<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1997
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[LOGO]
KEMPER
INTERMEDIATE GOVERNMENT TRUST
"...It was a good environment for fixed-income securities.
Throughout the period, both bonds and mortgage
securities, the principal components of our portfolio
of intermediate securities, performed well...."
[KEMPER FUNDS LOGO]
[KEMPER FRONT COVER]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
7
SHAREHOLDERS' MEETING
8
PORTFOLIO STATISTICS
9
REPORT OF
INDEPENDENT AUDITORS
10
PORTFOLIO OF INVESTMENTS
11
FINANCIAL STATEMENTS
13
NOTES TO
FINANCIAL STATEMENTS
16
FINANCIAL HIGHLIGHTS
17
DESCRIPTION OF
DIVIDEND REINVESTMENT PLAN
AT A GLANCE
- --------------------------------------------------------------------------------
TOTAL RETURNS
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASED ON BASED ON
NET ASSET MARKET
VALUE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER INTERMEDIATE
GOVERNMENT TRUST 8.18% 15.76%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE AND MARKET PRICE
- --------------------------------------------------------------------------------
AS OF AS OF
12/31/97 12/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE $7.86 $7.90
- --------------------------------------------------------------------------------
MARKET PRICE $7.56 $7.13
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS DISTRIBUTION AND YIELD INFORMATION FOR THE FUND AS OF
DECEMBER 31, 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
ONE-YEAR DISTRIBUTION: $0.6550
- --------------------------------------------------------------------------------
DECEMBER DISTRIBUTION: 0.0500
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON NET ASSET VALUE) 7.63%
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON MARKET VALUE) 7.94%
- --------------------------------------------------------------------------------
</TABLE>
Statistical Note: Current annualized distribution rate is the latest monthly
dividend shown as an annualized percentage of net asset value/market price on
the date shown. Distribution rate simply measures the level of dividends and is
not a complete measure of performance. Total return measures aggregate change in
net asset value/market price assuming reinvestment of dividends. Returns are
historical and do not represent future performance. Market price, net asset
value and returns fluctuate. Additional information concerning performance is
contained in the Financial Highlights appearing at the end of this report.
TERMS TO KNOW
ADJUSTABLE RATE MORTGAGES (ARMS) Mortgages whose interest rates adjust
periodically based on changes to a corresponding index rate. To protect the
borrower against dramatic rate increases in a short period of time, ARMs are
often originated with interest rate caps. An interest rate cap assures the
borrower that the rate will not adjust beyond a certain point within a specific
period.
DURATION Duration is a measure of the rate sensitivity of a fixed-income
investment or portfolio. The longer the duration, the greater the interest
rate risk.
FLIGHT TO QUALITY BUYING Flight to quality buying describes investors increasing
their allocation to U.S. Treasuries and other high quality securities from
riskier equity and foreign bond securities, in times of global economic
uncertainty.
MARKET PRICE The last reported price at which a security was sold on an
exchange.
NET ASSET VALUE In mutual funds, the market value of a fund share, synonymous
with bid price.
TOTAL RETURN A fund's total return figure measures both the net investment
income generated by, and the effect of, any realized and unrealized appreciation
or depreciation of the underlying investments in its portfolio for a period,
assuming the reinvestment of all dividends. It represents the aggregate
percentage change in the value of an investment in the fund over the period.
Total return may be based upon net asset value or market price.
<PAGE> 3
ECONOMIC OVERVIEW
[ALLYN PHOTO]
MAUREEN F. ALLYN, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.,
SERVES AS THE FIRM'S CHIEF ECONOMIST. ALLYN GRADUATED SUMMA CUM LAUDE FROM
OAKLAND UNIVERSITY NEAR DETROIT, WITH A BACHELOR'S DEGREE IN PSYCHOLOGY. SHE
RECEIVED HER MASTER'S IN ECONOMICS, WITH A SPECIALIZATION IN INTERNATIONAL TRADE
AND FINANCE, FROM THE NEW SCHOOL FOR SOCIAL RESEARCH IN NEW YORK.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT ADVISOR FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPANIES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
We start 1998 optimistic about the long-term prospects of the U.S. economy and
financial markets but cautious about the next several months. The Asian
financial crisis that dominated the global investment environment in the second
half of 1997 promises to continue, posing significant risks to the economy and
investors. We look for the strength of the American consumer -- currently
enjoying rising real incomes, better employment opportunities, lower mortgage
rates and easy access to credit -- and the secular strength of the trend toward
capital spending on high technology to be sufficient to override the influence
of Asia on the U.S. In short, our best case scenario calls for the U.S. to
muddle through an unsettling period.
As it has for several years, the country should continue to enjoy
relatively low interest rates and low inflation. But the new year will be
different in at least two ways, both of which can be expected to have direct
bearing on investment opportunities.
First, the economy should grow at a much slower pace. A slowdown in Asia
will depress capital goods spending and heighten import pricing pressure,
putting a damper on American corporations' pricing and profit growth at least
through 1999. While the U.S. economy grew at an almost 4 percent rate in 1997,
we look for no better than 2 percent growth for the next two years -- with more
than half of the change attributable to the effect of the Asian fallout.
Disappointing corporate profits is another given for 1998. Profits had
begun to slow last year even before the height of the Asian crisis. High current
valuations, however, seem to suggest that Wall Street has yet to recognize this.
The clash between Wall Street profit expectations and actual reported earnings
is part of the risk likely to be associated with equity investing in 1998.
Volatility, such as we experienced in 1997, should continue. In fact, the
overall market volatility is not likely to reflect the turmoil that individual
equities may experience. There will be a narrowing of the number of companies
able to meet analysts' expectations and this market will be absolutely
unforgiving to those companies that fall far short.
Having stated this, however, we look for the Standard & Poor's 500 to
return about 9.5 percent, including the effect of reinvested dividends. This
would be an average return and in line with the historical long-term 10 percent
return of the stock market. On the heels of the last three 20 percent-plus
return years, an investor in 1998 may weigh the 10 percent prospect against a
projected 7 percent total return on bonds and consider the difference
insufficient compensation for the inherent added risk. Adopting a more
conservative posture for the new year may be an appropriate step that you'll
want to discuss with your financial representative in the context of your
long-term investing objectives.
To achieve a 9.5 percent return in 1998, the market's already high
valuations need to move even higher. We expect this to occur for a few
reasons: the market has so far demonstrated a certain complacency about the
valuation levels; American investors don't perceive there's anywhere better to
go than the U.S. equity market; and foreigners think of the U.S. market as a
safe haven. All should help support the market.
Where, then, are the opportunities likely to be in 1998? Expect to see
disparate performance within industry sectors. For example, while the financial
services sector in 1997 tended to provide across-the-board strong performance,
in 1998 we expect the sector to include its share of winners and losers. Stock
selection will be key, too, to benefiting from the technology sector. Over the
long term, we are optimistic about technology and corporate America's continuing
commitment to it. It will be difficult to participate in a market return in 1998
without having some exposure to technology-based companies. One caution: Not all
technology companies will survive the year, which raises the risk of investing
in the sector.
Conventional wisdom might argue in favor of remaining in the U.S. with your
investment dollars in 1998 and, more specifically, invested in small
capitalization companies with domestic lines of business. We'd challenge such
thinking as slower growth, slower inflation and even
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 (1/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.54 6.3 6.42 5.81
PRIME RATE(2) 8.5 8.5 8.25 8.25
INFLATION RATE(3)* 1.7 2.23 3.04 2.72
THE U.S. DOLLAR(4)* 10.43 7.32 4.59 -0.57
CAPITAL GOODS ORDERS(5)* 14.6 11.13 3.61 3.73
INDUSTRIAL PRODUCTION(5)* 5.95 4.69 5.19 1.58
EMPLOYMENT GROWTH(6) 2.74 2.09 2.2 1.74
</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 percent. 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 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 December 31, 1997.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
deflation and pricing pressures change the U.S. economic climate. The only real
antidote is growth, and from now on growth is more likely to be found outside
the United States. Today to participate in the growth from global business you'd
need to be exposed to large capitalization companies.
International investing is a promising proposition in 1998, the Asian
fallout notwithstanding. In established markets, there are attractive
opportunities to be found in Europe and in Japan. Several Japanese companies
have real cash flows and even relatively attractive valuations. In addition, the
effect of the Asian problems has not been to discourage all investment into
emerging markets; rather investors have tended to divert investment dollars and
business to other increasingly attractive emerging markets in eastern Europe,
the Middle East, Africa and Latin America.
With that 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/ Maureen Allyn
MAUREEN ALLYN
CHIEF ECONOMIST, SCUDDER KEMPER INVESTMENTS, INC.
January 29, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[VANDENBERG PHOTO]
RICHARD VANDENBERG JOINED SCUDDER KEMPER INVESTMENTS, INC. IN MARCH 1996, AND
IS A MANAGING DIRECTOR. HE IS A PORTFOLIO MANAGER OF KEMPER INTERMEDIATE
GOVERNMENT TRUST. VANDENBERG HAS MORE THAN 23 YEARS OF FIXED-INCOME PORTFOLIO
MANAGEMENT EXPERIENCE. HE RECEIVED BOTH A BACHELOR'S DEGREE AND M.B.A. FROM THE
UNIVERSITY OF WISCONSIN.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
WITH SUBDUED INFLATION AND SUSTAINABLE ECONOMIC GROWTH THROUGHOUT THE FUND'S
FISCAL YEAR, KEMPER INTERMEDIATE GOVERNMENT TRUST PERFORMED WELL IN 1997.
PORTFOLIO MANAGER RICHARD VANDENBERG DISCUSSES THE YEAR AND THE FUND'S
INVESTMENT APPROACH.
Q KEMPER INTERMEDIATE GOVERNMENT TRUST'S OBJECTIVE IS FOR HIGH TOTAL RETURN
EMPHASIZING CURRENT INCOME. HOW EFFECTIVE WAS THIS STRATEGY DURING THE YEAR
ENDED DECEMBER 31, 1997?
A I'm pleased with the fund's results for the fiscal year and for the long
term. For the year ended December 31, 1997, the fund gained 8.18 percent on a
net asset value basis, with an annualized distribution rate of 7.63 percent. For
the one-year period, the fund beat the average return of its competitors.
Lipper's intermediate U.S. government closed-end fund universe of four funds
returned an average of 7.35 percent for the one-year period. Additionally, on a
market price basis, Kemper Intermediate Government Trust gained 15.76 percent
during the year.
We emphasize long-term investing for the Kemper Funds. While the fund is
designed to emphasize current income, we also want to give investors high total
return.
Q HOW DID ECONOMIC CONDITIONS DURING THE FUND'S FISCAL YEAR AFFECT THE
FUND'S RESULTS?
A The year ended December 31, 1997 was a good year for fixed-income
securities. It, however, began with considerable uncertainty on the part of
investors who reacted negatively to strong January reports regarding high growth
for fourth quarter 1996 gross domestic product. Specifically, a rise in average
hourly earnings, an increase in hours worked and strong holiday retail
sales created this concern about the strength of the economy. In addition,
Federal Reserve Board Chairman Alan Greenspan worried publicly about excessive
economic strength, potential inflation and inflated financial asset values.
These economic indicators raised the possibility that the Federal Reserve
Board (the Fed) would increase interest rates to slow the economy and help
control inflation. In March, the Fed did raise short-term interest rates by 0.25
percent to curb this feared inflation.
Throughout the remainder of the year, economic growth, though strong, did
not cause a pick up in inflation. Inflation, which hurts fixed-interest
securities by reducing their purchasing power, remained at unusually low
levels. Investor doubts concerning inflationary pressures were diminished,
leading to firming prices and falling yields by the end of April.
Yields of government securities moved lower over the remainder of the year
with inflation being contained by overseas competition. The 30-year Treasury
bond closed out the year at 5.97 percent after beginning it at 6.74 percent and
moving as high as 7.11 percent in April before steadily falling.
It was a good environment for fixed-income securities. Throughout the
period, both bonds and mortgage securities, the principal components of our
portfolio of intermediate securities, performed well.
5
<PAGE> 6
PERFORMANCE UPDATE
Q YOU'VE MENTIONED THAT IT WAS A GOOD YEAR FOR FIXED-INCOME SECURITIES A FEW
TIMES NOW. WAS IT SIMPLY BECAUSE OF THE LOW INFLATION THAT YOU HAVE DISCUSSED,
OR WERE THERE OTHER FACTORS CONTRIBUTING TO THE FIXED INCOME MARKET'S SUCCESS?
A Three things were important -- low inflation, reduced Treasury supply and
the Asian market and currency crisis, which created a "flight to quality." All
three factors contributed to strengthening the U.S. dollar, which is why
government securities.
In more detail, fewer new Treasury securities were offered because of two
things. First and primarily, a robust economy produced significantly more tax
revenues than anticipated, reducing the Treasury deficit. Secondarily, an
agreement was reached between the executive and legislative branches of the
federal government to reduce the federal budget deficit to zero by 2001. Simply,
with less debt to finance, the government has less need to issue government
securities to finance that debt. The lower supply typically increases the price
for these securities as demand then outweighs supply. And remember, yields move
in the opposite direction of price.
The Asian financial crisis surfaced in October and has had a wide-ranging
impact. Falling demand in Asia for oil and other commodities has reduced prices
for these commodities in the United States. The crisis has also created excess
productive capacity in Asia. This excess Asian capacity and a strong dollar has
made foreign goods and services imported by the U.S. very cheap. In turn, this
has prevented U.S. manufacturers from raising prices. All of this has led to
continued lower inflation, all good for bonds.
In addition, a "flight to quality" rally has also occurred in the U.S.
fixed-income markets in the last few months, stimulated by foreign capital,
particularly Asian, further helping to lower yields.
Q OVER THE YEAR, AS INTEREST RATES HAVE COME DOWN, HOW HAVE YOU KEPT YOUR
RETURN AT A HIGH LEVEL?
A A key component in this fund is its portfolio of very high credit quality
securities (the fund's long-term fixed-income securities are 100 percent rated
AAA.) To maintain high current income while preserving capital, we divide our
holdings between U.S. government and mortgage securities, with the exact
composition at any time spread-related. Mortgages tend to vary between 35 and 55
percent of the portfolio and have been a very successful investment area for us,
enabling us to increase the fund's return whenever Treasuries are low. (The fund
is also permitted to invest in foreign government securities. While not forming
part of our portfolio currently, these have an attraction when the dollar has
reached a peak.)
Q IN JANUARY 1997, FACED WITH A LIKELY RATE HIKE, WHAT DID YOU DO?
A In January and February, the fund's duration was shortened to below that
of its peers, and this position was held until April. In addition, the mortgage
allocation was elevated; mortgages tend to do well during rising rates.
In April, with markets recovering from the tightening, and inflation
remaining low despite continuing growth in the economy, we began adding
Treasuries -- short-term ones to start with -- to take advantage of this
favorable environment.
As it became clear that yields would continue to trend lower, we covered
interest rate hedges and
6
<PAGE> 7
PERFORMANCE UPDATE
extended the duration of the fund, adding some longer-maturity Treasuries from
July through September. (Treasuries tend to outperform mortgages in a declining
rate environment.) However, mortgages also continued to do well in tandem with
Treasuries for the remainder of the year.
Q THE AVERAGE DURATION OF THE PORTFOLIO IS 3.4 YEARS. HOW DOES THAT REFLECT
YOUR INVESTMENT STRATEGY?
A We are keeping the fund close to a neutral duration. This duration
reflects a cautious posture since market yields reflect current bullish
conditions of low and falling inflation with strong economic growth. The
inflation outlook remains very positive for the fixed-income market, and the Fed
is unlikely to raise rates as long as inflation is low and the Asian impact on
domestic growth remains unknown. The fund is fully invested, with no cash
reserves. It is also avoiding excessive risk by investing in lower-risk
investment quality bonds and mortgages.
Q KEMPER INSTITUTED A MANAGED DISTRIBUTION STRATEGY IN APRIL 1996. HOW
EFFECTIVE HAS THE STRATEGY BEEN?
A Since the strategy was adopted, we have been able to maintain stable
returns with distributions made from income, net capital gains, and, when
necessary, shareholder capital. The trust's discount to net asset value declined
from 10.38 percent at April 30, 1996 to 3.79 percent at December 31, 1997. It
was as low as 2.7 percent at November 30, 1997. The monthly dividend was cut in
December, from $0.055 to $0.05, because of the significant drop in interest
rates over the past few years. The adjustment better reflects the current
earnings capability of the fund, and we expect the dividend adjustment to reduce
the need for future distributions of shareholders' capital.
Q WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE INTERMEDIATE GOVERNMENT
MARKET?
A The intermediate government market looks favorable with inflation
appearing well under control, although wage inflation, which accounts for
two-thirds of the Consumer Price Index (CPI), at 4 percent is still on the high
side. Inflation has been helped by the strong dollar and by strong capacity in
Asia. We continue to monitor inflation indicators closely.
We also believe that U.S. government bonds and mortgage securities are
undervalued on world markets. With increasing globalization of interest rates,
this may be a factor in our favor, causing these holdings to be revalued
upwards.
SHAREHOLDERS MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held. Kemper
Intermediate Government Trust shareholders were asked to vote on three separate
issues: election of two members to the Board of Trustees, ratification of Ernst
& Young LLP as independent auditors and approval of the new investment
management agreement.
1) Election of Trustees
For Against
Daniel Pierce 28,332,684 449,915
Edmond D. Villani 28,349,921 432,678
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund
For Against Abstain
28,349,204 131,029 302,367
3) Approval of new investment management agreement
For Against Abstain
26,061,108 319,068 536,405
7
<PAGE> 8
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 12/31/97 ON 12/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGES 44% 52%
- --------------------------------------------------------------------------------
LONG-TERM GOVERNMENTS 1 --
- --------------------------------------------------------------------------------
INTERMEDIATE-TERM GOVERNMENTS 41 28
- --------------------------------------------------------------------------------
SHORT-TERM TREASURIES AND CASH
EQUIVALENTS (ONE YEAR OR LESS) 14 20
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 12/31/97 ON 12/31/97
AVERAGE MATURITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 12/31/97 ON 12/31/96
- --------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 5.7 years 6.2 years
- --------------------------------------------------------------------------------
</TABLE>
*Portfolio composition is subject to change.
8
<PAGE> 9
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER INTERMEDIATE GOVERNMENT TRUST
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Intermediate Government Trust
as of December 31, 1997, the related statements of operations for the year then
ended and changes in net assets for the year ended December 31, 1997, the month
ended December 31, 1996 and the year ended November 30, 1996, and the financial
highlights for each of the fiscal periods since 1993. 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
December 31, 1997, by correspondence with the custodian. 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
Intermediate Government Trust at December 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
periods referred to above in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 17, 1998
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER INTERMEDIATE GOVERNMENT TRUST
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COUPON PRINCIPAL
U.S. GOVERNMENT OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY Notes 8.875-9.25% 1998 $51,500 $ 52,717
SECURITIES--71.4% 8.00 1999 5,940 6,144
(Cost: $193,628) 8.75 2000 16,640 17,859
Bonds 10.75-10.375 2005 14,620 19,013
9.125 2009 16,712 20,613
12.75 2010 44,925 64,102
10.375 2012 5,000 6,647
12.00 2013 2,605 3,840
--------------------------------------------------------------------------------------
190,935
- --------------------------------------------------------------------------------------------------------------------------
GOVERNMENT (a)Adjustable rate mortgages 6.00 2028 2,000 2,018
NATIONAL MORTGAGE 7.00 2022 4,816 4,959
ASSOCIATION--24.1% Pass-through certificates 6.50 2028 10,000 9,897
(Cost: $62,508) 7.00 2022-2028 22,047 22,229
7.50 2022-2028 23,557 24,190
9.00 2016-2025 981 1,057
--------------------------------------------------------------------------------------
64,350
- --------------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL Collateralized mortgage
MORTGAGE ASSOCIATION--11.4% obligations 6.25 2022 10,000 9,941
(Cost: $28,983) Pass-through certificates 7.00 2028 10,000 10,072
8.00 2013 10,000 10,331
--------------------------------------------------------------------------------------
30,344
- --------------------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN Collateralized mortgage
MORTGAGE CORPORATION--8.3% obligations 6.25 -7.00 2021 22,000 22,124
(Cost: $20,221) --------------------------------------------------------------------------------------
TOTAL INVESTMENTS--115.2%
(Cost: $305,340) 307,753
--------------------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS--(15.2)% (40,535)
--------------------------------------------------------------------------------------
NET ASSETS--100% $267,218
--------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Adjustable rate securities. The interest rates on these securities vary with
a selected index at specified intervals and the rates shown above are the
effective rates on December 31, 1997. The dates shown represent the final
maturity of the obligations.
Based on the cost of investments of $305,340,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $5,968,000, the
gross unrealized depreciation was $3,555,000 and the net unrealized appreciation
on investments was $2,413,000.
10
<PAGE> 11
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $305,340) $307,753
- ------------------------------------------------------------------------
Cash 10,141
- ------------------------------------------------------------------------
Interest receivable 4,377
- ------------------------------------------------------------------------
TOTAL ASSETS 322,271
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Payable for:
Investments purchased 54,793
- ------------------------------------------------------------------------
Management fee 189
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 58
- ------------------------------------------------------------------------
Trustees' fees 13
- ------------------------------------------------------------------------
Total liabilities 55,053
- ------------------------------------------------------------------------
NET ASSETS $267,218
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $308,199
- ------------------------------------------------------------------------
Accumulated net realized loss on investments (43,394)
- ------------------------------------------------------------------------
Net unrealized appreciation on investments 2,413
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $267,218
- ------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, $.01 PAR VALUE
($267,218 / 33,996 shares outstanding) $7.86
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
NET INVESTMENT INCOME
- -----------------------------------------------------------------------
Interest income $22,278
- -----------------------------------------------------------------------
Expenses:
Management fee 2,134
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 198
- -----------------------------------------------------------------------
Professional fees 73
- -----------------------------------------------------------------------
Reports to shareholders 51
- -----------------------------------------------------------------------
Trustees' fees and other 72
- -----------------------------------------------------------------------
Total expenses 2,528
- -----------------------------------------------------------------------
NET INVESTMENT INCOME 19,750
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------
Net realized gain on sales of investments 801
- -----------------------------------------------------------------------
Net realized loss from futures transactions (1,062)
- -----------------------------------------------------------------------
Net realized loss (261)
- -----------------------------------------------------------------------
Change in net unrealized appreciation on investments 1,479
- -----------------------------------------------------------------------
Net gain on investments 1,218
- -----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $20,968
- -----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ONE MONTH
YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, NOVEMBER 30,
- -------------------------------------------------------------------------------------------------------
1997 1996 1996
OPERATIONS AND DIVIDENDS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income $ 19,750 1,515 20,818
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) (261) 856 (6,189)
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation/depreciation 1,479 (4,740) (2,933)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 20,968 (2,369) 11,696
- -------------------------------------------------------------------------------------------------------
Distribution from net investment income (19,974) (1,515) (20,956)
- -------------------------------------------------------------------------------------------------------
Tax return of capital distribution (2,294) (355) (462)
- -------------------------------------------------------------------------------------------------------
Total distributions to shareholders (22,268) (1,870) (21,418)
- -------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (1,300) (4,239) (9,722)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
Beginning of period 268,518 272,757 282,479
- -------------------------------------------------------------------------------------------------------
END OF PERIOD $267,218 268,518 272,757
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT DESCRIPTION OF FUND. Kemper Intermediate Government
ACCOUNTING POLICIES Trust (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, closed-end
management investment company.
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 financial futures and
options are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Over-the-counter
traded fixed income options are valued based upon
prices provided by market makers. 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). Interest income is recorded on the
accrual basis and includes discount amortization on
all fixed income securities and premium
amortization on mortgage-backed securities.
Realized gains and losses from investment
transactions are reported on an identified cost
basis.
The Fund may purchase securities with delivery or
payment to occur at a later date. At the time the
Fund enters into a commitment to purchase a
security, the transaction is recorded and the value
of the security is reflected in the net asset
value. The value of the security may vary with
market fluctuations. No interest accrues to the
Fund until payment takes place. At the time the
Fund enters into this type of transaction it is
required to segregate cash or other liquid assets
equal to the value of the securities purchased. At
December 31, 1997 the Fund had $54,701,000 in
purchase commitments outstanding (20% of net
assets) with a corresponding amount of assets
segregated.
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
December 31, 1997, amounting to approximately
$43,386,000, is available to offset future taxable
gains. If not applied, the loss carryover expires
during the period 1998 through 2006.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends to its shareholders on a monthly
basis. The dividends are recorded by the Fund on
the ex-dividend date. In 1996 the Fund adopted a
managed distribution policy whereby, in the current
interest rate environment, the Fund intends to pay
a monthly distribution of $.05 per share. The
distribution will be made from net investment
income, net realized gains and, to the extent
necessary, paid-in capital.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2 TRANSACTIONS WITH
AFFILIATES INVESTMENT MANAGER COMBINATION. Effective December
31, 1997, Zurich Insurance Company, the parent of
Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc.
(Scudder), another major investment manager. As a
result of this transaction, the operations of ZKI
were combined with Scudder to form a new global
investment organization named Scudder Kemper
Investments, Inc. (Scudder Kemper). The transaction
resulted in the termination of the Fund's
investment management agreement with ZKI, however,
a new investment management agreement between the
Fund and Scudder Kemper was approved by the Fund's
Board of Trustees and by the Fund's Shareholders.
The new management agreement, which is effective
December 31, 1997, is the same in all material
respects as the previous management agreement,
except that Scudder Kemper is the new investment
adviser to the Fund. In addition, the name of the
Fund's shareholder service agent was changed to
Kemper Service Company (KSvC).
MANAGEMENT AGREEMENT. Under its management
agreement, the Fund pays a management fee at an
annual rate of .80% of average weekly net assets.
The Fund incurred a management fee of $2,134,000
for the year ended December 31, 1997.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
KSvC is the shareholder service agent of the Fund.
Under the agreement, KSvC received shareholder
services fees of $35,000 for the year ended
December 31, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the year ended December 31,
1997, the Fund made no payments to its officers and
incurred trustees' fees of $27,000 to independent
trustees.
- --------------------------------------------------------------------------------
3 INVESTMENT For the year ended December 31, 1997, investment
TRANSACTIONS transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $1,026,788
Proceeds from sales 1,054,413
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 FINANCIAL FUTURES The Fund has entered into exchange traded financial
CONTRACTS futures contracts in order to help protect itself
from anticipated market conditions and, as such,
bears the risk that arises from entering into these
contracts.
At the time the Fund enters into a futures
contract, it is required to make a margin deposit
with its custodian. Subsequently, gain or loss is
recognized and payments are made on a daily basis
between the Fund and its broker as the market value
of the futures contract fluctuates. At December 31,
1997, the market value of assets pledged by the
Fund to cover margin requirements for open futures
positions was $3,295,000. The Fund also had liquid
securities in its portfolio in excess of the face
amount of the following open futures positions at
December 31, 1997:
<TABLE>
<CAPTION>
FACE EXPIRATION
TYPE POSITION AMOUNT MONTH GAIN (LOSS)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Note Long $ 1,085,000 March '98 $ 1,000
--------------------------------------------------------------------------
U.S. Treasury Note Short 41,036,000 March '98 (71,000)
--------------------------------------------------------------------------
U.S. Treasury Bond Short 2,995,000 March '98 (17,000)
--------------------------------------------------------------------------
Eurodollar Short 35,231,000 March '98 (103,000)
--------------------------------------------------------------------------
Eurodollar Short 8,191,000 June '98 (53,000)
--------------------------------------------------------------------------
Eurodollar Short 2,572,000 September '98 (17,000)
--------------------------------------------------------------------------
TOTAL $(260,000)
--------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
ONE MONTH
YEAR ENDED ENDED YEAR ENDED NOVEMBER 30,
DECEMBER 31, DECEMBER 31, ----------------------------------------
1997 1996 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $7.90 8.02 8.31 7.77 8.69 8.81
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .58 .04 .61 .58 .63 .71
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) .04 (.10) (.27) .56 (.87) (.12)
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations .62 (.06) .34 1.14 (.24) .59
- -----------------------------------------------------------------------------------------------------------------------
Less distributions:
Distribution from net investment
income .59 .05 .62 .60 .68 .71
- -----------------------------------------------------------------------------------------------------------------------
Tax return of capital distribution .07 .01 .01 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total distributions .66 .06 .63 .60 .68 .71
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.86 7.90 8.02 8.31 7.77 8.69
- -----------------------------------------------------------------------------------------------------------------------
Market value, end of period $7.56 7.13 7.38 7.13 7.13 8.50
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------------------
Based on net asset value 8.18% (.81) 4.38 15.20 (2.85) 6.90
- -----------------------------------------------------------------------------------------------------------------------
Based on market value 15.76% (2.66) 12.73 8.50 (8.36) 3.88
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------------------
Expenses .95% .95 .91 .95 .94 .92
- -----------------------------------------------------------------------------------------------------------------------
Net investment income 7.44% 6.74 7.61 7.28 7.68 8.02
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $267,218 268,518 272,757 282,479 264,063 295,471
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 351% 72 577 552 497 326
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Total return based on net asset value reflects changes in the Fund's net asset
value during the period. Total return based on market value reflects changes in
market value. Each figure includes reinvestment of dividends. These figures will
differ depending upon the level of any discount from or premium to net asset
value at which the Fund's shares trade during the period.
16
<PAGE> 17
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
1 PARTICIPATION We invite you to review the description of the
Dividend Reinvestment and Cash Purchase Plan (the
"Plan") which is available to you as a shareholder
of KEMPER INTERMEDIATE GOVERNMENT TRUST (the
"Fund"). If you wish to participate and your shares
are held in your own name, simply contact Kemper
Service Company, whose address and phone number are
provided in Paragraph 4 for the appropriate form.
If your shares are held in the name of a brokerage
firm, bank, or other nominee, you must instruct
that nominee to re-register your shares in your
name so that you may participate in the Plan,
unless your nominee has made the Plan available on
shares held by them. Shareholders who so elect will
be deemed to have appointed United Missouri Bank,
n.a. ("UMB") as their agent and as agent for the
Fund under the Plan.
- --------------------------------------------------------------------------------
2 DIVIDEND INVESTMENT The Fund's transfer agent and dividend disbursing
ACCOUNT agent or its delegate ("Agent") will establish a
Dividend Investment Account (the "Account") for
each shareholder participating in the Plan. Agent
will credit to the Account of each participant
funds it receives from the following sources: (a)
cash dividends and capital gains distributions paid
on shares of beneficial interest (the "Shares") of
the Fund registered in the participant's name on
the books of the Fund; (b) cash dividends and
capital gains distributions paid on Shares
registered in the name of Agent but credited to the
participant's Account; and (c) voluntary cash
contributions made pursuant to Paragraph 5 hereof.
Sources described in clauses (a) and (b) of the
preceding sentence are hereinafter called
"Distributions."
- --------------------------------------------------------------------------------
3 INVESTMENT OF If on the record date for a Distribution (the
DISTRIBUTION FUNDS "Record Date"), Shares are trading at a discount
HELD IN EACH ACCOUNT from net asset value per Share (according to the
evaluation most recently made on Shares of the
Fund), funds credited to a participant's Account
will be used to purchase Shares (the "Purchase").
UMB will attempt, commencing five (5) days prior to
the Payment Date and ending at the close of
business on the Payment Date ("Payment Date" as
used herein shall mean the last business day of the
month in which such Record Date occurs), to acquire
Shares in the open market. If and to the extent
that UMB is unable to acquire sufficient Shares to
satisfy the Distribution by the close of business
on the Payment Date, the Fund will issue to UMB
Shares valued at net asset value per Share
(according to the evaluation most recently made on
Shares of the Fund) in the aggregate amount of the
remaining value of the Distribution. If, on the
Record Date, Shares are trading at a premium over
net asset value per Share, the Fund will issue on
the Payment Date, Shares valued at net asset value
per Share on the Record Date to Agent in the
aggregate amount of the funds credited to the
participants' accounts. All cash contributions to a
participant's Account made pursuant to Paragraph 5
hereof will be invested in Shares purchased in the
open market.
- --------------------------------------------------------------------------------
4 ADDITIONAL Address all notices, correspondence, questions, or
INFORMATION other communication regarding the Plan to:
KEMPER SERVICE COMPANY
P.O. Box 419066
Kansas City, Missouri 64141-6066
1-800-294-4366
17
<PAGE> 18
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
5 VOLUNTARY CASH A participant may from time to time make voluntary
CONTRIBUTIONS cash contributions to his Account by sending to
Agent a check or money order, payable to Agent, in
a minimum amount of $100 with appropriate
accompanying instructions. (No more than $500 may
be contributed per month.) Agent will inform UMB of
the total funds available for the purchase of
Shares and UMB will use the funds to purchase
additional Shares for the participant's Account the
earlier of: (a) when it next purchases Shares as a
result of a Distribution or (b) on or shortly after
the first day of each month and in no event more
than 30 days after such date except when temporary
curtailment or suspension of purchases is necessary
to comply with applicable provisions of Federal
securities laws. Cash contributions received more
than fifteen calendar days or less than five
calendar days prior to a Payment Date will be
returned uninvested. Interest will not be paid on
any uninvested cash contributions. Participants
making voluntary cash investments will be charged a
$.75 service fee for each such investment and will
be responsible for their pro rata brokerage
commissions.
- --------------------------------------------------------------------------------
6 ADJUSTMENT OF The Fund will increase the price at which Shares
PURCHASE PRICE may be issued under the Plan to 95% of the fair
market value of the shares on the Record Date if
the net asset value per Share of the Shares on the
Record Date is less than 95% of the fair market
value of the Shares on the Record Date.
- --------------------------------------------------------------------------------
7 DETERMINATION OF The cost of Shares and fractional Shares acquired
PURCHASE PRICE for each participant's Account in connection with a
Purchase shall be determined by the average cost
per Share, including brokerage commissions as
described in Paragraph 8 hereof, of the Shares
acquired by UMB in connection with that Purchase.
Shareholders will receive a confirmation showing
the average cost and number of Shares acquired as
soon as practicable after Agent has received or UMB
has purchased Shares. Agent may mingle the cash in
a participant's account with similar funds of other
participants of the Fund for whom UMB acts as agent
under the Plan.
- --------------------------------------------------------------------------------
8 BROKERAGE CHARGES There will be no brokerage charges with respect to
Shares issued directly by the Fund as a result of
Distributions. However, each participant will pay a
pro rata share of brokerage commissions incurred
with respect to UMB's open market purchases in
connection with the reinvestment of Distributions
as well as from voluntary cash contributions. With
respect to purchases from voluntary cash
contributions, UMB will charge a pro rata share of
the brokerage commissions. Brokerage charges for
purchasing small amounts of Shares for individual
Accounts through the Plan can be expected to be
less than the usual brokerage charges for such
transactions, as UMB will be purchasing Shares for
all participants in blocks and prorating the lower
commission thus attainable.
- --------------------------------------------------------------------------------
9 SERVICE CHARGES There is no service charge by Agent or UMB to
shareholders who participate in the Plan other than
service charges specified in Paragraphs 5 and 13
hereof. However, the Fund reserves the right to
amend the Plan in the future to include a service
charge.
18
<PAGE> 19
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
10 TRANSFER OF SHARES Agent will maintain the participant's Account, hold
HELD BY AGENT the additional Shares acquired through the Plan in
safekeeping and furnish the participant with
written confirmation of all transactions in the
Account. Shares in the Account are transferable
upon proper written instructions to Agent. Upon
request to Agent, a certificate for any or all full
Shares in a participant's Account will be sent to
the participant.
- --------------------------------------------------------------------------------
11 SHARES NOT HELD IN Beneficial owners of Shares which are held in the
SHAREHOLDER'S name of a broker or nominee will not be
NAME automatically included in the Plan and will receive
all distributions in cash. Such shareholders should
contact the broker or nominee in whose name their
Shares are held to determine whether and how they
may participate in the Plan.
- --------------------------------------------------------------------------------
12 AMENDMENTS Experience under the Plan may indicate that changes
are desirable. Accordingly, the Fund reserves the
right to amend or terminate the Plan, including
provisions with respect to any Distribution paid
subsequent to notice thereof sent to participants
in the Plan at least ninety days before the record
date for such Distribution.
- --------------------------------------------------------------------------------
13 WITHDRAWAL FROM Shareholders may withdraw from the Plan at any time
PLAN by giving Agent a written notice. If the proceeds
are $25,000 or less and the proceeds are to be
payable to the shareholder of record and mailed to
the address of record, a signature guarantee
normally will not be required for notices by
individual account owners (including joint account
owners), otherwise a signature guarantee will be
required. In addition, if the certificate is to be
sent to anyone other than the registered owner(s)
at the address of record, a signature guarantee
will be required on the notice. A notice of
withdrawal will be effective for the next
Distribution following receipt of the notice by the
Agent provided the notice is received by the Agent
at least ten days prior to the Record Date for the
Distribution. When a participant withdraws from the
Plan, or when the Plan is terminated in accordance
with Paragraph 12 hereof, the participant will
receive a certificate for full Shares in the
Account, plus a check for any fractional Shares
based on market price; or if a Participant so
desires, Agent will notify UMB to sell his Shares
in the Plan and send the proceeds to the
participant, less brokerage commissions and a $2.50
service fee.
- --------------------------------------------------------------------------------
14 TAX IMPLICATIONS Shareholders will receive tax information annually
for personal records and to assist in preparation
of Federal income tax returns. If shares are
purchased at a discount, the amount of the discount
is considered taxable income and is added to the
cost basis of the purchased shares.
19
<PAGE> 20
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY LINDA J. WONDRACK
Chairman and Trustee President Vice President
JAMES E. AKINS PHILIP J. COLLORA JOHN R. HEBBLE
Trustee Vice President, Assistant Treasurer
Secretary and Treasurer
ARTHUR R. GOTTSCHALK JERARD K. HARTMAN MAUREEN E. KANE
Trustee Vice President Assistant Secretary
FREDERICK T. KELSEY THOMAS W. LITTAUER CAROLINE PEARSON
Trustee Vice President Assistant Secretary
FRED B. RENWICK ANN M. MCCREARY ELIZABETH C. WERTH
Trustee Vice President Assistant Secretary
JOHN B. TINGLEFF ROBERT C. PECK, JR.
Trustee Vice President
EDMOND D. VILLANI KATHRYN L. QUIRK
Trustee Vice President
JOHN G. WEITHERS RICHARD L. VANDENBERG
Trustee Vice President
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419066
Kansas City, MO 64141-6066
- --------------------------------------------------------------------------------
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INDEPENDENT ERNST & YOUNG LLP
AUDITORS 233 South Wacker Drive
Chicago, IL 60606
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LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
KIGT - 2(2/98) 1043580
Printed in the U.S.A. [KEMPER FUNDS LOGO]
