<PAGE>
Institutional Money Market Fund - 1997 Annual Report
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1997 Annual Report
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[Logo]
INSTITUTIONAL
MONEY MARKET
FUND
<PAGE>
CONTENTS
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INSTITUTIONAL MONEY MARKET FUND
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Portfolio Managers' Letter . . . . . . . . . . . . . . . . . . . . . . . . . .1
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . .3
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . . .9
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . 11
Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Glossary*** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
This report is intended for shareholders of Institutional Money Market Fund, but
may also be used as sales literature if preceded or accompanied by a prospectus.
The prospectus gives details about the charges, investment results, risks and
operating policies of the fund.
*An investment in a Piper money market 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.
***This report includes a glossary to help you understand financial terms
used in the portfolio managers' letter. When you see this symbol, it indicates a
word that is defined in the glossary.
[Logo]
INTERNATIONAL GROWTH FUNDS
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Emerging Markets Growth Fund
Pacific-European Growth Fund
U.S. GROWTH FUNDS
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Small Company Growth Fund
Emerging Growth Fund
Growth Fund
GROWTH AND INCOME FUNDS
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Growth and Income Fund
Balanced Fund
INCOME FUNDS
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Government Income Fund
Intermediate Bond Fund
Adjustable Rate Mortgage Securities Fund
TAX-EXEMPT INCOME FUNDS
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National Tax-Exempt Fund
Minnesota Tax-Exempt Fund
CASH MANAGEMENT FUNDS*
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Money Market Fund An investment staple, cash
U.S. Government Money Market Fund management funds can help you
Tax-Exempt Money Market Fund organize your finances and build
Institutional Money Market Fund your assets.
Piper Funds provide you with the flexibility to help you pursue your financial
goals. Among our funds, we offer a spectrum of investment objectives and
convenient shareholder services to meet the varied needs of today's investors.
Contact your Piper Jaffray Investment Executive for more information, including
prospectuses, about the Piper Funds, or call Mutual Fund Services at
800 866-7778. Please read the prospectuses carefully before investing.
<PAGE>
[Photo]
NANCY S. OLSEN
is primarily responsible for the management of Institutional Money Market Fund.
She has 19 years of financial experience.
INSTITUTIONAL MONEY MARKET FUND
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NOVEMBER 24, 1997
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DEAR SHAREHOLDERS:
INSTITUTIONAL MONEY MARKET FUND'S SEVEN-DAY CURRENT YIELD INCREASED SINCE WE
REPORTED TO YOU SIX MONTHS AGO FROM 5.18% ON MARCH 31, 1997, TO 5.42%* ON
SEPTEMBER 30, 1997. This is also an increase from one year ago on September 30,
1996, when the seven-day current yield was 5.12%.
SHORT-TERM INTEREST RATES FLUCTUATED DURING THE PERIOD WITH CHANGING
EXPECTATIONS ABOUT ECONOMIC GROWTH. During fourth quarter 1996, slower growth
led the markets to expect the Federal Reserve Board (Fed) to keep the federal
funds rate*** unchanged. But by late February, the economy was perceived to be
picking up steam - and on March 25 the Fed raised the federal funds rate by
0.25% from 5.25% to 5.50%. The markets turned around again during the second
quarter, reflecting decelerating inflation and signs that the economy was
slowing. During the third quarter, expectations of weaker economic growth,
combined with continued good news about inflation, resulted in lower bond and
money market yields.
WE PROVIDED YOU WITH A COMPETITIVE RETURN DURING THE PAST YEAR BY MANAGING THE
FUND'S AVERAGE WEIGHTED MATURITY*** AND MAKING SOME CHANGES TO THE FUND'S
STRUCTURE. We lengthened the fund's average weighted maturity as we moved closer
to year end 1996 to take advantage of higher rates. We shortened the maturity in
the first part of 1997 as rates began to increase, and then lengthened it again
by the end of the first quarter in time for the decline in short-term rates
during the second and third quarters. Throughout the summer, we continued to
position the fund with a longer average weighted maturity than its benchmark,***
which worked well given the decrease in rates during the period. Late in the
second quarter and early in the third, we added some one-year securities,
thereby positioning the
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30-DAY EFFECTIVE YIELD*
[Graph]
10/96.............. 5.12%
11/96.............. 5.18%
12/96.............. 5.18%
1/97.............. 5.17%
2/97.............. 5.18%
3/97.............. 5.20%
4/97.............. 5.32%
5/97.............. 5.35%
6/97.............. 5.38%
7/97.............. 5.54%
8/97.............. 5.56%
9/97.............. 5.54%
This chart shows Institutional Money Market Fund's 30-day effective yield as of
the end of each month. 30-day effective yield is the income generated by the
fund over a 30-day period. This income is annualized and assumed to be
reinvested.
* Past performance does not guarantee future results. The return of your
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.
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1 1997 Annual Report - Institutional Money Market Fund
<PAGE>
[Photo]
SHAISTA B. TAJAMAL
assists with the management of Institutional Money Market Fund. She has seven
years of financial experience.
INSTITUTIONAL MONEY MARKET FUND (continued)
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fund in more of a barbell structure. *** A barbell structure clusters
maturities at both the shorter end of the yield curve *** (one to three
months) and at the longer end (10 to 13 months). This structure works well when
the difference between yields on short- and longer-term securities decreases,
which is what happened during the third quarter of this year.
GOING FORWARD, WE BELIEVE THE PATTERN OF STRONG AND WEAK PERIODS OF ECONOMIC
GROWTH, ALTERNATING WITHOUT EXCESS IN EITHER DIRECTION, WILL CONTINUE. While
economic indicators are sending mixed signals, it appears the economy is fairly
well balanced. Any changes in Fed policy will depend on economic releases during
the coming months. We will continue to monitor this news carefully and formulate
our strategy accordingly.
OUR PRIMARY CONCERN IN MANAGING THE FUND IS THE SAFETY OF YOUR PRINCIPAL. We
continue to use a fundamental approach to identify high-quality government and
agency money market securities that provide competitive yields. Our strategy is
designed to add value by actively positioning the portfolio on the short end of
the yield curve (13 months or less) 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 investments that help you achieve your financial goals.
Sincerely,
/s/ Nancy Shellenberger Olson
Nancy Shellenberger Olsen
Portfolio Manager
[CHART]
PORTFOLIO COMPOSITION
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As a percentage of total assets on September 30, 1997
Federal Farm Credit Bank 6%
Federal Home Loan Mortgage Corporation 18%
Other Government Agency-Backed Securities 13%
Federal National Mortgage Association 26%
Student Loan Marketing Association 9%
Repurchase Agreements 20%
Federal Home Loan Bank 7%
U.S. Treasury Securities 1%
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2 1997 Annual Report - Institutional Money Market Fund
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Financial Statements
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STATEMENT OF ASSETS AND LIABILITIES September 30, 1997
................................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at amortized cost which
approximates market value (note 2) (including repurchase
agreements of $55,085,000) ............................... $ 280,759,557
Cash in bank on demand deposit ............................. 22,447
Organization costs (note 2) ................................ 9,431
Accrued interest receivable ................................ 890,239
-------------------
Total assets ............................................. 281,681,674
-------------------
LIABILITIES:
Dividends payable to shareholders .......................... 1,194,499
Payable for investment securities purchased ................ 2,998,110
Accrued investment management fee .......................... 35,075
-------------------
Total liabilities ........................................ 4,227,684
-------------------
Net assets applicable to outstanding capital stock ....... $ 277,453,990
-------------------
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COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital ............... $ 277,453,990
-------------------
Total - representing net assets applicable to outstanding
common stock ........................................... $ 277,453,990
-------------------
-------------------
NET ASSET VALUE AND OFFERING PRICE:
Net assets ................................................. $ 277,453,990
Shares outstanding (authorized 100 billion shares of $0.01
par value) ............................................... 277,453,990
Net asset value and offering price per share ............... $ 1.00
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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3 1997 Annual Report - Institutional Money Market Fund
<PAGE>
Financial Statements (continued)
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STATEMENT OF OPERATIONS For the Year Ended September 30,
1997
................................................................................
<TABLE>
<S> <C>
INCOME:
Interest ................................................... $ 14,759,364
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EXPENSES (NOTE 5):
Investment management fee .................................. 401,419
Custodian and accounting fees .............................. 193,895
Transfer agent and dividend disbursing agent fees .......... 32,971
Registration fees .......................................... 44,925
Reports to shareholders .................................... 40,834
Amortization of organization costs ......................... 14,166
Directors' fees ............................................ 7,968
Audit and legal fees ....................................... 53,919
Other expenses ............................................. 32,477
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Total expenses ........................................... 822,574
Less expenses paid indirectly .......................... (2,155)
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Total net expenses ....................................... 820,419
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Net investment income .................................... $ 13,938,945
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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4 1997 Annual Report - Institutional Money Market Fund
<PAGE>
Financial Statements (continued)
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STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED YEAR ENDED
9/30/97 9/30/96 6/30/96
------------------- ------------------- -------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 13,938,945 $ 2,199,636 $ 5,386,499
------------------- ------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................. (13,938,945) (2,199,636) (5,386,499)
------------------- ------------------- -------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Increase (decrease) in net assets from capital share
transactions ........................................... 104,889,203 (1,250,844) 121,326,769
------------------- ------------------- -------------------
Total increase (decrease) in net assets .................. 104,889,203 (1,250,844) 121,326,769
Net assets at beginning of year ............................ 172,564,787 173,815,631 52,488,862
------------------- ------------------- -------------------
Net assets at end of year .................................. $ 277,453,990 $ 172,564,787 $ 173,815,631
------------------- ------------------- -------------------
------------------- ------------------- -------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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5 1997 Annual Report - Institutional Money Market Fund
<PAGE>
Notes to Financial Statements
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(1) ORGANIZATION
................................
Piper Institutional Funds Inc. (the company) is registered
under the Investment Company Act of 1940 (as amended) as a
single, open-end management investment company. The
company currently includes one diversified series,
Institutional Money Market Fund (the fund). The company's
articles of incorporation permit the board of directors to
create additional series in the future.
Institutional Money Market Fund invests in short-term
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.
There is no assurance that the fund will be able to
maintain a stable net asset value of $1.00 per share.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
................................
INVESTMENTS IN SECURITIES
Pursuant to Rule 2a-7 of the Investment Company Act of
1940 (as amended), securities are valued on the basis of
amortized cost, which approximates market value.
Security transactions are accounted for on the date the
securities are purchased or sold. Interest income,
including amortization of discount and premium computed on
a straight line basis, is accrued daily.
FEDERAL TAXES
The fund intends 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. The fund
also intends to distribute its taxable net investment
income and realized gains, if any, to avoid the payment of
any federal excise taxes.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income
are declared daily and reinvested in additional shares of
the fund monthly.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with certain
broker-dealers, the fund, 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 or
agency obligations. Securities pledged as collateral for
all individual and joint repurchase agreements are held by
the fund's 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.
Provisions for all agreements ensure that the daily market
value of the collateral is in excess of the repurchase
amount, including accrued interest, to protect the fund in
the event of a default.
ORGANIZATION COSTS
Organization costs were incurred in connection with the
start up and initial registration of the fund. These costs
are amortized over 60 months on a straight-line basis. If
any or all of the shares representing initial capital of
the 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 preceding the
redemption.
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6 1997 Annual Report - Institutional Money Market Fund
<PAGE>
Notes to Financial Statements (continued)
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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 in the financial statements. Actual
results could differ from these estimates.
(3) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities,
for the year ended September 30, 1997, aggregated
$8,007,093,195 and $7,898,874,403, respectively.
(4) CAPITAL SHARE
TRANSACTIONS
................................
Capital share transactions for the fund, at net asset
value of $1, were as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 JUNE 30, 1996
------------------- ------------------- ----------------
<S> <C> <C> <C>
Sales of fund shares ................... $ 1,521,304,518 $ 228,681,381 $ 590,483,864
Issued for reinvested distributions .... 12,954,196 2,077,811 4,730,393
Redemptions of fund shares ............. (1,429,369,511) (232,010,036) (473,887,488)
------------------- ------------------- ----------------
$ 104,889,203 $ (1,250,844) $ 121,326,769
------------------- ------------------- ----------------
------------------- ------------------- ----------------
</TABLE>
(5) EXPENSES
................................
INVESTMENT MANAGEMENT FEE
The company has entered into an investment management
agreement with Piper Capital Management Incorporated
(Piper Capital) under which Piper Capital manages the
fund's assets and furnishes related office facilities,
equipment, research and personnel. The agreement requires
the fund to pay Piper Capital a monthly fee based on
average daily net assets. The fee is equal to an annual
rate of 0.15% of the fund's average daily net assets.
SHAREHOLDER ACCOUNT SERVICING FEES
The company has also entered into shareholder account
servicing agreements under which Piper Jaffray and Piper
Trust Company (Piper Trust) perform various transfer and
dividend disbursing agent services for accounts held at
the respective company. The fees, which are paid monthly
to Piper Jaffray and Piper Trust for providing these
services, are equal to an annual rate of $9.00 per active
shareholder account and $6.00 per closed account. For the
year ended September 30, 1997, the fund paid $6,474 and
$451 to Piper Jaffray and Piper Trust, respectively, in
connection with the shareholder account servicing
agreements.
OTHER FEES AND EXPENSES
In addition to the investment management, distribution and
shareholder account servicing fees, the 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; insurance; interest; taxes and other
miscellaneous expenses.
Expenses paid indirectly represent a reduction of
custodian fees for earnings on miscellaneous cash balances
maintained by the fund.
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7 1997 Annual Report - Institutional Money Market Fund
<PAGE>
Notes to Financial Statements (continued)
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(6) 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>
Three
Year Ended Months Ended Year Ended June 30,
September 30, September 30, --------------------------------------------------
1997 1996 1996 1995 1994 1993(b)
-------------- -------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ---------- ---------- ---------- -----------
Operations:
Net investment income ................ 0.05 0.01 0.05 0.05 0.03 0.01
Distributions to shareholders:
From net investment income ........... (0.05) (0.01) (0.05) (0.05) (0.03) (0.01)
------- ------- ---------- ---------- ---------- -----------
Net asset value, end of period ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ---------- ---------- ---------- -----------
------- ------- ---------- ---------- ---------- -----------
SELECTED INFORMATION
Total return (a) ....................... 5.32% 1.29% 5.42% 5.26% 3.23% 1.24%
Net assets at end of period (in
millions) ............................ $ 277 $ 173 $ 174 $ 52 $ 35 $ 40
Ratio of expenses to average daily net
assets ............................... 0.31% 0.35%(c) 0.35% 0.35% 0.35% 0.35%(c)
Ratio of net investment income to
average daily net assets ............. 5.21% 5.06%(c) 5.22% 5.17% 3.26% 3.02%(c)
Ratios before waivers by the advisor:
Ratio of expenses to average daily net
assets before waivers .............. -- 0.41%(c) 0.38% 0.49% 0.61% --
Ratio of net investment income to
average daily net assets before
waivers ............................ -- 5.00%(c) 5.19% 5.03% 3.00% --
</TABLE>
(a) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(b) COMMENCEMENT OF OPERATIONS WAS FEBRUARY 2, 1993.
(c) ANNUALIZED.
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8 1997 Annual Report - Institutional Money Market Fund
<PAGE>
Investments in Securities
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<TABLE>
<CAPTION>
INSTITUTIONAL MONEY MARKET FUND September 30, 1997
..............................................................................................
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------- --------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT AND AGENCY SECURITIES (68.0%):
FEDERAL FARM CREDIT BANK DISCOUNT NOTES (2.2%):
5.40%, 11/17/97 ..................................... $ 1,250,000 $ 1,241,188
5.41%, 12/4/97 ...................................... 5,000,000 4,951,911
--------------
6,193,099
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FEDERAL FARM CREDIT BANK FLOATING RATE NOTES (b) (4.3%):
5.56%, 11/2/98 ...................................... 3,000,000 2,996,841
5.47%, 12/17/97 ..................................... 3,000,000 2,999,440
5.50%, 3/19/98 ...................................... 6,000,000 5,997,719
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11,994,000
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FEDERAL HOME LOAN BANK COUPON NOTES (2.6%):
5.88%, 2/5/98 ....................................... 3,000,000 2,999,896
5.80%, 6/12/98 ...................................... 2,155,000 2,154,128
5.69%, 9/24/98 ...................................... 2,000,000 1,998,391
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7,152,415
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FEDERAL HOME LOAN BANK DISCOUNT NOTES (3.2%):
5.43%, 10/10/97 ..................................... 8,000,000 7,989,150
5.42%, 10/29/97 ..................................... 1,000,000 995,784
--------------
8,984,934
--------------
FEDERAL HOME LOAN BANK FLOATING RATE NOTES (b) (1.4%):
5.51%, 3/19/98 ...................................... 4,000,000 3,998,650
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION COUPON NOTES (1.4%):
5.89%, 5/29/98 ...................................... 3,825,000 3,822,352
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION DISCOUNT NOTES (15.6%):
5.43%, 10/3/97 ...................................... 7,000,000 6,997,888
5.43%, 10/7/97 ...................................... 2,600,000 2,597,647
5.42%, 10/9/97 ...................................... 7,000,000 6,991,569
5.43%, 10/10/97 ..................................... 5,000,000 4,993,212
5.44%, 10/31/97 ..................................... 5,000,000 4,977,333
5.41%, 11/14/97 ..................................... 7,000,000 6,953,714
5.45%, 11/25/97 ..................................... 2,376,000 2,356,217
5.41%, 10/10/97 ..................................... 2,350,000 2,346,821
5.42%, 10/14/97 ..................................... 5,000,000 4,990,214
--------------
43,204,615
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION MORTGAGE-BACKED SECURITY (1.2%):
6.50%, 2/1/98 ....................................... 3,385,935 3,391,508
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES (18.1%):
5.40%, 10/6/97 ...................................... 2,700,000 2,697,975
5.41%, 10/7/97 ...................................... 4,185,000 4,181,227
5.42%, 10/14/97 ..................................... 1,550,000 1,546,966
5.42%, 10/15/97 ..................................... 7,000,000 6,985,246
5.40%, 10/17/97 ..................................... 7,000,000 6,983,200
5.40%, 10/21/97 ..................................... 3,200,000 3,190,400
5.45%, 11/6/97 ...................................... 5,000,000 4,972,750
5.44%, 11/7/97 ...................................... 1,100,000 1,093,850
5.46%, 11/24/97 ..................................... 1,500,000 1,487,715
5.41%, 12/15/97 ..................................... 5,360,000 5,299,588
5.44%, 12/22/97 ..................................... 5,000,000 4,938,044
5.40%, 10/27/97 ..................................... $ 2,000,000 $ 1,992,200
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------- --------------
<S> <C> <C>
5.42%, 11/24/97 ..................................... 5,000,000 4,959,350
--------------
50,328,511
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION FLOATING RATE NOTES (b) (4.0%):
5.51%, 4/1/99 ....................................... 5,000,000 4,982,063
5.29%, 6/2/99 ....................................... 2,000,000 1,992,243
5.28%, 5/11/98 ...................................... 4,000,000 3,998,360
--------------
10,972,666
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION MEDIUM TERM NOTES (3.8%):
6.08%, 5/6/98 ....................................... 3,000,000 2,998,119
5.50%, 2/18/98 ...................................... 7,500,000 7,491,996
--------------
10,490,115
--------------
STUDENT LOAN MARKETING ASSOCIATION FLOATING RATE NOTES (b) (8.0%):
5.25%, 9/28/98 ...................................... 6,740,000 6,734,075
5.23%, 10/14/97 ..................................... 10,000,000 9,998,962
5.55%, 10/6/98 ...................................... 3,000,000 2,998,110
5.41%, 10/30/97 ..................................... 2,360,000 2,360,000
--------------
22,091,147
--------------
STUDENT LOAN MARKETING ASSOCIATION MEDIUM TERM NOTES (1.1%):
5.82%, 9/16/98 ...................................... 3,000,000 2,998,849
--------------
U.S. TREASURY NOTES AND BONDS (1.1%):
5.13%, 2/28/98 ...................................... 3,000,000 2,991,939
--------------
Total U.S. Government and Agency Securities
(cost: $188,614,800) ........................... 188,614,800
--------------
U.S. GOVERNMENT AGENCY-BACKED SECURITIES (13.4%):
Downey Savings & Loan Association, LOC Federal Home
Loan Bank of San Francisco, 5.50%, 12/5/97 ........ 7,000,000 6,930,487
Downey Savings & Loan Association, LOC Federal Home
Loan Bank of San Francisco, 5.46%, 3/27/98 ........ 6,000,000 5,838,930
Nebraska Higher Education Loan Program Inc., LOC
Student Loan Marketing Association, 5.55%,
10/14/97 .......................................... 2,100,000 2,095,791
Nebraska Higher Education Loan Program Inc., LOC
Student Loan Marketing Association, 5.50%,
10/14/97 .......................................... 4,200,000 4,191,658
Nebraska Higher Education Loan Program Inc., LOC
Student Loan Marketing Association, 5.53%,
10/24/97 .......................................... 3,768,000 3,754,687
Nebraska Higher Education Loan Program Inc., LOC
Student Loan Marketing Association, 5.50%,
10/23/97 .......................................... 1,394,000 1,389,315
USA Group Secondary Market Services Inc., LOC Student
Loan Marketing Association, 5.48%, 10/16/97 ....... 1,107,000 1,104,472
USA Group Secondary Market Services Inc., LOC Student
Loan Marketing Association, 5.47%, 10/22/97 ....... $ 6,000,000 $ 5,980,855
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
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9 1997 Annual Report - Institutional Money Market Fund
<PAGE>
Investments in Securities (continued)
- --------------------------------------------------------------------------------
INSTITUTIONAL MONEY MARKET FUND
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------- --------------
<S> <C> <C>
USA Group Secondary Market Services Inc., LOC Student
Loan Marketing Association, 5.47%, 10/31/97 ....... 5,800,000 5,773,562
--------------
Total U.S. Government Agency-Backed Securities
(cost: $37,059,757) ............................ 37,059,757
--------------
REPURCHASE AGREEMENTS (19.8%):
Repurchase agreement with Credit Suisse First Boston,
acquired on 9/12/97, interest of $30,611, 5.51%,
10/2/97 ........................................... 10,000,000(e) 10,000,000
Repurchase agreement with Goldman Sachs, acquired on
9/11/97, interest of $30,053, 5.52%, 10/9/97 ...... 7,000,000(c) (d) 7,000,000
Repurchase agreement with Goldman Sachs, acquired on
9/30/97, interest of $536, 6.25%, 10/1/97 ......... 3,085,000(c) 3,085,000
Repurchase agreement with Goldman Sachs, acquired on
9/4/97, interest of $20,850, 5.56%, 10/1/97 ....... 5,000,000(c) 5,000,000
Repurchase agreement with Goldman Sachs, acquired on
9/4/97, interest of $32,433, 5.56%, 10/16/97 ...... 5,000,000(c) (d) 5,000,000
Repurchase agreement with Morgan Stanley, acquired on
9/25/97, interest of $16,363, 5.61%, 10/2/97 ...... 15,000,000(c) 15,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------- --------------
<S> <C> <C>
Repurchase agreement with Morgan Stanley, acquired on
9/26/97, interest of $10,908, 5.61%, 10/3/97 ...... $ 10,000,000(c) $ 10,000,000
--------------
Total Repurchase Agreements
(cost: $55,085,000) ............................ 55,085,000
--------------
Total Investments in Securities
(cost: $280,759,557) (f) ....................... $ 280,759,557
--------------
--------------
</TABLE>
(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 SEPTEMBER 30, 1997. THE MATURITY DATE REPRESENTS
FINAL MATURITY. HOWEVER, FOR PURPOSES OF RULE 2a-7, MATURITY DATE IS THE
NEXT INTEREST RATE RESET DATE.
(c) REPURCHASE AGREEMENT IN A TRI-PARTY ACCOUNT WHICH IS COLLATERALIZED BY U.S.
GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS INTEREST
DUE AT MATURITY OF THE REPURCHASE AGREEMENT. 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 4.3% OF NET ASSETS AT SEPTEMBER 30, 1997.
(e) REPURCHASE AGREEMENT WHICH IS COLLATERALIZED BY U.S. GOVERNMENT AGENCY
SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS INTEREST DUE AT MATURITY OF
THE REPURCHASE AGREEMENT.
(f) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES.
- --------------------------------------------------------------------------------
10 1997 Annual Report - Institutional Money Market Fund
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PIPER INSTITUTIONAL FUNDS INC.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in
securities, of Institutional Money Market Fund (a fund
within Piper Institutional Funds Inc.) as of September 30,
1997, the related statement of operations for the year
then ended, the statements of changes in net assets for
the year ended September 30, 1997, the three months ended
September 30, 1996, and the year ended June 30, 1996, and
the financial highlights for the periods presented in note
6 to the financial statements. These financial statements
and the financial highlights are the responsibility of the
fund's management. Our responsibility is to express an
opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are
confirmed to us by the custodian. As to securities
purchased but not received, we request confirmations from
brokers and, where replies are not received, we carry out
other appropriate auditing procedures. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and the financial
highlights referred to above present fairly, in all
material respects, the financial position of Institutional
Money Market Fund as of September 30, 1997, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods stated in the
first paragraph above, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 7, 1997
- --------------------------------------------------------------------------------
11 1997 Annual Report - Institutional Money Market Fund
<PAGE>
Federal Income Tax Information
- --------------------------------------------------------------------------------
The following per-share information describes the federal
tax treatment of distributions made during the fiscal
year. Distributions for the calendar year will be reported
to you on Form 1099-DIV. Please consult a tax adviser on
how to report these distributions at the state and local
levels.
INCOME DISTRIBUTIONS (TAXABLE AS ORDINARY DIVIDENDS, NONE
QUALIFYING FOR DEDUCTION BY CORPORATIONS)
<TABLE>
<CAPTION>
PAYABLE DATE AMOUNT
- ---------------------------------------- -------
<S> <C>
October 1, 1996 ........................ $0.0042
November 1, 1996 ....................... 0.0043
December 2, 1996 ....................... 0.0042
January 2, 1997 ........................ 0.0043
February 3, 1997 ....................... 0.0043
March 3, 1997 .......................... 0.0039
April 1, 1997 .......................... 0.0043
May 1, 1997 ............................ 0.0043
June 2, 1997 ........................... 0.0044
July 1, 1997 ........................... 0.0043
August 1, 1997 ......................... 0.0046
September 2, 1997 ...................... 0.0046
-------
Total ................................ $0.0517
-------
-------
</TABLE>
- --------------------------------------------------------------------------------
12 1997 Annual Report - Institutional Money
Market Fund
<PAGE>
GLOSSARY OF TERMS ***
- --------------------------------------------------------------------------------
AVERAGE WEIGHTED MATURITY
The average maturity is the mean of the maturity dates of a group of securities.
The term is used to describe the average time before the securities in a fund
mature. Average weighted maturity takes into account the size of each holding
represented.
BARBELL STRUCTURE
A barbell investment structure emphasizes securities with long- and short-term
maturities and de-emphasizes securities with intermediate-range maturities. This
enables a manager to take advantage of the high yields associated with long-term
maturities, while still providing liquidity with short-term maturities.
BENCHMARK: INSTITUTIONAL MONEY MARKET FUND
IBC's MONEY FUND REPORT AVERAGES-TM- - Government-Only, Institutions-Only, as
reported by IBC's MONEY FUND REPORT-TM-, which is an average of
institutions-only funds investing in U.S. Treasury and government agency
securities.
FEDERAL FUNDS RATE
The federal funds rate is the interest rate charged by banks with excess
reserves at a Federal Reserve district bank to banks needing overnight loans to
meet reserve requirements. Although the Federal Reserve Board sets the target
federal funds rate, the actual federal funds rate is set daily by the market.
Since the rate is determined by market forces, unlike the prime rate and the
discount rate, which are periodically changed by banks and by the Federal
Reserve Board, respectively, it is the most sensitive indicator of the direction
of interest rates.
YIELD CURVE
A graph that shows the relationship between the interest rates paid on bonds and
their maturities, ranging from the shortest maturities to the longest available
(assuming the bonds are all of the same quality). The resulting curve indicates
whether short-term interest rates are higher or lower than long-term rates.
- --------------------------------------------------------------------------------
13 1997 Annual Report - Institutional Money Market Fund
<PAGE>
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, Retired 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.
DAVID A. HUGHEY, Retired Executive Vice President and Chief Administrative
Officer of Dean Witter InterCapital Inc. and Dean Witter Trust Co.
GEORGE LATIMER, Chief Executive Officer, National Equity Funds
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM H. ELLIS, Chairman of the Board
PAUL A. DOW, President
ROBERT H. NELSON, Vice President and Treasurer
SUSAN SHARP MILEY, Secretary
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
PIPER CAPITAL MANAGEMENT INCORPORATED
222 South Ninth Street, Minneapolis, MN 55402-3804
TRANSFER AND DIVIDEND DISBURSING AGENTS
- --------------------------------------------------------------------------------
INVESTORS FIDUCIARY TRUST COMPANY
1004 Baltimore Avenue, Kansas City, MO 64105-1614
PIPER JAFFRAY INC.
222 South Ninth Street, Minneapolis, MN 55402-3804
PIPER TRUST COMPANY
222 South Ninth Street, Minneapolis, MN 55402-3804
CUSTODIAN AND ACCOUNTING AGENT
- --------------------------------------------------------------------------------
INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue, Kansas City, MO 64105-1307
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
KPMG PEAT MARWICK LLP
4200 Norwest Center, Minneapolis, MN 55402
LEGAL COUNSEL
- --------------------------------------------------------------------------------
DORSEY & WHITNEY LLP
220 South Sixth Street, Minneapolis, MN 55402
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
By Phone [Graphic]
- --------------------------------------------------------------------------------
800 866-7778
FOR GENERAL INFORMATION
press 5, our Mutual Fund Services representatives are ready to answer
your questions.
TO ORDER LITERATURE
- --------------------------------------------------------------------------------
press 5, ask a service representative to mail you additional literature,
including a Quarterly Update. You can also request to be put on a mailing list
to receive this information automatically each quarter.
BY MAIL [Graphic]
- --------------------------------------------------------------------------------
Piper Capital Management
Attn: Mutual Fund Services
222 South Ninth Street
Minneapolis, MN 55402-3804
In an effort to reduce costs to our shareholders, we have implemented a process
to reduce duplicate mailings of the funds shareholder 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 Mutual
Fund Services area at 800 866-7778, or mail a request to us.
ON-LINE [Graphic]
- --------------------------------------------------------------------------------
http://www.piperjaffray.com/
<PAGE>
Institutional Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[Logo] PIPER FUNDS 222 South Ninth Street
Minneapolis, MN 55402-3804
PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.
10640 11/1997 270-97
