<PAGE>
1933 Act Registration No. 33-53718
1940 Act Registration No. 811-7320
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1996
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
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Post-Effective Amendment No. 6
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AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 7
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(Check appropriate box or boxes)
PIPER INSTITUTIONAL FUNDS INC.
(Exact Name of Registrant as Specified in Charter)
Piper Jaffray Tower
222 South Ninth Street, Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 342-6418
(Registrant's Telephone Number, including Area Code)
Paul A. Dow
222 South Ninth Street
Minneapolis, Minnesota 55402
(Name and Address of Agent for Service)
COPY TO:
Kathleen L. Prudhomme, Esq.
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
It is proposed that this filing will become effective (check appropriate box):
X immediately upon filing pursuant to paragraph (b) of Rule
-------- 485
on (specify date) pursuant to paragraph (b) of Rule 485
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75 days after filing pursuant to paragraph (a) of Rule 485
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on (date) pursuant to paragraph (a) of Rule 485
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The Registrant has registered an indefinite number of shares of common stock
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. A Rule 24f-2 Notice was filed by the Registrant on or
about August 5, 1996.
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<PAGE>
PIPER INSTITUTIONAL FUNDS INC.
Registration Statement on Form N-1A
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Cross Reference Sheet
Pursuant to Rule 481(a)
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Item No. Prospectus Heading
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1. Cover Page. . . . . . . . . . . . . . . Cover Page (no caption)
2. Synopsis. . . . . . . . . . . . . . . . Introduction; Fund Expenses
3. Condensed Financial Information . . . . Financial Highlights
4. General Description of Registrant . . . Introduction; Investment
Objective and Policies;
Special Investment Methods
5. Management of the Fund. . . . . . . . . Management
6. Capital Stock and Other Securities. . . Introduction; Dividends and
Distributions; Tax Status;
General Information
7. Purchase of Securities Being Offered. . How to Purchase Shares;
Valuation of Shares; Reducing
Your Sales Charge; Special
Purchase Plans
8. Redemption or Repurchase. . . . . . . . How to Redeem Shares;
Shareholder Services
9. Pending Legal Proceedings . . . . . . . General Information
Heading Statement of Additional
- ------- Information
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10. Cover Page. . . . . . . . . . . . . . . Cover Page (no caption)
11. Table of Contents . . . . . . . . . . . Table of Contents
12. General Information and History . . . . Pending Litigation
13. Investment Objectives and Policies. . . Investment Objective, Policies
and Restrictions
14. Management of the Fund. . . . . . . . . Directors and Executive
Officers
15. Control Persons and Principal
<PAGE>
Holders of Securities . . . . . . . . . Capital Stock and Ownership of
Shares
16. Investment Advisory and Other
Services. . . . . . . . . . . . . . . . Investment Advisory and Other
Services
17. Brokerage Allocation and Other
Practices . . . . . . . . . . . . . . . Portfolio Transactions and
Allocation of Brokerage
18. Capital Stock and Other Securities. . . Capital Stock and Ownership of
Shares
19. Purchase, Redemption and Pricing
of Securities Being Offered . . . . . . Net Asset Value and Public
Offering Price; Redemption
20. Tax Status. . . . . . . . . . . . . . . Taxation
21. Underwriters. . . . . . . . . . . . . . Investment Advisory and Other
Services; Portfolio
Transactions and Allocation of
Brokerage
22. Calculations of Performance Data. . . . Performance Comparisons
23. Financial Statements. . . . . . . . . . Financial Statements
<PAGE>
PROSPECTUS DATED OCTOBER 28, 1996
INSTITUTIONAL MONEY MARKET FUND
A SERIES OF PIPER INSTITUTIONAL FUNDS INC.
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET, MINNEAPOLIS, MINNESOTA 55402-3804
(800) 866-7778 (TOLL FREE)
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Institutional Money Market Fund (the "Fund") has an investment objective of
maximum current income consistent with preservation of capital and maintenance
of liquidity. The Fund will invest only in securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities and repurchase
agreements and reverse repurchase agreements with respect to such securities.
INVESTMENTS IN THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus concisely describes the information about the Fund that you
should know before investing. Please read the Prospectus carefully before
investing and retain it for future reference.
A Statement of Additional Information about the Fund dated October 28, 1996
is available free of charge. Write to the Fund at Piper Jaffray Tower, 222 South
Ninth Street, Minneapolis, Minnesota 55402-3804 or telephone (800) 866-7778
(toll free). The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated in its entirety by
reference in this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
INTRODUCTION
Institutional Money Market Fund (the "Fund") is a diversified series of
Piper Institutional Funds Inc. (the "Company"), an open-end management
investment company organized under the laws of the State of Minnesota in 1992.
The Fund is the only series of the Company currently outstanding.
THE INVESTMENT ADVISER
The Fund is managed by Piper Capital Management Incorporated (the
"Adviser"), a wholly owned subsidiary of Piper Jaffray Companies Inc. The Fund
pays the Adviser a fee for managing its investment portfolio at an annual rate
of .15% of the Fund's average daily net assets. See "Management -- Investment
Adviser."
THE DISTRIBUTOR
Piper Jaffray Inc. ("Piper Jaffray" or the "Distributor"), a wholly owned
subsidiary of Piper Jaffray Companies Inc. and an affiliate of the Adviser,
serves as Distributor of the Fund's shares.
OFFERING PRICES
Shares of the Fund are offered to the public at their net asset value of
$1.00 per share with no sales charge. There can be no assurance, however, that
the net asset value per share of the Fund will be maintained at $1.00.
MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS
The minimum initial investment is $100,000. There is no minimum for
subsequent investments.
EXCHANGES
You may exchange your shares for shares of any other mutual fund managed by
the Adviser which is open to new investors and eligible for sale in your state
of residence. All exchanges are subject to the minimum investment requirements
and other applicable terms set forth in the prospectus of the fund whose shares
you acquire. Exchanges are made on the basis of the net asset values of the
funds involved, except that if you exchange into a fund with a sales charge, you
pay the percentage-point difference between that fund's sales charge and any
sales charge you have previously paid in connection with the shares you are
exchanging. You may make four exchanges per year without payment of a service
charge. Thereafter, there is a $5 service charge for each exchange. See
"Shareholder Services -- Exchange Privilege."
REDEMPTION PRICE
Shares of the Fund may be redeemed at any time at their net asset value next
determined after a redemption request is received by your Piper Jaffray
Investment Executive or other broker-dealer. The Fund reserves the right, upon
30 days' written notice, to redeem an account if the net asset value of the
shares in that account falls below $50,000. See "How to Redeem Shares --
Involuntary Redemption."
CERTAIN RISK FACTORS TO CONSIDER
An investment in the Fund is subject to certain risks, as set forth in
detail under "Investment Objective and Policies" and "Special Investment
Methods." As with other mutual funds, there can be no assurance that the Fund
will achieve its objective. In addition, there is no assurance the Fund will be
able to maintain a stable net asset value of $1.00 per share.
2
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SHAREHOLDER INQUIRIES
Any questions or communications regarding a shareholder account should be
directed to your Piper Jaffray investment executive or, in the case of shares
held through another broker-dealer, to IFTC at (800) 874-6205. General inquiries
regarding the Fund should be directed to the Fund at the telephone number set
forth on the cover of this Prospectus.
FUND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)...................................................................... None
Exchange Fee (1)............................................................. $0
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees.............................................................. .15%
Rule 12b-1 Fees.............................................................. None
Other Expenses (after voluntary expense reimbursements)...................... .20%
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Total Fund Operating Expenses (after voluntary expense reimbursements)....... .35%
<FN>
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(1) There is a $5.00 fee for each exchange in excess of four exchanges per
year. See "How to Purchase Shares -- Exchange Privilege."
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming a 5%
annual return and redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year......................................... $ 4
3 Years........................................ $11
5 Years........................................ $20
10 Years........................................ $44
</TABLE>
The purpose of the above Fund Expenses table is to assist you in
understanding the various costs and expenses that investors in the Fund will
bear directly or indirectly. THE EXAMPLE CONTAINED IN THE TABLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Under an Investment Advisory and Management Agreement between the Fund and
the Adviser, the Adviser is entitled to receive fees equal on an annual basis to
.15% of the Fund's average daily net assets. The Adviser has voluntarily agreed,
for the fiscal year ending June 30, 1997, to reimburse the Fund to the extent
that total operating expenses exceed .35% of average daily net assets. The Total
Fund Operating Expenses set forth in the above table are based on this
agreement. Voluntary reimbursements by the Adviser may be discontinued at any
time following the Fund's fiscal year end, at the Adviser's discretion. For the
fiscal year ended June 30, 1996, the Adviser voluntarily agreed to pay all
operating expenses of the Fund which exceeded .35% of average daily net assets.
Absent such voluntary expense reimbursements, Total Fund Operating Expenses
would have been .38% of average daily net assets. For additional information,
including a more complete explanation of management fees, see "Management --
Investment Adviser" and "Management -- Expenses."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights have been audited by KPMG Peat Marwick
LLP, independent auditors, and should be read in conjunction with the financial
statements and the related notes thereto appearing in the Fund's annual report
to shareholders. An annual report of the Fund can be obtained without charge by
contacting the Fund at (612) 342-6387 (local calls) or (800) 866-7778 (toll
free). In addition to financial statements, the annual report contains further
information about the performance of the Fund.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30
------------------------------------- PERIOD FROM
1996 1995 1994 2/2/93* TO 6/30/93
----------- ----------- ----------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................... $ 1.00 $ 1.00 $ 1.00 $1.00
Operations:
Net investment income........................................ 0.05 0.05 0.03 0.01
----- ----- ----- -----
Total from operations...................................... 0.05 0.05 0.03 0.01
----- ----- ----- -----
Distributions from net investment income....................... (0.05) (0.05) (0.03) (0.01)
----- ----- ----- -----
Net asset value, end of period................................. $ 1.00 $ 1.00 $ 1.00 $1.00
----- ----- ----- -----
----- ----- ----- -----
Total return+.................................................. 5.42% 5.26% 3.23% 1.24%
Net assets, end of period (in millions)........................ $ 174 $ 52 $ 35 $ 40
Ratio of expenses to average daily net assets++................ 0.35% 0.35% 0.35% 0.35%**
Ratio of net investment income to average daily net assets++... 5.22% 5.17% 3.26% 3.02%**
<FN>
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* 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.
++ During the years reflected above, the Adviser voluntarily waived fees and
expenses. Had the Fund paid all fees and expenses, the ratios of expenses
and net investment income to average daily net assets would have been
0.38%/5.19%, 0.49%/5.03% and 0.61%/3.00% in fiscal years 1996, 1995 and
1994, respectively.
</TABLE>
4
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective set forth below cannot be changed without
shareholder approval. In view of the risks inherent in all investments in
securities, there is no assurance that this objective will be achieved. The
investment policies and techniques employed in pursuit of the Fund's objective
may be changed without shareholder approval, unless otherwise noted.
INVESTMENT OBJECTIVE. The Fund has an investment objective of maximum
current income consistent with preservation of capital and maintenance of
liquidity.
INVESTMENT POLICIES AND TECHNIQUES. The Fund will invest only in U.S.
Government Securities (as defined below) and in repurchase agreements with
respect to such securities. See "Special Investment Methods -- Repurchase
Agreements." The Fund will purchase only those securities with a remaining
effective maturity of 397 calendar days or less on the date of purchase and will
maintain a dollar-weighted average maturity of its portfolio of 60 days or less.
U.S. Government Securities are obligations issued or guaranteed as to
payment of principal and interest by the U.S. Government or its agencies or
instrumentalities. These securities include direct obligations of the U.S.
Treasury, such as U.S. Treasury bills, notes and bonds, and obligations of U.S.
Government agencies or instrumentalities, including, but not limited to, Federal
Home Loan Banks, the Farmers Home Administration, Federal Farm Credit Banks, the
Federal National Mortgage Association, the Government National Mortgage
Association, the Federal Home Loan Mortgage Corporation, the Financing
Corporation and the Student Loan Marketing Association. Obligations of U.S.
Government agencies or instrumentalities are backed in a variety of ways by the
U.S. Government or its agencies or instrumentalities. Some of these obligations,
such as Government National Mortgage Association mortgage-backed securities, are
backed by the full faith and credit of the U.S. Treasury. Others, such as those
of the Federal Home Loan Banks, are backed by the right of the issuer to borrow
from the Treasury. Still others, such as those issued by the Federal National
Mortgage Association, are backed by the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality.
Other obligations may be backed by an irrevocable letter of credit of an agency
or instrumentality of the U.S. Government. Finally, obligations of other
agencies or instrumentalities are only backed by the credit of the agency or
instrumentality issuing the obligations.
RULE 2A-7. The Fund is subject to the investment restrictions of Rule 2a-7
under the Investment Company Act of 1940 in addition to its other investment
policies and restrictions. Rule 2a-7 requires that the Fund invest exclusively
in securities that mature within 397 days and that the Fund maintain an average
weighted maturity of not more than 90 days. (As noted above, however, the Fund
intends to maintain a dollar-weighted average maturity of its portfolio of 60
days or less.) Rule 2a-7 also requires that all investments by the Fund be
limited to United States dollar-denominated investments that: (1) present
"minimal credit risks," and (2) are at the time of acquisition "Eligible
Securities." Eligible Securities include, among others, securities that are
rated by two Nationally Recognized Statistical Rating Organizations ("NRSROs")
in one of the two highest categories for short-term debt obligations, such as
A-1 or A-2 by Standard & Poor's Ratings Services or P-1 or P-2 by Moody's
Investors Service, Inc. It is the responsibility of the Adviser to determine
that the Fund's investments present only "minimal credit risks" and are Eligible
Securities. The Fund's Board of Directors has established written guidelines and
procedures for the Adviser and oversees the Adviser's determination that the
Fund's portfolio securities present only "minimal credit risks" and are Eligible
Securities.
5
<PAGE>
Under Rule 2a-7, 95% of the assets of non-tax-exempt money funds (such as
the Fund) must be invested in Eligible Securities that are deemed First Tier
Securities, which include, among others, securities rated by two NRSROs in the
highest category (such as A-1 and P-1). Rule 2a-7 requires that (1) a fund may
not invest more than 5% of its total assets in securities of a single issuer,
other than U.S. Government securities, (2) a fund may not invest more than 5% of
its total assets in Second Tier Securities (I.E., Eligible Securities that are
not First Tier Securities) and (3) a fund's investment in Second Tier Securities
of a single issuer may not exceed the greater of 1% of the fund's total assets
or $1,000,000.
SPECIAL INVESTMENT METHODS
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with respect to U.S.
Government Securities. A repurchase agreement involves the purchase by the Fund
of securities with the condition that after a stated period of time the original
seller (a member bank of the Federal Reserve System or a recognized securities
dealer) will buy back the same securities ("collateral") at a predetermined
price or yield. Repurchase agreements involve certain risks not associated with
direct investments in securities. In the event the original seller defaults on
its obligation to repurchase, as a result of its bankruptcy or otherwise, the
Fund will seek to sell the collateral, which action could involve costs or
delays. In such case, the Fund's ability to dispose of the collateral to recover
such investment may be restricted or delayed. While collateral will at all times
be maintained in an amount equal to the repurchase price under the agreement
(including accrued interest due thereunder), to the extent proceeds from the
sale of collateral were less than the repurchase price, the Fund would suffer a
loss. In the event of a seller's bankruptcy, the Fund might be delayed in, or
prevented from, selling the collateral to the Fund's benefit. Repurchase
agreements maturing in more than seven days are considered illiquid and subject
to the Fund's restriction on investing in illiquid securities. See "Illiquid
Securities," below.
BORROWING
The Fund may borrow money from banks for temporary or emergency purposes in
an amount up to one-third of the value of its total assets in order to meet
redemption requests without immediately selling any of its portfolio securities.
Reverse repurchase agreements entered into by the Fund are not subject to this
limitation. However, the Fund has not entered into reverse repurchase agreements
in the past and has no current intention of entering into such agreements in the
future. See "Investment Objective and Policies--Reverse Repurchase Agreements"
in the Statement of Additional Information. If, for any reason, the current
value of the Fund's total assets falls below an amount equal to three times the
amount of its indebtedness from money borrowed, the Fund will, within three
days, reduce its indebtedness to the extent necessary. To do this, the Fund may
have to sell a portion of its investments at a time when it may be
disadvantageous to do so. Interest paid by the Fund on borrowed funds would
decrease the net earnings of the Fund. The Fund will not purchase portfolio
securities while outstanding borrowings (other than reverse repurchase
agreements) exceed 5% of the value of the Fund's total assets. The Fund may
mortgage, pledge or hypothecate its assets to secure permitted temporary or
emergency borrowing. The policies set forth in this paragraph are fundamental
and may not be changed without the approval of a majority of the Fund's shares.
6
<PAGE>
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net assets in illiquid securities.
Illiquid securities may offer a higher yield than securities which are more
readily marketable, but they may not always be marketable on advantageous terms.
The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts than does the sale of securities
eligible for trading on national securities exchanges or in the over-the-counter
markets. The Fund may be restricted in its ability to sell such securities at a
time when the Adviser deems it advisable to do so. In addition, in order to meet
redemption requests, the Fund may have to sell other assets, rather than such
illiquid securities, at a time which is not advantageous.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions, which are set forth in
detail in the Statement of Additional Information under "Investment Objective,
Policies and Restrictions." Certain of these restrictions are fundamental and
may not be changed without shareholder approval, including restrictions
providing that the Fund will not (a) invest 25% or more of its total assets in
any one industry, or (b) with respect to 75% of its total assets, invest more
than 5% of the value of its total assets in the securities of any one issuer or
acquire more than 10% of the outstanding voting securities of an issuer. These
restrictions do not apply, however, to U.S. Government Securities.
Except with respect to the Fund's policy concerning borrowing, if a
percentage restriction set forth in this Prospectus is adhered to at the time of
an investment, a later increase or decrease in percentage resulting from changes
in values or assets will not constitute a violation of such restriction.
MANAGEMENT
BOARD OF DIRECTORS
The Company's Board of Directors has the primary responsibility for
overseeing the overall management of the Company and electing its officers.
INVESTMENT ADVISER
Piper Capital Management Incorporated (the "Adviser") has been retained
under an Investment Advisory and Management Agreement with the Company to act as
the Fund's investment adviser subject to the authority of the Board of
Directors.
In addition to acting as the investment adviser for the Fund, the Adviser
also serves as investment adviser to a number of other open-end and closed-end
investment companies and to various other concerns, including pension and profit
sharing funds, corporate funds and individuals. As of September 30, 1996, the
Adviser rendered investment advice regarding approximately $9 billion of assets.
The Adviser is a wholly owned subsidiary of Piper Jaffray Companies Inc., a
publicly held corporation which is engaged through its subsidiaries in various
aspects of the financial services industry. The address of the Adviser is Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-3804.
The Adviser furnishes the Fund with investment advice and, in general,
supervises the management and investment programs of the Fund. The Adviser
furnishes at its own expense all necessary administrative services, office
space, equipment and clerical personnel for servicing the investments
7
<PAGE>
of the Fund. The Adviser also provides investment advisory facilities and
executive and supervisory personnel for managing the investments and effecting
the portfolio transactions of the Fund. In addition, the Adviser pays the
salaries and fees of all officers and directors of the Company who are
affiliated with the Adviser.
Under the Investment Advisory and Management Agreement, the Adviser receives
a monthly fee paid at an annual rate of .15% of the average daily net assets of
the Fund.
PORTFOLIO MANAGEMENT
Nancy S. Olsen has been primarily responsible for the day-to-day management
of the Fund's portfolio since the Fund's inception in 1993. Ms. Olsen, who
joined the Adviser in 1987, is a Senior Vice President and fixed income
portfolio manager for the Adviser and directs the Adviser's cash reserve
management department. Ms. Olsen has an M.B.A. from the University of Minnesota
and has 16 years of financial experience.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND CUSTODIAN
Investors Fiduciary Trust Company ("IFTC"), 127 West Tenth Street, Kansas
City, Missouri 64105, (800) 874-6205, serves as Custodian for the Fund's
portfolio securities and cash and as Transfer Agent and Dividend Disbursing
Agent for the Fund.
The Company has entered into Shareholder Account Servicing Agreements with
the Distributor and Piper Trust Company, an affiliate of the Distributor and the
Adviser. Under these agreements the Distributor and Piper Trust Company provide
transfer agent and dividend disbursing agent services for certain shareholder
accounts. For more information, see "Investment Advisory and Other Services --
Transfer Agent and Dividend Disbursing Agent" in the Statement of Additional
Information.
8
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
HOW TO PURCHASE SHARES
GENERAL
The Fund's shares may be purchased at the public offering price from the
Distributor and from other broker-dealers who have sales agreements with the
Distributor. The address of the Distributor is that of the Fund. The Distributor
reserves the right to reject any purchase order. You should be aware that,
because the Fund does not issue stock certificates, Fund shares must be kept in
an account with the Distributor or with IFTC. All investments must be arranged
through your Piper Jaffray Investment Executive or other broker-dealer.
PURCHASE PRICE
Shares of the Fund are offered without a sales charge at the net asset value
per share next calculated after receipt of your order by your Piper Jaffray
Investment Executive or other broker-dealer. The net asset value per share of
the Fund is normally expected to be $1.00. See "Valuation of Shares".
The Adviser and/or the Distributor, out of their own assets, may pay for
certain expenses incurred in connection with the distribution of shares of the
Fund. Piper Jaffray Investment Executives and other broker-dealers receive
ongoing payments for their servicing and/or maintenance of shareholder accounts
in an amount equal to .06% of the average daily net assets of the Fund
attributable to shares sold by them.
The Distributor or the Adviser, at their own expense, provide promotional
incentives to Investment Executives of the Distributor and to broker-dealers who
have sales agreements with the Distributor in connection with sales of shares of
the Fund, and other mutual funds for which the Adviser acts as investment
adviser. In some instances, these incentives may be made available only to
certain Investment Executives or broker-dealers who have sold or may sell
significant amounts of such shares. The incentives may include payment for
travel expenses, including lodging at luxury resorts, incurred in connection
with sales seminars.
MINIMUM INVESTMENTS
The minimum initial investment is $100,000 and there is no minimum for
subsequent investments. The Distributor may waive the minimum initial investment
for clients of Piper Trust Company.
HOW TO REDEEM SHARES
NORMAL REDEMPTION
You may redeem all or a portion of your shares on any day that the Fund
values its shares. (Please refer to "Valuation of Shares" below for more
information.) Your shares will be redeemed at the net asset value next
calculated after the receipt of your instructions in good form by your Piper
Jaffray Investment Executive or other broker-dealer as explained below.
PIPER JAFFRAY INC. ACCOUNTS. To redeem your shares, please contact your
Piper Jaffray Investment Executive with an oral request to redeem your shares.
9
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING
OTHER BROKER-DEALER ACCOUNTS. To redeem your shares, you may either contact
your broker-dealer with an oral request or send a written request directly to
the Fund's transfer agent, IFTC. This request should contain: the dollar amount
or number of shares to be redeemed, your Fund account number and either a social
security or tax identification number (as applicable). You should sign your
request in exactly the same way the account is registered. If there is more than
one owner of the shares, all owners must sign. A signature guarantee is required
for redemptions over $25,000. Please contact IFTC or refer to "Redemption of
Shares" in the Statement of Additional Information for more details.
PAYMENT OF REDEMPTION PROCEEDS
After your shares have been redeemed, the cash proceeds will normally be
sent to you or your broker-dealer within three business days. In no event will
payment be made more than seven days after receipt of your order in good form.
However, payment may be postponed or the right of redemption suspended for more
than seven days under unusual circumstances, such as when trading is not taking
place on the New York Stock Exchange. Payment of redemption proceeds may also be
delayed if the shares to be redeemed were purchased by a check drawn on a bank
which is not a member of the Federal Reserve System, until such checks have
cleared the banking system (normally up to 15 days from the purchase date).
INVOLUNTARY REDEMPTION
The Fund reserves the right to redeem your account at any time the net asset
value of the account falls below $50,000 as the result of a redemption or
exchange request. You will be notified in writing prior to any such redemption
and will be allowed 30 days to make additional investments before the redemption
is processed.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
If your investment goals change, you may prefer a fund with a different
objective. If you are considering an exchange into another mutual fund managed
by the Adviser, you should carefully read the appropriate prospectus for
additional information about that fund. A prospectus may be obtained through
your Piper Jaffray Investment Executive, your broker-dealer or the Distributor.
To exchange your shares, please contact your Piper Jaffray Investment Executive,
your broker-dealer or IFTC.
You may exchange your shares for shares of any other mutual fund managed by
the Adviser that is open to new investors. All exchanges are subject to the
eligibility of share purchases in your state as well as the minimum investment
requirements and any other applicable terms in the prospectus of the fund being
acquired. Exchanges are made on the basis of the net asset values of the funds
involved, except that if you exchange into a fund with a sales charge, you pay
the percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging.
You may make four exchanges per year without payment of a service charge.
Thereafter, you will pay a $5 service charge for each exchange. The Company
reserves the right to change or discontinue the exchange privilege, or any
aspect of the privilege, upon 60 days' written notice.
10
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING
TELEPHONE TRANSACTION PRIVILEGES
PIPER JAFFRAY INC. ACCOUNTS. If you hold your shares in a Piper Jaffray
account, you may telephone your Investment Executive to execute any transaction
or to apply for many shareholder services. In some cases, you may be required to
complete a written application.
OTHER BROKER-DEALER ACCOUNTS. If you hold your shares in an account with
your broker-dealer or at IFTC, you may authorize telephone privileges by
completing the Account Application and Services Form. Please contact your
broker-dealer or IFTC (800-874-6205) for an application or for more details. The
Fund will employ reasonable procedures to confirm that a telephonic request is
genuine, including requiring that payment be made only to the address of record
or the bank account designated on the Account Application and Services Form and
requiring certain means of telephonic identification. If the Fund employs such
procedures it will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. If the Fund does not employ
such procedures, it may be liable for any losses due to unauthorized or
fraudulent telephone transactions. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests. If you cannot reach the Fund by telephone,
you should contact your broker-dealer or issue written instructions to IFTC at
the address set forth herein. See "Management -- Transfer Agent, Dividend
Disbursing Agent and Custodian." The Fund reserves the right to suspend or
terminate its telephone services at any time without notice.
SYSTEMATIC WITHDRAWAL PLAN
If your account has a value of $5,000 or more, you may establish a
Systematic Withdrawal Plan. This plan will allow you to receive regular periodic
payments by redeeming as many shares from your account as necessary. As with
other redemptions, a redemption to make a withdrawal is a sale for federal
income tax purposes. Payments made under a Systematic Withdrawal Plan cannot be
considered as actual yield or income since part of the payments may be a return
of capital.
A request to establish a Systematic Withdrawal Plan must be submitted in
writing to your Piper Jaffray Investment Executive or other broker-dealer. There
are no service charges for maintenance; the minimum amount that you may withdraw
each period is $100. You may choose to have withdrawals made monthly, quarterly
or semiannually. Please contact your Piper Jaffray Investment Executive, other
broker-dealer or IFTC for more information.
ACCOUNT PROTECTION
If you purchased your Fund shares through a Piper Jaffray Investment
Executive, you may choose from several account options. Your investments in the
Fund held in a Piper Jaffray account (except for non-"PAT" accounts) would be
protected up to $50 million. Investments held in non-"PAT" Piper Jaffray
accounts are protected up to $25 million. In each case, the Securities Investor
Protection Corporation ("SIPC") provides $500,000 of protection; the additional
coverage is provided by The Aetna Casualty & Surety Company. This protection
does not cover any declines in the net asset value of Fund shares.
11
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING
CONFIRMATION OF TRANSACTIONS AND REPORTING OF OTHER INFORMATION
Each time there is a transaction involving your Fund shares, such as a
purchase, redemption or dividend reinvestment, you will receive a confirmation
statement describing that activity. This information will be provided to you
from either Piper Jaffray, your broker-dealer or IFTC. In addition, you will
receive various IRS forms after the first of each year detailing important tax
information. The Fund is required to supply annual and semiannual reports that
list securities held by the Fund and include the current financial statements of
the Fund.
HOUSEHOLDING. If you have multiple accounts with Piper Jaffray, you may
receive some of the above information in combined mailings. This will not only
help to reduce Fund expenses, it will help the environment by saving paper.
Please contact your Piper Jaffray Investment Executive for more information.
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested in
additional shares of the Fund. The net investment income of the Fund will be
declared as dividends daily and will be paid monthly. Net realized capital
gains, if any, will be distributed on an annual basis. Shares will begin
accruing dividends on the date on which payment is received, provided such
payment is received by 12:00 noon, New York time. If a redemption request is
received by 12:00 noon, New York time, shares will be redeemed that day and a
dividend will not be earned.
12
<PAGE>
VALUATION OF SHARES
The Fund determines its net asset value on each day the New York Stock
Exchange (the "Exchange") is open for business. The calculation is made at 12:00
noon (New York time) and also as of the regular close of the Exchange (currently
4:00 p.m. New York time) after the Fund has declared any applicable dividends.
It is the policy of the Fund to attempt to maintain a net asset value per
share of $1.00. The securities held are valued on the basis of amortized cost,
in accordance with the Fund's election to operate under the provisions of Rule
2a-7 under the 1940 Act. The amortized cost method of valuation involves valuing
an instrument at its cost and thereafter assuming a constant amortization to
maturity of a discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value as
determined by amortized cost is higher or lower than the price the Fund would
receive if it sold the instrument. Under the direction of the Board of
Directors, procedures have been adopted to monitor and stabilize the price per
share. Calculations are made to compare the value of the Fund's portfolio valued
at amortized cost with market values. In the event that a deviation of one-half
of 1% or more exists between the $1.00 per share net asset value for the Fund
and the net asset value calculated by reference to market quotations, or if
there is any other deviation which the Board of Directors believes would result
in a material dilution to shareholders or purchasers, the Board of Directors
will promptly consider what action, if any, should be initiated. See "Net Asset
Value and Public Offering Price" in the Statement of Additional Information.
TAX STATUS
The Fund qualified as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), during its last
taxable year and intends to qualify as a regulated investment company during the
current taxable year. If so qualified, the Fund will not be liable for federal
income taxes to the extent it distributes its taxable income to shareholders.
Distributions by the Fund are generally taxable to shareholders as ordinary
income. Interest income from direct investments by noncorporate taxpayers in
United States Government obligations (but not repurchase agreements) generally
is not subject to state taxation. However, some states attempt to tax mutual
fund dividends attributable to such income. This treatment has been challenged
in a number of lawsuits. Shareholders are encouraged to consult their tax
advisers concerning this matter.
The foregoing relates to federal income taxation as in effect as of the date
of this Prospectus. For a more detailed discussion of the federal income tax
consequences of investing in shares of the Fund, see "Taxation" in the Statement
of Additional Information. Before investing in the Fund, you should check the
consequences of your local and state tax laws.
PERFORMANCE COMPARISONS
Advertisements and other sales literature may refer to the Fund's "yield,"
"effective yield," "average annual total return" and "cumulative total return."
All such yield and total return quotations are based upon historical earnings
and are not intended to indicate future performance.
13
<PAGE>
The Fund's yield refers to the income generated by an investment in the Fund
over a seven-day period stated in the advertisement. This income is then
annualized. That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment.
Average annual total return is the average annual compounded rate of return
on a hypothetical $1,000 investment made at the beginning of the advertised
period. Cumulative total return is calculated by subtracting a hypothetical
$1,000 payment to the Fund from the redeemable value of such payment at the end
of the advertised period, dividing such difference by $1,000 and multiplying the
quotient by 100. In calculating average annual and cumulative total return, all
dividends are assumed to be reinvested.
Comparative performance information may be used from time to time in
advertising the Fund's shares. For example, advertisements may compare the
Fund's performance to that of various unmanaged market indices, or may include
performance data from Lipper Analytical Services, Inc., Morningstar, Inc. or
other entities or organizations which track the performance of investment
companies.
For additional information regarding comparative performance information and
the calculation of yield, effective yield, average annual total return and
cumulative total return, see "Performance Comparisons" in the Statement of
Additional Information.
GENERAL INFORMATION
The Company is authorized to issue a total of 10 trillion shares of common
stock with a par value of $.01 per share. One hundred billion of these shares
have been authorized by the Board of Directors to be issued and have been
designated as Series B Common Shares, which are the shares of common stock of
the Fund.
The Board of Directors is empowered under the Company's Articles of
Incorporation to issue other series of the Company's common stock without
shareholder approval. In addition, the Board of Directors may, without
shareholder approval, create and issue one or more additional classes of shares
within the Fund, as well as within any series of the Company created in the
future. See "Capital Stock and Ownership of Shares" in the Statement of
Additional Information.
All shares, when issued, will be fully paid and nonassessable and will be
redeemable. All shares have equal voting rights. They can be issued as full or
fractional shares. A fractional share has pro-rata the same kind of rights and
privileges as a full share. The shares possess no preemptive or conversion
rights.
Each share of a series has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset value of the series'
shares. On some issues, such as the election of directors, all shares of the
Company vote together as one series. On an issue affecting only a particular
series, the shares of the affected series vote separately. Cumulative voting is
not authorized. This means that the holders of more than 50% of the shares
voting for the election of directors can elect 100% of the directors if they
choose to do so, and, in such event, the holders of the remaining shares will be
unable to elect any directors.
14
<PAGE>
The Bylaws of the Company provide that shareholder meetings be held only
with such frequency as required under Minnesota law. Minnesota corporation law
requires only that the Board of Directors convene shareholder meetings when it
deems appropriate. In addition, Minnesota law provides that if a regular meeting
of shareholders has not been held during the immediately preceding 15 months, a
shareholder or shareholders holding 3% or more of the voting shares of the
Company may demand a regular meeting of shareholders by written notice given to
the chief executive officer or chief financial officer of the Company. Within 30
days after receipt of the demand, the Board of Directors shall cause a regular
meeting of shareholders to be called, which meeting shall be held no later than
90 days after receipt of the demand, all at the expense of the Company. In
addition, the 1940 Act requires a shareholder vote for all amendments to
fundamental investment policies and restrictions and for all amendments to
investment advisory contracts.
PENDING LEGAL PROCEEDINGS
Complaints have been brought against the Adviser and the Distributor
relating to certain investment companies for which the Adviser acts or has acted
as investment adviser or subadviser. These lawsuits do not involve the Fund. A
number of complaints have been brought in federal and state court against the
Institutional Government Income Portfolio ("PJIGX") series of Piper Funds Inc.,
the Adviser, the Distributor, and certain individuals affiliated or formerly
affiliated with the Adviser and the Distributor. In addition, complaints have
been filed in federal court relating to a number of closed-end investment
companies managed by the Adviser and two open-end investment companies for which
the Adviser has acted as sub-adviser. The complaints, which ask for rescission
of plaintiff shareholders' purchases or compensatory damages, plus interest,
costs and expenses, generally allege, among other things, certain violations of
federal and/or state securities laws, including the making of materially
misleading statements in prospectuses concerning investment policies and risks.
The Adviser and the Distributor also are subject to regulatory inquiries related
to various funds or assets managed by the Adviser. See "Pending Litigation" in
the Statement of Additional Information.
On February 13, 1996, a Settlement Agreement became effective for the
consolidated class action lawsuit, titled In Re: PIPER FUNDS INC. INSTITUTIONAL
GOVERNMENT INCOME PORTFOLIO LITIGATION. The Amended Consolidated Class Action
Complaint was filed on October 5, 1994, in the United States District Court,
District of Minnesota, against PJIGX, the Adviser, the Distributor, William H.
Ellis and Edward J. Kohler, and had alleged the making of materially misleading
statements in the prospectus, common law negligent misrepresentation and breach
of fiduciary duty. The Settlement Agreement will provide approximately $67.5
million, together with interest earned, less certain disbursements and attorney
fees, to class members in payments scheduled over approximately three years.
Such payments will be made by Piper Jaffray Companies Inc. and the Adviser and
will not be an obligation of Piper Funds Inc. Three lawsuits and a number of
arbitrations brought by some of the investors who requested exclusion from the
settlement class remain pending. An additional Settlement Agreement has become
effective for litigation involving certain closed-end investment companies
managed by the Adviser, and agreements-in-principle have been reached to settle
certain other complaints. See "Pending Litigation" in the Statement of
Additional Information.
The Adviser and the Distributor do not believe that the PJIGX settlement,
any other settlement or agreement-in-principle to settle or any outstanding
complaint, action in arbitration or regulatory inquiry will have a material
adverse effect on their ability to perform under their agreements with the
Company or a material adverse effect on the Fund.
15
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS (AND/OR IN THE STATEMENT OF ADDITIONAL INFORMATION REFERRED TO
ON THE COVER PAGE OF THIS PROSPECTUS), AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND
OR PIPER JAFFRAY INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
16
<PAGE>
PIPER INSTITUTIONAL FUNDS INC.
INVESTMENT ADVISER
PIPER CAPITAL MANAGEMENT INCORPORATED
DISTRIBUTOR
PIPER JAFFRAY INC.
CUSTODIAN AND TRANSFER AGENT
INVESTORS FIDUCIARY TRUST COMPANY
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
LEGAL COUNSEL
DORSEY & WHITNEY LLP
Table of Contents
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction................................... 2
Fund Expenses.................................. 3
Financial Highlights........................... 4
Investment Objective and Policies.............. 5
Special Investment Methods..................... 6
Management..................................... 7
SHAREHOLDER GUIDE TO INVESTING
How to Purchase Shares....................... 9
How to Redeem Shares......................... 9
Shareholder Services......................... 10
Dividends and Distributions.................. 12
Valuation of Shares............................ 13
Tax Status..................................... 13
Performance Comparisons........................ 13
General Information............................ 14
</TABLE>
INSTITUTIONAL MONEY MARKET FUND
OCTOBER 28, 1996
PIF-05
<PAGE>
PART B
INSTITUTIONAL MONEY MARKET FUND
A series of Piper Institutional Funds Inc.
STATEMENT OF ADDITIONAL INFORMATION
October 28, 1996
Table of Contents
PAGE
Investment Objective, Policies and Restrictions. . . . . . . . . 2
Directors and Executive Officers . . . . . . . . . . . . . . . . 6
Investment Advisory and Other Services . . . . . . . . . . . . . 10
Portfolio Transactions and Allocation of Brokerage . . . . . . . 13
Capital Stock and Ownership of Shares. . . . . . . . . . . . . . 15
Net Asset Value and Public Offering Price. . . . . . . . . . . . 16
Performance Comparisons. . . . . . . . . . . . . . . . . . . . . 17
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . 19
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
General Information. . . . . . . . . . . . . . . . . . . . . . . 21
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 21
Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . 22
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus dated October 28, 1996, and
should be read in conjunction therewith. A copy of the Prospectus may be
obtained from the Fund at Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota 55402-3804.
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The shares of Piper Institutional Funds Inc. (the "Company") are currently
offered in one series: Institutional Money Market Fund (the "Fund"). The
investment objective and policies of the Fund are set forth in the Prospectus.
Certain additional investment information is set forth below.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements. The Fund's custodian will
hold the securities underlying any repurchase agreement or such securities will
be part of the Federal Reserve Book Entry System. The market value of the
collateral underlying the repurchase agreement will be determined on each
business day. If at any time the market value of the collateral falls below the
repurchase price of the repurchase agreement (including any accrued interest),
the Fund will promptly receive additional collateral (so the total collateral is
an amount at least equal to the repurchase price plus accrued interest).
The Fund has received from the Securities and Exchange Commission an
exemptive order permitting the Fund, along with other investment companies
currently managed by Piper Capital Management Incorporated (the "Adviser"), and
all future investment companies or series thereof advised by the Adviser or its
affiliates, to deposit uninvested cash balances into a large single joint
account to be used to enter into one or more large repurchase agreements.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreement transactions with the
same parties with whom it may enter into repurchase agreements. However, the
Fund does not currently enter into or intend to enter into such transactions
during the coming year. Under a reverse repurchase agreement, the Fund sells
securities and agrees to repurchase them at a mutually agreed date and price.
Because certain of the incidents of ownership of the security are retained by
the Fund, reverse repurchase agreements are considered a form of borrowing by
the Fund from the buyer, collateralized by the security. At the time the Fund
enters into a reverse repurchase agreement, it will establish and maintain a
segregated account with an approved custodian containing high-grade liquid debt
securities having a value not less than the repurchase price (including accrued
interest). Reverse repurchase agreements involve the risk that the market value
of the securities retained in lieu of sale by the Fund may decline below the
price of the securities the Fund has sold but is obligated to repurchase. In
the event the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's
obligation to repurchase the securities and the Fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decisions. Reverse repurchase agreements will be used as a means of borrowing
for investment purposes. This speculative technique is referred to as
leveraging. Leveraging may exaggerate the effect on net asset value of any
increase
-2-
<PAGE>
or decrease in the market value of a Fund's portfolio. Money borrowed for
leveraging will be subject to interest costs which may or may not be recovered
by income from or appreciation of the securities purchased. The Board of
Directors has established procedures, which are periodically reviewed by the
Board, pursuant to which the Adviser will monitor the creditworthiness of the
dealers and banks with which the Fund enters into reverse repurchase agreement
transactions.
PORTFOLIO TURNOVER
Portfolio turnover is the ratio of the lesser of annual purchases or sales
of portfolio securities to the average monthly value of portfolio securities,
not including securities maturing in less than 12 months. A 100% portfolio
turnover rate would occur, for example, if the lesser of the value of purchases
or sales of portfolio securities for a particular year were equal to the average
monthly value of the portfolio securities owned during such year.
The Fund, consistent with its objective, may attempt to maximize yield
through portfolio trading. This may involve selling portfolio instruments and
purchasing different instruments to take advantage of disparities of yield in
different segments of the high-grade money market or among particular
instruments within the same segment of the market. Since the Fund's assets will
be invested in securities with short maturities and the Fund will manage its
portfolio as described above, the portfolio will turn over several times a year.
However, this will not generally increase the Fund's brokerage costs, since
brokerage commissions as such are not usually paid in connection with the
purchase or sale of the instruments in which the Fund invests. Because
securities with maturities of less than one year are excluded from required
portfolio turnover rate calculations, the portfolio turnover rate for the Fund
will be zero.
INVESTMENT RESTRICTIONS
In addition to the investment objectives and policies set forth in the
Prospectus, the Fund is subject to certain investment restrictions, as set forth
below, which may not be changed without the vote of a majority of the Fund's
outstanding shares. "Majority," as used in the Prospectus and in this Statement
of Additional Information, means the lesser of (a) 67% of the outstanding shares
present at a meeting of the holders if more than 50% of the outstanding shares
are present in person or by proxy or (b) more than 50% of the outstanding
shares.
Unless otherwise specified below, the Fund will not:
1. With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer or own more than
10% of the outstanding voting securities of any one issuer, in each case other
than securities issued or guaranteed by the U.S. Government or any agency or
instrumentality thereof and securities of other investment companies.
-3-
<PAGE>
2. Invest 25% or more of the value of its total assets in the securities
of issuers conducting their principal business activities in any one industry.
This restriction does not apply to securities of the U.S. Government or its
agencies and instrumentalities and repurchase agreements relating thereto or to
obligations of U.S. banks, domestic branches thereof and U.S. branches of
foreign banks subject to United States regulation. The various types of
utilities companies, such as gas, electric, telephone, telegraph, satellite and
microwave communications companies, are considered as separate industries.
3. Issue any senior securities (as defined in the 1940 Act), other than as
set forth in restriction number 4 below.
4. Borrow money (provided that the Fund may enter into reverse repurchase
agreements) except from banks for temporary or emergency purposes. The Fund may
borrow money in an amount up to one-third of the value of its total assets in
order to meet redemption requests without immediately selling any of its
portfolio securities. If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three business days, reduce its
indebtedness to the extent necessary. The Fund will not purchase portfolio
securities while outstanding borrowings (other than reverse repurchase
agreements) exceed 5% of the value of the Fund's total assets. The Fund will
not borrow money for leverage purposes (provided that the Fund may enter into
reverse repurchase agreements for such purposes).
5. Mortgage, pledge or hypothecate its assets except to secure permitted
indebtedness. For purposes of this policy, collateral arrangements with respect
to reverse repurchase agreements or with respect to similar investment
techniques are not deemed to be a pledge or hypothecation of assets.
6. Purchase any securities on margin except to obtain such short-term
credits as may be necessary for the clearance of transactions.
7. Write, purchase or sell puts, calls or combinations thereof, provided
that the Fund may purchase securities with demand or put features.
8. Purchase or sell commodities or commodity futures contracts.
9. Purchase or sell real estate or real estate mortgage loans, except that
the Fund may invest in securities secured by real estate or interests therein or
issued by companies that invest in real estate or interests therein.
10. Act as an underwriter of securities of other issuers, except insofar
as the Fund may be technically deemed an underwriter under the federal
securities laws in connection with the disposition of portfolio securities.
11. Make loans of money or property to any person, except for loans of
portfolio securities and except through the use of repurchase agreements or the
-4-
<PAGE>
purchase of debt obligations in which the Fund may invest consistently with the
Fund's investment objective and policies.
In addition, as non-fundamental investment restrictions that may be changed
at any time without shareholder approval, the Fund will not:
(a) Invest more than 5% of the value of its total assets in the securities
of any issuers which, with their predecessors, have a record of less than three
years' continuous operation. (Securities of such issuers will not be deemed to
fall within this limitation if they are guaranteed by an entity in continuous
operation for more than three years. The value of all securities issued or
guaranteed by such guarantor and owned by the Fund shall not exceed 10% of the
value of the total assets of the Fund.)
(b) Make short sales of securities.
(c) Purchase or retain the securities of any issuer if, to the Fund's
knowledge, those officers or directors of the Company or its affiliates or of
its investment adviser who individually own beneficially more than 0.5% of the
outstanding securities of such issuer, together own more than 5% of such
outstanding securities.
(d) Invest for the purpose of exercising control or management.
(e) Purchase or sell oil, gas or mineral leases or interests in oil, gas
or other mineral exploration or development programs.
(f) Invest in the securities of other investment companies except as part
of a merger, consolidation or acquisition of assets.
(g) Invest more than 10% of its net assets in illiquid securities.
(h) Invest in real estate limited partnerships.
(i) Invest more than 5% of its net assets in warrants, valued at the lower
of cost or market. Included within this amount, but not to exceed 2% of the
value of the Fund's net assets, may be warrants which are not listed on the New
York or American Stock Exchange. For purposes of this investment restriction,
warrants acquired by the Fund in units or attached to securities may be deemed
to be without value.
Any investment restriction or limitation referred to above or in the
Prospectus, except the borrowing policy, which involves a maximum percentage of
securities or assets, shall not be considered to be violated unless an excess
over the percentage occurs immediately after an acquisition of securities or
utilization of assets and such excess results therefrom.
-5-
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of the Company and their principal occupations
during the past five years are set forth below. Unless otherwise indicated, all
positions have been held for more than five years. Each of the Company's
directors and officers also serves as a director or officer of various closed-
end and open-end investment companies managed by the Adviser.
NAME, ADDRESS AND (AGE) POSITION WITH THE COMPANY
---------------------- --------------------------
William H. Ellis* (54) Chairman of the Board of Directors
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
David T. Bennett (56) Director
3400 City Center
33 South Sixth Street
Minneapolis, Minnesota 55402
Jaye F. Dyer (69) Director
4670 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Karol D. Emmerich (47) Director
7302 Claredon Drive
Edina, Minnesota 55439
Luella G. Goldberg (59) Director
7019 Tupa Drive
Edina, Minnesota 55435
David A. Hughey (65) Director
134 Powers Road
Meredith, NH 03253
George Latimer (61) Director
754 Linwood Avenue
St. Paul, MN 55105
Paul A. Dow (45) President
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
Robert H. Nelson (33) Vice President
Piper Jaffray Tower and Treasurer
-6-
<PAGE>
222 South Ninth Street
Minneapolis, Minnesota 55402
Susan S. Miley (39) Secretary
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
- -----------------
* Directors of the Company who are interested persons (as that term is
defined by the 1940 Act) of Piper Capital Management Incorporated and the
Fund.
William H. Ellis is President of Piper Jaffray Companies Inc.; Director and
Chairman of the Board of Piper Capital Management Incorporated ("the Adviser");
President of the Adviser since 1994; Director of Piper Jaffray Inc..
David T. Bennett is of counsel to the law firm of Gray, Plant, Mooty, Mooty
& Bennett, P.A., located in Minneapolis, Minnesota. Mr. Bennett is chairman of
a group of privately held companies and serves on the board of directors of a
number of nonprofit organizations.
Jaye F. Dyer has been President of Dyer Management Company, a private
management company, since 1991. Prior to that he was President and Chief
Executive Officer of Dyco Petroleum Corporation, a Minneapolis based oil and
natural gas development company he founded, from 1971 to March 1, 1989, and
Chairman of the Board until December 31, 1990. Mr. Dyer serves on the board of
directors of Northwestern National Life Insurance Company, The ReliaStar
Financial Corp. (the holding company of Northwestern National Life Insurance
Company) and various privately held and nonprofit corporations.
Karol D. Emmerich has been President of The Paraclete Group, a consultant
to nonprofit organizations, since 1993. Prior to that she was Vice President,
Chief Accounting Officer and Treasurer of Dayton Hudson Corporation from 1980 to
1993. Ms. Emmerich is an Executive Fellow at the University of St. Thomas
Graduate School of Business and serves on the board of directors of a number of
privately held and nonprofit organizations.
Luella G. Goldberg serves on the board of directors of Northwestern
National Life Insurance Company (since 1976), The ReliaStar Financial Corp.
(since 1989), TCF Bank Savings fsb (since 1985), TCF Financial Corporation
(since 1988), and Hormel Foods Corp. (since 1993). Ms. Goldberg also serves as
a Trustee of Wellesley College, and as a director of a number of other
organizations, including the University of Minnesota Foundation and the
Minnesota Orchestral Association. Ms. Goldberg was Chairman of the Board of
Trustees of Wellesley College from 1985 to 1993 and acting President from July
1, 1993 to October 1, 1993.
David A. Hughey is a Trustee of Bentley College. Prior to September 1996,
he was Executive Vice President and Chief Administrative Officer of Dean Witter
InterCapital Inc., Dean Witter Services Company Inc. and Dean Witter
Distributors
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Inc.; Director, Executive Vice President and Chief Administrative Officer of
Dean Witter Trust Company; Vice President of Dean Witter Family of Funds and
TCW/DW Family of Funds; and Director of ICI Mutual Insurance Company.
George Latimer has been Chief Executive Officer of National Equity Fund,
Chicago, Illinois since November 1995; prior thereto, Mr. Latimer was Director,
Special Actions Office, Office of the Secretary, Department of Housing and Urban
Development since 1993, and prior thereto he had been Dean of Hamline Law
School, Saint Paul, Minnesota from 1990 to 1993. Mr. Latimer also serves on the
board of directors of Digital Biometrics, Inc. and Payless Cashways, Inc.
Paul A. Dow is Chief Investment Officer and Senior Vice President of the
Adviser.
Robert H. Nelson has been a Senior Vice President of the Adviser since
1993; prior there he had been a Vice President of the Adviser from 1991 to 1993.
Susan S. Miley has been Senior Vice President and General Counsel of the
Adviser since 1995 and Secretary of the Adviser since 1996; prior to which she
was counsel for American Express Financial Advisors, Minneapolis, Minnesota from
1994 to 1995 and an attorney at Simpson Thacher & Bartlett, New York, New York
from 1984 to 1992.
Ms. Goldberg, Ms. Emmerich and Mr. Dyer are members of the Audit Committee
of the Board of Directors. Ms. Goldberg acts as the chairperson of such
committee. The Audit Committee oversees the Company's financial reporting
process, reviews audit results and recommends annually to the Company a firm of
independent certified public accountants.
The Board of Directors also has a Committee of the Independent Directors,
consisting of Messrs. Bennett, Dyer, Hughey and Latimer, Ms. Emmerich and Ms.
Goldberg, and a Derivatives Subcommittee consisting of Ms. Emmerich, who serves
as chairperson, Ms. Goldberg and Mr. Dyer.
The functions of the Committee of the Independent Directors are: (a)
recommendation to the full Board of approval of any management, advisory,
sub-advisory and/or administration agreements; (b) recommendation to the full
Board of approval of any underwriting and/or distribution agreements; (c) review
of the fidelity bond and premium allocation; (d) review of errors and omissions
and any other joint insurance policies and premium allocation; (e) review of,
and monitoring of compliance with, procedures adopted pursuant to certain rules
promulgated under the 1940 Act; and (f) such other duties as the independent
directors shall, from time to time, conclude are necessary or appropriate to
carry out their duties under the 1940 Act. The functions of the Derivatives
Subcommittee are: (a) to oversee practices, policies and procedures of the
Adviser in connection with the use of derivatives; (b) to receive periodic
reports from management; and (c) to report periodically to the Committee of the
Independent Directors and the Board of Directors.
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<PAGE>
The directors of the Company who are officers or employees of the
Adviser or Sub-Adviser or any of their affiliates receive no remuneration
from the Company. Each of the other directors currently receives a quarterly
retainer of $3,625 that is allocated among the Fund and all other open-end
funds managed by the Adviser on the basis of the total assets of each such
fund. In addition, each director receives a fee from the Company for each
regular quarterly and in-person special meeting of the Board of Directors
attended. (The per-meeting fee is based on the combined total assets of the
Company and Piper Funds Inc. and ranges from $250 (net assets of less than
$200 million) to $1,500 (net assets of $5 billion or more). Members of the
Audit Committee who are not affiliated with the Adviser or Sub-Adviser
receive $1,000 for each Audit Committee meeting attended ($2,000 for the
chairperson of the Committee), and the chairperson of the Committee of the
Independent Directors receives $1,000 for each meeting of such committee
attended, with such fees being allocated evenly between the Company and all
other closed-end and open-end investment companies managed by the Adviser.
Members of the Committee of the Independent Directors and the Derivatives
Subcommittee (other than the chairperson of the Committee of the Independent
Directors) currently receive no additional compensation. In addition, each
Director who is not affiliated with the Adviser is reimbursed for expenses
incurred in connection with attending meetings.
The following table sets forth the compensation received by each director
from the Company during the fiscal year ended June 30, 1996, as well as the
total compensation received by each director from the Company and all other
registered investment companies managed by the Adviser or affiliates of the
Adviser during the calendar year ended December 31, 1995. Directors who are
officers or employees of the Adviser or any of its affiliates did not receive
any such compensation and are not included in the table. Mr. Hughey was not a
director of the Company during the fiscal year ended June 30, 1996, and
therefore, did not receive any compensation from the Company or the Fund
Complex.
Total
Aggregate Compensation
Compensation from Fund
Director From the Company Complex*
- -------- ---------------- --------
Jaye F. Dyer $1,647 $67,700
Karol D. Emmerich $1,647 $67,700
Luella G. Goldberg $1,693 $70,700
George Latimer $1,600 $64,700
David T. Bennett $1,600 $61,700
* Currently consists of 20 open-end and closed-end investment companies managed
by the Adviser, including the Company. During the 1995 calendar year, the Fund
Complex consisted of up to 27 such investment companies, managed by the Adviser
or an affiliate of the Adviser, several of which were merged or consolidated
during the year. Each director included in the table serves on the board of
each such open-end and closed-end investment company.
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INVESTMENT ADVISORY AND OTHER SERVICES
GENERAL
The investment adviser for the Fund is Piper Capital Management
Incorporated (the "Adviser"). Its affiliate, Piper Jaffray Inc. (the
"Distributor"), acts as the Fund's distributor. Each acts as such pursuant to a
written agreement which is periodically approved by the directors or the
shareholders of the Fund. The address of both the Adviser and the Distributor
is Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-
3804.
CONTROL OF THE ADVISER AND THE DISTRIBUTOR
The Adviser and the Distributor are both wholly owned subsidiaries of Piper
Jaffray Companies Inc., a publicly held corporation which is engaged through its
subsidiaries in various aspects of the financial services industry.
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
The Adviser acts as the investment adviser of the Fund under an Investment
Advisory and Management Agreement which has been approved by the Board of
Directors (including a majority of the directors who are not parties to the
agreement, or interested persons of any such party, other than as directors of
the Company) and the initial shareholder of the Company.
The Investment Advisory and Management Agreement will terminate
automatically in the event of its assignment. In addition, the agreement is
terminable at any time, without penalty, by the Board of Directors or by vote of
a majority of the Company's outstanding voting securities on not more than 60
days' written notice to the Adviser, and by the Adviser on 60 days' written
notice to the Company. The agreement may be terminated at any time by a vote of
the holders of a majority of the outstanding voting securities of the Fund, upon
60 days' written notice to the Adviser. Unless sooner terminated, the agreement
shall continue in effect for more than two years after its execution only so
long as such continuance is specifically approved at least annually by either
the Board of Directors or by a vote of a majority of the outstanding voting
securities of the Company, provided that in either event such continuance is
also approved by a vote of a majority of the directors who are not parties to
such agreement, or interested persons of such parties, cast in person at a
meeting called for the purpose of voting on such approval. If a majority of the
outstanding voting securities of any series of the Company approves the
agreement, the agreement shall continue in effect with respect to such approving
series whether or not the shareholders of the other series approve the
agreement.
Pursuant to the Investment Advisory and Management Agreement, the Fund pays
the Adviser monthly advisory fees equal on an annual basis to .15% of the Fund's
average daily net assets. The advisory fees paid by the Fund for the fiscal
years ended June 30, 1994, 1995 and 1996 and were $44,077, $51,262 and
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$155,276, respectively.
Although not required under the Investment Advisory and Management
Agreement, the Adviser has voluntarily agreed, for the fiscal year ending
June 30, 1997, to reimburse the Fund to the extent that total operating expenses
(including the Adviser's compensation but excluding interest, taxes, brokerage
fees and commissions and extraordinary expenses) exceed .35% per annum of
average daily net assets. Voluntary fee waivers and reimbursements by the
Adviser may be discontinued at any time following the Fund's fiscal year end, at
the Adviser's discretion. Even in the event of discontinuance of this
arrangement, the Fund will still be subject to the laws of certain states, which
require that if a mutual fund's expenses (including advisory fees but excluding
interest, taxes, brokerage commissions and extraordinary expenses) exceed
certain percentages of average net assets, the fund must be reimbursed for such
excess expenses. The Investment Advisory and Management Agreement provides that
the Adviser must make any expense reimbursements to the Fund required under
state law. The laws of California provide that aggregate annual expenses of a
mutual fund shall not normally exceed 2-1/2% of the first $30 million of the
average net assets, 2% of the next $70 million of the average net assets and
1-1/2% of the remaining average net assets. Such expenses include the Adviser's
compensation, but exclude interest, taxes, brokerage fees and commissions and
extraordinary expenses. The Adviser does not believe that the laws of any other
state in which the Fund's shares may be offered for sale contain expense
reimbursement requirements.
Under the Investment Advisory and Management Agreement, the Adviser
provides the Fund with advice and assistance in the selection and disposition of
the Fund's investments. All investment decisions are subject to review by the
Company's Board of Directors. The Adviser is obligated to pay the salaries and
fees of any affiliates of the Adviser serving as officers or directors of the
Company.
The same security may be suitable for the Fund and/or for other funds or
private accounts managed by the Adviser or its affiliates. If and when two or
more funds or accounts simultaneously purchase or sell the same security, the
transactions will be allocated as to price and amount in accordance with
arrangements equitable to each fund or account. The simultaneous purchase or
sale of the same securities by the Fund and other funds or accounts managed by
the Adviser or its affiliates may have a detrimental effect on the Fund, as this
may affect the price paid or received by the Fund or the size of the position
obtainable or able to be sold by the Fund.
EXPENSES
The expenses of the Fund are deducted from total income before dividends
are paid. These expenses include, but are not limited to, organizational costs,
fees paid to the Adviser, fees and expenses of officers and directors who are
not affiliated with the Adviser, taxes, interest, legal fees, transfer agent,
dividend disbursing agent and custodian fees, audit fees, brokerage fees and
commissions, fees and expenses of registering and qualifying the Fund and its
shares for distribution under federal and
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<PAGE>
state securities laws, expenses of preparing prospectuses and statements of
additional information and of printing and distributing prospectuses and
statements of additional information annually to existing shareholders, the
expenses of reports to shareholders, shareholders' meetings and proxy
solicitations and other expenses which are not expressly assumed by the Adviser
under the Investment Advisory and Management Agreement.
UNDERWRITING AND DISTRIBUTION AGREEMENT
Pursuant to an Underwriting and Distribution Agreement, the Distributor has
agreed to act as the principal underwriter for the Fund in the sale and
distribution to the public of Fund shares, either through dealers or otherwise.
The Distributor has agreed to offer such shares for sale at all times when such
shares are available for sale and may lawfully be offered for sale and sold.
The Distributor receives no compensation for its sales of Fund shares.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Investors Fiduciary Trust Company ("IFTC"), the transfer agent for the
Company, maintains certain omnibus shareholder accounts for the Fund. Each such
omnibus account represents the accounts of a number of individual shareholders
of the Fund. The Company has entered into Shareholder Account Servicing
Agreements with the Distributor and Piper Trust Company ("Piper Trust"),
pursuant to which the Distributor and Piper Trust provide certain transfer agent
and dividend disbursing agent services for the underlying individual shareholder
accounts held at the respective companies. Pursuant to such Agreements, the
Distributor and Piper Trust have agreed to perform the usual and ordinary
services of transfer agent and dividend disbursing agent not performed by IFTC
with respect to the underlying individual shareholder accounts, including,
without limitation, the following: maintaining all shareholder accounts,
preparing shareholder meeting lists, mailing shareholder reports and
prospectuses, tracking shareholder accounts for blue sky and Rule l2b-1
purposes, withholding taxes on nonresident alien and foreign corporation
accounts, preparing and mailing checks for disbursement of income dividends and
capital gains distributions, preparing and filing U.S. Treasury Department Form
1099 for all shareholders, preparing and mailing confirmation forms to
shareholders and dealers with respect to all purchases, exchanges and
liquidations of series shares and other transactions in shareholder accounts for
which confirmations are required, recording reinvestments of dividends and
distributions in series shares, recording redemptions of series shares, and
preparing and mailing checks for payments upon redemption and for disbursements
to withdrawal plan holders. As compensation for such services, the Distributor
and Piper Trust are paid annual fees of $9.00 per active shareholder account and
$6.00 per inactive account (defined as an account that has a balance of shares
in the Fund but that does not require a client statement for the current month).
There is no charge for a closed shareholder account (defined as an account that
has been inactive for at least three consecutive months). Such fees are payable
on a monthly basis at a rate of 1/12 of the annual per-account charge. Such fees
cover all services listed above, with the exception of preparing
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<PAGE>
shareholder meeting lists and mailing shareholder reports and prospectuses.
These services, along with proxy processing (if applicable) and other special
service requests, are billable as performed at a mutually agreed upon fee in
addition to the annual fee noted above, provided that such mutually agreed upon
fee shall be fair and reasonable in light of the usual and customary charges
made by others for services of the same nature and quality. Fees paid by the
Fund to the Distributor and Piper Trust during the fiscal year ended June 30,
1996 were $1,206 and $0, respectively.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
Because the Fund's portfolio is composed exclusively of debt, rather than
equity securities, most of the Fund's portfolio transactions are effected
without the payment of brokerage commissions, but at net prices which usually
include a markup. Most of the Fund's transactions are with the issuer, or with
major dealers on a principal basis acting for their own account and not as
brokers. However, portfolio transactions for the Fund which are executed on an
agency basis may be effected through the Distributor on a securities exchange if
the commissions, fees or other remuneration received by the Distributor are
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers or other futures commission merchants in connection with
comparable transactions involving similar securities or similar futures
contracts or options on futures contracts being purchased or sold on an exchange
during a comparable period of time. In effecting portfolio transactions through
the Distributor, the Fund intends to comply with Section 17(e)(1) of the 1940
Act. For the fiscal years ended June 30, 1994, 1995 and 1996, the Fund did not
pay any brokerage commissions.
The Adviser is responsible for decisions to buy and sell securities
for the Fund, the selection of broker-dealers to effect the transactions and the
negotiation of brokerage commissions, if any. In placing orders for securities
transactions, the primary criterion for the selection of a broker-dealer is the
ability of the broker-dealer, in the opinion of the Adviser, to secure prompt
execution of the transactions on favorable terms, including the reasonableness
of the commission and considering the state of the market at the time.
When consistent with these objectives, business may be placed with
broker-dealers who furnish investment research or services to the Adviser. Such
research or services include advice, both directly and in writing, as to the
value of securities; the advisability of investing in, purchasing or selling
securities; and the availability of securities, or purchasers or sellers of
securities; as well as analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts. This allows the Adviser to supplement its own investment research
activities and enables the Adviser to obtain the views and information of
individuals and research staffs of many different securities firms prior to
making investment decisions for the Fund. To the extent portfolio transactions
are effected with broker-dealers who furnish research services to the Adviser,
the Adviser receives a benefit, not capable of evaluation in dollar amounts,
without providing any direct monetary benefit to the Fund from
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<PAGE>
these transactions. The Adviser believes that most research services obtained
by it generally benefit several or all of the investment companies and private
accounts which it manages, as opposed to solely benefiting one specific managed
fund or account. Normally, research services obtained through managed funds or
accounts investing in common stocks would primarily benefit the managed funds or
accounts which invest in common stock; similarly, services obtained from
transactions in fixed-income securities would normally be of greater benefit to
the managed funds or accounts which invest in debt securities. The Fund will
not purchase at a higher price or sell at a lower price in connection with
transactions effected with a dealer, acting as principal, who furnishes research
services to the Adviser than would be the case if no weight were given by the
Adviser to the dealer's furnishing of such services.
The Adviser has not entered into any formal or informal agreements with any
broker-dealers, nor does it maintain any "formula" which must be followed in
connection with the placement of the Fund's portfolio transactions in exchange
for research services provided the Adviser, except as noted below. However, the
Adviser does maintain an informal list of broker-dealers, which is used from
time to time as a general guide in the placement of the Fund's business, in
order to encourage certain broker-dealers to provide the Adviser with research
services which the Adviser anticipates will be useful to it. Because the list
is merely a general guide, which is to be used only after the primary criterion
for the selection of broker-dealers (discussed above) has been met, substantial
deviations from the list are permissible and may be expected to occur. The
Adviser will authorize the Fund to pay an amount of commission for effecting a
securities transaction in excess of the amount of commission another
broker-dealer would have charged only if the Adviser determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either that particular transaction or the Adviser's overall responsibilities
with respect to the accounts as to which it exercises investment discretion. If
the Fund executes any transactions on an agency basis, it will generally pay
higher than the lowest commission rates available.
Any portfolio transactions for the Funds executed on an agency basis may be
effected through the Distributor. In determining the commissions to be paid to
the Distributor, it is the policy of the Fund that such commissions will, in the
judgment of the Adviser, subject to review by the Board of Directors, be both
(a) at least as favorable as those which would be charged by other qualified
brokers in connection with comparable transactions involving similar securities
being purchased or sold on an exchange during a comparable period of time, and
(b) at least as favorable as commissions contemporaneously charged by the
Distributor on comparable transactions for its most favored comparable
unaffiliated customers. While the Fund does not deem it practicable and in its
best interest to solicit competitive bids for commission rates on each
transaction, consideration will regularly be given to posted commission rates as
well as to other information concerning the level of commissions charged on
comparable transactions by other qualified brokers.
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<PAGE>
The Fund did not purchase any securities of its regular brokers or dealers
or parent companies of such brokers or dealers during the 1996 fiscal year.
CAPITAL STOCK AND OWNERSHIP OF SHARES
The Board of Directors is empowered under the Company's Articles of
Incorporation to issue additional series of the Company's common stock without
shareholder approval. On an issue affecting only a particular series, the
shares of the affected series vote separately. An example of such an issue
would be a fundamental investment restriction pertaining to only one series. In
voting on the Investment Advisory and Management Agreement (the "Agreement"),
approval of the Agreement by the shareholders of a particular series would make
the Agreement effective as to that series whether or not it had been approved by
the shareholders of the other series.
If the Company issues shares in additional series, the assets received by
the Company for the issue or sale of shares of each series, and all income,
earnings, profits and proceeds thereof, subject only to the rights of creditors,
are allocated to such series, and constitute the underlying assets of such
series. The underlying assets of each series are required to be segregated on
the books of account, and are to be charged with the expenses in respect to such
series and with a share of the general expenses of the Company. Any general
expenses of the Company not readily identifiable as belonging to a particular
series shall be allocated among the series based upon the relative net assets of
the series at the time such expenses were accrued.
The Board of Directors may, without shareholder approval, create and issue
one or more additional classes of shares within the Fund, as well as within any
series of the Company created in the future. All classes of shares in a Fund
would be identical except that each class of shares would be available through a
different distribution channel and certain classes might incur different
expenses for the provision of distribution services or the provision of
shareholder services or administration assistance by institutions. Shares of
each class would share equally in the gross income of a series, but any
variation in expenses would be charged separately against the income of the
particular class incurring such expenses. This would result in variations in
net investment income accrued and dividends paid by and in the net asset value
of the different classes of a series. This ability to create multiple classes
of shares within each series of the Company will allow the Company in the future
the flexibility to better tailor its methods of marketing, administering and
distributing shares of the Funds to the needs of particular investors and to
allocate expenses related to such marketing, administration and distribution
methods to the particular classes of shareholders of the Fund incurring such
expenses.
As of October 24, 1996, no shareholder was known to own beneficially 5% or
more of the outstanding shares of the Fund. The directors and officers of the
Funds as a group owned less than 1% of the outstanding shares of the Fund as of
such date.
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<PAGE>
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the public offering price of Fund shares is
summarized in the Prospectus in "Purchase of Shares -- Public Offering Price"
and "Valuation of Shares." The net asset value of the Fund's shares is
determined on each day on which the New York Stock Exchange is open, provided
that the net asset value need not be determined on days when no Fund shares are
tendered for redemption and no order for Fund shares is received. The New York
Stock Exchange is not open for business on the following holidays (or on the
nearest Monday or Friday if the holiday falls on a weekend): New Year's Day,
Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving
and Christmas.
The Fund values its portfolio securities at amortized cost in accordance
with Rule 2a-7 under the 1940 Act. This method involves valuing an instrument
at its cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuations in interest rates
on the market value of the instrument and regardless of any unrealized capital
gains or losses. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is higher
or lower than the price the Fund would receive if it sold the instrument.
During periods of declining interest rates, the daily yield on shares of the
Fund computed by dividing the annualized daily income of the Fund by the net
asset value computed as described above may tend to be higher than a like
computation made by the Fund with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all of its
securities.
Pursuant to Rule 2a-7, the Board of Directors of the Company has
determined, in good faith based upon a full consideration of all material
factors, that it is in the best interests of the Fund and its shareholders to
maintain a stable net asset value per share by virtue of the amortized cost
method of valuation. The Fund will continue to use this method only so long as
the Board of Directors believes that it fairly reflects the market-based net
asset value per share. In accordance with Rule 2a-7, the Board of Directors has
undertaken, as a particular responsibility within the overall duty of care owed
to Fund shareholders, to establish procedures reasonably designed, taking into
account current market conditions and the Fund's investment objectives, to
stabilize the Fund's net asset value per share at a single value. These
procedures include the periodic determination of any deviation of current net
asset value per share, calculated using available market quotations, from the
Fund's amortized cost price per share, the periodic review by the Board of the
amount of any such deviation and the method used to calculate any such
deviation, the maintenance of records of such determinations and the Board's
review thereof, the prompt consideration by the Board if any such deviation
exceeds 1/2 of 1%, and the taking of such remedial action by the Board as it
deems appropriate where it believes the extent of any such deviation may result
in material dilution or other unfair results to investors or existing
shareholders. Such remedial action may include redemptions in kind, selling
portfolio instruments prior to realizing capital gains or losses, shortening the
average portfolio maturity, withholding dividends or utilizing a net asset value
per share as determined by using available market
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<PAGE>
quotations. The Fund will, in further compliance with Rule 2a-7, maintain a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value and not exceeding 90 days, will not
purchase any instrument with a remaining maturity of greater than 397 calendar
days, will limit its portfolio investments to those U.S. dollar-denominated
instruments which the Board determines present minimal credit risks and which
are at the time of acquisition Eligible Securities (as defined in Rule 2a-7),
and will record, maintain and preserve a written copy of the above-described
procedures and a written record of the Board's considerations and actions taken
in connection with the discharge of its above-described responsibilities.
On June 30, 1996, the net asset value per share of the Fund was calculated
as follows:
Net Assets ($175,815,631) = Net Asset Value per Share ($1.00)
---------------------------------
Shares Outstanding (175,815,631)
PERFORMANCE COMPARISONS
Advertisements and other sales literature for the Fund may refer to
"yield," "effective yield," "average annual total return" and "cumulative total
return."
The Fund may issue current yield quotations. Simple yields are computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of a recent seven calendar day period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by 365/7. The
resulting yield figure will be carried to at least the nearest hundredth of one
percent. Effective yields are computed by determining the net change, exclusive
of capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of a recent seven calendar day period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:
365/7
Effective Yield = [(Base Period Return +1) ] -1
When calculating the foregoing yield or effective yield quotations, the
calculation of net change in account value will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, and all fees, other
than nonrecurring accounts or sales charges, that are charged to all shareholder
accounts in proportion to the length of the base period. Realized gains and
losses from the
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sale of securities and unrealized appreciation and depreciation are excluded
from the calculation of yield and effective yield.
The Fund's yield and effective yield, based upon the seven days ended
June 30, 1996, were 5.04% and 5.16%, respectively. During some of the
periods for which yield was calculated, the Adviser voluntarily waived or
reimbursed certain fees or expenses for the Fund, thereby increasing yields.
These fees may or may not be waived or reimbursed in the future, in the
Adviser's discretion. The yield and effective yield of the Fund as of June
30, 1996, absent the waiver of fees would have been 5.00% and 5.12%,
respectively.
Average annual total return figures are computed by finding the average
annual compounded rates of return over the periods indicated in the
advertisement that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made
at the beginning of such period.
This calculation assumes all dividends and any capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The average annual total returns for the Fund for one year and since
inception (February 2, 1993) for the period ending June 30, 1996 were 5.42% and
4.43%, respectively.
Cumulative total return is computed by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
CTR = (ERV-P) 100
-----
(P)
Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made
at the beginning of such period; and
P = initial payment of $1,000.
This calculation assumes all dividends and any capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in
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<PAGE>
the Prospectus and includes all recurring fees, such as investment advisory and
management fees, charged to all shareholder accounts.
The cumulative total return for the Fund from inception (February 2, 1993)
to June 30, 1996 was 15.93%.
In addition to advertising total return, comparative performance
information may be used from time to time in advertising the Fund's shares,
including data from Lipper Analytical Services, Inc. ("Lipper"), Morningstar,
other industry publications and other entities or organizations which track the
performance of investment companies. Performance information for the Fund also
may be compared to various unmanaged indices. Unmanaged indices do not reflect
deductions for administrative and management costs and expenses. The Fund ma
also include in advertisements and communications to Fund shareholders
evaluations of the Fund published by nationally recognized ranking services and
by financial publications that are nationally recognized, such as BARRON'S,
BUSINESS WEEK, FORBES, INSTITUTIONAL INVESTOR, INVESTOR'S DAILY, MONEY,
KIPLINGER'S PERSONAL FINANCE MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, THE NEW
YORK TIMES, USA TODAY AND THE WALL STREET JOURNAL.
REDEMPTION OF SHARES
GENERAL
Redemption of shares, or payment, may be suspended at times (a) when the
New York Stock Exchange is closed for other than customary weekend or holiday
closings, (b) when trading on said Exchange is restricted, (c) when an emergency
exists, as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable, or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) during any other period
when the Securities and Exchange Commission, by order, so permits, provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist.
Shareholders who purchased Fund shares through a broker-dealer other than
the Distributor may redeem such shares either by oral request to such broker-
dealer or by written request to IFTC at the address set forth in the Prospectus.
To be considered in proper form, written requests for redemption should indicate
the dollar amount or number of shares to be redeemed, refer to the shareholder's
Fund account number, and give either a social security or tax identification
number. The request should be signed in exactly the same way the account is
registered. If there is more than one owner of the shares, all owners must
sign. If shares to be redeemed have a value of $10,000 or more or redemption
proceeds are to be paid to someone other than the shareholder at the
shareholder's address of record, the signature(s) must be guaranteed by an
"eligible guarantor institution," which includes a commercial bank that is a
member of the Federal Deposit Insurance Corporation, a trust company, a member
firm of a domestic stock exchange, a savings association or a credit union that
is authorized by its charter to provide a signature guarantee.
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<PAGE>
IFTC may reject redemption instructions if the guarantor is neither a member of
nor a participant in a signature guarantee program. Signature guarantees by
notaries public are not acceptable. The purpose of a signature guarantee is to
protect shareholders against the possibility of fraud. Further documentation
will be requested from corporations, administrators, executors, personal
representatives, trustees and custodians. Redemption requests given by
facsimile will not be accepted. Unless other instructions are given in proper
form, a check for the proceeds of the redemption will be sent to the
shareholder's address of record.
SYSTEMATIC WITHDRAWAL PLAN
To establish a Systematic Withdrawal Plan for the Fund and receive regular
periodic payments, an account must have a value of $5,000 or more. A request to
establish a Systematic Withdrawal Plan must be submitted in writing to an
investor's Piper Jaffray Investment Executive or other broker-dealer. There are
no service charges for maintenance; the minimum amount that may be withdrawn
each period is $100. (This is merely the minimum amount allowed and should not
be interpreted as a recommended amount.) The holder of a Systematic Withdrawal
Plan will have any income dividends and any capital gains distributions
reinvested in full and fractional shares at net asset value. To provide funds
for payment, the Fund will redeem as many full and fractional shares as
necessary at the redemption price, which is net asset value. Redemption of
shares may reduce or possibly exhaust the shares in your account, particularly
in the event of a market decline. As with other redemptions, a redemption to
make a withdrawal payment is a sale for federal income tax purposes. Payments
made pursuant to a Systematic Withdrawal Plan cannot be considered as actual
yield or income since part of such payments may be a return of capital.
A confirmation of each transaction showing the sources of the payment and
the share and cash balance remaining in the account will be sent. The plan may
be terminated on written notice by the shareholder or the Fund, and it will
terminate automatically if all shares are liquidated or withdrawn from the
account or upon the death or incapacity of the shareholder. The amount and
schedule of withdrawal payments may be changed or suspended by giving written
notice to your Piper Jaffray Investment Executive or other broker-dealer at
least seven business days prior to the end of the month preceding a scheduled
payment.
TAXATION
Pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), the
Fund will be subject to a nondeductible excise tax equal to 4% of the excess, if
any, of the amount required to be distributed pursuant to the Code for each
calendar year over the amount actually distributed. In order to avoid the
imposition of this excise tax, the Fund generally must declare dividends by the
end of a calendar year representing 98% of the Fund's ordinary income for the
calendar year and 98% of its capital gain net income (both long-term and
short-term capital gains) for the 12-month period ending October 31 of the
calendar year. For purposes of this
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<PAGE>
calculation, any amount of income on which corporate-level income tax has been
paid is deemed to have been distributed.
Ordinarily, distributions and redemption proceeds earned by the Fund
shareholder are not subject to withholding of federal income tax. However, 31%
of the Fund's distributions and redemption proceeds must be withheld if a
shareholder fails to supply the Fund or its agent with such shareholder's
taxpayer identification number or if a shareholder who is otherwise exempt from
withholding fails to properly document such shareholder's status as an exempt
recipient.
Distributions paid from net realized capital gains, if any, will be taxable
to shareholders as ordinary income. Capital gains from the sale or exchange of
shares are also taxable.
Distributions may be subject to state and local income taxes and the
treatment thereof may differ from the federal income tax consequences discussed
above.
GENERAL INFORMATION
Minnesota has enacted legislation which authorizes corporations to
eliminate or limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of the fiduciary duty of "care"
(the duty to act with the care an ordinarily prudent person in a like position
would exercise under similar circumstances). Minnesota law does not, however,
permit a corporation to eliminate or limit the liability of a director (a) for
any breach of the director's duty of "loyalty" to the corporation or its
shareholders (the duty to act in good faith and in a manner reasonably believed
to be in the best interest of the corporation), (b) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(c) for authorizing a dividend, stock repurchase or redemption or other
distribution in violation of Minnesota law or for violation of certain
provisions of Minnesota securities laws, or (d) for any transaction from which
the director derived an improper personal benefit. Minnesota law does not
permit elimination or limitation of a director's liability under the 1933 Act or
the Securities Exchange Act of 1934, and the 1940 Act prohibits elimination or
limitation of a director's liability for acts involving willful malfeasance, bad
faith, gross negligence or reckless disregard of the duties of a director. The
Articles of Incorporation of the Company limit the liability of directors to the
fullest extent permitted by Minnesota law and the 1940 Act.
FINANCIAL STATEMENTS
The audited financial statements of the Fund dated June 30, 1996, as set
forth in the Fund's Annual Report, are incorporated by reference into this
Statement of Additional Information. The audited financial statement are proved
in reliance on the report of KPMG Peat Marwick LLP, 4200 Norwest Center,
Minneapolis, Minnesota 55402, independent auditors of the Fund, given on the
authority of such firm as experts in accounting and auditing.
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<PAGE>
PENDING LITIGATION
Complaints have been brought in federal and state court relating to one
open-end and twelve closed-end investment companies managed by the Adviser and
to two open-end funds for which the Adviser has acted as sub-adviser. On
February 13, 1996, a Settlement Agreement became effective for the consolidated
class action lawsuit, titled IN RE: PIPER FUNDS INC. INSTITUTIONAL GOVERNMENT
INCOME PORTFOLIO LITIGATION. The Amended Consolidated Class Action Complaint
was filed on October 5, 1994, in the United States District Court, District of
Minnesota, against Institutional Government Income Portfolio (a series of Piper
Funds Inc.), the Adviser, the Distributor, William H. Ellis and Edward J.
Kohler, and had alleged the making of materially misleading statements in the
prospectus, common law negligent misrepresentation and breach of fiduciary duty.
The Settlement Agreement will provide approximately $67.5 million, together with
interest earned, less certain disbursements and attorney fees, to class members
in payments scheduled over approximately three years. Such payments will be
made by Piper Jaffray Companies Inc. and the Adviser and will not be an
obligation of Piper Funds Inc.
Two additional complaints relating to the Institutional Government Income
Portfolio remain pending. These complaints were brought by investors who
requested exclusion from the settlement class and are based on claims similar to
those asserted in the consolidated Class Action complaint. The first pending
complaint was brought on April 11, 1995, and filed in the Minnesota State
District Court, Hennepin County. This action was removed to United States
District Court, District of Minnesota. The plaintiff, Frank R. Berman, Trustee
of Frank R. Berman Professional CP Pension Plan Trust, sued individually and not
on behalf of any putative class. Defendants are the Distributor, Piper Funds
Inc., Morton Silverman and Worth Bruntjen. A second pending complaint relating
to the Institutional Government Income Portfolio was filed on June 22, 1995 in
the Montana Thirteenth Judicial District Court, Yellowstone County by Beverly
Muth against the Distributor and Teresa L. Darnielle. In addition to the above
complaints, a number of actions have been commenced in arbitration by some of
individual investors who requested exclusion from the settlement class in the IN
RE: PIPER FUNDS INC. action.
A complaint was filed by Herman D. Gordon on October 20, 1994, in the
United States District Court, District of Minnesota, against American Adjustable
Rate Term Trust Inc.--1998, American Adjustable Rate Term Trust Inc.--1999, the
Adviser, the Distributor, Piper Jaffray Companies Inc., Benjamin Rinkey, Jeffrey
Griffin, Charles N. Hayssen and Edward J. Kohler. A second complaint was filed
by Frank Donio, I.R.A. and other plaintiffs on April 14, 1995, in the United
States District Court, District of Minnesota, against American Adjustable Rate
Term Trust Inc.--1996, American Adjustable Rate Term Trust Inc.--1997, American
Adjustable Rate Term Trust Inc.--1998, American Adjustable Rate Term Trust Inc.-
- -1999, the Adviser, the Distributor, Piper Jaffray Companies Inc. and certain
associated individuals. Plaintiffs in both actions filed a Consolidated Amended
Class Action Complaint on May 23, 1995 and by Order dated June 8, 1995, the
Court consolidated the two putative class actions. The consolidated amended
complaint, which
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<PAGE>
purports to be a class action, alleges certain violations of federal and state
securities laws, breach of fiduciary duty and negligent misrepresentation. On
August 23, 1996, the Court granted final approval to the parties' agreement to
settle all outstanding cliams of the purported class action. The Effective Date
of the Settlement Agreement was September 23, 1996. The Settlement Agreement
provides for $14 million in principal payments consisting of $500,000 which was
paid upon the Court's preliminary approval, $1.5 million which was paid on the
Effective Date of the Settlement Agreement, and payments of $3 million on each
anniversary of the Effective Date for the next four years, with accrued interest
payments of up to $1.8 million.
Two additional complaints relating to the American Adjustable Rate Term
Trusts, which are based on claims similar to those asserted in the Gordon/Donio
Consolidated Complaint, remain pending. The first of these additional
complaints was filed against the Distributor on August 11, 1995 in Washington
State District Court, King County, by plaintiff Ernest Volinn. The second
complaint was filed against the Distributor on November 1, 1995 in the United
States District Court, District of Idaho, by plaintiff Ewing Company Profit
Sharing Plan. In addition to the above complaints, a number of actions have
been commenced in arbitration by individual investors in the American Adjustable
Rate Term Trusts.
A complaint was filed by Gary E. Nelson on June 28, 1995 in the United
States District Court for the Western District of Washington at Seattle against
American Strategic Income Portfolio Inc. -- II ("BSP"), the Adviser, the
Distributor, Piper Jaffray Companies Inc., Worth Bruntjen, Charles N. Hayssen,
Michael Jansen, William H. Ellis and Edward J. Kohler. A second complaint was
filed by the same individual in the same court on July 12, 1995 against American
Opportunity Income Fund Inc. ("OIF"), the Adviser, the Distributor, Piper
Jaffray Companies Inc., Worth Bruntjen, Charles N. Hayssen, Michael Jansen,
William H. Ellis and Edward J. Kohler. On September 7, 1995, Christian
Fellowship Foundation Peace United Church of Christ, Gary E. Nelson and Lloyd
Schmidt filed an amended complaint purporting to be a class action in the United
States District Court for the District of Washington. The complaint was filed
against American Government Income Portfolio, Inc. ("AAF"), American Government
Income Fund Inc. ("AGF"), American Government Term Trust, Inc., American
Strategic Income Portfolio Inc. ("ASP"), American Strategic Income Portfolio
Inc. -- II, American Strategic Income Portfolio Inc. -- III ("CSP"), American
Opportunity Income Fund Inc., American Select Portfolio Inc., Piper Jaffray
Companies Inc., the Distributor, the Adviser and certain associated individuals.
By Order filed October 5, 1995, the complaints were consolidated. Plaintiffs
filed a second amended complaint on February 5, 1996 and a third amended
complaint on June 4, 1996. The third amended third complaint alleges generally
that the prospectus and financial statements of each investment company were
false and misleading. Specific violations of various federal securities laws
are alleged with respect to each investment company. The complaint also alleges
that the defendants violated the Racketeer Influenced and Corrupt Organizations
Act, the Washington State Securities Act and the Washington Consumer Protection
Act. The named plaintiffs and defendants have reached an agreement-in-principle
on a proposed settlement. If approved by the Court, a
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<PAGE>
settlement agreement consistent with the terms of the agreement-in-principle
would provide $15.5 million to class members in payments by Piper Jaffray
Companies Inc. and the Adviser over the next four years. The settlement also
includes an agreement that each of OIF, AAF, and AGF would offer to repurchase
up to 25% of their outstanding shares from current shareholders at net asset
value. If the discounts between net asset value and market price of these funds
do not decrease to 5% or less within approximately two years after the effective
date of the settlement, the fund boards may submit shareholder proposals to
convert these funds to an open-end format. Finally, the agreement stipulates
that each of ASP, BSP, CSP and SLA would offer to repurchase up to 10% of their
outstanding shares from current shareholders at net asset value.
Four additional complaints are pending which involve the funds named as
defendants in the Nelson/Christian Fellowship Consolidated Action and are based
on claims similar to that action. The first additional complaint was filed
against the Distributor and Richard Tallent in Montana State District Court,
Silver Bow County on November 1, 1995 by plaintiff John Darlington. The second
complaint was filed against the Distributor and Richard Tallent on April 11,
1996 in Montana State District Court, Silver Bow County by plaintiff Kenneth
Schneider. The third complaint was filed against the Distributor and Richard
Tallent on April 11, 1996 in Montana State District Court, Silver Bow County by
plaintiff Margaret Nagel. The fourth complaint was filed against the
Distributor on August 7, 1996 by plaintiff Kenneth Gennerman as Trustee of the
Nicole Bowlin Trust in Wisconsin Circuit Court, Waukesha County. In addition to
the above complaints, a number of arbitrations have been commenced by individual
investors in the funds named as defendants in the Nelson/Christian Fellowship
Consolidated Action.
Complaints have also been filed relating to two open-end funds for which
the Adviser has acted as sub-adviser, Managers Intermediate Mortgage Fund and
Managers Short Government Fund. A complaint was filed on September 26, 1994 in
the United States District Court, District of Connecticut, by Florence R. Hosea,
Bobby W. Hosea, Getrud B. Dale and Peter M. Dale, Andrew Poffel and Diane Poffel
as tenants by the Entireties, Myrone Sarone, Donna M. DiPalo, Bernard B. Geltner
and Gail Geltner and Paul Delman. The complaint was filed against The Managers
Funds, The Managers Funds, L.P., Robert P. Watson, the Adviser, the Distributor,
an individual associated with the Adviser, Evaluation Associates, Inc. and
Managers Intermediate Mortgage Fund. The complaint, which is a putative class
action, alleges certain violations of federal securities laws, including the
making of false and misleading statements in the prospectus, and alleges
negligent misrepresentation, breach of fiduciary duty and common law fraud. A
similar complaint was filed as a putative class action in the same court on
November 4, 1994. The complaint was filed by Karen E. Kopelman against The
Managers Fund, The Managers Funds, L.P., Robert P. Watson, the Adviser, the
Distributor, Worth Bruntjen, Evaluation Associates, Inc. and Managers
Intermediate Mortgage Fund. The two putative class actions were consolidated by
court order on December 13, 1994. Plaintiffs filed an Amended and Restated
Complaint on July 19, 1995. A complaint relating to the Managers Short
Government Fund was filed on November 18, 1994 in the United States District
Court, District of Minnesota. The
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<PAGE>
complaint was filed by Robert Fleck as a putative class action against The
Managers Funds, The Managers Funds, L.P., the Adviser, the Distributor, Worth
Bruntjen, Evaluation Associates, Inc., Robert P. Watson, John E. Rosati, William
M. Graulty, Madeline H. McWhinney, Steven J. Pasggioli, Thomas R. Schneeweis and
Managers Short Government Fund, F/K/A/ Managers Short Government Income Fund.
The complaint alleges certain violations of federal securities laws, including
the making of false and misleading statements in the prospectus, and negligent
misrepresentation. The named plaintiff and defendants have reached an
agreement-in-principle on a proposed settlement. If approved by the Court and a
sufficiently large percentage of the putative class members, a settlement
agreement consistent with the terms of the agreement-in-principle would provide
to class members up to a total of $1.5 million collectively from The Managers
Funds, L.P. and the Adviser on the effective date of the settlement. A third
complaint relating to both the Managers Intermediate Mortgage Fund and the
Managers Short Government Fund was filed on October 26, 1995 in Connecticut
State Superior Court, Stamford/Norwalk District. The complaint was filed by
First Commercial Trust Company, N.A. against the Managers Funds, Managers Short
Government Fund, Managers Intermediate Mortgage Fund, Managers Short and
Intermediate Bond Fund, The Managers Funds, L.P., EAIMC Holdings Corporation,
Evaluation Associates Holding Corporation, EAI Partners, L.P., Evaluation
Associates, Inc., Robert P. Watson, William W. Graulty, Madeline H. McWhinney,
Steven J. Paggioli, Thomas R. Schneeweis, William J. Crerend, the Adviser, Piper
Jaffray Companies Inc., Worth Bruntjen, Standish, Ayer & Wood, Inc., TCW Funds
Managements, Inc., and TCW Management Company. The complaint alleges claims
under Connecticut common law and violation of the Connecticut Securities Act and
the Connecticut Unfair and Deceptive Trade Practices Act.
The Adviser and Distributor do not believe that the settlements described
above, or any of the above lawsuits and arbitrations, will have a material
adverse effect upon their ability to perform under their agreements with the
Company, and they intend to defend the remaining lawsuits vigorously.
-25-
<PAGE>
PART C
Piper Institutional Funds Inc.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements are incorporated by reference to the Registrant's
Annual Report previously filed with the Commission.
(b) Exhibits:
(1) Restated Articles of Incorporation (1)
(2) Amended Bylaws (1)
(5) Investment Advisory and Management Agreement (1)
(6) Amended Underwriting and Distribution Agreement (1)
(8) Custody Agreement (1)
(9) Agency Agreement (1)
(10) Opinion and Consent of Dorsey & Whitney (1)
(11) Consent of KPMG Peat Marwick LLP (2)
(13) Letter of Investment Intent (1)
(15) Plan of Distribution (1)
(16) Powers of Attorney (1)
(18) Shareholder Account Servicing Agreement with Piper Trust
(19) Shareholder Account Servicing Agreement with Piper Jaffray
- -------------------
(1) Incorporated by reference to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A filed October 31, 1995.
(2) Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is directly or indirectly controlled by or under common control
with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of October 24, 1996:
Number of
Fund Title of Class Record Holders
---- -------------- --------------
Institutional Money Market Fund Common Shares 421
ITEM 27. INDEMNIFICATION
The Articles of Incorporation and Bylaws of the Registrant provide that the
Registrant shall indemnify such persons for such expenses and liabilities, in
such manner and under such circumstances, to the full extent permitted by
Section 302A.521, Minnesota Statutes, as now enacted or hereafter amended,
provided that
<PAGE>
no such indemnification may be made if it would be in violation of Section 17(h)
of the Investment Company Act of 1940, as now enacted or hereafter amended.
Section 302A.521 of the Minnesota Statutes, as now enacted, provides that a
corporation shall indemnify a person made or threatened to be made a party to a
proceeding of the person against judgments, penalties, fines, settlements, and
reasonable expenses, including attorneys' fees and disbursements, incurred by
the person in connection with the proceeding if, with respect to the acts or
omissions of the person complained of in the proceeding, the person has not been
indemnified by another organization for the same judgments, penalties, fines,
settlements, and reasonable expenses incurred by the person in connection with
the proceeding with respect to the same acts or omissions; acted in good faith,
received no improper personal benefit and the Minnesota Statutes dealing with
directors' conflicts of interest, if applicable, have been satisfied; in the
case of a criminal proceeding, had no reasonable cause to believe that the
conduct was unlawful; and reasonably believed that the conduct was in the best
interests of the corporation or, in certain circumstances, reasonably believed
that the conduct was not opposed to the best interests of the corporation.
Insofar as the indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information on the business of the Adviser is described in the section of
the Prospectus, incorporated by reference in this Registration Statement,
entitled "Management -- Investment Adviser."
The officers and directors of the Adviser and their titles are as follow:
Name Title
---- -----
William H. Ellis President, Director and Chairman of
the Board
Charles N. Hayssen Director
2
<PAGE>
Bruce C. Huber Director
David E. Rosedahl Director
Momchilo Vucenich Director
Paul A. Dow Senior Vice President and
Chief Investment Officer
Susan S. Miley Senior Vice President, General
Counsel and Secretary
Worth Bruntjen Senior Vice President
Michael C. Derck Senior Vice President
Richard W. Filippone Senior Vice President
John J. Gibas Senior Vice President
Marijo A. Goldstein Senior Vice President
Mark R. Grotte Senior Vice President
Jerry F. Gudmundson Senior Vice President
Robert C. Hannah Senior Vice President
Lynne Harrington Senior Vice President
Kim Jenson Senior Vice President
Lisa A. Kenyon Senior Vice President
Mark S. Lee Senior Vice President
Thomas S. McGlinch Senior Vice President
Curt D. McLeod Senior Vice President
Steven V. Markusen Senior Vice President
Paula Meyer Senior Vice President
Robert H. Nelson Senior Vice President
Gary Norstrem Senior Vice President
Nancy S. Olsen Senior Vice President
Ronald R. Reuss Senior Vice President
Bruce D. Salvog Senior Vice President
John K. Schonberg Senior Vice President
Sandra K. Shrewsbury Senior Vice President
David M. Steele Senior Vice President
Robert H. Weidenhammer Senior Vice President
John G. Wenker Senior Vice President
Douglas J. White Senior Vice President
Cynthia K. Castle Vice President
Richard Daly Vice President
Molly Destro Vice President
Julie Deutz Vice President
Joyce A. K. Halbe Vice President
Joan L. Harrod Vice President
Mary M. Hoyme Vice President
Amy K. Johnson Vice President
Russell J. Kappenman Vice President
Kimberly F. Kaul Vice President
John D. Kightlinger Vice President
Wan-Chong Kung Vice President
3
<PAGE>
Steven Meyer Vice President
Thomas Moore Vice President
Chris Neuharth Vice President
Paul D. Pearson Vice President
Eric L. Siedband Vice President
Catherine M. Stienstra Vice President
Shaista Tajamal Vice President
Jill A. Thompson Vice President
Jane K. Welter Vice President
Marcy K. Winson Vice President
Fong P. Woo Vice President
Principal occupations of Messrs. Ellis, Dow, Nelson and Ms. Miley are set
forth in the Statement of Additional Information under the heading "Directors
and Officers." MR. HAYSSEN is a Director of the Adviser and has been Chief
Information Officer of Piper Jaffray Companies Inc. since January 1996 and a
Managing Director of Piper Jaffray Inc. ("Piper Jaffray") since 1986, prior to
which he was a Managing Director of Piper Jaffray Companies Inc. from 1987 to
1995, Chief Financial Officer of Piper Jaffray from 1988 to 1995, Chief
Financial Officer of the Adviser from 1989 to 1995 and Chief Operating Officer
of the Adviser from 1994 to 1995. MR. HUBER has been a Director of the Adviser
since 1985 and a Managing Director of Piper Jaffray since 1986. MR. ROSEDAHL is
a Director of the Adviser and Managing Director and Secretary for Piper Jaffray
and Managing Director, Secretary and General Counsel for Piper Jaffray Companies
Inc. MR. VUCENICH has been a Director of the Adviser since 1994 and a Managing
Director of Piper Jaffray Inc. since 1993.
MR. BRUNTJEN has been a Senior Vice President of the Adviser since 1988.
MR. DERCK has been a Vice President of the Adviser since November 1992, prior to
which he had been a manager of Advisory Accounts Services with the Adviser since
April 1992 and, before that, an Assistant Vice President at First Trust since
1976. MR. FILIPPONE has been a Senior Vice President of the Adviser since 1991.
MR. GIBAS has been a Senior Vice President of the Adviser since 1992, prior to
which he had been a Vice President of the Adviser from 1987 to 1992. MS.
GOLDSTEIN has been a Senior Vice President of the Adviser since 1993, prior to
which she was a Vice President of the Adviser from 1991 to 1993. MR. GROTTE has
been a Senior Vice President of the Adviser since 1992, prior to which he had
been a Vice President of the Adviser from 1988 to 1992. MR. GUDMUNDSON has been
a Senior Vice President of the Adviser since 1995, prior to which he was an
Executive Vice President at Resource Capital Advisers from 1991 to 1995. MR.
HANNAH has been a Senior Vice President of the Adviser since 1995, prior to
which he was manager of Craig and Associates in Seattle, Washington from 1993 to
1994, and prior thereto, he was manager of Exvere in Seattle from January 1993
to August 1993 and a registered representative at Geneva in Irvine, California
from 1991 to 1992. MS. HARRINGTON has been a Senior Vice President of the
Adviser since 1995, prior to which she was a Managing Director at Piper Jaffray
Inc. in the Public Finance Department. MS. KENYON has been a Senior Vice
President of the Adviser since 1992, prior to which she had been a
4
<PAGE>
financial adviser for a private family in Los Angeles. MS. JENSON has been a
Senior Vice President of the Adviser since 1996, prior to which she was a
Managing Director at Piper Trust since 1991. MR. LEE has been a Senior Vice
President of the Adviser since 1995, prior to which he had been a Vice President
of the Adviser since 1990. MR. MCGLINCH has been a Senior Vice President of the
Adviser since 1995, prior to which he had been a Vice President of the Adviser
since 1992 and, prior thereto, he had been a specialty products trader at FBS
Investment Services from 1990 to 1992. MR. MCLEOD has been a Senior Vice
President of the Adviser since 1995, prior to which he had been an analyst at
the Adviser since 1988. MR. MARKUSEN has been a Senior Vice President of the
Adviser since 1993, prior to which had been a senior vice president of
Investment Advisers, Inc., in Minneapolis, Minnesota from 1989 to 1993. MS.
MEYER has been a Senior Vice President of the Adviser since 1994, prior to which
she had been a Vice President of Secura Insurance, Appleton, Wisconsin from 1988
to 1994. MR. NORSTREM has been a Senior Vice President of the Adviser since
1993, prior to which he was Treasurer of the City of Saint Paul, Minnesota for
twenty-eight years. MS. OLSEN has been a Senior Vice President of the Adviser
since 1991. MR. REUSS has been a Senior Vice President of the Adviser since
1989. MR. SALVOG has been a Senior Vice President of the Adviser since 1992,
prior to which he had been a portfolio manager at Kennedy & Associates in
Seattle, Washington from 1984 to 1992. MR. SCHONBERG has been a Senior Vice
President of the Adviser since 1995, prior to which he was a Vice President of
the Adviser from 1992 to 1995 and a portfolio manager for the Adviser since
1989. MS. SHREWSBURY has been a Senior Vice President of the Adviser since
1993, prior to which she had been a Managing Director of Piper Jaffray since
1992, and a Vice President of Piper Jaffray since 1990. MR. STEELE has been a
Senior Vice President of the Adviser since 1992, prior to which he had been a
portfolio manager at Kennedy & Associates in Seattle, Washington from 1987 to
1992. MR. WEIDENHAMMER has been a Senior Vice President of the Adviser since
1991. MR. WENKER has been a Senior Vice President of the Adviser since 1993,
prior to which he had been a Managing Director of Piper Jaffray from 1992 to
1993, and prior thereto, the Director of Revitalization Resources of the
Minneapolis Community Development Agency from 1990 to 1992. MR. WHITE has been
a Senior Vice President of the Adviser since 1991.
MS. CASTLE has been a Vice President of the Adviser since 1994, prior to
which she was a client service associate of the Adviser since 1990. MR. DALY
has been a Vice President of the Adviser since 1992, prior to which he was an
Assistant Vice President of the Piper Jaffray since 1990 and a broker with Piper
Jaffray from 1987 to 1992. MS. DESTRO has been a Vice President of the Adviser
since 1994, prior to which she was an Accounting Manager from 1993 to 1994 and
mutual fund accountant from 1991 to 1993 with the Adviser. MS. DEUTZ has been a
Vice President of the Adviser since September 1995, prior to which she was an
Assistant Vice President at Daiwa Bank, Ltd. from 1992 to September 1995 and a
manager of financial reporting at The Churchill Companies from 1991 to 1992.
MS. HALBE has been a Vice President of the Adviser since 1996, prior to which
she was a Vice President at First Asset Management since 1990. MS. HARROD has
been a Vice President of the Adviser since 1992 and has been a trader for the
Adviser since 1989. MS. HOYME has been a Vice
5
<PAGE>
President of the Adviser since 1996, prior to which she had been a Vice
President at First Asset Management since 1989. MS. JOHNSON has been a Vice
President of the Adviser since 1994, prior to which she was an Accounting
Manager from 1993 to 1994 and mutual fund accountant from 1991 to 1993 with the
Adviser. MR. KAPPENMAN has been a Vice President of the Adviser since 1991.
MS. KAUL has been a Vice President and Director of Corporate Communications of
the Adviser since 1991. MR. KIGHTLINGER has been a Vice President of the
Adviser since 1991. MS. KUNG has been a Vice President of the Adviser since
1993, prior to which she had been a Senior Consultant at Cytrol Inc. from 1989
to 1992. MR. MEYER has been a Vice President of the Adviser since 1994 and
manager of Systems Integration for the Adviser since 1991. MR. MOORE has been a
Vice President of the Adviser since 1992, prior to which he was a Portfolio
Manager at Alpine Capital Management from 1990 to 1992 and a broker at Hanifen
Capital Management from 1990 to 1992. MR. NEUHARTH has been a Vice President of
the Adviser since 1996, prior to which he had been a senior mortgage trader at
FBS Mortgage since 1995, and prior thereto, a fixed income portfolio manager at
Fortis Financial since 1987. MR. PEARSON has been a Vice President of the
Adviser since 1995, prior to which he was Mutual Funds Accounting Manager of the
Adviser from 1994 to 1995 and prior thereto, Director of Fund Operations at
Norwest Bank, Minneapolis from 1992 to 1994. MR. SIEDBAND has been a Vice
President of the Adviser since 1992. MS. STIENSTRA has been a Vice President of
the Adviser since November 1995 and a municipal bond trader of the Adviser since
June 1995, prior to which she was an assistant analyst of the Adviser from 1991
to 1994. MS. TAJAMAL has been a Vice President of the Adviser since 1995 and a
portfolio manager of the Adviser since 1993, prior to which she was a money
market analyst of the Adviser from 1990 to 1993. MS. THOMPSON has been a Vice
President of the Adviser since 1994, prior to which she had been a Vice
President at First Asset Management since 1991. MS. WELTER has been a Vice
President of the Adviser since 1994, prior to which she was a client service
associate of the Adviser since 1993 and a mutual fund accountant with the
Adviser from 1990 to 1993. MS. WINSON has been a Vice President of the Adviser
since November 1993, prior to which she was an Assistant Vice President of the
Adviser since March 1993 and an educator from 1990 to 1992. MR. WOO has been a
Vice President of the Adviser since 1994, prior to which he was a municipal
credit analyst of the Adviser since 1992 and a credit specialist at a commercial
trading firm from 1991 to 1992.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Piper Jaffray Inc. acts as principal underwriter for the Registrant
and also for three other open-end investment companies, Piper Funds Inc., the
shares of which are currently offered in twelve series, Piper Funds Inc. -- II,
the shares of which are currently offered in one series and Piper Global Funds
Inc., the shares of which are currently offered in two series. Piper Jaffray
has acted as principal underwriter in connection with the initial public
offering of shares of 23 closed-end investment companies.
6
<PAGE>
(b) The name, positions and offices with Piper Jaffray Inc., and positions
and offices with the Registrant of each director and officer of Piper Jaffray
Inc. are as follow:
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- ------------------------- ---------------------
<S> <C> <C>
Addison L. Piper Chairman of the Board of None
Directors and Chief Executive
Officer
Ralph W. Burnet Member of the Board None
of Directors
William H. Ellis Member of the Board None
of Directors
John L. McElroy, Jr. Member of the Board None
of Directors
Kathy Halbreich Member of the Board None
of Directors
Robert S. Slifka Member of the Board None
of Directors
David Stanley Member of the Board None
of Directors
James J. Bellus Managing Director None
AnnDrea M. Benson Managing Director and None
General Counsel
Lloyd K. Benson Managing Director None
Gary J. Blauer Managing Director None
Karen M. Bohn Managing Director None
Sean K. Boyea Managing Director None
Ronald O. Braun Managing Director None
Jay A. Brunkhorst Managing Director None
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- ------------------------- ---------------------
<S> <C> <C>
Kenneth S. Cameranesi Managing Director None
Stephen M. Carnes Managing Director None
Joseph V. Caruso Managing Director None
Antonio J. Cecin Managing Director None
Joyce E. Chaney Managing Director None
Kenneth P. Clark Managing Director None
Linda A. Clark Managing Director None
Stephen B. Clark Managing Director None
David P. Crosby Managing Director None
Mark A. Curran Managing Director None
George S. Dahlman Managing Director None
Jack C. Dillingham Managing Director None
Mark T. Donahoe Managing Director None
Darci L. Doneff Managing Director None
Andrew S. Duff Managing Director None
Andrew W. Dunleavy Managing Director None
Richard A. Edstrom Managing Director None
Fred R. Eoff, Jr. Managing Director None
Richard D. Estenson Managing Director None
Francis E. Fairman IV Managing Director None
John R. Farrish Managing Director None
G. Richard Ferguson Managing Director None
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- ------------------------- ---------------------
<S> <C> <C>
Paul Ferry Managing Director None
Mark E. Fisler Managing Director None
Michael W. Follett Managing Director None
Daniel P. Gallaher Managing Director None
Peter M. Gill Managing Director None
Kevin D. Grahek Managing Director None
Paul D. Grangaard Managing Director None
James S. Harrington Managing Director None
Charles N. Hayssen Managing Director None
William P. Henderson Managing Director None
Allan F. Hickok Managing Director None
Richard L. Hines Managing Director None
David B. Holden Managing Director None
Charles E. Howell Managing Director None
Bruce C. Huber Managing Director None
Elizabeth A. Huey Managing Director None
John R. Jacobs Managing Director None
Earl L. Johnson Managing Director None
Richard L. Johnson Managing Director None
Nicholas P. Karos Managing Director None
Paul P. Karos Managing Director None
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- ------------------------- ---------------------
<S> <C> <C>
Richard G. Kiss Managing Director None
Gordon E. Knudsvig Managing Director None
Jerome P. Kohl Managing Director None
Eric W. Larson Managing Director None
Dan L. Lastavich Managing Director None
Robert J. Magnuson Managing Director None
Robert E. Mapes Managing Director None
Peter T. Mavroulis Managing Director None
Michael P. McMahon Managing Director None
G. Terry McNellis Managing Director None
Thomas A. Medlin Managing Director None
Darryl L. Meyers Managing Director None
Joseph E. Meyers Managing Director None
John V. Miller Managing Director None
Dennis V. Mitchell Managing Director None
Edward P. Nicoski Managing Director None
Barry J. Nordstrand Managing Director None
Benjamin S. Oehler Managing Director None
Brooks G. O'Neil Managing Director None
John P. O'Neill Managing Director None
John Otterlei Managing Director None
Robin C. Pfister Managing Director None
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- ------------------------- ---------------------
<S> <C> <C>
Laurence S. Podobinski Managing Director None
Steven J. Proeschel Managing Director None
Rex W. Ramsay Managing Director None
Brian J. Ranallo Managing Director None
Roger W. Redmond Managing Director None
Robert P. Rinek Managing Director None
Wesley L. Ringo Managing Director None
Jim M. Roane Managing Director None
Deborah K. Roesler Managing Director None
Russ E. Rogers Managing Director None
David E. Rosedahl Managing Director None
and Secretary
Terry D. Sandven Managing Director None
Thomas P. Schnettler Managing Director None
Steven R. Schroll Managing Director None
Joyce Nelson Schuette Managing Director None\
Lawrence M. Schwartz, Jr. Managing Director None
Morton D. Silverman Managing Director None
Linda E. Singer Managing Director None
David P. Sirianni Managing Director None
Arch C. Smith Managing Director None
Robert L. Sonnek Managing Director None
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- ------------------------- ---------------------
<S> <C> <C>
Thomas E. Stanberry Managing Director None
DeLos V. Steenson Managing Director None
D. Greg Sundberg Managing Director None
Robert D. Swerdling Managing Director None
William H. Teeter Managing Director None
Ann C. Tillotson Managing Director None
Marie Uhrich Managing Director None
Momchilo Vucenich Managing Director None
Charles M. Webster, Jr. Managing Director None
Darrell L. Westby Managing Director None
David R. Westcott Managing Director None
Douglas R. Whitaker Managing Director None
James H. Wilford Managing Director None
Stephen W. Woodard Managing Director None
Mark Wren Managing Director None
Saul Yaari Managing Director None
Beverly J. Zimmer Managing Director None
</TABLE>
The principal business address of each of the individuals listed above is Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-3804.
12
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The physical possession of the accounts, books, and other documents
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and Rules 3la-1 to 3la-3 promulgated thereunder is maintained by the Registrant
at Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-
3804, except that the physical possession of certain accounts, books and other
documents related to the custody of the Registrant's securities is maintained by
Investors Fiduciary Trust Company, 127 West Tenth Street, Kansas City, Missouri
64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) Each recipient of a prospectus of any series of the Registrant may
request the latest Annual Report of such series, and such Annual Report will be
furnished by the Registrant without charge.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement on Form N-1A pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Minneapolis and State of Minnesota on the 28th day of October 1996.
PIPER INSTITUTIONAL FUNDS INC.
(Registrant)
By /s/ Paul A. Dow
--------------------------------
Paul A. Dow, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
/s/ Paul A. Dow President (principal October 28, 1996
- ------------------------- executive officer)
Paul A. Dow
/s/ Robert H. Nelson Treasurer (principal October 28, 1996
- -------------------------- financial and
Robert H. Nelson accounting officer)
David T. Bennett* Director
Jaye F. Dyer* Director
William H. Ellis* Director
Karol D. Emmerich* Director
Luella G. Goldberg* Director
- -------------------- Director
David A. Hughey
George Latimer* Director
*By /s/ William H. Ellis October 28, 1996
- --------------------------
William H. Ellis, Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
TO
REGISTRATION STATEMENT
OF
PIPER INSTITUTIONAL FUNDS INC.
Exhibit Page No.
- ------ --------
11 Consent of KPMG Peat Marwick LLP
<PAGE>
EXHIBIT 11
[LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Piper Institutional Funds Inc.:
We consent to the use of our report dated July 19, 1996 incorporated by
reference herein and to the references to our Firm under the headings "FINANCIAL
HIGHLIGHTS" in Part A and "FINANCIAL STATEMENTS" in Part B of the Registration
Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
October 28, 1996
