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                           KEMPER FIXED INCOME FUNDS
                            SUPPLEMENT TO PROSPECTUS
                             DATED DECEMBER 1, 1994
 
                  Kemper Adjustable Rate U.S. Government Fund
                         Kemper Diversified Income Fund
                     Kemper U.S. Government Securities Fund
                             Kemper High Yield Fund
                  Kemper Income and Capital Preservation Fund
           Kemper Portfolios comprised of the following three series:
                           Kemper Cash Reserves Fund
                           Kemper U.S. Mortgage Fund
                   Kemper Short-Intermediate Government Fund
 
                           -------------------------
 
     Kemper Corporation, the parent of Kemper Financial Services, Inc. ("KFS,"
the investment manager for the Funds), has entered into an agreement in
principle with an investor group led by Zurich Insurance Company ("Zurich")
pursuant to which Kemper Corporation would be acquired by the investor group in
a merger transaction. As part of the transaction, Zurich or an affiliate would
purchase KFS.
 
     A definitive agreement is expected in early May 1995, subject to the
completion of the investor group's due diligence. Consummation of the
transaction is subject to a number of contingencies, including approval by the
board and stockholders of Kemper Corporation and the Zurich board and regulatory
approvals. Because the transaction would constitute an assignment of the Funds'
investment management agreements with KFS and, where applicable, Rule 12b-1
agreements under the Investment Company Act of 1940, and therefore a termination
of such agreements, the transaction is subject also to approval of new
agreements by Kemper Fund boards and shareholders. If the contingencies are
timely met, the transaction is expected to close early in the fourth quarter of
1995.
 
     After consummation of the transaction, it is anticipated that the KFS
management team and the Kemper Fund portfolio managers would remain in place and
that the Kemper Funds would be operated in the same manner as they are
currently.
 
     Also, Paul F. Sloan has been named the portfolio manager of Kemper U.S.
Government Securities Fund and Kemper U.S. Mortgage Fund and portfolio
co-manager of Kemper Short-Intermediate Government Fund and Kemper Adjustable
Rate U.S. Government Fund replacing J. Patrick Beimford, Jr. Mr. Beimford
continues as Director of Fixed Income Investments at KFS. Prior to joining KFS,
Mr. Sloan was the director of institutional portfolio management at an
investment management company and prior thereto he was a
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vice president and investment officer for a regional bank. He received a B.A. in
English Literature from the University of Detroit, Detroit, Michigan, and an
M.B.A. in Finance and Business Economics from Wayne State University, Detroit,
Michigan.
 
     In addition, Kemper Diversified Income Fund is now managed by a team of
portfolio managers who are specialists in the basic sectors in which it invests.
Messrs. Robert S. Cessine, Gordon K. Johns, Michael A. McNamara, Harry E. Resis,
Jr., Paul F. Sloan and Jonathan W. Trutter are the members of the team. Mr.
Cessine is senior vice president and director of investment grade corporate and
sovereign bond research at KFS. Prior to joining KFS in January 1993, he was a
senior corporate bond analyst and chairman of the bond selection committee at an
investment management company. He received a masters degree in Finance from the
University of Wisconsin, Madison, Wisconsin, a masters degree in Agricultural
Economics from the University of Maryland, Baltimore/College Park, Maryland, and
a B.S. in Economics from the University of Wisconsin, Madison, Wisconsin. Mr.
Cessine is a Chartered Financial Analyst. Mr. Johns joined Kemper in 1988 and
currently is executive vice president of KFS and managing director of Kemper
Investment Management Company Limited in London. Previously, he was head of
international fixed income fund management at an investment bank in London. He
received a B.A. in law from Balliol College in Oxford, United Kingdom. Mr.
McNamara joined KFS in February 1972 and is currently a senior vice president of
KFS. He received a B.S. in Business Administration from the University of
Missouri, St. Louis, Missouri, and an M.B.A. in Finance from Loyola University,
Chicago, Illinois. Mr. Resis joined KFS in June 1988 and is currently a senior
vice president of KFS. He received a B.A. in Finance from Michigan State
University, East Lansing, Michigan. Mr. Sloan's background is discussed above.
Mr. Trutter is a first vice president of KFS. Before joining KFS in April 1989,
he was a vice president in commercial banking. Mr. Trutter has an A.B. with dual
majors in East Asian Languages and International Relations from University of
Southern California, Los Angeles and an M.B.A. from Kellogg Graduate School of
Management at Northwestern University, Evanston, Illinois. He is also a
Certified Public Accountant.
 
     Separately, effective February 1, 1995, KFS transferred all its duties and
responsibilities as principal underwriter, distributor and administrator of the
Funds to Kemper Distributors, Inc., a wholly-owned subsidiary of KFS. KFS
continues to provide investment management services. See "Investment Manager and
Underwriter" in the prospectus.
 
May 8, 1995
KFIF-1A  5/95                                    (LOGO)printed on recycled paper