<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1999
KEMPER INTERMEDIATE
GOVERNMENT TRUST
"... When it becomes clear that inflation remains
tame, we think bond prices should
show renewed vigor. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
7
PORTFOLIO STATISTICS
8
PORTFOLIO OF INVESTMENTS
10
FINANCIAL STATEMENTS
13
FINANCIAL HIGHLIGHTS
14
NOTES TO FINANCIAL STATEMENTS
17
REPORT OF INDEPENDENT AUDITORS
18
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
21
SHAREHOLDERS' MEETING
AT A GLANCE
TOTAL RETURNS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
.........................................................
BASED ON NAV -1.29%
.........................................................
BASED ON MARKET PRICE -7.61%
.........................................................
</TABLE>
NET ASSET VALUE AND MARKET PRICE
<TABLE>
<CAPTION>
AS OF AS OF
12/31/99 12/31/98
.........................................................
<S> <C> <C>
NET ASSET VALUE $7.14 $7.85
.........................................................
MARKET PRICE $6.44 $7.56
.........................................................
</TABLE>
DISTRIBUTION REVIEW
THE FOLLOWING TABLE SHOWS PER SHARE DISTRIBUTION INFORMATION FOR THE FUND AS OF
DECEMBER 31, 1999.
<TABLE>
<CAPTION>
KEMPER
INTERMEDIATE
GOVERNMENT
TRUST
......................................................
<S> <C>
ONE-YEAR DISTRIBUTION: $0.5750
......................................................
DECEMBER DISTRIBUTION: $0.0450
......................................................
ANNUALIZED DISTRIBUTION RATE
(BASED ON NET ASSET VALUE) 7.56%
......................................................
ANNUALIZED DISTRIBUTION RATE
(BASED ON MARKET VALUE) 8.39%
......................................................
</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. MARKET PRICE,
DISTRIBUTION RATES, NET ASSET VALUE AND RETURNS ARE HISTORICAL AND WILL
FLUCTUATE AND DO NOT GUARANTEE FUTURE RESULTS. ADDITIONAL INFORMATION CONCERNING
PERFORMANCE IS CONTAINED IN THE FINANCIAL HIGHLIGHTS APPEARING AT THE END OF
THIS REPORT.
TERMS TO KNOW
BASIS POINT. The movement of interest rates or yields expressed in hundredths of
a percent. For example, an increase in yield from 5.00% to 5.50% is 50 basis
points.
DURATION. A measure, in years, of the interest-rate sensitivity of a portfolio,
incorporating time-to-maturity and coupon size. The longer a portfolio's
duration, the greater its sensitivity to interest-rate changes.
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
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 $290 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR KEMPER FUNDS SHAREHOLDER:
The end of the metaphorical millennium, it turns out, was not a disaster.
Instead, it was an excuse to party. And why not? As our technological revolution
gained critical mass, its vast potential came into better focus. Capital
spending on information technology didn't slow down; it accelerated. Inflation
remained dormant. The budget surplus nearly doubled, with the promise of oceans
of black ink yet to come. Even the government delivered good news: Its
statisticians toyed with the national accounts to reveal a more productive
economy. It's no wonder the prevailing sentiment could be summed up with the
quintessentially American yelp of glee: Yahoo!
With the potential Y2K crisis seemingly averted, the main question hanging
over the economy has been whether the Federal Reserve Board would boost interest
rates to soak up extra liquidity caused by its pre-Y2K infusion of cash into the
economy. The Fed began that process on Feb. 2. Fearing that "increases in
demand" would foster "inflationary imbalances," they raised interest rates by a
quarter of a percentage point (0.25%).
Although some investors have expressed fear that the Fed's sucking cash out of
banks will jolt the financial system, we're more likely to see a slow winding
down, thanks to persistent low inflation. Yes, some prices are higher: Filling
up the SUV's gas tank definitely costs more. But the rate of inflation for
non-energy goods and services has actually slowed during the past year. Although
most analysts are worried that the reprieve won't last -- assuming that higher
commodity prices, a softer dollar and the scarcity of skilled workers will show
up as higher prices at the checkout counter -- we'd turn that worry on its head.
If inflation hasn't accelerated after three years of over 4-percent gross
domestic product (GDP) growth and an unprecedented credit explosion, prices
aren't likely to increase if growth slows and lenders get stingier.
More good news stems from the technological investment boom. While executives
have pared capital budgets in traditional areas such as industrial machinery and
buildings, they've boosted outlays on computers and software. Thanks to the
sheer force of technology spending, overall business investment has grown two to
four times as fast as GDP in every year since 1993. And that expansion should
continue, with more than 20 percent growth likely in high-tech through 2000 and
even beyond. And technology hurts inflation. It saves on labor and inventory,
increases capacity, creates new competitors, cuts out middlemen, gives shoppers
comparative price information and enables global auctions.
Our outlook is for inflation to stay centered around 2 percent, and we expect
a gentle slowing of growth from 4 percent in 1999 to around 3.5 percent in 2000
and just under 2.5 percent in 2001.
Despite this positive outlook, pre-Y2K fears were sufficient to show many
investors that risks exist in today's markets and remind them that they could be
in for a serious hangover.
The prospect of sparkling growth with no inflation has excited equity
investors, but there's a catch: declining corporate pricing power. If companies
don't have the ability to increase prices, profit growth will decline -- and
it's already happening. For the five years ending in June 1999, S&P 500
operating earnings averaged 9 percent, two and a half percentage points per year
slower than analysts had predicted. Profits did recover strongly in the second
half of 1999, but we suspect that they will soon sputter again. And the
economy's newfound productivity won't change the rules and allow companies to
make money even if they can't raise prices. Productivity gains do produce a
windfall, but historically customers and employees have grabbed the lion's
share. Web sites and dot.coms haven't changed this one iota. As a result, we
expect profits to be virtually flat in all of 2000 and to decline as the economy
slows in 2001.
Debt is another drink that could bring on future headaches. America has been
swigging it in prodigious amounts. Companies have borrowed heavily to fund
mergers, share buybacks and new investments. Homeowners have increased their
debt with new home equity loans and bigger mortgages. Financial institutions
have issued record amounts of new paper to fund aggressive growth. There's no
hard and fast rule for determining if the debt America is taking on is too much,
but warning bells should sound when debt grows by orders of magnitude faster
than necessary to fund economic activity. That happened in 1985 and 1986, when
excess credit created a commercial real estate bubble and funded dubious
leveraged buyouts with suspect
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 (1/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.70 5.80 4.70 5.50
Prime rate (2) 8.50 7.75 7.75 8.50
Inflation rate (3)* 2.70 2.00 1.60 1.70
The U.S. dollar (4) 1.50 -2.2 -4.2 9.40
Capital goods orders (5)* 18.30 -0.2 10.60 6.50
Industrial production (5)* 5.00 3.90 2.40 6.70
Employment growth (6)* 2.30 2.40 2.20 2.80
</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 12/31/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
junk bonds, and it's happening again now. Both the commercial real estate and
the high yield markets took years to recover. Today, the sheer size of the
excesses could make the "morning after" even more painful.
The end result: Given the continuing thrust of growth from the technological
revolution, an improving world economy and the Fed's experience and skill, 2000
could turn out to be a good year. But it's highly unlikely to be as good a year
as 1999.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
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 THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF FEB. 2, 2000, AND MAY NOT ACTUALLY COME TO PASS. THIS
INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS AN
INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[VANDENBERG PHOTO]
RICHARD VANDENBERG IS LEAD PORTFOLIO MANAGER OF KEMPER INTERMEDIATE GOVERNMENT
TRUST. HE JOINED SCUDDER KEMPER INVESTMENTS, INC. IN MARCH 1996 AND IS A
MANAGING DIRECTOR. HE HAS 25 YEARS OF FIXED-INCOME PORTFOLIO MANAGEMENT
EXPERIENCE.
[DUGENSKE PHOTO]
JOHN DUGENSKE IS A PORTFOLIO MANAGER FOR KEMPER INTERMEDIATE GOVERNMENT TRUST.
HE IS A VICE PRESIDENT OF SCUDDER KEMPER INVESTMENTS, INC. JOINING THE FIRM IN
1998.
[DOLAN PHOTO]
SCOTT DOLAN IS A PORTFOLIO MANAGER FOR KEMPER INTERMEDIATE GOVERNMENT TRUST. HE
JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1989 AND IS A VICE PRESIDENT.
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.
THE KEMPER INTERMEDIATE GOVERNMENT TRUST'S MANAGEMENT TEAM SOUGHT TO PRESERVE
CAPITAL AND INCREASE THE FUND'S INCOME-GENERATING POTENTIAL DURING LAST YEAR'S
DIFFICULT BOND MARKET. BELOW, THEY DISCUSS HOW A FOCUS ON MORTGAGES AND
SHORT-TERM SECURITIES HELPED THE FUND AVOID SUBSTANTIAL LOSSES.
Q HOW DID THE GOVERNMENT BOND MARKET PERFORM IN 1999?
A It was the worst calendar year for bond prices since 1994. Fear of
inflation drove the market down and outweighed positive trends such as
Washington's ability to post budget surpluses. Short-term bonds outperformed
intermediate and long-term bonds. Mortgages outperformed Treasuries, especially
during the second half of the year. Still, most high-quality bonds failed to
earn their coupons. For the 12 months ended December 31, 1999, the Lehman
Brothers Intermediate Government Bond Index* provided a 0.49 percent total
return while the Lehman Brothers Long Government Bond Index* returned -8.73
percent. By comparison, the total return of the fund was -1.29 percent (based on
NAV) with dividends reinvested.
In the spring of 1999, investors began to worry that a recovery in overseas
economies coupled with strong U.S. growth would lead to a spike in global
consumer and commodity prices. Oil prices rose sharply. In June, the Federal
Reserve Board began to increase its short-term interest rate target. By year's
end, the Fed raised rates 75 basis points (0.75%) (see Terms to Know on page 2)
erasing its 75-basis-point easing in 1998. The market acted stronger than the
Fed, pushing 30-year U.S. Treasury bond yields up nearly 140 basis points to
6.48 percent.
* THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX IS A TOTAL RETURN INDEX
CONSIDERED GENERALLY REPRESENTATIVE OF THE MARKET FOR GOVERNMENT BONDS WITH
MATURITIES OF TWO TO 10 YEARS. THE LEHMAN BROTHERS LONG GOVERNMENT BOND INDEX
IS A TOTAL RETURN INDEX CONSIDERED GENERALLY REPRESENTATIVE OF THE MARKET FOR
GOVERNMENT BONDS WITH MATURITIES OF 10 YEARS OR MORE. INVESTORS CANNOT
ACTUALLY INVEST IN THE INDICES.
Q HOW DID YOU POSITION KEMPER INTERMEDIATE GOVERNMENT TRUST?
A During the first half, we reduced the portfolio's average maturity by a
full year. This served us well in the second half as bond prices fell. As
spreads widened in the summer, we selectively added mortgage-backed securities.
As of year's end, mortgage-backed securities represented the largest component
of the portfolio.
Q PRICES OF INTERMEDIATE GOVERNMENT BONDS HAVE HISTORICALLY HAD LESS
FLUCTUATION WHILE PROVIDING MOST OF THE INCOME POTENTIAL OF LONG-TERM BONDS. WAS
THIS THE CASE IN 1999?
A Definitely yes. The yield curve is flat. At year's end, the income
potential available from five-year Treasuries was close to that of 30-year
Treasuries. In addition, with a market yield of 8.93 percent as of December 31,
1999, the fund provided more income potential than the Lehman Brothers Long
Government Index, whose yield was 6.82 percent as of year's end. Since the fund
is closed-end, the yield realized by investors during the year fluctuates. It
also depends on the purchase price of shares plus transaction costs.
5
<PAGE> 6
PERFORMANCE UPDATE
Q IN 1994, 30-YEAR TREASURY BOND YIELDS REACHED 8 PERCENT. DO YOU THINK THAT
WILL HAPPEN AGAIN?
A We doubt the Fed and the market will allow that to happen. Inflation has
remained less than 3% and prices are rising at a lower rate than five years ago.
The federal government is posting budget surpluses, unlike in 1994. A low
unemployment rate and election-year uncertainties may lead to somewhat higher
yields this year. Overall, however, the long-term fiscal and monetary trends
that have enabled bond prices to rise during much of the 1990s are still in
place. In our view, the most likely outcome of this fall's general elections
appears to be more divided government, and this bodes well for restraint on
spending and tax cuts, potentially benefiting government bond prices. We see
Alan Greenspan's nomination to a fourth term as chairman of the Federal Reserve
Board as an encouraging sign that inflation is likely to be kept in check
regardless of who controls Congress or the White House.
While the future can't be predicted with certainty and past performance can
not guarantee future results, long-term investors may recall that after bond
yields peaked in late 1994, the ensuing year offered robust bond market returns
as inflation fears dissipated. In fiscal 1995, the fund returned 15.20 percent.
Q HOW HAVE YOU POSITIONED THE FUND FOR THE COMING MONTHS?
A We are maintaining a slightly short duration (see Terms To Know on page 2)
because we anticipate higher rates in the months ahead. We also remain
overweighted in mortgage-backed securities. In our view, government statistics
are likely to show strong consumer spending growth in the fourth quarter of 1999
amid Y2K-related stockpiling and a strong Christmas sales season.
In the 1990s, the bond market clearly demonstrated that the prices of
fixed-income securities can be volatile in the short run. However, the net
result for the decade was that rates fell more years than they rose, boosting
prices and returns for investors who stayed the course. As we enter the first
decade of the new millennium, it is important to note that interest rates,
adjusting for inflation, appear to be high by historical standards. As of
December 31, 1999, with a yield of 6.44 percent, a 10-year Treasury note
provided a more than 365-basis-point "real yield" advantage over the U.S.
Consumer Price Index*, which rose 2.75 percent. When it becomes clear that
inflation remains tame, we think bond prices should show renewed vigor.
* THE U.S. CONSUMER PRICE INDEX IS A STATISTICAL MEASURE OF CHANGE, OVER TIME,
IN THE PRICES OF GOODS AND SERVICES IN MAJOR EXPENDITURE GROUPS FOR ALL URBAN
CONSUMERS. INVESTORS CANNOT INVEST IN THE INDEX.
6
<PAGE> 7
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
ON 12/31/99 ON 12/31/98
<S> <C> <C>
MORTGAGES 31% 60%
- --------------------------------------------------------------------------------
U.S. TREASURIES 23 --
- --------------------------------------------------------------------------------
U.S. GOVERNMENTS 26 35
- --------------------------------------------------------------------------------
SHORT-TERM GOVERNMENTS 10 --
- --------------------------------------------------------------------------------
CASH EQUIVALENTS (ONE YEAR OR LESS) 10 5
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 12/31/99 ON 12/31/98
AVERAGE MATURITY
<TABLE>
<CAPTION>
ON 12/31/99 ON 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE MATURITY 7.0 years 7.1 years
- --------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
7
<PAGE> 8
PORTFOLIO OF INVESTMENTS
KEMPER INTERMEDIATE GOVERNMENT TRUST
Portfolio of Investments at December 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--9.7% Merrill Lynch Inc., dated 10/17/1999, 5.950%, to be
repurchased at $25,100 on 01/10/2000 (b) $25,000 $ 25,000
State Street Bank and Trust Company, dated
12/31/1999, 2.80%, to be repurchased at $322 on
01/03/2000 (b) 322 322
-------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost: $25,322) 25,322
-------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS--10.3% Federal Home Loan Mortgage Corp. 1.50%, 01/03/2000 7,000 6,999
Federal Home Loan Mortgage Corp. 4.50%, 01/05/2000 20,000 19,990
-------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS
(Cost: $26,989) 26,989
-------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--23.3% U.S. Treasury Bond, 6.00%, 02/15/2026 1,700 1,556
U.S. Treasury Bond, 12.00%, 08/15/2013 44,500 59,421
-------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost: $62,138) 60,977
-------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE Government National Mortgage Association Pass-thru
ASSOCIATION--13.7% 7.00% with various maturities to 05/15/2029 20,978 20,292
Government National Mortgage Association Pass-thru
7.50% with various maturities to 10/15/2029 15,341 15,175
Government National Mortgage Association Pass-thru
9.00% with various maturities to 02/15/2025 355 373
-------------------------------------------------------------------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(Cost: $36,251) 35,840
-------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENT AGENCY Federal Home Loan Mortgage Corp. 5.75%, 03/15/2009 10,800 9,865
OBLIGATIONS--12.5% Federal Home Loan Mortgage Corp. 9.00%, with
various maturities to 08/15/2021 29 30
Federal Home Loan Mortgage Corp. 10.25%, with
various maturities to 07/01/2016 1,596 1,700
Federal National Mortgage Association 7.50%,
01/01/2029 (c) 21,400 21,166
-------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY PASS-THRUS
(Cost: $33,245) 32,761
-------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE Fannie Mae, Series 1998-58 PW, 5.50%, 02/25/2021 13,150 12,665
OBLIGATIONS--30.5% Fannie Mae, Series 1998-49 PE, 6.00%, 01/20/2019 6,811 6,585
Fannie Mae, Series 1994-30 H, 6.25%, 11/25/2022 10,000 9,616
Fannie Mae, Series 1999-54 PB, 6.50%, 04/1/2001 18,411 18,215
Fannie Mae, Series G94-10 PD, 6.50%, 09/17/2009 15,601 14,884
Freddie Mac, Series 2198 PA, 6.75%, 08/15/2016 2,000 1,989
Freddie Mac, Series 2093 VA, 6.00%, 07/15/2004 6,094 5,963
Freddie Mac, Series 1666 G, 6.25%, 12/15/2021 10,000 9,706
-------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost: $78,631) 79,623
-------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost $262,576)(a) $261,512
-------------------------------------------------------------------------
</TABLE>
8 The accompanying notes are an integral part of the financial statements.
<PAGE> 9
PORTFOLIO OF INVESTMENTS
NOTE TO PORTFOLIO OF INVESTMENTS
(a) The cost for federal income tax purposes was $262,576. At December 31, 1999,
the net unrealized depreciation for all securities based on tax cost was
$1,064. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$2,173 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $3,237.
(b) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(c) When-issued or forward delivery pools included.
The accompanying notes are an integral part of the financial statements. 9
<PAGE> 10
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments in securities, at value (cost $262,576) $261,512
- ------------------------------------------------------------------------
Cash 12
- ------------------------------------------------------------------------
Interest receivable 3,052
- ------------------------------------------------------------------------
Other assets 11
- ------------------------------------------------------------------------
TOTAL ASSETS 264,587
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------
Payable for investments purchased 21,454
- ------------------------------------------------------------------------
Accrued management fee 266
- ------------------------------------------------------------------------
Other accrued expenses 162
- ------------------------------------------------------------------------
Total liabilities 21,882
- ------------------------------------------------------------------------
NET ASSETS, AT VALUE $242,705
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------
Net assets consist of:
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
securities $ (1,064)
- ------------------------------------------------------------------------
Accumulated net realized gain (loss) (53,505)
- ------------------------------------------------------------------------
Paid-in capital 297,274
- ------------------------------------------------------------------------
NET ASSETS, AT VALUE $242,705
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSET VALUE
- ------------------------------------------------------------------------
Net asset value per share ($242,705 / 33,996 shares of
capital stock outstanding, $.01 par value, unlimited
number of shares authorized) $7.14
- ------------------------------------------------------------------------
</TABLE>
10 The accompanying notes are an integral part of the financial statements.
<PAGE> 11
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------
Interest $ 16,758
- ------------------------------------------------------------------------
Expenses:
Management fee 2,016
- ------------------------------------------------------------------------
Services to shareholders 79
- ------------------------------------------------------------------------
Custodian fees 30
- ------------------------------------------------------------------------
Auditing 59
- ------------------------------------------------------------------------
Legal 17
- ------------------------------------------------------------------------
Trustees' fees and expenses 21
- ------------------------------------------------------------------------
Reports to shareholders 135
- ------------------------------------------------------------------------
Other 126
- ------------------------------------------------------------------------
Total expenses, before expense reductions 2,483
- ------------------------------------------------------------------------
Expense reductions (3)
- ------------------------------------------------------------------------
Total expenses, after expense reductions 2,480
- ------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 14,278
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- ------------------------------------------------------------------------
Net realized gain (loss) from:
Investments (13,166)
- ------------------------------------------------------------------------
Futures (1,284)
- ------------------------------------------------------------------------
(14,450)
- ------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on investments (4,309)
- ------------------------------------------------------------------------
Net gain (loss) on investment transactions (18,759)
- ------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ (4,481)
- ------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1999 1998
<S> <C> <C>
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
- --------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ 14,278 $ 17,789
- --------------------------------------------------------------------------------------------
Net realized gain (loss) (14,450) 1,292
- --------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period (4,309) 832
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (4,481) 19,913
- --------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (14,281) (19,086)
- --------------------------------------------------------------------------------------------
Tax return of capital (5,267) (1,311)
- --------------------------------------------------------------------------------------------
Increase (decrease) in net assets (23,916) (484)
- --------------------------------------------------------------------------------------------
Net assets at beginning of period 266,734 267,218
- --------------------------------------------------------------------------------------------
Net assets at end of period $242,705 $266,734
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------------------
Shares outstanding at beginning of period 33,996 33,996
- --------------------------------------------------------------------------------------------
Shares issued to shareholders in reinvestment of dividends -- --
- --------------------------------------------------------------------------------------------
Net increase in Fund shares -- --
- --------------------------------------------------------------------------------------------
Shares outstanding at end of period 33,996 33,996
- --------------------------------------------------------------------------------------------
</TABLE>
12 The accompanying notes are an integral part of the financial statements.
<PAGE> 13
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLES INCLUDE SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
ONE MONTH
ENDED YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, NOVEMBER 30,
---------------------------- ------------ ---------------------
1999 1998 1997 1996 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $7.85 7.86 7.90 8.02 8.31 7.77
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .42(a) .52 .58 .04 .61 .58
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.55) .07 .04 (.10) (.27) .56
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations (.13) .59 .62 (.06) .34 1.14
- --------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.43) (.56) (.59) (.05) (.62) (.60)
- --------------------------------------------------------------------------------------------------------------------
Tax return of capital (.15) (.04) (.07) (.01) (.01) --
- --------------------------------------------------------------------------------------------------------------------
Total distributions (.58) (.60) (.66) (.06) (.63) (.60)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.14 7.85 7.86 7.90 8.02 8.31
- --------------------------------------------------------------------------------------------------------------------
Market value, end of year $6.44 7.56 7.56 7.13 7.38 7.13
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN
- --------------------------------------------------------------------------------------------------------------------
Based on net asset value (%) (1.29) 7.80 8.18 (.81)** 4.38 15.20
- --------------------------------------------------------------------------------------------------------------------
Based on market value (%) (7.61) 8.13 15.76 (2.66)** 12.73 8.50
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 242,705 266,734 267,218 268,518 272,757 282,479
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .98 .91 .95 .95* .91 .95
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .98 .91 .95 .95* .91 .95
- --------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 5.64 6.68 7.44 6.74* 7.61 7.28
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 821 422 351 72* 577 552
- --------------------------------------------------------------------------------------------------------------------
</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 reinvestments 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.
* Annualized
** Not annualized
(a) Based on monthly average shares outstanding during the period.
The accompanying notes are an integral part of the financial statements. 13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1
SIGNIFICANT
ACCOUNTING POLICIES Kemper Intermediate Government Trust (the "Fund")
is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a closed-
end, diversified management investment company
organized as a Massachusetts business trust.
The Fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. Securities which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Fund, whose 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. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost. All other
securities are valued at their fair value as
determined in good faith by the Valuation Committee
of the Board of Trustees.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the Fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
FUTURES CONTRACTS. A futures contract is an
agreement between a buyer or seller and an
established futures exchange or its clearinghouse
in which the buyer or seller agrees to take or make
a delivery of a specific amount of a financial
instrument at a specified price on a specific date
(settlement date). During the period, the Fund
purchased interest rate and securities index to
manage the duration of the portfolio as a temporary
substitute for purchasing selected investments and
to lock in the purchase price of a security which
it expects to purchase in the near future. In
addition, the Fund also sold interest rate and
securities index to hedge against declines in the
value of portfolio securities and as a temporary
substitute for selling selected investments.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
Upon entering into a futures contract, the Fund is
required to deposit with a financial intermediary
an amount ("initial margin") equal to a certain
percentage of the face value indicated in the
futures contract. Subsequent payments ("variation
margin") are made or received by the Fund dependent
upon the daily fluctuations in the value of the
underlying security and are recorded for financial
reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction,
the Fund will realize a gain or loss equal to the
difference between the value of the futures
contract to sell and the futures contract to buy.
Futures contracts are valued at the most recent
settlement price.
Certain risks may arise upon entering into futures
contracts, including the risk that an illiquid
secondary market will limit the Fund's ability to
close out a futures contract prior to the
settlement date and that a change in the value of a
futures contract may not correlate exactly with the
changes in the value of the securities or
currencies hedged. When utilizing futures contracts
to hedge, the Fund gives up the opportunity to
profit from favorable price movements in the hedged
positions during the term of the contract.
WHEN ISSUED/DELAYED DELIVERY SECURITIES. The Fund
may purchase securities with delivery or payment to
occur at a later date beyond the normal settlement
period. 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 at least equal to the amount of
the commitment.
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.
In addition, from November 1, 1999 through December
31, 1999 the Fund incurred approximately $2,881,000
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, 2000.
As of December 31, 1999 the Fund had a net tax
basis capital loss carryforward of approximately
$50,624,000 which may be applied against any
realized net taxable capital gains of each
succeeding year until fully utilized or until
December 31, 2000 ($8,431,000), December 31, 2001
($23,615,000), December 31, 2004 ($6,375,000), and
December 31, 2007 ($12,203,000), the respective
expiration dates, whichever occurs first.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made monthly.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
Accordingly, the Fund may periodically make
reclassifications among certain of its capital
accounts without impacting the net asset value of
the Fund.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. Interest income is recorded on the
accrual basis. Realized gains and losses from
investment transactions are recorded on an
identified cost basis. All discounts are accreted
for both tax and financial reporting purposes.
- --------------------------------------------------------------------------------
2
PURCHASES & SALES
OF SECURITIES For the year ended December 31, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $1,990,608
Proceeds from sales 2,016,873
- --------------------------------------------------------------------------------
3
TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper). The Fund pays a monthly
investment management fee of 1/12 if the annual
rate of .80% of average weekly net assets. The Fund
incurred a management fee of $2,016,000 for the
year ended December 31, 1999.
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 $28,000
for the year ended December 31, 1999 of which
$4,000 was unpaid at December 31, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. For the year ended December 31,
1999, the fund made no payments to its officers and
incurred trustees' fees of $21,000 to independent
trustees.
- --------------------------------------------------------------------------------
4
EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into arrangements with its
custodian whereby credits realized as a result of
uninvested cash balances were used to reduce a
portion of the Fund's expenses. During the period,
the Fund's custodian and transfer agent fees were
reduced by $1,000 and $2,000, respectively under
these arrangements.
- --------------------------------------------------------------------------------
5
LINE OF CREDIT The Fund and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemption
request that otherwise might require the untimely
disposition of securities. The Participants are
charged an annual commitment fee which is allocated
pro rata among each of the Participants. Interest
is calculated based on the market rates at the time
of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the
agreement.
16
<PAGE> 17
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, 1999, 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 1995.
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 auditing standards generally
accepted in the United States. 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, 1999, 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, 1999, the results of its
operations, for the year then ended, the changes in its net assets for each of
the two years then ended and the financial highlights for each of the periods
since 1995 in conformity with accounting principles generally accepted in the
United States.
ERNST & YOUNG LLP
Chicago, Illinois
February 15, 2000
17
<PAGE> 18
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 219066
Kansas City, Missouri 64121-6066
1-800-294-4366
18
<PAGE> 19
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
5
VOLUNTARY CASH
CONTRIBUTIONS A participant may from time to time make voluntary
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
PURCHASE PRICE The fund will increase the price at which Shares
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
PURCHASE PRICE The cost of Shares and fractional Shares acquired
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.
19
<PAGE> 20
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.
20
<PAGE> 21
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On July 14, 1999, a special shareholders' meeting was held. Kemper Intermediate
Government Trust shareholders were asked to vote on two separate issues:
election of 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. Akins 29,449,842 439,746
James R. Edgar 29,481,052 408,536
Arthur R. Gottschalk 29,500,781 388,807
Frederick T. Kelsey 29,545,345 344,243
Thomas W. Littauer 29,562,858 326,730
Fred B. Renwick 29,552,990 336,598
John G. Weithers 29,584,345 305,243
</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>
29,539,737 102,898 246,952
</TABLE>
21
<PAGE> 22
NOTES
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JAMES E. AKINS MARK S. CASADY LINDA J. WONDRACK
Trustee President Vice President
JAMES R. EDGAR 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 BRENDA LYONS
Trustee ANN M. MCCREARY Assistant Treasurer
Vice President
THOMAS W. LITTAUER
Trustee and Vice President ROBERT C. PECK, JR.
Vice President
FRED B. RENWICK
Trustee KATHRYN L. QUIRK
Vice President
JOHN G. WEITHERS
Trustee RICHARD L. VANDENBERG
Vice President
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219066
Kansas City, MO 64121-9066
.............................................................................................
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02109
.............................................................................................
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
.............................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
</TABLE>
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
KIGT - 2 (2/23/00) 1102930
