As Filed with the Securities and Exchange Commission on September 4, 1996
Registration No. 333-01949
811-7569
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-6EL24
PRE-EFFECTIVE AMENDMENT NO. 1
TO REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE
LIFE SEPARATE ACCOUNT
(Exact name of trust)
VALLEY FORGE LIFE INSURANCE COMPANY
(Name of depositor)
CNA Plaza, 43 South
Chicago, Illinois 60685
(Complete address of depositor's principal executive offices)
Corporate Secretary
Continental Assurance Company
CNA Plaza, 43 South
Chicago, Illinois 60685
(Name and complete address of agent for service)
Copy to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2404
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement
Securities Being Offered: Individual Flexible Premium Variable Life Insurance
Policies.
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the
Registrant has elected to register an indefinite amount of the securities being
offered. The $500 registration fee pursuant to Rule 24f-2 was paid with the
initial filing on March 25, 1996.
The Registrant hereby amends this Registration Statement on such dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE
LIFE SEPARATE ACCOUNT
VALLEY FORGE LIFE INSURANCE COMPANY
Cross Reference to Items Required by Form N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
1 Cover Page
2 Cover Page
3 Not Applicable
4 Sale of the Policies
5 The Variable Account
6 The Variable Account
7 Not Applicable
8 Not Applicable
9 Legal Matters
10 Summary and Diagram of the Policy; The Policy;
Withdrawal Privilege; Surrender Privilege; Transfers
of Policy Values; Premium Payments; Net Premium
Allocations; Voting Privileges; Modification of the
Policy
11 The Funds
12 The Funds
13 Charges and Deductions
14 Purchasing a Policy
15 Premium Payments; Net Premium Allocations
16 Net Premium Allocations; Variable Policy Value;
The Funds
17 Withdrawal Privilege; Surrender Privilege
18 The Variable Account
19 Reports to Owners
20 Other Policy Benefits and Provisions
21 Policy Loans
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 The Company; Other Information About the Policies and
the Company
26 Charges and Deductions
27 The Company; Other Information About the Policies and
the Company
28 The Company Directors and Executive Officers
29 The Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 The Variable Account
<PAGE>
36 Not Applicable
37 Not Applicable
38 Sale of the Policies
39 Sale of the Policies
40 Sale of the Policies
41 Sale of the Policies
42 Not Applicable
43 Not Applicable
44 Variable Policy Value
45 Not Applicable
46 Variable Policy Value
47 The Variable Account; The Funds
48 The Company
49 Not Applicable
50 Not Applicable
51 The Policy; Other Policy Benefits and Provisions
52 The Variable Account
53 Tax Considerations
54 Not Applicable
55 Illustrations of Policy Values, Surrender Values,
Death Benefits and Accumulated
Premium Payments
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
<PAGE>
PROSPECTUS
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE AND FIXED LIFE INSURANCE POLICY
Issued by
VALLEY FORGE LIFE INSURANCE COMPANY AND
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT
This prospectus describes an individual flexible premium variable and fixed life
insurance policy (the "Policy") offered by Valley Forge Life Insurance Company
(the "Company"). The Policy is designed to provide insurance protection on the
life of the Insured named in the Policy, and at the same time provide the Owner
with the flexibility to vary the amount and timing of premium payments and,
within certain limits, to change the amount of Death Benefits payable under the
Policy. This flexibility permits the Owner to provide for changing insurance
needs with a single insurance policy.
The Owner may, within limits, allocate Net Premium Payments and Policy Value to
one or more Subaccounts of the Valley Forge Life Insurance Company Variable Life
Separate Account (the "Variable Account") and the Company's general account (the
"Fixed Account"). Discussions of values under the Policy in this prospectus
generally relate only to the values allocated to the Variable Account. The
assets of each Subaccount of the Variable Account are invested in a
corresponding investment portfolio (each, a "Fund") of The Alger American Fund,
Federated Insurance Series, MFS Variable Insurance Trust, Sogen Variable Funds,
Inc., Van Eck Worldwide Insurance Trust and Fidelity Variable Insurance Products
Funds I and II.
The prospectuses for the Funds describe the investment objectives and risks of
investing in the Subaccount corresponding to each. The Owner bears the entire
investment risk for Policy Value allocated to a Subaccount. Consequently, except
as to Policy Value allocated to the Fixed Account, the Policy has no guaranteed
minimum Policy Value.
It may not be advantageous to replace existing insurance with this Policy.
Within certain limits, you may return the Policy, or convert it to a Policy that
provides benefits that do not vary with the investment results of the Variable
Account by exercising the Special Transfer Right.
Please read this prospectus and the prospectus for the Funds carefully and
retain both for future reference. This prospectus must be accompanied or
preceded by the current prospectuses for the Funds.
AN INVESTMENT IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR IS THE POLICY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
POLICY INVOLVES CERTAIN RISKS, INCLUDING THE LOSS RISK OF PREMIUM PAYMENTS
(PRINCIPAL).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
SEPTEMBER __, 1996
<PAGE>
TABLE OF CONTENTS
DEFINITIONS.................................................................
SUMMARY AND DIAGRAM OF THE POLICY...........................................
GENERAL INFORMATION ABOUT THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS...
The Company............................................................
The Variable Account...................................................
The Funds..............................................................
THE POLICY..................................................................
Purchasing a Policy....................................................
Cancellation Privilege.................................................
Premium Payments.......................................................
Net Premium Allocations................................................
Policy Lapse and Reinstatement.........................................
Variable Policy Value..................................................
Fixed Policy Value.....................................................
Transfers of Policy Values.............................................
Surrender Privilege....................................................
Withdrawal Privilege...................................................
Policy Loans...........................................................
Maturity Benefits......................................................
Death Benefit Proceeds.................................................
Settlement Options.....................................................
Telephone Transaction Privileges.......................................
THE FIXED ACCOUNT...........................................................
The Fixed Account......................................................
Interest Credited on Fixed Policy Value................................
CHARGES AND DEDUCTIONS......................................................
Sales Charges..........................................................
Premium Tax Charge.....................................................
Federal Tax Charge.....................................................
Surrender Charge.......................................................
Other Taxes............................................................
Monthly Deduction......................................................
Daily Mortality and Expense Risk Charge................................
Transfer Processing Fee................................................
Fund Expenses..........................................................
OTHER POLICY BENEFITS AND PROVISIONS........................................
Ownership..............................................................
The Company's Right to Contest the Policy..............................
Suicide Exclusion......................................................
<PAGE>
Misstatement of Age or Sex.............................................
Modification of the Policy.............................................
Suspension or Delay in Payments........................................
Reports to Owners......................................................
Supplemental Benefits and/or Riders....................................
TAX CONSIDERATIONS..........................................................
Tax Status of the Policies.............................................
Tax Treatment of Policy Benefits.......................................
OTHER INFORMATION ABOUT THE POLICIES AND THE COMPANY........................
Sale of the Policies...................................................
Voting Privileges......................................................
The Company Directors and Executive Officers...........................
Company Holidays.......................................................
State Regulation.......................................................
Additional Information.................................................
Experts................................................................
Legal Matters..........................................................
Financial Statements...................................................
ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES, DEATH BENEFITS AND
ACCUMULATED PREMIUM PAYMENTS................................................
Appendix....................................................................
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS OF THE FUNDS, OR THE STATEMENT OF ADDITIONAL
INFORMATION OF THE FUNDS.
<PAGE>
DEFINITIONS
ATTAINED AGE - The Insured's age as of the nearest birthday on the Policy
Effective Date, plus the number of complete Policy Years since the Policy
Effective Date.
BENEFICIARY - The person(s) to whom the Death Benefit Proceeds are paid upon the
death of the Insured. The Owner may designate primary, contingent, and
irrevocable Beneficiaries.
CANCELLATION PERIOD - The period shown in the Policy during which the Owner may
cancel the Policy for a refund by returning it to the Company.
CASH VALUE - Policy Value minus any applicable Surrender Charge.
CODE - The Internal Revenue Code of 1986, as amended.
CONTINGENT BENEFICIARY - The person(s) to whom the Death Benefit Proceeds are
paid upon the death of the Insured if the primary Beneficiary (or Beneficiaries)
is not living.
DEATH BENEFIT - The amount payable to the Beneficiary under a Death Benefit
Option before adjustments if the Insured dies while the Policy is in force
before the Maturity Date.
DEATH BENEFIT OPTION - One of two options that an Owner may select for the
computation of the Death Benefit Proceeds.
DEATH BENEFIT PROCEEDS - The total amount payable to the Beneficiary if the
Insured dies while the Policy is in force before the Maturity Date.
DUE PROOF OF DEATH - Proof of death satisfactory to the Company. Due Proof of
Death may consist of the following: (a) a certified copy of the death record;
(b) a certified copy of a court decree reciting a finding of death; or (c) any
other proof satisfactory to the Company.
FIXED ACCOUNT - Part of the Company's General Account to which Policy Value may
be transferred or Net Premium Payments may be allocated under a Policy.
FIXED POLICY VALUE - The Policy Value in the Fixed Account.
<PAGE>
FUND - Any open-end management investment company or investment portfolio
thereof, or unit investment trust or series thereof, in which a Subaccount
invests.
GENERAL ACCOUNT - The assets of the Company other than those allocated to the
Variable Account or any other separate account of the Company.
GRACE PERIOD - A 61-day period during which an Owner may make premium payments
to cover the overdue (and other specified) monthly deductions and thereby
prevent the Policy from Lapsing.
GUIDELINE ANNUAL PREMIUM - The "guideline annual premium" as defined in
applicable regulations under the Investment Company Act of 1940, as amended.
INITIAL SPECIFIED AMOUNT - The Specified Amount on the Policy Effective Date.
INSURED - The person whose life is insured by the Policy.
ISSUE AGE - The Insured's age as of the nearest birthday on the Policy Effective
Date.
LAPSE - Termination of the Policy at the expiration of the Grace Period while
the Insured is still living before the Maturity Date.
LOAN ACCOUNT - A portion of the Company's General Account to which Variable
Policy Value or Fixed Policy Value is transferred to provide collateral for any
loan taken under the Policy.
LOAN ACCOUNT VALUE - The Policy Value in the Loan Account.
LOAN AMOUNT - At any time other than a Policy Anniversary, the Loan Account
Value plus any interest charges accrued on the Loan Account Value up to that
time. On a Policy Anniversary, the Loan Amount equals the Loan Account Value.
MATURITY DATE - The date shown in the Policy on which the Owner is paid the
Surrender Value, if any, provided the Insured is still living while the Policy
is in force. It is the Policy Anniversary nearest the Insured's 95th birthday.
<PAGE>
MINIMUM INITIAL PREMIUM PAYMENT - The amount shown in the Policy that the Owner
must pay before coverage becomes effective under the Policy.
MINIMUM MONTHLY PREMIUM PAYMENT - The minimum amount of monthly premium payments
(or the equivalent) that an Owner must make in order for the Lapse Prevention
Guarantee to remain in effect.
MONTHLY ANNIVERSARY DAY - The same day as the Policy Effective Date for each
succeeding month.
NET AMOUNT AT RISK - As of any Monthly Anniversary Day, the Death Benefit under
the Policy (discounted for the upcoming month) less the Policy Value (before the
deduction of the monthly policy fee, monthly first-year issue fee and the cost
of additional benefits provided by rider).
NET ASSET VALUE PER SHARE - The value per share of any Fund on any Valuation
Day. The method of computing the Net Asset Value is described in the
prospectuses for the Funds.
NET PREMIUM PAYMENT - Any premium payment less any premium tax charge, deferred
acquisition cost tax charge, and sales charge deducted from the premium payment.
OWNER - The person or persons who owns (or own) the Policy and who is (are)
entitled to exercise all rights and privileges provided in the Policy. The
maximum number of joint Owners is two. References in this prospectus to an
action by the "Owner" mean, in the case of joint Owners, both Owners acting
jointly.
PLANNED PERIODIC PREMIUM PAYMENT - The premium payment selected by the Owner as
a level amount that he or she (or they) plans to pay on a monthly, quarterly,
semi-annual or annual basis over the life of the Policy.
POLICY ANNIVERSARY - The same date in each Policy Year as the Policy Effective
Date.
POLICY EFFECTIVE DATE - The date shown in the Policy from which Policy Years and
various other periods described in this prospectus are measured. The Policy
Effective Date is never the 29th, 30th or 31st of a month.
<PAGE>
POLICY VALUE - The sum of the Variable Policy Value, the Fixed Policy Value, and
the Loan Account Value.
POLICY YEAR - A twelve-month period beginning on the Policy Effective Date or on
a Policy Anniversary.
SEC - The U.S. Securities and Exchange Commission.
SERVICE CENTER - The offices of the Company's administrative agent, Financial
Administration Services, Inc., at 95 Bridge Street, Haddam, Connecticut 06438.
SETTLEMENT OPTION - The manner in which an Owner or Beneficiary (or Contingent
Beneficiary) elects to receive the amount of any surrender or withdrawal or the
Death Benefit Proceeds.
SETTLEMENT PAYMENT - Payments made by the Company under a Settlement Option.
SPECIFIED AMOUNT - A dollar amount selected by the Owner and shown in the Policy
that is used to determine the Death Benefit.
SUBACCOUNT - A subdivision of the Variable Account, the assets of which are
invested in a corresponding Fund.
SUBACCOUNT VALUE - The Policy Value in a Subaccount.
SURRENDER VALUE - The Cash Value minus any Loan Amount.
TARGET PREMIUM PAYMENT - An amount of premium payments, computed separately for
each increment of Specified Amount under a Policy, used to compute sales charges
and sales surrender charges.
THE COMPANY - Valley Forge Life Insurance Company.
UNIT - A unit of measurement used to calculate Variable Policy Value.
VALUATION DAY - For each Subaccount, each day on which the New York Stock
Exchange is open for business except for certain holidays listed in this
prospectus and days that a Subaccount's corresponding Fund does not value its
shares.
<PAGE>
VALUATION PERIOD - The period that starts at the close of regular trading on the
New York Stock Exchange on any valuation day and ends at the close of regular
trading on the next succeeding Valuation Day.
VARIABLE ACCOUNT - Valley Forge Life Insurance Company Variable Life Separate
Account.
VARIABLE POLICY VALUE - The sum of all Subaccount Values.
WRITTEN NOTICE - A written notice or request in a form satisfactory to the
Company that is signed by the Owner and received at the Service Center.
<PAGE>
SUMMARY AND DIAGRAM OF THE POLICY
The following summary of prospectus information and diagram of the Policy should
be read in conjunction with the detailed information appearing elsewhere in this
prospectus. Unless otherwise indicated, the description of the Policy in this
Prospectus assumes that the Insured is alive, the Policy is in force and there
is no outstanding Loan Amount.
The Policy is similar in many ways to a fixed-benefit life insurance policy. As
with a fixed-benefit life insurance policy, the Owner of a Policy makes premium
payments in return for insurance coverage on the person insured. Also, like many
fixed-benefit life insurance policies, the Policy provides for accumulation of
Net Premiums and a Surrender Value which is payable if the Policy is surrendered
during the Insured's lifetime. As with many fixed-benefit life insurance
policies, the Surrender Value during the early Policy Years is likely to be
substantially lower than the aggregate premium payments made.
However, the Policy differs from a fixed-benefit life insurance policy in
several important respects. Unlike a fixed-benefit life insurance policy, under
the Policy, the Death Benefit may and the Policy Value will increase or decrease
to reflect the investment performance of any Subaccounts to which Policy Value
is allocated. Also, unless the entire Policy Value is allocated to the Fixed
Account, there is no guaranteed minimum Surrender Value. If Policy Value is
insufficient to pay charges due, then, after a grace period, the Policy will
Lapse without value. (See "Policy Lapse and Reinstatement.") However, the
Company guarantees that the Policy will remain in force during the first five
Policy Years as long as certain requirements related to the Minimum Monthly
Premium Payment have been met. (See "Policy Lapse and Reinstatement.") If a
Policy Lapses while loans are outstanding, certain amounts may become subject to
income tax and a 10% penalty tax. (See "Tax Considerations.")
The most important features of the Policy, such as charges and deductions,
Policy Value benefits, Death Benefits, and calculation of Policy values, are
summarized in the diagram on the following pages.
PURPOSE OF THE POLICY. The Policy is designed to provide lifetime insurance
benefits and long-term investment of Policy Value. A prospective Owner should
evaluate the Policy in conjunction with other insurance coverage that he or she
may have, as well as their need for insurance and the Policy's long-term
investment potential. It may not be advantageous to replace existing insurance
coverage with the Policy. In particular, replacement should be carefully
considered if the decision to replace existing coverage is based solely on a
comparison of Policy illustrations (see below).
POLICY BENEFITS. Two Death Benefit options are available under the Policy: a
level Death Benefit ("Option 1") and a Death Benefit that may increase or
decrease ("Option 2"). The Company guarantees that the Death Benefit Proceeds
will never be less than the Specified Amount (less any outstanding Loan Amount
and past due charges) as long as sufficient premiums payments are made to keep
the Policy in force. The Policy provides for a Surrender Value that an Owner may
obtain by surrendering the Policy. The Policy also permits loans and
withdrawals, within limits.
ILLUSTRATIONS. Illustrations in this prospectus or used in connection with the
purchase of a Policy are based on HYPOTHETICAL rates of return. THESE RATES ARE
NOT GUARANTEED. They are illustrative only and should not be considered a
representation of past or future performance. Actual rates of return may be
higher or lower than those reflected in Policy illustrations, and therefore,
actual Policy values will be different from those illustrated.
<PAGE>
TAX CONSIDERATIONS. The Company intends for the Policy to satisfy the definition
of a life insurance contract under Section 7702 of the Code. A Policy may be a
"modified endowment contract" under federal tax law depending upon the amount of
premium payments made in relation to the Death Benefit provided under the
Policy. The Company will monitor Policies and will attempt to notify you on a
timely basis if your Policy is in jeopardy of becoming a modified endowment
contract. For further discussion of the tax status of a Policy and the tax
consequences of being treated as a life insurance contract or a modified
endowment contract, see "Tax Considerations."
<PAGE>
CANCELLATION PRIVILEGE AND SPECIAL TRANSFER RIGHT. For a limited time after the
Policy is issued, the Owner may cancel the Policy and receive a refund. (See
"Cancellation Privilege.") In certain states, until the end of this
"Cancellation Period," the Company will allocate Net Premium Payments to the
Subaccount investing in the Prime Money Market Fund (the "Money Market
Subaccount"). (See "Net Premium Allocations.") At any time within 24 Policy
Months after the date that coverage begins under the Policy, the Owner may
transfer the entire Variable Policy Value to the Fixed Account without payment
of any transfer fee and without the transfer counting as one the 12 transfers
per Policy Year that may be made without incurring a transfer fee. (See "Special
Transfer Privilege.")
OWNER INQUIRIES. If you have any questions, you may write or call the Company's
Service Center at 95 Bridge Street, Haddam, Connecticut 06438, 1-800-808-4537.
<PAGE>
DIAGRAM OF POLICY
|---------------------------------------------------------------------|
| PREMIUM PAYMENTS |
| o The Owner may select a payment plan but is not required to pay |
| premium payments according to the plan. The Owner can vary the |
| amount and frequency and can skip Planned Periodic Premium |
| Payments. See "Premium Payments" for rules and limits. |
| |
| o The Policy's Minimum Initial Premium Payment and Minimum |
| Monthly Premium Payment depend on the Insured's age, sex and |
| risk class, Specified Amount selected, and any supplemental |
| benefits and/or riders. See "Premium Payments." |
| |
| o Unscheduled premium payments may be made, within limits. See |
| "Premium Payments." |
|---------------------------------------------------------------------|
|
V
|-----------------------------------------------------------------------|
| DEDUCTIONS FROM PREMIUM PAYMENTS |
| o For sales charge (4% of premium payments up to the Target Premium |
| Payment in Policy Years 1 through 10; 2% of premium payments up to|
| the Target Premium Payment in Policy Year 11 and thereafter). See|
| "Charges and Deductions." |
| |
| o For federal taxes (1.25% of premium payments). See "Charges and |
| Deductions." |
| |
| o For state and local premium taxes (2.25% of premium payments). |
| See "Charges and Deductions." |
|-----------------------------------------------------------------------|
|
V
<PAGE>
|------------------------------------------------------------------------------|
| NET PREMIUM PAYMENTS |
| o The Owner may direct the allocation of Net Premium Payments among 18|
| Subaccounts and the Fixed Account. See "The Policy" for rules and limits |
| on Net Premium Payment allocations. |
| |
| o The Subaccounts invest in corresponding Funds. See "General Information |
| About the Company." Funds available are: |
| |
| Federated High Income Bond Fund II VIP II |
| Asset Manager Portfolio |
| Federated Prime Money Fund II VIP II |
| Contrafund Portfolio |
| Federated Utility Fund II VIP Equity-Income Portfolio |
| VIP II Index 500 Portfolio |
| MFS Emerging Growth Series |
| MFS Growth With Income Series MFS Research Series |
| MFS Limited Maturity Series MFS Total Return Series |
| |
| Alger American Growth Portfolio |
| Alger American MidCap Growth Portfolio |
| Alger American Small Capitalization Portfolio |
| Van Eck Emerging Markets Fund |
| Van Eck Gold and Natural Resources Fund |
| SoGen Overseas Portfolio |
| |
|o Interest is credited on amounts allocated to the Fixed Account at a |
| minimum guaranteed rate of 4%. See "The Fixed Account" for more |
| information about the Fixed Account. |
|------------------------------------------------------------------------------|
|
V
|------------------------------------------------------------------------------|
| DEDUCTIONS FROM POLICY VALUE |
| o Monthly Deduction for cost of insurance charge, policy fees, first-year |
| issue fee, Specified Amount Increase fee, and charges for any supplemental|
| and/or rider benefits. The policy fee is currently $6.00 per month, the |
| first-year issue fee is currently $20.00 per month for the first 12 Policy|
| months, and the Specified Amount increase fee is currently $10.00 per |
| month for the first 12 months following an increase. |
| |
| DEDUCTIONS FROM ASSETS |
| o Daily charge at an annual rate of 0.90% from the Subaccounts for mortality|
| and expense risks during the first 10 Policy Years, and 0.45% in the|
| eleventh Policy Year and thereafter. See "Charges and Deductions." This|
| charge is not deducted from Fixed Policy Value. |
| |
| o Investment advisory fees and fund operating expenses are also deducted |
| from the assets of each Fund. See page "Charges and Deductions." |
|------------------------------------------------------------------------------|
|
V
<PAGE>
|------------------------------------------------------------------------------|
| Policy Value |
| o Is equal to Net Premiums, as adjusted each Valuation Day to reflect |
| Subaccount investment experience, interest credited on Fixed Policy |
| Value, charges deducted and other Policy transactions (such as transfers |
| and withdrawals). See "Calculation of Policy Values." |
| |
| o May vary from day to day. There is no minimum guaranteed Policy Value. |
| The Policy may Lapse if the Policy Value is insufficient to cover a Monthly|
| Deduction due. See "The Policy." |
| |
| o Can be transferred between and among the Subaccounts and the Fixed Account.|
| A transfer fee of $25.00 per transfer may apply if more than 4 transfers|
| are made in a Policy Year. See "Policy Benefits" for rules and limits.|
| Policy loans reduce the amount available for allocations and transfers. |
| |
| o Is the starting point for calculating certain values under a Policy, such |
| as the Cash Value, Surrender Value, and the Death Benefit used to |
| determine Death Benefit Proceeds. |
|------------------------------------------------------------------------------|
| |
V V
<TABLE>
<CAPTION>
<S> <C>
|---------------------------------------------------------| |------------------------------------------------|
| POLICY BENEFITS | | DEATH BENEFITS |
| o Loans may be taken for amounts up to 90% of | | o Available as lump sum or under a variety of |
| Surrender Value, at an effective annual interest | | Settlement Options. |
| rate of 8%. See "Policy Loans" for rules and limits.| | |
| | | o The minimum Specified Amount is $100,000. |
| o Withdrawals generally can be made provided there is | | |
| sufficient remaining Surrender Value. See | | o Two Death Benefit Options available: Option |
| "Withdrawal Privilege" for rules and limits. | | 1, equal to the Specified Amount, and Option|
| | | 2, equal to the Specified Amount plus Policy|
| o The Policy may be surrendered in full at any time | | Value. See "Death Benefit Proceeds." |
| for its Surrender Value. A declining deferred | | |
| Surrender Charge is assessed in connection with the | | o Flexibility to change the Death Benefit |
| initial Specified Amount on surrenders or | | Option and Specified Amount. See "Death |
| withdrawals during the first 14 Policy Years. It | | Benefit Proceeds" for rules and limits. |
| consists of (1) a Sales Surrender Charge of up to | | |
| 34% of premium payments in the first Policy Year up | | o Supplemental benefits and/or riders are |
| to the Target Premium Payment and 33% of premium | | available. See "Other Policy Benefits and |
| payments up to the Target Premium Payment in each of | | Provisions." |
| Policy Years 2 through 6 until the total Sales | | |
| Surrender Charge equals 100% of a single Target | | |
| Premium Payment, and (2) an Administration Surrender | | |
| Charge of up to $5.00 per $1,000 of Specified | | |
| Amount. See "Charges and Deductions." | | |
| | | |
| o A declining deferred Sales Surrender Charge is | | |
| assessed in connection with an increase in Specified | | |
| Amount on surrenders or withdrawals within 14 Policy | | |
| Years of such increase. The Charge is 34% of | | |
| premium payments attributable to the increase up to | | |
| the Target Premium Payment for the increase in the | | |
| year following the increase, and 33% of premium | | |
| payments attributable to the increase up to the | | |
| Target Premium Payment for the increase in each of | | |
| next 5 years following the increase until the Sales | | |
| Surrender Charge for the increase equals 100% of the | | |
| Target Premium Payment for the increase. See | | |
| "Charges and Deductions." | | |
|---------------------------------------------------------| |------------------------------------------------|
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE COMPANY, THE VARIABLE ACCOUNT AND THE FUNDS
- --------------------------------------------------------------------------------
THE COMPANY
The Company is a life insurance company organized under the laws of the State of
Pennsylvania in 1956 and is authorized to transact business in the District of
Columbia, Puerto Rico, Guam and all states except New York. The Company's home
office is located at 401 Penn St., Reading, Pennsylvania 19601, and its
executive office is located at CNA Plaza, Chicago, Illinois 60685. The Company
is a wholly-owned subsidiary of Continental Assurance Company ("CAC"), a life
insurance company which, as of December 31, 1995, had consolidated assets of
approximately $13.1 billion. Subject to a coinsurance pooling agreement (a type
of reinsurance arrangement) with CAC, the Company assumes all insurance risks
under the Policies, and the Company's assets, which as of December 31, 1995
exceeded $627.0 million, support the benefits under the Policies. See "Other
Information About The Policies And The Company," for more detail regarding the
Company.
THE VARIABLE ACCOUNT
The Variable Account is a separate investment account of the Company established
under Pennsylvania law on October 18, 1995. The Company owns the assets of the
Variable Account. These assets are held separate from the Company's general
account and its other accounts. That portion of the Variable Account's assets
that is equal to the reserves and other Policy liabilities of the Variable
Account is not chargeable with liabilities arising out of any other business the
Company may conduct. If the assets exceed the required reserves and other Policy
liabilities, the Company may transfer the excess to the Company's general
account. The Variable Account's assets will at all times equal or exceed the sum
of the Subaccount Values of all policies funded by the Variable Account.
The Variable Account is registered with the SEC under the Investment Company Act
of 1940 (the "1940 Act") as a unit investment trust and meets the definition of
a "separate account" under the federal securities laws. Such registration does
not involve any supervision by the SEC of the management of the Variable Account
or the Company. The Variable Account also is governed by the laws of
Pennsylvania, the Company's state of domicile, and may also be governed by laws
of other states in which the Company does business.
The Variable Account has 18 Subaccounts, each of which invests in shares of a
corresponding Fund. Income, gains and losses, realized or unrealized, from
assets allocated to a Subaccount are credited to or charged against that
Subaccount without regard to other income, gains or losses of the Company.
Where permitted by applicable law, the Company may make the following changes to
the Variable Account:
1. Any changes required by the 1940 Act or other applicable law or
regulation;
2. Combine separate accounts, including the Variable Account;
3. Add new subaccounts to or remove existing subaccounts from the
Variable Account or combine Subaccounts;
4. Make Subaccounts (including new subaccounts) available to such
classes of Policies as the Company may determine;
5. Add new Funds or remove existing Funds;
6. Substitute new Funds for any existing Fund if shares of the Fund
are no longer available for investment or if the Company
determines that investment in a Fund is no longer appropriate in
light of the purposes of the Variable Account;
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7. Deregister the Variable Account under the 1940 Act if such
registration is no longer required; and
8. Operate the Variable Account as a management investment company
under the 1940 Act or as any other form permitted by law.
No such changes will be made without any necessary approval of the SEC and
applicable state insurance departments. Owners will be notified of any changes.
THE FUNDS
Each Subaccount invests in a corresponding Fund. Each of the Funds is either an
open-end diversified management investment company or a separate investment
portfolio of such a company and is managed by a registered investment adviser.
The Funds as well as a brief description of their investment objectives are
provided below.
Insurance Series
----------------
The Federated High Income Bond Fund II, Federated Prime Money Fund II and
Federated Utility Fund II Subaccounts each invest in shares of corresponding
Funds (i.e., investment portfolios) of Insurance Series ("IS"). IS issues five
"series" or classes of shares, each of which represents an interest in a Fund of
IS. Three of these series of shares are available as investment options under
the Contracts. The investment objectives of these Funds are set forth below.
Federated High Income Bond Fund II. This Fund invests primarily in
lower-rated fixed-income securities that seek to achieve high current
income.
Federated Prime Money Fund II. This Fund invests in money market
instruments maturing in thirteen months or less to achieve current
income consistent with stability of principal and liquidity.
Federated Utility Fund II. This Fund invests in equity and debt securities
of utility companies to achieve high current income and moderate capital
appreciation.
IS is advised by Federated Advisers.
Variable Insurance Products Fund and Variable Insurance Products Fund II
------------------------------------------------------------------------
The Equity-Income Subaccount invests in shares of a corresponding Fund
(i.e., investment portfolios) of Variable Insurance Products Fund ("VIP Fund").
VIP Fund issues five "series" or classes of shares, each of which represents an
interest in a Fund of VIP Fund. One of these series of shares is available as an
investment option under the Contracts. Asset Manager, Contrafund, and Index 500
Subaccounts each invest in shares of corresponding Funds (i.e., investment
portfolios) of Variable Insurance Products Fund II ("VIP Fund II"). VIP Fund II
issues five "series" or classes of shares, each of which represents an interest
in a Fund of VIP Fund II. Three of these series of shares are available as
investment options under the Policies. The investment objectives of these Funds
are set forth below.
Asset Manager Portfolio. This Fund seeks high total return with reduced
risk over the long-term by allocating its assets among domestic and foreign
stocks, bonds and short-term fixed-income instruments.
Contrafund Portfolio. This Fund seeks capital appreciation over the
long-term by investing in companies that are undervalued or out-of-favor.
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Equity-Income Portfolio. This Fund seeks current income by investing
primarily in income producing equity securities. In choosing these
securities, the Fund also considers the potential for capital appreciation.
Index 500 Portfolio. This Fund seeks investment results that correspond to
the total return of common stocks publicly traded in the United States, as
represented by the Standard & Poor's 500 Composite Index of 500 Common
Stocks.
VIP Fund and VIP Fund II are each advised by Fidelity Management &
Research Company.
The Alger American Fund
-----------------------
Alger American Growth, Alger American MidCap Growth and Alger American
Small Capitalization Subaccounts each invest in shares of corresponding Funds
(i.e., investment portfolios) of The Alger American Fund ("AAF"). AAF issues 6
"series" or classes of shares, each of which represents an interest in a Fund of
AAF. Three of these series of shares are available as investment options under
the Policies. The investment objectives of these Funds are set forth below.
Alger American Growth Portfolio. This Fund seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities, primarily of companies with total market capitalization
of $ 1 billion or greater.
Alger American MidCap Growth Portfolio. This Fund seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities, primarily of companies with total market capitalization
between $750 million and $3.5 billion.
Alger American Small Capitalization Portfolio. This Fund seeks long-term
capital appreciation by investing in a diversified, actively managed
portfolio of equity securities, primarily of companies with total market
capitalization of less than $1 billion.
AAF is advised by Fred Alger Management, Inc.
MFS Variable Insurance Trust
----------------------------
The MFS Emerging Growth, MFS Growth with Income, MFS Limited Maturity,
MFS Research and MFS Total Return Subaccounts each invest in shares of
corresponding Funds (i.e., investment portfolios) of MFS Variable Insurance
Trust ("MFSVIT"). MFSVIT issues 12 "series" or classes of shares, each of which
represents an interest in a Fund of MFSVIT. Five of these series of shares are
available as investment options under the Policies. The investment objectives of
these Funds are set forth below.
MFS Emerging Growth Series. This Fund seeks to obtain long-term growth of
capital by investing primarily in common stocks of small and medium-sized
companies that are early in their life cycle but which have the potential
to become major enterprises.
MFS Growth With Income Series. This Fund seeks to provide reasonable
current income and long-term growth of capital and income.
MFS Limited Maturity Series. This Fund seeks to provide as high a level of
current income as is believed to be consistent with prudent investment
risk, with capital protection as a secondary objective.
MFS Research Series. This Fund seeks to provide long-term growth of
capital and future income.
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MFS Total Return Series. This Fund seeks primarily to provide above-average
income consistent with prudent employment of capital and secondarily to
provide a reasonable opportunity for growth of capital and income.
MFSVIT is advised by Massachusetts Financial Services Company.
SoGen Variable Funds, Inc.
--------------------------
The SoGen Overseas Subaccount invests in shares of a corresponding Fund
(i.e., investment portfolio) of SoGen Variable Funds, Inc. ("SGVF"). SGVF issues
1 "series" or classes of shares, each of which represents an interest in a
Fund of SGVF. One of these series of shares is available as an investment option
under the Policies. The investment objective of this Fund is set forth below.
SoGen Overseas Portfolio. This Fund seeks long-term growth of capital by
investing primarily in securities of small and medium size non-U.S.
companies.
SGVF is advised by Societe Generale Asset Management Corp.
Van Eck Worldwide Insurance Trust
---------------------------------
The Emerging Market and Gold and Natural Resources Subaccounts each
invest in shares of corresponding Funds (i.e., investment portfolios) of Van Eck
Worldwide Insurance Trust ("VEWIT"). VEWIT issues 5 "series" or classes of
shares, each of which represents an interest in a Fund of VEWIT. Two of these
series of shares are available as investment options under the Policies. The
investment objectives of these Funds are set forth below.
Emerging Markets Fund. This Fund seeks capital appreciation by investing
primarily in equity securities in emerging markets around the world.
Gold and Natural Resources Fund. This Fund seeks long-term capital
appreciation by investing in equity and debt securities of companies
engaged in the exploration, development, production and distribution of
gold and other natural resources such as strategic and other metals,
minerals, forest products, oil, natural gas and coal.
VEWIT is advised by Van Eck Associates Corporation.
NO ONE CAN ASSURE THAT ANY FUND WILL ACHIEVE ITS STATED OBJECTIVES AND POLICIES.
More detailed information concerning the investment objectives, policies and
restrictions of the Funds, the expenses of the Funds, the risks attendant to
investing in the Funds and other aspects of their operations can be found in the
current prospectus for each Fund that accompanies this prospectus and the
current Statement of Additional Information for the Funds. The Funds' prospectus
should be read carefully before any decision is made concerning the allocation
of premium payments or transfers among the Subaccounts.
Not all of the Funds described in the prospectuses for the Funds are available
with the Contract. Moreover, the Company cannot guarantee that each Fund will
always be available for its variable annuity contracts, but in the unlikely
event that a Fund is not available, the Company will take reasonable steps to
secure the availability of a comparable fund. Shares of each Fund are purchased
and redeemed at net asset value, without a sales charge.
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The Company has entered into agreements with the investment advisers of several
of the Funds pursuant to which each such investment adviser will pay the Company
a servicing fee based upon an annual percentage of the average aggregate net
assets invested by the Company on behalf of the Variable Account. These
agreements reflect administrative services provided to the Funds by the Company.
Payments of such amounts by an adviser will not increase the fees paid by the
Funds or their shareholders.
Shares of the Funds are sold to separate accounts of insurance companies that
are not affiliated with the Company or each other, a practice known as "shared
funding." They are also sold to separate accounts to serve as the underlying
investment for both variable annuity contracts and variable life insurance
contracts, a practice known as "mixed funding." As a result, there is a
possibility that a material conflict may arise between the interests of Owners,
whose Policy Values are allocated to the Variable Account, and of owners of
other policies whose policy values are allocated to one or more other separate
accounts investing in any one of the Funds. Shares of some of the Funds may also
be sold to certain pension and retirement plans qualifying under Section 401 of
the Code. As a result, there is a possibility that a material conflict may arise
between the interests of Owners or owners of other policies (including policies
issued by other companies), and such retirement plans or participants in such
retirement plans. In the event of any such material conflicts, the Company will
consider what action may be appropriate, including removing the Fund from the
Variable Account or replacing the Fund with another Fund. There are certain
risks associated with mixed and shared funding and with the sale of shares to
qualified pension and retirement plans, as disclosed in each Fund's prospectus.
THE POLICY
PURCHASING A POLICY
To purchase a Policy, a prospective Owner must submit a completed application
and the Minimum Initial Premium Payment through a licensed agent of the Company
who is also a registered representative of broker-dealer having a selling
agreement with CNA Investor Services, Inc. ("CNA/ISI"), the principal
underwriter of the Policies. The Company requires satisfactory evidence of the
Insured's insurability, which may include a medical examination of the Insured.
Generally, the Company issues Policies covering Insureds up to age 75 if
evidence of insurability satisfies the Company's underwriting criteria.
Acceptance of an application is subject to the Company's underwriting criteria,
and the Company reserves the right to reject an application for any reason.
Insurance coverage under a Policy begins on the later of the Policy Effective
Date or the date that the Company receives the Minimum Initial Premium Payment.
Generally the Company establishes the Policy Effective Date (shown on the
Policy) after it completes the underwriting process and accepts the application.
Where the Minimum Initial Premium Payment is received by the Company after the
Policy Effective Date, coverage under the Policy is conditioned upon the
Insured's state of health being the same as that described in the application.
With the Company's prior approval, in order to obtain a lower Issue Age, an
Owner may "backdate" a Policy by electing a Policy Effective Date up to six
months prior to the date of the original application. A lower Issue Age for the
Insured generally results in slightly more favorable cost of insurance rates.
Charges for the monthly deduction for the backdated period are deducted as of
the Policy Effective Date.
Insurance coverage under the Policy terminates upon the first to occur of the
following events: (1) the Insured dies, (2) the Owner surrenders the Policy, (3)
the Policy reaches the Maturity Date, or (4) the Policy Lapses.
CANCELLATION PRIVILEGE
An Owner may cancel a Policy for a refund during the Cancellation Period by
returning it to the Service Center or to the sales representative who sold it
<PAGE>
along with a Written Notice requesting cancellation. The Cancellation Period is
determined by the law of the state in which the Owner resides or in which the
application is signed and is shown on the Policy. In most states it expires at
the latest of (1) ten days after the Owner first receives the Policy, (2) 45
days after the Owner signs the application, or (3) 10 days after the Company
mails or delivers a notice of the Owners withdrawal rights. Return of the Policy
by mail is effective upon receipt at the Service Center. When cancelled, the
Policy is treated as if it had never been issued. Within seven calendar days
after receiving the returned Policy, the Company will refund an amount equal to
the sum of (1) the difference between premium payments made (including any fees
and charges deducted) and the amounts allocated to the Fixed Account and to the
Subaccounts, (2) Fixed Policy Value determined as of the date the returned
Policy is received, and (3) Variable Policy Value determined as of the date the
returned Policy is received. This amount may be more or less than the aggregate
premium payments made under the Policy. In states where required, the Company
will instead refund premium payments.
PREMIUM PAYMENTS
MINIMUM INITIAL PREMIUM PAYMENT. The Minimum Initial Premium Payment required
depends on a number of factors, including the sex, Issue Age, and risk class of
the proposed Insured, the initial Specified Amount requested by the applicant,
any supplemental benefits and/or riders requested by the applicant, and the
Planned Periodic Premium Payments that the applicant selects. Owners should
consult their sales representative for information about the Minimum Initial
Premium Payment required for the coverage that they seek.
PLANNED PERIODIC PREMIUMS PAYMENTS. Owners may establish a schedule of monthly
(bank draft or pre-authorized payment only), quarterly, semi-annual or annual
Planned Periodic Premium Payments. Subject to the Company's approval, Owners may
change the amount or frequency of Planned Periodic Premium Payments by Written
Notice. The Company will send Owners reminder notices for Planned Periodic
Premium Payments. The Company also may arrange with Owners to have Planned
Periodic Premium Payments made under a pre-authorized payment arrangement.
Owners are not required to pay Planned Periodic Premium Payments.
UNPLANNED PREMIUM PAYMENTS. Subject to the limitations described below, Owners
generally may make additional premium payments at any time before the Maturity
Date while the Insured is alive and the Policy is in force. Unless the Owner
specifies otherwise in the application or by subsequent Written Notice, the
Company considers all unplanned premium payments first as repayments of any
outstanding Loan Amounts under the Policy.
PREMIUM PAYMENT LIMITATIONS. Unless otherwise approved by the Company, all
premium payments must be made payable to "Valley Forge Life Insurance Company"
at the Service Center. No premium payments are accepted after a Policy's
Maturity Date.
Premium payments must be at least $50 (unless paid pursuant to a pre-authorized
payment arrangement) and must be remitted to the Service Center. The Company
reserves the right to reject any premium payment in the event that it determines
that acceptance of such payment would cause a Policy to fail to qualify as a
life insurance contract under the Code or applicable regulations or rulings
thereunder. The Company will promptly return any premium payment that it rejects
for this reason. The Company will monitor Policies and will attempt to notify
the Owner on a timely basis if his or her Policy is in jeopardy of becoming a
modified endowment contract under the Code. (See "Tax Considerations.")
PREMIUM PAYMENTS UPON INCREASE IN SPECIFIED AMOUNT. Depending on the Policy
Value at the time of an increase in the Specified Amount and the amount of the
increase requested, an additional premium payment may be necessary or a change
in the amount of Planned Periodic Premium Payments may be advisable. (See "Death
Benefit Proceeds.")
<PAGE>
NET PREMIUM ALLOCATIONS
Net Premium Payments are allocated among and between the Subaccounts and the
Fixed Account as of the date that they are received at the Service Center
according to the Owner's allocation instructions in the application or in a
subsequent Written Notice. Allocation instructions must be in whole percentages
and the minimum amount that the Company can allocate to any Subaccount or the
Fixed Account is 1% of any Net Premium Payment. The Company reserves the right
to establish additional limitations on premium payment allocations.
For Policies issued in states where, upon cancellation during the Cancellation
Period, the Company refunds premium payments, the Company allocates Net Premium
Payments it receives during the Cancellation Period (including that related to
the Minimum Initial Premium Payment) that are to be allocated to any Subaccount,
to the Money Market Subaccount for a period equal to the number of days in the
Cancellation Period. At the end of this period, the Money Market Subaccount
Value will be reallocated to each other Subaccount selected by the Owner based
on the proportion that the Owner's allocation percentage bears to the Variable
Policy Value.
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike a conventional life insurance policy, failure to make Planned
Periodic Premium Payments does not necessarily cause a Policy to Lapse.
Conversely, making all Planned Periodic Premium Payments does not necessarily
prevent a Policy from Lapsing. Rather, except when the Lapse Prevention
Guarantee is in effect, whether a Policy Lapses depends on whether its Surrender
Value is sufficient to cover the monthly deduction on each Monthly Anniversary
Day. Surrender Value could become insufficient to cover the monthly deduction if
investment experience has been sufficiently unfavorable that it has resulted in
a decrease in Policy Value or the Policy Value has decreased because the Owner
did not make sufficient Net Premium Payments to offset prior monthly deductions.
If the Surrender Value on a Monthly Anniversary Day is insufficient to cover the
monthly deduction due on that Day, the Company will mail to the Owner and to any
assignee of record at their last known address(es), a notice stating that the
Policy will only remain in force for 61 days from the date that the notice was
mailed. This 61 day period is called the Grace Period. If the Owner does not
make sufficient premium payments to cover the monthly deduction(s) through the
end of the Grace Period by the end of the Grace Period, then the Policy will
terminate without value and all coverage under the Policy will terminate. The
notice mailed to the Owner and to any assignee of record will indicate how much
in additional premium payments the Owner must make before the end of the Grace
Period to keep the Policy in force. Coverage under the Policy continues during
the Grace Period and the Company will deduct unpaid monthly deductions when
computing Death Benefit Proceeds if the Insured dies during the Grace Period.
REINSTATEMENT. If the Policy Lapses, the Owner may reinstate it at any time
within five years of Lapse but before the Maturity Date. A Policy that has been
surrendered cannot be reinstated. To reinstate a Policy, the Owner must submit
to the Service Center:
1. evidence of insurability satisfactory to the Company;
2. premium payments in an amount sufficient to result (along with
any loan repayments) in a positive Surrender Value; and
3. premium payments in an amount sufficient that the resulting Net
Premium Payments equal or exceed the amount of the next two
monthly deductions.
Upon reinstatement of the Policy, the Company will reinstate any remaining Loan
Amount. The Policy Value of a reinstated Policy is the amount provided by the
<PAGE>
Net Premium Payments submitted with the application for reinstatement. The
effective date of a reinstated Policy is the Monthly Anniversary Date that falls
on or next follows the later of the date that the application for reinstatement
is approved or the above-listed items are received at the Service Center.
LAPSE PREVENTION GUARANTEE. The Company guarantees that a Policy will not Lapse
during the first five Policy Years, regardless of the Surrender Value, if,
throughout that period, (a) exceeds (b) where:
(a) is the aggregate premium payments made less the amount of any
withdrawals (including applicable surrender charges) less any
Loan Amount, and
(b) is the Minimum Monthly Premium Payment multiplied by the
number of complete months since the Policy Effective Date,
including the current month.
If the Policy's Specified Amount is increased while the Lapse Prevention
Guarantee is in effect, the Company will recalculate the Minimum Monthly Premium
Payment, which will generally increase following an increase in Specified
Amount. The Company will notify Owners of any increase in the Minimum Monthly
Premium Payment and will amend the Policy to reflect the change.
VARIABLE POLICY VALUE
The Variable Policy Value is the sum of all Subaccount Values and therefore
reflects the investment experience of the Subaccounts to which it is allocated.
THERE IS NO GUARANTEED MINIMUM VARIABLE POLICY VALUE.
SUBACCOUNT VALUE. The Subaccount Value of any Subaccount as of the Policy
Effective Date is equal to the amount of the initial Net Purchase Payment
allocated to that Subaccount. On subsequent Valuation Days prior to the Maturity
Date, the Subaccount Value is equal to that part of any Net Purchase Payment
allocated to the Subaccount and any Policy Value transferred to that Subaccount,
adjusted by interest income, dividends, net capital gains or losses, realized or
unrealized, and decreased by withdrawals (including any applicable surrender
charges) and any Policy Value transferred out of that Subaccount.
UNITS. For each Subaccount, Net Premium Payment(s) allocated to a Subaccount or
amounts of Policy Value transferred to a Subaccount are converted into Units.
The number of Units credited to a Policy is determined by dividing the dollar
amount directed to each Subaccount by the value of the Unit for that Subaccount
for the Valuation Day as of which the Net Premium Payment(s) or transferred
amount is invested in the Subaccount. Therefore, Net Premium Payments allocated
to or amounts transferred to a Subaccount under a Policy increase the number of
Units of that Subaccount credited to the Policy.
Certain events reduce the number of Units of a Subaccount credited to a Policy.
Withdrawals or transfers of Subaccount Value from a Subaccount result in the
cancellation of the appropriate number of Units of that Subaccount as do:
surrender of the Policy; payment of the Death Benefit Proceeds; and the
deduction of the monthly deduction. Units are cancelled as of the end of the
Valuation Period in which the Company receives Written Notice regarding the
event.
UNIT VALUE. For each Subaccount there exist two types of Units: A Units and B
Units. A Units represent Subaccount Value during the first ten Policy Years
under any Policy, while B Units represent Subaccount Value during Policy Years
11 and later. On the tenth Policy Anniversary, all A Units of any Subaccount
under a Policy are automatically exchanged for B Units on an equivalent dollar
value basis.
A Units and B Units both represent a fractional undivided interest in a
Subaccount. They differ only in their value as a result of the fact that the
mortality and expense risk charge deducted from each Subaccount is larger for
<PAGE>
Policies in the first ten Policy Years than the charge deducted for Policies in
Policy Years 11 and later. This difference in charges is reflected in a
different Net Investment Factor (described below) for A Units and B Units for
each Valuation Period.
The A Unit and B Unit values for each Subaccount were arbitrarily set initially
at $10 when that Subaccount began operations. Thereafter, the Unit Value at the
end of every Valuation Day is the Unit Value at the end of the previous
Valuation Day multiplied by the Net Investment Factor for that type of Unit
(either A or B), as described below. The Subaccount Value for a Policy is
determined on any Valuation Day by multiplying the number of Units of the
appropriate type (either A or B) attributable to the Policy in that Subaccount
by the value for that type of Unit for that Subaccount on that day.
NET INVESTMENT FACTOR. The Net Investment Factor is an index applied to measure
the investment performance of either A Units or B Units of a Subaccount from one
Valuation Period to the next. The Net Investment Factor for any Subaccount for
any Valuation Period 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 Fund held in the Subaccount,
determined at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
made by the Fund held in the Subaccount, if the "ex-dividend" date
occurs during the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the operations of
the Subaccount.
2. is the Net Asset Value Per Share of the Fund held in the Subaccount,
determined at the end of the last prior Valuation Period.
3. is a daily factor representing the mortality and expense risk charge for
the type of Unit deducted from the Subaccount adjusted for the number of
days in the Valuation Period.
FIXED POLICY VALUE
The Fixed Policy Value on any Valuation Day is equal to:
1. aggregate Net Premium Payments allocated to the Fixed Account;
plus
2. Policy Value transferred to the Fixed Account; plus
3. interest credited to the Fixed Account; less
4. any withdrawals (including any applicable surrender charges
deducted) or transfers (including any applicable transfer charge
deducted) from the Fixed Account; less
5. any surrender charges deducted in the event of a decrease in
Specified Amount; less
6. the portion of monthly deductions made from Fixed Policy Value.
See "The Fixed Account," for a discussion of how interest is credited to the
Fixed Account.
<PAGE>
TRANSFERS OF POLICY VALUES
GENERAL. Before the Maturity Date while the Insured is still living and the
Policy is in force, the Owner may, by Written Notice, transfer all or part any
Subaccount Value to another Subaccount(s) (subject to its availability) or to
the Fixed Account, or transfer all or part of Fixed Policy Value to any
Subaccount(s), (subject to its availability) subject to the following
restrictions and the additional restrictions for transfers from the Fixed
Account shown below:
1. the minimum transfer amount is $500 (or, the entire Subaccount
Value or Fixed Policy Value, if less); and
2. a transfer request that would reduce any Subaccount Value or
the Fixed Policy Value below $500 is treated as a transfer request
for the entire Subaccount Value or Fixed Policy Value.
The first 12 transfers during each Contract Year are free. The Company assesses
a transfer processing fee of $25 for each transfer in excess of 12 during a
Contract Year. (See "Charges and Deductions.")
RESTRICTIONS ON TRANSFERS OF FIXED POLICY VALUE. An Owner may transfer all or
part of the Fixed Policy Value to a Subaccount. Only one transfer may be made
each Policy Year from the Fixed Account to one or more Subaccounts and this
transfer must be at least 12 calendar months after the most recent transfer from
the Fixed Account. An unused transfer option does not carry over to the next
year. The maximum transfer amount is 25% of the Fixed Policy on the date of the
transfer, unless the balance after the transfer is less than $500.
SPECIAL TRANSFER PRIVILEGE. During the first 24 Policy Months following the date
that coverage begins under the Policy, Owners may make one transfer of the
entire Variable Policy Value to the Fixed Account without imposition of the
transfer processing fee or the transfer counting as one of the 12 free transfers
for a Policy Year. Likewise, during the first 24 Policy Months following the
effective date of any Specified Amount increase, Owners may make one transfer of
that portion of the Variable Policy Value attributable to the increase to the
Fixed Account without imposition of the transfer processing fee or the transfer
counting as one of the 12 free transfers for a Policy Year.
DOLLAR-COST AVERAGING FACILITY. If elected in the application or at any time
thereafter prior to the Maturity Date while the Insured is still living and the
Policy is in force by Written Notice, an Owner may systematically transfer (on a
monthly, quarterly, semi-annual or annual basis) specified dollar amounts from
the Money Market Subaccount to other Subaccounts. This is known as the
"dollar-cost averaging" method of investment. The fixed-dollar amount purchases
more Units of a Subaccount when their value is lower and fewer Units when their
value is higher. Over time, the cost per Unit averages out to be less than if
all purchases of Units had been made at the highest value and greater than if
all purchases had been made at the lowest value. The dollar-cost averaging
method of investment reduces the risk of making purchases only when the price of
Units is high. It does not assure a profit or protect against a loss in
declining markets.
Owners may only elect use the dollar-cost averaging facility if their Money
Market Subaccount Value is at least $1,000 at the time of the election. The
minimum transfer amount under the facility is $100 per month (or the
equivalent). If dollar-cost averaging transfers are to be made to more than one
Subaccount, then the Owner must indicate the dollar amount of the transfer to be
made to each. At least $50.00 must be designated to each Subaccount.
Transfers under the dollar-cost averaging facility are made as of the same
calendar day each month. If this calendar day is not a Valuation Day, transfers
are made as of the next Valuation Day. Once elected, transfers under the
dollar-cost averaging facility continue until the Money Market Subaccount Value
is depleted, the Maturity Date occurs or until the Owner cancels the election by
<PAGE>
Written Notice at least seven days in advance of the next transfer date.
Alternatively, Owners may specify in advance a date for transfers under the
facility to cease. There is no additional charge for using the dollar-cost
averaging facility. Transfers under the facility do not count towards the 12
transfers permitted without a transfer processing fee in any Policy Year. The
Company reserves the right to discontinue offering the dollar-cost averaging
facility at any time and for any reason or to change its features.
AUTOMATIC SUBACCOUNT VALUE REBALANCING. If elected in the application or
requested at any time thereafter prior to the Maturity Date while the Insured is
still living and the Policy is in force by Written Notice, an Owner may instruct
the Company to automatically transfer (on a quarterly, semi-annual or annual
basis) Variable Policy Value between and among specified Subaccounts in order to
achieve a particular percentage allocation of Variable Policy Value among such
Subaccounts ("automatic Subaccount Value rebalancing"). Such percentage
allocations must be in whole numbers. Once elected, automatic Subaccount Value
rebalancing begins on the first Valuation Day of the next calendar quarter or
other period (or, if later, the next calendar quarter or other period after the
expiration of the Cancellation Period).
Owners may stop automatic Subaccount Value rebalancing at any time at least
seven calendar days before the first Valuation Day in a new period. Owners may
specify allocations between and among as many Subaccounts as are available at
the time automatic Subaccount Value rebalancing is elected. Once automatic
Subaccount Value rebalancing has been elected, any subsequent allocation
instructions that differ from the then-current rebalancing allocation
instructions are treated as a request to change the automatic Subaccount Value
rebalancing allocation. Owners may change automatic Subaccount Value rebalancing
allocations at any time. Allocation changes will take effect as of the Valuation
Day that instructions are received at the Service Center. Once automatic
Subaccount Value rebalancing is in effect, an Owner may only transfer Subaccount
Value among or between Subaccounts by changing the automatic Subaccount Value
rebalancing allocation instructions. Changes to or termination of automatic
Subaccount Value rebalancing must be made by Written Notice.
There is no additional charge for automatic Subaccount Value rebalancing and
rebalancing transfers do not count as one of the 12 transfers available without
a transfer processing fee during any Policy Year. If automatic Subaccount Value
rebalancing is elected at the same time as the dollar-cost averaging facility or
when the dollar-cost averaging facility is being utilized, automatic Subaccount
rebalancing will be postponed until the first Valuation Day in the calendar
quarter or other period following the termination of dollar-cost averaging
facility. The Company reserves the right to discontinue offering the automatic
Subaccount Value rebalancing facility at any time and for any reason or to
change its features.
SURRENDER PRIVILEGE
At any time while the Insured is still living and the Policy is in force prior
to the Maturity Date, the Owner may, by Written Notice, surrender it for its
Surrender Value. A surrender is effective as of the date on which a Written
Notice requesting surrender is received at the Service Center. If the Owner
surrenders the Policy during the first 14 Policy Years, or the first 14 Policy
Years following an increase in Specified Amount, the Company will deduct a
surrender charge. (See "Surrender Charge.") Once the Policy is surrendered, all
coverage and other benefits under it cease and it cannot be reinstated.
<PAGE>
WITHDRAWAL PRIVILEGE
After the first Policy Year, while the Insured is still living and the Policy is
in force prior to the Maturity Date, an Owner may, by Written Request, withdraw
any part of the Surrender Value of the Policy, subject to certain conditions. A
withdrawal is effective as of the date on which a Written Notice requesting
withdrawal is received at the Service Center. As of that date, Policy Value is
reduced by the amount of the withdrawal plus any applicable surrender charge.
The minimum amount that may be withdrawn is $500. If the Owner has selected
<PAGE>
Death Benefit Option 1, the Company will reduce the Specified Amount by the
amount of the withdrawal plus any applicable surrender charge deduction. (See
"Death Benefit Proceeds.")
Unless otherwise indicated in the Written Request for Withdrawal, amounts
withdrawn and surrender charges deducted in connection with the withdrawals are
taken from Subaccount Values and Fixed Policy Value based on the proportion that
each Subaccount Value and the Fixed Policy Value bear to Policy Value. If the
Owner requests a decrease in Specified Amount or requests a change in the Death
Benefit Option as of the same date as a withdrawal request, then the withdrawal
is effected after the decrease in Specified Amount or change in Death Benefit
Option.
Notwithstanding the foregoing, the Company reserves the right to reject a
withdrawal request if the request would cause the Specified Amount to be reduced
below the minimum Specified Amount shown in the Policy. Likewise, the Company
reserves the right to deny a withdrawal request if the request would cause the
Policy to fail to qualify as a life insurance contract under the Code or
regulations or rulings thereunder, as interpreted by the Company.
POLICY LOANS
GENERAL. At any time prior to the Maturity Date while the Insured is still
living and the Policy is in force, the Owner may, by Written Notice, borrow
money from the Company using the Policy as the sole security for the loan
provided that (a) a written loan agreement is signed by the Owner, and (b) the
Owner makes a satisfactory assignment of the Policy to the Company. In taking a
loan, an Owner must borrow at least $500. The maximum amount that an Owner may
borrow is 90% of the Surrender Value of the Policy as of the date of the loan.
INTEREST. The Company charges interest on amounts borrowed by Owners. The
interest rate charged is 8% and is an effective annual rate compounded annually
on the Policy Anniversary. Interest is charged in arrears from the date of the
loan and is due from Owners on each Policy Anniversary for the prior Policy
Year. If the Owner does not pay such interest when due, the amount of the
interest is added to the outstanding Loan Amount. Thus, unpaid interest is
charged interest during the ensuing Policy Year. For Policies in the 11th Policy
Year or later, the Company charges a preferred 6% effective annual interest rate
on amounts borrowed up to an amount equal to Policy Value less aggregate premium
payments made to date.
The Company credits Loan Account Value with interest at an effective annual rate
of 6%. On each Policy Anniversary, interest earned on Loan Account Value since
the preceding Anniversary is transferred to the Subaccounts and the Fixed
Account. Unless the Owner specifies otherwise, such transfers are allocated in
the same manner as transfers of collateral to the Loan Account.
LOAN COLLATERAL. When the Company makes a loan to Owners, it transfers an amount
of Cash Value sufficient to secure the loan out of the Subaccounts and the Fixed
Account and into the Loan Account. Owners may specify how this transferred Cash
Value is allocated from among the Subaccount Values and the Fixed Policy Value.
If an Owner does not specify the allocation, the Company makes the allocation
based on the proportion that each Subaccount Value and the Fixed Policy Value
bear to the Cash Value as of the date that the transfer is made. If unpaid
interest is due from an Owner on a Policy Anniversary it is added to the Loan
Amount. Cash Value in the amount of the interest also is transferred to the Loan
Account as of that Anniversary. The Cash Value transferred in connection with
unpaid interest is allocated on the same basis as other Cash Value transferred
by the Company to the Loan Account.
Loan Account Value is recalculated when interest is added to the Loan Amount, a
loan repayment is made, or a new loan is made under Policy.
<PAGE>
NON-PAYMENT OF POLICY LOANS. If Loan Account Value exceeds Cash Value, then the
Owner must make either a loan repayment or a premium payment sufficient to raise
the Cash Value or lower the Loan Account Value so that Cash Value exceeds the
Loan Account Value. The Company will send the Owner and any assignee of record a
notice indicating the amount that must be paid. If payment is not received at
the Service Center within 30 days of the notice being mailed, the Grace Period
will begin. (See "Policy Lapse and Reinstatement.") If the Grace Period expires
without the payment being made, then the Policy Lapses.
LOAN REPAYMENT. The Owner may repay a loan or repay any part of a loan at any
time while the Insured is still living and the Policy is in force prior to the
Maturity Date. Upon repayment of any part of a loan, Loan Account Value in an
amount equal to the payment is transferred to the Subaccounts and the Fixed
Account as of the date that the payment is received at the Service Center.
Unless the Owner specifies otherwise, the amount transferred is allocated among
or between the Subaccounts and the Fixed Account in accordance with the Owner's
allocation instructions for Net Premium Payments in effect at that time.
EFFECT OF POLICY LOAN. A loan, whether or not repaid, has a permanent effect on
the Death Benefit and Policy values because the investment results of the
Subaccounts and current interest rates credited on Fixed Policy Value do not
apply to Policy Value in the Loan Account. The larger the loan and the longer
the loan is outstanding, the greater will be the effect of Policy Value being
held as collateral in the Loan Account. Depending on the investment results of
the Subaccounts or credited interest rates for the Fixed Account while the loan
is outstanding, the effect could be favorable or unfavorable. Policy loans also
may increase the potential for lapse if investment results of the Subaccounts to
which Surrender Value is allocated is unfavorable. If a Policy lapses with loans
outstanding, certain amounts may be subject to income tax and a 10% penalty tax.
See "Tax Considerations," for a discussion of the tax treatment of Policy loans.
In addition, if a Policy is a "modified endowment contract," loans may be
currently taxable and subject to a 10% penalty tax.
MATURITY BENEFITS
The Company will pay the Surrender Value, if any, to the Owner on the Maturity
Date. The Maturity Date is the Policy Anniversary nearest the Insured's 95th
birthday.
DEATH BENEFIT PROCEEDS
Upon receipt of Due Proof of Death of the Insured at the Service Center while
the Policy is in force before the Maturity Date, the Company will pay the Death
Benefit Proceeds to the Beneficiary (or Beneficiaries) or the Contingent
Beneficiary (or Contingent Beneficiaries). The Company pays the Death Benefit
Proceeds in a lump sum unless the Beneficiary (or Contingent Beneficiary) elects
to receive the Proceeds under a Settlement Option. (See "Settlement Options.")
Under certain circumstances, payment of the Death Benefit Proceeds may be
delayed. (See "Suspension or Delay in Payments.")
CALCULATION OF DEATH BENEFIT PROCEEDS. The Death Benefit Proceeds are determined
as of the date of the Insured's death and are equal to:
1. the Death Benefit under the Death Benefit Option selected by the
Owner; plus
2. any death benefit under any rider to the Policy; less
3. any Loan Amount; and less
4. any unpaid monthly deductions if the Insured dies during the
Grace Period.
<PAGE>
Under certain circumstances, the amount of the Death Benefit Proceeds may be
further adjusted. (See "The Company's Right to Contest the Policy" and
"Misstatement of Age or Sex.")
If part or all of the Death Benefit is paid in one sum, the Company will pay
interest on this sum as required by applicable state law from the date of
receipt of due proof of the Insured's death to the date of payment.
DEATH BENEFIT OPTIONS. The Owner may select one of two Death Benefit Options.
1. Death Benefit Option 1 is the greater of:
(a) the Specified Amount on the date of the Insured's death; or
(b) a percentage of the Policy Value on the date of the Insured's
death as indicated in the Table of Policy Value Percentages in
the Appendix.
2. Death Benefit Option 2 is the greater of:
(a) the Specified Amount plus the Policy Value on the date of the
Insured's death; or
(b) a percentage of the Policy Value on the date of the Insured's
death as indicated in the Table of Policy Value Percentages in
the Appendix.
The specified percentage is 250% if the Insured dies at Attained Age 40 or less,
and decreases with each year of Attained Age thereafter so that the percentage
is 100% if the Insured dies at an Attained Age of 95. A table showing these
percentages for Attained Ages 0 to 94 and examples of Death Benefit calculations
for both Death Benefit Options are found in the Appendix.
Under Death Benefit Option 1, the Death Benefit remains level at the Specified
Amount unless the Policy Value multiplied by the specified percentage exceeds
that Specified Amount, in which event the Death Benefit will vary as the Policy
Value varies. Owners who are satisfied with the amount of their insurance
coverage under the Policy and who prefer to have favorable investment
performance and additional Net Premium Payments reflected in higher Policy
Value, rather than increased Death Benefits, generally should select Option 1.
Under Death Benefit Option 2, the Death Benefit always varies as the Policy
Value varies (although it is never less than the Specified Amount). Owners who
prefer to have favorable investment performance and additional Net Premium
Payments reflected in increased Death Benefits generally should select Option 2.
CHANGING THE DEATH BENEFIT OPTION. After the first Policy Anniversary while the
Insured is still living and the Policy is in force prior to the Maturity Date,
the Owner may request a change in the Death Benefit Option. A Death Benefit
Option change becomes effective on the Monthly Anniversary Day on or next
following the date that the Company accepts a request for the change. The
Company may require satisfactory evidence of insurability before permitting a
change in the Death Benefit Option. After a change in Death Benefit Option, the
Company will send the Owner a supplemental policy specifications page showing
the new Death Benefit and Specified Amount. Changing the Death Benefit Option
could have federal tax consequences.
(See "TAX CONSIDERATIONS.")
<PAGE>
INCREASE OF SPECIFIED AMOUNT. After the first Policy Anniversary, while the
Insured is living and the Policy is in force prior to the Maturity Date, the
Owner may submit a supplemental application for an increase in Specified Amount.
The Company requires evidence of insurability before agreeing to an increase in
Specified Amount and may, depending upon the circumstances, also require
additional premium payments or the repayment of part or all of any Loan Amount
under the Policy. The Insured's Attained Age at the time of the increase may not
exceed 75. The amount of any requested increase in Specified Amount must be at
least $25,000 and not more than the amount that would increase the total
Specified Amount above the maximum specified amount for which the Company would
<PAGE>
issue a new Policy.
An increase in Specified Amount causes an increase in the Minimum Monthly
Premium Payment. Each increase in Specified Amount has a Target Premium Payment
and a Guideline Annual Premium Payment associated with it.
Any increase in Specified Amount is effective as of the date that the Company
approves it. Each increase in Specified Amount creates an increment of Specified
Amount to which a portion of Policy Value is thereafter attributed for the
purpose of computing sales surrender charges, the Net Amount at Risk and the
monthly cost of insurance charge and for the purpose of exercising the Special
Transfer Privilege. An additional monthly cost of insurance charge is deducted
for each additional increment in Specified Amount. This additional cost of
insurance charge is deducted from Policy Value attributable to the increase in
Specified Amount. Each increase in Specified Amount also results in additional
surrender charges. After an increase in Specified Amount, the Company will send
the Owner a supplemental policy specifications page showing the effective date
of the increase, the monthly cost of insurance charge for the increase,
additional sales surrender charges arising as a result of the increase and any
changes to premium payment information from the previous or original policy
specifications page.
The cancellation privilege applies to any increase in Specified Amount except
that when no additional premium payments are required for an increase, only the
monthly deduction(s) for the increase made before the cancellation is refunded
if the increase is cancelled. (See "Cancellation Privilege.")
DECREASE OF SPECIFIED AMOUNT. After the first Policy Anniversary while the
Insured is still living and the Policy is in force prior to the Maturity Date,
the Owner may by Written Notice request a decrease of Specified Amount. The
amount of any requested decrease in Specified Amount must be at least $25,000
and not be more than the amount that would decrease the total Specified Amount
below $100,000. Specified Amount may not be decreased when, to do so, would
cause Surrender Value to fall below zero. Any decrease becomes effective on the
Monthly Anniversary Day on or next following the date that the Company accepts
the request for the decrease. The decrease is first applied to reduce prior
increases in Specified Amount in the reverse order in which they occurred. After
all prior increases in Specified Amount have been eliminated, a decrease is
applied to reduce the initial Specified Amount.
A decrease of Specified Amount may result in the imposition of a surrender
charge. In this event, the charge is deducted from Policy Value as of the
effective date of the decrease. (See "Charges and Deductions.") A decrease in
Specified Amount causes a decrease in the Minimum Monthly Premium Payment and in
the Target Premium Payment and Guideline Annual Premium Payment associated with
the increment of Specified Amount being decreased. After a decrease in Specified
Amount, the Company will send the Owner a supplemental policy specifications
page showing the effective date of the decrease, the monthly cost of insurance
charge after the decrease, surrender charges deducted as a result of the
decrease, and any changes to premium payment information from the previous or
original specifications page.
The Company reserves the right to deny a request for a decrease in Specified
Amount for 12 months following the most recent increase in Specified Amount and
to limit decreases in Specified Amount to one per Policy Year.
If a decrease in the Specified Amount would result in total premiums paid
exceeding the premium limitations prescribed under current tax law to qualify
the Policy as a life insurance contract, the Company will contact the Owner and
inquire whether he or she wants to receive the excess above the premium
limitations or to forgo the decrease. The Company reserves the right to decline
a requested decrease in the Specified Amount if compliance with the guideline
premium limitations under current tax law would require payment of excess
premium to the Owner in an amount that would exceed the Surrender Value under
the Policy.
<PAGE>
SETTLEMENT OPTIONS
SELECTING A SETTLEMENT OPTION. The Company pays Owners or Beneficiaries (or
Contingent Beneficiaries), as appropriate, the amount of any surrender,
withdrawal, or Death Benefit Proceeds in a lump sum unless the Owner has, by
Written Notice, selected one of the Settlement Options described below. If the
amount being paid by the Company is less than $5,000, however, payment is only
made in a lump sum. In addition, if the Owner or Beneficiary (or Contingent
Beneficiary) receiving payment is an executor, administrator, trustee, or not a
natural person, payment is made in a lump sum unless the Company specifically
consents to payment under one of the Settlement Options.
Owners may select a Settlement Option for payment of the Death Benefit Proceeds
in lieu of a lump sum, at any time while the Insured is still living and the
Policy is in force prior to the Maturity Date. If no election is made by the
Owner before the Insured's death, then, upon the Insured's death, the
Beneficiary (or Contingent Beneficiary) may elect a Settlement Option before the
Death Benefit Proceeds are paid. The Owner also may elect to receive the
Surrender Value of a Policy or the amount of a withdrawal in the form of a
Settlement Option at any time before the payment of the Surrender Value or
withdrawal. For purposes of describing the Settlement Options, the term "Payee"
means Owner or Beneficiary (or Contingent Beneficiary), as appropriate.
FREQUENCY OF PAYMENTS. If Settlement Option 1,2, or 3 is selected, payments will
be made every 1 year, 6 months, 3 months, or every month. The Payee must specify
the payment frequency when selecting a settlement option. If settlement option
4, 5, or 6 is selected, payments will be made monthly. If payment under any
option would be less than $50, the Company will adjust the frequency of
payments so that each payment is at least $50.
FIRST PAYMENT. Depending on the payment frequency selected, the first payment
under Settlement Option 1 is made as of 1 year, 6 months, 3 months, 1 month from
the date of the Insured's death. Depending on the payment frequency selected and
subject to the Company's right to suspend or delay payments (see "Suspension or
Delay in Payments"), the first payment under Settlement Option 1 is made as of 1
year, 6 months, 3 months, 1 month from the effective date of any surrender or
withdrawal. The first payment under any other Settlement Option is made, subject
to the Company's right to suspend or delay payments, as of the date of the
Insured's death or the effective date of any surrender or withdrawal.
BETTERMENT OF RATES. If, under Settlement Options 4, 5, or 6, the Company's
regular annuity purchase rates on the date of the Insured's death or the
effective date of any surrender or withdrawal are more favorable than those upon
which Options 4, 5, or 6 are based, the Company shall compute payments using the
regular annuity rates. The Company will furnish information about the regular
annuity rates upon request.
DEATH OF PAYEE. Unless instructed otherwise at the time that the Settlement
Option is selected, at the death of the Payee the Company pays the amounts below
in a lump sum to the Payee's estate:
1. Under Settlement Option 1, the amount left on deposit with the
Company to accumulate interest.
2. Under Settlement Option 2, 3, or 5, the commuted value of the amount
payable at the Payee's death as provided under the Option selected.
The commuted value is based on interest at the rate that would
have been used to compute the first of the remaining Payments under
that option.
<PAGE>
OPTION 1, INTEREST PAYMENTS. The Company holds the Death Benefit Proceeds (or
the Surrender Value or the amount of a withdrawal) as principal and pays
interest to the Payee. The interest rate is 3% per year compounded annually. The
Company pays interest every 1 year, 6 months, 3 months, or 1 month, as specified
at the time this option is selected. At the death of the Payee, the value of the
remaining payments are paid as stated above.
<PAGE>
OPTION 2, PAYMENTS OF A SPECIFIED AMOUNT. The Company pays the Death Benefit
Proceeds (or the Surrender Value or the amount of a withdrawal) in equal
payments every 1 year, 6 months, 3 months, or 1 month. The amount and frequency
of the payments is specified at the time this option is selected. After each
payment, interest is added to the remaining amount applied under this option
that has not yet been paid. The interest rate is 3% per year compounded
annually. Payments are made to the Payee until the amount applied under this
option, including interest, is exhausted. The total of the payments made each
year must be at least 5% of the amount applied under this option. If the Payee
dies before the amount applied is exhausted, the Company pays the value of the
remaining payments as stated above.
OPTION 3, INSTALLMENTS FOR A SPECIFIED PERIOD. The Company pays the Death
Benefit Proceeds (or the Surrender Value or the amount of a withdrawal) in equal
payments for the number of years specified when the option is selected. Payments
are made every 1 year, 6 months, 3 months, or 1 month, as specified when the
option is selected. The amount of each payment for each $1,000 applied under
this option is shown in Policy. These amounts are calculated at an interest rate
of 3% per year compounded annually. If the Payee dies before the expiration of
the specified number of years, the Company pays the value of the remaining
payments as stated above.
OPTION 4, LIFE ANNUITY. The Company makes monthly payments to the Payee for as
long as he or she lives. The amount of each payment for each $1,000 applied
under this option is shown in the Policy.
OPTION 5, LIFE ANNUITY WITH PERIOD CERTAIN. The Company makes monthly payments
to the Payee for as long as the Payee lives. At the time this option is
selected, a period certain of 5, 10, 15, or 20 years must also be selected. If
the Payee dies before the specified period certain ends, the payments to the
Payee's estate will continue until the end of the specified period. The amount
of the monthly payments therefore depends on the period certain selected. The
amount of each payment for each period certain available is shown in the Policy.
The amounts shown are for each $1,000 applied under this option. If at any age
the amount of the payments is the same for two or more periods certain, payment
will be made as if the longest period certain was selected.
OPTION 6, JOINT LIFE AND SURVIVORSHIP ANNUITY. The Company makes monthly
payments to two Payees while both are living. After the death of either Payee,
payments continue to the other Payee for as long as the other Payee lives. The
amount of each payment for each $1,000 applied under this option is shown in the
Policy.
TELEPHONE TRANSACTION PRIVILEGES
If an Owner has elected this privilege in a form provided by the Company, an
Owner may make transfers or change allocation instructions by telephoning the
Service Center. A telephone authorization form received by the Company at the
Service Center is valid until it is rescinded or revoked by Written Notice or
until a subsequently dated form signed by the Owner is received at the Service
Center. The Company will send Owners a written confirmation of all transfers and
allocation instructions made pursuant to telephone instructions.
The Service Center requires a form of personal identification prior to acting on
instructions received by telephone and also may tape record instructions
received by phone. If the Company follows these procedures, it is not liable for
any losses due to unauthorized or fraudulent transactions. The Company reserves
the right to suspend telephone transaction privileges at any time for any
reason.
<PAGE>
THE FIXED ACCOUNT
Because of exemptive and exclusionary provisions, interests in the Fixed Account
have not been registered under the Securities Act of 1933 nor has the Fixed
Account been registered as an investment company under the Investment Company
Act of 1940. Accordingly, neither the Fixed Account nor any interests therein
are subject to the provisions of these Acts and, as a result, the staff of the
Securities and Exchange Commission has not reviewed the disclosure in this
Prospectus relating to the Fixed Account. The disclosure regarding the Fixed
Account may, however, be subject to certain generally applicable provisions of
the Federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
THE FIXED ACCOUNT
The Fixed Account consists of assets owned by the Company with respect to the
Policies, other than those in the Variable Account. It is part of the Company's
General Account assets. The Company's general account assets are used to support
its insurance and annuity obligations other than those supported by separate
accounts, and are subject to the claims of the Company's general creditors.
Subject to applicable law, the Company has sole discretion over the investment
of the assets of the Fixed Account. The Loan Account is part of the Fixed
Account. Guarantees of Net Premiums allocated to the Fixed Account, and interest
credited thereto, are supported by the Company. The Fixed Policy Value is
calculated daily. (See "Fixed Policy Value.")
INTEREST CREDITED ON FIXED POLICY VALUE
The Company guarantees that it will credit interest on Fixed Policy Value at an
effective annual rate of not less than 4.0%. In its discretion, the Company will
credit interest at rates higher than 4%.
"FULL-YEAR" RATES. Before the beginning of each calendar year, the Company
publishes an effective annual rate at which it will credit Fixed Policy Value
under the Policies for that year. Fixed Policy Values at the beginning of the
calendar year under all Policies are credited with that rate of interest for the
entire calendar year.
"NEW-MONEY" RATES. The Company credits Net Premium Payments allocated to and
Policy Value transferred to the Fixed Account during a calendar year with
interest at an effective annual rate in effect on the date that the Net Premium
Payment is received at the Service Center or the date that as of which the
transfer is made. These amounts are credited with interest at this rate until
the end of the calendar year. The Company publishes this "new money" rate from
time to time during a calendar year and may change the "new money" rate at its
discretion throughout any calendar year.
For purposes of crediting interest, Policy Value deducted, transferred, or
withdrawn from the Fixed Account, is accounted for on a "first-in, first-out"
basis.
CHARGES AND DEDUCTIONS
SALES CHARGES
The Company deducts a sales charge from certain premium payments. In Policy
Years 1 through 10, the sales charge deducted is 4% of premium payments received
up to a Target Premium Payment for the initial Specified Amount. In Policy Year
11 and each Policy Year thereafter, the sales charge deducted is 2% of premium
payments received up to a Target Premium Payment for the initial Specified
Amount. Absent an increase in Specified Amount, no sales charge is deducted in
any Policy Year from premium payments in excess of a Target Premium Payment for
the initial Specified Amount.
<PAGE>
If the Owner increases the Specified Amount, a Target Premium Payment is
established for the increase. Therefore, there is a Target Premium Payment for
each increment of Specified Amount. The Company deducts the sales charge from
premium payments attributable to the increase. For purposes of computing and
deducting sales charges, all Premium Payments made after an increase in
Specified Amount are apportioned to each increment of Specified Amount on the
basis of the relative Guideline Annual Premium Payments for each such increment.
For the first ten 12-month periods following an increase in Specified Amount,
the charge is 4% of premium payments made in each such 12-month period
attributable to the increase up to a Target Premium Payment for the increase.
For subsequent 12-month periods, the sales charge is 2% of premium payments made
during the 12-month period attributable to the increase in Specified Amount up
to a Target Premium Payment for the increase.
PREMIUM TAX CHARGE
A 2.25% charge for state and local premium taxes is also deducted from each
premium payment. The state and local premium tax charge reimburses the Company
for premium taxes associated with the Policies. The Company expects to pay an
average state and local premium tax rate of approximately 2.25% of premium
payments for all states. This tax can range from 2% to 16% of premium payments
and generally varies by the applicant's state of residence.
FEDERAL TAX CHARGE
The Company also deducts a charge for federal taxes from each premium payment.
This charge is 1.25% of all premium payments and compensates the Company for its
federal income tax liability resulting from Section 848 of the Code. The amount
of this charge, which may be increased or decreased, is reasonable in relation
to the Company's increased federal tax burden under Section 848 resulting from
the receipt of premium payments under the Policies.
SURRENDER CHARGE
GENERAL. If the Owner surrenders the Policy, makes a withdrawal, decreases the
Specified Amount or if the Policy lapses, the Company may deduct a surrender
charge. The surrender charge consists of two parts, a sales surrender charge
(i.e., a contingent deferred sales charge) and an administration surrender
charge. The total surrender charge declines over time as follows:
100% of the total Surrender Charge in Policy Years 1 through 6
80% of the total Surrender Charge in Policy Year 7
70% of the total Surrender Charge in Policy Year 8
60% of the total Surrender Charge in Policy Year 9
50% of the total Surrender Charge in Policy Year 10
40% of the total Surrender Charge in Policy Year 11
30% of the total Surrender Charge in Policy Year 12
20% of the total Surrender Charge in Policy Year 13
10% of the total Surrender Charge in Policy Year 14
No Charge in Policy Years 15 and later
The purpose of the surrender charge is to reimburse the Company for some of the
expenses incurred in the distribution of the Policies. The surrender charge,
together with the sales charge imposed on premium payments, may be insufficient
to recover the expenses of selling the Policies. Unrecovered expenses are borne
by the Company's General Account which may include profits, if any, from the
mortality and expense risk charge and mortality gains from cost of insurance
charges. (See "Daily Mortality and Expense Risk Charge," and "Cost of Insurance
Charge.")
<PAGE>
DEDUCTION OF THE SURRENDER CHARGE. If assessed upon the surrender of the Policy,
the surrender charge reduces the amount otherwise paid to the Owner. If assessed
upon Lapse of the Policy, the amount of the charge is not restored to Policy
Value in the event that the Policy is reinstated. If assessed upon a decrease in
Specified Amount, the charge is deducted from the remaining Policy Value and
reduces the amount of any remaining applicable surrender charge. If assessed on
a withdrawal, the surrender charge is deducted from the remaining Policy Value
and reduces the amount of any remaining applicable surrender charge. Unless
otherwise indicated in the request for a decrease or a withdrawal, surrender
charges deducted in connection with decreases in Specified Amount or withdrawals
are taken from Subaccount Values and Fixed Policy Value based on the proportion
that each Subaccount Value and the Fixed Policy Value bear to the Policy Value
before the deduction.
If taken upon a decrease in Specified Amount, the surrender charge is the
pro-rata portion of the total surrender charge based on the ratio that the
Specified Amount decrease bears to the total Specified Amount before the
decrease. If assessed upon a withdrawal, the surrender charge is the pro-rata
portion of the total surrender charge based on the ratio that the withdrawn
amount bears to the total Surrender Value before the withdrawal.
SALES SURRENDER CHARGE IN CONNECTION WITH THE INITIAL SPECIFIED AMOUNT. In the
first Policy Year, the sales surrender charge in connection with the initial
Specified Amount is 34% of premium payments received up to a Target Premium
Payment for the initial Specified Amount, and, in each of Policy Years 2 through
6, the charge is 33% of premium payments received up to the Target Premium
Payment for the initial Specified Amount in each year until the total sales
surrender charge equals 100% of a single Target Premium Payment for the initial
Specified Amount. Notwithstanding the foregoing, the sales surrender charge in
connection with the initial Specified Amount during the first two Policy Years
is never more than the sum of: (1) 26% of the first Guideline Annual Premium
Payment for the initial Specified Amount, (2) 6% of the second Guideline Annual
Premium Payment for the initial Specified Amount, and (3) 5% of all additional
Premium Payments attributable to the initial Specified Amount.
ADMINISTRATION SURRENDER CHARGE. The Administration Surrender Charge is $2.00
per $1,000 of initial Specified Amount for Policies on Insureds age 25 or less
on the Policy Effective Date, and $5.00 per $1,000 of initial Specified Amount
for Policies on Insureds age 35 or older on the Policy Effective Date. For
Insureds of other ages, the Administration Surrender Charge is the following per
$1,000 of Specified Amount: age 26 - $2.30, age 27 - $2.60, age 28 - $2.90, age
29 - $3.20, age 30 - $3.50, age 31 - $3.80, age 32 - $4.10, age 33 - $4.40, age
34 $4.70.
SALES SURRENDER CHARGE IN CONNECTION WITH INCREASES IN SPECIFIED AMOUNT. The
surrender charge is computed and assessed separately for the initial Specified
Amount and for each increase in Specified Amount. Only the sales charge
component of the surrender charge, however, is assessed for an increase in
Specified Amount. For purposes of computing and assessing the sales surrender
charge attributable to an increase in Specified Amount, all premium payments
made after an increase in Specified Amount are apportioned to each increment of
Specified Amount on the basis of the relative Guideline Annual Premium Payments
for each such increment. Likewise, Policy Value is apportioned to each increment
of Specified Amount on the basis of the relative Guideline Annual Premium
Payments for each such increment. The sales surrender charge for an increase in
Specified Amount is as follows: In the first 12 months following the increase,
the sales surrender charge is 34% of premium payments received up to a Target
Premium Payment for the increase in Specified Amount, and, in each of the five
subsequent 12-month periods following the increase, the charge is 33% of premium
payments received up to a Target Premium Payment for the increase in Specified
<PAGE>
Amount in each such 12-month period until the total sales surrender charge for
the increase equals 100% of a single Target Premium Payment for the increase in
Specified Amount. Notwithstanding the foregoing, during the first 24 months
following an increase in Specified Amount, the sales surrender charge for the
increase is never more than the sum of: (1) 26% of the first Guideline Annual
Premium Payment for the increase in Specified Amount, (2) 6% of the second
Guideline Annual Premium Payment for the increase in Specified Amount, and (3)
5% of all additional Premium Payments attributable to the increase in Specified
Amount. In addition, the sales surrender charge for an increase in Specified
<PAGE>
Amount declines over the 7th through the 15th 12-month period following the
increase in the same manner as the surrender charge in connection with the
initial Specified Amount.
OTHER TAXES
Currently a charge for federal income taxes is not deducted from the Variable
Account of the Policy Value. The Company reserves the right in the future to
make a charge to the Variable Account or the Policy Value for any federal, state
or local income taxes that the Company incurs that it determines to be properly
attributable to the Variable Account of the Policies. The Company will notify
Owners promptly of any such charge.
MONTHLY DEDUCTION
The monthly deduction is a charge made by the Company as of the Policy Effective
Date and every Monthly Anniversary Day thereafter by reducing Subaccount Values
(i.e., liquidating Units) and Fixed Policy Value in the proportion that each
Subaccount Value and Fixed Policy Value bears to Policy Value. The monthly
deduction consists of (1) the monthly cost of insurance charge, (2) the monthly
policy fee, (3) the monthly first-year issue fee (when applicable), (4) the
monthly Specified Amount increase fee (when applicable), and (5) the cost of any
riders (when applicable).
MONTHLY COST OF INSURANCE CHARGE. The monthly cost of insurance charge is
computed at the beginning of each Policy month by subtracting 2 from 1 and
multiplying the result by 3, where:
1. is the Death Benefit on the first day of the Policy month divided
by 1 plus the monthly equivalent of 4.0%;
2. is the Policy Value before deduction of the monthly policy fee,
the monthly first-year issue fee (when applicable), the monthly
Specified Amount increase fee (when applicable), and the cost of
any riders (when applicable); and
3. is the cost of insurance rate as described below.
The monthly cost of insurance charge is computed separately for the initial
Specified Amount and for each increment of Specified Amount resulting from
increases in Specified Amount. For the purpose of computing the Net Amount at
Risk (the result of subtracting 2 from 1 above), Policy Value is apportioned to
each increment of Specified Amount on the basis of the relative Guideline Annual
Premium Payments for each such increment. Where the Death Benefit is a percent
of Policy Value the monthly cost of insurance charge is computed separately, and
Policy Value is apportioned to, an increment of Death Benefit corresponding to
each increment of Specified Amount.
The monthly cost of insurance rate for a Policy is based on the sex, Attained
Age, Issue Age, risk class, and number of years that the Policy or increment of
Specified Amount has been in force. The Issue Age of the Insured will usually be
different for each increase in Specified Amount. The Company reviews monthly
cost of insurance rates on an ongoing basis (at least once every 5 years) based
on its expectations as to future mortality experience, investment earnings,
persistency, taxes and other expenses. Any changes in cost of insurance rates
are made on a uniform basis for Insureds of the same class as defined by sex,
Attained Age, Issue Age, risk class, and Policy duration. The Company guarantees
that the cost of insurance rates used to calculate the monthly cost of insurance
charge will not exceed the maximum cost of insurance rates set forth in the
Policies.
The Company places each Insured in a risk class when a Policy is first
underwritten. This risk class applies to the initial Specified Amount. When an
Owner requests an increase in Specified Amount, the Company conducts additional
<PAGE>
underwriting before approving the increase to determine whether a different risk
class should apply to the increase. If the risk class for the increase would
have a lower cost of insurance rate than the class for the initial Specified
Amount (or a previous increase), the risk class for the increase is applied to
the initial Specified Amount (or any previous increases in Specified Amount). If
the risk class for the increase would have a higher cost of insurance rate than
the class for the initial Specified Amount (or a previous increase), then the
risk class for the increase only applies to the increase in Specified Amount.
In connection with the cost of insurance rates guaranteed in the Policy, the
Company places Insureds into standard smoker and standard nonsmoker risk
classes. The guaranteed rates for standard classes are based on the 1980
Commissioners' Standard Ordinary Mortality Tables, Male or Female, Smoker or
Nonsmoker Mortality Rates ("1980 CSO Tables"). The guaranteed rates for
substandard classes are based on multiples of or additions to the 1980 CSO
Tables. In connection with current cost of insurance rates, the Company places
Insureds into the following risk classes: standard smoker, standard nonsmoker,
preferred smoker, preferred nonsmoker and preferred plus nonsmoker.
Cost of insurance rates (whether guaranteed or current) for an Insured in a
nonsmoker class are less than or equal to rates for an Insured of the same age
and sex in the same smoker class. Cost of insurance rates (whether guaranteed or
current) for an Insured in a nonsmoker or smoker standard class are generally
lower than guaranteed rates for an Insured of the same age and sex and smoking
status in a substandard class.
MONTHLY POLICY FEE, MONTHLY FIRST-YEAR ISSUE FEE, AND MONTHLY SPECIFIED AMOUNT
INCREASE FEE. These charges compensate the Company for administration expenses
associated with the Policies and the Variable Account. These expenses relate to
premium payment billing and collection, recordkeeping, processing death benefit
claims, Policy loans, Policy changes, reporting and overhead costs, processing
applications and establishing Policy records. The monthly policy fee is $6.00
per month. The monthly first-year issue fee is $20.00 per month during the first
Policy Year, and the monthly Specified Amount increase fee is $10.00 per month
for the first 12 months after an increase in Specified Amount. The Company does
not anticipate making any profit on these charges.
SUPPLEMENTAL BENEFIT AND/OR RIDER CHARGES. See "Supplemental Benefits and/or
Riders."
<PAGE>
DAILY MORTALITY AND EXPENSE RISK CHARGE
The Company deducts a daily charge from the assets of the Variable Account to
compensate it for mortality and expense risks that it assumes under the Policy.
The daily charge is at the rate of 0.002477% (approximately equivalent to an
effective annual rate of 0.90%) of the net assets of the Variable Account during
the first 10 Policy Years and .001236% (approximately equivalent to an effective
annual rate of 0.45%) of the net assets of the Variable Account during Policy
Years 11 and thereafter. During the first 10 Policy Years, approximately .35% of
this annual charge is for the assumption of mortality risk and .55% is for the
assumption of expense risk. During Policy Years 11 and thereafter, approximately
.35% of this annual charge is for the assumption of mortality risk and .10% is
for the assumption of expense risk. If the mortality and expense risk charge is
insufficient to cover the actual cost of the mortality and expense risks
<PAGE>
undertaken by the Company, the Company will bear the shortfall. Conversely, if
the charge proves more than sufficient, the excess will be profit to the Company
and will be available for any proper purpose including, among other things,
payment of expenses incurred in selling the Policies.
The mortality risk that the Company assumes is the risk that Insureds, as a
group, will live for a shorter period of time than the Company estimated when it
established the guaranteed costs of insurance rates in the Policy. Because of
these guarantees, each Owner is assured that the morbidity of a particular
Insured will not have an adverse effect on the Death Benefit Proceeds that a
Beneficiary would receive. The expense risk that the Company assumes is the risk
that the monthly Policy fee, monthly first-year issue fee, and monthly Specified
Amount increase fee (and the transfer processing fee, imposed) may be
insufficient to cover the actual expenses of administering the Policies.
TRANSFER PROCESSING FEE
The first 12 transfers during each Policy Year are free. The Company assesses a
Transfer Processing Fee of $25 for each transfer in excess of 12 during a
Policy Year. For the purposes of assessing the Transfer Processing Fee, each
Written Notice of transfer is considered to be one transfer, regardless of the
number of Subaccounts affected by the transfer. The Transfer Processing Fee is
deducted from the amount being transferred.
FUND EXPENSES
The value of the net assets of each Subaccount reflects the investment advisory
fees and other expenses incurred by the corresponding Fund in which the
Subaccount invests. See the prospectus for the Funds.
<TABLE>
<CAPTION>
FEE TABLE
ANNUAL FUND EXPENSES
(as a percentage of Fund average net assets)
Management
(Advisory) Other Total Annual
Fees Expenses Expenses
<S> <C> <C> <C>
Insurance Series:
Federated High Income Bond Fund II 0.0% [1] 0.80% 0.80%
Federated Prime Money Fund II 0.0% [2] 0.80% 0.80%
Federated Utility Fund II 0.0% [3] 0.85% 0.85%
Variable Insurance Products Fund and
Variable Insurance Products Fund II:
Fidelity VIP Equity-Income Portfolio 0.51% 0.10% 0.61%
Fidelity VIP II Asset Manager Portfolio 0.71% 0.08% 0.79% [4]
Fidelity VIP II Contrafund Portfolio 0.61% 0.11% 0.72% [4]
Fidelity VIP II Index 500 Portfolio 0.00% 0.28% 0.28% [5]
The Alger American Fund:
Alger American Growth Portfolio 0.75% 0.10% 0.85%
Alger American MidCap Growth Portfolio 0.80% 0.10% 0.90%
Alger American Small Capitalization Portfolio 0.85% 0.07% 0.92%
MFS Variable Insurance Trust:
MFS Emerging Growth Series 0.75% 0.25% 1.00% [6]
MFS Growth With Income Series 0.75% 0.25% 1.00% [6]
MFS Limited Maturity Series 0.55% 0.45% 1.00% [7]
MFS Research Series 0.75% 0.25% 1.00% [6]
MFS Total Return Series 0.75% 0.25% 1.00% [6]
SoGen Variable Funds, Inc.:
SoGen Overseas Portfolio 0.75% 0.60% 1.35%
Van Eck Worldwide Insurance Trust:
Emerging Markets Fund 0.00% [8] 0.00% [8] 0.00% [8]
Gold and Natural Resources Fund 1.00% 0.21% 1.21%
<FN>
[1]Voluntary waiver of management fee (0.60% maximum)
[2]Voluntary waiver of management fee (0.50% maximum)
[3]Voluntary waiver of management fee (0.75% maximum)
[4]Brokerage commissions used to reduce expenses (otherwise total operating
expenses were 0.81% for Asset Mangager and 0.73% for Contrafund)
[5]Voluntary reduction of fund expenses (otherwise management fee, other
expenses, and total expenses were 0.28%, 0.19% and 0.47% respectively)
[6]Adviser has agreed to bear expenses (otherwise other expenses and total
expenses were 1.00% and 1.55%, respectively)
[7]Adviser has agreed to bear expenses (otherwise other expenses and total
expenses were 1.00% and 1.55% respectively)
[8]Start up period, no experience to report (2.00% maximum, 1.50% estimate)
</FN>
</TABLE>
OTHER POLICY BENEFITS AND PROVISIONS
OWNERSHIP
GENERAL. The Policy belongs to the Owner. An Owner may exercise all of the
rights and options described in the Policy. The Insured is the Owner unless the
application specifies a different person as Owner.
CHANGING THE OWNER. The Owner may change the Owner by Written Notice at any time
while the Insured is alive and the Policy is in force prior to the Maturity
Date. A change of Ownership is effective as of the date that the Written Notice
is signed; however, the Company is not liable for payments it makes before it
receives a Written Notice of a change in Ownership. A change in Owner may have
significant tax consequences. (See "Tax Considerations.")
CONTINGENT OWNER. If the Owner is not the Insured, he or she may name a
Contingent Owner in the application or by subsequent Written Notice. The
Contingent Owner becomes the Owner in the event that the Owner dies before the
Insured. If no Contingent Owner survives the Owner, then upon the death of the
last surviving Owner, that Owner's estate becomes the Owner.
ASSIGNMENT. By Written Notice the Owner may assign his or her rights under this
Policy. The Company is not bound by the assignment unless it receives a
duplicate of the original assignment at the Service Center. The Company is not
responsible for the validity or sufficiency of any assignment and is not liable
for any payment it makes before receipt of the duplicate original assignment. An
assignment does not change or revoke the Beneficiary designation in effect at
the time that the assignment is made. If an assignment is absolute, the Owner's
rights and privileges under the Policy, including any right to change the
Beneficiary, pass to the assignee. If an assignment is collateral, the
collateral assignee has priority over the interest of any revocable Beneficiary
<PAGE>
or revocable payee under any optional method of settlement selected by the
Owner. Any claim under any assignment is subject to proof of interest and the
extent of the assignment. An assignment is subject to any Loan Amount.
SELECTING THE BENEFICIARY. The Owner designates the Beneficiary in the
application. Any Beneficiary designation is revocable unless otherwise stated in
the designation. Owners may designate Contingent Beneficiaries. Where more than
one Beneficiary or more than one Contingent Beneficiary is designated, each
Beneficiary or Contingent Beneficiary, as appropriate, shares in any Death
Benefit Proceeds equally unless the Beneficiary designation states otherwise.
CHANGING THE BENEFICIARY. The Owner may change the Beneficiary by Written Notice
at any time while the Insured is alive and the Policy is in force before the
Maturity Date. If, however, the Owner previously irrevocably named a
Beneficiary, that Beneficiary's written consent must be provided to the Company
before a new Beneficiary is designated. Any change of Beneficiary is effective
as of the date Written Notice is signed by the Owner but the Company is not
liable for any payments it makes under the Policy prior to the time it receives
Written Notice of any Beneficiary change.
THE COMPANY'S RIGHT TO CONTEST THE POLICY
The Company has the right to contest the validity of the Policy or to resist a
claim under it on the basis of any material misrepresentation of a fact stated
in the application or any supplemental application. The Company also has the
right to contest the validity of any increase of Specified Amount or other
change to the Policy on the basis of any material misrepresentation of a fact
stated in the application (or supplemental application) for such increase in
coverage or change. In issuing this Policy, the Company relies on all statements
made by or for the Insured in the application or in a supplemental application.
In the absence of fraud, the Company considers statements made in the
application(s) to be representations and not warranties.
In the absence of fraud, the Company cannot bring any legal action to contest
the validity of the Policy after it has been in force during the lifetime of the
Insured for two years from the Policy Effective Date, or if reinstated, for two
years from the date of reinstatement. Likewise, the Company cannot contest any
increase in coverage effective after the Policy Effective Date, or any
reinstatement thereof, after such increase or reinstatement has been in force
during the lifetime of the Insured for two years from its effective date.
SUICIDE EXCLUSION
If the Insured commits suicide, while sane or insane, within two years of the
Policy Effective Date, the Company's liability is limited to an amount equal to
the Policy Value less any Loan Amount. The Company will pay this amount to the
Beneficiary in one sum.
If the Insured commits suicide, while sane or insane, within two years from the
effective date of any increase in Specified Amount, the Company's liability with
respect to that increase is limited to an amount equal to the cost of insurance
attributable to the increase from the effective date of the increase to the date
of death.
MISSTATEMENT OF AGE OR SEX
If the Age or sex of the Insured has been stated incorrectly in the application
or any supplemental application, the Company will adjust the Death Benefit and
any benefits provided by rider or endorsement it pays under this Policy to the
amount that would have been payable at the correct age and sex based on the most
recent deduction for cost of insurance and the cost of any benefits provided by
rider or endorsement. If the age of the Insured has been overstated or
understated, the Company will recalculate the Policy Value using the cost of
insurance (and the cost of benefits provided by rider or endorsement) based on
the Insured's correct age and sex.
<PAGE>
MODIFICATION OF THE POLICY
Only an officer of the Company may modify this Policy or waive any of the
Company's rights or requirements under this Policy. Any modification or waiver
must be in writing. No agent may bind the Company by making any promise not
contained in this Policy.
Upon notice to the Owner, the Company may modify the Policy to:
1. conform the Policy or the operations of the Company or of the Variable
Account to the requirements of any law (or regulation issued by a
government agent) to which the Policy, the Company or the Variable Account
is subject);
2. assure continued qualification of the Policy as a life insurance contract
under the Code; or
3. reflect a change (permitted by the Policy) in the operation of the Variable
Account.
In the event of any such modification, the Company will make appropriate
endorsements to the Policy. If any provision of the Policy conflicts with the
laws of a jurisdiction that govern the Policy, the Policy provides that such
provision be deemed to be amended to conform with such laws.
SUSPENSION OR DELAY IN PAYMENTS
The Company usually pays the amounts of any surrender, withdrawals, Death
Benefit Proceeds, or settlement options within seven business days after receipt
of all applicable Written Notices and/or Due Proofs of Death. However, the
Company can postpone such payments if:
1. the New York Stock Exchange is closed, other than customary
weekend and holiday closing, or trading on the exchange is
restricted as determined by the SEC; or
2. the SEC permits, by an order, the postponement for the protection
of Owners; or
3. the SEC determines that an emergency exists that would make the
disposal of securities held in the Variable Account or the
determination of their value not reasonably practicable.
If a recent check or draft has been submitted, the Company has the right to
defer payment of surrenders, withdrawals, Death Benefit Proceeds, or payments
under a settlement option until such check or draft has been honored.
The Company has the right to defer payment of any surrender, withdrawal, or
transfer of Fixed Policy Value for up to six months from the date of receipt of
Your Written Notice.
REPORTS TO OWNERS
At least annually, or more often as required by law, the Company will mail to
Owners at their last known address a report showing the following items as of
the end of the report period:
1. the period covered by the report;
2. the current Policy Value, Cash Value and Surrender Value;
<PAGE>
3. the current Variable Policy Value (including each Subaccount
Value), Fixed Policy Value and Loan Account Value;
4. the current Loan Amount;
5. any premium payments, withdrawals, or surrenders made, Death
Benefit Proceeds paid and charges deducted since the last report;
6. current Net Premium Payment allocations; and
7. any other information required by law.
Owners may request additional copies of reports from the Company, but the
Company reserves the right to charge a fee for such additional copies. In
addition, the Company will send written confirmations of premium payments and
other financial transactions requested by Owners. Owners will also be sent
copies of the annual and semi-annual report to shareholders for each Fund in
which they are indirectly invested.
SUPPLEMENTAL BENEFITS AND/OR RIDERS
The following supplemental benefits and/or riders are available and may be added
to a Policy. Monthly charges for these benefits and/or riders are deducted from
Policy Value as part of the monthly deduction. The supplemental benefits and/or
riders available with the Policies provide fixed benefits that do not vary with
the investment experience of the Variable Account.
CHILDREN'S TERM LIFE INSURANCE RIDER. This rider provides a death benefit
payable upon the death of a covered child. This rider has no cash value.
SPOUSE'S TERM LIFE INSURANCE RIDER. This rider provides a death benefit payable
upon the death of an Owner's spouse. This rider has no cash value.
DISABILITY BENEFIT RIDER. This rider provides for the waiver of the monthly
deduction under the Policy during the total disability of the Owner.
Additional rules and limits apply to these supplemental benefits and/or riders.
TAX CONSIDERATIONS
The following summary provides a general description of the federal income tax
considerations associated with a Policy and does not purport to be complete or
to cover all situations. This discussion is not intended as tax advice. Counsel
or other competent tax advisers should be consulted for more complete
information. This discussion is based upon the Company's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service (the "Service"). No representation is made as to the
likelihood of continuation of the present federal income tax laws or of the
current interpretations by the Service.
TAX STATUS OF THE POLICIES
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal income tax purposes. Although the Secretary of the Treasury (the
"Treasury") is authorized to prescribe regulations implementing Section 7702,
while proposed regulations and other interim guidance has been issued, final
regulations have not been adopted. In short, guidance as to how Section 7702 is
to be applied is limited. If a Policy were determined not to be a life insurance
<PAGE>
contract for purposes of Section 7702, the Policy would not provide the tax
advantages normally provided by a life insurance contract.
With respect to a Policy issued on a standard basis, the Company believes that
such a Policy should meet the Section 7702 definition of a life insurance
contract. With respect to a Policy that is issued on a substandard basis (i.e.,
a premium class with extra rating involving higher than standard mortality
risk), there is less guidance, in particular as to how the mortality and other
expense requirements of Section 7702 are to be applied in determining whether
such a Policy meets the section 7702 definition of a life insurance contract.
Thus, it is not clear whether or not a Policy issued on a substandard basis
would satisfy section 7702, particularly if the Owner pays the full amount of
premium payments permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
the Company may take whatever steps are appropriate and reasonable to attempt to
cause such a Policy to comply with Section 7702. For these reasons, the Company
reserves the right to restrict Policy transactions as necessary to attempt to
qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Code requires that the investments of each of the
Subaccounts must be "adequately diversified" in accordance with Treasury
regulations in order for the Policy to qualify as a life insurance contract
under Section 7702 of the Code (discussed above). The Subaccounts, through the
Funds, intend to comply with the diversification requirements prescribed in
Treas. Reg. ss. 1.817-5, which affect how each Fund's assets are to be invested.
The Company believes that the Subaccounts will, thus, meet the diversification
requirements, and the Company will monitor continued compliance with this
requirement.
In certain circumstances, owners of variable life insurance policies may be
considered the owners, for federal income tax purposes, of the assets of the
subaccounts used to support their policies. In those circumstances, income and
gains from the subaccount assets would be includible in the variable policy
owner's gross income. The IRS has stated in published rulings that a variable
policy owner will be considered the owner of subaccount assets if the policy
owner possesses incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. The Treasury has also announced, in
connection with the issuance of regulations concerning diversification, that
those regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause the
investor (i.e., the Policy Owner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
stated that guidance would be issued by way of regulations or rulings on the
"extent to which Policyholders may direct their investments to particular
subaccounts without being treated as owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policy owners were not owners of subaccount assets. For example, an Owner
has additional flexibility in allocating Net Premium payments and transferring
Policy Value. These differences could result in an Owner being treated as the
owner of a pro-rata portion of the assets of the Subaccounts. In addition, the
Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury has stated it expects to issue. The
Company therefore reserves the right to modify the Policy as necessary to
attempt to prevent an Owner from being considered the Owner of a pro-rata share
of the assets of the Subaccounts.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.
<PAGE>
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. The Company believes that the Death Benefit Proceeds and Policy
Value increases of a Policy should be treated in a manner consistent with a
fixed-benefit life insurance policy for federal income tax purposes. Thus, the
Death Benefit Proceeds under the Policy should be excludible from the gross
income of the Beneficiary under Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit Option, a Policy loan, a withdrawal, a surrender, a
change in Ownership, or an assignment of the Policy may have federal income tax
consequences. In addition, federal, state and local transfer, and other tax
consequences of Ownership or receipt of distributions from a Policy depends on
the circumstances of each Owner or Beneficiary.
Generally, the Owner will not be deemed to be in constructive receipt of the
Policy Value, including increments thereof, until there is a distribution. The
tax consequences of distributions from, and loans taken from or secured by, a
Policy depend on whether the Policy is classified as a "Modified Endowment
Contract" (discussed below). Whether a Policy is or is not a Modified Endowment
Contract, upon a surrender or Lapse of a Policy or when benefits are paid at a
Policy's Maturity Date, if the amount received plus the Loan Amount exceeds the
total investment in the Policy, the excess will generally be treated as ordinary
income subject to tax.
The Policy may also be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, Owners contemplating
the use of a Policy in any arrangement the value of which depends in part on its
tax consequences, should be sure to consult a qualified tax adviser regarding
the tax attributes of the particular arrangement.
MODIFIED ENDOWMENT CONTRACTS. Section 7702A establishes a class of life
insurance contracts designated as "Modified Endowment Contracts." The rules
relating to whether a Policy will be treated as a Modified Endowment Contract
are extremely complex and cannot be completely described in this summary. In
general, a Policy will be a Modified Endowment Contract if the accumulated
premium payments made at any time during the first seven Policy Years exceed the
sum of the net level premium payments which would have been paid on or before
such time if the Contract provided for paid-up future benefits after the payment
of seven level annual premiums. A Policy may also become a Modified Endowment
Contract after a material change. The determination of whether a Policy will be
a Modified Endowment Contract after a material change generally depends upon the
relationship of the Death Benefit and Policy Value at the time of such change
and the additional premium payments made in the seven years following the
material change.
Due to the Policy's flexibility, classification as a Modified Endowment Contract
will depend on the individual circumstances of each Policy. In view of the
foregoing, a current or prospective Owner should consult with a tax adviser to
determine whether a Policy transaction will cause the Policy to be treated as a
Modified Endowment Contract. However, at the time that a premium payment is
credited which, in the Company's view, would cause the Policy to become a
Modified Endowment Contract, the Company will notify the Owner that unless a
refund of the excess premium (with any appropriate interest) is requested by the
Owner, the Policy will become a Modified Endowment Contract. The Owner will have
30 days after receiving such notification to request the refund.
<PAGE>
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS. Policies
classified as Modified Endowment Contracts will be subject to the following tax
rules: First, all distributions, including distributions upon surrender and
partial surrender from such a Policy are treated as ordinary income subject to
tax up to the amount equal to the excess (if any) of the Policy Value
immediately before the distribution over the investment in the Policy (described
below) at such time. Second, loans taken from or secured by such a Policy, are
<PAGE>
treated as distributions from the Policy and taxed accordingly. Past due loan
interest that is added to the loan amount will be treated as a loan. Third, a 10
% additional income tax is imposed on the portion of any distribution from, or
loan taken from or secured by, such a Policy that is included in income except
where the distribution or loan is made on or after the Owner attains age 59 1/2,
is attributable to the Owner's becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or life expectancy) of the
Owner or the joint lives (or joint life expectancies) of the Owner and the
Owner's beneficiary.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
Distributions from a Policy that is not a Modified Endowment Contract are
generally treated as first, recovering the investment in the Policy (described
below) and then, only after the return of all such investment in the Policy, as
distributing taxable income. An exception to this general rule occurs in the
case of a decrease in the Policy's Death Benefit or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in a cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. Such a
cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a Modified Endowment Contract
are not treated as distributions. Instead, such loans are treated as Loan
Amounts. It is, however, possible that loans in effect after the eleventh Policy
Year could be treated as distributions rather than loans.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment Contract
are subject to the 10 percent additional income tax rule. If a Policy which is
not a Modified Endowment Contract becomes a Modified Endowment Contract, then
any distributions made from the Policy within two years prior to the change in
such status will become taxable in accordance with the Modified Endowment
Contract rules discussed above.
POLICY LOAN INTEREST. Generally, consumer interest paid on any loan under a
Policy which is owned by an individual is not deductible. The deduction of
interest on other types of Policy loans may also be subject to other
restrictions under the Code. A qualified tax adviser should be consulted before
deducting any Policy loan interest.
INVESTMENT IN THE POLICY. Investment in the Policy means: (i) the aggregate
amount of any premium payments or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any loan from, or secured by, a
Policy that is a Modified Endowment Contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
loan from, or secured by, a Policy that is a Modified Endowment Contract to the
extent that such amount is included in the gross income of the Owner.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by the
Company (or its affiliates) to the same Owner during any calendar year are
treated as one Modified Endowment Contract for purposes of determining the
amount includible in an Owner's gross income under Section 72(e) of the Code.
<PAGE>
OTHER INFORMATION ABOUT THE POLICIES AND THE COMPANY
SALE OF THE POLICIES
CNA/ISI, which is located at CNA Plaza, Chicago, Illinois 60685, is principal
underwriter and distributor of the Policies as well as of other policies issued
through other separate accounts of the Company or affiliates of the Company.
CNA/ISI is an affiliate of the Company, is registered with the SEC as a
broker-dealer, and is a member of the National Association of Securities
Dealers, Inc. ("NASD"). The Company pays CNA/ISI for acting as principal
underwriter under a distribution agreement. The Policies are offered on a
continuous basis and the Company does not anticipate discontinuing the offer.
Applications for Policies are solicited by agents who are licensed by applicable
state insurance authorities to sell the Company's insurance contracts and who
are registered representatives of a broker-dealer having a selling agreement
with CNA/ISI. Such broker-dealers generally receive commissions based on a
percent of premium payments made (up to a maximum of 90%). The writing agent
receives a percentage of these commissions from the respective broker-dealer,
depending on the practice of that broker-dealer. Owners do not pay these
commissions. Total commissions may be as high as 110% of target premium which
would be split between wholesale and retail broker dealer.
VOTING PRIVILEGES
In accordance with current interpretations of applicable law, the Company votes
Fund shares held in the Variable Account at regular and special shareholder
meetings of the Funds in accordance with instructions received from persons
having voting interests in the corresponding Subaccounts. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or the Company otherwise determines that
it is allowed to vote the shares in its own right, it may elect to do so.
The number of votes that an Owner has the right to instruct is calculated
separately for each Subaccount, and may include fractional votes. While the
Insured is still living and the Policy is in force prior to the Maturity Date,
an Owner holds a voting interest in each Subaccount to which Variable Policy
Value is allocated. For each Owner, the number of votes attributable to a
Subaccount is determined by dividing the Owner's Subaccount Value by the Net
Asset Value Per Share of the Fund in which that Subaccount invests.
After the Maturity Date, the Payee under a Settlement Option has a voting
interest in each Subaccount from which variable Settlement Payments are made.
For each such Payee, the number of votes attributable to a Subaccount is
determined by dividing the liability for future variable Settlement Payments to
be paid from that Subaccount by the Net Asset Value Per Share of the Fund in
which that Subaccount invests. This liability for future payments is calculated
on the basis of the mortality assumptions, the selected Benchmark Rate of Return
and the Settlement Unit value of that Subaccount on the date that the number of
votes is determined. As Variable Settlement Payments are made to the Payee, the
liability for future payments decreases as does the number of votes.
The number of votes available to an Owner or Payee is determined as of the date
coinciding with the date established by the Fund for determining shareholders
eligible to vote at the relevant meeting of the Fund's shareholders. Voting
instructions will be solicited by written communication prior to such meeting in
accordance with procedures established for the Fund. Each Owner or Payee having
a voting interest in a Subaccount will receive proxy materials and reports
relating to any meeting of shareholders of the Fund in which that Subaccount
invests.
Fund shares as to which no timely instructions are received and shares held by
the Company in a Subaccount as to which no Owner or Payee has a beneficial
interest are voted in proportion to the voting instructions that are received
with respect to all Policies participating in that Subaccount. Voting
<PAGE>
instructions to abstain on any item to be voted upon will be applied to reduce
the total number of votes eligible to be cast on a matter. Under the 1940 Act,
certain actions affecting the Variable Account may require Owner approval. In
that case, an Owner will be entitled to vote in proportion to his or her
Variable Policy Value.
The Company may, if required by state insurance regulators, disregard Owner and
Payee voting instructions if such instructions would require Fund shares to be
voted so as to cause a change in sub-classification or investment objectives of
a Fund, or to approve or disapprove an investment management agreement or an
investment advisory agreement. In addition, the Company may under certain
circumstances disregard voting instructions that would require changes in an
investment management agreement, investment manager, an investment advisory
agreement or an investment adviser of a Fund, provided that the Company
reasonably disapproves of such changes in accordance with applicable regulations
under the 1940 Act. If the Company ever disregards voting instructions, Owners
and Payees will be advised of that action and of the reasons for such action in
the next semiannual report for the appropriate Fund.
THE COMPANY DIRECTORS AND EXECUTIVE OFFICERS
The following tables sets forth the name, position with the Company and
principal occupations during the past five years of each of the Company's
directors and executive officers. All such individuals are located at
Continental Assurance Company, CNA Plaza, Chicago, Illinois 60685.
Each director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and shall have qualified. Some
directors have held various executive positions with insurance company
affiliates of the Company.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
|-------------------------------------------------------------------------------------------------------------------|
| Officers of the Company |
|-----------------------|---|------------------|--------------------------------------------------------------------|
|-----------------------|---|------------------|--------------------------------------------------------------------|
| Name and |Age| Position(s) Held | Principal Occupation(s) |
| Address | | with the Company | During Past Five Years |
| | | | |
|-----------------------|---|------------------|--------------------------------------------------------------------|
|-----------------------|---|------------------|--------------------------------------------------------------------|
|Dennis H. Chookaszian |53 |Director, Chairman|Chairman of the Board and Chief Executive Officer of the CNA |
|CNA Plaza | |of the Board and |Insurance Companies since September 1992. From November 1990 to |
|Chicago, IL 60685 | |Chief Executive |September 1992, Mr. Chookaszian was President and Chief Operating |
| | |Officer |Officer of the CNA Insurance Companies. Prior thereto, he was Vice |
| | | |President and Controller Mr. Chookaszian has served as a Director |
| | | |since 1990.
|-----------------------|---|------------------|--------------------------------------------------------------------|
|-----------------------|---|------------------|--------------------------------------------------------------------|
|Phillip L. Engel |56 |Director, |President of the CNA Insurance Companies since September 1992. From |
|CNA Plaza | |President |November 1990 until September 1992 he was Executive Vice President |
|Chicago, IL 60685 | | |of the CNA Insurance Companies. Prior thereto, Mr. Engel had been a |
| | | |Vice President of the CNA Insurance Companies since 1977. |
|-----------------------|---|------------------|--------------------------------------------------------------------|
|-----------------------|---|------------------|--------------------------------------------------------------------|
|William J. Adamson, Jr.|43 |Senior Vice |Senior Vice President of the CNA Insurance Companies since November |
|200 S. Wacker Drive | |President |1995; Group Vice President of the CNA Insurance Companies from |
|Chicago, IL | | |April 1993 through October 1995; Vice President of the CNA |
| | | |Insurance Companies from May 1987 through April 1993. |
|-----------------------|---|------------------|--------------------------------------------------------------------|
|-----------------------|---|------------------|--------------------------------------------------------------------|
|James P. Flood |45 |Senior Vice |Senior Vice President of the CNA Insurance Companies since April |
|CNA Plaza | |President |1995; Senior Vice President of the Continental Insurance Company |
|Chicago, IL 60685 | | |from October 1992 through May 1995; Vice President of the |
|August 1991 | | |Continental Insurance Company from August 1991 through May 1995. |
|through May 1995. | | | |
|-----------------------|---|------------------|--------------------------------------------------------------------|
|-----------------------|---|------------------|--------------------------------------------------------------------|
|Michael C. Garner |44 |Senior Vice |Senior Vice President of the CNA Insurance Companies since September|
|CNA Plaza | |President |1993. Partner of Coopers and Lybrand from October 1989 through |
|Chicago, IL 60685 | | |September 1993. |
|-----------------------|---|------------------|--------------------------------------------------------------------|
|-----------------------|---|------------------|--------------------------------------------------------------------|
|Bernard L. Hengesbaugh |49 |Senior Vice |Senior Vice President of the CNA Insurance Companies since November |
|CNA Plaza | |President |1990. |
|Chicago, IL 60685 | | | |
|-----------------------|---|------------------|--------------------------------------------------------------------|
|-----------------------|---|------------------|--------------------------------------------------------------------|
|Peter E. Jokiel |49 |Director, Senior |Senior Vice President and Chief Financial Officer of the CNA |
|CNA Plaza | |Vice President |Insurance Companies since November 1990. |
|Chicago, IL 60685 | |and Chief | |
| | |Financial Officer | |
|-----------------------|---|------------------|--------------------------------------------------------------------|
|-----------------------|---|------------------|--------------------------------------------------------------------|
|Jack Kettler |52 |Senior Vice |Senior Vice President of the CNA Insurance Companies since May 1994;|
|CNA Plaza | |President |Senior Vice President of Midland Mutual Life Insurance Company from |
|Chicago, IL 60685 | | |January 1989 through May 1994. |
|-----------------------|---|------------------|--------------------------------------------------------------------|
|-----------------------|---|------------------|--------------------------------------------------------------------|
|Donald M. Lowry |66 |Director, Senior |Senior Vice President, Secretary and General Counsel of the CNA |
|CNA Plaza | |Vice President, |Insurance Companies since August 1992; Senior Vice President and |
|Chicago, IL 60685 | |Secretary and |General Counsel of the CNA Insurance Companies from November 1990 |
| | |General Counsel |to August 1992. |
|-----------------------|---|------------------|--------------------------------------------------------------------|
<PAGE>
|--------------------------------------------------------------------------------------------------------------------|
| Officers of the Company |
|-----------------------|---|------------------|---------------------------------------------------------------------|
|-----------------------|---|------------------|---------------------------------------------------------------------|
| Name and |Age| Position(s) Held | Principal Occupation(s) |
| Address | | with the Company | During Past Five Years |
| | | | |
|-----------------------|---|------------------|---------------------------------------------------------------------|
|-----------------------|---|------------------|---------------------------------------------------------------------|
|Carolyn L. Murphy |51 |Senior Vice |Senior Vice President of the CNA Insurance Companies since November |
|CNA Plaza | |President |1990. |
|Chicago, IL 60685 | | | |
|-----------------------|---|------------------|---------------------------------------------------------------------|
|-----------------------|---|------------------|---------------------------------------------------------------------|
|William H. Sharkey, Jr.|48 |Director, Senior |Senior Vice President of the CNA Insurance Companies since January |
|CNA Plaza | |Vice President |1994; Senior Vice President of Cigna Healthcare from October 1970 |
|Chicago, IL 60685 | | |through February 1994. |
|-----------------------|---|------------------|---------------------------------------------------------------------|
|-----------------------|---|------------------|---------------------------------------------------------------------|
|Wayne R. Smith III |50 |Senior Vice |Senior Vice President of the CNA Insurance Companies since May 1994; |
|CNA Plaza | |President |1994; Group Vice President of the CNA Insurance Companies from August|
|Chicago, IL 60685 | | |1993 through May 1994; Senior Vice President of the Computer Power |
| | | |Group from August 1991 through August 1993. |
|-----------------------|---|------------------|---------------------------------------------------------------------|
|-----------------------|---|------------------|---------------------------------------------------------------------|
|Adrian M. Tocklin |45 |Senior Vice |Senior Vice President of the CNA Insurance Companies since May 1995; |
|CNA Plaza | |President |President of the Continental Insurance Company from June 1994 |
|Chicago, IL 60685 | | |through May 1995; Executive Vice President of the Continental |
| | | |Insurance Company from August 1991 through August 1994. |
|-----------------------|---|------------------|---------------------------------------------------------------------|
|-----------------------|---|------------------|---------------------------------------------------------------------|
|Jae L. Wittlich |54 |Senior Vice |Senior Vice President of the CNA Insurance Companies since November |
|CNA Plaza | |President |1990. |
|Chicago, IL 60685 | | | |
|-----------------------|---|------------------|---------------------------------------------------------------------|
|-----------------------|---|------------------|---------------------------------------------------------------------|
|David W. Wroe |49 |Senior Vice |Senior Vice President of the CNA Insurance Companies since June |
|CNA Plaza | |President |1996; President of Agency Management Systems from August 1991 |
|Chicago, IL 60685 | | |through June 1996. |
|-----------------------|---|------------------|---------------------------------------------------------------------|
</TABLE>
COMPANY HOLIDAYS
The Company is closed on the following days in 1996: New Year's Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, the day after Thanksgiving
Day, and Christmas Day.
<PAGE>
STATE REGULATION
The Company is subject to regulation by the Department of Insurance of the State
of Pennsylvania, which periodically examines the financial condition and
operations of the Company. The Company is also subject to the insurance laws and
regulations of all jurisdictions where it does business. The Policy described in
this prospectus has been filed with and, where required, approved by, insurance
officials in those jurisdictions where it is sold.
The Company is required to submit annual statements of operations, including
financial statements, to the insurance departments of the various jurisdictions
where it does business to determine solvency and compliance with applicable
insurance laws and regulations.
ADDITIONAL INFORMATION
A registration statement under the Securities Act of 1933 has been filed with
the SEC relating to the offering described in this prospectus. This prospectus
does not include all the information set forth in the registration statement.
The omitted information may be obtained at the SEC's principal office in
Washington, D.C. by paying the SEC's prescribed fees.
EXPERTS
The financial statements of the Company included in this prospectus have been
audited by Deloitte & Touche, L.L.P, independent accountants, whose report
thereon is set forth elsewhere herein. Actuarial matters included in this
prospectus have been examined by Rob Foster, F.S.A. whose opinion is filed as an
exhibit to the registration statement.
LEGAL MATTERS
Sutherland, Asbill & Brennan of Washington, D.C. has provided advice on certain
matters relating to the federal securities laws.
FINANCIAL STATEMENTS
The following financial statements are those of Valley Forge Life Insurance
Company and not those of the Separate Account. They are included in this
Statement of Additional Information for the purpose of informing investors as to
the financial position and operations of the Company.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
Valley Forge Life Insurance Company
We have audited the accompanying balance sheets of Valley Forge Life Insurance
Company (a wholly-owned subsidiary of Continental Assurance Company, which is a
wholly-owned subsidiary of Continental Casualty Company, an affiliate of CNA
Financial Corporation, an affiliate of Loews Corporation) as of December 31,
1995 and 1994 and the related statements of operations, stockholder's equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Valley Forge Life Insurance Company as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, the Company changed its
method of accounting for certain investments in debt and equity securities in
1993.
Deloitte & Touche LLP
Chicago, Illinois
June 21, 1996
<PAGE>
ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS
The following tables have been prepared to illustrate hypothetically how certain
values under a Policy change with investment performance over an extended period
of time. The tables illustrate how Policy Values, Surrender Values and Death
Benefits under a Policy covering an Insured of a given age on the Policy
Effective Date, would vary over time if the Planned Periodic Premium Payments
were paid annually and the return on the assets in each fund were an assumed
uniform gross annual rate of 0%, 6% and 12%. The values would be different from
those shown if the returns averaged 0%, 6% or 12% but fluctuated over and under
those averages throughout the years shown. The tables also show Planned Periodic
Premium Payments accumulated at 5% interest compounded annually. THE
HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. Actual
rates of return for a particular Policy may be more or less than the
hypothetical investment rates of return illustrated and will depend on a number
of factors including the investment allocations made by an Owner and prevailing
rates. These illustrations assume that the Net Premiums are allocated equally
among the 18 Subaccounts available under the Policy, and that no amounts are
allocated to the Fixed Account.
The illustrations reflect the fact that the net investment returns on the assets
held in the Subaccounts is lower than the gross after tax return of the selected
Funds. The tables assume an average annual expense ratio of 0.92% of the average
daily net assets of the Funds available. This average annual expense ratio is
based on the expense ratios of each of the Funds for the last fiscal year,
adjusted, as appropriate, for any material changes in expenses effective for the
current fiscal year of the fund. The following information summarizes the
expenses by fund: Alger American Growth (0.85%),Alger American MidCap Growth
(0.90%), Alger American Small Capitalization (0.92%),Federated High Income
Bond II (0.80%), Federated Prime Money Fund II (0.80%), Federated Utility Fund
II (0.85%), Asset Manager Portfolio (0.79%), Contrafund (0.72%),
Equity-Income (0.61%), Index 500 (0.28%), MFS Emerging Growth Series (1.00 ),
MFS Growth With Income Series (1.00%), MFS Limited Maturity Series (1.00 ), MFS
Research Series (1.00%), SoGen Overseas Portfolio (1.35 5%), Emerging Markets
(1.50%.) and Gold and Natural Resources Fund (1.21 %).
In addition, the illustrations reflect the daily charge to the Variable Account
for assuming mortality and expense risk, which is equivalent to an effective
annual charge of 0.90% during Policy Years 1-10 and 0.45% during Policy Years 11
and later. After deduction of Fund expenses and the mortality and expense risk
charge, the illustrated gross annual investment rates of return of 0%, 6%, and
12% would correspond to approximate net annual rates of -1.82%, 4.18% and 10.18%
, respectively during Policy Years 1-10 and -1.37% , 4.63% and 10.63% during
Policy Years 11 and later.
The illustrations also reflect the deduction of the Sales Charges, Premium Tax
Charge, Federal Tax Charge and Monthly Deduction for the hypothetically insured.
The Surrender charge is reflected in the Surrender Value column. The Company's
current cost of insurance charges and the guaranteed maximum cost of insurance
charges that the Company has the contractual right to charge, are reflected in
separate illustrations on each of the following pages. All the illustrations
reflect the fact that no charges for federal or state income taxes are currently
made against the Variable Account and assumes no Loan Amount or partial
withdrawals/surrenders or charges for supplemental and/or rider benefits.
The illustrations are based on the Company's Preferred Nonsmoker risk class.
Upon request, Owner(s) will be furnished with a comparable illustration based on
the proposed Insured's individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated in the following
tables. Because the Death Benefit values vary depending on the Death Benefit
Option in effect, level and increasing death benefit options are illustrated
separately.
The illustrations show contract values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated and
all net premiums are allocated to subaccounts.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 0%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 365 -- 100,000
2 2,368 936 -- 100,000
3 3,641 1,470 -- 100,000
4 4,978 1,967 367 100,000
5 6,382 2,423 823 100,000
6 7,856 2,838 1,238 100,000
7 9,404 3,205 1,925 100,000
8 11,029 3,518 2,398 100,000
9 12,736 3,774 2,814 100,000
10 14,527 3,964 3,164 100,000
11 16,409 4,126 3,486 100,000
12 18,384 4,209 3,729 100,000
13 20,458 4,211 3,891 100,000
14 22,636 4,124 3,964 100,000
15 24,923 3,938 3,938 100,000
16 27,324 3,641 3,641 100,000
17 29,846 3,220 3,220 100,000
18 32,493 2,657 2,657 100,000
19 35,273 1,928 1,928 100,000
20 38,191 1,010 1,010 100,000
Age 60 24,923 3,938 3,938 100,000
Age 65 38,191 1,010 1,010 100,000
Age 70 55,125 -- -- 100,000
Age 75 76,737 -- -- 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 6%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 405 -- 100,000
2 2,368 1,046 13 100,000
3 3,641 1,687 87 100,000
4 4,978 2,327 727 100,000
5 6,382 2,961 1,361 100,000
6 7,856 3,588 1,988 100,000
7 9,404 4,201 2,921 100,000
8 11,029 4,794 3,674 100,000
9 12,736 5,359 4,399 100,000
10 14,527 5,889 5,089 100,000
11 16,409 6,428 5,788 100,000
12 18,384 6,919 6,439 100,000
13 20,458 7,356 7,036 100,000
14 22,636 7,730 7,570 100,000
15 24,923 8,026 8,026 100,000
16 27,324 8,230 8,230 100,000
17 29,846 8,324 8,324 100,000
18 32,493 8,284 8,284 100,000
19 35,273 8,083 8,083 100,000
20 38,191 7,689 7,689 100,000
Age 60 24,923 8,026 8,026 100,000
Age 65 38,191 7,689 7,689 100,000
Age 70 55,125 1,535 1,535 100,000
Age 75 76,737 -- -- 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 12%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 445 -- 100,000
2 2,368 1,162 129 100,000
3 3,641 1,924 324 100,000
4 4,978 2,735 1,135 100,000
5 6,382 3,595 1,995 100,000
6 7,856 4,509 2,909 100,000
7 9,404 5,477 4,197 100,000
8 11,029 6,498 5,378 100,000
9 12,736 7,572 6,612 100,000
10 14,527 8,699 7,899 100,000
11 16,409 9,950 9,310 100,000
12 18,384 11,268 10,788 100,000
13 20,458 12,659 12,339 100,000
14 22,636 14,127 13,967 100,000
15 24,923 15,672 15,672 100,000
16 27,324 17,299 17,299 100,000
17 29,846 19,007 19,007 100,000
18 32,493 20,798 20,798 100,000
19 35,273 22,670 22,670 100,000
20 38,191 24,621 24,621 100,000
Age 60 24,923 15,672 15,672 100,000
Age 65 38,191 24,621 24,621 100,000
Age 70 55,125 35,774 35,774 100,000
Age 75 76,737 50,059 50,059 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 0%
PREMIUMS
END ACCUMULATED
OF AT
POLICY 5% INTEREST POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- ------- ---------- ------ ---------- -------
1 1,155 528 -- 100,000
2 2,368 1,223 190 100,000
3 3,641 1,848 248 100,000
4 4,978 2,432 832 100,000
5 6,382 3,001 1,401 100,000
6 7,856 3,558 1,958 100,000
7 9,404 4,105 2,825 100,000
8 11,029 4,642 3,522 100,000
9 12,736 5,170 4,210 100,000
10 14,527 5,687 4,887 100,000
11 16,409 6,224 5,584 100,000
12 18,384 6,730 6,250 100,000
13 20,458 7,196 6,876 100,000
14 22,636 7,657 7,497 100,000
15 24,923 8,102 8,102 100,000
16 27,324 8,401 8,401 100,000
17 29,846 8,632 8,632 100,000
18 32,493 8,797 8,797 100,000
19 35,273 8,882 8,882 100,000
20 38,191 8,879 8,879 100,000
AGE 60 24,923 8,102 8,102 100,000
AGE 65 38,191 8,879 8,879 100,000
AGE 70 55,125 7,323 7,323 100,000
AGE 75 76,737 1,887 1,887 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 6%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 573 -- 100,000
2 2,368 1,352 319 100,000
3 3,641 2,106 506 100,000
4 4,978 2,860 1,260 100,000
5 6,382 3,640 2,040 100,000
6 7,856 4,453 2,853 100,000
7 9,404 5,300 4,020 100,000
8 11,029 6,183 5,063 100,000
9 12,736 7,104 6,144 100,000
10 14,527 8,064 7,264 100,000
11 16,409 9,109 8,469 100,000
12 18,384 10,180 9,700 100,000
13 20,458 11,270 10,950 100,000
14 22,636 12,416 12,256 100,000
15 24,923 13,607 13,607 100,000
16 27,324 14,723 14,723 100,000
17 29,846 15,833 15,833 100,000
18 32,493 16,942 16,942 100,000
19 35,273 18,036 18,036 100,000
20 38,191 19,111 19,111 100,000
Age 60 24,923 13,607 13,607 100,000
Age 65 38,191 19,111 19,111 100,000
Age 70 55,125 24,003 24,003 100,000
Age 75 76,737 27,046 27,046 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 12%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 619 -- 100,000
2 2,368 1,488 455 100,000
3 3,641 2,385 785 100,000
4 4,978 3,342 1,742 100,000
5 6,382 4,392 2,792 100,000
6 7,856 5,548 3,948 100,000
7 9,404 6,823 5,543 100,000
8 11,029 8,230 7,110 100,000
9 12,736 9,781 8,821 100,000
10 14,527 11,493 10,693 100,000
11 16,409 13,446 12,806 100,000
12 18,384 15,589 15,109 100,000
13 20,458 17,935 17,615 100,000
14 22,636 20,539 20,379 100,000
15 24,923 23,421 23,421 100,000
16 27,324 26,500 26,500 100,000
17 29,846 29,869 29,869 100,000
18 32,493 33,568 33,568 100,000
19 35,273 37,631 37,631 100,000
20 38,191 42,100 42,100 100,000
Age 60 24,923 23,421 23,421 100,000
Age 65 38,191 42,100 42,100 100,000
Age 70 55,125 72,709 72,709 100,000
Age 75 76,737 125 125,126 133,885
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 0%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 362 -- 100,362
2 2,368 929 -- 100,929
3 3,641 1,457 -- 101,457
4 4,978 1,945 345 101,945
5 6,382 2,389 789 102,389
6 7,856 2,789 1,189 102,789
7 9,404 3,138 1,858 103,138
8 11,029 3,431 2,311 103,431
9 12,736 3,661 2,701 103,661
10 14,527 3,823 3,023 103,823
11 16,409 3,950 3,310 103,950
12 18,384 3,996 3,516 103,996
13 20,458 3,956 3,636 103,956
14 22,636 3,824 3,664 103,824
15 24,923 3,590 3,590 103,590
16 27,324 3,243 3,243 103,243
17 29,846 2,772 2,772 102,772
18 32,493 2,160 2,160 102,160
19 35,273 1,390 1,390 101,390
20 38,191 440 440 100,440
Age 60 24,923 3,590 3,590 103,590
Age 65 38,191 440 440 100,440
Age 70 55,125 -- -- 92,447
Age 75 76,737 -- -- 76,604
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 6%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 402 -- 100,402
2 2,368 1,039 6 101,039
3 3,641 1,673 73 101,673
4 4,978 2,301 701 102,301
5 6,382 2,919 1,319 102,919
6 7,856 3,525 1,925 103,525
7 9,404 4,112 2,832 104,112
8 11,029 4,670 3,550 104,670
9 12,736 5,194 4,234 105,194
10 14,527 5,672 4,872 105,672
11 16,409 6,148 5,508 106,148
12 18,384 6,563 6,083 106,563
13 20,458 6,909 6,589 106,909
14 22,636 7,176 7,016 107,176
15 24,923 7,347 7,347 107,347
16 27,324 7,407 7,407 107,407
17 29,846 7,337 7,337 107,337
18 32,493 7,112 7,112 107,112
19 35,273 6,704 6,704 106,704
20 38,191 6,081 6,081 106,081
Age 60 24,923 7,347 7,347 107,347
Age 65 38,191 6,081 6,081 106,081
Age 70 55,125 -- -- 98,682
Age 75 76,737 -- -- 79,794
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 12%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 443 -- 100,443
2 2,368 1,154 121 101,154
3 3,641 1,907 307 101,907
4 4,978 2,703 1,103 102,703
5 6,382 3,543 1,943 103,543
6 7,856 4,429 2,829 104,429
7 9,404 5,357 4,077 105,357
8 11,029 6,326 5,206 106,326
9 12,736 7,332 6,372 107,332
10 14,527 8,370 7,570 108,370
11 16,409 9,505 8,865 109,505
12 18,384 10,676 10,196 110,676
13 20,458 11,879 11,559 111,879
14 22,636 13,111 12,951 113,111
15 24,923 14,364 14,364 114,364
16 27,324 15,625 15,625 115,625
17 29,846 16,883 16,883 116,883
18 32,493 18,118 18,118 118,118
19 35,273 19,305 19,305 119,305
20 38,191 20,416 20,416 120,416
Age 60 24,923 14,364 14,364 114,364
Age 65 38,191 20,416 20,416 120,416
Age 70 55,125 23,751 23,751 123,751
Age 75 76,737 18,253 18,253 118,253
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 0%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 527 -- 100,527
2 2,368 1,218 185 101,218
3 3,641 1,838 238 101,838
4 4,978 2,414 814 102,414
5 6,382 2,972 1,372 102,972
6 7,856 3,517 1,917 103,517
7 9,404 4,051 2,771 104,051
8 11,029 4,573 3,453 104,573
9 12,736 5,083 4,123 105,083
10 14,527 5,582 4,782 105,582
11 16,409 6,097 5,457 106,097
12 18,384 6,577 6,097 106,577
13 20,458 7,013 6,693 107,013
14 22,636 7,442 7,282 107,442
15 24,923 7,853 7,853 107,853
16 27,324 8,103 8,103 108,103
17 29,846 8,278 8,278 108,278
18 32,493 8,378 8,378 108,378
19 35,273 8,391 8,391 108,391
20 38,191 8,309 8,309 108,309
Age 60 24,923 7,853 7,853 107,853
Age 65 38,191 8,309 8,309 108,309
Age 70 55,125 6,246 6,246 106,246
Age 75 76,737 337 337 100,337
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 6%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 572 -- 100,572
2 2,368 1,348 314 101,348
3 3,641 2,094 494 102,094
4 4,978 2,838 1,238 102,838
5 6,382 3,605 2,005 103,605
6 7,856 4,400 2,800 104,400
7 9,404 5,227 3,947 105,227
8 11,029 6,085 4,965 106,085
9 12,736 6,978 6,018 106,978
10 14,527 7,905 7,105 107,905
11 16,409 8,908 8,268 108,908
12 18,384 9,929 9,449 109,929
13 20,458 10,958 10,638 110,958
14 22,636 12,034 11,874 112,034
15 24,923 13,146 13,146 113,146
16 27,324 14,150 14,150 114,150
17 29,846 15,125 15,125 115,125
18 32,493 16,071 16,071 116,071
19 35,273 16,972 16,972 116,972
20 38,191 17,817 17,817 117,817
21 41,256 18,603 18,603 118,603
22 44,474 19,305 19,305 119,305
23 47,852 19,921 19,921 119,921
24 51,400 20,433 20,433 120,433
Age 60 24,923 13,146 13,146 113,146
Age 65 38,191 17,817 17,817 117,817
Age 70 55,125 20,805 20,805 120,805
Age 75 76,737 19,966 19,966 119,966
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Male Issue Age 45, Preferred Non-Smoker
$1,100 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 12%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 1,155 617 -- 100,617
2 2,368 1,483 449 101,483
3 3,641 2,372 772 102,372
4 4,978 3,316 1,716 103,316
5 6,382 4,348 2,748 104,348
6 7,856 5,481 3,881 105,481
7 9,404 6,726 5,446 106,726
8 11,029 8,094 6,974 108,094
9 12,736 9,598 8,638 109,598
10 14,527 11,251 10,451 111,251
11 16,409 13,129 12,489 113,129
12 18,384 15,176 14,696 115,176
13 20,458 17,399 17,079 117,399
14 22,636 19,858 19,698 119,858
15 24,923 22,562 22,562 122,562
16 27,324 25,388 25,388 125,388
17 29,846 28,437 28,437 128,437
18 32,493 31,732 31,732 131,732
19 35,273 35,283 35,283 135,283
20 38,191 39,110 39,110 139,110
Age 60 24,923 22,562 22,562 122,562
Age 65 38,191 39,110 39,110 139,110
Age 70 55,125 63,186 63,186 163,186
Age 75 76,737 97,743 97,743 197,743
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 0%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 173 -- 100,000
2 1,722 597 -- 100,000
3 2,648 1,042 -- 100,000
4 3,621 1,508 208 100,000
5 4,642 1,998 698 100,000
6 5,714 2,510 1,210 100,000
7 6,839 3,044 2,004 100,000
8 8,021 3,599 2,689 100,000
9 9,262 4,171 3,391 100,000
10 10,565 4,762 4,112 100,000
11 11,934 5,416 4,896 100,000
12 13,370 6,097 5,707 100,000
13 14,879 6,810 6,550 100,000
14 16,463 7,561 7,431 100,000
15 18,126 8,353 8,353 100,000
16 19,872 9,182 9,182 100,000
17 21,706 10,045 10,045 100,000
18 23,631 10,930 10,930 100,000
19 25,653 11,823 11,823 100,000
20 27,775 12,708 12,708 100,000
Age 60 18,126 8,353 8,353 100,000
Age 65 27,775 12,708 12,708 100,000
Age 70 40,091 16,789 16,789 100,000
Age 75 55,809 18,673 18,673 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 6%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 148 -- 100,000
2 1,722 529 -- 100,000
3 2,648 904 -- 100,000
4 3,621 1,272 -- 100,000
5 4,642 1,631 331 100,000
6 5,714 1,978 678 100,000
7 6,839 2,310 1,270 100,000
8 8,021 2,622 1,712 100,000
9 9,262 2,908 2,128 100,000
10 10,565 3,166 2,516 100,000
11 11,934 3,426 2,906 100,000
12 13,370 3,654 3,264 100,000
13 14,879 3,849 3,589 100,000
14 16,463 4,011 3,881 100,000
15 18,126 4,136 4,136 100,000
16 19,872 4,214 4,214 100,000
17 21,706 4,232 4,232 100,000
18 23,631 4,171 4,171 100,000
19 25,653 4,006 4,006 100,000
20 27,775 3,711 3,711 100,000
Age 60 18,126 4,136 4,136 100,000
Age 65 27,775 3,711 3,711 100,000
Age 70 40,091 -- -- 100,000
Age 75 55,809 -- -- 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 12%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 124 -- 100,000
2 1,722 464 -- 100,000
3 2,648 778 -- 100,000
4 3,621 1,063 -- 100,000
5 4,642 1,321 21 100,000
6 5,714 1,546 246 100,000
7 6,839 1,738 698 100,000
8 8,021 1,893 983 100,000
9 9,262 2,007 1,227 100,000
10 10,565 2,079 1,429 100,000
11 11,934 2,134 1,614 100,000
12 13,370 2,143 1,753 100,000
13 14,879 2,108 1,848 100,000
14 16,463 2,030 1,900 100,000
15 18,126 1,907 1,907 100,000
16 19,872 1,732 1,732 100,000
17 21,706 1,494 1,494 100,000
18 23,631 1,177 1,177 100,000
19 25,653 760 760 100,000
20 27,775 224 224 100,000
Age 60 18,126 1,907 1,907 100,000
Age 65 27,775 224 224 100,000
Age 70 40,091 -- -- 100,000
Age 75 55,809 -- -- 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 0%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 356 -- 100,000
2 1,722 966 50 100,000
3 2,648 1,613 313 100,000
4 3,621 2,304 1,004 100,000
5 4,642 3,052 1,752 100,000
6 5,714 3,865 2,565 100,000
7 6,839 4,745 3,705 100,000
8 8,021 5,708 4,798 100,000
9 9,262 6,762 5,982 100,000
10 10,565 7,916 7,266 100,000
11 11,934 9,241 8,721 100,000
12 13,370 10,704 10,314 100,000
13 14,879 12,322 12,062 100,000
14 16,463 14,097 13,967 100,000
15 18,126 16,065 16,065 100,000
16 19,872 18,225 18,225 100,000
17 21,706 20,595 20,595 100,000
18 23,631 23,194 23,194 100,000
19 25,653 26,050 26,050 100,000
20 27,775 29,192 29,192 100,000
Age 60 18,126 16,065 16,065 100,000
Age 65 27,775 29,192 29,192 100,000
Age 70 40,091 50,408 50,408 100,000
Age 75 55,809 85,772 85,772 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 6%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 326 -- 100,000
2 1,722 877 -- 100,000
3 2,648 1,426 126 100,000
4 3,621 1,977 677 100,000
5 4,642 2,538 1,238 100,000
6 5,714 3,113 1,813 100,000
7 6,839 3,696 2,656 100,000
8 8,021 4,295 3,385 100,000
9 9,262 4,913 4,133 100,000
10 10,565 5,550 4,900 100,000
11 11,934 6,250 5,730 100,000
12 13,370 6,979 6,589 100,000
13 14,879 7,739 7,479 100,000
14 16,463 8,516 8,386 100,000
15 18,126 9,331 9,331 100,000
16 19,872 10,161 10,161 100,000
17 21,706 11,004 11,004 100,000
18 23,631 11,854 11,854 100,000
19 25,653 12,714 12,714 100,000
20 27,775 13,581 13,581 100,000
Age 60 18,126 9,331 9,331 100,000
Age 65 27,775 13,581 13,581 100,000
Age 70 40,091 17,884 17,884 100,000
Age 75 55,809 21,585 21,585 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Level Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 12%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 296 -- 100,000
2 1,722 791 -- 100,000
3 2,648 1,254 -- 100,000
4 3,621 1,687 387 100,000
5 4,642 2,101 801 100,000
6 5,714 2,496 1,196 100,000
7 6,839 2,869 1,829 100,000
8 8,021 3,228 2,318 100,000
9 9,262 3,573 2,793 100,000
10 10,565 3,904 3,254 100,000
11 11,934 4,256 3,736 100,000
12 13,370 4,598 4,208 100,000
13 14,879 4,932 4,672 100,000
14 16,463 5,242 5,112 100,000
15 18,126 5,549 5,549 100,000
16 19,872 5,827 5,827 100,000
17 21,706 6,073 6,073 100,000
18 23,631 6,280 6,280 100,000
19 25,653 6,451 6,451 100,000
20 27,775 6,583 6,583 100,000
Age 60 18,126 5,549 5,549 100,000
Age 65 27,775 6,583 6,583 100,000
Age 70 40,091 6,477 6,477 100,000
Age 75 55,809 4,452 4,452 100,000
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 0%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 172 -- 100,172
2 1,722 593 -- 100,593
3 2,648 1,033 -- 101,033
4 3,621 1,492 192 101,492
5 4,642 1,972 672 101,972
6 5,714 2,469 1,169 102,469
7 6,839 2,984 1,944 102,984
8 8,021 3,514 2,604 103,514
9 9,262 4,054 3,274 104,054
10 10,565 4,605 3,955 104,605
11 11,934 5,206 4,686 105,206
12 13,370 5,822 5,432 105,822
13 14,879 6,456 6,196 106,456
14 16,463 7,110 6,980 107,110
15 18,126 7,783 7,783 107,783
16 19,872 8,470 8,470 108,470
17 21,706 9,161 9,161 109,161
18 23,631 9,839 9,839 109,839
19 25,653 10,480 10,480 110,480
20 27,775 11,060 11,060 111,060
Age 60 18,126 7,783 7,783 107,783
Age 65 27,775 11,060 11,060 111,060
Age 70 40,091 12,469 12,469 112,469
Age 75 55,809 8,392 8,392 108,392
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 6%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 147 -- 100,147
2 1,722 525 -- 100,525
3 2,648 896 -- 100,896
4 3,621 1,258 -- 101,258
5 4,642 1,610 310 101,610
6 5,714 1,946 646 101,946
7 6,839 2,265 1,225 102,265
8 8,021 2,561 1,651 102,561
9 9,262 2,828 2,048 102,828
10 10,565 3,063 2,413 103,063
11 11,934 3,295 2,775 103,295
12 13,370 3,490 3,100 103,490
13 14,879 3,648 3,388 103,648
14 16,463 3,767 3,637 103,767
15 18,126 3,845 3,845 103,845
16 19,872 3,869 3,869 103,869
17 21,706 3,828 3,828 103,828
18 23,631 3,701 3,701 103,701
19 25,653 3,463 3,463 103,463
20 27,775 3,090 3,090 103,090
Age 60 18,126 3,845 3,845 103,845
Age 65 27,775 3,090 3,090 103,090
Age 70 40,091 -- -- 98,656
Age 75 55,809 -- -- 87,490
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using GUARANTEED Cost Of Insurance
Hypothetical Gross Investment Return of 12%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 123 -- 100,123
2 1,722 461 -- 100,461
3 2,648 771 -- 100,771
4 3,621 1,052 -- 101,052
5 4,642 1,303 3101,303
6 5,714 1,521 221 101,521
7 6,839 1,705 665 101,705
8 8,021 1,850 940 101,850
9 9,262 1,953 1,173 101,953
10 10,565 2,012 1,362 102,012
11 11,934 2,052 1,532 102,052
12 13,370 2,046 1,656 102,046
13 14,879 1,994 1,734 101,994
14 16,463 1,900 1,770 101,900
15 18,126 1,760 1,760 101,760
16 19,872 1,568 1,568 101,568
17 21,706 1,314 1,314 101,314
18 23,631 982 982 100,982
19 25,653 552 552 100,552
20 27,775 8 8 100,008
Age 60 18,126 1,760 1,760 101,760
Age 65 27,775 8 8 100,008
Age 70 40,091 -- -- 95,343
Age 75 55,809 -- -- 86,079
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 0%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 356 -- 100,356
2 1,722 964 48 100,964
3 2,648 1,607 307 101,607
4 3,621 2,292 992 102,292
5 4,642 3,032 1,732 103,032
6 5,714 3,834 2,534 103,834
7 6,839 4,699 3,659 104,699
8 8,021 5,642 4,732 105,642
9 9,262 6,670 5,890 106,670
10 10,565 7,794 7,144 107,794
11 11,934 9,079 8,559 109,079
12 13,370 10,493 10,103 110,493
13 14,879 12,052 11,792 112,052
14 16,463 13,752 13,622 113,752
15 18,126 15,633 15,633 115,633
16 19,872 17,684 17,684 117,684
17 21,706 19,919 19,919 119,919
18 23,631 22,349 22,349 122,349
19 25,653 24,997 24,997 124,997
20 27,775 27,883 27,883 127,883
Age 60 18,126 15,633 15,633 115,633
Age 65 27,775 27,883 27,883 127,883
Age 70 40,091 46,603 46,603 146,603
Age 75 55,809 74,918 74,918 174,918
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 6%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 325 -- 100,325
2 1,722 874 -- 100,874
3 2,648 1,421 121 101,421
4 3,621 1,967 667 101,967
5 4,642 2,522 1,222 102,522
6 5,714 3,088 1,788 103,088
7 6,839 3,661 2,621 103,661
8 8,021 4,248 3,338 104,248
9 9,262 4,850 4,070 104,850
10 10,565 5,468 4,818 105,468
11 11,934 6,147 5,627 106,147
12 13,370 6,849 6,459 106,849
13 14,879 7,580 7,320 107,580
14 16,463 8,322 8,192 108,322
15 18,126 9,098 9,098 109,098
16 19,872 9,882 9,882 109,882
17 21,706 10,670 10,670 110,670
18 23,631 11,454 11,454 111,454
19 25,653 12,237 12,237 112,237
20 27,775 13,015 13,015 113,015
Age 60 18,126 9,098 9,098 109,098
Age 65 27,775 13,015 13,015 113,015
Age 70 40,091 16,583 16,583 116,583
Age 75 55,809 18,744 18,744 118,744
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
Illustration of Policy Values
Valley Forge Life Insurance Company
Female Age 45 Preferred Non-smoker
$800 Annual Planned Premium
$100,000 Face Amount
Increasing Death Benefit Option
Using CURRENT Cost Of Insurance
Hypothetical Gross Investment Return of 12%
Premiums
End Accumulated
Of At
Policy 5% Interest Policy Surrender Death
Year Per Year Value Value Benefit
- ------- ---------- ------ ---------- -------
1 840 295 -- 100,295
2 1,722 789 -- 100,789
3 2,648 1,249 -- 101,249
4 3,621 1,679 379 101,679
5 4,642 2,088 788 102,088
6 5,714 2,477 1,177 102,477
7 6,839 2,843 1,803 102,843
8 8,021 3,194 2,284 103,194
9 9,262 3,529 2,749 103,529
10 10,565 3,850 3,200 103,850
11 11,934 4,190 3,670 104,190
12 13,370 4,519 4,129 104,519
13 14,879 4,839 4,579 104,839
14 16,463 5,133 5,003 105,133
15 18,126 5,423 5,423 105,423
16 19,872 5,682 5,682 105,682
17 21,706 5,906 5,906 105,906
18 23,631 6,089 6,089 106,089
19 25,653 6,232 6,232 106,232
20 27,775 6,334 6,334 106,334
Age 60 18,126 5,423 5,423 105,423
Age 65 27,775 6,334 6,334 106,334
Age 70 40,091 6,021 6,021 106,021
Age 75 55,809 3,714 3,714 103,714
* In the absence of additional premium, the Policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that planned premium is paid in the beginning of each year. Values
would be different if premiums are paid with a different frequency or in
different amounts.
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE
SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT
ALLOCATIONS BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND POLICY VALUES FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS BUT
ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
YEARS.
<PAGE>
APPENDIX
EXAMPLES OF DEATH BENEFIT COMPUTATIONS UNDER OPTIONS 1 AND 2
EXAMPLES OF OPTION 1. For purposes of this example, assume that the Insured's
Attained Age is between 0 and 40 and that there is no outstanding Loan Amount.
Under Option 1, a Policy with a $100,000 Specified Amount will generally pay
$100,000 in Death Benefits. However, because the Death Benefit must be equal to
or be greater than 250% of the Policy Value, any time that the Policy Value
exceeds $40,000, the Death Benefit will exceed the $100,000 Specified Amount.
Each additional dollar of Policy Value above $40,000 will increase the Death
Benefit by $2.50. A Policy with a $100,000 Specified Amount and a Policy Value
of $60,000 will provide Death Benefit of $150,000 ($60,000 x 250%); a Policy
Value of $80,000 will provide a Death Benefit of $200,000 ($80,000 x 250%); a
Policy Value of $100,000 will provide a Death Benefit of $250,000 ($100,000 x
250%).
Similarly, as long as Policy Value exceeds $40,000, each dollar taken out of
Policy Value will reduce the Death Benefit by $2.50. If, for example, the Policy
Value is reduced from $50,000 to $40,000 because of partial surrenders, charges,
or negative investment performance, the Death Benefit will be reduced from
$125,000 to $100,000. If at any time, however, the Policy Value multiplied by
the applicable percentage is less than the Specified Amount, the Death Benefit
will equal the current Specified Amount of the Policy.
The applicable Policy Value percentage becomes lower as the Insured's Attained
Age increases. If the Attained Age of the Insured in the example above were, for
example, 50 (rather than between 0 and 40), the Policy Value percentage would be
185%. The Death Benefit would not exceed the $100,000 Specified Amount unless
the Policy Value exceeded approximately $54,054 (rather than $40,000), and each
dollar then added to or taken from the Policy Value would change the Death
Benefit by $1.85 (rather than $2.50).
EXAMPLES OF OPTION 2. For purposes of this example, assume that the Insured's
Attained Age is between 0 and 40 and that there is no outstanding Loan Amount.
Under Option 2, a Policy with a Specified Amount of $100,000 will generally
provide a Death Benefit of $100,000 plus Policy Value. Thus, for example, a
Policy with a Policy Value of $10,000 will have a Death Benefit of $110,000
($100,000 + $10,000); a Policy Value of $20,000 will provide a Death Benefit of
$120,000 ($110,000 + $20,000). The Death Benefit, however, must be at least 250%
of the Policy Value. As a result, if the Policy Value exceeds $66,667, the Death
Benefit will be greater than the Specified Amount plus Policy Value. Each
additional dollar of Policy Value above $66,667 will increase the Death Benefit
by $2.50. A Policy with a Specified Amount of $100,000 and a Policy Value of
$80,000 will provide a Death Benefit of $200,000 ($80,000 x 250%); a Policy
Value of $120,000 will provide a Death Benefit of $300,000 ($120,000 X 250%).
Similarly, any time Policy Value exceeds $66,667, each dollar taken out of
Policy Value will reduce the Death Benefit by $2.50. If, for example, the Policy
Value is reduced from $80,000 to $70,000 because of partial surrenders, charges,
or negative investment performance, the Death Benefit will be reduced from
$200,000 to $175,000. If at any time, however, Policy Value multiplied by the
applicable percentage is less than the Specified Amount plus the Policy Value,
then the Death Benefit will be the current Specified Amount plus the Policy
Value.
The applicable Policy Value percentage becomes lower as the Insured's Attained
Age increases. If the Attained Age of the Insured in the example above were, for
example, 50 (rather than under 40), the Policy Value percentage would be 185%.
The amount of the Death Benefit would be the sum of the Policy Value plus
$100,000 unless the Policy Value exceeded $117,647 (rather than $66,667), and
each dollar then added to or taken from the Policy Value would change the Death
Benefit by $1.85 (rather than $2.50).
<PAGE>
<TABLE>
<CAPTION>
TABLE OF POLICY VALUE PERCENTAGES
<S> <C> <C> <C> <C> <C> <C> <C>
|======================|=====================|=====================|======================|
| | | | |
| Attained |Attained | Attained | Attained |
| Age Percentage | Age Percentage | Age Percentage | Age Percentage |
|----------------------|---------------------|---------------------|----------------------|
| | | | |
| 0-40 250% | 50 185% | 60 130% | 70 115% |
| | | | |
| 41 243% | 51 178% | 61 128% | 71 113% |
| | | | |
| 42 236% | 52 171% | 62 126% | 72 111% |
| | | | |
| 43 229% | 53 164% | 63 124% | 73 109% |
| | | | |
| 44 222% | 54 157% | 64 122% | 74 107% |
| | | | |
| 45 215% | 55 150% | 65 120% | 75-90 105% |
| | | | |
| 46 209% | 56 146% | 66 119% | 91 104% |
| | | | |
| 47 203% | 57 142% | 67 118% | 92 103% |
| | | | |
| 48 197% | 58 138% | 68 117% | 93 102% |
| | | | |
| 49 191% | 59 134% | 69 116% | 94 101% |
| | | | |
|======================|=====================|=====================|======================|
</TABLE>
<PAGE>
Part II
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned registrant hereby undertakes to
file with the Securities and Exchange Commission (the "Commission") such
supplementary and periodic information, documents and reports as may be
prescribed by any rule or regulation of the Commission heretofore or hereafter
duly adopted pursuant to authority conferred in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the
Securities Act of 1933 (the "Act") 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.
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 depositor's officers, directors and
employees are also officers, directors and/or employees of CNAFC.
CNAFC indemnifies any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of CNAFC) by reason of the fact that he
is or was a director, officer, employee or agent of CNAFC, or was serving at the
request of CNAFC as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of CNAFC, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
CNAFC indemnifies any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of CNAFC to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of CNAFC, or
was serving at the request of CNAFC as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
<PAGE>
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.
REPRESENTATIONS PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rule 6e-3(T) under the
Investment Company Act of 1940.
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(A)
under the Investment Company Act of 1940 with respect to the policies described
in the Prospectus.
Registrant makes the following representations:
(1) Rule 6e-3(T)(b)(13)(iii)(F) has been relied upon.
(2) The level of the mortality and expense risk charge is
within the range of industry practice for comparable
flexible or scheduled contracts.
(3) Registrant has concluded that there is a reasonable
likelihood that the distribution financing
arrangement of the Variable Account will benefit the
Variable Account and Owners and will keep and make
<PAGE>
available to the Commission on request a memorandum
setting forth the basis for this representation.
(4) The Variable Account will invest only in management
investment companies which have undertaken to have a
board of directors, a majority of whom are not
interested persons of the company, formulate and
approve any plan under Rule 12b-1 to finance
distribution expenses.
The methodology used to support the representation made in
paragraph (2) above is based on an analysis of the mortality and expense risk
charge contained in other variable life insurance contracts. Registrant
undertakes to keep and make available to the Commission on request the documents
used to support the representation in paragraph (2) above.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of __ pages.
Undertaking to file reports.
Rule 484 undertaking.
Representations pursuant to Rule 6e-3(T).
The signatures.
Written consents.
The following exhibits, corresponding to those required by paragraph A
of the instructions as to exhibits in Form N-8B-2:
1.
A.
(1) Resolution of the Board of Directors of Valley Forge
Life Insurance Company (the "Company") establishing
Valley Forge Life Insurance Company Variable Life
Separate Account (the "Variable Account")**
(2) Copy of Agreement for Lockbox Services*****
(3) (a) Not Applicable
(b) Form of underwriting/distribution agreement
between the Company and CNA Investor
Services, Inc.
(c) Schedule of Sales Commissions
(4) Not applicable
(5) (a) Specimen Individual Flexible Premium
Variable and Fixed Life Insurance Policy
(the "Policy")*
(b) Form of Waiver of Monthly Deduction Rider*
(c) Form of Term Insurance on Spouse Rider*
(d) Form of Term Insurance on Children Rider*
<PAGE>
(6) (a) Amended and restated Articles of
Incorporation of the Company ***
(b) By-laws of the Company ***
(7) Not applicable
(8) (a) Form of participation agreement between The
Alger American Fund and the Company ****
(b) Form of participation agreement between
Variable Insurance Products Fund and the
Company ****
(c) Form of participation agreement between
Variable Insurance Products Fund II and the
Company ****
(d) Form of participation agreement between MFS
Variable Insurance Trust and the Company ****
(e) Form of participation agreement between
SoGen Variable Funds, Inc. and the
Company ****
(f) Form of participation agreement between Van
Eck Worldwide Insurance Trust and the
Company ****
(g) Form of participation agreement between
Insurance Management Series and the
Company ****
(9) Not applicable
(10) Policy Application
(11) Description of issuance, transfer and redemption
procedures
B. Not applicable
C. Not applicable
2. Opinion and Consent of Lynne Gugenheim, Esquire
3. Not applicable
4. Not applicable
5. Not applicable
6. Opinion and consent of Rob Foster, F.S.A. as to actuarial
matters pertaining to the securities being registered
7. (a) Consent of Deloitte & Touche LLP
(b) Consent of Sutherland, Asbill & Brennan
________________________________
* Incorporated herein by reference to the registrant's initial filing
of Form S-6 on March 25, 1996.
** Incorporated by reference to exhibit number 1a to the Form N-4 EL/A
Registration Statment filed with the Securities and Exchange
Commission on February 20, 1996 (File #333-1087).
*** Incorporated by reference to exhibit number 6 to the Form N-4 EL/A
Registration Statment filed with the Securities and Exchange
Commission on February 20, 1996 (File #333-1087).
**** Incorporated by reference to exhibit number 8 to the Form N-4 EL/A
Registration Statment filed with the Securities and Exchange
Commission on the same date as this filing.
***** Incorporated by reference to exhibit number 2 to the Form N-4 EL/A
Registration Statment filed with the Securities and Exchange
Commission on the same date as this filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the registrant, Valley Forge Life Insurance Company
Variable Life Separate Account, has duly caused this registration statement to
be signed on its behalf by the undersigned thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Chicago, State of
Illinois, on this 4th day of September, 1996.
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE
LIFE SEPARATE ACCOUNT
(Registrant)
VALLEY FORGE LIFE INSURANCE COMPANY
(Depositor)
S/MARY A. RIBIKAWSKIS By: S/PETER E. JOKIEL
Attest: _____________________ ____________________________
Mary A. Ribikawskis Peter E. Jokiel
Assistant Secretary Senior Vice President,
Chief Financial Officer,
Director
Pursuant to the requirements of the Securities Act of 1933, Valley Forge Life
Insurance Company has duly caused this registration statement to be signed on
its behalf by the undersigned persons in their capacities with Valley Forge
Insurance Company therunto authorized, and its seal to be herunto affixed and
attested, all in the City of Chicago, State of Illinois, this __nd day of
August, 1996.
S/MARY A. RIBIKAWSKIS By: S/PETER E. JOKIEL
Attest: _______________________ ___________________________
Mary A. Ribikawskis Peter E. Jokiel
Assistant Secretary Senior Vice President,
Chief Financial Officer,
Director
Pursuant to the requirements of the Securities Act of 1933, Valley Forge
Life Insurance Company has duly caused this registration statement to be signed
on its behalf by the undersigned persons in their capacities with Valley Forge
Life Insurance Company thereunto authorized, and its seal to be hereunto affixed
and attested, all in the City of Chicago, State of Illinois, this __nd day of
August __, 1996.
<TABLE>
<CAPTION>
PRINCIPAL OFFICERS
<S> <C> <C>
Signature Title Date
_____________________________ ________________________________ __________________
S/DENNIS H. CHOOKASZIAN
_____________________________ Chairman of the Board, September 4, 1996
Dennis H. Chookaszian Chief Executive Officer
Director
<PAGE>
S/PHILIP L. ENGEL
_____________________________ President, Director September 4, 1996
Philip L. Engel
S/JAMES P. FLOOD
_____________________________ Senior Vice President September 4, 1996
James P. Flood
S/PETER E. JOKIEL
_____________________________ Senior Vice President,
Peter E. Jokiel Chief Financial Officer, Director September 4, 1996
S/DONALD M. LOWRY
____________________________ Senior Vice President, September 4, 1996
Donald M. Lowry General Counsel, Secretary,
Director
S/WILLIAM H. SHARKEY, JR.
____________________________ Senior Vice President, September 4, 1996
William H. Sharkey, Jr. Director
S/WILLIAM J. ADAMSON, JR.
_____________________________ Senior Vice President September 4, 1996
William J. Adamson, Jr.
S/BRUCE B. BRODIE
_____________________________ Senior Vice President September 4, 1996
Bruce B. Brodie
S/MICHAEL C. GARNER
_____________________________ Senior Vice President September 4, 1996
Michael C. Garner
S/BERNARD L. HENGESBAUGH
_____________________________ Senior Vice President September 4, 1996
Bernard L. Hengesbaugh
S/JACK KETTLER
_____________________________ Senior Vice President September 4, 1996
Jack Kettler
S/CAROLYN L. MURPHY
_____________________________ Senior Vice President September 4, 1996
Carolyn L. Murphy
S/WAYNE R. SMITH, III
_____________________________ Senior Vice President, September 4, 1996
Wayne R. Smith, III
S/ADRIAN M. TOCKLIN
_____________________________ Senior Vice President, September 4, 1996
Adrian M. Tocklin
S/JAE L. WITTLICH
_____________________________ Senior Vice President, September 4, 1996
Jae L. Wittlich
</TABLE>
Exhibit 1A 3B
UNDERWRITING AGREEMENT
This Agreement dated this __________ day of ___________________ 1996 is
by and between CNA INVESTOR SERVICES, INC. (herein called "Company"), an
Illinois corporation, and VALLEY FORGE LIFE INSURANCE COMPANY ON BEHALF OF ITS
VARIABLE LIFE SEPARATE ACCOUNT (herein called the "Separate Account"), an
Investment Company under the Investment Company Act of 1940.
WITNESSETH:
WHEREAS, Company is a broker-dealer that engages in the underwriting of
variable insurance products and other investment products;
WHEREAS, Separate Account desires to issue certain variable insurance
products described more fully below to the public through Company acting as
principal underwriter;
WHEREAS, Company and the Separate Account agree that Company shall be a
statutory underwriter within the meaning of Section 2(11) of the Securities Act
of 1933 and principal underwriter under Section 2(a)(29) of the Investment
Company Act of 1940; and
WHEREAS, Company and the Separate Account have entered into this
agreement to meet the requirements of Section 15(b) of the Investment Company
Act of 1940.
NOW, THEREFORE, in consideration of their mutual promises, Separate
Account and Company hereby agree as follows:
1. Additional Definitions.
a. Contracts -- The class or classes of variable insurance
products set forth on Schedule 1 to this Agreement as in
effect at the time this Agreement is executed, and such other
classes of variable insurance products that may be added to
Schedule 1 from time to time in accordance with Section 11.b
of this Agreement, and including any riders to such contracts
and any other contracts offered in connection therewith. For
this purpose and under this Agreement generally, a "class of
Contracts" shall mean those Contracts issued by Separate
Account on the same policy form or forms and covered by the
same Registration Statement.
b. Registration Statement -- At any time that this Agreement is
in effect, each currently effective registration statement
filed with the SEC ,as hereinafter defined, under the 1933 Act
on a prescribed form, or currently effective post-effective
amendment thereto, as the case may be, relating to a class of
Contracts, including financial statements included in, and all
exhibits to, such registration statement or post-effective
amendment. For purposes of Section 9 of this Agreement, the
term "Registration Statement" means any document which is or
at any time was a Registration Statement within the meaning of
this Section 1.b.
c. Prospectus -- The prospectus included within a Registration
----------
Statement, except that, if the most recently filed version of the
prospectus (including any supplements thereto) filed pursuant to
Rule 497 under the 1933 Act subsequent to the date on which a
Registration Statement became effective differs from the
prospectus included within such Registration Statement at the
time it became effective, the term "Prospectus" shall refer to
the most recently filed prospectus filed under Rule 497 under the
1933 Act, from and after the date on which it shall have been
filed. For purposes of Section 9 of this Agreement, the term "any
Prospectus" means any document which is or at any time was a
Prospectus within the meaning of this Section 1.c.
d. Fund -- An investment company in which the Separate Account
invests.
e. Variable Account -- A separate account supporting a class or
classes of Contracts and specified on Schedule 1 as in effect
at the time this Agreement is executed, or as it may be
amended from time to time in accordance with Section 11.b of
this Agreement
f. 1933 Act -- The Securities Act of 1933, as amended.
--------
g. 1934 Act -- The Securities Exchange Act of 1934, as amended.
--------
h. 1940 Act -- The Investment Company Act of 1940, as amended.
--------
i. SEC -- The Securities and Exchange Commission.
j. NASD -- The National Association of Securities Dealers, Inc.
k. Regulations -- The rules and regulations promulgated by the
SEC under the 1933 Act, the 1934 Act and the 1940 Act as in
effect at the time this Agreement is executed or thereafter
promulgated.
l. Selling Broker-Dealer -- A person registered as a
broker-dealer and licensed as a life insurance agent or
affiliated with a person so licensed, and authorized to
distribute the Contracts pursuant to a sales agreement as
provided for in Section 4 of this Agreement.
m. Agents Manual -- The agents manual and other written rules,
regulations and procedures provided by Separate Account to
insurance agents appointed to sell its insurance contracts, as
revised from time to time.
n. Representative -- When used with reference to Company or a
Selling Broker-Dealer, an individual who is an associated
person, as that term is defined in the 1934 Act, thereof.
o. Application -- An application for a Contract.
p. Premium -- A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
q. Customer Service Center -- the service center identified in
the Prospectus as the location at which Premiums and
Applications are accepted.
2. Authorization and Appointment.
a. Scope of Authority. Separate Account hereby authorizes
------------------
Company on an exclusive basis, and Company accepts such
authority, subject to the registration requirements of the 1933
Act and the 1940 Act and the provisions of the 1934 Act and
conditions herein, to be the principal underwriter for the sale
of the Contracts to the public in each state and other
jurisdiction in which the Contracts may lawfully be sold during
the term of this Agreement. Separate Account hereby appoints
Company as its independent general agent for sale of the
Contracts. Separate Account hereby authorizes Company to grant
authority to Selling Broker-Dealers to solicit Applications and
Premiums to the extent Company deems appropriate and consistent
with the marketing program for the Contracts or a class of
Contracts, subject to the conditions set forth in Section 4 of
this Agreement. The Contracts shall be offered for sale and
distribution at premium rates set from time to time by Separate
Account. Company shall use its best efforts to market the
Contracts actively, directly and/or through Selling
Broker-Dealers in accordance with Section 4 of this Agreement,
subject to compliance with applicable law, including rules of the
NASD.
b. Limits on Authority. Company shall act as an independent
-------------------
contractor and nothing herein contained shall constitute Company
or its agents, officers or employees as agents, officers or
employees of Separate Account solely by virtue of their
activities in connection with the sale of the Contracts
hereunder. Company and its Representatives shall not have
authority, on behalf of Separate Account: to make, alter or
discharge any Contract or other insurance policy or annuity
entered into pursuant to a Contract; to waive any Contract
forfeiture provision; to extend the time of paying any Premium;
or to receive any monies or Premiums (except for the sole purpose
of forwarding monies or Premiums to Separate Account). Company
shall not expend, nor contract for the expenditure of, the funds
of Separate Account. Company shall not possess or exercise any
authority on behalf of Separate Account other than that expressly
conferred on Company by this Agreement.
c. Effective Date of Appointment. This Agreement shall continue in
force until July 15, 1998 and indefinitely thereafter, but only so long as such
continuance is specifically approved at least annually by the members of the
Board of Directors of the Valley Forge Life Insurance company, who are neither
parties to the Agreement nor interested persons of any such party. Any such vote
shall be cast in person at a meeting called for the purpose of voting on the
approval of continuing this Agreement.
3. Solicitation Activities.
a. Company Representatives. No Company Representative shall
solicit the sale of a Contract unless at the time of such
solicitation such individual is duly registered with the NASD
and duly licensed with all applicable state insurance and
securities regulatory authorities, and is duly appointed as an
insurance agent of Valley Forge Life Insurance Company.
b. Solicitation Activities. All solicitation and sales activities
engaged in by Company and the Company Representatives with
respect to the Contracts shall be in compliance with all
applicable federal and state securities laws and regulations,
where applicable, as well as all applicable insurance laws and
regulations and the Agents Manual. In particular, without
limiting the generality of the foregoing:
(1) Company shall train, supervise and be solely
responsible for the conduct of Company
Representatives in their solicitation of Applications
and Premiums and distribution of the Contracts, and
shall supervise their compliance with applicable
rules and regulations of any insurance or securities
regulatory agencies that have jurisdiction over
variable insurance product activities.
(2) Neither Company nor any Company Representative shall
offer, attempt to offer, or solicit Applications for,
the Contracts or deliver the Contracts, in any state
or other jurisdiction unless Separate Account has
notified Company that such Contracts may lawfully be
sold or offered for sale in such state, and has not
subsequently revised such noting.
(3) Neither Company nor any Company Representative shall
give any information or make any representation in
regard to a class of Contracts in connection with the
offer or sale of such class of Contracts that is not
in accordance with the Prospectus for such class of
Contracts, or in the then-currently effective
prospectus or statement of additional information for
a Fund, or in current advertising materials for such
class of Contracts authorized by Separate Account.
(4) All Premiums paid by check or money order that are
collected by Company or any of its Representatives
shall be remitted promptly, and in any event not
later than noon of the next business day, in full,
together with any Applications, forms and any other
required documentation, to the Customer Service
Center. Premiums may be transmitted by wire order
from Company to the Customer Service Center in
accordance with the procedures set forth in the
Agents Manual. If any Premium is held at any time by
Company, Company shall hold such Premium in a
fiduciary capacity and such Premium shall be remitted
promptly, and in any event not later than noon of the
next business day, to Separate Account. Company
acknowledges that all such Premiums, whether by
check, money order or wire, shall be the property of
Separate Account. Company acknowledges that Separate
Account shall have the unconditional right to reject,
in whole or in part, any Application or Premium.
c. Representations and Warranties of Company. Company represents
and warrants to Separate Account that Company is and shall
remain registered during the term of this Agreement as a
broker-dealer under the 1934 Act, is a member with the NASD,
and is duly registered under applicable state securities laws,
and that Company is and shall remain during the term of this
Agreement in compliance with Section 9(a) of the 1940 Act.
4. Selling Broker-Dealers. Company shall ensure that sales of the Contracts by
Selling Broker-Dealers comply with the following conditions, and any additional
conditions Separate Account may specify from time to time.
a. Every Selling Broker-Dealer shall be both registered as a
broker-dealer with the SEC and a member of the NASD and licensed
as an insurance agent with authority to sell variable products or
associated with a insurance agent so licensed. Any individuals to
be authorized to act on behalf of Selling Broker-Dealer shall be
duly registered with the NASD as representatives of Selling
Broker-Dealer with authority to sell variable products, and shall
be licensed as insurance agents with authority to sell variable
products. Company shall verify that Selling Broker-Dealer and its
Representatives are duly licensed under applicable state
insurance law to sell the Contracts (or, if Broker-Dealer is not
so licensed, that it is associated with an entity so licensed).
b. Every Selling Broker-Dealer (or, if applicable, its associated
general insurance agency) and each of its Representatives
shall have been appointed by Separate Account, provided that
Separate Account reserves the right to refuse to appoint any
proposed person, or once appointed, to terminate such
appointment.
c. Every Selling Broker-Dealer must enter into a written sales
agreement with Company which sales agreement, among other
things, will require such Selling Broker-Dealer to use its
best efforts to solicit applications for Contracts and to
comply with applicable laws and regulations, including the
Separate Account's rules and regulations as reflected in the
Agents Manual or otherwise communicated to agents appointed by
Separate Account, and will contain such other provisions as
the Company deems to be consistent herewith.
d. In view of Separate Account's desire to ensure that
Contracts will be sold to purchasers for whom the Contracts will
be suitable, the written Sales Agreement shall require that
Selling Broker-Dealers and their Representatives not make
recommendations to an applicant to purchase a Contract in the
absence of reasonable grounds to believe that the purchase of the
Contract is suitable for the applicant. While not limited to the
following, a determination of suitability shall be based on
information supplied by an applicant after a reasonable inquiry
concerning the applicant's other security holdings, insurance and
investment objectives, financial situation and needs, and the
likelihood that the applicant will continue to make any premium
payments contemplated by the Contract applied for and will keep
the Contract in force for a sufficient period of time so that
Separate Account's acquisition costs are amortized over a
reasonable period of time.
5. Marketing Materials.
a. Preparation and Filing. Company shall be primarily
-----------------------
responsible for the design and preparation of all promotional,
sales and advertising material relating to the Contracts. Company
shall be responsible for filing such material, as required, with
the NASD and any state securities regulatory authorities.
Separate Account shall be responsible for filing all promotional,
sales or advertising material, as required, with any state
insurance regulatory authorities and the SEC. Separate Account
shall be responsible for preparing the Contract Forms and filing
them with applicable state insurance regulatory authorities, and
for preparing the Prospectuses and Registration Statements and
filing them with the SEC and state regulatory authorities, to the
extent required. The parties shall notify each other
expeditiously of any comments provided by the SEC, NASD or any
applicable securities or insurance regulatory authority on such
material, and will cooperate expeditiously in resolving and
implementing any comments, as applicable.
b. Use in Solicitation Activities. Separate Account shall be
responsible for furnishing Company with such Applications,
Prospectuses and other materials for use by Company and any
Selling Broker-Dealers in their solicitation activities with
respect to the Contracts. Separate Account shall notify
Company of those states or jurisdictions which require
delivery of a statement of additional information with a
prospectus to a prospective purchaser.
6. Compensation and Expenses.
a. The company will receive from the Separate Account such
underwriting commissions as shall be stated from time to time
in the Separate Account's then current prospectus.
b. Separate Account shall pay all expenses in connection with:
(1) the preparation and filing of each Registration
Statement (including each pre-effective and
post-effective amendment thereto) and the preparation
and filing of each Prospectus (including any
preliminary and each definitive Prospectus);
(2) the preparation, underwriting, issuance and
administration of the Contracts;
(3) any registration, qualification or approval or other
filing of the Contracts or Contract forms required
under the insurance laws of the states in which the
Contracts will be offered, as well as any applicable
state securities laws.
(4) all registration fees for the Contracts payable to
the SEC;
(5) the printing of all promotional materials, definitive
. Prospectuses for the Contracts, and
any supplements thereto for distribution to existing
Contractholders; and
(6) Company shall pay any other expenses incurred by
Company or its Representatives or employees for the
purpose of carrying out the obligations of Company
hereunder.
7. Compliance.
a. Maintaining Registration and Approvals. Separate Account shall
be responsible for maintaining the registration of the
Contracts with the SEC and any applicable state securities
regulatory authority with which such registration is required,
and for gaining and maintaining approval of the Contract forms
where required under the insurance laws and regulations of
each state or other jurisdiction in which the Contracts are to
be offered.
b. Confirmations and 1934 Act Compliance. Separate Account,
--------------------------------------
as agent for Company, shall confirm to each applicant for and
purchaser of a Contract in accordance with Rule 10b-10 under the
1934 Act acceptance of Premiums and such other transactions as
are required by Rule 10b-10 or administrative interpretations
thereunder. Separate Account shall maintain and preserve such
books and records with respect to such confirmations in
conformity with the requirements of Rules 17a-3 and 17a-4 under
the 1934 Act to the extent such requirements apply. Separate
Account shall maintain all such books and records and hold such
books and records on behalf of and as agent for Company whose
property they are and shall remain, and acknowledges that such
books and records are at all times subject to inspection by the
SEC in accordance with Section 17(a) of the 1934 Act.
c. Issuance and Administration of Contracts. Separate Account
shall be responsible for issuing the Contracts and
administering the Contracts and the Variable Account,
provided, however, that Company shall have full responsibility
for the securities activities of all persons employed by the
Separate Account, engaged directly or indirectly in the
Contract operations, and for the training, supervision and
control of such persons to the extent of such activities.
8. Investigations and Proceedings.
a. Cooperation. Company and Separate Account shall cooperate
fully in any securities or insurance regulatory investigation
or proceeding or judicial proceeding arising in connection
with the offering, sale or distribution of the Contracts
distributed under this Agreement. Without limiting the
foregoing, Separate Account and Company shall notify each
other promptly of any customer complaint or notice of any
regulatory investigation or proceeding or judicial proceeding
received by either party with respect to the Contracts
9. Indemnification.
a. By Separate Account. Separate Account shall indemnify and
-------------------
hold harmless Company and each person who controls or is
associated with Company within the meaning of such terms under
the federal securities laws, and any officer, director, employee
or agent of the foregoing, against any and all losses, claims,
damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any
action, suit or proceeding or any claim asserted), to which
Company and/or any such person may become subject, under any
statute or regulation, any NASD rule or interpretation, at common
law or otherwise, insofar as such losses, claims, damages or
liabilities:
(1) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading, in light of
the circumstances in which they were made, contained
in any (i) Registration Statement or in any
Prospectus or (ii) blue-sky application or other
document executed by Separate Account specifically
for the purpose of qualifying any or all of the
Contracts for sale under the securities laws or
insurance laws of any jurisdiction, where applicable;
provided that Separate Account shall not be liable in
any such case to the extent that such loss, claim,
damage or liability arises out of, or is based upon,
an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon
information furnished in writing to Separate Account
by Company specifically for use in the preparation of
any such Registration Statement or any such blue-sky
application or any amendment thereof or supplement
thereto:
(2) result from any breach by Separate Account of any
provision of this Agreement.
This indemnification agreement shall be in addition to any
liability that Separate Account may otherwise have; provided,
however, that no person shall be entitled to indemnification
pursuant to this provision if such loss, claim, damage or
liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the person seeking
indemnification
b. By Company. Company shall indemnify and hold harmless
----------
Separate Account and each person who controls or is associated
with Separate Account within the meaning of such terms under the
federal securities laws, and any officer, director, employee or
agent of the foregoing, against any and all losses, claims,
damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any
action, suit or proceeding or any claim asserted), to which
Separate Account and/or any such person may become subject under
any statute or regulation, any NASD rule or interpretation, at
common law or otherwise, insofar as such losses, claims, damages
or liabilities:
(1) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact
required to be stated therein or necessary in order
to make the statements therein not misleading, in
light of the circumstances in which they were made,
contained in any (i) Registration Statement or in any
Prospectus, or (ii) blue-sky application or other
document executed by Separate Account specifically
for the purpose of qualifying any or all of the
Contracts for sale under applicable securities laws
or insurance laws of any jurisdiction, where
applicable; in each case to the extent, but only to
the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was
made in reliance upon information furnished in
writing by Company to Separate Account specifically
for use in the preparation of any such Registration
Statement or any such blue-sky application or any
amendment thereof or supplement thereto
(2) result because of any use by Company or any Company
Representative of promotional, sales or advertising
material not authorized by Separate Account or any
verbal or written misrepresentations by Company or
any Company Representative or any unlawful sales
practices concerning the Contracts by Company or any
Company Representative under federal securities laws
or NASD regulations; or
(3) result from any breach by Company of any provision of
this Agreement. This indemnification shall be in
addition to any liability that Company may otherwise
have; provided, however, that no person shall be
entitled to indemnification pursuant to this
provision if such loss, claim, damage or liability is
due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the
person seeking indemnification.
c. General. Promptly after receipt by a party entitled to
-------
indemnification ("indemnified person") under this Section 9 of
notice of the commencement of any action as to which a claim will
be made against any person obligated to provide indemnification
under this Section 9 ("indemnifying party"), such indemnified
person shall notify the indemnifying party in writing of the
commencement thereof as soon as practicable thereafter, but
failure to so notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may have to the
indemnified person otherwise than on account of this Section 9.
The indemnifying party will be entitled to participate in the
defense of the indemnified person but such participation will not
relieve such indemnifying party of the obligation to reimburse
the indemnified person for reasonable legal and other expenses
incurred by such indemnified person in defending himself or
itself. The indemnification provisions contained in this Section
9 shall remain operative in full force and effect, regardless of
any termination of this Agreement. A successor by law of Company
or Separate Account, as the case may be, shall be entitled to the
benefits of the indemnification provisions contained in this
Section 9.
10. Termination. This Agreement shall terminate automatically upon
-----------
assignment. This Agreement may be terminated at any time for any
reason by either party upon 60 days' written notice to the other
party, without payment of any penalty. This Agreement may be
terminated at the option of either party to this Agreement upon
the other party's material breach of any provision of this
Agreement or of any representation or warranty made in this
Agreement, unless such breach has been cured within 10 days after
receipt of notice of breach from the non-breaching party. Upon
termination of this Agreement all authorizations, rights and
obligations shall cease except the obligation to settle accounts
hereunder, including commissions on Premiums subsequently
received for Contracts in effect at the time of termination or
issued pursuant to Applications received by Separate Account
prior to termination.
11. Miscellaneous.
a. Schedules. The parties to this Agreement may amend Schedule 1
to this Agreement from time to time to reflect additions of
any class of Contracts and Variable Accounts. The provisions
of this Agreement shall be equally applicable to each such
class of Contracts and each Variable Account that may be added
to the Schedule, unless the context otherwise requires. Any
other change in the terms or provisions of this Agreement
shall be by written agreement between Separate Account and
Company.
b. Rights and Remedies are Cumulative. 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.
c. Interpretation: Jurisdiction. This Agreement constitutes the
whole agreement between the parties hereto with respect to the
subject matter hereof, and supersedes all prior oral or
written understandings, agreements or negotiations between the
parties with respect to such subject matter. No prior writings
by or between the parties with respect to the subject matter
hereof shall be used by either party in connection with the
interpretation of any provision of this Agreement. This
Agreement shall be construed and its provisions interpreted
under and in accordance with the internal laws of the state of
Illinois without giving effect to principles of conflict of
laws.
d. Severability. This is a severable Agreement. In the event that
any provision of this Agreement would require a party to take
action prohibited by applicable federal or state law or prohibit
a party from taking action required by applicable federal or
state law, then it is the intention of the parties hereto that
such provision shall be enforced to the extent permitted under
the law, and, in any event, that all other provisions of this
Agreement shall remain valid and duly enforceable as if the
provision at issue had never been a part hereof.
e. Regulation. This Agreement shall be subject to the
provisions of the 1933 Act, 1934 Act and 1940 Act and the
regulations thereunder, and the rules and regulations of the
NASD, from time to time in effect, including such exemptions from
the 1940 Act as the SEC may grant, and the terms hereof shall be
interpreted and construed in accordance therewith.
f. Section and Other Headings. The headings 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by such authorized officers on the date specified below.
CNA INVESTOR SERVICES, INC.
By: __________________________________
Name:________________________________
Title: _________________________________
VALLEY FORGE LIFE INSURANCE COMPANY ON BEHALF OF ITS VARIABLE
LIFE SEPARATE ACCOUNT
By: __________________________________
Name:________________________________
Title: _________________________________
<PAGE>
SCHEDULE 1
The terms of this underwriting agreement are limited to the
following insurance product(s):
Variable annuity products issued by the Separate Account as
described in the Separate Account's current Prospectus.
Exhibit 1A 3C
Variable Universal Life
1. VUL Commissions. Rates per dollar of Target Premium (regardless of
allocation) are listed below:
Target Premiums Received by Duration Since
Segment Issue
Source 1st Year 2nd through 11th Year
10th Years and Later
Retail Broker Dealer 90% 2% 2%
Wholesale Broker Dealer 20% 2% 0%
Marketing 5% 0% 0%
Target Premium Compensation 115% 4% 2%
An additional 2% of Premium paid above Target Premium will be paid in all years,
1.5% to Retail Broker Dealers and 0.4% to Wholesale Broker Dealers, and 0.1% to
Marketing.
The 20% first year Wholesale Broker Dealer commission consists of a 15% base
rate with a 5% contribution to bonus.
Exhibit 1A (10)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
===========================================================================================================================
Application to: |_|Continental Assurance Company, CNA Plaza, Chicago, IL 60685
(Check One) |_|Valley Forge Life Insurance Company, 401 Penn Street, Reading, PA 19601
Executive Office, CNA Plaza, Chicago, IL 60685
(PLEASE TYPE OR PRINT ALL INFORMATION)
=================================================================================|===============|=====|============
1. PROPOSED INSURED 1 (First, Middle, Last) |_| Male |_| Female | Birth Date | |Birth Place
________________________________________ | Mo. Day Yr. | Age |State &
Home Phone:________________________| | |Country
Driver's License # and State____________ Bus. Phone:________________________| | |
_________________________________________________________________________________|_____|____|____|_____|____________
2. PROPOSED INSURED 2 (First, Middle, Last) |_| Male |_| Female |(Specified) | | |
_______________________________________________________________ |Amount | | |
Height__________Weight now____________Weight 1 yr. ago__________| $________ | | |
Cause of any lost weight_______________________________________ | or | | |
Driver's License # and State:__________________________________ | Units_____ | | |
| | | |
____________________________________________________________________|____________|______|____|___|_____|____________
3. CHILDREN PROPOSED FOR INSURANCE Height Weight |Child Units | | |
| | | |
______________________________________________|_________|___________|____________|______|____|___|_____|____________
| | | |
______________________________________________|_________|___________|____________|______|____|___|_____|____________
| | | |
4. If Proposed Insured is under age 15, name of Proposed Payor |Relationship| | |
| | | |
____________________________________________________________________|____________|______|____|___|_____|____________
5. Residence Address of Proposed Insured(s) City County State Zip Code
____________________________________________________________________________________________________________________
6. Plan of Insurance | Face/Specified Amount |Premium Mode| Amount remitted with this
| | | application $
____________________________________|_______________________________|____________|__________________________________
|
| Death Benefit |_| Option 1 |_| Option 2
_________________________________________________|__________________________________________________________________
First Premium (may not be less than |Planned Periodic Premium | Target Premium|Maturity Date (if less
Planned Periodic Premium Target Premium |$ | $ |than policy expiry):
| | |
_________________________________________________|_________________________|_______________|________________________
Rider/Amount | Rider/Amount | Rider/Amount
| |
____________________________________|_________________________________________________|_____________________________
7a. Occupation of Proposed Insured(s) or Payor if Proposed Insured is under age 15. List duties.
____________________________________________________________________________________________________________________
7b. Employer's name and address of Proposed Insured(s) (Applies to Payor if Proposed Insured is under age 15.)
____________________________________________________________________________________________________________________
8. List all life insurance amounts in force on all person(s) proposed for insurance (if none, so state).
Name of Person and Year Amount of Amount of Amount of Accidental
Insurance Company Issued Personal Insurance Business Insurance Death Benefit
___________________________ _________ $__________________ $__________________ $___________________
___________________________ _________ $__________________ $__________________ $___________________
____________________________________________________________________________________________________________________
<PAGE>
9. Will the policy applied for replace or change any insurance or annuity currently in force with this or any other
company on your life or the life of any person proposed for insurance? |_| No |_| Yes Have you or any person
proposed for insurance replaced a life insurance policy in the past three years? |_|No |_| Yes Replaced two or
more times in the last five years? |_| No |_| Yes If Yes,give name and reason.
Is any application for life or health insurance pending in this or any company? |_| No |_| Yes If Yes, give
name, company and details.
Name Company Policy number Issue Year Face Amount Acc. Death Benefit Amt.
$ $
________________________________________|________________|_____________|________________|_________________________
10. Send premium notice to Proposed Insured |_| Residence |_| Business Address |_| Other (Name, Address, Zip Code)
_______________________________________________________________________________________________________________
11. Name of owner, if other than Proposed Insured 1, or Applicant. | Owner's Social Sec. No.
(Include contingent owner, if any.) | or Tax No.
|
________________________________________________________________________________|_____________________________
12. Beneficiary Designation (The beneficiary under any spouse and children's insurance will be as stated in
those riders, unless otherwise designated. Print full name(s) and relationship to Proposed Insured 1).
__________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________
Contingent Beneficiary
__________________________________________________________________________________________________________________
==================================================================================================================
LV206-363-A
<PAGE>
========================================================================================|==========================
13. Has any person proposed for insurance: | Details of YES answers
| (Include item # proposed
| insured, dates, duration,
Yes No | attending physicians, and
A. |_| |_| In the last 3 years flown or plans to fly, as a pilot, student pilot | questionnaire for A & E)
or crew? |
B. |_| |_| Traveled or resided or plans to travel or reside outside the USA? |
C. |_| |_| Ever been convicted of a felony? |
D. |_| |_| Had 2 or more moving violations in the past 3 years, been convicted |
of driving while intoxicated, or ever had license suspended or revoked?|
E. |_| |_| In the last 3 years, engaged in, or intends to engage in, sky or scuba |
diving, hang-gliding, rock climbing, or any form of motorized racing? |
F. |_| |_| Received advice or treatment from a member of the medical profession |
for the use of alcohol or drugs, or been convicted of using, selling,|
or possessing any narcotics, stimulant, sedative or |
hallucinogenic drug in the past 10 years? |
G. |_| |_| Ever been advised by a physician to quit using tobacco for health |
reasons? |
H. |_| |_| Ever been declined for insurance, had a policy rated, modified in any |
way or denied reissue, reinstatement or renewal of a policy? |
________________________________________________________________________________________|____________________________
14. Special Features requested, such as policy date, risk classification, issue instructions_________________________
_____________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________
15. PROPOSED INSURED 1 Tobacco Use? |_| Never |_| Present |_| Former Check type: |_| smokeless |_| cigar
|_|cigarette |_| pipe
Mo./Year quit #Years as a smoker #Packs per day
_____________________________________________________________________________________________________________________
16. PROPOSED INSURED 2 Tobacco Use? |_| Never |_| Present |_| Former Check type: |_| smokeless |_| cigar
|_|cigarette |_| pipe
Mo./Year quit #Years as a smoker #Packs per day
_____________________________________________________________________________________________________________________
17. PROPOSED a) Height Weight: Current 1 yr. ago Cause of any weight loss | b)Annual Income $
INSURED 1 _______ ______ _________ _________________________ | Estimated Net Worth $
Mo./yr. of last exam Results | Ever filed bankruptcy?
Sigmoidoscopy _____________________ _________________________________________ | |_|Yes |_|No
Prostate Exam _____________________ _________________________________________ | Date discharged
Mammogram _____________________ _________________________________________ | Explain:
Breast Exam _____________________ _________________________________________ |
_______________________________________________________________________________________|_____________________________
c) EXERCISE Activities-aerobics/muscle strengthening/toning Mo./yr. started Times/Week Duration
___________________________________________________________________________________________________________________
d) REGULAR PHYSICIAN (First, Middle, Last) Date of last visit: Physician Phone #:
___________________________________________________________________________________Reason for/result of last visit:
Address City State Zip Code
_______________________________________________________________________________________________________________________
<PAGE>
18. In the past 10 years, has any person proposed for insurance been treated for or had: |Details of YES answers
Yes No (If Yes, circle each applicable item.) |(Include item #, proposed
|insured, dates, duration,
|medication, name and
A. |_| |_| Any disease or disorder of eyes, ears, nose or throat? |address of physicians)
B. |_| |_| Dizziness, fainting, convulsions, head injury, headaches, speech defect, |
paralysis or stoke, tremor, muscle weakness, depression, other mental or |
nervous disorder? |
C. |_| |_| Shortness or breath, persistent hoarseness or cough, blood spitting, |
bronchitis, pleurisy, asthma, emphysema, tuberculosis or chronic |
respiratory disorder? |
D. |_| |_| Chest pain, palpitations, high blood pressure, rheumatic fever, heart |
murmur, varicose veins, phlebitis, or other heart or blood vessel disorder?|
E. |_| |_| Hepatitis, ulcer, hernia, colitis, diverticulitis, recurrent indigestion, |
or other disorder of the stomach, intestines, liver, gall bladder, |
pancreas, or spleen? |
F. |_| |_| Sugar, albumin, blood or pus in urine, sexually transmitted or venereal |
disease, stone or other kidney, bladder, prostate or reproductive organ |
disorder? |
G. |_| |_| Allergies, anemia, bleeding tendency or other disorders of the blood? |
H. |_| |_| Neuralgia, neuritis, sciatica, rheumatism, arthritis, gout, or disorder |
of the muscles or bones including the spine, back and joints. |
I. |_| |_| Disorder of the skin or lymph glands cyst, tumor or cancer? |
J. |_| |_| Persistent fever, night sweats, chills, and/or diarrhea? |
K. |_| |_| Diabetes, thyroid or other endocrine disorder? |
L. |_| |_| Diagnosis or treatment for AIDS by a member of the medical profession? |
M. |_| |_| Any mental or physical disorder not listed; had or been advised to have |
any checkup, consultation, illness, injury, hospitalization, |
treatment or surgery including an EKG, x-ray or other |
diagnostic test not already listed. |
____________________________________________________________________________________________|________________________
N. |_| |_| Is any person proposed for insurance receiving treatment or taking any |
medication? |
____________________________________________________________________________________________|________________________
<PAGE>
____________________________________________________________________________________________________________________
19. FAMILY Age if living or At death Cancer History? Heart Diseases or Circulatory Disorder?
HISTORY Mother ___________ ______ |_|No |_|Yes, since Age ________ |_|No |_|Yes, since Age_________
Father ___________ ______ |_|No |_|Yes, since Age ________ |_|No |_|Yes, since Age_________
Siblings ___________ ______ |_|No |_|Yes, since Age ________ |_|No |_|Yes, since Age_________
Siblings ___________ ______ |_|No |_|Yes, since Age ________ |_|No |_|Yes, since Age_________
____________________________________________________________________________________________________________________
20. FUND SELECTION
ALLOCATIONS: On issued contracts, your initial Net Purchase Payment will be
allocated as indicated below. Selections must total 100%. Minimum initial
allocation to any single subaccount is 1%. No fractional percentages. These
percentages will apply in future years but may be changed at any time by
the owner. (If no allocation is indicated, Prime Money Fund will be
automatically selected.)
Federated Advisors MFS Asset Management, Inc.
______% High Income Bond Fund ______% Emerging Growth Series
______% Prime Money Fund ______% Growth with Income Series
______% Utility Fund ______% Limited Maturity Series
Fidelity Management and Research Company ______% Research Series
______% Asset Manager Portfolio ______% Total Return Series
______% Contrafund Portfolio SoGen
______% Equity-Income Portfolio ______% Overseas Portfolio
______% Index 500 Portfolio Van Eck Associates Corporation
Fred Alger Management, Inc. ______% Emerging Markets Fund
______% Growth Portfolio ______% Gold and Natural Resources Fund
______% MidCap Growth Portfolio Guaranteed Interest Option
______% Small Capitalization Portfolio ______% 1 Year
_____________________________________________________________________________________________________________________
21. SUITABILITY
A. Do you understand that the death benefit and surrender value may increase or decrease depending on the
investment experience of the variable subaccounts? |_| Yes |_| No
B. Your primary investment objective is? |_| Guaranteed Interest |_| Growth
|_| Preservation of Capital |_| Aggressive Growth
|_| Income
C. Do you believe that this policy will meet your insurance needs and financial objectives? |_| Yes |_| No
D. Have you received a copy of the current prospectus? |_| Yes |_| No
______________________________________________________________________________________________________________________
22. CONDITIONAL RECEIPT Questions related to conditional receipt for all persons proposed for insurance.
|_|Yes |_| No In the past 90 days, has any person proposed for
insurance been admitted to a hospital or other medical
facility, been advised to be admitted, contemplated surgery,
or had surgery performed or recommended?
|_|Yes |_| No In the past two years, has any person proposed for
insurance been treated by a member of the medial profession
for heart disease, stroke, cancer or AIDS, or had such
treatment recommended?
IF EITHER QUESTION IN THIS SECTION IS ANSWERED "YES" OR LEFT BLANK, A PREMIUM PAYMENT CANNOT BE
ACCEPTED WITH THIS APPLICATION AND ANY CONDITIONAL RECEIPT IS VOID.
________________________________________________________________________________________________________________________
<PAGE>
________________________________________________________________________________________________________________________
The Proposed Insured(s) and the Applicant, if other than the Proposed Insured(s), agrees that: (1) all
statements and answers in this application are complete, true and correctly recorded to the best of my (our)
knowledge and belief; (2) if this application is accepted by the Company, the policy applied for and this
application will constitute the entire insurance contract; (3) if no premium has been given to the agent with this
application, insurance will not take effect until the application is approved and accepted by the Company at CNA
Plaza, Chicago, Illinois, 60685 and the policy is delivered while the health of each person proposed for insurance
and other conditions remain as described in this application and at least the Minimum Premium for the Quarterly
Mode has been paid in full. The acceptance of the policy by the Proposed Insured(s) will ratify any corrections
and notations, including amendments of amount, risk classification, age at issue, plan of insurance or benefits.
However, in those states where written consent is required, any such amendment will be made only with the written
consent of the Proposed Insured(s) and the Applicant, if other than the Proposed Insured(s). The Proposed
Insured(s) acknowledges having received and read the Notice to the Proposed Insured(s) and the Medical
Information Bureau Notice. If a premium has been given to the agent with this application, the Proposed Insured(s)
acknowledges having read and understood the conditions of the Conditional
Premium Receipt. Under the penalties of perjury, I/We certify that the social security number(s) provided below
is/are true, correct and complete.
Signed at (City)_____________________________(State)___________________this______day of ____________________19______.
Social Security Number
X_____________________________________________X___________________________________________|__________________________
Applicant (If other than Proposed Insured) Signature of Proposed Insured 1
Social Security Number
X____________________________________________ X___________________________________________|__________________________
Official capacity (if signed on behalf Signature of Proposed Insured 2
of a corporation, trust, etc.)
I certify to the best of my knowledge the answers to the questions in all parts of this application are true and
correct. I further certify that to the best of my knowledge this policy |_| will |_| will not replace or change
any existing life insurance or annuity policy now in force.
LSO/LSA or
AGENT/REGISTERED REP (witness)____________________________________AGENT #_______________MGA Name____________________
Agent/Registered Rep Name ________________________________________Agent Code ________________ Percent_______________
Broker/Dealer Name________________________________________________Address___________________________________________
Agent/Registered Rep Name_________________________________________Agent Code _________________Percent_______________
Broker/Dealer Name______________________________________________________Address_____________________________________
====================================================================================================================
LV206-363-A
Mail to: CNA Insurance Companies, P.O. Box 305153, Nashville, TN 37230-5153
</TABLE>
<PAGE>
NOTICE REGARDING MEDICAL INFORMATION BUREAU
PLEASE READ CAREFULLY
Information regarding your insurability will be treated as confidential.
Continental Assurance Company or Valley Forge Life Insurance Company or their
reinsurer(s) may, however, make a brief report to the Medical Information
Bureau, a nonprofit membership organization of life insurance companies, which
operates an information exchange on behalf of its members. If you apply to
another Bureau member company for life or health insurance coverage, or a claim
for benefits is submitted to such a company, the Bureau, upon request, will
supply such company with the information in its file. Continental Assurance
Company or Valley Forge Life Insurance Company or their reinsurer(s) may also
release information in its file to other life insurance companies to whom you
apply for life or health insurance, or to whom a claim for benefits may be
submitted.
UPON RECEIPT OF A REQUEST FROM YOU, THE BUREAU WILL ARRANGE DISCLOSURE OF ANY
INFORMATION IT MAY HAVE IN YOUR FILE. IF YOU QUESTION THE ACCURACY OF
INFORMATION IN THE BUREAU'S FILE, YOU MAY CONTACT THE BUREAU AND SEEK A
CORRECTION IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE FEDERAL FAIR
CREDIT REPORTING ACT. THE ADDRESS OF THE BUREAU'S INFORMATION OFFICE IS POST
OFFICE BOX 105, ESSEX STATION, BOSTON, MASSACHUSETTS 02112, TELEPHONE NUMBER
(617) 426-3660. LV203-902-A
- -------------------------------------------------------------------------------
AUTHORIZATION TO OBTAIN INFORMATION
I HEREBY AUTHORIZE any physician, medical practitioner, hospital, clinic,
other medical or medically related facility, insurance or reinsuring company,
the Medical Information Bureau, Inc., consumer reporting agency, employer or the
Veterans Administration, having information available as to diagnosis, and
prognosis with respect to any physical or mental condition and/or treatment,
including psychiatric conditions, drug or alcohol abuse, and any other medical
or non-medical information about me or my health to give to Continental
Assurance Company or Valley Forge Life Insurance Company, its legal
representative, any and all such information.
To facilitate rapid submission of such information, I authorize all said
sources, except MIB, to give such records or knowledge to any agency employed by
the Company to collect and transmit such information.
I UNDERSTAND the information obtained by use of this Authorization will be
used by Continental Assurance Company or Valley Forge Life Insurance Company to
determine eligibility for insurance. Any information obtained will not be
released by Continental Assurance Company or Valley Forge Life Insurance to any
person or organization EXCEPT to reinsuring companies, the Medical Information
Bureau, Inc., or other persons or organizations performing business or legal
services in connection with my application, or as may be otherwise lawfully
required or as I may further authorize.
I UNDERSTAND that I may request to receive a copy of this Authorization. I
AGREE that a photographic copy of this Authorization shall be as valid as
the original. I ACKNOWLEDGE having received and read the Notice to the
Proposed Insured and the Medical Information Bureau Notice. I AGREE that
this Authorization shall remain valid for two years from its date.
________________________________________________________________________________
Proposed Insured 1 (If signing on behalf | Witness(Agent/
of Proposed Insured, specify | Registered Rep)
relationship/authority ) |
X |
______________________________________________________|_________________________
Proposed Insured 2/Payor | Date (month, day, year)
|
X |
______________________________________________________|_________________________
LV206-903-B
<PAGE>
NOTICE TO PROPOSED INSURED(S)
DETACH--LEAVE WITH APPLICANT
As a part of normal procedure for processing your application, an investigative
consumer report may be obtained whereby information is secured through personal
interviews with your friends, neighbors or others with whom you are acquainted.
This report, if obtained, typically contains information as to your character,
general reputation and personal characteristics. You have the right to make a
written request within a reasonable period of time for a complete and accurate
disclosure of additional information concerning the nature and scope of this
report. You have the right, upon request, to be informed of the name and address
of the consumer reporting agency to whom a request for preparation of an
investigative consumer report was made if such a report was, in fact, requested.
You may then contact that agency to request inspection of that report or a copy
of it. Please address your requests to our Individual Life Underwriting
Division, CNA Plaza, Chicago, Illinois 60685. We feel these reports are made in
your best interests. We try to be sure that our Insureds meet certain standards
so that we continue to offer coverage at the lowest possible cost to all who
qualify.
(Please see reverse side for notice regarding Medical Information Bureau.)
LV203-900-A Thank you for your application for insurance.
- --------------------------------------------------------------------------------
CONDITIONAL PREMIUM RECEIPT (REFER TO IMPORTANT INSTRUCTIONS WHEN THE TOTAL
AMOUNT OF COVERAGE APPLIED FOR EXCEEDS $500,000.) THIS CONDITIONAL RECEIPT MUST
NOT BE DETACHED UNLESS PAYMENT IS MADE AT THE TIME OF APPLICATION -- MAXIMUM
LIABILITY:$500,000. Received from______________________________________________
(Proposed Owner) on__________________, 19_______ $_______________which is paid
subject to the conditions of this Receipt as payment on the first premium of the
life insurance policy applied for in the written application to the Continental
Assurance Company or Valley Forge Life Insurance Company, with the same number
as this Receipt. IMPORTANT: This receipt does NOT automatically create interim
insurance coverage. NO INSURANCE IS EVER IN FORCE under this receipt until after
ALL of its conditions are met.
NO AGENT OF THE COMPANY AND NO BROKER IS AUTHORIZED TO ALTER OR WAIVE ANY
CONDITIONS OF THIS RECEIPT.
I. CONDITIONS REQUIRED FOR INSURANCE COVERAGE TO GO INTO EFFECT
It is understood and agreed that ALL of the following conditions must be
COMPLETELY satisfied for insurance coverage to take effect: A. The amount
paid in exchange for this Receipt must equal at least the Minimum Premium
for the Quarterly Mode for the policy applied
for in the application.
B. The application and all medical underwriting requirements specified by
the company rules and standards must be completed.
C. On the Underwriting Date, as defined in Section II below, both Proposed
Insureds 1 and 2 must be a standard risk according to the Company's
underwriting rules and standards for the plan and the amount of insurance
applied for in the application.
II. EFFECTIVE DATE OF CONDITIONAL COVERAGE
If all the Conditions in Section I are COMPLETELY satisfied, then insurance
coverage will begin on the LATER of the following dates:
A. The Underwriting Date, or
B. The Policy Date, if any, requested in item 14 of the application
UNDERWRITING DATE is the LATER of the following dates:
A. The date of the application, or
B. The date on which all medical underwriting requirements specified by the
Company rules and standards are completed.
<PAGE>
III. LIMIT OF LIABILITY
The liability of the Company under this Receipt and application for life
insurance and accidental death benefits will not exceed $500,000 reduced by
(1) any insurance issued by the Company on the life of either Proposed
Insured 1 or 2 within 90 days preceding the date of this receipt and (2) by
any death benefit payable under all other Receipts and applications
currently pending with the Company.
IV. LIABILITY NOT ASSUMED
If the Company determines that on the Underwriting Date, as defined in
Section II, that either Proposed Insured 1 or 2 is not a standard risk
according to the Company's underwriting rules and standards for the plan and
amount of insurance applied for in the application and if either Proposed
Insured 1 or 2 dies before the Underwriting Date, then the Company assumes
NO liability under this receipt and application for life insurance.
V. TERMINATION OF COVERAGE
Any coverage which takes effect through this Receipt will terminate on the
EARLIEST of the following dates:
A. Ninety (90) days after the date of this Receipt.
B. The expiration of the period for which Minimum Premium has been paid,
C. The date the policy goes into effect,
D. The date that the Company determines that either Proposed Insured 1 or 2
are not entitled under the Company's underwriting rules and standards for
insurance on the plan and amount of insurance applied for. In that case
no insurance becomes effective and the amount paid will be returned to
the Owner. ANY DELAY IN RETURNING THE AMOUNT PAID WILL NOT BE CONSTRUED
AS APPROVAL OF THE APPLICATION.
If coverage under this Receipt terminates as provided in Section V above,
any policy issued by the Company will not take effect until, during the
lifetime of Proposed Insured 1 and 2, both the policy is delivered to the
Owner and the first premium is paid, and then only if there has been no
change in the health of either the Proposed Insured 1 and 2 since the date
of this receipt.
LV203-901-D
<TABLE>
<CAPTION>
- --------------------------------|-----------------------------------------------------------------------------------
<S> <C>
Please attach voided copy of | REQUEST AND AUTHORITY TO HONOR PREAUTHORIZED PAYMENTS
check to adjacent form | Drawn by
I am paying other premiums | and payable to |_| CONTINENTAL ASSURANCE COMPANY OF CHICAGO, IL
to you on policy number(s): | (Check One) |_| VALLEY FORGE LIFE INSURANCE COMPANY OF READING, PA
________________________________|____________________________________________________________________________________
and desire to have one draw each|Name of Depositor as it appears on bank records
month for all premiums on the | ___________________________________________________________________________________
1st, 9th, 16th, or 23rd day | To: Name of Bank Branch (if any)
ofeach month (circle one). | ___________________________________________________________________________________
| Address of Bank or Branch Checking Account No. or Symbol (if any)
| ___________________________________________________________________________________
| As a convenience to me, I request and authorize you to pay and charge to my
| account electronic debits, checks or drafts drawn by and payable to the above
| indicated Company provided there are sufficient collected funds in said account
| to pay the same upon presentation. I agree that your rights for such draw will
| be the same as if it were a draw personally signed by me. This authority will
| remain in force until revoked by me in writing, and until you actually receive
| such notice. I agree that you will be fully protected in honoring any such draw.
| I AGREE THAT IF ANY SUCH DRAW IS HONORED, WHETHER WITH OR WITHOUT CAUSE AND
| WHETHERINTENTIONALLY OR INADVERTENTLY, YOU WILL BE UNDER NO LIABILITY EVEN
| THOUGH SUCH DISHONOR RESULTS IN THE FORFEITURE OF INSURANCE.
| ______________________________________________________________________________
| Date Signature (Must be the same as on file at bank)
| ______________________________________________________________________________
| [GRAPHIC OMITTED] Joint Account Signature
|______________________________________________________________________________
</TABLE>
<PAGE>
Date Submitted: REQUIREMENTS ORDERED
Blood HOS MED INSP APS EKG QUEST Other
Proposed Insured 1: |_| |_| |_| |_| |_| |_| |_| |_|
Proposed Insured 2: |_| |_| |_| |_| |_| |_| |_| |_|
Was the Proposed Insured(s) advised that someone would be calling to verify
information |_| Yes |_|No. If "Yes", best time to call? Home |_| am |_| pm /
Office |_| am |_| pm - central time.
________________________________________________________________________________
IMPORTANT INSTRUCTIONS
WHEN THE TOTAL AMOUNT OF COVERAGE DESIRED EXCEEDS $500,000
If money is to be taken with the application and if coverage for an amount
greater than $500,000 is desired, the amount applied for should be shown as
$500,000 (the maximum liability specified in the Conditional Premium Receipt),
and the corresponding premium for $500,000 is all that is to be collected. In
the Special Features question #14 indicate "If approved, instead of this policy,
issue an alternate policy for $XXX, same plan, based on the representation of
this application." The $XXX is the total amount desired. Our underwriting
guidelines and rules will be based on this amount. If, in fact, alternate
policies are desired, specify plans and face amounts of policies. Under no
--------
circumstances collect, submit, or retain premium to purchase insurance in excess
- -------------------------------------------------------------------------------
of $500,000 on a proposed insured's life.
- ----------------------------------------
AGENT'S REPORT THIS REPORT SHOULD ALWAYS BE COMPLETED AND REMAIN ATTACHED TO THE
APPLICATION.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Purpose of Insurance |_|Personal: |_|Estate Creation |_|Family Protection |_|Charitable |_|Other
____________________________________________________________________________________________
|_|Business: |_|Key Person |_|Buy-Sell |_|Creditor |_|Sole Proprietor
|_|Corporation |_|Other
If business, are other business associates being insured?
|_|Yes |_|No If "No" give explanation below.
History of How long have you known the proposed insured(s)?
Proposed Insured(s) |_|Friend |_|Acquaintance |_|Existing Client |_|Relative |_|Stranger
Prior Residence and Business Name and Address if current is less than 5 years:
_____________________________________________________________________________________________________________________
Premiums: Annual $______________________ Mode premium $_____________________Rate class quoted__________
Cash with Check one: |_|No payment was accepted with application.
Application |_|Payment was received with the application and a conditional receipt
was issued.
Amount of payment $_______________________ Date received _____________________
Does the child appear in good health? |_|Yes |_|No |_|Did not see the child
If Proposed Primary Are all brothers and sisters insured for equal amounts?
|_|Yes |_|No Insured is a Juvenile Are parents insured for at least as much as
that applied for and in force on the child?
|_|Yes |_|No Explain any "No" answers below
Explanations and
Special request
Agents credit
Writing Agent___________________________________________code___________________Split %___________
District Agent__________________________________________code___________________Split %___________
General Agent___________________________________________code___________________Split %___________
Managing General Agent/Sales Office_____________________code___________________Split %___________
Life Sales Rep__________________________________________code___________________Split %___________
<PAGE>
I represent that (1)I |_| did |_| did not personally see the proposed insured(s) when the application was taken;
(2) I truly and accurately recorded in this application the information as supplied by the owner and
the proposed insured(s); (3) to the best knowledge and belief there is nothing adversely affecting the
insurability of the proposed insured(s) other than as indicated in this application; and (4) the written disclosure
statement as given on or before the date the application was signed.
Writing Agent X__________________________________________ Date ______________________________________________
Other Agent X ____________________________________________ Date ______________________________________________
Other Agent X ____________________________________________ Date ______________________________________________
_____________________________________________________________________________________________________________________
So that you may comply with your depositor's request, |I AGREE TO THE FOLLOWING CONDITIONS:
|_| CONTINENTAL ASSURANCE COMPANY |
|_| VALLEY FORGE LIFE INSURANCE COMPANY agrees: |1.The payment of the premiums
1. To indemnify you and hold you harmless from any loss you may suffer as a | in this manner may be discontinued
consequence of your actions resulting from or in connection with the | at any time by the Company upon
execution and issuance of any electronic debit, check or draft whether | thirty (30) days written notice or
or not genuine, purporting to be executed and received by you in the | without if any draw is not paid
regular course of business for the purpose of payment to this Company | upon presentation.
including any costs or expenses reasonably incurred in connection |2.This authorization is revocable
therein. | by the undersigned upon receipt
2. In the event that any such electronic debit, check or draft is | by the Company of written
dishonored whether with or without cause, and whether intentionally or | revocation.
inadvertently, to indemnify you for any loss through dishonor which|3.If any such draw is dishonored,
Signature (Must be same as on file at bank) results in a forfeiture of the| the premium for which the draw
insurance. | is made shall be considered
3. To defend at our own cost and expense any action which might be brought | in default.
by any depositor or any other person because of your actions taken Joint|
Account Signature pursuant to this request, or in any manner arising due to|
your participation in this plan of premium collection. |
|
S/ DONALD LOWRY |
Secretay |
|
TO: |
|
________________________________________________________________________________|____________________________________
LV206-363A
</TABLE>
Exhibit 1A 11
Valley Forge Life Insurance Company
Description of Issuance, Transfer and Redemption Procedures
for Flexible Premium Variable and Fixed Life Insurance Policies
I. Procedure Relating to Issuance and Purchase of Policies
A. Purchase To purchase a Policy, a prospective Owner must submit a completed
application and the Minimum Initial Premium Payment through a licensed agent of
the Company who is also a registered representative of broker-dealer having a
selling agreement with CNA Investor Services, Inc. ("CNA/ISI"), the principal
underwriter of the Policies.
B. Application and Underwriting
The Company requires satisfactory evidence of the Insured's insurability.
Acceptance of an application is subject to the Company's underwriting criteria,
and the Company reserves the right to reject an application for any reason.
The Company uses information from the application and, in some cases, inspection
reports, attending physician statements or medical examination to determine
whether a Policy should be issued as applied for, rated or rejected. Medical
examinations of applicants are required for Policies over $1,000,000 (ages
18-70) and $500,000 (ages 71-75. Medical examinations are requested of any
applicant regardless of age and amount of requested coverage, if an examination
is deemed necessary to underwrite the risk. Substandard risks may be referred to
reinsurers for full or partial reinsurance of the substandard risk.
The Company requires blood samples to be drawn with applications for coverage
over $100,000 (ages 18-75). Blood samples are tested for a wide range of
chemical values and are screened for antibodies to the HIV virus. Applications
also contain questions permitted by law regarding the HIV virus which must be
answered by the proposed insureds. The Company will not issue a policy until the
underwriting procedures have been completed. Once the underwriting process has
been completed, the application file will be sent to our Variable Product
Service Center in Haddam CT. Issuance and mailing of the Policy will occur
within three days of underwriting completion.
Insurance coverage under a Policy begins on the later of the Policy Effective
Date or the date that the Company receives the Minimum Initial Premium Payment.
Generally the Company establishes the Policy Effective Date (shown on the
Policy) after it completes the underwriting process and accepts the application.
Where the Minimum Initial Premium Payment is received by the Company after the
Policy Effective Date, coverage under the Policy is conditioned upon the
Insured's state of health being the same as that described in the application.
With the Company's prior approval, in order to obtain a lower Issue Age, an
Owner may "backdate" a Policy by electing a Policy Effective Date up to six
months prior to the date of the original application. A lower Issue Age for the
Insured generally results in slightly more favorable cost of insurance rates.
Charges for the monthly deduction for the backdated period are deducted as of
the Policy Effective Date.
C. Initial Premium Processing and Premium Payments
Premiums for the Policies will not be the same for all Owners. The Company
requires that the initial premium payment for a Policy be at least equal to the
minimum premium required for the mode selected. Initial premium payments must be
submitted with the application or to the Variable Product Service Center in
Haddam CT.
An Owner may cancel a Policy for a refund during the Cancellation Period by
returning it to the Service Center or to the sales representative who sold it
along with a Written Notice requesting cancellation. The Cancellation Period is
determined by the law of the state in which the Owner resides or in which the
application is signed and is shown on the Policy. In most states it expires at
the latest of (1) ten days after the Owner first receives the Policy, (2) 45
days after the Owner signs the application, or (3) 10 days after the Company
mails or delivers a notice of the Owners withdrawal rights. Return of the Policy
by mail is effective upon receipt at the Service Center. When cancelled, the
Policy is treated as if it had never been issued. Within seven calendar days
after receiving the returned Policy, the Company will refund an amount equal to
the sum of (1) the difference between premium payments made (including any fees
and charges deducted) and the amounts allocated to the Fixed Account and to the
Subaccounts, (2) Fixed Policy Value determined as of the date the returned
Policy is received, and (3) Variable Policy Value determined as of the date the
returned Policy is received. This amount may be more or less than the aggregate
premium payments made under the Policy. In states where required, the Company
will instead refund premium payments.
Following the initial premium, the Owner may pay premiums in amounts no less
than $50 on a direct quarterly, semiannual or annual basis. Preauthorized check
payments are also available.
D. Policy Lapse and Reinstatement
Lapse. Unlike a conventional life insurance policy, failure to make Planned
Periodic Premium Payments does not necessarily cause a Policy to Lapse.
Conversely, making all Planned Periodic Premium Payments does not necessarily
prevent a Policy from Lapsing. Rather, except when the Lapse Prevention
Guarantee is in effect, whether a Policy Lapses depends on whether its Surrender
Value is sufficient to cover the monthly deduction on each Monthly Anniversary
Day. Surrender Value could become insufficient to cover the monthly deduction if
investment experience has been sufficiently unfavorable that it has resulted in
a decrease in Policy Value or the Policy Value has decreased because the Owner
did not make sufficient Net Premium Payments to offset prior monthly deductions.
If the Surrender Value on a Monthly Anniversary Day is insufficient to cover the
monthly deduction due on that Day, the Company will mail to the Owner and to any
assignee of record at their last known address(es), a notice stating that the
Policy will only remain in force for 61 days from the date that the notice was
mailed. This 61 day period is called the Grace Period. If the Owner does not
make sufficient premium payments to cover the monthly deduction(s) through the
end of the Grace Period by the end of the Grace Period, then the Policy will
terminate without value and all coverage under the Policy will terminate. The
notice mailed to the Owner and to any assignee of record will indicate how much
in additional premium payments the Owner must make before the end of the Grace
Period to keep the Policy in force. Coverage under the Policy continues during
the Grace Period and the Company will deduct unpaid monthly deductions when
computing Death Benefit Proceeds if the Insured dies during the Grace Period.
Lapse Prevention Guarantee. The Company guarantees that a Policy will not lapse
during the first five Policy Years, regardless of the Surrender Value, if,
throughout that period, (a) exceeds (b) where:
(a) is the aggregate premium payments made less the amount of any
withdrawals (including applicable surrender charges) less any
Loan Amount, and
(b) is the Minimum Monthly Premium Payment multiplied by the
number of complete months since the Policy Effective Date,
including the current month.
Reinstatement. If the Policy Lapses, the Owner may reinstate it at any time
within five years of Lapse but before the Maturity Date. A Policy that has been
surrendered cannot be reinstated. To reinstate a Policy, the Owner must submit
to the Service Center:
1. evidence of insurability satisfactory to the Company;
2. premium payments in an amount sufficient to result (along with any
loan repayments) in a positive Surrender Value; and
3. premium payments in an amount sufficient that the resulting Net
Premium Payments equal or exceed the amount of the next two
monthly deductions.
Upon reinstatement of the Policy, the Company will reinstate any remaining Loan
Amount. The Policy Value of a reinstated Policy is the amount provided by the
Net Premium Payments submitted with the application for reinstatement. The
effective date of a reinstated Policy is the Monthly Anniversary Date that falls
on or next follows the later of the date that the application for reinstatement
is approved or the above-listed items are received at the Service Center.
II. Redemption Procedures: Surrender and Related Transactions
Surrender Privilege
At any time while the Insured is still living and the Policy is in force prior
to the Maturity Date, the Owner may, by Written Notice, surrender it for its
Surrender Value. A surrender is effective as of the date on which a Written
Notice requesting surrender is received at the Service Center. If the Owner
surrenders the Policy during the first 14 Policy Years, or the first 14 Policy
Years following an increase in Specified Amount, the Company will deduct a
surrender charge. Once the Policy is surrendered, all coverage and other
benefits under it cease and it cannot be reinstated.
Surrenders may be paid a lump sum or under a Settlement Option. The Settlement
Options are described below under Death Benefit Proceeds.
Withdrawal Privilege
After the first Policy Year, while the Insured is still living and the Policy is
in force prior to the Maturity Date, an Owner may, by Written Request, withdraw
any part of the Surrender Value of the Policy, subject to certain conditions. A
withdrawal is effective as of the date on which a Written Notice requesting
withdrawal is received at the Service Center. As of that date, Policy Value is
reduced by the amount of the withdrawal plus any applicable surrender charge.
The minimum amount that may be withdrawn is $500. If the Owner has selected
Death Benefit Option 1, the Company will reduce the Specified Amount by the
amount of the withdrawal plus any applicable surrender charge deduction.
Unless otherwise indicated in the Written Request for withdrawal, amounts
withdrawn and surrender charges deducted in connection with the withdrawals are
taken from Subaccount Values and Fixed Policy Value based on the proportion that
each Subaccount Value and the Fixed Policy Value bear to Policy Value. If the
Owner requests a decrease in Specified Amount or requests a change in the Death
Benefit Option as of the same date as a withdrawal request, then the withdrawal
is effected after the decrease in Specified Amount or change in Death Benefit
Option.
Notwithstanding the foregoing, the Company reserves the right to reject a
withdrawal request if the request would cause the Specified Amount to be reduced
below the minimum Specified Amount shown in the Policy. Likewise, the Company
reserves the right to deny a withdrawal request if the request would cause the
Policy to fail to qualify as a life insurance contract under the Code or
regulations or rulings thereunder, as interpreted by the Company.
Policy Loans
At any time prior to the Maturity Date while the Insured is still living and the
Policy is in force, the Owner may, by Written Notice, borrow money from the
Company using the Policy as the sole security for the loan provided that (a) a
written loan agreement is signed by the Owner, and (b) the Owner makes a
satisfactory assignment of the Policy to the Company. In taking a loan, an Owner
must borrow at least $500. The maximum amount that an Owner may borrow is 90% of
the Surrender Value of the Policy as of the date of the loan. Checks will always
be mailed to the Owner unless otherwise specified in writing by the Owner.
The Company charges interest on amounts borrowed by Owners. The interest rate
charged is 8% and is an effective annual rate compounded annually on the Policy
Anniversary. Interest is charged in arrears from the date of the loan and is due
from Owners on each Policy Anniversary for the prior Policy Year. If the Owner
does not pay such interest when due, the amount of the interest is added to the
outstanding Loan Amount. Thus, unpaid interest is charged interest during the
ensuing Policy Year. For Policies in the 11th Policy Year or later, the Company
charges a preferred 6% effective annual interest rate on amounts borrowed up to
an amount equal to Policy Value less aggregate premium payments made to date.
The Company credits Loan Account Value with interest at an effective annual rate
of 6%. On each Policy Anniversary, interest earned on Loan Account Value since
the preceding Anniversary is transferred to the Subaccounts and the Fixed
Account. Unless the Owner specifies otherwise, such transfers are allocated in
the same manner as transfers of collateral to the Loan Account.
When the Company makes a loan to Owners, it transfers an amount of Cash Value
sufficient to secure the loan out of the Subaccounts and the Fixed Account and
into the Loan Account. Owners may specify how this transferred Cash Value is
allocated from among the Subaccount Values and the Fixed Policy Value. If an
Owner does not specify the allocation, the Company makes the allocation based on
the proportion that each Subaccount Value and the Fixed Policy Value bear to the
Cash Value as of the date that the transfer is made. If unpaid interest is due
from an Owner on a Policy Anniversary it is added to the Loan Amount. Cash Value
in the amount of the interest also is transferred to the Loan Account as of that
Anniversary. The Cash Value transferred in connection with unpaid interest is
allocated on the same basis as other Cash Value transferred by the Company to
the Loan Account.
Loan Account Value is recalculated when interest is added to the Loan Amount, a
loan repayment is made, or a new loan is made under Policy.
If Loan Account Value exceeds Cash Value, then the Owner must make either a loan
repayment or a premium payment sufficient to raise the Cash Value or lower the
Loan Account Value so that Cash Value exceeds the Loan Account Value. The
Company will send the Owner and any assignee of record a notice indicating the
amount that must be paid. If payment is not received at the Service Center
within 30 days of the notice being mailed, the Grace Period will begin. If the
Grace Period expires without the payment being made, then the Policy Lapses.
The Owner may repay a loan or repay any part of a loan at any time while the
Insured is still living and the Policy is in force prior to the Maturity Date.
Upon repayment of any part of a loan, Loan Account Value in an amount equal to
the payment is transferred to the Subaccounts and the Fixed Account as of the
date that the payment is received at the Service Center. Unless the Owner
specifies otherwise, the amount transferred is allocated among or between the
Subaccounts and the Fixed Account in accordance with the Owner's allocation
instructions for Net Premium Payments in effect at that time.
A loan, whether or not repaid, has a permanent effect on the Death Benefit and
Policy values because the investment results of the Subaccounts and current
interest rates credited on Fixed Policy Value do not apply to Policy Value in
the Loan Account. The larger the loan and longer the loan is outstanding, the
greater will be the effect of Policy Value being held as collateral in the Loan
Account. Depending on the investment results of the Subaccounts or credited
interest rates for the Fixed Account while the loan is outstanding, the effect
could be favorable or unfavorable. Policy loans also may increase the potential
for lapse if investment results of the Subaccounts to which Surrender Value is
allocated is unfavorable. If a Policy Lapses with loans outstanding, certain
amounts may be subject to income tax and a 10% penalty tax. In addition, if a
Policy is a "modified endowment contract," loans may be currently taxable and
subject to a 10% penalty tax.
Maturity Benefits
The Company will pay the Surrender Value, if any, to the Owner on the Maturity
Date. The Maturity Date is the Policy Anniversary nearest the Insured's 95th
birthday.
Death Benefit Proceeds
Upon receipt of Due Proof of Death of the Insured at the Service Center while
the Policy is in force before the Maturity Date, the Company will pay the Death
Benefit Proceeds to the Beneficiary (or Beneficiaries) or the Contingent
Beneficiary (or Contingent Beneficiaries). The Company pays the Death Benefit
Proceeds in a lump sum unless the Beneficiary (or Contingent Beneficiary) elects
to receive the Proceeds under a Settlement Option. Under certain circumstances,
payment of the Death Benefit Proceeds may be delayed.
The Death Benefit Proceeds are determined as of the date of the Insured's death
and are equal to:
1. the Death Benefit under the Death Benefit Option selected by the
Owner; plus
2. any death benefit under any rider to the Policy; less
3. any Loan Amount; and less
4. any unpaid monthly deductions if the Insured dies during the Grace
Period.
Under the Company's right to Contest the Policy and Misstatement of Age or Sex,
the amount of the Death Benefit Proceeds may be further adjusted. If part or all
of the Death Benefit is paid in one sum, the Company will pay interest on this
sum as required by applicable state law from the date of receipt of due proof of
the Insured's death to the date of payment.
Upon notification of death, a claimant statement will be sent for each
beneficiary to complete, sign and return to the Service Center. When a policy is
payable to an estate, the Claimant's Statement must be completed by the personal
representative of the estate and a copy of the Letters Testamentary is required.
When a policy is assigned as collateral for a loan, a Claimant's Statement must
be completed by the assignee and the beneficiary. If the loan has been repaid, a
statement from the assignee releasing the assignment is required. When a policy
is payable to "children" or others of a class, a statement must be furnished
giving the names, addresses and dates of birth of each person. If any have died,
the statement must give the date and place of death and whether they died
married/unmarried, testate/intestate and with or without issue. When an insured
dies while out of the United States, a Report of the Death of an American
Citizen Abroad is required. If an insured was not an American citizen, a
certified death certificate from the country where he died must be furnished.
Also required would be verification of a foreign, non-American death through an
independent investigation.
The following are acceptable proofs of birth: (a) Birth certificate from the
Bureau of Vital Statistics; (b) Birth certificate from the Custodian of Church
records showing birth date. Once the claim has been approved, distribution of
the proceeds will be sent to the claimants.
Proceeds will be paid in a lump sum unless the Owner has, by previous Written
Notice, selected a Settlement Option. A beneficiary may also elect a Settlement
Option prior to the death proceeds being paid. Note: All proceeds less than
$5,000 and any proceed being paid to an executor, administrator, trustee, or not
a natural person will be paid in lump sums unless the Company specifically
consents to payment under one of the Settlement Options.
There are six Settlement Options available. Option 1, Interest Payments, Option
2, Payments of a Specified Amount, Option 3, Payments for a Specified Period,
Option 4, Life Annuity, Option 5, Life Annuity with Period Certain or Option 6,
Joint Life and Survivorship Annuity.
The Owner may select one of two Death Benefit Options.
1. Death Benefit Option 1 is the greater of:
(a) the Specified Amount on the date of the Insured's death; or
(b) a percentage of the Policy Value on the date of the Insured's
death as indicated in the Table of Policy Value Percentages in
the Appendix.
2. Death Benefit Option 2 is the greater of:
(a) the Specified Amount plus the Policy Value on the date of the
Insured's death; or
(b) a percentage of the Policy Value on the date of the Insured's
death as indicated in the Table of Policy Value Percentages in
the Appendix.
The specified percentage is 250% if the Insured dies at Attained Age 40 or less,
and decreases with each year of Attained Age thereafter so that the percentage
is 100% if the Insured dies at an Attained Age of 95.
Under Death Benefit Option 1, the Death Benefit remains level at the Specified
Amount unless the Policy Value multiplied by the specified percentage exceeds
that Specified Amount, in which event the Death Benefit will vary as the Policy
Value varies. Owners who are satisfied with the amount of their insurance
coverage under the Policy and who prefer to have favorable investment
performance and additional Net Premium Payments reflected in higher Policy
Value, rather than increased Death Benefits, generally should select Option 1.
Under Death Benefit Option 2, the Death Benefit always varies as the Policy
Value varies (although it is never less than the Specified Amount). Owners who
prefer to have favorable investment performance and additional Net Premium
Payments reflected in increased Death Benefits generally should select Option 2.
After the first Policy Anniversary while the Insured is still living and the
Policy is in force prior to the Maturity Date, the Owner may request a change in
the Death Benefit Option. A Death Benefit Option change becomes effective on the
Monthly Anniversary Day on or next following the date that the Company accepts a
request for the change. The Company may require satisfactory evidence of
insurability before permitting a change in the Death Benefit Option. After a
change in Death Benefit Option, the Company will send the Owner a supplemental
policy specifications page showing the new Death Benefit and Specified Amount.
Changing the Death Benefit Option could have federal tax consequences.
Changes in Specified Amount
After the first Policy Anniversary, while the Insured is living and the Policy
is in force prior to the Maturity Date, the Owner may submit a supplemental
application for an increase in Specified Amount. The Company requires evidence
of insurability before agreeing to an increase in Specified Amount and may,
depending upon the circumstances, also require additional premium payments or
the repayment of part or all of any Loan Amount under the Policy. The Insured's
Attained Age at the time of the increase may not exceed 75. The amount of any
requested increase in Specified Amount must be at least $25,000 and not more
than the amount that would increase the total Specified Amount above the maximum
specified amount for which the Company would issue a new Policy.
An increase in Specified Amount causes an increase in the Minimum Monthly
Premium Payment. Each increase in Specified Amount has a Target Premium Payment
and a Guideline Annual Premium Payment associated with it.
Any increase in Specified Amount is effective as of the date that the Company
approves it. Each increase in Specified Amount creates an increment of Specified
Amount to which a portion of Policy Value is thereafter attributed for the
purpose of computing sales surrender charges, the Net Amount at Risk and the
monthly cost of insurance charge and for the purpose of exercising the Special
Transfer Privilege. An additional monthly cost of insurance charge is deducted
for each additional increment in Specified Amount. This additional cost of
insurance charge is deducted from Policy Value attributable to the increase in
Specified Amount. Each increase in Specified Amount also results in additional
surrender charges. After an increase in Specified Amount, the Company will send
the Owner a supplemental policy specifications page showing the effective date
of the increase, the monthly cost of insurance charge for the increase,
additional sales surrender charges arising as a result of the increase and any
changes to premium payment information from the previous or original policy
specifications page.
The cancellation privilege applies to any increase in Specified Amount except
that when no additional premium payments are required for an increase, only the
monthly deduction(s) for the increase made before the cancellation is refunded
if the increase is cancelled.
After the first Policy Anniversary while the Insured is still living and the
Policy is in force prior to the Maturity Date, the Owner may by Written Notice
request a decrease of Specified Amount. The amount of any requested decrease in
Specified Amount must be at least $25,000 and not be more than the amount that
would decrease the total Specified Amount below $100,000. Specified Amount may
not be decreased when, to do so, would cause Surrender Value to fall below zero.
Any decrease becomes effective on the Monthly Anniversary Day on or next
following the date that the Company accepts the request for the decrease. The
decrease is first applied to reduce prior increases in Specified Amount in the
reverse order in which they occurred. After all prior increases in Specified
Amount have been eliminated, a decrease is applied to reduce the initial
Specified Amount.
A decrease of Specified Amount may result in the imposition of a surrender
charge. In this event, the charge is deducted from Policy Value as of the
effective date of the decrease. A decrease in Specified Amount causes a decrease
in the Minimum Monthly Premium Payment and in the Target Premium Payment and
Guideline Annual Premium Payment associated with the increment of Specified
Amount being decreased. After a decrease in Specified Amount, the Company will
send the Owner a supplemental policy specifications page showing the effective
date of the decrease, the monthly cost of insurance charge after the decrease,
surrender charges deducted as a result of the decrease, and any changes to
premium payment information from the previous or original specifications page.
The Company reserves the right to deny a request for a decrease in Specified
Amount for 12 months following the most recent increase in Specified Amount and
to limit decreases in Specified Amount to one per Policy Year.
If a decrease in the Specified Amount would result in total premiums paid
exceeding the premium limitations prescribed under current tax law to qualify
the Policy as a life insurance contract, the Company will contact the Owner and
inquire whether he or she wants to receive the excess above the premium
limitations or to forgo the decrease. The Company reserves the right to decline
a requested decrease in the Specified Amount if compliance with the guideline
premium limitations under current tax law would require payment of excess
premium to the Owner in an amount that would exceed the Surrender Value under
the Policy.
III. Transfers
Before the Maturity Date while the Insured is still living and the Policy is in
force, the Owner may, by Written Notice or a telephone request, transfer all or
part any Subaccount Value to another Subaccount(s) (subject to its availability)
or to the Fixed Account, or transfer all or part of Fixed Policy Value to any
Subaccount(s), (subject to its availability) subject to the following
restrictions and the additional restrictions for transfers from the Fixed
Account shown below:
1. the minimum transfer amount is $500 (or, the entire Subaccount
Value or Fixed Policy Value, if less); and
2. a transfer request that would reduce any Subaccount Value or the
Fixed Policy Value below $500 is treated as a transfer request for the
entire Subaccount Value or Fixed Policy Value.
The first 12 transfers during each Contract Year are free. The Company assesses
a transfer processing fee of $25 for each transfer in excess of 12 during a
Contract Year.
An Owner may transfer all or part of the Fixed Policy Value to a Subaccount.
Only one transfer may be made each Policy Year from the Fixed Account to one or
more Subaccounts and this transfer must be at least 12 calendar months after the
most recent transfer from the Fixed Account. An unused transfer option does not
carry over to the next year. The maximum transfer amount is 25% of the Fixed
Policy on the date of the transfer, unless the balance after the transfer is
less than $500.
During the first 24 Policy Months following the date that coverage begins under
the Policy, Owners may make one transfer of the entire Variable Policy Value to
the Fixed Account without imposition of the transfer processing fee or the
transfer counting as one of the 12 free transfers for a Policy Year. Likewise,
during the first 24 Policy Months following the effective date of any Specified
Amount increase, Owners may make one transfer of that portion of the Variable
Policy Value attributable to the increase to the Fixed Account without
imposition of the transfer processing fee or the transfer counting as one of the
12 free transfers for a Policy Year.
Dollar-Cost Averaging Facility. If elected in the application or at any time
thereafter prior to the Maturity Date while the Insured is still living and the
Policy is in force by Written Notice, an Owner may systematically transfer (on a
monthly, quarterly, semi-annual or annual basis) specified dollar amounts from
the Money Market Subaccount to other Subaccounts. This is known as the
"dollar-cost averaging" method of investment. The fixed-dollar amount purchases
more Units of a Subaccount when their value is lower and fewer Units when their
value is higher. Over time, the cost per Unit averages out to be less than if
all purchases of Units had been made at the highest value and greater than if
all purchases had been made at the lowest value. The dollar-cost averaging
method of investment reduces the risk of making purchases only when the price of
Units is high. It does not assure a profit or protect against a loss in
declining markets.
Owners may only elect use the dollar-cost averaging facility if their Money
Market Subaccount Value is at least $1,000 at the time of the election. The
minimum transfer amount under the facility is $100 per month (or the
equivalent). If dollar-cost averaging transfers are to be made to more than one
Subaccount, then the Owner must indicate the dollar amount of the transfer to be
made to each. At least $50.00 must be designated to each Subaccount.
Transfers under the dollar-cost averaging facility are made as of the same
calendar day each month. If this calendar day is not a Valuation Day, transfers
are made as of the next Valuation Day. Once elected, transfers under the
dollar-cost averaging facility continue until the Money Market Subaccount Value
is depleted, the Maturity Date occurs or until the Owner cancels the election by
Written Notice at least seven days in advance of the next transfer date.
Alternatively, Owners may specify in advance a date for transfers under the
facility to cease. There is no additional charge for using the dollar-cost
averaging facility. Transfers under the facility do not count towards the 12
transfers permitted without a transfer processing fee in any Policy Year. The
Company reserves the right to discontinue offering the dollar-cost averaging
facility at any time and for any reason or to change its features.
Automatic Subaccount Value Rebalancing. If elected in the application or
requested at any time thereafter prior to the Maturity Date while the Insured is
still living and the Policy is in force by Written Notice, an Owner may instruct
the Company to automatically transfer (on a quarterly, semi-annual or annual
basis) Variable Policy Value between and among specified Subaccounts in order to
achieve a particular percentage allocation of Variable Policy Value among such
Subaccounts ("automatic Subaccount Value rebalancing"). Such percentage
allocations must be in whole numbers. Once elected, automatic Subaccount Value
rebalancing begins on the first Valuation Day of the next calendar quarter or
other period (or, if later, the next calendar quarter or other period after the
expiration of the Cancellation Period).
Owners may stop automatic Subaccount Value rebalancing at any time at least
seven calendar days before the first Valuation Day in a new period. Owners may
specify allocations between and among as many Subaccounts as are available at
the time automatic Subaccount Value rebalancing is elected. Once automatic
Subaccount Value rebalancing has been elected, any subsequent allocation
instructions that differ from the then-current rebalancing allocation
instructions are treated as a request to change the automatic Subaccount Value
rebalancing allocation. Owners may change automatic Subaccount Value rebalancing
allocations at any time. Allocation changes will take effect as of the Valuation
Day that instructions are received at the Service Center. Once automatic
Subaccount Value rebalancing is in effect, an Owner may only transfer Subaccount
Value among or between Subaccounts by changing the automatic Subaccount Value
rebalancing allocation instructions. Changes to or termination of automatic
Subaccount Value rebalancing must be made by Written Notice.
There is no additional charge for automatic Subaccount Value rebalancing and
rebalancing transfers do not count as one of the 12 transfers available without
a transfer processing fee during any Policy Year. If automatic Subaccount Value
rebalancing is elected at the same time as the dollar-cost averaging facility or
when the dollar-cost averaging facility is being utilized, automatic Subaccount
rebalancing will be postponed until the first Valuation Day in the calendar
quarter or other period following the termination of dollar-cost averaging
facility. The Company reserves the right to discontinue offering the automatic
Subaccount Value rebalancing facility at any time and for any reason or to
change its features.
Exhibit 2
Board of Directors
CNA INSURANCE COMPANIES
CNA Plaza, Chicago, Illinois 60685
September 4, 1996
Board of Directors
Valley Forge Life Insurance Company
CNA Plaza, 43-S
Chicago, Illinois 60685
Directors:
I have acted as counsel to Valley Forge Life Insurance Company
(the "Company"), a Pennsylvania insurance company, and Valley Forge Life
Insurance Company Variable Life Separate Account (the "Account") in connection
with the registration of an indefinite amount of securities in the form of
flexible premium variable life insurance contracts (the "Contracts") with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
I have examined such documents (including the Form S-6 registration statement)
and reviewed such questions of law as I considered necessary and appropriate,
and on the basis of such examination and review, it is my opinion that:
1. The Company is a corporation duly organized and
validly existing as a stock life insurance company
under the laws of the Commonwealth of Pennsylvania
and is duly authorized to by the Insurance Department
of the Commonwealth of Pennsylvania to issue the
Contracts.
2. The Account is a duly authorized and existing separate
account established pursuant to the provisions of
Section 40-37-109 of the Pennsylvania Unconsolidated
Statutes.
3. To the extent so provided under the Contracts, that
portion of the assets of the Account equal to the
reserves and other contract liabilities with respect
to the Account will not be chargeable with
liabilities arising out of any other business that
the Company may conduct.
4. The Contracts, when issued as contemplated by the
Form S-6 registration statement, will constitute
legal, validly issued and binding obligations of the
Company.
I hereby consent to the filing of this opinion as an exhibit
to the Form S-6 registration statement for the Contracts and the Account.
Sincerely,
S/LYNNE GUGENHEIM
Lynne Gugenheim
Vice President and
Associate General Counsel
Exhibit 6
Robert W. Foster, Jr., FSA, MAAA, CLU, ChFC
Director and Actuarial Manager
Individual Life/Annuity Products
Life Operations Department 2 East
615-316-7103
615-316-7126 (Fax)
August 19, 1996
Board of Directors
Valley Forge Life Insurance Company
CNA Plaza, 43S
Chicago, Illinois 60685
Directors:
In my capacity as Director and Actuarial Manager of Valley Forge Life Insurance
Company (the "Company"), I have provided actuarial advice concerning and
participated in the design of the Company's flexible premium variable life
insurance contract (the "Contracts"). I also have provided actuarial advice
concerning the preparation of pre-effective amendment number 1 to a registration
statement on Form S-6 (File No. 333-01949) for filing with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended, in
connection with the Contracts.
It is my professional opinion that:
1. The "sales load" as defined in paragraph (c)(4) of Rule 6e-3(T) under the
Investment Company Act of 1940, as amended, (as such definition would be
modified by the issuance of an SEC exception for which the Company has
applied to permit deductions of 1.25% of premiums to cover the Company's
federal income tax costs attributable to premiums), will not exceed 9% of
the sum of the guideline annual premiums that would be paid during the
period equal to the lesser of 20 years or the life expectancy of the
insured based on the appropriate 1980 Commissioners Standard Ordinary
Mortality Table.
2. During the first two Contract years, such "sales load" will not exceed the
sum of: (a) 30% of aggregate premium payments up to one guideline annual
premium, plus (b) 10% of each premium payment made in excess of one
guideline annual premium but less than or equal to two guideline annual
premiums, plus (c) 9% of each premium payment made in excess of two
guideline annual premiums.
3. The 1.25% federal tax charge for deferred acquisition costs is reasonable
to cover the increased cost incurred by the company as a result of the
enactment of Section 848 of the Internal Revenue Code of 1986, as amended.
In addition, using a 10% rate of return on capital is reasonable in
computing the federal tax charge, and the assumptions upon which this rate
is based, are appropriate for the company's life insurance products.
4. The illustrations of contract values, surrender values, death benefits and
accumulated premium payments in the prospectus contained in the
registration statement, are based on the assumptions stated in the
illustrations, and are consistent with the provisions of the Contracts. The
rate structure of the Contracts has not been designed so as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear to be more favorable to prospective purchasers of Contracts age 45,
in the rate classes illustrated, than to prospective purchasers of
Contracts, for males or females, at other ages and rate classes.
5. The information contained in the examples in the Appendix is based on the
assumptions stated in the examples, and is consistent with the provisions
of the contracts.
I hereby consent to the filing of this opinion as an exhibit to the
registration statement and to the inclusion of my name under the heading
"Expects" in the prospectus.
Sincerely,
S/ROBERT W. FOSTER, JR.
Robert W. Foster, Jr., FSA, MAAA, CLU, ChFC
Director and Actuarial Manager
Individual Life/Annuity Products
Exhibit 7A
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 33-01949 on Form S-6 of Valley Forge Life Insurance Company
Variable Life Separate Account of our report dated June 21, 1996 appearing in
the Prospectus, which is part of this Registration Statement, on the financial
statements of Valley Forge Life Insurance Company as of December 31, 1995 and
1994, and for each of the three years then ended. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
Deloitte & Touche LLP
Chicago, Illinois
August 2, 1996
Exhibit 7B
(Sutherland, Asbill & Brennan Letterhead)
August 28, 1996
Board of Directors
Valley Forge Life Insurance Company
CNA Plaza
Chicago, IL 60685
Directors:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus filed as part of the pre-effective amendment Number 1
to the Registration Statement on Form S-6 filed by Valley Forge Life Insurance
Company and Valley Forge Life Insurance Company Variable Life Separate Account
(Reg. File No. 333-01949) with the Securities and Exchange Commission. In giving
this consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
Sutherland, Asbill & Brennan
By: /S/ STEPHEN E. ROTH
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<INCOME-TAX> 12,200 3,433
<INCOME-CONTINUING> 22,510 6,299
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,510 6,299
<EPS-PRIMARY> 450.20 125.98
<EPS-DILUTED> 450.20 125.98
</TABLE>
