<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 12, 1999
REGISTRATION STATEMENT NO.333-
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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
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<S> <C>
COPIES TO:
FRANK JULIAN, ESQ. JOAN E. BOROS, ESQ.
Kemper Investors Life Insurance Company Jorden Burt Boros Cicchetti Berenson & Johnson
1 Kemper Drive 1025 Thomas Jefferson Street, N.W.
Long Grove, Illinois 60049 Suite 400E
Washington, D.C. 20007
</TABLE>
E. Title and amount of securities being registered:
The variable portion of Flexible Premium Variable Life Insurance
Policies.
F. Approximate date of proposed public offering:
As soon as practicable after the effective date of this registration.
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The registrant hereby amends this registration statement on such 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 dates as the Commission, acting pursuant to 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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<CAPTION>
ITEM NO.
OF
FORM N-8B-2 CAPTION IN PROSPECTUS
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<C> <S>
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 Benefits and Rights; 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. KILICO's Directors and Officers
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
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
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
ITEM NO.
OF
FORM N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<C> <S>
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 Funds; General
Provisions
53. Federal Tax Matters
54. Not Applicable
55. Not Applicable
56. Not Applicable
57. Not Applicable
58. Not Applicable
59. Financial Statements
</TABLE>
ii
<PAGE> 4
PROSPECTUS --
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
- --------------------------------------------------------------------------------
ISSUED BY
KEMPER INVESTORS LIFE INSURANCE COMPANY
THROUGH ITS KILICO VARIABLE SEPARATE ACCOUNT
HOME OFFICE: 1 KEMPER DRIVE, LONG GROVE, ILLINOIS 60049 (800) 321-9313
This Prospectus describes a variable life insurance policy of Kemper
Investors Life Insurance Company. The Policy provides life insurance and
accumulates variable Cash Value. Policy benefits depend upon the investment
experience of the KILICO Variable Separate Account. Generally, Policy premiums
are flexible.
The Policy is "life insurance" for federal tax purposes. If the Policy is a
modified endowment contract, different tax rules apply to distributions. See
"Federal Tax Matters", page 24 for a discussion of laws that affect the tax
treatment of the Policy.
A Policy owner has the following choices for allocating premium:
- the Fixed Account, which accrues interest at our guaranteed rate,
and
- the Subaccounts of the Separate Account, which invest in portfolios
of underlying mutual funds.
The following portfolios of underlying mutual funds are currently available
under the Policy:
- The Alger American Fund
- Alger American Balanced
- Alger American Growth
- Alger American Income & Growth
- Alger American MidCap Growth
- The Dreyfus Socially Responsible Growth Fund, Inc.
- Dreyfus Stock Index Fund
- Dreyfus Variable Investment Fund
- Dreyfus Capital Appreciation
- Dreyfus Small Cap
- Templeton Variable Products Series Fund (Class 2 Shares)
- Templeton Asset Allocation
- Templeton Bond
- Templeton Developing Markets
- Templeton International
- Fidelity Variable Insurance Products Fund
- Fidelity VIP Equity-Income
- Fidelity VIP Growth
- Fidelity VIP High Income
- Fidelity VIP Overseas
- Janus Aspen Series
- Janus Aspen Aggressive Growth
- Janus Aspen Balanced
- Janus Aspen Flexible Income
- Janus Aspen Growth
- Janus Aspen International Growth
- Janus Aspen Worldwide Growth
- Scudder Variable Life Investment Fund
(Class A Shares)
- Scudder VLIF Capital Growth
- Scudder VLIF Growth and Income
- Scudder VLIF International
- Kemper Variable Series
- Kemper Government Securities
- Kemper Investment Grade Bond
- Kemper Money Market
- Kemper Small Cap Growth
- Kemper Total Return
- Kemper Value + Growth
You may obtain more information about these portfolios in the accompanying
prospectuses. Not all portfolios described in the prospectuses may be available
under the Policy.
The Policy owner chooses from two death benefit options. The Death Benefit
is at least the amount shown in the Policy Specifications, unless there are
loans. Cash Value is not guaranteed. If the Surrender Value does not cover all
Policy charges, the Policy will lapse. The Policy Specifications show the
guarantee premium and the guarantee period. The Policy will not lapse during the
guarantee period if the guarantee premium is paid.
The Policy owner may cancel the Policy and receive a refund during the
Free-Look Period.
If you already own a flexible premium variable life insurance policy, it
may not be advantageous to buy additional insurance or to replace your policy
with the Policy described in this Prospectus.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT
PROSPECTUS FOR THE AVAILABLE UNDERLYING PORTFOLIOS. YOU SHOULD READ
AND RETAIN ALL PROSPECTUSES FOR FUTURE REFERENCE.
YOU CAN FIND THIS PROSPECTUS AND OTHER INFORMATION ABOUT THE SEPARATE
ACCOUNT REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (SEC) AT THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE> 5
TABLE OF CONTENTS
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Page
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DEFINITIONS................................................. 1
SUMMARY..................................................... 2
FEES AND EXPENSES........................................... 5
KILICO AND THE SEPARATE ACCOUNT............................. 8
THE FUNDS................................................... 8
FIXED ACCOUNT OPTION........................................ 11
THE POLICY.................................................. 12
POLICY BENEFITS AND RIGHTS.................................. 14
CHARGES AND DEDUCTIONS...................................... 18
GENERAL PROVISIONS.......................................... 21
DOLLAR COST AVERAGING....................................... 23
SYSTEMATIC WITHDRAWAL PLAN.................................. 23
DISTRIBUTION OF POLICIES.................................... 23
FEDERAL TAX MATTERS......................................... 24
LEGAL CONSIDERATIONS........................................ 26
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS................ 26
VOTING INTERESTS............................................ 27
STATE REGULATION OF KILICO.................................. 27
KILICO'S DIRECTORS AND OFFICERS............................. 28
LEGAL MATTERS............................................... 30
LEGAL PROCEEDINGS........................................... 30
YEAR 2000 READINESS DISCLOSURE.............................. 30
EXPERTS..................................................... 31
REGISTRATION STATEMENT...................................... 31
FINANCIAL STATEMENTS........................................ 32
CHANGE OF ACCOUNTANTS....................................... 32
APPENDIX A TABLE OF DEATH BENEFIT FACTORS................... 33
APPENDIX B SURRENDER TARGET PREMIUMS........................ 34
</TABLE>
<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 nearest 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.
COMPANY ("WE", "US", "OUR", "KILICO")--Kemper Investors Life Insurance
Company. Our home office is located at 1 Kemper Drive, Long Grove, Illinois
60049.
DATE OF RECEIPT--The date on which a request, form or payment is received
at our home office, provided: (1) that date is a Valuation Date and (2) we
receive the request, form or payment before the close of the New York Stock
Exchange (usually 3:00 p.m. Central time). Otherwise, the next Valuation Date.
DEBT--The sum of (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 time when a Policy owner may cancel the Policy and
receive a refund. This time depends on the state where the Policy is issued;
however, it will be at least 10 days from the date the owner receives the
Policy.
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 Debt.
MATURITY DATE--The Policy Date anniversary nearest the Insured's 100th
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.
NET SURRENDER VALUE--The Net Surrender Value of this Policy is the
Surrender Value on the date of surrender minus any Debt.
PLANNED PREMIUM--The scheduled premium specified by the Policy owner in the
application.
POLICY DATE--The Policy Date is used to determine Policy Years and Monthly
Processing Dates. The Policy Date is the date that insurance coverage takes
effect subject to the conditions set forth in the application, including the
payment of the initial premium.
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 Policy 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--Cash Value minus any applicable surrender charge.
TRADE DATE--The date 30 days following the date the Policy owner completes
all requirements for coverage and we record coverage under the Policy as in
force.
VALUATION DATE--Each business day on which valuation of the assets of the
Separate Account is required by applicable law, which currently is each day that
the New York Stock Exchange is open for trading.
VALUATION PERIOD--The period that starts at the close of a Valuation Date
and ends at the close of the next succeeding Valuation Date.
1
<PAGE> 7
SUMMARY
This section summarizes this Prospectus. Please read the entire Prospectus.
You should refer to the heading "Definitions" for the meaning of certain terms.
If states require variations, they appear in supplements attached to this
Prospectus or in endorsements to the Policy. Unless otherwise indicated, this
Prospectus describes an in force Policy with no loans.
The Policy owner pays a premium for life insurance coverage on the Insured.
Generally, an owner may choose the amount and frequency of premium payments. The
Policy provides for a Surrender Value which is payable if the Policy is
terminated during an Insured's lifetime. The death benefit and Cash Value of the
Policy may increase or decrease to reflect investment experience. Cash Value is
not guaranteed. If the Surrender Value is insufficient to pay Policy charges,
the Policy will lapse unless an additional premium payment or loan repayment is
made. The Policy will remain in force during the guarantee period if the
premiums paid, minus withdrawals and Debt, are at least equal to the guarantee
premiums. (See "The Policy--Premiums and Allocation of Premiums and Separate
Account Value," page 12, "Charges and Deductions," page 18, and "Policy Benefits
and Rights," page 14.)
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. The Policy may also become a modified endowment contract if excess
premiums are paid. For a Policy treated as a modified endowment contract,
certain distributions will be included in the Policy owner's gross federal
income (See "Federal Tax Matters," page 24.)
The purpose of the Policy is to provide insurance protection for the
beneficiary. The Policy is not comparable to a systematic investment plan of a
mutual fund.
POLICY BENEFITS
CASH VALUE. Cash Value reflects the amount and frequency of premium
payments, the investment experience of the selected Subaccounts, any values in
the Fixed Account and Loan Account, and Policy charges. The Policy owner bears
the entire investment risk on amounts allocated to the Separate Account. We do
not guarantee Separate Account Value. (See "Policy Benefits and Rights--Cash
Value," page 16.)
The Policy owner may surrender a Policy at any time and receive the Net
Surrender Value. The Net Surrender Value is the Surrender Value minus any
outstanding Debt. The Surrender Value is the Cash Value minus any applicable
surrender charge. Partial withdrawals are available subject to restrictions.
(See "Policy Benefits and Rights--Surrender Privilege," page 18.)
POLICY LOANS. After the first Policy Year, the Policy owner may borrow up
to 90% of Cash Value minus surrender charges and any other indebtedness.
Interest is charged at an effective annual rate of 4.50%. (See "Federal Tax
Matters," page 24.)
PREFERRED LOANS. The Policy owner may borrow an amount up to the earnings
in the Policy subject to any previous indebtedness. Interest on preferred loans
is charged at an effective annual rate of 3%.
The minimum amount of any loan is $500. When a loan is made, a portion of
Cash Value equal to the loan amount is transferred from the Separate Account and
the Fixed Account (pro rata, unless the Policy owner requests otherwise) to the
Loan Account. We credit 3% annual interest to Cash Value held in the Loan
Account. (See "Policy Benefits and Rights--Policy Loans," page 17.)
If the Policy is a modified endowment contract, a loan is treated as a
taxable distribution. (See "Federal Tax Matters," page 24.)
DEATH BENEFITS. An in force Policy pays a death benefit payment upon the
death of the Insured. The Policy has two death benefit options. The Policy owner
elects a death benefit option on the application. 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. The death benefit is never less than the
multiple of Cash Value specified in Appendix B. The death benefit payable is
reduced by any Debt. (See "Policy Benefits and Rights--Death Benefits," page
14.)
2
<PAGE> 8
PREMIUMS
The amount and frequency of premium payments are flexible. The Policy owner
specifies a Planned Premium on the application. However, the owner is not
required to make the Planned Premiums, 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 affects whether the Policy
will be classified as a modified endowment contract. The minimum monthly premium
payment is $50. Other minimums apply for other payment modes.
Payment of the Planned Premium does not guarantee that a Policy remains in
force. Instead, Surrender Value must be sufficient to cover all Policy charges
for the Policy to remain in force. A Policy will remain in force during the
guarantee period if premiums paid, less withdrawals and Debt, equal or exceed
the sum of the guarantee premiums. (See "The Policy -- Premiums," page 12.)
THE SEPARATE ACCOUNT
ALLOCATION OF PREMIUMS. The portion of the premium available for allocation
equals the premium paid less applicable charges. A Policy owner indicates in the
application the percentages of premium to be allocated among the Subaccounts of
the Separate Account and the Fixed Account. The Policy currently offers
thirty-one Subaccounts, each of which invests in shares of a designated
portfolio of one of the Funds.
The initial premium, minus applicable charges, is allocated to the Kemper
Money Market Subaccount on the day after receipt. On the Trade Date, the
Separate Account Value in the Kemper Money Market Subaccount is allocated among
the Subaccounts and the Fixed Account in accordance with the Policy owner's
instructions in the application. (See "The Policy -- Policy Issue," page 12.)
TRANSFERS. The Policy owner may transfer Separate Account Value among the
Subaccounts and into the Fixed Account once every fifteen days. One annual
transfer is permitted from the Fixed Account to the Subaccounts. (See "The
Policy -- Allocation of Premiums and Separate Account Value," page 12.)
THE FUNDS
The following portfolios of The Alger American Fund are currently available
for investment by the Separate Account:
- ALGER AMERICAN BALANCED
- ALGER AMERICAN GROWTH
- ALGER AMERICAN INCOME & GROWTH
- ALGER AMERICAN MIDCAP GROWTH
The Dreyfus Socially Responsible Growth Fund, Inc. is currently available
for investment by the Separate Account.
Dreyfus Stock Index Fund is currently available for investment by the
Separate Account.
The following portfolios of the Dreyfus Variable Investment Fund are
currently available for investment by the Separate Account:
- DREYFUS CAPITAL APPRECIATION
- DREYFUS SMALL CAP
Class 2 Shares of the following portfolios of the Templeton Variable
Products Series Fund are currently available for investment by the Separate
Account:
- TEMPLETON ASSET ALLOCATION
- TEMPLETON BOND
- TEMPLETON DEVELOPING MARKETS
- TEMPLETON INTERNATIONAL
The following portfolios of the Fidelity Variable Insurance Products Fund
are currently available for investment by the Separate Account:
- FIDELITY VIP EQUITY-INCOME
- FIDELITY VIP GROWTH
3
<PAGE> 9
- FIDELITY VIP HIGH INCOME
- FIDELITY VIP OVERSEAS
The following portfolios of the Janus Aspen Series are currently available
for investment by the Separate Account:
- JANUS ASPEN AGGRESSIVE GROWTH
- JANUS ASPEN BALANCED
- JANUS ASPEN FLEXIBLE INCOME
- JANUS ASPEN GROWTH
- JANUS ASPEN INTERNATIONAL GROWTH
- JANUS ASPEN WORLDWIDE GROWTH
Class A Shares of the following portfolios of the Scudder Variable Life
Investment Fund are currently available for investment by the Separate Account:
- SCUDDER VLIF CAPITAL GROWTH
- SCUDDER VLIF GROWTH AND INCOME
- SCUDDER VLIF INTERNATIONAL
The following portfolios of the Kemper Variable Series are currently
available for investment by the Separate Account:
- KEMPER GOVERNMENT SECURITIES
- KEMPER INVESTMENT GRADE BOND
- KEMPER MONEY MARKET
- KEMPER SMALL CAP GROWTH
- KEMPER TOTAL RETURN
- KEMPER VALUE + GROWTH
For a more detailed description of the Funds, see "The Funds," page 8, the
Funds' prospectuses accompanying this Prospectus, and Statements of Additional
Information available from us upon request.
CHARGES
The following charges are taken from each premium payment before the net
premium is allocated. (See "Charges and Deduction -- Deductions from Premiums,"
page 18.)
- 2.5% sales load
- 2.5% state and local premium tax charge
- 1% corporate income tax liability
We currently do not deduct any other charges from premium or the Separate
Account for federal, state or other taxes. Should we determine that these taxes
apply, we may make deductions from the Separate Account to pay those taxes. (See
"Federal Tax Matters," page 24.)
We will deduct a charge from Cash Value in each Subaccount and the Fixed
Account on the Policy Date and on each Monthly Processing Date for the cost of
life insurance coverage. In addition, we deduct an asset charge, at a current
annual rate of .60% for the first ten Policy Years, .40% for Policy Years eleven
through twenty, and .20% for Policy Years twenty-one and thereafter, from each
Subaccount on a daily basis for our assumption of mortality and expense risks.
The guaranteed Mortality and Expense Risk is .60% for all years. (See "Charges
and Deductions--Cost of Insurance Charge and Mortality and Expense Risk Charge,"
page 19.)
On each Monthly Processing Date, we deduct from Cash Value a monthly
administrative expense charge. In Policy Year one, the charge will be $10 per
month. In Policy Years two and thereafter the charge is anticipated to be $6 per
month, but in no case will it be greater than $7.50 per month. (See "Charges and
Deductions--Monthly Administrative Charge," page 19.)
We deduct a surrender charge if the Policy is surrendered or the Cash Value
is applied under a Settlement Option prior to the eleventh Policy Year (or the
eleventh Policy Year following an increase in Specified Amount). (See "Policy
Benefits and Rights--Surrender Privilege," page 18.)
4
<PAGE> 10
The Policy owner indirectly bears the annual Fund operating expenses of the
Portfolios in which the Subaccounts invest. These may include management fees,
12b-1 fees and other expenses. (See "Charges and Deductions--Charges Against the
Funds," page 20.)
TAX TREATMENT UNDER CURRENT FEDERAL TAX LAW
Under existing tax law, any increase in Cash Value is generally not taxable
until a distribution occurs through a withdrawal or surrender. Generally,
distributions are not included in income until the amount of the distributions
exceeds the premiums paid for the Policy. If the Policy is a modified endowment
contract, a loan is also treated as a distribution. Generally, distributions
from a modified endowment contract (including loans) are included in income to
the extent the Cash Value exceeds premiums paid. A change of owners, an
assignment, a loan or a surrender of the Policy may have tax consequences.
Death Benefits payable under the Policy are generally excludable from the
gross income of the Beneficiary. As a result, the Beneficiary would not be
subject to income tax on the Death Benefit. (See "Federal Tax Matters," page
24.)
FREE-LOOK PERIOD
The Policy owner may examine a Policy and return it for a refund during the
Free-Look Period. The length of the Free-Look Period depends on the state where
the Policy is issued; however, it will be at least 10 days from the date the
owner receives the Policy. (See "Policy Benefits and Rights--Free-Look Period
and Exchange Rights," page 18.)
ILLUSTRATIONS OF CASH VALUE, SURRENDER VALUE, DEATH BENEFIT
Tables in Exhibit 9 to the registration statement illustrate Cash Value,
Surrender Value and Death Benefits. These illustrations are based on Policy
charges and hypothetical assumed rates of return for the Separate Account. The
Separate Account's investment experience will differ, and the actual Policy
values will be higher or lower than those illustrated.
Upon request, we will provide a free, personalized illustration reflecting
the proposed Insured's age, underwriting classification, and sex (where
applicable). Otherwise, a personalized illustration uses the same methodology as
those appearing in Exhibit 9 to the registration statement.
FEES AND EXPENSES
The following tables are designed to help you understand the fees and
expenses that you bear, directly or indirectly, as a Policy owner. The first
table describes the Policy charges and deductions you directly bear under the
Policy. The second table describes the fees and expenses of the portfolios that
you bear indirectly when you purchase a Policy. (See "Charges and Deductions",
beginning on page 18.)
5
<PAGE> 11
POLICY CHARGES AND DEDUCTIONS
CHARGES DEDUCTED FROM THE SEPARATE ACCOUNT:
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Mortality and Expense Risk Charge: CURRENT: .60% of average daily assets for
first ten Policy Years; .40% for Policy
Years eleven through twenty; and .20% for
Policy Year twenty-one and thereafter.
GUARANTEED: .60% for all Policy Years
Federal Income Tax Charge: Currently none.(1)
CHARGES DEDUCTED FROM THE CASH VALUE (DEDUCTED MONTHLY):
Cost of Insurance Charge(4): CURRENT: Ranges from $ per $1,000 of
net amount at risk to $ per $1,000 of
net amount at risk(5)
GUARANTEED: Ranges from $ per $1,000
of net amount at risk to $ per $1,000
of net amount at risk(5)
Administrative Expense Charge: $10 monthly in Policy Year one; $6 monthly
in Policy Years two and thereafter, with a
$7.50 maximum monthly charge guaranteed.
Tax Charge: 2.5% from each premium payment for state and
local taxes;(2)
1% from each premium payment for corporate
income tax liability.(2)
Sales Load: 2.5% from each premium payment.(2)
Systematic Withdrawal Charge: $50 for the initial set-up plus $25 each
time a change is made to the plan.
TRANSACTION CHARGES:
Transfer Fee: Currently none.(3)
Maximum Withdrawal Charge: 100% of the target premium as shown in
Appendix B.
</TABLE>
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(1) We currently do not assess a charge for federal income taxes that may be
attributed to the operations of the Separate Account. We reserve the right
to do so in the future. (See "Charges and Deductions," beginning on page
18.)
(2) Before net premiums are allocated.
(3) We currently do not assess a transfer fee, however we reserve the right to
charge up to $25 for each transfer in the future.
(4) The current cost of insurance charge will never exceed the guaranteed cost
of insurance charge shown in the Policy Specifications. The net amount at
risk equals the death benefit divided by , minus Cash Value. (See
"Charges and Deductions -- Cost of Insurance Charge," page 19.)
(5) Current and guaranteed cost of insurance charges are based on the issue age
(or attained age following an increase in Specified Amount), sex, Insured's
rate class, and Policy Year.
6
<PAGE> 12
PORTFOLIO EXPENSES
(As a percentage of average net assets for the period ended December 31, 1998)
(total expense figures shown in parentheses are after fee waivers or reductions
and expense reimbursements, as indicated in the notes)
<TABLE>
<CAPTION>
12B-1 TOTAL FUND OTHER TOTAL FUND ANNUAL
PORTFOLIO MANAGEMENT FEES FEES EXPENSES EXPENSES
- --------- --------------- ------ ---------------- -----------------
<S> <C> <C> <C> <C>
Alger American Balanced................. 0.75% 0.17% 0.92%
Alger American Growth................... 0.75% 0.04% 0.79%
Alger American Income & Growth.......... 0.625% 0.075% 0.70%
Alger American MidCap Growth............ 0.80% 0.04% 0.84%
The Dreyfus Socially Responsible Growth
Fund, Inc............................. 0.75% 0.05% 0.80%
Dreyfus Stock Index Fund................ 0.25% 0.01% 0.26%
Dreyfus Capital Appreciation............ 0.75% 0.06% 0.81%
Dreyfus Small Cap....................... 0.75% 0.02% 0.77%
Templeton Asset Allocation.............. 0.60% 0.25% 0.18% 1.03%
Templeton Bond.......................... 0.50% 0.15% 0.23% 0.88%
Templeton Developing Markets............ 1.25% 0.25% 0.41% 1.91%
Templeton International................. 0.69% 0.25% 0.17% 1.11%
Fidelity VIP Equity-Income.............. 0.49% 0.09% 0.58%
Fidelity VIP Growth..................... 0.59% 0.09% 0.68%
Fidelity VIP High Income................ 0.58% 0.12% 0.70%
Fidelity VIP Overseas................... 0.74% 0.17% 0.91%
Janus Aspen Aggressive Growth........... 0.72% 0.03% 0.75%
Janus Aspen Balanced.................... 0.72% 0.02% 0.74%
Janus Aspen Flexible Income............. 0.65% 0.08% 0.73%
Janus Aspen Growth(2)................... 0.72% 0.03% 0.75% (0.68%)
Janus Aspen International Growth(2)..... 0.75% 0.20% 0.95% (0.86%)
Janus Aspen Worldwide Growth(2)......... 0.67% 0.07% 0.74% (0.72%)
Scudder VLIF Capital Growth............. 0.47% 0.04% 0.51%
Scudder VLIF Growth and Income.......... 0.47% 0.09% 0.56%
Scudder VLIF International.............. 0.87% 0.18% 1.05%
Kemper Government Securities............ 0.55% 0.11% 0.66%
Kemper Investment Grade Bond(1)......... 0.60% 0.07% 0.67%
Kemper Money Market..................... 0.50% 0.04% 0.54%
Kemper Small Cap Growth................. 0.65% 0.05% 0.70%
Kemper Total Return..................... 0.55% 0.05% 0.60%
Kemper Value + Growth(1)................ 0.75% 0.03% 0.78%
</TABLE>
- ---------------
(1) Pursuant to their respective agreements with Kemper Variable Series, the
investment manager and the accounting agent have agreed, for the one year
period commencing on approximately May 1, 1999, to limit their respective
fees and to reimburse other operating expenses to the extent necessary to
limit total operating expenses of the following described Portfolios to the
amounts set forth after the Portfolio names: Kemper Value+Growth Portfolio
(.84%) and Kemper Investment Grade Bond Portfolio (.80%). The amounts set
forth in the table above reflect actual expenses for the past fiscal year,
which were lower than these expense limits.
(2) The expense figures shown without parentheses are based on actual expenses
for the past fiscal year. They do not reflect certain fee waivers or
reductions from Janus Capital Corporation. With such waivers and reductions,
Management Fees, Other Expenses, and Total Portfolio Annual Expenses for the
Portfolios for the fiscal year ending December 31, 1998 were: 0.65%, 0.03%,
and 0.68%, respectively, for the Growth Portfolio; .66%, .20%, and .86%,
respectively, for the International Growth Portfolio; and .65%, .07%, and
.72%, respectively, for the Worldwide Growth Portfolio. See the prospectus
and Statement of Additional Information of Janus Aspen Series for a
description of these waivers and reductions. The Total Fund Annual Expense
figures set forth in parentheses reflect the effect of the fee waiver and
expense reduction arrangements described above.
7
<PAGE> 13
KILICO AND THE SEPARATE ACCOUNT
KEMPER INVESTORS LIFE INSURANCE COMPANY
Kemper Investors Life Insurance Company ("KILICO"), 1 Kemper Drive, Long
Grove, Illinois 60049, was organized in 1947 and is a stock life insurance
company organized under the laws of the State of Illinois. KILICO is a
wholly-owned subsidiary of Kemper Corporation, a nonoperating holding company.
Kemper Corporation is a majority owned (76.4 percent) subsidiary of Zurich
Holding Company of America ("ZHCA"), which is a wholly-owned subsidiary of
Zurich Insurance Company ("Zurich"). Zurich is a wholly-owned subsidiary of
Zurich Financial Services ("ZFS"). ZFS was formed in the September, 1998 merger
of the Zurich Group with the financial services business of B.A.T. Industries.
ZFS is owned by Zurich Allied A.G. and Allied Zurich p.l.c. fifty-seven percent
and forty-three percent, respectively. 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
as a separate investment account on January 22, 1987. The Separate Account
receives and invests net premiums under the Policy. In addition, the Separate
Account receives and invests net premiums for other variable life insurance
policies offered by KILICO.
The Separate Account is administered and accounted for as part of our
general business. The income, capital gains or capital losses of the Separate
Account are credited to or charged against Separate Account assets, without
regard to the income, capital gains or capital losses of any other separate
account or any other business we conduct. The Policy benefits are our
obligations.
The Separate Account is registered with the Securities and Exchange
Commission ("Commission") as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act"). However, the Commission does not supervise
the management, investment practices or policies of the Separate Account or
KILICO.
The Policy currently offers thirty-one Subaccounts. Additional Subaccounts
may be added in the future. Not all Subaccounts may be available in all
jurisdictions or under all Policies.
THE FUNDS
The Separate Account invests in shares of The Alger American Fund, The
Dreyfus Socially Responsible Growth Fund, Inc., Dreyfus Stock Index Fund,
Dreyfus Variable Investment Fund, Templeton Variable Products Series Fund,
Fidelity Variable Insurance Products Fund, Janus Aspen Series, Scudder Variable
Life Investment Fund and Kemper Variable Series. The Commission does not
supervise their management, investment practices or policies. The Funds provide
investment vehicles for variable life insurance and variable annuity contracts.
Shares of the Funds currently are sold only to insurance company separate
accounts and certain qualified retirement plans. In addition to the Separate
Account, shares of the Funds may be sold to variable life insurance and variable
annuity separate accounts of insurance companies not affiliated with KILICO. It
is conceivable that in the future it may be disadvantageous for variable life
insurance separate accounts of companies unaffiliated with KILICO, or for
variable life insurance separate accounts, variable annuity separate accounts
and qualified retirement plans to invest simultaneously in the Funds. Currently
we do not foresee disadvantages to variable life insurance owners, variable
annuity owners or qualified retirement plans. The Funds have an obligation to
monitor events for material conflicts between owners and determine what action,
if any, should be taken. In addition, if we believe that a Fund's response to
any of those events or conflicts insufficiently protects owners, we will take
appropriate action on our own.
A Fund may consist of separate portfolios. The assets of each portfolio are
held separate from the assets of the other portfolios, and each portfolio has
its own distinct investment objective and policies. Each portfolio operates as a
separate investment fund, and the income, gains or losses of one portfolio
generally have no effect on the investment performance of any other portfolio.
THE ALGER AMERICAN FUND
The Alger American Fund portfolios in which the Separate Account invests
are summarized below:
ALGER AMERICAN BALANCED: This Portfolio seeks current income and long-term
capital appreciation.
8
<PAGE> 14
ALGER AMERICAN GROWTH: This Portfolio seeks long-term capital appreciation.
ALGER AMERICAN INCOME & GROWTH: This Portfolio primarily seeks to provide a
high level of dividend income; its secondary goal is to provide capital
appreciation.
ALGER AMERICAN MIDCAP GROWTH: This Portfolio seeks long-term capital
appreciation.
Fred Alger Management, Inc. is the investment adviser to each Portfolio of
The Alger American Fund specified above.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
This Fund's primary goal is to provide capital growth through investment in
common stocks of companies which not only meet traditional investment standards,
but also conduct their business in a manner that contributes to the enhancement
of the quality of life in America.
The Dreyfus Corporation serves as the investment adviser, and NCM Capital
Management Group, Inc. is the sub-adviser, for this Fund.
DREYFUS STOCK INDEX FUND
This Fund's primary goal is to match the total return of the Standard &
Poor's Composite Stock Price Index.
The Dreyfus Corporation serves as the investment adviser for this Fund.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund portfolios in which the Separate
Account invests are summarized below:
DREYFUS CAPITAL APPRECIATION: This Portfolio seeks long-term capital growth
consistent with the preservation of capital; current income is a secondary goal.
DREYFUS SMALL CAP: This Portfolio seeks to maximize capital appreciation.
The Dreyfus Corporation serves as the investment adviser to each Portfolio
of the Dreyfus Variable Investment Fund specified above. Fayez Sarofim & Co.
serves as the sub-adviser for the Dreyfus Capital Appreciation Portfolio.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
The Templeton Variable Products Series Fund portfolios in which the
Separate Account invests are summarized below:
TEMPLETON ASSET ALLOCATION (CLASS 2 SHARES): This Portfolio seeks high
total return.
TEMPLETON BOND (CLASS 2 SHARES): This Portfolio seeks high current income.
Capital appreciation is a secondary consideration.
TEMPLETON DEVELOPING MARKETS (CLASS 2 SHARES): This Portfolio seeks
long-term capital appreciation.
TEMPLETON INTERNATIONAL (CLASS 2 SHARES): This Portfolio seeks long-term
capital growth.
Templeton Investment Counsel, Inc. is the investment manager for the
Templeton Asset Allocation Fund, the Templeton Bond Fund and the Templeton
International Fund. Templeton Asset Management Ltd. is the investment manager
for the Templeton Developing Markets Fund.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund portfolios in which the
Separate Account invests are summarized below:
FIDELITY VIP EQUITY-INCOME: This Portfolio seeks reasonable income.
FIDELITY VIP GROWTH: This Portfolio seeks capital appreciation.
FIDELITY VIP HIGH INCOME: This Portfolio seeks a high level of current
income while also considering growth of capital.
9
<PAGE> 15
FIDELITY VIP OVERSEAS: This Portfolio seeks long-term growth of capital.
Fidelity Management & Research Company (FMR) is the investment adviser for
the available Portfolios of the Fidelity Variable Insurance Products Fund.
Fidelity Management & Research (U.K.) Inc. (FMR U.K.), in London, England, and
Fidelity Management & Research Far East Inc. (FMR Far East), in Tokyo, Japan,
each serve as sub-advisers to the Fidelity VIP High Income Portfolio and the
Fidelity VIP Overseas Portfolio. Fidelity International Investment Advisors
(U.K.) Limited (FIIA (U.K.) L), in London, England, also serves as sub-adviser
to the Fidelity VIP Overseas Portfolio.
JANUS ASPEN SERIES
The Janus Aspen Series portfolios in which the Separate Account invests are
summarized below:
JANUS ASPEN AGGRESSIVE GROWTH: This Portfolio seeks long-term growth of
capital.
JANUS ASPEN BALANCED: This Portfolio seeks long-term capital growth,
consistent with preservation of capital and balanced by current income.
JANUS ASPEN FLEXIBLE INCOME: This Portfolio seeks to obtain maximum total
return consistent with preservation of capital.
JANUS ASPEN GROWTH: This Portfolio seeks long-term growth of capital in a
manner consistent with the preservation of capital.
JANUS ASPEN INTERNATIONAL GROWTH: This Portfolio seeks long-term growth of
capital.
JANUS ASPEN WORLDWIDE GROWTH: This Portfolio seeks long-term growth of
capital in a manner consistent with the preservation of capital.
Janus Capital serves as the investment adviser for the six available
Portfolios of the Janus Aspen Series.
SCUDDER VARIABLE LIFE INVESTMENT FUND
The Scudder Variable Life Investment Fund portfolios in which the Separate
Account invests are summarized below:
SCUDDER VLIF CAPITAL GROWTH (A SHARES): This Portfolio seeks to maximize
long-term capital growth from a portfolio consisting primarily of equity
securities.
SCUDDER VLIF GROWTH AND INCOME (A SHARES): This Portfolio seeks long-term
growth of capital, current income and growth of income from a portfolio
consisting primarily of common stocks and securities convertible into common
stocks.
SCUDDER VLIF INTERNATIONAL (A SHARES): This Portfolio seeks long-term
growth of capital principally from a diversified portfolio of foreign equity
securities.
Scudder Kemper Investments, Inc., our affiliate, is the investment adviser
of each portfolio of the Scudder Variable Life Investment Fund specified above.
KEMPER VARIABLE SERIES
The Kemper Variable Series portfolios in which the Separate Account invests
are summarized below:
KEMPER GOVERNMENT SECURITIES: This Portfolio seeks high current return
consistent with preservation of capital.
KEMPER INVESTMENT GRADE BOND: This Portfolio seeks high current income.
KEMPER MONEY MARKET: This Portfolio seeks maximum current income to the
extent consistent with stability of principal from a portfolio of high quality
money market instruments. The Portfolio seeks to maintain a net asset value of
$1.00 per share but there can be no assurance that the Portfolio will be able to
do so.
KEMPER SMALL CAP GROWTH: This Portfolio seeks maximum appreciation of
investors' capital.
KEMPER TOTAL RETURN: This Portfolio seeks a high total return, a
combination of income and capital appreciation, consistent with reasonable risk.
KEMPER VALUE + GROWTH: This Portfolio seeks growth of capital. A secondary
objective of the Portfolio is the reduction of risk over a full market cycle
compared to a portfolio of only growth stocks or only value stocks.
10
<PAGE> 16
Scudder Kemper Investments, Inc. is the investment manager to each
Portfolio of the Kemper Variable Series specified above.
The Portfolios may not achieve their stated objectives. More detailed
information, including a description of risks involved in investing in the
Portfolios, is found in the Funds' prospectuses and Statements of Additional
Information. The Funds' prospectuses accompany this Prospectus. The Funds'
Statements of Additional Information are available from us upon request.
CHANGE OF INVESTMENTS
We reserve the right to make additions to, deletions from, or substitutions
for the shares held by the Separate Account or that the Separate Account may
purchase. We reserve the right to eliminate the shares of any of the portfolios
and to substitute shares of another portfolio or of another investment company,
if the shares of a portfolio are no longer available for investment, or if in
our judgment further investment in any portfolio becomes inappropriate in view
of the purposes of the Policy or the Separate Account. We may also eliminate or
combine one or more Subaccounts, transfer assets, or substitute one Subaccount
for another Subaccount, if, in our discretion, marketing, tax or investment
conditions warrant. We will not substitute any shares attributable to a Policy
owner's interest in a Subaccount without notice to the owner and the
Commission's prior approval, if required. 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 Policy owners.
We also reserve 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. New Subaccounts may be established
when, in our sole discretion, marketing needs or investment conditions warrant.
New Subaccounts may be made available to existing owners as we determine.
If we deem it to be in the best interests of persons having voting
interests under the Policy, the Separate Account may be:
- operated as a management company under the 1940 Act;
- deregistered under that Act in the event such registration is no
longer required; or
- combined with our other separate accounts. To the extent permitted by
law, we may also transfer assets of the Separate Account to another
separate account, or to the General Account.
FIXED ACCOUNT OPTION
AMOUNTS ALLOCATED OR TRANSFERRED TO THE FIXED ACCOUNT ARE PART OF OUR
GENERAL ACCOUNT, SUPPORTING INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN THE
FIXED ACCOUNT ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1933 ACT"),
AND THE FIXED ACCOUNT IS NOT REGISTERED AS AN INVESTMENT COMPANY UNDER THE
INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED
ACCOUNT NOR ANY FIXED ACCOUNT INTERESTS GENERALLY ARE SUBJECT TO THE PROVISIONS
OF THE 1933 OR 1940 ACTS. WE HAVE BEEN ADVISED THAT THE STAFF OF THE COMMISSION
HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS RELATING TO THE FIXED
ACCOUNT. STATEMENTS REGARDING THE FIXED ACCOUNT, HOWEVER, MAY BE SUBJECT TO THE
GENERAL PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
Under the Fixed Account Option, we pay a fixed interest rate for stated
periods. This Prospectus describes only the aspects of the Policy involving the
Separate Account, unless we refer to fixed accumulation and settlement options.
A minimum balance of $500 must remain in the Fixed Account under the Fixed
Account Option. We guarantee the interest rate credited to the Fixed Account
will be at least 3% annually. At our discretion, we may credit interest in
excess of 3%. We reserve the right to change the rate of excess interest
credited. We also reserve the right to declare different rates of excess
interest depending on when amounts are allocated or transferred to the Fixed
Account. As a result, amounts at any designated time may be credited with a
different rate of excess interest than the rate previously credited to such
amounts and to amounts allocated or transferred at any other designated time.
11
<PAGE> 17
THE POLICY
POLICY ISSUE
Before we issue a Policy, we must receive a completed application and a
full initial premium at our home office. We ordinarily issue a Policy only for
Insureds Age 1 through 80 who supply satisfactory evidence of insurability.
Acceptance of an application is subject to our underwriting requirements. If we
decline an application, we will refund the Cash Value in the Kemper Money Market
Subaccount plus the total amount of monthly deductions and deductions against
premiums.
After underwriting is complete and the Policy is delivered to its owner,
insurance coverage begins as of the Policy Date. (See "Premiums," below.)
PREMIUMS
We must receive premiums at our home office. (See "Distribution of
Policies.") Checks must be made payable to KILICO.
PLANNED PREMIUMS. A Policy owner specifies a Planned Premium payment on the
application that provides for the payment of level premiums over a specified
period of time. However, the owner is not required to pay Planned Premiums.
The minimum monthly premium is $50. Other 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. Accordingly, variations from
Planned Premiums may cause the Policy to become a modified endowment contract,
and therefore subject to different tax treatment from conventional life
insurance contracts for certain pre-death distributions (See "Federal Tax
Matters".)
Payment of the Planned Premium does not guarantee that a Policy remains in
force. Instead, the duration of the Policy depends upon the Policy's Net
Surrender Value. Even if Planned Premiums are paid, the Policy will lapse any
time the Net 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 ends on the tenth Policy
anniversary. During the guarantee period, the Policy remains in force and no
grace period will begin, provided that the total premiums received, minus 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 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.") We may reject or
limit any premium payment below the current minimum premium amount, or that
would increase the death benefit by more than the amount of the premium. We may
return all or a portion of a premium payment if it would disqualify the Policy
as life insurance under the Internal Revenue Code.
Certain charges are deducted from each premium payment. (See "Charges and
Deductions.") The remainder of the premium, known as the net premium, is
allocated as described below under "Allocation of Premiums and Separate Account
Value."
POLICY DATE. The Policy Date is used to determine Policy Years and Monthly
Processing Dates. The Policy Date is the date that insurance coverage takes
effect subject to conditions set forth in the application, including the payment
of initial premium. If this date is the 29th, 30th, or 31st of a month, the
Policy Date will be the first day of the following month.
ALLOCATION OF PREMIUMS AND SEPARATE ACCOUNT VALUE
ALLOCATION OF PREMIUMS. The initial net premium is allocated to the Kemper
Money Market Subaccount. The Separate Account Value remains in the Kemper Money
Market Subaccount until the Trade Date. On the Trade Date, the Separate Account
Value in the Kemper Money Market Subaccount is allocated to the Subaccounts and
the Fixed Account as specified in the application. Additional premiums received
will be allocated as specified in the application or in later written
instructions received from the Policy owner. The minimum amount of any premium
that may be allocated to a Subaccount is $50. Cash Value may be allocated to a
total of nineteen Subaccounts at any given time.
12
<PAGE> 18
The Separate Account Value will vary with the investment experience of the
chosen Subaccounts. The Policy 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. These transfers are limited to
one transfer every fifteen days. All transfers made during a business day are
treated as one transfer.
Fixed Account value may be transferred to one or more Subaccounts. One
transfer of 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 us, or by
telephone authorization under forms we authorize. (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 Policy owner's
remaining interest in a Subaccount or the Fixed Account, from which amounts are
to be transferred, would be less than $500 after the transfer. We may waive
these minimums for reallocations under established third party asset allocation
programs. Transfers are based on the Accumulation Unit values next determined
following our receipt of valid, complete transfer instructions. We may suspend,
modify or terminate the transfer provision. We reserve the right to charge up to
$25 for each transfer after twelve transfers per calendar year. We disclaim all
liability if we follow in good faith instructions given in accordance with our
procedures, including requests for personal identifying information, that are
designed to limit unauthorized use of the privilege. Therefore, a Policy owner
bears the risk of loss in the event of a fraudulent telephone transfer.
If a Policy owner authorizes a third party to transact transfers on the
Policy owner's behalf, we will reallocate the Cash Value pursuant to the
authorized asset allocation program. However, we do not offer or participate in
any asset allocation program and we take no responsibility for any third party
asset allocation program. We may suspend or cancel acceptance of a third party's
instructions at any time and may restrict the investment options available for
transfer under third party authorizations.
AUTOMATIC ASSET REALLOCATION. A Policy owner may elect to have transfers
made automatically among the Subaccounts on an annual or a quarterly basis so
that Cash Value is reallocated to match the percentage allocations in the Policy
owner's predefined premium allocation elections. Transfers under this program
are neither subject to the $500 minimum transfer limitations nor limited by the
fifteen day transfer restriction. An election to participate in the automatic
asset reallocation program must be in writing on our form and returned to our
home office. There is currently no charge to participate in the program.
POLICY LAPSE AND REINSTATEMENT
LAPSE. The Policy will lapse when the Net Surrender Value is insufficient
to cover the current monthly deductions and a grace period expires without a
sufficient payment. (See "Charges and Deductions.")
The grace period is 61 days. The grace period begins when we send notice
that the Net Surrender Value is insufficient to cover the monthly deductions. If
we do not receive a premium payment or loan repayment during the grace period
sufficient to keep the Policy in force for three months, the Policy will 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 current allocation instructions. Amounts over and above the
amounts necessary to prevent lapse may be paid as additional premiums, to the
extent permissible. (See "The Policy--Premiums.")
We will not accept any payment causing the total premium payment to exceed
the maximum payment permitted for life insurance under the guideline premium
limits. However, the Policy owner may voluntarily repay a portion of Debt to
avoid lapse. The owner may also combine premium payments with Debt repayments.
(See "Federal Tax Matters.")
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 Net Surrender
Value to cover the monthly deductions, and it has not been surrendered for its
Net Surrender Value, it may be reinstated at any time within
13
<PAGE> 19
three years after the date of lapse. Tax consequences may affect the decision to
reinstate. Reinstatement is subject to:
- receipt of evidence of insurability satisfactory to us;
- payment of a minimum premium sufficient to cover monthly deductions
for the grace period and to keep the Policy in force three months; and
- payment or reinstatement of any Debt which existed at the date of
termination of coverage.
The effective date of reinstatement of a Policy is the Monthly Processing
Date that coincides with or next follows the date we approve the application for
reinstatement. Suicide and incontestability provisions 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. The death benefit proceeds equal the death benefit minus any Debt and
minus any monthly deductions due during the grace period.
A Policy owner selects in the application one of two death benefit options:
Option A or Option B. 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 Policy owner chooses the Specified Amount on the application. The
Specified Amount is stated in the Policy Specifications. The minimum Specified
Amount is $100,000.
OPTION A. Under Option A, the death benefit equals 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 Insured's age. The death benefit
percentage is 250% for an Insured at Age 40 or under, and it declines for older
Insureds. In setting the death benefit percentages, we seek to ensure that the
Policy will qualify for favorable federal income tax treatment. A table showing
the death benefit percentages is in the Appendix A to this Prospectus and in the
Policy.
OPTION B. Under Option B, the death benefit equals 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. The death benefit under Option B always varies 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 Amount, but different
Cash Values and assume that the Insured is Age 35 at the time of death and that
there is no outstanding Debt.
<TABLE>
<CAPTION>
POLICY I POLICY II POLICY 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 equals $100,000 since the
death benefit is the greater of the Specified Amount ($100,000) or the Cash
Value at the date of death times the death benefit percentage ($25,000 X 250% =
$62,500). For both Policies II and III under Option A, the Cash Value times 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 equals the higher value. Under Option B, the death benefit
for Policy I equals $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 times
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 times the death benefit percentage ($50,000 X 250% = $125,000).
In Policy III, the Cash Value
14
<PAGE> 20
times 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 equals the higher value.
All calculations of death benefit are 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 the Policy's settlements options.
Death Benefits ordinarily are paid within seven days after we receive all
required documentation. 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 change the death benefit
option from Option A to Option B, or from Option B to Option A. Changes in the
death benefit option may be made, in writing once per Policy Year. The effective
date of the change is the next Monthly Processing Date after we accept the
change.
A change in the death benefit from Option A to Option B reduces the
Specified Amount by the amount of the Policy's Cash Value. Therefore, the death
benefit payable under Option B at the time of the change equals the amount
payable under Option A immediately prior to the change. The change in option
affects the determination of the death benefit since the Cash Value will then be
added to the new Specified Amount, and the death benefit then varies with the
Cash Value. We may require evidence of insurability before we accept a change in
the death benefit from Option A to Option B.
A change in the death benefit from Option B to Option A increases the
Specified Amount by the amount of the Policy's Cash Value. Therefore, the death
benefit payable under Option A at the time of the change equals the amount
payable under Option B immediately prior to the change. However, the change in
option affects the determination of the death benefit since the Cash Value is
not added to the Specified Amount in determining the death benefit. The death
benefit then equals 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, which varies with the net amount at risk. Generally, net
amount at risk is the amount by which the death benefit exceeds the Cash Value.
(See "Charges and Deductions--Cost of Insurance Charge.") If the death benefit
does not equal the Cash Value times a death benefit percentage under either
Options A or B, changing from Option B to Option A will generally decrease the
future net amount at risk. This would decrease the future cost of insurance
charges. Changing from Option A to Option B generally results in a net amount at
risk that remains level. Such a change, however, results in an increase in the
cost of insurance charges over time, since the cost of insurance rates increase
with the Insured's Age.
CHANGES IN SPECIFIED AMOUNT
After the first Policy Year, a Policy owner may increase or decrease the
Specified Amount, subject to our approval. A change in Specified Amount may only
be made once per Policy Year. The minimum change in Specified Amount is $25,000.
Increases are not allowed after the Insured attains age 80. Increasing the
Specified Amount could increase the death benefit. Decreasing the Specified
Amount could decrease the death benefit. The amount of change in the death
benefit will depend, among other things, upon the selected death benefit option
and the degree to which the death benefit exceeds the Specified Amount prior to
the change. Changing the Specified Amount could affect the subsequent level of
death benefit and Policy values. An increase in Specified Amount may increase
the net amount at risk, thereby increasing a Policy owner's cost of insurance
charge and the guarantee premium amount. However, an increase in Specified
Amount does not extend the guarantee period. Conversely, a decrease in Specified
Amount may decrease the net amount at risk, thereby decreasing an owner's cost
of insurance charge. A decrease in Specified Amount will not decrease the
guarantee premium. Decreases in the death benefit may have tax consequences.
(See "Federal Tax Matters.")
INCREASES. We require additional evidence of insurability for an increase
in Specified Amount.
DECREASES. Any decrease in Specified Amount is first applied to the most
recent increases successively, then to the original Specified Amount. A decrease
is not permitted if the Specified Amount would fall below the lesser of the
initial Specified Amount or $100,000. If after a decrease in the Specified
Amount, total premiums paid exceed the tax law's premium limitations, we will
refund the amount exceeding the premium limitations. Some or all of the amount
refunded may be subject to tax. (See "Federal Tax Matters.")
We reserve the right to deny a requested decrease in Specified Amount. The
reasons for denial may include:
- our determination that the decrease would cause the Policy to fail
the tax guideline premium limitations, resulting in the Policy's
termination or
15
<PAGE> 21
- our determination that the decrease would cause the Policy to fail
the tax guideline premium limitations because the payments from Cash Value
required to effect the decrease exceed Net Surrender Value.
Requests for change in Specified Amount must be made in writing. The
requested change becomes effective on the Monthly Processing Date on or next
following our acceptance of the request. If the Policy owner is not the Insured,
we require the Insured's consent.
BENEFITS AT MATURITY
If the Insured is alive on the Policy Date anniversary nearest the
Insured's 100th birthday, we pay the Policy owner the Surrender Value of the
Policy. On the Maturity Date, the Policy terminates and we have no further
obligations under the Policy unless the Policy owner has purchased an Extended
Maturity Option Rider.
CASH VALUE
Cash Value reflects
- 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
- Policy charges
A Policy owner may make partial withdrawals of Cash Value or surrender the
Policy and receive the Policy's Net Surrender Value. (See "Surrender
Privilege.") The Cash Value is not guaranteed.
CALCULATION OF CASH VALUE. Cash Value is the total of
- Separate Account Value
- Fixed Account value
- Loan Account value
Cash Value is determined on each Valuation Date. It is first calculated on
the Policy Date. On that date, the Cash Value equals the initial premium, minus
the monthly deductions for the first Policy Month. (See "Charges and
Deductions.")
On any Valuation Date, Separate Account Value in any Subaccount equals:
(1) Separate Account Value in the Subaccount at the end of the
preceding Valuation Period times the Investment Experience Factor (defined
below) for 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 (from a Subaccount, the Fixed Account or the Loan Account
for Policy loan repayment (see "Policy Benefits and Rights--Policy
Loans,")); 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) 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.
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 for Policy loans. The Loan Account balance accrues daily interest at
an effective annual rate of 3.00%. (See "Policy Benefits and Rights--Policy
Loans.")
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<PAGE> 22
The Cash Value in the Fixed Account is credited with interest at our
declared annual rate. The annual rate will never be less than 3%.
ACCUMULATION UNIT VALUE. Each Subaccount has its own Accumulation Unit
Value. When net premiums or other amounts are allocated to a Subaccount, units
are purchased based on the Subaccount's 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.
For each Subaccount, 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 times the Accumulation Unit Value
for the preceding Valuation 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 due to 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 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 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 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 preceding Valuation Period;
(3) is the factor representing the Mortality and Expense Risk Charge. (See
"Charges and Deductions--Mortality and Expense Risk Charge.")
POLICY LOANS
After the first Policy Year, the Policy owner may borrow all or part of the
Policy's maximum loan amount. The maximum loan amount is 90% of Surrender Value.
The amount of any new loan may not exceed the maximum loan amount less Debt on
the date a loan is granted. Loan interest is charged at an effective annual rate
of 4.5%.
PREFERRED LOANS. The Policy owner may borrow an amount up to the earnings
in the Policy subject to any previous indebtedness. Interest on a preferred loan
is charged at an effective annual rate of 3%.
The minimum amount of any loan is $500. The loan ordinarily is paid within
seven days after we receive a written loan request, although payments may be
postponed under certain circumstances. (See "Postponement of Payments," and
"Federal Tax Matters.")
On the date a loan is made, the loan amount is transferred from the
Separate Account and Fixed Account to the Loan Account. Unless the Policy owner
directs otherwise, the loan amount is deducted from the Subaccounts and the
Fixed Account in proportion to the values that each bears to the total of
Separate Account Value and Fixed Account value at the end of the Valuation
Period during which the request is received.
Interest not paid when due is added to the loan amount. Unpaid interest is
due upon the earlier of the next Policy Date anniversary or when coverage
ceases. The same interest rates apply to unpaid interest. When interest is added
to the loan amount, we transfer an equal amount from the Separate Account and
the Fixed Account to the Loan Account.
Cash Value in the Loan Account earns 3.00% annual interest. Such interest
is allocated to the Loan Account.
LOAN REPAYMENT. All or any portion of a loan may be repaid at any time. A
Policy owner must specify that the purpose of a payment is loan repayment;
otherwise a payment is treated as premium. At the time of repayment, the Loan
Account is reduced by the repayment amount, adjusted for the difference between
interest
17
<PAGE> 23
charged and interest earned. The net repayment amount is allocated to the
Subaccounts and the Fixed Account, according to the Policy owner's current
allocation instructions, at the end of the Valuation Period during which the
repayment is received. These transfers are not limited by the 15 day transfer
restriction.
EFFECTS OF POLICY LOAN. Policy loans decrease the Net Surrender Value and,
therefore, the amount available to pay Policy charges. If the Net Surrender
Value on the day preceding a Monthly Processing Date is less than the next
monthly deductions we will notify the Policy owner. (See "General
Provisions--Written Notices and Requests.") The Policy will lapse and terminate
without value, unless we receive a sufficient payment within 61 days of the date
notice is sent. (See "The Policy--Policy Lapse and Reinstatement.")
EFFECT ON INVESTMENT EXPERIENCE. A Policy Loan affects Cash Value. The
collateral for the outstanding loan (the amount held in the Loan Account) does
not participate in the experience of the Subaccounts or earn current interest in
the Fixed Account. 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 a modified endowment contract, a loan is
treated as a distribution and is includible in income to the extent that Cash
Value exceeds premiums paid. Therefore, a loan may result in federal income tax
and a 10% tax penalty may also apply. (See "Federal Tax Matters.")
SURRENDER PRIVILEGE
If the Insured is alive, the Policy owner may surrender the Policy for its
Surrender Value. To surrender the Policy, the owner must return the Policy to
us, along with a written request. The Net Surrender Value equals Surrender
Value, minus any Debt. The Surrender Value equals the Cash Value minus any
applicable surrender charge. (See "Surrender Charge," below.)
PARTIAL WITHDRAWALS. After the first Policy Year, a Policy owner may
withdraw a portion of Surrender Value. The minimum amount of each withdrawal is
$500. The maximum withdrawal is limited to 10% of Net Surrender Value per year
during the surrender charge period. We reserve the right to impose a charge of
$25 for each partial withdrawal. This charge reimburses us for the
administrative expense related to the withdrawal. This charge is deducted after
the partial withdrawal amount is determined. (See "Charges and Deductions.") A
withdrawal decreases Cash Value by the amount of the withdrawal and, if Death
Benefit Option A is in effect, reduces Specified Amount by the amount of the
withdrawal.
FREE-LOOK PERIOD AND EXCHANGE RIGHTS
During the Free-Look Period, the Policy owner may examine the Policy and
return it for a refund. The time period depends on where 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 is the sum of Cash Value in the
Kemper Money Market Subaccount plus the total amount of monthly deductions and
deductions from Premium. An owner seeking a refund should return the Policy to
us or to the agent who sold the Policy.
At any time during the first two years after the Issue Date, the Policy
owner may exchange the Policy for a non-variable permanent fixed benefit life
insurance policy then currently offered by KILICO or an affiliate. Evidence of
insurability is not required. The amount of the new policy may be, at the
election of the owner, either the initial Death Benefit or the same net amount
at risk as the Policy on the exchange date. All Debt must be repaid and the
Policy must be surrendered before the exchange is made. The new policy will have
the same Policy Date and issue age as the exchanged Policy.
CHARGES AND DEDUCTIONS
DEDUCTIONS FROM PREMIUMS
We deduct a sales load of 2.5% from each premium before the net premium is
allocated. Additionally, we deduct a state and local premium tax charge of 2.5%
from each premium payment before net premium is allocated. This charge
reimburses us for paying state premium taxes. We expect 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, is deducted to compensate us for higher corporate
income taxes under the Internal Revenue Code.
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<PAGE> 24
COST OF INSURANCE CHARGE
We deduct a cost of insurance charge monthly from the Subaccounts and the
Fixed Account. This charge covers our anticipated mortality costs. The cost of
insurance charge is deducted monthly in advance and is allocated pro rata among
the Subaccounts and the Fixed Account.
We deduct the cost of insurance by cancelling units under the Subaccounts
and withdrawing amounts from the Fixed Account on the Policy Date and on each
Monthly Processing Date thereafter. If the Monthly Processing Date falls on a
day other than a Valuation Date, the charge is determined on the next Valuation
Date. The cost of insurance charge is determined by multiplying the monthly cost
of insurance rate (see below) by the "net amount at risk" for each Policy month.
The net amount at risk equals 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. We determine the
monthly cost of insurance rates based on our expectations as to future mortality
experience. Any change in the schedule of rates applies 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
Nearest Birthday, published by the National Association of Insurance
Commissioners.
RATE CLASS. The rate class of an Insured will affect the cost of insurance
rate. We currently place 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
We deduct a daily charge, at a current annual rate of .60% for the first
ten Policy Years, .40% for Policy Years eleven through twenty, and .20% for
Policy Years twenty-one and thereafter, from the Subaccounts for mortality and
expense risks we assume. We guarantee an annual rate of .60% for all Policy
Years.
The mortality and expense risk we assume is that our estimates of longevity
and of the expenses incurred over the life of the Policy will not be correct.
MONTHLY ADMINISTRATIVE CHARGE
We deduct a monthly administrative expense charge to reimburse us for
certain expenses related to maintenance of the Policies, accounting and record
keeping and periodic reporting to Policy owners. This charge is designed only to
reimburse us for actual administrative expenses. For the first Policy Year, this
charge is $10 per month. In Policy Years two and thereafter it is anticipated
that the charge will be $6 per month, but in no case will it be greater than
$7.50 per month.
OTHER CHARGES
SURRENDER CHARGE. We deduct a surrender charge from the Cash Value if the
Policy is surrendered or Cash Value is applied under a settlement option during
the first ten Policy Years. A surrender charge is also assessed during the first
ten Policy Years following an increase in Specified Amount.
1. The amount of the surrender charge for the initial Specified Amount
will be the product of a. times b. times c. where:
a. is the initial Specified Amount (in 1,000s);
b. is the surrender target premium rate as shown in Appendix B; and
c. is the surrender charge percentage for the applicable Policy Year
as shown below.
During the ten Policy Years following an increase in Specified Amount, an
additional surrender charge applies. The additional charge is calculated as
described below based on the amount of increase, years commencing on the date of
the increase and surrender target premium associated with the increase.
2. The amount of the surrender charge for each increase in the Specified
Amount will be the product of a. times b. times c. where;
a. is the amount of increase in Specified Amount for the base plan
(in 1,000s);
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<PAGE> 25
b. is the surrender target premium rate as shown in Appendix B; and
c. is the surrender charge percentage for the applicable Policy Year
as shown below.
The surrender charge is the sum of the amounts in 1. and 2. above. The
surrender charge will not be reduced by any decrease in Specified Amount.
The applicable surrender target premium rate depends on the Insured's age
at issue, sex, tobacco status, and underwriting rate class. See Appendix B.
SURRENDER CHARGE PERCENTAGES:
<TABLE>
<CAPTION>
Policy Year Percentages
- ----------- -----------
<S> <C>
1-5 100%
6 80%
7 60%
8 45%
9 30%
10 15%
11+ 0%
</TABLE>
WITHDRAWAL CHARGE. We may impose a charge of $25 for each partial
withdrawal. This charge reimburses us for the administrative expenses related to
the withdrawal.
TRANSFER CHARGE. Currently, no charges are made for transfers. However, we
reserve the right to charge up to $25 for each transfer. The transfer charge
reimburses us for the administrative expenses related to the transfer.
TAXES. Currently, no charges are made against the Separate Account for
federal, state or other taxes attributable to the Separate Account. We may,
however, in the future impose charges for income taxes or other taxes
attributable to the Separate Account or the Policy. (See "Federal Tax Matters.")
CHARGES AGAINST THE FUNDS. Under investment advisory agreements with each
Fund, the investment manager and/or adviser provides investment advisory and/or
management services for the portfolios. The Funds are responsible for advisory
fees and various other expenses, including 12b-1 distribution fees. Investment
advisory fees and expenses differ with respect to each of the portfolios of the
Funds. (See "The Funds.")
For additional information about the fees and expenses of the Funds, see
"The Funds", page 8, and the prospectuses for the Funds.
The Fund(s) may pay 12b-1 service fees to us or our affiliates for support
or distribution services relating to Fund shares. We may receive compensation
from the investment advisers for administrative services related to the Funds.
This compensation will be consistent with the services rendered or the cost
savings resulting from the arrangement. For more information concerning
investment advisory fees and other charges against the portfolios, see the
Funds' prospectuses accompanying this Prospectus and Statements of Additional
Information available from us upon request.
SYSTEMATIC WITHDRAWAL PLAN. An initial charge of $50 is imposed to enter
into a Systematic Withdrawal Plan. In addition, a $25 charge is imposed each
time a change is made to the plan. These charges reimburse us for administrative
expenses of this plan. (See "Systematic Withdrawal Plan.")
REDUCTION OF CHARGES. We may reduce certain charges and credit additional
amounts 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 our existing policyowners, sales
to employees or clients of members of the ZFS group of companies, or employees
and registered representatives (and their families) of broker-dealers (or their
affiliated financial institutions) that have entered into selling group
agreements with Investors Brokerage Services, Inc., the distributor of the
Policies. 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 unfairly
discriminate against any person, including the affected Policy owners and owners
of all other policies funded by the Separate Account.
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<PAGE> 26
GENERAL PROVISIONS
SETTLEMENT OPTIONS
The Policy owner, or Beneficiary at the death of the Insured if no election
by the owner is in effect, may elect to have the Death Benefit or Surrender
Value 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. The payee elects monthly, quarterly, semi-annual or annual payments. The
option selected must result in a payment that at least equals our required
minimum in effect when the option is chosen. If at any time the payments are
less than the minimum, we may increase the period between payments to quarterly,
semi-annual or annual or make the payment in one lump sum.
Benefit payments are based on Net Surrender Value calculated on the day
preceding the date the first benefit payment is due. The payment will be based
on the Settlement Option elected in accordance with the appropriate settlement
option table.
OPTION 1--FIXED INSTALLMENT ANNUITY. We pay income for the period and
payment mode elected. The period elected must at least 5 years, but not more
than 30 years.
OPTION 2--LIFE ANNUITY. We pay monthly income to the payee during the
payee's lifetime. If this Option is elected, annuity payments terminate
automatically and immediately on the death of the payee without regard to the
number or total amount of payments made. Thus, it is possible for an individual
to receive only one payment if death occurred prior to the date the second
payment was due.
OPTION 3--LIFE ANNUITY WITH INSTALLMENTS GUARANTEED. We pay monthly income
for the guaranteed period elected and thereafter for the remaining lifetime of
the payee. The available guaranteed periods are 5, 10, 15 or 20 years.
OPTION 4--JOINT AND SURVIVOR ANNUITY. We pay the full monthly income while
both payees are living. Upon the death of either payee, the income continues
during the lifetime of the surviving payee. The surviving payee's income is
based on the percentage designated (50%, 66 2/3%, 75% or 100%) at election time.
Payments terminate automatically and immediately upon the death of the surviving
payee without regard to the number or total amount of payments received.
We must consent to 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 Commission;
(2) The Commission by order permits postponement for the protection of
owners; or
(3) An emergency exists, as determined by the Commission, as a result
of which disposal of securities 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 us by check or draft may be
postponed until such time as we determine 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 us and the Policy 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.
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<PAGE> 27
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
adjusted to reflect the correct sex and age.
INCONTESTABILITY
We 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 (or within two years following an increase in Specified Amount) is a
risk not assumed under the Policy. Our 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.
ASSIGNMENT
No Policy assignment is binding on us until we receive it. We assume no
responsibility for the validity of the assignment. Any claim under an assignment
is subject to proof of the extent of the assignee's interest. If the Policy is
assigned, the rights of the Policy owner and Beneficiary are subject to the
rights of the assignee of record.
NONPARTICIPATING
The Policy does not pay dividends. It does not participate in any of
KILICO's surplus or earnings.
OWNER AND BENEFICIARY
The Policy owner may designate a new owner while the Insured is alive.
The Policy owner designates primary and secondary Beneficiaries in the
application. We rely upon the latest filed change of beneficiary. If the Insured
dies, and no designated Beneficiary is alive at that time, we will pay the
Insured's estate. The interest of any Beneficiary may be subject to that of an
assignee.
In order to change the Policy owner or a designated Beneficiary, the owner
must sign our form. The change is effective when the owner signs the form, but
we are not liable for payments made or actions taken before we receive the
signed form.
RECORDS AND REPORTS
We keep the Separate Account records. We send Policy owners, at their last
known address of record, an annual report showing:
<TABLE>
<S> <C>
- Death Benefit - partial withdrawals
- Accumulation Unit Value - transfers
- Cash Value - Policy loans and repayments
- Surrender Value - Policy charges
- additional premium payments
</TABLE>
Confirmations and acknowledgments of various transactions are also sent to
Policy owners. We also send annual and semi-annual Fund reports.
WRITTEN NOTICES AND REQUESTS
Send written notices or requests to our home office: Kemper Investors Life
Insurance Company, Customer Service, 1 Kemper Drive, Long Grove, Illinois 60049.
Please include the Policy number and the Insured's full name. We send notices to
a Policy owner's address shown in the application unless an address change is
filed with us.
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<PAGE> 28
OPTIONAL INSURANCE BENEFITS
The following optional insurance benefits are available by rider at the
time of application:
- waiver of premium due to Insured's total disability
- term insurance on the Insured's dependent children
- acceleration of a portion of the death benefit due to Insured's
terminal illness
- other insured rider
- extended maturity rider
The cost of these benefits is added to the monthly deduction. These
benefits and restrictions are described in the Rider. We provide samples of
these provisions upon written request.
DOLLAR COST AVERAGING
Under our Dollar Cost Averaging program, Cash Value in the Fixed Account,
the Kemper Money Market Subaccount or the Kemper Government Securities
Subaccount ("DCA Subaccount") is automatically transferred monthly to other
Subaccounts and the Fixed Account. A Policy owner may enroll any time by
completing our Dollar Cost Averaging form. Transfers are made on the tenth day
of the month, or the next business day if the tenth falls on a weekend. We must
receive the enrollment form at least five business days before the transfer
date.
Transfers commence on the first transfer date following the Trade Date. The
minimum transfer amount is $100 per Subaccount or Fixed Account. In order to
enroll, Cash Value in the DCA Subaccount must be at least $10,000. Dollar Cost
Averaging automatically ends if Cash Value in the DCA Subaccount is less than
the amount designated to be transferred. Cash Value remaining in the DCA
Subaccount will be transferred.
Dollar Cost Averaging ends if:
- the number of designated monthly transfers has been completed
- Cash Value attributable to the DCA Subaccount is insufficient to
complete the next transfer
- we receive the Policy owner's written termination at least five
business days before the next transfer date
- the Policy is surrendered.
There is currently no charge to participate in the Dollar Cost Averaging
program. We will give 30 days notice if we amend the Dollar Cost Averaging
program. We may terminate the program at any time.
A Policy owner may change Dollar Cost Averaging instructions by completing
our enrollment form. We must receive the enrollment form at least 5 business
days (10 business days for Fixed Account transfers), before the next transfer
date.
To participate in Dollar Cost Averaging, a Policy owner may have Cash Value
in the Fixed Account and no more than eight non-DCA Subaccounts.
SYSTEMATIC WITHDRAWAL PLAN
We offer a Systematic Withdrawal Plan ("SWP") allowing Policy owners to
preauthorize periodic withdrawals after the first Policy Year. Policy owners
instruct us to withdraw selected amounts from the Fixed Account, or up to 2
Subaccounts, on a monthly, quarterly, semi-annual or annual basis. The Policy
owner's periodic payment must be at least $500. These periodic payments are
partial withdrawals and are subject to surrender charges. (See "Policy Benefits
and Rights--Surrender Privileges," page 14.) The $25 withdrawal charge does not
apply. However, we charge $50 to establish an SWP and a $25 charge each time a
change is made. These charges reimburse us for SWP administrative expenses.
Periodic payments may be subject to income taxes, withholding and tax penalties.
(See "Federal Tax Matters.") An SWP application and additional information may
be obtained from the Policy owner's representative or us. We will give 30 days
notice if we amend the SWP. The SWP may be terminated at any time by the Policy
owner or us.
DISTRIBUTION OF POLICIES
Investors Brokerage Services, Inc. ("IBS") serves as distributor of the
Policies. IBS is located at 1 Kemper Drive, Long Grove, Illinois 60010. IBS is
our wholly-owned subsidiary. It is registered as a broker-dealer under the
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<PAGE> 29
Securities Exchange Act of 1934 (the "1934 Act"), and is a member of the
National Association of Securities Dealers, Inc. ("NASD").
The Policy is sold by licensed insurance representatives who represent us
and who are registered representatives of broker-dealers that are registered
under the Securities Exchange Act of 1934 and are members of the NASD.
The maximum sales commission payable to registered representatives is
approximately 70% of premiums up to the commission target premium and 2.5% of
excess premium in the first year and 2.5% of total premium in renewal years two
through ten. Beginning in the second Policy Year, a service fee on assets which
have been maintained and serviced may also be paid. In addition, certain
overrides and production and managerial bonuses may be paid. These additional
amounts may constitute a substantial portion of total commissions and fees paid.
Firms to which service fees and commissions may be paid include affiliated
broker-dealers. In addition to the commissions described above, we may pay
additional promotional incentives, in the form of cash or other compensation, to
licensed broker-dealers that sell the Policy. These incentives may be offered to
certain broker-dealers that sell or are expected to sell certain minimums during
specified periods.
The distribution agreement with IBS provides for indemnification of IBS by
KILICO and the Separate Account for liability arising out of allegedly untrue
statements in, or omissions of material fact from, the prospectus or the
Registration Statement. IBS agrees to indemnify KILICO and the Separate Account
against claims arising from the conduct of IBS or unaffiliated broker-dealers
that sell Policies.
FEDERAL TAX MATTERS
INTRODUCTION
This discussion of the federal income tax treatment of the Policy is not
exhaustive, does not purport to cover all situations, and is not intended as tax
advice. The federal income tax treatment of the Policy is unclear in certain
circumstances, and a qualified tax adviser should always be consulted with
regard to the application of law to individual circumstances. This discussion is
based on the Internal Revenue Code of 1986, as amended ("Code"), Treasury
Department regulations, and interpretations existing on the date of this
Prospectus. These authorities, however, are subject to change by Congress, the
Treasury Department, and judicial decisions.
This discussion does not address state or local tax consequences associated
with owning the Policy. IN ADDITION, WE MAKE NO GUARANTEE REGARDING ANY TAX
TREATMENT -- FEDERAL, STATE OR LOCAL -- OF ANY POLICY OR OF ANY TRANSACTION
INVOLVING A POLICY.
OUR TAX STATUS
We are taxed as a life insurance company and the operations of the Separate
Account are treated as part of our total operations. The operations of the
Separate Account do not materially affect our federal income tax liability
because we are allowed a deduction to the extent that net investment income of
the Separate Account is applied to increase Cash Value. We may incur state and
local taxes attributable to the Separate Account. At present, these taxes are
not significant. Accordingly, we do not charge or credit the Separate Account
for federal, state or local taxes. However, our federal income taxes are
increased because of the federal tax law's treatment of deferred acquisition
costs. Accordingly, we charge 1% of each premium payment to compensate us for
our higher corporate income tax liability.
If there is a material change in law, charges or credits may be made to the
Separate Account for taxes or reserves for taxes. These charges or credits are
determined independently of the taxes we actually pay.
TAXATION OF LIFE INSURANCE POLICIES
TAX STATUS OF THE POLICY. The Code establishes a definition of life
insurance which, in part, places limitations on the amount of premiums that may
be paid and the Cash Value that can accumulate relative to the Death Benefit. We
believe the Policy meets this definition. We reserve the right to refund
premiums, increase the Death Benefit (which may result in higher Policy
charges), or take any other action we deem necessary to ensure the Policy's
compliance with the tax definition of life insurance. The Death Benefit is
generally excludable from the Beneficiary's gross income. Interest and other
income credited are not taxable unless certain withdrawals are made (or are
deemed to be made) from the Policy prior to the Insured's death, as discussed
below. This tax treatment will only apply, however, if (1) the investments of
the Separate Account are "adequately diversified", and (2) we, rather than the
Policy owner, are considered the owner of the assets of the Separate Account.
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<PAGE> 30
DIVERSIFICATION REQUIREMENTS. The Code prescribes the manner in which the
Separate Account must be "adequately diversified." If the Separate Account fails
to comply with these diversification standards, the Policy will not be treated
as a life insurance contract, and the Policy owner is taxable on the income on
the contract (as defined in the tax law). We expect that the Separate Account,
through the Funds, will comply with the prescribed diversification requirements.
OWNERSHIP TREATMENT. In certain circumstances, variable life insurance
contract owners may be considered the owners of the assets of the Separate
Account. Income and gains from the Separate Account would then be includible in
the Policy owners' gross income. The IRS has stated that a variable contract
owner will be considered the owner of the assets of a separate account if the
owner possesses the ability to exercise investment control. As of the date of
this Prospectus, no investor control guidance is available.
We reserve the right to modify the Policy as necessary to attempt to
prevent Policy owners from being considered the owners of the assets of the
Separate Account. However, there is no assurance that such efforts would be
successful.
The following discussion assumes that the Policy will be treated as a life
insurance contract for tax purposes.
TAX TREATMENT OF LIFE INSURANCE DEATH BENEFIT PROCEEDS. In general, the
Death Benefit is excludable from gross income under the Code. Certain transfers
of the Policy, however, may result in a portion of the Death Benefit being
taxable. If the Death Benefit is paid under a Settlement Option, generally
payments will be prorated between the non-taxable Death Benefit and taxable
interest.
TAX DEFERRAL DURING ACCUMULATION PERIOD. Any increase in Cash Value is
generally not taxable to the Policy owner unless amounts are received (or are
deemed to be received) from the Policy before the Insured's death. If the Policy
is surrendered, the excess of Cash Value over the "investment in the contract"
is includible in the owner's ordinary income. The "investment in the contract"
generally is premium payments minus non-taxable distributions. Distributions may
be taxable to the owner if the Policy is considered a "modified endowment
contract" ("MEC").
POLICIES WHICH ARE NOT MECS
TAX TREATMENT OF WITHDRAWALS GENERALLY. If the Policy is not a MEC, the
amount of any withdrawal generally will be treated first as a non-taxable
recovery of premiums and then as taxable income. Thus, a withdrawal from a
non-MEC Policy generally is not taxable income unless the total withdrawals
exceed the investment in the contract.
DISTRIBUTIONS REQUIRED IN THE FIRST 15 POLICY YEARS. The Code limits the
amount of premium that may be paid and Cash Value that can accumulate relative
to the Death Benefit. Where cash distributions are required in connection with a
reduction in benefits during the first 15 years after the Policy is issued (or
if withdrawals are made in anticipation of a reduction in benefits during this
period), some or all of such amounts may be taxable. A reduction in benefits may
result from a decrease in Specified Amount, a change from an Option B Death
Benefit to an Option A Death Benefit, if withdrawals are made, and in certain
other instances.
TAX TREATMENT OF LOANS. If a Policy is not a MEC, a loan generally is
treated as indebtedness of the Policy owner. As a result, the loan is not
taxable income to the owner if the Policy remains in force. However, when the
interest rate credited to the Loan Account is the same as the interest rate
charged for the loan, some or all of the loan proceeds may be includible in
income. If a Policy lapses when a loan is outstanding, the amount of the loan
outstanding will be treated as a surrender in determining whether any amounts
are includible in the Policy owner's income.
Interest on an individual's Policy loans and interest on any loans of a
Policy owner that is a business entity are subject to possible disallowance
under complex rules. Consult a tax adviser on these issues.
POLICIES WHICH ARE MECS
CHARACTERIZATION OF A POLICY AS A MEC. A Policy is a MEC if (1) the Policy
is received in exchange for a life insurance contract that was a MEC, or (2) the
Policy is issued after June 21, 1988 and premiums are paid more rapidly than
permitted under the "7-Pay Test." A Policy fails this test (and thus is a MEC)
if the accumulated amount paid during the 1st 7 Policy Years exceeds the
cumulative sum of the net level premiums which would have been paid to that time
if the Policy provided for paid-up future benefits after the payment of 7 level
annual premiums. Under the Code, a material change of the Policy generally
results in a reapplication of the 7-Pay Test. In addition, any reduction in
benefits during the 7-Pay period will affect the application of this test.
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<PAGE> 31
We monitor the Policies and attempt to notify Policy owners on a timely
basis if a Policy is in jeopardy of becoming a MEC. The owner may then request
that we take available steps to avoid treating the Policy as a MEC.
TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES UNDER MECS. If
the Policy is a MEC, withdrawals are treated first as withdrawals of income and
then as a recovery of premiums. Thus, withdrawals are includible in income if
Cash Value exceeds the investment in the contract. A Policy loan is treated as a
withdrawal for tax purposes.
If the Policy owner assigns or pledges Cash Value under a MEC (or agrees to
assign or pledge any portion), such portion is a withdrawal for tax purposes.
The investment in the contract is increased by the amount includible in income
with respect to any assignment, pledge, or loan, though it is not affected by
any other aspect of the assignment, pledge, or loan (including its release or
repayment). Before assigning, pledging, or requesting a loan under a MEC, a
Policy owner should consult a qualified tax adviser.
PENALTY TAX. Generally, proceeds of a surrender or a withdrawal (or the
amount of any deemed withdrawal) from a MEC are subject to a penalty tax of 10%
of the portion of the proceeds that is includible in income, unless the
surrender or withdrawal is made (1) after the owner attains age 59 1/2, (2)
because the owner has become disabled (as defined in the Code), or (3) as
substantially equal periodic payments over the life or life expectancy of the
owner (or the joint lives or life expectancies of the owner and his or her
beneficiary).
AGGREGATION OF POLICIES. All life insurance contracts which are treated as
MECs and which are purchased by the same person from us or our affiliates within
the same calendar year are aggregated and treated as one contract in determining
the tax on withdrawals (including deemed withdrawals). The effects of
aggregation are not clear; however, it could affect the taxable amount of a
withdrawal (or a deemed withdrawal) and could subject the withdrawal to the 10%
penalty tax.
OTHER CONSIDERATIONS. Changing the Policy owner, exchanging the Policy,
changing from one Death Benefit option to another, and other Policy changes may
have tax consequences depending on the circumstances of the change. Federal
estate and state and local estate taxes, or inheritance taxes and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policy owner or Beneficiary.
FEDERAL INCOME TAX WITHHOLDING
We withhold and send to the federal government a part of the taxable
portion of withdrawals unless the Policy owner notifies us in writing at the
time of withdrawal that he or she elects no withholding. The Policy owner is
always responsible for the payment of any taxes and early distribution penalties
that may be due on the amounts received. The Policy owner may also be required
to pay penalties under the estimated tax rules, if the owner's withholding and
estimated tax payments are insufficient to satisfy the owner's total tax
liability.
LEGAL CONSIDERATIONS
On July 6, 1983, the Supreme Court held in ARIZONA GOVERNING COMMITTEE V.
NORRIS that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
The Policy 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 the Policy.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
We hold the assets of the Separate Account. We keep these assets segregated
and apart from our general funds. We maintain records of all purchases and
redemptions of the shares of each portfolio of the Funds by each of the
Subaccounts.
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<PAGE> 32
VOTING INTERESTS
We 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. Owners of all Policies participating in each Subaccount are entitled to
give us instructions with respect to that Subaccount. An owner's proportionate
interest in that Subaccount is measured by units. We determine the number of
shares for which a Policy owner may give voting instructions as of the record
date for the meeting. Owners will receive proxy material, reports, and other
materials relating to the appropriate portfolio of the Funds.
We vote all Fund shares held in the Separate Account proportionately based
on Policy owners' instructions. If changes in law permit, we may vote a Fund's
shares in our own right.
We 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, we may disregard
voting instructions in favor of changes initiated by a Policy owner in the
investment policy or the investment adviser of a portfolio of a Fund if we
reasonably disapprove 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 we determine that the change would have an adverse effect on
our General Account in that the proposed investment policy for a portfolio may
result in overly speculative or unsound investments. In the event we disregard
voting instructions, we will include a summary of that action and the reasons
for it in the next annual report to Policy 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. We
file an annual statement with the Director of Insurance on or before March 1st
of each year covering our operations and reporting on our financial condition 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.
In addition, we are subject to the insurance laws and regulations of the
other states where we operate. Generally, the insurance departments of other
states apply the laws of Illinois in determining our permissible investments.
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<PAGE> 33
KILICO'S DIRECTORS AND OFFICERS
Our directors and principal officers are listed below together with their
current positions and their other business experience during the past five
years. The address of each officer and director is 1 Kemper Drive, Long Grove,
Illinois 60049.
<TABLE>
<CAPTION>
NAME AND AGE
POSITION WITH KILICO
YEAR OF ELECTION OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS OR MORE
-------------------- -----------------------------------------------------
<S> <C>
Gale K. Caruso (41) President and Chief Executive Officer of Federal Kemper Life
President and Chief Executive Officer Assurance Company (FKLA), Fidelity Life Association (FLA),
since June 1999. Director since July Zurich Life Insurance Company of America (ZLICA) and Zurich
1999. Direct, Incorporated (ZD) since June 1999. Director of FKLA,
FLA and ZLICA since July 1999. Chairman, President and Chief
Executive Officer of Scudder Canada Investor Services, Ltd.
from 1995 to June 1999. Managing Director of Scudder Kemper
Investments, Inc. from July 1986 to June 1999.
John B. Scott (55) Chairman of the Board of FKLA, FLA, ZLICA and ZD since June
Chairman of the Board since June 1999. Chief Executive Officer, President and Director of
1999. Director since 1992. FKLA and FLA from 1988 to June 1999. Chief Executive
Officer, President and Director of ZLICA and ZD from March
1996 to June 1999. Chairman of the Board and Director of
Investors Brokerage Services, Inc. (IBS) and Investors
Brokerage Services Insurance Agency, Inc. (IBSIA) since
1993. Chairman of the Board of FKLA and FLA from April 1988
to January 1996. Chairman of the Board of KILICO from
February 1992 to January 1996. Executive Vice President and
Director of Kemper Corporation (Kemper) since January 1994
and March 1996, respectively. Executive Vice President of
Kemper Financial Companies, Inc. from January 1994 to
January 1996 and Director from 1992 to January 1996.
Eliane C. Frye (51) Executive Vice President of FKLA and FLA since 1995.
Executive Vice President since 1995. Executive Vice President of ZLICA and ZD since March 1996.
Director since May 1998. Director of FLA since December 1997. Director of FKLA and
ZLICA since May 1998. Director of ZD from March 1996 to
March 1997. Director of IBS and IBSIA since 1995. Senior
Vice President of KILICO, FKLA and FLA from 1993 to 1995.
Vice President of FKLA and FLA from 1988 to 1993.
Frederick L. Blackmon (47) Senior Vice President and Chief Financial Officer of FKLA
Senior Vice President and Chief since December 1995. Senior Vice President and Chief
Financial Officer since December Financial Officer of FLA since January 1996. Senior Vice
1995. President and Chief Financial Officer of ZLICA since March
1996. Senior Vice President and Chief Financial Officer of
ZD since March 1996. Director of FLA since May 1998.
Director of ZD from March 1996 to March 1997. Treasurer and
Chief Financial Officer of Kemper since January 1996. Chief
Financial Officer of Alexander Hamilton Life Insurance
Company from April 1989 to November 1995.
Russell M. Bostick (42) Senior Vice President and Chief Information Officer of FKLA,
Senior Vice President and Chief FLA, ZLICA and ZD since March 1999. Vice President and Chief
Information Officer since March 1999. Information Officer of FKLA, FLA, KILICO, ZLICA and ZD from
April 1998 to March 1999. Chief Technology Officer of
Corporate Software and Technology from June 1997 to April
1998. Vice President of CNA Insurance Companies from January
1995 to June 1997. Assistant Vice President of CNA Insurance
Companies from February 1994 to January 1995.
James C. Harkensee (41) Senior Vice President of FKLA and FLA since January 1996.
Senior Vice President since January Senior Vice President of ZLICA since 1995. Senior Vice
1996. President of ZD since 1995. Director of ZD from April 1993
to March 1997 and since March 1998. Vice President of ZLICA
from 1992 to 1995. Chief Actuary of ZLICA from 1991 to 1994.
Assistant Vice President of ZLICA from 1990 to 1992. Vice
President of ZD from 1994 to 1995.
</TABLE>
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<PAGE> 34
<TABLE>
<CAPTION>
NAME AND AGE
POSITION WITH KILICO
YEAR OF ELECTION OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS OR MORE
-------------------- -----------------------------------------------------
<S> <C>
James E. Hohmann (43) Senior Vice President of FKLA since December 1995. Chief
Senior Vice President since December Actuary of FKLA and KILICO from December 1995 to January
1995. Director since May 1998. 1999. Senior Vice President of FLA since January 1996. Chief
Actuary of FLA from January 1996 to January 1999. Senior
Vice President of ZLICA and ZD since March 1996. Chief
Actuary of ZLICA and ZD from March 1996 to January 1999.
Director of FLA since June 1997. Director of FKLA and ZLICA
since May 1998. Director of ZD from March 1996 to March
1997. Managing Principal (Partner) of Tillinghast-Towers
Perrin from January 1991 to December 1995.
Consultant/Principal (Partner) of Tillinghast-Towers Perrin
from November 1986 to January 1991.
Edward K. Loughridge (44) Senior Vice President and Corporate Development Officer of
Senior Vice President and Corporate FKLA and FLA since January 1996. Senior Vice President and
Development Officer since January Corporate Development Officer for ZLICA and ZD since March
1996. 1996. Senior Vice President of Human Resources of
Zurich-American Insurance Group from February 1992 to March
1996.
Debra P. Rezabek (43) Senior Vice President of FKLA and FLA since March 1996.
Senior Vice President since 1996. Corporate Secretary of FKLA and FLA since January 1996.
General Counsel since 1992. Corporate Director of FLA since May 1998. Vice President of KILICO,
Secretary since January 1996. FKLA and FLA since 1995. General Counsel and Director of
Government Affairs of FKLA and FLA since 1992 and of KILICO
since 1993. Senior Vice President, General Counsel and
Corporate Secretary of ZLICA since March 1996. Senior Vice
President, General Counsel and Corporate Secretary of ZD
since March 1996. Director of ZD from March 1996 to March
1997. Secretary of IBS and IBSIA since 1993. Director of IBS
and IBSIA from 1993 to 1996. Assistant General Counsel of
FKLA and FLA from 1988 to 1992. General Counsel and
Assistant Secretary of KILICO, FKLA and FLA from 1992 to
1996. Assistant Secretary of Kemper since January 1996.
Edward L. Robbins (59) Senior Vice President and Chief Actuary of FKLA, FLA, ZLICA
Senior Vice President and Chief and ZD since March 1999. Principal of KPMG Peat Marwick LLP
Actuary since March 1999. from May 1984 to January 1999.
Kenneth M. Sapp (53) Senior Vice President of FKLA, FLA and ZLICA since January
Senior Vice President since January 1998. Director of IBS since May 1998. Director of IBSIA
1998. since September 1998. Vice President--Aetna Life Brokerage
of Aetna Life & Annuity Company from February 1992 to
January 1998.
George Vlaisavljevich (56) Senior Vice President of FKLA, FLA and ZLICA since October
Senior Vice President since October 1996. Senior Vice President of ZD since March 1997. Director
1996. of IBS and IBSIA since October 1996. Executive Vice
President of The Copeland Companies from April 1983 to
September 1996.
</TABLE>
29
<PAGE> 35
<TABLE>
<CAPTION>
NAME AND AGE
POSITION WITH KILICO
YEAR OF ELECTION OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS OR MORE
-------------------- -----------------------------------------------------
<S> <C>
William H. Bolinder (56) Chairman of the Board of FKLA, FLA and KILICO from January
Director since January 1996. 1996 to June 1999. Director of FKLA and FLA since January
1996. Chairman of the Board of ZLICA and ZD from March 1995
to June 1999. Director of ZLICA and ZD since March 1995.
Chairman of the Board and Director of Kemper since January
1996. Director of SKI since January 1996. Vice Chairman of
SKI from January 1996 to 1998. Member of the Group Executive
Board of Zurich Financial Services Group since 1998. Member
of the Corporate Executive Board of Zurich Insurance Group
from October 1994 to 1998. Chairman of Zurich American
Insurance Company since 1998. Chairman of the Board of
American Guarantee and Liability Insurance Company, Zurich
American Insurance Company of Illinois, American Zurich
Insurance Company and Steadfast Insurance Company since
1995. Chief Executive Officer of American Guarantee and
Liability Insurance Company, Zurich American Insurance
Company of Illinois and American Zurich Insurance Company
from 1986 to June 1995. President of Zurich Holding Company
of America since 1986. Manager of Zurich Insurance Company,
U.S. Branch from 1986 to 1998. Underwriter for Zurich
American Lloyds since 1986.
David A. Bowers (52) Director of FKLA and ZLICA since May 1997. Director of FLA
Director since May 1997. since June 1997. Executive Vice President, Corporate
Secretary and General Counsel of Zurich U.S. since August
1985. Vice President, General Counsel and Secretary of
Kemper since January 1996.
Gunther Gose (54) Director of FKLA, FLA and ZLICA since November 1998. Chief
Director since November 1998. Financial Officer and Member of the Group Executive Board of
Zurich Financial Services since October 1998. Member of the
Corporate Executive Board of Zurich Insurance Group from
April 1990 to October 1998.
</TABLE>
LEGAL MATTERS
All matters of Illinois law pertaining to the Policy, including the
validity of the Policy and our right to issue the Policy under Illinois
Insurance Law, have been passed upon by Frank J. Julian, our Associate General
Counsel. Jorden Burt Boros Cicchetti Berenson & Johnson LLP, Washington, D.C.,
has advised us 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. We are not a party in
any litigation that is of material importance in relation to our total assets or
that relates to the Separate Account.
YEAR 2000 READINESS DISCLOSURE
Many existing computer programs were originally designed without
considering the impact of the year 2000 and currently use only two digits to
identify the year in the date field. This issue affects nearly all companies and
organizations and could cause computer applications and systems to fail or
create erroneous results for any transaction with a date of January 1, 2000, or
later.
Many companies must undertake major projects to address the year 2000
issue. Each company's costs and uncertainties will depend on a number of
factors, including its software and hardware, and the nature of the industry.
Companies must also coordinate with other entities with which they
electronically interact, including suppliers, customers, creditors and other
financial services institutions.
If a company does not successfully address its year 2000 issues, it could
face material adverse consequences in the form of lawsuits against the company,
lost business, erroneous results and substantial operating problems after
January 1, 2000.
We have taken substantial steps over the last several years to ensure that
our critical systems will be compliant for the year 2000. Such steps have
included the replacement of older systems with new systems which
30
<PAGE> 36
are already compliant. In 1996, we replaced our investment accounting system,
and, in 1997, we replaced our general ledger and accounts payable system. We
have also determined that new systems developed to support new product
introductions in 1997, 1998 and beyond are already year 2000 compliant. Data
processing expenses related solely to bringing our systems in compliance with
the year 2000 amounted to $337 thousand in the first half of 1999. We anticipate
that it will cost an additional $141,000 to bring all remaining systems into
compliance.
Our policy administration systems have been completely renovated to be year
2000 compliant, have been tested and have been placed back into production as of
June 30, 1999. All of our ancillary systems confirmed to be year 2000 compliant
were in production at June 30, 1999. Testing procedures have confirmed the
performance, functionality, and integration of converted or replaced platforms,
applications, databases, utilities, and interfaces in an operational
environment. Our testing and verification for year 2000 compliance has
encompassed the following:
- mainframe computing systems;
- mainframe hardware and systems software;
- PC/LAN computing systems;
- PC/LAN hardware and systems software;
- end-user computing systems;
- interfaces to and from third parties; and
- other miscellaneous electronic non-information systems.
We have also taken steps to determine whether all other entities with which
we electronically interact, including suppliers and other financial services
institutions, are year 2000 compliant.
If we do not successfully address our year 2000 issues, we could face
material adverse consequences from lawsuits, lost business, erroneous results
and substantial operating problems after January 1, 2000. Although we fully
expect to be year 2000 compliant by the close of 1999, we are currently
developing contingency plans to handle the most reasonably likely worst case
scenarios.
EXPERTS
The consolidated balance sheets of KILICO as of December 31, 1998 and 1997
and the related consolidated statements of operations, comprehensive income,
stockholder's equity, and cash flows for the years ended December 31, 1998 and
1997 have been included herein and in the registration statement in reliance
upon the report of PricewaterhouseCoopers LLP, independent public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. The consolidated statements of operations,
comprehensive income, stockholder's equity, and cash flows of KILICO and
subsidiaries for the period from January 4, 1996 to December 31, 1996 and the
financial statement schedules as of December 31, 1996 have been included herein
and in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
The statements of assets and liabilities and policy owners' equity of the
Separate Account as of December 31, 1998 and the related statements of
operations for the year then ended and the statements of changes in policy
owners' equity for the year then ended and for each of the period presented has
been included herein in reliance upon the report of PricewaterhouseCoopers LLP,
independent 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
Christopher J. Nickele, 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 (SEC) 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 or at the SEC's website at http://www.sec.gov.
31
<PAGE> 37
FINANCIAL STATEMENTS
[TO BE FILED BY PRE-EFFECTIVE AMENDMENT]
The financial statements of the Separate Account relate to other life
insurance policies in addition to those offered by this Prospectus. Our included
financial statements should be considered only as bearing upon our ability to
meet our contractual obligations under the Policy. The investment experience of
the Separate Account does not affect our financial statements.
CHANGE OF ACCOUNTANTS
On September 12, 1997, KILICO appointed the accounting firm of
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), formerly Coopers &
Lybrand, LLP, as independent public accountants for the year ended December 31,
1997 to replace KPMG LLP effective with such appointment. Our Board of Directors
approved the selection of PricewaterhouseCoopers as the new independent
accountants. Management had not consulted with PricewaterhouseCoopers on any
accounting, auditing or reporting matter, prior to that time.
During the fiscal year ended December 31, 1996, there were no disagreements
with KPMG LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure or any reportable events.
KPMG LLP's report on the financial statements for 1996 contained no adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles.
There were no disagreements with PricewaterhouseCoopers on accounting or
financial disclosures for the years ended December 31, 1998 or 1997.
32
<PAGE> 38
APPENDIX A
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 & thereafter 100
</TABLE>
* ATTAINED AGE AS OF THE BEGINNING OF THE POLICY YEAR
33
<PAGE> 39
APPENDIX B
POLICY FORM L-8521 KEMPER INVESTORS LIFE INSURANCE COMPANY
SURRENDER TARGET PREMIUMS
<TABLE>
<CAPTION>
PREFERRED NONSMOKER STANDARD NONSMOKER PREFERRED SMOKER STANDARD SMOKER
ISSUE -------------------- ------------------ ---------------- ----------------
AGE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE
- ----- -------- --------- ------- -------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 NA NA 7.60 6.30 NA NA NA NA
2 NA NA 7.60 6.30 NA NA NA NA
3 NA NA 7.60 6.30 NA NA NA NA
4 NA NA 7.60 6.30 NA NA NA NA
5 NA NA 7.60 6.30 NA NA NA NA
6 NA NA 7.60 6.30 NA NA NA NA
7 NA NA 7.60 6.30 NA NA NA NA
8 NA NA 7.60 6.30 NA NA NA NA
9 NA NA 7.60 6.30 NA NA NA NA
10 NA NA 7.60 6.30 NA NA NA NA
11 NA NA 7.60 6.30 NA NA NA NA
12 NA NA 7.60 6.30 NA NA NA NA
13 NA NA 7.60 6.30 NA NA NA NA
14 NA NA 7.60 6.30 NA NA NA NA
15 7.60 6.30 7.60 6.30 10.19 8.23 10.19 8.23
16 7.60 6.30 7.60 6.30 10.19 8.23 10.19 8.23
17 7.60 6.30 7.60 6.30 10.19 8.23 10.19 8.23
18 7.60 6.30 7.60 6.30 10.19 8.23 10.19 8.23
19 7.60 6.30 7.60 6.30 10.19 8.23 10.19 8.23
20 7.60 6.30 7.60 6.30 10.19 8.23 10.19 8.23
21 7.81 6.48 7.81 6.48 10.52 8.52 10.52 8.52
22 8.03 6.67 8.03 6.67 10.84 8.81 10.84 8.81
23 8.24 6.85 8.24 6.85 11.17 9.10 11.17 9.10
24 8.46 7.04 8.46 7.04 11.49 9.39 11.49 9.39
25 8.67 7.22 8.67 7.22 11.82 9.68 11.82 9.68
26 8.98 7.47 8.98 7.47 12.28 10.06 12.28 10.06
27 9.29 7.72 9.29 7.72 12.74 10.44 12.74 10.44
28 9.60 7.97 9.60 7.97 13.21 10.83 13.21 10.83
29 9.91 8.22 9.91 8.22 13.67 11.21 13.67 11.21
30 10.22 8.47 10.22 8.47 14.13 11.59 14.13 11.59
31 10.65 8.78 10.65 8.78 14.76 12.08 14.76 12.08
32 11.08 9.10 11.08 9.10 15.39 12.57 15.39 12.57
33 11.50 9.41 11.50 9.41 16.01 13.05 16.01 13.05
34 11.93 9.73 11.93 9.73 16.64 13.54 16.64 13.54
35 12.36 10.04 12.36 10.04 17.27 14.03 17.27 14.03
36 12.94 10.59 12.94 10.59 18.14 14.66 18.14 14.66
37 13.52 11.13 13.52 11.13 19.01 15.29 19.01 15.29
38 14.11 11.68 14.11 11.68 19.87 15.93 19.87 15.93
39 14.69 12.22 14.69 12.22 20.74 16.56 20.74 16.56
40 15.27 12.77 15.27 12.77 21.61 17.19 21.61 17.19
41 16.28 13.59 16.28 13.59 22.76 18.01 22.76 18.01
42 17.29 14.40 17.29 14.40 23.91 18.83 23.91 18.83
43 18.31 15.22 18.31 15.22 25.05 19.66 25.05 19.66
44 19.32 16.03 19.32 16.03 26.20 20.48 26.20 20.48
45 20.33 16.85 20.33 16.85 27.35 21.30 27.35 21.30
46 21.53 17.57 21.53 17.57 28.94 22.43 28.94 22.43
47 22.73 18.28 22.73 18.28 30.54 23.56 30.54 23.56
48 23.92 19.00 23.92 19.00 32.13 24.70 32.13 24.70
49 25.12 19.71 25.12 19.71 33.73 25.83 33.73 25.83
50 26.32 20.43 26.32 20.43 35.32 26.96 35.32 26.96
51 27.88 21.24 27.88 21.24 37.33 28.38 37.33 28.38
52 29.44 22.06 29.44 22.06 39.34 29.80 39.34 29.80
53 31.00 22.87 31.00 22.87 41.36 31.23 41.36 31.23
54 32.56 23.69 32.56 23.69 43.37 32.65 43.37 32.65
55 34.12 24.50 34.12 24.50 45.38 34.07 45.38 34.07
56 34.67 25.41 34.67 25.41 46.50 34.71 46.50 34.71
57 35.21 26.32 35.21 26.32 47.62 35.34 47.62 35.34
</TABLE>
34
<PAGE> 40
<TABLE>
<CAPTION>
PREFERRED NONSMOKER STANDARD NONSMOKER PREFERRED SMOKER STANDARD SMOKER
ISSUE -------------------- ------------------ ---------------- ----------------
AGE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE
- ----- -------- --------- ------- -------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
58 35.76 27.24 35.76 27.24 48.73 35.98 48.73 35.98
59 36.30 28.15 36.30 28.15 49.85 36.61 49.85 36.61
60 36.85 29.06 36.85 29.06 50.97 37.25 50.97 37.25
61 38.65 30.50 38.65 30.50 50.76 38.80 50.76 38.80
62 40.45 31.93 40.45 31.93 50.56 40.35 50.56 40.35
63 42.25 33.37 42.25 33.37 50.35 41.90 50.35 41.90
64 44.05 34.80 44.05 34.80 50.15 43.45 50.15 43.45
65 45.85 36.24 45.85 36.24 49.94 45.00 49.94 45.00
66 46.34 38.72 46.34 38.72 49.72 45.75 49.72 45.75
67 46.84 41.19 46.84 41.19 49.49 46.50 49.49 46.50
68 47.33 43.67 47.33 43.67 49.27 47.24 49.27 47.24
69 47.83 46.14 47.83 46.14 49.04 47.99 49.04 47.99
70 48.32 48.62 48.32 48.62 48.82 48.74 48.82 48.74
71 47.87 47.86 47.87 47.86 48.65 48.11 48.65 48.11
72 47.41 47.11 47.41 47.11 48.49 47.48 48.49 47.48
73 46.96 46.35 46.96 46.35 48.32 46.85 48.32 46.85
74 46.50 45.60 46.50 45.60 48.16 46.22 48.16 46.22
75 47.26 46.78 47.26 46.78 48.55 47.28 48.55 47.28
76 47.02 46.39 47.02 46.39 48.44 46.94 48.44 46.94
77 46.78 46.00 46.78 46.00 48.33 46.60 48.33 46.60
78 46.53 45.62 46.53 45.62 48.21 46.27 48.21 46.27
79 46.29 45.23 46.29 45.23 48.10 45.93 48.10 45.93
80 46.05 44.84 46.05 44.84 47.99 45.59 47.99 45.59
</TABLE>
35
<PAGE> 41
PART II -- OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, as amended, 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.
REPRESENTATION AS TO FEES AND CHARGES
KILICO hereby represents that the fees and charges deducted under the
Flexible Premium Variable Life Insurance Policies hereby registered by this
Registration Statement in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by KILICO.
REPRESENTATION PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rule 6e-3(T) under the Investment Company
Act of 1940, as amended.
UNDERTAKING AS TO INDEMNIFICATION
Pursuant to the Distribution Agreement filed as Exhibit 1-A(3)(a) to this
Registration Statement, KILICO and the Separate Account have agreed to indemnify
Investors Brokerage Services, Inc. ("IBS") against any claims, liabilities and
expenses which IBS may incur under the Securities Act of 1933, as amended (the
"Securities Act"), 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
may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant 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, the Registrant 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
Securities Act and will be governed by the final adjudication of such issue.
II-1
<PAGE> 42
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 35 pages.
The undertaking to file reports.
Representation as to Fees and Charges Pursuant to Section 26 of
the Investment Company Act of 1940.
Representation Pursuant to Rule 6e-3(T).
Undertaking as to Indemnification.
The signatures.
Written consents of the following persons:
A. Frank J. Julian, Esq. (to be included in Opinion filed as Exhibit
3(a)).
B. PricewaterhouseCoopers LLP, independent accountants (to be filed as
Exhibit 6(a)).
C. KPMG LLP, independent auditors (to be filed as Exhibit 6(b)).
D. Christopher J. Nickele, FSA (to be included in Opinion filed as
Exhibit 3(b)).
The following exhibits:
<TABLE>
<S> <C>
(1) 1-A(1) KILICO Resolution establishing the Separate Account
(1) 1-A(3)(a) Distribution Agreement between KILICO and Investors Brokerage
Services, Inc. (IBS)
(3) 1-A(3)(b) Specimen Selling Group Agreement of IBS
1-A(3)(c) Schedules of commissions (to be filed by pre-effective amendment)
(3) 1-A(3)(d) General Agent Agreement
1-A(5)(a) Form of Policy
1-A(5)(b) Accelerated Death Benefit Rider (to be filed by pre-effective amend-
ment)
1-A(5)(c) Extended Maturity Option Rider (to be filed by pre-effective
amendment)
1-A(5)(d) Dependent Children's Rider (to be filed by pre-effective amendment)
1-A(5)(e) Waiver of Premium (to be filed by amendment)
1-A(5)(f) Other Insured Rider (to be filed by amendment)
(1) 1-A(6)(a) KILICO Articles of Incorporation
(3) 1-A(6)(b) By-Laws of KILICO
(6) 1-A(8)(a)(i) Participation Agreement between Kemper Investors Life Insurance
Company and Scudder Variable Life Investment Fund
(6) 1-A(8)(a)(ii) Participating Contract and Policy Agreement between Kemper Investors
Life Insurance Company and Scudder Kemper Investments, Inc.
(6) 1-A(8)(a)(iii) Indemnification Agreement between Kemper Investors Life Insurance
Company and Scudder Kemper Investments, Inc.
(5) 1-A(8)(b)(i) Fund Participation Agreement among Kemper Investors Life Insurance
Company, Fidelity Variable Insurance Products Fund and Fidelity
Distributors Corporation
(4) 1-A(8)(b)(ii) Amendment to Fund Participation Agreement among Kemper Investors Life
Insurance Company, Fidelity Variable Insurance Products Fund and
Fidelity Distributors Corporation
</TABLE>
II-2
<PAGE> 43
<TABLE>
<S> <C>
(6) 1-A(8)(c) Participation Agreement Among Templeton Variable Products Series Fund,
Franklin Templeton Distributors, Inc. and Kemper Investors Life
Insurance Company.
(10) 1-A(8)(d) Fund Participation Agreement by and among The Alger American Fund,
Kemper Investors Life Insurance Company and Fred Alger & Company,
Incorporated
(10) 1-A(8)(e)(i) Fund Participation Agreement between Kemper Investors Life Insurance
Company and The Dreyfus Socially Responsible Growth Fund, Inc.
(10) 1-A(8)(e)(ii) Administrative Services Agreement by and between The Dreyfus Corporation
and Kemper Investors Life Insurance Company
1-A(8)(e)(iii) Form of Fund Participation Agreement between Kemper Investors Life
Insurance Company and Dreyfus Stock Index Fund (to be filed by
pre-effective amendment)
1-A(8)(e)(iv) Form of Fund Participation Agreement between Kemper Investors Life
Insurance Company and Dreyfus Variable Investment Fund (to be filed by
pre-effective amendment)
(7)1-A(8)(f)(i) Fund Participation Agreement among Kemper Investors Life Insurance
Company, Janus Aspen Series and Janus Capital Corporation
(8) 1-A(8)(f)(ii) Service Agreement between Kemper Investors Life Insurance Company and
Janus Capital Corporation
(9) 1-A(8)(g) Fund Participation Agreement among Kemper Investors Life Insurance
Company, Kemper Variable Series (formerly known as Kemper Investors
Fund), Zurich Kemper Investments, Inc. and Kemper Distributors, Inc.
1-A(10) Application for Policy (to be filed by pre-effective amendment)
(2) 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 pre-effective amendment)
3(b) Opinion and consent of actuarial officer of KILICO regarding prospectus
illustrations and actuarial matters (to be filed by pre-effective
amendment)
6(a) Consents of PricewaterhouseCoopers LLP, independent accountants (to be
filed by pre-effective amendment)
6(b) Consent of KPMG LLP, independent auditors (to be filed by pre-effective
amendment)
8 Procedures Memorandum, pursuant to Rule 6e-3(T)(b)(12)(iii) (to be filed
by pre-effective amendment)
9 Illustrations
</TABLE>
- -------------------------
( 1) Incorporated by reference to the Registration Statement of the Registrant
on Form S-6 filed on or about December 26, 1995 (File No. 33-65399).
( 2) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement of the Registrant on Form S-6 filed on or about June
5, 1996 (File No. 33-65399).
( 3) Incorporated by reference to Amendment No. 2 to the Registration Statement
on Form S-1 (File No. 333-02491) filed on or about April 23, 1997.
( 4) Incorporated by reference to Post-Effective Amendment No. 6 to the
Registration Statement on Form S-6 filed on or about April 23, 1999 (File
No. 33-65399).
( 5) Incorporated by reference to Post-Effective Amendment No. 24 to the
Registration Statement on Form N-4 filed on or about April 26, 1996 (File
No. 2-72671).
II-3
<PAGE> 44
(6) Incorporated by reference to Amendment No. 5 to the Registration Statement
on Form S-1 for KILICO (file No. 333-22389) filed on or about April 20,
1999.
(7) Incorporated herein by reference to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-4 filed on or about September 14, 1995
(File No. 2-72671).
(8) Incorporated herein by reference to Post-Effective Amendment No. 25 to the
Registration Statement on Form N-4 filed on or about April 28, 1997 (File
No. 2-72671).
(9) Incorporated herein by reference to Amendment No. 3 to the Registration
Statement of KILICO on Form S-1 filed on or about April 8, 1998 (File No.
333-22389).
(10) Incorporated herein by reference to Post-Effective Amendment No. 28 to the
Registration Statement on Form N-4 (File No. 2-72671) filed on or about
April 28, 1999.
II-4
<PAGE> 45
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 8th day of October, 1999.
KILICO VARIABLE SEPARATE ACCOUNT
(Registrant)
By: Kemper Investors Life Insurance
Company
(Depositor)
By:
/s/ GALE K. CARUSO
------------------------------------
Gale K. Caruso, President and Chief
Executive Officer
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 8th day of October, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ GALE K. CARUSO President, Chief Executive Officer and Director
- ----------------------------------------------- (Principal Executive Officer)
Gale K. Caruso
/s/ JOHN B. SCOTT Chairman of the Board and Director
- -----------------------------------------------
John B. Scott
/s/ FREDERICK L. BLACKMON Senior Vice President and Chief Financial
- ----------------------------------------------- Officer (Principal Financial Officer and
Frederick L. Blackmon Principal Accounting Officer)
/s/ W. H. BOLINDER Director
- -----------------------------------------------
William H. Bolinder
/s/ DAVID A. BOWERS Director
- -----------------------------------------------
David A. Bowers
/s/ ELIANE C. FRYE Director
- -----------------------------------------------
Eliane C. Frye
/s/ GUNTHER GOSE Director
- -----------------------------------------------
Gunther Gose
/s/ JAMES E. HOHMANN Director
- -----------------------------------------------
James E. Hohmann
</TABLE>
II-5
<PAGE> 46
EXHIBIT INDEX
<TABLE>
<S> <C>
1-A(5)(a) Form of Policy
9 Illustrations
</TABLE>
<PAGE> 1
EXHIBIT 1-A(5)(a)
KEMPER INVESTORS LIFE INSURANCE COMPANY
A Stock Life Insurance Company
1 Kemper Drive
Long Grove, Illinois 60049-0001 [ZURICH KEMPER LOGO]
ZURICH
KEMPER
Insured Issue Age
Policy Date Policy Number
Initial Specified
Amount
RIGHT TO CANCEL
This policy may be returned to us within days of the time you receive it,
or 45 days after you complete the application for insurance, whichever is later.
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 the policy.
Signed for the Kemper Investors Life Insurance Company at its home office in
Long Grove, Illinois.
/s/ Debra P. Rezabek /s/ John B. Scott
Secretary President
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
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
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Death Benefit Provisions 8
Definitions 5
General Account Provisions 11
General Provisions 6-8
Non-Forfeiture Provisions 13
Policy Loan Provisions 15
Settlement Option Table 19
Settlement Provisions 17-18
Surrender Value Provisions 16
Transfer Provisions 14
Variable Account Provisions 11-13
Withdrawal Provisions 15
</TABLE>
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 OCTOBER 01 1999 KI8508521 POLICY NUMBER
INITIAL SPECIFIED $250,000 OCTOBER 01 1999 ISSUE DATE
AMOUNT
DEATH BENEFIT A
OPTION
COVERAGE INFORMATION
RATE
CLASS COVERAGE MATURITY OR MONTHLY
BENEFIT DESCRIPTION PERCENT AMOUNT EXPIRY DATE RATE
FLEXIBLE PREMIUM VARIABLE LIFE* 100 250,000 OCTOBER 01 2064 PAGE D
*IT IS POSSIBLE THAT COVERAGE WILL EXPIRE PRIOR TO THE MATURITY DATE SHOWN
IF PREMIUMS PAID AFTER THE INITIAL PREMIUM ARE INSUFFICIENT TO CONTINUE THE
COVERAGE TO SUCH DATE. EVEN IF COVERAGE CONTINUES TO THE MATURITY DATE,
THERE MAY BE NO NET CASH SURRENDER VALUE TO BE PAID ON THAT DATE. COVERAGE
AMOUNT UNDER OPTION A IS THE SPECIFIED AMOUNT INCLUSIVE OF THE CASH VALUE.
PREMIUM INFORMATION
INITIAL PREMIUM $2,207.50
MONTHLY GUARANTEE PREMIUM $137.92
GUARANTEE PERIOD 10 YEARS
PLANNED PERIODIC PREMIUM $2,207.50 ANNUAL
INSURED RATE CLASS PREFERRED NONSMOKER
S-8521
PAGE A
<PAGE> 4
POLICY SPECIFICATIONS
INSURED JOHN DOE 35 ISSUE AGE
POLICY DATE OCTOBER 01 1999 KI8508521 POLICY NUMBER
DEDUCTION DAY DAY 01 OF EACH MONTH
DEDUCTION PERIOD 65 YEARS, 00 MONTHS
MINIMUM SPECIFIED AMOUNT $100,000
MINIMUM CHANGE IN SPECIFIED AMOUNT $25,000
MINIMUM WITHDRAWAL AMOUNT $500.00
PARTIAL WITHDRAWAL CHARGE $25.00
MONTHLY ADMINISTRATIVE CHARGE $6.00
GUARANTEED ADMINISTRATIVE CHARGE, YEAR 1 $10.00
PREMIUM CHARGES 6.00%
INITIAL SURRENDER CHARGE $3,090.00
SURRENDER CHARGE PERCENTAGE
<TABLE>
<CAPTION>
POLICY POLICY POLICY
YEAR PERCENT YEAR PERCENT YEAR PERCENT
<S> <C> <C> <C> <C> <C>
1 100 6 80 11 0
2 100 7 60 12 0
3 100 8 45 13 0
4 100 9 30 14 0
5 100 10 15 15 0
</TABLE>
SEE YOUR POLICY FOR FURTHER INFORMATION ON THE SURRENDER CHARGE.
<TABLE>
<CAPTION>
TABLE OF CASH VALUE CORRIDORS
ATTAINED ATTAINED ATTAINED ATTAINED
AGE* PERCENT AGE* PERCENT AGE* PERCENT AGE* PERCENT
<S> <C> <C> <C> <C> <C> <C> <C>
0-40 250 50 185 60 130 70 115
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94 101
95+ 100
</TABLE>
*ATTAINED AGE IS THE AGE NEAREST BIRTHDAY AS OF THE BEGINNING OF THE POLICY
YEAR.
S-8521
PAGE B
<PAGE> 5
POLICY SPECIFICATIONS
INSURED JOHN DOE 35 ISSUE AGE
POLICY DATE OCTOBER 01 1999 KI8508521 POLICY NUMBER
SEPARATE ACCOUNT INITIAL PREMIUM ALLOCATION
Alger American Balanced 10%
Alger American Growth 10%
Alger American Income & Growth 10%
Alger American MidCap Growth 10%
The Dreyfus Socially Responsible Growth Fund, Inc. 10%
Dreyfus Stock Index Fund 10%
Dreyfus Capital Appreciation 10%
Dreyfus Small Cap 0%
Templeton Asset Allocation 0%
Templeton Bond 0%
Templeton Developing Markets 0%
Templeton International 0%
Fidelity VIP Equity-Income 0%
Fidelity VIP Growth 0%
Fidelity VIP High Income 0%
Fidelity VIP Overseas 0%
Janus Aspen Aggressive Growth 0%
Janus Aspen Balanced 0%
Janus Aspen Flexible Income 0%
Janus Aspen Growth 0%
Janus Aspen International Growth 0%
Janus Aspen Worldwide Growth 0%
Scudder VLIF Capital Growth 0%
Scudder VLIF Growth and Income 0%
Scudder VLIF International 0%
Kemper Government Securities 0%
Kemper Investment Grade Bond 0%
Kemper Money Market 0%
Kemper Small Cap Growth 0%
Kemper Total Return 0%
Kemper Value + Growth 0%
GENERAL ACCOUNT
FIXED ACCOUNT 30%
A MORTALITY AND EXPENSE RISK CHARGE IS ASSESSED DAILY ON THE SEPARATE ACCOUNT
VALUE OF THIS POLICY. THIS CHARGE IS GUARANTEED NOT TO EXCEED 0.60% ANNUALLY.
THE CURRENT CHARGE, ASSESSED ON A DAILY BASIS, IS 0.60% ANNUALLY.
S-8521
PAGE C
<PAGE> 6
POLICY SPECIFICATIONS
INSURED JOHN DOE 35 ISSUE AGE
POLICY DATE OCTOBER 01 1999 KI8508521 POLICY NUMBER
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES PER $1,000
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED
AGE NONSMOKER SMOKER AGE NONSMOKER SMOKER AGE NONSMOKER SMOKER
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.08917 34 0.13417 0.20667 67 2.15500 3.58417
2 0.08250 35 0.14083 0.21917 68 2.37500 3.87917
3 0.08167 36 0.14750 0.23417 69 2.61500 4.19333
4 0.07917 37 0.15667 0.25333 70 2.88583 4.54000
5 0.07500 38 0.16667 0.27500 71 3.24250 4.92417
6 0.07167 39 0.17833 0.30000 72 3.54667 5.36083
7 0.06667 40 0.19083 0.32833 73 3.95333 5.85250
8 0.06333 41 0.20583 0.36167 74 4.41000 6.38833
9 0.06167 42 0.22083 0.39583 75 4.90000 6.98083
10 0.06083 43 0.23833 0.43500 76 5.41667 7.59167
11 0.06417 44 0.25583 0.47583 77 5.97000 8.21000
12 0.07083 45 0.27667 0.52250 78 6.53917 8.82583
13 0.08250 46 0.29917 0.56917 79 7.14333 9.45750
14 0.09583 47 0.32333 0.62000 80 7.80583 10.13250
15 0.10750 0.13750 48 0.34917 0.67333 81 8.54333 10.86750
16 0.11917 0.15583 49 0.37833 0.73333 82 9.37667 11.68333
17 0.12833 0.17083 50 0.40917 0.79167 83 10.31583 12.58583
18 0.13333 0.18000 51 0.44583 0.87000 84 11.34250 13.54083
19 0.13833 0.18833 52 0.48833 0.95167 85 12.43333 14.51667
20 0.14000 0.19250 53 0.53583 1.04500 86 13.56667 15.48167
21 0.13917 0.19417 54 0.59083 1.15000 87 14.73250 16.42167
22 0.13667 0.19167 55 0.65167 1.26167 88 15.90750 17.44750
23 0.13417 0.18833 56 0.71917 1.38250 89 17.10750 18.46000
24 0.13083 0.18417 57 0.79083 1.50750 90 18.34917 19.47417
25 0.12667 0.17833 58 0.86833 1.64083 91 19.65333 20.51000
26 0.12333 0.17333 59 0.95583 1.77917 92 21.06250 21.61083
27 0.12167 0.17167 60 1.05333 1.93250 93 22.63583 23.02500
28 0.12000 0.17000 61 1.16167 2.10500 94 24.63750 24.84583
29 0.12000 0.17167 62 1.28500 2.29917 95 27.49667 27.49667
30 0.12000 0.17500 63 1.42583 2.51917 96 32.04583 32.04583
31 0.12250 0.18083 64 1.58500 2.76167 97 40.01667 40.01667
32 0.12500 0.18667 65 1.76083 3.02417 98 54.83167 54.83167
33 0.12917 0.19583 66 1.95000 3.29750 99 83.33333 83.33333
</TABLE>
* THE GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES SHALL BE THE RATES
SHOWN IN THE TABLE ABOVE MULTIPLIED BY THE APPROPRIATE RATE CLASS PERCENT.
THIS PERCENT IS SHOWN ON PAGE 3A OF THE POLICY SPECIFICATIONS. THE RATES
ACTUALLY CHARGED MAY BE REDUCED IN ACCORDANCE WITH THE COST OF INSURANCE
RATE SECTION OF YOUR POLICY.
S-8521 PAGE D
<PAGE> 7
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 nearest
birthday on the Policy Date.
MATURITY DATE: The Maturity Date is stated in the Policy
Specifications. It is the policy anniversary nearest the
insured's 100th 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 KILICO 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 date all
requirements for coverage have been completed by you and
coverage under the policy is recorded by us as inforce. 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.
WE, OUR, OURS, US: Kemper Investors Life Insurance Company
YOU, YOUR, YOURS: The party(ies) named as owner in the
application unless later changed as provided in this policy.
Page 5
<PAGE> 8
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 are 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 and recorded.
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.
<PAGE> 9
GENERAL PROVISIONS (CONTINUED)
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.
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
and record it at our home office;
5. After we receive and record 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 and recorded will remain valid,
and
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 those
AND DEATH BENEFIT 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.
Page 7
<PAGE> 10
Page 8
GENERAL PROVISIONS (CONTINUED)
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.
EXCHANGE OF PLAN At any time during the first two years after the
Issue Date, you may exchange this policy for a
permanent fixed benefit life insurance policy on
the life of the Insured offered by the Company
or any of its affiliates. The Face Amount of
the new policy may be either the death benefit
as of this policy's Policy Date or this
policy's net amount at risk on the date of
exchange. The new policy will have the same
policy date, issue age and rate classification
as this policy. If this policy has benefit
riders in force on the date of exchange, each
such rider may be included in the new policy if
it is available with the new policy at the
Insured's then age. Any debt under this policy
must be repaid prior to exchange. This policy
must be surrendered. Surrender charges will not
be imposed. Evidence of insurability will not be
required. Your request for an exchange must be
in writing.
An equitable adjustment in the new policy's
premium and cash value will be made to reflect
variances, if any, in the premiums and values
under this policy and the new policy.
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.
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.
SPECIFIED AMOUNT The Death Benefit Option is shown on the Policy
Specifications, unless changed in accordance
with the Changes provision.
DEATH BENEFIT OPTION 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.
<PAGE> 11
DEATH BENEFIT PROVISIONS (CONTINUED)
CHANGES You may change the Death Benefit Option after
the first Policy Year. We may require evidence
of insurability before we accept a change from
Option A to Option B. 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 80. 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 minimum change in Specified
Amount is shown in the Policy Specifications.
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 Benefits will be paid following receipt by
DEATH BENEFIT 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.
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:
Page 9
<PAGE> 12
Page 10
PREMIUM PROVISIONS (CONTINUED)
1. the amount of the premium is below our
current minimum premium amount requirement;
2. the premium would increase the death benefit
by more than the amount of premium; or
3. the premium would disqualify the 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 initial 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
three years after the date of lapse. The
reinstatement is subject to:
1. receipt of evidence of insurability
satisfactory to us;
2. payment of enough premium to pay the unpaid
monthly deductions due during the last expired
grace period;
3. payment of a minimum premium sufficient to
keep this policy in force for three months; and
4. payment 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 us.
The suicide and incontestability provisions will
apply from the effective date of reinstatement.
<PAGE> 13
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 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 KILICO 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 The assets equal to the reserves and other
SEPARATE ACCOUNT 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 Valuation Period.
Page 11
<PAGE> 14
Page 12
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 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 Unless otherwise required by law or
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 Funds or other open-end investment
company and to substitute, for the Funds shares
held in any subaccount, the shares of another
portfolio of the Funds 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 Funds 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 the same unit value as the
net asset value of a share of the underlying
portfolio. When premiums or other amounts are
allocated to a subaccount, a number of units
are purchased based on the subaccount's
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> 15
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; and
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 each
deduction day.
1. The cost of insurance for the Initial
Specified Amount equals a. times the result of
b. minus c., where:
a. is the monthly Cost of Insurance rate per
1,000 for the Initial Specified monthly Amount;
b. is the death benefit less any increases in
Specified Amount divided by 1.0024663; and
c. is the Cash Value applicable to the Initial
Specified Amount.
2. The cost of insurance for each increase in
the Specified Amount equals a. times the result
of b. minus c., where:
a. is the monthly Cost of Insurance rate per
1,000 for each increase monthly in the Specified
Amount;
b. is the amount of the increase in the
Specified Amount divided by 1.0024663; and
c. is the Cash Value applicable to the increased
Specified Amount.
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 or
Nonsmoker Mortality Tables, age nearest
birthday.
SUPPLEMENTAL BENEFITS The monthly charges for any supplemental
AND RIDERS benefits and riders are shown on the Policy
Specifications.
ADMINISTRATION CHARGE The monthly administration charge for Policy
Year One is shown on the Policy Specifications.
The monthly administration charge for subsequent
policy years may vary, but will not be greater
than $7.50.
Page 13
<PAGE> 16
Page 14
NONFORFEITURE PROVISIONS (continued)
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.
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 a 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 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 in 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; and
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.
<PAGE> 17
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 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
shown 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 Surrender
Value. The amount of any new loan may not
exceed the maximum loan amount less Debt on
the date the loan is granted.
Preferred Loans may be made anytime after the
10th policy year. We will lend an amount up
to the earnings in the policy each year less
any Debt.
The minimum amount of any loan is $500. 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 4.50% for all
loans except preferred loans. Preferred loan
interest rate will be 3%. 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.
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.
Page 15
<PAGE> 18
Page 16
SURRENDER VALUE PROVISIONS
SURRENDER This policy may be surrendered for its Net
Surrender Value upon written request by you
and return of the 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 the 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 The surrender charge period for this policy
is the first 10 Policy Years after the Policy
Date and 10 Policy Years after the effective
date of any increase in the Specified Amount,
addition of a benefit rider and any increase
in the Coverage Amount of a benefit rider.
During this period a surrender charge will be
assessed if this policy is surrendered or if
the Net Surrender Value is applied for under
a settlement option.
1. The amount of the surrender charge for the
Initial Specified Amount will be the product
of a. times b., where:
a. is the surrender charge percentage for the
applicable Policy Year, as shown in the
Policy Specifications; and
b. is the Initial Surrender Charge as shown
in the Policy Specifications.
2. The amount of the surrender charge for
each increase in the Specified Amount will be
the product of a. times b. where:
a. is the surrender charge percentage for the
applicable Policy Year, as shown in the
Policy Specifications; and
b. is the Surrender Charge for the increase
in the Specified Amount as shown in the
endorsement reflecting the increase.
3. However, if the total premiums paid to
date less any partial withdrawals exceed the
sum of the Monthly Continuation Premiums
applicable to each month since the Policy
Date, then the Surrender Charge will not
exceed the Cash Value.
The surrender charge is the sum of the
amounts determined in 1. and 2. above. The
surrender charge will not be reduced by any
decrease in the Specified Amount.
<PAGE> 19
SETTLEMENT PROVISIONS
SETTLEMENT OPTIONS Instead of our 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. The 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 for 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.
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 INSTALLMENTS
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 OPTIONS May be available
with our consent.
Page 17
<PAGE> 20
Page 18
SETTLEMENT PROVISIONS (CONTINUED)
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 We may require satisfactory evidence of the
AND SURVIVAL 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 At the death of the payee any unpaid
UPON DEATH OF PAYEE instalments will be paid in one lump sum to
UNDER OPTIONS 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 upon 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> 21
SETTLEMENT OPTION TABLE
AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000 OF VALUE APPLIED
OPTION ONE - FIXED INSTALMENT ANNUITY
<TABLE>
<CAPTION>
Number Number Number Number
of years Monthly of years Monthly of years Monthly of years Monthly
selected Payment selected Payment selected Payment selected Payment
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 17.69 12 8.01 19 5.48 26 4.33
6 14.92 13 7.48 20 5.27 27 4.22
7 12.94 14 7.03 21 5.08 28 4.11
8 11.46 15 6.64 22 4.90 29 4.02
9 10.31 16 6.29 23 4.74 30 3.92
10 9.39 17 5.99 24 4.59
11 8.64 18 5.72 25 4.46
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
OPTIONS TWO AND THREE - LIFE ANNUITY WITH INSTALMENTS GUARANTEED:
<TABLE>
<CAPTION>
Age of MONTHLY PAYMENTS GUARANTEED Age of MONTHLY PAYMENTS GUARANTEED
Male Female
Payee Payee
NONE 60 120 180 240 NONE 60 120 180 240
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 3.98 3.97 3.94 3.88 3.81 55 3.62 3.61 3.60 3.58 3.54
56 4.05 4.04 4.01 3.95 3.86 56 3.68 3.67 3.66 3.64 3.59
57 4.14 4.12 4.09 4.02 3.92 57 3.75 3.74 3.73 3.70 3.65
58 4.22 4.21 4.17 4.09 3.99 58 3.82 3.81 3.79 3.76 3.71
59 4.31 4.30 4.25 4.17 4.05 59 3.89 3.88 3.86 3.83 3.77
60 4.41 4.39 4.34 4.25 4.11 60 3.97 3.96 3.94 3.90 3.83
61 4.51 4.50 4.44 4.33 4.18 61 4.05 4.04 4.02 3.97 3.89
62 4.62 4.60 4.54 4.42 4.25 62 4.14 4.13 4.10 4.05 3.96
63 4.74 4.72 4.64 4.51 4.31 63 4.23 4.22 4.19 4.13 4.03
64 4.86 4.84 4.75 4.60 4.38 64 4.33 4.32 4.28 4.21 4.10
65 4.99 4.96 4.87 4.69 4.45 65 4.44 4.42 4.38 4.30 4.17
66 5.14 5.10 4.99 4.79 4.51 66 4.55 4.53 4.48 4.39 4.24
67 5.29 5.25 5.12 4.89 4.58 67 4.67 4.65 4.59 4.48 4.31
68 5.45 5.40 5.25 4.99 4.64 68 4.79 4.77 4.70 4.58 4.39
69 5.62 5.57 5.39 5.09 4.71 69 4.93 4.90 4.82 4.68 4.46
70 5.81 5.74 5.54 5.20 4.77 70 5.07 5.04 4.95 4.78 4.53
71 6.00 5.93 5.69 5.30 4.83 71 5.23 5.19 5.09 4.89 4.61
72 6.21 6.12 5.85 5.41 4.88 72 5.39 5.35 5.23 5.00 4.68
73 6.44 6.33 6.01 5.51 4.93 73 5.57 5.52 5.38 5.11 4.74
74 6.68 6.55 6.17 5.61 4.98 74 5.76 5.71 5.53 5.23 4.81
75 6.94 6.79 6.35 5.71 5.02 75 5.96 5.90 5.70 5.34 4.87
76 7.21 7.03 6.52 5.80 5.06 76 6.19 6.11 5.87 5.46 4.93
77 7.50 7.29 6.70 5.90 5.09 77 6.43 6.34 6.05 5.57 4.98
78 7.82 7.57 6.88 5.98 5.12 78 6.69 6.58 6.24 5.68 5.03
79 8.16 7.86 7.06 6.06 5.15 79 6.97 6.84 6.43 5.79 5.07
80 8.52 8.16 7.24 6.14 5.17 80 7.28 7.12 6.63 5.90 5.11
81 8.90 8.48 7.42 6.21 5.19 81 7.61 7.41 6.83 5.99 5.14
82 9.32 8.81 7.59 6.27 5.21 82 7.97 7.73 7.03 6.09 5.17
83 9.77 9.16 7.76 6.33 5.22 83 8.36 8.06 7.24 6.17 5.19
84 10.24 9.52 7.93 6.38 5.24 84 8.78 8.42 7.44 6.24 5.21
85 10.75 9.90 8.09 6.43 5.24 85 9.24 8.79 7.64 6.31 5.22
</TABLE>
OPTION FOUR - JOINT AND 100% SURVIVOR ANNUITY
<TABLE>
<CAPTION>
Age of Age of Female Payee
Male
Payee 55 60 65 70 75 80 85
<S> <C> <C> <C> <C> <C> <C> <C>
55 3.32 3.47 3.60 3.71 3.80 3.87 3.91
60 3.41 3.60 3.79 3.96 4.11 4.22 4.30
65 3.47 3.71 3.96 4.22 4.45 4.64 4.78
70 3.52 3.80 4.11 4.46 4.80 5.12 5.38
75 3.56 3.86 4.23 4.66 5.14 5.63 6.07
80 3.58 3.90 4.31 4.81 5.42 6.11 6.80
85 3.60 3.93 4.36 4.92 5.63 6.51 7.51
</TABLE>
Page 19
<PAGE> 22
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.
KEMPER INVESTORS LIFE INSURANCE COMPANY
A Stock Life Insurance Company
1 Kemper Drive, Long Grove, Illinois 60049-0001
<PAGE> 1
EXHIBIT 9
ILLUSTRATIONS OF CASH VALUES,
CASH SURRENDER VALUES AND
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 .60% in Policy Years
one through ten; .40% in Policy Years eleven through twenty; and .20% in Policy
Years twenty-one and thereafter. This charge is guaranteed not to exceed an
effective annual rate of 0.60%. In addition, the net investment returns also
reflect the deduction of the Fund investment advisory fees and other Fund
expenses, ( %, the average of the fees and expenses). The tables also reflect
applicable charges and deductions including a 6.0% deduction against premiums, a
monthly administrative charge of $10 in the first Policy Year and $6 thereafter
(although not to exceed $7.50) 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.
Values are shown for Policies which are issued to a male standard nonsmoker
and 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, we will furnish an illustration based on the proposed
Insured's age, sex and premium payment requested.
2
<PAGE> 2
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE STANDARD NON-SMOKER $1,000.00 ANNUAL PREMIUM ISSUE AGE 35
$100,000 INITIAL DEATH BENEFIT:
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ------------------------------ ----------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- -------- --------- ------- ------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS.
(5) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
3
<PAGE> 3
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE STANDARD NON-SMOKER $1,000.00 ANNUAL PREMIUM ISSUE AGE 35
$100,000 INITIAL DEATH BENEFIT:
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ---------------------------- ---------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------ --------- ------- ------ --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS.
(5) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
4
<PAGE> 4
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE STANDARD NON-SMOKER $3,000.00 ANNUAL PREMIUM ISSUE AGE 55
$100,000 INITIAL DEATH BENEFIT:
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS -------------------------------- ----------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ---------- --------- ------- ------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS.
(5) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
5
<PAGE> 5
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE STANDARD NON-SMOKER $3,000.00 ANNUAL PREMIUM ISSUE AGE 55
$100,000 INITIAL DEATH BENEFIT:
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ---------------------------- ---------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------ --------- ------- ------ --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS.
(5) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
6
<PAGE> 6
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $1,500.00 ANNUAL PREMIUM ISSUE AGE 35
$150,000 INITIAL DEATH BENEFIT:
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ---------------------------- ----------------------------- -------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------ --------- ------- ------- --------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS.
(5) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
7
<PAGE> 7
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $1,500.00 ANNUAL PREMIUM ISSUE AGE 35
$150,000 INITIAL DEATH BENEFIT:
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ---------------------------- ---------------------------- -----------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------ --------- ------- ------ --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS.
(5) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
8
<PAGE> 8
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $4,500.00 ANNUAL PREMIUM ISSUE AGE 55
$150,000 INITIAL DEATH BENEFIT:
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ---------------------------- ----------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------ --------- ------- ------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS.
(5) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
9
<PAGE> 9
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE PREFERRED NON-SMOKER $4,500.00 ANNUAL PREMIUM ISSUE AGE 55
$150,000 INITIAL DEATH BENEFIT:
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
PREMIUM GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PAID PLUS ---------------------------- ---------------------------- ---------------------------------
POLICY INTEREST CASH SURRENDER DEATH CASH SURRENDER DEATH CASH SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ------ --------- ------ --------- ------- ------ --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
ASSUMPTIONS:
(1) BASED ON DEATH BENEFIT OPTION A AND ASSUMES NO POLICY LOANS HAVE BEEN
MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS.
(5) ZERO VALUES INDICATE POLICY LAPSE IN ABSENCE OF AN ADDITIONAL PREMIUM
PAYMENT.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT,
CASH VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY KEMPER INVESTORS LIFE INSURANCE COMPANY THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
10
