<TABLE>

                                FINANCIAL SUMMARY
<CAPTION>

(Dollars in thousands, except per share amounts)
Fiscal years ending September            1997         1996         1995         1994         1993
--------------------------------------------------------------------------------------------------
<S>                                <C>          <C>          <C>          <C>          <C>   

Revenue
Commissions                        $  218,139   $  185,301   $  145,492   $  147,539   $  128,940
Profits on principal transactions     162,340      165,284      124,910      101,381       95,656
Investment banking                     98,335       98,812       64,138       61,146      112,829
Interest                               53,107       41,130       33,765       24,792       19,110
Asset management fees                  37,517       37,442       43,913       51,917       40,811
Other income                           32,456       25,935       19,489       10,736       13,379
--------------------------------------------------------------------------------------------------
    Total revenue                     601,894      553,904      431,707      397,511      410,725
    Interest expense                   26,964       16,866       11,741        7,242        4,774
--------------------------------------------------------------------------------------------------
    Net revenue                       574,930      537,038      419,966      390,269      405,951
--------------------------------------------------------------------------------------------------
Non-Interest Expense
Employee compensation                 372,703      343,518      262,110      245,567      254,198
Other operating expense               200,713      181,559      180,509      104,572       83,441
--------------------------------------------------------------------------------------------------
    Total non-interest expense        573,416      525,077      442,619      350,139      337,639
--------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes       1,514       11,961      (22,653)      40,130       68,312
Income Taxes (Benefit)                    560        4,665       (8,535)      14,848       27,325
--------------------------------------------------------------------------------------------------
Net Income (Loss)                  $      954   $    7,296   $  (14,118)  $   25,282   $   40,987
==================================================================================================
Per Share Data
Net income (loss)                  $      .05   $      .40   $     (.82)  $     1.41   $     2.28
Dividends                                 .30          .30          .30          .70          .50
Shareholders' equity                     9.15         9.17         8.90         9.76         9.01
--------------------------------------------------------------------------------------------------
Other Data (at year end)
Total assets                       $1,131,869   $  923,740   $  679,763   $  584,447   $  535,146
Shareholders' equity               $  171,563   $  166,825   $  155,724   $  167,803   $  157,912
Common shares outstanding 
     (in thousands)                    18,754       18,197       17,500       17,188       17,089
Total full-time employees               3,133        2,956        2,703        2,658        2,427
Total retail branch offices                89           78           77           74           72
Piper Capital assets under 
     management (in billions)      $     12.8   $      9.1   $      9.4   $     11.6   $     12.0
--------------------------------------------------------------------------------------------------
</TABLE>
In 1997 eight previous satellite locations were reclassified as
branch offices, which accounts for the majority of the change over 1996.
<PAGE>

                          MANAGEMENT'S FINANCIAL DISCUSSION



Business Environment
Piper Jaffray  Companies  Inc. (the Company) is  principally  engaged in general
securities  brokerage,  corporate and public  finance  services,  and investment
management.  Statements  regarding the Company's  expectations  as to its future
operations and financial  condition and certain other  information  presented in
this Annual Report constitute  forward-looking  statements within the meaning of
the  Private  Securities  Litigation  Reform Act of 1995.  Although  the Company
believes that its expectations are based on reasonable assumptions,  there is no
assurance that actual results will not differ from expectations as the Company's
businesses are highly  competitive and sensitive to many factors,  including the
volatility and price level of securities markets; the volume, size and timing of
securities  transactions;  the demand for investment  banking services;  and the
level and volatility of interest  rates. In addition,  a significant  portion of
the   Company's   expense,   including   salaries,   benefits,   occupancy   and
communications,  is  relatively  fixed and does not vary with  market  activity.
Consequently, the Company's revenue and net income have been and may continue to
be subject to wide fluctuations.

The accompanying table summarizes the changes in the major categories of revenue
and expense for the past two fiscal years.

<TABLE>
                                      Increase (Decrease)    Increase (Decrease)
                                         1997 vs. 1996          1996 vs. 1995
--------------------------------------------------------------------------------
(in thousands)                          Amount      %          Amount      %
--------------------------------------------------------------------------------
<S>                                   <C>          <C>       <C>          <C>

Revenue
Commissions                           $ 32,838     18        $ 39,809     27
Profits on principal transactions       (2,944)    (2)         40,374     32
Investment banking                        (477)     0          34,674     54
Interest, net                            1,879      8           2,240     10
Asset management fees                       75      0          (6,471)   (15)
Other income                             6,521     25           6,446     33
--------------------------------------------------------------------------------
    Net revenue                         37,892      7         117,072     28
--------------------------------------------------------------------------------

Non-Interest Expense
Employee compensation                   29,185      8          81,408     31
Floor brokerage and clearance            1,557     17           1,182     15
Occupancy and equipment                  5,742     16           5,916     19
Communications                           3,950     20           4,015     25
Travel and promotional                   5,266     31           1,411      9
Charge for PJIGX settlement, net             -      -         (56,090)  (100)
Other operating expense                  2,639      3          44,616     82
--------------------------------------------------------------------------------
    Total non-interest expense          48,339      9          82,458     19
--------------------------------------------------------------------------------
Income Before Income Taxes             (10,447)     -          34,614      -
Income Taxes                            (4,105)     -          13,200      -
--------------------------------------------------------------------------------
Net Income                            $ (6,342)     -        $ 21,414      -
================================================================================
</TABLE>


Operations
Fiscal 1997 vs. Fiscal 1996
The  Company's  total  revenue  grew 9 percent in fiscal  1997,  exceeding  $600
million  for the  first  time  in the  firm's  history.  These  revenue  results
reflected generally favorable conditions in the financial markets throughout the
year.  For fiscal 1997, net income was $1.0 million and net income per share was
$0.05,  compared to net income of $7.3 million and net income per share of $0.40
in the prior year. The current year's  operations  include a $6.6 million pretax
charge to earnings for proposed settlement of a derivatives-related class action
lawsuit  and a related  claim,  an  additional  $24.0  million  accrual  for the
estimated  remaining  costs of litigation and regulatory  inquiries  relating to
funds or assets managed by Piper Capital and certain other  litigation  matters,
and various other litigation-related costs. The prior year also included various
litigation costs, including $29.5 million in pretax charges for two class action
litigation  settlements,  as well as other legal settlements,  professional fees
and costs related to funds or assets managed by Piper Capital.

Commission  revenue  increased 18 percent ($32.8 million) over fiscal 1996, with
strong  growth in equity  commissions  and in sales of mutual  funds and annuity
products  in  the  Company's   retail  branch  system.   The  growth  in  equity
commissions,  which are  equity  transactions  in which the  Company  acts as an
agent, was somewhat influenced by the decision to reduce the number of stocks in
which  the  Company  makes a  market.  Consequently,  while  equity  commissions
increased,  profits on principal  transactions dropped 2 percent ($2.9 million),
with most of this decrease coming in the equity secondary market. Revenue in the
equity secondary market also decreased due to downward  pressure on spreads from
the new limit order rules implemented in 1997.

Investment  banking revenue was essentially  flat to the prior year as a slowing
in the  equity  underwriting  calendar  was  offset  by  additional  merger  and
acquisition  activity and an increase in the Company's market share of municipal
underwriting business.

Substantial  growth in customer margin  receivables and higher average levels of
fixed income  inventories  led to an 8 percent  increase in net interest  income
($1.9 million) over fiscal 1996. This increase was partially  offset by interest
that has been accruing on several  structured  legal  settlements  during fiscal
1997.  Average assets under management at Piper Capital were essentially flat to
the prior year at approximately  $9.4 billion,  leading to no substantial change
in asset management fees. However, late in fiscal 1997 Piper Capital acquired an
additional $2.6 billion in assets under  management to end the year with a total
of $12.8  billion  under  management.  Other income  increased 25 percent  ($6.5
million), primarily reflecting growth in the fee-based managed account business.

The Company's non-interest expense grew 9 percent ($48.3 million) in fiscal 1997
including the impact of legal settlements and other related expense.

Growth in revenue-based broker compensation,  significant  recruiting efforts in
the equity capital markets division, and additions to sales support staff in the
branches and administrative support in headquarters contributed to the 8 percent
increase in employee compensation ($29.2 million).

Occupancy  expense  increased  16 percent  ($5.7  million) in fiscal 1997 due to
addition or expansion of several offices, along with continued spending to build
the Company's technology  infrastructure.  Implementation of a wide area network
and   increases  in  the  installed   base  of  various  data  services   caused
communication expense to increase 20 percent ($4.0 million).

Travel and  promotional  expense  for fiscal  1997  increased  31 percent  ($5.3
million)  compared to the prior year due to  additional  promotional  campaigns,
expansion of investor conferences and a general increase in visits to clients.

Other  operating  expense  increased  3  percent  ($2.6  million).  The  Company
anticipates  other  operating  expense  in fiscal  1998  will be lower  than the
previous two years due to a reduction in ongoing litigation expense.


Fiscal 1996 vs. Fiscal 1995
The  Company's  total  revenue  was a record  $553.9  million  in  fiscal  1996,
contributing  to a solid compound  annual revenue growth rate of 16 percent over
the preceding five years.  Total revenue  increased 28 percent ($122.2  million)
over fiscal 1995,  reflecting  strong growth in equity secondary markets as well
as a continuation of the active markets for new issues experienced at the end of
fiscal  1995.  For fiscal  1996,  net income was $7.3 million and net income per
share was  $0.40,  compared  to a net loss of $14.1  million  and a net loss per
share of $0.82 in the prior  year.  Operations  for fiscal 1996  included  $29.5
million in pretax charges for two class action litigation  settlements,  as well
as other  legal  settlements,  professional  fees and costs  related to funds or
assets managed by Piper Capital.  Fiscal 1995 also included  various  litigation
costs, including a $70 million pretax charge to settle Institutional  Government
Income  Portfolio  (PJIGX)  mutual fund  litigation,  partially  offset by $13.9
million in insurance proceeds, net of related expense.

Commission revenue,  or the income realized in securities  transactions in which
the Company acts as agent,  increased  27 percent  ($39.8  million)  over fiscal
1995,  reflecting  the favorable  equity markets and strong sales of mutual fund
products.  Profits  on  principal  transactions,   or  the  income  realized  in
securities  transactions in which the Company acts as a secondary  market trader
of securities, grew 32 percent ($40.4 million). This growth in principal revenue
was also driven  primarily by equity  products,  with strong  revenue  increases
recorded  by the retail and  institutional  sales  forces.  An active  corporate
equity underwriting calendar,  additional merger and acquisition fees and market
share gains in municipal  underwriting  contributed to a 54 percent  increase in
investment banking revenue ($34.7 million).

Net interest income  increased 10 percent ($2.2 million) over fiscal 1995 due to
substantial  growth in customer margin  receivables and higher average levels of
fixed income  inventories.  This increase was partially  offset by interest that
was accrued on several structured legal settlements during fiscal 1996. Although
assets under  management at Piper Capital have  remained  essentially  flat from
1995 year end at $9.1 billion,  asset  management fees declined 15 percent ($6.5
million)  in fiscal  1996.  This  decline  related  primarily  to the closing of
privately   managed   accounts  and  mutual  fund  net  redemptions   from  fund
reorganizations  which occurred during the last quarter of the prior year. Other
income increased 33 percent ($6.4 million),  primarily  reflecting growth in the
number of wrap fee accounts as well as increases in other non-product revenue.

The Company's  non-interest  expense grew 19 percent  ($82.5  million) in fiscal
1996 including the impact of legal  settlements  and other  litigation and legal
expense.

Employee  compensation  increased  31 percent  ($81.4  million) due to growth in
revenue-based  broker  compensation,  profit-based  incentive  compensation  and
salaries   from   additions  to  sales   support   staff  in  the  branches  and
administrative support staff at headquarters.

Investment in the  technology  infrastructure  of the branches and  headquarters
along with the addition or expansion of several  retail  offices  contributed to
the 19 percent  increase  ($5.9 million) in occupancy  expense.  Related to this
technology investment were increases in data services,  which, along with volume
increases in market data quotes, were reflected in the 25 percent ($4.0 million)
increase in communication expense.

Travel  and  promotional  expense  for fiscal  1996  increased  9 percent  ($1.4
million)  compared to the prior year, as lower spending on media advertising and
mutual fund shareholder  services was offset by a higher percentage of the sales
force  qualifying for incentive trips and increased  spending for  institutional
travel and conferences.

Other  operating  expense  increased 82 percent ($44.6 million) due primarily to
legal settlements, professional fees and other costs resulting from lawsuits and
arbitrations related to various funds or assets managed by Piper Capital.


Liquidity and Capital Resources
The Company has a liquid balance sheet.  Most of the Company's assets consist of
cash and assets readily convertible into cash. Securities inventories are stated
at market value and are generally  readily  marketable.  Customers' margin loans
are  collateralized  by  securities  and have  floating  interest  rates.  Other
receivables  and payables with  customers and other brokers and dealers  usually
settle  within a few days.  The  Company's  assets  are  financed  by its equity
capital,  bank lines of credit,  proceeds from securities lending and securities
sold under  agreements  to  repurchase,  in  addition  to  non-interest  bearing
liabilities  such as checks  and  drafts  payable,  payables  to  customers  and
employee  compensation  payable.  The  fluctuations in cash flows from financing
activities are directly related to operating activities due to the liquid nature
of the Company's balance sheet.

The Company's securities  broker/dealer,  Piper Jaffray Inc. (Piper Jaffray), is
required by  Securities  and  Exchange  Commission  regulations  to meet certain
liquidity  and capital  standards.  At Sept.  30,  1997,  Piper  Jaffray had net
capital,  as defined in the regulations,  of $115.6 million,  which exceeded the
minimum net capital  requirements by $102.0 million.  Piper Jaffray's regulatory
capital consists entirely of shareholder's equity.

The Company's margin loans to customers have increased  significantly  over 1996
levels.  Margin loans to customers  totaled  $574.9  million at Sept.  30, 1997,
versus $457.0 million a year earlier.  The Company  regularly reviews the credit
quality of these margin loans.

The Company's securities inventories consist principally of corporate equity and
debt securities and municipal and government debt  obligations.  Inventories are
maintained  generally  to  provide  product  and  liquidity  for  the  Company's
customers rather than for firm investment or market  speculation  purposes,  and
therefore experience relatively high turnover. At Sept. 30, 1997,  approximately
$25.1 million of debt inventories were aged over 30 days. The Company's  trading
inventories do not contain a significant amount of securities which derive their
value from other investment products (derivatives). Piper Capital manages mutual
funds and other investment portfolios which do contain such derivatives.

In the  ordinary  course of  business,  the  Company  may hold  high-yield  debt
obligations  which are either unrated or rated below investment  grade. At Sept.
30, 1997, Piper Jaffray held  approximately  $10.9 million of such securities in
inventory.  Consistent with Piper  Jaffray's  inventory  pricing  policy,  these
securities are recorded on a market value basis with unrealized gains and losses
being recognized currently in earnings.

The Company's  growth during recent years has been financed  principally  by the
earnings and borrowings of Piper  Jaffray.  The ability of Piper Jaffray to fund
the  activities  of its parent or affiliates  is subject to  restrictions  under
applicable net capital rules as previously mentioned.

Over the past three years,  Piper Jaffray  entered into operating lease or other
contractual  commitments  of  approximately  $9.3 million for personal  computer
hardware  and  software  relating  to  the  workstation  system  for  investment
executives.  Over half of these commitments  expire during fiscal 1998, at which
time they will be considered  for renewal.  In addition,  the Company's  current
headquarters  lease  expires in the year 2000 and the  Company  intends to enter
into a 14-year  commitment on a new  headquarters  location in fiscal 1998.  The
Company  expects other  capital  expenditures  in fiscal 1998 to approach  $10.3
million.  Refer to Note Eight of the financial  statements  for a summary of the
Company's contractual commitments and contingent liabilities.

At Sept. 30, 1997, Piper Jaffray had $185 million in committed credit agreements
collateralized by customers' margin securities.  The committed facility included
up to $95 million in uncommitted lines collateralized by securities inventories.
Piper Jaffray has  additional  credit  facilities  which provide $200 million in
uncommitted  credit lines  collateralized by customers' margin  securities,  $50
million in uncommitted  credit lines  collateralized by securities  inventories,
and $75  million  in  uncommitted  credit  lines  collateralized  by  government
securities inventories.  All credit arrangements bear interest at rates based on
the federal funds rate. In addition,  at Sept. 30, 1997, the Company had a $15.0
million  unsecured  line of credit which bears interest at a variable rate based
on LIBOR.  Management  believes that existing  capital,  funds from  operations,
current credit lines and other available resources will be sufficient to finance
the Company's business.

The Company has structured  certain legal  settlements  related to various funds
and assets managed by Piper Capital.  At Sept. 30, 1997, the total payable under
these agreements  through Sept. 30, 2002, was $35.0 million.  These payments are
expected to be financed  through cash flow from operations and available  credit
facilities.

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


Inflation
The Company's net assets are primarily monetary,  consisting of cash, securities
inventories and receivables less monetary liabilities. These monetary net assets
are  generally  liquid  in  nature  and  turn  over  rapidly  and  thus  are not
significantly  affected by  inflation.  However,  to the extent  that  inflation
affects the Company's  costs,  such costs may not be readily  recoverable in the
price of its services.

Concern over inflation is one of the factors  influencing the Federal  Reserve's
interest  rate  increases.  Actions by the Federal  Reserve could cause rates to
increase,  which would  generally  have an  unfavorable  impact on the Company's
financial results.


Other Matters
Like most corporations,  the Company is heavily reliant on technology to deliver
services. As the millennium  approaches,  the Company is working toward becoming
year 2000 ready. We have developed  specific plans to address this issue and are
in the process of  implementing  them. In this process,  the Company  expects to
replace some systems and upgrade others.  The incremental  costs of this project
are  not  presently  expected  to be  material  to  the  Company's  consolidated
financial statements.  However, the Company may be adversely impacted if similar
efforts of other organizations are unsuccessful.


Effects of Recent Accounting Standards
Effective  in January  1998,  the  Company  will  adopt  certain  provisions  of
Statement of  Financial  Accounting  Standards  (SFAS) No. 125,  Accounting  for
Transfers and Servicing of Financial Assets and  Extinguishments of Liabilities,
which are  applicable  to its  business.  SFAS No. 125  introduces  a  financial
components  approach which focuses on the  recognition  of financial  assets and
liabilities an entity  controls and the  derecognition  of financial  assets and
liabilities  for  which  control  has been  transferred.  The  adoption  of this
statement is not expected to have a material  effect on the Company's  financial
condition or results of operations.

In February 1997, SFAS No. 128,  Earnings Per Share, was issued and is effective
for financial  statements  issued for periods  ending after Dec. 15, 1997.  This
statement changes the method for calculating and disclosing  earnings per share.
This  statement  will not have a material  effect on the Company's  earnings per
share computations.


<PAGE>

<TABLE>

                        CONSOLIDATED STATEMENTS OF OPERATIONS

                                         Year Ended    Year Ended    Year Ended
                                          Sept. 30,     Sept. 30,     Sept. 30,
(in thousands, except per share amounts)       1997          1996          1995
--------------------------------------------------------------------------------
<S>                                        <C>           <C>           <C>   
Revenue
Commissions                                $218,139      $185,301      $145,492
Profits on principal transactions           162,340       165,284       124,910
Investment banking                           98,335        98,812        64,138
Interest                                     53,107        41,130        33,765
Asset management fees                        37,517        37,442        43,913
Other income                                 32,456        25,935        19,489
--------------------------------------------------------------------------------
Total revenue                               601,894       553,904       431,707
Interest expense                             26,964        16,866        11,741
--------------------------------------------------------------------------------
Net revenue                                 574,930       537,038       419,966
--------------------------------------------------------------------------------

Non-Interest Expense
Employee compensation                       372,703       343,518       262,110
Floor brokerage and clearance                10,876         9,319         8,137
Occupancy and equipment                      42,229        36,487        30,571
Communications                               23,993        20,043        16,028
Travel and promotional                       22,227        16,961        15,550
Charge for PJIGX settlement, net                  -             -        56,090
Other operating expense                     101,388        98,749        54,133
--------------------------------------------------------------------------------
    Total non-interest expense              573,416       525,077       442,619
--------------------------------------------------------------------------------
Income (Loss) Before Income Taxes             1,514        11,961       (22,653)
Income Taxes (Benefit)                          560         4,665        (8,535)
--------------------------------------------------------------------------------
Net Income (Loss)                         $     954      $  7,296      $(14,118)
--------------------------------------------------------------------------------
Net Income (Loss) Per Common and Common 
    Equivalent Share (Primary and Fully 
    Diluted)                              $     .05      $    .40      $  (0.82)
Weighted Average Number of Common and 
    Common Equivalent Shares Outstanding     19,727        18,377        17,300
--------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>

<TABLE>

                    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                                        Sept. 30,     Sept. 30,
 (in thousands, except per share amounts)                    1997          1996
--------------------------------------------------------------------------------
<S>                                                    <C>             <C> 
Assets
Cash (including $1,361 and $1,863, respectively, which 
    was required to be segregated under federal and 
    other regulations)                                 $   30,862      $ 23,406
Receivable from other brokers and dealers                  68,802        87,427
Receivable from customers                                 640,686       520,489
Trading securities owned, at market                       156,779       105,540
Securities purchased under agreements to resell            34,113        12,259
Investments pursuant to mortgage-backed bonds              39,871        44,064
Office equipment and leasehold improvements, at cost
    (less accumulated depreciation of $44,574 and 
    $52,546, respectively)                                 32,756        30,185
Deferred income tax asset                                  31,532        21,215
Other assets                                               96,468        79,155
--------------------------------------------------------------------------------
                                                       $1,131,869      $923,740
================================================================================

Liabilities and Shareholders' Equity
Short-term borrowings                                  $  210,805      $183,320
Checks and drafts payable                                  57,081        70,628
Payable to other brokers and dealers                      262,081       109,776
Payable to customers                                      127,513       160,930
Securities sold under agreements to repurchase             14,810             -
Trading securities sold but not yet purchased, 
     at market                                             49,370        27,472
Mortgage-backed bonds payable                              40,709        45,333
Employee compensation                                      96,302        81,740
Other payables and accrued expense                        101,635        77,716
--------------------------------------------------------------------------------
                                                          960,306       756,915
--------------------------------------------------------------------------------
Shareholders' equity
    Preferred stock, $1 par value; authorized,
        300,000 shares; none issued and outstanding             -             -
    Common stock, $1 par value; authorized,
        40,000,000 shares; 18,754,153 and
        18,197,725 shares issued, respectively             18,754        18,198
    Additional paid-in capital                             28,237        19,432
    Retained earnings                                     124,586       129,201
    Treasury stock, at cost; 555 and 467 shares, 
        respectively                                          (14)           (6)
--------------------------------------------------------------------------------
                                                          171,563       166,825
--------------------------------------------------------------------------------
                                                       $1,131,869      $923,740
================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>


                   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
                                   Common Stock     Additional                              Total
                                ------------------     Paid-In   Retained  Treasury  Shareholders'
(in thousands, except share      Shares     Amount     Capital   Earnings     Stock         Equity
and per share amounts)
--------------------------------------------------------------------------------------------------
<S>                             <C>        <C>      <C>         <C>        <C>           <C>
Balances at Sept. 30, 1994      17,188,161 $17,462  $   7,163   $146,601   $(3,423)      $167,803
  Net loss                                                       (14,118)                 (14,118)
  Net stock issued
  (redeemed):
    Book value stock
      purchase plan               (558,991)   (559)    (2,292)                             (2,851)
    Stock investment plan          244,115                                   2,734          2,734
    ESOP contribution              645,787     646      6,942                               7,588
    Other                           17,082      17         88                                 105
  Cash dividends-$.30 per share                                   (5,177)                  (5,177)
  Treasury stock acquired          (35,900)                                   (360)          (360)
--------------------------------------------------------------------------------------------------
Balances at Sept. 30, 1995      17,500,254  17,566     11,901    127,306    (1,049)       155,724
  Net income                                                       7,296                    7,296
  Net stock issued:
    Stock investment plan          347,178                                   4,678          4,678
    ESOP contribution              534,188     534      6,544                               7,078
    Other                           98,138      98        987                               1,085
  Cash dividends-$.30 per share                                   (5,401)                  (5,401)
  Treasury stock acquired         (282,500)                                 (3,635)        (3,635)
--------------------------------------------------------------------------------------------------
Balances at Sept. 30, 1996      18,197,258  18,198     19,432    129,201        (6)       166,825
  Net income                                                         954                      954
  Net stock issued:
    Stock investment plan          332,112                                   5,776          5,776
    ESOP contribution              469,270     469      7,215                               7,684
    Other                           87,158      87      1,590                               1,677
  Cash dividends-$.30 per share                                   (5,569)                  (5,569)
  Treasury stock acquired         (332,200)                                 (5,784)        (5,784)
--------------------------------------------------------------------------------------------------
Balances at Sept. 30, 1997      18,753,598 $18,754     28,237    124,586       (14)        171,563
==================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>


                        CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>

                                         Year Ended    Year Ended    Year Ended
                                          Sept. 30,      Sept.30,     Sept. 30,
(in thousands)                                1997           1996          1995
--------------------------------------------------------------------------------
<S>                                      <C>           <C>           <C>   
Operating Activities
Net income (loss)                        $     954     $    7,296    $  (14,118)
Adjustments to reconcile net income 
  (loss) to net cash provided by 
  (used in) operating activities
    Depreciation and amortization            10,715         8,913         7,478
    Loss on disposal of fixed assets            441           261           604
    Deferred income taxes                   (10,317)       18,878       (35,903)
    Accrual for PJIGX settlement, net 
      of escrow deposit                           -             -        51,500
    Decrease (increase) in
        Net receivable from customers      (153,614)      (66,766)        5,892
        Net trading securities              (29,341)      (40,908)       (2,717)
        Securities purchased under 
          agreements to resell              (21,854)      (12,259)            -
        Other                                 6,606       (37,645)       15,868
    Increase (decrease) in
        Checks and drafts payable           (13,547)       26,427           266
        Net payable to other brokers 
          and dealers                       170,930        (6,390)        4,584
        Employee compensation                14,562        18,062         4,591
        Federal and state income taxes 
          payable                                 -       (19,136)       17,855
--------------------------------------------------------------------------------
            Net cash provided by (used in)  
              operating activities          (24,465)     (103,267)       55,900
--------------------------------------------------------------------------------
Financing Activities
Net change in
    Short-term borrowings                    27,485       119,539       (44,351)
    Securities sold under repurchase 
      agreements                             14,810             -             -
    Mortgage-backed bonds payable            (4,624)       (8,744)       52,475
    Investments and funds pursuant to 
      mortgage-backed bonds                   4,193         8,885       (51,344)
Payments made on capitalized lease 
  obligations                                     -          (562)       (1,577)
Acquisition of treasury stock                (5,785)       (3,635)         (360)
Net common stock issued                      15,138        12,841         7,576
Dividends paid                               (5,569)       (5,401)       (5,177)
--------------------------------------------------------------------------------
            Net cash provided by (used in) 
              financing activities           45,648       122,923       (42,758)
--------------------------------------------------------------------------------
Net cash used for purchases of office 
  equipment and leasehold improvements      (13,727)      (13,595)       (7,867)
--------------------------------------------------------------------------------
Increase in cash                              7,456         6,061         5,275
Cash at beginning of year                    23,406        17,345        12,070
--------------------------------------------------------------------------------
Cash at end of year                      $   30,862    $   23,406    $   17,345
--------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for
    Interest                             $   26,534   $    16,888     $  11,011
    Income taxes (refund)                $   (3,940)  $    18,636     $   9,513
--------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>


                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




ONE Summary of Significant Accounting Policies
Piper Jaffray  Companies Inc. is the parent company of Piper Jaffray Inc. (Piper
Jaffray), a securities  broker/dealer and investment banking firm; Piper Capital
Management  Incorporated (Piper Capital),  an asset management firm; Piper Trust
Company  (Piper  Trust),  which  provides  trust  services  to  individuals  and
institutions;  Piper Jaffray Ventures Inc. (Piper Jaffray  Ventures),  a private
equity venture  capital firm  investing in emerging  growth  companies;  Premier
Acceptance Corporation (Premier),  an issuer of mortgage-backed bonds; and other
immaterial  subsidiaries.  All operate  within or are related to the  securities
industry.  The consolidated  financial  statements include the accounts of Piper
Jaffray  Companies Inc. and its  subsidiaries  (the  Company),  all of which are
wholly owned.  All material  intercompany  accounts and  transactions  have been
eliminated.  Where  appropriate,  prior years'  financial  information  has been
reclassified to conform with the current-year presentation.
  Customer securities transactions are recorded on a settlement date basis with 
the related commission revenue and expense recorded on a trade date basis. 
Principal securities transactions are also recorded on trade date.
  Substantially all of the Company's assets and liabilities  consist of cash and
assets readily  convertible to cash and  liabilities  which by their  short-term
nature  approximate  current fair value.  Trading  securities  owned and trading
securities  sold but not yet  purchased  are  stated  at  market  value  and are
generally  readily  marketable.  Market value is determined  by using  published
market quotes or last-traded  prices for most securities.  In the event a market
price  is not  available  for a  security,  other  valuation  methods  are  used
depending on the type of security and related market.
  Securities  borrowed and  securities  loaned are recorded at the amount of the
cash collateral provided for securities  borrowed  transactions and received for
securities loaned transactions,  respectively. The adequacy of the collateral is
continuously  monitored and adjusted when deemed  necessary to minimize the risk
associated  with this  activity.  Substantially  all of these  transactions  are
executed under master netting agreements, which give the Company right of offset
in the event of counterparty default.
  Securities   purchased  under   agreements  to  resell   (reverse   repurchase
agreements) and securities sold under repurchase agreements are accounted for as
financing  transactions  and are  recorded at the  contract  amount at which the
securities will subsequently be resold or reacquired, plus accrued interest.
  Depreciation  of  office  equipment  is  provided  using   straight-line   and
accelerated  methods  over  estimated  useful  lives of  three  to seven  years.
Leasehold improvements are amortized over the life of the lease.
  Net income  (loss) per common and common  equivalent  share is  calculated  by
dividing net income (loss) by the weighted  average  number of common shares and
common share equivalents outstanding,  which includes the dilutive effect of all
outstanding stock options. Stock options were antidilutive in fiscal 1995.
  The preparation of financial  statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosures of contingent
assets and  liabilities  at the date of the  financial  statements  and reported
amounts of revenue and expense during the reporting period. Actual results could
differ from those estimates.
  Effective  Oct. 1, 1997,  the Company  adopted the  disclosure  provisions  of
Statement of  Financial  Accounting  Standards  (SFAS) No. 123,  Accounting  for
Stock-Based  Compensation,  which  establishes  a  fair  value-based  method  of
accounting  for  stock-based  compensation  plans.  The  Company  has elected to
continue to follow the guidance of Accounting Principles Board Opinion (APB) No.
25, Accounting for Stock Issued to Employees, for measurement and recognition of
stock-based  transactions with employees.  Pro-forma impact of this statement is
disclosed in Note Seven to the consolidated financial statements.
  Effective in January 1998,  the Company will adopt certain  provisions of SFAS
No.  125,  Accounting  for  Transfers  and  Servicing  of  Financial  Assets and
Extinguishments of Liabilities,  which are applicable to its business.  SFAS No.
125 introduces a financial  components approach which focuses on the recognition
of  financial   assets  and  liabilities   which  an  entity  controls  and  the
derecognition  of financial  assets and  liabilities  for which control has been
transferred.  The adoption of this  statement is not expected to have a material
effect on the Company's financial condition or results of operations.
  In  February  1997,  SFAS No.  128,  Earnings  Per  Share,  was  issued and is
effective  for  financial  statements  issued for periods  ending after Dec. 15,
1997. This statement changes the method for calculating and disclosing  earnings
per  share.  This  statement  will not have a material  effect on the  Company's
earnings per share computations.


TWO Receivable From and Payable to Customers
(in thousands)  Amounts receivable from customers include cash accounts totaling
$65,772 and $63,506 and margin accounts  totaling $574,914 and $456,983 at Sept.
30, 1997 and 1996,  respectively.  Substantially  all receivables from customers
are collateralized by customers' marketable securities.


THREE Receivable From and Payable to Brokers and Dealers
<TABLE>

                                          Sept. 30,       Sept. 30,
(in thousands)                                 1997            1996
-------------------------------------------------------------------
<S>                                      <C>             <C>  
Receivable From Brokers and Dealers
Deposits for securities borrowed         $   29,686      $   17,945
Securities failed to deliver                 13,915          13,154
Clearing organizations, correspondent
  brokers and others                         25,201          56,328
-------------------------------------------------------------------
                                         $   68,802      $   87,427
-------------------------------------------------------------------
Payable to Brokers and Dealers
Deposits for securities loaned           $  237,989      $  100,322
Securities failed to receive                 14,082           9,100
Clearing organizations, correspondent
  brokers and others                         10,010             354
-------------------------------------------------------------------
                                         $  262,081      $  109,776
-------------------------------------------------------------------
</TABLE>

Securities  failed to  deliver  and  receive  represent  the  contract  value of
securities  which  have not been  delivered  or  received  by  settlement  date.
Securities  borrowed  and  securities  loaned  are  recorded  at the  amount  of
collateral  advanced or received in connection with the transaction.  Securities
borrowed  transactions  require the Company to deposit cash or other  collateral
with the lender. With respect to securities loaned, the Company receives cash or
other collateral. The initial collateral advanced or received has a market value
equal to or greater than the market value of the securities borrowed and loaned.
The Company monitors the market value of the securities borrowed and loaned on a
daily basis and requests additional collateral or returns excess collateral,  as
appropriate.


FOUR Trading Securities
Trading securities are as follows (at market value):
<TABLE>
                          Sept. 30,   Sept. 30,
(in thousands)                 1997        1996
-----------------------------------------------
<S>                        <C>         <C>

Owned
Corporate securities
  Equity                   $ 15,413    $ 18,818
  Fixed income               48,587      31,544
Government securities        29,607       8,072
Municipal securities         63,172      47,106
-----------------------------------------------
                           $156,779    $105,540
-----------------------------------------------
Sold But Not Yet Purchased
Corporate securities
  Equity                   $ 13,519    $ 12,834
  Fixed income                3,049       2,089
Government securities        28,632      12,306
Municipal securities          4,170         243
-----------------------------------------------
                           $ 49,370    $ 27,472
-----------------------------------------------
</TABLE>


FIVE Short-Term Borrowings
Piper Jaffray borrows from banks under various committed and uncommitted secured
lines of credit principally to finance customers' purchases on margin and dealer
trading securities.  These borrowings are primarily collateralized by securities
held in customer margin accounts and trading  securities owned and bear interest
at rates based on the federal funds rate. At Sept. 30, 1997, the market value of
customer securities and firm inventory pledged as collateral against outstanding
borrowings was approximately  $323.0 million and approximately $299.0 million of
additional  credit was  available,  subject to  collateral  requirements,  under
committed  and  uncommitted  lines of credit.  As of Sept.  30, 1997,  no formal
compensating balance agreements existed and Piper Jaffray was in compliance with
all debt  covenants  related to these  committed  facilities.  In addition,  the
Company has a $15.0 million  unsecured line of credit which was fully  available
at Sept. 30, 1997.


SIX Mortgage-Backed Bonds
(in thousands)  Premier  periodically  issues bonds which are  collateralized by
GNMA and FNMA  certificates.  The bonds are  obligations  solely of Premier  and
bondholders'  only  recourse  is  to  the  underlying  series'  collateral.  The
collateral,  which  was  purchased  with  the  issuance  proceeds,  is held by a
trustee. The collateral is carried at market value, which approximates amortized
cost and is based on quoted market  prices.  Principal and interest  payments on
the collateral are used to meet the debt service of the mortgage-backed bonds.
  During fiscal 1995, Premier issued three series of mortgage-backed  bonds with
an aggregate  principal amount of $54,400.  Prior to fiscal 1995, Premier issued
six series of mortgage-backed  bonds with a remaining aggregate principal amount
of  $17,486  and  purchased  related  collateral  which has been  accounted  for
financial reporting purposes as a sale.  Accordingly,  the assets,  liabilities,
interest income and interest  expense  relating to these series do not appear on
the consolidated financial statements of the Company.
  Interest  revenue  and  expense  related  to  mortgage-backed  bonds have been
recorded net in the  consolidated  statements of income.  Gross interest revenue
was  $3,490,  $3,994 and $3,412,  and  interest  expense was $3,528,  $4,062 and
$3,512 for fiscal years 1997, 1996 and 1995, respectively.


SEVEN Shareholders' Equity
The Company has  authorized  the  repurchase  of 1,650,000  shares of its common
stock to satisfy employee benefit plan  obligations,  of which 332,200,  282,500
and  35,900  shares  were  repurchased   during  fiscal  1997,  1996  and  1995,
respectively. At Sept. 30, 1997, approximately 420,000 shares remained available
for repurchase.
  On Nov. 4, 1997, the board of directors declared a quarterly dividend of 7.5
cents per share, payable on Dec. 9, 1997, to shareholders of record on Nov. 25,
1997. Also on Nov. 4, the board of directors approved the fiscal 1997 ESOP
contribution of approximately $13.4 million. This contribution will be made 50
percent in cash and 50 percent in the Company's common stock, thereby increasing
shareholders' equity by $6.7 million in the first quarter of fiscal 1998.

Stock Plans
Effective July 1, 1994, the Company  offered the Piper Jaffray  Companies  Stock
Investment Plan, which allows eligible employees the opportunity to purchase the
Company's common stock at a discount through after-tax payroll deductions.  Each
month the payroll  deductions are used to purchase the Company's common stock at
85 percent of the closing  market  price on the last day of the month.  The plan
provides  for 2.0 million  shares of common  stock to be  purchased by employees
under  the plan.  The  Company  satisfies  the share  obligations  by  reissuing
treasury  shares.  At Sept.  30, 1997, a total of 986,113 common shares had been
issued.
  The  Company's  1983 Book Value Stock  Purchase  Plan  provided  for up to 3.2
million shares to be sold to certain key employees.  Effective Nov. 9, 1993, the
Board suspended  offerings under this plan and no additional shares are expected
to be issued,  but the status of the  outstanding  shares and options  under the
plan is unchanged.  The plan allowed certain employees the right to purchase the
Company's  common stock at a price equal to the book value per share at the time
of sale.  These shares are entitled to full dividend and voting  rights.  Within
seven  years from date of  issuance,  the shares must have been sold back to the
Company at the current book value per share or exchanged  for a specific  number
of freely  transferrable  shares based on the relative market and book values at
the date of purchase.  Any shares repurchased or exchanged by the Company may be
reissued under the plan. Stock options have also been granted under the plan for
additional  book value shares.  Shares acquired by an employee upon the exercise
of an option  would  generally  be subject to the same  rights and  restrictions
described above.
  The Company issues executive  incentive stock options to certain  employees to
purchase  shares of the  Company's  common  stock  under the 1993 Piper  Jaffray
Companies  Inc.   Omnibus  Stock  Plan.  The  number  of  shares  available  for
distribution  under the plan shall not exceed 2.0  million  and  439,550  shares
remained available as of Sept. 30, 1997. During fiscal 1995 executive  incentive
stock options  totaling 405,250 were canceled to provide  approximately  600,000
special option grants to certain key employees. The purchase price of each share
subject  to an  option is fixed,  but is not less than 100  percent  of the fair
market value at the time the option is granted. Options expire 10 years from the
date of grant or earlier as  determined  by the Company and have  vesting  lives
ranging from one to five years.  No charges have been made to  operations  under
this plan.
  The Company applies the provisions of APB No. 25,  Accounting for Stock Issued
to Employees,  and related  interpretations in accounting for its employee stock
plans.   Accordingly,   as   options   granted   under  the  plans  are   either
"non-compensatory" or have exercise prices equal to market value at the time the
option is granted, under APB No. 25 no compensation expense has been recognized.
A summary of the Company's  stock options as of Sept.  30, 1997,  1996 and 1995,
and changes during the years ending on those dates is presented as follows:
<TABLE>

Fiscal years ending Sept. 30,        1997                         1996                         1995
-----------------------------------------------------------------------------------------------------------
                             Weighted                     Weighted                     Weighted
                        Average Price     Shares     Average Price     Shares     Average Price     Shares
-----------------------------------------------------------------------------------------------------------
<S>                          <C>        <C>                <C>       <C>                <C>      <C>
Book Value Plan Shares 
  Outstanding
Beginning of year            $   5.20    729,250           $  4.92    923,500           $  5.03  1,719,800
Options exercised                4.66     79,600              3.93     51,100              3.75     64,650
Converted to market shares       4.20   (322,250)             3.50   (214,600)             3.43   (254,000)
Repurchased                      5.86    (13,150)             6.53    (30,750)             5.73   (606,950)
-----------------------------------------------------------------------------------------------------------
End of year                  $   5.77    473,450           $  5.20    729,250           $  4.92    923,500
-----------------------------------------------------------------------------------------------------------
Book Value Plan Shares 
  Available Under Options
Beginning of year            $   5.66    280,850           $  5.42    339,750           $  5.18    427,000
Exercised                        4.66    (79,600)             3.93    (51,100)             3.75    (64,650)
Canceled                         6.36     (4,350)             6.37     (7,800)             5.76    (22,600)
-----------------------------------------------------------------------------------------------------------
End of year                  $   6.05    196,900           $  5.66    280,850           $  5.42    339,750
-----------------------------------------------------------------------------------------------------------
Executive Incentive Stock 
  Options Outstanding
Beginning of year            $  11.56  1,495,420           $ 11.17  1,372,820           $ 12.95  1,020,220
Granted                         19.25    164,000             13.50    175,000             10.43    769,850
Exercised                       11.26    (80,600)             4.75    (24,000)             4.25    (12,000)
Canceled                        11.01    (32,850)            10.38    (28,400)            14.10   (405,250)
-----------------------------------------------------------------------------------------------------------
End of year                  $  12.41  1,545,970           $ 11.56  1,495,420           $ 11.17  1,372,820
-----------------------------------------------------------------------------------------------------------
</TABLE>

  As of Sept. 30, 1997, the 1,742,870  options  outstanding have exercise prices
between $4.25 and $19.25 and a weighted  average  contractual life of 6.2 years.
There are 1,073,520 options currently  exercisable with a weighted average price
of $11.15.
  If  compensation  expense for the  Company's  stock plans had been  determined
based on the estimated fair value of the options  granted,  consistent with SFAS
No. 123, Accounting for Stock-Based Compensation, the Company's net earnings and
earnings per share would have been reduced to $453,000 and $0.02,  respectively,
in 1997,  and $6,967,000  and $0.38,  respectively,  in 1996. The fair values of
options granted were calculated  using the  Black-Scholes  option-pricing  model
with the  following  weighted  average  assumptions  used for grants in 1997 and
1996,  respectively:  risk-free  interest  rate of 6.0 percent and 6.5  percent;
expected volatility of 35.3 percent in both years; dividend yield of 1.0 percent
and 2.5 percent; expected lives of six years.


EIGHT Commitments and Contingent Liabilities
(in thousands) The Company and its subsidiaries lease office space and equipment
under various  noncancelable  leases.  Certain  leases have renewal  options and
clauses for escalation and operating cost adjustments.
  Aggregate  minimum lease  commitments  as of Sept. 30, 1997,  under  operating
leases and various other  contractual  commitments are as follows for the fiscal
years ending in September:

-----------------------------
1998                  $27,852
1999                   24,664
2000                   17,164
2001                    9,902
2002                    7,397
Thereafter             11,791
-----------------------------
                      $98,770

  Rental expense,  including  operating costs and real estate taxes,  charged to
operations was $40,947, $35,078 and $27,779 in fiscal years 1997, 1996 and 1995,
respectively.  The Company's current headquarters lease expires in the year 2000
and the Company intends to enter into a 14-year commitment on a new headquarters
location in fiscal 1998.
  In the normal course of business,  the Company  enters into  underwriting  and
other commitments. The ultimate settlement of such transactions open at year end
is not  expected  to  have a  material  effect  on  the  consolidated  financial
statements.


NINE Litigation
The  Company's  fiscal 1997  operations  included a $6.6 million  pretax  charge
related to a proposed settlement on its final  derivatives-related  class action
lawsuit and a related  claim,  a $24.o  million  pretax charge for the estimated
remaining  costs of litigation  and  regulatory  inquiries  relating to funds or
assets managed by Piper Capital and costs for certain other litigation  matters,
and various other litigation-related costs. The Company's fiscal 1996 operations
included  $29.5  million  in  pretax  charges  for two class  action  litigation
settlements,  as well as other legal  settlements,  professional  fees and costs
related to funds or assets  managed by Piper Capital.  In addition,  fiscal 1995
also included various litigation costs,  including a $70.0 million pretax charge
to  settle   Institutional   Government  Income  Portfolio  (PJIGX)  litigation,
partially offset by $13.9 million in insurance proceeds, net of related expense.
The pretax charges taken in fiscal 1997 represent the final anticipated costs to
the Company of litigation  related to funds or assets  managed by Piper Capital.
The Company has structured  certain legal  settlements  related to various funds
and assets managed by Piper Capital.  At Sept. 30, 1997, the total payable under
these agreements through Sept. 30, 2002, was $35.0 million.
  The  Company  is  involved  in  various  other  lawsuits  or  arbitrations  or
threatened lawsuits or arbitrations and regulatory  inquiries  incidental to its
securities business. Management of the Company, after consultation with counsel,
believes the  resolution of these  various  lawsuits,  arbitrations,  claims and
regulatory  inquiries will have no material  adverse effect on the  consolidated
financial statements.


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

Concentrations of Credit Risk
The Company  provides  investment,  financing and related  services to a diverse
group of domestic and foreign customers including governments, corporations, and
institutional and individual  investors.  The Company's  exposure to credit risk
associated with the  nonperformance of customers in fulfilling their contractual
obligations  pursuant to  securities  transactions  can be directly  impacted by
volatile  securities  markets,  credit  markets  and  regulatory  changes.  This
exposure is measured on an individual  customer  basis, as well as for groups of
customers  that share  similar  attributes.  To alleviate the potential for risk
concentrations, credit limits are established and continually monitored in light
of changing customer and market conditions.
  As of Sept. 30, 1997, the Company did not have significant concentrations of
credit risk with any one single or group of customers or counterparties.


ELEVEN Net Capital Requirements
(in  thousands)  Piper  Jaffray is subject to the Uniform Net Capital  Rule (the
Rule) of the Securities and Exchange  Commission  (SEC) and the net capital rule
of the New York Stock Exchange (the Exchange).  Piper Jaffray has elected to use
the alternative  method  permitted by the Rule,  which requires that it maintain
minimum  net  capital of 2 percent of  aggregate  debit  balances  arising  from
customer  transactions.  The Exchange may prohibit a member firm from  expanding
its business or paying cash  dividends if  resulting  net capital  would be less
than 5 percent of  aggregate  debit  balances.  In  addition,  Piper  Jaffray is
subject to certain  notification  requirements  related to withdrawals of excess
net capital.
  At Sept. 30, 1997, net capital under the Rule was $115,554 or 17 percent of
aggregate debit balances and $102,016 in excess of the minimum required net 
capital.


TWELVE Employee Benefit Plans
(in thousands) The Company has qualified  employee  stock  ownership  (ESOP) and
401(k)  plans  which  cover   substantially   all   employees.   The  plans  are
self-administered  and may be altered or  terminated at any time by the Company.
The  Company's  contributions  to the  plans  are  determined  by the  board  of
directors  within  limits to qualify  as  deductions  for  income tax  purposes.
Charges to operations for  contributions  to the ESOP were $18,853,  $21,803 and
$17,971 in fiscal years 1997, 1996 and 1995, respectively.  Contribution expense
for the 401(k) plan was $2,212, $1,991 and $1,693 in fiscal years 1997, 1996 and
1995, respectively.


THIRTEEN Income Taxes
The provision (benefit) for income taxes consists of:
<TABLE>

                                           Year Ended   Year Ended   Year Ended
                                            Sept. 30,    Sept. 30,    Sept. 30,
(in thousands)                                   1997         1996         1995
--------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>
Current
    Federal                                 $   8,519    $ (12,904)   $  22,188
    State                                       2,358       (1,309)       5,180
--------------------------------------------------------------------------------
                                               10,877      (14,213)      27,368
Changes in deferred taxes
    Federal                                    (9,099)      16,478      (31,290)
    State                                      (1,218)       2,400       (4,613)
--------------------------------------------------------------------------------
                                              (10,317)      18,878      (35,903)
--------------------------------------------------------------------------------
                                            $     560    $   4,665    $  (8,535)
================================================================================

The sources of the changes in deferred 
  taxes are
    Deferred employee compensation          $     678    $   8,343    $  (5,870)
    Partnership investment losses                 364          411          252
    Capital infusion for proprietary fund           -            -        2,000
    Litigation settlement                       1,813       21,334      (27,000)
    Other, principally accruals or their 
        reversal, not currently deductible 
        for tax purposes                      (13,172)     (11,210)      (5,285)
--------------------------------------------------------------------------------
                                            $ (10,317)   $  18,878    $ (35,903)
================================================================================
</TABLE>

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

<TABLE>
                                                        Year Ended   Year Ended
                                                         Sept. 30,    Sept. 30,
                                                              1997         1996
--------------------------------------------------------------------------------
<S>                                                      <C>          <C>
Deferred tax assets
    Accruals not currently deductible                    $  36,023    $  27,366
    Litigation settlement                                    2,853        4,666
    Other, including mark-to-market accounting 
        and depreciation                                     4,655        1,090
--------------------------------------------------------------------------------
                                                            43,531       33,122
--------------------------------------------------------------------------------
Deferred tax liabilities
    Partnership investments                                  9,477        8,984
    Other, including mark-to-market accounting 
        and prepaid expense                                  2,522        2,923
--------------------------------------------------------------------------------
                                                            11,999       11,907
--------------------------------------------------------------------------------
Net deferred tax assets                                  $  31,532    $  21,215
================================================================================
</TABLE>

Reconciliations  of the expected federal income tax provision  (benefit) and the
actual income taxes provided are as follows:
<TABLE>
                                           Year Ended   Year Ended   Year Ended
                                            Sept. 30,    Sept. 30,    Sept. 30,
                                                 1997         1996         1995
--------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>    
Computed federal income tax at the 
        weighted statutory rate of 
        35 percent                          $     530    $   4,186    $  (7,929)
Increase (reduction) in taxes resulting 
  from
    State income taxes net of federal 
        tax benefit                               562        1,241         (394)
    Net tax-exempt municipal bond interest     (1,223)      (1,062)        (872)
    Other                                         691          300          660
--------------------------------------------------------------------------------
Income taxes (benefit) provided             $     560    $   4,665    $  (8,535)
================================================================================
Effective tax rate                              37.0%        39.0%        37.7%
--------------------------------------------------------------------------------
</TABLE>

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


<PAGE>


                                REPORT OF MANAGEMENT





Financial Reporting Responsibility

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

/s/Addison L. Piper
Addison L. Piper
President, Chief Executive Officer and
Chairman of the Board of Directors
Piper Jaffray Companies

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




<PAGE>


                           REPORT OF INDEPENDENT AUDITORS





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

We have audited the accompanying  consolidated statements of financial condition
of Piper Jaffray  Companies Inc. and subsidiaries as of Sept. 30, 1997 and 1996,
and the related consolidated statements of operations,  shareholders' equity and
cash flows for each of the three years in the period ended Sept. 30, 1997. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.
  We  conducted  our  audits in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.
  In our opinion, such consolidated  financial statements present fairly, in all
material  respects,  the financial  position of Piper Jaffray Companies Inc. and
subsidiaries as of Sept. 30, 1997 and 1996, and the results of their  operations
and cash flows for each of the three years in the period  ended Sept.  30, 1997,
in conformity with generally accepted accounting principles.

/s/Deloitte & Touche LLP
Minneapolis, Minn.
Nov. 5, 1997


<PAGE>


                       SUMMARY OF QUARTERLY RESULTS (UNAUDITED)




<TABLE>
<CAPTION>

(in thousands, except per share amounts)        First    Second     Third    Fourth
------------------------------------------------------------------------------------
<S>                                          <C>       <C>       <C>       <C>
Fiscal 1997
    Total revenue                            $138,829  $153,282  $145,407  $164,376
    Income (loss) before income taxes           2,983    11,761    10,466   (23,696)
    Net income (loss)                           1,820     7,469     6,593   (14,928)
    Net income (loss) per share                   .10       .39       .34      (.80)
Fiscal 1996
    Total revenue                            $132,526  $137,592  $147,631  $136,155
    Income (loss) before income taxes          10,908    (3,987)   (2,256)    7,296
    Net income (loss)                           6,654    (2,294)   (1,514)    4,450
    Net income (loss) per share                   .37      (.13)     (.08)      .24

Market Prices and Dividends Per Share
Fiscal 1997
    Market Price Range
        High                                 $ 16.625  $ 19.375  $ 22.500  $ 30.563
        Low                                    11.375    13.875    13.750    20.750
    Dividends Paid                               .075      .075      .075      .075
Fiscal 1996
    Market Price Range
        High                                 $ 14.125  $ 14.500  $ 13.750  $ 12.375
        Low                                    11.625    12.875    12.500    11.625
    Dividends Paid                               .075      .075      .075      .075
------------------------------------------------------------------------------------
</TABLE>

The common stock of Piper Jaffray Companies Inc. (NYSE:PJC) is listed on the New
York Stock Exchange. At Nov. 28, 1997, there were approximately 652 registered
shareholders of the Company's common stock.
  Cash  dividends  have been paid on common shares in each year since 1971.  The
Company's  policy is to pay regular  quarterly  dividends on the common stock in
March,  June,  September and December.  On Nov. 4, 1997,  the board of directors
declared a quarterly dividend of 7.5 cents per share of its common stock.
  The fourth  quarter of fiscal 1997 included a $6.6 million pretax charge for a
derivatives-related  class  action  lawsuit and a related  claim.  Results  also
reflected a $24.0 million  pretax  accrual for the estimated  remaining  cost of
litigation and regulatory inquiries relating to funds or assets managed by Piper
Capital and other litigation matters.
  The second and third  quarters of fiscal 1996 included $14.0 million and $15.5
million,   respectively,   in  pretax   charges  for  class  action   litigation
settlements.