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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 26, 1995
REGISTRATION STATEMENT 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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
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
Copies To:
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FRANK JULIAN, ESQ. JOAN E. BOROS, ESQ.
Kemper Investors Life Insurance Company Katten Muchin & Zavis
1 Kemper Drive 1025 Thomas Jefferson Street, N.W.
Long Grove, Illinois 60049 Washington, D.C. 20007
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E. Title and amount of securities being registered:
Units of Interests in the Separate Account under
Flexible Premium Variable Life Insurance Policies.
F. Proposed maximum aggregate offering price to the public of the
securities being registered.
Registrant has previously registered an Indefinite Amount of Securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940 in
connection with File No. 33-11803. The Separate Account anticipates
filing its Rule 24f-2 Notice on or before February 29, 1996.
G. Amount of filing Fee:
H. Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
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ITEM NO.
OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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1. Cover Page
2. Cover Page
3. Not Applicable
4. Distribution of Policies
5. KILICO and the Separate Account; State Regulation of KILICO
6. KILICO and the Separate Account
7. Not Applicable
8. Experts
9. Legal Proceedings; Legal Considerations
10. KILICO and the Separate Account; The Funds; The Policy; Policy Rights and
Benefits; General Provisions; Voting Interests, Dollar Cost Averaging; Systematic
Withdrawal Plan; Federal Tax Matters
11. Cover Page; Summary; KILICO and the Separate Account; The Funds
12. Not Applicable
13. Charges and Deductions
14. The Policy
15. The Policy; Policy Benefits and Rights
16. Summary; The Policy
17. The Policy; Policy Benefits and Rights
18. The Funds
19. General Provisions
20. The Funds; General Provisions
21. Policy Benefits and Rights
22. Not Applicable
23. Not Applicable
24. General Provisions
25. KILICO and the Separate Account
26. Not Applicable
27. KILICO and the Separate Account
28. Directors and Officers of KILICO
29. KILICO and the Separate Account
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. KILICO and the Separate Account; Distribution of Policies
36. Not Applicable
37. Not Applicable
38. Distribution of Policies
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i
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<TABLE>
<CAPTION>
ITEM NO.
OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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39. KILICO and the Separate Account; Distribution of Policies
40. Not Applicable
41. KILICO and the Separate Account; Distribution of Policies
42. Not Applicable
43. Not Applicable
44. KILICO and the Separate Account; Charges and Deductions
45. Not Applicable
46. The Policy; Policy Benefits and Rights; Charges and Deductions
47. Summary; KILICO and the Separate Account; The Policy
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. Cover Page; Summary; KILICO and the Separate Account; The Policy; Policy Benefits
and Rights; Charges and Deductions; General Provisions; Distribution of Policies
52. Summary; KILICO and the Separate Account; The Fund; General Provisions
53. Federal Tax Matters
54. Not Applicable
55. Not Applicable
56. Not Applicable
57. Not Applicable
58. Not Applicable
59. Financial Statements
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ii
<PAGE> 4
PROSPECTUS--
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FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
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ISSUED BY
KEMPER INVESTORS LIFE INSURANCE COMPANY
THROUGH ITS KILICO VARIABLE SEPARATE ACCOUNT
HOME OFFICE: 1 KEMPER DRIVE, LONG GROVE, ILLINOIS 60049 (708) 320-4500
This Prospectus describes a variable life insurance policy (the "Policy")
offered by Kemper Investors Life Insurance Company ("KILICO"). The Policy
provides for life insurance and for the accumulation of Cash Value on a variable
basis. 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 (the "Separate
Account").
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. 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", page 21 for a discussion of laws that affect the
tax treatment of the Policy.
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) currently are:
(a) Kemper Investors Fund (portfolios--Money Market, Total Return, High Yield,
Equity, Government Securities, International and Small Capitalization Equity
("Small Cap")); and (b) American Skandia Trust (portfolios--Lord Abbett Growth
and Income, JanCap Growth, T. Rowe Price International Equity, Founders Capital
Appreciation, INVESCO Equity Income, PIMCO Total Return Bond and Berger Capital
Growth). The accompanying Prospectuses for the Funds describe the investment
objectives and the attendant risks of the portfolios of the Funds. The Cash
Value in the Fixed Account will accrue interest at a rate that is guaranteed by
KILICO.
The Policy permits the Owner to choose from two death benefit options.
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. There is no guaranteed Cash Value. If the Surrender
Value is insufficient to cover the charges under the Policy, the Policy will
lapse. A guarantee premium and guarantee period are stated in the Policy
Specifications. Payment of the guarantee premium is not required but if paid as
specified under the Policy will guarantee that the Policy will not lapse during
the guarantee period.
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 Cash Value
allocated to the Separate Account. For a brief summary of the Fixed Account
option see "The Fixed Account Option" on page 7.
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.
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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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Page
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DEFINITIONS................................................................................. 1
SUMMARY..................................................................................... 2
KILICO AND THE SEPARATE ACCOUNT............................................................. 4
THE FUNDS................................................................................... 5
FIXED ACCOUNT OPTION........................................................................ 7
THE POLICY.................................................................................. 8
POLICY BENEFITS AND RIGHTS.................................................................. 10
CHARGES AND DEDUCTIONS...................................................................... 15
GENERAL PROVISIONS.......................................................................... 17
DOLLAR COST AVERAGING....................................................................... 19
SYSTEMATIC WITHDRAWAL PLAN.................................................................. 20
DISTRIBUTION OF POLICIES.................................................................... 20
FEDERAL TAX MATTERS......................................................................... 21
LEGAL CONSIDERATIONS........................................................................ 22
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS................................................ 22
VOTING INTERESTS............................................................................ 22
STATE REGULATION OF KILICO.................................................................. 23
DIRECTORS AND OFFICERS OF KILICO............................................................ 24
LEGAL MATTERS............................................................................... 25
LEGAL PROCEEDINGS........................................................................... 25
EXPERTS..................................................................................... 25
REGISTRATION STATEMENT...................................................................... 25
FINANCIAL STATEMENTS........................................................................ 25
APPENDICES.................................................................................. 27
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<PAGE> 6
DEFINITIONS
ACCUMULATION UNIT--An accounting unit of measure used to calculate the
value of each Subaccount.
AGE--The Insured's age on his or her last birthday.
BENEFICIARY--The person to whom the proceeds due on the 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.
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.
GUIDELINE SINGLE PREMIUM--The maximum initial amount of premium that can be
paid while retaining qualification as a life insurance policy under the Internal
Revenue Code.
INSURED--The person whose life is covered by the Policy and who is named in
the Policy Specifications.
ISSUE DATE--The date shown in the Policy Specifications. Incontestability
and suicide periods 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 coinciding with or next
following the Insured's 99th birthday.
MONTHLY PROCESSING DATE--The same day in each month as the Policy Date.
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.
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 VALUE--The portion of the Cash Value in the Subaccount(s)
of the Separate Account.
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 applicable Surrender Charge; minus (3) any Debt.
TRADE DATE--The date 30 days after the Issue Date. The Trade Date is the
date on which initial investment allocations are made pursuant to the Owner's
elections.
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.
1
<PAGE> 7
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 tax laws apply.
The Owner of a Policy pays a premium for life insurance coverage on the
person insured. The Policy is a flexible premium policy, so subject to certain
limitations, a Policy 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. A guarantee premium and a guarantee period
are stated in the Policy Specifications. The Policy is guaranteed to remain in
force during the guarantee period provided the sum of the premiums paid less
withdrawals and debt is equal to or greater than the sum of the guarantee
premiums. (See "The Policy--Premiums and Allocation of Premiums and Separate
Account Value," pages 8 and 9, "Charges and Deductions," page 15, and "Policy
Benefits and Rights," page 10.)
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," page 21.)
The purpose of the Policy is to provide insurance protection for the
beneficiary named therein. 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," page 12.)
The Owner may surrender a Policy at any time and receive the Surrender
Value, which equals the Cash Value less any applicable surrender charge and
outstanding Debt. Partial withdrawals are also available. (See "Policy Benefits
and Rights--Surrender Privilege," page 14.)
POLICY LOANS. The Owner may borrow up to 95% of the Policy's Cash Value
minus applicable surrender charges, subject to the requirements of the Internal
Revenue Code. The minimum amount of a loan is $500. Interest at an effective
annual rate of 5.00% will be charged on outstanding loan amounts. (See "Federal
Tax Matters," page 21.)
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 3.00% annual interest for
the first nine Policy Years and 5% annual interest thereafter. Such earnings
will be allocated to the Loan Account. (See "Policy Benefits and Rights--Policy
Loans," page 14.)
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," page 21.)
DEATH BENEFITS. As long as the Policy remains in force, the Policy provides
a death benefit payment upon the death of the Insured. The Policy contains 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
2
<PAGE> 8
will not be less than a specified multiple of the Cash Value. The death benefit
payable will be reduced by any Debt. (See "Policy Benefits and Rights--Death
Benefits," page 10.)
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 scheduled premium will not guarantee that a Policy will
remain in force. Instead, the duration of the Policy depends on the Policy's
Surrender Value. A guarantee premium and a guarantee period are stated in the
Policy Specifications. A Policy will remain in force during the guarantee period
provided the sum of the premiums paid less withdrawals and Debt is equal to or
greater than the sum of the guarantee premiums. (See "The Policy--Premiums,"
page 8.)
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 of the Separate Account and the Fixed Account. The Separate Account
currently consists of fourteen Subaccounts, each of which invests in shares of a
designated portfolio of the Kemper Investors Fund or American Skandia Trust.
On the day following the date of receipt, 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 Money Market Subaccount will be allocated among the Subaccounts and
the Fixed Account in accordance with the Owner's instructions in the
application. (See "The Policy -- Policy Issue," page 8.)
TRANSFERS. An Owner may transfer Separate Account Value among the
Subaccounts. One transfer of all or part of the Separate Account Value may be
made within a fifteen day period. Transfers are also permitted between the Fixed
Account and the Subaccounts, subject to restrictions. (See "Allocation of
Premiums and Separate Account Value," page 9.)
THE FUNDS
The following portfolios of the Kemper Investors Fund are currently
available for investment by the Separate Account:
MONEY MARKET PORTFOLIO, TOTAL RETURN PORTFOLIO, HIGH YIELD PORTFOLIO,
EQUITY PORTFOLIO, GOVERNMENT SECURITIES PORTFOLIO, INTERNATIONAL PORTFOLIO AND
SMALL CAP PORTFOLIO.
The following portfolios of American Skandia Trust are currently available
for investment by the Separate Account:
LORD ABBETT GROWTH AND INCOME, JANCAP GROWTH, T. ROWE PRICE INTERNATIONAL
EQUITY, FOUNDERS CAPITAL APPRECIATION, INVESCO EQUITY INCOME, PIMCO TOTAL RETURN
BOND AND BERGER CAPITAL GROWTH.
For a more detailed description of the Funds, see "The Funds," page 5, the
Funds' prospectuses, and Statements of Additional Information available upon
request.
CHARGES
A state and local premium tax charge of 2.5% is deducted from each premium
payment under the Policy prior to allocation of the net premium. 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, page 15.)
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<PAGE> 9
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," page 21.)
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. 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 annual rate of .60%. This charge may be increased but is
guaranteed not to exceed .90%. (See "Charges and Deductions--Cost of Insurance
Charge and Mortality and Expense Risk Charge," page 16.)
A $5 per month administrative expense charge is deducted from the Policy's
Cash Value on each Monthly Processing Date. (See "Charges and
Deductions--Monthly Administrative Charges," page 16.)
If, prior to the 15th Policy year, the Policy is surrendered or the Cash
Value is applied under a Settlement Option, a surrender charge will be deducted.
(See "Policy Benefits and Rights--Surrender Privilege," page 14.)
In addition, the Subaccounts of the Separate Account purchase shares of the
Funds. For fees and expenses of the Funds, see the prospectuses for the Funds.
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, if the Policy is not treated as a modified endowment contract, 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. If the Policy is treated
as a modified endowment contract, a loan will also be treated as a distribution.
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," page 21.)
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,"
page 15.)
ILLUSTRATIONS OF CASH VALUES, CASH
SURRENDER VALUES, DEATH BENEFITS
Tables in the Appendix illustrate the Separate Account 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.
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 Financial Companies, Inc. ("KFC"), a
nonoperating holding company. KFC is a subsidiary of Kemper Corporation, a
public financial services holding company. 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 (the "Separate Account") was established
by KILICO as a separate investment account on January 22, 1987. The Separate
Account will receive and invest net premiums under
4
<PAGE> 10
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 fourteen 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
of the Separate Account or arising out of any business KILICO may conduct.
THE FUNDS
The Separate Account invests in shares of the Kemper Investors Fund and
American Skandia Trust, series type mutual funds registered with the Commission
as open-end, diversified management investment companies. 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. 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 both variable life insurance separate accounts
and variable annuity separate accounts, to invest simultaneously in the Funds.
Currently neither KILICO nor the Funds foresees any such disadvantages to either
variable life insurance or variable annuity owners. 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 the underlying Portfolios of the Funds. 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.
KEMPER INVESTORS FUND
The investment objectives and policies of the Kemper Investors Fund's
portfolios in which the Separate Account invests are summarized below:
Money Market Portfolio: This Portfolio seeks to provide maximum current
income to the extent consistent with stability of principal. It will maintain a
dollar weighted average portfolio maturity of 90 days or less. This Portfolio
pursues its objective of maximum income and stability of principal by investing
in money market securities such as U.S. Treasury obligations, commercial paper,
and certificates of deposit and bankers' acceptances of domestic and foreign
banks, including foreign branches of domestic banks, and will enter into
repurchase agreements.
Total Return Portfolio: This Portfolio seeks a high total return, a
combination of income and capital appreciation, by investing in a combination of
debt securities and common stocks. The Portfolio's investments will normally
consist of fixed-income and equity securities. Fixed-income securities will
include bonds and other debt securities and preferred stocks, some of which may
have a call on common stocks through attached warrants or a conversion
privilege. Equity investments normally will consist of common stocks and
securities convertible into or exchangeable for common stocks; however the
Portfolio may also make private placement investments (which are normally
restricted securities).
5
<PAGE> 11
HIGH YIELD PORTFOLIO: This Portfolio seeks to provide a high level of
current income by investing in fixed-income securities including lower rated and
unrated securities which may entail relatively greater risks of loss of income
or principal but may offer a current yield or yield to maturity which is higher.
Lower and unrated securities, which are sometimes referred to by the popular
press as "junk bonds", have widely varying characteristics and quality. The
Portfolio invests in U.S. Government, corporate, and other notes and bonds
paying high current income. See the prospectus for the Fund for additional
information and special risk factors.
EQUITY PORTFOLIO: This Portfolio seeks maximum appreciation of capital
through diversification of investment securities having potential for capital
appreciation. Current income will not be a significant factor. This Portfolio's
investments normally will consist of common stocks and securities convertible
into or exchangeable for common stocks; however, it may also make private
placement investments (which are normally restricted securities).
GOVERNMENT SECURITIES PORTFOLIO: This Portfolio seeks high current return
consistent with preservation of capital from a portfolio composed primarily of
U.S. Government securities. The Portfolio will also invest in fixed-income
securities other than U.S. Government securities, and will engage in options and
financial futures transactions. The Portfolio may purchase or sell portfolio
securities on a when-issued or delayed delivery basis. The Portfolio's current
return is sought from interest income and net short-term gains on securities and
options and futures transactions.
INTERNATIONAL PORTFOLIO: This Portfolio seeks a total return, a combination
of capital growth and income, principally through an internationally diversified
portfolio of equity securities. While this Portfolio invests principally in
equity securities of non-United States issuers, this Portfolio may also invest
in convertible and debt securities of non-United States issuers and foreign
currencies.
SMALL CAP PORTFOLIO: This Portfolio seeks maximum appreciation of capital.
At least 65% of its total assets normally will be invested in the equity
securities of smaller companies, i.e., those having a market capitalization of
$1 billion or less at the time of investment. Current income will not be a
significant factor. This Portfolio's investments normally will consist primarily
of common stocks and securities convertible into or exchangeable for common
stocks and to a limited degree in preferred stocks and debt securities.
Kemper Financial Services, Inc. ("KFS" or the "Adviser"), an affiliate of
KILICO, is the investment adviser to the Kemper Investors Fund and manages its
daily investments and business affairs, subject to the policies established by
the trustees of the Kemper Investors Fund. For its advisory services to the
Portfolios, the Adviser 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% and .65% of 1%
of the average daily net asset values of the Money Market Portfolio, the Total
Return Portfolio, the High Yield Portfolio, the Equity Portfolio, the Government
Securities Portfolio, the International Portfolio and the Small Cap Portfolio,
respectively.
AMERICAN SKANDIA TRUST
The investment objectives of the American Skandia Trust portfolios in which
the Separate Account invests are summarized below:
LORD ABBETT GROWTH AND INCOME PORTFOLIO: This Portfolio seeks long-term
growth of capital and income while attempting to avoid excessive fluctuations in
market value.
JANCAP GROWTH PORTFOLIO: This Portfolio seeks growth of capital in a manner
consistent with preservation of capital.
T. ROWE PRICE INTERNATIONAL EQUITY PORTFOLIO: This Portfolio seeks total
return on its assets from long-term growth of capital and income through
investment primarily in established, non-U.S. companies.
FOUNDERS CAPITAL APPRECIATION PORTFOLIO: This Portfolio seeks capital
appreciation through investment primarily in common stocks of small U.S.
companies with market capitalizations of $1.5 billion or less. The portfolio's
securities will ordinarily be traded in the over-the-counter market.
INVESCO EQUITY INCOME PORTFOLIO: This Portfolio seeks high current income
while following sound investment practices, with capital growth potential as an
additional but secondary consideration, by investing its assets primarily in
dividend-paying, marketable common stocks of domestic and foreign industrial
issuers.
PIMCO TOTAL RETURN BOND PORTFOLIO: This Portfolio seeks to realize maximum
total return. A secondary objective is preservation of capital.
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<PAGE> 12
Berger Capital Growth Portfolio: This Portfolio seeks to achieve long-term
capital appreciation primarily by investing in the common stocks of established
companies.
American Skandia Investment Services, Incorporated is the investment
adviser for the American Skandia Trust. The investment adviser engages a
sub-adviser for each Portfolio as described in the prospectus to the Fund. The
investment adviser receives compensation at annual rates equal to the following
percentages of average daily net asset values: Lord Abbett Growth and Income
0.75%; JanCap Growth 0.90%; T. Rowe Price International Equity 1.00%; Founders
Capital Appreciation .90%; INVESCO Equity Income 0.75%; PIMCO Total Return Bond
0.65%; and Berger Capital Growth 0.75%.
There is no assurance that any of the Portfolios of the Kemper Investors
Fund or the American Skandia 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 the Fund and the
Funds' Statement of Additional Information.
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 of the Funds and to substitute shares of
another portfolio 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 of the Separate Account
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 voting
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.
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 Contract pertaining
to the Separate Account except where it makes specific reference to fixed
accumulation and settlement elements.
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<PAGE> 13
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.
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 1 through 75 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," below.)
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, a Policy 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: annual $600; semi-annual $300;
quarterly $150. The amount, frequency and period of time over which a Policy
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. 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.")
A guarantee period and a monthly guarantee premium are specified in the
Policy Specifications. The guarantee period is the period that ends on the third
Policy anniversary. During the guarantee period, the policy will remain in force
and no grace period will begin provided that the total premiums received, less
any withdrawals and any outstanding loans, equals or exceeds the monthly
guarantee premium times the number of months since the Policy Date, including
the current month.
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.
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."
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 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
Money Market Subaccount plus the total amount of monthly deductions and
deductions against premiums will be refunded.
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<PAGE> 14
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. The initial net premium 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, which is 30 days after the
Issue Date. On the Trade Date, the Separate Account Value in the Kemper Money
Market Subaccount will be allocated to the Subaccounts and the Fixed Account as
elected by the Owner in the application for the 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.
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, 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 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 part 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. 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, a Policy Owner would bear this risk of loss in the
event of a fraudulent telephone transfer.
AUTOMATIC ASSET REALLOCATION. A Policy Owner may elect to have transfers
made automatically among the Subaccounts of the Separate Account on an annual or
a quarterly basis so that Cash Value is reallocated to match the Policy Owner's
predefined asset allocation program. Transfers under this program will not be
subject to the $500 minimum transfer amounts. If you authorize a third party to
transact transfers on your behalf, we will reallocate the Cash Value pursuant to
the asset allocation program determined by such third party. However, we do not
offer or participate in any asset allocation program and we take no
responsibility for any third party asset allocation program. 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.
POLICY LAPSE AND REINSTATEMENT
LAPSE. 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.")
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<PAGE> 15
KILICO will not accept any payment that would cause the total premium
payment to exceed the maximum payment permitted by the Code for life insurance
under the guideline premium limits. 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;
(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 Specified
Amount and the table of death benefit percentages applicable at the time of
death.
A Policy Owner may select one of two death benefit options: Option A or
Option B. An applicant designates the death benefit option in the application.
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 the Policy is $50,000.
OPTION A. Under Option A, 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 dies) multiplied by a death benefit percentage.
The death benefit percentages vary according to the age of the Insured and will
be at least equal to the cash value corridor in Section 7702 of the Internal
Revenue Code. 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 is in the Appendix C 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 dies) or, if greater, the Cash Value multiplied by a
death benefit percentage. The specified percentage is the same as that used in
connection with Option A and as stated in the Appendix. The death benefit under
Option B will always vary as Cash Value varies.
EXAMPLES OF OPTIONS A AND B. The following examples demonstrate the
determination of death benefits under Options A and B. The examples show three
Policies--Policies I, II, and III--with the same Specified
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<PAGE> 16
Amount, but Cash Values that vary as shown, and which assume an Insured is Age
35 at the time of death and that there is no outstanding Debt.
<TABLE>
<CAPTION>
POLICY POLICY
POLICY I II III
-------- -------- --------
<S> <C> <C> <C>
Specified Amount........................ $100,000 $100,000 $100,000
Cash Value on Date of Death............. $ 25,000 $ 50,000 $ 75,000
Death Benefit Percentage................ 250% 250% 250%
Death Benefit Under Option A............ $100,000 $125,000 $187,500
Death Benefit Under Option B............ $125,000 $150,000 $187,500
</TABLE>
Under Option A, the death benefit for Policy I is equal to $100,000 since
the death benefit is the greater of the Specified Amount ($100,000) or the Cash
Value at the date of death multiplied by the death benefit percentage ($25,000 X
250% = $62,500). For both Policies II and III under Option A, the Cash Value
multiplied by the death benefit percentage ($50,000 X 250% = $125,000 for Policy
II; $75,000 X 250% = $187,500 for Policy III) is greater than the Specified
Amount ($100,000), so the death benefit is equal to the higher value. Under
Option B, the death benefit for Policy I is equal to $125,000 since the death
benefit is the greater of Specified Amount plus Cash Value ($100,000 + $25,000 =
$125,000) or the Cash Value multiplied by the death benefit percentage ($25,000
X 250% = $62,500). Similarly, in Policy II, Specified Amount plus Cash Value
($100,000 + $50,000 = $150,000) is greater than Cash Value multiplied by the
death benefit percentage ($50,000 X 250% = $125,000). In Policy III, the Cash
Value multiplied by the death benefit percentage ($75,000 X 250% = $187,500) is
greater than the Specified Amount plus Cash Value ($100,000 + $75,000 =
$175,000), so the death benefit is equal to the higher value.
All calculations of death benefit will be made as of the end of the
Valuation Period during which the 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. Payments
may be postponed in certain circumstances. (See "General Provisions --
Postponement of Payments")
CHANGES IN DEATH BENEFIT OPTION
After the first Policy Year, a Policy 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 the insured's Age.
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<PAGE> 17
CHANGES IN SPECIFIED AMOUNT
After the first Policy Year, a Policy 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. Increases are not allowed after the
Insured attains age 75. Increasing the Specified Amount could increase the death
benefit under a Policy, and decreasing the Specified Amount could decrease the
death benefit. (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 and the guarantee premium amount. However, the guarantee period
will not be extended as a result of an increase 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. A decrease in Specified Amount
will not decrease the guarantee premium.
INCREASES. Additional evidence of insurability satisfactory to KILICO will
be required for an 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. 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.
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 before accepting a request.
BENEFITS AT MATURITY
If the Insured is living on the Policy Date anniversary following the
Insured's Age 99, 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 surrender charges and 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.")
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<PAGE> 18
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,
administrative 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 an effective annual rate of 3.00% during the first nine Policy
years and 5.00% thereafter. (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.
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) 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 charge or credit for any taxes reserved for the current valuation
period which we determine 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.")
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POLICY LOANS
After the first Policy Year, the 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 minus applicable surrender charges,
subject to the requirements of the Internal Revenue Code. 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 effective annual rate of 5.00%.
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 3.00% annual interest for the
first nine Policy Years and 5.00% annual interest thereafter. 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 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 taxed in the same way as a loan from an annuity. Therefore, a loan
may be subject to Federal income tax and a 10% tax penalty may apply. (See
"Federal Tax Matters.")
SURRENDER PRIVILEGE
While the Insured is living and 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 applicable
Surrender Charge and any Debt. (See "Surrender Charge," below.)
SURRENDER CHARGE. During the first fifteen Policy Years, if the Policy is
surrendered or if the Cash Value is applied under a Settlement Option, a
Surrender Charge is assessed against the Cash Value. The Surrender Charge
consists of two components, an administrative component (issue charge) and a
sales component (deferred sales charge).
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The issue charge is a level charge of $5.00 per thousand of initial
Specified Amount. For issue ages up to age 66, the full issue charge will apply
in Policy Years 1-5 and will decline by 10% each year in Policy Years 6-14 until
reaching zero at the beginning of Policy Year 15. For issue ages 66-75, the full
issue charge will apply in Policy Years 1-3 and will decline by 10% each year in
Policy Years 4-11 and by 5% in Policy Years 12-14 until reaching zero at the
beginning of Policy Year 15. This charge is designed to cover the administrative
expenses associated with underwriting and issuing a Policy, including the costs
of processing applications, conducting medical examinations, determining
insurability and the Insured's underwriting class, and establishing policy
records. KILICO does not expect to profit from the issue charge.
The deferred sales charge is equal to 30% of premiums paid up to one Target
Premium shown in the Policy and a percentage of premiums paid above one Target
Premium equal to 7.5% for issue ages up to age 66 and 5% for issue ages 66-75.
For issue ages up to age 66, the full deferred sales charge will apply in Policy
Years 1-5 and will decline by 10% each year in Policy Years 6-14 until reaching
zero at the beginning of Policy Year 15. For issue ages 66-75, the full deferred
sales charge will apply in Policy Years 1-3 and will decline by 10% each year in
Policy Years 4-11 and by 5% in Policy Years 12-14 until reaching zero at the
beginning of Policy Year 15. The deferred sales charge is to reimburse KILICO
for some of the expenses of distributing the Policies.
The applicable Surrender Charge will be determined based upon the date of
receipt of the written request for surrender.
PARTIAL WITHDRAWALS. After the first Policy Year, a Policy Owner may make
withdrawals of amounts less than the Surrender Value. The minimum amount of each
withdrawal is $500 and the maximum amount is 10% of the Surrender Value. A $25
withdrawal charge will be imposed for processing each withdrawal. (See "Charges
and Deductions.") 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 (before the withdrawal charge).
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 be the sum of the Cash Value in the Money Market
Subaccount plus the total amount of monthly deductions and deductions made
against Premiums. An Owner seeking a refund should return the Policy to KILICO
at its Home Office or to the agent who sold the Policy.
The Owner may, while the Policy is in force, exchange it at any time after
its issue, 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. No
evidence of insurability will be required. During the first two years after the
Policy Date, 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. After two years from the Policy Date, the amount of the new
policy will be for 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 of 2.5% is 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. 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. 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.
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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 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 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, sex, rate class of the Insured 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. 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 Last Birthday, published by the National Association of Insurance
Commissioners.
RATE CLASS. The rate class of an Insured will affect the cost of insurance
rate. KILICO currently places Insureds in 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 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. This charge will be at an annual
rate of 0.60%. This charge may be increased in the future but in no event will
it exceed an annual rate of 0.90%. KILICO may profit from this charge.
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.
MONTHLY ADMINISTRATIVE CHARGE
KILICO deducts a monthly administrative expense charge to reimburse it for
certain expenses related to maintenance of the Policies, accounting and record
keeping and periodic reporting to owners. This charge is designed only to
reimburse KILICO for certain actual administrative expenses. KILICO does not
expect to recover from this charge any amount in excess of aggregate maintenance
expenses. Currently, this charge is $5 per month.
OTHER CHARGES
SURRENDER CHARGE. During the first fifteen Policy Years, if the Policy is
surrendered or if the Cash Value is applied under a Settlement Option, a
Surrender Charge is assessed against the Cash Value. The Surrender Charge
consists of two components, an administrative component (issue charge) and a
sales component (deferred sales charge). The Surrender Charge is equal to the
sum of these components multiplied by the applicable Surrender Charge percentage
shown in the Policy and described below.
For issue ages up to age 66, the Surrender Charge percentage is 100% in
Policy Years 1-5 and declines by 10% each year in Policy Years 6-14 until
reaching zero at the beginning of Policy Year 15. For issue ages 66-75, the
Surrender Charge percentage is 100% in Policy Years 1-3, declines by 10% each
year in Policy Years 4-11 and by 5% in Policy Years 12-14 until reaching zero at
the beginning of Policy Year 15.
The issue charge is a level charge of $5.00 per thousand of initial
Specified Amount. This charge is designed to cover the administrative expenses
associated with underwriting and issuing a Policy, including the costs of
processing applications, conducting medical examinations, determining
insurability and the Insured's underwriting class, and establishing policy
records. KILICO does not expect to profit from the issue charge.
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<PAGE> 22
The deferred sales charge is equal to 30% of premiums paid up to one Target
Premium shown in the Policy and a percentage of premiums paid above one Target
Premium equal to 7.5% for issue ages up to age 66 and 5% for issue ages 66-75.
The deferred sales charge is to reimburse KILICO for some of the expenses of
distributing the Policies.
WITHDRAWAL CHARGE. A charge of $25 will be imposed for each partial
withdrawal. This charge is designed to reimburse KILICO for the administrative
expenses related to the withdrawal. KILICO does not expect to recover any amount
in excess of aggregate expenses.
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 advisers, the
investment advisers provide investment advisory services for the portfolios. The
Funds are responsible for the advisory fees and all other expenses. The
investment advisory fees differ with respect to each of the portfolios of the
Funds. (See "The Funds.") 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. For more information concerning the investment advisory fees and
other charges against the portfolios of the Funds, see the prospectuses for the
Funds and the Statements of Additional Information available upon request.
SYSTEMATIC WITHDRAWAL PLAN. A charge of $50 is imposed to enter into a
Systematic Withdrawal Plan (SWP.) In addition, a $25 charge will be imposed each
time a change is made to the SWP. These charges are to reimburse KILICO for
expenses related to the administration of the SWP. (See "Systematic Withdrawal
Plan.")
REDUCTION OF CHARGES. KILICO may reduce certain charges and the minimum
initial premium in special circumstances that result in lower sales,
administrative, or mortality expenses. For example, special circumstances may
exist in connection with group or sponsored arrangements, sales to KILICO
policyowners, or sales to employees or clients of members of the Kemper group of
companies. The amounts of any reductions will reflect the reduced sales effort
and administrative costs resulting from, or the different mortality experience
expected as a result of, the special circumstances. Reductions will not be
unfairly discriminatory against any person, including the affected Owners and
owners of all other policies funded by the Separate Account.
GENERAL PROVISIONS
SETTLEMENT OPTIONS
The Owner, or Beneficiary at the death of the 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 our
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 applicable Surrender Charge
and 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.
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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.
OPTION 4--JOINT AND SURVIVOR ANNUITY. 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, 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 SEC;
(2) The SEC by order permits postponement for the protection of
Owners; or
(3) An emergency exists, as determined by the SEC, as a result of
which disposal of securities of the Fund 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.
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, and the application constitute the entire
contract between KILICO and the Owner. All statements made by the Insured or
contained in the application 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 the 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. However, a Policy will be
incontestable after it has been in force during the lifetime of the Insured for
two years from the Issue Date. A new two year contestability period will apply
to increases in insurance, and to reinstatements beginning with the effective
date of the increase or reinstatement.
SUICIDE
Suicide by the 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.
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ASSIGNMENT
No assignment of a Policy is binding on KILICO until it is received 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 this Policy is assigned, the rights of the
Owner and Beneficiary are subject to the rights of the assignee of record.
NONPARTICIPATING
This Policy will not pay dividends. It will not participate in any of
KILICO's surplus or earnings.
OWNER AND BENEFICIARY
The Owner may, at any time during the life of the Insured and while the
Policy is in force, designate a new Owner.
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. If no Beneficiary survives the Insured, the
Insured's estate will be the Beneficiary. The interest of any Beneficiary may be
subject to that of an assignee.
Any change of Owner or Beneficiary must be made in writing in a form
acceptable to KILICO. The change will take effect as of the date the request is
signed. KILICO will not be liable for any payment made or other action taken
before the notice has been received at KILICO's Home Office.
RECORDS AND REPORTS
KILICO 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 Insured's full name. 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, a Policy Owner may elect to add one or
more of the following optional insurance benefits to the Policy by a Rider at
the time of application for a Policy. These optional benefits are: waiver of all
monthly deductions against the Policy in the event of total disability of the
Insured; term insurance on the Insured's dependent children; acceleration of the
payment of a portion of the death benefit when the Insured is terminally ill;
and term insurance on an additional insured specified by the Owner. The cost of
any additional insurance benefits will be deducted as part of the 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
A Policy 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. A Policy 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").
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Transfers will commence on the first Transfer Date following the Trade
Date. Transfers will be made in the amounts designated by the Policy Owner and
must be at least $500 per Subaccount or General 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 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 days notice or terminate it at any time.
A Policy 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, a Policy Owner must be invested in
the DCA Account and may be invested in the Fixed Account and a maximum of eight
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. Policy Owners
entering into a SWP agreement instruct KILICO to withdraw selected amounts from
the Fixed Account, or from a maximum of two 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 and will be subject to surrender charges, if applicable.
(See "Policy Benefits and Rights--Surrender Privileges.") The $25 withdrawal
charge does not apply. However, a charge of $50 will be imposed at the time a
SWP is established. In addition, a $25 charge will be imposed each time a change
is made to the SWP. These charges are designed to reimburse KILICO for expenses
related to the administration of the SWP. Withdrawals taken under the SWP may be
subject to income taxes, withholding and tax penalties. See "Federal Income
Taxes." 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 days' notice. The SWP may be terminated at any time by the Contract
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.
Gross commissions paid by KILICO on the sale of the Policy plus fees for
marketing services provided by affiliates of KILICO are not more than 115% in
the first year and 5% in renewal years. Beginning in the fifth Policy Year, a
service fee at an annual rate of 0.25% on assets which have been maintained and
serviced may also be paid. Firms to which service fees and commissions may be
paid include affiliated broker-dealers. In addition to the commissions described
above, KILICO may, from time to time, pay or allow additional promotional
incentives, in the form of cash or other compensation, to licensed broker-
dealers that sell the Policies. In some instances, such other incentives may be
offered only to certain licensed broker-dealers that sell or are expected to
sell during specified time periods certain minimum amounts of the Policy or
other contracts issued by KILICO.
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FEDERAL TAX MATTERS
The ultimate effect of Federal income taxes on the Policy, on settlement
options and on the economic benefit to the Owner, Beneficiary or payee depends
on KILICO's tax status, and upon the tax status of the individual concerned.
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 deduction to the extent that net investment income of the
Separate Account is applied to increase Owners' equity. 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. Thus, the Separate Account may
realize net investment income, such as interest, dividends or capital gains, and
reinvest such income all without tax consequences to the Separate Account.
If there is a material change in applicable Federal, state or local law,
however, 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.
TAX STATUS OF THE POLICY
Section 7702 of the Internal Revenue Code ("Code") provides that if certain
tests are met, a Policy will be treated as a life insurance policy for federal
tax purposes. KILICO will monitor compliance with these tests. The Policy should
thus receive the same federal income tax treatment as fixed benefit life
insurance. As a result, the death benefit payable under a Policy is excludable
from gross income of the beneficiary under Section 101 of the Code.
Section 7702A of the Code defines modified endowment contracts as those
policies issued or materially changed on or after June 21, 1988 on which the
total premiums paid during the first seven years exceed the amount that would
have been paid if the policy provided for paid up benefits after seven level
annual premiums. The Code provides for taxation of surrenders, partial
surrenders, loans, collateral assignments and other pre-death distributions from
modified endowment contracts in the same way annuities are taxed. Modified
endowment contract distributions are defined by the Code as amounts not received
as an annuity and are taxable to the extent the cash value of the policy
exceeds, at the time of distribution, the premiums paid into the policy. A 10%
tax penalty also applies to the taxable portion of such distributions unless the
Policy Owner is over age 59 1/2 or disabled, or if other exceptions apply.
It may not be advantageous to replace existing insurance with Policies
described in this prospectus. It may also be disadvantageous to purchase a
policy to obtain additional insurance protection if the purchaser already owns
another variable life insurance policy.
The Policies offered by this prospectus may or may not be issued as
modified endowment contracts. KILICO will monitor premiums paid and will notify
the Policy Owner when the Policy's non-modified endowment status is in jeopardy.
If a policy is not a modified endowment contract, a cash distribution during the
first 15 years after a policy is issued which causes a reduction in death
benefits may still become fully or partially taxable to the Owner pursuant to
Section 7702(f)(7) of the Code. The Policy Owner should carefully consider this
potential effect and seek further information before initiating any changes in
the terms of the Policy. Under certain conditions, a Policy may become a
modified endowment as a result of a material change or a reduction in benefits
as defined by Section 7702A(c) of the Code.
In addition to meeting the tests required under Section 7702 and Section
7702A, Section 817(h) of the Code requires that the investments of separate
accounts such as the Separate Account be adequately diversified. Regulations
issued by the Secretary of the Treasury, set the standards for measuring the
adequacy of this diversification. A variable life policy that is not adequately
diversified under these regulations would not be treated as life insurance under
Section 7702 of the Code. To be adequately diversified, each Subaccount of the
Separate Account must meet certain tests. KILICO believes that the investments
of the Separate Account meet the applicable diversification standards.
Should the Secretary of the Treasury issue additional rules or regulations
limiting the number of funds, transfers between funds, exchanges of funds or
changes in investment objectives of funds such that the
21
<PAGE> 27
Policy would no longer qualify as life insurance under Section 7702 of the Code,
KILICO will take whatever steps are available to remain in compliance.
KILICO will monitor compliance with these regulations and, to the extent
necessary, will change the objectives or assets of the sub-account investments
to remain in compliance.
A total surrender or cancellation of the Policy by lapse may have adverse
tax consequences depending on the circumstances.
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.
OTHER CONSIDERATIONS
Because of the complexity of the law in its application to a specific
individual, tax advice may be needed by a person contemplating purchase of a
Policy or the exercise of elections under a Policy. The above comments
concerning the Federal income tax consequences are not exhaustive and are not
intended as tax advice. Counsel and other competent advisers should be consulted
for more complete information. This discussion is based on KILICO's
understanding of Federal income tax laws as they are currently interpreted by
the Internal Revenue Service. No representation is made as to the likelihood of
continuation of these current laws and interpretations. KILICO also believes the
Policy meets other requirements concerning Owner control over investments.
However, the Secretary of Treasury has not issued regulations on this subject.
Such regulations, if adopted, could include requirements not included in the
Policy. We believe that such regulations if adopted would apply prospectively
but do not so guarantee. If possible, KILICO will make modifications to the
Policy to comply with such regulations.
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 of the Funds 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.
22
<PAGE> 28
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 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.
23
<PAGE> 29
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>
POSITION WITH KILICO OTHER BUSINESS EXPERIENCE DURING
NAME AND AGE YEAR OF ELECTION PAST 5 YEARS OR MORE
----------------------------- ----------------------- -------------------------------------
<S> <C> <C>
John B. Scott (50)........... Chairman of the Board, Executive Vice President of Kemper
Director, Chief Corporation from January 1994, Direc-
Executive Officer 1992 tor, Chairman of the Board, Chief
and President 1993 Executive Officer and President of
Federal Kemper Life Assurance Company
and Fidelity Life Association since
1988. Executive Vice President of
Kemper Financial Companies, Inc.
since January 1994 and Director since
1992.
John H. Fitzpatrick (38)..... Senior Vice President Executive Vice President since May,
1994 and Director 1992 1993 and Chief Financial Officer
since May 1993 of Kemper Corporation;
prior thereto, Senior Vice President
until May 1993 from May 1990; prior
thereto, Vice President of Kemper
Corporation; also Executive Vice
President and Chief Financial Officer
of Kemper Financial Companies, Inc.
since January 1994.
David B. Mathis (57)......... Director 1990 Chairman of the Board and Chief
Executive Officer of Kemper
Corporation from February 1992; prior
thereto, President from May 1990 to
September 1992, Chief Operating
Officer from May 1990 to February
1992; prior thereto, Executive Vice
President from May 1989 of Kemper
Corporation. Chairman of the Board
and Chief Executive Officer of Kemper
Reinsurance Company until March 1990;
Vice President of Lumbermens Mutual
Casualty Company until May 1989.
Stephen B. Timbers (50)...... Director 1989 President and Chief Operating Officer
of Kemper Corporation since September
1992; prior thereto, Chief Investment
Officer until May 1993 from May 1991
of Kemper Corporation; also Chairman,
Chief Executive Officer and Chief
Investment Officer of Kemper
Financial Services, Inc. from
February 1995; prior thereto, Chief
Investment Officer until May 1993
from May 1990; prior thereto,
Executive Vice President and Chief
Investment Officer.
Debra P. Rezabek (39)........ Vice President 1995 and Vice President since 1995, General
General Counsel, Direc- Counsel, Director of Government
tor of Government Affairs since 1992, Assistant General
Affairs and Assistant Counsel 1988-1992, Federal Kemper
Secretary 1992 Life Assurance Company and Fidelity
Life Association.
</TABLE>
24
<PAGE> 30
<TABLE>
<CAPTION>
POSITION WITH KILICO OTHER BUSINESS EXPERIENCE DURING
NAME AND AGE YEAR OF ELECTION PAST 5 YEARS OR MORE
----------------------------- ----------------------- -------------------------------------
<S> <C> <C>
Jerome J. Cwiok (47)......... Executive Vice Senior Vice President of KILICO 1993-
President 1994 and 1995; Executive Vice President since
Director 1995 1995, Senior Vice President
1993-1995, Vice President 1993,
Federal Kemper Life Assurance Company
and Fidelity Life Association.
Executive Vice President from
1986-1993 of Academy Insurance Group,
Atlanta, Georgia.
Eliane C. Frye (46).......... Executive Vice Senior Vice President of KILICO 1992-
President 1995 1995; Executive Vice President since
1995, Senior Vice President
1993-1995, Vice President 1988-1993,
Federal Kemper Life Assurance Company
and Fidelity Life Association.
Frederick L. Blackmon........ Senior Vice President Chief Financial Officer of Alexander
and Chief Financial Hamilton Life Insurance Company 1989-
Officer 1995 1995.
</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 Frank J. Julian, Assistant General
Counsel of KILICO. Katten Muchin & Zavis, 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.
EXPERTS
The financial statements of KILICO and the Separate Account have been
included in the Prospectus in reliance upon the reports 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.
Actuarial matters included in this prospectus have been examined by Steven
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
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.
25
<PAGE> 31
Financial Statements to be filed by Amendment.
26
<PAGE> 32
APPENDIX A
ILLUSTRATIONS OF CASH VALUES,
CASH SURRENDER VALUES,
DEATH BENEFITS
The tables in this Prospectus have been prepared to help show how values
under a Policy change with investment experience. The tables illustrate how Cash
Values, Surrender Values (reflecting the deduction of Surrender Charges, if any)
and Death Benefits under a Policy issued on an insured of a given age 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 is equivalent to an effective annual charge of 0.60% on a current
basis. This charge is guaranteed not to exceed an effective annual rate of
0.90%. In addition, the net investment returns also reflect the deduction of the
Funds investment advisory fees and other expenses of the Funds ( %, the average
of the fees and expenses for 1994). The tables also reflect applicable charges
and deductions including a 3.5% deduction against premiums, a monthly
administrative charge of $5 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 rate of return of
%, % and %, on a current basis. On a guaranteed basis, these
rates of return would be %, % and %, respectively. Cost of
insurance rates vary by issue age, sex, rating class and Policy Year and,
therefore, are not reflected in the approximate net annual investment rate of
return above.
The values shown are for Policies which are issued to a male preferred
nonsmoker. 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 age, sex and premium payment requested.
27
<PAGE> 33
Illustrations to be provided by Amendment.
28
<PAGE> 34
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
95-99 100
</TABLE>
* ATTAINED AGE AS OF THE BEGINNING OF THE POLICY YEAR
29
<PAGE> 35
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 Distribution 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.
II-1
<PAGE> 36
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 29 pages.
The undertaking to file reports.
Undertaking pursuant to Rule 484(b)(1) under the Securities Act
of 1933.
The signatures.
Written consents of the following persons:
A. Debra P. Rezabek, Esq. (Included in Opinion to be filed as
Exhibit 3(a)).
C. KPMG Peat Marwick, independent auditors (Included in Opinion
to be filed as Exhibit 6(a)).
D. Steven Powell, FSA (Included in Opinion to be filed as
Exhibit 3(b)).
The following exhibits:
<TABLE>
<CAPTION>
<S> <C>
1-A(1) KILICO Resolution establishing the Separate Account
1-A(3)(a) Distribution Agreement between KILICO and Investors Broker-
age Services, Inc. (IBS)
1-A(3)(b) Specimen Selling Group Agreement of IBS and KILICO General
Agent Agreement
1-A(3)(c) Schedules of commissions (To be filed by amendment)
1-A(5) Form of Policy
1-A(6)(a) KILICO Articles of Incorporation
1-A(6)(b) By-Laws of KILICO
1-A(10) Application for Policy (To be filed by amendment)
2 Specimen Notice of Withdrawal Right
3(a) Opinion and consent of legal officer of KILICO as to
legality of policies being registered (To be filed by
amendment)
3(b) Opinion and consent of actuarial officer of KILICO
regarding prospectus illustrations and actuarial matters
(To be filed by amendment)
6(a) Opinion and consent of independent auditors (To be filed by
amendment)
8 Procedures Memorandum, pursuant to Rule 6e-3(T)(b)(12)(iii)
(To be filed by amendment)
11 Representation, description and undertakings regarding
mortality and expense risk charge, pursuant to Rule
6e-3(T)(b)(13)(iii)(F)
</TABLE>
II-2
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
KILICO Variable Separate Account, has duly caused this 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 18th day of December 1995.
KILICO VARIABLE SEPARATE ACCOUNT
(Registrant)
By: Kemper Investors Life Insurance
Company
(Depositor)
By:
/s/ JOHN B. SCOTT
------------------------------------
John B. Scott, Chairman, Chief
Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
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 18th day of December 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------- -----------------------------------------------
<S> <C>
/s/ JOHN B. SCOTT Chairman, Chief Executive Officer, President
- ----------------------------------------------- and Director (Principal Executive Officer)
John B. Scott
/s/ JEROME J. CWIOK Executive Vice President and Director
- -----------------------------------------------
Jerome J. Cwiok
/s/ FREDERICK L. BLACKMON Senior Vice President and Chief Financial
- ----------------------------------------------- Officer (Principal Financial Officer)
Frederick L. Blackmon
/s/ JOHN H. FITZPATRICK Senior Vice President and Director
- -----------------------------------------------
John H. Fitzpatrick
/s/ DAVID B. MATHIS Director
- -----------------------------------------------
David B. Mathis
/s/ STEPHEN B. TIMBERS Director
- -----------------------------------------------
Stephen B. Timbers
/s/ JOSEPH R. SITAR Chief Accounting Officer (Principal Accounting
- ----------------------------------------------- Officer)
Joseph R. Sitar
</TABLE>
II-3
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER TITLE PAGES
- ------ ---------------------------------------------------------------------- ----------
<C> <S> <C>
1-A(1) KILICO Resolution establishing the Separate Account
1-A(3)(a) Distribution Agreement between KILICO and Investors Brokerage
Services, Inc.
1-A(3)(b) Specimen Selling Group Agreement of IBS and KILICO General Agent
Agreement
1-A(5) Form of Policy
1-A(6)(a) KILICO Articles of Incorporation
1-A(6)(b) By-laws of KILICO
2 Specimen Notice of Withdrawal Right
11 Representation, description and undertakings regarding mortality and
expense risk charge, pursuant to Rule 6e-3(T)(b)(13)(iii)(F)
</TABLE>
<PAGE> 1
EXHIBIT 1-A(1)
CERTIFIED RESOLUTION
KEMPER INVESTORS LIFE INSURANCE COMPANY
I, Frank J. Julian, Assistant Secretary of Kemper Investors Life
Insurance Company, certify that the attached resolution is true and correct
copy of a resolution adopted by the Executive Committee of the Board of
Directors of Kemper Investors Life Insurance Company on the 22 day of January,
1987, and that said resolution is in full force and effect and has not been
revoked.
IN WITNESS, I have signed this certification on the 18th day of
December, 1995.
/s/ Frank J. Julian
---------------------
<PAGE> 2
RESOLUTION
THE KILICO VARIABLE SEPARATE ACCOUNT
WHEREAS, Illinois Insurance Code, Section 245.21 provides that a
domestic life insurance company may authorize the establishment of one or more
separate accounts; and
WHEREAS, competitive conditions in the marketing of life insurance make
it both desirable and in the best interest of the Corporation for the
Corporation to be able to offer separate investment facilities; and
WHEREAS, the Board of Directors of this Corporation desires to authorize
and empower its officers to establish and maintain a separate account, so that
the Corporation may exercise each and every power and right permitted to it by
Section 245.21, and other sections relating thereto, of the Illinois Insurance
Code;
NOW, THEREFORE, BE IT RESOLVED, THAT:
1. A separate account designated The KILICO Variable Separate
Account ("Variable Separate Account") of the Corporation is
established and empowered to:
a. Provide for the sale of variable life insurance
policies issued and administered by the Corporation
which provide for the allocation of amount paid to or
held by the Corporation under such policies to the
Variable Separate Account.
b. Register, to the extent required, under the Investment
Company Act of 1940, or file a notification of claim of
exemption from such registration, and make applications
for such exemptions or orders under the provisions of
such Act as may appear to be necessary or desirable;
c. Register, to the extent required, the policies or units
of interest therein under the Securities Act of 1933;
d. Provide for custodial or depository arrangements for
assets allocated to the Variable Separate Account
including self custodianship or safekeeping
arrangements by the Corporation;
e. Select an independent public accountant to audit the
books and records of the Variable Separate Account;
f. Invest or reinvest the assets of the Variable Separate
Account in securities issued by one or more investment
companies registered under the Investment Company Act
of 1940;
g. Divide the Variable Separate Account into subaccounts
with each subaccount investing in shares of designated
classes of designated investment companies or other
appropriate securities; and
<PAGE> 3
-2-
h. Perform such additional functions and take such
additional action as may be necessary or desirable to
carry out the foregoing and the intent and purposes
thereof;
AND FURTHER RESOLVED, THAT:
2. The income, gains and losses, whether or not realized, from
assets allocated to the Variable Separate Account shall, in
accordance with the variable life insurance policies, be
credited to or charged against the Variable Separate Account
without regard to other income, gains or losses of the
Corporation; and the Variable Separate Account shall at all
times be created, operated and maintained in compliance with all
applicable federal and state laws governing insurance company
separate accounts;
3. The proper officers are authorized, as they deem appropriate
from time to time, to divide, modify or eliminate any
subaccounts of the Variable Separate Account, change the
designations of the Variable Separate Account to another
designation, designate further subaccounts, deregister the
Variable Separate Account under the Investment Company Act of
1940 and deregister the policies or units of interest therein
under the Securities Act of 1933;
4. The proper officers are, and each of them hereby is, authorized
to invest cash from the Corporation's general account in the
Variable Separate Account or in any division thereof as may be
deemed necessary or appropriate to facilitate the commencement
of the Variable Separate Account's operations or to meet any
minimum capital requirements under the Investment Company Act of
1940 and to transfer cash or securities from time to time
between the Corporation's general account and the Variable
Separate Account as deemed necessary or appropriate so long as
such transfers are not prohibited by law and are consistent with
the terms of the variable life insurance policies issued by the
Corporation providing for allocations to the Variable Separate
Account;
5. The fiscal year of the Variable Separate Account shall end on
the 31st day of December of each year;
6. The fundamental investment policies of the Variable Separate
Account shall be to invest or reinvest the assets of the
Variable Separate Account in securities issued by Kemper
Investors Fund or such other investment companies registered
under the Investment Company Act of 1940 as the proper officers
of the Corporation may designate pursuant to the provisions of
the variable life insurance policies issued by the Corporation
providing for allocations to the Variable Separate Account; and
the proper officers of the Corporation are authorized and
directed to prepare and execute any necessary agreements to
enable the Variable Separate Account to carry out this
investment policy;
<PAGE> 4
-3-
7. The proper officers of the Corporation are authorized to
prepare, execute and file all periodic reports required under
the Investment Company Act of 1940 and the Securities Exchange
Act of 1934 in connection with the Variable Separate Account and
the variable life insurance policies;
8. The Corporation may register variable life insurance policies,
or units of interest thereunder, under the Securities Act of
1933 and may register the Variable Separate Account as a unit
investment trust under the Investment Company Act of 1940 and,
in connection therewith, the proper officers of the Corporation
are, and each of them hereby is, authorized to prepare, execute
and file with the Securities and Exchange Commission (1)
registration statements under the Securities Act of 1933 and the
Investment Company Act of 1940, including prospectuses,
amendments, supplements, exhibits and other documents relating
thereto, (2) applications and amendments thereto for exemptions
from or orders under the Investment Company Act of 1940 and (3)
requests from the Securities and Exchange Commission for no
action and interpretive letters in such form and at such times
as the proper officer executing the same may deem necessary or
appropriate;
9. The proper officers of the Corporation are, and each of them is,
authorized to effect all such registrations, filings and
qualifications under blue sky or other applicable securities
laws and regulations, insurance securities laws and insurance
laws and regulations of such states and other jurisdictions as
they may deem necessary or appropriate, with respect to the
Corporation and any variable life insurance policies; such
authorization to include registration, filing and qualification
of the Corporation and of said policies, as well as
registration, filing and qualification of officers, employees
and agents of the Corporation as brokers, dealers, agents,
salesmen, or otherwise; and such authorization also to include
authority to prepare, execute, acknowledge and file all such
applications, applications for exemptions, appointments,
certificates, affidavits, covenants, consents to service of
process and other instruments and to take all such action as the
proper officer executing the same or taking such action may deem
necessary or desirable;
10. The Corporation's Secretary, Robert J. Engling, Esquire, is
hereby appointed as agent for service for, is duly authorized to
receive communications and notices with respect to, and is duly
authorized to exercise all powers given to such agent in
connection with (1) any registration statement or amendment
thereto under the Securities Act of 1933 or the Investment
Company Act, (2) any Investment Company Act exemptive
application or order, (3) any no action letter or interpretive
letter request under the Securities Act or Investment Company
Act or (4) any similar matter pertaining to state blue sky or
insurance regulation;
<PAGE> 5
-4-
11. The signature of any director of officer required by law to be
affixed to any document referred to in this resolution may be
affixed by said director or officer personally, or by an
attorney-in-fact duly constituted in writing by said director or
officer to sign his name thereto;
12. The proper officers of the Corporation are, and each of them
hereby is, authorized to establish procedures under which the
Corporation will provide for voting rights for owners of the
variable life insurance policies with respect to securities
owned by the Variable Separate Account;
13. The proper officers of the Corporation are, and each of them
hereby is, authorized to execute such agreement or agreements as
deemed necessary and appropriate with (1) Kemper Financial
Services, Inc., or another qualified entity under which Kemper
Financial Services, Inc., or such other qualified entity, will
be appointed principal underwriter and distributor of the
variable life insurance policies and (2) with one or more
qualified banks or other qualified entities to provide
administrative and/or custodial services in connection with the
establishment and maintenance of the Variable Separate Account
and the design, issuance and administration of the policies;
14. The proper officers of the Corporation are, and each of them
hereby is, authorized, in the name and on behalf of the
Corporation, to execute and deliver such corporate documents and
certificates and to take such further action as they deem
necessary or desirable, including, but not limited to, the
payment of applicable fees, in order to effectuate the purposes
of any of the foregoing matters.
<PAGE> 1
EXHIBIT 1-A(3)(a)
DISTRIBUTION AGREEMENT
BETWEEN
KEMPER INVESTORS LIFE INSURANCE COMPANY
AND
INVESTORS BROKERAGE SERVICES, INC.
THIS AGREEMENT is made on this 31st day of January, 1995 between KEMPER
INVESTORS LIFE INSURANCE COMPANY ("KILICO") on its own behalf and on behalf of
the KILICO Variable Separate Account (the "Account") and INVESTORS
BROKERAGE SERVICES, INC. ("IBS"). In consideration of the mutual covenants
contained in this Agreement, the parties agree as follows:
1. KILICO appoints IBS to promote the sale of variable life insurance
policies ("Policies") issued by KILICO and the Account. IBS will promote
such Policies in those states in which KILICO has variable policy authority
and in which the Policies are eligible for sale under applicable state law.
KILICO agrees to inform IBS of the status of such matters in each of these
states from time to time.
2. The solicitation of Policies shall be made by persons who are
registered representatives of National Association of Securities Dealers, Inc.
("NASD") member broker-dealers who have a Selling Group Agreement with IBS,
which agreement shall encompass the promotion of the sale of the Policies;
provided that, no such registered representative shall be allowed to
participate in the solicitation of the Policies unless such person has been
appointed to solicit variable Policies by KILICO in any state in which such
solicitation may occur.
3. All books and records maintained by KILICO in connection with
the sale of Policies will be maintained and preserved by KILICO in conformity
with the requirements of Rule 17a-3 and 17a-4 under the Securities Exchange Act
of 1934, to the extent that such requirements are applicable to the Policies.
4. KILICO assumes full responsibility for the activities of all
persons engaged directly or indirectly in the promotion of the solicitation of
the Policies, including all sales representatives and associated persons as
defined in the Securities Exchange Act of 1934. IBS shall, in the course of
contracting with NASD member broker-dealers with which it has agreements,
require that such broker-dealers be responsible for the acts of their
registered representatives and associated persons.
5. Compensation to broker-dealers for the sale of Policies shall
be paid by KILICO through IBS. Any obligation by IBS to pay such compensation
will occur only following receipt of such amounts by IBS from KILICO.
-1-
<PAGE> 2
6. IBS, when requested by KILICO, shall suspend its efforts to
effectuate sales of the Policies at any time KILICO shall request.
7. KILICO shall bear the expenses of printing and distributing
registration statements and prospectuses relating to the public sale of
Policies pursuant to this Agreement. KILICO agrees to bear the expenses of
qualification of the Policies for sale and of continuing the qualification in
the various states. KILICO shall bear the expenses of any sales literature
used by IBS or furnished by IBS to dealers in connection with offering the
Policies and the expenses of advertising in connection with such offerings,
except for customized pieces the cost of which shall be mutually agreed to by
KILICO and IBS.
8. IBS agrees that it will not use any sales material as defined
under the rules of the NASD or by the statutes or regulations of any state in
which the Policies may be solicited, unless such material has received prior
written approval by KILICO.
9. IBS, KILICO and the Account shall each comply with all
applicable provisions of the Investment Company Act of 1940, Securities Act of
1933 and of all Federal and state securities and insurance laws, rules and
regulations governing the issuance and sale of the Policies.
10. KILICO agrees to indemnify IBS against any and all claims,
liabilities and expenses including but not limited to reasonable attorneys fees
which IBS may incur under the Investment Company Act of 1940, Securities Act of
1933 and all Federal and state securities and insurance laws, rules and
regulations governing the issuance and sale of the Policies, 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
Account, or any alleged omission to state a material fact therein, the omission
of which makes any statement contained therein misleading or of any alleged act
or omission in connection with the offering, sale or distribution of the
Policies by any registered representatives or associated persons of a NASD
member broker-dealer which has an agreement with IBS. IBS agrees to indemnify
KILICO and the Account against any and all claims, demands, liabilities and
expenses, including but not limited to reasonable attorneys fees, which KILICO
or the Account may incur, arising out of or based upon any act 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.
KILICO acknowledges that IBS may similarly attempt to hold such an NASD member
broker-dealer responsible for the acts of registered representatives and
associated persons; and to the extent KILICO is obligated to indemnify IBS
under this Agreement, IBS agrees to assign its rights against such
broker-dealers to KILICO.
11. KILICO agrees to supply IBS with such information as may be
reasonably required by IBS including the "net accumulation unit value" computed
as of the time prescribed by and in compliance with all pertinent requirements
of the NASD and the Securities and Exchange Commission.
-2-
<PAGE> 3
12. This Agreement shall be effective February 1, 1995. This
Agreement is subject to termination by either party upon thirty (30) days'
prior written notice to the other party. This Agreement may not be assigned by
either party without the written consent of the other party. This Agreement
shall be interpreted according to the laws of the State of Illinois.
IN WITNESS WHEREOF, this Agreement has been signed by the parties on the date
first above written.
KEMPER INVESTORS LIFE INSURANCE COMPANY
ATTEST: BY: /s/ John B. Scott
--------------------------------
TITLE: Chairman, President and
Chief Executive Officer
/s/ Debra P. Rezabek
- ---------------------------------
TITLE: Asst. Secretary
INVESTORS BROKERAGE SERVICES, INC.
ATTEST: BY: /s/ Otis R. Heldman, Jr.
-------------------------------
TITLE: Marketing Officer
/s/ Debra P. Rezabek
- ---------------------------------
TITLE: Secretary
-3-
<PAGE> 1
EXHIBIT 1-A(3)(b)
INVESTORS BROKERAGE SERVICES, INC.
SPECIMEN SELLING GROUP AGREEMENT
THIS AGREEMENT ("Agreement") is made by and between Investors Brokerage
Services, Inc. ("IBS") and Broker-Dealer.
RECITALS:
A. IBS, pursuant to the provisions of Distribution Agreements
("Distribution Agreements") between it and Kemper Investors Life Insurance
Company ("KILICO") and between it and Federal Kemper Life Assurance Company
("FKLA"), acts as the principal underwriter of certain variable annuity
contracts and variable life insurance policies (the "variable products" or
"Contracts") issued by KILICO and FKLA. Such Contracts, and the investment
options available thereunder, are identified in Schedule 1 to this Agreement at
the time that this Agreement is executed, and such other Contracts that may be
added to Schedule 1 from time to time in accordance with Section 1.5 of this
Agreement. IBS desires that Broker-Dealer distribute such variable products in
those states or jurisdictions in which Broker-Dealer, IBS, KILICO, FKLA and the
Contracts are appropriately licensed, qualified or approved, and Broker-Dealer
desires to sell such Contracts, through its agents in such states or
jurisdictions, on the terms and conditions set forth hereinafter. KILICO and
FKLA have authorized IBS to enter into separate written agreements with broker-
dealers pursuant to which such broker-dealers would be authorized to
participate in the distribution of the Contracts and would agree to use their
best efforts to solicit applications for the Contracts to the general public.
B. KILICO and FKLA, pursuant to General Agent Agreements, have
authorized Broker-Dealer or an affiliate to act as a general agent ("General
Agent") for the solicitation of applications for the Contracts and to engage in
the distribution activities contemplated by this Agreement and such General
Agent Agreements.
C. The parties to this Agreement desire that Broker-Dealer be authorized
to solicit applications for the sale of the Contracts to the general public
subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and covenants hereinafter set forth, the parties agree as follows:
Section 1: Representations and Warranties; Authorizations
1.1 Broker-Dealer agrees to use its best efforts on behalf of IBS while
performing the functions set forth herein. Broker-Dealer shall be free to
exercise its own judgment as to whom to solicit and the time, place, and manner
of solicitation. Broker-Dealer shall pay all expenses incurred by it hereunder
and shall comply with all applicable federal and state laws, ordinances and
regulations relating thereto.
<PAGE> 2
1.2 Broker-Dealer is authorized, except as hereinafter specifically
provided, to cause its representatives ("Registered Representatives") to sell
such Contracts in the states and jurisdictions in which Broker-Dealer and its
Registered Representatives are appropriately licensed, registered or otherwise
qualified and in which the Contracts are duly authorized. Broker-Dealer shall
not have the authority nor shall it grant such authority to any of its
Registered Representatives, on behalf of IBS, and KILICO and/or FKLA: to make,
alter or discharge any Contract or other contract entered into pursuant to a
Contract; to waive any Contract's forfeiture provisions; to extend the time of
paying any premiums; or to receive any monies or premiums from applicants for
or purchasers of the Contracts (except for the sole purpose of forwarding
monies or premiums to KILICO or FKLA). IBS, in its sole discretion, may reject
any application for a Contract submitted to it by the Broker-Dealer or any of
its Registered Representatives.
1.3 IBS, subject to the terms and conditions contained herein, hereby
authorizes Broker-Dealer as an independent contractor, on a non-exclusive
basis, to make sales of such Contracts for which IBS acts as distributor.
Broker-Dealer agrees to direct the sales activities of its Registered
Representatives and to enforce written supervisory procedures to assure strict
compliance with applicable rules and regulations under the Securities Exchange
Act of 1934 ("1934 Act"), the National Association of Securities Dealers, Inc.
("NASD") rules, and other applicable federal and state statutes and
regulations.
1.4 Nothing herein contained shall constitute Broker-Dealer or any of its
Registered Representatives as employees of IBS, KILICO or FKLA in connection
with the solicitation of applications for the Contracts.
1.5 Schedule 1 to this Agreement may be amended by IBS at its sole
discretion from time to time to include other Contracts (or investment options)
distributed by IBS pursuant to the Distribution Agreements or other
distribution agreements with KILICO and FKLA, or to delete Contracts (or
investment options) from the Schedule. The provisions of this Agreement shall
be equally applicable to each Contract listed on Schedule 1 unless the context
otherwise requires.
Section 2: Representations and Warranties:
Registration, Licensing and Compliance
2.1 Broker-Dealer represents, warrants and covenants that:
a. It is and will remain at all times during the terms of this
Agreement a member in good standing of the NASD and a
broker-dealer duly registered with the Securities and Exchange
Commission ("SEC") under the 1934 Act and licensed as a
broker-dealer in each state or other jurisdiction in which
Broker-Dealer intends to perform its functions and fulfill its
obligations under this Agreement.
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<PAGE> 3
b. It is in compliance, and during the term of this Agreement, will
remain in compliance, with all applicable federal and state
security laws and regulations and the requirements of the NASD
and any applicable securities exchanges of which it is a member.
c. It is a corporation organized, existing and in good standing
under applicable state law and is qualified to do business as a
corporation in those states or jurisdictions where it is or will
be doing business.
d. Only Registered Representatives of Broker-Dealer who are agents
of KILICO and FKLA, and who are licensed, registered, or
otherwise qualified to offer and sell the variable products, may
do so under this Agreement and as permitted under the applicable
insurance laws of such state or jurisdiction under which the
Registered Representatives are authorized to perform their
activities.
e. It is in compliance with all applicable insurance laws and
regulations, including without limitation state insurance laws
and regulations imposing insurance licensing requirements.
f. It shall carry out its sales and administrative obligations
under this Agreement in continued compliance with federal and
state laws and regulations, including those governing securities
and/or insurance-related activities or transactions, as
applicable.
g. It has blanket bond insurance coverage. Broker-Dealer has the
affirmative duty to maintain its blanket bond insurance
coverage. Broker-Dealer will notify IBS immediately in the
event a determination is made to cancel, terminate or
substantially modify its blanket bond insurance coverage.
2.2 Broker-Dealer will be responsible for the training, supervision and
control of its Registered Representatives engaged in the offer and sale of the
Contracts and will supervise strict compliance with applicable federal and
state securities laws and NASD rules. IBS shall have no responsibility in
connection with such program of supervision and compliance.
2.3 If General Agent is an affiliate of Broker-Dealer as reflected in
Recital B. to this Agreement, then by engaging in the distribution activities
contemplated by this Agreement, Broker-Dealer represents and warrants that:
a. Broker-Dealer
(i) Has obtained a letter from the Staff of the SEC
advising Broker-Dealer that the Staff will not
3
<PAGE> 4
recommend enforcement action if General Agent is not registered
as a broker-dealer with the SEC; or
(ii) It is relying upon a no-action letter issued by the Staff of the
SEC at the request of a broker-dealer that, also, was a licensed
insurance agent engaged in distribution activities similar to
those contemplated by this Agreement, and where the Staff did
not recommend enforcement action if the insurance agent was not
registered as a broker-dealer with the SEC; and
(iii) It is complying and will continue to comply with the conditions
set forth in such letters at all times while this Agreement is
in effect; or
b. that at the time that this Agreement becomes effective and
during the term of this Agreement:
(i) General Agent is wholly-owned by Broker-Dealer or is
wholly-owned by one or more associated persons of Broker-Dealer;
(ii) General Agent and its personnel will be "associated persons" of
Broker-Dealer within the meaning of Section 3(a)(18) of the 1934
Act;
(iii) General Agent will engage in the offer or sale of the Contracts
only through persons who are also Registered Representatives of
Broker-Dealer;
(iv) General Agent will not receive or handle customer funds or
securities;
(v) Broker-Dealer will be responsible for the training, supervision
and control of its Registered Representatives engaged in the
offer or sale of the Contracts on behalf of General Agent, as
required under the 1934 Act, the NASD rules and other applicable
federal and state statutes and regulations, and will also be
responsible for the supervision and control of any of its
associated persons who are owners, directors, or executive
officers of General Agent;
(vi) Broker-Dealer will, in the offer and sale of the Contracts by it
or General Agent, comply with all applicable requirements of the
1934 Act and the NASD, including the requirement to maintain and
preserve books and records under Section 17(a) of the 1934 Act
and the rules thereunder; and
(vii) Commissions and fees relating to the Contracts will be reflected
in the quarterly FOCUS reports and the
4
<PAGE> 5
fee assessment reports filed by Broker-Dealer with the NASD.
2.4 Broker-Dealer shall notify IBS and KILICO and FKLA immediately in
writing if Broker-Dealer fails to comply with any of the applicable provisions
set forth above.
2.5 IBS represents and warrants that all Contracts are legally issued,
registered and filed as required by applicable federal securities and state
insurance laws.
Section 3: Sales Materials
3.1 Broker-Dealer shall submit to IBS, for written approval in advance of
use, all promotional, sales, and advertising material and signs involving the
use of IBS's, KILICO's and FKLA's name and/or pertaining to the sale of any
Contract.
3.2 IBS will file such materials or will cause such materials to be filed
with the SEC, the NASD, and with any state securities regulatory authorities,
as appropriate.
Section 4: Compensation
4.1 Except as otherwise stated herein, Broker-Dealer shall be entitled to
commissions with respect to sales of such Contracts it shall make in accordance
with the Schedule of Commissions under the General Agent Agreements with KILICO
and FKLA. Commissions are payable by KILICO and FKLA through IBS or as
otherwise permitted by law or regulations. Any obligation of IBS to pay such
commissions will occur only following receipt of such amounts by IBS from
KILICO or FKLA.
Section 5: Term and Exclusivity of Agreement
5.1 No relationship of principal and agent or partnership or joint
venture between the parties hereto is intended to be established and neither
party shall hold itself out as the agent, partner or joint venturer of or with
the other party in any respect whatsoever. Except for this Agreement and the
General Agent Agreement, no other legal relationship is intended between the
parties.
5.2 This Agreement may be terminated at any time by either party upon
thirty (30) days written notice to the other, and may be terminated immediately
by IBS for cause. For purposes of this Section, "cause" shall mean failure to
return money to clients where appropriate, failure to account for any money
received from or on behalf of IBS, any fraud, misrepresentation or dishonesty
in any relationship with IBS, its affiliates, or any past, present or proposed
client, violation of any federal or state law or regulation, or violation of
any of the terms of this Agreement.
5.3 Notice of termination shall be deemed to be given on the day
mailed or delivered by hand to an officer of either party. If mailed to IBS,
such notice shall be addressed to the principal
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<PAGE> 6
office of IBS, and if mailed to the Broker-Dealer, shall be addressed to the
last known address as shown on the records of IBS.
Section 6: Complaints and Investigations
6.1 Broker-Dealer shall cooperate fully in any securities or insurance
regulatory investigation or proceeding or judicial proceeding with respect to
IBS, KILICO and FKLA, and/or Broker-Dealer and its Registered Representatives
or any Affiliate, to the extent that such investigation or proceeding is in
connection with the Contracts marketed under this Agreement.
Section 7: Assignment
7.1 Broker-Dealer may not assign this Agreement without the prior written
approval of IBS.
7.2 This Agreement is exclusively for and shall inure to the benefit of
the parties hereto, their respective heirs, legal representatives, successors
and assigns and shall not be deemed to create any rights for the benefit of
third parties.
Section 8: Confidentiality
8.1 Each party will keep confidential information it may acquire as a
result of this Agreement regarding IBS, its affiliates' and subsidiaries'
affairs, including any customer list or other propriety information that it may
acquire in the performance of this Agreement, and shall not use such customer
list or information without the prior written consent of the other party which
requirement shall survive the termination of this Agreement.
Section 9: Modification of Agreement
9.1 This Agreement supersedes all prior agreements, either oral or
written, between the parties relating to the Contracts and, except for any
amendment of Schedule 1 pursuant to the terms of Section 1.5 hereof or of the
Schedule of Commissions pursuant to the terms of Section 4 hereof, may not be
modified in any way unless by written agreement signed by all of the parties.
Section 10: Indemnification
10.1 Broker-Dealer shall be responsible and liable for any damages arising
out of the acts or omissions of Broker-Dealer, its Registered Representatives,
and/or its employees and does hereby agree to indemnify and hold IBS harmless
against any loss or expense arising out of any of its Registered
Representatives, any Affiliate and/or employees failure to carry out fully and
without negligence the duties and responsibilities assigned to it herein.
10.2 If any action or proceeding shall be brought against Broker-Dealer
relating to a Contract sold pursuant to this Agreement, Broker-Dealer shall
give prompt written notice to IBS.
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<PAGE> 7
10.3 In the event of any dispute with a Contract owner, IBS shall have the
right to take such action as IBS may in its sole discretion deem necessary to
promptly effect a mitigation of damages or limitation of losses without
obtaining the prior consent of Broker-Dealer and without waiving or electing to
relinquish any rights or remedies IBS may have against Broker-Dealer.
10.4 IBS shall have the right to settle with any Contract owner engaged in
a dispute with IBS or Broker-Dealer without the prior consent of Broker-Dealer
and without waiving or electing to relinquish any rights or remedies IBS may
have against Broker-Dealer.
10.5 The indemnification provisions of this Agreement shall remain
operative and in full force and effect, regardless of the termination of this
Agreement and shall survive any such termination.
10.6 Without limiting the foregoing indemnities, IBS and Broker-Dealer
each agree to indemnify and hold harmless the other against any breach of
representation, warranty or covenant herein by the indemnifying party.
Section 11: Right, Remedies, etc. are Cumulative
11.1 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws. Failure of either party to insist upon strict compliance with
any of the conditions of this Agreement shall not be construed as a waiver of
any of the conditions, but the same shall remain in full force and effect. No
waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute a waiver of any other provisions, whether or not similar, nor shall
any waiver constitute a continuing waiver.
Section 12: Notices
12.1 All notices hereunder are to be made in writing and shall be either
hand delivered or transmitted by registered or certified United States mail
with return receipt requested to the principal office of the party and shall be
effective upon delivery, except as otherwise provided in Section 5.2 of this
Agreement.
Section 13: Interpretation, Jurisdiction, etc.
13.1 This Agreement constitutes the whole agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior oral
or written understandings, agreements or negotiations between the parties with
respect to the subject matter hereof. No prior writings by or between the
parties hereto with
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<PAGE> 8
respect to the subject matter hereof shall be used by either party in
connection with the interpretation of any provisions of this Agreement.
13.2 This Agreement is made in the State of Illinois, and all questions
concerning its validity, construction or otherwise shall be determined under
the laws of Illinois without giving effect to principles of conflict of laws.
Section 14: Headings
14.1 The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
Section 15: Counterparts
15.1 This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
Section 16: Severability
16.1 This is a severable Agreement. In the event that any provisions of
this Agreement would require a party to take action prohibited by applicable
federal or state law or prohibit a party from taking action required by
applicable federal or state law, then it is the intention of the parties hereto
that such provisions shall be enforced to the extent permitted under the law,
and, in any event, that all other provisions of this Agreement shall remain
valid and duly enforceable as if the provision at issue had never been a part
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year indicated below.
INVESTORS BROKERAGE ----------------------------------
SERVICES, INC. ("Broker-Dealer")
BY _______________________________ BY _______________________________
Print Name _______________________ Print Name ________________________
Title ____________________________ Title _____________________________
Date _____________________________ Date ______________________________
8
<PAGE> 9
/ / FEDERAL KEMPER LIFE ASSURANCE COMPANY
/ / FIDELITY LIVE ASSOCIATION, A MUTUAL LEGAL RESERVE COMPANY
/ / KEMPER INVESTORS LIFE INSURANCE COMPANY
/ / INVESTORS BROKERAGE SERVICES INSURANCE AGENCY, INC. (And its affiliated
companies)
Long Grove, IL 60049-0001
GENERAL AGENT'S AGREEMENT
In this AGREEMENT, the words you, your and yours refer to the General Agent
named on the last page of this AGREEMENT and the words us, we, our and Company
refer to the company(ies) indicated above.
Upon the signing of this AGREEMENT, you and the Company agree as follows:
1. APPOINTMENT
We appoint you to represent us as set forth below.
2. We authorize you (i) to solicit personally, and through Agents (and
Brokers where express authority has been given, see Section 3-E)
appointed by you, applications satisfactory to us for policies of life
insurance and annuity contracts specified in the attached SCHEDULE OF
COMMISSIONS AND ALLOWANCES and to send those applications to us, (ii)
to collect the initial premium for those policies and contracts, (iii)
to promptly send those premiums to us, and (iv) to make proper
delivery of policies and contracts issued by us. All these activities
shall be conducted in accordance with our rules and requirements
governing them and it is agreed that:
A. All applications for our policies and contracts shall be made
on our forms and completed applications and supporting
documents shall be considered our property and promptly
delivered to us.
B. All applications submitted to us shall be evaluated in
accordance with our underwriting rules and regulations and any
assumptions of legal liability on them shall be made at our
sole discretion. All applications are subject to acceptance
by the Company at its sole discretion.
C. All checks or money orders for initial premiums shall be drawn
to our order unless prior written approval to designate
another payee has been granted by an authorized officer of the
Company and no such check or money order shall be endorsed by
you, your Agents, Brokers or employees.
D. The full amount of the initial premium for the mode of premium
selected must be collected by you, your Agents or Brokers on
or before delivery of any life insurance policy or annuity
contract.
E. All money you, your Agents or Brokers receive as payment of
any premium on our policies or contracts shall be held in a
fiduciary capacity only and promptly sent to the Company.
Further, you are authorized to recruit Agents and to appoint Brokers to
represent you in the solicitation of insurance as authorized in this AGREEMENT
and to recommend their licensing to us. In all cases, however, we reserve the
right to refuse to license any such proposed Agent or Broker.
<PAGE> 10
You may contract directly with approved Agents or Brokers under agreements
suitable for governing the solicitation of insurance as authorized by us. In
the event you request us to pay commissions earned by your Agents or Brokers
directly to them or to provide you with separate checks for the commissions
earned by them, then you shall use the printed forms of AGENT'S, BROKER'S AND
SINGLE CASE AGREEMENTS furnished by us. None of these AGREEMENTS shall be in
force until we receive notice of your intention to use them and the notice has
been acknowledged in writing by an officer of the Company.
3. LIMITATION OF AUTHORITY
Unless provided in the AGREEMENT, you shall have no authority to:
A. alter, modify, waive or change any of the terms, rates or
conditions of our applications, policies or contracts, or any
other Company form;
B. make any representations to any person concerning the policies
or contracts covered by the AGREEMENT except as may be
contained in the sales literature, rate manual, material and
advertising furnished by us or previously approved in writing
by an authorized officer of the Company;
C. print, publish, use or disseminate any advertisement, sales
literature, circular, policy analysis, mailing piece or other
document relating to policies or contracts to be marketed
under this AGREEMENT or relating to us unless such material
has been first submitted to us for review and such printing,
publication, use or dissemination has been authorized in
writing by an authorized officer of the Company. Any such use
shall be subject to any terms, conditions or limitations which
may be imposed by us in the Authorization.
D. incur any indebtedness whatsoever in behalf of or in the name
of the Company;
E. accept business which has been obtained on a brokerage basis.
This AGREEMENT is not intended to include brokerage business
and the distribution of Company rates, brochures, sales
literature or advertising materials to Agents or Agencies to
encourage brokerage business is prohibited.
4. RESPONSIBILITIES OF THE PARTIES
A. RECORDS
You will keep proper records and accounts as specified by us
relating to the business transacted under the authority of
this appointment. We reserve the right, during regular
business hours, to review and make copies of these records or
accounts. Upon request you will account in the manner
prescribed by us for all Company materials provided to you.
B. LICENSING
As long as this AGREEMENT remains in force, we shall obtain
necessary state appointments for you and any Agents or Brokers
appointed by you who have been approved by us to represent
you. In addition, we shall pay for the renewal of such state
appointments provided that the individual Agent or Broker has
had production at levels satisfactory to the Company in the
prior twelve months.
<PAGE> 11
C. CONDUCT
You will conduct your activities as authorized in this
AGREEMENT in accordance with all laws and regulations in force
in the jurisdictions in which you are authorized to transact
business.
D. SUPERVISION
You agree to supervise your Agents and Brokers who solicit
applications for our insurance policies and annuity contracts
as provided in this AGREEMENT and to cause them to comply with
all rules, regulations, and obligations imposed on you.
E. INDEMNIFICATION
You shall be responsible to us for your acts and the acts of
your Agents and Brokers appointed by you and shall indemnify
and hold us harmless from any loss or expense on account of
any acts by you or any of your Agents or Brokers which are not
authorized by the terms of this AGREEMENT.
F. COOPERATION
You and the Company agree to cooperate fully with each other
in any state or federal regulatory investigation or proceeding
to the extent that it is related to matters pertaining to this
AGREEMENT.
5. RESERVATION OF RIGHTS
In addition to other rights set forth in this AGREEMENT, we
specifically reserve the right to (i) modify or amend any policy or
contract form or its premium rates, (ii) discontinue or withdraw any
policy or contract form from any state, (iii) fix maximum and minimum
limits on the amounts for which any policy or contract form may be
issued, (iv) modify or alter the conditions or terms under which any
policy or contract form may be sold, (v) cease doing business in any
state, (vi) amend, modify, delete or add any Company rule or
regulation upon giving you written notice of the change, and (vii)
require that you be bonded in a manner and amount which bears a
reasonable relationship to the composition and volume of your business
with the Company.
6. COMMISSIONS
We will pay you as full compensation for services rendered commissions
and/or service allowances at the rates provided and subject to the
terms and conditions contained in the attached SCHEDULE OF COMMISSIONS
AND ALLOWANCES. These commissions and/or allowances shall accrue only
with respect to premiums paid in cash to the Company for policies or
contracts actually issued by us pursuant to applications procured by
you, your Agents, or Brokers while this AGREEMENT remains in force and
bearing your name and/or the name of one or more of your licensed
Agents or Brokers.
We reserve the right to change the rates and any of the terms and
conditions (except those relating to vesting) set forth in the
SCHEDULE OF COMMISSIONS AND ALLOWANCES at any time by giving written
notice to you. You agree to immediately communicate any such change
to all Agents and Brokers appointed by you including those to whom the
Company pays commissions directly. The notice shall be effective on
the date set forth on the new SCHEDULE and any commissions and/or
service allowances accruing with respect to policies or contracts we
issue pursuant to applications received in our home office from you,
your Agents, or Brokers after that date shall be paid as provided in
the new SCHEDULE.
<PAGE> 12
7. TERMINATION
This AGREEMENT shall be subject to immediate termination at any time
by you, or by the Company, upon receipt of written notice to the other
party. The notice shall be delivered personally or mailed to the last
known address of the other party via United States Mail.
This AGREEMENT shall automatically terminate if any one of the
following events occur:
1. You die or are adjudged legally incompetent. In event of
death of the General Agent, such compensation as may become
due under this AGREEMENT shall be payable to the estate of the
General Agent. If the General Agent is a partnership, then
upon death of any member, the Company shall continue to pay
such compensation as may become due under this AGREEMENT to
the partnership unless or until properly notified to the
contrary in writing by any party claiming interest in such
compensation.
2. You cease doing business in the legal format indicated above
your signature on this AGREEMENT.
In the event of termination as provided in this AGREEMENT.
1. Any commissions or allowances remaining payable to you shall be paid
in accordance with the provisions contained in the SCHEDULE OF
COMMISSIONS AND ALLOWANCES;
2. The Company reserves the right at its discretion to appoint a licensed
agent to service the business produced under this AGREEMENT.
3. You or your legally appointed representative agree, upon demand, to
deliver all of the Company's property to us and shall, upon demand,
repay any existing indebtedness owed to us;
4. You or your legally appointed representative shall carry out all
residual obligations which arose while this AGREEMENT was in force;
5. If any payments to you under this AGREEMENT fail to exceed $1,000.00
in any calendar year, we shall, after the end of such year, have the
option, exercisable in our sole discretion, of purchasing from you any
future commissions and allowances payable for their present value.
"Present Value" as used here means the value of such commissions and
allowances determined by us on the basis of accepted actuarial
practices.
This AGREEMENT may be terminated for cause if you or your employees or licensed
Agents have wrongfully withheld any funds, property or documents belonging to
the Company; have misrepresented any product or service offered by or through
the Company; or have failed to comply with the terms of this AGREEMENT or the
Company's rules and regulations currently in force or later brought to your
attention. Upon termination for cause, you shall have no further rights or
privileges under this AGREEMENT, and all monies including any fees, or other
compensation or first year or renewal compensation otherwise payable under this
AGREEMENT shall be immediately forfeited.
8. INDEBTEDNESS
Any indebtedness owed at any time by your Agents or Brokers to any of
the entities identified as the Company in this AGREEMENT shall be a
first lien against the total of any amounts due you under the terms of
this AGREEMENT from any of the entities identified as the Company in
this AGREEMENT.
<PAGE> 13
The Company may offset against any claim for compensation payable by the
Company to the General Agent under this AGREEMENT or under any other AGREEMENT
with the Company or with any affiliate of the Company now or hereafter
existing, any existing or future indebtedness of the General Agent to the
Company or to any affiliate of the Company and any advances heretofore or
hereafter made by the Company or by an affiliate to the General Agent.
Any such indebtedness may be debited to your account or you may be required to
repay such amount immediately. In the event we are required to pursue formal
collection procedures in order to collect any indebtedness under the terms of
this AGREEMENT, you agree to be responsible for any expense incurred by us, be
it the fee of a collection agent, attorney, or other costs, including court
costs.
9. RELATIONSHIP
You shall be deemed to be an independent contractor and nothing
contained in this AGREEMENT shall be deemed to make you, your Agents,
Brokers or any of your employees an employee of ours. You shall be
free to exercise your own judgment and discretion as to the persons
you recommend for appointment as Agents, as to the persons from whom
you solicit applications, as to the time and place of solicitation,
and as to the methods by which the desired results are to be obtained;
but we may, from time to time, prescribe rules with respect to conduct
of the business, which you agree to observe.
10. COMPANY MATERIALS
Any manuals, guides, books, tapes, programs, and any other materials
relating to the Company or our products and information contained in
them, whether developed by us and delivered to you from time to time
or developed by you with our approval as provided in this AGREEMENT,
shall remain the sole and exclusive property of the Company; and shall
be used solely in the solicitation of applications for policies and
contracts covered by this AGREEMENT; and may not be reduced,
disclosed, distributed or otherwise divulged in any way without the
prior written approval of an authorized officer of the Company.
11. ASSIGNMENT
No actual or purported assignment of this AGREEMENT or any commissions
accruing under it or any interest in it shall be honored until a copy
has been submitted to us and acknowledged by an authorized officer.
In acknowledging any such assignment, the Company will not assume any
responsibility for the validity or sufficiency of it. Any assignment
shall be subject to any indebtedness of yours, or any of your Agents
or Brokers owed to us then or later.
12. WAIVER
The forbearance or neglect of the Company to insist upon the
performance of any terms of this AGREEMENT at any time or under any
circumstances shall not constitute a waiver unless so agreed by you
and an authorized officer of the Company in writing.
13. CONSTRUCTION
A. To the extent this AGREEMENT may be in conflict with any
applicable law or regulation, this AGREEMENT shall be
construed in a manner consistent with such law or regulation.
B. The invalidity or illegality of any provision of this
AGREEMENT shall not be deemed to affect the validity or
legality of any other provision of this AGREEMENT.
C. This AGREEMENT shall be construed in accordance with the laws
of the state of Illinois.
<PAGE> 14
14. ENTIRE AGREEMENT
As of the last date below, this AGREEMENT, including all existing and
subsequent amendments and materials attached to it, or incorporated by
reference including, but not limited to, Company rules, regulations,
rate manuals or commission schedules shall constitute the ENTIRE
AGREEMENT between the parties and shall supersede any prior AGREEMENT
or understanding of whatever nature between the Company and you
relating to the solicitation of the types of products governed by this
AGREEMENT. If any such AGREEMENT is in existence, it is hereby
cancelled, except that on any business already issued, any commissions
payable under the prior AGREEMENT shall, subject to all liens and
assignments, continue to be paid in accordance with the terms of that
AGREEMENT. This AGREEMENT in no way affects any contract or AGREEMENT
which you may have with the Company pertaining to any other forms of
insurance and annuities.
15. AMENDMENT
No amendment or waiver of the terms of this AGREEMENT (except as
provided or reserved above) shall be effective unless it is in writing
and signed by both you and by an authorized officer of the Company.
In signing this AGREEMENT, you and the Company agree to comply with its terms
and that it shall be effective on the last date shown below:
GENERAL AGENT
Name of General Agency:_______________________________________________________
(A Corporation), (a Partnership organized under the laws of the State of )
Name of Broker Dealer: (if applicable) _______________________________________
By: _________________________________ Date: __________________________________
Title: _______________________________________________________________________
FOR COMPANY USE ONLY: FEDERAL KEMPER LIFE ASSURANCE COMPANY
By: _________________________________ Date: __________________________________
Title: _______________________________________________________________________
FIDELITY LIFE ASSOCIATION, A MUTUAL LEGAL RESERVE COMPANY
By: _________________________________ Date: __________________________________
Title: _______________________________________________________________________
KEMPER INVESTORS LIFE INSURANCE COMPANY
By: _________________________________ Date: __________________________________
Title: _______________________________________________________________________
INVESTORS BROKERAGE SERVICES INSURANCE AGENCY, INC. (And Its Affilated
Companies)
By: _________________________________ Date: __________________________________
Title: _______________________________________________________________________
<PAGE> 1
EXHIBIT 1-A(5)
KEMPER INVESTORS LIFE INSURANCE COMPANY [KEMPER LOGO]
A Stock Life Insurance Company
Long Grove, IL 60049
<TABLE>
<S> <C> <C> <C>
Insured JOHN DOE Issue Age 35
Policy Date DEC 01 1995 Policy Number 0776003
Initial Specified
Amount $100,000 Issue Date DEC 01 1995
</TABLE>
RIGHT TO CANCEL
This policy may be returned to us within 20 days of the time you receive it. It
may be mailed or delivered to us or to the agent who sold it. Upon our
receipt, this policy will be deemed void from the beginning. The Cash Value of
the policy plus any monthly deductions and any deductions made against premiums
will be refunded within seven days of our receipt of a notice of cancellation
and the return of this policy. This amount will be at least equal to the
premiums paid.
On the Maturity Date, if the insured is living and this policy is in force, we
will pay the Net Surrender Value to you. If the insured dies prior to the
Maturity Date and this policy is in force, we will pay to the beneficiary the
death benefit in force at the time of the insured's death. Payment made to you
or to the beneficiary will be made subject to the terms of this policy.
This policy is issued in consideration of the attached application(s) and
payment of the Initial Premium. The terms on this and the following pages are
part of this policy.
Signed for the Kemper Investors Life Insurance Company at its home office in
Long Grove, Illinois.
[SIG.] [SIG.]
Secretary President
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MATURES AT THE INSURED'S ATTAINED AGE 100
NON-PARTICIPATING -- NO ANNUAL DIVIDENDS
TO THE EXTENT ALLOCATIONS ARE MADE TO THE SUBACCOUNTS, THE CASH VALUE IS BASED
ON THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS AND MAY INCREASE OR DECREASE
DAILY. THIS AMOUNT IS NOT GUARANTEED. THE AMOUNTS, OR DURATION OF THE DEATH
BENEFIT MAY VARY UNDER THE CONDITIONS DESCRIBED IN THE DEATH BENEFIT AND
TERMINATION PROVISIONS.
This policy is a legal contract between you and us.
READ YOUR POLICY CAREFULLY.
<PAGE> 2
INDEX
PAGE NO.
Death Benefit Provisions 8
Definitions 5
General Account Provisions 10
General Provisions 6-7
Nonforfeiture Provisions 12
Policy Loan Provisions 13-14
Premium Provisions 9
Settlement Option Table follows page 16
Settlement Provisions 15-16
Surrender Value Provisions 14
Transfer Provisions 13
Transfer, Withdrawal, Loan and Surrender Procedures 15
Variable Account Provisions 10-12
Withdrawal Provisions 13
Additional Benefits, if any, listed in the Policy Specifications are described
in the additional benefit agreements that follow the Settlement Option Table.
<PAGE> 3
POLICY SPECIFICATIONS
INSURED JOHN DOE 35 ISSUE AGE
POLICY DATE OCT 01, 1994 5004050 POLICY NUMBER
INITIAL SPECIFIED $100,000 OCT 01, 1994 ISSUE DATE
AMOUNT
DEATH BENEFIT OPTION A
COVERAGE INFORMATION
RATE
BENEFIT DESCRIPTION CLASS COVERAGE MATURITY OR MONTHLY
PERCENT AMOUNT EXPIRY DATE RATE
FLEXIBLE PREMIUM VARIABLE LIFE 100 100,000 OCT 01, 2059 SEE PAGE D
PREMIUM INFORMATION
INITIAL PREMIUM $1,000.00
MONTHLY GUARANTEE PREMIUM $31.67
GUARANTEE PERIOD 3 YEARS
PLANNED PERIODIC PREMIUM $1,000.00 ANNUAL
INSURED RATE CLASS PREFERRED NONSMOKER
<PAGE> 4
POLICY SPECIFICATIONS
INSURED JOHN DOE 35 ISSUE AGE
POLICY DATE OCT 01, 1994 5004050 POLICY NUMBER
MONTHLY PROCESSING DATE DAY 01 OF EACH MONTH
DEDUCTION PERIOD 65 YEARS, 00 MONTHS
MINIMUM SPECIFIED AMOUNT $25,000
MINIMUM CHANGE IN SPECIFIED AMOUNT $10,000
MINIMUM WITHDRAWAL AMOUNT $500.00
WITHDRAWAL CHARGE $ 25.00
MONTHLY ADMINISTRATION CHARGE $ 5.00
PREMIUM CHARGES 3.50%
GUIDELINE PREMIUM $ XX.XX
ISSUE CHARGE PER $1,000 $ 5.00
SURRENDER CHARGE PERCENTAGE
<TABLE>
<CAPTION>
Policy Year Ages 1 - 65 Ages 66 - 75
<S> <C> <C>
1 100% 100%
2 100 100
3 100 100
4 100 90
5 100 80
6 90% 70
7 80 60
8 70 50
9 60 40
10 50 30
11 40% 20
12 30 15
13 20 10
14 10 5
15 0 0
</TABLE>
See your Policy for further information on the Surrender Charge.
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
95-99 100
*ATTAINED AGE AS OF THE BEGINNING OF THE POLICY YEAR
</TABLE>
<PAGE> 5
POLICY SPECIFICATIONS
INSURED JOHN DOE 35 ISSUE AGE
POLICY DATE OCT 01, 1994 5004050 POLICY NUMBER
TRADE DATE NOV 01, 1994
SEPARATE ACCOUNT INITIAL PREMIUM ALLOCATION
KEMPER MONEY MARKET SUBACCOUNT 10%
KEMPER TOTAL RETURN SUBACCOUNT 10%
KEMPER HIGH YIELD SUBACCOUNT 10%
KEMPER EQUITY SUBACCOUNT 10%
KEMPER GOVERNMENT SECURITIES SUBACCOUNT 10%
KEMPER INTERNATIONAL SUBACCOUNT 10%
KEMPER SMALL CAPITALIZATION EQUITY SUBACCOUNT 10%
LORD ABBETT GROWTH AND INCOME SUBACCOUNT
JANCAP GROWTH SUBACCOUNT
T. ROWE PRICE INTERNATIONAL EQUITY SUBACCOUNT
FOUNDERS CAPITAL APPRECIATION SUBACCOUNT
INVESCO EQUITY INCOME SUBACCOUNT
PIMCO TOTAL RETURN BOND SUBACCOUNT
GENERAL ACCOUNT 30%
FIXED ACCOUNT
A MORTALITY AND EXPENSE RISK CHARGE IS ASSESSED DAILY ON THE SEPARATE ACCOUNT
VALUE OF THIS POLICY. THIS CHARGE IS GUARANTEED NOT TO EXCEED 0.90% ANNUALLY.
THE CURRENT CHARGE, ASSESSED ON A DAILY BASIS, IS 0.90% ANNUALLY.
<PAGE> 6
Page 5
DEFINITION SECTION
ACCUMULATION UNIT: An accounting unit of measure used
to calculate the value of each subaccount.
CASH VALUE: The Cash Value of this policy is the sum
of the subaccount values of the Separate Account plus
the fixed account value and loan account value.
DEBT: The principal of any outstanding loan under
this policy plus any loan interest due or accrued.
FUND: An investment company or separate series
thereof, in which the subaccounts of the Separate
Account invest.
GENERAL ACCOUNT: Our assets other than those
allocated to the Separate Account or any other
Separate Account.
ISSUE AGE: The insured's age as of his or her last
birthday on the Policy Date.
MATURITY DATE: The Maturity Date is stated in the
Policy Specifications. It is the policy anniversary
following the insured's 99th birthday.
MONTHLY PROCESSING DATE: The Monthly Processing Date
is stated in the Policy Specifications. It is 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.
NET SURRENDER VALUE: The Net Surrender Value of this
policy is the Surrender Value on the date of
surrender minus any Debt.
POLICY DATE, POLICY YEAR: The Policy Date is stated
in the Policy Specifications. It is used to determine
Policy Years and Monthly Processing Dates. Subsequent
Policy Years will start on anniversaries of the
Policy Date.
PREMIUM: A dollar amount received by us in U.S.
Currency as consideration for the benefits to be
provided under this policy.
PREMIUM CHARGES: The percentage of premium charges
that are deducted from the premium before the premium
is allocated to the subaccounts or the fixed account.
SEPARATE ACCOUNT: A unit investment trust registered
with the Securities and Exchange Commission under the
Investment Company Act of 1940 known as the FKLA
Variable Separate Account.
SEPARATE ACCOUNT VALUE: On any Valuation Date the
separate account value of this policy is the sum of
its subaccount values.
SUBACCOUNTS: The Separate Account has several
subaccounts. The subaccounts available under this
policy are stated in the Policy Specifications.
SUBACCOUNT VALUE: Each subaccount will be valued
separately as determined by the formula stated in
this policy.
SURRENDER VALUE: The Surrender Value of this policy
is the Cash Value on the date of surrender minus
any applicable surrender charge.
TRADE DATE: The Trade Date is 30 days following the
Issue Date of this policy. It is the date that the
money market subaccount value will be allocated to
the subaccounts and the fixed account according to
your allocation.
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.
YOU, YOUR, YOURS: The party(s) named as owner in the
application unless later changed as provided in this
policy.
<PAGE> 7
Page 6
GENERAL PROVISIONS
THE CONTRACT This policy, the attached application and any
supplemental application(s) form the entire
contract. All statements made in the
application and any supplemental
application(s) are representations and not
warranties unless fraud is involved. In
addition to other reasons permitted by law,
the validity of this policy can be contested
if any material misrepresentations of fact is
made in the application, a supplementary
application or a request. No statement will
void this policy or be used to deny a claim
unless it is contained in an attached
application or supplemental application.
MODIFICATION OF POLICY Only our president, secretary or assistant
secretaries have power to approve a change in
or waive the provisions of this policy. No
agent or person other than such officers can
change or waive the terms of this policy.
OWNERSHIP OF POLICY Unless otherwise provided in the application,
the insured is the original policy owner. You
have the exclusive right to cancel or amend
this policy by agreement with us and exercise
every option and right conferred by this
policy, including the right of assignment. We
reserve the right to require the return of
this policy for endorsement for any change.
CHANGE OF OWNERSHIP Ownership may be changed during the lifetime
of the insured by written notice from you in
a form satisfactory to us. After we receive
written notice at our home office, the change
will take effect as of the date the notice
was signed. The change, however, will not
apply to any payment made or action taken by
us before the notice was received.
EFFECTIVE DATE OF COVERAGE The effective date of coverage under this
policy is the Policy Date. The Issue Date is
the same date as the Policy Date unless a
different Issue Date is stated in the Policy
Specifications. Incontestability and suicide
periods are measured from the Issue Date.
TERMINATION All coverage under this policy terminates
when any one of the following events occurs:
1. you request that coverage terminate; 2.
the insured dies; 3. this policy matures; or
4. the grace period ends.
CONTESTABILITY This policy will be incontestable after it
has been in force during the lifetime of the
insured for two years from the Issue Date.
A new two year contestability period will
apply to each increase in insurance beginning
with the effective date of each increase and
will apply only to statements made in the
application for the increase.
If the policy is reinstated, a new two year
contestability period will apply from the
effective date of the reinstatement and will
apply only to statements made in the
application for the reinstatement.
MISSTATEMENT OF AGE AND/OR SEX If the age and/or sex of the insured was
misstated, the death benefit will be adjusted
based on what the cost of insurance charged
for the most recent Monthly Processing Date,
prior to the insured's death, would have
purchased using the correct age and/or sex.
SUICIDE If the insured dies by suicide, while sane or
insane, within two years from the Issue Date,
the death benefit proceeds will be limited to
the premiums paid less any withdrawals and
Debt.
If the insured dies by suicide, while sane or
insane, within two years of any increase in
insurance, or any reinstatement, our total
liability with respect to such increase or
reinstatement will be the cost of insurance.
DUE PROOF OF DEATH Upon the death of the insured, written proof
of death in the form of a certified copy of
the death certificate, a written physician's
statement or any other proof satisfactory to
us is required within sixty days of such
death or as soon thereafter as is reasonably
possible.
<PAGE> 8
Page 7
GENERAL PROVISIONS (CONTINUED)
BENEFICIARY DESIGNATION The original beneficiary is named in the
AND CHANGE OF BENEFICIARY application for this policy. If a
beneficiary is not named, the original
beneficiary is the estate of the insured.
You may change the beneficiary by filing a
written change with us subject to the
following:
1. The change must be filed during the
insured's lifetime;
2. This policy must be in force at the time a
change is filed;
3. Such change must not be prohibited by the
terms of an existing: assignment, beneficiary
designation, or other restriction;
4. Such change will take effect when we
receive it at our home office;
5. After we receive the request, the change
will take effect as of the date the request
for change was signed; however, action taken
by us before such request was received will
remain valid.
6. The request for change must provide
information to identify the new beneficiary.
DEATH OF BENEFICIARY The interest of a beneficiary who dies before
the insured will pass to the other
beneficiaries, if any, share and share alike,
unless otherwise provided in the beneficiary
designation. If no beneficiary survives the
insured, the proceeds of this policy will be
paid to the insured's estate.
If a beneficiary dies within ten days of the
insured's death, proceeds of this policy will
be paid as if the insured had survived that
beneficiary.
ASSIGNMENT No assignment of this policy is binding on us
until it is received by us at our home
office. We assume no responsibility for the
validity of any assignment. Any claim under
an assignment is subject to proof of the
extent of the interest of the assignee. Your
rights and the rights of the beneficiary are
subject to the rights of the assignee of
record.
NON-PARTICIPATING This policy will not pay dividends. It will
not participate in any of our surplus
earnings.
REPORTS At least once each Policy Year we will send
you a report. The report will show the
premiums paid, investment experience and
charges made since the last report. The
report will also show the current death
benefit and Cash Value as well as any other
information required by statute.
RESERVES, CASH VALUE All reserves are greater than or equal to
AND DEATH BENEFIT those required by statute. Any Cash Value
and death benefit available under this policy
are at least equal to the minimum benefits
required by the statutes of the state in
which this policy is delivered.
BASIS OF COMPUTATIONS A detailed statement of the method of
computation of Cash Value under this policy
has been filed with the insurance department
of the state in which this policy is
delivered. The 1980 Commissioner's Standard
Ordinary Smoker and Nonsmoker Mortality
Tables, age nearest birthday, is the basis
for minimum Surrender Values, death benefits
and guaranteed maximum cost of insurance
rates under this policy.
TAX TREATMENT This policy is intended to qualify as a life
insurance policy under the Internal Revenue
Code ("Code"). We may return premiums which
would disqualify the policy from tax
treatment as a life insurance policy. This
policy may be endorsed to reflect any change
in the Code and its regulations or rulings.
You will receive a copy of any such
endorsement.
Currently, no charges are made against the
Separate Account for federal, state or other
taxes that may be attributed to the Separate
Account. We may in the future, however,
impose charges for federal income taxes
attributed to the Separate Account. Charges
for other taxes, if any, attributed to this
policy may also be made.
<PAGE> 9
Page 8
DEATH BENEFIT PROVISIONS
DEATH BENEFIT The death benefit is based on the Specified
Amount, the Death Benefit Option and the
Table of Death Benefit Factors applicable at
the time of death. The Initial Specified
Amount, the Death Benefit Option and the
Table of Death Benefit Factors are shown in
the Policy Specifications.
SPECIFIED AMOUNT The Specified Amount is the Initial Specified
Amount shown on the Policy Specifications,
unless changed in accordance with the Changes
provision or reduced by a cash withdrawal.
DEATH BENEFIT OPTION The Death Benefit Option is shown on the
Policy Specifications, unless changed in
accordance with the Changes provision.
If Option A is in effect, the death benefit
is the greater of:
1. the Specified Amount; or
2. the Table of Death Benefit Factors times
the Cash Value of this policy on the date
of the insured's death.
If Option B is in effect, the death benefit
is the greater of:
1. the Specified Amount plus the Cash Value
of this policy on the date of the insured's
death; or
2. the Table of Death Benefit Factors times
the Cash Value of this policy on the date
of the insured's death.
CHANGES You may change the Death Benefit Option after
the first Policy Year. The Specified Amount
will be changed as follows:
1. If the change is from Option A to Option
B, the Specified Amount after such change
will be:
a. the Specified Amount prior to such change;
minus
b. the Cash Value on the date of the change.
2. If the change is from Option B to Option
A, the Specified Amount after such change
will be:
a. the Specified Amount prior to such change;
plus
b. the Cash Value on the date of the change.
You may increase the Specified Amount after
the first Policy Year and prior to the
insured's attained age 75. You may also
decrease the Specified Amount after the first
Policy Year. The change is subject to the
following:
1. Any such decrease will reduce the
insurance in the following order:
a. the most recent increase first,
b. any other increases in the reverse order
in which they occurred; and
c. finally, against the Initial Specified
Amount.
2. Any request for an increase must be
applied for on a supplemental application.
The request for a change must be in writing.
No more than one change will be allowed in
any Policy Year. The change will be effective
on the first Monthly Processing Date on or
after the day we receive the request. No
changes will be allowed if the resulting
Specified Amount would be less than the
lesser of the Initial Specified Amount or the
Minimum Specified Amount or if this policy
would be disqualified as life insurance under
the Code. The Initial Specified Amount and
the Minimum Specified Amount are shown on the
Policy Specifications.
PAYMENT OF THE DEATH BENEFIT Death benefits will be paid following
receipt by us at our home office of due proof
that the insured died while this policy was
in force. The death benefit will be
determined based upon the date of death. The
return of this policy is required before a
payment is made.
The death benefit proceeds will be equal to:
1. the death benefit; minus
2. any monthly deductions due during the
grace period; minus
3. any Debt.
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PREMIUM PROVISIONS
INITIAL PREMIUM The Initial Premium is shown in the Policy
Specifications. It is payable to us or to an
authorized agent on or before delivery of
this policy.
ADDITIONAL PREMIUMS The amount and frequency of Planned Periodic
Premium are shown on the Policy
Specifications. The amount and frequency can
be changed upon request, subject to our
approval.
While this policy is in force, additional
premiums may be paid at any time prior to the
Maturity Date. We reserve the right to limit
or refund any premium if:
1. the amount of the premium is below our
current minimum premium amount requirement;
or
2. the premium would increase the death
benefit by more than the amount of the
premium; or
3. the premium would disqualify this policy
as life insurance under the Code.
NET PREMIUMS The net premium equals the premium paid less
the premium charges shown in the Policy
Specifications.
PREMIUM ALLOCATION The Initial Premiums will be allocated to the
money market subaccount. On the first
Valuation Date on or following the Trade
Date, the money market subaccount value will
be allocated to the subaccounts and the fixed
account in accordance with the intial premium
allocation as shown in the Policy
Specifications. Any net premiums received
after the Trade Date will be allocated to the
subaccounts and the fixed account on the
first Valuation Date on or following the date
the premium is received in our home office in
accordance with the Initial Premium
allocation as shown in the Policy
Specifications.
The premium allocation shown in the Policy
Specifications may be changed by you. The
request for an allocation change must be in
writing.
GRACE PERIOD If the Net Surrender Value on the day
immediately preceding a Monthly Processing
Date is less than the monthly deduction for
the next month, a grace period of 61 days
will be allowed for the payment, without
evidence of insurability, of premium payment
or loan repayment equal to at least three
monthly deductions.
This grace period will begin on the day we
mail notice of the required payment to your
last known address. If payment is not
received within the grace period, all
coverage under this policy will terminate at
the end of the grace period in accordance
with the nonforfeiture provisions. If death
of the insured occurs within the grace
period, any amount payable will be reduced by
any unpaid monthly deductions.
During the Guarantee Period, the policy will
remain in force and no grace period will
begin provided the total premiums received,
less any withdrawals and any Debt, equals or
exceeds the Monthly Guarantee Premium times
the number of months since the Policy Date,
including the current month. The Guarantee
Period and Monthly Guarantee Premium are
shown in the Policy Specifications.
REINSTATEMENT If this policy lapses because of insufficient
Cash Value to cover the monthly deduction,
and has not been surrendered for its Net
Surrender Value, it may be reinstated at any
time within five years after the date of
lapse. The reinstatement is subject to:
1. receipt of evidence of insurability
satisfactory to us;
2. payment of a minimum premium sufficient to
keep this policy in force for three months;
and
3. payment of any Debt against this 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 us.
The suicide and incontestability provisions
will apply from the effective date of
reinstatement.
<PAGE> 11
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GENERAL ACCOUNT PROVISIONS
GENERAL ACCOUNT The guaranteed benefits under this policy are
provided through our General Account. The
fixed account is the only account available
to you in our General Account.
FIXED ACCOUNT The fixed account is credited with interest
rate(s) which will not be less than the
guaranteed minimum interest rate. The
guaranteed minimum interest rate is 3.00% per
year compounded daily at the daily equivalent
of a 3.00% annual effective rate.
We may declare from time to time a current
interest rate which is higher than the
guaranteed minimum interest rate. Each
current interest rate will be guaranteed
until the next policy anniversary.
On each policy anniversary, we will also
declare current interest rate(s) which will
apply to net premiums previously received,
and the interest thereon. These interest
rate(s) will be guaranteed until the next
policy anniversary.
FIXED ACCOUNT VALUE On any Valuation Date, the fixed account
value is equal to:
1. the sum of all net premiums allocated to
the fixed account; plus
2. any amounts transferred to the fixed
account; plus
3. the total interest credited to the fixed
account; minus
4. any pro-rata monthly deductions charged to
the fixed account; minus
5. any amounts transferred from the fixed
account; minus
6. any amounts withdrawn from the fixed
account; minus
7. any amounts loaned from the fixed account.
VARIABLE ACCOUNT PROVISIONS
SEPARATE ACCOUNT The variable benefits under this policy are
provided through the FKLA Variable Separate
Account which is referred to in this policy
as the "Separate Account". The Separate
Account is registered with the Securities and
Exchange Commission as a unit investment
trust under the Investment Company Act of
1940. It is a separate investment account
maintained by us into which a portion of our
assets have been allocated for this policy
and may be allocated for certain other
policies.
LIABILITIES OF SEPARATE ACCOUNT The assets equal to the reserves and other
liabilities of the Separate Account will not
be charged with liabilities arising out of
any other business we may conduct. If the
assets of the Separate Account exceed the
liabilities under the policies supported by
the Separate Account, then the excess may
be used to cover the liabilities of our
General Account. The assets of the Separate
Account will be valued on each Valuation
Date.
SUBACCOUNT VALUE On any Valuation Date, the subaccount value
in a subaccount equals:
1. the subaccount value on the previous
Valuation Date multiplied by the investment
experience factor for the end of the current
Valuation Period; plus
2. any net premiums received and allocated to
the subaccount during the current Valuation
Period; plus
3. any amounts transferred to the subaccount
during the current Valuation Period; minus
4. the pro-rata portion of any monthly
deduction charged to the subaccount when the
Valuation Period includes a Monthly
Processing Date; minus
5. any amounts transferred from the
subaccount during the current Valuation
Period; minus
6. any amounts withdrawn from the subaccount
during the current Valuation Period; minus
7. any amounts loaned from the subaccount
during the current Valuation Period.
<PAGE> 12
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VARIABLE ACCOUNT PROVISIONS (CONTINUED)
FUND Each subaccount of the Separate Account will
buy shares of an investment company or of a
separate series of an investment company
offered as an investment alternative under
the policy. The Funds are registered under
the Investment Company Act of 1940 as
open-end diversified management investment
companies. Each series of a Fund represents a
separate investment portfolio which
corresponds to one of the subaccounts of the
Separate Account.
If we establish additional subaccounts each
new subaccount will invest in a new series of
a Fund or in shares of an investment company.
We may also add and/or substitute other
investment companies.
CHANGE OF INVESTMENT ADVISER OR Unless otherwise required by law or
INVESTMENT OBJECTIVES regulation, the investment adviser or any
investment objective may not be changed
without our consent. Any investment
objective will not be materially changed
unless a statement of the change is filed
with and approved by the Insurance
Commissioner of the State of Illinois. If
required, approval of or change of any
investment objective will be filed with
the insurance department of the state where
this policy is delivered.
RIGHTS RESERVED BY US We reserve the right, subject to compliance
with the law as currently applicable or
subsequently changed:
1. to operate the Separate Account in any
form permitted under the Investment Company
Act of 1940 or in any other form permitted by
law;
2. to take any action necessary to comply
with or obtain and continue any exemptions
from the Investment Company Act of 1940 or to
comply with any other applicable law;
3. to transfer any assets in any subaccount
to another subaccount or to one or more
separate accounts, or our General Account; or
to add, combine or remove subaccounts in the
Separate Account;
4. to delete the shares of any of the
portfolios of the Fund or any other open-end
investment company and to substitute, for the
Fund shares held in any subaccount, the
shares of another portfolio of the Fund or
the shares of another investment company or
any other investment permitted by law; and
5. to change the way we assess charges, but
without increasing the aggregate amount
beyond that currently charged to the Separate
Account and the Fund in connection with the
policies.
When required by law, we will obtain your
approval of such changes and the approval of
any regulatory authority.
ACCUMULATION UNIT VALUE Each subaccount has an accumulation unit
value. For each subaccount the accumulation
unit value was initially set at $1.00. When
premiums or other amounts are allocated to a
subaccount, a number of units are purchased
based on the subaccounts accumulation unit
value 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.
The accumulation unit value for each
subsequent Valuation Period is the investment
experience factor for that period multiplied
by the accumulation unit value for the
immediately preceding period. The
accumulation unit value for a Valuation
Period applies to each day in such period.
The number of accumulation units will not
change as a result of investment experience.
INVESTMENT EXPERIENCE FACTOR Each subaccount has its own investment
experience factor. The investment experience
of the Separate Account is calculated by
applying the investment experience factor to
the Cash Value in each subaccount during a
Valuation Period.
The investment experience factor of a
subaccount for a Valuation Period is
determined by dividing 1. by 2. and
subtracting 3. from the result, where:
1. is the net result of:
<PAGE> 13
Page 12
VARIABLE ACCOUNT PROVISIONS (CONTINUED)
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
investments held in the subaccount, if the
"ex-dividend" date occurs during the current
Valuation Period; plus or minus
c. a charge or credit for any taxes reserved
for the current Valuation Period which we
determine 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.
NONFORFEITURE PROVISIONS
CASH VALUE The Cash Value of this policy is equal to the
sum of the subaccount values plus the fixed
account value plus the loan account value.
MONTHLY DEDUCTION On each Monthly Processing Date, a monthly
deduction will be made equal to the sum of
the following:
1. the monthly cost of insurance charge for
this policy; plus
2. the monthly charge for any supplemental
benefits and riders; plus
3. the monthly administration charge.
The monthly deduction will be deducted from
the subaccounts and the fixed account in
proportion to the value that each account
bears to the separate account value plus the
fixed account value.
COST OF INSURANCE The cost of insurance is determined on a
monthly basis. The cost of insurance charge
is equal to the result of 1. minus 2.
multiplied by 3. where:
1. is the death benefit;
2. is the Cash Value; and
3. is the cost of insurance rate, as
described in the cost of insurance rate
provision.
COST OF INSURANCE RATE The monthly cost of insurance rate is based
on the insured's sex, Issue Age, and Rate
Class. The cost of insurance rate will also
vary by Policy Year. The monthly cost of
insurance rate will be determined by us based
on our expectations as to future mortality
experience.
Any change in the cost of insurance rates
will apply to all individuals of the same
sex, Issue Age, Rate Class and Policy Year.
At no time will such rate ever be greater
than those shown in the Table of Guaranteed
Maximum Monthly Cost of Insurance Rates,
shown in the Policy Specifications,
multiplied by a Rate Class percent. These
rates are based on the 1980 Commissioner's
Standard Ordinary Smoker and Nonsmoker
Mortality Tables, age nearest birthday.
SUPPLEMENTAL BENEFITS AND RIDERS The monthly charges for any supplemental
benefits and riders are shown on the Policy
Specifications.
ADMINISTRATION CHARGE The monthly administration charge is shown on
the Policy Specifications.
INSUFFICIENT CASH VALUE This policy will terminate as provided in the
grace period provision if the Net Surrender
Value on the date immediately preceding a
Monthly Processing Date is:
1. insufficient to cover the monthly
deduction for the month following such
Monthly Processing Date; and
2. no premium payment or loan payment
sufficient to cover at least three monthly
deductions is received before the end of the
grace period.
Any deduction for the cost of insurance or
other benefits and riders after termination
of insurance will not be considered a
reinstatement of this policy or a waiver by
us of the termination.
<PAGE> 14
Page 13
TRANSFER PROVISIONS
TRANSFERS You may transfer all or part of the value of
each subaccount at any time to another
subaccount subject to the following
conditions:
1. transfers are not permitted until after
the Trade Date. Thereafter, one transfer will
be permitted in each fifteen day period. All
transfers which occur during one business day
will be considered one transfer;
2. the minimum amount which may be
transferred is $500.00 or, if smaller, the
remaining value of this policy's interest in
a subaccount; and
3. no partial transfer will be made if your
remaining subaccount value will be less than
$500.00 after such transfer unless this
policy's interest in such subaccount is
eliminated by means of such transfer.
You may also transfer all or a part of the
fixed account value to any subaccount subject
to the following conditions:
1. transfers are not permitted until after
the Trade Date. Thereafter, one transfer
will be permitted each Policy Year during the
thirty days that follow a policy anniversary.
2. the minimum amount which may be
transferred is $500.00 or, if smaller, the
remaining fixed account value.
3. no partial transfer will be made if your
remaining fixed account value will be less
than $500.00 after such transfer unless this
policy's fixed account value is eliminated by
means of such transfer.
We reserve the right at any time and without
prior notice to any party to terminate,
suspend or modify the transfer provision
described above. We also reserve the right to
charge up to $25 for each transfer.
Any transfer direction must clearly specify
the amount which is to be transferred and the
names of the accounts which are to be
affected. A telephone transfer direction will
be honored by us only if a properly executed
telephone transfer authorization is on file
with us, and if such transfer direction
complies with the authorization's conditions
and our administrative procedures.
WITHDRAWAL PROVISIONS
WITHDRAWAL Cash withdrawals may be made any time after
the first policy year. The minimum withdrawal
amount is shown on the Policy Specifications.
The maximum withdrawal amount is limited to
10% of the Net Surrender Value during the
surrender charge period. There is a charge
for each withdrawal. The withdrawal charge
is also on the Policy Specifications. You
must specify the accounts from which the
withdrawal is to be made.
EFFECT OF A WITHDRAWAL The Cash Value will be reduced by the amount
of the withdrawal. If Death Benefit Option A
is in effect, the Specified Amount will also
be reduced by the amount of the withdrawal.
POLICY LOAN PROVISIONS
POLICY LOANS Policy loans may be made any time after the
first policy year. We will lend up to a
maximum loan amount of 90% of the Surrender
Value. The amount of any new loan may not
exceed the maximum loan amount less Debt on
the date the loan is granted. The minimum
amount of a loan is $500.
<PAGE> 15
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POLICY LOAN PROVISIONS (CONTINUED)
On the date the loan is made, an amount equal
to the loan will be transferred from the
subaccounts and the fixed account to the loan
account held in the General Account until the
loan is repaid. Unless directed otherwise,
the loaned amount will be deducted from the
subaccounts and the fixed account in
proportion to the values that each account
bears to the separate account value plus the
fixed account value.
Should the Debt equal or exceed the Surrender
Value, this policy will terminate 61 days
after notice has been mailed to you at your
last known address.
Cash Values derived from premium received by
us in the form of a check or draft will not
be available for loans until 30 days after
deposit of such check or draft.
POLICY LOAN INTEREST The loan interest rate will be 5.00% per
year. Interest will be compounded daily at
the daily equivalent of the above annual
interest rates. Interest not paid will be
charged on a daily basis and will be added to
the Debt on this policy and bear interest at
the same rate.
During the existence of a loan, the loan
account value will earn 3.00% per year during
the first nine Policy Years and 5.00% per
year thereafter. Interest will be earned on a
daily basis and will be added to the loan
account.
POLICY LOAN REPAYMENT A Debt may be repaid in full or in part at
any time while this policy is in force.
As Debt is paid, the loan account value equal
to the amount of repayment which exceeds the
difference between interest due and interest
earned will be allocated to the subaccounts
and the fixed account according to the then
current premium allocation instructions.
EFFECT OF POLICY LOANS The Debt on this policy, along with the
surrender charge, will reduce the amount of
Cash Value payable upon surrender. The Debt
on this policy will also reduce the amount of
Cash Value available for withdrawal. The
death benefit payable to the beneficiary upon
the death of the insured will also be reduced
by the amount of Debt.
SURRENDER VALUE PROVISIONS
SURRENDER This policy may be surrendered for its Net
Surrender Value upon written request by you
and return of this policy to us at our home
office. The request must be made during the
lifetime of the insured and while this policy
is in force. The return of this policy is
required before the Net Surrender Value is
paid.
Payment of the Net Surrender Value will
discharge us from our obligations under this
policy. A surrender may subject the amount
surrendered to a surrender charge.
We will pay the Net Surrender Value of this
policy to you on the Maturity Date if the
insured is living and this policy is in
force.
SURRENDER CHARGE During the first 14 Policy Years a
surrender charge will be assessed if this
policy is surrendered or if the Net Surrender
Value is applied under a settlement option.
The surrender charge equals (a. + b. + c.)
times d. where:
a. The Issue Charge per $1,000 times the
Initial Specified Amount;
b. 30% of the premiums paid up to the
Guideline Premium;
c. 7.5% of the premiums paid above the
Guideline Premium for issue ages 1-65 or 5%
for issue ages 66-75; and
d. The Surrender Charge Percentage
The Issue Charge per $1,000, the Guideline
Premium and Surrender Charge Percentage are
shown on the Policy Specifications.
<PAGE> 16
Page 15
TRANSFER, WITHDRAWAL, LOAN
AND SURRENDER PROCEDURES
A transfer, withdrawal, loan or surrender
will be effective at the end of the Valuation
Period following a telephone transfer
direction or receipt by us at our home office
of a written request which contains all
required information.
Accumulation units will be redeemed to the
extent necessary to achieve the dollar amount
of the transfer, withdrawal, loan or
surrender. The accumulation units credited in
each subaccount will be reduced by the number
of accumulation units redeemed. The reduction
in the number of accumulation units will be
determined on the basis of the accumulation
unit value at the end of the Valuation Period
during which the request containing all
required information is received by us. An
amount withdrawn, loaned or surrendered from
the subaccounts will be paid within seven
calendar days after the date proper written
election is received by us unless: 1. the New
York Stock Exchange is closed (other than
customary weekend and holiday closings); 2.
trading in the markets normally utilized is
restricted, or an emergency exists as
determined by the Securities and Exchange
Commission, so that disposal of investments
or determination of the valuation unit is not
reasonably practicable; or 3. such other
periods as defined by the Securities and
Exchange Commission for the protection of
owners.
If the withdrawal, loan or surrender is to be
made from the fixed account, we may defer the
payment for a period permitted by law, but
not more than six months after the written
request is received by us. During the period
of deferral, interest at the then current
interest rate will continue to be credited to
the fixed account value.
SETTLEMENT PROVISIONS
SETTLEMENT OPTIONS Instead of us paying all of the death benefit
or Net Surrender Value of this policy due in
one sum, amounts may be applied under one of
the following settlement options.
Payments under these options will not be
affected by the investment experience of any
Separate Account after proceeds are applied
under a settlement option.
Payments must be made to a natural person in
his own right, referred to below as "payee".
Payment will be made as elected on a monthly,
quarterly, semi-annual or annual basis.
The option selected must result in a payment
that is at least equal to our minimum
payment, according to our rules, in effect at
the time the settlement option is chosen. If
at any time the payments are less than the
minimum payment, we have the right to
increase the period between payments to
quarterly, semi-annual or annual or to make
the payment in one lump sum so that the
payment is at least equal to our minimum
payment.
ELECTION OF SETTLEMENT OPTION Election of a settlement option may be made
by written notice to us. This election may be
made:
1. by you during the lifetime of the insured;
2. by the beneficiary if no election made by
you is in effect at the time of the death of
the insured; or
3. by the beneficiary if you reserve the
right to the beneficiary to change an
election upon the death of the insured. Such
change must be made prior to the first
settlement option payment.
An election in effect during the lifetime of
the insured will be revoked by a subsequent
change of beneficiary or an assignment of
this policy, unless provided otherwise.
<PAGE> 17
Page 16
SETTLEMENT PROVISIONS (CONTINUED)
GENERAL CONDITIONS The Net Surrender Value will be used to
determine the monthly benefit payment. The
monthly benefit payment will be based upon
the settlement option elected in accordance
with the appropriate Settlement Option Table.
OPTION 1 - FIXED INSTALMENT ANNUITY We will
pay a monthly income for the period elected
but not less than 5 years nor more than 30
years.
OPTION 2 - LIFE ANNUITY We will pay a monthly
income to the payee during the payee's
lifetime.
OPTION 3 - LIFE ANNUITY WITH INSTALMENTS
GUARANTEED We will pay a monthly income for
the Guaranteed Period elected and thereafter
for the remaining lifetime of the payee. The
period elected may be 5, 10, 15 or 20 years.
OPTION 4 - JOINT AND SURVIVOR ANNUITY We 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 will 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%.
OTHER SETTLEMENT ARRANGEMENTS May be
available with our consent.
SUPPLEMENTARY CONTRACT A supplementary contract will be issued to
reflect payments to be made under a
settlement option. If settlement is a result
of the death of the insured, its effective
date will be the date of death. Otherwise
its effective date will be the date chosen by
you.
DATE OF FIRST PAYMENT Interest under the settlement options will
begin to accrue on the effective date of the
supplementary contract. If the normal
effective date is the 29th, 30th or 31st of
the month, the effective date will be the
28th day of that month.
EVIDENCE OF AGE, SEX AND SURVIVAL We may require satisfactory evidence of the
age and sex of any person on whose life the
income is to be based and the continued
survival of any person on whose life the
income is based.
BASIS OF SETTLEMENT OPTIONS 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.
DISBURSEMENT OF FUNDS UPON At the death of the payee, any unpaid
DEATH OF PAYEE UNDER OPTIONS instalments will be paid in one Lump sum to
1 OR 3 the estate of the payee, unless otherwise
provided in the supplementary agreement. The
lump sum will be equal to the commuted value
of the remaining instalments, based on a
minimum interest rate of not less than 2.50%.
PROTECTION OF BENEFITS Unless otherwise provided in the
supplementary contract the payee may not: 1.
commute; 2. anticipate; 3. assign; 4.
alienate; or 5. otherwise encumber any
payment to be received.
CREDITORS The proceeds of the policy and any payment
under an option will be exempt from the claim
of creditors and from legal process to the
extent permitted by law.
<PAGE> 18
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MATURES AT THE INSURED'S ATTAINED AGE 100
NON-PARTICIPATING -- NO ANNUAL DIVIDENDS
This policy is a legal contract between you and us.
READ YOUR POLICY CAREFULLY.
FEDERAL KEMPER LIFE ASSURANCE COMPANY
A Stock Life Insurance Company
Long Grove, IL 60049
Policy Form No. S-6003
<PAGE> 1
EXHIBIT 1-A(6)(a)
CERTIFIED ARTICLES OF INCORPORATION
KEMPER INVESTORS LIFE INSURANCE COMPANY
I, Frank J. Julian, Assistant Secretary of Kemper Investors Life
Insurance Company, certify that the attached is a true and correct copy of the
Amended Articles of Incorporation of Kemper Investors Life Insurance Company
and that said Articles are in full force and effect as of the date hereon.
IN WITNESS, I have signed this certification on the 18th day of
December, 1995.
/s/ Frank J. Julian
-------------------
<PAGE> 2
Amended October 28, 1992
AMENDED ARTICLES OF INCORPORATION
OF
KEMPER INVESTORS LIFE INSURANCE COMPANY
Article 1. The name of the Corporation shall be KEMPER INVESTORS LIFE
INSURANCE COMPANY.
Article 2. The principal office of the Corporation shall be located in Long
Grove, County of Lake, State of Illinois.
Article 3. The duration of the Corporation shall be perpetual.
Article 4. The purposes for which the Corporation is formed and the class of
insurance business in which the Corporation may engage in are as follows:
(a) Life: Insurance on the lives of persons and every insurance
appertaining thereto or connected therewith and granting, purchasing
or disposing of annuities. Policies of life or endowment insurance or
annuity contracts or contracts supplemental thereto which contain
provisions for additional benefits in case of death by accidental
means and provisions operating to safeguard such policies or contracts
against lapse or to give a special surrender value, or special
benefit, or an annuity, in the event, that the insured or annuitant
shall become totally and permanently disabled as defined by the policy
or contract, shall be deemed to be policies of life or endowment
insurance or annuity contracts within the intent of this clause.
(b) Accident and Health: Insurance against bodily injury, disablement or
death by accident and against disablement resulting from sickness or
old age and every insurance appertaining thereto.
Article 5. The corporate powers shall be exercised by a board of directors,
not less than three nor more than twenty-one in number, at least three of whom
are residents and citizens of the State of Illinois, elected by the
shareholders of the Corporation at the first meeting of shareholders held
following incorporation and thereafter the directors shall be elected by the
shareholders of the Corporation at the annual meeting. In all elections for
directors each shareholder shall have the right to vote in person or by proxy
the number of shares owned by him for as many persons as there are directors to
be elected or to cumulate such shares and give one candidate as many votes as
the number of directors multiplied by the number of shares of stock shall
equal, or to distribute them on the same principle among as many candidates as
he may desire. A director shall serve for a term of one year and until his
successor is duly elected and qualified. The shareholders at any regular or
special meeting may fill any vacancy in the board of directors for the
unexpired term.
<PAGE> 3
Article 6. The amount of the authorized capital of the Corporation shall be
$3,000,000 consisting of 300,000 common shares with a par value of $10.00 each.
The number of common shares to be issued and outstanding at the effective date
of this Article shall be 250,000 shares.
The board of directors shall have the power, by appropriate resolution, to
authorize the issuance or sale at any time, or from time to time, of the whole
or any part of the 50,000 authorized but unissued common shares as additions
to the paid-up capital pursuant to permits issued at any time or from time to
time by the Director of Insurance of the State of Illinois.
Article 7. The board of directors shall adopt bylaws for its
own government and for the government of the business of the Corporation.
Article 8. The Corporation may issue both participating and non-
participating policies. The board of directors shall have the power to
determine the amount and manner of payment of dividends to the holders of
participating policies. Such dividends shall be in accordance with such rates
and rules and applicable to such kind or kinds of insurance as may be determined
by the board of directors, which shall have power to adopt any bylaws or
resolutions pertaining to such declaration and payment which in the judgment of
the said board of directors seem necessary or desirable.
Article 9. The Corporation shall have such other power and authority to
exercise and conduct business not inconsistent with the laws of the State of
Illinois as presently in effect or as may be amended from time to time.
IN WITNESS WHEREOF, we have hereto subscribed our names and caused the
seal of Kemper Investors Life Insurance Company to be affixed at Long Grove,
Illinois, this 28th day of October, 1992.
[SEAL]
/s/ John B. Scott, Chairman and Chief
---------------------------------------
John B. Scott, Chairman and Chief
Executive Officer
/s/ Kathleen A. Gallichio, Corporate
---------------------------------------
Kathleen A. Gallichio, Corporate
Counsel and Corporate Secretary
Approved Nov. 12, 1992
--------------
Date
State of Illinois
Department of Insurance
by: /s/ Stephen F. Selcke
-----------------------
Director of Insurance
- 2 -
<PAGE> 1
EXHIBIT 1-A(6)(b)
Amended 11/27/79
Amended 12/31/81
Amended 11/17/88
Amended 09/06/91
Amended 12/06/91
Amended 02/03/92
Amended 10/28/92
Amended 01/25/94
Amended 03/17/95
AMENDED BYLAWS
OF
KEMPER INVESTORS LIFE INSURANCE COMPANY
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. The annual meeting of shareholders shall be held on the
second Tuesday in May of each year, if not a legal holiday, and if a legal
holiday, then on the next business day following, at the home office of the
Company, or at such other time and place as the corporate secretary shall
provide by notice to the shareholders.
Section 2. A special meeting of the shareholders may be called by the
chairman of the board, the president, the secretary or by any officer directed
to do so by the board of directors, upon giving written notice to each
shareholder entitled to vote thereat, either personally or by mailing such
notice at least ten days before the date of the meeting, stating the time and
place of the meeting. The notice of a special meeting of shareholders shall
state the purpose of the meeting, but the shareholders present at any special
meeting may take any action which a meeting of shareholders lawfully may take
even though the action is not described in the notice of the meeting.
Section 3. Notice of any annual or special meeting of the
shareholders may be waived by any shareholder, and failure of any shareholder
to receive notice of any meeting of shareholders shall not invalidate the
meeting.
Section 4. At any meeting of the shareholders, a majority of the
stock issued and outstanding, and entitled to vote thereat, shall be requisite
and shall constitute a quorum for the transaction of business except as
otherwise provided by statute. If, however, a quorum shall not be present at
any meeting, the shareholders present may recess the meeting from time to time
by majority vote, to reconvene without notice other than announcement at the
meeting. Any resolution or recess shall state the time and place at which the
meeting shall reconvene. At any recessed meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting as originally called.
<PAGE> 2
Section 5. At any meeting of the shareholders, each shareholder shall
be entitled to vote in person or by proxy appointed by an instrument in writing
subscribed by such shareholder or by his duly authorized attorney, and shall
have one vote for each share of stock standing registered in his name on the
stock record of the company. Except as otherwise provided by statute, a
majority of the votes cast shall be sufficient to adopt or reject any proposal.
Section 6. Any action which may be taken at a meeting of the
shareholders may be taken without a meeting if authorized by a writing signed
by all of the shareholders entitled to vote at a meeting for such purpose and
filed with the secretary of the company.
ARTICLE II
BOARD OF DIRECTORS
Section 1. The corporate powers shall be exercised by, and the
business and affairs of the company shall be under the control of, the board of
directors. The number of directors shall be five persons who shall serve until
the next annual meeting of shareholders. The number of directors may be
increased or decreased from time to time by amendment to the bylaws. In the
event of a vacancy in the board of directors or in the event amendment to the
bylaws increases the number of directors, vacancies in the board of directors
shall be filled by vote of the shareholders at an annual or special meeting
which may be called for such purpose. Each director elected to fill a vacancy
shall hold office until the next annual meeting of the shareholders and until
his successor has been elected and qualified. In addition to the powers and
authority expressly conferred by the bylaws and the charter (articles of
incorporation), the board of directors may exercise all such powers of the
company and do all such lawful acts and things as are not required by statute
or by the charter (articles of incorporation) or by the bylaws to be exercised
or done by the shareholders.
Section 2. The board of directors shall meet and organize as soon as
practicable after the annual meeting of the shareholders. If the organization
meeting of the board of directors is held immediately after the adjournment of
the annual meeting of shareholders, no notice of such meeting need be given to
any directors.
Section 3. The board of directors may prescribe a schedule of regular
meetings stating the times and places thereof, and when such schedule is
adopted no notice of any such meeting need be given to the directors.
Section 4. A special meeting of the board of directors may be called
by the chairman of the board or secretary on 24 hours' notice. Such notice may
be given personally, by telephone, by telegram or by written notice mailed or
delivered to the business or residence address of a director provided that a
meeting may be held at any time without notice if a quorum of the directors is
present, and those not present consent thereto in writing or by telegram
confirmed in writing, either before or after such meeting. Notice of meeting
may be waived by any director, and attendance of a director shall constitute a
waiver of notice of such
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<PAGE> 3
meeting, except where such director attends the meeting for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called. Neither the business to be transacted nor the purpose
of any regular or special meeting of the board of directors need be stated in
the notice or waiver of notice of such meeting unless expressly required by
statute.
Section 5. A majority of the board of directors shall be requisite
and shall constitute a quorum for the transaction of business at any meeting of
the board of directors, and the act of a majority of directors present at any
meeting shall be the act of the board of directors except as may be otherwise
specifically provided by statute, by the charter (articles of incorporation),
or these bylaws. If less than a quorum be present at any meeting, a majority
of those present may recess the meeting from time to time to reconvene without
notice other than by announcement at the meeting, until a quorum shall be
present.
Section 6. The board of directors from time to time may adopt
resolutions and authorize the payment of refunds of unabsorbed premium deposits
(dividends) to the holders of participating policies. Such refunds (dividends)
shall be in accordance with such rates and rules and applicable to such kind or
kinds of insurance or policies of insurance or classifications thereof as may
be determined by the board of directors.
Section 7. The board of directors shall fix the compensation of
members of the board and provide for payment of expenses for attendance at
meetings.
Section 8. The board of directors, or any committee designated by
such board of directors, may participate in and act at any meeting of such
board or committee by means of a conference telephone or other similar
communications equipment by means of which all persons participating in the
meeting can hear each other, provided that a majority of such members consent
in writing to the keeping of minutes of such communications and provided that
such minutes are in fact made and become a part of the official records.
Participation in such a meeting shall constitute attendance and presence in
person at the meeting.
Section 9. Unless specifically prohibited by the articles of
incorporation or by bylaws, any action required to be taken at a meeting of the
board of directors, or any other action which may be taken at a meeting of the
board of directors or the executive committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all the directors entitled to vote with respect to the subject matter
thereof, or by all the members of such committee, as the case may be. Any such
consent signed by all the directors of all the members of the executive
committee shall have the same effect as a unanimous vote, and may be stated as
such in any document filed with the Department of Insurance.
-3-
<PAGE> 4
ARTICLE III
EXECUTIVE COMMITTEE - INVESTMENT COMMITTEE
Section 1. The board of directors by vote of a majority of the
directors may elect from among its number an executive committee of not less
than three regular members and one or more alternate members. The chairman of
the board (or in his absence or disability, then the respective officers next
in rank) shall have power to designate any alternate member or members to serve
on the executive committee at any time during the absence or disability of a
regular member. If the committee shall consist of three members, then the
attendance of at least one regular member shall be required, and if the
committee shall consist of more than three regular members, the attendance of
at least two regular members shall be required. The executive committee shall
have and exercise, during the interim between the meetings of the board, all
authority of the board of directors, including, but not limited to, the powers
specifically enumerated in this Article, but shall not have the power to amend
or repeal bylaws. A majority of the members of the executive committee shall
constitute a quorum for the transaction of business. A meeting of the
executive committee may be called and held in conformity with the provisions of
the bylaws relating to a meeting of the board of directors, or such meeting may
be held informally and action recorded by any member of the committee in
executive committee minutes. The votes of a majority of the members of the
executive committee shall govern with respect to any proposal. The minutes of
the meetings of the executive committee shall be reported to the board of
directors.
Section 2. The executive committee shall have general charge of the
investment affairs of the company with power to determine and authorize the
purchase or sale of any security or property, and to determine and authorize
any action with respect to the liquidation of, exchange of, or the exercise of
any right pertaining to any security or property in which the company has an
interest or which belongs to the company.
Section 3. The executive committee shall have power to adopt
resolutions and authorize the payment of refunds of unabsorbed premium deposits
(dividends to the holders of participating policies).
Section 4. The executive committee shall have power to adopt
resolutions governing the deposit of funds of the company and the manner of
withdrawal or disbursement of such funds, and to authorize the leasing of safe
deposit boxes and to provide rules and regulations for access to any safe
deposit box. The executive committee shall have the right to repeal or amend
any resolution previously adopted by the board of directors with respect to any
banking account or deposit of funds or safe deposit box unless such resolution
shall have specifically reserved to the board of directors the exclusive right
to amend or repeal such resolutions.
Section 5. The board of directors may limit or restrict the authority
of the executive committee to any extent stated in a resolution adopted by the
board of directors.
-4-
<PAGE> 5
Section 6. By resolution of the board of directors, there may be
delegated to an investment committee any authority or power determined by the
board of directors respecting the making of loans and investments of the funds
of the company, borrowing funds for the account of the company and the taking
of any action with respect to the custody of, the liquidation, sale or exchange
of, or the exercise of any right pertaining to any security or asset belong to
the company and such other powers relating to the deposit of or custody of
funds of the company as may be stated in such resolution. The investment
committee shall consist of not less than three regular members and one or more
alternate members, and the provisions of Section 1 relating to the designation
of alternates and the requirements for calling and holding a meeting of the
executive committee shall apply to meetings of the investment committee.
Section 7. The board of directors, by resolution passed by a majority
of the whole board, may establish other committees as may be deemed necessary
from time to time, and may elect members from among its number, consisting of
not less than three regular members.
ARTICLE IV
OFFICERS
Section 1. The board of directors shall elect or appoint the officers
specified or provided for in the bylaws and determine the powers and duties of
such officers. The board shall have power to fix or determine the manner of
fixing the compensation of officers and employees of the company. Any officer
shall serve at the pleasure of the board. One person may hold two or more
offices except those of president and secretary. Any vacancy in any office may
be filled by the board of directors.
Section 2. The officers of the company shall be a chairman of the
board, a president, a secretary, a treasurer and such other chairman,
vice-chairman, vice presidents, assistant secretaries, assistant treasurers and
other officers as may be deemed necessary or expedient for the proper conduct
of the business of the company.
Section 3. Principal Officers. The chairman of the board or the
president shall preside at meetings of shareholders of the company and shall
preside at meetings of the board of directors.
Section 4. Vice Presidents, Treasurer and Secretary. One or more
vice presidents, a treasurer or a secretary shall have such duties and
responsibilities as may be prescribed by the board of directors, the executive
committee or by the chairman of the board.
Section 5. Any officer of the company shall give such bond as may be
required and determined from time to time by the board of directors.
-5-
<PAGE> 6
ARTICLE V
SHAREHOLDERS
Section 1. The certificates of stock of the company shall be numbered
and shall be entered in the books of the company as they are issued. They
shall show the holder's name and number of shares and shall be signed by the
chairman of the board or the president or a vice president and by a secretary
or an assistant secretary.
Section 2. Transfers of shares of the corporation shall be made only
on the books of the corporation by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to transfer, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the secretary of the corporation, and on surrender for cancellation
of the certificate for such shares.
Section 3. The board of directors shall have power to close the stock
transfer record of the company for a period not exceeding sixty (60) days
preceding:
(a) the date of any meeting of shareholders, or
(b) the date for payment of any dividend, or
(c) the date for any allotment of rights, or
(d) the date when any change or conversion or exchange of capital
stock shall go into effect,
or in lieu of closing the stock transfer record, the board of directors may fix
in advance a date not exceeding sixty (60) days prior to a date mentioned in
items (a), (b) or (c) as a record date for any purpose stated in such items,
and only such shareholders as shall be shareholders of record on the closing or
record date so fixed shall be entitled to notice of and to vote at such
meeting, or to exercise rights respecting change or conversion or exchange of
capital stock, as the case may be, notwithstanding any transfer of any stock,
on the record of the company after such record date.
Section 4. The company shall be entitled to treat the holder of
record of any shares of stock as the holder in fact thereof, and accordingly
shall not be bound to recognize any equitable or other claim to, or interest
in, such shares on the part of any other person, whether or not the company
shall have express or other notice thereof, except as expressly provided by the
laws of Illinois.
Section 5. The board of directors may direct a new certificate of
stock to be issued in the place of any certificate of stock theretofore issued
by the company alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. The board of directors when directing such issuance of a new
certificate of stock, in its discretion and as a condition precedent to the
issuance thereof,
-6-
<PAGE> 7
may require the owner of such lost or destroyed certificate to advertise the
same in such manner as it shall require, and to give the company a bond in such
sum as the board of directors may determine as indemnity against any claim that
may be made against the company on account of such certificate of stock.
Section 6. The board of directors may determine from time to time
whether and, if allowed, when and under what conditions and regulations the
accounts and books of the company (except such as by statute specifically may
be required to be open to inspection) or any of them shall be open to the
inspection of the shareholders, and the shareholders' right in this respect are
and shall be restricted and limited accordingly.
Section 7. Dividends upon the capital stock of the company may be
declared by the board of directors in its discretion at any regular or special
meeting. Dividends may be paid in cash, property, shares of capital stock or
in any other form or manner permitted by law, as determined by the board of
directors.
Section 8. Before payment of any dividend there may be set aside out
of any funds of the company available for dividends such sum or sums as the
board of directors from time to time, in its discretion, deems proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the company or for such other purpose
as the board of directors shall deem conducive to the interest of the company.
ARTICLE VI
INDEMNIFICATION
Section 1. The company shall indemnify any person against all
expenses (including attorney fees), judgments, fines, amounts paid in
settlement and other costs actually and reasonably incurred by him in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the company) in which he is a party or is
threatened to be made a party by reason of his being or having been a director,
officer, employee or agent of the company, or serving or having served, at the
request of the company, as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by
reason of his holding a fiduciary position in connection with the management or
administration of retirement, pension, profit sharing or other benefit plans
including, but not limited to, any fiduciary liability under the Employee
Retirement Income Security Act of 1974 and any amendment thereof, if he acted
in good faith and in a manner he reasonably believed to be in and not opposed
to the best interests of the company, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that he did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the
bests interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
-7-
<PAGE> 8
Section 2. In any threatened, pending or completed action or suit by
or in the right of the corporation to procure a judgment in its favor by reason
of his being or having been a director, officer, employee or agent of the
company, or serving or having served at the request of the company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or by reason of his holding a fiduciary
position in connection with a retirement, pension, profit sharing or other
employee benefit plan, including, but not limited to, any fiduciary liability
under the Employee Retirement Income Security Act of 1974 and any amendment
thereof, each director and officer shall be indemnified by the company against
expenses (including attorneys fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the company, except that no indemnification shall be made
in respect of any claim, issue or matter as to which a director or officer
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the company, unless and only to the extent that the
court in which such action or suit was brought or other court of competent
jurisdiction shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, he is fairly and
reasonably entitled to indemnity for such expenses as the court shall deem
proper.
Section 3. To the extent any person referred to in Sections 1 and 2
of this article has been successful on the merits or otherwise in defense of
any such action, suit or proceeding herein referred to, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys fees) actually and reasonably incurred by him in
connection therewith.
Section 4. The right of indemnification herein provided shall not be
exclusive of other rights to which those indemnified may be entitled under any
agreement, vote of disinterested directors or otherwise as a matter of law,
both as to action in his official capacity and as to action in another capacity
while holding such office, and the right of indemnification shall continue as
to any person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 5. Any indemnification shall be made by the company only as
authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because he has met the
applicable standard of conduct herein set forth. Such determination shall be
made (1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs by independent legal counsel in a written
opinion, or (3) by the shareholders.
Section 6. Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the company in advance of the final
disposition of such action, suit or proceeding as authorized by the board of
directors in the specific case upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount unless it
shall ultimately be determined that he is entitled to be indemnified by the
corporation as herein provided.
-8-
<PAGE> 9
Section 7. Should the company be absorbed in a consolidation or
merger, each director or officer of the company shall be entitled to stand in
the same position with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity, with respect to indemnification by reason of his being or having been
a director of the company or serving or having served, at the request of the
company, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
Section 8. The right of indemnification herein provided shall extend
and apply to any employee holding a fiduciary position in connection with the
management or administration of retirement, pension, profit sharing or other
employee benefit plans including, but not limited to, any fiduciary liability
under the Employee Retirement Income Security Act of 1974 and any amendment
thereof.
Section 9. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this section.
ARTICLE VII
MISCELLANEOUS
Section 1. The form of the corporate seal may be determined from time
to time by the board of directors.
Section 2. These bylaws may be repealed or amended by the vote of a
majority of the whole board of directors at any regular or special meeting
except as otherwise provided by statute.
Section 3. The fiscal year shall begin the first day of January in
each year.
Filed this 10TH day of February, 1994.
/s/ Betty Ann Bohanek
----------------------
Betty Ann Bohanek
Supervisor
LAH Corporate Unit
-9-
<PAGE> 1
EXHIBIT 2
[KEMPER INVESTORS LIFE INSURANCE COMPANY LETTERHEAD]
DATE OF MAILING:
RE:
SPECIMEN NOTICE OF WITHDRAWAL RIGHT
This notice is sent to you in accordance with the laws administered by the
United States Securities and Exchange Commission ("SEC"). Please read it
carefully and retain it with your important records.
You have recently purchased a flexible premium variable life insurance policy
from Kemper Investors Life Insurance Company ("KILICO") under which benefits
depend on the investment experience of the KILICO Variable Separate Account.
You have, pursuant to requirements of the SEC and your policy, the right to
examine and return your policy for cancellation at any time within 10 days from
delivery of the policy or 45 days from the date of Part 1 of the application,
whichever is later. But in any event you have until 10 days from the date of
mailing of this notice, as determined by its postmark, to return the policy for
cancellation. Upon cancellation, you will receive a refund equal to the sum of
A) the premium payments made under this policy, and B) an amount that reflects
the investment experience (plus or minus) of the investment divisions of the
Separate Account under this policy to the date the returned policy is received
at our Administrative Office.
SEE THE REVERSE SIDE OF THIS LETTER WHICH GIVES FURTHER DETAILS ON YOUR RIGHTS
OF WITHDRAWAL.
Should you decide to exercise this right of cancellation, complete the enclosed
form and return your policy as outlined in the instructions on the form,
postmarked on or before the latest date permitted for cancellation as described
above.
John B. Scott
President
<PAGE> 2
Flexible Premium Variable Life Insurance
Accompanying your policy is a Personalized Policy Illustration of Death
Benefits, Policy Cash Values, Cash Surrender Values, and Planned Premiums under
various assumptions as to the performance of the Subaccounts of the Separate
Account.
In determining whether or not to exercise your right you should consider, among
other things, the projected cost of your policy and the deductions from the
premiums before the payment is allocated to the Subaccounts of the Separate
Account.
You have been furnished a Prospectus which describes the deductions from your
premium. The deductions are:
A charge for state and local premium taxes equal to 2.5% of each premium
payment.
A charge for federal taxes equal to 1% of each premium payment.
Deductions from your Policy Gross Value include:
A monthly administrative expense charge equal to $5.
A charge of $25 for each partial withdrawal.
A contingent deferred sales charge (surrender charge) based on the formula is
the Policy Specifications. The issue charge is $5.00 per thousand of Specified
amount. The deferred sales charge is equal to 30% of premiums paid up to the
Target Premium shown in the policy and a percentage of premiums shown in the
policy and a percentage of premiums above the Target Premium equal to 7.5% for
issue ages up to age 66 and 5% for issue ages 66-75. The surrender charge
decreases after policy year 5 for issue ages up to age 66 and after year 3 for
issue ages 66-75 until reaching zero in policy year 15.
A Cost of Insurance Charge based on rates no greater than the guaranteed
maximum cost of insurance rates stated in the Policy.
A deduction for any additional benefits you have chosen on your policy.
A contingent deferred sales charge (surrender charge) based on the formula in
the policy data of your policy. This amount is equal to 10% of any first year
premiums up to the maximum stated in your policy plus 7% of other premiums less
the amount of any pro-rata surrender charges previously deducted. This charge
will decrease as of the eleventh policy year and will be zero after the
fifteenth policy year.
<PAGE> 3
[KEMPER INVESTORS LIFE INSURANCE COMPANY LETTERHEAD]
SPECIMEN REQUEST FOR WITHDRAWAL
RE:
- Instructions -
Please Read Carefully
If, after reading the enclosed notice, you elect to return your policy for
cancellation, you must:
1. Sign and date the bottom portion of this form.
2. Mail this notice together with your policy (if received by you) to:
Kemper Investors Life Insurance Company
1 Kemper Drive
Long Grove, IL 60049
3. Make certain that the postmark on the return envelope is on or before the
last date permitted for cancellation as described in the attached letter.
4. Check the box on the bottom portion of this form if you have not yet
received your policy at the time of mailing this form.
- To Be Filled Out By Owner -
TO: Kemper Investors Life Insurance Company (Kemper)
Pursuant to the terms of the notice previously furnished me by Kemper, I hereby
return the policy numbered above (the "policy") for cancellation and request a
refund, reflecting investment experience of the premiums paid by me, for the
policy. I hereby release Kemper from any and all claims arising out of or in
connection with the sale or issuance of the policy under state insurance law
and I hereby acknowledge that Kemper's sole liability with respect to the
policy is the refund to me.
_________ __________________________________
Date Signature of Policyowner
I have not yet received the policy and should it be received, I will return it
to Kemper. ________
<PAGE> 1
EXHIBIT 11
Representations, Description and
Undertakings Pursuant to
Rule 6e-3(T)(b)(13)(iii)(F) Under
The Investment Company Act of 1940
Kemper Investors Life Insurance Company (KILICO) makes the following
representations:
(1) Section 6e-3(T)(b)(13)(iii)(F) is being relied upon.
(2) The level of the mortality and expense risk charge is reasonable in
relation to the risks assumed and is within the range of industry
practice for comparable products.
(3) The methodology used to support the representation made in paragraph
(2) above is based on an analysis of the levels of mortality and
expense risk charges being made in relation to the risks assumed, as
well as those in comparable flexible premium contracts filed with the
Commission. Kemper Investors Life undertakes to keep and make
available to the Commission on request the documents used to support
the representation in paragraph (2) above.
(4) KILICO has concluded that there is a reasonable likelihood that the
distribution financing arrangement will benefit the KILICO Variable
Separate Account and policy owners. KILICO undertakes to keep and
make available to the Commission on request the memorandum setting
forth the basis for this representation.
(5) Kemper Investors Life represents that the KILICO Variable Separate
Account will invest only in management investment companies which have
undertaken to have a board of directors, a majority of whom are not
interested persons of the company, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
