<PAGE>
1933 Act Registration No. 33-53718
1940 Act Registration No. 811-7320
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
-------
Post-Effective Amendment No. 8
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AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 9
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(Check appropriate box or boxes)
PIPER INSTITUTIONAL FUNDS INC.
(Exact Name of Registrant as Specified in Charter)
Piper Jaffray Tower
222 South Ninth Street, Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 342-6418
(Registrant's Telephone Number, including Area Code)
Paul A. Dow
222 South Ninth Street
Minneapolis, Minnesota 55402
(Name and Address of Agent for Service)
COPY TO:
Kathleen L. Prudhomme, Esq.
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
---------
on (specify date) pursuant to paragraph (b) of Rule 485
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75 days after filing pursuant to paragraph (a) of Rule 485
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X 60 days after filing pursuant to paragraph (a) of Rule 485
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<PAGE>
PIPER INSTITUTIONAL FUNDS INC.
Registration Statement on Form N-1A
----------------------------
Cross Reference Sheet
Pursuant to Rule 481(a)
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Item No. Prospectus Heading
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1. Cover Page . . . . . . . . . . . . . . . Cover Page (no caption)
2. Synopsis . . . . . . . . . . . . . . . . Fund Descriptions
3. Condensed Financial Information. . . . . Fund Descriptions
4. General Description of Registrant. . . . Fund Descriptions
5. Management of the Fund . . . . . . . . . Fund Descriptions
6. Capital Stock and Other Securities . . . Managing Your
Investment--Holding Shares
7. Purchase of Securities Being Offered . . Managing Your
Investment--Buying Shares
8. Redemption or Repurchase . . . . . . . . Managing Your
Investment--Selling Shares
9. Pending Legal Proceedings. . . . . . . . General Information
Statement of Additional
Heading Information
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10. Cover Page . . . . . . . . . . . . . . . Cover Page (no caption)
11. Table of Contents. . . . . . . . . . . . Table of Contents
12. General Information and History. . . . . Pending Litigation
13. Investment Objectives and Policies . . . Investment Policies and
Restrictions
14. Management of the Fund . . . . . . . . . Directors and Executive
Officers
15. Control Persons and Principal
Holders of Securities. . . . . . . . . . Capital Stock and Ownership of
Shares
16. Investment Advisory and Other
Services . . . . . . . . . . . . . . . . Investment Advisory and Other
Services
<PAGE>
17. Brokerage Allocation and Other
Practices. . . . . . . . . . . . . . . . Portfolio Transactions and
Allocation of Brokerage
18. Capital Stock and Other Securities . . . Capital Stock and Ownership of
Shares
19. Purchase, Redemption and Pricing
of Securities Being Offered. . . . . . . Net Asset Value and Public
Offering Price; Redemption
20. Tax Status . . . . . . . . . . . . . . . Taxation
21. Underwriters . . . . . . . . . . . . . . Investment Advisory and Other
Services; Portfolio
Transactions and Allocation of
Brokerage
22. Calculations of Performance Data . . . . Performance Comparisons
23. Financial Statements . . . . . . . . . . Financial Statements
<PAGE>
PROSPECTUS
___________, 1998
[LOGO]
INSTITUTIONAL MONEY MARKET FUND
BEFORE YOU INVEST:
PLEASE READ THIS PROSPECTUS CAREFULLY, AND KEEP IT FOR FUTURE REFERENCE. IT
CONTAINS IMPORTANT INFORMATION ABOUT THE FUND, INCLUDING INFORMATION ON
INVESTMENT POLICIES, RISKS AND FEES.
INVESTMENTS IN THE FUND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR
ANY OTHER ENTITY. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1 PER SHARE.
AS WITH ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION (SEC) OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
[LOGO]
CONTENTS
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INVESTING IN INSTITUTIONAL MONEY MARKET FUND . . 1
FUND DESCRIPTION
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INSTITUTIONAL MONEY MARKET FUND. . . . . . . . . 2 Investment objective and
policies, risk
considerations, portfolio
RISK FACTORS . . . . . . . . . . . . . . . . . . 4 managers, shareholder
expenses and financial
highlights
MANAGING YOUR INVESTMENT
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BUYING SHARES. . . . . . . . . . . . . . . . . . 5 Practical information to
Calculating Your Purchase Price help you manage your
Investing Automatically investment in Piper Funds
Minimum Investment Waiver
HOLDING SHARES . . . . . . . . . . . . . . . . . 6
Receiving Dividends and Other Distributions
Taxing of Dividends and Other Distributions
Exchanging Shares
Conducting Transactions by Phone
Staying Informed
SELLING SHARES . . . . . . . . . . . . . . . . . 7
Receiving the Proceeds
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GENERAL INFORMATION. . . . . . . . . . . . . . . 8
<PAGE>
INVESTING IN
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INSTITUTIONAL MONEY MARKET FUND
INSTITUTIONAL MONEY MARKET FUND PROVIDES YOU WITH A LIQUID INVESTMENT DESIGNED
TO OFFER CURRENT INCOME WHILE PRESERVING YOUR CAPITAL. THE FUND IS ADVISED BY
PIPER CAPITAL MANAGEMENT INCORPORATED.
BEFORE YOU INVEST:
KNOW YOUR GOALS
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Institutional Money Market Fund can complement your investment portfolio by:
- - Giving you easy access to your cash reserves.
- - Providing an interest-earning parking spot when you are between investments.
- - Offering a conservative alternative for a portion of your investable assets.
If you have ample liquid assets and are investing for the long term, consider
diversifying your portfolio with other investments as well. A money market fund
may not have the earning power you need to keep ahead of inflation.
UNDERSTAND THE RISKS
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While mutual funds are a convenient and potentially rewarding way to invest,
they do not always meet their objectives. Please remember: An investment in this
fund is neither insured nor guaranteed by the U.S. government or any other
entity. There is no assurance that the fund will maintain a stable net asset
value of $1 per share. Risks associated with this fund are outlined in the
following pages.
USE YOUR PROSPECTUS
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Please read this prospectus carefully and keep it on file for future reference.
More detailed information about the fund is contained in its statement of
additional information, which can be obtained from the fund at the address and
phone number on the back cover. Further information is also available from your
broker or by calling Piper Capital at 800 866-7778.
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1 PROSPECTUS - INSTITUTIONAL MONEY MARKET FUND
<PAGE>
FUND DESCRIPTIONS
INSTITUTIONAL MONEY MARKET FUND
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INSTITUTIONAL MONEY MARKET FUND SEEKS MAXIMUM CURRENT INCOME CONSISTENT WITH
PRESERVATION OF CAPITAL AND MAINTENANCE OF LIQUIDITY THROUGH INVESTMENTS IN
SHORT-TERM U.S. GOVERNMENT SECURITIES.
INVESTMENT POLICIES
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Institutional Money Market Fund invests only 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 with respect to those
securities. Not all of these securities are backed by the full faith and credit
of the U.S. government.
The fund invests only in securities that mature in 397 calendar days or less
from the date of purchase, and it maintains an average weighted maturity of 60
days or less. The fund's investments include securities with variable or
floating interest rates and securities with demand features. The maturities of
these securities are determined according to federal rules which allow the fund
to consider some of these securities as having maturities shorter than their
stated maturity dates.
The fund may borrow money from banks for temporary or emergency purposes in an
amount up to one-third of the value of its total assets. This policy may not be
changed without shareholder approval. Up to 10% of the fund's net assets may be
invested in illiquid securities.
RISK CONSIDERATIONS
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The fund seeks to maintain a stable share price of $1. However, there may be
situations where the fund's share price could fall below $1, which would reduce
the value of your account.
The level of income you receive from the fund will be affected by movements in
short-term interest rates.
By investing solely in U.S. government and agency securities and repurchase
agreements for those securities, the fund may offer less income than a money
market fund investing in other high-quality money market securities.
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PLEASE REMEMBER: THE GOVERNMENT'S GUARANTEE DOES NOT EXTEND TO
THE FUND ITSELF. NOR DOES IT COVER THE MARKET VALUE OR CURRENT
YIELD OF GOVERNMENT SECURITIES.
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The investment securities and techniques used by the fund present other risks as
well, including interest rate risk. See page 4 for more information.
PORTFOLIO MANAGERS
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NANCY OLSEN is a senior vice president of Piper Capital with 19 years of
financial experience.
SHAISTA TAJAMAL, a vice president of Piper Capital with seven years of financial
experience, has assisted with the management of the fund since its inception.
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SHAREHOLDER EXPENSES
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As a shareholder, you pay expenses both directly and indirectly. Figures below
show expenses for the past year.
SHAREHOLDER TRANSACTION EXPENSES
Maximum front-end sales charge on purchases. . . . . . . . . none
(AS A % OF OFFERING PRICE)
Maximum deferred sales charge. . . . . . . . . . . . . . . . none
(AS A % OF NET ASSET VALUE AT PURCHASE
OR REDEMPTION, WHICHEVER IS LESS)
FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
Management fee . . . . . . . . . . . . . . . . . . . . . . . . . 0.15%
12b-1 fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . none
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . 0.16%
-----
Total operating expenses . . . . . . . . . . . . . . . . . . . . 0.31%
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EXPENSES ON A $1,000 INVESTMENT
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The example below shows the expenses you would pay on a $1,000 investment over
various time periods. It assumes you reinvested all distributions and received a
5% annual return. PLEASE NOTE: THIS IS ONLY AN EXAMPLE AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES COULD
VARY.
1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3
3 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10
5 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17
10 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39
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2 PROSPECTUS - INSTITUTIONAL MONEY MARKET FUND
<PAGE>
FUND DESCRIPTIONS
INSTITUTIONAL MONEY MARKET FUND (continued)
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FINANCIAL HIGHLIGHTS The following information has been audited by KPMG Peat
Marwick LLP, independent auditors.
<TABLE>
<CAPTION>
Year Ended Three Months Ended Year Ended June 30,
September 30, September 30,
1997 1996 1996 1995 1994 1993(2)
----------------------------------------------------------------------------
<S> <S> <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
[GRAPH]
Total return(1). . . . . . . . . . . . . . . . . 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%(3) 0.35% 0.35% 0.35% 0.35%(3)
Ratio of net investment income to average
daily net assets . . . . . . . . . . . . . . . 5.21% 5.06%(3) 5.22% 5.17% 3.26% 3.02%(3)
Ratios before waivers by the advisor:
Of expenses to average daily net assets
before waivers . . . . . . . . . . . . . . . . -- 0.41%(3) 0.38% 0.49% 0.61% --
Of net investment income to average daily
net assets before waivers. . . . . . . . . . . -- 5.00%(3) 5.19% 5.03% 3.00% --
</TABLE>
(1) Total return assumes reinvestment of distributions and does not reflect a
sales charge.
(2) Commencement of operations was February 2, 1993.
(3) Annualized.
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3 PROSPECTUS - INSTITUTIONAL MONEY MARKET FUND
<PAGE>
FUND DESCRIPTIONS
RISK FACTORS
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A SUMMARY OF THE PRINCIPAL RISKS WHICH APPLY TO THE FUND IS PROVIDED IN "FUND
DESCRIPTION." MORE DETAIL REGARDING THESE AND OTHER RISKS ASSOCIATED WITH
INVESTMENT SECURITIES AND TECHNIQUES USED BY INSTITUTIONAL MONEY MARKET FUND IS
PROVIDED BELOW.
CREDIT RISK
The fund is subject to the risk that the issuer of a security could default on
its financial obligation, causing a loss in the fund's portfolio. Treasury
securities carry minimal credit risk. Obligations of government agencies are
somewhat riskier, although generally not as risky as obligations of private
issuers. The fund is also subject to credit risk when it enters into repurchase
agreements. In a repurchase agreement, the fund purchases securities on the
condition that the seller will buy them back at a set time and price, plus
interest. If the seller defaults on its obligation, there could be a loss to the
fund.
INTEREST RATE RISK
The fund is subject to interest rate risk. Generally, rising interest rates
cause a decline in market prices of existing debt securities, because investors
may purchase new debt securities at a higher rate of interest. Falling interest
rates generally cause market prices of existing debt securities to rise.
LEVERAGE RISK
Leverage is a speculative technique that involves the use of a relatively small
amount of money to produce a potentially large gain or loss. Securities or
practices that can multiply small index or market movements into large changes
in value involve leverage risk. The fund has the ability to borrow, which may
subject it to leverage risk.
LIQUIDITY RISK
The fund may invest up to 10% of its net assets in illiquid securities. The fund
may not be able to sell an illiquid security at the desired time and price. It
may have to accept a lower price or sell other securities instead at a time when
the sale of those securities might not be advantageous. The sale of illiquid
securities often requires more time and results in higher selling expenses than
the sale of liquid securities.
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4 PROSPECTUS - INSTITUTIONAL MONEY MARKET FUND
<PAGE>
MANAGING YOUR INVESTMENT
BUYING SHARES
- --------------------------------------------------------------------------------
YOU MAY PURCHASE SHARES OF THE FUND WITH AN INITIAL INVESTMENT OF $2 MILLION OR
MORE. ADD TO YOUR EXISTING INVESTMENT WITH ANY AMOUNT, AT ANY TIME. SIMPLY CALL
YOUR PIPER JAFFRAY INVESTMENT EXECUTIVE OR ANOTHER AUTHORIZED BROKERAGE FIRM.
CALCULATING YOUR PURCHASE PRICE
- --------------------------------------------------------------------------------
Shares of the fund are sold without any initial or deferred sales charges. Your
purchase price will be equal to the next net asset value of your shares
calculated after your broker receives your purchase order. The net asset value
of each share is equal to the market value of the fund's investments and other
assets, less any liabilities, divided by the number of fund shares. The fund's
net asset value is normally expected to be $1 per share.
INVESTING AUTOMATICALLY
- --------------------------------------------------------------------------------
CASH MANAGEMENT PROGRAM
If you are a Piper Jaffray client with a signed Piper Automated Transfer (PAT)
agreement, you may purchase shares of the fund through your PAT account or PAT
Plus account, subject to the fund's minimum initial investment requirement. Each
of these accounts is a conventional securities account that may be used to buy
and sell securities. Available cash in the account is automatically invested in
shares of the fund. Shares of the fund are redeemed automatically at net asset
value if cash is needed to pay debits in your account. See your PAT or PAT Plus
account agreement for details of the account.
MINIMUM INVESTMENT WAIVER
- --------------------------------------------------------------------------------
The $2 million minimum initial investment requirement will be waived for:
(a) Any investor who has entered into a personal trust relationship where Piper
Trust Company has investment authority.
(b) Any employee benefit plan for which Piper Trust Company acts as trustee
which has combined plan assets of at least $5 million or which invests in
Piper Trust Collective Investment Funds.
(c) Any investor who has an advisory account with the advisor.
(d) Any investor who maintains a single account with Piper Jaffray that has a
market value, excluding cash or other short-term investments, at the time
of the initial investment in the Fund, of at least $5 million.
(e) The spouse or any child under the age of 21 of any individual qualifying
under paragraph (d).
(f) Any trust, pension, profit-sharing or other benefit plan for any investor
qualifying under paragraphs (c), (d) or (e).
(g) Any family foundation of any investor qualifying under paragraphs (a), (c),
(d) or (e).
(h) Any entity related to a corporation or other entity qualifying under
paragraph (d).
(i) Any chief executive officer, chief financial officer, owner, partner or 10%
or greater shareholder of a corporation or other entity qualifying under
paragraph (d), if such officer, owner, partner or shareholder maintains an
account at Piper Jaffray.
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5 PROSPECTUS - INSTITUTIONAL MONEY MARKET FUND
<PAGE>
MANAGING YOUR INVESTMENT
HOLDING SHARES
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RECEIVING DIVIDENDS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
Dividends from the fund's net investment income will be declared daily and
reinvested in additional shares of the fund monthly. Shares begin accruing
dividends on the date on which payment is received, provided payment is received
by noon Eastern time. If a redemption request is received by noon Eastern time,
shares will be redeemed that day and a dividend will not be earned. Net realized
capital gains of the fund, if any, will be declared and reinvested in additional
fund shares at least annually.
TAXING OF DIVIDENDS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
The fund has qualified, and intends to continue qualifying, for taxation as a
regulated investment company. As long as the fund continues to qualify, it will
not be subject to federal income tax to the extent its income is distributed to
shareholders.
Dividends you receive from the fund are generally taxable as ordinary income
whether you reinvest them or take them in cash. Dividends attributable to income
from U.S. government securities may be exempt from state personal income taxes.
You should consult your tax advisor for more information.
EXCHANGING SHARES
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If your investment goals or your financial needs change, you may move from one
Piper fund to another, if the shares of that fund are legally available in your
state. There is no fee to exchange shares.
Exchanges from the fund into a fund which imposes a front-end sales charge will
generally require payment of the sales charge, except in cases where you
originally purchased shares of a Piper fund subject to a sales charge and then
exchanged into the fund. In that case, you will be required to pay a sales
charge equal to the difference between the sales charge on the exchange purchase
and the sales charge on the original purchase. If you exchange less than all of
your shares of the fund, shares which may be exchanged at net asset value
without payment of any sales charge will be exchanged first.
Before exchanging into any fund, be sure to read its
prospectus carefully. The fund may change or cancel its exchange policies at any
time, upon 60 days' notice to its shareholders.
CONDUCTING TRANSACTIONS BY PHONE
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You may buy or sell shares over the phone by calling your broker. If you hold
your shares with Investors Fiduciary Trust Company (IFTC) or with a brokerage
firm other than Piper Jaffray, you may also buy or sell shares by calling IFTC
at 800 874-6205, provided you have authorized telephone privileges in your
Account Application and Services form.
For your protection, IFTC will attempt to verify your identity by asking for
your account number, social security number or other form of personal
identification. If reasonable care is taken to identify you as the caller,
neither IFTC nor the fund will be liable for losses to your account resulting
from an unauthorized telephone transaction. Payments which result from telephone
transactions will be made only to the address of record or the bank account
designated on your Account Application and Services form.
STAYING INFORMED
- --------------------------------------------------------------------------------
Piper Capital offers a variety of resources to help keep you informed. If you
would like more information, please contact your broker or call Mutual Fund
Services at 800 866-7778. As a shareholder, you automatically receive the
following:
SHAREHOLDER REPORTS
Shareholder reports are mailed twice a year, in November and May. They include
financial statements and performance information on the fund, a message from
your portfolio managers, and, on an annual basis, the auditors' report.
To reduce shareholder costs and help eliminate duplication, only one report is
sent to each address that lists one or more shareholders with the same last
name. If you would like additional reports mailed to your address, please
contact Mutual Fund Services.
STATEMENTS
Statements are mailed monthly (quarterly if your account has no activity) and
include information on each purchase or sale of fund shares. Separate
confirmations are not sent out.
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6 PROSPECTUS - INSTITUTIONAL MONEY MARKET FUND
<PAGE>
MANAGING YOUR INVESTMENT
SELLING SHARES
- --------------------------------------------------------------------------------
YOU MAY SELL ANY OR ALL OF YOUR SHARES FOR THEIR NET ASSET VALUE ON ANY DAY WHEN
THE NEW YORK STOCK EXCHANGE IS OPEN. SIMPLY CALL YOUR BROKER. YOUR REQUEST WILL
BE EXECUTED AT THE NEXT NET ASSET VALUE CALCULATED AFTER YOUR BROKER RECEIVES
YOUR REQUEST.
RECEIVING THE PROCEEDS
- --------------------------------------------------------------------------------
Proceeds from a sale of shares normally will be transferred to your account --
if you are a Piper Jaffray client with a signed PAT agreement -- or sent to you
or your broker the next business day. If you sell shares that were recently
purchased by check, payment may be delayed until the check has cleared (normally
up to 15 days from the purchase date).
As noted above, you may sell shares by calling your broker. If you work with a
broker from a firm other than Piper Jaffray, you also may sell your shares by
submitting a written request to the fund's transfer agent, IFTC. Call IFTC at
800 874-6205 for instructions.
If your account falls below $10,000 due to a sale of shares or an exchange
request, your account may be liquidated following 30 days written notice.
- --------------------------------------------------------------------------------
7 PROSPECTUS - INSTITUTIONAL MONEY MARKET FUND
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
HOW THE FUND IS ORGANIZED
- --------------------------------------------------------------------------------
The fund is a diversified series of Piper Institutional Funds Inc., an open-end
investment company.
VOTING RIGHTS
Although the fund is not required by law to hold annual meetings, it may hold
shareholder meetings from time to time on important matters. In addition,
shareholders have the right to call a meeting under certain circumstances. When
the fund holds a meeting, you will receive a proxy statement requesting your
vote. You have one vote for each share you own.
FUND OBJECTIVE
The fund's investment objective is fundamental and may be changed only with
shareholder approval. The fund's investment policies and techniques may be
changed without shareholder approval, unless otherwise noted.
HOW THE FUND IS MANAGED
- --------------------------------------------------------------------------------
The fund is governed by a board of directors, which is responsible for
protecting the interests of shareholders. Directors meet periodically throughout
the year to oversee the fund's activities, review its performance and review the
actions of the fund's advisor. Although the board may include individuals who
are affiliated with the advisor, the majority of board members must be
independent. The board has retained the following companies to manage the fund's
operations.
INVESTMENT ADVISOR
PIPER CAPITAL MANAGEMENT INCORPORATED
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
As investment advisor, Piper Capital manages the fund's business and investment
activities, subject to the authority of the board of directors. The fund pays
Piper Capital a monthly management fee for providing investment advisory
services. See "Shareholder Expenses" in the "Fund Description" section of this
prospectus for more information.
Piper Capital also is investment advisor to other Piper open-end funds, to a
number of closed-end investment companies and to various institutions,
corporations and individuals. Piper Capital has approximately $12 billion under
management and is a wholly owned subsidiary of Piper Jaffray Companies Inc., a
full-service investment company.
DISTRIBUTOR
PIPER JAFFRAY INC.
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
Piper Jaffray is the principal distributor of the fund's shares. other brokerage
firms that have a sales agreement with Piper Jaffray may also sell fund shares.
Piper Jaffray is a wholly owned subsidiary of Piper Jaffray Companies and an
affiliate of Piper Capital.
CUSTODIAN AND ACCOUNTING AGENT
INVESTORS FIDUCIARY TRUST COMPANY
801 PENNSYLVANIA AVENUE
KANSAS CITY, MO 64105-1307
As the fund's custodian and accounting agent, IFTC holds the fund's portfolio
securities, settles trades, collects data needed to calculate net asset values,
and provides record-keeping.
TRANSFER AND DIVIDEND DISBURSING AGENTS
INVESTORS FIDUCIARY TRUST COMPANY
1004 BALTIMORE AVENUE
KANSAS CITY, MO 64105-1802
Piper Jaffray (address listed above)
PIPER TRUST COMPANY
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
IFTC provides transfer agent services and pays dividends and other distributions
for the fund. Piper Jaffray and Piper Trust Provide These services for
shareholders whose accounts they maintain.
- --------------------------------------------------------------------------------
8 PROSPECTUS - INSTITUTIONAL MONEY MARKET FUND
<PAGE>
GENERAL INFORMATION (continued)
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
NANCY OLSEN is director of the cash management team and a senior vice president
of Piper Capital. She joined the advisor in 1987 and has managed the fund since
its inception. She has 19 years of financial experience.
SHAISTA TAJAMAL is a vice president of Piper Capital. She joined the advisor in
1990 and has managed the fund since inception. She has seven years of financial
experience.
HOW DEALERS ARE COMPENSATED
- --------------------------------------------------------------------------------
Piper Jaffray Investment Executives and other brokerage firms who sell fund
shares receive ongoing fees from Piper Capital which equal, on an annual basis,
up to 0.06% of the fund's average daily net assets attributable to such shares.
PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
The fund purchases most of its portfolio securities directly from the issuer or
from an underwriter or market maker, and not from a broker acting as an agent.
However, the fund may from time to time use brokers when buying portfolio
securities. When deciding which brokers to use, Piper Capital may consider
whether brokers have sold shares of this or any other Piper fund. Piper Capital
may place trades through Piper Jaffray in compliance with Investment Company Act
of 1940 rules.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value per share is calculated by dividing the total market value of
the fund's investments and other assets, less any liabilities, by the number of
fund shares. The securities held by the fund are valued on the basis of
amortized cost. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the fund would receive if it sold the instrument.
The fund attempts to maintain a net asset value of $1 per share. Under the
direction of the board of directors, procedures have been adopted to monitor and
stabilize the fund's price per share.
Net asset value is calculated on each day the New York Stock Exchange is open
for trading, at noon (Eastern time) and also as of the close of regular trading
on the exchange (typically 4 p.m. Eastern time).
REGULATORY PROCEEDINGS
- --------------------------------------------------------------------------------
Piper Capital and Piper Jaffray are subject to an investigation by the
Securities and Exchange Commission which began February 21, 1995, related to
various funds and assets managed by Piper Capital.
- --------------------------------------------------------------------------------
9 PROSPECTUS - INSTITUTIONAL MONEY MARKET FUND
<PAGE>
PROSPECTUS - INSTITUTIONAL MONEY MARKET FUND
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
ANNUAL/SEMIANNUAL REPORTS
Shareholder reports include financial statements and performance information on
the fund, a message from your portfolio managers, and, on an annual basis, the
auditors' report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the fund. A current SAI has
been filed with the SEC and is incorporated by reference into this prospectus.
To order free copies, please write or call:
PIPER CAPITAL MANAGEMENT
ATTN: MUTUAL FUND SERVICES
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
800 866-7778
No dealer, sales representative or other person has been authorized to give any
information or make any representations other than those contained in this
prospectus or in the SAI. You should not rely upon any such information or
representation as having been authorized by the fund or Piper Jaffray.
- --------------------------------------------------------------------------------
[LOGO] PIPER FUNDS 222 South Ninth Street
Minneapolis, MN 55402-3804
<PAGE>
PART B
INSTITUTIONAL MONEY MARKET FUND
A series of Piper Institutional Funds Inc.
STATEMENT OF ADDITIONAL INFORMATION
____________________, 1998
Table of Contents
Page
----
Investment Policies and Restrictions . . . . . . . . . . . . . . . . . 2
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . 7
Investment Advisory and Other Services . . . . . . . . . . . . . . . . 11
Portfolio Transactions and Allocation of Brokerage . . . . . . . . . . 14
Capital Stock and Ownership of Shares. . . . . . . . . . . . . . . . . 16
Net Asset Value and Public Offering Price. . . . . . . . . . . . . . . 17
Performance Comparisons . . . . . . . . . . . . . . . . . . . . . . . 18
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 20
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 22
Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 23
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the Prospectus dated
_____________, 1998, and should be read in conjunction therewith. A copy of
the Prospectus may be obtained from the Fund at Piper Jaffray Tower, 222
South Ninth Street, Minneapolis, Minnesota 55402-3804.
30641
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
The shares of Piper Institutional Funds Inc. (the "Company") are currently
offered in one series: Institutional Money Market Fund (the "Fund"). The
investment objective and policies of the Fund are set forth in the Prospectus.
Certain additional investment information is set forth below.
RULE 2a-7
The Fund is subject to the investment restrictions of Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act"), in addition to its
other policies and restrictions. Rule 2a-7 requires that the Fund invest
exclusively in securities that mature within 397 days and that it maintain an
average weighted maturity of not more than 90 days. (However, the Fund intends
to maintain a dollar-weighted average maturity of its portfolio of 60 days or
less.) Rule 2a-7 also requires that all investments by the Fund be limited to
United States dollar-denominated investments that (a) present "minimal credit
risks" and (b) are at the time of acquisition "Eligible Securities." Eligible
Securities include, among others, (i) securities that are rated by two
Nationally Recognized Statistical Rating Organizations ("NRSROs") in one of the
two highest categories for short-term debt obligations, such as A-1 or A-2 by
Standard & Poor's Ratings Services or P-1 or P-2 by Moody's Investors Service,
Inc., (ii) securities that at the time of issuance were long-term securities but
that have remaining maturities of 397 calendar days or less, provided the issuer
has comparable outstanding short-term debt rated in one of the two highest
categories, and (iii) unrated securities of comparable quality. It is the
responsibility of the Adviser to determine that the Fund's investments present
only "minimal credit risks" and are Eligible Securities, pursuant to the
oversight of, and written guidelines and procedures established by, the
Company's Board of Directors.
Under Rule 2a-7, no more than 5% of the assets of non-tax-exempt money
funds such as the Fund may be invested in securities that are not First Tier
Securities. (First Tier Securities include, among others, securities rated by
two NRSROs in the highest category (such as A-1 and P-1)). In addition, a
non-tax-exempt money fund (a) may not invest (with certain limited exceptions)
more than 5% of it total assets in securities of a single issuer, other than
U.S. Government securities and (b) may not invest more than the greater of 1% of
the fund's total assets or $1,000,000 in Second Tier Securities of a single
issuer.
U.S. GOVERNMENT SECURITIES
The Fund will invest only in U.S. Government securities, which are
obligations issued or guaranteed as to payment of principal and interest by the
U.S. Government or its agencies or instrumentalities. These securities include
direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes and
bonds, and obligations of U.S. Government agencies or instrumentalities,
including, but not limited to, Federal Home Loan Banks, the Farmers Home
Administration, Federal Farm Credit Banks, the Federal National Mortgage
Association, the Government National Mortgage Association, the Federal Home Loan
Mortgage Corporation, the
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Financing Corporation and the Student Loan Marketing Association. Obligations
of U.S. Government agencies or instrumentalities are backed in a variety of ways
by the U.S. Government or its agencies or instrumentalities. Some of these
obligations, such as Government National Mortgage Association mortgage-backed
securities, are backed by the full and credit of the U.S. Treasury. Others,
such as those of the Federal Home Loan Banks, are backed by the right of the
issuer to borrow from the Treasury. Still others, such as those issued by the
Federal National Mortgage Association, are backed by the discretionary authority
of the U.S. Government to purchase certain obligations of the agency or
instrumentality. Finally, obligations of other agencies or instrumentalities
are backed only by the credit of the agency or instrumentality issuing the
obligations.
VARIABLE AND FLOATING RATE OBLIGATIONS
Certain of the obligations in which the Fund may invest may be variable or
floating rate obligations in which the interest rate is adjusted either at
predesignated periodic intervals (variable rate) or when there is a change in
the index rate of interest on which the interest rate payable on the obligation
is based (floating rate). Variable or floating rate obligations may include a
demand feature which is a put that entitles the holder to receive the principal
amount of the underlying security or securities and which may be exercised
either at any time on no more than 30 days' notice or at specified intervals not
exceeding 397 calendar days on no more than 30 days' notice. Variable or
floating rate instruments with a demand feature enable the Fund to purchase
instruments with a stated maturity in excess of 397 calendar days. The Fund
determines the maturity of variable or floating rate instruments in accordance
with Securities and Exchange Commission rules which allow the Fund to consider
certain of such instruments as having maturities that are less than the maturity
date on the face of the instrument.
ILLIQUID SECURITIES
As nonfundamental investment restrictions that may be changed at any time
without shareholder approval, the Fund will not invest more than 10% of its net
assets in illiquid securities. A security is considered illiquid if it cannot
be sold in the ordinary course of business within seven days at approximately
the price at which it is valued. Illiquid securities may offer a higher yield
than securities which are more readily marketable, but they may not always be
marketable on advantageous terms.
The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts and other selling expenses than
does the sale of securities eligible for trading on national securities
exchanges or in the over-the-counter markets. The Fund may be restricted in its
ability to sell such securities at a time when the Adviser deems it advisable to
do so. In addition, in order to meet redemption requests, the Fund may have to
sell other assets, rather than such illiquid securities, at a time which is not
advantageous.
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<PAGE>
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements with respect to U.S.
Government securities. A repurchase agreement involves the purchase by the Fund
of securities with the condition that after a stated period of time the original
seller (a member bank of the Federal Reserve System or a recognized securities
dealer) will buy back the same securities ("collateral") at a predetermined
price or yield. Repurchase agreements involve certain risks not associated with
direct investments in securities. In the event the original seller defaults on
its obligation to repurchase, as a result of its bankruptcy or otherwise, the
Fund will seek to sell the collateral, which action could involve costs or
delays. In such case, the Fund's ability to dispose of the collateral to
recover such investment may be restricted or delayed. To the extent proceeds
from the sale of collateral were less than the repurchase price, the Fund would
suffer a loss. Repurchase agreements maturing in more than seven days are
considered illiquid and subject to the Fund's restriction on investing in
illiquid securities.
The Fund's custodian will hold the securities underlying any repurchase
agreement or such securities will be part of the Federal Reserve Book Entry
System. The market value of the collateral underlying the repurchase agreement
will be determined on each business day. If at any time the market value of the
collateral falls below the repurchase price of the repurchase agreement
(including any accrued interest), the Fund will promptly receive additional
collateral (so the total collateral is an amount at least equal to the
repurchase price plus accrued interest).
The Fund has received from the Securities and Exchange Commission an
exemptive order permitting the Fund, along with other investment companies
currently managed by Piper Capital Management Incorporated (the "Adviser"), and
all future investment companies or series thereof advised by the Adviser or its
affiliates, to deposit uninvested cash balances into a single joint account to
be used to enter into one or more large repurchase agreements.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreement transactions with the
same parties with whom it may enter into repurchase agreements. However, the
Fund does not currently enter into or intend to enter into such transactions
during the coming year. Under a reverse repurchase agreement, the Fund sells
securities and agrees to repurchase them at a mutually agreed date and price.
Because certain of the incidents of ownership of the security are retained by
the Fund, reverse repurchase agreements are considered a form of borrowing by
the Fund from the buyer, collateralized by the security. At the time the Fund
enters into a reverse repurchase agreement, it will establish and maintain a
segregated account with an approved custodian containing liquid securities
having a value not less than the repurchase price (including accrued interest).
Reverse repurchase agreements involve the risk that the market value of the
securities retained in lieu of sale by the Fund may decline below the price of
the securities the Fund has sold but is obligated to repurchase. In the event
the buyer of securities under a reverse repurchase
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<PAGE>
agreement files for bankruptcy or becomes insolvent, such buyer or its trustee
or receiver may receive an extension of time to determine whether to enforce the
Fund's obligation to repurchase the securities and the Fund's use of the
proceeds of the reverse repurchase agreement may effectively be restricted
pending such decisions. Reverse repurchase agreements will be used as a means
of borrowing for investment purposes. This speculative technique is referred to
as leveraging. Leveraging may exaggerate the effect on net asset value of any
increase or decrease in the market value of a Fund's portfolio. Money borrowed
for leveraging will be subject to interest costs which may or may not be
recovered by income from or appreciation of the securities purchased. The Board
of Directors has established procedures, which are periodically reviewed by the
Board, pursuant to which the Adviser will monitor the creditworthiness of the
dealers and banks with which the Fund enters into reverse repurchase agreement
transactions.
PORTFOLIO TURNOVER
Portfolio turnover is the ratio of the lesser of annual purchases or sales
of portfolio securities to the average monthly value of portfolio securities,
not including securities maturing in less than 12 months. A 100% portfolio
turnover rate would occur, for example, if the lesser of the value of purchases
or sales of portfolio securities for a particular year were equal to the average
monthly value of the portfolio securities owned during such year.
The Fund, consistent with its objective, may attempt to maximize yield
through portfolio trading. This may involve selling portfolio instruments and
purchasing different instruments to take advantage of disparities of yield in
different segments of the high-grade money market or among particular
instruments within the same segment of the market. Since the Fund's assets will
be invested in securities with short maturities and the Fund will manage its
portfolio as described above, the portfolio will turn over several times a year.
However, this will not generally increase the Fund's brokerage costs, since
brokerage commissions as such are not usually paid in connection with the
purchase or sale of the instruments in which the Fund invests. Because
securities with maturities of less than one year are excluded from required
portfolio turnover rate calculations, the portfolio turnover rate for the Fund
will be zero.
INVESTMENT RESTRICTIONS
In addition to the investment objectives and policies set forth in the
Prospectus, the Fund is subject to certain investment restrictions, as set forth
below, which may not be changed without the vote of a majority of the Fund's
outstanding shares. "Majority," as used in the Prospectus and in this Statement
of Additional Information, means the lesser of (a) 67% of the outstanding shares
present at a meeting of the holders if more than 50% of the outstanding shares
are present in person or by proxy or (b) more than 50% of the outstanding
shares.
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<PAGE>
Unless otherwise specified below, the Fund will not:
1. With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer or own more than
10% of the outstanding voting securities of any one issuer, in each case other
than securities issued or guaranteed by the U.S. Government or any agency or
instrumentality thereof and securities of other investment companies.
2. Invest 25% or more of the value of its total assets in the securities
of issuers conducting their principal business activities in any one industry.
This restriction does not apply to securities of the U.S. Government or its
agencies and instrumentalities and repurchase agreements relating thereto or to
obligations of U.S. banks, domestic branches thereof and U.S. branches of
foreign banks subject to United States regulation. The various types of
utilities companies, such as gas, electric, telephone, telegraph, satellite and
microwave communications companies, are considered as separate industries.
3. Issue any senior securities (as defined in the 1940 Act), other than as
set forth in restriction number 4 below.
4. Borrow money (provided that the Fund may enter into reverse repurchase
agreements) except from banks for temporary or emergency purposes. The Fund may
borrow money in an amount up to one-third of the value of its total assets in
order to meet redemption requests without immediately selling any of its
portfolio securities. If, for any reason, the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three business days, reduce its
indebtedness to the extent necessary. The Fund will not purchase portfolio
securities while outstanding borrowings (other than reverse repurchase
agreements) exceed 5% of the value of the Fund's total assets. The Fund will
not borrow money for leverage purposes (provided that the Fund may enter into
reverse repurchase agreements for such purposes).
5. Mortgage, pledge or hypothecate its assets except to secure permitted
indebtedness. For purposes of this policy, collateral arrangements with respect
to reverse repurchase agreements or with respect to similar investment
techniques are not deemed to be a pledge or hypothecation of assets.
6. Purchase any securities on margin except to obtain such short-term
credits as may be necessary for the clearance of transactions.
7. Write, purchase or sell puts, calls or combinations thereof, provided
that the Fund may purchase securities with demand or put features.
8. Purchase or sell commodities or commodity futures contracts.
-6-
<PAGE>
9. Purchase or sell real estate or real estate mortgage loans, except that
the Fund may invest in securities secured by real estate or interests therein or
issued by companies that invest in real estate or interests therein.
10. Act as an underwriter of securities of other issuers, except insofar
as the Fund may be technically deemed an underwriter under the federal
securities laws in connection with the disposition of portfolio securities.
11. Make loans of money or property to any person, except for loans of
portfolio securities and except through the use of repurchase agreements or the
purchase of debt obligations in which the Fund may invest consistently with the
Fund's investment objective and policies.
In addition, as non-fundamental investment restrictions that may be changed
at any time without shareholder approval, the Fund will not:
(a) Make short sales of securities.
(b) Invest more than 10% of its net assets in illiquid securities.
(c) Invest in warrants.
Any investment restriction or limitation referred to above or in the
Prospectus, except the Fund's borrowing policy and policy with respect to
investing in illiquid securities, which involves a maximum percentage of
securities or assets, shall not be considered to be violated unless an excess
over the percentage occurs immediately after an acquisition of securities or
utilization of assets and such excess results therefrom.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of the Company and their principal occupations
during the past five years are set forth below. Unless otherwise indicated, all
positions have been held for more than five years. The Company's directors and
officers also serves as a director or officer of various closed-end and open-end
investment companies managed by the Adviser.
Name, Address and (Age) Position with the Company
----------------------- -------------------------
William H. Ellis (55) Chairman of the Board of Directors
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
David T. Bennett (57) Director
3400 City Center
33 South Sixth Street
Minneapolis, Minnesota 55402
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<PAGE>
Jaye F. Dyer (70) Director
4670 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Karol D. Emmerich (48) Director
7302 Claredon Drive
Edina, Minnesota 55439
Luella G. Goldberg (60) Director
7019 Tupa Drive
Edina, Minnesota 55435
David A. Hughey (66) Director
134 Powers Road
Meredith, NH 03253
George Latimer (62) Director
754 Linwood Avenue
St. Paul, MN 55105
Paul A. Dow (46) President
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
Robert H. Nelson (34) Vice President
Piper Jaffray Tower and Treasurer
222 South Ninth Street
Minneapolis, Minnesota 55402
Susan S. Miley (40) Secretary
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
- ----------------------------------
* Directors of the Company who are interested persons (as that term is
defined by the 1940 Act) of Piper Capital Management Incorporated and the
Funds.
William H. Ellis is retired. Prior to September 1997, he was President of
Piper Jaffray Companies Inc., President, Director and Chairman of the Board of
Piper Capital Management Incorporated ("the Adviser") and Director of Piper
Jaffray Inc..
David T. Bennett is of counsel to the law firm of Gray, Plant, Mooty, Mooty
& Bennett, P.A., located in Minneapolis, Minnesota. Mr. Bennett is chairman of
a group of privately held companies and serves on the board of directors of a
number of nonprofit organizations.
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<PAGE>
Jaye F. Dyer has been President of Dyer Management Company, a private
management company, since 1991. Prior to that he was President and Chief
Executive Officer of Dyco Petroleum Corporation, a Minneapolis based oil and
natural gas development company he founded, from 1971 to March 1, 1989, and
Chairman of the Board until December 31, 1990. Mr. Dyer serves on the board of
directors of various privately held and nonprofit corporations.
Karol D. Emmerich has been President of The Paraclete Group, a consultant
to nonprofit organizations, since 1993. Prior to that she was Vice President,
Chief Accounting Officer and Treasurer of Dayton Hudson Corporation from 1980 to
1993. Ms. Emmerich is an Executive Fellow at the University of St. Thomas
Graduate School of Business and serves on the board of directors of a number of
privately held and nonprofit organizations.
Luella G. Goldberg serves on the board of directors of Northwestern
National Life Insurance Company (since 1976), The ReliaStar Financial Corp.
(since 1989), TCF Bank Savings fsb (since 1985), TCF Financial Corporation
(since 1988), and Hormel Foods Corp. (since 1993). Ms. Goldberg also serves as
a Trustee of Wellesley College, and as a director of a number of other
organizations, including the University of Minnesota Foundation and the
Minnesota Orchestral Association. Ms. Goldberg was Chairman of the Board of
Trustees of Wellesley College from 1985 to 1993 and acting President from July
1, 1993 to October 1, 1993.
David A. Hughey is a Trustee of Bentley College. Prior to September 1996,
he was Executive Vice President and Chief Administrative Officer of Dean Witter
InterCapital Inc., Dean Witter Services Company Inc. and Dean Witter
Distributors Inc.; Director, Executive Vice President and Chief Administrative
Officer of Dean Witter Trust Company; Vice President of Dean Witter Family of
Funds and TCW/DW Family of Funds; and Director of ICI Mutual Insurance Company.
George Latimer has been Chief Executive Officer of National Equity Fund,
Chicago, Illinois since November 1995; prior thereto, Mr. Latimer was Director,
Special Actions Office, Office of the Secretary, Department of Housing and Urban
Development since 1993, and prior thereto he had been Dean of Hamline Law
School, Saint Paul, Minnesota from 1990 to 1993. Mr. Latimer also serves on the
board of directors of Digital Biometrics, Inc. and Payless Cashways, Inc.
Paul A. Dow is Chief Investment Officer of the Adviser and has been Chief
Executive Officer of the Adviser since 1997, prior to which he was a Senior Vice
President of the Adviser.
Robert H. Nelson has been a Senior Vice President of the Adviser since
1993; prior thereto he had been a Vice President of the Adviser from 1991 to
1993.
Susan S. Miley has been Senior Vice President and General Counsel of the
Adviser since 1995 and Secretary of the Adviser since 1996; prior to which she
was counsel for American Express Financial Advisors, Minneapolis, Minnesota from
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<PAGE>
1994 to 1995 and an attorney at Simpson Thatcher & Bartlett, New York, New York
from 1984 to 1992.
Ms. Emmerich, Ms. Goldberg and Mr. Hughey are members of the Audit
Committee of the Board of Directors. Ms. Emmerich acts as the chairperson of
such committee. The Audit Committee oversees the Company's financial reporting
process, reviews audit results and recommends annually to the Company a firm of
independent certified public accountants.
The Board of Directors also has a Committee of the Independent Directors,
consisting of Mr. Bennett, who serves as chairperson, Messrs. Dyer, Hughey and
Latimer, Ms. Emmerich and Ms. Goldberg, a Derivatives Subcommittee consisting of
Ms. Emmerich, who serves as chairperson, Ms. Goldberg and Mr. Dyer, and a
Pricing Committee consisting of Ms. Emmerich and Mr. Hughey.
The functions of the Committee of the Independent Directors are: (a)
recommendation to the full Board of approval of any management, advisory,
sub-advisory and/or administration agreements; (b) recommendation to the full
Board of approval of any underwriting and/or distribution agreements; (c) review
of the fidelity bond and premium allocation; (d) review of errors and omissions
and any other joint insurance policies and premium allocation; (e) review of,
and monitoring of compliance with, procedures adopted pursuant to certain rules
promulgated under the 1940 Act; and (f) such other duties as the independent
directors shall, from time to time, conclude are necessary or appropriate to
carry out their duties under the 1940 Act. The functions of the Derivatives
Subcommittee are: (a) to oversee practices, policies and procedures of the
Adviser in connection with the use of derivatives; (b) to receive periodic
reports from management; and (c) to report periodically to the Committee of the
Independent Directors and the Board of Directors.
The directors of the Company who are officers or employees of the Adviser
or of its affiliates receive no remuneration from the Company. Each of the
other directors currently receives a quarterly retainer of $3,625 that is
allocated among the Funds and all other open-end funds managed by the Adviser on
the basis of the total assets of each such fund. In addition, each director
receives a fee from the Company for each regular quarterly and in-person special
meeting of the Board of Directors attended. (The per-meeting fee is based on
the combined total assets of the Company and Piper Funds Inc.) The per-meeting
fee is based upon asset size and is $250 if assets are under $200 million, $500
if assets are $200 million and over but less than $500 million, $750 if asses
are $500 million and over but less than $1 billion, $1,000 if assets are $1
billion and over but less than $5 billion, and $1,500 if assets are $5 billion
or over. Members of the Audit Committee who are not affiliated with the
Adviser receive $1,000 for each Audit Committee meeting attended ($2,000 for the
chairperson of the Committee), and the chairperson of the Committee of the
Independent Directors receives $1,000 for each meeting of such committee
attended, with such fees being allocated evenly between the Company and all
other closed-end and open-end investment companies managed by the Adviser.
Members of the Committee of the Independent Directors, the Derivatives
Subcommittee and the
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<PAGE>
Pricing Committee (other than the chairperson of the Committee of the
Independent Directors) currently receive no additional compensation. In
addition, each Director who is not affiliated with the Adviser is reimbursed for
expenses incurred in connection with attending meetings.
The following table sets forth the compensation received by each director
from the Company during the fiscal year ended September 30, 1997, as well as the
total compensation received by each director from the Company and all other
registered investment companies managed by the Adviser or affiliates of the
Adviser during the calendar year ended December 31, 1997. Directors who are
officers or employees of the Adviser or any of its affiliates did not receive
any such compensation and are not included in the table.
Aggregate Compensation Total Compensation
Director from the Company from Fund Complex*
- -------- ---------------------- ------------------
David T. Bennett $1,339 $59,000
Jaye F. Dyer $1,214 $55,000
Karol D. Emmerich $1,339 $59,000
Luella G. Goldberg $1,276 $57,000
George Latimer $1,214 $55,000
David A. Hughey $1,276 $57,000
- -----------------------------------
* Currently consists of 20 registered investment companies managed by the
Adviser or an affiliate of the Adviser, including the Company. Each
director included in the table serves on the board of each such open-end
and closed-end investment company.
INVESTMENT ADVISORY AND OTHER SERVICES
GENERAL
The investment adviser for the Fund is Piper Capital Management
Incorporated (the "Adviser"). Its affiliate, Piper Jaffray Inc. (the
"Distributor"), acts as the Fund's distributor. Each acts as such pursuant to a
written agreement which is periodically approved by the directors or the
shareholders of the Fund. The address of both the Adviser and the Distributor
is Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota
55402-3804.
CONTROL OF THE ADVISER AND THE DISTRIBUTOR
The Adviser and the Distributor are both wholly owned subsidiaries of Piper
Jaffray Companies Inc., a publicly held corporation which is engaged through its
subsidiaries in various aspects of the financial services industry.
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Pursuant to an Investment Advisory and Management Agreement with the
Company, the Adviser furnishes the Fund with investment advice and supervises
the management and investment programs of the Fund. The Adviser furnishes at
its own expense all necessary administrative services, office space, equipment
and
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<PAGE>
clerical personnel for servicing the investments of the Fund. The Adviser also
provides investment advisory facilities and executive and supervisory personnel
for managing the investments and effecting the portfolio transactions of the
Fund. In addition, the Adviser pays the salaries and fees of all officers and
directors of the Company who are affiliated with the Adviser.
The Investment Advisory and Management Agreement will terminate
automatically in the event of its assignment. In addition, the agreement is
terminable at any time, without penalty, by the Board of Directors or by vote of
a majority of the Company's outstanding voting securities on not more than 60
days' written notice to the Adviser, and by the Adviser on 60 days' written
notice to the Company. The agreement may be terminated at any time by a vote of
the holders of a majority of the outstanding voting securities of the Fund, upon
60 days' written notice to the Adviser. Unless sooner terminated, the agreement
shall continue in effect for more than two years after its execution only so
long as such continuance is specifically approved at least annually by either
the Board of Directors or by a vote of a majority of the outstanding voting
securities of the Company, provided that in either event such continuance is
also approved by a vote of a majority of the directors who are not parties to
such agreement, or interested persons of such parties, cast in person at a
meeting called for the purpose of voting on such approval. If a majority of the
outstanding voting securities of any series of the Company approves the
agreement, the agreement shall continue in effect with respect to such approving
series whether or not the shareholders of the other series approve the
agreement.
Pursuant to the Investment Advisory and Management Agreement, the Fund pays
the Adviser monthly advisory fees equal on an annual basis to .15% of the Fund's
average daily net assets. The advisory fees paid by the Fund for the fiscal
year ended September 30, 1997, the three-month fiscal period ended September 30,
1996, the fiscal years ended June 30, 1996 and 1995 were $401,419, $64,916,
$155,276 and $51,262, respectively.
Under the Investment Advisory and Management Agreement, the Adviser
provides the Fund with advice and assistance in the selection and disposition of
the Fund's investments. All investment decisions are subject to review by the
Company's Board of Directors. The Adviser is obligated to pay the salaries and
fees of any affiliates of the Adviser serving as officers or directors of the
Company.
The same security may be suitable for the Fund and/or for other funds or
private accounts managed by the Adviser or its affiliates. If and when two or
more funds or accounts simultaneously purchase or sell the same security, the
transactions will be allocated as to price and amount in accordance with
arrangements equitable to each fund or account. The simultaneous purchase or
sale of the same securities by the Fund and other funds or accounts managed by
the Adviser or its affiliates may have a detrimental effect on the Fund, as this
may affect the price paid or received by the Fund or the size of the position
obtainable or able to be sold by the Fund.
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EXPENSES
The expenses of the Fund are deducted from total income before dividends
are paid. These expenses include, but are not limited to, organizational costs,
fees paid to the Adviser, fees and expenses of officers and directors who are
not affiliated with the Adviser, taxes, interest, legal fees, transfer agent,
dividend disbursing agent and custodian fees, audit fees, brokerage fees and
commissions, fees and expenses of registering and qualifying the Fund and its
shares for distribution under federal and state securities laws, expenses of
preparing prospectuses and statements of additional information and of printing
and distributing prospectuses and statements of additional information annually
to existing shareholders, the expenses of reports to shareholders, shareholders'
meetings and proxy solicitations and other expenses which are not expressly
assumed by the Adviser under the Investment Advisory and Management Agreement.
UNDERWRITING AND DISTRIBUTION AGREEMENT
Pursuant to an Underwriting and Distribution Agreement, the Distributor has
agreed to act as the principal underwriter for the Fund in the sale and
distribution to the public of Fund shares, either through dealers or otherwise.
The Distributor has agreed to offer such shares for sale at all times when such
shares are available for sale and may lawfully be offered for sale and sold.
The Distributor receives no compensation for its sales of Fund shares.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Investors Fiduciary Trust Company ("IFTC"), the transfer agent for the
Company, maintains certain omnibus shareholder accounts for the Fund. Each such
omnibus account represents the accounts of a number of individual shareholders
of the Fund. The Company has entered into Shareholder Account Servicing
Agreements with the Distributor and Piper Trust Company ("Piper Trust"),
pursuant to which the Distributor and Piper Trust provide certain transfer agent
and dividend disbursing agent services for the underlying individual shareholder
accounts held at the respective companies. Pursuant to such Agreements, the
Distributor and Piper Trust have agreed to perform the usual and ordinary
services of transfer agent and dividend disbursing agent not performed by IFTC
with respect to the underlying individual shareholder accounts, including,
without limitation, the following: maintaining all shareholder accounts,
preparing shareholder meeting lists, mailing shareholder reports and
prospectuses, tracking shareholder accounts for blue sky and Rule l2b-1
purposes, withholding taxes on nonresident alien and foreign corporation
accounts, preparing and mailing checks for disbursement of income dividends and
capital gains distributions, preparing and filing U.S. Treasury Department Form
1099 for all shareholders, preparing and mailing confirmation forms to
shareholders and dealers with respect to all purchases, exchanges and
liquidations of series shares and other transactions in shareholder accounts for
which confirmations are required, recording reinvestments of dividends and
distributions in series shares, recording redemptions of series shares, and
preparing and mailing checks for payments upon
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redemption and for disbursements to withdrawal plan holders. As compensation
for such services, the Distributor and Piper Trust are paid annual fees of $9.00
per active shareholder account and $6.00 per inactive account (defined as an
account that has a balance of shares in the Fund but that does not require a
client statement for the current month). There is no charge for a closed
shareholder account (defined as an account that has been inactive for at least
three consecutive months). Such fees are payable on a monthly basis at a rate
of 1/12 of the annual per-account charge. Such fees cover all services listed
above, with the exception of preparing shareholder meeting lists and mailing
shareholder reports and prospectuses. These services, along with proxy
processing (if applicable) and other special service requests, are billable as
performed at a mutually agreed upon fee in addition to the annual fee noted
above, provided that such mutually agreed upon fee shall be fair and reasonable
in light of the usual and customary charges made by others for services of the
same nature and quality.
During the fiscal year ended September 30, 1997, the Fund paid $6,474 to
the Distributor and $451 to Piper Trust under the Shareholder Account Servicing
Agreements.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
Because the Fund's portfolio is composed exclusively of debt, rather than
equity securities, most of the Fund's portfolio transactions are effected
without the payment of brokerage commissions, but at net prices which usually
include a markup. Most of the Fund's transactions are with the issuer, or with
major dealers on a principal basis acting for their own account and not as
brokers. However, portfolio transactions for the Fund which are executed on an
agency basis may be effected through the Distributor on a securities exchange if
the commissions, fees or other remuneration received by the Distributor are
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers or other futures commission merchants in connection with
comparable transactions involving similar securities or similar futures
contracts or options on futures contracts being purchased or sold on an exchange
during a comparable period of time. In effecting portfolio transactions through
the Distributor, the Fund intends to comply with Section 17(e)(1) of the 1940
Act. For the fiscal year ended September 30, 1997, the three-month fiscal
period ended September 30, 1996 and the fiscal years ended June 30, 1995 and
1996, the Fund did not pay any brokerage commissions.
The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of broker-dealers to effect the transactions and the
negotiation of brokerage commissions, if any. In placing orders for securities
transactions, the primary criterion for the selection of a broker-dealer is the
ability of the broker-dealer, in the opinion of the Adviser, to secure prompt
execution of the transactions on favorable terms, including the reasonableness
of the commission and considering the state of the market at the time.
When consistent with these objectives, business may be placed with
broker-dealers who furnish investment research or services to the Adviser. Such
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research or services include advice, both directly and in writing, as to the
value of securities; the advisability of investing in, purchasing or selling
securities; and the availability of securities, or purchasers or sellers of
securities; as well as analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts. This allows the Adviser to supplement its own investment research
activities and enables the Adviser to obtain the views and information of
individuals and research staffs of many different securities firms prior to
making investment decisions for the Fund. To the extent portfolio transactions
are effected with broker-dealers who furnish research services to the Adviser,
the Adviser receives a benefit, not capable of evaluation in dollar amounts,
without providing any direct monetary benefit to the Fund from these
transactions. The Adviser believes that most research services obtained by it
generally benefit several or all of the investment companies and private
accounts which it manages, as opposed to solely benefiting one specific managed
fund or account. Normally, research services obtained through managed funds or
accounts investing in common stocks would primarily benefit the managed funds or
accounts which invest in common stock; similarly, services obtained from
transactions in fixed-income securities would normally be of greater benefit to
the managed funds or accounts which invest in debt securities. The Fund will
not purchase at a higher price or sell at a lower price in connection with
transactions effected with a dealer, acting as principal, who furnishes research
services to the Adviser than would be the case if no weight were given by the
Adviser to the dealer's furnishing of such services.
In the event any transactions are executed on an agency basis, the Adviser
will authorize the Fund to pay an amount of commission for effecting a
securities transaction in excess of the amount of commission another
broker-dealer would have charged only if the Adviser determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either that particular transaction or the Adviser's overall responsibilities
with respect to the accounts as to which it exercises investment discretion. If
the Fund executes any transactions on an agency basis, it will generally pay
higher than the lowest commission rates available.
Any portfolio transactions for the Funds executed on an agency basis may be
effected through the Distributor. In determining the commissions to be paid to
the Distributor, it is the policy of the Fund that such commissions will, in the
judgment of the Adviser, subject to review by the Board of Directors, be both
(a) at least as favorable as those which would be charged by other qualified
brokers in connection with comparable transactions involving similar securities
being purchased or sold on an exchange during a comparable period of time, and
(b) at least as favorable as commissions contemporaneously charged by the
Distributor on comparable transactions for its most favored comparable
unaffiliated customers. While the Fund does not deem it practicable and in its
best interest to solicit competitive bids for commission rates on each
transaction, consideration will regularly be given to posted commission rates as
well as to other information concerning the level of commissions charged on
comparable transactions by other qualified brokers.
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The Fund did not purchase any securities of its regular brokers or dealers
or parent companies of such brokers or dealers during the fiscal year ended
September 30, 1997.
CAPITAL STOCK AND OWNERSHIP OF SHARES
The Company, which was organized under the laws of the State of Minnesota
in 1992, is authorized to issue a total of 10 trillion shares of common stock,
with a par value of $.01 per share. One hundred billion of these shares have
been authorized by the Board of Directors to be issued and have been designated
as Series B Common Shares, which are the shares of common stock of the Fund.
The Fund is the only series of the Company currently outstanding.
All shares, when issued, will be fully paid and nonassessable and will be
redeemable. All shares have equal voting rights. They can be issued as full or
fractional shares. A fractional share has pro-rata the same kind of rights and
privileges as a full share. The shares possess no preemptive or conversion
rights.
The Board of Directors is empowered under the Company's Articles of
Incorporation to issue additional series of the Company's common stock without
shareholder approval. If more than on series of shares of the Company is
outstanding, the assets received by the Company for the issue or sale of shares
of each series, and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, will be allocated to such series, and
constitute the underlying assets of such series. The underlying assets of each
series will be required to be segregated on the books of account, and will be
charged with the expenses in respect to such series and with a share of the
general expenses of the Company. Any general expenses of the Company not
readily identifiable as belonging to a particular series shall be allocated
among the series based upon the relative net assets of the series at the time
such expenses were accrued.
Each share of a series has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset value of the series'
shares. On some issues, such as the election of directors, all shares of the
Company vote together as one series. On an issue affecting only a particular
series, the shares of the affected series vote separately. Cumulative voting is
not authorized. This means that the holders of more than 50% of the shares
voting for the election of directors can elect 100% of the directors if they
choose to do so, and, in such event, the holders of the remaining shares will be
unable to elect any directors.
The Board of Directors may, without shareholder approval, create and issue
one or more additional classes of shares within the Fund, as well as within any
series of the Company created in the future. All classes of shares in a Fund
would be identical except that each class of shares would be available through a
different distribution channel and certain classes might incur different
expenses for the provision of distribution services or the provision of
shareholder services or administration assistance by institutions. Shares of
each class would share equally in the gross income of a series, but any
variation in expenses would be charged
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separately against the income of the particular class incurring such expenses.
This would result in variations in net investment income accrued and dividends
paid by and in the net asset value of the different classes of a series. This
ability to create multiple classes of shares within each series of the Company
will allow the Company in the future the flexibility to better tailor its
methods of marketing, administering and distributing shares of the Funds to the
needs of particular investors and to allocate expenses related to such
marketing, administration and distribution methods to the particular classes of
shareholders of the Fund incurring such expenses.
As of December 15, 1997, no shareholder owned of record or was known by the
Fund to own beneficially 5% or more of the outstanding shares of the Fund. The
directors and officers of the Funds as a group owned less than 1% of the
outstanding shares of the Fund as of such date.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the public offering price of Fund shares is
summarized in the Prospectus in the text following the heading "Managing Your
Investment -- Buying Shares." The net asset value of the Fund's shares is
determined on each day on which the New York Stock Exchange is open, provided
that the net asset value need not be determined on days when no Fund shares are
tendered for redemption and no order for Fund shares is received. The New York
Stock Exchange is not open for business on the following holidays (or on the
nearest Monday or Friday if the holiday falls on a weekend): New Year's Day,
Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving
and Christmas.
The Fund values its portfolio securities at amortized cost in accordance
with Rule 2a-7 under the 1940 Act. This method involves valuing an instrument
at its cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuations in interest rates
on the market value of the instrument and regardless of any unrealized capital
gains or losses. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is higher
or lower than the price the Fund would receive if it sold the instrument.
During periods of declining interest rates, the daily yield on shares of the
Fund computed by dividing the annualized daily income of the Fund by the net
asset value computed as described above may tend to be higher than a like
computation made by the Fund with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all of its
securities.
Pursuant to Rule 2a-7, the Board of Directors of the Company has
determined, in good faith based upon a full consideration of all material
factors, that it is in the best interests of the Fund and its shareholders to
maintain a stable net asset value per share by virtue of the amortized cost
method of valuation. The Fund will continue to use this method only so long as
the Board of Directors believes that it fairly reflects the market-based net
asset value per share. In accordance with Rule 2a-7, the Board of Directors has
undertaken, as a particular responsibility within the
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overall duty of care owed to Fund shareholders, to establish procedures
reasonably designed, taking into account current market conditions and the
Fund's investment objectives, to stabilize the Fund's net asset value per share
at a single value. These procedures include the periodic determination of any
deviation of current net asset value per share, calculated using available
market quotations, from the Fund's amortized cost price per share, the periodic
review by the Board of the amount of any such deviation and the method used to
calculate any such deviation, the maintenance of records of such determinations
and the Board's review thereof, the prompt consideration by the Board if any
such deviation exceeds 1/2 of 1%, and the taking of such remedial action by the
Board as it deems appropriate where it believes the extent of any such deviation
may result in material dilution or other unfair results to investors or existing
shareholders. Such remedial action may include redemptions in kind, selling
portfolio instruments prior to realizing capital gains or losses, shortening the
average portfolio maturity, withholding dividends or utilizing a net asset value
per share as determined by using available market quotations. The Fund will, in
further compliance with Rule 2a-7, record, maintain and preserve a written copy
of the above-described procedures and a written record of the Board's
considerations and actions taken in connection with the discharge of its
above-described responsibilities.
On September 30, 1997, the net asset value per share of the Fund was
calculated as follows:
Net Assets ($277,453,990) = Net Asset Value per Share ($1.00)
--------------------------------
Shares Outstanding (277,453,990)
PERFORMANCE COMPARISONS
Advertisements and other sales literature for the Fund may refer to the
Fund's "yield," "effective yield," "average annual total return" and "cumulative
total return."
The Fund may issue current yield quotations. The yield of the Fund refers
to the income generated by an investment in the Fund over a seven-day period.
This income is then annualized. That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52 week
period and is shown as a percentage of the investment. Simple yields are
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical preexisting account having a balance of one share at the
beginning of a recent seven calendar day period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then multiplying the base period return by
365/7. The resulting yield figure will be carried to at least the nearest
hundredth of one percent.
The Fund's effective yield is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
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effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. Effective yields are computed
by determining the net change, exclusive of capital changes, in the value of a
hypothetical preexisting account having a balance of one share at the beginning
of a recent seven calendar day period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
365/7
Effective Yield = [(Base Period Return +1) ] -1
When calculating the foregoing yield or effective yield quotations, the
calculation of net change in account value will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, and all fees, other
than nonrecurring accounts or sales charges, that are charged to all shareholder
accounts in proportion to the length of the base period. Realized gains and
losses from the sale of securities and unrealized appreciation and depreciation
are excluded from the calculation of yield and effective yield.
The Fund's yield and effective yield for the seven days ended September 30,
1997, were 5.42% and 5.57%, respectively.
Average annual total return is the average annual compounded rate of return
on a hypothetical $1,000 investment made at the beginning of the advertised
period. Average annual total return figures are computed according to the
following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period.
This calculation assumes all dividends and any capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The average annual total returns for the Fund for one year and since
inception (February 2, 1993) for the period ending September 30, 1997 were 5.32%
and 4.66%, respectively.
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Cumulative total return is calculated by subtracting a hypothetical $1,000
payment to the Fund from the redeemable value of such payment at the end of the
advertised period, dividing such difference by $1,000 and multiplying the
quotient by 100. Cumulative total return is computed according to the following
formula:
CTR = (ERV-P) 100
-----
P
Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period; and
P = initial payment of $1,000.
This calculation assumes all dividends and any capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The cumulative total return for the Fund from inception (February 2, 1993)
to September 30, 1997 was 23.67%.
In addition to advertising yield and total return, comparative performance
information may be used from time to time in advertising the Fund's shares,
including data from Lipper Analytical Services, Inc. ("Lipper"), Morningstar,
other industry publications and other entities or organizations which track the
performance of investment companies. Performance information for the Fund also
may be compared to unmanaged indices. Unmanaged indices do not reflect
deductions for administrative and management costs and expenses. The Fund may
also include in advertisements and communications to Fund shareholders
evaluations of the Fund published by nationally recognized ranking services and
by financial publications that are nationally recognized, such as BARRON'S,
BUSINESS WEEK, FORBES, INSTITUTIONAL INVESTOR, INVESTOR'S DAILY, MONEY,
KIPLINGER'S PERSONAL FINANCE MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, THE NEW
YORK TIMES, USA TODAY and THE WALL STREET JOURNAL.
REDEMPTION OF SHARES
GENERAL
Redemption of shares, or payment, may be suspended at times (a) when the
New York Stock Exchange is closed for other than customary weekend or holiday
closings, (b) when trading on said Exchange is restricted, (c) when an emergency
exists, as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable, or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) during any other period
when the Securities and Exchange Commission, by order, so permits, provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist.
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Shareholders who purchased Fund shares through a broker-dealer other than
the Distributor may redeem such shares either by oral request to such
broker-dealer or by written request to IFTC at the address set forth in the
Prospectus. To be considered in proper form, written requests for redemption
should indicate the dollar amount or number of shares to be redeemed, refer to
the shareholder's Fund account number, and give either a social security or tax
identification number. The request should be signed in exactly the same way the
account is registered. If there is more than one owner of the shares, all
owners must sign. If shares to be redeemed have a value of $10,000 or more or
redemption proceeds are to be paid to someone other than the shareholder at the
shareholder's address of record, the signature(s) must be guaranteed by an
"eligible guarantor institution," which includes a commercial bank that is a
member of the Federal Deposit Insurance Corporation, a trust company, a member
firm of a domestic stock exchange, a savings association or a credit union that
is authorized by its charter to provide a signature guarantee. IFTC may reject
redemption instructions if the guarantor is neither a member of nor a
participant in a signature guarantee program. Signature guarantees by notaries
public are not acceptable. The purpose of a signature guarantee is to protect
shareholders against the possibility of fraud. Further documentation will be
requested from corporations, administrators, executors, personal
representatives, trustees and custodians. Redemption requests given by
facsimile will not be accepted. Unless other instructions are given in proper
form, a check for the proceeds of the redemption will be sent to the
shareholder's address of record.
TAXATION
Pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), the
Fund will be subject to a nondeductible excise tax equal to 4% of the excess, if
any, of the amount required to be distributed pursuant to the Code for each
calendar year over the amount actually distributed. In order to avoid the
imposition of this excise tax, the Fund generally must declare dividends by the
end of a calendar year representing 98% of the Fund's ordinary income for the
calendar year and 98% of its capital gain net income (both long-term and
short-term capital gains) for the 12-month period ending October 31 of the
calendar year. For purposes of this calculation, any amount of income on which
corporate-level income tax has been paid is deemed to have been distributed.
Ordinarily, distributions and redemption proceeds earned by a Fund
shareholder are not subject to withholding of federal income tax. However, 31%
of the Fund's distributions and redemption proceeds must be withheld if a
shareholder fails to supply the Fund or its agent with such shareholder's
taxpayer identification number or if a shareholder who is otherwise exempt from
withholding fails to properly document such shareholder's status as an exempt
recipient.
Distributions paid from net realized capital gains, if any, will be taxable
to shareholders as ordinary income. Capital gains from the sale or exchange of
shares are also taxable.
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Distributions may be subject to state and local income taxes and the
treatment thereof may differ from the federal income tax consequences discussed
above.
GENERAL INFORMATION
The Bylaws of the Company provide that shareholder meetings be held only
with such frequency as required under Minnesota law. Minnesota corporation law
requires only that the Board of Directors convene shareholder meetings when it
deems appropriate. In addition, Minnesota law provides that if a regular
meeting of shareholders has not been held during the immediately preceding 15
months, a shareholder or shareholders holding 3% or more of the voting shares of
a corporation may demand a regular meeting of shareholders by written notice
given to the chief executive officer or chief financial officer of the
corporation. Within 30 days after receipt of the demand, the Board of Directors
shall cause a regular meeting of shareholders to be called, which meeting shall
be held no later than 90 days after receipt of the demand, all at the expense of
the corporation. In addition, the 1940 Act requires a shareholder vote for all
amendments to fundamental investment policies and restrictions, for all
amendments to investment advisory contracts and for certain amendments to Rule
12b-1 distribution plans.
Minnesota has enacted legislation which authorizes corporations to
eliminate or limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of the fiduciary duty of "care"
(the duty to act with the care an ordinarily prudent person in a like position
would exercise under similar circumstances). Minnesota law does not, however,
permit a corporation to eliminate or limit the liability of a director (a) for
any breach of the director's duty of "loyalty" to the corporation or its
shareholders (the duty to act in good faith and in a manner reasonably believed
to be in the best interest of the corporation), (b) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(c) for authorizing a dividend, stock repurchase or redemption or other
distribution in violation of Minnesota law or for violation of certain
provisions of Minnesota securities laws, or (d) for any transaction from which
the director derived an improper personal benefit. Minnesota law does not
permit elimination or limitation of a director's liability under the 1933 Act or
the Securities Exchange Act of 1934, and the 1940 Act prohibits elimination or
limitation of a director's liability for acts involving willful malfeasance, bad
faith, gross negligence or reckless disregard of the duties of a director. The
Articles of Incorporation of the Company limit the liability of directors to the
fullest extent permitted by Minnesota law and the 1940 Act.
FINANCIAL STATEMENTS
The audited financial statements of the Fund dated September 30, 1997, as
set forth in the Fund's Annual Report, are incorporated by reference into this
Statement of Additional Information. The audited financial statements are
provided in reliance on the report of KPMG Peat Marwick LLP, 4200 Norwest
Center, Minneapolis, Minnesota 55402, independent auditors of the Fund, given
on the authority of such firm as experts in accounting and auditing.
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PENDING LITIGATION
Complaints have been brought in federal and state court relating to one
open-end and twelve closed-end investment companies managed by the Adviser and
to two open-end funds for which the Adviser has acted as sub-adviser. On
February 13, 1996, a Settlement Agreement became effective for the consolidated
class action lawsuit, titled IN RE: PIPER FUNDS INC. INSTITUTIONAL GOVERNMENT
INCOME PORTFOLIO LITIGATION. The Amended Consolidated Class Action Complaint
was filed on October 5, 1994, in the United States District Court, District of
Minnesota, against Institutional Government Income Portfolio (a series of Piper
Funds Inc.), the Adviser, the Distributor, William H. Ellis and Edward J.
Kohler, and had alleged the making of materially misleading statements in the
prospectus, common law negligent misrepresentation and breach of fiduciary duty.
The Settlement Agreement will provide approximately $67.5 million, together with
interest earned, less certain disbursements and attorney fees, to class members
in payments scheduled over approximately three years. Such payments will be
made by Piper Jaffray Companies Inc. and the Adviser and will not be an
obligation of Piper Funds Inc.
A complaint was filed by Gary E. Nelson on June 28, 1995 in the United
States District Court for the Western District of Washington at Seattle against
American Strategic Income Portfolio Inc. -- II ("BSP"), the Adviser, the
Distributor, Piper Jaffray Companies Inc., Worth Bruntjen, Charles N. Hayssen,
Michael Jansen, William H. Ellis and Edward J. Kohler. A second complaint was
filed by the same individual in the same court on July 12, 1995 against American
Opportunity Income Fund Inc. ("OIF"), the Adviser, the Distributor, Piper
Jaffray Companies Inc., Worth Bruntjen, Charles N. Hayssen, Michael Jansen,
William H. Ellis and Edward J. Kohler. On September 7, 1995, Christian
Fellowship Foundation Peace United Church of Christ, Gary E. Nelson and Lloyd
Schmidt filed an amended complaint purporting to be a class action in the United
States District Court for the District of Washington. The complaint was filed
against American Government Income Portfolio, Inc. ("AAF"), American Government
Income Fund Inc. ("AGF"), American Government Term Trust, Inc., American
Strategic Income Portfolio Inc. ("ASP"), American Strategic Income Portfolio
Inc. -- II, American Strategic Income Portfolio Inc. -- III ("CSP"), American
Opportunity Income Fund Inc., American Select Portfolio Inc., Piper Jaffray
Companies Inc., the Distributor, the Adviser and certain associated individuals.
By Order filed October 5, 1995, the complaints were consolidated. Plaintiffs
filed a second amended complaint on February 5, 1996 and a third amended
complaint on June 4, 1996. The third amended third complaint alleges generally
that the prospectus and financial statements of each investment company were
false and misleading. Specific violations of various federal securities laws
are alleged with respect to each investment company. The complaint also alleges
that the defendants violated the Racketeer Influenced and Corrupt Organizations
Act, the Washington State Securities Act and the Washington Consumer Protection
Act. The Court has granted final approval to a Settlement Agreement which
became effective on September 20, 1997. The Settlement Agreement provides $15.5
million to class members in payments by Piper Jaffray Companies Inc. and the
Adviser over the next four years. The settlement also
-23-
<PAGE>
includes an agreement that each of OIF, AAF, and AGF would offer to repurchase
up to 25% of their outstanding shares from current shareholders at net asset
value. If the discounts between net asset value and market price of these funds
do not decrease to 5% or less within approximately two years after the effective
date of the settlement, the fund boards will submit shareholder proposals to
convert these funds to an open-end format, provided that they determine, at that
time, that such proposals are in the best interests of shareholders. Finally,
the agreement stipulates that each of ASP, BSP, CSP and SLA would offer to
repurchase up to 10% of their outstanding shares from current shareholders at
net asset value. Shareholders received notice of the offers to repurchase in
October 1997, and the offers to repurchase expired on November 17, 1997.
Four additional complaints are pending which involve the funds named as
defendants in the Nelson/Christian Fellowship Consolidated Action and are based
on claims similar to that action. The first additional complaint was filed
against the Distributor and Richard Tallent in Montana State District Court,
Silver Bow County on November 1, 1995 by plaintiff John Darlington. The second
complaint was filed against the Distributor and Richard Tallent on April 11,
1996 in Montana State District Court, Silver Bow County by plaintiff Kenneth
Schneider. The third complaint was filed against the Distributor and Richard
Tallent on April 11, 1996 in Montana State District Court, Silver Bow County by
plaintiff Margaret Nagel. The fourth complaint was filed against the
Distributor on August 7, 1996 by plaintiff Kenneth Gennerman as Trustee of the
Nicole Bowlin Trust in Wisconsin Circuit Court, Waukesha County. In addition to
the above complaints, a number of arbitrations have been commenced by individual
investors in the funds named as defendants in the Nelson/Christian Fellowship
Consolidated Action.
Complaints have also been filed relating to two open-end funds for which
the Adviser has acted as sub-adviser, Managers Intermediate Mortgage Fund and
Managers Short Government Fund. A complaint was filed on September 26, 1994 in
the United States District Court, District of Connecticut, by Florence R. Hosea,
Bobby W. Hosea, Getrud B. Dale and Peter M. Dale, Andrew Poffel and Diane Poffel
as tenants by the Entireties, Myrone Sarone, Donna M. DiPalo, Bernard B. Geltner
and Gail Geltner and Paul Delman. The complaint was filed against The Managers
Funds, The Managers Funds, L.P., Robert P. Watson, the Adviser, the Distributor,
an individual associated with the Adviser, Evaluation Associates, Inc. and
Managers Intermediate Mortgage Fund. The complaint, which is a putative class
action, alleges certain violations of federal securities laws, including the
making of false and misleading statements in the prospectus, and alleges
negligent misrepresentation, breach of fiduciary duty and common law fraud. A
similar complaint was filed as a putative class action in the same court on
November 4, 1994. The complaint was filed by Karen E. Kopelman against The
Managers Fund, The Managers Funds, L.P., Robert P. Watson, the Adviser, the
Distributor, Worth Bruntjen, Evaluation Associates, Inc. and Managers
Intermediate Mortgage Fund. The two putative class actions were consolidated by
court order on December 13, 1994. Plaintiffs filed an Amended and Restated
Complaint on July 19, 1995. The named plaintiffs and defendants have entered
into a settlement agreement which is subject to approval by the court and a
sufficiently large percentage of class members.
-24-
<PAGE>
Pursuant to the terms of the settlement agreement, defendants collectively have
agreed to pay a total amount of up to $6,942,733.66. The Piper defendants have
agreed to pay up to $4,592,220.59, consisting of up to $923,930.23 in cash and
three notes, each bearing interest of six percent per annum, to be paid as
follows: $1,199,908.06 six months from the settlement effective date;
$1,097,058.80 to be paid twelve months from the effective date; and
$1,371,323.50 to be paid eighteen months from the effective date. The
settlement of this putative class action is contingent on the settlement of
related actions involving claims by First Commercial Trust Company, an investor
in Managers Intermediate and other funds. A complaint relating to the Managers
Short Government Fund was filed on November 18, 1994 in the United States
District Court, District of Minnesota. The complaint was filed by Robert Fleck
as a putative class action against The Managers Funds, The Managers Funds, L.P.,
the Adviser, the Distributor, Worth Bruntjen, Evaluation Associates, Inc.,
Robert P. Watson, John E. Rosati, William M. Graulty, Madeline H. McWhinney,
Steven J. Pasggioli, Thomas R. Schneeweis and Managers Short Government Fund,
F/K/A/ Managers Short Government Income Fund. The complaint alleges certain
violations of federal securities laws, including the making of false and
misleading statements in the prospectus, and negligent misrepresentation. The
Court granted final approval to a settlement agreement which will provide to
class members up to a total of $1.5 million collectively from The Managers
Funds, L.P. and the Adviser. The effective date of the settlement was September
2, 1997. A third complaint relating to both the Managers Intermediate Mortgage
Fund and the Managers Short Government Fund was filed on October 26, 1995 in
Connecticut State Superior Court, Stamford/Norwalk District. The complaint was
filed by First Commercial Trust Company, N.A. against the Managers Funds,
Managers Short Government Fund, Managers Intermediate Mortgage Fund, Managers
Short and Intermediate Bond Fund, The Managers Funds, L.P., EAIMC Holdings
Corporation, Evaluation Associates Holding Corporation, EAI Partners, L.P.,
Evaluation Associates, Inc., Robert P. Watson, William W. Graulty, Madeline H.
McWhinney, Steven J. Paggioli, Thomas R. Schneeweis, William J. Crerend, the
Adviser, Piper Jaffray Companies Inc., Worth Bruntjen, Standish, Ayer & Wood,
Inc., TCW Funds Managements, Inc., and TCW Management Company. The complaint
alleges claims under Connecticut common law and violation of the Connecticut
Securities Act and the Connecticut Unfair and Deceptive Trade Practices Act.
The parties have entered into a settlement agreement to resolve this matter.
Pursuant to the settlement agreement, the share of the settlement to be paid by
the Piper defendants is a total of $1,995,968.75 consisting of $314.259.10 in
cash and three notes, bearing simple interest of six percent per annum, to be
paid as follows: $550,091.95 to be paid six months from the effective date;
$502,941.20 to be paid 12 months from the effective date; $628,676.50 to be paid
18 months from the effective date. The settlement of this matter is contingent
on the settlement of the related Hosea/Kopelman Consolidated Action and the
settlement will not be effective until the effective date of the settlement in
the Hosea/Kopelman Consolidated Action.
The Adviser and Distributor do not believe that the settlements described
above, or any of the above lawsuits and arbitrations, will have a material
adverse effect upon their ability to perform under their agreements with the
Company, and they intend to defend the remaining lawsuits vigorously.
-25-
<PAGE>
PART C
Piper Institutional Funds Inc.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements are incorporated by reference to the Registrant's
Annual Report previously filed with the Commission.
(b) Exhibits:
(1) Restated Articles of Incorporation (1)
(2) Amended Bylaws (1)
(5) Investment Advisory and Management Agreement (1)
(6) Amended Underwriting and Distribution Agreement (1)
(8) Custody Agreement (1)
(9) Agency Agreement (1)
(10) Opinion and Consent of Dorsey & Whitney (1)
(11) Consent of KPMG Peat Marwick LLP (2)
(13) Letter of Investment Intent (1)
(15) Plan of Distribution (1)
(16) Power of Attorney (3)
(18) Shareholder Account Servicing Agreement with Piper Trust (1)
(19) Shareholder Account Servicing Agreement with Piper Jaffray (1)
- ------------
(1) Incorporated by reference to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A filed October 31, 1995.
(2) Filed herewith.
(3) Incorporated by reference to Post-Effective Amendment No. 32 to the
Registration Statement of Piper Funds Inc. (File Nos. 33-10261 and
811-4905) on Form N-1A filed with the Commission on September 25, 1996.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is directly or indirectly controlled by or under common control
with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of December 18, 1997, there were 1,076 record holders of Common Shares
of the Fund.
ITEM 27. INDEMNIFICATION
The Articles of Incorporation and Bylaws of the Registrant provide that the
Registrant shall indemnify such persons for such expenses and liabilities, in
such manner and under such circumstances, to the full extent permitted by
Section 302A.521, Minnesota Statutes, as now enacted or hereafter amended,
provided that
<PAGE>
no such indemnification may be made if it would be in violation of Section 17(h)
of the Investment Company Act of 1940, as now enacted or hereafter amended.
Section 302A.521 of the Minnesota Statutes, as now enacted, provides that a
corporation shall indemnify a person made or threatened to be made a party to a
proceeding of the person against judgments, penalties, fines, settlements, and
reasonable expenses, including attorneys' fees and disbursements, incurred by
the person in connection with the proceeding if, with respect to the acts or
omissions of the person complained of in the proceeding, the person has not been
indemnified by another organization for the same judgments, penalties, fines,
settlements, and reasonable expenses incurred by the person in connection with
the proceeding with respect to the same acts or omissions; acted in good faith,
received no improper personal benefit and the Minnesota Statutes dealing with
directors' conflicts of interest, if applicable, have been satisfied; in the
case of a criminal proceeding, had no reasonable cause to believe that the
conduct was unlawful; and reasonably believed that the conduct was in the best
interests of the corporation or, in certain circumstances, reasonably believed
that the conduct was not opposed to the best interests of the corporation.
Insofar as the indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information on the business of the Adviser is described in the section of
the Prospectus, incorporated by reference in this Registration Statement,
entitled "Management -- Investment Adviser."
The officers and directors of the Adviser and their titles are as follow:
Name Title
---- -----
Paul A. Dow Chief Executive Officer and
Chief Investment Officer
E. Peter Gillette, Jr. Director
Deborah K. Roesler Director
2
<PAGE>
Paula Meyer President and Director of Marketing
Susan S. Miley Senior Vice President, General
Counsel and Secretary
Richard Daly Senior Vice President
Michael C. Derck Senior Vice President
John J. Gibas Senior Vice President
Marijo A. Goldstein Senior Vice President
Mark R. Grotte Senior Vice President
Jerry F. Gudmundson Senior Vice President
Joyce A. K. Halbe Senior Vice President
Robert C. Hannah Senior Vice President
Gregory Hanson Senior Vice President
Lynne Harrington Senior Vice President
Douglas Hedberg Senior Vice President
Mary M. Hoyme Senior Vice President
Kim Jenson Senior Vice President
Jeffrey Johnson Senior Vice President
Russell J. Kappenman Senior Vice President
Kimberly F. Kaul Senior Vice President
Thomas S. McGlinch Senior Vice President
Steven V. Markusen Senior Vice President
Robert H. Nelson Senior Vice President
Chris Neuharth Senior Vice President
William Nimmo Senior Vice President
Gary Norstrem Senior Vice President
Nancy S. Olsen Senior Vice President
Ronald R. Reuss Senior Vice President
Bruce D. Salvog Senior Vice President
Sandra K. Shrewsbury Senior Vice President
Eric L. Siedband Senior Vice President
David M. Steele Senior Vice President
Jill A. Thompson Senior Vice President
John G. Wenker Senior Vice President
Douglas J. White Senior Vice President
Mark Austin Vice President
Cynthia K. Castle Vice President
Molly Destro Vice President
Rochelle B. Gonzo Vice President
Joan L. Harrod Vice President
James Jenson, Jr. Vice President
Amy K. Johnson Vice President
Wan-Chong Kung Vice President
David Luebke Vice President
Jane C. Longueville Vice President
Yedda Marks Vice President
Brent D. Mellum Vice President
3
<PAGE>
Steven Meyer Vice President
Thomas Moore Vice President
Paul D. Pearson Vice President
Scott Richter Vice President
Catherine M. Stienstra Vice President
Shaista Tajamal Vice President
Jane K. Welter Vice President
Fong P. Woo Vice President
Principal occupations of Messrs. Dow and Nelson and Ms. Miley are set forth
in the Statement of Additional Information under the heading "Directors and
Officers." MR. GILLETTE has been a Director of the Adviser since 1997 and
President and Chairman of Piper Trust since 1995, prior to which he was a
Commissioner with the State of Minnesota since 1991. MS. MEYER has been
President and Director of Marketing of the Adviser since 1997, prior to which
she was a Senior Vice President of the Adviser since 1994, and prior thereto a
Vice President of Secura Insurance, Appleton, Wisconsin from 1988 to 1994. MS.
ROESLER has been a Director of the Adviser since 1997 and Chief Financial
Officer/Treasurer of Piper Jaffray Companies Inc. since 1989.
MR. DALY has been a Senior Vice President of the Adviser since November
1996, prior to which he had been a Vice President of the Adviser from 1992 to
1996. MR. DERCK has been a Vice President of the Adviser since 1992. MR. GIBAS
has been a Senior Vice President of the Adviser since 1992. MS. GOLDSTEIN has
been a Senior Vice President of the Adviser since 1993, prior to which she was a
Vice President of the Adviser from 1991 to 1993. MR. GROTTE has been a Senior
Vice President of the Adviser since 1992. MR. GUDMUNDSON has been a Senior Vice
President of the Adviser since 1995, prior to which he was an Executive Vice
President at Resource Capital Advisers from 1991 to 1995. MS. HALBE has been a
Senior Vice President of the Adviser since 1997, prior to which she was a Vice
President from 1996 to 1997, and prior thereto she was a Vice President at First
Asset Management since 1990. MR. HANNAH has been a Senior Vice President of the
Adviser since 1995, prior to which he was manager of Craig and Associates in
Seattle, Washington from 1993 to 1994, and prior thereto, he was manager of
Exvere in Seattle from January 1993 to August 1993 and a registered
representative at Geneva in Irvine, California from 1991 to 1992. MR. HANSON
has been a Senior Vice President and Portfolio Manager of the Adviser since
1997, prior to which he was employed at Washington Square Advisers, Minneapolis
since 1979, most recently as a Senior Vice President and Portfolio Manager. MS.
HARRINGTON has been a Senior Vice President of the Adviser since 1995, prior to
which she was a Managing Director at Piper Jaffray Inc. in the Public Finance
Department. MR. HEDBERG has been a Senior Vice President and Portfolio Manager
of the Adviser since 1997, prior to which he was employed at Washington Square
Advisers, Minneapolis, since 1981, most recently as an Executive Vice President,
Managing Director and Portfolio Manager. MS. HOYME has been a Senior Vice
President of the Adviser since 1997, prior to which she was a Vice President of
the Adviser from 1996 to 1997, and prior thereto, she had been a
4
<PAGE>
Vice President at First Asset Management since 1989. MS. JENSON has been a
Senior Vice President of the Adviser since 1996, prior to which she was a
Managing Director at Piper Trust since 1991. MR. JOHNSON has been a Senior Vice
President and Portfolio Manager of the Adviser since 1997, prior to which he was
a Vice President at First Asset Management since 1991. MR. KAPPENMAN has been a
Senior Vice President of the Adviser since 1996, prior to which he was a Vice
President of the Adviser from 1991 to 1996. MS. KAUL has been a Senior Vice
President of the Adviser since 1996 and Director of Corporate Communications of
the Adviser since 1991. MR. MCGLINCH has been a Senior Vice President of the
Adviser since 1995, prior to which he had been a Vice President of the Adviser
since 1992. MR. MARKUSEN has been a Senior Vice President of the Adviser since
1993, prior to which had been a senior vice president of Investment Advisers,
Inc., in Minneapolis, Minnesota from 1989 to 1993. MR. NEUHARTH has been a
Senior Vice President of the Adviser since 1997, prior to which he was a Vice
President of the Adviser from 1996 to 1997, and prior thereto he had been a
senior mortgage trader at FBS Mortgage since 1995. MR. NIMMO has been a Senior
Vice President of the Adviser since 1997, prior to which he was a Vice President
of the Adviser from 1996 to 1997, and prior thereto, a Vice President of
Washington Square Capital Management since 1991. MR. NORSTREM has been a Senior
Vice President of the Adviser since 1993, prior to which he was Treasurer of the
City of Saint Paul, Minnesota for twenty-eight years. MS. OLSEN has been a
Senior Vice President of the Adviser since 1991. MR. REUSS has been a Senior
Vice President of the Adviser since 1989. MR. SALVOG has been a Senior Vice
President of the Adviser since 1992. MS. SHREWSBURY has been a Senior Vice
President of the Adviser since 1993, prior to which she had been a Managing
Director of Piper Jaffray since 1992. MR. SIEDBAND has been a Senior Vice
President of the Adviser since November 1996, prior to which he was a Vice
President of the Adviser from 1992 to 1996. MR. STEELE has been a Senior Vice
President of the Adviser since 1992. MS. THOMPSON has been a Senior Vice
President of the Adviser since November 1996, prior to which she was a Vice
President of the Adviser from 1994 to 1996, and prior thereto, a Vice President
of Piper Jaffray since 1991. MR. WENKER has been a Senior Vice President of the
Adviser since 1993, prior to which he had been a Managing Director of Piper
Jaffray from 1992 to 1993. MR. WHITE has been a Senior Vice President of the
Adviser since 1991.
MR. AUSTIN has been a Vice President of the Adviser since 1997, prior to
which he was an Assistant Vice President of the Adviser since 1994, and prior
thereto, an associate in institutional marketing at Investment Advisers Inc.
from 1992 to 1994. MS. CASTLE has been a Vice President of the Adviser since
1994, prior to which she was a client service associate of the Adviser since
1990. MS. DESTRO has been a Vice President of the Adviser since 1994, prior to
which she was an Accounting Manager from 1993 to 1994 and mutual fund accountant
from 1991 to 1993 with the Adviser. MS. GONZO has been a Vice President of the
Adviser since 1996, prior to which she was a communications manager of the
Adviser since 1993, and prior thereto, a senior financial communications
specialist at Minnesota Mutual in St. Paul, Minnesota from 1986 to 1993. MS.
HARROD has been a Vice President of the Adviser since 1992. MR. JENSON has been
a Vice President of the Adviser since 1997, prior to
5
<PAGE>
which he was employed at Norwest Investment Services, Minneapolis, since 1989,
most recently as a Vice President and Director of Product Management/Wholesaler.
MS. JOHNSON has been a Vice President of the Adviser since 1994, prior to which
she was an Accounting Manager from 1993 to 1994 and mutual fund accountant from
1991 to 1993 with the Adviser. MS. KUNG has been a Vice President of the
Adviser since 1993, prior to which she had been a Senior Consultant at Cytrol
Inc. from 1989 to 1992. MR. LUEBKE has been a Vice President and Intermediate
Equity Analyst of the Adviser since 1997, prior to which he was employed at
First Bank System since 1986, most recently as a Vice President. MS.
LONGUEVILLE has been a Vice President of the Adviser since November 1996, prior
to which she was an Assistant Vice President since 1995, and prior thereto, a
communications manager at the Adviser. MS. MARKS has been a Vice President of
the Adviser since 1997, prior to which she worked in the derivatives department
of Piper Jaffray Companies since 1994. MR. MELLUM has been a Vice President of
the Adviser since 1996, prior to which he was an Assistant Vice President of the
Adviser since 1995, and prior thereto, a credit analyst at the Adviser since
1993, and prior to that he was a student. MR. MEYER has been a Vice President
of the Adviser since 1994 and manager of Systems Integration for the Adviser
since 1991. MR. MOORE has been a Vice President of the Adviser since 1992. MR.
PEARSON has been a Vice President of the Adviser since 1995, prior to which he
was Mutual Funds Accounting Manager of the Adviser from 1994 to 1995 and prior
thereto, Director of Fund Operations at Norwest Bank, Minneapolis from 1992 to
1994. MR. RICHTER has been a Vice President and Assistant General Counsel of
the Adviser since 1997, prior to which he was an attorney at Popham Haik
Schnobrich & Kaufman since 1982. MS. STIENSTRA has been a Vice President and a
municipal bond trader of the Adviser since 1995, prior to which she was an
assistant analyst of the Adviser from 1991 to 1994. MS. TAJAMAL has been a Vice
President of the Adviser since 1995 and a portfolio manager of the Adviser since
1993, prior to which she was a money market analyst of the Adviser from 1990 to
1993. MS. WELTER has been a Vice President of the Adviser since 1994, prior to
which she was a client service associate of the Adviser since 1993 and a mutual
fund accountant with the Adviser from 1990 to 1993. MR. WOO has been a Vice
President of the Adviser since 1994, prior to which he was a municipal credit
analyst of the Adviser since 1992.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Piper Jaffray Inc. acts as principal underwriter for the Registrant
and also for three other open-end investment companies, Piper Funds Inc. -- II,
the shares of which are currently offered in one series, Piper Institutional
Funds Inc., the shares of which are currently offered in one series and Piper
Global Funds Inc., the shares of which are currently offered in two series.
Piper Jaffray has acted as principal underwriter in connection with the initial
public offering of shares of 23 closed-end investment companies.
6
<PAGE>
(b) The name, positions and offices with Piper Jaffray Inc., and positions
and offices with the Registrant of each director and officer of Piper Jaffray
Inc. are as follow:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
Addison L. Piper Chairman of the None
Board of Directors
and Chief Executive
Officer
Andrew S. Duff President None
Ralph W. Burnet Member of the Board None
of Directors
Christopher E. Clouser Member of the Board None
of Directors
Susan E. Engel Member of the Board None
of Directors
Kathy Halbreich Member of the Board None
of Directors
Robert S. Slifka Member of the Board None
of Directors
David Stanley Member of the Board None
of Directors
James J. Bellus Managing Director None
AnnDrea M. Benson Managing Director and None
General Counsel
David E. Rosedahl Managing Director None
and Secretary
Darren L. Acheson Managing Director None
Jeffrey C. Adamson Managing Director None
Mark D. Appelbaum Managing Director None
Jack M. Armstrong Managing Director None
Lynda M. Babcock Managing Director None
7
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
James J. Bellus Managing Director None
Lloyd K. Benson Managing Director None
Christopher P. Bessette Managing Director None
Gary J. Blauer Managing Director None
Karen M. Bohn Managing Director None
Eric A. Borg Managing Director None
Ronald O. Braun Managing Director None
Jay A. Brunkhorst Managing Director None
Edward M. Caillier Managing Director None
Kenneth S. Cameranesi Managing Director None
Joseph V. Caruso Managing Director None
Antonio J. Cecin Managing Director None
Joyce E. Chaney Managing Director None
Kenneth P. Clark Managing Director None
Linda A. Clark Managing Director None
Stephen B. Clark Managing Director None
John P. Clausen Managing Director None
Carol L. Collias Managing Director None
Mark Copman Managing Director None
David P. Crosby Managing Director None
Mark A. Curran Managing Director None
George S. Dahlman Managing Director None
8
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
Michael D. Deede Managing Director None
Joel R. Denney Managing Director None
Jack C. Dillingham Managing Director None
Mark T. Donahoe Managing Director None
Darci L. Doneff Managing Director None
Stephen M. Dragos Managing Director None
Andrew S. Duff Managing Director None
Michael D. Duffy Managing Director None
Andrew W. Dunleavy Managing Director None
John O. Eaton Managing Director None
William H. Ellis Managing Director None
Fred R. Eoff, Jr. Managing Director None
Richard D. Estenson Managing Director None
Francis E. Fairman IV Managing Director None
John R. Farrish Managing Director None
James D. Fehrenbach Managing Director None
Gordon R. Ferguson Managing Director None
Paul Ferry Managing Director None
Mark E. Fisler Managing Director None
Michael W. Follett Managing Director None
Steven T. Frisbie Managing Director None
Daniel P. Gallaher Managing Director None
9
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
Peter M. Gill Managing Director None
Kevin D. Grahek Managing Director None
Paul D. Grangaard Managing Director None
Thomas J. Gunderson Managing Director None
James S. Harrington Managing Director None
Charles N. Hayssen Managing Director None
William P. Henderson Managing Director None
Allan F. Hickok Managing Director None
Richard L. Hines Managing Director None
David B. Holden Managing Director None
Charles E. Howell, Jr. Managing Director None
Bruce C. Huber Managing Director None
John R. Jacobs Managing Director None
Kim R. Jenson Managing Director None
Earl L. Johnson Managing Director None
Richard L. Johnson Managing Director None
Nicholas P. Karos Managing Director None
Paul P. Karos Managing Director None
Lisa A. Kenvon Managing Director None
Richard G. Kiss Managing Director None
Gordon E. Knudsvig Managing Director None
Jerome P. Kohl Managing Director None
10
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
Michael J. Lanigan Managing Director None
Eric W. Larson Managing Director None
Michael L. Libera Managing Director None
Marina M. Lyon Managing Director None
Michael R. Mach Managing Director None
Robert E. Mapes Managing Director None
Peter T. Mavroulis Managing Director None
Robert B. McClanahan Managing Director None
Michael P. McMahon Managing Director None
Gregory T. McNellis Managing Director None
Joseph E. Meyers, Jr. Managing Director None
Davil L. Midgley Managing Director None
Dennis V. Mitchell Managing Director None
Edward P. Nicoski Managing Director None
Barry J. Nordstrand Managing Director None
Brooks G. O'Neil Managing Director None
John P. O'Neill Managing Director None
Benjamin S. Oehler Managing Director None
Timothy J. Oswald Managing Director None
John Otterlei Managing Director None
William O. Patterson Managing Director None
Robin C. Pfister Managing Director None
11
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
Daniel J. Phillips Managing Director None
Addison L. Piper Managing Director None
Laurence S. Podobinski Managing Director None
Steven J. Proeschel Managing Director None
Rex W. Ramsay Managing Director None
Brian J. Ranallo Managing Director None
Roger W. Redmond Managing Director None
Stacey R. Rickert Managing Director None
Robert P. Rinek Managing Director None
Wesley L. Ringo Managing Director None
Jim M. Roane Managing Director None
Deborah K. Roesler Managing Director None
Ross E. Rogers Managing Director None
Jeanne R. Rosengren Managing Director None
Maxine D. Rossini Managing Director None
Terry D. Sandven Managing Director None
Thomas P. Schnettler Managing Director None
Steven R. Schroll Managing Director None
Joyce Nelson Schuette Managing Director None
David P. Sirianni Managing Director None
Arch C. Smith Managing Director None
Robert L. Sonnek Managing Director None
12
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
Sandra G. Sponem Managing Director None
Thomas E. Stanberry Managing Director None
DeLos V. Steenson Managing Director None
Richard J. Stream Managing Director None
Robert A. Stuber Managing Director None
D. Greg Sundberg Managing Director None
Robert D. Swerdling Managing Director None
Garey T. Symington, Jr. Managing Director None
William H. Teeter Managing Director None
Ann C. Tillotson Managing Director None
John F. Turner Managing Director None
Marie A. Uhrich Managing Director None
Momchilo Vucenich Managing Director None
Charles M. Webster, Jr. Managing Director None
Darrell L. Westby Managing Director None
David R. Westcott Managing Director None
Douglas R. Whitaker Managing Director None
James H. Wilford Managing Director None
Cindy L. Witt Managing Director None
Stephen W. Woodard Managing Director None
Mark E. Wren Managing Director None
Bradley F. Zilka Managing Director None
13
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
Beverly J. Zimmer Managing Director None
The principal business address of each of the individuals listed above is Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-3804.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The physical possession of the accounts, books, and other documents
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and Rules 3la-1 to 3la-3 promulgated thereunder is maintained by the Registrant
at Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota
55402-3804, except that the physical possession of certain accounts, books and
other documents related to the custody of the Registrant's securities is
maintained by Investors Fiduciary Trust Company, 127 West Tenth Street, Kansas
City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) Each recipient of a prospectus of any series of the Registrant may
request the latest Annual Report of such series, and such Annual Report will be
furnished by the Registrant without charge.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis and State of Minnesota on the 23rd
day of December 1997.
PIPER INSTITUTIONAL FUNDS INC.
(Registrant)
By /s/ Paul A. Dow
-----------------------------
Paul A. Dow, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
/s/ Paul A. Dow President (principal December 23, 1997
- ----------------------- executive officer)
Paul A. Dow
/s/ Robert H. Nelson Treasurer (principal December 23, 1997
- ----------------------- financial and
Robert H. Nelson accounting officer)
David T. Bennett* Director
Jaye F. Dyer* Director
William H. Ellis* Director
Karol D. Emmerich* Director
Luella G. Goldberg* Director
David A. Hughey Director
George Latimer* Director
*By /s/ William H. Ellis December 23, 1997
----------------------------
William H. Ellis, Attorney-in-Fact
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Piper Institutional Funds Inc.:
We consent to the use of our report dated November 7, 1997 incorporated by
reference herein and to the references to our Firm under the headings
"FINANCIAL HIGHLIGHTS" in Part A and "FINANCIAL STATEMENTS" in Part B of the
Registration Statement.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
December 23, 1997
