333-
File Nos. 811-7547
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. ___ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. _6_ [X]
(Check appropriate box or boxes.)
Valley Forge Life Insurance Company Variable Annuity Separate Account
_____________________________________________________________________
(Exact Name of Registrant)
Valley Forge Life Insurance Company
___________________________________
(Name of Depositor)
CNA Plaza, 43 South, Chicago, Illinois 60685
____________________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (312) 822-6597
Name and Address of Agent for Service
Corporate Secretary
Continental Assurance Company
CNA Plaza, 43 South
Chicago, Illinois 60685
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
4401 West Tradewinds Avenue
Suite 207
Lauderdale by the Sea, FL 33308
(954) 771-7909
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
Calculation of Registration Fee under the Securities Act of 1933:
Registrant is registering an indefinite number of securities under the
Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
(Required by Rule 495)
Item No. Location
- -------- --------
PART A
<S> <C>
Item 1. Cover Page Cover Page
Item 2. Definitions Index of Special of Terms
Item 3. Synopsis Highlights
Item 4. Condensed Financial Information Not Applicable
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies The Company, Distributor,
CROSS REFERENCE SHEET (CONT'D)
(Required by Rule 495)
Item No. Location
- -------- --------
Investment Choices
Item 6. Deductions and Expenses Expenses
Item 7. General Description of Variable The Annuity Contract
Annuity Contracts
Item 8. Annuity Period Annuity Provisions
Item 9. Death Benefit Death Benefit
Item 10. Purchases and Contract Value Purchase, Contract Value
Item 11. Redemptions Access to Your Money
Item 12. Taxes Taxes
Item 13. Legal Proceedings Not Applicable
Item 14. Table of Contents of the Statement of Other Information
Additional Information
PART B
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History Company
Item 18. Services Not Applicable
Item 19. Purchase of Securities Being Offered Not Applicable
Item 20. Underwriters Distribution
Item 21. Calculation of Performance Data Performance Information
Item 22. Annuity Payments Annuity Provisions
Item 23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered, in Part C to this Registration Statement.
VALLEY FORGE LIFE INSURANCE COMPANY
VFL VARIABLE ANNUITY SEPARATE ACCOUNT
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
This prospectus describes the variable annuity contract offered by Valley Forge
Life Insurance Company (we, us, our). This is an individual deferred variable
annuity contract and provides for accumulation of contract values and annuity
payments on a fixed and variable basis.
The contract has a number of investment choices (fixed accounts and variable
investment options). The fixed accounts provide an investment rate guaranteed by
us. You can put your money in the fixed accounts and/or any of the following
investment options which are offered through our variable account, the VFL
Variable Annuity Separate Account. Some of the investment options may not be
available in your state.
FEDERATED INSURANCE SERIES
Advised by Federated Investment Management Company
Federated High Income Bond Fund II
Federated Prime Money Fund II
Federated Utility Fund II
THE ALGER AMERICAN FUND
Advised by Fred Alger Management, Inc.
Alger American Growth Portfolio
Alger American Mid-Cap Growth Portfolio
Alger American Small Capitalization Portfolio
SOGEN VARIABLE FUNDS, INC.
Advised by Societe Generale Asset Management Corp.
SoGen Overseas Variable Fund
VAN ECK WORLDWIDE INSURANCE TRUST
Advised by Van Eck Associates Corporation
Van Eck Worldwide Emerging Markets Fund
Van Eck Worldwide Hard Assets Fund
VARIABLE INSURANCE PRODUCTS FUND (VIP) and
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
Advised by Fidelity Management & Research Company
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Contrafund
Fidelity VIP Equity-Income
Fidelity VIP II Index 500 Portfolio
MFS VARIABLE INSURANCE TRUST
Advised by MFS Investment Management
MFS Emerging Growth Series
MFS Growth With Income Series
MFS Research Series
MFS Total Return Series
JANUS ASPEN SERIES
Advised by Janus Capital Corporation
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income Portfolio
Janus Aspen International Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Please read this Prospectus before investing. You should keep it for future
reference. It contains important information about the contract.
To learn more about the contract, you can obtain a copy of the Statement of
Additional Information (SAI) (dated ________, 1999). The SAI has been filed with
the Securities and Exchange Commission (SEC) and is legally a part of this
prospectus. The SEC maintains a Web site (http://www.sec.gov) that contains the
SAI, material incorporated by reference and other information regarding
companies that file electronically with the SEC. The Table of Contents of the
SAI is on page _ of this prospectus. For a free copy of the SAI, call us at
(800) 262-1755 or write to: Valley Forge Life, Administrative Office, 100 CNA
Drive, Nashville, TN 37214.
The Contracts:
* are not bank deposits.
* are not federally insured.
* are not endorsed by any bank or governmental agency.
* are not guaranteed and may be subject to loss of principal.
The SEC has not approved these contracts or determined that this prospectus is
accurate or complete. Any representation that it has is a criminal offense.
______, 1999
TABLE OF CONTENTS
Page
INDEX OF SPECIAL TERMS
HIGHLIGHTS
TABLE OF FEES AND EXPENSES
THE COMPANY
THE ANNUITY CONTRACT
PURCHASE
INVESTMENT CHOICES
EXPENSES
CONTRACT VALUE
WITHDRAWALS
DEATH BENEFIT
ANNUITY PROVISIONS
TAXES
PERFORMANCE
OTHER INFORMATION
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable. We have identified the following as some of these
words or terms. The page indicated here is where we believe you will find the
best explanation for the word or term. These words and terms are in italics on
the indicated page.
Page
Accumulation Period
Accumulation Unit
Annuitant
Annuity Date
Annuity Payment Options
Annuity Payments
Annuity Period
Annuity Unit
Beneficiary
Investment Options
Non-Qualified
Qualified
HIGHLIGHTS
The variable annuity contract that we are offering is a contract between you,
the owner, and us, the insurance company. The contract provides a means for
investing on a tax-deferred basis in our fixed account options and investment
options. The contract is intended for retirement savings or other long-term
investment purposes.
The contract has an immediate interest feature where we will add an additional
4% to each purchase payment you make during the first contract year. The
contract also offers several optional enhanced death benefit and enhanced
annuity value options. These enhanced options guarantee minimum death benefit
amounts and the amount to be applied to an annuity option when you elect to
begin receiving annuity payments. The charges for these enhanced options range
from 0.05% to 0.23%, depending on your age and the option(s) chosen.
The contract, like all deferred annuity contracts, has two phases: the
accumulation period and the annuity period. During the accumulation period,
earnings accumulate on a tax-deferred basis and are taxed as income when you
make a withdrawal. If you make a withdrawal during the accumulation period, we
may also assess a withdrawal charge of up to 7%. The annuity period occurs when
you begin receiving regular payments from your contract.
You can choose to receive annuity payments on a variable basis, fixed basis or
combination of both. If you choose variable payments, the amount of the variable
annuity payments will depend upon the investment performance of the investment
options you select for the annuity period. If you choose fixed payments, the
amount of the fixed annuity payments are level for the annuity period.
Free Look. If you cancel the contract within 10 days after receiving it (or
whatever period is required in your state), we will cancel the contract without
assessing a withdrawal charge. You will receive whatever your contract is worth
on the day we receive your request. This may be more or less than your original
payment. We will return your original payment if required by law.
Tax Penalty. The earnings in your contract are not taxed until you take money
out of your contract. If you take money out during the accumulation period, for
tax purposes any earnings are deemed to come out first. If you are younger than
59 1/2 when you take money out, you may be charged a 10% federal tax penalty on
those earnings. Payments during the annuity period are considered partly a
return of your original investment.
Inquiries. If you need more information, please contact us at:
Valley Forge Life Insurance Company
100 CNA Drive
Nashville, TN 37214
(800) 262-1755
<TABLE>
<CAPTION>
TABLE OF FEES AND EXPENSES
Owner Transaction Expenses
Withdrawal Charge: (as a percentage of purchase payments withdrawn) (See Note 2)
Number of Contract Years
From Receipt of Purchase Payment Withdrawal Charge
<S> <C> <C>
1 7%
2 7%
3 6%
4 6%
5 5%
6 4%
7 3%
8 and thereafter 0%
Transfer Fee: No charge for the first 12 transfers in a
contract year during the accumulation period;
thereafter, the fee is $25 per transfer. There is
no charge for the 4 allowable transfers in a
contract year during the annuity period.
Contract Maintenance Charge: (See Note 3) $30 per contract year.
Option Charge: (See Note 4) Ranges from .05% to .23% of your contract
value in the investment options, depending
on the benefit(s) you select.
Variable Account Annual Expenses
(as a percentage of average variable account value)
Product Expense Charge: (See Note 5) 1.40%
</TABLE>
<TABLE>
<CAPTION>
Investment Option Expenses: (as a percentage of the average daily net assets of
an investment option)
Management Other Total Annual
(Advisory Fees) Expenses Expenses
--------------- -------- --------
Federated Insurance Series (See Note 7)
<S> <C> <C> <C>
Federated High Income Bond Fund II 0.60% 0.18% 0.78%
Federated Prime Money Fund II 0.49% 0.31% 0.80%
Federated Utility Fund II 0.68% 0.25% 0.93%
The Alger American Fund
Alger American Growth Portfolio 0.75% 0.04% 0.79%
Alger American Mid-Cap Growth Portfolio 0.80% 0.04% 0.84%
Alger American Small Capitalization Portfolio 0.85% 0.04% 0.89%
SoGen Variable Funds, Inc. (See Note 8)
SoGen Overseas Variable Fund 0.75% 0.75% 1.50%
Van Eck Worldwide Insurance Trust
Van Eck Worldwide Emerging Market Fund (See Note 9) 1.00% 0.50% 1.50%
Van Eck Worldwide Hard Assets Fund (See Note 10) 1.00% 0.16% 1.16%
Variable Insurance Products Fund (VIP) and Variable
Insurance Products Fund II (VIP II) (See Note 11)
Fidelity VIP II Asset Manager Portfolio 0.54% 0.10% 0.64%
Fidelity VIP II Contrafund 0.59% 0.11% 0.70%
Fidelity VIP Equity-Income 0.49% 0.09% 0.58%
Fidelity VIP Index 500 Portfolio 0.24% 0.11% 0.35%
MFS Variable Insurance Trust (See Note 12)
MFS Emerging Growth Series 0.75% 0.10% 0.85%
MFS Growth With Income Series 0.75% 0.13% 0.88%
MFS Research Series 0.75% 0.11% 0.86%
MFS Total Return Series 0.75% 0.16% 0.91%
Janus Aspen Series (See Note 13)
Janus Aspen Capital Appreciation Portfolio 0.70% 0.22% 0.92%
Janus Aspen Growth Portfolio 0.65% 0.03% 0.68%
Janus Aspen Balanced Portfolio 0.72% 0.02% 0.74%
Janus Aspen Flexible Income Portfolio 0.65% 0.08% 0.73%
Janus Aspen International Growth Portfolio 0.66% 0.20% 0.86%
Janus Aspen Worldwide Growth Portfolio 0.65% 0.07% 0.72%
</TABLE>
Examples
The examples below are designed to help you to understand the expenses in a
contract. You should not consider these to represent the actual expenses you
would pay. The actual expenses may be greater or less than those shown. The
examples below assume that you do not elect an enhanced death benefit option or
enhanced annuity value option. If you elect one of the enhanced options, your
expenses would be higher.
If you surrendered your contract after the end of the specified time period, you
would pay the following aggregate expenses on a $1,000 investment, assuming 5%
annual return:
<TABLE>
<CAPTION>
Investment Option 1 Year 3 Years 5 Years 10 Years
- ----------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Federated High Income Bond Fund II $96 $134 $164 $262
Federated Prime Money Fund II $96 $134 $165 $264
Federated Utility Fund II $97 $141 $172 $278
Alger American Growth Portfolio $96 $134 $164 $263
Alger American Mid-Cap Growth Portfolio $97 $135 $167 $268
Alger American Small Capitalization Portfolio $97 $137 $170 $274
SoGen Overseas Variable Fund $103 $156 $201 $336
Van Eck Worldwide Emerging Markets Fund $103 $156 $201 $236
Van Eck Worldwide Hard Assets Fund $100 $146 $184 $302
Fidelity VIP Equity-Income Portfolio $94 $127 $153 $239
Fidelity VIP II Asset Manager Portfolio $94 $129 $156 $246
Fidelity VIP II Contrafund $95 $130 $157 $249
Fidelity VIP II Index 500 Portfolio $91 $120 $141 $215
MFS Emerging Growth Series $97 $136 $168 $269
MFS Growth With Income Series $97 $137 $169 $273
MFS Research Series $97 $136 $168 $270
MFS Total Return Series $97 $138 $171 $276
Janus Aspen Capital Appreciation Portfolio $97 $138 - --
Janus Aspen Growth Portfolio $95 $130 - --
Janus Aspen Balanced Portfolio $95 $132 - --
Janus Aspen Flexible Income Portfolio $95 $132 - --
Janus Aspen International Growth Portfolio $97 $136 - --
Janus Aspen Worldwide Growth Portfolio $95 $132 - --
</TABLE>
If you do not surrender your contract after the end of the specified time period
or if you begin annuity payment you would pay the following aggregate expenses
on the same investment:
<TABLE>
<CAPTION>
Investment Option 1 Year 3 Years 5 Years 10 Years
- ----------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Federated High Income Bond Fund II $26 $74 $124 $262
Federated Prime Money Fund II $26 $74 $125 $264
Federated Utility Fund II $27 $78 $132 $278
Alger American Growth Portfolio $26 $74 $124 $263
Alger American Mid-Cap Growth Portfolio $27 $75 $127 $268
Alger American Small Capitalization Portfolio $27 $77 $130 $274
SoGen Overseas Variable Fund $33 $96 $161 $336
Van Eck Worldwide Emerging Markets Fund $33 $96 $161 $336
Van Eck Worldwide Hard Assets Fund $30 $86 $144 $302
Fidelity VIP Equity-Income Portfolio $24 $67 $113 $239
Fidelity VIP II Asset Manager Portfolio $24 $69 $116 $246
Fidelity VIP II Contrafund $25 $70 $117 $249
Fidelity VIP II Index 500 Portfolio $21 $60 $101 $215
MFS Emerging Growth Series $27 $76 $128 $269
MFS Growth With Income Series $27 $77 $129 $273
MFS Research Series $27 $76 $128 $270
MFS Total Return Series $27 $78 $131 $276
Janus Aspen Capital Appreciation Portfolio $27 $78 - --
Janus Aspen Growth Portfolio $25 $70 - --
Janus Aspen Balanced Portfolio $25 $72 - --
Janus Aspen Flexible Income Portfolio $25 $72 - --
Janus Aspen International Growth Portfolio $27 $76 - --
Janus Aspen Worldwide Growth Portfolio $25 $72 - --
<FN>
Notes to Table of Fees and Expenses and Examples
1. The purpose of the Table of Fees and Expenses is to assist you in
understanding the various costs and expenses that you will incur directly
or indirectly. The Table reflects expenses of the separate account as well
as the investment options.
2. There are circumstances under which we will waive or reduce the withdrawal
charge.
3. During the accumulation period we will waive this charge if your contract
value is $50,000 or more at the time the deduction is to be made.
4. You can select from various enhanced death benefit and enhanced annuity
value options. The amount of the option charge for your contract depends on
which benefits you have selected (see "Expenses," "Death Benefits" and
"Annuity Provisions" for more information on the charges and benefits).
5. The Fee Table and contract refer to a Product Expense Charge. This charge
is equivalent to the aggregate charges that until recently were referred to
as a Mortality and Expense Risk Charge and an Administrative Charge by many
companies issuing variable annuity contracts. Throughout this prospectus we
will refer to this charge as a Product Expense Charge. This charge may be
increased, but it will not exceed 1.75%. Under certain circumstances we may
reduce the charge.
6. The tables do not reflect any premium taxes, which range from 0% to 4%
depending upon the state or jurisdiction.
7. Federated Advisors has voluntarily agreed to waive a portion of its
management fee with respect to these funds. Absent this waiver, the total
annual expenses would have been 0.78%, 0.81% and 1.00% for the Federated
High Income Bond Fund II, the Federated Prime Money Fund II and the
Federated Utility Fund II, respectively.
8. The annualized ratios of operating expenses to average net assets for the
period ended December 31, 1998 would have been 4.98% without the effect of
earnings credits, and the investment advisory fee waiver and expense
reimbursement provided by the advisor.
9. For the year ended December 31, 1998, Van Eck Associates Corporation agreed
to waive its management fees and assume all expenses of the Fund except
interest, taxes, brokerage commissions and extraordinary expenses exceeding
1.5% of average daily net assets. Absent this reimbursement, management
fees, other expenses and total annual expenses would have been 1.00%,
0.61%, and 1.61%, respectively.
10. The fund directs certain portfolio trades to a broker that, in turn, pays a
portion of the Fund's operating expenses. The fund also has a fee
arrangement based on cash balances left on deposit with the custodian,
which reduces the fund's operating expenses. Absent these arrangements,
management fees, other expenses, and total annual expenses would have been
1.00%, 0.20% and 1.20%, respectively.
11. A portion of the brokerage commissions that these funds pay was used to
reduce fund expenses. In addition, these funds have entered into
arrangements with their custodian whereby credits realized as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses presented in the table would
have been 0.57%, 0.63% and 0.66% for the Equity-Income, Asset Manager and
Contrafund portfolios, respectively.
12. Each of these funds has an expense offset arrangement which reduces its
custodian fee based upon the amount of cash it maintains with its custodian
and dividend disbursing agent, and may enter into such arrangements and
directed brokerage arrangements (which would also have the effect of
reducing its expenses). Any such fee reductions are not reflected under
"Other Expenses".
13. Janus Aspen Series has voluntarily agreed to waive a portion of its fees
with respect to some of these funds. Absent this waiver, the total annual
expenses would have been 0.97%, 0.72%, 0.95%, and 0.74% for the Janus Aspen
Capital Appreciation Portfolio, Janus Aspen Growth Portfolio, Janus Aspen
International Growth Portfolio, and Janus Aspen Worldwide Growth Portfolio,
respectively.
</FN>
</TABLE>
THE COMPANY
Valley Forge Life Insurance Company, with its administrative office located at
100 CNA Drive, Nashville, TN 37214, is a wholly- owned subsidiary of Continental
Assurance Company ("Assurance"). Assurance is a wholly- owned subsidiary of
Continental Casualty Company ("Casualty"), which is wholly-owned by CNA
Financial Corporation ("CNA"). Loews Corporation owns approximately 86% of the
outstanding common stock of CNA.
We are principally engaged in the sale of life insurance and annuities. We are
licensed in the District of Columbia, Guam, Puerto Rico and all states except
New York, where we are only admitted as a reinsurer.
THE ANNUITY CONTRACT
This prospectus describes the variable annuity contract that we are offering. An
annuity is a contract between you, the owner, and us, the insurance company,
where we promise to pay you an income, in the form of annuity payments,
beginning on a designated date in the future. Until you decide to begin
receiving annuity payments, your annuity is in the accumulation period. Once you
begin receiving annuity payments, your contract is in the annuity period.
The contract benefits from tax deferral. Tax deferral means that you are not
taxed on earnings or appreciation on the assets in your contract until you take
money out of your contract. The contract is called a variable annuity because
you can choose among the investment options, and depending upon market
conditions, you can make or lose money in any of these options. If you elect
the variable annuity portion of the contract, the amount of money you are able
to accumulate in your contract during the accumulation period depends upon the
investment performance of the investment option(s) you elect.
You can choose to receive annuity payments on a variable basis, fixed basis or a
combination of both. If you choose variable payments, the amount of the annuity
payments you receive will depend upon the investment performance of the
investment option(s) you select for the annuity period. If you select to receive
payments on a fixed basis, the payments you receive will remain level.
The contract was intended to be sold as a non-qualified contract to individuals
seeking retirement savings or other long-term investment purposes. It can also
be purchased pursuant to standard IRA, Roth IRA and 403(b) qualified plans.
However, if the contract is issued pursuant to a 403(b) plan, it can only be
done as a rollover.
PURCHASE
Purchase Payments
A purchase payment is the money you give us to buy the contract. The minimum
initial purchase payment amount we will accept is $10,000for non-qualified
contracts, and $2,000 for qualified contracts. Each subsequent purchase payment
must be at least $1,000. If you participate in the Electronic Fund Transfer
program, the minimum subsequent payment is $100.Unless we agree otherwise, the
maximum total of all purchase payments we will accept for the contract is
$1,000,000.
Immediate Interest Payments
We will add an additional 4% to each purchase payment you make during the first
contract year. We refer to these amounts as immediate interest payments.
Immediate interest payments will be allocated in the same way as your purchase
payment.
If you make a withdrawal anytime during the first contract year (including an
exercise of your Free Look Right), we will deduct the immediate interest
payments from the amount you withdraw. However, we will not deduct any earnings
that resulted from the immediate interest payments. After the first contract
year, the immediate interest payment will vest and can be withdrawn at any time.
We reserve the right to limit immediate interest payments in the future. The
immediate interest payments are subject to certain state insurance laws and may
not be available in your state. An immediate interest payment and any of its
investment earnings are treated as taxable income.
Allocation of Purchase Payments
When you purchase a contract, you choose how we will apply your purchase
payments among the investment options and the fixed account options. You may
change the allocation of purchase payments by written notice. Any additional
purchase payments will be allocated according to the allocation schedule in
effect unless accompanied by written notice requesting a different allocation.
Only whole percentages may be applied.
Free Look. If you change your mind about owning this contract, you can cancel it
within 10 days after receiving it (or the period required in your state, which
is shown on page 1 of your contract). When you cancel the contract within this
time period, we will not assess a withdrawal charge. You will generally receive
back whatever your contract is worth on the day we receive your request.
In certain states, or if you have purchased the contract as an IRA, we may be
required to give you back your purchase payment if you decide to cancel your
contract within 10 days after receiving it (or whatever period is required in
your state). We reserve the right to allocate your purchase payment in the money
market fund, or similar investment option, for 15 days before we allocate your
first purchase payment to the investment option(s) you have selected. (In some
states, the period may be longer.) If you exercise your free look right, we will
return the greater of your contract value less any immediate interest payments
or your purchase payments.
Allocation. Once we receive your purchase payment and the necessary information,
we will issue your contract and allocate your first purchase payment within 2
business days. If you do not give us all of the information we need, we will
contact you to get it. If for some reason we are unable to complete this process
within 5 business days, we will either send back your money or get your
permission to keep it until we get all of the necessary information. If you add
more money to your contract by making additional purchase payments, we will
credit those amounts to your contract within one business day. Our business day
closes when the New York Stock Exchange normal business day ends, usually 4:00
p.m. Eastern time.
INVESTMENT CHOICES
The contract offers you the choice of allocating purchase payments to one of our
fixed account options or to one or more of the investment options which are
listed below. Additional investment options may be available in the future.
You should read the prospectuses for these funds carefully before investing.
Copies of these prospectuses are attached to this prospectus. Certain investment
options contained in the fund prospectuses may not be available with your
contract. Also, some of the investment options may not be available in your
state.
FEDERATED SERIES
Advised by Federated Investment Management Company
Federated High Income Bond I
Federated Prime Money Fund II
Federated Utility Fund II
THE ALGER AMERICAN FUND
Advised by Fred Alger Management, Inc.
Alger American Growth Portfolio
Alger American Mid-Cap Growth Portfolio
Alger American Small Capitalization Portfolio
SOGEN VARIABLE FUNDS, INC.
Advised by Societe Generale Asset Management Corp.
SoGen Overseas Variable Fund
VAN ECK WORLDWIDE INSURANCE TRUST
Advised by Van Eck Associates Corporation
Van Eck Worldwide Emerging Markets Fund
Van Eck Worldwide Hard Assets Fund
VARIABLE INSURANCE PRODUCTS FUND (VIP) and
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
Advised by Fidelity Management & Research Company
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Contrafund (long-term capital appreciation)
Fidelity VIP Equity-Income
Fidelity VIP II Index 500 Portfolio
MFS VARIABLE INSURANCE TRUST
Advised by MFS Investment Management
MFS Emerging Growth Series
MFS Growth With Income Series
MFS Research Series
MFS Total Return Series
JANUS ASPEN SERIES
Advised by Janus Capital Corporation
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income Portfolio
Janus Aspen International Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
The investment objectives and policies of the investment options are similar to
the investment objectives and policies of other mutual funds that the investment
advisers manage. Although the objectives and policies may be similar, the
investment results of the investment options may be higher or lower than the
results of such other mutual funds. The investment advisers cannot guarantee,
and make no representation, that the investment results of similar funds will be
comparable even though the funds have the same advisers.
Shares of the investment options may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with us. Certain
investment options may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous to
you.
We may enter into certain arrangements under which we are reimbursed by the
investment options' advisers, distributors and/or affiliates for the
administrative services which we provide to the funds.
Fixed Account Options
During the accumulation period, you may allocate purchase payments and contract
values to one of our fixed account options. Fixed Account I is part of our
general account, and will offer a uniform interest rate guaranteed by us. At our
discretion, we may declare an excess interest rate for this account.
Fixed Account II offers various interest rates and time periods to select from.
We have segregated our assets in Fixed Account II from our General Account. The
interest rates offered by Fixed Account II will depend on the time period you
select. In certain circumstances, if you withdraw your money from the account
before the expiration of the time period you may be subject to an interest
adjustment. The adjustment may be positive or negative.
Transfers
You can make transfers as described below. We have the right to terminate or
modify these transfer provisions.
You can make transfers by telephone. If you own the contract with a joint owner,
unless we are instructed otherwise, we will accept instructions from either you
or the other owner. We will use reasonable procedures to confirm that
instructions given to us by telephone are genuine. If we fail to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. However, we will not be liable for following telephone
instructions that we reasonably believe to be genuine. We may tape record
telephone instructions.
Transfers are subject to the following:
1. Currently, during the accumulation period, you can make 12 transfers
every contract year without charge.
2. We will assess a $25 transfer fee for each transfer during the
accumulation period in excess of the free 12 transfers allowed per
contract year. Transfers made at the end of the Free Look Period by us
and any transfers made pursuant to the Dollar Cost Averaging Option
and the Automatic Transfer Option will not be counted in determining
the application of any transfer fee.
3. The minimum amount which you can transfer is $250 or your entire value
in the investment option or any fixed account option, if it is less.
This requirement is waived if the transfer is made in connection with
the Dollar Cost Averaging Option or the Automatic Transfer Option.
4. You may not make a transfer until after the end of the Free Look
Period.
5. A transfer will be effected as of the end of a business day when we
receive an acceptable transfer request containing all required
information. This would include the amount which is to be transferred,
and the investment option(s) and/or the fixed account affected.
6. We are not liable for a transfer made in accordance with your
instructions.
7. We reserve the right to restrict transfers between investment options
to a maximum of 12 per contract year and to restrict transfers from
being made on consecutive business days. We also reserve the right to
restrict transfers into and out of any fixed account option.
8. Your right to make transfers is subject to modification if we
determine, in our sole opinion, that the exercise of the right by one
or more owners is, or would be, to the disadvantage of other owners.
Restrictions may be applied in any manner reasonably designed to
prevent any use of the transfer right which is considered by us to be
to the disadvantage of other owners. A modification could be applied
to transfers to, or from, one or more of the investment options and
could include, but is not limited to:
a. the requirement of a minimum time period between each transfer;
b. not accepting a transfer request from an agent acting under a
power of attorney on behalf of more than one owner; or
c. limiting the dollar amount that may be transferred between
investment options by an owner at any one time.
9. During times of drastic economic or market conditions, we may suspend
the transfer privilege temporarily without notice and treat transfer
requests based on their separate components (a redemption order with a
request for purchase of another investment option). In such a case,
the redemption order would be processed at the source investment
option's next determined accumulation unit value. However, the
purchase into the new investment option would be effective at the next
determined accumulation unit value for the new investment option only
after we receive the proceeds from the source investment option, or we
otherwise receive cash on behalf of the source investment option.
10. Transfers do not change your allocation instructions for future
purchase payments.
11. Transfers made during the annuity period are also subject to the
following:
a. you may make 4 transfers each contract year between investment
options or from the investment options to the general account;
b. you may not make a transfer from the general account to an
investment option; and
c. you may not make a transfer within 3 business days of the annuity
payment date.
Dollar Cost Averaging Option
The Dollar Cost Averaging Option allows you to systematically transfer a set
amount each month (for a period of 6 or 12 months) from our dollar cost
averaging account to any investment option or Fixed Account I. By allocating
amounts on a regular schedule as opposed to allocating the total amount at one
particular time, you may be less susceptible to the impact of market
fluctuations. The Dollar Cost Averaging Option is available only during the
accumulation period.
If you select this option, we will open a dollar cost averaging account for you.
You must have at least $1,000 in the dollar cost averaging account, in order to
participate in the Dollar Cost Averaging Option. The minimum amount which can be
transferred each month is $100, or 10% of the total amount being transferred. We
guarantee that the interest we credit to your dollar cost averaging account will
be at least equal to that credited to Fixed Account I. We may, at our
discretion, credit excess interest greater than that credited to Fixed Account
I.
We have the right to modify, terminate or suspend the Dollar Cost Averaging
Option. If you participate in the Dollar Cost Averaging Option, the transfers
made under the program are not taken into account in determining any transfer
fee. There is no additional charge for this option. If this option is
terminated, all money remaining in the dollar cost averaging account will be
transferred to Fixed Account I.
Dollar Cost Averaging does not assure a profit and does not protect against loss
in declining markets. Dollar Cost Averaging involves continuous investment in
the selected investment option(s) regardless of fluctuating price levels of the
investment option(s). You should consider your financial ability to continue the
Dollar Cost Averaging Option through periods of fluctuating price levels.
Automatic Transfer Option
Once your money has been allocated among the investment choices, the performance
of the elected options may cause your allocation to shift. You can direct us to
automatically rebalance amounts in selected investment options and Fixed Account
I to return to your original percentage allocations by selecting our Automatic
Transfer Option.
The Automatic Transfer Option is available only during the accumulation period.
You have the choice of rebalancing monthly, quarterly, semi-annually or
annually. Allocation percentages must be in whole numbers and are subject to the
minimums stated in your contract.
If you participate in the Automatic Transfer Option, the transfers made under
the program are not taken into account in determining any transfer fee.
Example:
Assume that you want your initial purchase payment split between 2
investment options. You want 80% to be in the MFS Growth With Income Series
and 20% to be in the Janus International Growth Portfolio. Over the next 2
1/2 months the domestic market does very well while the international
market performs poorly. At the end of the quarter, the MFS Growth With
Income Series now represents 86% of your holdings because of its increase
in value. If you had chosen to have your holdings rebalanced quarterly, on
the first day of the next quarter, we would sell some of your units in the
MFS Growth With Income Series to bring its value back to 80% and use the
money to buy more units in the Janus International Growth Portfolio to
increase those holdings to 20%.
Substitution and Limitation on Further Investment
We may be substitute one of the investment options you have elected with another
investment option. We would not do this without the prior approval of the
Securities and Exchange Commission. We may also limit further investment in an
investment option. We will give you notice of our intent to take either of these
actions.
EXPENSES
There are charges and other expenses associated with the contract that reduce
the return on your investment in the contract. These charges and expenses are:
Contract Maintenance Charge
Every year on the anniversary of the date when your contract was issued, we
deduct a $30 contract maintenance charge from your contract. We reserve the
right to change the charge but it will never be more than $50 per year. The
charge is deducted prorata from the investment options and fixed account
options. This charge is for administrative expenses associated with your
contract.
During the accumulation period, we will not deduct this charge if the value of
your contract is $50,000 or more. If you own more than one contract, we will
determine the value of all the contracts. If the total contract value for the
contracts exceeds $50,000, we will not deduct the charge. We may discontinue
this practice in the future and deduct the charge.
Product Expense Charge
Each business day we make a deduction for our Product Expense Charge. The
Product Expense Charge is currently equal to 1.40% (on an annual basis). We may
increase this charge but it will not be more than 1.75% (on an annual basis).
This charge is included in part of our calculation of the value of the
accumulation units and the annuity units. This charge is for the guarantee of
annuity rates, the death benefit, for certain expenses of the contract, and for
assuming the risk (expense risk) that the current charges will be insufficient
in the future to cover the cost of administering the contract. If the charges
under the contract are not sufficient, then we will bear the loss. We do,
however, expect to profit from this charge. This charge does not reimburse us
for costs associated with any of the enhanced death benefit or annuity value
options.
Withdrawal Charge
During the accumulation period, you can make withdrawals from your contract. We
keep track of each purchase payment. Subject to the free withdrawal amount and
other waivers discussed below, if you make a withdrawal and it has been less
than the stated number of years since you made your purchase payment, we will
assess a withdrawal charge.
Withdrawal Charge: (as a percentage of purchase payments withdrawn)
Number of Contract Years
From Receipt of Purchase Payment Withdrawal Charge
-------------------------------- -----------------
1 7%
2 7%
3 6%
4 6%
5 5%
6 4%
7 3%
8 and thereafter 0%
Each purchase payment has its own withdrawal charge period. When the
withdrawal is for only part of the value of your contract, the withdrawal
charge is deducted first from any earnings, and then from any purchase
payments in your contract.
Waiver and Reduction of the Withdrawal Charge
Free Withdrawals. We do not apply a withdrawal charge against the earnings
withdrawn from your contract. Also, after the first contract year, you may
withdraw an amount equal to 10% of the greater of the following each
contract year free from any withdrawal charge:
your total purchase payments, less any withdrawals, as of the first
business day of the contract year; or your contract value as of the day we
receive your written notice for the withdrawal.
This right is non-cumulative and we reserve the right to limit the number of
free partial withdrawals in any contract year.
For purposes of determining whether a withdrawal charge applies, we take out
amounts from your contract in the following order:
1. the 10% free withdrawal amount described above;
2. purchase payments from oldest to newest; and then
3. earnings from the purchase payments.
Waiver of Withdrawal Charges Under Terminal Illness-Confinement Benefit. Under
the conditions set out in the waiver of withdrawal charge for Terminal Illness
or Confinement Rider to your contract, if you were 75 or younger on the contract
date we will waive 100% of the withdrawal charge (25% if you were 76 or older on
the contract date) when:
* you become confined for at least 30 consecutive days; or
* you have been diagnosed with a terminal illness after the contract is
issued (which means you are not expected to live more than 12 months).
You can elect this benefit only if the contract is at least 30 days old. This
benefit varies from state to state and may not be available in your state.
Option Charge
For an additional charge, you can choose one of the enhanced death benefit and
enhanced annuity value options offered under the contract. The charges are a
percentage (as shown below) of your contract value in the investment options.
The charges for these enhancement options are as follows:
<TABLE>
<CAPTION>
ENHANCED DEATH BENEFIT AND ENHANCED ANNUITY BENEFIT OPTIONS
ENHANCED DEATH BENEFIT OPTION ENHANCED ANNUITY VALUE OPTION OPTION CHARGE
----------------------------- ----------------------------- -------------
<S> <C>
Enhanced Death Benefit I None .10%
Enhanced Death Benefit II None .05%
Enhanced Death Benefit II None .07 %
Enhanced Death Benefit III None .12%
Enhanced Death Benefit III None .15%
Enhanced Death Benefit I Enhanced Annuity Benefit I .18%*
Enhanced Death Benefit II Enhanced Annuity Benefit II .13%*
Enhanced Death Benefit II Enhanced Annuity Benefit II .15%*
Enhanced Death Benefit III Enhanced Annuity Benefit III .20%*
Enhanced Death Benefit III Enhanced Annuity Benefit III .23%*
<FN>
* The Enhanced Annuity Value Option is only available with the corresponding
Enhanced Death Benefit Option.
</FN>
</TABLE>
Tax Charges
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for the payment of these
taxes and will make a deduction from the value of your contract for them. Some
of these taxes are due when the contract is issued, and others are due when
annuity payments begin. Premium taxes generally range from 0% to 4%, depending
on the state.
Transfer Fee
We will charge $25 for each additional transfer in excess of the free transfers
permitted. The transfer fee is deducted from the amount which is transferred.
Transfers made at the end of the Free Look Period by us and any transfers made
pursuant to the Dollar Cost Averaging Option or Automatic Transfer Option will
not be counted in determining the application of any transfer fee.
Income Taxes
We will deduct from your contract for any income taxes which we incur because of
the contract. At the present time, we are not making any such deductions.
Investment Option Expenses
There are deductions from and expenses paid out of the assets of the various
investment options and are described in the attached fund prospectuses.
CONTRACT VALUE
Your contract value is the sum of your interest in the various investment
options and our fixed account options. Your interest in the investment option(s)
will vary depending upon the performance of the investment options you choose.
Accumulation Units
In order to keep track of your contract value, we use a unit of measure called
an accumulation unit. During the annuity period of your contract we call the
unit an annuity unit. Every business day we determine the value of an
accumulation unit and an annuity unit. We do this by:
1. determining the change in investment experience (including any
charges) for the investment option from the previous business day to
the current business day;
2. subtracting our product expense charge and any other charges such as
taxes we have deducted; and
3. multiplying the previous business day's accumulation unit (or annuity
unit) value by this result.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment option by the value of
the accumulation unit for that investment option. When you make a withdrawal, we
debit from your contract accumulation units representing the withdrawal. We also
debit accumulation units when we deduct certain charges under the contract.
We calculate the value of an accumulation unit for each investment option after
the New York Stock Exchange closes each day and the result is reflected in the
value of your contract.
Example:
On Monday we receive an additional purchase payment of $5,000 from you. You
have told us you want this to go to the MFS Growth With Income Series. When
the New York Stock Exchange closes on that Monday, we determine that the
value of an accumulation unit for the MFS Growth With Income Series is
$13.90. We then divide $5,000 by $13.90 and credit your contract on Monday
night with 359.71 accumulation units for the MFS Growth With Income Series.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
* by making a withdrawal (either a partial or a complete withdrawal); or
* by electing to receive annuity payments; or
* by receiving a death benefit.
Withdrawals Made During the Accumulation Period
You may withdraw all, or part, of your contract value at any time during the
accumulation period. If you make a withdrawal you will receive the value of your
contract on the day you made the withdrawal, less any applicable charges.
Unless you instruct us otherwise, any partial withdrawal will be made pro-rata
from all the investment options and any fixed account option(s) you elected.
Under most circumstances, the amount of any partial withdrawal must be for at
least $1,000, or your entire interest in any fixed account or investment option.
We require that you have a contract value of $1,000 in any investment option or
$5,000 in any fixed account option after any partial withdrawal. We require that
you leave at least $10,000 in the contract after a partial withdrawal for
non-qualified contracts and $2,000 for qualified contracts. We may terminate
your contract and pay you the withdrawal value (contract value less any charges
and applicable interest adjustment for Fixed Account II) if you make a
withdrawal before the annuity date of an amount which results in your contract
value falling below the minimum amount. We will notify you of our intent to
terminate the contract. The contract will automatically terminate unless we
receive additional purchase payments in excess of the minimum amount within 30
days.
Income taxes, tax penalties and certain restrictions may apply to any withdrawal
you make.
There are limits to the amount you can withdraw from a qualified plan referred
to as a 403(b) plan (TSA). For a more complete explanation see the discussion in
the Taxes Section and the discussion in the Statement of Additional Information.
Systematic Withdrawal Program
We will make payments to you periodically at your election (currently: monthly,
quarterly, semi-annually or annually). Withdrawals may be made from any
investment option or Fixed Account I.
Each payment must be at least $500. If there are insufficient funds in the
selected investment options or Fixed Account I, we will take amounts from
remaining investment options and fixed account options. These payments may be
subject to the withdrawal charges.
Minimum Distribution Option. If your contract has been issued as an IRA, TSA or
other qualified plan, you may elect the Systematic Withdrawal Program. Under
this program, we will make payments to you that are designed to meet the
applicable minimum distribution requirements imposed by the Internal Revenue
Code on such qualified plans.
Income taxes, tax penalties and certain restrictions may apply to systematic
withdrawals.
DEATH BENEFIT
Death of Contract Owner During the Accumulation Period
If you or your joint owner die during the accumulation period, a death benefit
will be paid to your primary beneficiary. Upon the death of a joint owner, the
surviving joint owner, if any, will be treated as the primary beneficiary. Any
other beneficiary designation on record at the time of death will be treated as
a contingent beneficiary.
Death Benefit Amount During the Accumulation Period
The standard death benefit amount provided in your contract is the greater of:
1. the total amount of purchase payments made, less any withdrawals and
applicable withdrawal charges; or
2. your contract value.
For an additional charge, you can select one of the available enhanced death
benefits described below. You can only select one enhanced death benefit. If you
wish to elect one of these death benefits, you must do so on the date we issue
your contract. If you do not select an enhanced death benefit, you may not
select an annuity value enhancement.
* Enhanced Death Benefit I. Before you or your joint owner turn 85, the
amount of the enhanced death benefit is the greatest of:
1. the total amount of purchase payments made, less any withdrawals and
applicable charges;
2. your contract value; or
3. the highest contract value on any contract anniversary, increased by
the total amount of purchase payments made since the contract
anniversary, less any withdrawals and applicable charges since the
contract anniversary.
After the 85th birthday of the older owner or joint owner, the death
benefit amount is equal to the greatest of 1, 2, or 3 above. However,
the maximum contract value under 3 above will be as of the 85th
birthday of the older of the owner or joint owner.
* Enhanced Death Benefit II. Before you or your joint owner turn 85, the
amount of the enhanced death benefit is the greatest of:
1. the total amount of purchase payments made, less any withdrawals and
applicable charges;
2. your contract value; or
3. the total amount of purchase payments made, less any withdrawals and
applicable charges, plus interest credited (either 3% or 5%, as you
select) on a daily basis until death or until you or your joint owner
turn 85.
The death benefit will never be more than 2 times the result of (1) above. After
the 85th birthday of the older owner or joint owner, the death benefit amount is
equal to the greatest of 1, 2, or 3. However, the maximum contract value under 3
above will be as of the 85th birthday of the older owner or joint owner.
* Enhanced Death Benefit III. Before you or your joint owner turn 85, the
amount of the death benefit is the greatest of the amounts provided under
both Enhanced Death Benefit I and II above. After the 85th birthday of the
older owner or joint owner, the death benefit amount is equal to the
greatest of the amounts provided under Enhanced Death Benefits I and II.
However, the values under (3) in each death benefit will be as of the 85th
birthday of the older of the owner or joint owner.
One or more of the above death benefits may not always be available in your
state. Check your registered representative for further details.
Contract value for purposes of the death benefits is determined as of the end of
the business day during which we receive both due proof of death and an election
for the payment method. It remains in an investment option and/or any fixed
account option until distribution begins. From the time the death benefit is
determined until complete distribution is made, any amount in an investment
option will be subject to investment risk which is borne by the beneficiary. We
reserve the right to restrict the availability of investment options if you
choose an enhanced death benefit. Check with your registered representative for
further details.
Death Benefit Options During the Accumulation Period
Unless already selected by you, a beneficiary must elect the death benefit to be
paid under one of the following options in the event of your death during the
accumulation period. If the beneficiary is the spouse of the owner, he or she
may elect to continue the contract in his or her own name and exercise all the
owner's rights under the contract. In this event, the contract value will be
adjusted to equal the death benefit.
Option 1 - lump sum payment of the death benefit; or
Option 2 - the payment of the entire death benefit within 5 years of the date of
death of the owner or any joint owner; or
Option 3 - payment of the death benefit under an annuity option over the
lifetime of the beneficiary or over a period not extending beyond the life
expectancy of the beneficiary with distribution beginning within 1 year of the
date of your death or of any joint owner.
Any portion of the death benefit not applied under Option 3 within 1 year of the
date of your death, or that of a joint owner, must be distributed within 5 years
of the date of death.
If a lump sum payment is requested, the amount will be paid within 7 days,
unless the suspension of payments provision is in effect.
Payment to the beneficiary, in any form other than a lump sum, may only be
elected during the 60 day period beginning with the date of receipt by us of
proof of death.
Death of Contract Owner During the Annuity Period
If you or a joint owner, who is not the annuitant, dies during the annuity
period, any remaining payments under the annuity option elected will continue to
be made at least as rapidly as under the method of distribution in effect at the
time of your death. Upon your death during the annuity period, the beneficiary
becomes the owner.
Death of Annuitant
Upon the death of the annuitant, who is not the owner, during the accumulation
period, you automatically become the annuitant. You may designate a new
annuitant subject to our underwriting rules then in effect. If the owner is a
non-natural person, the death of the annuitant will be treated as the death of
the owner and a new annuitant may not be designated.
Upon the death of the annuitant during the annuity period, the death benefit, if
any, will be as specified in the annuity option elected. Death benefits will be
paid at least as rapidly as under the method of distribution in effect at the
annuitant's death.
ANNUITY PROVISIONS
Under the contract you can receive regular income payments. You can choose the
day, month and year in which those payments begin. We call that date the annuity
date. The annuity date cannot be after the 28th of any month. You can also
choose among income plans. We call those annuity payments.
Your annuity date must be at least 1 contract year from the date you purchase
the contract. Annuity payments must begin by the annuitant's 95th birthday or
earlier if required by law. The annuitant is the person whose life we look to
when we make annuity payments.
During the annuity period, you have the same investment choices you had just
before the start of the annuity period. If you do not tell us otherwise, your
annuity payments will be based on the investment allocations that were in place
on the annuity date.
General Account
During the annuity period, you can elect to have your annuity payments paid out
of our general account. We guarantee a specified interest rate used in
determining the payments. If you elect this option, the payments you receive
will remain level. This option is only available during the annuity period.
Annuity Payment Amount
If you choose to have your payments come from the General Account, the payment
will not vary. If you choose to have any portion of your annuity payment come
from the investment option(s), the dollar amount of your payment from the
investment option(s) will depend upon four things:
* the value of your contract in the investment option(s) on the annuity
date;
* the 3% assumed investment rate used in the annuity table for the
contract;
* the performance of the investment options you selected; and
* if permitted in your state and under the type of contract you have
purchased, the age and sex of the annuitant(s).
If the actual performance exceeds the 3% assumed investment rate plus the
deductions for expenses, your annuity payments will increase. Similarly, if the
actual performance is less than 3% plus the amount of the deductions, your
annuity payments will decrease.
If you select an enhanced death benefit for an additional charge, you can also
select an annuity value enhancement that guarantees that a minimum contract
value will be applied to the annuity payment option you select. You can only
select one annuity value enhancement. If you do not select an enhanced death
benefit, you may not select an annuity value enhancement. You may select options
as follows:
* Enhanced Death Benefit I with Enhanced Annuity Value I
* Enhanced Death Benefit II (3% selected rate) with Enhanced
Annuity Value II (3% rate)
* Enhanced Death Benefit II (5% selected rate) with Enhanced
Annuity Value II (5% rate)
* Enhanced Death Benefit III with Enhanced Annuity Value III
You may select an enhanced death benefit and choose not to select an annuity
value enhancement. If you wish to elect one of these enhancements, you must do
so on the date we issue your contract. These annuity value enhancements are as
follows:
* Enhanced Annuity Value I. Before the 85th birthday of the older owner or
joint owner, the contract value applied to the annuity payment option is
equal to the greatest of:
1. the total amount of purchase payments made, less any withdrawals and
applicable charges;
2. your contract value; or
3. the highest contract value on any contract anniversary, increased by
the total amount of purchase payments received since that contract
anniversary, less all withdrawals and applicable charges since that
contract anniversary.
After the 85th birthday of the older, the amount is equal to the
greatest of 1, 2, or 3. However, the value under 3 will be as of the
85th birthday of the older of the owner or joint owner.
* Enhanced Annuity Value II. Before the 85th birthday of the older of the
owner or joint owner, the contract value applied to the annuity payment
option is equal to the greatest of:
1. the total amount of purchase payments made, less any withdrawals and
applicable charges;
2. your contract value; or
3. the total amount of purchase payments made, less any withdrawals and
applicable charges, plus interest credited (either 3% or 5%, as you
select) on a daily basis until age 85. The value will never be more
than 2 times the result of (1).
After the 85th birthday of the older owner or joint owner, the value
is equal to the greatest of 1, 2, or 3.
* Enhanced Annuity Value III. Before the 85th birthday of the older owner or
joint owner, the amount of the contract value applied to an annuity payment
option under is the greatest of the amounts provided under both Enhanced
Annuity Value I and II above. After the 85th birthday of the older owner or
joint owner, the annuity value is equal to the greatest of the amounts
provided under Enhanced Annuity Value I and II except that the values under
3 in each enhancement will be as of the 85th birthday of the older of the
owner or joint owner.
One or more of the above annuity value enhancements may not be available in your
state. Check your contract and riders for your applicable annuity value
provisions. We reserve the right to restrict the availability of investment
options if you choose a death benefit enhancement. Check with your registered
representative for further details.
Annuity Payment Options
You can choose one of the following annuity payment options. Annuity payments
start at least 30 days from the annuity date, provided the annuitant is alive.
Once annuity payments begin, you cannot change the annuity payment option. All
annuity payments are made to you unless you direct us otherwise. If you do not
choose an annuity payment option at the time you purchase the contract, we will
assume that you selected Option 4 with a 10 year period certain.
Option 1 - Payment Certain. Under this option we pay you the value of your
contract applied to the option in equal installments, as specified by you. The
minimum time period over which you can elect this option is 6 years. The total
payments in a year must be at least 5% of the value you apply to this option.
You may request a single lump sum payment as set forth in the contract.
Option 2 - Period Certain. Under this option we make equal payments over a
designated period between 6 and 30 years, as chosen by you. You may request a
single lump sum payment as set forth in the contract.
Option 3 - Life Annuity. Under this option we make monthly payments during the
lifetime of the annuitant and terminating with the last payment preceding
his/her death.
Option 4 - Life Annuity with a Period Certain. Under this option we make monthly
annuity payments until the later of the death of the annuitant or a designated
period between 6 and 30 years, as chosen by you. We guarantee that if, at the
death of the annuitant, payments have been made for less than a stated period,
the monthly payments will continue during the remainder of the stated period. If
the annuitant dies before we have made all of the payments within the selected
period, you may request a single lump sum payment as set forth in the contract.
Option 5 - Joint Life and Survivor Annuity. Under this option we make monthly
payments during the joint lifetime of the annuitant and another named individual
and thereafter during the lifetime of the survivor. Payments cease with the last
payment due prior to the death of the survivor.
Additional Options. We may make other options available.
TAXES
Note: We have prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. We have
included in the Statement of Additional Information a more comprehensive
discussion regarding taxes.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you are taxed
depending on how you take the money out and the type of contract - qualified or
non-qualified (see following sections).
Under non-qualified contracts, you, as the owner, are not taxed on increases in
the value of your contract until a distribution occurs - either as a withdrawal
or as annuity payments. When you make a withdrawal, you are taxed on the amount
of the withdrawal that is earnings. For annuity payments, different rules apply.
A portion of each annuity payment is treated as a partial return of your
purchase payments and is not taxed. The remaining portion of the annuity payment
is treated as ordinary income. How the annuity payment is divided between
taxable and non-taxable portions depends upon the period over which the annuity
payments are expected to be made. Annuity payments received after you have
received all of your purchase payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the contract as
an agent for a natural person), the contract will generally not be treated as an
annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts), and
pension and profit-sharing plans, which include 401(k) plans and H.R. 10 Plans.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or
more frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
Withdrawals - Qualified Contracts
If you make a withdrawal from your qualified contract, a portion of the
withdrawal is treated as taxable income. This portion depends on the ratio of
the pre-tax purchase payments to the after-tax purchase payments in your
contract. If all of your purchase payments were made with pre-tax money then the
full amount of any withdrawal is includible in taxable income. Special rules may
apply to withdrawals from certain types of qualified contracts.
The Code also provides that any amount received under a qualified contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid to you after leaving your employment in a series of substantially
equal payments made annually (or more frequently) under a lifetime
annuity;
(5) paid to you after you have attained age 55 and left your employment;
(6) paid for certain allowable medical expenses (as defined in the Code);
(7) paid pursuant to a qualified domestic relations order;
(8) paid from an IRA for medical insurance (as defined in the Code);
(9) paid from an IRA for qualified higher education expenses; or
(10) up to $10,000 for qualified first time home buyer expenses (as defined
in the Code).
The exceptions in (5) and (7) above do not apply to IRAs. The exception in (4)
above applies to IRAs but without the requirement of leaving employment.
We have provided a more complete discussion in the Statement of Additional
Information.
Withdrawals - Tax-Sheltered Annuities
The Code limits the withdrawal of purchase payments made by owners from certain
Tax-Sheltered Annuities. Withdrawals can only be made when an owner:
(1) reaches age 59 1/2;
(2) leaves his/her job;
(3) dies;
(4) becomes disabled (as that term is defined in the Code); or
(5) in the case of hardship.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. We believe that the investment options are managed so as to
comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, are considered the
owner of the shares of the investment options. If you are considered owner of
the shares, it will result in the loss of the favorable tax treatment for the
contract. It is unknown to what extent owners are permitted to select investment
options, to make transfers among the investment options or the number and type
of investment options owners may select from without being considered owner of
the shares. If any guidance is provided which is considered a new position, then
the guidance is generally applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This would
mean that you, as the owner of the contract, could be treated as the owner of
the investment options.
Due to the uncertainty in this area, we reserve the right to modify the contract
in an attempt to maintain favorable tax treatment.
PERFORMANCE
We periodically advertise performance of the various investment options. We will
calculate performance by determining the percentage change in the value of an
accumulation unit by dividing the increase (decrease) for that unit by the value
of the accumulation unit at the beginning of the period. This performance number
reflects the deduction of the product expense charge. It does not reflect the
deduction of any contract maintenance charge or withdrawal charge. The deduction
of any contract maintenance charge or withdrawal charge would reduce the
percentage increase or make greater any percentage decrease. Any advertisement
will also include average annual total return figures which reflect the
deduction of the product expense charge, contract maintenance charge and
withdrawal charges.
The performance will be based on the historical performance of the corresponding
investment options for the periods commencing from the date on which the
particular investment option was made available through the contracts. In
addition, for certain investment options performance may be shown for the period
commencing from the inception date of the investment option. These figures
should not be interpreted to reflect actual historical performance of the
Variable Account.
We may, from time to time, include in our advertising and sales materials, tax
deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
OTHER INFORMATION
The Variable Account
We established a variable account, VFL Variable Annuity Separate Account
(Variable Account), to hold the assets that underlie the contracts. Our Board of
Directors adopted a resolution to establish the Variable Account under Illinois
insurance law on February 12, 1996. We have registered the Variable Account with
the Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940.
The assets of the Variable Account are held in our name on behalf of the
Variable Account and legally belong to us. However, those assets that underlie
the contracts, are not chargeable with liabilities arising out of any other
business we may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts we may issue.
Year 2000
We have developed and initiated plans to assure that our computer systems will
function properly in the year 2000 and later years. These efforts have included
receiving assurances from outside service providers that their computer systems
will also function properly in this context. Included within these plans are the
computer systems of the advisers and sub-advisers of the various investment
options.
Although an assessment of the total cost of implementing these plans has not
been completed, the total amounts to be expended are not expected to have a
material effect on our financial position or results of operations. We believe
that we have taken all reasonable steps to address these potential problems.
There can be no assurance, however, that the steps taken will be adequate to
avoid any adverse impact.
Voting Rights
We are the legal owner of the investment option shares. However, we believe that
when an investment option solicits proxies in conjunction with a vote of
shareholders, it is required to obtain from you and other owners instructions as
to how to vote those shares. When we receive those instructions, we will vote
all of the shares we own in proportion to those instructions. This will also
include any shares that we own on our own behalf. Should we determine that we
are no longer required to comply with the above, we will vote the shares in our
own right.
Distributor
CNA Investor Services, Inc. ("CNA/ISI") serves as the distributor for the
contracts. CNA/ISI is located at CNA Plaza, Chicago, Illinois 60685.
Commissions will be paid to agents and broker-dealers who sell the contracts.
Such agents and broker-dealers will be paid commissions up to 5% of purchase
payments and may be paid an additional annual trail commission of up to 1% of
contract value.
Ownership
Owner. You, as the owner of the contract, have all the rights under the
contract. The owner is as designated at the time the contract is issued, unless
changed. You can change the owner at any time. A change will automatically
revoke any prior owner designation. The change request must be in writing.
Joint Owner. The contract can be owned by joint owners. Any joint owner must be
the spouse of the other owner (except where not permitted under state law). Upon
the death of either joint owner, the surviving joint owner will be the
designated beneficiary. Any other beneficiary designation at the time the
contract was issued or as may have been later changed will be treated as a
contingent beneficiary unless otherwise indicated in a written notice.
Beneficiary
The following information applies to the beneficiary:
* the beneficiary is the person(s) or entity you name to receive any
death benefit;
* the beneficiary is named at the time the contract is issued unless
changed at a later date;
* unless an irrevocable beneficiary has been named, you can change the
beneficiary at any time before you die.
Annuitant
The following information applies to the annuitant:
* you choose the annuitant at the time you buy the contract;
* you may change the annuitant prior to the annuity date;
* any change of annuitant is subject to our consent; and
* you cannot change the annuitant in a contract which is owned by a
non-individual.
Assignment
You can assign the contract at any time during your lifetime. We will not be
bound by the assignment until we receive written notice of the assignment. We
will not be liable for any payment or other action we take in accordance with
the contract before we receive notice of the assignment. An Assignment May Be a
Taxable Event.
If the contract is issued pursuant to a qualified plan, there may be limitations
on your ability to assign the contract.
Suspension of Payments or Transfers
We may be required to suspend or postpone payments for withdrawals or transfers
for any period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment options is not reasonably practicable or we cannot
reasonably value the shares of the investment options;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
We have reserved the right to defer payment for a withdrawal or transfer from
any fixed account option for the period permitted by law but not for more than
six months.
Financial Statements
Our financial statements have been included in the Statement of Additional
Information. (To be filed by pre-effective amendment)
Additional Information
For further information about the contract you may obtain a Statement of
Additional Information. You can call the telephone number indicated on the cover
page or you can write to us. For your convenience we have included a post card
for that purpose.
The Table of Contents of this statement is as follows:
Company
Independent Auditors
Legal Opinion
Distribution
Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
VALLEY FORGE LIFE INSURANCE COMPANY
ATTN:
____________________________________________________________________________
Please send me, at no charge, the Statement of Additional Information
dated___________, 1999 for the Annuity Contract issued by Valley Forge Life
Insurance Company.
(Please print or type and fill in all information)
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip Code
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE AND
FIXED
ANNUITY CONTRACT
ISSUED BY
VFL VARIABLE ANNUITY SEPARATE ACCOUNT
AND
VALLEY FORGE LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED _____, 1999, FOR THE INDIVIDUAL
FLEXIBLE PREMIUM DEFERRED VARIABLE AND FIXED ANNUITY CONTRACT WHICH IS DESCRIBED
HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT:100 CNA DRIVE, NASHVILLE, TN 37214, (800) 262-1755.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED _______, 1999.
TABLE OF CONTENTS
Page
COMPANY .......................................................................
INDEPENDENT AUDITORS............................................................
LEGAL OPINIONS..................................................................
DISTRIBUTION....................................................................
Reduction of the Withdrawal Charge.....................................
PERFORMANCE INFORMATION.........................................................
Total Return...........................................................
Historical Unit Values.................................................
Reporting Agencies.....................................................
Performance Information................................................
FEDERAL TAX STATUS..............................................................
Diversification........................................................
Multiple Contracts.....................................................
Contracts Owned by Other than Natural Persons..........................
Tax Treatment of Assignments...........................................
Income Tax Withholding.................................................
Tax Treatment of Withdrawals - Non-qualified Contracts.................
Qualified Plans........................................................
Tax Treatment of Withdrawals - Qualified Contracts.....................
Tax-sheltered Annuities - Withdrawal Limitations.......................
ANNUITY PROVISIONS..............................................................
Variable Annuity.......................................................
Fixed Annuity..........................................................
Annuity Unit...........................................................
Net Investment Factor..................................................
Expense Guarantee......................................................
FINANCIAL STATEMENTS............................................................
COMPANY
Valley Forge Life Insurance Company (the "Company"), is a wholly-owned
subsidiary of Continental Assurance Company ("Assurance"). Assurance is a
wholly-owned subsidiary of Continental Casualty Company ("Casualty"), which is
wholly-owned by CNA Financial Corporation ("CNA"). Loews Corporation owns
approximately 86% of the outstanding common stock of CNA.
The Company is principally engaged in the sale of life insurance and annuities.
It is licensed in the District of Columbia, Guam, Puerto Rico and all states
except New York, where we are only admitted as a reinsurer.
The Company is a Pennsylvania-based company with more than $246,801,125,000 of
life insurance in force and in excess of $800,121,021 in assets. It provides
life and health insurance, retirement plans, and related financial services to
individuals and groups.
INDEPENDENT AUDITORS
The statutory basis financial statements of the Company as of and for the years
ended December 31, 1998 and 1997 included in this Registration Statement have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
DISTRIBUTION
CNA Investor Services, Inc. ("CNAISI") acts as the distributor. CNAISI is an
affiliate of the Company. The offering is on a continuous basis.
REDUCTION OF THE WITHDRAWAL CHARGE. The amount of the withdrawal charge on the
contracts may be reduced or eliminated when sales of the contracts are made to
individuals or to a group of individuals in a manner that results in savings of
sales expenses. The entitlement to reduction of the withdrawal charge will be
determined by the Company after examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made. Generally,
the sales expenses for a larger group are less than for a smaller
group because of the ability to implement large numbers of contracts
with fewer sales contacts.
2. The total amount of purchase payments to be received. Per contract
sales expenses are likely to be less on larger purchase payments than
on smaller ones.
3. Any prior or existing relationship with the Company. Per contract
sales expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the contract
with fewer sales contacts.
4. Other circumstances, of which the Company is not presently aware,
which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines that
there will be a reduction in sales expenses, the Company may provide for a
reduction of the withdrawal charge.
The withdrawal charge may be eliminated when the contracts are issued to an
officer, director or employee of the Company or any of its affiliates.
In no event will any reduction or elimination of the withdrawal charge be
permitted where the reduction or elimination will be unfairly discriminatory to
any person.
PERFORMANCE INFORMATION
TOTAL RETURN. From time to time, the Company may advertise performance data.
Such data will show the percentage change in the value of an accumulation unit
based on the performance of an investment option over a period of time, usually
a calendar year, determined by dividing the increase (decrease) in value for
that unit by the accumulation unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a 1.40% product expense charge, the expenses for the underlying
investment option being advertised and any applicable withdrawal charges.
The hypothetical value of a contract purchased for the time periods described in
the advertisement will be determined by using the actual accumulation unit
values for an initial $1,000 purchase payment, and deducting any applicable
withdrawal charge to arrive at the ending hypothetical value. The average annual
total return is then determined by computing the fixed interest rate that a
$1,000 purchase payment would have to earn annually, compounded annually, to
grow to the hypothetical value at the end of the time periods described. The
formula used in these calculations is:
n
P (1 + T) = ERV
Where:
P= a hypothetical initial payment of $1,000
T= average annual total return
n= number of years
ERV= ending redeemable value at the end of the time
periods used (or fractional portion thereof) of a
hypothetical $1,000 payment made at the beginning of
the time periods used.
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of any
withdrawal charge. The deduction of any withdrawal charge would reduce any
percentage increase or make greater any percentage decrease.
Owners should note that the investment results of each investment option will
fluctuate over time, and any presentation of the investment option's total
return for any period should not be considered as a representation of what an
investment may earn or what an owner's total return may be in any future period.
HISTORICAL UNIT VALUES. The Company may also show historical accumulation unit
values in certain advertisements containing illustrations. These illustrations
will be based on actual accumulation unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in accumulation unit values for any of the investment options
against established market indices such as the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average or other management
investment companies which have investment objectives similar to the investment
option being compared. The Standard & Poor's 500 Composite Stock Price Index is
an unmanaged, unweighted average of 500 stocks, the majority of which are listed
on the New York Stock Exchange. The Dow Jones Industrial Average is an
unmanaged, weighted average of thirty blue chip industrial corporations listed
on the New York Stock Exchange. Both the Standard & Poor's 500 Composite Stock
Price Index and the Dow Jones Industrial Average assume quarterly reinvestment
of dividends.
REPORTING AGENCIES. The Company may also distribute sales literature which
compares the performance of the Accumulation unit values of the contracts with
the unit values of variable annuities issued by other insurance companies. Such
information will be derived from the Lipper Variable Insurance Products
Performance Analysis Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
PERFORMANCE INFORMATION. The Accumulation units invest in the portfolios managed
by Federated Insurance Series, The Alger American Fund, SoGen Variable Funds,
Inc., Van Eck Worldwide Insurance Trust, Variable Insurance Products Fund and
Variable Insurance Products Fund II, MFS Variable Insurance Trust and Janus
Aspen Series. In order to demonstrate how the investment experience of the these
portfolios affect accumulation unit values, performance information was
developed. The information is based upon the historical experience of the
portfolios and is for the periods shown.
Future performance of the portfolios will vary and the results shown are not
necessarily representative of future results. Performance for periods ending
after those shown may vary substantially from the examples shown. The
performance of the portfolios is calculated for a specified period of time by
assuming an initial purchase payment of $1,000 allocated to the portfolio.
Performance figures for the accumulation units will reflect the product expense
charges as well as the portfolio expenses. There are also performance figures
for the accumulation units which reflect the product expense charges, the
portfolio expenses, and assume that you make a withdrawal at the end of the
period and therefore the withdrawal charge is reflected. The percentage
increases (decreases) are determined by subtracting the initial purchase payment
from the ending value and dividing the remainder by the beginning value. The
performance may also show figures when no withdrawal is assumed.
FEDERAL TAX STATUS
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
GENERAL. Section 72 of the Code governs taxation of annuities in general. An
Owner is not taxed on increases in the value of a Contract until distribution
occurs, either in the form of a lump sum payment or as annuity payments under
the Annuity Option selected. For a lump sum payment received as a total
withdrawal, the recipient is taxed on the portion of the payment that exceeds
the cost basis of the Contract. For Non-Qualified Contracts, this cost basis is
generally the purchase payments, while for Qualified Contracts there may be no
cost basis. The taxable portion of the lump sum payment is taxed at ordinary
income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered i.e. when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION. Section 817(h) of the Code imposes certain diversification
standards on the underlying assets of variable annuity contracts. The Code
provides that a variable annuity contract will not be treated as an annuity
contract for any period (and any subsequent period) for which the investments
are not, in accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification of
the Contract as an annuity contract would result in the imposition of federal
income tax to the Owner with respect to earnings allocable to the Contract prior
to the receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the investment
options underlying variable contracts such as the Contract. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment option will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
option is represented by any one investment; (2) no more than 70% of the value
of the total assets of the option is represented by any two investments; (3) no
more than 80% of the value of the total assets of the option is represented by
any three investments; and (4) no more than 90% of the value of the total assets
of the option is represented by any four investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all investment options underlying the Contracts will be
managed in such a manner as to comply with these diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owners being
retroactively determined to be the owners of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS. The Code provides that multiple non-qualified annuity
contracts which are issued within a calendar year to the same contract owner by
one company or its affiliates are treated as one annuity contract for purposes
of determining the tax consequences of any distribution. Such treatment may
result in adverse tax consequences including more rapid taxation of the
distributed amounts from such combination of contracts. For purposes of this
rule, contracts received in a Section 1035 exchange will be considered issued in
the year of the exchange. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS. Under Section 72(u) of the Code,
the investment earnings on premiums for the Contracts will be taxed currently to
the Owner if the Owner is a non-natural person, e.g., a corporation or certain
other entities. Such Contracts generally will not be treated as annuities for
federal income tax purposes. However, this treatment is not applied to a
Contract held by a trust or other entity as an agent for a natural person nor to
Contracts held by Qualified Plans. Purchasers should consult their own tax
counsel or other tax adviser before purchasing a Contract to be owned by a
non-natural person.
TAX TREATMENT OF ASSIGNMENTS. An assignment, pledge, or other transfer of a
Contract may be a taxable event. Owners should therefore consult competent tax
advisers should they wish to assign, pledge, or transfer their Contracts.
INCOME TAX WITHHOLDING. All distributions or the portion thereof which is
includible in the gross income of the Owner are subject to federal income tax
withholding. Generally, amounts are withheld from periodic payments at the same
rate as wages and at the rate of 10% from non-periodic payments. However, the
Owner, in most cases, may elect not to have taxes withheld or to have
withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary or for a specified period of 10
years or more; or b) distributions which are required minimum distributions; or
c) the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions); or d) hardship distributions. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS. Section 72 of the Code
governs treatment of distributions from annuity contracts. It provides that if
the Contract Value exceeds the aggregate purchase payments made, any amount
withdrawn will be treated as coming first from the earnings and then, only after
the income portion is exhausted, as coming from the principal. Withdrawn
earnings are includible in gross income. It further provides that a ten percent
(10%) penalty will apply to the income portion of any premature distribution.
However, the penalty is not imposed on amounts received: (a) after the taxpayer
reaches age 59 1/2; (b) after the death of the Owner; (c) if the taxpayer is
totally disabled (for this purpose disability is as defined in Section 72(m)(7)
of the Code); (d) in a series of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the taxpayer
or for the joint lives (or joint life expectancies) of the taxpayer and his or
her Beneficiary; (e) under an immediate annuity; or (f) which are allocable to
purchase payments made prior to August 14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS. The Contracts offered herein are designed to be suitable for
use under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Contracts issued pursuant to the
plan. Some retirement plans are subject to distribution and other requirements
that are not incorporated into the Company's administrative procedures. Owners,
Annuitants and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are general descriptions of the types of Qualified
Plans with which the Contracts may be used. Such descriptions are not exhaustive
and are for general informational purposes only. The tax rules regarding
Qualified Plans are very complex and will have differing applications depending
on individual facts and circumstances. Each purchaser should obtain competent
tax advice prior to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described
herein. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon withdrawal or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to withdrawals from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
certain Qualified Plans will utilize annuity tables which do not differentiate
on the basis of sex. Such annuity tables will also be available for use in
connection with certain non-qualified deferred compensation plans.
A. TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax-Sheltered Annuities -
Withdrawal Limitations" below.) Any employee should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
B. INDIVIDUAL RETIREMENT ANNUITIES
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's taxable income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of Contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational disclosure be
given to persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
ROTH IRAS.
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year and are not
deductible from taxable income. Lower maximum limitations apply to individuals
with adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
joint returns, and between $0 and $10,000 in the case of married taxpayers
filing separately. An overall $2,000 annual limitation continues to apply to all
of a taxpayer's IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution.
Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
C. PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 401(k) of the Code permit employers, including self-employed
individuals, to establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Contracts to provide benefits
under the Plan. Contributions to the Plan for the benefit of employees will not
be includible in the gross income of the employees until distributed from the
Plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and restrictions on
all Plans including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, and withdrawals. (See
"Tax Treatment of Withdrawals Qualified Contracts" below.) Purchasers of
Contracts for use with Pension or Profit Sharing Plans should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
D. GOVERNMENT AND TAX-EXEMPT ORGANIZATION'S DEFERRED COMPENSATION PLAN
Under Code provisions, employees and independent contractors performing services
for state and local governments and other tax-exempt organizations may
participate in Deferred Compensation Plans. While participants in such Plans may
be permitted to specify the form of investment in which their Plan accounts will
participate, all such investments are owned by the sponsoring employer and are
subject to the claims of its creditors until December 31, 1998, or such earlier
date as may be established by Plan amendment. However, amounts deferred under a
Plan created on or after August 20, 1996 and amounts deferred under any 457 Plan
after December 31, 1998 must be held in trust, custodial account or annuity
contract for the exclusive benefit of Plan participants and their beneficiaries.
The amounts deferred under a Plan which meets the requirements of Section 457 of
the Code are not taxable as income to the participant until paid or otherwise
made available to the participant or beneficiary. As a general rule, the maximum
amount which can be deferred in any one year is the lesser of $8,000 or 33 1/3
percent of the participant's includable compensation. However, in limited
circumstances, up to $15,000 may be deferred in each of the last three years
before normal retirement age. Furthermore, the Code provides additional
requirements and restrictions regarding eligibility and distributions.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS. In the case of a withdrawal
under a Qualified Contract, a ratable portion of the amount received is taxable,
generally based on the ratio of the individual's cost basis to the individual's
total accrued benefit under the retirement plan. Special tax rules may be
available for certain distributions from a Qualified Contract. Section 72(t) of
the Code imposes a 10% penalty tax on the taxable portion of any distribution
from qualified retirement plans, including Contracts issued and qualified under
Code Sections 401 (Pension and Profit-Sharing Plans), 403(b)(Tax-Sheltered
Annuities) and 408 and 408A (Individual Retirement Annuities). To the extent
amounts are not includible in gross income because they have been rolled over to
an IRA or to another eligible Qualified Plan, no tax penalty will be imposed.
The tax penalty will not apply to the following distributions: (a) if
distribution is made on or after the date on which the Owner or Annuitant (as
applicable) reaches age 59 1/2; (b) distributions following the death or
disability of the Owner or Annuitant (as applicable) (for this purpose
disability is as defined in Section 72(m) (7) of the Code); (c) after separation
from service, distributions that are part of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the Owner or Annuitant (as applicable) or the joint lives (or
joint life expectancies) of such Owner or Annuitant (as applicable) and his or
her designated Beneficiary; (d) distributions to an Owner or Annuitant (as
applicable) who has separated from service after he has attained age 55; (e)
distributions made to the Owner or Annuitant (as applicable) to the extent such
distributions do not exceed the amount allowable as a deduction under Code
Section 213 to the Owner or Annuitant (as applicable) for amounts paid during
the taxable year for medical care; (f) distributions made to an alternate payee
pursuant to a qualified domestic relations order; (g) distributions from an
Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks (this
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (h) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) to the extent
such distributions do not exceed the qualified higher education expenses (as
defined in Section 72(t)(7) of the Code) of the Owner or Annuitant (as
applicable) for the taxable year; and (i) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8)of
the Code.) The exceptions stated in (d) and (f) above do not apply in the case
of an Individual Retirement Annuity. The exception stated in (c) above applies
to an Individual Retirement Annuity without the requirement that there be a
separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years on which the exception was used.
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed. There are no required distributions from a Roth IRA prior to the
death of the owner.
TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS. The Code limits the withdrawal
of amounts attributable to contributions made pursuant to a salary reduction
agreement (as defined in Section 403(b)(11) of the Code) to circumstances only
when the Owner: (1) attains age 59 1/2; (2) separates from service; (3) dies;
(4) becomes disabled (within the meaning of Section 72(m)(7) of the Code); or
(5) in the case of hardship. However, withdrawals for hardship are restricted to
the portion of the Owner's Contract Value which represents contributions made by
the Owner and does not include any investment results. The limitations on
withdrawals became effective on January 1, 1989 and apply only to salary
reduction contributions made after December 31, 1988, to income attributable to
such contributions and to income attributable to amounts held as of December 31,
1988. The limitations on withdrawals do not affect transfers between
Tax-Sheltered Annuity Plans. Owners should consult their own tax counsel or
other tax adviser regarding any distributions.
ANNUITY PROVISIONS
VARIABLE ANNUITY. A variable annuity is an annuity with payments which: (1) are
not predetermined as to dollar amount; and (2) will vary in amount with the net
investment results of the applicable investment option(s) of the separate
account. At the annuity calculation date, the contract value in each investment
option will be applied to the applicable annuity tables. The annuity table used
will depend upon the annuity option chosen. The dollar amount of annuity
payments after the first is determined as follows:
(1) the dollar amount of the first annuity payment is divided by the value
of an annuity unit as of the annuity calculation date. This
establishes the number of annuity units for each monthly payment. The
number of annuity units remains fixed during the annuity payment
period.
(2) the fixed number of annuity units per payment in each subaccount is
multiplied by the annuity unit value as of the annuity calculation
date. This result is the dollar amount of the payment.
The total dollar amount of each variable annuity payment is the sum of all
investment option variable annuity payments.
The Company determines the amount of variable annuity payments, including the
first, no more than ten (10) business days prior to the payment date. The
payment date must be the same day each month as the date selected for the
annuity date, i.e. the first or the fifteenth.
FIXED ANNUITY. A fixed annuity is a series of payments made during the annuity
period which are guaranteed as to dollar amount by the Company and do not vary
with the investment experience of the separate account. The general account
value as of the annuity calculation date will be used to determine the fixed
annuity monthly payment. The first monthly annuity payment will be based upon
the annuity option elected and the appropriate annuity option table. Fixed
annuity payments will remain level.
ANNUITY UNIT. The value of an annuity unit for each investment option was
arbitrarily set initially at $10. This was done when the first investment option
shares were purchased. The investment option annuity unit value for any business
day is determined by multiplying the investment option annuity unit value for
the immediately preceding business day by the product of the Net Investment
Factor for the business day for which the annuity unit value is being
calculated, and an amount equivalent to the daily assumed investment factor.
NET INVESTMENT FACTOR. The Net Investment Factor for any investment option for
any business day is determined by dividing:
(a) the accumulation unit value as of the close of the current business
day, by
(b) the accumulation unit value as of the close of the immediately
preceding business day.
The Net Investment Factor may be greater or less than one, as the annuity unit
value may increase or decrease.
EXPENSE GUARANTEE. The Company guarantees that the dollar amount of each annuity
payment after the first annuity payment will not be affected by variations in
actual mortality or expense experience.
FINANCIAL STATEMENTS
The statutory basis financial statements of the Company included herein should
be considered only as bearing upon the ability of the Company to meet its
obligations under the contracts. The audited financial statements of the
Separate Account as of and for the year ended December 31, 1998 are also
included herein. (To be filed by pre-effective amendment.)
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Financial Statements for the Company will be included in an amendment.
(b) Exhibits
(1) Certified resolution of the board of directors of the Company
dated October 18, 1995, establishing the Variable Account.*
(2) Not applicable.
(3) Form of underwriting agreement between the Company and CNA Investor
Services, Inc. ("CNA/ISI").**
(4) (a) Form of Flexible Premium Deferred Variable Annuity Contract (the
"Contract").
(b) Form of Terminal Illness and Confinement Endorsement.
(c) Form of Tax Sheltered Annuity Endorsement.
(d) Form of Pension/Profit Sharing Endorsement.
(e) Form of Systematic Withdrawal Endorsement.
(f) Form of Automatic Transfer Endorsement.
(g) Form of Dollar Cost Averaging Endorsement.
(h) Form of Fixed Account II Endorsement.
(i) Form of Enhanced Death Benefit I Endorsement.
(j) Form of Enhanced Death Benefit II Endorsement.
(k) Form of Enhanced Death Benefit III Endorsement.
(l) Form of Enhanced Annuity Value I Endorsement.
(m) Form of Enhanced Annuity Value II Endorsement.
(n) Form of Enhanced Annuity Value III Endorsement.
(o) Form of Roth IRA Endorsement.
(p) Form of IRA Endorsement.
(5) Not applicable.
(6) (a) Articles of Incorporation of the Company.*
(b) By-Laws of the Company.*
(7) Not applicable.
(8) (a) Form of Participation Agreement between the Company and Federated
Insurance Series.**
(b) Form of Participation Agreement between the Company and Variable
Insurance Products Fund.**
(c) Form of Participation Agreement between the Company and The Alger
American Fund.**
(d) Form of Participation Agreement between the Company and MFS
Variable Insurance Trust. **
(e) Form of Participation Agreement between the Company and SoGen
Variable Funds, Inc. **
(f) Form of Participation Agreement between the Company and Van Eck
Worldwide Insurance Trust.**
(g) Form of Participation Agreement between the Company and Janus
Aspen Series.
(9) Legal Consent (to be filed by amendment.)
(10) Auditor Consent (to be filed by amendment.)
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable
* Incorporated herein by reference to the initial filing of this Form N-4
Registration on February 20, 1996
** Incorporated herein by reference to filing of Pre-Effective Amendment
Number 1 to this Form N-4 Registration on September 4, 1996
ITEM 25. DIRECTORS AND OFFICERS OF THE COMPANY
The name, age, positions and offices, term as director, and business
experience during the past five years for VFL's directors and executive officers
are listed in the following table:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
OFFICERS OF VFL
- ----------------------------------------------------------------------------------------------------
POSITION(S) HELD
NAME AND ADDRESS AGE WITH VFL PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Philip L. Engel* 59 Director and President of CNA since September, 1992. Prior
CNA Plaza President thereto, Mr. Engel was Executive Vice
Chicago, IL 60685 President of CNA. Mr. Engel has served as a
Director of VFL since September, 1992.
- ----------------------------------------------------------------------------------------------------
Bernard L. Hengesbaugh 52 Chairman of the Chairman of the Board and Chief Executive
CNA Plaza Board, Chief Officer of CNA since February, 1999. Prior
Chicago, IL 60685 Executive thereto, Mr. Hengesbaugh served as Executive
Officer, and Vice President and Chief Operating Officer of
Director CNA since February, 1998. Prior thereto, Mr.
Hengesbaugh was Senior Vice President of CNA
since November, 1990. Mr. Hengesbaugh has
served as Director since February, 1999.
- ----------------------------------------------------------------------------------------------------
Peter E. Jokiel 52 President and Senior Vice President of CNA since November,
CNA Plaza Chief Operating 1990. Chief Financial Officer of CNA from
Chicago, IL 60685 Officer, November, 1990 through October, 1997. Mr.
CNA Life Jokiel served as a Director of VFL from July,
1992 through October, 1997.
- ----------------------------------------------------------------------------------------------------
Jonathan D. Kantor 44 Senior Vice Senior Vice President, Secretary and General
CNA Plaza President, Counsel of CNA since April, 1997. Group Vice
Chicago, IL 60685 Secretary, President of CNA since April, 1994. Prior
General Counsel thereto, Mr. Kantor was a partner at the law
and Director firm of Shea & Gould.** Mr. Kantor has served
as a Director of VFL since April, 1997.
- ----------------------------------------------------------------------------------------------------
W. James MacGinnitie 61 Chief Senior Vice President and Chief Financial
CNA Plaza Financial Officer of CNA since October, 1997. From 1994
Chicago, IL 60685 Officer and through 1997, Mr. MacGinnitie was a partner at
Director Ernst & Young. Prior thereto, Mr. MacGinnitie
(Chief Accounting was a principal with Tillinghast. Mr.
Officer) MacGinnitie has served as a Director of VFL
since October, 1997.
- ----------------------------------------------------------------------------------------------------
Tom Taylor 47 Executive Vice Executive Vice President, Underwriting Policy
President Group since June 1999. Specialty Operations,
1998-1999. President and Chief Operating
Officer, Financial Insurance, 1992-1998.
- ----------------------------------------------------------------------------------------------------
_____________________________________________________________________________________________________
</TABLE>
Each director is elected to serve until the next annual meeting of
stockholders or until his or her successor is elected and shall have qualified.
Some directors hold various executive positions with insurance company
affiliates of VFL. Executive officers serve at the discretion of the Board of
Directors.
* Mr. Engel plans to retire effective September, 1999.
** Shea & Gould declared bankruptcy in 1995.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The registrant is a segregated asset account of the Company and is therefore
owned and controlled by the Company. The Company is a stock life insurance
company of which all of the voting securities are owned by Continental Assurance
Company. Continental Assurance Company is owned by Continental Casualty Company,
a stock casualty insurance company organized under the Illinois Insurance Code,
the home office of which is located at CNA Plaza, Chicago, Illinois 60685. All
of the voting securities of Continental Casualty Company are owned by CNA
Financial Corporation, a Delaware Corporation. As of August 1, 1999, 86% of the
outstanding voting securities of CNA Financial Corporation are owned by Loews
Corporation, a Delaware Corporation, 667 Madison Avenue, New York, New York
10021-8087. Loews corporation has interests in insurance, hotels, watches and
other timing devices, drilling rigs and tobacco. Laurence A. Tisch is
Co-Chairman of the Board and a director of Loews Corporation and Chief Executive
Officer and a director of CNA Financial Corporation. Preston R. Tisch is
Co-Chairman of the Board and a director of Loews Corporation and a director of
CNA Financial Corporation. James S. Tisch is President and Chief Executive
Officer and director of Loews Corporation and a director of CNA Financial
Corporation.
ITEM 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
ITEM 28. INDEMNIFICATION
The registrant has no officers, directors or employees. The depositor and the
registrant do not indemnify the officers, directors of employees of the
depositor. CNA-Financial Corporation, ("CNAFC") a parent of the depositor,
indemnifies the depositor's officers, directors and employees in their capacity
as such. Most of the 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, office, 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
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 29. PRINCIPAL UNDERWRITER
(a) CNA/ISI is the registrant's principal underwriter and also serves as the
principal underwriter of certain variable life insurance contracts issued
by the Company and certain variable annuity contracts and variable life
insurance contracts issued by affiliates of the Company.
(b) CNA Investor Services Inc.("CNA/ISI") is the principal underwriter for the
Policies. The following persons are the officers and directors of CNA/ISI.
Name and Principal Positions and Offices
Business Address with Underwriter
---------------- ----------------
Ron Chapon Director
Lynne Gugenheim Director
James Pettorini Director
John Sullivan Director
Kevin Hogan Director
The principal business address for each officer and director of CNA/ISI is CNA
Plaza, 34 South Chicago, Illinois 60685.
(c) Not applicable.
Item 30. LOCATION BOOKS AND RECORDS
All of the accounts, books, records or other documents required to be kept by
Section 31(a) of the Investment Company Act of 1940 and rules thereunder, are
maintained by the Company at CNA Plaza, Chicago, Illinois 60685, or 100 CNA
Drive, Nashville, Tennessee 37214-3439, by Financial Administration Services,
Inc. at 1290 Silas Deane Highway, P.O. Box 290794, Wethersfield, Connecticut
06129-0794, and by CNA/ISI at CNA Plaza, Chicago, Illinois 60685.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under this
Form promptly upon written or oral request.
d. Valley Forge Life Insurance Company ("Company") hereby represents that
the fees and charges deducted under the Policies described in the Prospectus, in
the aggregate, are reasonable in relation to the services rendered, the expenses
to be incurred and the risks assumed by the Company.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No-Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his contract value.
SIGNATURES
As required by the securities Act of 1933 and the Investment Company Act of
1940, the registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this registration statement and has caused this
registration statement to be signed on its behalf, in the City of Chicago, and
the State of Illinois, on this 16th day of August 1999.
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE ANNUITY SEPARATE ACCOUNT
(Registrant)
By:
/s/ W. JAMES MACGINNITIE
----------------------
W. James MacGinnitie
Senior Vice President,
Chief Financial
Officer, Director
VALLEY FORGE LIFE INSURANCE COMPANY
(Depositor)
By: /s/W. JAMES MACGINNITIE
----------------------
W. James MacGinnitie
Senior Vice President
Chief Financial
Officer, Director
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- - --------- ----- ----
/s/ PHILIP L. ENGEL President, Director August 15, 1999
- - -----------------------
Philip L. Engel
/s/ PETER E. JOKIEL President and Chief August 15, 1999
- - ----------------------- Operating Officer, CNA Life
Peter E. Jokiel
/s/ BERNARD L. HENGESBAUGH Chairman of the Board,
- - -------------------------- Chief Executive Officer, August 16, 1999
Bernard L. Hengesbaugh Director
/s/ JONATHAN D. KANTOR Senior Vice President August 18, 1999
- - -------------------------- General Counsel, Secretary,
Jonathan D. Kantor Director
/s/ W. JAMES MACGINNITIE Senior Vice President, Chief August 16, 1999
- - -------------------------- Financial Officer and Director
W. James MacGinnitie (Chief Accounting Officer)
/s/ TOM TAYLOR
- ---------------------------- Executive Vice President August 16, 1999
Tom Taylor
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE ANNUITY SEPARATE ACCOUNT
REGISTRATION STATEMENT ON FORM N-4
INDEX TO EXHIBITS
EXHIBIT NO.
EX-99.B4(i) Individual Flexible Purchase Payment Deferred Variable and Fixed
Annuity Contract.
EX-99.B4(ii) Form of Terminal Illness and Confinement Endorsement.
EX-99.B4(iii) Form of Tax Sheltered Annuity Endorsement.
EX-99.B4(iv) Form of Pension/Profit Sharing Endorsement.
EX-99.B4(v) Form of Systematic Withdrawal Endorsement.
EX-99.B4(vi) Form of Automatic Transfer Endorsement.
EX-99.B4(vii) Form of Dollar Cost Averaging Endorsement.
EX-99.B4(viii) Form of Fixed Account II Endorsement.
EX-99.B4(ix) Form of Enhanced Death Benefit I Endorsement.
EX-99.B4(x) Form of Enhanced Death Benefit II Endorsement.
EX-99.B4(xi) Form of Enhanced Death Benefit III Endorsement.
EX-99.B4(x) Form of Enhanced Annuity Value I Endorsement.
EX-99.B4(xi) Form of Enhanced Annuity Value II Endorsement.
EX-99.B4(xii) Form of Enhanced Annuity Value III Endorsement.
EX-99.B4(xiii) Form of Roth IRA Endorsement.
EX-99.B4(xiv) Form of IRA Endorsement.
EX-99.B8(i) Janus Aspen Series Participation Agreement.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
We agree to pay the benefits described in this contract in accordance with its
provisions.
PLEASE READ THIS CONTRACT CAREFULLY. THIS IS A LEGAL CONTRACT BETWEEN YOU AND
VALLEY FORGE LIFE INSURANCE COMPANY.
NOTICE OF 10 DAY FREE LOOK PERIOD
If, for any reason, you are not satisfied with this contract, you may return it
to us for cancellation within 10 days of the day you receive it by delivering or
mailing it to us at our Administrative Office or to the agent from whom it was
purchased. This contract will be void as of the date we receive it and we will
promptly return the contract value.
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685.
__________________________ _________________________
Chairman of the Board Secretary
- --------------------------------------------------------------------------------
Annuity payments and other values provided by this contract, when based on the
investment performance of the Variable Account, may increase or decrease daily
as a function of the investment performance of the subaccounts you select and
are not guaranteed as to dollar amount. No minimum contract value is guaranteed.
- --------------------------------------------------------------------------------
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
We agree to pay the benefits described in this contract in accordance with its
provisions.
PLEASE READ THIS CONTRACT CAREFULLY. THIS IS A LEGAL CONTRACT BETWEEN YOU AND
VALLEY FORGE LIFE INSURANCE COMPANY.
- --------------------------------------------------------------------------------
NOTICE OF 10 DAY FREE LOOK PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If, for any reason, you are not satisfied with this contract, you may return it
to us for cancellation within 10 days of the date you receive it by delivering
or mailing it to us at our Administrative Office or to the agent from whom it
was purchased. This contract will be void as of the date we receive it and we
will promptly return the sum of all purchase payments.
VAR-101 (6/99)
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685.
__________________________ _________________________
Chairman of the Board Secretary
- --------------------------------------------------------------------------------
Annuity payments and other values provided by this contract, when based on the
investment performance of the Variable Account, may increase or decrease daily
as a function of the investment performance of the subaccounts you select and
are not guaranteed as to dollar amount. No minimum contract value is guaranteed.
- --------------------------------------------------------------------------------
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
VAQ-105 (6/99)
CONTRACT DATA PAGE
OWNER: [JOHN DOE] AGE AT ISSUE: [35]
JOINT OWNER: [JANE DOE] AGE AT ISSUE: [32]
ANNUITANT: [JOHN DOE] AGE AT ISSUE: [35]
CONTRACT NUMBER: [12345] CONTRACT DATE: [July 1, 1999]
PLAN TYPE: [Non-Qualified] ANNUITY DATE: [July 1, 2034]
ADMINISTRATIVE OFFICE: [Valley Forge Life, 100 CNA Drive, Nashville, TN 37214]
[1-800-262-1755]
PURCHASE PAYMENTS:
Initial Purchase Payment: [$10,000]
Minimum Subsequent Purchase Payment: [$1,000]
Maximum Total Purchase Payments: [$1,000,000 without approval]
BENEFICIARY:
[As designated by the owner on the contract date unless changed in
accordance with the contract provisions.]
CONTRACT MAINTENANCE CHARGE:
The contract maintenance charge is currently [$30.00] each contract
year. We reserve the right to change the contract maintenance charge
and will provide notice of the change. The maximum contract
maintenance charge is $50.00 per contract year. The contract
maintenance charge will be deducted from the contract value on each
contract anniversary while this contract is in force. If during the
accumulation period, your contract value on a contract anniversary is
at least [$50,000] then no contract maintenance charge is deducted. If
a total withdrawal is made on other than a contract anniversary and
your contract value for the business day when the total withdrawal is
made is less than [$50,000], the full contract maintenance charge will
be deducted at the time of total withdrawal. The contract maintenance
charge will be deducted from the subaccounts and any fixed account
selected in the same proportion that the amount of contract value in
each subaccount and/or any fixed account bears to the total contract
value. During the annuity period, the contract maintenance charge will
be collected pro rata from each annuity payment. [If you own more than
one contract, we will determine the total contract value for all of
the contracts. If the total contract value of all contracts exceeds
[$50,000], we will not assess the contract maintenance charge.] If the
owner is not a natural person, we will look to the annuitant in
determining the above.
PRODUCT EXPENSE CHARGE:
[Equal on an annual basis to [1.40%] of the average daily net asset
value of the Variable Account. [We may increase this charge, but it
may not be greater than [1.75%].]]
[TAX CHARGES:
We reserve the right to deduct from purchase payments or from the
Variable Account any federal, state or municipal taxes that may be
attributable to this contract.]
FIXED ACCOUNT OPTIONS:
[Fixed Account I:
Minimum Guaranteed Interest Rate: [3.00%]
Current Interest Rate as of Contract Date: [x%.] [The current interest
rates applies only to purchase payments allocated or transferred to
Fixed Account I during the calendar month in which this contract is
issued. This rate is guaranteed for one contract year.]
INVESTMENT OPTIONS:
[Federated Prime Money Fund II]
[Federated Utility Fund II]
[Federated High Income Bond Fund II]
[Fidelity VIP Equity-Income Portfolio]
[Fidelity VIP II Asset Manager Portfolio]
[Fidelity VIP II Index 500 Portfolio]
[Fidelity VIP II Contrafund]
[Alger American Small Capitalization Portfolio]
[Alger American Growth Portfolio]
[Alger American MidCap Growth Portfolio]
[MFS Emerging Growth Series]
[MFS Research Series]
[MFS Growth with Income Series]
[MFS Total Return Series]
[SoGen Overseas Variable Fund]
[Van Eck Worldwide Hard Assets Fund]
[Van Eck Worldwide Emerging Markets Fund]
[Janus Twenty]
[Janus Growth]
[Janus Balanced]
[Janus Flexible Income]
[Janus International Growth]
[Janus Worldwide Growth]
VARIABLE ACCOUNT: [VFL Variable Annuity Separate Account]
[ALLOCATION GUIDELINES:
1. Currently, you may select as many investment options as you wish. We
reserve the right to limit this in the future.
2. Currently, you may also select any available fixed account at the time the
purchase payment or transfer is made.
3. The initial purchase payment will be credited to your contract within two
(2) business days after receipt at our Administrative Office. Additional
purchase payments will be credited to your contract as of the business day
they are received.
4. Allocation percentages must be in whole numbers. Each allocation must be at
least [1%].]
TRANSFERS:
Number of Transfers Permitted
During the Accumulation Period: [Subject to any transfer fees and any
minimum and maximum amounts that may be transferred, currently there
is no limitation on the number of transfers that may be made between
subaccounts. Currently, you may make unlimited transfers to any fixed
account option, subject to any transfer fees and any required minimum
or maximum amounts that may be transferred. We reserve the right to
limit the number of transfers, but you will always be allowed at least
[12] transfers between subaccounts in a contract year during the
accumulation period.]
During the Annuity Period: [Currently, during a contract year you may
make [4] transfers between subaccounts, or, from one or more
subaccounts to the general account. The amounts transferred are
subject to any minimums and maximums we may establish. You may not
make a transfer from the general account to the subaccounts.]
Number of Free Transfers: [Currently, you are allowed [12] free
transfers each contract year during the accumulation period and [4]
free transfers each contract year during the annuity period.]
Transfer Fee: [For each transfer in excess of the free transfers
permitted, the transfer fee is [$25]. Transfers made pursuant to a
prescheduled transfer will not be counted in determining the
application of the transfer fee.]
Minimum and Maximum Amount to be Transferred: [The minimum amount
which may be transferred is [$250] or your entire interest in any
subaccount or any fixed account, if less. This requirement is waived
if the transfer is pursuant to a prescheduled transfer or applied to a
specified annuity option.]
Prescheduled Transfers: [You may elect the dollar cost averaging
option or the automatic transfer option. We reserve the right to limit
the availability of any subaccount or fixed account for a prescheduled
transfer.]
WITHDRAWALS:
Withdrawal Charge: [A withdrawal charge is assessed against each
purchase payment withdrawn. The withdrawal charge is calculated at the
time of each withdrawal. Each purchase payment is tracked from its
contract year of receipt and the withdrawal charges are determined in
accordance with the following:
Contract Year
Since Receipt of
Purchase Payment Withdrawal Charge
1 7%
2 7%
3 6%
4 6%
5 5%
6 4%
7 3%
8 0%]
[The withdrawal charge is separately calculated and applied to each
purchase payment when the purchase payment is withdrawn. No surrender
charge applies to withdrawals in excess of the sum of all purchase
payments less prior withdrawals of purchase payments. Purchase
payments are withdrawn before contract value in excess of total
purchase payments. We reserve the right to limit the number of partial
withdrawals in a contract year that are not subject to a withdrawal
charge.]
Waiver of Withdrawal Charge: [In each contract year after the first
contract year, you may withdraw an amount equal to 10% of the "free
partial withdrawal basis" without incurring withdrawal charge. We
reserve the right to limit the number of such free partial withdrawals
in any contract year.
"Free partial withdrawal basis" means the greater of: (1) Aggregate
purchase payments (less prior withdrawals of purchase payments) as of
the first business day of the contract year; or (2) contract value as
of the business day the written notice for withdrawal is received.]
Minimum partial withdrawal amount: [[$1,000] Withdrawals made pursuant
to the systematic withdrawal option [or any minimum distribution
option] are not subject to this minimum.] [Withdrawals made pursuant
to the systematic withdrawal option must be at least [$500.00].]
[Minimum contract value which must remain in an account or subaccount
after a partial withdrawal: [[$1,000] in any subaccount or [$5,000] in
any fixed account
Minimum contract value which must remain in the contract after a
partial withdrawal: [$10,000 for non-qualified contracts] [$2,000 for
qualified contracts]
[IMMEDIATE INTEREST RATE: [4%]
Immediate Interest: Each purchase payment received during the first contract
year will be credited immediate interest at the rate shown above. The immediate
interest will be allocated in the same manner as the purchase payments at the
time of receipt. The dollar amount of this immediate interest will be excluded
from any withdrawal value, including the exercise of any Free Look right, if the
contract value is withdrawn before the first day of the second contract year.]
RIDERS AND ENDORSEMENTS
[Individual Retirement Annuity Endorsement]
[Tax Sheltered Annuity Endorsement]
[Pension/Profit Sharing Endorsement]
[Roth IRA Endorsement]
[Simple IRA Endorsement]
[457 Endorsement]
[Terminal Illness - Confinement Rider]
[Dollar Cost Averaging]
[Systematic Withdrawal Rider]
[Automatic Transfer Rider]
[Enhanced Death Benefit I Rider ]
[Enhanced Death Benefit II Rider ]
[Enhanced Death Benefit III Rider]
[Enhanced Annuity Value I Rider ]
[Enhanced Annuity Value II Rider]
[Enhanced Annuity Value III]
[Fixed Account II]
RIDER CHARGES
RIDER CHARGE
[Enhanced Death Benefit I Rider] [0.00% annually, in advance]
[Enhanced Death Benefit II Rider] [0.00% annually, in advance]
[[3%] Guaranteed Increase]
[Enhanced Death Benefit III Rider] [0.00% annually, in advance]
[Greater of Ratchet or [3%] Guarantee]
Enhanced Annuity Value I Rider [0.00% annually, in advance]
Enhanced Annuity Value II Rider [0.00% annually, in advance]
[[3%] Guaranteed Increase]
Enhanced Annuity Value III Rider [0.00% annually, in advance]
[Greater of Ratchet or [3%] Guarantee]
TABLE OF CONTENTS
DEFINITIONS
Accumulation Period: The period prior to the annuity date during which you may
make purchase payments.
Accumulation Unit: A unit of measure used to calculate the contract value in a
subaccount.
Age: The age as of the last birthday.
Annuitant: The person or person(s) whose life (or lives) determines the annuity
payments under this contract.
Annuity Date: The date when annuity payments begin. This is shown on the
contract data page.
Annuity Payments: The periodic payment we make under an annuity payment option.
Annuity Payment Date: The date when we make annuity payments. This is the same
day of the month as the annuity date.
Annuity Period: The period starting on the annuity date during which annuity
payments are paid.
Annuity Unit: A unit of measure used to calculate variable annuity payments.
Annuity Value: The value of the contract available to be applied to an annuity
option.
Beneficiary: The person(s) who will receive the death benefit.
Business Day: Each day that both the New York Stock Exchange and we are open for
business. The Variable Account will be valued each business day.
Contract Anniversary: The same date each calendar year as the contract date.
Contract Date: The date on which the contract becomes effective as shown on the
contract data page.
Contract Value: The sum of the variable contract value and any fixed account.
Contract Year: A twelve-month period beginning on the contract date or contract
anniversary.
Fixed Account: A portion of the general account into which you may allocate
purchase payments or transfer contract value. It is equal to the sum of all
purchase payments allocated to any fixed account less withdrawals and charges.
At our discretion, we may from time to time declare an excess interest rate for
Fixed Account I. The excess interest rate will be guaranteed for one contract
year. A fixed account is available only during the accumulation period.
General Account: Our assets other than those allocated to any Variable Account
of the Company. The general account is available only during the annuity period.
Investment Option: The investment choices within the Variable Account available
under the contract. Current investment options are shown on the contract data
page.
Owner: The person(s) or entity(ies) who is (are) entitled to exercise all
ownership rights and privileges provided in the contract. All references to
owner shall include any named joint owner. Any joint owner must be the spouse of
the other owner unless limited by state law.
Subaccount: A subdivision of the Variable Account which is invested in a
corresponding investment option.
Subaccount Value: The amount equal to that part of any purchase payment
allocated or transferred to the subaccount adjusted by interest income,
dividends, net capital gains or losses, realized or unrealized, and decreased by
withdrawals (including any applicable withdrawal and tax charges) and any
amounts transferred out of that subaccount.
The Company, We, Us, Our: Valley Forge Life Insurance Company
Variable Account: Valley Forge Life Insurance Company Variable Annuity Separate
Account.
Variable Contract Value: The sum of all subaccount values.
Withdrawal Value: The contract value plus or minus any applicable interest
adjustment, less any applicable tax charges not previously deducted, less the
contract maintenance fee and less any applicable withdrawal charges.
Written Notice: A notice or request submitted in writing in a form satisfactory
to us that is signed by you and received at our Administrative Office.
You, Your: The owner(s).
GENERAL PROVISIONS
Entire Contract: The contract is made up of this contract and any attached
endorsements or riders.
Incontestability: We will not contest the validity of this contract.
Misstatement of Age or Sex: If the age or sex of the owner or annuitant has been
misstated, we will adjust the benefits paid under this contract to reflect the
correct age and/or sex. Underpayments will be made up immediately, overpayments
will be deducted from future annuity payments until the total is repaid.
Periodic Reports: At least once each contract year we will furnish you with a
report showing the contract value and any other information as may be required
by law. Reports will be sent to your last known address.
Non Participating: This contract does not participate in the surplus or profits
of the Company.
Protection of Benefits: To the extent permitted by law, no benefits payable or
account values under this contract are subject to the claims of creditors. No
beneficiary may commute, encumber, alienate or assign any payments under this
contract.
Taxes: Any taxes paid to any governmental entity relating to this contract will
be deducted from the purchase payments or contract value when incurred. We will,
at our sole discretion, determine when taxes have resulted from the investment
experience of the Variable Account, receipt by us of purchase payments or
commencement of annuity payments. We may, at our sole discretion, pay taxes when
due and deduct that amount from the contract value at a later date. Payment at
an earlier date does not waive any right we may have to deduct amounts at a
later date. We will deduct any withholding taxes required by applicable law.
Proof of Age and Survival: We have the right to require proof of the owner or
annuitant's age prior to the annuity date. We also reserve the right to require
proof of the owner or annuitant's survival before any annuity payment date.
Modification: We may modify this contract in order to maintain compliance with
applicable state and federal law. This contract may be changed or altered only
by one of our officers. Any change or alteration must be in writing.
Currency: Any money we pay, or that is paid to us, must be in United States
currency.
OWNERSHIP AND ASSIGNMENT
Owner: You, as the owner, have all the interest and rights under this contract.
The owner is designated on the contract date unless changed.
You may change the owner at any time. A change of owner will automatically
revoke any prior designation of owner. A request for change must be made by
written notice. The change will be effective as of the date the written notice
is signed. A new designation of owner will not apply to any payment made or
action taken by us prior to the time the new designation was recorded.
Joint Owner: A contract may be owned by joint owners. Any joint owner must be
the spouse of the other owner, unless limited by state law. Any actions which
are to be performed by the owner, in the case of joint owners, require the
signature of both owners, unless otherwise allowed by us. Upon the death of
either owner, the surviving joint owner will be the primary beneficiary. Any
other beneficiary designation will be treated as a contingent beneficiary unless
otherwise indicated in a written notice.
Annuitant: The person on whose life annuity payments are based. You designate
the annuitant on the contract date, and you may change the annuitant prior to
the annuity date. The annuitant may not be changed in a contract which is owned
by a non-individual. Any change of annuitant is subject to our consent.
Assignment: You may, at any time during your lifetime, assign your rights under
this contract. We will not be bound by any assignments until we record written
notice of the assignment. We are not responsible for the validity or sufficiency
of any assignments. We will not be liable as to any payment or other settlement
we make before we record the assignment.
BENEFICIARY PROVISIONS
Beneficiary: The beneficiary designation in effect on the contract date will
remain in effect unless changed. Unless you provide otherwise, the death benefit
will be paid in equal shares or all to the survivor as follows:
1. to the primary beneficiaries who survive you, and/or the annuitant(s), as
applicable; or if there are none,
2. to the contingent beneficiaries who survive you, and/or the annuitant(s),
as applicable; or if there are none,
3. to your estate.
Changing the Beneficiary: Subject to the rights of any irrevocable beneficiary,
you may change the primary or contingent beneficiary. A change may be made by
filing written notice. The change will take effect as of the date the written
notice is signed. We will not be liable for any payment made or action taken
before we record the change.
PURCHASE PAYMENTS
Purchase Payments: The initial purchase payment is due on the contract date. The
minimum subsequent purchase payments and maximum total purchase payments are
shown on the contract data page. Subject to the minimum and maximum payments
shown on the contract data page, you may increase or decrease or change the
frequency of subsequent purchase payments. We reserve the right to reject any
purchase payment.
Allocation of Purchase Payments: The allocation of purchase payments is made in
accordance with your selection made at the contract date. We reserve the right
to allocate initial purchase payments to the money market or similar subaccount
during the free look period. Unless you elect otherwise, subsequent purchase
payments will be allocated in accordance with your initial selection.
You may change the allocation of purchase payments by written notice. Any
additional purchase payments will be allocated in accordance with the allocation
schedule in effect unless accompanied by written notice requesting a different
allocation. Only whole percentages may be applied. The minimum percentage that
may be allocated is shown on the contract data page. Purchase payments may be
allocated net of any government imposed tax charges.
CONTRACT VALUE
FIXED ACCOUNT
Fixed Account I Value - The value of Fixed Account I at any time is equal to:
1. the purchase payments allocated to Fixed Account I; plus
2. amounts transferred to Fixed Account I; plus
3. any interest credited to Fixed Account I; less
4. any prior withdrawals and withdrawal charges deducted from Fixed Account I;
less
5. any amounts transferred from Fixed Account I; less
6. any applicable taxes or charges deducted from Fixed Account I.
Interest To Be Credited - We guarantee that the interest to be credited to any
fixed account will not be less than the minimum guaranteed interest rate shown
on the contract data page or any supplemental data page. We may credit
additional interest at our sole discretion to Fixed Account I. Declared interest
will be guaranteed one contract year.
THE VARIABLE ACCOUNT
Variable Account: The Variable Account is named on the contract data page and
consists of assets set aside by us, which are kept separate from our general
assets and all of our other Variable Account assets. The assets of the Variable
Account, equal to reserves and other liabilities of your contract and those of
other owners, will not be charged with liabilities arising out of any other
business we may do.
The Variable Account assets are divided into subaccounts. The assets of the
subaccounts are allocated to the investment options shown on the contract data
page.
Investments of the Variable Account: Purchase payments applied to the Variable
Account are allocated to subaccounts. We may, from time to time, add additional
investment options to those options shown on the contract data page. You may be
permitted to transfer contract values to the additional investment option(s).
However, the right to make any transfer will be limited by any terms and
conditions in effect at the time of transfer.
If the shares of any of the investment options become unavailable for investment
by the Variable Account, or if we deem further investment in these shares
inappropriate, we may limit further purchase of such shares or substitute shares
of another investment option for shares already purchased under this contract.
Valuation of Assets: Assets of the Variable Account are valued each business day
at their fair market value in accordance with our procedures.
Change in Operation of the Variable Account: We reserve the right to modify the
structure or operation of the Variable Account. If we do so, we guarantee that
such modification will not affect the value of your contract.
Accumulation Units: Accumulation units shall be used to account for all amounts
allocated to or withdrawn from a subaccount as a result of purchase payments,
transfers, withdrawals, or fees and charges. We will determine the number of
accumulation units of a subaccount purchased or canceled. This is done by
dividing the amount allocated to (or the amount withdrawn from) the subaccount,
by the dollar value of one accumulation unit of the subaccount as of the
business day during which the request for transfer is received at our
Administrative Office.
Accumulation Unit Value: The accumulation unit value for each subaccount was
arbitrarily set at $10. Subsequent accumulation unit values for each subaccount
are determined by multiplying the accumulation unit value for the immediate
preceding business day by the net investment factor of the subaccount for the
current business day. The accumulation unit value may increase or decrease from
business day to business day.
Net Investment Factor: The net investment factor for each subaccount is
determined by dividing (1) by (2) and subtracting (3) from the result, where:
(1) is the result of:
(a) the net asset value per share of the investment option held in the
subaccount, determined at the end of the normal business day; plus
(b) the per share amount of any divided or capital gain distributions made
by the investment option held in the subaccount, if the "ex-dividend"
date occurs as of the current business day; plus or minus
(c) a per share charge or credit for any taxes reserved for, which we
determine to have resulted from the operations of the subaccount.
(2) is the net asset value per share of the investment option held in the
subaccount, determined at the end of the prior business day.
(3) is a daily factor representing the product expense charge deducted from the
subaccount.
TRANSFERS
A transfer is subject to the following:
1. The maximum number of transfers without a transfer fee is shown on the
contract data page;
2. We reserve the right to assess a transfer fee if the number of transfers
exceeds the maximum number of free transfers. We will notify you of the
imposition of any transfer fee. Any transfer fee we may impose is deducted
from the amount which is transferred;
3. You may not make a transfer until after the end of the free look period;
4. The minimum amount which may be transferred is shown on the contract data
page;
5. A transfer will be effected as of the end of the normal business day when
we receive an acceptable transfer request;
6. We are not liable for a transfer made in accordance with your instructions;
7. We reserve the right to restrict transfers between subaccounts to a maximum
of twelve (12) per contract year and to restrict transfers from being made
on consecutive business days. We also reserve the right to restrict
transfers into and out of the any fixed account;
8. Your right to make transfers is subject to modification if we determine, in
our sole opinion, that the exercise of the right by one or more owners is,
or would be, to the disadvantage of other owners. Restrictions may be
applied in any manner reasonably designed to prevent any use of the
transfer right which we considered to be to the disadvantage of other
owners. A modification could be applied to transfers to or from, one or
more of the subaccounts and could include, but is not limited to:
a. the requirement of a minimum time period between each transfer;
b. not accepting a transfer request from an agent acting under a power of
attorney on behalf of more than one owner; or
c. limiting the dollar amount that may be transferred between the
subaccounts by an owner at any one time;
9. During times of severe economic or market conditions, we may suspend the
transfer privilege temporarily without notice and treat transfer requests
based on their separate components (a redemption order with a simultaneous
request for purchase of another subaccount). In such a case, the redemption
order would be processed at the source subaccount's next determined
accumulation unit. However, the purchase into the new subaccount would be
effective at the next determined accumulation unit value for the new
subaccount only after we receive proceeds from the source subaccount, or we
otherwise receive cash on behalf of the source subaccount;
10. Transfers do not change the allocation instructions for future purchase
payments;
11. You may elect to make transfers by telephone. To elect this option you must
first make a written request. If there are joint owners, unless we are
instructed to the contrary, instructions by telephone will be accepted from
either one of the joint owners. We will use reasonable procedures to
confirm that instructions communicated by telephone are genuine;
12. Transfers made during the annuity period are also subject to the following:
a. The number of transfers is limited to the number of transfers set
forth on the contract data page;
b. You may not make a transfer from the general account to a subaccount;
c. The amount transferred to the general account from a subaccount will
be based on current company practice for such requests at the time of
the transfer; and
d. You may not make a transfer within three (3) business days of an
annuity payment date.
WITHDRAWALS
Withdrawals during the Accumulation Period: You may withdraw all of the contract
value at any time. You may withdraw part of the contract value at any time after
the end of the first contract year subject to the following:
1. The minimum partial withdrawal amount is shown on the contract data page.
2. The maximum partial withdrawal is the amount that would leave a minimum
contract value of the amount shown on the contract data page.
Any withdrawal made during the first contract year must be a total withdrawal.
This contract ends when we pay the withdrawal value. The withdrawal value will
be determined as of the date we receive your written notice and this contract.
We will withdraw the amount you request from the contract value as of the day
that we receive your written notice and send that amount to you. We will deduct
any applicable withdrawal and tax charge.
If your written notice does not specify the amount to be withdrawn from each
subaccount or any fixed account, we will make the withdrawal based on the
proportion that each subaccount and each fixed account bears to the contract
value as of the date of the withdrawal.
For purposes of withdrawal charges, all withdrawals will be determined on a
first in, first out basis.
Termination: We may terminate this contract and pay you the withdrawal value, if
before the annuity date your withdrawal will result in your contract value
falling below the minimum stated on the contract data page.
We will mail you a notice of our intent to terminate this contract. This
contract will automatically terminate unless we receive additional purchase
payments in excess of the minimum amount specified on the contract data page
within thirty (30) days.
Minimum Benefit: The value of this contract is at least equal to the minimum
under any nonforfeiture law where this contract has been issued.
PAYMENT OF BENEFITS
Payment of Benefits from Subaccounts: We will make any transfer and will pay the
proceeds of any withdrawal, death benefit or annuity payment within seven
business days after receipt of all written notices and/or due proofs of death.
This payment or transfer may be postponed if:
1. The New York Stock Exchange is closed, other than customary weekend or
holiday closing, or trading on the exchange is restricted as determined by
the Securities and Exchange Commission ("SEC"); or
2. The SEC permits, by an order, the postponement for your protection; or
3. The SEC determines that an emergency exists that would make the disposal of
securities held in the Variable Account or determination of their value not
reasonably practicable.
Right to Defer Payments or Transfers from the fixed account: We have the right
to defer payment of any withdrawal or transfer from the any fixed account for up
to six (6) months from the date we receive your written notice, unless the law
in your state provides otherwise.
DEATH BENEFIT
Minimum Guaranteed Death Benefit: The minimum guaranteed death benefit during
the accumulation period is equal to the greater of:
1. total purchase payments less any withdrawals and related withdrawal
charges; or
2. the contract value determined as of the end of the normal business day
during which we receive both due proof of death and an election for the
payment method.
Death of Owner During the Accumulation Period: Upon your death or the death of
any joint owner during the accumulation period, the death benefit will be paid
to the beneficiary(ies) you had designated. Upon death of a joint owner, the
surviving joint owner, if any, will be treated as the primary beneficiary. Any
other beneficiary designation on record at the time of death will be treated as
a contingent beneficiary.
Death Benefit Options During the Accumulation Period: Unless already selected by
the owner, a beneficiary must elect the death benefit to be paid under one (1)
of the options below in the event of the death of an owner during the
accumulation period. Furthermore, if the beneficiary is the spouse of the owner,
he or she may elect to continue this contract in his or her own name and
exercise all the owner's rights under the contract. In this event, the contract
value will be adjusted to equal the death benefit.
Option 1 - lump sum payment of the death benefit;
Option 2 - payment of the entire death benefit within five (5) years
of the date of the death of the owner or any joint owner; or
Option 3 - payment of the death benefit under an annuity option over
the lifetime of the beneficiary or over a period not extending beyond
the life expectancy of the beneficiary with distribution beginning
within one (1) year of the date of death of the owner or any joint
owner.
Any portion of the death benefit not applied to option 2 within one (1) year of
the date of death of the owner or joint owner must be distributed within five
(5) years of the date of death.
If a lump sum payment is requested, the amount will be paid within seven (7)
days of receipt of proof of death and election, unless payment is postponed as
described above.
Payment to the beneficiary, other than in a single sum, may be elected only
during the 60-day period beginning with the date we receive due proof of death.
Contract value is computed as of the date we receive due proof of death of the
owner. From the time the death benefit is determined until complete distribution
is made, any amount in any subaccount will be subject to investment risk which
is borne by the beneficiary.
Death Benefits on or After the Annuity Date: If the owner or joint owner, who is
not the annuitant, dies after the annuity date, any remaining payments under the
annuity option elected will continue at least as rapidly as under the method of
distribution in effect on the date of the owner's death. Upon the death of the
owner during the annuity period, the beneficiary becomes the new owner.
Death of the Annuitant: Upon the death of an annuitant, who is not the owner,
during the accumulation period, the owner automatically becomes the annuitant.
The owner may designate a new annuitant, subject to the Company's underwriting
rules then in effect. If the owner is a non-natural person, the death of the
primary annuitant will be treated as death of the owner and a new annuitant may
not be designated.
Upon the death of the annuitant during the annuity period, the death benefit, if
any, will be as specified in the annuity option elected. Death benefits will be
paid at least as rapidly as under the method of distribution in effect at the
annuitant's death.
ANNUITY PROVISIONS AND PAYMENT OPTIONS
The Annuity Date: The annuity date may not be sooner than the first day of the
second contract year nor may it be later than the 95th birthday of the
annuitant, or earlier if required by law. Upon your request to annuitize, we
will issue a supplemental contract. If you do not elect an annuity option,
Option 4 with 10 year period certain is the default.
Annuity Payments: Annuity payments start at least 30 days after the annuity
date, provided the annuitant is alive. All annuity payments are made to you,
unless you elect otherwise.
Minimum Annuity Benefit: The minimum annuity benefit will be greater than or
equal to that mandated by law in the state of issue.
Fixed Annuity Payments: Fixed annuity payments are periodic payments that depend
only on the form and duration of the annuity payment option selected, the
annuity value applied to purchase the annuity payments and the age and sex of
the annuitant.
Variable Annuity Payments: The value of a variable annuity payment is based on
the annuity units on the annuity date. The number of annuity units attributable
to each subaccount under a contract remains fixed unless there is an exchange of
annuity units.
Annuity Unit: An annuity unit is the unit of measure used to calculate variable
annuity payments. An annuity unit is calculated by dividing the dollar amount of
the first variable annuity payment attributable to that subaccount by the
accumulation unit value of that subaccount.
Annuity Unit Value: The annuity unit value of each subaccount for any business
day is equal to (a) multiplied by (b) where:
(a) is the net investment factor for the business day for which the annuity
unit value is being calculated;
(b) is the annuity unit value for the preceding valuation period.
Annuity Value: The annuity value is the contract value less any contract
maintenance charge less any applicable taxes.
Payment Option Rate Tables: The amount of monthly payments per $1,000 applied is
shown for a fixed annuity in these tables. For a variable annuity, the tables
show the amount of the first variable annuity payment only. Subsequent variable
annuity payments will change with changes in annuity unit value.
Option 1 - Payment Certain - We pay the annuity value in equal payments as you
specify. The total of all payments made in each year must be at least 5% of the
annuity value applied under this option. The amount of each fixed annuity
payment and the first variable annuity payment for each $1,000 of annuity value
applied is shown in Table 1. The owner has the right of commutation at the
interest rate used for determination of payments less any applicable withdrawal
charges.
Option 2 - Period Certain - We pay the annuity value in equal installments over
a designated period of time you choose of not less than six (6) nor more than
thirty (30) years. The amount of each fixed annuity payment and the first
variable annuity payment for each $1,000 of annuity value applied is shown in
Table 2. The owner has the right of commutation at the interest rate used for
determination of payments less any applicable withdrawal charges.
Option 3 - Life Annuity -- We apply the annuity value to make monthly payments
while the annuitant lives.
Option 4 - Life Annuity with Period Certain - We apply the annuity value to make
monthly payments until the later of the death of the annuitant or the period
certain. The period certain is not to be less than six (6) years nor more than
thirty (30) years. The amount of each fixed annuity payment and the first
variable annuity payment is shown in Table 2. If the annuitant dies during the
period certain payout, the owner has the right of commutation at the interest
rate used for determination of payments .
Option 5 - Joint Life and Survivor Annuity - We apply the annuity value to make
monthly payments while both annuitants are living. After the death of either
annuitant, payments continue as long as the other annuitant still lives. The
amount of each fixed annuity payment and the first variable annuity payment is
shown in Table 3.
Additional Options: We may make other income options available.
<TABLE>
<CAPTION>
TABLE 1 - PAYMENTS CERTAIN (per $1,000 of annuity value applied)
Number Amount of
of Years Specified Installments
Annual Semi-Annual Quarterly Monthly
------ ----------- --------- -------
<S> <C> <C> <C> <C> <C>
6 179.22 90.27 45.30 15.14
7 155.83 78.49 39.39 13.16
8 138.31 69.67 34.96 11.68
9 31.52 10.53 31.52 10.53
10 28.77 9.61 28.77 9.61
11 26.52 8.86 26.52 8.86
12 24.66 8.24 24.66 8.24
13 23.08 7.71 23.08 7.71
14 21.73 7.26 21.73 7.26
15 20.56 6.87 20.56 6.87
16 19.54 6.53 19.54 6.53
17 73.74 37.14 18.64 6.23
18 70.59 35.56 17.84 5.96
19 67.78 34.14 17.13 5.73
20 65.26 32.87 16.50 5.51
25 55.76 28.08 14.09 4.71
30 49.53 24.95 12.52 4.18
</TABLE>
1983(a) mortality tables at 3% interest with a five (5) year setback for females
<TABLE>
<CAPTION>
Table 2 - Period Certain and Life (per $1,000 of annuity value applied)
Number of Number Of Number of
Male Female 15 20 Male Female 15 20 Male Female 15 20
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
16 and 21 and 39 44 $3.59 $3.56 63 68 $5.26 $4.91
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
under under $2.96 $2.96 40 45 3.63 3.60 64 69 5.37 4.97
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
17 22 2.98 2.97 41 46 3.67 3.64 65 70 5.47 5.03
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
18 23 2.99 2.99 42 47 3.72 3.68 66 71 5.57 5.09
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
21 26 3.05 3.05 45 50 3.87 3.82 69 74 5.87 5.23
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
22 27 3.07 3.07 46 51 3.93 3.87 70 75 5.97 5.27
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
23 28 3.09 3.09 47 52 3.98 3.92 71 76 6.06 5.31
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
24 29 3.11 3.11 48 53 4.04 3.98 72 77 6.15 5.35
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
25 30 3.14 3.13 49 54 4.10 4.03 73 78 6.24 5.37
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
26 31 3.16 3.16 50 55 4.17 4.09 74 79 6.32 5.40
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
27 32 3.19 3.18 51 56 4.24 4.15 75 80 6.39 5.42
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
28 33 3.21 3.20 52 57 4.31 4.20 76 81 6.46 5.44
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
29 34 3.24 3.23 53 58 4.38 4.26 77 82 6.52 5.46
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
30 35 3.27 3.26 54 59 4.45 4.33 78 83 6.58 5.47
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
31 36 3.30 3.29 55 60 4.53 4.39 79 84 6.63 5.48
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
32 37 3.33 3.32 56 61 4.61 4.45 80 85 6.67 5.49
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
33 38 3.36 3.35 57 62 4.70 4.52 81 and 6.71 5.50
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
34 39 3.39 3.38 58 63 4.79 4.58 82 over 6.74 5.50
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
35 40 3.43 3.41 59 64 4.88 4.65 83 6.77 5.50
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
36 41 3.47 3.45 60 65 4.97 4.72 84 6.79 5.51
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
37 42 3.50 3.48 61 66 5.07 4.78 85+ 6.81 5.51
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
38 43 3.54 3.52 62 67 5.16 4.85
- ------------ ------------ -------- --------- ------- ----------- -------- --------- ------- ----------- -------- =========
o Use the Payee's age nearest the Date of Settlement.
1983(a) mortality tables at 3% interest with a five (5) year setback for females
o
Joint and Survivor (per $1,000 of annuity value applied)
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
Age of
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
Male Female 60 61 62 63 64 65 66
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
51 56 $3.89 $3.92 $3.94 $3.97 $3.99 $4.01 $4.04
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
52 57 3.93 3.96 3.98 4.01 4.04 4.06 4.08
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
53 58 3.96 3.99 4.02 4.05 4.08 4.11 4.13
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
54 59 4.00 4.03 4.06 4.09 4.12 4.15 4.18
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
55 60 4.03 4.07 4.10 4.14 4.17 4.20 4.23
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
56 61 4.07 4.11 4.14 4.18 4.21 4.25 4.28
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
57 62 4.10 4.14 4.18 4.22 4.26 4.30 4.33
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
58 63 4.14 4.18 4.22 4.26 4.30 4.34 4.38
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
59 64 4.17 4.21 4.26 4.30 4.35 4.39 4.44
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
60 65 4.20 4.25 4.30 4.34 4.39 4.44 4.49
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
61 66 4.23 4.28 4.33 4.38 4.44 4.49 4.54
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
62 67 4.26 4.32 4.37 4.42 4.48 4.53 4.59
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
63 68 4.29 4.35 4.41 4.46 4.52 4.58 4.63
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
64 69 4.32 4.38 4.44 4.50 4.56 4.62 4.68
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
65 70 4.35 4.41 4.47 4.54 4.60 4.66 4.73
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
66 71 4.37 4.44 4.50 4.57 4.64 4.71 4.78
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
67 72 4.40 4.47 4.53 4.60 4.67 4.75 4.82
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
68 73 4.42 4.49 4.56 4.64 4.71 4.79 4.86
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
69 74 4.45 4.52 4.59 4.67 4.74 4.82 4.90
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
70 75 4.47 4.54 4.62 4.70 4.78 4.86 4.94
- ----------------- ----------- ---------- ---------- ---------- -------------- -------------- ------------- ==============
1983(a) mortality tables at 3% interest with a five (5) year setback for females
Joint and Survivor (con't.)
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
Age of
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
Male Female 67 68 69 70 71 72 73 74 75
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
51 56 4.06 4.08 4.10 4.12 4.13 4.15 4.17 4.18 4.19
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
52 57 4.11 4.13 4.15 4.17 4.19 4.21 4.23 4.24 4.26
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
53 58 4.16 4.18 4.21 4.23 4.25 4.27 4.29 4.31 4.33
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
54 59 4.21 4.24 4.26 4.29 4.31 4.33 4.36 4.38 4.40
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
55 60 4.26 4.29 4.32 4.35 4.37 4.40 4.42 4.45 4.47
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
56 61 4.32 4.35 4.38 4.41 4.44 4.47 4.49 4.52 4.54
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
57 62 4.37 4.41 4.44 4.47 4.50 4.53 4.56 4.59 4.62
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
58 63 4.42 4.46 4.50 4.54 4.57 4.60 4.64 4.67 4.70
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
59 64 4.48 4.52 4.56 4.60 4.64 4.67 4.71 4.74 4.78
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
60 65 4.53 4.58 4.62 4.66 4.71 4.75 4.79 4.82 4.86
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
61 66 4.59 4.63 4.68 4.73 4.78 4.82 4.86 4.90 4.94
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
62 67 4.64 4.69 4.74 4.80 4.85 4.89 4.94 4.99 5.03
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
63 68 4.69 4.75 4.81 4.86 4.92 4.97 5.02 5.07 5.12
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
64 69 4.74 4.81 4.87 4.93 4.99 5.05 5.10 5.16 5.21
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
65 70 4.80 4.86 4.93 4.99 5.06 5.12 5.18 5.24 5.30
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
66 71 4.85 4.92 4.99 5.06 5.13 5.19 5.26 5.33 5.39
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
67 72 4.89 4.97 5.05 5.12 5.19 5.27 5.34 5.41 5.48
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
68 73 4.94 5.02 5.10 5.18 5.26 5.34 5.42 5.50 5.58
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
69 74 4.99 5.07 5.16 5.24 5.33 5.41 5.50 5.58 5.67
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
70 75 5.03 5.12 5.21 5.30 5.39 5.48 5.58 5.67 5.76
- ----------------- ---------- ----------- ---------- -------- ---------- ----------- -------- --------- --------- ========
1983(a) mortality tables at 3% interest with a five (5) year setback for females
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
</TABLE>
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
WAIVER OF SURRENDER CHARGE
FOR TERMINAL ILLNESS OR CONFINEMENT RIDER
This rider is part of the contract to which it is attached.
We will waive 100% of the withdrawal charge if your age on the contract date was
75 or less. We will waive 25% of the withdrawal charge if your age on the
contract date was 76 or over. We will make this waiver if you:
1. sustained confinement for a period of at least 30 consecutive days and
remain so confined at the time of withdrawal; or
2. have been diagnosed with a terminal illness which was diagnosed after the
contract date.
Your withdrawal request must include proof of confinement or terminal illness.
The contract must be at least 30 days old when you request the withdrawal.
You must not have been confined in a qualified institution on the contract date.
In the case of joint owners, this rider applies to either joint owner.
If the owner is not a natural person, this waiver applies to the annuitant.
DEFINITIONS
Confinement means confinement as an inpatient in a qualified institution.
Confinement must begin while the contract is in force and must be for treatment
prescribed by a qualified medical professional.
Qualified institution is a licensed hospital or licensed skilled or intermediate
care nursing facility where daily medical treatment is available and daily
medical records are kept for each patient. It is not a facility whose purpose is
to provide accommodations, board or personal care services to individuals who do
not need daily medical or nursing care or a place mainly for rest.
Qualified medical professional means a Medical Doctor (M.D.) or Doctor of
Osteopathy (D.O.) practicing within the scope of his or her license. He or she
is not your sibling, parent, child, sibling-in-law or parent-in-law.
Terminal illness is an illness or physical condition which is reasonably
expected to result in death within 12 months from the date a qualified medical
professional certifies to such fact.
Treatment is the rendering of medical care or advice. Treatment must relate to a
specific medical condition and includes diagnosis and subsequent care. Treatment
does not include routine monitoring unless medically necessary.
Consult with your tax advisor prior to making any withdrawals under this rider.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn Street
Chicago, Illinois 60685 Reading, Pennsylvania 19601
TAX SHELTERED ANNUITY ENDORSEMENT
This Endorsement modifies the Contract to which it is attached so that it may
qualify as a tax-sheltered annuity under Section 403(b) of the Internal Revenue
Code ("Code") and the Regulations under that Section. In the case of a conflict
with any provision in the Contract, the provisions of this Endorsement will
control. The effective date of this Endorsement is the Contract Issue Date shown
on the Contract Data Page. The Contract is modified as follows:
1. Owner. The Owner must be either an organization described in section
403(b)(1(A) of the Code or an individual employee of such an organization.
If the Owner is an organization described in section 403(b)(1)(A) of the
Code, then the individual employee for whose benefit the organization has
established an annuity plan under section 403(b) of the Code must be the
Annuitant under the Contract. If the Owner is an employee of an
organization described in section 403(b)(1(A) of the Code, then such
employee must be the Annuitant under the Contract.
2. The interest of the Annuitant in the Contract shall be nonforfeitable.
3. Non-transferability. Other than in a transaction with the Company, or as
provided below, the interest of the Annuitant under this Contract cannot be
transferred, sold, assigned, discounted, or used as collateral for a loan
or as security for any other purpose. The Annuitant cannot borrow amounts
from this Contract.
These requirements shall not apply to a "qualified domestic relations
order" (as defined in Code Section 414(p)).
4. Purchase Payments must be made by a rollover contribution under Code
Sections 403(b)(8) or 408(d)(3), or a nontaxable transfer from another
contract qualifying under Code Section 403(b) or a custodial account
qualifying under Code Section 403(b)(7). All Purchase Payments must be made
in cash.
5. Distributions During Annuitant's Life. Distributions under this Contract
must commence no later than April 1 of the calendar year following the
later of: a) the calendar year in which the Annuitant attains age 70 1/2;
or b) the calendar year in which the Annuitant retires; (the required
beginning date) over (a) the life of the Annuitant or the lives of the
Annuitant and his or her designated Beneficiary (within the meaning of
Section 401(a)(9) of the Code), or (b) a period certain not extending
beyond the life expectancy of the Annuitant or the joint and last survivor
expectancy of the Annuitant and his or her designated Beneficiary.
If payments under an Annuity Option in the Contract are to be made for a
definite or fixed period, said period cannot, at the time payments are to
commence, exceed the life expectancy of the Annuitant or, if applicable,
the joint and last survivor expectancy of the Annuitant and a designated
Beneficiary, nor may it exceed the applicable maximum period under Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Payments must be made in periodic payments at intervals of no longer than
one year. In addition, payments must either be nonincreasing or may
increase only as provided in Q&A F-3 of section 1.401(a)(9)-1 of the
Proposed Income Tax Regulations.
All distributions under this Contract are subject to the distribution
requirements of Code Section 403(b)(10) and will be made in accordance with
the requirements of section 401(a)(9) of the Code, including the incidental
death benefit requirements of section 401(a)(9)(G) of the Code, and the
regulations thereunder, including the minimum distribution incidental
benefit requirement of section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
6. Minimum Distribution Requirements - After Death. If the Annuitant dies
after required distributions under this Contract are deemed to have begun,
all amounts payable under this Contract must be distributed to the
Beneficiary or to such other person entitled to receive them at least as
rapidly as under the method of distribution in effect prior to the
Annuitant's death.
If the Annuitant dies before distributions have begun, the entire interest
will be distributed by December 31 of the calendar year containing the
fifth anniversary of the Annuitant's death, except that:
(a) if the interest is payable to an individual who is the Annuitant's
designated Beneficiary, the designated Beneficiary may elect to
receive the entire interest over the life of the designated
Beneficiary or over a period not extending beyond the life expectancy
of the designated Beneficiary, commencing on or before December 31 of
the calendar year immediately following the calendar year in which the
Annuitant dies; or
(b) if the designated Beneficiary is the Annuitant's surviving spouse, the
surviving spouse may elect to receive the entire interest over the
life of the surviving spouse or over a period not extending beyond the
life expectancy of the surviving spouse, commencing at any date on or
before the later of i) December 31 of the calendar year immediately
following the calendar year in which the Annuitant died; and
(ii) December 31 of the calendar year in which the Annuitant would
have attained age 70 1/2.
If the surviving spouse dies before distributions begin, the
limitations of this Section 6 (without regard to this paragraph
(b)) will be applied as if the surviving spouse were the
Annuitant.
An irrevocable election of the method of distribution by a
designated Beneficiary who is the surviving spouse must be made
no later than the earlier of December 31 of the calendar year
containing the fifth anniversary of the Annuitant's death or the
date distributions are required to begin pursuant to this
paragraph (b). If no election is made, the entire interest will
be distributed in accordance with the method of distribution in
this paragraph (b).
An irrevocable election of the method of distribution by a designated
Beneficiary who is not the surviving spouse must be made within one
year of the Annuitant's death. If no such election is made, the entire
interest will be distributed by December 31 of the calendar year
containing the fifth anniversary of the Annuitant's death.
Distributions under this section are considered to have begun if
distributions are made on account of the Annuitant reaching his or her
required beginning date or if prior to the required beginning date
distributions irrevocably commence to the Annuitant over a period
permitted and in an annuity form acceptable under Section 1.401(a)(9)
of the Proposed Income Tax Regulations.
7. Life Expectancy Calculations. Life expectancy is computed by use of the
expected return multiples in Tables V and VI of Section 1.72-9 of the
Income Tax Regulations.
If benefits under the Contract are payable in accordance with Annuity
Options under the Contract, life expectancy will not be recalculated. If
required distributions are payable in a form other than under such Annuity
Options, life expectancy will not be recalculated unless permitted by the
Company and annual recalculation is elected at the time distributions are
required to begin (a) by the Annuitant, or (b) for purposes of
distributions beginning after the Annuitant's death, by the surviving
spouse. Such an election will be irrevocable as to the Annuitant and the
surviving spouse, and will apply to all subsequent years.
The life expectancy of a non-spouse designated Beneficiary (a) may not be
recalculated, and (b) will be calculated using the attained age of such
designated Beneficiary during the calendar year in which distributions are
required to begin pursuant to this Endorsement. Payments for any subsequent
calendar year will be calculated based on such life expectancy reduced by
one for each calendar year which has elapsed since the calendar year in
which life expectancy was first calculated.
8. Annuity Options. Except to the extent Treasury regulations allow the
Company to offer different Annuity Options that are agreed to by the
Company, only Annuity Options 1, 2, 3, 4 or 5 will be available to the
Annuitant. Under Option 5, any joint annuitant must either be the
Annuitant's spouse or if a non-spouse, then cannot be more than 10 years
younger than the Annuitant.
9. Premature Distribution Restrictions. Any amounts in the Contract
attributable to contributions made pursuant to a salary reduction agreement
after December 31, 1988, and the earnings on such contributions and on
amounts held on December 31, 1988, may not be distributed unless the
Annuitant has reached age 59 1/2, separated from service, died, become
disabled (within the meaning of Code Section 72(m)(7)) or incurred a
hardship as determined by the organization described in Section 1 of this
Endorsement; provided, that amounts permitted to be distributed in the
event of hardship shall be limited to actual salary deferral contributions
(excluding earnings thereon); and provided further, that amounts may be
distributed pursuant to a qualified domestic relations order to the extent
permitted by section 414(p) of the Code.
Purchase payments made by a nontaxable transfer from a custodial account
qualifying under Code Section 403(b)(7), and earnings on such amounts, will
not be paid or made available before the Annuitant dies, attains age
59 1/2, separates from service, becomes disabled (within the meaning of
Code Section 72(m)(7)), or in the case of such amounts attributable to
contributions made under the custodial account pursuant to a salary
reduction agreement, encounters financial hardship; provided, that amounts
permitted to be paid or made available in the event of hardship will be
limited to actual salary deferral contributions made under the custodial
account (excluding earnings thereon); and provided further, that amounts
may be distributed pursuant to a qualified domestic relations order to the
extent permitted by Section 414(p) of the Code.
10. Direct Rollovers. The Annuitant subject to the terms of the Contract, may
elect to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the Annuitant. An
eligible rollover distribution is any distribution of all or any portion of
the balance to the credit of the Annuitant, except that an eligible
rollover distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Annuitant or the
joint lives (or joint life expectancies) of the Annuitant and the
Annuitant's Beneficiary, or for a specified period of ten years of more;
any distribution required under Code Section 401(a)(9); hardship
distribution; and the portion of any distribution that is not includable in
gross income. An eligible retirement plan is an individual retirement
account described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), or another Code Section 403(b)
tax-sheltered annuity, that accepts the Annuitant's eligible rollover
distribution. However, in the case of an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is only an individual
retirement account or individual retirement annuity. A direct rollover is a
payment by the Company to the eligible retirement plan specified by the
Annuitant.
11. If this Contract is part of a plan which is subject to Title 1 of the
Employee Retirement Income Security Act of 1974 ("ERISA"), any payments and
distributions under this Contract (whether as income, as proceeds payable
at the Annuitant's death, upon partial redemption or full surrender or
otherwise), and any Beneficiary designation, shall be subject to the joint
and survivor annuity and preretirement survivor annuity requirements of
ERISA Section 205.
12. The Company will furnish annual calendar year reports concerning the status
of the annuity.
13. Amendments. The Company may further amend this Contract from time to time
in order to meet any requirements which apply to it under Code Section
403(b) or ERISA.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn Street
Chicago, Illinois 60685 Reading, Pennsylvania 19601
PENSION/ PROFIT SHARING PLAN ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached and is
effective as of the date of the Contract. The following provisions apply to a
Contract which is issued under a Plan qualified under Internal Revenue Code
Section 401. In the case of conflict with any provision in the Contract, the
provisions of this Endorsement will control.
1. The Annuitant of this Contract will be the applicable Participant under the
Plan and the owner of this Contract will be as designated in the Plan.
2. This Contract, and the benefits under it, cannot be sold, assigned,
transferred, discounted, pledged as collateral for a loan or as security
for the performance of an obligation or for any other purpose to any person
other than the Company. The Annuitant cannot borrow amounts from this
Contract.
3. The terms of this Contract and Endorsement are subject to the provisions of
the Plan under which this Contract and Endorsement are issued.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
SYSTEMATIC WITHDRAWAL RIDER
This rider forms a part of the contract to which it is attached.
Before the annuity date, you may choose to receive systematic withdrawals by
written notice. Your payment period may be on a monthly, quarterly, semi-annual
or annual basis. No payment period may begin after the 28th day of any month.
We will make the withdrawals from the subaccounts or Fixed Account I as you
specify. Withdrawals will begin one payment period after we receive your written
notice. Systematic withdrawals are subject to the minimums shown on the contract
data page. The withdrawals may be either:
1. A specified dollar amount; or
2. Specified whole percentages of subaccount or fixed account value.
If a subaccount or fixed account from which withdrawals are made becomes zero,
the systematic withdrawal will be reapportioned among the remaining subaccounts
and fixed account(s).
Once systematic withdrawal payments begin, they will continue until:
1. You tell us to stop payments; or
2. You begin receiving annuity payments; or
3. The contract is canceled due to a total withdrawal or your death.
Systematic withdrawals may be subject to withdrawal charges. Please refer to the
Waiver of Withdrawal Charge provision on the contract data page.
Consult your tax advisor regarding the tax consequences of this or any
withdrawal.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
AUTOMATIC TRANSFER RIDER
This rider forms a part of the contract to which it is attached.
Before the annuity date, you may choose to have us automatically transfer
contract value (on a monthly, quarterly, semi-annual or annual basis) among
subaccounts and Fixed Account I to achieve a particular percentage allocation.
No such transfer may be later than the 28th of the month.
Your choice is made by giving us written notice. The allocation percentages must
be in whole numbers and are subject to the minimums on the contract data page.
You may stop automatic transfer at any time by written notice. We must receive
your written notice at least seven days before the first business day in a new
period. Once automatic transfer has been elected, any subsequent transfer
instructions that differ from the then current instructions are treated as a
request to change the automatic transfer allocation. All changes must be by
written notice.
Automatic transfers do not count as one of the 12 free transfers each contract
year.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
DOLLAR COST AVERAGING RIDER
This rider forms a part of the contract to which it is attached.
If you request dollar cost averaging, we will open a dollar cost averaging
account for you under this contract. All purchase payment(s) applied to this
option will be allocated to the dollar cost averaging account. No transfers may
be made into this account.
Before the annuity date, you may choose to have us transfer a fixed dollar
amount on a monthly basis from the dollar cost averaging account to any of the
subaccounts or Fixed Account I for a 6 or 12 month period. The transfers will
begin when you request but no sooner than seven business days following receipt
of your written notice provided the transfers do not begin until 30 days after
the contract date. Transfers will terminate at the end of the 6 or 12 month
period you designate or within seven business days of your written request to
terminate these transfers.
The interest rate earned on this account will be the interest rate earned in
Fixed Account I, plus any additional interest, which we may declare from time to
time.
To be eligible for dollar cost averaging the following conditions must be met:
1. The value of the dollar cost averaging account must be at least $1,000.
2. The minimum transfer amount must be at least $100 or 10% of the total
amount being transferred.
You may have only one dollar cost averaging account in operation at one time.
Transfers under the dollar cost averaging are made as of the same day every
calendar month. This day may not be later than the 28th of the month. If this
calendar day is not a business day, transfers are made as of the next business
day. There is no additional charge for this option and these transfers do not
count toward the 12 free transfers each contract year.
We reserve the right to discontinue this option at any point in time or change
its features.
If this option is terminated, all money remaining in the dollar cost averaging
account will be transferred to Fixed Account I.
Signed for the Company at its Executive Offices in Chicago, Illinois.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
FIXED ACCOUNT II RIDER
This rider forms a part of the contract to which it is attached. We will issue a
supplemental contract data page showing the effective date of this rider, the
guarantee period(s) selected and interest rate(s) to be credited.
The terms of this rider apply when purchase payments are allocated to Fixed
Account II. This endorsement amends the contract as follows:
I. Free Look
The Free Look provision of the contract also applies to this rider if the
effective date of this rider is the contract date.
II. Fixed Account II
Fixed Account II is added to the fixed account options available under this
contract. Fixed Account II is held in a separate account, not in the
general account. It offers guarantee periods longer than one year during
which the rate of interest credited to the account may not change. The
guarantee period(s) chosen is (are) shown on the supplemental contract data
page. An interest adjustment as described below may be applied if funds are
withdrawn from Fixed Account II before the end of a guarantee period.
After the initial guarantee period(s), the current interest rate for any
subsequent guarantee period of Fixed Account II may change. All interest
payable is compounded daily.
III. Interest Adjustment
If you make total or partial withdrawal or transfer from Fixed Account II
other than at the end of a guarantee period, an interest adjustment will be
made. The interest adjustment with respect to each purchase payment or
transfer allocated from Fixed Account II is: Amount *
{(1+I)/(1+J+0.005)}n/12 - 1
Amount = The amount being withdrawn or transferred less any applicable
contract maintenance charges or transfer processing fees;
I = The guaranteed interest rate in effect on the rider effective date.
J = The current guaranteed interest rate available to new allocations
for the same guarantee period on the withdrawal or transfer date.
n = The number of full months remaining in the term at the time the
withdrawal or transfer is processed.
If the interest adjustment is a negative value, the interest adjustment is
subtracted from the contract value. If the interest adjustment is a
positive value, the interest adjustment is added to the contract value.
The interest adjustment will never result in the contract value allocated
to Fixed Account II being less than the sum of all purchase payments
allocated to Fixed Account II less withdrawals and charges, plus 3%
interest, compounded annually.
There will be no interest adjustment on withdrawals or transfers from a
guarantee period for: a.) a death benefit is paid under the contract; b.)
amounts to pay fees and charges; and c.) amounts withdrawn or transferred
at the end of a guarantee period.
Within each guarantee period of Fixed Account II, withdrawals and transfers
will be determined on a first-in, first-out basis.
IV. Withdrawals and Transfers
Any amount withdrawn or transferred from Fixed Account II other than at the
end of a guarantee period will be subject to the interest adjustment shown
above.
V. Guarantee Period
The initial current guarantee period(s) is (are) shown on a supplemental
contract data page. During the thirty (30) days prior to the end of a
guarantee period, you may: (1) renew for the same or other available
guarantee period at its then current interest rate; or (2) elect to
transfer all or some of the amount to any of the subaccounts or fixed
accounts available under the contract.
Such transfer will be made as of the last business day of a current
guarantee period and will not be subject to any interest adjustment.
If you do not choose a new guarantee period when a current one expires, we
will select a new period. The period we select will be the same or next
closest (choosing a shorter period first then a longer) guarantee period as
had just expired. Such new guarantee period may not extend beyond the
annuity date you chose. If such guarantee period does extend beyond your
chosen annuity date, we will select the longest period which will not
extend beyond that date. The funds in any guarantee period which expires
within one (1) year of the latest annuity date will be allocated to Fixed
Account I.
VI. Multiple Guarantee Periods
You may elect more than one guarantee period subject to our underwriting
rules. Multiple guarantees and guarantee periods of the same duration but
with different effective dates are treated separately for applying the
interest adjustment. We reserve the right to credit different interest
rates to: 1. different guarantee periods; 2. guarantee periods of the same
duration with different effective dates.
VII. Change in Guarantee Period
You may upon written notice change to any guarantee period currently being
offered. If your request is other than at the end of a guarantee period,
the interest adjustment will be applied.
VIII. Fixed Account II Value
The value of Fixed Account II at any time is equal to:
1. the purchase payments allocated to Fixed Account II; plus
2. amounts transferred to Fixed Account II; plus
3. any interest credited to Fixed Account II; less
4. any prior withdrawals and withdrawal charges deducted from Fixed
Account II; less
5. any amounts transferred from Fixed Account II; less
6. any applicable taxes or charges deducted from Fixed Account II.
IX. Deferral of Payments
We reserve the right to defer transfers or withdrawals from Fixed Account
II for up to six months after receipt of written notice, unless the law in
your state provides otherwise.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
rider effective date.
SUPPLEMENTAL CONTRACT DATA PAGE
Fixed Account II Rider
Form Number VAR-112 (6/99)
Issued as a part of this contract.
Rider Effective Date: [November 1, 1999]
Fixed Account II:
Minimum Guaranteed Interest Rate: [3.00%]
[Current Fixed Account II Guarantee Periods: [2, 3, 4, 5, 6, 7, 8, 9, 10]
Current Interest Rates for available guarantee period(s): Each current
interest rate applies only to purchase payments allocated or transferred to
Fixed Account II during the calendar month in which this contract is
issued.
[2 years %
3 years %
4 years %
5 years %
6 years %
7 years %
8 years %
9 years %
10 years %]
After the initial guarantee period, the current interest rate for any
subsequent guarantee period of Fixed Account II may change. All interest
payable is compounded daily.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
ENHANCED DEATH BENEFIT I RIDER
This rider forms a part of the contract to which it is attached. The charge for
the rider is shown on the contract data page.
The Minimum Guaranteed Death Benefit provision is deleted and replaced by the
following:
Before the 85th birthday of the older of the owner or joint owner during the
accumulation period, the enhanced death benefit is equal to the greatest of:
(a) The contract value;
(b) Sum of all purchase payments less all withdrawals, contract maintenance
charges and any tax charges; or
(c) The maximum contract value as described below:
The maximum contract value is equal to the highest contract value on any
contract anniversary, increased by the sum of all purchase payments
received since that anniversary, decreased by the sum of all withdrawals,
maintenance charges and any tax charges since that contract anniversary.
After the 85th birthday of the older of the owner or joint owner during the
accumulation period, the enhanced death benefit is equal to the greatest of (a),
(b) or (c), except that the maximum contract value under (c) above will be as of
the 85th birthday of the older of the owner or joint owner.
There will be no charges deducted for this rider after the older of the owner or
joint owner attains age 85.
If the owner is not a natural person, the person whose life is measured is the
annuitant.
You may terminate this rider at any time. Once terminated it may not be added at
a later date.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
ENHANCED DEATH BENEFIT II RIDER
This rider forms a part of the contract to which it is attached. The charge for
the rider is as shown on the contract data page.
The Minimum Guaranteed Death Benefit provision is deleted and replaced by the
following:
Before the 85th birthday of the older of the owner or joint owner during the
accumulation period, the enhanced death benefit is equal to the greatest of:
(a) The contract value;
(b) Sum of all purchase payments less all withdrawals, contract maintenance
charges and any tax charges; or
(c) The maximum contract value as described below:
The maximum contract value is equal to the sum of all purchase payments,
less the sum of withdrawals and any charges, plus interest credited on a
daily basis until the date of death or until age 85 at the annual rate
shown on the contract data page. The death benefit determined as a result
of this rider shall never be more than two (2) times the result of (b)
above.
After the 85th birthday of the older of the owner or joint owner during the
accumulation period, the enhanced death benefit is equal to the greatest of (a),
(b) or (c), except that the maximum contract value under (c) above will be as of
the 85th birthday of the older of the owner or joint owner.
There will be no charges deducted for this rider after the older of the owner or
joint owner attains age 85.
If the owner is not a natural person, the person whose life is measured is the
annuitant.
You may terminate this rider at any time. Once terminated it may not be added at
a later date.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
ENHANCED DEATH BENEFIT III RIDER
This rider forms a part of the contract to which it is attached. The charge for
the rider is as shown on the contract data page.
The Minimum Guaranteed Death Benefit provision is deleted and replaced by the
following:
Before the 85th birthday of the older of the owner or joint owner during the
accumulation period, the enhanced death benefit is equal to the greatest of:
(a) The contract value;
(b) Sum of all purchase payments less all withdrawals, contract maintenance
charges and any tax charges;
(c) The highest contract value on any contract anniversary, increased by the
sum of all purchase payments received since that anniversary, less the sum
of all withdrawals, maintenance charges and any tax charges since that
contract anniversary; or
(d) The sum of all purchase payments, less the sum of withdrawals and any
charges, plus interest credited on a daily basis until the date of death or
until age 85 at the annual rate shown on the contract data page. The death
benefit determined as a result of this rider shall never be more than two
(2) times the result produced in (b) above.
After the 85th birthday of the older of the owner or joint owner during the
accumulation period, the enhanced death benefit is equal to the greatest of (a),
(b), (c) or (d), except that the values under (c) and (d) above will be as of
the 85th birthday of the older of the owner or joint owner.
There will be no charges deducted for this rider after the older of the owner or
joint owner attains age 85.
If the owner is not a natural person, the person whose life is measured is the
annuitant.
You may terminate this rider at any time. Once terminated it may not be added at
a later date.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
ENHANCED ANNUITY VALUE I RIDER
This rider forms a part of the contract to which it is attached. The charge for
the rider is as shown on the contract data page.
The Annuity Value provision of the contract is deleted and replaced by the
following:
Before the 85th birthday of the older of the owner or joint owner during the
accumulation period, the annuity value is equal to the greatest of:
(a) The contract value;
(b) Sum of all purchase payments less all withdrawals, contract maintenance and
any tax charges; or
(c) The annuity value as described below:
The annuity value is equal to the highest contract value on any contract
anniversary, increased by the sum of all purchase payments received since
that anniversary, and decreased by the sum of all withdrawals, contract
maintenance charges and any tax charges since that contract anniversary.
After the 85th birthday of the older of the owner or joint owner during the
accumulation period, the annuity value is equal to the greatest of (a), (b) or
(c), except that the annuity value under (c) above will be as of the 85th
birthday of the older of the owner or joint owner.
There will be no charges deducted for this rider after the older of the owner or
joint owner attains age 85.
If the owner is not a natural person, the person whose life is measured is the
annuitant.
You may terminate this rider at any time. Once terminated it may not be added at
a later date.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
ENHANCED ANNUITY VALUE II RIDER
This rider forms a part of the contract to which it is attached. The charge for
the rider is as shown on the contract data page.
The Annuity Value provision of the contract is deleted and replaced by the
following:
Before the 85th birthday of the older of the owner or joint owner during the
accumulation period, the annuity value is equal to the greatest of:
(a) The contract value;
(b) Sum of all purchase payments less all withdrawals, contract maintenance
charges and any tax charges; or
(c) The annuity value as described below:
The annuity value is equal to the sum of all purchase payments, less the
sum of withdrawals and any charges, plus interest credited on a daily basis
until age 85 at the annual rate shown on the contract data page. The
annuity value determined as a result of this rider shall never be more than
two (2) times the result of (b) above.
After the 85th birthday of the older of the owner or joint owner during the
accumulation period, the annuity value is equal to the greatest of (a), (b) or
(c) except that the annuity value under (c) above will be as of the 85th
birthday of the older of the owner or joint owner.
There will be no charges deducted for this rider after the older of the owner or
joint owner attains age 85.
If the owner is not a natural person, the person whose life is measured is the
annuitant.
You may terminate this rider at any time. Once terminated it may not be added at
a later date.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
ENHANCED ANNUITY BENEFIT III RIDER
This rider forms a part of the contract to which it is attached. The charge for
the rider is as shown on the contract data page.
The Annuity Value provision of the contract is deleted and replaced by the
following:
Before the 85th birthday of the older of the owner or joint owner during the
accumulation period, the annuity value is equal to the greatest of:
(a) The contract value;
(b) Sum of all purchase payments less all withdrawals, contract maintenance
charges and any tax charges;
(c) The highest contract value on any contract anniversary, increased by the
sum of all purchase payments received since that anniversary, less the sum
of all withdrawals, maintenance charges and any tax charges since that
contract anniversary; or
(d) The sum of all purchase payments, less the sum of withdrawals and any
charges, plus interest credited on a daily basis until age 85 at the annual
rate shown on the contract data page. The annuity value determined as a
result of this rider shall never be more than two (2) times the result of
(b) above.
After the 85th birthday of the older of the owner or joint owner during the
accumulation period, the annuity value is equal to the greatest of (a), (b), (c)
or (d), except that the values under (c) and (d) above will be as of 85th
birthday of the older of the owner or joint owner.
You may terminate this rider at any time. Once terminated it may not be added at
a later date.
If the owner is not a natural person, the person whose life is measured is the
annuitant.
There will be no charges deducted for this rider after the older of the owner or
joint owner attains age 85.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
contract date.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn Street
Chicago, Illinois 60685 Reading, Pennsylvania 19601
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
Valley Forge Life Insurance Company has issued this endorsement as a part of the
contract to which it is attached.
An Individual Retirement Annuity (IRA) is a retirement plan described in the
Internal Revenue Code of 1986, as amended ("Code") Section 408(b). It must
comply with federal IRA requirements. As an IRA, this contract is intended to
qualify under Code Section 408(b) and all provisions of this contract will be
interpreted to ensure and maintain such qualification, despite any other
provisions to the contrary. This contract is for the exclusive benefit of the
owner and the beneficiary. The owner's rights and entire interest in this
contract are nonforfeitable.
Some of the provisions in this endorsement will be different than as described
in the attached contract. The specific differences in your IRA annuity are
described below.
Ownership Provisions
As an IRA, the following conditions apply:
The owner and annuitant must be the same person.
Joint ownership is not allowed.
The owner cannot pledge or assign any interest in this contract to another
person.
The owner cannot transfer ownership, except in the event of divorce or
separation, as allowed by federal IRA requirements.
The owner cannot borrow any amounts from this contract, nor use this contract as
security for a loan.
Contributions
Purchase payments must be paid to us in cash. Except in the case of an allowable
rollover or transfer contribution, or a contribution made according to the terms
of a Simplified Employee Pension (SEP) plan, the total purchase payment for any
taxable year cannot be more than $2,000. We reserve the right to return any
portion of a purchase payment that represents an excess contribution.
No contribution will be accepted under a SIMPLE plan established by any employer
pursuant to Code Section 408(p). No transfer or rollover of funds attributable
to contributions made by a particular employer under its SIMPLE plan will be
accepted from a SIMPLE IRA, (an IRA used in conjunction with a SIMPLE plan)
prior to the expiration of the two (2) year period beginning on the date the
owner first participated in the employer's SIMPLE plan.
Required Minimum Distributions
Federal law requires that the owner begin receiving payments from any or all IRA
contracts no later than the April 1 following the year the owner turns age 70
1/2 (the required beginning date). If settlement option payments start prior to
the April 1 following the year the owner turns age 70 1/2, then the annuity date
of such settlement option payments will be treated as the required beginning
date for the purposes of the death benefit provisions below. If the required
minimum distribution is made under an annuity option, recalculation will not be
allowed. If the required minimum distribution is made under other than an
annuity option, recalculation is allowed. The owner may take required minimum
distributions from any IRA contract he or she currently maintains, as long as:
Distributions begin when required;
Periodic payments must be made at least once per year; and
The amount to be distributed each year is not less than the minimum required
under current federal law.
The required minimum distribution payments from this contract are considered
partial withdrawals. The amount of each withdrawal during any calendar year must
meet federal IRA requirements and be in equal or substantially equal amounts
over:
The life of the owner or over the joint lives of the owner and the beneficiary;
or
A period not extending beyond the life expectancy of the owner or the joint life
expectancy of the owner and the beneficiary.
Required minimum distribution payments will be made annually and the amount will
not increase or will increase only as allowed under federal tax law.
Life Expectancy
Life expectancy is:
The remaining life of the owner;
The remaining joint life expectancy of both the owner and the beneficiary; or
The remaining life expectancy of the beneficiary.
The life expectancy of the owner or the joint life expectancy of the owner and
the beneficiary are calculated by use of the return multiples in Tables V and VI
of Income Tax Regulation Section 1.72-9.
Before required minimum distributions begin, the owner may choose to have his or
her life expectancy determined under the age recalculation or no age
recalculation method as determined under federal law. If the owner does not make
an election before the required beginning date, the life expectancy of the owner
will be recalculated annually. After an election is made, it may not be changed
and will apply to all subsequent years in which required minimum distributions
are made.
If the owner dies before the required beginning date and the beneficiary is the
owner's surviving spouse, then such beneficiary may also choose to have his or
her life expectancy determined under the age recalculation or no age
recalculation method. Once the owner's surviving spouse makes an election, such
election may not be changed and will apply to all subsequent years. If the
owner's surviving spouse does not make an election by the time distributions are
scheduled to begin under the Death Provisions, the surviving spouse's life
expectancy will be recalculated annually for all years and may not be changed.
In all cases, if the beneficiary is not the owner's surviving spouse, his or her
life expectancy may not be recalculated and will be determined using his or her
attained age on the date settlement option payments or any other distribution is
scheduled to begin. Payments for subsequent years will be based on such life
expectancy reduced by one year for each calendar year which has elapsed since
the calendar year in which the life expectancy of the non-spouse beneficiary was
first calculated.
Death Provisions
If the owner dies before the required beginning date, the entire death benefit
must:
Be completely distributed no later than December 31 of the fifth year following
the year the owner died; or
Begin to be distributed under one of the options available to the beneficiary,
as described below.
The following options are available to the beneficiary as soon as we receive
proof of the owner's death.
The beneficiary may elect to receive the death benefit in the form of settlement
option payments from us. The option selected must pay out equal or substantially
equal amounts over the beneficiary's life or over a period not extending beyond
the beneficiary's life expectancy. Once settlement option payments begin, no
changes may be made to the selected option.
If the beneficiary is the owner's surviving spouse, he or she will become the
new owner/annuitant and can continue this IRA on the same basis as before the
owner's death.
If the owner's surviving spouse does not wish to continue this contract as his
or her own IRA, he or she may elect to receive the death benefit in the form of
settlement option payments. Such payments must be in equal or substantially
equal amounts over the spouse's life or a period not extending beyond his or her
life expectancy.
The surviving spouse must elect this option and begin receiving payments no
later than the earliest of the following dates:
December 31 of the year following the year the owner died; or
December 31 of the year in which the owner would have reached the required
beginning date if he or she had not died.
If the owner dies after the required beginning date, we will continue to
distribute the remaining death benefit at least as rapidly as under the
settlement option in effect at the date of the owner's death.
Signed for the Company at its Executive Office, in Chicago, Illinois.
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn Street
Chicago, Illinois 60685 Reading, Pennsylvania 19601
ROTH INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
This endorsement is made a part of the annuity contract to which it is attached,
and the following provisions apply in lieu of any provisions in the contract to
the contrary. The provisions of this endorsement meet the requirements of
Section 408A and have been automatically approved by the Internal Revenue
Service (IRS).
The annuitant is establishing a Roth individual retirement annuity (Roth IRA)
under Section 408A to provide for his or her retirement and for the support of
his or her beneficiaries after death. The contract is for the exclusive benefit
of the annuitant or his or her beneficiaries.
This Roth IRA can be used by an annuitant to hold:
(a) IRA Conversion Contributions, amounts rolled over or transferred from
another Roth IRA, and annual cash contributions of up to $2,000 from
the annuitant; and
(b) If designated as a Roth Conversion IRA, only IRA Conversion
Contributions for the same tax year.
Article I - If this Roth IRA is not designated as a Roth Conversion IRA, then,
except in the case of a rollover contribution described in Section 408A(e), the
Issuer will accept only cash contributions and only up to the maximum amount of
$2,000 for any tax year of the annuitant.
If this Roth IRA is designated as Roth Conversion IRA, no contributions other
than IRA Conversion Contributions made during the same tax year will be
accepted.
Article II - The $2,000 limit described in Article I is gradually reduced to $0
between certain levels of adjusted gross income (AGI). For a single annuitant,
the $2,000 annual contribution is phased out between AGI of $95,000 and
$110,000; for a married annuitant who files jointly, between AGI of $150,000 and
$160,000; and for a married annuitant who files separately, between $0 and
$10,000. In the case of a conversion, the Issuer will not accept IRA Conversion
Contributions in a tax year if the annuitant's AGI for that tax year exceeds
$100,000 or if the annuitant is married and files a separate return. Adjusted
gross income is defined in Section 408A(c)(3) and does not include IRA
Conversion Contributions.
Article III - The annuitant's interest in the contract is nonforfeitable and
nontransferable.
Article IV - The contract does not require fixed contributions.
Article V - If the annuitant dies before his or her entire interest in the
contract is distributed to him or her and the annuitant's surviving spouse is
not the sole beneficiary, the entire remaining interest will, at the election of
the annuitant or, if the annuitant has not so elected, at the election of the
beneficiary, either:
(a) Be distributed by December 31 of the calendar year containing the
fifth anniversary of the annuitant's death; or
(b) Be distributed over the life, or a period not longer than the life
expectancy, of the designated beneficiary starting no later than
December 31 of the calendar year following the calendar year of the
annuitant's death. Life expectancy is computed using the expected
return multiples in Table V of section 1.72-9 of the Income Tax
Regulations.
If distributions do not begin by the date described in (b), distribution method
(a) will apply.
If the annuitant's spouse is the sole beneficiary on the annuitant's date of
death, such spouse will then be treated as the annuitant.
Article VI - The annuitant agrees to provide the Issuer with information
necessary for the Issuer to prepare any reports required under Sections 408(I)
and 408A(d)(3)(E), and Regulations sections 1.408-5 and 1.408-6, and under
guidance published by the IRS. The Issuer agrees to submit reports to the IRS
and the annuitant as prescribed by the IRS.
Article VII - Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through IV and this sentence will be
controlling. Any additional articles that are not consistent with Section 408A,
the related regulations, and other published guidance will be invalid.
Article VIII - This endorsement will be amended from time to time to comply with
the provisions of the Code, related regulations, and other published guidance.
Other amendments may be made with the consent of the persons whose signatures
appear on the contract.
Article IX - This article contains additional information and amendments as they
relate to the annuity contract to which this endorsement is attached.
Definitions - For purposes of this endorsement, the following definitions apply:
Annuity Contract - The "annuity contract" is the legal document which evidences
the establishment of the Roth IRA, whether such document is referred to as
"annuity contract", "policy", "contract" or "certificate".
Annuitant - The "annuitant" is the person who establishes the annuity contract,
whether the annuity contract refers to such person as "owner",
"owner/annuitant', "you" or "participant". While such person is living, he or
she shall be the sole annuitant.
Contribution - The term "contribution" means any amount paid to the Issuer under
the annuity contract, whether the annuity contract refers to such payment as
"premium", "purchase payment", or "single premium". In all cases, the
contribution must be in cash.
IRA Conversion Contribution - Amounts rolled over, transferred, or considered
transferred from a non- Roth IRA to a Roth IRA. A non-Roth IRA is an individual
retirement account or annuity described in Section 408(a) or 408(b), other than
a Roth IRA.
Issuer - The "Issuer" is Valley Forge Life Insurance Company, whether the
annuity contract refers to the Issuer as "Company" or "us".
Roth Conversion IRA - A Roth IRA that accepts only IRA Conversion Contributions
made during the same tax year.
Section - The term "section" refers to sections of the Internal Revenue Code of
1986, as amended, unless otherwise noted.
Tax Qualification - The annuity contract as amended by this endorsement is
intended to qualify as part of a tax-qualified retirement plan, arrangement or
contract that meets the requirements of Section 408A (a "Roth IRA"). To that
end, the provisions of this endorsement and the annuity contract, including any
other rider or endorsements, are to be interpreted to ensure or maintain such
tax qualification, notwithstanding any other provisions to the contrary. The
Issuer reserves the right to amend this endorsement or the annuity contract to
reflect any clarifications that may be needed or are appropriate to maintain
such tax qualification or to conform the annuity contract to any applicable
changes in the tax qualification requirements. The Issuer will send the
annuitant a copy of any such amendment. If the annuitant refuses such an
amendment, it must be given to the Issuer in writing. The annuitant's refusal
may result in adverse tax consequences.
Signed for the Company at its Executive Office in Chicago, Illinois.
VALLEY FORGE LIFE INSURANCE COMPANY
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn Street
Chicago, Illinois 60685 Reading, Pennsylvania 19601
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
Valley Forge Life Insurance Company has issued this endorsement as a part of the
contract to which it is attached.
An Individual Retirement Annuity (IRA) is a retirement plan described in the
Internal Revenue Code of 1986, as amended ("Code") Section 408(b). It must
comply with federal IRA requirements. As an IRA, this contract is intended to
qualify under Code Section 408(b) and all provisions of this contract will be
interpreted to ensure and maintain such qualification, despite any other
provisions to the contrary. This contract is for the exclusive benefit of the
owner and the beneficiary. The owner's rights and entire interest in this
contract are nonforfeitable.
Some of the provisions in this endorsement will be different than as described
in the attached contract. The specific differences in your IRA annuity are
described below.
Ownership Provisions
As an IRA, the following conditions apply:
The owner and annuitant must be the same person.
Joint ownership is not allowed.
The owner cannot pledge or assign any interest in this contract to another
person.
The owner cannot transfer ownership, except in the event of divorce or
separation, as allowed by federal IRA requirements.
The owner cannot borrow any amounts from this contract, nor use this contract as
security for a loan.
Contributions
Purchase payments must be paid to us in cash. Except in the case of an allowable
rollover or transfer contribution, or a contribution made according to the terms
of a Simplified Employee Pension (SEP) plan, the total purchase payment for any
taxable year cannot be more than $2,000. We reserve the right to return any
portion of a purchase payment that represents an excess contribution.
No contribution will be accepted under a SIMPLE plan established by any employer
pursuant to Code Section 408(p). No transfer or rollover of funds attributable
to contributions made by a particular employer under its SIMPLE plan will be
accepted from a SIMPLE IRA, (an IRA used in conjunction with a SIMPLE plan)
prior to the expiration of the two (2) year period beginning on the date the
owner first participated in the employer's SIMPLE plan.
Required Minimum Distributions
Federal law requires that the owner begin receiving payments from any or all IRA
contracts no later than the April 1 following the year the owner turns age 70
1/2 (the required beginning date). If settlement option payments start prior to
the April 1 following the year the owner turns age 70 1/2, then the annuity date
of such settlement option payments will be treated as the required beginning
date for the purposes of the death benefit provisions below. If the required
minimum distribution is made under an annuity option, recalculation will not be
allowed. If the required minimum distribution is made under other than an
annuity option, recalculation is allowed. The owner may take required minimum
distributions from any IRA contract he or she currently maintains, as long as:
Distributions begin when required;
Periodic payments must be made at least once per year; and
The amount to be distributed each year is not less than the minimum required
under current federal law.
The required minimum distribution payments from this contract are considered
partial withdrawals. The amount of each withdrawal during any calendar year must
meet federal IRA requirements and be in equal or substantially equal amounts
over:
The life of the owner or over the joint lives of the owner and the beneficiary;
or
A period not extending beyond the life expectancy of the owner or the joint life
expectancy of the owner and the beneficiary.
Required minimum distribution payments will be made annually and the amount will
not increase or will increase only as allowed under federal tax law.
Life Expectancy
Life expectancy is:
The remaining life of the owner;
The remaining joint life expectancy of both the owner and the beneficiary; or
The remaining life expectancy of the beneficiary.
The life expectancy of the owner or the joint life expectancy of the owner and
the beneficiary are calculated by use of the return multiples in Tables V and VI
of Income Tax Regulation Section 1.72-9.
Before required minimum distributions begin, the owner may choose to have his or
her life expectancy determined under the age recalculation or no age
recalculation method as determined under federal law. If the owner does not make
an election before the required beginning date, the life expectancy of the owner
will be recalculated annually. After an election is made, it may not be changed
and will apply to all subsequent years in which required minimum distributions
are made.
If the owner dies before the required beginning date and the beneficiary is the
owner's surviving spouse, then such beneficiary may also choose to have his or
her life expectancy determined under the age recalculation or no age
recalculation method. Once the owner's surviving spouse makes an election, such
election may not be changed and will apply to all subsequent years. If the
owner's surviving spouse does not make an election by the time distributions are
scheduled to begin under the Death Provisions, the surviving spouse's life
expectancy will be recalculated annually for all years and may not be changed.
In all cases, if the beneficiary is not the owner's surviving spouse, his or her
life expectancy may not be recalculated and will be determined using his or her
attained age on the date settlement option payments or any other distribution is
scheduled to begin. Payments for subsequent years will be based on such life
expectancy reduced by one year for each calendar year which has elapsed since
the calendar year in which the life expectancy of the non-spouse beneficiary was
first calculated.
Death Provisions
If the owner dies before the required beginning date, the entire death benefit
must:
Be completely distributed no later than December 31 of the fifth year following
the year the owner died; or
Begin to be distributed under one of the options available to the beneficiary,
as described below.
The following options are available to the beneficiary as soon as we receive
proof of the owner's death.
The beneficiary may elect to receive the death benefit in the form of settlement
option payments from us. The option selected must pay out equal or substantially
equal amounts over the beneficiary's life or over a period not extending beyond
the beneficiary's life expectancy. Once settlement option payments begin, no
changes may be made to the selected option.
If the beneficiary is the owner's surviving spouse, he or she will become the
new owner/annuitant and can continue this IRA on the same basis as before the
owner's death.
If the owner's surviving spouse does not wish to continue this contract as his
or her own IRA, he or she may elect to receive the death benefit in the form of
settlement option payments. Such payments must be in equal or substantially
equal amounts over the spouse's life or a period not extending beyond his or her
life expectancy.
The surviving spouse must elect this option and begin receiving payments no
later than the earliest of the following dates:
December 31 of the year following the year the owner died; or
December 31 of the year in which the owner would have reached the required
beginning date if he or she had not died.
If the owner dies after the required beginning date, we will continue to
distribute the remaining death benefit at least as rapidly as under the
settlement option in effect at the date of the owner's death.
Signed for the Company at its Executive Office, in Chicago, Illinois.
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 16 day of June, 1999, between JANUS ASPEN
SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and CONTINENTAL ASSURANCE COMPANY, a life
insurance company organized under the laws of the State of Illinois (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Accounts").
W I T N E S S E T H :
---------------------
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the " 1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and Exchange
Commission granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b)
of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the
extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless registration
is not required under applicable law) certain variable life insurance policies
and/or variable annuity contracts under the 1933 Act (the "Contracts"); and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more Portfolios as
an investment vehicle of the Accounts;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
Sale of Trust Shares
--------------------
1.1 The Trust shall make shares of its Portfolios available to the Accounts
at the net asset value next computed after receipt of such purchase order by the
Trust (or its agent), as established in accordance with the provisions of the
then current prospectus of the Trust. Shares of a particular Portfolio of the
Trust shall be ordered in such quantities and at such times as determined by the
Company to be necessary to meet the requirements of the Contracts. The Trustees
of the Trust (the "Trustees") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.2 The Trust will redeem any full or fractional shares of any Portfolio
when requested by the Company on behalf of an Account at the net asset value
next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints the
Company as its agent for the limited purpose of receiving and accepting purchase
and redemption orders resulting from investment in and payments under the
Contracts. Receipt by the Company shall constitute receipt by the Trust provided
that i) such orders are received by the Company in good order prior to the time
the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 10:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance with
Section 1.3 shall be paid for no later than 12:00 noon New York time on the same
Business Day that the Trust receives notice of the order. Payments shall be made
in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account. Shares
ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7 The Trust shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 6 p.m. New York time.
1.8 The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company agrees
that Trust shares will be used only for the purposes of funding the Contracts
and Accounts listed in Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.8 and Article IV of
this Agreement.
ARTICLE II
Obligations of the Parties
--------------------------
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide the
Company (at the Company's expense) with as many copies of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request; or (b) provide the Company with a
camera ready copy of such documents in a form suitable for printing. The Trust
shall provide the Company with a copy of its statement of additional information
in a form suitable for duplication by the Company. The Trust (at its expense)
shall provide the Company with copies of any Trust-sponsored proxy materials in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
2.3 (a) The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
(b) If the Company elects to include any materials provided by the Trust,
specifically prospectuses, SAIs, shareholder reports and proxy materials, on its
web site or in any other computer or electronic format, the Company assumes sole
responsibility for maintaining such materials in the form provided by the Trust
and for promptly replacing such materials with all updates provided by the
Trust.
2.4 The Company agrees and acknowledges that the Trust's adviser, Janus
Capital Corporation (" Janus Capital"), is the sole owner of the name and mark
"Janus" and that all use of any designation comprised in whole or part of Janus
(a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of Janus
Capital. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to the Trust or
its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The Company
shall furnish, or shall cause to be furnished, to the Trust or its designee,
each piece of sales literature or other promotional material in which the Trust
or its investment adviser is named, at least fifteen Business Days prior to its
use. No such material shall be used if the Trust or its designee reasonably
objects to such use within fifteen Business Days after receipt of such material.
2.6 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or its investment
adviser in connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Trust shares (as such registration statement and
prospectus may be amended or supplemented from time to time), reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as required
by legal process or regulatory authorities or with the written permission of the
Trust or its designee.
2.7 The Trust shall not give any information or make any representations or
statements on behalf of the Company or concerning the Company, the Accounts or
the Contracts other than information or representations contained in and
accurately derived from the registration statement or prospectus for the
Contracts (as such registration statement and prospectus may be amended or
supplemented from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials, except
as required by legal process or regulatory authorities or with the written
permission of the Company.
2.8 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
2.9 The Company shall notify the Trust of any applicable state insurance
laws that restrict the Portfolios' investments or otherwise affect the operation
of the Trust and shall notify the Trust of any changes in such laws.
ARTICLE III
Representations and Warranties
------------------------------
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Illinois and
that it has legally and validly established each Account as a segregated asset
account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that each Account has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act.
3.3 The Company represents and warrants that the Contracts or interests in
the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that it will take
reasonable steps to ensure that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and the sale of the Contracts shall comply in all material respects with state
insurance suitability requirements.
3.4 Each party to this Agreement represents and warrants that it has taken,
or will take, appropriate measures to adjust its computer systems so that its
operations and services provided under this agreement will not be materially
affected upon January 1, 2000. If the operations and services are materially
affected by a party's failure to implement any Year 2000 required adjustments,
such party shall indemnify and hold harmless the other parties to this Agreement
from and against all claims, demands, actions, losses, damages, liabilities,
costs, charges, reasonable counsel fees and expenses incurred as a result of
such failure, in accordance with Section 2. No party shall be liable for any
indirect, special or consequential losses, even if the party has notice of the
possibility of such losses.
3.5 The Trust represents and warrants that it is duly organized and validly
existing under the laws of the State of Delaware.
3.6 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
3.7 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
ARTICLE IV
Potential Conflicts
-------------------
4.1 The parties acknowledge that the Trust's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a variety
of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of its
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Exemptive Order) on terms and conditions materially different
from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 6e-3, as adopted, to the extent such
rules are applicable.
ARTICLE V
Indemnification
---------------
5.1 Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Trust and each of its Trustees, officers, employees and agents
and each person, if any, who controls the Trust within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a registration
statement or prospectus for the Contracts or in the Contracts themselves or
in sales literature generated or approved by the Company on behalf of the
Contracts or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and was accurately derived from written information furnished to the
Company by or on behalf of the Trust for use in Company Documents or
otherwise for use in connection with the sale of the Contracts or Trust
shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Trust Documents as defined in Section 5.2(a)) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as defined in
Section 5.2(a) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was made in
reliance upon and accurately derived from written information furnished to
the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to provide
the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company.
5.2 Indemnification By the Trust. The Trust agrees to indemnify and hold
harmless the Company and each of its directors, officers, employees and agents
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Trust (or any amendment or supplement
thereto), (collectively, "Trust Documents" for the purposes of this Article
V), or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to the Trust by or on
behalf of the Company for use in Trust Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Company Documents) or wrongful conduct of the Trust or persons under its
control, with respect to the sale or acquisition of the Contracts or Trust
shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived from
written information furnished to the Company by or on behalf of the Trust;
or
(d) arise out of or result from any failure by the Trust to provide
the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Trust.
5.3 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice of
service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
Party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties, the
indemnifying party shall be entitled to participate, at its own expense, in the
defense of such action. The indemnifying party also shall be entitled to assume
the defense thereof, with counsel reasonably satisfactory to the party named in
the action. After notice from the indemnifying party to the Indemnified Party of
an election to assume such defense, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
ARTICLE VI
Termination
-----------
6.1 This Agreement may be terminated by either party for any reason by
ninety (90) days advance written notice delivered to the other party.
6.2 Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares of the
Trust (or any Portfolio) pursuant to the terms and conditions of this Agreement
for all Contracts in effect on the effective date of termination of this
Agreement, provided that the Company continues to pay the costs set forth in
Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
Janus Aspen Series
100 Fillmore Street
Denver, Colorado 80206
Attention: General Counsel
If to the Company:
Continental Assurance Company
Variable Life Insurance Products - 34 South
CNA Plaza
Chicago, IL 60611
Attention: Kevin Hogan
ARTICLE VIII
Miscellaneous
-------------
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc., and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.8 The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Participation Agreement as of the date and year first above
written.
JANUS ASPEN SERIES
By: /s/ BONNIE HOWE
Name: Bonnie M. Howe
Title: Assistant Vice President
CONTINENTAL ASSURANCE COMPANY
By: /s/ KEVIN M. HOGAN
Name: Kevin M. Hogan
Title: Vice President
Schedule A
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Continental Assurance Company CNA Capital Select VA
Variable Annuity Separate Account
January 30, 1996
Continental Assurance Company CNA Capital Select VUL
Variable Life Separate Account
January 30, 1996
