-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UxriRehG8YmmgEvD83vJ7lCgci48if71jA8//diKb6sdPyQgWXb5lMmUvxUNJH+N binNK5hVOMhh9o2VSl7IAA== 0000950137-99-000042.txt : 19990301 0000950137-99-000042.hdr.sgml : 19990301 ACCESSION NUMBER: 0000950137-99-000042 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KILICO VARIABLE SEPARATE ACCOUNT/IL CENTRAL INDEX KEY: 0000810369 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 36305975 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05025 FILM NUMBER: 99551280 BUSINESS ADDRESS: STREET 1: 1 KEMPER DRIVE CITY: LONG GROVE STATE: IL ZIP: 60049-0001 BUSINESS PHONE: 7083204982 MAIL ADDRESS: STREET 1: C/O KEMPER LIFE INSURANCE COMPANIES STREET 2: 1 KEMPER DRIVE CITY: LONG GROVE STATE: IL ZIP: 60049-0001 N-30D 1 ANNUAL REPORT DATED 12/31/98 1 1998 ANNUAL REPORT ........... KEMPER SELECT Variable Universal Life Policies ------ Kemper Investors Life Insurance Company ------ Variable Separate Account PERIOD ENDED DECEMBER 31, 1998 [KEMPER LOGO] 2 REPORT OF INDEPENDENT ACCOUNTANTS THE BOARD OF DIRECTORS OF KEMPER INVESTORS LIFE INSURANCE COMPANY AND POLICY OWNERS OF VARIABLE SEPARATE ACCOUNT In our opinion, the accompanying combined statements of assets and liabilities and policy owners' equity and the related combined statements of operations and combined statements of changes in policy owners' equity present fairly, in all material respects, the financial position of Kemper Investors Life Insurance Company Variable Separate Account (the "Company") at December 31, 1998 and the combined results of its operations for the year then ended and the combined changes in its policy owners' equity for the years ended December 31, 1998 and 1997 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluations of the overall financial statement presentation. Our procedures included confirmation of portfolio shares owned at December 31, 1998 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion expressed above. PricewaterhouseCoopers L.L.P. February 19, 1999 1 3 COMBINED FINANCIAL STATEMENTS KEMPER INVESTORS LIFE INSURANCE COMPANY VARIABLE SEPARATE ACCOUNT COMBINED STATEMENT OF ASSETS AND LIABILITIES AND POLICY OWNERS' EQUITY December 31, 1998 (IN THOUSANDS)
MONEY TOTAL GOVERNMENT MARKET RETURN HIGH YIELD GROWTH SECURITIES COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------------ ASSETS - ------------------------------------------------------------------------------------------------------------ Investment, at current value $13,863 981 3,681 1,333 3,472 4,396 Dividend and other receivables 4 3 -- -- 1 -- - ------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 13,867 984 3,681 1,333 3,473 4,396 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ LIABILITIES AND POLICY OWNERS' EQUITY - ------------------------------------------------------------------------------------------------------------ Liabilities: Mortality and expense risk charges 9 1 2 1 2 3 Other 17 17 -- -- -- -- - ------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 26 18 2 1 2 3 - ------------------------------------------------------------------------------------------------------------ Policy owners' equity $13,841 966 3,679 1,332 3,471 4,393 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ ANALYSIS OF POLICY OWNERS' EQUITY - ------------------------------------------------------------------------------------------------------------ Excess of proceeds from units sold over payments for units redeemed $ 4,838 348 948 318 1,346 1,878 Accumulated net investment income 6,492 618 1,698 903 1,406 1,867 Accumulated net realized gain on sales of investments 1,779 -- 816 66 319 578 Unrealized appreciation of investments 732 -- 217 45 400 70 - ------------------------------------------------------------------------------------------------------------ Policy owners' equity $13,841 966 3,679 1,332 3,471 4,393 - ------------------------------------------------------------------------------------------------------------
See accompanying notes to combined financial statements. 2 4 COMBINED FINANCIAL STATEMENTS KEMPER INVESTORS LIFE INSURANCE COMPANY VARIABLE SEPARATE ACCOUNT COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
MONEY TOTAL GOVERNMENT MARKET RETURN HIGH YIELD GROWTH SECURITIES COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Dividend and capital gain distributions $1,392 72 505 84 458 273 - ------------------------------------------------------------------------------------------------------- Mortality and expense risk charges 103 6 16 13 27 41 - ------------------------------------------------------------------------------------------------------- Net investment income 1,289 66 489 71 431 232 - ------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments: Net realized gain (loss) on sales of investments (113) -- (67) (42) (288) 284 Change in unrealized appreciation (depreciation) of investments (30) -- (1) (10) 234 (253) - ------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (143) -- (68) (52) (54) 31 - ------------------------------------------------------------------------------------------------------- NET INCREASE IN POLICY OWNERS' EQUITY RESULTING FROM OPERATIONS $1,146 66 421 19 377 263 - -------------------------------------------------------------------------------------------------------
See accompanying notes to combined financial statements. 3 5 COMBINED FINANCIAL STATEMENTS KEMPER INVESTORS LIFE INSURANCE COMPANY VARIABLE SEPARATE ACCOUNT COMBINED STATEMENTS OF CHANGES IN POLICY OWNERS' EQUITY For the years ended December 31, 1998 and 1997 (IN THOUSANDS)
MONEY MARKET COMBINED SUBACCOUNT -------------------- ------------------- 1998 1997 1998 1997 - ------------------------------------------------------------------------------------------------------------ OPERATIONS - ------------------------------------------------------------------------------------------------------------ Net investment income $ 1,289 1,290 66 34 Net realized gain (loss) on sales of investments (113) 531 -- -- Change in unrealized appreciation (depreciation) of investments (30) (312) -- -- - ------------------------------------------------------------------------------------------------------------ Net increase in policy owners' equity resulting from operations 1,146 1,509 66 34 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ ACCOUNT UNIT TRANSACTIONS - ------------------------------------------------------------------------------------------------------------ Proceeds from units sold 6,365 3,138 5,791 2,965 Net transfers (to) from affiliate or subaccounts (2,005) (707) (2,163) (1,059) Payments for units redeemed (5,039) (2,547) (3,694) (2,011) - ------------------------------------------------------------------------------------------------------------ Net increase (decrease) in policy owners' equity from account unit transactions (679) (116) (66) (105) - ------------------------------------------------------------------------------------------------------------ Total increase (decrease) in policy owners' equity 467 1,393 -- (71) - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ POLICY OWNERS' EQUITY - ------------------------------------------------------------------------------------------------------------ Beginning of period 13,374 11,981 966 1,037 - ------------------------------------------------------------------------------------------------------------ End of period $13,841 13,374 966 966 - ------------------------------------------------------------------------------------------------------------
See accompanying notes to combined financial statements. 4 6 COMBINED FINANCIAL STATEMENTS
TOTAL RETURN HIGH YIELD GOVERNMENT SUBACCOUNT SUBACCOUNT GROWTH SUBACCOUNT SECURITIES SUBACCOUNT - ----------------- ------------- ----------------- --------------------- 1998 1997 1998 1997 1998 1997 1998 1997 489 390 71 87 431 496 232 283 (67) 426 (42) 96 (288) (10) 284 19 (1) (281) (10) (27) 234 (21) (253) 17 - ----------------------------------------------------------------------------- 421 535 19 156 377 465 263 319 - ----------------------------------------------------------------------------- 63 27 86 22 393 92 32 32 638 (400) (502) 298 421 (38) (399) 492 (479) (217) (205) (50) (461) (138) (200) (131) - ----------------------------------------------------------------------------- 222 (590) (621) 270 353 (84) (567) 393 - ----------------------------------------------------------------------------- 643 (55) (602) 426 730 381 (304) 712 - ----------------------------------------------------------------------------- 3,036 3,091 1,934 1,508 2,741 2,360 4,697 3,985 - ----------------------------------------------------------------------------- 3,679 3,036 1,332 1,934 3,471 2,741 4,393 4,697 - -----------------------------------------------------------------------------
5 7 NOTES TO COMBINED FINANCIAL STATEMENTS KEMPER INVESTORS LIFE INSURANCE COMPANY VARIABLE SEPARATE ACCOUNT - -------------------------------------------------------------------------------- 1 GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION. Kemper Investors Life Insurance Company Variable Separate Account (the "Separate Account") is a unit investment trust registered under the Investment Company Act of 1940, as amended, established by Kemper Investors Life Insurance Company ("KILICO"). KILICO is a wholly-owned subsidiary of Zurich Financial Services ("ZFS"). ZFS was formed with the September 7, 1998 merger of the Zurich Group with the financial services business of B.A.T. Industries. ZFS is owned by Zurich Allied AG and Allied Zurich p.l.c., fifty-seven percent and forty-three percent, respectively. Zurich Allied AG, representing the financial interest of the former Zurich Group, is listed on the Swiss Market Index (SMI) replacing Zurich. Allied Zurich p.l.c., representing the financial interest of the financial services business of B.A.T. Industries, is included in the FTSE-100 Share Index in London. The Separate Account is used to fund policies ("Policy") for Select variable universal life policies and Power V flexible premium variable universal life policies. The Separate Account is divided into five subaccounts and each subaccount invests exclusively in the shares of a corresponding portfolio of the Investors Fund Series (the "Fund"), an open-end diversified management investment company. The Fund has added additional subaccounts, which are not reflected in the accompanying financial statements, and which are not available investment options to Select Policy Owners of the Separate Account. The Power V Policy Owners also have additional subaccounts which invest exclusively in the shares of another fund, which are not reflected in the accompanying financial statements. ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that could affect the reported amounts of assets and liabilities as well as the disclosure of contingent amounts at the date of the financial statements. As a result, actual results reported as income and expenses could differ from the estimates reported in the accompanying financial statements. SECURITY VALUATION. The investments are stated at current value which is based on the closing bid price, net asset value, at December 31, 1998. SECURITY TRANSACTIONS AND INVESTMENT INCOME. Security transactions are accounted for on the trade date (the date the order to buy or sell is executed). Dividends and capital gains distributions are recorded as income on the ex- dividend date. Realized gains and losses from security transactions are reported on a first in, first out ("FIFO") cost basis. ACCOUNT UNIT TRANSACTIONS. Proceeds from a Policy are automatically allocated to the Money Market subaccount on the trade date for a 15 day period. At the end of this period, the Separate Account value (cash value) may be allocated to other subaccounts as designated by the owner of the Policy. ACCUMULATION UNIT VALUATION. On each day the New York Stock Exchange (the "Exchange") is open for trading, the accumulation unit value is determined as of the earlier of 3:00 p.m. (Chicago time) or the close of the Exchange by dividing the total value of each subaccount's investments and other assets, less 6 8 NOTES TO COMBINED FINANCIAL STATEMENTS liabilities, by the number of accumulation units outstanding in the respective subaccount. FEDERAL INCOME TAXES. The operations of the Separate Account are included in the Federal income tax return of KILICO. Under existing Federal income tax law, investment income and realized capital gains and losses of the Separate Account increase liabilities under the policy and are, therefore, not taxed. Thus the Separate Account may realize net investment income and capital gains and losses without Federal income tax consequences. - -------------------------------------------------------------------------------- 2 SUMMARY OF INVESTMENTS Investments, at cost, at December 31, 1998, are as follows (in thousands):
SHARES OWNED COST ----------------------------------------------------------------------- Investors Fund Series Money Market Subaccount 981 $ 981 Investors Fund Series Total Return Subaccount 1,347 3,464 Investors Fund Series High Yield Subaccount 1,088 1,288 Investors Fund Series Growth Subaccount 1,175 3,072 Investors Fund Series Government Securities Subaccount 3,639 4,326 ----------------------------------------------------------------------- TOTAL INVESTMENTS $13,131 -----------------------------------------------------------------------
The underlying investments are summarized below. MONEY MARKET SUBACCOUNT: This subaccount invests primarily in short-term obligations of major banks and corporations. TOTAL RETURN SUBACCOUNT: This subaccount's investments will normally consist of fixed-income and equity securities. Fixed-income securities will include bonds and other debt securities and preferred stocks. Equity investments normally will consist of common stocks and securities convertible into or exchangeable for common stocks, however, the subaccount may also make private placement investments (which are normally restricted securities). HIGH YIELD SUBACCOUNT: This subaccount invests in fixed-income securities, a substantial portion of which are high yielding fixed-income securities. These securities ordinarily will be in the lower rating categories of recognized rating agencies or will be non-rated, and generally will involve more risk than securities in the higher rating categories. GROWTH SUBACCOUNT: This subaccount's investments normally will consist of common stocks and securities convertible into or exchangeable for common stocks, however, it may also make private placement investments (which are normally restricted securities). GOVERNMENT SECURITIES SUBACCOUNT: This subaccount invests primarily in U.S. Government Securities. The subaccount may also invest in fixed-income securities other than U.S. Government securities and may engage in options and financial futures transactions. 7 9 NOTES TO COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 3 TRANSACTIONS WITH AFFILIATES KILICO provides a death benefit payment upon the death of the Policy Owner under the terms of the death benefit option selected by the Policy Owner as further described in the Policy. KILICO assesses a monthly charge to the subaccounts for the cost of providing this insurance protection to the Policy Owner. These cost of insurance charges vary with the issue age, sex and rate class of the Policy Owner, and are allocated among the subaccounts in the proportion of each subaccount to the Separate Account value. Cost of insurance charges totaled approximately $111,539 and $1,454,886 for the Select and Power V Variable Universal Life products, respectively, for the year ended December 31, 1998. Additionally, KILICO assesses a daily charge to the subaccounts for mortality and expense risk assumed by KILICO at an annual rate of .90% of assets. Proceeds payable on the surrender of a Policy are reduced by the amount of any applicable contingent deferred sales charge. A state and local premium tax charge of 2.5% is deducted from each premium payment under the Power V policy prior to allocation of the net premium. This charge is to reimburse KILICO for the payment of state premium taxes. KILICO expects to pay an average state premium tax rate of approximately 2.5% but the accrual premium tax attributable to a Policy may be more or less. Under Section 848 of the Internal Revenue Code (the "Code"), the receipt of premium income by a life insurance company requires the deferral of a portion of the acquisition costs over a maximum of a 120 month period. The effect of Section 848 for KILICO is an acceleration of income recognition over a deferral of the associated deductions for tax purposes; this is referred to as deferred acquisition cost or, the "DAC tax". As compensation for this accelerated liability, a DAC tax charge of 1.00% of each premium dollar is deducted from the premium by KILICO before investment of a policy owner's funds into the Separate Account. Policy loans are also provided for under the terms of the Policy. The minimum amount of the loan is $500 and is limited to 90% of the Policy's investment value, less applicable surrender charges. Interest is assessed against the policy loan under the terms of the Policy. Policy loans are carried in KILICO's general account. Scudder Kemper Investments, Inc., an affiliated company, is the investment manager of the portfolios of the Fund which serve as the underlying investments of the Separate Account. Investors Brokerage Services, Inc., a wholly-owned subsidiary of KILICO, is the principal underwriter for the Separate Account. - -------------------------------------------------------------------------------- 4 NET TRANSFERS (TO) FROM AFFILIATE OR SUBACCOUNTS Net transfers (to) from affiliate or subaccounts include transfers of all or part of the Policy Owner's interest to or from another subaccount or to the general account of KILICO. 8 10 NOTES TO COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 5 POLICY OWNERS' EQUITY Policy owners' equity at December 31, 1998, is as follows (in thousands, except unit value; differences are due to rounding):
POLICY NUMBER UNIT OWNERS' SELECT POLICIES OF UNITS VALUE EQUITY --------------- -------- ----- ------- Money Market Subaccount 193 $1.704 $ 330 Total Return Subaccount 1,260 2.839 3,576 High Yield Subaccount 481 2.459 1,181 Growth Subaccount 762 3.826 2,914 Government Securities Subaccount 2,047 2.136 4,372 ----------------------------------------------------------------------------- TOTAL SELECT POLICY OWNERS' EQUITY $12,373 ----------------------------------------------------------------------------- POLICY NUMBER UNIT OWNERS' POWER V POLICIES OF UNITS VALUE EQUITY -------------------------------------------- ----- ------ ------- Money Market Subaccount 578 $1.098 $ 636 Total Return Subaccount 27 3.811 103 High Yield Subaccount 106 1.421 151 Growth Subaccount 121 4.614 557 Government Securities Subaccount 15 1.380 21 ----------------------------------------------------------------------------- TOTAL POWER V POLICY OWNERS' EQUITY $ 1,468 -----------------------------------------------------------------------------
9 11 Distributed by Investors Brokerage Services, Inc. Kemper Investors Life Insurance Company 1 Kemper Drive [ZURICH KEMPER LOGO] Long Grove, IL 60049 Policy Form Series L-5672, L-5454 & L-5797 [LOGO] PRINTED ON RECYCLED PAPER. L-5759(2/99)1042
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