PIPER JAFFRAY COMPANIES INC, 10-K, 1996-12-26

PIPER JAFFRAY COMPANIES INC
10-K, 1996-12-26
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934

For the fiscal year ended September 30, 1996

[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Commission File No. 1-7421

PIPER JAFFRAY COMPANIES INC.
(Exact name of Registrant as specified in its charter)

Delaware 41-1233380
(State of incorporation) (IRS Employer Identification No.)

Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (612) 342-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered

Common Stock, par value $1.00 per share New York Stock Exchange
Chicago Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

As of November 29, 1996, 18,202,349 shares of common stock were issued and
outstanding, and the aggregate market value of the shares of common stock held
by non-affiliates was approximately $137,976,000 (based upon the closing price
on the New York Stock Exchange).

<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE

Item Document of Reference
PART II

Item 5. Market for Registrant's "Market Prices and Dividends Per
Common Equity and Related Share" from the Annual Report to
Shareholder Matters Shareholders for the fiscal year
ended September 30, 1996 (the
"1996 Annual Report")

Item 6. Selected Financial Data "Financial Summary" from the
1996 Annual Report

Item 7. Management's Discussion and "Management's Financial Discussion"
Analysis of Financial Condition from the 1996 Annual Report
and Results of Operation

Item 8. Financial Statements and "Consolidated Financial Statements"
Supplementary Data and "Summary of Quarterly Results"
from the 1996 Annual Report

PART III

Item 10. Directors and Executive "Election of Directors" on pages 2-3
Officers of the Registrant and "Compliance with Reporting Require-
ments" on page 12 of the Registrant's
definitive Proxy Statement for the
Annual Meeting of Shareholders to be
held on January 22, 1997 (the "1997
Proxy Statement") and to be filed within
120 days after the Registrant's fiscal
year ended September 30, 1996

Item 11. Executive Compensation "Executive Compensation" on pages 6-10
of the 1997 Proxy Statement

Item 12. Security Ownership of Certain "Equity Securities Beneficially
Beneficial Owners and Owned by Directors and Executive
Management Officers" on page 5 of the 1997
Proxy Statement

Item 13. Certain Relationships and "Transactions with Directors and
Transactions Officers" on page 12 of the 1997
Proxy Statement
PART IV

Item 14.(a):

1. Consolidated Financial Statements "Consolidated Financial Statements"
from the 1996 Annual Report to
Shareholders, included in Exhibit
13 filed herein

2. Financial Statement Schedules "Summary of Quarterly Results" from
Selected Quarterly Financial Data the 1996 Annual Report to
Shareholders, included in Exhibit 13
filed herein

<PAGE>

PART I

Item 1. Business

Piper Jaffray Companies Inc. (the "Company"), a Delaware corporation, is a
holding company which offers individual investor, investment banking, investment
management and trust services through its wholly owned subsidiaries. The Company
is not engaged in any business activities other than certain investing and
administrative functions.

The Company's primary wholly owned subsidiaries include Piper Jaffray Inc.
(Piper Jaffray), its broker/dealer subsidiary; Piper Capital Management
Incorporated (Piper Capital), an asset management firm; Piper Trust Company
(Piper Trust); and Premier Acceptance Corporation (Premier), an issuer of
mortgage-backed bonds.

Piper Jaffray Inc.

Piper Jaffray is a Delaware corporation organized in 1969 as the successor to a
business established in 1895. Piper Jaffray is a securities broker/dealer and
investment banking firm. As such, it effects transactions in listed and unlisted
securities and options and futures contracts, underwrites corporate and
municipal securities, and sells mutual fund shares, U.S. government securities,
and other financial products and services.

Piper Jaffray is a member of the New York Stock Exchange, American Stock
Exchange, Chicago Stock Exchange, National Association of Securities Dealers,
National Futures Association, Cincinnati Stock Exchange, Minneapolis Grain
Exchange, and the New York Futures Exchange.

As of September 30, 1996 Piper Jaffray had 78 retail sales offices in 17 states.
Piper Jaffray is licensed as a broker/dealer in all states and Washington D.C.

Piper Capital Management Incorporated

Piper Capital, a Delaware corporation, was incorporated in 1983 and is an
investment adviser registered under the Investment Advisers Act of 1940. Piper
Capital furnishes investment advice to various clients, including pension and
profit sharing funds, corporations and individuals. Piper Capital is also the
investment adviser to 16 closed-end funds, and the Piper Funds Inc. series of 16
open-end mutual funds. As of September 30, 1996, Piper Capital's total assets
under management were approximately $9.1 billion.

Piper Trust Company

Piper Trust, chartered in Minnesota in 1989, provides trust services to
individuals and institutions, focusing primarily on employee benefit and
personal trust services. Personal trust administrators assist individual clients
in planning their estates, setting investment goals, and monitoring investment
activities. Piper Trust administrators also work with institutions to provide
401(k) and other employee-directed, company-sponsored retirement plans. Piper
Trust operates 13 common and collective funds and had $1.0 billion in client
assets under trust as of September 30, 1996.

Premier Acceptance Corporation

Premier was incorporated in Delaware in 1988 and is an issuer of bonds which are
collateralized by GNMA and FNMA certificates. As of September 30, 1996, the
Company had $45.3 million of mortgage-backed bonds outstanding. The issuance of
six series of mortgage-backed bonds with an aggregate original principal amount
of $176.1 million and the related purchase of collateral have been accounted for
financial reporting purposes as a sale. Accordingly, the assets, liabilities,
interest income, and interest expense relating to these series do not appear on
the financial statements.

Sources of Revenues

Commissions

Piper Jaffray charges a brokerage commission when acting as agent for the
purchaser or seller of a security or futures contract. If the security is listed
on an exchange and Piper Jaffray does not act as a principal in the security,
the transaction is generally effected through an automatic execution and
clearing system or Piper Jaffray's own floor brokers. If the security is traded
on the over-the-counter market, Piper Jaffray generally effects the transaction
directly with one of the firms making a market in that security. Piper Jaffray
also acts as agent with respect to the purchase and sale of futures and option
contracts. These transactions are effected through correspondent brokers. Piper
Jaffray purchases mutual fund shares at a specified discount from the price at
which the shares are resold to customers. Piper Jaffray is also a distributor of
Piper Capital's open-end mutual funds.

Principal Transactions

Profits on principal trading transactions represent the difference between the
cost of securities purchased by Piper Jaffray for its own account and the
proceeds received upon the sale of such securities. Such transactions occur with
respect to corporate equity and fixed income securities, municipal securities
(generally issued by states, their agencies and political subdivisions), and
U.S. government securities.

Piper Jaffray acts as a market maker for unlisted common stocks and convertible
debt securities of approximately 417 companies. As a market maker, Piper
Jaffray, for its own account, generally maintains a long or short inventory
position with respect to such securities and stands ready to effect purchase or
sale transactions with customers and other dealers. Piper Jaffray also acts as a
principal in the trading of approximately 107 listed stocks.

Piper Jaffray maintains inventories of non-convertible corporate debt
securities, preferred stocks, municipal securities, and government securities,
as well as equity and convertible securities in which Piper Jaffray does not
make a market. These inventories usually result from underwriting and other
positions that have not yet been sold to customers, but are maintained to
facilitate customers' transactions and trading.

Piper Jaffray is exposed to the possibility of a loss and has the opportunity to
profit as market prices of the securities in its inventory positions change. The
value of the common stock and convertible debt inventory positions is primarily
affected by changes in the general market for equity securities and the
financial prospects of the issuers of such securities. The value of corporate
fixed income, municipal and government securities inventory positions is
primarily affected by changes in market interest rates. In general, Piper
Jaffray's securities inventories are maintained to meet customers' trading
demands. Accordingly, it is the policy of Piper Jaffray to carry as low a level
of securities inventories as is necessary to conduct customer business.

Investment Banking

Piper Jaffray underwrites both municipal and corporate securities. In an
underwriting, Piper Jaffray generally joins with other securities firms in a
group which commits to purchase securities from an issuer at a fixed price and
to re-offer those securities to the public. While most of Piper Jaffray's
underwriting revenues are derived from acting as manager or co-manager, Piper
Jaffray also acts as a member of underwriting groups managed by other firms.

Participation in an underwriting exposes Piper Jaffray to certain risks. If all
of the securities that Piper Jaffray has committed to underwrite cannot be
resold at the agreed upon price, Piper Jaffray might incur losses. In addition,
federal and state securities laws and regulations affect the activities of
underwriters and impose potential liabilities in connection with sales of
securities by underwriters to the public.

It is generally more profitable to be manager or co-manager of an underwriting
than to be solely a member of the underwriting group. However, managers usually
must commit to underwrite a larger portion of the offering than other members of
the underwriting group.

In addition to the underwriting of securities, Piper Jaffray engages in other
investment banking activities. These include raising capital through the private
placement of securities, appraising corporate securities for tax or other
purposes, arranging and evaluating the terms of mergers and acquisitions, and
advising companies with respect to financing plans and related matters.
Compensation for such services is in the form of negotiated fees.

Asset Management

Piper Capital, as investment adviser to mutual funds, provides each fund with
advice and assistance in the selection and disposition of that fund's
investments. In return, each fund pays Piper Capital monthly advisory fees
generally equal to a certain percentage of the fund's average net assets. Piper
Capital also serves as investment adviser for individual and fiduciary accounts.

Piper Capital effects a wide range of securities transactions in managed
accounts as well as within managed mutual funds. Certain managed accounts and
funds invest in derivative and/or mortgage-backed derivative securities. The use
of these and other securities in managed accounts and funds is monitored for
both eligibility of type of security and limitations on amount of security in
accordance with policies applicable to the particular accounts and funds,
including investment management agreements and fund prospectus guidelines.

Piper Trust also generates substantially all of its revenues through a
percentage fee based on the market value of total assets under management for
each client's account and through fees for estate planning and custodial and
fiduciary services.

Interest Income

Customers' purchases of listed and certain over-the-counter securities may be
effected on either a cash or margin basis. If the purchase is made on a cash
basis, full payment is due by a designated settlement date, generally three
business days following the purchase date. In a margin transaction, however,
Piper Jaffray lends the customer a portion of the purchase price up to limits
set by the Federal Reserve Board. Such loans are collateralized by the
securities purchased. These receivable amounts are funded by equity capital,
bank lines of credit, and proceeds from securities lending, as well as
non-interest bearing liabilities. As collateral for short-term bank borrowings,
Piper Jaffray is generally permitted to use securities in a customer's margin
account with a total market value of up to 140% of the amount owed to Piper
Jaffray by the customer.

Other Revenues

Piper Jaffray provides other financial services and products, including
custodial services for IRA's and defined contribution plans, managed account
services, wrap accounts, and various insurance investment products through the
Piper Jaffray sales force. Piper Jaffray also derives revenue for services
provided in connection with tender and exchange offers, from dividend and
interest payments on securities owned, and other miscellaneous items.

Employees

As of September 30, 1996, the Company, Piper Jaffray, Piper Capital and Piper
Trust had 291, 2,538, 125 and 37 full-time employees, respectively. Premier has
no employees. As of September 30, 1996 there were 1,223 employees of Piper
Jaffray, including some officers, registered with the New York Stock Exchange as
investment executives involved in Piper Jaffray's retail and institutional sales
activities. Of these, 150 were located in the Company's corporate headquarters
sales offices in Minneapolis.

Effective October 1, 1995, the core administrative and support services formerly
housed within the Company's subsidiaries were transferred to the Company. The
Company charges a management fee to its affiliates for these services based upon
their respective utilization. Certain reclassifications have been made to prior
year financial statements of the Company, included herein, to reflect current
year presentation.

Competition

The Company's subsidiaries are subject to intense competition in all aspects of
their businesses, not only from other companies in the securities industry, but
also from banks, savings and loan associations, retailers, and other firms
offering financial services. Many of these companies are larger and have greater
financial resources than the Company. In addition to competition from such
companies, there is competition within the securities industry in obtaining and
retaining the services of investment executives.

Regulation

The rules and regulations of the Securities and Exchange Commission, the
exchanges of which Piper Jaffray is a member, and the other regulatory bodies
under the jurisdiction of which Piper Jaffray conducts its business, are complex
and extensive. Regulated areas include the effecting of securities transactions,
the financial condition of Piper Jaffray, its record keeping and reporting
procedures, relationships with customers, including the handling of cash and
margin accounts, the experience and training requirements for certain employees,
and business procedures with non-member firms.

The exchanges, the National Association of Securities Dealers, and the National
Futures Association are voluntary, self-regulatory bodies composed of members
which have agreed to abide by the respective bodies' rules and regulations. Each
of these organizations may expel, fine and otherwise discipline member firms and
their employees.

Piper Jaffray is registered as a securities broker/dealer and as an investment
adviser with the Securities and Exchange Commission. Piper Jaffray is also
registered with the Commodity Futures Trading Commission as a futures commission
merchant under the Commodity Exchange Act. In addition to being subject to
various federal laws, rules and regulations, Piper Jaffray must be licensed as a
broker/dealer in, and comply with the regulations of, the states in which it
does business.

Piper Jaffray is subject to the Uniform Net Capital Rule (the "Rule") of the
Securities and Exchange Commission and the net capital rule of the New York
Stock Exchange (the "Exchange"). Piper Jaffray has elected to use the
alternative method permitted by the Rule which requires that it maintain minimum
net capital of 2% of aggregate debit balances arising from customer
transactions. The Exchange may prohibit a member firm from expanding its
business or paying cash dividends if resulting net capital would be less than 5%
of aggregate debit balances. In addition, Piper Jaffray is subject to certain
notification requirements related to withdrawals of excess net capital. At
September 30, 1996, Piper Jaffray's net capital under the Rule was $122.8
million or 23% of aggregate debit balances.

Piper Capital is registered under the Investment Advisers Act of 1940 and is the
investment adviser for investment companies regulated under the Investment
Company Act of 1940. As such, Piper Capital and each of its funds are subject to
annual independent audits and periodic examinations by the Securities and
Exchange Commission.

Piper Capital is subject to capital requirements in several states in which it
is registered as an investment adviser. Under requirements of the most
restrictive state, excess net capital was $2.6 million at September 30, 1996.

As a Minnesota trust company, Piper Trust is subject to the rules and
regulations of the State of Minnesota and the Minnesota Department of Commerce.
Regulatory examiners conduct periodic examinations of Piper Trust.

The laws, rules and regulations of the various federal, state and other
regulatory bodies to which the businesses of Piper Jaffray, Piper Capital and
Piper Trust are subject are constantly changing. While management of the Company
and its subsidiaries believes that they are currently in compliance in all
material respects with all laws, rules and regulations applicable to its
business, the effect of any such changes cannot be predicted.

Item 2. Properties

The Company currently conducts its operations through 79 retail and capital
markets offices in 17 states and London, U.K. All of its offices are leased with
various expiration dates through 2006. See Note 7 of the Notes to Consolidated
Financial Statements filed herein for information concerning leases.

Item 3. Legal Proceedings

The Company is currently a defendant in lawsuits and arbitrations and is subject
to regulatory inquiries related to various funds or assets managed by Piper
Capital. In addition, management is aware of unasserted claims which may contain
similar allegations. The Company is also a defendant in a case involving an
underwriting of Bonneville Pacific Corporation by Piper Jaffray. The Company
intends to defend or, in some cases, negotiate to settle these actions. It is
impossible to predict the outcome of these actions, and, at the present time,
the effect of these actions on the consolidated financial statements cannot be
determined. Accordingly, no provision for losses that may result has been
recorded in the consolidated financial statements. However, the aggregate cost
of litigation and any judgments, settlements or regulatory action relating to
these cases could have a material adverse effect on the consolidated financial
statements.

The Company is involved in various other lawsuits or arbitrations or threatened
lawsuits or arbitrations incidental to its securities business. Management of
the Company, after consultation with counsel, believes the resolution of these
various lawsuits, arbitrations and claims will have no material adverse effect
on the consolidated financial statements.

The following actions, individually or when aggregated with similar actions,
make claims for a material amount and are described in more detail below:

Lawsuits and Arbitrations Related to Various Funds or Assets Managed
by Piper Capital Management Incorporated

1. Institutional Government Income Portfolio

a. Lawsuits Brought by Investors in the Institutional Government Income
Portfolio.

The following actions have been brought by investors in the Institutional
Government Income Portfolio, managed by Piper Capital Management
Incorporated (Piper Capital). Plaintiffs in these actions requested
exclusion from a previously settled consolidated class action, In re Piper
Funds Inc. Institutional Government Income Portfolio (United States District
Court, District of Minnesota) ("PJIGX action"). The PJIGX action had
included claims based on allegations of misrepresentation and improper
management. The Court granted final approval to the settlement of the
consolidated class action on December 14, 1995. The claims alleged in the
following actions are similar to the claims which had been alleged in the
PJIGX action.

Frank R. Berman, Trustee of Frank R. Berman Professional CP Pension
Plan Trust v. Piper Jaffray Inc., Piper Fund, Inc., Morton Silverman
and Worth Bruntjen (Minnesota State District Court, Hennepin County).

Action commenced on April 11, 1995 in Minnesota State District Court,
Hennepin County. This action was removed to United States District Court,
District of Minnesota. Plaintiff seeks monetary damages, plus interest, and
attorneys' fees and costs. The Complaint does not specify an amount of
damages sought.

Beverly Muth vs. Piper Jaffray Inc. and Teresa L. Darnielle (Montana
Thirteenth Judicial District Court, Yellowstone County).

Action commenced on June 22, 1995. Plaintiff seeks monetary damages of over
$12,000, a sum to be determined at trial for extreme emotional distress and
an award of punitive damages.

b. Arbitrations Brought by Investors in Institutional Government Income
Portfolio.

The following arbitrations, commenced by investors in the Institutional
Government Income Portfolio, are based on claims similar to the claims which
had been alleged in the PJIGX action. Claimants in these arbitrations
requested exclusion from the settlement class in the PJIGX action.

Fredrikson & Byron, P.A., Bertin A. Bisbee, William J. Brody, John P.
Byron, and Richard R. Hansen, as Trustees of the Fredrikson & Byron,
P.A. Money Purchase Pension Plan, Fredrikson & Byron, P.A. Money
Purchase Pension Trust, Fredrikson & Byron, P.A. Profit Sharing Plan
and Fredrikson & Byron, P.A. Profit Sharing Trust v. Piper Jaffray
Incorporated, Piper Capital Management Incorporated, Worth Bruntjen,
and John Gibas (National Association of Securities Dealers
Arbitration).

Claim filed November 11, 1994. Claimants seek to recover in excess of $1
million.

Eric Wade Compton Russell v. Piper Funds Inc. Institutional Government
Income Portfolio, Piper Capital Management Incorporated, Piper Jaffray
Inc., Piper Jaffray Companies Inc. and Edwin Johnson (New York Stock
Exchange Arbitration).

Claim filed June 13, 1995. Claimant seeks to recover in excess of $37,500.

Hart v. Piper Jaffray Inc. (National Association of Securities Dealers
Arbitration).

Claim filed December 28, 1995. Claimant seeks to recover in excess of
$804,629.

North Dakota State College of Science Foundation v. Piper Capital
Management Incorporated, Piper Jaffray Inc. and Piper Jaffray
Companies Inc. (National Association of Securities Dealers
Arbitration).

Claim filed January 8, 1996. Claimant seeks to recover compensatory damages,
attorneys' fees, costs and punitive damages in an unspecified amount.

Catholic Charities of the Diocese of Winona v. Piper Jaffray Inc.
(National Association of Securities Dealers Arbitration).

Claim filed January 15, 1996. Claimant seeks to recover in excess of
$377,271.

Fairview Hospital v. Piper Capital Management Incorporated, Piper
Jaffray Inc. and Piper Jaffray Companies Inc. (National Association of
Securities Dealers Arbitration).

Claim filed March 1, 1996. Claimant seeks to recover in excess of $1.5
million.

Lummi Indian Business Council v. Piper Jaffray Inc. and Piper Capital
Management Incorporated (National Association of Securities Dealers
Arbitration).

Claim filed June 13, 1996. Claimant seeks to recover in excess of $1.7
million.

City of Eden Prairie v. Piper Capital Management, Piper Jaffray Inc.,
Piper Jaffray Companies Inc. and Worth Bruntjen (National Association
of Securities Dealers Arbitration).

Claim filed June 12, 1996. Claimant seeks to recover in excess of $1
million.

2. Adjustable Rate Term Trusts

a. The following action has been brought by an investor in the Adjustable Rate
Term Trusts. Plaintiff in this action requested exclusion from a previously
settled consolidated class action, Gordon et al. v. American Adjustable Rate
Term Trust 1996 et al. The Court granted final approval to the settlement of
the consolidated class action on August 23, 1996, and the effective date of
the settlement was September 23, 1996.

Willis Short, II v. Piper Jaffray Inc. and Piper Capital Management
Incorporated (Superior Court of California, County of San Diego.)

Plaintiff served a complaint on October 11, 1996 alleging common law claims
for fraud, breach of contract, breach of fiduciary duty and negligence.
Plaintiff seeks to recover in excess of $500,000 in compensatory damages and
punitive damages.

b. Arbitration Claims Brought by Investors in Adjustable Rate Term Trusts
and Other Funds

The following arbitrations have been brought by investors in the Adjustable
Rate Term Trusts and other funds. Claimants in these arbitrations requested
exclusion from the previously settled consolidated class action, Gordon, et
al. v. American Adjustable Rate Term Trust 1996, et al.

William J. Kenney v. John P. Murphy, Piper Capital Management Inc.,
and Kemper Securities, Inc. (National Association of Securities
Dealers Arbitration).

Claim filed February 24, 1995. Claimant seeks to recover approximately
$97,500.

William C. Schwenck v. Piper Jaffray Inc. (National Association of
Securities Dealers Arbitration).

Claim filed July 17, 1996. Claimant seeks to recover in excess of $100,000.

David L. G. Willats and Dixie Lea Willats v. Piper Jaffray Inc.
(National Association of Securities Dealers Arbitration).

Claim filed July 25, 1996. Claimant seeks to recover in excess of $62,000.

Robert M. Matthews, Sue B. Matthews, Trustee, and Jean Myers v. Piper
Jaffray and Stephen Driever (National Association of Securities
Dealers Arbitration).

Claim filed November 18, 1996. Claimant seeks to recover in excess of
$31,645.

3. American Strategic Income Portfolio Inc. I, II, and III (ASP, BSP and
CSP, respectively), American Select Portfolio Inc. (SLA), American
Opportunity Income Fund Inc. (OIF), American Government Income Fund
Inc. (AGF), American Government Income Portfolio Inc. (AAF) and other
named funds.

a. The following actions have been brought by investors in one or more of
the above-mentioned funds.

Gary E. Nelson, et al. v. American Strategic Income Portfolio Inc.-II, Piper
Jaffray Companies Inc., Piper Capital Management Incorporated, Piper Jaffray
Inc., Worth Bruntjen, Charles Hayssen, Michael Jansen, William Ellis and
Edward Kohler (United States District Court, Western District of
Washington).

Christian Fellowship Foundation Peace United Church of Christ,
Roseville Firefighter's Relief Association, William J. and Florence B.
Cohen, John and Shirley Breitner, Gary E. Nelson and Lloyd Schmidt, et al.
v. American Government Income Portfolio, Inc., American Government Income
Fund Inc., American Government Term Trust Inc., American Strategic Income
Portfolio Inc., American Strategic Income Portfolio Inc.-II, American
Strategic Income Portfolio Inc.-III, American Opportunity Income Fund Inc.,
American Select Portfolio Inc., Piper Jaffray Companies Inc., Piper Capital
Management Inc., Piper Jaffray Inc., Worth Bruntjen, Charles Hayssen,
Michael Jansen, William H. Ellis and Edward J. Kohler (United States
District Court, Western District of Washington).

Plaintiff Nelson, an investor in BSP, filed a putative class action lawsuit
on June 28, 1995. Nelson also was an investor in OIF, and filed a second
putative class action lawsuit on July 12, 1995. On September 7, 1995,
Plaintiffs Nelson, et al. filed an Amended Complaint alleging claims against
eight funds and various individuals and entities, which included many of the
allegations contained in the previous two putative class action lawsuits, as
well as new allegations. By Order filed October 5, 1995, the Court
consolidated the two putative class action lawsuits. Plaintiffs filed a
Second Amended Complaint on February 5, 1996, and a Third Amended Complaint
on June 4, 1996. Plaintiffs seek to represent a global class of persons who
purchased shares in the eight funds during the period May 25, 1988 through
May 1, 1995, as well as certain subclasses.

With respect to some or all of the subclasses, Plaintiffs allege violations
of Sections 11, 12(2) and 15 of the Securities Act of 1933 (Securities Act);
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (Securities
Exchange Act) and Rule 10b-5 promulgated thereunder; Sections 13(a), 34(b),
and 36(b) of the Investment Company Act; certain subsections of the
Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. ss.
1962 based on alleged predicate acts of mail fraud, wire fraud, interstate
transportation of money obtained through fraud, and fraud in the sale of
securities; the Washington State Securities Act; and the Washington Consumer
Protection Act. Plaintiffs may also purport to allege claims under the
common law of negligent misrepresentation and breach of fiduciary duty.
Under some or all of the claims, plaintiffs seek rescission or monetary
damages, treble damages, attorney's fees, prejudgment interest and costs.
The Third Amended Complaint does not specify a particular amount of damages
sought. The defendants filed a motion to dismiss the consolidated action and
a motion for summary judgment.

The named plaintiffs and defendants have reached an agreement-in-principle
on a proposed settlement. If approved by the Court, a settlement agreement
consistent with the terms of the agreement-in-principle would provide $15.5
million in payments by the Company and Piper Capital over the next four
years. The settlement also includes an agreement that each of AGF, AAF and
OIF would offer to repurchase up to 25 percent of their outstanding shares
from current shareholders at net asset value. If the discounts between net
asset value and market price of these funds do not decrease to 5 percent or
less within approximately two years after the effective date of the
settlement, the fund boards may submit shareholder proposals to convert
these funds to an open-end format, unless they determine that it is not in
the shareholders' best interest to do so. Finally, the agreement stipulates
that each of ASP, BSP, CSP and SLA would offer to repurchase up to 10
percent of their outstanding shares from current shareholders at net asset
value.

The Ewing Company Profit Sharing Plan v. Piper Jaffray Inc. (United
States District Court, District of Idaho).

Plaintiff, an investor in the American Adjustable Rate Term Trusts, Inc.,
1995, 1996, 1997, 1998, 1999, the American Strategic Income Portfolio Inc.,
and the American Strategic Income Portfolio Inc.-II, filed this action on
November 1, 1995. Plaintiff alleges violation of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder;
violation of the Idaho Securities Act and the Idaho Consumer Protection Act;
and common law fraud. Plaintiff seeks to recover principal in excess of
$90,000, interest in excess of $32,000, attorneys' fees and costs and has
reserved the right to seek punitive damages. Plaintiff has agreed to dismiss
all claims relating to the American Adjustable Rate Term Trusts.

John Darlington and Ann Darlington v. Piper Jaffray Inc. and Dick
Tallent (Montana Second Judicial District Court, Silver Bow County).

Plaintiff filed this action on November 1, 1995 based on his investment in
the American Strategic Income Portfolio Inc.-III and the Americas Income
Trust Inc. Plaintiff alleges claims of breach of contract, breach of the
covenant of good faith and fair dealing, fraud and misrepresentation. The
Complaint seeks compensatory damages in an unspecified amount, damages for
mental and emotional distress and pain and suffering, punitive damages, and
costs and attorneys' fees.

Kenneth Schneider v. Piper Jaffray Inc. and Richard Tallent (Montana
Second Judicial District Court, Silver Bow County).

Plaintiff filed this action on April 11, 1996 based on his investment in
SLA. Plaintiff alleges claims of misrepresentation and negligent
misrepresentation. The Complaint seeks compensatory damages in an
unspecified amount, punitive damages, costs and attorneys' fees.

Margaret Nagel v. Piper Jaffray Inc. and Richard Tallent (Montana
Second Judicial District Court, Silver Bow County).

Plaintiff filed this action on April 11, 1996 based on her investment in
SLA. Plaintiff alleges claims of misrepresentation and negligent
misrepresentation. The Complaint seeks compensatory damages in an
unspecified amount, punitive damages, costs and attorneys' fees.

Kenneth Gennerman as Trustee of The Nicole Bowlin Trust v. Piper
Jaffray Inc. (Wisconsin Circuit Court, Waukesha County)

Plaintiff filed this action on August 7, 1996 based on his investment in
OIF. Plaintiff alleges claims of negligent misrepresentation, intentional
misrepresentation and strict responsibility. The Complaint seeks rescission
or compensatory damages for investment of $10,000, plus interest, punitive
damages and attorneys' fees and costs.

b. The following arbitration claims seek recovery by investors in one or
more of the afore-mentioned closed-end funds:

Frederick Poole and Jane Poole; George Chapman; Dolores Patterson; Craig
Carter; Elliott J. Ashford and Linda K. Ashford; Elliott J. Ashford as the
Custodian for the accounts of Katie Stoltz and Zachary Stoltz; Linda K.
Ashford, as custodian for the account of Shelby Ashford; Kenneth Powers and
Marlene Powers; Robert Ferris and William Ferris, Custodians for the account
of Eva Ferris; Jim Toomey and Linda Toomey; Jeffrey Erwin and Lynda Erwin;
Alan Citron and Kathy Citron; Mishelle Barr as the custodian for the account
of Maria Barr; J. Kerry Wilcox and Sally E. Wilcox; Willard R. Helton and
Lenora J. Helton; Richard Austin and Joan Austin; Sydney Bannister; F. Alan
Boyd and Viola Boyd; Joseph Brown and Wanda Brown; Peter Crane and Jody
Gebbers; Robert Fately and Regna Fately; Millard Fowler and Frankie Fowler;
Marilyn Gearing; Edward Godsey and Nancy Godsey; James Keaton; R. L.
McDonald; Nora Rappe and Elmer Rappe;; Doris Riggs; Larry Simms and Bonnie
Simms; Kenneth Willig and Noreen Willig, as trustees for the Kenneth A.
Willig 1976 Trust; Talleta Wibmer and Helmut Wibmer; Susan Van Masdam;
George Willot; Teresa Smith; Betty Wick; Susan Wick; Velma Donelly v. Piper
Jaffray & Hopwood Incorporated; Piper Capital Management Inc; American
Strategic Income Portfolio, Inc., I; American Strategic Income Portfolio,
Inc., II; American Strategic Income Portfolio, III; American Select, Inc.;
Piper Jaffray Companies Inc.; Piper Jaffray Inc.; and Mike Jansen (National
Association of Securities Dealers Arbitration).

Claim filed December 6, 1995. Claimants seek rescission or damages, interest
and costs in an unspecified amount.

Daniel K. Nordby and Barbara L. Rawley v. Piper Jaffray Inc. and Gary
M. Petrucci (National Association of Securities Dealers Arbitration).

Claim filed in February, 1995. Claimants seek to recover approximately
$31,500.

Penny DiRocco v. Piper Jaffray Inc. (National Association of
Securities Dealers Arbitration).

Claim filed March 27, 1995. Claimant seeks damages in excess of $500,000.

Kelly E. Andrews v. Piper Jaffray Inc. (National Association of
Securities Dealers Arbitration).

Claim filed May 10, 1996. Claimant seeks to recover approximately $24,979.

Mabel I. Hines v. Piper Jaffray Inc. and Robert Bliss (National
Association of Securities Dealers Arbitration).

Claim filed May 16, 1996. Claimant seeks to recover approximately $25,000.

Thomas R. Clements v. Piper Jaffray Inc. (National Association of
Securities Arbitration).

Claim filed July 18, 1996. Claimant seeks to recover $7,275.

Henry G. and Barbara S. Kohler Trustees FBO Calneva Development
Company Inc., Combined Retirement Trust Dated 3/1/81 v. M.L. Stern &
Company and Piper Jaffray Inc. (National Association of Securities
Dealers Arbitration).

Claim filed August 5, 1996. Claimant seeks to recover in excess of $19,984.

Janet Hayden v. Piper Jaffray Inc. (National Association of Securities
Dealers Arbitration).

Claim filed September 3, 1996. Claimant seeks to recover in excess of
$256,550.

A. J. Low, Jr. v. Piper Jaffray Inc. (National Association of
Securities Dealers Arbitration).

Claim filed September 12, 1996. Claimant seeks to recover $10,000.

Kenneth W. Nagel, Trustee, and Rachel J. Nagel, Trustee v. Piper
Jaffray Inc. (National Association of Securities Dealers Arbitration).

Claim filed November 18, 1996. Claimants seek to recover $10,000.

4. Managers Intermediate Mortgage Fund

Florence R. Hosea, Bobby W. Hosea, Getrud B. Dale and Peter M. Dale,
Andrew Poffel and Diane Poffel as tenants by the Entireties, Myrone
Barone, Donna M. DiPalo, Bernard B. Geltner as IRA custodian, IRA and
Bernard B. Geltner and Gail Geltner and Paul Delman v. The Managers
Funds, The Managers Funds, L.P., Robert P. Watson, Piper Capital
Management Incorporated, Piper Jaffray Inc., Worth Bruntjen and
Managers Intermediate Mortgage Fund (United States District Court,
District of Connecticut).

Karen E. Kopelman v. The Managers Fund, The Managers Funds, L.P.,
Robert P. Watson, Piper Capital Management Incorporated, Piper Jaffray
Inc., Worth Bruntjen and Managers Intermediate Mortgage Fund (United
States District Court, District of Connecticut).

Plaintiff Hosea filed a putative class action lawsuit on September 26, 1994.
Plaintiff Kopelman filed a putative class action lawsuit on November 4,
1994. By court order dated December 13, 1994, these two putative class
action lawsuits were consolidated. The plaintiffs purport to represent a
class of persons who purchased shares in the Managers Intermediate Mortgage
Fund ("Managers Intermediate") during the period from May 1, 1992, through
June 14, 1994. Managers Intermediate is a no-load, open-end mutual fund that
was generally managed by The Managers Funds, L.P. During the class period,
Piper Capital was the portfolio asset manager.

In their Amended and Restated Complaint, filed on July 19, 1995, plaintiffs
allege that defendants Piper Capital, Piper Jaffray and Worth Bruntjen (the
"Piper Defendants") violated Sections 11, 12(2) and 15 of the Securities
Act; Section 10(b) of the Securities Exchange Act, and Rule 10b-5
promulgated thereunder; Sections 34(b) and 36(b) of the Investment Company
Act; and engaged in negligent misrepresentation. Plaintiffs seek rescission
or monetary damages, plus prejudgment interest, punitive damages "where
appropriate," and attorneys' fees and costs. The Complaint does not specify
an amount of damages sought.

Although the plaintiffs in this consolidated action allege that it has been
brought as a class action, the Court has not yet determined whether a class
will be certified. The defendants have filed a motion to dismiss the
consolidated action in its entirety.

5. Managers Short Government Income Fund

a. Robert Fleck, on behalf of himself and all others similarly situated v. The
Managers Funds, The Managers Funds, L.P., Piper Jaffray Inc., Piper Capital
Management Incorporated, Worth Bruntjen, Evaluation Associates, Inc.,
Robert P. Watson, John E. Rosati, William M. Graulty, Madeline H.
McWhinney, Steven J. Paggioli, Thomas R. Schneeweis and Managers Short
Government Fund, F/K/A Managers Short Government Income Fund (United States
District Court, District of Minnesota).

Plaintiff, a shareholder of the Managers Short Government Income Fund
("Managers Short"), filed this putative class action lawsuit on November 18,
1994. Plaintiff purports to represent a class of persons who purchased
shares of Managers Short during the period from May 1, 1993, through
September 12, 1994. Managers Short is a no-load, open-end mutual fund that
was generally managed by The Managers Funds, L.P. Piper Capital was the
portfolio asset manager until August 12, 1994.

By Order filed November 24, 1995, the Court dismissed all claims against the
Piper Defendants for failure to state a claim. The Court ordered that
plaintiff may file an amended Complaint on or before December 20, 1995. The
Court denied, in part, a motion to dismiss claims asserted against
defendants other than the Piper Defendants, including claims for alleged
violation of Sections 11, 12(2) and 15 of the Securities Act.

On December 14, 1995, plaintiff served an Amended Complaint alleging that
defendants Piper Jaffray Inc., Piper Capital and Worth Bruntjen (the "Piper
Defendants") violated Sections 11, 12(2) and 15 of the Securities Act;
Section 10(b) of the Securities Exchange Act, and Rule 10b-5 promulgated
thereunder; Section 13(a)(3) of the Investment Company Act; and engaged in
common law fraud. Plaintiff seeks rescission and monetary damages, plus
prejudgment interest, punitive damages if appropriate, and attorneys' fees
and costs. The Amended Complaint does not specify an amount of damages
sought. The Piper Defendants filed a motion to dismiss the claims against
them in the Amended Complaint.

The named plaintiff and defendants have reached an agreement-in-principle on
a proposed settlement. If approved by the Court and a sufficiently large
percentage of the putative class members, a settlement agreement consistent
with the terms of the agreement-in-principle would provide to class members
up to a total of $1.5 million collectively from The Managers Funds, L.P. and
Piper Capital on the effective date of the settlement.

b. Other Lawsuit Brought by Investor in the Managers Short Government
Fund and the Managers Intermediate Mortgage Fund

First Commercial Trust Company, N.A. v. The Managers Funds, a Massachusetts
Business Trust, Managers Short Government Fund, Managers Intermediate
Mortgage Fund, Managers Short and Intermediate Bond Fund, The Managers
Funds, L.P., EAIMC Holdings Corporation, Evaluation Associates Holding
Corporation, EAI Partners, L.P., Evaluation Associates, Inc., Robert P.
Watson, William W. Graulty, Madeline H. McWhinney, Steven J. Paggioli,
Thomas R. Schneeweis, William J. Crerend, Piper Capital Management Inc.,
Piper Jaffray Companies Inc., Worth Bruntjen, Standish, Ayer & Wood, Inc.,
TCW Funds Management, Inc. and TCW Management Company (Connecticut Superior
Court, Stamford/Norwalk District).

According to the Complaint filed on October 26, 1995, plaintiff First
Commercial Trust Company is an investor in the Managers Short Government
Fund, the Managers Intermediate Mortgage Fund, and the Managers Short and
Intermediate Bond Fund. Piper Capital was the portfolio asset manager for
the Managers Short Government Fund and the Managers Intermediate Bond Fund,
which are generally managed by The Managers Funds, L.P. Based on the
allegations in the Complaint, plaintiff appears to fall within the
definition of the proposed classes in both the Hosea/Kopelman and Fleck
actions described above.

Plaintiff alleges that the Company, Piper Capital and Bruntjen (the "Piper
Defendants"), engaged in fraud, fraudulent concealment, breach of contract,
breach of fiduciary duty, breach of implied covenant of good faith and fair
dealing, negligent misrepresentation, civil conspiracy, negligent
interference with contractual relations, violation of the Connecticut Unfair
and Deceptive Trade Practices Act, and violation of the Connecticut
Securities Act. Plaintiff seeks compensatory damages in an unspecified
amount, punitive damages, attorneys' fees, interest and costs. The Piper
Defendants have joined a motion brought by other defendants to dismiss the
Complaint or alternatively to stay the action.

In a declaratory action filed on October 26, 1995 in the United States
District Court, District of Connecticut, the Piper Defendants, along with
The Managers Funds, L.P., The Managers Funds and related persons and
entities seek a declaration that they bear no liability to the Plaintiff.
Plaintiff has brought a motion to dismiss the declaratory action.

6. Privately Managed Accounts

The following arbitration claim seeks recovery for accounts managed by Piper
Capital:

Regents of the University of Minnesota and Ruminco, Ltd. v. Piper Capital
Management Incorporated, Piper Jaffray Inc., Piper Jaffray Companies Inc.
and Worth Bruntjen (National Association of Securities Dealers
Arbitration).

Claim filed November 22, 1995. Claimants seek to recover over $15 million
and punitive damages. Claimants allege violation of federal and state
securities laws, breach of fiduciary duty, breach of contract, negligence
and violation of the Minnesota Consumer Fraud Act. Claimants' individually
managed accounts included investments in derivative products.

Bonneville Pacific Corporation

Piper Jaffray was named as one of several defendants in a lawsuit filed in
the United States District Court for the District of Utah resulting from
Piper Jaffray's dealings with Bonneville Pacific Corporation ("BPCO"). Other
defendants include BPCO's attorneys, accountants, lenders and other
investment bankers. BPCO is currently in Chapter 11 reorganization
proceedings in Utah.

The plaintiffs in the first-filed lawsuit originally brought their complaint
as a purported class action relating to the $63.25 million offering of
convertible subordinated debentures of BPCO in August 1989, for which Piper
Jaffray was a co-managing underwriter in a syndicate led by Kidder, Peabody
& Co. and secondary trading in BPCO's Common Stock from August 1989 through
the inception of BPCO's bankruptcy proceeding in December 1991. The
plaintiffs in their complaint alleged violations of federal and state
securities laws, common law fraud and negligent misrepresentation. On March
14, 1994, the plaintiffs filed a motion to amend their complaint seeking
leave to add additional parties and claims. The proposed amended complaint
seeks to add claims under RICO and to expand the class period, under a
common law fraud theory, to include the $22.5 million initial public
offering of BPCO's Common Stock in August 1986, for which Piper Jaffray
acted as the sole underwriter, and the $31 million secondary offering of
BPCO's Common Stock in August 1987, for which Piper Jaffray acted as
co-managing underwriter. In addition to actual damages, the proposed amended
complaint also seeks treble damages under RICO, punitive damages, interest,
costs and attorneys' fees. On April 29, 1994, motions to dismiss brought by
Piper Jaffray and the other underwriter defendants with respect to the
plaintiffs' claims of violations of Section 10(b) of the Securities Exchange
Act and Rule 10b-5 promulgated thereunder, conspiracy, aiding and abetting,
common-law fraud and negligent misrepresentation were granted. The judge in
the case certified to the Utah Supreme Court issues related to the
plaintiffs' claims under the Utah Uniform Securities Act and further denied
plaintiffs' March 14, 1994 motion for leave to file an amended complaint as
premature. The plaintiffs were given leave to amend all dismissed claims
except the conspiracy and aiding and abetting claims under Section 10(b),
which were dismissed with prejudice. By date of June 14, 1994, plaintiffs
served a second amended complaint, realleging claims under Sections 11 and
15 of the Securities Act and Section 10 of the Securities Exchange Act and
Rule 10b-5 promulgated thereunder. Plaintiffs also asserted RICO claims and
claims under the Utah Uniform Securities Act, among others. On August 2,
1994, Piper Jaffray and the other defendants moved to dismiss the RICO,
Securities Exchange Act and Utah Uniform Securities Act claims and that
motion is pending. In an opinion filed July 5, 1996, the Utah Supreme Court
held that reliance was not an element of a claim under Utah's Uniform
Securities Act, but that the plaintiffs were required to establish privity
with a particular defendant seller of securities in order to recover from
that defendant.

The second lawsuit was brought by the BPCO bankruptcy trustee. The lawsuit
alleged conspiracy, RICO, common law fraud, breach of fiduciary duty and
similar theories arising out of the activities of BPCO from 1984 through the
inception of its bankruptcy proceeding. The lawsuit sought actual damages,
treble damages under RICO, punitive damages, interest, costs and attorney's
fees. On August 12, 1996, Piper Jaffray entered into a settlement agreement
with the BPCO bankruptcy trustee providing for the payment of $10.0 million
in settlement of all claims against Piper Jaffray. The settlement agreement
was subsequently approved by the District Court and the Bankruptcy Court.
Under the terms of the settlement agreement, Piper made a $7.0 million
payment on September 9, 1996. Two additional payments of $1.5 million each
are payable in September 1997 and September 1998.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 1996.

<PAGE>

PART II

All information required in Part II, Items 5 - 8 is contained in the 1996 Annual
Report to Shareholders, incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

PART III

All information required in Part III, Items 10-13 will be contained in the
Registrant's definitive Proxy Statement for the 1997 Annual Meeting of
Shareholders, incorporated herein by reference.

PART IV

Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K

(a)

1. Consolidated financial statements:

Independent Auditors' Report
Consolidated Statements of Financial Condition
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Incorporated herein by reference is the 1996 Annual Report to Shareholders, a
copy of which is filed herewith as Exhibit 13.

2. Financial statement schedules:

Schedule III - Condensed Financial Information of Registrant

Schedules not listed above have been omitted because they are either not
applicable or the required information has been given in the Consolidated
Financial Statements or notes thereto.

(b)

Reports on Form 8-K

On March 6, 1996, the Company filed a report on Form 8-K announcing the
agreements with the National Association of Securities Dealers and the
Minnesota Department of Commerce related to their joint investigations of the
Company's marketing and sale of the PJIGX fund.

On April 23, 1996, the Company filed a report on Form 8-K announcing the
agreement in principle to settle purported class action litigation brought on
behalf of shareholders of the American Adjustable Rate Term Trusts.

On June 21, 1996, the Company filed a report on Form 8-K announcing the
agreement in principle to settle purported class action litigation brought on
behalf of shareholders of several closed-end funds managed by Piper Capital.

(c)

Exhibits:

3.1 Restated Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Form 10-K for the fiscal
year ended September 27, 1991, as amended by Form 8 dated January 30,
1992, Commission File No. 1-7421).

3.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the
Registrant's Form 10-K for the fiscal year ended September 27, 1991, as
amended by Form 8 dated January 30, 1992, Commission File No. 1-7421).

3.3 Certificate of Ownership & Merger dated April 8, 1992, amending the
Restated Certificate of Incorporation of the Registrant to change the
Registrant's name to Piper Jaffray Companies Inc. (incorporated by
reference to Exhibit 3.3 to the Registrant's Form 10-Q for the quarter
ended March 27, 1992, Commission File No. 1-7421).

4.1 Indenture dated July 19, 1988 between Premier Acceptance Corporation, a
wholly owned subsidiary of the Registrant, as issuer, and First Trust
National Association, as trustee, relating to the subsidiary's issuance
of mortgage-backed bonds (incorporated by reference to Exhibit A to
Premier Acceptance Corporation's Form 8-K dated July 22, 1988, Commission
File No.'s 33-21775, 33-25070, 33-33261).*

4.2 Indenture dated as of November 23, 1988 between Premier Acceptance
Corporation, as issuer, and First Bank National Association , as trustee
(incorporated by reference to Exhibit 4.1 to Premier Acceptance
Corporation's Form 8-K dated November 23, 1988, Commission
File No.'s 33-21775, 33-25070, 33-33261).*

10.1 Amended and Restated Limited Liability Company Agreement among the
Registrant, Midland Walwyn Capital Corporation and Hercules
International Management l.l.c. dated October 18, 1993. (incorporated
by reference to Exhibit 10.1 of the Registrant's Form 10-K for the
fiscal year ended September 30, 1993, Commission File No. 1-7421).

10.2 Lease Agreement between the Registrant and OB Joint Venture II dated as
of March 31, 1983, including amendments thereto through September 27,
1991, (portions of the lease have been omitted pursuant to Rule 24b-2
promulgated under the Securities Exchange Act of 1934) (incorporated by
reference to Exhibit 10.2 of the Registrant's Form 10-K for the fiscal
year ended September 27, 1991, as amended by Form 8 dated January 30,
1992, Commission File No. 1-7421).

10.3 1983 Book Value Stock Purchase Plan of the Registrant (incorporated by
reference to Exhibit 10.3 of the Registrant's S-8 Registration Statement
dated January 30, 1987, Commission File No. 33-11657).

10.4 Deferred Compensation Plan of the Registrant (incorporated by reference
to Exhibit 10.4 of the Registrant's Form 10-K for the fiscal year ended
September 27, 1991, as amended by Form 8 dated January 30, 1992,
Commission File No. 1-7421).

10.6 Piper Capital Management Incorporated 1988 Phantom Share Incentive Bonus
Plan (incorporated by reference to Exhibit 10.6 of the Registrant's Form
10-K for the fiscal year ended September 27, 1991, as amended by Form 8
dated February 25, 1992, Commission File No. 1-7421).

10.7 Piper Jaffray Inc. Participating Bonus Agreement for Premier Acceptance
Corporation Transactions (incorporated by reference to Exhibit 10.7 of
the Registrant's Form 10-K for the fiscal year ended September 27, 1991,
as amended by Form 8 dated February 25, 1992, Commission File No.
1-7421).

10.8 1993 Omnibus Stock Plan of the Registrant (incorporated by reference to
Appendix A to the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders held on January 28, 1993, Commission File No.
1-7421).

10.9 Piper Jaffray Companies Stock Investment Plan (incorporated by reference
to Exhibit 4.03 of the Registrant's Form S-8 dated June 4, 1994,
Commission File No. 033-53979).

10.10Piper Jaffray Companies Inc. 1995 Executive Performance Bonus Plan
(incorporated by reference to Appendix A to the Registrant's
definitive Proxy Statement for the Annual Meeting of Shareholders
held on January 25, 1995, Commission File No. 1-7421).

10.11Agreement to dissolve Hercules International Management, Limited
Liability Company, between the Registrant and Midland Walwyn Capital
Corporation, dated November 16, 1995.

10.12Piper Capital Management Incorporated 1995 Phantom Stock Option Plan.

10.13Pledge and Collateral Administration Agreement, between Piper Jaffray
Inc. and Northern Trust Company, dated November 23, 1994.

10.14Credit Agreement, between Piper Jaffray Inc. and Norwest Bank
Minnesota, National Association, dated November 23, 1994.

10.15Credit Agreement, between Piper Jaffray Inc. and First Bank National
Association, dated November 23, 1994.

10.16Credit Agreement, between Piper Jaffray Inc. and Northern Trust
Company, dated November 23, 1994.

10.17First Amendment to Credit Agreement, between Piper Jaffray Inc. and
Norwest Bank Minnesota, National Association, dated December 28, 1994.

10.18First Amendment to Credit Agreement, between Piper Jaffray Inc. and
First Bank National Association, dated December 27, 1994.

10.19First Amendment to Credit Agreement, between Piper Jaffray Inc. and
Northern Trust Company, dated December 23, 1994.

10.20Second Amendment to Credit Agreement, between Piper Jaffray Inc. and
Norwest Bank Minnesota, National Association, dated November 7, 1995.

10.21Second Amendment to Credit Agreement, between Piper Jaffray Inc. and
First Bank National Association, dated November 7, 1995.

10.22Second Amendment to Credit Agreement, between Piper Jaffray Inc. and
Northern Trust Company, dated November 9, 1995.

10.23Piper Jaffray Inc. Second Century Growth Deferred Compensation Plan,
dated September 26, 1996.

11 Statement Re: Computation of Per Share Earnings

13 1996 Annual Report to Shareholders

21 Subsidiaries of the Registrant

23 Independent Auditors' Consent

27 Financial Data Schedule

* Premier Acceptance Corporation has filed Registration Statements pursuant to
which $900,000,000 in aggregate principal amount of mortgage-backed bonds were
registered under the Securities Act. The bonds are issued in series, pursuant to
series supplements and supplemental indentures referenced in Item 14(a)(3) of
Premier Acceptance Corporation's Form 10-K for the fiscal year ended September
30, 1996. Norwest Bank Minnesota, National Association was appointed successor
Trustee under the Indentures in 1991.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Piper Jaffray Companies Inc.
(Registrant)
Dated: December 20, 1996
By:

/s/ Addison Piper
Addison L. Piper
Chairman and Chief Executive Officer, and Director

/s/ William H. Ellis
William H. Ellis
President, and Director

/s/ Deborah K. Roesler
Deborah K. Roesler
Managing Director and Chief Financial Officer

/s/ Sandra G. Sponem
Sandra G. Sponem
Managing Director and Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated:

Signature Title Signature Title

/s/ Ralph W. Burnet Director /s/ Kathy Halbreich Director
Ralph W. Burnet Kathy Halbreich

Director Director
John L. McElroy, Jr. Robert S. Slifka

/s/ David Stanley Director
David Stanley

Dated: December 20, 1996

<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Piper Jaffray Companies Inc.
Minneapolis, Minnesota

We have audited the consolidated financial statements of Piper Jaffray Companies
Inc. and subsidiaries as of September 30, 1996 and 1995, and for each of the
three years in the period ended September 30, 1996, and have issued our report
thereon dated November 6, 1996 (which includes an emphasis on a matter relating
to litigation described in Note 8 of the consolidated financial statements);
such consolidated financial statements and report are included in your 1996
Annual Report to Shareholders and are incorporated herein by reference. Our
audits also included the financial statement schedule of Piper Jaffray Companies
Inc. and subsidiaries, listed in Item 14(a)2. This financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/s/ Deloitte & Touche LLP

Minneapolis, Minnesota
November 6, 1996

<PAGE>

Schedule III
PIPER JAFFRAY COMPANIES INC.
Parent Company Only

(Dollars in thousands)

Condensed Statements of Operations

Year ended Year ended Year ended
September 30, September 30, September 30,
1996 1995 1994
Revenues

Interest income $ 36 $ 839 $ 460
Land and facilities rental 1452 896 698
---- --- ---
1,488 1,735 1,158

Expenses

Compensation 15,240 11,176 10,872
Interest expense 3,030 35 296
Loss on investments 432 1,103 3,841
Occupancy 9,784 7,648 7,301
Communications 1,351 652 403
Travel and promotional 1,364 1,178 1,774
Professional fees 4,454 1,804 1,395
PJIGX settlement, net - 56,090 -
Other operating expenses,
including settlements 54,055 20,026 4,250
------ ------ -----
89,710 99,712 30,132

Parent company management fee (34,254) (26,777) (25,409)
------- ------- -------
Loss before income taxes and
equity in earnings of
subsidiaries (53,968) (71,200) (3,565)

Income tax benefit (21,047) (27,468) (1,319)
------- ------- ------
Loss before equity in
earnings of subsidiaries (32,921) (43,732) (2,246)
Equity in earnings of
subsidiaries 40,217 29,614 27,528
------ ------ ------
Net income (loss) $ 7,296 $ (14,118) $ 25,282
========== ========== =========

Certain reclassifications have been made to prior year financial statements to
reflect current year presentation.

<PAGE>

Schedule III
PIPER JAFFRAY COMPANIES INC.
Parent Company Only

(Dollars in thousands)

Condensed Statements of Financial Condition

September 30, September 30,
1996 1995
ASSETS
Cash $ 2 $ 2
Investments in subsidiaries 228,988 194,172
Equipment and leasehold improvements 9,975 7,015
Firm investments, at estimated market value 2,323 3,019
Advances to subsidiaries 4,379 25,325
Deferred income tax asset 21,274 32,918
Other assets 14,603 61
------ -----
$ 281,544 $ 262,512
========== =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 30,000 $ -
Employee compensation and benefits payable 26,238 18,821
Federal and state income taxes payable - 19,136
Other liabilities and payables 58,481 68,831
------ ------
114,719 106,788
Shareholders' equity:
Common stock 18,198 17,565
Additional paid-in capital 19,432 11,902
Retained earnings 129,201 127,306
Treasury stock, at cost (6) (1,049)
------ ------
166,825 155,724
------- -------
$ 281,544 $ 262,512
========== =========

Certain reclassifications have been made to prior year financial statements to
reflect current year presentation.

<PAGE>

Schedule III
PIPER JAFFRAY COMPANIES INC.
Parent Company Only

(Dollars in thousands)

Condensed Statements of Cash Flows

Year ended Year ended Year ended
September 30, September 30, September 30,
1996 1995 1994

Operating Activities
Net loss (before equity in earnings
of subsidiaries)........................ $(32,921) $(43,732) $ (2,246)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization ........... 3,022 2,101 2,157
Deferred income taxes ................... 11,644 (32,918) -
Decrease (increase) in:
Advances to (from) subsidiaries ...... 20,945 (17,817) 23,028
Firm investments ..................... 696 10,078 (8,850)
Increase (decrease) in:
Employee compensation ................ 7,417 1,198 (18,301)
Dividends received from subsidiaries.. 5,401 5,177 12,233
Other ................................ (44,027) 85,453 2,663
------- ------ -----
Net cash (used in) provided
by operating activities ........... (27,823) 9,540 10,684

Investing activities:
Other changes in investments in subsidiaries - 2,323 (1,000)
Net additions to equipment and leaseholds ..(5,981) (3,902) (4,293)
------ ------ ------
Net cash used in investing activities ..(5,981) (1,579) (5,293)

Financing activities:
Short-term borrowings ......................30,000 (10,000) 10,000
Net common stock issued ....................12,840 7,576 1,658
Dividends paid .............................(5,401) (5,177) (12,233)
Acquisition of treasury stock ..............(3,635) (360) (4,816)
------ ---- ------
Net cash used in (provided by)
financing activities ...............33,804 (7,961) (5,391)

Increase in cash ............................. - - -
Cash at beginning of year .................... 2 2 2
------ ------- ------
Cash at end of year .........................$ 2 $ 2 $ 2
======= ======== ========

Certain reclassifications have been made to prior year financial statements to
reflect current year presentation.

<PAGE>

INDEX TO EXHIBITS

Exhibit Description of Exhibit Form of Filing

3.1 Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 of the Registrant's Form 10-K for the
fiscal year ended September 27, 1991, as amended by Form 8 dated
January 30, 1992, Commission File No. 1-7421).

3.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of
the Registrant's Form 10-K for the fiscal year ended September 27,
1991, as amended by Form 8 dated January 30, 1992, Commission File No.
1-7421).

4.1 Indenture dated July 19, 1988 between Premier Acceptance Corporation, a
wholly owned subsidiary of the Registrant, as issuer, and First Trust
National Association, as trustee, relating to the subsidiary's issuance
of mortgage-backed bonds (incorporated by reference to Exhibit A to
Premier Acceptance Corporation's Form 8-K dated July 22, 1988,
Commission File No.'s 33-21775, 33-25070, 33-33261).*

4.2 Indenture dated as of November 23, 1988 between Premier Acceptance
Corporation, as issuer, and First Bank National Association , as
trustee (incorporated by reference to Exhibit 4.1 to Premier Acceptance
Corporation's Form 8-K dated November 23, 1988, Commission File No.'s
33-21775, 33-25070,
33-33261).*

10.1 Amended and Restated Limited Liability Company Agreement among the
Registrant, Midland Walwyn Capital Corporation and Hercules
International Management l.l.c. dated October 18, 1993 (incorporated by
reference to Exhibit 10.1 of the Registrant's Form 10-K for the fiscal
year ended September 30, 1993, Commission File No. 1-7421).

<PAGE>

Exhibit Description of Exhibit Form of Filing

10.6 Piper Capital Management Incorporated 1988 Phantom Share Incentive
Bonus Plan (incorporated by reference to Exhibit 10.6 of the
Registrant's Form 10-K for the fiscal year ended September 27, 1991, as
amended by Form 8 dated February 25, 1992, Commission File No. 1-7421).

10.7 Piper Jaffray Inc. Participating Bonus Agreement for Premier Acceptance
Corporation Transactions (incorporated by reference to Exhibit 10.7 of
the Registrant's Form 10-K for the fiscal year ended September 27,
1991, as amended by Form 8 dated February 25, 1992, Commission File No.
1-7421).

10.8 1993 Omnibus Stock Plan of the Registrant (incorporated by reference to
Appendix A to the Registrant's definitive Proxy Statement for the
Annual Meeting of Shareholders held on January 28, 1993, Commission
File No. 1-7421).

10.9 Piper Jaffray Companies Stock Investment Plan (incorporated by
reference to Exhibit 4.03 of the Registrant's Form S-8 dated June 4,
1994, Commission File No. 033-53979).

10.10 Piper Jaffray Companies Inc. 1995 Executive Performance Bonus
Plan (incorporated by reference to Appendix A to the Registrant's
definitive Proxy Statement for the Annual Meeting of Shareholders held
on January 25, 1995, Commission
File No. 1-7421).

10.11 Agreement to dissolve Hercules International Management, Limited
Liability Company, between the Registrant and Midland Walwyn Capital
Corporation, dated November 16, 1995.

10.12 Piper Capital Management Incorporated 1995 Phantom Stock Option
Plan.

10.13 Pledge and Collateral Administration Agreement, between Piper Jaffray
Inc. and Northern Trust Company, dated November 23, 1994.

10.14 Credit Agreement, between Piper Jaffray Inc. and Norwest Bank
Minnesota, National Association, dated November 23, 1994.

10.15 Credit Agreement, between Piper Jaffray Inc. and First Bank National
Association, dated November 23, 1994.

10.16 Credit Agreement, between Piper Jaffray Inc. and Northern Trust
Company, dated November 23, 1994.

10.17 First Amendment to Credit Agreement, between Piper Jaffray Inc. and
Norwest Bank Minnesota, National Association, dated December 28, 1994.

10.18 First Amendment to Credit Agreement, between First Bank National
Association, dated December 27, 1994.

10.19 First Amendment to Credit Agreement, between Northern Trust Company,
dated December 23, 1994.

10.20 Second Amendment to Credit Agreement, between Piper Jaffray Inc. and
Norwest Bank Minnesota, National Association, dated November 7, 1995.

10.21 Second Amendment to Credit Agreement, between Piper Jaffray Inc. and
First Bank National Association, dated November 7, 1995.

10.22 Second Amendment to Credit Agreement, between Piper Jaffray Inc. and
Nothern Trust Company, dated November 9, 1995.

10.23 Piper Jaffray Inc. Second Century Growth Deferred Compensation
Plan, dated September 26, 1996. electronic
transmission

11 Statement Re: Computation of Per Share Earnings electronic
transmission

13 1996 Annual Report to Shareholders electronic
transmission

21 Subsidiaries of the Registrant electronic
transmission

23 Independent Auditors' Consent electronic
transmission

27 Financial Data Schedule electronic
transmission

* Premier Acceptance Corporation has filed Registration Statements
pursuant to which $900,000,000 in aggregate principal amount of
mortgage-backed bonds were registered under the Securities Act.
The bonds are issued in series pursuant to series supplements and
supplemental indentures referenced in Item 14(a)(3) of Premier
Acceptance Corporation's Form 10-K for the fiscal year ended
September 30, 1996. Norwest Bank Minnesota, National Association
was appointed successor Trustee under the Indentures in 1991.

<PAGE>

Exhibit 11

PIPER JAFFRAY COMPANIES INC.

STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per Share Amounts)
(Unaudited)

Year Ended Year Ended Year Ended
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1994

PRIMARY NET INCOME (LOSS) PER SHARE:

Net income (loss) $ 7,296 $ (14,118) $ 25,282

Average number of common and common equivalent shares outstanding:

Average common shares outstanding 17,953 17,300 17,455
Dilutive effect of CSE's:
Book value plan options 175 - 312
Executive incentive stock options 249 - 178
------- ------ ------
18,377 17,300 17,945
------- ------ ------
Primary net income (loss) per share $ .40 $ (.82) $ 1.41
========== ========== ==========

NET INCOME (LOSS) PER SHARE
ASSUMING FULL DILUTION:

Net income (loss) $ 7,296 $ (14,118) $ 25,282

Average number of common and common equivalent shares outstanding:

Average common shares outstanding 17,953 17,300 17,455
Dilutive effect of CSE's:
Book value plan options 175 - 312
Executive incentive stock options 249 - 178
------ ------ ------
18,377 17,300 17,945
------ ------ ------
Fully diluted net income (loss)
per share $ .40 $ (.82) $ 1.41
========= ========= =========

<PAGE>

Exhibit 21

PIPER JAFFRAY COMPANIES INC.

SUBSIDIARIES OF THE REGISTRANT

September 30, 1996

Percentage
of Voting
State of Securities
Subsidiary Name Incorporation Owned
- --------------- ------------- -----

Piper Jaffray Inc. Delaware 100%

Piper Jaffray International Inc. (a wholly Delaware 100%
owned subsidiary of Piper Jaffray Inc.)

Piper Capital Management Incorporated Delaware 100%

Piper Trust Company Minnesota 100%

Premier Acceptance Corporation Delaware 100%

Piper Realty Management Incorporated Delaware 100%

Piper Mortgage Incorporated Delaware 100%

Piper Jaffray Ventures, Inc. Delaware 100%

Piper Mortgage Acceptance Corporation Delaware 100%

<PAGE>

Exhibit 23

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statements No.
2-88699, No. 33-4542 and No. 33-11657 on Form S-8, of our reports dated November
6, 1996 (which includes an emphasis on a matter relating to litigation described
in Note 8 of the consolidated financial statements) appearing in and
incorporated by reference in the Annual Report on Form 10-K of Piper Jaffray
Companies Inc. for the fiscal year ended September 30, 1996.

/s/ Deloitte & Touche LLP

Minneapolis, Minnesota
December 20, 1996

Piper Jaffray Inc.
Second Century Growth
Deferred Compensation Plan PIPER JAFFRAY INC.
SECOND CENTURY GROWTH DEFERRED
COMPENSATION PLAN

TABLE OF CONTENTS
Page
SECTION 1 INTRODUCTION 1
1.1. Establishment 1
1.2. Purpose. 1
1.3. Definitions 1
1.3.1. Account 1
1.3.2. Beneficiary 1
1.3.3. Code 1
1.3.4. ECM Investment Committee 1
1.3.5. ECM Operating Committee 1
1.3.6. ERISA 1
1.3.7. Executive Compensation Committee 1
1.3.8. Liquidity Event 2
1.3.9. Management Committee 2
1.3.10. Measuring Investment 2
1.3.11. Participant 2
1.3.12. Plan 2
1.3.13. Plan Statement 2
1.3.14. Plan Year 2
1.4. Rules of Interpretation 2
SECTION 2 PARTICIPATION 3
2.1. Eligibility and Selection 3
2.2. Notification 3
2.3. Enrollment 3

SECTION 3 ACCOUNTS 3
3.1. Accounts 3
3.2. Credits to Accounts 4
3.2.1. Bonus Credit 4
3.2.2. Interest Credit 4
3.2.3. Investment Credit 4
3.3. Measuring Investments 4
3.4. Charges to Accounts 4
3.4.1. Investment Charge 4
3.4.2. Benefit Payment Charge 5
3.4.3. Debt Set-Off Charge 5

SECTION 4 BENEFITS 5
4.1. Benefits Payable to a Participant 5
4.2. Three-Year Waiting Period 5
4.3. Forfeiture of Benefits upon Competition 5
4.4. Forfeiture of Benefits upon Gross Misconduct 6
4.5. No Reallocation of Forfeited Amounts 6
4.6. Benefits Payable to a Beneficiary. 6
4.6.1. Death Before Full Payment 6
4.6.2. Beneficiary Designation 6
4.6.3. Failure of Designation 7
4.6.4. Definitions 7
4.6.5. Special Rules 7

SECTION 5 ADMINISTRATION 8
5.1. Administration 8
5.2. ECM Investment Committee 8
5.2.1. Appointment 8
5.2.2. Organization 8
5.2.3. Authority 8
5.2.4. Exercise of Authority 8
5.2.5. Limitation on Individual's Authority 8
5.3. ECM Operating Committee 9
5.3.1. Appointment 9
5.3.2. Organization 9
5.3.3. Authority 9
5.3.4. Exercise of Authority 9
5.3.5. Limitation on Individual's Authority 9
5.4. Binding Effect 9

SECTION 6 AMENDMENT AND TERMINATION
6.1. Amendment 10
6.2. Termination 10

SECTION 7 GENERAL PROVISIONS
7.1. Contractual Right to Benefits 10
7.2. Effect on Qualified Plans 10
7.3. Benefits Not Transferable 10
7.4. Withholding Taxes 10
7.5. Effect on Employment Rights and Other Benefit
Programs 11
7.6. Binding Effect of Agreement 11

PIPER JAFFRAY INC.
SECOND CENTURY GROWTH
DEFERRED COMPENSATION PLAN

SECTION 1

INTRODUCTION

1.1. Establishment. Piper Jaffray Inc., a Delaware
corporation, has adopted this Plan by written action of its
Board of Directors dated September 26, 1996.

1.2. Purpose. The purpose of the Plan is to help motivate and
retain the employees who are key contributors to the success of
the Equity Capital Markets business of Piper Jaffray Inc. by
providing them with deferred bonus payments measured by the
performance of certain investments related to the focus of that
business.

1.3. Definitions. When the following terms are used herein
with initial capital letters, they shall have the following
meanings:

1.3.1. Account -- the separate recordkeeping account (unfunded and
unsecured) maintained foreach Participant in connection with his/her
participation in the Plan for a specific Plan Year.

1.3.2. Beneficiary -- a person designated by a Participant
(or automatically by operation of this Plan Statement) to
receive a benefit equal to part or all of the balance of the
Participant's Accounts in the event of the Participant's death
prior to full payment thereof.

1.3.3. Code -- the Internal Revenue Code of 1986, as the
same may be amended from time to time.

1.3.4. ECM Investment Committee -- the committee established under Section
5.2 of the Plan Statement to make various investment decisions under the Plan,
as such committee may be constituted from time to time.

1.3.5. ECM Operating Committee -- the committee established under Section
5.3 of the Plan Statement to make various administrative decisions under the
Plan, as such committee may be constituted from time to time.

1.3.6. ERISA -- the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time.

1.3.7. Executive Compensation Committee -- the "Executive Compensation
Committee" of Piper Jaffray Companies Inc., as such committee may be constituted
from time to time.

1.3.8. Liquidity Event -- any occurrence with respect to a Measuring
Investment that would provide its investors with liquidity, such as a cash
distribution, an initial public offering, a merger or other transaction in which
investors receive cash or securities.

1.3.9. Management Committee -- the "Management Committee" of Piper Jaffray
Companies Inc., as such committee may be constituted from time to time.

1.3.10. Measuring Investment -- an investment related to the focus of the
Equity Capital Markets business of Piper Jaffray Inc. that is designated by the
ECM Investment Committee as a device for measuring the value of all
Participants' Accounts maintained for a specific Plan Year.

1.3.11. Participant -- an employee of Piper Jaffray Inc.
who becomes a Participant in the Plan for a specific Plan Year
under the rules of Section 2 of the Plan Statement.

1.3.12. Plan -- the unfunded deferred compensation plan
established and maintained by Piper Jaffray Inc. under this
Plan Statement for the benefit of the employees who are key
contributors to the success of its Equity Capital Markets
business. (As used herein, "Plan" refers to the legal entity
maintained by Piper Jaffray Inc. and not to the document
pursuant to which the Plan is maintained. That document is
referred to herein as the "Plan Statement.") The name of the
Plan is "Piper Jaffray Inc. Second Century Growth Deferred
Compensation Plan."

1.3.13. Plan Statement -- this document entitled Piper
Jaffray Inc. Second Century Growth Deferred Compensation Plan,
as adopted by written action of the Board of Directors of Piper
Jaffray Inc. dated September 26, 1996, as the same may be
amended from time to time.

1.3.14. Plan Year -- the twelve consecutive month period that begins each
October 1 and ends the following September 30. The first Plan Year begins
October 1, 1995, and ends September 30, 1996.

1.4. Rules of Interpretation. The Plan is intended to be an unfunded plan
maintained primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees, within the meaning
of ERISA section 301(a)(3). The administration of the Plan and the
interpretation of the Plan Statement shall be consistent with that intent.
Whenever appropriate, words used herein in the singular may be read in the
plural, or words used herein in the plural may be read in the singular; the
masculine may include the feminine; and the words hereof, herein or hereunder or
other similar compounds of the word here shall mean and refer to the entire Plan
Statement and not to any particular paragraph or section of this Plan Statement
unless the context clearly indicates to the contrary. The titles given to the
various sections of this Plan Statement are inserted for convenience of
reference only and are not part of this Plan Statement, and they shall not be
considered in determining the purpose, meaning or intent of any provision
hereof. Any reference in this Plan Statement to a statute shall be considered
also to mean and refer to the applicable regulations for that statute; and any
reference in this Plan Statement to a statute or regulation shall be considered
also to mean and refer to any subsequent amendment or replacement of that
statute or regulation. This Plan Statement has been executed and delivered in
the State of Minnesota and has been drawn in conformity to the laws of that
State and shall, except to the extent that federal law is controlling, be
construed and enforced in accordance with the laws of the State of Minnesota
(without regard to its conflict of law principles).

SECTION 2
PARTICIPATION

2.1. Eligibility and Selection. At the end of each Plan Year,
the Participants for that year shall be selected and their
deferred bonus awards shall be determined as follows:

(a) The Executive Compensation Committee, in its sole
discretion, shall select the Management Committee
members eligible to participate in the Plan for that
year and shall determine the deferred bonus award for
each such member. To be eligible for selection, a
Management Committee member must be a key contributor
to the success of the Equity Capital Markets business
of Piper Jaffray Inc. by directly managing or
actively developing that business.

(b) The ECM Operating Committee, in its sole discretion,
shall select the Equity Capital Markets employees
eligible to participate in the Plan for that year and
shall determine the deferred bonus award for each
such employee. To be eligible for selection, an
Equity Capital Markets employee must be (i) a key
contributor to the success of the Equity Capital
Markets business of Piper Jaffray Inc., (ii) a highly
compensated employee within the meaning of Code
section 414(q), and (iii) a management or highly
compensated employee within the meaning of ERISA
section 301(a)(3).

2.2. Notification. Piper Jaffray Inc. shall provide each
individual so selected with (i) written notification of his/her
selection and deferred bonus award, (ii) the required
enrollment forms, and (iii) either a copy of the Plan Statement
or written notification that such a copy is available upon
request.

2.3. Enrollment. Participation in the Plan is voluntary for
each individual so selected, but Piper Jaffray Inc. shall not
provide a cash bonus or other remuneration in lieu of such
participation. To become a Participant, the individual must
enroll by signing and returning a participation agreement as
prescribed by Piper Jaffray Inc.

SECTION 3

ACCOUNTS

3.1. Accounts. Piper Jaffray Inc. shall establish and maintain
a separate Account for each Participant for each Plan Year that
he/she enrolls as a Participant. The Account shall be for
recordkeeping purposes only and shall not represent a trust
fund or other segregation of assets for the benefit of the
Participant.

3.2. Credits to Accounts. The Account so established and
maintained for each Participant shall be credited from time to
time as provided in this Section 3.2.

3.2.1. Bonus Credit. As of the last day of the Plan Year
for which the Participant enrolls, the Account shall be
credited with the amount of his/her deferred bonus award for
that year, as determined under Section 2.1 of the Plan
Statement.

3.2.2. Interest Credit. Commencing as of the first day of the Plan Year
immediately following the Plan Year for which the Participant enrolls, any
portion of the Account balance that is not allocated to Measuring Investments
under Section 3.3 below shall be credited with interest at the rate applicable
from time to time to investors in the Piper Institutional Money Market Fund.

3.2.3. Investment Credit. Commencing as of the first day of the Plan Year
immediately following the Plan Year for which the Participant enrolls, any
portion of the Account balance that is allocated to Measuring Investments under
Section 3.3 below shall be credited with its share of the income and gains of
such Measuring Investments under such procedures as the ECM Investment
Committee, in its sole discretion, shall determine from time to time.

3.3. Measuring Investments. The ECM Investment Committee, in its sole
discretion, shall designate certain investments related to the focus of the
Equity Capital Markets business of Piper Jaffray Inc. to be the Measuring
Investments for determining the value of all Participants' Accounts maintained
for a specific Plan Year. For this purpose, it shall be deemed that the Account
balances of all the Participants for that year are combined and that such
portion of the combined amount as the ECM Investment Committee, in its sole
discretion, shall determine is placed in each such designated investment on the
same terms and conditions as would be available to Piper Jaffray Inc. as an
investor. Each Participant shall be deemed to have a pro rata share (based on
the ratio of his/her Account balance for that year to the Account balances of
all Participants for that year) in each such designated investment. The
Measuring Investments are solely a device for computing the amount of benefits
to be paid to Participants under the Plan, and Participants have no claim or
right to any actual investments.

3.4. Charges to Accounts. The Account so established and
maintained for each Participant shall be charged from time to
time as provided in this Section 3.4.

3.4.1. Investment Charge. Commencing as of the first day of the Plan Year
immediately following the Plan Year for which the Participant enrolls, any
portion of the Account balance that is allocated to Measuring Investments under
Section 3.3 above shall be charged with its share of the losses and expenses of
such Measuring Investments under such procedures as the ECM Investment
Committee, in its sole discretion, shall determine from time to time.

3.4.2. Benefit Payment Charge. As of the date any benefit
payment is made to the Participant or to his/her Beneficiary
under the Plan, the Account shall be charged with the amount of
such benefit payment.
3.4.3. Debt Set-Off Charge. As the date any debt is set
off against the Account under Section 7.3 of the Plan
Statement, the Account shall be charged with the amount of
such debt.

SECTION 4
BENEFITS

4.1. Benefits Payable to a Participant. As soon as administratively feasible
after a Liquidity Event for a particular Measuring Investment, Piper Jaffray
Inc. shall pay each Participant whose Account is deemed to be invested in that
Measuring Investment a benefit equal to the portion of his/her Account that is
deemed liquid as a result of such Liquidity Event, as the ECM Operating
Committee, in its sole discretion, shall determine. The benefit payment shall be
made in the form of cash or securities of the type received by investors in the
Measuring Investment or in a combination of cash and such securities, as the ECM
Operating Committee, in its sole discretion, shall determine.

4.2. Three-Year Waiting Period. Notwithstanding any other provision of this Plan
Statement, no benefit payment shall be made to any Participant until the end of
the third (3rd) Plan Year following the Plan Year for which his/her Account is
established. If a Liquidity Event occurs during this three-year period, the ECM
Investment Committee, in its sole discretion, shall direct that the liquid
proceeds from such Measuring Investment be treated in any one or a combination
of the following ways for purposes of Section 3 of the Plan Statement:

(a) Credited with interest pursuant to Section 3.2.2 for
payment at the end of the three-year period;

(b) Reinvested in another Measuring Investment pursuant to Section 3.3 for
payment upon a subsequent Liquidity Event for that other investment;
or

(c) Held in the form of securities of the type received by investors in
the Measuring Investment for payment at the end of the three-year
period, with any cash dividend or other cash distributions with
respect to such securities being credited with interest pursuant to
Section 3.2.2 for payment at the end of the threeyear period.

4.3. Forfeiture of Benefits upon Competition. If a Participant's employment with
Piper Jaffray Inc. shall be terminated (whether voluntarily or involuntarily),
and at any time thereafter such Participant shall become Involved (as defined
below) with a Competitor (as defined below), then such Participant shall
immediately forfeit forever all rights to benefits with respect to all Accounts
then maintained for such Participant. Notwithstanding the foregoing sentence,
however, the Participant shall not forfeit any benefits if the ECM Operating
Committee, in its sole discretion, determines that his/her employment was
terminated by Piper Jaffray Inc. due to a business decision to discontinue
operations in a particular geographic location or in a particular market niche.

For purposes of this Section 4.3.:

(a) The term "Involved" shall mean any participation with or involvement
in as an employee, partner, shareholder (except as a 5% or less
shareholder of a public corporation), creditor, director, officer,
principal, agent, consultant, or in any other relationship or
capacity; and

(b) The term "Competitor" shall mean any person, partnership, corporation
or other entity engaged in any business which competes with the Equity
Capital Markets business of Piper Jaffray Inc. in sales, trading,
corporate finance or research;

in each case as determined by the ECM Operating Committee, in
its sole discretion.

4.4. Forfeiture of Benefits upon Gross Misconduct. If a Participant commits any
act of Gross Misconduct (as defined below) then such Participant shall
immediately forfeit forever all rights to benefits with respect to all Accounts
then maintained for such Participant. During the resolution of a charge of Gross
Misconduct, the Accounts shall be maintained for such Participant, but no
benefit payments shall be made with respect to such Accounts.

For purposes of this Section 4.4, the term "Gross Misconduct" shall mean any one
or more of the following:

(a) Impropriety or misbehavior of a type resulting in
termination of employment under the policies and
practices of Piper Jaffray Inc.; or

(b) Conviction of or pleading guilty or nolo contendere
to any felony;

in each case as determined by the ECM Operating Committee, in
its sole discretion.

4.5. No Reallocation of Forfeited Amounts. Any Account balance
forfeited under Sections 4.3 and 4.4 above shall revert to
Piper Jaffray Inc. and shall not be reallocated among the
remaining Participants.

4.6. Benefits Payable to a Beneficiary.

4.6.1. Death Before Full Payment. If the Participant has an unpaid balance in
any one or more Accounts at his/her death, Piper Jaffray Inc. shall pay the
Beneficiary of the deceased Participant a benefit equal to the remaining value
of those Accounts at the same time and in the same amount and form as payment
would otherwise have been made to the Participant if he/she were living.

4.6.2. Beneficiary Designation. Each Participant may designate, upon forms to be
furnished by and filed with Piper Jaffray Inc., one or more primary
Beneficiaries or contingent Beneficiaries to receive all or a specified part of
his/her unpaid Account balances in the event of his/her death. The Participant
may change or revoke any such designation from time to time without notice to or
consent from any Beneficiary or spouse. No such designation, change or
revocation shall be effective unless executed by the Participant and received by
Piper Jaffray Inc. during the Participant's lifetime. Each such designation,
change or revocation shall apply to all the Accounts maintained for the
Participant under the Plan.

4.6.3. Failure of Designation. If a Participant:

(a) Fails to designate a Beneficiary,

(b) Designates a Beneficiary and thereafter such
designation is revoked without another Beneficiary
being named, or

such Participant's unpaid Account balances, or the part thereof as to which such
Participant's designation fails, as the case may be, shall be payable to the
representative of the Participant's estate.

4.6.4. Definitions. When used herein and, unless the Participant has otherwise
specified in his/her Beneficiary designation, when used in a Beneficiary
designation, "issue" means all persons who are lineal descendants of the person
whose issue are referred to, including adopted descendants and their descendants
but not including illegitimate descendants and their descendants; "child" means
an issue of the first generation; "per stirpes" means in equal shares among
living children of the person whose issue are referred to and the issue (taken
collectively) of each deceased child of such person, with such issue taking by
right of representation of such deceased child; and "survive" and "surviving"
mean living after the death of the Participant.

4.6.5. Special Rules. Unless the Participant has
otherwise specified in his/her Beneficiary designation, the
following rules shall apply:

(a) If there is not sufficient evidence that a Beneficiary was living at
the time of the death of the Participant, it shall be deemed that the
Beneficiary was not living at the time of the death of the
Participant.

(b) The Beneficiaries designated by the Participant shall become fixed at
the time of the Participants death so that, if a Beneficiary survives
the Participant but dies before the receipt of all payments due such
Beneficiary hereunder, such remaining payments shall be payable to the
representative of such Beneficiary's estate.

(c) If the Participant designates as a Beneficiary the
person who is the Participant's spouse on the date of
the designation, either by name or by relationship,
or both, the dissolution, annulment or other legal
termination of the marriage between the Participant
and such person shall automatically revoke such
designation. (The foregoing shall not prevent the
Participant from designating a former spouse as a
Beneficiary on a form executed by the Participant and
received by Piper Jaffray Inc. after the date of the
legal termination of the marriage between the
Participant and such former spouse, and during the
Participantss lifetime.)

(d) Any designation of a nonspouse Beneficiary by name that is accompanied
by a description of relationship to the Participant shall be given
effect without regard to whether the relationship to the Participant
exists then or at the Participants death.

(e) Any designation of a Beneficiary only by statement of relationship to
the Participant shall be effective only to designate the person or
persons standing in such relationship to the Participant at the
Participant's death.

The ECM Operating Committee shall be the sole judge of the content,
interpretation and validity of a purported Beneficiary designation.

SECTION 5
ADMINISTRATION
5.1. Administration. Except for the matters specifically
assigned to the Executive Compensation Committee or the
Management Committee by this Plan Statement, the Plan shall be
administered by Piper Jaffray Inc. in accordance with the
determinations of the ECM Investment Committee and the ECM
Operating Committee.

5.2. ECM Investment Committee.
5.2.1. Appointment. The Director of Equity Capital Markets shall determine the
size of the ECM Investment Committee from time to time and shall appoint the
members. Each member of the ECM Investment Committee shall hold office at the
pleasure of the Director of Equity Capital Markets and any vacancies in its
membership shall be filled from time to time, as they occur, by appointment by
the Director of Equity Capital Markets.

5.2.2. Organization. The ECM Investment Committee shall hold meetings upon such
notice, at such times and at such places as it may determine, and may consult
and transact business by telephone or by written action in lieu of a formal
meeting. Any action taken or approval given by a majority of the members of the
ECM Investment Committee shall be considered the action or approval of the ECM
Investment Committee.

5.2.3. Authority. The ECM Investment Committee shall have the authority to make
such uniform rules as may be necessary to carry out the investment
responsibilities assigned to it under the Plan Statement. The ECM Investment
Committee shall determine any questions arising in the interpretation and
application of the Plan that are related to its investment responsibilities.

5.2.4. Exercise of Authority. The ECM Investment Committee
may exercise its authority in its full discretion, subject only
to the limits expressly imposed on it under the Plan Statement.

5.2.5. Limitation on Individual's Authority. If any member of the ECM Investment
Committee is also an employee of Piper Jaffray Inc. or a Participant, he/she
shall have no authority as such member with respect to any matter specially
affecting his/her individual interest hereunder (as distinguished from the
interests of all Participants and Beneficiaries or a broad class of Participants
and Beneficiaries), all such authority being reserved exclusively to the other
members of the ECM Investment Committee to the exclusion of such Participant or
Beneficiary, and such Participant or Beneficiary shall act only in his/her
individual capacity in connection with any such matter.

5.3. ECM Operating Committee.

5.3.1. Appointment. The Director of Equity Capital Markets shall determine the
size of the ECM Operating Committee from time to time and shall appoint the
members. Each member of the ECM Operating Committee shall hold office at the
pleasure of the Director of Equity Capital Markets and any vacancies in its
membership shall be filled from time to time, as they occur, by appointment by
the Director of Equity Capital Markets.

5.3.2. Organization. The ECM Operating Committee shall hold meetings upon such
notice, at such times and at such places as it may determine, and may consult
and transact business by telephone or by written action in lieu of a formal
meeting. Any action taken or approval given by a majority of the members of the
ECM Operating Committee shall be considered the action or approval of the ECM
Operating Committee.

5.3.3. Authority. The ECM Operating Committee shall have the authority to make
such uniform rules as may be necessary to carry out its administrative
responsibilities under the Plan Statement. The ECM Operating Committee shall
determine any questions arising in the administration, interpretation, and
application of the Plan, subject to the investment authority of the ECM
Investment Committee.

5.3.4. Exercise of Authority. The ECM Operating Committee
may exercise its authority in its full discretion, subject only
to the limits expressly imposed on it under the Plan Statement.

5.3.5. Limitation on Individual's Authority. If any member of the ECM Operating
Committee is also an employee of Piper Jaffray Inc. or a Participant, he/she
shall have no authority as such member with respect to any matter specially
affecting his/her individual interest hereunder (as distinguished from the
interests of all Participants and Beneficiaries or a broad class of Participants
and Beneficiaries), all such authority being reserved exclusively to the other
members of the ECM Operating Committee to the exclusion of such Participant or
Beneficiary, and such Participant or Beneficiary shall act only in his/her
individual capacity in connection with any such matter.

5.4. Binding Effect. The determinations of the ECM Operating
Committee and the ECM Investment Committee in any matter within
their authority shall be binding and conclusive upon Piper
Jaffray Inc. and all persons having any right or benefit under
the Plan.

SECTION 6

AMENDMENT AND TERMINATION

6.1. Amendment. Piper Jaffray Inc. reserves the power to
amend this Plan Statement either prospectively or retroactively
or both in any respect, by action of its Board of Directors,
provided that, no amendment shall be effective to reduce or
divest benefits payable with respect to any Account of any
Participant without his/her consent.

6.2. Termination. Piper Jaffray Inc. reserves the right to
terminate the Plan at any time by action of its Board of
Directors; provided that, the termination of the Plan shall not
reduce or divest benefits payable with respect to any Account
of any Participant or negate the Participant's or Beneficiary's
rights with respect to such benefits.

SECTION 7

GENERAL PROVISIONS

7.1. Contractual Right to Benefits. The Plan creates in each
Participant a contractual right to the benefits to which he/she
becomes entitled. This contractual right is unsecured, and the
Participant and his/her Beneficiaries are general, unsecured
creditors and may look only to the general assets of Piper
Jaffray Inc. to satisfy this contractual right.

7.2. Effect on Qualified Plans. A Participant's Recognized Compensation under
the Piper Jaffray Companies ESOP shall not include any credits to his/her
Accounts under this Plan or any benefit payments made under this Plan. A
Participant's Recognized Compensation under the Piper Jaffray Companies 401(k)
Plan shall not include any credits to his/her Accounts under this Plan, but it
shall include (subject to the terms of that plan) any benefit payments made
under this Plan while the Participant is in Recognized Employment under that
plan.

7.3. Benefits Not Transferable. Neither a Participant nor any Beneficiary shall
have any transmissible interest in the payments due hereunder or any right to
anticipate, alienate, dispose of, pledge or encumber the same prior to their
actual receipt, nor shall any Account or any benefit payment be subject to
attachment, garnishment, execution following judgment or other legal process
instituted by creditors of the Participant or Beneficiary; provided that, the
balance of each Account and all benefit payments hereunder shall at all times be
subject to setoff, as directed by the ECM Operating Committee, for debts owed by
the Participant or Beneficiary to Piper Jaffray Inc. and/or any other entity
controlling, controlled by, or under common control with Piper Jaffray Inc.

7.4. Withholding Taxes. Piper Jaffray Inc. may withhold from
any benefit payment made under the Plan (and transmit to the
proper taxing authority) such amount as it may be required to
withhold under any federal, state or other law.

7.5. Effect on Employment Rights and Other Benefit Programs. The Plan shall not
give any Participant any right to be retained in the employment of Piper Jaffray
Inc. The Plan shall not replace any contract of employment, whether oral or
written, between Piper Jaffray Inc. and the Participant. The Plan is in addition
to, and not in lieu of, any other employee benefit plan or program in which the
Participant may be or become eligible to participate by reason of employment
with Piper Jaffray Inc. No payments made under this Plan shall have any effect
on payments to be made under any other employee benefit plan or program
maintained by Piper Jaffray Inc., except as provided in Section 7.2 above with
respect to the Piper Jaffray Companies 401(k) Plan.

7.6. Binding Effect of Agreement. The Plan shall be binding
upon and inure to the benefit of the successors and assigns of
Piper Jaffray Inc., and the Beneficiaries, personal
representatives and heirs of the Participant.

IN WITNESS WHEREOF, Piper Jaffray Inc. has caused this Plan Statement to
be executed by its duly authorized officers as of the 26th day of September,
1996.

PIPER JAFFRAY INC.
By __/s/ Andrew Duff
Its President

And
/s/ Bruce Huber
Its Managing Director

FINANCIAL SUMMARY

(Dollars in thousands, except per share amounts)
<TABLE>
Fiscal years ending 1996 1995 1994 1993 1992
September
- ------------------------------------------------------------------------------------
Revenue <C> <C> <C> <C> <C>
Commissions $185,301 $145,492 $147,539 $128,940 $103,292
Profits on principal
transactions 165,284 124,910 101,381 95,656 85,950
Investment banking 98,812 64,138 61,146 112,829 101,521
Interest 41,130 33,765 24,792 19,110 17,994
Asset management fees 37,442 43,913 51,917 40,811 28,649
Other Income 25,935 19,489 10,736 13,379 22,613
------ ------ ------ ------ ------
Total revenue 553,904 431,707 397,511 410,725 360,019
======= ======= ======= ======= =======

Expenses
Employee compensation 343,518 262,110 245,567 254,198 220,171
Other operating expenses 181,559 180,509 104,572 83,441 74,475
Interest expense 16,866 11,741 7,242 4,774 3,956
------ ------ ----- ----- -----
Total expenses 541,943 454,360 357,381 342,413 298,602

Income (loss) Before
Income Taxes 11,961 (22,653) 40,130 68,312 61,417
Income Taxes 4,665 (8,535) 14,848 27,325 23,890
----- ------ ------ ------ ------
Net Income (loss) $ 7,296 $(14,118) $ 25,282 $ 40,987 $ 37,527
- ------------------------------------------------------------------------------------

Per Share Data
Net income $ .40 $ (.82) $ 1.41 $ 2.28 $ 2.21
Dividends .30 .30 .70 .50 .35
Shareholder's equity 9.17 8.90 9.76 9.01 7.05
- ------------------------------------------------------------------------------------
Other Data (at year end)
Total assets $923,740 $679,763 $584,447 $535,146 $480,554
Shareholder's equity 166,825 155,724 167,803 157,912 120,447
Common shares outstanding
(in thousands) 18,197 17,500 17,188 17,531 17,089
Total full-time employees 2,956 2,703 2,658 2,427 2,165
Total retail branch offices 78 77 74 72 67
Piper Capital assets under
management (in billions) $ 9.1 $ 9.4 $ 11.6 $ 12.0 $ 8.9
- ------------------------------------------------------------------------------------
The Company and/or its subsidiaries are defendants in lawsuits. See Note 8 to
the consolidated financial statements.
</TABLE>

<PAGE>

Management's Financial Discussion

Business Environment: Piper Jaffray Companies Inc. (the Company) is principally
engaged in general securities brokerage, corporate and public finance services
and investment management. Statements regarding the Company's expectations as to
its future operations and financial condition and certain other information
presented in this Annual Report constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Although the
Company believes that its expectations are based on reasonable assumptions,
there is no assurance that actual results will not differ from expectations. The
Company's businesses are highly competitive and sensitive to many factors,
including the volatility and price level of securities markets, the volume, size
and timing of securities transactions, the demand for investment banking
services, and the level and volatility of interest rates. A significant portion
of the Company's expenses, including salaries and benefits, occupancy and
communications, are relatively fixed and do not vary with market activity.
Consequently, the Company's revenue and net income have been and may continue to
be subject to wide fluctuations. In addition, the Company is currently a
defendant in lawsuits and arbitrations and is subject to regulatory inquiries
related to various funds or assets managed by its subsidiary, Piper Capital
Management Incorporated (Piper Capital). It is impossible to predict the outcome
of these actions and, at the present time, the effect of these actions on the
consolidated financial statements cannot be determined. The accompanying table
summarizes the changes in the major categories of revenue and expenses for the
past two years. <TABLE>
Increase (Decrease) Increase (Decrease)
1996 vs. 1995 1995 vs. 1994
- --------------------------------------------------------------------------------
(in thousands) Amount % Amount %
- --------------------------------------------------------------------------------
<C> <C> <C> <C>
Revenue
Commissions $39,809 27 $(2,047) (1)
Profits on principal transactions 40,374 32 23,529 23
Investment banking 34,674 54 2,992 5
Interest 7,365 22 8,973 36
Asset management fees (6,471) (15) (8,004) (15)
Other income 6,446 33 8,753 82
- --------------------------------------------------------------------------------
Total revenue 122,197 28 34,196 9
- --------------------------------------------------------------------------------
Expenses
Employee compensation 81,408 31 16,543 7
Floor brokerage and clearance 1,182 15 704 10
Interest 5,125 44 4,499 62
Occupancy and equipment 5,916 19 2,726 10
Communications 4,015 25 1,560 11
Travel and promotional 1,411 9 125 1
Charge for PJIGX settlement, net (56,090) (100) 56,090 100
Other operating expenses 44,616 82 14,732 37
- --------------------------------------------------------------------------------
Total expenses 87,583 19 96,979 27
- --------------------------------------------------------------------------------
Income Before Income Taxes 34,614 - (62,783) (156)
Income Taxes 13,200 - (23,383) (157)
- --------------------------------------------------------------------------------
Net Income $21,414 - $(39,400) (156)
================================================================================
</TABLE>

Operations
Fiscal 1996 vs. Fiscal 1995
The Company's revenue was a record $553.9 million in fiscal 1996, contributing
to a solid compound annual revenue growth rate of 16 percent over the past five
years. Revenue increased 28 percent ($122.2 million) over fiscal 1995,
reflecting strong growth in equity secondary markets as well as a continuation
of the active markets for new issues experienced at the end of last year. For
fiscal 1996, net income was $7.3million and net income per share was $0.40,
compared to a net loss of $14.1 million and a net loss per share of $0.82 in the
prior year. The current year's operations include $29.5 million in pretax
charges for two class action litigation settlements, as well as other legal
settlements, professional fees and costs related to funds or assets managed by
Piper Capital. The prior year also included various litigation costs, including
a $70 million pretax charge to settle Institutional Government Income Portfolio
(PJIGX) mutual fund litigation, partially offset by $13.9 million in insurance
proceeds, net of related expenses. The weighted average number of common shares
and common share equivalents outstanding increased slightly (6 percent) to 18.4
million due to the issuance of shares to meet obligations under employee benefit
plans. Commission revenue, or the income realized in securities transactions in
which the Company acts as agent, increased 27 percent ($39.8 million) over
fiscal 1995, reflecting the favorable equity markets and strong sales of mutual
fund products. Profits on principal transactions, or the income realized in
securities transactions in which the Company acts as a secondary market trader
of securities, grew 32 percent ($40.4 million). This growth in principal revenue
was also driven primarily by equity products, with strong revenue increases
recorded by both the retail and institutional sales forces. An active corporate
equity underwriting calendar, additional merger and acquisition fees and market
share gains in municipal underwriting contributed to a 54 percent increase in
investment banking revenue ($34.7 million). Interest income increased 22 percent
($7.4 million) over fiscal 1995 due to substantial growth in customer margin
receivables and higher average levels of fixed income inventories. Although
assets under management at Piper Capital have remained essentially flat from
last year end at $9.1 billion, asset management fees declined 15 percent ($6.5
million) in fiscal 1996. This decline relates primarily to the closing of
privately managed accounts and mutual fund net redemptions from fund
reorganizations which occurred during the last quarter of the prior year. Other
income increased 33percent ($6.4 million), primarily reflecting growth in the
number of wrap fee accounts as well as increases in other non-product revenue.
The Company's expenses grew 19 percent ($87.6million) in fiscal 1996
including the impact of legal settlements and other litigation and legal
expenses. Employee compensation increased 31 percent ($81.4 million) due to
growth in revenue-based broker compensation, profit-based incentive compensation
and salaries from additions to sales support staff in the branches and
administrative support staff at headquarters.

Interest expense increased 44 percent ($5.1million) in fiscal 1996 as bank
borrowings and stock lending increased to fund higher average inventory levels
and customer margin loans. In addition, interest began accruing on several
structured legal settlements in fiscal 1996. Investment in the technology
infrastructure of the branches and headquarters along with the addition or
expansion of several retail offices contributed to the 19 percent increase ($5.9
million) in occupancy expenses. Related to this technology investment were
increases in data services, which, along with volume increases in market data
quotes, were reflected in the 25 percent ($4.0 million) increase in
communication expense.

Travel and promotional expenses for fiscal 1996 increased 9 percent ($1.4
million) compared to the prior year, as lower spending on media advertising and
mutual fund shareholder services was offset by a higher percentage of the sales
force qualifying for incentive trips and increased spending for institutional
travel and conferences. Other operating expenses increased 82 percent ($44.6
million) due primarily to legal settlements, professional fees, and other costs
resulting from lawsuits and arbitrations related to various funds or assets
managed by Piper Capital. The Company anticipates other operating expenses in
fiscal 1997 will be higher than average due to ongoing litigation expenses
related to these actions.

Fiscal 1995 vs. Fiscal 1994
Revenue was $431.7 million in fiscal 1995, increasing 9 percent ($34.2
million) from fiscal 1994. Revenue reflected favorable industry trends in the
second half of the year. However, net income declined $39.4million (156
percent), and net income per share declined 158 percent due to a $70 million
pretax charge for settlement of Institutional Government Income Portfolio
(PJIGX) mutual fund litigation. The charge, taken in the second quarter, was
partially offset during the third quarter by $13.9 million of insurance
proceeds, net of related expenses. Fiscal 1995 results also reflect other legal
settlements, professional fees and costs related to funds or assets managed by
Piper Capital. The weighted average number of common shares and common share
equivalents outstanding decreased slightly (4 percent) to 17.3 million.
Interest income increased 36 percent ($9.0 million), reflecting the
increase in interest rates charged on customers' interest-bearing margin loans.
The decrease in asset management fees of 15 percent ($8.0 million) in fiscal
1995 corresponds to the decline in assets under management by Piper Capital from
$11.6 billion to $9.4 billion. Assets under management decreased due to the
closing of privately managed accounts and mutual fund net redemptions, of which
approximately $500 million were a result of reorganizing certain mutual funds
during fiscal 1995. Other income increased 82 percent ($8.8 million) reflecting
increased fees in wrap accounts and capital gains. In addition, the Company
recognized a loss of $0.8 million in the Hercules International Management LLC
joint venture compared to a loss of $2.7million in fiscal 1994. The Company
dissolved the joint venture agreement during fiscal 1995 and brought the
Hercules international mutual funds into the Piper Capital fund family.
The Company's expenses grew 27 percent ($97.0 million) in fiscal 1995
including the impact of the PJIGX settlement and other litigation and legal
expenses related to funds or assets managed by Piper Capital.
Employee compensation increased 7 percent ($16.5 million) due to growth in
revenue-based broker compensation, profit-based incentive compensation and
salaries from targeted additions to staff. Interest expense increased 62 percent
($4.5 million) in fiscal 1995 as bank borrowings increased to fund higher
average inventory levels and customer margin loans.
The addition of three branch offices, as well as the significant investment
in broker workstation technology, caused occupancy and equipment expenses to
increase 10 percent ($2.7 million). The investment in technology and increase in
the number of investment executives also were reflected in the 11 percent ($1.6
million) increase in communication expense.
Travel and promotional expenses for fiscal 1995 were essentially flat
compared to the prior year. An increase in institutional sales travel and
investor conference costs was offset by a decrease in marketing and incentive
trips.
Other operating expenses increased 37 percent ($14.7 million) due primarily
to legal settlements, professional fees and other costs resulting from lawsuits
and arbitrations related to various funds or assets managed by Piper Capital.

Liquidity and Capital Resources

The Company has a liquid balance sheet. Most of the Company's assets
consist of cash and assets readily convertible into cash. Securities inventories
are stated at market value and are generally readily marketable. Customers'
margin loans are collateralized by securities and have floating interest rates.
Other receivables and payables with customers and other brokers and dealers
usually settle within a few days. The Company's assets are financed by its
equity capital, bank lines of credit and proceeds from securities lending, in
addition to non-interest bearing liabilities such as checks and drafts payable,
payables to customers and employee compensation payable. The fluctuations in
cash flows from financing activities are directly related to operating
activities due to the liquid nature of the Company's balance sheet.
The Company's securities broker/dealer, Piper Jaffray Inc. (Piper Jaffray),
is required by Securities and Exchange Commission regulations to meet certain
liquidity and capital standards. At Sept. 30, 1996, Piper Jaffray had net
capital, as defined in the regulations, of $122.8 million, which exceeded the
minimum net capital requirements by $112.1 million. Piper Jaffray's regulatory
capital consists entirely of shareholder's equity.
The Company's margin loans to customers have increased significantly over
1995 levels. Total margin loans to customers totaled $457.0 million at Sept. 30,
1996, versus $334.5 million a year earlier. The Company regularly reviews the
credit quality of these margin loans.
The Company's securities inventories consist principally of corporate
equity and debt securities and municipal debt obligations. Inventories are
maintained generally to provide product and liquidity for the Company's
customers rather than for firm investment or market speculation purposes, and
therefore experience relatively high turnover. At Sept. 30, 1996, approximately
$15.1 million of debt inventories were aged over 30 days. The Company's trading
inventories do not contain a significant amount of securities which derive their
value from other investment products (derivatives). Piper Capital manages mutual
funds and other investment portfolios which do contain such derivatives.
In the ordinary course of business, the Company may hold high-yield debt
obligations which are either unrated or rated below investment grade. At Sept.
30, 1996, Piper Jaffray held approximately $3.2 million of such securities in
inventory. Consistent with Piper Jaffray's inventory pricing policy, these
securities are recorded on a market value basis with unrealized gains and losses
being recognized currently in earnings.
The Company's growth during recent years has been financed principally by
the earnings and borrowings of Piper Jaffray. The ability of Piper Jaffray to
fund the activities of its parent or affiliates is subject to restrictions under
applicable net capital rules as previously mentioned.
During fiscal 1996, Piper Jaffray entered into operating lease commitments
of approximately $1.0 million for personal computer hardware and software
relating to the workstation system for investment executives. Piper Jaffray
expects to commit an additional $2.3 million in operating leases related to the
workstations in fiscal 1997. In addition, the Company expects other capital
expenditures in fiscal 1997 to approach $10.0 million. There were no other
material commitments for capital expenditures or lease commitments as of Sept.
30, 1996.
At Sept. 30, 1996, Piper Jaffray had $185 million in committed credit
agreements collateralized by customers' margin securities. The committed
facility included up to $95 million in uncommitted lines collateralized by
securities inventories. Piper Jaffray has additional credit facilities which
provide $75 million in uncommitted credit lines collateralized by customers'
margin securities, $30 million in uncommitted credit lines collateralized by
securities inventories and $75 million in uncommitted credit lines
collateralized by government securities inventories. All credit arrangements
bear interest at rates based on the federal funds rate. In addition, at Sept.
30, 1996, the Company had a $30 million unsecured note due Sept.30, 1997, which
bears interest at a variable rate based on LIBOR. Management believes that
existing capital, funds from operations, current credit lines and other
available resources will be sufficient to finance the Company's business.
The Company has structured certain legal settlements related to various
funds and assets managed by Piper Capital. At Sept. 30, 1996, the total payable
under these agreements, which are payable over one to five years, was $46.4
million. These payments are expected to be financed through cash from operations
and available credit facilities.
The Company is currently a defendant in other lawsuits and arbitrations and
is subject to regulatory inquiries related to various funds or assets managed by
Piper Capital. In addition, management is aware of unasserted claims which may
contain similar allegations. The Company is also a defendant in a case involving
an underwriting by Piper Jaffray. The Company intends to defend or, in some
cases, negotiate to settle these actions. It is impossible to predict the
outcome of these actions, and, at the present time, the effect of these actions
on the consolidated financial statements cannot be determined. Accordingly, no
provision for losses that may result has been recorded in the consolidated
financial statements. However, the aggregate cost of litigation and any
judgments, settlements or regulatory action relating to these cases could have a
material adverse effect on the consolidated financial statements.
The Company is involved in various other lawsuits or arbitrations or
threatened lawsuits or arbitrations incidental to its securities business.
Management of the Company, after consultation with counsel, believes the
resolution of these various lawsuits, arbitrations and claims will have no
material adverse effect on the consolidated financial statements.

Inflation
The Company's net assets are primarily monetary, consisting of cash,
securities inventories and receivables less monetary liabilities. These monetary
net assets are generally liquid in nature and turn over rapidly and thus are not
significantly affected by inflation. However, to the extent that inflation
affects the Company's costs, such costs may not be readily recoverable in the
price of its services.
Concern over inflation is one of the factors influencing the Federal
Reserve's interest rate increases. Actions by the Federal Reserve could cause
rates to increase, which would generally have an unfavorable impact on the
Company's financial results.

Effects of Recent Accounting Standards
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. The Company has elected to continue following the guidance of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, for measurement and recognition of stock-based transactions with
employees. The Company will adopt the disclosure provisions of SFAS No. 123 in
fiscal 1997.
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities. The Company will evaluate adoption of SFAS No. 125 in 1997 as
required.

CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
Year Ended Year Ended Year Ended
Sept. 30 Sept. 30 Sept. 30
(in thousands, except per share 1996 1995 1994
amounts)
- -----------------------------------------------------------------------------
Revenue <C> <C> <C>
Commissions $ 185,301 $ 145,492 $ 147,539
Profits on principal transactions 165,284 124,910 101,381
Investment banking 98,812 64,138 61,146
Interest 41,130 33,765 24,792
Asset management fees 37,442 43,913 51,917
Other income 25,935 19,489 10,736
- -----------------------------------------------------------------------------
Total revenue 553,904 431,707 397,511
- -----------------------------------------------------------------------------

Expenses
Employee compensation 343,518 262,110 245,567
Floor brokerage and clearance 9,319 8,137 7,433
Interest expense 16,866 11,741 7,242
Occupancy and equipment 36,487 30,571 27,845
Communications 20,043 16,028 14,468
Travel and promotional 16,961 15,550 15,425
Charge for PJIGX settlement, net - 56,090 -
Other operating expenses 98,749 54,133 39,401
- -----------------------------------------------------------------------------
Total expenses 541,943 454,360 357,381
- -----------------------------------------------------------------------------
Income (loss) Before Income Taxes 11,961 (22,653) 40,130
Income Taxes 4,665 (8,535) 14,848
- -----------------------------------------------------------------------------
Net Income (loss) $ 7,296 $ (14,118) $ 25,282
- -----------------------------------------------------------------------------
Net Income (loss) Per Common and Common
Equivalent Share (Primary and
Fully Diluted) $ .40 $ (0.82) $ 1.41
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding 18,377 17,300 17,945
- -----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
Common Stock Additional Retained Total
------------------ Paid-In Retained Treasury Shareholders'
(in thousands, except share Shares Amount Capital Earnings Stock Equity
and per share amounts)
- -------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Balances at Sept. 30, 1993 17,530,872 17,531 6,829 133,552 - 157,912
Net income 25,282 25,282
Net stock issued
(redeemed):
Book value stock
purchase plan (116,839) (159) 19 708 568
Executive incentive
stock option plan 89,520 90 315 405
Stock investment plan 62,708 685 685
Cash dividends-$.70 per share (12,233) (12,233)
Treasury stock acquired (378,100) (4,816) (4,816)
- -------------------------------------------------------------------------------------------
Balances at Sept. 30, 1994 17,188,161 17,462 7,163 146,601 (3,423) 167,803
Net loss (14,118) (14,118)
Net stock issued
(redeemed):
Book value stock
purchase plan (558,991) (559) (2,292) (2,851)
Executive incentive
stock option plan 12,000 12 39 51
Shares issued to directors
in lieu of fees 5,082 5 49 54
Stock investment plan 244,115 2,734 2,734
ESOP contribution 645,787 646 6,942 7,588
Cash dividends-$.30 per share (5,177) (5,177)
Treasury stock acquired (35,900) (360) (360)
- -------------------------------------------------------------------------------------------
Balances at Sept. 30, 1995 17,500,254 17,566 11,901 127,306 (1,049) 155,724
Net income 7,296 7,296
Net stock issued:
Book value stock
purchase plan 14,693 15 251 266
Executive incentive
stock option plan 24,000 24 90 114
Shares issued to directors
in lieu of fees 3,999 4 50 54
Stock investment plan 347,178 4,678 4,678
ESOP contribution 534,188 534 6,544 7,078
Other 55,446 55 596 651
Cash dividends-$.30 per share (5,401) (5,401)
Treasury stock acquired (282,500) (3,635) (3,635)
- -------------------------------------------------------------------------------------------
Balances at Sept. 30, 1996 18,197,258 $18,198 $19,432 $129,201 $ (6) $166,825
- -------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>

Consolidated Statements of Financial Condition
<TABLE>

Sept. 30 Sept. 30
(in thousands, except per share amounts) 1996 1995
- --------------------------------------------------------------------------------
<C> <C>
Assets
Cash (including $1,863 and $2,401, respectively, which
was required to be segregated under federal and
other regulations) $ 23,406 $ 17,345
Receivable from other brokers and dealers 99,686 55,708
Receivable from customers 520,489 371,667
Trading securities owned, at market 105,540 58,651
Investments pursuant to mortgage-backed bonds 44,064 52,949
Office equipment and leasehold improvements, at cost
(less accumulated depreciation of $52,546 and
$47,621, respectively) 30,185 25,764
Deferred income tax asset 21,215 40,093
Other assets 79,155 57,586
- --------------------------------------------------------------------------------
$923,740 $679,763
================================================================================

Liabilities and Shareholders' Equity
Short-term borrowings $183,320 $63,781
Checks and drafts payable 70,628 44,201
Payable to other brokers and dealers 109,776 84,447
Payable to customers 160,930 78,874
Trading securities sold but not yet purchased,
at market 27,472 21,491
Mortgage-backed bonds payable 45,333 54,077
Employee compensation 81,740 63,678
Federal and state income taxes - 19,136
Other accounts payable and accrued expenses 77,716 94,354
- --------------------------------------------------------------------------------
756,915 524,039
- --------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock, $1 par value; authorized,
300,000 shares; none issued and outstanding - -
Common stock, $1 par value; authorized,
40,000,000 shares; 18,197,725 and
17,565,399 shares issued, respectively 18,198 17,566
Additional paid-in capital 19,432 11,901
Retained earnings 129,201 127,306
Treasury stock, at cost; 467 and 65,145 shares,
respectively (6) (1,049)
- --------------------------------------------------------------------------------
166,825 155,724
- --------------------------------------------------------------------------------
$923,740 $679,763
================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
Year Ended Year Ended Year Ended
Sept.30 Sept.30 Sept. 30
(in thousands 1996 1995 1994
- -----------------------------------------------------------------------------
<C> <C> <C>
Operating Activities
Net income (loss) $ 7,296 $(14,118) $ 25,282
Adjustments to reconcile net income
(loss) to net cash
provided by (used in)
operating activities:
Depreciation and amortization 8,913 7,478 7,246
Loss on disposal of fixed assets 261 604 -
Deferred income taxes 18,878 (35,903) (5,101)
Accrual for PJIGX settlement, net of
escrow deposit - 51,500 -
Decrease (increase) in:
Net receivable from customers (66,766) 5,892 (36,455)
Net trading securities (40,908) (2,717) 25,136
Other (37,645) 15,868 (6,913)
Increase (decrease) in:
Checks and drafts payable 26,427 266 5,252
Net payable to other
brokers and dealers (18,649) 4,584 (34,813)
Employee compensation 18,062 4,591 (15,769)
Federal and state income
taxes payable (19,136) 17,855 (2,181)
- -------------------------------------------------------------------------------
Net cash (used in) provided by
operating activities (103,267) 55,900 (38,316)
- -------------------------------------------------------------------------------
Financing Activities
Net change in:
Short-term borrowings 119,539 (44,351) 62,578
Mortgage-backed bonds payable (8,744) 52,475 (1,533)
Investments and funds pursuant to
mortgage-backed bonds 8,885 (51,344) 1,514
Payments made on capitalized lease
obligations (562) (1,577) (1,349)
Acquisition of treasury stock (3,635) (360) (4,816)
Net common stock issued 12,841 7,576 1,658
Dividends paid (5,401) (5,177) (12,233)
- -------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 122,923 (42,758) 45,819
- -------------------------------------------------------------------------------
Net cash used for purchases of office
equipment and leasehold improvements (13,595) (7,867) (15,317)
- -------------------------------------------------------------------------------
Increase (decrease) in cash 6,061 5,275 (7,814)
Cash at beginning of year 17,345 12,070 19,884
- -------------------------------------------------------------------------------
Cash at end of year $ 23,406 $ 17,345 $ 12,070
- -------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information Cash paid during the year for:
Interest $ 16,688 $ 11,011 $ 6,883
Income taxes 18,636 9,513 22,130
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies
Piper Jaffray Companies Inc. (the Company) is the parent company of Piper
Jaffray Inc. (Piper Jaffray), a securities broker/dealer and investment banking
firm; Piper Capital Management Incorporated (Piper Capital), an asset management
firm; Piper Trust Company, which provides trust services to individuals and
institutions; Premier Acceptance Corporation (Premier), an issuer of
mortgage-backed bonds; and other immaterial subsidiaries. All operate within or
are related to the securities industry. The consolidated financial statements
include the accounts of Piper Jaffray Companies Inc. and its subsidiaries, all
of which are wholly owned. All material intercompany accounts and transactions
have been eliminated.
Customer securities transactions are recorded on a settlement date basis
with the related commission revenue and expenses recorded on a trade date basis.
Principal securities transactions are also recorded on trade date.
Substantially all of the Company's assets and liabilities consist of cash
and assets readily convertible to cash and liabilities which, by their
short-term nature, approximate current fair value. Trading securities owned and
sold but not yet purchased are stated at market value and are generally readily
marketable. Market value is determined by using published market quotes or
last-traded prices for most securities. In the event a market price is not
available for a security, other valuation methods are used depending on the type
of security and related market.
Depreciation of office equipment is provided using straight-line and
accelerated methods over estimated useful lives of three to seven years.
Leasehold improvements are amortized over the life of the lease.
Net income (loss) per common and common equivalent share is calculated by
dividing net income (loss) by the weighted average number of common shares and
common share equivalents outstanding, which includes the dilutive effect of all
outstanding stock options. Stock options were antidilutive in fiscal 1995.
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,
disclosures of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. The Company has elected to continue following the guidance of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, for measurement and recognition of stock-based transactions with
employees. The Company will adopt the disclosure provisions of SFAS No. 123 in
fiscal 1997.
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities. The Company will evaluate adoption of SFAS No. 125 in 1997 as
required.

2. Receivable From and Payable to Customers
(in thousands)
Amounts receivable from customers include cash accounts totaling $63,506
and $37,122 and margin accounts totaling $456,983 and $334,545 at Sept. 30, 1996
and 1995, respectively. Substantially all receivables from customers are
collateralized by customers' marketable securities. Amounts payable to customers
include free credit balances of $104,013 and $55,782 at Sept. 30, 1996 and 1995,
respectively.

<TABLE>

3. Trading Securities
Sept.30 Sept.30
1996 1995
- ---------------------------------------------------
<C> <C>
Owned:
Corporate securities
Equity $ 18,818 $ 17,236
Fixed income 31,544 7,097
Government securities 8,072 1,729
Municipal securities 47,106 32,589
- ---------------------------------------------------
$105,540 $ 58,651
- ---------------------------------------------------
Sold but not yet purchased:
Corporate securities
Equity $ 12,834 $ 19,631
Fixed income 2,089 1,410
Government securities 12,306 405
Municipal securities 243 45
- ---------------------------------------------------
$ 27,472 $ 21,491
- ---------------------------------------------------
</TABLE>

4. Short-Term Borrowings
Piper Jaffray borrows from banks under various committed and uncommitted
secured lines of credit principally to finance customers' purchases on margin
and dealer trading securities. These borrowings are primarily collateralized by
securities held in customer margin accounts and trading securities owned, and
bear interest at rates based on the federal funds rate. At Sept.30, 1996, the
market value of customer securities and securities inventories pledged as
collateral against outstanding borrowings was approximately $324 million, and
approximately $212million of additional credit was available under committed and
uncommitted lines of credit. In addition, at Sept.30, 1996, the Company had a
$30 million unsecured note due Sept.30, 1997, which bears interest at a variable
rate based on LIBOR. As of Sept.30, 1996, no formal compensating balance
agreements existed and Piper Jaffray was in compliance with all debt covenants
related to these committed facilities.

5. Mortgage-Backed Bonds
(in thousands)
Premier periodically issues bonds which are collateralized by GNMA and FNMA
certificates. The bonds are obligations solely of Premier and bondholders' only
recourse is to the underlying series' collateral. The collateral, which was
purchased with the issuance proceeds, is held by a trustee and is classified as
available for sale under SFAS No.115, Accounting for Certain Investments in Debt
and Equity Securities. The collateral is carried at market value, which
approximates amortized cost and is based on quoted market prices. Principal and
interest payments on the collateral are used to meet the debt service of the
mortgage-backed bonds.
During fiscal 1995, Premier issued three series of mortgage-backed bonds
with an aggregate principal amount of $54,400. Prior to fiscal 1995, Premier
issued six series of mortgage-backed bonds with a remaining aggregate principal
amount of $22,293 and purchased related collateral which has been accounted for
financial reporting purposes as a sale. Accordingly, the assets, liabilities,
interest income and interest expense relating to these series do not appear on
the consolidated financial statements of the Company.
Interest revenue and expense related to mortgage-backed bonds have been
recorded net in the consolidated statements of income. Gross interest revenue
was $3,994, $3,412 and $230, and interest expense was $4,062, $3,512 and $205
for fiscal years 1996, 1995 and 1994, respectively.

6. Shareholders' Equity
Prior to fiscal 1996, the board of directors authorized the repurchase of
up to 900,000 shares of the Company's common stock to satisfy employee benefit
plan obligations. On July 23, 1996, the board of directors authorized the
repurchase of up to an additional 750,000 shares. During fiscal 1996, 1995 and
1994, respectively, 282,500, 35,900 and 378,100 shares were repurchased.
On Nov. 5, 1996, the board of directors declared a quarterly dividend of
7.5 cents per share, payable on Dec. 10, 1996, to shareholders of record on Nov.
26, 1996. Also on Nov. 5, 1996, the board of directors approved the fiscal 1996
ESOP contribution of approximately $15.4 million. This contribution will be made
50 percent in cash and 50 percent in the Company's common stock, thereby
increasing shareholders' equity by $7.7 million in the first quarter of fiscal
1997.
Effective July 1, 1994, the Company offered the Piper Jaffray Companies
Stock Investment Plan, which allows eligible employees the opportunity to
purchase the Company's common stock at a discount through after-tax payroll
deductions. Each month, the payroll deductions are used to purchase the
Company's common stock at 85 percent of the closing market price on the last day
of the month. The plan provides for no more than 1 million shares of common
stock to be purchased by employees under the plan. In November 1996, the board
of directors increased the number of shares available to be purchased under the
Stock Investment Plan to 2 million, subject to the approval of the Company's
shareholders. The Company satisfies the share obligations by reissuing treasury
shares. At Sept. 30, 1996, a total of 654,001 common shares had been issued
under the Stock Investment Plan. Compensation expense charged to operations as a
result of the plan was $785,000, $117,000 and $102,000 for fiscal years 1996,
1995 and 1994, respectively.
The Company's 1983 Book Value Stock Purchase Plan provided for up to 3.2
million shares to be sold to certain key employees. Effective Nov. 9, 1993, the
board of directors suspended offerings under this plan and no additional shares
are expected to be issued, but the status of the outstanding shares and options
under the plan is unchanged. The plan allowed certain employees the right to
purchase the Company's common stock at a price equal to the book value per share
at the time of sale. These shares are entitled to full dividend and voting
rights. Within seven years from date of issuance, the shares must have been sold
back to the Company at the current book value per share or exchanged for a
specific number of freely transferable shares based on the relative market and
book values at the date of purchase. Any shares repurchased or exchanged by the
Company may be reissued under the plan. Stock options also have been granted
under the plan for additional book value shares. Shares acquired by an employee
upon the exercise of an option would generally be subject to the same rights and
restrictions described above. Compensation expense charged to operations as a
result of the increase in book value of shares issued under the plan was $0,
$1.2 million and $2.4 million for fiscal years 1996, 1995 and 1994,
respectively.
The Company issues executive incentive stock options to certain employees
to purchase shares of the Company's common stock under the 1993 Piper Jaffray
Companies Inc. Omnibus Stock Plan. The number of shares available for
distribution under the plan shall not exceed 2 million and, as of Sept. 30,
1996, 495,000 shares remained available. During fiscal 1995, stock options
covering 405,250 shares of common stock were canceled to provide for special
option grants to certain key employees covering approximately 600,000 shares.
The purchase price of each share subject to an option is fixed, but is not less
than the fair market value of the Company's common stock at the time the option
is granted. Options expire 10 years from the date of grant or earlier as
determined by the Company. No charges have been made to operations under this
plan.
The following table summarizes activity for the book value shares and
options and the executive incentive stock option plan for the three years ended
Sept.30, 1996:

<TABLE>

Fiscal years ending 1996 1995 1994
September
- --------------------------------------------------------------------------------
<C> <C> <C>
Book value plan shares outstanding:
Beginning of year 923,500 1,719,800 2,255,850
Options exercised 51,100 64,650 94,600
Converted to market shares (214,600) (254,000) (523,975)
Repurchased (30,750) (606,950) (106,675)
- --------------------------------------------------------------------------------
End of year 729,250 923,500 1,719,800
- --------------------------------------------------------------------------------
Participants' cost per share $3.80 $3.80 $3.80
outstanding at end to to to
of year $7.45 $7.45 $7.45
- --------------------------------------------------------------------------------
Book value plan shares available under options:
Beginning of year 339,750 427,000 529,850
Exercised (51,100) (64,650) (94,600)
Cancelled (7,800) (22,600) (8,250)
- --------------------------------------------------------------------------------
End of year 280,850 339,750 427,000
- --------------------------------------------------------------------------------
Exercise price per share $3.23 $2.85 $2.85
to to to
$7.45 $7.45 $7.45
- --------------------------------------------------------------------------------
Executive incentive stock options outstanding and exercisable:
Beginning of year 1,372,820 1,020,220 945,740
Granted 175,000 769,850 164,000
Exercised (24,000) (12,000) (89,520)
Cancelled (28,400) (405,250) -
- --------------------------------------------------------------------------------
End of year 1,495,420 1,372,820 1,020,220
- --------------------------------------------------------------------------------
Exercise price per share $4.25 $4.25 $4.25
to to to
$16.50 $16.50 $16.50
- --------------------------------------------------------------------------------
</TABLE>

7. Commitments and Contingent Liabilities
(in thousands)
The Company and its subsidiaries lease office space and equipment under
various noncancellable leases. Certain leases have renewal options and clauses
for escalation and operating cost adjustments.
Aggregate minimum lease commitments as of Sept.30, 1996, under operating
leases are as follows for the fiscal years ending in September:

1997 $23,620
1998 22,754
1999 20,138
2000 13,744
2001 7,092
Thereafter 14,825
-------
$102,173

Rental expense, including operating costs and real estate taxes, charged to
operations was $35,078, $27,779 and $25,010 in fiscal years 1996, 1995 and 1994,
respectively.
In the normal course of business, Piper Jaffray enters into underwriting
and other commitments. The ultimate settlement of such transactions open at year
end is not expected to have a material effect on the consolidated financial
statements.

8. Litigation
The Company's fiscal 1996 operations include $29.5 million in pretax
charges for two class action litigation settlements, as well as other legal
settlements, professional fees and costs related to funds or assets managed by
Piper Capital. Fiscal 1995 also included various litigation costs, including a
$70 million pretax charge to settle Institutional Government Income Portfolio
(PJIGX) litigation, partially offset by $13.9 million in insurance proceeds, net
of related expenses.
The Company is currently a defendant in other lawsuits and arbitrations and
is subject to regulatory inquiries related to various funds or assets managed by
Piper Capital. In addition, management is aware of unasserted claims which may
contain similar allegations. The Company is also a defendant in a case involving
an underwriting by Piper Jaffray. The Company intends to defend or, in some
cases, negotiate to settle these actions. It is impossible to predict the
outcome of these actions, and, at the present time, the effect of these actions
on the consolidated financial statements cannot be determined. Accordingly, no
provision for losses that may result has been recorded in the consolidated
financial statements. However, the aggregate cost of litigation and any
judgments, settlements or regulatory action relating to these cases could have a
material adverse effect on the consolidated financial statements.
The Company is involved in various other lawsuits or arbitrations or
threatened lawsuits or arbitrations incidental to its securities business.
Management of the Company, after consultation with counsel, believes resolution
of these various lawsuits, arbitrations and claims will have no material adverse
effect on the consolidated financial statements.

9. Financial Instruments With Off-Balance-Sheet Risk
In the normal course of business, the Company's customer, trading and
correspondent clearance activities involve the execution, settlement and
financing of various securities transactions. These activities may expose the
Company to off-balance-sheet risk in the event the other party to the
transaction is unable to fulfill its contractual obligations.
The Company utilizes financial futures contracts to a limited extent to
hedge fixed income inventories against market interest rate fluctuations. Such
transactions are subject to the same controls as all trading for the Company's
own account. The Company also enters into government reverse repurchase
agreements to facilitate hedging. The Company does not, and has no plans to,
enter into for either hedging or speculative purposes the following types of
transactions: interest rate swaps, foreign currency contracts or significant
amounts of futures, options, forwards, mortgage-backed derivatives, or other
securities whose value is derived from other investment products (derivatives).
The Company's financing and customer securities activities involve the
Company using securities as collateral. In the event the counterparty does not
meet its contractual obligation to return securities used as collateral or
customers do not deposit additional securities or cash for margin when required,
the Company may be exposed to the risk of reacquiring the securities or selling
the securities at unfavorable market prices in order to satisfy its obligations
to its customers or counterparties. The Company controls this risk, as does the
securities industry, by monitoring the market value of securities pledged or
used as collateral on a daily basis and requiring adjustments in the event of
excess market exposure.
The Company sells securities not yet purchased (short sales) for its own
account. The establishment of short positions exposes the Company to
off-balance-sheet risk in the event prices increase, as the Company may be
obligated to acquire the securities at unfavorable market prices.

Concentrations of Credit Risk:
The Company provides investment, financing and related services to a
diverse group of domestic and foreign customers including governments,
corporations and institutional and individual investors. The Company's exposure
to credit risk associated with the nonperformance of customers in fulfilling
their contractual obligations pursuant to securities transactions can be
directly impacted by volatile securities markets, credit markets and regulatory
changes. This exposure is measured on an individual customer basis, as well as
for groups of customers that share similar attributes. To alleviate the
potential for risk concentrations, credit limits are established and continually
monitored in light of changing customer and market conditions.
As of Sept. 30, 1996, the Company did not have significant concentrations
of credit risk with any single customer or group of customers or counterparties.

10. Net Capital Requirements
(in thousands)
Piper Jaffray is subject to the Uniform Net Capital Rule (the Rule) of the
Securities and Exchange Commission (SEC) and the net capital rule of the New
York Stock Exchange (the Exchange). Piper Jaffray has elected to use the
alternative method permitted by the Rule, which requires that it maintain
minimum net capital of 2 percent of aggregate debit balances arising from
customer transactions. The Exchange may prohibit a member firm from expanding
its business or paying cash dividends if resulting net capital would be less
than 5 percent of aggregate debit balances. In addition, Piper Jaffray is
subject to certain notification requirements related to withdrawals of excess
net capital.
At Sept. 30, 1996, net capital under the Rule was $122.8 million or 23
percent of aggregate debit balances and $112.1 million in excess of the minimum
required net capital.

11. Employee Benefit Plans
(in thousands)
The Company has a qualified employee stock ownership plan (ESOP) and a
401(k) plan which cover substantially all employees. The plans are
self-administered and may be altered or terminated at any time by the Company.
The Company's contributions to these plans are determined by the board of
directors within limits to qualify as deductions for income tax purposes.
Charges to operations for contributions to the ESOP were $21,803, $17,971 and
$16,735 in fiscal years 1996, 1995 and 1994, respectively. Contribution expense
for the 401(k) plan was $1,991, $1,693 and $1,599 in fiscal years 1996, 1995 and
1994, respectively.

12. Income Taxes
(in thousands)
<TABLE>
Year Year Year
Ended Ended Ended
Sept.30 Sept.30 Sept.30
1996 1995 1994
- -------------------------------------------------------------------------------
<C> <C> <C>
Current:
Federal $ (12,904) $ 22,188 $ 16,240
State (1,309) 5,180 3,709
- -------------------------------------------------------------------------------
(14,213) 27,368 19,949
Changes in deferred taxes:
Federal 16,478 (31,290) (4,463)
State 2,400 (4,613) (638)
- -------------------------------------------------------------------------------
18,878 (35,903) (5,101)
- -------------------------------------------------------------------------------
$ 4,665 $ (8,535) $ 14,848
- -------------------------------------------------------------------------------
The sources of the changes in deferred taxes are:
Deferred employee compensation $ 8,343 $ (5,870) $ (1,086)
Partnership investment losses 411 252 320
Capital infusion for proprietary fund - 2,000 (2,000)
Litigation settlement 21,334 (27,000) -
Other, principally accruals or their reversal,
not currently deductible for tax purposes (11,210) (5,285) (2,335)
- -------------------------------------------------------------------------------
$ 18,878 $(35,903) $ (5,101)
- -------------------------------------------------------------------------------
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes using enacted tax rates in
effect in the years in which the differences are expected to reverse. The tax
effects of significant items comprising the Company's net deferred tax assets
are as follows: <TABLE>

Sept.30 Sept.30
1996 1995
- ---------------------------------------------------------------------------
<C> <C>
Deferred tax assets:
Accruals not currently deductible $ 27,366 $ 22,531
Litigation settlement 4,666 27,000
Other, including mark-to-market
accounting and depreciation 1,090 841
- ---------------------------------------------------------------------------
33,122 50,372
- ---------------------------------------------------------------------------
Deferred tax liabilities:
Partnership investments 8,984 7,828
Other, including mark-to-market accounting and
prepaid expenses 2,923 2,451
- ---------------------------------------------------------------------------
11,907 10,279
- ---------------------------------------------------------------------------
Net deferred tax asset $ 21,215 $ 40,093
- ---------------------------------------------------------------------------
</TABLE>

Reconciliations of the expected federal income tax provision (benefit) and
the actual income taxes provided are as follows:
<TABLE>
Year Year Year
Ended Ended Ended
Sept.30 Sept.30 Sept.30
1996 1995 1994
- ---------------------------------------------------------------------------
<C> <C> <C>
Computed federal income tax at the
weighted statutory rate of 35% for 1996,
1995 and 1994 $ 4,186 $ (7,929) $ 14,046
Increase (reduction) in taxes
resulting from:
State income taxes net of
federal tax benefit 1,241 (394) 1,879
Net tax-exempt municipal
bond interest (1,062) (872) (654)
Other 300 660 (423)
- ---------------------------------------------------------------------------
Income taxes provided $ 4,665 $ (8,535) $ 14,848
- ---------------------------------------------------------------------------
Effective tax rate 39.0% 37.7% 37.0%
</TABLE>

The Company expects to fully realize the benefit of deferred tax assets
given its historical earnings. Accordingly, no valuation allowance has been
established.

<PAGE>

Report of Management

Financial Reporting Responsibility
Management is responsible for the content of the consolidated financial
statements of Piper Jaffray Companies. The statements have been prepared in
accordance with generally accepted accounting principles and include amounts
based on management's estimates and judgments. The financial information
throughout the Annual Report is consistent with that in the financial
statements.
To meet its responsibility for the integrity of the statements, management
relies on an internal control structure that recognizes that there are inherent
limitations in all internal control structures, and that the cost of such a
structure should never exceed the benefits to be derived. Management believes
its internal control structure provides reasonable assurance that the
consolidated financial statements are free of material misstatement.
The internal control structure is reviewed by the internal audit staff and
the independent auditors, Deloitte & Touche LLP. The Audit Committee of the
board of directors, comprising outside directors, also provides an oversight
review of the internal control structure. The Audit Committee meets periodically
with the director of internal audit and with Deloitte & Touche LLP to review
matters related to the internal control structure, and to discuss the nature,
extent and results of audit efforts. Such meetings are held with and without
management present.
The consolidated financial statements have been audited by Deloitte &
Touche LLP. Their report expresses their independent professional opinion as to
the fairness of the financial statements and is based upon audits made in
accordance with generally accepted auditing standards.

/s/ Addison L. Piper
Addison L. Piper
Chief Executive Officer, Piper Jaffray CompaniesChairman, Board of Directors

/s/ William H. Ellis
William H. Ellis
President, Piper Jaffray CompaniesChairman and President, Piper Capital

/s/ Deborah K. Roesler
Deborah K. Roesler
Chief Financial Officer, Piper Jaffray Companies

Report of Independent Auditors

Board of Directors and Shareholders
Piper Jaffray Companies
Minneapolis, Minn.

We have audited the accompanying consolidated statements of financial
condition of Piper Jaffray Companies and subsidiaries as of Sept. 30, 1996 and
1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended Sept. 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 consolidated financial statements 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Piper Jaffray Companies and
subsidiaries as of Sept. 30, 1996 and 1995, and the results of their operations
and cash flows for each of the three years in the period ended Sept. 30, 1996,
in conformity with generally accepted accounting principles.
As discussed in paragraph 2 of Note 8 to the consolidated financial
statements, the Company is involved in litigation.

/s/ Deloitte & Touche LLP
Minneapolis, Minn.
Nov. 6, 1996

<PAGE>

SUMMARY OF QUARTERLY RESULTS (Unaudited)
<TABLE>

(in thousands, except per
share amounts) First Second Third Fourth
- ------------------------------------------------------------------------
<C> <C> <C> <C>
Fiscal 1996
Revenue $132,526 $137,592 $147,631 $136,155
Income before income taxes 10,908 (3,987) (2,256) 7,296
Net income 6,654 (2,294) (1,514) 4,450
Net income per share .37 (.13) (.08) .24
Fiscal 1995
Revenue 92,499 97,857 109,156 132,195
Income before income taxes 7,622 (60,613) 21,468 8,870
Net income
4,650 (37,274) 13,095 5,411
Net income per share .27 (2.17) .73 .30

Market Prices and Dividends Per Share
Fiscal 1996
Market Price Range
High $14.13 $14.50 $13.75 $12.38
Low 11.63 12.88 12.50 11.63
Dividends Paid .075 .075 .075 .075
Fiscal 1995
Market Price Range
High 11.63 12.75 15.50 17.00
Low 9.50 9.75 11.63 14.38
Dividends Paid .075 .075 .075 .075
</TABLE>

The common stock of Piper Jaffray Companies Inc. (NYSE:PJC) is listed on
the New York Stock Exchange. At Nov. 29, 1996, there were approximately 689
registered shareholders of the Company's common stock.
Cash dividends have been paid on common shares in each year since 1971. The
Company's policy is to pay regular quarterly dividends on the common stock in
March, June, September and December. On Nov. 5, 1996, the board of directors
declared a quarterly dividend of 7.5 cents per share of its common stock.
The second and third quarters of fiscal 1996 include $14 million and $15.5
million, respectively, in pretax charges for class action litigation
settlements.
The second quarter of fiscal 1995 includes a $70 million pretax charge for
settlement of Institutional Government Income Portfolio (PJIGX) mutual fund
litigation, which was partially offset in the third quarter of fiscal 1995 by
$13.9 million of insurance proceeds, net of related expenses.

<ARTICLE> BD
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF PIPER JAFFRAY COMPANIES INC. AS OF
AND FOR THE PERIODS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 23,406
<RECEIVABLES> 620,175
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 149,604
<PP&E> 30,185
<TOTAL-ASSETS> 923,740
<SHORT-TERM> 183,320
<PAYABLES> 341,334
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 27,472
<LONG-TERM> 45,333
0
0
<COMMON> 18,198
<OTHER-SE> 148,627
<TOTAL-LIABILITY-AND-EQUITY> 923,740
<TRADING-REVENUE> 165,284
<INTEREST-DIVIDENDS> 41,130
<COMMISSIONS> 185,301
<INVESTMENT-BANKING-REVENUES> 98,812
<FEE-REVENUE> 37,442
<INTEREST-EXPENSE> 16,866
<COMPENSATION> 343,518
<INCOME-PRETAX> 11,961
<INCOME-PRE-EXTRAORDINARY> 11,961
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,296
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40

</TABLE>