, 1995 (June 29, 1995
for Enhanced 500 Fund) and the financial
highlights for the two years ended June 30,
1995 (June 29, 1995 for Enhanced 500 Fund) and
the period from February 2, 1993 to June 30,
1993. These financial statements and the
financial highlights are the responsibility of
the Funds' management. Our responsibility is
to express an opinion on these financial
statements and the financial highlights based
on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements and the
financial highlights are free of material
misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts
and disclosures in the financial statements.
Investment securities held in custody are
confirmed to us by the custodian. As to
securities purchased or sold but not received
or delivered, we request confirmations from
brokers, and where replies are not received,
we carry out other appropriate auditing
procedures. An audit also includes assessing
the accounting principles used and significant
estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and
the financial highlights referred to above
present fairly, in all material respects, the
financial position of Institutional Money
Market Fund, Institutional Government
Adjustable Portfolio and Enhanced 500 Fund as
of June 30, 1995, and the results of their
operations, cash flows (Institutional
Government Adjustable Portfolio only), changes
in their net assets and the financial
highlights for the periods noted in the first
paragraph, in conformity with generally
accepted accounting principles.
Enhanced 500 Fund was liquidated on June 29,
1995.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 4, 1995
17
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
Information for federal income tax purposes is
presented as an aid to shareholders in
reporting the distributions shown below. By
early February 1996, each shareholder will
receive a breakdown of income earned by
investment category on a calendar-year basis.
Shareholders should consult a tax adviser on
how to report these distributions on state and
local levels.
INSTITUTIONAL MONEY MARKET FUND
For the year ended June 30, 1995
Income distributions--taxable as dividend
income, none qualify for corporate dividends
received deduction.
<TABLE>
<CAPTION>
Payable Date Per Share
- ------------------------------------------------------------------------- -----------
<S> <C>
July 6, 1994 .......................................................... $ 0.0033
August 3, 1994 .......................................................... 0.0036
September 6, 1994 ....................................................... 0.0035
October 5, 1994 ......................................................... 0.0037
November 3, 1994 ........................................................ 0.0039
December 5, 1994 ........................................................ 0.0041
January 5, 1995 ......................................................... 0.0046
February 3, 1995 ........................................................ 0.0046
March 3, 1995 ........................................................... 0.0042
April 5, 1995 ........................................................... 0.0048
May 3, 1995 ............................................................. 0.0047
June 1, 1995 ............................................................ 0.0048
-----------
$ 0.0498
-----------
-----------
</TABLE>
INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
For the year ended June 30, 1995
Income distributions--taxable as dividend
income, none qualify for corporate dividends
received deduction.
<TABLE>
<CAPTION>
Payable Date Per Share
- ------------------------------------------------------------------------- -----------
<S> <C>
July 6, 1994 .......................................................... $ 0.0417
August 3, 1994 .......................................................... 0.0417
September 6, 1994 ....................................................... 0.0417
October 5, 1994 ......................................................... 0.0417
November 3, 1994 ........................................................ 0.0417
December 5, 1994 ........................................................ 0.0417
January 5, 1995 ......................................................... 0.0417
February 3, 1995 ........................................................ 0.0417
March 3, 1995 ........................................................... 0.0417
April 5, 1995 ........................................................... 0.0417
May 3, 1995 ............................................................. 0.0417
June 1, 1995 ............................................................ 0.0417
-----------
$ 0.5004*
-----------
-----------
<FN>
* $0.09 PER SHARE OF THE TOTAL DISTRIBUTIONS OF $0.5004 PER SHARE REPRESENTS A
RETURN OF CAPITAL FOR TAX PURPOSES.
</TABLE>
ENHANCED 500 FUND
For the year ended June 30, 1995
Income distributions--taxable as dividend
income, 70% qualify for corporate dividends
received deduction.
<TABLE>
<CAPTION>
Payable Date Per Share
- ------------------------------------------------------------------------- -----------
<S> <C>
September 16, 1994 .................................................... $ 0.050
December 19, 1994 ....................................................... 0.087
March 10, 1995 .......................................................... 0.200
June 9, 1995 ............................................................ 0.177
-----------
$ 0.514
-----------
-----------
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
DIRECTORS David T. Bennett, CHAIRMAN, HIGHLAND HOMES, INC., USL PRODUCTS INC., KIEFER
BUILT, INC., OF COUNSEL, GRAY, PLANT, MOOTY, MOOTY & BENNETT, P.A.
Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT COMPANY
William H. Ellis, PRESIDENT, PIPER JAFFRAY COMPANIES INC., PIPER CAPITAL
MANAGEMENT INCORPORATED
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL, RELIASTAR FINANCIAL CORP.,
HORMEL FOODS CORP.
George Latimer, DIRECTOR, SPECIAL ACTIONS OFFICE, OFFICE OF THE SECRETARY,
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD
Paul A. Dow, PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT
Nancy S. Olsen, SENIOR VICE PRESIDENT
Thomas S. McGlinch, VICE PRESIDENT
John K. Schonberg, VICE PRESIDENT
David E. Rosedahl, SECRETARY
Charles N. Hayssen, TREASURER
INVESTMENT ADVISER Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
CUSTODIAN AND Investors Fiduciary Trust Company
TRANSFER AGENT 127 WEST TENTH STREET, KANSAS CITY, MO 64105-1716
LEGAL COUNSEL Dorsey & Whitney P.L.L.P.
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
INDEPENDENT AUDITORS KPMG Peat Marwick LLP
4200 NORWEST CENTER, MINNEAPOLIS, MN 55402
</TABLE>
