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Piper Jaffray Executive Resigns

November 18, 1997

MINNEAPOLIS (AP) _ A Piper Jaffray fund manager whose investments in derivatives made headlines when customers lost millions of dollars in 1994 is resigning.

Worth Bruntjen, senior vice president of Piper Capital Management, will leave the company Jan. 1. Maria Verven, a spokeswoman for Piper, said, ``It was his interest to pursue his own interests.″ She declined comment when asked if the resignation was related to the resolution of most disputes over the losses.

Bruntjen oversaw three closed-end funds _ American Government Income Fund, American Government Income Portfolio and American Opportunity Income Fund _ and an open-ended fund, Piper Jaffray’s Intermediate Bond Fund.

The investment strategy involved mixing bond mutual funds and privately managed accounts with derivatives created from pools of home mortgages. A derivative is an investment whose value is derived from an underlying asset, such as a stock, a currency or a mortgage.

The opportunities for gain are great with derivatives, which let investors leverage their bets on such market factors as the direction of interest rates.

For a while, the derivatives offered supercharged returns. Bruntjen got national recognition for outperforming other bond fund managers.

But when interest rates increased in 1994, derivatives plunged in value.

More than 7,000 mutual fund shareholders and institutions such as the Minnesota Orchestra sued Piper, claiming they were never told that the derivatives strategy was risky.

Piper has settled those claims, with damages reaching more than $100 million.

Piper has never admitted any wrongdoing and the company says the mortgage funds have earned strong returns for investors in other years.

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