-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VDKnXoY3h+sSS8xvTkkEYqdx0/LqBW/0ZYY2FYu/xMq0Dmm3OJetb1QQICWf17GJ y1nCggSTngPkgoYuiF+7+w== 0001047469-98-036422.txt : 19981006 0001047469-98-036422.hdr.sgml : 19981006 ACCESSION NUMBER: 0001047469-98-036422 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19981005 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIPER FUNDS INC CENTRAL INDEX KEY: 0000806177 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04905 FILM NUMBER: 98720843 BUSINESS ADDRESS: STREET 1: 222 S 9TH ST - STE 1300 STREET 2: PIPER JEFFRAY TOWER CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123426288 MAIL ADDRESS: STREET 1: 222 S 9TH ST - STE 1300 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: PIPER JAFFRAY INVESTMENT TRUST INC DATE OF NAME CHANGE: 19940520 FORMER COMPANY: FORMER CONFORMED NAME: PIPER JAFFRAY FUNDS INC DATE OF NAME CHANGE: 19870127 N-30D 1 N-30D Financial Statements - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS For the Period Ended July 31, 1998* ................................................................................
GOVERNMENT INTERMEDIATE INCOME FUND BOND FUND ------------ ------------- INCOME: Interest ................................................... $ 3,747,904 $ 3,343,251 Fee income (note 2) ........................................ 75,481 -- ------------ ------------- Total income ............................................. 3,823,385 3,343,251 ------------ ------------- EXPENSES (NOTE 5): Investment management fee .................................. 265,576 158,930 Distribution and service fees: CLASS A .................................................. 264,406 131,538 CLASS Y .................................................. -- -- Custodian and accounting fees .............................. 54,258 59,514 Transfer agent and dividend disbursing agent fees .......... 63,311 47,687 Registration fees .......................................... 14,410 19,648 Reports to shareholders .................................... 25,053 32,583 Directors' fees ............................................ 7,937 7,937 Audit and legal fees ....................................... 40,526 41,226 Other expenses ............................................. 6,961 6,864 ------------ ------------- Total expenses ........................................... 742,438 505,927 Less Class A expenses waived by the distributor ........ (90,228) (37,323) ------------ ------------- Net expenses before expenses paid indirectly ............. 652,210 468,604 Less expenses paid indirectly .......................... (205) (64) ------------ ------------- Total net expenses ....................................... 652,005 468,540 ------------ ------------- Net investment income .................................... 3,171,380 2,874,711 ------------ ------------- NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS: Net realized gain on investments (note 3) .................. 221,586 354,300 Net change in unrealized appreciation or depreciation of investments .............................................. 648,930 (93,800) ------------ ------------- Net gain on investments .................................. 870,516 260,500 ------------ ------------- Net increase in net assets resulting from operations ... $ 4,041,896 $ 3,135,211 ------------ ------------- ------------ ------------- * DATE FUNDS DISCONTINUED OPERATIONS DUE TO MERGER. SEE NOTE 1 IN THE NOTES TO FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- 1 1998 Annual Report - Income Funds Financial Statements (continued) - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS ................................................................................
GOVERNMENT INCOME FUND INTERMEDIATE BOND FUND ----------------------------- ----------------------------- Period Ended Year Ended Period Ended Year Ended 7/31/98* 9/30/97 7/31/98* 9/30/97 ------------- ------------- ------------- ------------- OPERATIONS: Net investment income ...................................... $ 3,171,380 $ 4,770,030 $ 2,874,711 $ 5,962,017 Net realized gain on investments ........................... 221,586 697,901 354,300 281,651 Net change in unrealized appreciation or depreciation of investments .............................................. 648,930 2,063,487 (93,800) 2,015,896 ------------- ------------- ------------- ------------- Net increase in net assets resulting from operations ..... 4,041,896 7,531,418 3,135,211 8,259,564 ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: CLASS A: From net investment income ............................... (3,328,229) (4,771,839) (2,262,077) (5,402,892) Tax return of capital .................................... (5,804) -- (108,938) -- CLASS Y: From net investment income ............................... -- -- (480,552) (559,127) Tax return of capital .................................... -- -- (23,143) -- ------------- ------------- ------------- ------------- Total distributions ...................................... (3,334,033) (4,771,839) (2,874,710) (5,962,019) ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS (NOTE 4): CLASS A .................................................... (67,976,240) (19,319,777) (64,573,447) (73,660,708) CLASS Y .................................................... -- -- (14,073,799) 13,912,070 ------------- ------------- ------------- ------------- Decrease in net assets from capital share transactions ... (67,976,240) (19,319,777) (78,647,246) (59,748,638) ------------- ------------- ------------- ------------- Total decrease in net assets ............................. (67,268,377) (16,560,198) (78,386,745) (57,451,093) Net assets at beginning of period .......................... 67,268,377 83,828,575 78,386,745 135,837,838 ------------- ------------- ------------- ------------- Net assets at end of period ................................ $ -- $ 67,268,377 $ -- $ 78,386,745 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Distributions in excess of net investment income ........... $ -- $ -- $ -- $ (125,225) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- * DATE FUNDS DISCONTINUED OPERATIONS DUE TO MERGER. SEE NOTE 1 IN THE NOTES TO FINANCIAL STATEMENTS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- 2 1998 Annual Report - Income Funds Notes to Financial Statements - -------------------------------------------------------------------------------- (1) ORGANIZATION ................................ Piper Funds Inc. (Piper Funds) is registered under the Investment Company Act of 1940 (as amended) as a single, open-end management investment company. Piper Funds has 12 series, including Government Income Fund and Intermediate Bond Fund. Each fund is classified as a diversified series. Intermediate Bond Fund commenced offering Class Y shares on February 18, 1997. All shares existing prior to that date were classified as Class A shares. Key features of each class were: CLASS A: - Subject to a front-end sales charge - Subject to distribution and service fees CLASS Y: - Required a minimum initial investment of $1 million - No front-end or contingent deferred sales charges - No distribution and service fees The classes of shares of Intermediate Bond Fund had the same rights and were identical in all respects except that each class had different distribution expenses, had exclusive voting rights with respect to matters affecting that class and had different exchange privileges. Government Income Fund had a single class of shares, which is shown as Class A in the financial statements. Government Income Fund invested primarily in securities issued or guaranteed as to payment of principal and interest by the U.S. government, its agencies or instrumentalities, including mortgage-backed securities. Intermediate Bond Fund invested primarily in a broad range of investment-quality debt securities. On May 1, 1998, Piper Jaffray Companies Inc., the parent company of the funds' investment advisor, was acquired by U.S. Bancorp. U.S. Bancorp is a multi-state bank holding company headquartered in Minneapolis, Minnesota with a geographic service area spanning 17 states. As of June 30, 1998, U.S. Bancorp was the 14th largest U.S. commercial bank holding company, with assets of nearly $73.8 billion. U.S. Bank National Association ("U.S. Bank"), a wholly owned subsidiary of U.S. Bancorp, currently acts as the investment advisor to 32 mutual funds (the "First American Funds"). As of June 30, 1998, U.S. Bank, acting through its First American Asset Management group, managed more than $77.5 billion in assets, including approximately $28.4 billion in assets of the First American Funds. - -------------------------------------------------------------------------------- 3 1998 Annual Report - Income Funds Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- As discussed in note 7, the net assets of Government Income Fund and Intermediate Bond Fund were acquired by First American Investment Funds, Inc. - Fixed Income Fund and Intermediate Term Income Fund, respectively, effective at the close of business on July 31, 1998. It is anticipated that the company will be dissolved under Minnesota law as soon as practicable. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................ INVESTMENTS IN SECURITIES Portfolio securities for which market quotations were readily available were valued at current market value. If market quotations or valuations were not readily available, or if such quotations or valuations were believed to be inaccurate, unreliable or not reflective of market value, portfolio securities were 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 have reasonably expected to receive for the security or other asset upon its current sale. The current market value of certain fixed income securities was provided by an independent pricing service. Fixed income securities for which prices were not available from an independent pricing service but where an active market exists were 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 were valued at amortized cost, which approximated market value. Securities transactions were accounted for on the date securities were purchased or sold. Realized gains and losses were calculated on the identified-cost basis. Interest income, including amortization of bond discount and premium, is recorded on an accrual basis. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS Delivery and payment for securities that were purchased by the funds on a when-issued or forward-commitment basis could take place a month or more after the transaction date. During this period, such securities did not earn interest, were subject to market fluctuation and may have increased or decreased in value prior to their delivery. The funds segregated, with their custodian, assets with a market value equal to the amount of their purchase commitments. The purchase of securities on a when-issued or forward-commitment basis may have increased the volatility of the funds' net asset value if the funds made such purchases while remaining substantially fully invested. In connection with their ability to purchase securities on a when-issued or forward-commitment basis, Government Income Fund entered into mortgage dollar rolls in which the fund sold securities purchased on a forward commitment basis and simultaneously contracted with a counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. As an inducement to "roll over" its purchase commitments, the fund received negotiated fees. For the period ended July 31, 1998, such fees earned amounted to $75,481 for Government Income Fund. - -------------------------------------------------------------------------------- 4 1998 Annual Report - Income Funds Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- FEDERAL TAXES Each fund is treated separately for federal income tax purposes. Prior to discontinuing operations, each fund complied with the requirements of the Internal Revenue Code applicable to regulated investment companies in order to avoid payment of federal income tax. The funds distributed their taxable net investment income and realized gains to avoid the payment of any federal excise tax. Net investment income and net realized gains (losses) may have differed for financial statement and tax purposes primarily because of losses deferred due to "wash sale" transactions and the timing of recognition of income on certain collateralized mortgage-backed securities. The character of distributions made during the year from net investment income or net realized gains may have differed from its ultimate characterization for federal income tax purposes. In addition, due to the timing of dividend distributions, the fiscal year in which amounts were distributed may have differed from the year that the income or realized gains or losses were recorded by the funds. As a result of permanent book-to-tax differences, reclassification adjustments were made prior to the mergers of the funds as follows:
GOVERNMENT INTERMEDIATE INCOME FUND BOND FUND ------------ ------------- Decrease distributions in excess of net investment income .................... $156,849 $ -- Decrease undistributed net investment income ............................... $ -- $ 6,857 Increase accumulated net realized loss on investment ........................ $160,695 $ -- Increase additional paid in captial .... $ 3,846 $ 6,857
ALLOCATION OF INCOME, EXPENSES AND GAINS (LOSSES) Income, expenses (other than class-specific expenses) and realized and unrealized gains and losses for Intermediate Bond Fund were allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Class-specific expenses, which included distribution and service fees, were charged directly to such class. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders from net investment income for Government Income Fund were declared daily and paid monthly. Distributions to shareholders from net investment income for Intermediate Bond Fund were declared separately for each class daily and paid monthly. Net realized gains distributions for the funds, if any, were made at least annually. Distributions were payable in cash or reinvested in additional shares of the same class. REPURCHASE AGREEMENTS For repurchase agreements entered into with certain broker-dealers, the funds, along with other affiliated registered investment companies, transferred uninvested cash balances to a joint trading account, the daily aggregate of which was invested in repurchase agreements secured by U.S. government or agency obligations. Securities pledged as collateral for all individual and joint repurchase agreements were held by the funds' custodian bank until maturity of the repurchase agreement. Provisions for all agreements ensured that the daily market value of the collateral was in excess of the repurchase amount, including accrued interest, to protect the funds in the event of a default. - -------------------------------------------------------------------------------- 5 1998 Annual Report - Income Funds Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles required management to make estimates and assumptions that affected the reported amounts in the financial statements. Actual results could have differed from these estimates. (3) INVESTMENT SECURITY TRANSACTIONS ................................ Cost of purchases and proceeds from sales of securities, other than temporary investments in short-term securities and dollar roll transactions, for the period ended July 31, 1998 were as follows:
GOVERNMENT INTERMEDIATE INCOME FUND BOND FUND ----------- ------------- Purchases .............................. $13,985,396 $ 2,348,999 Proceeds from sales .................... $28,808,201 $ 27,098,153
Including dollar rolls for Government Income Fund, purchases and sales aggregated $49,048,287 and $63,871,092, respectively. (4) CAPITAL SHARE TRANSACTIONS ................................ Capital share transactions for the funds were as follows:
PERIOD ENDED YEAR ENDED JULY 31, 1998(b) SEPTEMBER 30, 1997 ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ GOVERNMENT INCOME FUND: Sales of fund shares ................. 937,630 $ 8,714,404 686,546 $ 6,139,195 Issued for reinvested distributions ...................... 281,562 2,611,180 406,146 3,630,952 Redemptions of fund shares ........... (2,307,534) (21,422,174) (3,247,825) (29,089,924) Merger into Fixed Income Fund (note 7) ................................. (6,252,012) (57,879,650) -- -- ---------- ------------ ---------- ------------ (7,340,354) $(67,976,240) (2,155,133) $(19,319,777) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
PERIOD ENDED PERIOD ENDED JULY 31, 1998(b) SEPTEMBER 30, 1997(a) ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ INTERMEDIATE BOND FUND: CLASS A Sales of fund shares ................. 102,373 $ 788,322 412,880 $ 3,127,050 Issued for reinvested distributions ...................... 194,317 1,496,893 467,515 3,535,885 Redemptions of fund shares ........... (2,979,130) (22,932,706) (8,391,651) (63,548,352) Redemptions in exchange for Class Y shares ............................. -- -- (2,201,482) (16,775,291) Merger into Intermediate Term Income Fund Class A (note 7) .............. (5,708,848) (43,925,956) -- -- ---------- ------------ ---------- ------------ (8,391,288) $(64,573,447) (9,712,738) $(73,660,708) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ CLASS Y Sales of fund shares ................. 77,751 $ 600,490 37,581 $ 284,580 Sales in exchange for Class A shares ............................. -- -- 2,201,482 16,775,291 Issued for reinvested distributions ...................... 31,746 244,595 41,735 316,060 Redemptions of fund shares ........... (782,115) (6,075,058) (459,438) (3,463,861) Merger into Intermediate Term Income Fund Class Y (note 7) .............. (1,148,742) (8,843,826) -- -- ---------- ------------ ---------- ------------ (1,821,360) $(14,073,799) 1,821,360 $ 13,912,070 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
(a) REPRESENTS PERIOD FROM FEBRUARY 18 (COMMENCEMENT OF OFFERING OF SHARES) TO SEPTEMBER 30, 1997. (b) PERIOD FROM OCTOBER 1, 1997 TO JULY 31, 1998 (DATE OF MERGER). - -------------------------------------------------------------------------------- 6 1998 Annual Report - Income Funds Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- Piper Jaffray Inc. (Piper Jaffray) acted as distributor for the funds from inception through April 30, 1998. On May 1, 1998, SEI Investments Distribution Corporation (SEI) assumed the role of the funds' distributor. SEI is not an affiliate of Piper Capital Management Incorporated or of the funds. Sales charges received by Piper Jaffray, the funds' distributor, for distributing the funds' shares from October 31, 1998 through April 30, 1998, were as follows:
INTERMEDIATE BOND FUND GOVERNMENT ---------------------- INCOME FUND CLASS A CLASS Y ------------ -------- ----------- Front-end sales charges ................ $8,779 $3,663 $ -- Contingent deferred sales charges ...... 1,165 628 -- ------------ -------- --- $9,944 $4,291 $ -- ------------ -------- --- ------------ -------- ---
(5) EXPENSES ................................ INVESTMENT MANAGEMENT FEE Piper Funds entered into investment management agreements with Piper Capital Management Incorporated (Piper Capital) under which Piper Capital managed each fund's assets and furnished related office facilities, equipment, research and personnel. The agreements required each fund to pay Piper Capital a monthly fee based on average daily net assets. The fees for each fund were as follows: Government Income Fund, an annual rate of 0.50% of the first $250 million in net assets and decreasing percentages thereafter to 0.40% of net assets in excess of $500 million; Intermediate Bond Fund, an annual rate of 0.30% of the first $100 million in net assets, 0.25% of the next $150 million and 0.20% of net assets in excess of $250 million. For the period ended July 31, 1998, the effective management fees paid by the funds were 0.50% and 0.30% on an annual basis for Government Income Fund and Intermediate Bond Fund, respectively. DISTRIBUTION AND SERVICE FEES Piper Jaffray acted as distributor for the funds from inception through April 30, 1998. On May 1, 1998, SEI Investments Distribution Corporation (SEI) assumed the role of the funds' distributor. Each fund paid Piper Jaffray and SEI fees accrued daily and paid quarterly, for providing shareholder services and distribution-related services for the periods referred to above. The fees for each fund, which were being voluntarily limited for Government Income Fund and Class A of Intermediate Bond Fund for the period ended July 31, 1998, are stated below as a percent of average daily net assets attributable to such shares.
INTERMEDIATE BOND FUND GOVERNMENT --------------------- INCOME FUND CLASS A CLASS Y ------------ -------- ---------- Distribution fee ....................... 0.25% 0.05% -- Service fee ............................ 0.25% 0.25% -- ------ -------- ---------- Total distribution and service fees ............................... 0.50% 0.30% -- ------ -------- ---------- ------ -------- ---------- Total distribution and service fees after voluntary limitation ......... 0.34% 0.22% -- ------ -------- ---------- ------ -------- ----------
SHAREHOLDER ACCOUNT SERVICING FEES The company also entered into shareholder account servicing agreements under which Piper Jaffray and Piper Trust Company (Piper Trust) performed various transfer and dividend disbursing agent services for accounts held at the respective company. The fees, which were paid monthly to Piper - -------------------------------------------------------------------------------- 7 1998 Annual Report - Income Funds Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- Jaffray and Piper Trust for providing these services, were equal to an annual rate of $7.50 per active shareholder account and $1.60 per closed account. For the period ended July 31, 1998, Piper Jaffray and Piper Trust received the following amounts in connection with the shareholder account servicing agreements:
GOVERNMENT INTERMEDIATE INCOME FUND BOND FUND ------------ ------------- Piper Jaffray .......................... $26,455 $10,692 Piper Trust ............................ 5,684 915 ------------ ------------- $32,139 $11,607 ------------ ------------- ------------ -------------
OTHER FEES AND EXPENSES In addition to the investment management, distribution and shareholder account servicing fees, each fund was responsible for paying most other operating expenses including: outside directors' fees and expenses; custodian fees; registration fees; printing and shareholder reports; transfer agent fees and expenses; legal, auditing and accounting services; insurance; interest; taxes and other miscellaneous expenses. Expenses paid indirectly represented a reduction of custodian fees for earnings on miscellaneous cash balances maintained by the funds. (6) CAPITAL LOSS CARRYOVER ................................ For federal income tax purposes, the following funds had capital loss carryovers at the date of the merger, which, if not offset by subsequent capital gains, will expire on the funds' fiscal year-ends as indicated below. As a result of the acquisition of the funds' net assets by First American Investment Funds, Inc.--Fixed Income Fund and Intermediate Term Income Fund, these capital loss carryovers will be available to Fixed Income Fund and Intermediate Term Income Fund, subject to certain limitations. It is unlikely the boards of the acquiring funds will authorize a distribution of any net realized capital gains until the available capital loss carryovers have been offset or expire. Utilization of these capital loss carryovers by First American Investment Funds, Inc. - Fixed Income Fund and Intermediate Term Income Fund in the year ended September 30, 1998 is limited to $474,993 and 432,277, respectively. In subsequent years, utilization of these capital loss carryovers is limited to $2,989,179 per year and $2,720,363 per year, respectively.
GOVERNMENT INTERMEDIATE INCOME FUND BOND FUND - -------------------------- ---------------------------- CAPITAL LOSS CAPITAL LOSS CARRYOVER EXPIRATION CARRYOVER EXPIRATION - -------------- ---------- --------------- ---------- $ 781,426 2002 $ 180,104,699 2003 13,367,115 2003 95,748,876 2004 1,723,511 2004 - -------------- --------------- $ 15,872,052 $ 275,853,575 - -------------- --------------- - -------------- ---------------
(7) MERGER ................................ At a special meeting held July 10, 1998, shareholders of Government Income Fund and Intermediate Bond Fund approved a plan under which the funds' net assets were acquired by First American Investment Funds, Inc. - Fixed Income Fund and Intermediate Term Income Fund, respectively, each of which is a diversified series of an open-end investment management company. These tax-free reorganizations were effective July 31, 1998. - -------------------------------------------------------------------------------- 8 1998 Annual Report - Income Funds Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- The following table presents the composition of the net assets of the funds immediately prior to the mergers.
GOVERNMENT INTERMEDIATE INCOME FUND BOND FUND ------------ ------------- Capital stock and additional paid-in capital .............................. $ 70,536,725 $ 327,633,994 Accumulated net realized loss on investments .......................... (16,068,218) (275,855,768) Unrealized appreciation of investments .......................... 3,411,143 991,556 ------------ ------------- Total - representing net assets applicable to capital stock .......... $ 57,879,650 $ 52,769,782 ------------ ------------- ------------ ------------- CLASS A: Net assets ........................... $ 57,879,650 $ 43,925,956 Net asset value ...................... $ 9.258 $ 7.694 Shares outstanding ................... 6,252,012 5,708,848 CLASS Y: Net assets ........................... -- $ 8,843,826 Net asset value ...................... -- $ 7.699 Shares outstanding ................... -- 1,148,742
- -------------------------------------------------------------------------------- 9 1998 Annual Report - Income Funds Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- (8) FINANCIAL HIGHLIGHTS ................................ Per-share data for a share of capital stock outstanding throughout each period and selected information for each period are as follows: GOVERNMENT INCOME FUND
Period Ended Year Ended September 30, July 31, ------------------------------------------------ 1998(c) 1997 1996 1995 1994 1993 ------------- ------- ------- ------- ------- ------- PER-SHARE DATA Net asset value, beginning of period ... $ 9.16 $ 8.83 $ 8.99 $ 8.42 $ 10.01 $ 9.86 ------------- ------- ------- ------- ------- ------- Operations: Net investment income ................ 0.49 0.57 0.60 0.60 0.69 0.80 Net realized and unrealized gains (losses) on investments ............ 0.10 0.33 (0.16) 0.60 (1.58) 0.15 ------------- ------- ------- ------- ------- ------- Total from operations .............. 0.59 0.90 0.44 1.20 (0.89) 0.95 ------------- ------- ------- ------- ------- ------- Distributions to shareholders: From net investment income ........... (0.49) (0.57) (0.60) (0.63) (0.68) (0.80) From net realized gains .............. -- -- -- -- (0.02) -- ------------- ------- ------- ------- ------- ------- Total distributions to shareholders ..................... (0.49) (0.57) (0.60) (0.63) (0.70) (0.80) ------------- ------- ------- ------- ------- ------- Net asset value, date of merger (7/31/98) ............................ (9.26) -- -- -- -- -- ------------- ------- ------- ------- ------- ------- Net asset value, end of period ......... $ -- $ 9.16 $ 8.83 $ 8.99 $ 8.42 $ 10.01 ------------- ------- ------- ------- ------- ------- ------------- ------- ------- ------- ------- ------- SELECTED INFORMATION Total return (a) ....................... 6.54% 10.49% 4.99% 14.87% (9.26)% 10.06% Net assets at end of period (in millions) ............................ -- $ 67 $ 84 $ 106 $ 126 $ 160 Ratio of expenses to average daily net assets ............................... 1.23%(b) 1.19% 1.09% 1.11% 1.05% 1.09% Ratio of net investment income to average daily net assets ............. 5.98%(b) 6.32% 6.66% 7.02% 7.43% 8.10% Portfolio turnover rate (excluding short-term securities and dollar roll transactions) ........................ 20% 21% 32% 87% 121% 191% Ratios before waivers by the distributor: Ratio of expenses to average daily net assets before waivers .............. 1.40%(b) 1.35% 1.28% 1.29% 1.24% 1.27% Ratio of net investment income to average daily net assets before waivers ............................ 5.81%(b) 6.16% 6.47% 6.84% 7.24% 7.92%
(a) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A SALES CHARGE. (b) ANNUALIZED. (c) DATE FUND DISCONTINUED OPERATIONS DUE TO MERGER. SEE NOTE 1 IN THE NOTES TO FINANCIAL STATMENTS. - -------------------------------------------------------------------------------- 10 1998 Annual Report - Income Funds Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- (8) FINANCIAL HIGHLIGHTS (CONTINUED) ................................ Per-share data for a share of capital stock outstanding throughout each period and selected information for each period are as follows: INTERMEDIATE BOND FUND
CLASS A ------------------------------------------------------------------- Period Ended Year Ended September 30, July 31, -------------------------------------------------- 1998(f) 1997 1996 1995 1994 1993 ----------- ------- ------- ------- ------- ------- PER-SHARE DATA Net asset value, beginning of period .......................... $ 7.67 $ 7.50 $ 8.12 $ 7.98 $ 12.22 $ 11.51 ----------- ------- ------- ------- ------- ------- Operations: Net investment income ........... 0.35 0.44 0.53(c) 0.88 0.90 1.29 Net realized and unrealized gains (losses) on investments ....... 0.02 0.17 (0.11) 0.31 (3.96) 0.56 ----------- ------- ------- ------- ------- ------- Total from operations ......... 0.37 0.61 0.42 1.19 (3.06) 1.85 ----------- ------- ------- ------- ------- ------- Distributions to shareholders: From net investment income ...... (0.33) (0.44) (1.04) (1.05) (0.95) (0.90) From net realized gains ......... -- -- -- -- (0.23) (0.24) Tax return of capital ........... (0.02) -- -- -- -- -- ----------- ------- ------- ------- ------- ------- Total distributions to shareholders ................ (0.35) (0.44) (1.04) (1.05) (1.18) (1.14) ----------- ------- ------- ------- ------- ------- Net asset value, date of merger (7/31/98) ....................... (7.69) -- -- -- -- -- ----------- ------- ------- ------- ------- ------- Net asset value, end of period .... $ -- $ 7.67 $ 7.50 $ 8.12 $ 7.98 $ 12.22 ----------- ------- ------- ------- ------- ------- ----------- ------- ------- ------- ------- ------- SELECTED INFORMATION Total return (a) .................. 4.93% 8.29% 5.68% 16.15% (26.65)% 17.04% Net assets at end of period (in millions) ....................... $ -- $ 64 $ 136 $ 319 $ 564 $ 792 Ratio of expenses to average daily net assets (b) .................. 0.92%(e) 0.85% 0.72% 0.97% 0.78% 0.70% Ratio of net investment income to average daily net assets ........ 5.40%(e) 5.83% 6.65% 8.02% 9.33% 12.51% Portfolio turnover rate (excluding short-term securities) .......... 4% 86% 89% 136% 169% 109% Ratios before waivers by the distributor: Ratio of expenses to average daily net assets before waivers (b) ........................... 1.01%(e) 0.93% 0.82% 1.07% 0.85% 0.77% Ratio of net investment income to average daily net assets before waivers ....................... 5.31%(e) 5.75% 6.55% 7.92% 9.26% 12.44%
CLASS Y ------------------------------------------------ Period Ended Period Ended July 31, 1998(f) September 30, 1998(d) -------------------- ------------------------- PER-SHARE DATA Net asset value, beginning of period ... $ 7.68 $ 7.62 ------- ------- Operations: Net investment income ................ 0.36 0.28 Net realized and unrealized gains on investments ........................ 0.02 0.06 ------- ------- Total from operations .............. 0.38 0.34 ------- ------- Distributions to shareholders: From net investment income ........... (0.34) (0.28) Tax return of capital ................ (0.02) -- ------- ------- Total distributions to shareholders ..................... (0.36) (0.28) ------- ------- Net asset value, date of merger (7/31/98) ............................ (7.70) -- ------- ------- Net asset value, end of period ......... $ -- $ 7.68 ------- ------- ------- ------- SELECTED INFORMATION Total return (a) ....................... 5.05% 4.58% Net assets at end of period (in millions) ............................ $ -- $ 14 Ratio of expenses to average daily net assets ............................... 0.70%(e) 0.57%(e) Ratio of net investment income to average daily net assets ............. 5.63%(e) 6.06%(e) Portfolio turnover rate (excluding short-term securities) ............... 4% 86%
(a) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A SALES CHARGE. (b) INCLUDES FEDERAL EXCISE TAXES OF 0.08%, 0.37%, 0.23% AND 0.09% FOR FISCAL 1996, 1995, 1994 AND 1993, RESPECTIVELY. (c) BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. (d) COMMENCEMENT OF OFFERING OF CLASS Y SHARES WAS FEBRUARY 18, 1997. (e) ANNUALIZED. (f) DATE FUND DISCONTINUED OPERATIONS DUE TO MERGER. SEE NOTE 1 TO THE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- 11 1998 Annual Report - Income Funds Independent Auditors' Report - -------------------------------------------------------------------------------- THE BOARD OF DIRECTORS AND SHAREHOLDERS PIPER FUNDS INC.: We have audited the accompanying statements of operations of Government Income Fund and Intermediate Bond Fund (funds within Piper Funds Inc.) for the period from October 1, 1997 to July 31, 1998 (date of fund mergers), the statements of changes in net assets for the period from October 1, 1997 to July 31, 1998, and the year ended September 30, 1997, and the financial highlights for periods presented in note 8 to the financial statements. These financial statements and the financial highlights are the responsibility of the funds' management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and the financial highlights referred to above present fairly, in all material respects, for Government Income Fund and Intermediate Bond Fund, the results of their operations, the changes in their net assets and the financial highlights for the periods stated in the first paragraph above, in conformity with generally accepted accounting principles. As described in note 1 to the financial statements, Government Income Fund and Intermediate Bond Fund merged into Fixed Income Fund and Intermediate Term Income Fund (each a series of First American Investment Funds, Inc.), respectively, on July 31, 1998. KPMG Peat Marwick LLP Minneapolis, Minnesota September 11, 1998 - -------------------------------------------------------------------------------- 12 1998 Annual Report - Income Funds Federal Income Tax Information - -------------------------------------------------------------------------------- The following per-share information describes the federal tax treatment of distributions made during the fiscal year. Distributions for the calendar year will be reported on Form 1099-DIV. Please consult a tax advisor on how to report these distributions at the state and local levels. INCOME DISTRIBUTIONS (99.8% AND 95.4% TAXABLE AS ORDINARY DIVIDENDS, NONE QUALIFYING FOR DEDUCTION BY CORPORATIONS, AND 0.2% AND 4.6% TAX RETURN OF CAPITAL FOR GOVERNMENT INCOME FUND AND INTERMEDIATE BOND FUND, RESPECTIVELY)
INTERMEDIATE GOVERNMENT BOND FUND INCOME --------------------- PAYABLE DATE FUND CLASS A CLASS Y - ---------------------------------------- ----------- --------- --------- October 1, 1997 ........................ $0.0481 $ 0.0312 $ 0.0354 November 3, 1997 ....................... 0.0465 0.0361 0.0377 December 2, 1997 ....................... 0.0450 0.0360 0.0374 January 2, 1998 ........................ 0.0482 0.0360 0.0375 February 2, 1998 ....................... 0.0464 0.0341 0.0356 March 2, 1998 .......................... 0.0463 0.0370 0.0382 April 1, 1998 .......................... 0.0488 0.0293 0.0306 May 1, 1998 ............................ 0.0468 0.0351 0.0364 June 2, 1998 ........................... 0.0455 0.0351 0.0366 July 1, 1998 ........................... 0.0463 0.0370 0.0383 July 31, 1998 .......................... 0.0708 0.0317 0.0333 ----------- --------- --------- Total ................................ $0.5387 $ 0.3786 $ 0.3970 ----------- --------- --------- ----------- --------- ---------
- -------------------------------------------------------------------------------- 13 1998 Annual Report - Income Funds Shareholder Update - -------------------------------------------------------------------------------- SPECIAL MEETING RESULTS A special meeting of the funds' shareholders was held on July 10, 1998. 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. PROPOSAL TO RATIFY AND APPROVE AN INTERIM ADVISORY AGREEMENT between the funds and Piper Capital Management Incorporated ("Piper Capital") and the receipt of investment advisory fees by Piper Capital under such agreement.
GOVERNMENT INTERMEDIATE BOND FUND INCOME FUND --------------------------- ------------ CLASS A CLASS Y SHARES VOTED SHARES VOTED SHARES VOTED ------------ ------------ ------------ For .................................... 6,023,175 5,896,468 1,162,896 Against ................................ 160,107 146,662 -- Abstain ................................ 275,060 162,611 -- ------------ ------------ ------------ Total .................................. 6,458,342 6,205,741 1,162,896
2. PROPOSAL TO APPROVE AN AGREEMENTAND PLAN OF REORGANIZATION providing for the transfer of the assets and liabilities of Government Income Fund and Intermediate Bond Fund, respectively, to funds of First American Investment Funds, Inc. ("FAIF"), in exchange for shares of the same class of shares of FAIF Fixed Income Fund and FAIF Intermediate Term Income Fund.
GOVERNMENT INTERMEDIATE BOND FUND INCOME FUND --------------------------- ------------ CLASS A CLASS Y SHARES VOTED SHARES VOTED SHARES VOTED ------------ ------------ ------------ For .................................... 3,337,396 3,211,763 1,133,738 Against ................................ 134,361 125,426 -- Abstain ................................ 273,694 186,608 -- Broker Non-Vote ........................ 2,712,891 2,681,945 29,158 ------------ ------------ ------------ Total .................................. 6,458,342 6,205,742 1,162,896
- -------------------------------------------------------------------------------- 14 1998 Annual Report - Income Funds -----END PRIVACY-ENHANCED MESSAGE-----