<PAGE>
SEMIANNUAL REPORT
[LOGO]
DECEMBER 31, 1995
PIPER
INSTITUTIONAL
FUNDS
MINNEAPOLIS
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402
612 342-6402
SEATTLE
1200 FIFTH AVENUE
SEATTLE, WA 98101
206 287-8862
DENVER
1050 17TH STREET
DENVER, CO 80265
303 820-5885
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TABLE OF CONTENTS
INSTITUTIONAL MONEY MARKET FUND
Institutional Money Market Fund seeks maximum current income consistent with
preservation of capital and maintenance of liquidity. To realize its
objective, the fund invests in securities that are issued or guaranteed as to
payment of principal and interest by the U.S. government, its agencies or
instrumentalities, and repurchase agreements backed by such securities. The
U.S. government securities held by the fund, not the fund shares, are
guaranteed as to payment of principal and interest. An investment in the fund
is neither insured nor guaranteed by the U.S. government. There can be no
assurance the fund will be able to maintain a stable net asset value of
$1 per share.
<TABLE>
<S> <C>
Letter to Shareholders................... 1
Financial Statements and Notes........... 6
Investments in Securities................ 16
</TABLE>
INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
Institutional Government Adjustable Portfolio seeks high current income
consistent with low principal volatility. The fund invests primarily (at least
65% of its total assets under normal market conditions) in adjustable rate
mortgage (ARM) securities that are issued or guaranteed by the U.S.
government, its agencies or its instrumentalities. The fund also may invest in
privately issued ARM securities, mortgage-backed securities other than ARM
securities, other types of U.S. government securities, Canadian government
securities, structured securities including foreign linked index securities
and corporate debt securities. The fund may also purchase securities through
the sale-forward (dollar-roll) program. This investment technique and
investments in certain types of securities, such as foreign linked index
securities, may cause the fund's net asset value to fluctuate to a greater
extent than would be expected from interest rate movements alone. As with
other mutual funds, there can be no assurance the fund will achieve its
objective. Since the fund's inception on February 2, 1993, it has had a credit
rating of AAAf by Standard and Poor's Mutual Funds Ratings Group (S&P).*
*THE FUND IS RATED AAAf, WHICH MEANS THE FUND'S INVESTMENTS HAVE AN OVERALL
CREDIT QUALITY OF AAA. CREDIT QUALITIES ARE ASSESSED BY STANDARD AND POOR'S
MUTUAL FUNDS RATINGS GROUP. S&P DOES NOT EVALUATE THE MARKET RISK OF AN
INVESTMENT WHEN ASSIGNING A CREDIT RATING. SEE STANDARD AND POOR'S CORPORATE
AND MUNICIPAL RATINGS DEFINITIONS FOR AN EXPLANATION OF AAA. THE FUND HAS
BEEN GIVEN A MARKET RISK RATING BY S&P, WHICH WE CANNOT PUBLISH DUE TO NASD
REGULATIONS. RISK RATINGS EVALUATE VARIOUS INVESTMENT RISKS THAT CAN AFFECT
THE PERFORMANCE OF A BOND FUND AND INDICATE THE FUND'S OVERALL STABILITY AND
SENSITIVITY TO CHANGING MARKET CONDITIONS. THESE RATINGS ARE AVAILABLE BY
CALLING S&P AT 1 800 424-FUND.
<TABLE>
<S> <C>
Letter to Shareholders................... 3
Financial Statements and Notes........... 6
Investments in Securities................ 17
</TABLE>
THIS REPORT IS INTENDED FOR SHAREHOLDERS OF INSTITUTIONAL MONEY MARKET FUND
AND INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO, BUT IT MAY ALSO BE USED AS
SALES LITERATURE IF PRECEDED OR ACCOMPANIED BY A PROSPECTUS. THE PROSPECTUS
GIVES DETAILS ABOUT THE CHARGES, INVESTMENT RESULTS AND OPERATING POLICIES OF
THE FUNDS.
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INSTITUTIONAL MONEY MARKET FUND
February 15, 1996
Dear Shareholders:
DURING THE PAST SIX MONTHS, INSTITUTIONAL MONEY
MARKET FUND'S SEVEN-DAY CURRENT YIELD DROPPED FROM
5.67% ON JUNE 30 TO 5.36% ON DECEMBER 31.* This
decline is due to a decrease in short-term interest
rates brought on by the Federal Reserve Board (Fed)
NANCY SHELLENBERGER OLSEN easing credit in July and December. In anticipation
IS PRIMARILY RESPONSIBLE of further reductions in short-term interest rates
FOR THE MANAGEMENT OF during the first half of 1996, we will keep the
INSTITUTIONAL MONEY fund's average weighted maturity relatively long.
MARKET FUND. SHE HAS As of December 31, the fund's average weighted
17 YEARS OF FINANCIAL maturity was 65 days.
EXPERIENCE.
AFTER LOWERING THE FEDERAL FUNDS RATE FROM 5.75% TO
5.50% IN DECEMBER, THE FED EASED CREDIT AGAIN BY
LOWERING IT ANOTHER 0.25% IN JANUARY. The Fed
SHAISTA TAJAMAL stated that inflation appeared to be "somewhat more
ASSISTS WITH THE favorable than expected" and that there had been
MANAGEMENT OF "a decline in inflation expectations." From these
INSTITUTIONAL MONEY statements, we think the Fed believed the bond
MARKET FUND. SHE HAS market rally was a result of reduced long-term
SIX YEARS OF FINANCIAL inflation expectations and that easing credit was
EXPERIENCE. necessary to bring the federal funds rate more in
line with market rates. In addition, poor holiday
retail sales figures have added to the Fed's
perception of a slowing economy. Because of the
government's budget impasse and the country's
recently harsh weather conditions, economic
statistical releases are still being delayed and
we are unable to get a clear picture of current
economic conditions. However, we do believe it's
likely the Fed will lower the federal funds
rate again in the near future.
BECAUSE WE ARE EXPERIENCING AN INVERTED YIELD CURVE IN WHICH SHORT-TERM
MATURITIES ARE YIELDING MORE THAN LONGER-TERM MATURITIES, WE HAVE POSITIONED
THE PORTFOLIO IN SOMEWHAT OF A "BARBELL" STRUCTURE. This short-term maturity
barbell structure emphasizes securities primarily with shorter-term (one- to
three-month) maturities and, to a lesser extent, longer-term (10- to 13-month)
maturities. This structure de-emphasizes securities with intermediate-range
maturities. The fund's investment in securities with shorter maturities should
provide higher yields while the longer maturity securities should provide some
protection from further declines in short-term interest rates by locking in
current rates.
PORTFOLIO COMPOSITION
DECEMBER 31, 1995
[GRAPHIC REPRESENTATION OF PIE CHART]
<TABLE>
<S> <C>
Federal Home Loan Bank......................... 26%
Federal Home Loan Mortgage Corporation......... 9%
Other Government-Backed........................ 2%
Federal Farm Credit Bank....................... 9%
Federal National Mortgage Association.......... 20%
Student Loan Marketing Association............. 9%
Repurchase Agreements.......................... 25%
</TABLE>
INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.
*PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE RETURN OF AN
INVESTMENT WILL FLUCTUATE. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1 PER SHARE.
1
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INSTITUTIONAL MONEY MARKET FUND
CURRENT YIELDS
YIELDS ARE CALCULATED USING THE 7- AND 30-DAY CURRENT YIELDS AT THE
END OF EACH MONTH
[GRAPHIC REPRESENTATION OF CHART]
THE SAFETY OF YOUR PRINCIPAL REMAINS OUR PRIMARY CONSIDERATION IN MANAGING THE
FUND AS WE STRIVE TO PROVIDE YOU WITH A CONSERVATIVE ALTERNATIVE FOR YOUR
SHORT-TERM CASH. As of December 31, all of the fund's investments were in
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities, or in repurchase agreements backed by such securities. We
continue to use a fundamental approach to identify high-quality, liquid money
market securities that provide competitive yields. Our strategy is designed to
add value by active positioning of the portfolio on the short end of the yield
curve, investing in high-quality securities and managing the fund's average
weighted maturity based on our interest rate forecast.
Thank you for your investment in Institutional Money Market Fund. We remain
committed to providing you with quality service and look forward to helping
you achieve your financial goals.
Sincerely,
/s/ NANCY SHELLENBERGER OLSEN
Nancy Shellenberger Olsen
Portfolio Manager
2
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INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
February 15, 1996
Dear Shareholders:
DURING THE SIX-MONTH PERIOD ENDED DECEMBER 31,
1995, INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
HAD A TOTAL RETURN OF 3.55%.* This return includes
TOM MCGLINCH, reinvested distributions but not the fund's sales
CFA IS PRIMARILY charge. Comparatively, the six-month return for
RESPONSIBLE FOR THE the Lipper Adjustable Rate Mortgage Funds Average
MANAGEMENT OF was 1.41% and the Lehman Brothers Adjustable Rate
INSTITUTIONAL GOVERNMENT Mortgage Index's return was 3.97%. During this
ADJUSTABLE PORTFOLIO. HE period, coupon income contributed a significant
HAS 15 YEARS OF FINANCIAL portion of the fund's total return; however, its
EXPERIENCE. performance lagged the Lehman index because the
fund was underweighted in more price sensitive
securities, such as adjustable rate mortgage (ARM)
securities with coupon rates that reset to the
Cost of Funds Index. These securities typically
have greater price increases during periods of
falling interest rates, such as we experienced in
1995. The fund's holdings of U.S. agency fixed
rate mortgages and a Canadian mortgage-backed
security helped it outperform the Lipper average.
THE BOND MARKET RALLY ACCELERATED THROUGHOUT 1995 AS REPORTS CONTINUED TO
INDICATE SLOW ECONOMIC GROWTH. Interest rates continued their decline during
the second half of the year with the yield on the one-year Treasury note
falling from 5.60% in June 1995 to 5.15% by December 31. During this same
period, the Federal Reserve Board (Fed) lowered the federal funds rate by
moving it from 6.0% in June to 5.50% by December. The Fed cut this rate by
another 0.25% in January. These moves have important implications for the ARM
securities market as many of the underlying loans reset their coupons based on
the one-year Treasury yield. Also, many borrowers will begin to see the
interest rate on their mortgage decrease, and investors will experience a
gradual reduction in coupon income as the underlying mortgage loans reset to
lower rates.
TO MEET FUND REDEMPTIONS DURING THE PAST SIX MONTHS, WE SOLD
SOME OF THE FUND'S FIXED RATE SECURITIES WHICH, IN TURN, CAUSED ITS POSITION
IN U.S. AGENCY ARM SECURITIES TO INCREASE TO 90% OF TOTAL ASSETS. This
compares to 76% as of June 30. We will maintain our weighting in ARM
securities until we see indications of changing market conditions. Not only
does the current market for these securities appear strong, but we believe
they have the potential to generate high relative income in the first half
of 1996.
PORTFOLIO COMPOSITION
DECEMBER 31, 1995
[GRAPHIC REPRESENTATION OF PIE CHART]
<TABLE>
<S> <C>
U.S. Agency ARM Securities..................... 90%
U.S. Agency Fixed Rate Mortgages............... 8%
U.S. Treasuries................................ 1%
Other Assets................................... 1%
</TABLE>
INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.
*PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN
AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES,
WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
3
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INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
VALUE OF $100,000 INVESTED
DECEMBER 31, 1995
[GRAPHIC REPRESENTATION OF CHART]
$100,000 INVESTED IN FEBRUARY 1993 AND HELD THROUGH DECEMBER 31, 1995, WOULD
HAVE GROWN TO $109,262. THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES
CHARGE OF 1%, WHILE NO SUCH CHARGES ARE REFLECTED IN THE INDEX OR AVERAGE.
ALL PERFORMANCE FIGURES INCLUDE REINVESTED DISTRIBUTIONS. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS.
AVERAGE ANNUALIZED TOTAL RETURNS
THROUGH 12/31/95, INCLUDING 1% SALES CHARGE
<TABLE>
<S> <C>
One Year................................... 8.63%
Since Inception (2/2/93)................... 3.09%
</TABLE>
DURING SOME PERIODS, PIPER CAPITAL WAIVED OR PAID FUND EXPENSES AND/OR PIPER
JAFFRAY, THE FUND'S DISTRIBUTOR, VOLUNTARILY LIMITED 12b-1 FEES FOR THE FUND.
HAD THESE FEES AND EXPENSES NOT BEEN WAIVED, THE AVERAGE ANNUALIZED TOTAL
RETURNS INCLUDING REINVESTED DISTRIBUTIONS AND THE FUND'S SALES CHARGE WOULD
HAVE BEEN 8.51% ONE YEAR AND 3.02% SINCE INCEPTION.
THE FUND HAS BENEFITED FROM ITS EMPHASIS ON ARM SECURITIES. After the sharp
increase in short-term interest rates in 1994, the coupons on the fund's ARM
securities gradually reset to higher rates and, in most cases, equaled market
rates. As short-term interest rates began to fall in 1995, the coupon rates on
these ARM securities did not fall as quickly or as far as market rates due to
the lagging nature of their reset frequency. As a result, they increased in
value. However, if the coupon rates on these ARM securities begin to fall more
quickly than market rates, their values may drop.
EARLY PRINCIPAL PAYMENTS IN THE PAST SIX MONTHS HAVE HAD A NEGATIVE IMPACT ON
THE FUND'S INCOME. Borrowers are refinancing (prepaying) their adjustable rate
mortgages at a faster speed due to the lower rates available on fixed rate
mortgages. Since many of the ARM securities held in the fund were purchased at
premium prices, the faster prepayments are causing the fund to amortize these
premiums more quickly. This reduces the fund's current income level. To
minimize the impact of prepayments, we sold some of the fund's ARM securities
that we believed were most susceptible to prepayments.
WE SOLD THE FUND'S CANADIAN FIXED RATE MORTGAGE-BACKED SECURITY IN OCTOBER. In
light of lower Canadian interest rates and an improved currency rate, along
with our anticipation of currency volatility associated with the Quebec
referendum in early November, we felt it was an opportune time to eliminate
the fund's exposure to foreign exchange risk. The fund has realized a loss on
this Canadian dollar-denominated security, which was backed by an agency of
the Canadian government, due to the decline in value of the Canadian dollar
since we purchased the security in 1993.
SOME OF THE FUND'S 1995 DIVIDENDS WERE RECLASSIFIED AS A RETURN OF CAPITAL FOR
TAX PURPOSES DUE TO THE SALE AND MATURITY OF SOME OF THE FUND'S FOREIGN-
DENOMINATED SECURITIES WHICH RECOGNIZED FOREIGN CURRENCY LOSSES. Tax
regulations require that certain foreign currency losses be treated as
ordinary losses and be offset against net investment income when determining
taxable ordinary income. As a result, some of the fund's distributions to
investors were classified as a return of capital. A return of capital means
that the distribution is not reported as taxable
4
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INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
income but can be used to reduce the investor's cost basis in the fund. This
will affect the capital gain or loss calculation upon your sale of the fund's
shares. Your tax adviser can provide more information about how this will
affect you in your tax reporting.
GOING FORWARD, WE HAVE POSITIONED THE FUND TO PERFORM BEST IN A STABLE OR
SLIGHTLY DECLINING INTEREST RATE ENVIRONMENT. The securities
in the fund have a relatively high average coupon, which reduces their price
sensitivity to changing market rates and allows them to maintain relatively
high levels of income. As you know, we have not employed the sale-forward
program or borrowing through reverse repurchase agreements (except for
temporary borrowing on December 29 to cover fund redemptions) since February
1995. We do not intend to use either of these techniques under current market
conditions.
Thank you for your investment in Institutional Government Adjustable
Portfolio. As always, my efforts are dedicated to reaching the fund's
objective and helping you achieve your financial goals.
Sincerely,
/s/ TOM MCGLINCH
Tom McGlinch
Portfolio Manager
5
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FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Institutional Institutional
Money Government
Market Adjustable
Fund Portfolio
-------------- --------------
<S> <C> <C>
ASSETS:
Investments in securities at market value*
(including repurchase agreements of $20,729,000 and $0,
respectively) (note 2) ............................... $ 81,103,185 11,084,844
Cash in bank on demand deposit ........................... 25,331 12,206
Organization costs (note 6) .............................. 34,230 19,272
Mortgage security paydowns receivable .................... -- 5,135
Accrued interest receivable .............................. 285,822 81,334
-------------- --------------
Total assets ......................................... 81,448,568 11,202,791
-------------- --------------
LIABILITIES:
Dividends payable to shareholders ........................ 375,209 55,840
Reverse repurchase agreement payable ..................... -- 2,100,000
Accrued investment management fee ........................ 10,661 2,900
Accrued interest ......................................... -- 1,050
Other accrued expenses ................................... 13,011 2,223
-------------- --------------
Total liabilities .................................... 398,881 2,162,013
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Net assets applicable to outstanding capital stock ....... $ 81,049,687 9,040,778
-------------- --------------
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REPRESENTED BY:
Capital stock - authorized 100 billion shares of $0.01 par
value of Institutional Money Market Fund and 10 billion
shares of $0.01 par value of Institutional Government
Adjustable Portfolio; outstanding, 81,049,687 and
951,827 shares, respectively ......................... $ 810,497 9,518
Additional paid-in capital ............................... 80,239,190 12,605,875
Distributions in excess of net investment income ......... -- (174,610)
Accumulated net realized loss on investments ............. -- (3,369,393)
Unrealized depreciation of investments ................... -- (30,612)
-------------- --------------
Total - representing net assets applicable to
outstanding capital stock ......................... $ 81,049,687 9,040,778
-------------- --------------
-------------- --------------
Net asset value per share of outstanding capital stock ... $ 1.00 9.50
-------------- --------------
-------------- --------------
* Investments in securities at identified cost ........... $ 81,103,185 11,115,456
-------------- --------------
-------------- --------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
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FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Institutional Institutional
Money Government
Market Adjustable
Fund Portfolio
-------------- --------------
<S> <C> <C>
INCOME:
Interest (net of interest expense of $1,050 for
Institutional Government Adjustable Portfolio) ....... $ 1,989,963 447,284
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EXPENSES (NOTE 5):
Investment management fee ................................ 51,163 20,385
Custodian, accounting and transfer agent fees ............ 43,372 20,133
Shareholder account servicing fees ....................... 344 195
Registration fees ........................................ 4,107 7,058
Reports to shareholders .................................. 3,474 3,865
Amortization of organization costs ....................... 7,141 4,020
Directors' fees .......................................... 3,480 2,997
Audit and legal fees ..................................... 28,360 27,125
Other expenses ........................................... 20,004 7,328
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Total expenses ....................................... 161,445 93,106
Less expenses waived by the adviser ...................... (41,513) (54,340)
-------------- --------------
Net expenses before expenses paid indirectly ......... 119,932 38,766
Less expenses paid indirectly ............................ (551) (415)
-------------- --------------
Total net expenses ................................... 119,381 38,351
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Net investment income ................................ 1,870,582 408,933
-------------- --------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized loss on investments (note 3) ................ -- (78,370)
Net change in unrealized appreciation or depreciation of
investments ............................................ -- 135,722
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Net gain on investments ................................ -- 57,352
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Net increase in net assets resulting from
operations ........................................ $ 1,870,582 466,285
-------------- --------------
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
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FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Institutional
Government
Adjustable
Portfolio
--------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest income .................................................. $ 447,284
Net expenses ....................................................... (38,351)
--------------
Net investment income .......................................... 408,933
--------------
Adjustments to reconcile net investment income to net cash provided by
operating activities:
Change in accrued interest and mortgage security paydowns
receivable ......................................................... 81,047
Net amortization of bond discount and premium ........................ 2,341
Change in accrued fees and expenses .................................. 3,959
--------------
Total adjustments .............................................. 87,347
--------------
Net cash provided by operating activities ...................... 496,280
--------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ................................. 5,115,405
Purchases of investments ........................................... (1,577,057)
Net sales of short-term securities ................................. 359,000
--------------
Net cash provided by investing activities ...................... 3,897,348
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net redemption of fund shares ...................................... (6,110,063)
Net proceeds from reverse repurchase agreements .................... 2,100,000
Distributions paid to shareholders ................................. (396,412)
--------------
Net cash used by financing activities .......................... (4,406,475)
--------------
Net decrease in cash ............................................... (12,847)
Cash at beginning of period ........................................ 25,053
--------------
Cash at end of period ........................................ $ 12,206
--------------
--------------
Supplemental disclosure of cash flow information:
Cash paid for interest on reverse repurchase agreements .......... $ --
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
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FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Institutional Money Market Institutional Government
Fund Adjustable Portfolio
----------------------------- -----------------------------
Six Months Six Months
Ended Ended
12/31/95 Year Ended 12/31/95 Year Ended
(Unaudited) 6/30/95 (Unaudited) 6/30/95
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .................................. $ 1,870,582 1,764,252 408,933 1,295,309
Net realized loss on investments ......................... -- -- (78,370) (2,209,087)
Net change in unrealized appreciation or depreciation of
investments ............................................ -- -- 135,722 1,791,630
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations ... 1,870,582 1,764,252 466,285 877,852
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............................... (1,870,582) (1,764,252) (385,217) (1,105,594)
Tax return of capital .................................... -- -- -- (148,061)
------------- ------------- ------------- -------------
Total distributions .................................... (1,870,582) (1,764,252) (385,217) (1,253,655)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sales ...................................... 169,871,646 168,842,836 3,809 875,301
Proceeds from shares issued for reinvestment of
distributions .......................................... 1,655,618 1,434,995 339,975 983,642
Payments for shares redeemed ............................. (142,966,439) (152,763,914) (6,353,847) (21,423,001)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from capital share
transactions ......................................... 28,560,825 17,513,917 (6,010,063) (19,564,058)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets .............. 28,560,825 17,513,917 (5,928,995) (19,939,861)
Net assets at beginning of period .......................... 52,488,862 34,974,945 14,969,773 34,909,634
------------- ------------- ------------- -------------
Net assets at end of period .............................. $ 81,049,687 52,488,862 9,040,778 14,969,773
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Distributions in excess of net investment income ......... $ -- -- (174,610) (198,326)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION
Piper Institutional Funds Inc. (the company)
was incorporated on September 24, 1992, and is
registered under the Investment Company Act of
1940 (as amended) as an open-end management
investment company and currently includes a
series of two individual diversified funds
including Institutional Money Market Fund and
Institutional Government Adjustable Portfolio
(the funds). Institutional Money Market Fund
seeks maximum current income consistent with
preservation of capital and maintenance of
liquidity. To realize its objective, the fund
invests in securities that are issued or
guaranteed as to payment of principal and
interest by the U.S. government, its agencies
or instrumentalities, and repurchase
agreements backed by such securities.
Institutional Government Adjustable Portfolio
seeks high current income consistent with low
principal volatility. The fund invests
primarily (at least 65% of its total assets
under normal market conditions) in adjustable
rate mortgage-backed securities that are
issued or guaranteed by the U.S. government,
its agencies or its instrumentalities. The
company's articles of incorporation permit the
board of directors to create additional funds
in the future.
(2) SIGNIFICANT
ACCOUNTING
POLICIES
INVESTMENTS IN SECURITIES
For Institutional Money Market Fund, pursuant
to Rule 2a-7 of the Investment Company Act of
1940 (as amended), securities are valued at
amortized cost, which approximates market
value, in order to maintain a constant net
asset value of $1 per share.
For Institutional Government Adjustable
Portfolio, the values of fixed income
securities are provided by independent pricing
services or prices quoted by independent
brokers. When market quotations are not
readily available, securities are valued at
fair value as determined in good faith by the
board of directors. Short-term securities with
maturities of 60 days or less are valued at
amortized cost which approximates market
value.
Securities transactions are accounted for on
the date the securities are purchased or sold.
Realized gains and losses are calculated on
the identified cost basis. Interest income,
including amortization of bond discount and
premium computed on a level yield basis, is
accrued daily.
OPTION TRANSACTIONS
For hedging purposes, Institutional Government
Adjustable Portfolio may buy and sell put and
call options, write covered call options on
portfolio securities and write cash-secured
puts. The risk in writing a call option is
that the fund gives up the opportunity for
profit if the market price of the security
increases and the option is exercised. The
risk in writing a put option is that the fund
may incur a loss if the market price of the
security decreases and the option is
exercised. The risk in buying an option is the
fund pays a premium whether or not the option
is exercised. The fund also has the additional
risk of not being able to enter into a closing
transaction if a liquid secondary market does
not exist. The fund also may write
over-the-counter options where the completion
of the obligation is dependent upon the credit
standing of the other party.
Option contracts are valued daily and
unrealized appreciation or depreciation is
recorded. The fund will realize a gain or loss
upon expiration or closing of the option
transaction. When an option is exercised, the
proceeds on the sale of a written call option,
the purchase cost for a written put option, or
the cost of a security for purchased put and
call options is adjusted by the amount of
premium received or paid.
10
<PAGE>
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FUTURES TRANSACTIONS
In order to gain exposure to or protect
against changes in the market, Institutional
Government Adjustable Portfolio may buy and
sell financial futures contracts and related
options. Risks of entering into futures
contracts and related options include the
possibility there may be an illiquid market
and that a change in the value of the contract
or option may not correlate with changes in
the value of the underlying securities.
Upon entering into a futures contract, the
fund is required to deposit either cash or
securities in an amount (initial margin) equal
to a certain percentage of the contract value.
Subsequent payments (variation margin) are
made or received by the fund each day. The
variation margin payments are equal to the
daily changes in the contract value and are
recorded as unrealized gains and losses. The
fund recognizes a realized gain or loss when
the contract is closed or expires.
INTEREST RATE TRANSACTIONS
Institutional Government Adjustable Portfolio,
to preserve a return or spread on a particular
investment or portion of its portfolio or for
other non-speculative purposes, may enter into
various hedging transactions such as interest
rate swaps and the purchase or sale of
interest rate caps and floors. Interest rate
swaps involve the exchange of commitments to
pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate
payments. The purchase of an interest rate cap
entitles the purchaser, to the extent that a
specified index exceeds a predetermined
interest rate, to receive payments of interest
on a contractually based notional principal
amount from the party selling the interest
rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent
that a specified index falls below a
predetermined interest rate, to receive
payments of interest on a contractually based
notional principal amount from the party
selling the interest rate floor.
If forecasts of interest rates and other
market factors are incorrect, investment
performance will diminish compared to what
performance would have been if these
investment techniques were not used. Even if
the forecasts are correct, there is risk that
the positions may correlate imperfectly with
the asset or liability being hedged. Other
risks of entering into these transactions are
that a liquid secondary market may not always
exist, or that the other party to the
transaction may not perform.
For interest rate swaps, caps and floors, the
fund accrues weekly, as an increase or
decrease to interest income, the current net
amount due to or owed by the fund. Interest
rate swaps, caps and floors are valued from
prices quoted by independent brokers. These
valuations represent the present value of all
future cash settlement amounts based upon
implied forward interest rates.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have
been purchased by Institutional Government
Adjustable Portfolio on a forward-commitment
or when-issued basis can take place a month or
more after the transaction date. During this
period, such securities do not earn interest,
are subject to market fluctuation and may
increase or decrease in value prior to their
delivery. The fund maintains, in a segregated
account with its custodian, assets with a
market value equal to the amount of its
purchase commitments. The purchase of
securities on a when-issued or
forward-commitment basis may increase the
volatility of the fund's net asset value to
the extent the fund makes such purchases while
remaining substantially fully invested. As of
December 31, 1995, Institutional Government
Adjustable Portfolio had no outstanding
when-issued or forward commitments.
11
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
In connection with its ability to purchase
securities on a when-issued or forward-
commitment basis, Institutional Government
Adjustable Portfolio may enter into mortgage
"dollar rolls" in which the fund sells
securities for delivery in the current month
and simultaneously contracts with the same
counterparty to repurchase similar (same type,
coupon and maturity) but not identical
securities on a specified future date. As an
inducement to "roll over" its purchase
commitments, the fund receives negotiated
fees. For the six months ended December 31,
1995, Institutional Government Adjustable
Portfolio earned no such fees.
FEDERAL TAXES
Each fund within the company is treated as a
separate entity for federal income tax
purposes. The funds intend to comply with the
requirements of the Internal Revenue Code
applicable to regulated investment companies
and not be subject to federal income tax.
Therefore, no income tax provision is
required. On a calendar-year basis each fund
intends to distribute substantially all of its
taxable income and realized gains, if any, and
the funds will therefore not be subject to
federal excise taxes.
Net investment income and net realized gains
(losses) may differ for financial statement
and tax purposes primarily because of the
recognition of certain foreign currency gains
(losses) as ordinary income for tax purposes
and losses deferred due to "wash sale"
transactions. The character of distributions
made during the year from net investment
income or net realized gains may therefore
differ from their ultimate characterization
for federal income tax purposes. In addition,
due to the timing of dividend distributions,
the fiscal year in which amounts are
distributed may differ from the year that the
income or realized gains (losses) were
recorded by the fund.
DISTRIBUTIONS
Distributions to shareholders from net
investment income for Institutional Money
Market Fund and Institutional Government
Adjustable Portfolio are declared daily and
payable monthly in cash or reinvested in
additional shares. Distributions from net
realized gains, if any, will be made on an
annual basis for both funds.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with
certain broker-dealers, the funds, along with
other affiliated registered investment
companies, may transfer uninvested cash
balances into an individual, joint or
tri-party trading account, the daily aggregate
of which is invested in repurchase agreements
secured by U.S. government and agency
obligations. Securities pledged as collateral
for all individual and joint repurchase
agreements are held by the funds' custodian
bank until maturity of the repurchase
agreement. Securities pledged as collateral
for all tri-party repurchase agreements are
held by a third party custodian until maturity
of the repurchase agreement. Procedures for
all agreements ensure that the daily market
value of the collateral is in excess of the
repurchase amount in the event of default.
USE OF ESTIMATES
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities,
the disclosure of contingent assets and
liabilities at the date of the financial
statements, and the results of operations
during the reporting period. Actual results
could differ from those estimates.
12
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(3) SECURITIES
TRANSACTIONS
Cost of purchases and proceeds from sales of
securities, other than temporary investments
in short-term securities (for Institutional
Government Adjustable Portfolio), for the six
months ended December 31, 1995, were as
follows:
<TABLE>
<CAPTION>
Sales
Purchases Proceeds
------------- -------------
<S> <C> <C>
Institutional Money Market Fund ................... $ 1,667,017,099 1,638,359,496
Institutional Government Adjustable Portfolio ..... $ 1,574,716 5,115,405
</TABLE>
During the six months ended December 31, 1995,
Institutional Government Adjustable Portfolio
paid no brokerage commissions to Piper Jaffray
Inc., an affiliated broker.
(4) CAPITAL SHARE
TRANSACTIONS
Transactions in shares of each fund for the
six months ended December 31, 1995, and the
year ended June 30, 1995, were as follows:
<TABLE>
<CAPTION>
Institutional
Institutional Government
Money Market Adjustable
12/31/95 Fund Portfolio
-------------- --------------
<S> <C> <C>
Sold ....................................................... 169,871,646 401
Issued for reinvested distributions ........................ 1,655,618 35,902
Redeemed ................................................... (142,966,439) (670,172)
-------------- --------------
Increase (decrease) ...................................... 28,560,825 (633,869)
-------------- --------------
-------------- --------------
<CAPTION>
6/30/95 (Audited)
<S> <C> <C>
Sold ....................................................... 168,842,836 95,422
Issued for reinvested distributions ........................ 1,434,995 104,898
Redeemed ................................................... (152,763,914) (2,304,441)
-------------- --------------
Increase (decrease) ...................................... 17,513,917 (2,104,121)
-------------- --------------
-------------- --------------
</TABLE>
(5) FEES AND EXPENSES
The funds have entered into an investment
advisory and management agreement with Piper
Capital Management (Piper Capital) under which
Piper Capital manages each fund's assets and
furnishes related office facilities,
equipment, research and personnel. The
agreement requires each fund to pay Piper
Capital a monthly fee based on average daily
net assets. The fees for Institutional Money
Market Fund are equal to an annual rate of
0.15%. The fees for Institutional Government
Adjustable Portfolio are equal to an annual
rate of 0.30%.
In addition to the investment advisory and
management fees, each fund is responsible for
paying most other operating expenses including
outside directors' fees and expenses,
custodian fees, registration fees, printing
and shareholder reports, transfer agent fees
and expenses, legal, auditing and accounting
services, organization costs, insurance,
interest, taxes and other miscellaneous
expenses. For the year ended June 30, 1996,
Piper Capital voluntarily limited total fees
and expenses, excluding interest and tax
expense, to not more than 0.35% and 0.55% of
average daily net assets on an annual basis
for Institutional Money Market Fund and
Institutional Government Adjustable Portfolio,
respectively.
Expenses paid indirectly represent a reduction
of custodian fees for earnings on cash
balances maintained with the custodian by the
funds.
13
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(6) ORGANIZATION COSTS
(UNAUDITED)
Organization costs were incurred in connection
with the start up and initial registration of
the funds. These costs are being amortized
over 60 months on a straight-line basis. If
any or all of the shares representing initial
capital of each fund are redeemed by any
holder thereof prior to the end of the
amortization period, the proceeds will be
reduced by the unamortized organization cost
balance in the same proportion as the number
of shares redeemed bears to the number of
initial shares outstanding immediately
preceding the redemption.
(7) CAPITAL LOSS
CARRYOVER
(AUDITED)
For federal income tax purposes, Institutional
Government Adjustable Portfolio had capital
loss carryovers in the amount of $3,291,023 at
June 30, 1995, which, if not offset by
subsequent capital gains, will expire in 2002
through 2004. It is unlikely the board of
directors will authorize a distribution of any
net realized capital gains until the available
capital loss carryovers have been offset or
expired.
(8) FINANCIAL
HIGHLIGHTS
Per-share data for a share of capital stock
outstanding throughout each period and
selected information for each period are as
follows:
INSTITUTIONAL MONEY MARKET FUND
<TABLE>
<CAPTION>
Six Months Year Period from
Ended 12/31/95 Ended Year Ended 2/2/93* to
(Unaudited) 6/30/95 6/30/94 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 ........................................ 0.03 0.05 0.03 0.01
----- ----- ----- -----
Total from operations ...................................... 0.03 0.05 0.03 0.01
----- ----- ----- -----
Distributions from net investment income ....................... (0.03) (0.05) (0.03) (0.01)
----- ----- ----- -----
Net asset value, end of period ............................... $ 1.00 1.00 1.00 1.00
----- ----- ----- -----
----- ----- ----- -----
Total return+ .................................................. 2.79% 5.26% 3.23% 1.24%
Net assets, end of period (in millions) ...................... $ 81 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++ ... 5.47%** 5.17% 3.26% 3.02%**
</TABLE>
* COMMENCEMENT OF OPERATIONS.
** ADJUSTED TO AN ANNUAL BASIS.
+ TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT A SALES
CHARGE.
++ VARIOUS INSTITUTIONAL MONEY MARKET FUND FEES AND EXPENSES WERE VOLUNTARILY
WAIVED OR ABSORBED BY PIPER CAPITAL DURING THE PERIODS REFERRED TO ABOVE.
HAD INSTITUTIONAL MONEY MARKET FUND PAID ALL EXPENSES, THE RATIOS OF
EXPENSES AND NET INVESTMENT INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE
BEEN AS FOLLOWS: 0.47%/5.35%, 0.49%/5.03% AND 0.61%/3.00% IN THE SIX MONTHS
ENDED 12/31/95 AND IN FISCAL YEARS 1995 AND 1994, RESPECTIVELY. BEGINNING
IN FISCAL YEAR 1996, THE EXPENSE RATIO REFLECTS THE EFFECT OF GROSS
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT
BEEN ADJUSTED.
14
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(8) FINANCIAL
HIGHLIGHTS
(CONTINUED)
<TABLE>
<CAPTION>
INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
Six Months
Ended Year Year Period from
12/31/95 Ended Ended 2/2/93* to
(Unaudited) 6/30/95 6/30/94 6/30/93
------------- ------- ------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ......................................... $ 9.44 9.46 10.04 10.00
----- ------- ------- ------
Operations:
Net investment income ........................................................ 0.30 0.52 0.49 0.18
Net realized and unrealized gains (losses) on investments .................... 0.03 (0.04) (0.57) 0.04
----- ------- ------- ------
Total from operations ...................................................... 0.33 0.48 (0.08) 0.22
----- ------- ------- ------
Distributions to shareholders:
From net investment income ................................................... (0.27) (0.41) (0.50) (0.18)
Tax return of capital ........................................................ -- (0.09) -- --
----- ------- ------- ------
Total distributions ........................................................ (0.27) (0.50) (0.50) (0.18)
----- ------- ------- ------
Net asset value, end of period ............................................... $ 9.50 9.44 9.46 10.04
----- ------- ------- ------
----- ------- ------- ------
Total return+ .................................................................. 3.55% 5.26% (0.91%) 2.18%
Net assets, end of period (in millions) ...................................... $ 9 15 35 41
Ratio of expenses to average daily net assets++ ................................ 0.57% 0.55% 0.55% 0.74%**
Ratio of net investment income to average daily net assets++ ................... 6.02% 5.54% 5.13% 4.73%**
Portfolio turnover rate (excluding short-term securities) ...................... 12% 43% 110% 26%
Amount of borrowings outstanding at end of period (in millions)+++ ........... $ 2 -- 9 6
Average amount of borrowings outstanding during the period (in millions) ..... $ 0.36 1.62 11.70 5.87
Average number of shares outstanding during the period (in millions) ........... 1.35 2.40 5.46 3.36
Average per-share amount of borrowings outstanding during the period $ 0.27 0.67 2.14 1.74
</TABLE>
* COMMENCEMENT OF OPERATIONS.
** ADJUSTED TO AN ANNUAL BASIS.
+ TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
++ VARIOUS INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO FEES AND EXPENSES
WERE VOLUNTARILY WAIVED OR ABSORBED BY PIPER CAPITAL DURING THE PERIODS
REFERRED TO ABOVE. HAD INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO PAID
ALL EXPENSES, THE RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE
DAILY NET ASSETS WOULD HAVE BEEN AS FOLLOWS: 1.37%/5.22%, 0.75%/5.34% AND
0.60%/5.08% IN THE SIX MONTHS ENDED 12/31/95 AND IN FISCAL YEARS 1995 AND
1994, RESPECTIVELY. BEGINNING IN FISCAL YEAR 1996, THE EXPENSE RATIO
REFLECTS THE EFFECT OF GROSS EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR
PERIOD EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.
+++ SECURITIES PURCHASED ON A WHEN-ISSUED BASIS FOR WHICH LIQUID, HIGH-GRADE
DEBT OBLIGATIONS ARE MAINTAINED IN A SEGREGATED ACCOUNT ARE NOT CONSIDERED
BORROWINGS. SEE FOOTNOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
INSTITUTIONAL MONEY MARKET FUND
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ------------ ---------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT AND AGENCY SECURITIES (72.1%):
FEDERAL FARM CREDIT BANK DISCOUNT NOTES (4.9%):
5.48%, 1/31/96 ...................................... $ 1,000,000 995,433
5.51%, 2/26/96 ........................................ 1,000,000 991,429
5.58%, 1/8/96 ......................................... 2,000,000 1,997,830
---------------
3,984,692
---------------
FEDERAL FARM CREDIT FLOATING RATE NOTES (B) (2.5%):
5.58%, 5/24/96 ........................................ 2,000,000 1,999,459
---------------
FEDERAL FARM CREDIT MEDIUM TERM NOTES (1.2%):
4.10%, 1/18/96 ........................................ 1,000,000 999,158
---------------
FEDERAL HOME LOAN BANK DISCOUNT NOTES (22.2%):
5.12%, 9/20/96 ........................................ 1,000,000 962,596
5.18%, 10/4/96 ........................................ 1,325,000 1,272,189
5.30%, 4/17/96 ........................................ 500,000 492,124
5.35%, 4/17/96 ........................................ 1,000,000 984,099
5.42%, 4/18/96 ........................................ 2,000,000 1,967,480
5.44%, 3/26/96 ........................................ 1,000,000 987,156
5.45%, 3/1/96 ......................................... 1,000,000 990,917
5.48%, 3/22/96 ........................................ 710,000 701,246
5.50%, 2/2/96 ......................................... 1,000,000 995,111
5.66%, 1/16/96 ........................................ 3,000,000 2,992,920
5.66%, 1/17/96 ........................................ 1,960,000 1,955,073
5.67%, 1/8/96 ......................................... 2,000,000 1,997,795
5.67%, 1/11/96 ........................................ 1,690,000 1,687,338
---------------
17,986,044
---------------
FEDERAL HOME LOAN BANK FLOATING RATE NOTES (B) (3.7%):
5.73%, 11/21/96 ....................................... 2,000,000 1,999,575
5.26%, 9/2/97 ......................................... 1,000,000 995,880
---------------
2,995,455
---------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
COUPON NOTES (3.1%):
5.56%, 11/7/96 ........................................ 1,000,000 999,634
6.21%, 5/13/96 ........................................ 1,500,000 1,502,818
---------------
2,502,452
---------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES (5.5%):
5.37%, 3/21/96 ........................................ 595,000 587,900
5.48%, 2/8/96 ......................................... 635,000 631,327
5.55%, 2/13/96 ........................................ 2,250,000 2,235,084
5.56%, 2/8/96 ......................................... 1,000,000 994,131
---------------
4,448,442
---------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
COUPON NOTES (B) (1.2%):
5.66%, 3/15/96 ........................................ 1,000,000 1,000,032
---------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
DISCOUNT NOTES (15.4%):
5.31%, 4/5/96 ......................................... 700,000 690,191
5.46%, 2/28/96 ........................................ 680,000 674,018
5.46%, 3/14/96 ........................................ 1,000,000 988,928
5.49%, 1/29/96 ........................................ 1,000,000 995,730
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ------------ ---------------
<S> <C> <C>
5.49%, 2/28/96 ...................................... $ 2,500,000 2,478,016
5.50%, 3/28/96 ........................................ 1,000,000 986,708
5.58%, 1/29/96 ........................................ 1,430,000 1,423,795
5.60%, 1/5/96 ......................................... 480,000 479,701
5.65%, 1/11/96 ........................................ 250,000 249,608
5.67%, 1/9/96 ......................................... 2,500,000 2,496,850
5.67%, 1/19/96 ........................................ 1,000,000 997,165
---------------
12,460,710
---------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
FLOATING RATE NOTES (B) (2.5%):
5.81%, 10/4/96 ........................................ 2,000,000 2,000,000
---------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
MEDIUM TERM NOTES (1.2%):
5.60%, 11/1/96 ........................................ 1,000,000 1,001,008
---------------
STUDENT LOAN MARKETING ASSOCIATION
FLOATING RATE NOTES (B) (8.7%):
5.40%, 10/30/97 ....................................... 2,360,000 2,360,000
5.26%, 12/20/96 ....................................... 2,000,000 2,000,000
6.08%, 7/1/96 ......................................... 1,700,000 1,700,092
6.13%, 6/30/97 ........................................ 1,000,000 999,377
---------------
7,059,469
---------------
Total U.S. Government and Agency Securities
(cost: $58,436,921) ................................ 58,436,921
---------------
OTHER U.S. GOVERNMENT AGENCY-BACKED (2.4%):
Downey Savings & Loan, LOC Federal Home Loan Bank,
5.25%, 8/16/96 ....................................... 1,000,000 966,750
Downey Savings & Loan, LOC Federal Home Loan Bank,
5.50%, 7/12/96 ....................................... 1,000,000 970,514
---------------
Total Other U.S. Government Agency-Backed
(cost: $1,937,264) ................................. 1,937,264
---------------
REPURCHASE AGREEMENTS (25.6%):
Repurchase agreement with Goldman Sachs in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 11/30/95, accrued interest at
repurchase date of $28,400, 5.68%, 2/28/96 ........... 2,000,000(c)(d) 2,000,000
Repurchase agreement with Goldman Sachs in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 12/29/95, accrued interest at
repurchase date of $40,875, 5.45%, 3/28/96 ........... 3,000,000(c)(d) 3,000,000
Repurchase agreement with Goldman Sachs, collateralized
by U.S. government agency securities, acquired on
12/29/95, accrued interest at repurchase date of
$2,449, 5.91%, 1/2/96 ................................ 3,729,000 3,729,000
Repurchase agreement with Morgan Stanley in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 12/11/95, accrued interest at
repurchase date of $22,090, 5.64%, 3/14/96 ........... 1,500,000(c)(d) 1,500,000
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
16
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
INSTITUTIONAL MONEY MARKET FUND
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ------------ ---------------
<S> <C> <C>
Repurchase agreement with Morgan Stanley in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 12/18/95, accrued interest at
repurchase date of $7,338, 5.87%, 1/2/96 ........... $ 3,000,000(c) 3,000,000
Repurchase agreement with Morgan Stanley in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 12/26/95, accrued interest at
repurchase date of $3,471, 5.95%, 1/2/96 ............. 3,000,000(c) 3,000,000
Repurchase agreement with Morgan Stanley in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 12/26/95, accrued interest at
repurchase date of $3,967, 5.95%, 1/3/96 ............. 3,000,000(c) 3,000,000
Repurchase agreement with Morgan Stanley in a tri-party
agreement, collateralized by U.S. government agency
securities, acquired on 12/7/95, accrued interest at
repurchase date of $78,000, 5.85%, 1/8/96 ............ 1,500,000(c)(d) 1,500,000
---------------
Total Repurchase Agreements
(cost: $20,729,000) ................................ 20,729,000
---------------
Total Investments in Securities (100.1%)
(cost: $81,103,185) (e) ............................ 81,103,185
---------------
Liabilities in excess of other assets (-0.1%) (53,498)
---------------
Net assets (100.0%) ................................ $ 81,049,687
---------------
---------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) INTEREST RATE VARIES TO REFLECT CURRENT MARKET CONDITIONS; RATE SHOWN IS
THE EFFECTIVE RATE ON DECEMBER 31, 1995. THE MATURITY DATE SHOWN REPRESENTS
FINAL MATURITY. HOWEVER, FOR PURPOSES OF RULE 2A-7, THE MATURITY DATE USED
IS THE NEXT INTEREST RATE RESET DATE.
(C) TRI-PARTY REPURCHASE AGREEMENTS REPRESENT AGREEMENTS WHERE UNINVESTED CASH
BALANCES ARE TRANSFERRED TO AN INDEPENDENT THIRD-PARTY CUSTODIAN (BANK OF
NEW YORK) AND THE COLLATERAL PLEDGED BY THE COUNTERPARTY TO THE AGREEMENT
IS HELD AT THE SAME THIRD PARTY CUSTODIAN FOR THE BENEFIT OF THE FUND.
(D) REPURCHASE AGREEMENTS WITH GREATER THAN SEVEN DAYS TO MATURITY ARE
CONSIDERED ILLIQUID. THE AGGREGATE VALUE OF SUCH REPURCHASE AGREEMENTS
REPRESENTS 9.9% OF NET ASSETS.
(E) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES.
INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ------------ ---------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT SECURITIES (0.6%):
U.S. Treasury Note, 7.25%, 2/15/98
(cost: $50,350) ................................... $ 50,000 52,014
---------------
MORTGAGE-BACKED SECURITIES (122.0%):
U.S. AGENCY FIXED RATE MORTGAGES (10.1%):
7.50%, FNMA, 2/1/10 .................................. 893,191 918,853
---------------
U.S. AGENCY ADJUSTABLE RATE MORTGAGES (111.9%):
7.25%, FHLMC, 1/1/17 ................................. 1,862,649 1,891,260
7.76%, FNMA, 3/1/28 .................................. 2,797,543(b) 2,879,539
7.89%, FNMA, 9/1/22 .................................. 2,092,515 2,156,357
8.03%, FNMA, 2/1/22 .................................. 1,621,592 1,669,575
7.38%, GNMA II, 6/20/23 .............................. 1,490,229 1,517,246
---------------
10,113,977
---------------
Total Mortgage-Backed Securities
(cost: $11,065,106) ............................... 11,032,830
---------------
Total Investments in Securities (122.6%)
(cost: $11,115,456) ............................... 11,084,844
---------------
Liabilities in excess of other assets (-22.6%) ..... (2,044,066)
---------------
Net assets (100.0%) ............................... $ 9,040,778
---------------
---------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS
(B) ON DECEMBER 31, 1995, SECURITIES VALUED AT $2,879,539 WERE PLEDGED AS
COLLATERAL FOR THE FOLLOWING OUTSTANDING REVERSE REPURCHASE AGREEMENTS:
<TABLE>
<CAPTION>
NAME OF BROKER
ACQUISITION ACCRUED AND DESCRIPTION
AMOUNT DATE RATE* DUE INTEREST OF COLLATERAL
- --------- ---------- --------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
2,100,000 12/29/95 6% 1/3/96 $ 1,050 (1)
</TABLE>
* INTEREST RATE IS AS OF DECEMBER 31, 1995. RATE IS BASED ON THE LONDON
INTERBANK OFFERED RATE (LIBOR).
NAME OF BROKER AND DESCRIPTION OF COLLATERAL:
(1) MORGAN STANLEY; FNMA 7.76%, 3/1/28, $2,797,543 PAR.
(C) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS BASED ON THIS COST
WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 65,637
GROSS UNREALIZED DEPRECIATION ...... (96,249)
------------
NET UNREALIZED DEPRECIATION .... $ (30,612)
------------
------------
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
DIRECTORS David T. Bennett, CHAIRMAN, HIGHLAND HOMES, INC., USL
PRODUCTS INC., KIEFER BUILT, INC., OF COUNSEL, GRAY,
PLANT, MOOTY, MOOTY & BENNETT, P.A.
Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT COMPANY
William H. Ellis, PRESIDENT, PIPER JAFFRAY COMPANIES INC.,
PIPER CAPITAL
MANAGEMENT INCORPORATED
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL, RELIASTAR
FINANCIAL CORP.,
HORMEL FOODS CORP.
George Latimer, CHIEF EXECUTIVE OFFICER, NATIONAL EQUITY
FUNDS
OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD
Paul A. Dow, PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT AND TREASURER
Nancy S. Olsen, SENIOR VICE PRESIDENT
Thomas S. McGlinch, VICE PRESIDENT
John K. Schonberg, VICE PRESIDENT
David E. Rosedahl, SECRETARY
INVESTMENT ADVISER Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
CUSTODIAN AND Investors Fiduciary Trust Company
TRANSFER AGENT 127 WEST TENTH STREET, KANSAS CITY, MO 64105-1716
LEGAL COUNSEL Dorsey & Whitney P.L.L.P.
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
</TABLE>
18
<PAGE>
PIPER CAPITAL
MANAGEMENT
PIPER CAPITAL MANAGEMENT INCORPORATED Bulk Rate
222 SOUTH NINTH STREET U.S. Postage
MINNEAPOLIS, MN 55402-3804 PAID
Permit No. 3008
Mpls., MN
PIPER JAFFRAY INC., FUND SPONSOR AND NASD MEMBER.
Recycle THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
Logo 100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.
In an effort to reduce costs to our shareholders, we have
implemented a process to reduce duplicate mailings of
the fund's annual and semiannual reports. This
householding process should allow us to mail one report
to each address where one or more registered shareholders
with the same last name reside. If you would like to have
additional reports mailed to your address, please call our
Shareholder Services area at 1 800 866-7778, or mail your
request to:
Corporate Communications
Piper Capital Management
222 South Ninth Street
Minneapolis, MN 55402-3804
085-96 PIF02 2/96
