VALLEY FORGE LIFE INSURANCE CO, S-1, 1996-03-29

VALLEY FORGE LIFE INSURANCE CO
S-1, 1996-03-29

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As filed with the Securities and Exchange Commission on March 29, 1996
File No. 33-_____

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM S-1

Registration Statement Under
the Securities Act of 1933

VALLEY FORGE LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
Pennsylvania 6312 23-6200031
------------ ------ ----------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

CNA Plaza, 43 South
Chicago, Illinois 60685
(312) 822-4921
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

<TABLE>
<S> <C>
Corporate Secretary Copy to:
Continental Assurance Company Stephen E. Roth, Esq.
CNA Plaza, 43 South Sutherland, Asbill & Brennan
Chicago, Illinois 60685 1275 Pennsylvania Avenue, N.W.
(312) 822-5158 Washington, DC 20004-2404
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
</TABLE>

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of the registration statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [x]

<TABLE>
<CAPTION>
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Unit Offering Price Fee
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Modified Guaranteed Annuity * * $289,999.65 $100
Contracts
</TABLE>
<PAGE>
* The proposed maximum aggregate offering price is estimated solely for
determining the registration fee. The amount to be registered and the proposed
maximum offering price per unit are not applicable since these securities are
not issued in predetermined amounts or units.

The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a),
shall determine.
<PAGE>

VALLEY FORGE LIFE INSURANCE COMPANY

----------------

CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)

<TABLE>
<CAPTION>
FORM S-1 ITEM NO. AND CAPTION LOCATION
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus . . . . . Outside Front Cover

2. Inside Front and Outside Back Cover of
Prospectus . . . . . . . . . . . . . . . . . . . Summary; Table of Contents

3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges . . . . . . . . . . Outside Front Cover; Summary; Definitions;
Description of the Contract

4. Use of Proceeds . . . . . . . . . . . . . . . . . Additional Information About Valley Forge Life
Insurance Company -- Investments

5. Determination of Offering Price . . . . . . . . . Not Applicable

6. Dilution . . . . . . . . . . . . . . . . . . . . Not Applicable

7. Selling Security Holders . . . . . . . . . . . . Not Applicable

8. Plan of Distribution . . . . . . . . . . . . . . Other Information -- Distribution of the Contracts

9. Description of Securities to be Registered . . . Summary; Description of the Contract; Contract
Charges and Fees; Selecting an Annuity Payment
Option; Other Information

10. Interest of Named Experts and Counsel . . . . . Other Information -- Legal Matters; Other
Information -- Experts

11. Information with Respect to the Registrant . . . The Company and the Accounts; Federal Tax
Considerations; Additional Information About Valley
Forge Life Insurance Company; Other Information --
Legal Proceedings
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . Part II, Item 14

</TABLE>
<PAGE>

PROSPECTUS

SINGLE PREMIUM DEFERRED MODIFIED GUARANTEED ANNUITY CONTRACT
issued by
VALLEY FORGE LIFE INSURANCE COMPANY

This prospectus describes individual and group single premium deferred modified
guaranteed annuity contracts and individual certificates issued thereunder
(referred to as the "Contract") issued by Valley Forge Life Insurance Company
(the "Company"). The Contract may be sold to or used in connection with
retirement plans, including plans that qualify for special federal income tax
treatment under the Internal Revenue Code.

The Owner of a Contract may allocate the Net Single Premium and Accumulation
Value to one or more Accounts available under the Contract. Accounts include
Interest Accounts, which provide Account Values based on the crediting of
specified Guaranteed Interest Rates; and may include Indexed Accounts, which
provide Account Values based on the crediting of interest rates that in part
reflect certain changes in a market index ("Index") specified in the Contract
(currently, The Standard and Poor's 500 Composite Stock Price Index (the "S&P
500"(R))).

Accumulation Value will vary as a function of interest credited to the
Accounts. The Company guarantees minimum Account Values for amounts maintained
in the Accounts until the expiration of the applicable Guarantee Period.
Account Values surrendered, withdrawn, transferred, or applied to an Annuity
Payment Option prior to that time are subject to a Market Value Adjustment, the
operation of which may result in upward or downward adjustments in values.

This prospectus sets forth the information regarding the Contract and the
Accounts that a prospective investor should know before purchasing a Contract.

PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE.

AN INVESTMENT IN A CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR IS THE CONTRACT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
CONTRACT INVOLVES CERTAIN RISKS, INCLUDING THE RISK OF LOSS OF PURCHASE
PAYMENTS (PRINCIPAL).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
June __, 1996

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
General Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Purchasing a Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Cancelling the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Surrenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Diagram of the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

THE COMPANY AND THE ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Interest Accounts, Indexed Accounts, and Guarantee Periods Under the Contract . . . . . . . . 11
Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

DESCRIPTION OF THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Purchasing a Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Cancelling the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Crediting and Allocating Net Single Premium . . . . . . . . . . . . . . . . . . . . . . . . . 16
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Surrenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Reference Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Payments by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Telephone Transfer Privileges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

CONTRACT CHARGES AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Surrender Charge (Contingent Deferred Sales Charge) . . . . . . . . . . . . . . . . . . . . . 22
Premium Tax Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Rider Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

SELECTING AN ANNUITY PAYMENT OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Annuity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Annuity Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Election and Changes of Annuity Payment Options . . . . . . . . . . . . . . . . . . . . . . . 26
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Annuity Payment Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

ADDITIONAL CONTRACT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Changing the Owner or Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Misstatement of Age or Sex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>

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<PAGE>
<TABLE>
<S> <C>
Change of Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Reports to Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Tax Status of the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Taxation of Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Transfers, Assignments or Exchanges of a Contract . . . . . . . . . . . . . . . . . . . . . . 35
Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Multiple Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Taxation of Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Other Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Distribution of the Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

ADDITIONAL INFORMATION ABOUT VALLEY FORGE
LIFE INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

FINANCIAL STATEMENTS OF VALLEY FORGE LIFE INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . 44

APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.

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<PAGE>

DEFINITIONS

ACCOUNT: An Interest Account or an Indexed Account available under the
Contract.

ACCOUNT VALUE: An amount on which the Company credits a specified and
guaranteed rate of interest (Interest Account Value), or for which the Company
credits interest based on a formula that takes into account certain changes in
a market index specified in the Contract (Indexed Account Value).

ACCUMULATION VALUE: Accumulation Value is the total amount invested under the
Contract (the sum of Interest Account Values and Indexed Account Values).

ADJUSTED ACCUMULATION VALUE: The Accumulation Value, plus or minus any
applicable Market Value Adjustment, less any Premium Tax Charges due and not
previously deducted.

AGE: The age of any person on the birthday nearest the date for which Age is
determined.

ANNUITANT: The person (or persons) whose life (or lives) determines the
Annuity Payments payable under the Contract and whose death determines the
death benefit. With regard to joint and survivorship Annuity Payment Options,
the maximum number of joint Annuitants is two, and provisions referring to the
death of an Annuitant mean the death of the last surviving Annuitant.
Provisions relating to an action by the Annuitant mean, in the case of joint
Annuitants, both Annuitants acting jointly.

ANNUITY DATE: The date on which the Annuity Value will be applied to purchase
an Annuity.

ANNUITY PAYMENT: One of several periodic payments made by the Company to the
Payee under an Annuity Payment Option.

ANNUITY PAYMENT DATE: The date each month, quarter, semi-annual period, or
year as of which the Company makes Annuity Payments.

ANNUITY PAYMENT OPTION: The form of Annuity Payments selected by the Owner
under the Contract.

ANNUITY VALUE: At any time on or before the fifth Contract Anniversary, the
Annuity Value equals the Surrender Value. At any time after the fifth Contract
Anniversary up to and including the Annuity Date, the Annuity Value equals the
greater of the Adjusted Accumulation Value and the Adjusted Reference Value.

BENEFICIARY: The person(s) to whom the death benefit will be paid on the death
of the Owner or Annuitant.

BUSINESS DAY: A day on which the New York Stock Exchange is open for trading
and the Company is open for business.

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<PAGE>
CANCELLATION PERIOD: The ten day period (or longer, if required by state law),
during which the Owner may return the Contract for a refund of the Adjusted
Accumulation Value (or in certain states, the Single Premium).

THE CODE: The Internal Revenue Code of 1986, as amended.

THE COMPANY: Valley Forge Life Insurance Company.

CAP: The maximum percentage per year by which Account Value in an Indexed
Account may be increased. The Company will declare the Cap for an Indexed
Account at each Reset Date. The Cap will not change during a Guarantee Period.

CONTINGENT ANNUITANT: The person who becomes the Annuitant in the event that
the Annuitant dies before the Annuity Date while the Owner is still alive.

CONTINGENT BENEFICIARY: The person(s) to whom a death benefit will be paid if
the Beneficiary (or Beneficiaries) is not living.

CONTRACT: The individual contract, or group contract and individual certificate
issued thereunder, together with any riders or endorsements and the
application.

CONTRACT ANNIVERSARY: The same date in each Contract Year as the Investment
Start Date.

CONTRACT YEAR: A twelve-month period beginning on the Investment Start Date or
on a Contract Anniversary.

EXCHANGE: The New York Stock Exchange.

FLOOR: The minimum percentage per year by which Account Value in an Indexed
Account may be increased. The Floor will never be less than 0%. The Company
will declare the Floor for an Indexed Account at each Reset Date. The Floor
will not change during a Guarantee Period.

GUARANTEE PERIOD: A specific number of years for which the Company agrees to
credit a specified Guaranteed Interest Rate to an Interest Account, or to apply
a specified Index Participation Rate, Cap, and Floor to an Indexed Account.

GUARANTEED INTEREST RATE: An effective annual rate of interest that the
Company credits to an Interest Account. The applicable Guaranteed Interest
Rate will not change during a Guarantee Period.

HOME OFFICE: The Company's office at 401 Penn Street, Reading, PA 19601.

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<PAGE>
INDEX: Currently, The Standard and Poor's 500 Composite Stock Price Index (R).
In the future, Indexed Accounts that credit interest based on other Indexes may
be made available in the Company's sole discretion.

INDEXED ACCOUNT: An account for which the Company credits interest based on a
formula that takes into account certain changes in an Index.

INDEXED ACCOUNT VALUE: Account Value allocated to Indexed Accounts.

INDEX PARTICIPATION RATE: The percentage used to calculate the Index Increase
for an Indexed Account. The Index Participation Rate will not change during a
Guarantee Period.

INTEREST ACCOUNT: An account to which the Company credits a specified and
guaranteed rate of interest.

INTEREST ACCOUNT VALUE: Account Value allocated to Interest Accounts.

INVESTMENT START DATE: The Investment Start Date is shown in the Contract. It
is used to determine Contract Years and Contract Anniversaries.

ISSUE DATE: The date on which the Company issues the Contract.

MARKET VALUE ADJUSTMENT: A positive or negative adjustment made to any portion
of Account Value upon the surrender, withdrawal, transfer, or application to an
Annuity Payment Option of such portion of the Account Value.

NET ALLOCATION: The amount allocated to an Account at its most recent Reset
Date, less withdrawals and transfers from the Account since then (including any
surrender charges or Market Value Adjustments).

NET SINGLE PREMIUM. The Single Premium less any Premium Tax Charge deducted
from it.

NON-QUALIFIED CONTRACT: A Contract that is not a "qualified contract."

OWNER: The person who owns or persons who own the Contract and who is or are
entitled to exercise all rights and privileges provided in the Contract. The
maximum number of joint Owners is two. Provisions relating to action by the
Owner mean, in the case of joint Owners, both Owners acting jointly. In the
context of a Contract issued on a group basis, an Owner refers to the
participant under a group Contract.

PAYEE: The person entitled to receive Annuity Payments under the Contract.

PREMIUM TAX CHARGE: A charge for state premium taxes deducted either from the
Single Premium or from the Accumulation Value prior to surrender,
annuitization, or death of the Owner or Annuitant.

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<PAGE>
QUALIFIED CONTRACT: A Contract that is issued in connection with a retirement
plan that qualifies for special federal income tax treatment under Sections
401, 408, or 457 of the Code.

REFERENCE VALUE: A minimum guaranteed value used to calculate benefits under
the Contract.

RESET DATES: The date that an amount is first allocated to an Account is the
first Reset Date for that Account. The next Reset Date for that Account is the
first day of the next Guarantee Period applicable to that Account.

SEC: The United States Securities and Exchange Commission.

SEPARATE ACCOUNTS: The Valley Forge Life Insurance Company Indexed Separate
Account and the Valley Forge Life Insurance Company MVA Guaranteed Interest
Separate Account.

SERVICE CENTER: The offices of the Company's administrative agent at 95 Bridge
Street (or P.O. Box 310), Haddam, Connecticut 06438.

SINGLE PREMIUM: The payment made by an Owner to purchase the Contract.

SURRENDER VALUE: The greater of: (i) the Adjusted Accumulation Value less any
applicable surrender charges; or (ii) the Adjusted Reference Value.

WINDOW PERIOD: The last thirty calendar days of a Guarantee Period.

WRITTEN NOTICE: A notice or request submitted in writing in a form
satisfactory to the Company that is signed by the Owner and received at the
Service Center.

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<PAGE>
SUMMARY

This prospectus has been designed to provide prospective Owners with the
information necessary to decide whether or not to purchase a Contract. This
summary provides a concise description of the more significant aspects of the
Contract. Further detail is provided in this prospectus and in the Contract.
For additional information, contact the Service Center.

In some jurisdictions, the Contract is issued directly to individuals. In
other jurisdictions, the Contract is only available as a group contract. Group
contracts are issued to or on behalf of groups, such as employers for their
employees. Individuals who are part of groups for which a Contract is issued
receive a certificate that recites substantially all of the provisions of the
group contract. Throughout this prospectus, the term "Contract" refers both to
individual contracts, and to group contracts and individual certificates issued
thereunder.

GENERAL DESCRIPTION

The Contract is a single premium deferred annuity, providing annuitization,
surrender, and death benefits. The amount of these benefits is determined
largely by the Accumulation Value under the Contract. Account Values may be
based either on accumulation at a stated, guaranteed rate of interest (Interest
Accounts) or on a stated, guaranteed percentage of increases (if any) in the
Index, subject to certain limits (Indexed Accounts). Multiple Guarantee
Periods are available, and the Owner can allocate the Net Single Premium among
the Account types and Guarantee Periods offered by the Company at the time of
allocation.

If an Account is maintained for the duration of the applicable Guarantee
Period, the Owner's principal allocated to that Account is guaranteed in full
by the Company. However, withdrawals and surrenders from an Account before the
end of its Guarantee Period are subject to a Market Value Adjustment, which may
be positive or negative, and to a surrender charge. BECAUSE THE CONTRACT
PROVIDES ONLY LIMITED LIQUIDITY DURING A GUARANTEE PERIOD THROUGH THE FREE
WITHDRAWAL PROVISION, IT IS NOT SUITABLE FOR SHORT-TERM INVESTMENT.

From the Issue Date to the Investment Start Date, the Company will hold the Net
Single Premium and credit it with daily interest equivalent to an annual rate
of at least 3%. On the Investment Start Date, the Company will allocate the
Net Single Premium (together with interest) to the Accounts selected by the
Owner based on the Owner's allocation percentages. An Owner may allocate all
or a portion of the Net Single Premium or transfer Account Values, within
limits, among several Accounts.

The Contract offers Interest Accounts, under which an Owner may allocate all or
a portion of Net Single Premium and transfer Account Values among Guarantee
Periods selected by the Owner. In general, if amounts allocated to an Interest
Account remain in a Guarantee Period until its expiration date, its value will
be equal to the amount originally allocated, multiplied on an annually
compounded basis by the applicable Guaranteed Interest Rate.

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<PAGE>

Subject to state availability, the Contract may also offer Indexed Accounts,
under which an Owner may allocate all or a portion of the Net Single Premium
and transfer Account Values among Guarantee Periods selected by the Owner. In
general, if amounts allocated to an Indexed Account remain in a Guarantee
Period until its expiration date, its value will be equal to the amount
originally allocated plus interest that reflects in part certain positive
changes, if any, in the S&P 500(R)(1) (Index Increases). The S&P 500(R) can, of
course, increase or decrease daily; however, Indexed Account Value will remain
constant during a Contract Year. Index Increases (if any) are determined and
credited to Indexed Account Value at the end of each Contract Year during a
Guarantee Period.

The investment risk and return characteristics for an Interest Account are
similar to those of a zero coupon bond or certificate of deposit; an Interest
Account, if maintained until its "maturity," or expiration, provides a fixed
rate of return over a stated period. Principal and credited interest are
guaranteed by the Company and are available without surrender charge or Market
Value Adjustment during the 30-day Window Period at the end of each Guarantee
Period. If Interest Account Value is withdrawn prematurely, or before the
Window Period at the end of the applicable Guarantee Period, then the effect of
the surrender charge and Market Value Adjustment may result in a loss of
principal.

The investment risk and return characteristics for an Indexed Account are
expected to fall in between those typical of fixed annuities and those typical
of equity mutual funds or variable annuities. A fixed annuity guarantees
principal, and provides for no participation in equity or other markets. A
variable annuity does not guarantee principal, and provides for 100%
participation in equity or other markets. Long-term returns under the Contract
may be higher than those offered by a typical fixed annuity, but year-to-year
growth under the Contract will be more volatile than under a fixed annuity as
the Index fluctuates. The principal guarantee under the Contract may make an
Indexed Account more suitable than direct equity investment for risk-averse
Owners. However, expected long-term returns of Indexed Accounts will be lower
than those for equity mutual funds or variable annuities.

Any surrender, withdrawal, transfer, or annuitization made prior to the
expiration date of the Guarantee Period will be subject to a Market Value
Adjustment that may increase or decrease the Account Value (or portion thereof)
being surrendered, withdrawn, transferred, or annuitized. Depending on the
size of the Market Value Adjustment, such an adjustment may reduce the Account
Value (or portion thereof) to less than the Net Single Premium allocated to or
Account Value transferred to a Guarantee Period. (See "THE COMPANY AND THE
ACCOUNTS - Market Value Adjustment.")

- ----------------------
(1) The S&P 500 is an unmanaged index of common stocks comprised of 500
industrial, financial, utility and transportation companies. "Standard & Poor's
(R)," "S&P(R)," and "S&P 500(R)," are trademarks of McGraw-Hill, Inc. The
Contract is not sponsored, endorsed, sold or promoted by Standard & Poor's and
Standard & Poor's makes no representation regarding the advisability of
purchasing a Contract or allocating Net Single Premium or Account Value to
Indexed Accounts.

- 6 -
<PAGE>

The Surrender Value may increase or decrease. OWNERS BEAR THE INVESTMENT RISK
FOR AMOUNTS SURRENDERED, WITHDRAWN, TRANSFERRED, OR APPLIED TO AN ANNUITY
PAYMENT OPTION OUTSIDE OF AN APPLICABLE WINDOW PERIOD. Surrender Value,
Annuity Value, and Death Benefits are subject to certain minimums based on the
Reference Value or Adjusted Reference Value of the Contract. (See "THE COMPANY
AND THE ACCOUNTS - Reference Value.")

The Contract also offers a choice of Annuity Payment Options to which Owners
may apply the Annuity Value as of the Annuity Date. The Annuity Date, once
established by the Owner, may not be changed. Beneficiaries may also apply the
Death Benefit to certain Annuity Payment Options.

PURCHASING A CONTRACT

The Contract permits the payment of a Single Premium. The minimum Single
Premium for a Contract is $5,000. The Company reserves the right to reject any
Contract application. On the Investment Start Date, the Net Single Premium is
allocated to one or more Accounts specified on the application. The Investment
Start Date will be the first or 15th calendar day of the month (whichever comes
first) that next follows the Company's receipt of the Single Premium (or, if
the that day is not a Business Day, the next Business Day thereafter). (The
Company reserves the right to specify different Investment Start Dates under
Contracts issued in the future.)

CANCELLING THE CONTRACT

At any time during the Cancellation Period, an Owner may cancel the Contract
and receive a refund of the Adjusted Accumulation Value (or, for some states,
the Single Premium). The Cancellation Period is a ten day period of time
beginning when the Contract is received by an Owner. Some states may require
that the Company provide a longer Cancellation Period. (See "DESCRIPTION OF THE
CONTRACT -- Cancelling the Contract.")

TRANSFERS

On any Contract Anniversary, an Owner may transfer all or part of Interest
Account Value or Indexed Account Value to other Accounts then available.
Transfers are subject to certain restrictions, and transfers from an Indexed
Account are subject to additional limitations. A Market Value Adjustment will
apply unless Account Value is transferred during the applicable Window Period.
(SEE "DESCRIPTION OF THE CONTRACT -- Transfers.")

WITHDRAWALS

Upon Written Notice prior to the Annuity Date, an Owner may, subject to certain
restrictions, withdraw part of the Surrender Value. (See "THE COMPANY AND THE
ACCOUNTS -- Market Value Adjustment.") Withdrawals of Surrender Value may
reflect a positive or negative Market Value Adjustment. In addition, a
surrender charge and any Premium Tax Charge may apply. (See "DESCRIPTION OF
THE CONTRACT -- Withdrawals" and

- 7 -
<PAGE>

"CONTRACT FEES AND CHARGES - Surrender Charge.") Once each Contract Year, an
Owner may withdraw an amount up to the Free Withdrawal Amount as of the
preceding Contract Anniversary (10% of the amounts allocated to each of the
Accounts as of their most recent Reset Dates) without imposition of a surrender
charge, although the Free Withdrawal Amount will be subject to a Market Value
Adjustment. Withdrawals are subject to tax and may also be subject to a 10%
penalty tax. (See "FEDERAL TAX CONSIDERATIONS.")

SURRENDERS

Upon Written Notice prior to the Annuity Date, an Owner may surrender the
Contract and receive its Surrender Value. An Owner may elect to have the
Surrender Value paid in a single sum or under an Annuity Payment Option. (See
"DESCRIPTION OF THE CONTRACT -- Surrenders" and "CONTRACT FEES AND CHARGES -
Surrender Charge.") Surrenders are subject to tax and may also be subject to a
10% penalty tax. (See "FEDERAL TAX CONSIDERATIONS.")

CHARGES

The following charges are assessed under the Contract:

Surrender Charge. No sales charge is deducted from the Single Premium at the
time that it is paid. However, a surrender charge is deducted upon any
withdrawal or surrender from an Account prior to the Annuity Date that is
outside of a Window Period. The surrender charge is generally equal to a
percentage of the Net Allocation for an Account. The surrender charge
percentage varies depending upon the type of Account and the duration of the
Guarantee Period applicable to the Account, but will not exceed a maximum of 8%
during each Contract Year. During each of the ten Contract Years preceding the
Annuity Date, the surrender charge percentage declines in ten equal increments
on each Contract Anniversary to zero on the Annuity Date. No surrender charge
applies to Account Value in excess of the Net Allocation. In addition, after
the first Contract Year, the surrender charge does not apply to the Free
Withdrawal Amount as of the preceding Contract Anniversary.

The Surrender Charge, along with the Market Value Adjustment, could result in
an Owner receiving less than the Net Single Premium amount upon surrender. The
Owner will not, however, receive less than the Contract's Adjusted Reference
Value upon surrender. Adjusted Reference Value is equal to 90% of the Single
Premium, adjusted for certain interest credits and previous withdrawals and
surrenders. (See "THE COMPANY AND THE ACCOUNTS - Reference Value" and
"DESCRIPTION OF THE CONTRACT - Surrenders.")

Rider Cost. The Contract's Reference Value will reflect charges for any riders
or endorsements, including (if allocations have been made to Indexed Accounts)
an annual charge of 0.85% of the value of the Indexed Account(s). (See "THE
COMPANY AND THE ACCOUNTS - Reference Value.")

- 8 -
<PAGE>

Premium Tax Charge. Certain states and municipalities impose a tax on the
Company in connection with the receipt of annuity considerations. This tax can
range from 0% to 3.5% of such considerations and generally varies based on the
Annuitant's state of residence. The charge is deducted either from the Single
Premium or from Accumulation Value upon surrender, annuitization, or death of
the Owner or Annuitant.

(See "CONTRACT CHARGES AND FEES.")

DIAGRAM OF THE CONTRACT

Set forth below is a diagram showing the relationship between the Single
Premium, Accumulation Value, Surrender Value, Annuity Value and Death Benefits.

|------|
| Net |
| Single |
| Premium |
|--------------|
|
V
|-------------------------|--------------------------|
| Interest | Indexed |
| Accounts | Accounts |
| -------- | -------- |
| - Values Based | - Values Based |
| on Specified | on Indexed |
| Guaranteed | Rates |
| Rates | |
|---------------------------------|----------------------------------|
| | |
| Interest Account Value | Indexed Account Value |
|------------------------------------|-------------------------------------|
| Accumulation Value |
|------------------------------------------------------------------------------|
|
V
|------------------| |---------------------------| |-------------------------|
| Surrender | | Annuity | | Death |
| Value | | Value | | Benefit |
| --------- | | ------- | | ------- |
| | | | | |
|At Least Equal to | | - During The First Five | | - On Death of Owner, |
|Adjusted | | Contract Years, Equal to| | Equal to Surrender |
|Accumulation Value| | Surrender Value | | Value |
|Less Surrender | | | | |
|Charges | | - After the First Five | | - On Death of Annuitant,|
| | | Contract Years At Least | | At Least Equal to |
| | | Equal to Adjusted | | Accumulation Value |
| | | Accumulation Value | | |
|------------------| |---------------------------| | ------------------------|

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<PAGE>

THE COMPANY AND THE ACCOUNTS

THE COMPANY AND THE SEPARATE ACCOUNTS

The Company is a life insurance company organized under the laws of the State
of Pennsylvania in 1956 and is authorized to transact business in the District
of Columbia, Puerto Rico, Guam, and all states except New York. The Company's
home office is located at 401 Penn St., Reading, Pennsylvania 19601, and its
executive office is located at CNA Plaza, Chicago, Illinois 60685. The Company
is a wholly-owned subsidiary of Continental Assurance Company ("CAC"), a life
insurance company which, as of December 31, 1995, had assets of approximately
$12.9 billion. See "ADDITIONAL INFORMATION ABOUT VALLEY FORGE LIFE
INSURANCE COMPANY" for more detail regarding the Company.

The Company has established two separate accounts in connection with the
Contracts (the Separate Accounts) -- the Valley Forge Life Insurance MVA
Guaranteed Interest Separate Account and the Valley Forge Life Insurance
Company Indexed Separate Account. The Separate Accounts are subject to the
laws of Pennsylvania.

The VFL Indexed Separate Account was established by the Company with respect
to, and is used to support the values and benefits attributable to, the Indexed
Accounts. The VFL MVA Guaranteed Interest Separate Account was established by
the Company with respect to, and is used by the Company to support the values
and benefits attributable to, the Interest Accounts. Although the Company owns
the assets of the Separate Accounts, the assets of each Separate Account are
held separately from the Company's other assets and are not part of the
Company's general account. Pennsylvania insurance law provides that the
portion of the assets of each Separate Account equal to its reserves and other
liabilities are not chargeable with liabilities that arise from any other
business that the Company conducts. The Company has the right to transfer to
its general account any assets of a Separate Account that are in excess of its
reserves and other liabilities.

As part of its overall investment strategy, the Company intends to maintain
assets in VFL MVA Guaranteed Interest Separate Account, and in the VFL Indexed
Separate Account, that reflect its obligations to Owners that have made
allocations to Interest Accounts and Indexed Accounts, respectively.
Accordingly, it is anticipated that assets of the VFL MVA Guaranteed Interest
Separate Account will likely consist of fixed income investments, and that
assets of the VFL Indexed Separate Account will likely consist of fixed income
investments, as well as call options or other hedging instruments that relate
to movements in the Index.

The Contracts have been registered under the Securities Act of 1933, but
neither of the Separate Accounts nor the Company's general account has been
registered as an investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"). Accordingly, neither of the Separate Accounts nor
the general account, nor any interests therein, are generally subject to
regulation under the 1940 Act.

- 10 -
<PAGE>

INTEREST ACCOUNTS, INDEXED ACCOUNTS, AND GUARANTEE PERIODS UNDER THE CONTRACT

The Net Single Premium may be allocated to, and transfers of Account Value may
be made to, the Accounts.

The assets in the VFL MVA Guaranteed Interest Separate Account and the VFL
Indexed Separate Account are used to support the values and benefits under the
Interest Accounts and the Indexed Accounts, respectively, of the Contract.
Under Pennsylvania insurance law, the Company is required to maintain assets in
each Separate Account at least equal to its reserves and other contract
liabilities. In the unlikely event of liquidation of the Company, if the
Company cannot satisfy all of its insurance obligations, (i) Owners with
Interest Account Value will have a priority claim against assets of the VFL MVA
Guaranteed Interest Separate Account equal to its liabilities, and a claim
against the Company's general account for any remaining Company liabilities;
and (ii) Owners with Indexed Account Value will have a priority claim against
assets of the VFL Indexed Separate Account equal to its liabilities, and a
claim against the Company's general account for any remaining Company
liabilities. Thus, the Separate Accounts represent pools of assets that
provide an additional measure of assurance that Owners will receive full
payment of benefits under the Contracts.

INTEREST ACCOUNTS. Through the Interest Accounts, the Company offers specified
effective annual rates of interest (Guaranteed Interest Rates) that are
determined as of the Issue Date or Reset Date, as applicable, credited daily as
of the Investment Start Date or Reset Date, as applicable, and are available
for specified periods of time selected by the Owner (Guarantee Periods). The
Company may make available Guarantee Periods of from one year to ten years in
duration. As of the date of this Prospectus, Guarantee Periods of one, three,
five, seven and ten years are available for Interest Accounts.

Although the Guaranteed Interest Rate may differ among Guarantee Periods, it
will never be less than 3%.

Interest Accounts provide values and benefits based upon the Net Single Premium
and Account Values allocated thereto, the Guaranteed Interest Rate credited on
such amounts, and any charges or Market Value Adjustments imposed on such
amounts in accordance with the terms of the Contract. Owners allocating the
Net Single Premium and/or Account Value to Interest Accounts do not participate
in the investment performance of assets of the VFL Guaranteed Income Separate
Account, and this performance does not determine the Interest Account Value or
benefits relating thereto.

- 11 -
<PAGE>

INDEXED ACCOUNTS. If approved in the Owner's state, one or more Indexed
Accounts may be available under the Contract. The Net Single Premium may be
allocated to, and transfers of Account Value may be made to, Indexed Accounts.

Through the Indexed Accounts, the Company offers interest in accordance with a
formula that reflects in part changes in the S&P 500 (R). The formula is based
on a set of factors (the Index Participation Rate, Cap, and Floor) that are
available for the Guarantee Period(s) selected by the Owner. As of the date of
this Prospectus, the Company offers five year Guarantee Periods for Indexed
Accounts. The rate at which the value of an Indexed Account grows depends on
certain changes in the Index on which it is based, as well as its Cap, Floor,
and Index Participation Rates. The Index Participation Rate, Cap, and Floor
may vary among Guarantee Periods, and the Company reserves the right to
establish new Index Participation Rates, Caps, and Floors on any Reset Date.

Index Accounts provide values and benefits based upon the Net Single Premium
and Account Values allocated thereto, the Index Increases (if any) credited on
such amounts, and any charges or Market Value Adjustments imposed on such
amounts in accordance with the terms of the Contract. Indexed Account Value
will reflect an annual Index Increase, calculated as described below, if the
Index increases during a Contract Year. Indexed Account Value is not
---
determined by, and does not reflect, the investment performance of the VFL
Indexed Separate Account, and does not correspond directly to increases or
decreases in the Index. ---

Index Increases. The Company will calculate the Index Increase, if any, for an
Indexed Account at each Contract Anniversary. The Index Increase equals the
Indexed Account Value multiplied by the Index Increase Percentage Factor. If
the Index Increase is greater than zero, the Company will increase the Indexed
Account Value by the Index Increase on the Contract Anniversary. In between
Contract Anniversaries, Indexed Account Value will remain constant (unless a
Death Benefit becomes payable); amounts surrendered, withdrawn, transferred, or
applied to an Annuity Payment Option may, however, be subject to a Surrender
Charge and/or a Market Value Adjustment. (See "DESCRIPTION OF THE CONTRACT -
Death Benefit" and "CONTRACT CHARGES AND FEES - Surrender Charge" and "THE
COMPANY AND THE ACCOUNTS - Market Value Adjustment.")

The Index Increase Percentage Factor will not be less than the Floor or more
than the Cap declared at the previous Reset Date. Within those bounds, the
Index Increase Percentage Factor equals (a) multiplied by (b) where:

(a) is the Average Index Increase Percentage for the Indexed
Account at the Contract Anniversary, and

(b) is the Index Participation Rate declared at the previous Reset
Date for the Indexed Account.

- 12 -
<PAGE>

Average Index Increase Percentage. The Average Index Increase Percentage for
an Indexed Account on any Contract Anniversary within a Guarantee Period
equals:

(b) - (a)
---------
(a)
where

(a) is the value of the Index on the previous Contract
Anniversary; and
(b) is the arithmetic average of the values of the Index on each
day that the Exchange is open for business during the 90 days
ending on the Contract Anniversary.

GUARANTEE PERIODS. An Initial Guarantee Period begins on the date as of which
the Net Single Premium is allocated to, or an amount of Account Value is
transferred to, an Account. It ends when the number of years in the Guarantee
Period elected has elapsed. The last day of the Guarantee Period is the
expiration date for that Guarantee Period. A subsequent Guarantee Period
begins on the first day following the expiration date of a previous Guarantee
Period (the Reset Date).

Allocations of the Net Single Premium and transfers of Account Value to the
Accounts will have different applicable Guaranteed Interest Rates (for Interest
Accounts), or Index Participation Rates, Caps, and Floors (for Indexed
Accounts), depending on the timing of such allocations or transfers. However,
once the allocation or transfer is made, the applicable Guaranteed Interest
Rate or Index Participation Rate, Cap, and Floor do not change during the
selected Guarantee Period.

If the allocated or transferred amount remains in the Account until the end of
the applicable Guarantee Period, at that time its value will be equal to the
amount originally allocated or transferred to the Account, either (i)
multiplied on an annually compounded basis by its Guaranteed Interest Rate
(Interest Accounts), or (ii) plus Index Increases, if any (Indexed Accounts).
If Account Value is surrendered, withdrawn, transferred, or applied to an
Annuity Payment Option prior to the expiration date of the applicable Guarantee
Period, the Account Value is subject to a Market Value Adjustment, which may
result in the payment of an amount less than the amount originally allocated or
transferred to that Account. (See "THE COMPANY AND THE ACCOUNTS - Market Value
Adjustment.") Surrenders and withdrawals are also subject to a surrender
charge. (See "CONTRACT FEES AND CHARGES - Surrender Charge.")

By Written Notice prior to the expiration date of a Guarantee Period applicable
to an Account, the Owner may:

- - choose a different Guarantee Period, with an expiration date no later
than the Annuity Date, from among those the Company offers at that
time;

- - transfer all or a portion of the expiring Account Value to a new
Account; or

- 13 -
<PAGE>

- - transfer all or a portion of the expiring Account Value to an existing
Account for which the next Reset Date falls on the day immediately
following the expiration date for the expiring Account.

Transfers are subject to restrictions, and a Market Value Adjustment will
usually apply to the amount transferred. However, if the transfer occurs
during a Window Period for an Account (for example, upon the expiration of the
Guarantee Period), no Market Value Adjustment (or Surrender Charge) will apply
to the amount transferred. (See "DESCRIPTION OF THE CONTRACT - Transfers.")

Unless the Company receives Written Notice prior to the expiration date for an
Account, a new Guarantee Period will commence automatically on the first day
following the expiration date. The new Guarantee Period will be of the same
duration as the expiring Guarantee Period if the Company is still offering that
Guarantee Period and if the expiration date of the new Guarantee Period is no
later than the Annuity Date. Otherwise, the new Guarantee Period will be one
year. If the expiring Account is an Interest Account, it will continue to be
an Interest Account; if the expiring Account is an Indexed Account, it will
continue to be an Indexed Account.

The Company will notify an Owner in writing at least thirty days prior to the
expiration date of any Guarantee Period. The Company's notice to the Owner of
the expiration of a Guarantee Period will contain information about the
then-available Guarantee Periods, and the Guaranteed Interest Rates (for
Interest Accounts), and Index Participation Rates, Caps, and Floors (for
Indexed Accounts) applicable to such Guarantee Periods.

The Guarantee Periods being made available by the Company for Interest Accounts
and for Indexed Accounts will change from time to time. Contact the Service
Center for information regarding the Guarantee Periods being made available by
the Company for each type of Account at any time, and regarding the current
Guaranteed Interest Rates for available Interest Accounts, and current Index
Participation Rates, Caps, and Floors for available Indexed Accounts.

TO THE EXTENT PERMITTED BY LAW, THE COMPANY RESERVES THE RIGHT AT ANY TIME TO
OFFER GUARANTEE PERIODS THAT DIFFER IN DURATION FROM THOSE AVAILABLE WHEN A
CONTRACT IS ISSUED. THE COMPANY ALSO RESERVES THE RIGHT, AT ANY TIME, TO STOP
ACCEPTING NET SINGLE PREMIUM ALLOCATIONS OR TRANSFERS OF ACCOUNT VALUE TO A
PARTICULAR GUARANTEE PERIOD.

MARKET VALUE ADJUSTMENTS

Any surrender, withdrawal, transfer, or application to an Annuity Payment
Option of Interest Account Value or Indexed Account Value is subject to a
Market Value Adjustment that may be positive or negative, unless the effective
date of the surrender, withdrawal, transfer, or application is within the
Window Period. The Market Value Adjustment will be applied before the
deduction of any applicable surrender charge or Premium Tax Charge.

- 14 -
<PAGE>

The Market Value Adjustment reflects the relationship between the Guaranteed
Interest Rate for an Interest Account with the same Reset Date and Guarantee
Period as the Account from which Account Value is being taken (the "Credited
Rate"), and the Guaranteed Interest Rate that is currently being offered for an
Interest Account with a Guarantee Period of the same duration as the time
remaining until the expiration date of the Guarantee Period for the Interest
Account or Indexed Account from which Account Value is being taken (the
"Current Rate"). (If a Current Rate is not available because the Company is no
longer offering Guarantee Periods of the relevant duration, then the Company
will use a rate equal to the most recent Moody's Corporate Bond Yield Average -
Monthly Average Corporates as published by Moody's Investors Services, Inc.)

Generally, if the Credited Rate is lower than the Current Rate, then the
application of the Market Value Adjustment will result in the payment, upon
surrender, withdrawal, transfer or application of amounts to an Annuity Payment
Option, of an amount less than the Account Value (or portion thereof) being
surrendered, withdrawn, transferred or applied (and may even result in the
payment of an amount less than the Net Single Premium allocated to or the
portion of Account Value transferred to the Guarantee Period). Similarly, if
the Credited Rate is higher than the Current Rate, then application of the
Market Value Adjustment will result in the payment, upon surrender, withdrawal,
transfer or application of amounts to an Annuity Payment Option, of an amount
greater than the Account Value (or portion thereof) being surrendered,
withdrawn, transferred or applied.

The Market Value Adjustment is computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to a Death Benefit or an
Annuity Payment Option by the Market Value Adjustment Factor. The Market Value
Adjustment Factor is calculated as:

[[(1+a)/(1+b)^(n/12)]-1]

where:

"a" is the Credited Rate;

"b" is the Current Rate. Where the time remaining to the expiration of
the Guarantee Period is not comparable to a Guarantee Period duration
then offered by the Company, "b" is the rate found by linear
interpolation between the rate for the Guarantee Periods having the
duration closest to the time remaining or, if the time remaining is
less than 1 year, "b" is the rate for a 1 year period; and

"n" is the number of complete months remaining before the expiration of
the Guarantee Period for the Account from which the surrender,
withdrawal, transfer, or application to a Death Benefit or an Annuity
Payment Option is being made.

Examples of computing the Market Value Adjustment are set forth in Appendix A.

- 15 -

<PAGE>

DESCRIPTION OF THE CONTRACT

PURCHASING A CONTRACT

A prospective Owner may purchase a Contract by submitting an application
through a licensed agent of the Company who is also a representative of a
broker-dealer having a selling agreement with CNA Investor Services, Inc.
("CNA/ISI"), the principal underwriter for the Contracts. The maximum Age for
Owners on the Issue Date is 75. A Single Premium must be delivered to the
Service Center along with the Owner's application. The minimum Single Premium
is $5,000. Additional premium payments under a Contract are not permitted;
however, an Owner may purchase more than one Contract. Unless the Company
gives its prior approval, it will not accept a Single Premium in excess of
$500,000 and reserves the right not to accept any Single Premium or application
for a Contract for any reason. The Company will send Owners a confirmation
notice upon receipt and acceptance of the Owner's Single Premium.

CANCELLING THE CONTRACT

Owners may cancel the Contract during the Cancellation Period, which is the ten
day period after an Owner receives the Contract. Some states may require a
longer Cancellation Period. To cancel the Contract, the Owner must mail or
deliver the Contract to the Service Center or to the agent who sold it. The
Company will refund the Adjusted Accumulation Value (or, for some states, the
Single Premium).

CREDITING AND ALLOCATING NET SINGLE PREMIUM

If the application for a Contract is properly completed and is accompanied by
all the information necessary to process it, including payment of the Single
Premium, the Net Single Premium will be allocated, as designated by the Owner,
to one or more of the Accounts on the Investment Start Date.

From the Issue Date until the Investment Start Date, the Company will credit
interest to the Net Single Premium of at least 3%. The Investment Start Date
will be the first or 15th calendar day of the month (whichever comes first)
that next follows the Company's receipt of the Single Premium (or, if that day
is not a Business Day, the next Business Day thereafter). The Company reserves
the right to establish different Investment Start Dates under Contracts issued
in the future. On the Investment Start Date, the Company will allocate the
resulting sum to each Account based on the Owner's allocation percentages.

An Owner may allocate the Net Single Premium among any or all Accounts
available on the Issue Date. At least $500 of a Net Single Premium must be
allocated to that Account. All percentage allocations must be in whole
numbers.

- 16 -
<PAGE>

TRANSFERS

General. On any Contract Anniversary, by Written Notice, an Owner may transfer
all or part of the balance of an Account to a new Account(s). An Owner may
also transfer some or all of the balance to an existing Account for which the
Reset Date falls on the Contract Anniversary. Transfers may only occur on
Contract Anniversaries. ----

The amount transferred cannot be less than $500. If the Owner does not
transfer the entire balance of an Account, the amount remaining in the Account
after the transfer must be at least equal to $500.

If the transfer from an Account occurs at a Reset Date for that Account, then
the Owner may select any new Guarantee Period for the transferred amount that
the Company then offers that does not expire prior to the Annuity Date. If the
transfer does not occur at such a Reset Date, then, in addition to the
foregoing, the Guarantee Period selected from those the Company then offers
must be no shorter than the number of years remaining in the Guarantee Period
of the Account from which the amount is being transferred (rounded up to the
next whole number of years for a Guarantee Period the Company is then
offering).

A Market Value Adjustment will usually apply to the amount transferred. (See
"THE COMPANY AND THE ACCOUNTS - Market Value Adjustment.") However, if the
transfer occurs during the Window Period for the Account from which some or all
of the balance is being transferred, no Market Value Adjustment will apply to
the amount transferred from that Account.

Additional Restrictions. Transfers of some or all of the balance of an Account
(the "Source Account") to another Account (the "Destination Account") are also
subject to the following conditions:

- The Destination Account must be of an Account Type and
Guarantee Period duration that the Company is offering at the
time of the transfer;
- The date of transfer must be a Reset Date for the Destination
Account, unless it is a new Account;
- The Guarantee Period for a Destination Account may not be
longer than the number of years remaining until the Annuity
Date;
- If the date of transfer is not a Reset Date for the Source
Account, then the Guarantee Period for the Destination Account
must be no shorter than the number of years remaining in the
Guarantee Period for the Source Account, rounded up to the
next whole number of years;
- If the transfer occurs at a Reset Date for the Source Account,
then the Destination Account may be any type of Account;
- If the Source Account is an Interest Account, then the
Destination Account may be any type of Account;

- 17 -
<PAGE>

- If the Source Account is an Indexed Account, then the
Destination Account may be a different type of Account only if
----
the transfer occurs at a Reset Date for the Source Account.

WITHDRAWALS

General. At any time prior to the Annuity Date, an Owner may withdraw part of
the Surrender Value, subject to certain limitations. Each withdrawal must be
requested by Written Notice. A Written Notice of withdrawal must specify the
amount to be withdrawn from each Account. If the Written Notice does not
specify this information, or if the value of the specified Account(s) is
inadequate to comply with the request, the Company will make the withdrawal
from Interest Accounts and Indexed Accounts based on the proportion that the
value of each Account bears to the Accumulation Value as of the day of the
withdrawal.

The amount withdrawn cannot be less than the Minimum Withdrawal Amount, which
is $500. The maximum withdrawal is the amount that would leave a Minimum
Account Value per Account of $500. A withdrawal request that would reduce any
Account Value below the Minimum Account Value will be treated as a request for
a withdrawal of all of that Account Value.

The Company withdraws the amount requested from the Account Value as of the day
that the Owner's Written Notice is received at the Service Center, and sends
the Owner that amount plus or minus any applicable Market Value Adjustment.
The Company will then deduct any applicable surrender charge and any applicable
Premium Tax Charge from the remaining Account Value.

Tax Consequences of Withdrawals. Consult your tax adviser regarding the tax
consequences associated with making withdrawals. A withdrawal made before the
taxpayer reaches Age 59 1/2 may have federal income tax consequences, including
the possible imposition of a penalty tax of 10% of the taxable portion
withdrawn. See "FEDERAL TAX CONSIDERATIONS" for more details.

SURRENDERS

An Owner may surrender the Contract for its Surrender Value at any time prior
to the Annuity Date. An Owner may elect to have the Surrender Value paid in a
single sum or under an Annuity Payment Option. If no election is made, the
Surrender Value will be paid in a single sum. The Surrender Value will be
determined as of the date the Company receives both the Written Notice for
surrender and the Contract at the Service Center. The Contract ends when the
Company pays the Surrender Value or applies such sum to an Annuity Payment
Option.

The Surrender Value generally reflects the imposition of the surrender charge.
(See "CONTRACT FEES AND CHARGES - Surrender Charge.") However, no surrender
charge will be imposed on surrenders from an Account during the Account's
Window Period. In

- 18 -
<PAGE>

addition, if the Contract is surrendered during a Contract Year, no surrender
charge will apply to the Free Withdrawal Amount for that Contract Year, or to
amounts in excess of the Net Allocation for each Account, determined on an
Account-by-Account basis.

Consult your tax adviser regarding the tax consequences of a surrender. A
surrender made before Age 59 1/2 may have federal income tax consequences,
including the possible imposition of a penalty tax of 10% of the taxable
portion of the Surrender Value. See "FEDERAL TAX CONSIDERATIONS" for more
details.

DEATH BENEFITS

The Death Benefit. The Death Benefit the Company pays on the death of an Owner
who is not the Annuitant is the Surrender Value. Thus, the Death Benefit in
this circumstance may reflect a surrender charge and a Market Value Adjustment.
The Death Benefit the Company pays on the death of the Annuitant is the greater
of the Account Value and the Reference Value. In calculating the Death
Benefit, the Account Value will include any Index Increase payable, treating
the date of death as the Reset Date for each Indexed Account.

Death Benefits on or After the Annuity Date. If an Owner dies on or after the
Annuity Date, any surviving joint Owner becomes the sole Owner. If there is no
surviving Owner, any successor Owner becomes the new Owner. If there is no
surviving or successor Owner, the Payee becomes the new Owner. If an Annuitant
or an Owner dies on or after the Annuity Date, the remaining undistributed
portion, if any, of the Account Value will be distributed at least as rapidly
as under the method of distribution being used as of the date of such death.
Under some Annuity Payment Options, there will be no death benefit.

Death Benefits When an Owner Dies Before the Annuity Date. If any Owner dies
prior to the Annuity Date, any surviving joint Owner becomes the new sole
Owner. If there is no surviving joint Owner, any successor Owner becomes the
new Owner and if there is no successor Owner, the Annuitant becomes the new
Owner unless the deceased Owner was also the Annuitant. If the sole deceased
Owner was also the Annuitant, then the provisions relating to the death of the
Annuitant (described below) will govern unless the deceased Owner was one of
two joint Annuitants, in which event the surviving Annuitant becomes the new
Owner.

The following options are available to new Owners:

1. to receive the Death Benefit in a single lump sum within five
years of the deceased Owner's death; or

2. elect to receive the Death Benefit paid out under an Annuity
Payment Option provided that: (a) Annuity Payments begin
within one year of the deceased Owner's death, and (b) Annuity
Payments are made in substantially equal installments over the
life of the new Owner or over a period not greater than the
life expectancy of the new Owner; or

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<PAGE>

3. if the new Owner is the spouse of the deceased Owner, he or
she may by Written Notice within one year of the Owner's
death, elect to continue the Contract as the new Owner. If
the spouse so elects, all of his or her rights as a
Beneficiary cease and if the deceased Owner was also the sole
Annuitant and appointed no Contingent Annuitant, he or she
will become the Annuitant. The spouse will be deemed to have
made the election to continue the Contract if he or she makes
no election before the expiration of the one year period.

With regard to new Owners who are not the spouse of the deceased Owner: (a)
options 1 and 2 apply even if the Annuitant or Contingent Annuitant is alive at
the time of the deceased Owner's death, (b) if the new Owner is not a natural
person, only option 1 is available, (c) if no election is made within one year
of the deceased Owner's death, option 1 is deemed to have been elected.

Death Benefit is computed as of the date that the Company receives Due Proof of
Death of the Owner. Payment of the death benefit is in full settlement of all
of the Company's liability under the Contract.

Death Benefits When the Annuitant Dies Before the Annuity Date. If the
Annuitant dies before the Annuity Date while the Owner is still living, any
Contingent Annuitant will become the Annuitant. If the Annuitant dies before
the Annuity Date and no Contingent Annuitant has been named, the Company will
pay the Death Benefit described below to the Beneficiary. If there is no
surviving Beneficiary, the Company will pay the Death Benefit to any Contingent
Beneficiary. If there is no surviving Contingent Beneficiary, the Company will
immediately pay the Death Benefit to the Owner (or the Owner's estate, if the
Owner is then deceased) in a lump sum.

If the Annuitant who is also an Owner dies or if the Annuitant dies and the
Owner is not a natural person, a Beneficiary (or a Contingent Beneficiary):

1. will receive the Death Benefit in a single lump sum within
five years of the deceased Annuitant's death; or

2. may elect to receive the Death Benefit paid out under an
Annuity Payment Option provided that: (a) Annuity Payments
begin within one year of the deceased Annuitant's death, and
(b) Annuity Payments are made in substantially equal
installments over the life of the Beneficiary or over a period
not greater than the life expectancy of the Beneficiary; or

3. if the Beneficiary is the spouse of the deceased Annuitant, he
or she may by Written Notice within one year of the
Annuitant's death, elect to continue the Contract as the new
Owner. If the spouse so elects, all his or her rights as a
Beneficiary cease and if the deceased Annuitant was also the
sole Annuitant

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<PAGE>

and appointed no Contingent Annuitant, he or she will become
the Annuitant. The spouse will be deemed to have made the
election to continue the Contract if he or she makes no
election before the expiration of the one year period.

REFERENCE VALUE

The Surrender Value, Annuity Value, and death benefits provided under the
Contract are subject to certain minimums based on a Contract's Reference Value.

The Reference Value at any time is equal to

(a) 90% of the Single Premium; plus

(b) any Excess Interest Credits; less

(c) any charges for riders or additional benefits under the
Contract, including the rider cost of 0.85% if allocation(s)
have been made to Indexed Accounts; less

(d) the total amount of previous surrenders and withdrawals from
the Contract (including Market Value Adjustments); plus

(e) interest on (a) through (d) above, credited annually at a rate
at least equal to 3% (as shown in the Contract).

Excess Interest Credits will be calculated on each Reset Date after any Index
Increases are credited. The amount of Excess Interest Credits will be the
amount, if any, by which (i) all interest credited to Interest Accounts,
together with all Index Increases to Indexed Accounts, exceeds (ii) the sum of
all Reference Value interest, including previous Excess Interest Credits, as
described in (b) and (e) above.

The Adjusted Reference Value is equal to the Reference Value, multiplied by the
ratio of the Adjusted Account Value to the Account Value. Thus, like the
Adjusted Account Value, the Adjusted Reference Value reflects the impact of
changes in prevailing interest rates.

PAYMENTS BY THE COMPANY

The Company generally makes payments of withdrawals, surrenders, Death
Benefits, or any Annuity Payments within seven business days of receipt of all
applicable Written Notices and/or Due Proof of Death. Due Proof of Death is
proof of death satisfactory to the Company. Due Proof of Death may consist of
the following if acceptable to the Company: (a) a certified copy of the death
record; (b) a certified copy of a court decree reciting a finding of death; or
(c) any other proof satisfactory to the Company.

The Company may defer payment of any withdrawal, surrender, or transfer for up
to six months after it receives an Owner's Written Notice. The Company pays
interest on the

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<PAGE>

amount of any payment that is delayed for more than thirty days after the
payment becomes payable, or after the time required by the applicable
jurisdiction if less than thirty days. This interest will accrue from the date
that the payment becomes payable to the date of payment, but not for more than
one year, at an annual rate of 3%, or the rate and time required by law, if
greater.

TELEPHONE TRANSFER PRIVILEGES

If an Owner has elected this privilege in a form provided by the Company, an
Owner may make transfers by telephoning the Service Center. A telephone
authorization form received by the Company at the Service Center is valid until
it is rescinded or revoked by Written Notice or until a subsequently dated form
signed by the Owner is received at the Service Center. The Company will send
Owners a written confirmation of all transfers made pursuant to telephone
instructions.

The Service Center requires a form of personal identification prior to acting
on instructions received by telephone and also may tape record instructions
received by phone. If the Company follows these procedures, it is not liable
for any losses due to unauthorized or fraudulent transactions. The Company
reserves the right to suspend telephone transaction privileges at any time for
any reason.

CONTRACT CHARGES AND FEES

SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)

General. No sales charge is deducted from the Single Premium at the time the
payment is made. However, a surrender charge may be deducted upon a withdrawal
or surrender prior to the Annuity Date.

Charge for Surrender or Withdrawals. Surrender charges are calculated for each
Account individually, and are the product of:

(a) the amount allocated to the Account at its most recent Reset
Date, less any transfers and withdrawals from the Account
(including any previously imposed Market Value Adjustment or
surrender charge) since then (the Net Allocation), and

(b) the surrender charge percentage for the Account (see below).

Surrender charges are waived during the last thirty days of each Guarantee
Period (the Window Period). No surrender charge applies to surrenders or
withdrawals in excess of the Net Allocation.

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<PAGE>

In the first Contract Year, the Company calculates the surrender charge under
the assumption that amounts surrendered and withdrawn come first from the Net
Allocation, and then from any interest credited to the Account Value. In
Contract Years after the first, a Free Withdrawal Amount is calculated, equal
to 10% of the Net Allocation. Surrenders and withdrawals are assumed to come
first from the Free Withdrawal Amount, then from the remaining 90% of the Net
Allocation, and then from any interest credited to the Account Value since the
last Reset Date.

At any time on or before the fifth Contract Anniversary, the Annuity Value
equals the Surrender Value, and therefore reflects the surrender charge. The
surrender charge percentage on the Annuity Date equals 0%.

Withdrawals. With regard to all withdrawals, the Company withdraws the amount
requested from the Account(s) specified by the Owner as of the day that the
Company receives the Written Notice regarding the withdrawal, and sends the
Owner that amount plus or minus any applicable Market Value Adjustment. The
Company then deducts any surrender charge and any applicable Premium Tax Charge
from the remaining Account Values of the Account(s) from which the withdrawal
was taken. The surrender charge is deducted from each Account from which a
withdrawal is taken based on the ratio of the amount surrendered or withdrawn
to the Net Allocation of each affected Account.

Surrender Charge Percentages. Surrender charge percentages differ among
Interest Accounts and Indexed Accounts, and are higher for Accounts with longer
Guarantee Periods. In addition, surrender charge percentages for all Accounts
vary by the time remaining until the Annuity Date. For a given Guarantee
Period and type of Account, the surrender charge percentage is constant until
the Contract Anniversary ten years before the Annuity Date, and then declines
in ten equal increments on each Contract Anniversary to zero on the Annuity
Date.

Because surrender charge percentages are higher for longer Guarantee Periods,
transferring from an Account with a shorter Guarantee Period to one with a
longer Guarantee Period may lead to a larger surrender charge. However, the
amount of the surrender charge may in some cases be limited, because the
Adjusted Reference Value may be greater than the Adjusted Accumulation Value
less surrender charges.

The surrender charge percentage applicable to Accounts selected by an Owner for
allocations are set forth in the Contract, and will never exceed 8%. The
surrender charge percentages applicable to Accounts available as of the date of
this prospectus are set forth below:

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<PAGE>

Interest Accounts
-----------------

GUARANTEE PERIOD SURRENDER
CHARGE %
-----------------------------------------
1 year 3%

3 years 5%

5 years 6%

7 years 7%

10 years 8%

Indexed Accounts
----------------

GUARANTEE PERIOD SURRENDER
CHARGE %
-----------------------------------------
5 years 7%

Amounts Not Subject to a Surrender Charge. On each Contract Anniversary, the
Company calculates a Free Withdrawal Amount equal to 10% of the sum of the
amounts allocated to each of the Accounts at their most recent Reset Dates,
less all amounts withdrawn and transferred from those Accounts (including
Market Value Adjustments and surrender charges) since their most recent Reset
Dates. The Owner may withdraw an amount up to the Free Withdrawal Amount as of
the Contract Anniversary on or next preceding the effective date of the
withdrawal pro-rata from the Accounts once in each Contract Year after the
first Contract Year without incurring a surrender charge. Free Withdrawal
Amounts remain subject to a Market Value Adjustment unless the withdrawal is
made during a Window Period.

If a Nursing Home Confinement/Terminal Medical Condition Rider is attached to
the Contract, then the Free Withdrawal Amount may be increased under certain
conditions:

- If the Annuitant is confined to a nursing home for a
period of at least 90 days or has a "terminal medical
condition," then the Free Withdrawal Amount is 50% of
the Account Value.

- If the Annuitant's spouse is confined to a nursing
home for a period of at least 90 days or has a
"terminal medical condition," then the Free
Withdrawal Amount is 25% of the Account Value.

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<PAGE>

"Terminal Medical Condition" means a determinable medical condition, diagnosed
by a physician practicing within the scope of his or her license, with the life
expectancy of 12 months or less from the date of the physician's diagnosis.
This rider is not available if the Annuitant or Annuitant's spouse is confined
to a nursing home on the Issue Date, and terminates upon termination of the
Contract (or may be terminated by the Owner upon thirty days Written Notice).

PREMIUM TAX CHARGE

Certain states and municipalities impose a tax on the Company in connection
with the receipt of annuity considerations. This tax can range from 0% to 3.5%
of such considerations and generally varies based on the Annuitant's state of
residence. The tax may be incurred by the Company as of the Annuity Date based
on the Accumulation Value on that date, or at the time such considerations are
made. The Company reserves the right to deduct any state and local taxes on
annuity considerations from the Account Value at the time such tax is due.

RIDER COST

The Contract's Reference Value will reflect charges for any riders or
endorsements to the Contract, including (if allocations have been made to
Indexed Accounts) an annual charge of 0.85% of the value of the Indexed
Accounts.

SELECTING AN ANNUITY PAYMENT OPTION

ANNUITY DATE

The Annuity Date, which is specified by the Owner in the application for the
Contract, cannot be changed after the Issue Date. The Initial Annuity Payment
Date may not be the 29th, 30th, or 31st day of a month. For all Contracts, the
Annuity Date must be no later than the Contract Anniversary following the
Annuitant's Age 85. In addition, for Qualified Contracts, Owners have
responsibility for ensuring that Account Value is distributed, or distribution
commences, on a distribution start date that is no later than April 1 of the
calendar year following the calendar year in which the Owner attains Age
70-1/2.

ANNUITY PAYMENT DATES

The Company computes the first Annuity Payment as of the Annuity Date and makes
the first Annuity Payment as of the initial Annuity Payment Date selected by
the Owner. The Owner selects the Initial Annuity Payment Date in the
application. All subsequent Annuity Payments are computed and payable as of
Annuity Payment Dates. These dates will be the same day of the month as the
initial Annuity Payment Date. Monthly Annuity Payments will be computed and
payable as of the same day each month as the initial Annuity Payment Date.
Quarterly Annuity Payments will be computed and payable as of the same day in
the third, sixth, ninth, and twelfth month following the initial Annuity
Payment Date and on the same days of such

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<PAGE>

months in each successive Contract Year. Semi-annual Annuity Payment Dates
will be computed and payable as of the same day in the sixth and twelfth month
following the initial Annuity Payment Date and on the same days of such months
in each successive Contract Year. Annual Annuity Payments will be computed and
payable as of the same day in each Contract Year as the initial Annuity Payment
Date. The frequency of Annuity Payments selected is shown in the Contract.

ELECTION AND CHANGES OF ANNUITY PAYMENT OPTIONS

On the Annuity Date, the Surrender Value or Adjusted Contract Value is applied
under an Annuity Payment Option, unless the Owner elects to receive the
Surrender Value in a lump sum. If the Annuity Date falls during the first five
Contract Years, Surrender Value is applied under an Annuity Payment Option. If
the Annuity Date falls after the fifth Contract Anniversary, Adjusted Contract
Value is applied under an Annuity Payment Option. The Annuity Payment Option
specifies the type of annuity to be paid and determines how long the annuity
will be paid, the frequency, and the amount of each payment. The Owner may
elect or change the Annuity Payment Option by Written Notice at any time prior
to the Annuity Date. [If no Annuity Payment Option has been selected by the
Annuity Date, Surrender Value or Adjusted Contract Value will be applied under
Annuity Payment Option 5 (Life Annuity with Period Certain) with a designated
period of 10 years. Any death benefit applied to purchase Annuity Payments is
allocated among the Accounts as instructed by the Beneficiary unless the Owner
previously made the foregoing elections.]

ANNUITY PAYMENTS

Fixed Annuity Payments are periodic payments from the Company to the designated
Payee, the amount of which is fixed and guaranteed by the Company. The dollar
amount of each payment depends on the form and duration of the Annuity Payment
Option chosen, the Age of the Annuitant, the sex of the Annuitant (if
applicable), the Annuity Value applied to purchase the Annuity Payments, and
the applicable annuity purchase rates. The annuity purchase rates in the
Contract are based on an interest rate of not less than 3.0%.

The dollar amount of the Annuity Payment is determined by dividing the dollar
amount of Annuity Value being applied to purchase Annuity Payments by $1,000
and multiplying the result by the annuity purchase rate in the settlement
option tables set forth in the Contract for the selected Annuity Payment
Option. These settlement option tables are based on the 1983A Mortality Table
with a ten-year improvement by scale G, with a five-year setback for females.

AFTER THE ANNUITY DATE, VALUES (INCLUDING THE AMOUNT OF ANNUITY PAYMENTS) DO
NOT REFLECT GUARANTEED INTEREST RATES OR INDEX INCREASES.
- ---

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<PAGE>

ANNUITY PAYMENT OPTIONS

OPTION 1. INTEREST PAYMENTS. The Company holds the Annuity Value as principal
and pays interest to the Payee. The interest rate is 3% per year compounded
annually. The Company pays interest every 1 year, 6 months, 3 months or 1
month, as specified at the time this option is selected. At the death of the
Payee, the value of the remaining payments are paid in a lump sum to the
Payee's estate.

OPTION 2. PAYMENTS OF A SPECIFIED AMOUNT. The Company pays the Annuity Value
in equal payments every 1 year, 6 months, 3 months or 1 month. The amount and
frequency of the payments is specified at the time this option is selected.
After each payment, interest is added to the remaining amount applied under
this option that has not yet been paid. The interest rate is 3% per year
compounded annually. Payments are made to the Payee until the amount applied
under this option, including interest, is exhausted. The total of the payments
made each year must be at least 5% of the amount applied under this option. If
the Payee dies before the amount applied is exhausted, the Company pays the
value of the remaining payments in a lump sum to the Payee's estate.

OPTION 3. PAYMENTS FOR A SPECIFIED PERIOD. The Company pays the lump sum in
equal payments for the number of years specified when the option is selected.
Payments are made every 1 year, 6 months, 3 months or 1 month, as specified
when the option is selected. The amount of each Annuity Payment for each
$1,000 applied under this option is calculated at an interest rate of 3% per
year compounded annually. If the Payee dies before the expiration of the
specified number of years, the Company pays the commuted value of the remaining
payments in a lump sum to the Payee's estate.

OPTION 4. LIFE ANNUITY. The Company makes monthly payments to the Payee for
as long as the Annuitant lives. UNDER THIS OPTION, A PAYEE COULD RECEIVE ONLY
ONE PAYMENT IF THE ANNUITANT DIES AFTER THE FIRST PAYMENT, TWO PAYMENTS IF THE
ANNUITANT DIES AFTER THE SECOND PAYMENT, ETC.

OPTION 5. LIFE ANNUITY WITH PERIOD CERTAIN. The Company makes monthly
payments to the Payee for as long as the Annuitant lives. At the time this
option is selected, a period certain of 5, 10, 15, or 20 years must also be
selected. If the Annuitant dies before the specified period certain ends, the
payments to the Payee will continue until the end of the specified period. The
amount of the monthly payments therefore depends on the period certain
selected. If at any age the amount of the payments is the same for two or more
periods certain, payment will be made as if the largest period certain was
selected.

OPTION 6. JOINT LIFE AND SURVIVORSHIP ANNUITY. The Company makes monthly
payments to the Payee while both Annuitants are living. After the death of
either Annuitant, payments continue to the Payee for as long as the other
Annuitant lives. UNDER THIS OPTION, THE PAYEE COULD RECEIVE ONLY ONE PAYMENT
IF BOTH ANNUITANTS DIE AFTER THE FIRST PAYMENT, TWO PAYMENTS IF BOTH ANNUITANTS
DIE AFTER THE SECOND PAYMENT, ETC.

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<PAGE>

Unless instructed otherwise at the time that the Annuity Payment Option is
selected, at the death of the Payee the Company pays the amounts below in a
lump sum to the Payee's estate:

1. Under Annuity Payment Option 1, the amount left on deposit
with the Company to accumulate interest.

2. Under Annuity Payment Option 2, 3, or 5, the commuted value of
the amount payable at the Payee's death as provided under the
Option selected. The commuted value is based on the interest
rate used to calculate the amount of the payments under that
Option.

ADDITIONAL CONTRACT INFORMATION

OWNERSHIP

The Contract belongs to the Owner. An Owner may exercise all of the rights and
options described in the Contract.

Subject to more specific provisions elsewhere herein, an Owner's rights include
the right to: (1) select or change a successor Owner, (2) select or change any
Beneficiary or Contingent Beneficiary, (3) select or change the Payee prior to
the Annuity Date, (4) select or change the Annuity Payment Option, (5) allocate
the Net Single Premium among and between the Accounts, and (6) transfer Account
Values among and between the Accounts.

If a successor Owner is named in the application or by subsequent Written
Notice and the Owner is not the Annuitant, the successor Owner shall become the
new Owner should the Owner die before the Annuitant.

The rights of Owners of Qualified Contracts may be restricted by the terms of a
related employee benefit plan. For example, such plans may require an Owner of
a Qualified Contract to obtain the consent of his or her spouse before
exercising certain ownership rights or may restrict withdrawals. See "FEDERAL
TAX CONSIDERATIONS" for more details.

Selection of an Annuitant or Payee who is not the Owner may have tax
consequences. See "FEDERAL TAX CONSIDERATIONS" for more details.

CHANGING THE OWNER OR BENEFICIARY

At any time prior to the Annuity Date while the Annuitant is still living, an
Owner may assign ownership of the Contract by Written Notice. The Company is
not responsible for the validity or sufficiency of any assignment. The Company
is not bound by the assignment until it receives a duplicate of the original of
the assignment at the Service Center.

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<PAGE>

At any time before a death benefit is paid, the Owner may name a new
Beneficiary by Written Notice unless an irrevocable Beneficiary has previously
been named. When an irrevocable Beneficiary has been designated, the Owner
must provide the irrevocable Beneficiary's written consent to the Company
before a new Beneficiary is designated.

Any change of Beneficiary takes effect as of the day the Written Notice is
received at the Service Center and the Company is not liable for any payments
made under the Contract prior to the effectiveness of any Beneficiary change.
For possible tax consequences associated with changing the Owner or
Beneficiary, see "FEDERAL TAX CONSIDERATIONS."

MISSTATEMENT OF AGE OR SEX

If an Age or sex of the Annuitant given in the application is misstated, the
Company will adjust the benefits it pays under the Contract to the amount that
would have been payable at the correct Age or sex. If the Company made any
underpayments because of any such misstatement, it shall pay the amount of such
underpayment plus interest at an annual effective rate of 3%, immediately to
the Payee or Beneficiary in one sum. If the Company makes any overpayments
because of a misstatement of Age or sex, it shall deduct from current or future
payments due under the Contract, the amount of such overpayment plus interest
at an annual effective rate of 3%.

CHANGE OF CONTRACT TERMS

Upon notice to the Owner, the Company may modify the Contract to:

1. conform the Contract or the operations of the Company or of
the Separate Accounts to the requirements of any law (or
regulation issued by a government agency) to which the
Contract, the Company or the Separate Accounts are subject;

2. assure continued qualification of the Contract as an annuity
contract under the Code; or

3. reflect a change (as permitted in the Contract) in the
operation of the Separate Accounts.

In the event of any such modification, the Company will make appropriate
endorsements to the Contract.

Only one of the Company's officers may modify the Contract or waive any of the
Company's rights or requirements under the Contract. Any modification or
waiver must be in writing. No agent may bind the Company by making any promise
not contained in the Contract.

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<PAGE>

REPORTS TO OWNERS

The Company will send each Owner a report at least annually, or more often as
required by law, indicating the following items as of a date shown on the
report: the Accumulation Value and Adjusted Accumulation Value; the Reference
Value, Adjusted Reference Value, and Surrender Value; any withdrawals or
surrenders made and Death Benefits paid since the last report; the current
interest rate applicable to each Interest Account; and any other information
required by law.

The reports, which will be mailed to Owners at their last known address, will
include any information that may be required by the SEC or the insurance
supervisory official of the jurisdiction in which the Contract is delivered.

The Company will also send any other reports, notices or documents required by
law to be furnished to Owners.

MISCELLANEOUS

Non-Participating. The Contract does not participate in the surplus or profits
of the Company and the Company does not pay dividends on the Contract.

Protection of Proceeds. To the extent permitted by law, no benefits payable
under the Contract to a Beneficiary or Payee are subject to the claims of an
Owner's or a Beneficiary's creditors.

Discharge of Liability. Any payments made by the Company under any Annuity
Payment Option or in connection with the payment of any withdrawal, surrender
or death benefit, shall discharge the Company's liability to the extent of each
such payment.

Proof of Age and Survival. The Company reserves the right to require proof of
the Annuitant's Age prior to the Annuity Date. In addition, for life
contingent Annuity Options, the Company reserves the right to require proof of
the Annuitant's survival before any Annuity Payment Date.

Contract Application. The Company issues the Contract in consideration of the
Owner's application and payment of the initial single premium. The entire
Contract is made up of the group contract, the certificate, any attached
endorsements or riders, and the application. In the absence of fraud, the
Company considers statements made in the application to be representations and
not warranties. The Company will not use any statement in defense of a claim
or to void the Contract unless it is contained in the application. The Company
will not contest the Contract.

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<PAGE>

FEDERAL TAX CONSIDERATIONS

THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL TAX CONSIDERATIONS THAT RELATE TO
THE CONTRACT IS GENERAL IN NATURE, AND IS NOT INTENDED AS TAX ADVICE TO OWNERS.
OWNERS, ANNUITANTS, AND PAYEES SHOULD CONSULT THEIR QUALIFIED TAX ADVISER FOR
ADDITIONAL INFORMATION AND FOR ADVICE REGARDING OWNERSHIP OF A CONTRACT, AND
THE POTENTIAL FEDERAL TAX IMPLICATIONS OF TRANSACTIONS THEREUNDER.

INTRODUCTION

This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under the Contract issued by the Company. Any person concerned
about these tax implications should consult a competent tax adviser before
initiating any transaction. This discussion is based upon the Company's
understanding of the present federal income tax laws. No representation is
made as to the likelihood of the continuation of the present federal income tax
laws. Moreover, no attempt has been made to consider any applicable state or
other tax laws.

The Contract may be purchased on a non-qualified basis or purchased and used in
connection with plans qualifying for favorable tax treatment. The Qualified
Contract is designed for use by individuals whose purchase payments are
comprised solely of proceeds from and/or contributions under retirement plans
that are intended to qualify as plans entitled to special income tax treatment
under sections 401(a), 408, or 457 of the Code. The ultimate effect of federal
income taxes on the amounts held under a Contract, or Annuity Payments, and on
the economic benefit to the Owner, the Annuitant, or the Beneficiary depends on
the type of retirement plan, on the tax and employment status of the individual
concerned, and on the Company's tax status. In addition, certain requirements
must be satisfied in purchasing a Qualified Contract with proceeds from a
tax-qualified plan and receiving distributions from a Qualified Contract in
order to continue receiving favorable tax treatment. Therefore, purchasers of
Qualified Contracts should seek competent legal and tax advice regarding the
suitability of a Contract for their situation, the applicable requirements, and
the tax treatment of the rights and benefits of a Contract. The following
discussion assumes that Qualified Contracts are purchased with proceeds from
and/or contributions under retirement plans that qualify for the intended
special federal income tax treatment.

TAX STATUS OF THE CONTRACT

The Company believes that the Contract will be treated as an annuity contract
and that the Company will be treated as owning the assets supporting the
Contract for federal income tax purposes. The Company, however, reserves the
right to modify the Contract as necessary to prevent the Owner from being
considered the owner of the assets supporting the Contract for federal tax
purposes.

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<PAGE>

Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any Owner dies on or after the
Annuity Date but prior to the time the entire interest in the Contract has been
distributed, the remaining portion of such interest will be distributed at
least as rapidly as under the method of distribution being used as of the date
of that Owner's death; and (b) if any Owner dies prior to the Annuity Date, the
entire interest in the Contract will be distributed within five years after the
date of the Owner's death. These requirements will be considered satisfied as
to any portion of the Owner's interest that is payable to or for the benefit of
a "designated beneficiary," and that is distributed over the life of such
beneficiary or over a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin within one year of that
Owner's death. The Owner's "designated beneficiary" is the person designated
by such Owner as a beneficiary and to whom ownership of the contract passes by
reason of death and must be a natural person. However, if the Owner's
"designated beneficiary" is the surviving spouse of the Owner, the Contract may
be continued with the surviving spouse as the new Owner.

Non-Qualified Contracts contain provisions that are intended to comply with the
requirements of section 72(s) of the Code, although no regulations interpreting
these requirements have yet been issued. The Company intends to review such
provisions and modify them if necessary to assure that they comply with the
requirements of Code section 72(s) when clarified by regulation or otherwise.

Other rules may apply to Qualified Contracts.

The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.

TAXATION OF ANNUITIES

In General. Section 72 of the Code governs taxation of annuities in general.
The Company believes that an Owner who is a natural person is not taxed on
increases in Contract Value until distribution occurs by withdrawing all or
part of the Accumulation Value (e.g., withdrawals and surrenders) or as Annuity
Payments under the Annuity Payment Option elected. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the
Accumulation Value (and in the case of a Qualified Contract, any portion of an
interest in the qualified plan) generally will be treated as a distribution.
The taxable portion of a distribution (in the form of a single sum payment or
payment option) is taxable as ordinary income.

The owner of any annuity contract who is not a natural person generally must
include in income any increase in the excess of the contract value over the
"investment in the contract" during the taxable year. There are some
exceptions to this rule, and a prospective Owner that is not a natural person
may wish to discuss these with a qualified tax adviser.

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<PAGE>

The following discussion generally applies to Contracts owned by natural
persons.

Withdrawals. In the case of a withdrawal from a Qualified Contract, under
section 72(e) of the Code, a ratable portion of the amount received is taxable,
generally based on the ratio of the "investment in the contract" to the
participant's total accrued benefit or balance under the retirement plan. The
"investment in the contract" generally equals the portion, if any, of any
purchase payments paid by or on behalf of the individual under a Contract that
was not excluded from the individual's gross income. For Contracts issued in
connection with qualified plans, the "investment in the contract" can be zero.
Special tax rules may be available for certain distributions from Qualified
Contracts.

In the case of a withdrawal from a Non-Qualified Contract, under section 72(e),
any amounts received are generally first treated as taxable income to the
extent that the Accumulation Value immediately before the withdrawal exceeds
the "investment in the contract" at that time. Any additional amount withdrawn
is not taxable. The Accumulation Value immediately before a partial withdrawal
may have to be increased by any positive Market Value Adjustment which results
from a partial withdrawal. There is, however, no definitive guidance on the
proper tax treatment of Market Value Adjustments and an Owner should contact a
qualified tax adviser with respect to the potential tax consequences of such an
adjustment.

In the case of a surrender under a Qualified or Non-Qualified Contract, the
amount received generally will be taxable only to the extent it exceeds the
"investment in the contract."

Exchanges. Section 1035 of the Code generally provides that no gain or loss
shall be recognized on the exchange of one annuity contract for another. If
the surrendered contract was issued prior to August 14, 1982, the tax rules
formerly provided that the surrender was taxable only to the extent the amount
received exceeds the owner's investment in the contract will continue to apply
to amounts allocable to investments in that contract prior to August 14, 1982.
In contrast, contracts issued after January 19, 1985 in a Code section 1035
exchange are treated as new contracts for purposes of the penalty and
distribution-at-death rules. Special rules and procedures apply to section
1035 transactions. Prospective Owners wishing to take advantage of section
1035 should consult their tax adviser.

Annuity Payments. Although tax consequences may vary depending on the payment
option elected under an annuity contract, under Code section 72(b), generally
(prior to recovery of the investment in the contract) gross income does not
include that part of any amount received as an annuity under an annuity
contract that bears the same ratio to such amount as the investment in the
contract bears to the expected return at the annuity starting date. In
general, there is no tax on the portion of each payment that represents the
same ratio that the "investment in the contract" bears to the total expected
value of the annuity payments for the term of the payments; however, the
remainder of each annuity payment is taxable until the recovery of the
investment in the contract, and thereafter the full amount or each annuity
payment is taxable. If death occurs before full recovery of the investment in
the contract, the unrecovered amount may be deducted on the annuitant's final
tax return.

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<PAGE>

Taxation of Death Benefit Proceeds. Amounts may be distributed from a Contract
because of the death of an Owner or the Annuitant. Generally, such amounts are
includible in the income of the recipient as follows: (i) if distributed in a
lump sum, they are taxed in the same manner as a full surrender of the Contract
or (ii) if distributed under an Annuity Payment Option, they are taxed in the
same way as Annuity Payments. For these purposes, the investment in the
contract is not affected by the owner's or annuitant's death. That is, the
investment in the contract remains the amount of any purchase payment paid that
was not excluded from gross income.

Penalty Tax on Certain Withdrawals. In the case of a distribution pursuant to
a Non-Qualified Contract, there may be imposed a federal penalty tax equal to
10% of the amount treated as taxable income. In general, however, there is no
penalty on distributions:

1. made on or after the taxpayer reaches age 59 1/2;

2. made on or after the death of the holder (or if the holder is
not an individual, the death of the primary annuitant);

3. attributable to the taxpayer's becoming disabled;

4. a part of a series of substantially equal periodic payments
(not less frequently than annually) for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of the taxpayer and his or her designated
beneficiary;

5. made under certain annuities issued in connection with
structured settlement agreements; and

6. made under an annuity contract that is purchased with a single
purchase payment when the annuity date is no later than a year
from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during
the annuity payment period.

Other tax penalties may apply to certain distributions under a Qualified
Contract.

Possible Changes in Taxation. In past years, legislation has been proposed
that would have adversely modified the federal taxation of certain annuities.
For example, one such proposal would have changed the tax treatment of
non-qualified annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity. Although as of the date of
this prospectus Congress is not considering any legislation regarding taxation
of annuities, there is always the possibility that the tax treatment of
annuities could change by legislation or other means (such as IRS regulations,
revenue rulings, judicial decisions, etc.). Moreover, it is also possible that
any change could be retroactive (that is, effective prior to the date of the
change).

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<PAGE>

TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT

A transfer of ownership of a Contract, the designation of an Annuitant, Payee
or other Beneficiary who is not also the Owner, the selection of certain
Annuity Dates or the exchange of a Contract may result in certain tax
consequences to the Owner that are not discussed herein. An Owner
contemplating any such transfer, assignment, or exchange of a Contract should
contact a competent tax adviser with respect to the potential tax effects of
such a transaction.

WITHHOLDING

Pension and annuity distributions generally are subject to withholding for the
recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Effective January 1, 1993, distributions from certain qualified
plans are generally subject to mandatory withholding. Certain states also
require withholding of state income tax whenever federal income tax is
withheld.

MULTIPLE CONTRACTS

All non-qualified deferred annuity contracts that are issued by the Company (or
its affiliates) to the same owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in gross
income under section 72(e) of the Code. The effects of this rule are not yet
clear; however, it could affect the time when income is taxable and the amount
that might be subject to the 10% penalty tax described above. In addition, the
Treasury Department has specific authority to issue regulations that prevent
the avoidance of section 72(e) of the Code through the serial purchase of
annuity contracts or otherwise. There may also be other situations in which
the Treasury Department may conclude that it would be appropriate to aggregate
two or more annuity contracts purchased by the same owner. Accordingly, an
Owner should consult a competent tax adviser before purchasing more than one
annuity contract.

TAXATION OF QUALIFIED PLANS

The Contracts are designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in
excess of specified limits; distributions prior to age 59 1/2 (subject to
certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; aggregate distributions in excess
of a specified annual amount; and in other specified circumstances. Therefore,
no attempt is made to provide more than general information about the use of
the Contracts with the various types of qualified retirement plans. Owners,
Annuitants, and Beneficiaries are cautioned that the rights of any person to
any benefits under these qualified retirement plans may be subject to the terms
and conditions of

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<PAGE>

the plans themselves, regardless of the terms and conditions of the Contract,
but the Company shall not be bound by the terms and conditions of such plans to
the extent such terms contradict the Contract, unless the Company consents to
be bound. Owners are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts satisfy
applicable law. Purchasers of Contracts for use with any retirement plan
should consult their legal and tax adviser regarding the suitability of the
Contract. Brief descriptions follow of the various types of qualified
retirement plans in connection with a Contract. The Company will amend the
Contract as necessary to conform it to the requirements of such plan.

Corporate Pension and Profit Sharing Plans and H.R. 10 Plans. Section 401(a)
of the Code permits corporate employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish these plans for themselves and their employees. Such retirement
plans may permit the purchase of the Contract to provide benefits under the
plans. Adverse tax consequences to the plan, to the participant or to both may
result if this Contract is assigned or transferred to any individual as a means
to provide benefit payments. Employers intending to use the Contract with such
plans should seek competent advice.

Individual Retirement Annuities. Sections 219 and 408 of the Code permit
eligible individuals to contribute to an individual retirement program known as
an "Individual Retirement Annuity" or "IRA." These IRAs are subject to limits
on the amount that may be contributed, the persons who may be eligible, and on
the time when distributions may commence. Also, distributions from certain
other types of qualified retirement plans may be "rolled over" on a
tax-deferred basis into an IRA. Sales of the Contract for use with IRAs may be
subject to special requirements of the IRS. Employers may establish Simplified
Employee Pension (SEP) Plans to provide IRA contributions on behalf of their
employees.

Deferred Compensation Plans. Section 457 of the Code provides for certain
deferred compensation plans. These plans may be offered with respect to
service for state governments, local governments, political subdivisions,
agencies, instrumentalities, certain affiliates of such entities, and tax
exempt organizations. The plans may permit participants to specify the form of
investment for their deferred compensation account. All investments are owned
by the sponsoring employer and are subject to the claims of the general
creditors of the employer. Depending on the terms of the particular plan, the
employer may be entitled to draw on deferred amounts for purposes unrelated to
its Section 457 plan obligations. In general, all amounts distributed from a
Section 457 plan to the owner or annuitant are taxable at the time of
distribution.

Restrictions Under Qualified Contracts. Other restrictions with respect to the
election, commencement, or distribution of benefits may apply under Qualified
Contracts or under the terms of the plans in respect of which Qualified
Contracts are issued.

Unisex Legal Considerations for Employers. In 1983, the Supreme Court held in
Arizona Governing Committee v. Norris that optional annuity benefits provided
under an employee's deferred compensation plan could not, under Title VII of
the Civil Rights Act of 1964, vary

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<PAGE>

between men and women. In addition, legislative, regulatory and decisional
authority of some states may prohibit use of sex-distinct mortality tables
under certain circumstances.

Generally, the annuity payment rates under the Annuity Payment Options are
based on tables that distinguish between men and women. As a result, different
benefits may be paid to men and women of the same age. Employers and employee
organizations should check with their legal advisers before purchasing these
Contracts.

OTHER TAX CONSEQUENCES

As noted above, the foregoing comments about the federal tax consequences under
these Contracts are not exhaustive, and special rules are provided with respect
to other tax situations not discussed in the prospectus. Further, the federal
income tax consequences discussed herein reflect the Company's understanding of
current law and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each Owner or
recipient of the distribution. A competent tax adviser should be consulted for
further information.

OTHER INFORMATION

DISTRIBUTION OF THE CONTRACTS

CNA/ISI, which is located at CNA Plaza, Chicago, Illinois 60685, is principal
underwriter and distributor of the Contracts. CNA/ISI is an affiliate of the
Company, is registered with the SEC as a broker-dealer, and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). The Company pays
CNA/ISI for acting as principal underwriter under a distribution agreement.
The Contract are offered on a continuous basis and the Company does not
anticipate discontinuing the offer.

Applications for Contracts are solicited by agents who are licensed by
applicable state insurance authorities to sell the Company's insurance
contracts and who are also registered representatives of a broker-dealer having
a selling agreement with CNA/ISI. Such broker-dealers will generally receive
commissions based on a percentage of the Single Premium made (up to a maximum
of 7%). The writing agent will receive a percentage of these commissions from
the respective broker-dealer, depending on the practice of that broker-dealer.
Owners do not pay these commissions. In general, commissions paid will vary
with the type of Account and Guarantee Period durations selected by the Owner,
with longer duration Guarantee Periods generating relatively higher
commissions.

ADMINISTRATIVE SERVICES

Financial Administration Services, Inc. administers the Contract on behalf of
the Company at the Service Center. In this capacity, Financial Administration
Services, Inc. is responsible for

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<PAGE>

the following: processing Single Premiums, Annuity Payments, death benefits,
surrenders, withdrawals, and transfers; preparing confirmation notices and
periodic reports; calculating Account Values; distributing tax reports; and
generally assisting Owners.

LEGAL PROCEEDINGS

There are no legal proceedings to which the Separate Accounts are a party to or
which the assets of the Separate Accounts are subject. The Company, as an
insurance company, is ordinarily involved in litigation. The Company does not
believe that any current litigation is material to its ability to meet its
obligations under the Contract or to the Separate Accounts nor does the Company
expect to incur significant losses from such actions.

LEGAL MATTERS

All matters relating to Pennsylvania law pertaining to the Contracts, including
the validity of the Contracts and the Company's authority to issue the
Contracts, have been passed upon by Lynne Gugenheim, Esquire, Vice President
and Associate General Counsel of the Company. Sutherland, Asbill & Brennan of
Washington, D.C. has provided advice on certain matters relating to the federal
securities laws.

EXPERTS

The balance sheets of the Company as of December 31, 1995 and 1994, and the
related statements of income, stockholder's equity, and cash flows for the
years ended December 31, 1995, 1994, and 1993, which are included in the
prospectus, have been audited by Deloitte & Touche LLP, independent auditors,
as set forth in their report therein, and are included therein in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.

ADDITIONAL INFORMATION ABOUT VALLEY FORGE
LIFE INSURANCE COMPANY

HISTORY AND BUSINESS

Valley Forge Life Insurance Company was incorporated under the laws of the
state of Pennsylvania on August 9, 1956 and began its operations on December 1,
1956. The Company markets a full range of insurance products, including
universal life, traditional life, and annuities.

Formation of the Company was sponsored American Casualty Company of Reading,
Pennsylvania, which owned 50% of the 44,000 outstanding shares of the Company.
The remaining 50% interest was held by the Valley Forge Insurance Company, a
wholly owned subsidiary of American Casualty Company.

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<PAGE>

In late 1963, control of the parent companies was acquired by Continental
Casualty Company of Chicago, Illinois. In 1967, all outstanding shares of
Continental Casualty Company were exchanged for stock of CNA Financial
Corporation, the parent company of the CNA pool of life insurance companies.
On December 30, 1983, all outstanding shares of the Company were acquired by
Continental Assurance Company, a life insurance company subsidiary of CNA
Financial Corporation. Controlling interest of CNA Financial Corporation is
held by Loews Corporation.

Effective December 31, 1985, pursuant to a [____________] agreement entered
into on [__________________], the Company began ceding all of its business to
its parent, Continental Assurance Company. This business was then pooled with
the business of Continental Assurance Company, excluding Continental Assurance
Company's participating contracts and separate accounts, and separate accounts
of the Company, and 10% of the combined net pool was retroceded to the Company.

The nature and results of any other reclassification, merger or consolidation,
acquisitions and dispositions of material amounts of the Company's assets, as
well as any material changes in the Company's mode of conducting business are
as follows: [ ].

SELECTED FINANCIAL DATA

The following selected financial data for the Company should be read in
conjunction with the financial statements and notes thereto included in this
prospectus.

Selected Financial Data
For the Periods Ended December 31,
---------------------------------------------------
1995 1994 1993 1992 1991
Net Investment Income $ $ $ $ $
Net Earnings $ $ $ $ $
Total Assets $ $ $ $ $

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Financial Statements and
Notes to Financial Statements included herein.

RESULTS OF OPERATIONS

The following are comparisons of 1995 to 1994, 1994 to 1993, and 1993 to 1992
with respect to net earnings, net investment income and interest credited to
policyholders' account balances, net realized investment gains or losses,
policy charge revenue, reinsurance premium ceded, amortization of deferred
policy acquisition costs, and insurance expenses and taxes.

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<PAGE>

[TO BE ADDED BY AMENDMENT]

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity requirements include the payment of sales commissions
and other underwriting expenses and the funding of its contractual obligations
for the life insurance it has in-force.

In order to continue to market life insurance and annuity products, the Company
must meet or exceed the statutory capital and surplus requirements of the
insurance departments of the states in which it conducts business. Statutory
accounting practices differ from generally accepted accounting principles in
two major respects: under statutory accounting practices, the acquisition
costs of new business are charged to expenses; and the required additions to
statutory reserves for new business in some cases may initially exceed the
statutory revenues attributable to such business. These practices result in a
reduction of statutory income and surplus at the time of recording new
business.

The National Association of Insurance Commissioners ("NAIC") has developed and
implemented effective December 31, 1993, the Risk Based Capital ("RBC")
adequacy monitoring system. The RBC calculates the amount of adjusted capital
that a life insurance company should have based upon that company's risk
profile. The NAIC has established four different levels of regulatory action
with respect to the RBC adequacy monitoring system. Each of these levels may
be triggered if an insurer's total adjusted capital is less than a
corresponding level of RBC. As of December 31, 1995 and 1994, based on the RBC
formula, the Company's total adjusted capital level was [in excess] of the
minimum amount of capital required to avoid regulatory action.

The Company believes that it will be able to fund the capital and surplus
requirements of projected new business from current statutory earnings and
existing statutory capital and surplus. If sales of new business significantly
exceed projections, the Company may have to look to its parent and other
affiliated companies to provide the capital or borrowings necessary to support
its current marketing efforts. The Company's future marketing efforts could be
hampered should its parent and/or affiliates be unwilling to commit additional
funding.

SEGMENT INFORMATION

The Company's operations consist of one business segment, which is the sale of
life insurance. The Company is not dependent upon any single customer, and no
single customer accounted for more than 10% of the Company's revenues during
1995.

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<PAGE>

REINSURANCE

Portions of the Company's life insurance risks are reinsured with other
companies. The Company has reinsurance agreements with other insurance
companies for individual life insurance. The maximum retention on any one life
is approximately $20 million.

INVESTMENTS

As of December 31, 1995, the Company had total invested assets of $[_______]
million consisting of $[________] million of short-term securities and
$[_______] million of bonds and other long-term investments. The Company's
assets must be invested in accordance with applicable state laws. These laws
govern the nature and quality of investments that may be made by life insurance
companies and the percentage of their assets that may be committed to any
particular type of investment. In general, these laws permit investments,
within specified limits and subject to certain qualifications, in federal,
state, and municipal obligations, corporate bonds, preferred or common stocks,
real estate mortgages, real estate and certain other investments. All of the
Company's assets, except for the separate account assets supporting variable
products, are available to meet its obligations under the Contracts.

The Company makes investments in accordance with investment guidelines that
take into account investment quality, liquidity and diversification, and
invests assets supporting Contract guarantees primarily in U.S. Government
agency and corporate issues.

COMPETITION

The Company is engaged in a business that is highly competitive due to the
large number of stock and mutual life insurance companies and other entities
marketing insurance products. Based upon total assets, a substantial number of
these insurers are larger than the Company.

EMPLOYEES

As of December 31, 1995, the Company had approximately [______] employees at
its Home Office in Reading, Pennsylvania, and approximately [______ ] employees
at its executive office in Chicago, Illinois. [In addition there are
approximately [______] Company employees at various branch and marketing
offices throughout the United States.]

PROPERTIES

The Company leases space [from an affiliate] at its home office located at 401
Penn St. Reading, Pennsylvania 19601; at its executive office which is located
at CNA Plaza, Chicago, Illinois 60685; and at its business offices located at
[_______________________], Nashville, Tennessee. The Company pays its
allocable share of the expense of leasing these properties.

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<PAGE>

STATE REGULATION

The Company is subject to the laws of the Commonwealth of Pennsylvania
governing insurance companies and to the regulations of the Pennsylvania
Department of Insurance (the "Insurance Department"). A detailed financial
statement in the prescribed form (the "Statement") is filed with the Insurance
Department each year covering the Company's operations for the preceding year
and its financial condition as of the end of that year. Regulation by the
Insurance Department includes periodic examination to determine contract
liabilities and reserves so that the Insurance Department may certify that
these items are correct. The Company's books and accounts are subject to
review by the Insurance Department at all times. A full examination of the
Company's operations is conducted periodically by the Insurance Department and
under the auspices of the NAIC.

In addition, the Company is subject to regulation under the insurance laws of
all jurisdictions in which it operates. The laws of the various jurisdictions
establish supervisory agencies with broad administrative powers with respect to
various matters, including licensing to transact business, overseeing trade
practices, licensing agents, approving contract forms, establishing reserve
requirements, fixing maximum interest rates on life insurance contract loans
and minimum rates for accumulation of surrender values, prescribing the form
and content of required financial statements and regulating the type and
amounts of investments permitted. The Company is required to file the
Statement with supervisory agencies in each of the jurisdictions in which it
does business, and its operations and accounts are subject to examination by
these agencies at regular intervals.

The NAIC has adopted several regulatory initiatives designed to improve the
surveillance and financial analysis regarding the solvency of insurance
companies in general. These initiatives include the development and
implementation of a risk-based capital formula for determining adequate levels
of capital and surplus. Insurance companies are required to calculate their
risk-based capital in accordance with this formula and to include the results
in their Statement. It is anticipated that these standards will have no
significant effect upon the Company.

Further, many states regulate affiliated groups of insurers, such as the
Company and its affiliates, under insurance holding company legislation. Under
such laws, inter-company transfers of assets and dividend payments from
insurance subsidiaries may be subject to prior notice or approval, depending on
the size of the transfers and payments in relation to the financial positions
of the companies involved.

Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed (up to prescribed limits) for contract owner losses
incurred by other insurance companies that have become insolvent. Most of
these laws provide that an assessment may be excused or deferred if it would
threaten an insurer's own financial strength.

Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Certain insurance products of the Company are subject to
various federal securities laws and

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<PAGE>

regulations. In addition, current and proposed federal measures that may
significantly affect the insurance business include regulation of insurance
company solvency, employee benefit regulation, removal of barriers preventing
banks from engaging in the insurance business, tax law changes affecting the
taxation of insurance companies and the tax treatment of insurance products and
its impact on the relative desirability of various personal investment
vehicles.

DIRECTORS AND EXECUTIVE OFFICERS

The name, age, positions and offices, term as director, and business experience
during the past five years for the Company's directors and executive officers
are listed in the following table:

<TABLE>
<CAPTION>
Name (Age) Position(s) with the Company and Business Experience
---------- ----------------------------------------------------
<S> <C>
Dennis H. Chookaszian ( ) Director, Chairman of the Board
Philip L. Engel ( ) Director, President
Peter E. Jokiel ( ) Director, Senior Vice President, Chief
Financial Officer
Donald M. Lowry ( ) Director, Senior Vice President,
Secretary, and General Counsel
Donald C. Rycroft ( ) Director, Group Vice President,
Treasurer
William H. Sharkey, Jr. ( ) Director, Senior Vice President
William J. Adamson, Jr. ( ) Senior Vice President
Floyd E. Brady ( ) Senior Vice President
Bruce B. Brodie ( ) Senior Vice President
James P. Flood ( ) Senior Vice President
Michael C. Garner ( ) Senior Vice President
Bernard L. Hengesbaugh ( ) Senior Vice President
Jack Kettler ( ) Senior Vice President
Carolyn L. Murphy ( ) Senior Vice President
Wayne R. Smith, III ( ) Senior Vice President
Adrian M. Tocklin ( ) Senior Vice President
Jae L. Wittlich ( ) Senior Vice President
</TABLE>

Each director is elected to serve until [______________] or until his or her
successor is elected and shall have qualified. Some directors have held
various executive positions with insurance company affiliates of the Company.

[BUSINESS EXPERIENCE TO BE ADDED]

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<PAGE>

EXECUTIVE COMPENSATION

The salaries and any other compensation of the chairman of the board and the
four most highly compensated executive officers whose compensation exceeded
$100,000 for the fiscal year ended December 31, 1995 is provided below.
Compensation shown is with respect to services provided to the Company and its
affiliates.

[TO BE ADDED BY AMENDMENT]

FINANCIAL STATEMENTS OF VALLEY FORGE LIFE INSURANCE COMPANY

[TO BE ADDED BY AMENDMENT]

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<PAGE>

ISSUED BY:

Valley Forge Life Insurance Company
CNA Plaza
Chicago, Illinois 60685

DISTRIBUTED BY:

CNA Investor Services, Inc.
CNA Plaza
Chicago, Illinois 60685

SERVICE CENTER:

Financial Administration Services, Inc.
95 Bridge Street
Haddam, Connecticut 06438

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<PAGE>

APPENDIX A

The Market Value Adjustment is computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to an Annuity Payment Option by
the Market Value Adjustment Factor. The Market Value Adjustment factor is
calculated as:

[(1+a)/(1+b)^(n/12)]-1

where:

"a" is the Credited Rate;

"n" is the number of complete months remaining before the expiration of
the Guarantee Period for the Account from which the surrender,
withdrawal, transfer, or application to an Annuity Payment Option is
being made.

As an example of calculating "b" by linear interpolation, if the time remaining
to the expiration of the Guarantee Period is 4.5 years, the interpolated
Guaranteed Interest Rate is equal to the sum of one-fourth of the three-year
Guaranteed Interest Rate and three-fourths of the five-year Guaranteed Interest
Rate. If the three-year Guaranteed Interest Rate is 4.5% and the five-year
Guaranteed Interest Rate is 5%, the interpolated Guaranteed Interest Rate
equals 4.875% -- that is, 4.5% multiplied by 0.25 plus 5% multiplied by 0.75.

The following examples illustrate the effect of the Market Value Adjustment and
surrender charge on a surrender of Interest Account Value (Example 1A), Index
Account Value (Example 1B), and a Contract with both Account types (Example 1C)
prior to the end of the applicable Guarantee Period in an interest rate
environment in which rates are rising and falling, but are ultimately higher at
the time of surrender; thus the Market Value Adjustment will operate to reduce
the amount paid upon surrender. ------

A - 1
<PAGE>

EXAMPLE 1A: Surrender of Interest Account Value 3 Years After Issue
- ----------
Interest Account Assumptions --
----------------------------

Guaranteed Interest Rate 5.00%
Guarantee Period 7 years
Net Single Premium Allocated $10,000
Applicable Surrender Charge
Percentage 7%

<TABLE>
<CAPTION>
|---------|------------|------------|--------------|------------------|---------------|------------|
|Contract | Interest | Interest | Years | Current Rate | Market Value | Surrender |
| Years | Account | Credit | Remaining - | For Remaining | Adjustment | Charge |
| | Value | (Year-End) | Guarantee | Guarantee Period | Factor | |
| | | | Period | | | |
|---------|------------|------------|--------------|------------------|---------------|------------|
<S> <C> <C> <C> <C> <C> <C>
| 0 | $ 10,000 | $ 500 | 7 | 5.00% | 0.00000 | $ 700 |
|---------|------------|------------|--------------|------------------|---------------|------------|
| 1 | 10,500 | 525 | 6 | 4.50% | 0.02905 | 700 |
|---------|------------|------------|--------------|------------------|---------------|------------|
| 2 | 11,025 | 551.25 | 5 | 5.00% | 0.00000 | 700 |
|---------|------------|------------|--------------|------------------|---------------|------------|
| 3 | 11,576.25 | | 4 | 6.00% | -0.03721 | 700 |
|---------|------------|------------|--------------|------------------|---------------|------------|
</TABLE>

If the Owner surrenders the Interest Account Value three years after issue
($11,576.25), then the amount paid on surrender will equal

Interest Market Surrender
Account - Value - Charge,
Value Adjustment

or $11,576.25, minus $430.70, minus $700, or $10,445.55.

EXAMPLE 1B: Surrender of Indexed Account Value 3 Years After Issue
- ----------
Indexed Account Assumptions --
---------------------------

Index Participation Rate 70%
Floor 0%
Cap 12%
Guarantee Period 5 years
Guaranteed Interest Rate for
5 Year Guaranteed Interest Account 4.75%
Net Single Premium Allocated $15,000
Applicable Surrender Charge
Percentage 7%

A - 2

<PAGE>

<TABLE>
<CAPTION>
|--------|--------|--------|---------|-----------|---------|----------|----------|------------|----------|
|Contract| Indexed| Year | Final | Index | Index |Remaining | Current | Market |Surrender |
| Years | Account| Start | Average| Increase |Increase |Guarantee | Rate for | Value | Charge |
| | Value | Index | Index | %age | (Year- | Period | Remaining| Adjustment | |
| | | | | Factor | end) | | Guarantee| Factor | |
| | | | | | | | Period | | |
|--------|--------|--------|---------|-----------|---------|----------|----------|------------|----------|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
| 0 |$ 15,000| 600 | 610 | 1.17% | $ 175 | 5 | 4.75% | 0.00000 | $1,050 |
|--------|--------|--------|---------|-----------|---------|----------|----------|------------|----------|
| 1 | 15,175| 600 | 780 | 12.00% | 1,821 | 4 | 4.25% | 0.01932 | 1,050 |
|--------|--------|--------|---------|-----------|---------|----------|----------|------------|----------|
| 2 | 16,996| 800 | 700 | 0.00% | 0 | 3 | 4.75% | 0.00000 | 1,050 |
|--------|--------|--------|---------|-----------|---------|----------|----------|------------|----------|
| 3 | 16,996| 700 | | | | 2 | 5.50% | -0.01417 | 1,050 |
|--------|--------|--------|---------|-----------|---------|----------|----------|------------|----------|
</TABLE>

If the Owner surrenders the Indexed Account Value three years after issue
($16,996), then the amount paid on surrender will equal

Indexed Market Surrender
Account - Value - Charge,
Value Adjustment

or $16,996, minus $240.79, minus $1,050, or $15,705.21.

EXAMPLE 1C: Surrender of Interest Account Value and
---------- Indexed Account Value 3 Years After Issue

Interest Account Assumptions--
----------------------------

Guaranteed Interest Rate 5.00%
Guarantee Period 7 years
Net Single Premium Allocated $10,000
Applicable Surrender Charge
Percentage 7%

Indexed Account Assumptions --
---------------------------
Index Participation Rate 70%
Floor 0%
Cap 12%
Guarantee Period 5 years
Guaranteed Interest Rate for
5 Year Guaranteed Interest Account 4.75%
Net Single Premium Allocated $15,000
Applicable Surrender Charge
Percentage 7%

A - 3
<PAGE>

Thus, the assumed Net Single Premium is $25,000. $10,000 has been allocated to
an Interest Account, as described in Example 1A; and $15,000 has been allocated
to an Indexed Account, as described in Example 1B. Based on these assumptions,
values under the contract would be as follows:

<TABLE>
<CAPTION>
|---------|-----------|----------|------------|------------|------------|------------|
|Contract | Interest | Indexed | Account | Adjusted | Reference | Adjusted |
| Year | Account | Account | Value | Account | Value | Reference |
| | Value | Value | | Value | | Value |
|---------|-----------|----------|------------|------------|------------|------------|
<S> <C> <C> <C> <C> <C> <C>
| 0 | $10,000 | $15,000 | $ 25,000 | $ 25,000 | $22,500.00 | $22,500.00 |
|---------|-----------|----------|------------|------------|------------|------------|
| 1 | 10,500 | 15,175 | 25,675 | 25,980 | 23,046.14 | 23,319.96 |
|---------|-----------|----------|------------|------------|------------|------------|
| 2 | 11,025 | 16,996 | 28,021 | 28,021 | 23,607.15 | 23,607.15 |
|---------|-----------|----------|------------|------------|------------|------------|
| 3 | 11,576.25 | 16,996 | 28,572.25 | 27,901 | 24,169.35 | 23,601.34 |
|---------|-----------|----------|------------|------------|------------|------------|
</TABLE>

If the Owner surrenders the Contract three years after issue, then the amount
paid on surrender will equal the greater of (i) the Surrender Value (the sum of
the Surrender Value of the Interest Account, and of the Indexed Account, or
$26,150.76) or (ii) the Adjusted Reference Value ($23,601.34). Accordingly,
the amount paid on surrender would equal the Surrender Value of $26,150.76.

A - 4
<PAGE>

APPENDIX B

THE EXAMPLES BELOW ARE INTENDED ONLY TO ILLUSTRATE THE CALCULATION OF INDEXED
ACCOUNT VALUE, INDEX INCREASES, AND REFERENCE VALUE, AND ARE NOT INTENDED TO
REFLECT PAST PERFORMANCE OR PREDICT FUTURE PERFORMANCE OF THE INDEX. THE S&P
500(R) WILL INCREASE AND DECREASE OVER TIME, AND DURING ANY GIVEN PERIOD OF
TIME, MAY REMAIN RELATIVELY CONSTANT, OR MAY EXPERIENCE SIGNIFICANT
FLUCTUATIONS. INDEX INCREASES ARE CALCULATED IN ACCORDANCE WITH THE TERMS OF
THE CONTRACT, AND DUE TO THE EFFECT OF THE INDEX PARTICIPATION RATE, CAP AND
FLOOR, WILL NOT CORRESPOND DIRECTLY TO INCREASES (OR DECREASES) IN THE INDEX.

The following examples illustrate the calculation of the Index Increases (if
any) credited to an Indexed Account, and the resulting Indexed Account Value
and Reference Value. Each example assumes that (i) the entire Net Single
Premium of $10,000 has been allocated to an Indexed Account with a five year
Guarantee Period; (ii) the applicable Index Participation Rate is 75%; (iii)
the applicable Floor is 0%; (iv) the applicable Cap is 12%; and (iv) the rider
cost is 0.85%. (The daily equivalent of the rider cost, which is reflected in
Reference Value, is 0.002319%.) Actual Index Participation Rates, Caps, and
Floors under the Contract may be different.

EXAMPLE 1A: Example 1A assumes that the Index (the S&P
----------
500(R)) remains flat, or constant, over the course of the
Guarantee Period applicable to the Indexed Account. Given
this assumption, Indexed Account Value, Index Increases, and
Reference Value over the course of the five year Guarantee
Period would be as follows:
<TABLE>
<CAPTION>
|---------|----------|-------|-------|---------|--------|------------|-----------|----------|---------|
|Contract | Indexed | Year | Final | Index | Index | Year-Start| Reference | Rider | Excess |
| Years | Account | Start |Average| Increase|Increase| Reference | Value | Charge | Interest|
| | Value | Index | Index | %age | (Year- | Value | Interest | to Year-| Credit |
| | | | | Factor | end) | | | End | |
|---------|----------|-------|-------|---------|--------|------------|-----------|----------|---------|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
| 0 | $10,000 | 600 | 600 | 0.00% | $0.00 | $9,000.00 | $270.00 | $85.91 | $0.00 |
|---------|----------|-------|-------|---------|--------|------------|-----------|----------|---------|
| 1 | 10,000 | 600 | 600 | 0.00% | 0.00 | 9,184.09 | 275.52 | 85.91 | 0.00 |
|---------|----------|-------|-------|---------|--------|------------|-----------|----------|---------|
| 2 | 10,000 | 600 | 600 | 0.00% | 0.00 | 9,373.70 | 281.21 | 85.91 | 0.00 |
|---------|----------|-------|-------|---------|--------|------------|-----------|----------|---------|
| 3 | 10,000 | 600 | 600 | 0.00% | 0.00 | 9,569.00 | 287.07 | 85.91 | 0.00 |
|---------|----------|-------|-------|---------|--------|------------|-----------|----------|---------|
| 4 | 10,000 | 600 | 600 | 0.00% | 0.00 | 9,770.16 | 293.10 | 85.91 | 0.00 |
|---------|----------|-------|-------|---------|--------|------------|-----------|----------|---------|
| 5 | 10,000 | | | | | 9,977.36 | | | |
|---------|----------|-------|-------|---------|--------|------------|-----------|----------|---------|
</TABLE>

EXAMPLE 1B: Example 1B assumes that the Index (the S&P
----------
500(R)) increases and decreases over the course of the
Guarantee Period applicable to the Indexed Account. In
addition, the Example assumes that the Index Increase after
the end of Contract Year [1] is subject to the Cap of 12%.
(In other words, but for the Cap, the Index Increase after
Contract Year [1] would have been higher

B - 1
<PAGE>
than 12%.) Given the assumptions set forth above, Indexed
Account Value, Index Increases, and Reference Value over
the course of the five year Guarantee Period would be as
follows:
<TABLE>
<CAPTION>
|--------|----------|---------|---------|-----------|-----------|------------|------------|---------|----------|
|Contract| Indexed | Year | Final | Index | Index | Year- | Reference | Rider | Excess |
| Years | Account | Start | Average | Increase | Increase| Start | Value | Charge | Interest|
| | Value | Index | Index | %age | (Year- | Reference | Interest | to Year-| Credit |
| | | | | Factor | end) | Value | | End | |
|--------|----------|---------|---------|-----------|-----------|------------|------------|---------|----------|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
| 0 | $10,000 | 600 | 700 | 12.00% | $1,200.00 | $9,000.00 | $270.00 | $ 85.91 | $ 0.00 |
| | | | | | | | | | |
| 1 | 11,200 | 700 | 810 | 11.79% | 1,320.00 | 9,184.09 | 275.52 | 96.22 | 0.00 |
| | | | | | | | | | |
| 2 | 12,520 | 825 | 700 | 0.00% | 0.00 | 9,363.39 | 280.90 | 107.56 | 0.00 |
| | | | | | | | | | |
| 3 | 12,520 | 700 | 750 | 5.36% | 670.71 | 9,536.74 | 286.10 | 107.56 | 0.00 |
| | | | | | | | | | |
| 4 | 13,190.71| 740 | 700 | 0.00% | 0.00 | 9,715.28 | 291.46 | 113.32 | 1,786.73|
| | | | | | | | | | |
| 5 | 13,190.71| | | | | 11,680.15 | | | |
|--------|----------|---------|---------|-----------|-----------|------------|------------|---------|----------|
</TABLE>

EXAMPLE 1C: Example 1C assumes that the Index (the S&P
----------
500(R)) increases and decreases over the course of the
Guarantee Period applicable to the Indexed Account. In
addition, the Example assumes that overall, the Index does not
experience significant increases over the course of the
Guarantee Period. Given the assumptions set forth above,
Indexed Account Value, Index Increases and Reference Value
over the course of the five year Guarantee Period would be as
follows:
<TABLE>
<CAPTION>
|---------|-----------|-------|---------|----------|----------|------------|-----------|-----------|----------|
|Contract | Indexed | Year | Final | Index | Index | Year- | Reference | Rider | Excess |
| Years | Account | Start | Average | Increase | Increase | Start | Value |Charge to | Interest |
| | Value | Index | Index | %age | (Year- | Reference | Interest | Year-End | Credit |
| | | | | Factor | end) | Value | | | |
|---------|-----------|-------|---------|----------|----------|------------|-----------|-----------|----------|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
| 0 | $ 10,000 | 600 | 550 | 0.00% | $ 0.00 | $9,000.00 | $270.00 | $ 85.91 | $0.00 |
|---------|-----------|-------|---------|----------|----------|------------|-----------|-----------|----------|
| 1 | 10,000 | 560 | 600 | 5.36% | 535.71 | 9,184.09 | 275.52 | 85.91 | 0.00 |
|---------|-----------|-------|---------|----------|----------|------------|-----------|-----------|----------|
| 2 | 10,535.71| 600 | 625 | 3.13% | 329.24 | 9,373.70 | 281.21 | 90.51 | 0.00 |
|---------|-----------|-------|---------|----------|----------|------------|-----------|-----------|----------|
| 3 | 10,864.96| 620 | 650 | 3.63% | 394.29 | 9,564.40 | 286.93 | 93.34 | 0.00 |
|---------|-----------|-------|---------|----------|----------|------------|-----------|-----------|----------|
| 4 | 11,259.25| 650 | 550 | 0.00% | 0.00 | 9,757.99 | 292.74 | 96.73 | 0.00 |
|---------|-----------|-------|---------|----------|----------|------------|-----------|-----------|----------|
| 5 | 11,259.25| | | | | 9,954.00 | | | |
|---------|-----------|-------|---------|----------|----------|------------|-----------|-----------|----------|
</TABLE>

B - 2
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Securities and Exchange Commission Registration Fees $_________
Printing and engraving $_________
Accounting fees and expenses $_________
Legal fees and expenses $_________
Miscellaneous $_________
Total Expenses $_________

[to be completed by amendment]

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The registrant has no officers, directors or employees. The
registrant does not indemnify its officers, directors of employees.
CNA-Financial Corporation ("CNAFC"), parent of the registrant,
indemnifies the registrant's officers, directors and employees in
their capacity as such. Most of the registrant's officers, directors
and employees are also officers, directors and/or employees of CNAFC.

CNAFC indemnifies any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of CNAFC) by
reason of the fact that he is or was a director, officer, employee or
agent of CNAFC, or was serving at the request of CNAFC as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests
of CNAFC, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.

CNAFC indemnifies any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit
by or in the right of CNAFC to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or
agent of CNAFC, or was serving at the request of CNAFC as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of CNAFC. No indemnification is made,
however, in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to CNAFC unless and only to
the extent that a court determines that, despite the

-1-
<PAGE>

adjudication of liability but in view of all of the circumstances of
the case, such person is fairly and reasonably entitled to indemnity
for such expenses which the court deems proper.

To the extent that any person referred to above is successful on the
merits or otherwise in defense of any action, suit or proceeding
referred to above, or in defense of any claim, issue or matter
therein, CNAFC will indemnify such person against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
therewith. CNAFC may advance to such a person, expenses incurred in
defending a civil or criminal action, suit or proceeding as authorized
by CNAFC's board of directors upon receipt of an undertaking by (or on
behalf of) such person to repay the amount advanced unless it is
ultimately determined that he is entitled to be indemnified.

Indemnification and advancement of expenses described above (unless
pursuant to a court order) is only made as authorized in the specific
case upon a determination that such indemnification or advancement of
expenses is proper in the circumstances because he has met the
applicable standard of conduct. Such determination must be made by a
majority vote of a quorum of CNAFC's board of directors who are not
parties to the action, suit or proceeding or by independent legal
counsel in a written opinion or by CNAFC's stockholders.

Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, 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 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 Act and will be
governed by the final adjudication of such issue.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Not applicable.

ITEM 16. EXHIBITS

1. Form of Underwriting Agreement between Valley Forge
Life Insurance Company (the "Company") and CNA
Investor Services, Inc. (To be filed by Amendment.)
3(i). Articles of Incorporation of Valley Forge Life
Insurance Company.*
(ii). By-Laws of Valley Forge Life Insurance Company.*
4. (a) Form of Single Premium Deferred Modified
Guaranteed Annuity Certificate.
(b) Form of Index Rider.
(c) Form of Qualified Plan Rider.
(d) Form of Individual Retirement Annuity Rider.

-2-
<PAGE>

(e) Form of Nursing Home Confinement/Terminal
Medical Condition Rider.
5. Opinion regarding legality. (To be filed by
Amendment.)
10. Policy Application
23. (a) Consent of Sutherland, Asbill & Brennan. (To
be filed by Amendment.)
(b) Consent of Deloitte & Touche LLP. (To be
filed by Amendment.)
27. Financial Data Schedule. (To be filed by Amendment.)

* Incorporated by Reference to Registrant's Registration Statement on Form N-4
(File No. 33- _______), filed with the Commission on February 20, 1996.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
and

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois, on this 29th day of March, 1996.

VALLEY FORGE LIFE INSURANCE COMPANY
(Registrant)

Attest: S/ MARY A. RIBIKAWSKIS By: /S/ PETER E. JOKIEL
---------------------- -----------------------------
Mary A. Ribikawskis Peter E. Jokiel
Assistant Secretay Senior Vice President,
Chief Financial Officer, and
Director

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ DENNIS H. CHOOKASZIAN Chairman of the Board,
- ------------------------------------------- Chief Executive Officer, and Director March 29, 1996
Dennis H. Chookaszian

/S/ PHILIP L. ENGEL President and Director
- ------------------------------------------- March 29, 1996
Philip L. Engel

/S/ PETER E. JOKIEL Senior Vice President,
- ------------------------------------------- Chief Financial Officer, and Director March 29, 1996
Peter E. Jokiel

/S/ DONALD M. LOWRY Senior Vice President, Secretary,
- ------------------------------------------- General Counsel, and Director March 29, 1996
Donald M. Lowry

/S/ DONALD C. RYCROFT Group Vice President,
- ------------------------------------------- Treasurer, and Director March 29, 1996
Donald C. Rycroft

/S/ WILLIAM H. SHARKEY, JR. Senior Vice President
- ------------------------------------------- and Director March 29, 1996
William H. Sharkey, Jr.

</TABLE>

Exhibit 4(a)
VALLEY FORGE LIFE INSURANCE COMPANY
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601

In this Certificate, Valley Forge Life Insurance Company is referred to as
"We," "Us," "Our," or the "Company." "You" and "Your" refer to the Participant.

This is a Certificate issued in conformance with the Group Single Premium
Deferred Annuity Contract. If there is a conflict between the Group Contract
and the Certificate, the Group Contract will control.

This cover sheet provides only a brief outline of some of the important
features of the Certificate. This cover sheet is not the insurance contract and
only the actual policy provisions will control. The Certificate itself sets
forth, in detail, the rights and obligations of both the Participant and the
Valley Forge Life Insurance Company. We agree to pay the benefits as described
in this Certificate in accordance with its provisions.

PLEASE READ THIS CERTIFICATE CAREFULLY
It is a legal contract between You and Us.

NOTICE OF 10-DAY CANCELLATION PERIOD

Please read this Certificate carefully. If for any reason You are not satisfied
with this Certificate, You may return it to Us for cancellation by delivering
or mailing it to:

1. Valley Forge Life Insurance Company Service Center, 95 Bridge Street,
Haddam, Connecticut 06438, or

2. the agent through whom it was purchased.

To cancel this Certificate, You must return it to Us no later than 10 days
after You first receive it. Upon delivery or mailing, this Certificate will be
void as of the date We receive it and Your request for cancellation and We will
promptly return Your Single Premium, or, in those jurisdictions where required
by law, pay You the Adjusted Accumulation Value instead.

Signed for the Valley Forge Life Insurance Company at its Executive Office, CNA
Plaza, Chicago, Illinois 60685.

Chairman of the Board Secretary

ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CERTIFICATE ARE SUBJECT TO A
MARKET VALUE ADJUSTMENT, THE OPERATION OF WHICH MAY RESULT IN UPWARD OR
DOWNWARD ADJUSTMENTS IN AMOUNTS PAID (INCLUDING WITHDRAWALS, SURRENDERS,
TRANSFERS, DEATH BENEFITS AND AMOUNTS APPLIED TO PURCHASE ANNUITY PAYMENTS) TO
A PARTICIPANT OR OTHER PAYEE. PAYMENTS WITHIN AN APPLICABLE WINDOW PERIOD ARE
NOT SUBJECT TO THE MARKET VALUE ADJUSTMENT.

SINGLE PREMIUM DEFERRED MODIFIED GUARANTEED ANNUITY CERTIFICATE

NON-PARTICIPATING

<PAGE>

CERTIFICATE SPECIFICATIONS

GROUP CONTRACT HOLDER: Valley Forge Indexed Annuity Trust

GROUP CONTRACT NUMBER: 00001

CERTIFICATE NUMBER: 0000001

PARTICIPANT:

PARTICIPANT'S AGE:

ANNUITANT:

ANNUITANT'S AGE:

BENEFICIARY:

ISSUE DATE:

INVESTMENT START DATE:

ANNUITY DATE:

ANNUITY PAYMENT DATE:

ANNUITY PAYMENT OPTION:

ANNUITY PAYMENT FREQUENCY:

SINGLE PREMIUM:

FREE WITHDRAWAL PERCENTAGE: [10%]

MINIMUM WITHDRAWAL AMOUNT: $500

MINIMUM ALLOCATION AMOUNT: $500

MINIMUM ALLOCATION PERCENTAGE: 1%

MINIMUM TRANSFER AMOUNT: $500

MINIMUM ACCOUNT VALUE: $500

PAYEE:

MINIMUM INTEREST RATE: 3%

SHORT TERM INTEREST RATE: 3%

PREMIUM TAX CHARGE:

<PAGE>

ACCOUNT SPECIFICATIONS

GUARANTEE PERIOD: 5 Certificate Years

GUARANTEED INTEREST RATE: 4.75% for the first Guarantee Period; as declared by
Us for each Guarantee Period thereafter

SURRENDER CHARGE PERCENTAGE: [7%]

The surrender charge is zero during the Window Period: at all other times, it
is equal to the Net Allocation times the Surrender Charge Percentage. The
Surrender Charge Percentage is constant until the Certificate Anniversary ten
years before the Annuity Date, and then declines in ten equal steps to zero on
the Annuity Date.

NET SINGLE PREMIUM ALLOCATION: 50%

<PAGE>

INDEX RIDER SPECIFICATIONS

GUARANTEE PERIOD: 5 Certificate Years

RIDER CHARGE: 0.85% per Certificate Year

INDEX: The Standard & Poor's 500 Composite Stock Price Index

FLOOR: 0% for the first Guarantee Period; as declared by Us for each Guarantee
Period thereafter, but not less than 0%

CAP: 12% for the first Guarantee Period; as declared by Us for each Guarantee
Period thereafter

INDEX PARTICIPATION RATE: 70% for the first Guarantee Period; as declared by Us
for each Guarantee Period thereafter

AVERAGING PERIOD: 90 days

SURRENDER CHARGE PERCENTAGE: [7%]

NET SINGLE PREMIUM ALLOCATION: 50%

"S&P 500(R)" and "Standard & Poor's 500" are trademarks of McGraw-Hill, Inc.
and have been licensed for use by Valley Forge Life Insurance Company. This
annuity is not sponsored, endorsed, sold, or promoted by Standard & Poor's and
Standard & Poor's makes no representation regarding the advisability of
purchasing the annuity.

4
<PAGE>

TABLE OF CONTENTS

1. DEFINITIONS ............................................................6

2. GENERAL PROVISIONS .....................................................8

3. THE PARTICIPANT ........................................................9

4. THE SEPARATE ACCOUNTS ..................................................9

5. THE ACCOUNTS ..........................................................10

6. ALLOCATIONS AND TRANSFERS .............................................12

7. CALCULATION OF VALUES .................................................13

8. FEES AND CHARGES ......................................................14

9. PAYMENT OF BENEFITS ...................................................14

10. DEATH BENEFITS .......................................................15

11. ANNUITY PROVISIONS AND PAYMENT OPTIONS ...............................16

<PAGE>
1. DEFINITIONS

ACCOUNT: An account to which We credit a specified and guaranteed rate of
interest.

ACCOUNT VALUE: An amount on which We credit a specified and guaranteed rate of
interest, as described in Section 5.1 of the Certificate.

ACCUMULATION VALUE: The total amount invested under the Certificate. It is the
sum of the Account Values.

ADJUSTED ACCUMULATION VALUE: The Accumulation Value, plus or minus any
applicable Market Value Adjustment, less Premium Tax Charges not previously
deducted.

ADJUSTED REFERENCE VALUE: The Reference Value multiplied by the ratio of the
Adjusted Accumulation Value to the Accumulation Value.

AGE: The Age of any person on the birthday nearest the date for which Age is
determined.

ANNUITANT: The person or persons whose life (or lives) determines the Annuity
Payments payable under the Certificate and whose death determines the death
benefit. With regard to joint and survivorship Annuity Payment Options, the
maximum number of joint Annuitants is two and provisions referring to the death
of an Annuitant mean the death of the last surviving Annuitant. Provisions
relating to an action by the Annuitant mean, in the case of joint Annuitants,
both Annuitants acting jointly.

ANNUITY DATE: The date on which the Annuity Value will be applied to purchase
an Annuity.

ANNUITY PAYMENT: One of several periodic payments made by the Company to the
Payee under an Annuity Payment Option.

ANNUITY PAYMENT DATE: The date each month, quarter, semiannual period or year
as of which We make Annuity Payments. The Annuity Payment Date is shown on the
Certificate Specifications page.

ANNUITY PAYMENT OPTION: The form of Annuity Payments selected by the
Participant under the Certificate. The Annuity Payment Option is shown on the
Certificate Specifications page.

ANNUITY VALUE: The amount that will be applied on the Annuity Date to purchase
an Annuity, as described in Section 11.2 of the Certificate.

BENEFICIARY: The person(s) to whom the death benefit will be paid on the death
of the Participant or Annuitant.

BUSINESS DAY: A day on which the New York Stock Exchange is open for trading
and the Company is open for business.

CANCELLATION PERIOD: The period described on the cover page of this Certificate
during which the Participant may return the Certificate for a refund of the
Single Premium, or, in those jurisdictions where required by law, the Adjusted
Accumulation Value.

THE CODE: The Internal Revenue Code of 1986, as amended.

CERTIFICATE ANNIVERSARY: The same date in each Certificate Year as the
Investment Start Date.

CERTIFICATE YEAR: A twelve-month period beginning on the Investment Start Date
or on a Certificate Anniversary.
<PAGE>

CONTINGENT ANNUITANT: The person designated by the Participant in the
application who becomes the Annuitant in the event that the Annuitant dies
before the Annuity Date while the Participant is still alive.

CONTINGENT BENEFICIARY: The person(s) to whom the death benefit will be paid if
the beneficiary (or beneficiaries) is not living.

<PAGE>

DUE PROOF OF DEATH: Proof of death satisfactory to the Company. Due Proof of
Death may consist of the following if acceptable to the Company: (a) a
certified copy of the death record; (b) a certified copy of a court decree
reciting a finding of death; or (c) any other proof satisfactory to the
Company.

EXCHANGE: The New York Stock Exchange.

GENERAL ACCOUNT: The assets of the Company other than those allocated to the
Separate Accounts or any other separate account of the Company.

GROUP CONTRACT: the Group Contract is the deferred annuity contract issued to
the Group Contract Holder named on the Certificate Specifications page.

GUARANTEE PERIOD: A specific number of years for which the Company agrees to
credit a specified effective annual rate of interest to an Account.

GUARANTEED INTEREST RATE: An effective annual rate of interest that the Company
will pay on an Account. The Guaranteed Interest Rate will not be less than the
Minimum Interest Rate shown on the Certificate Specifications page.

HOME OFFICE: The Company's office at 401 Penn Street, Reading, PA 19601.

INVESTMENT START DATE: The Investment Start Date is set forth on the
Certificate Specifications page and is used to determine Certificate Years and
Certificate Anniversaries.

ISSUE DATE: The date on which We receive the Single Premium.

MARKET VALUE ADJUSTMENT: A positive or negative adjustment made to any portion
of an Account Value upon the surrender, withdrawal, transfer, or application to
an Annuity Payment Option of that portion of the Account Value. No Market Value
Adjustment applies during the Window Period.

NET ALLOCATION: The amount allocated to an Account at its most recent Reset
Date, less withdrawals and transfers from the Account since then (including any
surrender charges and any Market Value Adjustments decreasing the Account
Value).

NET SINGLE PREMIUM: The Single Premium less any Premium Tax Charge deducted
from it.

NON-QUALIFIED CERTIFICATE: A Certificate that is not a "qualified certificate".

PARTICIPANT: The person or persons to whom the Certificate belongs and who is
(are) entitled to exercise all rights and privileges provided in the
Certificate. Also referred to herein as "You" or "Your". The maximum number of
joint Participants is two. Provisions relating to action by the Participant
mean, in the case of joint Participants, both Participants acting jointly.

PAYEE: The person(s) entitled to receive Annuity Payments under the
Certificate.

PREMIUM TAX CHARGE: A charge shown on the Certificate Specifications page that
is deducted either from the Single Premium or from the Accumulation Value prior
to surrender, annuitization or death of the Participant or Annuitant.

QUALIFIED CERTIFICATE: A Certificate that is issued in connection with a
retirement plan that qualifies for special federal income tax treatment under
Sections 401, 408 or 457 of the Code.

REFERENCE VALUE: a minimum guaranteed value used to calculate benefits under
the Certificate.
<PAGE>

RESET DATES: The date that an amount is first allocated to an Account is the
first Reset Date for that Account. The start of the next Guarantee Period is
the next Reset Date for that Account.

SEC: The U.S. Securities and Exchange Commission.

SEPARATE ACCOUNTS: The Valley Forge Life Insurance Company Indexed Separate
Account and the Valley Forge Life Insurance Company MVA Guaranteed Interest
Separate Account.

<PAGE>

SERVICE CENTER: The Company's service center at 95 Bridge Street, Haddam,
Connecticut 06438.

SHORT TERM INTEREST RATE: The rate of interest credited to the Net Single
Premium from the Issue Date to the Investment Start Date, as shown on the
Certificate Specifications page.

SURRENDER VALUE: The greater of:

1. the Adjusted Accumulation Value less any applicable surrender charges,
and

2. the Adjusted Reference Value.

THE COMPANY, WE, US OR OUR: Valley Forge Life Insurance Company.

WINDOW PERIOD - The last 30 calendar days of each Guarantee Period.

WRITTEN NOTICE: A notice or request submitted in writing in a form satisfactory
to the Company that is signed by the Participant and received at the Service
Center.

2. GENERAL PROVISIONS

2.1 THE CERTIFICATE - We have issued this Certificate in consideration of
Your application and Your payment of the Single Premium. The entire
contract is made up of the Group Contract, this Certificate, any attached
riders or endorsements, and the attached copy of the application. In the
absence of fraud, We consider statements made in the application to be
representations and not warranties. We will not use any statement in
defense of a claim or to void this Certificate unless it is contained in
the attached application. Only one of Our officers may modify this
Certificate or waive any of Our rights or requirements under this
Certificate. Any modification or waiver must be in writing. No agent may
bind the Company by making any promise not contained in this Certificate.

2.2 INCONTESTABILITY - We will not contest this Certificate.

2.3 MISSTATEMENT OF AGE OR SEX - If the Age or sex of the Annuitant has been
misstated, the Company will adjust the benefits it pays under this
Certificate to the amount that would have been payable at the correct Age
and sex. If the Company made any underpayments because of any such
misstatement, it shall pay the amount of such underpayment plus interest
at an annual effective rate of 3%, immediately to the Payee or Beneficiary
in one sum. If the Company makes any overpayments because of a
misstatement of Age or sex, it shall deduct from current or future
payments due under this Certificate, the amount of such overpayment plus
interest at an annual effective rate of 3%.

2.4 PERIODIC REPORTS - At least annually, or more often as required by law,
the Company will mail to Participants at their last known address a report
showing the following items as of a date shown on the report: the value of
the Accounts; the Accumulation Value, Adjusted Accumulation Value,
Reference Value, Adjusted Reference Value, and Surrender Value; any
withdrawals or surrenders made and death benefits paid since the last
report; the current interest rate applicable to each Account; and any
other information required by law.
<PAGE>

2.5 MODIFICATION - Upon notice to the Participant, the Company may modify the
Certificate to: conform the Certificate or the operations of the Company
or of the Separate Accounts to the requirements of any law (or regulation
issued by a government agency) to which the Group Contract, the
Certificate, the Company or the Separate Accounts are subject; assure
continued qualification of the Certificate as an annuity certificate under
the Code; or reflect a change (as permitted in this Certificate) in the
operation of the Separate Accounts. In the event of any such modification,
the Company will make appropriate endorsements to the Certificate.

<PAGE>

2.6 NON-PARTICIPATING - This Certificate does not participate in the surplus
or profits of the Company and the Company does not pay dividends on it.

2.7 PROTECTION OF PROCEEDS - To the extent permitted by law, no benefits
payable under this Certificate to a Beneficiary or Payee are subject to
the claims of a Participant's or a Beneficiary's creditors.

2.8 DISCHARGE OF LIABILITY - Any payments made by Us under any Annuity
Payment Option or in connection with the payment of any withdrawal,
surrender or death benefit, shall discharge Our liability to the extent of
each such payment.

2.9 SINGLE PREMIUM - The Single Premium is shown on the Certificate
Specifications page. The Company will not issue the Certificate until it
receives the Single Premium.

2.10 PROOF OF AGE AND SURVIVAL - The Company reserves the right to require
proof of the Age or Ages of the Annuitant or Annuitants prior to the
Annuity Date. In addition, for life contingent Annuity Options, the
Company reserves the right to require proof of the Annuitant's survival
before any Annuity Payment Date.

3. THE PARTICIPANT

3.1 PARTICIPANT - This Certificate belongs to the Participant. The
Participant, as shown on the Certificate Specifications page, or as
subsequently changed, may exercise all rights under this Certificate.
Subject to more specific provisions elsewhere herein, these rights include
the right to: (1) select or change a successor Participant, (2) select or
change any Beneficiary or Contingent Beneficiary, (3) select or change the
Payee prior to the Annuity Date, (4) select or change the Annuity Payment
Option, (5) allocate the Net Single Premium among and between the
Accounts, and (6) transfer Accumulation Value among and between the
Accounts.

3.2 ASSIGNMENT - At any time before the Annuity Date while the Annuitant is
still living, the Participant may assign this certificate by Written
Notice. We are not responsible for the validity or sufficiency of any
assignment. Your rights and the rights of any Beneficiary will be affected
by an assignment. The Company is not bound by the assignment until it
receives a duplicate of the original of the assignment at the Service
Center.

3.3 SUCCESSOR PARTICIPANT - If a successor Participant is named in the
application or by subsequent Written Notice and the Participant is not the
Annuitant, the successor Participant shall become the new Participant
should the Participant die before the Annuitant.

3.4 CHANGING THE BENEFICIARY - The Participant may change the Beneficiary by
Written Notice at any time before a death benefit is paid. If, however,
the Participant previously irrevocably named a Beneficiary, that
Beneficiary's written consent must be provided to the Company before a new
Beneficiary is designated. Any change of Beneficiary is effective as of
the date Written Notice is received at the Service Center and the Company
is not liable for any payments made under the Certificate prior to the
effectiveness of any Beneficiary change.

3.5 PAYEE - The Annuitant is the Payee unless the Participant designates a
different person as Payee.
<PAGE>

4. THE SEPARATE ACCOUNTS

4.1 SEPARATE ACCOUNTS - We have established the Separate Accounts in
connection with the Group Contract and Certificates issued under it. The
Separate Accounts are subject to the laws of Our state of domicile.

<PAGE>
We established the Valley Forge Life Insurance Company MVA Guaranteed
Interest Separate Account with respect to the Accounts. Although We own
the assets in the Valley Forge Life Insurance Company MVA Guaranteed
Interest Separate Account, these assets are held separately from Our
other assets and are not part of Our General Account. The values and
benefits attributable to the Accounts are supported by the assets in the
Valley Forge Life Insurance Company MVA Guaranteed Interest Separate
Account and Our General Account. The portion of the assets of the Valley
Forge Life Insurance Company MVA Guaranteed Interest Separate Account
equal to the reserves and other liabilities of the Valley Forge Life
Insurance Company MVA Guaranteed Interest Separate Account are not
chargeable with liabilities that arise from any other business that We
conduct. We have the right to transfer to Our general account any assets
of the Valley Forge Life Insurance Company MVA Guaranteed Interest
Separate Account that are in excess of such reserves and other
liabilities.

The Company's obligations under (and the values and benefits under) the
Certificates do not vary as a function of the investment performance of
the Separate Accounts. Participants, Beneficiaries and Payees with rights
under a Certificate do not participate in the investment gains or losses
of the assets of the Separate Accounts. Such gains or losses accrue
solely to the Company. The Company retains the risk that the value of the
assets in the Separate Accounts may fall below the reserves and other
liabilities that it must maintain in connection with its obligations
under the Certificates. In such an event, the Company will transfer
assets from its General Account to the Separate Accounts to make up the
difference. The Separate Accounts are not registered as investment
companies under the Investment Company Act of 1940.

5. THE ACCOUNTS

5.1 ACCOUNTS - Accounts are supported by the Valley Forge Life Insurance
Company MVA Guaranteed Interest Separate Account and Our General Account.
The Net Single Premium may be allocated to, and transfers of Accumulation
Value may be made to, the Accounts. Account Value is not determined by and
does not reflect the investment performance of the Separate Account.

Through the Accounts, the Company offers specified effective annual rates
of interest (Guaranteed Interest Rates) that are available for specified
periods of time You select (Guarantee Periods) from those We offer.
Although the Guaranteed Interest Rate may differ among Guarantee Periods,
it will never be less than the Minimum Interest Rate shown on the
Certificate Specifications page.

Initial Guarantee Periods begin on the date as of which the Net Single
Premium is allocated or an amount of Accumulation Value is transferred to
an Account and end when the number of years in the Guarantee Period
elected has elapsed. The last day of the Guarantee Period is the
expiration date for that Guarantee Period. Subsequent Guarantee Periods
begin on the first day following the expiration date of a previous
Guarantee Period.

Allocations of the Net Single Premium and transfers of Accumulation Value
to the Accounts may have different applicable Guaranteed Interest Rates
depending on the timing of such allocations or transfers. However, the
applicable Guaranteed Interest Rate does not change during a Guarantee
Period. The Company will notify Participants in writing at least 30 days
prior to the expiration date of any Guarantee Period.
<PAGE>

If the allocated or transferred amount remains in the Account until the
end of the applicable Guarantee Period, the Account Value at that time
will be equal to the amount originally allocated or transferred,
multiplied, on an annually compounded basis, by the Guaranteed Interest
Rate. If an Account Value is surrendered, withdrawn, transferred, or
applied to an Annuity Payment

<PAGE>

Option prior to the expiration of the Guarantee Period, the Account Value
is subject to a Market Value Adjustment and a surrender charge, as
described below.

5.2 ACCOUNT SELECTION - By Written Notice prior to the expiration date for an
Account You may:

- choose a different Guarantee Period, with expiration date no
later than the Annuity Date, from among those We offer at that time;

- transfer all or a portion of the expiring Account Value to a
new Account; or

- transfer all or a portion of the expiring Account Value to an
existing Account for which the next Reset Date falls on the day
after the expiration date for the expiring Account.

Unless We receive Written Notice prior to the expiration date for an
Account, a new Guarantee Period will commence automatically on the first
day following the expiration date. The new Guarantee Period will be the
same as the expiring Guarantee Period if we are still offering that
Guarantee Period and if the expiration date of the new Guarantee Period
is no later than the Annuity Date. Otherwise the new Guarantee Period
will be one year.

Our notice to the Participant of the expiration of a Guarantee Period
will contain information about the then currently available Guarantee
Periods and the Guaranteed Interest Rates applicable to such Guarantee
Periods.

To the extent permitted by law, We reserve the right at any time to offer
Guarantee Periods that differ from those available when Your Certificate
was issued. We also reserve the right, at any time, to stop accepting Net
Single Premium allocations or transfers of Accumulation Value to a
particular Guarantee Period. Since the specific Guarantee Periods
available may change periodically, please contact the Service Center to
determine the Guarantee Periods and Guaranteed Interest Rates currently
being offered.

5.3 MARKET VALUE ADJUSTMENT - Any surrender, withdrawal, transfer or
application to an Annuity Payment Option of an Account Value is subject to
a Market Value Adjustment that may be positive or negative, unless the
effective date of the surrender, withdrawal, transfer or application is
within the Window Period. A Market Value Adjustment reflects the change in
prevailing current interest rates since the date of allocation or transfer
to that Account.

Generally, if interest rates have increased since the beginning of the
Guarantee Period, then the application of the Market Value Adjustment
will result in the payment, upon surrender, withdrawal, transfer or
application of amounts to an Annuity Payment Option, of an amount less
than the Account Value (or portion thereof) being surrendered, withdrawn,
transferred or applied to an Annuity Payment Option.

Conversely, if interest rates have decreased since the beginning of the
Guarantee Period, then the application of the Market Value Adjustment
will result in the payment, upon surrender, withdrawal, transfer or
application of amounts to an Annuity Payment Option, of an amount greater
than the Account Value (or portion thereof) being surrendered, withdrawn,
transferred or applied to an Annuity Payment Option.

The Market Value Adjustment will be applied before the deduction of any
applicable surrender charge or Premium Tax Charge.
<PAGE>

5.4 MARKET VALUE ADJUSTMENT FACTOR - The Market Value Adjustment is computed
by multiplying the amount being surrendered, withdrawn, transferred, or
applied to an Annuity Payment Option, by the Market Value Adjustment
Factor. The Market Value Adjustment Factor is calculated as:

(n/12)
[(1+a)/(1+b)] - 1

11
<PAGE>
where:

"a" is the Guaranteed Interest Rate currently being credited to the
Account from which the amount is taken;

"b" is the Guaranteed Interest Rate currently being offered for a
Guarantee Period equal to the time remaining to the expiration of the
Guarantee Period for the Account from which the amount is taken. Where
the time remaining to the expiration of the Guarantee Period is not 1, 3,
5, 7 or 10 years, "b" is the rate found by linear interpolation between
the rates for Accounts with Guarantee Periods closest to the time
remaining or, if the time remaining is less than 1 year, the rate for a 1
year period. If these are not available, We will use a rate equal to the
most recent Moody's Corporate Bond Yield Average - Monthly Average
Corporates as published by Moody's Investors Service, Inc.; and

"n" is the number of complete months remaining before the expiration of
the Guarantee Period for the Account from which the amount is taken.

6. ALLOCATIONS AND TRANSFERS

6.1 NET SINGLE PREMIUM ALLOCATION - In the application, You must select how
the Net Single Premium is to be allocated among the Accounts. The portion
of the Net Single Premium that may be applied to an Account must be a
whole percentage. The minimum percentage that may be allocated to an
Account (the Minimum Allocation Percentage) is shown on the Certificate
Specifications page. The amount allocated must also be at least equal to
the Minimum Allocation Amount shown on the Certificate Specifications
page.

We will hold the Net Single Premium at interest at the Short Term
Interest Rate from the Issue Date to the Investment Start Date. On the
Investment Start Date, We will allocate the Net Single Premium with
interest to the Accounts selected by the Participant based on the
Participant's allocation percentages (shown in the application).

6.2 TRANSFERS - On any Certificate Anniversary, You may transfer some or all
of the balance of an Account to a new Account. You may also transfer some
or all of the balance to an existing Account for which the Reset Date
falls on the Certificate Anniversary. Transfers may not occur other than
at Certificate Anniversaries.

The amount transferred cannot be less than the Minimum Transfer Amount
shown on the Certificate Specifications page. If you do not transfer the
entire balance of an Account, the amount remaining in the Account after
the transfer must be at least equal to the Minimum Account Value shown on
the Certificate Specifications page.

If the transfer occurs at a Reset Date for the Account from which some or
all of the balance is being transferred, then You may select any
Guarantee Period We then offer that is not longer than the number of
years remaining until the Annuity Date. If the transfer does not occur at
such a Reset Date, then in addition the Guarantee Period You select from
those We then offer must be no shorter than the number of years remaining
in the Guarantee Period of the Account from which some or all of the
balance is being transferred, rounded up to the next whole number of
years.

A Market Value Adjustment will usually apply to the amount transferred.
However, if the transfer occurs during the Window Period for the Account
from which some or all of the balance is being transferred, no Market
Value Adjustment or surrender charge will apply to the amount
transferred.

12
<PAGE>
7. CALCULATION OF VALUES

7.1 SURRENDER - You may surrender this Certificate for its Surrender Value at
any time before the Annuity Date. You may elect to have the Surrender
Value paid in a single sum or under an Annuity Payment Option. The
Certificate ends when We pay the Surrender Value or apply such sum to an
Annuity Payment Option. The Surrender Value will be determined as of the
date We receive Your Written Notice for surrender and this Certificate at
Our Service Center.

7.2 WITHDRAWALS - You may withdraw part of the Surrender Value at any time
before the Annuity Date, subject to these limits: the Minimum Withdrawal
Amount is shown on the Certificate Specifications page; the maximum
withdrawal is the amount that would leave a Minimum Account Value of the
amount shown on the Certificate Specifications page; and a withdrawal
request that would reduce any Account Value below the Minimum Account
Value shown on the Certificate Specifications page will be treated as a
request for a withdrawal of all of that Account Value.

We will withdraw the amount You request from the Accumulation Value as of
the day that We receive Your Written Notice and send to You that amount
plus or minus any applicable Market Value Adjustment. We will then deduct
any applicable surrender charge and any applicable Premium Tax Charge
shown on the Certificate Specifications page from the remaining
Accumulation Value.

Your Written Notice must specify the amount to be withdrawn from each
Account. If the Written Notice does not specify this information, or any
Account Value is inadequate to comply with Your request, We will make the
withdrawal based on the proportion that each Account Value bears to the
Accumulation Value as of the day of the withdrawal.

7.3 REFERENCE VALUE - The Reference Value at any time is equal to:

(a) 90% of the Single Premium; plus

(b) any Excess Interest Credits; less

(d) the total amount of any previous surrenders and withdrawals
from the Certificate; plus

(e) interest on the above items (a) through (d) credited annually
at the Minimum Interest Rate shown on the Certificate Specifications
page.

7.4 EXCESS INTEREST CREDITS - On each Reset Date, we will calculate an Excess
Interest Credit. The amount of the Excess Interest Credit will be the
amount, if any, by which (a) exceeds (b), where:

(a) is all interest ever credited to the Accounts; and

(b) is the sum of all interest ever credited to the Reference
Value, including previous Excess Interest Credits.

7.5 BASIS OF VALUES - Any paid-up annuity, surrender or death benefits that
may be available are at least equal to the minimum required by law in the
jurisdiction in which this Certificate is delivered. A detailed statement
of the method used to compute the minimum values has been filed, where
required, with the insurance officials of the jurisdiction in which this
Certificate is delivered.

13
<PAGE>
8. FEES AND CHARGES

8.1 SURRENDER CHARGE - We will deduct a surrender charge upon any surrender
or withdrawal. The charge is equal to the Surrender Charge Percentage as
shown on the Certificate Specifications page times the Net Allocation. No
surrender charge applies to surrenders or withdrawals in excess of the Net
Allocation. Surrender charges for an Account are waived during its Window
Period.

In the first Certificate Year, We calculate the surrender charge under
the assumption that amounts surrendered and withdrawn come first from the
Net Allocation, and then from any interest credited to the Account Value.
The full surrender charge applies upon surrender. In calculating the
surrender charge applicable to withdrawals, the surrender charge is
prorated based on the ratio of the amount surrendered or withdrawn to the
Net Allocation.

In Certificate Years after the first, a Free Partial Withdrawal amount is
calculated, equal to the Net Allocation at the Certificate Anniversary
times the Free Withdrawal Percentage from the Certificate Specifications
page. You may withdraw an amount up to the Free Partial Withdrawal amount
from the Accounts once in each Certificate Year after the first without
incurring a surrender charge. Any further surrenders and withdrawals are
assumed to be taken from the remainder of the Net Allocation, and then
from any interest credited to the Account Value.

With regard to withdrawals, We will withdraw the amount You request from
the Accounts as of the day that We receive Your Written Notice and send
to You that amount plus or minus any applicable Market Value Adjustment.
We will then deduct any surrender charge and any applicable Premium Tax
Charge shown on the Certificate Specifications page from the Account from
which the withdrawal was taken.

If an Annuity Payment Option is selected on surrender then we will apply
the Annuity Value to the Annuity Payment Option. If on the Annuity Date,
however, the Payee elects (or the Participant previously elected) to
receive a lump sum, this sum will equal the Surrender Value on such date.

8.2 PREMIUM TAX CHARGE - The charge shown on the Certificate Specifications
page is deducted either from the Single Premium or from the Accumulation
Value prior to surrender, annuitization or death of the Participant or
Annuitant.

8.3 OTHER TAX CHARGES - The Company reserves the right to deduct a charge
from the Single Premium or from the Accumulation Value for any federal,
state or municipal taxes (or other economic burden resulting from the
application of the tax laws) that it incurs that may be attributable to
the Certificate.

9. PAYMENT OF BENEFITS

9.1 PAYMENT OF BENEFITS - We will usually pay the proceeds of any surrender,
withdrawals, death benefit, or any Annuity Payments within seven business
days after receipt of all applicable Written Notices and/or Due Proofs of
Death. However, We have the right to defer payment of any surrender,
withdrawal, or transfer for up to six months from the date We receive Your
Written Notice. We will pay interest on the amount of any payment that is
delayed for more than 30 days after the payment becomes payable; or after
the time required by the applicable jurisdiction, if less than 30 days.
This interest will accrue from the date that the payment becomes payable
to the date of payment, but not for more than one year at an annual rate
of 3%, or the rate and time required by law, if greater.

<PAGE>
10. DEATH BENEFITS

10.1 DEATH BENEFITS ON OR AFTER THE ANNUITY DATE - If a Participant dies on or
after the Annuity Date, any surviving joint Participant becomes the sole
Participant. If there is no surviving Participant, any successor
Participant becomes the new Participant. If there is no surviving or
successor Participant, the Payee becomes the new Participant. If an
Annuitant or a Participant dies on or after the Annuity Date, the
remaining undistributed portion, if any, of the Annuity Value will be
distributed at least as rapidly as under the method of distribution being
used as of the date of such death. Under some Annuity Payment Options,
there will be no death benefit.

10.2 DEATH BENEFIT BEFORE THE ANNUITY DATE

Death Benefit is computed as of the date that the Company receives Due
Proof of Death. Payments under this provision are full settlement of all
of the Company's liability under this Certificate.

Death of a Participant
----------------------
The Death Benefit We will pay on the death of a Participant is the
Surrender Value.

If any Participant dies prior to the Annuity Date, any surviving
Participant becomes the new sole Participant. If there is no surviving
Participant, any successor Participant becomes the new Participant and if
there is no successor Participant the Annuitant becomes the new
Participant unless the deceased Participant was also the Annuitant. If
the sole deceased Participant was also the Annuitant, then the provisions
relating to the death of the Annuitant (described below) will govern
unless the deceased Participant was one of two joint Annuitants, in which
event the surviving Annuitant becomes the new Participant. The following
options are available to new Participants:

1. to receive the Death Benefit in a single lump sum within 5
years of the deceased Participant's death; or

2. elect to receive the Death Benefit paid out under an Annuity
Payment Option provided that: (a) Annuity Payments begin within 1
year of the deceased Participant's death, and (b) Annuity Payments
are made in substantially equal installments over the life of the
new Participant or over a period not greater than the life
expectancy of the new Participant; or

3. if the new Participant is the spouse of the deceased
Participant, he or she may by Written Notice within one year of the
Participant's death, elect to continue the Certificate as the new
Participant. If the spouse so elects, all of his or her rights as a
Beneficiary cease and if the deceased Participant was also the sole
Annuitant and appointed no Contingent Annuitant, the spouse will
become the Annuitant. The spouse will be deemed to have made the
election to continue the Certificate if he or she makes no election
before the expiration of the one year period described in 2. above.

With regard to new Participants who are not the spouse of the deceased
Participant: (a) 1 and 2 apply even if the Annuitant or Contingent
Annuitant is alive at the time of the deceased Participant's death, (b)
if the new Participant is not a natural person, only option 1 is
available, (c) if no election is made within one year of the deceased
Participant's death, option 1 is deemed to have been elected.
<PAGE>

Death of the Annuitant
----------------------
The Death Benefit We will pay on the death of an Annuitant is the greater
of the Accumulation Value and the Reference Value.

15
<PAGE>
If the Annuitant dies before the Annuity Date while a Participant is
still living, any Contingent Annuitant will become the Annuitant. If the
Annuitant dies before the Annuity Date and no Contingent Annuitant has
been named, the Company will pay the Death Benefit to the Beneficiary. If
there is no surviving Beneficiary, the Company will pay the Death Benefit
to any Contingent Beneficiary. If there is no surviving Contingent
Beneficiary, the Company will immediately pay the Death Benefit to the
Participant (or the Participant's estate, if the Participant is deceased)
in a lump sum.

If the Annuitant who is also a Participant dies or if the Annuitant dies
and the Participant is not a natural person, a Beneficiary (or a
Contingent Beneficiary):

1. will receive the Death Benefit in a single lump sum within 5
years of the deceased Annuitant's death; or

2. may elect to receive the Death Benefit paid out under an
Annuity Payment Option provided that: (a) Annuity Payments begin
within 1 year of the deceased Annuitant's death, and (b) Annuity
Payments are made in substantially equal installments over the life
of the Beneficiary or over a period not greater than the life
expectancy of the Beneficiary; or

3. If the Beneficiary is the spouse of the deceased Annuitant,
he or she may by Written Notice within one year of the Annuitant's
death, elect to continue the Certificate as the new Participant. If
the spouse so elects, all his or her rights as a Beneficiary cease
and if the deceased Annuitant was also the sole Annuitant and
appointed no Contingent Annuitant, the spouse will become the
Annuitant. The spouse will be deemed to have made the election to
continue the Certificate if he or she makes no election before the
expiration of the one year period.

11. ANNUITY PROVISIONS AND PAYMENT OPTIONS

11.1 ANNUITY BENEFITS - If this Certificate is in force and the Annuitant is
alive on the Annuity Date, payments to the Annuitant will begin under the
Annuity Payment Option chosen. You may choose or change a payment option
by sending Us Written Notice at least 30 days prior to the Annuity Date.

11.2 ANNUITY VALUE - At any time on or before the fifth Certificate
Anniversary, the Annuity Value equals the Surrender Value. At any time
after the fifth Certificate Anniversary up to and including the Annuity
Date, the Annuity Value equals the greater of the Adjusted Accumulation
Value and the Adjusted Reference Value.

11.3 ANNUITY PAYMENTS - Annuity Payments are periodic payments from Us to the
designated Payee, the amount of which is fixed and guaranteed by Us. The
amount of these payments depends only on the form and duration of the
Annuity Payment Option selected, the Age of the Annuitant, the sex of the
Annuitant (if applicable), the Annuity Value applied to the Annuity
Payments and the applicable annuity purchase rates. The annuity purchase
rates in the Certificate are based on an interest rate of 3.0%.

11.4 INITIAL ANNUITY PAYMENT DATE - The initial Annuity Payment Date You
selected is shown on the Certificate Specifications page. The initial
Annuity Payment Date may not be the 29th, 30th, or 31st day of a month.
The first Annuity Payment will be computed as of the Annuity Date and paid
as of the initial Annuity Payment Date.

<PAGE>

11.5 ANNUITY PAYMENT DATES - All subsequent Annuity Payments will be computed
and payable as of Annuity Payment Dates. These dates will be the same day
of the month as the initial Annuity Payment Date. Monthly Annuity
Payments will be computed and payable as of the same day each month as
the initial Annuity Payment Date. Quarterly Annuity Payments will be
computed and payable as of the same day in the third, sixth, ninth, and
twelfth month following the initial Annuity Payment Date and on the same
days of such months in each successive Certificate Year. Semi-annual
Annuity Payment Dates will be computed and payable as of the same day in
the sixth and twelfth month following the initial Annuity Payment Date
and on the same days of such months in each successive Certificate Year.
Annual Annuity Payments will be computed and payable as of the same day
in each Certificate Year as the initial Annuity Payment Date. The
frequency of Annuity Payments You have selected also is shown on the
Certificate Specifications page.

11.6 PAYMENT OPTION RATE TABLES - The amount of the monthly payments per
$1,000 applied is shown for an Annuity in these tables. Amounts for ages
not shown will be determined on a basis consistent with those shown in
these tables. The settlement option rate tables are based on the 1983A
Mortality Table with a ten-year improvement by scale G, 3% interest and a
five-year setback for females.

11.7 DEATH OF PAYEE - Unless instructed otherwise at the time that the Annuity
Payment Option is selected, at the death of the Payee We pay the amounts
below in a lump sum to the Payee's estate:

1. Under Annuity Payment Option 1, the amount left on deposit
with Us to accumulate interest.

2. Under Annuity Payment Option 2, 3, or 5, the commuted value
of the amount payable at the Payee's death as provided under the
Option selected. The commuted value is based on interest rate used
to calculate the amount of the payments under that Option.

11.8 OPTION 1, INTEREST PAYMENTS - We hold the Annuity Value as principal and
pay interest to the Payee. The interest rate is 3% per year compounded
annually. We pay interest every 1 year, 6 months, 3 months or 1 month, as
specified at the time this option is selected. At the death of the Payee,
the value of the remaining payments is paid as stated in Section 11.7.

11.9 OPTION 2, PAYMENTS OF A SPECIFIED AMOUNT - We pay the Annuity Value in
equal payments every 1 year, 6 months, 3 months or 1 month. The amount and
frequency of the payments is specified at the time this option is
selected. After each payment, interest is added to the remaining amount
applied under this option that has not yet been paid. The interest rate is
3% per year compounded annually. Payments are made to the Payee until the
amount applied under this option, including interest, is exhausted. The
total of the payments made each year must be at least 5% of the amount
applied under this option. If the Payee dies before the amount applied is
exhausted, We pay the value of the remaining payments as stated in Section
11.7.

11.10 OPTION 3, PAYMENTS FOR A SPECIFIED PERIOD - We pay the lump sum in equal
payments for the number of years specified when the option is selected.
Payments are made every 1 year, 6 months, 3 months or 1 month, as
specified when the option is selected. The amount of each Annuity Payment
for each $1,000 applied under this option is shown in the tables 1 and 2.
These amounts are calculated at an interest rate of 3% per year compounded
annually. If the Payee dies before the expiration of the specified number
of years, We pay the value of the remaining payments as stated in Section
11.7.
<PAGE>

11.11 OPTION 4, LIFE ANNUITY - We make monthly payments to the Payee for as
long as the Annuitant lives. The amount of each Annuity Payment for each
$1,000 applied under this option is shown in table 3 below.

11.12 OPTION 5, LIFE ANNUITY WITH PERIOD CERTAIN - We make monthly payments to
the Payee for as long as the Annuitant lives. At the time this option is
selected, a period certain of

17
<PAGE>

5, 10, 15, or 20 years must also be selected. If the Annuitant dies
before the specified period certain ends, the payments to the Payee will
continue until the end of the specified period. The amount of the monthly
payments therefore depends on the period certain selected. The amount of
each Annuity Payment for each period certain available is shown in tables
4 and 5 below. The amounts shown are for each $1,000 applied under this
option. If at any age the amount of the payments is the same for two or
more periods certain, payment will be made as if the longest period
certain was selected.

11.13 OPTION 6, JOINT LIFE AND SURVIVORSHIP ANNUITY - We make monthly payments
to the Payee while both Annuitants are living. After the death of either
Annuitant, payments continue to the Payee for as long as the other
Annuitant lives. The amount of each Annuity Payment for each $1,000
applied under this option is shown in tables 6 and 7 below.

EXHIBIT 4(b)

INDEX RIDER

GENERAL PROVISION - This rider is part of the Certificate to which it is
attached. The provisions of this rider supplement, and where inconsistent
override, corresponding provisions of the Certificate. Except where the rider
provides otherwise, it is subject to all provisions of the Certificate.

INDEX RIDER DEFINITIONS

ACCOUNT: An Indexed Account or Interest Account.

ACCOUNT TYPE: The Account Type for an Account is either "Indexed" or
"Interest", depending on whether the Account is an Indexed Account or an
Interest Account, respectively.

ACCOUNT VALUE: An amount on which We credit a specified and guaranteed rate of
interest, or for which we calculate values depending on increases in an Index,
as described below under "Indexed Accounts".

AVERAGING PERIOD: A period of time at the end of each Certificate Year over
which values of the Index are averaged before the calculation of any Index
Increase. The Averaging Period is shown on the Index Rider Specifications Page.

CAP: The maximum percentage per year by which an Indexed Account will be
increased. We will declare the Cap for an Indexed Account at each Reset Date on
a basis which does not discriminate unfairly within any class of Certificates.

DESTINATION ACCOUNT: An Account to which a transfer is made.

FLOOR: The minimum percentage per year by which an Indexed Account will be
increased. The Floor will never be less than 0%. We will declare the Floor for
an Indexed Account at each Reset Date on a basis which does not discriminate
unfairly within any class of Certificates.

GUARANTEE PERIOD: A specific number of years for which the Company agrees to
credit a particular effective annual rate of interest to an Interest Account,
or to apply a particular Index Participation Rate, Cap, and Floor to an Indexed
Account.

INDEX: The Index shown on the Index Rider Specifications Page. If the
publication of the Index is discontinued, or the calculation of the Index is
changed substantially, we will substitute a suitable index and notify you.

INDEX PARTICIPATION RATE: The percentage used to calculate the Index Increase
for an Indexed Account.

INDEXED ACCOUNT: An account for which We calculate values depending on
increases in an Index.

INTEREST ACCOUNT: An account to which we credit a specified and guaranteed rate
of interest.

SOURCE ACCOUNT: An Account from which a transfer is made.
<PAGE>

INDEX RIDER PROVISIONS

RIDER BENEFIT - This rider allows you to select that for one or more of your
Accounts, the value of the Account will be based on increases in an Index. Any
Account that you so select is called an Indexed Account. This selection can
only become effective on a Reset Date for the Account.

RIDER CHARGE - The annual charge for this rider is a percentage of the value of
the Indexed Accounts, as shown on the Index Rider Specifications page. The
daily compounded equivalent of this charge is deducted daily.

THE SEPARATE ACCOUNTS - We have established the Valley Forge Life Insurance
Company Indexed Separate Account in connection with the Indexed Accounts.
Although We own the assets in the Valley Forge Life Insurance Company Indexed
Separate Account, these assets are held separately from

<PAGE>

Our other assets and are not part of Our General Account. The values and
benefits attributable to the Indexed Accounts are supported by the assets in
the Valley Forge Life Insurance Company Indexed Separate Account and Our
General Account. The portion of the assets of the Valley Forge Life Insurance
Company Indexed Separate Account equal to the reserves and other liabilities of
the Valley Forge Life Insurance Company Indexed Account are not chargeable with
liabilities that arise from any other business that We conduct. We have the
right to transfer to Our general account any assets of the Valley Forge Life
Insurance Company Indexed Separate Account that are in excess of such reserves
and other liabilities.

INDEXED ACCOUNTS - The Indexed Accounts are available under the Certificate and
are supported by the Valley Forge Life Insurance Company Indexed Separate
Account, part of Our general assets. The Net Single Premium may be allocated
to, and transfers of Accumulation Value may be made to, the Indexed Accounts.
Indexed Account Value is not determined by and does not reflect the investment
performance of the Separate Accounts.

Through the Indexed Accounts, the Company offers increases based on a specified
Index. The increases are determined based on a formula with specified
parameters (the Index Participation Rate, Cap, and Floor) that are available
for specified periods of time You select (Guarantee Periods) from those We
offer. The rate at which the value of an Indexed Account grows depends on
changes in the Index on which it is based, as well as its Cap, Floor, and Index
Participation Rates. The Index Participation Rate, Cap, and Floor may differ
among Guarantee Periods.

Initial Guarantee Periods begin on the date as of which the Net Single Premium
is allocated or an amount of Accumulation Value is transferred to an Indexed
Account and end when the number of years in the Guarantee Period elected has
elapsed. The last day of the Guarantee Period is the expiration date for that
Guarantee Period. Subsequent Guarantee Periods begin on the first day following
the expiration date of a previous Guarantee Period.

Allocations of the Net Single Premium and transfers of Accumulation Value to
the Indexed Accounts may have different applicable Index Participation Rates,
Caps, and Floors depending on the timing of such allocations or transfers.
However, the applicable Index Participation Rate, Cap, and Floor do not change
during a Guarantee Period. The Company will notify Participants in writing at
least 30 days prior to the expiration date of any Guarantee Period.

If the allocated or transferred amount remains in the Indexed Account until the
end of the applicable Guarantee Period, the Account Value at that time will be
equal to the amount originally allocated or transferred plus any Index
Increases. If an Indexed Account Value is surrendered, withdrawn, transferred,
or applied to an Annuity Payment Option prior to the expiration of the
Guarantee Period, the Indexed Account Value is subject to a Market Value
Adjustment and a surrender charge, as described below.

ACCOUNT SELECTION - By Written Notice prior to the expiration date for an
Interest or Indexed Account You may:

- - choose a different Guarantee Period, with expiration date no later than
the Annuity Date, from among those We offer at that time;
- - transfer all or a portion of the expiring Account Value to a new Account;
or
- - transfer all or a portion of the expiring Account Value to an existing
Account for which the next Reset Date falls on the day after the
expiration date for the expiring Account.
<PAGE>

Transfers are subject to restrictions as described below under "Transfer
Restrictions". A Market Value Adjustment will usually apply to the amount
transferred. However, if the transfer occurs during the Window Period for the
Account from which some or all of the balance is being transferred, no Market
Value Adjustment or surrender charge will apply to the amount transferred.

<PAGE>

will be the same as the expiring Guarantee Period if we are still offering that
Guarantee Period and if the expiration date of the new Guarantee Period is no
later than the Annuity Date. Otherwise the new Guarantee Period will be one
year. If the expiring Account is an Interest Account, it will continue to be an
Interest Account. If the expiring Account is an Indexed Account, then it will
continue to be an Indexed Account, if the new Guarantee Period is one for which
We offer Indexed Accounts; otherwise, it will become an Interest Account.

Our notice to the Participant of the expiration of a Guarantee Period will
contain information about the then currently available Guarantee Periods and
the Guaranteed Interest Rates, Index Participation Rates, Caps, and Floors
applicable to such Guarantee Periods.

To the extent permitted by law, We reserve the right at any time to offer
Guarantee Periods that differ from those available when Your Certificate was
issued. We also reserve the right, at any time, to stop accepting Net Single
Premium allocations or transfers of Accumulation Value to a particular
Guarantee Period. Since the specific Guarantee Periods available may change
periodically, please contact the Service Center to determine the Guarantee
Periods and the Guaranteed Interest Rates, Index Participation Rates, Caps, and
Floors currently being offered.

INDEX INCREASES - We will calculate the Index Increase for an Indexed Account
at each Certificate Anniversary. The Index Increase equals the Indexed Account
Value times the Index Increase Percentage Factor. If the Index Increase is
greater than zero we will increase the Indexed Account Value by the Index
Increase at the Certificate Anniversary.

(a) is the Average Index Increase Percentage for the Indexed Account at the
Certificate Anniversary, and

(b) is the Index Participation Rate declared at the previous Reset Date for
the Account.

AVERAGE INDEX INCREASE PERCENTAGE - The Average Index Increase Percentage for
an Indexed Account at each Certificate Anniversary within a Guarantee Period
equals:

(b) - (a)
---------
(a),

where

(a) is the value of the Index on the previous Certificate Anniversary, and

(b) is the arithmetic average of the values of the Index on each day that the
Exchange is open for business during the Averaging Period ending on the
Certificate Anniversary.

EXCESS INTEREST CREDITS - On each Reset Date, after making any Index Increase,
we will calculate an Excess Interest Credit. The amount of the Excess Interest
Credit will be the amount, if any, by which (a) plus (b) exceeds (c), where:

(a) is the sum of all Index Increases ever made to the Indexed Account
Values;

(b) is all interest ever credited to the Interest Accounts; and

DEATH BENEFIT - In calculating the Death Benefit, We will treat the Date of
Death as the Reset Date for each Indexed Account. The Accumulation Value will
then include any Index Increases payable.

TRANSFER RESTRICTIONS - You may transfer some or all of the balance of an
Account (the "Source Account") to another Account (the "Destination Account")
subject to the following conditions:

21
<PAGE>
- - Transfers may only occur at Certificate Anniversaries;
- - The Destination Account must be of an Account Type and Guarantee Duration
We then offer;
- - The date of transfer must be a Reset Date for the Destination Account,
unless it is a new Account;
- - The Guarantee Period for a Destination Account may not be longer than the
number of years remaining until the Annuity Date;
- - If the date of transfer is not a Reset Date for the Source Account, then
the Guarantee Period for the Destination Account must be no shorter than
the number of years remaining in the Guarantee Period for the Source
Account, rounded up to the next whole number of years;
- - If the transfer occurs at a Reset Date for the Source Account then the
Destination Account may be any Account Type;
- - If the Source Account is an Interest Account then the Destination Account
may be any Account Type;
- - If the Source Account is an Indexed Account, then the Destination Account
may be a different Account Type only if the transfer occurs at a Reset Date
for the Source Account.

MARKET VALUE ADJUSTMENT - Any surrender, withdrawal, transfer or application to
an Annuity Payment Option of an Indexed Account Value is subject to a Market
Value Adjustment that may be positive or negative, unless the effective date of
the surrender, withdrawal, transfer or application is within the Window Period.
A Market Value Adjustment reflects the change in prevailing current interest
rates since the date of allocation or transfer to that Guarantee Period.

Generally, if interest rates have increased since the beginning of the
Guarantee Period, then the application of the Market Value Adjustment will
result in the payment, upon surrender, withdrawal, transfer or application of
amounts to an Annuity Payment Option, of an amount less than the Indexed
Account Value (or portion thereof) being surrendered, withdrawn, transferred or
applied to an Annuity Payment Option.

Similarly, if interest rates have decreased since the beginning of the
Guarantee Period, then the application of the Market Value Adjustment will
result in the payment, upon surrender, withdrawal, transfer or application of
amounts to an Annuity Payment Option, of an amount greater than the Indexed
Account Value (or portion thereof) being surrendered, withdrawn, transferred or
applied to an Annuity Payment Option.

The Market Value Adjustment will be applied before the deduction of any
applicable surrender charge or Premium Tax Charge.

MARKET VALUE ADJUSTMENT FACTOR - The Market Value Adjustment for an Indexed
Account is computed by multiplying the amount being surrendered, withdrawn,
transferred, or applied to an Annuity Payment Option, by the applicable Market
Value Adjustment Factor. The Market Value Adjustment Factor is calculated as:

(n/12)
[(1+a)/(1+b)] - 1

where:

"a" is the Guaranteed Interest Rate for an Interest Account with the same Reset
Date and Guarantee Period as the Indexed Account from which the amount is
taken;

"b" is the Guaranteed Interest Rate is currently being offered for a Guarantee
Period equal to the time remaining to the expiration of the Guarantee Period
for the Indexed Account from which the amount is taken. Where the time
remaining to the expiration of the Guarantee Period is not 1, 3, 5, 7 or 10
years, "b" is the rate found by linear interpolation between the rates for
Interest Accounts with Guarantee Periods closest to the time remaining or, if
the time remaining is less than 1 year, the rate for a 1 year period. If

22
<PAGE>

these are not available, We will use a rate equal to the most recent Moody's
Corporate Bond Yield Average - Monthly Average Corporates as published by
Moody's Investors Service, Inc.; and

"n" is the number of complete months remaining before the expiration of the
Guarantee Period for the Indexed Account from which the amount is taken.

TERMINATION - This rider terminates when the Certificate to which it is
attached is surrendered, or at the Annuity Date if the Certificate is still in
force. You may terminate this rider at any Reset Date by sending us written
notice.

EXHIBIT 4(c)

QUALIFIED PLAN RIDER

This Rider is part of the Certificate to which it is attached. This Certificate
is issued to or purchased by the trustee of a pension or profit-sharing plan
intended to qualify under Section 401(a) of the Code. The following provisions
apply and replace any contrary Certificate provisions:

1 Except as allowed by the qualified pension or profit sharing plan of
which this Certificate is a part, the Certificate may not be transferred,
sold, assigned, discounted or pledged, either as collateral for a loan or
as security for the performance of an obligation or for any other purpose,
to any person other than Us.

2 This Certificate shall be subject to the provisions, terms, and
conditions of the qualified pension or profit-sharing plan of which the
Certificate is a part. Any payment, distribution, or transfer under this
Certificate shall comply with the provisions, terms and conditions of such
plan as determined by the plan administrator, trustee or other designated
plan fiduciary. We shall be under no obligation either (a) to determine
whether any such payment, distribution, or transfer complies with the
provisions, terms and conditions of such plan or with any applicable law,
or (b) to administer such plan, including, without limitation, any
provisions required by the Retirement Equity Act of 1984.

3 Notwithstanding any provision to the contrary in this Certificate or the
qualified pension or profit-sharing plan of which this Certificate is a
part, We reserve the right to amend or modify the Group Contract, this
Certificate, or this Rider to the extent necessary to comply with any law,
regulation, ruling or other requirement We deem to be necessary to
establish or maintain the qualified status of such pension or
profit-sharing plan.

Except as otherwise set forth above, this Rider is subject to the exclusions,
definitions, and provisions of the Certificate and the Group Contract.

Signed for the Valley Forge Life Insurance Company at Chicago, Illinois 60685.

EXHIBIT 4(d)

INDIVIDUAL RETIREMENT ANNUITY RIDER

This Rider is part of the Certificate to which it is attached. The Certificate
as amended is intended to qualify as an individual retirement annuity under
Section 408(b) of the Code. The following provisions apply and replace any
contrary provisions of the Certificate:

1. You shall be the Participant. Any provision of the Certificate that would
allow for joint participants, or that would allow more than one person to
share distributions, is deleted.

2. The Certificate is not transferable or assignable (other than pursuant to
a divorce decree in accordance with applicable law) and is established for
the exclusive benefit of You and Your beneficiaries. It may not be sold,
assigned, alienated, or pledged as collateral for a loan or as security.

3. Your entire interest in the Certificate shall be nonforfeitable.

4. The Single Premium shall be in cash. The Single Premium may be any of the
following:

a) A rollover contribution as described in Sections 402(c),
403(a)(4), 403(b)(8) or 408(d)(3) of the Code;

b) An amount transferred from another individual retirement
account or annuity;

c) A contribution pursuant to a Simplified Employee Pension as
provided in Section 408(k) of the Code.

You shall have the sole responsibility for determining whether the Single
Premium meets applicable income tax requirements.

5. The Distribution Start Date is the date Your entire Accumulation Value
will be distributed or commence to be distributed to You. Your
Distribution Start Date shall be no later than April 1 of the calendar
year following the calendar year in which You attain age 70 1/2. You shall
have the sole responsibility for requesting a distribution that complies
with this Rider and applicable law.

6. With respect to any amount which becomes payable under the Certificate
during Your lifetime, such payment shall commence on or before the
Distribution Start Date and shall be payable in substantially equal
amounts, no less frequently than annually. Payments shall be made in the
manner as follows:

a) in a lump sum, or

b) over Your life, or

c) over the lives of You and Your designated Beneficiary, or

d) over a period certain not exceeding Your life expectancy, or

e) over a period certain not exceeding the joint and last
survivor expectancy of You and Your designated Beneficiary.
<PAGE>

If Your entire interest is to be distributed in other than a lump sum, then
the minimum amount to be distributed each year (commencing with the
calendar year following the calendar year in which You attain age 70 1/2
and each year thereafter) shall be determined in accordance with Code
Section 408(b)(3) and the regulations thereunder, including the incidental
death benefit requirements of Section 401(a)(9)(G) of the Code, the
regulations thereunder, and the minimum distribution incidental benefit
requirement of Proposed Income Tax Regulation Section 1.401(a)(9)-2.
Payments must be either nonincreasing or may increase only as provided in
Proposed Income Tax Regulation 1.401(a)(9)-1, Q&A F-3.

7. If You die after distribution of Your interest has commenced, the
remaining portion of such interest will continue to be distributed at
least as rapidly as under the method of distribution being used prior to
Your death.

<PAGE>

If You die before distribution has begun, the entire interest must be
distributed no later than December 31 of the calendar year in which the
fifth anniversary of Your death occurs. However, proceeds which are payable
to a named Beneficiary who is a natural person may be distributed in
substantially equal installments over the lifetime of the Beneficiary or a
period certain not exceeding the life expectancy of the Beneficiary provided
such distribution begins not later than December 31 of the calendar year in
which Your death occurred. If the Beneficiary is Your surviving spouse, the
Beneficiary may elect not later than December 31 of the calendar in which
the fifth anniversary of Your death occurs to receive equal or substantially
equal payments over the life or life expectancy of the surviving spouse
commencing at any date prior to the date on which You would have attained
age 70 1/2. Minimum payments will be calculated in accordance with Code
Section 408(b)(3) and the regulations thereunder.

For the purposes of this requirement, any amount paid to any of Your
children will be treated as if it had been paid to Your surviving spouse if
the remainder of the interest becomes payable to the surviving spouse when
the child reaches the age of majority.

8. If Your spouse is not the named Beneficiary, the method of distribution
selected will assure that at least 50% of the present value of the amount
available for distribution is paid within Your life expectancy and that
such method of distribution complies with the requirements of Code Section
408(b)(3) and the regulations thereunder.

9. For purposes of the foregoing provisions, life expectancy and joint and
last survivor expectancy shall be determined by use of the expected return
multiples in Tables V and VI of Treasury Regulation Section 1.72-9 in
accordance with Code Section 408(b)(3) and the regulations thereunder. In
the case of distributions under paragraph (6) of this Rider, the life
expectancy of You and Your Beneficiary will be initially determined on the
basis of Your attained ages in the year You reach 70 1/2. In the case of a
distribution under paragraph (7) of this Rider, life expectancy will be
initially determined on the basis of Your Beneficiary's attained age in
the year distributions are required to commence. Unless You (or Your
spouse) elect otherwise prior to the time distributions are required to
commence, Your life expectancy and, if applicable, Your spouse's life
expectancy will be recalculated annually based on your attained ages in
the year for which the required distribution is being determined. The life
expectancy of a nonspouse Beneficiary will not be recalculated.

The annual distribution required to be made by Your Distribution Start Date
is for the calendar year in which You reached age 70 1/2. Annual payments
for subsequent years, including the year in which Your Distribution Start
Date occurs, must be made by December 31 of that year. The amount
distributed for each year shall equal or exceed the Accumulation Value as of
the close of business on December 31 of the preceding year, divided by the
applicable life expectancy or joint and last survivor expectancy.

You may satisfy the minimum distribution requirements under Section
408(b)(3) of the Code by receiving a distribution from one IRA that is equal
to the amount required to satisfy the minimum distribution requirement for
two or more IRA's. For this purpose, if You own two or more IRAs, You may
use the alternative method described in Notice 88-38, 1988-1 C.B. 524, to
satisfy the minimum distribution requirements.

10. We reserve the right to amend the Group Contract, this Certificate, or
this Rider to the extent necessary to qualify as an individual retirement
annuity for federal income tax purposes.
<PAGE>

11. This Rider is effective as of the Issue Date.

This Rider is subject to all the exclusions, definitions and provisions of the
Group Contract and the Certificate which are not inconsistent herewith.

Signed for the Valley Forge Life Insurance Company at Chicago, Illinois 60685.

EXHIBIT 4(e)

NURSING HOME CONFINEMENT / TERMINAL MEDICAL

CONDITION RIDER

GENERAL PROVISION - This rider is a part of the Certificate. It is subject to
all the terms of the policy unless We state otherwise.

EFFECTIVE DATE - This rider becomes effective on the Issue Date shown on the
Certificate Specifications Page, subject to the following requirements:

1. if the Annuitant is confined to a nursing home or has a Terminal Medical
Condition on the Issue Date, then the Annuitant will not be covered under
this rider; and

2. if the Annuitant's spouse is confined to a nursing home or has a Terminal
Medical Condition on the Issue Date, then the Annuitant's spouse will not
be covered under this rider.

CONSIDERATION - This rider is issued in consideration of the application. There
is no cost associated with this rider.

BENEFIT - If the Annuitant is confined to a nursing home for a period of at
least 90 days or has a Terminal Medical Condition, the Free Withdrawal
Percentage as referenced in Section 8.1 is changed to 50%.

If the Annuitant's spouse is confined to a nursing home for a period of at
least 90 days or has a Terminal Medical Condition, the Free Withdrawal
Percentage as referenced in Section 8.1 is changed to 25%.

Terminal Medical Condition means a determinable medical condition, diagnosed by
a physician practicing within the scope of his or her license, with the life
expectancy of 12 months or less from the date of the physician's diagnosis.

TERMINATION - This rider will terminate upon the earlier of:

1. The termination of the Certificate;

2. The date You specify provided We receive Written Notice 30 days prior to
the date termination is to take effect.

Signed for the Valley Forge Life Insurance Company at Chicago, Illinois 60685.

APPLICATION
FOR A DEFERRED MODIFIED GUARANTEED ANNUITY CONTRACT

In this application Valley Forge Life Insurance Company is referred to as "we",
"our" or "us".

1. Desired Contract:__________________________________________________________

2. Proposed Annuitant:

Name:__________________________________________Social Security #:__________
(Last) (First) (Initial)

Address:___________________________________________________________________
(Street) (City) (State) (Zip)

Sex: |_| Male |_| Female Date of Birth:_________________________
(Month) (Day) (Year)

3. Proposed Owner (if other than proposed annuitant):

Name:______________________________________________________________________

_______________________Tax I.D. or Social Security #:______________________

Address:___________________________________________________________________
(Street) (City) (State) (Zip)

4. Proposed Contingent Owner

Name:_______________________ Tax I.D. or Social Security #:________________

Address:___________________________________________________________________
(Street) (City) (State) (Zip)

5. Beneficiary (include name and relationship to proposed annuitant):_________
___________________________________________________________________________
___________________________________________________________________________

6. Desired Annuity Date:______________________________________________________
(Month) (Day) (Year)

7. Desired Annuity Option. (If no box is checked, the contract will be issued
with the Life Annuity with 10 Year Certain Period as the annuity option.)

|_| Life Annuity
|_| Life Annuity with 10 year Certain Period
|_| Life Annuity with 20 year Certain Period
|_| Joint Life and Survivorship Annuity
|_| Joint Life Annuity with Payments Reduced One-Half at Payee's Death
|_| Other_________________________________________________________________
If a joint life annuity is elected, complete the following for the
joint payee:

Name:___________________________________Social Security #:_______________

Sex: |_| Male |_| Female Date of Birth:___________________________
(Month) (Day) (Year)
<PAGE>
8. The annuity will be used in the type of plan checked below:
|_| Corporate Qualified Pension Plan |_| Spousal Individual Retirement
Annuity
|_| 401K |_| Rollover Individual Retirement
Annuity
|_| Simplified Employee Pension Plan |_| Contract will not be used in
tax-qualified plan
|_| Regular Individual Retirement |_| Other:___________________________
Annuity

(also complete other side)

V206-364-A

<PAGE>
9. Allocations

Your initial Net Purchase Payment will be allocated as indicated below.
Selections must total 100%. Minimum initial allocation to any single option
is $500 or 1%. No fractional percentages.

___% Indexed Option Guaranteed Interest Option
____% 1 Year ____% 7 Year
____% 3 Year ____% 10 Year
____% 5 Year ____% ___ Year

10. Have you received a copy of the current prospectus? |_|Yes |_| No

11. Contribution Submitted with Application: $__________________________________

12. Will the contract applied for replace or change any life insurance or
annuity coverage in force on the life of the proposed annuitant?
|_| Yes |_| No

If yes, give details________________________________________________________

13. Corrections, notations, and changes made by us._____________________________
____________________________________________________________________________
____________________________________________________________________________

The proposed annuitant will be the owner of the contract unless a different
owner is named in item 3 above. The proposed annuitant declares that all
statements and answers above are made a part of this application and that they
are complete and true, to the best of his or her knowledge and belief, and
correctly recorded. If we accept this application, the entire contract will
consist of this application, the contract to which it is attached and riders
attached to the contract. If the owner accepts the contract it means he or she
agrees to corrections, notations and changes made in item 13 above, except in
those states where written consent is required.

Dated at _______________________________________ Signed_________________________
Proposed Annuitant
This_____Day of_______________________, 19______ Signed_________________________
Applicant (if other
than proposed annuitant)
Witness_________________________________________ By_________________________
Agent/Registered Rep Signed and title of person
signing for corporation,
partnership or trust as
applicant
V206-364-A
AGENT'S REPLACEMENT QUESTION

Do you have knowledge or reason to believe that the annuity applied for by this
application will replace or change any insurance or annuity coverage currently
in force on the life of the proposed annuitant? |_| Yes |_| No
If yes, give details____________________________________________________________

Dated__________________________________Signed___________________________________
Agent/Registered Rep
<PAGE>

AGENT TRANSMITTAL
NOTE: THE WRITING AGENT'S NAME MUST BE PRINTED. THE NAME ENTERED MUST BE
IDENTICAL TO THE SA NAME ON THE AGENT'S STATE LICENSE.

Agent/Registered Rep Name_________________Agent Code_______________Percent______

Broker/Dealer Name________________________Address_______________________________

Agent/Registered Rep Name_________________Agent Code_______________Percent______

Broker/Dealer Name________________________Address_______________________________