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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998
REGISTRATION STATEMENT 333-35159
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
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A. Exact name of Trust: KILICO VARIABLE SEPARATE ACCOUNT-2
B. Name of depositor: KEMPER INVESTORS LIFE INSURANCE COMPANY
C. Complete address of depositor's principal executive offices:
1 Kemper Drive
Long Grove, Illinois 60049
D. Name and complete address of agent for service:
DEBRA P. REZABEK, ESQ.
Kemper Investors Life Insurance Company
1 Kemper Drive
Long Grove, Illinois 60049
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COPIES TO:
KURT W. BERNLOHR, ESQ. JOAN E. BOROS, ESQ.
Kemper Investors Life Insurance Company Jorden Burt Boros
1 Kemper Drive Cicchetti Berenson & Johnson
Long Grove, Illinois 60049 1025 Thomas Jefferson Street, N.W.
Suite 400 E
Washington, D.C. 20007
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It is proposed that this filing will become effective (check appropriate
box)
[ ] Immediately upon filing pursuant to paragraph (b), or
[ ] 60 days after filing pursuant to paragraph (a)(1), or
[X] on May 1, 1998 pursuant to paragraph (b), or
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
E. Title of securities being registered:
Units of Interests in the Separate Account under
Flexible Premium Variable Life Insurance Policies
(Individual Life and Survivorship).
F. Approximate date of proposed public offering:
Continuous.
[ ] Check box if it is proposed that this filing will become effective on
(date) at (time) pursuant to Rule 487.
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PROSPECTUS--MAY 1, 1998
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FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
(INDIVIDUAL LIFE AND SURVIVORSHIP)
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ISSUED BY
KEMPER INVESTORS LIFE INSURANCE COMPANY
THROUGH ITS KILICO VARIABLE SEPARATE ACCOUNT-2
HOME OFFICE: 1 KEMPER DRIVE, LONG GROVE, ILLINOIS 60049 (847) 550-5500
This Prospectus describes variable life insurance policies (the "Policy" or
"Policies") offered by Kemper Investors Life Insurance Company ("KILICO") which
provide insurance coverage on either the life of one Insured ("Individual
Policy") or two Insureds ("Survivorship Policy"). The Survivorship Policy
provides life insurance with the Death Benefit payable on the second death as
long as the Policy is in force. Premiums under the Policy are flexible, subject
to certain restrictions. The Death Benefit and Cash Value of the Policy may vary
to reflect the investment experience of the KILICO Variable Separate Account-2
(the "Separate Account").
An Owner may allocate premiums under a Policy to one or more of the
Subaccounts of the Separate Account and the Fixed Account. Each Subaccount
invests in shares of one portfolio of an underlying mutual fund. The underlying
mutual funds and the portfolios of the underlying mutual funds (the
"Portfolios") currently available under the Policy are: (a) Investors Fund
Series (portfolios--Kemper Money Market, Kemper Total Return, Kemper High Yield,
Kemper Growth, Kemper Government Securities, Kemper International, Kemper Small
Cap Growth, Kemper Investment Grade Bond, Kemper Contrarian Value (formerly
Kemper Value), Kemper Small Cap Value, Kemper Value+Growth, Kemper Horizon 20+,
Kemper Horizon 10+, and Kemper Horizon 5 (each, a "Kemper Horizon Portfolio" and
collectively, the "Kemper Horizon Portfolios"), Kemper Blue Chip, and Kemper
Global Income); and (b) Evergreen Variable Annuity Trust (portfolios--Evergreen
VA, Evergreen VA Growth and Income, Evergreen VA Foundation, Evergreen VA Global
Leaders, Evergreen VA Strategic Income, and Evergreen VA Aggressive Growth). The
accompanying prospectuses for the Funds describe the investment objectives and
the attendant risks of the Portfolios. The Cash Value in the Fixed Account will
accrue interest at a rate that is guaranteed by KILICO.
The Policy meets the definition of "life insurance" under Section 7702 of
the Internal Revenue Code. The Policy may be issued as or become a modified
endowment contract under Section 7702A of the Internal Revenue Code. For a
Policy treated as a modified endowment contract, certain distributions will be
includable in gross income for Federal income tax purposes. See "Federal Tax
Matters" for a discussion of laws that affect the tax treatment of the Policy.
The Owner will make two elections to determine the Death Benefit under the
Policy. First, the Owner will choose one of two Death Benefit options offered
under the Policy. In general, under Death Benefit Option A, the Death Benefit is
the Specified Amount stated in the Policy Specifications. Under Option B, the
Death Benefit is the Specified Amount stated in the Policy Specifications plus
the Cash Value. Second, the Owner will choose the Death Benefit qualification
test, which is the method of qualifying the Policy as a life insurance contract
for purposes of Federal tax law. The Owner may not change the Death Benefit
qualification test once selected, but may, subject to certain restrictions,
change from one Death Benefit option to the other after the Policy has been
issued. KILICO guarantees that the Death Benefit payable for a Policy will never
be less than the Death Benefit stated in the Policy Specifications, less Debt,
as long as the Policy is in force. KILICO reserves the right to limit the Death
Benefit under certain circumstances. There is no guaranteed Cash Value. If the
Surrender Value is insufficient to cover the charges under the Policy, the
Policy will lapse.
The Owner may examine the Policy and return it to KILICO for a refund
during the Free-Look Period.
It may not be advantageous to purchase a Policy as a replacement for
another type of life insurance policy, or to obtain additional insurance
protection if a flexible premium variable life insurance policy is already
owned.
This Prospectus generally describes only that portion of the Policy
allocated to the Separate Account. For a brief summary of the Fixed Account
option see "The Fixed Account Option."
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED OR PRECEDED BY A CURRENT
PROSPECTUS FOR THE APPLICABLE UNDERLYING FUND. ALL PROSPECTUSES SHOULD
BE READ AND RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS AND OTHER INFORMATION ABOUT THE SEPARATE ACCOUNT
REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC)
CAN BE FOUND IN THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV.
THE POLICY IS NOT INSURED BY THE FDIC, IS NOT A DEPOSIT OR OTHER
OBLIGATION OF, OR GUARANTEED BY, THE DEPOSITORY INSTITUTION; AND IS
SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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DEFINITIONS................................................. 1
SUMMARY..................................................... 3
KILICO AND THE SEPARATE ACCOUNT............................. 6
THE FUNDS................................................... 6
FIXED ACCOUNT OPTION........................................ 8
THE POLICY.................................................. 9
POLICY BENEFITS AND RIGHTS.................................. 11
CHARGES AND DEDUCTIONS...................................... 17
GENERAL PROVISIONS.......................................... 20
DOLLAR COST AVERAGING....................................... 23
SYSTEMATIC WITHDRAWAL PLAN.................................. 23
DISTRIBUTION OF POLICIES.................................... 23
FEDERAL TAX MATTERS......................................... 24
LEGAL CONSIDERATIONS........................................ 28
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS................ 28
VOTING INTERESTS............................................ 28
STATE REGULATION OF KILICO.................................. 29
DIRECTORS AND OFFICERS OF KILICO............................ 29
LEGAL MATTERS............................................... 31
LEGAL PROCEEDINGS........................................... 31
YEAR 2000 COMPLIANCE........................................ 31
EXPERTS..................................................... 32
REGISTRATION STATEMENT...................................... 32
FINANCIAL STATEMENTS........................................ 32
CHANGE OF ACCOUNTANTS....................................... 32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.................... 33
APPENDIX A ILLUSTRATIONS OF CASH VALUES, SURRENDER VALUES
AND DEATH BENEFITS........................................ 54
APPENDIX B TABLE OF DEATH BENEFIT FACTORS................... 83
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DEFINITIONS
ACCOUNT MAINTENANCE CHARGE--A charge deducted in the calculation of the
Accumulation Unit Value for maintaining the Separate Account and Owner records.
ACCUMULATION UNIT--An accounting unit of measure used to calculate the
value of each Subaccount.
AGE--An Insured's age on his or her nearest birthday.
BENEFICIARY--The person to whom the proceeds due on the Insured's (or last
surviving Insured's) death are paid.
CASH VALUE--The sum of the value of Policy assets in the Separate Account,
Fixed Account and Loan Account.
DATE OF RECEIPT--Date of receipt means the Valuation Date during which a
request, form or payment is received at KILICO's Home Office. KILICO is deemed
to have received any request, form or payment on the date it is actually
received at the Home Office, provided that it is received before the close of
the New York Stock Exchange (which is normally 3:00 p.m. Long Grove time) on any
date when the New York Stock Exchange is open. Otherwise, it will be deemed to
be received on the next such day.
DEBT--Debt means (1) the principal of any outstanding loan, plus (2) any
loan interest due or accrued to KILICO.
FIXED ACCOUNT--The amount of assets held in the General Account
attributable to the fixed portion of the Policy.
FIXED ACCOUNT VALUE--The portion of the Cash Value in the General Account,
excluding the Loan Account.
FREE-LOOK PERIOD--The period of time in which an Owner may cancel the
Policy and receive a refund. The applicable period of time will depend on the
state in which the Policy is issued; however, it will be at least 10 days from
the date the Policy is received by the Owner.
FUNDS--The underlying mutual funds in which the Subaccounts of the Separate
Account invest.
GENERAL ACCOUNT--The assets of KILICO other than those allocated to the
Separate Account or any other separate account.
INSURED(S)--The person(s) whose life is/are covered by the Policy and who
is/are named in the Policy Specifications.
ISSUE DATE--The date shown in the Policy Specifications. Incontestability
and suicide periods for the initial Specified Amount are measured from the Issue
Date.
LOAN ACCOUNT--The amount of assets transferred from the Separate Account
and the Fixed Account and held in the General Account as collateral for Policy
Loans.
MATURITY DATE--The Policy Date anniversary nearest the Insured's (or last
surviving Insured's) 100th birthday.
MONTHLY PROCESSING DATE--The same day in each month as the Policy Date. It
is the day from which policy months are determined.
MORTALITY AND EXPENSE RISK CHARGE--A charge deducted in the calculation of
the Accumulation Unit Value for the assumption of mortality risks and expense
guarantees.
OWNER--The person designated on the application who may exercise all rights
and privileges under the Policy.
PLANNED PREMIUM--The scheduled premium specified by the Owner in the
application.
POLICY DATE--The date shown in the Policy Specifications. The Policy Date
is the date used to determine Policy Years and Monthly Processing Dates. The
Policy Date is the date that insurance coverage takes effect subject to any
principles of conditional receipt under applicable law.
POLICY YEAR--Each year commencing with the Policy Date and each Policy Date
anniversary thereafter.
SEPARATE ACCOUNT--The KILICO Variable Separate Account-2, which was
established under Illinois law as a separate investment account of KILICO.
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SEPARATE ACCOUNT VALUE--The portion of the Cash Value in the Subaccount(s).
SPECIFIED AMOUNT--The amount chosen by the Owner and used to calculate the
Death Benefit. The Specified Amount is shown in the Policy Specifications.
SUBACCOUNT--A subdivision of the Separate Account.
SURRENDER VALUE--The surrender value of a Policy is (1) the Cash Value
minus (2) any Debt.
TRADE DATE--For Policies issued in those jurisdictions that require a
return of the initial premium during the Free-Look Period, including Policies
which replace an existing insurance policy issued in certain jurisdictions, the
Valuation Date which is generally 30 days following the date all requirements
for coverage have been completed by the Owner and coverage under the Policy is
recorded by KILICO as in force.
VALUATION DATE--Each business day on which valuation of the assets of the
Separate Account is required by applicable law, which currently is each day that
the New York Stock Exchange is open for trading.
VALUATION PERIOD--The period that starts at the close of a Valuation Date
and ends at the close of the next succeeding Valuation Date.
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SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE DETAILED
INFORMATION IN THIS PROSPECTUS. YOU SHOULD REFER TO THE HEADING "DEFINITIONS"
FOR THE MEANING OF CERTAIN TERMS. VARIATIONS FROM THE INFORMATION APPEARING IN
THIS PROSPECTUS DUE TO INDIVIDUAL STATE REQUIREMENTS ARE DESCRIBED IN
SUPPLEMENTS WHICH ARE ATTACHED TO THIS PROSPECTUS, OR IN ENDORSEMENTS TO THE
POLICY, AS APPROPRIATE. UNLESS OTHERWISE INDICATED, THE DESCRIPTION OF THE
POLICY CONTAINED IN THIS PROSPECTUS ASSUMES THAT THE POLICY IS IN FORCE, THAT
THERE IS NO INDEBTEDNESS, AND THAT CURRENT FEDERAL INCOME TAX LAWS APPLY.
The Owner of a Policy pays a premium for life insurance coverage on the
person or persons insured. The Policy is a flexible premium policy, so subject
to certain limitations, an Owner may choose the amount and frequency of premium
payments. The Policy provides for a Surrender Value which is payable if the
Policy is terminated during an Insured's lifetime. The Death Benefit and Cash
Value of the Policy may increase or decrease to reflect investment experience.
There is no guaranteed Cash Value. If the Surrender Value is insufficient to pay
charges under the Policy, the Policy will lapse unless an additional premium
payment or loan repayment is made. (See "The Policy--Premiums and Allocation of
Premiums and Separate Account Value," "Charges and Deductions," and "Policy
Benefits and Rights.")
Under certain circumstances, a Policy may be issued as or become a modified
endowment contract as a result of a material change or reduction in benefits as
defined by the Internal Revenue Code. Excess premiums paid may also cause the
Policy to become a modified endowment contract. For a Policy treated as a
modified endowment contract, certain distributions will be included in the
Owner's gross income for purposes of Federal income tax (See "Federal Tax
Matters.")
The purpose of the Policy is to provide insurance protection for the named
beneficiary. No claim is made that the Policy is in any way similar or
comparable to a systematic investment plan of a mutual fund.
POLICY BENEFITS
CASH VALUE. The Policy provides for a Cash Value. The Cash Value will
reflect the amount and frequency of premium payments, the investment experience
of the selected Subaccounts, any values in the Fixed Account and Loan Account,
and charges imposed in connection with the Policy. The Owner bears the entire
investment risk on that portion of the net premiums and Cash Value allocated to
the Separate Account. KILICO does not guarantee a minimum Separate Account
Value. (See "Policy Benefits and Rights--Cash Value.")
An Owner may surrender a Policy at any time and receive the Surrender
Value, which equals the Cash Value less any outstanding Debt. Partial
withdrawals are also available subject to restrictions. (See "Policy Benefits
and Rights--Surrender Privilege.")
POLICY LOANS. An Owner may borrow up to 90% of the Policy's Cash Value.
(See "Policy Loans.") The minimum amount of a loan is $500. Interest at a rate
not to exceed the greater of the interest rate set forth in the Policy and a
published monthly average, currently Moody's Corporate Bond Yield
Average-Monthly Average Corporates ("Adjustable Loan Interest Rate") will be
charged on outstanding loan amounts.
When a loan is made, a portion of the Policy's Cash Value equal to the
amount of the loan will be transferred from the Separate Account and the Fixed
Account (proportionately, unless the Owner requests otherwise) to the Loan
Account. Cash Values within the Loan Account will earn interest at a rate equal
to Adjustable Loan Interest Rate reduced by not more than 1%. Such earnings will
be allocated to the Loan Account. (See "Policy Benefits and Rights--Policy
Loans.")
If the Policy is treated as a modified endowment contract, a loan will be
treated as a distribution for Federal income tax purposes and may be subject to
tax, withholding and penalties. (See "Federal Tax Matters.")
DEATH BENEFITS. As long as the Policy remains in force, the Policy provides
a Death Benefit payment upon the death of the Insured (or upon the death of the
last surviving Insured if the Policy is issued as a Survivorship Policy). The
Owner will make two elections to determine the Death Benefit under the Policy.
First, the Owner will choose one of two Death Benefit options. Under Option A,
the Death Benefit is the Specified Amount stated in the Policy Specifications.
Under Option B, the Death Benefit is the Specified Amount stated in the Policy
Specifications plus the Cash Value. In either case, the Death Benefit will not
be less than a specified multiple of the Cash Value. KILICO reserves the right
to limit the Death Benefit under certain circumstances. Second, the Owner will
choose the Death Benefit qualification test, which is the method for qualifying
the Policy as a life insurance contract for purposes of Federal tax law. The
Owner may not change the Death Benefit qualification test once selected, but
may, subject to certain restrictions, change from Death Benefit Option A to
Death Benefit Option B,
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and vice versa, after the Policy has been issued. The Death Benefit payable will
be reduced by any Debt. (See "Policy Benefits and Rights--Death Benefits.")
PREMIUMS
The Owner has flexibility concerning the amount and frequency of premium
payments. At the time of application, the Owner will determine a Planned
Premium. However, the Owner will not be required to adhere to the schedule and,
subject to certain restrictions, may make premium payments in any amount and at
any frequency. The amount, frequency, and period of time over which an Owner
pays premiums may affect whether the Policy will be classified as a modified
endowment contract. The minimum monthly premium payment is $50. Other minimums
apply for other payment modes.
Payment of the Planned Premium will not guarantee that a Policy will remain
in force. Instead, the duration of the Policy depends on the Policy's Surrender
Value. (See "The Policy--Premiums.")
THE SEPARATE ACCOUNT
ALLOCATION OF PREMIUMS. The portion of the premium available for allocation
equals the premium paid less applicable charges. An Owner indicates in the
application for the Policy the percentages of premium to be allocated among the
Subaccounts and the Fixed Account. The Separate Account currently consists of
twenty-two Subaccounts, each of which invests in shares of a designated
portfolio of the Investors Fund Series or Evergreen Variable Trust.
For Policies issued in those jurisdictions that require a return of
premium, including Policies which replace an existing insurance policy issued in
certain jurisdictions, the initial premium less applicable charges will be
allocated to the Kemper Money Market Subaccount. On the Trade Date, which is
thirty days from the Issue Date, the Separate Account Value in the Kemper Money
Market Subaccount will be allocated among the Subaccounts and the Fixed Account
in accordance with the Owner's instructions in the application. For all other
jurisdictions, on the Issue Date the initial premium less applicable charges
will generally be allocated to the Subaccounts and the Fixed Account as elected
by the Owner in the application for a Policy. (See "The Policy--Policy Issue.")
TRANSFERS. Separate Account Value may be transferred among the Subaccounts.
One transfer of all or part of the Separate Account Value may be made within a
fifteen (15) day period. Transfers are also permitted between the Fixed Account
and the Subaccounts, subject to restrictions. (See "Allocation of Premiums and
Separate Account Value.")
THE FUNDS
The following portfolios of the Investors Fund Series are currently
available for investment by the Separate Account:
KEMPER MONEY MARKET PORTFOLIO, KEMPER TOTAL RETURN PORTFOLIO, KEMPER HIGH
YIELD PORTFOLIO, KEMPER GROWTH PORTFOLIO, KEMPER GOVERNMENT SECURITIES
PORTFOLIO, KEMPER INTERNATIONAL PORTFOLIO, KEMPER SMALL CAP GROWTH PORTFOLIO,
KEMPER INVESTMENT GRADE BOND PORTFOLIO, KEMPER CONTRARIAN VALUE PORTFOLIO,
KEMPER SMALL CAP VALUE PORTFOLIO, KEMPER VALUE+GROWTH PORTFOLIO, KEMPER HORIZON
20+ PORTFOLIO, KEMPER HORIZON 10+ PORTFOLIO, KEMPER HORIZON 5 PORTFOLIO, KEMPER
BLUE CHIP PORTFOLIO, AND KEMPER GLOBAL INCOME PORTFOLIO.
The following portfolios of Evergreen Variable Annuity Trust are currently
available for investment by the Separate Account:
EVERGREEN VA FUND, EVERGREEN VA GROWTH AND INCOME FUND, EVERGREEN VA
FOUNDATION FUND, EVERGREEN VA GLOBAL LEADERS FUND, EVERGREEN VA STRATEGIC INCOME
FUND, AND EVERGREEN VA AGGRESSIVE GROWTH FUND.
For a more detailed description of the Funds, see "The Funds", the Funds'
prospectuses, and statements of additional information available upon request.
CHARGES
A state and local premium tax charge equal to the actual state tax rate may
be deducted from each premium payment under the Policy prior to allocation of
the net premium. State and local premium tax rates range from .75% to 5%. In
addition, a charge of 1% of each premium payment will be deducted to compensate
KILICO for higher corporate income tax liability resulting from changes in the
tax law made by the Omnibus Budget Reconciliation Act of 1990. (See "Charges and
Deductions--Deductions from Premiums.")
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No other charges are currently made from premium or the Separate Account
for Federal, state or other taxes. Should KILICO determine that such taxes may
be imposed, it may make deductions from the Separate Account to pay those taxes.
(See "Federal Tax Matters.")
Deductions will be made from the Policy's Cash Value in each Subaccount and
the Fixed Account on the Policy Date and on each Monthly Processing Date for the
cost of providing life insurance coverage for the Insured(s). In addition,
KILICO deducts an asset charge from each Subaccount on a daily basis for the
assumption by KILICO of certain mortality and expense risks incurred in
connection with the Policy, at an effective annual rate guaranteed not to exceed
0.90%. (See "Charges and Deductions--Cost of Insurance Charge and Mortality and
Expense Risk Charge.")
KILICO also deducts a Monthly Administrative Charge and an Account
Maintenance Charge to compensate it for expenses related to Policy
administration and maintenance of the Separate Account. The Monthly
Administrative Charge is deducted from the Policy's Cash Value on each Monthly
Processing Date in the amount of $20 per month during the first Policy Year and
the first 12 months following an increase in Specified Amount, and $5 per month
at all other times. The Account Maintenance Charge is taken as a daily asset
charge, at an effective annual rate of 0.45%, from each Subaccount. (See
"Charges and Deductions--Policy and Separate Account Administration Charges.")
The Subaccounts purchase shares of the Funds. Each Portfolio of the Funds
incurs annual fund operating expenses which consist of management fees and other
expenses. See "Charges and Deductions--Other Charges" in this Prospectus and the
prospectuses for the Funds for the other expenses for each Portfolio and for
additional information about the fees and expenses of the Funds.
The Policy is available for distribution through entities or persons that
provide separate trust or consultative services for which they charge a fee. The
fees are not part of the Policy and KILICO is not responsible for the payment of
the fees. Under special circumstances with KILICO's consent, the Policy may be
distributed through entities or persons that do not provide such additional
services. Although KILICO does not charge any explicit sales load, it will
compensate broker-dealers for the sale of the Policies. Expenses incurred in the
distribution of the Policies, including commissions and marketing allowances,
printing, and preparing sales literature may be covered from other sources,
including profits from other charges, including the Mortality and Expense Risk
Charge, administrative charges and cost of insurance charges.
TAX TREATMENT UNDER CURRENT FEDERAL TAX LAW
The Cash Value, while it remains in the Policy, and the Death Benefit
should be subject to the same Federal income tax treatment as the cash value
under a conventional fixed benefit life insurance policy. Under existing tax
law, the Owner is generally not deemed to be in receipt of the Cash Value under
a Policy until a distribution occurs through a withdrawal or surrender.
Generally, distributions are not included in income until the amount of the
distributions exceed the premiums paid for the Policy. If the Policy is treated
as a modified endowment contract (MEC), a loan will also be treated as a
distribution. Generally, distributions from a MEC (including loans) are included
in income to the extent the Cash Value exceeds premiums paid for the Policy. A
change of Owners, an assignment, a loan or a surrender of the Policy may have
tax consequences.
Death Benefits payable under the Policy should be completely excludable
from the gross income of the Beneficiary. As a result, the Beneficiary generally
will not be subject to income tax on the Death Benefit. (See "Federal Tax
Matters.")
FREE-LOOK PERIOD
The Owner is granted a period of time to examine a Policy and return it for
a refund. The applicable period of time will depend on the state in which the
Policy is issued; however, it will be at least 10 days from the date the Policy
is received by the Owner. (See "Policy Benefits and Rights--Free-Look Period and
Exchange Rights.")
ILLUSTRATIONS OF CASH VALUES, SURRENDER VALUES, DEATH BENEFITS
Tables in Appendix A illustrate the Cash Values, Surrender Values and Death
Benefits based upon certain hypothetical assumed rates of return for the
Separate Account and the charges deducted under the Policy.
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KILICO AND THE SEPARATE ACCOUNT
KEMPER INVESTORS LIFE INSURANCE COMPANY
Kemper Investors Life Insurance Company ("KILICO"), 1 Kemper Drive, Long
Grove, Illinois 60049, was organized in 1947 and is a stock life insurance
company organized under the laws of the State of Illinois. KILICO is a
wholly-owned subsidiary of Kemper Corporation, a nonoperating holding company.
Kemper Corporation is a wholly-owned subsidiary of Zurich Holding Company of
America ("ZHCA"), which is a wholly-owned subsidiary of Zurich Insurance Company
("Zurich"). KILICO offers life insurance and annuity products and is admitted to
do business in the District of Columbia and all states except New York.
SEPARATE ACCOUNT
KILICO Variable Separate Account-2 (the "Separate Account") was established
by KILICO as a separate investment account on June 17, 1997. The Separate
Account will receive and invest net premiums under the Policy. In addition, the
Separate Account may receive and invest net premiums for other variable life
insurance policies offered by KILICO.
The Separate Account is administered and accounted for as part of the
general business of KILICO, but the income, capital gains or capital losses of
the Separate Account are credited to or charged against the assets held in the
Separate Account, without regard to any other income, capital gains or capital
losses of any other separate account or arising out of any other business which
KILICO may conduct. The benefits provided under the Policy are obligations of
KILICO.
The Separate Account has been registered with the Securities and Exchange
Commission ("Commission") as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act"). Such registration does not involve
supervision by the Commission of the management, investment practices or
policies of the Separate Account or KILICO.
The Separate Account is currently divided into twenty-two Subaccounts. Each
Subaccount invests exclusively in shares of one of the corresponding portfolios
of the Funds. Income and both realized and unrealized gains or losses from the
assets of each Subaccount generally are credited to or charged against that
Subaccount without regard to income, gains or losses from any other Subaccount
or arising out of any business KILICO may conduct. Additional Subaccounts may be
added in the future. Not all Subaccounts may be available in all jurisdictions
or under all Policies.
THE FUNDS
The Separate Account invests in shares of the Investors Fund Series and
Evergreen Variable Trust, series type mutual funds registered with the
Commission as open-end management investment companies. A series mutual fund has
two or more separate series or portfolios with differing investment objectives.
Registration of the Funds does not involve supervision of their management,
investment practices or policies by the Commission. The Funds are designed to
provide investment vehicles for variable life insurance and variable annuity
contracts. Shares of the Funds currently are sold only to insurance company
separate accounts and, with respect to Evergreen Variable Trust, certain
qualified retirement plans. In addition to the Separate Account, shares of the
Funds may be sold to variable life insurance and variable annuity separate
accounts of insurance companies not affiliated with KILICO. It is conceivable
that in the future it may be disadvantageous for variable life insurance
separate accounts of companies unaffiliated with KILICO, or for variable life
insurance separate accounts, variable annuity separate accounts and qualified
retirement plans to invest simultaneously in the Funds. Currently neither KILICO
nor the Funds foresees any such disadvantages to variable life insurance owners,
variable annuity owners or qualified retirement plans. Management of the Funds
has an obligation to monitor events to identify material conflicts between such
owners and determine what action, if any, should be taken. In addition, if
KILICO believes that a Fund's response to any of those events or conflicts
insufficiently protects the Owners, it will take appropriate action on its own.
The Separate Account invests in several series of the Funds ("Portfolios").
The assets of each Portfolio are held separate from the assets of the other
Portfolios, and each Portfolio has its own distinct investment objective and
policies. Each Portfolio operates as a separate investment fund, and the income,
gains or losses of one Portfolio generally have no effect on the investment
performance of any other Portfolio.
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INVESTORS FUND SERIES
The Portfolios of Investors Fund Series in which the Separate Account
invests are summarized below:
KEMPER MONEY MARKET PORTFOLIO: Seeks maximum current income to the extent
consistent with stability of principal from a portfolio of high quality money
market instruments.
KEMPER TOTAL RETURN PORTFOLIO: Seeks a high total return, a combination of
income and capital appreciation, by investing in a combination of debt
securities and common stocks.
KEMPER HIGH YIELD PORTFOLIO: Seeks a high level of current income by
investing in fixed-income securities.
KEMPER GROWTH PORTFOLIO: Seeks maximum appreciation of capital through
diversification of investment securities having potential for capital
appreciation.
KEMPER GOVERNMENT SECURITIES PORTFOLIO: Seeks high current return
consistent with preservation of capital from a portfolio composed primarily of
U.S. Government securities.
KEMPER INTERNATIONAL PORTFOLIO: Seeks total return, a combination of
capital growth and income, principally through an internationally diversified
portfolio of equity securities.
KEMPER SMALL CAP GROWTH PORTFOLIO: Seeks maximum appreciation of investors'
capital from a portfolio primarily of growth stocks of smaller companies.
KEMPER INVESTMENT GRADE BOND PORTFOLIO: Seeks high current income by
investing primarily in a diversified portfolio of investment grade debt
securities.
KEMPER CONTRARIAN VALUE PORTFOLIO (FORMERLY KEMPER VALUE): Seeks to achieve
a high rate of total return from a portfolio primarily of value stocks of larger
companies.
KEMPER SMALL CAP VALUE PORTFOLIO: Seeks long-term capital appreciation from
a portfolio primarily of value stocks of small companies.
KEMPER VALUE+GROWTH PORTFOLIO: Seeks growth of capital through professional
management of a portfolio of growth and value stocks.
KEMPER HORIZON 20+ PORTFOLIO: Designed for investors with approximately a
20+ year investment horizon, seeks growth of capital, with income as a secondary
objective.
KEMPER HORIZON 10+ PORTFOLIO: Designed for investors with approximately a
10+ year investment horizon, seeks a balance between growth of capital and
income, consistent with moderate risk.
KEMPER HORIZON 5 PORTFOLIO: Designed for investors with approximately a 5
year investment horizon, seeks income consistent with preservation of capital,
with growth of capital as a secondary objective.
KEMPER BLUE CHIP PORTFOLIO: Seeks growth of capital and of income.
KEMPER GLOBAL INCOME PORTFOLIO: Seeks to provide high current income
consistent with prudent total return asset management.
Scudder Kemper Investments, Inc. ("SKI"), an affiliate of KILICO, serves as
the investment adviser to each portfolio of the Investors Fund Series specified
above. Zurich Investment Management Limited ("ZIML"), an affiliate of SKI,
serves as sub-adviser for the Kemper International and Kemper Global Income
Portfolios.
EVERGREEN VARIABLE ANNUITY TRUST
The Portfolios of the Evergreen Variable Annuity Trust in which the
Separate Account invests are summarized below:
EVERGREEN VA FUND: Seeks to achieve capital appreciation by investing in
the securities of little-known or relatively small companies, or companies
undergoing changes which the Fund's investment adviser believes will have
favorable consequences. Income will not be a factor in the selection of
portfolio investments.
EVERGREEN VA GROWTH AND INCOME FUND: Seeks to achieve a return composed of
capital appreciation in the value of its shares and current income. The Fund
will attempt to meet its objective by investing in the securities of companies
which are undervalued in the marketplace relative to those companies' assets,
breakup value, earnings, or potential earnings growth.
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<PAGE> 11
EVERGREEN VA FOUNDATION FUND: Seeks, in order of priority, reasonable
income, conservation of capital and capital appreciation. The Fund invests
principally in income-producing common and preferred stocks, securities
convertible into or exchangeable for common stocks and fixed income securities.
EVERGREEN VA GLOBAL LEADERS FUND: Seeks to achieve capital appreciation by
investing primarily in a diversified portfolio of U.S. and non-U.S. equity
securities of companies located in the world's major industrialized countries.
The Fund's investment adviser will attempt to screen the largest companies in
the world's major industrialized countries and cause the Fund to invest, in the
opinion of the Fund's investment adviser, in the 100 best based on certain
qualitative and quantitative criteria.
EVERGREEN VA STRATEGIC INCOME FUND: Seeks high current income from interest
on debt securities and, secondarily, considers potential for growth of capital
in selecting securities.
EVERGREEN VA AGGRESSIVE GROWTH FUND: Seeks long-term capital appreciation
by investing primarily in common stocks of emerging growth companies and in
larger, more well established companies, all of which are viewed by the Fund's
investment adviser as having above average appreciation potential.
Evergreen Asset Management Corp. ("Evergreen Asset") is the investment
adviser to Evergreen VA Fund, Evergreen VA Growth and Income Fund, Evergreen VA
Foundation Fund, and Evergreen VA Global Leaders Fund. Keystone Investment
Management Company is the investment adviser to Evergreen VA Strategic Income
Fund. The Capital Management Group of First Union National Bank ("CMG") is the
investment adviser to Evergreen VA Aggressive Growth Fund.
There is no assurance that any of the Portfolios of the Investors Fund
Series or the Evergreen Variable Trust will achieve its stated objective. More
detailed information, including a description of risks involved in investing in
each of the Portfolios may be found in the prospectus for each Fund and each
Fund's statement of additional information. (Also see "Charges and
Deductions--Other Charges").
CHANGE OF INVESTMENTS
KILICO reserves the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares held by the Separate Account or
that the Separate Account may purchase. KILICO reserves the right to eliminate
the shares of any of the Portfolios and to substitute shares of another series
of the Funds or of another investment company, if the shares of a Portfolio are
no longer available for investment, or if in its judgment further investment in
any Portfolio becomes inappropriate in view of the purposes of the Policy or the
Separate Account. KILICO may also eliminate or combine one or more subaccounts,
transfer assets, or it may substitute one subaccount for another subaccount, if,
in its sole discretion, marketing, tax or investment conditions warrant. KILICO
will not substitute any shares attributable to an Owner's interest in a
Subaccount without notice to the Owner and prior approval of the Commission, to
the extent required by the 1940 Act or other applicable law. Nothing contained
in this Prospectus shall prevent the Separate Account from purchasing other
securities for other series or classes of policies, or from permitting a
conversion between series or classes of policies on the basis of requests made
by Owners.
KILICO also reserves the right to establish additional subaccounts of the
Separate Account, each of which would invest in a new portfolio of the Funds, or
in shares of another investment company, with a specified investment objective.
New subaccounts may be established when, in the sole discretion of KILICO,
marketing needs or investment conditions warrant, and any new subaccounts may be
made available to existing Owners as determined by KILICO.
If deemed by KILICO to be in the best interests of persons having interests
under the Policy, the Separate Account may be: (a) operated as a management
company under the 1940 Act; (b) deregistered under that Act in the event such
registration is no longer required; or (c) combined with other KILICO separate
accounts. To the extent permitted by law, KILICO may also transfer the assets of
the Separate Account associated with the Policy to another separate account, or
to the General Account.
FIXED ACCOUNT OPTION
NET PREMIUMS ALLOCATED BY POLICY OWNERS TO THE FIXED ACCOUNT OF THE POLICY
AND TRANSFERS TO THE FIXED ACCOUNT BECOME PART OF THE GENERAL ACCOUNT OF KILICO,
WHICH SUPPORTS INSURANCE AND ANNUITY OBLIGATIONS. BECAUSE OF EXEMPTIVE AND
EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED ACCOUNT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") NOR IS THE FIXED ACCOUNT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
GENERALLY ARE SUBJECT TO THE PROVISIONS OF THE 1933 OR 1940 ACTS AND KILICO HAS
BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO THE FIXED PORTION.
DISCLOSURES REGARDING THE FIXED ACCOUNT, HOWEVER, MAY BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
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<PAGE> 12
Under the Fixed Account Option offered under the Policies, KILICO allocates
payments to its General Account and pays a fixed interest rate for stated
periods. This Prospectus describes only the element of the Policy pertaining to
the Separate Account except where it makes specific reference to fixed
accumulation and settlement elements.
The Policies guarantee that payments allocated to the Fixed Account will
earn a minimum fixed interest rate of 3%. KILICO, at its discretion, may credit
interest in excess of 3%. KILICO reserves the right to change the rate of excess
interest credited as provided under the terms of the Policy. KILICO also
reserves the right to declare separate rates of excess interest for net premiums
or amounts transferred at designated times, with the result that amounts at any
given designated time may be credited with a higher or lower rate of excess
interest than the rate or rates of excess interest previously credited to such
amounts and net premiums or amounts transferred at any other designated time.
Pursuant to state insurance law, KILICO may defer payment of any surrender
proceeds, withdrawal amounts, or loan amounts from the Fixed Account for a
period up to six (6) months.
THE POLICY
POLICY ISSUE
Before KILICO will issue a Policy, it must receive a completed application
and a full initial premium at its Home Office. A Policy ordinarily will be
issued only for Insureds Age up through 85 who supply satisfactory evidence of
insurability to KILICO. Acceptance of an application is subject to underwriting
by KILICO.
After underwriting is complete and the Policy is delivered to the Owner,
insurance coverage under the Policy will be deemed to have begun as of the
Policy Date. (See "Premiums.") If the Policy is a Survivorship Policy, the Owner
of the Policy will be the Insureds jointly or the surviving Owner, unless a
different Owner is named in the application or subsequently changed. If the
Policy is jointly owned, rights under the Policy must be exercised by the Owners
jointly.
PREMIUMS
Premiums are to be paid to KILICO at its Home Office. (See "Distribution of
Policies.") Checks ordinarily must be made payable to KILICO.
PLANNED PREMIUMS. When applying for a Policy, an Owner will specify a
Planned Premium payment that provides for the payment of level premiums over a
specified period of time. However, the Policy Owner is not required to pay
Planned Premiums.
The minimum monthly premium that will be accepted by KILICO is $50. For
modes other than monthly the minimums are: single premium $5,000; annual $600;
semi-annual $300; quarterly $150; and unscheduled $150. The maximum amount of
premium that may be paid at any time is that which is permitted under applicable
tax law to qualify the Policy as a life insurance contract. The amount,
frequency and period of time over which an Owner pays premiums may affect
whether the Policy will be classified as a modified endowment contract, which is
a type of life insurance contract subject to different tax treatment than
conventional life insurance contracts for certain pre-death distributions. (See
"Federal Tax Matters.") Accordingly, variations from the Planned Premiums on a
Policy that is not otherwise a modified endowment contract may result in the
Policy becoming a modified endowment contract for tax purposes.
Payment of the Planned Premium will not guarantee that a Policy will remain
in force. Instead, the duration of the Policy depends upon the Policy's
Surrender Value. Even if Planned Premiums are paid, the Policy will lapse any
time Surrender Value is insufficient to pay the current monthly deductions and a
Grace Period expires without sufficient payment. (See "Policy Lapse and
Reinstatement.")
KILICO may reject or limit any premium payment that is below the current
minimum premium amount requirements, or that would increase the Death Benefit by
more than the amount of the premium. All or a portion of a premium payment will
be rejected and returned to the Owner if it would disqualify the Policy as life
insurance under the Internal Revenue Code. In no event will KILICO reject a
premium payment which is required to keep a Policy in force. (See "Policy Lapse
and Reinstatement.")
Certain charges will be deducted from each premium payment. (See "Charges
and Deductions.") The remainder of the premium, known as the net premium, will
be allocated as described below under "Allocation of Premiums and Separate
Account Value."
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<PAGE> 13
POLICY DATE. The Policy Date is the date used to determine Policy Years and
Monthly Processing Dates. The Policy Date will be the date that coverage on the
Insured(s) takes effect. If such date is the 29th, 30th, or 31st of a month, the
Policy Date will be the first of the following month.
In the event an application is declined by KILICO, the Cash Value in the
Kemper Money Market Subaccount plus the total amount of monthly deductions and
deductions against premiums will be refunded.
The full initial premium is the only premium required to be paid under a
Policy. However, additional premiums may be necessary to keep the Policy in
force. (See "The Policy--Policy Lapse and Reinstatement.")
ALLOCATION OF PREMIUMS AND SEPARATE ACCOUNT VALUE
ALLOCATION OF PREMIUMS. For Policies issued in those jurisdictions that
require a return of premium, including Policies which replace an existing
insurance policy issued in certain jurisdictions, the initial premium less
applicable charges will be allocated to the Kemper Money Market Subaccount. The
Separate Account Value will remain in the Kemper Money Market Subaccount until
the Trade Date. On the Trade Date, the Separate Account Value in the Kemper
Money Market Subaccount will be allocated among the Subaccounts and the Fixed
Account as elected by the Owner in the application for the Policy. The initial
premium less applicable charges in other jurisdictions will be allocated on the
Issue Date to the Subaccounts and the Fixed Account as elected by the Owner in
the application for a Policy. Additional premiums received will continue to be
allocated in accordance with the Owner's instructions in the application unless
contrary written instructions are received. Once a change in allocation is made,
all future premiums will be allocated in accordance with the new allocation,
unless contrary written instructions are received. The minimum amount of any
premium that may be allocated to a Subaccount is $50. Cash Value may be
allocated to a total of ten (10) accounts at any given time.
The Separate Account Value will vary with the investment experience of the
chosen Subaccounts. The Owner bears the entire investment risk.
TRANSFERS. After the Trade Date if the initial premium is allocated to the
Kemper Money Market Subaccount or the Issue Date if the initial net premium has
been allocated to the Subaccounts, Separate Account Value may be transferred
among the Subaccounts and into the Fixed Account. One transfer of all or a part
of the Separate Account Value may be made within a fifteen (15) day period. All
transfers made during a business day will be treated as one request.
Fixed Account Value may be transferred to one or more Subaccounts. One
transfer of up to 30% of the Fixed Account Value may be made once each Policy
Year in the thirty day period following the end of a Policy Year.
Transfer requests must be in writing in a form acceptable to KILICO, or by
telephone authorization under forms authorized by KILICO. (See "General
Provisions--Written Notices and Requests.") The minimum partial transfer amount
is $500. No partial transfer may be made if the value of the Owner's remaining
interest in a Subaccount or the Fixed Account, from which amounts are to be
transferred, would be less than $500 after such transfer unless such remaining
amount is zero. These minimums may be waived for reallocations under established
third party asset allocation programs. Transfers will be based on the
Accumulation Unit values next determined following receipt of valid, complete
transfer instructions by KILICO. The transfer provision may be suspended,
modified or terminated at any time by KILICO. KILICO disclaims all liability for
acting in good faith in following instructions which are given in accordance
with procedures established by KILICO, including requests for personal
identifying information, that are designed to limit unauthorized use of the
privilege. Therefore, an Owner would bear this risk of loss in the event of a
fraudulent telephone transfer.
If an Owner authorizes a third party to transact transfers on the Policy
Owner's behalf, KILICO will reallocate the Cash Value pursuant to the asset
allocation program determined by such third party. However, KILICO does not
offer or participate in any asset allocation program and takes no responsibility
for any third party asset allocation program. KILICO may suspend or cancel
acceptance of a third party's instructions at any time and may restrict the
investment options that will be available for transfer under third party
authorizations.
AUTOMATIC ASSET REALLOCATION. An Owner may elect to have transfers made
automatically among the Subaccounts of the Separate Account on an annual,
semi-annual, quarterly, or monthly basis so that Cash Value is reallocated to
match the percentage allocations in the Policy Owner's predefined premium
allocation elections. Transfers under this program will not be subject to the
$500 minimum transfer amounts. An election to participate in the automatic asset
reallocation program must be in writing in the form prescribed by KILICO and
returned to KILICO at its home office.
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<PAGE> 14
POLICY TERMINATION, LAPSE AND REINSTATEMENT
TERMINATION AND LAPSE. All coverage under the Policy terminates when any
one of the following events occurs: (1) the Owner requests that the coverage
terminates; (2) the Insured dies; (3) the Policy matures; or (4) a lapse occurs.
Lapse will occur when the Surrender Value of a Policy is insufficient to cover
the monthly deductions, and a grace period expires without a sufficient payment
being made. (See "Charges and Deductions.")
A grace period of 61 days will be given to the Owner. It begins when notice
is sent that the Surrender Value of the Policy is insufficient to cover the
monthly deductions. Failure to make a premium payment or loan repayment during
the grace period sufficient to keep the Policy in force for three months will
cause the Policy to lapse and terminate without value.
If payment is received within the grace period, the premium or loan
repayment will be allocated to the Subaccounts and the Fixed Account in
accordance with the most current allocation instructions, unless otherwise
requested. Amounts over and above the amounts necessary to prevent lapse may be
paid as additional premiums, however, to the extent otherwise permitted. (See
"The Policy--Premiums.")
KILICO will not accept any payment that would cause the total premium
payment to exceed the maximum payment permitted by the Internal Revenue Code for
life insurance. However, the Owner may voluntarily repay a portion of Debt to
avoid lapse. (See "Federal Tax Matters.")
If premium payments have not exceeded the maximum payment permitted by the
Code, the Owner may choose to make a larger payment than the minimum required
payment to avoid the recurrence of the potential lapse of coverage. The Owner
may also combine premium payments with Debt repayments.
The Death Benefit payable during the grace period will be the Death Benefit
in effect immediately prior to the grace period, less any Debt and any unpaid
monthly deductions.
REINSTATEMENT. If a Policy lapses because of insufficient Surrender Value
to cover the monthly deductions, and it has not been surrendered for its
Surrender Value, it may be reinstated at any time within three years after the
date of lapse. Tax consequences may affect the decision to reinstate.
Reinstatement is subject to:
(1) receipt of evidence of insurability satisfactory to KILICO (if the
Policy is a Survivorship Policy, KILICO must receive satisfactory
evidence of insurability for both Insureds or evidence for the last
surviving Insured and due proof of the first death prior to the date of
lapse);
(2) payment of a minimum premium sufficient to cover monthly deductions for
the grace period and to keep the Policy in force three months; and
(3) payment or reinstatement of any Debt against the Policy which existed
at the date of termination of coverage.
The effective date of reinstatement of a Policy will be the Monthly
Processing Date that coincides with or next follows the date the application for
reinstatement is approved by KILICO. Suicide and incontestability provisions
will apply from the effective date of reinstatement.
POLICY BENEFITS AND RIGHTS
DEATH BENEFITS
While the Policy is in force (see "Policy Lapse and Reinstatement--Lapse,"
above), the Death Benefit is based on the Death Benefit option, the Death
Benefit qualification test, the Specified Amount and the table of Death Benefit
percentages applicable at the time of death. The Death Benefit proceeds will be
equal to the Death Benefit minus any Debt and minus any monthly deductions due
during any grace period.
An Owner will make in the application two elections to determine the Death
Benefit under the Policy. First, the Owner will choose one of two Death Benefit
options--Option A or Option B--offered under the Policy. Second, the Owner will
choose the Death Benefit qualification test: the cash value accumulation test or
guideline premium test. The Death Benefit qualification test is the method for
qualifying the Policy as a life insurance contract for purposes of Federal tax
law. If no Death Benefit option or qualification test is designated, KILICO will
assume that Option A under the guideline premium test as described below, has
been selected. Subject to certain restrictions, the Owner can change the Death
Benefit option selected. So long as the Policy remains in force, the Death
Benefit under either option will never be less than the Specified Amount.
The Specified Amount is chosen by the Owner on the application and is
stated in the Policy Specifications. The minimum Specified Amount permitted
under an Individual Policy is $50,000 (or a lower amount which is based upon a
single premium payment and which satisfies the requirements of applicable tax
law to qualify the
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<PAGE> 15
Policy as a life insurance contract), and the minimum Specified Amount permitted
under a Survivorship Policy is $1,000,000.
KILICO reserves the right in circumstances where it cannot obtain
reinsurance coverage to reduce the death benefits arising from application of
the required Death Benefit Factors. The reductions will be effected by requiring
Partial Withdrawals of Cash Value. Such right will be exercised consistent with
administrative procedures to insure that the right is exercised in a
non-discriminatory manner. Such Partial Withdrawals may be taxable in whole or
in part to the Owners. (See "Federal Tax Matters.")
OPTION A. Under Option A, for Policies issued pursuant to the cash value
accumulation test, as described below, the Death Benefit will be equal to the
Specified Amount or, if greater, the Cash Value (determined as of the end of the
Valuation Period during which the Insured or last surviving Insured dies)
multiplied by a Death Benefit percentage. For Policies issued pursuant to the
guideline premium test, as described below, the Death Benefit will be equal to
the Specified Amount or, if greater, the Cash Value (determined as of the end of
the Valuation Period during which the Insured or last surviving Insured dies)
multiplied by the appropriate Death Benefit Factor. The Death Benefit
percentages under both tests vary according to the age(s) of the Insured(s) and
will be at least equal to those required in Section 7702 of the Internal Revenue
Code. For example, under the guideline premium test, the Death Benefit
percentage is 250% for an Insured at Age 40 or under, and it declines for older
Insureds. A table showing the Death Benefit percentages (Death Benefit Factors)
under the guideline premium test is in Appendix B to this Prospectus and in the
Policy.
OPTION B. Under Option B, the Death Benefit will be equal to the Specified
Amount plus the Cash Value (determined as of the end of the Valuation Period
during which the Insured or last surviving Insured dies). For Policies issued
pursuant to the cash value accumulation test, the Death Benefit will not be less
that the Cash Value (determined as of the end of the Valuation Period during
which the Insured or last surviving Insured dies) multiplied by the appropriate
Death Benefit Factor. For Policies issued pursuant to the guideline premium
test, the Death Benefit will not be less than the Cash Value multiplied by the
appropriate Death Benefit Factor. The Death Benefit Factors are the same as
those used in connection with Option A and as stated in Appendix B. The Death
Benefit under Option B will always vary as Cash Value varies.
The Owner will also choose from two Death Benefit qualification tests
available under the Policy. Once selected, the Death Benefit qualification test
cannot be changed for the duration of the Policy.
CASH VALUE ACCUMULATION TEST. Generally, the cash value accumulation test
requires that under the terms of a Policy, the Death Benefit must be sufficient
so that the cash surrender value, as defined in Section 7702 of the Internal
Revenue Code, does not at any time exceed the net single premium required to
fund the future benefits under the Policy. If the Cash Value under a Policy is
at any time greater than the net single premium at the Insured's age and sex for
the proposed Death Benefit, the Death Benefit will be increased automatically by
multiplying the Cash Value by the corridor percentage computed in compliance
with the Internal Revenue Code. The corridor percentages under the Policy vary
according to the age, sex, and underwriting classification of the Insured(s),
and the resulting Death Benefit determined by using the corridor percentage will
be at least equal to the amount required for the Policy to be deemed life
insurance under Section 7702 of the Internal Revenue Code. The corridor
percentage is calculated using a four percent (4%) interest rate or, if greater,
the contractually guaranteed interest rate and using mortality charges specified
in the prevailing Commissioner's standard table as of the time the Policy is
issued.
GUIDELINE PREMIUM TEST. The guideline premium test limits the amount of
premiums payable under a Policy to a certain amount for an Insured of a
particular age and sex. The test also applies a prescribed corridor percentage
to determine a minimum ratio of Death Benefit to Cash Value.
There are two main differences between the guideline premium test and the
cash value accumulation test. First, the guideline premium test limits the
amount of premium that may be paid into a Policy. No such limits apply under the
cash value accumulation test. (However, any premium that would increase the net
amount at risk is subject to evidence of insurability satisfactory to KILICO.)
Second, the factors that determine the minimum Death Benefit relative to the
Policy's Cash Value are different. Required increases in the minimum Death
Benefit due to growth in Cash Value will generally be greater under the cash
value accumulation test than under the guideline premium test. Owners who desire
to pay premiums in excess of the guideline premium test limitations should
select the cash value accumulation test. Owners who do not desire to pay
premiums in excess of the guideline premium test limitations should consider the
guideline premium test. Applicants for a Policy should consult a qualified tax
adviser in making their Death Benefit selections.
EXAMPLES OF OPTIONS A AND B. The following examples demonstrate the
determination of Death Benefits under Options A and B for the cash value
accumulation test and the guideline premium test. The examples show
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<PAGE> 16
an Individual Policy and a Survivorship Policy, with the same Specified Amounts
and Cash Values. The Individual Policy example assumes a male, non-smoker
Insured who is Age 50 and Age 70 at the time of death and that there is no
outstanding Debt. The Survivorship Policy example assumes one male Age 55 and
one female Insured Age 50, and one male Age 75 and one female Insured Age 70,
both non-smokers. The Policy is in its tenth (10th) Policy Year with both
Insureds having attained Age 55 at the time of death, and there is no
outstanding Debt.
INDIVIDUAL POLICY--AGE 50
<TABLE>
<CAPTION>
CASH VALUE GUIDELINE
ACCUMULATION PREMIUM
TEST TEST
------------ ---------
<S> <C> <C>
Specified Amount............................................ $250,000 $250,000
Cash Value.................................................. $150,000 $150,000
Death Benefit (corridor) percentage......................... 262% 185%
Death Benefit Option A...................................... $393,000 $277,500
Death Benefit Option B...................................... $400,000 $400,000
</TABLE>
INDIVIDUAL POLICY--ATTAINED AGE 70
<TABLE>
<CAPTION>
CASH VALUE GUIDELINE
ACCUMULATION PREMIUM
TEST TEST
------------ ---------
<S> <C> <C>
Specified Amount.......................................... $1,000,000 $1,000,000
Cash Value................................................ $ 700,000 $ 700,000
Death Benefit (corridor) percentage....................... 152% 115%
Death Benefit Option A.................................... $1,064,000 $1,000,000
Death Benefit Option B.................................... $1,700,000 $1,700,000
</TABLE>
SURVIVORSHIP POLICY--AGES MALE 55 AND FEMALE 50
<TABLE>
<CAPTION>
CASH VALUE GUIDELINE
ACCUMULATION PREMIUM
TEST TEST
------------ ---------
<S> <C> <C>
Specified Amount.......................................... $1,000,000 $1,000,000
Cash Value................................................ $ 500,000 $ 500,000
Death Benefit (corridor) percentage....................... 337% 185%
Death Benefit Option A.................................... $1,685,000 $1,000,000
Death Benefit Option B.................................... $1,685,000 $1,500,000
</TABLE>
SURVIVORSHIP POLICY--AGES MALE 75 AND FEMALE 70
<TABLE>
<CAPTION>
CASH VALUE GUIDELINE
ACCUMULATION PREMIUM
TEST TEST
------------ ---------
<S> <C> <C>
Specified Amount.......................................... $2,000,000 $2,000,000
Cash Value................................................ $1,500,000 $1,500,000
Death Benefit (corridor) percentage....................... 170% 115%
Death Benefit Option A.................................... $2,550,000 $2,000,000
Death Benefit Option B.................................... $3,500,000 $3,500,000
</TABLE>
THE CASH VALUES SHOWN IN THESE EXAMPLES ARE ILLUSTRATIVE ONLY AND NOT BASED
ON ANY SPECIFIC ASSUMED INVESTMENT RETURN.
All calculations of Death Benefit will be made as of the end of the
Valuation Period during which the Insured or last surviving Insured dies. Death
Benefit proceeds may be paid to a Beneficiary in a lump sum or under a payment
plan offered under the Policy. The Policy should be consulted for details.
Death Benefits under the Policy will ordinarily be paid within seven days
after KILICO receives all documentation required for such a payment. If the
Policy is a Survivorship Policy, documentation required for payment of the Death
Benefit includes due proof of the first death. Due proof of death is required
within 60 days
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<PAGE> 17
of death or as soon thereafter as is possible. Written proof of death must be in
the form of a certified copy of the death certificate, a physician's statement
or any other proof satisfactory to KILICO. Payments may be postponed in certain
circumstances. (See "General Provisions--Postponement of Payments").
CHANGES IN DEATH BENEFIT OPTION
After the first Policy Year, an Owner may request that the Death Benefit
under the Policy be changed from Option A to Option B, or from Option B to
Option A. Changes in the Death Benefit Option may be made only once per Policy
Year and should be made in writing to KILICO's Home Office. The effective date
of any such change is the next Monthly Processing Date after the change is
accepted.
A change in the Death Benefit from Option A to Option B will result in a
reduction in the Specified Amount of the Policy by the amount of the Policy's
Cash Value, with the result that the Death Benefit payable under Option B at the
time of the change will equal that which would have been payable under Option A
immediately prior to the change. The change in Option will affect the
determination of the Death Benefit since Cash Value will then be added to the
new Specified Amount, and the Death Benefit will then vary with Cash Value.
A change in the Death Benefit from Option B to Option A will result in an
increase in the Specified Amount of the Policy by the amount of the Policy's
Cash Value, with the result that the Death Benefit payable under Option A at the
time of the change will equal that which would have been payable under Option B
immediately prior to the change. However, the change in Option will affect the
determination of the Death Benefit since the Cash Value will no longer be added
to the Specified Amount in determining the Death Benefit. From that point on,
the Death Benefit will equal the new Specified Amount (or, if higher, the Cash
Value times the applicable specified percentage).
A change in Death Benefit Option may affect the future monthly cost of
insurance charge since this charge varies with the net amount at risk, which
generally is the amount by which the Death Benefit exceeds Cash Value. (See
"Charges and Deductions--Cost of Insurance Charge.") Assuming that the Policy's
Death Benefit would not be equal to Cash Value times a Death Benefit percentage
under either Option A or B, changing from Option B to Option A will generally
decrease the future net amount at risk, and therefore decrease the future cost
of insurance charges. Changing from Option A to Option B will generally result
in a net amount at risk that remains level. Such a change, however, will result
in an increase in the cost of insurance charges over time, since the cost of
insurance rates increase with an Insured's Age.
CHANGES IN SPECIFIED AMOUNT
After the first Policy Year, an Owner may request an increase or decrease
in the Specified Amount under a Policy subject to approval from KILICO. A change
in Specified Amount may only be made once per Policy Year and must be in an
amount at least equal to $25,000 for an Individual Policy and $100,000 for a
Survivorship Policy. Increases are not allowed after an Insured attains age 85.
Increasing the Specified Amount could increase the Death Benefit under a Policy,
and decreasing the Specified Amount could decrease the Death Benefit. Decreases
in the Death Benefit may have tax consequences. (See "Federal Tax Matters.") The
amount of change in the Death Benefit will depend, among other things, upon the
Death Benefit Option chosen by the Owner and the degree to which the Death
Benefit under a Policy exceeds the Specified Amount prior to the change.
Changing the Specified Amount could affect the subsequent level of the Death
Benefit while the Policy is in force and the subsequent level of Policy values.
An increase in Specified Amount may increase the net amount at risk under a
Policy, which will increase an Owner's cost of insurance charge. Separate cost
of insurance rates apply to increases in Specified Amount. Conversely, a
decrease in Specified Amount may decrease the net amount at risk, which will
decrease an Owner's cost of insurance charge.
INCREASES. Additional evidence of insurability satisfactory to KILICO will
be required for an increase in Specified Amount. Suicide and incontestability
provisions will apply from the effective date of any increase in Specified
Amount.
DECREASES. Any decrease in Specified Amount will first be applied to the
most recent increases successively, then to the original Specified Amount. A
decrease will not be permitted if the Specified Amount would fall below the
lesser of the initial Specified Amount or $50,000 for an Individual Policy or
$1,000,000 for a Survivorship Policy. If a decrease in the Specified Amount
would result in total premiums paid exceeding the premium limitations prescribed
under tax law to qualify the Policy as a life insurance contract, KILICO will
refund the Policy Owner the amount of such excess above the premium limitations.
Some or all of the amount refunded may be subject to tax. (See "Federal Tax
Matters.")
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<PAGE> 18
KILICO reserves the right to disallow a requested decrease, and will not
permit a requested decrease, among other reasons, (1) if compliance with the
guideline premium limitations under tax law resulting from the requested
decrease would result in immediate termination of the Policy, or (2) if, to
effect the requested decrease, payments to the Owner would have to be made from
Cash Value for compliance with the guideline premium limitations, and the amount
of such payments would exceed the Surrender Value under the Policy.
Any request for an increase or decrease in Specified Amount must be made by
written application to KILICO's Home Office. It will become effective on the
Monthly Processing Date on or next following KILICO's acceptance of the request.
If the Owner is not the Insured, KILICO will also require the consent of the
Insured(s) before accepting a request.
BENEFITS AT MATURITY
If the Insured is living on the Policy Date anniversary nearest the
Insured's 100th birthday (or, if the Policy is a Survivorship Policy, the last
surviving Insured is living on the Policy Date anniversary nearest the last
surviving Insured's 100th birthday), KILICO will pay the Owner the Surrender
Value of the Policy. On the Maturity Date, the Policy will terminate and KILICO
will have no further obligations under the Policy.
CASH VALUE
The Policy's Cash Value will reflect the investment experience of the
selected Subaccounts, the frequency and amount of premiums paid, transfers
between Subaccounts, withdrawals, any Fixed Account or Loan Account values, and
any charges assessed in connection with the Policy. An Owner may make partial
withdrawals of Cash Value or surrender the Policy and receive the Policy's
Surrender Value, which equals the Cash Value less Debt. (See "Surrender
Privilege.") There is no minimum guaranteed Cash Value.
CALCULATION OF CASH VALUE. The Cash Value of the Policy is the total of the
Policy's Separate Account Value, Fixed Account Value and Loan Account value. The
Cash Value is determined on each Valuation Date. It will first be calculated on
the Policy Date. On that date, the Cash Value equals the initial premium, less
the monthly deductions for the first Policy month. (See "Charges and
Deductions.")
On any Valuation Date during the Policy Year, the Policy's Separate Account
Value in any Subaccount will equal:
(1) The Policy's Separate Account Value in the Subaccount at the end
of the preceding Valuation Period, multiplied by the Investment Experience
Factor (defined below) for the current Valuation Period; plus
(2) Any net premiums received during the current Valuation Period
which are allocated to the Subaccount; plus
(3) All amounts transferred to the Subaccount, either from another
Subaccount or the Fixed Account or from the Loan Account in connection with
the repayment of a Policy Loan (see "Policy Benefits and Rights--Policy
Loans") during the current Valuation Period; minus
(4) The pro rata portion of the monthly cost of insurance charge and
any other charges assessed to the Subaccount (see "Charges and
Deductions--Cost of Insurance Charge"); minus
(5) All amounts transferred from the Subaccount during the current
Valuation Period; minus
(6) All amounts withdrawn from the Subaccount during the current
Valuation Period; minus
(7) All amounts loaned from the Subaccount during the current
Valuation Period.
There will also be Cash Value in the Loan Account if there is a Policy Loan
outstanding. The Loan Account is credited with amounts transferred from
Subaccounts in connection with Policy Loans. The Loan Account balance accrues
daily interest at a rate equal to the Adjustable Loan Interest Rate reduced by
not more than 1%. (See "Policy Benefits and Rights--Policy Loans.")
The Cash Value in the Fixed Account is credited with interest at the annual
rate declared by KILICO. The annual rate will never be less than 3%.
ACCUMULATION UNIT VALUE. Each Subaccount has a distinct Accumulation Unit
Value. When net premiums or other amounts are allocated to a Subaccount, a
number of units are purchased based on the Accumulation Unit Value of the
Subaccount at the end of the Valuation Period during which the allocation is
made. When amounts are transferred out of, or deducted from, a Subaccount, units
are redeemed in a similar manner.
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<PAGE> 19
For each Subaccount, the Accumulation Unit Value was initially set at the
same unit value as the net asset value of a share of the underlying Fund. The
Accumulation Unit Value for each subsequent Valuation Period is the Investment
Experience Factor for that Valuation Period multiplied by the Accumulation Unit
Value for the immediately preceding period. Each Valuation Period has a single
Accumulation Unit Value which applies for each day in the period. The number of
Accumulation Units will not change as a result of investment experience. The
Investment Experience Factor may be greater or less than one; therefore, the
Accumulation Unit Value may increase or decrease.
INVESTMENT EXPERIENCE FACTOR. The investment experience of the Separate
Account is calculated by applying the Investment Experience Factor to the
Separate Account Value in each Subaccount during a Valuation Period. Each
Subaccount has its own distinct Investment Experience Factor. The Investment
Experience Factor of a Subaccount for any Valuation Period is determined by
dividing (1) by (2) and subtracting (3) and (4) from the result, where:
(1) is the net result of:
a. The net asset value per share of the investment held in the
Subaccount determined at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
made by the investment held in the Subaccount division, if the
"ex-dividend" date occurs during the current Valuation Period; plus or
minus
c. a credit or charge for any taxes reserved for the current Valuation
Period which KILICO determines to have resulted from the investment
operations of the Subaccount;
(2) is the net asset value per share of the investment held in the
Subaccount, determined at the end of the last prior Valuation Period;
(3) is the factor representing the Mortality and Expense Risk Charge. (See
"Charges and Deductions--Mortality and Expense Risk Charge.")
(4) is the factor representing the Account Maintenance Fee (See "Charges
and Deductions--Policy and Separate Account Administration Charges.")
POLICY LOANS
After the first Policy Year, an Owner may by written request to KILICO
borrow all or part of the maximum loan amount of the Policy. The maximum loan
amount is 90% of the Policy's Cash Value. The amount of any new loan may not
exceed the maximum loan amount less Debt on the date a loan is granted. The
minimum amount of a loan is $500. Any amount due an Owner under a Policy Loan
ordinarily will be paid within 7 days after KILICO receives a loan request at
its Home Office, although payments may be postponed under certain circumstances.
(See "Postponement of Payments," and "Federal Tax Matters.")
On the date a Policy Loan is made, an amount equal to the loan amount will
be transferred from the Separate Account and Fixed Account to the Loan Account.
Unless the Owner directs otherwise, the loaned amount will be deducted from the
Subaccounts and the Fixed Account in proportion to the values that each bears to
the Separate Account Value of the Policy in all of the Subaccounts plus the
Fixed Account Value at the end of the Valuation Period during which the request
is received.
The loan interest will be assessed at an adjustable rate determined by
KILICO at the beginning of each Policy Year. The Policy guarantees that the loan
interest rate will not exceed the greater of the interest rate set forth in the
Policy and a published monthly average, currently Moody's Corporate Bond Yield
Average-Monthly Average Corporates, as published by Moody's Investors Service,
Inc., or any successor to that service, for the calendar month that ends two
months before the loan interest rate is determined by KILICO (the "Adjustable
Loan Interest Rate"). Interest not paid when due will be added to the loan
amount due upon the earlier of the next Policy Date anniversary or when coverage
ceases upon lapse, surrender, death or maturity and bear interest at the same
rate. When interest is added to the loan amount, a transfer in this amount will
be made from the Separate Account and the Fixed Account to the Loan Account.
Cash Value in the Loan Account will earn interest at a declared rate equal
to the Adjustable Loan Interest Rate reduced by not more than 1%. Such earnings
will be allocated to the Loan Account.
LOAN REPAYMENT. While the Policy is in force, Policy Loans may be repaid at
any time, in whole or in part. At the time of repayment, Cash Value in the Loan
Account equal to the amount of the repayment which exceeds the difference
between interest due and interest earned will be allocated to the Subaccounts
and the Fixed
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<PAGE> 20
Account according to the Owner's current allocation instructions, unless
otherwise requested by the Owner. Transfers from the Loan Account to the
Separate Account or the Fixed Account as a result of the repayment of Debt will
be allocated at the end of the Valuation Period during which the repayment is
received. Such transfers will not be counted in determining the transfers made
within a 15 day period.
EFFECTS OF POLICY LOAN. Policy Loans decrease Surrender Value and,
therefore, the amount available to pay the charges necessary to keep the Policy
in force. If Surrender Value on the day immediately preceding a Monthly
Processing Date is less than the monthly deductions for the next month, KILICO
will notify the Owner. (See "General Provisions--Written Notices and Requests.")
The Policy will lapse and terminate without value, unless a sufficient payment
is made to KILICO within 61 days of the date such notice is sent to the Owner.
(See "The Policy--Policy Lapse and Reinstatement.")
EFFECT ON INVESTMENT EXPERIENCE. A Policy Loan will have an effect on the
Cash Value of a Policy. The collateral for the loan (the amount held in the Loan
Account) does not participate in the experience of the Subaccounts or the
current interest rate of the Fixed Accounts while the loan is outstanding. If
the interest credited to the Loan Account is more than the amount that would
have been earned in the Subaccounts or the Fixed Account, the Cash Value will,
and the Death Benefit may, be higher as a result of the loan. Conversely, if the
amount credited to the Loan Account is less than would have been earned in the
Subaccounts or the Fixed Account, the Cash Value, as well as the Death Benefit,
may be less.
TAX TREATMENT. If the Policy is treated as a modified endowment contract, a
loan will be treated as a distribution and will be includible in income to the
extent the Cash Value exceeds the premiums paid for the Policy. Therefore, a
loan may be subject to Federal income tax and a 10% tax penalty may also apply.
(See "Federal Tax Matters.")
SURRENDER PRIVILEGE
While the Insured is living (or, if the Policy is a Survivorship Policy, at
any time prior to the earlier of the death of the last surviving Insured and the
Maturity Date) and provided the Policy is in force, the Owner may surrender the
Policy for its Surrender Value. To surrender the Policy, the Owner must make
written request to KILICO at its Home Office and return the Policy to KILICO.
The Surrender Value is equal to the Cash Value less any Debt.
PARTIAL WITHDRAWALS. After the first Policy Year, an Owner may make
withdrawals of amounts less than the Surrender Value. The minimum amount of each
withdrawal is $500. A withdrawal will decrease the Cash Value by the amount of
the withdrawal and, if Death Benefit Option A is in effect, will reduce the
Specified Amount by the amount of the withdrawal.
FREE-LOOK PERIOD AND EXCHANGE RIGHTS
The Owner may, until the end of the period of time specified in the Policy,
examine the Policy and return it for a refund. The applicable period of time
will depend on the state in which the Policy is issued; however, it will be at
least 10 days from the date the Policy is received by the Owner, or, 45 days
after the Owner completes the application for insurance, whichever is later. The
amount of the refund will depend on the state in which the Policy is issued, but
will generally be the sum of the Cash Value in the Subaccounts and the Fixed
Account. An Owner seeking a refund should return the Policy to KILICO at its
Home Office or to the agent who sold the Policy.
In certain states, at any time during the first two years after the Issue
Date, the Owner may exchange the Policy for a non-variable permanent fixed
benefit life insurance policy then currently being offered by KILICO or an
affiliate on the life of the Insured(s). No evidence of insurability will be
required. The amount of the new policy may be, at the election of the Owner,
either the initial Death Benefit or the same net amount at risk as the Policy on
the exchange date. All Debt under the Policy must be repaid and the surrender of
the Policy is required before the exchange is made. The Policy Date and issue
age will be the same as existed under the Policy.
CHARGES AND DEDUCTIONS
DEDUCTIONS FROM PREMIUMS
A state and local premium tax charge equal to the actual state tax rate may
be deducted from each premium payment under the Policy prior to allocation of
the net premium. This charge is to reimburse KILICO for the payment of state
premium taxes. State and local premium tax rates range from .75% to 5%. KILICO
expects to pay an average state premium tax rate of approximately 2.5%, but the
actual premium tax attributable to a Policy may be more or less. This charge may
be increased or decreased to reflect any changes in state and local premium
17
<PAGE> 21
tax rates. In addition, a charge for federal taxes equal to 1% of each premium
payment will be deducted to compensate KILICO for a higher corporate income tax
liability resulting from changes made to the Internal Revenue Code by the
Omnibus Budget Reconciliation Act of 1990.
COST OF INSURANCE CHARGE
A monthly deduction is made from the Subaccounts and the Fixed Account for
the cost of insurance to cover KILICO's anticipated mortality costs. The cost of
insurance charge is deducted monthly in advance and, unless otherwise requested,
is allocated among the Subaccounts and the Fixed Account in proportion each
bears to the Cash Value of the Policy less Debt.
The cost of insurance will be deducted on the Policy Date and on each
Monthly Processing Date thereafter by the cancellation of units. If the Monthly
Processing Date falls on a day other than a Valuation Date, the charge will be
determined on the next Valuation Date. The cost of insurance charge is
determined by multiplying the applicable cost of insurance rate (see below) by
the "net amount at risk" for each Policy month. The net amount at risk is equal
to the Death Benefit divided by 1.0024663 minus the Cash Value on the Monthly
Processing Date.
COST OF INSURANCE RATE. The monthly cost of insurance rates are based on
the issue age (or attained age in the case of increases in Specified Amount),
sex, rate class of the Insured(s) and Policy Year. The monthly cost of insurance
rates will be determined by KILICO based on its expectations as to future
mortality experience. Any change in the schedule of rates will apply to all
individuals of the same class as the Insured(s). The cost of insurance rate may
never exceed those shown in the table of guaranteed maximum cost of insurance
rates in the Policy. The guaranteed maximum cost of insurance rates are based on
the 1980 Commissioner's Standard Ordinary Smoker and Non-Smoker Mortality
Tables, Age Nearest Birthday, published by the National Association of Insurance
Commissioners. Separate costs of insurance rates apply to any increases in
Specified Amount.
RATE CLASS. The rate class of an Insured will affect the cost of insurance
rate. KILICO currently places Insureds in premier and preferred rate classes and
rate classes involving a higher mortality risk. The cost of insurance rates for
rate classes involving a higher mortality risk are multiples of the premier and
preferred rates. (See "Charges and Deductions--Cost of Insurance Rate," above.)
MORTALITY AND EXPENSE RISK CHARGE
A daily charge is deducted from the Subaccounts of the Separate Account for
mortality and expense risks assumed by KILICO. The mortality and expense risk
assumed is that KILICO's estimates of longevity and of the expenses incurred
over the lengthy period the Policy may be in effect--which estimates are the
basis for the level of other charges KILICO makes under the Policy--will not be
correct.
The amount of the mortality and expense risk charge will be determined
based upon the cumulative amount of premiums paid with respect to a Policy,
prior to any deduction for state and local premium tax and federal taxes, and
net of any partial withdrawals or Policy Loans. The following table reflects the
effective annual rates at which the mortality and expense risk charge is
currently deducted. These current rates are subject to change, but the mortality
and expense risk charge is guaranteed never to exceed an effective annual rate
of 0.90% of the average net assets of the Subaccounts of the Separate Account.
The mortality and expense risk charge will be assessed daily against the average
net assets of the Subaccounts of the Separate Account at a daily rate of the
effective annual rate divided by 365. The effects of simple compounding may
result in charges slightly in excess of the effective annual rate.
<TABLE>
<CAPTION>
CUMULATIVE MORTALITY AND EXPENSE
PREMIUMS PAID RISK CHARGE
------------- ---------------------
<S> <C>
Up to $100,000................................... 0.65%
$100,001 - $250,000.............................. 0.50%
$250,001 - $500,000.............................. 0.40%
$500,001 and higher.............................. 0.30%
</TABLE>
For the purpose of determining the amount of cumulative premiums paid in
connection with any Policy, KILICO reserves the right to aggregate cumulative
premiums paid in connection with one or more Policies which have a common
grantor, Owner, sponsor (such as in split dollar arrangements), or which involve
some other group arrangement.
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<PAGE> 22
POLICY AND SEPARATE ACCOUNT ADMINISTRATION CHARGES
KILICO performs or delegates all administrative functions relative to the
Policies and the Separate Account. Expenses of Policy administration include
those associated with preparing the Policies and confirmations, maintenance of
Owner records, and the cost of other services necessary for Owner servicing.
Separate Account administration expenses include those related to preparation of
annual reports and statements, maintenance of Subaccount records, and filing
fees. In addition, certain expenses, such as administrative personnel costs,
mailing costs, data processing costs, legal fees, accounting fees, and costs
associated with accounting, valuation, regulatory and reporting requirements,
are attributable to both the Policies and maintenance of the Separate Account.
MONTHLY ADMINISTRATIVE CHARGE. The Monthly Administrative Charge is
deducted from the Policy's Cash Value on each Monthly Processing Date in the
amount of $20 per month during the first Policy Year and the first 12 months
following an increase in Specified Amount, and $5 per month at all other times.
ACCOUNT MAINTENANCE CHARGE. To further defray the costs of the
administrative functions described above, KILICO deducts a daily charge from the
Subaccount of the Separate Account. This charge will be at an effective annual
rate of 0.45% of the average net assets of the Subaccount of the Separate
Account. The Account Maintenance Charge will be assessed daily against the
average net assets of the Subaccount of the Separate Account at a daily rate of
the effective annual rate divided by 365. The effects of simple compounding may
result in fees slightly in excess of the effective annual rate.
Pursuant to its administrative services agreement with KILICO, Bancorp
Services L.L.C. ("BSC") provides certain services to KILICO in connection with
the Policy and management of the Separate Account. BSC receives a fee from
KILICO based on the services it renders. KILICO is solely responsible for
payment of the fee.
In addition, KILICO and its affiliates have other business relationships
with unaffiliated service providers who may have business relationships with
prospective purchasers of the Policy. Thus, for example, KILICO and its
affiliates have certain significant financial arrangements with BSC relating to
the development and implementation of administrative and informational systems,
product design, and the development of marketing materials for the Policy and
other insurance and investment products. BSC may be called upon to perform other
services for KILICO and its affiliates in connection with the sale of the
Policy. KILICO and its affiliates also may enter into other business and
investment arrangements with BSC.
OTHER CHARGES
TAXES. Currently, no charges are made against the Separate Account for
Federal, state or other taxes that may be attributable to the Separate Account.
KILICO may, however, in the future impose charges for Federal income taxes
attributable to the Separate Account. Charges for other taxes, if any,
attributable to the Policy may also be made. (See "Federal Tax Matters.")
CHARGES AGAINST THE FUND. Under the investment advisory agreements between
each Fund, on behalf of the Portfolios, and the investment manager and/or
adviser, such entities provide investment advisory and/or management services
for the Portfolios. The Funds are responsible for the advisory fees and various
other expenses. The investment advisory fees differ with respect to each of the
Portfolios. (See "The Funds.")
Scudder Kemper Investments, Inc. ("SKI"), an affiliate of KILICO, serves as
investment manager for each of the Kemper Portfolios, subject to the policies
established by the trustees of the Investors Fund Series. For its advisory
services to the Portfolios, SKI receives compensation monthly at annual rates
equal to .50 of 1%, .55 of 1%, .60 of 1%, .60 of 1%, .55 of 1%, .75 of 1%, .65
of 1%, .60 of 1%, .75 of 1%, .75 of 1%, .75 of 1%, .60 of 1%, .60 of 1%, .60 of
1%, .65 of 1%, and .75% of 1% of the average daily net asset values of the
Kemper Money Market Portfolio, the Kemper Total Return Portfolio, the Kemper
High Yield Portfolio, the Kemper Growth Portfolio, the Kemper Government
Securities Portfolio, the Kemper International Portfolio, the Kemper Small Cap
Growth Portfolio, the Kemper Investment Grade Bond Portfolio, the Kemper
Contrarian Value Portfolio, the Kemper Small Cap Value Portfolio, the Kemper
Value+Growth Portfolio, the Kemper Horizon 20+ Portfolio, the Kemper Horizon 10+
Portfolio, the Kemper Horizon 5 Portfolio, the Kemper Blue Chip Portfolio, and
the Kemper Global Income Portfolio, respectively. SKI uses the services of
Zurich Investment Management Limited ("ZIML"), an affiliate of SKI, as a
sub-adviser for the Kemper International Portfolio and Kemper Global Income
Portfolio. SKI pays ZIML for its services a sub-advisory fee, payable monthly at
the following annual rates applied to the portion of the average daily net
assets of the applicable Portfolio allocated by SKI to ZIML for management: .35
of 1% for the Kemper International Portfolio and .30 of 1% for the Kemper Global
Income Portfolio.
Evergreen Asset Management Corp. has entered into a sub-advisory agreement
with Lieber & Company for the Evergreen VA Fund, Evergreen VA Growth and Income
Fund, Evergreen VA Foundation Fund, and
19
<PAGE> 23
Evergreen VA Global Leaders Fund Portfolios of the Evergreen Variable Annuity
Trust, as described in the prospectus for the Evergreen Variable Annuity Trust.
Evergreen Asset is solely responsible for compensating Lieber & Company. For its
services as investment adviser, Evergreen Asset receives an annual fee equal to
the following percentages of average daily net asset values: Evergreen VA Fund
0.95 of 1%; Evergreen VA Growth and Income Fund 0.95 of 1%; Evergreen VA
Foundation Fund 0.825 of 1%; and Evergreen VA Global Leaders Fund 0.95 of 1%.
For its services as investment adviser to Evergreen VA Strategic Income Fund,
Keystone Investment Management Company receives a fee consisting of 2% of gross
investment income earned by the Portfolio during each fiscal period, plus a
maximum percentage of 0.45 of 1% of average daily net assets. The Capital
Management Group of First Union National Bank receives an annual fee equal to
0.60 of 1% of average daily net assets of the Evergreen VA Aggressive Growth
Fund Portfolio for its services as investment adviser.
Other Expenses range between .04 of 1% and .20 of 1% of average daily net
asset values for the Kemper Money Market Portfolio, Kemper Total Return
Portfolio, Kemper High Yield Portfolio, Kemper Growth Portfolio, Kemper
Government Securities Portfolio, Kemper International Portfolio and Kemper Small
Cap Growth Portfolio of the Investors Fund Series. Other Expenses are estimated
to range between .20 of 1% and .30 of 1% of average daily net asset values for
the Kemper Investment Grade Bond Portfolio, Kemper Contrarian Value Portfolio,
Kemper Small Cap Value Portfolio, Kemper Value+Growth Portfolio, Kemper Horizon
20+ Portfolio, Kemper Horizon 10+ Portfolio, Kemper Horizon 5 Portfolio, and
Kemper Blue Chip Portfolio of the Investors Fund Series. Other Expenses, after
any expense waivers and reimbursements, range between .05 of 1% and .40 of 1% of
average daily net asset values for the Evergreen Variable Annuity Trust. Absent
the expense waivers and reimbursements, Other Expenses would be .36%, .26%, and
.25%, and Total Expenses would be 1.31%, 1.23%, and 1.10%, for the Evergreen VA
Fund, Evergreen VA Growth and Income Fund, and Evergreen VA Foundation Fund,
respectively. Aggregate Operating Expenses (including investment advisory fees,
but excluding interest, brokerage commissions and extraordinary expenses) are
voluntarily limited to 1.00% of average daily net assets for the Evergreen VA
Global Leaders Fund, Evergreen VA Strategic Income Fund, and Evergreen VA
Aggressive Growth Fund.
KILICO may receive compensation from the investment advisers of the Funds
for services related to the Funds. Such compensation will be consistent with the
services rendered or the cost savings resulting from the arrangement and
therefore may differ between Funds. For more information concerning the
investment advisory fees and other charges against the Portfolios, see the
prospectuses for the funds and the statements of additional information
available upon request.
GENERAL PROVISIONS
SETTLEMENT OPTIONS
The Owner, or Beneficiary at the death of the Insured (or last surviving
Insured) if no election by the Owner is in effect, may elect to have all of the
Death Benefit or Surrender Value of this Policy paid in a lump sum or have the
amount applied to one of the Settlement Options. Payments under these options
will not be affected by the investment experience of the Separate Account after
proceeds are applied under a Settlement Option. Payment will be made as elected
by the payee on a monthly, quarterly, semi-annual or annual basis. The option
selected must result in a payment that is at least equal to KILICO's required
minimum, according to rules in effect at the time the option is chosen. If at
any time the payments are less than the minimum payment, KILICO may increase the
period between payments to quarterly, semi-annual or annual so that the payment
is at least equal to KILICO's minimum payment or to make the payment in one lump
sum.
The Cash Value on the day immediately preceding the date on which the first
benefit payment is due will first be reduced by any Debt. The Surrender Value
will be used to determine the benefit payment. The payment will be based on the
Settlement Option elected in accordance with the appropriate settlement option
table.
OPTION 1--INCOME FOR SPECIFIED PERIOD. KILICO will pay income for the
period and payment mode elected, but not less than 5 years nor more than 30
years.
OPTION 2--LIFE INCOME. KILICO will pay a monthly income to the payee during
the payee's lifetime. If this Option is elected, annuity payments terminate
automatically and immediately on the death of the payee without regard to the
number or total amount of payments made. Thus, it is possible for an individual
to receive only one payment if death occurred prior to the date the second
payment was due.
OPTION 3--LIFE INCOME WITH INSTALLMENTS GUARANTEED. KILICO will pay a
monthly income for the guaranteed period elected and thereafter for the
remaining lifetime of the payee. The period elected may only be 5, 10, 15 or 20
years.
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OPTION 4--JOINT AND SURVIVOR INCOME. KILICO will pay the full monthly
income while both payees are living. Upon the death of either payee, the income
will continue during the lifetime of the surviving payee. The surviving payee's
income shall be the percentage of such full amount chosen at the time of
election of this option. The percentages available are 50%, 66 2/3%, 75% and
100%. Payments terminate automatically and immediately upon the death of the
surviving payee without regard to the number or total amount of payments
received.
KILICO's consent is necessary for any other payment methods.
The guaranteed monthly payments are based on an interest rate of 2.50% per
year and, where mortality is involved, the "1983 Table a" individual mortality
table developed by the Society of Actuaries, with a 5-year setback.
POSTPONEMENT OF PAYMENTS
GENERAL. Payment of any amount due upon: (a) Policy termination at the
Maturity Date, (b) surrender of the Policy, (c) payment of any Policy Loan, or
(d) death of the Insured (or last surviving Insured, may be postponed whenever:
(1) The New York Stock Exchange is closed other than customary weekend
and holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the Commission;
(2) The Commission by order permits postponement for the protection of
Owners; or
(3) An emergency exists, as determined by the Commission, as a result
of which disposal of securities of the Funds is not reasonably practicable
or it is not reasonably practicable to determine the value of the net
assets of the Separate Account.
Transfers may also be postponed under these circumstances.
Death Benefit payments are generally not subject to deferral. However,
KILICO may defer for up to six months payments of any surrender proceeds,
withdrawal amounts, or loan amounts from the Fixed Account, unless otherwise
required by law.
PAYMENT NOT HONORED BY BANK. The portion of any payment due under the
Policy which is derived from any amount paid to KILICO by check or draft may be
postponed until such time as KILICO determines that such instrument has been
honored by the bank upon which it was drawn.
THE CONTRACT
The Policy, any endorsements, the application, and any supplemental
application(s) constitute the entire contract between KILICO and the Owner. All
statements made by an Owner or Insured or contained in the application and any
supplemental application(s) will, in the absence of fraud or misrepresentation,
be deemed representations and not warranties.
Only the President, the Secretary, or an Assistant Secretary of KILICO is
authorized to change or waive the terms of a Policy. Any change or waiver must
be in writing and signed by one of those persons.
MISSTATEMENT OF AGE OR SEX
If the age or sex of an Insured is misstated, the Death Benefit will be
changed to what the cost of insurance on the previous Monthly Processing Date
would have purchased based on the correct sex and age.
INCONTESTABILITY
KILICO may contest the validity of a Policy if any material
misrepresentations are made in the application or any supplemental
application(s). However, a Policy will be incontestable after it has been in
force during the lifetime of the Insured (or, if the Policy is a Survivorship
Policy, during the lifetimes of both Insureds) for two years from the Issue
Date. A new two-year contestability period will apply to each increase in
Specified Amount and to reinstatements beginning with the effective date of the
increase or reinstatement.
SUICIDE
Suicide by an Insured, while sane or insane, within two years from the
Issue Date of the Policy is a risk not assumed under the Policy. KILICO's
liability for such suicide is limited to the premiums paid less any withdrawals
and Debt. When the laws of the state in which a Policy is delivered require less
than a two-year period, the period or amount paid will be as stated in such
laws. If the Policy is a Survivorship Policy and there is a surviving Insured,
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KILICO will make a new policy available to the surviving Insured, without
evidence of insurability. The new policy will have the same amount of insurance
coverage, issue age, policy date, and rate class as the Policy when it was
issued. A new two-year period will apply to increases in Specified Amount and to
reinstatements beginning with the effective date of the increase or
reinstatement.
ASSIGNMENT
No assignment of a Policy is binding on KILICO until it is received and
accepted by KILICO at its Home Office. KILICO assumes no responsibility for the
validity of the assignment. Any claim under an assignment is subject to proof of
the extent of the interest of the assignee. If a Policy is assigned, the rights
of the Owner and Beneficiary are subject to the rights of the assignee of
record. An assignment of coverage may have tax consequences. (See "Federal Tax
Matters.")
NONPARTICIPATING
The Policy will not pay dividends. It will not participate in any of
KILICO's surplus or earnings.
OWNER AND BENEFICIARY
Unless otherwise provided in the application or subsequently changed, the
Insured is the Owner. The Owner has exclusive right to cancel or amend the
Policy by agreement with KILICO and exercise every option or right conferred by
this Policy, including the right of assignment.
Primary and secondary Beneficiaries may be designated by the Owner in the
application. If changed, the primary or secondary Beneficiary is as shown in the
latest change filed with KILICO. One or more primary or secondary Beneficiaries
may be named. In such case, the proceeds of the Policy will be paid in equal
shares to the survivors in the appropriate beneficiary class, unless otherwise
requested by the Owner. If no Beneficiary is designated or survives the Insured,
the Insured's estate will be the Beneficiary. If the Policy is a Survivorship
Policy and no Beneficiary is living upon the death of the last surviving
Insured, the estate of the last surviving Insured will be the Beneficiary. If a
Beneficiary dies within ten days of the Insured's death, proceeds of the Policy
will be paid as if the Insured had survived the Beneficiary. The interest of any
Beneficiary may be subject to that of an assignee.
The Owner may, at any time during the life of the Insured(s) and while the
Policy is in force, designate in writing a new Owner or Beneficiary. Any change
of Owner or Beneficiary must be made in writing in a form acceptable to KILICO.
Any such change must not be prohibited by the terms of an existing assignment,
beneficiary designation or other restriction. KILICO reserves the right to
require the return of the Policy for endorsement for any change. The change will
take effect as of the date the request is signed; however, KILICO will not be
liable for any payment made or other action taken before the notice has been
received at KILICO's Home Office. A change of ownership may have tax
consequences. (See "Federal Tax Matters.")
RECORDS AND REPORTS
KILICO or its designee will maintain all records relating to the Separate
Account. KILICO will send Owners, at their last known address of record, an
annual report stating the Death Benefit, the Accumulation Unit Value, the Cash
Value and Surrender Value under the Policy, and indicating any additional
premium payments, partial withdrawals, transfers, Policy Loans and repayments
and charges made during the Policy Year. In addition, Owners will be sent
confirmations and acknowledgments of various transactions. Owners will also be
sent annual and semi-annual reports for the Fund to the extent required by the
1940 Act.
WRITTEN NOTICES AND REQUESTS
Any written notice or request to be sent to KILICO should be sent to its
Home Office, 1 Kemper Drive, Long Grove, Illinois 60049. The notice or request
should include the Policy number and the full name of the Insured(s). Any notice
sent by KILICO to an Owner will be sent to the address shown in the application
unless an address change has been filed with KILICO.
OPTIONAL INSURANCE BENEFITS
Subject to certain requirements, an Owner may elect to add one or both of
the following optional insurance benefits to the Policy by a Rider at the time
of application for a Policy. These optional benefits are: continuation of the
Policy under an extended Maturity Date and acceleration of the payment of a
portion of the Death Benefit when an Insured is terminally ill. The cost of any
additional insurance benefits will be deducted as part of the
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monthly deductions. Certain restrictions may apply. Restrictions and provisions
related to these benefits are more fully described in the applicable rider.
Samples of the provisions are available from KILICO upon written request.
DOLLAR COST AVERAGING
An Owner may predesignate a portion of the Cash Value under a Policy
attributable to the Fixed Account, the Kemper Money Market Subaccount or the
Kemper Government Securities Subaccount (the designated account is referred to
as the "DCA Account") to be automatically transferred on a monthly basis to one
or more of the other Subaccounts and the Fixed Account. An Owner may enroll in
this program at the time the Policy is issued or anytime thereafter by properly
completing the Dollar Cost Averaging enrollment form and returning it to KILICO
at its Home Office at least five (5) business days prior to the 10th day of a
month, which is the date that all Dollar Cost Averaging transfers will be made
("Transfer Date").
Transfers will commence on the first Transfer Date following the Trade Date
if the initial net premium has been allocated to the Kemper Money Market
Subaccount. In all other cases transfers will commence on the first Transfer
Date following the Issue, subject to the requirements stated above. Transfers
will be made in the amounts designated by the Policy Owner and must be at least
$500 per Subaccount or Fixed Account. The total Cash Value in the DCA Account at
the time Dollar Cost Averaging is elected must be at least equal to the greater
of $10,000 or the amount designated to be transferred on each Transfer Date
multiplied by the duration selected. Dollar Cost Averaging will cease
automatically if the Cash Value does not equal or exceed the amount designated
to be transferred on each Transfer Date, and the remaining amount will be
transferred.
Dollar Cost Averaging will terminate when (i) the number of designated
monthly transfers has been completed, (ii) the Cash Value attributable to the
DCA Account is insufficient to complete the next transfer, (iii) the Policy
Owner requests termination in writing and such writing is received by KILICO at
its Home Office at least five (5) business days prior to the next Transfer Date
in order to cancel the transfer scheduled to take effect on such date, or (iv)
the Policy is surrendered. KILICO reserves the right to amend Dollar Cost
Averaging on thirty (30) days notice or terminate it at any time.
An Owner may initiate, reinstate or change Dollar Cost Averaging or change
existing Dollar Cost Averaging terms by properly completing the new enrollment
form and returning it to KILICO at its Home Office at least five (5) business
days, (ten (10) business days for Fixed Account transfers), prior to the next
Transfer Date such transfer is to be made.
When utilizing Dollar Cost Averaging, an Owner must be invested in the DCA
Account and may be invested in the Fixed Account and a maximum of eight (8)
other Subaccounts at any given time.
SYSTEMATIC WITHDRAWAL PLAN
KILICO administers a Systematic Withdrawal Plan ("SWP") which allows
certain Policy Owners to preauthorize periodic withdrawals after the first
Policy Year. Policy Owners entering into a SWP agreement instruct KILICO to
withdraw selected amounts from the Fixed Account or from a maximum of two (2)
Subaccounts on a monthly, quarterly, semi-annual or annual basis. Currently the
SWP is available to Policy Owners who request a minimum $500 periodic payment.
The amounts distributed under the SWP are partial withdrawals. (See "Policy
Benefits and Rights--Surrender Privileges.") Withdrawals taken under the SWP may
be subject to income taxes, withholding and tax penalties. (See "Federal Tax
Matters.") Policy Owners interested in the SWP may obtain an application and
full information concerning this program and its restrictions from their
representative or KILICO's Home Office. The right is reserved to amend the SWP
on thirty (30) days' notice. The SWP may be terminated at any time by the Policy
Owner or KILICO.
DISTRIBUTION OF POLICIES
The Policy is sold by licensed insurance representatives who represent
KILICO and who are registered representatives of broker-dealers which are
registered under the Securities Exchange Act of 1934 and are members of the
National Association of Securities Dealers, Inc. The Policy is distributed
through the principal underwriter, Investors Brokerage Services, Inc. ("IBS"),
an affiliate of KILICO. IBS is engaged in the sale and distribution of other
variable life policies and annuities. Pursuant to an Underwriting Agreement
between KILICO and IBS, IBS is authorized to enter into Selling Group Agreements
with broker-dealers that are registered under the 1934 Act and are members of
the NASD. IBS is engaged in the sale and distribution of other variable life
policies and annuities.
The Policy is available for distribution through entities or persons that
provide separate trust or consultative estate and business planning services for
which they charge a fee. The fees are not a part of the Policy and KILICO
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is not responsible for the payment of the fees. Under special circumstances with
KILICO's consent, the Policy may be distributed through entities or persons that
do not provide such additional services.
Notwithstanding that no explicit sales load is imposed under the Policies,
KILICO, through IBS, pays compensation, not to exceed 4% of premiums paid, to
selected broker-dealers. Part of the compensation will be used to cover the
broker-dealer's costs including but not limited to those associated with the
provision of sales, training and other marketing support, record keeping,
compliance oversight, and general office related overhead. KILICO, through IBS
and pursuant to selling agreements, may pay compensation, including marketing
allowances to licensed broker-dealers, both affiliated and unaffiliated, in
recognition of the costs and expenses associated with any or all of the
following: product design, distribution channel development, advanced
underwriting, technology development, preparation of sales material and other
collateral marketing support required for the sale and distribution of the
Policies.
GROUP OR SPONSORED ARRANGEMENTS
Policies may be purchased under group or sponsored arrangements, as well as
on an individual basis. A "group arrangement" includes a program under which a
trustee, employer or similar entity purchases individual Policies covering a
group of individuals on a group basis. Examples of such arrangements are
employer-sponsored benefit plans and deferred compensation plans. A "sponsored
arrangement" includes a program under which an employer permits group
solicitation of its employees or an association permits group solicitation of
its members for the purchase of Policies on an individual basis.
KILICO may reduce the following types of charges for Policies issued in
connection with group or sponsored arrangements: the cost of insurance charge,
mortality and expense risk charges, and administration charges. KILICO may also
issue Policies in connection with group or sponsored arrangements on a
"non-medical" or guaranteed issue basis. Due to the underwriting criteria
established for Policies issued on a non-medical, guaranteed issue basis, actual
monthly cost of insurance charges may be higher than the current cost of
insurance charges under otherwise identical Policies that are medically
underwritten. In addition, KILICO may also specify different minimum initial
premiums at issue for Policies issued in connection with group or sponsored
arrangements.
The amounts of any reduction, the charges to be reduced, the elimination or
modification of underwriting requirements, and the criteria for applying a
reduction or modification will generally reflect the reduced sales and
administrative effort, costs and differing mortality experience appropriate to
the circumstances giving rise to the reduction or modification. The charges will
be reduced in accordance with KILICO's practice in effect when the Policy is
issued. The elimination or modification of underwriting requirements will be
done in accordance with KILICO's administrative procedures with respect to
underwriting when the Policy is issued. Reductions and modifications will not be
made where prohibited by applicable law and will not be unfairly discriminatory
against any person including the purchasers to whom the reduction or
modification applies and all other Owners of the Policy.
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion of the federal income tax treatment of the Policy
is not exhaustive, does not purport to cover all situations, and is not intended
as tax advice. The federal income tax treatment of the Policy is unclear in
certain circumstances, and a qualified tax adviser should always be consulted
with regard to the application of law to individual circumstances. This
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Department regulations, and interpretations existing on the
date of this Prospectus. These authorities, however, are subject to change by
Congress, the Treasury Department, and judicial decisions.
This discussion does not address state or local tax consequences associated
with the purchase of the Policy. In addition, KILICO MAKES NO GUARANTEE
REGARDING ANY TAX TREATMENT -- FEDERAL, STATE OR LOCAL -- OF ANY POLICY OR OF
ANY TRANSACTION INVOLVING A POLICY.
KILICO'S TAX STATUS
Under current interpretations of federal income tax law, KILICO is taxed as
a life insurance company and the operations of the Separate Account are treated
as part of the total operations of KILICO. The operations of the Separate
Account do not materially affect KILICO's Federal income tax liability because
KILICO is allowed a
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deduction to the extent that net investment income of the Separate Account is
applied to increase Policy Cash Values. KILICO may incur state and local taxes
attributable to the Separate Account. At present, these taxes are not
significant. Accordingly, KILICO does not charge or credit the Separate Account
for Federal, state or local taxes. However, KILICO's federal income taxes are
increased in respect of the Policies because of the federal tax law's treatment
of deferred acquisition costs. Accordingly, a charge equal to 1% of each premium
payment in all Policy Years is made to compensate KILICO for its higher
corporate income tax liability.
If there is a material change in applicable federal, state or local law,
charges or credits may be made to the Separate Account for federal, state or
local taxes, or reserves for such taxes, if any, attributable to the Separate
Account. Such charges or credits will be determined independent of the taxes
actually paid by KILICO.
TAXATION OF LIFE INSURANCE POLICIES
TAX STATUS OF THE POLICY. Section 7702 of the Code establishes a statutory
definition of life insurance for federal tax purposes. KILICO believes that the
Policy will meet the current statutory definition of life insurance, which
places limitations on the amount of premiums that may be paid and the Cash
Values that can accumulate relative to the Death Benefit. As a result, the Death
Benefit payable under the Policy will generally be excludable from the
Beneficiary's gross income, and interest and other income credited under the
Policy will not be taxable unless certain withdrawals are made (or are deemed to
be made) from the Policy prior to the Insured's death, as discussed below. This
tax treatment will only apply, however, if (1) the investments of the Separate
Account are "adequately diversified" in accordance with Treasury Department
regulations, and (2) KILICO, rather than the Policy Owner, is considered the
owner of the assets of the Separate Account for federal income tax purposes.
DIVERSIFICATION REQUIREMENTS. The Code and Treasury Department regulations
prescribe the manner in which the investments of a segregated asset account,
such as the Separate Account, are to be "adequately diversified." If the
Separate Account fails to comply with these diversification standards, the
Policy will not be treated as a life insurance contract for federal income tax
purposes and the Owner would generally be taxable currently on the income on the
contract (as defined in the tax law). KILICO expects that the Separate Account,
through the Funds, will comply with the diversification requirements prescribed
by the Code and Treasury Department regulations.
OWNERSHIP TREATMENT. In certain circumstances, variable life insurance
contract owners may be considered the owners, for federal income tax purposes,
of the assets of a segregated asset account, such as the Separate Account, used
to support their contracts. In those circumstances, income and gains from the
segregated asset account would be includible in the contract owners' gross
income. The Internal Revenue Service (the "IRS") has stated in published rulings
that a variable contract owner will be considered the owner of the assets of a
segregated asset account if the owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. In
addition, the Treasury Department announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts [of a segregated asset account] without
being treated as owners of the underlying assets." As of the date of this
Prospectus, no such guidance has been issued.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of the assets of a segregated
asset account. For example, the Owner of this Policy has the choice of more
investment options to which to allocate premium payments and Separate Account
values, and may be able to transfer among investment options more frequently,
than in such rulings. These differences could result in the Policy Owner being
treated as the owner of a portion of the assets of the Separate Account and thus
subject to current taxation on the income and gains from those assets. In
addition, KILICO does not know what standards will be set forth in the
regulations or rulings which the Treasury Department has stated it expects to
issue. KILICO therefore reserves the right to modify the Policy as necessary to
attempt to prevent Policy Owners from being considered the owners of the assets
of the Separate Account. However, there is no assurance that such efforts would
be successful.
The remainder of this discussion assumes that the Policy will be treated as
a life insurance contract for federal tax purposes.
TAX TREATMENT OF LIFE INSURANCE DEATH BENEFIT PROCEEDS. In general, the
amount of the Death Benefit payable under a Policy by reason of the death of the
Insured is excludable from gross income under Section 101 of the Code. Certain
transfers of the Policy for valuable consideration, however, may result in a
portion of the
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Death Benefit being taxable. If the Death Benefit is not received in a lump sum
and is, instead, applied under a Settlement Option, generally payments will be
prorated between amounts attributable to the Death Benefit, which will be
excludable from the Beneficiary's income, and amounts attributable to interest
(accruing after the Insured's death), which will be includible in the
Beneficiary's income.
TAX DEFERRAL DURING ACCUMULATION PERIOD. Under existing provisions of the
Code, except as described below, any increase in an Owner's Cash Value is
generally not taxable to the Owner unless amounts are received (or are deemed to
be received) from the Policy prior to the Insured's death. If there is a
surrender of the Policy, an amount equal to the excess of the Cash Value over
the "investment in the contract" will be includible in the Owner's income. The
"investment in the contract" generally is the aggregate premium payments less
the aggregate amount received under the Policy previously to the extent such
amounts received were excludable from gross income. Whether withdrawals (or
other amounts deemed to be distributed) from the Policy constitute income to the
Owner depends, in part, upon whether the Policy is considered a "modified
endowment contract" ("MEC") for federal income tax purposes.
POLICIES WHICH ARE NOT MECS
TAX TREATMENT OF WITHDRAWALS GENERALLY. If the Policy is not a MEC
(described below), the amount of any withdrawal from the Policy generally will
be treated first as non-taxable recovery of premiums paid and then as income
from the Policy. Thus, a withdrawal from a Policy that is not a MEC generally
will not be includible in income except to the extent the withdrawal exceeds the
investment in the contract immediately before the withdrawal.
CERTAIN DISTRIBUTIONS REQUIRED BY THE TAX LAW IN THE FIRST 15 POLICY
YEARS. As indicated above, section 7702 places limitations on the amount of
premiums that may be paid and the Cash Values that can accumulate relative to
the Death Benefit. Where cash distributions are required under section 7702 in
connection with a reduction in benefits during the first 15 years after the
Policy is issued (or if withdrawals are made in anticipation of a reduction in
benefits, within the meaning of the tax law, during this period), some or all of
such amounts may be includible in income notwithstanding the general rule
described in the preceding paragraph. A reduction in benefits may result upon a
decrease in the Specified Amount, a change from an Option B Death Benefit to an
Option A Death Benefit, if withdrawals are made, and in certain other instances.
TAX TREATMENT OF LOANS. If a Policy is not classified as a MEC, a loan
under the Policy generally will be treated as indebtedness of the Owner. As a
result, no part of any loan under a Policy will constitute income to the Owner
so long as the Policy remains in force. However, in those situations where the
interest rate credited to the Loan Account equals the interest rate charged for
the loan, it is possible that some or all of the loan proceeds may be includible
in income. If a Policy lapses when a loan is outstanding, the amount of the loan
outstanding will be treated as the proceeds of a surrender for purposes of
determining whether any amounts are includible in the Owner's income.
Generally, interest paid on any loans under this Policy will not be tax
deductible. The nondeductibility of interest includes interest paid or accrued
on indebtedness with respect to one or more life insurance policies owned by a
taxpayer covering any individual who is or has been an officer or employee of,
or financially interested in, any trade or business carried on by the taxpayer.
A limited exception to this rule exists for certain interest paid in connection
with certain "key person" insurance. In the case of interest paid in connection
with a loan with respect to a Policy covering the life of any key person,
interest is deductible only to the extent that the aggregate amount of loans
under one or more life insurance policies does not exceed $50,000. Further, even
as to such loans up to $50,000, interest would not be deductible if the Policy
were deemed for federal tax purposes to be a single premium life insurance
policy or, in certain circumstances, if the loans were treated as "systematic
borrowing" within the meaning of the tax law. A "key person" is an individual
who is either an officer or a twenty percent owner of the taxpayer. The maximum
number of individuals who can be treated as key persons may not exceed the
greater of (1) 5 individuals or (2) the lesser of 5 percent of the total number
of officers and employees of the taxpayer or 20 individuals. Owners should
consult a tax advisor regarding the deductibility of interest incurred in
connection with loans under this Policy.
In addition, in the case of Policies issued to a non-natural taxpayer, or
held for the benefit of such an entity, a portion of the taxpayer's otherwise
deductible interest expenses may not be deductible as a result of ownership of a
policy even if no loans are taken under the policy. An exception to the latter
rule is provided for certain life Policies which cover the life of an individual
who is a 20-percent owner, or an officer, director, or employee of, a trade or
business. However, this exception is not applicable to Survivorship Policies,
other than where the Insureds are a 20-percent owner and his or her spouse.
Entities that are considering purchasing the Policy, or entities that will be
beneficiaries under a policy, should consult a tax advisor.
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POLICIES WHICH ARE MECS
CHARACTERIZATION OF A POLICY AS A MEC. In general, a Policy will be
considered a MEC for federal income tax purposes if (1) the Policy is received
in exchange for a life insurance contract that was a MEC, or (2) the Policy is
entered into after June 21, 1988 and premiums are paid into the Policy more
rapidly than the rate defined by a "7-Pay Test." This test generally provides
that a Policy will fail this test (and thus be considered a MEC) if the
accumulated amount paid under the Policy at any time during the 1st 7 Policy
Years exceeds the cumulative sum of the net level premiums which would have been
paid to that time if the Policy provided for paid-up future benefits after the
payment of 7 level annual premiums. A material change of the Policy (as defined
in the tax law) will generally result in a reapplication of the 7-Pay Test. In
addition, any reduction in benefits during the 7-Pay period will affect the
application of this test.
KILICO will monitor the Policies and will attempt to notify Owners on a
timely basis if a Policy is in jeopardy of becoming a MEC. The Policy Owner may
then request that KILICO take whatever steps are available to avoid treating the
Policy as a MEC, if that is desired.
TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES UNDER MECS. If
the Policy is a MEC, withdrawals from the Policy will be treated first as
withdrawals of income and then as a recovery of premiums paid. Thus, withdrawals
will be includible in income to the extent the Cash Value exceeds the investment
in the contract. The amount of any Policy loan will be treated as a withdrawal
for tax purposes. In addition, the discussion of interest on loans and of lapses
while loans are outstanding under the caption "Policies Which Are Not MECs" also
applies to Policies which are MECs.
If the Owner assigns or pledges any portion of the Cash Value (or agrees to
assign or pledge any portion), such portion will be treated as a withdrawal for
tax purposes. The Owner's investment in the contract is increased by the amount
includible in income with respect to any assignment, pledge, or loan, though it
is not affected by any other aspect of the assignment, pledge, or loan
(including its release or repayment). Before assigning, pledging, or requesting
a loan under a Policy treated as a MEC, an Owner should consult a qualified tax
advisor.
PENALTY TAX. Generally, proceeds of a surrender or a withdrawal (or the
amount of any deemed withdrawal) from a MEC are subject to a penalty tax equal
to 10% of the portion of the proceeds that is includible in income, unless the
surrender or withdrawal is made (1) after the Owner attains age 59 1/2, (2)
because the Owner has become disabled (as defined in the tax law), or (3) as
substantially equal periodic payments over the life or life expectancy of the
Owner (or the joint lives or life expectancies of the Owner and his or her
beneficiary, as defined in the tax law).
AGGREGATION OF POLICIES. All life insurance contracts which are treated as
MECs and which are purchased by the same person from KILICO or any of its
affiliates within the same calendar year will be aggregated and treated as one
contract for purpose of determining the tax on withdrawals (including deemed
withdrawals). The effects of such aggregation are not clear; however, it could
affect the amount of a withdrawal (or a deemed withdrawal) that is taxable and
the amount which might be subject to the 10% penalty tax described above.
SURVIVORSHIP POLICIES. Although KILICO believes that the Policy, when
issued as a Survivorship Policy, complies with Section 7702 of the Code, the
manner in which Section 7702 should be applied to Survivorship Policies is not
directly addressed by Section 7702. In the absence of final regulations or other
guidance issued under Section 7702 regarding this form of Policy, there is
necessarily some uncertainty whether a Survivorship Policy will meet the Section
7702 definition of a life insurance policy. Prospective owners considering the
purchase of the Policy as a Survivorship Policy should consult a qualified tax
advisor.
Where the Owner of the Policy is the last surviving Insured, the Death
Benefit will generally be includible in the Policy Owner's estate on his or her
death for purposes of the Federal estate tax. If the Policy Owner dies and was
not the last surviving Insured, the fair market value of the Policy would be
included in the Policy Owner's estate. In general, no part of the Policy's value
would be includible in the last surviving Insured's estate if he or she neither
retained incidents of ownership at death nor had given up ownership within three
years before death.
TREATMENT OF MATURITY BENEFITS AND EXTENSION OF MATURITY DATE. At the
Maturity Date, the Surrender Value will be paid to the Owner. This payment will
be taxable in the same manner as a Surrender of the Policy. If the Owner elects
to add at the time of purchase a rider to extend the Maturity Date, it is
possible that the IRS could treat the Owner as being in constructive receipt of
the Cash Value when the Insured reaches age 100. If this were the case, an
amount equal to the excess of the Cash Value over the investment in the contract
could be includible in the Owner's income at that time.
ACTIONS TO ENSURE COMPLIANCE WITH THE TAX LAW. KILICO reserves the right to
refund premiums which exceed those permitted by the federal tax definition of
life insurance. KILICO also reserves the right to increase
27
<PAGE> 31
the Death Benefit (which may result in larger charges under a Policy) or to take
any other action deemed necessary to ensure the compliance of the Policy with
the federal tax definition of life insurance.
OTHER CONSIDERATIONS. Changing the Owner, exchanging the Policy, changing
from one Death Benefit option to another, and other changes under the Policy may
have tax consequences (other than those discussed herein) depending on the
circumstances of such change or withdrawal. Federal estate and state and local
estate, inheritance and other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Policy Owner or Beneficiary.
FEDERAL INCOME TAX WITHHOLDING
KILICO will withhold and remit to the Federal government a part of the
taxable portion of withdrawals made under a Policy unless the Owner notifies
KILICO in writing at or before the time of the withdrawal that he or she elects
not to have any amounts withheld. Regardless of whether the Owner requests that
no taxes be withheld or whether KILICO withholds a sufficient amount of taxes,
the Owner will be responsible for the payment of any taxes and early
distribution penalties that may be due on the amounts received. The Owner may
also be required to pay penalties under the estimated tax rules, if the Owner's
withholding and estimated tax payments are insufficient to satisfy the Owner's
total tax liability.
LEGAL CONSIDERATIONS
On July 6, 1983, the Supreme Court held in ARIZONA GOVERNING COMMITTEE V.
NORRIS that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
The Policy described in this Prospectus contains cost of insurance rates that
distinguish between men and women. Accordingly, employers and employee
organizations should consider, in consultation with legal counsel, the impact of
Federal, state and local laws, including Title VII of the Civil Rights Act, the
Equal Pay Act, and NORRIS and subsequent cases on any employment-related
insurance or fringe benefit program before purchasing this Policy.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
KILICO holds the assets of the Separate Account. The assets are kept
segregated and held separate and apart from the general funds of KILICO. KILICO
maintains records of all purchases and redemptions of the shares of each
Portfolio by each of the Subaccounts.
VOTING INTERESTS
To the extent required by law, KILICO will vote a Fund's shares held in the
Separate Account at regular and special shareholder meetings of the Fund in
accordance with instructions received from persons having voting interests in
the corresponding Subaccounts of the Separate Account. If, however, the 1940 Act
or any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result KILICO determines that it is permitted to
vote a Fund's shares in its own right, it may elect to do so.
Owners of all Policies participating in each Subaccount shall have voting
interests with respect to that Subaccount, based upon each Owner's proportionate
interest in that Subaccount as measured by units.
Each person having a voting interest in a Subaccount will receive proxy
material, reports, and other materials relating to the appropriate portfolio of
the Funds.
KILICO will vote shares of the Funds for which it has not received timely
instructions in proportion to the voting instructions that KILICO has received
with respect to all variable policies participating in a portfolio. KILICO will
also vote any Fund shares attributed to amounts it has accumulated in the
Subaccounts in the same proportions that Owners vote.
KILICO may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the subclassification or investment objective
of the Fund or of one or more of its portfolios or to approve or disapprove an
investment advisory contract for a portfolio of the Fund. In addition, KILICO
itself may disregard voting instructions in favor of changes initiated by an
Owner in the investment policy or the investment adviser of a portfolio of a
Fund if KILICO reasonably disapproves of such changes. A proposed change would
be disapproved only if the change is contrary to state law or prohibited by
state regulatory authorities, or if KILICO determines that the change would
28
<PAGE> 32
have an adverse effect on its General Account in that the proposed investment
policy for a portfolio may result in overly speculative or unsound investments.
In the event KILICO does disregard voting instructions, a summary of that action
and the reasons for such action will be included in the next annual report to
Owners.
STATE REGULATION OF KILICO
KILICO, a stock life insurance company organized under the laws of
Illinois, is subject to regulation by the Illinois Department of Insurance. An
annual statement is filed with the Director of Insurance on or before March 1st
of each year covering the operations and reporting on the financial condition of
KILICO as of December 31st of the preceding year. Periodically, the Director of
Insurance examines the liabilities and reserves of KILICO and the Separate
Account and certifies to their adequacy, and a full examination of KILICO's
operations is conducted by the National Association of Insurance Commissioners
at least once every three years.
In addition, KILICO is subject to the insurance laws and regulations of
other states within which it is licensed to operate. Generally, the insurance
department of any other state applies the laws of the state of domicile in
determining permissible investments.
DIRECTORS AND OFFICERS OF KILICO
The directors and principal officers of KILICO are listed below together
with their current positions and their other business experience during the past
five years. The address of each officer and director is 1 Kemper Drive, Long
Grove, Illinois 60049.
<TABLE>
<CAPTION>
NAME AND AGE
POSITION WITH KILICO
YEAR OF ELECTION OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS OR MORE
-------------------- -----------------------------------------------------
<S> <C>
John B. Scott (53) Chief Executive Officer, President and Director of Federal
Chief Executive Officer since Kemper Life Assurance Company (FKLA) and Fidelity Life
February 1992. President since Association (FLA) since 1988. Chief Executive Officer,
November 1993. Director since 1992. President and Director of Zurich Life Insurance Company of
America (ZLICA) and Zurich Direct, Inc. (ZD) since March
1996. Chairman of the Board and Director of Investors
Brokerage Services, Inc. (IBS) and Investors Brokerage
Services Insurance Agency, Inc. (IBSIA) since 1993. Chairman
of the Board of FKLA and FLA from April 1988 to January
1996. Chairman of the Board of KILICO from February 1992 to
January 1996. Executive Vice President and Director of
Kemper Corporation (Kemper) from January 1994 and March
1996, respectively. Executive Vice President of Kemper
Financial Companies, Inc. from January 1994 to January 1996
and Director from 1992 to January 1996.
Eliane C. Frye (50) Executive Vice President of FKLA and FLA since 1995.
Executive Vice President since 1995. Executive Vice President of ZLICA and ZD since March 1996.
Director of FLA since December 1997. Director of ZD from
March 1996 to March 1997. Director of IBS and IBSIA since
1995. Senior Vice President of KILICO, FKLA and FLA from
1993 to 1995. Vice President of FKLA and FLA from 1988 to
1993.
Frederick L. Blackmon (46) Senior Vice President and Chief Financial Officer of FKLA
Senior Vice President and Chief since December 1995. Senior Vice President and Chief
Financial Officer since December Financial Officer of FLA since January 1996. Senior Vice
1995. President and Chief Financial Officer of ZLICA since March
1996. Senior Vice President and Chief Financial Officer of
ZD since March 1996. Director of ZD from March 1996 to March
1997. Treasurer and Chief Financial Officer of Kemper since
January 1996. Chief Financial Officer of Alexander Hamilton
Life Insurance Company from April 1989 to November 1995.
James C. Harkensee (39) Senior Vice President of FKLA and FLA since January 1996.
Senior Vice President since January Senior Vice President of ZLICA since 1995. Senior Vice
1996. President of ZD since 1995. Director of ZD from April 1993
to March 1997. Vice President of ZLICA from 1992 to 1995.
Chief Actuary of ZLICA from 1991 to 1994. Assistant Vice
President of ZLICA from 1990 to 1992. Vice President of ZD
from 1994 to 1995.
</TABLE>
29
<PAGE> 33
<TABLE>
<CAPTION>
NAME AND AGE
POSITION WITH KILICO
YEAR OF ELECTION OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS OR MORE
-------------------- -----------------------------------------------------
<S> <C>
James E. Hohmann (42) Senior Vice President and Chief Actuary of FKLA since
Senior Vice President and Chief December 1995. Senior Vice President and Chief Actuary of
Actuary since December 1995. FLA since January 1996. Senior Vice President and Chief
Actuary of ZLICA since March 1996. Senior Vice President and
Chief Actuary of ZD since March 1996. Director of FLA since
June 1997. Director of ZD from March 1996 to March 1997.
Managing Principal (Partner) of Tillinghast-Towers Perrin
from January 1991 to December 1995. Consultant/Principal
(Partner) of Tillinghast-Towers Perrin from November 1986 to
January 1991.
Edward K. Loughridge (43) Senior Vice President and Corporate Development Officer of
Senior Vice President and Corporate FKLA and FLA since January 1996. Senior Vice President and
Development Officer since January Corporate Development Officer for ZLICA and ZD since March
1996. 1996. Senior Vice President of Human Resources of
Zurich-American Insurance Group from February 1992 to March
1996.
Phillip D. Meserve (47) Senior Vice President of FKLA, FLA, ZLICA and ZD since March
Senior Vice President since March 1997. Director of IBSIA and IBS since March and May, 1997,
1997 respectively. Managing Director of Equitable Distributors
from May 1996 to March 1997. Senior Vice President of
Banker's Trust from April 1995 to April 1996. Senior Vice
President of Fidelity Investments Insurance Services from
February 1992 to March 1995.
Debra P. Rezabek (42) Senior Vice President of FKLA and FLA since March 1996.
Senior Vice President since 1996. Corporate Secretary of FKLA and FLA since January 1996. Vice
General Counsel since 1992. Corporate President of KILICO, FKLA and FLA since 1995. General
Secretary since January 1996. Counsel and Director of Government Affairs of FKLA and FLA
since 1992 and of KILICO since 1993. Senior Vice President,
General Counsel and Corporate Secretary of ZLICA since March
1996. Senior Vice President, General Counsel and Corporate
Secretary of ZD since March 1996. Director of ZD from March
1996 to March 1997. Secretary of IBS and IBSIA since 1993.
Director of IBS and IBSIA from 1993 to 1996. Assistant
General Counsel of FKLA and FLA from 1988 to 1992. General
Counsel and Assistant Secretary of KILICO, FKLA and FLA from
1992 to 1996. Assistant Secretary of Kemper since January
1996.
Kenneth M. Sapp (52) Senior Vice President of FKLA, FLA and ZLICA since January
Senior Vice President since January 1998. Vice President--Aetna Life Brokerage of Aetna Life &
1998. Annuity Company from February 1992 to January 1998.
George Vlaisavljevich (55) Senior Vice President of FKLA, FLA and ZLICA since October
Senior Vice President since October 1996. Senior Vice President of ZD since March 1997. Director
1996. of IBS and IBSIA since October 1996. Executive Vice
President of The Copeland Companies from April 1983 to
September 1996.
Loren J. Alter (59) Director of FKLA, FLA and Scudder Kemper Investments, Inc.
Director since January 1996. (SKI) since January 1996. Director of ZLICA since May 1979.
Executive Vice President of Zurich Insurance Company since
1979. President, Chief Executive Officer and Director of
Kemper since January 1996.
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
NAME AND AGE
POSITION WITH KILICO
YEAR OF ELECTION OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS OR MORE
-------------------- -----------------------------------------------------
<S> <C>
William H. Bolinder (54) Chairman of the Board and Director of FKLA and FLA since
Chairman of the Board and Director January 1996. Chairman of the Board of ZLICA and ZD since
since January 1996. March 1995. Chairman of the Board and Director of Kemper
since January 1996. Vice Chairman and Director of SKI since
January 1996. Member of the Corporate Executive Board of
Zurich Insurance Group since October 1994. Chairman of the
Board of American Guarantee and Liability Insurance Company,
Zurich American Insurance Company of Illinois, American
Zurich Insurance Company and Steadfast Insurance Company
since 1995. Chief Executive Officer of American Guarantee
and Liability Insurance Company, Zurich American Insurance
Company of Illinois, American Zurich Insurance Company and
Steadfast Insurance Company from 1986 to June 1995.
President of Zurich Holding Company of America since 1986.
Manager of Zurich Insurance Company, U.S. Branch since 1986.
Underwriter for Zurich American Lloyds since 1986.
David A. Bowers (51) Director of FKLA and ZLICA since May 1997. Director of FLA
Director since May 1997. since June 1997. Executive Vice President, Corporate
Secretary and General Counsel of Zurich-American Insurance
Group since August 1985. Vice President, General Council and
Secretary of Kemper since January 1996.
Markus Rohrbasser (43) Director of FKLA, FLA and ZLICA since May 1997. Chief
Director since May 1997. Financial Officer and Member of the Corporate Executive
Board of Zurich Insurance Company since January 1997. Member
of Enlarged Corporate Executive Board and Chief Executive
Officer of Union Bank of Switzerland (North America) from
1992 to 1997.
</TABLE>
LEGAL MATTERS
All matters of Illinois law pertaining to the Policy, including the
validity of the Policy and KILICO's right to issue the Policy under Illinois
Insurance Law, have been passed upon by Debra P. Rezabek, Senior Vice President,
General Counsel, and Corporate Secretary of KILICO. Jorden Burt Boros Cicchetti
Berenson & Johnson, Washington, D.C., has advised KILICO on certain legal
matters concerning Federal securities laws applicable to the issue and sale of
Policies.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or
to which the assets of the Separate Account are subject. KILICO is not a party
in any litigation that is of material importance in relation to its total assets
or that relates to the Separate Account.
YEAR 2000 COMPLIANCE
Many existing computer programs were originally designed without
considering the impact of the year 2000 and currently use only two digits to
identify the year in the date field. This issue affects nearly all companies and
organizations and could cause computer applications and systems to fail or
create erroneous results to occur for any transaction with a date of January 1,
2000, or later.
Many companies must undertake major projects to address the year 2000 issue
and each company's costs and uncertainties will depend on a number of factors,
including its software and hardware, and the nature of the industry. Companies
must also coordinate with other entities with which they electronically
interact, including suppliers, customers, creditors and other financial services
institutions.
If a company does not successfully address its year 2000 issues it could
face material adverse consequences in the form of lawsuits against the company,
lost business, erroneous results and substantial operating problems after
January 1, 2000.
KILICO has taken substantial steps over the last several years to ensure
that its systems will be compliant for the year 2000. Such steps have included
the replacement of older systems with new systems that are already compliant. In
1996, KILICO replaced its investment accounting system and in 1997 KILICO
replaced its general ledger and accounts payable system. KILICO has also ensured
that new systems developed to support new
31
<PAGE> 35
product introductions in 1996 and 1997 are already year 2000 compliant. Data
processing expenses related solely to bringing KILICO's systems in compliance
with the year 2000 amounted to $88 thousand in 1997 and KILICO anticipates that
it will cost an additional $895 thousand to bring all remaining systems into
compliance. KILICO has also undertaken steps which require that all other
entities with which KILICO electronically interacts, including suppliers and
other financial services institutions, attest in writing to KILICO that their
systems are year 2000 compliant.
EXPERTS
The consolidated balance sheet of KILICO as of December 31, 1997 and the
related consolidated statements of operations, stockholder's equity, and cash
flows for the year ended December 31, 1997 have been included herein and in the
registration statement in reliance upon the report of Coopers & Lybrand L.L.P.,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The
consolidated balance sheet of KILICO as of December 31, 1996 and the related
consolidated statements of operations, stockholder's equity, and cash flows for
the periods from January 4, 1996 to December 31, 1996 and for the year ended
December 31, 1995 have been included herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP covering
KILICO's financial statements referred to above contains an explanatory
paragraph that states as a result of the acquisition of its parent, Kemper
Corporation, the consolidated financial information for the period after the
acquisition is presented on a different cost basis than that for the period
before the acquisition and, therefore, is not comparable.
Actuarial matters included in this Prospectus have been examined by Steven
D. Powell, FSA, as stated in the opinion filed as an exhibit to the registration
statement.
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies. For further information concerning the Separate Account, KILICO and
the Policy, reference is made to the registration statement as amended with
exhibits. Copies of the registration statement are available from the Commission
upon payment of a fee.
FINANCIAL STATEMENTS
No financial statements are included for the Separate Account. As of
December 31, 1997, the end of KILICO's most recent fiscal year, the Separate
Account had not yet commenced operations, had no assets or liabilities, and had
received no income or incurred any expense. The financial statements of KILICO
that are included should be considered only as bearing upon KILICO's ability to
meet its contractual obligations under the Policy. KILICO's financial statements
do not bear on the investment experience of the assets held in the Separate
Account. KILICO has not provided interim financial statements. There has been no
adverse material change in KILICO's financial position since the dates of the
audited financial statements.
CHANGE OF ACCOUNTANTS
On September 12, 1997, Kemper Investors Life Insurance Company ("KILICO")
appointed the accounting firm of Coopers & Lybrand L.L.P. as independent
accountants for the year ended December 31, 1997 to replace KPMG Peat Marwick
LLP effective with such appointment. KILICO's Board of Directors approved the
selection of Coopers & Lybrand L.L.P. as the new independent accountants.
Management had not consulted with Coopers & Lybrand L.L.P. on any accounting,
auditing or reporting matter, prior to that time.
During the two most recent fiscal years ended December 31, 1996, there have
been no disagreements with KPMG Peat Marwick LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure or any reportable events. KPMG Peat Marwick LLP's report on the
financial statements for the past two years contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles.
There were no disagreements with Coopers & Lybrand L.L.P. on accounting or
financial disclosures for the year ended December 31, 1997.
32
<PAGE> 36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholder's
Kemper Investors Life Insurance Company:
We have audited the accompanying consolidated balance sheet of Kemper
Investors Life Insurance Company and subsidiaries as of December 31, 1997, and
the related consolidated statements of operations, stockholder's equity, and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit. The
financial statements of Kemper Investors Life Insurance Company and subsidiaries
for the period from January 4, 1996 to December 31, 1996 (post-acquisition
basis) and for the year ended December 31, 1995 (pre-acquisition basis), were
audited by other auditors, whose unqualified report, dated March 21, 1997,
included an explanatory paragraph that described the acquisition of Kemper
Investors Life Insurance Company as discussed in Note 1 to the financial
statements.
We conducted our audit 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Kemper Investors Life Insurance Company and subsidiaries as of December 31,
1997, and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Chicago, Illinois
March 18, 1998
33
<PAGE> 37
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholder
Kemper Investors Life Insurance Company:
We have audited the accompanying consolidated balance sheet of Kemper
Investors Life Insurance Company and subsidiaries as of December 31, 1996 and
the related consolidated statements of operations, stockholder's equity, and
cash flows for the period from January 4, 1996 to December 31, 1996
(post-acquisition), and for the year ended December 31, 1995 (pre-acquisition).
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 aforementioned post-acquisition consolidated financial
statements present fairly, in all material respects, the financial position of
Kemper Investors Life Insurance Company and subsidiaries as of December 31, 1996
and the results of their operations and their cash flows for the
post-acquisition period, in conformity with generally accepted accounting
principles. Also, in our opinion, the aforementioned pre-acquisition
consolidated financial statements present fairly, in all material respects, the
results of their operations and their cash flows for the pre-acquisition period,
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
January 4, 1996, an investor group as described in Note 1, acquired all of the
outstanding stock of Kemper Corporation, the parent of Kemper Investors Life
Insurance Company, in a business combination accounted for as a purchase. As a
result of the acquisition, the consolidated financial information for the
periods after the acquisition is presented on a different cost basis than that
for the periods before the acquisition and, therefore, is not comparable.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 21, 1997
34
<PAGE> 38
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale, at fair value
(amortized cost: December 31, 1997, $3,644,075; December
31, 1996, $3,929,650)..................................... $3,668,643 $3,866,431
Short-term investments...................................... 236,057 71,696
Joint venture mortgage loans................................ 72,663 110,971
Third-party mortgage loans.................................. 102,974 106,585
Other real estate-related investments....................... 44,409 50,157
Policy loans................................................ 282,439 288,302
Equity securities........................................... 24,839 9,910
Other invested assets....................................... 20,820 13,597
----------- ----------
Total investments................................. 4,452,844 4,517,649
Cash........................................................ 23,868 2,776
Accrued investment income................................... 117,789 115,199
Goodwill.................................................... 229,393 244,688
Value of business acquired.................................. 138,482 189,639
Deferred insurance acquisition costs........................ 59,459 26,811
Deferred income taxes....................................... 39,993 --
Reinsurance recoverable..................................... 382,609 427,165
Receivable on sales of securities........................... 20,076 32,569
Other assets and receivables................................ 3,187 34,117
Assets held in separate accounts............................ 5,121,950 2,127,247
----------- ----------
Total assets...................................... $10,589,650 $7,717,860
=========== ==========
LIABILITIES
Future policy benefits...................................... $3,856,871 $4,256,521
Ceded future policy benefits................................ 382,609 427,165
Benefits and funds payable.................................. 150,524 36,142
Other accounts payable and liabilities...................... 212,133 59,462
Deferred income taxes....................................... -- 60,362
Liabilities related to separate accounts.................... 5,121,950 2,127,247
----------- ----------
Total liabilities................................. 9,724,087 6,966,899
----------- ----------
Commitments and contingent liabilities
STOCKHOLDER'S EQUITY
Capital stock--$10 par value,
authorized 300,000 shares; outstanding 250,000 shares..... 2,500 2,500
Additional paid-in capital.................................. 806,538 761,538
Unrealized gain (loss) on investments....................... 12,637 (47,498)
Retained earnings........................................... 43,888 34,421
----------- ----------
Total stockholder's equity........................ 865,563 750,961
----------- ----------
Total liabilities and stockholder's equity........ $10,589,650 $7,717,860
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE> 39
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
PREACQUISITION
--------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUE
Net investment income...................................... $296,195 $299,688 $ 348,448
Realized investment gains (losses)......................... 10,546 13,602 (318,700)
Premium income............................................. 22,239 7,822 236
Separate account fees and charges.......................... 85,413 25,309 21,909
Other income............................................... 11,087 9,786 16,192
-------- -------- ---------
Total revenue.................................... 425,480 356,207 68,085
-------- -------- ---------
BENEFITS AND EXPENSES
Interest credited to policyholders......................... 199,782 223,094 237,984
Claims incurred and other policyholder benefits............ 28,372 14,255 7,631
Taxes, licenses and fees................................... 52,608 2,173 6,912
Commissions................................................ 32,602 25,962 24,881
Operating expenses......................................... 36,837 24,678 20,837
Deferral of insurance acquisition costs.................... (38,177) (27,820) (36,870)
Amortization of insurance acquisition costs................ 3,204 2,316 14,423
Amortization of value of business acquired................. 24,948 21,530 --
Amortization of goodwill................................... 15,295 10,195 --
-------- -------- ---------
Total benefits and expenses...................... 355,471 296,383 275,798
-------- -------- ---------
Income (loss) before income tax expense (benefit).......... 70,009 59,824 (207,713)
Income tax expense (benefit)............................... 31,292 25,403 (74,664)
-------- -------- ---------
Net income (loss)................................ $ 38,717 $ 34,421 $(133,049)
======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE> 40
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(in thousands)
<TABLE>
<CAPTION>
PREACQUISITION
--------------
DECEMBER 31 DECEMBER 31 JANUARY 4 DECEMBER 31
1997 1996 1996 1995
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
CAPITAL STOCK, beginning and end of period.... $ 2,500 $ 2,500 $ 2,500 $ 2,500
-------- -------- -------- ---------
ADDITIONAL PAID-IN CAPITAL, beginning of
period...................................... 761,538 743,104 491,994 491,994
Capital contributions from parent............. 45,000 18,434 -- --
Adjustment to reflect purchase accounting
method...................................... -- -- 251,110 --
-------- -------- -------- ---------
End of period....................... 806,538 761,538 743,104 491,994
-------- -------- -------- ---------
UNREALIZED GAIN (LOSS) ON INVESTMENTS,
beginning of period......................... (47,498) -- 68,502 (236,443)
Unrealized gain (loss) on revaluation of
investments, net............................ 60,135 (47,498) -- 304,945
Adjustment to reflect purchase accounting
method...................................... -- -- (68,502) --
-------- -------- -------- ---------
End of period....................... 12,637 (47,498) -- 68,502
-------- -------- -------- ---------
RETAINED EARNINGS, beginning of period........ 34,421 -- 42,880 175,929
Net income (loss)............................. 38,717 34,421 -- (133,049)
Dividends to parent........................... (29,250) -- -- --
Adjustment to reflect purchase accounting
method...................................... -- -- (42,880) --
-------- -------- -------- ---------
End of period....................... 43,888 34,421 -- 42,880
-------- -------- -------- ---------
Total stockholder's equity.......... $865,563 $750,961 $745,604 $ 605,876
======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE> 41
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
PREACQUISITION
--------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................................... $ 38,717 $ 34,421 $(133,049)
Reconcilement of net income (loss) to net cash
provided:
Realized investment losses (gains)................ (10,546) (13,602) 318,700
Interest credited and other charges............... 198,206 230,298 237,984
Deferred insurance acquisition costs.............. (34,973) (25,504) (22,447)
Amortization of value of business acquired........ 24,948 21,530 --
Amortization of goodwill.......................... 15,295 10,195 --
Amortization of discount and premium on
investments..................................... 17,866 25,743 4,586
Deferred income taxes............................. (99,370) (897) 38,423
Net change in current Federal income taxes........ 97,386 108,806 (86,990)
Benefits and premium taxes due related to separate
account bank-owned life insurance............... 180,546 -- --
Other, net........................................ 17,168 (22,283) (29,905)
--------- ----------- ---------
Net cash provided from operating
activities................................. 445,243 368,707 327,302
--------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash from investments sold or matured:
Fixed maturities held to maturity................. 229,208 264,383 320,143
Fixed maturities sold prior to maturity........... 633,872 891,995 297,637
Mortgage loans, policy loans and other invested
assets.......................................... 131,866 168,727 450,573
Cost of investments purchased or loans originated:
Fixed maturities.................................. (606,028) (1,369,091) (549,867)
Mortgage loans, policy loans and other invested
assets.......................................... (76,350) (119,044) (131,966)
Short-term investments, net.......................... (164,361) 300,819 (168,351)
Net change in receivable and payable for securities
transactions...................................... 29,746 (31,667) (1,397)
Net reductions in other assets....................... 244 115 1,996
--------- ----------- ---------
Net cash provided by investing activities.... 178,197 106,237 218,768
--------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder account balances:
Deposits.......................................... 145,687 141,159 247,778
Withdrawals....................................... (745,510) (700,084) (755,917)
Capital contributions from parent.................... 45,000 18,434 --
Dividends to parent.................................. (29,250) -- --
Other................................................ (18,275) 42,512 (35,309)
--------- ----------- ---------
Net cash used in financing activities........ (602,348) (497,979) (543,448)
--------- ----------- ---------
Net increase (decrease) in cash......... 21,092 (23,035) 2,622
CASH, beginning of period.............................. 2,776 25,811 23,189
--------- ----------- ---------
CASH, end of period.................................... $ 23,868 $ 2,776 $ 25,811
========= =========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE> 42
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Kemper Investors Life Insurance Company and subsidiaries (the "Company")
issues fixed and variable annuity products, variable life, term life and
interest-sensitive life insurance products marketed primarily through a network
of financial institutions, securities brokerage firms, insurance agents and
financial planners. The Company is licensed in the District of Columbia and all
states except New York. The Company is a wholly-owned subsidiary of Kemper
Corporation ("Kemper"). On January 4, 1996, an investor group comprised of
Zurich Insurance Company ("Zurich"), Insurance Partners, L.P. ("IP") and
Insurance Partners Offshore (Bermuda), L.P. (together with IP, "Insurance
Partners") acquired all of the issued and outstanding common stock of Kemper. As
a result of that change in control, Zurich and Insurance Partners owned 80
percent and 20 percent, respectively, of Kemper and therefore the Company. On
February 27, 1998, Zurich acquired Insurance Partner's remaining 20 percent
interest for cash. As a result of this transaction, Kemper and the Company
became wholly-owned subsidiaries of Zurich.
The financial statements include the accounts of the Company on a
consolidated basis. All significant intercompany balances and transactions have
been eliminated. Certain reclassifications have been made to the 1996 and 1995
consolidated financial statements in order for them to conform to the 1997
presentation.
PURCHASE ACCOUNTING METHOD
The acquisition of the Company on January 4, 1996, was accounted for using
the purchase method of accounting. The consolidated financial statements of the
Company prior to January 4, 1996, were prepared on a historical cost basis in
accordance with generally accepted accounting principles. The accompanying
financial statements and notes thereto prepared prior to January 4, 1996 have
been labeled "preacquisition". The accompanying consolidated financial
statements of the Company as of January 4, 1996 (the acquisition date) and as of
and for the years ended December 31, 1996 and 1997, have been prepared in
conformity with the purchase method of accounting. The Company has presented
January 4, 1996 (the acquisition date), as the opening purchase accounting
balance sheet where appropriate for comparative purposes throughout the
accompanying financial statements and notes thereto.
Under purchase accounting, the Company's assets and liabilities have been
marked to their relative fair values as of the acquisition date. The difference
between the cost of acquiring the Company and the net fair values of the
Company's assets and liabilities as of the acquisition date has been recorded as
goodwill. The allocated cost of acquiring the Company was $745.6 million and the
acquisition resulted in goodwill of $254.9 million as of January 4, 1996. The
Company began to amortize goodwill during 1996 on a straight-line basis over
twenty-five years. In December of 1997, the Company changed its amortization
period to twenty years in order to conform to Zurich's accounting practices and
policies. As a result of the change in amortization periods, the Company
recorded an increase in goodwill amortization expense of $5.1 million during
1997.
The Company reviews goodwill to determine if events or changes in
circumstances may have affected the recoverability of the outstanding goodwill
as of each reporting period. In the event that the Company determines that
goodwill is not recoverable, it would amortize such amounts as additional
goodwill expense in the accompanying financial statements. As of December 31,
1997, the Company believes that no such adjustment is necessary.
Purchase accounting adjustments primarily affected the recorded historical
values of fixed maturities, mortgage loans, other invested assets, deferred
insurance acquisition costs, future policy benefits and deferred income taxes.
Deferred insurance acquisition costs, and the related amortization thereof,
for policies sold prior to January 4, 1996, have been replaced by the value of
business acquired.
The value of business acquired reflects the estimated fair value of the
Company's life insurance business in force and represents the portion of the
cost to acquire the Company that is allocated to the value of the right to
receive future cash flows from insurance contracts existing at the date of
acquisition. Such value is the present value of the actuarially determined
projected cash flows for the acquired policies.
A 15 percent discount rate was used to determine such value and represents
the rate of return required by Zurich and Insurance Partners to invest in the
business being acquired. In selecting the rate of return used to value
39
<PAGE> 43
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the policies purchased, the Company considered the magnitude of the risks
associated with each of the actuarial assumptions used in determining expected
future cash flows, the cost of capital available to fund the acquisition, the
perceived likelihood of changes in insurance regulations and tax laws, the
complexity of the Company's business, and the prices paid (i.e., discount rates
used in determining other life insurance company valuations) on similar blocks
of business sold in recent periods.
The value of the business acquired is amortized over the estimated contract
life of the business acquired in relation to the present value of estimated
gross profits using current assumptions based on an interest rate equal to the
liability or contract rate on the value of business acquired. The estimated
amortization and accretion of interest for the value of business acquired for
each of the years through December 31, 2002 are as follows:
<TABLE>
<CAPTION>
PROJECTED
(IN THOUSANDS) BEGINNING ACCRETION OF ENDING
YEAR ENDED DECEMBER 31 BALANCE AMORTIZATION INTEREST BALANCE
---------------------- --------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
1996 (actual)....................................... $190,222 $(31,427) $9,897 $168,692
1997 (actual)....................................... 168,692 (34,906) 9,958 143,744
1998................................................ 143,744 (25,633) 8,933 127,044
1999................................................ 127,044 (23,701) 7,873 111,216
2000................................................ 111,216 (21,668) 6,876 96,424
2001................................................ 96,424 (19,122) 5,973 83,275
2002................................................ 83,275 (17,835) 5,134 70,574
</TABLE>
The projected ending balance of the value of business acquired will be
further adjusted to reflect the impact of unrealized gains or losses on fixed
maturities held as available for sale in the investment portfolio. Such
adjustments are not recorded in the Company's net income but rather are recorded
as a credit or charge to stockholder's equity, net of income tax. As of December
31, 1997 and 1996, this adjustment increased (decreased) the value of business
acquired by $(5.3) million and $20.9 million, respectively, and stockholder's
equity by approximately $(3.4) million and $13.6 million, respectively.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that could affect the reported amounts of assets and liabilities as
well as the disclosure of contingent assets or liabilities at the date of the
financial statements. As a result, actual results reported as revenue and
expenses could differ from the estimates reported in the accompanying financial
statements. As further discussed in the accompanying notes to the consolidated
financial statements, significant estimates and assumptions affect deferred
insurance acquisition costs, the value of business acquired, provisions for real
estate-related losses and reserves, other-than-temporary declines in values for
fixed maturities, the valuation allowance for deferred income taxes and the
calculation of fair value disclosures for certain financial instruments.
LIFE INSURANCE REVENUE AND EXPENSES
Revenue for annuities, variable life insurance and interest-sensitive life
insurance products consists of investment income, and policy charges such as
mortality, expense and surrender charges and expense loads for premium taxes on
certain contracts. Expenses consist of benefits and interest credited to
contracts, policy maintenance costs and amortization of deferred insurance
acquisition costs. Also reflected in fees and other income is a ceding
commission experience adjustment received in 1995 as a result of certain
reinsurance transactions entered into by the Company during 1992. (See note
captioned "Reinsurance".)
Premiums for term life policies are reported as earned when due. Profits
for such policies are recognized over the duration of the insurance policies by
matching benefits and expenses to premium income.
40
<PAGE> 44
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED INSURANCE ACQUISITION COSTS
The costs of acquiring new business, principally commission expense and
certain policy issuance and underwriting expenses, have been deferred to the
extent they are recoverable from estimated future gross profits on the related
contracts and policies. The deferred insurance acquisition costs for annuities,
separate account business and interest-sensitive life insurance products are
being amortized over the estimated contract life in relation to the present
value of estimated gross profits. Deferred insurance acquisition costs related
to such interest-sensitive products also reflect the estimated impact of
unrealized gains or losses on fixed maturities held as available for sale in the
investment portfolio, through a credit or charge to stockholder's equity, net of
income tax. The deferred insurance acquisition costs for term-life insurance
products are being amortized over the premium paying period of the policies.
FUTURE POLICY BENEFITS
Liabilities for future policy benefits related to annuities and
interest-sensitive life contracts reflect net premiums received plus interest
credited during the contract accumulation period and the present value of future
payments for contracts that have annuitized. Current interest rates credited
during the contract accumulation period range from 3.0 percent to 7.3 percent.
Future minimum guaranteed interest rates vary from 3.0 percent to 4.0 percent.
For contracts that have annuitized, interest rates used in determining the
present value of future payments range principally from 3.0 percent to 12.0
percent.
Liabilities for future term life policy benefits have been computed
principally by a net level premium method. Anticipated rates of mortality are
based on the 1975-1980 Select and Ultimate Table modified by Company experience,
including withdrawals. Estimated future investment yields are a level 7 percent
for reinsurance assumed and for direct business, 8 percent for three years; 7
percent for year four; and 6 percent thereafter.
INVESTED ASSETS AND RELATED INCOME
Investments in fixed maturities and equity securities are carried at fair
value. Short-term investments are carried at cost, which approximates fair
value. (See note captioned "Fair Value of Financial Instruments".)
The amortized cost of fixed maturities is adjusted for amortization of
premiums and accretion of discounts to maturity, or in the case of
mortgage-backed and asset-backed securities, over the estimated life of the
security. Such amortization is included in net investment income. Amortization
of the discount or premium from mortgage-backed and asset-backed securities is
recognized using a level effective yield method which considers the estimated
timing and amount of prepayments of the underlying loans and is adjusted to
reflect differences which arise between the prepayments originally anticipated
and the actual prepayments received and currently anticipated. To the extent
that the estimated lives of such securities change as a result of changes in
prepayment rates, the adjustment is also included in net investment income. The
Company does not accrue interest income on fixed maturities deemed to be
impaired on an other-than-temporary basis, or on mortgage loans and other real
estate loans where the likelihood of collection of interest is doubtful.
Mortgage loans are carried at their unpaid balance, net of unamortized
discount and any applicable reserves or write-downs. Other real estate-related
investments net of any applicable reserve and write-downs include notes
receivable from real estate ventures; investments in real estate ventures,
adjusted for the equity in the operating income or loss of such ventures; and
real estate owned carried at fair value.
Real estate reserves are established when declines in collateral values,
estimated in light of current economic conditions and calculated in conformity
with Statement of Financial Accounting Standards ("SFAS") 114, ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN, indicate a likelihood of loss. At year-end
1995, reflecting the Company's change in strategy with respect to its real
estate portfolio, and the disposition thereof, and on January 4, 1996,
reflecting the acquisition of the Company, real estate-related investments were
valued using an estimate of the investments observable market price, net of
estimated costs to sell.
Under purchase accounting, the market value of the Company's policy loans
and other invested assets consisting primarily of venture capital investments
and a leveraged lease, became the Company's new cost basis in such investments.
Investments in policy loans and other invested assets after January 4, 1996 are
carried at cost.
41
<PAGE> 45
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Realized gains or losses on sales of investments, determined on the basis
of identifiable cost on the disposition of the respective investment,
recognition of other-than-temporary declines in value and changes in real
estate-related reserves and write-downs are included in revenue. Net unrealized
gains or losses on revaluation of investments are credited or charged to
stockholder's equity. Such unrealized gains are recorded net of deferred income
tax expense, while unrealized losses are not tax benefitted.
SEPARATE ACCOUNT BUSINESS
The assets and liabilities of the separate accounts represent segregated
funds administered and invested by the Company for purposes of funding variable
annuity and variable life insurance contracts for the exclusive benefit of
variable annuity and variable life insurance contract holders. The Company
receives administrative fees from the separate account and retains varying
amounts of withdrawal charges to cover expenses in the event of early
withdrawals by contract holders. The assets and liabilities of the separate
accounts are carried at fair value.
INCOME TAX
The operations of the Company prior to January 4, 1996 have been included
in the consolidated Federal income tax return of Kemper. Income taxes receivable
or payable have been determined on a separate return basis, and payments have
been received from or remitted to Kemper pursuant to a tax allocation
arrangement between Kemper and its subsidiaries, including the Company. The
Company generally had received a tax benefit for losses to the extent such
losses can be utilized in Kemper's consolidated Federal tax return. Subsequent
to January 4, 1996, the Company and its subsidiaries file separate Federal
income tax returns.
Deferred taxes are provided on the temporary differences between the tax
and financial statement basis of assets and liabilities.
(2) CASH FLOW INFORMATION
The Company defines cash as cash in banks and money market accounts.
Federal income tax refunded by Kemper under the tax allocation arrangement for
the period from January 1, 1996 to January 4, 1996 and for the years ended
December 31, 1995 amounted to $108.8 million and $25.2 million, respectively.
The Company paid Federal income taxes of $29.0 million and $28.1 million
directly to the United States Treasury Department during 1997 and 1996,
respectively.
42
<PAGE> 46
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) INVESTED ASSETS AND RELATED INCOME
The Company is carrying its fixed maturity investment portfolio at
estimated fair value as fixed maturities are considered available for sale. The
carrying value (estimated fair value) of fixed maturities compared with
amortized cost, adjusted for other-than-temporary declines in value, were as
follows:
<TABLE>
<CAPTION>
ESTIMATED UNREALIZED
CARRYING AMORTIZED --------------------
VALUE COST GAINS LOSSES
(in thousands) -------- --------- ----- ------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U.S. treasury securities and obligations of U.S.
government agencies and authorities................. $ 6,258 $ 6,298 $ 4 $ (44)
Obligations of states and political subdivisions,
special revenue and nonguaranteed................... 29,330 29,308 160 (138)
Debt securities issued by foreign governments......... 92,563 92,722 188 (347)
Corporate securities.................................. 1,861,655 1,846,588 24,733 (9,666)
Mortgage and asset-backed securities.................. 1,678,837 1,669,159 10,035 (357)
---------- ---------- ------- --------
Total fixed maturities......................... $3,668,643 $3,644,075 $35,120 $(10,552)
========== ========== ======= ========
DECEMBER 31, 1996
U.S. treasury securities and obligations of U.S.
government agencies and authorities................. $ 92,238 $ 93,202 $ -- $ (964)
Obligations of states and political subdivisions,
special revenue and nonguaranteed................... 30,853 31,519 -- (666)
Debt securities issued by foreign governments......... 105,394 108,456 504 (3,566)
Corporate securities.................................. 1,896,615 1,935,511 5,918 (44,814)
Mortgage and asset-backed securities.................. 1,741,331 1,760,962 1,990 (21,621)
---------- ---------- ------- --------
Total fixed maturities......................... $3,866,431 $3,929,650 $ 8,412 $(71,631)
========== ========== ======= ========
</TABLE>
Upon default or indication of potential default by an issuer of fixed
maturity securities, the Company-owned issue(s) of such issuer would be placed
on nonaccrual status and, since declines in fair value would no longer be
considered by the Company to be temporary, would be analyzed for possible
write-down. Any such issue would be written down to its net realizable value
during the fiscal quarter in which the impairment was determined to have become
other than temporary. Thereafter, each issue on nonaccrual status is regularly
reviewed, and additional write-downs may be taken in light of later
developments.
The Company's computation of net realizable value involves judgments and
estimates, so such value should be used with care. Such value determination
considers such factors as the existence and value of any collateral security;
the capital structure of the issuer; the level of actual and expected market
interest rates; where the issue ranks in comparison with other debt of the
issuer; the economic and competitive environment of the issuer and its business;
the Company's view on the likelihood of success of any proposed issuer
restructuring plan; and the timing, type and amount of any restructured
securities that the Company anticipates it will receive.
The Company's $220.0 million real estate portfolio at December 31, 1997
consists of joint venture and third-party mortgage loans and other real
estate-related investments. At December 31, 1997 and 1996, total impaired real
estate-related loans were as follows:
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
1997 1996
(in millions) ----------- -----------
<S> <C> <C>
Impaired loans without reserves--gross...................... $39.3 $39.8
Impaired loans with reserves--gross......................... 2.2 7.6
----- -----
Total gross impaired loans........................... 41.5 47.4
Reserves related to impaired loans.......................... (2.1) (4.4)
----- -----
Net impaired loans................................... $39.4 $43.0
===== =====
</TABLE>
43
<PAGE> 47
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) INVESTED ASSETS AND RELATED INCOME (CONTINUED)
Impaired loans without reserves include loans in which the deficit in
equity investments in real estate-related investments is considered in
determining reserves and write-downs. At December 31, 1997 and 1996, the
Company's deficit in equity investments considered in determining reserves and
write-downs amounted to $0 and $5.9 million, respectively. The Company had an
average balance of $45.2 million and $30.8 million in impaired loans for 1997
and 1996, respectively. Cash payments received on impaired loans are generally
applied to reduce the outstanding loan balance.
At December 31, 1997 and December 31, 1996, loans on nonaccrual status,
before reserves and write-downs, amounted to $47.4 million and $43.5 million,
respectively. The Company's nonaccrual loans are generally included in impaired
loans.
At December 31, 1997, securities carried at approximately $6.3 million were
on deposit with governmental agencies as required by law.
Proceeds from sales of investments in fixed maturities prior to maturity
were $633.9 million, $892.0 million and $297.6 million during 1997, 1996 and
1995, respectively. Gross gains of $3.1 million, $9.9 million and $21.2 million
and gross losses of $13.7 million, $16.2 million and $11.9 million were realized
on sales and write-downs of fixed maturities in 1997, 1996 and 1995,
respectively.
The carrying value and amortized cost of fixed maturity investments, by
contractual maturity at December 31, 1997, are shown below. Actual maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties and
because mortgage-backed and asset-backed securities provide for periodic
payments throughout their life.
<TABLE>
<CAPTION>
CARRYING AMORTIZED
VALUE COST VALUE
(in thousands) -------- ----------
<S> <C> <C>
One year or less............................................ $ 47,724 $ 47,797
Over one year through five.................................. 649,279 648,291
Over five years through ten................................. 988,849 984,495
Over ten years.............................................. 303,954 294,333
Securities not due at a single maturity date, primarily
mortgage and asset-backed securities(1)................... 1,678,837 1,669,159
---------- ----------
Total fixed maturities............................... $3,668,643 $3,644,075
========== ==========
</TABLE>
- ---------------
(1) Weighted average maturity of 3.8 years.
The sources of net investment income were as follows:
<TABLE>
<CAPTION>
PREACQUISITION
--------------
1997 1996 1995
(in thousands) -------- -------- --------------
<S> <C> <C> <C>
Interest and dividends on fixed maturities................. $250,170 $250,683 $269,934
Dividends on equity securities............................. 2,123 646 681
Income from short-term investments......................... 4,128 9,130 13,159
Income from mortgage loans................................. 16,283 20,257 40,494
Income from policy loans................................... 20,549 20,700 19,658
Income from other real estate-related investments.......... 6,631 4,917 15,565
Income from other loans and investments.................... 2,045 2,480 1,555
-------- -------- --------
Total investment income............................. 301,929 308,813 361,046
Investment expense......................................... (5,734) (9,125) (12,598)
-------- -------- --------
Net investment income............................... $296,195 $299,688 $348,448
======== ======== ========
</TABLE>
44
<PAGE> 48
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) INVESTED ASSETS AND RELATED INCOME (CONTINUED)
Realized gains (losses) for the years ended December 31, 1997, 1996 and
1995, were as follows:
<TABLE>
<CAPTION>
REALIZED GAINS (LOSSES)
-----------------------------------------------
PREACQUISITION
--------------
1997 1996 1995
(in thousands) -------- ------- --------------
<S> <C> <C> <C>
Real estate-related........................................ $ 19,758 $17,462 $(325,611)
Fixed maturities........................................... (10,656) (6,344) 9,336
Equity securities.......................................... 914 -- (346)
Other...................................................... 530 2,484 (2,079)
-------- ------- ---------
Realized investment gains (losses) before income tax
expense (benefit)..................................... 10,546 13,602 (318,700)
Income tax expense (benefit)............................... 3,691 4,761 (111,545)
-------- ------- ---------
Net realized investment gains (losses)................... $ 6,855 $ 8,841 $(207,155)
======== ======= =========
</TABLE>
Unrealized gains (losses) are computed below as follows: fixed
maturities--the difference between fair value and amortized cost, adjusted for
other-than-temporary declines in value; equity securities and other--the
difference between fair value and cost. The change in unrealized investment
gains (losses) by class of investment for the years ended December 31, 1997,
1996 and 1995 were as follows:
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED GAINS (LOSSES)
---------------------------------------------------------
PREACQUISITION
--------------
DECEMBER 31 DECEMBER 31 JANUARY 4 DECEMBER 31
1997 1996 1996 1995
(in thousands) ------------ ------------ ---------- --------------
<S> <C> <C> <C> <C>
Fixed maturities..................................... $ 87,787 $(63,219) $ $351,964
Equity and other securities.......................... (103) 1,256 -- 180
Adjustment to deferred insurance acquisition costs... (2,325) 1,307 -- (14,277)
Adjustment to value of business acquired............. (26,209) 20,947 -- --
-------- -------- -- --------
Unrealized gain (loss) before income tax expense... 59,150 (39,709) -- 337,867
Income tax expense (benefit)......................... (985) 7,789 -- 32,922
-------- -------- -- --------
Net unrealized gain (loss) on investments..... $ 60,135 $(47,498) $-- $304,945
======== ======== == ========
</TABLE>
(4) UNCONSOLIDATED INVESTEES
At December 31, 1997 and 1996 the Company, along with other Kemper
subsidiaries, directly held partnership interests in a number of real estate
joint ventures. The Company's direct and indirect real estate joint venture
investments are accounted for utilizing the equity method, with the Company
recording its share of the operating results of the respective partnerships. The
Company, as an equity owner, has the ability to fund, and historically has
elected to fund, operating requirements of certain of the joint ventures.
Consolidation accounting methods are not utilized as the Company, in most
instances, does not own more than 50 percent in the aggregate, and in any event,
major decisions of the partnership must be made jointly by all partners.
As of December 31, 1997 and December 31, 1996, the Company's net equity
investment in unconsolidated investees amounted to $19.3 million and $11.7
million, respectively. The Company's share of net income related to such
unconsolidated investees amounted to $835 thousand and $223 thousand in 1997 and
1996, respectively, and a net loss of $453 thousand in 1995.
(5) CONCENTRATION OF CREDIT RISK
The Company generally strives to maintain a diversified invested asset
portfolio; however, certain concentrations of credit risk exist in mortgage and
asset-backed securities and real estate.
Approximately 35.1 percent of the Company's investment-grade fixed
maturities at December 31, 1997 were mortgage-backed securities, down from 36.4
percent at December 31, 1996, due to sales and paydowns during
45
<PAGE> 49
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) CONCENTRATION OF CREDIT RISK (CONTINUED)
1997. These investments consist primarily of marketable mortgage pass-through
securities issued by the Government National Mortgage Association, the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation and
other investment-grade securities collateralized by mortgage pass-through
securities issued by these entities. The Company has not made any investments in
interest-only or other similarly volatile tranches of mortgage-backed
securities. The Company's mortgage-backed investments are generally AAA credit
quality.
Approximately 10.8 percent and 8.8 percent of the Company's
investment-grade fixed maturities at December 31, 1997 and 1996, respectively,
consisted of corporate asset-backed securities. The majority of the Company's
investments in asset-backed securities were backed by home equity loans (27.7%),
auto loans (22.3%), manufactured housing loans (17.2%), equipment loans (13.7%),
and commercial mortgage backed securities (10.7%).
The Company's real estate portfolio is distributed by geographic location
and property type, as shown in the following two tables:
GEOGRAPHIC DISTRIBUTION AS OF DECEMBER 31, 1997
<TABLE>
<S> <C>
California....................... 38.2%
Hawaii........................... 14.2
Colorado......................... 9.8
Oregon........................... 9.2
Washington....................... 9.1
Florida.......................... 6.4
Texas............................ 5.1
Michigan......................... 3.7
Ohio............................. 3.3
Illinois......................... 1.0
-----
Total.................. 100.0%
=====
</TABLE>
DISTRIBUTION BY PROPERTY TYPE AS OF DECEMBER 31, 1997
<TABLE>
<S> <C>
Hotel............................ 41.3%
Land............................. 28.2
Residential...................... 13.1
Retail........................... 3.3
Office........................... 3.1
Industrial....................... .9
Other............................ 10.1
-----
Total.................. 100.0%
=====
</TABLE>
Undeveloped land represented approximately 28.2 percent of the Company's
real estate portfolio at December 31, 1997. To maximize the value of certain
land and other projects, additional development has been proceeding or has been
planned. Such development of existing projects would continue to require
funding, either from the Company or third parties. In the present real estate
markets, third-party financing can require credit enhancing arrangements (e.g.,
standby financing arrangements and loan commitments) from the Company. The
values of development projects are dependent on a number of factors, including
Kemper's and the Company's plans with respect thereto, obtaining necessary
construction and zoning permits and market demand for the permitted use of the
property. The values of certain development projects have been written down as
of December 31, 1995, reflecting changes in plans in connection with the
Zurich-led acquisition of Kemper. There can be no assurance that such permits
will be obtained as planned or at all, nor that such expenditures will occur as
scheduled, nor that Kemper's and the Company's plans with respect to such
projects may not change substantially.
Approximately half of the Company's real estate mortgage loans are on
properties or projects where the Company, Kemper, or their affiliates have taken
ownership positions in joint ventures with a small number of partners. (See note
captioned "Unconsolidated Investees".)
At December 31, 1997, loans to and investments in joint ventures in which
Patrick M. Nesbitt or his affiliates ("Nesbitt"), a third-party real estate
developer, have ownership interests constituted approximately $88.2 million, or
40.1 percent, of the Company's real estate portfolio. The Nesbitt ventures
consist of nine hotel properties and two office buildings. At December 31, 1997,
the Company did not have any Nesbitt-related off-balance-sheet legal funding
commitments outstanding.
At December 31, 1997, loans to a master limited partnership (the "MLP")
between subsidiaries of Kemper and subsidiaries of Lumbermens Mutual Casualty
Company ("Lumbermens"), a former affiliate, constituted approximately $60.5
million, or 27.5 percent, of the Company's real estate portfolio. Kemper's
interest is
46
<PAGE> 50
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
75 percent at December 31, 1997. At December 31, 1997, MLP-related commitments
accounted for approximately $7.4 million of the Company's off-balance-sheet
legal commitments, which the Company expects to fund.
At December 31, 1997, the Company no longer had any outstanding loans or
investments in projects with the Prime Group, Inc. or its affiliates, as all
such investments have been sold or written-down to zero. However, the Company
continues to have Prime Group-related commitments, which accounted for $25.7
million of the Company's off-balance-sheet legal commitments at December 31,
1997. The Company does not expect to fund any of these commitments.
(6) INCOME TAXES
Income tax expense (benefit) was as follows for the years ended December
31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
PREACQUISITION
--------------
1997 1996 1995
(in thousands) -------- ------- --------------
<S> <C> <C> <C>
Current................................................ $130,662 $26,300 $(113,087)
Deferred............................................... (99,370) (897) 38,423
-------- ------- ---------
Total........................................ $ 31,292 $25,403 $ (74,664)
======== ======= =========
</TABLE>
Included in the 1995 current tax benefit is the recognition of a net
operating loss carryover at December 31, 1995 which was utilized against taxable
income on Kemper's consolidated short-period Federal income tax return for the
January 1 through January 4, 1996 tax year. Beginning January 5, 1996, the
Company and its subsidiaries each filed a stand alone Federal income tax return.
Previously, the Company had filed a consolidated Federal income tax return with
Kemper. In 1996, the Company and Kemper settled all outstanding balances under
the tax allocation agreement.
The actual income tax expense (benefit) for 1997, 1996 and 1995 differed
from the "expected" tax expense (benefit) for those years as displayed below.
"Expected" tax expense (benefit) was computed by applying the U.S. Federal
corporate tax rate of 35 percent in 1997, 1996, and 1995 to income (loss) before
income tax expense (benefit).
<TABLE>
<CAPTION>
PREACQUISITION
--------------
1997 1996 1995
(in thousands) ------- ------- --------------
<S> <C> <C> <C>
Computed expected tax expense (benefit)................. $24,503 $20,938 $(72,700)
Difference between "expected" and actual tax expense
(benefit):
State taxes........................................... 1,801 913 (1,370)
Amortization of goodwill.............................. 5,353 3,568 --
Foreign tax credit.................................... (278) -- (183)
Other, net............................................ (87) (16) (411)
------- ------- --------
Total actual tax expense (benefit)............ $31,292 $25,403 $(74,664)
======= ======= ========
</TABLE>
Deferred tax assets and liabilities are generally determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company only records deferred tax
assets if future realization of the tax benefit is more likely than not, with a
valuation allowance recorded for the portion that is not likely to be realized.
The valuation allowance is subject to future adjustments based upon, among other
items, the Company's estimates of future operating earnings and capital gains.
The Company has established a valuation allowance to reduce the deferred
Federal tax asset related to real estate and other investments to the amount
that, based upon available evidence, is, in management's judgment, more likely
than not to be realized. Any reversals of the valuation allowance are contingent
upon the recognition of future capital gains in the Company's Federal income tax
return or a change in circumstances which causes the recognition of the benefits
to become more likely than not. The change in the valuation allowance is related
solely to the change in the net deferred Federal tax asset or liability from
unrealized gains or losses on investments.
47
<PAGE> 51
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the Company's net deferred Federal tax asset or liability were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 JANUARY 4
1997 1996 1996
(in thousands) ----------- ----------- ---------
<S> <C> <C> <C>
Deferred Federal tax assets:
Deferred insurance acquisition costs...................... $ 75,522 $ 4,520 $ --
Unrealized losses on investments.......................... -- 16,624 --
Life policy reserves...................................... 43,337 46,452 46,654
Unearned revenue.......................................... 37,243 -- --
Real estate-related....................................... 13,400 20,642 27,736
Other investment-related.................................. 3,298 5,409 1,773
Other..................................................... 4,371 3,639 9,750
-------- -------- --------
Total deferred Federal tax assets...................... 177,171 97,286 85,913
Valuation allowance....................................... (15,201) (31,825) (15,201)
-------- -------- --------
Total deferred Federal tax assets after valuation
allowance............................................ 161,970 65,461 70,712
-------- -------- --------
Deferred Federal tax liabilities:
Value of business acquired................................ 48,469 66,373 66,578
Deferred insurance acquisition costs...................... 20,811 9,384 --
Depreciation and amortization............................. 20,201 15,473 15,490
Other investment-related.................................. 18,774 28,855 37,919
Unrealized gains on investments........................... 9,002 -- --
Other..................................................... 4,720 5,738 4,197
-------- -------- --------
Total deferred Federal tax liabilities................. 121,977 125,823 124,184
-------- -------- --------
Net deferred Federal tax assets (liabilities)............... $ 39,993 $(60,362) $(53,472)
======== ======== ========
</TABLE>
The net deferred tax assets relate primarily to unearned revenue and the
tax on deferred insurance acquisition costs ("DAC Tax") associated with $2.7
billion of new 1997 sales from a non-registered individual and group variable
bank-owned life insurance contract ("BOLI"). As a result of proposed tax law
changes, as more fully discussed below, the level of DAC Tax experienced in 1997
is not anticipated to occur in future periods and it is expected that the
Company will return to its normalized earnings patterns in 1998. Management
believes that it is more likely, than not, that the results of future operations
will generate sufficient taxable income over the ten year amortization period of
the unearned revenue and DAC Tax to realize such deferred tax assets.
In early 1998, the Clinton Administration's Fiscal Year 1998 Budget
("Budget") was released and contained certain proposals to change the taxation
of non-qualified fixed and variable annuities and variable life insurance
contracts, including BOLI. It is currently unknown whether or not such proposals
will be accepted, amended or omitted in the final 1999 Budget approved by
Congress. If the current Budget proposals are accepted, certain of the Company's
non-qualified fixed and variable annuities and certain of its variable life
insurance products, including BOLI and the non-registered individual variable
universal life insurance contracts introduced during 1997, may no longer be tax
advantaged products and therefore no longer attractive to those customers who
purchase them because of their favorable tax attributes. Additionally, sales of
such products during 1998 may also be negatively impacted until the likelihood
of the current proposals being enacted into law has been determined.
The tax returns through the year 1986 have been examined by the Internal
Revenue Service ("IRS"). Changes proposed are not material to the Company's
financial position. The tax returns for the years 1987 through 1993 are
currently under examination by the IRS.
(7) RELATED-PARTY TRANSACTIONS
The Company received cash capital contributions of $45.0 million and $18.4
million during 1997 and 1996, respectively. The Company paid cash dividends of
$29.3 million to Kemper during 1997.
The Company has loans to joint ventures, consisting primarily of mortgage
loans on real estate, in which the Company and/or one of its affiliates has an
ownership interest. At December 31, 1997 and December 31, 1996,
48
<PAGE> 52
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) RELATED-PARTY TRANSACTIONS (CONTINUED)
joint venture mortgage loans totaled $72.7 million and $111.0 million,
respectively, and during 1997, 1996 and 1995, the Company earned interest income
on these joint venture loans of $7.5 million, $9.5 million and $19.6 million,
respectively.
All of the Company's personnel are employees of Federal Kemper Life
Assurance Company ("FKLA"), an affiliated company. The Company is allocated
expenses for the utilization of FKLA employees and facilities, the investment
management services of Scudder Kemper Investments, Inc. ("SKI"), formerly Zurich
Kemper Investments, Inc., an affiliated company, and the information systems of
Kemper Service Company ("KSvC"), an SKI subsidiary, based on the Company's share
of administrative, legal, marketing, investment management, information systems
and operation and support services. During 1997, 1996 and 1995, expenses
allocated to the Company from SKI and KSvC amounted to $114 thousand, $1.7
million and $4.4 million, respectively. The Company also paid to SKI investment
management fees of $3.5 million, $3.6 million and $3.4 million during 1997, 1996
and 1995, respectively. In addition, expenses allocated to the Company from FKLA
during 1997, 1996 and 1995 amounted to $30.0 million, $10.5 million and $14.3
million, respectively.
During 1995, the Company sold certain mortgages and real estate-related
investments, net of reserves, amounting to approximately $3.5 million to an
affiliated non-life realty company, in exchange for cash. No gain or loss was
recognized on these sales. During 1996, the Company purchased approximately
$24.5 million of real estate-related investments from an affiliated non-life
realty subsidiary for cash. The Company also paid to Kemper real estate
subsidiaries $2.2 million, $1.8 million and $1.8 million in 1997, 1996 and 1995,
respectively, related to the management of the Company's real estate portfolio.
(8) REINSURANCE
In the ordinary course of business, the Company enters into reinsurance
agreements to diversify risk and limit its overall financial exposure to certain
blocks of fixed-rate annuities and to individual death claims. The Company
generally cedes 100 percent of the related annuity liabilities under the terms
of the reinsurance agreements. Although these reinsurance agreements
contractually obligate the reinsurers to reimburse the Company, they do not
discharge the Company from its primary liabilities and obligations to
policyholders. As such, these amounts paid or deemed to have been paid are
recorded on the Company's consolidated balance sheet as reinsurance recoverables
and ceded future policy benefits.
In 1992 and 1991, the Company entered into 100 percent indemnity
reinsurance agreements ceding $515.7 million and $416.3 million, respectively,
of its fixed-rate annuity liabilities to Fidelity Life Association, a Mutual
Legal Reserve Company ("FLA"). FLA is a mutual insurance company that shares
common management and common board members with the Company, FKLA and Kemper. As
of December 31, 1997 and 1996, the reinsurance recoverable related to the
fixed-rate annuity liabilities ceded to FLA amounted to $382.6 million and
$427.2 million, respectively. During 1995, the Company recorded income of $4.4
million related to a ceding commission experience adjustment from the 1992
reinsurance agreement.
In December 1996, the Company assumed on a yearly renewable term basis
approximately $14.4 billion (face amount) of term life insurance from FKLA. As a
result of this transaction, the Company recorded premiums and reserves of
approximately $7.3 million. The difference between the cash transferred, which
represents the statutory reserves of the business assumed, and the reserves
recorded under generally accepted accounting principles, of approximately $18.4
million, was deemed to be a capital contribution from Kemper and was recorded as
additional paid-in-capital during 1996. Premiums assumed during 1997 under the
terms of the treaty amounted to $21.1 million and the face amount which remained
outstanding at December 31, 1997 amounted to $12.6 billion.
The Company's retention limit on term life insurance prior to 1997 was $300
thousand (face amount) on the life of any one individual with the excess amounts
ceded to outside reinsurers. The term life insurance business assumed from FKLA
during 1996 did not have any individual contracts greater than $300 thousand in
face amount. Effective January 1, 1997, the Company ceded 90 percent of all new
term life insurance premiums to outside reinsurers. Term life reserves ceded to
outside reinsurers on the Company's direct business amounted to approximately
$139 thousand and $102 thousand as of December 31, 1997 and 1996, respectively.
During December 1997, the Company entered into a funds held reinsurance
agreement with a Zurich affiliated company, EPICENTRE Reinsurance (Bermuda)
Limited ("EPICENTRE"). Under the terms of this
49
<PAGE> 53
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
agreement, the Company ceded, on a yearly renewable term basis, ninety percent
of the net amount at risk (death benefit payable to the insured less the
insured's separate account cash surrender value) related to a new product
developed in 1997, a non-registered variable bank-owned life insurance contract
("BOLI"), which is held in the Company's separate accounts. During 1997, the
Company issued $59.3 billion (face amount) of new BOLI business and ceded $51.1
billion (face amount) to EPICENTRE under the terms of the treaty. During 1997,
the Company also ceded $24.3 million of separate account fees (cost of insurance
charges) to EPICENTRE. The Company has also withheld approximately $23.4 million
of such funds due to EPICENTRE under the terms of the reinsurance agreement as a
component of benefits and funds payable in the accompanying consolidated balance
sheet as of December 31, 1997.
(9) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
FKLA sponsors a welfare plan that provides medical and life insurance
benefits to its retired and active employees and the Company is allocated a
portion of the costs of providing such benefits. The Company is self insured
with respect to medical benefits, and the plan is not funded except with respect
to certain disability-related medical claims. The medical plan provides for
medical insurance benefits at retirement, with eligibility based upon age and
the participant's number of years of participation attained at retirement. The
plan is contributory for pre-Medicare retirees, and will be contributory for all
retiree coverage for most current employees, with contributions generally
adjusted annually. Postretirement life insurance benefits are noncontributory
and are limited to $10,000 per participant.
The allocated accumulated postretirement benefit obligation accrued by the
Company amounted to $1.9 million and $1.7 million at December 31, 1997 and 1996,
respectively.
The discount rate used in determining the allocated postretirement benefit
obligation was 7.25 percent and 7.75 percent for 1997 and 1996, respectively.
The assumed health care trend rate used was based on projected experience for
1997 and 1998, 8 percent in 1999, gradually declining to 5.0 percent by the year
2002 and remaining at that level thereafter.
A one percentage point increase in the assumed health care cost trend rate
for each year would increase the accumulated postretirement benefit obligation
as of December 31, 1997 and 1996 by $242 thousand and $191 thousand,
respectively.
The Company also provides certain severance-related policies to provide
benefits, generally limited in time, to former or inactive employees after
employment but before retirement.
(10) COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in various legal actions for which it establishes
liabilities where appropriate. In the opinion of the Company's management, based
upon the advice of legal counsel, the resolution of such litigation is not
expected to have a material adverse effect on the consolidated financial
statements.
Although neither the Company or its joint venture projects have been
identified as a "potentially responsible party" under Federal environmental
guidelines, inherent in the ownership of or lending to real estate projects is
the possibility that environmental pollution conditions may exist on or near or
relate to properties owned or previously owned on properties securing loans.
Where the Company has presently identified remediation costs, they have been
taken into account in determining the cash flows and resulting valuations of the
related real estate assets. Based on the Company's receipt and review of
environmental reports on most of the projects in which it is involved, the
Company believes its environmental exposure would be immaterial to its
consolidated results of operations. However, the Company may be required in the
future to take actions to remedy environmental exposures, and there can be no
assurance that material environmental exposures will not develop or be
identified in the future. The amount of future environmental costs is impossible
to estimate due to, among other factors, the unknown magnitude of possible
exposures, the unknown timing and extent of corrective actions that may be
required, the determination of the Company's liability in proportion to others
and the extent such costs may be covered by insurance or various environmental
indemnification agreements.
See the note captioned "Financial Instruments--Off-Balance-Sheet Risk"
below for the discussion regarding the Company's loan commitments and standby
financing agreements.
50
<PAGE> 54
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
The Company is liable for guaranty fund assessments related to certain
unaffiliated insurance companies that have become insolvent during the years
1997 and prior. The Company's financial statements include provisions for all
known assessments that are expected to be levied against the Company as well as
an estimate of amounts (net of estimated future premium tax recoveries) that the
Company believes it will be assessed in the future for which the life insurance
industry has estimated the cost to cover losses to policyholders. The Company is
also contingently liable for any future guaranty fund assessments related to
insolvencies of unaffiliated insurance companies, for which the life insurance
industry has been unable to estimate the cost to cover losses to policyholders.
No specific amount can be reasonably estimated for such insolvencies as of
December 31, 1997.
(11) FINANCIAL INSTRUMENTS--OFF-BALANCE-SHEET RISK
At December 31, 1997, the Company had future legal loan commitments and
stand-by financing agreements totaling $75.3 million to support the financing
needs of various real estate investments. To the extent these arrangements are
called upon, amounts loaned would be secured by assets of the joint ventures,
including first mortgage liens on the real estate. The Company's criteria in
making these arrangements are the same as for its mortgage loans and other real
estate investments. The Company presently expects to fund approximately $21.2
million of these arrangements. These commitments are included in the Company's
analysis of real estate-related reserves and write-downs. The fair values of
loan commitments and standby financing agreements are estimated in conjunction
with and using the same methodology as the fair value estimates of mortgage
loans and other real estate-related investments.
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates are made at specific points in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular financial
instrument. A significant portion of the Company's financial instruments are
carried at fair value. (See note captioned "Invested Assets and Related
Income".) Fair value estimates for financial instruments not carried at fair
value are generally determined using discounted cash flow models and assumptions
that are based on judgments regarding current and future economic conditions and
the risk characteristics of the investments. Although fair value estimates are
calculated using assumptions that management believes are appropriate, changes
in assumptions could significantly affect the estimates and such estimates
should be used with care.
Fair value estimates are determined for existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and certain liabilities that are not
considered financial instruments. Accordingly, the aggregate fair value
estimates presented do not represent the underlying value of the Company. For
example, the Company's subsidiaries are not considered financial instruments,
and their value has not been incorporated into the fair value estimates. In
addition, tax ramifications related to the realization of unrealized gains and
losses can have a significant effect on fair value estimates and have not been
considered in any of the estimates.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
Fixed maturities and equity securities: Fair values were determined by
using market quotations, or independent pricing services that use prices
provided by market makers or estimates of fair values obtained from yield data
relating to instruments or securities with similar characteristics, or fair
value as determined in good faith by the Company's portfolio manager, SKI.
Cash and short-term investments: The carrying amounts reported in the
consolidated balance sheet for these instruments approximate fair values.
Mortgage loans and other real estate-related investments: Fair values were
estimated based upon the investments observable market price, net of estimated
costs to sell. The estimates of fair value should be used with care given the
inherent difficulty of estimating the fair value of real estate due to the lack
of a liquid quotable market.
51
<PAGE> 55
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Other loans and investments: The carrying amounts reported in the
consolidated balance sheet for these instruments approximate fair values. The
fair values of policy loans were estimated by discounting the expected future
cash flows using an interest rate charged on policy loans for similar policies
currently being issued.
Life policy benefits: Fair values of the life policy benefits regarding
investment contracts (primarily deferred annuities) and universal life contracts
were estimated by discounting gross benefit payments, net of contractual
premiums, using the average crediting rate currently being offered in the
marketplace for similar contracts with maturities consistent with those
remaining for the contracts being valued. The Company had projected its future
average crediting rate in 1997 and 1996 to be 5.25 percent and 4.75 percent,
respectively, while the assumed average market crediting rate was 6.0 percent
and 5.8 percent in 1997 and 1996, respectively.
The carrying values and estimated fair values of the Company's financial
instruments at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(in thousands) -------- ----- -------- -----
<S> <C> <C> <C> <C>
Financial instruments recorded as assets:
Fixed maturities.............................. $3,668,643 $3,668,643 $3,866,431 $3,866,431
Cash and short-term investments............... 259,925 259,925 74,472 74,472
Mortgage loans and other real estate-related
assets..................................... 220,046 220,046 267,713 267,713
Policy loans.................................. 282,439 282,439 288,302 288,302
Equity securities............................. 24,839 24,839 9,910 9,910
Other invested assets......................... 20,820 24,404 13,597 13,597
Financial instruments recorded as liabilities:
Life policy benefits, excluding term life
reserves................................... 3,846,023 4,050,852 4,249,264 4,101,588
</TABLE>
(13) STOCKHOLDER'S EQUITY--RETAINED EARNINGS
The maximum amount of dividends which can be paid by insurance companies
domiciled in the State of Illinois to shareholders without prior approval of
regulatory authorities is restricted. The maximum amount of dividends which can
be paid by the Company without prior approval in 1998 is $58.4 million. The
Company paid cash dividends of $29.3 million to Kemper during 1997. The Company
paid no cash dividends in 1996 or 1995.
The Company's net income (loss) and capital and surplus as determined in
accordance with statutory accounting principles were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(in thousands) ---- ---- ----
<S> <C> <C> <C>
Net income (loss)........................................... $ 58,372 $ 37,287 $(64,707)
======== ======== ========
Statutory capital and surplus............................... $476,924 $411,837 $383,374
======== ======== ========
</TABLE>
52
<PAGE> 56
KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) UNAUDITED INTERIM FINANCIAL INFORMATION
The following table sets forth the Company's unaudited quarterly financial
information:
(in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C>
1997 OPERATING SUMMARY
Net investment income.............................. $74,249 $74,050 $72,950 $ 74,946
Realized investment gains (losses)................. 889 8,161 (3,032) 4,528
Premium income..................................... 5,008 4,121 3,938 9,172
Separate account fees and other income............. 8,909 12,961 12,215 62,415(1)
------- ------- ------- --------
Total revenue.............................. 89,055 99,293 86,071 151,061
------- ------- ------- --------
Interest credited and benefits to policyholders.... 57,859 56,643 57,965 55,687
Commissions, taxes, licenses and fees.............. 8,023 9,475 8,389 59,323(1)
Operating expenses................................. 7,175 8,780 10,014 10,868
Net deferral of insurance acquisition costs........ (7,216) (6,877) (7,471) (13,409)
Amortization of value of business acquired......... 4,821 6,991 6,743 6,393
Amortization of goodwill........................... 2,547 2,552 2,549 7,647(2)
------- ------- ------- --------
Total benefits and expenses................ 73,209 77,564 78,189 126,509
------- ------- ------- --------
Income before income tax expense................... 15,846 21,729 7,882 24,552
Income tax expense................................. 5,678 8,723 3,778 13,113
------- ------- ------- --------
Net income................................. $10,168 $13,006 $ 4,104 $ 11,439
======= ======= ======= ========
1996 OPERATING SUMMARY
Net investment income.............................. $72,302 $74,647 $76,070 $ 76,669
Realized investment gains (losses)................. (1,248) (2,439) 13,518 3,771
Premium income..................................... 130 109 150 7,433(3)
Separate account fees and other income............. 8,028 9,419 8,478 9,170
------- ------- ------- --------
Total revenue.............................. 79,212 81,736 98,216 97,043
------- ------- ------- --------
Interest credited and benefits to policyholders.... 58,296 57,335 57,512 64,206
Commissions, taxes, licenses and fees.............. 6,868 6,486 6,819 7,962
Operating expenses................................. 5,440 4,920 6,974 7,344
Net deferral of insurance acquisition costs........ (5,032) (7,302) (5,434) (7,736)
Amortization of value of business acquired......... 4,234 2,787 11,582 2,927
Amortization of goodwill........................... 2,547 2,552 2,549 2,547
------- ------- ------- --------
Total benefits and expenses................ 72,353 66,778 80,002 77,250
------- ------- ------- --------
Income before income tax expense................... 6,859 14,958 18,214 19,793
Income tax expense................................. 3,513 6,402 7,391 8,097
------- ------- ------- --------
Net income................................. $ 3,346 $ 8,556 $10,823 $ 11,696
======= ======= ======= ========
</TABLE>
- ---------------
Notes:
(1) Reflects premium tax expense loads received and premium taxes incurred of
$49.1 million related to new BOLI sales of $2.6 billion in the fourth
quarter of 1997.
(2) Reflects the effect of the change in amortization of goodwill from 25 to 20
years.
(3) Reflects the assumption of term life insurance business from FKLA.
53
<PAGE> 57
APPENDIX A
ILLUSTRATIONS OF CASH VALUES,
SURRENDER VALUES AND
DEATH BENEFITS
The tables in this Prospectus have been prepared to help show how values
under Individual and Survivorship Policies change with investment experience.
The tables illustrate how Cash Values, Surrender Values, and Death Benefits
under a Policy issued on an Insured or Insureds of given ages would vary over
time if the hypothetical gross investment rates of return were a uniform, after
tax, annual rate of 0%, 6%, and 12%. If the hypothetical gross investment rate
of return averages 0%, 6%, or 12%, but fluctuates over or under those averages
throughout the years, the Cash Values, Surrender Values and Death Benefits may
be different.
The amounts shown for the Cash Value, Surrender Value and Death Benefit as
of each Policy anniversary reflect the fact that the net investment return on
the assets held in the Subaccounts is lower than the gross return. This is
because of a daily charge to the Subaccounts for assuming mortality and expense
risks, which currently varies from 0.30% to 0.65% depending upon the cumulative
amount of premiums paid, but is guaranteed not to exceed an effective annual
rate of 0.90%. In addition, the net investment returns also reflect the
deduction of the Fund investment advisory fees and other Fund expenses (.87%,
the average of the actual and estimated fees and expenses including any caps or
reimbursements). The tables also reflect applicable charges and deductions
including a 3.0% deduction against premiums (1% of which represents the charge
for federal taxes and 2.0% of which represents an estimated charge to
approximate certain taxes and charges imposed by states and other
jurisdictions), a monthly administrative charge of $20 per month for the first
Policy Year and $5 per month thereafter, a daily Account Maintenance Fee which
is equal to an effective annual charge of 0.45%, and monthly charges for
providing insurance protection. For each hypothetical gross investment rate of
return, tables are provided reflecting current and guaranteed cost of insurance
charges. Hypothetical gross average investment rates of return of 0%, 6% and 12%
correspond to the following approximate net annual investment rates of return of
- -1.52%, 4.48% and 10.48%, on a current basis. On a guaranteed basis, these rates
of return would be -1.77%, 4.23% and 10.23%, respectively. Cost of insurance
rates vary by issue age (or attained age in the case of increases in Specified
Amount), sex, rating class and Policy Year and, therefore, are not reflected in
the approximate net annual investment rate of return above.
Values are shown for Policies which are issued to preferred nonsmoker
Insureds. Values for Policies issued on a basis involving a higher mortality
risk would result in lower Cash Values, Surrender Values and Death Benefits than
those illustrated. Females generally have a more favorable rate structure than
males.
The tables also reflect the fact that no charges for Federal, state or
other income taxes are currently made against the Separate Account. If such a
charge is made in the future, it will take a higher gross rate of return than
illustrated to produce the net after-tax returns shown in the tables.
Upon request, KILICO will furnish an illustration based on the proposed
Insured's or Insureds' age, sex and premium payment requested.
54
<PAGE> 58
INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $3,500. ANNUAL PREMIUM ISSUE AGE 40
$250,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS -------------------------------- ----------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ---------- --------- ------- ------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,675 3,004 3,004 250,000 3,197 3,197 250,000 3,391 3,391 250,000
2 7,534 6,103 6,103 250,000 6,683 6,683 250,000 7,286 7,286 250,000
3 11,585 9,096 9,096 250,000 10,263 10,263 250,000 11,525 11,525 250,000
4 15,840 12,003 12,003 250,000 13,959 13,959 250,000 16,161 16,161 250,000
5 20,307 14,827 14,827 250,000 17,779 17,779 250,000 21,237 21,237 250,000
6 24,997 17,574 17,574 250,000 21,732 21,732 250,000 26,802 26,802 250,000
7 29,922 20,240 20,240 250,000 25,820 25,820 250,000 32,903 32,903 250,000
8 35,093 22,829 22,829 250,000 30,049 30,049 250,000 39,595 39,595 250,000
9 40,523 25,336 25,336 250,000 34,420 34,420 250,000 46,935 46,935 250,000
10 46,224 27,760 27,760 250,000 38,936 38,93 250,000 54,987 54,987 250,000
11 52,210 30,098 30,098 250,000 43,602 43,602 250,000 63,822 63,822 250,000
12 58,495 32,343 32,343 250,000 48,414 48,414 250,000 73,515 73,515 250,000
13 65,095 34,485 34,485 250,000 53,371 53,371 250,000 84,149 84,149 250,000
14 72,025 36,524 36,524 250,000 58,478 58,478 250,000 95,824 95,824 250,000
15 79,301 38,466 38,466 250,000 63,749 63,749 250,000 108,658 108,658 251,728
16 86,941 40,187 40,187 250,000 69,078 69,078 250,000 122,643 122,643 275,690
17 94,963 41,803 41,803 250,000 74,575 74,575 250,000 137,931 137,931 300,979
18 103,387 43,326 43,326 250,000 80,259 80,259 250,000 154,652 154,652 327,739
19 112,231 44,751 44,751 250,000 86,138 86,138 250,000 172,938 172,938 356,044
20 121,517 46,073 46,073 250,000 92,216 92,216 250,000 192,929 192,929 386,070
25 175,397 50,780 50,780 250,000 125,833 125,833 250,000 324,226 324,226 566,746
30 244,163 51,196 51,196 250,000 166,206 166,206 257,570 528,311 528,311 818,724
35 331,927 45,042 45,042 250,000 214,245 214,245 299,086 845,531 845,531 1,180,362
40 443,939 27,476 27,476 250,000 269,374 269,374 345,579 1,332,621 1,332,621 1,709,620
45 -- -- -- -- -- -- -- -- -- --
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON CASH VALUE ACCUMULATION TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.65% THROUGH POLICY YEAR 28,
0.50% THEREAFTER.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
55
<PAGE> 59
INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $3,500. ANNUAL PREMIUM ISSUE AGE 40
$250,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ---------------------------- ----------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------ --------- ------- ------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,675 2,524 2,524 250,000 2,702 2,702 250,000 2,880 2,880 250,000
2 7,534 5,133 5,133 250,000 5,652 5,652 250,000 6,193 6,193 250,000
3 11,585 7,647 7,647 250,000 8,676 8,676 250,000 9,793 9,793 250,000
4 15,840 10,062 10,062 250,000 11,772 11,772 250,000 13,704 13,704 250,000
5 20,307 12,380 12,380 250,000 14,944 14,944 250,000 17,958 17,958 250,000
6 24,997 14,596 14,596 250,000 18,187 18,187 250,000 22,582 22,582 250,000
7 29,922 16,708 16,708 250,000 21,500 21,500 250,000 27,611 27,611 250,000
8 35,093 18,714 18,714 250,000 24,884 24,884 250,000 33,086 33,086 250,000
9 40,523 20,614 20,614 250,000 28,340 28,340 250,000 39,050 39,050 250,000
10 46,224 22,400 22,400 250,000 31,863 31,863 250,000 45,548 45,548 250,000
11 52,210 24,071 24,071 250,000 35,454 35,454 250,000 52,637 52,637 250,000
12 58,495 25,616 25,616 250,000 39,104 39,104 250,000 60,368 60,368 250,000
13 65,095 27,023 27,023 250,000 42,804 42,804 250,000 68,801 68,801 250,000
14 72,025 28,281 28,281 250,000 46,548 46,548 250,000 78,008 78,008 250,000
15 79,301 29,375 29,375 250,000 50,322 50,322 250,000 88,065 88,065 250,000
16 86,941 30,294 30,294 250,000 54,120 54,120 250,000 99,065 99,065 250,000
17 94,963 31,024 31,024 250,000 57,932 57,932 250,000 111,112 111,112 250,000
18 103,387 31,557 31,557 250,000 61,755 61,755 250,000 124,296 124,296 263,409
19 112,231 31,882 31,882 250,000 65,584 65,584 250,000 138,577 138,577 285,302
20 121,517 31,976 31,976 250,000 69,403 69,403 250,000 154,011 154,011 308,192
21 131,268 31,815 31,815 250,000 73,197 73,197 250,000 170,680 170,680 332,108
22 141,507 31,372 31,372 250,000 76,952 76,952 250,000 188,666 188,666 357,125
23 152,257 30,609 30,609 250,000 80,643 80,643 250,000 208,051 208,051 383,293
24 163,545 29,480 29,480 250,000 84,241 84,241 250,000 228,917 228,917 410,678
25 175,397 27,931 27,931 250,000 87,716 87,716 250,000 251,348 251,348 439,357
26 187,842 25,914 25,914 250,000 91,041 91,041 250,000 275,438 275,438 469,429
27 200,909 23,382 23,382 250,000 94,194 94,194 250,000 301,296 301,296 500,965
28 214,629 20,277 20,277 250,000 97,149 97,149 250,000 329,035 329,035 534,090
29 229,036 16,538 16,538 250,000 99,878 99,878 250,000 358,781 358,781 568,883
30 244,163 12,081 12,081 250,000 102,342 102,342 250,000 390,660 390,660 605,406
31 260,046 6,777 6,777 250,000 104,479 104,479 250,000 424,782 424,782 643,757
32 276,723 315 315 250,000 106,118 106,118 250,000 461,111 461,111 683,827
33 294,234 0 0 0 107,329 107,329 250,000 499,986 499,986 726,230
34 -- -- -- -- 107,894 107,894 250,000 541,354 541,354 770,564
35 -- -- -- -- 107,666 107,666 250,000 585,295 585,295 817,071
36 -- -- -- -- 106,496 106,496 250,000 631,937 631,937 866,006
37 -- -- -- -- 104,207 104,207 250,000 681,428 681,428 917,542
38 -- -- -- -- 100,582 100,582 250,000 733,951 733,951 971,751
39 -- -- -- -- 95,358 95,358 250,000 789,727 789,727 1,028,935
40 -- -- -- -- 88,166 88,166 250,000 848,968 848,968 1,089,141
41 -- -- -- -- 78,471 78,471 250,000 911,836 911,836 1,152,560
42 -- -- -- -- 65,524 65,524 250,000 978,476 978,476 1,219,181
43 -- -- -- -- 48,253 48,253 250,000 1,048,975 1,048,975 1,289,190
</TABLE>
56
<PAGE> 60
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ---------------------------- ----------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------ --------- ------- ------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
44 -- -- -- -- 25,142 25,142 250,000 1,123,398 1,123,398 1,362,682
45 -- -- -- -- 0 0 0 1,201,842 1,201,842 1,440,047
46 -- -- -- -- -- -- -- 1,284,489 1,284,489 1,521,477
47 -- -- -- -- -- -- -- 1,371,588 1,371,588 1,607,364
48 -- -- -- -- -- -- -- 1,463,465 1,463,465 1,697,912
49 -- -- -- -- -- -- -- 1,560,569 1,560,569 1,793,562
50 -- -- -- -- -- -- -- 1,663,387 1,663,387 1,894,598
51 -- -- -- -- -- -- -- 1,772,527 1,772,527 2,001,183
52 -- -- -- -- -- -- -- 1,888,731 1,888,731 2,113,679
53 -- -- -- -- -- -- -- 2,012,879 2,012,879 2,232,484
54 -- -- -- -- -- -- -- 2,146,116 2,146,116 2,357,938
55 -- -- -- -- -- -- -- 2,289,459 2,289,459 2,489,787
56 -- -- -- -- -- -- -- 2,443,373 2,443,373 2,627,847
57 -- -- -- -- -- -- -- 2,607,393 2,607,393 2,770,355
58 -- -- -- -- -- -- -- 2,777,861 2,777,861 2,913,976
59 -- -- -- -- -- -- -- 2,950,845 2,950,845 3,058,846
60 -- -- -- -- -- -- -- 3,166,198 3,166,198 3,250,102
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON CASH VALUE ACCUMULATION TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.90% IN ALL POLICY YEARS.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
57
<PAGE> 61
INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $3,500. ANNUAL PREMIUM ISSUE AGE 40
$250,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ----------------------------- ---------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- ------- ------ --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,675 3,004 3,004 250,000 3,197 3,197 250,000 3,391 3,391 250,000
2 7,534 6,103 6,103 250,000 6,683 6,683 250,000 7,286 7,286 250,000
3 11,585 9,096 9,096 250,000 10,263 10,263 250,000 11,525 11,525 250,000
4 15,840 12,003 12,003 250,000 13,959 13,959 250,000 16,161 16,161 250,000
5 20,307 14,827 14,827 250,000 17,779 17,779 250,000 21,237 21,237 250,000
6 24,997 17,574 17,574 250,000 21,732 21,732 250,000 26,802 26,802 250,000
7 29,922 20,240 20,240 250,000 25,820 25,820 250,000 32,903 32,903 250,000
8 35,093 22,829 22,829 250,000 30,049 30,049 250,000 39,595 39,595 250,000
9 40,523 25,336 25,336 250,000 34,420 34,420 250,000 46,935 46,935 250,000
10 46,224 27,760 27,760 250,000 38,936 38,936 250,000 54,987 54,987 250,000
11 52,210 30,098 30,098 250,000 43,602 43,602 250,000 63,822 63,822 250,000
12 58,495 32,343 32,343 250,000 48,414 48,414 250,000 73,515 73,515 250,000
13 65,095 34,485 34,485 250,000 53,371 53,371 250,000 84,149 84,149 250,000
14 72,025 36,524 36,524 250,000 58,478 58,478 250,000 95,824 95,284 250,000
15 79,301 38,466 38,466 250,000 63,749 63,749 250,000 108,658 108,658 250,000
16 86,941 40,187 40,187 250,000 69,078 69,078 250,000 122,693 122,693 250,000
17 94,963 41,803 41,803 250,000 74,575 74,575 250,000 138,148 138,148 250,000
18 103,387 43,326 43,326 250,000 80,259 80,259 250,000 155,189 155,189 250,000
19 112,231 44,751 44,751 250,000 86,138 86,138 250,000 173,992 173,992 250,000
20 121,517 46,073 46,073 250,000 92,216 92,216 250,000 194,744 194,744 260,956
25 175,397 50,780 50,780 250,000 125,833 125,833 250,000 333,598 333,598 406,989
30 244,163 51,196 51,196 250,000 166,249 166,249 250,000 556,461 556,461 645,495
35 331,927 45,042 45,042 250,000 217,236 217,236 250,000 917,418 917,418 981,638
40 443,939 27,476 27,476 250,000 283,099 283,099 297,254 1,501,814 1,501,814 1,576,905
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON GUIDELINE PREMIUM TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.65% THROUGH POLICY YEAR 28,
0.50% THEREAFTER.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
58
<PAGE> 62
INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $3,500. ANNUAL PREMIUM ISSUE AGE 40
$250,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ---------------------------- ----------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------ --------- ------- ------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,675 2,524 2,524 250,000 2,702 2,702 250,000 2,880 2,880 250,000
2 7,534 5,133 5,133 250,000 5,652 5,652 250,000 6,193 6,193 250,000
3 11,585 7,647 7,647 250,000 8,676 8,676 250,000 9,793 9,793 250,000
4 15,840 10,062 10,062 250,000 11,772 11,772 250,000 13,704 13,704 250,000
5 20,307 12,380 12,380 250,000 14,944 14,944 250,000 17,958 17,958 250,000
6 24,997 14,596 14,596 250,000 18,187 18,187 250,000 22,582 22,582 250,000
7 29,922 16,708 16,708 250,000 21,500 21,500 250,000 27,611 27,611 250,000
8 35,093 18,714 18,714 250,000 24,884 24,884 250,000 33,086 33,086 250,000
9 40,523 20,614 20,614 250,000 28,340 28,340 250,000 39,050 39,050 250,000
10 46,224 22,400 22,400 250,000 31,863 31,863 250,000 45,548 45,548 250,000
11 52,210 24,071 24,071 250,000 35,454 35,454 250,000 52,637 52,637 250,000
12 58,495 25,616 25,616 250,000 39,104 39,104 250,000 60,368 60,368 250,000
13 65,095 27,023 27,023 250,000 42,804 42,804 250,000 68,801 68,801 250,000
14 72,025 28,281 28,281 250,000 46,548 46,548 250,000 78,008 78,008 250,000
15 79,301 29,375 29,375 250,000 50,322 50,322 250,000 88,065 88,065 250,000
16 86,941 30,294 30,294 250,000 54,120 54,120 250,000 99,065 99,065 250,000
17 94,963 31,024 31,024 250,000 57,932 57,932 250,000 111,112 111,112 250,000
18 103,387 31,557 31,557 250,000 61,755 61,755 250,000 124,332 124,332 250,000
19 112,231 31,882 31,882 250,000 65,584 65,584 250,000 138,869 138,869 250,000
20 121,517 31,976 31,976 250,000 69,403 69,403 250,000 154,881 154,881 250,000
21 131,268 31,815 31,815 250,000 73,197 73,197 250,000 172,556 172,556 250,000
22 141,507 31,372 31,372 250,000 76,952 76,952 250,000 192,116 192,116 250,000
23 152,257 30,609 30,609 250,000 80,643 80,643 250,000 213,705 213,705 269,269
24 163,545 29,480 29,480 250,000 84,241 84,241 250,000 237,296 237,296 294,248
25 175,397 27,931 27,931 250,000 87,716 87,716 250,000 263,068 263,068 320,943
26 187,842 25,914 25,914 250,000 91,041 91,041 250,000 291,231 291,231 349,477
27 200,909 23,382 23,382 250,000 94,194 94,194 250,000 321,946 321,946 383,115
28 214,629 20,277 20,277 250,000 97,149 97,149 250,000 355,441 355,441 419,420
29 229,036 16,538 16,538 250,000 99,878 99,878 250,000 391,965 391,965 458,599
30 244,163 12,081 12,081 250,000 102,342 102,342 250,000 431,791 431,791 500,878
31 260,046 6,777 6,777 250,000 104,479 104,479 250,000 475,208 475,208 546,490
32 276,723 315 315 250,000 106,118 106,118 250,000 522,697 522,697 590,647
33 294,234 0 0 0 107,329 107,329 250,000 574,787 574,787 638,014
34 -- -- -- -- 107,894 107,894 250,000 631,971 631,971 688,849
35 -- -- -- -- 107,666 107,666 250,000 694,886 694,886 743,528
36 -- -- -- -- 106,496 106,496 250,000 764,304 764,304 802,520
37 -- -- -- -- 104,207 104,207 250,000 840,025 840,025 882,027
38 -- -- -- -- 100,582 100,582 250,000 922,575 922,575 968,704
39 -- -- -- -- 95,358 95,358 250,000 1,012,522 1,012,522 1,063,148
40 -- -- -- -- 88,166 88,166 250,000 1,110,463 1,110,463 1,165,986
41 -- -- -- -- 78,471 78,471 250,000 1,217,017 1,217,017 1,277,867
42 -- -- -- -- 65,524 65,524 250,000 1,332,819 1,332,819 1,399,460
43 -- -- -- -- 48,253 48,253 250,000 1,458,510 1,458,510 1,531,436
44 -- -- -- -- 25,142 25,142 250,000 1,594,734 1,594,734 1,674,470
</TABLE>
59
<PAGE> 63
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ---------------------------- ----------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------ --------- ------- ------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 -- -- -- -- 0 0 0 1,742,156 1,742,156 1,829,264
46 -- -- -- -- -- -- -- 1,901,474 1,901,474 1,996,548
47 -- -- -- -- -- -- -- 2,073,421 2,073,421 2,177,092
48 -- -- -- -- -- -- -- 2,258,753 2,258,753 2,371,691
49 -- -- -- -- -- -- -- 2,458,276 2,458,276 2,581,190
50 -- -- -- -- -- -- -- 2,672,781 2,672,781 2,806,420
51 -- -- -- -- -- -- -- 2,903,027 2,903,027 3,048,178
52 -- -- -- -- -- -- -- 3,158,262 3,158,262 3,284,593
53 -- -- -- -- -- -- -- 3,442,794 3,442,794 3,546,078
54 -- -- -- -- -- -- -- 3,761,966 3,761,966 3,837,205
55 -- -- -- -- -- -- -- 4,122,515 4,122,515 4,163,740
56 -- -- -- -- -- -- -- 4,529,361 4,529,361 4,529,361
57 -- -- -- -- -- -- -- 4,975,996 4,975,996 4,975,996
58 -- -- -- -- -- -- -- 5,466,313 5,466,313 5,466,313
59 -- -- -- -- -- -- -- 6,004,582 6,004,582 6,004,582
60 -- -- -- -- -- -- -- 6,595,494 6,595,494 6,595,494
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON GUIDELINE PREMIUM TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.09% IN ALL POLICY YEARS.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
60
<PAGE> 64
INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $35,000. ANNUAL PREMIUM ISSUE AGE 60
$1,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PAID GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PLUS ------------------------------- --------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ -------- ----- --------- ------- ----- --------- ------- ----- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 36,750 31,282 31,282 1,000,000 33,255 33,255 1,000,000 35,230 35,230 1,000,000
2 75,338 61,441 61,441 1,000,000 67,336 67,336 1,000,000 73,471 73,471 1,000,000
3 115,854 90,209 90,209 1,000,000 101,994 101,994 1,000,000 114,758 114,758 1,000,000
4 158,397 117,883 117,883 1,000,000 137,551 137,551 1,000,000 159,725 159,725 1,000,000
5 203,067 144,337 144,337 1,000,000 173,920 173,920 1,000,000 208,655 208,655 1,000,000
6 249,970 170,102 170,102 1,000,000 211,672 211,672 1,000,000 262,527 262,527 1,000,000
7 299,219 194,900 194,900 1,000,000 250,607 250,607 1,000,000 321,641 321,641 1,000,000
8 350,930 218,897 218,897 1,000,000 291,025 291,025 1,000,000 386,930 386,930 1,000,000
9 405,226 241,914 241,914 1,000,000 332,811 332,811 1,000,000 458,896 458,896 1,000,000
10 462,238 263,682 263,682 1,000,000 375,831 375,831 1,000,000 538,211 538,211 1,000,000
11 522,099 283,903 283,903 1,000,000 419,967 419,967 1,000,000 625,737 625,737 1,000,000
12 584,954 302,756 302,756 1,000,000 465,534 465,534 1,000,000 722,494 722,494 1,071,459
13 650,952 320,199 320,199 1,000,000 512,699 512,699 1,000,000 828,137 828,137 1,202,869
14 720,250 336,372 336,372 1,000,000 561,801 561,801 1,000,000 943,481 943,481 1,342,951
15 793,012 350,915 350,915 1,000,000 613,248 613,248 1,000,000 1,069,894 1,069,894 1,493,571
16 869,413 363,807 363,807 1,000,000 667,121 667,121 1,000,000 1,207,700 1,207,700 1,655,032
17 949,633 375,366 375,366 1,000,000 724,020 724,020 1,000,000 1,358,163 1,358,163 1,828,766
18 1,033,865 385,478 385,478 1,000,000 783,812 783,812 1,037,767 1,522,381 1,522,381 2,015,633
19 1,122,308 394,030 394,030 1,000,000 845,439 845,439 1,101,523 1,701,554 1,701,554 2,216,955
20 1,215,174 400,894 400,894 1,000,000 908,941 908,941 1,166,080 1,897,003 1,897,003 2,433,665
25 1,753,971 404,323 404,323 1,000,000 1,256,604 1,256,604 1,505,662 3,174,708 3,174,708 3,803,935
30 2,441,628 326,917 326,917 1,000,000 1,659,586 1,659,586 1,890,268 5,143,456 5,143,456 5,858,396
35 3,319,271 33,564 33,564 1,000,000 2,123,895 2,123,895 2,309,736 8,163,406 8,163,406 8,877,704
40 -- -- -- -- 2,696,073 2,696,073 2,767,519 12,972,611 12,972,611 13,316,386
45 -- -- -- -- -- -- -- -- -- --
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON CASH VALUE ACCUMULATION TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.65% THROUGH POLICY YEAR 2,
0.50% IN POLICY YEARS 3 THROUGH 7, 0.40% IN POLICY YEARS 8 THROUGH 14,
AND 0.30% THEREAFTER.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
61
<PAGE> 65
INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $35,000. ANNUAL PREMIUM ISSUE AGE 60
$1,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- ------------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- ------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 36,750 20,767 20,767 1,000,000 22,407 22,407 1,000,000 24,055 24,055 1,000,000
2 75,338 40,267 40,267 1,000,000 44,862 44,862 1,000,000 49,674 49,674 1,000,000
3 115,854 58,212 58,212 1,000,000 67,069 67,069 1,000,000 76,735 76,735 1,000,000
4 158,397 74,470 74,470 1,000,000 88,881 88,881 1,000,000 105,288 105,288 1,000,000
5 203,067 88,901 88,901 1,000,000 110,148 110,148 1,000,000 135,401 135,401 1,000,000
6 249,970 101,385 101,385 1,000,000 130,738 130,738 1,000,000 167,202 167,202 1,000,000
7 299,219 111,829 111,829 1,000,000 150,556 150,556 1,000,000 200,897 200,897 1,000,000
8 350,930 120,106 120,106 1,000,000 169,479 169,479 1,000,000 236,725 236,725 1,000,000
9 405,226 126,086 126,086 1,000,000 187,388 187,388 1,000,000 275,001 275,001 1,000,000
10 462,238 129,567 129,567 1,000,000 204,106 204,106 1,000,000 316,078 316,078 1,000,000
11 522,099 130,212 130,212 1,000,000 219,338 219,338 1,000,000 360,317 360,317 1,000,000
12 584,954 127,060 127,060 1,000,000 232,228 232,228 1,000,000 407,778 407,778 1,000,000
13 650,952 120,570 120,570 1,000,000 243,205 243,205 1,000,000 459,746 459,746 1,000,000
14 720,250 109,477 109,477 1,000,000 251,195 251,195 1,000,000 516,613 516,613 1,000,000
15 793,012 92,957 92,957 1,000,000 255,511 255,511 1,000,000 579,440 579,440 1,000,000
16 869,413 70,219 70,219 1,000,000 255,507 255,507 1,000,000 649,778 649,778 1,000,000
17 949,633 40,313 40,313 1,000,000 250,395 250,395 1,000,000 729,684 729,684 1,000,000
18 1,033,865 2,117 2,117 1,000,000 239,237 239,237 1,000,000 818,424 818,424 1,083,593
19 1,122,308 0 0 0 220,898 220,898 1,000,000 912,936 912,936 1,189,464
20 -- -- -- -- 193,757 193,757 1,000,000 1,013,571 1,013,571 1,300,310
21 -- -- -- -- 155,446 155,446 1,000,000 1,120,625 1,120,625 1,416,470
22 -- -- -- -- 102,634 102,634 1,000,000 1,234,376 1,234,376 1,538,032
23 -- -- -- -- 30,557 30,557 1,000,000 1,355,025 1,355,025 1,665,326
24 -- -- -- -- 0 0 0 1,482,742 1,482,742 1,798,566
25 -- -- -- -- -- -- -- 1,617,731 1,617,731 1,938,366
26 -- -- -- -- -- -- -- 1,760,313 1,760,313 2,085,091
27 -- -- -- -- -- -- -- 1,910,902 1,910,902 2,239,386
28 -- -- -- -- -- -- -- 2,070,032 2,070,032 2,401,651
29 -- -- -- -- -- -- -- 2,238,420 2,238,420 2,572,616
30 -- -- -- -- -- -- -- 2,416,855 2,416,855 2,752,798
31 -- -- -- -- -- -- -- 2,606,320 2,606,320 2,942,535
32 -- -- -- -- -- -- -- 2,808,014 2,808,014 3,142,448
33 -- -- -- -- -- -- -- 3,023,366 3,023,366 3,353,215
34 -- -- -- -- -- -- -- 3,254,229 3,254,229 3,575,422
35 -- -- -- -- -- -- -- 3,502,296 3,502,296 3,808,747
36 -- -- -- -- -- -- -- 3,768,422 3,768,422 4,052,938
37 -- -- -- -- -- -- -- 4,052,024 4,052,024 4,305,276
38 -- -- -- -- -- -- -- 4,347,485 4,347,485 4,560,512
39 -- -- -- -- -- -- -- 4,648,632 4,648,632 4,818,772
40 -- -- -- -- -- -- -- 5,018,579 5,018,579 5,151,571
</TABLE>
62
<PAGE> 66
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON CASH VALUE ACCUMULATION TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.90% IN ALL POLICY YEARS.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
63
<PAGE> 67
INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $35,000. ANNUAL PREMIUM ISSUE AGE 60
$1,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL
PAID GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PLUS -------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ -------- ----- --------- ------- ----- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 36,750 31,282 31,282 1,000,000 33,255 33,255 1,000,000
2 75,338 61,441 61,441 1,000,000 67,336 67,336 1,000,000
3 115,854 90,209 90,209 1,000,000 101,994 101,994 1,000,000
4 158,397 117,883 117,883 1,000,000 137,551 137,551 1,000,000
5 203,067 144,337 144,337 1,000,000 173,920 173,920 1,000,000
6 249,970 170,102 170,102 1,000,000 211,672 211,672 1,000,000
7 299,219 194,900 194,900 1,000,000 250,607 250,607 1,000,000
8 350,930 218,897 218,897 1,000,000 291,025 291,025 1,000,000
9 405,226 241,914 241,914 1,000,000 332,811 332,811 1,000,000
10 462,238 263,682 263,682 1,000,000 375,831 375,831 1,000,000
11 522,099 283,903 283,903 1,000,000 419,967 419,967 1,000,000
12 584,954 302,756 302,756 1,000,000 465,534 465,534 1,000,000
13 650,952 320,199 320,199 1,000,000 512,699 512,699 1,000,000
14 720,250 336,372 336,372 1,000,000 561,801 561,801 1,000,000
15 793,012 350,915 350,915 1,000,000 613,248 613,248 1,000,000
16 869,413 363,807 363,807 1,000,000 667,121 667,121 1,000,000
17 949,633 375,366 375,366 1,000,000 724,020 724,020 1,000,000
18 1,033,865 385,478 385,478 1,000,000 784,378 784,378 1,000,000
19 1,122,308 394,030 394,030 1,000,000 848,733 848,733 1,000,000
20 1,215,174 400,894 400,894 1,000,000 917,748 917,748 1,000,000
25 1,753,971 404,323 404,323 1,000,000 1,316,496 1,316,496 1,382,321
30 2,441,628 326,917 326,917 1,000,000 1,794,960 1,794,960 1,884,708
35 3,319,271 33,564 33,564 1,000,000 2,383,558 2,383,558 2,407,393
40 -- -- -- -- 3,146,397 3,146,397 3,146,397
45 -- -- -- -- -- -- --
<CAPTION>
12% HYPOTHETICAL
GROSS INVESTMENT RETURN
---------------------------------------
POLICY CASH SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- ------ ----- --------- -------
<S> <C> <C> <C>
1 35,230 35,230 1,000,000
2 73,471 73,471 1,000,000
3 114,758 114,758 1,000,000
4 159,725 159,725 1,000,000
5 208,655 208,655 1,000,000
6 262,527 262,527 1,000,000
7 321,641 321,641 1,000,000
8 386,930 386,930 1,000,000
9 458,896 458,896 1,000,000
10 538,211 538,211 1,000,000
11 625,737 625,737 1,000,000
12 722,839 722,839 1,000,000
13 830,992 830,992 1,000,000
14 951,901 951,901 1,037,572
15 1,086,568 1,086,568 1,162,628
16 1,235,362 1,235,362 1,297,130
17 1,399,258 1,399,258 1,469,221
18 1,579,748 1,579,748 1,658,735
19 1,778,459 1,778,459 1,867,382
20 1,997,172 1,997,172 2,097,030
25 3,465,371 3,465,371 3,638,640
30 5,810,938 5,810,938 6,101,485
35 9,612,153 9,612,153 9,708,275
40 15,979,843 15,979,843 15,979,843
45 -- -- --
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON GUIDELINE PREMIUM TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.65% THROUGH POLICY YEAR 2,
0.50% IN POLICY YEARS 3 THROUGH 7, 0.40% IN POLICY YEARS 8 THROUGH 14,
AND 0.30% THEREAFTER.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
64
<PAGE> 68
INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $35,000. ANNUAL PREMIUM ISSUE AGE 60
$1,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- ------------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- ------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 36,750 20,767 20,767 1,000,000 22,407 22,407 1,000,000 24,055 24,055 1,000,000
2 75,338 40,267 40,267 1,000,000 44,862 44,862 1,000,000 49,674 49,674 1,000,000
3 115,854 58,212 58,212 1,000,000 67,069 67,069 1,000,000 76,735 76,735 1,000,000
4 158,397 74,470 74,470 1,000,000 88,881 88,881 1,000,000 105,288 105,288 1,000,000
5 203,067 88,901 88,901 1,000,000 110,148 110,148 1,000,000 135,401 135,401 1,000,000
6 249,970 101,385 101,385 1,000,000 130,738 130,738 1,000,000 167,202 167,202 1,000,000
7 299,219 111,829 111,829 1,000,000 150,556 150,556 1,000,000 200,897 200,897 1,000,000
8 350,930 120,106 120,106 1,000,000 169,479 169,479 1,000,000 236,725 236,725 1,000,000
9 405,226 126,086 126,086 1,000,000 187,388 187,388 1,000,000 275,001 275,001 1,000,000
10 462,238 129,567 129,567 1,000,000 204,106 204,106 1,000,000 316,078 316,078 1,000,000
11 522,099 130,212 130,212 1,000,000 219,338 219,338 1,000,000 360,317 360,317 1,000,000
12 584,954 127,060 127,060 1,000,000 232,228 232,228 1,000,000 407,778 407,778 1,000,000
13 650,952 120,570 120,570 1,000,000 243,205 243,205 1,000,000 459,746 459,746 1,000,000
14 720,250 109,477 109,477 1,000,000 251,195 251,195 1,000,000 516,613 516,613 1,000,000
15 793,012 92,957 92,957 1,000,000 255,511 255,511 1,000,000 579,440 579,440 1,000,000
16 869,413 70,219 70,219 1,000,000 255,507 255,507 1,000,000 649,778 649,778 1,000,000
17 949,633 40,313 40,313 1,000,000 250,395 250,395 1,000,000 729,684 729,684 1,000,000
18 1,033,865 2,117 2,117 1,000,000 239,237 239,237 1,000,000 821,899 821,899 1,000,000
19 1,122,308 0 0 0 220,898 220,898 1,000,000 930,055 930,055 1,000,000
20 -- -- -- -- 193,757 193,757 1,000,000 1,053,716 1,053,716 1,106,402
21 -- -- -- -- 155,446 155,446 1,000,000 1,188,398 1,188,398 1,247,818
22 -- -- -- -- 102,634 102,634 1,000,000 1,334,933 1,334,933 1,401,680
23 -- -- -- -- 30,557 30,557 1,000,000 1,494,171 1,494,171 1,568,880
24 -- -- -- -- 0 0 0 1,666,969 1,666,969 1,750,318
25 -- -- -- -- -- -- -- 1,854,214 1,854,214 1,946,925
26 -- -- -- -- -- -- -- 2,056,832 2,056,832 2,159,673
27 -- -- -- -- -- -- -- 2,275,790 2,275,790 2,389,580
28 -- -- -- -- -- -- -- 2,512,089 2,512,089 2,637,694
29 -- -- -- -- -- -- -- 2,766,788 2,766,788 2,905,127
30 -- -- -- -- -- -- -- 3,040,935 3,040,935 3,192,982
31 -- -- -- -- -- -- -- 3,335,542 3,335,542 3,502,319
32 -- -- -- -- -- -- -- 3,661,468 3,661,468 3,807,927
33 -- -- -- -- -- -- -- 4,024,027 4,024,027 4,144,748
34 -- -- -- -- -- -- -- 4,429,824 4,429,824 4,518,420
35 -- -- -- -- -- -- -- 4,887,186 4,887,186 4,936,058
36 -- -- -- -- -- -- -- 5,402,360 5,402,360 5,402,360
37 -- -- -- -- -- -- -- 5,967,918 5,967,918 5,967,918
38 -- -- -- -- -- -- -- 6,588,788 6,588,788 6,588,788
39 -- -- -- -- -- -- -- 7,270,379 7,270,379 7,270,379
40 -- -- -- -- -- -- -- 8,018,629 8,018,629 8,018,629
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
65
<PAGE> 69
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON GUIDELINE PREMIUM TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.90% IN ALL POLICY YEARS.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
66
<PAGE> 70
SURVIVORSHIP
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER ISSUE AGE 45
FEMALE PREFERRED NON-SMOKER ISSUE AGE 40
ANNUAL PREMIUM $9,500
$1,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- --------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,975 8,698 8,698 1,000,000 9,240 9,240 1,000,000 9,782 9,782 1,000,000
2 20,449 17,404 17,404 1,000,000 19,038 19,038 1,000,000 20,737 20,737 1,000,000
3 31,446 25,939 25,939 1,000,000 29,231 29,231 1,000,000 32,791 32,791 1,000,000
4 42,993 34,307 34,307 1,000,000 39,836 39,836 1,000,000 46,055 46,055 1,000,000
5 55,118 42,511 42,511 1,000,000 50,870 50,870 1,000,000 60,652 60,652 1,000,000
6 67,849 50,554 50,554 1,000,000 62,349 62,349 1,000,000 76,714 76,714 1,000,000
7 81,217 58,433 58,433 1,000,000 74,286 74,286 1,000,000 94,382 94,382 1,000,000
8 95,252 66,135 66,135 1,000,000 86,682 86,682 1,000,000 113,801 113,801 1,000,000
9 109,990 73,665 73,665 1,000,000 99,558 99,558 1,000,000 135,150 135,150 1,000,000
10 125,464 81,028 81,028 1,000,000 112,936 112,936 1,000,000 158,624 158,624 1,000,000
11 141,713 88,368 88,368 1,000,000 127,023 127,023 1,000,000 184,695 184,695 1,000,000
12 158,773 95,576 95,576 1,000,000 141,702 141,702 1,000,000 213,425 213,425 1,000,000
13 176,687 102,653 102,653 1,000,000 156,998 156,998 1,000,000 245,086 245,086 1,000,000
14 195,496 109,603 109,603 1,000,000 172,936 172,936 1,000,000 279,976 279,976 1,000,000
15 215,246 116,428 116,428 1,000,000 189,543 189,543 1,000,000 318,426 318,426 1,000,000
16 235,983 123,130 123,130 1,000,000 206,848 206,848 1,000,000 360,799 360,799 1,005,799
17 257,758 129,669 129,669 1,000,000 224,839 224,839 1,000,000 407,451 407,451 1,094,454
18 280,621 136,035 136,035 1,000,000 243,539 243,539 1,000,000 458,797 458,797 1,187,825
19 304,627 142,223 142,223 1,000,000 262,967 262,967 1,000,000 515,297 515,297 1,286,234
20 329,833 148,223 148,223 1,000,000 283,147 283,147 1,000,000 577,459 577,459 1,390,175
21 356,300 154,025 154,025 1,000,000 304,102 304,102 1,000,000 645,836 645,836 1,500,083
22 384,090 159,617 159,617 1,000,000 325,855 325,855 1,000,000 721,033 721,033 1,616,411
23 413,269 164,991 164,991 1,000,000 348,437 348,437 1,000,000 803,720 803,720 1,739,732
24 443,907 170,135 170,135 1,000,000 371,873 371,873 1,000,000 894,628 894,628 1,870,756
25 476,078 175,032 175,032 1,000,000 396,194 396,194 1,000,000 994,553 994,553 2,010,190
26 509,857 179,666 179,666 1,000,000 421,428 421,428 1,000,000 1,104,369 1,104,369 2,158,820
27 545,325 184,180 184,180 1,000,000 448,021 448,021 1,000,000 1,226,110 1,226,110 2,319,554
28 582,566 188,337 188,337 1,000,000 475,605 475,605 1,000,000 1,359,894 1,359,894 2,491,597
29 621,669 192,086 192,086 1,000,000 504,207 504,207 1,000,000 1,506,851 1,506,851 2,675,715
30 662,728 195,371 195,371 1,000,000 533,857 533,857 1,000,000 1,668,205 1,668,205 2,873,150
31 705,839 198,117 198,117 1,000,000 564,585 564,585 1,000,000 1,845,273 1,845,273 3,084,927
32 751,106 200,287 200,287 1,000,000 596,457 596,457 1,000,000 2,039,556 2,039,556 3,312,443
33 798,636 201,822 201,822 1,000,000 629,536 629,536 1,000,000 2,252,672 2,252,672 3,557,194
34 848,543 202,628 202,628 1,000,000 663,859 663,859 1,020,219 2,486,344 2,486,344 3,821,013
35 900,945 202,594 202,594 1,000,000 699,370 699,370 1,047,027 2,742,432 2,742,432 4,105,695
36 955,967 201,588 201,588 1,000,000 736,049 736,049 1,074,632 3,022,944 3,022,944 4,413,498
37 1,013,741 199,463 199,463 1,000,000 773,907 773,907 1,103,127 3,330,063 3,330,063 4,746,671
38 1,074,403 196,091 196,091 1,000,000 812,972 812,972 1,132,632 3,666,228 3,666,228 5,107,788
39 1,138,098 191,295 191,295 1,000,000 853,260 853,260 1,163,249 4,034,043 4,034,043 5,499,611
40 1,204,978 184,867 184,867 1,000,000 894,787 894,787 1,194,988 4,436,332 4,436,332 5,924,722
41 1,275,202 176,585 176,585 1,000,000 937,577 937,577 1,227,945 4,876,200 4,876,200 6,386,359
42 1,348,937 166,206 166,206 1,000,000 981,663 981,663 1,262,124 5,357,063 5,357,063 6,887,576
</TABLE>
67
<PAGE> 71
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- --------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
43 1,426,359 153,096 153,096 1,000,000 1,026,966 1,026,966 1,297,469 5,882,013 5,882,013 7,431,335
44 1,507,651 136,969 136,969 1,000,000 1,073,544 1,073,544 1,334,200 6,455,149 6,455,149 8,022,460
45 1,593,009 117,026 117,026 1,000,000 1,121,328 1,121,328 1,372,281 7,080,146 7,080,146 8,664,682
46 1,682,635 92,723 92,723 1,000,000 1,170,363 1,170,363 1,411,692 7,761,677 7,761,677 9,362,135
47 1,776,741 63,243 63,243 1,000,000 1,220,655 1,220,655 1,452,580 8,504,554 8,504,554 10,120,419
48 1,875,553 27,577 27,577 1,000,000 1,272,218 1,272,218 1,494,856 9,314,030 9,314,030 10,943,986
49 1,979,306 0 0 0 1,325,088 1,325,088 1,538,295 10,195,983 10,195,983 11,836,517
50 -- -- -- -- 1,379,319 1,379,319 1,582,906 11,156,913 11,156,913 12,803,673
51 -- -- -- -- 1,434,986 1,434,986 1,628,709 12,204,100 12,204,100 13,851,654
52 -- -- -- -- 1,491,878 1,491,878 1,675,230 13,342,915 13,342,915 14,982,759
53 -- -- -- -- 1,551,649 1,551,649 1,724,193 14,595,699 14,595,699 16,218,740
54 -- -- -- -- 1,613,174 1,613,174 1,774,330 15,962,570 15,962,570 17,557,231
55 -- -- -- -- 1,676,841 1,676,841 1,825,744 17,457,325 17,457,325 19,007,536
56 -- -- -- -- 1,743,214 1,743,214 1,877,791 19,097,329 19,097,329 20,571,643
57 -- -- -- -- 1,812,934 1,812,934 1,927,874 20,903,073 20,903,073 22,228,327
58 -- -- -- -- 1,887,124 1,887,124 1,980,348 22,903,613 22,903,613 24,035,051
59 -- -- -- -- 1,966,617 1,966,617 2,038,596 25,128,588 25,128,588 26,048,294
60 -- -- -- -- 2,051,666 2,051,666 2,106,036 27,603,810 27,603,810 28,335,311
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON CASH VALUE ACCUMULATION TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.65% THROUGH POLICY YEAR 10,
0.50% IN POLICY YEARS 11 THROUGH 26, 0.40% THEREAFTER.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
68
<PAGE> 72
SURVIVORSHIP
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER ISSUE AGE 45
FEMALE PREFERRED NON-SMOKER ISSUE AGE 40
ANNUAL PREMIUM $9,500
$1,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- ------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- ------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,975 8,656 8,656 1,000,000 9,197 9,197 1,000,000 9,739 9,739 1,000,000
2 20,449 17,299 17,299 1,000,000 18,927 18,927 1,000,000 20,621 20,621 1,000,000
3 31,446 25,751 25,751 1,000,000 29,026 29,026 1,000,000 32,569 32,569 1,000,000
4 42,993 34,016 34,016 1,000,000 39,508 39,508 1,000,000 45,687 45,687 1,000,000
5 55,118 42,099 42,099 1,000,000 50,388 50,388 1,000,000 60,089 60,089 1,000,000
6 67,849 49,994 49,994 1,000,000 61,670 61,670 1,000,000 75,892 75,892 1,000,000
7 81,217 57,676 57,676 1,000,000 73,342 73,342 1,000,000 93,204 93,204 1,000,000
8 95,252 65,143 65,143 1,000,000 85,410 85,410 1,000,000 112,165 112,165 1,000,000
9 109,990 72,391 72,391 1,000,000 97,881 97,881 1,000,000 132,930 132,930 1,000,000
10 125,464 79,414 79,414 1,000,000 110,762 110,762 1,000,000 155,667 155,667 1,000,000
11 141,713 86,205 86,205 1,000,000 124,056 124,056 1,000,000 180,560 180,560 1,000,000
12 158,773 92,754 92,754 1,000,000 137,765 137,765 1,000,000 207,811 207,811 1,000,000
13 176,687 99,050 99,050 1,000,000 151,893 151,893 1,000,000 237,642 237,642 1,000,000
14 195,496 105,077 105,077 1,000,000 166,435 166,435 1,000,000 270,295 270,295 1,000,000
15 215,246 110,819 110,819 1,000,000 181,391 181,391 1,000,000 306,038 306,038 1,000,000
16 235,983 116,256 116,256 1,000,000 196,753 196,753 1,000,000 345,167 345,167 1,000,000
17 257,758 121,363 121,363 1,000,000 212,516 212,516 1,000,000 387,999 387,999 1,042,203
18 280,621 126,115 126,115 1,000,000 228,669 228,669 1,000,000 434,790 434,790 1,125,671
19 304,627 130,482 130,482 1,000,000 245,202 245,202 1,000,000 485,850 485,850 1,212,729
20 329,833 134,423 134,423 1,000,000 262,097 262,097 1,000,000 541,529 541,529 1,303,676
21 356,300 137,891 137,891 1,000,000 279,328 279,328 1,000,000 602,196 602,196 1,398,721
22 384,090 140,828 140,828 1,000,000 296,869 296,869 1,000,000 668,243 668,243 1,498,068
23 413,269 143,155 143,155 1,000,000 314,672 314,672 1,000,000 740,070 740,070 1,601,956
24 443,907 144,774 144,774 1,000,000 332,683 332,683 1,000,000 818,087 818,087 1,710,702
25 476,078 145,567 145,567 1,000,000 350,834 350,834 1,000,000 902,714 902,714 1,824,565
26 509,857 145,406 145,406 1,000,000 369,057 369,057 1,000,000 994,391 994,391 1,943,835
27 545,325 144,085 144,085 1,000,000 387,230 387,230 1,000,000 1,093,503 1,093,503 2,068,689
28 582,566 141,556 141,556 1,000,000 405,358 405,358 1,000,000 1,200,653 1,200,653 2,199,836
29 621,669 137,583 137,583 1,000,000 423,324 423,324 1,000,000 1,316,285 1,316,285 2,337,327
30 662,728 131,944 131,944 1,000,000 441,031 441,031 1,000,000 1,440,907 1,440,907 2,481,675
31 705,839 124,371 124,371 1,000,000 458,371 458,371 1,000,000 1,575,038 1,575,038 2,633,148
32 751,106 114,524 114,524 1,000,000 475,206 475,206 1,000,000 1,719,175 1,719,175 2,792,112
33 798,636 101,949 101,949 1,000,000 491,358 491,358 1,000,000 1,873,771 1,873,771 2,958,872
34 848,543 86,090 86,090 1,000,000 506,615 506,615 1,000,000 2,039,247 2,039,247 3,133,915
35 900,945 66,262 66,262 1,000,000 520,734 520,734 1,000,000 2,216,001 2,216,001 3,317,575
36 955,967 41,639 41,639 1,000,000 533,439 533,439 1,000,000 2,404,417 2,404,417 3,510,449
37 1,013,741 11,247 11,247 1,000,000 544,431 544,431 1,000,000 2,604,917 2,604,917 3,713,048
38 1,074,403 0 0 0 553,373 553,373 1,000,000 2,817,973 2,817,973 3,925,999
39 -- -- -- -- 559,875 559,875 1,000,000 3,044,115 3,044,115 4,150,043
40 -- -- -- -- 563,454 563,454 1,000,000 3,283,932 3,283,932 4,385,692
41 -- -- -- -- 563,467 563,467 1,000,000 3,537,988 3,537,988 4,633,703
42 -- -- -- -- 559,053 559,053 1,000,000 3,806,851 3,806,851 4,894,468
</TABLE>
69
<PAGE> 73
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- ------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- ------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
43 -- -- -- -- 549,019 549,019 1,000,000 4,091,022 4,091,022 5,168,598
44 -- -- -- -- 531,730 531,730 1,000,000 4,390,960 4,390,960 5,457,085
45 -- -- -- -- 505,026 505,026 1,000,000 4,707,354 4,707,354 5,760,860
46 -- -- -- -- 465,879 465,879 1,000,000 5,041,039 5,041,039 6,080,502
47 -- -- -- -- 410,088 410,088 1,000,000 5,393,105 5,393,105 6,417,795
48 -- -- -- -- 331,489 331,489 1,000,000 5,764,733 5,764,733 6,773,561
49 -- -- -- -- 221,072 221,072 1,000,000 6,157,616 6,157,616 7,148,377
50 -- -- -- -- 64,782 64,782 1,000,000 6,573,251 6,573,251 7,543,463
51 -- -- -- -- 0 0 0 7,013,218 7,013,218 7,960,003
52 -- -- -- -- -- -- -- 7,479,054 7,479,054 8,398,230
53 -- -- -- -- -- -- -- 7,972,249 7,972,249 8,858,763
54 -- -- -- -- -- -- -- 8,495,269 8,495,269 9,343,946
55 -- -- -- -- -- -- -- 9,055,353 9,055,353 9,859,469
56 -- -- -- -- -- -- -- 9,667,065 9,667,065 10,413,362
57 -- -- -- -- -- -- -- 10,316,388 10,316,388 10,970,447
58 -- -- -- -- -- -- -- 10,989,052 10,989,052 11,531,911
59 -- -- -- -- -- -- -- 11,669,078 11,669,078 12,096,166
60 -- -- -- -- -- -- -- 12,516,358 12,516,358 12,848,042
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON CASH VALUE ACCUMULATION TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.90% IN ALL POLICY YEARS.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
70
<PAGE> 74
SURVIVORSHIP
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER ISSUE AGE 45
FEMALE PREFERRED NON-SMOKER ISSUE AGE 40
ANNUAL PREMIUM $9,500
$1,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- --------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,975 8,698 8,698 1,000,000 9,240 9,240 1,000,000 9,782 9,782 1,000,000
2 20,449 17,404 17,404 1,000,000 19,038 19,038 1,000,000 20,737 20,737 1,000,000
3 31,446 25,939 25,939 1,000,000 29,231 29,231 1,000,000 32,791 32,791 1,000,000
4 42,993 34,307 34,307 1,000,000 39,836 39,836 1,000,000 46,055 46,055 1,000,000
5 55,118 42,511 42,511 1,000,000 50,870 50,870 1,000,000 60,652 60,652 1,000,000
6 67,849 50,554 50,554 1,000,000 62,349 62,349 1,000,000 76,714 76,714 1,000,000
7 81,217 58,433 58,433 1,000,000 74,286 74,286 1,000,000 94,382 94,382 1,000,000
8 95,252 66,135 66,135 1,000,000 86,682 86,682 1,000,000 113,801 113,801 1,000,000
9 109,990 73,665 73,665 1,000,000 99,558 99,558 1,000,000 135,150 135,150 1,000,000
10 125,464 81,028 81,028 1,000,000 112,936 112,936 1,000,000 158,624 158,624 1,000,000
11 141,713 88,368 88,368 1,000,000 127,023 127,023 1,000,000 184,695 184,695 1,000,000
12 158,773 95,576 95,576 1,000,000 141,702 141,702 1,000,000 213,425 213,425 1,000,000
13 176,687 102,653 102,653 1,000,000 156,998 156,998 1,000,000 245,086 245,086 1,000,000
14 195,496 109,603 109,603 1,000,000 172,936 172,936 1,000,000 279,976 279,976 1,000,000
15 215,246 116,428 116,428 1,000,000 189,543 189,543 1,000,000 318,426 318,426 1,000,000
16 235,983 123,130 123,130 1,000,000 206,848 206,848 1,000,000 360,799 360,799 1,000,000
17 257,758 129,669 129,669 1,000,000 224,839 224,839 1,000,000 407,461 407,461 1,000,000
18 280,621 136,035 136,035 1,000,000 243,539 243,539 1,000,000 458,849 458,849 1,000,000
19 304,627 142,223 142,223 1,000,000 262,967 262,967 1,000,000 515,444 515,444 1,000,000
20 329,833 148,223 148,223 1,000,000 283,147 283,147 1,000,000 577,780 577,780 1,000,000
21 356,300 154,025 154,025 1,000,000 304,102 304,102 1,000,000 646,451 646,451 1,000,000
22 384,090 159,617 159,617 1,000,000 325,855 325,855 1,000,000 722,113 722,113 1,000,000
23 413,269 164,991 164,991 1,000,000 348,437 348,437 1,000,000 805,501 805,501 1,014,932
24 443,907 170,135 170,135 1,000,000 371,873 371,873 1,000,000 897,372 897,372 1,112,742
25 476,078 175,032 175,032 1,000,000 396,194 396,194 1,000,000 998,549 998,549 1,218,230
26 509,857 179,666 179,666 1,000,000 421,428 421,428 1,000,000 1,109,975 1,109,975 1,331,970
27 545,325 184,180 184,180 1,000,000 448,021 448,021 1,000,000 1,233,779 1,233,779 1,468,197
28 582,566 188,337 188,337 1,000,000 475,605 475,605 1,000,000 1,370,202 1,370,202 1,616,839
29 621,669 192,086 192,086 1,000,000 504,207 504,207 1,000,000 1,520,516 1,520,516 1,779,004
30 662,728 195,371 195,371 1,000,000 533,857 533,857 1,000,000 1,686,118 1,686,118 1,955,897
31 705,839 198,117 198,117 1,000,000 564,585 564,585 1,000,000 1,868,541 1,868,541 2,148,823
32 751,106 200,287 200,287 1,000,000 596,457 596,457 1,000,000 2,069,581 2,069,581 2,338,626
33 798,636 201,822 201,822 1,000,000 629,536 629,536 1,000,000 2,291,173 2,291,173 2,543,202
34 848,543 202,628 202,628 1,000,000 663,886 663,886 1,000,000 2,535,470 2,535,470 2,763,662
35 900,945 202,594 202,594 1,000,000 699,583 699,583 1,000,000 2,804,876 2,804,876 3,001,217
36 955,967 201,588 201,588 1,000,000 736,721 736,721 1,000,000 3,102,091 3,102,091 3,257,196
37 1,013,741 199,463 199,463 1,000,000 775,422 775,422 1,000,000 3,429,498 3,429,498 3,600,973
38 1,074,403 196,091 196,091 1,000,000 815,848 815,848 1,000,000 3,790,108 3,790,108 3,979,614
39 1,138,098 191,295 191,295 1,000,000 858,192 858,192 1,000,000 4,187,215 4,187,215 4,396,576
40 1,204,978 184,867 184,867 1,000,000 902,690 902,690 1,000,000 4,624,419 4,624,419 4,855,640
41 1,275,202 176,585 176,585 1,000,000 949,641 949,641 1,000,000 5,105,660 5,105,660 5,360,943
42 1,348,937 166,206 166,206 1,000,000 998,882 998,882 1,048,826 5,635,249 5,635,249 5,917,001
43 1,426,359 153,096 153,096 1,000,000 1,050,019 1,050,019 1,102,520 6,217,765 6,217,765 6,528,653
44 1,507,651 136,969 136,969 1,000,000 1,103,105 1,103,105 1,158,260 6,858,326 6,858,326 7,201,243
45 1,593,009 117,026 117,026 1,000,000 1,158,160 1,158,160 1,216,068 7,562,325 7,562,325 7,940,441
46 1,682,635 92,723 92,723 1,000,000 1,215,223 1,215,223 1,275,984 8,335,739 8,335,739 8,752,526
47 1,776,741 63,243 63,243 1,000,000 1,274,317 1,274,317 1,338,032 9,184,980 9,184,980 9,644,229
48 1,875,553 27,577 27,577 1,000,000 1,335,456 1,335,456 1,402,229 10,116,954 10,116,954 10,622,802
49 1,979,306 0 0 0 1,398,649 1,398,649 1,468,581 11,139,098 11,139,098 11,696,053
50 -- -- -- -- 1,463,890 1,463,890 1,537,085 12,259,385 12,259,385 12,872,354
51 -- -- -- -- 1,531,165 1,531,165 1,607,723 13,486,349 13,486,349 14,160,667
</TABLE>
71
<PAGE> 75
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- --------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
52 -- -- -- -- 1,601,555 1,601,555 1,665,617 14,839,372 14,839,372 15,432,947
53 -- -- -- -- 1,677,136 1,677,136 1,727,450 16,349,596 16,349,596 16,840,084
54 -- -- -- -- 1,757,030 1,757,030 1,792,171 18,024,772 18,024,772 18,385,268
55 -- -- -- -- 1,841,967 1,841,967 1,860,386 19,888,808 19,888,808 20,087,697
56 -- -- -- -- 1,932,202 1,932,202 1,932,202 21,963,375 21,963,375 21,963,375
57 -- -- -- -- 2,026,390 2,026,390 2,026,390 24,253,282 24,253,282 24,253,282
58 -- -- -- -- 2,124,703 2,124,703 2,124,703 26,780,880 26,780,880 26,780,880
59 -- -- -- -- 2,227,322 2,227,322 2,227,322 29,570,844 29,570,844 29,570,844
60 -- -- -- -- 2,334,436 2,334,436 2,334,436 32,650,406 32,650,406 32,650,406
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON GUIDELINE PREMIUM TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.65% THROUGH POLICY YEAR 10,
0.50% IN POLICY YEARS 11 THROUGH 26, 0.40% THEREAFTER.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
72
<PAGE> 76
SURVIVORSHIP
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER ISSUE AGE 45
FEMALE PREFERRED NON-SMOKER ISSUE AGE 40
ANNUAL PREMIUM $9,500
$1,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- ------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- ------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,975 8,656 8,656 1,000,000 9,197 9,197 1,000,000 9,739 9,739 1,000,000
2 20,449 17,299 17,299 1,000,000 18,927 18,927 1,000,000 20,621 20,621 1,000,000
3 31,446 25,751 25,751 1,000,000 29,026 29,026 1,000,000 32,569 32,569 1,000,000
4 42,993 34,016 34,016 1,000,000 39,508 39,508 1,000,000 45,687 45,687 1,000,000
5 55,118 42,099 42,099 1,000,000 50,388 50,388 1,000,000 60,089 60,089 1,000,000
6 67,849 49,994 49,994 1,000,000 61,670 61,670 1,000,000 75,892 75,892 1,000,000
7 81,217 57,676 57,676 1,000,000 73,342 73,342 1,000,000 93,204 93,204 1,000,000
8 95,252 65,143 65,143 1,000,000 85,410 85,410 1,000,000 112,165 112,165 1,000,000
9 109,990 72,391 72,391 1,000,000 97,881 97,881 1,000,000 132,930 132,930 1,000,000
10 125,464 79,414 79,414 1,000,000 110,762 110,762 1,000,000 155,667 155,667 1,000,000
11 141,713 86,205 86,205 1,000,000 124,056 124,056 1,000,000 180,560 180,560 1,000,000
12 158,773 92,754 92,754 1,000,000 137,765 137,765 1,000,000 207,811 207,811 1,000,000
13 176,687 99,050 99,050 1,000,000 151,893 151,893 1,000,000 237,642 237,642 1,000,000
14 195,496 105,077 105,077 1,000,000 166,435 166,435 1,000,000 270,295 270,295 1,000,000
15 215,246 110,819 110,819 1,000,000 181,391 181,391 1,000,000 306,038 306,038 1,000,000
16 235,983 116,256 116,256 1,000,000 196,753 196,753 1,000,000 345,167 345,167 1,000,000
17 257,758 121,363 121,363 1,000,000 212,516 212,516 1,000,000 388,010 388,010 1,000,000
18 280,621 126,115 126,115 1,000,000 228,669 228,669 1,000,000 434,934 434,934 1,000,000
19 304,627 130,482 130,482 1,000,000 245,202 245,202 1,000,000 486,348 486,348 1,000,000
20 329,833 134,423 134,423 1,000,000 262,097 262,097 1,000,000 542,708 542,708 1,000,000
21 356,300 137,891 137,891 1,000,000 279,328 279,328 1,000,000 604,525 604,525 1,000,000
22 384,090 140,828 140,828 1,000,000 296,869 296,869 1,000,000 672,382 672,382 1,000,000
23 413,269 143,155 143,155 1,000,000 314,672 314,672 1,000,000 746,937 746,937 1,000,000
24 443,907 144,774 144,774 1,000,000 332,683 332,683 1,000,000 828,934 828,934 1,027,879
25 476,078 145,567 145,567 1,000,000 350,834 350,834 1,000,000 918,879 918,879 1,121,032
26 509,857 145,406 145,406 1,000,000 369,057 369,057 1,000,000 1,017,389 1,017,389 1,220,866
27 545,325 144,085 144,085 1,000,000 387,230 387,230 1,000,000 1,125,170 1,125,170 1,338,953
28 582,566 141,556 141,556 1,000,000 405,358 405,358 1,000,000 1,243,091 1,243,091 1,466,848
29 621,669 137,583 137,583 1,000,000 423,324 423,324 1,000,000 1,372,054 1,372,054 1,605,303
30 662,728 131,944 131,944 1,000,000 441,031 441,031 1,000,000 1,513,052 1,513,052 1,755,141
31 705,839 124,371 124,371 1,000,000 458,371 458,371 1,000,000 1,667,170 1,667,170 1,917,245
32 751,106 114,524 114,524 1,000,000 475,206 475,206 1,000,000 1,835,922 1,835,922 2,074,592
33 798,636 101,949 101,949 1,000,000 491,358 491,358 1,000,000 2,020,809 2,020,809 2,243,098
34 848,543 86,090 86,090 1,000,000 506,615 506,615 1,000,000 2,223,557 2,223,557 2,423,677
35 900,945 66,262 66,262 1,000,000 520,734 520,734 1,000,000 2,446,173 2,446,173 2,617,405
36 955,967 41,639 41,639 1,000,000 533,439 533,439 1,000,000 2,691,036 2,691,036 2,825,588
37 1,013,741 11,247 11,247 1,000,000 544,431 544,431 1,000,000 2,958,612 2,958,612 3,106,543
38 1,074,403 0 0 0 553,373 553,373 1,000,000 3,250,817 3,250,817 3,413,357
39 -- -- -- -- 559,875 559,875 1,000,000 3,569,690 3,569,690 3,748,175
40 -- -- -- -- 563,454 563,454 1,000,000 3,917,400 3,917,400 4,113,270
41 -- -- -- -- 563,467 563,467 1,000,000 4,296,220 4,296,220 4,511,031
42 -- -- -- -- 559,053 559,053 1,000,000 4,708,526 4,708,526 4,943,952
43 -- -- -- -- 549,019 549,019 1,000,000 5,156,762 5,156,762 5,414,600
44 -- -- -- -- 531,730 531,730 1,000,000 5,643,430 5,643,430 5,925,602
45 -- -- -- -- 505,026 505,026 1,000,000 6,171,134 6,171,134 6,479,691
46 -- -- -- -- 465,879 465,879 1,000,000 6,742,523 6,742,523 7,079,649
47 -- -- -- -- 410,088 410,088 1,000,000 7,360,342 7,360,342 7,728,359
48 -- -- -- -- 331,489 331,489 1,000,000 8,027,309 8,027,309 8,428,675
49 -- -- -- -- 221,072 221,072 1,000,000 8,746,163 8,746,163 9,183,471
50 -- -- -- -- 64,782 64,782 1,000,000 9,519,325 9,519,325 9,995,291
51 -- -- -- -- 0 0 0 10,348,837 10,348,837 10,866,279
52 -- -- -- -- -- -- -- 11,264,214 11,264,214 11,714,783
53 -- -- -- -- -- -- -- 12,280,251 12,280,251 12,648,658
54 -- -- -- -- -- -- -- 13,416,547 13,416,547 13,684,878
55 -- -- -- -- -- -- -- 14,699,559 14,699,559 14,846,554
56 -- -- -- -- -- -- -- 16,147,229 16,147,229 16,147,229
57 -- -- -- -- -- -- -- 17,736,481 17,736,481 17,736,481
58 -- -- -- -- -- -- -- 19,481,162 19,481,162 19,481,162
59 -- -- -- -- -- -- -- 21,396,472 21,396,472 21,396,472
60 -- -- -- -- -- -- -- 23,499,101 23,499,101 23,499,101
</TABLE>
73
<PAGE> 77
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON GUIDELINE PREMIUM TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.90% IN ALL POLICY YEARS.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
74
<PAGE> 78
SURVIVORSHIP
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER ISSUE AGE 65
FEMALE PREFERRED NON-SMOKER ISSUE AGE 60
ANNUAL PREMIUM $50,000
$2,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- --------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 47,115 47,115 2,000,000 50,011 50,011 2,000,000 52,907 52,907 2,000,000
2 107,625 93,627 93,627 2,000,000 102,373 102,373 2,000,000 111,468 111,468 2,000,000
3 165,506 139,039 139,039 2,000,000 156,665 156,665 2,000,000 175,725 175,725 2,000,000
4 226,282 183,184 183,184 2,000,000 212,781 212,781 2,000,000 246,074 246,074 2,000,000
5 290,096 226,158 226,158 2,000,000 270,903 270,903 2,000,000 323,285 323,285 2,000,000
6 357,100 267,619 267,619 2,000,000 330,755 330,755 2,000,000 407,701 407,701 2,000,000
7 427,455 307,281 307,281 2,000,000 392,125 392,125 2,000,000 499,823 499,823 2,000,000
8 501,328 345,439 345,439 2,000,000 455,375 455,375 2,000,000 600,789 600,789 2,000,000
9 578,895 382,065 382,065 2,000,000 520,574 520,574 2,000,000 711,570 711,570 2,000,000
10 660,339 417,784 417,784 2,000,000 588,583 588,583 2,000,000 834,219 834,219 2,000,000
11 745,856 452,042 452,042 2,000,000 658,915 658,915 2,000,000 969,344 969,344 2,000,000
12 835,649 485,492 485,492 2,000,000 732,297 732,297 2,000,000 1,118,882 1,118,882 2,000,000
13 929,932 518,249 518,249 2,000,000 808,991 808,991 2,000,000 1,284,509 1,284,509 2,053,673
14 1,026,928 550,608 550,608 2,000,000 889,414 889,414 2,000,000 1,467,399 1,467,399 2,279,017
15 1,132,875 582,598 582,598 2,000,000 973,767 973,767 2,000,000 1,669,080 1,669,080 2,520,979
16 1,242,018 612,999 612,999 2,000,000 1,061,363 1,061,363 2,000,000 1,890,720 1,890,720 2,780,682
17 1,356,619 641,251 641,251 2,000,000 1,152,105 1,152,105 2,000,000 2,133,900 2,133,900 3,060,012
18 1,476,950 667,205 667,205 2,000,000 1,246,259 1,246,259 2,000,000 2,400,598 2,400,598 3,360,598
19 1,603,298 690,659 690,659 2,000,000 1,344,144 1,344,144 2,000,000 2,692,942 2,692,942 3,685,022
20 1,735,963 711,383 711,383 2,000,000 1,446,169 1,446,169 2,000,000 3,013,233 3,013,233 4,035,924
21 1,875,261 729,139 729,139 2,000,000 1,552,756 1,552,756 2,037,992 3,364,002 3,364,002 4,415,252
22 2,021,524 743,679 743,679 2,000,000 1,663,060 1,663,060 2,141,522 3,748,018 3,748,018 4,826,323
23 2,175,100 754,268 754,268 2,000,000 1,776,819 1,776,819 2,247,321 4,167,908 4,167,908 5,271,570
24 2,336,355 760,643 760,643 2,000,000 1,894,142 1,894,142 2,355,745 4,626,980 4,626,980 5,754,575
25 2,505,673 761,896 761,896 2,000,000 2,014,930 2,014,930 2,466,879 5,128,312 5,128,312 6,278,592
26 2,683,456 757,487 757,487 2,000,000 2,139,261 2,139,261 2,581,019 5,675,669 5,675,669 6,847,694
27 2,870,129 746,560 746,560 2,000,000 2,267,168 2,267,168 2,697,930 6,273,021 6,273,021 7,464,895
28 3,066,136 728,070 728,070 2,000,000 2,398,686 2,398,686 2,817,976 6,924,665 6,924,665 8,135,097
29 3,271,942 700,747 700,747 2,000,000 2,533,878 2,533,878 2,941,072 7,635,345 7,635,345 8,862,345
30 3,488,039 662,994 662,994 2,000,000 2,672,872 2,672,872 3,066,586 8,410,403 8,410,403 9,649,256
31 3,714,941 612,809 612,809 2,000,000 2,815,842 2,815,842 3,194,854 9,255,799 9,255,799 10,501,630
32 3,953,189 544,980 544,980 2,000,000 2,962,361 2,962,361 3,325,250 10,175,979 10,175,979 11,422,536
33 4,203,348 455,435 455,435 2,000,000 3,112,740 3,112,740 3,457,943 11,178,215 11,178,215 12,417,879
34 4,466,015 339,132 339,132 2,000,000 3,267,496 3,267,496 3,593,265 12,271,262 12,271,262 13,494,707
35 4,741,816 189,871 189,871 2,000,000 3,427,439 3,427,439 3,731,453 13,465,947 13,465,947 14,660,376
36 5,031,407 -- -- -- 3,593,763 3,593,763 3,871,201 14,775,907 14,775,907 15,916,608
37 -- -- -- -- 3,767,954 3,767,954 4,006,843 16,217,734 16,217,734 17,245,938
38 -- -- -- -- 3,952,475 3,952,475 4,147,728 17,814,531 17,814,531 18,694,569
39 -- -- -- -- 4,149,210 4,149,210 4,301,071 19,589,924 19,589,924 20,306,915
40 -- -- -- -- 4,358,813 4,358,813 4,474,322 21,564,553 21,564,553 22,136,013
</TABLE>
75
<PAGE> 79
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON CASH VALUE ACCUMULATION TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.65% THROUGH POLICY YEAR 2,
0.50% IN POLICY YEARS 3 THROUGH 5, 0.40% IN POLICY YEARS 6 THROUGH 10,
AND 0.30% THEREAFTER.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
76
<PAGE> 80
SURVIVORSHIP
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER ISSUE AGE 65
FEMALE PREFERRED NON-SMOKER ISSUE AGE 60
ANNUAL PREMIUM $50,000
$2,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- ------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- ------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 46,840 46,840 2,000,000 49,731 49,731 2,000,000 52,623 52,623 2,000,000
2 107,625 92,046 92,046 2,000,000 100,732 100,732 2,000,000 109,766 109,766 2,000,000
3 165,506 135,330 135,330 2,000,000 152,722 152,722 2,000,000 171,542 171,542 2,000,000
4 226,282 176,548 176,548 2,000,000 205,563 205,563 2,000,000 238,240 238,240 2,000,000
5 290,096 215,523 215,523 2,000,000 259,082 259,082 2,000,000 310,165 310,165 2,000,000
6 357,100 252,055 252,055 2,000,000 313,087 313,087 2,000,000 387,657 387,657 2,000,000
7 427,455 285,846 285,846 2,000,000 367,295 367,295 2,000,000 471,042 471,042 2,000,000
8 501,328 316,772 316,772 2,000,000 421,603 421,603 2,000,000 560,905 560,905 2,000,000
9 578,895 344,508 344,508 2,000,000 475,731 475,731 2,000,000 657,777 657,777 2,000,000
10 660,339 368,734 368,734 2,000,000 529,423 529,423 2,000,000 762,361 762,361 2,000,000
11 745,856 389,071 389,071 2,000,000 582,397 582,397 2,000,000 875,523 875,523 2,000,000
12 835,649 405,038 405,038 2,000,000 634,314 634,314 2,000,000 998,325 998,325 2,000,000
13 929,932 416,004 416,004 2,000,000 684,750 684,750 2,000,000 1,132,089 1,132,089 2,000,000
14 1,028,928 421,190 421,190 2,000,000 733,216 733,216 2,000,000 1,278,534 1,278,534 2,000,000
15 1,132,875 419,652 419,652 2,000,000 779,163 779,163 2,000,000 1,437,785 1,437,785 2,171,630
16 1,242,018 410,262 410,262 2,000,000 821,989 821,989 2,000,000 1,608,180 1,608,180 2,365,151
17 1,356,619 391,710 391,710 2,000,000 861,068 861,068 2,000,000 1,790,121 1,790,121 2,567,033
18 1,476,950 362,443 362,443 2,000,000 895,729 895,729 2,000,000 1,984,049 1,984,049 2,777,471
19 1,603,298 320,587 320,587 2,000,000 925,221 925,221 2,000,000 2,190,445 2,190,445 2,997,405
20 1,735,963 263,785 263,785 2,000,000 948,644 948,644 2,000,000 2,409,813 2,409,813 3,227,704
21 1,875,261 188,932 188,932 2,000,000 964,814 964,814 2,000,000 2,642,687 2,642,687 3,468,526
22 2,021,524 91,895 91,895 2,000,000 972,155 972,155 2,000,000 2,889,575 2,889,575 3,720,906
23 2,175,100 -- -- -- 968,481 968,481 2,000,000 3,150,954 3,150,954 3,985,327
24 -- -- -- -- 950,811 950,811 2,000,000 3,427,294 3,427,294 4,262,526
25 -- -- -- -- 915,253 915,253 2,000,000 3,719,249 3,719,249 4,553,476
26 -- -- -- -- 856,348 856,348 2,000,000 4,027,541 4,027,541 4,859,228
27 -- -- -- -- 766,545 766,545 2,000,000 4,353,250 4,353,250 5,180,368
28 -- -- -- -- 634,713 634,713 2,000,000 4,697,455 4,697,455 5,518,570
29 -- -- -- -- 444,564 444,564 2,000,000 5,061,543 5,061,543 5,874,933
30 -- -- -- -- 170,522 170,522 2,000,000 5,446,983 5,446,983 6,249,323
31 -- -- -- -- -- -- -- 5,855,243 5,855,243 6,643,358
32 -- -- -- -- -- -- -- 6,287,596 6,287,596 7,057,827
33 -- -- -- -- -- -- -- 6,745,180 6,745,180 7,493,221
34 -- -- -- -- -- -- -- 7,230,145 7,230,145 7,950,990
35 -- -- -- -- -- -- -- 7,749,148 7,749,148 8,436,497
36 -- -- -- -- -- -- -- 8,315,927 8,315,927 8,957,917
37 -- -- -- -- -- -- -- 8,917,745 8,917,745 9,483,130
38 -- -- -- -- -- -- -- 9,542,343 9,542,343 10,013,735
39 -- -- -- -- -- -- -- 10,175,804 10,175,804 10,548,238
40 -- -- -- -- -- -- -- 10,958,019 10,958,019 11,248,406
</TABLE>
77
<PAGE> 81
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON CASH VALUE ACCUMULATION TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.90% IN ALL POLICY YEARS.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
78
<PAGE> 82
SURVIVORSHIP
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER ISSUE AGE 65
FEMALE PREFERRED NON-SMOKER ISSUE AGE 60
ANNUAL PREMIUM $50,000
$2,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- --------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 47,115 47,115 2,000,000 50,011 50,011 2,000,000 52,907 52,907 2,000,000
2 107,625 93,627 93,627 2,000,000 102,373 102,373 2,000,000 111,468 111,468 2,000,000
3 165,506 139,039 139,039 2,000,000 156,665 156,665 2,000,000 175,725 175,725 2,000,000
4 226,282 183,184 183,184 2,000,000 212,781 212,781 2,000,000 246,074 246,074 2,000,000
5 290,096 226,158 226,158 2,000,000 270,903 270,903 2,000,000 323,285 323,285 2,000,000
6 357,100 267,619 267,619 2,000,000 330,755 330,755 2,000,000 407,701 407,701 2,000,000
7 427,455 307,281 307,281 2,000,000 392,125 392,125 2,000,000 499,823 499,823 2,000,000
8 501,328 345,439 345,439 2,000,000 455,375 455,375 2,000,000 600,789 600,789 2,000,000
9 578,895 382,065 382,065 2,000,000 520,574 520,574 2,000,000 711,570 711,570 2,000,000
10 660,339 417,784 417,784 2,000,000 588,583 588,583 2,000,000 834,219 834,219 2,000,000
11 745,856 452,042 452,042 2,000,000 658,915 658,915 2,000,000 969,344 969,344 2,000,000
12 835,649 485,492 485,492 2,000,000 732,297 732,297 2,000,000 1,118,882 1,118,882 2,000,000
13 929,932 518,249 518,249 2,000,000 808,901 808,991 2,000,000 1,284,535 1,284,535 2,000,000
14 1,028,928 550,608 550,608 2,000,000 889,414 889,414 2,000,000 1,468,259 1,468,259 2,000,000
15 1,132,875 582,598 582,598 2,000,000 973,767 973,767 2,000,000 1,672,039 1,672,039 2,000,000
16 1,242,018 612,999 612,999 2,000,000 1,061,363 1,061,363 2,000,000 1,897,877 1,897,877 2,000,000
17 1,356,619 641,251 641,251 2,000,000 1,152,105 1,152,105 2,000,000 2,147,623 2,147,623 2,255,004
18 147,950 667,205 667,205 2,000,000 1,246,259 1,246,259 2,000,000 2,423,020 2,423,020 2,544,171
19 1,603,298 690,659 690,659 2,000,000 1,344,144 1,344,144 2,000,000 2,726,647 2,726,647 2,862,980
20 1,735,963 711,383 711,383 2,000,000 1,446,169 1,446,169 2,000,000 3,061,326 3,061,326 3,214,393
21 1,875,261 729,139 729,139 2,000,000 1,552,872 1,552,872 2,000,000 3,430,149 3,430,149 3,601,656
22 2,021,524 743,679 743,679 2,000,000 1,664,937 1,664,937 2,000,000 3,836,497 3,836,497 4,028,322
23 2,175,100 754,268 754,268 2,000,000 1,783,124 1,783,124 2,000,000 4,283,993 4,283,993 4,498,192
24 2,336,355 760,643 760,643 2,000,000 1,908,596 1,908,596 2,004,026 4,776,658 4,776,658 5,015,491
25 2,505,673 761,896 761,896 2,000,000 2,039,999 2,039,999 2,141,999 5,318,761 5,318,761 5,584,699
26 2,683,456 757,487 757,487 2,000,000 2,176,490 2,176,490 2,285,315 5,915,014 5,915,014 6,210,765
27 2,870,129 746,560 746,560 2,000,000 2,318,157 2,318,157 2,434,065 6,570,484 6,570,484 6,899,008
28 3,066,136 728,070 728,070 2,000,000 2,465,070 2,465,070 2,588,324 7,290,636 7,290,636 7,655,168
29 3,271,942 700,747 700,747 2,000,000 2,617,282 2,617,282 2,748,146 8,081,358 8,081,358 8,485,426
30 3,488,039 662,994 662,994 2,000,000 2,774,822 2,774,822 2,913,563 8,948,969 8,948,969 9,396,417
31 3,714,941 612,809 612,809 2,000,000 2,937,693 2,937,693 3,084,577 9,900,241 9,900,241 10,395,253
32 3,953,189 544,980 544,980 2,000,000 3,107,976 3,107,976 3,232,295 10,949,822 10,949,822 11,387,815
33 4,203,348 455,435 455,435 2,000,000 3,286,673 3,286,673 3,385,273 12,110,425 12,110,425 12,473,738
34 4,466,015 339,132 339,132 2,000,000 3,475,054 3,475,054 3,544,555 13,397,295 13,397,295 13,665,240
35 4,741,816 189,871 189,871 2,000,000 3,674,680 3,674,680 3,711,426 14,828,715 14,828,715 14,977,002
36 5,031,407 -- -- -- 3,886,193 3,886,193 3,886,193 16,421,407 16,421,407 16,421,407
37 -- -- -- -- 4,106,972 4,106,972 4,106,972 18,179,420 18,179,420 18,179,420
38 -- -- -- -- 4,337,420 4,337,420 4,337,420 20,119,914 20,119,914 20,119,914
39 -- -- -- -- 4,577,962 4,577,962 4,577,962 22,261,832 22,261,832 22,261,832
40 -- -- -- -- 4,829,039 4,829,039 4,829,039 24,626,082 24,626,082 24,626,082
</TABLE>
79
<PAGE> 83
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON GUIDELINE PREMIUM TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.65% THROUGH POLICY YEAR 2,
0.50% IN POLICY YEARS 3 THROUGH 5, 0.40% IN POLICY YEARS 6 THROUGH 10,
AND 0.30% THEREAFTER.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
80
<PAGE> 84
SURVIVORSHIP
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER ISSUE AGE 65
FEMALE PREFERRED NON-SMOKER ISSUE AGE 60
ANNUAL PREMIUM $50,000
$2,000,000 INITIAL DEATH BENEFIT:
OPTION A
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------- ------------------------------- ------------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------- --------- --------- ------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 46,840 46,840 2,000,000 49,731 49,731 2,000,000 52,623 52,623 2,000,000
2 107,625 92,046 92,046 2,000,000 100,732 100,732 2,000,000 109,766 109,766 2,000,000
3 165,506 135,330 135,330 2,000,000 152,722 152,722 2,000,000 171,542 171,542 2,000,000
4 226,282 176,548 176,548 2,000,000 205,563 205,563 2,000,000 238,240 238,240 2,000,000
5 290,096 215,523 215,523 2,000,000 259,082 259,082 2,000,000 310,165 310,165 2,000,000
6 357,100 252,055 252,055 2,000,000 313,087 313,087 2,000,000 387,657 387,657 2,000,000
7 427,455 285,846 285,846 2,000,000 367,295 367,295 2,000,000 471,042 471,042 2,000,000
8 501,328 316,772 316,772 2,000,000 421,603 421,603 2,000,000 560,905 560,905 2,000,000
9 578,895 344,508 344,508 2,000,000 475,731 475,731 2,000,000 657,777 657,777 2,000,000
10 660,339 368,734 368,734 2,000,000 529,423 529,423 2,000,000 762,361 762,361 2,000,000
11 745,856 389,071 389,071 2,000,000 582,397 582,397 2,000,000 875,523 875,523 2,000,000
12 835,649 405,038 405,038 2,000,000 634,314 634,314 2,000,000 998,325 998,325 2,000,000
13 929,932 416,004 416,004 2,000,000 684,750 684,750 2,000,000 1,132,089 1,132,089 2,000,000
14 1,028,928 421,190 421,190 2,000,000 733,216 733,216 2,000,000 1,278,534 1,278,534 2,000,000
15 1,132,875 419,652 419,652 2,000,000 779,163 779,163 2,000,000 1,439,934 1,439,934 2,000,000
16 1,242,018 410,262 410,262 2,000,000 821,989 821,989 2,000,000 1,619,337 1,619,337 2,000,000
17 1,356,619 391,710 391,710 2,000,000 861,068 861,068 2,000,000 1,820,853 1,820,853 2,000,000
18 1,476,950 362,443 362,443 2,000,000 895,729 895,729 2,000,000 2,047,647 2,047,647 2,150,030
19 1,603,298 320,587 320,587 2,000,000 925,221 925,221 2,000,000 2,295,578 2,295,578 2,410,357
20 1,735,963 263,785 263,785 2,000,000 948,644 948,644 2,000,000 2,566,115 2,566,115 2,694,421
21 1,875,261 188,932 188,932 2,000,000 964,814 964,814 2,000,000 2,861,057 2,861,057 3,004,110
22 2,021,524 91,895 91,895 2,000,000 972,155 972,155 2,000,000 3,182,285 3,182,285 3,341,399
23 2,175,100 -- -- -- 968,481 968,481 2,000,000 3,531,738 3,531,738 3,708,325
24 -- -- -- -- 950,811 950,811 2,000,000 3,911,410 3,911,410 4,106,980
25 -- -- -- -- 915,253 915,253 2,000,000 4,323,372 4,323,372 4,539,540
26 -- -- -- -- 856,348 856,348 2,000,000 4,769,737 4,769,737 5,008,223
27 -- -- -- -- 766,545 766,545 2,000,000 5,252,691 5,252,691 5,515,326
28 -- -- -- -- 634,713 634,713 2,000,000 5,774,410 5,774,410 6,063,131
29 -- -- -- -- 444,564 444,564 2,000,000 6,337,086 6,337,086 6,653,940
30 -- -- -- -- 170,522 170,522 2,000,000 6,942,676 6,942,676 7,289,810
31 -- -- -- -- -- -- -- 7,592,842 7,592,842 7,972,484
32 -- -- -- -- -- -- -- 8,309,551 8,309,551 8,641,933
33 -- -- -- -- -- -- -- 9,104,147 9,104,147 9,377,272
34 -- -- -- -- -- -- -- 9,991,701 9,991,701 10,191,535
35 -- -- -- -- -- -- -- 10,992,618 10,992,618 11,102,544
36 -- -- -- -- -- -- -- 12,120,876 12,120,876 12,120,876
37 -- -- -- -- -- -- -- 13,359,478 13,359,478 13,359,478
38 -- -- -- -- -- -- -- 14,719,215 14,719,215 14,719,215
39 -- -- -- -- -- -- -- 16,211,935 16,211,935 16,211,935
40 -- -- -- -- -- -- -- 17,850,642 17,850,642 17,850,642
</TABLE>
81
<PAGE> 85
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED
ON GUIDELINE PREMIUM TEST.
(5) THE MORTALITY AND EXPENSE RISK CHARGE IS 0.90% IN ALL POLICY YEARS.
(6) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
82
<PAGE> 86
APPENDIX B
TABLE OF DEATH BENEFIT FACTORS
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED ATTAINED
AGE* PERCENT AGE* PERCENT AGE* PERCENT AGE* PERCENT
- -------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
0-40 250 50 185 60 130 70 115
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94 101
95+ 100
</TABLE>
* ATTAINED AGE IS THE AGE NEAREST BIRTHDAY AS OF THE BEGINNING OF THE POLICY
YEAR.
83
<PAGE> 87
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKING PURSUANT TO RULE 484(B)(1)
UNDER THE SECURITIES ACT OF 1933
Pursuant to the Underwriting Agreement filed as Exhibit 1-A(3)(a) to this
Registration Statement, Kemper Investors Life Insurance Company (KILICO) and the
Separate Account will agree to indemnify Investors Brokerage Services, Inc.
(IBS) against any claims, liabilities and expenses which IBS may incur under the
Securities Act of 1933, common law or otherwise, arising out of or based upon
any alleged untrue statements of material fact contained in any registration
statement or prospectus of the Separate Account, or any omission to state a
material fact therein, the omission of which makes any statement contained
therein misleading. IBS will agree to indemnify KILICO and the Separate Account
against any and all claims, demands, liabilities and expenses which KILICO or
the Separate Account may incur, arising out of or based upon any act or deed of
IBS or of any registered representative of an NASD member investment dealer
which has an agreement with IBS and is acting in accordance with KILICO's
instructions.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
KILICO or the Separate Account (by virtue of the fact that they may also be
agents, employees or controlling persons of IBS) pursuant to the foregoing
provisions, or otherwise, KILICO and the Separate Account have been advised that
in the opinion of the Securities and Exchange Commission such indemnification
may be against public policy as expressed in the Act and may be, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by KILICO or the Separate Account of
expenses incurred or paid by a director, officer or controlling person of KILICO
or the Separate Account in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, KILICO and the Separate Account
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
REPRESENTATION REGARDING FEES AND CHARGES PURSUANT TO
SECTION 26 OF THE INVESTMENT COMPANY ACT OF 1940
Kemper Investors Life Insurance Company (KILICO) represents that the fees
and charges deducted under the Policy, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by KILICO.
II-1
<PAGE> 88
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The Facing sheet.
Reconciliation and tie between items in N-8B-2 and Prospectus.
The prospectus consisting of 83 pages.
The undertaking to file reports.
Undertaking pursuant to Rule 484(b)(1) under the Securities Act of
1933.
Representation Regarding Fees and Charges Pursuant to Section 26
of the Investment Company Act of 1940.
The signatures.
Written consents of the following persons:
A. Coopers & Lybrand L.L.P., independent accountants (Filed as
Exhibit 6(a)).
B. KPMG Peat Marwick LLP, Independent Auditors (Filed as Exhibit
6(b)).
C. Steven D. Powell, FSA (Included in Opinion filed as Exhibit 3(b)).
The following exhibits:
<TABLE>
<S> <C> <C>
(3) 1-A(1) KILICO Resolution establishing the Separate Account
1-A(2) Not Applicable
(3) 1-A(3)(a) Form of Underwriting Agreement between KILICO and Investors Brokerage Services, Inc.
(IBS)
(2) 1-A(3)(b) Specimen Selling Group Agreement of IBS
(5) 1-A(3)(c) Schedule of Commissions
(2) 1-A(3)(d) General Agent Agreement
(4) 1-A(4) Not Applicable
(3) 1-A(5)(a) Form of Individual Policy
(3) 1-A(5)(b) Form of Survivorship Policy
1-A(5)(c) Extended Maturity Option Rider
1-A(5)(d) Accelerated Death Benefit Option Rider
(1) 1-A(6)(a) KILICO Articles of Incorporation
(2) 1-A(6)(b) By-Laws of KILICO
1-A(7) Not Applicable
(4) 1-A(8)(a) Form of Participation Agreement among KILICO, Investors Fund Series (formerly known
as Kemper Investors Fund), Zurich Kemper Investments, Inc., and Kemper Distributors,
Inc.
(4) 1-A(8)(b) Form of Participation Agreement among KILICO and Evergreen Variable Annuity Trust
1-A(8)(c) Form of Administrative Services Agreement between KILICO and Bancorp Services L.L.C.
1-A(9) Not Applicable
1-A(10)(a) Application for Individual Policy
1-A(10)(b) Application for Survivorship Policy
(3) 3(a) Opinion and consent of legal officer of KILICO as to legality of policies being
registered
3(b) Opinion and consent of actuarial officer of KILICO regarding prospectus illustra-
tions and actuarial matters
6(a) Consent of Coopers & Lybrand L.L.P., independent accountants
6(b) Consent of KPMG Peat Marwick LLP, independent auditors
(5) 8 Procedures Memorandum, pursuant to Rule 6e-3(T)(b)(12)(iii)
</TABLE>
- -------------------------
(1) Filed with the Registration Statement of the Registrant on Form S-6 filed on
or about December 26, 1995 (File No. 33-65399).
(2) Filed with Amendment No. 2 to the Registration Statement on Form S-1 (File
No. 333-02491) filed on or about April 23, 1997.
(3) Filed with the Registration Statement of the Registrant on Form S-6 filed on
or about September 8, 1997 (File No. 333-35159).
(4) Filed with Pre-Effective Amendment No. 1 to the Registration Statement of
the Registrant on Form S-6 filed on or about December 5, 1997 (File No.
333-35159).
(5) To be filed with subsequent post-effective amendment.
II-2
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
KILICO Variable Separate Account-2, certifies that it meets the requirements of
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Long Grove and State of Illinois on
the 22nd day of April, 1998.
KILICO VARIABLE SEPARATE ACCOUNT-2
(Registrant)
By: Kemper Investors Life Insurance
Company
(Depositor)
By: /s/ JOHN B. SCOTT
----------------------------------
John B. Scott, Chief Executive
Officer
and President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following directors
and principal officers of Kemper Investors Life Insurance Company in the
capacities indicated on the 22nd day of April, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ JOHN B. SCOTT Chief Executive Officer, President and Director
- ----------------------------------------------- (Principal Executive Officer)
John B. Scott
/s/ WILLIAM H. BOLINDER Chairman of the Board and Director
- -----------------------------------------------
William H. Bolinder
/s/ FREDERICK L. BLACKMON Senior Vice President and Chief Financial
- ----------------------------------------------- Officer (Principal Financial Officer and
Frederick L. Blackmon Principal Accounting Officer)
/s/ LOREN J. ALTER Director
- -----------------------------------------------
Loren J. Alter
/s/ DAVID A. BOWERS Director
- -----------------------------------------------
David A. Bowers
Director
- -----------------------------------------------
Markus Rohrbasser
</TABLE>
II-3
<PAGE> 90
EXHIBIT INDEX
<TABLE>
<S> <C>
1-A(5)(c) Extended Maturity Option Rider
1-A(5)(d) Accelerated Death Benefit Option Rider
1-A(8)(c) Form of Administrative Services Agreement between KILICO and
Bancorp Services, L.L.C.
1-A(10)(a) Application for Individual Policy
1-A(10)(b) Application for Survivorship Policy
3(b) Opinion and Consent of Actuarial Officer of KILICO regarding
prospectus illustrations and actuarial matters
6(a) Consent of Coopers & Lybrand L.L.P., independent accountants
6(b) Consent of KPMG Peat Marwick LLP, independent auditors
</TABLE>
<PAGE> 1
EXHIBIT 1-A(5)(C)
KEMPER INVESTORS LIFE INSURANCE COMPANY [ZURICH KEMPER LOGO]
A Stock Life Insurance Company
1 Kemper Drive
Long Grove, Illinois 60049-0001
EXTENDED MATURITY OPTION RIDER
This Rider is a part of the policy to which it is attached. It is subject to all
of the policy's provisions which are not inconsistent with this Rider. If
inconsistencies occur, the provisions of this Rider will apply.
BENEFIT
On the Maturity Date while this policy is in force, you may extend the Maturity
Date for one year. You may continue to extend the Maturity Date for one year
intervals. While this policy is continued under this provision, we will extend
the deduction period for one year and waive any cost of insurance charges
against the policy. All attached benefit riders, other than this Rider, will
terminate. No additional policy loans or partial withdrawals will be allowed.
Upon the death of the insured while this Policy is in force, the Death Benefit
will be payable. The Death Benefit under this option is the Cash Value. If the
Maturity Date is not extended the policy will mature.
EFFECTIVE DATE
This Rider becomes effective on the Policy Date, as shown on the Policy
Specifications Page.
TERMINATION
This Rider will terminate on the day coverage under this policy terminates.
REINSTATEMENT
This Rider may be reinstated if:
1. The policy itself is being reinstated; and
2. The Rider terminated due to the termination of the policy
according to the terms of the policy's Grace Period provision.
Signed for the Kemper Investors Life Insurance Company at its home office in
Long Grove, Illinois.
[SIG] [SIG]
Secretary President
<PAGE> 2
KEMPER INVESTORS LIFE INSURANCE COMPANY
A Stock Life Insurance Company [ZURICH KEMPER LOGO]
1 Kemper Drive
Long Grove, Illinois 60049-0001
EXTENDED MATURITY OPTION RIDER
This Rider is a part of the policy to which it is attached. It is subject to all
of the policy's provisions which are not inconsistent with this Rider. If
inconsistencies occur, the provisions of this Rider will apply.
BENEFIT
On the Maturity Date while this policy is in force, you may extend the Maturity
Date for one year. You may continue to extend the Maturity Date for one year
intervals. While this policy is continued under this provision, we will extend
the deduction period for one year and waive any cost of insurance charges
against the policy. All attached benefit riders, other than this Rider, will
terminate. No additional policy loans or partial withdrawals will be allowed.
Upon the death of the Life Insured while this Policy is in force, the Death
Benefit will be payable. The Death Benefit under this option is the Cash Value.
If the Maturity Date is not extended the policy will mature.
EFFECTIVE DATE
This Rider becomes effective on the Policy Date, as shown on the Policy
Specifications Page.
TERMINATION
This Rider will terminate on the day coverage under this policy terminates.
REINSTATEMENT
This Rider may be reinstated if:
1. The policy itself is being reinstated; and
2. The Rider terminated due to the termination of the policy according
to the terms of the policy's Grace Period provision.
Signed for the Kemper Investors Life Insurance Company at its home office in
Long Grove, Illinois.
[SIG] [SIG]
Secretary President
<PAGE> 1
EXHIBIT 1-A(5)(d)
KEMPER INVESTORS LIFE INSURANCE COMPANY
1 Kemper Drive, Long Grove, IL 60049-0001
ACCELERATED DEATH BENEFIT RIDER
IMPORTANT Benefits as specified under the Policy will be reduced
if you receive an Accelerated Death Benefit payment.
The benefit payment under this Rider may be taxable or
may affect eligibility for benefits under state or federal
law. You should contact your personal tax advisor for
specific advice. Neither the Company nor its agents can
provide tax advice.
EFFECTIVE This Rider is a part of the Policy as of the Issue Date
DATE of the Policy.
DEFINITIONS ACCELERATED DEATH BENEFIT - This is the amount of death
benefit that you elect to accelerate when the insured is
determined to be Terminally Ill. We will pay you the
Accelerated Death Benefit less certain specified
adjustments.
TERMINALLY ILL - This is when the insured has a life
expectancy of 12 months or less due to an illness or
physical condition. We will require proof, satisfactory to
us, that the insured is Terminally Ill. This proof will
include, but is not limited to, certification by a
Physician.
PHYSICIAN - This must be a Physician licensed and
practicing, within, the scope of his/her license, within the
United States. The Physician must not be: you; the insured;
or, related to either party by blood or marriage.
ACCELERATED You may elect to have a portion of the death benefit
DEATH BENEFIT accelerated when the insured is found to be Terminally Ill,
subject to the terms and conditions of this Rider. The
maximum Accelerated Death Benefit you may elect under this
Policy is the lesser of:
1. 25% of the death benefit; or
2. $250,000.
The total Accelerated Death Benefit available under all
policies issued by us or our affiliates on the life of the
insured will not exceed $250,000. The minimum death benefit
you may elect to accelerate is $10,000. You may not request
more than one Accelerated Death Benefit under this Rider.
ADJUSTMENTS We will pay you the Accelerated Death Benefit less the
following adjustments in one lump sum:
1. There is an administration fee of $150.00 for
processing an Accelerated Death Benefit.
2. If there is any outstanding policy loan, the
Accelerated Death Benefit will be used to repay the policy
loan and any accrued interest thereon.
LIEN We will treat the Accelerated Death Benefit as a lien
against your Policy. As a lien, we will charge you interest
on the Accelerated Death Benefit. The maximum annual
interest rate we may charge you is the greater of:
1. The interest rate charged on policy loans, as stated
in the Policy; or
2. The current 90-day U.S. Treasury Bill rate in effect
on the date that the Accelerated Death Benefit is paid.
The maximum interest rate we will charge on the portion
of the lien which is equal to the Surrender Value of this
Policy at the time the Accelerated Death Benefit is
requested will be no greater than the rate we charge on
policy loans.
S-9218 Page 1
<PAGE> 2
S-9218 Page 2
EFFECTS ON POLICY The Accelerated Death Benefit will first be used to
repay any outstanding policy loans and any unpaid accrued
interest thereon. The Accelerated Death Benefit plus any
accrued interest thereon will be treated as a lien against
your Policy. Your access to the Net Surrender, Value of your
Policy through policy loans, full surrenders, or partial
surrenders, if any, will be limited to the excess of the Net
Surrender value over the lien. The death benefit payable
under this Policy will also be reduced by the amount of the
lien. Any benefits payable under other Riders attached to
this Policy will not be affected by any benefit payable
under this Rider. Premiums, without reduction, will still be
payable on this Policy, including any Rider premiums.
CONDITIONS Payment of an Accelerated Death Benefit is subject to
the conditions that follow:
1. This Rider is subject to the terms of the
Contestability provision under this Policy.
2. The insured must not be Terminally Ill due to any
attempt of suicide while the suicide provision under this
policy is in effect.
3. You may reinstate this Rider subject to the same
terms which apply to the Policy.
4. You must send us a written request to elect the
Accelerated Death Benefit. The written request must be in a
form satisfactory to us.
5. Any irrevocable beneficiaries or assignees must send
us a written consent to the Accelerated Death Benefit. The
written consent must be in a form satisfactory to us.
6. You must provide us with proof satisfactory to us
that the insured is Terminally Ill. This proof must include
a certification by a Physician, who is not: you; the
insured; or, related to either party by blood or marriage.
We reserve the right to obtain a second medical opinion at
our expense. If there is a conflict of opinion, we reserve
the right to make the final determination.
7.This Rider provides for the accelerated payment of
the death benefit and is not intended to allow third parties
to cause you to involuntarily invade your Policy proceeds
ultimately payable to your beneficiary. Therefore, any
election forced by creditors or government agencies will be
honored only to the extent required by law.
RELATIONSHIP TO This Rider is part of the Policy to which it is
THE POLICY attached. The terms and conditions of the Policy apply to
this Rider. Where the terms and conditions of the Policy and
this Rider are in conflict, the terms and conditions of this
Rider will prevail.
TERMINATION This Rider will terminate on the earliest of:
1. the date we pay you an Accelerated Death Benefit;
2. the date you ask us to do so in writing and send us
the Policy; or
3. the date this Policy lapses because a premium due is
not paid within the required grace period.
Signed for the Kemper Investors Life Insurance Company
at its home office in Long Grove, Illinois.
Secretary President
<PAGE> 1
EXHIBIT 1-A(8)(C)
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT, dated as of June 16, 1997, by and among
Kemper Investors Life Insurance Company, an Illinois insurance company
(together with its successors and permitted assigns, the "Company"), Bancorp
Services, L.L.C., a Missouri limited liability company (together with its
successors and permitted assigns, the "Administrator"), and Zurich Centre
ReSource Limited, a Delaware corporation (together with its successors and
permitted assigns, "ZCR").
WHEREAS, the Company is the underwriter of the Series I Private Placement
Variable Life Insurance Policies identified in Schedule A and the Series II
- - VII Private Placement Variable Life Insurance Policies identified in
Schedule B (such policies hereinafter referred to as the "Policy"),
Schedule A and Schedule B are attached to and form a part of this Agreement
and which may be amended from time to time;
WHEREAS, the Company and the Administrator desire to enter into this
Agreement whereby the Administrator agrees to perform administrative
services in connection with the Policy, as specified herein;
WHEREAS, ZCR, the Company and the Administrator have entered into an
SVP/SCV Technology License Agreement pursuant to which Administrator has
granted certain rights and licenses to ZCR (and ZCR has granted certain
rights and sublicenses to the Company ), and ZCR and the Company have
entered into a Product and Marketing Support Agreement pursuant to which
ZCR has agreed to perform certain services for and license certain
technology to the Company in connection with Series I Private Placement
Variable Life Insurance Policies;
NOW, THEREFORE, in consideration of these premises, the parties hereto mutually
agree as follows:
SECTION 1- RESPONSIBILITY
The Company hereby appoints and designates the Administrator to be the
administrator of the Company's Series I Private Placement Variable Life
Insurance Policies identified in Schedule A and the Series II - VII Private
Placement Variable Life Insurance Policies identified in Schedule B. The
Company and the Administrator may by mutual consent add policies to and
delete polices from Schedule A and Schedule B from time to time.
The Administrator hereby agrees to assume responsibility for the performance of
"administrative services," as hereinafter described.
<PAGE> 2
SECTION 2 - ADMINISTRATIVE SERVICES
The term "administrative services" as used in this Agreement shall mean the
performance by the Administrator of the following functions:
1. Billing - The Administrator shall prepare all premium statements and
distribute them to the policyholder.
2. Reports - The Administrator shall furnish to the Company premium
reports, including information as to covered employees, additions to and
terminations of coverage, total gross premium billed; full and partial
surrenders, loans, as well as any other information the Company may
reasonably require, including, but not limited to, the timely provision
of information necessary to permit the Company to determine the payments
required to be made pursuant to paragraph 8 of Section 3 hereof. The
Administrator shall furnish to the Company all information and reports
necessary to enable compliance with Internal Revenue Code Section 7702
and Section 7702A and with any other tax reporting obligations the
Company might have. The Company shall have the sole and exclusive right
to interpret the Internal Revenue Code and determine its tax and other
liabilities and responsibilities thereunder.
3. Communications with Policyholders - The Administrator shall prepare
statements for policyholders showing account values and other
transactions, including surrenders. Such statements shall be furnished
annually to each policyholder or more often as such policyholder may
reasonably require. The Administrator shall perform such other services
customarily associated with insurance policy administration, including
processing changes in the amount of insurance, and communication with
the policyholder.
4. Office and Supplies - The Administrator shall maintain, at its own
expense, an office and the Company will provide the necessary supplies
of forms for the administration of the Policy.
5. Reports - Any forms or reports developed by the Administrator for the
administration of the Policy and for distribution to policyholders must
be approved by the Company prior to use.
6. Reserve Calculations - The Administrator shall perform all reserve
calculations in connection with the Policy and shall furnish reserve
information to the Company at such times required by the Company and in
such format agreed to by the Company and the Administrator.
7. Loans and Surrenders - The Administrator shall process all requests for
loans and full and partial surrenders under the Policy.
2
<PAGE> 3
SECTION 3 - GENERAL PROVISIONS
1. Standard of Care - The Administrator agrees to perform, in a timely
manner consistent with reasonable industry practice, faithfully and in
accordance with applicable law, the duties as set forth herein. The
Administrator represents that it meets all applicable requirements to
enter into this agreement including any required state licenses and
agrees to take such action as may be required under any applicable law
to perform its obligations under this agreement. In performing the
services set forth herein, the Administrator shall direct its efforts
towards advancing the business and interests of the Company to the best
of its ability.
2. Indemnification - The Administrator agrees to indemnify the Company and
hold the Company harmless from any and all losses, damages, and
expenses, including reasonable legal fees and expenses, which the
Company may incur as a result of or arising out of any acts or
omissions, whether dishonest, fraudulent, criminal or negligent, of the
Administrator or its employees, acting alone or in collusion with
others.
The Company agrees to indemnify the Administrator and hold the
Administrator harmless from any and all losses, damages, and expenses,
including reasonable legal fees and expenses, which the Administrator
may incur as a result of or arising out of any acts or omissions,
whether dishonest, fraudulent, criminal or negligent, of the Company or
its employees, acting alone or in collusion with others.
The Administrator shall maintain in effect an errors and omissions
liability policy in the amount of no less than $1,000,000 per
occurrence, $3,000,000 annual aggregate limit, providing for
indemnification of the Company to cover any loss arising as a result of
any real or alleged dishonest, fraudulent, criminal or negligent
conduct on the part of the Administrator's officers, agents or
employees in any aspect of the performance of the Administrator's
services under this Agreement. The Administrator shall cause the issuer
of said policy to name the Company as a loss payee under such policy
and to deliver to the Company evidence of the existence of such policy.
The Administrator shall also cause the issuer to give 30 days' written
notice prior to the cancellation of or any material change in the
policy.
3. Termination - This Agreement shall become effective as of the date it
has been duly executed by all parties and shall continue in effect
until terminated pursuant to paragraph a or b below.
a. This Agreement may be terminated by the Company or the Administrator
by giving written notice to the other at least ninety days prior to the
termination date, provided that, in the event of a termination by the
Administrator pursuant to this sentence, the Company shall have the
right in its sole discretion to extend the term
3
<PAGE> 4
of this Agreement for up to an additional 90 days (i.e., so that this
Agreement would not be terminated on less than 180 days prior written
notice by the Administrator).
b. Notwithstanding any other provision herein to the contrary, this
Agreement may be terminated immediately by the Company for any of the
following reasons:
i. The Administrator fails to perform any of its obligations
under this Agreement which failure to perform shall continue
without cure for not less than 30 days following the
Administrator's receipt of written notice from the Company of the
Administrator's failure to perform; or
ii. The occurrence of an event described in Section 14 of this
Agreement.
Notwithstanding any other provision herein to the contrary, this
Agreement may be terminated by the Administrator if the Company fails
to make a payment required to be made by this Agreement to the
Administrator and such failure has not been cured within 30 days after
notice (specifying that it is a notice of termination being given
pursuant to this Section 3b) has been sent by the Administrator to the
Company, provided that with respect to this paragraph of Section 3b,
written notice is given in the manner provided in Section 20 below,
and, additionally concurrent telephone confirmation of such notice is
given personally directly to any of Debra Rezabek, Frank Julian or Phil
Meserve.
c. Upon termination of this Agreement for any reason, the Administrator
agrees that for a period of five years from the date of termination,
neither it nor any of its affiliates will take any action designed or
calculated to result in the transfer or exchange of Policies or provide
administrative services or otherwise use or offer its systems for use
in administering policies issued by an insurance Company other than the
Company where the cash values of such policies are the result of
transfers or exchanges from policies administered under this Agreement.
4. Independent Contractor - The execution of this Agreement does not serve
to indicate any relationship of employer and employee between the
Company and the Administrator, and it is understood that the
Administrator is an independent contractor.
5. Delivery to Policyholder - Any policies, certificates, booklets,
termination notices or other written communications delivered by the
Company to the Administrator for delivery to the policyholder, shall be
delivered by the Administrator, at the Company's expense, promptly
after receipt of instructions from the Company to do so.
6. Legal or Administrative Proceedings - If any notice of the commencement
of any legal proceeding involving any policyholder is received by the
Administrator, or
4
<PAGE> 5
if it receives any communication from any Insurance Department or other
administrative agency or any other person identifying a complaint by a
policyholder or calling a hearing involving any Company insuring
practice, the Administrator shall immediately thereafter forward any
correspondence or necessary files to the Company's Home Office for
handling by the Company.
7. Records - The Administrator shall hold and possess, as the property of
the Company, all papers, books, files, correspondence, and records of
all kinds which at any time shall come into its possession or under its
control relating to transactions by or for the Company. Such records
will be maintained during the duration of this Agreement and six years
thereafter.
Upon termination of this Agreement or upon prior request, the
Administrator shall surrender this property to the Company or its
designee provided the Company is the underwriter on such date. If this
Agreement is terminated because the Company is replaced as the
underwriter with respect to all Policies, then all such property
(except that relating to the payment of claims which shall remain the
property of the Company) shall inure to the new underwriter at no
charge by the Company; however, the Company will have access to such
property to the extent needed to fulfill its contractual obligations
and any other legal obligations which may arise.
Notwithstanding the foregoing, the Administrator shall have the right
to retain copies of all papers, books, files, correspondence and
records of all kinds relating to this Agreement upon termination of
this Agreement for any reason.
8. Compensation - The Company will pay the Administrator the fees set out
in Schedule C. The Company and the Administrator may by mutual consent
add, delete, or change the fees shown in Schedule C from time to time.
This compensation will be payable only on those Policies for which
Administrator provides administrative services and only for so long as
those services are provided in accordance with this Agreement. The
provisions contained in this paragraph shall survive termination of
this Agreement.
9. Policy Amendment - The Administrator shall have no authority to alter
or amend the Policy, or to modify, waive or extend any of its
provisions.
10. Advertising, Etc. - It is expressly agreed that the Administrator
shall have no authority to prepare or distribute any advertising,
promotional or descriptive material relating to the Policy without
first obtaining the Company's written approval of same. The
Administrator shall not use the Company name, trademarks, logo or the
name of the affiliated company in any way or manner not specifically
authorized in writing by the Company.
5
<PAGE> 6
11. Furnishing Information: Audit, Etc.
a. The Administrator shall furnish the Company and ZCR with all
reasonably requested information regarding any and all matters or
transactions or activities pertaining to the Policy. The Administrator
shall furnish such information, including information required for
financial reporting purposes, at such times required by the Company and
ZCR, as the case may be, and in a format mutually agreed upon. The
Company and ZCR shall have the right to inspect any documents, books
and records of the Administrator pertaining to the Policy or any
activities of the Administrator in connection therewith. Any right on
the part of the Company and ZCR to have access to the offices of the
Administrator or to inspect, audit or photocopy any of the
Administrator's documents, books or records shall be subject to
reasonable advance notice, shall be conducted during the
Administrator's normal business hours in a manner which will not
unreasonably interfere with the Administrator's conduct of its business
and shall be conducted at the sole expense of the Company or ZCR, as
the case may be.
b. The Administrator shall provide access and cooperation to duly
authorized representatives of ZCR and the Company and Insurance
Department representatives (and representatives of other regulatory
authorities), for the purpose of conducting examinations or audits of
its books and accounts, and the Administrator shall make full
disclosure, without reservation of any kind, necessary to enable ZCR
and the Company to determine fully whether the Administrator is
faithfully performing its obligations under this Agreement. Any right
on the part of ZCR and the Company to have access to the offices of
the Administrator or to inspect, audit or photocopy any of the
Administrator's books or records shall be subject to reasonable advance
notice, shall be conducted during the Administrator's normal business
hours in a manner which will not unreasonably interfere with the
Administrator's conduct of its business and shall be conducted at the
sole expense of ZCR or the Company, as the case may be.
c. Each of the Company and ZCR shall have the right to conduct periodic
audits at ZCR's or the Company's office, as the case may be, or at the
office of the Administrator. If ZCR or the Company chooses to conduct
an audit at its own offices, the Administrator shall immediately ship
copies of all requested records to the designated Company or ZCR office
at the sole expense of the Company or ZCR, as the case may be. Any
right on the part of ZCR and the Company to conduct periodic audits at
the offices of the Administrator shall be subject to reasonable
advance notice, shall be conducted during the Administrator's normal
business hours in a manner which will not unreasonably interfere with
the Administrator's conduct of its business and shall be conducted at
the sole expense of ZCR or the Company, as the case may be.
12. Assignment - The Administrator shall not assign or subcontract any of
its administrative functions, duties, or responsibilities without the
prior written
6
<PAGE> 7
approval of the Company. The Company shall have the right to refuse
approval for any reason whatsoever at its sole discretion.
13. No Other Agreements - The Administrator shall have no authority to
make any agreement binding upon the Company, except as otherwise
provided in this Agreement, with respect to the Policy or premiums
payable thereon unless previously agreed upon in advance and in
writing between the Administrator and the Company.
14. Insolvency, Etc. - In the event the Administrator shall become
insolvent, make a general assignment for the benefit of creditors, or
if any proceeding of any nature under the Federal Bankruptcy Act, as
amended, or under any state insolvency statute, be commenced by or
against the Administrator (or one of its joint ventures) or if a
receiver be appointed therefore, and such proceeding remains in effect
and unstayed for a period of not less than 90 days, the Administrator
shall immediately notify the Company and ZCR pursuant to Section 20
hereof, and upon the request of the Company:
a. cease and desist all administrative services provided for herein;
b. promptly relinquish and turn over to the Company all records as may
be required or requested by the Company; and,
c. provide to the Company whatever additional information or assistance
may be required or requested by the Company.
15. Arbitration; Submission to Jurisdiction - Any dispute arising out of
or relating to this Agreement or the breach, termination or validity
hereof shall be settled by arbitration before one arbitrator in
Chicago, Illinois in accordance with the commercial arbitration rules
then in effect of the American Arbitration Association. The parties
hereby consent and submit to the personal jurisdiction of any federal
court sitting in Chicago, Illinois and of any Illinois State court of
competent jurisdiction sitting in Chicago, Illinois in any suit,
action or proceeding in connection with arbitration arising out of or
relating to this Agreement. The award entered by the arbitrator shall
be final and binding on all parties to arbitration. Each party shall
bear its respective arbitration expenses and shall each pay its pro
rata portion based on the number of parties participating in such
arbitration of the arbitrator's charges and expenses. The arbitrator
shall not award punitive, exemplary or consequential damages.
Notwithstanding the foregoing, this agreement to arbitrate shall not
bar any party hereto from seeking temporary or provisional remedies
in any court having jurisdiction thereof.
16. Headings - The headings and captions in this Agreement are inserted
for convenience only and shall not be considered in the construction
of any provisions.
7
<PAGE> 8
17. Entire Contract - This Agreement constitutes the entire contract
between the parties hereto. Any amendment or modification of this
Agreement, including any Schedule hereto, will not be effective unless
made in writing and signed by the parties hereto.
18. Governing Law - This Agreement shall be construed and enforced
according to the laws of the State of Illinois.
19. Miscellaneous - This Agreement shall be binding upon the Company and
the Administrator, and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. This Agreement may
be executed simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument. No failure or delay in exercising any
right, power or privilege hereunder will operate as a waiver thereof,
nor will any single or partial exercise thereof preclude any other
further exercise thereof or the exercise of any right, power or
privilege hereunder.
20. Notices - All notices and other communications hereunder shall be in
writing and shall be sent by registered or certified mail, return
receipt requested, posted prepaid, by hand delivery or by telecopier,
as follows:
If to Company: Kemper Investors Life Insurance Company
1 Kemper Drive
Long Grove, IL 60049
Attention: General Counsel
Telecopier No: 847.550.5535
with a copy to: Zurich Centre Resource Limited
One Chase Manhattan Plaza, 44th Floor
New York, NY 10005
Attention: John Cross
Telecopier No.: 212.898.8766
and with a copy to: Zurich Centre Resource Limited
One Chase Manhattan Plaza, 44th Floor
New York, NY 10005
Attention: General Counsel
Telecopier No.: 212.898.5444
8
<PAGE> 9
If to ZCR: Zurich Centre ReSource Limited
One Chase Manhattan Plaza, 44th Floor
New York, NY 10005
Attention: John Cross
Telecopier No.: 212.898.8766
with a copy to: Zurich Centre ReSource Limited
One Chase Manhattan Plaza, 44th Floor
New York, NY 10005
Attention: General Counsel
Telecopier No.: 212.898.5444
If to Administrator: Bancorp Services, L.L.C.
1611 Des Peres Road, Suite 370
St. Louis, MO 63131
Attention: Seth Koppes
Telecopier No.: 314.984.0025
with copies to: Bryan Cave LLP
One Metropolitan Square, Suite 3600
St. Louis, MO 63102-2750
Attention: William Seabaugh
Telecopier No: 314.259.2020
and
Zurich Centre ReSource Limited
One Chase Manhattan Plaza, 44th Floor
New York, NY 10005
Attention: John Cross
Telecopier No.: 212.898.8766
and
Zurich Centre ReSource Limited
One Chase Manhattan Plaza, 44th Floor
New York, NY 10005
Attention: General Counsel
Telecopier No.: 212.898.5444
or to such other person or address as any party shall specify by like notice to
each of the other parties. All such notices and communications shall be deemed
to have been duly given or made (i) when delivered by hand, (ii) when mailed,
five business days after
9
<PAGE> 10
being deposited in the mail, postage prepaid and (iii) when telecopied, receipt
acknowledged.
IN WITNESS WHEREOF, this Agreement has been duly executed by an authorized
representative of each of the parties hereto.
BANCORP SERVICES, L.L.C. KEMPER INVESTORS LIFE
INSURANCE COMPANY
By: /s/ Chris Garlich By: /s/ Phil Meserve
---------------------------- ----------------------------
Name: Chris Garlich Name: Phil Meserve
Title: EVP Title: EVP
ZURICH CENTRE RESOURCE LIMITED
By: /s/ John E. Cross
----------------------------
Name: JOHN E. CROSS
Title: MANAGING DIRECTOR
10
<PAGE> 11
SCHEDULE A
----------
SERIES I VARIABLE LIFE INSURANCE POLICIES
Policy Owner Date of Issue
- ------------ -------------
"Star Banc Corporation Rabbi Trust, First Union June 17, 1997
National Bank, Trustee, dated 10-27-95 and as
Amended and restated 6-16-97"
11
<PAGE> 12
SCHEDULE B
SERIES II-VII PRIVATE PLACEMENT VARIABLE LIFE INSURANCE POLICES
Series II Private Placement Single Life Variable Life
Insurance Policy Form S-7004
Series III Private Placement Single Life Variable Life
Insurance Policy Form S-7004
Series IV Private Placement Survivorship Variable Life
Insurance Policy Form S-7006
Series V Private Placement Survivorship Variable Life
Insurance Policy Form S-7005
Series VI Private Placement Survivorship Variable Life
Insurance Policy Form S-7005
Series VII Private Placement Survivorship Variable Life
Insurance Policy Form S-7007
12
<PAGE> 13
SCHEDULE C
SERIES I PRIVATE PLACEMENT VARIABLE LIFE INSURANCE POLICIES
The Company will pay the Administrator for product administration on Series I
Private Placement Variable Life Insurance Policies $2.50 per month per insured
($30.00 per annum per insured). The fees are payable in arrears on a monthly
basis on the sixth Business Day of each calendar month (the "Payment Date") and
on the termination of this Agreement and are based on the number of insureds as
of the last Business Day of the calendar month immediately preceding such
Payment Date. "Business Day", for purposes of this Schedule C, means each day
that the New York Stock Exchange is open for trading.
SERIES II-VII PRIVATE PLACEMENT VARIABLE LIFE INSURANCE POLICIES
For each Series II - VII Private Placement Variable Life Insurance Policy, the
Administrator shall earn a fee for product administration equal to $12.50 per
month per policy. For each such policy, such fee shall be payable on the Payment
Date in the first full calendar month immediately following the date such policy
was issued, on the Payment Date for such calendar month in each calendar year
thereafter, and on the termination of this Agreement.
For each policy that terminates during the term of this Agreement for any reason
other than the death of the insured(s), the Administrator shall refund to the
Company a portion of the fee paid with respect to such policy on the most recent
Payment Date for such policy. Such portion shall be equal to the product of (i)
the amount of the fee paid with respect to such policy on the most recent
Payment Date for such policy and (ii) the quotient of (x) the number of calendar
days that remain until, but not including, the next Payment Date for such policy
and (y) 365. Such refund may be offset against any payment payable by the
Company to the Administrator hereunder or paid promptly following the
termination of such policy.
Upon the termination of this Agreement, for each policy, the Administrator shall
refund to the Company a portion of the fee paid with respect to such policy on
the most recent Payment Date for such policy. Such portion shall be equal to the
product of (i) the amount of such fee paid with respect to such policy on the
most recent Payment Date for such policy and (ii) the quotient of (x) the number
of calendar days that remain until, but not including, the next Payment Date for
such policy and (y) 365. Such refund shall be paid by the Administrator within
ten Business Days following the termination of this Agreement.
The provisions of this Schedule shall survive the termination of this Agreement.
13
<PAGE> 1
EXHIBIT 1-A(10)(a)
<TABLE>
<S><C>
APPLICATION TO
KEMPER INVESTORS LIFE INSURANCE COMPANY [ZURICH KEMPER LOGO]
1 Kemper Drive, Long Grove, Illinois 60049-0001
VARIABLE UNIVERSAL LIFE SUPPLEMENT
Name of Proposed Insured _____________________________ Plan ___________________
Planned Premium ________________________________ Mode Payable _________________
- ----------------------------------------------------------------------------------------------------------------------------------
PREMIUM ALLOCATION
Evergreen Variable Trust INVESTORS FUND SERIES FIXED ACCOUNT
% of Premium % of Premium % OF Premium
(Whole Percentages Only) (Whole Percentages Only) (Whole Percentages Only)
Subaccount Subaccount
__ % Evergreen VA __ % Money Market ___ %
__ % Evergreen VA Growth and Income __ % Total Return
__ % Evergreen VA Foundation __ % High Yield
__ % Evergreen VA Global Leaders __ % Growth
__ % Evergreen VA Strategic Income __ % Government Securities
__ % Evergreen VA Aggressive Growth __ % International
__ % Small Cap Growth
__ % Investment Grade Bond
__ % Value
__ % Small Cap Value
__ % Value + Growth
__ % Horizon 20+
__ % Horizon 10+
__ % Horizon 5
__ % Blue Chip
__ % Global Income
Premium may be allocated to 10 subaccounts. Total
of subaccount plus fixed account must equal 100%
- ----------------------------------------------------------------------------------------------------------------------------------
SUITABILITY
ANNUAL EARNINGS
[ ] $25,000 to $50,000 [ ] $50,000 to $100,000 [ ] $100,000 to $200,000 [ ] over $200,000
NET WORTH
[ ] $25,000 to $75,000 [ ] $75,000 to $125,000 [ ] $125,000 to $250,000 [ ] over $250,000
FINANCIAL OBJECTIVES:
[ ] Long Term Growth [ ] Preservation of Capital [ ] Maximum Capital Appreciation
Other ____________________________________________________________________________________________________________
[ ] Check this box if you do not wish to provide this information.
- -----------------------------------------------------------------------------------------------------------------------------------
IRC SECTION 7702 TEST
[ ] Guideline Premium Test
[ ] Cash Value Accumulation Test
- -----------------------------------------------------------------------------------------------------------------------------------
TELEPHONE AUTHORIZATION
[ ] Check here to authorize telephone transfers among the subaccounts and the fixed account subject to the conditions of the
Telephone Transfer Agreement.
- -----------------------------------------------------------------------------------------------------------------------------------
I understand that
THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY VARY UNDER SPECIFIED CONDITIONS. POLICY VALUES MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE EXPERIENCE OF THE SEPARATE ACCOUNT. ILLUSTRATIONS OF BENEFITS, INCLUDING DEATH BENEFITS, POLICY VALUES, AND CASH
SURRENDER VALUES ARE AVAILABLE UPON REQUEST.
Receipt is acknowledged of the current prospectus for the Policy and for the underlying funds for the Premium Allocation options
selected above.
All statements and answers to the foregoing questions are, to the best of my knowledge and belief: (a) complete; and (b)
true. I agree (a) that they shall form a part of my application; (b) that they shall be subject to the terms of the agreement found
in the application; and (c) that they shall become a part of any policy based on my application.
Dated at
----------------------------------------- ---------------------------------------------------
City and State Signature of Proposed Insured
on
---------------------------------------------- ---------------------------------------------------
Month Day Year Signature of Applicant and Owner
(If other than Proposed Insured)
Signature of Agent as Witness
-------------------------------------------------
Signature of Registered Principal
---------------------------------------------
</TABLE>
L-8178
<PAGE> 2
[ZURICH KEMPER LOGO]
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
<TABLE>
<S><C>
LIFE INSURANCE APPLICATION
COMPLETE THE FOLLOWING IN ALL CASES: THE FOLLOWING ARE NOT INCLUDED IN THIS SET
Part A: General Information (USE WHEN NEEDED):
Part B: Agreement Part G: Aviation Supplement
Agent's Report (located at end of set) Part H: Financial Supplement
Part J: Insurance History Supplement
COMPLETE THE FOLLOWING WHEN NEEDED:
Part C: Medical Questionnaire (must be completed for all
non-examined cases)
Part D: Multiple Insured Supplement
Part E: Additional Details
Pre-authorized Checking (PAC) Authorization (if electronic
debit is desired)
- -------------------------------------------------------------------------------
DIRECTIONS
You, as the Agent, are responsible for completing the necessary forms required to process and underwrite this application. All
forms must be completed in full and must be legible. The directions below must be followed carefully.
DO - DON'T -
- - Submit separate applications on Joint Insureds. - Don't accept or send money on applications
- - Provide full details totalling over $500,000.
- - Print application in black ink. - Don't send partial premiums - full mode
- - Get all required signatures. premium is needed.
- - Have the applicant initial all changes. - Don't use pencil.
- - Complete the Agent's Report, especially Question 10 - Don't use whiteout.
(regarding replacement)
- - Sign the Agent's Report after completing.
- - Complete the Financial Supplement, Part H, if the
application is for more than $1 million.
- - Give the Notification (below) to the applicant prior
to completion of the application.
- - Send two months' premium on all PAC cases.
LIFE APP/S9S
(Tear here)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
- NOTIFICATION - IMPORTANT INFORMATION - PLEASE READ BOTH SIDES CAREFULLY-
FEDERAL FAIR CREDIT REPORTING ACT NOTICE
We may request a consumer report which contains information about your character, general reputation, personal characteristics
and mode of living, except as may be related directly or indirectly to your sexual orientation. The information is obtained through
interviews with your friends, neighbors, and associates. It is part of our underwriting procedure. We will furnish information about
the nature of the report to you and a written summary of your rights if you write to us and ask.
THIS NOTIFICATION MUST BE GIVEN TO THE PROPOSED INSURED BEFORE THE APPLICATION IS COMPLETED.
</TABLE>
<PAGE> 3
[ZURICH KEMPER LOGO]
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
<TABLE>
<S><C>
CONDITIONAL RECEIPT (do not complete and give to Applicant unless payment is made)
In exchange for the payment of the first required rules and practices, for the plan and
premium with the application, the Company will amount applied for, without amendment, at the
provide insurance prior to policy delivery, under rate class applied for or a lesser premium, as
the following terms. of the date the Company receives all of its
medical requirements; and
NO INSURANCE WILL BE PROVIDED UNDER THIS RECEIPT
UNLESS ALL REQUIREMENTS ARE FIRST FULFILLED EXACTLY f. The Proposed Insured has complied with all parts
DURING THE LIFETIME OF THE PROPOSED INSURED. IF ALL of Life Application - Part B: Agreement.
REQUIREMENTS ARE NOT SO MET, OR THE PROPOSED INSURED
DIES BY SUICIDE, THE LIABILITY OF THE COMPANY SHALL START OF INSURANCE - If the above requirements are
BE LIMITED TO A REFUND TO THE APPLICANT OF THE first met, this Receipt will provide insurance beginning
PAYMENT MADE FOR THIS RECEIPT. MEDICAL REQUIREMENTS the latest of: ( 1 ) the date of the application; or
ARE DEFINED BY THE COMPANY'S CURRENT RULES AND (2) the date of receipt of all medical requirements
PRACTICES AND INCLUDE HOSPITAL AND PHYSICIAN REPORTS, by the Company.
AND MEDICAL EXAMINATIONS AND TESTS. NO AGENT MAY
ALTER OR WAIVE ANY PART OF THIS RECEIPT. THIS END OF INSURANCE - Once begun, any insurance this
RECEIPT PROVIDES NO INSURANCE FOR RIDERS OR ADDITIONAL receipt may provide ends at the earliest of: (1) 60
BENEFITS. days after the date of the application; (2)
when the Company sends a refund of the premium
REQUIREMENTS -The following must first be fulfilled which was exchanged for this receipt; or, (3) the
for insurance to start: date any policy issued goes into effect.
a. All medical requirements are completed and AMOUNT LIMIT - The amount of insurance provided
received by the Company within 60 days from the by this receipt is the lesser of: (a) the initial
date of the application; death benefit of the insurance applied for in
the application; or ( b ) $500,000 less all amounts
b. The first premium has been paid in full; of life insurance and accidental death benefits
applied for or in force with the Company and its
c. All questions in the application have been affiliates.
answered;
PAYMENT TERMS - The first premium will not be
d. All answers given in the application are true considered paid unless any check, draft, or other
and complete; instrument of payment (given as premium) is paid
in accordance with its terms. ALL PREMIUM
e. The Proposed Insured is acceptable to the Company CHECKS MUST BE MADE PAYABLE TO THE COMPANY. DO NOT
under its MAKE CHECKS PAYABLE TO THE AGENT. DO NOT LEAVE
THE PAYEE BLANK.
- -----------------------------------------------------------------------------------------------------------------------------------
This receipt is given on behalf of the company selected in item 8 of Part A of the application.
I have read and agree to the above terms.
- ---------------------------------------- ---------------------------------------------------------------------------
Dated Signature of the Owner/Applicant
Received from $
------------------------------------------------------------------------------ -----------------------------------
for coverage on (the Proposed Insured)
-----------------------------------------------------------------------------------------------
- ---------------------------------------- ---------------------------------------------------------------------------
Dated Signature of Agent
L-B595 (Tear here)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
MEDICAL INFORMATION BUREAU NOTICE
Information regarding your insurability will be Upon receipt of a request from you,
treated as confidential. Federal Kemper Life the Bureau will arrange disclosure of any
Assurance Company, Fidelity Life Association or information it may have in your file. If you
Kemper Investors Life Insurance Company (we), question the accuracy of information in
or our reinsurers, may, however, make a brief the Bureau's file, you may contact the Bureau and
report thereon to the Medical Information Bureau, seek a correction in accordance with the
a non-profit membership organization of life procedures set forth in the Federal
insurance companies, which operates an information Fair Credit Reporting Act. The address of
exchange on behalf of its members. If you apply the Bureau's information office is
to another Bureau member company for life or Post Office Box 105, Essex Station,
health insurance coverage, or a claim for Boston, Massachusetts 02112, telephone
benefits is submitted to such a company, the number (781) 426-3660.
Bureau, upon request, will supply such
company with the information in its file. We, or our reinsurers, may also release
information in our file to other life
insurance companies to whom you may apply
for life or health insurance, or to
whom a claim for benefits may be submitted.
THIS NOTIFICATION MUST BE GIVEN TO THE PROPOSED INSURED BEFORE THE APPLICATION IS COMPLETED.
</TABLE>
<PAGE> 4
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY Policy number___________
Long Grove, IL 60049
LIFE APPLICATION - PART A: GENERAL INFORMATION
1. PROPOSED INSURED [ ] Male [ ] Female
First name Middle initial Last name
Former name if changed in last five years
Birthdate Age at nearest birthday Birthplace
(use to calculate premium) (state or country)
Social Security number Driver's license state/number
2. Street Address
City State Zip
Home phone
( )
3. What is your occupation?
Describe duties
Employer
Employer's street address
City State Zip
Business phone
( )
If more information is needed, you can be reached at:
[ ] Home [ ] Work Best time of day:_______________________
4. Current annual earned income:
$
5. OWNER/APPLICANT [ ] Proposed Insured [ ] Other (complete below)
Name
Street
City State Zip
Relationship to Proposed Insured Social Security or Tax ID#
6. PREMIUM PAYOR (select one) [ ] Proposed Insured
[ ] Owner [ ] Other (give name & address in #16)
7. BENEFICIARY DESIGNATION (Use Part E if additional space is needed.)
PRIMARY BENEFICIARY(S) & ADDRESS % OF RELATIONSHIP TO
(If trust, give name/date of trust) PROCEEDS PROPOSED INSURED
CONTINGENT BENEFICIARY(S) & ADDRESS
8. This application is to: (select one)
[ ] Federal Kemper Life Assurance Company
[ ] Fidelity Life Association
[ ] Kemper Investors Life Insurance Company
9. NAME OF INSURANCE PLAN (if applicable INITIAL DEATH BENEFIT
indicate type: 1/5/10/15-year, etc.) (Specified amount, if UL)
If Universal Life:
[ ] Option A: Specified amount includes cash value
[ ] Option B: Specified amount plus the cash value
(If neither is selected, Option A will be assigned.)
Riders: [ ] WP/WMD [ ] FDR* _________ Units
[ ] WSP $_________ [ ] DCR _________ Units
[ ] ______________ [ ] _____________________
*COMPLETE PART D: MULTIPLE INSURED SUPPLEMENT
10.If this application is to Fidelity Life Association, select the desired
dividend option, if applicable:
[ ] Pay in cash [ ] Reduce premiums [ ] Accumulate at interest
[ ] Buy additional paid-up insurance [ ] Other
11.a. Have you smoked cigarettes in the past 36 months? [ ] Yes [ ] No
b. Have you used tobacco in any other form in the
past 36 months? [ ] Yes [ ] No
Type ____________________ Quantity _______________________________
12.Have you ever been told you had, or been treated for:
diabetes, cancer, heart disease, alcoholism, drug abuse,
or high blood pressure? [ ] Yes [ ] No
(If Yes, preferred rates will not likely be available.)
13.Rate class applied for:
[ ] Preferred non-tobacco [ ] Preferred tobacco
[ ] Standard non-tobacco [ ] Standard tobacco
[ ] Other ______________________________________________________________
14.a. Bill frequency: b. Bill form:
[ ] Annual [ ] Direct
[ ] Semi-annual [ ] PAC (monthly only)
[ ] Quarterly [ ] List (monthly only)
[ ] Monthly (PAC or list only) [ ] Other _______________________
(For PAC, complete authorization form.)
c. Planned periodic premium: (UL plans only) $__________________________
15.Amount remitted with this application, in exchange
for the conditional receipt: $ _________________________________________
DO NOT SUBMIT MONEY IF DEATH BENEFIT EXCEEDS $500,000.
16.SPECIAL REQUESTS
ZURICH
KEMPER
LOGO
(Continued)
L-A595
<PAGE> 5
FEDERAL KEMPER LIFE ASSURANCE COMPANY PART A (Continued)
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
17. INDIVIDUAL LIFE INSURANCE IN FORCE (If none, state none.)
(Do not list group)
DATE -PURPOSE-
COMPANY AMOUNT ISSUED PERSONAL BUSINESS
a
b.
c.
d.
e.
f.
18. Is this policy to replace any existing insurance or annuities?
(If Yes, complete required replacement forms.) [ ] Yes [ ] No
If Yes, indicate which policy(s) _________________________________________
19. Are there life insurance applications pending with any
other companies? (If Yes, complete the following) [ ] Yes [ ] No
TO BE PLACED
IN ADDITION TO - PURPOSE -
COMPANY AMOUNT OUR POLICY? PERS. BUS.
20. Have you ever been refused life insurance or been asked to pay extra
premium for life insurance? (If Yes, provide full details) [ ] Yes [ ] No
21. A you a U.S. citizen? (If No, complete below.) [ ] Yes [ ] No
Country of citizenship Type of Visa Expiration date
22. Have you traveled or lived outside the U.S. or Canada within the past two
years, or do you intend to in the next 24 months? [ ] Yes [ ] No
(If Yes, list country, reason, frequency and length of stay in #28.)
23. In the past three years, have you had three or more moving violations,
or had your driver's license suspended or revoked? [ ] Yes [ ] No
24. Have you ever been convicted of reckless driving, or driving under
the influence of alcohol or drugs? [ ] Yes [ ] No
(If #23 or #24 are Yes, give details, dates & current status in #28.)
25. Have you been convicted of, or are you awaiting trial for a
felony? (If Yes, give type, date & current status.) [ ] Yes [ ] No
26. In the past five years have you, or do you intend to:
a. Scuba dive [ ] Yes [ ] No e. Mountain climb [ ] Yes [ ] No
b. Sky dive [ ] Yes [ ] No f. Race motorcycles [ ] Yes [ ] No
c. Parachute [ ] Yes [ ] No g. Race automobiles [ ] Yes [ ] No
d. Hang glide [ ] Yes [ ] No h. Race power boats [ ] Yes [ ] No
(If Yes, explain frequency, purpose, date of last activity & future plans.)
27. In the past five years,have you flown as a pilot or crew
member in any flying activity, or do you intend to? [ ] Yes [ ] No
(If Yes, complete PART G: AVIATION SUPPLEMENT.)
28. Details of Yes answers for #20, 22-26 (Use Part E if additional space
is needed.)
PART B: AGREEMENT
I (we) have read all the questions and answers in the application, including
all required parts. All responses are true and complete to the best of my
(our) knowledge and belief. I (we) promise to tell the Company of any change
in the health or habits of the Proposed Insured that occurs after completing
this application, but before the Policy is delivered to me (us) and the first
premium is paid.
I (we) agree:
1. This application, including all of its parts, will be the basis for and form
part of the Policy;
2. An Agent has no authority to alter the Company's rules or requirements, this
Agreement, the Receipt, or the Policy;
3. The first premium will not be deemed paid unless any check, draft, or other
instrument of payment (given as premium) is paid in accordance with its
terms; and
4. (Except as provided in the Receipt, if given) the insurance applied for never
takes effect unless, during the lifetime of the Proposed Insured: ( a) the
Policy has been issued, delivered to, and accepted by me (us); ( b) the
required first premium has been paid; ( c) any amendments issued with the
Policy have been completed and signed; all while the health and habits of the
Proposed Insured remain as stated in this application.
Amendments to plan, amounts, classification or benefits will be made only with
my (our) consent.
I (we) have received the notification about the Federal Fair Credit Reporting
Act and the Medical Information Bureau.
I hereby authorize: any licensed physician or medical practitioner; any
hospital, clinic or other medical or medically related facility; any insurance
company; the Medical Information Bureau; and any other organization, institution
or person, that has any records or knowledge of me or my health, to give to
Federal Kemper Life Assurance Company, Fidelity Life Association, A Mutual Legal
Reserve Company or Kemper Investors Life Insurance Company, or their reinsurers,
or the Medical Information Bureau, any such information. This authorization is
valid for two and one-half years from the date this form is signed. An exact
copy of this authorization is as valid as the original.
Signed at ___________________ ________________________________________________
City and state Signature of Proposed Insured
(if age 15 or over)
on __________________________ ________________________________________________
Month/day/year Signature of Owner/Applicant, if other than
Proposed Insured
______________________________ ______________________ _______________
Signature of Agent/Witness Print Agent name Agent number
L-A5952
<PAGE> 6
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY Policy number__________
Long Grove, IL 60049
PART C: MEDICAL QUESTIONNAIRE
1. PROPOSED INSURED
First name Middle initial Last name
Amount of insurance Birthdate Social Security number
Purpose of this examination: [ ] New insurance
[ ] Change of existing policy [ ] Reinstatement of lapsed policy
2. Have you ever had or been treated for:
a. High blood pressure, chest pain, rheumatic fever, a
heart condition, heart murmur, irregular heart
rhythm, heart attack, stroke, or other disease of
the heart or blood vessels? [ ] Yes [ ] No
b. Diabetes, a thyroid disorder, or other disease of
the glands? [ ] Yes [ ] No
c. Cancer, tumor, lymph gland disorder, cyst, or
any blood disorder? [ ] Yes [ ] No
d. Albumin, blood or sugar in the urine, kidney
trouble, or any other disease of the urinary or
genital tract (including prostate)? [ ] Yes [ ] No
e. Epilepsy, convulsion, fainting spell, stroke, paralysis,
or any other disease of the brain or nervous system? [ ] Yes [ ] No
f. Asthma, chronic bronchitis, emphysema, pneumonia,
sarcoidosis, tuberculosis, shortness of breath,
or other lung or respiratory system ailment? [ ] Yes [ ] No
g. Ulcer, colitis, hepatitis, pancreatitis or other
disorder of the esophagus, stomach, intestines,
liver, gallbladder or pancreas? [ ] Yes [ ] No
h. Severe injuries or any disease or deformity of the
muscles, connective tissue, bones, joints, or skin? [ ] Yes [ ] No
i. Any impairment of sight or hearing or disease of
the eyes, ears, nose or throat? [ ] Yes [ ] No
3. FAMILY RECORD -- LIVING -- -- DECEASED --
AGE STATE OF HEALTH AGE CAUSE OF DEATH
Father
Mother
Brothers
(list individually)
Sisters
(list individually)
(Use #7 for additional brothers or sisters.)
4. Has any family member listed in #3 had cancer, diabetes, high
blood pressure, heart disease, or kidney disease? [ ] Yes [ ] No
(If Yes, identify family member, disorder and age at onset.)
5. Answer both parts a and b.
a. Have you smoked cigarettes in the past 36 months? [ ] Yes [ ] No
b. Have you used tobacco in any other form in the
past 36 months? [ ] Yes [ ] No
Type ___________________________ Quantity _____________________________
6. Have you ever:
a. Used narcotics, hallucinogens, barbiturates, heroin,
cocaine, amphetamines, or any other habit-forming
drugs except as prescribed by a physician? [ ] Yes [ ] No
b. Been advised by a physician, psychiatrist, or
psychologist to quit or reduce your alcohol use? [ ] Yes [ ] No
c. Been advised to seek, or received treatment or
counseling for alcohol or other drug use? [ ] Yes [ ] No
d. Been advised to attend or been a member of any
self-help group, such as Alcoholics Anonymous
or Narcotics Anonymous? [ ] Yes [ ] No
e. Been convicted of drug possession or distribution? [ ] Yes [ ] No
7. DETAILS OF ITEMS 2 THROUGH 6. Give complete details of all Yes answers.
(Use #13 or Part E, if needed, for further details.)
<TABLE>
<CAPTION>
QUESTION DATE OF DETAILS, DIAGNOSIS, NAMES AND ADDRESSES OF DOCTORS,
NUMBER OCCURRENCE TREATMENT, MEDICATION, RESULTS DURATION HOSPITALS, AND MEDICAL FACILITIES CONSULTED
<S> <C> <C> <C> <C>
</TABLE>
ZURICH
KEMPER
LOGO
L-C595 (Continued)
<PAGE> 7
FEDERAL KEMPER LIFE ASSURANCE COMPANY PART C (Continued)
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
8. Have you:
a. Consulted a physician, psychiatrist, psychologist, or
other medical practitioner in the last five years? [ ] Yes [ ] No
b. Had any blood studies (other than an HIV or AIDS
test), electrocardiograms, stress electrocardiograms,
or other medical tests or studies in the last
five years? [ ] Yes [ ] No
c. Tested positive for the Human Immunodeficiency
Virus (HIV) or antibody? [ ] Yes [ ] No
d. Been under observation or received treatment in
any hospital or other institution or medical facility
in the last ten years? [ ] Yes [ ] No
e. Been advised, in the last two years, to have any
diagnostic test, surgery, or hospitalization which
has not been completed? [ ] Yes [ ] No
f. Ever received any sickness or disability pension,
benefits, or compensation? [ ] Yes [ ] No
g. Ever attempted suicide? [ ] Yes [ ] No
9. What is your height? ___________ Weight? _________
Have you lost any weight in the past year? [ ] Yes [ ] No
If Yes, amount? _________ Reason? ________________
10. Are you currently taking or have you been advised to
take any medication? [ ] Yes [ ] No
(If Yes, list name of medication, reason & doctor's name and address.)
11. To the best of your knowledge, do you have:
a. Any mental illness or psychiatric disorder? [ ] Yes [ ] No
b. Any physical disorder or disease? [ ] Yes [ ] No
12. Who is your personal physician? (If none, state none.)
Name
Street
City | State | Zip
Date last seen? | Phone ( )
Why?
What tests were made?
Were the results normal? (If No, give details below.) [ ] Yes [ ] No
<TABLE>
13. DETAILS OF ITEMS 8 THROUGH 12. Give complete details of all Yes answers.
(Use #7 or Part E, if needed, for further details.)
Question Date of Details, diagnosis, Names and addresses of doctors,
number occurrence treatment, medication,results Duration hospitals, and medical facilities consulted
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
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-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
All statements and answers to the foregoing questions are, to the best of my
knowledge and belief: (a) complete; and (b) true. I agree (a) that they
shall form a part of my application; (b) that they shall be subject to the
terms of the agreement found in the application; and ( c) that they shall
become a part of any policy based on my application. I hereby authorize: any
licensed physician or medical practitioner; any hospital, clinic, or other
medical or medically related facility; any insurance company; the Medical
Information Bureau; and any other organization, institution or person, that
has any records or knowledge of me or my health, to give to Federal Kemper
Life Assurance Company, Fidelity Life Association, A Mutual Legal Reserve
Company or Kemper Investors Life Insurance Company, or their reinsurers, or
the Medical Information Bureau, any such information. This authorization is
valid for two and one-half years from the date this form is signed. An exact
copy of this authorization is as valid as the original.
Dated at________________________ __________________________________________
City and State Signature of Proposed Insured
on______________________________
Month/day/year
___________________________________________
Signature of Witness [ ] Agent [ ] Examiner
L-C5952
<PAGE> 8
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049 Policy number__________
<TABLE>
<S><C>
PART D: MULTIPLE INSURED SUPPLEMENT (use for Riders: Dependent Children s, Family Dependents', etc.)
1. SPOUSE OR OTHER ADULT PROPOSED FOR INSURANCE [ ]Male [ ]Female Birthdate Age Birthplace Height Weight
Name (first, middle, last) | Social Security number
2. DEPENDENTS PROPOSED FOR INSURANCE Relationship
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
</TABLE>
3. Has the person named in #1 above used tobacco in any
form in the past 36 months? [ ] Yes [ ] No
Type________________Quantity_____________________
4. Has any person named above lost any weight in the
past year? [ ] Yes [ ] No
If Yes, amount?____________ Reason?_______________
5. Has any person named above ever used narcotics,
hallucinogens, barbiturates, heroin, cocaine,
amphetamines, or any other habit-forming drugs
except as prescribed by a physician? [ ] Yes [ ] No
6. To the best of your knowledge, does any person named
above have any mental or physical impairment or disease? [ ] Yes [ ] No
7. Has any person named above: a. Consulted a physician,
psychiatrist, psychologist, or other medical
practitioner in the last five years? [ ] Yes [ ] No
a. Consulte a physician, psychiatrist, psychologist, or other
medical practitioner in the last five year? [ ] Yes [ ] No
b. Had any blood studies (other than an HIV or AIDS test),
electrocardiograms, stress electrocardiograms, or other
medical test or studies within the last five years? [ ] Yes [ ] No
c. Been under observation or received treatment in a
hospital or other institution or medical facility in
the last five years? [ ] Yes [ ] No
d. Tested positive for the Human Immunodeficiency
Virus (HIV) or antibody? [ ] Yes [ ] No
8. Is any person named above currently taking, or been
advised to take, any medication? [ ] Yes [ ] No
(If Yes, list name of medication, reason & doctor's name and address.)
9. Has any person named above ever had or been treated for:
a. High blood pressure? [ ] Yes [ ] No d. Stroke? [ ] Yes [ ] No
b. A heart condition? [ ] Yes [ ] No e. Diabetes? [ ] Yes [ ] No
c. Chest pain? [ ] Yes [ ] No f. Cancer? [ ] Yes [ ] No
10. Who is the family physician? (If none, none, state none.)
Name
Street
City | State |Zip
Date last seen? | Phone ( )
Which proposed insured?
Why?
What tests were made?
Were the results normal? (If No, give details below.) [ ] Yes [ ] No
<TABLE>
11. DETAILS OF ITEMS 5 THROUGH 10. (If more space is needed, Use Part E.)
Question Name of Date of Details, diagnosis, Names and addresses of doctors,
number family member occurrence treatment, medication, results Duration hospitals, and medical facilities consulted
<S><C>
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
All statements and answers to the foregoing questions are, to the best of my
knowledge and belief: (a) complete; and (b) true. I agree (a) that they
shall form a part of my application; (b) that they shall be subject to the
terms of the agreement found in the application; and (c) that they shall
become a part of any policy based on my application. I hereby authorize: any
licensed physician or medical practitioner; any hospital, clinic, or other
medical or medically related facility; any insurance company; the Medical
Information Bureau; and any other organization, institution or person, that
has any records or knowledge of me or my health, to give Federal Kemper Life
Assurance Company, Fidelity Life Association, A Mutual Legal Reserve Company
or Kemper Investors Life Insurance Company, or their reinsurerers, or the
Medical Information Bureau, any such information. This authorization is
valid for two and one-half years from the date this form is signed. An exact
copy of this authorization is as valid as the original.
Dated at______________________ __________________________________________
City and state Signature of person named in Part D 1.,
if any, otherwise signature of Proposed
Insured who signed Part B
on ___________________________
Month/day/year
__________________________________________
Signature of Agent/Witness
L-D595
<PAGE> 9
FEDERAL KEMPER LIFE ASSURANCE COMPANY [ZURICH KEMPER LOGO]
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
<TABLE>
<S><C>
PART E: ADDITIONAL DETAILS (use for any explanation where space is insufficient)
Part Question no. Details
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
All statements and answers to the foregoing questions are, to the best of my
knowledge and belief, complete and true. I agree (a) that they shall form a
part of my application: (b) that they shall be subject to the terms of the
agreement found in Part B; and (c) that they shall become a part of any
policy based on this application.
Date at____________________ ______________________________________
City and state Signature of Proposed Insured
(if age 15 or over)
on ________________________ ______________________________________
Month/day/year Signature of Owner/Applicant,
if other than Proposed Insured
______________________________________
Signature of Agent/Witness
L-E595
<PAGE> 10
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY Policy number_________
Long Grove, IL 60049
WRITING AGENT'S REPORT (complete in all cases)
1. Name of Proposed Insured
2. How well do you know the Proposed Insured?
[ ] Known well [ ] Not known well
[ ] Relative (state relationship)________________
How long known?______________________________________
3. Who first suggested the purchase of this insurance?
[ ] Agent [ ] Owner/Applicant
[ ] Proposed Insured [ ] Other _______________
4. a. Did you personally see the Proposed Insured? [ ] Yes [ ] No
b. Was the application signed by the Proposed Insured
after all questions were answered? [ ] Yes [ ] No
(If either a or b are No, explain in #11.)
Insured is: [ ] Single [ ] Married [ ] Divorced [ ] Widowed
6. a. Are you aware of anything about the health, habits,
hobbies, or other factors which might affect the
insurability of the Proposed Insured?
b. Are you aware of any reason why the Proposed
Insured might not qualify for preferred rates? [ ] Yes [ ] No
(If either a or b are Yes, explain in #11.)
7. Select the purpose(s) that best describe(s) the use of
this insurance:
(If purpose is solely for estate conservation, Part H
is required.)
-Personal- -Business-
[ ] Income replacement [ ] Key person
[ ] Estate conservation [ ] Buy/sell Cl Mortgage protection
[ ] Creditor Debt repayment [ ] Other___________________
[ ] Other__________________
8. If this is business insurance:
a. Are other principals being insured also? [ ] Yes [ ] No
(If No, explain reason in #11; if Yes, give names, amounts & company.)
b. Business net worth $_______________________________________________
c. Business net income Year ___ Amount $______________________________
d. Percent of business owned by Proposed Insured ____________________%
9. If Proposed Insured is a juvenile:
a. Did you see the child? [ ] Yes [ ] No
b. Does he/she live with parents? [ ] Yes [ ] No
c. Are all brothers and sisters insured for like
amounts? (If No, explain in #11.) [ ] Yes [ ] No
d. How much insurance is in force on the life of
the person responsible for the child's support? $ _________________
10. a. To the best of your knowledge, does the policy
applied for involve the replacement of existing
life insurance or annuities? [ ] Yes [ ] No
b. If Yes, has the Proposed Insured replaced other
life insurance policies in the past five years? [ ] Yes [ ] No
(If both a & b are Yes, completed PART J: INSURANCE HISTORY SUPPLEMENT.)
11. EXPLANATIONS AND DETAILS _____________________________________________
_______________________________________________ YOUR CALCULATION OF
_______________________________________________ FIRST ANNUAL PREMIUM
_______________________________________________ Base Policy $ _______
_______________________________________________ Riders _______
_______________________________________________ _______
_______________________________________________ Policy fee _______
_______________________________________________ Total $ _______
I represent that the above information is true and complete to the best
of my knowledge and belief, and that the application has been completed in
accordance with the Company's rules, guidelines and instructions. I certify
that I have given the Proposed Insured the Notification about the Federal
Fair Credit Reporting Act and the Medical Information Bureau. If I become
aware of a change in the health or habits of the Proposed Insured, occurring
after the date of the application but before I deliver the policy, I promise
to inform the Company of the change and agree to withhold delivery of the
policy until instructed by the Company.
X__________________________________________________________________________
Signature of Agent
Print name _______________________________________________________________
S.S.# _________________ Share of commission _____________________________
Address __________________________________________________________________
__________________________________________________________________________
Telephone number ( ) ___________________________________________________
X_________________________________________________________________________
Signature of additional Agent
Print additional Agent name _____________________________________________
S.S.# _____________________ Share of commission ______________________
Address _________________________________________________________________
MEDICAL REQUIREMENTS: Name of Kemper Date
Arranged by approved vendor ordered
Kemper Paramed: [ ] Agent [ ] GA
Blood profile/HOS: [ ] Agent [ ] GA
Inspection report: [ ] GA
APS: [ ] GA
Doctor's name(s) for APS ________________________________________________
GENERAL AGENT'S REPORT (complete in all cases)
Gl. Have you discussed this risk with the home of fice? [ ] Yes [ ] No
(Give details in #11 above.)
G2. GA name ________________________________________________________________
Address ________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Case manager ___________________________________________________________
GA# __________________ Phone number ( ) _____________________________
L-R595
<PAGE> 11
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049 Policy number_________
|
PRE-AUTHORIZED CHECKING (PAC) AGREEMENT
Authorization to Honor Checks/Debits by Federal Kemper Life Assurance
Co./Fidelity Life Association/Kemper Investors Life Insurance Co.
<TABLE>
<S><C>
INSTRUCTIONS IF YOU CHANGE ACCOUNTS:
1. Sign the authorization in the designated area in accordance with your 1. Contact your insurance agent to assist you
signature(s) on file at your financial institution. with the change.
if you change your address. - OR -
2. Please notify us if you change your address. 2. Contact the Home Office to obtain a new
3. Please attach two months' modal premium. authorization.
</TABLE>
As a convenience to me, I hereby request and authorize this financial
institution to pay and charge my account for checks/electronic debits
drawn on my account by Federal Kemper Life Assurance Company/Fidelity Life
Association/Kemper Investors Life Insurance Company to its own order. This
authorization will remain in effect until revoked by me in writing and
until you receive such notice. I agree that you shall be fully protected
in honoring any such check/electronic debit.
I agree that your treatment of each check/electronic debit, and your
right in respect to it, shall be the same as if it were signed by me
personally. I further agree that if any such check/electronic debit be
dishonored, whether with or without cause, you shall be under no liability
whatsoever even though such dishonor results in the lapse of insurance.
Federal Kemper Life Assurance Company/Fidelity Life Association/Kemper
Investors Life Insurance Company is instructed to forward this
authorization to you.
<TABLE>
<S><C>
DEPOSITOR(S) YOUR BANK
Name of Depositor(s) listed on the account Date of first debit Name of Bank
Address of Bank
City | State | Zip
_______________________________________________________________
Signature of Depositor Bank phone
______________________________________________________________ ( )
Signature of Joint Depositor Checking account number you wish us to debit
- ATTACH A SAMPLE "VOID" CHECK (NO DEPOSIT SLIPS, PLEASE). -
</TABLE>
TO: THE FINANCIAL INSTITUTION NAMED ABOVE,
So that you may comply with your depositor's request, the Company agrees:
1. To indemnify and hold you harmless from any loss you may
suffer as a consequence of your actions resulting from or in connection
with the execution and issuance of any check/electronic debit or order,
whether or not genuine, purporting to be executed by the undersigned and
received by you in the regular course of business for the purpose of
payment, including any costs or expenses reasonably incurred in connection
therewith.
2. In the event that any such check/electronic debit or order shall be
dishonored whether with or without cause, and whether intentionally or
inadvertently, to indemnify you for any loss even though dishonor results
in a forfeiture of insurance.
3. To defend at our own cost and expense any action which might be brought by
any depositor or any other persons because of your actions taken pursuant
to the foregoing requests, or in any manner arising by reason of your
participation in the foregoing plan of premium collection.
John B. Scott Debra P. Rezabek
President Secretary
Federal Kemper Life Assurance Company
Fidelity Life Association
Kemper Investors Life Insurance Company
Long Grove, IL 60049
Authorized in a resolution adopted by the Board of Directors of Federal Kemper
Life Assurance Company/Fidelity Life Association (A Mutual Legal Reserve
Company) /Kemper Investors Life Insurance Company of Long Grove, Illinois on
April 29, 1963, October 16, 1958, and January 15, 1963, respectively.
[ZURICH KEMPER LOGO]
L-P595
<PAGE> 1
EXHIBIT 1-A(10)(b)
<TABLE>
<S><C>
APPLICATION TO
KEMPER INVESTORS LIFE INSURANCE COMPANY [ZURICH KEMPER LOGO]
1 Kemper Drive, Long Grove, Illinois 60049-0001
VARIABLE UNIVERSAL LIFE SUPPLEMENT
Name of Proposed Insureds _____________________________________________________
Planned Premium __________________________ Mode Payable __________ Plan _______
- ----------------------------------------------------------------------------------------------------------------------------------
PREMIUM ALLOCATION
Evergreen Variable Trust INVESTORS FUND SERIES FIXED ACCOUNT
% of Premium % of Premium % OF Premium
(Whole Percentages Only) (Whole Percentages Only) (Whole Percentages Only)
Subaccount Subaccount
__ % Evergreen VA __ % Money Market ___ %
__ % Evergreen VA Growth and Income __ % Total Return
__ % Evergreen VA Foundation __ % High Yield
__ % Evergreen VA Global Leaders __ % Growth
__ % Evergreen VA Strategic Income __ % Government Securities
__ % Evergreen VA Aggressive Growth __ % International
__ % Small Cap Growth
__ % Investment Grade Bond
__ % Value
__ % Small Cap Value
__ % Value + Growth
__ % Horizon 20+
__ % Horizon 10+
__ % Horizon 5
__ % Blue Chip
__ % Global Income
Premium may be allocated to 10 subaccounts. Total
of subaccount plus fixed account must equal 100%
- ----------------------------------------------------------------------------------------------------------------------------------
SUITABILITY
ANNUAL EARNINGS
[ ] $25,000 to $50,000 [ ] $50,000 to $100,000 [ ] $100,000 to $200,000 [ ] over $200,000
NET WORTH
[ ] $25,000 to $75,000 [ ] $75,000 to $125,000 [ ] $125,000 to $250,000 [ ] over $250,000
FINANCIAL OBJECTIVES:
[ ] Long Term Growth [ ] Preservation of Capital [ ] Maximum Capital Appreciation
Other ____________________________________________________________________________________________________________
[ ] Check this box if you do not wish to provide this information.
- -----------------------------------------------------------------------------------------------------------------------------------
IRC SECTION 7702 TEST
[ ] Guideline Premium Test
[ ] Cash Value Accumulation Test
- -----------------------------------------------------------------------------------------------------------------------------------
TELEPHONE AUTHORIZATION
[ ] Check here to authorize telephone transfers among the subaccounts and the fixed account subject to the conditions of the
Telephone Transfer Agreement.
- -----------------------------------------------------------------------------------------------------------------------------------
We understand that
THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY VARY UNDER SPECIFIED CONDITIONS. POLICY VALUES MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE EXPERIENCE OF THE SEPARATE ACCOUNT. ILLUSTRATIONS OF BENEFITS, INCLUDING DEATH BENEFITS, POLICY VALUES, AND CASH
SURRENDER VALUES ARE AVAILABLE UPON REQUEST.
All statements and answers to the foregoing questions are, to the best of my knowledge and belief: (a) complete; and (b) true.
We agree (a) that they shall form a part of my application; (b) that they shall be subject to the terms of the agreement found
in the application; and (c) that they shall become a part of any policy based on our application.
Dated at on
----------------------------------------- ----------------------------------------------
City and State Month Day Year
- --------------------------------------------------- -------------------------------------------------
Signature of Proposed Insured Signature of Proposed Insured
Signature of Applicant(s) and Owner(s)
(if other than Proposed Insureds) ------------------------------------------------------------------
------------------------------------------------------------------
Signature of Agent as Witness
-------------------------------------------------------------------------
Signature of Registered Principal
-------------------------------------------------------------------------
</TABLE>
L-8179
<PAGE> 2
[ZURICH KEMPER LOGO]
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
<TABLE>
<S><C>
LIFE INSURANCE APPLICATION
COMPLETE THE FOLLOWING IN ALL CASES: THE FOLLOWING ARE NOT INCLUDED IN THIS SET
Part A: General Information (USE WHEN NEEDED):
Part B: Agreement Part G: Aviation Supplement
Agent's Report (located at end of set) Part H: Financial Supplement
Part J: Insurance History Supplement
COMPLETE THE FOLLOWING WHEN NEEDED:
Part C: Medical Questionnaire (must be completed for all
non-examined cases)
Part D: Multiple Insured Supplement
Part E: Additional Details
Pre-authorized Checking (PAC) Authorization (if electronic
debit is desired)
- -------------------------------------------------------------------------------
DIRECTIONS
You, as the Agent, are responsible for completing the necessary forms required to process and underwrite this application. All
forms must be completed in full and must be legible. The directions below must be followed carefully.
DO - DON'T -
- - Submit separate applications on Joint Insureds. - Don't accept or send money on applications
- - Provide full details totalling over $500,000.
- - Print application in black ink. - Don't send partial premiums - full mode
- - Get all required signatures. premium is needed.
- - Have the applicant initial all changes. - Don't use pencil.
- - Complete the Agent's Report, especially Question 10 - Don't use whiteout.
(regarding replacement)
- - Sign the Agent's Report after completing.
- - Complete the Financial Supplement, Part H, if the
application is for more than $1 million.
- - Give the Notification (below) to the applicant prior
to completion of the application.
- - Send two months' premium on all PAC cases.
LIFE APP/595
(Tear here)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
- NOTIFICATION - IMPORTANT INFORMATION - PLEASE READ BOTH SIDES CAREFULLY-
FEDERAL FAIR CREDIT REPORTING ACT NOTICE
We may request a consumer report which contains information about your character, general reputation, personal characteristics
and mode of living, except as may be related directly or indirectly to your sexual orientation. The information is obtained through
interviews with your friends, neighbors, and associates. It is part of our underwriting procedure. We will furnish information about
the nature of the report to you and a written summary of your rights if you write to us and ask.
THIS NOTIFICATION MUST BE GIVEN TO THE PROPOSED INSURED BEFORE THE APPLICATION IS COMPLETED.
</TABLE>
<PAGE> 3
[ZURICH KEMPER LOGO]
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
<TABLE>
<S><C>
CONDITIONAL RECEIPT (do not complete and give to Applicant unless payment is made)
In exchange for the payment of the first required rules and practices, for the plan and
premium with the application, the Company will amount applied for, without amendment, at the
provide insurance prior to policy delivery, under rate class applied for or a lesser premium, as
the following terms. of the date the Company receives all of its
medical requirements; and
NO INSURANCE WILL BE PROVIDED UNDER THIS RECEIPT
UNLESS ALL REQUIREMENTS ARE FIRST FULFILLED EXACTLY f. The Proposed Insured has complied with all parts
DURING THE LIFETIME OF THE PROPOSED INSURED. IF ALL of Life Application - Part B: Agreement.
REQUIREMENTS ARE NOT SO MET, OR THE PROPOSED INSURED
DIES BY SUICIDE, THE LIABILITY OF THE COMPANY SHALL START OF INSURANCE - If the above requirements are
BE LIMITED TO A REFUND TO THE aPPLICANT OF THE first met, this Receipt will provide insurance beginning
PAYMENT MADE FOR THIS RECEIPT. MEDICAL REQUIREMENTS the latest of: ( 1 ) the date of the application; or
ARE DEFINED BY THE COMPANY'S CURRENT RULES AND (2) the date of receipt of all medical requirements
PRACTICES AND INCLUDE HOSPITAL AND PHYSICIAN REPORTS, by the Company.
AND MEDICAL EXAMINATIONS AND TESTS. NO AGENT MAY
ALTER OR WAIVE ANY PART OF THIS RECEIPT. THIS END OF INSURANCE - Once begun, any insurance this
RECEIPT PROVIDES NO INSURANCE FOR RIDERS OR ADDITIONAL receipt may provide ends at the earliest of: (1) 60
BENEFITS. days after the date of the application; (2)
when the Company sends a refund of the premium
REQUIREMENTS - The following must first be fulfilled which was exchanged for this receipt; or. (3) the
for insurance to start: date any policy issued goes into effect.
a. All medical requirements are completed and AMOUNT LIMIT - The amount of insurance provided
received by the Company within 60 days from the by this receipt is the lesser of: (a) the initial
date of the application; death benefit of the insurance applied for in
the application; or ( b ) $500,000 less all amounts
b. The first premium has been paid in full; of life insurance and accidental death benefits
applied for or in force with the Company and its
c. All questions in the application have been affiliates.
answered;
PAYMENT TERMS - The first premium will not be
d. All answers given in the application are true considered paid unless any check, draft, or other
and complete; instrument of payment (given as premium) is paid
in accordance with its terms. ALL PREMIUM
e. The Proposed Insured is acceptable to the Company CHECKS MUST BE MADE PAYABLE TO THE COMPANY. DO NOT
under its MAKE CHECKS PAYABLE TO THE AGENT. DO NOT LEAVE
THE PAYEE BLANK.
- -----------------------------------------------------------------------------------------------------------------------------------
This receipt is given on behalf of the company selected in item 8 of Part A of the application.
I have read and agree to the above terms.
- ---------------------------------------- ---------------------------------------------------------------------------
Dated Signature of the Owner/Applicant
Received from $
------------------------------------------------------------------------------ -----------------------------------
for coverage on (the Proposed Insured)
-----------------------------------------------------------------------------------------------
- ---------------------------------------- ---------------------------------------------------------------------------
Dated Signature of Agent
L-B595 (Tear here)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
MEDICAL INFORMATION BUREAU NOTICE
Information regarding your insurability will be Upon receipt of a request from you,
treated as confidential. Federal Kemper Life the Bureau will arrange disclosure of any
Assurance Company, Fidelity Life Association or information it may have in your file. If you
Kemper Investors Life Insurance Company (we), question the accuracy of information in
or our reinsurers, may, however, make a brief the Bureau's file, you may contact the Bureau and
report thereon to the Medical Information Bureau, seek a correction in accordance with the
a non-profit membership organization of life procedures set forth in the Federal
insurance companies, which operates an information Fair Credit Reporting Act. The address of
exchange on behalf of its members. If you apply the Bureau's information office is
to another Bureau member company for life or Post Office Box 105, Essex Station,
health insurance coverage, or a claim for Boston, Massachusetts 02112, telephone
benefits is submitted to such a company, the number (781) 426-3660.
Bureau, upon request, will supply such
company with the information in its file. We, or our reinsurers, may also release
information in our file to other life
insurance companies to whom you may apply
for life or health insurance, or to
whom a claim for benefits may be submitted.
THIS NOTIFICATION MUST BE GIVEN TO THE PROPOSED INSURED BEFORE THE APPLICATION IS COMPLETED.
</TABLE>
<PAGE> 4
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY Policy number___________
Long Grove, IL 60049
LIFE APPLICATION - PART A: GENERAL INFORMATION
1. PROPOSED INSURED [ ] Male [ ] Female
First name Middle initial Last name
Former name if changed in last five years
Birthdate Age at nearest birthday Birthplace
(use to calculate premium) (state or country)
Social Security number Driver's license state/number
2. Street Address
City State Zip
Home phone
( )
3. What is your occupation?
Describe duties
Employer
Employer's street address
City State Zip
Business phone
( )
If more information is needed, you can be reached at:
[ ] Home [ ] Work Best time of day:_______________________
4. Current annual earned income:
$
5. OWNER/APPLICANT [ ] Proposed Injured [ ] Other (complete below)
Name
Street
City State Zip
Relationship to Proposed Insured Social Security or Tax ID#
6. PREMIUM PAYOR (select one) [ ] Proposed Insured
[ ] Owner [ ] Other (give name & address in #16)
7. BENEFICIARY DESIGNATION (Use Part E if additional space is needed.)
PRIMARY BENEFICIARY(S) & ADDRESS % OF RELATIONSHIP TO
(If trust, give name/date of trust) PROCEEDS PROPOSED INSURED
CONTINGENT BENEFICIARY(S) & ADDRESS
8. This application is to: (select one)
[ ] Federal Kemper Life Assurance Company
[ ] Fidelity Life Association
[ ] Kemper Investors Life Insurance Company
9. NAME OF INSURANCE PLAN (if applicable, INITIAL DEATH BENEFIT
indicate type: 1/5/10/15-year, etc.) (Specifed amount, if UL)
If Universal Life:
[ ] Option A: Specified amount includes cash value
[ ] Option B: Specified amount plus the cash value
(If neither is selected, Option A will be assigned.)
Riders: [ ] WP/WMD [ ] FDR* _________ Units
[ ] WSP $_________ [ ] DCR _________ Units
[ ] ______________ [ ] _____________________
*COMPLETE PART D: MULTIPLE INSURED SUPPLEMENT
10.If this application is to Fidelity Life Association, select the desired
dividend option, if applicable:
[ ] Pay in cash [ ] Reduce premiums [ ] Accumulate at interest
[ ] Buy additional paid-up insurance [ ] Other
11.a. Have you smoked cigarettes in the past 36 months? [ ] Yes [ ] No
b. Have you used tobacco in any other form in the
past 36 months? [ ] Yes [ ] No
Type ____________________ Quantity _______________________________
12.Have you ever been told you had, or been treated for:
diabetes, cancer, heart disease, alcoholism, drug abuse,
or high blood pressure? [ ] Yes [ ] No
(If Yes, preferred rates will not likely be available.)
13.Rate class applied for:
[ ] Preferred non-tobacco [ ] Preferred tobacco
[ ] Standard non-tobacco [ ] Standard tobacco
[ ] Other ______________________________________________________________
14.a. Bill frequency: b. Bill form:
[ ] Annual [ ] Direct
[ ] Semi-annual [ ] PAC (monthly only)
[ ] Quarterly [ ] List (monthly only)
[ ] Monthly (PAC or list only) [ ] Other _______________________
(For PAC, complete authorization form.)
c. Planned periodic premium: (UL plans only) $__________________________
15.Amount remitted with this application, in exchange
for the conditional receipt: $ _________________________________________
DO NOT SUBMIT MONEY IF DEATH BENEFIT EXCEEDS $500,000.
16.SPECIAL REQUESTS
ZURICH
KEMPER
LOGO
(Continued)
L-A595
<PAGE> 5
FEDERAL KEMPER LIFE ASSURANCE COMPANY PART A (Continued)
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
17. INDIVIDUAL LIFE INSURANCE IN FORCE (If none, state none.)
(Do not list group)
DATE -PURPOSE-
COMPANY AMOUNT ISSUED PERSONAL BUSINESS
a
b.
c.
d.
e.
f.
18. Is this policy to replace any existing insurance or annuities?
(If Yes, complete required replacement forms.) [ ] Yes [ ] No
If Yes, indicate which policy(s) _________________________________________
19. Are there life insurance applications pending with any
other companies? (If Yes, complete the following) [ ] Yes [ ] No
TO BE PLACED
IN ADDITION TO - PURPOSE -
COMPANY AMOUNT OUR POLICY? PERS. BUS.
20. Have you ever been refused life insurance or been asked to pay extra
premium for life insurance? (If Yes, provide full details) [ ] Yes [ ] No
21. A you a U.S. citizen? (If No, complete below.) [ ] Yes [ ] No
Country of citizenship Type of Visa Expiration date
22. Have you traveled or lived outside the U.S. or Canada within the past two
years, or do you intend to in the next 24 months? [ ] Yes [ ] No
(If Yes, list country, reason, frequency and length of stay in #28.)
23. In the past three years have you had three or more moving violations,
or had your driver's license suspended or revoked? [ ] Yes [ ] No
24. Have you ever been convicted of reckless driving, or driving under
the influence of alcohol or drugs? [ ] Yes [ ] No
(If #23 or #24 are Yes, give details, dates & current status in #28.)
25. Have you been convicted of, or are you awaiting trial for a
felony? (If Yes, give type, date & current status.) [ ] Yes [ ] No
26. In the past five years have you, or do you intend to:
a. Scuba dive [ ] Yes [ ] No e. Mountain climb [ ] Yes [ ] No
b. Sky dive [ ] Yes [ ] No f. Race motorcycles [ ] Yes [ ] No
c. Parachute [ ] Yes [ ] No g. Race automobiles [ ] Yes [ ] No
d. Hang glide [ ] Yes [ ] No h. Race power boats [ ] Yes [ ] No
(If Yes, explain frequency, purpose, date of last activity & future plans.)
27. In the past five years,have you flown as a pilot or crew
member in any flying activity, or do you intend to? [ ] Yes [ ] No
(If Yes, complete PART G: AVIATION SUPPLEMENT.)
28. Details of Yes answers for #20, 22-26 (Use Part E if additional space
is needed.)
PART B: AGREEMENT
I (we) have read all the questions and answers in the application, including
all required parts. All responses are true and complete to the best of my
(our) knowledge and belief. I (we) promise to tell the Company of any change
in the health or habits of the Proposed Insured that occurs after completing
this application, but before the Policy is delivered to me (us) and the first
premium is paid.
I (we) agree:
1. This application, including all of its parts, will be the basis for and form
part of the Policy;
2. An Agent has no authority to alter the Company's rules or requirements, this
Agreement, the Receipt, or the Policy;
3. The first premium will not be deemed paid unless any check, draft, or other
instrument of payment (given as premium) is paid in accordance with its
terms; and
4. (Except as provided in the Receipt, if given) the insurance applied for never
takes effect unless, during the lifetime of the Proposed Insured: ( a) the
Policy has been issued, delivered to, and accepted by me (us); ( b) the
required first premium has been paid; ( c) any amendments issued with the
Policy have been completed and signed; all while the health and habits of the
Proposed Insured remain as stated in this application.
Amendments to plan, amounts, classification or benefits will be made only with
my (our) consent.
I (we) have received the notification about the Federal Fair Credit Reporting
Act and the Medical Information Bureau.
I hereby authorize: any licensed physician or medical practitioner; any
hospital, clinic or other medical or medically related facility; any insurance
company; the Medical Information Bureau; and any other organization, institution
or person, that has any records or knowledge of me or my health, to give to
Federal Kemper Life Assurance Company, Fidelity Life Association, A Mutual Legal
Reserve Company or Kemper Investors Life Insurance Company, or their reinsurers,
or the Medical Information Bureau, any such information. This authorization is
valid for two and one-half years from the date this form is signed. An exact
copy of this authorization is as valid as the original.
Signed at ___________________ ________________________________________________
City and state Signature of Proposed Insured
(if age 15 or over)
on __________________________ ________________________________________________
Month/day/year Signature of Owner/Applicant, if other than
Proposed Insured
______________________________ ______________________ _______________
Signature of Agent/Witness Print Agent name Agent number
L-A5952
<PAGE> 6
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION,
A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY Policy number__________
Long Grove, IL 60049
PART C: MEDICAL QUESTIONNAIRE
1. PROPOSED INSURED
First name Middle initial Last name
Amount of insurance Birthdate Social Security number
Purpose of this examination: [ ] New insurance
[ ] Change of existing policy [ ] Reinstatement of lapsed policy
2. Have you ever had or been treated for:
a. High blood pressure, chest pain, rheumatic fever, a
heart condition, heart murmur, irregular heart
rhythm, heart attack, stroke, or other disease of
the heart or blood vessels? [ ] Yes [ ] No
b. Diabetes, a thyroid disorder, or other disease of
the glands? [ ] Yes [ ] No
c. Cancer, tumor, lymph gland disorder, cyst, or
any blood disorder? [ ] Yes [ ] No
d. Albumin, blood or sugar in the urine, kidney
trouble, or any other disease of the urinary or
genital tract (including prostate)? [ ] Yes [ ] No
e. Epilepsy, convulsion, fainting spell, stroke, paralysis,
or any other disease of the brain or nervous system? [ ] Yes [ ] No
f. Asthma, chronic bronchitis, emphysema, pneumonia,
sarcoidosis, tuberculosis, shortness of breath,
or other lung or respiratory system ailment? [ ] Yes [ ] No
g. Ulcer, colitis, hepatitis, pancreatitis or other
disorder of the esophagus, stomach, intestines,
liver, gallbladder or pancreas? [ ] Yes [ ] No
h. Severe injuries or any disease or deformity of the
muscles, connective tissue, bones, joints, or skin? [ ] Yes [ ] No
i. Any impairment of sight or hearing or disease of
the eyes, ears, nose or throat? [ ] Yes [ ] No
3. FAMILY RECORD -- LIVING -- -- DECEASED --
AGE STATE OF HEALTH AGE CAUSE OF DEATH
Father
Mother
Brothers
(list individually)
Sisters
(list individually)
(Use #7 for additional brothers or sisters.)
4. Has any family member listed in #3 had cancer, diabetes, high
blood pressure, heart disease, or kidney disease? [ ] Yes [ ] No
(If Yes, identify family member, disorder and age at onset.)
5. Answer both parts a and b.
a. Have you smoked cigarettes in the past 36 months? [ ] Yes [ ] No
b. Have you used tobacco in any other form in the
past 36 months? [ ] Yes [ ] No
Type ___________________________ Quantity _____________________________
6. Have you ever:
a. Used narcotics, hallucinogens, barbiturates, heroin,
cocaine, amphetamines, or any other habit-forming
drugs except as prescribed by a physician? [ ] Yes [ ] No
b. Been advised by a physician, psychiatrist, or
psychologist to quit or reduce your alcohol use? [ ] Yes [ ] No
c. Been advised to seek, or received treatment or
counseling for alcohol or other drug use? [ ] Yes [ ] No
d. Been advised to attend or been a member of any
self-help group, such as Alcoholics Anonymous
or Narcotics Anonymous? [ ] Yes [ ] No
e. Been convicted of drug possession or distribution? [ ] Yes [ ] No
7. DETAILS OF ITEMS 2 THROUGH 6. Give complete details of all Yes answers.
(Use #13 or Part E, if needed, for further details.)
<TABLE>
<CAPTION>
QUESTION DATE OF DETAILS, DIAGNOSIS, NAMES AND ADDRESSES OF DOCTORS,
NUMBER OCCURRENCE TREATMENT, MEDICATION, RESULTS DURATION HOSPITALS, AND MEDICAL FACILITIES CONSULTED
<S> <C> <C> <C> <C>
</TABLE>
ZURICH
KEMPER
LOGO
(Continued)
L-C595
<PAGE> 7
FEDERAL KEMPER LIFE ASSURANCE COMPANY PART C (Continued)
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY
Long Grove, IL 60049
8. Have you:
a. Consulted a physician, psychiatrist, psychologist, or
other medical practitioner in the last five years? [ ] Yes [ ] No
b. Had any blood studies (other than an HIV or AIDS
test), electrocardiograms, stress electrocardiograms,
or other medical tests or studies in the last
five years? [ ] Yes [ ] No
c. Tested positive for the Human Immunodeficiency
Virus (HIV) or antibody? [ ] Yes [ ] No
d. Been under observation or received treatment in
any hospital or other institution or medical facility
in the last ten years? [ ] Yes [ ] No
e. Been advised, in the last two years, to have any
diagnostic test, surgery, or hospitalization which
has not been completed? [ ] Yes [ ] No
f. Ever received any sickness or disability pension,
benefits, or compensation? [ ] Yes [ ] No
g. Ever attempted suicide? [ ] Yes [ ] No
9. What is your height? ____________________ Weight? _________________________
Have you lost any weight in the past year? [ ] Yes [ ] No
If Yes, amount? ________________ Reason? __________________________________
10. Are you currently taking or have you been advised to
take any medication? [ ] Yes [ ] No
(If Yes, list name of medication, reason & doctor's name and address.)
11. To the best of your knowledge, do you have:
a. Any mental illness or psychiatric disorder? [ ] Yes [ ] No
b. Any physical disorder or disease? [ ] Yes [ ] No
12. Who is your personal physician? (If none, state none.)
Name
Street
City State Zip
Date last seen? Phone ( )
Why?
What tests were made?
Were the results normal? (If No, give details below.) [ ] Yes [ ] No
13. DETAILS OF ITEMS 8 THROUGH 12. Give complete details of all Yes answers.
(Use #7 or Part E, if needed, for further details.)
<TABLE>
<CAPTION>
QUESTION DATE OF DETAILS, DIAGNOSIS, NAMES AND ADDRESSES OF DOCTORS,
NUMBER OCCURRENCE TREATMENT, MEDICATION, RESULTS DURATION HOSPITALS, AND MEDICAL FACILITIES CONSULTED
<S> <C> <C> <C> <C>
</TABLE>
All statements and answers to the foregoing questions are, to the best of my
knowledge and belief: ( a) complete; and (b) true. I agree (a) that they
shall form a part of my application; (b) that they shall be subject to the
terms of the agreement found in the application; and ( c) that they shall
become a part of any policy based on my application.
I hereby authorize: any licensed physician or medical practitioner; any
hospital, clinic, or other medical or medically related facility; any
insurance company; the Medical Information Bureau; and any other
organization, institution or person, that has any records or knowledge of me
or my health, to give to Federal Kemper Life Assurance Company, Fidelity Life
Association, A Mutual Legal Reserve Company or Kemper Investors Life
Insurance Company, or their reinsurers, or the Medical Information Bureau,
any such information. This authorization is valid for two and one-half years
from the date this form is signed. An exact copy of this authorization is as
valid as the original.
Dated at __________________ _______________________________________________
City and State Signature of Proposed Insured
on ________________________ _______________________________________________
Month/day/year Signature of Witness [ ] Agent [ ] Examiner
L-C5952
<PAGE> 8
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY Policy number__________
Long Grove, IL 60049
<TABLE>
<S><C>
PART D: MULTIPLE INSURED SUPPLEMENT (use for Riders: Dependent Children's, Family Dependents', etc.)
1. SPOUSE OR OTHER ADULT PROPOSED FOR INSURANCE [ ] Male [ ] Female Birthdate Age Birthplace Height Weight
Name (first, middle, last) Social Security number
2. DEPENDENTS PROPOSED FOR INSURANCE Relationship
</TABLE>
3. Has the person named in #1 above used tobacco in any
form in the past 36 months? [ ] Yes [ ] No
Type ________________________ Quantity ___________________________________
4. Has any person named above lost any weight in the
past year? [ ] Yes [ ] No
If Yes, amount? _____________ Reason? ____________________________________
5. Has any person named above ever used narcotics, hallucinogens,
barbiturates, heroin, cocaine, amphetamines, or any other habit-
forming drugs except as prescribed by a physician? [ ] Yes [ ] No
6. To the best of your knowledge, does any person named above
have any mental or physical impairment or disease? [ ] Yes [ ] No
7. Has any person named above:
a. Consulted a physician, psychiatrist, psychologist, or other
medical practitioner in the last five years? [ ] Yes [ ] No
b. Had any blood studies (other than an HIV or AIDS test),
electrocardiograms, stress electrocardiograms, or other
medical test or studies within the last five years? [ ] Yes [ ] No
c. Been under observation or received treatment in a hospital or other
institution or medical facility in the last five years? [ ] Yes [ ] No
d. Tested positive for the Human Immunodeficiency
Virus (HIV) or antibody? [ ] Yes [ ] No
8. Is any person named above currently taking, or been
advised to take, any medication? [ ] Yes [ ] No
(If Yes, list name of medication, reason & doctor's name and address.)
9. Has any person named above ever had or been treated for:
a. High blood pressure? [ ] Yes [ ] No d. Stroke? [ ] Yes [ ] No
b. A heart condition? [ ] Yes [ ] No e. Diabetes? [ ] Yes [ ] No
c. Chest pain? [ ] Yes [ ] No f. Cancer? [ ] Yes [ ] No
10. Who is the family physician? (If none, state none.)
Name
Street
City State Zip
Date last seen? Phone ( )
Which proposed insured?
Why?
What tests were made?
Were the results normal? (If No, give details below.) [ ] Yes [ ] No
11. DETAILS OF ITEMS 5 THROUGH 10. (If more space is needed, Use Part E.)
<TABLE>
<CAPTION>
QUESTION NAME OF DATE OF DETAILS, DIAGNOSIS, NAMES AND ADDRESSES OF DOCTORS,
NUMBER FAMILY MEMBER OCCURRENCE TREATMENT, MEDICATION, RESULTS DURATION HOSPITALS, AND MEDICAL FACILITIES CONSULTED
<S> <C> <C> <C> <C> <C>
</TABLE>
All statements and answers to the foregoing questions are, to the best of my
knowledge and belief: (a) complete; and (b) true. I agree (a) that they shall
form a part of my application; (b) that they shall be subject to the terms of
the agreement found in the application; and (c) that they shall become a part
of any policy based on my application.
I hereby authorize: any licensed physician or medical practitioner; any
hospital, clinic, or other medical or medically related facility; any
insurance company; the Medical Information Bureau; and any other
organization, institution or person, that has any records or knowledge of me
or my health, to give Federal Kemper Life Assurance Company, Fidelity Life
Association, A Mutual Legal Reserve Company or Kemper Investors Life
Insurance Company, or their reinsurerers, or the Medical Information Bureau,
any such information. This authorization is valid for two and one-half years
from the date this form is signed. An exact copy of this authorization is as
valid as the original.
Dated at _________________ _________________________________________________
City and state Signature of person named in Part D 1., if any,
otherwise signature of Proposed Insured who
signed Part B
on _______________________ _________________________________________________
Month/day/year Signature of Agent/Witness
L-D595
<PAGE> 9
FEDERAL KEMPER LIFE ASSURANCE COMPANY ZURICH
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company KEMPER
KEMPER INVESTORS LIFE INSURANCE COMPANY LOGO
Long Grove, IL 60049
PART E: ADDITIONAL DETAILS (use for any explanation where space is insufficient)
Part Question no. Details
All statements and answers to the foregoing questions are, to the best of my
knowledge and belief, complete and true. I agree (a) that they shall form a part
of my application: (b) that they shall be subject to the terms of the agreement
found in Part B; and (c) that they shall become a part of any policy based on
this application.
Date at __________________ __________________________________________________
City and state Signature of Proposed Insured (if age 15 or over)
on _______________________ __________________________________________________
Month/day/year Signature of Owner/Applicant, if other than
Proposed Insured
__________________________________________________
Signature of Agent/Witness
L-E595
<PAGE> 10
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY Policy number__________
Long Grove, IL 60049
WRITING AGENT'S REPORT (complete in all cases)
1. Name of Proposed Insured
2. How well do you know the Proposed Insured?
[ ] Known well [ ] Not known well
[ ] Relative (state relationship) ______________________________________
How long known?
3. Who first suggested the purchase of this insurance?
[ ] Agent [ ] Owner/Applicant
[ ] Proposed Insured [ ] Other _______________________________
4. a. Did you personally see the Proposed Insured? [ ] Yes [ ] No
b. Was the application signed by the Proposed Insured
after all questions were answered? [ ] Yes [ ] No
(If either a or b are No, explain in #11.)
Insured is: [ ] Single [ ] Married [ ] Divorced [ ] Widowed
6. a. Are you aware of anything about the health, habits,
hobbies, or other factors which might affect the
insurability of the Proposed Insured? [ ] Yes [ ] No
b. Are you aware of any reason why the Proposed
Insured might not qualify for preferred rates? [ ] Yes [ ] No
(If either a or b are Yes, explain in #11.)
7. Select the purpose(s) that best describe(s) the use of this insurance:
(If purpose is solely for estate conservation, Part H is required.)
--PERSONAL-- --BUSINESS--
[ ] Income replacement [ ] Key person
[ ] Estate conservation [ ] Buy/sell
[ ] Mortgage protection [ ] Creditor
[ ] Debt repayment [ ] Other ___________________
[ ] Other _____________________
8. If this is business insurance:
a. Are other principals being insured also? [ ] Yes [ ] No
(If No, explain reason in #11; if Yes, give names, amounts & company.)
b. Business net worth $ ___________________________________________________
c. Business net income Year _______ Amount $______________________________
d. Percent of business owned by Proposed Insured _________________________%
9. If Proposed Insured is a juvenile:
a. Did you see the child? [ ] Yes [ ] No
b. Does he/she live with parents? [ ] Yes [ ] No
c. Are all brothers and sisters insured for like
amounts? (If No, explain in #11.) [ ] Yes [ ] No
d. How much insurance is in force on the life
of the person responsible for the child's support? $ ___________________
10. a. To the best of your knowledge, does the policy
applied for involve the replacement of existing
life insurance or annuities? [ ] Yes [ ] No
b. If Yes, has the Proposed Insured replaced other
life insurance policies in the past five years? [ ] Yes [ ] No
(If both a & b are Yes, complete Part J: Insurance History Supplement.)
11. EXPLANATIONS AND DETAILS
YOUR CALCULATION OF
FIRST ANNUAL PREMIUM
Base Policy $ __________
Riders __________
__________
Policy fee __________
Total $ __________
I represent that the above information is true and complete to the best of my
knowledge and belief, and that the application has been completed in
accordance with the Company's rules, guidelines and instructions. I CERTIFY
THAT I HAVE GIVEN THE PROPOSED INSURED THE NOTIFICATION ABOUT THE FEDERAL
FAIR CREDIT REPORTING ACT AND THE MEDICAL INFORMATION BUREAU. If I become
aware of a change in the health or habits of the Proposed Insured, occurring
after the date of the application but before I deliver the policy, I promise
to inform the Company of the change and agree to withhold delivery of the
policy until instructed by the Company.
X___________________________________________________________________________
Signature of Agent
Print name _________________________________________________________________
S.S.# _________________________ Share of commission _____________________
Address ____________________________________________________________________
____________________________________________________________________________
Telephone number (________) ________________________________________________
X___________________________________________________________________________
Signature of additional Agent
Print additional Agent name ________________________________________________
S.S.# _________________________ Share of commission _____________________
Address ____________________________________________________________________
____________________________________________________________________________
Telephone number (________) ________________________________________________
MEDICAL REQUIREMENTS: Name of Kemper Date
Arranged by approved vendor ordered
Kemper Paramed: [ ] Agent [ ] GA
Blood profile/HOS: [ ] Agent [ ] GA
Inspection report: [ ] GA
APS: [ ] GA
Doctor's name(s) for APS __________________________________________________
GENERAL AGENT'S REPORT (complete in all cases)
Gl. Have you discussed this risk with the home office? [ ] Yes [ ] No
(Give details in #11 above.)
G2. GA name ___________________________________________________________________
Address ___________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Case manager ______________________________________________________________
GA# ___________________ Phone number (_______) ____________________________
L-R595
<PAGE> 11
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION, A Mutual Legal Reserve Company
KEMPER INVESTORS LIFE INSURANCE COMPANY Policy number__________
Long Grove, IL 60049
PRE-AUTHORIZED CHECKING (PAC) AGREEMENT
Authorization to Honor Checks/Debits by Federal Kemper Life Assurance Co./
Fidelity Life Association/Kemper Investors Life Insurance Co.
INSTRUCTIONS
1. Sign the authorization in the designated area in accordance with your
signature(s) on file at your financial institution.
2. Please notify us if you change your address.
3. Please attach two months' modal premium.
IF YOU CHANGE ACCOUNTS:
1. Contact your insurance agent to assist you with the change.
-OR-
2. Contact the Home Office to obtain a new authorization.
As a convenience to me, I hereby request and authorize this financial
institution to pay and charge my account for checks/electronic debits drawn on
my account by Federal Kemper Life Assurance Company/Fidelity Life
Association/Kemper Investors Life Insurance Company to its own order. This
authorization will remain in effect until revoked by me in writing and until you
receive such notice. I agree that you shall be fully protected in honoring any
such check/electronic debit.
I agree that your treatment of each check/electronic debit, and your rights in
respect to it, shall be the same as if it were signed by me personally. I
further agree that if any such check/electronic debit be dishonored, whether
with or without cause, you shall be under no liability whatsoever even though
such dishonor results in the lapse of insurance.
Federal Kemper Life Assurance Company/Fidelity Life Association/Kemper Investors
Life Insurance Company is instructed to forward this authorization to you.
DEPOSITOR(S)
Name of Depositor(s) listed on the account Date of first debit
X______________________________________________________________________________
Signature of Depositor
X______________________________________________________________________________
Signature of Joint Depositor
YOUR BANK
Name of Bank
Address of Bank
City State Zip
Bank phone
( )
Checking account number you wish us to debit
--ATTACH A SAMPLE "VOID" CHECK (NO DEPOSIT SLIPS, PLEASE).--
TO: THE FINANCIAL INSTITUTION NAMED ABOVE,
So that you may comply with your depositor's request, the Company agrees:
1. To indemnify and hold you harmless from any loss you may suffer as a
consequence of your actions resulting from or in connection with the
execution and issuance of any check/electronic debit or order, whether or not
genuine, purporting to be executed by the undersigned and received by you in
the regular course of business for the purpose of payment, including any
costs or expenses reasonably incurred in connection therewith.
2. In the event that any such check/electronic debit or order shall be
dishonored whether with or without cause, and whether intentionally or
inadvertently, to indemnify you for any loss even though dishonor results in
a forfeiture of insurance.
3. To defend at our own cost and expense any action which might be brought by
any depositor or any other persons because of your actions taken pursuant to
the foregoing requests, or in any manner arising by reason of your
participation in the foregoing plan of premium collection.
John B. Scott Debra P. Rezabek
President Secretary
FEDERAL KEMPER LIFE ASSURANCE COMPANY
FIDELITY LIFE ASSOCIATION
KEMPER INVESTORS LIFE INSURANCE COMPANY
LONG GROVE, IL 60049
Authorized in a resolution adopted by the Board of Directors of Federal Kemper
Life Assurance Company/Fidelity Life Association (A Mutual Legal Reserve
Company) /Kemper Investors Life Insurance Company of Long Grove, Illinois on
April 29, 1963, October 16, 1958, and January 15, 1963, respectively.
ZURICH
KEMPER
LOGO
L-P595
<PAGE> 1
EXHIBIT 3(b)
ACTUARIAL OPINION
This opinion is supplied with the filing of Post-Effective Amendment No. 1 to
the Registration Statement on Form S-6, File No. 333-35159, by the KILICO
Variable Separate Account-2 (the "Separate Account") and Kemper Investors Life
Insurance Company ("KILICO") covering an indefinite number of units of interest
in the Separate Account. Premiums received under KILICO's Individual and
Survivorship Flexible Premium Variable Life Insurance Policies may be allocated
by KILICO to the Separate Account as described in the Prospectus included in
the Registration Statement.
I am familiar with the provisions of the Policies and the description in the
Prospectus and it is my opinion that the illustrations of death benefits,
surrender values, cash values, and accumulated premiums included in Appendix A
of the Prospectus, based on the assumptions in the illustrations, are
consistent with the provisions of the Policies. The rate structure of the
Policies have not been designed to make the relationship between planned
premiums and benefits, as shown in the illustrations, appear more favorable, in
the case of individual Policies, to prospective nonsmoker preferred males ages
40 and 60, than to nonsmoker preferred males at other ages, or, in the case of
survivorship Policies, to prospective nonsmoker preferred males and females
ages 45 and 40 and 65 and 60, respectively, than to nonsmoker preferred males
and females at other ages. The nonsmoker risk class generally has a more
favorable rate structure than the smoker risk classes. Female risk classes
generally have a more favorable rate structure than male risk classes.
Preferred risk classes generally have a more favorable rate structure than
nonpreferred risk classes.
The current and guaranteed monthly mortality rates used in the illustrations
have not been designed so as to make the relationship between current and
guaranteed rates more favorable for the ages and sexes illustrated than for a
nonsmoker male or female at other ages. The nonsmoker risk classes generally
have lower monthly mortality rates than the smoker risk classes. The female
risk classes generally have lower monthly mortality rates than the male risk
classes. Preferred risk classes generally have lower monthly mortality rates
than nonpreferred risk classes.
I consent to the use of this opinion as an Exhibit to Post-Effective Amendment
No. 1 to the Registration Statement and to the reference to me under the
heading "Experts" in the Prospectus.
/s/ Steven D. Powell
-------------------------
Steven D. Powell, FSA
<PAGE> 1
Exhibit 6(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of
Kemper Investors Life Insurance Company
We consent to the inclusion in this registration statement on Form S-6 (File
No. 333-35159) of our report dated March 18, 1998, on our audit of the
consolidated financial statements of Kemper Investors Life Insurance Company
and to the reference to our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Chicago, Illinois
April 27, 1998
<PAGE> 1
EXHIBIT 6(b)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Kemper Investors Life Insurance Company
We consent to the use of our report included herein on the consolidated
financial statements of Kemper Investors Life Insurance Company (KILICO) and
to the reference to our firm under the heading "Experts" in the prospectus.
Our report on KILICO's financial statements dated March 21, 1997, contains an
explanatory paragraph that states as a result of the acquisition of its parent,
Kemper Corporation, the consolidated financial information for the periods
after the acquisition is presented on a different cost basis than that for the
periods before the acquisition and, therefore, is not comparable.
KPMG PEAT MARWICK LLP
Chicago, Illinois
April 27, 1998
