PIPER GLOBAL FUNDS INC /MN, N-30D, 1997-11-26

PIPER GLOBAL FUNDS INC /MN
N-30D, 1997-11-26

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<PAGE>

International Growth Funds - 1997 Annual Report

[LOGO]

INTERNATIONAL GROWTH FUNDS

1997 Annual Report

EMERGING MARKETS GROWTH FUND

PACIFIC-EUROPEAN GROWTH FUND

INSIDE: ACTION OR REACTION --

Which Guides Your Approach to Investing?

[PICTURE]
<PAGE>

[LOGO]

CONTENTS

President's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . .27
Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . .28
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Glossary***. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

EMERGING MARKETS GROWTH FUND

Portfolio Manager's Letter . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . .10
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . .23

PACIFIC-EUROPEAN GROWTH FUND

Portfolio Manager's Letter . . . . . . . . . . . . . . . . . . . . . . . . . 7
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . .10
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . .25

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

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

ACTION
- ------------------------------------------------------------------------------

WHICH GUIDES YOUR APPROACH TO INVESTING?
The market soars 150 points. The market plummets 150 points. One financial
commentator urges investors to sell stocks and buy bonds. Another promotes a
"can't miss" investment opportunity. One thing is for sure -- in today's
financial markets, it's easy to get the impression that investment experts
possess a secret formula for success. Yet many successful investors realize
there are no short-term secrets to investing. While others heed market
soothsayers and prophets, savvy investors work with investment professionals who
help them remain calm in the face of volatility. Guided by long-term investment
plans rather than by emotions, these investors stay the course while others
react to the latest trend. More important, successful investors employ several
time-tested investment strategies to help reach their goals, including
diversification and systematic investing.*

- -------------------------------------------------------------------------------
WALL STREET'S WILD RIDE
- --------------------------------------------------------------------------------
Dow Jones Industrial Average

[EDGAR REPRESENTATION OF CHART]

8/1 8194
8/4 8198
8/5 8188
8/6 8259
High 8/6/97 8,259
8/7 8188
8/8 8031
8/11 8062
8/12 7961
8/13 7928
8/14 7942
8/15 7695
8/18 7803
8/19 7918
8/20 8021
8/21 7894
8/22 7888
8/25 7860
8/26 7782
8/27 7787
8/28 7694
8/29 7622
9/2 7880
9/3 7895
9/4 7867
9/5 7822
9/8 7835
9/9 7852
9/10 7719
9/11 7661
9/12 7743
9/15 7721
9/16 7896
9/17 7886
9/18 7923
9/19 7917
9/22 7997
9/23 7970
9/24 7907
9/25 7848
9/26 7922
9/29 7991
9/30 7945
10/1 8016
10/2 8028
10/3 8039
10/6 8100
10/7 8178
10/8 8095
10/9 8061
10/10 8045
10/13 8072
10/14 8096
10/15 8058
10/16 7939
10/17 7847
10/20 7921
10/21 8060
10/22 8035
10/23 7848
10/24 7715
10/27 7161
Low 10/27/97 7,161
10/28 7498
10/29 7507
10/30 7382
10/31 7442

Source: Bloomberg. The Dow Jones industrial average is a price-weighted average
of the 30 largest blue-chip stocks on the New York Stock Exchange.

DO YOUR EXPECTATIONS REFLECT MARKET REALITIES?
Investors' expectations have risen with the market -- and are in sharp contrast
to market realities. In the words of Federal Reserve Chairman Alan Greenspan,
there is an "irrational exuberance" based on unprecedented growth in recent
years. During the past few years, returns -- especially from stocks -- have been
much higher than at any other time in history. The chart below shows long-term
returns of various securities compared to the highly inflated results of the
past year.

- --------------------------------------------------------------------------------
SHORT-TERM RETURNS VS. LONG-TERM RETURNS THROUGH SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
The past year has provided investors with unusually high returns

[EDGAR REPRESENTATION OF CHART]

THE PAST YEAR PAST 71 YEARS
total return average annualized
total return 1926-1997

Large-Company Stocks 40.49% 10.98%
Long-Term Corporate Bonds 12.67% 5.67%

Source: Ibbotson Associates. Past performance does not guarantee future
results. Stocks generally exhibit more volatility than bonds.

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

OR REACTION:
- --------------------------------------------------------------------------------

What actions do successful investors take to weather the market's normal ups
and downs? First, they realize that markets move in cycles. In addition, they
diversify their holdings among a mix of funds that mirror their investment
objectives and risk tolerance and continue to purchase fund shares
systematically. By investing regularly* -- consistently buying shares through
market fluctuations -- educated investors steadily increase the number of shares
they own, while evening out their average cost per share over time.

THE MISGUIDED REACTIVE INVESTOR
The reactive investor believes that a shortcut to success is to chase today's
best-performing funds. After all, what could go wrong when you invest in these
winners? Plenty. The lure of a quick profit could fade to the reality of poor
returns for reactive investors who buy in at the peak of a fund's rally. They
often buy when prospects look bright and sell when prices drop -- behavior that
can devastate an investor's returns even while the market makes solid gains.

In contrast, educated investors don't succumb to emotions that could undermine
rational decisions. They're aware that few, if any, mutual funds can
significantly outperform their peers year after year. They also realize that
long-term investing helps reduce volatility. A buy-and-hold philosophy protects
investors against wild swings triggered by short-term market fluctuations -- and
helps them sleep better at night, too.

IT'S A FACT: INVESTORS PROFIT FROM THEIR ACTIONS, NOT THEIR REACTIONS
If you want to be successful in the financial marketplace, don't be swayed by
emotions or speculation. Keep in mind that markets change daily, yet your goals
may not change for years. Work with your Piper Jaffray Investment Executive to
develop an investment plan or to fine-tune your investment strategies as your
objectives change. A professional can help you ignore short-term volatility and
focus on long-term results. Your actions -- not your reactions -- ultimately
represent the difference between getting by ... and getting ahead.

* Keep in mind, investing regularly does not assure a profit and does not
protect against loss in declining markets.

TAKE THE GUESSWORK OUT OF INVESTING WITH THESE TRIED-AND-TRUE INVESTMENT
STRATEGIES
- --------------------------------------------------------------------------------

X GET AN INVESTMENT PLAN An investment plan maps out your goals and
identifies effective ways to pursue them.

X INVEST SYSTEMATICALLY* Systematic investing is an effective way to build
wealth over time and helps you avoid hitting only market peaks and valleys.

X DIVERSIFY Diversification helps reduce volatility within your portfolio
and may also give you better long-term results.

X REASSESS YOUR RISK TOLERANCE Life's events may affect the amount of risk
that's comfortable.

A "BUY-AND-HOLD" PHILOSOPHY HELPS REDUCE YOUR RISK
- --------------------------------------------------------------------------------
Your chance of losing money decreases the longer you hold stocks

[EDGAR REPRESENTATION OF CHART]

HOLDING STOCKS FOR ONE YEAR 29%
HOLDING STOCKS FOR FIVE YEARS 11%
HOLDING STOCKS FOR 10 YEARS 3%

Source: Based on rolling annual returns of the S&P 500 Index through 1996. The
S&P 500 is an unmanaged index of large-capitalization stocks. Past performance
does not guarantee future results.
<PAGE>

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

[PHOTO]
PAUL A. DOW, CFA
- --------------------------------------------------------------------------------
President
Piper Funds

November 19, 1997
- --------------------------------------------------------------------------------

DEAR SHAREHOLDERS:

Over the past few years, the U.S. stock market has provided investors, for the
most part, with steadily rising prices, resulting in historically high returns.
International markets, on the other hand, have given investors a rockier ride.
While many regions around the world have enjoyed healthy economies, markets in
the Far East have cast a shadow on international markets in general. Currency
problems have plagued markets in Thailand and Indonesia. Last month, we watched
as turmoil in Hong Kong dramatically affected markets around the world. And
Japanese equities have exhibited volatility and low returns for quite some time.

That said, we still believe that geographic diversification is essential for
successful investing. And the reasons to invest internationally* are as
plentiful as ever. However, the potential for significant growth will, at times,
be countered by periods of underperformance. As the chart below shows, this has
been the case over the past three years. That's why a long-term perspective is
so important.

Events we've witnessed recently in Asia certainly present a challenge to an
international investor. Fortunately, however, Latin American markets have
experienced minimal spillover effects from the current problems in Asia. Mexican
and Brazilian markets, in particular, have been good performers over the past
year. In Mexico, good news about lower inflation and interest rates as well as a
recovery in corporate profits resulted in a strong economic climate. In Brazil,
the overall market is being

- --------------------------------------------------------------------------------
INTERNATIONAL VS. U.S. PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------

[EDGAR REPRESENTATION OF CHART]

1993 1994 1995 1996 1997

S&P 500 Index 9.99 1.31 37.43 23.07 29.64
MSCI EAFE Index 32.94 8.06 11.55 6.36 10.65

The MSCI EAFE Index is an unmanaged index of securities listed on the stock
exchanges of Europe, Australia and the Far East that includes no expenses or
transaction charges.

The S&P 500 Index is an unmanaged index of large-capitalization stocks that
includes no expenses or transaction charges.

Past performance does not guarantee future results. Returns assume reinvestment
of distributions and do not include fees or expenses.

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

2 1997 Annual Report - International Growth Funds
<PAGE>

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

influenced by privatization of the telecommunication and petrochemical sectors.
Inflation in that country remained under control during the year, and there is
the potential for decreasing interest rates. In the coming year, it will be
important to pay attention to the long-term implications of events in this
region, such as the approaching presidential election in Brazil.

European markets were also strong during the funds' fiscal year, supported by
low inflation and corporate restructurings. In addition, the market implications
of Europe's move toward monetary union have been viewed positively.

When investing in today's changing international markets, it is important to
clearly understand, and be disciplined in, your investment strategy. At Piper
Funds, we believe that maintaining sound, disciplined investment strategies is
essential to achieving consistent, competitive performance in an ever-changing
environment.

We also believe in providing a higher level of quality service to shareholders.
That means going the extra step to make sure you understand your investments.
Take a look at the fund prospectus that accompanies this shareholder report.
We've revised it to make it simpler and easier to read. We hope the information
in your new prospectus, and in this shareholder report, is useful to you, and we
look forward to continuing to provide you with exceptional service. Thank you
for your continued confidence in the Piper Funds family.

Sincerely,

/s/ Paul A. Dow

Paul A. Dow
President, Piper Funds

* International investing involves risks not typically associated with
investing in the United States, including currency fluctuations, political
instability and different accounting standards.

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

3 1997 Annual Report - International Growth Funds
<PAGE>

EMERGING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------

[PHOTO]
RICHARD MUCKART
is investment director and head of emerging markets investing at Edinburgh Fund
Managers plc and manager of Emerging Markets Growth Fund. He has 25 years of
financial experience.
- --------------------------------------------------------------------------------

November 19, 1997
- --------------------------------------------------------------------------------

DEAR SHAREHOLDERS:

EMERGING MARKETS GROWTH FUND CLASS A RETURNED 23.91%* FOR THE ONE-YEAR PERIOD
ENDED SEPTEMBER 30, 1997, WITH ALL DISTRIBUTIONS REINVESTED, BUT NOT INCLUDING
THE FUND'S SALES CHARGE. This compares to a 6.56% return for the MSCI Emerging
Markets Free Index+ and a 19.02% return for the Lipper Emerging Markets Funds
Average++ over the same time period. The fund's good relative performance can be
attributed to its overweighting*** in Latin America, which recorded solid
investment results, and its underweighting*** in Asia, which registered
relatively weak performance.

A FAVORABLE ECONOMIC ENVIRONMENT WAS THE MAIN REASON BEHIND LATIN AMERICA'S
STRONG SHOWING. Several markets in the region were bolstered by additional
developments, as well. For example, Argentina benefited from strong cash flows
into newly established pension funds. Improving political conditions helped fuel
markets in Mexico. Brazil was bolstered by the government's acceleration of the
privatization program and significant tariff increases for telecommunications
and electricity companies. Telebras (3.0% of total assets as of September 30,
1997), Brazil's leading telecommunications company, was one of the fund's better
performers there.

- --------------------------------------------------------------------------------
PERFORMANCE THROUGH SEPTEMBER 30, 1997*
- --------------------------------------------------------------------------------
Growth of $10,000 Invested Since Inception

[EDGAR REPRESENTATION OF CHART]

Emerging Markets Growth MSCI Emerging Markets Lipper Emerging Markets
Fund Class A, reflects Free Index+ Funds Average++
the fund's maximum
4% sales charge

11/93 9600 10000 10000
11/93 9581 10000 10000
12/93 10608 11653 11494
1/94 11645 11865 11947
2/94 11482 11654 11630
3/94 10454 10599 10643
4/94 9158 10387 10278
5/94 9408 10743 10489
6/94 8774 10447 10006
7/94 9437 11096 10624
8/94 10867 12473 11768
9/94 11443 12615 11974
10/94 10906 12388 11704
11/94 10550 11744 11201
12/94 8688 10800 10215
1/95 7267 9651 9084
2/95 6317 9404 8777
3/95 6010 9464 8804
4/95 6864 9888 9188
5/95 6778 10414 9574
6/95 6912 10445 9600
7/95 6998 10679 9909
8/95 7075 10428 9691
9/95 7008 10378 9653
10/95 6691 9981 9225
11/95 6538 9803 8991
12/95 6797 10238 9295
1/96 8026 10966 10176
2/96 7709 10791 10033
3/96 7622 10875 10097
4/96 8150 11310 10455
5/96 8515 11260 10547
6/96 8486 11330 10560
7/96 8112 10556 9947
8/96 8410 10826 10227
9/96 8496 10920 10318
10/96 8381 10628 10062
11/96 8534 10806 10245
12/96 8789 10855 10390
1/97 9423 11596 11159
2/97 9730 12092 11537
3/97 9596 11775 11215
4/97 9682 11795 11212
5/97 10124 12133 11617
6/97 10739 12782 12130
7/97 11238 12973 12545
8/97 9903 11322 11124
9/97 10527 11636 11582

+ The Morgan Stanley Capital International (MSCI) Emerging Markets Free Index
is an unmanaged index of securities from emerging markets that are open to
foreign investors, that includes no expenses or transaction charges.

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

- --------------------------------------------------------------------------------
Class A Average Annualized Total Returns
Includes the fund's maximum 4% front-end sales charge

One Year 18.95%
- --------------------------------------------------------------------------------
Three Year -4.05%
- --------------------------------------------------------------------------------
Since Inception (11/9/93) 1.33%
- --------------------------------------------------------------------------------

Class B Cumulative Total Returns
Includes the fund's maximum 4% contingent deferred sales charge

Since Inception (2/18/97) 3.21%
- -------------------------------------------------------------------------------

* PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of
an investment will fluctuate so that fund shares, when sold, may be worth more
or less than their original cost. Safety of principal is not guaranteed.
Performance prior to June 21, 1996, is that of Hercules Latin American Value
Fund, the fund's predecessor. International investing involves risks not
typically associated with U.S. investing, including currency fluctuations,
political instability and different accounting standards. Risks are particularly
significant when investing in emerging markets. See the prospectus for more
complete information regarding risks. During most periods, the fund's advisor
waived or paid certain expenses and/or the fund's distributor voluntarily waived
certain 12b-1 fees. Without waivers, Class A returns would have been lower.

All fund and benchmark returns include reinvested distributions.

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

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

4 1997 Annual Report - International Growth Funds
<PAGE>

EMERGING MARKETS GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------

ASSET ALLOCATION*** DECISIONS IN LATIN AMERICAN MARKETS ALSO CONTRIBUTED TO THE
FUND'S INVESTMENT RESULTS.
In March, the fund temporarily reduced its exposure to Latin America, which
helped protect shareholders. In April, markets there were briefly affected by
the stronger-than-expected increase in U.S. economic activity. The fund's
decision to increase its exposure to Latin America in May enhanced performance
as many markets in the region recorded strong investment results over the
ensuing months.

DEVALUATION*** OF CURRENCIES AND THE RESULTING SLOWDOWN IN ECONOMIC ACTIVITY
WERE LARGELY RESPONSIBLE FOR THE DOWNTURN IN ASIAN STOCKS. While most markets in
the region were hurt by the fallout of these events, larger markets, such as
Australia, held up relatively well. The fund enjoyed good performance from its
construction and infrastructure holdings in China. During the period, the fund
was overweighted in Papua New Guinea and underweighted in Malaysia and
Indonesia. Our underweighting in these countries helped the fund's investment
results because their markets recorded sub-par performance. Ironically, the one
event that many analysts thought would have some impact on Asian markets during
the period, the much-anticipated and celebrated British handover of Hong Kong to
China, had little impact on regional markets. Orogen Minerals (1.9%), a Papua
New Guinea oil and mining company, provided good returns.

THE FUND INCREASED ITS EXPOSURE TO AFRICA, WHICH HELPED PERFORMANCE. Stocks that
contributed favorably to the fund's investment results in Africa included
Pioneer Tobacco (1.4%), Ghana's principle cigarette company; and Sasol (2.3%), a
South African synthetic oil company. To expand into these areas, we used the
sale of Asian stocks that had met our price targets.

OUR OUTLOOK FOR LATIN AMERICA AND AFRICA IS FAVORABLE GIVEN THEIR LONG-TERM
GROWTH PROSPECTS AND THE GENERALLY STABLE POLITICAL ENVIRONMENT IN EACH REGION.
In Latin America, the economic background continues to improve and inflation
remains low. Moreover, underlying trends, such as increased

- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY REGION
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1997

[EDGAR REPRESENTATION OF CHART]

Emerging Markets MSCI Emerging
Growth Fund Markets Free
Index+

Latin America 41% 37%
Pacific Basin 28% 40%
Africa 15% 12%
Emerging Europe 7% 9%
Middle East 2% 2%
Other Assets 7% 0%

TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1997

COMPANY SECTOR COUNTRY
<S> <C> <C> <C>
1 Grupo Financiero Banorte
Class B Financial Services Mexico 5.0%
- -------------------------------------------------------------------------------------------------------
2 Fomento Economico Mexicano
Class B Food & Beverage Mexico 3.2%
- -------------------------------------------------------------------------------------------------------
3 Telecomunicacoes Brasileiras
(Telebras) Telecommunications Brazil 3.0%
- -------------------------------------------------------------------------------------------------------
4 Chilectra ADR Utilities Chile 2.9%
- -------------------------------------------------------------------------------------------------------
5 Al-Ahram Beverages GDR Brewing & Distilling Egypt 2.8%
- -------------------------------------------------------------------------------------------------------
6 Centrais Eletricas Brasileiras
(Electrobras) Utilities Brazil 2.7%
- -------------------------------------------------------------------------------------------------------
7 Petroleo Brasileiro Oil & Gas Brazil 2.6%
- -------------------------------------------------------------------------------------------------------
8 Cemex Class B Construction Materials Mexico 2.5%
- -------------------------------------------------------------------------------------------------------
9 Sasol Oil & Gas South Africa 2.3%
- -------------------------------------------------------------------------------------------------------
10 Goody's Food & Beverage Greece 2.3%
- -------------------------------------------------------------------------------------------------------
</TABLE>

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

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

5 1997 Annual Report - International Growth Funds
<PAGE>

EMERGING MARKETS GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------

earnings growth and ongoing privatization, create a good foundation for stock
prices to move higher. In Africa, several companies have excellent earnings
growth prospects and are still selling at reasonable valuations*** relative to
stocks in mature markets. Moreover, the economies in which these companies
operate are growing steadily.

IN SOUTHEAST ASIA, WE REMAIN CONCERNED OVER THE PREVAILING CURRENCY TURMOIL AND
ITS POTENTIAL IMPACT ON STOCK PRICES THERE. Since continued devaluations across
the region may have major long-term implications for economic growth, we don't
expect to increase our exposure in Asia until governments set clear policies to
address the underlying problems. Once such progress is made, we intend to use
market weakness as an opportunity to increase our investment in companies with
solid fundamentals (good management, strong earnings growth, attractive
valuation, etc.) and establish new positions in businesses that meet our strict
criteria for initial investment.

We would like to express our appreciation for your investment in Emerging
Markets Growth Fund. We remain dedicated to helping you achieve your investment
goals in the new fiscal year.

Sincerely,

/s/ Richard Muckart

Richard Muckart
Portfolio Manager

- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY COUNTRY
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1997

[MAP]

Argentina 3%
Brazil 17%
Chile 6%
China 2%
Egypt 3%
Ghana 2%
Greece 2%
Hong Kong 4%
Hungary 3%
India 2%
Indonesia 5%
Israel 1%
Lebanon 1%
Malaysia 4%
Mexico 14%
Pakistan 1%
Papua New Guinea 2%
Peru 1%
Philippines 2%
Russia 2%
South Africa 9%
South Korea 1%
Taiwan 2%
Thailand 3%
Zimbabwe 1%

Other assets of 7% are not included in the chart.

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

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

6 1997 Annual Report - International Growth Funds
<PAGE>

PACIFIC-EUROPEAN GROWTH FUND
- --------------------------------------------------------------------------------

[PHOTO]
RICHARD MUCKART
is investment director and head of emerging markets investing at Edinburgh Fund
Managers plc and manager of Pacific-European Growth Fund. He has 25 years of
financial experience.
- --------------------------------------------------------------------------------

November 19, 1997
- --------------------------------------------------------------------------------

DEAR SHAREHOLDERS:

FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 1997, PACIFIC-EUROPEAN GROWTH FUND
CLASS A PRODUCED A TOTAL RETURN OF 7.25%,* WITH ALL DISTRIBUTIONS REINVESTED,
BUT NOT INCLUDING THE FUND'S SALES CHARGE. Over the same time frame, the MSCI
European, Australian, Far East (EAFE) Index+, the fund's benchmark,*** returned
12.49%, and the Lipper International Funds Average++ returned 18.59%. We are
disappointed in the fund's underperformance, which we attribute primarily to its
exposure to Pacific Basin stocks, which, on balance, registered lower investment
results than those recorded by European equities.

THE PERFORMANCE OF JAPANESE STOCKS DETRACTED FROM THE FUND'S INVESTMENT RESULTS.
Japan's market was most affected by investor concern over the country's banking
system and the state of Japan's weak economy. The Japanese market enjoyed a good
run during the first half of 1997 after reports that the economy was showing
signs of improvement. However, the economy's upturn was short-lived, which
caused Japanese stock prices to trend lower late in the period. The fund's
holdings in Japan that performed relatively well included Matsushita Electric
Works (1.1% of total assets as of September 30, 1997) and Hitachi (0.8%).

STRONG PERFORMANCE IN CONTINENTAL EUROPEAN STOCK MARKETS HELPED THE FUND'S
PERFORMANCE. Low inflation, weak currencies and corporate restructurings were
largely responsible for the rally in Europe.

[EDGAR REPRESENTATION OF CHART]

Pacific-European Growth MSCI EAFE Index+ Lipper International
Fund Class A, reflects Funds Average++
the fund's Maximum 4%
sales charge

Apr-90 9600 10000 10000
Apr-90 9635 10000 10000
May-90 9775 11144 10741
Jun-90 9793 11049 10969
Jul-90 8935 11207 11399
Aug-90 9031 10122 10202
Sep-90 7885 8714 9042
Oct-90 8349 10075 9771
Nov-90 8121 9483 9519
Dec-90 8347 9641 9491
Jan-91 8580 9955 9743
Feb-91 9117 11025 10498
Mar-91 9269 10366 10203
Apr-91 9350 10471 10317
May-91 9502 10583 10425
Jun-91 9072 9808 9892
Jul-91 9233 10293 10339
Aug-91 8947 10086 10270
Sep-91 8902 10658 10580
Oct-91 8830 10812 10621
Nov-91 8866 10310 10238
Dec-91 9286 10845 10729
Jan-92 9485 10617 10838
Feb-92 9521 10240 10862
Mar-92 9205 9567 10499
Apr-92 9241 9615 10791
May-92 9919 10261 11313
Jun-92 9766 9778 11008
Jul-92 9096 9531 10615
Aug-92 9142 10132 10650
Sep-92 9187 9935 10430
Oct-92 9440 9417 10132
Nov-92 9214 9508 10178
Dec-92 9205 9560 10315
Jan-93 9458 9562 10362
Feb-93 9775 9854 10607
Mar-93 10055 10715 11197
Apr-93 10823 11735 11757
May-93 10977 11986 11990
Jun-93 10742 11802 11758
Jul-93 10950 12218 12115
Aug-93 11511 12880 12908
Sep-93 11610 12593 12893
Oct-93 12397 12984 13519
Nov-93 12225 11852 13022
Dec-93 13840 12710 14352
Jan-94 14412 13787 15169
Feb-94 14021 13752 14805
Mar-94 13168 13163 14101
Apr-94 13694 13724 14471
May-94 13785 13648 14448
Jun-94 13640 13844 14263
Jul-94 13922 13980 14667
Aug-94 14475 14314 15136
Sep-94 14149 13867 14800
Oct-94 14303 14332 15074
Nov-94 13413 13646 14361
Dec-94 13427 13735 14168
Jan-95 12477 13210 13465
Feb-95 12467 13176 13533
Mar-95 13172 14001 14010
Apr-95 13339 14531 14475
May-95 13300 14362 14637
Jun-95 13035 14114 14658
Jul-95 13907 14996 15434
Aug-95 13672 14428 15115
Sep-95 13633 14714 15389
Oct-95 13368 14322 15098
Nov-95 13623 14724 15257
Dec-95 14234 15321 15707
Jan-96 14706 15388 16034
Feb-96 14549 15443 16106
Mar-96 14811 15775 16366
Apr-96 15273 16238 16850
May-96 14853 15943 16810
Jun-96 14838 16037 16953
Jul-96 14108 15572 16371
Aug-96 13920 15610 16583
Sep-96 14307 16029 16936
Oct-96 13842 15869 16866
Nov-96 14306 16504 17641
Dec-96 14086 16296 17760
Jan-97 13927 15729 17692
Feb-97 14256 15990 17971
Mar-97 14086 16052 18012
Apr-97 13995 16141 18078
May-97 15052 17195 19123
Jun-97 15856 18148 20020
Jul-97 15970 18445 20626
Aug-97 14447 17071 19111
Sep-97 15345 18031 20350

+ The Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged
index of securities listed on the stock exchanges of Europe, Australia and
the Far East that includes no expenses or transaction charges.

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

Class A Average Annualized Total Returns
Includes the fund's maximum 4% front-end sales charge

One Year 2.96%
- --------------------------------------------------------------------------------
Five Year 9.90%
- --------------------------------------------------------------------------------
Since Inception (4/27/90) 5.93%
- --------------------------------------------------------------------------------

Class B and Y Cumulative Total Returns
Class B share returns include the fund's maximum 4% contingent deferred sales
charge. Sales charges do not apply to Class Y shares.

Class B Since Inception (2/18/97) 3.40%
- --------------------------------------------------------------------------------
Class Y Since Inception (2/18/97) 8.03%
- --------------------------------------------------------------------------------

* PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. The investment return and
principal value of an investment will fluctuate so that fund shares, when
sold, may be worth more or less than their original cost. Safety of principal
is not guaranteed. Performance prior to its conversion to an open-end fund on
August 31, 1992, is based on its experience as a closed-end fund.
International investing involves risks not typically associated with U.S.
investing, including currency fluctuations, political instability and
different accounting standards. See the prospectus for more complete
information regarding risks. During most periods, the fund's advisor waived
or paid certain expenses and/or the fund's distributor voluntarily waived
certain 12b-1 fees. Without waivers, returns would have been lower.

All fund and benchmark returns include reinvested distributions.

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

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

7 1997 Annual Report - International Growth Funds
<PAGE>

PACIFIC-EUROPEAN GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------

Contributing to the fund's investment results were British Aerospace (1.3%) and
Deutsche Bank (2.3%). Given the strong performance by European markets and signs
that economic growth is beginning to increase on the continent, we positioned
the fund defensively midway through the period by emphasizing value-oriented
stocks.

PACIFIC BASIN MARKETS, ON BALANCE, DID NOT BENEFIT THE FUND'S INVESTMENT
RESULTS. In early July, Thailand devalued*** its currency, which not only
weighed heavily on its stock market but had a negative spillover effect on other
markets in the region. The death of China's chairman Deng Xiaoping in February
and the much-anticipated takeover of Hong Kong by China in July had little
impact on local markets. Some of the fund's better performing stocks in Asia
included Hutchison Whampoa (1.0%) and Lend Lease Corp. (0.7%).

THE FUND'S POSITION IN LATIN AMERICA, ALTHOUGH RELATIVELY SMALL, CONTRIBUTED
POSITIVELY TO INVESTMENT RESULTS. Early in the period, the fund realized good
performance from Brazil and Argentina. Each country saw its economy improve
markedly in late 1996 and early 1997. The privatization and deregulation program
in Brazil also had a favorable impact on stock prices there. In the final three
months of the period, Mexico contributed solid investment results for the fund
as political uncertainty subsided and the country's economy showed increasing
strength.

DURING THE YEAR, WE MADE CHANGES TO THE FUND'S ASSET ALLOCATION*** STRATEGY THAT
ARE WORTH NOTING. When Japan's economy showed sustained weakness in early 1997,
we trimmed our position there and increased our exposure to Europe. In March,
when U.S. interest rates rose due to inflation fears, we temporarily reduced our
exposure to Latin American markets because of their sensitivity to U.S. economic
events, a decision that helped protect shareholder capital. In May and June,
following the strong runup in Brazil's market, we took profits in certain
Brazilian stocks and established a new position in Spain.

[EDGAR REPRESENTATION OF CHART]

Pacific-European MSCI EAFE Index+
Growth Fund

Europe 61% 60%
Japan 22% 31%
Other Pacific Basin 8% 9%
Latin America 4% 0%
Short-Term 3% 0%
Other Assets 2% 0%

TOP 10 EQUITY HOLDINGS
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1997

<TABLE>
<CAPTION>
COMPANY SECTOR COUNTRY
<S> <C> <C> <C>
1 Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit (VNU) Printing & Publishing Netherlands 3.0%
- -------------------------------------------------------------------------------------------------------
2 Union Bank of Switzerland
Class B Money Center Banks Switzerland 2.7%
- -------------------------------------------------------------------------------------------------------
3 Koninklijke Ahold NV Food/Retail Netherlands 2.7%
- -------------------------------------------------------------------------------------------------------
4 Pinault-Printemps-Redoute Retail France 2.4%
- -------------------------------------------------------------------------------------------------------
5 Deutsche Bank Financial Services Germany 2.3%
- -------------------------------------------------------------------------------------------------------
6 Thyssen Metal Products Germany 2.3%
- -------------------------------------------------------------------------------------------------------
7 Schneider Electronics France 2.2%
- -------------------------------------------------------------------------------------------------------
8 Rhone-Poulenc Class A Pharmaceuticals France 2.2%
- -------------------------------------------------------------------------------------------------------
9 Novartis Pharmaceuticals Switzerland 2.2%
- -------------------------------------------------------------------------------------------------------
10 Bayer Industrials &
Conglomerates Germany 2.2%
- -------------------------------------------------------------------------------------------------------
</TABLE>

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

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

8 1997 Annual Report - International Growth Funds
<PAGE>

PACIFIC-EUROPEAN GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------

LOOKING AHEAD, OUR FORECAST FOR JAPAN REMAINS CAUTIOUS. The Japanese economy is
still weak and no clear signs indicate sustained improvement is likely anytime
soon. Recent data show falling levels of confidence and industrial production
and an increase in inventory levels. While the country's banking problems have
been, in our judgment, overstated, they are likely to remain a source of
significant concern to investors.

OUR OUTLOOK FOR CONTINENTAL EUROPE IS FAVORABLE, BUT WE ARE LESS OPTIMISTIC
ABOUT THE PROSPECTS FOR THE PACIFIC BASIN. Corporate earnings growth in Europe
is generally good and inflation is under control. Moreover, companies are
continuing to make their businesses more efficient through restructuring.
Currency problems in the Pacific Basin may continue to cause volatility for
markets in the region.

Thank you for your investment in Pacific-European Growth Fund. In these
difficult international markets, we will continue to do our best to deliver
improved performance in seeking the fund's long-term investment goal.

Sincerely,

/s/ Richard Muckart

Richard Muckart
Portfolio Manager

[MAP]

EUROPE 61%

France 11%
Germany 11%
Italy 2%
Netherlands 7%
Spain 2%
Sweden 3%
Switzerland 7%
United Kingdom 18%

[MAP]

PACIFIC BASIN 7%

Australia 2%
Hong Kong 3%

Malaysia LESS THAN 1%
New Zealand LESS THAN 1%
Papua New Guinea LESS THAN 1%
Singapore 2%

[MAP]

JAPAN 23%

[MAP]

LATIN AMERICA 4%

Argentina 1%
Brazil 1%
Cayman Islands LESS THAN 1%
Chile 1%
Mexico 1%

Short-term assets of 3% and other assets of 2% are not included in the chart.

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

9 1997 Annual Report - International Growth Funds
<PAGE>
Financial Statements

- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES September 30, 1997
................................................................................

<TABLE>
<CAPTION>
EMERGING
MARKETS PACIFIC-EUROPEAN
GROWTH FUND GROWTH FUND
------------ ------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (including
repurchase agreements of $0 and $2,440,000, respectively)
(note 2) ................................................. $16,391,637 $94,433,004
Cash in bank on demand deposit ............................. 774,019 39,206
Foreign cash in bank on demand deposit ..................... 339,583 47,871
Receivable for investment securities sold .................. 136,388 1,306,342
Receivable for fund shares sold ............................ 7,571 172,843
Organization costs ......................................... 23,931 --
Dividends and accrued interest receivable .................. 70,474 443,727
Other assets ............................................... 17,551 --
------------ ------------
Total assets ............................................. 17,761,154 96,442,993
------------ ------------

LIABILITIES:
Net unrealized depreciation of forward foreign currency
contracts held (note 5) .................................. 3,968 3,685
Payable for investment securities purchased ................ 408,373 1,172,148
Payable for fund shares redeemed ........................... 21,198 1,238,213
Accrued investment management fee .......................... 14,080 79,733
Accrued distribution and service fees ...................... 4,796 21,531
Other accrued expenses ..................................... 597 8,706
------------ ------------
Total liabilities ........................................ 453,012 2,524,016
------------ ------------
Net assets applicable to outstanding capital stock ....... $17,308,142 $93,918,977
------------ ------------
------------ ------------

COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital ............... $20,131,544 $83,764,712
Undistributed (distributions in excess of) net investment
income ................................................... (33,872) 3,067,134
Accumulated net realized loss on investments and foreign
currency translations .................................... (5,672,277) (5,592,519)
Unrealized appreciation of investments and on translation of
other assets and liabilities denominated in foreign
currencies ............................................... 2,882,747 12,679,650
------------ ------------

Total - representing net assets applicable to outstanding
capital stock .......................................... $17,308,142 $93,918,977
------------ ------------
------------ ------------

* Investments in securities at identified cost ............. $13,497,499 $81,741,387
------------ ------------
------------ ------------

NET ASSET VALUE AND OFFERING PRICE:

CLASS A:
Net assets ................................................. $16,998,380 $78,802,319
Shares outstanding (authorized 800 million shares of $0.01
par value) ............................................... 1,551,058 5,836,071
Net asset value ............................................ $ 10.96 $ 13.50
Maximum offering price per share (net asset value plus 4% of
offering price) .......................................... $ 11.42 $ 14.06

CLASS B:
Net assets ................................................. $ 309,762 $ 55,489
Shares outstanding (authorized 400 million shares of $0.01
par value) ............................................... 28,531 4,120
Net asset value and offering price per share ............... $ 10.86 $ 13.47

CLASS Y:
Net assets ................................................. -- $15,061,169
Shares outstanding (authorized 200 million shares of $0.01
par value) ............................................... -- 1,111,928
Net asset value and offering price per share ............... -- $ 13.55
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- --------------------------------------------------------------------------------
10 1997 Annual Report - International Growth Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------

STATEMENTS OF OPERATIONS For the Year Ended September 30,
1997
................................................................................

<TABLE>
<CAPTION>
EMERGING
MARKETS PACIFIC-EUROPEAN
GROWTH FUND GROWTH FUND
----------- -----------
<S> <C> <C>
INCOME:
Dividends (net of foreign withholding taxes of $25,876 and
$216,367, respectively) .................................. $ 285,660 $1,817,526
Interest (net of foreign withholding taxes of $0 and $1,448,
respectively) ............................................ 3,367 68,062
----------- -----------

Total income ............................................. 289,027 1,885,588
----------- -----------

EXPENSES (NOTE 6):
Investment management fee .................................. 160,956 936,677
Distribution and service fees:
CLASS A .................................................. 80,014 577,711
CLASS B .................................................. 924 240
CLASS Y .................................................. -- --
Custodian and accounting fees .............................. 90,971 419,435
Transfer agent and dividend disbursing agent fees .......... 34,447 140,499
Registration fees .......................................... 25,305 45,673
Reports to shareholders .................................... 39,981 97,497
Amortization of organization costs ......................... 17,900 --
Directors' fees ............................................ 9,122 9,060
Audit and legal fees ....................................... 69,271 71,553
Other expenses ............................................. 9,145 21,936
----------- -----------
Total expenses ........................................... 538,036 2,320,281
Less Class A expenses waived by the distributor ........ (27,284) (196,521)
Less expenses waived by the advisor .................... (188,071) --
----------- -----------

Net expenses before expenses paid indirectly ............. 322,681 2,123,760
Less expenses paid indirectly .......................... (61,065) (2,801)
----------- -----------

Total net expenses ....................................... 261,616 2,120,959
----------- -----------

Net investment income (loss) ............................. 27,411 (235,371)
----------- -----------

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments (including foreign tax benefit of $0 and
$926,949, respectively)(note 3) ........................ 1,183,314 1,444,981
Foreign currency transactions ............................ (78,803) (580,438)
----------- -----------

Net realized gain on investments and foreign currency .... 1,104,511 864,543
Net change in unrealized appreciation or depreciation of
investments and on translation of other assets and
liabilities denominated in foreign currencies ............ 2,200,606 6,160,316
----------- -----------

Net gain on investments and foreign currency ............. 3,305,117 7,024,859
----------- -----------

Net increase in net assets resulting from operations ... $3,332,528 $6,789,488
----------- -----------
----------- -----------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- --------------------------------------------------------------------------------
11 1997 Annual Report - International Growth Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
EMERGING MARKETS GROWTH FUND PACIFIC-EUROPEAN GROWTH FUND
-------------------------------------------- ------------------------------------------
Three Months Seven Months
Year Ended Ended Year Ended Year Ended Ended Year Ended
9/30/97 9/30/96 6/30/96* 9/30/97 9/30/96 2/29/96
------------ ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .......... $ 27,411 $ 9,030 $ 28,691 $ (235,371) $ 292,446 $ 593,324
Net realized gain (loss) on investments
and foreign currency transactions ... 1,104,511 (235,353) 1,703,865 864,543 9,295,452 10,814,732
Net change in unrealized appreciation or
depreciation of investments and on
translation of other assets and
liabilities denominated in foreign
currencies .......................... 2,200,606 256,946 1,774,245 6,160,316 (13,137,979) 13,491,482
------------ ------------- ------------- ------------ ------------ ------------

Net increase (decrease) in net assets
resulting from operations ......... 3,332,528 30,623 3,506,801 6,789,488 (3,550,081) 24,899,538
------------ ------------- ------------- ------------ ------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS:
CLASS A:
From net investment income .......... (7,719) -- -- (306,934) -- (593,324)
From net realized gains ............. -- -- -- (4,156,148) (8,239,435) (10,077,791)
CLASS B:
From net investment income .......... -- -- -- (30) -- --
From net realized gains ............. -- -- -- -- -- --
CLASS Y:
From net investment income .......... -- -- -- (11,223) -- --
From net realized gains ............. -- -- -- -- -- --
------------ ------------- ------------- ------------ ------------ ------------
Total distributions ................. (7,719) -- -- (4,474,335) (8,239,435) (10,671,115)
------------ ------------- ------------- ------------ ------------ ------------

CAPITAL SHARE TRANSACTIONS (NOTE 4):
CLASS A ................................ (88,308) (194,919) (12,194,639) (94,756,049) 20,931,482 (5,309,571)
CLASS B ................................ 299,743 -- -- 53,014 -- --
CLASS Y ................................ -- -- -- 13,853,189 -- --
------------ ------------- ------------- ------------ ------------ ------------
Increase (decrease) in net assets from
capital share transactions ........ 211,435 (194,919) (12,194,639) (80,849,846) 20,931,482 (5,309,571)
------------ ------------- ------------- ------------ ------------ ------------
Total increase (decrease) in net
assets ............................ 3,536,244 (164,296) (8,687,838) (78,534,693) 9,141,966 8,918,852

Net assets at beginning of period (note
1) .................................. 13,771,898 13,936,194 22,624,032 172,453,670 163,311,704 154,392,852
------------ ------------- ------------- ------------ ------------ ------------

Net assets at end of period ........... $17,308,142 $ 13,771,898 $ 13,936,194 $ 93,918,977 $172,453,670 $163,311,704
------------ ------------- ------------- ------------ ------------ ------------
------------ ------------- ------------- ------------ ------------ ------------

Undistributed (distributions in excess
of) net investment income ........... $ (33,872) $ 7,531 $ -- $ 3,067,134 $ 191,694 $ --
------------ ------------- ------------- ------------ ------------ ------------
------------ ------------- ------------- ------------ ------------ ------------

* REPRESENTS HISTORICAL FINANCIAL RESULTS OF HERCULES LATIN AMERICAN VALUE FUND PRIOR TO JUNE 21, 1996. SEE NOTE 1 TO FINANCIAL
STATEMENTS.
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

- --------------------------------------------------------------------------------
12 1997 Annual Report - International Growth Funds
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------

(1) ORGANIZATION
................................
Piper Global 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 outstanding two series (the funds):
Emerging Markets Growth Fund and Pacific-European Growth
Fund, which are classified as non-diversified and
diversified series, respectively. 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
Pacific-European Growth 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 distribution and service fees than Class B

CLASS B:
- No front-end sales charge

- Subject to a contingent deferred sales charge upon
redemption

- Higher distribution and service fees 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

- No front-end or contingent deferred sales charges

- No distribution or service fees

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.

Emerging Markets Growth Fund invests primarily in common
stocks of emerging securities markets. Emerging securities
markets can be found in regions such as Latin America,
Asia, Eastern Europe, the Middle East and Africa. Emerging
Markets Growth Fund commenced operations and acquired the
net assets of Hercules Latin American Value Fund, a series
of Hercules Funds Inc., on June 21, 1996, via a tax-free
reorganization. Emerging Markets Growth Fund had no assets
or liabilities prior to the acquisition. Consequently, the
information presented for Emerging Markets Growth Fund
prior to June 21, 1996, represents the financial history
of Hercules Latin American Value Fund.

- --------------------------------------------------------------------------------
13 1997 Annual Report - International Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

Pacific-European Growth Fund invests primarily in the
Pacific Basin (for example, Japan, Hong Kong, Malaysia,
Singapore or Thailand) and Europe (including Eastern
Europe). Pacific-European Growth Fund acquired the net
assets of Hercules European Value Fund and Hercules
Pacific Basin Value Fund on June 21, 1996, via a tax-free
reorganization.

(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
................................
INVESTMENTS IN SECURITIES
Portfolio securities for which market quotations are
readily available are valued at current market value. If
market quotations or valuations are not available, or if
such quotations or valuations are believed to be
inaccurate, unreliable or not reflective of market value,
portfolio securities are valued according to procedures
adopted by the funds' board of directors in good faith at
"fair value", that is, a price that the fund might
reasonably expect to receive for the security or other
asset upon its current sale.

Pricing services value domestic and foreign equity
securities (and occasionally fixed-income securities)
traded on a securities exchange or Nasdaq at the last
reported sale price, up to the time of valuation. If there
are no reported sales of a security on the valuation date,
it is valued at the mean between the published bid and
asked prices reported by the exchange or Nasdaq. If there
are no sales and no published bid and asked quotations for
a security on the valuation date or the security is not
traded on an exchange or Nasdaq, the pricing service may
obtain market quotations directly from broker-dealers.

Securities transactions are accounted for on the date
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, is recorded on an accrual basis.

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

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

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

- --------------------------------------------------------------------------------
14 1997 Annual Report - International Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
subject to federal income tax. Therefore, no income tax
provision is required. The funds also intend to distribute
their taxable net investment income and realized gains, if
any, to avoid the payment of any federal excise taxes.

Net investment income and net realized gains (losses) may
differ for financial statement and tax purposes primarily
because of the recognition of certain foreign currency
gains (losses) as ordinary income (loss) for tax purposes,
the "mark-to-market" of certain Passive Foreign Investment
Companies (PFICs) for tax purposes, the "mark-to-market"
of certain other investments for tax purposes, losses
deferred due to "wash sale" 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. 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 and losses were recorded by the funds.

On the statements of assets and liabilities, as a result
of permanent book-to-tax differences, reclassification
adjustments have been made as follows:

<TABLE>
<CAPTION>
EMERGING MARKETS PACIFIC-EUROPEAN
GROWTH FUND GROWTH FUND
----------------- -----------------
<S> <C> <C>
Decrease additional paid-in capital .... $(17,708) $ (62,785)
Increase (Decrease) accumulated net
realized loss on investments ......... $(78,803) $3,366,213
Increase (Decrease) undistributed net
investment income .................... $(61,095) $3,428,998
</TABLE>

DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income
will be declared separately for each class and paid at
least annually. 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.

ORGANIZATION COSTS
Organization costs were incurred in connection with the
start up and initial registration of Emerging Markets
Growth Fund's predecessor. 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.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
Securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollars at the
closing rate of exchange. Foreign currency amounts related
to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the
transaction date. For financial reporting purposes the
realized and unrealized gain (loss) on investments
reflects changes in exchange rates as well as changes in
the market value of investments.

The funds also may enter into forward foreign currency
exchange contracts for hedging purposes. The net U.S.
dollar value of foreign currency underlying all
contractual commitments held by the funds,

- --------------------------------------------------------------------------------
15 1997 Annual Report - International Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
and the resulting unrealized appreciation or depreciation,
are determined using foreign currency exchange rates from
independent pricing sources. The funds are subject to the
credit risk that the other party will not complete the
obligations of the contract.

REPURCHASE AGREEMENTS
For repurchase agreements entered into with certain
broker-dealers, Pacific-European Growth Fund, 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. Emerging Markets Growth Fund may invest in
repurchase agreements secured by U.S. government or agency
obligations in an individual account. 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.

ALLOCATION OF INCOME, EXPENSES AND GAINS (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.

CONCENTRATION OF RISK
Investments in countries with limited or developing
capital markets may involve greater risks than investments
in more developed markets and the prices of such
investments may be volatile. The consequences of
political, social or economic changes in these markets may
have disruptive effects on the market prices of the funds'
investments and the income they generate, as well as the
funds' ability to repatriate such amounts.

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

(3) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities,
other than temporary investments in short-term securities,
for the year ended September 30, 1997, were as follows:

<TABLE>
<CAPTION>
EMERGING MARKETS PACIFIC-EUROPEAN
GROWTH FUND GROWTH FUND
----------------- -----------------
<S> <C> <C>
Purchases .............................. $16,026,016 $ 77,183,862
Proceeds from sales .................... $15,502,732 $157,023,085
</TABLE>

Net realized gain on investments for Pacific-European
Growth Fund includes realized gains of $3,419,105 related
to purchased foreign currency options which were sold
during the year.

- --------------------------------------------------------------------------------
16 1997 Annual Report - International Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 (a) SEPTEMBER 30, 1996 JUNE 30, 1996
------------------------ ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
EMERGING MARKETS GROWTH FUND:
CLASS A:
Sales of fund shares ................. 668,289 $ 6,437,548 570,420 $ 4,970,884 1,061,183 $ 8,309,695
Issued for reinvested
distributions ...................... 850 7,638 -- -- -- --
Redemptions of fund shares ........... (673,484) (6,533,494) (590,645) (5,165,803) (2,625,903) (20,504,334)
---------- ------------ ---------- ------------ ---------- ------------
(4,345) $ (88,308) (20,225) $ (194,919) (1,564,720) $(12,194,639)
---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------
CLASS B:
Sales of fund shares ................. 29,614 311,376
Redemptions of fund shares ........... (1,083) (11,633)
---------- ------------
28,531 $ 299,743
---------- ------------
---------- ------------
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 (a) SEPTEMBER 30, 1996 FEBRUARY 29, 1996
------------------------ ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC-EUROPEAN GROWTH FUND:
CLASS A:
Sales of fund shares ................. 1,339,186 $ 16,832,030 1,035,524 $ 13,832,617 2,173,410 $ 29,496,476
Issued for reinvested
distributions ...................... 345,346 4,320,301 610,491 8,150,058 795,210 10,633,411
Redemptions of fund shares ........... (7,646,599) (96,625,546) (2,238,550) (29,624,360) (3,316,664) (45,439,458)
Redemptions in exchange for Class Y
shares ............................. (1,531,333) (19,282,834)
Issued in connection with acquisition
(note 8) ........................... -- -- 2,139,125 28,573,167 -- --
---------- ------------ ---------- ------------ ---------- ------------
(7,493,400) $(94,756,049) 1,546,590 $ 20,931,482 (348,044) $ (5,309,571)
---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------
CLASS B:
Sales of fund shares ................. 4,118 $ 52,984
Issued for reinvested
distributions ...................... 2 30
---------- ------------
4,120 $ 53,014
---------- ------------
---------- ------------
CLASS Y:
Sales of fund shares ................. 94,569 $ 1,258,268
Sales in exchange for Class A shares 1,531,178 19,282,834
Issued for reinvested
distributions ...................... 763 10,526
Redemptions of fund shares ........... (514,582) (6,698,439)
---------- ------------
1,111,928 $ 13,853,189
---------- ------------
---------- ------------
</TABLE>

(a) REPRESENTS PERIOD FROM FEBRUARY 18 (COMMENCEMENT OF OFFERING OF SHARES) TO
SEPTEMBER 30, 1997, FOR CLASS B AND CLASS Y.

Sales charges received by Piper Jaffray Inc. (Piper
Jaffray), the funds' distributor, for distributing the
funds' shares for the year ended September 30, 1997, were
as follows:

<TABLE>
<CAPTION>
EMERGING MARKETS PACIFIC-EUROPEAN
GROWTH FUND GROWTH FUND
----------------- -------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS Y
------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Front-end sales charges ................ $15,893 $-- $ 19,554 $-- $--
Contingent deferred sales charges ...... 7,191 12 12,509 -- --
------- --- --------- --- ---
$23,084 $12 $ 32,063 $-- $--
------- --- --------- --- ---
------- --- --------- --- ---
</TABLE>

- --------------------------------------------------------------------------------
17 1997 Annual Report - International Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

(5) FORWARD FOREIGN
CURRENCY CONTRACTS
................................
On September 30, 1997, the funds had open foreign currency
exchange contracts which obligate the funds to deliver and
receive currencies at specified future dates. The
unrealized depreciation on these contracts is reflected in
the accompanying financial statements. The terms of the
open contracts are as follows:

<TABLE>
<CAPTION>
U.S. U.S.
CURRENCY $ VALUE CURRENCY $ VALUE
TO BE AS OF TO BE AS OF APPRECIATION
SETTLEMENT DATE DELIVERED 9/30/97 RECEIVED 9/30/97 (DEPRECIATION)
- ---------------------------------------- --------------- -------- ------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
EMERGING MARKETS GROWTH FUND:
October 2, 1997 ........................ 817,506 MYR $251,811 250,961 USD $250,961 $ (850)
October 2, 1997 ........................ 85,861 USD 85,861 2,962,190 THB 82,743 $(3,118)
-------- -------- ---------------
$337,672 $333,704 $(3,968)
-------- -------- ---------------
-------- -------- ---------------
PACIFIC-EUROPEAN GROWTH FUND:
October 2, 1997 ........................ 248,965 USD $248,965 342,173 AUD $248,127 $ (838)
October 2, 1997 ........................ 332,343 AUD 240,999 239,952 USD 239,952 (1,047)
October 2, 1997 ........................ 132,837,846 IDR 40,623 40,376 USD 40,376 (247)
October 2, 1997 ........................ 23,700,560 IDR 7,248 7,204 USD 7,204 (44)
October 1, 1997 ........................ 332,726 DEM 188,781 187,272 USD 187,272 (1,509)
-------- -------- ---------------
$726,616 $722,931 $(3,685)
-------- -------- ---------------
-------- -------- ---------------
</TABLE>

AUD=AUSTRALIA DOLLAR
DEM=GERMAN MARK
IDR=INDONESIAN RUPIAH
MYR=MALAYSIA RINGGIT
THB=THAI BAHT
USD=UNITED STATES DOLLAR

(6) 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 the
funds' 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. For Emerging Markets Growth Fund
the fee is equal to an annual rate of 1% of the fund's
average daily net assets. For Pacific-European Growth
Fund, the fee is equal to an annual rate of 1% of the
first $100 million in average daily net assets, 0.875% of
the next $100 million and 0.75% of the net assets in
excess of $200 million. For the year ended September 30,
1997, the effective management fees paid by Emerging
Markets Growth Fund and Pacific-European Growth Fund were
1.00% and 0.75%, respectively, on an annual basis.

Since April 1991, the basic fee for Pacific-European
Growth Fund has been subject to a performance adjustment.
The adjustment is computed monthly by comparing the
performance of the Class A shares relative to the Morgan
Stanley Capital International EAFE Index, over the
preceding 12 month period. For each percentage point the
Class A shares outperform or underperform the EAFE Index
the monthly fee is increased or decreased by 0.05% (on an
annual basis) up to a maximum of 0.25% (on an annual
basis) of the fund's average daily net assets. During the
year ended September 30, 1997, the performance adjustment
decreased the management fee by $295,862.

Edinburgh Fund Managers plc has been retained by Piper
Capital as the subadvisor of Pacific-European Growth Fund
and is paid a fee equal to 65% of the basic investment
management fee plus

- --------------------------------------------------------------------------------
18 1997 Annual Report - International Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

or minus 90% of the performance adjustment. Edinburgh Fund
Managers plc has entered into an expense reimbursement
agreement with the advisor under which it pays the advisor
a monthly fee equal to 10% of the basic investment
management fee. This 10% fee is a reimbursement to the
advisor for certain expenses it bears in connection with
the administration of Pacific-European Growth Fund.
Edinburgh Fund Managers plc has also been retained by
Piper Capital as the subadvisor of Emerging Markets Growth
Fund and is paid a fee equal to 0.50% of the fund's
average daily net assets.

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 ended September 30, 1997, are stated below as a
percent of average daily net assets attributable to such
shares.

<TABLE>
<CAPTION>
EMERGING MARKETS PACIFIC-EUROPEAN
GROWTH FUND GROWTH FUND
----------------- ---------------------------
CLASS A CLASS B CLASS A CLASS B CLASS Y
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Payable as a distribution fee .......... 0.25% 0.75% 0.25% 0.75% --
Payable as a 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. 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 year ended September 30, 1997, Piper
Jaffray and Piper Trust received the following amounts in
connection with the shareholder account servicing
agreements:

<TABLE>
<CAPTION>
EMERGING MARKETS PACIFIC-EUROPEAN
GROWTH FUND GROWTH FUND
----------------- -----------------
<S> <C> <C>
Piper Jaffray .......................... $19,896 $83,724
Piper Trust ............................ -- 12,727
----------------- -----------------
$19,896 $96,451
----------------- -----------------
----------------- -----------------
</TABLE>

OTHER FEES AND EXPENSES
In addition to the investment management, distribution and
shareholder account servicing fees, the fund is
responsible for paying most other operating expenses,
including: outside directors' fees and expenses; custodian
fees; registration fees; printing and shareholder reports;
transfer agent fees and expenses; legal, auditing and
accounting services; insurance; interest; taxes and other
miscellaneous expenses. For the year ended September 30,
1997, Piper Capital voluntarily limited total fees and
expenses for Emerging Markets Growth Fund to annual rates
of 2.00% and 2.67% of average daily net assets
attributable to such shares for Class A and Class B,
respectively.

- --------------------------------------------------------------------------------
19 1997 Annual Report - International Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

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

(7) CAPITAL LOSS
CARRYOVER
................................
For federal income tax purposes, the funds had capital
loss carryovers at September 30, 1997, which, if not
offset by subsequent capital gains, will expire on the
funds' fiscal year-ends as indicated below. It is unlikely
the board of directors will authorize a distribution of
any net realized capital gains until the available capital
loss carryovers have been offset or expire.

Utilization of the capital loss carryovers is limited to
$820,258 and $1,065,056 per year for Emerging Markets
Growth Fund and Pacific-European Growth Fund,
respectively.

<TABLE>
<CAPTION>
EMERGING MARKETS PACIFIC-EUROPEAN
GROWTH FUND GROWTH FUND
-------------------------- ---------------------------
CAPITAL LOSS CAPITAL LOSS
CARRYOVER EXPIRATION CARRYOVER EXPIRATION
------------- ---------- ------------- -----------
<S> <C> <C> <C>
$5,670,695 2003 $5,592,519 2003-2006
------------- -------------
------------- -------------
</TABLE>

(8) ACQUISITION
................................
On June 21, 1996, the Pacific-European Growth Fund
acquired all of the net assets of Hercules European Value
Fund and Hercules Pacific Basin Value Fund (Hercules
Funds) in a tax-free reorganization approved by the
Hercules Funds' shareholders on June 18, 1996. The fund
issued 759,622 shares in exchange for net assets of
$10,146,587 of Hercules European Value Fund and 1,379,503
shares for net assets of $18,426,580 of Hercules Pacific
Basin Value Fund. Included in the net assets acquired was
$1,106,240 in unrealized appreciation and $2,940,783 in
accumulated losses. The aggregate net assets of the
combined fund following the transaction totalled
$190,869,104.

- --------------------------------------------------------------------------------
20 1997 Annual Report - International Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

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

EMERGING MARKETS GROWTH FUND

<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------
Three Months
Year Ended Ended Year Ended June 30,
September 30, September 30, -------------------------------------
1997 1996 1996(c) 1995 1994(d)
-------------- -------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 8.85 $ 8.84 $ 7.20 $ 9.14 $10.00
-------------- -------------- ----------- --------- -----------
Operations:
Net investment income ................ 0.02 -- 0.01 -- 0.01
Net realized and unrealized gains
(losses) on investments ............ 2.10 0.01 1.63 (1.94) (0.87)
-------------- -------------- ----------- --------- -----------
Total from operations .............. 2.12 0.01 1.64 (1.94) (0.86)
-------------- -------------- ----------- --------- -----------
Distributions to shareholders:
From net investment income ........... (0.01) -- -- -- --
-------------- -------------- ----------- --------- -----------
Net asset value, end of period ......... $ 10.96 $ 8.85 $ 8.84 $ 7.20 $ 9.14
-------------- -------------- ----------- --------- -----------
-------------- -------------- ----------- --------- -----------
SELECTED INFORMATION
Total return (a) ....................... 23.91% 0.11% 22.78% (21.23)% (8.60)%
Net assets at end of period (in
millions) ............................ $ 17 $ 14 $ 14 $ 23 $ 28
Ratio of expenses to average daily net
assets ............................... 2.00% 2.00%(f) 2.00% 2.00% 2.00%(f)
Ratio of net investment income (loss) to
average daily net assets ............. 0.17% 0.26%(f) 0.15% (0.03)% 0.14%(f)
Average commission rate paid on
portfolio transactions (b) ........... $0.0007 $0.0009 n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) ............... 105% 0% 140% 161% 78%
Ratios before waivers by the advisor and
distributor:
Ratio of expenses to average daily net
assets before waivers .............. 3.34% 4.09%(f) 3.54% 3.47% 3.10%(f)
Ratio of net investment loss to
average daily net assets before
waivers ............................ (1.17)% (1.83)%(f) (1.39)% (1.50)% (0.96)%(f)
</TABLE>

<TABLE>
<CAPTION>
CLASS B
--------------
Period Ended
September 30,
1997(e)
--------------
<S> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 10.13
--------------
Operations:
Net realized and unrealized gains on
investments ........................ 0.73
--------------
Net asset value, end of period ......... $ 10.86
--------------
--------------
SELECTED INFORMATION
Total return (a) ....................... 7.21%
Net assets at end of period (in
thousands) ........................... $ 310
Ratio of expenses to average daily net
assets ............................... 2.64%(f)
Ratio of net investment income to
average daily net assets ............. 0.03%(f)
Average commission rate paid on
portfolio transactions (b) ........... $0.0007
Portfolio turnover rate (excluding
short-term securities) ............... 105%
Ratios before waivers by the advisor:
Ratio of expenses to average daily net
assets before waivers .............. 3.39%(f)
Ratio of net investment loss to
average daily net assets before
waivers ............................ (0.72)%(f)
</TABLE>

(a) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(b) DISCLOSED IN ACCORDANCE WITH GUIDELINES ADOPTED IN 1996. THE COMPARABILITY
OF THIS INFORMATION MAY BE AFFECTED BY THE FACT THAT COMMISSION RATES PER
SHARE VARY SIGNIFICANTLY AMONG FOREIGN COUNTRIES.
(c) EMERGING MARKETS GROWTH FUND COMMENCED OPERATIONS AND ACQUIRED THE NET
ASSETS OF HERCULES LATIN AMERICAN VALUE FUND ON JUNE 21, 1996, VIA A
TAX-FREE REORGANIZATION. EMERGING MARKETS GROWTH FUND HAD NO ASSETS OR
LIABILITIES PRIOR TO THE ACQUISITION. CONSEQUENTLY, THE INFORMATION
PRESENTED FOR EMERGING MARKETS GROWTH FUND PRIOR TO JUNE 21, 1996,
REPRESENTS THE FINANCIAL HISTORY OF HERCULES LATIN AMERICAN VALUE FUND. AS
A RESULT OF THE REORGANIZATION, THE FUND'S SUBADVISOR CHANGED FROM BANKERS
TRUST COMPANY TO EDINBURGH FUND MANAGERS PLC. ON JULY 18, 1995,
SHAREHOLDERS OF HERCULES LATIN AMERICAN VALUE FUND APPROVED A CHANGE IN THE
FUND'S ADVISOR FROM HERCULES INTERNATIONAL MANAGEMENT LLC TO PIPER CAPITAL
MANAGEMENT INCORPORATED.
(d) COMMENCEMENT OF OPERATIONS OF HERCULES LATIN AMERICAN VALUE FUND WAS
NOVEMBER 9, 1993.
(e) COMMENCEMENT OF OFFERING OF CLASS B SHARES WAS FEBRUARY 18, 1997.
(f) ANNUALIZED.

- --------------------------------------------------------------------------------
21 1997 Annual Report - International Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------

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

PACIFIC-EUROPEAN GROWTH FUND

<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------
Seven Months
Year Ended Ended Year Ended February 28,
September 30, September 30, -----------------------------------------
1997 1996(b) 1996 1995 1994 1993(d)
-------------- -------------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 12.94 $ 13.86 $ 12.73 $ 15.44 $ 10.81 $10.53
-------------- -------------- ------- ------- ------- -----------
Operations:
Net investment income (loss) ......... (0.04)(g) 0.07 0.05 (0.03) (0.03) --
Net realized and unrealized gains
(losses) on investments ............ 0.95 (0.28) 2.03 (1.63) 4.72 0.28
-------------- -------------- ------- ------- ------- -----------
Total from operations .............. 0.91 (0.21) 2.08 (1.66) 4.69 0.28
-------------- -------------- ------- ------- ------- -----------
Distributions to shareholders:
From net investment income ........... (0.03) -- (0.05) -- -- --
From net realized gains .............. (0.32) (0.71) (0.90) (1.05) (0.06) --
-------------- -------------- ------- ------- ------- -----------
Total distributions to
shareholders ..................... (0.35) (0.71) (0.95) (1.05) (0.06) --
-------------- -------------- ------- ------- ------- -----------
Net asset value, end of period ......... $ 13.50 $ 12.94 $ 13.86 $ 12.73 $ 15.44 $10.81
-------------- -------------- ------- ------- ------- -----------
-------------- -------------- ------- ------- ------- -----------
SELECTED INFORMATION
Total return (a) ....................... 7.25% (1.66)% 16.70% (11.09)% 43.45% 2.66%
Net assets at end of period (in
millions) ............................ $ 79 $ 172 $ 163 $ 154 $ 166 $ 60
Ratio of expenses to average daily net
assets ............................... 1.72% 1.64%(f) 1.55% 1.76% 1.81% 2.25%
Ratio of net investment income (loss) to
average daily net assets ............. (0.28)% 0.29%(f) 0.36% (0.19)% (0.29)% 0.03%
Average commission rate paid on
portfolio transactions (c) ........... $0.0212 $0.0173 n/a n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) ............... 62% 49% 65% 57% 52% 59%
Ratios before waivers by the advisor and
distributor:
Ratio of expenses to average daily net
assets before waivers .............. 1.89% 1.83%(f) 1.73% 1.98% 2.01% 2.59%
Ratio of net investment income (loss)
to average daily net assets before
waivers ............................ (0.45)% 0.10%(f) 0.18% (0.41)% (0.49)% (0.31)%
</TABLE>

<TABLE>
<CAPTION>
CLASS B CLASS Y
-------------- --------------
Period Ended Period Ended
September 30, September 30,
1997(e) 1997(e)
-------------- --------------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 12.55 $ 12.55
-------------- --------------
Operations:
Net investment income (loss) ......... (0.01) 0.07
Net realized and unrealized gains on
investments ........................ 0.94 0.94
-------------- --------------
Total from operations .............. 0.93 1.01
Distributions to shareholders:
From net investment income ........... (0.01) (0.01)
-------------- --------------
Net asset value, end of period ......... $ 13.47 $ 13.55
-------------- --------------
-------------- --------------
SELECTED INFORMATION
Total return (a) ....................... 7.40% 8.03%
Net assets at end of period (in
thousands and millions for Class B and
Class Y, respectively) ............... $ 55 $ 15
Ratio of expenses to average daily net
assets ............................... 2.44%(f) 1.42%(f)
Ratio of net investment income (loss) to
average daily net assets ............. (0.24)%(f) 0.77%(f)
Average commission rate paid on
portfolio transactions (c) ........... $0.0212 $0.0212
Portfolio turnover rate (excluding
short-term securities) ............... 62% 62%
</TABLE>

(a) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(b) ON JUNE 21, 1996, THE FUND ACQUIRED THE NET ASSETS OF HERCULES EUROPEAN
VALUE FUND AND HERCULES PACIFIC BASIN VALUE FUND VIA A TAX-FREE
REORGANIZATION.
(c) DISCLOSED IN ACCORDANCE WITH GUIDELINES ADOPTED IN 1996. THE COMPARABILITY
OF THIS INFORMATION MAY BE AFFECTED BY THE FACT THAT COMMISSION RATES PER
SHARE VARY SIGNIFICANTLY AMONG FOREIGN COUNTRIES.
(d) THE FUND CONVERTED FROM A CLOSED-END INVESTMENT COMPANY TO AN OPEN-END
INVESTMENT COMPANY ON AUGUST 31, 1992. INFORMATION FOR PERIODS PRIOR TO
CONVERSION IS BASED ON THE FUND'S OPERATIONS AS A CLOSED-END FUND. FISCAL
1993 EXPENSES INCLUDE 0.32% RELATED TO CONVERTING TO AN OPEN-END FUND.
(e) COMMENCEMENT OF OFFERING OF CLASS B AND CLASS Y SHARES WAS FEBRUARY 18,
1997.
(f) ANNUALIZED.
(g) BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.

- --------------------------------------------------------------------------------
22 1997 Annual Report - International Growth Funds
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EMERGING MARKETS GROWTH FUND September 30, 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 (86.5%):
ARGENTINA (3.0%):
Banco Frances del Rio de la Plata ADR - banking and
financial services .............................. 6,702 $ 219,072
Perez Companc Class B - oil and gas ............... 38,387 308,309
------------
527,381
------------
BRAZIL (9.8%):
Centrais Eletricas Brasileiras (Electrobras) -
utilities ....................................... 905,958 474,471
Paranaense de Energia Copel - utilities . 23,000,000 350,456
Telecomunicacoes Brasileiras (Telebras) -
telecommunications .............................. 3,248,300 371,954
Telecomunicacoes Brasileiras (Telebras) ADR -
telecommunications 1,300 167,375
Uniao de Bancos Brasileiros GDR (Unibanco) -
banking ......................................... 9,000(b) 329,625
------------
1,693,881
------------
CHILE (6.1%):
Cervecerias Unidas ADR - brewer and distiller ..... 12,500 359,375
Chilectra ADR - utilities ......................... 16,250 512,972
Telecomunicaciones de Chile ADR -
telecommunications .............................. 5,911 191,369
------------
1,063,716
------------
CHINA (1.8%):
Quingling Motors - automobile ..................... 490,000 310,287
------------
EGYPT (2.9%):
Al-Ahram Beverages GDR - brewers and distillers ... 16,000(b) 504,000
------------
GHANA (1.9%):
Guinness Ghana - brewers and distillers 354,889(b) 70,659
Pioneer Tobacco - tobacco ......................... 1,500,000(b) 254,831
------------
325,490
------------
GREECE (2.4%):
Goody's - food and beverage ....................... 23,540 409,200
------------
HONG KONG (4.5%):
Asia Satellite Telecom Hldgs - telecommunication
services ........................................ 66,000 183,381
China Overseas Land and Investment - real
estate .......................................... 280,000 176,402
Guangdong Kelon Electrical - consumer goods ....... 100,000 129,232
Hutchison Whampoa - diversified holding company ... 19,000 187,225
Pacific Port - transportation ..................... 320,000(b) 97,183
------------
773,423
------------
</TABLE>

<TABLE>
<CAPTION>
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
HUNGARY (2.9%):
BorsodChem GDR - chemicals ........................ 4,870 $ 194,191
OTP Bank GDR - banking and financial services ..... 9,700 315,978
------------
510,169
------------
INDIA (2.3%):
Mahindra & Mahindra GDR - automobiles ............. 19,300 225,328
Videsh Sanchar Nigam GDR 144A - telecommunications
services ........................................ 10,400(c) 174,590
------------
399,918
------------
INDONESIA (5.0%):
Daya Guna Samudera - food and beverage ............ 175,000 291,667
Eterindo Wahanatama - chemicals ................... 400,000(b) 232,416
Gulf Indonesia Resources - oil and gas ............ 1,500 33,375
Indofood Sukses Makmur - food and beverage ........ 13,600 16,532
PT London Sumatra Indonesia - agricultural
operations ...................................... 240,000 293,578
------------
867,568
------------
ISRAEL (0.8%):
Comfy Interactive Movies - communications ......... 118,500(b) 133,249
------------
LEBANON (1.0%):
Solidere GDR - real estate ........................ 10,800(b) 180,630
------------
MALAYSIA (4.2%):
Guinness Anchor - brewers and distillers 160,000 246,419
Kentucky Fried Chicken Malaysia - food and
beverage ........................................ 48,000 111,628
Malaysia Assurance Alliance - insurance ........... 55,000 148,237
Petronas Gas Berhad - oil and gas ................. 13,000(b) 38,441
Sungei Way Holdings - construction and construction
materials ....................................... 200,000 183,582
------------
728,307
------------
MEXICO (14.1%):
Cemex Class B - construction and construction
materials ....................................... 74,000 440,453
Corporacion GEO Class B - real estate ............. 58,900(b) 366,512
Fomento Economico Mexicano (Femsa) Class B - food
and beverage .................................... 65,500 565,373
Grupo Carso Class A1 - diversified holding
company ......................................... 23,179 186,937
Grupo Financiero Banorte Class B - banking and
financial services .............................. 455,625(b) 880,491
------------
2,439,766
------------
PAKISTAN (0.8%):
Hub Power GDR - utilities ......................... 4,200(b) 138,600
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- --------------------------------------------------------------------------------
23 1997 Annual Report - International Growth Funds
<PAGE>
Investments in Securities (continued)
- --------------------------------------------------------------------------------

EMERGING MARKETS GROWTH FUND
(CONTINUED)

<TABLE>
<CAPTION>
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
------------
PAPUA NEW GUINEA (2.0%):
Orogen Minerals - mining .......................... 120,000 $ 343,721
------------
PERU (0.7%):
Telefonica del Peru Class B -
telecommunications .............................. 48,100 112,866
------------
PHILIPPINES (1.8%):
Belle - real estate ............................... 1,100,000(b) 143,478
San Miguel Class B - brewers and distillers ....... 110,000 176,957
------------
320,435
------------
RUSSIA (2.5%):
Gazprom ADR - oil and gas ......................... 11,650(b) 288,338
Vimpel-Communications ADR - telecommunications .... 3,400(b) 141,950
------------
430,288
------------
SOUTH AFRICA (9.7%):
Anglo American Corporation of South Africa -
mining .......................................... 4,000 204,875
Dimension Data Holdings LTD - computers ........... 43,100(b) 180,490
Fedsure Holdings Limited - life/health
insurance ....................................... 20,000 230,860
JD Group - consumer goods ......................... 40,000 302,803
Johnnies Industrial - mining ...................... 17,500 227,370
Sasol - oil and gas ............................... 30,000 413,938
South Africa Breweries ADR - brewers and
distillers ...................................... 4,000 116,032
------------
1,676,368
------------
SOUTH KOREA (0.9%):
Kookmin Bank GDR - banking ........................ 12,114(b) 151,425
------------
TAIWAN (1.8%):
Asustek Computer GDR - technology ................. 11,000(b) 192,500
Standard Foods Taiwan GDR - food and beverage ..... 12,000(b) 117,000
------------
309,500
------------
THAILAND (2.7%):
Delta Electronics Thai PLC - electric
products-miscellaneous .......................... 19,000 164,525
Exploration and Production - oil and gas 7,000 95,028
</TABLE>

<TABLE>
<CAPTION>
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Thai Farmers Bank - banking ....................... 24,000 85,140
Tipco Asphalt - construction and construction
materials ....................................... 41,000 127,123
------------
471,816
------------
ZIMBABWE (0.9%):
NMBZ Holdings - banking and financial services .... 65,000(b) $ 156,000
------------
Total Common Stock
(cost: $12,292,336) .......................... 14,978,004
------------
PREFERRED STOCK (8.2%):
BRAZIL (8.2%):
Banco Bradesco - banking and financial services ... 30,000,032 312,046
Cervejaria Brahma - food and beverage . 400,730 306,032
Refrigeracao Parana (Refripar) - consumer goods ... 700 1
Mesbla - retail ................................... 1,300,000(b) --
Petroleo Brasileiro - oil and gas ................. 1,616,500 454,289
Usinas Siderurgica de Minas Gerais (Usiminas) -
metal products .................................. 31,273 341,265
------------
Total Preferred Stock
(cost: $1,205,163) ........................... 1,413,633
------------
WARRANTS (0.0%):
Belle Corp. - Philippines - real estate, 12/31/00
(cost: $0) ...................................... 220,000(b) --
------------
Total Investments in Securities
(cost: $13,497,499) (d) ...................... $ 16,391,637
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS. MARKET VALUES ARE STATED IN U.S. DOLLARS.
(b) CURRENTLY NON-INCOME PRODUCING.
(c) SECURITIES SOLD WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM, EXEMPT FROM
REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER ACCREDITED INVESTORS.
SECURITIES ARE CONSIDERED LIQUID UNDER GUIDELINES ESTABLISHED BY THE BOARD
OF DIRECTORS.
(d) ON SEPTEMBER 30, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $13,497,499. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 4,586,145
GROSS UNREALIZED DEPRECIATION ...... (1,692,007)
------------
NET UNREALIZED APPRECIATION ...... $ 2,894,138
------------
------------
</TABLE>

- --------------------------------------------------------------------------------
24 1997 Annual Report - International Growth Funds
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PACIFIC-EUROPEAN GROWTH FUND September 30, 1997
.......................................................................................

COMMON STOCK (92.9%):
ARGENTINA (0.7%):
Inversiones y Representaciones (IRSA) GDR - real
estate .......................................... 4,600 $ 203,550
Telecom Argentina ADR - telecommunications ........ 13,800 420,038
------------
623,588
------------
AUSTRALIA (2.6%):
Brambles Industries LTD - diversified
operations/commercial services .................. 17,000 354,417
Futuris - diversified industrial and
conglomerates ................................... 260,000 383,677
GIO Australia Holdings LTD - multi-line
insurance ....................................... 120,000 356,774
Lend Lease - financial services ................... 30,000 713,352
Reinsurance Australia - insurance ................. 148,000 403,531
Westpac Banking Corp. - banking ................... 38,000 239,735
------------
2,451,486
------------
BRAZIL (0.6%):
Telecomunicacoes Brasileiras (Telebras) ADR -
telecommunications .............................. 4,700 605,125
------------
CHILE (0.7%):
Enersis ADR - utilities ........................... 15,500 574,469
------------
FRANCE (9.1%):
Pinault - Printemps-Redoute - retail .............. 4,980 2,341,342
Rhone-Poulenc Class A - pharmaceuticals ........... 52,500 2,093,118
Schneider - electronics ........................... 33,400 2,113,103
Total Class B - oil and gas ....................... 17,700 2,030,324
------------
8,577,887
------------
GERMANY (11.1%):
Bayer - diversified industrial and conglomerate ... 52,200 2,083,557
Deutsche Bank - banking and financial services .... 31,000 2,188,028
Mannesmann - industrial machinery manufacturing ... 4,135 1,975,416
Metro AG - retail-major department store .......... 6,200 285,640
Thyssen - metal products .......................... 9,320 2,178,633
Veba - diversified industrial and conglomerates ... 29,900 1,751,589
------------
10,462,863
------------
HONG KONG (3.2%):
Cheung Kong - real estate ......................... 80,000 899,457
Dao Heng Bank Group - banking and financial
services ........................................ 165,000 744,185
Hutchison Whampoa - diversified holding company ... 90,000 886,857
Hysan Development - real estate ................... 170,000 508,594
------------
3,039,093
------------
</TABLE>

<TABLE>
<CAPTION>
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
INDONESIA (0.0%):
Gulf Indonesia Resources - oil and gas ............ 1,500 $ 33,375
------------
ITALY (1.9%):
Ente Nazionale Idrocarburi (ENI) - oil and gas .... 279,100 1,761,641
------------
JAPAN (21.6%):
Aoyama Trading - retail ........................... 30,000 862,377
Bank of Tokyo - Mitsubishi - banking .............. 20,000 382,171
Bridgestone Corporation - rubber-tires ............ 25,000 602,335
Canon - electronics ............................... 35,000 1,026,461
Canon Sales - retail .............................. 40,000 790,928
DDI - telecommunications .......................... 120 604,162
Fuji Photo Film - consumer goods .................. 24,000 992,980
Fujikura - telecommunications ..................... 100,000 716,986
Fujitsu LTD - computers-integrated systems ........ 70,000 878,162
Hitachi - electronics ............................. 90,000 785,112
Honda Motor - motor vehicles ...................... 18,000 629,585
Isetan - retail ................................... 70,000 674,615
Kyocera - electronics ............................. 15,000 983,259
Matsushita Electric Industrial - electronics ...... 50,000 905,579
Matsushita Electric Works - construction and
construction materials .......................... 100,000 1,046,816
Mitsui & Co. - diversified industrial and
conglomerates ................................... 110,000 867,279
Mitsui Fudosan - real estate ...................... 70,000 854,900
Mori Seiki - industrial machinery and
manufacturing ................................... 50,000 585,718
Nippon Telephone and Telegraph -
telecommunications .............................. 10,000 922,195
Nissan Motor - automobiles ........................ 150,000 897,271
Ono Pharmaceutical - pharmaceuticals .............. 30,000 894,778
Sekisui Chemical - chemicals ...................... 88,000 664,579
Shohkoh Fund - financial services ................. 1,800 503,967
Sony Corporation - electronics .................... 6,000 568,272
Sumitomo Metal Industries - construction and
construction materials .......................... 350,000 729,863
Sumitomo Trust and Banking - financial services ... 45,000 448,635
Tokyu Land Corp. - real estate .................... 185,000(b) 478,004
------------
20,296,989
------------
MALAYSIA (0.2%):
Guinness Anchor - brewers and distillers .......... 120,000 184,814
------------
MEXICO (1.4%):
Cemex Class CPO - construction and construction
materials ....................................... 66,400 344,746
Fomento Economico Mexicano (Femsa) Class B - food
and beverage .................................... 47,200 407,421
Gruma Class B - food and beverage ................. 59,606(b) 288,738
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- --------------------------------------------------------------------------------
25 1997 Annual Report - International Growth Funds
<PAGE>
Investments in Securities (continued)
- --------------------------------------------------------------------------------

PACIFIC-EUROPEAN GROWTH FUND
(CONTINUED)

<TABLE>
<CAPTION>
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Kimberly-Clark de Mexico - A - paper and related
products ........................................ 60,700 $ 312,415
------------
1,353,320
------------
NETHERLANDS (6.9%):
ING Groep N.V. - money center banks . 21,700 999,083
Koninklijke Ahold NV - food-retail ................ 96,000 2,601,652
Verenigde Nederlandse Uitgeversbedrijven Verenigd
Bezit (VNU) - printing and publishing ........... 122,500 2,850,846
------------
6,451,581
------------
NEW ZEALAND (0.1%):
Restaurant Brands New Zealand - retail ............ 81,000(b) 123,101
------------
PAPUA NEW GUINEA (0.6%):
Orogen Minerals - mining .......................... 195,000 558,547
------------
SINGAPORE (1.6%):
City Developments - real estate ................... 64,400 417,115
Development Bank of Singapore - financial
services ........................................ 61,000 622,571
United Overseas Bank - banking and financial
services ........................................ 68,000 502,715
------------
1,542,401
------------
SPAIN (2.1%):
Banco Bilbao Vizcaya - money center banks ......... 63,000 1,945,072
------------
SWEDEN (2.8%):
Astra AB - A - medical-drugs ...................... 87,500 1,618,230
Nordbanken AB - regional banks .................... 28,000 957,992
------------
2,576,222
------------
SWITZERLAND (6.8%):
ABB AG - Bearer - engineering/research and
development services ............................ 1,110 1,640,021
Novartis - pharmaceuticals ........................ 1,360 2,091,947
Union Bank of Switzerland Schweiz Bankgesellschaft
- B - money center banks ........................ 2,221 2,602,848
------------
6,334,816
------------
UNITED KINGDOM (18.9%):
Barclays - banking and financial services ......... 40,000 1,077,482
BBA - automobiles ................................. 145,000 987,821
British Aerospace - aerospace ..................... 48,000 1,272,366
British Petroleum - oil and gas ................... 127,000 1,917,985
British Telecom - telecommunications .............. 130,000 858,350
General Electric - electronics .................... 120,000 755,516
GKN PLC - auto/truck parts and equipment .......... 33,500 758,753
Glaxo Wellcome - pharmaceuticals .................. 41,000 922,997
HSBC Holdings - banking and financial services .... 36,500 1,297,030
Legal & General Group - insurance ................. 140,000 1,089,815
</TABLE>

<TABLE>
<CAPTION>
Number
of Shares
or
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Lloyds TSB Group - banking and financial
services ........................................ 130,000 $ 1,747,130
Marks & Spencers - retail ......................... 119,400 1,222,056
SeaPerfect - food and beverage .................... 90,497(b) --
TI Group - mechanical engineering ................. 90,000 966,188
Unilever - consumer products ...................... 18,200 532,828
Wolseley PLC - retail-building products ........... 133,000 1,092,867
Zeneca - pharmaceuticals .......................... 39,000 1,274,933
------------
17,774,117
------------
Total Common Stock
(cost: $74,815,748) .......................... 87,270,507
------------
PREFERRED STOCK (2.2%):
BRAZIL (0.7%):
Centrais Electricas Brasileiras (Electrobras) -
utilities ....................................... 25,150 699,007
------------
JAPAN (1.5%):
Fuji International Finance Trust, 0.25%, 2/1/02
(Japanese Yen) - financial services ............. 180,000,000 1,406,659
------------
Total Preferred Stock
(cost: $2,020,983) ........................... 2,105,666
------------
CONVERTIBLE CORPORATE NOTES AND BONDS (d) (2.8%):
CAYMAN ISLANDS (0.5%):
STB Cayman Capital, 0.50%, 10/1/07 (Japanese Yen) -
financial services .............................. 55,000,000 509,206
------------
FRANCE (2.3%):
Finaxa, 2.75%, 1/1/06 (French Francs) - financial
services ........................................ 11,854,100 2,107,625
------------
Total Convertible Corporate Notes and Bonds
(cost: $2,464,656) ........................... 2,616,831
------------
SHORT-TERM SECURITIES (2.6%):
Repurchase agreement with Goldman Sachs, acquired
on 9/30/97, interest of $417, 6.15%, 10/1/97
(cost: $2,440,000) .............................. $ 2,440,000(c) 2,440,000
------------
Total Investments in Securities
(cost: $81,741,387) (e) ...................... $ 94,433,004
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS. MARKET VALUES ARE STATED IN U.S. DOLLARS.
(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) PRINCIPAL AMOUNTS ARE STATED IN THE CURRENCY WHICH IS INDICATED
PARENTHETICALLY.
(e) ON SEPTEMBER 30, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $81,741,387. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 17,604,223
GROSS UNREALIZED DEPRECIATION ...... (4,912,606)
------------
NET UNREALIZED APPRECIATION ...... $ 12,691,617
------------
------------
</TABLE>

- --------------------------------------------------------------------------------
26 1997 Annual Report - International Growth Funds
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------

THE BOARD OF DIRECTORS AND SHAREHOLDERS
PIPER GLOBAL FUNDS INC.:

We have audited the accompanying statements of assets and
liabilities, including the schedules of investments in
securities, of Emerging Markets Growth Fund and
Pacific-European Growth Fund (funds within Piper Global
Funds Inc.) as of September 30, 1997, and the related
statements of operations for the year then ended, the
statements of changes in net assets for the year ended
September 30, 1997, the three months ended September 30,
1996, and the year ended June 30, 1996, for Emerging
Markets Growth Fund, and the year ended September 30,
1997, the seven months ended September 30, 1996, and the
year ended February 29, 1996, for Pacific-European Growth
Fund, and the financial highlights presented in note 9 to
the financial statements. These financial statements and
the financial highlights are the responsibility of the
funds' management. Our responsibility is to express an
opinion on these financial statements and the financial
highlights based on our audits.

We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are
confirmed to us by the custodian. As to securities
purchased and sold but not received or delivered, we
request confirmations from brokers and, where replies are
not received, we carry out other appropriate auditing
procedures. An audit also includes assessing the
accounting principles used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.

In our opinion, the financial statements and the financial
highlights referred to above present fairly, in all
material respects, the financial position of Emerging
Markets Growth Fund and Pacific-European Growth Fund as of
September 30, 1997, and the results of their operations,
the changes in their net assets and the financial
highlights for the periods stated in the first paragraph
above, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 7, 1997

- --------------------------------------------------------------------------------
27 1997 Annual Report - International Growth Funds
<PAGE>
Federal Income Tax Information
- --------------------------------------------------------------------------------

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

INCOME DISTRIBUTIONS (TAXABLE AS ORDINARY DIVIDENDS, 0%
QUALIFYING FOR DEDUCTION BY CORPORATIONS)

LONG-TERM GAINS (TAXABLE AS CAPITAL GAINS DISTRIBUTIONS)

<TABLE>
<CAPTION>
EMERGING MARKETS PACIFIC-EUROPEAN
GROWTH FUND GROWTH FUND
---------------- -------------------------
PAYABLE DATE CLASS A CLASS B CLASS A CLASS B CLASS Y
- ---------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
October 22, 1996 ....................... $ -- $ -- $0.2862 $ -- $ --
December 23, 1996 ...................... -- -- 0.0285 -- --
June 16, 1997 .......................... -- -- 0.0083 0.0083 0.0083
------- ------- ------- ------- -------
Total ................................ $ -- $ -- $0.3230 $0.0083 $0.0083
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>

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

28 1997 Annual Report - International Growth
Funds
<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

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

29 1997 Annual Report - International Growth Funds
<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

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

30 1997 Annual Report - International Growth Funds
<PAGE>

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

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

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

LOW MINIMUM INVESTMENTS

You may become a shareholder in Piper Funds class A shares or class B shares
with an initial investment of $250 or more. Class Y shares have a minimum
initial investment of $1 million. Add to your existing investment with any
amount, at any time.

AUTOMATIC MONTHLY INVESTMENT PROGRAMS

To purchase shares as part of a savings discipline, you may automatically
transfer $100 or more each month to any Piper fund from your bank, savings and
loan or other financial institution. Or, transfer $25 or more per month from any
of the Piper money market funds.*

RECEIVING DIVIDENDS AND OTHER DISTRIBUTIONS

Dividend and capital gains distributions may be reinvested in additional shares
of the fund you own, invested in shares of a different Piper fund offered in
your state, or distributed in cash. Any reinvestments must be in the same class
of shares.

REDUCING THE CLASS A FRONT-END SALES CHARGE

You may reduce, or even eliminate, the class A front-end sales charge if: your
initial investment exceeds a specified amount, your investment combined with the
value of your existing Piper Funds investments (or a related account's
investments) exceeds a specified amount or if your investments combined during a
13-month period exceed a specified amount. See your prospectus for details.

EXCHANGING SHARES

If your investment goals or your financial needs change, you may move from one
Piper fund to the same class of another Piper fund, if the shares of that fund
are legally available in your state. There is no fee to exchange shares.

Exchanges are generally made based on the net asset value per share of each fund
at the time of the exchange. However, if your new fund has a higher sales
charge, you must pay the difference.

TAKING SYSTEMATIC WITHDRAWALS

If your account has a value of $5,000 or more, you may make automatic
withdrawals from your account. You may withdraw $100 or more monthly, quarterly,
or semiannually by authorizing the sale of the appropriate number of shares on a
periodic basis.

REINVESTING AFTER A SALE

If you sell class A shares, you may reinvest in class A shares of that fund or
another Piper fund within 30 days without a sales charge. If you sell class B
shares (or other shares subject to a CDSC) and elect to reinvest within 30 days,
that charge will be credited to your account and the reinvested shares will
continue to be subject to the CDSC.

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.

ACCOUNT STATEMENTS

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

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

31 1997 Annual Report - International Growth Funds
<PAGE>

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

Asset allocation

Asset allocation is the process of dividing investment funds among categories of
assets, such as cash equivalents, stocks, bonds, and such tangible assets as
real estate, precious metals and collectables. The term also applies to
subcategories such as government, municipal and corporate bonds, and industry
groupings of common stocks. Asset allocation affects both risk and return and is
a central concept in personal financial planning and investment management.

Benchmark

A benchmark is an established basis of comparison for an investment's
performance. A benchmark may be an unmanaged market index or a group of similar
investments.

Devalued or devaluation

The lowering of the value of a country's currency relative to gold and/or the
currencies of other nations. Devaluation can also result from a rise in value of
other currencies relative to the currency of a particular country.

Overweighted or overweighting

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

Underweighted or underweighting

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

Valuations

The determined or estimated value of a particular stock.

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

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

32 1997 Annual Report - International Growth Funds

<PAGE>

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, Retired 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 ADVISOR
- --------------------------------------------------------------------------------
PIPER CAPITAL MANAGEMENT INCORPORATED, 222 South Ninth Street, Minneapolis, MN
55402-3804

SUBADVISOR
- --------------------------------------------------------------------------------
EDINBURGH FUND MANAGERS PLC, Donaldson House, 97 Haymarket Terrace, Edinburgh,
Scotland EH12 5HD

TRANSFER AND DIVIDEND DISBURSING AGENTS
- --------------------------------------------------------------------------------
INVESTORS FIDUCIARY TRUST COMPANY, 1004 Baltimore, Kansas City, MO 64105-1614

PIPER JAFFRAY INC., 222 South Ninth Street, Minneapolis, MN 55402-3804

PIPER TRUST COMPANY, 222 South Ninth Street, Minneapolis, MN 55402-3804

CUSTODIAN
- --------------------------------------------------------------------------------
INVESTORS FIDUCIARY TRUST COMPANY (EMERGING MARKETS GROWTH FUND)
801 Pennsylvania, Kansas City, MO 64105-1307

FIRST TRUST NATIONAL ASSOCIATION (PACIFIC-EUROPEAN GROWTH FUND)
180 East Fifth Street, St. Paul, MN 55101

ACCOUNTING AGENT
- --------------------------------------------------------------------------------
INVESTORS FIDUCIARY TRUST COMPANY, 801 Pennsylvania, Kansas City, MO 64105-1307

INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
KPMG PEAT MARWICK LLP, 4200 Norwest Center, Minneapolis, MN 55402

LEGAL COUNSEL
- --------------------------------------------------------------------------------
DORSEY & WHITNEY LLP, 220 South Sixth Street, Minneapolis, MN 55402

FOR MORE INFORMATION

BY PHONE [GRAPHIC]

800 866-7778

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

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 800 866-7778, or mail a request to us.

ON-LINE [GRAPHIC]

http://www.piperjaffray.com/

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INTERNATIONAL GROWTH FUNDS

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

International investments offer geographic diversification, often considered
essential for successful equity investing.

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

GROWTH AND INCOME FUNDS
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Growth and Income Fund
Balanced Fund

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

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

CASH MANAGEMENT FUNDS*
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Money Market Fund
U.S. Government Money Market Fund
Tax-Exempt 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,
including prospectuses, about the Piper Funds or call Mutual Fund Services at
800 866-7778. Please read the prospectuses carefully before investing or
sending money.

*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.

PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.

#10100 11/1997 264-97
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