<PAGE> 1
SUPPLEMENT DATED OCTOBER 1, 1999
TO PROSPECTUS DATED MAY 1, 1999 FOR
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
(INDIVIDUAL LIFE AND SURVIVORSHIP)
- --------------------------------------------------------------------------------
ISSUED BY
KEMPER INVESTORS LIFE INSURANCE COMPANY
THROUGH ITS KILICO VARIABLE SEPARATE ACCOUNT-2
HOME OFFICE: 1 KEMPER DRIVE, LONG GROVE, ILLINOIS (847) 550-5500
Effective October 1, 1999, the Evergreen VA Aggressive Growth Fund (the
"Fund"), a Subaccount available under this Policy, changed its name to Evergreen
VA Omega Fund. The Fund also modified its investment objective, strategy, and
risk factors concurrently.
A prospectus supplement for the underlying mutual fund, of which the Fund
is a series, is attached to this Supplement.
The changes to the Prospectus follow with references to those parts of the
Prospectus that are modified by this Supplement.
INTRODUCTION
The third paragraph on the cover page of the Prospectus is revised to read
as follows:
"The following portfolios of underlying mutual funds are currently
available under the Policies:
- - Evergreen Variable Annuity Trust
- Evergreen VA Fund
- Evergreen VA Growth and Income Fund
- Evergreen VA Foundation Fund
- Evergreen VA Global Leaders Fund
- Evergreen VA Strategic Income Fund
- Evergreen VA Omega Fund (formerly Evergreen VA Aggressive Growth Fund)
- Evergreen VA Small Cap Value Fund (formerly Evergreen VA Small Cap Equity
Income Fund)
- Evergreen VA International Growth Fund
- Evergreen VA Masters Fund
- - Goldman Sachs Variable Insurance Trust
- Goldman Sachs International Equity Fund
- Goldman Sachs Global Income Fund
- - Morgan Stanley Dean Witter Universal Funds, Inc.
- High Yield Portfolio
- U.S. Real Estate Portfolio
- - Fidelity's Variable Insurance Products Fund ("VIP")
- VIP Money Market Portfolio
- VIP Overseas Portfolio
- - Fidelity's Variable Insurance Products Fund II ("VIP II")
- VIP II Contrafund Portfolio
- VIP II Index 500 Portfolio"
SUMMARY -- THE FUNDS
The first paragraph under the section titled "THE FUNDS" under "SUMMARY" on
page 6 of the Prospectus is revised to read as follows:
"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
- Evergreen VA Omega Fund (formerly Evergreen VA Aggressive Growth Fund)
- Evergreen VA Small Cap Value Fund (formerly Evergreen VA Small Cap Equity
Income Fund)
- Evergreen VA International Growth Fund
- Evergreen VA Masters Fund."
S-1
<PAGE> 2
The table titled "PORTFOLIO EXPENSES AFTER WAIVERS/REIMBURSEMENTS"
appearing on page 9 of the Prospectus is revised as follows:
"PORTFOLIO EXPENSES AFTER WAIVERS/REIMBURSEMENTS
(as a percentage of net assets for the period ended December 31, 1998)
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
PORTFOLIO FEES EXPENSES EXPENSES
--------- ---------- -------- ---------
<S> <C> <C> <C>
Evergreen VA Fund(1)........................................ 0.95% 0.05% 1.00%
Evergreen VA Growth and Income Fund()(1).................... 0.95% 0.05% 1.00%
Evergreen VA Foundation Fund................................ 0.83% 0.17% 1.00%
Evergreen VA Global Leaders Fund()(1)....................... 0.95% 0.05% 1.00%
Evergreen VA Strategic Income Fund(1)....................... 0.45% 0.55% 1.00%
Evergreen VA Omega Fund(1).................................. 0.60% 0.40% 1.00%
Evergreen VA Small Cap Value Fund(1)........................ 0.95% 0.05% 1.00%
Evergreen VA International Growth Fund(1)................... 0.75% 0.25% 1.00%
Evergreen VA Masters Fund(2)................................ 0.95% 0.05% 1.00%
Goldman Sachs International Equity Fund(3).................. 1.00% 0.25% 1.25%
Goldman Sachs Global Income Fund(3)......................... 0.90% 0.15% 1.05%
Morgan Stanley Dean Witter High Yield Portfolio(4).......... 0.15% 0.65% 0.80%
Morgan Stanley Dean Witter U.S. Real Estate Portfolio(4).... 0.17% 0.93% 1.10%
Fidelity's VIP Money Market Portfolio....................... 0.20% 0.10% 0.30%
Fidelity's VIP Overseas Portfolio(5)........................ 0.74% 0.15% 0.89%
Fidelity's VIP II Contrafund Portfolio(5)................... 0.59% 0.07% 0.66%
Fidelity's VIP II Index 500 Portfolio(6).................... 0.24% 0.04% 0.28%
</TABLE>
- ---------------
(1) Reflects an agreement to voluntarily limit aggregate operating expenses
(including investment advisory expenses, but excluding interest, brokerage
commissions and extraordinary expenses) to 1.00% of average daily net
assets. Absent such an agreement, the actual Management Fees, Other Expenses
and Total Operating Expenses for the period from January 1, 1998 to December
31, 1998 were as follows:
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
FEES EXPENSES EXPENSES
---------- -------- ---------
<S> <C> <C> <C>
Evergreen VA Fund......................................... 0.95% 0.19% 1.14%
Evergreen VA Growth and Income Fund....................... 0.95% 0.21% 1.16%
Evergreen VA Global Leaders Fund.......................... 0.95% 0.61% 1.56%
Evergreen VA Strategic Income Fund........................ 0.45% 0.57% 1.02%
Evergreen VA Omega Fund................................... 0.60% 0.95% 1.55%
Evergreen VA Small Cap Value Fund......................... 0.95% 2.52% 3.47%
Evergreen VA International Growth Fund.................... 0.75% 7.50% 8.25%
</TABLE>
(2) Expenses have been estimated for the current fiscal year.
(3) Each Goldman Sachs Portfolio is a series of Goldman Sachs Variable Insurance
Trust. Expenses are based on actual expenses for fiscal year ended December
31, 1998. Each Portfolio's investment adviser has voluntarily agreed to
reduce or limit certain "Other Expenses" (excluding management fees, taxes,
interest, brokerage fees, litigation, indemnification and other
extraordinary expenses) to the extent such expenses exceed .25% and .15%,
respectively, of each Portfolio's average daily net assets. Without such
reduction, "Other Expenses" and "Total Operating Expenses" for the Goldman
Sachs International Equity Fund and the Goldman Sachs Global Income Fund
would have been 1.97% and 2.97% and 2.40% and 3.30%, respectively, on an
annualized basis. The reductions or limits may be discontinued or modified
by the investment adviser in its discretion at any time.
(4) Each Portfolio's management fees and expenses were voluntarily waived and/or
reimbursed by its investment adviser. Absent waiver and/or reimbursement,
Management Fees, Other Expenses, and Total Operating Expenses would have
been 0.50%, 0.65% and 1.15% for High Yield Portfolio, and 0.80%, 0.93% and
1.73% for U.S. Real Estate Portfolio.
(5) A portion of the brokerage commissions that certain Portfolios pay was used
to reduce expenses. In addition, certain Portfolios have entered into
arrangements with their custodian whereby credits realized as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, Total Operating Expenses would have been 0.91% for VIP
Overseas Portfolio and 0.70% for VIP II Contrafund Portfolio.
(6) The investment adviser agreed to reimburse a portion of VIP II Index 500
Portfolio's expenses during the period. Without such reimbursement,
Management Fees, Other Expenses and Total Operating Expenses would have been
0.24%, 0.11%, and 0.35%, respectively."
S-2
<PAGE> 3
THE FUNDS
The fifth paragraph on page 11 of the Prospectus under the section titled
"EVERGREEN VARIABLE ANNUITY TRUST" under "THE FUNDS" is revised to read as
follows:
"Evergreen VA Omega Fund (formerly Evergreen VA Aggressive Growth
Fund): Seeks maximum capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Fund's
investment adviser seeks to identify and invest in industries that are
growing faster than the economy."
The ninth paragraph on page 11 of the Prospectus under the section titled
"EVERGREEN VARIABLE ANNUITY TRUST" under "THE FUNDS" is revised to read as
follows:
"Evergreen Asset Management Corp. is the investment adviser to
Evergreen VA Fund, Evergreen VA Growth and Income Fund, Evergreen VA
Foundation Fund, Evergreen VA Global Leaders Fund, and Evergreen VA
Small Cap Value Fund (formerly Evergreen VA Small Cap Equity Income
Fund). Keystone Investment Management Company is the investment
adviser to Evergreen VA Strategic Income Fund and Evergreen VA
International Growth Fund. Evergreen Investment Management (formerly
the Capital Management Group of First Union National Bank) is the
investment adviser to Evergreen VA Omega Fund (formerly Evergreen VA
Aggressive Growth Fund) and, pursuant to a manager of managers
strategy, Evergreen VA Masters Fund. Evergreen Asset Management Corp.,
MFS Institutional Advisors, Inc., Oppenheimer Funds, Inc. and Putnam
Investment Management Inc. currently serve as managers of segments of
the Evergreen VA Masters Fund."
S-3
