<PAGE> 1
KEMPER FIXED INCOME FUNDS
SUPPLEMENT TO PROSPECTUS
DATED DECEMBER 1, 1994
CLASS I SHARES
Kemper Adjustable Rate U.S. Government Fund
Kemper Cash Reserves Fund
Kemper Diversified Income Fund
Kemper U.S. Government Securities Fund
Kemper High Yield Fund
Kemper Income and Capital Preservation Fund
Kemper U.S. Mortgage Fund
Kemper Short-Intermediate Government Fund
Kemper Adjustable Rate U.S. Government Fund (the "Adjustable Rate Fund"),
Kemper Cash Reserves Fund (the "Cash Reserves Fund"), Kemper Diversified Income
Fund (the "Diversified Fund"), Kemper U.S. Government Securities Fund (the
"Government Fund"), Kemper High Yield Fund (the "High Yield Fund"), Kemper
Income and Capital Preservation Fund (the "Income and Capital Fund"), Kemper
U.S. Mortgage Fund (the "Mortgage Fund") and Kemper Short-Intermediate
Government Fund (the "Short-Intermediate Government Fund") (collectively, the
"Funds") currently offer four classes of shares to provide investors with
different purchasing options. These are Class A, Class B and Class C shares,
which are described in the prospectus, and Class I shares, which are described
in the prospectus as supplemented hereby.
Class I shares are available for purchase exclusively by the following
investors: (a) tax-exempt retirement plans of Kemper Financial Services, Inc.
("KFS") and its affiliates; and (b) the following investment advisory clients
of KFS and its investment advisory affiliates (including Kemper Asset
Management Company ("KAMCO")) that invest at least $1 million in a Fund: (1)
unaffiliated benefit plans, such as qualified retirement plans (other than
individual retirement accounts and self-directed retirement plans); (2)
unaffiliated banks and insurance companies purchasing for their own accounts;
and (3) endowment funds of unaffiliated non-profit organizations. Class I
shares currently are available for purchase only from KFS or Kemper Clearing
Corp., an affiliate of KFS and KAMCO. Share certificates are not available for
Class I shares.
The primary distinctions among the classes of each Fund's shares lie in
their initial and contingent deferred sales charge schedules and in their
ongoing expenses, including asset-based sales charges in the form of Rule 12b-1
distribution fees. Class I shares are offered at net asset value without an
initial sales charge and are not subject to a contingent deferred sales charge
or a Rule 12b-1 distribution fee. Also, there is no administrative services
fee charged to Class I shares. As a result of the relatively lower expenses
for Class I shares, the level of income dividends per share (as a percentage of
net asset value) and, therefore, the overall investment return, will be higher
for Class I shares than for Class A, Class B and Class C shares.
The following information supplements the indicated sections of the
prospectus.
SUMMARY OF EXPENSES
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO ALL FUNDS) CLASS I
<S> <C>
Maximum Sales Charge on Purchases
(as a percentage of offering price) . . . . . . . . . . . . . . . . . . . . . . . . . None
Maximum Sales Charge on Reinvested Dividends . . . . . . . . . . . . . . . . . . . . . None
Redemption Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Deferred Sales Charge (as a percentage of redemption proceeds) . . . . . . . . . . . . None
</TABLE>
<TABLE>
<CAPTION>
INCOME SHORT-
ADJUSTABLE CASH HIGH AND INTERMEDIATE
ANNUAL FUND OPERATING EXPENSES RATE RESERVES DIVERSIFIED GOVERNMENT YIELD CAPITAL MORTGAGE GOVERNMENT
(as a percentage of average net assets) FUND FUND FUND FUND FUND FUND FUND FUND
---------- -------- ----------- ---------- ----- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees (restated) . . . . . . .55% .39% .56% .41% .53% .53% .50% .55%
12b-1 Fees. . . . . . . . . . . . . . None None None None None None None None
Other Expenses (estimated) . . . . . . .10% .06% .06% .04% .03% .04% .06% .05%
---------- -------- ----------- ---------- ----- ------- -------- -----------
Total Operating Expenses . . . . . . . .65% .45% .62% .45% .56% .57% .56% .60%
========== ======== =========== ========== ===== ======= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
You would pay the following Adjustable Rate . . . . . . . . $7 $21 $36 $81
expenses on a $1,000 Cash Reserves . . . . . . . . . $5 $14 $25 $57
investment, assuming (1) 5% Diversified . . . . . . . . . . $6 $20 $35 $77
annual return Government . . . . . . . . . . . $5 $14 $25 $57
and (2) redemption at the end High Yield . . . . . . . . . . . $6 $18 $31 $70
of each time period Income and Capital . . . . . . . $6 $18 $32 $71
Mortgage . . . . . . . . . . . . $6 $18 $31 $70
Short-Intermediate Government. . $6 $19 $33 $75
</TABLE>
The purpose of the preceding table is to assist investors in understanding
the various costs and expenses that an investor in Class I shares of a Fund
will bear directly or indirectly.
As discussed in the prospectus under "Investment Manager and Underwriter,"
effective May 31, 1994, the investment management fee for each Fund was
changed. "Management Fees" have been restated based upon the new management
fee.
"Other Expenses" for Class I shares, which were not available for purchase
prior to May 31, 1994, have been estimated for the current fiscal year.
As discussed under "Investment Manager and Underwriter" in the Statement
of Additional Information, KFS agreed to waive its full investment management
fee and absorb certain other operating expenses of the Adjustable Rate Fund
from January 17, 1992 through December 31, 1992. Thereafter, the investment
management fee and other operating expenses were gradually reinstated through
January 31, 1994. The table for the Adjustable Rate Fund reflects the full
management fee rate without any waiver and estimated "Other Expenses" for the
current fiscal year without the effect of any expense absorption.
As discussed more fully under "Investment Manager and Underwriter" in the
Statement of Additional Information, KFS agreed to temporarily absorb a portion
of the operating expenses of the Cash Reserves Fund from October 1, 1992 to May
31, 1994. The table for the Cash Reserves Fund shows "Other Expenses" without
the effect of this expense absorption.
The Example assumes a 5% annual rate of return pursuant to requirements of
the Securities and Exchange Commission. This hypothetical rate of return is
not intended to be representative of past or future performance of any Fund.
The Example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
SPECIAL FEATURES
Shareholders of a Fund's Class I shares may exchange their shares for (i)
shares of Kemper Money Market Fund - Money Market Portfolio if the shareholders
of Class I shares have purchased shares because they are participants in
tax-exempt retirement plans of KFS and its affiliates and (ii) Class I shares
of any other "Kemper Mutual Fund" listed under "Special Features - Class A
Shares - Combined Purchases" in the prospectus. Conversely, shareholders of
Kemper Money Market Fund - Money Market Portfolio who have purchased shares
because they are participants in tax-exempt retirement plans of KFS and its
affiliates may exchange their shares for Class I shares of "Kemper Mutual
Funds" to the extent that they are available through their plan. Exchanges
will be made at the shares relative net asset values. Exchanges are subject to
the limitations set forth in the prospectus under "Special Features - Exchange
Privilege - General."
July 10, 1995
KFIF-1I (7/95) (LOGO)printed on recycled paper
