<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[LOGO]
KEMPER
INTERMEDIATE GOVERNMENT TRUST
"... We performed slightly behind the intermediate
government bond index but very well versus our
competition in the closed-end world. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
6
Year 2000
7
Portfolio Statistics
8
Portfolio
of Investments
9
Report of
Independent Auditors
10
Financial Statements
12
Notes to Financial Statements
15
Financial Highlights
16
Description of Dividend
Reinvestment Plan
19
Shareholders' Meeting
AT A GLANCE
- --------------------------------------------------------------------------------
TOTAL RETURNS
FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASED ON BASED ON
NET ASSET MARKET
VALUE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER INTERMEDIATE
GOVERNMENT TRUST 7.80% 8.13%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE AND MARKET PRICE
- --------------------------------------------------------------------------------
AS OF AS OF
12/31/98 12/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE $7.85 $7.86
- --------------------------------------------------------------------------------
MARKET PRICE $7.56 $7.56
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS DISTRIBUTION AND YIELD INFORMATION FOR THE FUND AS OF
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
KEMPER
INTERMEDIATE
GOVERNMENT
TRUST
- --------------------------------------------------------------------------------
<S> <C>
ONE-YEAR DISTRIBUTION: $.6000
- --------------------------------------------------------------------------------
DECEMBER DISTRIBUTION: $.0500
- --------------------------------------------------------------------------------
ANNUALIZED DISTRIBUTION RATE:
(BASED ON NET ASSET VALUE) 7.64%
- --------------------------------------------------------------------------------
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, DISTRIBUTION
RATES, 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
DURATION A measure of the interest rate sensitivity of a fixed income investment
or portfolio, incorporating time to maturity and coupon size. The longer the
duration, the greater the interest rate risk.
FANNIE MAE Short for Federal National Mortgage Association (FNMA), which
repackages pools of mortgages for resale to investors. Fannie Mae securities do
not carry a direct, specified guarantee of payment from the U.S. government, but
are issued under Treasury supervision.
FREDDIE MAC Short for Federal Home Loan Mortgage Corporation (FHLMC). Like FNMA,
FHLMC repackages mortgages for sale to investors. Freddie Mac securities do not
carry a direct, specified guarantee of payment from the U.S. government, but are
issued under Treasury supervision.
GINNIE MAE Short for Government National Mortgage Association (GNMA). As its
name implies, Ginnie Mae mortgage-backed securities carry a guarantee of payment
by the U.S. government, and therefore are considered marginally more secure than
Fannie Mae or Freddie Mac securities.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER INVESTMENTS, HE WAS WITH
THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $280 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
DEAR KEMPER FUNDS SHAREHOLDER:
If you think the first quarter of 1999 has seemed rather anticlimactic compared
to 1998, you're not alone. The year began with a quiet bang in the U.S. stock
market, with the Dow Jones Industrial Average hitting an all-time high of 9643
points in the first week of January. While stock market volatility has
continued, it seems to be phasing investors less and less. Even global events
are being taken in stride. Europe's Economic and Monetary Union (EMU) was
launched without much notice. And when Brazil's economy recently took a turn for
the worse, Wall Street was only mildly concerned. Also contributing to today's
laid-back attitude -- the impeachment trial of President Clinton has all but
fizzled into obscurity without significantly affecting the U.S. economy or
markets.
Indeed, the U.S. economy looks good. The fundamentals by which we measure the
state of the economy remain strong. We continue to see solid consumer spending
growth, continued investment spending and low inflation. This suggests that
there are no internal problems for continued U.S. economic growth.
Additionally, we can expect the Federal Reserve Board to keep short-term
interest rates low. On February 3, the Fed left interest rates unchanged. It is
likely that this "hands-off" approach will continue, particularly if the U.S.
economy remains in check and there is a degree of uncertainty in the
international arena.
The U.S. budget surplus for 1998 came in at $60 billion, with another budget
surplus of between $80 billion and $100 billion expected for fiscal 1999. Growth
in the nation's gross domestic product (GDP), which represents the total value
of all goods and services produced within the U.S. economy, has remained steady.
GDP, driven by consumer spending, is expected to grow at an annualized rate of
approximately 3 percent in 1999. We also anticipate modest capital spending
growth and modest inventory growth.
The consumer price index (CPI) remains in the vicinity of 2 percent. However,
energy prices, which were down 6 to 7 percent last year and helped keep the CPI
down, are unlikely to remain so low this year.
Employment growth has slowed to 2 percent, combined with real wage growth of
between 2 percent and 2.5 percent. But real income growth is between 4 percent
and 5 percent. In addition, gains in household net worth, which tends to fuel
consumer spending, are also on the rise. Banks appear to be only a little less
willing to lend in 1999, so the threat of a general credit crunch is minimal.
On a less positive note, corporate profits have slowed in 1999, growing at a
rate of 1 percent to 3 percent on a year-over-year basis. As a result, we may
see a slowdown in capital spending this year. The current U.S. account deficit
is rising, which suggests the U.S. economy is increasingly dependent on foreign
capital inflows to finance its economic activity. This is acceptable as long as
foreign money continues to flow in. But if foreign investors, particularly the
Japanese, no longer wish to invest in the United States, we can expect problems
for interest rates and exchange rates, as well as increased uncertainty and
market volatility.
At this point, investors may be comforted by the fact that the U.S. markets
and economy have withstood the test of a tumultuous 1998. While certain
countries, such as Malaysia, Indonesia, Brazil and Russia, are still suffering
from economic crises, others, including the Philippines, South Korea, Thailand
and China, appear to have survived. As long as the Fed and the Group of Eight
leading industrial nations (G8) are committed to avoiding recession on national
and global levels respectively, investors have a good chance of experiencing a
more stable economic environment.
At home, there has been somewhat of a slowdown in manufacturing, as reduced
U.S. exports reflect foreign economic turmoil. But the global impact of the
Asian crisis still has not hit the U.S. as hard as some analysts expected.
Indeed, Asian turmoil has not affected U.S. export volumes as much as it has
lowered import prices and helped reduce global interest rates.
Ultimately, Europe's recently inaugurated EMU is likely to bring more
flexibility and growth potential for the region. European equities may be the
beneficiaries of
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( 1/31/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1)* 4.65 5.65 6.21 6.83
PRIME RATE(2) 7.75 8.50 8.50 8.25
INFLATION RATE(3)* 1.61 1.38 2.22 3.00
THE U.S. DOLLAR(4) -4.37 3.92 7.62 4.74
CAPITAL GOODS ORDERS(5)* 11.78 10.47 15.67 4.79
INDUSTRIAL PRODUCTION(5)* 1.88 5.09 6.12 4.87
EMPLOYMENT GROWTH(6) 2.17 2.57 2.65 2.22
</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, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
increased spending, as governments seek to ease fiscal and monetary policy,
foster growth and reduce unemployment. It's going to be interesting to watch as
the monetary union continues to evolve. One lesson for investors -- particularly
those with international holdings -- is to diversify. With the democratization
of the world, the globalization of trade and more free market economies at our
fingertips, international markets are becoming more and more attractive. But if
you subscribe to the concept of international investment, be cautious -- don't
put all of your investment eggs in one basket.
Other key elements to watch in 1999: the race for the next presidency and
preparedness for the year 2000. And remember, while it is nearly impossible to
predict the next big crisis, there always appears to be one just around the
bend.
Thank you for choosing to invest with Kemper Funds. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/S/John E. Silvia
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN E. SILVIA AS OF FEBRUARY 8, 1999,
AND MAY NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO
PART OF THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
4
<PAGE> 5
PERFORMANCE UPDATE
RICHARD VANDENBERG JOINED SCUDDER KEMPER INVESTMENTS, INC. IN MARCH 1996, AND IS
A MANAGING DIRECTOR. HE IS ALSO LEAD PORTFOLIO MANAGER OF KEMPER INTERMEDIATE
GOVERNMENT TRUST. VANDENBERG HAS 25 YEARS OF FIXED-INCOME PORTFOLIO MANAGEMENT
EXPERIENCE. HE RECEIVED HIS BACHELOR'S DEGREE AND M.B.A. FROM THE UNIVERSITY OF
WISCONSIN.
SCOTT DOLAN JOINED SCUDDER KEMPER INVESTMENTS IN 1989, AND IS A VICE PRESIDENT.
HE IS ALSO A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE KEMPER INTERMEDIATE
GOVERNMENT TRUST. HE RECEIVED A BACHELOR'S DEGREE IN BUSINESS ADMINISTRATION
MAJORING IN FINANCE FROM NORTHEASTERN UNIVERSITY AND AN MS DEGREE IN FINANCE
FROM BOSTON COLLEGE.
JOHN DUGENSKE IS A VICE PRESIDENT OF SCUDDER KEMPER INVESTMENTS AND MEMBER OF
THE PORTFOLIO MANAGEMENT TEAM FOR KEMPER INTERMEDIATE GOVERNMENT TRUST. HE
RECEIVED A BACHELOR'S AND MASTERS DEGREE IN MECHANICAL ENGINEERING AS WELL AS
HIS M.B.A. FROM THE UNIVERSITY OF ILLINOIS.
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.
IN A VOLATILE YEAR FOR GOVERNMENT BONDS, THE FUND PERFORMED WELL VERSUS OTHER
CLOSED-END GOVERNMENT FUNDS. BELOW, THE MANAGERS DISCUSS THEIR STRATEGY FOR
MANEUVERING THROUGH THE CHOPPY BOND ENVIRONMENT.
Q GENTLEMEN, BEFORE WE DISCUSS THE GOVERNMENT BOND MARKET IN 1998 AND HOW
THE FUND WAS POSITIONED, COULD YOU PROVIDE A PERFORMANCE RECAP?
A Certainly. For 1998, the fund's total return was 7.80 percent, based on
net asset value. That result was well ahead of the 6.97 percent return
registered by the Lipper U.S. Government Closed-End Fund Average, but slightly
behind the Lehman Intermediate Government Bond Index return of 8.49 percent. We
performed slightly behind the intermediate government bond index but very well
versus our competition in the closed-end world.
Q IN THE FUND'S SEMIANNUAL REPORT DATED JUNE 30, 1998, YOU MENTIONED THAT
EVENTS IN OVERSEAS MARKETS TENDED TO DRIVE U.S. GOVERNMENT BOND PRICES DURING
THE FIRST HALF OF THE YEAR. DID THAT CONTINUE THROUGH THE REST OF 1998?
A Absolutely, although the forces tended to take a different form. Broadly,
during the first half of the year, uncertainty in foreign markets -- first in
Asia, then in Russia, prompted global investors to flock to "safe havens" --
i.e., U.S. Treasury bonds. The clamor for U.S. government bonds pushed prices up
and yields down, particularly on longer-term securities. But the euphoria was
tempered in the second half of the year, when international market turbulence
constricted the liquidity of government bond markets around the globe. Trading
became more and more difficult, leading to a market that was frozen in its
tracks, paralyzed by uncertainty. Fortunately, the Federal Reserve came to the
rescue with three interest rate cuts during the last quarter of 1998. Their
monetary easing broke the ice and helped the government bond market recover.
During the last quarter of 1998, the market became quite choppy as
investors tried to balance positive economic conditions in America and Europe
with negative events in Japan, Russia and Brazil. Overall, it was a positive
year for U.S. government bonds, but also a volatile one.
Q HOW DID YOU MANAGE THE FUND IN THESE CONDITIONS?
A As the year began, we had anticipated that the turbulence in international
markets would help boost the U.S. government market. So we lengthened the
duration of the fund to help it make the most of a potential rally, and we
weighted the portfolio in favor of Treasuries rather than mortgage-backed
securities. This strategy worked very well for the first few months of the year.
But as the months progressed, Treasuries began to look richer and richer, and
mortgages started to look like a better value. So at mid-year we began to shift
our weighting in favor of mortgages.
Q WHAT DID MORTGAGES OFFER?
A First, they normally pay a higher yield than Treasuries to compensate
investors for prepayment risk. In addition, following the massive rally by
Treasuries, they appeared to have much greater
<PAGE> 6
PERFORMANCE UPDATE
potential for capital appreciation. Based on our valuation models, mortgages
more than made up for their prepayment risk with their strong possibility for
total return. Of course, credit quality was not an issue because agency
mortgages (Ginnie Mae, Fannie Mae, Freddie Mac) have either direct or assumed
guarantees from the U.S. government. We maintained our long duration/mortgage
biased position through the end of the year.
Q HOW DID THAT STRATEGY WORK OUT?
A In hindsight, we appear to have been a bit early in our shift toward
mortgages. They underperformed Treasuries through most of the last half of the
year, since market uncertainty caused investors to favor only the very safest
and most liquid securities. However, our careful issue selection helped reduce
any negative impact during the latter half of the year, and recently mortgages
have begun to show more strength.
Q HOW SO?
A As we mentioned earlier, the Federal Reserve cut interest rates three
times in the last half of 1998. But these cuts were not due to a stalling
economy, which is the usual reason the Federal Reserve eases. Rather, the cuts
were intended to jump-start illiquid capital markets worldwide -- the U.S.
economy was rolling along well. So we think there's reason to suspect that the
cuts may fuel a stronger economy in 1999. If so, interest rates would likely
track sideways, or perhaps a bit higher. In such an environment, mortgage-backed
securities would be poised to perform very well compared to Treasuries. If we do
see a pickup in economic growth, we believe our carefully selected portfolio of
mortgage-backed issues could provide the fund with satisfying performance in the
year ahead.
We will, however, closely monitor world economic and liquidity conditions
and adjust our outlook as conditions dictate.
Year 2000
- --------------------------------------------------------------------------------
YEAR 2000 ISSUE
Like other registered investment companies and financial and business
organizations worldwide, the fund could be adversely affected if computer
systems on which the fund relies, which primarily include those used by the
investment manager, its affiliates or other service providers, are unable to
correctly process date-related information on and after January 1, 2000. This
risk is commonly called the Year 2000 Issue. Failure to successfully address the
Year 2000 Issue could result in interruptions to and other material adverse
effects on the fund's business and operations, such as problems with calculating
net asset value. The investment manager has commenced a review of the Year 2000
Issue as it may affect the fund and is taking steps it believes are reasonably
designed to address the Year 2000 Issue, although there can be no assurances
that these steps will be sufficient. In addition, there can be no assurances
that the Year 2000 Issue will not have an adverse effect on the issuers whose
securities are held by the fund or on global markets or economies generally.
6
<PAGE> 7
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 12/31/98 ON 12/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGES 60% 44%
- --------------------------------------------------------------------------------
LONG-TERM GOVERNMENTS -- 1
- --------------------------------------------------------------------------------
INTERMEDIATE-TERM GOVERNMENTS 35 41
- --------------------------------------------------------------------------------
SHORT-TERM TREASURIES AND CASH
EQUIVALENTS (ONE YEAR OR LESS) 5 14
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 12/31/98 ON 12/31/97
*Portfolio composition is subject to change.
AVERAGE MATURITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 12/31/98 ON 12/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 7.1 years 5.7 years
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
PORTFOLIO OF INVESTMENTS
KEMPER INTERMEDIATE GOVERNMENT TRUST
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
COUPON PRINCIPAL
U.S. GOVERNMENT OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GOVERNMENT NATIONAL Pass-through 6.50% 2013 $28,082 $ 28,613
MORTGAGE ASSOCIATION--34.1% certificates 7.00 2022-2028 41,092 42,055
(Cost: $90,381) 7.50 2027-2028 19,014 19,602
9.00 2016-2025 653 701
---------------------------------------------------------------------
90,971
- ------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY Notes 7.00 2006 13,100 14,912
SECURITIES--27.6% 6.625 2007 2,000 2,249
(Cost: $74,131) Bonds 8.75 2008 30,200 35,211
12.75 2010 14,575 21,170
---------------------------------------------------------------------
73,542
- ------------------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN Collateralized mortgage 6.25 2021 10,000 10,185
MORTGAGE CORPORATION--19.8% obligations 5.50 2028 7,217 7,323
(Cost: $51,362) Pass-through 6.00 2029 11,615 11,473
certificates
6.50 2028-2029 21,282 21,435
10.25 2016 2,218 2,443
---------------------------------------------------------------------
52,859
- ------------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL Collateralized mortgage 6.00 2019 6,811 6,868
MORTGAGE ASSOCIATION--13.4% obligations 6.25 2022 10,000 10,161
(Cost: $33,914) Notes 5.75 2008 18,000 18,628
---------------------------------------------------------------------
35,657
---------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS--94.9%
(Cost: $249,788) 253,029
---------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
MONEY MARKET Yield--5.14%
INSTRUMENT--11.1% Due--January 1999
(Cost: $29,745) Federal Home Loan Mortgage Corp. 29,800 29,749
---------------------------------------------------------------------
TOTAL INVESTMENTS--106%
(Cost: $279,533) 282,778
---------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS--(6.0)% (16,044)
---------------------------------------------------------------------
NET ASSETS--100% $266,734
---------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Based on the cost of investments of $279,533,000 for federal income tax purposes
at December 31, 1998, the gross unrealized appreciation was $3,888,000, the
gross unrealized depreciation was $643,000 and the net unrealized appreciation
on investments was $3,245,000.
See accompanying Notes to Financial Statements.
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, 1998, 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 1994.
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, 1998, 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
Intermediate Government Trust at December 31, 1998, 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 18, 1999
9
<PAGE> 10
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $279,533) $282,778
- ------------------------------------------------------------------------
Cash 917
- ------------------------------------------------------------------------
Receivable for:
Investments sold 13,708
- ------------------------------------------------------------------------
Interest 2,307
- ------------------------------------------------------------------------
TOTAL ASSETS 299,710
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Payable for:
Investments purchased 32,629
- ------------------------------------------------------------------------
Management fee 291
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 42
- ------------------------------------------------------------------------
Trustees' fees and other 14
- ------------------------------------------------------------------------
Total liabilities 32,976
- ------------------------------------------------------------------------
NET ASSETS $266,734
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $302,540
- ------------------------------------------------------------------------
Accumulated net realized loss on investments (39,051)
- ------------------------------------------------------------------------
Net unrealized appreciation on investments 3,245
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $266,734
- ------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, $.01 PAR VALUE
($266,734 / 33,996 shares outstanding) $7.85
- ------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
10
<PAGE> 11
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
NET INVESTMENT INCOME
- -----------------------------------------------------------------------
Interest income $20,207
- -----------------------------------------------------------------------
Expenses:
Management fee 2,135
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 128
- -----------------------------------------------------------------------
Professional fees 26
- -----------------------------------------------------------------------
Reports to shareholders 100
- -----------------------------------------------------------------------
Trustees' fees and other 29
- -----------------------------------------------------------------------
Total expenses 2,418
- -----------------------------------------------------------------------
NET INVESTMENT INCOME 17,789
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------
Net realized gain on sales of investments 1,435
- -----------------------------------------------------------------------
Net realized loss from futures transactions (143)
- -----------------------------------------------------------------------
Net realized gain 1,292
- -----------------------------------------------------------------------
Change in net unrealized appreciation on investments 832
- -----------------------------------------------------------------------
Net gain on investments 2,124
- -----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $19,913
- -----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
- ---------------------------------------------------------------------------------------------
OPERATIONS AND DIVIDENDS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 17,789 19,750
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) 1,292 (261)
- ---------------------------------------------------------------------------------------------
Change in net unrealized appreciation 832 1,479
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 19,913 20,968
- ---------------------------------------------------------------------------------------------
Distribution from net investment income (19,086) (19,974)
- ---------------------------------------------------------------------------------------------
Tax return of capital distribution (1,311) (2,294)
- ---------------------------------------------------------------------------------------------
Total distributions to shareholders (20,397) (22,268)
- ---------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (484) (1,300)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------
Beginning of year 267,218 268,518
- ---------------------------------------------------------------------------------------------
END OF YEAR $266,734 267,218
- ---------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES DESCRIPTION OF FUND. Kemper Intermediate Government
Trust is registered under the Investment Company
Act of 1940 as a diversified, closed-end management
investment company.
SECURITY VALUATION. Investments are stated at
value. Portfolio debt securities are valued by
pricing agents approved by the officers of the
fund, which quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. An exchange traded options
contract on securities, futures and other financial
instruments is valued at its most recent sale price
on such exchange. If no sales occurred, the options
contract is valued at the calculated mean between
the most recent bid and asked quotations. If there
are no such bid and asked quotations, the options
contract is valued at the most recent bid quotation
in the case of a purchased options contract, or the
most recent asked quotation in the case of a
written options contract. An options contract on
securities and other financial instruments traded
over-the-counter is valued at the most recent bid
quotation in the case of a purchased options
contract and at the most recent asked quotation in
the case of a written options contract. Futures
contracts are valued at the most recent settlement
price. All other securities are valued at their
fair value as determined in good faith by the
Valuation Committee of the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis and includes discount
amortization on fixed income 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, 1998, the fund had $21,122,000 in
purchase commitments outstanding (8% of net assets)
with a corresponding amount of assets segregated.
FEDERAL INCOME TAXES. The fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was required.
At December 31, 1998, the fund had a tax basis net
loss carryforward of approximately $38,420,000,
which may be applied against any realized net
taxable gains of each succeeding year until fully
utilized or it will expire during the period 2000
through 2004. In addition, from November 1, 1998
through December 31, 1998 the fund incurred
approximately $622,000 of net realized capital
losses. As permitted by tax regulations, the fund
intends to elect to defer these losses and treat
them as arising in the fiscal year ended December
31, 1999.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
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.
- --------------------------------------------------------------------------------
2 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of .80%
of average weekly net assets. The fund incurred a
management fee of $2,135,000 for the year ended
December 31, 1998.
ZURICH/B.A.T MERGER. On September 7, 1998, Zurich
Insurance Company (Zurich), majority owner of
Scudder Kemper, entered into an agreement with
B.A.T Industries p.l.c. (B.A.T) pursuant to which
the financial services businesses of B.A.T were
combined with Zurich's businesses to form a new
global insurance and financial services company
known as Zurich Financial Services. Upon
consummation of the transaction, the fund's
investment management agreement with Scudder Kemper
was deemed to have been assigned and, therefore,
terminated. The Board of Trustees of the fund has
approved a new investment management agreement with
Scudder Kemper, which is substantially identical to
the former investment management agreement, except
for the dates of execution and termination.
Shareholders approved the new investment management
agreement through a proxy solicitation that
concluded in mid-December.
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 $31,000
for the year ended December 31, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. For the year ended December 31,
1998, the fund made no payments to its officers and
incurred trustees' fees of $22,000 to independent
trustees.
- --------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the year ended December 31, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $1,139,197
Proceeds from sales 1,196,184
- --------------------------------------------------------------------------------
4 FINANCIAL FUTURES
CONTRACTS The fund has entered into exchange traded financial
futures contracts in order to take advantage of
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,
1998, the
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
market value of assets pledged by the fund to cover
margin requirements for open futures positions was
$394,000. The fund also had liquid assets in excess
of the face amount of open futures contracts. At
December 31, 1998, the following futures contracts
were owned by the fund.
<TABLE>
<CAPTION>
FACE EXPIRATION GAIN (LOSS)
TYPE AMOUNT POSITION MONTH AT 12/31/98
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Note $33,362,000 Long March '99 $ 82,000
-----------------------------------------------------------------------------------
Eurodollar 25,010,000 Long March '99 (68,000)
-----------------------------------------------------------------------------------
TOTAL $ 14,000
-----------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH
DECEMBER 31, ENDED YEAR ENDED NOVEMBER 30,
--------------- DECEMBER 31, ---------------------------
1998 1997 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $7.86 7.90 8.02 8.31 7.77 8.69
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .52 .58 .04 .61 .58 .63
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .07 .04 (.10) (.27) .56 (.87)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .59 .62 (.06) .34 1.14 (.24)
- -----------------------------------------------------------------------------------------------------------
Less distributions:
Distribution from net investment income .56 .59 .05 .62 .60 .68
- -----------------------------------------------------------------------------------------------------------
Tax return of capital distribution .04 .07 .01 .01 -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions .60 .66 .06 .63 .60 .68
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.85 7.86 7.90 8.02 8.31 7.77
- -----------------------------------------------------------------------------------------------------------
Market value, end of period $7.56 7.56 7.13 7.38 7.13 7.13
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Based on net asset value 7.80% 8.18 (.81) 4.38 15.20 (2.85)
- -----------------------------------------------------------------------------------------------------------
Based on market value 8.13% 15.76 (2.66) 12.73 8.50 (8.36)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Expenses .91% .95 .95 .91 .95 .94
- -----------------------------------------------------------------------------------------------------------
Net investment income 6.68% 7.44 6.74 7.61 7.28 7.68
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $266,734 267,218 268,518 272,757 282,479 264,063
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 422% 351 72 577 552 497
- -----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: 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.
15
<PAGE> 16
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
16
<PAGE> 17
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.
17
<PAGE> 18
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.
18
<PAGE> 19
SHAREHOLDERS' MEETING
ANNUAL SHAREHOLDERS' MEETING
An annual shareholders' meeting was held on October 22, 1998, for Kemper
Intermediate Government Trust. Shareholders were asked to vote on two separate
issues: election of eight members to the Board of Trustees and ratification of
Ernst & Young LLP as independent auditors. The following are the results for
each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
James E. Atkins 30,843,946 663,335
Arthur R. Gottschalk 30,972,024 535,257
Frederick T. Kelsey 30,988,195 519,087
Thomas W. Littauer 30,856,211 651,071
Daniel Pierce 30,854,363 652,919
Fred B. Renwick 30,841,798 665,483
John B. Tingleff 31,005,850 501,431
John G. Weithers 30,999,899 507,382
</TABLE>
SPECIAL SHAREHOLDERS' MEETING
A special shareholders' meeting was held on December 17, 1998, for Kemper
Intermediate Government Trust. Shareholders were asked to vote on one issue:
approval of the new Investment Management Agreement between the fund and Scudder
Kemper Investments, Inc. The following are the results for this issue:
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
28,102,045 266,581 573,827
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
30,965,150 193,054 349,064
</TABLE>
19
<PAGE> 20
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY LINDA J. WONDRACK
Chairman and Trustee President Vice President
JAMES E. AKINS PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President and Assistant Secretary
Secretary
ARTHUR R. GOTTSCHALK CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
FREDERICK T. KELSEY ELIZABETH C. WERTH
Trustee ANN M. MCCREARY Assistant Secretary
Vice President
THOMAS W. LITTAUER BRENDA LYONS
Trustee and Vice President ROBERT C. PECK, JR. Assistant Treasurer
Vice President
FRED B. RENWICK
Trustee KATHRYN L. QUIRK
Vice President
JOHN B. TINGLEFF
Trustee RICHARD L. VANDENBERG
Vice President
JOHN G. WEITHERS
Trustee
- --------------------------------------------------------------------------------
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 Avenue
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INDEPENDENT ERNST & YOUNG LLP
AUDITORS 233 South Wacker Drive
Chicago, IL 60606
KEMPER FUNDS LOGO
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
KIGT - (2/23/99) 1066850
