-----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, Ih+nyttThvKEkH7n/3GokzolVGUMMj0ZmKzdZMO+5+HFicEweMyh9Od56BhaqTwd k+Li5Cchh2qsBxF0PYQdQg== 0000950137-99-001883.txt : 19990624 0000950137-99-001883.hdr.sgml : 19990624 ACCESSION NUMBER: 0000950137-99-001883 CONFORMED SUBMISSION TYPE: S-6 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990528 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KILICO VARIABLE SEPARATE ACCOUNT/IL CENTRAL INDEX KEY: 0000810369 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 363050975 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6 SEC ACT: SEC FILE NUMBER: 333-79615 FILM NUMBER: 99637720 BUSINESS ADDRESS: STREET 1: 1 KEMPER DRIVE CITY: LONG GROVE STATE: IL ZIP: 60049-0001 BUSINESS PHONE: 8479693507 MAIL ADDRESS: STREET 1: C/O KEMPER LIFE INSURANCE COMPANIES STREET 2: 1 KEMPER DRIVE CITY: LONG GROVE STATE: IL ZIP: 60049-0001 S-6 1 FORM S-6 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1999 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM S-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ A. Exact name of trust: KILICO VARIABLE SEPARATE ACCOUNT B. Name of depositor: KEMPER INVESTORS LIFE INSURANCE COMPANY C. Complete address of depositor's principal executive offices: 1 Kemper Drive Long Grove, Illinois 60049 D. Name and complete address of agent for service: DEBRA P. REZABEK, ESQ. Kemper Investors Life Insurance Company 1 Kemper Drive Long Grove, Illinois 60049 COPIES TO: 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
E. Securities being offered: Variable Portion of Modified Single Premium Variable Universal Life Insurance Policies. F. Approximate date of proposed public offering: As soon as practicable after the effective date of this registration. The registrant is registering an indefinite amount of securities, by reason of Section 24(f) of the Investment Company Act of 1940. ------------------ 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 CROSS REFERENCE SHEET TO PROSPECTUS Cross reference sheet pursuant to Rule 404(c) showing location in Prospectus of information required by Items of Form N-8B-2.
ITEM NUMBER IN FORM N-8B-2 CAPTION IN PROSPECTUS - -------------------------- --------------------- ORGANIZATION AND GENERAL INFORMATION 1. (a) Name of trust........................................ Cover, Definitions (b) Title of each class of securities issued............. Cover, Purchase of Policy and Allocation of Premiums 2. Name & address of each depositor..................... Cover, Kemper Life Insurance Company 3. Name & address of custodian.......................... Separate Account 4. Name & address of principal underwriter.............. Distribution of Policies 5. State in which organized............................. Separate Account 6. Date of organization................................. Separate Account 9. Material litigation.................................. Legal Proceedings GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST GENERAL INFORMATION CONCERNING SECURITIES AND RIGHTS OF HOLDERS 10. (a),(b) Type of Securities................................... Cover, Purchase of Policy and Allocation of Premiums (c) Rights of security holders re: withdrawal or redemption........................................... Cover, Amount Payable on Surrender of the Policy, Policy Loans, Cancellation (Free Look Period) (d) Rights of security holders re: conversion, transfer or partial withdrawal................................ Cover, Cancellation (Free Look Period), Amount Payable on Surrender of the Policy, Partial Withdrawals, Allocation of Premiums, Transfer of Cash Value (e) Rights of security holders re: lapses, default, & reinstatement........................................ No Lapse Guarantee and Grace Period; Termination; Reinstatement (f) Provisions re: voting rights......................... Voting Rights (g) Notice to security holders........................... Reports to Owners (h) Consent of security holders.......................... Additions, Deletions, and Substitutions of Securities, Allocation of Premiums (i) Other principal features............................. Charges and Deductions, Policy Benefits and Rights, Cash Value INFORMATION CONCERNING SECURITIES UNDERLYING TRUST'S SECURITIES 11. Unit of specified securities in which security holders have an interest............................. Cover, Separate Account Investments: the Portfolios 12. (a)-(d) Name of company, name & address of its custodian..... Cover, Separate Account Investments: the Portfolios INFORMATION CONCERNING LOADS, FEES, CHARGES & EXPENSES 13. (a) With respect to each load, fee, charge & expense..... Charges and Deductions (b) Deductions for sales charges......................... Withdrawal Charge (c) Sales load as percentage of amount invested.......... Withdrawal Charge (d)-(g) Other loads, fees & expenses......................... Charges and Deductions
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ITEM NUMBER IN FORM N-8B-2 CAPTION IN PROSPECTUS - -------------------------- --------------------- INFORMATION CONCERNING OPERATION OF TRUST 14. Procedure for applications for & issuance of trust's securities........................................... Application for a Policy, Allocation of Premiums, Distribution of Policies 15. Procedure for receipt of payments from purchases of trust's securities................................... Application for a Policy, Allocation of Premiums, Premiums, Transfer of Cash Value 16. Acquisition and disposition of underlying securities........................................... Cover, Separate Account Investments: the Portfolios 17. (a) Procedure for withdrawal............................. Cover, Amount Payable on Surrender of the Policy, Partial Withdrawals, Cancellation (Free Look Period) (b) Redemption or repurchase............................. Cover, Amount Payable on Surrender of the Policy, Partial Withdrawals, Cancellation (Free Look Period) (c) Cancellation or resale............................... Not Applicable 18. (a) Income of the Trust.................................. Portfolios, Allocation of Premiums 19. Procedures for keeping records & furnishing information to security holders...................... Portfolios, Reports to Owners 21. (a)&(b) Loans to security holders............................ Policy Loans 23. Bonding arrangements for depositor................... Safekeeping of the Separate Account's Assets 24. Other material provisions............................ General Policy Provisions ORGANIZATION, PERSONNEL & AFFILIATED PERSONS OF DEPOSITOR ORGANIZATION & OPERATIONS OF DEPOSITOR 25. Form, state & date of organization of depositor...... KILICO 27. General character of business of depositor........... KILICO 28. (a) Officials and affiliates of the depositor............ KILICO, Officers and Directors of KILICO (b) Business experience of officers and directors of the depositor............................................ Officers and Directors of KILICO COMPANIES OWNING SECURITIES OF DEPOSITOR 29. Each company owning 5% of voting securities of depositor............................................ KILICO CONTROLLING PERSONS 30. Control of depositor................................. KILICO DISTRIBUTION & REDEMPTIONS OF SECURITIES 35. Distribution......................................... KILICO, Distribution of Policies 38. (a) General description of method of distribution of securities........................................... Distribution of Policies (b) Selling agreement between trust or depositor & underwriter.......................................... Distribution of Policies (c) Substance of current agreements...................... Distribution of Policies
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ITEM NUMBER IN FORM N-8B-2 CAPTION IN PROSPECTUS - -------------------------- --------------------- PRINCIPAL UNDERWRITER 39. (a)&(b) Principal Underwriter................................ Distribution of Policies 41. Character of Underwriter's business.................. Distribution of Policies OFFERING PRICE OR ACQUISITION VALUE OF SECURITIES OF TRUST 44. Information concerning offering price or acquisition valuation of securities of trust. (All underlying securities are shares in registered investment companies.).......................................... Separate Account Investments: the Portfolios, Cash Value REDEMPTION VALUATION OF SECURITIES OF TRUST 46. Information concerning redemption valuation of securities of trust. (All underlying securities are shares in registered investment companies.).......... Separate Account Investments: the Portfolios, Cash Value PURCHASE & SALE OF INTERESTS IN UNDERLYING SECURITIES 47. Maintenance of Position.............................. Cover, Separate Account, Separate Account Investments: the Portfolios, Allocation of Premiums INFORMATION CONCERNING TRUSTEE OR CUSTODIAN 48. Custodian of trust................................... Separate Account 50. Lien on trust assets................................. Separate Account INFORMATION CONCERNING TRUSTEE OR CUSTODIAN 51. (a) Name & address of insurer............................ Cover, KILICO (b) Types of Contracts................................... Cover, Purchase of Policy and Allocation of Premiums, Federal Tax Considerations (c) Risks insured & excluded............................. Death Benefit, Optional Insurance Benefits, Misstatement as to Age and Sex, Suicide (d) Coverage............................................. Cover, Purchase of Policy and Allocation of Premiums (e) Beneficiaries........................................ Death Benefit, Beneficiary (f) Terms of cancellations & reinstatement............... Cancellation (Free Look Period); No Lapse Guarantee and Grace Period; Termination; Reinstatement (g) Method of determining amount of premium paid by holder............................................... Purchase of Policy and Allocation of Premiums POLICY OF REGISTRANT 52. (a)&(c) Selection of Portfolio securities.................... Additions, Deletions, and Substitutions of Securities REGULATED INVESTMENT COMPANY 53. (a) Taxable status of Trust.............................. Taxation of KILICO and the Separate Accounts FINANCIAL AND STATISTICAL INFORMATION 59. Financial Statements................................. Financial Statements
* Items not listed are not applicable to this Registration Statement. iii 5 PROSPECTUS - -------------------------------------------------------------------------------- MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES (SINGLE LIFE AND SURVIVORSHIP) - -------------------------------------------------------------------------------- ISSUED BY KEMPER INVESTORS LIFE INSURANCE COMPANY THROUGH ITS KILICO VARIABLE SEPARATE ACCOUNT 1 KEMPER DRIVE, LONG GROVE, ILLINOIS 60049 (800) 621-5001 This prospectus describes Modified Single Premium Variable Universal Life Insurance Policies (the "Policies") offered by Kemper Investors Life Insurance Company ("we" or "KILICO") for prospective insured persons ages 0-90. This prospectus describes Policies which provide insurance coverage on the life of one Insured ("Single Life Policies") and Policies which provide insurance on the lives of two Insureds ("Survivorship Policies"). You may pay a significant initial Premium and, subject to certain restrictions, additional Premiums. Under the Single Life Policies, when the Insured dies, we will pay a Death Benefit to a Beneficiary specified by You. Under the Survivorship Policies, the Death Benefit is payable upon the second death, as long as the Policy is in force. While the Policy is in force, the Death Benefit is at least the amount shown in the Policy specifications, unless you have loans or the Net Surrender Value is insufficient to pay the monthly expense charges. The Policy does not have a guaranteed minimum Cash Value. If you choose a Policy with our No Lapse Guarantee, while this guarantee is in effect your Policy will never lapse, regardless of changes in Net Surrender Value. Instead, if the Net Surrender Value becomes insufficient to pay the monthly charges, the Death Benefit payable will at least equal your total Premiums paid (less any prior withdrawals of Premium). This guarantee is in effect while you have no outstanding Policy Debt. If you choose a Policy without this guarantee or if this guarantee is not in effect under your Policy, your coverage under the Policy may end if the Net Surrender Value of your Policy becomes insufficient to cover the monthly expense charges. - -------------------------------------------------------------------------------- THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS MAY , 1999. 6 You may allocate and reallocate your Policy's Cash Value among the Subaccounts of the KILICO Variable Separate Account (the "Separate Account"). Each Subaccount invests exclusively in shares of one of the following Portfolios: Kemper Aggressive Growth Portfolio Kemper Technology Growth Portfolio Kemper-Dreman Financial Services Portfolio Kemper Small Cap Growth Portfolio Kemper Small Cap Value Portfolio Kemper-Dreman High Return Equity Portfolio Kemper International Portfolio Kemper International Growth & Income Portfolio Kemper Global Blue Chip Portfolio Kemper Growth Portfolio Kemper Contrarian Value Portfolio Kemper Blue Chip Portfolio Kemper Value+Growth Portfolio Kemper Horizon 20+ Portfolio Kemper Total Return Portfolio Kemper Horizon 10+ Portfolio Kemper High Yield Portfolio Kemper Horizon 5 Portfolio Kemper Global Income Portfolio Kemper Investment Grade Bond Portfolio Kemper Government Securities Portfolio Kemper Money Market Portfolio Scudder VLIF Global Discovery Portfolio Scudder VLIF Growth and Income Portfolio Scudder VLIF International Portfolio Scudder VLIF Capital Growth Portfolio Janus Aspen Growth Portfolio Janus Aspen Growth and Income Portfolio Warburg Emerging Markets Portfolio Warburg Post-Venture Capital Portfolio You may obtain more information about these Portfolios by reading the attached Prospectuses for the Portfolios. Not all of the Subaccounts may be available under your Policy. You generally may cancel the Policy and receive a refund by returning it to us within ten days after you receive it. In some states, however, this free look period may be longer. The Policies are modified endowment contracts for Federal income tax purposes, except in certain cases as described in "Federal Tax Considerations" beginning on page 33. Accordingly, the death benefit under your Policy generally is not subject to federal income tax, and federal income tax on any growth in your Policy's Cash Value generally is deferred until you withdraw it by taking a loan, partial withdrawal, or other distribution from your Policy during the life of the Insured. In addition, any taxable withdrawal taken before age 59 1/2 will also be subject to an additional ten percent federal penalty tax, with certain exceptions. In certain states the Policies may be offered as group policies with individual ownership represented by Certificates. The discussion of Policies in this Prospectus applies equally to Certificates under group policies, unless the context specifies otherwise. THE POLICIES AND THE INVESTMENTS IN THE SEPARATE ACCOUNT ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK. THE POLICIES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. THE POLICIES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. IF YOU ALREADY OWN A VARIABLE LIFE INSURANCE POLICY, IT MAY NOT BE ADVANTAGEOUS FOR YOU TO BUY ADDITIONAL COVERAGE OR REPLACE YOUR EXISTING POLICY WITH THE POLICY DESCRIBED IN THIS PROSPECTUS. THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE PORTFOLIOS LISTED ABOVE. IF ANY OF THOSE PROSPECTUSES ARE MISSING OR OUTDATED, PLEASE CONTACT US AND WE WILL SEND YOU THE PROSPECTUS YOU NEED. 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 WEBSITE AT http://www.sec.gov. PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE REFERENCE. The Policies may not be available in all states. 1 7 TABLE OF CONTENTS - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PAGE ---- DEFINITIONS................................................. SUMMARY..................................................... FEES AND EXPENSES........................................... PURCHASE OF POLICY AND ALLOCATION OF PREMIUMS............... Application for a Policy.................................. Simplified Underwriting................................ Standard Underwriting.................................. Premiums.................................................. Allocation of Premiums.................................... Cash Value................................................ Accumulation Unit Value................................... Transfer of Cash Value.................................... Transfers Authorized by Telephone......................... Automatic Dollar Cost Averaging........................... Automatic Asset Rebalancing............................... INVESTMENT OPTIONS.......................................... Separate Account Investments: the Portfolios.............. Voting Rights............................................. Additions, Deletions, and Substitutions of Securities..... The DCA Fixed Account..................................... POLICY BENEFITS AND RIGHTS.................................. Death Benefit............................................. Accelerated Death Benefit Rider........................... Policy Loans.............................................. Amount Payable on Surrender of the Policy................. Partial Withdrawals....................................... Systematic Withdrawals.................................... Settlement Option Payments................................ No Lapse Guarantee and Grace Period....................... Termination............................................... Maturity Benefit and Extended Maturity.................... Reinstatement............................................. Cancellation (Free Look Period)........................... Postponement of Payments.................................. CHARGES AND DEDUCTIONS...................................... Separate Account Charges.................................. Mortality and Expense Risk Charge...................... Reserve for Taxes...................................... Monthly Deduction......................................... Cost of Insurance Charge............................... Tax Charge............................................. Administration Charge.................................. Records Maintenance Charge............................. Portfolio Expenses........................................ Withdrawal Charge......................................... Free Withdrawal Amount and Waiver of Withdrawal Charge.... Transfer Fee.............................................. Reduction of Charges......................................
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PAGE ---- GENERAL POLICY PROVISIONS................................... Reports to Owners......................................... Limit on Right to Contest................................. Suicide................................................... Misstatement as to Age and Sex............................ Beneficiary............................................... Assignment................................................ Creditors' Claims......................................... Dividends................................................. Notice and Elections...................................... Modification.............................................. Survivorship Policies..................................... FEDERAL TAX CONSIDERATIONS.................................. Taxation of KILICO and the Separate Account............... Tax Status of the Policy.................................. Diversification Requirements........................... Owner Control.......................................... Tax Treatment of Life Insurance Death Benefit Proceeds.... Accelerated Death Benefit.............................. Tax Deferral During Accumulation Period................... Policies Which Are MECs................................... Characterization of a Policy as a MEC.................. Tax Treatment of Withdrawals, Loans, Assignments and Pledges Under MECs.................................... Penalty Tax............................................ Aggregation of Policies................................ Policies Which are not MECs............................... Tax Treatment of Withdrawals Generally................. Tax Treatment of Loans................................. Survivorship Policies..................................... Treatment of Maturity Benefits and Extension of Maturity Date................................................... Actions to Ensure Compliance with the Tax Law............. Federal Income Tax Withholding............................ Tax Advice................................................ DESCRIPTION OF KILICO AND THE SEPARATE ACCOUNT.............. KILICO.................................................... Officers and Directors of KILICO.......................... Separate Account.......................................... Safekeeping of the Separate Account's Assets.............. State Regulation of KILICO................................ Year 2000 MATTERS........................................... DISTRIBUTION OF POLICIES.................................... LEGAL PROCEEDINGS........................................... LEGAL MATTERS............................................... REGISTRATION STATEMENT...................................... EXPERTS..................................................... FINANCIAL STATEMENTS........................................ CHANGE OF ACCOUNTANTS.......................................
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. WE DO NOT AUTHORIZE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN AS BASED IN THIS PROSPECTUS. 3 9 DEFINITIONS Please refer to this list for the meaning of the following terms: ACCUMULATION UNIT--An accounting unit of measurement which we use to calculate the value of a Subaccount. ACCUMULATION UNIT VALUE--The value of an Accumulation Unit determined for a Valuation Period according to the formula stated in your Policy. ANNUITY UNIT--An accounting unit of measurement which we use to calculate the amount of variable payments under a settlement option. ANNUITY UNIT VALUE--The value of an Annuity Unit determined for a Valuation Period according to the formula stated in your Policy. BENEFICIARY(IES)--The person(s) named by you to receive the Death Benefit under the Policy. CASH VALUE--The sum of the Separate Account Value plus the Fixed Account Value plus the Loan Account Value. DCA FIXED ACCOUNT--The portion of the Cash Value allocated to our general account for purposes of participating in our Dollar Cost Averaging program. DEATH BENEFIT--The amount payable to the Beneficiary under the Policy upon the death of the Insured(s), before payment of any unpaid Policy Debt or Policy charges. DEDUCTION DAY--The same day in each month as the Effective Date. The day of the month on which the Monthly Deduction is taken from your Cash Value. EFFECTIVE DATE--The effective date of insurance coverage under the Policy, as stated in the Policy specifications. It is used to determine Policy Anniversaries, Policy Years and the Deduction Day. If the Effective Date otherwise would be the 29th, 30th or 31st of a month, the Effective Date will be the 28th day of that month. FIXED ACCOUNT--The portion of the Cash Value allocated to our general account. FIXED ACCOUNT VALUE--The value of the Fixed Account, including the DCA Fixed Account and any initial Premium (plus interest) paid prior to the Issue Date. GUIDELINE SINGLE PREMIUM--The "Guideline Single Premium" as defined in Section 7702 of the Code. INSURED--A person whose life is insured under the Policy. Under a Survivorship Policy, there initially are two Insureds. INVESTMENT EXPERIENCE FACTOR--The factor we use to determine the change in value of an Accumulation Unit in any Valuation Period. We determine the Investment Experience Factor separately for each Subaccount. ISSUE AGE--An Insured's age on his or her most recent birthday before the Effective Date. ISSUE DATE--The issue date stated in the Policy specifications. It is the date all requirements for coverage and Premium have been received, and the Policy is approved. LOAN ACCOUNT--An account established for amounts transferred from the Subaccounts as security for outstanding Policy Debt. LOAN ACCOUNT VALUE--The value of the Loan Account. MATURITY DATE--For Single Life Policies, the Policy Anniversary nearest the Insured's 100th birthday. For Survivorship Policies, the Policy Anniversary nearest the younger Insured's 100th birthday. MONTHLY DEDUCTION--The amount deducted from the Cash Value on each Deduction Day for the cost of insurance charge, the Administration Charge, the Tax Charge, the Records Maintenance Charge (when due), and the cost of any benefit rider. NET SURRENDER VALUE--The Surrender Value minus all outstanding Policy Debt. NO LAPSE GUARANTEE--Our guarantee that, if you have no outstanding Policy Debt, your Policy will never lapse regardless of changes in the Net Surrender Value. If the Net Surrender Value becomes insufficient to 4 10 cover the monthly charges, however, Your Death Benefit may be reduced to equal your total Premiums (less any prior withdrawals of Premium). The No Lapse Guarantee is not available under all Policies. OWNER ("YOU, YOUR, YOURS")--The person(s) having the privileges of ownership defined in the Policy. The Owner(s) may or may not be the same person(s) as the Insured(s). If your Policy is issued pursuant to a retirement plan, your ownership privileges may be modified by the plan. POLICY ANNIVERSARY--The same day and month as the Effective Date for each subsequent year the Policy remains in force. POLICY DEBT--The sum of all unpaid Policy Loans and accrued loan interest. POLICY YEAR--Each twelve-month period beginning on the Effective Date and each Policy Anniversary. PORTFOLIO(S)--The underlying portfolios in which the Subaccounts invest. Each Portfolio is an investment company registered with the SEC or a separate investment series of a registered investment company. PREMIUM--An amount paid to us as payment for the Policy by you or on your behalf. SEC--The United States Securities and Exchange Commission. SEPARATE ACCOUNT--KILICO Variable Separate Account, a unit investment trust registered with the SEC under the Investment Company Act of 1940. SEPARATE ACCOUNT VALUE--The sum of the Subaccount Values of the Policy on the Valuation Date. SPECIFIED AMOUNT--The amount of insurance under your Policy. As of the Effective Date, the Specified Amount is the amount shown on your Policy's specifications page. Thereafter, the Specified Amount is reduced to reflect partial withdrawals. SUBACCOUNT--A division of the Separate Account, which invests wholly in shares of one of the Portfolios. SUBACCOUNT VALUE--The value of the assets held in a Subaccount. SURRENDER VALUE--The Cash Value less any applicable Withdrawal Charge. TAX CODE--The Internal Revenue Code of 1986, as amended. TRADE DATE--On the Trade Date, we allocate your initial Premium plus any interest to the Subaccounts according to your instructions. In some states, the Trade Date is the same as the Issue Date. If your state requires us to return your Premium if you cancel Your Policy during the free look period, the Trade Date will be after the end of the free look period, as explained at page [14] below. VALUATION DATE--Each business day that applicable law requires us to value the assets of the Separate Account. Currently this 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, US, KILICO--Kemper Investors Life Insurance Company. WITHDRAWAL CHARGE--The surrender charge plus the unamortized state premium tax charge. YOU, YOUR, YOURS--The party(s) named as Owner in the application, unless later changed as provided in the Policy. 5 11 SUMMARY This section summarizes some of the more important features of your Policy. The Policy is described more fully in the remainder of this Prospectus. Please read this Prospectus carefully. Unless otherwise indicated, the description of the Policy contained in this Prospectus assumes that the Policy is in force, that there is no Policy Debt, and that current federal tax laws apply. This Policy is a modified single premium variable universal life insurance policy. The Policy has a Death Benefit, a Cash Value, and other features similar to life insurance policies providing fixed benefits. The Policy permits the Owner to pay a single significant initial Premium and, subject to restrictions, additional Premiums. It is a "variable" Policy because the Cash Value and, in some circumstances, the Death Benefit vary according to the investment performance of the Subaccounts to which you have allocated your Premium. The Cash Value is not guaranteed. This Policy provides you with the opportunity to take advantage of any increase in your Cash Value, but you also bear the risk of any decrease. We will issue Policies on the lives of prospective Insureds age 0-90 who meet our underwriting standards. You may purchase a Policy to provide insurance coverage on the life of one Insured ("Single Life Policy") or a Policy to provide insurance coverage on the lives of two Insureds ("Survivorship Policy"). PAYMENT OF PREMIUM Your initial Premium must equal at least $10,000. You may choose a minimum initial Premium of 90% or 100% of the Guideline Single Premium, based on the initial Specified Amount. If you choose to pay 90% of the Guideline Single Premium, your current cost of insurance charge will be higher and your Policy will not include our No Lapse Guarantee. You may pay additional Premiums, subject to the restrictions described in this Prospectus. We may refuse to accept any Premium that would cause an increase in the Death Benefit, other than a reinstatement Premium. We will accept any Premium at such time as it would not cause your Policy to lose its status as a life insurance contract under the Tax Code. POLICY EFFECTIVE DATE In general, your Policy will be effective and your life insurance coverage under the Policy will begin as of the date we receive your initial Premium, after satisfaction of the applicable underwriting requirements. While your application is in underwriting, if You have paid your initial Premium, we may provide you with temporary life insurance coverage in accordance with the terms of our conditional receipt. This temporary coverage will not exceed $500,000 plus the amount of Your initial Premium. We may decline for any lawful reason to accept your initial Premium until the Issue Date. You may be eligible to purchase a Policy through simplified underwriting without a medical examination if you meet our simplified underwriting criteria. Simplified underwriting will only be available for Individual Policies and Survivorship Policies involving spouses. Other survivorship cases will be considered on a fully underwritten basis. You are not eligible for simplified underwriting if the Insured is under 35 years old or over 80 years old at the time of application. If we approve your application, and you paid all or a portion of your initial Premium prior to the Issue Date, we will credit interest to your Initial Premium at our then current declared rate for the period from the Effective Date to the Issue Date. On the Trade Date, we will allocate your initial Premium to the Subaccounts you have selected or to the DCA Fixed Account (if you have selected it for Dollar Cost Averaging). In some states, the Trade Date will be the same as the Issue Date. If your state requires us to return your Premium if you cancel your Policy during the free look period, however, on the Issue Date we will initially allocate your initial Premium (plus any interest) to the Kemper Money Market Subaccount, and the Trade Date will depend on the length of the free look period in your state. If the free look period is ten days, the Trade Date will occur twenty days after the Issue Date. If the free look period is longer, the Trade Date will occur a corresponding number of days later. We will begin to deduct the Policy charges as of the Effective Date. If we reject your application, we will not issue you a Policy. We will return any Premium you have paid, adding interest as and at the rate required in your state. We will not subtract any Policy charges from the amount we refund to You. POLICY BENEFITS CASH VALUE. The Cash Value of your Policy on any Valuation Date is equal to the sum of the Separate Account Value, the Fixed Account Value (if any), and the Loan Account Value (if applicable). Your Cash Value 6 12 will depend on the investment performance of the Subaccounts to which you have allocated your Premiums, the amount of interest we credit to the DCA Fixed Account and the Loan Account (if you have any Cash Value in those Accounts), as well as the Premiums paid, partial withdrawals, and charges assessed. We do not guarantee a minimum Cash Value. SURRENDER OR PARTIAL WITHDRAWALS. While your Policy is in force, you may surrender it for the Net Surrender Value. We also will deduct the Records Maintenance Charge from your surrender proceeds, if your Cash Value on the last Policy Anniversary was less than $50,000. Upon surrender, life insurance coverage under your Policy will end. You may also withdraw part of your Cash Value through a partial withdrawal, subject to the restrictions described in "Partial Withdrawals" on page [23] below. If you take a partial withdrawal, we will reduce the Specified Amount as described in this Prospectus on page [22]. WITHDRAWAL CHARGE. If you surrender your Policy, the Withdrawal Charge will equal a percentage of your initial Premium net of all previous withdrawal amounts on which you paid a Withdrawal Charge. You pay a proportionate amount of Withdrawal Charge on partial withdrawals in excess of the free withdrawal amount described below. The Withdrawal Charge has two parts: (1) a surrender charge, which is intended to cover our distribution expenses; and (2) an unamortized state premium tax charge, which is intended to cover state premium tax expenses that are not recovered through the Tax Charge. The rate used to determine the Withdrawal Charge depends on the year the surrender or partial withdrawal is made. The maximum Withdrawal Charge is 10% of the initial Premium. It declines to zero percent after the ninth Policy Year, at the rates shown in the table on page [30]. FREE WITHDRAWALS. In each Policy Year, we will waive the Withdrawal Charge for partial withdrawals equal to the greater of: 1. Ten percent of the Cash Value; or 2. Earnings not previously withdrawn. We will also waive the Withdrawal Charge for qualified medical stays and disability. For more detail see "Amount Payable on Surrender of the Policy" and "Partial Withdrawals" on page [23]. POLICY LOANS. You may borrow money from us using your Policy as security for the loan. Each Policy Loan must equal at least $1,000. Your total Policy Loans may not exceed 90% of the Surrender Value of your Policy. In most instances Policy Loans are treated as distributions for Federal tax purposes. Therefore, you may incur tax liabilities if you borrow a Policy Loan. For more detail, see "Policy Loans", on pages [22-23], and "Policies Which Are MECs", on page [35]. DEATH BENEFITS. Under a Single Life Policy, while the Policy is in force, we will pay a Death Benefit to the Beneficiary upon the death of the Insured. Under a Survivorship Policy, we will pay the Death Benefit to the Beneficiary upon the death of the second Insured. While your Policy is in force, the Death Benefit will equal the greater of Your Policy's then current Specified Amount and the Cash Value multiplied by a specified percentage, except as provided under "No Lapse Guarantee" below. Before we pay the Death Benefit, we will subtract an amount sufficient to repay any outstanding Policy Debt and to pay any due and unpaid charges. NO LAPSE GUARANTEE Under our No Lapse Guarantee, if you do not have any outstanding Policy Debt, your Policy will never lapse, regardless of changes in the Net Surrender Value. Your Policy will remain in force until payment of the Death Benefit or the Maturity Date, unless you voluntarily surrender your Policy at an earlier date. If your Net Surrender Value is insufficient to cover a Monthly Deduction when due, we will give you a 61-day Grace Period to pay additional Premium. If you do not pay sufficient additional Premium, at the end of the Grace Period your Policy will stay in force but the Death Benefit will be reduced to equal your total Premium payments (less any prior partial withdrawals of Premium). The No Lapse Guarantee applies to your Policy unless: (a) you paid 90% of the Guideline Single Premium at issue for your Policy or (b) your Policy has outstanding Policy Debt. DURATION OF COVERAGE If the No Lapse Guarantee does not apply to your Policy and your Net Surrender Value is insufficient to cover a Monthly Deduction when due, we will give you a 61-day Grace Period to pay additional Premium. If you do not pay sufficient additional Premium, your Policy will terminate at the end of the Grace Period. 7 13 ALLOCATION OF PREMIUMS When you apply for the Policy, you specify in your application how to allocate your initial Premium among the Subaccounts and/or the DCA Fixed Account. Total allocations must equal 100%. You may allocate all or a portion of your initial Premium to the DCA Fixed Account solely for the purpose of subsequent transfers to the Subaccounts under our Automatic Dollar Cost Averaging Program, as described on pages [20-21]. We allocate any subsequent Premiums to the Subaccounts in the proportions you specified in your application, until you give us new instructions. While there is no limit to the number of Subaccounts open at any time, the minimum initial investment in a Subaccount is $500. In the future, we may change these limits. As a general rule, any subsequent Premium will be allocated to the Subaccounts as of the date your Premium is received in our Home Office. You may not allocate subsequent Premiums or make transfers to the DCA Fixed Account. TRANSFERS You may transfer Cash Value among the Subaccounts while the Policy is in force, by writing to us or calling us at (800) 621-5001. We currently do not charge a transfer fee. We reserve the right to charge a fee of $25 per transfer on each transfer after the first twelve transfers in each Policy Year, excluding transfers under our Automatic Dollar Cost Averaging or Automatic Asset Rebalancing Programs. The minimum amount that may be transferred is $100 or the remaining value in the Subaccount, if the value that would remain in the Subaccount after the transfer would be less than $500. For more detail, see "Transfer of Cash Value" and "Transfers Authorized by Telephone", on page [15]. You may also use our Automatic Dollar Cost Averaging program or our Automatic Asset Rebalancing program. You may not use both programs at the same time. Under the Automatic Dollar Cost Averaging program, amounts are automatically transferred to the Subaccounts of your choice on a monthly, quarterly, semiannual, or annual basis. For more detail, see "Automatic Dollar Cost Averaging", on pages [16-17]. Under the Automatic Asset Rebalancing program, you periodically can readjust the percentage of your Cash Value allocated to each Subaccount to maintain a pre-set level. Investment results will shift the balance of your Cash Value allocations. If you elect Automatic Asset Rebalancing, we periodically transfer your Cash Value back to the specified percentages annually, semiannually, quarterly, or at your request. For more detail, see "Automatic Asset Rebalancing", on pages [15-16]. THE SEPARATE ACCOUNT You can allocate and reallocate your Cash Value among the Subaccounts, each of which in turn invests in a single Portfolio. Under the Policy, the Separate Account currently invests in the following Portfolios: KEMPER VARIABLE SERIES: Kemper Aggressive Growth Portfolio Kemper Technology Growth Portfolio Kemper-Dreman Financial Services Portfolio Kemper Small Cap Growth Portfolio Kemper Small Cap Value Portfolio Kemper-Dreman High Return Equity Portfolio Kemper International Portfolio Kemper International Growth & Income Portfolio Kemper Global Blue Chip Portfolio Kemper Growth Portfolio Kemper Contrarian Value Portfolio Kemper Blue Chip Portfolio Kemper Value+Growth Portfolio Kemper Horizon 20+ Portfolio Kemper Total Return Portfolio Kemper Horizon 10+ Portfolio Kemper High Yield Portfolio Kemper Horizon 5 Portfolio Kemper Global Income Portfolio Kemper Investment Grade Bond Portfolio Kemper Government Securities Portfolio Kemper Money Market Portfolio SCUDDER VARIABLE LIFE INVESTMENT FUND (CLASS A SHARES): Scudder VLIF Global Discovery Portfolio Scudder VLIF Growth and Income Portfolio Scudder VLIF International Portfolio Scudder VLIF Capital Growth Portfolio JANUS ASPEN SERIES: Janus Aspen Growth Portfolio Janus Aspen Growth and Income Portfolio WARBURG PINCUS TRUST: Warburg Emerging Markets Portfolio Warburg Post-Venture Capital Portfolio Each Portfolio holds its assets separate from the assets of the other Portfolios. Each Portfolio has distinct investment objectives and policies, which are described in the accompanying Prospectuses for the Portfolios. 8 14 CHARGES CHARGES ASSESSED ON THE SUBACCOUNTS. On each Valuation Date, we deduct a Mortality and Expense Risk Charge from the Separate Account. The Mortality and Expense Charge equals an annual rate of .90% of average daily net assets, and is intended to compensate us for expenses incurred and certain mortality and expense risks assumed under the Policies. See "Mortality and Expense Risk Charge" on page [45] below. MONTHLY DEDUCTION. We also deduct a Monthly Deduction from your Cash Value. The Monthly Deduction consists of the cost of insurance charge, the Administration Charge, the Tax Charge, and the cost of any benefit rider. We also deduct the Records Maintenance Charge on each Policy Anniversary, if your Policy's Cash Value was less than $50,000 on the previous Policy Anniversary. The cost of insurance charge covers our anticipated mortality costs. If your Initial Premium exceeds $500,000, your cost of insurance charges may be lower. The Administration Charge is intended to compensate us for some of our administrative costs under the Policy. The Tax Charge covers state premium tax expenses under the Policies and certain federal tax liabilities resulting from our receipt of Premiums under the Policies, as required by law. The Records Maintenance Charge reimburses us for certain administrative costs associated with the Policies. See "Monthly Deduction", on pages [28-29] below. WITHDRAWAL CHARGE. We impose a Withdrawal Charge to cover a portion of our premium tax expenses and a portion of the sales expenses we incur in distributing the Policies. These sales expenses include agents' commissions, advertising, and the printing of Prospectuses. See "Withdrawal Charge" on page [7] above and in "Withdrawal Charge" on page [30] below. TRANSFER FEE. We currently do not charge a transfer fee. Under the Policy, however, we reserve the right to charge a fee of $25 per transfer on each transfer in excess of twelve transfers in a single Policy Year, excluding Portfolio Rebalancing and Automatic Dollar Cost Averaging transfers. See "Transfer Fee" on page [31] below. The charges assessed under the Policy are summarized in the table entitled "Policy Charges and Deductions" on pages [10-11] below, and described in more detail in "Charges and Deductions", beginning on page [28]. In addition to our charges under the Policy, each Portfolio deducts amounts from its assets to pay its investment advisory fee and other expenses. The Prospectuses for the Portfolios describe their respective charges and expenses in more detail. We may receive compensation from the investment advisers or administrators of the Portfolios. Such compensation will be consistent with the services we provide or the cost savings resulting from the arrangement and therefore may differ between Portfolios. We also may receive fees from the Portfolios to assist us in distributing the Policies. TAX TREATMENT UNDER CURRENT FEDERAL TAX LAW Your Policy is structured to meet the definition of a life insurance contract under the Tax Code. We may need to limit the amount of Premiums you pay under the Policy to ensure that your Policy continues to meet that definition. In most circumstances, your Policy will be considered a "modified endowment contract", which is a form of life insurance contract under the Tax Code. Special rules govern the tax treatment of modified endowment contracts. Under current tax law, death benefit payments under modified endowment contracts, like death benefit payments under other life insurance contracts, generally are excluded from the gross income of the beneficiary. Withdrawals and Policy Loans, however, are treated differently. Amounts withdrawn and Policy Loans are treated first as income, to the extent of any gain, and then as a return of Premium. The income portion of the distribution is includable in your taxable income. Also, an additional ten percent federal penalty tax is generally imposed on the taxable portion of amounts received before age 59 1/2. For more information on the tax treatment of the Policy, see "Federal Tax Considerations", beginning on page [33], and consult your tax adviser. FREE-LOOK PERIOD In most states, you may cancel your Policy by returning it to us no later than ten days after you receive it. In other states, however, this free look period may be longer, as provided by state law. If you return your Policy, the Policy terminates and, in some states, we will pay you an amount equal to your Premium (less any Policy Debt). In some other states, however, we will return your Cash Value. Since state laws differ as to the consequences of returning a Policy, You should refer to your Policy for specific information about your circumstances. ILLUSTRATION OF HOW POLICY VALUES CHANGE WITH EXPERIENCE At your request we will furnish you with a free, personalized illustration of Cash Value, Surrender Value and Death Benefit. The illustration will be personalized to reflect the proposed Insureds' age, sex, underwriting classification, proposed initial Premium, and any available riders requested. The illustrated Cash Value, Surrender 9 15 Value and Death Benefit will be based on certain hypothetical assumed rates of return for the Separate Account. Your actual investment experience probably will differ, and as a result the actual values under the Policy at any time may be higher or lower than those illustrated. The personalized illustrations will follow the methodology and format of the hypothetical illustrations that we filed with the SEC in 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 [28]). POLICY CHARGES AND DEDUCTIONS CHARGES DEDUCTED FROM THE SEPARATE ACCOUNT: Mortality and Expense Risk Charge: 0.90% of average daily net assets(1) Federal Income Tax Charge:Currently none.(2) CHARGES DEDUCTED FROM CASH VALUE:(3) Monthly Cost of Insurance Charge:(3) CURRENT: The lower of: (i) the product of the applicable current asset-based cost of insurance charge times the Cash Value on the Deduction Day;(4) and (ii) the product of the applicable guaranteed cost of insurance rate times the net amount at risk. If your initial Premium is no more than $500,000 and you pay 100% of the Guideline Single Premium, the current asset-based rate for Single Life Policies for the Standard (NS)(5) rate class is 0.55% annually of Cash Value for the first ten Policy Years and 0.25% thereafter and the rate for Survivorship Policies for the Standard (NS) rate class is 0.45% for the first ten Policy Years and 0.20% thereafter. If your initial Premium is more than $500,000 and you pay 100% of the Guideline Single Premium, the current asset-based rate for Single Life Policies for the Standard (NS) rate class is 0.25% for the first ten Policy Years and 0.10% thereafter and the rate for Survivorship Policies for the Standard (NS) rate class is 0.20% for the first ten Policy Years and 0.10% thereafter. GUARANTEED: Ranges from $.06 per $1,000 of net amount at risk to $83.33 per $1,000 of net amount at risk.(6) Administration Charge(7) 0.35% annually of average monthly Cash Value for Policy Years 1-10 0.25% annually of average monthly Cash Value for Policy Years 11 and later Tax Charge(7) 0.40% annually of the average monthly Cash Value for Policy Years 1-10 0.00% for Policy Years 11 and later Records Maintenance Charge(8) $30.00 per year, deducted annually, if your Cash Value is less than $50,000 on the most recent Policy Anniversary. TRANSACTION CHARGES: Transfer Fee:(9) Currently none. MAXIMUM WITHDRAWAL CHARGE:(10) 10% of the initial Premium - --------------- (1) Deducted each Valuation Period at a rate equivalent to the effective annual rate shown, multiplied by the Separate Account Value on the relevant Valuation Date, times the number of days in the relevant Valuation 10 16 Period. No mortality and expense risk charge is deducted from the Kemper Money Market II Subaccount, which is only available for Automatic Dollar Cost Averaging that will deplete the owner's Subaccount Value by the end of the first Policy Year. (2) 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 [28]. (3) Assessed monthly, allocated pro rata among all active Subaccounts and the DCA Fixed Account. (4) The asset-based cost of insurance rate differs depending on Policy type and history of tobacco use of the Insured(s). The current-asset based cost of insurance rates also reflect whether you pay 90% or 100% of the Guideline Single Premium at issue (based on the initial Specified Amount). The asset-based rates that we set will reflect our expectations as to mortality experience under the Policies and other relevant factors, such that the aggregate actual cost of insurance charges paid under the Policies will compensate us for our aggregate mortality risks under the Policies. In our discretion, We may change the asset-based rate used in the current cost of insurance formula. Even if we change the asset-based rate, however, you will never be charged more than the amount determined using the guaranteed cost of insurance tables in your Policy. For further explanation, see "Charges and Deductions--Monthly Deduction--Cost of Insurance Charge", on pages [28-29]. (5) The Standard (NS) rate class is our best rate class for Insureds who have not used tobacco of any kind within the past 36 months. (6) The guaranteed cost of insurance charges are based on attained age, sex, and history of tobacco use of the Insured. The net amount at risk is the difference between the Death Benefit and the Cash Value. See "Charges and Deductions--Monthly Deduction--Cost of Insurance Charge", on pages [28-29]. (7) Deducted monthly in an amount equal to 1/12 the annual rate shown, multiplied by the total Cash Value, including the Loan Account Value, on the relevant Deduction Day. The Administration Charge covers certain of our administrative expenses in connection with the Policies. The Tax Charge covers a portion of our state premium tax expense and certain federal income tax liability associated with the receipt of Premium. (8) The Records Maintenance Charge is deducted annually on each Policy Anniversary. If you surrender your Policy during a Policy Year, we will deduct the Records Maintenance Charge from your surrender proceeds. (9) We currently do not charge a transfer fee. Under the Policy, we reserve the right in the future to charge a transfer fee of $25 on each transfer after the first twelve transfers each Policy Year, excluding transfers under our Automatic Dollar Cost Averaging and Automatic Asset Rebalancing Programs. (10) This charge only applies upon withdrawals of the initial Premium. It does not apply to withdrawals of any additional Premiums paid under a Policy. The Withdrawal Charge declines to zero percent after the ninth Policy Anniversary. It is imposed to cover a portion of our premium tax expenses and the sales expenses incurred by us in distributing the Policies. In any Policy Year, we will not charge any Withdrawal Charge on that portion of your withdrawals equal to the greater of (a) ten percent of the Cash Value, less any prior free partial withdrawal since the most recent Policy Anniversary, or (b) earnings not previously withdrawn. See Charges and Deductions--Withdrawal Charge, page [30]. 11 17 PORTFOLIO EXPENSES(1) (As a percentage of average net assets for the period ended December 31, 1998) (after fee waivers and expense reimbursements, as indicated in the notes)
TOTAL FUND OTHER TOTAL FUND ANNUAL PORTFOLIO MANAGEMENT FEES EXPENSES EXPENSES - --------- --------------- ---------------- ----------------- Kemper Aggressive Growth Portfolio(4)............. 0.67% 0.28% 0.95% Kemper Technology Growth Portfolio(2)............. 0.66% 0.29% 0.95% Kemper-Dreman Financial Services Portfolio(2)(5)................................. 0.02% 0.97% 0.99% Kemper Small Cap Growth Portfolio................. 0.65% 0.05% 0.70% Kemper Small Cap Value Portfolio(1)............... 0.75% 0.05% 0.80% Kemper-Dreman High Return Equity Portfolio(2)(5)................................. 0.42% 0.45% 0.87% Kemper International Portfolio.................... 0.75% 0.18% 0.93% Kemper International & Growth Income Portfolio(2)(5)................................. 0.00% 1.12% 1.12% Kemper Global Blue Chip Portfolio(2)(5)........... 0.00% 1.56% 1.56% Kemper Growth Portfolio........................... 0.60% 0.05% 0.65% Kemper Contrarian Value Portfolio(1).............. 0.75% 0.03% 0.78% Kemper Blue Chip Portfolio(1)(6).................. 0.65% 0.11% 0.76% Kemper Value+Growth Portfolio(1).................. 0.75% 0.03% 0.78% Kemper Horizon 20 Portfolio(1).................... 0.60% 0.07% 0.67% Kemper Total Return Portfolio..................... 0.55% 0.05% 0.60% Kemper Horizon 10+ Portfolio(1)................... 0.60% 0.04% 0.64% Kemper High Yield Portfolio....................... 0.60% 0.05% 0.65% Kemper Horizon 5 Portfolio(1)..................... 0.60% 0.06% 0.66% Kemper Global Income Portfolio(2)(6).............. 0.72% 0.33% 1.05% Kemper Investment Grade Bond Portfolio(6)......... 0.60% 0.07% 0.67% Kemper Government Securities Portfolio............ 0.55% 0.11% 0.66% Kemper Money Market Portfolio(3).................. 0.50% 0.04% 0.54%
Scudder VLIF Global Discovery Portfolio(7). % 0.91 % 0.81 % 1.72 Scudder VLIF Growth and Income Portfolio.......... 0.47% 0.09% 0.56% Scudder VLIF International Portfolio.............. 0.87% 0.18% 1.05% Scudder VLIF Capital Growth Portfolio............. 0.47% 0.04% 0.51% Janus Aspen Growth Portfolio(8)................... 0.65% 0.03% 0.68% Janus Aspen Growth and Income Portfolio(8)........ 0.00% 1.25% 1.25% Warburg Emerging Markets Portfolio(9)............. 0.20% 1.20% 1.40% Warburg Post-Venture Capital Portfolio(9)......... 1.08% 0.24% 1.32%
- --------------- (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 the date of this Prospectus, to limit their respective fees and to reimburse other operating expenses, in a manner communicated to the Board of the Fund, 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%), Kemper Contrarian Value Portfolio (.80%), Kemper Small Cap Value Portfolio (.84%), Kemper Horizon 5 Portfolio (.97%), Kemper Horizon 10+ Portfolio (.83%), Kemper Horizon 20+ Portfolio (.93%), Kemper Investment Grade Bond Portfolio (.80%), and Kemper Blue Chip Portfolio (.95%). The amounts set forth in the table above reflect actual expenses for the past fiscal year, which were lower than these expense limits. (2) 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 the date of this Prospectus, to limit their respective fees and to reimburse other operating expenses, in a manner communicated to the Board of the Fund, to the extent necessary to limit total operating expenses of the Kemper Aggressive Growth, Kemper Technology Growth, Kemper-Dreman Financial Services, Kemper-Dreman High Return Equity, Kemper International Growth and Income, Kemper Global Blue Chip and Kemper Global Income Portfolios of Kemper Variable Series to the levels set forth in the table above. Without taking into effect these expense caps, for the Aggressive Growth, Technology Growth, Financial Services, High Return Equity, International Growth and Income, Global Blue Chip and Global Income Portfolios of Kemper Variable Series: management fees are estimated to be .75%, .75%, .75%, .75%, 1.00%, 1.00% and .75%. Other Expenses are estimated 12 18 to be .28%, .29%, .97%, .45%, 18.54%, 11.32%, and .33%, respectively, and total operating expenses are estimated to be 1.03%, 1.04%, 1.72%, 1.20%, 19.54%, 12.32%, and 1.08%, respectively. In addition, for Kemper International Growth and Income and Kemper Global Blue Chip, the investment manager has agreed to limit its management fee to .70% and .85%, respectively, of such portfolios for one year from the date of this Prospectus. (3) This Portfolio is the underlying investment for the Kemper Money Market Subaccount and the Kemper Money Market II Subaccount. The Kemper Money Market II Subaccount is only available to allocate all or a portion of your initial Premium for Automatic Dollar Cost Averaging that will deplete your Subaccount Value by the end of the first Policy Year. (4) Portfolio commenced operations after 5/1/99. "Other Expenses" have been estimated. (5) Portfolios commenced operations on or after 5/1/98. "Other Expenses" have been estimated. (6) Portfolios commenced operations 5/1/97. "Other Expenses" have been estimated. (7) Until April 10, 1998, the Adviser waived a portion of its management fee to limit the expenses of this Portfolio to 1.50% of the average daily net assets. (8) The expense figures shown are net of certain fee waivers or reductions from Janus Capital Corporation. Without such waivers, Management Fees, Other Expenses, and Total Portfolio Annual Expenses for the Portfolios for the fiscal year ending December 31, 1998 would have been: 0.72%, 0.03%, and 0.75%, respectively, for the Growth Portfolio; and 0.75%, 2.31%, and 3.06%, respectively, for the Growth and Income Portfolio. See the prospectus and Statement of Additional Information of Janus Aspen Series for a description of these waivers. (9) The expense figures shown are net of certain fee waivers or reductions from Warburg Pincus Asset Management, Inc. and its affiliates based on actual expenses for fiscal year ended December 31, 1998. Without such waivers, Management Fees, Other Expenses, and Total Portfolio Annual Expenses for the Portfolios for the fiscal year ended December 31, 1998 would have been: 1.25%, 6.96%, and 8.21%, respectively, for the Emerging Markets Portfolio; and 1.25%, 0.45%, and 1.70%, respectively, for the Post-Venture Capital Portfolio. Fee waivers and expense reimbursements may be discontinued at any time. PURCHASE OF POLICY AND ALLOCATION OF PREMIUMS APPLICATION FOR A POLICY You may apply to purchase a Policy by submitting a written application to us through one of our authorized agents. We will issue Policies to insure people who are 90 years of age or younger. When you apply for a Policy, we will require you to submit evidence of insurability satisfactory to us. If we do not issue a Policy to you, we will return your Premium to you. In general, we will deliver your Policy only when (1) we have received your initial Premium and (2) we have determined that your application meets our underwriting requirements. If you are paying Premium from more than one source, we will not issue your Policy until all Premium has been received. The Effective Date will be the effective date of insurance coverage under your Policy. We use the Effective Date to determine Policy Anniversaries, Policy Years, and Deduction Days. The Effective Date usually will be the date when we have received your initial Premium, after satisfaction of the applicable underwriting requirements. We will not accept your initial Premium with your application if it exceeds our then-current limit. In other cases, you may choose to pay the initial Premium with your application. If you did not submit your initial Premium with your application, we will require you to pay your entire Premium before we place your insurance in force. Acceptance of your application is subject to our underwriting rules. We reserve the right to reject your application for any lawful reason. We reserve the right to change the terms or conditions of your Policy to comply with differences in applicable state law. Variations from the information appearing in this Prospectus due to individual state requirements are described in supplements which are attached to this Prospectus or in endorsements to the Policy, as appropriate. SIMPLIFIED UNDERWRITING. Under our current underwriting rules, which we may change when and as we decide, proposed Insureds are eligible for simplified underwriting without a medical examination, if the application responses and requested initial Premium meet our simplified underwriting standards. Simplified underwriting is not available if the initial Premium exceeds the limits set in our simplified underwriting standards. 13 19 For Survivorship Policies, both Insureds must meet our simplified underwriting requirements. Simplified underwriting limits may vary by state. STANDARD UNDERWRITING. If you are not eligible for simplified underwriting, we will process your application in accordance with our customary underwriting requirements. While your application is in underwriting, if you have paid your initial Premium we may provide you with temporary life insurance coverage in accordance with the terms of our conditional receipt. Any temporary coverage may not exceed $500,000 plus the amount of your initial Premium. If you did not pay your Premium with your application, we will require you to pay your entire Premium before we place your insurance in force. If you pay Premium through more than one source, e.g., through the rollover of another policy, we will not place your Policy in force until all Premium has been received. If we approve your application, you will earn interest and/or investment return on your Premium from the Effective Date. We will also begin to deduct the Policy charges as of the Effective Date. If we reject your application, we will not issue you a Policy. We will return any Premium you have made, adding interest as and at the rate required in your state. We will not subtract any Policy charges from the amount we refund to You. PREMIUMS You must pay an initial Premium to purchase a Policy. You may choose a minimum initial Premium of 90% or 100% of the Guideline Single Premium for your Policy's initial Specified Amount. Your choice will affect your current cost of insurance charge. In addition, if you choose to pay 90%, your Policy will not include our No Lapse Guarantee. Under either option, the minimum initial Premium is $10,000. We may waive or change this minimum. You may pay additional Premiums at any time and in any amount necessary to avoid termination of your Policy. In addition, we will accept any additional Premium at such time as it would not disqualify your Policy as a life insurance contract under the Tax Code. If you wish to repay Policy Debt (if any), you must send written instructions with your payment; otherwise, we will treat any payment received from you as additional Premium. ALLOCATION OF PREMIUMS If you pay all or a portion of your initial Premium prior to the Issue Date, we will initially allocate your payment to our Fixed Account. If we approve your application, we will credit interest to that amount at an effective rate of not less from 3% annually for the period from the Effective Date to the Issue Date. On the Issue Date, if your state requires us to return your Premium if you cancel your Policy during the free look period, we will initially allocate your initial Premium (and any interest) to the Kemper Money Market Subaccount. Subsequently, on the Trade Date, we will allocate your Cash Value to the Subaccounts and/or the DCA Fixed Account (if you have selected it for Dollar Cost Averaging) in accordance with your instructions. The Trade Date will depend on the length of the free look period. If the free look period is ten days, the Trade Date will occur twenty days after the Issue Date. If the free look period is longer, the Trade Date will occur a corresponding number of days later. In other states, on the Issue Date we will allocate your initial Premium according to your instructions, because the Trade Date will be the same as the Issue Date. You must specify your allocation percentages in your Policy application. The total allocation must equal 100%. We will allocate your subsequent Premiums in those proportions, until you give us new allocation instructions. You may change your allocation instructions orally or in writing. Your initial allocation to a Subaccount must equal at least $500. You may not allocate your Cash Value to more than 30 Subaccounts at one time. You may not allocate Premiums to the DCA Fixed Account after the initial Premium. We generally will allocate your additional Premiums to the Subaccounts as of the date your Premium is received in our Home Office. We may refuse to accept any Premium that would cause an increase in the Death Benefit, other than a reinstatement Premium. We will make all valuations in connection with the Policy, other than the initial Premium and other Premium payments requiring an underwriting, on the date a Premium is received or your request for other action is received at our Home Office, if that date is a Valuation Date, or on the next succeeding Valuation Date. CASH VALUE Your Cash Value on any Valuation Date is the sum of the value of your interest in the Subaccounts you have chosen, your Fixed Account Value (if any), plus your Loan Account Value (if any). Your Cash Value may 14 20 increase or decrease daily to reflect the performance of the Subaccounts you have chosen, the addition of interest credited to the Loan Account, the addition of Premiums, and the subtraction of partial withdrawals and charges assessed. There is no minimum guaranteed Cash Value. On the Effective Date, your Cash Value will equal the initial Premium less the Monthly Deduction for the first Policy Month. The Separate Account Value equals the sum of the Subaccount Values, each of which equals: a. The total value of your Accumulation Units in the Subaccount; plus b. Any Premium received and allocated to the Subaccount during the current Valuation Period; plus c. Any amount transferred to the Subaccount during the current Valuation Period; minus d. The pro-rata portion of any Monthly Deduction charged to the Subaccount when the Valuation Period includes a Deduction Day; minus e. Any amount transferred from the Subaccount during the current Valuation Period; minus f. Any amount withdrawn from the Subaccount during the current Valuation Period; minus g. Any amount loaned from the Subaccount during the current Valuation Period. ACCUMULATION UNIT VALUE The Accumulation Unit Value for each Subaccount will vary to reflect the investment experience of the corresponding Portfolio and the deduction of certain expenses. We will determine the Accumulation Unit Value for each Subaccount on each Valuation Date. A Subaccount's Accumulation Unit Value for a particular Valuation Date will equal the Subaccount's Accumulation Unit Value on the preceding Valuation Date multiplied by the Investment Experience Factor for that Subaccount for the Valuation Period then ended. The Investment Experience Factor for each Subaccount is (1) divided by (2) minus (3), where: (1) is the sum of (a) the net asset value per share of the corresponding Portfolio at the end of the current Valuation Period plus (b) the per share amount of any dividend or capital gains distribution by that Portfolio, if the "ex-dividend" date occurs in that Valuation Period; plus or minus (c) a credit or charge 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 corresponding Portfolio at the end of the last prior Valuation Period; and (3) is the factor representing the Mortality and Expense Risk Charge. You should refer to the Prospectuses for the Portfolios which accompany this Prospectus for a description of how the assets of each Portfolio are valued, since that determination directly affects the investment experience of the corresponding Subaccount and, therefore, your Cash Value. TRANSFER OF CASH VALUE While the Policy is in force before the Maturity Date, you may transfer Cash Value among the Subaccounts in writing or by telephone. We currently do not charge a transfer fee. However, under the Policy we reserve the right to charge a fee of $25 for each transfer in excess of twelve per Policy Year, excluding transfers under our Automatic Dollar Cost Averaging and Automatic Asset Rebalancing Programs. You may not transfer Cash Value to the DCA Fixed Account. The minimum amount that may be transferred from a single Subaccount is $100, or the remaining value in the Subaccount, if the value that would remain in the Subaccount after the transfer would be less than $500. We reserve the right to waive or change these minimums. As a general rule, we only make transfers on days when we and the New York Stock Exchange are open for business. If we receive your request on one of those days, we will make the transfer that day. Otherwise, we will make the transfer on the first subsequent day on which we and the NYSE are open. Transfers pursuant to a Automatic Dollar Cost Averaging or Automatic Asset Rebalancing program will be made at the intervals you have selected in accordance with the procedures and requirements we establish. We may suspend, modify, or terminate the transfer provisions. 15 21 TRANSFERS AUTHORIZED BY TELEPHONE You may make transfers by telephone, if you so advise us in writing on our authorized forms. The cut off time for telephone transfer requests is 4:00 p.m. Eastern time. Timely requests will be processed on that day at that day's price. If we receive your request after 4:00 p.m. Eastern time, we will process your request at the next day's price. We use procedures that we believe provide reasonable assurance that telephone authorized transfers are genuine. For example, we tape telephone conversations with persons purporting to authorize transfers and request identifying information. Accordingly, we disclaim any liability for losses resulting from allegedly unauthorized telephone transfers. We may suspend, modify or terminate the telephone transfer privilege at any time without notice. AUTOMATIC DOLLAR COST AVERAGING Under our Automatic Dollar Cost Averaging program, while the Policy is in force you may authorize us to transfer a fixed dollar amount monthly, quarterly, semiannually, or annually to the Subaccounts of your choice in accordance with the procedures and requirements that we establish. The transfers will continue until you instruct us to stop, or until your chosen source of transfer payments is exhausted. The minimum Automatic Dollar Cost Averaging transfer is $100 per transfer. Upon early termination of your Automatic Dollar Cost Averaging program, we will allocate the remaining amount from your source account to the Subaccounts in accordance with your instructions in our files. If you do not give us new instructions, we will follow the allocation instructions in our files. You may make Dollar Cost Averaging transfers from any Subaccount. At issue, you may choose to allocate some or all of your initial Premium to the Kemper Money Market II Subaccount or to the DCA Fixed Account, for purposes of participating in the Dollar Cost Averaging Program. Amounts allocated to the Kemper Money Market II Subaccount or the DCA Fixed Account must be transferred to other Subaccounts by the first Policy Anniversary. The Kemper Money Market II Subaccount invests in the Kemper Money Market Portfolio. However, the Mortality and Expense Risk Charge is not charged to this Subaccount. We offer two DCA Fixed Account options in connection with the Automatic Dollar Cost Averaging Program: a six-month option and a twelve-month option. Amounts designated for one of these options will be transferred to the Subaccounts within six months or twelve months of the Effective Date, as appropriate. Until they are transferred, they will accrue interest at the rate we declare. We may declare different rates for the six-month and the twelve-month options. In our discretion, we may change the DCA Fixed Account options that we offer under the Policy. For more information, see "The DCA Fixed Account" on pages [20-21]. Your request to participate in this program will be effective when we receive your completed application at our Home Office at the address given on the first page of this Prospectus. Call or write us for a copy of the application and additional information concerning the program. You may not use Automatic Dollar Cost Averaging and Automatic Asset Rebalancing at the same time. We may change, terminate, limit or suspend Automatic Dollar Cost Averaging at any time. The theory of automatic dollar cost averaging is that by spreading your investment over time, you may be able to reduce the effect of transitory market conditions on your investment. In addition, because a given dollar amount will purchase more units when the unit prices are relatively low rather than when the prices are higher, in a fluctuating market, the average cost per unit may be less than the average of the unit prices on the purchase dates. However, participation in this program does not assure you of a greater profit from your purchases under the program; nor will it prevent or necessarily reduce losses in a declining market. Moreover, other investment programs, such as our Automatic Asset Rebalancing Program, may not work in concert with Automatic Dollar Cost Averaging. Therefore, you should monitor your use of these programs, as well as other transfers or withdrawals, while Automatic Dollar Cost Averaging is being used. AUTOMATIC ASSET REBALANCING Automatic Asset Rebalancing allows you to readjust the percentage of your Cash Value allocated to each Subaccount to maintain a pre-set level. Over time, the variations in each Subaccount's investment results will shift the balance of your Cash Value allocations. Under the Automatic Asset Rebalancing feature, we periodically will transfer your Cash Value, including new Premiums (unless you specify otherwise), back to the percentages you specify in accordance with procedures and requirements that we establish. you may select the Subaccounts to include in an Automatic Asset Rebalancing program. 16 22 You may request Automatic Asset Rebalancing when you apply for your Policy or by submitting a completed written request to us at our Home Office at the address given on the first page of this Prospectus. You may not use Automatic Asset Rebalancing and Automatic Dollar Cost Averaging at the same time. We may change, terminate, limit or suspend Automatic Dollar Cost Averaging at any time. Please call or write us for a copy of the request form and additional information concerning Asset Automatic Rebalancing. Automatic Asset Rebalancing is consistent with maintaining your allocation of investments among market segments, although it is accomplished by reducing your Cash Value allocated to the better performing segments. Other investment programs may not work in concert with Automatic Asset Rebalancing. Therefore, you should monitor your use of these programs, as well as other transfers or withdrawals, while Automatic Asset Rebalancing is being used. We may change, terminate, limit, or suspend Automatic Asset Rebalancing at any time. INVESTMENT OPTIONS SEPARATE ACCOUNT INVESTMENTS: THE PORTFOLIOS. Each of the Subaccounts invests in the shares of one of the Portfolios. Each Portfolio is a separate investment series of an open-end management investment company registered under the Investment Company Act of 1940. We briefly describe the Portfolios below. You should read the current Prospectuses for the Portfolios for more detailed and complete information concerning the Portfolios, their investment objectives and strategies, and the investment risks associated with the Portfolios. If you do not have a Prospectus for a Portfolio, contact us and we will send you a copy. Each Portfolio holds its assets 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, and losses of one Portfolio have no effect on the investment performance of any other Portfolio. The Portfolios which currently are the permissible investments of the Separate Account under this Policy are separate series of: - Kemper Variable Series; - Scudder Variable Life Investment Fund (Class A Shares); - Janus Aspen Series; and - Warburg Pincus Trust. The investment objectives of the Portfolios are briefly described below. PORTFOLIOS OF KEMPER VARIABLE SERIES KEMPER AGGRESSIVE GROWTH PORTFOLIO seeks capital appreciation through the use of aggressive investment techniques. KEMPER TECHNOLOGY GROWTH PORTFOLIO seeks growth of capital. KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO seeks long-term capital appreciation. KEMPER SMALL CAP GROWTH PORTFOLIO seeks maximum appreciation of investors= capital. KEMPER SMALL CAP VALUE PORTFOLIO seeks long-term capital appreciation. KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO seeks to achieve a high rate of total return. KEMPER INTERNATIONAL PORTFOLIO seeks total return, a combination of capital growth and income, principally through an internationally diversified portfolio of equity securities. KEMPER INTERNATIONAL GROWTH & INCOME PORTFOLIO seeks a long-term growth of capital and current income, primarily from foreign equity securities. KEMPER GLOBAL BLUE CHIP PORTFOLIO seeks long-term growth of capital through a diversified worldwide portfolio of marketable securities, primarily equity securities, including common stocks, preferred stocks and debt securities convertible into common stocks. KEMPER GROWTH PORTFOLIO seeks maximum appreciation of capital through diversification of investment securities having potential for capital appreciation. KEMPER CONTRARIAN VALUE PORTFOLIO seeks to achieve a high rate of total return. 17 23 KEMPER BLUE CHIP PORTFOLIO seeks growth of capital and of income. KEMPER VALUE+GROWTH 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. KEMPER HORIZON 20+ PORTFOLIO, designed for investors with approximately a 20+ year investment horizon, seeks growth of capital, with income as a secondary objective. KEMPER TOTAL RETURN PORTFOLIO seeks a high total return, a combination of income and capital appreciation. KEMPER HORIZON 10+ PORTFOLIO, designed for investors with approximately a 10+ year investment horizon, seeks a balance between growth of capital and income, consistent with moderate risk. KEMPER HIGH YIELD PORTFOLIO seeks to provide a high level of current income. KEMPER HORIZON 5 PORTFOLIO, designed for investors with approximately a 5-year investment horizon, seeks income consistent with preservation of capital, with growth of capital as a secondary objective. KEMPER GLOBAL INCOME PORTFOLIO seeks to provide high current income consistent with prudent total return asset management. KEMPER INVESTMENT GRADE BOND PORTFOLIO seeks high current income. KEMPER GOVERNMENT SECURITIES PORTFOLIO seeks high current return consistent with preservation of capital. KEMPER MONEY MARKET PORTFOLIO seeks maximum current income to the extent consistent with stability of principal from a portfolio of high quality money market instruments. This Portfolio seeks to maintain a net asset value of $1.00 per share, but there is no assurance that the Portfolio will be able to do so. PORTFOLIOS OF SCUDDER VARIABLE LIFE INVESTMENT FUND (CLASS A SHARES) SCUDDER VLIF GLOBAL DISCOVERY PORTFOLIO seeks above-average capital appreciation over the long term by investing primarily in the equity securities of small companies located throughout the world. SCUDDER VLIF GROWTH AND INCOME 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 PORTFOLIO seeks long-term growth of capital principally from a diversified portfolio of foreign equity securities. SCUDDER VLIF CAPITAL GROWTH PORTFOLIO seeks to maximize long-term capital growth from a portfolio consisting primarily of equity securities. PORTFOLIOS OF JANUS ASPEN SERIES JANUS ASPEN GROWTH PORTFOLIO seeks long-term growth of capital in a manner consistent with the preservation of capital. JANUS ASPEN GROWTH AND INCOME PORTFOLIO seeks long-term capital growth and current income. PORTFOLIOS OF WARBURG PINCUS TRUST WARBURG EMERGING MARKETS PORTFOLIO seeks long-term growth of capital by investing in equity securities of emerging markets. WARBURG POST-VENTURE CAPITAL PORTFOLIO seeks long-term growth of capital by investing primarily in equity securities of issuers in their post-venture-capital stage of development and pursues an aggressive investment strategy. Not all Subaccounts may be available under your Policy. You should contact your representative for further information on the availability of the Subaccounts. Scudder Kemper Investments, Inc. ("Scudder Kemper") is the investment manager for the twenty-two available Portfolios of Kemper Variable Series and the four available Portfolios of Scudder Variable Life Investment Fund. Scudder Investments (U.K.) Limited ("Scudder U.K."), an affiliate of Scudder Kemper, is the subadviser for the Kemper International Portfolio and the Kemper Global Income Portfolio. Under the terms of the Sub- 18 24 Advisory Agreement with Scudder Kemper, Scudder U.K. renders investment advisory and management services for that portion of this Portfolio's assets that Scudder Kemper from time to time allocates to Scudder U.K. for management, including services related to foreign securities, foreign currency transactions, and related investments. Dreman Value Management L.L.C. ("DVM") serves as sub-adviser for the Kemper-Dreman High Return Equity and Kemper-Dreman Financial Services Portfolios. Under the terms of the SubAdvisory Agreement between Scudder Kemper and DVM for each Portfolio, DVM manages the investment and reinvestment of each Portfolio's assets in accordance with its investment objectives, policies and limitations and subject to the supervision of Scudder Kemper and the Board of Trustees. Janus Capital Corporation is the investment adviser for the two available Portfolios of the Janus Aspen Series. Warburg Pincus Asset Management, Inc. is the investment adviser for the two available Portfolios of the Warburg Pincus Trust. We do not promise that the Portfolios will meet their investment objectives. Amounts you have allocated to Subaccounts may grow in value, decline in value, or grow less than you expect, depending on the investment performance of the Portfolios in which those Subaccounts invest. You bear the investment risk that those Portfolios possibly will not meet their investment objectives. YOU SHOULD CAREFULLY REVIEW THE PORTFOLIOS' PROSPECTUSES BEFORE ALLOCATING AMOUNTS TO THE SUBACCOUNTS. Each Portfolio is subject to certain investment restrictions and policies which may not be changed without the approval of a majority of the shareholders of the Portfolio. See the accompanying Prospectuses of the Portfolios for further information. We automatically reinvest all dividends and capital gains distributions from the Portfolios in shares of the distributing Portfolio at their net asset value. The income and realized and unrealized gains or losses on the assets of each Subaccount are separate and are credited to or charged against the particular Subaccount without regard to income, gains or losses from any other Subaccount or from any other part of our business. We will use the Premiums you allocate to a Subaccount to purchase shares in the corresponding Portfolio and will redeem shares in the Portfolios to meet Policy obligations or make adjustments in reserves. The Portfolios are required to redeem their shares at net asset value and to make payment within seven days. Some of the Portfolios have been established by investment advisers which manage publicly traded mutual funds having similar names and investment objectives. While some of the Portfolios may be similar to, and may in fact be modeled after publicly traded mutual funds, you should understand that the Portfolios are not otherwise directly related to any publicly traded mutual fund. Consequently, the investment performance of publicly traded mutual funds and any similarly named Portfolio may differ substantially. Certain of the Portfolios sell their shares to separate accounts underlying both variable life insurance and variable annuity policies. It is conceivable that in the future it may be unfavorable for variable life insurance separate accounts and variable annuity separate accounts to invest in the same Portfolio. Although neither we nor any of the Portfolios currently foresees any such disadvantages either to variable life insurance or variable annuity owners, each Portfolio's Board of Directors intends to monitor events in order to identify any material conflicts between variable life and variable annuity owners and to determine what action, if any, should be taken in response thereto. If a Board of Directors were to conclude that separate investment funds should be established for variable life and variable annuity separate accounts, Owners will not bear the attendant expenses. VOTING RIGHTS As a general matter, you do not have a direct right to vote the shares of the Portfolios held by the Subaccounts to which you have allocated your Cash Value. Under current interpretations, however, you are entitled to give us instructions on how to vote those shares on certain matters. We will notify you when your instructions are needed and will provide proxy materials or other information to assist you in understanding the matter at issue. We will determine the number of votes for which you may give voting instructions as of the record date set by the relevant Portfolio for the shareholder meeting at which the vote will occur. As a general rule, you are the person entitled to give voting instructions. However, if you assign your Policy, the assignee may be entitled to give voting instructions. Retirement plans may have different rules for voting by plan participants. If you send us written voting instructions, we will follow your instructions in voting the Portfolio shares attributable to your Policy. If you do not send us written instructions, we will vote the shares attributable to your Policy in the same proportions as we vote the shares for which we have received instructions from other Owners. 19 25 We will vote shares that we hold in the same proportions as we vote the shares for which we have received instructions from other Owners. We may, when required by state insurance regulatory authorities, disregard Owner voting instructions if the instructions require that the shares be voted so as to cause a change in the subclassification or investment objective of one or more of the Portfolios or to approve or disapprove an investment advisory contract for one or more of the Portfolios. In addition, we may disregard voting instructions given by Owners in the investment objectives or the investment adviser of the Portfolios if we reasonably disapprove of the proposed change. We would disapprove a proposed change only if the proposed change is contrary to state law or prohibited by state regulatory authorities or we reasonably conclude that the proposed change would not be consistent with the investment objectives of the Portfolio or would result in the purchase of securities for the Portfolio which vary from the general quality and nature of investments and investment techniques utilized by the Portfolio. If we disregard voting instructions, we will include a summary of that action and our reasons for that action in the next semi-annual financial report to You. This description reflects our view of currently applicable law. If the law changes or our interpretation of the law changes, we may decide that we are permitted to vote the Portfolio shares without obtaining instructions from our Owners, and we may choose to do so. ADDITIONS, DELETIONS, AND SUBSTITUTIONS OF SECURITIES If the shares of any of the Portfolios are no longer available for investment by the Separate Account or if, in our judgment, further investment in the shares of a Portfolio is no longer appropriate in view of the purposes of the Policy, we may add or substitute shares of another Portfolio or mutual fund for Portfolio shares already purchased or to be purchased in the future by Premiums under the Policy. Any substitution will comply with the requirements of the 1940 Act. We also reserve the right to make the following changes in the operation of the Separate Account and the Subaccounts: (a) to operate the Separate Account in any form permitted by law; (b) to take any action necessary to comply with applicable law or obtain and continue any exemption from applicable laws; (c) to transfer assets from one Subaccount to another, or from any Subaccount to our General Account; (d) to add, combine, or remove Subaccounts in the Separate Account; (e) to assess a charge for taxes attributable to the operation of the Separate Account or for other taxes, as described in "Charges and Deductions--Separate Account Charges" on page [28] below; and (f) to change the way in which we assess other charges, as long as the total other charges do not exceed the maximum guaranteed charges under the Policies. If we deem it to be in the best interests of persons having voting interest under the Policies, the Separate Account may be (a) operated as a management company under the 1940 Act, (b) deregistered under the 1940 Act if such registration is no longer required; or (c) 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 our General Account. If we take any of these actions, we will comply with the then applicable legal requirements. THE FIXED ACCOUNT THE PORTION OF THE POLICY RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 AND THE FIXED ACCOUNT IS NOT REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940. ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTEREST IN THE FIXED ACCOUNT IS SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE STATEMENTS ABOUT THE FIXED ACCOUNT IN THIS PROSPECTUS MAY BE SUBJECT TO GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS REGARDING ACCURACY AND COMPLETENESS. 20 26 You may allocate part or all of your initial Premium to the DCA Fixed Account, to be transferred subsequently to the Subaccounts under our Dollar Cost Averaging Program. In addition, we allocate your initial Premium to our Fixed Account for the period prior to the Issue Date, if you pay all or a portion of your initial Premium prior to the Issue Date. No other Fixed Account option currently is available under this Contract. We reserve the right to discontinue offering or to offer additional Fixed Account options under the Contract, in accordance with applicable law. The interest rate credited to amounts allocated to the Fixed Account, including the DCA Fixed Account will be shown in your Contract. We may change the rate credited to new Contracts at any time in our discretion. We set interest rates in accordance with then current market conditions and other factors. Amounts allocated to the Fixed Account become part of the general account of KILICO. KILICO invests the assets of the general account in accordance with applicable laws governing the investments of insurance company general accounts. We may delay payment of partial or full withdrawals from the Fixed Account for up to six months from the date we receive your written withdrawal request. POLICY BENEFITS AND RIGHTS DEATH BENEFIT While your Policy is in force, we will pay the Death Benefit proceeds upon the death of the Insured or, if your Policy is a Survivorship Policy, upon the death of the second Insured to die. We will pay the Death Benefit proceeds to the named Beneficiary(ies) or, if none survives, to contingent Beneficiary(ies). We will pay the Death Benefit proceeds in a lump sum or apply them under the Policy's settlement options, which are described in "Settlement Option Payments" on pages [24-26]. The Death Benefit proceeds payable to the Beneficiary equal the Death Benefit, less any Policy Debt and less any due and unpaid charges. We will determine the amount of the Death Benefit proceeds as of the end of the Valuation Period following the date of death of the Insured (or second Insured). We must receive due proof of death within 60 days after the death of an Insured, or as soon thereafter as reasonably possible. We usually will pay the Death Benefit proceeds within seven days after we have received all required documentation. Payment may be postponed in certain circumstances. See "Postponement of Payments", at page [27]. The Death Benefit generally is the greater of: (1) the Specified Amount; or (2) the Cash Value at the date of death multiplied by a factor from the table of death benefit factors. The death benefit factors in the table reflect the "corridor percentages" for the guideline premium test under the Tax Code. We set the death benefit factors so as to ensure that Policies will qualify for favorable tax treatment. The death benefit factors vary according to the age of the Insured. Under this formula, an increase in Cash Value due to favorable investment experience may increase the Death Benefit above the Specified Amount, and a decrease in Cash Value due to unfavorable investment experience may reduce the Death Benefit (but not below the Specified Amount). However, as explained in "No Lapse Guarantee and Grace Period" and "Termination" at page [26] below, if your Policy's Net Surrender Value is insufficient to cover a Monthly Deduction when due, the Death Benefit may be reduced to equal your total Premium payments (less any prior withdrawals of Premium) or, if you have any outstanding Policy Debt, your Policy may lapse. EXAMPLES:
EXAMPLE A EXAMPLE B --------- --------- Specified Amount............................................ $100,000 $100,000 Insured's Age............................................... 60 60 Cash Value on Date of Death................................. $ 80,000 $ 50,000 Applicable Death Benefit Factors............................ 130% 130% Death Benefit............................................... $104,000 $100,000
In Example A, the Death Benefit equals $104,000, i.e., the greater of $100,000 (the Specified Amount) and $104,000 (the Cash Value at the Date of Death of $80,000, multiplied by the corridor percentage of 130%). This amount, less any Policy Debt and unpaid charges, constitutes the Death Benefit proceeds that we would pay to the Beneficiary. 21 27 In Example B, the Death Benefit is $100,000, i.e., the greater of $100,000 (the Specified Amount) or $65,000 (the Cash Value of $50,000 multiplied by the corridor percentage of 130%). As explained in more detail in "Federal Tax Considerations" beginning on page [33], we have structured the Policy to satisfy the definition of life insurance contract under Section 7702 of the Tax Code. As a result, the Death Benefit ordinarily will be excluded from the gross income of the Beneficiary, and any growth in the Cash Value of the Policy will not be taxable until distributed. However, because the Policy generally will be treated as a modified endowment contract for tax purposes, withdrawals and Policy Debt will be treated as coming first from any gain under your Policy, and then as a return of Premium. The income portion of the distribution is includable in your taxable income. In addition, a ten percent federal penalty tax may apply to the taxable portion of the distributions received before age 59 1/2. For advice about the tax consequences of purchasing a Policy or your specific circumstances, please consult your tax adviser. ACCELERATED DEATH BENEFIT RIDER You may request payment of a portion of the Death Benefit as an Accelerated Death Benefit if the Insured becomes terminally ill. You generally may request an Accelerated Death Benefit of up to 50% of existing Death Benefit. In approved states, the Accelerated Death Benefit Rider will be issued with all Policies at no extra Premium. If you request an Accelerated Death Benefit, the balance of the Death Benefit (net of the amount previously requested) is payable upon the Insured's death. You may request an Accelerated Death Benefit only once. Under Survivorship Policies, the Accelerated Death Benefit may not be requested until after the death of one of the Insureds. In general, the tax treatment of accelerated death benefits [is the same as the tax treatment of the Death Benefit,] as described in "Federal Tax Considerations" beginning on page [33]. Please consult your tax adviser for more information. POLICY LOANS While the Policy is in force, you may borrow money from us using the Policy as the only security for your loan. Loans have priority over the claims of any assignee or any other person. You may borrow up to 90% of the Surrender Value of your Policy as of the end of the Valuation Period in which we receive your loan request. Any outstanding Policy Debt will count against that limit. Thus, for example, if the Surrender Value of your Policy was $100,000 and you already had $50,000 in Policy Debt outstanding, you could borrow an additional $40,000 ($100,000 X 90% - $50,000). The minimum loan amount is $1,000. In addition, if you have named an irrevocable Beneficiary, you must also obtain his or her written consent before we make a Policy Loan to You. YOU MAY REALIZE TAXABLE INCOME WHEN YOU TAKE A POLICY LOAN. In most instances, a Policy is treated as a "modified endowment contract" for federal tax purposes. As a result, Policy Loans are treated as withdrawals for tax purposes, and the amount of the loan equal to any increase in your Cash Value may be treated as taxable income to You. In addition, you may also incur an additional ten percent federal penalty tax. You should also be aware that interest on Policy Loans is generally not deductible. On the other hand, although a Policy Loan is treated as a withdrawal for tax purposes, it is treated differently for Policy purposes. For example, under the Policy, a Policy Loan, unlike a partial withdrawal, does not reduce the Specified Amount. Accordingly, before you take a Policy Loan, you should consult your tax adviser and carefully consider the potential impact of a Policy Loan on your rights and benefits under the Policy. While the Policy remains in force, you may repay a Policy Loan in whole or in part without any penalty at any time while the Insured is living. The loan interest rate on all Policy Loans will be 5.50% per year compounded daily. Interest not paid will be charged on a daily basis and will be added to the Policy Debt on this Policy and bear interest at the same rate. When we make a Policy Loan to You, an amount equal to the Loan will be transferred from the Subaccounts to the Loan Account until the Loan is repaid. Unless you instruct us otherwise, the amount of the Loan will be deducted pro rata from the Subaccounts based on their relative Subaccount Values under your Policy. As explained in "No Lapse Guarantee and Grace Period" at page [26] below, if the Policy Debt outstanding under your Policy should ever equal or exceed the Net Surrender Value, your Policy will enter the grace period and may terminate if you do not pay sufficient additional Premium. We reserve the right not permit you to borrow Cash Value derived from Premium paid in the form of a check or draft for up to 30 days after we deposit that check or draft. 22 28 We will credit interest at an annual rate of 5.50% to your Loan Value attributable to "Preferred Loans". We will classify as "Preferred Loans" the portion of your total Loan Value equal to the difference between your Policy's Cash Value minus total Premiums paid (net of all prior withdrawals of Premium). Your remaining Loan Value will be credited interest at an annual rate of 3.50%. If you purchase your Policy in exchange for a policy with another insurance company, we will accept up to 50% of the Cash Value as a rollover loan. We will treat as a Preferred Loan the portion of the rollover loan equal to the cash value of your old policy, minus the total premiums paid under your old policy, plus any withdrawal of premiums under your old policy prior to the exchange. A Policy Loan, whether or not repaid, will have a permanent effect on the Cash Value because the investment results of each Subaccount will apply only to the amounts remaining in those Subaccounts. The longer a loan is outstanding, the greater the effect is likely to be. The effect could be favorable or unfavorable. If the Subaccounts earn more than the annual interest rate for amounts held in the Loan Account, your Cash Value will not increase as rapidly as it would if you had not taken a Policy Loan. If the Subaccounts earn less than that rate, then your Cash Value will be greater than it would have been if you had not taken a Policy Loan. Also, if you do not repay a Policy Loan, your Policy Debt will be subtracted from the Death Benefit and Surrender Value otherwise payable. AMOUNT PAYABLE ON SURRENDER OF THE POLICY While your Policy is in force, you may fully surrender your Policy. Upon surrender, we will pay you the Net Surrender Value determined as of the day we receive your written request at our Home Office. Your Policy will terminate on the day we receive your written request. We may require that you give us your Policy document before we pay you the surrender proceeds. Before we pay a full surrender, you must provide us with tax withholding information. The Net Surrender Value equals the Cash Value less any applicable Withdrawal Charge, less any outstanding Policy Debt. We also will deduct the $30 Records Maintenance Charge, if it would otherwise be due at the end of the current Policy Year. We will determine the Net Surrender Value as of the end of the Valuation Period during which we received your request for surrender. We generally will pay you the surrender proceeds of the Policy within seven days of our receiving your complete written request or on the effective surrender date you have requested, whichever is later. The determination of the Withdrawal Charge is described on page [30]. You may receive the surrender proceeds in a lump sum or under any of the settlement options described in "Settlement Option Payments" on pages [24-26]. The tax consequences of surrendering the Policy are discussed in "Federal Tax Considerations," beginning on page [33]. PARTIAL WITHDRAWALS You may receive a portion of the Surrender Value of your Policy by making a partial withdrawal from your Policy. Your request may be by telephone or in writing. If you request a partial withdrawal by telephone, however, the amount withdrawn may not exceed our limit, which currently is $10,000; larger requests must be in writing. All partial withdrawals requested by telephone will be sent only to the address of record of the Contract owner. Your request, whether written or telephonic, will be effective on the date we receive it at our Home Office, provided we receive it before 4:00 p.m. Eastern time. If we are not provided with tax withholding information, we will withhold taxes from the amount withdrawn. We reserve the right to change the terms of telephonic withdrawals, including our limit, at any time. When you request a partial withdrawal, we will pay you the amount requested and subtract the amount requested plus any applicable Withdrawal Charge from your Cash Value. We may waive the Withdrawal Charge on some or all of your partial withdrawal. The determination of the Withdrawal Charge is described on page [30]. You may specify how much of your partial withdrawal you wish taken from each Subaccount. The amount requested from a specific Subaccount may not exceed the value of that option less any applicable Withdrawal Charge. If you do not specify the option from which you wish to take your partial withdrawal, we will take it pro rata from the Subaccounts. You may take an unlimited number of partial withdrawals each Policy Year. The minimum withdrawal amount is $100 or the amount that remains in the Subaccount if less. The minimum balance in the Subaccount after the withdrawal is $500 unless the total Subaccount Value is withdrawn. If a partial withdrawal would reduce your Policy's Net Surrender Value below $5,000, we will treat your request as a request to surrender your Policy. 23 29 When you take a partial withdrawal, your Specified Amount will decrease in proportion to the resulting reduction in Cash Value. We will notify you of the new Specified Amount. We will not permit a partial withdrawal that would reduce the Specified Amount below the minimum specified in your Policy. Partial withdrawals generally will be subject to income tax and may be subject to a ten percent federal penalty tax. The tax consequences of partial withdrawals are discussed in "Federal Tax Considerations" beginning on page [33]. SYSTEMATIC WITHDRAWALS You may enroll in our systematic withdrawal program by sending a completed enrollment form to our Home Office at the address shown on the first page of this Prospectus. You may choose between payout schedules of monthly, quarterly, semiannually or annually. You may specify the amount of the withdrawal, the day of the month for each scheduled payment, and the Subaccount(s) from which the withdrawal will be taken. You may start, stop, increase, or decrease payment at any time. The minimum withdrawal amount is $100. We will treat systematic withdrawals in the same way as other partial withdrawals in applying the Withdrawal Charge. In our discretion we may stop paying systematic withdrawals if your Cash Value falls below our current minimum. We reserve the right to modify or suspend the systematic withdrawal program. In our discretion, any change may apply to existing systematic plans. Write us at the address shown on the first page of this Prospectus or call us at (800) 621-5001 for more information about our Systematic Withdrawal Program. SETTLEMENT OPTION PAYMENTS GENERAL. We will pay the Surrender Value or Death Benefit proceeds under the Policy in a lump sum or under one of the settlement options that we then offer. The option selected must result in a payment that is at least equal to our minimum payment, according to our rules, 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-annually, or annually so that the payment is at least equal to the minimum payment, or to make payment in one lump sum. The amount of the payments under a settlement option are based on: - the settlement option table specified in the Contract; - the selected settlement option; and - the investment performance of the selected Subaccount(s) (if variable payments are chosen). Under each settlement option, you and/or the payee may choose fixed payments or variable payments or a combination of the two. If fixed payments are chosen, the payee receives a fixed amount each month determined in accordance with the settlement option you have chosen. If variable payments are chosen, the payee receives the value of a fixed number of Annuity Units each month. An Annuity Unit's value reflects the investment performance of the Subaccount(s) selected by the payee. The amount of each payment varies accordingly. If you do not provide instructions, we will initially apply your Separate Account Value to variable payments and any Fixed Account Value to fixed payments. The payee may change the Subaccounts or the relative weighting of the Subaccounts on which variable payments are based, or increase the portion of each payment that is a fixed payment, subject to certain limitations, as described below under "Settlement Option Payments--Transfers". BEFORE CHOOSING VARIABLE PAYMENTS, YOU SHOULD CONSIDER WHETHER THE ALLOCATION OF PROCEEDS AMONG THE SUB-ACCOUNTS FOR YOUR PERIODIC PAYMENTS IS THE ALTERNATIVE BEST SUITED TO YOUR NEEDS. You may request a settlement option by writing to us at our Home Office at the address given on the first page of this Prospectus before the death of the Insured. If you change the Beneficiary, the existing choice of settlement option will become invalid and you may either notify us that you wish to continue the pre-existing choice of settlement option or select a new one. We will issue a supplementary contract reflecting the terms of the settlement option chosen. If payment is made as a Death Benefit distribution, the effective date of the supplementary agreement will be the date of death. Otherwise, you may choose the effective date. SETTLEMENT OPTIONS. The following settlement options are available under the Policy: OPTION 1--FIXED INSTALLMENT ANNUITY. We will make monthly payments for a fixed number of installments. Payments must be made for at least 5 years, but not more than 30 years. OPTION 2--LIFE ANNUITY. We will make monthly payments while the payee is alive. It is possible for the payee to receive only one payment if the payee dies before the second payment is due. 24 30 OPTION 3--LIFE ANNUITY WITH INSTALLMENTS GUARANTEED. We will make monthly payments for a guaranteed period and thereafter while the payee is alive. The guaranteed period must be selected at the time the annuity option is chosen. The guaranteed periods available are 5, 10, 15, and 20 years. OPTION 4--JOINT AND SURVIVOR ANNUITY. We will pay the full monthly income while both payees are alive. Upon the death of either payee, we will continue to pay the surviving payee a percentage of the original monthly payment. The percentage payable to the surviving payee must be selected at the time the annuity option is chosen. The percentages available are 50%, 66 2/3%, 75%, and 100%. It is possible for the payees to receive only one payment if they both die before the second payment is due. OTHER OPTIONS. We may make other settlement annuity options available. Payments are also available on a quarterly, semi-annual or annual basis. When the payee dies under Options 1 and 3, we will pay the commuted value of any unpaid installments in a lump sum to the estate of the payee, unless the supplementary agreement provides otherwise. We will determine the commuted amount based upon an interest rate of not less than 2.5%. You may not withdraw Cash Value once we begin making payments to you under any settlement option involving payments to the payee for life or any combination of payments for life and a minimum guaranteed payment period, such as options 2, 3, and 4. AMOUNT OF PAYMENT. The amount applied to a settlement option will equal the Cash Value on the first day preceding the date when the first annuity payment is due, less any applicable Withdrawal Charge and Records Maintenance Charge. The remainder will be used to determine the fixed or variable payment in accordance with the appropriate Settlement Option Table. The amount of each fixed payment is determined by multiplying the amount applied to the settlement option by the appropriate settlement option rate. We will use a rate at least as high as the rate shown in the appropriate Settlement Option Table. These tables show the monthly payment for each $1,000 of Cash Value allocated to fixed payments. The amount of each subsequent fixed payment does not change regardless of investment, mortality or expense experience. The amount of the first variable payment also is determined from the Settlement Option Tables, based on the Cash Value allocated to variable payments. Subsequent variable payments are determined by multiplying the number of Annuity Units in each Subaccount chosen by the payee times the Annuity Unit Value of each such Subaccount at the Valuation Period before each variable payment is due. The first variable payment is divided by the Annuity Unit Value as of the Annuity Date to establish the number of Annuity Units representing each variable payment. We determine the number of Annuity Units separately for each Subaccount on which variable payments are based. This number does not change, unless the payee makes a transfer as described in "Settlement Option Payments--Transfers" below. The guaranteed monthly payments shown in the Settlement Option Tables are based on an interest rate of 2.50% per year and, where mortality is involved, the "1983 Table a", an individual mortality table developed by the Society of Actuaries projected using Projection Scale G. Interest under a settlement option begins to accrue on the effective date of the supplementary agreement. If the effective date determined as described above would be the 29th, 30th or 31st day of a month, the 28th day of that month will be deemed the Effective Date. TRANSFERS. While variable payments are being made under a settlement option, the payee may request, in writing, to change the Subaccounts or the relative weighting of the Subaccounts on which variable payments are based, or the relative proportions of variable and fixed payments. These changes may be effected by transferring Annuity Unit Value from one Subaccount to another or to fixed payments, or by making transfers from fixed payments to the Subaccounts. This type of transfer is subject to the following limitations: - The payee may make only one transfer during each twelve month period beginning on the date of the first settlement payment and each anniversary of that date. - We must receive the payee's written request at least 30 days before the effective date of the transfer. - Each transfer must consist of at least $1,000 of Annuity Unit Value or annuity reserve value. After the transfer, at least $1,000 of Annuity Unit Value or annuity reserve value must remain in the account from which the transfer was made, unless the entire amount is transferred. - After the transfer, the payee's variable payments may not be based on more than three Subaccounts. We will execute transfers using values as of the end of the Valuation Period preceding the effective date of the transfer. Transfers among the Subaccounts will be effected at the Annuity Unit Value of the relevant Subaccounts. Transfers from fixed to variable payments and from variable to fixed payments will be based in part 25 31 on the present value of the remaining payments under the chosen option, and will reflect the differences in the interest rates used to calculate fixed and variable payments. The method for calculating these transfers is described in more detail in the Policy. We may suspend, change or terminate the transfer privilege at any time. ANNUITY UNIT VALUE. Annuity Unit Value is determined independently for each Subaccount. Annuity Unit Value for any Valuation Period is: - Annuity Unit Value for the immediately preceding Valuation Period; times - the net investment factor for the current Valuation Period; times - an interest factor of .99993235 per calendar day of the current Valuation Period in order to offset the effect of the assumed rate of 2.5% per year used in the Policy's settlement option tables. The net investment factor for a Subaccount for any Valuation Period is: (1) the sum of (a) the net asset value per share of the corresponding Portfolio at the end of the current Valuation Period plus (b) the per share amount of any dividend or capital gains distribution by that Portfolio, if the "ex-dividend" date occurs in that Valuation Period; plus or minus (c) a credit or charge for any taxes reserved for the current Valuation Period which we determine to have resulted from the investment operations of the Subaccount; divided by (2) is the net asset value per share of the corresponding Portfolio at the end of the last prior Valuation Period. A 2.5% per annum rate of investment earnings is assumed by the Policy's Settlement Option tables. Under the formula for determining Annuity Unit Value, if the actual net investment earnings rate on the selected Subaccounts exceeds 2.5% per annum, variable payments increase accordingly. Conversely, if the actual earnings rate is less than 2.5% per annum, variable payments decrease. ANNUITY RESERVE VALUE. Annuity reserve value is used in calculating transfers from variable payments to fixed payments. Annuity reserve value equals: (1) the number of annuity units transferred from a Subaccount; times (2) the Annuity Unit Value for that Subaccount; times (3) the present value of $1.00 per payment period using the attained age of the payee(s) and any remaining unpaid guaranteed payments at the time of the transfer. NO LAPSE GUARANTEE AND GRACE PERIOD Under our No Lapse Guarantee, we guarantee that your Policy will remain in force regardless of changes in the Net Surrender Value, provided you have no outstanding Policy Debt. If the Net Surrender Value of your Policy is less than the Monthly Deduction for the next month, your Policy will enter the Grace Period. The Grace Period lasts 61 days. If the Insured dies during the Grace Period, the Death Benefit will be the amount determined as described in "Death Benefit" on pages [21-22], less any due and unpaid Monthly Deduction or other charge. During the Grace Period, you may pay additional Premium or loan repayment without evidence of insurability to keep your Policy in force. Your payment must equal at least three Monthly Deductions. No payment is required, however. This Grace Period will begin on the day we mail notice of the Grace Period to your last known address. If the No Lapse Guarantee is in effect under your Policy and you do not pay sufficient additional Premium or loan repayment, your Policy will remain in force, but the amount paid upon death of the Insured after the Grace Period will be limited to the return of Premium paid (less any prior withdrawals of Premium). You may restore the Specified Amount, however, by complying with the reinstatement provisions. The No Lapse Guarantee applies to your Contract unless: (a) you paid 90% of the Guideline Single Premium for your Policy or (b) your Policy has outstanding Policy Debt. If the No Lapse Guarantee does not apply to your Policy and the Net Surrender Value of your Policy is less than the Monthly Deduction for the next month, your Policy also will enter the Grace Period, as described above. However, if you do not make the required payment, your coverage will terminate at the end of the Grace Period. You may reinstate your coverage by complying with the reinstatement provisions. 26 32 TERMINATION The Policy will terminate and life insurance coverage will end when one of the following events first occurs: (a) you surrender your Policy; (b) the Insured dies or, for Survivorship Policies, the Surviving Insured dies; (c) the Policy matures; or (d) the Grace Period ends and there is Policy Debt outstanding. MATURITY BENEFIT AND EXTENDED MATURITY In certain states, if the Insured is still living and your Policy is in force on the Maturity Date, we will pay you a Maturity Benefit. The Maturity Benefit will equal the Net Surrender Value on the Maturity Date. The Maturity Date is the Policy Anniversary after the Insured's 100th birthday. In states where approved, the Extended Maturity Rider will be issued with all Policies at no extra Premium. This rider maintains life insurance benefits beyond the Maturity Date. The Death Benefit after the Maturity Date is the greater of the Specified Amount or the Cash Value. After the Maturity Date, we will not charge the cost of insurance charge or the mortality and expense risk charge. We will, however, continue to charge other charges under your Policy. This rider is effective only if the Net Surrender Value at age 100 equals at least 30% of the initial Specified Amount. Otherwise, notwithstanding this Rider, the Policy will terminate on the Maturity Date. All other riders still active end at age 100. The tax treatment of the Maturity Benefit and the Maturity Extension rider is discussed in "Treatment of Maturity Benefits and Extension of Maturity Date" on page 36. REINSTATEMENT If your coverage has been reduced pursuant to our No Lapse Guarantee or has lapsed due to insufficient Cash Value (see "No Lapse Guarantee and Grace Period" on page 26 above, you may reinstate coverage by complying with the conditions described below. After reinstatement, your Policy will be in force and the minimum Death Benefit will equal the Specified Amount in effect before your coverage was reduced or lapsed. To reinstate your Policy, you must apply to us within three years of the end of the most recent Grace Period and meet the following conditions: (1) Provide evidence of insurability satisfactory to us; (2) Pay the unpaid Monthly Deductions due during the expired Grace Period; (3) Pay at least sufficient additional Premium to keep your Policy in force for three months; and (4) Pay or reinstate any Policy Debt that existed at the date of lapse. The effective date of reinstatement of a Policy will be the Deduction Day that coincides with or next follows the date on which we approve your application for reinstatement. You may not reinstate a Policy that has been surrendered. Under Survivorship Policies, if one of the Lives Insured dies during the lapse, upon payment of the reinstatement Premium the Policy will be reissued as a single life permanent policy. The suicide and incontestability provisions will apply from the effective date of reinstatement. CANCELLATION (FREE-LOOK PERIOD) In many states, you may cancel your Policy by returning it to us within ten days after you receive it. In some states, however, this free look period may be longer, as provided by state law. If you return your Policy, the Policy terminates and we will pay you your Cash Value or, in some states, an amount equal to your Premium, (less any Policy Debt). We will pay the refund within seven days of receiving your request. No Withdrawal Charge is imposed upon return of a Policy within the free look period. This free look right may vary in certain states in order to comply with the requirements of state insurance laws and regulations. Accordingly, you should refer to your Policy for specific information about your circumstances. 27 33 POSTPONEMENT OF PAYMENTS We may defer for up to fifteen days the payment of any amount attributable to a Premium paid by check to allow the check a reasonable time to clear. We ordinarily will pay any amount attributable to Separate Account Value within seven days, except: (1) whenever the New York Stock Exchange ("NYSE") is closed (other than customary weekend and holiday closings); (2) when trading on the NYSE is restricted or an emergency exists, as determined by the SEC, so that disposal of the Separate Account's investments or determination of the value of its net assets is not reasonable practicable; or (3) at any other time permitted by the SEC for your protection. CHARGES AND DEDUCTIONS We assess charges and deductions under the Policies against the Subaccounts and the Cash Value. Additional deductions and expenses are paid out of the Portfolios' assets, as described in the Prospectuses of the Portfolios. SEPARATE ACCOUNT CHARGES MORTALITY AND EXPENSE RISK CHARGE. On each Valuation Date, we will deduct a charge from each Subaccount at an annual rate of 0.90% of average daily net assets for mortality and expense risks we assume. The mortality risk assumed in relation to the Policy includes the risk that the cost of insurance charges specified in the Policy will be insufficient to meet claims and the risks under the No Lapse Guarantee. We also assume a risk that, on the Deduction Day preceding the death of an Insured, the Death Benefit will exceed the amount on which the cost of insurance charges were based. The expense risk assumed is that expenses incurred in issuing and administering the Policies will exceed the Administration Charges set in the Policy. RESERVE FOR TAXES. We currently are not maintaining a provision for taxes attributable to the operations of the Separate Account (as opposed to the federal tax related to the receipt of Premiums under the Policies). In the future, however, we may make such a charge. Charges for other taxes, if any, attributable to the Separate Account or to this class of Policies may also be made. MONTHLY DEDUCTION On the Effective Date and on each monthly Deduction Day we will take a Monthly Deduction from your Cash Value. The Monthly Deduction equals the sum of the following: (1) The monthly cost of insurance charge for the Policy; plus (2) The monthly charge for any riders; plus (3) The Administration Charge; plus (4) The Tax Charge. On each Policy Anniversary, we also will deduct the Records Maintenance Charge, if your Policy's Cash Value was less than $50,000 on the previous Policy Anniversary. COST OF INSURANCE CHARGE. The cost of insurance charge is intended to pay for the cost of providing life insurance coverage for the Insured(s). The current cost of insurance charge differs based on whether you paid 90% or 100% of the Guideline Single Premium at issue. We guarantee that this charge will not exceed the maximum cost of insurance charge determined on the basis of the rates shown in the mortality table guaranteed in the Policy. If your initial Premium exceeds $500,000, your cost of insurance charge may be lower. The current monthly cost of insurance charge is the lesser of: (a) the applicable current asset-based cost of insurance rate times the Cash Value on the Deduction Day; or (b) the applicable guaranteed cost of insurance rate multiplied by the net amount at risk on the Deduction Day. 28 34 If your initial Premium is no greater than $500,000 and you paid 100% of the Guideline Single Premium, our current asset-based cost of insurance rate for the Single Life Policies for the Standard Rating Class (NS) is 0.55% annually of Cash Value for Policy Years 1-10, and 0.25% annually of Cash Value thereafter. Our current asset-based cost of insurance rate for Second to Die Policies, when both Insureds are in the Standard Rating Class (NS), is 0.45% annually of Cash Value for Policy Years 1-10, and 0.20% annually of Cash Value thereafter. If your initial Premium is greater than $500,000 and you paid 100% of the Guideline Single Premium, our current asset-based cost of insurance rate for the Single Life Policies for the Standard Rating Class (NS) is 0.25% annually of Cash Value for Policy Years 1-10, and 0.10% annually of Cash Value thereafter. Our current asset-based cost of insurance rate for Second to Die Policies, when both Insureds are in the Standard Rating Class (NS), is 0.20% annually of Cash Value for Policy Years 1-10, and 0.10% annually of Cash Value thereafter. If you paid 90% of the Guideline Single Premium, your current cost of insurance rates will be higher. In addition, rates for other classes may differ based on the type of Policy and the history of tobacco use of the Insured(s). Your guaranteed cost of insurance rates are set forth in the mortality tables in your Policy. The net amount at risk is (a)-(b), where: (a) is the Death Benefit on the first day of the Policy Month; and (b) the Cash Value on that day before the deduction of the Monthly Deduction for the Cost of Insurance. Because your Cash Value and the net amount for which we are at risk under your Policy may vary monthly, your cost of insurance charge is likely to differ each month. In general, under these formulas, when your current monthly cost of insurance charge is determined using the asset-based rate, an increase in your Cash Value increases your current monthly cost of insurance charge, up to the guaranteed maximum cost of insurance charge determined as described above. Since that maximum charge is based on the net amount at risk, it declines as your Cash Value increases, unless an increase in Cash Value also would increase the Death Benefit under your Policy. Thus, if the asset-based charge would be higher than the guaranteed maximum charge, further increases in your Cash Value may reduce your current cost of insurance charge. The cost of insurance charge covers our anticipated mortality costs for standard and substandard risks. We determine the current cost of insurance rates based on our expectations as to our future mortality experience and other factors. We guarantee, however, that we will never charge you a cost of insurance charge higher than the amount determined using the maximum guaranteed cost of insurance rates shown in the Policy. We base our cost of insurance rates on the sex, issue age, Policy Year, rating class, and history of tobacco use of the Insured. However, we issue unisex policies in Montana. Our cost of insurance rates are based on the 1980 Commissioners Standard Ordinary ("1980 CSO") Mortality Table based on the Insured's sex, age last birthday, and history of tobacco use. Our cost of insurance rates for unisex Policies will never exceed a maximum based on the 1980 CSO Table B assuming a blend of 80% male and 20% female lives. TAX CHARGE. For the first ten Policy Years, on each Deduction Day, we charge a Tax Charge equal to an annual rate of 0.40% of the average monthly Cash Value. The Tax Charge covers a portion of our state premium tax expenses and certain Federal income tax liability incurred as a result of the receipt of Premium. We expect to recover total premium tax expenses over the life of the Policies from the aggregate Tax Charges and the unamortized state premium tax charge portion of the Withdrawal Charge. However, the amount of premium taxes differ from state to state and some states have no premium tax. Accordingly, the amount of these charges paid under your Policy may be more or less than the premium taxes that we actually pay with respect to your Policy. ADMINISTRATION CHARGE. On each Deduction Day we will deduct the Administration Charge from Cash Value. This charge will equal an annual rate of 0.35% of average monthly Cash Value for the first ten Policy Years and 0.25% thereafter. This charge is intended to compensate us for certain administrative expenses related to the maintenance of the Policies, accounting and recordkeeping, and provide a reporting to Policy owners. RECORDS MAINTENANCE CHARGE. We charge a Records Maintenance Charge of $30.00 per year on each Policy Anniversary. If you surrender your Policy during a Policy Year, we will deduct the full Records Maintenance Charge from your surrender proceeds. The Records Maintenance Charge is intended to compensate us for administrative expenses such as salaries, postage, telephone, office equipment and periodic reports. We currently waive the Records Maintenance Charge on a Policy, if the Cash Value is at least $50,000 on the previous Policy Anniversary. 29 35 PORTFOLIO EXPENSES You indirectly bear the charges and expenses of the Portfolios whose shares are held by the Subaccounts to which you allocate your Cash Value. The Separate Account purchases shares of the Portfolios at net asset value. Each Portfolio's net asset value reflects investment advisory fees and administrative expenses already deducted from the Portfolio's assets. For a summary of current estimates of these charges and expenses, see pages [12-13] above. For more information concerning the investment advisory fees and other charges against the Portfolios, see the Prospectuses for the Portfolios, which are available upon request. We may receive compensation from the investment advisers or administrators of the Portfolios. Such compensation will be consistent with the services we provide or the cost savings resulting from the arrangement and therefore may differ between Portfolios. WITHDRAWAL CHARGE If you surrender your Policy during the first nine Policy Years, we may subtract a Withdrawal Charge from the proceeds. The Withdrawal Charge will be calculated at the rate shown below. If you surrender your Policy, the Withdrawal Charge will equal a percentage of your initial Premium net of all previous withdrawal amounts on which you paid a Withdrawal Charge. The Withdrawal Charge consists of two components: a surrender charge and an unamortized state premium tax charge. The rate used to determine the Withdrawal Charge depends on the year the withdrawal is made. The Withdrawal Charge declines to zero percent after the ninth Policy Year. The Withdrawal Charge is assessed at the following rates:
COMPLETE UNAMORTIZED POLICY YEARS PREMIUM TAX TOTAL WITHDRAWAL ELAPSED SINCE ISSUE SURRENDER CHARGE CHARGE CHARGE ------------------- ---------------- ----------- ---------------- 1 7.75% 2.25% 10.00% 2 7.75% 2.00% 9.75% 3 7.50% 1.75% 9.25% 4 6.50% 1.50% 8.00% 5 5.75% 1.25% 7.00% 6 5.00% 1.00% 6.00% 7 4.25% .75% 5.00% 8 3.50% .50% 4.00% 9 2.75% .25% 3.00% 9+ 0% 0.00% 0.00%
We may also charge a Withdrawal Charge on partial withdrawals. The Withdrawal Charge will apply to any partial withdrawal in a given Policy Year in excess of the free withdrawal amount described below. Additional Premiums do not increase the amount of Withdrawal Charge you may be required to pay. Only your initial Premium is used in our formula for calculating Withdrawal Charges. The Withdrawal Charge is imposed to cover a portion of our actual premium tax expenses and sales expenses, which include agents' sales commissions and other sales and distribution expenses. The Unamortized Premium Tax Charge, together with a portion of the monthly Tax Charge, is intended to recover our state premium tax expenses. We also expect to recover total sales expenses of the Policies over the life of the Policies. However, to the extent distribution costs are not recovered by the Withdrawal Charge, we may make up any shortfall from the assets of our General Account, which includes funds derived from the Mortality and Expense Risk Charge and other fees and charges under the Policies. FREE WITHDRAWAL AMOUNT AND WAIVER OF WITHDRAWAL CHARGE The free withdrawal amount in a Policy Year equals the greater of: (a) 100% of Policy earnings not previously withdrawn; or (b) 10% of the Cash Value, less any prior free withdrawals since the beginning of that Policy Year. NURSING CARE WAIVER OF WITHDRAWAL CHARGE. We will waive the Withdrawal Charge if the Insured is confined to a skilled health care facility for at least 30 consecutive days. We also will waive the Withdrawal 30 36 Charge after you have been released from the facility, if your request is made within 30 days of release. This waiver is described in more detail in the Policy. DISABILITY WAIVER. We will waive the Withdrawal Charge if the Insured becomes disabled after the Policy is issued and before attaining age 65 according to the following Social Security Administration definition: Inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. This waiver is described in more detail in the Policy. TRANSFER FEE The Policy permits us to charge a transfer fee of $25 per transfer, excluding transfers under our Automatic Dollar Cost Averaging and Automatic Asset Rebalancing Programs, on each transfer after the first twelve transfers in each Policy Year. We currently do not charge a transfer fee on any transfer. We reserve the right to begin to charge the transfer fee in the future. 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 Policy owners, sales to employees or clients of members of the Kemper 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. GENERAL POLICY PROVISIONS REPORTS TO OWNERS We will maintain all records relating to the Separate Account and the Subaccounts. At least annually we will send you a report which will include information such as Premiums received, interest credited, 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. If you ask us, we will send you an additional report at any time. We may charge you up to $25 for this additional report. We will tell you the current charge before we send you the report. In addition, we will send you the financial statements of the Portfolios and other reports as specified in the Investment Company Act of 1940, as amended. We also will mail you confirmation notices or other appropriate notices of Policy transactions quarterly or more frequently within the time periods specified by law. Please give us prompt written notice of any address change. Please read your statements and confirmations carefully and verify their accuracy and contact us promptly with any question. LIMIT ON RIGHT TO CONTEST In the absence of fraud, we may not contest the insurance coverage under the Policy after the Policy has been in force for two years after the Effective Date while the Insured is alive. The two year incontestability period may vary in certain states to comply with the requirements of state insurance laws and regulations. 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. In issuing a Policy, we rely on your application. Your statements in that application, in the absence of fraud, are considered representations and not warranties. In the absence of fraud, we will not use any statement made in connection with the Policy application to void the Policy or to deny a claim, unless that statement is a part of the application or an amendment thereto. 31 37 SUICIDE If the Insured under a Single Life Policy dies by suicide, while sane or insane, within two years from the Effective Date, the Death Benefit proceeds will be limited to the Premiums paid less any partial withdrawals and Policy Debt. If the Insured dies by suicide, while sane or insane, within two years of any reinstatement, our total liability with respect to such reinstatement will be the cost of insurance. If the first death under a Survivorship Policy is by suicide, within two years of the Effective Date or date of reinstatement, whether the Insured was sane or insane, we will reissue the Policy. The new Policy on the survivor will be a single life permanent Policy which is available at the time of reissue. The suicide provision for the new Policy will be effective as of the original Effective Date. If the second death is by suicide, within two years from the Effective Date, whether the Insured is sane or insane, we will pay only the Premiums paid less any partial withdrawals and Policy Debt. If the second death occurs within two years after the date of reinstatement, our total liability with respect to such reinstatement will be the cost of insurance since the date of reinstatement. MISSTATEMENT AS TO AGE AND SEX If the age or sex of the Insured is incorrectly stated in the application, the Death Benefit and all Policy values will be adjusted based on what the initial Premium would have purchased using the correct age and/or sex. BENEFICIARY You name the original Beneficiary(ies) and Contingent Beneficiary(ies) in the application for the Policy. You may change the Beneficiary or Contingent Beneficiary at any time while the Insured is alive, except irrevocable Beneficiaries and irrevocable Contingent Beneficiaries may not be changed without their consent. You must request a change of Beneficiary in writing. We will provide a form to be signed and filed with us. Your request for a change in Beneficiary or Contingent Beneficiary will take effect as of the date you signed the form after we acknowledge receipt in writing. Until we acknowledge receipt of your change instructions, we are entitled to rely on your most recent instructions in our files. Accordingly, we are not liable for making a payment to the person shown in our files as the Beneficiary or treating that person in any other respect as the Beneficiary, even if instructions that we subsequently receive from you seek to change your Beneficiaries effective as of a date before we made the payment or took the action in question. If you name more than one Beneficiary, we will divide the Death Benefit among your Beneficiaries according to your most recent written instructions. If you have not given us written instructions, we will pay the Death Benefit in equal shares to the Beneficiaries. If one of the Beneficiaries dies before You, we will divide the Death Benefit among the surviving Beneficiaries. If no Beneficiary is living, the Contingent Beneficiary will be the Beneficiary. The interest of any revocable Beneficiary is subject to the interest of any assignee. If no Beneficiary or Contingent Beneficiary is living, the Beneficiary is the Owner or the Owner's estate. ASSIGNMENT While the Insured is alive, you may assign your Policy as collateral security. You must notify us in writing if you assign the Policy. Until we receive notice from You, we are not liable for any action we may take or payments we may make that may be contrary to the terms of your assignment. We are not responsible for the validity of an assignment. Your rights and the rights of the Beneficiary may be affected by an assignment. An assignment may result in income tax and a ten percent federal penalty tax. You should consult your tax adviser before assigning your Policy. CREDITOR'S CLAIMS To the extent permitted by law, no benefits payable under this Policy will be subject to the claims of your or the Beneficiary's creditors. DIVIDENDS We will not pay any dividend under the Policy. 32 38 NOTICE AND ELECTIONS To be effective, all notices and elections under the Policy must be in writing, signed by You, and received by us at our Home Office. Certain exceptions may apply. Unless otherwise provided in the Policy, all notices, requests and elections will be effective when received at our Home Office complete with all necessary information. MODIFICATION We reserve the right to modify the Policy without your express consent, in the circumstances described in this Prospectus or as necessary to conform to applicable law or regulation or any ruling issued by a governmental agency. The provisions of the Policy will be construed so as to comply with the requirements of Section 7702 of the Tax Code. SURVIVORSHIP POLICIES We offer Policies on a single life and "last survivor" basis. The Survivorship Policy operates almost identically to the Single Life Policy. The primary difference is that the Survivorship Policy has two Insureds and the Death Benefit is paid only upon the death of the last surviving Insured. Other significant differences are: (1) the cost of insurance charge differs because we base it on the anticipated mortality of two Insureds and we do not pay the Death Benefit until both Insureds have died; (2) for a Survivorship Policy to qualify for simplified underwriting, both Insureds must meet our standards; (3) under a Survivorship Policy, provisions regarding incontestability, suicide, and misstatements of age or sex apply to each Insured; and (4) the Accelerated Death Benefit is only available upon the Terminal Illness of the surviving Insured, as this term is defined in the Policy. FEDERAL TAX CONSIDERATIONS NOTE: The following discussion is based upon our understanding of current federal income tax law applicable to life insurance policies in general. We cannot predict the probability that any changes in those laws will be made. Also, we do not guarantee the tax status of the Policies. You bear the complete risk that the Policies may not be treated as "life insurance policies" under federal income tax laws. In addition, this discussion does not include a detailed description of the federal income tax consequences of the purchase of these Policies or any discussion of special tax rules that may apply to certain purchase situations. We also have not tried to consider any other possibly applicable state or other tax laws, for example, the estate tax consequences of the Policies. You should seek tax advice concerning the effect on your personal tax liability of the transactions permitted under the Policy, as well as any other questions you may have concerning the tax status of the Policy or the possibility of changes in the tax law. TAXATION OF KILICO AND THE SEPARATE ACCOUNT KILICO is taxed as a life insurance company under Subchapter L of the Tax Code. The operations of the Separate Account are taxed as part of the operations of KILICO. Investment income and realized capital gains are not taxed to the extent that they are applied under the Policies. Accordingly, we do not anticipate that KILICO will incur any federal income tax liability attributable to the operation of the Separate Account (as opposed to the federal tax related to the receipt of Premiums under the Policies). Therefore, we are not making any charge or provision for federal income taxes. However, if the tax treatment of the Separate Account is changed, we may charge the Separate Account for its share of the resulting federal income tax. In several states we may incur state and local taxes on the operations of the Separate Account. We currently are not making any charge or provision for them against the Separate Account. We do, however, use part of the Policy charges to offset these taxes. If these taxes should be increased, we may make a charge or provision for them against the Subaccounts. If we do so, the investment results of the Subaccounts will be reduced. 33 39 TAX STATUS OF THE POLICY The Policy is structured to satisfy the definition of a life insurance policy under the Tax Code. As a result, the Death Benefit ordinarily will be fully excluded from the gross income of the Beneficiary. The Death Benefit will be included in your gross estate for federal estate tax purposes if the proceeds are payable to your estate. The Death Benefit will also be included in your estate, if the Beneficiary is not your estate but you retained incidents of ownership in the Policy. Examples of incidents of ownership include the right to change Beneficiaries, to assign the Policy or revoke an assignment, and to pledge the Policy or obtain a Policy Loan. If you own and are the Insured under a Policy and if you transfer all incidents of ownership in the Policy more than three years before your death, the Death Benefit will not be included in your gross estate. State and local estate and inheritance tax consequences may also apply. In addition, certain transfers of the Policy or Death Benefit, either during life or at death, to individuals (or trusts for the benefit of individuals) two or more generations below that of the transferor may be subject to the federal generation-skipping transfer tax. In addition, you may use the Policy in various arrangements, including non-qualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans and others. The tax consequences of such plans may vary depending on the particular facts and circumstances of each individual arrangement. Therefore, if you are contemplating the use of a Policy in any arrangement the value of which depends in part on its tax consequences, you should be sure to consult a qualified tax adviser regarding the tax treatment of the proposed arrangement. DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Tax Code requires that the underlying assets of variable life insurance policies be diversified. The Tax Code provides that a variable life insurance policy will not be treated as a life insurance policy for federal income tax purposes for any period and any subsequent period for which the investments are not adequately diversified. If the Policy were disqualified for this reason, you would lose the tax deferral advantages of the Policy and would be subject to current federal income taxes on all earnings allocable to the Policy. The United States Treasury Department (the "Treasury Department") also has issued regulations that establish diversification requirements for the investment accounts underlying variable policies such as the Policies. These regulations amplify the diversification requirements set forth in the Tax Code and provide an alternative diversification test to the provision described above. These diversification standards are applied to each Subaccount by looking to the investments of the Portfolio underlying the Subaccount. One of our criteria in selecting the Portfolios is that their investment managers intend to manage them in compliance with these diversification requirements. OWNER CONTROL. In certain circumstances, variable life insurance owners will be considered the Owners, for tax purposes, of separate account assets underlying their Policies. In those circumstances, the Owners could be subject to taxation on the income and gains from the separate account assets. In published rulings, the Internal Revenue Service has stated that a variable insurance Owner will be considered the owner of separate account assets, if the Owner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. When the diversification regulations were issued, the Treasury Department announced that in the future, it would provide guidance on the extent to which variable Owners could direct their investments among Subaccounts without being treated as Owners of the underlying assets of the Separate Account. As of the date of this Prospectus, no such guidance has been issued. We cannot predict when or whether the Treasury Department will issue that guidance or what position the Treasury Department will take. In addition, although regulations are generally issued with prospective effect, it is possible that regulations may be issued with retroactive effect. The ownership rights under the Policy are similar in many respects to those described in IRS rulings in which the owners were not deemed to own the separate account assets. In some respects, however, they differ. For example, under the Policy you have many more investment options to choose from than were available under the policies involved in the published rulings, and you may be able to transfer Cash Value among the investment options more frequently than in the published rulings. Because of these differences, it is possible that you could be treated as the owner, for tax purposes, of the Portfolio shares underlying your Policy and therefore subject to taxation on the income and gains on those shares. Moreover, it is possible that the Treasury Department's position, when announced, may adversely affect the tax treatment of existing Policies. We therefore reserve the right to modify the Policy as necessary to attempt to prevent you from being considered the owner for tax purposes of the underlying assets. The remainder of this discussion assumes that the Policy will be treated as a life insurance policy for federal tax purposes. 34 40 TAX TREATMENT OF LIFE INSURANCE DEATH BENEFIT PROCEEDS In general, the amount of the Death Benefit payable under a Policy is excludable from gross income under the Tax Code. Certain transfers of the Policy, however, may result in a portion of the Death Benefit being taxable. If the Death Benefit is not received in a lump sum and is, instead, applied under one of the settlement options, payments generally will be prorated between amounts attributable to the Death Benefit, which will be excludable from the Beneficiary's income, and amounts attributable to interest (occurring after the insured's death), which will be includable in the beneficiary's income. ACCELERATED DEATH BENEFIT. In general, the tax treatment of an Accelerated Death Benefit is the same as the treatment of Death Benefits, as described above. TAX DEFERRAL DURING ACCUMULATION PERIOD Under existing provisions of the Tax Code, except as described below, any increase in your Cash Value is generally not taxable to you unless you receive or are deemed to receive amounts from the Policy before the Insured dies. If you surrender your Policy, the Cash Value (less any Annual Records Maintenance Charge paid upon surrender) will be includable in your income to the extent the amount received exceeds the "investment in the policy." The "investment in the policy" generally is the total Premiums and other consideration paid for the Policy, less the aggregate amount received under the Policy previously to the extent such amounts received were excludable from gross income. Whether partial withdrawals (or other amounts deemed to be distributed) from the Policy constitute income depends, in part, upon whether the Policy is considered a "modified endowment contract" ("MEC") for federal income tax purposes. POLICIES WHICH ARE MECS CHARACTERIZATION OF A POLICY AS A MEC. In general, this Policy will constitute a MEC unless (1) it was received in exchange for another life insurance policy which was not a MEC, (2) no Premiums or other consideration (other than the exchanged policy) are paid into the Policy during the first 7 Policy Years, and (3) there is no withdrawal or reduction in the Death Benefit during the first 7 Policy Years. In addition, even if the Policy initially is not a MEC, it may, in certain circumstances, become a MEC if there is a later increase in benefits or any other "material change" of the Policy within the meaning of the tax law. TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES UNDER MECS. Because your Policy is a MEC, withdrawals from your Policy will be treated first as withdrawals of income and then as a recovery of Premiums. Thus, you may realize taxable income upon a withdrawal if the Cash Value exceeds the investment in the Policy. You may also realize taxable income when you take a Policy Loan, because any loan (including unpaid loan interest) under the Policy will be treated as a withdrawal for tax purposes. In addition, if you assign or pledge any portion of the value of your Policy (or agree to assign or pledge any portion), the assigned or pledged portion of your Cash Value will be treated as a withdrawal for tax purposes. Before assigning, pledging, or requesting a loan under a Policy which is a MEC, you should consult a qualified tax adviser. PENALTY TAX. Generally, withdrawals (or the amount of any deemed withdrawals) from a MEC are subject to a federal penalty tax equal to ten percent of the portion of the withdrawal that is includable in income, unless the withdrawals are made: (1) after you reach age 59 1/2, (2) because you have become disabled (as defined in the tax law), or (3) as substantially equal periodic payments over your life or life expectancy (or the joint lives or life expectancies of you and your beneficiary, as defined in the tax law). Certain other exceptions to the ten percent federal penalty tax may apply. Payments under our systematic withdrawal program possibly may not qualify for the exception from federal penalty tax for "substantially equal periodic payments" which is described above. Accordingly, this Policy may be inappropriate for Owners who expect to take substantially equal periodic payments prior to age 59 1/2. You should consult a qualified tax adviser before entering into a systematic withdrawal plan. AGGREGATION OF POLICIES. All life insurance policies which are MECs and which are purchased by the same person from us or any of our affiliates within the same calendar year will be aggregated and treated as one policy for purposes of determining the amount of a withdrawal (including a deemed withdrawal) that is includable in taxable income. POLICIES WHICH ARE NOT MECS TAX TREATMENT OF WITHDRAWALS GENERALLY. If your Policy is not a MEC, the amount of any withdrawal from the Policy will be treated first as a non-taxable recovery of premiums and then as income from the Policy. Thus, 35 41 only the portion of a withdrawal that exceeds the investment in the Policy immediately before the withdrawal will be includable in taxable income. TAX TREATMENT OF LOANS. If your Policy is not a MEC, a loan received under the Policy generally will be treated as indebtedness for tax purposes, rather than a withdrawal of Cash Value. As a result, you will not realize taxable income on any part of the loan as long as the Policy remains in force. If you surrender your Policy, however, any outstanding loan balance will be treated as an amount received by you as part of the Surrender Value. Accordingly, you may be subject to taxation on the loan amount at that time. Moreover, if any portion of your Policy Loan is a preferred loan, a portion of your Policy Loan may be includable in your taxable income. Generally, you may not deduct interest paid on loans under the Policy, even if you use the loan proceeds in your trade or business. SURVIVORSHIP POLICIES Although we believe that the Policy, when issued as a Survivorship Policy, meets the definition of life insurance policy under the Tax Code, the Tax Code does not directly address how it applies to Survivorship Policies. In the absence of final regulations or other guidance under the Tax Code regarding this form of Policy, there is necessarily some uncertainty whether a Survivorship Policy will meet the Tax Code's definition of a life insurance policy. If you are considering purchasing a Survivorship Policy, you should consult a qualified tax adviser. If the Owner is the last surviving Insured, the Death Benefit proceeds will generally be includable in the Owner's estate on his or her death for purposes of the federal estate tax. If the Owner dies and was not the last surviving Insured, the fair market value of the Policy may be included in the Owner's estate. In general, the Death Benefit proceeds are not included in the last surviving Insured's estate if he or she neither retained incidents of ownership at death nor had given up ownership within three years before death. TREATMENT OF MATURITY BENEFITS AND EXTENSION OF MATURITY DATE If your Policy does not have an Extended Maturity Rider, at the Maturity Date, we pay the Net Surrender Value to You. Generally, the excess of the Cash Value (less any applicable Records Maintenance Charge) over your investment in the Policy will be includable in your taxable income at that time. If your Policy has an Extended Maturity Rider, we believe the Policy will continue to qualify as life insurance under the Tax Code. However, there is some uncertainty regarding this treatment. It is possible, therefore, that you would be viewed as constructively receiving the Surrender Value in the year in which the Insured attains age 100 and would realize taxable income at that time, even if the Policy proceeds were not distributed at that time. ACTIONS TO ENSURE COMPLIANCE WITH THE TAX LAW We believe that the maximum amount of Premiums we intend to permit for the Policies will comply with the Tax Code definition of a life insurance policy. We will monitor the amount of your Premiums, and, if your total Premiums during a Policy Year exceed those permitted by the Tax Code, [we will refund the excess Premiums within 60 days of the end of the Policy Year and will pay interest and other earnings (which will be includable in taxable income) as required by law on the amount refunded.] We reserve the right to increase the Death Benefit (which may result in larger charges under a Policy) or to take any other action deemed necessary to ensure the compliance of the Policy with the federal tax definition of a life insurance contract. FEDERAL INCOME TAX WITHHOLDING We will withhold and remit to the federal government a part of the taxable portion of withdrawals made under a Policy, unless the Owner notifies us in writing at or before the time of the withdrawal that he or she chooses not to have withholding. As Owner, you will be responsible for the payment of any taxes and early distribution penalties that may be due on the amounts received under the Policy, whether or not you choose withholding. You may also be required to pay penalties under the estimated tax rules, if your withholding and estimated tax payments are insufficient to satisfy your total tax liability. TAX ADVICE This summary is not a complete discussion of the tax treatment of the Policy. You should seek tax advice from an attorney who specializes in tax issues. 36 42 DESCRIPTION OF KILICO AND THE SEPARATE ACCOUNT KILICO 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%) 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. KILICO also acts as a sponsor for [identify other separate accounts]. The officers and employees of KILICO are covered by a fidelity bond in the amount of $[ ]. OFFICERS AND DIRECTORS OF KILICO Our directors and officers are listed below, together with information as to their dates of election and principal business occupations during the past five or more years (if other than their present occupation). Where no dates are given, the person has held that position for at least the past five years.
NAME AND AGE POSITION WITH KILICO YEAR OF ELECTION OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS OR MORE -------------------- ----------------------------------------------------- John B. Scott (54) Chief Executive Officer, President and Director of Federal Chief Executive Officer since Kemper Life Assurance Company (FKLA) and Fidelity Life February 1992. President since Association (FLA) since 1988. Chief Executive Officer, November 1993. Director since 1992. President and Director of Zurich Life Insurance Company of America (ZLICA) and Zurich Direct, Inc. (ZD) since March 1996. 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. James C. Harkensee (40) 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.
37 43
NAME AND AGE POSITION WITH KILICO YEAR OF ELECTION OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS OR MORE -------------------- ----------------------------------------------------- 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. 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. Loren J. Alter (60) Director of FKLA, FLA and Scudder Kemper Investments, Inc. Director since January 1996. (SKI) since January 1996. Director of ZLICA since May 1979. Executive Vice President and Chief Financial Officer of Zurich U.S. since 1979. President, Chief Executive Officer and Director of Kemper since January 1996.
38 44
NAME AND AGE POSITION WITH KILICO YEAR OF ELECTION OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS OR MORE -------------------- ----------------------------------------------------- William H. Bolinder (55) Chairman of the Board and Director of FKLA and FLA since Chairman of the Board and Director January 1996. Chairman of the Board of ZLICA and ZD since since January 1996. 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.
The business address of each of the foregoing officers and directors is 1 Kemper Drive, Long Grove, Illinois 60049. SEPARATE ACCOUNT KILICO Variable Separate Account was established on January 22, 1987, as a separate investment account under the laws of Illinois. The Separate Account receives and invests Premiums under the Policy. The Separate Account is registered with the SEC as a unit investment trust under the Investment Company Act of 1940. The SEC does not supervise the management, investment practices or policies of the Separate Account or KILICO. Benefits provided under the Policies are our obligations. Although the assets in the Separate Account are our property, they are held separately from our other assets and are not chargeable with liabilities arising out of any other business we may conduct. Income, capital gains and capital losses, whether or not realized, from the assets allocated to the Separate Account are credited to or charged against the Separate Account without regard to the income, capital gains and capital losses arising out of any other business we may conduct. Thirty-one Subaccounts of the Separate Account are currently available. Each Subaccount invests exclusively in shares of one of the corresponding Portfolios. We may add or delete Subaccounts in the future. The Separate Account purchases and redeems shares from the Portfolios at net asset value. We redeem shares of the Portfolios as necessary to provide benefits, to deduct Policy charges and to transfer assets from one Subaccount to another as requested by Policy owners. All dividends and capital gains distributions received by the Separate Account from a Portfolio are reinvested in that Portfolio at net asset value and retained as assets of the corresponding Subaccount. SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS We hold the assets of the Separate Account. We keep those assets physically segregated and held separate and apart from our General Account assets. We maintain records of all purchases and redemptions of shares of the Portfolios. 39 45 STATE REGULATION OF KILICO We are subject to the laws of Illinois and regulated by the Illinois Division of Insurance. Every year we file an annual statement with the Division of Insurance covering our operations for the previous year and our financial condition as of the end of the year. We are inspected periodically by the Division of Insurance to verify our Policy liabilities and reserves. We also are examined periodically by the National Association of Insurance Commissioners. Our books and records are subject to review by the Division of Insurance at all times. We are also subject to regulation under the insurance laws of every jurisdiction in which we operate. YEAR 2000 MATTERS 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 systems will be compliant for the year 2000. Such steps have included the replacement of older systems with new systems which 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 ensured 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 $1.3 million in 1998. We anticipate that it will cost an additional $662,000 to bring all remaining systems into compliance. Our policy administration systems have been completely renovated to be year 2000 compliant and are currently running in a test environment. Approximately 75 percent of our ancillary systems confirmed to be year 2000 compliant were in production at December 31, 1998. We anticipate that all such systems will be in production at April 30, 1999 or sooner. 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 requiring all other entities with which we electronically interact, including suppliers and other financial services institutions, to attest to us in writing that their systems 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. These contingency plans are scheduled for completion in the third quarter of 1999. 40 46 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 Securities Exchange Act of 1934 (the "1934 Act"), and is a member of the National Association of Securities Dealers, Inc. The Policies described in this Prospectus are sold by registered representatives of broker-dealers or bank employees who are licensed insurance agents appointed by the Company, either individually or through an incorporated insurance agency. IBS enters into selling agreements with the unaffiliated broker-dealers and banks whose personnel participate in the offer and sale of the Policies. In some states, the Policies may be sold by representatives or employees of banks which may be acting as broker-dealers without separate registration under the 1934 Act, pursuant to legal and regulatory exceptions. The maximum sales compensation payable by the Company is not more than the equivalent of 7.5% percent of each Premium. Trail Commissions of up to 1.0% of Cash Value may also be paid where a lower commission rate applies to Premiums. In addition, we may pay or permit other promotional incentives, in cash, or credit or other compensation. We also may pay asset-based expense allowances and service fees. 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. The name and position of each officer and director of IBS as of May 1, 1999, are as follows: John B. Scott............................................... Chairman and Director Otis R. Heldman, Jr......................................... President and Director Michael A. Kelly............................................ Vice President David S. Jorgensen.......................................... Vice President and Treasurer Debra P. Rezabek............................................ Secretary Frank J. Julian............................................. Assistant Secretary Kenneth M. Sapp............................................. Director Eliane C. Frye.............................................. Director George Vlaisavljevich....................................... Director
LEGAL PROCEEDINGS There are no pending legal proceedings affecting the Separate Account. KILICO is engaged in routine law suits which, in our management's judgment, are not of material importance to its total assets or material with respect to the Separate Account. 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 law, have been passed upon by Frank Julian, Esq., our Associate General Counsel. The law firm of Jorden Burt Boros Cicchetti Berenson & Johnson, 1025 Thomas Jefferson St., Suite 400, East Lobby, Washington, D.C. 20007-5201, serve as special counsel to KILICO with regard to the federal securities laws. REGISTRATION STATEMENT We have filed a registration statement with the SEC, Washington, D.C., under the Securities Act of 1933 as amended, with respect to the Policies offered by this Prospectus. This Prospectus does not contain all the information set forth in the registration statement and the exhibits filed as part of the registration statement. You should refer to the registration statement and the exhibits for further information concerning the Separate Account, KILICO, and the Policies. The descriptions in this Prospectus of the Policies and other legal instruments are summaries. You should refer to those instruments as filed for their precise terms. 41 47 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 certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. Actuarial matters included in this prospectus have been examined by Steven D. Powell, FSA, as stated in the opinion filed as an exhibit to the Registration Statement. FINANCIAL STATEMENTS [TO BE FILED BY PRE-EFFECTIVE AMENDMENT] The included financial statements of the Separate Account do not reflect any assets attributable to the Policy, because we did not sell the Policy during the period covered by those financial statements. The included financial statements for KILICO only bear on our ability to meet our obligations under the Policy. They do not relate to the investment performance of the assets held in the Separate Account. CHANGE OF ACCOUNTANTS On September 12, 1997, KILICO appointed PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), formerly Coopers & Lybrand, L.L.P., as independent accountants for the year ended December 31, 1997 to replace KPMG LLP effective with such appointment. Our Board of Directors approved their selection 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. 42 48 PART II--OTHER INFORMATION UNDERTAKING TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities 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 Modified Single Premium Variable Universal 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 (the "1940 Act"). 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 will agree to indemnify Investors Brokerage Services, Inc. ("IBS") against any claims, liabilities and expenses which IBS may incur under the Securities Act of 1933, common law or otherwise, arising out of or based upon any alleged untrue statements of material fact contained in any registration statement or prospectus of the Separate Account, or any omission to state a material fact therein, the omission of which makes any statement contained therein misleading. IBS will agree to indemnify KILICO and the Separate Account against any and all claims, demands, liabilities and expenses which KILICO or the Separate Account may incur, arising out of or based upon any act or deed of IBS or of any registered representatives of an NASD member investment dealer which has an agreement with IBS and is acting in accordance with KILICO's instructions. Insofar as indemnification for liability arising under the Securities Act of 1933, as amended (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 49 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. Prospectus consisting of pages. The undertaking to file reports. Undertaking as to indemnification pursuant to Rule 484(b)(1) under the Securities Act of 1933. Representation Regarding Fees and Charges Pursuant to Section 26 of the Investment Company Act of 1940. The signatures. Written consents of the following persons: A. Frank J. Julian, Esq. (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. Steven D. Powell, FSA (included in Opinion to be filed as Exhibit 3(b)(I)). The following exhibits: (1) 1-A(1) KILICO Resolution establishing the Separate Account (2) 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 Individual Policy 1-A(5)(b) Form of Survivorship Policy 1-A(5)(c) Accelerated Death Benefit Rider (to be filed by pre-effective amend- ment) 1-A(5)(c) Extended Maturity Rider (to be filed by pre-effective amendment) 1-A(5)(d) Nursing Care Waiver of Withdrawal Charge Rider (to be filed by pre-effective amendment) 1-A(5)(e) Disability Waiver Rider (to be filed by pre-effective amendment) (1) 1-A(6)(a) KILICO Articles of Incorporation (3) 1-A(6)(b) By-Laws of KILICO (4) 1-A(8)(a) Participation Agreement between KILICO and Scudder Variable Life Investment Fund (4) 1-A(8)(b) Participating Contract and Policy Agreement between KILICO and Scudder Kemper Investments, Inc. (4) 1-A(8)(c) Indemnification Agreement between KILICO and Scudder Kemper Investments, Inc. (5) 1-A(8)(d) Fund Participation Agreement among KILICO, Janus Aspen Series and Janus Capital Corporation (6) 1-A(8)(e) Service Agreement between KILICO and Janus Capital Corporation (7) 1-A(8)(f) Participation Agreement By and Among KILICO and Warburg, Pincus Trust and Warburg Pincus Asset Management Inc. (f/k/a Warburg, Pincus Counsellors, Inc.) and Counsellors Securities, Inc. (8) 1-A(8)(g) Service Agreement between Warburg Pincus Asset Management Inc. (f/k/a Warburg, Pincus Counsellors, Inc.) and Federal Kemper Life Assurance Company and KILICO
II-2 50 (7) 1-A(8)(h) Fund Participation Agreement among KILICO, Investors Fund 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 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
- ------------------------- (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 of KILICO on Form S-1 (File No. 333-02491) filed on or about April 23, 1997. (4) Incorporated by reference to Amendment No. 5 to the Registration Statement of KILICO on Form S-1 filed on or about April 20, 1999 (File No. 333-22389). (5) Incorporated by reference to Post-Effective Amendment No. 23 to the Registration Statement of KILICO Variable Annuity Separate Account on Form N-4 filed on or about September 14, 1995 (File No. 2-72671). (6) Incorporated by reference to Post-Effective Amendment No. 25 to the Registration Statement of KILICO Variable Annuity Separate Account on Form N-4 filed on or about April 28, 1997 (File No. 2-72671). (7) Incorporated 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). (8) Incorporated by reference to Post-Effective Amendment No. 4 to the Registration Statement of FKLA Variable Separate Account on Form S-6 filed on or about April 30, 1997 (File No. 33-79808). II-3 51 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 27th day of May, 1999. KILICO VARIABLE SEPARATE ACCOUNT (Registrant) By: Kemper Investors Life Insurance Company (Depositor) By: /s/ JOHN B. SCOTT ------------------------------------ John B. Scott, Chief Executive Officer and President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following directors and principal officers of Kemper Investors Life Insurance Company in the capacities indicated on the 27th day of May, 1999:
SIGNATURE TITLE --------- ----- /s/ JOHN B. SCOTT Chief Executive Officer, President and Director - -------------------------------------------------------- (Principal Executive Officer) John B. Scott /s/ W. H. BOLINDER Chairman of the Board and Director - -------------------------------------------------------- William H. Bolinder /s/ FREDERICK L. BLACKMON Senior Vice President and Chief Financial - -------------------------------------------------------- Officer (Principal Financial Officer and Frederick L. Blackmon Principal Accounting Officer) /s/ LOREN J. ALTER Director - -------------------------------------------------------- Loren J. Alter /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
II-4 52 EXHIBIT LIST 1.A(5)(A) Form of Individual Policy 1.A(5)(B) Form of Survivorship Policy 9 Illustrations
II-5 EX-1.A(5)(A) 2 FORM OF INDIVIDUAL POLICY 1 Exhibit 1.A(5)(a) KEMPER INVESTORS LIFE INSURANCE COMPANY [ZURICH KEMPER LOGO] A Stock Life Insurance Company 1 Kemper Drive Long Grove, Illinois 60049-0001 INSURED: JOHN DOE ISSUE AGE: 35 EFFECTIVE DATE: JAN 01 1999 POLICY NO: 0000000 SINGLE PREMIUM: $10,000 INITIAL SPECIFIED AMOUNT: $100,000 RIGHT TO CANCEL - At any time within 10 days of receiving this policy, you may return it to us or to the agent through whom it was purchased. Immediately upon our receipt, this policy will be voided as if it had never been in force. Within ten days we will pay an amount equal to premiums paid for this policy less any Debt. 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 and payment of the single premium. The provisions on this cover and the pages that follow are part of this policy. Signed for Kemper Investors Life Insurance Company at its home offices in Long Grove, Illinois. Secretary President INDIVIDUAL MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY NON-PARTICIPATING 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 is a legal contract between the owner and Kemper Investors Life Insurance Company. READ THIS POLICY CAREFULLY. 2
TABLE OF CONTENTS PAGE NO. APPLICATION Follows Policy Specifications DEATH BENEFIT PROVISIONS 2 Payment of Death Benefits 2 Amount Payable Upon Death 3 DEFINITIONS 1 ENDORSEMENTS, if any Follows Settlement Option Table GENERAL PROVISIONS 1 - 2 The Contract 1 Contestability 1 Assignment 2 Reports 2 NONFORFEITURE PROVISIONS 4 OWNERSHIP PROVISIONS 2 Owner of Policy 2 Change of Ownership 2 Beneficiary 2 POLICY SPECIFICATIONS Follows Index PREMIUM PROVISIONS 3 SETTLEMENT OPTION TABLE Follows Page 7 TRANSFER, WITHDRAWAL AND LOAN PROVISIONS 5 - 6 Transfers 5 Withdrawals 5 Withdrawal Charges 5 Loans 5 Transfer, Withdrawal and Loan Procedures 6 VARIABLE ACCOUNT PROVISIONS 3 - 4 Separate Account 3 Liabilities of Separate Account 3 Separate Account Value 3 Subaccounts 4 Rights Reserved By The Company 4 Accumulation Unit Value 4
3 POLICY SPECIFICATIONS INSURED JOHN DOE ISSUE AGE 35 EFFECTIVE DATE JAN 01 1999 POLICY NUMBER 0000000 INITIAL SPECIFIED AMOUNT $100,000 ISSUE DATE JAN 01 1999 COVERAGE INFORMATION
RATE INITIAL CLASS SPECIFIED MATURITY OR MONTHLY BENEFIT DESCRIPTION PERCENT AMOUNT EXPIRY DATE RATE MODIFIED SINGLE PREMIUM VARIABLE LIFE* 100 $100,000 [JAN 01 2064] SEE PAGE D
* IT IS POSSIBLE THAT COVERAGE WILL EXPIRE PRIOR TO THE MATURITY DATE SHOWN IF PREMIUMS PAID ARE INSUFFICIENT TO CONTINUE THE COVERAGE TO SUCH DATE. EVEN IF COVERAGE CONTINUES TO THE MATURITY DATE, THERE MAY BE NO SURRENDER VALUE TO BE PAID ON THAT DATE. PREMIUM INFORMATION SINGLE PREMIUM [ $10,000 ] INSURED RATE CLASS STANDARD TOBACCO/NON-TOBACCO 4 POLICY SPECIFICATIONS INSURED JOHN DOE ISSUE AGE 35 EFFECTIVE DATE JAN 01 1999 POLICY NUMBER [000000] MONTHLY PROCESSING DAY DAY 01 OF EACH MONTH DEDUCTION PERIOD [65 YEARS, 00 MONTHS] MINIMUM SPECIFIED AMOUNT AFTER WITHDRAWAL [$10,000] MINIMUM WITHDRAWAL AMOUNT [$100.00] MINIMUM NET SURRENDER VALUE AFTER WITHDRAWAL [$5,000] MINIMUM LOAN AMOUNT [$1,000.00] POLICY LOAN INTEREST CHARGED [ 5.50% ] POLICY LOAN INTEREST CREDITED Preferred Loan Portion [ 5.50% ] Non-Preferred Loan Portion [ 3.50% ] MINIMUM PREMIUM [$10,000.00] IRC SECTION 7702 TEST GUIDELINE PREMIUM TABLE OF DEATH BENEFIT FACTORS
ATTAINED ATTAINED ATTAINED ATTAINED AGE* PERCENT AGE* PERCENT AGE* PERCENT AGE* PERCENT 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
*ATTAINED AGE IS THE AGE ON LAST BIRTHDAY AS OF THE BEGINNING OF THE POLICY YEAR. 5 POLICY SPECIFICATIONS INSURED JOHN DOE ISSUE AGE 35 ISSUE DATE JAN 01 1999 POLICY NUMBER [000000] SEPARATE ACCOUNT INITIAL PREMIUM ALLOCATION KEMPER AGGRESSIVE GROWTH PORTFOLIO 100% KEMPER TECHNOLOGY GROWTH PORTFOLIO KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO KEMPER SMALL CAP GROWTH PORTFOLIO KEMPER SMALL CAP VALUE PORTFOLIO KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO KEMPER INTERNATIONAL PORTFOLIO KEMPER INTERNATIONAL GROWTH & INCOME PORTFOLIO KEMPER GLOBAL BLUE CHIP PORTFOLIO KEMPER GROWTH PORTFOLIO KEMPER CONTRARIAN VALUE PORTFOLIO KEMPER BLUE CHIP PORTFOLIO KEMPER VALUE+GROWTH PORTFOLIO KEMPER HORIZON 20+ PORTFOLIO KEMPER TOTAL RETURN PORTFOLIO KEMPER HORIZON 10+ PORTFOLIO KEMPER HIGH YIELD PORTFOLIO KEMPER HORIZON 5 PORTFOLIO KEMPER GLOBAL INCOME PORTFOLIO KEMPER INVESTMENT GRADE BOND PORTFOLIO KEMPER GOVERNMENT SECURITIES PORTFOLIO KEMPER MONEY MARKET PORTFOLIO SCUDDER VLIF GLOBAL DISCOVERY PORTFOLIO SCUDDER VLIF GROWTH AND INCOME PORTFOLIO SCUDDER VLIF INTERNATIONAL PORTFOLIO SCUDDER VLIF CAPITAL GROWTH PORTFOLIO JANUS ASPEN GROWTH PORTFOLIO JANUS ASPEN GROWTH AND INCOME PORTFOLIO WARBURG EMERGING MARKETS PORTFOLIO WARBURG POST-VENTURE CAPITAL PORTFOLIO ASSET BASED CHARGES ARE ASSESSED FOR THE ABOVE SUBACCOUNTS. FOR A COMPLETE DISCUSSION OF ASSET BASED CHARGES, PLEASE REFER TO SCHEDULE 1. 6 POLICY SPECIFICATIONS INSURED JOHN DOE ISSUE AGE 35 POLICY DATE JAN 01 1999 POLICY NUMBER [000000] TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES* PER $1,000
ATTAINED NON- ATTAINED NON- AGE TOBACCO TOBACCO AGE TOBACCO TOBACCO ----------------- -------------- -- --------------- ----- -------------- ---------------- - ---------------- 0 0.219480 0.219480 50 0.428690 0.837880 1 0.085880 0.085880 51 0.468090 0.916270 2 0.082540 0.082540 52 0.513380 1.004870 3 0.080880 0.080880 53 0.565410 1.105400 4 0.077540 0.077540 54 0.623350 1.215380 5 0.073370 0.073370 55 0.688070 1.333150 6 0.069200 0.069200 56 0.758730 1.457890 7 0.065030 0.065030 57 0.833670 1.589640 8 0.062530 0.062530 58 0.917110 1.728430 9 0.061690 0.061690 59 1.010780 1.877720 10 0.062530 0.062530 60 1.115550 2.044410 11 0.067530 0.067530 61 1.232310 2.232910 12 0.076700 0.076700 62 1.367070 2.445950 13 0.089220 0.089220 63 1.519910 2.684600 14 0.103400 0.103400 64 1.690090 2.946500 15 0.113420 0.146810 65 1.876860 3.224930 16 0.123430 0.163510 66 2.079500 3.517450 17 0.130940 0.175200 67 2.297270 3.821590 18 0.135950 0.184390 68 2.534600 4.141890 19 0.139290 0.190240 69 2.798580 4.490890 20 0.140130 0.193580 70 3.098170 4.877870 21 0.138460 0.193580 71 3.441600 5.314990 22 0.135950 0.190240 72 3.839990 5.812080 23 0.132610 0.186890 73 4.293280 6.366660 24 0.129280 0.181880 74 4.794460 6.979050 25 0.125100 0.176030 75 5.333740 7.638620 26 0.122600 0.172690 76 5.907380 8.318710 27 0.120930 0.171020 77 6.511600 9.007620 28 0.120090 0.171020 78 7.150730 9.710250 29 0.120090 0.173530 79 7.845900 10.451730 30 0.120930 0.177710 80 8.620930 11.258160 31 0.123430 0.183550 81 9.498890 12.154910 32 0.126770 0.191070 82 10.501350 13.160810 33 0.131780 0.201100 83 11.628210 14.262960 34 0.137620 0.212790 84 12.862100 15.427670 35 0.144300 0.227000 85 14.178860 16.617240 36 0.151820 0.243720 86 15.565070 17.803170 37 0.161840 0.264620 87 17.002260 19.039280 38 0.172690 0.288040 88 18.486430 20.348230 39 0.184390 0.314810 89 20.041320 21.671680 40 0.198590 0.345780 90 21.693700 23.030110 41 0.213630 0.379270 91 23.488560 24.468300 42 0.229510 0.416120 92 25.504290 26.169550 43 0.247060 0.456350 93 27.961930 28.406850 44 0.266290 0.500790 94 31.383850 31.563380 45 0.288040 0.547780 95 36.798270 36.798270 46 0.311460 0.596470 96 46.588990 46.588990 47 0.336570 0.649400 97 67.043870 67.043870 48 0.364190 0.706570 98 83.333330 83.333330 49 0.394340 0.768830 99 83.333330 83.333330
*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 1 OF THE POLICY SPECIFICATIONS. THE RATES ACTUALLY CHARGED MAY BE REDUCED IN ACCORDANCE WITH THE COST OF INSURANCE RATE SECTION. 7
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES -------------------------------------------------------------- MALE NON-TOBACCO -------------------------------------------------------------- ATTAINED ATTAINED AGE AGE ------------------------------ ----------------------------- 0 0.219480 50 0.428690 ------------------------------ ----------------------------- 1 0.085880 51 0.468090 ------------------------------ ----------------------------- 2 0.082540 52 0.513380 ------------------------------ ----------------------------- 3 0.080880 53 0.565410 ------------------------------ ----------------------------- 4 0.077540 54 0.623350 ------------------------------ ----------------------------- 5 0.073370 55 0.688070 ------------------------------ ----------------------------- 6 0.069200 56 0.758730 ------------------------------ ----------------------------- 7 0.065030 57 0.833670 ------------------------------ ----------------------------- 8 0.062530 58 0.917110 ------------------------------ ----------------------------- 9 0.061690 59 1.010780 ------------------------------ ----------------------------- 10 0.062530 60 1.115550 ------------------------------ ----------------------------- 11 0.067530 61 1.232310 ------------------------------ ----------------------------- 12 0.076700 62 1.367070 ------------------------------ ----------------------------- 13 0.089220 63 1.519910 ------------------------------ ----------------------------- 14 0.103400 64 1.690090 ------------------------------ ----------------------------- 15 0.113420 65 1.876860 ------------------------------ ----------------------------- 16 0.123430 66 2.079500 ------------------------------ ----------------------------- 17 0.130940 67 2.297270 ------------------------------ ----------------------------- 18 0.135950 68 2.534600 ------------------------------ ----------------------------- 19 0.139290 69 2.798580 ------------------------------ ----------------------------- 20 0.140130 70 3.098170 ------------------------------ ----------------------------- 21 0.138460 71 3.441600 ------------------------------ ----------------------------- 22 0.135950 72 3.839990 ------------------------------ ----------------------------- 23 0.132610 73 4.293280 ------------------------------ ----------------------------- 24 0.129280 74 4.794460 ------------------------------ ----------------------------- 25 0.125100 75 5.333740 ------------------------------ ----------------------------- 26 0.122600 76 5.907380 ------------------------------ ----------------------------- 27 0.120930 77 6.511600 ------------------------------ ----------------------------- 28 0.120090 78 7.150730 ------------------------------ ----------------------------- 29 0.120090 79 7.845900 ------------------------------ ----------------------------- 30 0.120930 80 8.620930 ------------------------------ ----------------------------- 31 0.123430 81 9.498890 ------------------------------ ----------------------------- 32 0.126770 82 10.501350 ------------------------------ ----------------------------- 33 0.131780 83 11.628210 ------------------------------ ----------------------------- 34 0.137620 84 12.862100 ------------------------------ ----------------------------- 35 0.144300 85 14.178860 ------------------------------ ----------------------------- 36 0.151820 86 15.565070 ------------------------------ ----------------------------- 37 0.161840 87 17.002260 ------------------------------ ----------------------------- 38 0.172690 88 18.486430 ------------------------------ ----------------------------- 39 0.184390 89 20.041320 ------------------------------ ----------------------------- 40 0.198590 90 21.693700 ------------------------------ ----------------------------- 41 0.213630 91 23.488560 ------------------------------ ----------------------------- 42 0.229510 92 25.504290 ------------------------------ ----------------------------- 43 0.247060 93 27.961930 ------------------------------ ----------------------------- 44 0.266290 94 31.383850 ------------------------------ ----------------------------- 45 0.288040 95 36.798270 ------------------------------ ----------------------------- 46 0.311460 96 46.588990 ------------------------------ ----------------------------- 47 0.336570 97 67.043870 ------------------------------ ----------------------------- 48 0.364190 98 83.333330 ------------------------------ ----------------------------- 49 0.394340 99 83.333330 ------------------------------ -----------------------------
8
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES -------------------------------------------------------------- MALE TOBACCO -------------------------------------------------------------- ATTAINED ATTAINED AGE AGE ------------------------------ ----------------------------- 0 0.219480 50 0.837880 ------------------------------ ----------------------------- 1 0.085880 51 0.916270 ------------------------------ ----------------------------- 2 0.082540 52 1.004870 ------------------------------ ----------------------------- 3 0.080880 53 1.105400 ------------------------------ ----------------------------- 4 0.077540 54 1.215380 ------------------------------ ----------------------------- 5 0.073370 55 1.333150 ------------------------------ ----------------------------- 6 0.069200 56 1.457890 ------------------------------ ----------------------------- 7 0.065030 57 1.589640 ------------------------------ ----------------------------- 8 0.062530 58 1.728430 ------------------------------ ----------------------------- 9 0.061690 59 1.877720 ------------------------------ ----------------------------- 10 0.062530 60 2.044410 ------------------------------ ----------------------------- 11 0.067530 61 2.232910 ------------------------------ ----------------------------- 12 0.076700 62 2.445950 ------------------------------ ----------------------------- 13 0.089220 63 2.684600 ------------------------------ ----------------------------- 14 0.103400 64 2.946500 ------------------------------ ----------------------------- 15 0.146810 65 3.224930 ------------------------------ ----------------------------- 16 0.163510 66 3.517450 ------------------------------ ----------------------------- 17 0.175200 67 3.821590 ------------------------------ ----------------------------- 18 0.184390 68 4.141890 ------------------------------ ----------------------------- 19 0.190240 69 4.490890 ------------------------------ ----------------------------- 20 0.193580 70 4.877870 ------------------------------ ----------------------------- 21 0.193580 71 5.314990 ------------------------------ ----------------------------- 22 0.190240 72 5.812080 ------------------------------ ----------------------------- 23 0.186890 73 6.366660 ------------------------------ ----------------------------- 24 0.181880 74 6.979050 ------------------------------ ----------------------------- 25 0.176030 75 7.638620 ------------------------------ ----------------------------- 26 0.172690 76 8.318710 ------------------------------ ----------------------------- 27 0.171020 77 9.007620 ------------------------------ ----------------------------- 28 0.171020 78 9.710250 ------------------------------ ----------------------------- 29 0.173530 79 10.451730 ------------------------------ ----------------------------- 30 0.177710 80 11.258160 ------------------------------ ----------------------------- 31 0.183550 81 12.154910 ------------------------------ ----------------------------- 32 0.191070 82 13.160810 ------------------------------ ----------------------------- 33 0.201100 83 14.262960 ------------------------------ ----------------------------- 34 0.212790 84 15.247670 ------------------------------ ----------------------------- 35 0.227000 85 16.617240 ------------------------------ ----------------------------- 36 0.243720 86 17.803170 ------------------------------ ----------------------------- 37 0.264620 87 19.039280 ------------------------------ ----------------------------- 38 0.288040 88 20.348230 ------------------------------ ----------------------------- 39 0.314810 89 21.671680 ------------------------------ ----------------------------- 40 0.345780 90 23.030110 ------------------------------ ----------------------------- 41 0.379270 91 24.468300 ------------------------------ ----------------------------- 42 0.416120 92 26.169550 ------------------------------ ----------------------------- 43 0.456350 93 28.406850 ------------------------------ ----------------------------- 44 0.500790 94 31.563380 ------------------------------ ----------------------------- 45 0.547780 95 36.798270 ------------------------------ ----------------------------- 46 0.596470 96 46.588990 ------------------------------ ----------------------------- 47 0.649400 97 67.043870 ------------------------------ ----------------------------- 48 0.706570 98 83.333330 ------------------------------ ----------------------------- 49 0.768830 99 83.333330 ------------------------------ -----------------------------
9
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES -------------------------------------------------------------- FEMALE NON-TOBACCO -------------------------------------------------------------- ATTAINED ATTAINED AGE AGE ------------------------------ ----------------------------- ------------------------------ ----------------------------- 0 0.156830 50 0.362520 ------------------------------ ----------------------------- 1 0.070030 51 0.390150 ------------------------------ ----------------------------- 2 0.066700 52 0.421990 ------------------------------ ----------------------------- 3 0.065030 53 0.457190 ------------------------------ ----------------------------- 4 0.064190 54 0.493240 ------------------------------ ----------------------------- 5 0.062530 55 0.531830 ------------------------------ ----------------------------- 6 0.060860 56 0.570440 ------------------------------ ----------------------------- 7 0.059190 57 0.608230 ------------------------------ ----------------------------- 8 0.058360 58 0.646040 ------------------------------ ----------------------------- 9 0.057520 59 0.688910 ------------------------------ ----------------------------- 10 0.056690 60 0.739370 ------------------------------ ----------------------------- 11 0.058360 61 0.801660 ------------------------------ ----------------------------- 12 0.060860 62 0.879170 ------------------------------ ----------------------------- 13 0.064190 63 0.974480 ------------------------------ ----------------------------- 14 0.068360 64 1.081730 ------------------------------ ----------------------------- 15 0.071700 65 1.197600 ------------------------------ ----------------------------- 16 0.075040 66 1.317890 ------------------------------ ----------------------------- 17 0.077540 67 1.440910 ------------------------------ ----------------------------- 18 0.080040 68 1.568370 ------------------------------ ----------------------------- 19 0.082540 69 1.710530 ------------------------------ ----------------------------- 20 0.084210 70 1.877720 ------------------------------ ----------------------------- 21 0.085880 71 2.082070 ------------------------------ ----------------------------- 22 0.086720 72 2.333340 ------------------------------ ----------------------------- 23 0.088380 73 2.635430 ------------------------------ ----------------------------- 24 0.090050 74 2.984600 ------------------------------ ----------------------------- 25 0.091720 75 3.376280 ------------------------------ ----------------------------- 26 0.094220 76 3.802330 ------------------------------ ----------------------------- 27 0.095890 77 4.261570 ------------------------------ ----------------------------- 28 0.098400 78 4.761660 ------------------------------ ----------------------------- 29 0.101730 79 5.319450 ------------------------------ ----------------------------- 30 0.104240 80 5.958680 ------------------------------ ----------------------------- 31 0.107580 81 6.700420 ------------------------------ ----------------------------- 32 0.110910 82 7.564140 ------------------------------ ----------------------------- 33 0.115090 83 8.550150 ------------------------------ ----------------------------- 34 0.120090 84 9.651690 ------------------------------ ----------------------------- 35 0.125940 85 10.861090 ------------------------------ ----------------------------- 36 0.134280 86 12.174410 ------------------------------ ----------------------------- 37 0.144300 87 13.594640 ------------------------------ ----------------------------- 38 0.155160 88 15.128280 ------------------------------ ----------------------------- 39 0.166850 89 16.793990 ------------------------------ ----------------------------- 40 0.181050 90 18.613420 ------------------------------ ----------------------------- 41 0.196080 91 20.640050 ------------------------------ ----------------------------- 42 0.211120 92 22.968510 ------------------------------ ----------------------------- 43 0.226170 93 25.797340 ------------------------------ ----------------------------- 44 0.241210 94 29.586210 ------------------------------ ----------------------------- 45 0.257930 95 35.366190 ------------------------------ ----------------------------- 46 0.275490 96 45.525080 ------------------------------ ----------------------------- 47 0.294730 97 66.318680 ------------------------------ ----------------------------- 48 0.314810 98 83.333330 ------------------------------ ----------------------------- 49 0.337410 99 83.333330 ------------------------------ -----------------------------
10
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES -------------------------------------------------------------- FEMALE TOBACCO -------------------------------------------------------------- ATTAINED ATTAINED AGE AGE ------------------------------ ----------------------------- 0 0.156830 50 0.566250 ------------------------------ ----------------------------- 1 0.070030 51 0.607390 ------------------------------ ----------------------------- 2 0.066700 52 0.654440 ------------------------------ ----------------------------- 3 0.065030 53 0.706570 ------------------------------ ----------------------------- 4 0.064190 54 0.759570 ------------------------------ ----------------------------- 5 0.062530 55 0.814290 ------------------------------ ----------------------------- 6 0.060860 56 0.868210 ------------------------------ ----------------------------- 7 0.059190 57 0.918800 ------------------------------ ----------------------------- 8 0.058360 58 0.968570 ------------------------------ ----------------------------- 9 0.057520 59 1.021750 ------------------------------ ----------------------------- 10 0.056690 60 1.085110 ------------------------------ ----------------------------- 11 0.058360 61 1.164600 ------------------------------ ----------------------------- 12 0.060860 62 1.267040 ------------------------------ ----------------------------- 13 0.064190 63 1.391670 ------------------------------ ----------------------------- 14 0.068360 64 1.530960 ------------------------------ ----------------------------- 15 0.080040 65 1.678160 ------------------------------ ----------------------------- 16 0.084210 66 1.828210 ------------------------------ ----------------------------- 17 0.088380 67 1.973420 ------------------------------ ----------------------------- 18 0.092560 68 2.120610 ------------------------------ ----------------------------- 19 0.095060 69 2.280960 ------------------------------ ----------------------------- 20 0.097560 70 2.470900 ------------------------------ ----------------------------- 21 0.099230 71 2.712220 ------------------------------ ----------------------------- 22 0.101730 72 3.008860 ------------------------------ ----------------------------- 23 0.104240 73 3.363220 ------------------------------ ----------------------------- 24 0.106740 74 3.769070 ------------------------------ ----------------------------- 25 0.109240 75 4.214910 ------------------------------ ----------------------------- 26 0.113420 76 4.691660 ------------------------------ ----------------------------- 27 0.116760 77 5.192770 ------------------------------ ----------------------------- 28 0.120930 78 5.725870 ------------------------------ ----------------------------- 29 0.125940 79 6.310570 ------------------------------ ----------------------------- 30 0.131780 80 6.970840 ------------------------------ ----------------------------- 31 0.136790 81 7.726990 ------------------------------ ----------------------------- 32 0.142630 82 8.595770 ------------------------------ ----------------------------- 33 0.150150 83 9.611100 ------------------------------ ----------------------------- 34 0.158500 84 10.726950 ------------------------------ ----------------------------- 35 0.167680 85 11.929990 ------------------------------ ----------------------------- 36 0.181880 86 13.214160 ------------------------------ ----------------------------- 37 0.198590 87 14.570110 ------------------------------ ----------------------------- 38 0.217810 88 16.008410 ------------------------------ ----------------------------- 39 0.238700 89 17.532150 ------------------------------ ----------------------------- 40 0.263790 90 19.256820 ------------------------------ ----------------------------- 41 0.290550 91 21.156900 ------------------------------ ----------------------------- 42 0.317320 92 23.319700 ------------------------------ ----------------------------- 43 0.344100 93 25.937870 ------------------------------ ----------------------------- 44 0.370890 94 29.586210 ------------------------------ ----------------------------- 45 0.399370 95 35.366190 ------------------------------ ----------------------------- 46 0.428690 96 45.525080 ------------------------------ ----------------------------- 47 0.458870 97 66.318680 ------------------------------ ----------------------------- 48 0.491570 98 83.333330 ------------------------------ ----------------------------- 49 0.527640 99 83.333330 ------------------------------ -----------------------------
11 SCHEDULE 1 CHARGES AND DEDUCTIONS
- -------------------------------------------------------------------------------- SCHEDULE OF ASSET BASED CHARGES - -------------------------------------------------------------------------------- Mortality and Expense Risk Charge .90% Administration Charge .35% annually for Policy Years 1-10 .25% annually for Policy Years 11 and later Tax Charge .40% annually for Policy Years 1-10 - --------------------------------------------------------------------------------
THE ASSET BASED CHARGES WILL BE ASSESSED DAILY ON THE SEPARATE ACCOUNT VALUE. The Annual Record Maintenance Charge of $30 is deducted from your Cash Value at the end of the Policy Year.
- ---------------------------------------------------------------------------- SCHEDULE OF PREMIUM WITHDRAWAL CHARGES - ---------------------------------------------------------------------------- POLICY YEARS SURRENDER PREMIUM TAX TOTAL WITHDRAWAL ELAPSED SINCE ISSUE CHARGE CHARGE CHARGE - ---------------------------------------------------------------------------- 1 7.75% 2.25% 10.00% 2 7.75% 2.00% 9.75% 3 7.50% 1.75% 9.25% 4 6.50% 1.50% 8.00% 5 5.75% 1.25% 7.00% 6 5.00% 1.00% 6.00% 7 4.25% .75% 5.00% 8 3.50% .50% 4.00% 9 2.75% .25% 3.00% over 9 0% 0% 0% - ----------------------------------------------------------------------------
THE WITHDRAWAL CHARGE PERCENTAGES ARE APPLIED AGAINST THE ORIGINAL SINGLE PREMIUM AMOUNT. A FREE PARTIAL WITHDRAWAL OF THE GREATER OF 10% OF CASH VALUE OR CASH VALUE LESS PREMIUM PAID IS AVAILABLE EACH YEAR. "PREMIUM PAID" FOR THIS PURPOSE IS THE PREMIUM SUBJECT TO A WITHDRAWAL CHARGE MINUS WITHDRAWALS PREVIOUSLY ASSESSED [A WITHDRAWAL CHARGE]. 12 DEFINITIONS ACCUMULATION UNIT - An accounting unit of measure used to calculate the value of each Subaccount. ACCUMULATION UNIT VALUE - The value of a Subaccount determined for a Valuation Period according to the formula stated in this policy. ADMINISTRATION CHARGE - A charge deducted from the Cash Value for a portion of Our administrative costs. CASH VALUE - The sum of the Separate Account Value plus the Fixed Account Value plus the Loan Account Value. DEBT - The principal of any outstanding loan plus any loan interest due or accrued. DEDUCTION DAY - The Deduction Day is stated in the policy specifications. It is the same day in each month as the Effective Date. It is the day from which policy months are determined. EFFECTIVE DATE - The Effective Date is shown on the front of Your policy. It is the date coverage becomes effective. If the Effective Date would have been the 29th, 30th or 31st of the month, the Effective Date will be the 28th day of that month. FIXED ACCOUNT - The portion of the Cash Value allocated to our General Account, including amounts allocated to our DCA Fixed Account to be transferred to the Subaccounts under the automatic Dollar Cost Averaging program. FIXED ACCOUNT VALUE - The value of the Fixed Account. 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. GUIDELINE SINGLE PREMIUM - The Guideline Single Premium as defined in Section 7702 of the Internal Revenue Code. ISSUE AGE - The attained age as of the insured's last birthday on the Effective Date. ISSUE DATE - The issue date stated in the policy specifications. It is the date all requirements for coverage and Premium have been received, and the policy is approved. LOAN ACCOUNT - The account established for amounts transferred from the Subaccounts as security for outstanding Policy Debt. LOAN ACCOUNT VALUE - The value of the Loan Account. Page 1 13 Page 2 MATURITY DATE - The Maturity Date is stated in the policy specifications. It is the policy anniversary nearest the insured's 100th birthday. MORTALITY AND EXPENSE CHARGE - A charge deducted in the calculation of the accumulation unit value. It is for Our assumption of mortality risks and expense guarantees. NET SURRENDER VALUE - The Surrender Value minus any Debt. OWNER - See "You, Your, Yours" below. POLICY YEAR - Each twelve-month period beginning on the Effective Date and each Policy Anniversary. PREFERRED LOAN - The portion of any loan as to which the loan account is credited a higher rate of interest. The maximum amount available as a Preferred Loan is the Separate Account Value minus premium paid plus any prior withdrawal of premium. PREMIUM - The dollar amount We receive in U.S. currency to buy the benefits this policy provides. RECORDS MAINTENANCE CHARGE - A charge assessed against Your policy as specified in the policy specifications. RECEIVED - Received by Kemper Investors Life Insurance Company at its home office in Long Grove, Illinois. 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 Annuity Separate Account. SEPARATE ACCOUNT VALUE - The sum of the Subaccount Values of this policy on the Valuation Date. SUBACCOUNTS - The Separate Account has several Subaccounts. The available Subaccounts are stated in the policy specifications. SUBACCOUNT VALUE - The value of each Subaccount calculated separately according to the formula stated in this policy. SURRENDER VALUE - The Surrender Value of this policy is the Cash Value minus any applicable withdrawal charge. TAX EXPENSE CHARGE - A charge deducted from the Cash Value to pay applicable state and local Premium taxes and federal taxes imposed under Section 848 of the Internal Revenue Code of 1986, as amended (the "Code"). TRADE DATE - The Trade Date is ten (10) days plus the number of days in your right to cancel period after the Issue Date. It is the date that your initial premium plus any interest will be allocated to the Subaccounts according to your instructions. The right to cancel period is shown on the front of Your policy. VALUATION DATE - Each business day that applicable law requires that We value the assets of the Separate Account. Currently this 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, US - Kemper Investors Life Insurance Company, Long Grove, Illinois. 14 YOU, YOUR, YOURS - The party(s) named as owner in the application unless later changed as provided in this policy. The owner, prior to the distribution of any death benefit, has the exclusive right to exercise every option and right conferred by this policy. GENERAL PROVISIONS THE POLICY The policy, the attached application and any supplemental application(s) constitute the entire contract between the parties. All statements made in the application and supplemental application(s) are deemed representations and not warranties. No misstatement will void this policy or be used as a defense of a claim unless it is contained in the application or any supplemental application. MODIFICATION OF Only Our president, secretary and assistant POLICY secretaries have the power to approve a change or waive any provisions of this policy. Any such modifications must be in writing. No agent or person other than the officers named has the authority to change or waive the provisions of this policy. CONTESTABILITY We cannot contest this policy after it has been in force for two years from the Effective Date. 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 If the age and/or sex of the Insured was misstated, AND/OR SEX the death benefit and all policy values will be adjusted based on what the initial Premium would have purchased using the correct ages and/or sexes. SUICIDE If the Insured dies by suicide, while sane or insane, within two years from the Effective 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 reinstatement, Our total liability with respect to such reinstatement will be the cost of insurance. EFFECTIVE DATE The Effective Date of coverage under this policy is the Effective Date. If the OF COVERAGE Effective Date would have been the 29th, 30th, or 31st of the month, the Effective Date will be the 28th day of that month. Incontestability and suicide periods are measured from the Effective Date. We will deduct the first monthly deduction on the Effective Date. TERMINATION All coverage under this policy terminates when any one of the following occurs: 1. You request that coverage terminates; 2. The insured dies; 3. This policy matures, or 4. The grace period ends and there is Debt outstanding. ASSIGNMENT No assignment of this policy is binding unless We receive written notice of the assignment. We assume no responsibility for the validity or sufficiency of any assignment. Once notice of the assignment is recorded, the rights of the owner, annuitant and beneficiary are subject to the assignment. Any claim is subject to proof of interest of the assignee. DUE PROOF OF DEATH We must receive written proof of death within sixty days of the death of the insured, or as soon thereafter as is reasonably possible, when a death benefit is payable. The proof may be a certified death certificate, the written statement of a physician, or any other proof satisfactory to Us. Page 3 15 Page 4 RESERVES, CASH VALUES All reserves are equal to or greater than those AND DEATH BENEFITS required by statute. Any available Cash Value and death benefit are not less than 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 computations of cash values 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 or Nonsmoker Mortality tables, age last birthday, is the basis for minimum Cash Values, death benefits, and guaranteed maximum cost of insurance rates under this policy. TAX TREATMENT This policy is intended to qualify as a life insurance policy under the Internal Revenue Code ("Code"). We may return Premiums which would disqualify the policy from tax treatment as a life insurance policy. This policy may be endorsed to reflect any change in the Code and its regulations and rulings. You will receive a copy of any such endorsement or when a federal income tax should apply, we may 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. NON-PARTICIPATING This policy does not pay dividends. It will not share in Our surplus or earnings. REPORTS At least once each Policy Year We will send You a statement showing Premiums received, interest credited, 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. OWNERSHIP PROVISIONS OWNERS OF POLICY The insured is the original policy owner unless otherwise provided in the application. You have the right to cancel or amend this policy if We agree. You may exercise every option and right conferred by this policy including the right of assignment. The joint owners must agree to any change if more than one owner is named. CHANGE OF OWNERSHIP You may change the owner by written request at any time during the lifetime of the Insured. You must furnish information sufficient to clearly identify the new owner to Us. The change is subject to any existing assignment of this policy. When We record the effective date of the change, it will be the date the notice was signed except for action taken by Us prior to receiving the request. Any change is subject to the payment of any proceeds. We may require You to return this policy to Us for endorsement of a change. BENEFICIARY The application for this policy shows the original DESIGNATION AND beneficiary. You may change the beneficiary if You CHANGE OF BENEFICIARY send Us a written change form. Changes are subject to the following: 1. The change must be filed while the insured is alive; 2. This policy must be in force at the time You file a change; 3. Such change must not be prohibited by the terms of an existing assignment, beneficiary designation or other restriction; 4. Such change will take effect when We receive it; 5. After We receive the change, it will take effect on the date the change form was signed. However, action taken by Us before the change form was received will remain in effect; and 6. The request for change must provide information sufficient to identify the new beneficiary. We may require You to return this policy for endorsement of a change. 16 DEATH OF BENEFICIARY The interest of a beneficiary who dies before the distribution of the death benefit will pass to the other beneficiaries, if any, share and share alike, unless otherwise provided in the beneficiary designation. If no beneficiary survives, or if no beneficiary is named, the distribution will be made to the insured's estate. If a beneficiary dies within ten days of the date of the insured's death, the death benefit will be paid as if the insured had survived the beneficiary. DEATH BENEFIT PROVISIONS PAYMENT OF DEATH We will pay a death benefit to the beneficiary when BENEFITS We receive due proof of death, if the insured dies while this policy is inforce. The return of this policy is required before a payment is made. We will pay the death benefit in a lump sum. This sum may be deferred for up to five years from the date of death. During this time, it will continue to accrue interest at the normal rate for death benefits left on deposit with Us. Instead of a lump sum payment the beneficiary may elect to have the death benefit distributed under a settlement option. The beneficiary must make this choice within sixty days of the time We receive due proof of death. AMOUNT PAYABLE We compute the death benefit at the end of the UPON DEATH Valuation Period following Our receipt of due proof of death and the return of this policy. As long as there is positive Net Surrender Value, or during the Grace Period, the death benefit is the greater of: 1. the specified amount on the date of the Insured's death, and 2. the cash value on the date of the insured's death multiplied by the applicable death benefit factor at the time of death. The death benefit proceeds equal a. minus b. minus c., where: a. is the death benefit b. is any monthly deductions due during the grace period c. is any Debt. The initial specified amount and the table of cash value corridors are shown in the policy specifications. The specified amount is the initial specified amount, unless reduced by a withdrawal. If there is no positive Net Surrender Value, no Debt outstanding, you paid 100% of the Guideline Single Premium as your initial Premium, and your policy is not in the Grace Period, the death benefit will be your total Premium paid, less any withdrawal. DEFERMENT OF DEATH The payment of death benefits in excess of the BENEFITS specified amount may be deferred: (a) for up to 6 months from the date requested if these benefits are based upon policy values which do not depend on the investment performance of the Separate Account or (b) otherwise, (1) during any period when the New York Stock Exchange is closed other than customary weekend and holiday closings; (2) when trading in the markets normally utilized is restricted, or an emergency exists as determined by the Securities and Exchange Commission, so that disposal of investments or determination of the accumulation unit value is not practical; or (3) for such other periods as the Securities and Exchange Commission may permit for protection of owners. PREMIUM PROVISIONS The owner may choose a minimum initial Premium of 90% or 100% of the Guideline Single Premium (based on the initial specified amount). Page 5 17 Page 6 ADDITIONAL PREMIUM Payment of additional Premium of at least $1,000 will be permitted under the following circumstances: 1. An additional Premium payment is required to maintain or reinstate coverage, as described in the GRACE PERIOD and REINSTATEMENT provisions. 2. The Premium payment would not cause the policy to fail to meet the definition of a life insurance under Section 7702 of the Internal Revenue Code ("Code"). We reserve the right to require satisfactory evidence of insurability before accepting any additional Premium that increases the death benefit. Premium which does not meet the tax qualification guidelines for life insurance under the Code will not be applied to the policy. If there is current Debt on the policy, additional moneys will be considered repayment of Debt first, unless You state otherwise. PLACE OF PAYMENT All Premiums under this policy must be paid to Us at Our home office or such other location as We may select. We will notify You and any other interested parties in writing of such other locations. Premiums received by an agent will be allocated to the Subaccounts only after We receive them. PREMIUM ALLOCATION If you paid all or a portion of Your initial Premium before the Issue Date of your Policy, we credit interest to your initial Premium for the period prior to the Issue Date at a rate not less than 3% annually. On the Issue Date (unless the Trade Date is the same as the Issue Date), we allocate the premium and any accumulations to the Kemper Money Market Subaccount. The Subaccount value of the Kemper Money Market Subaccount will be allocated to the Subaccounts, according to the Premium allocation shown in the policy specifications, on the Trade Date. You may temporarily allocate a portion of Your initial Premium to any single Subaccount or to our Fixed Account to be transferred to the Subaccounts under our automatic dollar cost averaging program. Only initial Premiums may be allocated to the Fixed Account, and only for the purpose of subsequent transfers to the Subaccounts under our automatic dollar cost averaging program. (If the Issue Date is the same as the Trade Date, the Premium will be immediately allocated to the Subaccounts). GRACE PERIOD If the net Surrender Value immediately proceeding a is less than the monthly deduction for that 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 there is no current Debt on the policy, you paid 100% of the Guideline Single Premium as your Initial Premium, and payment is not received within the grace period, coverage under this policy will remain in force, but the amount paid upon death of the insured after the grace period will be limited to the return of Your total Premiums paid less any prior partial withdrawals. The Specified Amount coverage can be restored according to the REINSTATEMENT provision below. If there is any Debt on the policy or you paid 90% of the Guideline Single Premium as your Initial Premium, and payment is not received within the grace period, 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. REINSTATEMENT If this policy enters insufficient fund value status as defined on Page 10 below, and has not been surrendered for its Net Surrender Value, it may be reinstated to the Specified Amount at any time within 3 years after entering that status. The policy may also be reinstated within 3 years of policy lapse if it has not been surrendered for its Net Surrender Value. Either type of reinstatement is subject to: 18 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 this policy which existed at the date of termination of coverage. The effective date of reinstatement of a policy will be the Deduction Day that coincides with or next follows the date the application for reinstatement is approved by Us. The SUICIDE and CONTESTABILITY provisions will apply from the effective date of reinstatement. VARIABLE ACCOUNT PROVISIONS SEPARATE ACCOUNT The variable benefits under this policy are provided through the KILICO Variable Separate Account. This is called 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 has been allocated for this policy and may be allocated for certain other policies. LIABILITIES OF SEPARATE The assets equal to the reserves and other 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. We will value the assets of the Separate Account on each Valuation Date. SEPARATE ACCOUNT On any Valuation Date, the Separate Account Value is VALUE the sum of its Subaccount Values. SUBACCOUNTS The Separate Account consists of several Subaccounts as shown in the policy specifications. We may, from time to time, combine or remove Subaccounts in the Separate Account and establish additional Subaccounts of the Separate Account. In such event, We may permit You to select other Subaccounts under this policy. However, the right to select any other Subaccount is limited by the terms and conditions We may impose such transactions. 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 Page 7 19 Page 8 4. the pro-rata portion of any monthly deduction charged to the Subaccount when the Valuation Period includes a Deduction Day; minus 5. any amounts transferred or withdrawn from the Subaccount during the current Valuation Period; minus 6. any amounts loaned from the Subaccount during the current Valuation Period. FUND Each Subaccount of the Separate Account will buy shares of an investment company registered under the Investment Company Act of 1940 as an open-end diversified management investment company or shares of a separate series thereof. Each such investment company or series 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 shares of an additional series or investment company. We may also substitute other investment companies. RIGHTS RESERVED BY We reserve the right, subject to compliance with the THE COMPANY current law or as it may be changed in the future: 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 the General Account, or to add, combine or remove Subaccounts in the Separate Account. 4. To delete the shares of any of the portfolios of the fund or any other open- end investment company and to substitute, for the fund shares held in any Subaccount, the shares of another portfolio of the fund or the shares of another investment company or any other investment permitted by law; and 5. To change the way We assess charges, but not to increase the aggregate amount above that currently charged to the Separate Account and the fund in connection with the policies. When required by law, We will obtain Your approval of such changes and the approval of any regulatory authority. ACCUMULATION UNIT Each Subaccount has an accumulation unit value. When VALUE Premiums or other amounts are allocated to a Subaccount, a number of units are purchased based on the accumulation unit value of the Subaccount at the end of the Valuation Period during which the allocation is made. When amounts are transferred out of or deducted from a Subaccount, units are redeemed in a similar manner. 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 period immediately preceding. Each Valuation Period has a single accumulation unit value that is applied to each day in the period. The number of accumulation units will not change as a result of investment experience. 20 INVESTMENT EXPERIENCE Each Subaccount has its own investment experience FACTOR factor. The investment experience of a Subaccount is calculated by applying the investment experience factor to the value in each Subaccount during the 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: a. the net asset value per share of the investment held in the Subaccount determined at the end of the current Valuation Period; plus b. the per share amount of any dividend or capital gain distributions made by the investment held in the Subaccount, 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 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 Valuation Period; 3. is the factor representing the sum of the Mortality and Expense Risk Charge, stated in the policy specifications, for the number of days in the Valuation Period. NONFORFEITURE PROVISIONS CASH VALUE The cash value of this policy is equal to the sum of the Separate Account Value, plus the Loan Account Value, plus the Fixed Account Value. MONTHLY DEDUCTION On each Deduction Day, 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 riders; plus 3. the monthly Administration Charge; plus 4. the monthly Tax Expense Charge. The monthly deduction will be deducted from the Subaccounts and Fixed Account in proportion to the value that each Subaccount and Fixed Account bears to the Separate Account Value. COST OF INSURANCE We calculate the cost of insurance on each Deduction Day. The maximum cost of insurance charge equals a. times the result of b. minus c. where: a. is the maximum cost of insurance rate per $1,000 for the initial specified amount; b. is the death benefit; and c. is the cash value. Page 9 21 Page 10 COST OF INSURANCE The cost of insurance rate is based on the insured's RATE sex, issue age, coverage year, and rate class. The cost of insurance is also based on whether 90% or 100% of the Guideline Single Premium has been paid at issue. Any change in the cost of insurance rate will be on a uniform basis for all insureds of the same: 1. sex; 2. attained age at start of coverage; 3. coverage year; and 4. rate class. However, the cost of insurance rates will not exceed those shown in the Table of Guaranteed Maximum Monthly Cost of Insurance Rates per $1,000 multiplied by any rate class percent over 100. These rates are found in the policy specifications. These rates are based on the Commissioners 1980 Standard Ordinary Smoker and Nonsmoker Mortality Tables, Age Last Birthday. RIDERS The monthly charges for any riders are shown in the policy specifications. MORTALITY AND EXPENSE These charges are shown in the policy specifications. RISK CHARGE, ADMIN- ISTRATION CHARGE, TAX CHARGE, AND ANNUAL RECORDS MAINTENANCE CHARGE INSUFFICIENT FUND This policy will enter the insufficient fund value VALUE STATUS status as provided in the GRACE PERIOD provision if the Net Surrender Value immediately preceding a deduction is: 1. insufficient to cover the monthly deduction, 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 monthly deduction after entering insufficient fund value status will not be considered a reinstatement of this policy. TRANSFER, WITHDRAWAL AND LOAN PROVISIONS TRANSFERS You may direct all or part of one Subaccount's value to another Subaccount. Transfers will also be subject to the following conditions: 1. The minimum amount which may be transferred is $100 or, if smaller, the remaining value in a Subaccount; 2. No partial transfer will be made if the remaining value of any Subaccount will be less than $500 unless the transfer will eliminate Your interest in such account; 3. We reserve the right to charge $25 for each transfer in excess of 12 in a policy year. Any transfer request must clearly specify: 1. the amount which is to be transferred; and 2. the names of the Subaccounts which are affected. 22 We will only honor a telephone transfer request if a properly executed telephone transfer authorization is on file with Us. Such request for a transfer must comply with the conditions of the authorization. We reserve the right at any time and without notice to any party, to terminate, suspend, or modify these transfer rights. WITHDRAWALS You may withdraw all or part of the Cash Value that remains after We subtract any withdrawal charge. We must receive a written request that indicates the amount of the withdrawal from each Subaccount. You must return the policy to Us if You elect a total withdrawal. Withdrawals are subject to these conditions: 1. Each withdrawal must be at least $100 or the value that remains in the Subaccount if smaller; 2. A minimum of $500 must remain in the Subaccount after You make a withdrawal unless the Subaccount is eliminated by such withdrawal; 3. A minimum of $5,000 must remain in the Separate Account after You make a withdrawal. 4. The maximum You may withdraw from any Subaccount is the value of the Subaccount less the amount of any withdrawal charge. 5. Any withdrawal amount You request will be increased by the withdrawal charge. EFFECT OF A The Cash Value will be reduced by the amount of the WITHDRAWAL withdrawal. The specified amount will be reduced proportional to the reduction in Cash Value due to the partial withdrawal. We will not permit a withdrawal if it will decrease the specified amount to less than the Minimum Specified Amount stated in the Policy Specifications. WITHDRAWAL CHARGES Withdrawal charges are shown in the policy specifications. Any amount withdrawn which is not subject to a withdrawal charge will be considered a "free partial withdrawal," as referenced in the policy specifications. POLICY LOANS Policy loans may be made any time. We will lend up to a maximum loan amount of 90% of the policy's Cash Value less any applicable withdrawal charges. The amount of any new loan may not exceed the maximum loan amount less Debt on the date the loan is granted. The Preferred Loan portion of a loan will be determined on the date the loan is made, and will not be subsequently redetermined. The minimum amount of a loan is $1,000. On the date the loan is made, an amount equal to the loan will be transferred from the Subaccounts 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 Subaccount in proportion to the values that each account bears to the Separate Account Value. Should the Debt equal or exceed the Surrender Value, this policy will be subject to the GRACE PERIOD provisions. Cash values derived from Premium received by Us in the form of a check or draft will not be available for loans until 30 days after deposit of such check or draft. POLICY LOAN INTEREST The loan interest rate will be [5.50%] per year compounded daily. 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. Page 11 23 Page 12 During the existence of a loan, the portion of the Loan Account Value attributable to a Preferred Loan will earn [5.50%] per year. The remainder of the Loan Account value will earn [3.50%] per year. Interest will be earned on a daily basis and will be added to the Loan Account. If an Internal Revenue Code Section 1035(a) exchange takes place that has an outstanding loan at the time of transfer, the difference between the Cash Value and the total of all Premiums paid under the exchanged policy is considered a Preferred Loan. 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 according to the then current Premium allocation instructions. Loan repayments will be considered repayment of Preferred Loans last. EFFECTS OF POLICY The Debt on this policy, along with the withdrawal LOANS 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. TRANSFER, WITHDRAWAL We will redeem the necessary number of accumulation AND LOAN PROCEDURES units to achieve the dollar amount requested plus any applicable charges when the withdrawal, transfer or loan is made form a Subaccount. We will reduce the number of accumulation units credited in each Subaccount by the number of accumulation units redeemed. The reduction in the number of accumulation units is determined based on the accumulation unit value at the end of the Valuation Period when We receive the request, provided the request contains all required information. We will pay the amount within seven calendar days after the date We receive the request, except as provided below. DEFERMENT OF WITH- If the withdrawal, transfer or loan is to be made DRAWAL TRANSFER OR from a Subaccount, We may suspend the right of LOAN withdrawal or transfer or delay payment more than seven calendar days: 1. during any period when the New York Stock Exchange is closed other than customary weekend and holiday closings; 2. when trading in the markets normally utilized is restricted, or an emergency exists as determined by the Securities and Exchange Commission, so that disposal of investments or determination of the accumulation unit value is not practical; or 3. for such other periods as the Securities and Exchange Commission by order may permit for protection of owners. SETTLEMENT OPTIONS The Owner, or beneficiary at the death of the insured, if no election by the Owner is in effect, may elect to have all of the Net Surrender Value or Death Benefit of this policy paid in a lump sum or have the amount applied to one of the settlement options noted below. The beneficiary may elect to have the death benefit distributed as stated in Option 1 for a period not to exceed the beneficiary's life expectancy; or Options 2, or 3 based upon the life expectancy of the beneficiary as prescribed by federal regulations. The beneficiary must make this choice within sixty days of the time we receive due proof of death. An option can not be changed after the first of such payments is made. Payments must be made to a natural person, referred to below as "payee." If the beneficiary is not a natural person, the beneficiary must elect that the entire death benefit be distributed within five years of your death. Distribution of the death benefit must start within one year after your death. It may start later if prescribed by federal regulations. 24 If the total death benefit proceeds are applied under one of the annuity options, this contract must be surrendered to us. Payments for all options are derived from the applicable tables. Current annuity rates will be used if they produce greater payments than those shown in the policy. The age in the tables is the age of the payee on the last birthday before the first payment is due. The option selected must result in a periodic payment equivalent to at least $20 per month when annuity payments begin. If the annuity option selected or otherwise applied should result in a periodic payment less than the minimum required on the date payments are scheduled to begin, we reserve the right to make a lump sum payment in satisfaction of our obligation to the payee under the policy. ELECTION OF SETTLEMENT Election of a settlement option may be made by OPTION written notice to Us. This election may be made: 1. by You during the lifetime of the insured; 2. by the beneficiary if no election made by You is in effect at the time of the death of the insured; or 3. by the beneficiary if You reserve the right to the beneficiary to change an election upon the death of the insured. Such change must be made prior to the first settlement option payment. An election in effect during the lifetime of the insured will be revoked by a subsequent change of beneficiary or an assignment of this policy unless provided otherwise. OPTION 1 FIXED INSTALLMENT We will make monthly payments for a fixed number of ANNUITY installments. Payments must be made for at least 5 years, but not more than 30 years. Upon the payee's death, if the beneficiary is a natural person, we will automatically continue payments for the remainder of the certain period to the beneficiary. If the beneficiary is either an estate or trust we will pay the discounted value of the remaining payments in the specified period based on the discount rate stated in the supplemental contract. OPTION 2 LIFE ANNUITY We will make monthly payments while the payee is alive. OPTION 3 LIFE ANNUITY WITH INSTAL-We will make monthly payments for a guaranteed period LMENTS GUARANTEED and thereafter while the payee is alive. The guaranteed period must be selected at the time the settlement option is chosen. The guaranteed periods available are 5, 10, 15 and 20 years. If, at the death of the payee, payments have been made for less than five, ten, fifteen or twenty years as elected, and the beneficiary is a natural person, we will automatically continue payments for the remainder of the elected period to the beneficiary. If the beneficiary is either an estate or trust, we will pay the discounted value of the remaining payments in the specified period based on the discount rate stated in the supplemental contract. Page 13 25 Page 14 OPTION 4 JOINT AND SURVIVOR We will pay the full monthly income while both payees ANNUITY are alive. Upon the death of either payee, we will continue to pay the surviving payee a percentage of the original monthly payment. The percentage payable t the surviving payee must be selected at the time the annuity option is chosen. The percentages available are 50%, 66 2/3%, 75% and 100%. OTHER OPTIONS We may make other settlement options available. Payments are also available on a quarterly, semi-annual or annual basis. VARIABLE PAYOUT If a variable payout option is selected, the monthly OPTIONS payment will reflect the investment performance of the Subaccounts in accordance with the allocation of the lump sum distribution allocated to those Subaccounts. Allocations will not be changed thereafter, except as provided in the TRANSFERS DURING THE PAYOUT PERIOD provision. The first monthly payment is based on the guaranteed annuity option shown in the Annuity Option Table. You may elect any option available. The dollar amount of the subsequent payments may increase or decrease depending on the investment experience of each Subaccount. The number of annuity units per payments will remain fixed for each Subaccount. The number of annuity units for each Subaccount is calculated by dividing a. by b. where: a. is the portion of the initial monthly payment that can be attributed to that Subaccount; and b. is the annuity unit value for that Subaccount at the end of the Valuation Period. The Valuation Period includes the date on which the payment is made. Monthly payments, after the first payment, are calculated by summing up, for each Subaccount, the product of a. times b. where: a. is the number of annuity units per payment in each Subaccount; and b. is the annuity unit value for that Subaccount at the end of the Valuation Period. The Valuation Period includes the date on which the payment is made. After the first payment, we guarantee that the dollar amount of each payment will not be affected adversely by actual expenses or changes in mortality experience from the expense and mortality assumptions on which we based the first payment. ANNUITY UNIT VALUE The value of an annuity unit for each Subaccount at the end of any subsequent Valuation Period is determined by multiplying the result of a. times b. by c. a. is the annuity unit value for the immediately preceding Valuation Period; and b. is the net investment factor for the Valuation Period for which the annuity unit value is being calculated; and c. is the interest factor of .99993235 per calendar day of such subsequent Valuation Period to offset the effect of the assumed rate of 2.50% per year used in the Annuity Option Table. 26 The net investment factor for each Subaccount for any Valuation Period is determined by dividing a. by b. where: a. is the value of an annuity unit of the applicable Subaccount as of the end of the current Valuation Period plus or minus the per share credit or charge for taxes reserved; and b. is the value of an annuity unit of the applicable Subaccount as of the end of the immediately preceding Valuation Period, plus or minus the per share credit or charge for taxes reserved. FIXED PAYOUT If a fixed payout option is chosen, your payment OPTION will be fixed in an amount throughout the payout period. We determine the amount of your fixed payment by multiplying the amount applied to the option by a rate determined by Us which is not less than the rate specified in the Settlement Option Tables below. The amount of the payment will not change throughout the payout period. TRANSFERS DURING During the payout period, the payee may choose to THE PAYOUT PERIOD change the Subaccounts or the relative weighting of the Subaccounts on which variable payments are based, or the relative proportions of fixed and variable payments. A transfer may be made subject to the following: 1. The payee must send us a written notice in a form satisfactory to us; 2. One transfer is permitted each twelve month period from the date of the first annuity payment. We must receive notice of any such transfer at least thirty days prior to the effective date of the transfer; 3. A payee may not base variable payments on more than three Subaccounts after any transfer; 4. At least $1,000 of annuity unit value or annuity reserve value must be transferred from a Subaccount or from the General Account; and 5. At least $1,000 of annuity unit value or annuity reserve value must remain in the account from which the transfer was made. When a transfer is made between Subaccounts, the number of annuity units per payment attributable to a Subaccount to which a transfer is made is equal to a. multiplied by b. divided by c., where: a. is the number of annuity units per payment in the Subaccount from which transfer is being made; b. is the annuity unit value for the Subaccount from which the transfer is being made; and c. is the annuity unit value for the Subaccount to which transfer is being made. When a transfer is made from the General Acccount to a Subaccount, the number of annuity units per payment attributable to a Subaccount to which transfer is made is equal to a. divided by b. divided by c., where: a. is the General Account annuity value being transferred; and b. is the present value of $1.00 per payment period using the attained age(s) of the payee(s) and any remaining guaranteed payments that may be due at the time of the transfer; and c. is the annuity unit value for the Subaccount to which the transfer is being made. The General Account annuity value equals the present value of the remaining fixed annuity payments using the same interest and mortality basis used to calculated the fixed annuity payments. Page 15 27 Page 16 The amount of money allocated to the General Account in case of a transfer from a Subaccount equals the annuity reserve for the payee's interest in such Subaccount. The annuity reserve is the product of a. multiplied by b. multiplied by c. where: a. is the number of annuity units representing the payee's interst in such Subaccount per annuity payment; b. is the annuity unit value for such Subaccount; and c. is the present value of $1.00 per payment period using the attained age(s) of the payee(s) and any remaining guaranteed payemtns that may be due at the time of the transfer. Money allocated to the General Account upon such transfer will be applied under the same annuity payout option as originally elected. Guaranteed period payments will be adjusted to reflect the number of guaranteed payments already made. If all guaranteed payments have already been made, no further payments will be guaranteed. All amounts and annuity unit values are determined as of the end of the Valuation Period preceding the effective date of the transfer. We reserve the right at any time and without notice to any party to terminate, suspend or modify these transfer privileges. SUPPLEMENTARY A supplementary agreement will be issued to reflect AGREEMENT payments that will be made under a settlement option. If payment is made as a death benefit distribution, the effective date will be the date of death. Otherwise, the effective date will be the date chosen by the Owner. DATE OF FIRST PAYMENT The effective date under an option will be the date of death. Interest will start to accrue on the effective date. If the normal effective date is the 29th, 30th, or 31st of the month, the effective date will be the 28th day of the that month. EVIDENCE OF AGE, SEX We may require satisfactory evidence of the age, sex AND SURVIVAL and the continued survival of any person on whose life the income is based. MISSTATEMENT OF AGE If the age or sex of the payee has been misstated, OR SEX the amount payable under the annuity option selected will be such as the lump sum applied would have purchased at the correct age or sex. Interest not to exceed 6% compounded each year will be charged to any overpayment or credited to any underpayment against future payments We may make under the supplementary agreement for the option selected. BASIS OF ANNUITY The guaranteed payments are based on an interest rate OPTIONS of 2.50% per year and, where mortality is involved, the "1983 Table a" individual annuity mortality table developed by the Society of Actuaries, projected using Projection Scale G. We may also make available variable annuity payment options based on assumed investment rates other than 2.50%. CREDITORS The proceeds of this policy and any payment under an annuity option will be exempt from the claim of creditors and from legal process to the extent permitted by law. 28 ANNUITY OPTION TABLE AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000 OF VALUE APPLIED OPTION ONE - FIXED INSTALLMENT ANNUITY
Number Number Number Number of years Monthly of years Monthly of years Monthly of years Monthly selected Payment selected Payment selected Payment selected Payment - ------------------------------------------------------------------------------------------------------------------ 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
OPTION TWO AND THREE - LIFE ANNUITY WITH INSTALLMENTS GUARANTEED:
Age of MONTHLY PAYMENTS GUARANTEED Age of MONTHLY PAYMENTS GUARANTEED Male Female Payee NONE 60 120 180 240 Payee NONE 60 120 180 240 55 4.17 4.16 4.13 4.06 3.96 55 3.87 3.86 3.84 3.81 3.75 56 4.27 4.25 4.21 4.14 4.03 56 3.95 3.94 3.92 3.88 3.82 57 4.36 4.35 4.30 4.22 4.09 57 4.03 4.02 4.00 3.95 3.88 58 4.46 4.45 4.40 4.30 4.16 58 4.11 4.11 4.08 4.03 3.95 59 4.57 4.55 4.50 4.39 4.22 59 4.21 4.20 4.17 4.11 4.01 60 4.69 4.67 4.60 4.48 4.29 60 4.30 4.29 4.26 4.19 4.08 61 4.81 4.79 4.71 4.57 4.36 61 4.41 4.40 4.35 4.28 4.15 62 4.94 4.92 4.83 4.66 4.43 62 4.52 4.50 4.46 4.37 4.23 63 5.09 5.05 4.95 4.76 4.49 63 4.64 4.62 4.56 4.46 4.30 64 5.24 5.20 5.08 4.86 4.56 64 4.76 4.74 4.68 4.56 4.37 65 5.40 5.35 5.21 4.96 4.62 65 4.90 4.87 4.80 4.66 4.45 66 5.57 5.52 5.35 5.06 4.69 66 5.04 5.01 4.93 4.77 4.52 67 5.75 5.69 5.49 5.17 4.75 67 5.19 5.16 5.06 4.87 4.59 68 5.95 5.87 5.64 5.27 4.81 68 5.36 5.32 5.20 4.98 4.66 69 6.15 6.07 5.80 5.37 4.86 69 5.53 5.49 5.35 5.10 4.73 70 6.38 6.27 5.96 5.48 4.91 70 5.72 5.68 5.51 5.21 4.80 71 6.61 6.49 6.12 5.58 4.96 71 5.93 5.87 5.67 5.33 4.86 72 6.86 6.72 6.29 5.68 5.00 72 6.15 6.08 5.85 5.44 4.92 73 7.13 6.96 6.47 5.77 5.04 73 6.39 6.31 6.03 5.56 4.97 74 7.42 7.21 6.64 5.86 5.08 74 6.65 6.55 6.21 5.67 5.02 75 7.72 7.48 6.82 5.95 5.11 75 6.93 6.81 6.41 5.78 5.06 76 8.05 7.76 7.00 6.03 5.14 76 7.24 7.08 6.60 5.88 5.10 77 8.40 8.06 7.18 6.11 5.17 77 7.57 7.38 6.80 5.98 5.13 78 8.77 8.37 7.35 6.18 5.19 78 7.92 7.69 7.01 6.07 5.16 79 9.18 8.69 7.53 6.25 5.20 79 8.31 8.02 7.21 6.15 5.18 80 9.60 9.03 7.70 6.31 5.22 80 8.72 8.37 7.41 6.23 5.20 81 10.06 9.38 7.86 6.36 5.23 81 9.17 8.74 7.61 6.30 5.22 82 10.55 9.74 8.02 6.41 5.24 82 9.66 9.13 7.80 6.35 5.23 83 11.07 10.12 8.17 6.45 5.25 83 10.20 9.54 7.98 6.41 5.24 84 11.63 10.50 8.32 6.49 5.26 84 10.77 9.96 8.15 6.45 5.25 85 12.22 10.89 8.45 6.52 5.26 85 11.39 10.40 8.31 6.49 5.26
OPTION FOUR - JOINT AND 100% SURVIVOR ANNUITY
Age of Age of Female Payee Male Payee 55 60 65 70 75 80 85 55 3.49 3.66 3.81 3.93 4.02 4.08 4.12 60 3.61 3.83 4.05 4.24 4.40 4.52 4.59 65 3.69 3.97 4.28 4.57 4.84 5.05 5.20 70 3.76 4.09 4.47 4.89 5.31 5.67 5.95 75 3.80 4.17 4.63 5.16 5.75 6.34 6.83 80 3.83 4.23 4.73 5.37 6.14 6.99 7.80 85 3.84 4.26 4.80 5.51 6.44 7.55 8.75
Rates for ages not shown here will be provided upon request. 29 ANNUITY OPTION TABLE AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000 OF VALUE APPLIED OPTION ONE - FIXED INSTALLMENT ANNUITY
Number Number Number Number of years Monthly of years Monthly of years Monthly of years Monthly selected Payment selected Payment selected Payment selected Payment 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
OPTIONS TWO AND THREE - LIFE ANNUITY WITH INSTALLMENTS GUARANTEED MONTHLY PAYMENTS GUARANTEED
AGE NONE 60 120 180 240 55 4.02 4.01 3.99 3.94 3.86 56 4.11 4.10 4.07 4.01 3.92 57 4.20 4.19 4.15 4.09 3.99 58 4.29 4.28 4.24 4.17 4.05 59 4.39 4.38 4.33 4.25 4.12 60 4.50 4.48 4.43 4.34 4.19 61 4.61 4.59 4.53 4.43 4.26 62 4.73 4.71 4.64 4.52 4.33 63 4.86 4.84 4.76 4.61 4.40 64 5.00 4.97 4.88 4.71 4.47 65 5.15 5.11 5.01 4.81 4.54 66 5.30 5.26 5.14 4.92 4.61 67 5.47 5.43 5.28 5.02 4.68 68 5.65 5.60 5.43 5.13 4.74 69 5.84 5.78 5.58 5.24 4.80 70 6.05 5.97 5.74 5.35 4.86 71 6.27 6.18 5.90 5.46 4.91 72 6.50 6.40 6.07 5.56 4.96 73 6.76 6.63 6.25 5.67 5.01 74 7.03 6.88 6.43 5.77 5.05 75 7.32 7.14 6.62 5.87 5.09 76 7.64 7.42 6.80 5.96 5.12 77 7.98 7.72 6.99 6.05 5.15 78 8.34 8.03 7.18 6.13 5.17 79 8.73 8.36 7.37 6.20 5.19 80 9.16 8.70 7.56 6.27 5.21 81 9.61 9.06 7.74 6.33 5.23 82 10.10 9.44 7.91 6.38 5.24 83 10.63 9.83 8.08 6.43 5.25 84 11.19 10.23 8.24 6.47 5.25 85 11.80 10.64 8.38 6.50 5.26
OPTION FOUR - JOINT AND 100% SURVIVOR ANNUITY
Age of Age of Secondary Payee Primary Payee 55 60 65 70 75 80 85 55 3.51 3.64 3.76 3.85 3.92 3.96 3.99 60 3.64 3.84 4.02 4.18 4.29 4.38 4.43 65 3.76 4.02 4.29 4.54 4.75 4.90 5.00 70 3.85 4.18 4.54 4.91 5.25 5.53 5.74 75 3.92 4.29 4.75 5.25 5.77 6.26 6.64 80 3.96 4.38 4.90 5.53 6.26 7.00 7.69 85 3.99 4.43 5.00 5.74 6.64 7.69 8.76
Rates for ages not shown here will be provided upon request. 30 INDIVIDUAL MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY NON-PARTICIPATING 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 is a legal contract between the owner and Kemper Investors Life Insurance Company. READ YOUR POLICY CAREFULLY. KEMPER INVESTORS LIFE INSURANCE COMPANY 1 Kemper Drive, Long Grove, Illinois 60049-0001 EX-1.A(5)(B) 3 FORM OF SURVIVORSHIP POLICY 1 Exhibit 1 A (5)(B) KEMPER INVESTORS LIFE INSURANCE COMPANY [ZURICH KEMPER -LOGO] A Stock Life Insurance Company 1 Kemper Drive Long Grove, Illinois 60049-0001 LIVES INSURED: JOHN DOE ISSUE AGE: 35 JANE DOE 35 EFFECTIVE DATE: JAN 01 1999 POLICY NO: 0000000 SINGLE PREMIUM: $ 10,000 INITIAL SPECIFIED AMOUNT: $ 100,000 RIGHT TO CANCEL - At any time within 10 days of receiving this policy, you may return it to us or to the agent through whom it was purchased. Immediately upon our receipt, this policy will be voided as if it had never been in force. Within ten days we will pay an amount equal to premiums paid for this policy less any Debt. On the Maturity Date, if either of the Lives Insured is living and this policy is in force, we will pay the Net Surrender Value to you. If both Lives Insured die 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 Surviving 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 and payment of the single premium. The provisions on this cover and the pages that follow are part of this policy. Signed for Kemper Investors Life Insurance Company at its home offices in Long Grove, Illinois. Secretary President SURVIVORSHIP, MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY PAYABLE ON THE SECOND DEATH NON-PARTICIPATING 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 is a legal contract between the owner and Kemper Investors Life Insurance Company. READ THIS POLICY CAREFULLY. 2 TABLE OF CONTENTS PAGE NO. APPLICATION Follows Policy Specifications DEATH BENEFIT PROVISIONS 2 - 3 Payment of Death Benefits 2 Amount Payable Upon Death 3 DEFINITIONS 1 ENDORSEMENTS, if any Follows Settlement Option Table GENERAL PROVISIONS 1 - 2 The Contract 1 Contestability 1 Assignment 2 Reports 2 NONFORFEITURE PROVISIONS 4-5 OWNERSHIP PROVISIONS 2 Owner of Policy 2 Change of Ownership 2 Beneficiary 2 POLICY SPECIFICATIONS Follows Index PREMIUM PROVISIONS 3 SETTLEMENT OPTION TABLE Follows Page 7 TRANSFER, WITHDRAWAL AND LOAN PROVISIONS 5 - 6 Transfers 5 Withdrawals 5 Withdrawal Charges 5 Loans 5 Transfer, Withdrawal and Loan Procedures 6 VARIABLE ACCOUNT PROVISIONS 3 - 4 Separate Account 3 Liabilities of Separate Account 3 Separate Account Value 3 Subaccounts 4 Rights Reserved By The Company 4 Accumulation Unit Value 4 3 POLICY SPECIFICATIONS INSURED LIVES JOHN DOE ISSUE AGE 35 JANE DOE 35 EFFECTIVE DATE JAN 01 1999 POLICY NUMBER 0000000 INITIAL SPECIFIED AMOUNT $100,000 ISSUE DATE JAN 01 1999 COVERAGE INFORMATION RATE INITIAL CLASS SPECIFIED MATURITY OR MONTHLY BENEFIT DESCRIPTION PERCENT AMOUNT EXPIRY DATE RATE MODIFIED SINGLE PREMIUM VARIABLE LIFE* 100 $100,000 [JAN 01 2064] SEE PAGE D * IT IS POSSIBLE THAT COVERAGE WILL EXPIRE PRIOR TO THE MATURITY DATE SHOWN IF PREMIUMS PAID ARE INSUFFICIENT TO CONTINUE THE COVERAGE TO SUCH DATE. EVEN IF COVERAGE CONTINUES TO THE MATURITY DATE, THERE MAY BE NO SURRENDER VALUE TO BE PAID ON THAT DATE. PREMIUM INFORMATION SINGLE PREMIUM [$10,000] INSURED RATE CLASS STANDARD TOBACCO/NON-TOBACCO Page A 4 POLICY SPECIFICATIONS INSURED LIVES JOHN DOE ISSUE AGE 35 JANE DOE 35 EFFECTIVE DATE JAN 01 1999 POLICY NUMBER [000000] MONTHLY PROCESSING DAY DAY 01 OF EACH MONTH DEDUCTION PERIOD [65 YEARS, 00 MONTHS] MINIMUM SPECIFIED AMOUNT AFTER WITHDRAWAL [$10,000] MINIMUM WITHDRAWAL AMOUNT [$100.00] MINIMUM NET SURRENDER VALUE AFTER WITHDRAWAL [$5,000] MINIMUM LOAN AMOUNT [$1,000.00] POLICY LOAN INTEREST CHARGED [5.50%] POLICY LOAN INTEREST CREDITED Preferred Loan Portion [5.50%] Non-Preferred Loan Portion [3.50%] MINIMUM PREMIUM [$10,000.00] IRC SECTION 7702 TEST GUIDELINE PREMIUM TABLE OF DEATH BENEFIT FACTORS
ATTAINED ATTAINED ATTAINED ATTAINED AGE* PERCENT AGE* PERCENT AGE* PERCENT AGE* PERCENT 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
*ATTAINED AGE IS THE AGE ON LAST BIRTHDAY AS OF THE BEGINNING OF THE POLICY YEAR. Page B 5 POLICY SPECIFICATIONS LIVES INSURED JOHN DOE ISSUE AGE 35 JANE DOE 35 ISSUE DATE JAN 01 1999 POLICY NUMBER [000000] SEPARATE ACCOUNT INITIAL PREMIUM ALLOCATION KEMPER AGGRESSIVE GROWTH PORTFOLIO 100% KEMPER TECHNOLOGY GROWTH PORTFOLIO KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO KEMPER SMALL CAP GROWTH PORTFOLIO KEMPER SMALL CAP VALUE PORTFOLIO KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO KEMPER INTERNATIONAL PORTFOLIO KEMPER INTERNATIONAL GROWTH & INCOME PORTFOLIO KEMPER GLOBAL BLUE CHIP PORTFOLIO KEMPER GROWTH PORTFOLIO KEMPER CONTRARIAN VALUE PORTFOLIO KEMPER BLUE CHIP PORTFOLIO KEMPER VALUE+GROWTH PORTFOLIO KEMPER HORIZON 20+ PORTFOLIO KEMPER TOTAL RETURN PORTFOLIO KEMPER HORIZON 10+ PORTFOLIO KEMPER HIGH YIELD PORTFOLIO KEMPER HORIZON 5 PORTFOLIO KEMPER GLOBAL INCOME PORTFOLIO KEMPER INVESTMENT GRADE BOND PORTFOLIO KEMPER GOVERNMENT SECURITIES PORTFOLIO KEMPER MONEY MARKET PORTFOLIO SCUDDER VLIF GLOBAL DISCOVERY PORTFOLIO SCUDDER VLIF GROWTH AND INCOME PORTFOLIO SCUDDER VLIF INTERNATIONAL PORTFOLIO SCUDDER VLIF CAPITAL GROWTH PORTFOLIO JANUS ASPEN GROWTH PORTFOLIO JANUS ASPEN GROWTH AND INCOME PORTFOLIO WARBURG EMERGING MARKETS PORTFOLIO WARBURG POST-VENTURE CAPITAL PORTFOLIO ASSET BASED CHARGES ARE ASSESSED FOR THE ABOVE SUBACCOUNTS. FOR A COMPLETE DISCUSSION OF ASSET BASED CHARGES, PLEASE REFER TO SCHEDULE 1. Page C 6 POLICY SPECIFICATIONS LIVES INSURED JOHN DOE ISSUE AGE 35 JANE DOE 35 ISSUE DATE JAN 01 1999 POLICY NUMBER [000000] TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES* PER $1,000
ATTAINED NON- ATTAINED NON- AGE TOBACCO TOBACCO AGE TOBACCO TOBACCO - ------------------------------------------------------------------------------------------------------------ 0 0.219480 0.219480 50 0.428690 0.837880 1 0.085880 0.085880 51 0.468090 0.916270 2 0.082540 0.082540 52 0.513380 1.004870 3 0.080880 0.080880 53 0.565410 1.105400 4 0.077540 0.077540 54 0.623350 1.215380 5 0.073370 0.073370 55 0.688070 1.333150 6 0.069200 0.069200 56 0.758730 1.457890 7 0.065030 0.065030 57 0.833670 1.589640 8 0.062530 0.062530 58 0.917110 1.728430 9 0.061690 0.061690 59 1.010780 1.877720 10 0.062530 0.062530 60 1.115550 2.044410 11 0.067530 0.067530 61 1.232310 2.232910 12 0.076700 0.076700 62 1.367070 2.445950 13 0.089220 0.089220 63 1.519910 2.684600 14 0.103400 0.103400 64 1.690090 2.946500 15 0.113420 0.146810 65 1.876860 3.224930 16 0.123430 0.163510 66 2.079500 3.517450 17 0.130940 0.175200 67 2.297270 3.821590 18 0.135950 0.184390 68 2.534600 4.141890 19 0.139290 0.190240 69 2.798580 4.490890 20 0.140130 0.193580 70 3.098170 4.877870 21 0.138460 0.193580 71 3.441600 5.314990 22 0.135950 0.190240 72 3.839990 5.812080 23 0.132610 0.186890 73 4.293280 6.366660 24 0.129280 0.181880 74 4.794460 6.979050 25 0.125100 0.176030 75 5.333740 7.638620 26 0.122600 0.172690 76 5.907380 8.318710 27 0.120930 0.171020 77 6.511600 9.007620 28 0.120090 0.171020 78 7.150730 9.710250 29 0.120090 0.173530 79 7.845900 10.451730 30 0.120930 0.177710 80 8.620930 11.258160 31 0.123430 0.183550 81 9.498890 12.154910 32 0.126770 0.191070 82 10.501350 13.160810 33 0.131780 0.201100 83 11.628210 14.262960 34 0.137620 0.212790 84 12.862100 15.427670 35 0.144300 0.227000 85 14.178860 16.617240 36 0.151820 0.243720 86 15.565070 17.803170 37 0.161840 0.264620 87 17.002260 19.039280 38 0.172690 0.288040 88 18.486430 20.348230 39 0.184390 0.314810 89 20.041320 21.671680 40 0.198590 0.345780 90 21.693700 23.030110 41 0.213630 0.379270 91 23.488560 24.468300 42 0.229510 0.416120 92 25.504290 26.169550 43 0.247060 0.456350 93 27.961930 28.406850 44 0.266290 0.500790 94 31.383850 31.563380 45 0.288040 0.547780 95 36.798270 36.798270 46 0.311460 0.596470 96 46.588990 46.588990 47 0.336570 0.649400 97 67.043870 67.043870 48 0.364190 0.706570 98 83.333330 83.333330 49 0.394340 0.768830 99 83.333330 83.333330
*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 1 OF THE POLICY SPECIFICATIONS. THE RATES ACTUALLY CHARGED MAY BE REDUCED IN ACCORDANCE WITH THE COST OF INSURANCE RATE SECTION. Page D 7 GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
-------------------------------------------------------------- MALE NON-TOBACCO -------------------------------------------------------------- ATTAINED ATTAINED AGE AGE ------------------------------ ----------------------------- 0 0.219480 50 0.428690 ------------------------------ ----------------------------- 1 0.085880 51 0.468090 ------------------------------ ----------------------------- 2 0.082540 52 0.513380 ------------------------------ ----------------------------- 3 0.080880 53 0.565410 ------------------------------ ----------------------------- 4 0.077540 54 0.623350 ------------------------------ ----------------------------- 5 0.073370 55 0.688070 ------------------------------ ----------------------------- 6 0.069200 56 0.758730 ------------------------------ ----------------------------- 7 0.065030 57 0.833670 ------------------------------ ----------------------------- 8 0.062530 58 0.917110 ------------------------------ ----------------------------- 9 0.061690 59 1.010780 ------------------------------ ----------------------------- 10 0.062530 60 1.115550 ------------------------------ ----------------------------- 11 0.067530 61 1.232310 ------------------------------ ----------------------------- 12 0.076700 62 1.367070 ------------------------------ ----------------------------- 13 0.089220 63 1.519910 ------------------------------ ----------------------------- 14 0.103400 64 1.690090 ------------------------------ ----------------------------- 15 0.113420 65 1.876860 ------------------------------ ----------------------------- 16 0.123430 66 2.079500 ------------------------------ ----------------------------- 17 0.130940 67 2.297270 ------------------------------ ----------------------------- 18 0.135950 68 2.534600 ------------------------------ ----------------------------- 19 0.139290 69 2.798580 ------------------------------ ----------------------------- 20 0.140130 70 3.098170 ------------------------------ ----------------------------- 21 0.138460 71 3.441600 ------------------------------ ----------------------------- 22 0.135950 72 3.839990 ------------------------------ ----------------------------- 23 0.132610 73 4.293280 ------------------------------ ----------------------------- 24 0.129280 74 4.794460 ------------------------------ ----------------------------- 25 0.125100 75 5.333740 ------------------------------ ----------------------------- 26 0.122600 76 5.907380 ------------------------------ ----------------------------- 27 0.120930 77 6.511600 ------------------------------ ----------------------------- 28 0.120090 78 7.150730 ------------------------------ ----------------------------- 29 0.120090 79 7.845900 ------------------------------ ----------------------------- 30 0.120930 80 8.620930 ------------------------------ ----------------------------- 31 0.123430 81 9.498890 ------------------------------ ----------------------------- 32 0.126770 82 10.501350 ------------------------------ ----------------------------- 33 0.131780 83 11.628210 ------------------------------ ----------------------------- 34 0.137620 84 12.862100 ------------------------------ ----------------------------- 35 0.144300 85 14.178860 ------------------------------ ----------------------------- 36 0.151820 86 15.565070 ------------------------------ ----------------------------- 37 0.161840 87 17.002260 ------------------------------ ----------------------------- 38 0.172690 88 18.486430 ------------------------------ ----------------------------- 39 0.184390 89 20.041320 ------------------------------ ----------------------------- 40 0.198590 90 21.693700 ------------------------------ ----------------------------- 41 0.213630 91 23.488560 ------------------------------ ----------------------------- 42 0.229510 92 25.504290 ------------------------------ ----------------------------- 43 0.247060 93 27.961930 ------------------------------ ----------------------------- 44 0.266290 94 31.383850 ------------------------------ ----------------------------- 45 0.288040 95 36.798270 ------------------------------ ----------------------------- 46 0.311460 96 46.588990 ------------------------------ ----------------------------- 47 0.336570 97 67.043870 ------------------------------ ----------------------------- 48 0.364190 98 83.333330 ------------------------------ ----------------------------- 49 0.394340 99 83.333330 ------------------------------ -----------------------------
8 GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
-------------------------------------------------------------- MALE TOBACCO ------------------------------- ------------------------------- ATTAINED ATTAINED AGE AGE ------------------------------ ----------------------------- 0 0.219480 50 0.837880 ------------------------------ ----------------------------- 1 0.085880 51 0.916270 ------------------------------ ----------------------------- 2 0.082540 52 1.004870 ------------------------------ ----------------------------- 3 0.080880 53 1.105400 ------------------------------ ----------------------------- 4 0.077540 54 1.215380 ------------------------------ ----------------------------- 5 0.073370 55 1.333150 ------------------------------ ----------------------------- 6 0.069200 56 1.457890 ------------------------------ ----------------------------- 7 0.065030 57 1.589640 ------------------------------ ----------------------------- 8 0.062530 58 1.728430 ------------------------------ ----------------------------- 9 0.061690 59 1.877720 ------------------------------ ----------------------------- 10 0.062530 60 2.044410 ------------------------------ ----------------------------- 11 0.067530 61 2.232910 ------------------------------ ----------------------------- 12 0.076700 62 2.445950 ------------------------------ ----------------------------- 13 0.089220 63 2.684600 ------------------------------ ----------------------------- 14 0.103400 64 2.946500 ------------------------------ ----------------------------- 15 0.146810 65 3.224930 ------------------------------ ----------------------------- 16 0.163510 66 3.517450 ------------------------------ ----------------------------- 17 0.175200 67 3.821590 ------------------------------ ----------------------------- 18 0.184390 68 4.141890 ------------------------------ ----------------------------- 19 0.190240 69 4.490890 ------------------------------ ----------------------------- 20 0.193580 70 4.877870 ------------------------------ ----------------------------- 21 0.193580 71 5.314990 ------------------------------ ----------------------------- 22 0.190240 72 5.812080 ------------------------------ ----------------------------- 23 0.186890 73 6.366660 ------------------------------ ----------------------------- 24 0.181880 74 6.979050 ------------------------------ ----------------------------- 25 0.176030 75 7.638620 ------------------------------ ----------------------------- 26 0.172690 76 8.318710 ------------------------------ ----------------------------- 27 0.171020 77 9.007620 ------------------------------ ----------------------------- 28 0.171020 78 9.710250 ------------------------------ ----------------------------- 29 0.173530 79 10.451730 ------------------------------ ----------------------------- 30 0.177710 80 11.258160 ------------------------------ ----------------------------- 31 0.183550 81 12.154910 ------------------------------ ----------------------------- 32 0.191070 82 13.160810 ------------------------------ ----------------------------- 33 0.201100 83 14.262960 ------------------------------ ----------------------------- 34 0.212790 84 15.247670 ------------------------------ ----------------------------- 35 0.227000 85 16.617240 ------------------------------ ----------------------------- 36 0.243720 86 17.803170 ------------------------------ ----------------------------- 37 0.264620 87 19.039280 ------------------------------ ----------------------------- 38 0.288040 88 20.348230 ------------------------------ ----------------------------- 39 0.314810 89 21.671680 ------------------------------ ----------------------------- 40 0.345780 90 23.030110 ------------------------------ ----------------------------- 41 0.379270 91 24.468300 ------------------------------ ----------------------------- 42 0.416120 92 26.169550 ------------------------------ ----------------------------- 43 0.456350 93 28.406850 ------------------------------ ----------------------------- 44 0.500790 94 31.563380 ------------------------------ ----------------------------- 45 0.547780 95 36.798270 ------------------------------ ----------------------------- 46 0.596470 96 46.588990 ------------------------------ ----------------------------- 47 0.649400 97 67.043870 ------------------------------ ----------------------------- 48 0.706570 98 83.333330 ------------------------------ ----------------------------- 49 0.768830 99 83.333330 ------------------------------ -----------------------------
9 GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
-------------------------------------------------------------- FEMALE NON-TOBACCO -------------------------------------------------------------- ATTAINED ATTAINED AGE AGE ------------------------------ ----------------------------- 0 0.156830 50 0.362520 ------------------------------ ----------------------------- 1 0.070030 51 0.390150 ------------------------------ ----------------------------- 2 0.066700 52 0.421990 ------------------------------ ----------------------------- 3 0.065030 53 0.457190 ------------------------------ ----------------------------- 4 0.064190 54 0.493240 ------------------------------ ----------------------------- 5 0.062530 55 0.531830 ------------------------------ ----------------------------- 6 0.060860 56 0.570440 ------------------------------ ----------------------------- 7 0.059190 57 0.608230 ------------------------------ ----------------------------- 8 0.058360 58 0.646040 ------------------------------ ----------------------------- 9 0.057520 59 0.688910 ------------------------------ ----------------------------- 10 0.056690 60 0.739370 ------------------------------ ----------------------------- 11 0.058360 61 0.801660 ------------------------------ ----------------------------- 12 0.060860 62 0.879170 ------------------------------ ----------------------------- 13 0.064190 63 0.974480 ------------------------------ ----------------------------- 14 0.068360 64 1.081730 ------------------------------ ----------------------------- 15 0.071700 65 1.197600 ------------------------------ ----------------------------- 16 0.075040 66 1.317890 ------------------------------ ----------------------------- 17 0.077540 67 1.440910 ------------------------------ ----------------------------- 18 0.080040 68 1.568370 ------------------------------ ----------------------------- 19 0.082540 69 1.710530 ------------------------------ ----------------------------- 20 0.084210 70 1.877720 ------------------------------ ----------------------------- 21 0.085880 71 2.082070 ------------------------------ ----------------------------- 22 0.086720 72 2.333340 ------------------------------ ----------------------------- 23 0.088380 73 2.635430 ------------------------------ ----------------------------- 24 0.090050 74 2.984600 ------------------------------ ----------------------------- 25 0.091720 75 3.376280 ------------------------------ ----------------------------- 26 0.094220 76 3.802330 ------------------------------ ----------------------------- 27 0.095890 77 4.261570 ------------------------------ ----------------------------- 28 0.098400 78 4.761660 ------------------------------ ----------------------------- 29 0.101730 79 5.319450 ------------------------------ ----------------------------- 30 0.104240 80 5.958680 ------------------------------ ----------------------------- 31 0.107580 81 6.700420 ------------------------------ ----------------------------- 32 0.110910 82 7.564140 ------------------------------ ----------------------------- 33 0.115090 83 8.550150 ------------------------------ ----------------------------- 34 0.120090 84 9.651690 ------------------------------ ----------------------------- 35 0.125940 85 10.861090 ------------------------------ ----------------------------- 36 0.134280 86 12.174410 ------------------------------ ----------------------------- 37 0.144300 87 13.594640 ------------------------------ ----------------------------- 38 0.155160 88 15.128280 ------------------------------ ----------------------------- 39 0.166850 89 16.793990 ------------------------------ ----------------------------- 40 0.181050 90 18.613420 ------------------------------ ----------------------------- 41 0.196080 91 20.640050 ------------------------------ ----------------------------- 42 0.211120 92 22.968510 ------------------------------ ----------------------------- 43 0.226170 93 25.797340 ------------------------------ ----------------------------- 44 0.241210 94 29.586210 ------------------------------ ----------------------------- 45 0.257930 95 35.366190 ------------------------------ ----------------------------- 46 0.275490 96 45.525080 ------------------------------ ----------------------------- 47 0.294730 97 66.318680 ------------------------------ ----------------------------- 48 0.314810 98 83.333330 ------------------------------ ----------------------------- 49 0.337410 99 83.333330 ------------------------------ -----------------------------
10 GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
-------------------------------------------------------------- FEMALE TOBACCO -------------------------------------------------------------- ATTAINED ATTAINED AGE AGE ------------------------------ ----------------------------- 0 0.156830 50 0.566250 ------------------------------ ----------------------------- 1 0.070030 51 0.607390 ------------------------------ ----------------------------- 2 0.066700 52 0.654440 ------------------------------ ----------------------------- 3 0.065030 53 0.706570 ------------------------------ ----------------------------- 4 0.064190 54 0.759570 ------------------------------ ----------------------------- 5 0.062530 55 0.814290 ------------------------------ ----------------------------- 6 0.060860 56 0.868210 ------------------------------ ----------------------------- 7 0.059190 57 0.918800 ------------------------------ ----------------------------- 8 0.058360 58 0.968570 ------------------------------ ----------------------------- 9 0.057520 59 1.021750 ------------------------------ ----------------------------- 10 0.056690 60 1.085110 ------------------------------ ----------------------------- 11 0.058360 61 1.164600 ------------------------------ ----------------------------- 12 0.060860 62 1.267040 ------------------------------ ----------------------------- 13 0.064190 63 1.391670 ------------------------------ ----------------------------- 14 0.068360 64 1.530960 ------------------------------ ----------------------------- 15 0.080040 65 1.678160 ------------------------------ ----------------------------- 16 0.084210 66 1.828210 ------------------------------ ----------------------------- 17 0.088380 67 1.973420 ------------------------------ ----------------------------- 18 0.092560 68 2.120610 ------------------------------ ----------------------------- 19 0.095060 69 2.280960 ------------------------------ ----------------------------- 20 0.097560 70 2.470900 ------------------------------ ----------------------------- 21 0.099230 71 2.712220 ------------------------------ ----------------------------- 22 0.101730 72 3.008860 ------------------------------ ----------------------------- 23 0.104240 73 3.363220 ------------------------------ ----------------------------- 24 0.106740 74 3.769070 ------------------------------ ----------------------------- 25 0.109240 75 4.214910 ------------------------------ ----------------------------- 26 0.113420 76 4.691660 ------------------------------ ----------------------------- 27 0.116760 77 5.192770 ------------------------------ ----------------------------- 28 0.120930 78 5.725870 ------------------------------ ----------------------------- 29 0.125940 79 6.310570 ------------------------------ ----------------------------- 30 0.131780 80 6.970840 ------------------------------ ----------------------------- 31 0.136790 81 7.726990 ------------------------------ ----------------------------- 32 0.142630 82 8.595770 ------------------------------ ----------------------------- 33 0.150150 83 9.611100 ------------------------------ ----------------------------- 34 0.158500 84 10.726950 ------------------------------ ----------------------------- 35 0.167680 85 11.929990 ------------------------------ ----------------------------- 36 0.181880 86 13.214160 ------------------------------ ----------------------------- 37 0.198590 87 14.570110 ------------------------------ ----------------------------- 38 0.217810 88 16.008410 ------------------------------ ----------------------------- 39 0.238700 89 17.532150 ------------------------------ ----------------------------- 40 0.263790 90 19.256820 ------------------------------ ----------------------------- 41 0.290550 91 21.156900 ------------------------------ ----------------------------- 42 0.317320 92 23.319700 ------------------------------ ----------------------------- 43 0.344100 93 25.937870 ------------------------------ ----------------------------- 44 0.370890 94 29.586210 ------------------------------ ----------------------------- 45 0.399370 95 35.366190 ------------------------------ ----------------------------- 46 0.428690 96 45.525080 ------------------------------ ----------------------------- 47 0.458870 97 66.318680 ------------------------------ ----------------------------- 48 0.491570 98 83.333330 ------------------------------ ----------------------------- 49 0.527640 99 83.333330 ------------------------------ -----------------------------
11 SCHEDULE 1 CHARGES AND DEDUCTIONS - -------------------------------------------------------------------------------- SCHEDULE OF ASSET BASED CHARGES - -------------------------------------------------------------------------------- Mortality and Expense Risk Charge .90% - -------------------------------------------------------------------------------- Administration Charge .35% annually for Policy Years 1-10 .25% annually for Policy Years 11 and later Tax Charge .40% annually for Policy Years 1-10 THE ASSET BASED CHARGES WILL BE ASSESSED DAILY ON THE SEPARATE ACCOUNT VALUE. The Annual Record Maintenance Charge of $30 is deducted from your Cash Value at the end of the Policy Year.
- ---------------------------------------------------------------------------------------------------------- SCHEDULE OF PREMIUM WITHDRAWAL CHARGES - ---------------------------------------------------------------------------------------------------------- POLICY YEARS SURRENDER PREMIUM TAX TOTAL WITHDRAWAL ELAPSED SINCE ISSUE CHARGE CHARGE CHARGE - ---------------------------------------------------------------------------------------------------------- 1 7.75% 2.25% 10.00% 2 7.75% 2.00% 9.75% 3 7.50% 1.75% 9.25% 4 6.50% 1.50% 8.00% 5 5.75% 1.25% 7.00% 6 5.00% 1.00% 6.00% 7 4.25% .75% 5.00% 8 3.50% .50% 4.00% 9 2.75% .25% 3.00% over 9 0% 0% 0% - ----------------------------------------------------------------------------------------------------------
THE WITHDRAWAL CHARGE PERCENTAGES ARE APPLIED AGAINST THE ORIGINAL SINGLE PREMIUM AMOUNT. A FREE PARTIAL WITHDRAWAL OF THE GREATER OF 10% OF CASH VALUE OR CASH VALUE LESS PREMIUM PAID IS AVAILABLE EACH YEAR. PREMIUM PAID FOR THIS PURPOSE IS THE PREMIUM SUBJECT TO A WITHDRAWAL CHARGE MINUS WITHDRAWALS PREVIOUSLY ASSESSED [A WITHDRAWAL CHARGE]. 12 DEFINITIONS ACCUMULATION UNIT - An accounting unit of measure used to calculate the value of each Subaccount. ACCUMULATION UNIT VALUE - The value of a Subaccount determined for a Valuation Period according to the formula stated in this policy. ADMINISTRATION CHARGE - A charge deducted from the Cash Value for a portion of Our administrative costs. CASH VALUE - The sum of the Separate Account Value plus the Fixed Account Value plus the Loan Account Value. DEBT - The principal of any outstanding loan plus any loan interest due or accrued. DEDUCTION DAY - The Deduction Day is stated in the policy specifications. It is the same day in each month as the Effective Date. It is the day from which policy months are determined. EFFECTIVE DATE - The Effective Date is shown on the front of Your policy. It is the date coverage becomes effective. If the Effective Date would have been the 29th, 30th or 31st of the month, the Effective Date will be the 28th day of that month. FIXED ACCOUNT - The portion of the Cash Value allocated to our General Account, including amounts allocated to our DCA Fixed Account to be transferred to the Subaccount under the automatic Dollar Cost Averaging program. FIXED ACCOUNT VALUE - The value of the Fixed Account. 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. GUIDELINE SINGLE PREMIUM - The Guideline Single Premium as defined in Section 7702 of the Internal Revenue Code. ISSUE AGE - The attained age as of the Life Insured's last birthday on the Effective Date. ISSUE DATE - The issue date stated in the policy specifications. It is the date all requirements for coverage and Premium have been received, and the policy is approved. LIVES INSURED - The persons whose lives are insured under the policy as set forth in the policy specifications. LOAN ACCOUNT - The account established for amounts transferred from the Subaccounts as security for outstanding Policy Debt. LOAN ACCOUNT VALUE - The value of the Loan Account. Page 1 13 Page 2 MATURITY DATE - The Maturity Date is stated in the policy specifications. It is the policy anniversary nearest the insured's 100th birthday. MORTALITY AND EXPENSE CHARGE - A charge deducted in the calculation of the accumulation unit value. It is for Our assumption of mortality risks and expense guarantees. NET SURRENDER VALUE - The Surrender Value minus any Debt. OWNER - See "You, Your, Yours" below. POLICY YEAR - Each twelve-month period beginning on the Effective Date and each Policy Anniversary. PREFERRED LOAN - The portion of any loan as to which the loan account is credited a higher rate of interest. The maximum amount available as a Preferred Loan is the Separate Account Values minus premium paid plus any prior withdrawal of premium. PREMIUM - The dollar amount We receive in U.S. currency to buy the benefits this policy provides. RECORDS MAINTENANCE CHARGE - A charge assessed against Your policy as specified in the policy specifications. RECEIVED - Received by Kemper Investors Life Insurance Company at its home office in Long Grove, Illinois. 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 Annuity Separate Account. SEPARATE ACCOUNT VALUE - The sum of the Subaccount Values of this policy on the Valuation Date. SUBACCOUNTS - The Separate Account has several Subaccounts. The available Subaccounts are stated in the policy specifications. SUBACCOUNT VALUE - The value of each Subaccount calculated separately according to the formula stated in this policy. SURRENDER VALUE - The Surrender Value of this policy is the Cash Value minus any applicable withdrawal charge. SURVIVING INSURED - The second Life Insured to die. TAX EXPENSE CHARGE - A charge deducted from the Cash Value to pay applicable state and local Premium taxes and federal taxes imposed under Section 848 of the Internal Revenue Code of 1986, as amended (the "Code"). TRADE DATE - The Trade Date is ten (10) days plus the number of days in your right to cancel period after the Issue Date. It is the date that your initial premium plus any interest will be allocated to the Subaccounts according to your instructions. The right to cancel period is shown on the front of Your policy. VALUATION DATE - Each business day that applicable law requires that We value the assets of the Separate Account. Currently this 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. 14 WE, OUR, US - Kemper Investors Life Insurance Company, Long Grove, Illinois. YOU, YOUR, YOURS - The party(s) named as owner in the application unless later changed as provided in this policy. The owner, prior to the distribution of any death benefit, has the exclusive right to exercise every option and right conferred by this policy. GENERAL PROVISIONS THE POLICY The policy, the attached application and any supplemental application(s) constitute the entire contract between the parties. All statements made in the application and supplemental application(s) are deemed representations and not warranties. No misstatement will void this policy or be used as a defense of a claim unless it is contained in the application or any supplemental application. MODIFICATION OF Only Our president, secretary and assistant secretaries POLICY have the power to approve a change or waive any provisions of this policy. Any such modifications must be in writing. No agent or person other than the officers named has the authority to change or waive the provisions of this policy. CONTESTABILITY We cannot contest this policy after it has been in force for two years from the Effective Date. 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 If the age and/or sex of the Life Insured was misstated, AND/OR SEX the death benefit and all policy values will be adjusted based on what the initial Premium would have purchased using the correct ages and/or sexes. SUICIDE If the first death is by suicide, within two years of the Effective Date or date of reinstatement, whether the Life Insured was sane or insane, We will reissue this policy. The new policy on the Surviving Insured will be a single life permanent policy which is available at time of re-issue. The suicide provision for the new policy will be effective as of the original issue date. If the second death is by suicide, within two years from the Effective Date, whether the Surviving Insured is sane or insane, We will pay only the Premiums paid less any withdrawal and Debt. If the second death occurs by suicide within two years after the date of reinstatement, Our total liability with respect to such reinstatement will be the cost of insurance since the date of reinstatement. EFFECTIVE DATE The Effective Date of coverage under this policy is the OF COVERAGE Effective Date. If the Effective Date would have been the 29th, 30th, or 31st of the month, the Effective Date will be the 28th day of that month. Incontestability and suicide periods are measured from the Effective Date. We will deduct the first monthly deduction on the Effective Date. TERMINATION All coverage under this policy terminates when any one of the following occurs: 1. You request that coverage terminates; 2. The Surviving Insured dies; 3. This policy matures, or 4. The grace period ends and there is Debt outstanding. ASSIGNMENT No assignment of this policy is binding unless We receive written notice of the assignment. We assume no responsibility for the validity or sufficiency of any assignment. Once notice of the assignment is recorded, the rights of the owner, annuitant and beneficiary are subject to the assignment. Any claim is subject to proof of interest of the assignee. DUE PROOF OF DEATH The death benefit is payable when the Surviving Insured dies. We must receive written proof of both deaths within sixty days of the death of each of the Lives Insured, or as soon thereafter as is reasonably possible. The proof may be a certified death certificate, the written statement of a physician, or any other proof satisfactory to Us. Page 3 15 Page 4 RESERVES, CASH VALUES All reserves are equal to or greater than those required AND DEATH BENEFITS by statute. Any available Cash Value and death benefit are not less than 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 computations of cash values 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 or Nonsmoker Mortality tables, age last birthday, is the basis for minimum Cash Values, death benefits, and guaranteed maximum cost of insurance rates under this policy. TAX TREATMENT This policy is intended to qualify as a life insurance policy under the Internal Revenue Code ("Code"). We may return Premiums which would disqualify the policy from tax treatment as a life insurance policy. This policy may be endorsed to reflect any change in the Code and its regulations and rulings. You will receive a copy of any such endorsement. If or when a federal income tax should apply, we may 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. NON-PARTICIPATING This policy does not pay dividends. It will not share in Our surplus or earnings. REPORTS At least once each Policy Year We will send You a statement showing Premiums received, interest credited, 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. OWNERSHIP PROVISIONS OWNERS OF POLICY The insured is the original policy owner unless otherwise provided in the application. You have the right to cancel or amend this policy if We agree. You may exercise every option and right conferred by this policy including the right of assignment. The joint owners must agree to any change if more than one owner is named. CHANGE OF OWNERSHIP You may change the owner by written request at any time during the lifetime of the Surviving Insured. You must furnish information sufficient to clearly identify the new owner to Us. The change is subject to any existing assignment of this policy. When We record the effective date of the change, it will be the date the notice was signed except for action taken by Us prior to receiving the request. Any change is subject to the payment of any proceeds. We may require You to return this policy to Us for endorsement of a change. BENEFICIARY The application for this policy shows the original DESIGNATED AND beneficiary. You may change the beneficiary if You send CHANGE OF BENEFICIARY Us a written change form. Changes are subject to the following: 1. The change must be filed while the Surviving Insured is alive; 2. This policy must be in force at the time You file a change; 3. Such change must not be prohibited by the terms of an existing assignment, beneficiary designation or other restriction; 4. Such change will take effect when We receive it; 5. After We receive the change, it will take effect on the date the change form was signed. However, action taken by Us before the change form was received will remain in effect; and 6. The request for change must provide information sufficient to identify the new beneficiary. We may require You to return this policy for endorsement of a change. 16 DEATH OF BENEFICIARY The interest of a beneficiary who dies before the distribution of the death benefit will pass to the other beneficiaries, if any, share and share alike, unless otherwise provided in the beneficiary designation. If no beneficiary survives, or if no beneficiary is named, the distribution will be made to the insured's estate. If a beneficiary dies within ten days of the date of the Surviving Insured's death, the death benefit will be paid as if the Surviving Insured had survived the beneficiary. DEATH BENEFIT PROVISIONS PAYMENT OF DEATH We will pay a death benefit to the beneficiary when We BENEFITS receive due proof of death, if the Surviving Insured dies while this policy is inforce. The return of this policy is required before a payment is made. We will pay the death benefit in a lump sum. This sum may be deferred for up to five years from the date of death. During this time, it will continue to accrue interest at the normal rate for death benefits left on deposit with Us. Instead of a lump sum payment the beneficiary may elect to have the death benefit distributed under a settlement option. The beneficiary must make this choice within sixty days of the time We receive due proof of death. AMOUNT PAYABLE We compute the death benefit at the end of the Valuation UPON DEATH Period following Our receipt of due proof of death of the Surviving Insured and the return of this policy. As long there is positive Net Surrender Value or during the Grace Period, the death benefit is the greater of: 1. the specified amount on the date of the Surviving Insured's death, and 2. the cash value on the date of the Surviving Insured's death multiplied applicable death benefit factor at the time of death. The death benefit proceeds equal a. minus b. minus c., where: a. is the death benefit b. is any monthly deductions due during the grace period c. is any Debt. The initial specified amount and the table of cash value corridors are shown in the policy specifications. The specified amount is the initial specified amount, unless reduced by a withdrawal. If there is no positive Net Surrender Value, no Debt outstanding, you paid 100% of the Guideline Single Premium as your initial Premium, and your policy is not in the Grace Period, the death benefit will be your total Premium payments paid, less any withdrawal prior partial withdrawals of Premium. DEFERMENT OF DEATH The payment of death benefits in excess of the specified BENEFITS amount may be deferred: (a) for up to 6 months from the date requested if these benefits are based upon policy values which do not depend on the investment performance of the Separate Account or (b) (1) during any period when the New York Stock Exchange is closed other than customary weekend and holiday closings; (2) when trading in the markets normally utilized is restricted or an emergency exists as determined by the Securities and Exchange Commission, so that disposal of investments or determination of the accumulation unit value is not practical; or (3) for such other periods as the Securities and Exchange Commission may permit for protection of owners. PREMIUM PROVISIONS The owner may choose a minimum initial Premium of 90% or 100% of the Guideline Single Premium (based on the initial specified amount). Page 5 17 Page 6 ADDITIONAL PREMIUM Payment of additional Premium of at least $1,000 will be permitted under the following circumstances: 1. An additional Premium payment is required to maintain or reinstate coverage, as described in the GRACE PERIOD and REINSTATEMENT provisions. 2. The Premium payment would not cause the policy to fail to meet the definition of a life insurance under Section 7702 of the Internal Revenue Code ("Code"). We reserve the right to require satisfactory evidence of insurability before accepting any additional Premium that increases the death benefit. Premium which does not meet the tax qualification guidelines for life insurance under the Code will not be applied to the policy. If there is current Debt on the policy, additional moneys will be considered additional premium, unless You state otherwise. PLACE OF PAYMENT All Premiums under this policy must be paid to Us at Our home office or such other location as We may select. We will notify You and any other interested parties in writing of such other locations. Premiums received by an agent will be allocated to the Subaccounts only after We receive them. PREMIUM ALLOCATION If you paid all or a portion of Your initial Premium before the Issue Date of your Policy, we credit interest to your initial Premium for the period prior to the Issue Date at a rate not less than 3% annually. On the Issue Date (unless the Trade Date is the same as the Issue Date), we allocate the premium and any accumulations to the Kemper Money Market Subaccount. The Subaccount value of the Kemper Money Market Subaccount will be allocated to the Subaccounts, according to the Premium allocation shown in the policy specifications, on the Trade Date. You may temporarily allocate a portion of Your initial Premium to any single Subaccount or to our Fixed Account to be transferred to the Subaccounts under our automatic dollar cost averaging program. Only initial Premiums may be allocated to the Fixed Account, and only for the purpose of subsequent transfers to the Subaccounts under our automatic dollar cost averaging program. (If the Issue Date is the same as the Trade Date, the Premium will be immediately allocated to the Subaccounts). GRACE PERIOD If the net Surrender Value immediately proceeding a deduction is less than the monthly deduction for that 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 there is no current Debt on the policy, you paid 100% of the Guideline Single Premium as your Initial Premium, and payment is not received within the grace period, coverage under this policy will remain inforce, but the amount paid upon death of the insured after the grace period will be limited to the return of Your total Premiums paid less any prior partial withdrawals of premium. The Specified Amount coverage can be restored according to the REINSTATEMENT provision below. If there is any Debt on the policy or you paid 90% of the Guideline Single Premium as your Initial Premium and payment is not received within the grace period, coverage under this policy will terminate at the end of the grace period in accordance with the NONFORFEITURE provisions. If death of the Surviving Insured occurs within the grace period, any amount payable will be reduced by any unpaid monthly deductions. REINSTATEMENT If this policy enters insufficient fund value status as defined on Page 10 below, and has not been surrendered for its Net Surrender Value, it may be reinstated to the Specified Amount at any time within 3 years after entering that status. The policy may also be reinstated within 3 years of policy lapse if it has not been surrendered for its Net Surrender Value. If one of the Lives Insured dies during the lapse, the policy will be re-issued as a single life permanent policy. Either type of reinstatement is subject to: 18 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 this policy which existed at the date of termination of coverage. The effective date of reinstatement of a policy will be the Deduction Day that coincides with or next follows the date the application for reinstatement is approved by Us. The SUICIDE and CONTESTABILITY provisions will apply from the effective date of reinstatement. VARIABLE ACCOUNT PROVISIONS SEPARATE ACCOUNT The variable benefits under this policy are provided through the KILICO Variable Separate Account. This is called 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 has been allocated for this policy and may be allocated for certain other policies. LIABILITIES OF SEPARATE The assets equal to the reserves and other 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. We will value the assets of the Separate Account on each Valuation Date. SEPARATE ACCOUNT On any Valuation Date, the Separate Account Value is the VALUE sum of its Subaccount Values. SUBACCOUNTS The Separate Account consists of several Subaccounts as shown in the policy specifications. We may, from time to time, combine or remove Subaccounts in the Separate Account and establish additional Subaccounts of the Separate Account. In such event, We may permit You to select other Subaccounts under this policy. However, the right to select any other Subaccount is limited by the terms and conditions We may impose such transactions. 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 Page 7 19 Page 8 4. the pro-rata portion of any monthly deduction charged to the Subaccount when the Valuation Period includes a Deduction Day; minus 5. any amounts transferred or withdrawn from the Subaccount during the current Valuation Period; minus 6. any amounts loaned from the Subaccount during the current Valuation Period. FUND Each Subaccount of the Separate Account will buy shares of an investment company registered under the Investment Company Act of 1940 as an open-end diversified management investment company of shares of a separate series thereof. Each such investment company with or series 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 the Kemper Investors Fund or in shares of another investment company. We may also substitute other investment companies. RIGHTS RESERVED BY We reserve the right, subject to compliance with the current law or as it may be changed in the future: 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 the General Account, or to add, combine or remove Subaccounts in the Separate Account. 4. To delete the shares of any of the portfolios of the fund or any other open-end investment company and to substitute, for the fund shares held in any Subaccount, the shares of another portfolio of the fund or the shares of another investment company or any other investment permitted by law; and 5. To change the way We assess charges, but not to increase the aggregate amount above that currently charged to the Separate Account and the fund in connection with the policies. When required by law, We will obtain Your approval of such changes and the approval of any regulatory authority. ACCUMULATION UNIT Each Subaccount has an accumulation unit value. When VALUE Premiums or other amounts are allocated to a Subaccount, a number of units are purchased based on the accumulation unit value of the Subaccount at the end of the Valuation Period during which the allocation is made. When amounts are transferred out of or deducted from a Subaccount, units are redeemed in a similar manner. 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 period immediately preceding. Each Valuation Period has a single accumulation unit value that is applied to each day in the period. The number of accumulation units will not change as a result of investment experience. 20 INVESTMENT EXPERIENCE Each Subaccount has its own investment experience factor. The investment experience of a Subaccount is calculated by applying the investment experience factor to the value in each Subaccount during the 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: a. the net asset value per share of the investment held in the Subaccount determined at the end of the current Valuation Period; plus b. the per share amount of any dividend or capital gain distributions made by the investment held in the Subaccount, 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 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 Valuation Period; 3. is the factor representing the sum of the Mortality and Expense Risk Charge, stated in the policy specifications, for the number of days in the Valuation Period. NONFORFEITURE PROVISIONS CASH VALUE The cash value of this policy is equal to the sum of the Separate Account Value, plus the Loan Account Value, plus the Fixed Account Value. MONTHLY DEDUCTION On each Deduction Day, 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 riders; plus 3. the monthly Administration Charge; plus 4. the monthly Tax Expense Charge. The monthly deduction will be deducted from the Subaccounts and Fixed Account in proportion to the value that each Subaccount and Fixed Account bears to the Separate Account Value. COST OF INSURANCE We calculate the cost of insurance on each Deduction Day. The maximum cost of insurance charge equals a. times the result of b. minus c. where: a. is the maximum cost of insurance rate per $1,000 for the initial specified amount; b. is the death benefit; and c. is the cash value. Page 9 21 Page 10 COST OF INSURANCE The cost of insurance rate is based on the insured's sex, issue age, coverage year, and rate class. The cost of insurance is also based on whether 90% or 100% of the Guideline Single Premium has been paid at issue. Any change in the cost of insurance rate will be on a uniform basis for all insureds of the same: 1. sex; 2. attained age at start of coverage; 3. coverage year; and 4. rate class. However, the cost of insurance rates will not exceed those shown in the Table of Guaranteed Maximum Monthly Cost of Insurance Rates per $1,000 multiplied by any rate class percent over 100. These rates are found in the policy specifications. These rates are based on the Commissioners 1980 Standard Ordinary Smoker and Nonsmoker Mortality Tables, Age Last Birthday. RIDERS The monthly charges for any riders are shown in the policy specifications. MORTALITY AND EXPENSE These charges are shown in the policy specifications. RISK CHARGE, ADMIN- ISTRATION CHARGE, TAX CHARGE, AND ANNUAL RECORDS MAINTENANCE CHARGE INSUFFICIENT FUND This policy will enter the insufficient fund value VALUE STATUS status as provided in the GRACE PERIOD provision if the Net Surrender Value immediately preceding a deduction is: 1. insufficient to cover the monthly deduction, 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 monthly deduction after entering insufficient fund value status will not be considered a reinstatement of this policy. TRANSFER, WITHDRAWAL AND LOAN PROVISIONS TRANSFERS You may direct all or part of one Subaccount's value to another Subaccount. Transfers will also be subject to the following conditions: 1. The minimum amount which may be transferred is $100 or, if smaller, the remaining value in a Subaccount; 2. No partial transfer will be made if the remaining value of any Subaccount will be less than $500 unless the transfer will eliminate Your interest in such account; 3. We reserve the right to charge $25 for each transfer in excess of 12 in a policy year. Any transfer request must clearly specify: 1. the amount which is to be transferred; and 2. the names of the Subaccounts which are affected. 22 We will only honor a telephone transfer request if a properly executed telephone transfer authorization is on file with Us. Such request for a transfer must comply with the conditions of the authorization. We reserve the right at any time and without notice to any party, to terminate, suspend, or modify these transfer rights. WITHDRAWALS You may withdraw all or part of the Cash Value that remains after We subtract any withdrawal charge. We must receive a written request that indicates the amount of the withdrawal from each Subaccount. You must return the policy to Us if You elect a total withdrawal. Withdrawals are subject to these conditions: 1. Each withdrawal must be at least $100 or the value that remains in the Subaccount if smaller; 2. A minimum of $500 must remain in the Subaccount after You make a withdrawal unless the Subaccount is eliminated by such withdrawal; 3. A minimum of $5,000 must remain in the Separate Account after You make a withdrawal. 4. The maximum You may withdraw from any Subaccount is the value of the Subaccount less the amount of any withdrawal charge. 5. Any withdrawal amount You request will be increased by the withdrawal charge. EFFECT OF A The Cash Value will be reduced by the amount of the WITHDRAWAL withdrawal. The specified amount will be reduced proportional to the reduction in Cash Value due to the partial withdrawal. We will not permit a withdrawal if it will decrease the specified amount to less than the Minimum Specified Amount stated in the Policy Specifications. WITHDRAWAL CHARGES Withdrawal charges are shown in the policy specifications. Any amount withdrawn which is not subject to a withdrawal charge will be considered a "free partial withdrawal," as referenced in the policy specifications. POLICY LOANS Policy loans may be made any time. We will lend up to a maximum loan amount of 90% of the policy's Cash Value less any applicable withdrawal charges. The amount of any new loan may not exceed the maximum loan amount less Debt on the date the loan is granted. The Preferred Loan portion of a loan will be determined on the date the loan is made, and will not be subsequently redetermined. The minimum amount of a loan is $1,000. On the date the loan is made, an amount equal to the loan will be transferred from the Subaccounts 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 Subaccount in proportion to the values that each account bears to the Separate Account Value. Should the Debt equal or exceed the Surrender Value, this policy will be subject to the GRACE PERIOD provisions. Cash values derived from Premium received by Us in the form of a check or draft will not be available for loans until 30 days after deposit of such check or draft. POLICY LOAN INTEREST The loan interest rate will be [5.50%] per year compounded daily. 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. Page 11 23 Page 12 During the existence of a loan, the portion of the Loan Account Value attributable to a Preferred Loan will earn [5.50%] per year. The remainder of the Loan Account Value will earn [3.50%] per year. Interest will be earned on a daily basis and will be added to the Loan Account. If an Internal Revenue Code Section 1035(a) exchange takes place that has an outstanding loan at the time of transfer, the difference between the Cash Value and the total of all Premiums paid under the exchanged policy is considered a Preferred Loan. 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 according to the then current Premium allocation instructions. Loan repayments will be considered repayment of Preferred Loans last. EFFECTS OF POLICY The Debt on this policy, along with the withdrawal LOANS charge will reduce the amount LOANS 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 Surviving Insured will also be reduced by the amount of Debt. TRANSFER, WITHDRAWAL We will redeem the necessary number of accumulation AND LOAN PROCEDURES units to achieve the dollar amount requested plus any applicable charges when the withdrawal, transfer or loan is made form a Subaccount. We will reduce the number of accumulation units credited in each Subaccount by the number of accumulation units redeemed. The reduction in the number of accumulation units is determined based on the accumulation unit value at the end of the Valuation Period when We receive the request, provided the request contains all required information. We will pay the amount within seven calendar days after the date We receive the request, except as provided below. DEFERMENT OF WITH- If the withdrawal, transfer or loan is to be made from a Subaccount, We may suspend the right of withdrawal or transfer or delay payment more than seven calendar days: 1. during any period when the New York Stock Exchange is closed other than customary weekend and holiday closings; 2. when trading in the markets normally utilized is restricted, or an emergency exists as determined by the Securities and Exchange Commission, so that disposal of investments or determination of the accumulation unit value is not practical; or 3. for such other periods as the Securities and Exchange Commission by order may permit for protection of owners. SETTLEMENT OPTIONS The Owner, or beneficiary at the death of the Surviving Insured, if no election by the Owner is in effect, may elect to have all of the Net Surrender Value or Death Benefit of this policy paid in a lump sum or have the amount applied to one of the settlement options noted below. The beneficiary may elect to have the death benefit distributed as stated in Option 1 for a period not to exceed the beneficiary's life expectancy; or Options 2, or 3 based upon the life expectancy of the beneficiary as prescribed by federal regulations. The beneficiary must make this choice within sixty days of the time we receive due proof of death. An option can not be changed after the first of such payments is made. Payments must be made to a natural person, referred to below as "payee." If the beneficiary is not a natural person, the beneficiary must elect that the entire death benefit be distributed within five years of your death. Distribution of the death benefit must start within one year after your death. It may start later if prescribed by federal regulations. 24 If the total death benefit proceeds are applied under one of the annuity options, this contract must be surrendered to us. Payments for all options are derived from the applicable tables. Current annuity rates will be used if they produce greater payments than those shown in the policy. The age in the tables is the age of the payee on the last birthday before the first payment is due. The option selected must result in a periodic payment equivalent to at least $20 per month when annuity payments begin. If the annuity option selected or otherwise applied should result in a periodic payment less than the minimum required on the date payments are scheduled to begin, we reserve the right to make a lump sum payment in satisfaction of our obligation to the payee under the policy. ELECTION OF SETTLEMENT Election of a settlement option may be made by written OPTION notice to Us. This election may be made: 1. by You during the lifetime of the insured; 2. by the beneficiary if no election made by You is in effect at the time of the death of the insured; or 3. by the beneficiary if You reserve the right to the beneficiary to change an election upon the death of the insured. Such change must be made prior to the first settlement option payment. An election in effect during the lifetime of the insured will be revoked by a subsequent change of beneficiary or an assignment of this policy unless provided otherwise. OPTION 1 FIXED INSTALLMENT We will make monthly payments for a fixed number of ANNUITY installments. Payments must be made for at least 5 years, but not more than 30 years. Upon the payee's death, if the beneficiary is a natural person, we will automatically continue payments for the remainder of the certain period to the beneficiary. If the beneficiary is either an estate or trust we will pay the discounted value of the remaining payments in the specified period based on the discount rate stated in the supplemental contract. OPTION 2 LIFE ANNUITY We will make monthly payments while the payee is alive. OPTION 3 LIFE ANNUITY WITHINSTAL-We will make monthly payments for a guaranteed period MENTS GUARANTEED and thereafter while the payee is alive. The guaranteed period must be selected at the time the settlement option is chosen. The guaranteed periods available are 5, 10, 15 and 20 years. If, at the death of the payee, payments have been made for less than five, ten, fifteen or twenty years as elected, and the beneficiary is a natural person, we will automatically continue payments for the remainder of the elected period to the beneficiary. If the beneficiary is either an estate or trust, we will pay the discounted value of the remaining payments in the specified period based on the discount rate stated in the supplemental contract. Page 13 25 Page 14 OPTION 4 JOINT AND SURVIVOR We will pay the full monthly income while both payees ANNUITY are alive. Upon the death of either payee, we will continue to pay the surviving payee a percentage of the original monthly payment. The percentage payable t the surviving payee must be selected at the time the annuity option is chosen. The percentages available are 50%, 66 2/3%, 75% and 100%. OTHER OPTIONS We may make other settlement options available. Payments are also available on a quarterly, semi-annual or annual basis. VARIABLE PAYOUT If a variable payout option is selected, the monthly OPTIONS payment will reflect the investment performance of the Subaccounts in accordance with the allocation of the lump sum distribution allocated to those Subaccounts. Allocations will not be changed thereafter, except as provided in the TRANSFERS DURING THE PAYOUT PERIOD provision. The first monthly payment is based on the guaranteed annuity option shown in the Annuity Option Table. You may elect any option available. The dollar amount of the subsequent payments may increase or decrease depending on the investment experience of each Subaccount. The number of annuity units per payments will remain fixed for each Subaccount. The number of annuity units for each Subaccount is calculated by dividing a. by b. where: a. is the portion of the initial monthly payment that can be attributed to that Subaccount; and b. is the annuity unit value for that Subaccount at the end of the Valuation Period. The Valuation Period includes the date on which the payment is made. Monthly payments, after the first payment, are calculated by summing up, for each Subaccount, the product of a. times b. where: a. is the number of annuity units per payment in each Subaccount; and b. is the annuity unit value for that Subaccount at the end of the Valuation Period. The Valuation Period includes the date on which the payment is made. After the first payment, we guarantee that the dollar amount of each payment will not be affected adversely by actual expenses or changes in mortality experience from the expense and mortality assumptions on which we based the first payment. ANNUITY UNIT VALUE The value of an annuity unit for each Subaccount at the end of any subsequent Valuation Period is determined by multiplying the result of a. times b. by c. a. is the annuity unit value for the immediately preceding Valuation Period; and b. is the net investment factor for the Valuation Period for which the annuity unit value is being calculated; and c. is the interest factor of .99993235 per calendar day of such subsequent Valuation Period to offset the effect of the assumed rate of 2.50% per year used in the Annuity Option Table. 26 The net investment factor for each Subaccount for any Valuation Period is determined by dividing a. by b. where: a. is the value of an annuity unit of the applicable Subaccount as of the end of the current Valuation Period plus or minus the per share credit or charge for taxes reserved; and b. is the value of an annuity unit of the applicable Subaccount as of the end of the immediately preceding Valuation Period, plus or minus the per share credit or charge for taxes reserved. FIXED PAYOUT OPTION If a fixed payout option is chosen, your payment will be fixed in amount throughout the payout period. We determine the amount of your fixed annuity payment by multiplying the amount applied to the option by a rate determined by Us which is not less than the rate specified in the Settlement Option Tables below. The amount of the payment will not change throughout the payout period. TRANSFERS DURING During the payout period, the payee may choose to THE PAYOUT PERIOD change the Subaccounts or the relative weighting of the Subaccounts on which variable payments are based, or the relative proportions of fixed and variable payments. A transfer may be made subject to the following: 1. The payee must send us a written notice in a form satisfactory to us; 2. One transfer is permitted each twelve month period from the date of the first annuity payment. We must receive notice of any such transfer at least thirty days prior to the effective date of the transfer; 3. A payee may not base variable payments on more than three Subaccounts after any transfer; 4. At least $1,000 of annuity unit value or annuity reserve value must be transferred from a Subaccount or from the General Account; and 5. At least $1,000 of annuity unit value or annuity reserve value must remain in the account from which the transfer was made. When a transfer is made between Subaccounts, the number of annuity units per payment attributable to a Subaccount to which a transfer is made is equal to a. multiplied by b. divided by c., where: a. is the number of annuity units per payment in the Subaccount from which transfer is being made; b. is the annuity unit value for the Subaccount from which the transfer is being made; and c. is the annuity unit value for the Subaccount to which transfer is being made. When a transfer is made from the General Account to a Subaccount, the number of annuity units per payment attributable to a Subaccount to which transfer is made is equal to a. divided by b. divided by c., where: a. is the General Account annuity value being transferred; and b. is the present value of $1.00 per payment period using the attained age(s) of the payee(s) and any remaining guaranteed payments that may be due at the time of the transfer; and c. is the annuity unit value for the Subaccount to which the transfer is being made. The General Account annuity value equals the present value of the remaining fixed annuity payments using the same interest and mortality basis used to calculated the fixed annuity payments. Page 15 27 Page 16 The amount of money allocated to the General Account in case of a transfer from a Subaccount equals the annuity reserve for the Payee's interest in such Subaccount. The annuity reserve is the product of a. multiplied by b. multiplied by c. where: a. is the number of annuity un its representing the Payee's interst in such Subaccount per annuity payment; b. is the annuity unit value for such Subaccount; and c. is the present value of $1.00 per payment period using the attained age(s) of the Payee(s) and any remaining guaranteed payemtns that may be due at the time of the transfer. Money allocated to the General Account upon such transfer will be applied under the same annuity payout option as originally elected. Guaranteed period payments will be adjusted to reflect the number of guaranteed payments have already been made, no further payments will be guaranteed. All amounts and annuity unit values are determined as of the end of the Valuation Period preceding the effective date of the transfer. We reserve the right at any time and without notice to any party to terminate, suspend or modify these transfer privileges. SUPPLEMENTARY A supplementary agreement will be issued to reflect AGREEMENT payments that will be made under a settlement option. If payment is made as a death benefit distribution, the effective date will be the date of death. Otherwise, the effective date will be the date chosen by the Owner. DATE OF FIRST PAYMENT The effective date under an option will be the date o death. Interest will start to accrue on the effective date. If the normal effective date is the 29th, 30th, or 31st of the month, the effective date will be the 28th day of the that month. EVIDENCE OF AGE, SEX We may require satisfactory evidence of the age, sex and AND SURVIVAL the continued survival of any person on whose life the income is based. MISSTATEMENT OF AGE If the age or sex of the payee has been misstated, the OR SEX amount payable under the annuity option selected will be such as the lump sum applied would have purchased at the correct age or sex. Interest not to exceed 6% compounded each year will be charged to any overpayment or credited to any underpayment against future payments We may make under the supplementary agreement for the option selected. BASIS OF ANNUITY The guaranteed payments are based on an interest rate of OPTIONS 2.50% per year and, where mortality is involved, the "1983 Table a" individual annuity mortality table developed by the Society of Actuaries, projected using Projection Scale G. We may also make available variable annuity payment options based on assumed investment rates other than 2.50%. CREDITORS The proceeds of this policy and any payment under an annuity option will be exempt from the claim of creditors and from legal process to the extent permitted by law. 28 ANNUITY OPTION TABLE AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000 OF VALUE APPLIED OPTION ONE - FIXED INSTALLMENT ANNUITY
Number Number Number Number of years Monthly of years Monthly of years Monthly of years Monthly selected Payment selected Payment selected Payment selected Payment - ----------------------------------------------------------------------------------------------- 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
OPTIONS TWO AND THREE - LIFE ANNUITY WITH INSTALLMENTS GUARANTEED MONTHLY PAYMENTS GUARANTEED
AGE NONE 60 120 180 240 55 4.02 4.01 3.99 3.94 3.86 56 4.11 4.10 4.07 4.01 3.92 57 4.20 4.19 4.15 4.09 3.99 58 4.29 4.28 4.24 4.17 4.05 59 4.39 4.38 4.33 4.25 4.12 60 4.50 4.48 4.43 4.34 4.19 61 4.61 4.59 4.53 4.43 4.26 62 4.73 4.71 4.64 4.52 4.33 63 4.86 4.84 4.76 4.61 4.40 64 5.00 4.97 4.88 4.71 4.47 65 5.15 5.11 5.01 4.81 4.54 66 5.30 5.26 5.14 4.92 4.61 67 5.47 5.43 5.28 5.02 4.68 68 5.65 5.60 5.43 5.13 4.74 69 5.84 5.78 5.58 5.24 4.80 70 6.05 5.97 5.74 5.35 4.86 71 6.27 6.18 5.90 5.46 4.91 72 6.50 6.40 6.07 5.56 4.96 73 6.76 6.63 6.25 5.67 5.01 74 7.03 6.88 6.43 5.77 5.05 75 7.32 7.14 6.62 5.87 5.09 76 7.64 7.42 6.80 5.96 5.12 77 7.98 7.72 6.99 6.05 5.15 78 8.34 8.03 7.18 6.13 5.17 79 8.73 8.36 7.37 6.20 5.19 80 9.16 8.70 7.56 6.27 5.21 81 9.61 9.06 7.74 6.33 5.23 82 10.10 9.44 7.91 6.38 5.24 83 10.63 9.83 8.08 6.43 5.25 84 11.19 10.23 8.24 6.47 5.25 85 11.80 10.64 8.38 6.50 5.26
OPTION FOUR - JOINT AND 100% SURVIVOR ANNUITY
Age of Age of Secondary Payee Primary Payee 55 60 65 70 75 80 85 55 3.51 3.64 3.76 3.85 3.92 3.96 3.99 60 3.64 3.84 4.02 4.18 4.29 4.38 4.43 65 3.76 4.02 4.29 4.54 4.75 4.90 5.00 70 3.85 4.18 4.54 4.91 5.25 5.53 5.74 75 3.92 4.29 4.75 5.25 5.77 6.26 6.64 80 3.96 4.38 4.90 5.53 6.26 7.00 7.69 85 3.99 4.43 5.00 5.74 6.64 7.69 8.76
Rates for ages not shown here will be provided upon request. 29 ANNUITY OPTION TABLE AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000 OF VALUE APPLIED OPTION ONE - FIXED INSTALLMENT ANNUITY
Number Number Number Number of years Monthly of years Monthly of years Monthly of years Monthly selected Payment selected Payment selected Payment selected Payment - -------------- ----------- -- ------------ --------------- -------------- -------------- - --------------- ---------------- 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
OPTION TWO AND THREE - LIFE ANNUITY WITH INSTALLMENTS GUARANTEED:
Age of MONTHLY PAYMENTS GUARANTEED Age of MONTHLY PAYMENTS GUARANTEED Male Female Payee NONE 60 120 180 240 Payee NONE 60 120 180 240 55 4.17 4.16 4.13 4.06 3.96 55 3.87 3.86 3.84 3.81 3.75 56 4.27 4.25 4.21 4.14 4.03 56 3.95 3.94 3.92 3.88 3.82 57 4.36 4.35 4.30 4.22 4.09 57 4.03 4.02 4.00 3.95 3.88 58 4.46 4.45 4.40 4.30 4.16 58 4.11 4.11 4.08 4.03 3.95 59 4.57 4.55 4.50 4.39 4.22 59 4.21 4.20 4.17 4.11 4.01 60 4.69 4.67 4.60 4.48 4.29 60 4.30 4.29 4.26 4.19 4.08 61 4.81 4.79 4.71 4.57 4.36 61 4.41 4.40 4.35 4.28 4.15 62 4.94 4.92 4.83 4.66 4.43 62 4.52 4.50 4.46 4.37 4.23 63 5.09 5.05 4.95 4.76 4.49 63 4.64 4.62 4.56 4.46 4.30 64 5.24 5.20 5.08 4.86 4.56 64 4.76 4.74 4.68 4.56 4.37 65 5.40 5.35 5.21 4.96 4.62 65 4.90 4.87 4.80 4.66 4.45 66 5.57 5.52 5.35 5.06 4.69 66 5.04 5.01 4.93 4.77 4.52 67 5.75 5.69 5.49 5.17 4.75 67 5.19 5.16 5.06 4.87 4.59 68 5.95 5.87 5.64 5.27 4.81 68 5.36 5.32 5.20 4.98 4.66 69 6.15 6.07 5.80 5.37 4.86 69 5.53 5.49 5.35 5.10 4.73 70 6.38 6.27 5.96 5.48 4.91 70 5.72 5.68 5.51 5.21 4.80 71 6.61 6.49 6.12 5.58 4.96 71 5.93 5.87 5.67 5.33 4.86 72 6.86 6.72 6.29 5.68 5.00 72 6.15 6.08 5.85 5.44 4.92 73 7.13 6.96 6.47 5.77 5.04 73 6.39 6.31 6.03 5.56 4.97 74 7.42 7.21 6.64 5.86 5.08 74 6.65 6.55 6.21 5.67 5.02 75 7.72 7.48 6.82 5.95 5.11 75 6.93 6.81 6.41 5.78 5.06 76 8.05 7.76 7.00 6.03 5.14 76 7.24 7.08 6.60 5.88 5.10 77 8.40 8.06 7.18 6.11 5.17 77 7.57 7.38 6.80 5.98 5.13 78 8.77 8.37 7.35 6.18 5.19 78 7.92 7.69 7.01 6.07 5.16 79 9.18 8.69 7.53 6.25 5.20 79 8.31 8.02 7.21 6.15 5.18 80 9.60 9.03 7.70 6.31 5.22 80 8.72 8.37 7.41 6.23 5.20 81 10.06 9.38 7.86 6.36 5.23 81 9.17 8.74 7.61 6.30 5.22 82 10.55 9.74 8.02 6.41 5.24 82 9.66 9.13 7.80 6.35 5.23 83 11.07 10.12 8.17 6.45 5.25 83 10.20 9.54 7.98 6.41 5.24 84 11.63 10.50 8.32 6.49 5.26 84 10.77 9.96 8.15 6.45 5.25 85 12.22 10.89 8.45 6.52 5.26 85 11.39 10.40 8.31 6.49 5.26
OPTION FOUR - JOINT AND 100% SURVIVOR ANNUITY
Age of Age of Female Payee Male Payee 55 60 65 70 75 80 85 55 3.49 3.66 3.81 3.93 4.02 4.08 4.12 60 3.61 3.83 4.05 4.24 4.40 4.52 4.59 65 3.69 3.97 4.28 4.57 4.84 5.05 5.20 70 3.76 4.09 4.47 4.89 5.31 5.67 5.95 75 3.80 4.17 4.63 5.16 5.75 6.34 6.83 80 3.83 4.23 4.73 5.37 6.14 6.99 7.80 85 3.84 4.26 4.80 5.51 6.44 7.55 8.75
Rates for ages not shown here will be provided upon request. 30 SURVIVORSHIP, MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY PAYABLE ON THE SECOND DEATH NON-PARTICIPATING 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 is a legal contract between the owner and Kemper Investors Life Insurance Company. READ YOUR POLICY CAREFULLY. KEMPER INVESTORS LIFE INSURANCE COMPANY 1 Kemper Drive, Long Grove, Illinois 60049-0001 EX-9 4 ILLUSTRATIONS 1 EXHIBIT 9 ILLUSTRATIONS OF CASH VALUES, SURRENDER VALUES, AND DEATH BENEFITS (Destinations Life) The tables in this Illustration have been prepared to help show how values under Individual and Survivorship Policies change with investment experience. The tables illustrate how Cash Values, Surrender Values (reflecting the deduction of Withdrawal Charges, if any) and Death Benefits under a Policy issued on an Insured or Insureds of a given age would vary over time, if the hypothetical gross investment rates of return were a uniform, after tax, annual rate of 0%, 6%, and 12%. If the hypothetical gross investment rate of return averages 0%, 6%, or 12%, but fluctuates over or under those averages throughout the years, the Cash Values, Surrender Values and Death Benefits may be different. The amounts shown for the Cash Value, Surrender Value and Death Benefit as of each Policy Anniversary reflect the fact that the net investment return on the assets held in the Subaccounts is lower than the gross return. This is because of a daily charge to the Subaccounts for assuming mortality and expense risks, which is equivalent to an effective annual charge of 0.90%. In addition, the net investment returns also reflect the deduction of the Portfolio investment advisory fees and other Portfolio expenses (0.xx%, the average of the actual and estimated fees and expenses including any caps or reimbursements). The tables also reflect applicable charges and deductions including (a) a monthly Administration Charge of 0.35% annually for the first ten Policy Years and 0.25% annually thereafter, (b) a monthly Tax Charge of 0.40% annually for the first ten Policy Years and 0.0% thereafter, (c) an annual Records Maintenance Charge of $30.00 per year, and (d) monthly charges for insurance protection. However, no Records Maintenance Charge is deducted in any year in which the Policy Value exceeds $50,000 on the prior Policy Anniversary. The current cost of insurance charge for Individual Policies, Standard class (NS) is (a) 0.55% annually of Cash Value for the first ten Policy Years and 0.25% thereafter or (b) the guaranteed cost of insurance charge. The current cost of insurance charge for Survivorship Policies, Standard class (NS) is (a) 0.45% annually of Cash Value for the first ten Policy Years and 0.20% thereafter or (b) the guaranteed cost of insurance charge. 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 - -x.xx%, x.xx% and xx.xx%, respectively. Cost of insurance rates vary by age, sex and rating class and, therefore, are not reflected in the approximate net annual investment rate of return above. The values shown are for Policies issued to preferred nonsmoker Insureds. Values for Policies issued on a basis involving a higher mortality risk would result in lower Cash Values, Surrender Values and Death Benefits than those illustrated. Females generally have a more favorable rate structure than males. The tables also reflect the fact that no charges for Federal, state or other income taxes are currently made against the Separate Account. If such a charge is made in the future, it will take a higher gross rate of return than illustrated to produce the net after-tax returns shown in the tables. Upon request, KILICO will furnish an illustration based on the proposed Insured's age, sex and premium payment requested. 1 2 INDIVIDUAL MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY MALE STANDARD NON-SMOKER [$10,000] INITIAL PREMIUM ISSUE AGE [40] $XXXXX INITIAL SPECIFIED AMOUNT: VALUES--CURRENT COST OF INSURANCE
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ----------------------------- ------------------------------ ------------------------------ Premium Paid Plus Policy Interest at Cash Surrender Death Cash Surrender Death Cash Surrender Death Year 5% Value Value Benefit Value Value Benefit Value Value Benefit - ---------- ----------- ----- --------- ------- ----- --------- ------- ----- --------- ------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 45
ASSUMPTIONS: 2 3 (1) NO ADDITIONAL PREMIUMS PAID AND 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 SHOWN IN THE PROSPECTUS APPENDIX. (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 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 4 INDIVIDUAL MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY MALE STANDARD NON-SMOKER [$10,000] INITIAL PREMIUM ISSUE AGE [40] $XXXXX INITIAL SPECIFIED AMOUNT: VALUES--GUARANTEED COST OF INSURANCE
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ----------------------------- ------------------------------ ------------------------------ Premium Paid Plus Policy Interest at Cash Surrender Death Cash Surrender Death Cash Surrender Death Year 5% Value Value Benefit Value Value Benefit Value Value Benefit - ---------- ----------- ----- --------- ------- ----- --------- ------- ----- --------- ------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 45
ASSUMPTIONS: 4 5 (1) NO ADDITIONAL PREMIUMS PAID AND 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 SHOWN IN THE PROSPECTUS APPENDIX. (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 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 6 SURVIVORSHIP MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY MALE STANDARD NON-SMOKER ISSUE AGE [45] FEMALE STANDARD NON-SMOKER ISSUE AGE [40] [$10,000] INITIAL PREMIUM $XXXXX INITIAL SPECIFIED AMOUNT: VALUES--CURRENT COST OF INSURANCE
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ----------------------------- ------------------------------ ------------------------------ Premium Paid Plus Policy Interest at Cash Surrender Death Cash Surrender Death Cash Surrender Death Year 5% Value Value Benefit Value Value Benefit Value Value Benefit - ---------- ----------- ----- --------- ------- ----- --------- ------- ----- --------- ------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 45
6 7 ASSUMPTIONS: (1) NO ADDITIONAL PREMIUMS PAID AND 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 SHOWN IN THE PROSPECTUS APPENDIX. (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 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 8 SURVIVORSHIP MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY MALE STANDARD NON-SMOKER ISSUE AGE [45] FEMALE STANDARD NON-SMOKER ISSUE AGE [40] [$10,000] INITIAL PREMIUM $XXXXX INITIAL SPECIFIED AMOUNT: VALUES--GUARANTEED COST OF INSURANCE
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ----------------------------- ------------------------------ ------------------------------ Premium Paid Plus Policy Interest at Cash Surrender Death Cash Surrender Death Cash Surrender Death Year 5% Value Value Benefit Value Value Benefit Value Value Benefit - ---------- ----------- ----- --------- ------- ----- --------- ------- ----- --------- ------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 45
8 9 ASSUMPTIONS: (1) NO ADDITIONAL PREMIUMS PAID AND 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 SHOWN IN THE PROSPECTUS APPENDIX. (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 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 10 ILLUSTRATIONS OF CASH VALUES, SURRENDER VALUES, AND DEATH BENEFITS (Destination Life Plus) The tables in this Illustration have been prepared to help show how values under Individual and Survivorship Policies change with investment experience. The tables illustrate how Cash Values, Surrender Values (reflecting the deduction of Withdrawal Charges, if any) and Death Benefits under a Policy issued on an Insured or Insureds of a given age would vary over time, if the hypothetical gross investment rates of return were a uniform, after tax, annual rate of 0%, 6%, and 12%. If the hypothetical gross investment rate of return averages 0%, 6%, or 12%, but fluctuates over or under those averages throughout the years, the Cash Values, Surrender Values and Death Benefits may be different. The amounts shown for the Cash Value, Surrender Value and Death Benefit as of each Policy Anniversary reflect the fact that the net investment return on the assets held in the Subaccounts is lower than the gross return. This is because of a daily charge to the Subaccounts for assuming mortality and expense risks, which is equivalent to an effective annual charge of 0.90%. In addition, the net investment returns also reflect the deduction of the Portfolio investment advisory fees and other Portfolio expenses (0.xx%, the average of the actual and estimated fees and expenses including any caps or reimbursements). The tables also reflect applicable charges and deductions including (a) a monthly Administration Charge of 0.35% annually for the first ten Policy Years and 0.25% annually thereafter, (b) a monthly Tax Charge of 0.40% annually for the first ten Policy Years and 0.0% thereafter, (c) an annual Records Maintenance Charge of $30.00 per year, and (d) monthly charges for insurance protection. However, no Records Maintenance Charge is deducted in any year in which the Policy Value exceeds $50,000 on the prior Policy Anniversary. The current cost of insurance charge for Individual Policies, Standard class (NS) is (a) 0.25% annually of Cash Value for the first ten Policy Years and 0.10% thereafter or (b) the guaranteed cost of insurance charge. The current cost of insurance charge for Survivorship Policies, Standard class (NS) is (a) 0.20% annually of Cash Value for the first ten Policy Years and 0.10% thereafter or (b) the guaranteed cost of insurance charge. 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 - -x.xx%, x.xx% and xx.xx%, respectively. Cost of insurance rates vary by age, sex and rating class and, therefore, are not reflected in the approximate net annual investment rate of return above. The values shown are for Policies issued to preferred nonsmoker Insureds. Values for Policies issued on a basis involving a higher mortality risk would result in lower Cash Values, Surrender Values and Death Benefits than those illustrated. Females generally have a more favorable rate structure than males. The tables also reflect the fact that no charges for Federal, state or other income taxes are currently made against the Separate Account. If such a charge is made in the future, it will take a higher gross rate of return than illustrated to produce the net after-tax returns shown in the tables. Upon request, KILICO will furnish an illustration based on the proposed Insured's age, sex and Premium payment requested. 10 11 INDIVIDUAL MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY MALE STANDARD NON-SMOKER $[300,000] INITIAL PREMIUM ISSUE AGE [40] $XXXXX INITIAL SPECIFIED AMOUNT: VALUES--CURRENT COST OF INSURANCE
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ----------------------------- ------------------------------ ------------------------------ Premium Paid Plus Policy Interest at Cash Surrender Death Cash Surrender Death Cash Surrender Death Year 5% Value Value Benefit Value Value Benefit Value Value Benefit - ---------- ----------- ----- --------- ------- ----- --------- ------- ----- --------- ------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 45
ASSUMPTIONS: 11 12 (1) NO ADDITIONAL PREMIUMS PAID AND 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 SHOWN IN THE PROSPECTUS APPENDIX. (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 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. 12 13 INDIVIDUAL MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY MALE STANDARD NON-SMOKER [$300,000] INITIAL PREMIUM ISSUE AGE [40] $XXXXX INITIAL SPECIFIED AMOUNT: VALUES--GUARANTEED COST OF INSURANCE
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ----------------------------- ------------------------------ ------------------------------ Premium Paid Plus Policy Interest at Cash Surrender Death Cash Surrender Death Cash Surrender Death Year 5% Value Value Benefit Value Value Benefit Value Value Benefit - ---------- ----------- ----- --------- ------- ----- --------- ------- ----- --------- ------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 45
ASSUMPTIONS: 13 14 (1) NO ADDITIONAL PREMIUMS PAID AND 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 SHOWN IN THE PROSPECTUS APPENDIX. (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 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. 14 15 SURVIVORSHIP MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY MALE STANDARD NON-SMOKER ISSUE AGE [45] FEMALE STANDARD NON-SMOKER ISSUE AGE [40] [$300,000] INITIAL PREMIUM $XXXXX INITIAL SPECIFIED AMOUNT: VALUES--CURRENT COST OF INSURANCE
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ----------------------------- ------------------------------ ------------------------------ Premium Paid Plus Policy Interest at Cash Surrender Death Cash Surrender Death Cash Surrender Death Year 5% Value Value Benefit Value Value Benefit Value Value Benefit - ---------- ----------- ----- --------- ------- ----- --------- ------- ----- --------- ------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 45
15 16 ASSUMPTIONS: (1) NO ADDITIONAL PREMIUMS PAID AND 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 SHOWN IN THE PROSPECTUS APPENDIX. (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 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. 16 17 SURVIVORSHIP MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY MALE STANDARD NON-SMOKER ISSUE AGE [45] FEMALE STANDARD NON-SMOKER ISSUE AGE [40] [$300,000] INITIAL PREMIUM $XXXXX INITIAL SPECIFIED AMOUNT: VALUES--GUARANTEED COST OF INSURANCE
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ----------------------------- ------------------------------ ------------------------------ Premium Paid Plus Policy Interest at Cash Surrender Death Cash Surrender Death Cash Surrender Death Year 5% Value Value Benefit Value Value Benefit Value Value Benefit - ---------- ----------- ----- --------- ------- ----- --------- ------- ----- --------- ------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 45
17 18 ASSUMPTIONS: (1) NO ADDITIONAL PREMIUMS PAID AND 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 SHOWN IN THE PROSPECTUS APPENDIX. (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 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. 18 -----END PRIVACY-ENHANCED MESSAGE-----