<PAGE> 1
KEMPER
HIGH YIELD FUND
ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
Offering investors the opportunity for a high level of current income
from a diversified portfolio of fixed income securities
"... While most fixed-income investments suffered due to the economy's pickup,
high yield bonds flourished in the higher market rate environment..."
[KEMPER FUNDS LOGO]
<PAGE> 2
Table of
Contents
2
At a Glance
2
Terms to Know
3
General
Economic Overview
5
Performance Update
8
Portfolio Statistics
10
Portfolio of
Investments
16
Report of
Independent Auditors
17
Financial Statements
19
Notes to
Financial Statements
23
Financial Highlights
At A Glance
- --------------------------------------------------------------
KEMPER HIGH YIELD FUND
TOTAL RETURNS
- --------------------------------------------------------------
FOR THE YEAR ENDED SEPTEMBER 30, 1996 (UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
Lipper High Current
Yield Funds Category
Class A Class B Class C Average*
- ------- ------- ------- --------------------
<S> <C> <C> <C>
13.00% 12.02% 12.06% 12.92%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------
AS OF AS OF
9/30/96 9/30/95
- --------------------------------------------------------------
<S> <C> <C>
KEMPER HIGH YIELD FUND
CLASS A $8.23 $8.01
- --------------------------------------------------------------
KEMPER HIGH YIELD FUND
CLASS B $8.22 $8.00
- --------------------------------------------------------------
KEMPER HIGH YIELD FUND
CLASS C $8.24 $8.02
- --------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not represent future performance.
Returns and net asset value fluctuate. Shares are redeemable at current net
asset value, which may be more or less than original cost.
*Lipper Analytical Services, Inc. returns and rankings are based upon changes in
net asset value with all dividends reinvested and do not include the effect of
sales charges and, if they had, results may have been less favorable. Returns
and rankings are historical and do not reflect future performance.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
KEMPER HIGH YIELD FUND RANKINGS*
- -----------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER
HIGH CURRENT YIELD FUNDS CATEGORY
CLASS A CLASS B CLASS C
- -----------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #58 OF #83 OF #82 OF
143 FUNDS 143 FUNDS 143 FUNDS
- -----------------------------------------------------------
5-YEAR #21 OF N/A N/A
63 FUNDS
- -----------------------------------------------------------
10-YEAR #2 OF N/A N/A
43 FUNDS
- -----------------------------------------------------------
15-YEAR #1 OF N/A N/A
23 FUNDS
- -----------------------------------------------------------
</TABLE>
- -----------------------------------------------------------
DIVIDEND AND YIELD REVIEW
- -----------------------------------------------------------
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND
AND YIELD INFORMATION FOR THE FUND AS OF
SEPTEMBER 30, 1996.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -----------------------------------------------------------
<S> <C> <C> <C>
1 YEAR INCOME: $0.7680 $0.6969 $0.7020
- -----------------------------------------------------------
SEPTEMBER
DIVIDEND: $0.0665 $0.0604 $0.0605
- -----------------------------------------------------------
ANNUALIZED
DISTRIBUTION
RATE+: 9.70% 8.82% 8.81%
- -----------------------------------------------------------
SEC YIELD+: 8.90% 8.43% 8.47%
- -----------------------------------------------------------
</TABLE>
+Current annualized distribution rate is the latest monthly dividend shown as an
annualized percentage of net asset value on September 30, 1996. Distribution
rate simply measures the level of dividends and is not a complete measure of
performance. The SEC yield is net investment income per share earned over the
month ended September 30, 1996 shown as an annualized percentage of the maximum
offering price on that date. The SEC yield is computed in accordance with the
standardized method prescribed by the Securities and Exchange Commission.
TERMS TO KNOW
CYCLICAL ISSUES Cyclical issues are bonds within industries whose earnings tend
to rise quickly when the economy strengthens and fall quickly when the economy
weakens. Examples are housing, automobiles and paper companies. The performance
of noncyclical industries such as food, insurance and drugs is normally not as
directly affected by economic changes.
HIGH YIELD BONDS High yield bonds are issued by companies, often without long
track records of sales and earnings, or by those with questionable credit
strength, and pay a higher yield to investors to help compensate for their
greater risk of loss to principal and interest. High yield bonds carry a credit
rating of BB or lower from either Moody's or Standard & Poor's bond rating
services and are considered to be "below investment grade" by these rating
agencies. Such bonds may also be unrated. The bonds present greater risk to
principal and income than higher quality bonds.
TOTAL RETURN A fund's total return figure measures both the net investment
income and any realized and unrealized appreciation or depreciation of the
underlying investments in its portfolio for the period, assuming the
reinvestment of all dividends. It represents the aggregate percentage or dollar
value change over the period.
YIELD A fund's yield is a measure of the net investment income per share earned
over a specific one month or 30-day period expressed as a percentage of the
maximum offering price of the fund's shares at the end of the period.
<PAGE> 3
GENERAL ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $76 BILLION IN ASSETS, INCLUDING $42 BILLION IN RETAIL
MUTUAL FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM
HARVARD UNIVERSITY.
DEAR SHAREHOLDER:
As we approach the close of 1996, it's remarkable how eventful the year has been
and yet, economically, we are essentially where we were one year ago.
The fundamentals of the economy are remarkably similar today to what they
were in 1995. Long-term interest rates are approximately 6.52% compared to 6.29%
in November 1995. The economy is growing at a rate of approximately 2.2%.
Inflation continues to be well under control, at about 3.0%.
One significant difference between today and one year ago is that prices of
the stocks are on average up 15% to 20%. While price movements were more
volatile in 1996 than in the past few years, the patient investor was amply
rewarded. The prime element sending the stock market higher was strong positive
cash flows. This liquidity in an environment of modestly increasing corporate
profits and relatively stable interest rates pushed stocks higher for most of
the year.
This higher stock market has caused many market observers to worry. While
we cannot ignore what has happened, we find no reason to be bearish over the
long term. The environment is benign to favorable for financial assets. Given
steady interest rates, moderate economic growth and continued moderate corporate
earnings growth, there are few excesses in the system. In fact, real interest
rates are probably too high considering our outlook for inflation, and we may
see them decline over time.
Naturally, we cannot rule out the possibility of a market correction. But,
in our belief, the downside would appear to be limited to 5% to 8%, which is the
size of a typical correction based on historical data. As we have said in
previous outlooks, three elements tend to move the market:
- - EARNINGS. We forecast corporate earnings to range between 0% and 5% on
average for the Standard & Poor's 500* in 1997 -- not as high as in recent
previous years but positive nonetheless.
- - INTEREST RATES. Rates should remain stable, and short-term interest
rates may even decline.
- - LIQUIDITY. Investors, through mutual funds, 401(k)s and qualified
contribution plans in particular, continue to create strong demand for
securities.
In order to move the market more than would be expected in a typical
decline, one or more of these elements will have to turn negative in 1997, and,
while future market conditions cannot be predicted with certainty, we fail to
see what would materially change our outlook. Our outlook going forward is that
1997 should be a lot like 1996.
While the economy continued along a relatively consistent path, the United
States took some politically significant steps in 1996. First, of course,
President Bill Clinton and a Republican Congress were re-elected by the voters.
In the first few days after the general election, especially, investors
demonstrated their support for such a balance in our leadership. But of much
greater long-term significance is the expressed commitment by both parties to
balance the federal budget and address certain entitlement programs. The first
year after an election can be a fertile time to accomplish major initiatives,
and we are hopeful that progress can be made.
The future of the Social Security system, which many experts believe will
run out of money about 20 years from now, will be a subject in which you can
expect Zurich Kemper Investments, Inc. to play a leadership role. The possible
solutions for "fixing Social Security" are finite: raise Social Security taxes,
reduce benefits, raise the retirement age, change inflation assumptions or
pursue a higher rate of return on assets contributed by workers. We believe that
a bipartisan solution will be worked out, which will include giving individuals
the option of investing a portion of their Social Security contributions in an
account earmarked for them. This change is needed to return credibility to the
system, which many Americans have lost faith in.
What to do with Social Security is a debate that spans generations and
promises to occupy much attention in the coming years. As we hope to help
advance constructive debate, we'll be advocating partial privatization for this
federal program while maintaining a safety net for many low-wage earners and
providing a seamless transition for seniors near or in retirement.
3
<PAGE> 4
ECONOMIC OVERVIEW
- -------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- -------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their investment
rationale that may help your investment decision-making. The 10-year Treasury
rate and the prime rate are prevailing interest rates. The other data report
year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
Now (10/31/96) 6 Months ago 1 year ago 2 years ago
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.53 6.74 6.04 7.74
Prime rate (2) 8.25 8.25 8.75 7.75
Inflation rate (3) 3 2.9 2.6 2.6
The U.S. dollar (4) 4.74 8.94 -1.05 -5.28
Capital goods orders (5)* 2.24 7.42 8.57 15.65
Industrial production (5) 3.5 2.56 1.92 6.77
Employment growth (6) 2.01 2.07 1.93 3.3
</TABLE>
1 Falling interest rates in recent years have been a big plus for financial
assets.
2 The interest rate that commercial lenders charge their best borrowers.
3 Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6%. The low, moderate inflation of the last
few years has meant high real returns.
4 Changes in the exchange value of the dollar impact U.S. exporters and the
value of the U.S. firms' foreign profits.
5 These influence corporate profits and equity performance.
6 An influence on family income and retail sales.
* Data as of September 30, 1996.
SOURCE: ECONOMICS DEPARTMENT, ZURICH KEMPER INVESTMENTS, INC.
With this letter as an economic backdrop, we encourage you to read the
following detailed report of your fund, including an interview with your fund's
portfolio management. Thank you for your continued support. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
- ----------------------
Stephen B. Timbers
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
Zurich Kemper Investments, Inc.
November 15, 1996
*THE STANDARD & POOR'S 500 IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE OF THE
U.S. STOCK MARKET.
4
<PAGE> 5
PERFORMANCE UPDATE
[MCNAMARA PHOTO]
MICHAEL MCNAMARA HAS BEEN WITH ZURICH KEMPER INVESTMENTS, INC. SINCE 1972 AND IS
SENIOR VICE PRESIDENT OF ZKI AND PORTFOLIO CO-MANAGER OF KEMPER HIGH YIELD FUND.
MCNAMARA GRADUATED WITH A BACHELORS OF SCIENCE DEGREE IN BUSINESS ADMINISTRATION
FROM THE UNIVERSITY OF MISSOURI AND EARNED AN M.B.A. FROM LOYOLA UNIVERSITY.
[RESIS PHOTO]
HARRY RESIS JOINED ZURICH KEMPER INVESTMENTS, INC., IN 1988 AND IS SENIOR VICE
PRESIDENT OF ZKI AND PORTFOLIO CO-MANAGER OF KEMPER HIGH YIELD FUND. RESIS HOLDS
A BACHELORS DEGREE IN FINANCE FROM MICHIGAN STATE UNIVERSITY.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED
ON MARKET AND OTHER CONDITIONS.
DURING A PERIOD OF HIGHER INTEREST RATES AND FEARS OF INFLATION, HIGH YIELD
BONDS OUTPERFORMED NEARLY EVERY OTHER FIXED-INCOME ASSET CLASS. PORTFOLIO
CO-MANAGERS MICHAEL MCNAMARA AND HARRY RESIS EXPLAIN THE REASONS BEHIND THIS
OUTPERFORMANCE AND DISCUSS THEIR OUTLOOK FOR THE HIGH YIELD MARKET.
Q. HIGH YIELD BONDS ENJOYED STRONG PERFORMANCE DURING THE YEAR WHILE OTHER
FIXED-INCOME INVESTMENTS STRUGGLED. WHAT WAS THE REASON?
A. The growing U.S. economy continued to drive strong high yield bond
returns during the fiscal year. While most fixed-income investments suffered
due to the economy's pickup, high yield bonds flourished in the higher market
rate environment that ensued. That's because stronger economic growth fueled
corporate earnings, which enabled most companies to meet the interest payments
on their outstanding bond issues. The strong stock market was also positive for
high yield bonds. It facilitated an increased number of initial public
offerings by high yield issuers, which enabled many issuers to pay down their
debt.
Q. WOULD YOU CONSIDER THE LAST 12 MONTHS THE OPTIMAL ECONOMIC ENVIRONMENT
FOR HIGH YIELD BONDS?
A. This year's growing economy, low inflation and low level of defaults
were quite positive for high yield bonds. Although we didn't realize returns of
the same magnitude we did in 1995, the tighter spreads between high yield bonds
and U.S. Treasuries that resulted were positive. Let us explain.
A growing U.S. economy helped keep defaults at bay this year. Stronger
economic growth generated consumer spending, which fueled corporate earnings.
With relatively stable corporate earnings, defaults were minimal because
companies were generally able to cover their high yield bond coupon interest
payments. Therefore, demand for high yield bonds increased and prices rose.
Conversely, demand for and prices of U.S. Treasuries fell during the year as
interest rates rose and investors feared the onset of higher inflation. This
change in demand and pricing created a "narrowing of spreads" between high
yield bonds and Treasuries, which was positive for the fund.
Q. WHAT TYPES OF ADJUSTMENTS DID YOU MAKE TO KEMPER HIGH YIELD FUND DURING
THE PERIOD?
A. We focused primarily on changing the mix of the fund's cyclical
holdings. Cyclical industries are those that produce or support the production
of discretionary goods such as new homes or automobiles. Companies within these
types of industries tend to flourish when the economy is expanding but are
normally the first to suffer when the economy contracts. By contrast, defensive
industries tend to be less sensitive to economic slowdowns because they support
nondiscretionary spending on items such as food or health and beauty products.
5
<PAGE> 6
PERFORMANCE UPDATE
Historically, the fund had been heavily weighted in companies within
deep cyclical industries like steel, paper and chemicals. But last year we
began moving out of deep cyclical industries. That's because those types of
companies tend to experience large movements in their revenues and earnings
during changes in the economy or in their industry cycles.
Over the past year, we continued to add issues from companies that,
although cyclical, have less cyclicality, or have some degree of independence
from changes in the overall U.S. economy. For example, we've increased our
weighting in the energy sector. Another example would be our increased
investment in the casino and gaming industry. Although some may argue that
gaming is not a cyclical industry, we believe it is. If there would be a sharp
downturn in the economy, we would expect a decline in industry revenues.
Although the gaming industry would suffer from an economic downturn, the losses
would not be anywhere near as significant as those that the steel or auto
industries might experience.
Q. HAS THE INVESTMENT SELECTION PROCESS GOTTEN ANY SIMPLER GIVEN THE HIGH
YIELD MARKET'S LOW LEVEL OF DEFAULTS?
A. Although the low level of defaults has given us more issues to choose
from, it has not predicated a change in our investment analysis process. We
believe our careful bond selection, which is based on extensive research, is
directly responsible for the fund's outstanding historical long-term
performance. Kemper's team of bond analysts routinely goes beyond traditional
analysis. They visit issuing companies and meet with their senior management,
walk through factories, talk to suppliers and speak with customers. After a
bond is purchased for the fund, analysts continuously monitor the firm's
financial strength and the bond's ongoing investment potential.
Q. WHAT CAN YOU TELL US ABOUT THE QUALITY OF THE FUND'S HOLDINGS?
A. We didn't significantly alter the quality of the fund's portfolio
during the period. We kept about two-thirds of the fund invested in lower
quality B-rated bonds and close to 25 percent invested in relatively higher
rated BB-rated bonds. This positioning provided a good level of income for the
fund, while mitigating some potential risk.
Q. WERE THERE ANY BONDS THAT PERFORMED PARTICULARLY WELL?
A. There were a number of issues that provided outstanding performance
during the year. An example was our investment in Trump Taj Mahal, which was
called away from us at par value ($1,000 per bond) plus accrued interest. These
bonds were issued to finance the Atlantic City casino's first mortgage and we
purchased them in the secondary market at a deep discount to par value. Early
on, many investors doubted the stability of this issue, but we were optimistic
about the future of the casino and Atlantic City. We believed that the bonds'
11.35 percent coupon combined with their discounted price made the investment
worthwhile. In fact, we were so confident about the potential of this
investment, we made it one of the fund's largest holdings.
Our outlook for Atlantic City and Trump Taj Mahal proved to be correct,
and the bonds were consistently one of the fund's top performing investments.
Moreover, the fund enjoyed a substantial gain when the vast majority of the
bonds were called away in March 1996.
Q. WHAT ABOUT DISAPPOINTMENTS?
A. Three of the fund's issues defaulted during the first part of the
fiscal year. The bonds were issued by Color Tile, a home improvement retailer,
Burlington Motor Freights, a trucking company and Beatrice Ltd., a Canadian
dairy company. All three were hurt by the debt they had taken on and the effect
that 1994's rising interest rate environment had on their businesses.
Color Tile and Burlington are still in the midst of restructuring their
debt. However, by the close of the fiscal year, Beatrice Ltd. bonds had
recaptured some of their earlier losses.
Q. WILL THE HIGH YIELD BOND MARKET BE ABLE TO SUSTAIN ITS MOMENTUM?
A. Our outlook for the high yield bond market is positive, although we
don't expect corporate earnings to keep pace with levels from the past couple
of years. This slowdown in earnings and the aging of issues will most likely
lead to an increased default rate, but we do not believe that it will be
alarming. Our investment focus will continue to be on healthy companies that
are positioned to perform well in the current slow growth economy.
6
<PAGE> 7
PERFORMANCE UPDATE
Average Annual Total Returns*
FOR PERIODS ENDED SEPTEMBER 30, 1996 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 5-YEAR 10-YEAR CLASS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEMPER HIGH YIELD FUND CLASS A 7.88% 11.98 10.90% 11.73% (Since 1/26/78)
- ---------------------------------------------------------------------------------------------------------
KEMPER HIGH YIELD FUND CLASS B 9.02 N/A N/A 9.51 (Since 5/31/94)
- ---------------------------------------------------------------------------------------------------------
KEMPER HIGH YIELD FUND CLASS C 12.06 N/A N/A 10.80 (Since 5/31/94)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Kemper High Yield Fund Class A
from 1/1/80 through 9/30/96
- -------------------------------------------------------------------------------
[Bar Graph]
<TABLE>
<CAPTION>
1/1/80 12/31/93 12/31/94 12/31/95 9/30/96
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KEMPER HIGH YIELD FUND
CLASS A(1) 10,000 60,046 59,102 69,313 75,978
- -------------------------------------------------------------------------------
SALOMON BROTHERS LONG-TERM
HIGH YIELD BOND INDEX(+) 10,000 60,336 58,053 75,089 76,965
- -------------------------------------------------------------------------------
CONSUMER PRICE INDEX(++) 10,000 19,009 19,518 20,013 20,574
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Kemper High Yield Fund Class B
from 5/31/94 through 9/30/96
- -------------------------------------------------------------------------------
[Bar Graph]
<TABLE>
<CAPTION>
5/31/94 12/31/94 12/31/95 9/30/96
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER HIGH YIELD FUND
CLASS B(1) 10,000 10,005 11,640 12,370
- -------------------------------------------------------------------------------
SALOMON BROTHERS LONG-TERM
HIGH YIELD BOND INDEX(+) 10,000 10,160 13,141 13,469
- -------------------------------------------------------------------------------
CONSUMER PRICE INDEX(++) 10,000 10,149 10,407 10,698
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Kemper High Yield Fund Class C
from 5/31/94 through 9/30/96
- -------------------------------------------------------------------------------
[Bar Graph]
<TABLE>
<CAPTION>
5/31/94 12/31/94 12/31/95 9/30/96
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER HIGH YIELD FUND
CLASS C(1) 10,000 10,032 11,677 12,711
- -------------------------------------------------------------------------------
SALOMON BROTHERS LONG-TERM
HIGH YIELD BOND INDEX(+) 10,000 10,160 13,141 13,469
- -------------------------------------------------------------------------------
CONSUMER PRICE INDEX(++) 10,000 10,149 10,407 10,698
- -------------------------------------------------------------------------------
</TABLE>
Past Performance is not predictive of future performance. Returns and net asset
value fluctuate. Shares are redeemable at current net asset value, which may be
more or less than original cost.
* Average annual total return measures net investment income and capital
gain or loss from portfolio investments, assuming reinvestment of
dividends and for Class A shares adjustment for the maximum sales charge
of 4.5%, for Class B shares adjustment for the applicable contingent
deferred sales charge (CDSC) as follows: 1-year, 3%; 5-year, 1%; since
inception, 0% and for C shares no adjustment for sales charge. The maximum
B share CDSC is 4%. For C shares purchased on or after 4/1/96 there is a
1% CDSC on certain redemptions within the first year of purchase.
(1) Performance includes reinvestment of dividends and adjustment for the
maximum sales charge for A shares and the contingent deferred sales charge
in effect at the end of the period for B shares. When reviewing the
performance chart, please note that the inception date for the Salomon
Brothers Long-Term High Yield Bond Index is 1/1/80. As a result, we are
not able to illustrate the Life of Class performance (since 1/26/78) for
the Kemper High Yield Fund Class A shares. In comparing the performance of
the fund to that of the Salomon Brothers Long-Term High Yield Bond Index
and the Consumer Price Index, you should also note that the fund's
performance reflects the maximum sales charge, while no such charges are
reflected in the performance of the indices.
The Fund may invest in lower-rated and non-rated securities which present
greater risk of loss to principal and interest than high-rated securities.
(+) The Salomon Brothers Long-Term High Yield Bond Index is on a total return
basis with all dividends reinvested and is comprised of high yield bonds
with a par value of $50 million or higher and a remaining maturity of ten
years or longer rated BB+ or lower by Standard & Poor's Corporation or BAL
or lower by Moody's Investors Service, Inc. This index is unmanaged.
Source is Salomon Brothers Inc.
(++)The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. Source is Towers Data Systems.
7
<PAGE> 8
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
ON 9/30/96 ON 9/30/95
- ---------------------------------------------------------------------------------
<S> <C> <C>
BONDS 91% 90%
- ---------------------------------------------------------------------------------
CASH AND EQUIVALENTS 6 8
- ---------------------------------------------------------------------------------
TREASURIES 1-3 YEARS 1 --
- ---------------------------------------------------------------------------------
PREFERRED AND COMMON STOCK 2 2
- ---------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART]
YEARS TO MATURITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
ON 9/30/96 ON 9/30/95
- ----------------------------------------------------------------------------------
<S> <C> <C>
CASH AND EQUIVALENTS 6% 8%
- ----------------------------------------------------------------------------------
1-10 84 84
- ----------------------------------------------------------------------------------
10-20 9 7
- ----------------------------------------------------------------------------------
OVER 20 1 1
- ----------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART]
* Portfolio composition and holdings are subject to change.
8
<PAGE> 9
PORTFOLIO STATISTICS
QUALITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
ON 9/30/96 ON 9/30/95
- ----------------------------------------------------------------------------------------
<S> <C> <C>
AAA-A 2% 7%
- ----------------------------------------------------------------------------------------
A 1 --
- ----------------------------------------------------------------------------------------
BB 21 25
- ----------------------------------------------------------------------------------------
B 68 59
- ----------------------------------------------------------------------------------------
OTHER 8 9
- ----------------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART]
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS AT SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY NOTES--2.0% 8.875%, 1997 $ 33,500 $ 34,568
6.875%, 2006 22,500 22,753
7.00%, 2006 23,000 23,471
-----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost: $81,439) 80,792
-----------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AEROSPACE--2.4% Fairchild Corporation, 12.00%, 2001 37,830 37,925
Howmet Inc., 10.00%, 2003 4,510 4,820
K & F Industries, Inc.
11.875%, 2003 19,830 21,416
10.375%, 2004 24,750 25,307
UNC, Inc., 11.00%, 2006 8,370 8,789
-----------------------------------------------------------------------------
98,257
- ----------------------------------------------------------------------------------------------------------------
BROADCASTING, CABLESYSTEMS Adelphia Communications Corporation
AND PUBLISHING--17.5% 12.50%, 2002 19,370 20,435
11.875%, 2004 8,510 8,893
Affinity Group, Inc., 11.50%, 2003 21,400 22,096
American Radio Systems, 9.00%, 2006 22,450 21,777
(b)American Telecasting
14.50%, 2004 13,120 9,758
14.50%, 2005 7,850 5,093
(b)Bell Cablemedia PLC
11.95%, 2004 29,960 22,994
11.875%, 2005 1,490 1,017
(b)Benedek Communications, 13.25%, 2006 5,420 3,191
Big Flower Press, Inc., 10.75%, 2003 19,202 19,730
CAI Wireless Systems, 12.25%, 2002 15,150 15,718
CF Cable TV Inc., 11.625%, 2005 20,205 22,832
Cablevision Systems Corporation
9.25%, 2005 5,880 5,660
9.875%, 2013 7,725 7,455
10.50%, 2016 28,235 28,694
9.875%, 2023 4,490 4,277
Century Communications Corporation
11.875%, 2003 20,095 21,502
9.50%, 2005 21,390 21,230
(b)Charter Communications, 14.00%, 2007 30,410 18,322
Comcast Corporation
9.125%, 2006 26,250 26,152
9.50%, 2008 14,390 14,660
10.625%, 2012 4,400 4,774
(b)Comcast UK Cable Partners Limited, 11.20%,
2007 45,225 28,774
(b)CS Wireless, 11.37%, 2006 39,320 20,053
(b)Echostar Communications, 12.875%, 2004 38,190 30,170
EZ Communications, 9.75%, 2005 16,140 16,422
Granite Broadcasting Corp.
10.375%, 2005 15,470 15,837
9.375%, 2005 9,140 8,889
(b)International Cabletel Incorporated
12.75%, 2005 48,310 32,579
11.50%, 2006 6,560 3,903
Multicanal Participacoes, 12.625%, 2004 13,330 14,313
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Neodata Services, 12.00%, 2003 $ 23,290 $ 23,523
Newsquest Capital PLC, 11.00%, 2006 21,410 22,052
(b)People's Choice TV, Unit, 13.125%, 2004 31,605 19,563
Rogers Cablesystems Limited
9.625%, 2002 9,290 9,371
10.00%, 2005 9,930 10,141
10.00%, 2007 4,540 4,540
Sinclair Broadcasting Group, Inc.
10.00%, 2003 24,805 25,022
10.00%, 2005 1,550 1,560
Sullivan Broadcasting
10.25%, 2005 6,190 6,236
13.25%, 2006 12,850 13,300
Telewest Communications PLC
9.625%, 2006 24,815 24,660
(b) 11.00%, 2007 21,433 13,610
(b)UIH Australia Pacific, Inc., 14.00%, 2006 41,630 22,272
(b)Videotron Holdings PLC
11.125%, 2004 7,825 5,869
11.00%, 2005 14,600 9,673
Young Broadcasting Inc., 11.75%, 2004 6,375 6,853
-----------------------------------------------------------------------------
715,445
- ----------------------------------------------------------------------------------------------------------------
BUSINESS SERVICES--.9% Corporate Express Inc., 9.125%, 2004 18,760 18,760
Monarch Marking Systems, 12.50%, 2003 17,510 19,480
-----------------------------------------------------------------------------
38,240
- ----------------------------------------------------------------------------------------------------------------
CHEMICALS AND Agriculture, Mining and Chemicals, Inc.,
AGRICULTURE--5.1% 10.75%, 2003 15,080 15,947
Arcadian Partners, L.P., 10.75%, 2005 11,170 12,287
Atlantis Group, Inc., 11.00%, 2003 25,355 25,545
G-I Holdings Inc., zero coupon, 1998 43,410 37,875
Hines Horticulture, 11.75%, 2005 13,450 14,055
NL Industries, 11.75%, 2003 4,230 4,452
Pioneer Americas Acquisition Corporation,
13.375%, 2005 13,060 14,431
Polymer Group Inc., 12.25%, 2002 13,244 14,469
Rexene Corporation, 11.75%, 2004 31,845 34,870
Sterling Chemicals, 11.75%, 2006 8,260 8,652
Terra Industries Inc., 10.50%, 2005 12,200 12,963
UCC Investors Holdings, Inc., 10.50%, 2002 10,480 11,109
-----------------------------------------------------------------------------
206,655
- ----------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--10.6% (b)Call-Net Enterprises Inc., 13.25%, 2004 15,280 11,899
(b)Cellular, Inc., 11.75%, 2003 28,740 24,501
(b)Comunicacion Celular, 13.125%, with
warrants, 2003 30,800 20,251
CommNet Celluar, 11.25%, 2005 10,935 11,482
(b)ICG Holdings, 13.50%, 2005 29,930 20,652
Impsat Corp., 12.125%, 2003 13,260 13,691
Intermedia Capital Partners, 11.25%, 2006 16,530 17,233
Intermedia Communications of Florida Inc.,
13.50%, 2005 with warrants expiring 2000 25,680 30,184
(b)Millicom International Cellular S.A.,
13.50%, 2006 34,540 19,731
Mobilemedia Communications, 9.375%, 2007 24,195 19,356
Netsat Servicos, 12.75%, 2004 9,950 10,597
Nextlink Communications, 12.50%, 2006 13,060 13,550
</TABLE>
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Paging Network, Inc.
11.75%, 2002 $ 25,590 $ 27,765
10.125%, 2007 23,215 23,882
(b)PanAmSat, L.P., 11.375%, 2003 47,345 43,084
Rogers Cantel
11.125%, 2002 29,712 31,402
9.375%, 2008 12,340 12,247
9.75%, 2016 8,240 8,116
RSL Communications Ltd., 12.25%, 2006 11,700 11,700
(b)Shared Technologies, 12.25%, 2006 12,480 9,766
USA Mobile Communications, Inc. II
9.50%, 2004 8,170 7,843
14.00%, 2004 16,290 18,245
Vanguard Cellular Systems, 9.375%, 2006 18,160 18,069
Western Wireless, 10.50%, 2006 6,620 6,777
-----------------------------------------------------------------------------
432,023
- ----------------------------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--2.5% American Standard Inc., 9.25%, 2016 17,615 17,703
(b)Building Materials Corporation of America,
11.75%, 2004 41,650 33,632
Nortek, Inc., 9.875%, 2004 25,045 24,575
Triangle Pacific Corp., 10.50%, 2003 26,565 27,694
-----------------------------------------------------------------------------
103,604
- ----------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS AMF Group
AND SERVICES--6.9%
10.875%, 2006 36,442 37,467
(b) 12.25%, 2006 23,990 14,544
Avondale Mills, 10.25%, 2006 19,500 19,793
(c)Beatrice Foods, Inc., 12.00%, 2001 31,870 18,485
Cinemark USA, Inc., 9.625%, 2008 17,250 17,034
Coinmach Corporation, 11.75%, 2005 36,160 38,872
(b)Dr. Pepper Bottling Holdings, Inc., 11.625%,
2003 18,629 16,952
Herff Jones, Inc., 11.00%, 2005 15,640 16,539
Premier Parks Inc., 12.00%, 2003 16,700 17,953
(b)Six Flags Theme Park, 12.25%, 2005 46,280 41,189
Van De Kamps, Inc., 12.00%, 2005 9,880 10,769
West Point Stevens Inc., 9.375%, 2005 34,045 34,045
-----------------------------------------------------------------------------
283,642
- ----------------------------------------------------------------------------------------------------------------
DRUGS AND HEALTH CARE--3.8% Dade International Inc., 11.125%, 2006 15,000 15,975
Magellan Health Services, 11.25%, 2004 32,730 35,839
Ornda Healthcorporation
12.25%, 2002 31,830 34,257
11.375%, 2004 18,520 20,604
Paracelsus Healthcare, 10.00%, 2006 12,960 13,284
Tenet Healthcare, 10.125%, 2005 33,150 35,885
-----------------------------------------------------------------------------
155,844
- ----------------------------------------------------------------------------------------------------------------
ENERGY AND RELATED Benton Oil & Gas Co., 11.625%, 2003 13,835 15,149
SERVICES--5.9%
Chesapeake Energy Corporation, 10.50%, 2002 15,565 16,538
Clark USA Inc., 10.875%, 2005 13,730 14,090
Cliffs Drilling Co., 10.25%, 2003 13,090 13,548
Coda Energy, 10.50%, 2006 17,540 18,307
Empire Gas Corporation, 7.00%, with warrants,
2004 14,640 12,894
Ferrellgas Partners, L.P., 9.375%, 2006 16,760 16,760
Flores & Rucks, 9.75%, 2006 4,950 5,018
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gulf Canada Resources Limited
9.25%, 2004 $ 16,305 $ 16,651
9.625%, 2005 17,360 18,076
MESA Inc., 10.625%, 2006 22,170 23,334
Plains Resources, 10.25%, 2006 15,590 16,175
Sante Fe Energy Resources, Inc., 11.00%, 2004 12,625 13,990
United Meridian Corp., 10.375%, 2005 11,520 12,211
Vintage Petroleum, 9.00%, 2005 28,420 28,278
-----------------------------------------------------------------------------
241,019
- ----------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES, Continental Homes Holding, 10.00%, 2006 26,200 26,200
HOMEBUILDERS AND Forecast Group L.P., 11.375%, 2000 10,895 9,261
REAL ESTATE--3.7% Fortress Group, 13.75%, 2003 10,700 11,289
GMAC, Medium Term Note, 6.75%, 1997 18,500 18,614
Hovnanian Kent, 11.25%, 2002 27,557 27,281
J.M. Peters Company, 12.75%, 2002 11,330 10,707
Presley Companies, 12.50%, 2001 24,025 23,304
Ryland Group, 10.50%, 2006 23,580 24,287
-----------------------------------------------------------------------------
150,943
- ----------------------------------------------------------------------------------------------------------------
LODGING AND GAMING--5.1% Bally's Park Place Funding, Inc., 9.25%, 2004 23,220 24,903
Empress River Casino, 10.75%, 2002 30,273 32,468
Eldorado Resorts 10.50%, 2006 13,980 14,469
Harvey's Casino Resorts, 10.625%, 2006 7,470 7,825
MGM Grand Hotel Finance Corporation, 12.00%,
2002 37,120 40,461
Players International, 10.875%, 2005 20,540 20,335
Station Casinos Inc., 10.125%, 2006 28,105 27,683
Trump Atlantic City, 11.25%, 2006 41,890 41,262
-----------------------------------------------------------------------------
209,406
- ----------------------------------------------------------------------------------------------------------------
MANUFACTURING, METALS Aftermarket Technology, 12.00%, 2004 11,140 12,198
AND MINING--12.6% Alvey Systems, 11.375%, 2003 16,645 17,477
Bar Technologies, 13.50%, with warrants, 2001 9,370 9,979
Bluebird Body Company, 11.75%, 2002 24,585 25,446
Collins & Aikman Corporation, 11.50%, 2006 28,020 29,561
Crain Industries, Inc., 13.50%, 2005 11,700 13,046
Day International Group, Inc., 11.125%, 2005 25,025 26,151
Delco Remy International, 10.625%, 2006 23,475 24,209
Essex Group Incorporated, 10.00%, 2003 20,360 20,869
Euramax International, 11.25%, 2006 14,130 14,519
Fairfield Manufacturing Company, 11.375%, 2001 17,560 17,999
(b)Foamex - JPS Automotive L.P., 14.00%, with
warrants, 2004 16,620 13,379
Foamex L.P., 11.25%, 2002 28,510 30,221
Great Dane Holding Company, 12.75%, 2001 16,008 15,788
GS Technologies
12.00%, 2004 10,005 10,543
12.25%, 2005 12,970 13,797
Gulf States Steel, 13.50%, with warrants, 2003 31,695 28,595
Hayes Wheels Intl., 11.00%, 2006 24,240 25,573
IMO Industries, 11.75%, 2006 6,970 7,249
Jordan Industries, 10.375%, 2003 21,935 21,441
JPS Automotive Products Corporation, 11.125%,
2001 25,380 25,951
Knoll Inc., 10.875%, 2006 15,480 16,409
Newflo Corporation, 13.25%, 2002 14,500 16,059
NS Group Inc., 13.50%, 2003 6,660 6,693
</TABLE>
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Penda Industries Inc., 10.75%, 2004 $ 16,360 $ 15,951
Thermadyne Industries, Inc.
10.25%, 2002 13,426 13,929
10.75%, 2003 25,116 25,744
Weirton Steel Corp., 11.375%, 2004 17,880 17,969
-----------------------------------------------------------------------------
516,745
- ----------------------------------------------------------------------------------------------------------------
PAPER, FOREST PRODUCTS BPC Holding Corp., 12.50%, 2006 11,650 12,174
AND CONTAINERS--8.0% Berry Plastics Corporation, 12.25%, 2004 7,020 7,599
Container Corporation of America, 11.25%, 2004 9,420 9,985
Crown Paper, 11.00%, 2005 19,360 19,118
Four M Corporation, 12.00%, 2006 8,370 8,956
Gaylord Container Corporation, 12.75%, 2005 20,850 22,883
Maxxam Group, Inc.
(b) 12.25%, 2003 7,265 5,994
11.25%, 2003 24,325 25,176
National Fiberstock, 11.625%, 2002 11,810 12,164
Owens-Illinois, Inc.
11.00%, 2003 11,035 12,070
9.75%, 2004 42,525 43,375
9.95%, 2004 13,062 13,585
Printpack Inc., 10.625%, 2006 16,510 17,005
Repap New Brunswick Inc., 10.625%, 2005 9,000 9,090
Riverwood International
10.25%, 2006 8,920 8,965
10.875%, 2008 41,500 40,878
Stone Container Corporation
11.50%, 2006 32,650 33,466
11.875%, 2016 24,600 25,830
-----------------------------------------------------------------------------
328,313
- ----------------------------------------------------------------------------------------------------------------
RETAILING--4.3% Brunos, 10.50%, 2005 26,810 27,480
(c)Color Tile, Inc., 10.75%, 2001 20,480 1,190
Dominick's Finer Foods, 10.875%, 2005 12,000 13,005
Finlay Fine Jewelry Corporation, 10.625%, 2003 28,300 28,866
Guitar Center Management, 11.00%, 2006 8,285 8,596
Michaels Stores, 10.875%, 2006 13,550 13,719
Pamida Holdings, 11.75%, 2003 39,535 34,988
Pathmark Stores, Inc.
11.625%, 2002 8,305 8,513
12.625%, 2002 24,025 24,986
Thrifty Payless Inc., 12.25%, 2004 12,590 14,101
-----------------------------------------------------------------------------
175,444
- ----------------------------------------------------------------------------------------------------------------
TECHNOLOGY--.6% Communication and Power Industry, Inc., 12.00%,
2005 7,975 8,633
Computervision Corporation, 11.375%, 1999 16,207 17,017
-----------------------------------------------------------------------------
25,650
- ----------------------------------------------------------------------------------------------------------------
TRANSPORTATION--.7% (c)Burlington Motor Holdings Inc., 11.50%, 2003 20,750 311
GPA Group, PLC, 10.875%, 2019 21,130 22,715
(b)Transtar Holdings, L.P., 13.375%, 2003 10,100 7,676
-----------------------------------------------------------------------------
30,702
-----------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--90.6%
(Cost: $3,639,574) 3,711,932
-----------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT OR NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON AND PREFERRED (a)Benedek Unit, PIK, preferred 9,000 shs. $10,508
STOCK--1.6% Computervision Corporation 3,112,436 27,234
Capital Pacifics Holdings 54,431 54
(c)Echostar Communications 218,250 5,947
(c)Gaylord Container Corporation 1,805,934 13,319
(c)Grand Union Company 741,858 4,729
(c)Great Bay Power 21,293 213
Intelcom Group, Inc., warrants 67,617 879
(c)Sullivan Broadcasting 205,600 2,056
(c)Thrifty Payless Inc. 56,259 1,048
(c)Walter Industries, Inc. 103,179 1,328
(a)Waxman Industries, Inc., warrants, 2004 800,453 1,601
-----------------------------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCKS
(Cost: $64,303) 68,916
-----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
MONEY MARKET Yield--5.31% - 5.85%
INSTRUMENTS--3.4% Due--October 1996
(Cost: $138,258) $ 138,400 138,258
-----------------------------------------------------------------------------
TOTAL INVESTMENTS--97.6%
(Cost: $3,923,574) 3,999,898
-----------------------------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--2.4% 97,041
-----------------------------------------------------------------------------
NET ASSETS--100% $4,096,939
-----------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The following securities may require registration under the Securities Act
of 1933 or an exemption therefrom in order to effect sale in the ordinary
course of business; they were valued at cost on the dates of acquisition.
These securities are valued at fair value as determined in good faith by the
Board of Trustees of the Fund. At September 30, 1996 the value of the
restricted securities was $12,109,000, which represented .30% of net assets.
<TABLE>
<CAPTION>
DATE OF NUMBER
ACQUISITION OF SHARES UNIT COST
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Benedek Unit, PIK, preferred May 1996 9,000 $1,000.00
-----------------------------------------------------------------------------------------------------------------
Waxman Industries, Inc., warrants, 2004 June 1994 800,453 2.00
-----------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Deferred interest obligation; currently zero coupon under terms of the
initial offering.
(c) Non-income producing security. In the case of a bond, generally denotes the
issuer has defaulted on the payment of principal or interest or has filed
for bankruptcy.
"PIK" denotes that interest or dividends are paid in kind.
Based on the cost of investments of $3,923,574,000 for federal income tax
purposes at September 30, 1996, the gross unrealized appreciation was
$177,548,000, the gross unrealized depreciation was $101,224,000 and the net
unrealized appreciation on investments was $76,324,000.
See accompanying Notes to Financial Statements.
15
<PAGE> 16
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER HIGH YIELD FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper High Yield Fund as of
September 30, 1996, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the fiscal periods since 1992.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
September 30, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Kemper High Yield Fund at September 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the fiscal periods since 1992, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 18, 1996
16
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at value
(Cost: $3,923,574) $3,999,898
- ---------------------------------------------------------------------------------------------------------
Cash 3,636
- ---------------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 13,910
- ---------------------------------------------------------------------------------------------------------
Investments sold 33,029
- ---------------------------------------------------------------------------------------------------------
Interest and dividends 97,225
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS 4,147,698
- ---------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Payable for:
Fund shares redeemed 5,254
- ---------------------------------------------------------------------------------------------------------
Investments purchased 41,578
- ---------------------------------------------------------------------------------------------------------
Management fee 1,761
- ---------------------------------------------------------------------------------------------------------
Distribution services fee 701
- ---------------------------------------------------------------------------------------------------------
Administrative services fee 672
- ---------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 664
- ---------------------------------------------------------------------------------------------------------
Trustees' fees and other 129
- ---------------------------------------------------------------------------------------------------------
Total liabilities 50,759
- ---------------------------------------------------------------------------------------------------------
NET ASSETS $4,096,939
- ---------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Paid-in capital $4,071,359
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (149,765)
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 76,324
- ---------------------------------------------------------------------------------------------------------
Undistributed net investment income 99,021
- ---------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $4,096,939
- ---------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- ---------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($2,908,866 / 353,630 shares outstanding) $8.23
- ---------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 4.71% of net asset value or 4.50% of offering price) $8.62
- ---------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to contingent deferred sales charge) per
share
($1,099,016 / 133,703 shares outstanding) $8.22
- ---------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to contingent deferred sales charge) per share
($58,332 / 7,078 shares outstanding) $8.24
- ---------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net asset value and redemption price per share
($30,725 / 3,735 shares outstanding) $8.23
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
17
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended September 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------
<S> <C>
Interest income $378,111
- -------------------------------------------------------------------------------------------------------
Expenses:
Management fee 19,436
- -------------------------------------------------------------------------------------------------------
Distribution services fee 7,695
- -------------------------------------------------------------------------------------------------------
Administrative services fee 7,627
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 5,807
- -------------------------------------------------------------------------------------------------------
Professional fees 98
- -------------------------------------------------------------------------------------------------------
Reports to shareholders 523
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 167
- -------------------------------------------------------------------------------------------------------
Total expenses 41,353
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 336,758
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments (including options purchased) 42,506
- -------------------------------------------------------------------------------------------------------
Net realized loss from futures transactions (84)
- -------------------------------------------------------------------------------------------------------
Net realized gain 42,422
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments 66,471
- -------------------------------------------------------------------------------------------------------
Net gain on investments 108,893
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $445,651
- -------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 336,758 352,388
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) 42,422 (61,865)
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 66,471 155,866
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 445,651 446,389
- ---------------------------------------------------------------------------------------------------------
Net equalization credits 7,259 2,331
- ---------------------------------------------------------------------------------------------------------
Distribution from net investment income (338,218) (319,210)
- ---------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 454,293 246,415
- ---------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 568,985 375,925
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Beginning of year 3,527,954 3,152,029
- ---------------------------------------------------------------------------------------------------------
END OF YEAR
(including undistributed net investment income of
$99,021 and $93,202, respectively) $4,096,939 3,527,954
- ---------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper High Yield Fund is an open-end diversified
management investment company organized as a
business trust under the laws of Massachusetts. The
Fund offers four classes of shares. Class A shares
are sold to investors subject to an initial sales
charge. Class B shares are sold without an initial
sales charge but are subject to higher ongoing
expenses than Class A shares and a contingent
deferred sales charge payable upon certain
redemptions. Class B shares automatically convert
to Class A shares six years after issuance. Class C
shares are sold without any initial sales charges
but are subject to higher ongoing expenses than
Class A shares and, for shares sold on or after
April 1, 1996, a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into
another class. Class I shares are offered to a
limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than other classes.
Differences in class expenses will result in the
payment of different per share income dividends by
class. All shares of the Fund have equal rights
with respect to voting, dividends and assets,
subject to class specific preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION. Investments are stated at
value. Fixed income securities are valued by using
market quotations, or independent pricing services
that use prices provided by market makers or
estimates of market values obtained from yield data
relating to instruments or securities with similar
characteristics. Portfolio securities that are
traded on a domestic securities exchange are valued
at the last sale price on the exchange where
primarily traded or, if there is no recent sale, at
the last current bid quotation. Portfolio
securities that are primarily traded on foreign
securities exchanges are generally valued at the
preceding closing values of such securities on
their respective exchanges where primarily traded.
Securities not so traded are valued at the last
current bid quotation if market quotations are
available. Exchange traded options are valued at
the last sale price unless there is no sale price,
in which event prices provided by market makers are
used. Over-the-counter traded options are valued
based upon prices provided by market makers.
Financial futures and options thereon are valued at
the settlement price established each day by the
board of trade or exchange on which they are
traded. Forward foreign currency contracts are
valued at the forward rates prevailing on the day
of valuation. Other securities and assets are
valued at fair value as determined in good faith by
the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis. Interest income includes
discount amortization on fixed income securities.
Realized gains and losses from investment
transactions are reported on an identified cost
basis.
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class by dividing the Fund's net assets
attributable to that class by the number of shares
of the class outstanding.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required. The
accumulated net realized loss on sales of
investments for federal income tax purposes at
September 30, 1996, amounting to approximately
$149,709,000, is available to offset future taxable
gains. If not applied, the loss carryover expires
during the period 1998 through 2004.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income monthly and
any net realized capital gains annually, which are
recorded on the ex-dividend date. Dividends are
determined in accordance with income tax principles
which may treat certain transactions differently
from generally accepted accounting principles.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment
income so that income per share available for
distribution is not affected by sales or
redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI), and pays a management fee at an annual rate
of .58% of the first $250 million of average daily
net assets declining to .42% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $19,436,000 for the
year ended September 30, 1996.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
paid in connection with the distribution of Class A
shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
ALLOWED BY KDI
COMMISSIONS -----------------------------
RETAINED BY KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Year ended September 30, 1996 $ 857,000 6,035,000 226,000
</TABLE>
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares. In addition, KDI receives any contingent
deferred sales charges (CDSC) from redemptions of
Class B and Class C shares. Distribution fees and
commissions paid in connection with the sale of
Class B and
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
Class C shares and the CDSC received in connection
with the redemption of such shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION FEES
DISTRIBUTION FEES PAID BY KDI
AND CDSC ------------------------------
RECEIVED BY KDI TO ALL FIRMS TO AFFILIATES
----------------- ------------ -------------
<S> <C> <C> <C>
Year ended September 30, 1996 $ 9,022,000 7,658,000 91,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, the
Fund pays KDI a fee at an annual rate of up to .25%
of average daily net assets of each class. KDI in
turn has various agreements with financial services
firms that provide these services and pays these
firms based on assets of Fund accounts that the
firms service. Administrative services fees (ASF)
paid are as follows:
<TABLE>
<CAPTION>
ASF PAID BY KDI
ASF PAID BY THE ------------------------------
FUND TO KDI TO ALL FIRMS TO AFFILIATES
--------------- ------------ -------------
<S> <C> <C> <C>
Year ended September 30, 1996 $ 7,627,000 7,844,000 134,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the Fund. Under the agreement,
KSvC received shareholder services fees of
$4,142,000 for the year ended September 30, 1996.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the year ended September 30, 1996, the Fund
made no payments to its officers and incurred
trustees' fees of $54,000 to independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended September 30, 1996, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $4,477,028
Proceeds from sales 4,199,655
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
1996 1995
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 119,890 $ 932,368 117,635 $ 876,873
-----------------------------------------------------------------------------
Class B 71,697 573,147 65,256 502,035
-----------------------------------------------------------------------------
Class C 8,808 70,603 3,063 23,849
-----------------------------------------------------------------------------
Class I 2,785 22,315 3,956 30,746
-----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 18,832 151,343 18,031 140,351
-----------------------------------------------------------------------------
Class B 6,906 55,478 7,152 55,638
-----------------------------------------------------------------------------
Class C 299 2,414 90 706
-----------------------------------------------------------------------------
Class I 300 2,407 135 1,070
-----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHARES REDEEMED
Class A (112,436) (879,849) (127,013) (959,427)
-----------------------------------------------------------------------------
Class B (52,980) (422,563) (52,707) (407,589)
-----------------------------------------------------------------------------
Class C (4,106) (32,901) (1,398) (10,899)
-----------------------------------------------------------------------------
Class I (2,554) (20,469) (887) (6,938)
-----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 15,982 129,116 12,509 98,552
-----------------------------------------------------------------------------
Class B (16,001) (129,116) (12,516) (98,552)
-----------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE
TRANSACTIONS $ 454,293 $ 246,415
-----------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------
CLASS A
--------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 8.01 7.74 8.12 7.86 7.30
- ------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .76 .83 .73 .81 .85
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .23 .20 (.35) .23 .54
- ------------------------------------------------------------------------------------------------
Total from investment operations .99 1.03 .38 1.04 1.39
- ------------------------------------------------------------------------------------------------
Less distributions from net investment
income .77 .76 .76 .78 .83
- ------------------------------------------------------------------------------------------------
Net asset value, end of year $ 8.23 8.01 7.74 8.12 7.86
- ------------------------------------------------------------------------------------------------
TOTAL RETURN 13.00% 14.10 4.64 13.92 19.96
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses .88% .90 .86 .80 .82
- ------------------------------------------------------------------------------------------------
Net investment income 9.45 10.74 9.22 10.22 11.00
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------
YEAR ENDED
SEPTEMBER 30, MAY 31 TO
1996 1995 SEPTEMBER 30, 1994
- ----------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.00 7.73 7.96
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .69 .76 .23
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .23 .20 (.23)
- ----------------------------------------------------------------------------------------------------
Total from investment operations .92 .96 --
- ----------------------------------------------------------------------------------------------------
Less distributions from net investment
income .70 .69 .23
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.22 8.00 7.73
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.02% 13.09 --
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------
Expenses 1.77% 1.77 1.80
- ----------------------------------------------------------------------------------------------------
Net investment income 8.56 9.87 8.70
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------- ----------------------------------------
CLASS C CLASS I
---------------------------------- ----------------------------------------
YEAR ENDED MAY 31 TO YEAR ENDED DECEMBER 29, 1994
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER 30,
1996 1995 1994 1996 1995
- -------------------------------------------------------------------------- ----------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.02 7.75 7.96 8.01 7.55
- -------------------------------------------------------------------------- ----------------------------------------
Income from investment operations:
Net investment income .69 .77 .25 .78 .66
- -------------------------------------------------------------------------- ----------------------------------------
Net realized and unrealized gain (loss) .23 .20 (.23) .23 .39
- -------------------------------------------------------------------------- ----------------------------------------
Total from investment operations .92 .97 .02 1.01 1.05
- -------------------------------------------------------------------------- ----------------------------------------
Less distribution from net investment
income .70 .70 .23 .79 .59
- -------------------------------------------------------------------------- ----------------------------------------
Net asset value, end of period $8.24 8.02 7.75 8.23 8.01
- -------------------------------------------------------------------------- ------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.06% 13.13 .27 13.32 14.37
- -------------------------------------------------------------------------- ------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------- ------------------------------------
Expenses 1.71% 1.71 1.74 .61 .61
- -------------------------------------------------------------------------- ----------------------------------------
Net investment income 8.62 9.93 8.75 9.72 10.70
- -------------------------------------------------------------------------- ----------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at end of year (in thousands) $4,096,939 3,527,954 3,152,029 1,957,524 1,953,509
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 102% 99 93 101 69
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges.
23
<PAGE> 24
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS J. PATRICK BEIMFORD, JR.
President and Trustee Vice President
DAVID W. BELIN MICHAEL A. MCNAMARA
Trustee Vice President
LEWIS A. BURNHAM CHARLES R. MANZONI, JR.
Trustee Vice President
DONALD L. DUNAWAY JOHN E. NEAL
Trustee Vice President
ROBERT B. HOFFMAN HARRY RESIS
Trustee Vice President
DONALD R. JONES PHILIP J. COLLORA
Trustee Vice President
and Secretary
DOMINIQUE P. MORAX
Trustee JEROME L. DUFFY
Treasurer
SHIRLEY D. PETERSON
Trustee ELIZABETH C. WERTH
Assistant Secretary
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
http://www.kemper.com
[RECYCLE LOGO]
Printed on recycled paper.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Fixed Income Fund prospectus.
KHYF - 2 (11/96) 1024040
[KEMPER MUTUAL FUNDS LOGO]
Printed in the U.S.A.
