<PAGE>
1996 ANNUAL REPORT
SMALL COMPANY GROWTH FUND
EMERGING GROWTH FUND
GROWTH FUND
[LOGO] U.S. GROWTH FUNDS
[GRAPHIC]
U.S. Growth Funds - 1996 Annual Report
<PAGE>
[LOGO]
CONTENTS
SMALL COMPANY GROWTH FUND
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . .11
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . . .22
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . .27
Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Shareholder Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
EMERGING GROWTH FUND
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . .11
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . . .24
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . .27
Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
GROWTH FUND
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . .11
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . . .26
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . .27
Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
THIS REPORT IS INTENDED FOR SHAREHOLDERS OF SMALL COMPANY GROWTH FUND, EMERGING
GROWTH FUND AND GROWTH 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.
INTERNATIONAL GROWTH FUNDS
- ------------------------------
Emerging Markets Growth Fund
Pacific-European Growth Fund
U.S. GROWTH FUNDS
- --------------------------------------------------------------------------------
Small Company Growth Fund
Emerging Growth Fund
Growth Fund
Portfolios that offer the opportunity for long-term capital appreciation are
valued by many investors for their potential to build wealth over time.
GROWTH AND INCOME FUNDS
- ------------------------------
Growth and Income Fund
Balanced Fund
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
***, 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
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
1 1996 Annual Report - U.S. Growth Funds
<PAGE>
SMALL COMPANY GROWTH FUND
November 15, 1996
DEAR SHAREHOLDERS:
AT A SPECIAL MEETING ON SEPTEMBER 12, SHAREHOLDERS OF EQUITY STRATEGY FUND
APPROVED A CHANGE IN INVESTMENT OBJECTIVE, which resulted in several other
changes, including a new name - Small Company Growth Fund - and a different
management team. The fund's new investment objective is long-term capital
appreciation. Previously, the goal was high total investment return consistent
with prudent investment risk. In seeking its new objective, the fund now invests
primarily in small company stocks which we believe have superior growth
prospects. Previously, it invested in stocks of companies representing a number
of economic sectors***. As a result of this change in policy, the fund's
benchmark*** has changed from the S&P 500 Index to the S&P SmallCap 600 Index.
The fund is now listed in newspapers under "Piper Jaffray SmallCo."
FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 1996, SMALL COMPANY GROWTH FUND
REGISTERED A 5.38%* TOTAL RETURN WITH ALL DIVIDENDS AND CAPITAL GAINS REINVESTED
BUT NOT INCLUDING THE FUND'S SALES CHARGE. This figure reflects performance for
the former Equity Strategy Fund, as the policy changes were not implemented
until near the end of the period. In comparison, the Lipper Capital Appreciation
Funds Average** rose 16.01%, and the Standard & Poor's 500 Index+ advanced
20.32%. The fund's new benchmark, the S&P SmallCap 600 Index,++ returned 15.31%
during the year. The fund's underperformance was due largely to its high cash
position during a period of rising stock prices and its overweighting*** in
technology stocks when these issues underperformed the market.
[PHOTO]
SANDRA SHREWSBURY, CFA
heads the team that is now responsible for the management of Small Company
Growth Fund. She has 13 years of financial experience. Other management team
members are shown on pages 3 - 7.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FUND PERFORMANCE THROUGH SEPTEMBER 30, 1996*
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED SINCE INCEPTION
[GRAPH]
+ AN UNMANAGED INDEX, THAT INCLUDES NO EXPENSES OR TRANSACTION CHARGES, OF LARGE
STOCKS.
++ AN UNMANAGED INDEX, THAT INCLUDES NO EXPENSES OR TRANSACTION CHARGES, OF
SMALL-CAPITALIZATION STOCKS.
** THE AVERAGE TOTAL RETURN OF SIMILAR FUNDS AS CHARACTERIZED BY LIPPER
ANALYTICAL SERVICES.
AVERAGE ANNUALIZED TOTAL RETURNS
Includes 4% maximum sales charge.
ONE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.16%
FIVE YEARS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.23%
SINCE INCEPTION (3/16/87). . . . . . . . . . . . . . . . . . . . . . . . . 8.35%
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 0.68% ONE YEAR,
8.77% FIVE YEARS AND 7.85% SINCE INCEPTION.
* PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PLEASE REMEMBER, YOU COULD
LOSE MONEY WITH THIS INVESTMENT. SAFETY OF PRINCIPAL IS NOT 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. STOCKS OF
SMALL COMPANIES ARE MORE VOLATILE THAN STOCKS OF LARGER COMPANIES. THE FUND'S
INVESTMENTS MAY FACE SPECIAL RISKS SUCH AS LACK OF MANAGEMENT EXPERIENCE,
FINANCIAL RESOURCES, PRODUCT DIVERSIFICATION OR THE COMPETITIVE STRENGTH OF THE
COMPANIES. SEE THE PROSPECTUS FOR MORE COMPLETE INFORMATION REGARDING RISKS.
ALL FUND AND BENCHMARK PERFORMANCE FIGURES INCLUDE REINVESTED DISTRIBUTIONS.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
2 1996 Annual Report - U.S. Growth Funds
<PAGE>
SMALL COMPANY GROWTH FUND (continued)
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 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 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. Blue-chip stocks and basic materials stocks were
not widely held by the fund during the fiscal year.
THE FUND'S HIGH CASH POSITION HURT INVESTMENT RESULTS BECAUSE OF MISSED
OPPORTUNITIES TO PARTICIPATE IN KEY STOCK MARKET RALLIES. This heavy cash
exposure was designed to help protect shareholder capital in the event of a
market downturn. While the intent was good, the timing was not. The stock
market, which recorded superior investment results in 1995, continued to deliver
solid gains in early 1996 and, after leveling off by midyear, resumed its upward
trend in August.
THE FUND'S OVERWEIGHTING IN TECHNOLOGY STOCKS ALSO NEGATIVELY AFFECTED
PERFORMANCE WHEN THESE STOCKS CAME UNDER PRESSURE IN LATE 1995 AND EARLY 1996.
The downturn occurred when several companies failed to meet analysts' earnings
expectations. While the technology sector rebounded by the end of the reporting
period, the rally was by no means broadly based. Many of the technology stocks
in the fund did not participate in the rally.
A BRIGHT SPOT FOR THE FUND WAS ITS INVESTMENT IN THE ENERGY SECTOR. At the start
of the period, energy stocks were out-of-favor; however, as the period
progressed, investors turned to these stocks largely because of their attractive
valuations*** and high dividend yields***. Some of the fund's larger holdings in
this area included Noble Drilling, which manufactures oil drilling equipment,
Tidewater Inc. (4% of the fund's total assets), a provider of support services
and equipment to the energy industry, and Baker
[PHOTO]
CURT MCLEOD, CFA
assists with the management of Small Company Growth Fund and Emerging Growth
Fund. He has 10 years of financial experience.
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- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY SECTOR
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1996.
[CHART]
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1996.
1 TIDEWATER INC. 4%
- --------------------------------------------------------------------------------
2 HOUSEHOLD INTERNATIONAL 3%
- --------------------------------------------------------------------------------
3 MORROW SNOWBOARDS 2%
- --------------------------------------------------------------------------------
4 AMERICAN HOME PRODUCTS 2%
- --------------------------------------------------------------------------------
5 J.P. MORGAN 2%
- --------------------------------------------------------------------------------
6 POTASH CORP. OF SASKATCHEWAN 2%
- --------------------------------------------------------------------------------
7 HOME DEPOT 2%
- --------------------------------------------------------------------------------
8 TCF FINANCIAL 2%
- --------------------------------------------------------------------------------
9 TECH DATA CORP. 2%
- --------------------------------------------------------------------------------
10 MARRIOTT INTERNATIONAL 2%
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
3 1996 Annual Report - U.S. Growth Funds
<PAGE>
SMALL COMPANY GROWTH FUND (continued)
Hughes, which manufactures products for the petroleum, mineral-production,
water-treatment, chemical and food-processing markets. Noble Drilling and Baker
Hughes were sold before the end of the reporting period.
WHILE THIS LETTER COVERS THE ONE-YEAR PERIOD THROUGH SEPTEMBER 30, 1996,
IMPORTANT DEVELOPMENTS THAT OCCURRED IN OCTOBER ARE ALSO WORTH NOTING. To make
the fund's net asset value more attractive to new and existing shareholders, the
board of directors declared a 100% common stock dividend payable on October 21,
1996, to shareholders of record on October 18, 1996. Shareholders received one
additional fund share for each share owned (doubling the number of shares
outstanding) and the fund's net asset value was reduced by half. This common
stock dividend, which had the same impact as a 2-for-1 stock split, did not
result in a taxable event or change the total value of your holdings. In
addition, the restructuring of the fund's portfolio resulted in significant
realized capital gains***. On October 21, the fund distributed $2.23 per share
in long-term capital gains and $0.61 per share in short-term capital gains,
based on shares owned immediately following the common stock dividend.
GIVEN THE CHANGES THAT WE HAVE MADE AND OUR CURRENT INVESTMENT STRATEGY, WE ARE
OPTIMISTIC ABOUT THE FUND'S POTENTIAL. While the fund's prospectus enables us to
invest in companies with a market capitalization*** within the range of
companies in the S&P SmallCap 600 Index, we currently intend to focus on a more
narrowly defined group of companies with market capitalizations from $50 million
to $1 billion. We are already familiar with companies that fall within this
range, since we have done research in this area in managing Emerging Growth
Fund. (It focuses on stocks with market capitalizations between $500 million and
$5 billion.) The sectors that we currently intend to favor are also familiar to
us for the same reason. They include commercial services and consumer services.
Both, in our opinion, have solid, long-term growth prospects. We also believe
attractive investment opportunities can be found in small company technology
stocks and intend to take a more selective approach in building positions in
this area in the months ahead. Also, please note that it will not be part of the
fund's strategy to maintain a high cash position going forward. We intend to
stay fully invested.
WE ARE EXCITED ABOUT THE OPPORTUNITIES THE FUND'S POLICIES NOW PROVIDE AND ARE
PLEASED TO BE ADDRESSING YOU AS THE NEW FUND'S MANAGEMENT TEAM FOR THE FIRST
TIME. Our group combines many years of financial experience, and we feel Small
Company Growth Fund will be best managed through the contributions and ideas
each of us brings. Thank you for your investment in Small Company Growth Fund.
We are committed to providing you with quality service as you work to achieve
your financial goals.
Sincerely,
/s/ Sandra Shrewsbury
Sandra Shrewsbury
Portfolio Manager
[PHOTO]
JILL THOMPSON, CFA
assists with the management of Small Company Growth Fund and Emerging Growth
Fund. She has seven years of financial experience.
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
4 1996 Annual Report - U.S. Growth Funds
<PAGE>
EMERGING GROWTH FUND
November 15, 1996
DEAR SHAREHOLDERS:
FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 1996, EMERGING GROWTH FUND
REGISTERED A 17.84%* TOTAL RETURN. This includes reinvested distributions but
not the fund's sales charge. The fund outperformed both the Lipper MidCap Funds
Average,+ which advanced 16.73%, and the Standard & Poor's MidCap 400 Index,**
which rose 14.00%. The fund's strong relative performance was primarily due to
our diversification strategy and a generally good environment for stocks.
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 started to
show clear signs of strengthening in early 1996, as evidenced by higher
commodity prices, investors turned to stocks of companies that tend to perform
well during periods of economic strength. These include basic materials stocks
such as steel, chemicals and paper. As the economy began to moderate late in the
period, investors favored blue-chip stocks*** whose profits are not greatly
affected by economic slowdowns. Although this volatile environment caused mid-
sized companies to underperform their large company counterparts, our stock
selection enabled the fund to perform well in this environment.
[PHOTO]
SANDRA SHREWSBURY, CFA
is primarily responsible for the management of Emerging Growth Fund. She has 13
years of financial experience. Other management team members are shown on
pages 3 - 7.
- --------------------------------------------------------------------------------
FUND PERFORMANCE THROUGH SEPTEMBER 30, 1996*
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED SINCE INCEPTION
[GRAPH]
** AN UNMANAGED INDEX, THAT INCLUDES NO EXPENSES OR TRANSACTION CHARGES, OF MID-
CAPITALIZATION STOCKS.
+ THE AVERAGE TOTAL RETURN OF SIMILAR FUNDS AS CHARACTERIZED BY LIPPER
ANALYTICAL SERVICES.
AVERAGE ANNUALIZED TOTAL RETURNS
Includes 4% maximum sales charge.
ONE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13.13%
FIVE YEARS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16.30%
SINCE INCEPTION (4/23/90). . . . . . . . . . . . . . . . . . . . . . . . .18.36%
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 12.88% ONE YEAR,
15.99% FIVE YEARS AND 18.01% SINCE INCEPTION.
* PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PLEASE REMEMBER, YOU COULD
LOSE MONEY WITH THIS INVESTMENT. SAFETY OF PRINCIPAL IS NOT 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. STOCKS OF
MID-SIZED COMPANIES ARE MORE VOLATILE THAN STOCKS OF LARGER COMPANIES. THE
FUND'S INVESTMENTS MAY FACE SPECIAL RISKS SUCH AS LIMITED PRODUCT LINES, MARKETS
OR FINANCIAL RESOURCES. SEE THE PROSPECTUS FOR MORE COMPLETE INFORMATION
REGARDING RISKS.
ALL FUND AND BENCHMARK PERFORMANCE FIGURES INCLUDE REINVESTED DISTRIBUTIONS.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
5 1996 Annual Report - U.S. Growth Funds
<PAGE>
EMERGING GROWTH FUND (continued)
OUR DECISION TO REDUCE THE FUND'S EXPOSURE TO THE TECHNOLOGY SECTOR BEFORE THIS
INDUSTRY GROUP EXPERIENCED A SHARP CORRECTION IN LATE 1995 AND EARLY 1996 HAD A
POSITIVE EFFECT ON THE FUND'S PERFORMANCE. Technology stocks came under pressure
after several companies failed to meet analysts' earnings expectations. When we
saw the correction*** begin to subside, we gradually increased the fund's
exposure to this sector***. We added to existing positions in Cambridge
Technology Partners (2% of the fund's total assets), a consulting and software
development services company, and BISYS Group (1%), a provider of computing,
administrative and marketing-support services to financial organizations. We
established new positions in KLA Instruments (0.5%), a semiconductor equipment
firm, Altera Corp. (0.8%), a semiconductor manufacturer, and FORE Systems
(0.7%), a networking firm. Increasing our exposure to technology when we did
proved to be a prudent strategy, as the sector showed clear signs of rebounding
late in the period.
OUR INCREASED EXPOSURE TO ENERGY STOCKS, WHICH RECORDED SOLID INVESTMENT RESULTS
DURING THE PERIOD, CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE. Attractive
valuations***, above-average dividend yields*** and an increasing demand for
energy in many global markets helped fuel the rally in energy stocks.
Specifically, we added to service companies because we expect drilling activity
to increase due to low energy inventories. Some of our larger energy holdings
include Smith International (1%), an energy services company, Reading & Bates
(1%), which provides offshore drilling services, and Noble Affiliates (2%), an
oil and gas exploration and production company.
OUR CONTINUING EMPHASIS ON COMPANIES THAT OFFER OUTSOURCING SERVICES ALSO HELPED
THE FUND'S INVESTMENT RESULTS. Outsourcing services enable businesses to reduce
costs and focus more of their energies on the things they do best. We added to
our position in Interim Services (1%) and AccuStaff (0.8%). These companies
offer clerical, professional and health care personnel on a temporary basis to
businesses, service organizations and government agencies. We also own Cintas
Corp. (0.6%), which designs, manufactures and leases uniforms to businesses, and
Richfood Holdings (1%), a wholesale distributor of food products to grocery
stores.
[PHOTO]
JOYCE HALBE, CFA
assists with the management of Emerging Growth Fund and Small Company Growth
Fund. She has 11 years of financial experience.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY SECTOR
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1996.
[CHART]
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1996.
1 TOMMY HILFIGER 3%
- --------------------------------------------------------------------------------
2 TCF FINANCIAL 2%
- --------------------------------------------------------------------------------
3 GREEN TREE FINANCIAL 2%
- --------------------------------------------------------------------------------
4 FINOVA GROUP 2%
- --------------------------------------------------------------------------------
5 STEWART ENTERPRISES CLASS A 2%
- --------------------------------------------------------------------------------
6 CORPORATE EXPRESS 2%
- --------------------------------------------------------------------------------
7 THERMO ELECTRON 2%
- --------------------------------------------------------------------------------
8 MGIC INVESTMENT 2%
- --------------------------------------------------------------------------------
9 CUC INTERNATIONAL 2%
- --------------------------------------------------------------------------------
10 WISCONSIN CENTRAL TRANSPORTATION 2%
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
6 1996 Annual Report - U.S. Growth Funds
<PAGE>
EMERGING GROWTH FUND (continued)
DURING THE FISCAL YEAR, WE WERE SLIGHTLY OVERWEIGHTED*** IN THE CAPITAL GOODS
AND COMMERCIAL SERVICES SECTORS. These sectors tend to fare well when the
economy strengthens. Some of our investments in this sector include Corporate
Express (2%), which distributes office supplies to large corporate customers,
Viking Office Products (2%), which sells office products via customized catalogs
to small- and medium-sized businesses, and Wilmar Industries (0.6%), which
markets and distributes repair and maintenance products to the apartment-housing
market. In the consumer services sector, we received good performance from our
position in Apollo Group (0.7%), one of the nation's largest providers of adult
education. The company has 78 campuses and learning centers in 25 states and
also has the sixth largest private university in the nation.
THROUGHOUT MUCH OF THE PERIOD, WE MAINTAINED AN OVERWEIGHTED EXPOSURE TO THE
HEALTH CARE INDUSTRY, but by the middle of 1996, we began reducing our position
in this sector because of the uncertainty facing the industry due to pricing
pressures. Two of our holdings in this sector include IDEXX Laboratories (2%),
which develops and manufactures biotechnology- and chemical-based detection
systems, and PhyCor Inc. (2%), which operates multispecialty medical clinics.
LOOKING AHEAD, OUR OUTLOOK FOR SMALL- AND MEDIUM-CAP STOCKS IS POSITIVE. While
these so-called secondary stocks*** have realized strong investment results over
the last two years, they continue to be reasonably priced compared to their
large-cap counterparts. Moreover, with interest rates low and inflationary
pressures still under control, the environment for higher stock prices remains
favorable. Finally, cash flows into stocks and stock mutual funds continue to be
strong.
DURING THE PERIOD, WE ADDED THREE PROFESSIONALS TO OUR STAFF: JOYCE HALBE, MARY
HOYME AND ADAM BENSON. We are excited about their decision to join our group.
Each brings valuable analytical experience, which will help us broaden our
coverage of the small- and mid-cap markets. In addition, after the period end
the fund distributed $1.21 per share in long-term capital gains and $0.04 per
share in short-term capital gains on October 21, 1996.
Thank you for your investment in Emerging Growth Fund. We appreciate the
opportunity to serve your needs and hope that you will contact our Mutual Fund
Services area at 1 800 866-7778 whenever we can be of assistance to you.
Sincerely,
/s/ Sandra Shrewsbury
Sandra Shrewsbury
Portfolio Manager
[PHOTO]
MARY HOYME, CFA
assists with the management of Emerging Growth Fund and Small Company Growth
Fund. She has 13 years of financial experience.
- -------------------------------------------------------------------------------
[PHOTO]
ADAM BENSON
assists with the management of Emerging Growth Fund and Small Company Growth
Fund. He has two years of financial experience.
- -------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
7 1996 Annual Report - U.S. Growth Funds
<PAGE>
GROWTH FUND
November 15, 1996
DEAR SHAREHOLDERS:
FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 1996, GROWTH FUND RETURNED 16.87%,*
WHICH INCLUDES REINVESTED DISTRIBUTIONS BUT NOT THE FUND'S SALES CHARGE. This
compares to a 15.89% return for the Lipper Growth Funds Average+ and a 20.32%
return for the Standard & Poor's 500 Index.** The fund's underweighting*** in
sectors that outperformed the market, namely consumer non-durables, financial
and health care, caused it to underperform the S&P 500. We outpaced the Lipper
average due to our prudent stock selection.
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. But in early 1996, as
commodity prices increased and several employment reports came in stronger-than-
expected, stocks experienced above-average market volatility. As the economy
continued to strengthen, 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. However, as the economy began
to moderate, investors turned to blue-chip stocks***, whose profits are not
greatly affected by a slowdown in economic activity. The fund's holdings
included some basic materials stocks and blue-chip stocks.
[PHOTO]
STEVE MARKUSEN, CFA
is primarily responsible for the management of Growth Fund's portfolio. He has
12 years of financial experience.
- --------------------------------------------------------------------------------
FUND PERFORMANCE THROUGH SEPTEMBER 30, 1996*
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED SINCE INCEPTION
[GRAPH]
** AN UNMANAGED INDEX, THAT INCLUDES NO EXPENSES OR TRANSACTION CHARGES, OF
LARGE STOCKS.
+ THE AVERAGE TOTAL RETURN OF SIMILAR FUNDS AS CHARACTERIZED BY LIPPER
ANALYTICAL SERVICES.
AVERAGE ANNUALIZED TOTAL RETURNS
Includes 4% maximum sales charge.
ONE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.20%
FIVE YEARS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.91%
SINCE INCEPTION (3/16/87). . . . . . . . . . . . . . . . . . . . . . . . 11.84%
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 11.99% ONE YEAR,
9.72% FIVE YEARS AND 11.60% SINCE INCEPTION.
* PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PLEASE REMEMBER, YOU COULD
LOSE MONEY WITH THIS INVESTMENT. SAFETY OF PRINCIPAL IS NOT 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. THE FUND
IS SUBJECT TO CERTAIN RISKS, INCLUDING MARKET VOLATILITY. SEE THE PROSPECTUS FOR
MORE COMPLETE INFORMATION REGARDING RISKS.
ALL FUND AND BENCHMARK PERFORMANCE FIGURES INCLUDE REINVESTED DISTRIBUTIONS.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
8 1996 Annual Report - U.S. Growth Funds
<PAGE>
GROWTH FUND (continued)
THE FUND RECORDED POSITIVE RESULTS DUE TO OUR OVERWEIGHTING*** IN CERTAIN STOCKS
THAT FARED RELATIVELY WELL COMPARED TO THE MARKET. Three stocks in the energy
sector were particularly good performers: Baker Hughes (3% of the fund's total
assets), which manufactures products for the petroleum, mineral-production,
water-treatment, chemical and food-processing markets, Schlumberger (4%), which
provides oil companies with well maintenance and analytical/troubleshooting
services and products, and Enron (5%), a diversified energy and utility company
and the largest buyer and seller of natural gas in North America. Other stocks
we received good performance from include: Morton International (4%), the
nation's largest producer of salt, specialty chemicals and automotive-safety
products; AlliedSignal (6%), which has business interests in the aerospace and
automotive industries; and The Gap (3%), a specialty retailer that operates
stores selling casual apparel to men, women, and children under private-label
brand names.
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 and finished the fiscal year on a strong note.
However, while highly visible companies such as Microsoft and Intel Corp. (1%)
recorded positive investment results, the prices of many other stocks in this
group remained under considerable pressure. (The fund did not own Microsoft.) We
intend to maintain our underweighting in technology stocks, given their
generally high valuations*** and deteriorating fundamentals***.
ALTHOUGH THE STOCK MARKET HAS HAD A STRONG RUN SINCE LATE 1994, WE STILL BELIEVE
GOOD VALUES CAN BE FOUND. Ford Motor (2%) is one such investment opportunity.
Not only has the company reduced operating costs and improved productivity, but
its stock price and dividend are attractive compared to the market. The same can
be said about WMX Technologies (3%), the nation's largest waste management
company. WMX was an above-average performing stock in the 1980s, growing through
acquisition. In the 1990s, operating costs rose considerably, which affected
profits, but in
[PHOTO]
BRENT MELLUM, CFA
assists with the management of Growth Fund. He has two years of financial
experience.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY SECTOR
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1996.
[GRAPH]
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1996.
1 ALLIEDSIGNAL 6%
- --------------------------------------------------------------------------------
2 ENRON 5%
- --------------------------------------------------------------------------------
3 MORTON INTERNATIONAL 4%
- --------------------------------------------------------------------------------
4 TRANSOCEAN OFFSHORE 4%
- --------------------------------------------------------------------------------
5 SCHLUMBERGER LTD 4%
- --------------------------------------------------------------------------------
6 BAKER HUGHES 3%
- --------------------------------------------------------------------------------
7 THE GAP 3%
- --------------------------------------------------------------------------------
8 ANADARKO PETROLEUM 3%
- --------------------------------------------------------------------------------
9 AIRTOUCH COMMUNICATIONS 3%
- --------------------------------------------------------------------------------
10 NOBLE AFFILIATES 3%
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
9 1996 Annual Report - U.S. Growth Funds
<PAGE>
GROWTH FUND (continued)
recent years, the company has improved its balance sheet and increased returns
on operations. Furthermore, the industry has gone through a consolidation,
leaving WMX Technologies, in our opinion, well-positioned for future growth.
Finally, another stock that we like is GTE Corp., which operates the largest
independent telephone system. Its current dividend is around 4%. We anticipate
GTE's earnings to grow between 10% and 12% annually over the next three years.
(GTE was added to the fund following this reporting period and was 1% of total
assets as of the date of this letter.)
WHILE THIS LETTER COVERS THE ONE-YEAR PERIOD THROUGH SEPTEMBER 30, 1996,
IMPORTANT DEVELOPMENTS THAT OCCURRED IN OCTOBER ARE ALSO WORTH NOTING. To make
the fund's net asset value more attractive to new and existing shareholders, the
board of directors declared a 100% common stock dividend payable on October 21,
1996, to shareholders of record on October 18, 1996. Shareholders received one
additional fund share for each share owned (doubling the number of shares
outstanding) and the fund's net asset value was reduced by half. This common
stock dividend, which had the same impact as a 2-for-1 stock split, did not
result in a taxable event or change the total value of your holdings. In
addition, the fund realized significant capital gains during the year. On
October 21, the fund distributed $0.92 per share in long-term capital gains and
$0.15 per share in short-term capital gains, based on shares owned immediately
following the common stock dividend.
LOOKING AHEAD, WE BELIEVE THAT THE UNDERPINNINGS FOR STRONGER ECONOMIC GROWTH
ARE IN PLACE, NOT ONLY IN THE UNITED STATES BUT IN OTHER REGIONS AROUND THE
WORLD. Germany's economy, for example, has been showing signs of strength and
the Japanese economy appears to have bottomed after several years of relative
weakness. Additionally, emerging growth countries*** continue to show a strong
appetite for basic materials, such as chemicals and aluminum, oil and other
commodities. A stronger global economy should prove beneficial for many of the
stocks in the fund because of our overweighting in capital goods and basic
materials stocks.
Thank you for your investment in Growth Fund. We look forward to serving your
investment needs.
Sincerely,
/s/ Steve Markusen
Steve Markusen
Portfolio Manager
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
10 1996 Annual Report - U.S. Growth Funds
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES September 30, 1996
..................................................................
<TABLE>
<CAPTION>
SMALL
COMPANY EMERGING
GROWTH GROWTH GROWTH
FUND FUND FUND
----------- ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including repurchase agreements of $2,844,000;
$11,695,000 and $74,000, respectively) ................... $31,831,481 $304,295,971 $178,537,852
Cash in bank on demand deposit ............................. 50,465 52,440 118,556
Receivable for investment securities sold .................. -- 2,097,972 --
Receivable for fund shares sold ............................ 67,018 572,749 76,659
Other assets ............................................... 1,369 11,248 6,734
Dividends and accrued interest receivable .................. 16,378 46,909 180,888
----------- ------------ ------------
Total assets ............................................. 31,966,711 307,077,289 178,920,689
----------- ------------ ------------
LIABILITIES:
Payable for investment securities purchased ................ 844,766 1,819,281 --
Payable for fund shares redeemed ........................... 119,795 1,250,005 470,514
Accrued investment management fee .......................... 19,857 164,667 102,919
Accrued distribution fee ................................... 8,208 74,648 45,176
Other accrued expenses ..................................... 6,173 -- --
----------- ------------ ------------
Total liabilities .......................................... 998,799 3,308,601 618,609
----------- ------------ ------------
Net assets applicable to outstanding capital stock ......... $30,967,912 $303,768,688 $178,302,080
----------- ------------ ------------
----------- ------------ ------------
REPRESENTED BY:
Capital stock - authorized 10 billion shares for each fund
of $0.01 par value; outstanding, 1,646,473; 21,912,057 and
8,426,882 shares, respectively ........................... $ 16,465 $ 219,121 $ 84,269
Additional paid-in capital ................................. 21,777,402 163,863,655 109,631,870
Undistributed net investment income ........................ 80,672 -- 46,969
Accumulated net realized gain on investments ............... 5,638,228 25,750,238 14,429,059
Unrealized appreciation of investments ..................... 3,455,145 113,935,674 54,109,913
----------- ------------ ------------
Total - representing net assets applicable to outstanding
capital stock .......................................... $30,967,912 $303,768,688 $178,302,080
----------- ------------ ------------
----------- ------------ ------------
Net asset value per share of outstanding capital stock ..... $ 18.81 $ 13.86 $ 21.16
----------- ------------ ------------
----------- ------------ ------------
* Investments in securities at identified cost ............. $28,376,336 $190,360,297 $124,427,939
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
11 1996 Annual Report - U.S. Growth Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS For the Year Ended September 30,
1996
..................................................................
<TABLE>
<CAPTION>
SMALL
COMPANY EMERGING
GROWTH GROWTH GROWTH
FUND FUND FUND
----------- ------------ ------------
<S> <C> <C> <C>
INCOME:
Dividends (net of foreign withholding taxes of $3,075; $0
and $12,053, respectively) ............................... $ 365,192 $ 1,048,589 $ 2,585,454
Interest ................................................... 250,036 1,045,463 89,586
----------- ------------ ------------
Total investment income .................................. 615,228 2,094,052 2,675,040
----------- ------------ ------------
EXPENSES (NOTE 5):
Investment management fee .................................. 307,937 1,875,662 1,248,175
Distribution fee ........................................... 204,381 1,361,879 879,974
Transfer agent and dividend disbursing agent fees .......... 67,588 180,975 132,918
Custodian and accounting fees .............................. 45,006 183,941 131,364
Registration fees .......................................... 15,103 24,115 20,183
Reports to shareholders .................................... 31,862 47,749 37,244
Directors' fees ............................................ 2,791 2,790 2,790
Audit and legal fees ....................................... 38,018 36,085 37,784
Other expenses ............................................. 19,368 22,546 20,374
----------- ------------ ------------
Total expenses ........................................... 732,054 3,735,742 2,510,806
Less expenses waived by the distributor .................... (77,376) (516,242) (333,538)
Less expenses waived by the adviser ........................ (116,602) -- --
----------- ------------ ------------
Net expenses before expenses paid indirectly ............. 538,076 3,219,500 2,177,268
Less expenses paid indirectly .............................. (7,066) (761) (246)
----------- ------------ ------------
Total net expenses ....................................... 531,010 3,218,739 2,177,022
----------- ------------ ------------
Net investment income (loss) ............................. 84,218 (1,124,687) 498,018
----------- ------------ ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 3) .................. 8,156,373 32,003,899 16,132,322
Net realized loss on closed futures contracts .............. (591,710) -- --
----------- ------------ ------------
Net realized gain on investments ......................... 7,564,663 32,003,899 16,132,322
Net change in unrealized appreciation or depreciation of
investments .............................................. (5,498,330) 13,771,971 10,738,269
----------- ------------ ------------
Net gain on investments .................................. 2,066,333 45,775,870 26,870,591
----------- ------------ ------------
Net increase in net assets resulting from operations ..... $2,150,551 $ 44,651,183 $ 27,368,609
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
12 1996 Annual Report - U.S. Growth Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
..................................................................
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND EMERGING GROWTH FUND GROWTH FUND
--------------------------- --------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/96 9/30/95 9/30/96 9/30/95 9/30/96 9/30/95
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ........... $ 84,218 $ 312,569 $ (1,124,687) $ (1,114,400) $ 498,018 $ 692,225
Net realized gain on investments ....... 7,564,663 2,299,225 32,003,899 22,980,605 16,132,322 33,873,121
Net change in unrealized appreciation or
depreciation of investments .......... (5,498,330) 3,616,002 13,771,971 44,487,176 10,738,269 (3,064,427)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations .................... 2,150,551 6,227,796 44,651,183 66,353,381 27,368,609 31,500,919
------------ ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............. (175,841) (368,410) -- -- (511,937) (713,170)
From net realized gains ................ (3,725,755) -- (23,854,784) -- (19,384,717) (17,100,544)
------------ ------------ ------------ ------------ ------------ ------------
Total distributions .................. (3,901,596) (368,410) (23,854,784) -- (19,896,654) (17,813,714)
------------ ------------ ------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTES 1 AND
4):
Proceeds from sales (note 5) ........... 1,445,527 3,460,408 65,931,347 30,869,511 18,395,008 16,086,755
Shares issued for reinvestment of
distributions ........................ 3,901,679 368,425 23,845,752 -- 19,897,268 17,812,204
Payments for shares redeemed ........... (21,049,527) (39,642,763) (59,436,830) (68,778,435) (39,947,433) (69,895,194)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets from
capital share transactions ......... (15,702,321) (35,813,930) 30,340,269 (37,908,924) (1,655,157) (35,996,235)
------------ ------------ ------------ ------------ ------------ ------------
Total increase (decrease) in net
assets ............................. (17,453,366) (29,954,544) 51,136,668 28,444,457 5,816,798 (22,309,030)
Net assets at beginning of year ........ 48,421,278 78,375,822 252,632,020 224,187,563 172,485,282 194,794,312
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of year .............. $ 30,967,912 $ 48,421,278 $303,768,688 $252,632,020 $178,302,080 $172,485,282
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Undistributed net investment income .... $ 80,672 $ 172,295 $ -- $ -- $ 46,969 $ 60,888
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
13 1996 Annual Report - U.S. Growth 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 Small Company Growth
Fund, Emerging Growth Fund and Growth 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.
Small Company Growth Fund (formerly Equity Strategy Fund)
invests primarily in common stocks of small-capitalization
companies.
Emerging Growth Fund invests primarily in common stocks
and securities convertible into common stocks of emerging
growth companies, emphasizing those with headquarters,
offices or manufacturing facilities in states where Piper
Jaffray maintains offices. On December 23, 1995, Emerging
Growth Fund declared a 100% stock dividend. Shareholders
received one additional share of capital stock for each
share they owned and the net asset value of each share was
reduced by half.
Growth Fund (formerly Value Fund) invests in a broadly
diversified mix of stocks from many industries.
(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. Valuation of open short positions will be at
the average 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.
- --------------------------------------------------------------------------------
14 1996 Annual Report - U.S. Growth 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, Growth Fund 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 fund gives up the
opportunity of profit if the market price of the security
increases. The risk in writing a put option is that the
fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying
an option is that the fund pays a premium whether or not
the option is exercised. The fund also has the additional
risk of not being able to enter into a closing transaction
if a liquid secondary market does not exist.
Option contracts are valued daily and unrealized
appreciation or depreciation is recorded. The fund will
realize a gain or loss upon expiration or closing of the
option transaction. When an option is exercised, the
proceeds on 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, Growth Fund may buy and sell stock
index 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 fund is
required to deposit either cash or securities in an amount
(initial margin) equal to a certain percentage of the
contract value. Subsequent payments (variation margin) are
made or received by the fund each day. The variation
margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains and
losses. The fund recognizes a realized gain or loss when
the contract is closed or expires.
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"
transactions.
- --------------------------------------------------------------------------------
15 1996 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 statements of assets and liabilities, as a result
of permanent book-to-tax differences, reclassification
adjustments have been made to increase undistributed net
investment income and decrease accumulated net realized
gain on investments by $1,124,687 for Emerging Growth
Fund.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income
for Growth Fund are declared and paid quarterly. For Small
Company Growth Fund and Emerging Growth Fund,
distributions from net investment income will be made
annually. For each fund, 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.
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 may 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>
SMALL
COMPANY EMERGING
GROWTH FUND GROWTH FUND GROWTH FUND
------------ ------------- ------------
<S> <C> <C> <C>
Purchases ................................... $45,436,079 $ 129,401,892 $ 33,824,952
Proceeds from sales ......................... $66,602,851 $ 114,329,861 $ 51,118,507
</TABLE>
For the year ended September 30, 1996, brokerage
commissions paid to Piper Jaffray Inc., an affiliated
broker, amounted to $65,924 and $3,726 for Small Company
Growth Fund and Emerging Growth Fund, respectively.
- --------------------------------------------------------------------------------
16 1996 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(4) CAPITAL SHARE TRANSACTIONS
................................................................................
Transactions in shares of each fund for the years ended
September 30, 1996, and 1995, were as follows:
<TABLE>
<CAPTION>
SMALL
COMPANY EMERGING
GROWTH FUND GROWTH FUND GROWTH FUND
----------- ----------- -----------
<S> <C> <C> <C>
1996:
Sold ...................................... 77,719 4,424,067 909,407
Issued for reinvested distributions ....... 211,527 986,585 1,050,275
Redeemed .................................. (1,130,511) (3,766,383) (1,987,117)
Shares issued for stock dividend .......... -- 10,529,165 --
----------- ----------- -----------
Increase (decrease) ..................... (841,265) 12,173,434 (27,435)
----------- ----------- -----------
----------- ----------- -----------
1995:
Sold ...................................... 205,012 1,474,930 833,862
Issued for reinvested distributions ....... 13,052 -- 812,811
Redeemed .................................. (2,294,518) (3,378,437) (3,500,722)
----------- ----------- -----------
Decrease ................................ (2,076,454) (1,903,507) (1,854,049)
----------- ----------- -----------
----------- ----------- -----------
</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 account
servicing agreements under which Piper Jaffray and Piper
Trust Company perform various transfer and dividend
disbursing agent services for accounts 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>
SMALL
COMPANY EMERGING
GROWTH FUND GROWTH FUND GROWTH FUND
----------- ----------- -----------
<S> <C> <C> <C>
Piper Jaffray ............................... $ 45,089 $ 130,707 $ 86,841
Piper Trust ................................. 2,830 19,737 15,791
----------- ----------- -----------
$ 47,919 $ 150,444 $ 102,632
----------- ----------- -----------
----------- ----------- -----------
</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
- --------------------------------------------------------------------------------
17 1996 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 Small
Company Growth Fund.
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 $23,234, $695,309 and $169,574 for
Small Company Growth Fund, Emerging Growth Fund and Growth
Fund, respectively, for the year ended September 30, 1996.
(6) SUBSEQUENT EVENT
................................................................................
On October 21, 1996, Growth Fund and Small Company Growth
Fund declared a 100% common stock dividend. This had the
same effect as a 2 for 1 stock split, doubling the number
of shares outstanding and reducing the net asset value of
each share by half.
- --------------------------------------------------------------------------------
18 1996 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(7) FINANCIAL HIGHLIGHTS
................................................................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
SMALL COMPANY GROWTH 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 ........ $ 19.46 $ 17.17 $ 16.84 $ 13.57 $ 12.82
-------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.05 0.11 0.07 0.03 0.08
Net realized and unrealized gains on
investments ............................. 0.95 2.27 0.29 3.30 0.71
-------- ------- ------- ------- -------
Total from operations ................... 1.00 2.38 0.36 3.33 0.79
-------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income ................ (0.07) (0.09) (0.03) (0.06) (0.04)
From net realized gains on investments .... (1.58) -- -- -- --
-------- ------- ------- ------- -------
Total distributions to shareholders ..... (1.65) (0.09) (0.03) (0.06) (0.04)
-------- ------- ------- ------- -------
Net asset value, end of period .............. $ 18.81 $ 19.46 $ 17.17 $ 16.84 $ 13.57
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
SELECTED INFORMATION
Total return(a) ............................. 5.38% 13.88% 2.12% 24.56% 6.18%
Net assets at end of period (in millions) ... $ 31 $ 48 $ 78 $ 84 $ 9
Ratio of expenses to average daily net
assets(b)(d) .............................. 1.32% 1.40% 1.32% 1.28% 1.47%
Ratio of net investment income to average
daily net assets(b) . 0.20% 0.43% 0.37% 0.50% 0.56%
Average brokerage commission rate(c) ........ $ 0.0600 n/a n/a n/a n/a
Portfolio turnover rate (excluding short-term
securities) ............................... 125% 182% 177% 154% 420%
</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:
1.79%/(0.27%), 1.63%/0.20%, 1.54%/0.15%, 1.86%/(0.08%), AND 2.49%/(0.46%)
IN 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) FOR THE YEAR ENDED SEPTEMBER 30, 1992, GROSS EXPENSES INCLUDED 0.15% OF
INCOME TAX EXPENSE.
- --------------------------------------------------------------------------------
19 1996 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(7) FINANCIAL HIGHLIGHTS
(CONTINUED)
................................................................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
EMERGING GROWTH FUND
<TABLE>
<CAPTION>
Fiscal year ended September 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA (A)
Net asset value, beginning of period ........ $ 12.97 $ 9.63 $ 9.87 $ 7.21 $ 6.93
-------- ------- ------- ------- -------
Operations:
Net investment income (loss) .............. (0.05) (0.06) (0.04) (0.03) --
Net realized and unrealized gains (losses)
on investments .......................... 2.18 3.40 (0.20) 2.69 0.32
-------- ------- ------- ------- -------
Total from operations ................... 2.13 3.34 (0.24) 2.66 0.32
-------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income ................ -- -- -- -- --
From net realized gains on investments .... (1.24) -- -- -- (0.04)
-------- ------- ------- ------- -------
Total distributions to shareholders ..... (1.24) -- -- -- (0.04)
-------- ------- ------- ------- -------
Net asset value, end of period .............. $ 13.86 $ 12.97 $ 9.63 $ 9.87 $ 7.21
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
SELECTED INFORMATION
Total return(b) ............................. 17.84% 34.68% (2.38)% 36.92% 4.55%
Net assets at end of period (in millions) ... $ 304 $ 253 $ 224 $ 191 $ 110
Ratio of expenses to average daily net
assets(c) ................................. 1.18% 1.24% 1.24% 1.29% 1.30%
Ratio of net investment income (loss) to
average daily net assets(c) ............... (0.41)% (0.51)% (0.38)% (0.34)% (0.14)%
Average brokerage commission rate(d) ........ $ 0.0600 n/a n/a n/a n/a
Portfolio turnover rate (excluding short-term
securities) ............................... 44% 33% 31% 30% 21%
</TABLE>
(A) PER-SHARE AMOUNTS HAVE BEEN ADJUSTED TO REFLECT THE EFFECT OF THE STOCK
DIVIDEND DECLARED ON DECEMBER 23, 1995. SEE NOTE 1 IN THE NOTES TO
FINANCIAL STATEMENTS.
(B) 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.
(C) 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:
1.37%/(0.60%), 1.42%/(0.69%), 1.44%/(0.58%), 1.49%/(0.54%), AND
1.56%/(0.40%), IN 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.
(D) 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.
- --------------------------------------------------------------------------------
20 1996 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(7) FINANCIAL HIGHLIGHTS
(CONTINUED)
................................................................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
GROWTH 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 ........ $ 20.40 $ 18.90 $ 19.30 $ 17.06 $ 16.86
-------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.06 0.08 0.08 0.12 0.17
Net realized and unrealized gains (losses)
on investments .......................... 3.10 3.60 (0.37) 2.24 0.76
-------- ------- ------- ------- -------
Total from operations ................... 3.16 3.68 (0.29) 2.36 0.93
-------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income ................ (0.06) (0.08) (0.11) (0.12) (0.16)
From net realized gains on investments .... (2.34) (2.10) -- -- (0.57)
-------- ------- ------- ------- -------
Total distributions to shareholders ..... (2.40) (2.18) (0.11) (0.12) (0.73)
-------- ------- ------- ------- -------
Net asset value, end of period .............. $ 21.16 $ 20.40 $ 18.90 $ 19.30 $ 17.06
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
SELECTED INFORMATION
Total return(a) ............................. 16.87% 20.60% (1.51)% 13.85% 5.76%
Net assets at end of period (in millions) ... $ 178 $ 172 $ 195 $ 252 $ 200
Ratio of expenses to average daily net
assets(b) ................................. 1.24% 1.27% 1.23% 1.26% 1.29%
Ratio of net investment income to average
daily net assets(b) . 0.28% 0.40% 0.43% 0.66% 1.04%
Average brokerage commission rate(c) ........ $ 0.0600 n/a n/a n/a n/a
Portfolio turnover rate (excluding short-term
securities) ............................... 19% 80% 11% 45% 36%
</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: 1.43%/.09%,
1.45%/0.22%, 1.42%/0.24%, 1.44%/0.48%, AND 1.47%/0.86%, IN 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.
- --------------------------------------------------------------------------------
21 1996 Annual Report - U.S. Growth Funds
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH 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 (92.0%):
BASIC MATERIALS (4.4%):
CFC International, Inc. ............................. 15,000(b) $ 187,500
ChiRex Inc. ......................................... 19,000(b) 247,000
Newmont Mining ...................................... 3,600 170,100
OM Group ............................................ 4,200 159,600
Potash Corp. Saskatchewan ........................... 8,000 585,000
------------
1,349,200
------------
CAPITAL GOODS AND SERVICES (9.1%):
AES Corp. ........................................... 5,000(b) 196,875
AMETEK Inc. ......................................... 10,000 188,750
Cuno Inc. ........................................... 20,000(b) 310,000
Farr Co. ............................................ 25,000(b) 362,500
Greenfield Industries ............................... 10,000 240,000
HON Industries ...................................... 5,000 198,750
Miller (Herman) ..................................... 10,000 405,000
Pentair, Inc. ....................................... 15,000 397,500
Tyco International .................................. 5,000 215,625
USA Waste Service ................................... 10,000(b) 315,000
------------
2,830,000
------------
COMMERCIAL SERVICES (4.2%):
Alternative Resources ............................... 12,000(b) 337,500
Correctional Services Corp. ......................... 20,000(b) 282,500
Learning Tree International ......................... 1,000(b) 37,000
Manpower Inc. ....................................... 10,000 332,500
Rexel Inc. .......................................... 20,000(b) 315,000
------------
1,304,500
------------
CONSUMER DURABLES (5.2%):
International Game Technology ....................... 15,000 307,500
Mohawk Industries ................................... 20,000(b) 512,500
Morrow Snowboards ................................... 55,000(b) 646,250
Shaw Industries ..................................... 10,000 133,750
------------
1,600,000
------------
CONSUMER NON-DURABLES (3.7%):
Avon Products ....................................... 5,000 248,125
Colgate-Palmolive ................................... 4,000 347,500
Donna Karan International ........................... 13,000(b) 297,375
Oakley Inc. ......................................... 5,800(b) 246,500
------------
1,139,500
------------
CONSUMER SERVICES (5.2%):
Doubletree Corp. .................................... 10,000(b) 398,750
Evergreen Media Corporation 'A' ..................... 10,000(b) 312,500
Marriott International .............................. 10,000 551,250
Tribune Co. ......................................... 5,000 390,000
------------
1,652,500
------------
FINANCIAL SERVICES (15.6%):
BankAmerica Corp. ................................... 5,000 410,625
Capital One Financial Corp. ......................... 10,000 300,000
Green Tree Financial ................................ 5,000 196,250
</TABLE>
<TABLE>
<CAPTION>
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Household International ............................. 10,000 $ 822,500
J.P. Morgan ......................................... 7,000 622,125
Money Store ......................................... 15,000 397,500
ReliaStar Financial ................................. 10,000 475,000
Sirrom Capital ...................................... 10,000 302,500
SunAmerica Inc. ..................................... 10,000 345,000
TCF Financial ....................................... 15,000 564,375
Weingarten Realty SBI ............................... 10,000 387,500
------------
4,823,375
------------
HEALTH CARE (8.2%):
American Home Products .............................. 10,000 637,500
Amrion Inc. ......................................... 15,000(b) 320,625
EmCare Holdings ..................................... 5,000(b) 135,000
Genesis Health Ventures ............................. 11,000(b) 309,375
Physician Reliance Network .......................... 15,000(b) 228,750
Physio-Control International ........................ 11,000(b) 277,760
SEQUUS Pharmaceuticals .............................. 20,000(b) 315,000
Urogen .............................................. 10,000(b)(d) --
Vital Signs Inc. .................................... 15,000 307,500
------------
2,531,510
------------
RETAIL TRADE (10.6%):
Albertson's, Inc. ................................... 5,000 210,625
Eagle Hardware and Garden ........................... 20,000(b) 540,000
Federated Department Stores ......................... 5,000(b) 167,500
Home Depot .......................................... 10,000 568,750
Intimate Brands 'A' ................................. 15,000 273,750
Pier 1 Imports ...................................... 20,000 322,500
Safeway Inc. ........................................ 10,000(b) 426,250
Toys R Us ........................................... 10,000(b) 291,250
Vons Companies ...................................... 700(b) 30,013
Zale Corp. .......................................... 20,000(b) 437,500
------------
3,268,138
------------
TECHNOLOGY (13.8%):
Activision Inc. ..................................... 20,000(b) 282,500
Advanced Fibre Communication ........................ 250(b) 6,250
Automatic Data Processing ........................... 5,000 218,125
BISYS Group ......................................... 8,000(b) 328,000
Ceridian Corp. ...................................... 10,000(b) 500,000
Comverse Technology ................................. 5,575(b) 216,728
Cymer, Inc. ......................................... 2,000(b) 35,500
EMC Corp. ........................................... 10,000(b) 226,250
GenRad, Inc. ........................................ 10,000(b) 166,250
Kollmorgen Corp. .................................... 10,000 126,250
Microsoft Corp. ..................................... 4,000(b) 527,500
Oracle Corp. ........................................ 10,000(b) 425,625
SunGard Data Systems ................................ 5,000(b) 225,000
Symantec Corp. ...................................... 40,000(b) 435,000
Tech Data Corp. ..................................... 20,000(b) 557,500
------------
4,276,478
------------
UTILITIES (4.6%):
Consolidated Natural Gas ............................ 10,000 536,250
Enron ............................................... 10,000 407,500
NICOR Inc. .......................................... 5,000 168,750
Peoples Energy ...................................... 5,000 170,000
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
22 1996 Annual Report - U.S. Growth Funds
<PAGE>
Investments in Securities (continued)
- --------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND
(CONTINUED)
<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
United Water Resources .............................. 9,000 $ 148,500
------------
1,431,000
------------
ENERGY (7.4%):
Lomak Petroleum ..................................... 20,000 262,500
Newpark Resources ................................... 10,000(b) 363,750
Smith International ................................. 10,000(b) 351,250
Tidewater Inc. ...................................... 35,000 1,308,125
------------
2,285,625
------------
Total Common Stock
(cost: $25,037,021) ............................ 28,491,826
------------
SHORT-TERM SECURITIES (10.8%):
U.S. Treasury Bill, 5.32%, 12/5/96 .................. $ 500,000 495,655
------------
Repurchase agreement with Goldman Sachs, acquired on
9/30/96, interest of $458, 5.80%, 10/1/96 ......... 2,844,000(c) 2,844,000
------------
Total Short-Term Securities
(cost: $3,339,315) ............................. 3,339,655
------------
Total Investments in Securities
(cost: $28,376,336) (e) ........................ $ 31,831,481
------------
------------
</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) SECURITY IS RESTRICTED (CANNOT BE OFFERED FOR PUBLIC SALE) AND ILLIQUID.
SECURITY WAS ACQUIRED AS A RESULT OF A SPINOFF FROM MEDSTONE INTERNATIONAL
AT NO COST TO THE SHAREHOLDER. OWNERSHIP OF SECURITY CANNOT BE LEGALLY
TRANSFERRED BEFORE DEC. 31, 1997.
(E) ON SEPTEMBER 30, 1996, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $28,376,336. 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 ...... $ 4,359,393
GROSS UNREALIZED DEPRECIATION ...... (904,248)
------------
NET UNREALIZED APPRECIATION ...... $ 3,455,145
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
23 1996 Annual Report - U.S. Growth Funds
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING GROWTH 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 (96.3%):
BASIC MATERIALS (4.5%):
Englehard Corp. ..................................... 105,000 $ 2,415,000
Morton International ................................ 136,000 5,406,000
Sealed Air .......................................... 90,000(b) 3,352,500
Valspar Corp. ....................................... 50,000 2,462,500
------------
13,636,000
------------
CAPITAL GOODS AND SERVICES (9.7%):
Danaher Corp. ....................................... 100,000 4,137,500
Fastenal Co. ........................................ 75,000 3,712,500
Greenfield Industries ............................... 100,000 2,400,000
Pentair, Inc. ....................................... 100,000 2,650,000
TETRA Technologies .................................. 81,250(b) 1,929,688
Thermo Electron ..................................... 157,500(b) 6,378,750
U.S. Filter ......................................... 70,000(b) 2,388,750
United Waste Systems Inc. ........................... 170,000(b) 5,907,500
------------
29,504,688
------------
COMMERCIAL SERVICES (9.3%):
AccuStaff Inc. ...................................... 95,000(b) 2,458,125
Alternative Resources ............................... 85,000(b) 2,390,625
Cintas Corp. ........................................ 35,000 1,960,000
Corporate Express ................................... 165,000(b) 6,414,375
G & K Services Class A .............................. 50,000(b) 1,462,500
Interim Services .................................... 80,000(b) 3,420,000
Richfood Holdings ................................... 85,000 3,166,250
Viking Office Products .............................. 175,000(b) 5,250,000
Wilmar Industries ................................... 75,000(b) 1,706,250
------------
28,228,125
------------
CONSUMER DURABLES (0.6%):
ITI Technologies .................................... 50,000(b) 1,762,500
------------
CONSUMER NON-DURABLES (3.7%):
Donna Karan International ........................... 85,000(b) 1,944,375
Robert Mondavi Class A .............................. 50,000(b) 1,637,500
Tommy Hilfiger ...................................... 130,000(b) 7,702,500
------------
11,284,375
------------
CONSUMER SERVICES (8.7%):
Apollo Group Class A ................................ 75,000(b) 2,006,250
CUC International ................................... 150,000(b) 5,981,250
HFS Inc. ............................................ 75,000(b) 5,015,625
Papa John's International Inc. ...................... 65,000(b) 3,412,500
Regal Cinemas ....................................... 130,000(b) 3,250,000
Stewart Enterprises Class A ......................... 195,000 6,581,250
------------
26,246,875
------------
FINANCIAL SERVICES (12.1%):
Commercial Federal .................................. 70,000 3,010,000
FINOVA Group ........................................ 110,000 6,600,000
Firstar Corp. ....................................... 98,000 4,728,500
Green Tree Financial ................................ 190,000 7,457,500
MGIC Investment ..................................... 90,000 6,063,750
Schwab (Charles) Corp. .............................. 60,000 1,387,500
</TABLE>
<TABLE>
<CAPTION>
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
TCF Financial ....................................... 200,000 $ 7,525,000
------------
36,772,250
------------
HEALTH CARE (12.8%):
American Medical Response ........................... 60,000(b) 2,160,000
Cerner Corp. ........................................ 92,000(b) 1,426,000
Elan Corp. PLC - ADR ................................ 130,000(b) 3,883,750
Emeritus Corp. ...................................... 50,000(b) 787,500
Genesis Health Ventures ............................. 108,500(b) 3,051,563
Genzyme Corp. - General Division .................... 100,000(b) 2,550,000
Healthsource Inc. ................................... 100,000(b) 1,475,000
IDEXX Laboratories .................................. 105,500(b) 4,773,875
Nellcor Puritan Bennett ............................. 116,000(b) 2,552,000
Oxford Health Plans ................................. 60,000(b) 2,985,000
Patterson Dental .................................... 100,000(b) 2,675,000
PhyCor Inc. ......................................... 140,625(b) 5,352,539
Physician Reliance Network .......................... 70,000(b) 1,067,500
Physician Sales & Service ........................... 180,000(b) 4,230,000
------------
38,969,727
------------
RETAIL TRADE (5.5%):
AutoZone Inc. ....................................... 100,000(b) 2,900,000
Barnes & Noble ...................................... 80,000(b) 2,750,000
Casey's General Stores .............................. 90,000 1,575,000
Consolidated Stores ................................. 67,000(b) 2,680,000
Eckerd Corp. ........................................ 130,000(b) 3,640,000
Kohl's Corp. ........................................ 90,000(b) 3,240,000
------------
16,785,000
------------
TECHNOLOGY (21.0%):
ADC Telecommunications .............................. 90,000(b) 5,760,000
Altera Corp. ........................................ 50,000(b) 2,531,250
American Management Systems ......................... 75,000(b) 2,100,000
Andrew Corp. ........................................ 112,500(b) 5,610,938
Baan Co. NV ......................................... 50,000(b) 1,668,750
BISYS Group ......................................... 78,000(b) 3,198,000
Business Objects ADR ................................ 50,000(b) 962,500
Cambridge Technology Partners Inc. .................. 180,000(b) 5,445,000
Ceridian Corp. ...................................... 100,000(b) 5,000,000
Comverse Technology ................................. 53,950(b) 2,097,306
Digi International .................................. 90,000(b) 1,282,500
EMC Corp. ........................................... 100,000(b) 2,262,500
Fiserv Inc. ......................................... 50,000(b) 1,912,500
FORE Systems ........................................ 50,000(b) 2,068,750
Glenayre Technologies ............................... 60,000(b) 1,380,000
HNC Software ........................................ 25,000(b) 1,000,000
Informix Corp. ...................................... 150,000(b) 4,181,250
INSO Corp. .......................................... 65,000(b) 3,526,250
KLA Instruments ..................................... 75,000(b) 1,687,500
Shiva Corp. ......................................... 75,000(b) 4,303,125
Tecnomatix Technologies Ltd. ........................ 82,000(b) 1,424,750
VeriFone Inc. ....................................... 100,000(b) 4,475,000
------------
63,877,869
------------
TRANSPORTATION (2.0%):
Wisconsin Central Transportation .................... 165,000(b) 5,919,375
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
24 1996 Annual Report - U.S. Growth Funds
<PAGE>
Investments in Securities (continued)
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
(CONTINUED)
<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
UTILITIES (1.5%):
Frontier Corp. ...................................... 175,000 $ 4,659,375
------------
ENERGY (4.9%):
Input/Output Inc. ................................... 91,500(b) 2,722,125
Lomak Petroleum ..................................... 37,500 492,187
Noble Affiliates .................................... 110,000 4,647,500
Reading & Bates ..................................... 132,000(b) 3,580,500
Smith International ................................. 100,000(b) 3,512,500
------------
14,954,812
------------
Total Common Stock
(cost: $178,665,297) ........................... 292,600,971
------------
SHORT-TERM SECURITIES (3.8%):
Repurchase agreement with Goldman Sachs, acquired on
9/30/96, interest of $1884, 5.80%, 10/1/96
(cost: $11,695,000) ............................... $11,695,000(c) 11,695,000
------------
Total Investments in Securities
(cost: $190,360,297) (d) ....................... $304,295,971
------------
------------
</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) ON SEPTEMBER 30, 1996, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $190,360,297. 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 ...... $117,420,392
GROSS UNREALIZED DEPRECIATION ...... (3,484,718)
------------
NET UNREALIZED APPRECIATION ...... $113,935,674
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
25 1996 Annual Report - U.S. Growth Funds
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH 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 (100.1%):
BASIC MATERIALS (12.6%):
Aluminum Company of America ......................... 50,000 $ 2,950,000
Morton International ................................ 200,000 7,950,000
Newmont Mining ...................................... 55,000 2,598,750
Nucor Corp. ......................................... 50,000 2,537,500
Phelps Dodge ........................................ 50,000 3,206,250
Willamette Industries ............................... 50,000 3,275,000
------------
22,517,500
------------
CAPITAL GOODS AND SERVICES (18.2%):
AlliedSignal Inc. ................................... 150,000 9,881,250
Magna International Class A ......................... 100,000 4,825,000
Pentair, Inc. ....................................... 150,000 3,975,000
Transocean Offshore Inc. ............................ 120,000 7,350,000
Wabash National ..................................... 98,000 1,543,500
WMX Technologies, Inc. .............................. 150,000 4,931,250
------------
32,506,000
------------
COMMERCIAL SERVICES (1.3%):
Sensormatic Electronics ............................. 125,000 2,234,374
------------
CONSUMER DURABLES (3.1%):
Ford Motor .......................................... 100,000 3,125,000
General Motors ...................................... 50,000 2,400,000
------------
5,525,000
------------
CONSUMER NON-DURABLES (5.0%):
Coca-Cola Co. ....................................... 50,000 2,543,750
Colgate-Palmolive ................................... 34,000 2,953,750
Reebok International ................................ 100,000 3,475,000
------------
8,972,500
------------
CONSUMER SERVICES (3.5%):
Carnival Corp. - Class A ............................ 80,000 2,480,000
H&R Block ........................................... 125,000 3,718,750
------------
6,198,750
------------
FINANCIAL SERVICES (9.7%):
American International Group ........................ 30,000 3,022,500
Federal National Mortgage Association . 80,000 2,790,000
FINOVA Group ........................................ 35,000 2,100,000
Franklin Resources .................................. 40,000 2,655,000
Norwest Corp. ....................................... 100,000 4,087,500
TCF Financial ....................................... 70,000 2,633,750
------------
17,288,750
------------
HEALTH CARE (3.8%):
Corvas International Inc. ........................... 960(b) 4,440
Medtronic, Inc. ..................................... 40,000 2,565,000
St. Jude Medical .................................... 60,000(b) 2,422,500
United Healthcare ................................... 40,000 1,665,000
------------
6,656,940
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
RETAIL TRADE (6.3%):
Gap Inc. ............................................ 200,000 $ 5,775,000
Home Depot .......................................... 40,000 2,275,000
Tandy Corp. ......................................... 80,000 3,230,000
------------
11,280,000
------------
TECHNOLOGY (8.0%):
CompuServe Corp. .................................... 150,000(b) 2,025,000
First Data .......................................... 20,000 1,632,500
Imation Corp. ....................................... 75,000(b) 1,837,500
Intel Corp. ......................................... 25,000 2,385,938
Motorola, Inc. ...................................... 30,000 1,548,750
Tech Data Corp. ..................................... 175,000(b) 4,878,125
------------
14,307,813
------------
TRANSPORTATION (2.2%):
AMR Corp. ........................................... 50,000(b) 3,981,250
------------
UTILITIES (9.2%):
AirTouch Communications ............................. 200,000(b) 5,525,000
Enron ............................................... 200,000 8,150,000
Enron Global Power & Pipeline LLC ................... 105,200 2,616,850
------------
16,291,850
------------
ENERGY (17.2%):
Anadarko Petroleum .................................. 100,000 5,587,500
Baker Hughes Inc. ................................... 200,000 6,075,000
Burlington Resources ................................ 80,000 3,550,000
Halliburton Co. ..................................... 75,000 3,871,875
Noble Affiliates .................................... 125,000 5,281,250
Schlumberger Ltd. ................................... 75,000 6,337,500
------------
30,703,125
------------
Total Common Stock
(cost: $124,353,939) ........................... 178,463,852
------------
SHORT-TERM SECURITIES (0.0%):
Repurchase agreement with Goldman Sachs, acquired on
9/30/96, interest of $12, 5.80%, 10/1/96
(cost: $74,000) ................................... $ 74,000(c) 74,000
------------
Total Investments in Securities
(cost: $124,427,939) (d) ....................... $178,537,852
------------
------------
</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) ON SEPTEMBER 30, 1996, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $124,427,939. 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 ...... $ 60,803,097
GROSS UNREALIZED DEPRECIATION ...... (6,693,184)
------------
NET UNREALIZED APPRECIATION ...... $ 54,109,913
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
26 1996 Annual Report - U.S. Growth 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 Small Company Growth Fund, Emerging Growth
Fund and Growth 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 each of the years in the five-year period then ended.
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. As to securities
purchased and sold but not received or delivered, we
request confirmations from brokers and, where replies are
not received, we carry out other appropriate auditing
procedures. 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 Small Company
Growth Fund, Emerging Growth Fund and Growth 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
- --------------------------------------------------------------------------------
27 1996 Annual Report - U.S. Growth 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,
13.97%, 100% AND 75.63% QUALIFYING FOR DEDUCTION BY
CORPORATIONS, RESPECTIVELY)
<TABLE>
<CAPTION>
SMALL
COMPANY EMERGING
GROWTH GROWTH GROWTH
PAYABLE DATE FUND FUND FUND
- --------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
December 22, 1995 ........................... $0.0700 $ -- $ 0.0200
March 25, 1996 .............................. -- -- 0.0150
June 17, 1996 ............................... -- -- 0.0125
September 30, 1996 .......................... -- -- 0.0100
-------- -------- --------
Total ..................................... $0.0700 $ -- $ 0.0575
-------- -------- --------
-------- -------- --------
</TABLE>
SHORT-TERM GAINS (TAXABLE AS ORDINARY DIVIDENDS)
<TABLE>
<CAPTION>
SMALL
COMPANY EMERGING
GROWTH GROWTH GROWTH
PAYABLE DATE FUND FUND FUND
- --------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
December 5, 1995 ............................ $0.3678 $ -- $ 0.6536
-------- -------- --------
-------- -------- --------
</TABLE>
LONG-TERM GAINS (TAXABLE AS CAPITAL GAINS DISTRIBUTIONS)
<TABLE>
<CAPTION>
SMALL
COMPANY EMERGING
GROWTH GROWTH GROWTH
PAYABLE DATE FUND FUND FUND
- --------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
December 5, 1995 ............................ $1.2097 $1.2419 $ 1.6836
-------- -------- --------
-------- -------- --------
</TABLE>
- --------------------------------------------------------------------------------
28 1996 Annual Report - U.S. Growth Funds
<PAGE>
Shareholder Update
- --------------------------------------------------
SMALL COMPANY GROWTH FUND (FORMERLY EQUITY STRATEGY FUND)
At a special meeting of shareholders held on September 12,
1996, shareholders of Small Company Growth Fund approved a
change in the Fund's investment objective from high total
investment return consistent with prudent investment risk
to long-term capital appreciation. In connection with this
change in investment objective, the Fund's investment
policies were revised and the Fund's name was changed from
Equity Strategy Fund to Small Company Growth Fund. The
following votes were cast regarding this matter: 1,136,110
shares voted "for", 38,901 shares voted "against" and
40,926 abstentions.
- --------------------------------------------------------------------------------
29 1996 Annual Report - U.S. Growth 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
- --------------------------------------------------------------------------------
30 1996 Annual Report - U.S. Growth 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.
31 1996 Annual Report - U.S. Growth Funds
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
32 1996 Annual Report - U.S. Growth Funds
<PAGE>
GLOSSARY OF TERMS ***
- --------------------------------------------------------------------------------
BENCHMARK
An established basis of comparison for an investment's performance. Benchmarks
may be an unmanaged market index or a group of similar investments.
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.
CORRECTION
Reverse movement, usually downward in the price of a stock.
DIVIDEND YIELD
Annual percentage rate of return paid on a stock in the form of dividends.
EMERGING GROWTH COUNTRIES
Refers to countries either in the early stages of economic development or going
through the process of major economic revitalization.
FUNDAMENTALS
A company's fundamentals include its assets, earnings, sales, products,
management and markets. A portfolio manager who uses "fundamental analysis" in
decision making looks at these factors to determine whether a company's stock is
undervalued or overvalued at its current market price.
MARKET CAPITALIZATION
The value of a company determined by multiplying the number of outstanding
shares by the current market price of a share.
OVERWEIGHTED OR OVERWEIGHTING
In portfolio management, overweighting means a fund's portfolio contains a
higher percentage of a certain sector than its benchmark.
REALIZED CAPITAL GAINS
Profits earned by a fund from the sale of securities in the portfolio.
SECONDARY STOCKS
Stocks with a smaller value (market capitalization), than blue-chip stocks.
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 than its benchmark.
VALUATION
The determined or estimated value of a particular stock.
FOR MORE INFORMATION
BY PHONE [GRAPHIC]
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:
12 for Small Company Growth Fund
13 for Emerging Growth Fund
14 for Growth 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 [GRAPHIC]
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 [GRAPHIC]
http://www.piperjaffray.com/
money_management/
33
<PAGE>
U.S. GROWTH FUNDS
- --------------------------------------------------------------------------------
[LOGO] PIPER FUNDS 222 South Ninth Street
Minneapolis, MN 55402-3804
PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.
#10200 11/1996 233-96
