As Filed with the Securities and Exchange Commission on September 2, 1999
Registration No. 333-01949
811-07569
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 6
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 services)
It is proposed that this filing will become effective (check appropriate box):
/x/ Immediately upon filing pursuant of paragraph (b).
/ / On (date) pursuant to paragraph (b).
/ / 60 days after filing pursuant to paragraph (a)(1).
/ / On (date) pursuant to paragraph (a)(1) of Rule 485.
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.
Pursuant to rule 24f-(b)(2), the Registrant did not file a Rule 24f-2 notice
because it did not sell any securities pursuant to such declaration during the
most recent fiscal year.
Securities Being Offered: Individual Flexible Premium Variable Life Insurance
Policies.
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 Privileged; 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 VFL; Other Information About the Policies and
VFL
26 Charges and Deductions
27 VFL; Other Information About the Policies and
VFL
28 VFL Directors and Executive Officers
29 VFL
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 The Variable Account
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 VFL
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
- --------------------------------------------------------------------------------
THE PROSPECTUS WAS FILED IN POST-EFFECTIVE AMENDMENT NUMBER 5 TO FORM S-6
(FILE NO. 333-01949) ON APRIL 27, 1999 AND IS INCORPORATED HEREIN BY REFERENCE.
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY AND
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT
Supplement dated September __, 1999 to
Prospectus dated May 1, 1999
1. The date of the prospectus is September __, 1999.
2. As of September __, 1999, you may also allocate net premium payments and
policy value to the following Funds of Janus Aspen Series:
- -- Janus Aspen Capital Appreciation Portfolio
- -- Janus Aspen Growth Portfolio
- -- Janus Aspen Balanced Portfolio
- -- Janus Aspen Flexible Income Portfolio
- -- Janus Aspen International Growth Portfolio
- -- Janus Aspen Worldwide Growth Portfolio
3. The following information is added under "Fund Expenses:"
FEE TABLE ANNUAL FUND EXPENSES
(as a percentage of Fund average net assets)
<TABLE>
MANAGEMENT
(ADVISORY) OTHER TOTAL ANNUAL
FEES EXPENSES EXPENSES
---------- -------- ------------
JANUS ASPEN SERIES
<S> <C> <C> <C>
Janus Aspen Capital Appreciation Portfolio............ 0.70% 0.22% 0.92%[*]
Janus Aspen Growth Portfolio.......................... 0.65% 0.03% 0.68%[*]
Janus Aspen Balanced Portfolio........................ 0.72% 0.02% 0.74%
Janus Aspen Flexible Income Portfolio................. 0.65% 0.08% 0.73%
Janus Aspen International Growth Portfolio............ 0.66% 0.20% 0.86%[*]
Janus Worldwide Growth Portfolio...................... 0.65% 0.07% 0.72%[*]
<FN>
[*] Expenses are stated net of contractual waivers and fee reductions by
Janus Capital. Absent these waivers, the total annual expenses would have
been 0.97%, 0.75%, 0.95% and 0.74% for the Janus Aspen Capital Appreciation
Portfolio, Janus Aspen Growth Portfolio, Janus Aspen International
Growth Portfolio and Janus Aspen Worldwide Growth Portfolio, respectively.
</FN>
</TABLE>
4. The following information is added under "GENERAL INFORMATION ABOUT VFL,
THE VARIABLE ACCOUNT AND THE FUNDS - THE FUNDS:"
JANUS ASPEN SERIES
The Janus Aspen Capital Appreciation, Janus Aspen Growth, Janus Aspen
Balanced, Janus Aspen Flexible Income, Janus Aspen International Growth and
Janus Aspen Worldwide Growth Subaccounts each invest in shares of corresponding
Funds (i.e., "investment portfolios") of Janus Aspen Series ("JAS"). JAS issues
11 "series" or classes of shares, each of which represents an interest in a Fund
of JAS. Six of these series of shares are available as investment options under
the Policies. The investment objectives of these Funds are set forth below.
JANUS ASPEN CAPITAL APPRECIATION PORTFOLIO. This Fund seeks long-term
growth of capital by investing primarily in common stocks selected for
their growth potential.
JANUS ASPEN GROWTH PORTFOLIO. This Fund seeks long-term growth of
capital in a manner consistent with the preservation of capital by
investing primarily in common stocks selected for their growth potential.
JANUS ASPEN BALANCED PORTFOLIO. This Fund seeks long-term capital
growth, consistent with preservation of capital and balanced by current
income by normally investing 40-60% of its assets in securities selected
primarily for their growth potential and 40-60% of its assets in securities
selected primarily for their income potential.
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO. This Fund seeks to obtain
maximum total return, consistent with preservation of capital by investing
primarily in a wide variety of income-producing securities such as
corporate bonds and notes, government securities and preferred stock.
JANUS ASPEN INTERNATIONAL GROWTH PORTFOLIO. This Fund seeks long-term
growth of capital by normally investing at least 65% of its total assets in
securities of issuers from at least five different countries, excluding the
United States.
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO. This Fund seeks long-term
growth of capital in a manner consistent with the preservation of capital
by investing primarily in common stocks of companies of any size throughout
the world.
5. The following paragraph replaces the first paragraph under the heading
"POLICY LAPSE AND REINSTATEMENT - LAPSE PREVENTION GUARANTEE:"
LAPSE PREVENTION GUARANTEE. VFL guarantees that a Policy will not Lapse for
a period of up to 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.
6. The following supplements and replaces information under "Directors and
Executive Officers":
Effective August 16, 1999, the information pertaining to W. James MacGinnitie is
deleted. The following information is added:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Robert V. Deutsch 39 Senior Vice President, Chief Senior Vice
CNA Plaza Financial Officer, Director President,
Chicago, IL 60685 Chief Financial
Officer and
Director since
August 16, 1999.
Prior thereto,
Chief Financial
Officer for Executive
Risk, Inc.
Carol Dubnicki 48 Senior Vice President, Senior Vice President,
Director Human Resources since
May, 1998. Prior
thereto, Senior Vice
President, Human
Resources, Amoco, 1993-
1998.
Donald P. Lofe, Jr. 42 Group Vice President, Group Vice President,
Director Corporate Finance
Department since
October 1998. Prior
thereto, partner-in-
charge of
PricewaterhouseCoopers LLP.
John M. Squarok 46 Group Vice Group Vice President of CNA since July 1998.
President Prior thereto, Mr. Squarok was Chief Financial
and Director Officer of various businesses of GE Capital from
August 1988 until July 1998. Director since
August 1998.
</TABLE>
7. The paragraph entitled "Legal Matters" is deleted in its entirety.
8. The following financial statements are now included in the prospectus:
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY
FEDERATED FEDERATED FEDERATED FIDELITY ASSET FIDELITY FIDELITY
PRIME MONEY UTILITY HIGH INCOME EQUITY-INCOME MANAGER INDEX 500 CONTRAFUND
DECEMBER 31, 1998 FUND II FUND II BOND FUND II PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at market value: $847,527 $49,741 $65,501 $299,454 $85,716 $420,003 $327,340
-------- ------- ------- -------- ------- -------- --------
TOTAL ASSETS 847,527 49,741 65,501 299,454 85,716 420,003 327,340
-------- ------- ------- -------- ------- -------- --------
LIABILITIES - - - - - - -
- - ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $847,527 $49,741 $65,501 $299,454 $85,716 $420,003 $327,340
=================================================================================================================================
</TABLE>
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY
FEDERATED FEDERATED FEDERATED FIDELITY ASSET FIDELITY FIDELITY
PRIME MONEY UTILITY HIGH INCOME EQUITY-INCOME MANAGER INDEX 500 CONTRAFUND
DECEMBER 31, 1997 FUND II FUND II BOND FUND II PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at market value: $ 65,595 $13,779 $ 4,131 $ 26,621 $ 7,491 $ 40,348 $ 22,720
-------- ------- ------- -------- ------- -------- --------
TOTAL ASSETS 65,595 13,779 4,131 26,621 7,491 40,348 22,720
-------- ------- ------- -------- ------- -------- --------
LIABILITIES - - - - - - -
- - ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 65,595 $13,779 $ 4,131 $ 26,621 $ 7,491 $ 40,348 $ 22,720
=================================================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE ALGER THE ALGER MFS VAN ECK
AMERICAN THE ALGER AMERICAN MFS GROWTH MFS MFS SOGEN WORLDWIDE VAN ECK
SMALL AMERICAN MIDCAP EMERGING MFS WITH LIMITED TOTAL OVERSEAS HARD EMERGING
CAPITALIZATION GROWTH GROWTH GROWTH RESEARCH INCOME MATURITY RETURN VARIABLE ASSETS MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO SERIES SERIES SERIES SERIES SERIES FUND FUND FUND
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$131,214 $280,243 $168,837 $286,259 $205,296 $210,576 $53,470 $128,308 $134,319 $10,403 $18,839
-------- -------- -------- -------- -------- -------- ------- -------- -------- ------- -------
131,214 280,243 168,837 286,259 205,296 210,576 53,470 128,308 134,319 10,403 18,839
-------- -------- -------- -------- -------- -------- ------- -------- -------- ------- -------
- - - - - - - - - - -
---------------------------------------------------------------------------------------------------------------------------------
$131,214 $280,243 $168,837 $286,259 $205,296 $210,576 $53,470 $128,308 $134,319 $10,403 $18,839
=================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE ALGER THE ALGER MFS VAN ECK
AMERICAN THE ALGER AMERICAN MFS GROWTH MFS MFS SOGEN WORLDWIDE VAN ECK
SMALL AMERICAN MIDCAP EMERGING MFS WITH LIMITED TOTAL OVERSEAS HARD EMERGING
CAPITALIZATION GROWTH GROWTH GROWTH RESEARCH INCOME MATURITY RETURN VARIABLE ASSETS MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO SERIES SERIES SERIES SERIES SERIES FUND FUND FUND
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 15,548 $ 34,134 $ 11,475 $ 26,721 $ 20,542 $ 26,897 $11,351 $ 1,967 $ 13,189 $5,902 $ 6,757
-------- -------- -------- -------- -------- -------- ------- -------- -------- ------ -------
15,548 34,134 11,475 26,721 20,542 26,897 11,351 1,967 13,189 5,902 6,757
-------- -------- -------- -------- -------- -------- ------- -------- -------- ------ -------
- - - - - - - - - - -
--------------------------------------------------------------------------------------------------------------------------------
$ 15,548 $ 34,134 $ 11,475 $ 26,721 $ 20,542 $ 26,897 $11,351 $ 1,967 $ 13,189 $5,902 $ 6,757
================================================================================================================================
</TABLE>
- -------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY
FEDERATED FEDERATED FEDERATED FIDELITY ASSET FIDELITY FIDELITY
PRIME MONEY UTILITY HIGH INCOME EQUITY-INCOME MANAGER INDEX 500 CONTRAFUND
FOR THE YEAR ENDED DECEMBER 31, 1998 FUND II FUND II BOND FUND II PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 14,829 $ 1,169 $ 428 $ 2,052 $ 1,442 $ 1,936 $ 1,679
-------- ------- ------- -------- ------- -------- --------
14,829 1,169 428 2,052 1,442 1,936 1,679
-------- ------- ------- -------- ------- -------- --------
Expenses:
Mortality and expense risk charges 2,836 233 305 1,263 356 2,416 1,179
Policy fees/cost of insurance 26,469 3,992 5,655 23,455 7,266 38,308 23,265
-------- ------- ------- -------- ------- -------- --------
29,305 4,225 5,960 24,718 7,622 40,724 24,444
-------- ------- ------- -------- ------- -------- --------
NET INVESTMENT INCOME (LOSS) (14,476) (3,056) (5,532) (22,666) (6,180) (38,788) (22,765)
Investment gains and (losses):
Net realized gains (losses) - 1,039 (214) (1,500) 160 1,250 2,859
Net unrealized gains (losses) - 2,291 406 13,059 6,423 45,203 43,204
-------- ------- ------- -------- ------- -------- --------
NET REALIZED AND UNREALIZED
INVESTMENT GAINS (LOSSES) - 3,330 192 11,559 6,583 46,453 46,063
- - ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $(14,476) $ 274 $(5,340) $(11,107) $ 403 $ 7,665 $ 23,298
=================================================================================================================================
FOR THE PERIOD FROM INCEPTION TO
DECEMBER 31, 1997 1-MAY-97 10-JUN-97 8-APR-97 10-JUN-97 10-JUN-97 8-APR-97 8-APR-97
- - ---------------------------------------------------------------------------------------------------------------------------------
Investment income:
Dividend income $ 279 $ 51 $ 2 - - - -
-------- ------- ------- -------- ------- -------- --------
279 51 2 - - - -
-------- ------- ------- -------- ------- -------- --------
Expenses:
Mortality and expense risk charges 48 46 6 $ 56 $ 28 $ 75 $ 27
Policy fees/cost of insurance 1,663 476 227 1,777 409 3,947 1,593
-------- ------- ------- -------- ------- -------- --------
1,711 522 233 1,833 437 4,022 1,620
-------- ------- ------- -------- ------- -------- --------
NET INVESTMENT INCOME (LOSS) (1,432) (471) (231) (1,833) (437) (4,022) (1,620)
Investment gains and (losses):
Net realized gains (losses) - 163 (1) 433 19 445 61
Net unrealized gains (losses) - 1,465 56 873 402 1,172 206
-------- ------- ------- -------- ------- -------- --------
NET REALIZED AND UNREALIZED
INVESTMENT GAINS (LOSSES) - 1,628 55 1,306 421 1,617 267
- - ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ (1,432) $ 1,157 $ (176) $ (527) $ (16) $ (2,405) $ (1,353)
=================================================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE THE
ALGER THE ALGER MFS VAN ECK
AMERICAN ALGER AMERICAN MFS GROWTH MFS MFS SOGEN WORLDWIDE VAN ECK
SMALL AMERICAN MIDCAP EMERGING MFS WITH LIMITED TOTAL OVERSEAS HARD EMERGING
CAPITALIZATION GROWTH GROWTH GROWTH RESEARCH INCOME MATURITY RETURN VARIABLE ASSETS MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO SERIES SERIES SERIES SERIES SERIES FUND FUND FUND
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,871 $15,637 $ 2,887 $ 761 $ 1,263 - - $ 249 - $ 963 $ 129
------- ------- ------- -------- -------- --------- ------- ------- -------- ------- -------
7,871 15,637 2,887 761 1,263 - - 249 - 963 129
------- ------- ------- -------- -------- --------- ------- ------- -------- ------- -------
571 1,164 538 1,151 780 $ 1,182 $ 287 281 $ 660 70 96
10,724 20,570 11,785 22,252 16,270 17,398 4,476 5,492 13,889 1,310 3,647
------- ------- ------- -------- -------- --------- ------- ------- -------- ------- -------
11,295 21,734 12,323 23,403 17,050 18,580 4,763 5,773 14,549 1,380 3,743
------- ------- ------- -------- -------- --------- ------- ------- -------- ------- -------
(3,424) (6,097) (9,436) (22,642) (15,787) (18,580) (4,763) (5,524) (14,549) (417) (3,614)
(5,511) 397 (288) 692 569 (4,017) 139 281 (2,402) (3,284) (3,044)
9,960 44,439 22,787 40,124 18,267 16,293 (638) 5,812 (808) (516) (664)
------- ------- ------- -------- -------- --------- ------- ------- -------- ------- -------
4,449 44,836 22,499 40,816 18,836 12,276 (499) 6,093 (3,210) (3,800) (3,708)
- - ---------------------------------------------------------------------------------------------------------------------------------
$ 1,025 $38,739 $13,063 $ 18,174 $ 3,049 $ (6,304) $(5,262) $ 569 $(17,759) $(4,217) $(7,322)
=================================================================================================================================
27-FEB-97 24-FEB-97 29-MAY-97 24-FEB-97 8-APR-97 8-APR-97 16-SEP-97 24-FEB-97 24-FEB-97 8-APR-97 2-APR-97
- - ----------------------------------------------------------------------------------------------------------------------------------
$ 8 $ 1 - - - $ 623 $ 652 - - - -
------- ------- ------- -------- -------- --------- ------- ------- -------- ------- -------
8 1 - - - 623 652 - - - -
------- ------- ------- -------- -------- --------- ------- ------- -------- ------- -------
20 87 $ 18 $ 28 $ 33 30 11 $ 3 $ 31 $ 7 $ 6
1,189 2,394 678 1,704 1,669 1,328 247 315 1,799 282 612
------- ------- ------- -------- -------- --------- ------- ------- -------- ------- -------
1,209 2,481 696 1,732 1,702 1,358 258 318 1,830 289 618
------- ------- ------- -------- -------- --------- ------- ------- -------- ------- -------
(1,201) (2,480) (696) (1,732) (1,702) (735) 394 (318) (1,830) (289) (618)
(30) 889 (53) 45 (44) 199 13 19 (319) (67) (207)
(56) (1,200) (400) 317 332 11 (611) 50 (424) (297) (129)
------- ------- ------- -------- -------- --------- ------- ------- -------- ------- -------
(86) (311) (453) 362 288 210 (598) 69 (743) (364) (336)
- - ---------------------------------------------------------------------------------------------------------------------------------
$(1,287) $(2,791) $(1,149) $ (1,370) $(1,414) $ (525) $ (204) $ (249) $ (2,573) $ (653) $ (954)
=================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY
FEDERATED FEDERATED FEDERATED FIDELITY ASSET FIDELITY FIDELITY
PRIME MONEY UTILITY HIGH INCOME EQUITY-INCOME MANAGER INDEX 500 CONTRAFUND
FOR THE YEAR ENDED DECEMBER 31, 1998 FUND II FUND II BOND FUND II PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income (loss) $ (14,476) $ (3,056) $ (5,532) $ (22,666) $ (6,180) $ (38,788) $ (22,765)
Net realized and unrealized
investment gains (losses) - 3,330 192 11,559 6,583 46,453 46,063
--------- --------- --------- ---------- --------- ---------- ----------
Change in net assets resulting from
operations (14,476) 274 (5,340) (11,107) 403 7,665 23,298
--------- --------- --------- ---------- --------- ---------- ----------
From capital transactions:
Net premiums/deposits 1,100,864 36,000 58,181 263,891 61,909 327,244 246,088
Surrenders and withdrawals (572) (83) (165) (2,423) (129) (6,058) (1,201)
Transfers into (out of)
subaccounts, net -- Note 1 (303,884) (229) 8,694 22,472 16,042 50,804 36,435
--------- --------- --------- ---------- --------- ---------- ----------
Change in net assets resulting
from capital transactions 796,408 35,688 66,710 283,940 77,822 371,990 281,322
--------- --------- --------- ---------- --------- ---------- ----------
Increase in net assets 781,932 35,962 61,370 272,833 78,225 379,655 304,620
--------- --------- --------- ---------- --------- ---------- ----------
Net assets at beginning of period 65,595 13,779 4,131 26,621 7,491 40,348 22,720
- - ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD $ 847,527 $ 49,741 $ 65,501 $ 299,454 $ 85,716 $ 420,003 $ 327,340
=================================================================================================================================
NET ASSET VALUE PER UNIT AT END OF
PERIOD $ 1.00 $ 15.27 $ 10.92 $ 25.42 $ 18.16 $ 141.25 $ 24.44
=================================================================================================================================
UNITS OUTSTANDING AT END OF PERIOD 847,527 3,257 5,998 11,780 4,720 2,973 13,394
=================================================================================================================================
FOR THE PERIOD FROM INCEPTION TO
DECEMBER 31, 1997 1-MAY-97 10-JUN-97 8-APR-97 10-JUN-97 10-JUN-97 8-APR-97 8-APR-97
- - ---------------------------------------------------------------------------------------------------------------------------------
From operations:
Net investment income (loss) $ (1,432) $ (471) $ (231) $ (1,833) $ (437) $ (4,022) $ (1,620)
Net realized and unrealized gains
(losses) - 1,628 55 1,306 421 1,617 267
--------- --------- --------- ---------- --------- ---------- ----------
Change in net assets resulting
from operations (1,432) 1,157 (176) (527) (16) (2,405) (1,353)
--------- --------- --------- ---------- --------- ---------- ----------
From capital transactions:
Net premiums/deposits 97,987 10,230 2,941 21,697 7,428 34,213 18,058
Transfers into (out of)
subaccounts, net -- Note 1 (30,960) 2,392 1,366 5,451 79 8,540 6,015
--------- --------- --------- ---------- --------- ---------- ----------
Change in net assets resulting
from capital transactions 67,027 12,622 4,307 27,148 7,507 42,753 24,073
--------- --------- --------- ---------- --------- ---------- ----------
Increase in net assets 65,595 13,779 4,131 26,621 7,491 40,348 22,720
--------- --------- --------- ---------- --------- ---------- ----------
Net assets at beginning of period - - - - - - -
- - ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD $ 65,595 $ 13,779 $ 4,131 $ 26,621 $ 7,491 $ 40,348 $ 22,720
=================================================================================================================================
NET ASSET VALUE PER UNIT AT END OF
PERIOD $ 1.00 $ 14.29 $ 10.95 $ 24.28 $ 18.01 $ 114.39 $ 19.94
=================================================================================================================================
UNITS OUTSTANDING AT END OF PERIOD 65,595 964 377 1,096 416 353 1,139
=================================================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE ALGER THE ALGER MFS VAN ECK
AMERICAN THE ALGER AMERICAN MFS GROWTH MFS MFS SOGEN WORLDWIDE VAN ECK
SMALL AMERICAN MIDCAP EMERGING MFS WITH LIMITED TOTAL OVERSEAS HARD EMERGING
CAPITALIZATION GROWTH GROWTH GROWTH RESEARCH INCOME MATURITY RETURN VARIABLE ASSETS MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO SERIES SERIES SERIES SERIES SERIES FUND FUND FUND
- - ----------------------------------------------------------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ (3,424) $ (6,097) $ (9,436) $ (22,642) $(15,787) $ (18,580) $ (4,763) $ (5,524) $(14,549) $ (417) $ (3,614)
4,449 44,836 22,499 40,816 18,836 12,276 (499) 6,093 (3,210) (3,800) (3,708)
--------- ---------- --------- ---------- --------- ---------- --------- --------- --------- -------- ---------
1,025 38,739 13,063 18,174 3,049 (6,304) (5,262) 569 (17,759) (4,217) (7,322)
--------- ---------- --------- ---------- --------- ---------- --------- --------- --------- -------- ---------
88,005 171,948 119,140 214,349 173,364 141,269 47,751 97,181 135,934 9,690 20,390
(313) (1,636) (1,360) (734) (2,718) (2,367) (363) (194) (2,482) (156) (296)
26,949 37,058 26,519 27,749 11,059 51,081 (7) 28,785 5,437 (816) (690)
--------- ---------- --------- ---------- --------- ---------- --------- --------- --------- -------- ---------
114,641 207,370 144,299 241,364 181,705 189,983 47,381 125,772 138,889 8,718 19,404
--------- ---------- --------- ---------- --------- ---------- --------- --------- --------- -------- ---------
115,666 246,109 157,362 259,538 184,754 183,679 42,119 126,341 121,130 4,501 12,082
--------- ---------- --------- ---------- --------- ---------- --------- --------- --------- -------- ---------
15,548 34,134 11,475 26,721 20,542 26,897 11,351 1,967 13,189 5,902 6,757
- - ---------------------------------------------------------------------------------------------------------------------------------
$ 131,214 $ 280,243 $168,837 $ 286,259 $205,296 $ 210,576 $ 53,470 $128,308 $134,319 $ 10,403 $ 18,839
=================================================================================================================================
$ 43.97 $ 53.22 $ 28.87 $ 21.47 $ 19.05 $ 20.11 $ 10.16 $ 18.12 $ 10.07 $ 9.20 $ 7.12
=================================================================================================================================
2,984 5,266 5,848 13,333 10,777 10,471 5,263 7,081 13,339 1,131 2,646
=================================================================================================================================
27-FEB-97 24-FEB-97 29-MAY-97 24-FEB-97 8-APR-97 8-APR-97 16-SEP-97 24-FEB-97 24-FEB-97 8-APR-97 2-APR-97
- - ---------------------------------------------------------------------------------------------------------------------------------
$ (1,201) $ (2,480) $ (696) $ (1,732) $ (1,702) $ (735) $ 394 $ (318) $ (1,830) $ (289) $ (618)
(86) (311) (453) 362 288 210 (598) 69 (743) (364) (336)
--------- ---------- --------- ---------- --------- ---------- --------- --------- --------- -------- ---------
(1,287) (2,791) (1,149) (1,370) (1,414) (525) (204) (249) (2,573) (653) (954)
--------- ---------- --------- ---------- --------- ---------- --------- --------- --------- -------- ---------
14,166 35,288 8,051 18,949 12,643 11,690 6,149 2,216 14,325 4,423 7,649
2,669 1,637 4,573 9,142 9,313 15,732 5,406 - 1,437 2,132 62
--------- ---------- --------- ---------- --------- ---------- --------- --------- --------- -------- ---------
16,835 36,925 12,624 28,091 21,956 27,422 11,555 2,216 15,762 6,555 7,711
--------- ---------- --------- ---------- --------- ---------- --------- --------- --------- -------- ---------
15,548 34,134 11,475 26,721 20,542 26,897 11,351 1,967 13,189 5,902 6,757
--------- ---------- --------- ---------- --------- ---------- --------- --------- --------- -------- ---------
- - - - - - - - - - -
- - ---------------------------------------------------------------------------------------------------------------------------------
$ 15,548 $ 34,134 $ 11,475 $ 26,721 $ 20,542 $ 26,897 $ 11,351 $ 1,967 $ 13,189 $ 5,902 $ 6,757
=================================================================================================================================
$ 43.75 $ 42.76 $ 24.18 $ 16.14 $ 15.79 $ 16.44 $ 10.01 $ 16.63 $ 9.77 $ 15.72 $ 11.00
=================================================================================================================================
355 798 475 1,656 1,301 1,636 1,134 118 1,350 375 614
=================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
- --------------------------------------------------------------------------------
Valley Forge Life Insurance Company Variable Life Separate Account
("Variable Account"), a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, is a separate
account of Valley Forge Life Insurance Company ("VFL"). The Variable Account
began operations on February 24, 1997. VFL is a wholly-owned subsidiary of
Continental Assurance Company ("Assurance"). Assurance is a wholly-owned
subsidiary of Continental Casualty Company ("Casualty"), which is wholly-owned
by CNA Financial Corporation ("CNA"). Loews Corporation owns approximately 86%
of the outstanding common stock of CNA.
VFL sells a wide range of life insurance products, including the Capital
Select Variable Life Policy ("Policy"). Under the terms of the Policy,
policyowners select where the net premium payments of the Policy are invested.
The policyowner may choose to invest in either the Variable Account, the fixed
account of VFL ("Fixed Account") or both the Variable Account and Fixed Account.
Policyowners who invest in the Variable Account are hereinafter referred to as
the contractholder.
The Variable Account currently offers 18 subaccounts each of which invests
in shares of a corresponding fund ("Fund"), in which the contractholders bear
all of the investment risk. Each Fund 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 advisor ("Investment
Advisor"). The Investment Advisors and subaccounts are identified in Notes 3.
The Fixed Account is part of the general account of VFL and is an
investment option available to contractholders. The Fixed Account has 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.
The accompanying financial statements do not reflect amounts invested in the
Fixed Account.
The assets of the Variable Account are segregated from VFL's general
account and other separate accounts. The contractholder (before the maturity
date, while the contractholder is still living or the policy is inforce) may
transfer all or part of any subaccount value to another subaccount(s) or to the
Fixed Account or transfer all or part of amounts in the Fixed Account to any
subaccount(s).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
VALUATION OF INVESTMENTS -- Investments consist of shares of the Funds and
are stated at market value based on quoted market prices. Changes in the
difference between market value and cost are reflected as net unrealized gains
(losses) in the statement of operations.
INVESTMENT INCOME -- Investment income consists of dividends declared by
the Funds that are recognized on the date of record.
REALIZED INVESTMENT GAINS AND LOSSES -- Realized investment gains and
losses represent the difference between the proceeds from sales of shares of the
Funds held by the Variable Account and the cost of such shares, which are
determined using the average cost method.
FEDERAL INCOME TAXES -- Net investment income and realized gains and losses
on investments of the Variable Account are taxable to contractholders generally
upon distribution. Accordingly, no provision for income taxes has been recorded
in the accompanying financial statements.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles ("GAAP") requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
In the opinion of Variable Account's management, these statements include all
adjustments, consisting of normal recurring accruals, which are necessary for
the fair presentation of the financial position, results of operations and
changes in net assets in the accompanying financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 3. INVESTMENTS
- --------------------------------------------------------------------------------
The investments in the funds of the subaccounts of the Variable Account at
December 31, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
INVESTMENT ADVISOR MARKET
FUND/SUBACCOUNT SHARES COST VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERATED ADVISERS:
FEDERATED PRIME MONEY FUND II
December 31, 1998 847,527 $847,527 $847,527
December 31, 1997 65,595 $ 65,595 $ 65,595
FEDERATED UTILITY FUND II
December 31, 1998 3,257 $ 45,985 $ 49,741
December 31, 1997 964 $ 12,314 $ 13,779
FEDERATED HIGH INCOME BOND FUND II
December 31, 1998 5,998 $ 65,039 $ 65,501
December 31, 1997 377 $ 4,075 $ 4,131
FIDELITY MANAGEMENT & RESEARCH COMPANY:
FIDELITY VARIABLE INSURANCE PRODUCTS FUND EQUITY-INCOME
PORTFOLIO ("FIDELITY EQUITY-INCOME PORTFOLIO")
December 31, 1998 11,780 $285,522 $299,454
December 31, 1997 1,096 $ 25,748 $ 26,621
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II ASSET MANAGER
PORTFOLIO ("FIDELITY ASSET MANAGER PORTFOLIO")
December 31, 1998 4,720 $ 78,891 $ 85,716
December 31, 1997 416 $ 7,089 $ 7,491
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II INDEX 500
PORTFOLIO ("FIDELITY INDEX 500 PORTFOLIO")
December 31, 1998 2,973 $373,628 $420,003
December 31, 1997 353 $ 39,176 $ 40,348
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II CONTRAFUND
PORTFOLIO ("FIDELITY CONTRAFUND PORTFOLIO")
December 31, 1998 13,394 $283,930 $327,340
December 31, 1997 1,139 $ 22,514 $ 22,720
FRED ALGER MANAGEMENT, INC.:
THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
December 31, 1998 2,984 $121,310 $131,214
December 31, 1997 355 $ 15,604 $ 15,548
THE ALGER AMERICAN GROWTH PORTFOLIO
December 31, 1998 5,266 $237,004 $280,243
December 31, 1997 798 $ 35,334 $ 34,134
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 3. INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
INVESTMENT ADVISOR MARKET
FUND/SUBACCOUNT SHARES COST VALUE
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FRED ALGER MANAGEMENT, INC.:
THE ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
December 31, 1998 5,848 $146,450 $168,837
December 31, 1997 475 $ 11,875 $ 11,475
MASSACHUSETTS FINANCIAL SERVICES COMPANY:
MFS EMERGING GROWTH SERIES
December 31, 1998 13,333 $245,818 $286,259
December 31, 1997 1,656 $ 26,404 $ 26,721
MFS RESEARCH SERIES
December 31, 1998 10,777 $186,697 $205,296
December 31, 1997 1,301 $ 20,210 $ 20,542
MFS GROWTH WITH INCOME SERIES
December 31, 1998 10,471 $194,272 $210,576
December 31, 1997 1,636 $ 26,886 $ 26,897
MFS LIMITED MATURITY SERIES
December 31, 1998 5,263 $ 54,719 $ 53,470
December 31, 1997 1,134 $ 11,962 $ 11,351
MFS TOTAL RETURN SERIES
December 31, 1998 7,081 $122,446 $128,308
December 31, 1997 118 $ 1,917 $ 1,967
SOCIETE GENERALE ASSET MANAGEMENT CORP.:
SOGEN OVERSEAS VARIABLE FUND
December 31, 1998 13,339 $135,551 $134,319
December 31, 1997 1,350 $ 13,613 $ 13,189
VAN ECK ASSOCIATES CORPORATION:
VAN ECK WORLDWIDE HARD ASSETS FUND
December 31, 1998 1,131 $ 11,216 $ 10,403
December 31, 1997 375 $ 6,199 $ 5,902
VAN ECK EMERGING MARKETS FUND
December 31, 1998 2,646 $ 19,632 $ 18,839
December 31, 1997 614 $ 6,886 $ 6,757
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 4. INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
The aggregate cost of purchases and proceeds from sales of funds in the
subaccounts for the year ended December 31, 1998 and from inception through
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
INVESTMENT ADVISOR 1998 1997
FUND/SUBACCOUNT PURCHASES SALES PURCHASES SALES
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERATED ADVISERS:
Federated Prime Money Fund II $2,481,159 $1,714,056 $145,193 $79,877
Federated Utility Fund II 49,310 17,847 18,819 6,718
Federated High Income Bond Fund II 90,509 29,759 7,919 3,845
FIDELITY MANAGEMENT & RESEARCH COMPANY:
Fidelity Equity-Income Portfolio 369,832 110,610 42,621 17,306
Fidelity Asset Manager Portfolio 93,987 23,787 7,528 458
Fidelity Index 500 Portfolio 990,469 659,203 59,865 21,134
Fidelity Contrafund Portfolio 357,616 100,738 43,658 21,205
FRED ALGER MANAGEMENT, INC.:
The Alger American Small Capitalization Portfolio 149,591 46,245 28,590 12,964
The Alger American Growth Portfolio 250,054 64,418 44,379 9,935
The Alger American MidCap Growth Portfolio 150,003 18,027 22,938 11,010
MASSACHUSETTS FINANCIAL SERVICES COMPANY:
MFS Emerging Growth Series 457,350 239,389 41,571 15,212
MFS Research Series 248,443 83,788 29,976 9,723
MFS Growth With Income Series 545,157 373,754 45,455 19,391
MFS Limited Maturity Series 71,105 28,487 26,273 14,976
MFS Total Return Series 145,064 25,065 2,345 447
SOCIETE GENERALE ASSET MANAGEMENT CORP.:
SoGen Overseas Variable Fund 213,850 89,510 19,038 5,106
VAN ECK ASSOCIATES CORPORATION:
Van Eck Worldwide Hard Assets Fund 13,942 6,604 12,851 6,585
Van Eck Emerging Markets Fund 22,311 6,650 8,457 1,364
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 5. CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Monthly deductions are made from each contractholder's account under the
terms of the Policy to compensate VFL for certain administration expenses. The
policy fee is $6 per month. In addition, in the first year of a policy another
$20 per month is deducted. Furthermore, in the event of an increase to the death
benefit of the Policy, an additional fee of $10 per month is deducted for the
twelve months subsequent to the death benefit increase. A daily deduction is
also made for the cost of insurance and any charges for supplemental riders. The
cost of insurance charge 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. All of the foregoing charges are deducted from the
contractholder's investment in the Fixed Account and the subaccounts of the
Variable Account in proportion to the contractholder's investments in such
accounts.
VFL 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 equal to an annual rate of 0.90% of the net assets of the
Variable Account during the first 10 policy years and an annual rate of 0.45% of
the net assets of the Variable Account during policy years 11 and thereafter.
VFL deducts an amount equal to 3.5% from each premium payment (deposit)
made by the contractholder to cover federal tax liabilities and state and local
premium taxes. An additional deduction for sales charges is made from premium
payments (deposits). Such deduction is made under the terms of the Policy and
ranges from 2% to 4% of the premium payments (deposits).
VFL permits 12 transfers between and among the subaccounts (one of which
can be applied to the Fixed Account) per policy year without an assessment of a
fee. For each additional transfer, VFL charges $25 at the time each such
transfer is processed. The fee is deducted from the amount being transferred. -
- --------------------------------------------------------------------------------
NOTE 6. DIVERSIFICATION REQUIREMENTS
- --------------------------------------------------------------------------------
Under the provisions of Section 817(h) of the Internal Revenue Code of 1986
(the Code), a variable life insurance policy will not be treated as life
insurance under Section 7702 of the Code for any period for which the
investments of the segregated asset account on which the policy is based are not
adequately diversified. The Code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations issued
by the Secretary of the Treasury. VFL believes, based on the prospectuses of
each of the Funds that the Variable Account participates in, that the Funds
satisfy the diversification requirement of the regulations.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Contractholders of Valley Forge Life Insurance Company Variable Life
Separate Account and the Board of Directors of Valley Forge Life Insurance
Company:
We have audited the accompanying statements of assets and liabilities of
the subaccounts of Valley Forge Life Insurance Company Variable Life Separate
Account (the "Account") as of December 31, 1998 and related 1997, and the
related statements of operations and changes in net assets for the year ended
December 31, 1998 and the period from inception through December 31, 1997. The
subaccounts that collectively comprise the Account are the Federated Prime Money
Fund II, Federated Utility Fund II, Federated High Income Bond Fund II, Fidelity
Variable Insurance Products Fund Equity-Income Portfolio, Fidelity Variable
Insurance Products Fund II Asset Manager Portfolio, Fidelity Variable Insurance
Products Fund II Index 500 Portfolio, Fidelity Variable Insurance Products Fund
II Contrafund Portfolio, The Alger American Small Capitalization Portfolio, The
Alger American Growth Portfolio, The Alger American MidCap Growth Portfolio, MFS
Emerging Growth Series, MFS Research Series, MFS Growth With Income Series, MFS
Limited Maturity Series, MFS Total Return Series, SoGen Overseas Variable Fund,
Van Eck Worldwide Hard Assets Fund and Van Eck Emerging Markets Fund. These
financial statements are the responsibility of the Variable Account'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. Our procedures included
confirmation of securities owned at December 31, 1998 and 1997. 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 each of the subaccounts that comprise the
Account as of December 31, 1998 and 1997, the results of their operations and
the changes in their net assets for the year ended December 31, 1998 and the
period from inception through December 31, 1997, in conformity with generally
accepted accounting principles.
Chicago, Illinois
February 23, 1999
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY
FEDERATED FEDERATED FEDERATED EQUITY- ASSET FIDELITY FIDELITY
PRIME MONEY UTILITY HIGH INCOME INCOME MANAGER INDEX 500 CONTRAFUND
FUND II FUND II BOND FUND II PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at market value
(cost noted below): $687,386 $ 96,936 $ 88,953 $556,534 $238,818 $1,320,174 $749,017
-------- -------- -------- -------- -------- ---------- --------
TOTAL ASSETS 687,386 96,936 88,953 556,534 238,818 1,320,174 749,017
-------- -------- -------- -------- -------- ---------- --------
LIABILITIES - - - - - - -
- - ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $687,386 $ 96,936 $ 88,953 $556,534 $238,818 $1,320,174 $749,017
=================================================================================================================================
SUPPLEMENTAL COST INFORMATION:
Investments, at cost $687,386 $ 93,443 $ 91,438 $487,179 $236,291 $1,171,514 $670,834
=================================================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE ALGER THE ALGER VAN ECK
AMERICAN THE ALGER AMERICAN MFS MFS GROWTH MFS MFS SOGEN WORLDWIDE
SMALL AMERICAN MIDCAP EMERGING MFS WITH LIMITED TOTAL OVERSEAS HARD
CAPITALIZATION GROWTH GROWTH GROWTH RESEARCH INCOME MATURITY RETURN VARIABLE ASSETS
PORTFOLIO PORTFOLIO PORTFOLIO SERIES SERIES SERIES SERIES SERIES FUND FUND
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$207,104 $ 882,045 $ 347,001 $471,698 $ 329,081 $381,183 $ 69,542 $ 263,524 $244,720 $ 20,667
-------- --------- --------- -------- --------- -------- -------- ---------- -------- --------
207,104 882,045 347,001 471,698 329,081 381,183 69,542 263,524 244,720 20,667
-------- --------- --------- -------- --------- -------- -------- ---------- -------- --------
- - - - - - - - - -
- - ------------------------------------------------------------------------------------------------------------------------------
$207,104 $ 882,045 $ 347,001 $471,698 $ 329,081 $381,183 $ 69,542 $ 263,524 $244,720 $ 20,667
==============================================================================================================================
$190,321 $ 814,415 $ 323,405 $384,331 $ 285,367 $340,327 $ 69,925 $ 256,976 $209,930 $ 18,654
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VAN ECK
EMERGING
MARKETS
FUND
- - --- --------
<S> <C>
$ 34,845
--------
34,845
--------
-
- - ---
$ 34,845
===
$ 27,858
===
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY
FEDERATED FEDERATED FEDERATED EQUITY- ASSET FIDELITY FIDELITY
PRIME MONEY UTILITY HIGH INCOME INCOME MANAGER INDEX 500 CONTRAFUND
FUND II FUND II BOND FUND II PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 14,527 $ 5,411 $ 6,010 $ 18,590 $ 13,097 $ 8,381 $ 16,984
-------- -------- -------- -------- -------- ---------- --------
14,527 5,411 6,010 18,590 13,097 8,381 16,984
-------- -------- -------- -------- -------- ---------- --------
Expenses:
Mortality and expense risk
charges 3,078 328 315 1,971 862 3,512 2,311
Policy fees/Cost of insurance 32,512 4,453 5,667 22,711 9,489 54,524 31,203
-------- -------- -------- -------- -------- ---------- --------
35,590 4,781 5,982 24,682 10,351 58,036 33,514
-------- -------- -------- -------- -------- ---------- --------
NET INVESTMENT INCOME (LOSS) (21,063) 630 28 (6,092) 2,746 (49,655) (16,530)
Investment gains and (losses):
Net realized gains (losses) - 110 (1,098) (1,841) 7,002 16,102 20,485
Net unrealized gains (losses) - (262) (2,947) 55,423 (4,298) 102,284 34,773
-------- -------- -------- -------- -------- ---------- --------
NET REALIZED AND UNREALIZED
INVESTMENT GAINS (LOSSES) - (152) (4,045) 53,582 2,704 118,386 55,258
- - ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $(21,063) $ 478 $ (4,017) $ 47,490 $ 5,450 $ 68,731 $ 38,728
=================================================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE ALGER THE ALGER MFS
AMERICAN THE ALGER AMERICAN MFS GROWTH MFS MFS SOGEN
SMALL AMERICAN MIDCAP EMERGING MFS WITH LIMITED TOTAL OVERSEAS
CAPITALIZATION GROWTH GROWTH GROWTH RESEARCH INCOME MATURITY RETURN VARIABLE
PORTFOLIO PORTFOLIO PORTFOLIO SERIES SERIES SERIES SERIES SERIES FUND
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 16,693 $ 62,822 $ 38,874 $ - $ 2,936 $ 1,986 $ - $ 12,073 $ 1,473
-------- --------- --------- -------- --------- -------- -------- ---------- --------
16,693 62,822 38,874 - 2,936 1,986 - 12,073 1,473
-------- --------- --------- -------- --------- -------- -------- ---------- --------
605 2,569 1,020 1,522 1,063 1,225 271 988 762
8,923 30,768 12,506 24,018 14,951 16,179 4,267 10,867 12,946
-------- --------- --------- -------- --------- -------- -------- ---------- --------
9,528 33,337 13,526 25,540 16,014 17,404 4,538 11,855 13,708
-------- --------- --------- -------- --------- -------- -------- ---------- --------
7,165 29,485 25,348 (25,540) (13,078) (15,418) (4,538) 218 (12,235)
276 25,425 2,100 7,247 3,312 1,467 (170) 4,877 4,250
6,879 24,391 1,209 46,926 25,115 24,551 866 687 36,022
-------- --------- --------- -------- --------- -------- -------- ---------- --------
7,155 49,816 3,309 54,173 28,427 26,018 696 5,564 40,272
- - ----------------------------------------------------------------------------------------------------------------
$ 14,320 $ 79,301 $ 28,657 $ 28,633 $ 15,349 $ 10,600 $ (3,842) $ 5,782 $ 28,037
================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VAN ECK
WORLDWIDE VAN ECK
HARD EMERGING
ASSETS MARKETS
FUND FUND
- - ---
<S> <C> <C>
$ 190 $ -
-------- --------
190 -
-------- --------
65 109
1,044 2,229
-------- --------
1,109 2,338
-------- --------
(919) (2,338)
(356) 2,197
2,826 7,780
-------- --------
2,470 9,977
- - ---
$ 1,551 $ 7,639
===
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY
FEDERATED FEDERATED FEDERATED FIDELITY ASSET FIDELITY
PRIME MONEY UTILITY HIGH INCOME EQUITY-INCOME MANAGER INDEX 500
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) FUND II FUND II BOND FUND II PORTFOLIO PORTFOLIO PORTFOLIO
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income (loss) $ (21,063) $ 630 $ 28 $ (6,092) $ 2,746 $ (49,655)
Net realized and unrealized investment gains
(losses) - (152) (4,045) 53,582 2,704 118,386
---------- ------- -------- -------- -------- ----------
Change in net assets resulting from operations (21,063) 478 (4,017) 47,490 5,450 68,731
---------- ------- -------- -------- -------- ----------
From capital transactions:
Net premiums/deposits 288,952 50,993 51,118 250,870 123,677 563,684
Surrenders and withdrawals (407) (149) (895) (1,767) (675) (3,336)
Transfers in (out of) subaccounts, net -- Note 1 (427,623) (4,127) (22,754) (39,513) 24,650 271,092
---------- ------- -------- -------- -------- ----------
Change in net assets resulting from capital
transactions (139,078) 46,717 27,469 209,590 147,652 831,440
---------- ------- -------- -------- -------- ----------
Increase in net assets (160,141) 47,195 23,452 257,080 153,102 900,171
Net assets at beginning of period 847,527 49,741 65,501 299,454 85,716 420,003
- - ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD $ 687,386 $96,936 $ 88,953 $556,534 $238,818 $1,320,174
==================================================================================================================================
NET ASSET VALUE PER UNIT AT END OF PERIOD $ 1.00 $ 14.53 $ 10.27 $ 27.25 $ 17.69 $ 155.65
==================================================================================================================================
UNITS OUTSTANDING AT END OF PERIOD 687,386 6,671 8,661 20,423 13,500 8,482
==================================================================================================================================
FOR THE YEAR ENDED DECEMBER 31, 1998
- - ----------------------------------------------------------------------------------------------------------------------------------
From operations:
Net investment income (loss) $ (14,476) $(3,056) $ (5,532) $(22,666) $ (6,180) $ (38,788)
Net realized and unrealized investment gains
(losses) - 3,330 192 11,559 6,583 46,453
---------- ------- -------- -------- -------- ----------
Change in net assets resulting from operations (14,476) 274 (5,340) (11,107) 403 7,665
---------- ------- -------- -------- -------- ----------
From capital transactions:
Net premiums/deposits 1,100,864 36,000 58,181 263,891 61,909 327,244
Surrenders and withdrawals (572) (83) (165) (2,423) (129) (6,058)
Transfers in (out of) subaccounts, net -- Note 1 (303,884) (229) 8,694 22,472 16,042 50,804
---------- ------- -------- -------- -------- ----------
Change in net assets resulting from capital
transactions 796,408 35,688 66,710 283,940 77,822 371,990
---------- ------- -------- -------- -------- ----------
Increase (decrease) in net assets 781,932 35,962 61,370 272,833 78,225 379,655
Net assets at beginning of period 65,595 13,779 4,131 26,621 7,491 40,348
- - ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD $ 847,527 $49,741 $ 65,501 $299,454 $ 85,716 $ 420,003
==================================================================================================================================
NET ASSET VALUE PER UNIT AT END OF PERIOD $ 1.00 $ 15.27 $ 10.92 $ 25.42 $ 18.16 $ 141.25
==================================================================================================================================
UNITS OUTSTANDING AT END OF PERIOD 847,527 3,257 5,998 11,780 4,720 2,973
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
CONTRAFUND
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) PORTFOLIO
- - -------------------------------------------------- ----------
<S> <C>
From operations:
Net investment income (loss) $(16,530)
Net realized and unrealized investment gains
(losses) 55,258
--------
Change in net assets resulting from operations 38,728
--------
From capital transactions:
Net premiums/deposits 336,858
Surrenders and withdrawals (824)
Transfers in (out of) subaccounts, net -- Note 1 46,915
--------
Change in net assets resulting from capital
transactions 382,949
--------
Increase in net assets 421,677
Net assets at beginning of period 327,340
- - --------------------------------------------------
NET ASSETS AT END OF PERIOD $749,017
==================================================
NET ASSET VALUE PER UNIT AT END OF PERIOD $ 26.10
==================================================
UNITS OUTSTANDING AT END OF PERIOD 28,698
==================================================
FOR THE YEAR ENDED DECEMBER 31, 1998
- - --------------------------------------------------
From operations:
Net investment income (loss) $(22,765)
Net realized and unrealized investment gains
(losses) 46,063
--------
Change in net assets resulting from operations 23,298
--------
From capital transactions:
Net premiums/deposits 246,088
Surrenders and withdrawals (1,201)
Transfers in (out of) subaccounts, net -- Note 1 36,435
--------
Change in net assets resulting from capital
transactions 281,322
--------
Increase (decrease) in net assets 304,620
Net assets at beginning of period 22,720
- - --------------------------------------------------
NET ASSETS AT END OF PERIOD $327,340
==================================================
NET ASSET VALUE PER UNIT AT END OF PERIOD $ 24.44
==================================================
UNITS OUTSTANDING AT END OF PERIOD 13,394
==================================================
</TABLE>
See accompanying Notes to Financial Statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE THE
ALGER THE ALGER MFS
AMERICAN ALGER AMERICAN MFS GROWTH MFS MFS SOGEN
SMALL AMERICAN MIDCAP EMERGING MFS WITH LIMITED TOTAL OVERSEAS
CAPITALIZATION GROWTH GROWTH GROWTH RESEARCH INCOME MATURITY RETURN VARIABLE
PORTFOLIO PORTFOLIO PORTFOLIO SERIES SERIES SERIES SERIES SERIES FUND
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,165 $ 29,485 $ 25,348 $(25,540) $(13,078) $(15,418) $(4,538) $ 218 $(12,235)
7,155 49,816 3,309 54,173 28,427 26,018 696 5,564 40,272
-------- -------- -------- -------- -------- -------- ------- -------- --------
14,320 79,301 28,657 28,633 15,349 10,600 (3,842) 5,782 28,037
-------- -------- -------- -------- -------- -------- ------- -------- --------
92,852 438,826 115,034 166,413 104,493 152,155 34,367 130,053 74,358
- (25,094) (5) (1,656) (1,763) (1,021) (218) (337) -
(31,282) 108,769 34,478 (7,951) 5,706 8,873 (14,235) (282) 8,006
-------- -------- -------- -------- -------- -------- ------- -------- --------
61,570 522,501 149,507 156,806 108,436 160,007 19,914 129,434 82,364
-------- -------- -------- -------- -------- -------- ------- -------- --------
75,890 601,802 178,164 185,439 123,785 170,607 16,072 135,216 110,401
131,214 280,243 168,837 286,259 205,296 210,576 53,470 128,308 134,319
- - -------------------------------------------------------------------------------------------------------------
$207,104 $882,045 $347,001 $471,698 $329,081 $381,183 $69,542 $263,524 $244,720
=============================================================================================================
$ 43.58 $ 55.84 $ 27.60 $ 24.22 $ 20.48 $ 21.14 $ 10.25 $ 18.10 $ 12.47
=============================================================================================================
4,752 15,796 12,572 19,476 16,068 18,031 6,785 14,559 19,625
=============================================================================================================
- - -------------------------------------------------------------------------------------------------------------
$ (3,424) $ (6,097) $ (9,436) $(22,642) $(15,787) $(18,580) $(4,763) $ (5,524) $(14,549)
4,449 44,836 22,499 40,816 18,836 12,276 (499) 6,093 (3,210)
-------- -------- -------- -------- -------- -------- ------- -------- --------
1,025 38,739 13,063 18,174 3,049 (6,304) (5,262) 569 (17,759)
-------- -------- -------- -------- -------- -------- ------- -------- --------
88,005 171,948 119,140 214,349 173,364 141,269 47,751 97,181 135,934
(313) (1,636) (1,360) (734) (2,718) (2,367) (363) (194) (2,482)
26,949 37,058 26,519 27,749 11,059 51,081 (7) 28,785 5,437
-------- -------- -------- -------- -------- -------- ------- -------- --------
114,641 207,370 144,299 241,364 181,705 189,983 47,381 125,772 138,889
-------- -------- -------- -------- -------- -------- ------- -------- --------
115,666 246,109 157,362 259,538 184,754 183,679 42,119 126,341 121,130
15,548 34,134 11,475 26,721 20,542 26,897 11,351 1,967 13,189
- - -------------------------------------------------------------------------------------------------------------
$131,214 $280,243 $168,837 $286,259 $205,296 $210,576 $53,470 $128,308 $134,319
=============================================================================================================
$ 43.97 $ 53.22 $ 28.87 $ 21.47 $ 19.05 $ 20.11 $ 10.16 $ 18.12 $ 10.07
=============================================================================================================
2,984 5,266 5,848 13,333 10,777 10,471 5,263 7,081 13,339
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VAN ECK
WORLDWIDE VAN ECK
HARD EMERGING
ASSETS MARKETS
FUND FUND
- - ---
<S> <C> <C>
$ (919) $(2,338)
2,470 9,977
------- -------
1,551 7,639
------- -------
10,739 12,961
(70) (59)
(1,956) (4,535)
------- -------
8,713 8,367
------- -------
10,264 16,006
10,403 18,839
- - ---
$20,667 $34,845
===
$ 10.71 $ 10.39
===
1,930 3,354
===
- - ---
$ (417) $(3,614)
(3,800) (3,708)
------- -------
(4,217) (7,322)
------- -------
9,690 20,390
(156) (296)
(816) (690)
------- -------
8,718 19,404
------- -------
4,501 12,082
5,902 6,757
- - ---
$10,403 $18,839
===
$ 9.20 $ 7.12
===
1,131 2,646
===
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 -- UNAUDITED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
- --------------------------------------------------------------------------------
Valley Forge Life Insurance Company Variable Life Separate Account
("Variable Account"), a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, is a Separate
Account of Valley Forge Life Insurance Company ("VFL"). The Variable Account
began operations on February 24, 1997. VFL is a wholly-owned subsidiary of
Continental Assurance Company ("Assurance"). Assurance is a wholly-owned
subsidiary of Continental Casualty Company ("Casualty"), which is wholly-owned
by CNA Financial Corporation ("CNA"). Loews Corporation owns approximately 86%
of the outstanding common stock of CNA.
VFL sells a wide range of life insurance products, including the Capital
Select variable life policy ("Policy"). Under the terms of the Policy,
policyowners' select where the net premium payments of the Policy are invested.
The policyowner may choose to invest in either the Variable Account, the fixed
account ("Fixed Account") or both the Variable Account and Fixed Account.
Policyholders who invest in the Variable Account are hereinafter referred to as
the contractholder.
The Variable Account currently offers 17 subaccounts each of which invests
in shares of a corresponding fund ("Fund"), in which the contractholders bear
all of the investment risk. Each Fund is either an open-end diversified
management investment company or a separate investment portfolio of such a
company and is managed by an investment advisor ("Investment Advisor") which is
registered with the Securities and Exchange Commission. The Investment Advisors
and subaccounts are identified here.
- ------------------------------------------------------------
INVESTMENT ADVISOR:
FUND/SUBACCOUNT
- ------------------------------------------------------------
FEDERATED ADVISERS:
Federated Prime Money Fund II
Federated Utility Fund II
Federated High Income Bond Fund II
FIDELITY MANAGEMENT & RESEARCH COMPANY:
Fidelity Variable Insurance Products Fund
Equity-Income Portfolio
("Fidelity Equity-Income Portfolio")
Fidelity Variable Insurance Products Fund II
Asset Manager Portfolio
("Fidelity Asset Manager Portfolio")
Fidelity Variable Insurance Products Fund II
Index 500 Portfolio ("Fidelity Index 500 Portfolio")
Fidelity Variable Insurance Products Fund II
Contrafund Portfolio
("Fidelity Contrafund Portfolio")
- - ------------------------------------------------------------
INVESTMENT ADVISOR:
FUND/SUBACCOUNT
- - ------------------------------------------------------------
FRED ALGER MANAGEMENT, INC.:
The Alger American Small Capitalization Portfolio
The Alger American Growth Portfolio
The Alger American MidCap Growth Portfolio
MASSACHUSETTS FINANCIAL SERVICES COMPANY:
MFS Emerging Growth Series
MFS Research Series
MFS Growth With Income Series
MFS Limited Maturity Series (closed to
new investments)
MFS Total Return Series
SOCIETE GENERALE ASSET MANAGEMENT CORP.:
SoGen Overseas Variable Fund
VAN ECK ASSOCIATES CORPORATION:
Van Eck Worldwide Hard Assets Fund
Van Eck Emerging Markets Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 -- UNAUDITED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fixed Account is part of the general account of VFL and is an
investment option available to contractholders. The Fixed Account has 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.
The accompanying financial statements do not reflect amounts invested in the
Fixed Account.
The assets of the Variable Account are segregated from VFL's general
account and other separate accounts. The contractholder (before the maturity
date, while the contractholder is still living or the policy is in force), may
transfer all or part of any subaccount value to another subaccount(s) or to the
Fixed Account, or transfer all or part of amounts in the Fixed Account to any
subaccount(s). The MFS Limited Maturity Series subaccount is not available to
receive transfers from new participants as of May 1, 1999.
- --------------------------------------------------------------------------------
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
VALUATION OF INVESTMENTS -- Investments consist of shares of the Funds and
are stated at fair value based on quoted market prices. Changes in the
difference between market value and cost are reflected as net unrealized gains
(losses) in the statement of operations.
INVESTMENT INCOME -- Investment income consists of dividends declared by
the Funds which are recognized on the date of record.
REALIZED INVESTMENT GAINS AND LOSSES -- Realized investment gains and
losses represent the difference between the proceeds from sales of shares of the
Funds held by the Variable Account and the cost of such shares, which are
determined using the average cost method.
FEDERAL INCOME TAXES -- Net investment income and realized gains and losses
on investments of the Variable Account are taxable to contractholders generally
upon distribution. Accordingly, no provision for income taxes has been recorded
in the accompanying financial statements.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles ("GAAP") requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
In the opinion of Variable Account's management, these statements include all
adjustments, consisting of normal recurring accruals, which are necessary for
the fair presentation of the financial position, results of operations and
changes in net assets in the accompanying financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 -- UNAUDITED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 3. CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Monthly deductions are made from each contractholder's account under the
terms of the Policy to compensate VFL for certain administration expenses. The
policy fee is $6 per month. In addition, in the first year of a policy another
$20 per month is deducted. Furthermore, in the event of an increase to the death
benefit of the Policy, an additional fee of $10 per month is deducted for the
twelve months subsequent to the death benefit increase. A deduction is also made
for the cost of insurance and any charges for supplemental riders. The cost of
insurance charge 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. All of the foregoing charges are deducted from the contractholder's
investment in the Fixed Account and the subaccounts of the Variable Account in
proportion to the contractholder's investments in such accounts.
VFL 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 equal to an annual rate of 0.90% of the net assets of the
Variable Account during the first 10 policy years and an annual rate of 0.45% of
the net assets of the Variable Account during policy years 11 and thereafter.
VFL deducts an amount equal to 3.5% from each premium payment (deposit)
made by the contractholder to cover federal tax liabilities and state and local
premium taxes. An additional deduction for sales charges is made from premium
payments (deposits). Such deduction is made under the terms of the Policy and
ranges from 2% to 4% of the premium payments (deposits).
VFL permits 12 transfers between and among the subaccounts (one of which
can be applied to the Fixed Account) per policy year without an assessment of a
fee. For each additional transfer, VFL charges $25 at the time each such
transfer is processed. The fee is deducted from the amount being transferred. -
- --------------------------------------------------------------------------------
NOTE 4. DIVERSIFICATION REQUIREMENTS
- --------------------------------------------------------------------------------
Under the provisions of Section 817(h) of the Internal Revenue Code of 1986
(the Code), a variable life insurance policy will not be treated as life
insurance under Section 7702 of the Code for any period for which the
investments of the segregated asset account on which the policy is based are not
adequately diversified. The Code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations issued
by the Secretary of the Treasury. VFL believes, based on the prospectuses of
each of the Funds that the Variable Account participates in, that the mutual
funds satisfy the diversification requirement of the regulations.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 -- UNAUDITED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 5. MANAGEMENT'S DISCUSSION OF YEAR 2000 IMPACT ON VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
The widespread use of computer programs, both in the United States and
internationally, that rely on two digit date fields to perform computations and
decision making functions may cause computer systems to malfunction when
processing information involving dates beginning in 1999. Such malfunctions
could lead to business delays and disruptions. Separate Account does not
maintain any systems. Instead, it relies on the systems of CNA, third party
vendors and other business partners. CNA, on behalf of Separate Account, has a
plan under which it reviews periodically the progress that these parties are
making on this issue. As of December 1, 1998, CNA had certified internally as
Year 2000-ready all of the internal systems used by Separate Account. However,
as business conditions change, CNA may respond by revising previous Year 2000
strategies or solutions affecting specific systems. In limited cases, a system
that was to have been replaced, instead, may be renovated to become Year 2000
ready prior to January 1, 2000. Separate Account does not believe these changes
will have a material impact on the Company.
CNA has also received statements of Year 2000 compliance from certain key
business partners. Separate Account management believes that the systems on
which it relies does not have any significant remaining exposure to the Year
2000 issue and, therefore Separate Account does not have a material exposure to
the Year 2000 issue. However, due to the interdependent nature of computer
systems, there may be an adverse impact on Separate Account if its business
partners fail to address the Year 2000 issue successfully. To mitigate this
impact, if any, CNA on behalf of itself and Separate Account is communicating
with its business partners to coordinate Year 2000 conversion. In addition, CNA
has developed business resumption plans to ensure that it and Separate Account
are able to continue critical processes through other means in the event that it
becomes necessary to do so. Formal strategies have been developed to include
appropriate recovery processes and use of alternative vendors.
Based on its current assessment, CNA estimates that the total cost to
replace and upgrade its systems to accommodate Year 2000 processing will be
approximately $70 million. As of June 30, 1999, CNA has spent approximately $60
million on Year 2000 readiness matter.
- --------------------------------------------------------------------------------
VALLEY FORGE LIFE INSURANCE COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
JUNE 30 DECEMBER 31
1999 1998
(Unaudited)
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(In thousands of dollars, except per share amounts)
ASSETS:
Investments:
Fixed maturities available-for-sale (amortized cost: $481,347 and $454,635) $ 476,265 $ 460,516
Equity securities available-for-sale (cost: $981 and $981) 2,558 2,218
Policy loans 74,213 74,150
Other invested assets 351 485
Short-term investments 33,500 81,418
----------- -----------
TOTAL INVESTMENTS 586,887 618,787
Cash 4,515 3,750
Receivables:
Reinsurance 2,215,669 2,119,897
Premium and other insurance 53,088 54,664
Deferred acquisition costs 119,845 111,963
Receivables for securities sold 17,309 --
Accrued investment income 8,229 7,721
Due from affiliates 39,165 --
Deferred income taxes 2,804 --
Other 1,836 902
Separate Account business 128,691 73,745
- - --------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 3,178,038 $ 2,991,429
==============================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities:
Insurance reserves:
Future policy benefits $ 2,540,154 $ 2,438,305
Claims 142,776 93,001
Policyholders' funds 48,003 42,746
Payables for securities purchased 17,106 370
Federal income taxes payable 8,260 6,468
Deferred income taxes -- 6,213
Due to affiliates -- 1,946
Commissions and other payables 38,783 64,815
Separate Account business 128,691 73,745
----------- -----------
TOTAL LIABILITIES 2,923,773 2,727,609
----------- -----------
Commitments and contingent liabilities - Note 3 -- --
Stockholder's Equity:
Common stock ($50 par value; Authorized-200,000 shares;
Issued-50,000 shares) 2,500 2,500
Additional paid-in capital 69,150 69,150
Retained earnings 183,453 187,683
Accumulated other comprehensive income (838) 4,487
----------- -----------
TOTAL STOCKHOLDER'S EQUITY 254,265 263,820
- - --------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 3,178,038 $ 2,991,429
==============================================================================================================
</TABLE>
See accompanying Notes to Condensed Financial Statements (Unaudited).
3
VALLEY FORGE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
PERIOD ENDED JUNE 30 1999 1998 1999 1998
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands of dollars)
Revenues:
Premiums $ 83,651 $ 73,025 $158,324 $154,580
Net investment income 9,004 9,032 18,108 17,623
Realized investment gains (losses) (13,213) 1,520 (17,902) 3,513
Other 3,597 2,595 5,262 4,156
-------- -------- -------- --------
83,039 86,172 163,792 179,872
-------- -------- -------- --------
Benefits and expenses:
Insurance claims and policyholders' benefits 80,891 70,228 151,002 145,381
Amortization of deferred acquisition costs 3,068 2,615 6,065 5,167
Other operating expenses 7,415 6,713 13,714 16,571
-------- -------- -------- --------
91,374 79,556 170,781 167,119
-------- -------- -------- --------
Income (loss) before income tax and cumulative
effect of change in accounting principle (8,335) 6,616 (6,989) 12,753
Income tax expense (benefit) (3,485) 2,336 (2,993) 4,554
-------- -------- -------- --------
Income (loss) before cumulative effect of change
in accounting principle (4,850) 4,280 (3,996) 8,199
Cumulative effect of change in accounting
principle, net of taxes - Note 5 - - (234) -
- - ------------------------------------------------------------- ------- -------- -------
NET INCOME (LOSS) $ (4,850) $ 4,280 $ (4,230) $ 8,199
============================================================= ======= ======== =======
</TABLE>
See accompanying Notes to Condensed Financial Statements (Unaudited).
4
VALLEY FORGE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
(Unaudited)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional Other Total
Six Months Ended Common Paid-in Comprehensive Retained Comprehensive Stockholder's
June 30, 1999 and 1998 Stock Capital Income (Loss) Earnings Income (Loss) Equity
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(In thousands of dollars)
Balance, December 31, 1997 $ 2,500 $ 39,150 $ 170,230 $ 4,380 $ 216,260
Comprehensive income (loss):
Net income - - $ 8,199 8,199 - 8,199
Other comprehensive income - - 788 - 788 788
---------
Total comprehensive income $ 8,987
=========
- - ----------------------------------------------------------- ------------------------------------------
Balance, June 30, 1998 $ 2,500 $ 39,150 $ 178,429 $ 5,168 $ 225,247
=========================================================== ==========================================
Balance, December 31, 1998 $ 2,500 $ 69,150 $ 187,683 $ 4,487 $ 263,820
Comprehensive income (loss):
Net loss - - $ (4,230) (4,230) - (4,230)
Other comprehensive loss - - (5,325) - (5,325) (5,325)
---------
Total comprehensive loss $ (9,555)
=========
- - ----------------------------------------------------------- -------------------------------------------
Balance, June 30, 1999 $ 2,500 $ 69,150 $ 183,453 $ (838) $ 254,265
=========================================================== ===========================================
</TABLE>
See accompanying Notes to Condensed Financial Statements (Unaudited).
5
VALLEY FORGE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30 1999 1998
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
(In thousands of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (4,230) $ 8,199
Adjustments to reconcile net income to net cash flows from
operating activities:
Deferred income provision (6,277) 4,292
Net realized investment (gains) losses, pre-tax 17,902 (3,513)
Amortization of bond discount (1,237) (1,955)
Changes in:
Insurance receivables, net (94,196) (491,676)
Deferred acquisition costs (5,657) (8,873)
Accrued investment income (508) (514)
Due from affiliates (41,111) 29,566
Federal income taxes 1,792 102
Insurance reserves 171,590 495,132
Commissions and other payables and other (26,631) (39,109)
--------- ---------
Total adjustments 15,667 (16,548)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 11,437 (8,349)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed maturities (989,428) (190,742)
Proceeds from fixed maturities:
Sales 898,060 173,683
Maturities, calls and redemptions 46,529 28,186
Change in policy loans (63) (3,329)
Change in other invested assets (214) --
Change in short-term investments 49,153 (29,854)
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES 4,037 (22,056)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts for investment contracts credited to policyholder account balances 5,982 27,111
Return of policyholder account balances on investment contracts (20,691) (19,836)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES (14,709) 7,275
--------- ---------
NET CASH FLOWS 765 (23,130)
Cash at beginning of period 3,750 24,565
- - -------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 4,515 $ 1,435
=======================================================================================================
Supplemental disclosures of cash flow information:
Federal income taxes paid $ -- $ --
=======================================================================================================
</TABLE>
See accompanying Notes to Condensed Financial Statements (Unaudited).
6
VALLEY FORGE LIFE INSURANCE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1999
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION:
Valley Forge Life Insurance Company (VFL) is a wholly-owned subsidiary of
Continental Assurance Company (CAC). CAC is a wholly-owned subsidiary of
Continental Casualty Company (Casualty) which is wholly-owned by CNA Financial
Corporation (CNA Financial). CNA Financial is a holding company whose primary
subsidiaries consist of property/casualty and life insurance companies,
collectively CNA. Loews Corporation owns approximately 86% of the outstanding
common stock of CNA Financial.
VFL markets and underwrites insurance products designed to satisfy the
life, health and retirement needs of individuals and groups. Products available
in individual policy form include annuities as well as term and universal life
insurance. Products available in group policy form include life, pension,
accident and health.
The operations, assets and liabilities of VFL and its parent, CAC, are
managed on a combined basis pursuant to a Reinsurance Pooling Agreement. Under
this Reinsurance Pooling Agreement, VFL cedes all of its business, excluding its
Separate Account business, to its parent, CAC. This business is then pooled with
the business of CAC, which excludes CAC's participating contracts and separate
account business, and 10% of the combined pool is assumed by VFL.
The operating results for the interim periods are not necessarily
indicative of the results to be expected for the full year. These statements
should be read in conjunction with the financial statements and notes thereto
included in VFL's Form 10-K for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
The accompanying condensed financial statements have been prepared in
conformity with generally accepted accounting principles. Certain amounts
applicable to prior years have been reclassified to conform to classifications
followed in 1999.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. In the
opinion of VFL's management, these statements include all adjustments,
consisting of normal recurring accruals, which are necessary for the fair
presentation of the financial position, results of operations and cash flows in
the accompanying condensed financial statements.
7
VALLEY FORGE LIFE INSURANCE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
NOTE 2. REINSURANCE:
The ceding of insurance does not discharge the primary liability of the
original insurer. VFL places reinsurance with other carriers only after careful
review of the nature of the contract and a thorough assessment of the
reinsurers' credit quality and claim settlement performance. Further, for
carriers that are not authorized reinsurers in VFL's state of domicile, VFL
receives collateral, primarily in the form of bank letters of credit.
In the table below, the majority of life premium revenue is from long
duration type contracts, while the majority of accident and health earned
premiums is from short duration contracts. The effects of reinsurance on premium
revenues are shown in the following schedule:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
PREMIUMS
-------------------------------------------
ASSUMED/
SIX MONTHS ENDED JUNE 30 DIRECT ASSUMED CEDED NET NET %
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(In thousands of dollars)
1999
Life $312,515 $ 38,004 $319,682 $ 30,837 123%
Accident and health 2,945 127,487 2,945 127,487 100
- - --------------------------------------------------------------------------------------------
TOTAL PREMIUMS $315,460 $165,491 $322,627 $158,324 105%
============================================================================================
1998
Life $255,982 $ 41,293 $258,973 $ 38,302 108%
Accident and health 1,827 116,278 1,827 116,278 100%
- - --------------------------------------------------------------------------------------------
Total premiums $257,809 $157,571 $260,800 $154,580 102%
============================================================================================
</TABLE>
Transactions with CAC, as part of the pooling agreement described in Note
1, are reflected in the above table. Premium revenues ceded to non-affiliated
companies were $187.4 million for the six months ended June 30, 1999, and $111.0
million for the six months ended June 30, 1998. Additionally, benefits and
expenses for insurance claims and policyholders' benefits are net of reinsurance
recoveries from non-affiliated companies of $139.2 million for the period ended
June 30, 1999, and $77.5 million for the same period in 1998.
Reinsurance receivables reflected on the balance sheets are amounts
recoverable from reinsurers who have assumed a portion of VFL's insurance
reserves. These balances are principally due from CAC pursuant to the
Reinsurance Pooling Agreement.
NOTE 3. LEGAL PROCEEDINGS:
VFL is party to litigation in the ordinary course of business. The outcome
of this litigation will not, in the opinion of management, materially affect the
results of operations or equity of VFL.
8
VALLEY FORGE LIFE INSURANCE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
NOTE 4. OTHER COMPREHENSIVE INCOME:
Comprehensive income is comprised of all changes to stockholder's equity,
including net income, except those changes resulting from investments by, and
distributions to, the stockholder. Other comprehensive income (loss) is
comprehensive income exclusive of net income. The change in the components of
other comprehensive income (loss) are presented in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
PRE-TAX TAX (EXPENSE) NET
THREE MONTHS ENDED JUNE 30, 1999 AMOUNT BENEFIT AMOUNT
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(In thousands of dollars)
Net unrealized gains (losses) on investments securities:
Net unrealized gains (losses) arising during the period $(1,304) $ 354 (950)
Reclassification adjustment for (gains) losses included in net income (566) 198 (368)
- - --------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER COMPREHENSIVE LOSS $(1,870) $ 552 $(1,318)
==========================================================================================================================
Pre-tax Tax (Expense) Net
Three Months Ended June 30, 1998 Amount Benefit Amount
- - --------------------------------------------------------------------------------------------------------------------------
(In thousands of dollars)
Net unrealized gains (losses) on investments securities:
Net unrealized gains (losses) arising during the period $(3,606) $ 1,263 $(2,343)
Reclassification adjustment for (gains) losses included in net income 5,428 (1,900) 3,528
- - --------------------------------------------------------------------------------------------------------------------------
Total Other Comprehensive Income $ 1,822 $ (637) $ 1,185
==========================================================================================================================
- - --------------------------------------------------------------------------------------------------------------------------
PRE-TAX TAX (EXPENSE) NET
SIX MONTHS ENDED JUNE 30, 1999 AMOUNT BENEFIT AMOUNT
- - --------------------------------------------------------------------------------------------------------------------------
(In thousands of dollars)
Net unrealized gains (losses) on investments securities:
Net unrealized gains (losses) arising during the period $(5,323) $ 1,851 $(3,472)
Reclassification adjustment for (gains) losses included in net income (2,851) 998 (1,853)
- - --------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER COMPREHENSIVE LOSS $(8,174) $ 2,849 $(5,325)
==========================================================================================================================
Pre-tax Tax (Expense) Net
Six Months Ended June 30, 1998 Amount Benefit Amount
- - --------------------------------------------------------------------------------------------------------------------------
(In thousands of dollars)
Net unrealized gains (losses) on investments securities:
Net unrealized gains (losses) arising during the period $(1,750) $ 613 $(1,137)
Reclassification adjustment for (gains) losses included in net income 2,962 (1,037) 1,925
- - --------------------------------------------------------------------------------------------------------------------------
Total Other Comprehensive Income $ 1,212 $ (424) $ 788
==========================================================================================================================
</TABLE>
9
VALLEY FORGE LIFE INSURANCE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONCLUDED
NOTE 5. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE:
In December 1997, the American Institute of Certified Public Accountants'
Accounting Standards Executive Committee issued Statement of Position (SOP)
97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 requires that entities recognize liabilities for
insurance-related assessments when all of the following criteria have been met:
an assessment has been imposed or it is probable that an assessment will be
imposed; the event obligating an entity to pay an imposed or probable assessment
has occurred on or before the date of the financial statements; and the amount
of the assessment can be reasonably estimated. This SOP is effective for
financial statements for fiscal years beginning after December 15, 1998.
Accordingly, VFL adopted SOP 97-3 effective January 1, 1999 and an after-tax
charge of $234,000 ($360,000 pre-tax) was recorded during 1999 to reflect the
cumulative effect of a change in accounting principle.
9. The following replaces the information under "ILLUSTRATIONS OF POLICY
VALUES, SURRENDER VALUES, DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS"
in its entirety:
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 23 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 0.86% of
the average daily net assets of the Funds available. The following information
summarizes the expenses by fund: Alger American Growth (0.79%), Alger American
MidCap Growth (0.84%), Alger American Small Capitalization (0.89%), Federated
High Income Bond II (0.78%), Federated Prime Money Fund II (0.80%), Federated
Utility Fund II (0.93%), VIP II Asset Manager Portfolio (0.64%), VIP II
Contrafund Portfolio (0.70%), VIP Equity-Income Portfolio (0.58%), VIP II Index
500 Portfolio (0.35%), MFS Emerging Growth Series (.85%), MFS Growth With Income
Series (0.88%), MFS Research Series (.86%), SoGen Overseas Portfolio (1.50%),
Worldwide Emerging Markets (1.50%), Worldwide Hard Assets Fund (1.16%) and Janus
Aspen Capital Appreciation Portfolio (0.92%), Janus Asepn Growth Portfolio
(0.68%), Janus Aspen Balanced Portfolio (0.74%), Janus Aspen Flexible Income
Portfolio (0.73%), Janus Aspen International Growth Portfolio (0.86%), and Janus
Aspen Worldwide Growth Portfolio (0.72%).
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 -1.76%,
4.24% and 10.24% , respectively during Policy Years 1-10 and - 1.31% , 4.69% and
10.69% 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. VFL's
current cost of insurance charges and the guaranteed maximum cost of insurance
charges that VFL 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 VFL'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.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$2,006 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ ---------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 2,105 1,226 352 100,000
2 4,316 2,647 1,505 100,000
3 6,638 4,021 2,421 100,000
4 9,075 5,346 3,746 100,000
5 11,634 6,622 5,022 100,000
6 14,321 7,848 6,248 100,000
7 17,143 9,018 7,738 100,000
8 20,105 10,129 9,009 100,000
9 23,216 11,177 10,217 100,000
10 26,483 12,157 11,357 100,000
11 29,912 13,146 12,506 100,000
12 33,513 14,061 13,581 100,000
13 37,294 14,900 14,580 100,000
14 41,265 15,659 15,499 100,000
15 45,433 16,328 16,328 100,000
16 49,810 16,901 16,901 100,000
17 54,406 17,367 17,367 100,000
18 59,232 17,713 17,713 100,000
19 64,299 17,923 17,923 100,000
20 69,620 17,979 17,979 100,000
21 75,206 17,865 17,865 100,000
22 81,072 17,564 17,564 100,000
23 87,231 17,059 17,059 100,000
24 93,698 16,329 16,329 100,000
25 100,488 15,347 15,347 100,000
26 107,618 14,071 14,071 100,000
27 115,105 12,397 12,397 100,000
28 122,966 10,354 10,354 100,000
29 131,219 7,806 7,806 100,000
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$2,006 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 2,105 1,318 444 100,000
2 4,316 2,916 1,774 100,000
3 6,638 4,558 2,958 100,000
4 9,075 6,246 4,646 100,000
5 11,634 7,979 6,379 100,000
6 14,321 9,759 8,159 100,000
7 17,143 11,583 10,303 100,000
8 20,105 13,449 12,329 100,000
9 23,216 15,355 14,395 100,000
10 26,483 17,297 16,497 100,000
11 29,912 19,388 18,748 100,000
12 33,513 21,529 21,049 100,000
13 37,294 23,721 23,401 100,000
14 41,265 25,967 25,807 100,000
15 45,433 28,264 28,264 100,000
16 49,810 30,613 30,613 100,000
17 54,406 33,012 33,012 100,000
18 59,232 35,460 35,460 100,000
19 64,299 37,954 37,954 100,000
20 69,620 40,491 40,491 100,000
21 75,206 43,073 43,073 100,000
22 81,072 45,705 45,705 100,000
23 87,231 48,393 48,393 100,000
24 93,698 51,145 51,145 100,000
25 100,488 53,970 53,970 100,000
26 107,618 56,874 56,874 100,000
27 115,105 59,840 59,840 100,000
28 122,966 62,924 62,924 100,000
29 131,219 66,116 66,116 100,000
30 139,886 69,440 69,440 100,000
- - -------------------------
</TABLE>
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE AGE 45 PREFERRED NON-SMOKER
$2,006 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 2,105 1,411 537 100,000
2 4,316 3,196 2,054 100,000
3 6,638 5,140 3,540 100,000
4 9,075 7,259 5,659 100,000
5 11,634 9,570 7,970 100,000
6 14,321 12,092 10,492 100,000
7 17,143 14,843 13,563 100,000
8 20,105 17,846 16,726 100,000
9 23,216 21,124 20,164 100,000
10 26,483 24,705 23,905 100,000
11 29,912 28,778 28,138 100,000
12 33,513 33,262 32,782 100,000
13 37,294 38,207 37,887 100,000
14 41,265 43,674 43,514 100,000
15 45,433 49,727 49,727 100,000
16 49,810 56,444 56,444 100,000
17 54,406 63,917 63,917 100,000
18 59,232 72,253 72,253 100,000
19 64,299 81,577 81,577 101,156
20 69,620 91,918 91,918 112,140
21 75,206 103,309 103,309 123,971
22 81,072 115,834 115,834 137,843
23 87,231 129,606 129,606 152,935
24 93,698 144,748 144,748 169,355
25 100,488 161,393 161,393 187,216
26 107,618 179,691 179,691 206,644
27 115,105 199,862 199,862 225,844
28 122,966 222,155 222,155 246,592
29 131,219 246,814 246,814 269,027
30 139,886 274,144 274,144 293,334
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$2,006 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 2,105 1,388 514 100,000
2 4,316 2,931 1,789 100,000
3 6,638 4,393 2,793 100,000
4 9,075 5,803 4,203 100,000
5 11,634 7,187 5,587 100,000
6 14,321 8,548 6,948 100,000
7 17,143 9,888 8,608 100,000
8 20,105 11,207 10,087 100,000
9 23,216 12,505 11,545 100,000
10 26,483 13,783 12,983 100,000
11 29,912 15,113 14,473 100,000
12 33,513 16,407 15,927 100,000
13 37,294 17,658 17,338 100,000
14 41,265 18,898 18,738 100,000
15 45,433 20,117 20,117 100,000
16 49,810 21,204 21,204 100,000
17 54,406 22,227 22,227 100,000
18 59,232 23,189 23,189 100,000
19 64,299 24,080 24,080 100,000
20 69,620 24,895 24,895 100,000
21 75,206 25,638 25,638 100,000
22 81,072 26,294 26,294 100,000
23 87,231 26,864 26,864 100,000
24 93,698 27,342 27,342 100,000
25 100,488 27,706 27,706 100,000
26 107,618 27,960 27,960 100,000
27 115,105 28,080 28,080 100,000
28 122,966 28,071 28,071 100,000
29 131,219 27,920 27,920 100,000
30 139,886 27,591 27,591 100,000
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$2,006 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 2,105 1,485 611 100,000
2 4,316 3,218 2,076 100,000
3 6,638 4,969 3,369 100,000
4 9,075 6,768 5,168 100,000
5 11,634 8,641 7,041 100,000
6 14,321 10,597 8,997 100,000
7 17,143 12,640 11,360 100,000
8 20,105 14,773 13,653 100,000
9 23,216 17,002 16,042 100,000
10 26,483 19,331 18,531 100,000
11 29,912 21,868 21,228 100,000
12 33,513 24,511 24,031 100,000
13 37,294 27,260 26,940 100,000
14 41,265 30,149 29,989 100,000
15 45,433 33,178 33,178 100,000
16 49,810 36,259 36,259 100,000
17 54,406 39,457 39,457 100,000
18 59,232 42,785 42,785 100,000
19 64,299 46,245 46,245 100,000
20 69,620 49,847 49,847 100,000
21 75,206 53,606 53,606 100,000
22 81,072 57,529 57,529 100,000
23 87,231 61,635 61,635 100,000
24 93,698 65,940 65,940 100,000
25 100,488 70,459 70,459 100,000
26 107,618 75,220 75,220 100,000
27 115,105 80,247 80,247 100,000
28 122,966 85,579 85,579 100,000
29 131,219 91,256 91,256 100,000
30 139,886 97,279 97,279 100,000
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$2,006 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 2,105 1,583 709 100,000
2 4,316 3,518 2,376 100,000
3 6,638 5,593 3,993 100,000
4 9,075 7,854 6,254 100,000
5 11,634 10,346 8,746 100,000
6 14,321 13,096 11,496 100,000
7 17,143 16,134 14,854 100,000
8 20,105 19,489 18,369 100,000
9 23,216 23,195 22,235 100,000
10 26,483 27,289 26,489 100,000
11 29,912 31,964 31,324 100,000
12 33,513 37,137 36,657 100,000
13 37,294 42,859 42,539 100,000
14 41,265 49,218 49,058 100,000
15 45,433 56,276 56,276 100,000
16 49,810 64,057 64,057 100,000
17 54,406 72,693 72,693 100,000
18 59,232 82,293 82,293 100,000
19 64,299 92,906 92,906 101,156
20 69,620 104,620 104,620 112,140
21 75,206 117,555 117,555 123,971
22 81,072 131,822 131,822 137,843
23 87,231 147,560 147,560 152,935
24 93,698 164,919 164,919 169,355
25 100,488 184,061 184,061 187,216
26 107,618 205,172 205,172 206,644
27 115,105 228,494 228,494 22,584
28 122,966 254,282 254,282 246,592
29 131,219 282,819 282,819 269,027
30 139,886 314,421 314,421 293,334
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$4,633 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 4,854 3,703 2,829 103,703
2 9,950 7,456 6,314 107,551
3 15,301 11,304 9,704 111,304
4 20,920 14,961 13,361 114,961
5 26,820 18,518 16,918 118,518
6 33,015 22,338 20,738 122,338
7 39,519 25,333 24,053 125,333
8 46,349 28,579 27,459 128,579
9 53,520 31,711 30,751 131,711
10 61,050 34,724 33,924 134,724
11 68,956 37,807 37,167 137,807
12 77,258 40,769 40,289 140,769
13 85,974 43,607 43,287 143,607
14 95,127 46,316 46,156 146,316
15 104,737 48,886 48,886 148,886
16 114,828 51,307 51,307 151,307
17 125,423 53,567 53,567 153,567
18 136,548 55,561 55,561 155,561
19 148,229 57,541 57,541 157,541
20 160,494 59,217 59,217 159,217
21 173,372 60,663 60,663 160,663
22 186,895 61,864 61,864 161,864
23 201,093 62,806 62,806 162,806
24 216,002 63,474 63,474 163,474
25 231,655 63,847 63,847 163,847
26 248,092 63,892 63,892 163,892
27 265,350 63,512 63,512 163,512
28 283,472 62,774 62,774 162,774
29 302,499 61,560 61,560 161,560
30 322,478 59,815 59,815 159,815
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$4,633 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 4,854 3,945 3,071 103,945
2 9,950 8,178 7,036 108,273
3 15,301 12,753 11,153 112,753
4 20,920 17,389 15,789 117,389
5 26,820 22,184 20,584 122,184
6 33,015 27,143 25,543 127,143
7 39,519 32,264 30,984 132,264
8 46,349 37,549 36,429 137,549
9 53,520 42,997 42,037 142,997
10 61,050 48,607 47,807 148,607
11 68,956 54,650 54,010 154,650
12 77,258 60,891 60,411 160,891
13 85,974 67,337 67,017 167,337
14 95,127 73,989 73,829 173,989
15 104,737 80,844 80,844 180,844
16 114,828 87,899 87,899 187,899
17 125,423 95,152 95,152 195,152
18 136,548 102,592 102,592 202,592
19 148,229 110,208 110,208 210,208
20 160,494 117,984 117,984 217,984
21 173,372 125,908 125,908 225,908
22 186,895 133,971 133,971 233,971
23 201,093 142,160 142,160 242,160
24 216,002 150,461 150,461 250,461
25 231,655 158,857 158,857 258,857
26 248,092 167,313 167,313 267,313
27 265,350 175,728 175,728 275,728
28 283,472 184,163 184,163 284,163
29 302,499 192,493 192,493 292,493
30 322,478 200,653 200,653 300,653
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$4,633 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 4,854 4,187 3,313 104,187
2 9,950 8,928 7,786 109,023
3 15,301 14,319 12,719 114,319
4 20,920 20,120 18,520 120,120
5 26,820 26,472 24,872 126,472
6 33,015 33,430 31,830 133,430
7 39,519 41,047 39,767 141,047
8 46,349 49,382 48,262 149,382
9 53,520 58,504 57,544 158,504
10 61,050 68,481 67,681 168,481
11 68,956 79,780 79,140 179,780
12 77,258 92,197 91,717 192,197
13 85,974 105,844 105,524 205,844
14 95,127 120,847 120,687 220,847
15 104,737 137,336 137,336 237,336
16 114,828 155,457 155,457 255,457
17 125,423 175,370 175,370 275,370
18 136,548 197,248 197,248 297,248
19 148,229 221,278 221,278 321,278
20 160,494 247,665 247,665 347,665
21 173,372 276,641 276,641 376,641
22 186,895 308,465 308,465 408,465
23 201,093 343,420 343,420 443,420
24 216,002 381,821 381,821 481,821
25 231,655 424,011 424,011 524,011
26 248,092 470,355 470,355 570,355
27 265,350 521,161 521,161 621,161
28 283,472 577,062 577,062 677,062
29 302,499 638,378 638,378 738,378
30 322,478 705,660 705,660 805,660
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$4,633 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 4,854 3,867 2,993 103,867
2 9,950 7,746 6,604 107,841
3 15,301 11,685 10,085 111,685
4 20,920 15,430 13,830 115,430
5 26,820 19,102 17,502 119,102
6 33,015 22,707 21,107 122,707
7 39,519 26,247 24,967 126,247
8 46,349 29,723 28,603 129,723
9 53,520 33,135 32,175 133,135
10 61,050 36,486 35,686 136,486
11 68,956 39,957 39,317 139,957
12 77,258 43,354 42,874 143,354
13 85,974 46,669 46,349 146,669
14 95,127 49,941 49,781 149,941
15 104,737 53,157 53,157 153,157
16 114,828 56,176 56,176 156,176
17 125,423 59,084 59,084 159,084
18 136,548 61,883 61,883 161,883
19 148,229 64,558 64,558 164,558
20 160,494 67,104 67,104 167,104
21 173,372 69,523 69,523 169,523
22 186,895 71,794 71,794 171,794
23 201,093 73,920 73,920 173,920
24 216,002 75,892 75,892 175,892
25 231,655 77,679 77,679 177,679
26 248,092 79,289 79,289 179,289
27 265,350 80,688 80,688 180,688
28 283,472 81,888 81,888 181,888
29 302,499 82,875 82,875 182,875
30 322,478 83,605 83,605 183,605
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$4,633 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 4,854 4,114 3,240 104,114
2 9,950 8,486 7,344 108,581
3 15,301 13,174 11,574 113,174
4 20,920 17,926 16,326 117,926
5 26,820 22,871 21,271 122,871
6 33,015 28,019 26,419 128,019
7 39,519 33,381 32,101 133,381
8 46,349 38,967 37,847 138,967
9 53,520 44,784 43,824 144,784
10 61,050 50,843 50,043 150,843
11 68,956 57,414 56,774 157,414
12 77,258 64,263 63,783 164,263
13 85,974 71,393 71,073 171,393
14 95,127 78,856 78,696 178,856
15 104,737 86,653 86,653 186,653
16 114,828 94,655 94,655 194,655
17 125,423 102,956 102,956 202,956
18 136,548 111,571 111,571 211,571
19 148,229 120,500 120,500 220,500
20 160,494 129,747 129,747 229,747
21 173,372 139,330 139,330 239,330
22 186,895 149,240 149,240 249,240
23 201,093 159,495 159,495 259,495
24 216,002 170,097 170,097 270,097
25 231,655 181,033 181,033 281,033
26 248,092 192,320 192,320 292,320
27 265,350 203,940 203,940 303,940
28 283,472 215,916 215,916 315,916
29 302,499 228,250 228,250 328,250
30 322,478 240,909 240,909 340,909
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$4,633 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 4,854 4,362 3,488 104,362
2 9,950 9,257 8,115 109,352
3 15,301 14,784 13,184 114,784
4 20,920 20,733 19,133 120,733
5 26,820 27,278 25,678 127,278
6 33,015 34,483 32,883 134,483
7 39,519 42,417 41,137 142,417
8 46,349 51,153 50,033 151,153
9 53,520 60,774 59,814 160,774
10 61,050 71,367 70,567 171,367
11 68,956 83,410 82,770 183,410
12 77,258 96,705 96,225 196,705
13 85,974 111,375 111,055 211,375
14 95,127 127,606 127,446 227,606
15 104,737 145,550 145,550 245,550
16 114,828 165,240 165,240 265,240
17 125,423 186,948 186,948 286,948
18 136,548 210,891 210,891 310,891
19 148,229 237,291 237,291 337,291
20 160,494 266,400 266,400 366,400
21 173,372 298,508 298,508 398,508
22 186,895 333,911 333,911 433,911
23 201,093 372,960 372,960 472,960
24 216,002 416,032 416,032 516,032
25 231,655 463,523 463,523 563,523
26 248,092 515,907 515,907 615,907
27 265,350 573,670 573,670 673,670
28 283,472 637,392 637,392 737,392
29 302,499 707,694 707,694 807,694
30 322,478 785,227 785,227 885,227
- - -------------------------
</TABLE>
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$1,707 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 1,791 986 214 100,000
2 3,672 2,176 1,140 100,000
3 5,647 3,328 2,028 100,000
4 7,721 4,441 3,141 100,000
5 9,899 5,516 4,216 100,000
6 12,185 6,548 5,248 100,000
7 14,586 7,539 6,499 100,000
8 17,106 8,485 7,575 100,000
9 19,753 9,383 8,603 100,000
10 22,532 10,232 9,582 100,000
11 25,450 11,099 10,579 100,000
12 28,514 11,920 11,530 100,000
13 31,731 12,696 12,436 100,000
14 35,109 13,429 13,299 100,000
15 38,656 14,119 14,119 100,000
16 42,380 14,759 14,759 100,000
17 46,291 15,341 15,341 100,000
18 50,397 15,853 15,853 100,000
19 54,708 16,278 16,278 100,000
20 59,235 16,602 16,602 100,000
21 63,988 16,817 16,817 100,000
22 68,979 16,915 16,915 100,000
23 74,219 16,896 16,896 100,000
24 79,722 16,757 16,757 100,000
25 85,499 16,490 16,490 100,000
26 91,565 16,073 16,073 100,000
27 97,935 15,473 15,473 100,000
28 104,623 14,644 14,644 100,000
29 111,646 13,529 13,529 100,000
30 119,020 12,064 12,064 100,000
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
<PAGE> 91
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$1,707 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 1,791 1,062 290 100,000
2 3,672 2,399 1,363 100,000
3 5,647 3,774 2,474 100,000
4 7,721 5,188 3,888 100,000
5 9,899 6,643 5,343 100,000
6 12,185 8,138 6,838 100,000
7 14,586 9,674 8,634 100,000
8 17,106 11,250 10,340 100,000
9 19,753 12,863 12,083 100,000
10 22,532 14,516 13,866 100,000
11 25,450 16,301 15,781 100,000
12 28,514 18,143 17,753 100,000
13 31,731 20,045 19,785 100,000
14 35,109 22,015 21,885 100,000
15 38,656 24,056 24,056 100,000
16 42,380 26,167 26,167 100,000
17 46,291 28,348 28,348 100,000
18 50,397 30,593 30,593 100,000
19 54,708 32,895 32,895 100,000
20 59,235 35,249 35,249 100,000
21 63,988 37,658 37,658 100,000
22 68,979 40,126 40,126 100,000
23 74,219 42,663 42,663 100,000
24 79,722 45,279 45,279 100,000
25 85,499 47,983 47,983 100,000
26 91,565 50,777 50,777 100,000
27 97,935 53,659 53,659 100,000
28 104,623 56,627 56,627 100,000
29 111,646 59,678 59,678 100,000
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$1,707 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 1,791 1,139 367 100,000
2 3,672 2,631 1,595 100,000
3 5,647 4,257 2,957 100,000
4 7,721 6,030 4,730 100,000
5 9,899 7,966 6,666 100,000
6 12,185 10,079 8,779 100,000
7 14,586 12,387 11,347 100,000
8 17,106 14,909 13,999 100,000
9 19,753 17,665 16,885 100,000
10 22,532 20,680 20,030 100,000
11 25,450 24,112 23,592 100,000
12 28,514 27,897 27,507 100,000
13 31,731 32,078 31,818 100,000
14 35,109 36,707 36,577 100,000
15 38,656 41,837 41,837 100,000
16 42,380 47,526 47,526 100,000
17 46,291 53,842 53,842 100,000
18 50,397 60,856 60,856 100,000
19 54,708 68,658 68,658 100,000
20 59,235 77,351 77,351 100,000
21 63,988 87,052 87,052 104,462
22 68,979 97,769 97,769 116,345
23 74,219 109,581 109,581 129,306
24 79,722 122,603 122,603 143,446
25 85,499 136,959 136,959 158,872
26 91,565 152,784 152,784 175,701
27 97,935 170,264 170,264 192,398
28 104,623 189,581 189,581 210,435
29 111,646 210,945 210,945 229,930
30 119,020 234,600 234,600 251,022
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$1,707 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 1,791 1,259 385 100,000
2 3,672 2,605 1,463 100,000
3 5,647 4,096 2,496 100,000
4 7,721 5,352 3,752 100,000
5 9,899 6,576 4,976 100,000
6 12,185 7,771 6,171 100,000
7 14,586 8,872 7,592 100,000
8 17,106 9,978 8,858 100,000
9 19,753 11,059 10,099 100,000
10 22,532 12,115 11,315 100,000
11 25,450 13,223 12,583 100,000
12 28,514 14,313 13,833 100,000
13 31,731 15,388 15,068 100,000
14 35,109 16,434 16,274 100,000
15 38,656 17,469 17,469 100,000
16 42,380 18,502 18,502 100,000
17 46,291 19,499 19,499 100,000
18 50,397 20,457 20,457 100,000
19 54,708 21,377 21,377 100,000
20 59,235 22,258 22,258 100,000
21 63,988 23,094 23,094 100,000
22 68,979 23,887 23,887 100,000
23 74,219 24,628 24,628 100,000
24 79,722 25,320 25,320 100,000
25 85,499 25,958 25,958 100,000
26 91,565 26,531 26,531 100,000
27 97,935 27,041 27,041 100,000
28 104,623 27,473 27,473 100,000
29 111,646 27,823 27,823 100,000
30 119,020 28,068 28,068 100,000
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$1,707 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
1 1,791 1,341 467 100,000
2 3,672 2,848 1,706 100,000
3 5,647 4,587 2,987 100,000
4 7,721 6,178 4,578 100,000
5 9,899 7,827 6,227 100,000
6 12,185 9,537 7,937 100,000
7 14,586 11,248 9,968 100,000
8 17,106 13,060 11,940 100,000
9 19,753 14,947 13,987 100,000
10 22,532 16,912 16,112 100,000
11 25,450 19,060 18,420 100,000
12 28,514 21,311 20,831 100,000
13 31,731 23,673 23,353 100,000
14 35,109 26,136 25,976 100,000
15 38,656 28,725 28,725 100,000
16 42,380 31,455 31,455 100,000
17 46,291 34,300 34,300 100,000
18 50,397 37,265 37,265 100,000
19 54,708 40,358 40,358 100,000
20 59,235 43,586 43,586 100,000
21 63,988 46,954 46,954 100,000
22 68,979 50,472 50,472 100,000
23 74,219 54,147 54,147 100,000
24 79,722 57,993 57,993 100,000
25 85,499 62,019 62,019 100,000
26 91,565 66,236 66,236 100,000
27 97,935 70,662 70,662 100,000
28 104,623 75,309 75,309 100,000
29 111,646 80,201 80,201 100,000
30 119,020 85,356 85,356 100,000
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$1,707 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 1,791 1,423 549 100,000
2 3,672 3,102 1,960 100,000
3 5,647 5,118 3,518 100,000
4 7,721 7,107 5,507 100,000
5 9,899 9,289 7,689 100,000
6 12,185 11,687 10,087 100,000
7 14,586 14,259 12,979 100,000
8 17,106 17,127 16,007 100,000
9 19,753 20,290 19,330 100,000
10 22,532 23,778 22,978 100,000
11 25,450 27,770 27,130 100,000
12 28,514 32,196 31,716 100,000
13 31,731 37,109 36,789 100,000
14 35,109 42,550 42,390 100,000
15 38,656 48,592 48,592 100,000
16 42,380 55,318 55,318 100,000
17 46,291 62,771 62,771 100,000
18 50,397 71,036 71,036 100,000
19 54,708 80,208 80,208 100,000
20 59,235 90,374 90,374 110,256
21 63,988 101,609 101,609 121,931
22 68,979 114,022 114,022 135,686
23 74,219 127,734 127,734 150,726
24 79,722 142,883 142,883 167,173
25 85,499 159,618 159,618 185,157
26 91,565 178,102 178,102 204,818
27 97,935 198,541 198,541 224,352
28 104,623 221,144 221,144 245,470
29 111,646 246,151 246,151 268,305
30 119,020 273,829 273,829 292,997
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$3,706 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 3,891 2,877 2,105 102,877
2 7,976 5,922 4,886 105,922
3 12,265 8,892 7,592 108,892
4 16,769 11,786 10,486 111,786
5 21,498 14,605 13,305 114,605
6 26,463 17,345 16,045 117,345
7 31,677 20,007 18,967 120,007
8 37,151 22,588 21,678 122,588
9 42,899 25,084 24,304 125,084
10 48,935 27,494 26,844 127,494
11 55,272 29,970 29,450 129,970
12 61,926 32,368 31,978 132,368
13 68,913 34,690 34,430 134,690
14 76,249 36,937 36,807 136,937
15 83,952 39,109 39,109 139,109
16 92,041 41,198 41,198 141,198
17 100,533 43,196 43,196 143,196
18 109,450 45,086 45,086 145,086
19 118,813 46,850 46,850 146,850
20 128,645 48,470 48,470 148,470
21 138,967 49,938 49,938 149,938
22 149,806 51,246 51,246 151,246
23 161,187 52,395 52,395 152,395
24 173,137 53,385 53,385 153,385
25 185,684 54,209 54,209 154,209
26 198,859 54,845 54,845 154,845
27 212,693 55,260 55,260 155,260
28 227,218 55,407 55,407 155,407
29 242,469 55,231 55,231 155,231
30 258,483 54,680 54,680 154,680
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$3,706 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 3,891 3,068 2,296 103,068
2 7,976 6,491 5,455 106,491
3 12,265 10,034 8,734 110,034
4 16,769 13,701 12,401 113,701
5 21,498 17,497 16,197 117,497
6 26,463 21,422 20,122 121,422
7 31,677 25,481 24,441 125,481
8 37,151 29,674 28,764 129,674
9 42,899 34,002 33,222 134,002
10 48,935 38,468 37,818 138,468
11 55,272 43,289 42,769 143,289
12 61,926 48,288 47,898 148,288
13 68,913 53,474 53,214 153,474
14 76,249 58,857 58,727 158,857
15 83,952 64,444 64,444 164,444
16 92,041 70,235 70,235 170,235
17 100,533 76,230 76,230 176,230
18 109,450 82,422 82,422 182,422
19 118,813 88,798 88,798 188,798
20 128,645 95,346 95,346 195,346
21 138,967 102,067 102,067 202,067
22 149,806 108,956 108,956 208,956
23 161,187 116,019 116,019 216,019
24 173,137 123,265 123,265 223,265
25 185,684 130,692 130,692 230,692
26 198,859 138,282 138,282 238,282
27 212,693 146,010 146,010 246,010
28 227,218 153,827 153,827 253,827
29 242,469 161,681 161,681 261,681
30 258,483 169,513 169,513 269,513
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$3,706 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 3,891 3,260 2,488 103,260
2 7,976 7,082 6,046 107,082
3 12,265 11,269 9,969 111,269
4 16,769 15,856 14,556 115,856
5 21,498 20,881 19,581 120,881
6 26,463 26,385 25,085 126,385
7 31,677 32,415 31,375 132,415
8 37,151 39,020 38,110 139,020
9 42,899 46,251 45,471 146,251
10 48,935 54,172 53,522 154,172
11 55,272 63,153 62,633 163,153
12 61,926 73,042 72,652 173,042
13 68,913 83,935 83,675 183,935
14 76,249 95,941 95,811 195,941
15 83,952 109,175 109,175 209,175
16 92,041 123,759 123,759 223,759
17 100,533 139,828 139,828 239,828
18 109,450 157,521 157,521 257,521
19 118,813 176,989 176,989 276,989
20 128,645 198,401 198,401 298,401
21 138,967 221,954 221,954 321,954
22 149,806 247,865 247,865 347,865
23 161,187 276,384 276,384 376,384
24 173,137 307,787 307,787 407,787
25 185,684 342,372 342,372 442,372
26 198,859 380,452 380,452 480,452
27 212,693 422,363 422,363 522,363
28 227,218 468,460 468,460 568,460
29 242,469 519,131 519,131 619,131
30 258,483 574,802 574,802 674,802
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$3,706 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 3,891 3,050 2,278 103,050
2 7,976 6,251 5,215 106,251
3 12,265 9,370 8,070 109,370
4 16,769 12,413 11,113 112,413
5 21,498 15,390 14,090 115,390
6 26,463 18,303 17,003 118,303
7 31,677 21,148 20,108 121,148
8 37,151 23,934 23,024 123,934
9 42,899 26,663 25,883 126,663
10 48,935 29,336 28,686 129,336
11 55,272 32,113 31,593 132,113
12 61,926 34,847 34,457 134,847
13 68,913 37,542 37,282 137,542
14 76,249 40,179 40,049 140,179
15 83,952 42,782 42,782 142,782
16 92,041 45,324 45,324 145,324
17 100,533 47,802 47,802 147,802
18 109,450 50,208 50,208 150,208
19 118,813 52,547 52,547 152,547
20 128,645 54,815 54,815 154,815
21 138,967 57,004 57,004 157,004
22 149,806 59,116 59,116 159,116
23 161,187 61,139 61,139 161,139
24 173,137 63,075 63,075 163,075
25 185,684 64,920 64,920 164,920
26 198,859 66,656 66,656 166,656
27 212,693 68,288 68,288 168,288
28 227,218 69,791 69,791 169,791
29 242,469 71,162 71,162 171,162
30 258,483 72,371 72,371 172,371
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$3,706 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 3,891 3,247 2,475 103,247
2 7,976 6,840 5,804 106,840
3 12,265 10,559 9,259 110,559
4 16,769 14,411 13,111 114,411
5 21,498 18,411 17,111 118,411
6 26,463 22,566 21,266 122,566
7 31,677 26,879 25,839 126,879
8 37,151 31,364 30,454 131,364
9 42,899 36,028 35,248 136,028
10 48,935 40,878 40,228 140,878
11 55,272 46,147 45,627 146,147
12 61,926 51,656 51,266 151,656
13 68,913 57,417 57,157 157,417
14 76,249 63,425 63,295 163,425
15 83,952 69,713 69,713 169,713
16 92,041 76,267 76,267 176,267
17 100,533 83,094 83,094 183,094
18 109,450 90,200 90,200 190,200
19 118,813 97,601 97,601 197,601
20 128,645 105,305 105,305 205,305
21 138,967 113,319 113,319 213,319
22 149,806 121,656 121,656 221,656
23 161,187 130,319 130,319 230,319
24 173,137 139,325 139,325 239,325
25 185,684 148,684 148,684 248,684
26 198,859 158,391 158,391 258,391
27 212,693 168,468 168,468 268,468
28 227,218 178,906 178,906 278,906
29 242,469 189,715 189,715 289,715
30 258,483 200,881 200,881 300,881
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$3,706 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
INCREASING DEATH BENEFIT OPTION
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
PREMIUMS ACCUMULATED
AT 5% INTEREST
END OF POLICY YEAR PER YEAR POLICY VALUE SURRENDER VALUE DEATH BENEFIT
- - ------------------ -------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1 3,891 3,444 2,672 103,444
2 7,976 7,454 6,418 107,454
3 12,265 11,844 10,544 111,844
4 16,769 16,656 15,356 116,656
5 21,498 21,942 20,642 121,942
6 26,463 27,752 26,452 127,752
7 31,677 34,133 33,093 134,133
8 37,151 41,152 40,242 141,152
9 42,899 48,873 48,093 148,873
10 48,935 57,369 56,719 157,369
11 55,272 67,036 66,516 167,036
12 61,926 77,724 77,334 177,724
13 68,913 89,546 89,286 189,546
14 76,249 102,602 102,472 202,602
15 83,952 117,048 117,048 217,048
16 92,041 133,002 133,002 233,002
17 100,533 150,621 150,621 250,621
18 109,450 170,074 170,074 270,074
19 118,813 191,558 191,558 291,558
20 128,645 215,286 215,286 315,286
21 138,967 241,486 241,486 341,486
22 149,806 270,424 270,424 370,424
23 161,187 302,376 302,376 402,376
24 173,137 337,665 337,665 437,665
25 185,684 376,640 376,640 476,640
26 198,859 419,673 419,673 519,673
27 212,693 467,201 467,201 567,201
28 227,218 519,674 519,674 619,674
29 242,469 577,615 577,615 677,615
30 258,483 641,572 641,572 741,572
</TABLE>
- - -------------------------
* 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 VFL OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF YEARS.
Part II
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, 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.
Section 26(e)(2)(A) Representation
Valley Forge Life Insurance Company hereby represents that the fees and
charges deducted under the Policy, in the aggregate, are reasonable in relation
to the services rendered, the expenses expected to be incurred, and the risks
assumed by Valley Forge Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 84 pages.
Undertaking to file reports.
Rule 484 undertaking.
Representations pursuant to Section 26(e)(2)(A)
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**
(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*
(h) Form of participation agreement between Janus Aspen 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
3. Not applicable
4. Not applicable
5. Financial Data Schedule (Not Applicable)
6. Opinion and consent as to actuarial matters pertaining to the
securities being registered
7. (a) Consent of Deloitte & Touche LLP
- --------------------------------------------------------------------------------
* Incorporated by reference to the Form N-4 Registration Statement filed with
the Securities and Exchange Commission on September 4, 1996 (File No.
333-1087).
** Incorporated herein by reference to the registrant's initial filing of Form
S-6 on March 25, 1996 (File No. 333-01949).
*** Incorporated by reference to the N-4 Registration Statement filed with the
Securities and Exchange Commission on February 20, 1996 (File No. 333-1087)
**** Incorporated by reference to the registrant's Pre-effective Amendment No.1
filing on Form S-6 on September 4, 1996 (File No. 333-01949).
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it meets all of the requirements for effectiveness of this
registration statement pursuant to Rule 485(b) under the Securities Act of 1933,
and has duly caused this amendment to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois, on this 2nd day of September, 1999
VALLEY FORGE LIFE INSURANCE COMPANY
(Registrant)
Attest: /s/G. STEPHEN WASTEK By: /s/KEVIN M. HOGAN
---------------------- -------------------------
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - -------------------------- ------------------------ --------------------
<S> <C> <C>
/s/PHILIP L. ENGEL President, Director September 2, 1999
- - ----------------------------
Philip L. Engel
/s/BERNARD L. HENGESBAUGH Chief Executive Officer, September 2, 1999
- - ---------------------------- Chairman of the Board,
Bernard L. Hengesbaugh Director
Senior Vice President, Secretary, _________
- - ---------------------------- General Counsel,
Jonathan D. Kantor Director
/s/ROBERT V. DEUTSCH Chief Financial Officer September 2, 1999
- - -------------------------
Robert V. Deutsch and Director
/s/CAROL DUBNICKI Senior Vice President,
- --------------------------- Director September 2, 1999
Carol Dubnicki
Group Vice President,
- --------------------------- Director _________
Donald P. Lofe, Jr.
Group Vice President,
- --------------------------- Director _________
John M. Squarok
</TABLE>
INDEX TO EXHIBITS
EX-99.A.8.(h) Form of Participation Agreement between Janus Aspen Series
and the Company
EX-99.C.2. Opinion and Consent
EX-99.C.6. Actuarial Opinion and Consent
EX-99.C.7.a Consent of Deloitte & Touche LLP
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 16 day of June, 1999, between JANUS ASPEN
SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and CONTINENTAL ASSURANCE COMPANY, a life
insurance company organized under the laws of the State of Illinois (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Accounts").
W I T N E S S E T H :
---------------------
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the " 1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and Exchange
Commission granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b)
of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the
extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless registration
is not required under applicable law) certain variable life insurance policies
and/or variable annuity contracts under the 1933 Act (the "Contracts"); and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more Portfolios as
an investment vehicle of the Accounts;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
Sale of Trust Shares
--------------------
1.1 The Trust shall make shares of its Portfolios available to the Accounts
at the net asset value next computed after receipt of such purchase order by the
Trust (or its agent), as established in accordance with the provisions of the
then current prospectus of the Trust. Shares of a particular Portfolio of the
Trust shall be ordered in such quantities and at such times as determined by the
Company to be necessary to meet the requirements of the Contracts. The Trustees
of the Trust (the "Trustees") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.2 The Trust will redeem any full or fractional shares of any Portfolio
when requested by the Company on behalf of an Account at the net asset value
next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints the
Company as its agent for the limited purpose of receiving and accepting purchase
and redemption orders resulting from investment in and payments under the
Contracts. Receipt by the Company shall constitute receipt by the Trust provided
that i) such orders are received by the Company in good order prior to the time
the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 10:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance with
Section 1.3 shall be paid for no later than 12:00 noon New York time on the same
Business Day that the Trust receives notice of the order. Payments shall be made
in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account. Shares
ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7 The Trust shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 6 p.m. New York time.
1.8 The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company agrees
that Trust shares will be used only for the purposes of funding the Contracts
and Accounts listed in Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.8 and Article IV of
this Agreement.
ARTICLE II
Obligations of the Parties
--------------------------
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide the
Company (at the Company's expense) with as many copies of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request; or (b) provide the Company with a
camera ready copy of such documents in a form suitable for printing. The Trust
shall provide the Company with a copy of its statement of additional information
in a form suitable for duplication by the Company. The Trust (at its expense)
shall provide the Company with copies of any Trust-sponsored proxy materials in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
2.3 (a) The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
(b) If the Company elects to include any materials provided by the Trust,
specifically prospectuses, SAIs, shareholder reports and proxy materials, on its
web site or in any other computer or electronic format, the Company assumes sole
responsibility for maintaining such materials in the form provided by the Trust
and for promptly replacing such materials with all updates provided by the
Trust.
2.4 The Company agrees and acknowledges that the Trust's adviser, Janus
Capital Corporation (" Janus Capital"), is the sole owner of the name and mark
"Janus" and that all use of any designation comprised in whole or part of Janus
(a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of Janus
Capital. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to the Trust or
its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The Company
shall furnish, or shall cause to be furnished, to the Trust or its designee,
each piece of sales literature or other promotional material in which the Trust
or its investment adviser is named, at least fifteen Business Days prior to its
use. No such material shall be used if the Trust or its designee reasonably
objects to such use within fifteen Business Days after receipt of such material.
2.6 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or its investment
adviser in connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Trust shares (as such registration statement and
prospectus may be amended or supplemented from time to time), reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as required
by legal process or regulatory authorities or with the written permission of the
Trust or its designee.
2.7 The Trust shall not give any information or make any representations or
statements on behalf of the Company or concerning the Company, the Accounts or
the Contracts other than information or representations contained in and
accurately derived from the registration statement or prospectus for the
Contracts (as such registration statement and prospectus may be amended or
supplemented from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials, except
as required by legal process or regulatory authorities or with the written
permission of the Company.
2.8 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
2.9 The Company shall notify the Trust of any applicable state insurance
laws that restrict the Portfolios' investments or otherwise affect the operation
of the Trust and shall notify the Trust of any changes in such laws.
ARTICLE III
Representations and Warranties
------------------------------
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Illinois and
that it has legally and validly established each Account as a segregated asset
account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that each Account has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act.
3.3 The Company represents and warrants that the Contracts or interests in
the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that it will take
reasonable steps to ensure that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and the sale of the Contracts shall comply in all material respects with state
insurance suitability requirements.
3.4 Each party to this Agreement represents and warrants that it has taken,
or will take, appropriate measures to adjust its computer systems so that its
operations and services provided under this agreement will not be materially
affected upon January 1, 2000. If the operations and services are materially
affected by a party's failure to implement any Year 2000 required adjustments,
such party shall indemnify and hold harmless the other parties to this Agreement
from and against all claims, demands, actions, losses, damages, liabilities,
costs, charges, reasonable counsel fees and expenses incurred as a result of
such failure, in accordance with Section 2. No party shall be liable for any
indirect, special or consequential losses, even if the party has notice of the
possibility of such losses.
3.5 The Trust represents and warrants that it is duly organized and validly
existing under the laws of the State of Delaware.
3.6 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
3.7 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
ARTICLE IV
Potential Conflicts
-------------------
4.1 The parties acknowledge that the Trust's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a variety
of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of its
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Exemptive Order) on terms and conditions materially different
from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 6e-3, as adopted, to the extent such
rules are applicable.
ARTICLE V
Indemnification
---------------
5.1 Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Trust and each of its Trustees, officers, employees and agents
and each person, if any, who controls the Trust within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a registration
statement or prospectus for the Contracts or in the Contracts themselves or
in sales literature generated or approved by the Company on behalf of the
Contracts or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and was accurately derived from written information furnished to the
Company by or on behalf of the Trust for use in Company Documents or
otherwise for use in connection with the sale of the Contracts or Trust
shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Trust Documents as defined in Section 5.2(a)) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as defined in
Section 5.2(a) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was made in
reliance upon and accurately derived from written information furnished to
the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to provide
the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company.
5.2 Indemnification By the Trust. The Trust agrees to indemnify and hold
harmless the Company and each of its directors, officers, employees and agents
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Trust (or any amendment or supplement
thereto), (collectively, "Trust Documents" for the purposes of this Article
V), or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to the Trust by or on
behalf of the Company for use in Trust Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Company Documents) or wrongful conduct of the Trust or persons under its
control, with respect to the sale or acquisition of the Contracts or Trust
shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived from
written information furnished to the Company by or on behalf of the Trust;
or
(d) arise out of or result from any failure by the Trust to provide
the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Trust.
5.3 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice of
service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
Party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties, the
indemnifying party shall be entitled to participate, at its own expense, in the
defense of such action. The indemnifying party also shall be entitled to assume
the defense thereof, with counsel reasonably satisfactory to the party named in
the action. After notice from the indemnifying party to the Indemnified Party of
an election to assume such defense, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
ARTICLE VI
Termination
-----------
6.1 This Agreement may be terminated by either party for any reason by
ninety (90) days advance written notice delivered to the other party.
6.2 Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares of the
Trust (or any Portfolio) pursuant to the terms and conditions of this Agreement
for all Contracts in effect on the effective date of termination of this
Agreement, provided that the Company continues to pay the costs set forth in
Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
Janus Aspen Series
100 Fillmore Street
Denver, Colorado 80206
Attention: General Counsel
If to the Company:
Continental Assurance Company
Variable Life Insurance Products - 34 South
CNA Plaza
Chicago, IL 60611
Attention: Kevin Hogan
ARTICLE VIII
Miscellaneous
-------------
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc., and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.8 The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Participation Agreement as of the date and year first above
written.
JANUS ASPEN SERIES
By: /s/ BONNIE HOWE
Name: Bonnie M. Howe
Title: Assistant Vice President
CONTINENTAL ASSURANCE COMPANY
By: /s/ KEVIN M. HOGAN
Name: Kevin M. Hogan
Title: Vice President
Schedule A
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Continental Assurance Company CNA Capital Select VA
Variable Annuity Separate Account
January 30, 1996
Continental Assurance Company CNA Capital Select VUL
Variable Life Separate Account
January 30, 1996
August 31, 1999
Securities and Exchange Commission
Division of Investment Management
Office of Insurance Products
450 Fifth Street, N.W.
Washington, DC 20549
Re: Opinion of Counsel - Valley Forge Life Insurance Company Variable Life
Separate Account
File Nos. 333-01949 and 811-07569
Gentlemen:
This Opinion of Counsel is rendered in connection with the filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, of Post-Effective Amendment No. 6 to a Registration Statement filed on
Form S-6 for the variable life insurance policies to be issued by Valley Forge
Life Insurance Company and its separate account, Valley Forge Life Insurance
Company Variable Life Separate Account. I have made such examination of the law
and have examined such records and documents as, in my judgment, are necessary
or appropriate to enable me to render the opinions expressed below.
I am of the following opinions:
1. Valley Forge Life Insurance Company Variable Life Separate Account is a
Unit Investment Trust as that term is defined in Section 4(2) of the
Investment Company Act of 1940 (the "Act"), and is currently registered
with the Securities and Exchange Commission, pursuant to Section 8(a) of
the Act.
2. Upon the acceptance of premiums paid by an Owner pursuant to a policy
issued in accordance with the Prospectus contained in the Registration
Statement and upon compliance with applicable law, such an Owner will have
a legally-issued, fully-paid, non-assessable contractual interest under
such policy.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
Very truly yours,
/s/TIMOTHY SCOTT
- ----------------------
ACTUARIAL OPINION AND CONSENT
This opinion is furnished in connection with Post-Effective Amendment No. 6 to
the registration of the Individual Variable Flexible Premium Life Insurance
policy of the Valley Forge Life Insurance Company Separate Account, file numbers
333-01949 and 888-07569.
I am familiar with the terms of the Registration Statement and the accompanying
exhibits. The prospectus included in Registration Statement describes the policy
issued by Valley Forge Life Insurance Company. In my professional opinion:
1. The charges on the policy are reasonable in relation to industry norms and
in relation to the expenses expected to be incurred by Valley Forge Life
Insurance Company in connection with this policy.
2. The illustrations of accumulated premium, death benefits, account values,
and cash surrender values that appear in the prospectus are consistent with
the provisions of the policy and are based on the assumptions stated in the
accompanying text.
3. The illustrations show values on both a current basis and a guaranteed
basis.
4. The specific ages, sex, rate class, and the premium amounts used in these
illustrations are representative of the typical purchases that Valley Forge
Life Insurance Company expects will purchase the product. These
characteristics have not been selected so as to make the relationship
between premiums and benefits look more favorable in these specific
instances than it would for prospective purchases with different
characteristics.
I hereby consent to the use of this opinion as an Exhibit to the registration.
/S/ ROD RISHEL
- -------------------------
Rod Rishel
Actuarial Director of Pricing
Valley Forge Life Insurance Company
EXHIBIT 7A
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 6 to Registration Statement No. 333-01949 on Form S-6 of Valley Forge Life
Insurance Company Variable Life Separate Account of our report on the financial
statements and financial statement schedules of Valley Forge Life insurance
Company, dated February 10, 1999, and to the use of our report on the financial
statements of the Valley Forge Life Insurance Company Variable Annuity Separate
Account, dated February 23, 1999, appearing in the Registration Statement.
Deloitte & Touche LLP
Chicago, Illinois
August 31, 1999
