KFIF-13A
                               KEMPER INCOME FUNDS

                     Kemper Diversified Income Fund ("KDIF")
                         Kemper High Yield Fund ("KHYF")
                  Kemper High Yield Opportunity Fund ("KHYOF")
              Kemper Income and Capital Preservation Fund ("KICPF")


                        SUPPLEMENT DATED JANUARY 1, 1999
          TO STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 1, 1999


         A proxy statement dated October 23, 1998 (the "Proxy Statement")
solicited the approval of the shareholders of each of the funds listed above
(each a "Fund" and, collectively, the "Funds") on certain proposals, including
the revision of fundamental policies mandated by the Investment Company Act of
1940 and the elimination of the shareholder approval requirement to change
certain other fundamental policies (the "Proposals"). However, at the Special
Meeting of Shareholders held on December 17, 1998 (the "Special Meeting"), there
were insufficient votes to approve the Proposals. The Special Meeting was
adjourned to January 15, 1999. The currently effective Statement of Additional
Information of the Funds describes the investment policies as proposed to be
changed. Until such time as the requisite number of shares of the Funds has been
voted in favor of the Proposals, the Statement of Additional Information is
revised as follows:

For KDIF

All investment policies for KDIF listed under the "Investment Restrictions"
section (except for KDIF non-fundamental policies numbered 1, 2 and 3) are
replaced in their entirety by the following:

KDIF may not, as a fundamental policy:

         (1) With respect to 75% of the Fund's total assets, purchase 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 securities of the issuer, or (b)
the Fund would hold more than 10% of the outstanding voting securities of that
issuer.

         (2) Lend money or securities, provided that the making of time or
demand deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described in the prospectus.



         (3) Borrow money except for temporary or emergency purposes (but no for
the purpose of purchase of investments) and then only in an amount not to exceed
5% of the Fund's net assets; or pledge the Fund's securities or receivables or
transfer or assign or otherwise encumber them in an amount exceeding the amount
of the borrowing secured thereby.

         (4) Engage in margin purchases 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; nor may the Fund make short sales of securities or maintain a
short position unless, at all times when a short position is open, the Fund owns
an equal amount of such securities or securities convertible into or
exchangeable for securities, without payment of additional consideration, which
are equal in amount to and of the same issue as the securities sold short and
such securities are not subject to outstanding call options, and unless not more
than 10% of the Fund's net assets is held as collateral for such sales at any
one time. (Management does not intend to make such sales except for the purpose
of deferring realization of gain or loss for federal income tax purposes.)

         (5) 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 the purchase of put and call
options, combinations thereof or similar options; except that the Fund may write
covered call options with respect to its portfolio securities or securities
indices, or write secured put options; and the Fund may enter into closing
transactions with respect to such options, and may buy or sell options on
financial futures contracts.

         (6) Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry.

         (7) Invest in commodities or commodity futures contracts, although it
may buy sell financial futures contracts and options of such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.

         (8) Underwrite securities issued by others except to the extent the
Fund may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.

         (9) Issue senior securities except as permitted under the Investment
Company Act of 1940.

For KHYF

All investment policies for KHYF listed under the "Investment Restrictions"
section (except for KHYF non-fundamental policies numbered 1, 2 and 3) are
replaced in their entirety by the following:




KHYF may not, as a fundamental policy:

         (1) With respect to 75% of the Fund's total assets, purchase 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 securities of that issuer, or
(b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer.

         (2) Lend money or securities, provided that the making of time or
demand deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objectives and policies are not prohibited and it may
lend its securities as discussed under "Investment Policies and Techniques."

         (3) Borrow money except for temporary or emergency purposes (but not
for the purpose of purchase of investments) and then only in an amount not to
exceed 5% of the Fund's net assets; or pledge the Fund's securities or
receivables or transfer or assign or otherwise encumber them in an amount
exceeding the amount of the borrowing secured thereby.

         (4) Invest more than 25% of the Fund's total assets in fixed income
securities which are payable in currencies other than United States Dollars.
(Investments in such securities may involve risks which differ from investments
in securities of U.S. issuers, such as future political and economic
developments, the possible imposition of governmental restrictions and taxes, as
well as currency fluctuation.)

         (5) Engage in margin purchases 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; nor may the Fund make short sales of securities or maintain a
short position unless, at all times when a short position is open, the Fund owns
an equal amount of such securities or securities convertible into or
exchangeable for securities, without payment of additional consideration, which
are equal in amount to and of the same issue as the securities sold short and
such securities are not subject to outstanding call options, and unless not more
than 10% of the Fund's net assets is held as collateral for such sales at any
one time. (Management does not intend to make such sales except for the purpose
of deferring realization of gain or loss for federal income tax purposes.)

         (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 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) Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry.

         (8) Invest in commodities or commodity futures contracts, although it
may buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.

         (9) Underwrite securities issued by others except to the extent the
Fund may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.

         (10) Issue senior securities except as permitted under the Investment
Company Act of 1940.

For KHYOF

All investment policies for KHYOF listed under the "Investment Restrictions"
section (except for KHYOF non-fundamental policies numbered 1, 2, 3 and 4) are
replaced in their entirety by the following:

 KHYOF may not, as a fundamental policy:

         (1) With respect to 75% of the Fund's total assets, purchase 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 securities of that issuer, or
(b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer, except that all or substantially all of the assets of the Fund may
be invested in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund.

         (2) Lend money or securities, provided that the making of time or
demand deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objectives and policies are not prohibited and it may
lend its securities as discussed under "Investment Policies and Techniques."

         (3) Borrow money except (i) for leverage purposes, but not for more
than 20% of the Fund's total assets, including the amount borrowed, and (ii) as
a temporary measure for extraordinary or emergency purposes, and then only in an
amount up to one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately selling any
portfolio securities. The maximum amount that the Fund may borrow is one-third
of the value of its assets (including the amount borrowed). If, for any reason,
the current



value of the Fund's total assets falls below an amount equal to three times the
amount of its indebtedness from money borrowed, the Fund will, within three days
(not including Sundays and holidays), reduce its indebtedness to the extent
necessary.

         (4) Engage in margin purchases 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; nor may the Fund make short sales of securities or maintain a
short position unless, at all times when a short position is open, the Fund owns
an equal amount of such securities or securities convertible into or
exchangeable for securities, without payment of additional consideration, which
are equal in amount to and of the same issue as the securities sold short and
such securities are not subject to outstanding call options, and unless not more
than 10% of the Fund's net assets is held as collateral for such sales at any
one time. (Management does not intend to make such sales except for the purpose
of deferring realization of gain or loss for federal income tax purposes.)

         (5) Concentrate more than 25% of the value of its assets in any one
industry, except that all or substantially all of the assets of the Fund may be
invested in another registered investment company having the same investment
objective and substantially similar investment policies as the Fund. Water,
communications, electric and gas utilities shall each be considered a separate
industry.

         (6) Invest in commodities or commodity futures contracts, although it
may buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.

         (7) Underwrite securities issued by others except to the extent the
Fund may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities, and except that all or
substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objective and
substantially similar investment policies as the Fund.

         (8) Issue senior securities except as permitted under the Investment
Company Act of 1940.

For KICPF

All investment policies for KICPF listed under the "Investment Restrictions"
section (except for KICPF non-fundamental policies numbered 1, 2 and 3) are
replaced in their entirety by the following:

KICPF may not, as a fundamental policy:




         (1) Invest in securities other than those specified under "Investment
Policies and Techniques." This restriction does not prevent the Fund from
holding common stocks or other corporate securities not qualifying as debt
obligations if such securities are acquired through conversion provisions of
debt securities or from corporate reorganizations. Nor does it prevent the
holding of debt securities whose quality rating is reduced by the rating
services below those specified under "Investment Policies and Techniques" after
purchase by the Fund.

         (2) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States or Canadian governments, 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.

         (3) Purchase more than 10% of any class of securities of any issuer.
All debt securities and all preferred stocks are each considered as one class.

         (4) Lend money or securities, provided that the making of time or
demand deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
in accordance with its objective and policies are not prohibited and the Fund
may lend its portfolio securities as described under "Investment Policies and
Techniques."

         (5) Borrow money except for temporary or emergency purposes (but not
for the purpose of purchase of investments) and then only in an amount not to
exceed 5% of the Fund's net assets; or pledge the Fund's securities or
receivables or transfer or assign or otherwise encumber them in an amount
exceeding the amount of the borrowing secured thereby.

         (6) 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.

         (7) 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.

         (8) Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry.

         (9) Invest in commodities or commodity futures contracts, although it
may buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.




         (10) Underwrite securities issued by others except to the extent the
Fund may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.

         (11) Issue senior securities except as permitted under the Investment
Company Act of 1940.