PIPER FUNDS INC. - II
                    ADJUSTABLE RATE MORTGAGE SECURITIES FUND
                      SUPPLEMENT DATED AUGUST 28, 1996 TO
                       PROSPECTUS DATED DECEMBER 18, 1995
 
    For the fiscal year ending August 31, 1996, Piper Capital Management
Incorporated (the "Adviser") will reimburse Adjustable Rate Mortgage Securities
Fund (the "Fund") to the extent that the Fund's total operating expenses exceed
 .60% per annum of its average daily net assets. The Adviser has determined that
it will not reimburse any Fund expenses for the fiscal year ending August 31,
1997. Given this determination, the Fund Expenses table appearing on page 4 of
the Prospectus is hereby revised as follows to reflect actual expenses (absent
voluntary expense reimbursements by the Adviser) that the Fund is expected to
incur for the fiscal year ending August 31, 1996:
 
                                                                                                                   
SHAREHOLDER TRANSACTION EXPENSES
  Maximum Sales Load Imposed on Purchases (as a percentage of offering price).......................................       1.50%
  Exchange Fee (1)..................................................................................................         $0
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
  Management Fees...................................................................................................        .35%
  Rule 12b-1 Fees...................................................................................................        .15%
  Other Expenses....................................................................................................        .24%
                                                                                                                            ---
  Total Fund Operating Expenses.....................................................................................        .74%


 
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(1) THERE IS A $5.00 FEE FOR EACH EXCHANGE IN EXCESS OF FOUR EXCHANGES PER YEAR.
    SEE "HOW TO PURCHASE SHARES - EXCHANGE PRIVILEGE."
 
EXAMPLE
 
    You would pay the following expenses on a $1,000 investment assuming a 5%
annual return and redemption at the end of each time period:
 
                                                                                                    
 1 Year..............................................................................................        $22
 3 Years.............................................................................................        $38
 5 Years.............................................................................................        $56
10 Years.............................................................................................       $105


 
    The purpose of the above table is to assist you in understanding the various
costs and expenses that investors in the Fund will bear directly or indirectly.
THE EXAMPLE CONTAINED IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.