PIPER FUNDS INC, N-30D, 1996-11-27

PIPER FUNDS INC
N-30D, 1996-11-27

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<PAGE>
1996 ANNUAL REPORT
- --------------------------------------------------------------------------------

GROWTH AND INCOME FUNDS
------------------------------

BALANCED FUND
------------------------------

{LOGO] GROWTH AND

INCOME FUND

<PAGE>

CONTENTS

Growth and Income Fund

Letter to Shareholders . . . . . . . . . . . . .2
Financial Statements and Notes . . . . . . . . .8
Investments in Securities. . . . . . . . . . . 18
Independent Auditors' Report . . . . . . . . . 22
Federal Tax Information . . . . . . . . . . . 23
Directors and Officers . . . . . . . . . . . . 24
Shareholder Services . . . . . . . . . . . . . 25
Glossary . . . . . . . . . . . . . . . . . . . 29

Balanced Fund

Letter to Shareholders . . . . . . . . . . . . .5
Financial Statements and Notes . . . . . . . . .8
Investments in Securities. . . . . . . . . . . 20
Independent Auditors' Report . . . . . . . . . 22
Federal Tax Information . . . . . . . . . . . 23
Directors and Officers . . . . . . . . . . . . 24
Shareholder Services . . . . . . . . . . . . . 25
Glossary . . . . . . . . . . . . . . . . . . . 29

THIS REPORT IS INTENDED FOR SHAREHOLDERS OF GROWTH AND INCOME FUND AND BALANCED
FUND, BUT MAY ALSO BE USED AS SALES LITERATURE IF PRECEDED OR ACCOMPANIED BY A
PROSPECTUS. THE PROSPECTUS GIVES DETAILS ABOUT THE CHARGES, INVESTMENT RESULTS,
RISKS AND OPERATING POLICIES OF THE FUNDS.

*AN INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1 PER SHARE.

[LOGO]

INTERNATIONAL GROWTH FUNDS
- ----------------------------------------
Emerging Markets Growth Fund
Pacific-European Growth Fund

U.S. GROWTH FUNDS
- ----------------------------------------
Small Company Growth Fund
Emerging Growth Fund
Growth Fund

GROWTH AND INCOME FUNDS
- --------------------------------------------------------------------------------
Growth and Income Fund
Balanced Fund

Portfolios composed of quality stocks and bonds offer the potential for both
investment income and capital appreciation, considered a valuable combination by
many investors.

INCOME FUNDS
- ----------------------------------------
Government Income Fund
Intermediate Bond Fund
Adjustable Rate Mortgage Securities Fund

TAX-EXEMPT INCOME FUNDS
- ----------------------------------------
National Tax-Exempt Fund
Minnesota Tax-Exempt Fund

CASH MANAGEMENT FUNDS*
- ----------------------------------------
Money Market Fund
Tax-Exempt Money Market Fund
U.S. Government Money Market Fund
Institutional Money Market Fund

Piper Funds provide you with the flexibility to help you pursue your lifelong
goals. Among our funds, we offer a spectrum of investment objectives and
convenient shareholder services to meet the varied needs of today's investors.

Contact your Piper Jaffray Investment Executive for more information about the
Piper Funds, including prospectuses, or call Mutual Fund Services at 1 800
866-7778.

<PAGE>

PRESIDENT'S LETTER
- --------------------------------------------------------------------------------

November 15, 1996
- --------------------------------------------------------------------------------

DEAR SHAREHOLDERS:

Check out the best sellers' list at your local bookstore. You'll notice a number
of books about companies that have gone through dramatic changes in recent
years. Surprising? Not really. Every company experiences change periodically.
And we re no exception. At Piper Capital Management, we've recently made
significant changes to enhance our ability to achieve consistent, competitive
performance and provide a higher level of quality service.
We've restructured our fund family to offer you a broader range of mutual
funds - from small company to emerging markets. We've renamed certain funds so
it's easier to identify how they invest. Take a look at the names, and you'll
see what I mean.
We've upgraded our toll-free telephone system so you spend less time
listening to voice response and more time receiving information you can put to
use. When calling our toll-free number, you'll now have the option to listen to
our portfolio managers talk about their current investment strategies and market
outlook. Find out the many ways to reach us, including our toll-free number, on
the back page of this report.
Take a close look at the annual report in your hand. You'll see that the
format is simpler and more inviting. The report has less jargon and is easier to
read. We've even added a glossary of terms at the back of the book to help you
better understand commonly used financial terms. Whenever you see this symbol v,
it indicates a term that is defined in the glossary. In addition, we've
developed more literature that clearly spells out each fund's investment process
with succinct content that you can easily grasp. Flip to the back page for more
information on how to order literature.
You'll hear the word "team" more often when we talk about our portfolio
managers. We've reorganized our investment management group so managers interact
more frequently, sharing their best ideas to improve the investment capabilities
of Piper Capital.
There is one thing that hasn't changed at Piper Capital, and that's the
value we place on your Investment Executive. He or she plays an integral part in
helping you build your wealth. Rely on your Piper Jaffray Investment Executive
to give you the support and guidance that you need in working toward your
financial goals.
The recent changes we have made represent a new way of doing business at
Piper Capital - an approach we believe will enable us to establish an
unparalleled reputation for prudent investing and high-quality service.
That said, we look forward to serving your future financial needs and
exceeding your expectations in every way we can.

Thank you for your investment.

Sincerely,

/s/ William H. Ellis

William H. Ellis

[PHOTO]

William H. Ellis
President
Piper Capital Management
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

1 1996 Annual Report - Growth and Income Funds

<PAGE>

GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------

November 15, 1996
- --------------------------------------------------------------------------------

DEAR SHAREHOLDERS:

FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 1996, GROWTH AND INCOME FUND
PROVIDED A 19.56%* TOTAL RETURN WITH ALL DIVIDENDS AND CAPITAL GAINS REINVESTED,
BUT NOT INCLUDING THE SALES CHARGE. The fund outperformed the Lipper Growth and
Income Funds Average,+ which advanced 17.24%, and modestly lagged the Standard &
Poor's 500 Index,** which gained 20.32% during the same time frame. The main
reason for the fund's good investment results was our emphasis on growth
stocks,*** which outperformed bonds.

FOR MUCH OF THE PERIOD, THE DIRECTION OF THE ECONOMY WAS UNCERTAIN, CAUSING
VOLATILITY AMONG MANY SECTORS***. When the period began, the economy appeared to
be slowing, but it picked up considerably early in 1996 before showing signs of
moderating midway through the summer and into the fall. The slowdown in economic
activity early in the period sent interest rates down and stock prices higher.
When the economy began showing clear signs of strengthening in early 1996, as
evidenced by higher commodity prices, investors bought stocks of companies that
tend to perform well during periods of economic strength, such as basic
materials stocks, which include steel, chemicals and paper. As the economy began
to moderate, investors turned to blue-chip stocks*** whose profits are not
greatly affected by a slowdown in economic activity.

OUR OVERWEIGHTING*** IN ECONOMICALLY SENSITIVE*** STOCKS HELPED PERFORMANCE
EARLY IN THE PERIOD. One stock that performed particularly well was aerospace
manufacturer Boeing Co. (2% of the fund's total

- --------------------------------------------------------------------------------

[PHOTO]
JOHN SCHONBERG, CFA
shares primary responsibility
for the management of
Growth and Income Fund. He
has nine years of financial
experience.
- --------------------------------------------------------------------------------

FUND PERFORMANCE THROUGH SEPTEMBER 30, 1996*
- --------------------------------------------------------------------------------

Growth of $10,000 Invested Since Inception

[GRAPH]

Average Annualized Total Returns
Includes 4% maximum sales charge.

One Year . . . . . . . . . . . . . . . . . 14.78%
Since Inception (7/21/92). . . . . . . . . 11.89%

DURING SOME PERIODS, THE FUND'S ADVISER WAIVED OR PAID CERTAIN FUND EXPENSES
AND/OR THE FUND'S DISTRIBUTOR VOLUNTARILY LIMITED CERTAIN FUND 12B-1 FEES.
OTHERWISE, THE AVERAGE ANNUAL TOTAL RETURNS WOULD HAVE BEEN 14.47% ONE YEAR AND
11.62% SINCE INCEPTION.

* PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PLEASE REMEMBER, YOU COULD
LOSE MONEY WITH THIS INVESTMENT. NEITHER SAFETY OF PRINCIPAL NOR STABILITY OF
INCOME IS GUARANTEED. THE RETURN AND PRINCIPAL VALUE OF YOUR INVESTMENT WILL
FLUCTUATE SO THAT FUND SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.

ALL FUND AND BENCHMARK PERFORMANCE FIGURES INCLUDE REINVESTED DISTRIBUTIONS.

** AN UNMANAGED INDEX OF LARGE STOCKS THAT INCLUDES NO EXPENSES OR TRANSACTION
CHARGES.

+ THE AVERAGE TOTAL RETURN OF SIMILAR FUNDS AS CHARACTERIZED BY LIPPER
ANALYTICAL SERVICES.

*** - This symbol represents a graduation cap, used throughout the report to
indicate terms defined in the glossary.

2 1996 Annual Report - Growth and Income Funds

<PAGE>

GROWTH AND INCOME FUND (CONTINUED)
- --------------------------------------------------------------------------------

assets). The company benefited due to increased orders from U.S. transportation
companies and overseas companies, particularly in China and other areas of the
Far East. Given our favorable forecast for the global airline industry, our
outlook for Boeing remains positive.

OUR OVERWEIGHTING IN ENERGY STOCKS ALSO HELPED BOLSTER PERFORMANCE. Energy stock
prices, which until recently had been depressed for several years, began to
strengthen for several reasons. Valuations*** and dividend yields of many
companies in this sector are attractive compared to the market, and the economic
recovery taking place in many global markets is creating greater demand for
energy. We continue to own Baker Hughes (1%) and Schlumberger (2%), two oil
service companies, and we recently added Mobil (0.9%), a major oil company.
Mobil has been through a significant restructuring and is now focusing on
expanding its operation with what we believe is a solid management team. We
believe the prices of many oil producing and oil service companies represent
excellent values in today's market.

WE MAINTAINED AN UNDERWEIGHTING*** IN TECHNOLOGY STOCKS, WHICH PROVED TO BE A
GOOD STRATEGY BECAUSE OF THE SIGNIFICANT VOLATILITY EXPERIENCED BY MANY STOCKS
IN THIS SECTOR. After going through a difficult time early in the period,
technology stocks rebounded midway through the period and finished the fiscal
year on a strong note. However, although the stocks of some technology companies
did very well, the prices of many other stocks in this group remained under
considerable pressure throughout the period. We intend to maintain our
underweighting in technology stocks, given their generally high valuations and
uncertainty regarding future prospects.

LOOKING AHEAD, WE EXPECT TO INCREASE OUR WEIGHTING IN BLUE-CHIP STOCKS WITH GOOD
GROWTH PROSPECTS, GIVEN THEIR FAVORABLE VALUATIONS. One area that is
particularly attractive to us is the telephone utility group. Within that
sector, we believe GTE (2%), which operates the largest independent telephone
system, has the potential to outperform the market. Currently, the stock yields
around 4%, and the

- --------------------------------------------------------------------------------

[PHOTO]

PAUL DOW, CFA
shares primary responsibility
for the management of
Growth and Income Fund. He
has 22 years of financial
experience.

- --------------------------------------------------------------------------------

PORTFOLIO COMPOSITION BY SECTOR
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1996.

[GRAPH]

TOP 10 EQUITY HOLDINGS
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1996.

1 General Electric 4%
- ---------------------------------------------------
2 H&R Block 3%
- ---------------------------------------------------
3 Abbott Laboratories 3%
- ---------------------------------------------------
4 Exxon Corporation 3%
- ---------------------------------------------------
5 Philip Morris Company 3%
- ---------------------------------------------------
6 Ford Motor 2%
- ---------------------------------------------------
7 Texaco 2%
- ---------------------------------------------------
8 GTE 2%
- ---------------------------------------------------
9 Merck & Company 2%
- ---------------------------------------------------
10 WMX Technologies 2%
- ---------------------------------------------------

*** - This symbol represents a graduation cap, used throughout the report to
indicate terms defined in the glossary.

2 1996 Annual Report - Growth and Income Funds

<PAGE>

GROWTH AND INCOME FUND (CONTINUED)
- --------------------------------------------------------------------------------

company's earnings prospects look good. We also like AT&T (2%). The company has
cut operating costs and is now going through a major restructuring that should
make it more competitive. AT&T plans to split its communication services,
network systems and computer divisions into three separate companies by the end
of 1996. Moreover, the company is taking steps to compete with low-cost rivals,
many of which are already operating on tight profit margins.

FINALLY, WE PLAN TO TAKE A DELIBERATE, HIGHLY SELECTIVE APPROACH TO REINVESTING
OUR CASH RESERVES. It's been reported that because of the boom in mutual fund
assets, some managers have been investing new cash flows into existing
securities, regardless of their current prices. You can be sure that any
security under consideration for this fund must meet our stringent criteria for
investment before it is selected for your portfolio.

Thank you for your investment in Growth and Income Fund. We consider it a
privilege to manage your money and appreciate the opportunity to serve your
investment needs.

Sincerely,

/s/ John Schonberg

John Schonberg
Portfolio Manager

/s/Paul Dow

Paul Dow
Portfolio Manager

- --------------------------------------------------------------------------------

[PHOTO]

David Steele
assists with the management
of Growth and Income Fund.
He has 17 years of financial
experience.
- --------------------------------------------------------------------------------

4 1996 Annual Report - Growth and Income Funds

<PAGE>

BALANCED FUND
- --------------------------------------------------------------------------------

November 15, 1996
- --------------------------------------------------------------------------------

Dear Shareholders:

FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 1996, BALANCED FUND REGISTERED A
10.16%* TOTAL RETURN WITH ALL DIVIDENDS AND CAPITAL GAINS REINVESTED, BUT NOT
INCLUDING THE SALES CHARGE. The fund underperformed the Lipper Balanced Funds
Average,++ which gained 12.46%. For the same time period, the Standard & Poor's
500 Index + and the Lehman Brothers Government Corporate Index** advanced 20.32%
and 4.50%, respectively. The fund's underperformance reflects our decision to
invest less in stocks compared to the average balanced fund. While we believe
similar funds invested 60% in stocks and 40% in bonds during this period,
Balanced Fund maintained a more conservative 50%/50% blend.

FOR MUCH OF THE PERIOD, THE DIRECTION OF THE ECONOMY WAS UNCERTAIN, CAUSING
VOLATILITY AMONG MANY SECTORS***. Late last year, the economy appeared to be
slowing, but it picked up considerably early in 1996 before showing signs of
moderating midway through the summer and into the fall. The slowdown in economic
activity early in the period sent interest rates down and stock prices higher.
When the economy started to show clear signs of strengthening in early 1996, as
evidenced by higher commodity prices, investors bought stocks of companies that
tend to perform well during times of economic strength, such as basic materials
stocks, which include steel, chemicals and paper. As the

- --------------------------------------------------------------------------------

[PHOTO]

BRUCE SALVOG
shares responsibility for the
management of the
fixed income portion of
Balanced Fund. He has
26 years of financial
experience.
- --------------------------------------------------------------------------------

FUND PERFORMANCE THROUGH SEPTEMBER 30, 1996*
- --------------------------------------------------------------------------------
Growth of $10,000 Invested Since Inception

[GRAPH]

- --------------------------------------------------------------------------------
Average Annualized Total Returns
Includes 4% maximum sales charge.

One Year . . . . . . . . . . . . . . . . . .5.76%
Five Years . . . . . . . . . . . . . . . . 10.11%
Since Inception (3/16/87). . . . . . . . . .8.39%

ALL FUND AND BENCHMARK PERFORMANCE FIGURES INCLUDE REINVESTED DISTRIBUTIONS.

** An unmanaged index of all U.S.
government and Treasury securities and investment-grade corporate debt
securities that includes no expenses or transaction charges.

+ An unmanaged index of large stocks that includes no expenses or transaction
charges.
++ The average total return of similar funds as characterized by Lipper
Analytical Services.

*** - This symbol represents a graduation cap, used throughout the report to
indicate terms defined in the glossary.

5 1996 Annual Report - Growth and Income Funds

<PAGE>

BALANCED FUND (CONTINUED)
- --------------------------------------------------------------------------------

economy began to moderate, investors turned to blue-chip stocks*** whose profits
are not greatly affected by a slowdown in economic activity.

IN THE EQUITY PORTION OF THE PORTFOLIO, WE CONTINUED TO BE OVERWEIGHTED*** IN
CAPITAL GOODS AND SERVICES, OUR LARGEST SECTOR. These stocks tend to fare well
when the economy strengthens. Some of the fund s larger holdings in this group
are Boeing (1% of the fund's total assets), General Electric (2%), 3M (2%) and
WMX Technologies (1%), the nation's largest waste management company. These
companies have gone through major restructuring to reduce operating costs and
increase returns. As the economy continues to grow moderately, we believe they
will be well positioned for above-average growth potential.

OUR OVERWEIGHTED POSITION IN THE ENERGY SECTOR BOLSTERED PERFORMANCE. After
several years of underperforming the market, energy stocks rebounded solidly due
to their attractive valuations*** and dividend yields and an increased demand
for energy, fueled by a stronger global economy. Some of the fund's larger
holdings in this sector include Burlington Resources (0.6%), which operates oil
and natural gas wells in the south central region of the United States, and
Baker Hughes (0.8%), which manufactures products for the petroleum,
mineral-production, water-treatment, chemical and food-processing markets. In
our opinion, these companies have strong management and solid growth potential.

DURING THE PERIOD, WE MAINTAINED AN UNDERWEIGHTED*** EXPOSURE TO THE TECHNOLOGY
SECTOR. This strategy helped the fund's performance when these stocks declined
in late 1995 and early 1996 due to lower-than-expected earnings for the group.
While technology stocks began to rebound late in the period, we took a selective
approach to adding investments in this sector. Many technology companies face
rising capital expenditures and increasing pricing pressures, which have begun
to cut into profitability. Moreover, valuations remain high.

- --------------------------------------------------------------------------------

[PHOTO]

JOHN SCHONBERG, CFA
shares responsibility for the
management of the equity
portion of Balanced Fund. He
has nine years of financial
experience.

- --------------------------------------------------------------------------------

PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1996.

[GRAPH]

- --------------------------------------------------------------------------------

TOP 10 EQUITY HOLDINGS
- --------------------------------------------------------------------------------

As a percentage of total assets on September 30, 1996.

1 General Electric 2%
- ---------------------------------------------------
2 FNMA (Fannie Mae) 2%
- ---------------------------------------------------
3 Procter & Gamble 2%
- ---------------------------------------------------
4 3M 2%
- ---------------------------------------------------
5 Norwest 2%
- ---------------------------------------------------
6 Exxon Corporation 2%
- ---------------------------------------------------
7 AlliedSignal 1%
- ---------------------------------------------------
8 Royal Dutch Petroleum 1%
- ---------------------------------------------------
9 Merck & Company 1%
- ---------------------------------------------------
10 Enron 1%
- ---------------------------------------------------

*** - This symbol represents a graduation cap, used throughout the report to
indicate terms defined in the glossary.

6 1996 Annual Report - Growth and Income Funds

<PAGE>

BALANCED FUND (CONTINUED)
- --------------------------------------------------------------------------------

IN THE BOND PORTION OF THE FUND, OUR EFFECTIVE DURATION*** STRATEGY HELPED
PROTECT SHAREHOLDER CAPITAL AND ENHANCE PERFORMANCE. In late 1995 and early
1996, we maintained a defensive*** duration compared to our bench-mark to help
protect against a rise in interest rates. This strategy proved successful as
rates rose early in 1996 due to stronger-than-expected economic growth. When we
saw signs that the economy was starting to slow by mid-year, we shifted to a
neutral*** duration posture. This approach helped performance, because a slowing
economy brought stable interest rates and, in turn, higher income.

Our overweighted position in mortgage-backed securities and our decision to
implement a ladder*** to bullet*** portfolio structure contributed to the fund s
performance. Mortgages proved to be the best performing sector during the
period, compared to corporate bonds and government securities. The ladder to
bullet portfolio approach helped the fund increase income and protect
shareholder capital during a period when the difference between yields on short-
and long-term securities (i.e. the yield curve***) was widening. The ladder to
bullet portfolio approach involves emphasizing bonds with maturities across the
medium-term spectrum, which, in the case of the fund, are securities maturing
between three and seven years. When the yield curve is steepening, bonds with
these maturities tend to fare well compared to a combination of securities with
short- and long-term maturities.

GOING FORWARD, WE REMAIN PARTICULARLY OPTIMISTIC ABOUT OUR INVESTMENT IN ENERGY
STOCKS. We believe the prices of many oil producing and oil service companies
represent excellent values in today's market. As for our fixed income strategy,
we expect to keep a duration strategy that is neutral relative to our benchmark
until we receive clearer signals concerning the direction of the economy.
Near-term, we intend to maintain our current allocation of 50% in stocks and 50%
in bonds. Given the strong run up in stock prices, we are reluctant to add new
money to stocks until valuations become more attractive. Moreover, our near-term
outlook for bonds is not optimistic enough to warrant additional investments in
this area now.

Thank you for your investment in Balanced Fund. We are dedicated to serving your
investment needs and helping you reach your financial goals.

Sincerely,

/s/ Bruce Salvog /s/ John Schonberg

Bruce Salvog John Schonberg
Portfolio Manager Portfolio Manager

/s/ David Steele /s/ Paul Dow

David Steele Paul Dow
Portfolio Manager Portfolio Manager

- --------------------------------------------------------------------------------

[PHOTO]

David Steele
shares responsibility for the
management of the
fixed income portion of
Balanced Fund. He has
17 years of financial
experience.
- --------------------------------------------------------------------------------

[PHOTO]

Paul Dow, CFA
shares responsibility for the
management of the equity
portion of Balanced Fund. He
has 22 years of financial
experience.
- --------------------------------------------------------------------------------

*** - This symbol represents a graduation cap, used throughout the report to
indicate terms defined in the glossary.

7 1996 Annual Report - Growth and Income Funds

<PAGE>
Financial Statements

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES September 30, 1996
..................................................................

<TABLE>
<CAPTION>
GROWTH
AND INCOME BALANCED
FUND FUND
------------ ------------

<S> <C> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including a repurchase agreement of $3,877,000 and
$339,000, respectively) .................................. $97,300,508 $45,127,572
Cash in bank on demand deposit ............................. 51,021 54,122
Receivable for fund shares sold ............................ 127,121 67,538
Other assets ............................................... 16,777 1,776
Dividends and accrued interest receivable .................. 234,962 273,865
------------ ------------
Total assets ............................................. 97,730,389 45,524,873
------------ ------------

LIABILITIES:
Open option contracts written at market value (premium
received of $55,993 and $0, respectively) (note 6) ....... 140,625 --
Payable for fund shares redeemed ........................... 254,174 35,523
Accrued investment management fee .......................... 58,704 27,566
Accrued distribution fee ................................... 24,264 11,394
Other accrued expenses ..................................... 15,993 7,319
------------ ------------
Total liabilities .......................................... 493,760 81,802
------------ ------------
Net assets applicable to outstanding capital stock ......... $97,236,629 $45,443,071
------------ ------------
------------ ------------

REPRESENTED BY:
Capital stock - authorized 10 billion shares for each fund
of $0.01 par value; outstanding, 6,464,268 and 3,227,093
shares, respectively ..................................... $ 64,643 $ 32,271
Additional paid-in capital ................................. 64,478,175 35,641,013
Undistributed net investment income ........................ 61,629 24,113
Accumulated net realized gain on investments ............... 5,883,018 2,387,854
Unrealized appreciation of investments ..................... 26,749,164 7,357,820
------------ ------------

Total - representing net assets applicable to outstanding
capital stock .......................................... $97,236,629 $45,443,071
------------ ------------
------------ ------------

Net asset value per share of outstanding capital stock ..... $ 15.04 $ 14.08
------------ ------------
------------ ------------

* Investments in securities at identified cost ............. $70,466,712 $37,769,752
------------ ------------
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- --------------------------------------------------------------------------------

8 1996 Annual Report - Growth and Income Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------

STATEMENTS OF OPERATIONS For the Year Ended September 30,
1996
..................................................................

<TABLE>
<CAPTION>
GROWTH
AND INCOME BALANCED
FUND FUND
------------ ------------

<S> <C> <C>
INCOME:
Dividends (net of foreign withholding taxes of $8,051 and
$3,562, respectively) .................................... $ 2,056,865 $ 505,257
Interest ................................................... 136,714 1,532,841
------------ ------------

Total investment income .................................. 2,193,579 2,038,098
------------ ------------

EXPENSES (NOTE 5):
Investment management fee .................................. 639,184 342,187
Distribution fee ........................................... 424,685 227,300
Custodian and accounting fees .............................. 70,893 53,191
Transfer agent and dividend disbursing agent fees .......... 75,207 54,740
Registration fees .......................................... 21,435 14,757
Reports to shareholders .................................... 26,557 23,482
Amortization of organization costs ......................... 16,243 --
Directors' fees ............................................ 2,791 2,791
Audit and legal fees ....................................... 34,747 34,427
Other expenses ............................................. 13,172 13,033
------------ ------------
Total expenses ........................................... 1,324,914 765,908
Less expenses waived by the distributor .................... (161,043) (86,168)
Less expenses waived by the adviser ........................ (45,422) (81,102)
------------ ------------

Net expenses before expenses paid indirectly ............. 1,118,449 598,638
Less expenses paid indirectly .............................. (3,793) (585)
------------ ------------

Total net expenses ....................................... 1,114,656 598,053
------------ ------------

Net investment income .................................... 1,078,923 1,440,045
------------ ------------

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 3) .................. 6,012,377 2,867,497
Net change in unrealized appreciation or depreciation of
investments .............................................. 7,464,585 28,858
------------ ------------

Net gain on investments .................................. 13,476,962 2,896,355
------------ ------------

Net increase in net assets resulting from operations ..... $14,555,885 $ 4,336,400
------------ ------------
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- --------------------------------------------------------------------------------

9 1996 Annual Report - Growth and Income Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------

STATEMENTS OF CHANGES IN NET ASSETS
..................................................................

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND BALANCED FUND
----------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/96 9/30/95
------------- ------------- ------------ -------------

<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 1,078,923 $ 1,319,711 $ 1,440,045 $ 1,529,179
Net realized gain on investments ........................... 6,012,377 1,154,360 2,867,497 1,462,490
Net change in unrealized appreciation or depreciation of
investments .............................................. 7,464,585 14,777,345 28,858 5,480,753
------------- ------------- ------------ -------------

Net increase in net assets resulting from operations ..... 14,555,885 17,251,416 4,336,400 8,472,422
------------- ------------- ------------ -------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................. (1,181,927) (1,345,444) (1,452,108) (1,593,407)
From net realized gains .................................... (996,506) (237,873) (1,746,546) (443,615)
------------- ------------- ------------ -------------
Total distributions ...................................... (2,178,433) (1,583,317) (3,198,654) (2,037,022)
------------- ------------- ------------ -------------

CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sales ........................................ 18,689,037 6,264,849 9,367,148 7,292,483
Shares issued for reinvestment of distributions ............ 2,178,416 1,587,615 3,199,026 2,041,758
Merger of Hercules North American Growth and Income Fund
(note 7) ................................................. 7,333,808 -- -- --
Payments for shares redeemed ............................... (16,773,069) (22,910,085) (12,252,477) (17,558,182)
------------- ------------- ------------ -------------
Increase (decrease) in net assets from capital share
transactions ........................................... 11,428,192 (15,057,621) 313,697 (8,223,941)
------------- ------------- ------------ -------------
Total increase (decrease) in net assets .................. 23,805,644 610,478 1,451,443 (1,788,541)

Net assets at beginning of year ............................ 73,430,985 72,820,507 43,991,628 45,780,169
------------- ------------- ------------ -------------

Net assets at end of year .................................. $ 97,236,629 $ 73,430,985 $ 45,443,071 $ 43,991,628
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------

Undistributed net investment income ........................ $ 61,629 $ 155,433 $ 24,113 $ 36,176
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- --------------------------------------------------------------------------------

10 1996 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements
- --------------------------------------------------

(1) ORGANIZATION
................................................................................
Piper Funds Inc. (the company) is registered under the
Investment Company Act of 1940 (as amended) as a single,
open-end management investment company. The company
currently has 12 series, including Growth and Income Fund
and Balanced Fund (the funds), each of which is classified
as a diversified series. The company's articles of
incorporation permit the board of directors to create
additional series in the future.

Growth and Income Fund invests primarily in stocks of
large, established companies that appear undervalued and
potentially offer long-term dividend and earnings growth.
The fund may also invest in fixed income securities
including U.S. government securities and nonconvertible
preferred stock. On June 21, 1996, Growth and Income Fund
acquired all of the net assets of Hercules North American
Growth and Income Fund in a tax-free reorganization
approved by Hercules Funds' shareholders on June 18, 1996.

Balanced Fund invests in both common stocks and fixed
income securities on the basis of combined considerations
of risk, income, capital appreciation and protection of
capital value.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
................................................................................
INVESTMENTS IN SECURITIES
Investments in securities traded on a national securities
exchange or on the Nasdaq National Market System are
valued at the last reported sales price that day.
Securities traded on a national securities exchange or on
the Nasdaq National Market System for which there were no
sales on that day and securities traded on other
over-the-counter markets for which market quotations are
readily available are valued at the mean of the bid and
asked prices. Exchange-traded options are valued at the
last sales price on the exchange prior to the time when
assets are valued. If no sales were reported that day, the
options will be valued at the mean between the current
closing bid and asked prices. Financial futures are valued
at the last settlement price established each day by the
board of trade or exchange on which they are traded. Such
valuations are determined using independent pricing
services or prices quoted by independent brokers.

The value of certain fixed income securities will be
provided by an independent pricing service, which
determines these valuations at a time earlier than the
close of the Exchange. Fixed income securities for which
prices are not available from an independent pricing
service but where an active market exists will be valued
using market quotations obtained from one or more dealers
that make markets in the securities.

Occasionally, events affecting the value of such
securities may occur between the time valuations are
determined and the close of the Exchange. If events
materially affecting the value of such securities occur,
if the Company's management determines for any other
reason that valuations provided by the pricing service are
inaccurate or when market quotations are not readily
available, securities will be valued at their fair value
according to procedures decided upon in good faith by the
Board of Directors. Short-term securities with maturities
of 60 days or less are valued at amortized cost, which
approximates market value.

- --------------------------------------------------------------------------------

11 1996 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

Securities transactions are accounted for on the date the
securities are purchased or sold. Realized gains and
losses are calculated on the identified-cost basis.
Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond discount
and premium computed on a level-yield basis, is accrued
daily.

OPTIONS TRANSACTIONS
For hedging purposes, the funds may buy and sell put and
call options, write covered call options on portfolio
securities and write cash-secured puts. The risk in
writing a call option is that the funds give up the
opportunity of profit if the market price of the security
increases. The risk in writing a put option is that the
funds may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying
an option is that the funds pay a premium whether or not
the option is exercised. The funds also have the
additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.

Option contracts are valued daily and unrealized
appreciation or depreciation is recorded. The funds will
realize a gain or loss upon expiration or closing of the
option transaction. When an option is exercised, the
proceeds on the sale of a written call option, the
purchase cost of a written put option, or the cost of a
security for purchased put and call options is adjusted by
the amount of premium received or paid.

FUTURES TRANSACTIONS
For hedging purposes, the funds may buy and sell financial
futures contracts and related options. Risks of entering
into futures contracts and related options include the
possibility that there may be an illiquid market and that
a change in the value of the contract or option may not
correlate with changes in the value of the underlying
securities.

Upon entering into a futures contract, the funds are
required to deposit either cash or securities in an amount
(initial margin) equal to a certain percentage of the
contract value. Subsequent payments (variation margin) are
made or received by the funds each day. The variation
margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains and
losses. The funds recognize a realized gain or loss when
the contract is closed or expires.

SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been
purchased by the funds on a forward-commitment or
when-issued basis can take place a month or more after the
transaction date. During this period, such securities do
not earn interest, are subject to market fluctuation and
may increase or decrease in value prior to their delivery.
Each fund maintains, in segregated accounts with the
custodian, assets with a market value equal to the amount
of its purchase commitments. The purchase of securities on
a when-issued or forward-commitment basis may increase the
volatility of each fund's net asset value if the funds
make such purchases while remaining substantially fully
invested. As of September 30, 1996, the funds had no
outstanding when-issued or forward-commitments.

- --------------------------------------------------------------------------------

12 1996 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

FEDERAL TAXES
Each fund is treated separately for federal income tax
purposes. Each fund intends to comply with the
requirements of the Internal Revenue Code applicable to
regulated investment companies and not be subject to
federal income tax. Therefore, no income tax provision is
required. In addition, on a calendar-year basis, the funds
will distribute substantially all of their taxable net
investment income and realized gains, if any, to avoid the
payment of any federal excise taxes.

Net investment income and net realized gains (losses) may
differ for financial statement and tax purposes primarily
because of losses deferred due to "wash sale" and
"straddle" transactions and the non-deductability of
amortization of organization costs.

The character of distributions made during the year from
net investment income or net realized gains may differ
from its ultimate characterization for federal income tax
purposes. In addition, due to the timing of dividend
distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or
realized gains (losses) were recorded by the funds.

On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, a reclassification
adjustment has been made to increase undistributed net
investment income and decrease additional paid-in-capital
by $9,200 for Growth and Income Fund. There were no
permanent book-to-tax differences for Balanced Fund.

DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income
are declared and paid quarterly. Net realized gains
distributions, if any, will be made at least annually.
Distributions are payable in cash or reinvested in
additional shares.

REPURCHASE AGREEMENTS
For repurchase agreements entered into with certain
broker-dealers, the funds, along with other affiliated
registered investment companies, may transfer uninvested
cash balances to a joint trading account, the daily
aggregate of which is invested in repurchase agreements
secured by U.S. government or agency obligations.
Securities pledged as collateral for all individual and
joint repurchase agreements are held by the funds'
custodian bank until maturity of the repurchase agreement.
Provisions for all agreements ensure that the daily market
value of the collateral is in excess of the repurchase
amount, including accrued interest, to protect the funds
in the event of a default.

ORGANIZATION COSTS
Organization costs were incurred in connection with the
start up and initial registration of the funds. These
costs are amortized over 60 months on a straight-line
basis. If any or all of the shares representing initial
capital of the fund are redeemed by any holder thereof
prior to the end of the amortization period, the proceeds
will be reduced by the unamortized organization cost
balance in the same proportion as the number of shares
redeemed bears to the number of initial shares outstanding
preceding the redemption.

- --------------------------------------------------------------------------------

13 1996 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts in the financial statements. Actual
results could differ from these estimates.

(3) INVESTMENT SECURITY TRANSACTIONS
................................................................................
Cost of purchases and proceeds from sales of securities,
other than temporary investments in short term securities,
for the year ended September 30, 1996, were as follows:

<TABLE>
<CAPTION>
GROWTH
AND INCOME BALANCED
FUND FUND
------------ ------------
<S> <C> <C>
Purchases ................................... $ 21,150,408 $ 12,333,995
Proceeds from sales ......................... $ 17,857,646 $ 13,845,328
</TABLE>

For the year ended September 30, 1996, no brokerage
commissions were paid to Piper Jaffray Inc., an affiliated
broker.

(4) CAPITAL SHARE TRANSACTIONS
................................................................................
Transactions in shares of each fund for the years ended
September 30, 1996, and 1995, were as follows:

<TABLE>
<CAPTION>
GROWTH
AND INCOME BALANCED
FUND FUND
----------- -----------
<S> <C> <C>
1996:
Sold ...................................... 1,318,710 671,093
Issued for reinvested distributions ....... 156,296 231,008
Shares issued in connection with the merger
of Hercules North American Growth and
Income Fund ............................. 494,086 --
Redeemed .................................. (1,183,011) (877,520)
----------- -----------
Increase ................................ 786,081 24,581
----------- -----------
----------- -----------
1995:
Sold ...................................... 536,973 582,543
Issued for reinvested distributions ....... 145,560 166,353
Redeemed .................................. (2,097,497) (1,423,325)
----------- -----------
Decrease ................................ (1,414,964) (674,429)
----------- -----------
----------- -----------
</TABLE>

(5) EXPENSES
................................................................................
The company has entered into an investment management
agreement with Piper Capital Management Incorporated
(Piper Capital) under which Piper Capital manages each
fund's assets and furnishes related office facilities,
equipment, research and personnel. The agreement requires
each fund to pay Piper Capital a monthly fee based on
average daily net assets. The fee for each fund is equal
to an annual rate of 0.75% of the first $100 million in
net assets, 0.65% of the next $200 million and decreasing
percentages thereafter to 0.50% of net assets in excess of
$500 million.

Each fund also pays Piper Jaffray Inc. (Piper Jaffray),
the funds' distributor, a monthly fee for providing
shareholder services and distribution-related services.
The fee is limited to an annual rate of 0.50% of average
daily net assets for each fund and includes 0.25% payable
as a servicing fee and 0.25% payable as a distribution
fee. For the year ended September 30, 1996, Piper Jaffray
voluntarily agreed to limit the fee to an annual rate of
0.32% of each fund's average daily net assets.

The company has also entered into shareholder servicing
agreements under which Piper Jaffray and Piper Trust
Company perform various transfer and dividend disbursing
agent services for accounts

- --------------------------------------------------------------------------------

14 1996 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
held at the respective company. The fees, which are paid
monthly to Piper Jaffray and Piper Trust Company for
providing these services, are equal to an annual rate of
$6.00 per active shareholder account and $1.60 per closed
account. For the year ended September 30, 1996, Piper
Jaffray and Piper Trust received the following amounts in
connection with the shareholder account servicing
agreements:

<TABLE>
<CAPTION>
GROWTH
AND
INCOME BALANCED
FUND FUND
-------- --------
<S> <C> <C>
Piper Jaffray ............................... $49,083 $17,321
Piper Trust ................................. $ 1,859 $17,282
-------- --------
$50,942 $34,603
-------- --------
-------- --------
</TABLE>

In addition to the investment management, distribution and
shareholder account servicing fees, each fund is
responsible for paying most other operating expenses
including: outside directors' fees and expenses; custodian
fees; registration fees; printing and shareholder reports;
transfer agent fees and expenses; legal, auditing and
accounting services; insurance; interest; taxes and other
miscellaneous expenses. For the year ended September 30,
1996, Piper Capital voluntarily limited total fees and
expenses, including the distribution and servicing fees,
but excluding interest and income tax expenses, to an
annual rate of 1.32% of average daily net assets for the
funds.

Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by
the funds.

Sales charges received by Piper Jaffray for distributing
the funds' shares were $187,370 and $73,382 for Growth and
Income Fund and Balanced Fund, respectively, for the year
ended 1996.

(6) OPTION CONTRACTS WRITTEN
................................................................................
The number of contracts and premium amounts associated
with call option contracts written during the year ended
September 30, 1996, for Growth and Income Fund were as
follows:

<TABLE>
<CAPTION>
CALL OPTIONS
-----------------
NUMBER
OF PREMIUM
CONTRACTS AMOUNT
---- --------
<S> <C> <C>
Balance at September 30, 1995 ............... -- $ --
Opened .................................... 230 55,993
---- --------
Balance at September 30, 1996 ............... 230 $55,993
---- --------
---- --------
</TABLE>

(7) MERGER
................................................................................
As described in note 1 to the financial statements, on
June 21, 1996 the net assets of Hercules North American
Growth and Income Fund were acquired in a tax-free merger.
Growth and Income Fund issued 494,086 shares in exchange
for net assets of $7,333,808 of Hercules North American
Growth and Income Fund. Included in the net assets
acquired was $1,114,581 in unrealized appreciation. The
aggregate net assets of the combined fund following the
transaction totalled $96,447,398.

- --------------------------------------------------------------------------------

15 1996 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

(8) FINANCIAL HIGHLIGHTS
................................................................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:

GROWTH AND INCOME FUND

<TABLE>
<CAPTION>
Period
ended
Fiscal year ended September 30, September
-------------------------------------------- 30,
1996 1995 1994 1993 1992(d)
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ........ $ 12.93 $ 10.27 $ 10.30 $ 10.01 $10.00
-------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.18 0.19 0.24 0.24 0.03
Net realized and unrealized gains (losses)
on investments .......................... 2.31 2.70 0.02 0.29 (0.02)
-------- ------- ------- ------- -------
Total from operations ................... 2.49 2.89 0.26 0.53 0.01
-------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income ................ (0.20) (0.19) (0.24) (0.24) --
From net realized gains on investments .... (0.18) (0.04) (0.05) -- --
-------- ------- ------- ------- -------
Total distributions to shareholders ..... (0.38) (0.23) (0.29) (0.24) --
-------- ------- ------- ------- -------
Net asset value, end of period .............. $ 15.04 $ 12.93 $ 10.27 $ 10.30 $10.01
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
SELECTED INFORMATION
Total return (a) ............................ 19.56% 28.81% 2.53% 5.41% 0.10%
Net assets at end of period (in millions) ... $ 97 $ 73 $ 73 $ 96 $ 52
Ratio of expenses to average daily net assets
(b) ....................................... 1.32% 1.32% 1.29% 1.32% 1.28%(e)
Ratio of net investment income to average
daily net assets (b) ...................... 1.26% 1.93% 2.26% 2.51% 3.00%(e)
Portfolio turnover rate (excluding short-term
securities) ............................... 22% 14% 20% 26% 1%
Average brokerage commission rate (c) ....... $ 0.0600 n/a n/a n/a n/a
</TABLE>

(A) TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT A SALES
CHARGE.
(B) DURING THE YEARS REFLECTED ABOVE, THE ADVISER AND DISTRIBUTOR VOLUNTARILY
WAIVED FEES AND EXPENSES. HAD THE FUND PAID ALL EXPENSES AND THE MAXIMUM
DISTRIBUTION FEE BEEN IN EFFECT, THE RATIOS OF EXPENSES AND NET INVESTMENT
INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN AS FOLLOWS: 1.56%/1.02%,
1.60%/1.65%, 1.62%/1.93%, 1.58%/2.25% AND 2.06%/2.22% FOR FISCAL 1996,
1995, 1994, 1993, AND 1992, RESPECTIVELY. BEGINNING IN FISCAL 1995, THE
EXPENSE RATIOS REFLECT THE EFFECT OF GROSS EXPENSES PAID INDIRECTLY BY THE
FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.
(C) BEGINNING IN FISCAL 1996, THE FUND IS REQUIRED TO DISCLOSE AN AVERAGE
BROKERAGE COMMISSION RATE. THE RATE IS CALCULATED BY DIVIDING TOTAL
BROKERAGE COMMISSIONS PAID ON PURCHASES AND SALES OF PORTFOLIO SECURITIES
BY THE TOTAL NUMBER OF RELATED SHARES PURCHASED AND SOLD.
(D) COMMENCEMENT OF OPERATIONS WAS JULY 27, 1992.
(E) ADJUSTED TO AN ANNUAL BASIS.

- --------------------------------------------------------------------------------

16 1996 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

BALANCED FUND

<TABLE>
<CAPTION>
Fiscal year ended September 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ........ $ 13.74 $ 11.81 $ 12.23 $ 11.88 $ 10.77
-------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.44 0.47 0.38 0.34 0.38
Net realized and unrealized gains (losses)
on investments .......................... 0.89 1.93 (0.26) 0.65 1.17
-------- ------- ------- ------- -------
Total from operations ................... 1.33 2.40 0.12 0.99 1.55
-------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income ................ (0.44) (0.35) (0.37) (0.34) (0.39)
From net realized gains on investments .... (0.55) (0.12) (0.17) (0.30) (0.05)
-------- ------- ------- ------- -------
Total distributions to shareholders ..... (0.99) (0.47) (0.54) (0.64) (0.44)
-------- ------- ------- ------- -------
Net asset value, end of period .............. $ 14.08 $ 13.74 $ 11.81 $ 12.23 $ 11.88
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
SELECTED INFORMATION
Total return (a) ............................ 10.16% 21.78% 1.00% 8.51% 14.75%
Net assets at end of period (in millions) ... $ 45 $ 44 $ 46 $ 57 $ 28
Ratio of expenses to average daily net assets
(b) ....................................... 1.32% 1.32% 1.32% 1.32% 1.32%
Ratio of net investment income to average
daily net assets (b) 3.16% 3.54% 3.03% 3.13% 3.57%
Portfolio turnover rate (excluding short-term
securities) ............................... 27% 39% 62% 41% 58%
Average brokerage commission rate (c) ....... $ 0.0600 n/a n/a n/a n/a
</TABLE>

(A) TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT A SALES
CHARGE.
(B) DURING THE YEARS REFLECTED ABOVE, THE ADVISER AND DISTRIBUTOR VOLUNTARILY
WAIVED FEES AND EXPENSES. HAD THE FUND PAID ALL EXPENSES AND THE MAXIMUM
DISTRIBUTION FEE BEEN IN EFFECT, THE RATIOS OF EXPENSES AND NET INVESTMENT
INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN AS FOLLOWS: 1.69%/2.79%,
1.65%/3.21%, 1.60%/2.75%, 1.62%/2.83%, AND 1.77%/3.12%,FOR FISCAL 1996,
1995, 1994, 1993, AND 1992, RESPECTIVELY. BEGINNING IN FISCAL 1995, THE
EXPENSE RATIOS REFLECT THE EFFECT OF GROSS EXPENSES PAID INDIRECTLY BY THE
FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.
(C) BEGINNING IN FISCAL 1996, THE FUND IS REQUIRED TO DISCLOSE AN AVERAGE
BROKERAGE COMMISSION RATE. THE RATE IS CALCULATED BY DIVIDING TOTAL
BROKERAGE COMMISSIONS PAID ON PURCHASES AND SALES OF PORTFOLIO SECURITIES
BY THE TOTAL NUMBER OF RELATED SHARES PURCHASED AND SOLD.

- --------------------------------------------------------------------------------

17 1996 Annual Report - Growth and Income Funds
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND September 30, 1996
.......................................................................................

Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

COMMON STOCK (96.1%):
BASIC MATERIALS (8.5%):
Air Products & Chemicals ............................ 31,200 $ 1,817,400
Aluminum Company of America ......................... 20,000 1,180,000
duPont (E.I.) de Nemours & Co. ...................... 12,400 1,094,300
Englehard Corp. ..................................... 25,000 575,000
Morton International ................................ 42,400 1,685,400
Union Camp .......................................... 14,500 708,688
Monsanto Co. ........................................ 33,500(d) 1,222,750
------------
8,283,538
------------

CAPITAL GOODS AND SERVICES (14.8%):
AlliedSignal Inc. ................................... 25,000 1,646,875
Boeing Co. .......................................... 21,500 2,031,750
Emerson Electric .................................... 10,500 946,313
Fluor Corp. ......................................... 28,800 1,771,200
General Electric .................................... 44,500 4,049,500
Minnesota Mining & Manufacturing Co. ................ 26,200 1,830,725
WMX Technologies, Inc. .............................. 64,200 2,110,575
------------
14,386,938
------------

CONSUMER DURABLES (4.6%):
Eastman Kodak ....................................... 6,900 541,650
Ford Motor .......................................... 77,900 2,434,375
General Motors ...................................... 30,400 1,459,200
------------
4,435,225
------------

CONSUMER NON-DURABLES (11.0%):
Anheuser-Busch Co. .................................. 24,800 933,100
Coca-Cola Co. ....................................... 16,800 854,700
Colgate-Palmolive ................................... 19,000 1,650,625
Philip Morris Co. ................................... 28,000 2,513,000
Procter & Gamble .................................... 20,500 1,998,750
Reebok International ................................ 49,000 1,702,750
General Mills ....................................... 18,000 1,086,750
------------
10,739,675
------------

CONSUMER SERVICES (5.5%):
Carnival Corp. - Class A ............................ 40,000 1,240,000
Gannett Co. ......................................... 20,000 1,407,500
H&R Block ........................................... 89,900 2,674,525
------------
5,322,025
------------

FINANCIAL SERVICES (8.8%):
American Express .................................... 27,000 1,248,750
BankAmerica Corp. ................................... 18,400 1,511,100
Chubb Corp. ......................................... 31,000 1,426,000
Federal National Mortgage Association ............... 44,000 1,534,500
J.P. Morgan ......................................... 12,100 1,075,387
Norwest Corp. ....................................... 42,900 1,753,538
------------
8,549,275
------------
</TABLE>

<TABLE>
<CAPTION>
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>

HEALTH CARE (8.8%):
Abbott Laboratories ................................. 51,400 $ 2,531,450
American Home Products .............................. 15,200 969,000
Johnson & Johnson ................................... 19,200 984,000
Medtronic, Inc. ..................................... 13,700 878,512
Merck & Co., Inc. ................................... 30,800 2,167,550
Schering-Plough ..................................... 16,000 984,000
------------
8,514,512
------------

RETAIL TRADE (3.6%):
Dayton Hudson ....................................... 26,700 881,100
Home Depot .......................................... 16,600 944,125
Limited Inc. ........................................ 18,417 352,225
Tandy Corp. ......................................... 32,000 1,292,000
------------
3,469,450
------------

TECHNOLOGY (5.5%):
CompuServe Corp. .................................... 53,000(b) 715,500
Electronic Data Systems ............................. 23,009 1,412,177
Imation Corp. ....................................... 37,620(b) 921,690
Intel Corp. ......................................... 11,600(d) 1,107,075
Lucent Technologies ................................. 15,975 732,853
Cisco Systems, Inc. ................................. 8,000(b)(d) 496,500
------------
5,385,795
------------

TRANSPORTATION (1.9%):
Burlington Northern Santa Fe ........................ 21,700 1,830,937
------------

UTILITIES (11.4%):
AirTouch Communications ............................. 56,900(b) 1,571,863
AT&T Corp. .......................................... 38,600 2,016,850
BellSouth Corp. ..................................... 38,000 1,406,000
Enron ............................................... 47,800 1,947,850
FPL Group ........................................... 26,500 1,146,125
GTE Corp. ........................................... 57,700 2,221,450
SBC Communications .................................. 16,800 808,500
------------
11,118,638
------------

ENERGY (11.7%):
Baker Hughes Inc. ................................... 40,700 1,236,263
Burlington Resources ................................ 31,700 1,406,687
Exxon Corp. ......................................... 30,200 2,514,150
Royal Dutch Petroleum ............................... 9,600 1,498,800
Schlumberger Ltd. ................................... 17,600 1,487,200
Texaco Inc. ......................................... 25,200 2,318,400
Mobil Corp. ......................................... 8,000 926,000
------------
11,387,500
------------

Total Common Stock
(cost: $66,589,712) ............................ 93,423,508
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- --------------------------------------------------------------------------------

18 1996 Annual Report - Growth and Income
Funds
<PAGE>
Investments in Securities (continued)
- --------------------------------------------------------------------------------

GROWTH AND INCOME FUND
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
SHORT-TERM SECURITIES (4.0%):
Repurchase agreement with Goldman Sachs, acquired on
9/30/96, interest of $625, 5.80%, 10/1/96
(cost: $3,877,000) ................................ $ 3,877,000(c) $ 3,877,000
------------

Total Investments in Securities
(cost: $70,466,712) (e) ........................ $ 97,300,508
------------
------------
</TABLE>
<TABLE>
<S> <C>
NOTES TO INVESTMENTS IN SECURITIES
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) REPURCHASE AGREEMENT IN A JOINT TRADING ACCOUNT WHICH IS COLLATERALIZED BY
U.S. GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS
INTEREST DUE AT MATURITY OF THE REPURCHASE AGREEMENT.
(D) AT SEPTEMBER 30, 1996, THE FUND HAS OPEN WRITTEN CALL OPTION CONTRACTS
DETAILED AS FOLLOWS:

EXPIRATIONMARKETDESCRIPTION NUMBER OF
DATEVALUE CONTRACTS
- --- -----------
EXERCISE
OPTION
--
--------------- --------------
<S> <C>
CISCO SYSTEMS, INC...... 40 $ 60.00 OCTOBER 1996 $ 14,000
CISCO SYSTEMS, INC...... 40 $ 65.00 OCTOBER 1996 $ 3,500
INTEL CORP.............. 50 $ 75.00 OCTOBER 1996 $ 103,125
MONSANTO CO............. 100 $ 35.00 OCTOBER 1996 $ 20,000
---------
$ 140,625
---------
---------
</TABLE>

(E) ON SEPTEMBER 30, 1996, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $70,476,001. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 28,409,416
GROSS UNREALIZED DEPRECIATION ...... (1,584,909)
------------
NET UNREALIZED APPRECIATION ...... $ 26,824,507
------------
------------
</TABLE>

- --------------------------------------------------------------------------------

19 1996 Annual Report - Growth and Income
Funds
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BALANCED FUND September 30, 1996
.......................................................................................

COMMON STOCK (49.8%):
BASIC MATERIALS (4.6%):
Air Products & Chemicals .......................... 8,000 $ 466,000
Aluminum Company of America ....................... 4,000 236,000
duPont (E.I.) de Nemours & Co. .................... 3,300 291,225
Englehard Corp. ................................... 10,500 241,500
International Paper ............................... 6,800 289,000
Morton International .............................. 9,000 357,750
Phelps Dodge ...................................... 3,000 192,375
------------
2,073,850
------------

CAPITAL GOODS AND SERVICES (8.8%):
AlliedSignal Inc. ................................. 10,000 658,750
Boeing Co. ........................................ 5,300 500,850
Emerson Electric .................................. 3,000 270,375
Fluor Corp. ....................................... 6,600 405,900
General Electric .................................. 10,000 910,000
Minnesota Mining & Manufacturing Co. 10,500 733,688
WMX Technologies, Inc. ............................ 15,400 506,275
------------
3,985,838
------------

COMMERCIAL SERVICES (0.4%):
Sensormatic Electronics ........................... 10,000 178,749
------------

CONSUMER DURABLES (1.7%):
Ford Motor ........................................ 14,400 450,000
General Motors .................................... 6,400 307,200
------------
757,200
------------

CONSUMER NON-DURABLES (3.7%):
Coca-Cola Co. ..................................... 4,100 208,588
Philip Morris Co. ................................. 4,400 394,900
Procter & Gamble .................................. 8,200 799,500
Reebok International .............................. 8,000 278,000
------------
1,680,988
------------

CONSUMER SERVICES (2.2%):
Carnival Corp. - Class A .......................... 10,000 310,000
H&R Block ......................................... 15,000 446,250
McDonald's Corp. .................................. 5,000 236,875
------------
993,125
------------

FINANCIAL SERVICES (4.9%):
Associates First Capital 'A' ...................... 1,300 53,300
BankAmerica Corp. ................................. 5,224 429,021
Chubb Corp. ....................................... 4,000 184,000
Federal National Mortgage Association 23,800 830,025
Norwest Corp. ..................................... 17,700 723,488
------------
2,219,834
------------

HEALTH CARE (4.1%):
American Home Products ............................ 9,200 586,500
Medtronic, Inc. ................................... 6,800 436,050
Merck & Co., Inc. ................................. 9,000 633,375
</TABLE>

<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
United Healthcare ................................. 5,000 $ 208,125
------------
1,864,050
------------

RETAIL TRADE (2.7%):
Gap Inc. .......................................... 11,800 340,724
Home Depot ........................................ 5,600 318,500
Limited Inc. ...................................... 9,246 176,830
Tandy Corp. ....................................... 10,100 407,788
------------
1,243,842
------------

TECHNOLOGY (3.8%):
CompuServe Corp. .................................. 17,500(b) 236,250
DSC Communications ................................ 7,000(b) 175,000
Electronic Data Systems ........................... 7,400 454,175
General Instrument ................................ 11,000(b) 272,250
Imation Corp. ..................................... 9,050(b) 221,725
Intel Corp. ....................................... 2,800 267,225
Motorola, Inc. .................................... 2,000 103,250
------------
1,729,875
------------

TRANSPORTATION (1.0%):
Burlington Northern Santa Fe ...................... 5,700 480,937
------------

UTILITIES (5.7%):
AirTouch Communications ........................... 9,500(b) 262,437
AT&T Corp. ........................................ 9,000 470,250
BellSouth Corp. ................................... 11,000 407,000
Enron ............................................. 14,500 590,875
GTE Corp. ......................................... 13,800 531,300
Wisconsin Energy Corp. ............................ 13,250 357,750
------------
2,619,612
------------

ENERGY (6.2%):
Anadarko Petroleum ................................ 4,000 223,500
Baker Hughes Inc. ................................. 11,600 352,350
Burlington Resources .............................. 6,000 266,250
Exxon Corp. ....................................... 8,400 699,300
Royal Dutch Petroleum ............................. 4,100 640,113
Schlumberger Ltd. ................................. 4,300 363,350
Texaco Inc. ....................................... 3,000 276,000
------------
2,820,863
------------

Total Common Stock
(cost: $15,551,571) .......................... 22,648,763
------------

CORPORATE BONDS (12.3%):
American Express Credit Corporation, 7.38%,
2/1/99 .......................................... $ 400,000 407,492
Aon Corp., 6.88%, 10/1/99 ......................... 400,000 402,344
Boeing Co., 8.75%, 9/15/31 ........................ 500,000 572,895
Ford Holdings, 9.25%, 3/1/00 ...................... 400,000 429,900
General Motors Acceptance Corp., 6.75%, 3/15/03 ... 400,000 391,536
Heller Financial, 9.13%, 8/1/99 ................... 300,000 318,147
Korea Electric Power ADS, 6.38%, 12/1/03 .......... 500,000 478,300
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- --------------------------------------------------------------------------------

20 1996 Annual Report - Growth and Income
Funds
<PAGE>
Investments in Securities (continued)
- --------------------------------------------------------------------------------

BALANCED FUND
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Lehman Brothers, 5.04%, 12/15/03 .................. $ 650,000 $ 650,312
MCI Communications, 7.13%, 6/15/27 500,000 510,055
NationsBank Corp., 6.63%, 1/15/98 ................. 400,000 402,904
Pennsylvania Power and Light, 7.70%, 10/1/09 ...... 500,000 521,600
Time Warner Inc., 8.88%, 10/1/12 .................. 500,000 524,720
------------

Total Corporate Bonds
(cost: $5,489,947) ........................... 5,610,205
------------

U.S. GOVERNMENT AND AGENCY SECURITIES (30.8%):
GOVERNMENT TRUST CERTIFICATES (0.8%):
9.25%, Government Trust Certificate, 11/15/01 ..... 350,000 372,789
------------

U.S. AGENCY DEBENTURES (4.3%):
5.94%, FHLMC, 9/21/99 ............................. 1,000,000 989,260
6.63%, FNMA, 3/21/06 .............................. 1,000,000 975,320
------------
1,964,580
------------

U.S. AGENCY MORTGAGE-BACKED SECURITIES (12.9%):
FIXED RATE (10.5%):
6.50%, FHLMC, 9/1/25 .............................. 386,051 363,849
7.00%, FHLMC, 11/1/25 ............................. 676,323 655,181
7.50%, FHLMC, 3/1/11 .............................. 484,514 488,443
6.50%, FHLMC, 1/1/01 .............................. 514,974 511,266
8.00%, FHLMC, 11/1/24 ............................. 1,004,780 1,015,631
6.50%, FHLMC, Series 1056, Class KB, 3/15/01 ...... 456,759 456,581
6.00%, FNMA, 4/1/09 ............................... 836,301 797,220
6.00%, FNMA, 3/1/03 ............................... 400,945 388,035
10.00%, FNMA, Series 1989-15, Class D, 9/25/18 .... 68,502 70,848
------------
4,747,054
------------

FLOATING RATE (2.4%):
6.80%, FHLMC, Series 1435, Class FA, LIBOR,
12/15/22 ........................................ 586,622(d) 590,693
7.27%, FNMA, 4/1/18 ............................... 506,490(d) 520,905
------------
1,111,598
------------

U.S. GOVERNMENT SECURITIES (12.8%):
8.13%, U.S. Treasury Bond, 8/15/19 ................ 1,000,000 1,118,650
8.50%, U.S. Treasury Bond, 2/15/20 ................ 1,000,000 1,161,990
5.75%, U.S. Treasury Note, 8/15/03 ................ 1,200,000 1,144,572
5.88%, U.S. Treasury Note, 2/15/04 ................ 1,000,000 956,910
6.75%, U.S. Treasury Note, 6/30/99 ................ 1,000,000 1,012,690
6.35%, U.S. Treasury Strip, 2/15/15 ............... 1,500,000(c) 410,295
------------
5,805,107
------------

Total U.S. Government and Agency Securities
(cost: $13,827,550) .......................... 14,001,128
------------
</TABLE>

<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>

PRIVATE MORTGAGE-BACKED SECURITIES (3.3%):
FIXED RATE (3.3%):
6.40%, Capstead Securities Corporation, Series
1993-D, Class D2, 7/25/23 ....................... $ 270,618 $ 261,357
8.50%, Residential Funding Mortgage Securities,
Series 1992-S26, Class A17, 6/25/09 ............. 900,000 910,336
9.30%, Security Pacific National Bank, Series
1989-A, Class 7, 8/25/19 ........................ 338,598 338,069
------------

Total Private Mortgage-Backed Securities
(cost: $1,544,484) ........................... 1,509,762
------------

ASSET-BACKED SECURITIES (2.2%):
General Motors Acceptance Corp., Series 1994-A,
Grantor Trust, 6.30%, 6/15/99 ................... 254,503 255,732
NationsBank Credit Card Master Trust, Series
1993-1, Class A, 4.75%, 9/15/98 ................. 480,000 479,933
Premier Auto Trust, Series 1993-6, Class A2, 4.65%,
11/2/99 ......................................... 285,738 283,049
------------

Total Asset-Backed Securities
(cost: $1,017,200) ........................... 1,018,714
------------

SHORT-TERM SECURITIES (0.7%):
Repurchase agreement with Goldman Sachs, acquired
on 9/30/96, interest of $55, 5.80%, 10/1/96
(cost: $339,000) ................................ 339,000(e) 339,000
------------

Total Investments in Securities
(cost: $37,769,752) (f) ...................... $ 45,127,572
------------
------------
</TABLE>

<TABLE>
<S> <C>
NOTES TO INVESTMENTS IN SECURITIES
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(D) PORTFOLIO ABBREVIATIONS AND DEFINITIONS:
LIBOR - LONDON INTERBANK OFFERED RATE
ADJUSTABLE RATE - REPRESENTS SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) WITH AN INCREASE (DECREASE) IN THE SPECIFIED
INDEX.
(E) REPURCHASE AGREEMENT IN A JOINT TRADING ACCOUNT WHICH IS COLLATERALIZED BY
U.S. GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS
INTEREST DUE AT MATURITY OF THE REPURCHASE AGREEMENT.
(F) ON SEPTEMBER 30, 1996, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $37,769,752. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
</TABLE>

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 8,165,876
GROSS UNREALIZED DEPRECIATION ...... (808,056)
------------
NET UNREALIZED APPRECIATION ...... $ 7,357,820
------------
------------
</TABLE>

- --------------------------------------------------------------------------------

21 1996 Annual Report - Growth and Income
Funds
<PAGE>
Independent Auditors' Report
- --------------------------------------------------

THE BOARD OF DIRECTORS AND SHAREHOLDERS
PIPER FUNDS INC.:

We have audited the accompanying statements of assets and
liabilities, including the schedules of investments in
securities, of Growth and Income Fund and Balanced Fund
(funds within Piper Funds Inc.) as of September 30, 1996,
and the related statements of operations for the year then
ended, the statements of changes in net assets for each of
the years in the two-year period then ended and the
financial highlights for the periods presented in note 8
to the financial statements. These financial statements
and the financial highlights are the responsibility of the
funds' management. Our responsibility is to express an
opinion on these financial statements and the financial
highlights based on our audits.

We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are
confirmed to us by the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and the financial
highlights referred to above present fairly, in all
material respects, the financial position of Growth and
Income Fund and Balanced Fund as of September 30, 1996,
and the results of their operations, the changes in their
net assets and the financial highlights for the periods
stated in the first paragraph above, in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 14, 1996

- --------------------------------------------------------------------------------

22 1996 Annual Report - Growth and Income Funds
<PAGE>
Federal Income Tax Information
- --------------------------------------------------

The following per-share information describes the federal
tax treatment of distributions made during the fiscal
year. Distributions for the calendar year will be reported
to you on Form 1099-DIV. Please consult a tax adviser on
how to report these distributions at the state and local
levels.

INCOME DISTRIBUTIONS (TAXABLE AS ORDINARY DIVIDENDS,
86.38% AND 33.69% QUALIFYING FOR DEDUCTION BY
CORPORATIONS, RESPECTIVELY)

<TABLE>
<CAPTION>
GROWTH
AND
INCOME BALANCED
PAYABLE DATE FUND FUND
- --------------------------------------------- -------- --------
<S> <C> <C>
December 22, 1995 ........................... $0.0780 $0.1200
March 25, 1996 .............................. 0.0500 0.1000
June 17, 1996 ............................... 0.0300 0.1000
September 30, 1996 .......................... 0.0400 0.1200
-------- --------
Total ..................................... $0.1980 $0.4400
-------- --------
-------- --------
</TABLE>

SHORT-TERM GAINS (TAXABLE AS ORDINARY DIVIDENDS)

<TABLE>
<CAPTION>
GROWTH
AND
INCOME BALANCED
PAYABLE DATE FUND FUND
- --------------------------------------------- -------- --------
<S> <C> <C>
December 5, 1995 ............................ $0.1154 $0.1132
-------- --------
-------- --------
</TABLE>

LONG-TERM GAINS (TAXABLE AS CAPITAL GAINS DIVIDENDS)

<TABLE>
<CAPTION>
GROWTH
AND
INCOME BALANCED
PAYABLE DATE FUND FUND
- --------------------------------------------- -------- --------
<S> <C> <C>
December 5, 1995 ............................ $0.0602 $0.4409
-------- --------
-------- --------
</TABLE>

- --------------------------------------------------------------------------------

23 1996 Annual Report - Growth and Income Funds
<PAGE>
Directors and Officers
- --------------------------------------------------

DIRECTORS
David T. Bennett, CHAIRMAN, HIGHLAND HOMES, INC., USL
PRODUCTS, INC., KIEFER BUILT, INC., OF COUNSEL, GRAY,
PLANT, MOOTY, MOOTY & BENNETT, P.A.
Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT COMPANY
William H. Ellis, PRESIDENT, PIPER JAFFRAY COMPANIES INC.,
PIPER CAPITAL MANAGEMENT INCORPORATED
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL, RELIASTAR
FINANCIAL CORP., HORMEL FOODS CORP.
David A. Hughey, RETIRED EXECUTIVE VICE PRESIDENT AND
CHIEF ADMINISTRATIVE OFFICER OF DEAN WITTER
INTERCAPITAL INC. AND DEAN WITTER TRUST CO.
George Latimer, CHIEF EXECUTIVE OFFICER, NATIONAL EQUITY
FUNDS

OFFICERS
William H. Ellis, CHAIRMAN OF THE BOARD
Paul A. Dow, PRESIDENT
Robert H. Nelson, VICE PRESIDENT AND TREASURER
Susan Sharp Miley, SECRETARY

INVESTMENT ADVISER
Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804

DISTRIBUTOR
Piper Jaffray Inc.
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804

CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
4200 NORWEST CENTER, MINNEAPOLIS, MN 55402

LEGAL COUNSEL
Dorsey & Whitney LLP
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402

- --------------------------------------------------------------------------------

24 1996 Annual Report - Growth and Income Funds
<PAGE>

SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------

As a shareholder in Piper Funds, you have access to a full range of services and
benefits.

Check your prospectus for details about services and any limitations that might
apply to your fund.

- --------------------------------------------------------------------------------

LOW MINIMUM INVESTMENTS
You can open a Piper mutual fund account with a minimum investment of $250.

QUANTITY DISCOUNTS
If your initial investment exceeds a specified amount, if an investment combined
with the value of your existing Piper shares exceeds a specified amount, or if
your investments combined during a 13-month period exceed a specified amount,
you can reduce or even eliminate the front-end sales charge.

WAIVER OF SALES CHARGES
Money market funds carry no sales charges.* Sales charges on other Piper funds
are waived on purchases of $500,000 or more. However, a contingent deferred
sales charge may be imposed. See your prospectus for details.

AUTOMATIC REINVESTMENT OF DIVIDENDS
For maximum growth of your assets, you can reinvest dividends and capital gains
automatically in additional shares of your fund without a sales charge.

CROSS-REINVESTMENT OF DISTRIBUTIONS
Diversify your holdings by reinvesting dividends and capital gains from one
Piper fund to another.

CASH DISTRIBUTIONS
If you prefer, take your dividends and/or capital gains in cash.

AUTOMATIC MONTHLY INVESTMENT PROGRAM
You may automatically transfer $25 or more each month from any Piper money
market fund* into many other Piper funds.

AUTOMATIC MONTHLY MONEY TRANSFER PROGRAM
If you are starting a savings discipline or seeking a convenient way to invest,
you can transfer a minimum of $100 automatically from your bank, savings and
loan or other financial institution into many of the Piper funds.

EXCHANGE PRIVILEGES
Revise your investment plan without incurring a sales charge by moving assets
from one Piper fund to another with the same fee structure. See your prospectus
for restrictions involving exchanges between funds with different sales charges.

REINVESTMENT PRIVILEGES
If you buy a fund with a sales charge and later redeem your shares, you may
reinvest all or part of the proceeds in shares of that fund or another Piper
fund within 30 days and pay no additional sales charge, subject to each fund's
minimum investment requirements.

SYSTEMATIC WITHDRAWAL PLAN
If your account has a value of $5,000 or more, you can elect to receive periodic
payments of $100 or more, at no cost, excluding money market funds.

ACCOUNT STATEMENTS
Whenever you add to or withdraw money from your account, you'll receive a
monthly statement from Piper Jaffray. Accounts with no activity receive a
quarterly statement instead. Periodic dividend and capital gain distributions,
if any, also appear on your statement.

CONFIRMATION OF TRANSACTIONS
You receive a confirmation statement following every transaction, except in the
money market funds. All transactions are reflected on your account statement.

$50 MILLION SHAREHOLDER PROTECTION
If you have a Piper Jaffray PRIME or PAT Plus account, you are protected up to
$50 million in the unlikely event that Piper Jaffray were to fail financially.
Other securities clients of Piper Jaffray are protected up to $25 million. This
protection does not cover market loss.

* AN INVESTMENT IN A PIPER MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1 PER SHARE.

- --------------------------------------------------------------------------------

25 1996 Annual Report - Growth and Income Funds

<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

- --------------------------------------------------------------------------------

26 1996 Annual Report - Growth and Income Funds

<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

- --------------------------------------------------------------------------------

27 1996 Annual Report - Growth and Income Funds

<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

- --------------------------------------------------------------------------------

28 1996 Annual Report - Growth and Income Funds

<PAGE>

GLOSSARY OF TERMS ***
- --------------------------------------------------------------------------------

BLUE-CHIP STOCK
Stock of a nationally-known company with a long record of profit growth and
dividend payment and a reputation for quality management, products and services.

BULLET PORTFOLIO STRUCTURE
A bullet portfolio structure emphasizes securities whose maturities fall in one
particular section of the yield curve.

ECONOMICALLY SENSITIVE STOCKS
Economically sensitive stocks, also called cyclical stocks, are shares of
companies that are highly dependent on the state of the economy. When things
slow down, their earnings generally fall rapidly, and typically, so does the
stock price. But when the economy recovers, earnings generally rise rapidly, and
the price of the stock typically goes up.

EFFECTIVE DURATION
Effective duration estimates how much the value of a security is expected to
change with a given change in interest rates. Longer effective durations
indicate more sensitivity to changes in interest rates. For example, if interest
rates were to increase by 1%, the market value of a bond with an effective
duration of five years would decrease by about 5%, with all other factors being
constant. It is important to remember that effective duration is based on
certain assumptions and has several limitations. It is most effective as a
measure when interest rate changes are small, rapid and occur equally across all
the different points of the yield curve. In addition, effective duration is
difficult to calculate precisely for bonds with prepayment options, such as
mortgage-backed securities.

If a fund has an AGGRESSIVE EFFECTIVE DURATION, it means its managers have set a
longer duration posture in comparison to the fund's benchmark. A fund with a
long effective duration is more sensitive to changing interest rates.

If a fund has a DEFENSIVE EFFECTIVE DURATION, it means its managers have set a
shorter duration posture in comparison to the fund's benchmark, to make the fund
less sensitive to changing interest rates.

If a fund has a NEUTRAL EFFECTIVE DURATION, the duration is approximately the
same as its benchmark.

GROWTH STOCK
Stock of a corporation that has exhibited faster-than-average gains in earnings
over the last few years and is expected to continue to show high levels of
profit growth. Over the long run, growth stocks tend to outperform
slower-growing or stagnant stocks. Growth stocks are riskier investments than
average stocks, however, since they usually have higher price/earnings ratios
and make little or no dividend payments to shareholders.

LADDER PORTFOLIO STRUCTURE
A ladder portfolio structure emphasizes securities with maturities on many
different points on the yield curve.

OVERWEIGHTED OR OVERWEIGHTING
In portfolio management, overweighting means a fund's portfolio contains a
higher percentage of a certain sector than its benchmark.

SECTOR
Refers to a particular group of stocks, usually in one industry.

UNDERWEIGHTED OR UNDERWEIGHTING
In portfolio management, underweighting means a fund's portfolio contains a
lower percentage of a certain sector or stock than its benchmark.

VALUATION
The determined or estimated value of a
particular stock.

YIELD CURVE
The yield curve is a graph that shows the relationship between the interest
rates paid on bonds and their maturities, ranging from the shortest maturities
to the longest available (assuming the bonds are all of the same quality). The
resulting curve indicates whether short-term interest rates are higher or lower
than long-term rates.

- --------------------------------------------------------------------------------

FOR MORE INFORMATION

By Phone [SYMBOL]

1 800 866-7778

FOR GENERAL INFORMATION
press 5, our Mutual Fund Services representatives are ready to answer your
questions.

TO LISTEN TO MONTHLY FUND UPDATES
press 3, press 1, then press:

15 for Growth and Income Fund
16 for Balanced Fund

TO ORDER LITERATURE
press 5, ask a service representative to mail you additional literature,
including a Quarterly Update. You can also request to be put on a mailing list
to receive this information automatically each quarter.

BY MAIL [SYMBOL]

Piper Capital Management
Attn: Mutual Fund Services
222 South Ninth Street
Minneapolis, MN 55402-3804

In an effort to reduce costs to our shareholders, we have implemented a process
to reduce duplicate mailings of the funds' shareholder reports. This
householding process should allow us to mail one report to each address where
one or more registered shareholders with the same last name reside. If you would
like to have additional reports mailed to your address, please call our Mutual
Fund Services area at 1 800 866-7778, or mail a request to us.

ON-LINE [SYMBOL]

http://www.piperjaffray.com/
money_management/

*** - This symbol represents a graduation cap, used throughout the report to
indicate terms defined in the glossary.

29 1996 Annual Report - Income Funds
<PAGE>
Growth and Income Funds
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[LOGO] PIPER FUNDS 222 South Ninth Street
Minneapolis, MN 55402-3804

PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.