INVESTORS FUND SERIES
Kemper Blue Chip Portfolio
Kemper Contrarian Value Portfolio
Kemper Global Blue Chip Portfolio
Kemper Global Income Portfolio
Kemper Government Securities Portfolio
Kemper Growth Portfolio
Kemper High Yield Portfolio
Kemper Horizon 10+ Portfolio
Kemper Horizon 20+ Portfolio
Kemper Horizon 5 Portfolio
Kemper International Growth and Income Portfolio
Kemper International Portfolio
Kemper Investment Grade Bond Portfolio
Kemper Money Market Portfolio
Kemper Small Cap Growth Portfolio
Kemper Small Cap Value Portfolio
Kemper Total Return Portfolio
Kemper Value+Growth Portfolio
Kemper-Dreman Financial Services Portfolio
Kemper-Dreman High Return Equity Portfolio
SUPPLEMENT TO CURRENTLY EFFECTIVE STATEMENT OF ADDITIONAL
INFORMATION OF EACH OF THE LISTED PORTFOLIOS (EACH A "FUND")
DATED MAY 1, 1998
--------------------
On September 7, 1998, Zurich Insurance Company ("Zurich"), the majority owner of
Scudder Kemper Investments, Inc. (the "Adviser"), entered into an agreement with
B.A.T Industries p.l.c. ("B.A.T"), pursuant to which the financial services
businesses of B.A.T were combined with Zurich's businesses to form a new global
insurance and financial services company known as Zurich Financial Services.
Upon consummation of the transaction, each Fund's investment management
agreement with the Adviser was deemed to have been assigned and, therefore,
terminated. The Board of Trustees of each Fund and the shareholders of each Fund
have approved a new investment management agreement with the Adviser, which is
substantially identical to the former investment management agreement, except
for the dates of execution and termination.
At the special meeting of shareholders for the Funds held on December 16, 1998
(the "Special Meeting"), the shareholders confirmed the following: For Kemper
Global Income Portfolio: as a matter of fundamental policy, the Fund is
classified as a non-diversified series of an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act"), but the shareholders voted
to eliminate any additional fundamental diversification policies. For all other
Funds, the shareholders confirmed that as a matter of fundamental policy, each
Fund is classified as a diversified series of an open-end investment company
under the 1940 Act, but the shareholders voted to eliminate any additional
fundamental diversification policies.
<PAGE>
Additionally, at the Special Meeting, the shareholders approved the
reclassification of each Fund's investment objective(s) and policies as
non-fundamental, with the exception of those policies required to be fundamental
by the 1940 Act (see below). An objective or policy which is non-fundamental may
be changed or eliminated by the Board of Trustees without a vote of the
shareholders.
Each Fund's fundamental policies have been amended by a vote of shareholders at
the Special Meeting. Following is a list of each Fund's amended and restated
fundamental policies. As a matter of fundamental policy, each Fund may not:
(1) borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time;
(2) issue senior securities, except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time;
(3) For all Funds except Kemper Money Market Portfolio: concentrate its
investments in a particular industry, as that term is used in the Investment
Company Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
For Kemper Money Market Portfolio: concentrate its investments in a particular
industry, as that term is used in the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time, except that the Fund intends to invest more
than 25% of its net assets in instruments issued by banks;
(4) engage in the business of underwriting securities issued by others, except
to the extent that a Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities;
(5) purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by real
estate or interests therein, except that the Fund reserves freedom of action to
hold and to sell real estate acquired as a result of the Fund's ownership of
securities;
(6) purchase physical commodities or contracts relating to physical commodities;
(7) make loans except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
The following policies are non-fundamental, and may be changed or eliminated for
each Fund by its Board of Trustees without a vote of the shareholders:
Each of Kemper Money Market Portfolio, Kemper Total Return Portfolio, Kemper
High Yield Portfolio, Kemper Growth Portfolio and Kemper Government Securities
Portfolio may not:
2
<PAGE>
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government or its agencies or instrumentalities) if, as a
result, more than five percent (5%) of the Fund's total assets would be invested
in securities of that issuer. For Kemper High Yield Portfolio only, the
restriction is as follows: "With respect to 75% of the Fund's total assets,
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities)
if, as a result, (a) more than 5% of the Fund's total assets would be invested
in the securities of that issuer, or (b) the Fund would hold more than 10% of
the outstanding voting securities of that issuer;"
(2) Except for Kemper High Yield Portfolio, purchase more than ten percent (10%)
of any class of securities of any issuer. All debt securities and all preferred
stocks are each considered as one class;
(3) For Kemper Money Market Portfolio only, enter into repurchase agreements if,
as a result thereof, more than ten percent (10%) of the Fund's total assets
valued at the time of the transaction would be subject to repurchase agreements
maturing in more than seven (7) days;
(4) For all Funds, Make short sales of securities or purchase any securities on
margin except to obtain such short-term credits as may be necessary for the
clearance of transactions; however, Kemper Total Return Portfolio, Kemper High
Yield Portfolio, Kemper Growth Portfolio and Kemper Government Securities
Portfolio may make margin deposits in connection with financial futures and
options transactions;
(5) For Kemper Money Market Portfolio only, invest more than five percent (5%)
of the Fund's total assets in securities restricted as to disposition under the
Federal securities laws;
(6) For all Funds: purchase securities of other investment companies, except as
permitted under the 1940 Act including in connection with a merger,
consolidation, reorganization or acquisition of assets;
(7) For Kemper Money Market Portfolio only, write, purchase or sell puts, calls
or combinations thereof;
(8) For Kemper Total Return Portfolio, Kemper High Yield Portfolio and Kemper
Growth Portfolio only, engage in put or call option transactions; except that
the Fund may write (sell) put or call options on up to 25% of its net assets and
may purchase put and call options if no more than 5% of its net assets would be
invested in premiums on put and call options, combinations thereof or similar
options; and it may buy and sell options on financial futures contracts.
Kemper International Portfolio may not:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States or any foreign government or their agencies or
instrumentalities) if, as a result, more than 5% of the Fund's total assets
would be invested in securities of that issuer. With respect to 75% of its
assets, the Fund will limit its investments in the securities of any one foreign
government issuer to 5% of the Fund's total assets;
3
<PAGE>
(2) Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities. All debt securities are considered as one class and all
preferred stocks are considered as one class;
(3) Pledge the Fund's securities or receivables or transfer or assign or
otherwise encumber them in an amount exceeding the amount of a borrowing secured
thereby;
(4) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions;
(5) Write or sell put or call options, combinations thereof or similar options
on more than 25% of the Fund's net assets; nor may it purchase put or call
options if more than 5% of the Fund's net assets would be invested in premiums
on put and call options, combinations thereof or similar options; however, the
Fund may buy or sell options on financial futures contracts;
(6) Purchase securities of other investment companies, except in connection with
a merger, consolidation, acquisition or reorganization, or by purchase in the
open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commission, is involved and only if immediately thereafter not more than (i) 3%
of the total outstanding voting stock of such company is owned by the Fund, (ii)
5% of the Fund's total assets would be invested in any one such company, and
(iii) 10% of the Fund's total assets would be invested in such securities.
Each of Kemper Small Cap Growth Portfolio, Kemper Investment Grade Bond
Portfolio, Kemper Contrarian Value Portfolio, Kemper Small Cap Value Portfolio,
Kemper Value+Growth Portfolio, Kemper Horizon 10+ Portfolio, Kemper Horizon 20+
Portfolio and Kemper Horizon 5 Portfolio may not:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the United States Government, its agencies or instrumentalities) if, as a
result, more than 5% of the Fund's total assets would be invested in securities
of that issuer; except that, for Kemper Contrarian Value Portfolio and Kemper
Small Cap Value Portfolio, up to 25% of each Fund's total assets may be invested
without regard to these limitations;
(2) Purchase more than 10% of the outstanding voting securities of any issuer;
(3) Make short sales of securities, or purchase any securities on margin except
to obtain such short-term credits as may be necessary for the clearance of
transactions; however, the Fund may make margin deposits in connection with
financial futures and options transactions;
(4) For Kemper Small Cap Growth Portfolio, Kemper Investment Grade Bond
Portfolio and Kemper Horizon 10+ Portfolio, Kemper Horizon 20+ Portfolio and
Kemper Horizon 5 Portfolio only, write (sell) put or call options, combinations
thereof or similar options on more than 25% of the Fund's net assets; nor may
the Fund purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations thereof or
similar options; however, the Fund may buy or sell options on financial futures
contracts.
4
<PAGE>
Kemper Blue Chip Portfolio may not:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities) if, as a result,
more than 5% of the total value of the Fund's assets would be invested in
securities of that issuer;
(2) Purchase more than 10% of any class of voting securities of any issuer;
(3) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure permitted borrowings. (The collateral
arrangements with respect to options, financial futures and delayed delivery
transactions and any margin payments in connection therewith are not deemed to
be pledges or other encumbrances.);
(4) Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with options and financial futures transactions;
(5) Make short sales of securities or maintain a short position for the account
of the Fund unless at all times when a short position is open it owns an equal
amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and equal in amount to, the securities sold short and unless
not more than 10% of the Fund's total assets is held as collateral for such
sales at any one time;
(6) Write (sell) put or call options, combinations thereof or similar options;
nor may it purchase put or call options if more than 5% of the Fund's net assets
would be invested in premiums on put and call options, combinations thereof or
similar options; however, the Fund may buy or sell options on financial futures
contracts;
(7) Invest in real estate limited partnerships.
Kemper Global Income Portfolio may not:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities) if, as a result,
more than 5% of the total value of the Fund's assets would be invested in
securities of that issuer except that, with respect to 50% of the Fund's total
assets, the Fund may invest up to 25% of its total assets in securities of any
one issuer;
(2) Purchase more than 10% of any class of voting securities of any issuer;
(3) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure permitted borrowings. (The collateral
arrangements with respect to options, financial futures and delayed delivery
transactions and any margin payments in connection therewith are not deemed to
be pledges or other encumbrances.);
5
<PAGE>
(4) Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Fund may make
margin deposits in connection with options and financial futures transactions;
(5) Make short sales of securities or other assets or maintain a short position
for the account of the Fund unless at all times when a short position is open it
owns an equal amount of such securities or other assets or owns securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities or other assets of the same issue as, and equal in
amount to, the securities or other assets sold short and unless not more than
10% of the Fund's total assets is held as collateral for such sales at any one
time;
(6) Write or sell put or call options, combinations thereof or similar options
on more than 25% of the Fund's net assets; nor may the Fund purchase put or call
options if more than 5% of the Fund's net assets would be invested in premiums
on put and call options, combinations thereof or similar options; however, the
Fund may buy or sell options on financial futures contracts;
(7) Invest in real estate limited partnerships.
Kemper-Dreman High Return Equity Portfolio may not:
(1) Purchase securities of any one issuer other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
(collectively "U.S. Government Securities") if immediately thereafter more than
5% of its total assets would be invested in the securities of any one issuer, or
purchase more than 10% of an issuer's outstanding securities, except that up to
25% of the Fund's total assets may be invested without regard to these
limitations;
(2) Mortgage, pledge or hypothecate any assets except in connection with a
borrowing in amounts not in excess of the lesser of the amount borrowed or 10%
or the value of its total assets at the time of such borrowing;
(3) Purchase securities on margin or make short sales of securities, provided
that the Fund may enter into futures contracts and related options and make
initial and variation margin deposits in connection therewith;
(4) Invest in oil, gas or mineral exploration or development programs, except
that the Fund may, to the extent appropriate to its investment objective,
purchase publicly traded securities of companies engaging in whole or in part in
such activities;
(5) Invest in mortgage loans, except that the Fund may, to the extent
appropriate to its investment objective, purchase publicly traded securities of
companies engaging in whole or in part in such activities.
The following replaces the respective sections under "Investment Policies and
Techniques":
FOREIGN CURRENCY OPTIONS. The Total Return, High Return Equity, High Yield,
Growth, International, Small Cap Growth, Investment Grade Bond, Value+Growth,
Horizon, Blue Chip, Global Income, Financial Services, Global Blue Chip, and
International Growth and
6
<PAGE>
Income Portfolios may engage in foreign currency options transactions. A foreign
currency option provides the option buyer with the right to buy or sell a stated
amount of foreign currency at the exercise price at a specified date or during
the option period. A call option gives its owner the right, but not the
obligation, to buy the currency, while a put option gives its owner the right,
but not the obligation, to sell the currency. The option seller (writer) is
obligated to fulfill the terms of the option sold if it is exercised. However,
either seller or buyer may close its position during the option period in the
secondary market for such options any time prior to expiration.
A call rises in value if the underlying currency appreciates. Conversely, a put
rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Portfolio against an adverse movement in
the value of a foreign currency, it does not limit the gain which might result
from a favorable movement in the value of such currency. For example, if a
Portfolio were holding securities denominated in an appreciating foreign
currency and had purchased a foreign currency put to hedge against a decline in
the value of the currency, it would not have to exercise its put. Similarly, if
the Portfolio had entered into a contract to purchase a security denominated in
a foreign currency and had purchased a foreign currency call to hedge against a
rise in value of the currency but instead the currency had depreciated in value
between the date of purchase and the settlement date, the Portfolio would not
have to exercise its call but could acquire in the spot market the amount of
foreign currency needed for settlement.
FOREIGN CURRENCY FUTURES TRANSACTIONS. As part of their financial futures
transactions (see "Financial Futures Contracts" and "Options on Financial
Futures Contracts" above), the Total Return, High Return Equity, High Yield,
Growth, International, Small Cap Growth, Investment Grade Bond, Value+Growth,
Horizon, Blue Chip, Global Income, Financial Services, Global Blue Chip, and
International Growth and Income Portfolios may use foreign currency futures
contracts and options on such futures contracts. Through the purchase or sale of
such contracts, a Portfolio may be able to achieve many of the same objectives
as through forward foreign currency exchange contracts more effectively and
possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency futures
contracts and options on foreign currency futures contracts are standardized as
to amount and delivery period and are traded on boards of trade and commodities
exchanges. It is anticipated that such contracts may provide greater liquidity
and lower cost than forward foreign currency exchange contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Total Return, High Return
Equity, High Yield, Growth, International, Small Cap Growth, Investment Grade
Bond, Value+Growth, Horizon, Blue Chip, Global Income, Financial Services,
Global Blue Chip, International Growth and Income Portfolios may engage in
forward foreign currency transactions. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days ("term") from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers. The investment manager believes that it
is important to have the flexibility to enter into such forward contracts when
it determines that to do so is in the best interest of a Portfolio.
A Portfolio will not speculate in foreign currency exchange.
7
<PAGE>
If a Portfolio retains the portfolio security and engages in an offsetting
transaction with respect to a forward contract, the Portfolio will incur a gain
or a loss (as described below) to the extent that there has been movement in
forward contract prices. If a Portfolio engages in an offsetting transaction, it
may subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between a Portfolio's entering
into a forward contract for the sale of foreign currency and the date when it
enters into an offsetting contract for the purchase of the foreign currency, the
Portfolio would realize a gain to the extent the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Portfolio would suffer a loss to the extent
the price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. Although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, they also
tend to limit any potential gain that might result should the value of such
currency increase. A Portfolio may have to convert its holdings of foreign
currencies into U.S. Dollars from time to time in order to meet such needs as
Portfolio expenses and redemption requests. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies.
The returns available from foreign currency denominated debt instruments can be
adversely affected by changes in exchange rates. The investment manager believes
that the use of foreign currency hedging techniques, including "cross-hedges"
for the International, Global Income, Financial Services, Global Blue Chip, and
International Growth and Income Portfolios, can help protect against declines in
the U.S. Dollar value of income available for distribution to shareholders, and
against declines in the net asset value of a Portfolio's shares resulting from
adverse changes in currency exchange rates. For example, the return available
from securities denominated in a particular foreign currency would diminish if
the value of the U.S. Dollar increased against that currency. Such a decline
could be partially or completely offset by the increased value of a cross-hedge
involving a forward foreign currency exchange contract to sell a different
foreign currency, if that contract were available on terms more advantageous to
the Portfolio than a contract to sell the currency in which the position being
hedged is denominated. The investment manager believes that cross-hedges can
therefore provide significant protection of net asset value in the event of a
general rise in the U.S. Dollar against foreign currencies. However, a
cross-hedge cannot provide assured protection against exchange rate risks and,
if the investment manager misjudges future exchange rate relationships, the
Portfolio could be in a less advantageous position than if such a hedge had not
been established.
A Portfolio will not enter into forward contracts or maintain a net exposure in
such contracts when the Portfolio would be obligated to deliver an amount of
foreign currency in excess of the value of the Portfolio's securities or other
assets (a) denominated in that currency or (b), in the case of a "cross-hedge"
(see "Investment Objectives, Policies and Risk Factors" in the prospectus),
denominated in a currency or currencies that the investment manager believes
will have price movements that tend to correlate closely with that currency. The
investment manager will normally seek to select currencies for sale under a
forward contract for a "cross-hedge" that would reflect a price movement
correlation of .8 or higher with respect to the currency being hedged (1
reflects a perfect correlation, 0 reflects a random relationship and -1 reflects
a diametrically opposite correlation). There is, of course, no assurance that
any specific correlation can be maintained for any specific transaction. See
"Foreign Currency Transactions" under
8
<PAGE>
"Investment Techniques" in the prospectus. The Portfolio's custodian bank
segregates eligible securities to the extent required by applicable regulation
in connection with forward foreign currency exchange contracts entered into for
the purchase of foreign currency. If the value of the securities segregated
declines, additional cash or securities are added so that the segregated amount
is not less than the amount of the Portfolio's commitments with respect to such
contracts. The Portfolios currently do not intend to enter into such forward
contracts if they would have more than 15% of the value of their total assets
committed to such contracts, except that there is no limit as to the percentage
of assets that the Global Income, Financial Services, Global Blue Chip, and
International Growth and Income Portfolios intend to commit to such forward
contracts. A Portfolio generally will not enter into a forward contract with a
term longer than one year.
February 22, 1999
9