FINANCIAL SUMMARY

(Dollars in thousands, except per share amounts)
<TABLE>
Fiscal years ending          1996       1995         1994          1993        1992
September
------------------------------------------------------------------------------------
Revenue                  <C>         <C>          <C>          <C>        <C>
Commissions               $185,301    $145,492     $147,539     $128,940    $103,292
Profits on principal
transactions               165,284     124,910      101,381       95,656      85,950
Investment banking          98,812      64,138       61,146      112,829     101,521
Interest                    41,130      33,765       24,792       19,110      17,994
Asset management fees       37,442      43,913       51,917       40,811      28,649
Other Income                25,935      19,489       10,736       13,379      22,613
                            ------      ------       ------       ------      ------
  Total revenue            553,904     431,707      397,511      410,725     360,019
                           =======     =======      =======      =======     =======

Expenses
Employee compensation      343,518     262,110      245,567      254,198     220,171
Other operating expenses   181,559     180,509      104,572       83,441      74,475
Interest expense            16,866      11,741        7,242        4,774       3,956
                            ------      ------        -----        -----       -----
   Total expenses          541,943     454,360      357,381      342,413     298,602

Income (loss) Before
Income Taxes                11,961     (22,653)      40,130       68,312      61,417
Income Taxes                 4,665      (8,535)      14,848       27,325      23,890
                             -----      ------       ------       ------      ------
Net Income (loss)         $  7,296    $(14,118)    $ 25,282     $ 40,987    $ 37,527
------------------------------------------------------------------------------------

Per Share Data
Net income                $    .40    $   (.82)    $   1.41     $   2.28    $   2.21
Dividends                      .30         .30          .70          .50         .35
Shareholder's equity          9.17        8.90         9.76         9.01        7.05
------------------------------------------------------------------------------------
Other Data (at year end)
 Total assets             $923,740    $679,763     $584,447     $535,146    $480,554
 Shareholder's equity      166,825     155,724      167,803      157,912     120,447
 Common shares outstanding
  (in thousands)            18,197      17,500       17,188       17,531      17,089
 Total full-time employees   2,956       2,703        2,658        2,427       2,165
 Total retail branch offices    78          77           74           72          67
 Piper Capital assets under
  management (in billions) $   9.1    $    9.4     $   11.6     $   12.0    $    8.9
------------------------------------------------------------------------------------
The Company and/or its  subsidiaries  are defendants in lawsuits.  See Note 8 to
the consolidated financial statements.
</TABLE>


<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. 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. A significant portion
of the  Company's  expenses,  including  salaries and  benefits,  occupancy  and
communications,  are  relatively  fixed  and do not vary with  market  activity.
Consequently, the Company's revenue and net income have been and may continue to
be subject to wide  fluctuations.  In  addition,  the  Company  is  currently  a
defendant in lawsuits and  arbitrations  and is subject to regulatory  inquiries
related to various  funds or assets  managed by its  subsidiary,  Piper  Capital
Management Incorporated (Piper Capital). It is impossible to predict the outcome
of these  actions and, at the present  time,  the effect of these actions on the
consolidated  financial statements cannot be determined.  The accompanying table
summarizes  the changes in the major  categories of revenue and expenses for the
past two years. <TABLE>
                                        Increase (Decrease)  Increase (Decrease)
                                            1996 vs. 1995        1995 vs. 1994
--------------------------------------------------------------------------------
(in thousands)                           Amount         %     Amount         %
--------------------------------------------------------------------------------
                                        <C>            <C>   <C>           <C> 
Revenue
 Commissions                             $39,809        27    $(2,047)       (1)
 Profits on principal transactions        40,374        32     23,529        23
 Investment banking                       34,674        54      2,992         5
 Interest                                  7,365        22      8,973        36
 Asset management fees                    (6,471)      (15)    (8,004)      (15)
 Other income                              6,446        33      8,753        82
--------------------------------------------------------------------------------
   Total revenue                         122,197        28     34,196         9
--------------------------------------------------------------------------------
Expenses
 Employee compensation                    81,408        31     16,543         7
 Floor brokerage and clearance             1,182        15        704        10
 Interest                                  5,125        44      4,499        62
 Occupancy and equipment                   5,916        19      2,726        10
 Communications                            4,015        25      1,560        11
 Travel and promotional                    1,411         9        125         1
 Charge for PJIGX settlement, net        (56,090)     (100)    56,090       100
 Other operating expenses                 44,616        82     14,732        37
--------------------------------------------------------------------------------
   Total expenses                         87,583        19     96,979        27
--------------------------------------------------------------------------------
 Income Before Income Taxes               34,614         -    (62,783)     (156)
 Income Taxes                             13,200         -    (23,383)     (157)
--------------------------------------------------------------------------------
 Net Income                              $21,414         -   $(39,400)     (156)
================================================================================
</TABLE>

Operations
Fiscal 1996 vs. Fiscal 1995
The Company's  revenue was a record $553.9 million in fiscal 1996,  contributing
to a solid compound  annual revenue growth rate of 16 percent over the past five
years.   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 last year. For
fiscal  1996,  net  income was  $7.3million  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.  The  current  year's  operations  include  $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. The prior year 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 expenses. The weighted average number of common shares
and common share equivalents  outstanding increased slightly (6 percent) to 18.4
million due to the issuance of shares to meet obligations under employee benefit
plans.  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 both 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). Interest income increased 22 percent
($7.4  million) over fiscal 1995 due to  substantial  growth in customer  margin
receivables  and higher  average  levels of fixed income  inventories.  Although
assets under  management at Piper Capital have  remained  essentially  flat from
last year end at $9.1 billion,  asset  management fees declined 15 percent ($6.5
million)  in fiscal  1996.  This  decline  relates  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  33percent ($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  expenses  grew 19  percent  ($87.6million)  in fiscal  1996
including  the  impact  of legal  settlements  and  other  litigation  and legal
expenses.  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.

Interest  expense  increased  44 percent  ($5.1million)  in fiscal  1996 as bank
borrowings and stock lending  increased to fund higher average  inventory levels
and customer  margin  loans.  In addition,  interest  began  accruing on several
structured  legal  settlements  in fiscal  1996.  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  expenses.  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  expenses  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  expenses  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.  The Company  anticipates other operating  expenses in
fiscal  1997 will be higher  than  average  due to ongoing  litigation  expenses
related to these actions.

Fiscal 1995 vs. Fiscal 1994
     Revenue was $431.7  million in fiscal  1995,  increasing  9 percent  ($34.2
million) from fiscal 1994.  Revenue reflected  favorable  industry trends in the
second  half  of the  year.  However,  net  income  declined  $39.4million  (156
percent),  and net income per share  declined  158  percent due to a $70 million
pretax  charge for  settlement  of  Institutional  Government  Income  Portfolio
(PJIGX) mutual fund  litigation.  The charge,  taken in the second quarter,  was
partially  offset  during  the  third  quarter  by $13.9  million  of  insurance
proceeds, net of related expenses.  Fiscal 1995 results also reflect other legal
settlements,  professional  fees and costs related to funds or assets managed by
Piper  Capital.  The weighted  average  number of common shares and common share
equivalents outstanding decreased slightly (4 percent) to 17.3 million.
     Interest  income  increased  36  percent  ($9.0  million),  reflecting  the
increase in interest rates charged on customers'  interest-bearing margin loans.
The decrease in asset  management  fees of 15 percent  ($8.0  million) in fiscal
1995 corresponds to the decline in assets under management by Piper Capital from
$11.6  billion to $9.4  billion.  Assets under  management  decreased due to the
closing of privately managed accounts and mutual fund net redemptions,  of which
approximately  $500 million were a result of  reorganizing  certain mutual funds
during fiscal 1995. Other income increased 82 percent ($8.8 million)  reflecting
increased  fees in wrap  accounts and capital  gains.  In addition,  the Company
recognized a loss of $0.8 million in the Hercules  International  Management LLC
joint  venture  compared to a loss of  $2.7million  in fiscal 1994.  The Company
dissolved  the joint  venture  agreement  during  fiscal  1995 and  brought  the
Hercules international mutual funds into the Piper Capital fund family.
     The  Company's  expenses  grew 27 percent  ($97.0  million)  in fiscal 1995
including  the impact of the PJIGX  settlement  and other  litigation  and legal
expenses related to funds or assets managed by Piper Capital.
     Employee compensation  increased 7 percent ($16.5 million) due to growth in
revenue-based  broker  compensation,  profit-based  incentive  compensation  and
salaries from targeted additions to staff. Interest expense increased 62 percent
($4.5  million)  in fiscal  1995 as bank  borrowings  increased  to fund  higher
average inventory levels and customer margin loans.
     The addition of three branch offices, as well as the significant investment
in broker  workstation  technology,  caused occupancy and equipment  expenses to
increase 10 percent ($2.7 million). The investment in technology and increase in
the number of investment  executives also were reflected in the 11 percent ($1.6
million) increase in communication expense.
     Travel and  promotional  expenses  for fiscal  1995 were  essentially  flat
compared  to the prior  year.  An increase  in  institutional  sales  travel and
investor  conference  costs was offset by a decrease in marketing  and incentive
trips.
     Other operating expenses increased 37 percent ($14.7 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 and proceeds from securities  lending,  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,  1996,  Piper  Jaffray had net
capital,  as defined in the regulations,  of $122.8 million,  which exceeded the
minimum net capital  requirements by $112.1 million.  Piper Jaffray's regulatory
capital consists entirely of shareholder's equity.
     The Company's margin loans to customers have increased  significantly  over
1995 levels. Total margin loans to customers totaled $457.0 million at Sept. 30,
1996,  versus $334.5 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  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, 1996,  approximately
$15.1 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, 1996,  Piper Jaffray held  approximately  $3.2 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.
     During fiscal 1996, Piper Jaffray entered into operating lease  commitments
of  approximately  $1.0  million for  personal  computer  hardware  and software
relating to the  workstation  system for  investment  executives.  Piper Jaffray
expects to commit an additional $2.3 million in operating  leases related to the
workstations  in fiscal 1997.  In addition,  the Company  expects  other capital
expenditures  in fiscal  1997 to  approach  $10.0  million.  There were no other
material commitments for capital expenditures or lease commitments as of Sept.
30, 1996.
     At Sept.  30, 1996,  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 $75 million in  uncommitted  credit lines  collateralized  by customers'
margin  securities,  $30 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, 1996, the Company had a $30 million unsecured note due Sept.30,  1997, 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, 1996, the total payable
under  these  agreements,  which are payable  over one to five years,  was $46.4
million. These payments are expected to be financed through cash from operations
and available credit facilities.
     The Company is currently a defendant in other lawsuits and arbitrations and
is subject to regulatory inquiries related to various funds or assets managed by
Piper Capital.  In addition,  management is aware of unasserted claims which may
contain similar allegations. The Company is also a defendant in a case involving
an  underwriting  by Piper  Jaffray.  The Company  intends to defend or, in some
cases,  negotiate  to settle  these  actions.  It is  impossible  to predict the
outcome of these actions,  and, at the present time, the effect of these actions
on the consolidated financial statements cannot be determined.  Accordingly,  no
provision  for  losses  that may result has been  recorded  in the  consolidated
financial  statements.  However,  the  aggregate  cost  of  litigation  and  any
judgments, settlements or regulatory action relating to these cases could have a
material adverse effect on the consolidated financial statements.
      The Company is  involved in various  other  lawsuits  or  arbitrations  or
threatened  lawsuits or  arbitrations  incidental  to its  securities  business.
Management  of the  Company,  after  consultation  with  counsel,  believes  the
resolution  of these  various  lawsuits,  arbitrations  and claims  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.

Effects of Recent Accounting Standards
     In October 1995, the Financial  Accounting Standards Board issued Statement
of Financial  Accounting  Standards  (SFAS) No. 123,  Accounting for Stock-Based
Compensation.  The Company has elected to  continue  following  the  guidance of
Accounting  Principles  Board  Opinion No. 25,  Accounting  for Stock  Issued to
Employees,  for  measurement and  recognition of stock-based  transactions  with
employees.  The Company will adopt the disclosure  provisions of SFAS No. 123 in
fiscal 1997.
     In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities.  The  Company  will  evaluate  adoption  of SFAS No. 125 in 1997 as
required.

CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
                                           Year Ended   Year Ended  Year Ended
                                           Sept. 30     Sept. 30     Sept. 30
(in thousands, except per share               1996         1995        1994
amounts)
-----------------------------------------------------------------------------
Revenue                                   <C>          <C>         <C>
Commissions                               $  185,301   $ 145,492   $ 147,539
Profits on principal transactions            165,284     124,910     101,381
Investment banking                            98,812      64,138      61,146
Interest                                      41,130      33,765      24,792
Asset management fees                         37,442      43,913      51,917
Other income                                  25,935      19,489      10,736
-----------------------------------------------------------------------------
Total revenue                                553,904     431,707     397,511
-----------------------------------------------------------------------------

Expenses
Employee compensation                        343,518     262,110     245,567
Floor brokerage and clearance                  9,319       8,137       7,433
Interest expense                              16,866      11,741       7,242
Occupancy and equipment                       36,487      30,571      27,845
Communications                                20,043      16,028      14,468
Travel and promotional                        16,961      15,550      15,425
Charge for PJIGX settlement, net                   -      56,090           -
Other operating expenses                      98,749      54,133      39,401
-----------------------------------------------------------------------------
Total expenses                               541,943     454,360     357,381
-----------------------------------------------------------------------------
Income (loss) Before Income Taxes             11,961     (22,653)     40,130
Income Taxes                                   4,665      (8,535)     14,848
-----------------------------------------------------------------------------
Net Income (loss)                         $    7,296   $ (14,118)   $ 25,282
-----------------------------------------------------------------------------
Net Income (loss) Per Common and Common
Equivalent Share (Primary and
    Fully Diluted)                        $     .40     $  (0.82)   $   1.41
Weighted Average Number of Common
and Common Equivalent Shares
    Outstanding                               18,377      17,300      17,945
-----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.

</TABLE>



<PAGE>




CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
                                  Common Stock    Additional  Retained           Total
                                ------------------ Paid-In   Retained Treasury Shareholders'
(in thousands, except share      Shares     Amount  Capital   Earnings  Stock     Equity
and per share amounts)
-------------------------------------------------------------------------------------------
                               <C>         <C>      <C>       <C>      <C>     <C>
Balances at Sept. 30, 1993      17,530,872  17,531   6,829    133,552       -    157,912
    Net income                                                 25,282             25,282
    Net stock issued
    (redeemed):
      Book value stock
        purchase plan             (116,839)   (159)     19                708        568
      Executive incentive
        stock option plan           89,520      90     315                           405
      Stock investment plan         62,708                                 685        685
    Cash dividends-$.70 per share                             (12,233)           (12,233)
    Treasury stock acquired       (378,100)                             (4,816)    (4,816)
-------------------------------------------------------------------------------------------
Balances at Sept. 30, 1994      17,188,161  17,462   7,163    146,601  (3,423)   167,803
    Net loss                                                  (14,118)           (14,118)
    Net stock issued
    (redeemed):
      Book value stock
        purchase plan             (558,991)   (559) (2,292)                       (2,851)
      Executive incentive
        stock option plan           12,000      12      39                            51
      Shares issued to directors
        in lieu of fees              5,082       5      49                            54
      Stock investment plan        244,115                              2,734      2,734
      ESOP contribution            645,787     646   6,942                         7,588
    Cash dividends-$.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:
      Book value stock
        purchase plan               14,693      15     251                           266
      Executive incentive
        stock option plan           24,000      24      90                           114
      Shares issued to directors
        in lieu of fees              3,999       4      50                            54
      Stock investment plan        347,178                              4,678      4,678
      ESOP contribution            534,188     534   6,544                         7,078
      Other                         55,446      55     596                           651
    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
-------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.

</TABLE>



<PAGE>



Consolidated Statements of Financial Condition
<TABLE>

                                                         Sept. 30       Sept. 30
    (in thousands, except per share amounts)                1996           1995
--------------------------------------------------------------------------------
                                                          <C>          <C>
Assets
Cash (including $1,863 and $2,401, respectively, which
  was required to be segregated under federal and
  other regulations)                                      $ 23,406     $ 17,345
Receivable from other brokers and dealers                   99,686       55,708
Receivable from customers                                  520,489      371,667
Trading securities owned, at market                        105,540       58,651
Investments pursuant to mortgage-backed bonds               44,064       52,949
Office equipment and leasehold improvements, at cost
  (less accumulated depreciation of $52,546 and
   $47,621, respectively)                                   30,185       25,764
Deferred income tax asset                                   21,215       40,093
Other assets                                                79,155       57,586
--------------------------------------------------------------------------------
                                                          $923,740     $679,763
================================================================================

Liabilities and Shareholders' Equity
Short-term borrowings                                     $183,320      $63,781
Checks and drafts payable                                   70,628       44,201
Payable to other brokers and dealers                       109,776       84,447
Payable to customers                                       160,930       78,874
Trading securities sold but not yet purchased,
  at market                                                 27,472       21,491
Mortgage-backed bonds payable                               45,333       54,077
Employee compensation                                       81,740       63,678
Federal and state income taxes                                   -       19,136
Other accounts payable and accrued expenses                 77,716       94,354
--------------------------------------------------------------------------------
                                                           756,915      524,039
--------------------------------------------------------------------------------
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; 18,197,725 and
    17,565,399 shares issued, respectively                  18,198       17,566
  Additional paid-in capital                                19,432       11,901
  Retained earnings                                        129,201      127,306
  Treasury stock, at cost; 467 and 65,145 shares,
      respectively                                              (6)      (1,049)
--------------------------------------------------------------------------------
                                                           166,825      155,724
--------------------------------------------------------------------------------
                                                          $923,740     $679,763
================================================================================
</TABLE>


    See accompanying notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
                                              Year Ended  Year Ended Year Ended
                                                Sept.30    Sept.30    Sept. 30
(in thousands                                     1996       1995       1994
-----------------------------------------------------------------------------
                                               <C>         <C>        <C>
Operating Activities
Net income (loss)                               $  7,296   $(14,118)  $ 25,282
Adjustments to reconcile net income
(loss) to net cash
    provided by (used in)
    operating activities:
      Depreciation and amortization                8,913      7,478      7,246
      Loss on disposal of fixed assets               261        604          -
      Deferred income taxes                       18,878    (35,903)    (5,101)
      Accrual for PJIGX settlement, net of
         escrow deposit                                -     51,500          -
      Decrease (increase) in:
          Net receivable from customers          (66,766)     5,892    (36,455)
          Net trading securities                 (40,908)    (2,717)    25,136
          Other                                  (37,645)    15,868     (6,913)
      Increase (decrease) in:
          Checks and drafts payable               26,427        266      5,252
          Net payable to other
           brokers and dealers                   (18,649)     4,584    (34,813)
          Employee compensation                   18,062      4,591    (15,769)
          Federal and state income
           taxes payable                         (19,136)    17,855     (2,181)
-------------------------------------------------------------------------------
            Net cash (used in) provided by
            operating activities                (103,267)    55,900    (38,316)
-------------------------------------------------------------------------------
Financing Activities
Net change in:
    Short-term borrowings                        119,539    (44,351)    62,578
    Mortgage-backed bonds payable                 (8,744)    52,475     (1,533)
    Investments and funds pursuant to
    mortgage-backed bonds                          8,885    (51,344)     1,514
Payments made on capitalized lease
 obligations                                        (562)    (1,577)    (1,349)
Acquisition of treasury stock                     (3,635)      (360)    (4,816)
Net common stock issued                           12,841      7,576      1,658
Dividends paid                                    (5,401)    (5,177)   (12,233)
-------------------------------------------------------------------------------
            Net cash provided by (used in)
            financing activities                 122,923    (42,758)    45,819
-------------------------------------------------------------------------------
Net cash used for purchases of office
equipment and leasehold improvements             (13,595)    (7,867)   (15,317)
-------------------------------------------------------------------------------
Increase (decrease) in cash                        6,061      5,275     (7,814)
Cash at beginning of year                         17,345     12,070     19,884
-------------------------------------------------------------------------------
Cash at end of year                            $  23,406   $ 17,345   $ 12,070
-------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information Cash paid during the year for:
    Interest                                   $  16,688   $ 11,011    $ 6,883
    Income taxes                                  18,636      9,513     22,130
-------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>




Notes to Consolidated Financial Statements


1. Summary of Significant Accounting Policies
     Piper Jaffray  Companies  Inc. (the Company) 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,  which  provides  trust services to individuals  and
institutions;   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,  all
of which are wholly owned. All material  intercompany  accounts and transactions
have been eliminated.
     Customer  securities  transactions  are recorded on a settlement date basis
with the related commission revenue and expenses 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
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.
     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 revenues and expenses  during the reporting
period. Actual results could differ from those estimates.
     In October 1995, the Financial  Accounting Standards Board issued Statement
of Financial  Accounting  Standards  (SFAS) No. 123,  Accounting for Stock-Based
Compensation.  The Company has elected to  continue  following  the  guidance of
Accounting  Principles  Board  Opinion No. 25,  Accounting  for Stock  Issued to
Employees,  for  measurement and  recognition of stock-based  transactions  with
employees.  The Company will adopt the disclosure  provisions of SFAS No. 123 in
fiscal 1997.
     In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities.  The  Company  will  evaluate  adoption  of SFAS No. 125 in 1997 as
required.

2. Receivable From and Payable to Customers
(in thousands)
     Amounts  receivable from customers  include cash accounts  totaling $63,506
and $37,122 and margin accounts totaling $456,983 and $334,545 at Sept. 30, 1996
and  1995,  respectively.  Substantially  all  receivables  from  customers  are
collateralized by customers' marketable securities. Amounts payable to customers
include free credit balances of $104,013 and $55,782 at Sept. 30, 1996 and 1995,
respectively.




<TABLE>

3. Trading Securities
                                 Sept.30   Sept.30
                                   1996       1995
---------------------------------------------------
                              <C>        <C>
Owned:
    Corporate securities
      Equity                   $ 18,818   $ 17,236
      Fixed income               31,544      7,097
    Government securities         8,072      1,729
    Municipal securities         47,106     32,589
---------------------------------------------------
                               $105,540   $ 58,651
---------------------------------------------------
Sold but not yet purchased:
    Corporate securities
      Equity                   $ 12,834   $ 19,631
      Fixed income                2,089      1,410
    Government securities        12,306        405
    Municipal securities            243         45
---------------------------------------------------
                               $ 27,472   $ 21,491
---------------------------------------------------
</TABLE>


4. 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,  1996,  the
market  value of  customer  securities  and  securities  inventories  pledged as
collateral against  outstanding  borrowings was approximately $324 million,  and
approximately $212million of additional credit was available under committed and
uncommitted  lines of credit. In addition,  at Sept.30,  1996, the Company had a
$30 million unsecured note due Sept.30, 1997, which bears interest at a variable
rate  based on  LIBOR.  As of  Sept.30,  1996,  no formal  compensating  balance
agreements  existed and Piper Jaffray was in compliance  with all debt covenants
related to these committed facilities.

5. 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 and is classified as
available for sale under SFAS No.115, Accounting for Certain Investments in Debt
and  Equity  Securities.  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 $22,293 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 $3,994,  $3,412 and $230, and interest  expense was $4,062,  $3,512 and $205
for fiscal years 1996, 1995 and 1994, respectively.

6. Shareholders' Equity
     Prior to fiscal 1996,  the board of directors  authorized the repurchase of
up to 900,000 shares of the Company's  common stock to satisfy  employee benefit
plan  obligations.  On July 23,  1996,  the board of  directors  authorized  the
repurchase of up to an additional  750,000 shares.  During fiscal 1996, 1995 and
1994, respectively, 282,500, 35,900 and 378,100 shares were repurchased.
     On Nov. 5, 1996,  the board of directors  declared a quarterly  dividend of
7.5 cents per share, payable on Dec. 10, 1996, to shareholders of record on Nov.
26, 1996. Also on Nov. 5, 1996, the board of directors  approved the fiscal 1996
ESOP contribution of approximately $15.4 million. This contribution will be made
50  percent  in cash and 50  percent  in the  Company's  common  stock,  thereby
increasing  shareholders'  equity by $7.7 million in the first quarter of fiscal
1997.
     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 no more than 1 million  shares of common
stock to be purchased by employees  under the plan. In November  1996, the board
of directors  increased the number of shares available to be purchased under the
Stock  Investment  Plan to 2 million,  subject to the approval of the  Company's
shareholders.  The Company satisfies the share obligations by reissuing treasury
shares.  At Sept.  30,  1996, a total of 654,001  common  shares had been issued
under the Stock Investment Plan. Compensation expense charged to operations as a
result of the plan was  $785,000,  $117,000  and $102,000 for fiscal years 1996,
1995 and 1994, respectively.
     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 of directors  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  transferable  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  also have 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.  Compensation  expense charged to operations as a
result of the  increase  in book value of shares  issued  under the plan was $0,
$1.2  million  and  $2.4   million  for  fiscal  years  1996,   1995  and  1994,
respectively.
     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 million  and,  as of Sept.  30,
1996,  495,000  shares  remained  available.  During fiscal 1995,  stock options
covering  405,250  shares of common  stock were  canceled to provide for special
option grants to certain key employees  covering  approximately  600,000 shares.
The purchase price of each share subject to an option is fixed,  but is not less
than the fair market value of the Company's  common stock at the time the option
is  granted.  Options  expire  10 years  from the  date of grant or  earlier  as
determined by the Company.  No charges have been made to  operations  under this
plan.
     The  following  table  summarizes  activity  for the book value  shares and
options and the executive  incentive stock option plan for the three years ended
Sept.30, 1996:

<TABLE>

Fiscal years ending                             1996        1995        1994
September
--------------------------------------------------------------------------------
                                             <C>        <C>          <C>
Book value plan shares outstanding:
Beginning of year                             923,500    1,719,800   2,255,850
Options exercised                              51,100       64,650      94,600
Converted to market shares                   (214,600)    (254,000)   (523,975)
Repurchased                                   (30,750)    (606,950)   (106,675)
--------------------------------------------------------------------------------
End of year                                   729,250      923,500   1,719,800
--------------------------------------------------------------------------------
Participants' cost per share                    $3.80       $3.80       $3.80
   outstanding at end                            to         to          to
   of year                                      $7.45       $7.45       $7.45
--------------------------------------------------------------------------------
Book value plan shares available under options:
Beginning of year                             339,750      427,000     529,850
Exercised                                     (51,100)     (64,650)    (94,600)
Cancelled                                      (7,800)     (22,600)     (8,250)
--------------------------------------------------------------------------------
End of year                                   280,850      339,750     427,000
--------------------------------------------------------------------------------
Exercise price per share                        $3.23        $2.85       $2.85
                                                  to          to          to
                                                $7.45        $7.45       $7.45
--------------------------------------------------------------------------------
Executive incentive stock options outstanding and exercisable:
Beginning of year                           1,372,820    1,020,220     945,740
Granted                                       175,000      769,850     164,000
Exercised                                     (24,000)     (12,000)    (89,520)
Cancelled                                     (28,400)    (405,250)          -
--------------------------------------------------------------------------------
End of year                                 1,495,420    1,372,820   1,020,220
--------------------------------------------------------------------------------
Exercise price per share                        $4.25        $4.25       $4.25
                                                   to         to          to
                                               $16.50       $16.50      $16.50
--------------------------------------------------------------------------------
</TABLE>


7. Commitments and Contingent Liabilities
(in thousands)
     The Company and its  subsidiaries  lease office space and  equipment  under
various  noncancellable  leases. Certain leases have renewal options and clauses
for escalation and operating cost adjustments.
     Aggregate  minimum lease  commitments as of Sept.30,  1996, under operating
leases are as follows for the fiscal years ending in September:

1997                               $23,620
1998                                22,754
1999                                20,138
2000                                13,744
2001                                 7,092
Thereafter                          14,825
                                   -------
                                  $102,173

     Rental expense, including operating costs and real estate taxes, charged to
operations was $35,078, $27,779 and $25,010 in fiscal years 1996, 1995 and 1994,
respectively.
     In the normal course of business,  Piper Jaffray  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.

8. Litigation
     The  Company's  fiscal  1996  operations  include  $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) litigation, partially offset by $13.9 million in insurance proceeds, net
of related expenses.
     The Company is currently a defendant in other lawsuits and arbitrations and
is subject to regulatory inquiries related to various funds or assets managed by
Piper Capital.  In addition,  management is aware of unasserted claims which may
contain similar allegations. The Company is also a defendant in a case involving
an  underwriting  by Piper  Jaffray.  The Company  intends to defend or, in some
cases,  negotiate  to settle  these  actions.  It is  impossible  to predict the
outcome of these actions,  and, at the present time, the effect of these actions
on the consolidated financial statements cannot be determined.  Accordingly,  no
provision  for  losses  that may result has been  recorded  in the  consolidated
financial  statements.  However,  the  aggregate  cost  of  litigation  and  any
judgments, settlements or regulatory action relating to these cases could have a
material adverse effect on the consolidated financial statements.
     The Company is  involved  in various  other  lawsuits  or  arbitrations  or
threatened  lawsuits or  arbitrations  incidental  to its  securities  business.
Management of the Company, after consultation with counsel,  believes resolution
of these various lawsuits, arbitrations and claims will have no material adverse
effect on the consolidated financial statements.

9. 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).
     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, 1996, the Company did not have  significant  concentrations
of credit risk with any single customer or group of customers or counterparties.

10. 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,  1996,  net capital  under the Rule was $122.8  million or 23
percent of aggregate  debit balances and $112.1 million in excess of the minimum
required net capital.

11. Employee Benefit Plans
(in thousands)
     The Company  has a qualified  employee  stock  ownership  plan (ESOP) and a
401(k)   plan  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 these  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 $21,803,  $17,971 and
$16,735 in fiscal years 1996, 1995 and 1994, respectively.  Contribution expense
for the 401(k) plan was $1,991, $1,693 and $1,599 in fiscal years 1996, 1995 and
1994, respectively.

12. Income Taxes
(in thousands)
<TABLE>
                                                    Year      Year      Year
                                                   Ended     Ended       Ended
                                                  Sept.30   Sept.30    Sept.30
                                                    1996      1995       1994
-------------------------------------------------------------------------------
                                                <C>         <C>       <C>
Current:
    Federal                                     $ (12,904)  $ 22,188  $ 16,240
    State                                          (1,309)     5,180     3,709
-------------------------------------------------------------------------------
                                                  (14,213)    27,368    19,949
Changes in deferred taxes:
    Federal                                        16,478    (31,290)   (4,463)
    State                                           2,400     (4,613)     (638)
-------------------------------------------------------------------------------
                                                   18,878    (35,903)   (5,101)
-------------------------------------------------------------------------------
                                                $   4,665   $ (8,535) $ 14,848
-------------------------------------------------------------------------------
The sources of the changes in deferred taxes are:
Deferred employee compensation                  $   8,343   $ (5,870) $ (1,086)
Partnership investment losses                         411        252       320
Capital infusion for proprietary fund                   -      2,000    (2,000)
Litigation settlement                              21,334    (27,000)        -
Other, principally accruals or their reversal,
not currently deductible for tax purposes         (11,210)    (5,285)   (2,335)
-------------------------------------------------------------------------------
                                                 $ 18,878   $(35,903) $ (5,101)
-------------------------------------------------------------------------------
</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>

                                                         Sept.30     Sept.30
                                                           1996       1995
---------------------------------------------------------------------------
                                                       <C>        <C>
Deferred tax assets:
    Accruals not currently deductible                  $ 27,366   $ 22,531
    Litigation settlement                                 4,666     27,000
    Other, including mark-to-market
    accounting and depreciation                           1,090        841
---------------------------------------------------------------------------
                                                         33,122     50,372
---------------------------------------------------------------------------
Deferred tax liabilities:
    Partnership investments                               8,984      7,828
    Other, including mark-to-market accounting and
    prepaid expenses                                      2,923      2,451
---------------------------------------------------------------------------
                                                         11,907     10,279
---------------------------------------------------------------------------
Net deferred tax asset                                 $ 21,215   $ 40,093
---------------------------------------------------------------------------
</TABLE>

    Reconciliations  of the expected federal income tax provision  (benefit) and
the actual income taxes provided are as follows:
<TABLE>
                                              Year       Year       Year
                                               Ended      Ended      Ended
                                              Sept.30    Sept.30    Sept.30
                                               1996       1995       1994
---------------------------------------------------------------------------
                                            <C>        <C>         <C>
Computed federal income tax at the
weighted statutory rate of 35% for 1996,
    1995 and 1994                           $  4,186    $ (7,929)  $ 14,046
Increase (reduction) in taxes
resulting from:
    State income taxes net of
    federal tax benefit                        1,241        (394)     1,879
    Net tax-exempt municipal
    bond interest                             (1,062)       (872)      (654)
    Other                                        300         660       (423)
---------------------------------------------------------------------------
Income taxes provided                       $  4,665    $ (8,535)  $ 14,848
---------------------------------------------------------------------------
Effective tax rate                             39.0%      37.7%      37.0%
</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.  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 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.  The Audit  Committee of the
board of directors,  comprising  outside  directors,  also provides an oversight
review 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
Chief Executive Officer, Piper Jaffray CompaniesChairman, Board of Directors

/s/ William H. Ellis
William H. Ellis
President, Piper Jaffray CompaniesChairman and President, Piper Capital

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






Report of Independent Auditors

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

     We have  audited the  accompanying  consolidated  statements  of  financial
condition of Piper Jaffray  Companies and  subsidiaries as of Sept. 30, 1996 and
1995,  and the related  consolidated  statements  of  operations,  shareholders'
equity and cash flows for each of the three years in the period ended Sept.  30,
1996.  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 and
subsidiaries as of Sept. 30, 1996 and 1995, and the results of their  operations
and cash flows for each of the three years in the period  ended Sept.  30, 1996,
in conformity with generally accepted accounting principles.
     As  discussed  in  paragraph  2 of  Note  8 to the  consolidated  financial
statements, the Company is involved in litigation.


/s/ Deloitte & Touche LLP
Minneapolis, Minn.
Nov. 6, 1996



<PAGE>




SUMMARY OF QUARTERLY RESULTS (Unaudited)
<TABLE>

(in thousands, except per
share amounts)                          First   Second     Third    Fourth
------------------------------------------------------------------------
                                      <C>       <C>       <C>      <C>
Fiscal 1996
    Revenue                          $132,526 $137,592  $147,631  $136,155
    Income before income taxes         10,908   (3,987)   (2,256)    7,296
    Net income                          6,654   (2,294)   (1,514)    4,450
    Net income per share                  .37     (.13)     (.08)      .24
Fiscal 1995
    Revenue                            92,499   97,857   109,156   132,195
    Income before income taxes          7,622  (60,613)   21,468     8,870
    Net income
                                        4,650  (37,274)   13,095     5,411
    Net income per share                  .27    (2.17)      .73       .30

Market Prices and Dividends Per Share
Fiscal 1996
    Market Price Range
      High                             $14.13   $14.50    $13.75    $12.38
      Low                               11.63    12.88     12.50     11.63
    Dividends Paid                       .075     .075      .075      .075
Fiscal 1995
    Market Price Range
      High                              11.63    12.75     15.50     17.00
      Low                                9.50     9.75     11.63     14.38
    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. 29, 1996,  there were  approximately  689
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. 5, 1996,  the board of directors
declared a quarterly dividend of 7.5 cents per share of its common stock.
     The second and third  quarters of fiscal 1996 include $14 million and $15.5
million,   respectively,   in  pretax   charges  for  class  action   litigation
settlements.
     The second  quarter of fiscal 1995 includes a $70 million pretax charge for
settlement of  Institutional  Government  Income  Portfolio  (PJIGX) mutual fund
litigation,  which was  partially  offset in the third quarter of fiscal 1995 by
$13.9 million of insurance proceeds, net of related expenses.