<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the period from October 1,
1997 to June 30, 1998*
................................................................................
<TABLE>
<S> <C>
INCOME:
Interest ................................................... $13,749,002
-----------------
EXPENSES (NOTE 5):
Investment management fee .................................. 368,211
Custodian and accounting fees .............................. 180,109
Transfer agent and dividend disbursing agent fees .......... 23,417
Registration fees .......................................... 118,498
Reports to shareholders .................................... 14,611
Amortization of organization costs ......................... 9,431
Directors' fees ............................................ 7,937
Audit and legal fees ....................................... 39,940
Other expenses ............................................. 16,085
-----------------
Total expenses ........................................... 778,239
Less expenses paid indirectly .......................... (1,696)
-----------------
Total net expenses ....................................... 776,543
-----------------
Net investment income .................................... $12,972,459
-----------------
-----------------
* DATE FUND DISCONTINUED OPERATIONS. SEE NOTE 1 IN THE NOTES TO FINANCIAL
STATEMENTS.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1 1998 Annual Report - Institutional Money Market Fund
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
6/30/98* 9/30/97
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 12,972,459 $ 13,938,945
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................. (13,024,616) (13,938,945)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets from capital share
transactions (note 4) .................................. (277,401,833) 104,889,203
---------------- ----------------
Total increase (decrease) in net assets .................. (277,453,990) 104,889,203
Net assets at beginning of period .......................... 277,453,990 172,564,787
---------------- ----------------
Net assets at end of period ................................ -- $277,453,990
---------------- ----------------
---------------- ----------------
* DATE FUND DISCONTINUED OPERATIONS. SEE NOTE 1 IN THE NOTES TO FINANCIAL
STATEMENTS.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
2 1998 Annual Report - Institutional Money Market Fund
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) ORGANIZATION
................................
Piper Institutional Funds Inc. (the company) is registered
under the Investment Company Act of 1940 (as amended) as a
single, open-end management investment company. The
company currently includes one diversified series,
Institutional Money Market Fund (the fund). It is
anticipated that the company will be dissolved under
Minnesota law before the end of 1998.
Institutional Money Market Fund invested in short-term
securities issued or guaranteed as to payment of principal
and interest by the U.S. government, its agencies or
instrumentalities, and repurchase agreements backed by
such securities.
On May 1, 1998, Piper Jaffray Companies Inc., the parent
company of the fund's investment advisor, was acquired by
U.S. Bancorp. U.S. Bancorp is a multi-state bank holding
company headquartered in Minneapolis, Minnesota with a
geographic service area spanning 17 states. As of March
31, 1998, U.S. Bancorp was the 15th largest U.S.
commercial bank holding company, with assets of nearly
$70.9 billion. U.S. Bank National Association ("U.S.
Bank"), a wholly owned subsidiary of U.S. Bancorp,
currently acts as the investment advisor to 32 mutual
funds (the "First American Funds"). As of March 31, 1998,
U.S. Bank, acting through its First American Asset
Management group, managed more than $65.3 billion in
assets, including approximately $23.3 billion in assets of
the First American Funds.
As a result of the acquisition of Piper Jaffray Companies
Inc. by U.S. Bancorp, shares were redeemed and the fund
discontinued operations as a result of the change in the
brokerage firm sweep vehicle from the Institutional Money
Market Fund to First American Funds - Prime Obligations
Fund.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
................................
INVESTMENTS IN SECURITIES
Pursuant to Rule 2a-7 of the Investment Company Act of
1940 (as amended), securities were valued on the basis of
amortized cost, which approximated market value.
Security transactions were accounted for on the date the
securities were purchased or sold. Interest income,
including amortization of discount and premium computed on
a straight line basis, was accrued daily.
FEDERAL TAXES
Prior to discontinuing operations, the fund complied with
the requirements of the Internal Revenue Code applicable
to regulated investment companies in order to avoid the
payment of federal income tax. The fund distributed its
taxable net investment income and realized gains to avoid
the payment of any federal excise taxes.
As a result of permanent book-to-tax differences, a
reclassification adjustment was made to increase
undistributed net investment income and decrease
additional paid-in-capital by $52,157 prior to the closing
of the fund.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income
were declared daily and reinvested in additional shares of
the fund monthly.
- --------------------------------------------------------------------------------
3 1998 Annual Report - Institutional Money Market Fund
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
For repurchase agreements entered into with certain
broker-dealers, the funds, along with other affiliated
registered investment companies, transferred uninvested
cash balances into an individual, joint or tri-party
trading account, the daily aggregate of which was invested
in repurchase agreements secured by U.S. government or
agency obligations. Securities pledged as collateral for
all individual and joint repurchase agreements were held
by the fund's custodian bank until maturity of the
repurchase agreement. Securities pledged as collateral for
all tri-party repurchase agreements were held by a
third-party custodian until maturity of the repurchase
agreement. Provisions for all agreements ensured that the
daily market value of the collateral was in excess of the
repurchase amount, including accrued interest, to protect
the fund in the event of a default.
ORGANIZATION COSTS
Organization costs were incurred in connection with the
start up and initial registration of the fund. These costs
were amortized over 60 months on a straight-line basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts in the financial statements. Actual
results could differ from these estimates.
(3) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities
for the period from October 1, 1997 to June 30, 1998,
aggregated $6,776,031,012 and $7,056,790,569,
respectively.
(4) CAPITAL SHARE
TRANSACTIONS
................................
Capital share transactions for the fund at net asset value
of $1 per share were as follows:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1, 1997 YEAR ENDED
TO JUNE 30, 1998* SEPTEMBER 30, 1997
---------------------- -------------------
<S> <C> <C>
Sales of fund shares ................... $ 1,783,912,230 $ 1,521,304,518
Issued for reinvested distributions .... 12,052,618 12,954,196
Redemptions of fund shares ............. (2,073,366,681) (1,429,369,511)
---------------------- -------------------
$ (277,401,833) $ 104,889,203
---------------------- -------------------
---------------------- -------------------
</TABLE>
* THE FUND DISCONTINUED OPERATIONS ON JUNE 30, 1998.
SEE NOTE 1.
(5) EXPENSES
................................
INVESTMENT MANAGEMENT FEE
The company had entered into an investment management
agreement with Piper Capital Management Incorporated
(Piper Capital) under which Piper Capital managed the
fund's assets and furnished related office facilities,
equipment, research and personnel. The agreement required
the fund to pay Piper Capital a monthly fee based on
average daily net assets. The fee was equal to an annual
rate of 0.15% of the fund's average daily net assets. For
the period from October 1, 1997 to June 30, 1998, the
effective management fee paid by the fund was 0.15% on an
annual basis.
- --------------------------------------------------------------------------------
4 1998 Annual Report - Institutional Money Market Fund
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
SHAREHOLDER ACCOUNT SERVICING FEES
The company had also entered into shareholder account
servicing agreements under which Piper Jaffray and Piper
Trust Company (Piper Trust) performed various transfer and
dividend disbursing agent services for accounts held at
the respective company. The fees, which were paid monthly
to Piper Jaffray and Piper Trust for providing these
services, were equal to an annual rate of $7.50 per active
shareholder account and $1.60 per closed account. For the
period from October 1, 1997 to June 30, 1998, the fund
paid $7,464 and $2,446 to Piper Jaffray and Piper Trust,
respectively, in connection with the shareholder account
servicing agreements.
OTHER FEES AND EXPENSES
In addition to the investment management, distribution and
shareholder account servicing fees, the fund was
responsible for paying most other operating expenses
including: outside directors' fees and expenses; custodian
fees; registration fees; printing and shareholder reports;
transfer agent fees and expenses; legal, auditing and
accounting services; insurance; interest; taxes and other
miscellaneous expenses.
Expenses paid indirectly represent a reduction of
custodian fees for earnings on miscellaneous cash balances
maintained by the fund.
- --------------------------------------------------------------------------------
5 1998 Annual Report - Institutional Money Market Fund
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(6) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
INSTITUTIONAL MONEY MARKET FUND
<TABLE>
<CAPTION>
Three Months
Period Ended Year Ended Ended Year Ended June 30,
June 30, September 30, September 30, -----------------------------------------------
1998(d) 1997 1996 1996 1995 1994 1993(b)
------------- -------------- -------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning
of period .................. $ 1.00 $1.00 $1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
------------- ------ ------ --------- --------- --------- -----------
Operations:
Net investment income ...... 0.04 0.05 0.01 0.05 0.05 0.03 0.01
Distributions to shareholders:
From net investment
income ................... (0.04) (0.05) (0.01) (0.05) (0.05) (0.03) (0.01)
Redemption of fund shares (1.00) -- -- -- -- -- --
------------- ------ ------ --------- --------- --------- -----------
Net asset value, end of
period ..................... $ 0.00 $1.00 $1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
------------- ------ ------ --------- --------- --------- -----------
------------- ------ ------ --------- --------- --------- -----------
SELECTED INFORMATION
Total return (a) ............. 4.01% 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 ........... 0.32%(c) 0.31% 0.35%(c) 0.35% 0.35% 0.35% 0.35%(c)
Ratio of net investment income
to average daily net
assets ..................... 5.29%(c) 5.21% 5.06%(c) 5.22% 5.17% 3.26% 3.02%(c)
Ratios before waivers by
the advisor:
Ratio of expenses to average
daily net assets before
waivers .................. 0.32%(c) 0.31% 0.41%(c) 0.38% 0.49% 0.61% 0.35%(c)
Ratio of net investment
income to average daily
net assets before
waivers .................. 5.29%(c) 5.21% 5.00%(c) 5.19% 5.03% 3.00% 3.02%(c)
</TABLE>
(a) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(b) COMMENCEMENT OF OPERATIONS WAS FEBRUARY 2, 1993.
(c) ANNUALIZED.
(d) PERIOD FROM OCTOBER 1, 1997 TO JUNE 30, 1998. FUND DISCONTINUED OPERATIONS
ON JUNE 30, 1998. SEE NOTE 1 IN THE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6 1998 Annual Report - Institutional Money Market Fund
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PIPER INSTITUTIONAL FUNDS INC.:
We have audited the accompanying statement of operations
of Institutional Money Market Fund (a fund within Piper
Institutional Funds Inc.) for the period from October 1,
1997 to June 30, 1998 (date fund discontinued operations),
the statements of changes in net assets for the period
from October 1, 1997 to June 30, 1998, and the year ended
September 30, 1997, and the financial highlights for the
periods presented in note 6 to the financial statements.
These financial statements and the financial highlights
are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements present fairly,
in all material respects for Institutional Money Market
Fund, the results of its operations, the changes in its
net assets and the financial highlights for the periods
stated in the first paragraph above, in conformity with
generally accepted accounting principles.
As described in note 1 to the financial statements, all of
Institutional Money Market Fund's shares were redeemed and
the fund discontinued operations on June 30, 1998.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 7, 1998
- --------------------------------------------------------------------------------
7 1998 Annual Report - Institutional Money Market Fund
<PAGE>
Federal Income Tax Information
- --------------------------------------------------------------------------------
The following per-share information describes the federal
tax treatment of distributions made during the fiscal
year. Distributions for the calendar year will be reported
on Form 1099-DIV. Please consult a tax advisor on how to
report these distributions at the state and local levels.
INCOME DISTRIBUTIONS (TAXABLE AS ORDINARY DIVIDENDS, NONE
QUALIFYING FOR DEDUCTION BY CORPORATIONS)
<TABLE>
<CAPTION>
PAYABLE DATE AMOUNT
- ---------------------------------------- -------
<S> <C>
October 1, 1997 ........................ $0.0045
November 3, 1997 ....................... 0.0045
December 1, 1997 ....................... 0.0043
January 2, 1998 ........................ 0.0046
February 2, 1998 ....................... 0.0045
March 2, 1998 .......................... 0.0041
April 1, 1998 .......................... 0.0046
May 1, 1998 ............................ 0.0043
June 1, 1998 ........................... 0.0044
June 29, 1998 .......................... 0.0041
-------
Total ................................ $0.0439
-------
-------
</TABLE>
- --------------------------------------------------------------------------------
8 1998 Annual Report - Institutional Money Market Fund
