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SUPPLEMENT DATED NOVEMBER 20, 2000
TO PROSPECTUS DATED JUNE 23, 2000 FOR
KEMPER INVESTORS LIFE INSURANCE COMPANY
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INDIVIDUAL AND GROUP VARIABLE AND MARKET VALUE
ADJUSTED DEFERRED ANNUITY CONTRACTS
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ZURICH PREFERRED
ISSUED BY
KILICO VARIABLE ANNUITY SEPARATE ACCOUNT
AND
KEMPER INVESTORS LIFE INSURANCE COMPANY
This Supplement amends your Prospectus and describes a new optional feature
available under your Contract. Please read this Supplement carefully and keep it
with your Prospectus for future reference.
The section entitled "SUMMARY," appearing on pages 3 and 4 of the Prospectus, is
hereby modified by adding the following new paragraph at the end of the section:
"You may elect, where available, to enter into a separate investment
advisory agreement with our affiliate, PMG Asset Management, Inc. ("PMG").
PMG provides asset allocation services under PMG's Managed Investment
Advisory Account ("MIAA"). MIAA allocates Contract Value among certain
Subaccounts. (See "Asset Allocation Service.") The MIAA and applicable fees
are described more fully in a separate disclosure statement. MIAA is not
available in all states or through all distributors."
The following new section is hereby added immediately following the section
entitled "CONTRACT OWNER TRANSACTION EXPENSES" in the table entitled "SUMMARY OF
EXPENSES," appearing on page 5 of the Prospectus:
<TABLE>
<S> <C>
"MIAA EXPENSES
MIAA Initial Set Up Fee (optional).......................... $30
MIAA Expense (optional)..................................... .50%*
* Charged quarterly in arrears at the rate of .125%
per quarter of Contract Value subject to the MIAA
Expense, using an average daily weighted balance
methodology. (See "Asset Allocation Service.")"
</TABLE>
The following is hereby added as the first sentence of the paragraph immediately
following the tables entitled "EXAMPLE," appearing on page 7 of the Prospectus:
"These tables reflect expenses if you did NOT participate in the optional
MIAA program."
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The following tables are hereby added immediately following the tables entitled
"EXAMPLE" and the subsequent paragraph, appearing on page 7 of the Prospectus:
"EXAMPLE
<TABLE>
<CAPTION>
SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
If you do or do not surrender your Kemper Money Market $54 $102 $152 $291
Contract and you participated in Kemper Technology Growth 58 114 173 331
the optional MIAA program, you Kemper Total Return 54 104 156 297
would pay the following expenses Kemper High Yield 55 106 159 303
on a $1,000 investment, assuming Kemper Growth 55 105 158 302
5% annual return on assets and Kemper Government Securities 55 104 157 299
assuming the current .25% Kemper Small Cap Growth 55 107 161 307
administrative charge. This Kemper Investment Grade Bond 55 105 158 301
example also assumes the current Scudder VLIF Capital Growth 53 100 150 285
level of Fund expenses for all Scudder VLIF International 59 116 177 338
years shown. Scudder VLIF Bond 54 103 154 293
Alger American Growth 56 109 165 315
Alger American Small Capitalization 57 113 170 326
Alger American MidCap Growth 57 111 168 321
Janus Aspen Growth 55 106 159 303
Janus Aspen Aggressive Growth 55 106 159 303
Janus Aspen Worldwide Growth 55 107 160 306
Janus Aspen Balanced 55 106 159 303
Fidelity VIP Equity-Income 54 103 154 293
Fidelity VIP Growth 55 105 158 302
Fidelity VIP II Index 500 54 103 155 296
Fidelity VIP II Contrafund 55 106 159 303
American Century VP Income & Growth 55 107 160 306
American Century VP Value 58 116 175 335
J.P. Morgan Small Company 60 120 182 350
Warburg Pincus Trust-Emerging Markets 63 127 195 373
Dreyfus Socially Responsible Growth 56 109 165 315
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
If you do or do not surrender your Kemper Money Market $56 $108 $162 $311
Contract and you participated in Kemper Technology Growth 60 120 182 350
the optional MIAA program, Kemper Total Return 57 110 166 317
you would pay the following Kemper High Yield 57 112 169 323
expenses on a $1,000 investment, Kemper Growth 57 111 168 322
assuming 5% annual return on Kemper Government Securities 57 110 167 319
assets and assuming the maximum Kemper Small Cap Growth 58 113 171 327
.45% administrative charge. This Kemper Investment Grade Bond 57 111 168 321
example also assumes the current Scudder VLIF Capital Growth 55 106 160 305
level of Fund expenses for all Scudder VLIF International 61 122 186 357
years shown. Scudder VLIF Bond 56 109 164 313
Alger American Growth 58 115 175 334
Alger American Small Capitalization 59 118 180 345
Alger American MidCap Growth 59 117 177 340
Janus Aspen Growth 57 112 169 323
Janus Aspen Aggressive Growth 57 112 169 323
Janus Aspen Worldwide Growth 57 113 170 326
Janus Aspen Balanced 57 112 169 323
Fidelity VIP Equity-Income 56 109 164 313
Fidelity VIP Growth 57 111 168 322
Fidelity VIP II Index 500 56 110 165 316
</TABLE>
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<TABLE>
<CAPTION>
SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Fidelity VIP II Contrafund $57 $112 $169 $323
American Century VP Income & Growth 57 113 170 326
American Century VP Value 61 121 185 354
J.P. Morgan Small Company 62 126 192 368
Warburg Pincus Trust-Emerging Markets 65 133 204 391
Dreyfus Socially Responsible Growth 58 115 175 334
</TABLE>
These tables reflect expenses if you DID participate in the optional
MIAA program. The purpose of the preceding tables is to assist you in
understanding the various costs and expenses that an Owner in a
Subaccount will bear directly or indirectly. The tables reflect
expenses of the Separate Account and the Funds, as well as expenses
you will incur under the optional MIAA program. These tables do not
reflect the expenses of the MVA Option. See "Contract Charges and
Expenses" and "The MVA Option" for more information regarding the
various costs and expenses. THE EXAMPLES SHOULD NOT BE CONSIDERED TO
BE REPRESENTATIONS OF PAST OR FUTURE EXPENSES AND DO NOT INCLUDE THE
DEDUCTION OF STATE PREMIUM TAXES, WHICH MAY BE ASSESSED BEFORE OR UPON
ANNUITIZATION. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. The Examples assume a 5% annual rate of return pursuant to
requirements of the Securities and Exchange Commission. This
hypothetical rate of return is not intended to be representative of
past or future performance of any Subaccount. The Records Maintenance
Charge is a single charge; it is not a separate charge for each
Subaccount. In addition, the effect of the Records Maintenance Charge
has been reflected by applying the percentage derived by dividing the
total amounts of annual Records Maintenance Charge collected by the
total net assets of all the Subaccounts in the Separate Account. These
tables also assume that all the Contract Value in a particular
Subaccount is in the MIAA program."
The third paragraph under the section entitled "F. TRANSFER DURING ACCUMULATION
PERIOD." appearing on page 16 of the Prospectus, is hereby modified to read as
follows:
"If you authorize an unaffiliated third party outside the MIAA program
(See "Asset Allocation Service") to transact transfers on your behalf,
we will reallocate the Contract Value pursuant to the authorized
advisory program. However, we take no responsibility for any
unaffiliated third party advisory program. We may suspend or cancel
acceptance of an unaffiliated third party's instructions at any time
and may restrict the investment options available for transfer under
third party authorizations."
The following new section is hereby added between the sections entitled
"SYSTEMATIC WITHDRAWAL PLAN" and "EXPERTS," appearing on page 30 of the
Prospectus:
"ASSET ALLOCATION SERVICE
You may elect, where available, to enter into a separate investment advisory
agreement with our affiliate, PMG Asset Management, Inc. ("PMG"). PMG is
registered as an investment adviser with the SEC. For a fee, PMG provides a
discretionary asset allocation service under its Managed Investment Advisory
Account ("MIAA") which is fully described in a separate disclosure
statement. Under an agreement with PMG, BARRA RogersCasey ("BARRA") performs
certain functions for the MIAA program. BARRA is an unaffiliated registered
investment adviser. MIAA is not available in all states or through all
distributors.
A. SUMMARY OF THE SERVICE PROVIDED.
Under MIAA, your Contract Value is allocated among certain Subaccounts. PMG
selects the appropriate allocation model based on your financial objectives
and risk tolerance, utilizing BARRA's proprietary analysis of the
Subaccounts and the underlying Funds. PMG then periodically transfers
Contract Value between the Subaccounts in accordance with your selected
allocation model. Currently, if you enroll in
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the MIAA program, all of your Contract Value must be placed under the MIAA
program. If you transfer your Contract Value placed under the MIAA program, your
participation in the MIAA program will automatically end. In the future,
however, we expect to make changes to permit you to place only a portion of
your Contract Value under the MIAA program and to allocate the remainder
yourself.
B. MIAA CHARGES.
PMG's annual charge for the MIAA program is one-half of one percent (.50%)
of the Contract Value allocated under the MIAA program. The MIAA Expense is
paid by quarterly withdrawals from your Contract Value. The quarterly MIAA
Expense with respect to the amount in each Subaccount covered by the MIAA
program equals the average daily number of units in that Subaccount covered
by the MIAA program, multiplied by the ending unit value for that
Subaccount, and multiplied by .125%. You will also be charged an MIAA
Initial Set Up Fee ("Set Up Fee") of $30.00. The MIAA Expense and Set Up Fee
are in addition to the Contract Charges and Expenses appearing in the
"Summary of Expenses".
C. TAX TREATMENT OF FEES AND CHARGES.
This discussion is not exhaustive and is not intended as tax advice. A
qualified tax adviser should always be consulted in the application of the
law to individual circumstances.
For Qualified Contracts, the MIAA Expense and Set Up Fee will not be treated
as taxable distributions. For Non-Qualified Contracts, payments of MIAA
Expense and Set Up Fee are treated as a taxable event. This means the MIAA
Expense and Set Up Fee are taxable distributions to you and may subject you
to an additional 10% tax penalty.
D. RISKS TO YOU.
When you elect the MIAA program, you understand that:
- all investments involve risk, the amount of which may vary significantly,
- performance cannot be predicted or guaranteed, and
- the value of your allocations in the Subaccounts will fluctuate due to
market conditions and other factors.
PMG has not authorized anyone to make any guarantee, either written or oral,
that your investment objectives will be met.
PMG seeks to perform services in a professional manner. However, except for
negligence, malfeasance, or violations of applicable law, PMG and its
officers, directors, agents and employees are not liable for any action
performed or omitted to be performed or for any errors of judgment in your
asset allocation or in transferring your Contract Value. The federal
securities laws impose liabilities under certain circumstances on persons
who act in good faith and, therefore, nothing herein in any way constitutes
a waiver or limitation on any rights that you may have under federal
securities laws.
E. CONFLICTS OF INTEREST.
The MIAA program is marketed directly by officers of PMG and through
solicitors who recommend the MIAA program, but who have no discretionary
investment authority. The PMG solicitor is a registered representative with
a broker-dealer registered under the Securities Exchange Act of 1934. As
such, the PMG solicitor may receive or may have received commissions for
your purchase of your Contract. PMG solicitors may also receive a portion of
the MIAA Expense (See "MIAA Charges") as compensation. You will be charged
the same fees for the MIAA program whether or not a PMG solicitor is
involved. Since the PMG solicitor may receive commissions for the purchase
of your Contract and may receive a portion of the MIAA Expense charged to
your Contract, there is a potential for a conflict of interest."
