<PAGE>
Minnesota Municipal Income Portfolio - 1997 Semiannual Report
1997 Semiannual Report
MINNESOTA
MUNICIPAL
INCOME
PORTFOLIO
MXA
[LOGO]
<PAGE>
[LOGO]
CONTENTS
Portfolio Managers' Letter . . . . . . . . . . . . . . . . . . . . . . . . .2
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . .6
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . 15
Shareholder Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Glossary***. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
*** This report includes a glossary to help you understand financial terms used
in the portfolio managers' letter. When you see this symbol, it indicates a word
that is defined in the glossary.
MINNESOTA MUNICIPAL INCOME PORTFOLIO
- -------------------------------------
FUND OBJECTIVE
High current income exempt from both regular federal income tax and Minnesota
personal income tax, consistent with preservation of capital. The fund's income
may be subject to federal and/or state of Minnesota alternative minimum tax.
Investors should consult their tax advisers. As with other investment companies,
there can be no assurance this fund will achieve its objective.
PRIMARY INVESTMENTS
A wide range of Minnesota municipal securities rated investment grade or of
comparable quality when purchased. These securities may include municipal
derivative securities, such as inverse floating rate and inverse interest-only
municipal securities, which may be more volatile than traditional municipal
securities in certain market conditions.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURNS
- --------------------------------------------------------------------------------
Based on net asset value for the periods ended July 31, 1997
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[GRAPH]
Average annualized total returns are through July 31, 1997, and are based on
changes in net asset value (NAV). They reflect the reinvestment of distributions
but do not reflect sales charges. NAV-based performance is used to measure
investment management results.
Average annualized total returns based on changes in market price for the
one-year, three-year and since inception periods ended July 31, 1997, were
20.68%, 8.29% and 3.57%, respectively. These returns also assume reinvested
distributions and do not reflect sales charges.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. NEITHER SAFETY OF
PRINCIPAL NOR STABILITY OF INCOME IS GUARANTEED. Past performance does not
guarantee future results. The investment return and principal value of an
investment will fluctuate so that fund shares, when sold, may be worth more or
less than their original cost. Closed-end funds, such as this fund, often trade
at discounts to net asset value. Therefore, you may be unable to realize the
full net asset value of your shares when you sell.
The Lipper General Municipal Bond Funds: Leveraged Average represents the
average total return, with distributions reinvested, of leveraged perpetual and
term trust national closed-end municipal funds as characterized by Lipper
Analytical Services. The Lehman Brothers Municipal Long Bond Index is comprised
of municipal bonds with more than 22 years to maturity and an average credit
quality of AA. The index is unmanaged and does not include any fees or expenses
in its total returns.
The since inception numbers for the Lipper average and Lehman index are
calculated from the month end following the fund's inception through July 31,
1997.
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1997 Semiannual Report 1 Minnesota Municipal Income Portfolio
<PAGE>
PORTFOLIO MANAGERS' LETTER
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[PHOTO]
DOUG WHITE, CFA,
shares responsibility for the management of Minnesota Municipal Income
Portfolio. He has 14 years of financial experience.
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September 17, 1997
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DEAR SHAREHOLDERS:
MINNESOTA MUNICIPAL INCOME PORTFOLIO CONTINUED TO PAY HIGH CURRENT INCOME EXEMPT
FROM REGULAR FEDERAL INCOME TAX AND MINNESOTA PERSONAL INCOME TAX DURING THE SIX
MONTHS ENDED JULY 31, 1997. The fund's monthly dividend remained stable at
6.3125 cents per share. During the six-month period, the fund's net asset value
(NAV) total return was 7.72%, compared to 7.62% for the Lipper General Municipal
Bond Funds: Leveraged Average and 7.53% for the Lehman Brothers Municipal Long
Bond Index. One-year NAV total returns for the fund and its benchmarks were
13.87%, 12.83% and 12.61%, respectively. We attribute the fund's positive NAV
total return primarily to its effective duration,*** which was longer than the
duration of the Lehman
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PORTFOLIO COMPOSITION
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As a percentage of total assets on July 31, 1997
[CHART]
Housing Revenue 15%
Nursing Home Revenue 3%
Leasing Revenue 2%
Other Assets 3%
Multiple Utility Revenue 3%
Water/Sewer/Pollution
Control Revenue 3%
General Obligations 32%
Hospital Revenue 20%
Education Revenue 10%
Industrial Development
Revenue 1%
Sales/Excise Tax
Revenue 1%
Electric Revenue 5%
Health Service/
HMO Revenue 2%
Municipal inverse floating rate securities and municipal inverse interest-only
securities account for 3% of the fund's total assets.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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1997 Semiannual Report 2 Minnesota Municipal Income Portfolio
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
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[PHOTO]
RON REUSS, ISFA,
shares responsibility for the management of Minnesota Municipal Income
Portfolio. He has 28 years of financial experience.
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index. (We discuss effective duration in greater detail below.) Based on market
price, the fund's total return for the six months was 11.18%.*
WE ARE PLEASED THAT THE DISCOUNT*** BETWEEN THE FUND'S NET ASSET VALUE AND
MARKET PRICE HAS BEEN REDUCED OVER THE PAST YEAR. As of July 31, 1997, the
fund's NAV was $14.65, and its market price was $13.50, a discount of 7.85%,
which is down from 12.56% a year ago. We attribute this reduction primarily
to an increased level of interest in the fund from the investment community.
In addition, we believe some investors have become concerned about the high
levels of the stock market and are beginning to move back into bonds.
DURING THE REPORTING PERIOD, INTEREST RATES AND, IN TURN, BOND PRICES WERE
VOLATILE. The economy showed signs of strength early in the period, prompting
the Federal Reserve Board (the Fed) to raise the federal funds rate in March
from 5.25% to 5.50%. That caused bond yields to rise and prices to fall.
Beginning in mid-April, however, we began to see signs that the economy and
inflation were beginning to slow. As a result, interest rates
began to fall, and bond prices increased throughout the rest of the period.
WHILE THE FUND'S DURATION HELPED ITS PERFORMANCE DURING THE REPORTING PERIOD, WE
HAVE TAKEN STEPS TO SHORTEN IT SLIGHTLY TO HELP REDUCE THE FUND'S NAV
VOLATILITY. This fund generally maintains an effective duration that is longer
than that of its benchmark to help meet its objective of high current income.
However, to make the fund less sensitive to changes in interest rates, we have
been broadening the fund's focus in the past year to include shorter duration
securities in addition to longer duration bonds. Since reducing duration can
negatively affect a fund's income, we have done this selectively, following a
process whereby we consider
* ALL RETURNS INCLUDE REINVESTED DISTRIBUTIONS, BUT NOT SALES CHARGES. PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES, WHEN SOLD,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
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1997 Semiannual Report 3 Minnesota Municipal Income Portfolio
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
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such things as a bond's call protection,*** coupon*** rate and maturity -- in
addition to duration. Although we've been shortening the fund's duration, the
fund has recently been earning slightly more than its dividend and contributing
to its dividend reserve. This was largely due to a Minnesota Housing and Finance
Agency bond, an inverse interest-only security that has since been called.***
THE SUPPLY OF TAX-EXEMPT MUNICIPAL BOND ISSUES IN MINNESOTA IS DOWN ALMOST 25%
COMPARED TO LAST YEAR AT THIS TIME. Interest rates, while down, need to fall
even further in order to make it feasible for issuers to refund bonds. This is
one reason for the shortage in supply. Another reason is that the economy is in
good health and generating positive tax revenues, which has so far decreased the
need for new bond issues.
OUR STRATEGY CONTINUES TO INCLUDE CHOOSING HIGHER QUALITY BONDS AND MAXIMIZING
THE FUND'S CALL PROTECTION. The difference between yields of higher and lower
quality bonds narrowed during the period, allowing us to keep the fund's quality
fairly high. Eighty-three percent of the bonds in the fund are rated A or
higher, up from 81% the last time we reported to you. The fund's call protection
is about seven years. Keeping long call protection enhances our ability to
maintain the fund's income for a longer period, since it helps protect against
bond refinancings during times of falling interest rates. Ideally, we believe a
call protection of nine years or more is desirable; however, the current short
supply of issues in the state lessens the opportunity to extend this fund's call
protection.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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1997 Semiannual Report 4 Minnesota Municipal Income Portfolio
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
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WE DO NOT ANTICIPATE MAKING MAJOR STRATEGY CHANGES IN THE COMING MONTHS. We
believe the economy will continue to grow at the moderate pace it has recently
experienced, which should help keep inflation under control and keep the Fed
from raising short-term interest rates. However, if inflation does become a
concern and interest rates do rise, we would look to add income to the fund's
portfolio by purchasing bonds at the higher interest rates. If, on the other
hand, interest rates were to fall from current levels, we feel the fund is
positioned appropriately.
Thank you for investing in Minnesota Municipal Income Portfolio. We remain
committed to providing you with top-quality management and helping you meet
your investment goals.
Sincerely,
/s/ Douglas J. White /s/ Ronald. R. Reuss
Douglas J. White Ronald R. Reuss
Portfolio Manager Portfolio Manager
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WHAT IS PREFERRED STOCK?
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This fund holds preferred stock, which pays dividends at a specified rate and
has preference over common stock in the payments of dividends and the
liquidation of assets. Rates paid on preferred stock are reset every seven days
and are based on short-term, tax-exempt interest rates. Preferred shareholders
accept these short-term rates in exchange for low credit risk (shares of
preferred stock are rated AAA by Moody's and S&P) and high liquidity (shares of
preferred stock trade at par and are remarketed every seven days). The proceeds
from the sale of preferred stock are invested at intermediate- and long-term
tax-exempt rates. Because these intermediate- and long-term rates are normally
higher than the short-term rates paid on preferred stock, common shareholders
benefit by receiving higher dividends and/or an increase to the dividend
reserve. However, the risk of having preferred stock is that if short-term rates
rise higher than intermediate- and long-term rates, creating an inverted yield
curve, common shareholders may receive a lower rate of return than if their fund
did not have any preferred stock outstanding. This type of economic environment
is unusual and historically has been short term in nature. Investors should also
be aware that the issuance of preferred stock results in the leveraging of
common stock, which increases the volatility of both the net asset value of the
fund and, potentially, the market value of shares of common stock.
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1997 Semiannual Report 5 Minnesota Municipal Income Portfolio
<PAGE>
Financial Statements (Unaudited)
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STATEMENT OF ASSETS AND LIABILITIES July 31, 1997
..................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2) ........ $89,593,528
Cash in bank on demand deposit ............................. 552,556
Other assets ............................................... 12,750
Accrued interest receivable ................................ 1,751,234
-----------------
Total assets ............................................. 91,910,068
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LIABILITIES:
Preferred stock dividends payable (note 3) ................. 4,899
Accrued investment management fee .......................... 27,013
Accrued remarketing agent fee .............................. 6,910
Accrued administrative fee ................................. 11,577
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Total liabilities ........................................ 50,399
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Net assets applicable to outstanding capital stock ....... $91,859,669
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COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital (common and
preferred stock)(note 3) ................................. $89,146,706
Undistributed net investment income ........................ 717,636
Accumulated net realized loss on investments ............... (2,613,955)
Unrealized appreciation of investments ..................... 4,609,282
-----------------
Total - representing net assets applicable to capital
stock .................................................. $91,859,669
-----------------
-----------------
* Investments in securities at identified cost ............. $84,984,246
-----------------
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NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to common stock ...................... $60,759,669
Shares of common stock outstanding ......................... 4,146,743
Net asset value ............................................ $ 14.65
Market price ............................................... $ 13.50
LIQUIDATION PREFERENCE OF PREFERRED STOCK:
Net assets applicable to preferred stock ................... $31,100,000
Shares of preferred stock outstanding ...................... 1,244
Liquidation preference per share ........................... $ 25,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 6 Minnesota Municipal Income Portfolio
<PAGE>
Financial Statements (Unaudited) (continued)
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STATEMENT OF OPERATIONS For the Six Months Ended July 31, 1997
..................................................................
<TABLE>
<S> <C>
INCOME:
Interest ................................................... $ 2,607,777
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EXPENSES (NOTE 5):
Investment management fee .................................. 154,938
Administrative fee ......................................... 66,402
Remarketing agent fee ...................................... 39,306
Custodian and accounting fees .............................. 30,266
Transfer agent fees ........................................ 12,971
Reports to shareholders .................................... 14,172
Directors' fees ............................................ 6,096
Audit and legal fees ....................................... 21,760
Other expenses ............................................. 21,340
-----------------
Total expenses ........................................... 367,251
Less expenses paid indirectly .......................... (4,671)
-----------------
Total net expenses ....................................... 362,580
-----------------
Net investment income .................................... 2,245,197
-----------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 39,772
Net change in unrealized appreciation or depreciation of
investments .............................................. 2,659,460
-----------------
Net gain on investments .................................. 2,699,232
-----------------
Net increase in net assets resulting from operations ... $ 4,944,429
-----------------
-----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 7 Minnesota Municipal Income Portfolio
<PAGE>
Financial Statements (continued)
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STATEMENTS OF CHANGES IN NET ASSETS
..................................................................
<TABLE>
<CAPTION>
SIX MONTHS ENDED
7/31/97 YEAR ENDED
(UNAUDITED) 1/31/97
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 2,245,197 $ 4,526,520
Net realized gain on investments ........................... 39,772 435,954
Net change in unrealized appreciation or depreciation of
investments .............................................. 2,659,460 (2,270,499)
----------------- -----------------
Net increase in net assets resulting from operations ..... 4,944,429 2,691,975
----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ..................................... (1,570,579) (3,141,158)
Preferred stock dividends .................................. (538,990) (987,022)
----------------- -----------------
Total distributions ...................................... (2,109,569) (4,128,180)
----------------- -----------------
Total increase (decrease) in net assets .................. 2,834,860 (1,436,205)
Net assets at beginning of period .......................... 89,024,809 90,461,014
----------------- -----------------
Net assets at end of period ................................ $91,859,669 $89,024,809
----------------- -----------------
----------------- -----------------
Undistributed net investment income ........................ $ 717,636 $ 582,008
----------------- -----------------
----------------- -----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 8 Minnesota Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited)
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(1) ORGANIZATION
................................
Minnesota Municipal Income Portfolio Inc. (the fund) is
registered under the Investment Company Act of 1940 (as amended)
as a non-diversified, closed-end management investment company.
The fund invests in a wide range of Minnesota municipal
securities rated investment grade or of comparable quality when
purchased. These securities may include municipal derivative
securities, such as inverse floating rate and inverse
interest-only municipal securities. Fund shares are listed on the
American Stock Exchange under the symbol MXA.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
................................
INVESTMENTS IN SECURITIES
Portfolio securities for which market quotations are readily
available are valued at current market value. If market
quotations or valuations are not available, or if such quotations
or valuations are believed to be inaccurate, unreliable or not
reflective of market value, portfolio securities are valued
according to procedures adopted by the funds' board of directors
in good faith at "fair value", that is, a price that the fund
might reasonably expect to receive for the security or other
asset upon its current sale.
The current market value of certain fixed income securities is
provided by an independent pricing service. Fixed income
securities for which prices are not available from an independent
pricing service but where an active market exists are valued
using market quotations obtained from one or more dealers that
make markets in the securities or from a widely-used quotation
system. Short-term securities with maturities of 60 days or less
are valued at amortized cost, which approximates market value.
Securities transactions are accounted for on the date the
securities are purchased or sold. Realized gains and losses are
calculated on the identified-cost basis. Interest income,
including amortization of bond discount and premium, is recorded
on an accrual basis.
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1997 Semiannual Report 9 Minnesota Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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The fund concentrates its investments in Minnesota and,
therefore, may have more credit risk related to the economic
conditions of Minnesota than portfolios with a broader
geographical diversification.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been purchased by
the fund on a when-issued or forward-commitment basis can take
place a month or more after the transaction date. During this
period, such securities do not earn interest, are subject to
market fluctuation and may increase or decrease in value prior to
their delivery. The fund segregates, with its custodian, assets
with a market value equal to the amount of its purchase
commitments. The purchase of securities on a when-issued or
forward-commitment basis may increase the volatility of the
fund's net asset value if the fund makes such purchases while
remaining substantially fully invested. As of July 31, 1997, the
fund had no outstanding when-issued or forward commitments.
FEDERAL TAXES
The fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and not
be subject to federal income tax. Therefore, no income tax
provision is required. The fund also intends to distribute its
taxable net investment income and realized gains, if any, to
avoid the payment of any federal excise taxes.
Net investment income and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of
market discount amortization. The character of distributions made
during the year from net investment income or net realized gains
may differ from its ultimate characterization for federal income
tax purposes. In addition, due to the timing of dividend
distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gains
(losses) were recorded by the funds.
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1997 Semiannual Report 10 Minnesota Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly for
common shareholders and weekly for preferred shareholders. Common
stock distributions are recorded as of the close of business on
the ex-dividend date and preferred stock dividends are accrued
daily. Net realized gains distributions, if any, will be made at
least annually. Distributions are payable in cash or, for common
shareholders pursuant to the fund's dividend reinvestment plan,
reinvested in additional shares of the fund's common stock. Under
the plan, common shares will be purchased in the open market.
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) REMARKETED
PREFERRED
STOCK
................................
Minnesota Municipal Income Portfolio Inc. has issued and, as of
July 31, 1997, has outstanding 1,244 shares of remarketed
preferred stock (622 shares in class "M" and 622 shares in class
"W") (RP) with a liquidation preference of $25,000 per share. The
dividend rate on the RP is adjusted every seven days (on Mondays
for class "M" and on Wednesdays for class "W"), as determined by
the remarketing agent. On July 31, 1997, the dividend rates were
2.90% and 2.80% for class "M" and "W," respectively.
RP is a registered trademark of Merrill Lynch & Company.
(4) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities, for the six
months ended July 31, 1997, aggregated $14,282,770 and
$15,207,976, respectively.
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1997 Semiannual Report 11 Minnesota Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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(5) EXPENSES
................................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The fund has entered into the following agreements with Piper
Capital Management Incorporated (the adviser and administrator):
The investment advisory agreement provides the adviser with a
monthly investment management fee equal to an annual rate of
0.35% of the fund's average weekly net assets (computed by
subtracting liabilities, which exclude preferred stock, from the
value of the total assets of the fund). For its fee, the adviser
provides investment advice and conducts the management and
investment activities of the fund.
The administration agreement provides the administrator with a
monthly fee in an amount equal to an annual rate of 0.15% of the
fund's average weekly net assets (computed by subtracting
liabilities, which exclude preferred stock, from the value of the
total assets of the fund). For its fee, the administrator
provides reporting, regulatory and record-keeping services for
the fund.
REMARKETING AGENT FEE
The fund has entered into a remarketing agent agreement with
Merrill Lynch, Pierce, Fenner & Smith (the remarketing agent).
The remarketing agreement provides the remarketing agent with a
monthly fee in an amount equal to an annual rate of 0.25% of the
fund's average amount of RP outstanding. For its fee, the
remarketing agent will remarket shares of RP tendered to it on
behalf of shareholders and will determine the applicable dividend
rate for each seven-day dividend period.
OTHER FEES AND EXPENSES
In addition to the investment management, administrative and
remarketing agent fees, the fund is responsible for paying most
other operating expenses including: outside directors' fees and
expenses; custodian fees; registration fees; printing and
shareholder reports; transfer agent fees and expenses; legal,
auditing and accounting services; insurance; interest; taxes and
other miscellaneous expenses.
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1997 Semiannual Report 12 Minnesota Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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Expenses paid indirectly represent a reduction of custodian fees
for earnings on miscellaneous cash balances maintained by the
fund.
(6) CAPITAL LOSS
CARRYOVER
................................
For federal income tax purposes, the fund had capital loss
carryovers at January 31, 1997, which, if not offset by
subsequent capital gains, will expire as indicated below. It is
unlikely the board of directors will authorize a distribution of
any net realized capital gains until the available capital loss
carryovers have been offset or expire.
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYOVER DATE
------------- -----
<S> <C>
$2,238,668 2003
415,059 2004
-------------
$2,653,727
-------------
-------------
</TABLE>
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1997 Semiannual Report 13 Minnesota Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
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(7) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
MINNESOTA MUNICIPAL INCOME PORTFOLIO
<TABLE>
<CAPTION>
Six
Months
Ended Year Ended January 31, Period
7/31/97 -------------------------------- Ended
(Unaudited) 1997 1996 1995 1/31/94(e)
------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning of
period .................................... $13.97 $ 14.32 $ 11.96 $ 14.67 $14.13
------- ------- ------- -------- -------
Operations:
Net investment income ..................... 0.54 1.09 1.06 1.09 0.55
Net realized and unrealized gains (losses)
on investments .......................... 0.65 (0.44) 2.40 (2.74) 0.63
------- ------- ------- -------- -------
Total from operations ................... 1.19 0.65 3.46 (1.65) 1.18
------- ------- ------- -------- -------
Distributions to shareholders from net
investment income:
Paid to common shareholders ............... (0.38) (0.76) (0.82) (0.83) (0.42)
Paid to preferred shareholders ............ (0.13) (0.24) (0.28) (0.23) (0.08)
------- ------- ------- -------- -------
Total distributions to shareholders ..... (0.51) (1.00) (1.10) (1.06) (0.50)
------- ------- ------- -------- -------
Offering costs and underwriting discounts
associated with the remarketed preferred
stock ..................................... -- -- -- -- (0.14)
------- ------- ------- -------- -------
Net asset value, common stock, end of
period .................................... $14.65 $ 13.97 $ 14.32 $ 11.96 $14.67
------- ------- ------- -------- -------
------- ------- ------- -------- -------
Market value, common stock, end of period ... $13.50 $ 12.50 $ 12.88 $ 11.88 $15.50
------- ------- ------- -------- -------
------- ------- ------- -------- -------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ....................................... 7.72% 3.09% 27.27% (12.69)% 6.86%
Total return, common stock, market value
(b) ....................................... 11.18% 3.19% 15.74% (18.11)% 6.18%
Net assets at end of period (in millions) ... $ 92 $ 89 $ 90 $ 81 $ 92
Ratio of expenses to average weekly net
assets .................................... 0.83%(f) 0.82% 0.82% 0.79% 0.69%(f)
Ratio of expenses to average weekly net
assets applicable to common stock ......... 1.27%(f) 1.26% 1.28% 1.27% 1.13%(f)
Ratio of net investment income to total
average weekly net assets ................. 5.07%(f) 5.16% 5.06% 5.54% 4.66%(f)
Ratio of net investment income to average
weekly net assets applicable to common
stock (c) ................................. 5.91%(f) 6.25% 5.81% 7.00% 6.54%(f)
Portfolio turnover rate (excluding short-term
securities) ............................... 17% 25% 13% 49% 55%
Remarketed preferred stock outstanding end of
period (in millions) ...................... $ 31 $ 31 $ 31 $ 31 $ 31
Asset coverage ratio (d) .................... 296% 286% 291% 260% 296%
</TABLE>
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
(b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(c) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY AVERAGE WEEKLY NET
ASSETS APPLICABLE TO COMMON STOCK.
(d) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(e) COMMENCEMENT OF OPERATIONS WAS JUNE 25, 1993.
(f) ANNUALIZED.
- ---------------------------------------------------------------------
1997 Semiannual Report 14 Minnesota Municipal Income Portfolio
<PAGE>
Investments in Securities (Unaudited)
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
MINNESOTA MUNICIPAL INCOME PORTFOLIO July 31, 1997
................................................................................................
Principal Market
Description of Security Amount Value (a)
- ------------------------------------------------------------ --------------- -------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (93.1%):
MUNICIPAL BONDS (89.7%)
EDUCATION REVENUE (9.5%):
Higher Education Facility-Carleton College (Callable
11/01/07 at 100), 5.30%-5.40%, 11/1/13-11/1/14 ....... $ 2,500,000 $ 2,563,465
Higher Education Facility-St. John's University
(Callable 10/01/07 at 100), 5.35%, 10/1/17 ........... 1,500,000 1,506,885
Higher Education Facility-Carleton College (Callable
5/1/06 at 100), 5.75%, 11/1/12 ....................... 2,000,000 2,107,980
Higher Education Facility-Macalester College (Callable
3/1/05 at 100), 5.50%-5.55%, 3/1/12-3/1/16 ........... 500,000 512,728
Higher Education Facility-St. Benedict College (Callable
3/1/04 at 100), 6.20%-6.38%, 3/1/14-3/1/20 ........... 1,050,000 1,104,630
Higher Education Facility-St. Mary's College (Callable
10/1/03 at 101), 6.10%, 10/1/16 ...................... 500,000 520,105
Higher Education Facility-St. Thomas University
(Callable 9/1/03 at 101), 5.50%-5.60%,
9/1/08-9/1/14 ........................................ 430,000 443,303
-------------
8,759,096
-------------
ELECTRIC REVENUE (5.2%):
Western Minnesota Municipal Power Agency (AMBAC)
(Callable 1/1/06 at 102), 5.40%-5.50%,
1/1/09-1/1/12 ........................................ 4,500,000 4,730,255
-------------
GENERAL OBLIGATIONS (28.2%):
Anoka County (Callable 6/1/03 at 102), 6.10%, 6/1/13 ... 500,000 531,915
Burnsville Independent School District (Callable 2/1/06
at 100), 4.88%, 2/1/13 ............................... 2,000,000 1,977,500
Chaska Independent School District (Callable 2/1/06 at
100), 6.00%, 2/1/15 .................................. 2,725,000 2,896,321
Hawley Independent School District (Callable 2/1/06 at
100), 5.75%, 2/1/17 .................................. 1,000,000 1,034,620
Itasca County Minnesota Independent School District
(MBIA) (Callable 2/1/05 at 100), 5.25%, 2/1/11 ....... 2,710,000 2,779,186
Minneapolis General Obligation (Callable 9/1/05 at 100),
5.20%, 3/1/13 ........................................ 3,750,000 3,810,675
Osseo Independent School District, 5.59%, 2/1/13 ....... 2,000,000 2,071,900
Rosemount General Obligation (Callable 4/1/06 at 100),
5.75%, 4/1/13 ........................................ 1,000,000 1,053,590
State General Obligation, 5.00%, 11/1/01 ............... 2,000,000 2,071,800
State General Obligation (Callable 8/1/03 at 100),
5.40%, 8/1/12 ........................................ 4,500,000 4,620,915
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 15 Minnesota Municipal Income Portfolio
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- ------------------------------------------------------------ --------------- -------------
<S> <C> <C>
Wayzata Minnesota Independent School District (Callable
2/1/07 at 100), 5.50%, 2/1/17 ........................ $ 3,000,000 $ 3,064,530
-------------
25,912,952
-------------
HEALTH SERVICE/HMO (1.8%):
Brainerd Health Care Facility (Callable 2/15/03 at 102),
6.00%, 2/15/12 ....................................... 1,060,000 1,125,879
Duluth Clinic Health Care Facilities (AMBAC) (Callable
11/1/02 at 102), 6.30%, 11/1/22 ...................... 500,000 551,977
-------------
1,677,856
-------------
HOSPITAL REVENUE (17.6%):
Breckenridge Health Facility, 5.21%, 11/15/13 .......... 4,120,000 4,177,639
Duluth Health Facility-Benedictine Health System
(Callable 2/15/03 at 102), 6.00%, 2/15/12 ............ 2,800,000 2,963,212
Fergus Falls Health Care-Lake Region Hospital (Callable
9/1/03 at 102), 6.50%, 9/1/18 ........................ 1,000,000 1,053,160
Minneapolis Health Care-Fairview Hospital (MBIA)
(Callable 11/15/03 at 102), 5.25%, 11/15/13 .......... 500,000 506,665
Red Wing Health Care Facility-River Region (Callable
9/1/03 at 102), 6.50%, 9/1/22 ........................ 1,000,000 1,053,160
St. Paul Housing Redevelopment Authority-Healtheast
Project (Callable 11/1/03 at 102), 6.63%, 11/1/17 .... 6,000,000 6,393,060
-------------
16,146,896
-------------
HOUSING REVENUE (14.6%):
Brooklyn Center, Ponds Family Housing Project (Callable
1/1/04 at 102), 5.90%, 1/1/20 ........................ 1,050,000 1,063,125
Burnsville, Summit Park Apartments (Callable 7/1/03 at
102), 5.75%, 7/1/11 .................................. 1,000,000 1,023,550
Coon Rapids, Multifamily Development-Woodland Apts.
(FHA) (Callable 12/1/03 at 100), 5.63%, 12/1/09 ...... 3,265,000 3,314,171
Minneapolis and St. Paul, Housing and Redevelopment
Health Care System-Childrens Health Care (FSA)
(Callable 8/15/05 at 102), 5.70%, 8/15/16 ............ 500,000 520,935
New Hope, Multifamily Housing Project (Callable 1/1/06
at 102), 6.05%, 1/1/17 ............................... 450,000 467,955
St. Louis Park, Multifamily Housing Project (Callable
12/1/04 at 102), 6.15%, 12/1/16 ...................... 500,000 518,530
State Housing and Finance Agency (Callable 1/1/04 at
102), 6.30%, 7/1/25 .................................. 750,000 787,373
State Housing and Finance Agency (Callable 7/1/03 at
102), 5.95%, 1/1/17 .................................. 3,235,000 3,331,435
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 16 Minnesota Municipal Income Portfolio
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- ------------------------------------------------------------ --------------- -------------
<S> <C> <C>
State Housing and Finance Agency (Callable 8/1/03 at
102), 5.70%-6.10%, 8/1/07-8/1/22 ..................... $ 2,325,000 $ 2,397,096
-------------
13,424,170
-------------
IDR - MISCELLANEOUS PROJECTS (0.3%):
Duluth Seaway Port Authority, Cargill Inc. Project
(Callable 12/1/03 at 102), 5.75%, 12/1/16 ............ 300,000(d) 310,629
-------------
LEASING REVENUE (2.4%):
Benton County Jail Facility (FSA) (Callable 2/1/05 at
100), 5.70%, 2/1/13-2/1/16 ........................... 900,000 938,308
Waconia Housing Redevelopment Authority-Public Project
(Callable 1/1/03 at 100), 5.70%-5.75%,
1/1/10-1/1/15 ........................................ 1,240,000 1,264,953
-------------
2,203,261
-------------
MULTIPLE UTILITY REVENUE (2.9%):
Owatonna Public Utility Revenue (AMBAC) (Callable 1/1/04
at 100), 5.45%, 1/1/16 ............................... 2,600,000 2,619,578
-------------
NURSING HOME REVENUE (3.4%):
Red Wing Elderly Housing-River Region (Callable 9/1/03
at 102), 6.50%, 9/1/22 ............................... 1,500,000 1,579,740
Waconia Housing Redevelopment Authority (Callable 6/1/03
at 102), 6.00%, 6/1/14 ............................... 1,500,000 1,557,705
-------------
3,137,445
-------------
SALES TAX REVENUE (0.6%):
Minneapolis Convention Center Facilities (Callable
4/1/04 at 100), 5.40%, 4/1/12 ........................ 500,000 513,810
-------------
WATER/POLLUTION CONTROL REVENUE (3.2%):
Minnesota Public Facilities Authority Water Pollution
Control Revenue (Callable 3/1/06 at 100), 4.75%-5.35%,
3/1/10-3/1/12 ........................................ 2,900,000 2,936,453
-------------
Total Municipal Bonds
(cost: $78,397,693) ............................... 82,372,401
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 17 Minnesota Municipal Income Portfolio
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
MINNESOTA MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- ------------------------------------------------------------ --------------- -------------
<S> <C> <C>
MUNICIPAL DERIVATIVE SECURITIES (3.4%):
INVERSE FLOATER (3.2%):
Duluth Health Facility-Benedictine Health System, Series
E-2, 8.94%, 2/15/12 .................................. $ 925,000(b)(d) $ 1,099,594
Osseo Independent School District (FGIC), 7.93%,
2/1/14 ............................................... 775,000(b)(d) 843,781
Rochester Health Care, 8.67%, 11/15/10 ................. 740,000(b)(d) 955,525
-------------
2,898,900
-------------
INVERSE INTEREST-ONLY (0.2%):
State Housing and Finance Agency, 193.95%, 2/1/15 ...... 9,700,000(b)(d) 222,227
-------------
Total Municipal Derivative Securities
(cost: $2,486,553) ................................ 3,121,127
-------------
Total Municipal Long-Term Securities
(cost: $80,884,246) ............................... 85,493,528
-------------
MUNICIPAL SHORT-TERM SECURITIES (4.4%):
Bloomington, MN, Port Authority, 3.75%, 2/1/09 ......... 400,000(c) 400,000
Bloomington, MN, Port Authority, 3.75%, 2/1/13 ......... 200,000(c) 200,000
Mankato, MN, 3.70%, 2/1/18 ............................. 400,000(c) 400,000
Minneapolis Commercial Development Revenue-International
Centre, 3.70%, 9/1/13 ................................ 150,000(c) 150,000
Minnesota State Higher Education Facilities Authority,
3.75%, 3/1/24 ........................................ 750,000(c) 750,000
Richfield, MN, Independent School District, 3.45%,
2/1/10 ............................................... 1,200,000(c) 1,200,000
Richfield, MN, Independent School District, 3.45%,
2/1/12 ............................................... 1,000,000(c) 1,000,000
-------------
Total Municipal Short-Term Securities
(cost: $4,100,000) ................................ 4,100,000
-------------
Total Investments in Securities
(cost: $84,984,246)(e) ............................ $ 89,593,528
-------------
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 18 Minnesota Municipal Income Portfolio
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) PORTFOLIO DEFINITIONS:
INVERSE FLOATER - REPRESENTS SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) IN THE SAME MAGNITUDE AS, OR IN A MULTIPLE OF, A
DECREASE (INCREASE) IN THE MARKET RATE PAID ON A RELATED, FLOATING
RATE SECURITY. INTEREST RATES DISCLOSED ARE IN EFFECT ON JULY 31,
1997.
INVERSE INTEREST-ONLY - REPRESENTS SECURITIES THAT ENTITLE HOLDERS TO
RECEIVE ONLY INTEREST PAYMENTS. INTEREST IS PAID AT A RATE THAT
INCREASES (DECREASES) WITH A DECREASE (INCREASE) IN THE MARKET RATE
PAID ON A RELATED, FLOATING RATE SECURITY. INTEREST RATE REPRESENTS
YIELD BASED UPON CURRENT INCOME AND COST BASIS.
(c) FLOATING OR VARIABLE RATE OBLIGATION MATURING IN MORE THAN ONE YEAR. THE
INTEREST RATE, WHICH IS BASED ON SPECIFIC, OR AN INDEX OF, MARKET INTEREST
RATES, IS SUBJECT TO CHANGE PERIODICALLY AND IS THE EFFECTIVE RATE ON JULY
31, 1997. THIS INSTRUMENT MAY ALSO HAVE A DEMAND FEATURE WHICH ALLOWS THE
RECOVERY OF PRINCIPAL AT ANY TIME, OR AT SPECIFIED INTERVALS NOT EXCEEDING
ONE YEAR, ON UP TO 30 DAYS' NOTICE. MATURITY DATE SHOWN REPRESENTS FINAL
MATURITY.
(d) SECURITIES PURCHASED AS PART OF A PRIVATE PLACEMENT WHICH HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933 AND ARE CONSIDERED TO BE ILLIQUID. ON JULY 31, 1997, THE TOTAL
MARKET VALUE OF THESE INVESTMENTS WAS $3,431,756 OR 3.74% OF TOTAL NET
ASSETS.
(e) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
GROSS UNREALIZED APPRECIATION ...... $ 4,609,282
GROSS UNREALIZED DEPRECIATION ...... 0
-----------
NET UNREALIZED APPRECIATION ...... $ 4,609,282
-----------
-----------
- ---------------------------------------------------------------------
1997 Semiannual Report 19 Minnesota Municipal Income Portfolio
<PAGE>
Shareholder Update
- ----------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on August
20, 1997. Each matter voted upon at that meeting, as well as the
number of votes cast for, against or withheld, the number of
abstentions, and the number of broker non-votes with respect to
such matters, are set forth below.
(1) The fund's preferred shareholders elected the following
directors:
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- -----------------
<S> <C> <C>
David T. Bennett ................................. 739 4
William H. Ellis ................................. 739 4
</TABLE>
(2) The fund's preferred and common shareholders, voting as a
class, elected the following directors:
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- -----------------
<S> <C> <C>
Jaye F. Dyer ..................................... 2,439,353 30,568
Karol D Emmerich ................................. 2,440,215 29,707
Luella G. Goldberg ............................... 2,439,881 30,041
David A. Hughey .................................. 2,440,215 29,707
George Latimer ................................... 2,437,015 32,907
</TABLE>
(3) The fund's shareholders ratified the selection by a majority
of the independent members of the fund's board of directors
of KPMG Peat Marwick LLP as the independent public
accountants for the fund for the fiscal year ending January
31, 1998. The following votes were cast regarding this
matter:
<TABLE>
<CAPTION>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
------------- --------------- ----------- ---------
<S> <C> <C> <C>
2,451,163 2,957 15,802 --
</TABLE>
- ---------------------------------------------------------------------
1997 Semiannual Report 20 Minnesota Municipal Income Portfolio
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK
- --------------------------------------------------------------------------------
1997 Semiannual Report 21 Minnesota Municipal Income Portfolio
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK
- -------------------------------------------------------------------------------
1997 Semiannual Report 22 Minnesota Municipal Income Portfolio
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK
- -------------------------------------------------------------------------------
1997 Semiannual Report 23 Minnesota Municipal Income Portfolio
<PAGE>
GLOSSARY OF TERMS***
- --------------------------------------------------------------------------------
CALL
Many bonds have "call" provisions. This means the issuer has the right to redeem
outstanding bonds before their scheduled maturity dates. The first dates when
the issuer may "call" bonds are specified in the prospectus.
CALL PROTECTION
Call protection is the length of time during which a security cannot be redeemed
by the issuer. For bonds, long call protection allows a security to maintain its
income stream for a longer period of time by keeping issuers from refinancing
their bonds during times of falling interest rates. At the same time, long call
protection leaves more opportunity for a bond's price to increase in times of
decreasing interest rates.
COUPON
Coupon is the interest rate on a bond that the issuer promises to pay to the
holder until the bond matures or resets its rate. It is expressed as an annual
percentage of face value.
DISCOUNT
Closed-end funds may trade in the market at prices that are equal to, above or
below their net asset value (NAV). When investors purchase or sell shares at a
price that is below current NAV, the shares are said to be trading at a
discount.
EFFECTIVE DURATION
Effective duration estimates how much the value of a security is expected to
change with a given change in interest rates. Longer effective durations
indicate more sensitivity to changes in interest rates. For example, if interest
rates were to increase by 1%, the market value of a bond with an effective
duration of five years would decrease by about 5%, with all other factors being
constant. It is important to remember that effective duration is based on
certain assumptions and has several limitations. It is most effective as a
measure when interest rate changes are small, rapid and occur equally across all
the different points of the yield curve. In addition, effective duration is
difficult to calculate precisely, especially in the case of a bond that is
callable prior to maturity, and can be greatly affected by interest rate
changes.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
1997 Semiannual Report 24 Minnesota Municipal Income Portfolio
<PAGE>
DIRECTORS
- --------------------------------------------------------------------------------
DAVID T. BENNETT, Chairman, Highland Homes, Inc., USL Products, Inc., Kiefer
Built, Inc., of Counsel, Gray, Plant, Mooty, Mooty & Bennett, P.A.
JAYE F. DYER, President, Dyer Management Company
WILLIAM H. ELLIS, President, Piper Jaffray Companies Inc., Piper Capital
Management Incorporated
KAROL D. EMMERICH, President, The Paraclete Group
LUELLA G. GOLDBERG, Director, TCF Financial, ReliaStar Financial Corp., Hormel
Foods Corp.
DAVID A. HUGHEY, Retired Executive Vice President and Chief Administrative
Officer of Dean Witter InterCapital Inc. and Dean Witter Trust Co.
GEORGE LATIMER, Chief Executive Officer, National Equity Funds
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM H. ELLIS, Chairman of the Board
PAUL A. DOW, President
ROBERT H. NELSON, Vice President and Treasurer
SUSAN SHARP MILEY, Secretary
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
PIPER CAPITAL MANAGEMENT INCORPORATED
222 South Ninth Street, Minneapolis, MN 55402-3804
CUSTODIAN, ACCOUNTING AND TRANSFER AGENT
- --------------------------------------------------------------------------------
Investors Fiduciary Trust Company
127 West 10th Street, Kansas City, MO 64105-1716
LEGAL COUNSEL
- --------------------------------------------------------------------------------
DORSEY & WHITNEY LLP
220 South Sixth Street, Minneapolis, MN 55402
FOR MORE INFORMATION
BY PHONE [GRAPHIC]
1 800 866-7778
FOR GENERAL INFORMATION
press 5, our Mutual Fund Services representatives are ready to answer your
questions.
TO ORDER LITERATURE
press 5, ask a service representative to mail you additional literature,
including a Quarterly Update. You can also request to be put on a mailing list
to receive this information automatically each quarter.
BY MAIL [GRAPHIC]
Piper Capital Management
Attn: Mutual Fund Services
222 South Ninth Street
Minneapolis, MN 55402-3804
In an effort to reduce costs to our shareholders, we have implemented a process
to reduce duplicate mailings of the fund's shareholder reports. This
householding process should allow us to mail one report to each address where
one or more registered shareholders with the same last name reside. If you would
like to have additional reports mailed to your address, please call our Mutual
Fund Services area at 1 800 866-7778, or mail a request to us.
ON-LINE [GRAPHIC]
http://www.piperjaffray.com/
<PAGE>
[LOGO]
PIPER CAPITAL MANAGEMENT INCORPORATED
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3084
[LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM 100% TOTAL RECOVERED FIBER,
INCLUDING 15% POST-CONSUMER WASTE.
#21420 9/1997 237-9
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