<PAGE>
ADJUSTABLE RATE
MORTGAGE
SECURITIES
FUND
1996
SEMIANNUAL REPORT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders.................2
Investments in Securities..............5
Financial Statements and Notes.........6
</TABLE>
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
Adjustable Rate Mortgage Securities Fund is a diversified, open-end mutual
fund with an investment objective of providing the maximum current income
that is consistent with low volatility of principal. The fund invests
primarily in adjustable rate mortgage (ARM) securities. It may also invest in
mortgage-backed securities other than ARM securities, U.S. government
securities, asset-backed securities and corporate debt securities. The fund's
Nasdaq symbol is PJARX. As with other mutual funds, there can be no assurance
the fund will achieve its objective.
CALL TO RECEIVE QUARTERLY UPDATES
If you would like to be put on our mailing list to receive quarterly fund
summaries for Adjustable Rate Mortgage Securities Fund, call our Shareholder
Services Department at 1 800 866-7778.
THIS REPORT IS INTENDED FOR SHAREHOLDERS OF ADJUSTABLE RATE MORTGAGE
SECURITIES FUND, BUT IT MAY ALSO BE USED AS SALES LITERATURE IF PRECEDED OR
ACCOMPANIED BY A PROSPECTUS. THE PROSPECTUS GIVES DETAILS ABOUT THE CHARGES,
INVESTMENT RESULTS AND OPERATING POLICIES OF THE FUND.
<PAGE>
SHAREHOLDER SERVICES
AS A SHAREHOLDER IN PIPER FUNDS, YOU HAVE ACCESS TO A FULL RANGE OF SERVICES
AND BENEFITS. IF YOU HOLD YOUR FUND SHARES THROUGH A BROKER/DEALER OTHER THAN
PIPER JAFFRAY, THESE SERVICES MAY NOT BE AVAILABLE TO YOU. CHECK YOUR
PROSPECTUS FOR DETAILS ABOUT SERVICES AND ANY LIMITATIONS THAT MIGHT APPLY TO
YOUR FUND.
LOW MINIMUM INVESTMENTS
You can open most Piper mutual fund accounts with a minimum investment of $250.
QUANTITY DISCOUNTS
If your initial investment exceeds a specified amount, if an investment
combined with the value of your existing Piper shares exceeds a specified
amount, or if your investments combined during a 13-month period exceed a
specified amount, you can reduce or even eliminate the front-end sales charge.
WAIVER OF SALES CHARGES
Money market funds carry no sales charges.* Sales charges on other Piper
funds are waived on purchases of $500,000 or more. However, a contingent
deferred sales charge may be imposed. See your prospectus for details.
AUTOMATIC REINVESTMENT OF DIVIDENDS
For maximum growth of your assets, you can reinvest dividends and capital
gains automatically in additional shares of your fund without a sales charge.
CROSS-REINVESTMENT OF DISTRIBUTIONS
Diversify your holdings by reinvesting dividends and capital gains from one
Piper fund into another.
CASH DISTRIBUTIONS
If you prefer, take your dividends and/or capital gains in cash.
AUTOMATIC MONTHLY INVESTMENT PROGRAM
You may automatically transfer $25 or more each month from any Piper money
market fund into many other Piper funds.*
AUTOMATIC MONTHLY MONEY TRANSFER PROGRAM
If you are starting a savings discipline or seeking a convenient way to
invest, you can transfer a minimum of $100 automatically from your bank,
savings and loan or other financial institution into many of the Piper funds.
EXCHANGE PRIVILEGES
Revise your investment plan without incurring a sales charge by moving assets
from one Piper fund to another with the same fee structure. See your
prospectus for restrictions involving exchanges between funds with different
sales charges.
REINVESTMENT PRIVILEGES
If you buy a fund with a sales charge and later redeem your shares, you may
reinvest all or part of the proceeds in shares of that fund or another Piper
fund within 30 days and pay no additional sales charge, subject to each
fund's minimum investment requirements.
SYSTEMATIC WITHDRAWAL PLAN
If your account has a value of $5,000 or more, you can elect to receive
periodic payments of $100 or more, at no cost, excluding money market funds.
ACCOUNT STATEMENTS
Whenever you add to or withdraw money from your account, you'll receive a
monthly statement from Piper Jaffray. Accounts with no activity receive a
quarterly statement instead. Periodic dividend and capital gain
distributions, if any, also appear on your statement.
CONFIRMATION OF TRANSACTIONS
You receive a confirmation statement following every transaction, except in
the money market funds. All transactions are reflected on your account
statement.
$25 MILLION SHAREHOLDER PROTECTION
If you have a Piper Jaffray PRIME or PAT account, you are protected up to $25
million in the unlikely event that Piper Jaffray were to fail financially.
This is in addition to basic Securities Investor Protection Corporation
(SIPC) coverage, which protects up to $500,000 in cash and securities
($100,000 in cash only) per customer. This protection does not cover market
loss.
* AN INVESTMENT IN A PIPER MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1 PER SHARE.
1
<PAGE>
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
[PHOTO TOM MCGLINCH]
FPO
65%
[PHOTO WAN-CHONG KUNG]
FPO
52%
TOM MCGLINCH
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF ADJUSTABLE RATE MORTGAGE
SECURITIES FUND. HE HAS 15 YEARS OF INVESTMENT EXPERIENCE.
WAN-CHONG KUNG
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF ADJUSTABLE RATE MORTGAGE
SECURITIES FUND. SHE HAS FOUR YEARS OF INVESTMENT EXPERIENCE.
PORTFOLIO COMPOSITION
FEBRUARY 29, 1996
[CHART]
U.S. Agency ARM Securities 69%
Short-Term 1%
U.S. Treasuries 11%
U.S. Agency Fixed Rate Mortgage-Backed Securities 2%
Privately Issued ARM Securities 16%
Other Assets 1%
INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.
April 17, 1996
Dear Shareholders:
FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 29, 1996, ADJUSTABLE RATE MORTGAGE
SECURITIES FUND HAD A TOTAL RETURN OF 3.51%* which includes reinvested
distributions but not the fund's sales charge. The fund's emphasis on
high-quality securities helped it outperform the Lipper Adjustable Rate
Mortgage Funds Average return of 1.31% for the same period. The fund
performed in line with the Lehman Brothers Adjustable Rate Mortgage Index
which returned 3.92% for the same six-month period. The slight outperformance
by the Lehman index resulted from its larger allocation to Government
National Mortgage Association (GNMA) securities and securities with coupon
rates that reset to the Cost of Funds Index (COFI). Although these securities
typically experience greater price appreciation during periods of falling
interest rates such as we experienced for most of the six-month period, they
produce less income than the higher-coupon issues held by the fund.
THE FUND'S NET ASSET VALUE HAS EXPERIENCED LITTLE VOLATILITY SINCE IT WAS
BROUGHT OUT AT $8.00 PER SHARE AFTER THE MERGER OF THE FOUR TERM TRUSTS. Over
the last six months, interest rates generally declined as the Federal Reserve
lowered the fed funds rate once in December from 5.75% to 5.50%, and another
time in January from 5.50% to 5.25% to try to stimulate the economy. The rate
cuts helped to move short-term interest rates lower which in turn increased
the prices of ARM securities. This was reflected in a modest rise in the net
asset value of Adjustable Rate Mortgage Securities Fund to a high of $8.08 on
February 2. However, we positioned the fund to emphasize income more than an
increase in net asset value as we expected the Federal Reserve to ease rates
much less aggressively than did the market in general. This strategy paid off
in February when the bond market realized it had effectively
"overanticipated" the number of rate cuts the Federal Reserve would make and
rates began to rise. In late February, the net asset value of the fund
dropped only slightly and is currently $8.03 as of April 17.
SINCE THE MERGER LAST FALL, WE HAVE FOCUSED OUR EFFORTS ON IMPROVING THE
LEVEL AND PREDICTABILITY OF DIVIDEND INCOME TO SHAREHOLDERS. The lower rate
environment throughout most of the period decreased the interest rates on
mortgages, causing investors in ARM securities to experience a gradual
reduction in coupon income as the underlying mortgage loans reset. We took
steps to extend the average number of
* FIGURES SHOWN REFLECT PAST PERFORMANCE AND DO 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.
2
<PAGE>
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
[CHART]
Adjustable Rate Mortgage Securities Fund (Results include historical net
asset value performance of American Adjustable Rate Term Trust--1998, assume
reinvested distribution and reflect the funds 1.5% sales charge since
inception)
Lehman Brothers Adjustable Rate Mortgage Index, an unmanaged index of all
U.S. agency adjustable rate mortgage securities
Lipper Adjustable Rate Mortgage Funds Average, the average total return, with
distributions reinvested, of similar funds as characterized by Lipper
Analytical Services
IF YOU HAD INVESTED $10,000 IN JANUARY 1992 AND HELD YOUR INVESTMENT THROUGH
FEBRUARY 29, 1996, REINVESTING ALL DISTRIBUTIONS, YOUR INVESTMENT WOULD HAVE
GROWN TO $11,690. IN COMPARING THE FUND TO THE LEHMAN BROTHERS INDEX AND THE
LIPPER AVERAGE, KEEP IN MIND THAT THE FUND'S PERFORMANCE REFLECTS THE SALES
CHARGE, WHILE NO SUCH CHARGES ARE REFLECTED IN THE INDEX OR THE AVERAGE. PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
AVERAGE ANNUAL TOTAL RETURNS
THROUGH 2/29/96, INCLUDING 1.5% SALES CHARGE
<TABLE>
<S> <C>
One Year..............................6.26%
Since Inception (1/30/92).............3.90%
</TABLE>
FUND RESULTS INCLUDE REINVESTED DISTRIBUTIONS AND REFLECT THE ADJUSTABLE RATE
MORTGAGE SECURITIES FUND'S MAXIMUM 1.5% SALES CHARGE AS IF IT WAS APPLIED
SINCE THE FUND'S INCEPTION. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE
RESULTS.
ON SEPTEMBER 1, 1995, FOUR AMERICAN ADJUSTABLE RATE TERM TRUSTS MERGED INTO
THE ADJUSTABLE RATE MORTGAGE SECURITIES FUND. ALL PERFORMANCE RESULTS ABOVE
INCLUDE THE HISTORICAL NET ASSET VALUE PERFORMANCE THROUGH SEPTEMBER 1, 1995,
OF AMERICAN ADJUSTABLE RATE TERM TRUST-1998, THE FUND'S PREDECESSOR FOR
PERFORMANCE AND FINANCIAL REPORTING PURPOSES.
months for coupons to reset by increasing the fund's allocation to GNMA ARM
securities. These securities have coupons ranging from 6.0% to 7.38% that
won't reset until the fourth quarter of 1996. In addition, we overweighted
ARM securities indexed to the one-year Constant Maturity Treasury, which
reset less frequently than LIBOR-based or Treasury bill-based ARM securities.
The lower rates also caused many adjustable rate mortgage borrowers to prepay
their mortgages and lock in a lower rate with fixed rate mortgages. This
level of prepayments also reduced the fund's income level. That's because the
fund purchased many of these mortgages at premium prices and the prepayments
forced the fund to amortize these premiums more quickly. We reduced the
fund's exposure to prepayments by selling higher cost, faster prepaying ARM
securities for lower cost, slower prepaying ARM securities.
THESE ACTIONS, IN ADDITION TO A SMALLER CASH POSITION IN THE FUND, HAVE
RESULTED IN A HIGHER LEVEL OF DIVIDEND INCOME TO SHAREHOLDERS. The dividend
has increased from the September 1995 level of $0.0340 per share to the March
1996 level of $0.0403 per share. The dividend policy for the fund is to
distribute to shareholders substantially all of the investment income earned
during any period. Therefore, we will not attempt to stabilize monthly
distributions by retaining income in a dividend reserve.
THE FUND IS STILL EXPERIENCING REDEMPTIONS THAT BEGAN AFTER THE MERGER LAST
FALL. We have continued to meet redemption requests without disruption to the
fund's net asset value or income. This has been accomplished by maintaining a
small cash position in the fund at all times and by selling privately issued
and U.S. government agency ARM securities or U.S. Treasury securities when
necessary.
THROUGHOUT MOST OF THE SEMIANNUAL PERIOD, THE FUND MAINTAINED A HIGH
PERCENTAGE IN ARM SECURITIES. We believed they represented a good value when
comparing their level of income to their price stability. As of February 29,
85% of the fund's total assets were invested in ARM securities (see pie chart
on page 2), with 69% issued by a U.S. government agency and 16% privately
issued and rated AAA or AA by Standard and Poor's. Nearly all of these ARM
securities had coupons which were indexed to the one-year Constant Maturity
Treasury yield and which reset on an annual basis.
3
<PAGE>
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
WHAT ARE ADJUSTABLE RATE MORTGAGE (ARM) SECURITIES?*
An ARM security represents ownership in a pool of adjustable rate mortgage
loans. Payments on the ARM securities come from payments on the adjustable
rate mortgages. When a borrower's mortgage rate resets to a higher (lower)
rate due to changes in a market index, the coupon on the ARM security also
resets to a higher (lower) level. This results in a larger (smaller) interest
payment that is then passed through to investors. The borrower's loan
document specifically states the dates on which the rate will change, the
market index on which the new rate is based, and the margin by which the rate
is set over the index rate. For example, many borrowers have loans indexed to
the one-year Treasury rate plus a margin of 2.75%, which reset once a year.
If, on the reset date, the one-year Treasury rate is 5.50%, the borrower's
new rate for the following 12 months will increase to 8.25%. Likewise, the
rate passed through to the investor will increase to 8.25% minus a mortgage
servicer and guarantee fee. Almost all ARM loans have periodic reset caps and
lifetime caps, which limit how often and how high rates can reset. Smaller
periodic caps and lower lifetime caps work to the advantage of the borrower
and to the disadvantage of the investor when rates are rising. Although ARM
pools are made up of thousands of similarly indexed loans, in any particular
month only a portion of the loans reset to a current market rate, creating
lags in the adjustment process.
* ARM SECURITIES ARE DEFINED MORE BROADLY IN THE FUND'S PROSPECTUS. PLEASE
SEE THE PROSPECTUS FOR A COMPLETE DEFINITION.
RECENT VOLATILITY IN THE BOND MARKET HAS CAUSED US TO REDUCE THE ARM
SECURITIES PORTION OF THE FUND BY ABOUT 5% AND PURCHASE TWO-YEAR U.S.
TREASURY NOTES. This volatility, and higher rates, were the result of good
economic data concerning job growth that came out in March and April.
Positive job growth data and a stronger economy reignite inflation concerns,
which in turn cause rates to rise.
LOOKING AHEAD, WE EXPECT A RELATIVELY STABLE INTEREST RATE ENVIRONMENT
THROUGH THE FUND'S FISCAL YEAR END IN AUGUST. The higher interest rates we're
experiencing, and the additional income that now comes from extending
maturities, could lead to opportunities in fixed rate securities and a
reduction in the percentage of ARM securities the fund holds.
SINCE WE LAST REPORTED TO YOU IN OCTOBER, WE HAVE ADDED A NEW PORTFOLIO
MANAGER TO THE FUND. Wan-Chong Kung joined the fund as a co-manager in
December. Wan-Chong, a vice president and fixed income portfolio manager at
Piper Capital Management, also assists with the management of Highlander
Income Fund and several separately managed accounts. Prior to joining Piper
Capital in 1993, Wan-Chong was a senior consultant for a financial services
firm. She has four years of financial experience. Mike Jansen, who previously
co-managed the fund, has left Piper Capital to pursue other career
opportunities.
Thank you for your investment in the Adjustable Rate Mortgage Securities
Fund. We remain committed to providing you with top-quality investment
management and service.
Sincerely,
[sig]
Tom McGlinch
Portfolio Manager
4
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
ADJUSTABLE RATE MORTGAGE SECURITIES FUND
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT SECURITIES (10.7%):
U.S. Treasury Note, 6.38%, 6/30/97 ................. $ 10,000,000 10,136,100
U.S. Treasury Note, 6.00%, 11/30/97 .................. 23,000,000 23,218,500
U.S. Treasury Note, 6.63%, 3/31/97 ................... 7,500,000 7,606,200
-----------
Total U.S. Government Securities
(cost: $40,937,953) ............................... 40,960,800
-----------
MORTGAGE-BACKED SECURITIES (87.7%):
U.S. Agency Fixed Rate Mortgages (1.8%):
10.00%, FNMA, 12/1/21 ................................ 2,205,323 2,426,517
9.00%, GNMA, 5/15/16 ................................. 1,272,415 1,359,868
10.00%, GNMA, 2/15/25 ................................ 2,876,741 3,180,554
-----------
6,966,939
-----------
U.S. Agency Adjustable Rate Mortgages (67.4%):
7.95%, FHLMC, 2/1/22 ................................. 14,279,780 14,768,148
8.01%, FHLMC, 9/1/22 ................................. 4,485,622 4,602,651
7.50%, FHLMC, 11/1/16 ................................ 8,889,192 9,066,709
8.00%, FHLMC, 5/1/17 ................................. 3,199,579 3,252,979
7.73%, FHLMC, 6/1/18 ................................. 1,816,259 1,870,638
7.74%, FHLMC, 1/1/21 ................................. 5,230,181 5,340,643
7.72%, FHLMC, 5/1/19 ................................. 1,841,215 1,877,910
7.77%, FHLMC, 10/1/18 ................................ 6,029,254 6,197,712
7.71%, FHLMC, 8/1/20 ................................. 9,633,482 9,866,420
7.69%, FNMA, 1/1/18 .................................. 1,876,024 1,940,165
7.71%, FNMA, 1/1/29 .................................. 3,362,914 3,453,276
7.40%, FNMA, 5/1/18 .................................. 6,690,528 6,827,282
7.33%, FNMA, 3/1/28 .................................. 9,239,020 9,430,637
7.43%, FNMA, 7/1/19 .................................. 2,572,057 2,626,276
7.30%, FNMA, 11/1/17 ................................. 8,863,650 8,981,270
7.81%, FNMA, 1/1/20 .................................. 1,812,091 1,865,185
7.55%, FNMA, 12/1/20 ................................. 7,062,010 7,220,834
7.49%, FNMA, 11/1/21 ................................. 6,319,834 6,466,960
7.33%, FNMA, 10/1/25 ................................. 7,405,840 7,479,899
7.00%, GNMA, 5/20/23 ................................. 10,130,390 10,273,633
7.25%, GNMA, 9/20/23 ................................. 8,020,783 8,150,158
7.00%, GNMA, 6/20/24 ................................. 9,627,184 9,791,423
6.50%, GNMA, 9/20/25 ................................. 14,639,769 14,928,026
6.00%, GNMA, 8/20/25 ................................. 21,155,800 21,411,574
6.00%, GNMA, 9/20/25 ................................. 21,152,554 21,408,712
7.00%, GNMA II, 7/20/22 .............................. 7,667,352 7,800,074
7.25%, GNMA II, 7/20/22 .............................. 10,943,011 11,164,716
7.00%, GNMA II, 6/20/22 .............................. 7,710,315 7,818,414
7.38%, GNMA II, 6/20/23 .............................. 16,515,271 16,784,635
7.00%, GNMA II, 8/20/21 .............................. 6,916,383 7,056,370
7.00%, GNMA II, 10/20/21 ............................. 6,772,966 6,914,047
-----------
256,637,376
-----------
Collateralized Mortgage Obligations (b) (18.5%):
U.S. Agency Floating Rate (2.3%):
4.88%, FHLMC 1693, Class FA, Treasury, 3/15/09 ....... 9,139,139 8,789,568
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
Private Floating Rate (16.2%):
7.79%, Donaldson, Lufkin and Jenrette, Series
1992-MF3, Class A3, LIBOR, 6/18/07 ................ $ 13,000,000 13,130,000
8.16%, Resolution Trust Corporation, Series 1991-8,
Class A1, Treasury, 12/25/20 ........................ 11,002,561 11,105,710
7.85%, Resolution Trust Corporation, Series 1992-6,
Class B3, Treasury, 1/25/26 ......................... 23,345,266 23,491,174
7.15%, Sears Mortgage Securities, Series 1991-K, Class
A1, LIBOR, 9/25/21 .................................. 13,776,414 13,776,414
-----------
61,503,298
-----------
Total Mortgage-Backed Securities
(cost: $335,964,435) .............................. 333,897,181
-----------
SHORT-TERM SECURITIES (1.4%):
Repurchase agreement with Goldman Sachs in a joint
trading account collateralized by U.S. government
agency securities, acquired on 2/29/96, accrued
interest at repurchase date of $803, 5.42%, 3/1/96
(cost: $5,331,000) .................................. 5,331,000 5,331,000
-----------
Total Investments in Securities (99.8%)
(cost: $382,233,388) (c) .......................... 380,188,981
-----------
Other assets in excess of liabilities (0.2%) ....... 599,523
-----------
Net assets (100.0%) ............................... $ 380,788,504
-----------
-----------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) DESCRIPTIONS OF CERTAIN COLLATERALIZED MORTGAGE OBLIGATIONS ARE AS FOLLOWS:
LIBOR - LONDON INTERBANK OFFERED RATE.
FLOATING RATE - REPRESENT SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) WITH AN INCREASE (DECREASE) IN A SPECIFIED INDEX.
(C) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 631,844
GROSS UNREALIZED DEPRECIATION ...... (2,676,251)
----------
NET UNREALIZED DEPRECIATION .... $ (2,044,407)
----------
----------
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (including a
repurchase agreement of $5,331,000) (note 2) ......... $ 380,188,981
Cash in bank on demand deposit ........................... 26,385
Mortgage security paydowns receivable .................... 958,307
Accrued interest receivable .............................. 3,052,533
----------------
Total assets ......................................... 384,226,206
----------------
LIABILITIES:
Dividends payable to shareholders ($0.0407 per share) .... 1,924,914
Payable for fund shares redeemed ......................... 1,244,988
Accrued investment management fee ........................ 109,211
Accrued distribution fee ................................. 158,589
----------------
Total liabilities .................................... 3,437,702
----------------
Net assets applicable to outstanding capital stock ....... $ 380,788,504
----------------
----------------
REPRESENTED BY:
Capital stock - authorized 1 billion shares of $0.01 par
value; outstanding, 47,281,277 shares ................ $ 472,813
Additional paid-in capital ............................... 526,223,960
Undistributed net investment income ...................... 57,012
Accumulated net realized loss on investments ............. (143,920,874)
Unrealized depreciation of investments ................... (2,044,407)
----------------
Total - representing net assets applicable to
outstanding capital stock ........................ $ 380,788,504
----------------
----------------
Net asset value per share of outstanding capital stock ... $ 8.05
----------------
----------------
* Investments in securities at identified cost ........... $ 382,233,388
----------------
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 1996
<TABLE>
<S> <C>
INCOME:
Interest ............................................... $ 17,006,142
----------------
EXPENSES (NOTE 3):
Investment management fee ................................ 916,089
Distribution fees ........................................ 395,218
Custodian, accounting and transfer agent fees ............ 463,088
Shareholder account servicing fees ....................... 21,055
Registration fees ........................................ 69,631
Reports to shareholders .................................. 54,111
Directors' fees .......................................... 17,603
Audit and legal fees ..................................... 26,751
Other expenses ........................................... 29,844
----------------
Total expenses ....................................... 1,993,390
Less expenses waived by the adviser ...................... (375,349)
----------------
Net expenses before expenses paid indirectly ........... 1,618,041
Less expenses paid indirectly ............................ (9,013)
----------------
Total net expenses ................................... 1,609,028
----------------
Net investment income ................................ 15,397,114
----------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized loss on investments (note 4) ................ (1,876,436)
Net change in unrealized appreciation or depreciation of
investments ............................................ 6,268,848
----------------
Net gain on investments ................................ 4,392,412
----------------
Net increase in net assets resulting from
operations ....................................... $ 19,789,526
----------------
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
2/29/96 Year Ended
(Unaudited) 8/31/95*
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 15,397,114 23,499,426
Net realized loss on investments ......................... (1,876,436) (20,761,474)
Net change in unrealized appreciation or depreciation of
investments . 6,268,848 17,558,315
---------------- ----------------
Net increase in net assets resulting from operations ... 19,789,526 20,296,267
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............................... (15,340,102) (27,746,007)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of 344,857 shares .................... 2,765,136 --
Proceeds from issuance of 959,489 shares for reinvestment
of distributions ....................................... 7,705,791 --
Payments for 105,492,397 shares redeemed ................. (845,180,658) --
Payments for retirement of 488,000 shares (note 6) ....... -- (3,579,372)
Payments for tender of 9,135,819 shares respectively (note
7) ..................................................... -- (79,726,515)
Net asset value of 104,403,211 shares issued in connection
with merger transaction** (note 9) ..................... 801,742,686 --
---------------- ----------------
Decrease in net assets from capital share
transactions ......................................... (32,967,045) (83,305,887)
---------------- ----------------
Total decrease in net assets ......................... (28,517,621) (90,755,627)
Net assets at beginning of period .......................... 409,306,125 500,061,752
---------------- ----------------
Net assets at end of period .............................. $ 380,788,504 409,306,125
---------------- ----------------
---------------- ----------------
Undistributed net investment income ...................... $ 57,012 --
---------------- ----------------
---------------- ----------------
</TABLE>
* REPRESENTS HISTORICAL FINANCIAL INFORMATION OF AMERICAN
ADJUSTABLE RATE TERM TRUST 1998.
** INCLUDES 100,218,356 SHARES ISSUED IN CONNECTION WITH THE
MERGER OF AMERICAN ADJUSTABLE RATE TERM TRUST 1996, AMERICAN
ADJUSTABLE RATE TERM TRUST 1997 AND AMERICAN ADJUSTABLE RATE
TERM TRUST 1999, AND AN INCREASE OF 4,184,855 SHARES DUE TO
THE DIFFERENCE BETWEEN THE ENDING NET ASSET VALUE PER SHARE
OF AMERICAN ADJUSTABLE RATE TERM TRUST 1998 AND THE INITIAL
NET ASSET VALUE PER SHARE OF THE FUND.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION
Piper Funds Inc. - II (the company) was
incorporated on April 10, 1995 and is
registered under the Investment Company Act of
1940 (as amended) as a single, open-end
investment management company. The company
currently includes only the Adjustable Rate
Mortgage Securities Fund (the fund), which is
classified as a diversified fund. The
company's articles of incorporation permit the
board of directors to create additional funds
in the future.
The fund invests primarily in adjustable rate
mortgage (ARM) securities. It may also invest
in mortgage-backed securities other than ARM
securities, U.S. government securities,
asset-backed securities and corporate debt
securities.
For financial reporting purposes, American
Adjustable Rate Term Trust 1998 (DDJ) (a
closed-end fund) is considered the surviving
entity of the merger of American Adjustable
Rate Term Trust 1996 (BDJ), American
Adjustable Rate Term Trust 1997 (CDJ),
American Adjustable Rate Term Trust 1998 (DDJ)
and American Adjustable Rate Term Trust 1999
(EDJ) into Piper Funds Inc. - II Adjustable
Rate Mortgage Securities Fund, which was
effective September 1, 1995. As such, only
historical financial information of DDJ is
relevant with respect to the future financial
reporting of Piper Funds Inc. - II Adjustable
Rate Mortgage Securities Fund.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
INVESTMENTS IN SECURITIES
The values of fixed income securities are
determined using pricing services or prices
quoted by independent brokers. Exchange-listed
options are valued at the last sale price and
open financial futures contracts are valued at
the last settlement price. When market
quotations are not readily available,
securities are valued at fair value according
to methods selected in good faith by the board
of directors. Short-term securities with
maturities of 60 days or less are valued at
amortized cost which approximates market
value.
Securities transactions are accounted for on
the date the securities are purchased or sold.
Realized gains and losses are calculated on
the identified-cost basis. Interest income,
including amortization of bond discount and
premium computed on a level-yield basis, is
accrued daily.
OPTION TRANSACTIONS
For hedging purposes, the fund may purchase
and write put and call options which are
exchange-traded and cannot write call options
that are not covered. The risk in writing a
call option is that the fund gives up the
opportunity for profit if the market price of
the security increases. The risk in writing a
put option is that the fund may incur a loss
if the market price of the security decreases
and the option is exercised. The risk in
buying an option is that the fund pays a
premium whether or not the option is
exercised. The fund also has the additional
risk of not being able to enter into a closing
transaction if a liquid secondary market does
not exist.
Option contracts are valued daily, and
unrealized appreciation or depreciation is
recorded. The fund will realize a gain or loss
upon expiration or closing of the option
transaction. When an option is exercised, the
proceeds on sales for a written call option,
the purchase cost for a written put option, or
the cost of a security for a purchased put or
call option is adjusted by the amount of
premium received or paid.
9
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FUTURES TRANSACTIONS
In order to gain exposure to or protect
against changes in the market, the fund may
buy and sell interest rate futures contracts
and related options. Risks of entering into
futures contracts and related options include
the possibility of an illiquid market and that
a change in the value of the contract or
option may not correlate with changes in the
value of the underlying securities.
Upon entering into a futures contract, the
fund is required to deposit either cash or
securities in an amount (initial margin) equal
to a certain percentage of the contract value.
Subsequent payments (variation margin) are
made or received by the fund each day. The
variation margin payments are equal to the
daily changes in the contract value and are
recorded as unrealized gains and losses. The
fund recognizes the realized gain or loss when
the contract is closed or expires.
INTEREST RATE TRANSACTIONS
To preserve a return or spread on a particular
investment or portion of its portfolio or for
other non-speculative purposes, the fund may
purchase and sell interest rate caps and
floors. The purchase of an interest rate cap
entitles the purchaser, to the extent that a
specified index exceeds a predetermined
interest rate, to receive payments of interest
on a contractually based notional principal
amount from the party selling the interest
rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent
that a specified index falls below a
predetermined interest rate, to receive
payments of interest on a contractually based
notional principal amount from the party
selling the interest rate floor.
If forecasts of interest rates and other
market factors are incorrect, investment
performance will diminish compared to what
performance would have been if these
investment techniques were not used. Even if
the forecasts are correct, there is risk that
the positions may correlate imperfectly with
the asset or liability being hedged. Other
risks of entering into these transactions are
that a liquid secondary market may not always
exist, or that another party to a transaction
may not perform.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have
been purchased by the fund on a
forward-commitment or when-issued basis can
take place one month or more after the
transaction date. During this period, such
securities do not earn interest, are subject
to market fluctuations and may increase or
decrease in value prior to their delivery. The
fund maintains, in a segregated account with
its custodian, cash or securities 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 NAV to the extent the
fund makes such purchases while remaining
substantially fully invested. As of February
29, 1996, the fund had no outstanding
when-issued or forward commitments.
FEDERAL TAXES
The fund's policy is 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.
Net investment income and net realized gains
(losses) may differ for financial statement
and tax purposes primarily because of the
recognition of certain foreign currency gains
(losses) as ordinary income for tax purposes,
and losses deferred due to "wash sale" and
"straddle" transactions. The character of
distributions made during the year from net
investment income or net realized gains may
differ from their ultimate characterization
for federal income tax purposes. Also, due to
the
10
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
timing of dividend distributions, the fiscal
year in which amounts are distributed may
differ from the year that the income or
realized gains (losses) were recorded by the
fund.
DISTRIBUTIONS
Distributions to shareholders from net
investment income for the fund will be
declared daily and paid monthly in cash or
reinvested in additional shares. Distributions
from net realized gains, if any, will be made
on at least an annual basis.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with
certain broker-dealers, the fund, along with
other affiliated registered investment
companies may transfer uninvested cash
balances into a joint trading account, the
daily aggregate of which is invested in
repurchase agreements secured by U.S.
government and agency obligations. Securities
pledged as collateral for all individual and
joint repurchase agreements are held by the
fund's custodian bank until maturity of the
repurchase agreements. Provisions for all
agreements ensure the daily market value of
the collateral is in excess of the repurchase
amount in the event of default.
USE OF ESTIMATES
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities,
the disclosure of contingent assets and
liabilities at the date of the financial
statements, and the results of operations
during the reporting period. Actual results
could differ from those estimates.
(3) EXPENSES
The Company has entered into an investment
management agreement with Piper Capital
Management Incorporated (Piper Capital) under
which Piper Capital manages the fund's assets
and furnishes related office facilities,
equipment, research and personnel. The
agreement requires the fund to pay Piper
Capital a monthly fee based on its average
daily net assets. The fee is equal to an
annual rate of 0.35% of the first $500 million
in net assets and 0.30% of net assets in
excess of $500 million.
The fund will pay Piper Jaffray Inc. (Piper
Jaffray) a monthly fee for expenses incurred
in the distribution and promotion of fund
shares. The fee is limited to an annual rate
of 0.15% of the fund's average daily net
assets and is payable as a servicing fee.
The fund has also entered into shareholder
account servicing agreements under which Piper
Jaffray and Piper Trust Company perform
various transfer and dividend disbursing agent
services. The fees, which are paid monthly to
Piper Jaffray and Piper Trust Company for
providing such services, are equal to an
annual rate of $6.00 per active shareholder
account, and $1.60 per closed shareholder
account.
In addition to these 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.
Sales charges paid to Piper Jaffray for
distributing the fund's shares were $4,792 for
the six months ended February 29, 1996.
11
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Expenses paid indirectly represent a reduction
of custodian fees for earnings on cash
balances maintained with the custodian by the
fund.
(4) SECURITIES
TRANSACTIONS
Cost of purchases and proceeds from sales of
securities (other than temporary investments
in short-term securities) for the six months
ended February 29, 1996, were $115,831,023 and
$763,165,053, respectively.
During the six months ended February 29, 1996,
the fund paid Piper Jaffray Inc., an
affiliated broker, no brokerage commissions.
(5) CAPITAL LOSS
CARRYOVER
For federal income tax purposes, after giving
effect to capital loss carryovers acquired in
the merger, the fund had capital loss
carryovers of $141,672,558 at September 1,
1995. If these loss carryovers are not offset
by subsequent capital gains, they will expire
at various times during 1999 through 2002. 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.
(6) RETIREMENT OF FUND
SHARES
The board of directors of DDJ (a closed-end
fund) had approved a plan to repurchase shares
of the fund in the open market and retire
those shares. Repurchases were only made when
the previous day's closing market price was at
a discount from net asset value. Daily
repurchases were limited to 25% of the
previous four weeks average daily trading
volume on the New York Stock Exchange. Under
the plan, cumulative repurchases were limited
to 3% of the total shares originally issued.
Pursuant to the plan, DDJ cumulatively
repurchased and retired 823,000 shares (1.44%
of originally issued shares) as of August 31,
1995.
(7) TENDER OFFER OF
FUND SHARES
On August 22, 1994, shareholders of DDJ
approved a fundamental policy that allowed
shareholders to periodically tender their
shares back to the fund at net asset value.
A tender offer to repurchase up to 25% of
DDJ's outstanding shares was mailed to
shareholders on September 6, 1994. The
deadline for participating in the offer was
October 3, 1994. The repurchase price was
determined on October 10, 1994, at the close
of the New York Stock Exchange (4 p.m. Eastern
Time). Proceeds from the tender offer were
paid to shareholders on October 17, 1994. The
total proceeds (including tender fees) paid by
DDJ as well as the number and percentage of
shares tendered were as follows:
<TABLE>
<CAPTION>
Percentage Shares Proceeds
Tendered Tendered Paid
--------------- --------- ------------
<S> <C> <C> <C>
16% 9,135,819 $ 79,726,515
</TABLE>
(8) PENDING LITIGATION
On October 20, 1994, a complaint was filed by
Herman D. Gordon in the U.S. District Court
for the District of Minnesota against DDJ,
EDJ, Piper Jaffray Companies Inc. (Piper
Companies), Piper Capital Management
Incorporated (Piper Capital), Piper Jaffray
Inc. (Piper Jaffray) and certain associated
individuals. A second complaint was filed on
April 14, 1995, in the same court by Frank
Donio, I.R.A., and other plaintiffs against
BDJ, CDJ, DDJ and EDJ, Piper Companies, Piper
Capital, Piper Jaffray and certain associated
individuals. Plaintiffs in both actions filed
a Consolidated Amended Class Action Complaint
on May 23, 1995, alleging violations of
certain federal and state securities laws.
Piper Companies and Piper Capital have agreed
to indemnify Piper Funds Inc. II Adjustable
Rate Mortgage Securities Fund (as the
successor by merger to BDJ, CDJ, DDJ and EDJ)
against any expenses or losses incurred in
connection with such complaint. The parties
have
12
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
reached an agreement-in-principal to settle
all outstanding claims of the purported class
action. If approved by the Court and a
sufficiently large percentage of the class, a
settlement agreement consistent with the terms
of the agreement-in-principle would provide
$14 million in principal payments consisting
of $500,000 payable upon execution of the
settlement agreement, $1.5 million payable
upon final approval by the court, and payments
of $3 million on each anniversary of the final
court approval for the next four years, with
accrued interest payments of up to $1.8
million.
(9) MERGER
As described in note 1, BDJ, CDJ, DDJ and EDJ
were combined on September 1, 1995 to create
the fund. The merger was accounted for as a
tax free reorganization. The following table
presents the shares issued by the fund in
exchange for the net assets of BDJ, CDJ, DDJ
and EDJ and the composition of such net assets
at September 1, 1995.
<TABLE>
<CAPTION>
BDJ CDJ EDJ Total(a) DDJ
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Shares issued by Adjustable Rate Mortgage
Securities fund on 9/1/95 ....................... 23,619,989 46,350,330 30,248,037 100,218,356 51,250,972
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net assets of acquired funds on 9/1/95 ......... $ 188,958,910 370,800,763 241,983,013 801,742,686 410,006,496
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Composition of net assets:
Capital stock ................................ $ 212,202,280 413,741,503 274,887,229 900,831,012 460,623,794
Accumulated net realized loss on investments ... (21,813,013) (41,193,687) (31,942,871) (94,949,571) (47,214,017)
Unrealized depreciation of investments.......... (1,430,357) (1,747,053) (961,345) (4,138,755) (3,403,281)
------------ ------------ ------------ ------------ ------------
$ 188,958,910 370,800,763 241,983,013 801,742,686 410,006,496
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
(A) SINCE DDJ IS CONSIDERED THE SURVIVING ENTITY FOR FINANCIAL REPORTING
PURPOSES THE COMBINED NET ASSETS OF BDJ, CDJ AND EDJ ARE PRESENTED AS BEING
ACQUIRED BY THE SURVIVING ENTITY IN THE STATEMENT OF CHANGES IN NET ASSETS.
13
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(10) FINANCIAL
HIGHLIGHTS
Per-share data for a share of capital stock
outstanding throughout each period and
selected information for each period are as
follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Year Year
2/29/96 Ended Ended Ended Period Ended
(Unaudited) 8/31/95 8/31/94 8/31/93 8/31/92(b)
----------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA (A)
Net asset value, beginning of period ........... $ 7.99 8.10 8.88 8.95 8.80
----- ------- ------- ------- -----
Operations:
Net investment income .......................... 0.25 0.47 0.55 0.63 0.40
Net realized and unrealized gains (losses) on
investments .................................. 0.04 (0.05) (0.82) (0.09) 0.07
----- ------- ------- ------- -----
Total from operations ........................ 0.29 0.42 (0.27) 0.54 0.47
----- ------- ------- ------- -----
Distributions to shareholders:
From net investment income ..................... (0.23) (0.53) (0.51) (0.61) (0.32)
----- ------- ------- ------- -----
Net asset value, end of period ................. $ 8.05 7.99 8.10 8.88 8.95
----- ------- ------- ------- -----
----- ------- ------- ------- -----
SELECTED INFORMATION (A)
Total investment return (c) ...................... 3.51% 5.43% -3.18% 6.24% 5.49%
Net assets at end of period (in millions) ...... $ 381 409 500 551 555
Ratio of expenses to average net assets (d) ...... 0.60%(f) 0.63% 0.60% 0.58% 0.58%(f)
Ratio of net investment income to average net
assets (d) ..................................... 5.73%(f) 5.62% 6.39% 7.25% 7.70%(f)
Portfolio turnover rate (excluding short-term
securities) .................................... 25% 36% 39% 39% 41%
Amount of borrowings outstanding at end of period
(in millions) (e) ............................ $ n/a -- 145 145 145
Average amount of borrowings outstanding during
the period (in millions) (e) ................. $ n/a 57 145 149 90
Average number of shares outstanding during the
period (in millions) (e) ....................... n/a 53 62 62 52
Average per-share amount of borrowings outstanding
during the period (e) ........................ $ n/a 1.09 2.34 2.41 1.67
</TABLE>
(A) ON SEPTEMBER 1, 1995 FOUR CLOSED-END FUNDS, AMERICAN ADJUSTABLE RATE TERM
TRUST 1996, AMERICAN ADJUSTABLE RATE TERM TRUST 1997, AMERICAN ADJUSTABLE
RATE TERM TRUST 1998 (DDJ) AND AMERICAN ADJUSTABLE RATE TERM TRUST 1999
WERE COMBINED TO CREATE THE FUND. DDJ IS CONSIDERED THE SURVIVING ENTITY
FOR FINANCIAL REPORTING PURPOSES. THE FINANCIAL HIGHLIGHTS PRESENTED FOR
THE PERIODS PRIOR TO SEPTEMBER 1, 1995 ARE THOSE OF DDJ. THE PER SHARE
INFORMATION FOR SUCH PERIODS HAS BEEN RESTATED TO REFLECT THE IMPACT OF
ADDITIONAL SHARES CREATED RESULTING FROM THE DIFFERENCE IN THE NET ASSET
VALUE PER SHARE OF DDJ AT THE TIME OF THE MERGER ($8.71) AND THE INITIAL
NET ASSET VALUE PER SHARE OF THE FUND ($8.00).
(B) COMMENCEMENT OF OPERATIONS OF DDJ WAS JANUARY 30, 1992.
(C) TOTAL INVESTMENT RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE, ASSUMES
REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT REFLECT A
SALES CHARGE.
(D) VARIOUS FEES AND EXPENSES OF THE FUND WERE VOLUNTARILY WAIVED OR ABSORBED
BY PIPER CAPITAL DURING FISCAL YEAR 1996. THE ANNUALIZED RATIOS OF EXPENSES
AND NET INVESTMENT INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN
0.74%/5.59%, RESPECTIVELY, FOR THE SIX MONTHS ENDED 2/29/96. BEGINNING IN
FISCAL YEAR 1996, THE EXPENSE RATIO REFLECTS THE EFFECT OF GROSS EXPENSES
PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT BEEN
ADJUSTED.
(E) DDJ WAS A CLOSED-END INVESTMENT MANAGEMENT COMPANY AND WAS PERMITTED TO
ENTER INTO BORROWINGS FOR OTHER THAN TEMPORARY OR EMERGENCY PURPOSES.
ADJUSTABLE RATE MORTGAGE SECURITIES FUND MAY BORROW ONLY FOR TEMPORARY OR
EMERGENCY PURPOSES.
(F) ADJUSTED TO AN ANNUAL BASIS.
14
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS OF PIPER FUNDS INC. - II
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, CHAIRMAN OF THE BOARD, PRESIDENT, PIPER
CAPITAL MANAGEMENT INCORPORATED,
PIPER JAFFRAY COMPANIES INC.
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL, RELIASTAR
CORP., HORMEL FOODS CORP.
George Latimer, CHIEF EXECUTIVE OFFICER, NATIONAL EQUITY
FUNDS
OFFICERS Paul A. Dow, PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT/TREASURER
Thomas S. McGlinch, SENIOR VICE PRESIDENT
Amy K. Johnson, VICE PRESIDENT
Susan Miley, SECRETARY
INVESTMENT ADVISER Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
CUSTODIAN AND Investors Fiduciary Trust Company
TRANSFER AGENT 127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716
LEGAL COUNSEL Dorsey & Whitney LLP
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
15
<PAGE>
PIPER CAPITAL
MANAGEMENT ---------------
Bulk Rate
U.S. Postage
PIPER CAPITAL MANAGEMENT INCORPORATED PAID
222 SOUTH NINTH STREET Permit No. 3008
MINNEAPOLIS, MN 55402-3804 Mpls., MN
---------------
PIPER JAFFREY INC., FUND DISTRIBUTOR AND NASD MEMBER.
[LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.
In an effort to reduce costs to our shareholders, we have
implemented a process to reduce duplicate mailings of
the fund's 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
Shareholder Services area at 1 800 866-7778, or mail
your request to:
Piper Capital Management
Attn: Communications Department
222 South Ninth Street
Minneapolis, MN 55402-3804
http://www.piperjaffray.com
115-96 PJARX-02 5/96
