PIPER FUNDS INC, N-30D, 1997-05-30

PIPER FUNDS INC
N-30D, 1997-05-30

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<PAGE>

1997 Semiannual Report
- --------------------------------------------------------------------------------
[LOGO]

Growth and Income Funds - 1997 Semiannual Report

GROWTH AND INCOME FUNDS

GROWTH AND INCOME FUND
BALANCED FUND

<PAGE>

Contents

GROWTH AND INCOME FUND

Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . 2
Financial Statements and Notes . . . . . . . . . . . . . . . . . 8
Investments in Securities. . . . . . . . . . . . . . . . . . . . 20
Directors and Officers . . . . . . . . . . . . . . . . . . . . . 23
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . 24
Glossary***. . . . . . . . . . . . . . . . . . . . . . . . . . . 25

BALANCED FUND

Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . 5
Financial Statements and Notes . . . . . . . . . . . . . . . . . 8
Investments in Securities. . . . . . . . . . . . . . . . . . . . 21
Directors and Officers . . . . . . . . . . . . . . . . . . . . . 23
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . 24
Glossary***. . . . . . . . . . . . . . . . . . . . . . . . . . . 25

This report is intended for shareholders of Growth and Income Fund and Balanced
Fund, but may also be used as sales literature if preceded or accompanied by a
prospectus. The prospectus gives details about the charges, investment results,
risks and operating policies of the funds.

*An investment in a 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.

*** This report includes a glossary to help you understand financial words used
in the portfolio managers' letters. When you see this symbol, it indicates a
word that is defined in the glossary.

[LOGO]

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

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

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

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

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

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

Cash Management Funds*
..........................................
Money Market Fund
Tax-Exempt Money Market Fund
U.S. Government Money Market Fund
Institutional Money Market Fund

Piper Funds provide you with the flexibility to help you pursue your financial
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. Please read the prospectuses carefully before investing.

<PAGE>

PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
May 15, 1997

DEAR SHAREHOLDERS:

What are you expecting from the markets this year? There's no denying that the
stock market's been on a bit of a roller coaster ride of late. The past six
months alone have seen record Dow highs, followed by quick downturns and
rebounds that are higher still. In fact, stock and bond prices have seen
unprecedented growth for almost 15 years. And, fortunately, more of you than
ever are sharing in these gains.

Word has it that investors' EXPECTATIONS have soared right along with these
phenomenal returns, and that's troubling. Don't get me wrong - we're happy about
the gains investors have enjoyed. But it's important that we all understand the
markets' potential for volatility and balance that with a good dose of reality.

Here's what I mean. According to Ibbotson Associates, the markets have, on
average, returned 11% in large-company stocks and 5% in long-term government
bonds per year since 1926.* Yet today's investors expect much more. I recently
read the results of a national survey by Louis Harris and Associates that found
a wide majority of investors expect at least a 14% stock market return over the
next 10 years (which is the average annual return from the last decade). Some
predict even greater returns.

No matter what the markets bring this year, I believe it's important to
maintain a long-term perspective. History shows that it's common for investors
to bail out at the first signs of a market downturn. But if I've learned one
thing from my 30 years in the financial services industry, it's this: you can
gain only if you stay in the game for the long term. Remember that market and
interest rate volatility (like we saw in March) are normal parts of investing.
I've never met anyone who can always time the market to their advantage. Here's
an adage to keep in mind: focus on "TIME IN the market," not "TIMING the
market."

My other advice for weathering the bumpy markets? Stay in touch with your
Investment Executive. Together, you have probably already set your financial
goals and formulated a plan to help you reach them. Stick to that plan. During
this uncertain time, your Investment Executive can help you sort through the
clutter and tune out the market noise. Best of all, your broker can lend you the
perspective gained from years of experience and help you focus on long-term
results.

Thank you for your investment and best wishes for the balance of 1997.

Sincerely,

/s/ William H. Ellis

William H. Ellis

[PHOTO]

William H. Ellis
President
Piper Capital Management

INVESTOR EXPECTATIONS

What investors expect from the stock market over the next 10 years.

[CHART]

56% Expect a 14% return
29% Expect more than a 14% return
14% Expect less than a 14% return

Source: Louis Harris and
Associates, 1996

*Past performance does not guarantee future results. Keep in mind that stocks
are more volatile than bonds, and long-term government bonds are guaranteed by
the U.S. government or its agencies as to payment of principal and interest.

1 1997 Semiannual Report - Growth and Income Funds

<PAGE>

GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
May 15, 1997

DEAR SHAREHOLDERS:

FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1997, GROWTH AND INCOME FUND CLASS A
PROVIDED AN 8.68%* TOTAL RETURN WITH ALL DIVIDENDS AND CAPITAL GAINS
REINVESTED, BUT NOT INCLUDING THE SALES CHARGE. The fund performed in line
with the Lipper Growth and Income Funds Average, which advanced 8.65%, and
trailed the Standard & Poor's 500 Index,** which gained 11.23% during the
same time frame. The fund received strong investment results from energy,
financial, health care and retail stocks. However, these gains were partially
offset by weakness in capital goods and services, utilities and consumer
durables, sectors*** in which the fund was overweighted.*** This, along with
the S&P 500's heavy emphasis on large-cap, blue chip stocks,*** helped the
index outperform the fund. The largest stocks in the S&P 500 (based on market
capitalization) propelled the index to its strong performance. In our
opinion, many of these large stocks are highly overvalued.***

THROUGHOUT MUCH OF THE PERIOD, ECONOMIC CONDITIONS WERE FAVORABLE AND THE STOCK
MARKET FARED RELATIVELY WELL. Large-cap growth stocks recorded solid investment
results in this modestly growing economic environment. From early February
through the end of March, signs of a strengthening economy, such as an increase
in consumer spending, caused interest rates to rise due to fears of higher
inflation. By mid-March, these fears carried over to the stock market, sending
prices down

[PHOTO]

PAUL DOW, CFA
shares responsibility for the management of Growth and Income Fund. He has 23
years of financial experience.

FUND PERFORMANCE THROUGH MARCH 31, 1997*
- --------------------------------------------------------------------------------
Growth of $10,000 Invested Since Inception

[GRAPH]

Growth and Income Fund Class A, reflects the fund's maximum 4% sales charges.
S&P 500 Index**
Lipper Growth and Income Funds Average+

** An unmanaged index of large capitalization stocks that includes no expenses
or transaction charges.

+ The average total return of similar funds as characterized by Lipper
Analytical Services. Does not include sales charges.

CLASS A AVERAGE ANNUALIZED TOTAL RETURNS
Includes the fund's maximum 4% front-end sales charge.

One Year 9.94%
................................................................................
Three Year 18.65%
................................................................................
Since Inception (7/21/92) 12.54%
................................................................................

CLASS B AND Y CUMULATIVE TOTAL RETURNS
Class B shares include the fund's contingent deferred sales charge. Sales
charges do not apply to Class Y shares.

Class B Since Inception (2/18/97) -9.55%
................................................................................
Class Y Since Inception (2/18/97) -5.74%
................................................................................

During some periods, the fund's adviser waived or paid certain fund expenses
and/or the fund's distributor voluntarily limited certain 12b-1 fees for the
fund. Otherwise, the class A average annualized total returns would have been:
9.65% one year, 18.36% three year and 12.27% since inception; and the class B
cumulative since inception total return would have been -9.66%.

* PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PLEASE REMEMBER, YOU COULD
LOSE MONEY WITH THIS INVESTMENT. Neither safety of principal nor stability of
income is guaranteed. The return and principal value of your investment will
fluctuate so that fund shares, when sold, may be worth more or less than their
original cost.

All fund and benchmark returns include reinvested distributions.

2 1997 Semiannual Report - Growth and Income Funds
<PAGE>

GROWTH AND INCOME FUND (CONTINUED)
- --------------------------------------------------------------------------------
sharply during the last three weeks of the month. Large-cap growth stocks and
technology stocks were most affected by the decline. In its effort to combat
higher inflation, the Federal Reserve on March 25 raised the federal funds rate
for the first time in two years. Despite the market downturn in March, large-cap
stocks in general performed very well during the period.

CYCLICAL STOCKS,*** WHICH ARE WIDELY REPRESENTED IN THE FUND, DID NOT BENEFIT
FROM THE INCREASE IN ECONOMIC ACTIVITY. Generally cyclicals, which include the
capital goods, consumer durables and basic materials sectors, outperform the
market in a robust economic environment. Their prices tend to rise due to higher
earnings resulting from economic strength. While earnings for cyclical stocks
were higher during the period, their prices remained relatively flat.
Additionally, cyclicals, along with virtually every other type of stock, were
not spared from the market's sharp downturn in March. Despite our general
disappointment with the performance of these stocks, we still realized
relatively good investment results from two in particular: Air Products &
Chemicals (approximately 2% of the fund's total assets on March 31, 1997) and
duPont (E.I.) de Nemours (1%). Both companies recorded strong earnings due to a
strong economic climate and improving profit margins.

ENERGY STOCKS CONTINUED TO BE WELL REPRESENTED IN THE PORTFOLIO, BECAUSE OF
THEIR RELATIVELY ATTRACTIVE PRICES. We remained focused on the large
international oil companies, such as Texaco (2%) and Exxon (3%), and oil service
companies, such as Baker Hughes (2%) and Schlumberger Limited (3%). Over the
next several years, we believe this sector will realize improved earnings due to
higher demand for its products and services.

WE INCREASED OUR EXPOSURE IN RETAIL STOCKS DUE TO THEIR ATTRACTIVE PRICES
COMPARED TO THE MARKET. Some of our top holdings in this sector included larger,
well-known retailers, such as The Limited (3%), which recently restructured its
operations by closing poorly performing stores, and Home Depot (0.7%), the
nation's largest store for home improvement equipment. Given their size, these
companies should benefit if the economy and consumer spending continue to
strengthen.

[PHOTO]

STEVE MARKUSEN, CFA
Steve Markusen has joined Growth and Income Fund's management team, along with
Brent Mellum. They replace John Schonberg, who left to pursue other
opportunities.

Steve is a senior vice president and director of the large-cap equity area at
Piper Capital Management. He has been with Piper Capital since 1993 and has 13
years of financial experience, including 12 years in portfolio management. He
earned a master's degree in business administration from the University of
Denver and is a Chartered Financial Analyst.

PORTFOLIO COMPOSITION BY SECTOR
As a percentage of total assets on March 31, 1997.

TOP 10 EQUITY HOLDINGS
As a percentage of total assets on March 31, 1997.

[GRAPH]

** An unmanaged index of large capitalization stocks that includes no expenses
or transaction charges.

TOP 10 EQUITY HOLDINGS
As a percentage of total assets on March 31, 1997.

1 GTE 3%
................................................................................
2 The Limited 3%
................................................................................
3 Ford Motor 3%
................................................................................
4 Exxon 3%
................................................................................
5 Schlumberger Limited 3%
................................................................................
6 H&R Block 3%
................................................................................
7 General Electric 2%
................................................................................
8 Abbott Laboratories 2%
................................................................................
9 Baker Hughes 2%
................................................................................
10 Texaco 2%
................................................................................

3 1997 Semiannual Report - Growth and Income Funds
<PAGE>

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

EARLY IN 1997, WE ADDED TO OUR POSITION IN ELECTRIC AND TELEPHONE UTILITIES,
GIVEN THEIR FAIR VALUATIONS*** AND ATTRACTIVE DIVIDEND YIELDS.*** Three of our
holdings in this sector include GTE (3%), BellSouth (2%) and FPL Group (2%). We
have a particularly favorable outlook for FPL Group. This large Florida electric
utility is likely to see earnings increase due to growth in its service
territory as well as disciplined expense control.

THE FUND'S UNDERWEIGHTING*** IN TECHNOLOGY STOCKS DETRACTED FROM PERFORMANCE IN
LATE 1996 BUT HELPED PROTECT SHAREHOLDER CAPITAL IN EARLY 1997. Technology
stocks recorded strong investment results in late 1996, following a difficult
period last summer, but during the first three months of 1997, many of these
stocks fell sharply as investors grew concerned over their lofty valuations
compared to the market. Late in the period, we began looking for attractively
priced stocks within this sector. Further weakness in this industry group may
encourage us to increase our exposure in some of the larger, more established
companies.

LOOKING AHEAD, WE WILL CONTINUE TO FOCUS ON LARGE, HIGH-QUALITY COMPANIES WITH
ATTRACTIVE VALUATIONS. Many companies have not participated in the strong stock
market over the past several years. We think the market will remain volatile
until the economic and inflation outlook becomes more certain. We continue to
believe the fund will benefit from its investments in the energy and utility
areas due to the market's uncertainty. Both groups are considered defensive
because of their relatively high dividend yields. We will also focus our
research efforts on finding companies in the technology and financial areas to
take advantage of the large price corrections*** that occurred within these
groups late in the period.

Thank you for your investment in Growth and Income Fund. We appreciate the
opportunity to manage your assets and help you pursue your long-term investment
goals.

Sincerely,

/s/ Paul Dow /s/ Steve Markusen /s/ Brent Mellum
Paul Dow Steve Markusen Brent Mellum
Portfolio Manager Portfolio Manager Portfolio Manager

[PHOTO]

Brent Mellum, CFA
Brent Mellum has joined Growth and Income Fund's management team, along with
Steve Markusen. They replace John Schonberg, who left to pursue other
opportunities.

Brent is a vice president and portfolio manager with three years of financial
experience, including one year in portfolio management. He earned a master's
degree in business administration from the University of Texas in Dallas and is
a Chartered Financial Analyst.

[PHOTO]

David Steele
assists with the management of the fixed income portion of Growth and Income
Fund. He has 18 years of financial experience.

4 1997 Semiannual Report - Growth and Income Funds
<PAGE>

BALANCED FUND
- --------------------------------------------------------------------------------
May 15, 1997

DEAR SHAREHOLDERS:

FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1997, BALANCED FUND CLASS A REGISTERED
A 4.54%* TOTAL RETURN WITH ALL DIVIDENDS AND CAPITAL GAINS REINVESTED, BUT NOT
INCLUDING THE SALES CHARGE. The fund underperformed the Lipper Balanced Funds
Average,++ which gained 5.43%. For the same time period, the Standard & Poor's
500 Index+ and the Lehman Brothers Government Corporate Index** advanced 11.23%
and 2.17%, respectively. The fund's underperformance reflects our decision to
maintain a relatively conservative investment approach during the period. This
conservative 50%/50% blend of stocks and bonds was based on our assessment that
large company stocks were fully valued*** relative to bonds on a risk-adjusted
basis. We continue to believe this allocation strategy will benefit the fund in
the prevailing market environment.

THROUGHOUT MUCH OF THE PERIOD, ECONOMIC CONDITIONS WERE GENERALLY FAVORABLE. In
this environment, stocks recorded good investment results, while bonds produced
modest gains. Late in 1996, the economy grew moderately, which kept interest
rates under control, enabling bond and stock prices to advance. Beginning in
February, a series of stronger-than-expected economic reports, such as an
increase in consumer spending, raised inflation concerns among investors. As a
result, interest rates rose and

[PHOTO]

Bruce Salvog
shares responsibility for the management of the fixed income portion of Balanced
Fund. He has 27 years of financial experience.

FUND PERFORMANCE THROUGH MARCH 31, 1997*
................................................................................
Growth of $10,000 Invested Since Inception

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

+ An unmanaged index of large capitalization stocks that includes no expenses
or transaction charges.

++ The average total return of similar funds as characterized by Lipper
Analytical Services. Does not include sales charges.

CLASS A AVERAGE ANNUALIZED TOTAL RETURNS
Includes the fund's maximum 4% front-end sales charge.

One Year 3.11%
................................................................................
Five Year 9.72%
................................................................................
Ten Year 8.50%
................................................................................
Since Inception (3/16/87) 8.44%
................................................................................

CLASS B CUMULATIVE TOTAL RETURNS
Includes the fund's contingent deferred sales charge.

Since Inception (2/18/97) -8.63%
................................................................................
During some periods, the fund's adviser waived or paid certain fund expenses
and/or the fund's distributor voluntarily limited certain 12b-1 fees for the
fund. Otherwise, the class A average annualized total returns would have been:
2.74% one year, 9.37% five year, 8.03% ten year and 7.96% since inception; and
the class B cumulative since inception total return would have
been: -8.83%.

All fund and benchmark returns include reinvested distributions.

5 1997 Semiannual Report - Growth and Income Funds
<PAGE>

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

bond prices fell. By mid-March, these fears carried over to the stock market,
sending prices down sharply during the last three weeks of the month. In its
effort to combat fears of higher inflation, the Federal Reserve on March 25
raised the federal funds rate for the first time in two years.

IN THE STOCK PORTION OF THE PORTFOLIO, WE WERE OVERWEIGHTED*** IN ECONOMICALLY
SENSITIVE STOCKS, OR CYCLICALS.*** Generally, cyclicals, which include
companies that produce capital goods and basic materials, outperform the market
when the economy begins to show signs of strength. However, over the last three
years, these stocks have generally underperformed the market, and their prices
do not reflect the improvements we see in their fundamental businesses. Our
holdings in this group include Boeing Co. (approximately 1% of the fund's total
assets as of March 31, 1997), the nation's largest airplane manufacturer, and 3M
(0.8%), which manufactures Scotch tape, sandpaper and other products. These
stocks turned in generally favorable investment results, despite the lackluster
investment results recorded by cyclicals.

ENERGY STOCKS WERE WELL REPRESENTED IN THE FUND, BECAUSE OF THEIR RELATIVELY
ATTRACTIVE PRICES. Despite good performance by energy stocks in 1996, we believe
many are still selling at favorable prices. Our largest holdings in this group
include Exxon (1%), the world's leading oil company, Royal Dutch Petroleum
(0.8%), owners of Shell Oil Company, and Schlumberger Limited (1%), a leading
oil services company. Strong demand growth combined with limited supply
increases should support higher energy prices over the next several years.

WE MAINTAINED OUR OVERWEIGHTING IN RETAIL STOCKS, WHICH PERFORMED IN LINE WITH
THE MARKET. Lower unemployment, strong job growth, good wage gains and high
consumer confidence should support high levels of consumer spending. Sears,
Roebuck and Co. (1%) and The Limited (1%) are two of our larger holdings within
this group. In addition to offering good long-term growth, we believe the stocks
are undervalued*** and offer good dividend income.

[PHOTO]

Steve Markusen, CFA
Steve Markusen has joined Balanced Fund's management team. He replaces John
Schonberg, who left to pursue other opportunities.

PORTFOLIO COMPOSITION
................................................................................
As a percentage of total assets on March 31, 1997.

STOCKS 50%
Basic Materials 6%
Capital Goods & Services 7%
Commercial Services 1%
Consumer Durables 2%
Consumer Non-Durables 4%
Consumer Services 2%
Energy 7%
Financial Services 5%
Health Care 3%
Retail Trade 4%
Technology 2%
Transportation 1%
Utilities 6%

BONDS 50%
U.S. Treasury Securities 18%
Corporate Bonds 14%
U.S. Agency Fixed Rate Mortgage-Backed Securities 6%
U.S. Agency Adjustable Rate Mortgage-Backed Securities 1%
Private Fixed Rate CMOs 3%
U.S. Agency CMOs 2%
Asset-Backed Securities 1%
U.S. Agency Fixed Debentures 4%
Short-Term 1%

TOP 10 EQUITY HOLDINGS
................................................................................
As a percentage of total assets on March 31, 1997.

1 Norwest 2%
................................................................................
2 GTE 2%
................................................................................
3 Merck & Co. 2%
................................................................................
4 FNMA (Fannie Mae) 2%
................................................................................
5 AlliedSignal 2%
................................................................................
6 General Electric 1%
................................................................................
7 Baker Hughes 1%
................................................................................
8 Schlumberger Limited 1%
................................................................................
9 Enron 1%
................................................................................
10 Sears, Roebuck and Co. 1%
................................................................................

6 1997 Semiannual Report - Growth and Income Funds

<PAGE>

BALANCED FUND (CONTINUED)
- --------------------------------------------------------------------------------
IN THE BOND PORTION OF THE FUND, WE REALIZED GOOD INVESTMENT RESULTS FROM OUR
POSITION IN MORTGAGE-BACKED SECURITIES. These securities enjoyed strong
performance compared to other fixed income securities. With regard to
investment-grade corporate securities, we concentrated on bonds with short- to
intermediate-term maturities due to our assessment that these securities were
fairly priced. We maintained the fund's effective duration*** at approximately
five years, which is similar to that of our fixed income benchmark (the Lehman
Brothers Government Corporate Index). Our laddered portfolio structure*** had a
negligible impact on performance. If the economy continues to show unexpected
signs of strength in the coming months, interest rates could move higher.
However, since we don't expect rates to rise significantly, we intend to view a
further upward move as an opportunity to increase portfolio income by extending
the fund's effective duration.

GOING FORWARD, WE BELIEVE THE STRENGTH OF THE ECONOMY WILL HAVE A SIGNIFICANT
EFFECT ON THE STOCK AND BOND MARKETS. Further increases in interest rates are
likely to cause stock and bond prices to decline near-term, but we believe such
a development would be relatively short-lived. Federal Reserve Chairman Alan
Greenspan has a long history of fighting inflation and appears committed to
maintaining this philosophy in keeping future inflationary pressures under
control. Given our forecast, we intend to view future market downturns for both
stocks and bonds as excellent long-term buying opportunities.

Thank you for your investment in Growth and Income Fund. We appreciate the
opportunity to manage your assets and help you pursue your long-term investment
goals.

Sincerely,

/s/ Bruce Salvog /s/ Steve Markusen
Bruce Salvog Steve Markusen
Portfolio Manager Portfolio Manager

/s/ David Steele /s/ Paul Dow
David Steele Paul Dow
Portfolio Manager Portfolio Manager

[PHOTO]

DAVID STEELE
shares responsibility for the management of the fixed income portion of Balanced
Fund. He has 18 years of financial experience.

[PHOTO]

PAUL DOW, CFA
shares responsibility for the management of the equity portion of Balanced Fund.
He has 23 years of financial experience.

7 1997 Semiannual Report - Growth and Income Funds

<PAGE>
Financial Statements (Unaudited)

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES March 31, 1997
..................................................................

<TABLE>
<CAPTION>
GROWTH AND
INCOME BALANCED
FUND FUND
------------ -------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including repurchase agreements of $8,240,000 and
$278,000, respectively) .................................. $118,891,641 $ 46,905,954
Cash in bank on demand deposit ............................. 10,259 3,497
Receivable for fund shares sold ............................ 40,804 13,357
Organization costs ......................................... 5,148 --
Dividends and accrued interest receivable .................. 206,768 322,962
Principal receivable on mortgage securities ................ -- 19,629
------------ -------------
Total assets ............................................. 119,154,620 47,265,399
------------ -------------

LIABILITIES:
Payable for fund shares redeemed ........................... 200 60,467
Accrued investment management fee .......................... 76,984 31,120
Accrued distribution and service fees ...................... 33,416 14,107
------------ -------------
Total liabilities ........................................ 110,600 105,694
------------ -------------
Net assets applicable to outstanding capital stock ....... $119,044,020 $ 47,159,705
------------ -------------
------------ -------------

COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital ............... $85,152,839 $ 38,590,784
Distributions in excess of net investment income ........... (142,761) (7,651)
Accumulated net realized gain on investments ............... 6,020,083 1,550,269
Unrealized appreciation of investments ..................... 28,013,859 7,026,303
------------ -------------

Total - representing net assets applicable to outstanding
capital stock .......................................... $119,044,020 $ 47,159,705
------------ -------------
------------ -------------

NET ASSET VALUE AND OFFERING PRICE:

CLASS A:
Net assets ................................................. $110,124,114 $ 47,145,178
Shares outstanding ......................................... 7,253,129 3,444,204
Net asset value ............................................ $ 15.18 $ 13.69
Maximum offering price per share (net asset value plus 4% of
offering price) .......................................... $ 15.81 $ 14.26

CLASS B:
Net assets ................................................. $ 196,810 $ 14,527
Shares outstanding ......................................... 12,968 1,062
Net asset value and offering price per share ............... $ 15.18 $ 13.68

CLASS Y:
Net assets ................................................. $ 8,723,096 --
Shares outstanding ......................................... 574,736 --
Net asset value and offering price per share ............... $ 15.18 --

* Investments in securities at identified cost ............. $90,877,782 $ 39,879,651
------------ -------------
------------ -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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

8 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------

STATEMENTS OF OPERATIONS For the Six Months Ended March
31, 1997
..................................................................

<TABLE>
<CAPTION>
GROWTH AND
INCOME BALANCED
FUND FUND
------------ -------------
<S> <C> <C>
INCOME:
Dividends .................................................. $ 1,151,506 $ 223,151
Interest ................................................... 202,011 826,462
------------ -------------

Total income ............................................. 1,353,517 1,049,613
------------ -------------

EXPENSES (NOTE 5):
Investment management fee .................................. 417,342 181,324
Distribution and service fees:
Class A .................................................. 277,655 120,894
Class B .................................................. 135 13
Class Y .................................................. -- --
Custodian and accounting fees .............................. 50,702 28,656
Transfer agent and dividend disbursing agent fees .......... 37,059 20,342
Registration fees .......................................... 27,701 19,951
Reports to shareholders .................................... 16,394 14,967
Amortization of organization costs ......................... 8,077 --
Directors' fees ............................................ 3,619 3,619
Audit and legal fees ....................................... 24,053 24,052
Other expenses ............................................. 6,930 7,046
------------ -------------
Total expenses ........................................... 869,667 420,864
Less Class A expenses waived by the distributor ........ (95,630) (41,816)
Less expenses waived by the adviser .................... (24,644) (53,882)
------------ -------------

Net expenses before expenses paid indirectly ............. 749,393 325,166
Less expenses paid indirectly .......................... (13) (117)
------------ -------------

Total net expenses ....................................... 749,380 325,049
------------ -------------

Net investment income .................................... 604,137 724,564
------------ -------------

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 3) .................. 6,857,022 1,716,908
Net realized loss on closed or expired option contracts
written (note 2) ......................................... (181,637) --
------------ -------------

Net realized gain on investments ......................... 6,675,385 1,716,908
Net change in unrealized appreciation or depreciation of
investments .............................................. 1,264,695 (331,517)
------------ -------------

Net gain on investments .................................. 7,940,080 1,385,391
------------ -------------

Net increase in net assets resulting from operations ... $ 8,544,217 $ 2,109,955
------------ -------------
------------ -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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

9 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND BALANCED FUND
----------------------------- -----------------------------
Six Months Six Months
Ended 3/31/97 Year Ended Ended 3/31/97 Year Ended
(Unaudited) 9/30/96 (Unaudited) 9/30/96
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 604,137 $ 1,078,923 $ 724,564 $ 1,440,045
Net realized gain on investments ........................... 6,675,385 6,012,377 1,716,908 2,867,497
Net change in unrealized appreciation or depreciation of
investments .............................................. 1,264,695 7,464,585 (331,517) 28,858
------------- ------------- ------------- -------------

Net increase in net assets resulting from operations ..... 8,544,217 14,555,885 2,109,955 4,336,400
------------- ------------- ------------- -------------

DISTRIBUTIONS TO SHAREHOLDERS:
CLASS A:
From net investment income ............................... (788,064) (1,181,927) (756,239) (1,452,108)
From net realized gains .................................. (6,538,320) (996,506) (2,554,493) (1,746,546)
CLASS B:
From net investment income ............................... (350) -- (89) --
From net realized gains .................................. -- -- -- --
CLASS Y:
From net investment income ............................... (20,113) -- -- --
From net realized gains .................................. -- -- -- --
------------- ------------- ------------- -------------
Total distributions ...................................... (7,346,847) (2,178,433) (3,310,821) (3,198,654)
------------- ------------- ------------- -------------

CAPITAL SHARE TRANSACTIONS (NOTE 4):
CLASS A .................................................... 11,017,906 11,428,192 2,902,275 313,697
CLASS B .................................................... 206,738 -- 15,225 --
CLASS Y .................................................... 9,385,377 -- -- --
------------- ------------- ------------- -------------
Increase in net assets from capital share transactions ... 20,610,021 11,428,192 2,917,500 313,697
------------- ------------- ------------- -------------
Total increase in net assets ............................. 21,807,391 23,805,644 1,716,634 1,451,443

Net assets at beginning of period .......................... 97,236,629 73,430,985 45,443,071 43,991,628
------------- ------------- ------------- -------------

Net assets at end of period ................................ $119,044,020 $ 97,236,629 $ 47,159,705 $ 45,443,071
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------

Undistributed (distributions in excess of) net investment
income ................................................... $ (142,761) $ 61,629 $ (7,651) $ 24,113
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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

10 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------

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

The funds commenced offering Class B shares and Growth and
Income Fund commenced offering Class Y shares on February
18, 1997. All shares existing prior to that date were
classified as Class A shares. Key features of each class
are:

CLASS A:
- Subject to a front-end sales charge

- Lower annual expenses than Class B

CLASS B:
- No front-end sales charge

- Subject to a contingent deferred sales charge upon
redemption

- Higher annual expenses than Class A

- Automatic conversion to Class A shares at the beginning
of the sixth calendar year after issuance

CLASS Y:
- Requires a minimum initial investment of $1 million or
more

- No front-end or contingent deferred sales charges

- Lower annual expenses than other classes

The classes of shares have the same rights and are
identical in all respects except that each class bears
different distribution expenses, has exclusive voting
rights with respect to matters affecting that class and
has different exchange privileges.

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

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

11 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------

Balanced Fund invests in both common stocks and fixed
income securities that appear to have some potential for
capital appreciation.

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

The value of certain fixed income securities will be
provided by an independent pricing service, which
determines these valuations at a time earlier than the
close of the New York Stock 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 or
dealers 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.

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

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

Option contracts are valued daily and unrealized
appreciation or depreciation is recorded. The funds will
realize a gain or loss upon expiration or closing of the
option transaction. When an option is

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

12 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
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.

The number of contracts and premium amounts associated
with call option contracts written during the six months
ended March 31, 1997, for Growth and Income Fund were as
follows:

<TABLE>
<CAPTION>
CALL OPTIONS
-------------------
NUMBER
OF PREMIUM
CONTRACTS AMOUNT
----- ---------
<S> <C> <C>
Balance at September 30, 1996 ............... 230 $ 55,993
Opened .................................... -- --
Closed .................................... (230) (55,993)
----- ---------
Balance at March 31, 1997 ................... -- $ --
----- ---------
----- ---------
</TABLE>

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

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

SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been
purchased by the funds on a when-issued or
forward-commitment basis can take place a month or more
after the transaction date. During this period, such
securities do not earn interest, are subject to market
fluctuation and may increase or decrease in value prior to
their delivery. The funds segregate, with their custodian,
assets with a market value equal to the amount of their
purchase commitments. The purchase of securities on a
when-issued or forward-commitment basis may increase the
volatility of the fund's net asset value if the funds make
such purchases while remaining substantially fully
invested. As of March 31, 1997, the funds had no
outstanding when-issued or forward-commitments.

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.

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

13 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------

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

The character of distributions made during the year from
net investment income or net realized gains may differ
from its ultimate characterization for federal income tax
purposes. Distributions which exceed the net investment
income or net realized gains for financial statement
purposes are presented as an "excess distribution" in the
statements of changes in net assets and the financial
highlights. 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.

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

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

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

ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES
Income, expenses (other than class-specific expenses) and
realized and unrealized gains and losses are allocated
daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Class-specific expenses, which include distribution and
service fees, are charged directly to such class.

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

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

14 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------

(3) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities,
other than temporary investments in short term securities,
for the six months ended March 31, 1997, were as follows:

<TABLE>
<CAPTION>
GROWTH
AND INCOME BALANCED
FUND FUND
------------ ------------
<S> <C> <C>
Purchases ................................... $ 24,644,566 $ 10,792,279
Proceeds from sales ......................... $ 15,453,518 $ 10,338,288
</TABLE>

For the six months ended March 31, 1997, no brokerage
commissions were paid to Piper Jaffray Inc., an affiliated
broker.

(4) CAPITAL SHARE
TRANSACTIONS
................................
Capital share transactions for all classes of the funds
were as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 (A) SEPTEMBER 30, 1996
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
GROWTH AND INCOME FUND:
CLASS A (authorized four billion shares of
$0.01 par value):
Purchases of fund shares .................. 1,734,264 $ 26,570,527 1,318,710 $ 18,689,037
Issued for reinvested distributions ....... 465,752 6,839,671 156,296 2,178,416
Issued in connection with the merger of
Hercules North American Growth and Income
Fund (note 6) ........................... -- -- 494,086 7,333,808
Redemptions of fund shares ................ (785,099) (12,185,206) (1,183,011) (16,773,069)
Redemptions in exchange for Class Y
shares .................................. (626,056) (10,207,086) -- --
----------- ------------ ----------- ------------
788,861 $ 11,017,906 786,081 $ 11,428,192
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
CLASS B (authorized two billion shares of
$0.01 par value):
Purchases of fund shares .................. 15,448 $ 246,393
Issued for reinvested distributions ....... 22 350
Redemptions of fund shares ................ (2,502) (40,005)
----------- ------------
12,968 $ 206,738
----------- ------------
----------- ------------
CLASS Y (authorized one billion shares of
$0.01 par value):
Purchases of fund shares .................. 620 $ 10,000
Purchases in exchange for Class A
shares .................................. 626,056 10,207,086
Issued for reinvested distributions ....... 1,289 20,113
Redemptions of fund shares ................ (53,229) (851,822)
----------- ------------
574,736 $ 9,385,377
----------- ------------
----------- ------------
</TABLE>

(A) REPRESENTS PERIOD FROM FEBRUARY 18 (COMMENCEMENT OF OFFERING OF SHARES) TO
MARCH 31, 1997 FOR CLASS B AND CLASS Y.

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

15 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------

Sales charges received by Piper Jaffray Inc. (Piper
Jaffray), the funds' distributor, for distributing the
funds' shares for the six months ended March 31, 1997,
were as follows:

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
---------------------------- BALANCED FUND
CLASS CLASS -------------------
CLASS A B Y CLASS A CLASS B
-------- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
Front-end sales charges ..................... $ 19,122 $ -- $ -- $1,485 $ --
Contingent deferred sales charges ........... 901 -- -- 284 --
-------- ----- ----- ------- -------
$ 20,023 $ -- $ -- $1,769 $ --
-------- ----- ----- ------- -------
-------- ----- ----- ------- -------
</TABLE>

(5) EXPENSES
................................
INVESTMENT MANAGEMENT FEE
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.

DISTRIBUTION AND SERVICE FEES
Each fund also pays Piper Jaffray fees accrued daily and
paid quarterly for providing shareholder services and
distribution-related services. The fees for each class,
which are being voluntarily limited for Class A for the
year ending September 30, 1997, are stated below as a
percent of average daily net assets attributable to such
class.

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND BALANCED FUND
------------------------- ---------------
CLASS CLASS CLASS CLASS CLASS
A B Y A B
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Distribution fee ............................ 0.25% 0.75% -- 0.25% 0.75%
Service fee ................................. 0.25% 0.25% -- 0.25% 0.25%
----- ----- ----- ----- -----
Total distribution and service fees ....... 0.50% 1.00% -- 0.50% 1.00%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Total distribution and service fees after
voluntary limitation .................... 0.33% 1.00% -- 0.33% 1.00%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

SHAREHOLDER ACCOUNT SERVICING FEES
The company has also entered into shareholder account
servicing agreements under which Piper Jaffray and Piper
Trust Company (Piper Trust) 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 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
six months ended March 31, 1997, Piper Jaffray and Piper
Trust received the following amounts in connection with
the shareholder account servicing agreements:

<TABLE>
<CAPTION>
GROWTH
AND
INCOME BALANCED
FUND FUND
-------- --------
<S> <C> <C>
Piper Jaffray ............................... $28,723 $ 8,259
Piper Trust ................................. 836 4,583
-------- --------
$29,559 $12,842
-------- --------
-------- --------
</TABLE>

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

16 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------

OTHER FEES AND EXPENSES
In addition to the investment management, distribution and
shareholder account servicing fees, each fund is
responsible for paying most other operating expenses
including: outside directors' fees and expenses; custodian
fees; registration fees; printing and shareholder reports;
transfer agent fees and expenses; legal, auditing and
accounting services; insurance; interest; taxes and other
miscellaneous expenses. For the year ending September 30,
1997, Piper Capital voluntarily limited total fees and
expenses for Growth and Income Fund to annual rates of
1.34%, 2.00% and 1.00% of average daily net assets
attributable to such shares for Class A, Class B and Class
Y, respectively, and for Balanced Fund to annual rates of
1.34% and 2.00% of average daily net assets attributable
to such shares for Class A and Class B, respectively.

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

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

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

17 1997 Semiannual Report - Growth and
Income 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:

GROWTH AND INCOME FUND

<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
Six Months
Ended Period ended
March 31, Year Ended September 30, September
1997 ------------------------------------------------- 30,
(Unaudited) 1996 1995 1994 1993 1992(c)
------------ ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 15.04 $ 12.93 $ 10.27 $ 10.30 $ 10.01 $ 10.00
------------ ---------- ---------- ---------- ---------- ------------
Operations:
Net investment income ................ 0.08 0.18 0.19 0.24 0.24 0.03
Net realized and unrealized gains
(losses) on investments ............ 1.18 2.31 2.70 0.02 0.29 (0.02)
------------ ---------- ---------- ---------- ---------- ------------
Total from operations .............. 1.26 2.49 2.89 0.26 0.53 0.01
------------ ---------- ---------- ---------- ---------- ------------
Distributions to shareholders:
From net investment income ........... (0.11) (0.20) (0.19) (0.24) (0.24) --
From net realized gains on
investments ........................ (1.01) (0.18) (0.04) (0.05) -- --
------------ ---------- ---------- ---------- ---------- ------------
Total distributions to
shareholders ..................... (1.12) (0.38) (0.23) (0.29) (0.24) --
------------ ---------- ---------- ---------- ---------- ------------
Net asset value, end of period ......... $ 15.18 $ 15.04 $ 12.93 $ 10.27 $ 10.30 $ 10.01
------------ ---------- ---------- ---------- ---------- ------------
------------ ---------- ---------- ---------- ---------- ------------
SELECTED INFORMATION
Total return (a) ....................... 8.68% 19.56% 28.81% 2.53% 5.41% 0.10%
Net assets at end of period (in
millions) ............................ $ 110 $ 97 $ 73 $ 73 $ 96 $ 52
Ratio of expenses to average daily net
assets ............................... 1.34%(e) 1.32% 1.32% 1.29% 1.32% 1.28%(e)
Ratio of net investment income to
average daily net assets ............. 1.07%(e) 1.26% 1.93% 2.26% 2.51% 3.00%(e)
Average commission rate paid on
portfolio transactions (b) ........... $ 0.0600 $ 0.0600 n/a n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) ............... 15% 22% 14% 20% 26% 1%
Ratios before waivers by the adviser
and/or distributor:
Ratio of expenses to average daily net
assets before waivers .............. 1.56%(e) 1.56% 1.60% 1.62% 1.58% 2.06%(e)
Ratio of net investment income to
average daily net assets before
waivers ............................ 0.85%(e) 1.02% 1.65% 1.93% 2.25% 2.22%(e)
</TABLE>

<TABLE>
<CAPTION>
CLASS B CLASS Y
------------- -------------
(Unaudited) (Unaudited)
Period Ended Period Ended
March 31, March 31,
1997(d) 1997(d)
------------- -------------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 16.14 $ 16.14
------------- -------------
Operations:
Net investment income ................ -- 0.02
Net realized and unrealized loss on
investments ........................ (0.93) (0.95)
------------- -------------
Total from operations .............. (0.93) (0.93)
------------- -------------
Distributions to shareholders:
From net investment income ........... (0.03) (0.03)
------------- -------------
Net asset value, end of period ......... $ 15.18 $ 15.18
------------- -------------
------------- -------------
SELECTED INFORMATION
Total return (a) ....................... (5.78)% (5.74)%
Net assets at end of period (in
thousands and millions for Class B and
Class Y, respectively) ............... $ 197 $ 9
Ratio of expenses to average daily net
assets ............................... 1.94%(e) 0.99%(e)
Ratio of net investment income to
average daily net assets ............. 0.19%(e) 1.33%(e)
Average commission rate paid on
portfolio transactions (b) ........... $ 0.0600 $ 0.0600
Portfolio turnover rate (excluding
short-term securities) ............... 15% 15%
Ratios before waivers by the adviser:
Ratio of expenses to average daily net
assets before waivers .............. 1.98%(e) 1.03%(e)
Ratio of net investment income (loss)
to average daily net assets before
waivers ............................ 0.15%(e) 1.29%(e)
</TABLE>

(A) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(B) DISCLOSED IN ACCORDANCE WITH GUIDELINES ADOPTED IN 1996.
(C) COMMENCEMENT OF OPERATIONS WAS JULY 27, 1992.
(D) COMMENCEMENT OF OFFERING OF CLASS B AND CLASS Y SHARES WAS FEBRUARY 18,
1997.
(E) ANNUALIZED.

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

18 1997 Semiannual Report - Growth and
Income 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:

BALANCED FUND

<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------
Six Months
Ended
March 31, Year Ended September 30,
1997 --------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 14.08 $ 13.74 $ 11.81 $ 12.23 $ 11.88 $ 10.77
------------ ---------- ---------- ---------- ---------- ----------
Operations:
Net investment income ................ 0.21 0.44 0.47 0.38 0.34 0.38
Net realized and unrealized gains
(losses) on investments ............ 0.42 0.89 1.93 (0.26) 0.65 1.17
------------ ---------- ---------- ---------- ---------- ----------
Total from operations .............. 0.63 1.33 2.40 0.12 0.99 1.55
------------ ---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income ........... (0.22) (0.44) (0.35) (0.37) (0.34) (0.39)
From net realized gains on
investments ........................ (0.80) (0.55) (0.12) (0.17) (0.30) (0.05)
------------ ---------- ---------- ---------- ---------- ----------
Total distributions to
shareholders ..................... (1.02) (0.99) (0.47) (0.54) (0.64) (0.44)
------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ......... $ 13.69 $ 14.08 $ 13.74 $ 11.81 $ 12.23 $ 11.88
------------ ---------- ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ---------- ----------
SELECTED INFORMATION
Total return (a) ....................... 4.54% 10.16% 21.78% 1.00% 8.51% 14.75%
Net assets at end of period (in
millions) ............................ $ 47 $ 45 $ 44 $ 46 $ 57 $ 28
Ratio of expenses to average daily net
assets ............................... 1.34%(d) 1.32% 1.32% 1.32% 1.32% 1.32%
Ratio of net investment income to
average daily net assets ............. 3.00%(d) 3.16% 3.54% 3.03% 3.13% 3.57%
Average commission rate paid on
portfolio transactions (b) ........... $ 0.0600 $ 0.0600 n/a n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) . 22% 27% 39% 62% 41% 58%
Ratios before waivers by the adviser
and/or distributor:
Ratio of expenses to average daily net
assets before waivers .............. 1.74%(d) 1.69% 1.65% 1.60% 1.62% 1.77%
Ratio of net investment income to
average daily net assets before
waivers ............................ 2.60%(d) 2.79% 3.21% 2.75% 2.83% 3.12%
</TABLE>

<TABLE>
<CAPTION>
CLASS B
--------------
(Unaudited)
Period Ended
March 31,
1997(c)
--------------
<S> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 14.46
--------------
Operations:
Net investment income ................ 0.03
Net realized and unrealized loss on
investments ........................ (0.73)
--------------
Total from operations .............. (0.70)
--------------
Distributions to shareholders:
From net investment income ........... (0.08)
--------------
Net asset value, end of period ......... $ 13.68
--------------
--------------
SELECTED INFORMATION
Total return (a) ....................... (4.82)%
Net assets at end of period (in
thousands) ........................... $ 15
Ratio of expenses to average daily net
assets ............................... 1.97%(d)
Ratio of net investment income to
average daily net assets ............. 2.53%(d)
Average commission rate paid on
portfolio transactions (b) ........... $ 0.0600
Portfolio turnover rate (excluding
short-term securities) ............... 22%
Ratios before waivers by the adviser:
Ratio of expenses to average daily net
assets before waivers .............. 2.19%(d)
Ratio of net investment income to
average daily net assets before
waivers ............................ 2.31%(d)
</TABLE>

(A) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(B) DISCLOSED IN ACCORDANCE WITH GUIDELINES ADOPTED IN 1996.
(C) COMMENCEMENT OF OFFERING OF CLASS B SHARES WAS FEBRUARY 18, 1997.
(D) ANNUALIZED.

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

19 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Investments in Securities (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GROWTH AND INCOME FUND March 31, 1997
........................................................................................

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

COMMON STOCK (93.0%):
BASIC MATERIALS (9.3%):
Air Products & Chemicals ............................ 31,200 $ 2,117,700
Aluminum Company of America ......................... 20,000 1,360,000
duPont (E.I.) de Nemours & Co. ...................... 12,400 1,314,400
Morton International ................................ 42,400 1,791,400
Phelps Dodge ........................................ 20,000 1,462,500
Union Camp .......................................... 14,500 683,312
USX - U.S. Steel Group .............................. 85,000 2,263,125
-------------
10,992,437
-------------
CAPITAL GOODS AND SERVICES (10.8%):
AlliedSignal Inc. ................................... 25,000 1,781,250
Boeing Co. .......................................... 21,500 2,120,437
Emerson Electric .................................... 21,000 945,000
Fluor Corp. ......................................... 22,800 1,197,000
General Electric .................................... 30,000 2,977,500
Minnesota Mining & Manufacturing Co. . 21,200 1,791,400
WMX Technologies, Inc. .............................. 64,200 1,966,125
-------------
12,778,712
-------------
COMMERCIAL SERVICES (1.7%):
Sensormatic Electronics ............................. 120,000 2,025,000
-------------
CONSUMER DURABLES (4.2%):
Ford Motor .......................................... 106,900 3,353,987
General Motors ...................................... 30,400 1,683,400
-------------
5,037,387
-------------
CONSUMER NON-DURABLES (7.9%):
Anheuser-Busch Co. .................................. 24,800 1,044,700
Colgate-Palmolive ................................... 19,000 1,892,875
General Mills ....................................... 23,000 1,428,875
Philip Morris Co. ................................... 15,000 1,711,875
Procter & Gamble .................................... 19,900 2,288,500
Reebok International ................................ 24,000 1,077,000
-------------
9,443,825
-------------
CONSUMER SERVICES (5.3%):
Carnival Corp. - Class A ............................ 40,000 1,480,000
Gannett Co. ......................................... 20,000 1,717,500
H&R Block ........................................... 104,900 3,081,438
-------------
6,278,938
-------------
FINANCIAL SERVICES (8.3%):
American Express .................................... 27,000 1,616,625
BankAmerica Corp. ................................... 18,400 1,853,800
Chubb Corp. ......................................... 31,000 1,670,125
Federal National Mortgage Association . 44,000 1,589,500
J.P. Morgan ......................................... 12,100 1,188,825
Norwest Corp. ....................................... 42,900 1,984,125
-------------
9,903,000
-------------
HEALTH CARE (7.7%):
Abbott Laboratories ................................. 51,400 2,884,825
American Home Products .............................. 15,200 912,000
Johnson & Johnson ................................... 19,200 1,015,200
Medtronic, Inc. ..................................... 13,700 852,825
Merck & Co., Inc. ................................... 30,800 2,594,900
Pharmacia & Upjohn .................................. 25,000 915,625
-------------
9,175,375
-------------
</TABLE>

<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- -------------
<S> <C> <C>
RETAIL TRADE (6.0%):
Dayton Hudson ....................................... 26,700 $ 1,114,725
Home Depot .......................................... 16,600 888,100
Limited Inc. ........................................ 191,417 3,517,287
Tandy Corp. ......................................... 32,000 1,604,000
-------------
7,124,112
-------------
TECHNOLOGY (3.3%):
CompuServe Corp. .................................... 103,000(b) 1,015,516
Electronic Data Systems ............................. 23,009 928,988
General Instrument .................................. 40,000(b) 915,000
Imation Corp. ....................................... 42,620(b) 1,065,500
-------------
3,925,004
-------------
TRANSPORTATION (1.8%):
Burlington Northern Santa Fe ........................ 28,700 2,123,800
-------------
UTILITIES (13.2%):
AirTouch Communications ............................. 116,900(b) 2,688,700
AT&T Corp. .......................................... 78,600 2,731,350
BellSouth Corp. ..................................... 47,000 1,985,750
Enron ............................................... 57,800 2,196,400
FPL Group ........................................... 54,000 2,382,750
GTE Corp. ........................................... 80,700 3,762,638
-------------
15,747,588
-------------
ENERGY (13.5%):
Baker Hughes Inc. ................................... 73,700 2,828,238
Burlington Resources ................................ 31,700 1,355,175
Exxon Corp. ......................................... 30,200 3,254,050
Mobil Corp. ......................................... 8,000 1,045,000
Royal Dutch Petroleum - ADR ......................... 9,600 1,680,000
Schlumberger Ltd. ................................... 29,600 3,174,600
Texaco Inc. ......................................... 25,200 2,759,400
-------------
16,096,463
-------------
Total Common Stock
(cost: $82,637,782) ............................ 110,651,641
-------------
SHORT-TERM SECURITIES (6.9%):
Repurchase agreement with Goldman Sachs, acquired on
3/31/97, interest of $1,495, 6.53%, 4/1/97
(cost: $8,240,000) ................................ $ 8,240,000(c) 8,240,000
-------------
Total Investments in Securities
(cost: $90,877,782) (d) ........................ $ 118,891,641
-------------
-------------
</TABLE>

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) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 30,734,401
GROSS UNREALIZED DEPRECIATION ...... (2,720,542)
------------
NET UNREALIZED APPRECIATION ...... $ 28,013,859
------------
------------
</TABLE>

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

20 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Investments in Securities (Unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BALANCED FUND March 31, 1997
.......................................................................................

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

COMMON STOCK (49.1%):
BASIC MATERIALS (5.7%):
Air Products & Chemicals .......................... 5,000 $ 339,375
Aluminum Company of America ....................... 6,000 408,000
duPont (E.I.) de Nemours & Co. .................... 2,900 307,400
International Paper ............................... 6,800 264,350
Morton International .............................. 14,000 591,500
Phelps Dodge ...................................... 6,000 438,750
USX - U.S. Steel Group ............................ 13,200 351,450
------------
2,700,825
------------

CAPITAL GOODS AND SERVICES (7.0%):
AlliedSignal Inc. ................................. 10,000 712,500
Boeing Co. ........................................ 5,300 522,712
Fluor Corp. ....................................... 4,500 236,250
General Electric .................................. 7,000 694,750
Minnesota Mining & Manufacturing Co. 4,500 380,250
Transocean Offshore Inc. .......................... 5,000 280,625
WMX Technologies, Inc. ............................ 15,400 471,625
------------
3,298,712
------------

COMMERCIAL SERVICES (0.5%):
Sensormatic Electronics ........................... 14,000 236,250
------------

CONSUMER DURABLES (1.7%):
Ford Motor ........................................ 14,400 451,800
General Motors .................................... 6,400 354,400
------------
806,200
------------

CONSUMER NON-DURABLES (3.5%):
Coca-Cola Co. ..................................... 4,100 229,087
Philip Morris Co. ................................. 4,400 502,150
Procter & Gamble .................................. 4,700 540,500
Reebok International .............................. 8,000 359,000
------------
1,630,737
------------

CONSUMER SERVICES (2.2%):
Carnival Corp. - Class A .......................... 10,000 370,000
H&R Block ......................................... 15,000 440,625
McDonald's Corp. .................................. 5,000 236,250
------------
1,046,875
------------

FINANCIAL SERVICES (5.2%):
American International Group ...................... 1,500 176,062
Associates First Capital 'A' ...................... 1,300 55,900
BankAmerica Corp. ................................. 5,224 526,318
Chubb Corp. ....................................... 2,000 107,750
Federal National Mortgage Association 20,800 751,400
Norwest Corp. ..................................... 17,700 818,625
------------
2,436,055
------------
</TABLE>

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

HEALTH CARE (3.4%):
Columbia / HCA Healthcare ......................... 13,000 $ 437,125
Medtronic, Inc. ................................... 6,800 423,300
Merck & Co., Inc. ................................. 9,000 758,250
------------
1,618,675
------------

RETAIL TRADE (4.4%):
Gap Inc. .......................................... 11,800 395,300
Home Depot ........................................ 5,600 299,600
Limited Inc. ...................................... 27,946 513,508
Sears, Roebuck .................................... 12,000 603,000
Tandy Corp. ....................................... 5,100 255,638
------------
2,067,046
------------

TECHNOLOGY (2.0%):
CompuServe Corp. .................................. 17,500(b) 172,539
Imation Corp. ..................................... 9,050(b) 226,250
Intel Corp. ....................................... 2,800 389,550
Lucent Technologies ............................... 2,916 153,819
NCR Corp. ......................................... 562(b) 19,811
------------
961,969
------------

TRANSPORTATION (1.1%):
Burlington Northern Santa Fe ...................... 6,900 510,600
------------

UTILITIES (5.6%):
AirTouch Communications ........................... 21,500(b) 494,500
AT&T Corp. ........................................ 9,000 312,750
BellSouth Corp. ................................... 11,000 464,750
Enron ............................................. 16,100 611,800
GTE Corp. ......................................... 16,800 783,300
------------
2,667,100
------------

ENERGY (6.8%):
Anadarko Petroleum ................................ 4,000 224,500
Baker Hughes Inc. ................................. 18,000 690,750
Burlington Resources .............................. 8,000 342,000
Exxon Corp. ....................................... 5,200 560,300
Royal Dutch Petroleum - ADR ....................... 2,100 367,500
Schlumberger Ltd. ................................. 6,300 675,675
Texaco Inc. ....................................... 3,000 328,500
------------
3,189,225
------------

Total Common Stock
(cost: $16,140,436) .......................... 23,170,269
------------

CORPORATE BONDS (14.1%):
American Express Credit Corporation, 7.38%,
2/1/99 .......................................... $ 400,000 405,036
Aon Corp., 6.88%, 10/1/99 ......................... 450,000 449,833
BankAmerica Corp., 8.38%, 3/15/02 ................. 480,000 502,128
Boeing Co., 8.75%, 9/15/31 ........................ 500,000 563,575
Ford Holdings, 9.25%, 3/1/00 ...................... 400,000 423,224
General Motors Acceptance Corp., 8.50%, 1/1/03 .... 400,000 422,144
Heller Financial, 9.13%, 8/1/99 ................... 300,000 314,334
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

21 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Investments in Securities (Unaudited) (continued)
- --------------------------------------------------------------------------------

BALANCED FUND
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Korea Electric Power ADS, 6.38%, 12/1/03 .......... $ 500,000 $ 473,060
Lehman Brothers, 7.36%, 12/15/03 .................. 650,000 641,986
MCI Communications, 7.13%, 6/15/27 500,000 508,025
Morgan Stanley Group Inc., 8.10%, 6/24/02 ......... 500,000 519,085
NationsBank Corp., 5.38%, 4/15/00 ................. 400,000 383,368
Pennsylvania Power and Light, 7.70%, 10/1/09 ...... 500,000 514,735
Time Warner Inc., 8.88%, 10/1/12 .................. 500,000 529,515
------------

Total Corporate Bonds
(cost: $6,595,445) ........................... 6,650,048
------------

U.S. GOVERNMENT AND AGENCY SECURITIES (31.8%):
GOVERNMENT TRUST CERTIFICATES (0.7%):
9.25%, Government Trust Certificate, 11/15/01 ..... 325,451 342,234
------------

U.S. AGENCY DEBENTURES (4.2%):
5.94%, FHLMC, 9/21/99 ............................. 1,000,000 985,480
6.63%, FNMA, 3/21/06 .............................. 1,000,000 969,910
------------
1,955,390
------------

U.S. AGENCY MORTGAGE-BACKED SECURITIES (9.2%):
FIXED RATE (6.9%):
6.50%, FHLMC, 9/1/25 .............................. 383,006 358,628
6.50%, FHLMC, 1/1/01 .............................. 507,091 506,615
8.00%, FHLMC, 11/1/24 ............................. 814,703 821,115
6.50%, FHLMC, Series 1056, Class KB, 3/15/01 ...... 412,329 411,892
6.00%, FNMA, 4/1/09 ............................... 787,887 746,215
6.00%, FNMA, 3/1/03 ............................... 383,809 371,216
10.00%, FNMA, Series 1989-15, Class D, 9/25/18 .... 50,867 52,128
------------
3,267,809
------------

ADJUSTABLE AND FLOATING RATE (2.3%):
6.80%, FHLMC, Series 1435, Class FA, LIBOR,
12/15/22 ........................................ 586,622(d) 592,535
7.29%, FNMA, 4/1/18 ............................... 467,097(d) 484,501
------------
1,077,036
------------

U.S. GOVERNMENT SECURITIES (17.7%):
8.13%, U.S. Treasury Bond, 8/15/19 ................ 1,000,000 1,097,380
8.50%, U.S. Treasury Bond, 2/15/20 ................ 1,000,000 1,139,800
5.75%, U.S. Treasury Note, 8/15/03 ................ 1,000,000 943,960
5.88%, U.S. Treasury Note, 2/15/04 ................ 1,500,000 1,418,835
6.75%, U.S. Treasury Note, 6/30/99 ................ 800,000 804,688
7.25%, U.S. Treasury Note, 8/15/04 ................ 1,500,000 1,529,370
6.25%, U.S. Treasury Note, 10/31/01 . 1,000,000 980,300
7.04%, U.S. Treasury Strip, 2/15/15 ............... 1,500,000(c) 412,110
------------
8,326,443
------------

Total U.S. Government and Agency Securities
(cost: $14,998,659) .......................... 14,968,912
------------
</TABLE>

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

PRIVATE MORTGAGE-BACKED SECURITIES (3.0%):
FIXED RATE (3.0%):
6.40%, Capstead Securities Corporation, Series
1993-D, Class D2, 7/25/23 ....................... $ 253,451 $ 246,227
8.50%, Residential Funding Mortgage Securities,
Series 1993-S26, Class A17, 6/25/09 ............. 900,000 908,173
9.30%, Security Pacific National Bank, Series
1989-A, Class 7, 8/25/19 ........................ 245,773 246,081
------------

Total Private Mortgage-Backed Securities
(cost: $1,429,133) ........................... 1,400,481
------------

ASSET-BACKED SECURITIES (0.9%):
General Motors Acceptance Corp., Series 1994-A,
Grantor Trust, 6.30%, 6/15/99 ................... 210,064 210,713
Premier Auto Trust, Series 1993-6, Class A2, 4.65%,
11/2/99 ......................................... 229,394 227,531
------------

Total Asset-Backed Securities
(cost: $437,978) ............................. 438,244
------------

SHORT-TERM SECURITIES (0.6%):
Repurchase agreement with Goldman Sachs, acquired
on 3/31/97, interest of $50, 6.53%, 4/1/97
(cost: $278,000) ................................ 278,000(e) 278,000
------------

Total Investments in Securities
(cost: $39,879,651) (f) ...................... $ 46,905,954
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(D) PORTFOLIO ABBREVIATIONS AND DEFINITIONS:
LIBOR - LONDON INTERBANK OFFERED RATE
ADJUSTABLE RATE - REPRESENTS SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) WITH AN INCREASE (DECREASE) IN THE SPECIFIED
INDEX. INTEREST RATES DISCLOSED ARE IN EFFECT ON MARCH 31, 1997.
FLOATING RATE - REPRESENTS COLLATERALIZED MORTGAGE OBLIGATIONS OR
MULTI-CLASS PASS-THROUGH SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) WITH AN INCREASE (DECREASE) IN THE SPECIFIED
INDEX. INTEREST RATES DISCLOSED ARE IN EFFECT ON MARCH 31, 1997.
(E) REPURCHASE AGREEMENT IN A JOINT TRADING ACCOUNT WHICH IS COLLATERALIZED BY
U.S. GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS
INTEREST DUE AT MATURITY OF THE REPURCHASE AGREEMENT.
(F) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 8,068,904
GROSS UNREALIZED DEPRECIATION ...... (1,042,601)
------------
NET UNREALIZED APPRECIATION ...... $ 7,026,303
------------
------------
</TABLE>

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

22 1997 Semiannual Report - Growth and
Income Funds
<PAGE>
Directors and Officers
- --------------------------------------------------

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

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

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

TRANSFER AND DIVIDEND DISBURSING AGENTS
Investors Fiduciary Trust Company
127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716
Piper Jaffray Inc.
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
Piper Trust Company
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804

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

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

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

23 1997 Semiannual Report - Growth and
Income Funds
<PAGE>

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

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

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

LOW MINIMUM INVESTMENTS
You can open a Piper 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 DISTRIBUTIONS
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.

* 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.

24 1997 Semiannual Report-Growth and Income Funds
<PAGE>

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

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

CORRECTION
A reverse movement (usually downward)in the price of a security.

CYCLICAL STOCKS
Shares of companies that are highly dependent on the state of the economy (also
called economically sensitive stocks). When the economy slows, their earnings
generally fall rapidly, and typically, so does the stock price. But when the
economy recovers, earnings generally rise rapidly, and the price of the stock
typically goes up.

DIVIDEND YIELD
The annual percentage rate of return paid on a stock in the form of dividends.

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

FULLY VALUED
A stock is considered fully valued if it has reached a price at which analysts
think the underlying company's fundamental earnings power has been recognized by
the market. If the stock goes up from that price, it is called overvalued. If it
goes down, it is termed undervalued.

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

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

OVERVALUED
A security is overvalued if it is selling at a price higher than what analysts
believe it is worth.

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

UNDERVALUED
A security is undervalued if it is selling at a price lower than what analysts
believe it is worth.

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:
15 for Growth and Income Fund
16 for Balanced Fund

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

BY MAIL [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/

<PAGE>

[LOGO]

Growth and Income Funds

Piper Funds 222 South Ninth Street
Minneapolis, MN 55402-3804

PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.

#20300 5/1997 153-97