-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R3TMNSXjikfDFsn0swHXWOCnrYZPZ2/35/yEU6dJ3Q/3gCIGPYqTwZdWRfcTCyFR T0avz2MzTUQT/453V3A6QQ== 0000928389-97-000009.txt : 19970114 0000928389-97-000009.hdr.sgml : 19970114 ACCESSION NUMBER: 0000928389-97-000009 CONFORMED SUBMISSION TYPE: N-4 EL PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19970113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREFERRED LIFE VARIABLE ACCOUNT C CENTRAL INDEX KEY: 0000845775 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133191369 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-4 EL SEC ACT: 1933 Act SEC FILE NUMBER: 333-19699 FILM NUMBER: 97505047 FILING VALUES: FORM TYPE: N-4 EL SEC ACT: 1940 Act SEC FILE NUMBER: 811-05716 FILM NUMBER: 97505048 BUSINESS ADDRESS: STREET 1: ALLIANZ LIFE STREET 2: 1750 HENNEPIN AVENUE CITY: MINNEAPOLIS STATE: MN ZIP: 35403-2195 BUSINESS PHONE: 612-337-6140 MAIL ADDRESS: STREET 1: ALLIANZ LIFE STREET 2: 1750 HENNEPIN AVENUE CITY: MINNEAPOLIS STATE: MN ZIP: 55403-2195 N-4 EL 1 File Nos. 333-____ 811-5716 ============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X) Pre-Effective Amendment No. ( ) Post-Effective Amendment No. ( ) REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( ) Amendment No. 17 (X) (Check appropriate box or boxes.) PREFERRED LIFE VARIABLE ACCOUNT C -------------------------------------- (Exact Name of Registrant) PREFERRED LIFE INSURANCE COMPANY OF NEW YORK --------------------------------------------------- (Name of Depositor) 152 West 57th Street, 18th Floor, New York, New York 10019 ------------------------------------------------------- --------- (Address of Depositor's Principal Executive Offices) (Zip Code) Depositor's Telephone Number, including Area Code (212) 586-7733 Name and Address of Agent for Service - -------------------------------------------- Eugene Long Preferred Life Insurance Company of New York 152 West 57th Street, 18th Floor New York, New York 10019 Copies to: Judith A. Hasenauer Blazzard, Grodd & Hasenauer, P.C. P.O. Box 5108 Westport, CT 06881 (203) 226-7866 Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Filing. Calculation of Registration Fee under the Securities Act of 1933: Registrant is registering an indefinite number of securities under the Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2. =========================================================================== The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. CROSS REFERENCE SHEET (Required by Rule 495)
Item No. Location PART A Item 1. Cover Page............................. Cover Page Item 2. Definitions............................. Index of Terms Item 3. Synopsis or Highlights................ Profile Item 4. Condensed Financial Information....... Not Applicable Item 5. General Description of Registrant, Depositor, and Portfolio Companies... Preferred Life, The Separate Account, Investment Options Item 6. Deductions.............................. Expenses Item 7. General Description of Variable Annuity Contracts...................... The Valuemark IV Variable and Fixed Annuity Contract Item 8. Annuity Period......................... Annuity Payments (The Income Phase) Item 9. Death Benefit.......................... Death Benefit Item 10. Purchases and Contract Value.......... Purchase Item 11. Redemptions.............................. Access to Your Money Item 12. Taxes.................................... Taxes Item 13. Legal Proceedings....................... None Item 14. Table of Contents of the Statement of Additional Information.................. Table of Contents of the Statement of Additional Information
Item No. Location PART B Item 15. Cover Page.............................. Cover Page Item 16. Table of Contents....................... Table of Contents Item 17. General Information and History........ Insurance Company Item 18. Services.................................. Not Applicable Item 19. Purchase of Securities Being Offered.. Not Applicable Item 20. Underwriters.............................. Distributor Item 21. Calculation of Performance Data........ Calculation of Performance Data Item 22. Annuity Payments......................... Annuity Provisions Item 23. Financial Statements..................... Financial Statements
PART C Information required to be included in Part C is set forth under the appropriate Item so numbered, in Part C to this Registration Statement. PROFILE OF THE VALUEMARK IV VARIABLE ANNUITY CONTRACT _____________ , 1997 This Profile is a summary of some of the more important points that you should consider and know before purchasing the Valuemark IV Variable Annuity Contract. The Contract is more fully described in the prospectus which accompanies this Profile. Please read the prospectus carefully. 1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT. The variable annuity contract with a fixed account option offered by Preferred Life is a contract between you, the owner, and Preferred Life Insurance Company of New York (Preferred Life), an insurance company. The Contract provides a means for investing on a tax-deferred basis in 23 funds of the Franklin Valuemark Funds, a series fund, and a fixed account of Preferred Life. The Contract is intended for retirement savings or other long-term investment purposes and provides for a death benefit and guaranteed annuity income options. The Contract has 24 investment options. There are 23 funds which are managed by professional money managers. A list of the available funds is contained in Section 4. Depending upon market conditions, you can make or lose money in the funds. The fixed account offers an interest rate that is guaranteed by Preferred Life. The interest rate is set monthly and is guaranteed for 12 months. While your money is in the fixed account, the interest your money will earn as well as your principal is guaranteed by Preferred Life. Preferred Life reserves the right to limit the number of funds which you may invest in at any one time (now or in the future). Currently, you can put your money in 10 investment options (which includes any of the 23 funds listed in Section 4 and the Preferred Life fixed account). Like all deferred annuity contracts, your Contract has two phases: the accumulation phase and the income phase. During the accumulation phase, your earnings accumulate on a tax-deferred basis and are based on the investment performance of the fund(s) you selected and/or the interest rate earned on the money you have in the fixed account. During the accumulation phase, the earnings are taxed as income only when you make a withdrawal. The income phase occurs when you begin receiving regular payments from your Contract. The amount of the payments you may receive during the income phase depends in part upon the amount of money you are able to accumulate in your Contract during the accumulation phase. 2. ANNUITY PAYMENTS (THE INCOME PHASE). You can receive monthly annuity payments from your Contract by selecting one of the following annuity options (all of these options assume you are the owner and the annuitant): (1) payments for your life; (2) payments for your life, but if you die before payments have been made for the guaranteed period you selected, payments will continue for the remainder of the guaranteed period (5,10, 15 or 20 years); (3) payments during the joint lifetime of you and the joint annuitant - when either of you die, payments will continue as long as the survivor lives; (4) payments during the joint lifetime of you and the joint annuitant, but if you or the joint annuitant die before payments have been made for the guaranteed period you selected, payments will continue for the remainder of the guaranteed period (5, 10, 15 or 20 years); and (5) payments during your life ending with the last payment due prior to your death with a guarantee that at your death Preferred Life will make a refund to your beneficiary. Once you begin receiving regular payments, you cannot change your annuity option or surrender your contract. During the income phase, you have the same investment choices you had during the accumulation phase. You can choose to have payments come from the fixed account, the funds or both. If you choose to have any part of your payments come from the funds, the dollar amount of your annuity payments may go up or down, depending on the investment performance. 3. PURCHASE. You can buy the Contract with $5,000 or more under most circumstances. You can add $250 or more any time you like during the accumulation phase. You and the annuitant cannot be older than 85 years old at the time you buy the Contract. 4.INVESTMENT OPTIONS. You may invest in the Preferred Life fixed account or the following funds of Franklin Valuemark Funds: FUND SEEKING STABILITY OF PRINCIPAL AND INCOME: Money Market FUNDS SEEKING CURRENT INCOME: High Income Templeton Global Income Securities The U.S. Government Securities Zero Coupon - 2000, 2005 and 2010 FUNDS SEEKING GROWTH AND INCOME: Growth and Income Income Securities Mutual Shares Securities Real Estate Securities Rising Dividends Templeton Global Asset Allocation Utility Equity FUNDS SEEKING CAPITAL GROWTH: Capital Growth Mutual Discovery Securities Precious Metals Small Cap Templeton Developing Markets Equity Templeton Global Growth Templeton International Equity Templeton International Smaller Companies Templeton Pacific Growth The funds are fully described in the attached prospectus for Franklin Valuemark Funds. You can make or lose money in the funds, depending upon market conditions. 5. EXPENSES. The Contract has insurance features and investment features, and there are costs related to each. The annual insurance charges total 1.49% of the average daily value of your Contract allocated to the funds during the accumulation period (1.40% during the income phase). Each year Preferred Life deducts a $30 contract maintenance charge from your Contract. Preferred Life currently waives this charge if the cumulative value of all your Valuemark IV Contracts (registered with the same social security number) are at least $50,000. There are also annual fund charges which range from .40% to 1.41% of the average daily value of the funds depending upon the fund(s) you invest in. You can transfer between accounts up to 12 times a year without charge. After 12 transfers, the charge is $25 or 2% of the amount transferred, whichever is less. If you make a withdrawal from the Contract, Preferred Life may assess a contingent deferred sales charge (withdrawal charge). The amount of the charge depends upon how long Preferred Life has had your payment. The charge is:
Number of complete years from receipt 0 1 2 3 4 5 6 7 or more Contingent deferred sales charge (as a percentage of purchase payments) 6% 6% 6% 5% 4% 3% 2% 0%
Under certain circumstances, after the first year, Preferred Life will permit you to access your money in the contract without deducting a contingent deferred sales charge: 1) if you become terminally ill; or 2) if you become disabled. Also, if you are unemployed for at least 90 days, you can take up to 50% of your money out without incurring a contingent deferred sales charge. The State of New York does not impose a premium tax on purchase payments for annuities. We have provided the following chart to help you understand the charges in your Contract. The column "Total Annual Charges" shows the total of the $30 contract maintenance charge (which is represented as .10% below), the 1.49% insurance charges and the total annual fund charges for each fund. The next two columns show you two examples of the charges, in dollars, you would pay under a Contract. The examples assume that you invested $1,000 in a Contract which earns 5% annually and that you withdraw your money: (1) at the end of year 1, and (2) at the end of year 10. For year 1, the Total Annual Charges are assessed as well as the contingent deferred sales charge. For year 10, the Total Annual Charges are assessed but no contingent deferred sales charge is deducted. The premium tax is assumed to be 0% in both examples. These are just examples. Future expenses may be higher or lower than those shown. EXAMPLES:
Total Total Total Expenses Expenses Insurance Annual Fund Annual at end of at end of Fund Charges Charges Charges 1 Year 10 Years - ----------------------------------- ---------- ------------ -------- ---------- ---------- Money Market 1.59% .53% 2.12% $ 82 $ 245 High Income 1.59% .56% 2.15% $ 82 $ 248 Templeton Global Income Securities 1.59% .64% 2.23% $ 83 $ 256 The U.S. Government Securities 1.59% .52% 2.11% $ 81 $ 244 Zero Coupon 2000 1.59% .40% 1.99% $ 80 $ 231 Zero Coupon 2005 1.59% .40% 1.99% $ 80 $ 231 Zero Coupon 2010 1.59% .40% 1.99% $ 80 $ 231 Growth and Income 1.59% .52% 2.11% $ 81 $ 244 Income Securities 1.59% .51% 2.10% $ 81 $ 243 Mutual Shares Securities 1.59% .85% 2.44% $ 85 $ 278 Real Estate Securities 1.59% .59% 2.18% $ 82 $ 251 Rising Dividends 1.59% .78% 2.37 $ 84 $ 271 Templeton Global Asset Allocation 1.59% .90% 2.49% $ 85 $ 283 Utility Equity 1.59% .50% 2.09% $ 81 $ 242 Capital Growth 1.59% .79% 2.38% $ 84 $ 272 Mutual Discovery Securities 1.59% 1.05% 2.64% $ 87 $ 298 Precious Metals 1.59% .66% 2.25% $ 83 $ 258 Small Cap 1.59% .90% 2.49% $ 85 $ 283 Templeton Developing Markets Equity 1.59% 1.41% 3.00% $ 90 $ 332 Templeton Global Growth 1.59% .97% 2.56% $ 86 $ 290 Templeton International Equity 1.59% .92% 2.51% $ 85 $ 285 Templeton International Smaller Companies 1.59% 1.10% 2.69% $ 87 $ 302 Templeton Pacific Growth 1.59% 1.01% 2.60% $ 86 $ 294
The charges for the newly formed funds have been estimated. The charges for some of the funds reflect expense reimbursement and/or fee waiver arrangements. For more detailed information, see the Fee Table in the prospectus for the Contract. 6. TAXES. Your earnings are not taxed until you take them out. In most cases, if you take money out, earnings come out first and are taxed as income. If you are younger than 59 when you take money out, you may be charged a 10% federal tax penalty on the taxable amounts withdrawn. Payments during the income phase are considered partly a return of your original investment. That part of each payment is not taxable as income. If the contract is tax-qualified, the entire payment may be taxable. 7. ACCESS TO YOUR MONEY. You may make a withdrawal at any time during the accumulation phase. Any partial withdrawal must be for at least $50. You may request a withdrawal in writing or by electing the Systematic Withdrawal Program or Minimum Distribution Program which are briefly described in Section 10 of this Profile. After the first year, you can make multiple withdrawals up to a total of 15% of the value of your Contract each year without charge from Preferred Life. Withdrawals in excess of that amount will be subject to a contingent deferred sales charge. After Preferred Life has had a payment for 7 years, there is no charge for withdrawals. Each purchase payment you add to your Contract has its own 7 year charge period. Of course, you may also have to pay income tax and a tax penalty on any money you take out. 8. PERFORMANCE OF THE FUNDS. The value of the Contract will vary up or down depending upon the performance of the fund(s) you choose. From time to time, Preferred Life may advertise total return figures for each fund. As of the date of this prospectus, the sale of the Contracts has not begun. Therefore, no performance is presented here. 9. DEATH BENEFIT. If you die during the accumulation phase, the person you have selected as your beneficiary will receive a death benefit. This death benefit will be the greater of: 1) the current value of your Contract, less any taxes, on the day all claims proofs and payment election forms are received by Preferred Life at the Valuemark Service Center; or 2) (if applicable) the guaranteed minimum death benefit, less any taxes, as of the day you die. The guaranteed minimum death benefit as of the date of death is the greater of: A) payments you have made, less any money you have taken out and charges paid on the money you have taken out; or B) the highest value of the contract on each contract anniversary prior to the owner's 76th birthday, increased by any payments made since that anniversary, less any money taken out and charges paid on the money you have taken out since that anniversary. 10. OTHER INFORMATION. Free Look. If you cancel the Contract within 10 days after receiving it (or whatever period is required in your state), we will send your money back without assessing a contingent deferred sales charge. You will receive whatever your Contract is worth on the day we receive your request. This may be more or less than your original payment. No Probate. In most cases, when you die, your beneficiary will receive the death benefit without going through probate. Who should purchase the Contract? The Valuemark IV Variable Annuity Contract is designed for people seeking long-term tax-deferred accumulation of assets, generally for retirement or other long-term purposes. The tax-deferred feature is most attractive to people in high federal and state tax brackets. You should not buy this Contract if you are looking for a short-term investment or if you cannot take the risk of getting back less money than you put in. Additional Features. The Contract offers additional features which you might be interested in. These include: Automatic Investment Plan - You can automatically add to your Contract on a monthly or quarterly basis for as little as $100 by electronic transfer of funds from your savings or checking account. Dollar Cost Averaging - You can arrange to have a regular amount of money automatically transferred to selected funds each month, theoretically giving you a lower average cost per unit over time than a single one time purchase. However, there are no guarantees that this will take place. Flexible Rebalancing - Preferred Life will automatically readjust your money among the funds to maintain your specified allocation mix. This can be done quarterly, semi-annually or annually. Systematic Withdrawal Program - You can elect to receive monthly or quarterly payments from Preferred Life while your Contract is in the accumulation phase. Of course, you may have to pay taxes on the money you receive. Minimum Distribution Program - You can arrange to have money sent to you each month or quarter to meet certain required distribution requirements imposed by the Internal Revenue Code. These features may not be suitable for your particular situation. 11. INQUIRIES. If you have any questions about your Contract or need more information, please contact us at: Valuemark Service Center 300 Berwyn Park P.O. Box 3031 Berwyn, PA 19312-0031 (800) 624-0197 THE VALUEMARK IV VARIABLE ANNUITY CONTRACT ISSUED BY PREFERRED LIFE VARIABLE ACCOUNT C AND PREFERRED LIFE INSURANCE COMPANY OF NEW YORK This prospectus describes the Valuemark IV Variable Annuity Contract with a fixed account option offered by Preferred Life Insurance Company of New York (Preferred Life). The annuity has 24 investment options - the 23 funds of Franklin Valuemark Funds which are listed below and a fixed account option of Preferred Life. You can put your money in 10 investment options (which includes any of the funds listed below and the fixed account). FUND SEEKING STABILITY OF PRINCIPAL AND INCOME Money Market FUNDS SEEKING CURRENT INCOME High Income Templeton Global Income Securities The U.S. Government Securities Zero Coupon - 2000, 2005 and 2010 FUNDS SEEKING GROWTH AND INCOME Growth and Income Income Securities Mutual Shares Securities Real Estate Securities Rising Dividends Templeton Global Asset Allocation Utility Equity FUNDS SEEKING CAPITAL GROWTH Capital Growth Mutual Discovery Securities Precious Metals Small Cap Templeton Developing Markets Equity Templeton Global Growth Templeton International Equity Templeton International Smaller Companies Templeton Pacific Growth Please read this prospectus before investing and keep it for future reference. It contains important information about the Valuemark IV Variable Annuity Contract with a fixed account option. To learn more about the annuity offered by this prospectus, you can obtain a copy of the Statement of Additional Information (SAI) dated _______, 1997. The SAI has been filed with the Securities and Exchange Commission (SEC) and is incorporated by reference into this prospectus. The Table of Contents of the SAI is on Page __ of this prospectus. For a free copy of the SAI, call us at (800) 342-3863 or write us at: 1750 Hennepin Avenue, Minneapolis, Minnesota 55403-2195. INVESTMENT IN A VARIABLE ANNUITY CONTRACT IS SUBJECT TO RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ________________, 1997 TABLE OF CONTENTS PAGE INDEX OF TERMS FEE TABLE 1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT Contract Owner Joint Owner Annuitant Beneficiary Assignment 2. ANNUITY PAYMENTS (THE INCOME PHASE) Annuity Options 3. PURCHASE Purchase Payments Automatic Investment Plan Allocation of Purchase Payments Free Look Accumulation Units 4. INVESTMENT OPTIONS Transfers Dollar Cost Averaging Program Flexible Rebalancing Voting Rights Substitution 5. EXPENSES Insurance Charges Mortality and Expense Risk Charge Administrative Charge Contract Maintenance Charge Contingent Deferred Sales Charge Waiver of Contingent Deferred Sales Charge Benefits Reduction or Elimination of the Contingent Deferred Sales Charge Transfer Fee Income Taxes Fund Expenses 6. TAXES Annuity Contracts in General Qualified and Non-Qualified Contracts Withdrawals - Non-Qualified Contracts Withdrawals - Qualified Contracts Withdrawals - Tax-Sheltered Annuities Diversification 7. ACCESS TO YOUR MONEY Systematic Withdrawal Program Minimum Distribution Program Suspension of Payments or Transfers 8. PERFORMANCE 9. DEATH BENEFIT Upon Your Death Death of Annuitant 10. OTHER INFORMATION Preferred Life The Separate Account Distribution Administration Financial Statements APPENDIX TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION INDEX OF TERMS We have tried to make this prospectus as understandable for you as possible. Below is a list of some of the technical terms used in this prospectus. They are identified in the prospectus as capitalized terms. The page that is indicated below is where you will find the definition for the word or term. Page Accumulation Phase....................................................... Accumulation Unit........................................................ Annuitant................................................................ Annuity Options.......................................................... Annuity Payments......................................................... Annuity Unit............................................................. Beneficiary.............................................................. Contract Owner........................................................... Fixed Account............................................................ Funds.................................................................... Income Date.............................................................. Income Phase............................................................. Joint Owner.............................................................. Non-Qualified............................................................ Purchase Payment......................................................... Qualified................................................................ Tax Deferral............................................................. FEE TABLE Contract Owner Transaction Fees Contingent Deferred Sales Charge* (as a percentage of purchase payments)
Number of Complete Years From Receipt Charge ---------------------------------------- ------- 0 6% 1 6% 2 6% 3 5% 4 4% 5 3% 6 2% 7 years or more 0% Transfer Fee First 12 transfers in a Contract year are free. Thereafter, the fee is $25 (or 2% of the amount transferred, if less). Dollar Cost Averaging transfers and Flexible Rebalancing transfers are not counted. Contract Maintenance Charge** 30 per Contract per year Separate Account Annual Expenses (as a percentage of average account value) Mortality and Expense Risk Charge*** 1.34% Administrative Charge .15% ----- Total Separate Account Annual Expenses 1.49% * Each year after the first contract year, you may make multiple partial withdrawals of up to a total of 15% of the value of your contract and no contingent deferred sales charge will be assessed. See Section 7 - Access to Your Money for additional options. ** During the accumulation phase, the charge is waived if the value of your contract is at least $50,000. If you own more than one Valuemark IV Contract (registered with the same social security number), we will determine the total value of all your contracts. If the total value of all your contracts is at least $50,000, the charge is waived. *** The Mortality and Expense Risk Charge is 1.25% during the income phase.
FRANKLIN VALUEMARK FUNDS' ANNUAL EXPENSES (as a percentage of Franklin Valuemark Funds' average net assets) The Management Fees for each fund are based on a percentage of that fund's assets under management. See the prospectus for Franklin Valuemark Funds for more information. The "Management and Fund Administration Fees" below are the amounts that were paid to the Managers and Fund Administrators for the 1995 calendar year except for funds with fee waivers/expense reductions or newer funds without a full year of operations as of December 31, 1995.
Management Other and Fund Expenses Total Administration (after expense Annual Fees(1/) reductions) Expenses Money Market Fund (2/) .51% .02% .53% High Income Fund .53% .03% .56% Templeton Global Income Securities Fund (3/) .55% .09% .64% The U.S. Government Securities Fund .49% .03% .52% Zero Coupon Fund-2000 (4/) .37% .03% .40% Zero Coupon Fund-2005 (4/) .37% .03% .40% Zero Coupon Fund-2010 (4/) .37% .03% .40% Growth and Income Fund .49% .03% .52% Income Securities Fund .47% .04% .51% Mutual Shares Securities Fund (5/) .75% .10% .85% Real Estate Securities Fund .56% .03% .59% Rising Dividends Fund .75% .03% .78% Templeton Global Asset Allocation Fund (5/) .80% .10% .90% Utility Equity Fund .47% .03% .50% Capital Growth Fund (5/) .75% .04% .79% Mutual Discovery Securities Fund (5/) .95% .10% 1.05% Precious Metals Fund .61% .05% .66% Small Cap Fund (5/) .75% .15% .90% Templeton Developing Markets Equity Fund 1.25% .16% 1.41% Templeton Global Growth Fund .93% .04% .97% Templeton International Equity Fund .83% .09% .92% Templeton International Smaller Companies Fund (5/) 1.00% .10% 1.10% Templeton Pacific Growth Fund .90% .11% 1.01% 1/ The Fund Administration Fee is a direct expense for the Templeton Global Asset Allocation Fund, the Templeton International Smaller Companies Fund, the Mutual Discovery Securities Fund and the Mutual Shares Securities Fund; other funds pay for similar services indirectly through the Management Fee. See the Franklin Valuemark Funds prospectus for further information regarding these fees. 2/ Franklin Advisers, Inc. agreed to waive a portion of its Management Fee and to pay certain expenses of the Money Market Fund during 1995. It is currently continuing this arrangement in 1996. This arrangement may be terminated at any time. With this reduction, the fund's total annual expenses for 1995 were 0.40% of the average daily net assets of the fund. 3/ Prior to May 1, 1996, the Templeton Global Income Securities Fund was known as the Global Income Fund. 4/ Although not obligated to, Franklin Advisers, Inc. has agreed to waive a portion of its Management Fees and to pay certain expenses of the three Zero Coupon Funds through at least December 31, 1996 so that the total expenses of the Zero Coupon Funds will not exceed 0.40% of each fund's net assets. Absent the management fee waivers and expense payments, for the year ended December 31, 1995, the Total Annual Expenses and Management and Fund Administration Fees would have been as follows: Zero Coupon Fund-2000, .63% and .60%; Zero Coupon Fund-2005, .66% and .63%; and Zero Coupon Fund- 2010, .66% and .63%. 5/ The Templeton Global Asset Allocation Fund began operations on May 1, 1995; the Small Cap Fund began operations on November 1, 1995; the Capital Growth and Templeton International Smaller Companies Funds began operations on May 1, 1996; and the Mutual Shares Securities and Mutual Discovery Securities Funds began operations on November 8, 1996. The expenses shown above for these funds are therefore estimated for 1996.
The purpose of this Fee Table is to show you the expenses you will incur directly or indirectly with the contract. The Fee Table reflects expenses of the Separate Account as well as the funds. The examples below should not be considered a representation of past or future expenses. Actual expenses may be greater or less than those shown. The $30 contract maintenance charge is included in the Examples as a prorated charge of $1. Since the average contract account size is greater than $1,000, the contract maintenance charge is reduced accordingly. Premium taxes are not reflected in the Tables. Premium taxes may apply. For additional information, see Section 5 - Expenses and the Franklin Valuemark Funds prospectus. EXAMPLES You will pay the following expenses on a $1,000 investment, assuming a 5% annual return on your money if you surrender your Contract at the end of each time period:
1 3 5 10 Year Years Years Years Money Market Fund $ 82 $ 117 $ 148 $ 245 High Income Fund $ 82 $ 118 $ 149 $ 248 Templeton Global Income Securities Fund $ 83 $ 121 $ 153 $ 256 The U.S. Government Securities Fund $ 81 $ 117 $ 147 $ 244 Zero Coupon Fund-2000# $ 80 $ 113 $ 141 $ 231 Zero Coupon Fund-2005# $ 80 $ 113 $ 141 $ 231 Zero Coupon Fund-2010# $ 80 $ 113 $ 141 $ 231 Growth and Income Fund $ 81 $ 117 $ 147 $ 244 Income Securities Fund $ 81 $ 117 $ 147 $ 243 Mutual Shares Securities Fund * $ 85 $ 127 Real Estate Securities Fund $ 82 $ 119 $ 151 $ 251 Rising Dividends Fund $ 84 $ 125 $ 161 $ 271 Templeton Global Asset Allocation Fund* $ 85 $ 129 $ 167 $ 283 Utility Equity Fund $ 81 $ 116 $ 146 $ 242 Capital Growth Fund* $ 84 $ 125 $ 161 $ 272 Mutual Discovery Securities * $ 87 $ 133 Precious Metals Fund $ 83 $ 121 $ 154 $ 258 Small Cap Fund** $ 85 $ 129 $ 167 $ 283 Templeton Developing Markets Equity Fund $ 90 $ 144 $ 192 $ 332 Templeton Global Growth Fund $ 86 $ 131 $ 170 $ 290 Templeton International Equity Fund $ 85 $ 129 $ 168 $ 285 Templeton International Smaller Companies Fund* $ 87 $ 135 $ 177 $ 302 Templeton Pacific Growth Fund $ 86 $ 132 $ 172 $ 294
* Estimated # Calculated with waiver of fees and reimbursement of expenses You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on your money if your contract is not surrendered or is annuitized:
1 3 5 10 Year Years Years Years Money Market Fund $ 22 $ 66 $ 114 $ 245 High Income Fund $ 22 $ 67 $ 115 $ 248 Templeton Global Income Securities Fund $ 23 $ 70 $ 119 $ 256 The U.S. Government Securities Fund $ 22 $ 66 $ 113 $ 244 Zero Coupon Fund-2000# $ 20 $ 62 $ 107 $ 231 Zero Coupon Fund-2005# $ 20 $ 62 $ 107 $ 231 Zero Coupon Fund-2010# $ 20 $ 62 $ 107 $ 231 Growth and Income Fund $ 21 $ 66 $ 113 $ 244 Income Securities Fund $ 21 $ 66 $ 113 $ 243 Mutual Shares Securities Fund* $ 25 $ 76 Real Estate Securities Fund $ 22 $ 68 $ 117 $ 251 Rising Dividends Fund $ 24 $ 74 $ 127 $ 271 Templeton Global Asset Allocation Fund* $ 25 $ 78 $ 133 $ 283 Utility Equity Fund $ 21 $ 65 $ 112 $ 242 Capital Growth Fund* $ 24 $ 74 $ 127 $ 272 Mutual Discovery Securities Fund* $ 27 $ 82 Precious Metals Fund $ 23 $ 70 $ 120 $ 258 Small Cap Fund* $ 25 $ 78 $ 133 $ 283 Templeton Developing Markets Equity Fund $ 30 $ 93 $ 158 $ 332 Templeton Global Growth Fund $ 26 $ 80 $ 136 $ 290 Templeton International Equity Fund $ 25 $ 78 $ 134 $ 285 Templeton International Smaller Companies Fund* $ 27 $ 84 $ 143 $ 302 Templeton Pacific Growth Fund $ 26 $ 81 $ 138 $ 294
* Estimated # Calculated with waiver of fees and reimbursement of other expenses As of the date of this prospectus, no contracts have been sold. Therefore, Allianz Life has not provided Condensed Financial Information. 1. THE VALUEMARK IV VARIABLE ANNUITY CONTRACT This prospectus describes a variable annuity contract with a fixed account option offered by Preferred Life. An annuity is a contract between you, the owner, and an insurance company (in this case Preferred Life), where the insurance company promises to pay you (or someone else you choose) an income, in the form of annuity payments, beginning on a designated date that is at least two years in the future. Until you decide to begin receiving annuity payments, your annuity is in the accumulation phase. Once you begin receiving annuity payments, your contract switches to the income phase. The contract benefits from tax deferral. Tax deferral means that you are not taxed on earnings or appreciation on the assets in your contract until you take money out of your contract. The contract is called a variable annuity because you can choose among 23 funds. Depending upon market conditions, you can make or lose money in any of these funds. If you select the variable annuity portion of the contract, the amount of money you are able to accumulate in your contract during the accumulation phase depends in part upon the investment performance of the fund(s) you select. The amount of the annuity payments you receive during the income phase from the variable annuity portion of the contract also depends upon the investment performance of the funds you select for the income phase. The contract also contains a fixed account. The fixed account offers an interest rate that is guaranteed for all deposits made within the twelve month period by Preferred Life. This interest rate is set monthly and is guaranteed for 12 months. Preferred Life guarantees that the interest credited to the fixed account will not be less than 3% per year. If you select the fixed account, your money will be placed with the other general assets of Preferred Life. If you select the fixed account, the amount of money you are able to accumulate in your contract during the accumulation phase depends upon the total interest credited to your contract. We will not make any changes to your contract without your permission except as may be required by law. CONTRACT OWNER . You as the contract owner, have all the rights under the contract. The contract owner is as designated at the time the contract is issued, unless changed. You may change contract owners at any time. This may be a taxable event. You should consult with your tax adviser before doing this. JOINT OWNER . The contract can be owned by joint owners. Any joint owner must be the spouse of the other contract owner (except in Pennsylvania and Oregon). Upon the death of either joint owner, the surviving spouse will be the designated beneficiary. Any other beneficiary designation at the time the contract was issued or as may have been later changed will be treated as a contingent beneficiary unless otherwise indicated. ANNUITANT . You name an annuitant. You may change the annuitant at any time before the income date unless the contract is owned by a non-individual (for example, a corporation). BENEFICIARY The beneficiary is the person(s) or entity you name to receive any death benefit. The beneficiary is named at the time the contract is issued unless changed at a later date. Unless an irrevocable beneficiary has been named, you can change the beneficiary or contingent beneficiary. ASSIGNMENT You can assign the contract at any time during your lifetime. Preferred Life will not be bound by the assignment until it receives the written notice of the assignment. Preferred Life will not be liable for any payment or other action we take in accordance with the contract before we receive notice of the assignment. Any assignment made after the death benefit has become payable can only be done with our consent. AN ASSIGNMENT MAY BE A TAXABLE EVENT. If the contract is issued pursuant to a qualified plan, there may be limitations on your ability to assign the contract. 2. ANNUITY PAYMENTS (THE INCOME PHASE) You can receive regular monthly income payments under your contract. You can choose the month and year in which those payments begin. We call that date the income date. Your income date must be the first day of a calendar month and must be at least 2 years after you buy the contract. You can also choose among income plans. We call those annuity options. We ask you to choose your income date when you purchase the contract. You can change it at any time before the income date with 30 days notice to us. Annuity payments must begin by the annuitant's 90th birthday. The annuitant is the person whose life we look to when we make annuity payments. You (or someone you designate) will receive the annuity payments. You will receive tax reporting on those payments. If you do not choose an annuity option at the time you purchase the contract, we will assume that you selected Option 2 which provides a life annuity with 10 years of guaranteed payments. You may elect to receive your annuity payments as a variable payout, a fixed payout, or a combination of both. Under a fixed payout, all of the annuity payments will be the same dollar amount (equal installments). Under a variable payout, you have the same investment choices you had during the accumulation phase. If you do not tell us otherwise, your annuity payments will be based on the investment allocations that were in place on the income date. If you choose to have any portion of your annuity payments come from the fund(s), the dollar amount of your payment will depend upon three things: 1) the value of your contract in the fund(s) on the income date, 2) the 5% assumed investment rate used in the annuity table for the contract, and 3) the performance of the fund(s) you selected. If the actual performance exceeds the 5% assumed rate, your annuity payments will increase. Similarly, if the actual rate is less than 5%, your annuity payments will decrease. Annuity Options You can choose one of the following annuity options or any other annuity option you want and that Preferred Life agrees to provide. After annuity payments begin, you cannot change the annuity option. OPTION 1. LIFE ANNUITY. Under this option, we will make monthly annuity payments so long as the annuitant is alive. After the annuitant dies, we stop making annuity payments. OPTION 2. LIFE ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS GUARANTEED. Under this option, we will make monthly annuity payments so long as the annuitant is alive. However, if, when the annuitant dies, we have made annuity payments for less than the selected guaranteed period, we will continue to make annuity payments to you for the rest of the guaranteed period. If you do not want to receive annuity payments, you can ask us for a single lump sum. OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make monthly annuity payments during the joint lifetime of the annuitant and the joint annuitant. When the annuitant dies, if the joint annuitant is still alive, we will continue to make annuity payments, so long as the joint annuitant continues to live. The amount of the annuity payments we will make to the survivor can be equal to 100%, 75% or 50% of the amount that we would have paid if they both were alive. The monthly annuity payments will end when the last surviving annuitant dies. OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 5, 10, 15 or 20 YEAR PAYMENTS GUARANTEED. Under this option, we will make monthly annuity payments during the joint lifetime of the annuitant and the joint annuitant. When the annuitant dies, if the joint annuitant is still alive, we will continue to make annuity payments, so long as the surviving annuitant continues to live, at 100% of the amount that would have been paid if they were both alive. If, when the last death occurs, we have made annuity payments for less than the selected guaranteed period, we will continue to make annuity payments to you or any person you designate for rest of the guaranteed period. If you do not want to receive annuity payments, you can ask us for a single lump sum. OPTION 5. REFUND LIFE ANNUITY. Under this option, we will make monthly annuity payments during the annuitant's lifetime. The last annuity payment will be made before the annuitant dies with a guarantee that Preferred Life will pay you a refund if the amount (units) annuitized has not been repaid. 3. PURCHASE PURCHASE PAYMENTS A purchase payment is the money you invest in the contract. The minimum payment Preferred Life will accept is $5,000 when the contract is bought as a non-qualified contract. If you enroll in the automatic investment plan (which is described below), your purchase payment can be $2,000. If you are buying the contract as part of an IRA (Individual Retirement Annuity), 401(k) or other qualified plan, the minimum amount we will accept is $2,000. The maximum we will accept without our prior approval is $1 million. You can make additional purchase payments of $250 (or as low as $100 if you have selected the automatic investment plan) or more to either type of contract. At the time you buy the contract, you and the annuitant cannot be older than 85 years old. AUTOMATIC INVESTMENT PLAN The Automatic Investment Plan (AIP) is a program which allows you to make additional purchase payments to your contract on a monthly or quarterly basis by electronic transfer of funds from your savings or checking account. You may participate in this program by completing the appropriate form. We must receive your form by the first of the month in order for AIP to begin that same month. Investments will take place on the 20th of the month, or the next business day. The minimum investment that can be made by AIP is $100. You may stop AIP at any time you want. We need to be notified by the first of the month in order to stop or change AIP that month. If AIP is used for a qualified contract, you should consult your tax adviser for advice regarding maximum contributions. ALLOCATION OF PURCHASE PAYMENTS When you purchase a contract, we will allocate your purchase payment to the fixed account and/or one or more of the funds you have selected. We ask that you allocate your money in either whole percentages or round dollars. You can instruct us how to allocate additional purchase payments you make. If you do not instruct us, we will allocate them in the same way as your previous instructions to us. Preferred Life reserves the right to limit the number of funds that you may invest in at one time. Currently, you may invest in 10 investment options at one time (which includes any of the 23 funds of Franklin Valuemark Funds listed in Section 4 and the Preferred Life fixed account). We may change this in the future. However, we will always allow you to invest in at least five funds. Once we receive your purchase payment, the necessary information and federal funds (federal funds means monies credited to a bank's account with its regional federal reserve bank), we will issue your contract and allocate your first purchase payment within 2 business days. If you do not give us all of the information we need, we will contact you to get it. If for some reason we are unable to complete this process within 5 business days, we will either send back your money or get your permission to keep it until we get all of the necessary information. If you make additional purchase payments, we will credit these amounts to your contract within one business day. Our business day closes when the New York Stock Exchange closes, which is usually at 4:00 p.m. Eastern time. FREE LOOK If you change your mind about owning the contract, you can cancel it within 10 days after receiving it. Return of the contract by mail is effective on being postmarked, properly addressed and postage prepaid. When you cancel the contract within this time period, Preferred Life will not assess a contingent deferred sales charge. You will receive back whatever your contract is worth on the day we receive your request. If you have purchased the contract as an IRA, we are required to give you back your purchase payment if you decide to cancel your contract within 10 days after receiving it. If that is the case, we have the right to put your purchase payment in the Money Market Fund for 15 days after we issue your contract. At the end of that period, we will re-allocate those funds as you selected. Currently, however, we will directly allocate your money to the funds and/or the fixed account as you have selected. ACCUMULATION UNITS The value of the portion of your contract allocated to the funds will go up or down depending upon the investment performance of the fund(s) you choose. The value of your contract will also depend on the expenses of the contract. In order to keep track of the value of your contract, we use a measurement called an accumulation unit (which is like a share of a mutual fund). During the income phase of the contract we call it an annuity unit. Every business day we determine the value of an accumulation unit for a fund by multiplying the accumulation unit value for the previous period by a factor for each fund for the current period. The factor for each fund is determined by: 1. dividing the value of a fund share at the end of the current period by the value of a fund share for the previous period; and 2. multiplying it by one minus the daily amount of the insurance charges and any charges for taxes. The value of an accumulation unit may go up or down from day to day. When you make a purchase payment, we credit your contract with accumulation units. The number of accumulation units credited is determined by dividing the amount of the purchase payment allocated to a fund by the value of the accumulation unit for that fund. We calculate the value of an accumulation unit for each fund after the New York Stock Exchange closes each day and then credit your contract. EXAMPLE: On Wednesday we receive an additional purchase payment of $3,000 from you. You have told us you want this to go to the Growth and Income Fund. When the New York Stock Exchange closes on that Wednesday, we determine that the value of an accumulation unit for the Growth and Income Fund is $12.50. We then divide $3,000 by $12.50 and credit your contract on Wednesday night with 240 accumulation units for the Growth and Income Fund. 4. INVESTMENT OPTIONS The Contract offers 23 funds of Franklin Valuemark Funds and a fixed account option of Preferred Life. Additional funds may be available in the future. YOU SHOULD READ THE FRANKLIN VALUEMARK FUNDS PROSPECTUS (WHICH IS ATTACHED TO THIS PROSPECTUS) CAREFULLY BEFORE INVESTING. Franklin Valuemark Funds is the mutual fund underlying your contract. Each fund has its own investment objective. Franklin Advisers, Inc. serves as each fund's investment manager (except the Templeton Global Growth Fund, the Templeton Developing Markets Equity Fund, the Templeton Global Asset Allocation Fund, the Templeton International Smaller Companies Fund, the Rising Dividends Fund, the Mutual Shares Securities Fund and the Mutual Discovery Securities Fund). The investment manager for the Templeton Global Growth and the Templeton Global Asset Allocation Funds is Templeton Global Advisors Limited. The investment manager for the Templeton Developing Markets Equity Fund is Templeton Asset Management Ltd. The investment manager for the Templeton International Smaller Companies Fund is Templeton Investment Counsel, Inc. The investment manager for the Rising Dividends Fund is Franklin Advisory Services, Inc.. The investment manager for the Mutual Shares Securities and the Mutual Discovery Securities Funds is Franklin Mutual Advisers, Inc. Certain managers have retained one or more subadvisers to help them manage the funds. Franklin Valuemark Funds serves as the underlying mutual fund for variable life insurance policies offered by an affiliate of Preferred Life and other variable annuity contracts offered by Preferred Life and its affiliates. Franklin Valuemark Funds does not believe that offering its shares in this manner will be disadvantageous to you. The following is a list of the funds which are available under the contract: FUND SEEKING STABILITY OF PRINCIPAL AND INCOME: Money Market FUNDS SEEKING CURRENT INCOME: High Income Templeton Global Income Securities The U.S. Government Securities Zero Coupon - 2000, 2005 and 2010 FUNDS SEEKING GROWTH AND INCOME: Growth and Income Income Securities Mutual Shares Securities Real Estate Securities Rising Dividends Templeton Global Asset Allocation Utility Equity FUNDS SEEKING CAPITAL GROWTH: Capital Growth Mutual Discovery Securities Precious Metals Small Cap Templeton Developing Markets Equity Templeton Global Growth Templeton International Equity Templeton International Smaller Companies Templeton Pacific Growth TRANSFERS You can transfer money among the 23 funds and/or the fixed account. Preferred Life currently allows you to make as many transfers as you want to each year. Preferred Life may change this practice in the future. However, this product is not designed for professional market timing organizations or other individuals using programmed and frequent transfers. Such activity may be disruptive to a fund. We reserve the right to stop or prohibit these types of transfers if we determine that they could harm a fund. Your contract provides that you can make 3 transfers every year without charge. However, currently Preferred Life permits you to make 12 transfers every year without charge. We measure a year from the anniversary of the day we issued your contract. You can make a transfer to or from the fixed account and to or from any fund. If you make more than 12 transfers in a year, there is a transfer fee deducted. The fee is $25 per transfer or, if less, 2% of the amount transferred. The following applies to any transfer: 1. The minimum amount which you can transfer is $1,000 or your entire value in the fund or fixed account. This requirement is waived if the transfer is in connection with the Dollar Cost Averaging Program or Flexible Rebalancing (which are described below). 2. We may not allow you to make transfers during the free look period. 3. Your request for a transfer must clearly state which fund(s) or the fixed account is involved in the transfer. 4. Your request for a transfer must clearly state how much the transfer is for. 5. You cannot make any transfers within 7 calendar days prior to the date your first annuity payment is due. 6. During the income phase, you may not make a transfer from a fixed annuity option to a variable annuity option. 7. During the income phase, you can make at least one transfer from a variable annuity option to a fixed annuity option. Preferred Life has reserved the right to modify the transfer provisions subject to the guarantees described above. You can make transfers by telephone. We may allow you to authorize someone else to make transfers by telephone on your behalf. If you own the contract with a joint owner, unless Preferred Life is instructed otherwise, Preferred Life will accept instructions from either one of you. Preferred Life will use reasonable procedures to confirm that instructions given us by telephone are genuine. If we do not use such procedures, we may be liable for any losses due to unauthorized or fraudulent instructions. Preferred Life tape records all telephone instructions. DOLLAR COST AVERAGING PROGRAM The Dollar Cost Averaging Program allows you to systematically transfer a set amount of money each month or quarter from any one fund or the fixed account to up to eight of the other funds. By allocating amounts on a regularly scheduled basis, as opposed to allocating the total amount at one particular time, you may be less susceptible to the impact of market fluctuations. You may only participate in this program during the accumulation phase. You must participate in the program for at least six months (or two quarters) and must transfer at least $500 each time (or $1,500 each quarter). Your allocations can be in whole percentages or dollar amounts. The fund(s) you transfer from may not be the fund(s) you transfer to in this program. You may elect this program by properly completing the Dollar Cost Averaging forms provided by Preferred Life. All Dollar Cost Averaging transfers will be made on the 10th day of the month unless that day is not a business day. If it is not, then the transfer will be made the next business day. Your participation in the program will end when any of the following occurs: (1) the number of desired transfers have been made; (2) you do not have enough money in the fund(s) or fixed account to make the transfer (if less money is available, that amount will be dollar cost averaged and the program will end); (3) you request to terminate the program (your request must be received by us by the first of the month to terminate that month); (4) the contract is terminated; or (5) we receive proof of the contract owner's death. If you participate in the Dollar Cost Averaging Program, the transfers made under the program are not taken into account in determining any transfer fee. You may not participate in the Dollar Cost Averaging Program and Flexible Rebalancing at the same time. FLEXIBLE REBALANCING Once your money has been invested, the performance of the funds and the earnings from the fixed account may cause your allocation to shift. Flexible Rebalancing is designed to help you maintain your specified allocation mix between the different funds. You can direct us to readjust your money quarterly, semi-annually or annually to return to your original allocations. Flexible Rebalancing transfers will be made on the 20th day of the month unless that day is not a business day. If it is not, then the transfer will be made on the previous day. If you participate in Flexible Rebalancing, the transfers made under the program are not taken into account in determining any transfer fee. VOTING RIGHTS Preferred Life is the legal owner of the fund shares. However, Preferred Life believes that when a fund solicits proxies in conjunction with a shareholder vote, it is required to obtain from you and other contract owners instructions as to how to vote those shares. When we receive those instructions, we will vote all of the shares we own in proportion to those instructions. This will also include any shares that Preferred Life owns on its own behalf. Should Preferred Life determine that it is no longer required to comply with the above, we will vote the shares in our own right. SUBSTITUTION Preferred Life may be required to substitute one of the funds you have selected with another fund. We would not do this without the prior approval of the Securities and Exchange Commission. We will give you notice of our intention to do this. 5. EXPENSES There are charges and other expenses associated with the contract that will reduce your investment return. These charges and expenses are: INSURANCE CHARGES Each day, Preferred Life makes a deduction for its insurance charges. Preferred Life does this as part of its calculation of the value of the accumulation units and the annuity units. The insurance charge has two parts: 1) the mortality and expense risk charge and 2) the administrative charge. MORTALITY AND EXPENSE RISK CHARGE . During the accumulation phase, this charge is equal, on an annual basis, to 1.34% of the average daily value of the contract invested in a fund, after the deduction of expenses. During the income phase, the charge is equal, on an annual basis, to 1.25% of the average daily value of the contract invested in a fund, after the deduction of expenses. This charge compensates us for all the insurance benefits provided by your contract (for example, the guarantee of annuity rates, the death benefits, certain expenses related to the contract, and for assuming the risk (expense risk) that the current charges will be insufficient in the future to cover the cost of administering the contract). The amount of the mortality and expense risk charge is less during the income phase because Preferred Life does not pay a death benefit separate from benefits under the annuity option if you die during the income phase. If this charge is not sufficient, then Preferred Life will bear the loss. Preferred Life does, however, expect to profit from this charge. The mortality and expense risk charge cannot be increased. Preferred Life may use any profits it makes from this charge to pay for the costs of distributing the contract. ADMINISTRATIVE CHARGE . This charge is equal, on an annual basis, to .15% of the average daily value of the contract invested in a fund, after the deduction of expenses. This charge, together with the contract maintenance charge (which is explained below), is for all the expenses associated with the administration of the contract. Some of these expenses include: preparation of the contract, confirmations, annual reports and statements, maintenance of contract records, personnel costs, legal and accounting fees, filing fees, and computer and systems costs. Because this charge is taken out of every unit value, you may pay more in administrative costs than those that are associated solely with your contract. Preferred Life does not intend to profit from this charge. However, if this charge and the contract maintenance charge are not enough to cover the costs of the contracts in the future, Preferred Life will bear the loss. CONTRACT MAINTENANCE CHARGE Every year on the anniversary of the date when your contract was issued, Preferred Life deducts $30 from your contract as a contract maintenance charge. This charge is for administrative expenses (see above). This charge can not be increased. However, during the accumulation phase, if the value of your contract is at least $50,000 when the deduction for the charge is to be made, Preferred Life will not deduct this charge. If you own more than one Valuemark IV contract, Preferred Life will determine the total value of all your contracts. If the total value of all contracts registered under the same social security number is at least $50,000, Preferred Life will not assess the contract maintenance charge. If the contract is owned by a non-natural person (e.g., a corporation), Preferred Life will look to the annuitant to determine if it will assess the charge. If you make a complete withdrawal from your contract, the contract maintenance charge will also be deducted. During the income phase, the charge will be collected monthly out of each annuity payment. CONTINGENT DEFERRED SALES CHARGE Withdrawals may be subject to a contingent deferred sales charge. During the accumulation phase, you can make withdrawals from your contract. Preferred Life keeps track of each purchase payment you make. The amount of the contingent deferred sales charge depends upon how long Preferred Life has had your payment. The charge is:
Number of complete years from receipt of payment: 0 1 2 3 4 5 6 7 or more Contingent Deferred Sales Charge: 6% 6% 6% 5% 4% 3% 2% 0%
However, after Preferred Life has had a purchase payment for 7 years, there is no charge when you withdraw that purchase payment. For purposes of the contingent deferred sales charge, Preferred Life treats withdrawals as coming from the oldest purchase payments first. Preferred Life does not assess the contingent deferred sales charge on any payments paid out as annuity payments or as death benefits. NOTE: For tax purposes, withdrawals are considered to have come from the last money you put into the contract. Thus, for tax purposes, earnings are considered to come out first. FREE WITHDRAWAL AMOUNT - Each year after the first contract year, you can make multiple withdrawals up to 15% of the value of your contract and no contingent deferred sales charge will be deducted from the 15% you take out. Withdrawals in excess of that free amount will be subject to the contingent deferred sales charge. You may also select to participate in the Systematic Withdrawal Program or the Minimum Distribution Program which allow you to withdraw money without the deduction of the contingent deferred sales charge under certain circumstances. You cannot use these Programs and the 15% free withdrawal amount in the same contract year. See Section 7 - Access to Your Money for a description of the Systematic Withdrawal Program and the Minimum Distribution Program. WAIVER OF CONTINGENT DEFERRED SALES CHARGE BENEFITS Under certain circumstances, after the first year, Preferred Life will permit you to take your money out of the contract without deducting a contingent deferred sales charge: 1) if you become terminally ill, which is defined as life expectancy of 12 months or less (a full surrender of the contract will be required); or 2) if you become totally disabled for at least 90 days. Also, after the first year, if you become unemployed for at least 90 days, you can take up to 50% of your money out without incurring a contingent deferred sales charge. This benefit is available only once during the life of the contract and you may not use both this benefit and the 15% free withdrawal amount in the same contract year. REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE Preferred Life will reduce or eliminate the amount of the contingent deferred sales charge when the contract is sold under circumstances which reduce its sales expenses. Some examples are: if there is a large group of individuals that will be purchasing the contract or a prospective purchaser already had a relationship with Preferred Life. Preferred Life will not deduct a contingent deferred sales charge under a contract issued to an officer, director or employee of Preferred Life or any of its affiliates. Any circumstances resulting in reduction or elimination of the contingent deferred sales charge requires prior approval of Preferred Life. TRANSFER FEE You can make 12 free transfers every year. We measure a year from the day we issue your contract. If you make more than 12 transfers a year, we will deduct a transfer fee of $25 or 2% of the amount that is transferred, whichever is less, for each additional transfer. If the transfer is part of the Dollar Cost Averaging Program or the Flexible Rebalancing Program, it will not count in determining the transfer fee. INCOME TAXES Preferred Life will deduct from the contract for any income taxes which it may incur because of the contract. Currently, Preferred Life is not making any such deductions. FUND EXPENSES There are deductions from and expenses paid out of the assets of the various funds which are described in the attached prospectus for Franklin Valuemark Funds. 6. TAXES NOTE: Preferred Life has prepared the following information on taxes as a general discussion of the subject. It is not intended as tax advice. You should consult your own tax adviser about your own circumstances. Preferred Life has included additional information regarding taxes in the Statement of Additional Information. ANNUITY CONTRACTS IN GENERAL Annuity contracts are a means of setting aside money for future needs - usually retirement. Congress recognized how important saving for retirement was and provided special rules in the Internal Revenue Code (Code) for annuities. Basically, these rules provide that you will not be taxed on the earnings on the money held in your annuity contract until you take the money out. This is referred to as tax deferral. There are different rules regarding how you will be taxed depending upon how you take the money out and the type of contract - qualified or non-qualified (see following sections). You, as the contract owner, will not be taxed on increases in the value of your contract until a distribution occurs - either as a withdrawal or as annuity payments. When you make a withdrawal you are taxed on the amount of the withdrawal that is earnings. For annuity payments, different rules apply. A portion of each annuity payment you receive will be treated as a partial return of your purchase payments and will not be taxed. The remaining portion of the annuity payment will be treated as ordinary income. How the annuity payment is divided between taxable and non-taxable portions depends upon the period over which the annuity payments are expected to be made. Annuity payments received after you have received all of your purchase payments are fully includible in income. When a non-qualified contract is owned by a non-natural person (e.g., a corporation or certain other entities other than tax-qualified trusts), the contract will generally not be treated as an annuity for tax purposes. This means that the contract may not receive the benefits of tax-deferral. Income may be taxed as ordinary income every year. QUALIFIED AND NON-QUALIFIED CONTRACTS If you purchase the contract under a qualified plan, your contract is referred to as a qualified contract. Examples of qualified plans are: Individual Retirement Annuities (IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts), H.R. 10 Plans (sometimes referred to as Keogh Plans), and pension and profit-sharing plans, which include 401(k) plans. If you do not purchase the contract under a qualified plan, your contract is referred to as a non-qualified contract. WITHDRAWALS - NON-QUALIFIED CONTRACTS If you make a withdrawal from your contract, the Code treats such a withdrawal as first coming from earnings and then from your purchase payments. In most cases, such withdrawn earnings are includible in income. The Code also provides that any amount received under an annuity contract which is included in income may be subject to a tax penalty. The amount of the penalty is equal to 10% of the amount that is includible in income. Some withdrawals will be exempt from the penalty. They include any amounts: (1) paid on or after the taxpayer reaches age 59 1/2; (2) paid after you die; (3) paid if the taxpayer becomes totally disabled (as that term is defined in the Code); (4) paid in a series of substantially equal payments made annually (or more frequently) for the life or life expectancy of the taxpayer; (5) paid under an immediate annuity; or (6) which come from purchase payments made prior to August 14, 1982. WITHDRAWALS - QUALIFIED CONTRACTS The above information describing the taxation of non-qualified contracts does not apply to qualified contracts. There are special rules that govern qualified contracts. A more complete discussion of withdrawals from qualified contracts is contained in the Statement of Additional Information. WITHDRAWALS - TAX-SHELTERED ANNUITIES The Code limits the withdrawal of purchase payments made by contract owners from certain Tax-Sheltered Annuities. Withdrawals can only be made when a contract owner: (1) reaches age 59-1/2; (2) leaves his/her job; (3) dies; (4) becomes disabled (as that term is defined in the Code); or (5) in the case of hardship. However, in the case of hardship, the contract owner can only withdraw the purchase payments and not any earnings. DIVERSIFICATION The Code provides that the underlying investments for a variable annuity must satisfy certain diversification requirements in order to be treated as an annuity contract. Preferred Life believes that the funds are being managed so as to comply with the requirements. Neither the Code nor the Internal Revenue Service Regulations issued to date provide guidance as to the circumstances under which you, because of the degree of control you exercise over the underlying investments, and not Preferred Life would be considered the owner of the shares of the funds. If this occurs, it will result in the loss of the favorable tax treatment for the contract. It is unknown to what extent under federal tax law contract owners are permitted to select funds, to make transfers among the funds or the number and type of funds owners may select from. If any guidance is provided which is considered a new position, then the guidance would generally be applied prospectively. However, if such guidance is considered not to be a new position, it may be applied retroactively. This would mean that you, as the owner of the contract, could be treated as the owner of the funds. Due to the uncertainty in this area, Preferred Life reserves the right to modify the contract in an attempt to maintain favorable tax treatment. 7. ACCESS TO YOUR MONEY You can have access to the money in your contract: (1) by making a withdrawal (either a partial or a total withdrawal); (2) by receiving annuity payments; or (3) when a death benefit is paid to your beneficiary. Withdrawals can only be made during the accumulation phase. When you make a complete withdrawal you will receive the value of the contract on the day you made the withdrawal less any applicable contingent deferred sales charge, less any premium tax and less any contract maintenance charge. (See Section 5 - Expenses for a discussion of the charges.) Any partial withdrawal must be for at least $500 and, unless you instruct Preferred Life otherwise, and will be made pro-rata from all the funds and the fixed account you selected. Preferred Life requires that after you make a partial withdrawal the value of your contract must be at least $2,000. INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE. There are limits to the amount you can withdraw from a qualified plan referred to as a 403(b) plan. For a more complete explanation see Section 6 - Taxes and the discussion in the SAI. SYSTEMATIC WITHDRAWAL PROGRAM If the value of your contract is at least $25,000, Preferred Life offers a plan which provides automatic monthly or quarterly payments to you each year. The total systematic withdrawals which you can make each year without Preferred Life deducting a contingent deferred sales charge is limited to 15% of the value of your contract on the day the request is received. You may withdraw any amount you want under this program if your payments are no longer subject to the contingent deferred sales charge. You may not participate in this program if you own a non-qualified contract and are under age 59 1/2. If you make withdrawals under this plan, you may not also use the 15% free withdrawal amount that year. For a discussion of the contingent deferred sales charge and the 15% free withdrawal amount, see Section 5 - Expenses. all systematic withdrawals will be made on the 9th day of the month unless that day is not a business day. If it is not, then the withdrawal will be made the previous business day. INCOME TAXES MAY APPLY TO SYSTEMATIC WITHDRAWALS. MINIMUM DISTRIBUTION PROGRAM If you own a contract that is an Individual Retirement Annuity (IRA), you may select the Minimum Distribution Program. Under this program, Preferred Life will make payments to you that are designed to meet the applicable minimum distribution requirements imposed by the Internal Revenue Code for IRAs. If the value of your contract is at least $25,000, Preferred Life will make payments to you on a monthly or quarterly basis. The payments will not be subject to the contingent deferred sales charge and will be instead of the 15% free withdrawal amount. SUSPENSION OF PAYMENTS OR TRANSFERS Preferred Life may be required to suspend or postpone payments for withdrawals or transfers for any period when: 1. the New York Stock Exchange is closed (other than customary weekend and holiday closings); 2. trading on the New York Stock Exchange is restricted; 3. an emergency exists as a result of which disposal of the fund shares is not reasonably practicable or Preferred Life cannot reasonably value the fund shares; 4. during any other period when the Securities and Exchange Commission, by order, so permits for the protection of owners. Preferred Life has reserved the right to defer payment for a withdrawal or transfer from the fixed account for the period permitted by law but not for more than six months. 8. PERFORMANCE Preferred Life periodically advertises performance of the various funds. Preferred Life will calculate performance by determining the percentage change in the value of an accumulation unit by dividing the increase (decrease) for that unit by the value of the accumulation unit at the beginning of the period. This performance number reflects the deduction of the insurance charges. It does not reflect the deduction of any applicable contingent deferred sale charge and contract maintenance charge. The deduction of any applicable contract maintenance charge and contingent deferred sales charges would reduce the percentage increase or make greater any percentage decrease. Any advertisement will also include average annual total return figures which reflect the deduction of the insurance charges, contract maintenance charge, contingent deferred sales charges and the expenses of the funds. Preferred Life may also advertise aggregate total return information. Aggregate total return is determined the same way except that the results are not annualized. Certain funds have been in existence for some time and have investment performance history. However, the contracts are new. In order to demonstrate how the actual investment experience of the funds may affect your accumulation unit values, Preferred Life has prepared hypothetical performance information (Part A of the Appendix to this prospectus). The performance is based on the performance of the funds, modified to reflect the charges and expenses of your contract as if it had been in existence for the time periods shown. The information is based upon the historical experience of the funds and does not necessarily represent what your investment would earn in those funds. The Mutual Shares Securities Fund and the Mutual Discovery Securities Fund (New Valuemark funds) are newly created and therefore also do not yet have any meaningful performance record. However, they have the same investment objectives and portfolio managers and substantially the same investment policies as two corresponding series of Franklin Mutual Series Fund Inc. (formerly, Mutual Series Fund Inc.) which have been sold to the public (Public Funds). In order to show how the performance of the Public Funds would have affected accumulation unit values, hypothetical performance information was developed. Part B of the Appendix shows the historical performance of the Public Funds which reflects the deduction of the historical fees and expenses paid by the Public Funds and not those paid by the New Valuemark funds. There are hypothetical performance figures for the accumulation units which assume the deduction of the mortality and expense risk charge, the administrative charge and the fees and expenses that the Public Funds paid. There are also hypothetical performance figures for the accumulation units which reflect the deduction of the mortality and expense risk charge, the administrative charge, the contract maintenance charge, the contingent deferred sales charge and the fees and expenses that the Public Funds paid. The hypothetical performance figures for the accumulation units have not been restated to reflect the higher fees for the New Valuemark funds. If the higher fees were used, the hypothetical performance shown would be lower. Future performance may vary and the results shown are not necessarily representative of future results. Preferred Life may in the future also advertise yield information for one or more of the funds. If it does, it will provide you with information regarding how yield is calculated. More detailed information regarding how performance is calculated is found in the SAI. Any performance advertised will be based on historical data and does not guarantee future results of the funds. 9. DEATH BENEFIT UPON YOUR DEATH If you die during the accumulation phase, a death benefit is payable to your beneficiary (see below). No separate death benefit is paid during the income phase. If you have a joint owner, and the joint owner dies, the surviving owner will be considered the beneficiary. Joint owners must be spouses. The death benefit will be the greater of: 1) the current value of your contract, less any taxes on the day all claim proofs and payment election forms are received by Preferred Life at the Valuemark Service Center; or 2) (if applicable) as set forth in the enhanced death benefit endorsement to the contract, the guaranteed minimum death benefit, less any taxes, as of the day you die. Certain contract owners will not receive an enhanced death benefit endorsement. For these contract owners, the death benefit is as set forth in Item No. 1 above. The guaranteed minimum death benefit is equal to the greater of: A) the payments you have made, less any money you have taken out and any charges paid on the money you have taken out; or B) the highest value of the contract on each contract anniversary prior to an owner's 76th birthday, increased by any payments made since that anniversary, less any money taken out and charges paid on the money you have taken out since that anniversary. If you have a joint owner, the age of the oldest owner will be used to determine the guaranteed minimum death benefit. The guaranteed minimum death benefit will be reduced by any amounts withdrawn after the date of death. If the contract is owned by a non-natural person, then all references to you mean the annuitant. A beneficiary may request that the death benefit be paid in one of the following ways: (1) payment of the entire death benefit within 5 years of the date of death; or (2) payment of the death benefit under an annuity option. The death benefit payable under an annuity option must be paid over the beneficiary's lifetime or for a period not extending beyond the beneficiary's life expectancy. Payment must begin within one year of the date of death. If the beneficiary is the spouse of the contract owner, he/she can choose to continue the contract in his/her own name at the then current value, or if greater, the death benefit value. If a lump sum payment is elected and all the necessary requirements are met, the payment will be made within 7 days. If you (or any joint owner) die during the income phase and you are not the annuitant, any payments which are remaining under the annuity option selected will continue at least as rapidly as they were being paid at your death. If you die during the income phase, the beneficiary becomes the contract owner. DEATH OF ANNUITANT If the annuitant, who is not a contract owner or joint owner, dies during the accumulation phase, you can name a new annuitant. If a new annuitant is not named within 30 days of the death of the annuitant, you will become the annuitant. However, if the contract owner is a non-natural person (e.g., a corporation), then the death of the annuitant will be treated as the death of the contract owner, and a new annuitant may not be named. If the annuitant dies after annuity payments have begun, the remaining amounts payable, if any, will be as provided for in the annuity option selected. The remaining amounts payable will be paid to the contract owner at least as rapidly as they were being paid at the annuitant's death. 10. OTHER INFORMATION PREFERRED LIFE Preferred Life Insurance Company of New York (Preferred Life), 152 West 57th Street, 18th Floor, New York, NY 10019, was organized under the laws of the state of New York. Preferred Life offers annuities and group life, group accident and health insurance and variable annuity products. Preferred Life is licensed to do business in 6 states. Preferred Life is a wholly-owned subsidiary of Allianz Life Insurance Company of North America, which is a wholly-owned subsidiary of Allianz Versicherungs AG Holding. THE SEPARATE ACCOUNT Preferred Life established a separate account, Preferred Life Variable Account C (Separate Account), to hold the assets that underlie the contracts. The Board of Directors of Preferred Life adopted a resolution to establish the Separate Account under New York insurance law on February 26, 1988. Preferred Life has registered the Separate Account with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. The Separate Account is divided into sub-accounts. Each sub-account invests in a fund. The assets of the Separate Account are held in Preferred Life's name on behalf of the Separate Account and legally belong to Preferred Life. However, those assets that underlie the contracts, are not chargeable with liabilities arising out of any other business Preferred Life may conduct. All the income, gains and losses (realized or unrealized) resulting from these assets are credited to or charged against the contracts and not against any other contracts Preferred Life may issue. DISTRIBUTION NALAC Financial Plans, LLC (NFP), 1750 Hennepin Avenue, Minneapolis, MN 55403, acts as the distributor of the contracts. NFP is an affiliate of Preferred Life. Commissions will be paid to broker-dealers who sell the contracts. Broker-dealers will be paid commissions and expense reimbursements up to an amount equal to 6.0% of purchase payments for promotional or distribution expenses associated with marketing of the Contracts. The New York Insurance Department now permits asset based compensation. Preferred Life may adopt an asset based compensation program in addition to, or in lieu of, the present compensation program. Commissions may be recovered from broker-dealers if a full or partial surrender occurs within 12 months of a purchase payment. ADMINISTRATION Preferred Life has hired Delaware Valley Financial Services, Inc., 300 Berwyn Park, Berwyn, Pennsylvania, to perform administrative services regarding the contracts. The administrative services include issuance of the contracts and maintenance of contract owner's records. FINANCIAL STATEMENTS The consolidated financial statements of Preferred Life and the Separate Account have been included in the Statement of Additional Information. APPENDIX PERFORMANCE INFORMATION The following information is based on the historical investment performance of the funds. The results shown are not necessarily representative of future performance. PART A - FRANKLIN VALUEMARK FUNDS - EXISTING FUNDS The funds of Franklin Valuemark Funds have been in existence for some time and have investment performance history (except the Small Cap, Capital Growth, Templeton International Smaller Companies, Mutual Shares Securities and Mutual Discovery Securities Funds). In order to show you how investment performance of the funds affects accumulation unit values, we have developed the following hypothetical performance information. The chart below shows the actual historical investment performance of the funds and hypothetical accumulation unit performance. The hypothetical accumulation unit performance assumes that the accumulation units were invested in each of the funds for the same periods. The performance figures in Column I reflect the deduction of the actual fees and expenses paid by the funds. Column II represents hypothetical performance figures for the accumulation units which reflects the deduction of the insurance charges and the fees and expenses of the funds. Column III represents hypothetical performance figures for the accumulation units which reflects the insurance charges, the contract maintenance charge, the fees and expenses of the funds and assumes that you make a withdrawal at the end of the period (therefore the contingent deferred sales charge is reflected). Total Return for the periods ended _______:
Column I Column II Column III Fund Performance Hypothetical Accumulation Unit Performance ------------------------ ------------------------- ------------------------ Inception Since Since Since --------- ------------------------ ------------------------- ------------------------ FUND Date 1 yr. 5 yrs. Inception 1 yr. 5 yrs. Inception 1 yr. 5 yrs. Inception - ----------------------------------- --------- ------------------------ ------------------------- ------------------------ Money Market High Income Templeton Global Income Securities The U.S. Government Securities Zero Coupon - 2000 Zero Coupon - 2005 Zero Coupon - 2010 Growth and Income Income Securities Real Estate Securities Rising Dividends Templeton Global Asset Allocation Utility Equity Precious Metals Templeton Developing Markets Equity Templeton Global Growth Templeton International Equity Templeton Pacific Growth
PART B - PUBLIC FUNDS The Mutual Shares Securities Fund and Mutual Discovery Securities Fund ("New Valuemark funds") are newly created series of Franklin Valuemark Funds and have no performance record. The New Valuemark funds do, however, have the same investment objective and portfolio managers,(1) and substantially the same investment policies, as two corresponding series of Franklin Mutual Series Fund Inc. (formerly "Mutual Series Fund Inc.") which have been sold directly to the public ("Public Funds"). Chart 1 below shows the past performance of the Public Funds, in terms of average annual total return over the periods indicated. Average annual total return represents the average annual change in value of an investment over the stated periods, assuming reinvestment of dividends and capital gains at net asset value. These figures reflect the deduction of the historical fees and expenses paid by the Public Funds, which have been sold without sales charges. Chart 2 below shows hypothetical performance of accumulation units of the New Valuemark funds, based on the past average annual total return of the Public Funds and the deduction of all current recurring expenses of the Separate Account. These figures do not reflect any contingent deferred sales charge or annual contract maintenance charge, and have not been restated to reflect the higher expenses of the New Valuemark funds; all of which would lower the hypothetical performance shown. Chart 3 below shows hypothetical performance of accumulation units of the New Valuemark funds, based on the past average annual total return of the Public Funds and the deduction of all current recurring expenses of the Separate Account, as well as deduction of the applicable contingent deferred sales charge and annual contract maintenance charge. These figures have not been restated to reflect the higher expenses of the New Valuemark funds, and which would lower the hypothetical performance shown. Past performance cannot predict or guarantee future results of the New Valuemark funds. In addition, the investment performance of the New Valuemark funds will differ from the performance of the Public Funds because of product and portfolio differences, including differences in portfolio size, the investments held, the timing of purchases of similar investments, cash flows, minor differences in certain investment policies, insurance product related tax diversification requirements, state insurance regulations, and additional administrative and insurance costs associated with insurance company separate accounts. These figures are not adjusted for tax consequences. _______________________ (1) In November 1996, Franklin Resources, Inc., parent company of the investment managers of the Franklin Valuemark Funds, completed the acquisition of Heine Securities Corporation, the investment manager of Mutual Series Fund Inc. This transaction did not, however, change the individuals responsible for the day-to-day operations of Franklin Mutual Series Fund Inc., who are also responsible for the day-to-day operations of the New Valuemark funds.
1. Public Funds' Historical Performance Since Inception Periods Ended: One-Year Five-Years Ten-Years Inception Date - --------------------------------------------------------------------------------------------------------------- Mutual Discovery Fund................. -- -- -- -- 12/31/92 Mutual Shares Fund.................... -- -- -- -- 7/1/49
2. Hypothetical Accumulation Unit Performance (includes all current recurring expenses of the Separate Account) Since Inception Periods Ended: One-Year Five-Years Ten-Years Inception Date - --------------------------------------------------------------------------------------------------------------- Mutual Discovery Securities Sub-Account ......................... _____% -- -- _____% 12/31/92 Mutual Shares Securities Sub-Account ......................... _____% _____% _____% -- 7/1/49
3. Hypothetical Accumulation Unit Performance (includes all current recurring expenses of the Separate Account and deduction of the contingent deferred sales charge and annual contract maintenance charge) Since Inception Periods Ended 9/30/96: One-Year Five-Years Ten-Years Inception Date - --------------------------------------------------------------------------------------------------------------- Mutual Discovery Securities Sub-Account.......................... _____% -- -- _____% 12/31/92 Mutual Shares Securities Sub-Account.......................... ____% _____% _____% -- 7/1/49
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Insurance Company Experts Legal Opinions Distributor Reduction or Elimination of the Contingent Deferred Sales Charge Calculation of Performance Data Annuity Provisions Tax Status Mortality and Expense Guarantee Financial Statements PART B STATEMENT OF ADDITIONAL INFORMATION INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY CONTRACTS ISSUED BY PREFERRED LIFE VARIABLE ACCOUNT C AND PREFERRED LIFE INSURANCE COMPANY OF NEW YORK ____________________, 1997 THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN. THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS, CALL OR WRITE THE INSURANCE COMPANY AT: 152 West 57th Street, 18th Floor, New York, NY 10019. THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED ____________, 1997, AND AS MAY BE AMENDED FROM TIME TO TIME. TABLE OF CONTENTS PAGE INSURANCE COMPANY EXPERTS LEGAL OPINIONS DISTRIBUTOR REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE CALCULATION OF PERFORMANCE DATA TAX STATUS ANNUITY PROVISIONS MORTALITY AND EXPENSE RISK GUARANTEE FINANCIAL STATEMENTS INSURANCE COMPANY Information regarding Preferred Life Insurance Company of New York ("Insurance Company") is contained in the Prospectus. The Insurance Company is rated A+e (Superior, Parent Rating) by A.M. BEST, an independent analyst of the insurance industry. The financial strength of an insurance company may be relevant insofar as the ability of a company to make fixed annuity payments from its general account. EXPERTS The financial statements of Preferred Life Variable Account C and the consolidated financial statements of Preferred Life Insurance Company of New York as of and for the year ended December 31, 1995, included in this Statement of Additional Information have been audited by ___________________, independent auditors, as indicated in their reports included in this Statement of Additional Information and are included herein in reliance upon such reports and upon the authority of said firm as experts in accounting and auditing. LEGAL OPINIONS Legal matters in connection with the Contracts described herein are being passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut. DISTRIBUTOR NALAC Financial Plans, LLC, an affiliate of the Insurance Company, acts as the distributor. The offering is on a continuous basis. REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE The amount of the Contingent Deferred Sales Charge on the Contracts may be reduced or eliminated when sales of the Contracts are made to individuals or to a group of individuals in a manner that results in savings of sales expenses. The entitlement to a reduction of the Contingent Deferred Sales Charge will be determined by the Insurance Company after examination of the following factors: 1) the size of the group; 2) the total amount of purchase payments expected to be received from the group; 3) the nature of the group for which the Contracts are purchased, and the persistency expected in that group; 4) the purpose for which the Contracts are purchased and whether that purpose makes it likely that expenses will be reduced; and 5) any other circumstances which the Insurance Company believes to be relevant to determining whether reduced sales or administrative expenses may be expected. None of the reductions in charges for sales is contractually guaranteed. The Contingent Deferred Sales Charge will be eliminated when the Contracts are issued to an officer, director or employee of the Insurance Company or any of its affiliates. In no event will any reduction or elimination of the Contingent Deferred Sales Charge be permitted where the reduction or elimination will be unfairly discriminatory to any person. CALCULATION OF PERFORMANCE DATA TOTAL RETURN From time to time, the Insurance Company may advertise the performance data for the Funds in advertisements and Contract Owner communications. Such data will show the percentage change in the value of an accumulation unit based on the performance of a fund over a stated period of time, usually a calendar year, which is determined by dividing the increase (or decrease) in value for that unit by the accumulation unit value at the beginning of the period. Any such advertisement will include total return figures for the time periods indicated in the advertisement. Such total return figures will reflect the deduction of a 1.34% Mortality and Expense Risk Charge, a .15% Administrative Charge, the fees of the fund being advertised and any applicable Contract Maintenance Charge and Contingent Deferred Sales Charges. The hypothetical value of a Contract purchased for the time periods described in the advertisement will be determined by using the actual accumulation unit values for an initial $1,000 purchase payment, and deducting any applicable Contract Maintenance Charges and any applicable Contingent Deferred Sales Charge to arrive at the ending hypothetical value. The average annual total return is then determined by computing the fixed interest rate that a $1,000 purchase payment would have to earn annually, compounded annually, to grow to the hypothetical value at the end of the time periods described. The formula used in these calculations is: n P (1 + T) = ERV
P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the time periods used at the end of such time periods (or fractional portion thereof).
The Insurance Company may also advertise performance data which will be calculated in the same manner as described above but which will not reflect the deduction of the Contingent Deferred Sales Charge and the Contract Maintenance Charge. The Company may also advertise aggregate and average total return information over different periods of time. Aggregate total return is calculated in a similar manner, except that the results are not annualized. Each calculation assumes that no sales load is deducted from the initial $1,000 payment at the time it is allocated to the Funds and assumes that the income earned by the investment in the Fund is reinvested. Contract Owners should note that investment results will fluctuate over time, and any presentation of total return for any period should not be considered as a representation of what an investment may earn or what a Contract Owner's total return may be in any future period. YIELD THE MONEY MARKET FUND. The Insurance Company may advertise yield information for the Money Market Fund. The Money Market Fund's current yield may vary each day, depending upon, among other things, the average maturity of the underlying Fund's investment securities and changes in interest rates, operating expenses, the deduction of the Mortality and Expense Risk Charge, the Administrative Charge and the Contract Maintenance Charge and, in certain instances, the value of the underlying Fund's investment securities. The fact that the Fund's current yield will fluctuate and that the principal is not guaranteed should be taken into consideration when using the Fund's current yield as a basis for comparison with savings accounts or other fixed- yield investments. The yield at any particular time is not indicative of what the yield may be at any other time. The Money Market Fund's current yield is computed on a base period return of a hypothetical Contract having a beginning balance of one accumulation unit for a particular period of time (generally seven days). The return is determined by dividing the net change (exclusive of any capital changes) in such accumulation unit by its beginning value, and then multiplying it by 365/7 to get the annualized current yield. The calculation of net change reflects the value of additional shares purchased with the dividends paid by the Fund, and the deduction of the Mortality and Expense Risk Charge, the Administrative Charge and Contract Maintenance Charge. The effective yield reflects the effects of compounding and represents an annualization of the current return with all dividends reinvested. (Effective yield = [(Base Period Return + 1)365/7]-1.) The Insurance Company does not currently advertise any yield information for the Money Market Fund. OTHER FUNDS. The Insurance Company may also quote current yield in advertisements and Contract Owner communications for the other Funds. Each Fund (other than the Money Market Fund) will publish standardized total return information with any quotation of current yield. The yield computation is determined by dividing the net investment income per accumulation unit earned during the period (minus the deduction for the Mortality and Expense Risk Charge, Administrative Charge and the Contract Maintenance Charge) by the accumulation unit value on the last day of the period and annualizing the resulting figure, according to the following formula: 6 Yield = 2 [[(a-b) + 1] - 1] _____ cd Where:
a = net investment income earned during the period by the Fund attributable to shares owned by the Fund. b = expenses accrued for the period (net of reimbursements). c = the average daily number of accumulation units outstanding during the period. d = the maximum offering price per accumulation unit on the last day of the period.
The above formula will be used in calculating quotations of yield, based on specified 30-day periods identified in the advertisement or communication. Yield calculations assume no sales load. The Insurance Company does not currently advertise any yield information for any Fund. PERFORMANCE RANKING Total return may be compared to relevant indices, including U. S. domestic and international taxable bond indices and data from Lipper Analytical Services, Inc., Standard & Poor's Indices, or VARDS. From time to time, evaluation of performance by independent sources may also be used in advertisements and in information furnished to present or prospective contract owners. TAX STATUS NOTE: The following description is based upon the Insurance Company's understanding of current federal income tax law applicable to annuities in general. The Insurance Company cannot predict the probability that any changes in such laws will be made. Purchasers are cautioned to seek competent tax advice regarding the possibility of such changes. The Insurance Company does not guarantee the tax status of the Contracts. Purchasers bear the complete risk that the Contracts may not be treated as "annuity contracts" under federal income tax laws. It should be further understood that the following discussion is not exhaustive and that special rules not described herein may be applicable in certain situations. Moreover, no attempt has been made to consider any applicable state or other tax laws. GENERAL Section 72 of the Internal Revenue Code of 1986, as amended (the "Code") governs taxation of annuities in general. A Contract Owner is not taxed on increases in the value of a Contract until distribution occurs, either in the form of a lump sum payment or as annuity payments under the Annuity Option elected. For a lump sum payment received as a total surrender (total redemption) or death benefit, the recipient is taxed on the portion of the payment that exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost basis is generally the purchase payments, while for Qualified Contracts there may be no cost basis. The taxable portion of the lump sum payment is taxed at ordinary income tax rates. For annuity payments, a portion of each payment in excess of an exclusion amount is includable in taxable income. The exclusion amount for payments based on a fixed annuity option is determined by multiplying the payment by the ratio that the cost basis of the Contract (adjusted for any period certain or refund feature) bears to the expected return under the Contract. The exclusion amount for payments based on a variable annuity option is determined by dividing the cost basis of the Contract (adjusted for any period certain or refund guarantee) by the number of years over which the annuity is expected to be paid. Payments received after the investment in the Contract has been recovered (i.e. when the total of the excludable amounts equal the investment in the Contract) are fully taxable. The taxable portion is taxed at ordinary income rates. For certain types of Qualified Plans there may be no cost basis in the Contract within the meaning of Section 72 of the Code. Contract Owners, Annuitants and Beneficiaries under the Contracts should seek competent financial advice about the tax consequences of any distributions. The Insurance Company is taxed as a life insurance company under the Code. For federal income tax purposes, the Separate Account is not a separate entity from the Insurance Company, and its operations form a part of the Insurance Company. DIVERSIFICATION Section 817(h) of the Code imposes certain diversification standards on the underlying assets of variable annuity contracts. The Code provides that a variable annuity contract will not be treated as an annuity contract for any period (and any subsequent period) for which the investments are not adequately diversified in accordance with regulations prescribed by the United States Treasury Department ("Treasury Department"). Disqualification of the Contract as an annuity contract would result in imposition of federal income tax to the Contract Owner with respect to earnings allocable to the Contract prior to the receipt of payments under the Contract. The Code contains a safe harbor provision which provides that annuity contracts such as the Contracts meet the diversification requirements if, as of the end of each quarter, the underlying assets meet the diversification standards for a regulated investment company and no more than fifty-five percent (55%) of the total assets consist of cash, cash items, U.S. government securities and securities of other regulated investment companies. On March 2, 1989, the Treasury Department issued regulations (Treas. Reg. 1.817-5) which established diversification requirements for the investment portfolios underlying variable contracts such as the Contracts. The regulations amplify the diversification requirements for variable contracts set forth in the Code and provide an alternative to the safe harbor provision described above. Under the regulations, an investment portfolio will be deemed adequately diversified if: (1) no more than 55% of the value of the total assets of the portfolio is represented by any one investment; (2) no more than 70% of the value of the total assets of the portfolio is represented by any two investments; (3) no more than 80% of the value of the total assets of the portfolio is represented by any three investments; and (4) no more than 90% of the value of the total assets of the portfolio is represented by any four investments. The Code provides that for purposes of determining whether or not the diversification standards imposed on the underlying assets of variable contracts by Section 817(h) of the Code have been met, "each United States government agency or instrumentality shall be treated as a separate issuer." The Insurance Company intends that all Funds of Franklin Valuemark Funds underlying the Contracts will be managed by the Managers for Franklin Valuemark Funds in such a manner as to comply with these diversification requirements. The Treasury Department has indicated that the diversification Regulations do not provide guidance regarding the circumstances in which Contract Owner control of the investments of the Separate Account will cause the Contract Owner to be treated as the owner of the assets of the Separate Account, thereby resulting in the loss of favorable tax treatment for the Contract. At this time it cannot be determined whether additional guidance will be provided and what standards may be contained in such guidance. The amount of Contract Owner control which may be exercised under the Contract is different in some respects from the situations addressed in published rulings issued by the Internal Revenue Service in which it was held that the policy owner was not the owner of the assets of the separate account. It is unknown whether these differences, such as the Contract Owner's ability to transfer among investment choices or the number and type of investment choices available, would cause the Contract Owner to be considered as the owner of the assets of the Separate Account resulting in the imposition of federal income tax to the Contract Owner with respect to earnings allocable to the Contract prior to receipt of payments under the Contract. In the event any forthcoming guidance or ruling is considered to set forth a new position, such guidance or ruling will generally be applied only prospectively. However, if such ruling or guidance was not considered to set forth a new position, it may be applied retroactively resulting in the Contract Owner being retroactively determined to be the owner of the assets of the Separate Account. Due to the uncertainty in this area, the Insurance Company reserves the right to modify the Contract in an attempt to maintain favorable tax treatment. MULTIPLE CONTRACTS The Code provides that multiple non-qualified annuity contracts which are issued within a calendar year period to the same contract owner by one company or its affiliates are treated as one annuity contract for purposes of determining the tax consequences of any distribution. Such treatment may result in adverse tax consequences, including more rapid taxation of the distributed amounts from such combination of contracts. Contract Owners should consult a tax adviser prior to purchasing more than one non-qualified annuity contract in any calendar year period. CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS Under Section 72(u) of the Code, the investment earnings on purchase payments for the Contracts will be taxed currently to the Contract Owner if the Owner is a non-natural person, e.g., a corporation or certain other entities. Such Contracts generally will not be treated as annuities for federal income tax purposes. However, this treatment is not applied to Contracts held by a trust or other entity as an agent for a natural person nor to Contracts held by qualified plans. Purchasers should consult their own tax counsel or other tax adviser before purchasing a Contract to be owned by a non-natural person. TAX TREATMENT OF ASSIGNMENTS An assignment or pledge of a Contract may be a taxable event. Contract Owners should therefore consult competent tax advisers should they wish to assign or pledge their Contracts. INCOME TAX WITHHOLDING All distributions or the portion thereof which is includible in the gross income of the Contract Owner are subject to federal income tax withholding. Generally, amounts are withheld from periodic payments at the same rate as wages and at the rate of 10% from non-periodic payments. However, the Contract Owner, in most cases, may elect not to have taxes withheld or to have withholding done at a different rate. Effective January 1, 1993, certain distributions from retirement plans qualified under Section 401 or Section 403(b) of the Code, which are not directly rolled over to another eligible retirement plan or individual retirement account or individual retirement annuity, are subject to a mandatory 20% withholding for federal income tax. The 20% withholding requirement generally does not apply to: a) a series of substantially equal payments made at least annually for the life or life expectancy of the participant or joint and last survivor expectancy of the participant and a designated beneficiary, or for a specified period of 10 years or more; or b) distributions which are required minimum distributions; or (c) the portion of the distributions not includible in gross income (i.e. returns of after-tax contributions). Participants should consult their own tax counsel or other tax adviser regarding withholding requirements. TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS Section 72 of the Code governs treatment of distributions from annuity contracts. It provides that if the contract value exceeds the aggregate purchase payments made, any amount withdrawn will be treated as coming first from the earnings and then, only after the income portion is exhausted, as coming from the principal. Withdrawn earnings are includible in gross income. It further provides that a ten percent (10%) penalty will apply to the income portion of any distribution. However, the penalty is not imposed on amounts received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the Contract Owner; (c) if the taxpayer is totally disabled (for this purpose disability is as defined in Section 72(m)(7) of the Code); (d) in a series of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the taxpayer or for the joint lives (or joint life expectancies) of the taxpayer and his Beneficiary; (e) under an immediate annuity; or (f) which are allocable to purchase payments made prior to August 14, 1982. The above information does not apply to Qualified Contracts. However, separate tax withdrawal penalties and restrictions may apply to such Qualified Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts.") QUALIFIED PLANS The Contracts offered are designed to be suitable for use under various types of Qualified Plans. Because of the minimum purchase payment requirements, these Contracts may not be appropriate for some periodic payment retirement plans. Taxation of participants in each Qualified Plan varies with the type of plan and terms and conditions of each specific plan. Contract Owners, Annuitants and Beneficiaries are cautioned that benefits under a Qualified Plan may be subject to the terms and conditions of the plan regardless of the terms and conditions of the Contracts issued pursuant to the plan. Some retirement plans are subject to distribution and other requirements that are not incorporated into the Insurance Company's administrative procedures. Contract Owners, participants and Beneficiaries are responsible for determining that contributions, distributions and other transactions with respect to the Contracts comply with applicable law. Following are general descriptions of the types of Qualified Plans with which the Contracts may be used. Such descriptions are not exhaustive and are for general informational purposes only. The tax rules regarding Qualified Plans are very complex and will have differing applications, depending on individual facts and circumstances. Each purchaser should obtain competent tax advice prior to purchasing a Contract issued under a Qualified Plan. On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V. NORRIS that optional annuity benefits provided under an employer's deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women. The Contracts sold by the Insurance Company in connection with Qualified Plans will utilize annuity tables which do not differentiate on the basis of sex. Such annuity tables will also be available for use in connection with certain non-qualified deferred compensation plans. Contracts issued pursuant to Qualified Plans include special provisions restricting Contract provisions that may otherwise be available and described in this Statement of Additional Information. Generally, Contracts issued pursuant to Qualified Plans are not transferable except upon surrender or annuitization. Various penalty and excise taxes may apply to contributions or distributions made in violation of applicable limitations. Furthermore, certain withdrawal penalties and restrictions may apply to surrenders from Qualified Contracts. (See "Tax Treatment of Withdrawals - Qualified Contracts.") a. H.R. 10 Plans Section 401 of the Code permits self-employed individuals to establish Qualified Plans for themselves and their employees, commonly referred to as "H.R. 10" or "Keogh" plans. Contributions made to the Plan for the benefit of the employees will not be included in the gross income of the employees until distributed from the Plan. The tax consequences to participants may vary, depending upon the particular Plan design. However, the Code places limitations and restrictions on all Plans, including on such items as: amounts of allowable contributions; form, manner and timing of distributions; transferability of benefits; vesting and nonforfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions, withdrawals and surrenders. (See "Tax Treatment of Withdrawals - - Qualified Contracts.") Purchasers of Contracts for use with an H.R. 10 Plan should obtain competent tax advice as to the tax treatment and suitability of such an investment. b. Tax-Sheltered Annuities Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by public schools and certain charitable, educational and scientific organizations described in Section 501(c)(3) of the Code. These qualifying employers may make contributions to the Contracts for the benefit of their employees. Such contributions are not includable in the gross income of the employee until the employee receives distributions from the Contract. The amount of contributions to the tax-sheltered annuity is limited to certain maximums imposed by the Code. Furthermore, the Code sets forth additional restrictions governing such items as transferability, distributions, nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals Qualified Contracts" and "Tax-Sheltered Annuities - Withdrawal Limitations.") Employee loans are not allowed under these Contracts. Any employee should obtain competent tax advice as to the tax treatment and suitability of such an investment. c. Individual Retirement Annuities Section 408(b) of the Code permits eligible individuals to contribute to an individual retirement program known as an "Individual Retirement Annuity" ("IRA"). Under applicable limitations, certain amounts may be contributed to an IRA which may be deductible from the individual's gross income. These IRAs are subject to limitations on eligibility, contributions, transferability and distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts.") Under certain conditions, distributions from other IRAs and other Qualified Plans may be rolled over or transferred on a tax-deferred basis into an IRA. Sales of Contracts for use with IRAs are subject to special requirements imposed by the Code, including the requirement that certain informational disclosure be given to persons desiring to establish an IRA. Purchasers of Contracts to be qualified as Individual Retirement Annuities should obtain competent tax advice as to the tax treatment and suitability of such an investment. d. Corporate Pension and Profit-Sharing Plans Sections 401(a) and 401(k) of the Code permit corporate employers to establish various types of retirement plans for employees. These retirement plans may permit the purchase of the Contracts to provide benefits under the Plan. Contributions to the Plan for the benefit of employees will not be includable in the gross income of the employee until distributed from the Plan. The tax consequences to participants may vary, depending upon the particular Plan design. However, the Code places limitations and restrictions on all Plans, including on such items as: amount of allowable contributions; form, manner and timing of distributions; transferability of benefits; vesting and nonforfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions, withdrawals and surrenders. Participant loans are not allowed under the Contracts purchased in connection with these Plans. (See "Tax Treatment of Withdrawals Qualified Contracts.") Purchasers of Contracts for use with Corporate Pension or Profit- Sharing Plans should obtain competent tax advice as to the tax treatment and suitability of such an investment. TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS In the case of a withdrawal under a Qualified Contract, a ratable portion of the amount received is taxable, generally based on the ratio of the individual's cost basis to the individual's total accrued benefit under the retirement plan. Special tax rules may be available for certain distributions from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of any distribution from qualified retirement plans, including Contracts issued and qualified under Code Sections 401 (H.R. 10 and Corporate Pension and Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities) and 408(b) (Individual Retirement Annuities). To the extent amounts are not includible in gross income because they have been properly rolled over to an IRA or to another eligible Qualified Plan, no tax penalty will be imposed. The tax penalty will not apply to the following distributions: (a) if distribution is made on or after the date on which the Contract Owner or Annuitant (as applicable) reaches age 59 1/2; (b) distributions following the death or disability of the Contract Owner or Annuitant (as applicable) (for this purpose disability is as defined in Section 72(m)(7) of the Code); (c) after separation from service, distributions that are part of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the Contract Owner or Annuitant (as applicable) or the joint lives (or joint life expectancies) of such Contract Owner or Annuitant (as applicable) and his designated beneficiary; (d) distributions to a Contract Owner or Annuitant (as applicable) who has separated from service after he has attained age 55; (e) distributions made to the Contract Owner or Annuitant (as applicable) to the extent such distributions do not exceed the amount allowable as a deduction under Code Section 213 to the Contract Owner or Annuitant (as applicable) for amounts paid during the taxable year for medical care; (f) distributions made to an alternate payee pursuant to a qualified domestic relations order; and (g) distributions from an Individual Retirement Annuity for the purchase of medical insurance (as described in Section 213(d)(1)(D) of the Code) for the Contract Owner and his or her spouse and dependents if the Contract Owner has received unemployment compensation for at least 12 weeks. This exception no longer applies after the Contract Owner has been re-employed for at least 60 days. The exceptions stated in items (d) and (f) above do not apply in the case of an Individual Retirement Annuity. The exception stated in item (c) applies to an Individual Retirement Annuity without the requirement that there be a separation from service. Generally, distributions from a Qualified Plan must commence no later than April 1 of the calendar year following the later of: (a) the year in which the employee attains age 70 1/2 or (b) the calendar year in which the employee retires. The date set forth in (b) does not apply to an Individual Retirement Annuity. Required distributions must be over a period not exceeding the life expectancy of the individual or the joint lives or life expectancies of the individual and his or her designated beneficiary. If the required minimum distributions are not made, a 50% penalty tax is imposed as to the amount not distributed. TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS The Code limits the withdrawal of amounts attributable to contributions made pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of the Code) to circumstances only when the Contract Owner: (1) attains age 59 ; (2) separates from service; (3) dies; (4) becomes disabled (within the meaning of Section 72(m)(7) of the Code); or (5) in the case of hardship. However, withdrawals for hardship are restricted to the portion of the Contract Owner's Contract Value which represents contributions by the Contract Owner and does not include any investment results. The limitations on withdrawals became effective on January 1, 1989 and apply only to salary reduction contributions made after December 31, 1988, and to income attributable to such contributions and to income attributable to amounts held as of December 31, 1988. The limitations on withdrawals do not affect rollovers and transfers between certain Qualified Plans. Contract Owners should consult their own tax counsel or other tax adviser regarding any distributions. ANNUITY PROVISIONS FIXED ANNUITY PAYOUT A fixed annuity is an annuity with payments which are guaranteed as to dollar amount by the Insurance Company and do not vary with the investment experience of a Fund. The Fixed Account value on the day immediately preceding the Income Date will be used to determine the Fixed Annuity monthly payment. The monthly Annuity Payment will be based upon the Contract Value at the time of annuitization, the Annuity Option selected, the age of the annuitant and any joint annuitant and the sex of the annuitant and joint annuitant where allowed. VARIABLE ANNUITY PAYOUT A variable annuity is an annuity with payments which: (1) are not predetermined as to dollar amount; and (2) will vary in amount with the net investment results of the applicable Fund(s). ANNUITY UNIT VALUE On the Income Date, a fixed number of Annuity Units will be purchased as follows: The first Annuity Payment is equal to the Adjusted Contract Value, divided first by $1,000 and then multiplied by the appropriate Annuity Payment amount for each $1,000 of value for the Annuity Option selected. In each Fund the fixed number of Annuity Units is determined by dividing the amount of the initial Annuity Payment determined for each Fund by the Annuity Unit value on the Income Date. Thereafter, the number of Annuity Units in each Fund remains unchanged unless the Contract Owner elects to transfer between Funds. All calculations will appropriately reflect the Annuity Payment frequency selected. On each subsequent Annuity Payment date, the total Annuity Payment is the sum of the Annuity Payments for each Fund. The Annuity Payment in each Fund is determined by multiplying the number of Annuity Units then allocated to such Fund by the Annuity Unit value for that Fund. On each subsequent Valuation Date, the value of an Annuity Unit is determined in the following way: First: The Net Investment Factor is determined as described in the Prospectus under "Purchase - Accumulation Units." Second: The value of an Annuity Unit for a Valuation Period is equal to: a. the value of the Annuity Unit for the immediately preceding Valuation Period. b. multiplied by the Net Investment Factor for the current Valuation Period; c. divided by the Assumed Net Investment Factor (see below) for the Valuation Period. The Assumed Net Investment Factor is equal to one plus the Assumed Investment Return which is used in determining the basis for the purchase of an Annuity, adjusted to reflect the particular Valuation Period. The Assumed Investment Return that the Insurance Company will use is 5%. However, the Insurance Company may agree to use a different value. MORTALITY AND EXPENSE RISK GUARANTEE The Insurance Company guarantees that the dollar amount of each annuity payment after the first annuity payment will not be affected by variations in mortality and expense experience. FINANCIAL STATEMENTS The audited consolidated financial statements of the Insurance Company as of and for the year ended December 31, ______, included herein should be considered only as bearing upon the ability of the Insurance Company to meet its obligations under the Contracts. The audited financial statements of the Separate Account as of and for the year ended December 31, ______, are also included herein. PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS a. Financial Statements The financial statements of the Company and the Separate Account will be filed by amendment. b. Exhibits 1. Resolution of Board of Directors of the Company authorizing the establishment of the Variable Account 2. Not Applicable 3. Principal Underwriter Agreement (to be filed by Amendment) 4. Individual Variable Annuity Contract 4a. Waiver of Contingent Deferred Sales Charge Endorsement 4b. Enhanced Death Benefit Endorsement 5. Application for Individual Variable Annuity Contract 6.(i) Copy of Articles of Incorporation of the Company (ii) Copy of the Bylaws of the Company (to be filed by Amendment) 7. Not Applicable 8. Form of Fund Participation Agreement 9. Opinion and Consent of Counsel (to be filed by Amendment) 10. Independent Auditors' Consent (to be filed by Amendment) 11. Not Applicable 12. Not Applicable 13. Calculation of Performance Information (to be filed be Amendment) 14. Company Organizational Chart 27. Financial Data Schedule (to be filed by Amendment) ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR The following are the Officers and Directors of the Company:
Name and Principal Positions and Offices Business Address with Depositor - ----------------- ------------------------------ Lowell C. Anderson Director 1750 Hennepin Avenue Minneapolis, MN 55403 Howard E. Barnhill Director The Mews 3726 Rachel Lane Naples, FL 34103 Ronald L. Wobbeking Chairman, Chief Executive Officer and Director 1750 Hennepin Avenue Minneapolis, MN 55403 Thomas G. Brown Director One Liberty Plaza, 45th Floor New York, NY 10006 Thomas Duncanson Director 12778 Mariner Court Palm City, FL 34990 Edward J. Bonach Director 1750 Hennepin Avenue Minneapolis, MN 55403 Alan A. Grove Secretary and Director 1750 Hennepin Avenue Minneapolis, MN 55403 Shannon Hendricks Treasurer 1750 Hennepin Avenue Minneapolis, MN 55403 Dennis Marion Director 500 Valley Road Wayne, NJ 07470 Reinhard Obermueller Director 560 Lexington Avenue New York, NY 10022 Kenneth P. Schrapp Appointed Actuary 1750 Hennepin Avenue Minneapolis, MN 55403 Robert S. James Director 1750 Hennepin Avenue Minneapolis, MN 55403 Eugene T. Wilkinson Director 14 Commerce Drive Cranford, NJ 07016 Richard M. Murray Director 60 Remsen Street, Apt. 10C Brooklyn Heights, NY 11201 Eugene Long Vice President of Operations 152 W. 57th Street and Director 18th Floor New York, NY 10019 Thomas J. Lynch President, Chief 1750 Hennepin Avenue Marketing Officer Minneapolis, MN 55403 and Director Carol B. Shaw Second Vice President 152 W. 57th Street, 18th Floor New York, NY 10019
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT The Company organizational chart is attached as Exhibit 14. ITEM 27. NUMBER OF CONTRACT OWNERS Not Applicable. ITEM 28. INDEMNIFICATION The Bylaws of the Company provide that: Each person (and the heirs, executors, and administrators of such person) made or threatened to be made a party to any action, civil or criminal, by reason of being or having been a Director, officer, or employee of the corporation (or by reason of serving any other organization at the request of the corporation) shall be indemnified to the extent permitted by the laws of the State of New York, and in the manner prescribed therein. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted for directors and officers or controlling persons of the Company pursuant to the foregoing, or otherwise, the Company 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, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company 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 Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 29. PRINCIPAL UNDERWRITERS a. NALAC Financial Plans LLC is the principal underwriter for the Contracts. It also is the principal underwriter for: Allianz Life Variable Account A Allianz Life Variable Account B b. The following are the officers and directors of NALAC Financial Plans LLC:
Name & Principal Positions and Offices Business Address with Underwriter - ------------------ ------------------------ Alan A. Grove Director 1750 Hennepin Avenue Minneapolis, MN 55403 James P. Kelso Director 1750 Hennepin Ave. Minneapolis, MN 55403 Thomas B. Clifford President and Director 1750 Hennepin Avenue Minneapolis, MN 55403 Michael T. Westermeyer Secretary and Director 1750 Hennepin Avenue Minneapolis, MN 55403 Michael J. Yates Treasurer 1750 Hennepin Avenue Minneapolis, MN 55403 Edward J. Bonach Director 1750 Hennepin Avenue Minneapolis, MN 55403 Catherine L. Mielke Compliance Officer 1750 Hennepin Avenue Minneapolis, MN 55403
c. Not Applicable ITEM 30. LOCATION OF ACCOUNTS AND RECORDS Thomas Clifford, whose address is 1750 Hennepin Avenue, Minneapolis, Minnesota, maintains physical possession of the accounts, books or documents of the Variable Account required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder. ITEM 31. MANAGEMENT SERVICES Not Applicable ITEM 32. UNDERTAKINGS a. Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen (16) months old for so long as payment under the variable annuity contracts may be accepted. b. Registrant hereby undertakes to include either (1) as part of any application to purchase a contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information. c. Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. d. Preferred Life Insurance Company of New York ("Company") hereby represents that the fees and charges deducted under the Contract described in the Prospectus, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred and the risks assumed by the Company. REPRESENTATIONS The Company hereby represents that it is relying upon a No-Action Letter issued to the American Council of Life Insurance, dated November 28, 1988 (Commission ref. IP-6-88), and that the following provisions have been complied with: 1. Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in each registration statement, including the prospectus, used in connection with the offer of the contract; 2. Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in any sales literature used in connection with the offer of the contract; 3. Instruct sales representatives who solicit participants to purchase the contract specifically to bring the redemption restrictions imposed by Section 403(b)(11) to the attention of the potential participants; 4. Obtain from each plan participant who purchases a Section 403(b) annuity contract, prior to or at the time of such purchase, a signed statement acknowledging the participant's understanding of (1) the restrictions on redemption imposed by Section 403(b)(11), and (2) other investment alternatives available under the employer's Section 403(b) arrangement to which the participant may elect to transfer his contract value. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, as amended, the Registrant certifies that it has caused this registration statement to be signed on its behalf in the City of Minneapolis and State of Minnesota, on this 27th day of December, 1996. PREFERRED LIFE VARIABLE ACCOUNT C (Registrant) By: PREFERRED LIFE INSURANCE COMPANY OF NEW YORK (Depositor) By: /s/ ALAN A. GROVE ________________________________________________ PREFERRED LIFE INSURANCE COMPANY OF NEW YORK By: /s/ ALAN A. GROVE _______________________________________________ Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature and Title
Lowell C. Anderson* Director 12/27/96 - ------------------------ --------- Lowell C. Anderson Howard E. Barnhill* Director 12/27/96 - ------------------------ --------- Howard E. Barnhill Ronald L. Wobbeking* Chairman, Chief Executive 12/27/96 - ------------------------ --------- Ronald L. Wobbeking Officer and Director Shannon Hendricks* Treasurer 12/27/96 - ------------------------ --------- Shannon Hendricks /s/ ALAN A. GROVE Secretary and Director 12/27/96 - --------------------- --------- Alan A. Grove Thomas G. Brown* Director 12/27/96 - ------------------------ --------- Thomas G. Brown Thomas Duncanson* Director 12/27/96 - ------------------------ --------- Thomas Duncanson Edward J. Bonach* Director 12/27/96 - ------------------------ --------- Edward J. Bonach Robert S. James* Director 12/27/96 - ------------------------ --------- Robert S. James Thomas J. Lynch* Director 12/27/96 - ------------------------ --------- Thomas J. Lynch Dennis Marion* Director 12/27/96 - ------------------------ --------- Dennis Marion Richard M. Murray* Director 12/27/96 - ------------------------ --------- Richard M. Murray* Eugene T. Wilkinson* Director 12/27/96 - ------------------------ --------- Eugene T. Wilkinson Eugene Long* Director 12/27/96 - ------------------------ --------- Eugene Long Reinhard W. Obermueller* Director 12/27/96 - ------------------------ --------- Reinhard W. Obermueller
* By /S/ ALAN A. GROVE ____________________________________ Attorney-in-Fact LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Lowell C. Anderson, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Alan A. Grove, as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 31st day of March, 1992. WITNESS: /S/ TINA M. ERICKSON /S/ LOWELL C. ANDERSON __________________________________ __________________________________ Tina M. Erickson Lowell C. Anderson LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Howard E. Barnhill, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 2nd day of April, 1992. WITNESS: /S/ ALAN A. GROVE /S/ HOWARD E. BARNHILL __________________________________ __________________________________ Alan A. Grove Howard E. Barnhill LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Ronald L. Wobbeking, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 1st day of April, 1992. WITNESS: /S/ TINA M. ERICKSON /S/ RONALD L. WOBBEKING __________________________________ __________________________________ Tina M. Erickson Ronald L. Wobbeking LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Shannon Hendricks, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 13th day of April, 1995. WITNESS: /S/ MICHAEL T. WESTERMEYER /S/ SHANNON HENDRICKS __________________________________ __________________________________ Michael T. Westermeyer Shannon Hendricks LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Alan A. Grove, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson, as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 2nd day of April, 1992. WITNESS: /S/ TINA M. ERICKSON /S/ ALAN A. GROVE __________________________________ __________________________________ Tina M. Erickson Alan A. Grove LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Thomas G. Brown, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 2nd day of April, 1992. WITNESS: /S/ ALAN A. GROVE /S/ THOMAS G. BROWN __________________________________ __________________________________ Alan A. Grove Thomas G. Brown LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Thomas Duncanson, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 2nd day of April, 1992. WITNESS: /S/ ALAN A. GROVE /S/ THOMAS DUNCANSON __________________________________ __________________________________ Alan A. Grove Thomas Duncanson LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Edward J. Bonach, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 30th day of March, 1992. WITNESS: /S/ MARGO JESKE /S/ EDWARD J. BONACH __________________________________ __________________________________ Margo Jeske Edward J. Bonach LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Robert S. James, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 20th day of April, 1993. WITNESS: /S/ ROBERT S. JAMES __________________________________ __________________________________ Robert S. James LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Thomas J. Lynch, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 20th day of April, 1993. WITNESS: /S/ MICHAEL T. WESTERMEYER /S/ THOMAS J. LYNCH __________________________________ __________________________________ Michael T. Westermeyer Thomas J. Lynch LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Dennis J. Marion, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 2nd day of April, 1992. WITNESS: /S/ ALAN A. GROVE /S/ DENNIS J. MARION __________________________________ __________________________________ Alan A. Grove Dennis J. Marion LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Richard M. Murray, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 2nd day of April, 1992. WITNESS: /S/ ALAN A. GROVE /S/ RICHARD M. MURRAY __________________________________ __________________________________ Alan A. Grove Richard M. Murray LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Eugene T. Wilkinson, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 2nd day of April, 1992. WITNESS: /S/ ALAN A. GROVE /S/ EUGENE T. WILKINSON __________________________________ __________________________________ Alan A. Grove Eugene T. Wilkinson LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Eugene Long, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 13th day of April, 1995. WITNESS: /S/ CARL SHAW /S/ EUGENE LONG __________________________________ __________________________________ Carl Shaw Eugene Long LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Reinhard W. Obermueller, a Director of Preferred Life Insurance Company of New York (Preferred Life), a corporation duly organized under the laws of the State of New York, do hereby appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney and agent, for me, and in my name as a Director of Preferred Life on behalf of Preferred Life or otherwise, with full power to execute, deliver and file with the Securities and Exchange Commission all documents required for registration of a security under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and to do and perform each and every act that said attorney may deem necessary or advisable to comply with the intent of the aforesaid Acts. WITNESS my hand and seal this 23rd day of September, 1996. WITNESS: /S/ A. FRANCISCO /S/ REINHARD W. OBERMUELLER __________________________________ __________________________________ A. Francisco Reinhard W. Obermueller EXHIBITS TO FORM N-4 PREFERRED LIFE VARIABLE ACCOUNT C PREFERRED LIFE INSURANCE COMPANY OF NEW YORK INDEX TO EXHIBITS EXHIBIT PAGE EX-99.B1 Resolution of Board of Directors EX-99.B4 Individual Variable Annuity Contract EX-99.B4a Waiver of Contingent Deferred Sales Charge Endorsement EX-99.B4b Enhanced Death Benefit Endorsement EX-99.B5 Application for Individual Variable Annuity Contract EX-99.B6(i) Copy of Articles of Incorporation EX-99.B8 Form of Fund Participation Agreement EX-99.B14 Company Organizational Chart EX-99.B1 2 RESOLUTIONS CERTIFICATION The following resolutions were adopted at a meeting of the Board of Directors of Preferred Life Insurance Company of New York on February 26, 1988. RESOLVED: That this company is hereby authorized to establish one or more separate accounts in accordance with state insurance laws and to issue variable and fixed annuity contracts and variable and fixed life insurance policies with the reserves for such contracts and policies being segregated in such separate accounts or in the general accounts of this company in the manner specified in such accounts. RESOLVED FURTHER: That the President or Vice President - Operations of the Company or such other executive officer of this company as shall be designated by the President is hereby authorized to designate such separate accounts as may be deemed necessary or convenient and to register such separate accounts and those variable and fixed annuity contracts and life insurance policies authorized hereby under such federal securities laws as are deemed appropriate. RESOLVED FURTHER: That the President or Vice President - Operations of this company or such other executive officer of this company as shall be designated by the President is hereby authorized to invest such sums in any separate account established hereby as may be deemed necessary or appropriate to comply with requirements of applicable law. RESOLVED FURTHER: That the President of this company and such other executive officers of this company as may be appropriate, are hereby authorized to do any act necessary or appropriate to carry out the intention of this resolution. I, the undersigned, do hereby certify that I am the duly elected and qualified Secretary and keeper of the records and corporate seal of Preferred Life Insurance Company of New York, a corporation organized under the laws of the State of New York, and that the foregoing is a full, true and correct copy of the resolutions duly adopted at a meeting of the Board of Directors of said Corporation, convened and held in accordance with the law and articles and bylaws of said Corporation on the 26th day of February, 1988, and that said resolution supersedes all resolutions previously adopted for the purpose stated and is now in full force and effect. Attest/s/ VICKI L. OSBAUGH /s/ ALAN A. GROVE __________________________ ____________________________ Alan A. Grove, Secretary EX-99.B4 3 INDIVIDUAL VARIABLE ANNUITY CONTRACT [PREFERRED LIFE logo] INSURANCE COMPANY OF NEW YORK 152 West 57th Street, 18th Floor New York, New York 10019 This is a legal Contract between the Contract Owner (referred to in this Contract as you and your) and Preferred Life Insurance Company of New York (Preferred Life) (herein referred to as we, us and our). We will make Annuity Payments as set forth in this Contract beginning on the Income Date. This Contract is issued in consideration of the payment of the initial Purchase Payment. READ YOUR CONTRACT CAREFULLY RIGHT TO EXAMINE. THIS CONTRACT MAY BE RETURNED WITHIN 10 DAYS AFTER YOU RECEIVE IT. IT CAN BE MAILED OR DELIVERED TO EITHER US OR THE AGENT WHO SOLD IT. RETURN OF THIS CONTRACT BY MAIL IS EFFECTIVE ON BEING POSTMARKED, PROPERLY ADDRESSED AND POSTAGE PREPAID. THE RETURNED CONTRACT WILL BE TREATED AS IF WE HAD NEVER ISSUED IT. WE WILL PROMPTLY REFUND THE CONTRACT VALUE AS OF THE DATE OF SURRENDER. THIS MAY BE MORE OR LESS THAN THE PURCHASE PAYMENTS. WE HAVE THE RIGHT TO ALLOCATE PAYMENTS TO THE MONEY MARKET FUND UNTIL THE EXPIRATION OF THE RIGHT TO EXAMINE PERIOD. IF WE SO ALLOCATE PAYMENTS, WE WILL REFUND THE GREATER OF THE PURCHASE PAYMENTS, LESS ANY SURRENDERS, OR THE CONTRACT VALUE. This is a Variable Annuity Contract with Annuity Payments and Contract Values increasing or decreasing depending on the experience of the Variable Account which is set forth in the Contract Schedule. Signed by the Company: /s/ Alan A. Grove /s/ Thomas J. Lynch Secretary President INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY NONPARTICIPATING Annuity payments will not decrease as long as the investment return of the variable account assets equals or exceeds the Assumed Investment Return plus 1.34% plus the Administrative Expense Charge on an annual basis. Variable Account expenses consist of a mortality and expense risk charge, an administrative charge, a distribution expense charge, a contract maintenance charge, and transfer fees. These are shown on the Contract Schedule Page. The variable provisions can be found on pages 4, 5, 6, and 15 of this contract. TABLE OF CONTENTS RIGHT TO EXAMINE CONTRACT SCHEDULE DEFINITIONS PURCHASE PAYMENTS PURCHASE PAYMENTS CHANGE IN PURCHASE PAYMENTS NO DEFAULT ALLOCATION OF PURCHASE PAYMENTS VARIABLE ACCOUNT THE VARIABLE ACCOUNT VALUATION OF ASSETS ACCUMULATION UNITS ACCUMULATION UNIT VALUE NET INVESTMENT FACTOR MORTALITY AND EXPENSE RISK CHARGE ADMINISTRATIVE CHARGE DISTRIBUTION EXPENSE CHARGE MORTALITY AND EXPENSE GUARANTEE CONTRACT VALUE CONTRACT MAINTENANCE CHARGE TRANSFERS SURRENDER PROVISIONS SURRENDERS CONTINGENT DEFERRED SALES CHARGE PROCEEDS PAYABLE ON DEATH DEATH OF CONTRACT OWNER DURING THE ACCUMULATION PERIOD DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD DEATH OF CONTRACT OWNER DURING THE ANNUITY PERIOD DEATH OF ANNUITANT PAYMENT OF DEATH BENEFIT BENEFICIARY CHANGE OF BENEFICIARY SUSPENSION OR DEFERRAL OF PAYMENTS PROVISION CONTRACT OWNER, ANNUITANT, ASSIGNMENT PROVISIONS CONTRACT OWNER JOINT OWNER ANNUITANT ASSIGNMENT OF A CONTRACT ANNUITY PROVISIONS GENERAL INCOME DATE SELECTION OF AN ANNUITY OPTION ANNUITY OPTIONS OPTION 1 - LIFE ANNUITY OPTION 2 - LIFE ANNUITY WITH 60, 120, 180, OR 240 MONTHLY ANNUITY PAYMENTS GUARANTEED OPTION 3 - JOINT AND LAST SURVIVOR ANNUITY OPTION 4 - JOINT AND LAST SURVIVOR ANNUITY WITH 60, 120, 180, OR 240 MONTHLY ANNUITY PAYMENTS GUARANTEED OPTION 5 - REFUND LIFE ANNUITY ANNUITY FIXED ANNUITY VARIABLE ANNUITY GENERAL PROVISIONS THE CONTRACT NON-PARTICIPATING IN SURPLUS INCONTESTABILITY MISSTATEMENT OF AGE OR SEX CONTRACT SETTLEMENT REPORTS TAXES EVIDENCE OF SURVIVAL PROTECTION OF PROCEEDS MODIFICATION OF CONTRACT CONTRACT SCHEDULE CONTRACT OWNER: [John Doe] CONTRACT NUMBER: [GA687456] JOINT OWNER: [Jane Doe] ISSUE DATE: [04/15/96] ANNUITANT: [John Doe] INCOME DATE: 04/15/06] PURCHASE PAYMENTS: INITIAL PURCHASE PAYMENT: [Non-Qualified: $5,000 or $2,000 if you have selected AIP; MINIMUM SUBSEQUENT PURCHASE PAYMENT: [$250 or $100 if you have selected AIP] MAXIMUM TOTAL PURCHASE PAYMENTS: [$1 million; higher amounts may be accepted with our prior approval] ALLOCATION GUIDELINES: [1. Currently, you can select all of the Funds and the Fixed Account. 2. If allocations are made in percentages, whole numbers must be used. 3. If the initial Purchase Payment and the forms required to issue a Contract are in good order, the initial Purchase Payment will be credited to your Contract within two (2) business days after receipt at the Valuemark Service Center. Additional Purchase Payments will be credited to your Contract as of the Valuation Period when they are received in good order.] VARIABLE ACCOUNT: [Preferred Life Insurance Company of New York Variable Account C] ELIGIBLE INVESTMENTS: [FRANKLIN VALUEMARK FUNDS ] [CAPITAL GROWTH FUND] [GROWTH AND INCOME FUND] [HIGH INCOME FUND] [INCOME SECURITIES FUND] [MONEY MARKET FUND] [PRECIOUS METALS FUND] [REAL ESTATE SECURITIES FUND] [RISING DIVIDENDS FUND] [SMALL CAP FUND] [TEMPLETON DEVELOPING MARKETS EQUITY FUND] [TEMPLETON GLOBAL ASSET ALLOCATION FUND] [TEMPLETON GLOBAL INCOME SECURITIES FUND] [TEMPLETON GLOBAL GROWTH FUND] [TEMPLETON INTERNATIONAL EQUITY FUND] [TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND] [TEMPLETON PACIFIC GROWTH FUND] [U.S. GOVERNMENT SECURITIES FUND] [UTILITY EQUITY FUND] [ZERO COUPON FUND 2000] [ZERO COUPON FUND 2005] [ZERO COUPON FUND 2010] [PREFERRED LIFE INSURANCE COMPANY OF NEW YORK GENERAL ACCOUNT] [PREFERRED LIFE FIXED ACCOUNT] MORTALITY AND EXPENSE RISK CHARGE: During the Accumulation Period, the Mortality and Expense Risk Charge is equal on an annual basis to [1.34%] of the average daily net asset value of the Variable Account. During the Annuity Period, the Mortality and Expense Risk is equal on an annual basis to [1.25%] of the average daily net asset value of the Variable Account. We may decrease this charge, but we may not increase it. ADMINISTRATIVE CHARGE: Equal on an annual basis to [.15%] of the average daily net asset value of the Variable Account. DISTRIBUTION EXPENSE CHARGE: [None] CONTRACT MAINTENANCE CHARGE: The Contract Maintenance Charge is currently [$30.00] each Contract Year. The Contract Maintenance Charge will be deducted from the Contract Value on each Contract Anniversary while this Contract is in force. However, during the Accumulation Period, if your Contract Value on a Contract Anniversary is at least [$50,000], then no Contract Maintenance Charge is deducted. If a total surrender is made on other than a Contract Anniversary and your Contract Value for the Valuation Period during which the total surrender is made is less than [$50,000], the full Contract Maintenance Charge will be deducted at the time of the total surrender. The Contract Maintenance Charge will be deducted from the Funds [and the Fixed Account] in the same proportion that the amount of the Contract Value in each Fund [and/or Fixed Account] bears to the total Contract Value. During the Annuity Period, the Contract Maintenance Charge will be collected pro rata from each Annuity Payment. In the event you own more than one Contract, we will determine the total Contract Value for all of the Contracts. If the total Contract Value is at least [$50,000], we will not assess the Contract Maintenance Charge. If the Contract Owner is not a natural person, we will look to the Annuitant in determining the foregoing. TRANSFERS: NUMBER OF FREE TRANSFERS PERMITTED: Currently, there are no limits on the number of transfers that can be made. We reserve the right to change this, but you will always be allowed at least 3 free transfers in any Contract Year. [Currently, you are allowed 12 free transfers each Contract Year. This applies to transfers prior to and after the Income Date.] TRANSFER FEE: For each transfer in excess of the Free Transfers Permitted, the Transfer Fee is the lesser of [$25] or 2% of the amount transferred. Transfers made at the end of the Right to Examine period by us and any transfers made pursuant to a regularly scheduled transfer will not be counted in determining the application of the Transfer Fee. MINIMUM AMOUNT TO BE TRANSFERRED: [$1,000 (from any Fund or the Fixed Account) or your entire interest in the Fund or the Fixed Account, if less.] This requirement is waived if the transfer is pursuant to a pre-scheduled transfer. SURRENDERS: CONTINGENT DEFERRED SALES CHARGE: A Contingent Deferred Sales Charge is assessed against Purchase Payments withdrawn. The Charge is calculated at the time of each surrender. For partial surrenders, the Charge is deducted from the remaining Contract Value and is deducted from the Funds [and the Fixed Account] in the same proportion that the amount of surrender from the Fund [or Fixed Account] bears to the total of the partial surrender. The Contingent Deferred Sales Charge is based upon the length of the time from receipt of the Purchase Payment. Surrenders are deemed to have come from the oldest Purchase Payments first. Each Purchase Payment is tracked as to its date of receipt and the Contingent Deferred Sales Charges are determined in accordance with the following. [CONTINGENT DEFERRED SALES CHARGE Number of Years from Receipt Charge ____________ ______ 0 6% 1 6% 2 6% 3 5% 4 4% 5 3% 6 2% 7 years or more 0%] [FREE SURRENDER AMOUNT: Each Contract Year after the first Contract Year, on a non-cumulative basis, you can withdraw amounts from the Contract Value without incurring a Contingent Deferred Sales Charge. The amount not subject to the Contingent Deferred Sales Charge is 15% of the Contract Value, less any previous Free Surrender Amount withdrawn during that Contract Year.] [If your Contract Value is $25,000 or more you can elect the Systematic Withdrawal Option in lieu of the Free Surrender Option described above. Systematic Withdrawals are available on a monthly or quarterly basis if your Contract Value is $25,000 or more. The total of Systematic Withdrawals in a Contract Year which can be made without incurring a Contingent Deferred Sales Charge is limited to not more than 15% of the Contract Value determined on the last Valuation Date prior to the receipt of the Systematic Withdrawal Option request. There is no limit to the amount or percentage of the Systematic Withdrawals if your Purchase Payments are no longer subject to a Contingent Deferred Sales Charge. If you have elected the Systematic Withdrawal Option, any additional surrenders will be subject to any applicable Contingent Deferred Sales Charge. We reserve the right to modify the eligibility rules at any time, without notice.] [If you have a Qualified Contract and your Contract Value is $25,000 or more, you can elect the Minimum Distribution Program with respect to your Contract. Surrenders will be made on a monthly or quarterly basis and will not be subject to a Contingent Deferred Sales Charge. Such payments will be designed to meet the applicable minimum distribution requirements imposed by the Internal Revenue Code on Qualified Contracts. Withdrawals from your Qualified Contract pursuant to the Minimum Distribution Program are in lieu of the Free Surrender Amount described above. If you have elected the Minimum Distribution Program, any additional surrenders will be subject to any applicable Contingent Deferred Sales Charge.] MINIMUM PARTIAL SURRENDER: [$500] MINIMUM CONTRACT VALUE WHICH MUST REMAIN IN THE CONTRACT AFTER A PARTIAL SURRENDER: [$2,000] [FIXED ACCOUNT INITIAL RATE:] [X%] We guarantee this rate for one year from the Issue Date. RIDERS: [Individual Retirement Annuity Endorsement] [403 (b) Endorsement] [Enhanced Death Benefit Endorsement] [Unisex Endorsement] [Declared Interest Rate Fixed Account Endorsement] [Group Pension Plan Death Benefit Endorsement] [Waiver of Contingent Deferred Sales Charge Endorsement] SERVICE OFFICE: VALUEMARK SERVICE CENTER [Lock Box Department - 3W P.O. Box 11129 101 Barclay Street New York, NY 10286-1129 800-624-0197] DEFINITIONS ACCUMULATION UNIT: An accounting unit of measure used to calculate the Contract Value prior to the Income Date. ACCUMULATION PERIOD: The period prior to the Income Date during which you can make Purchase Payments. ADJUSTED CONTRACT VALUE: The Contract Value less any applicable Premium Tax. This amount is applied to the applicable Annuity Table to determine the initial Annuity Payment. AGE: Age last birthday unless otherwise specified. ANNUITANT: The natural person upon whose continuation of life any Annuity Payment involving life contingencies depends. You may change the Annuitant at any time prior to the Income Date unless the Contract Owner is a non-individual. On or after the Income Date, any reference to Annuitant shall also include any Joint Annuitant. ANNUITY OPTION: An arrangement under which Annuity Payments are made under this Contract. ANNUITY PAYMENTS: The series of payments made to you or any named payee after the Income Date under the Annuity Option selected. ANNUITY PERIOD: The period of time beginning on the Income Date during which Annuity Payments are made. ANNUITY RESERVE: The assets which support the Annuity Option you have selected during the Annuity Period. ANNUITY UNIT: An accounting unit of measure used to calculate Annuity Payments after the Income Date. ASSUMED INVESTMENT RETURN: The investment return upon which the Variable Annuity Payments in the Contract are based. AUTHORIZED REQUEST: A request, in a form satisfactory to the Company, which is received by the Valuemark Service Center. BENEFICIARY: The person(s) or entity(ies) who will receive any death benefit payable under this Contract. COMPANY: Preferred Life Insurance Company of New York. CONTRACT ANNIVERSARY: An anniversary of the Issue Date of this Contract. CONTRACT OWNER: The person(s) or entity(ies) entitled to the ownership rights stated in this Contract. If Joint Owners are named, all references to Contract Owner shall mean the Joint Owners. CONTRACT SURRENDER VALUE: The Contract Value less any applicable Premium Tax, less any Contingent Deferred Sales Charge and less any applicable Contract Maintenance Charge. CONTRACT VALUE: The dollar value as of any Valuation Date of all amounts accumulated under this Contract. CONTRACT YEAR: Any period of twelve (12) months commencing with the Issue Date and each Contract Anniversary thereafter. ELIGIBLE INVESTMENT(S): Those investments available under the Contract. Current Eligible Investments are shown on the Contract Schedule. FUND: A segment of an Eligible Investment which constitutes a separate and distinct class of interests under an Eligible Investment. GENERAL ACCOUNT: Our general investment account which contains all the assets of the Company with the exception of the Variable Account and other segregated asset accounts. INCOME DATE: The date on which Annuity Payments are to begin. ISSUE DATE: The date shown on the Contract Schedule on which the first Contract Year begins. JOINT OWNER: If there is more than one Contract Owner, each Contract Owner shall be a Joint Owner of the Contract. Joint Owners have equal ownership rights and must both authorize any exercising of those ownership rights unless otherwise allowed by us. Any Joint Owner must be the spouse of the other Contract Owner. PREMIUM TAX: Any premium taxes owed to any governmental entity and assessed against Purchase Payments or Contract Value. PURCHASE PAYMENT: A payment made toward this Contract. SUB-ACCOUNT: Variable Account assets are divided into Sub-Accounts. Assets of each Sub-Account will be invested in shares of an Eligible Investment or Fund. In this Contract, "Fund" may also refer to the Sub-Accounts from which the Fund investment is made. VALUATION DATE: The Variable Account will be valued each day that the New York Stock Exchange is open for trading. VALUATION PERIOD: The period commencing at the close of business of the New York Stock Exchange on each Valuation Date and ending at the close of business for the next succeeding Valuation Date. VALUEMARK SERVICE CENTER: The office indicated on the Contract Schedule of this Contract to which notices, requests and Purchase Payments must be sent. All sums payable to us under the Contract are payable only at the Valuemark Service Center. VARIABLE ACCOUNT: A separate account maintained by us in which a portion of our assets has been allocated for this and certain other contracts. It has been designated on the Contract Schedule. PURCHASE PAYMENTS PURCHASE PAYMENTS: Purchase Payments are payable according to the frequency and in the amount selected by you. The initial Purchase Payment is due on the Issue Date. We reserve the right to decline any Purchase Payment. The Minimum Subsequent Purchase Payment and the Maximum Total Purchase Payments allowed are shown on the Contract Schedule. CHANGE IN PURCHASE PAYMENTS: You may elect to increase or decrease or to change the frequency of Purchase Payments. NO DEFAULT: Unless surrendered, this Contract remains in force and will not be in default if no additional Purchase Payments are made. ALLOCATION OF PURCHASE PAYMENTS: Purchase Payments are allocated to one or more of the Funds of the Variable Account [and/or the Fixed Account] in accordance with your selection. The allocation of the initial Purchase Payment is made in accordance with your selection made at the Issue Date. Unless you inform us otherwise, subsequent Purchase Payments are allocated in the same manner as the initial Purchase Payment. However, the Company has reserved the right to allocate the initial Purchase Payment to the Money Market Fund until the expiration of the Right to Examine period. All allocations of Purchase Payments are subject to the Allocation Guidelines shown on the Contract Schedule. We guarantee that you will be allowed to select at least five Funds for allocation of Purchase Payments. VARIABLE ACCOUNT THE VARIABLE ACCOUNT: The Variable Account is designated on the Contract Schedule. It consists of assets we have set aside and have kept separate from the rest of our assets and those of our other separate accounts. The assets of the Variable Account, equal to reserves and other liabilities of your Contract and those of other Contract Owners, will not be charged with liabilities arising out of any other business we may conduct. The Variable Account assets are divided into Funds. The Funds which are available under this Contract are listed on the Contract Schedule. The assets of the Fund are allocated to the Eligible Investments (and/or the Funds, if any, within an Eligible Investment) shown on the Contract Schedule. We may add additional Eligible Investments or Funds to those shown. You may be permitted to transfer your Contract Value or allocate Purchase Payments to the additional Fund(s). However, the right to make such transfers or allocations will be limited by any terms and conditions we may impose. Should the shares of any Eligible Investment(s), or any Fund(s) within an Eligible Investment, become unavailable for investment by the Variable Account, or our Board of Directors deems further investment in the shares inappropriate, we may limit further purchase of such shares or substitute shares of another Eligible Investment or Fund for shares already purchased. VALUATION OF ASSETS: Assets of Eligible Investments within each Fund will be valued at their net asset value on each Valuation Date. ACCUMULATION UNITS: Accumulation Units shall be used to account for all amounts allocated to or withdrawn from the Funds of the Variable Account as a result of Purchase Payments, surrenders, transfers, or fees and charges. We will determine the number of Accumulation Units of a Sub-Account purchased or canceled. This will be done by dividing the amount allocated to (or the amount withdrawn from) the Sub-Account by the dollar value of one Accumulation Unit of the Sub-Account as of the end of the Valuation Period during which the transaction is processed at the Valuemark Service Center. ACCUMULATION UNIT VALUE: The Accumulation Unit Value for each Fund was arbitrarily set initially. Subsequent Accumulation Unit Values for each Fund are determined by multiplying the Accumulation Unit Value for the immediately preceding Valuation Period by the Net Investment Factor for the Fund for the current period. The Accumulation Unit value may increase or decrease from Valuation Period to Valuation Period. NET INVESTMENT FACTOR: The Net Investment Factor for each Fund is determined by dividing A by B and multiplying by (1 - C) where: A is (i) the net asset value per share of the Eligible Investment or the Fund of an Eligible Investment held by the Fund at the end of the current Valuation Period; plus (ii) any dividend or capital gains per share declared on behalf of such Eligible Investment or Fund that has an ex-dividend date within the current Valuation Period. B is the net asset value per share of the Eligible Investment or Fund held by the Fund for the immediately preceding Valuation Period. C is (i) the Valuation Period equivalent of the daily Mortality and Expense Risk Charge, for the Administrative Charge [and for the Distribution Expense Charge, if any,] which are shown on the Contract Schedule; plus (ii) a charge factor, if any, for any taxes or any tax reserve we have established as a result of the operation or maintenance MORTALITY AND EXPENSE RISK CHARGE: Each Valuation Period, we deduct a Mortality and Expense Risk Charge from the Variable Account which is equal, on an annual basis, to the amount shown on the Contract Schedule. The Mortality and Expense Risk Charge compensates us for assuming the mortality and expense risks under this Contract. ADMINISTRATIVE CHARGE: Each Valuation Period, we deduct an Administrative Charge from the Variable Account which is equal, on an annual basis, to the amount shown on the Contract Schedule. The Administrative Charge compensates us for the costs associated with the administration of this Contract and the Variable Account. [DISTRIBUTION EXPENSE CHARGE: Each Valuation Period, we deduct a Distribution Expense Charge from the Separate Account which is equal, on an annual basis, to the amount shown on the Contract Schedule. The Distribution Expense Charge compensates the Company for costs associated with the distribution of Contracts.] MORTALITY AND EXPENSE GUARANTEE: We guarantee that the dollar amount of each annuity payment after the first will not be affected by variations in mortality or expense experience. CONTRACT VALUE The Contract Value for any Valuation Period is equal to the total dollar value accumulated under this Contract. The Contract Value in a Fund of the Variable Account is determined by multiplying the number of Accumulation Units allocated to the Contract Value for the Fund by the Accumulation Unit Value. Purchase Payments, surrenders and transfers from or to a Fund will result in the addition of or the cancellation of Accumulation Units in a Fund. CONTRACT MAINTENANCE CHARGE We deduct an annual Contract Maintenance Charge shown on the Contract Schedule. Prior to the Income Date, this will be deducted from the Contract Value by canceling Accumulation Units to reimburse us for expenses relating to maintenance of this Contract. The number of Accumulation Units to be canceled will be from each applicable Fund is the ratio that the value of each Fund bears to the total Contract Value. TRANSFERS You may transfer all or a part of your interest in a Fund to another Fund. We reserve the right to charge for transfers if there are more than the number of free transfers shown on the Contract Schedule. All transfers are subject to the following: 1. The deduction of any Transfer Fee that may be imposed as shown on the Contract Schedule. The Transfer Fee will be deducted from the Fund from which the transfer is made. If the entire amount in the Fund is transferred, then the Transfer Fee will be deducted from the amount transferred. If there are multiple source Funds, it will be treated as a single transfer. Any Transfer Fee will be deducted proportionally from the source Funds if less than the entire amount in the Fund is transferred. 2. We reserve the right to limit transfers until the expiration of the Right to Examine period. 3. The minimum amount which can be transferred is shown on the Contract Schedule. 4. No transfer will be effective within seven calendar days prior to the date on which the first Annuity Payment is due. 5. Any transfer direction must clearly specify: a. the amount which is to be transferred; and b. the Funds which are to be affected. 6. After the Income Date, transfers may not be made from a fixed annuity option to a variable annuity option. 7. After the Income Date, you can make at least one transfer from a variable annuity option to a fixed annuity option. The number of Annuity Units canceled from the variable annuity option will be equal in value to the amount of the Annuity Reserve transferred out of the Variable Account. The amount transferred will purchase fixed annuity payments under the Annuity Option in effect and based on the age and sex of the Annuitant at the time of the transfer where allowed. 8. We reserve the right to establish policies that limit or discourage excessive trading that may be disruptive to the Fund, which may result in limitations being placed on the Contract Owner's right to make transfers. 9. We reserve the right at any time and without prior notice to any party to modify the transfer provisions described above. However, if we do modify these provisions we guarantee that they will not be any more restrictive than the above. If you elect to use this transfer privilege, we will not be liable for transfers made in accordance with your instructions. All amounts and Accumulation Units will be determined as of the end of the Valuation Period during which the request for transfer is received at the Valuemark Service Center. SURRENDER PROVISIONS SURRENDERS: During the Accumulation Period, you may, upon Authorized Request, make a total or partial surrender of the Contract Surrender Value. Surrenders will result in the cancellation of Accumulation Units from each Fund in the ratio that the value of each Fund bears to the total Contract Value. You must specify, by Authorized Request, which Accumulation Units are to be canceled if other than the above mentioned method of cancellation is desired. The Company will pay the amount of any surrender from the Variable Account within seven (7) days of receipt of a request in good order unless the Suspension or Deferral of Payments Provision is in effect. Each partial surrender must be for an amount which is not less than the amount shown on the Contract Schedule. The minimum Contract Value which must remain in the Contract after a partial surrender is shown on the Contract Schedule. CONTINGENT DEFERRED SALES CHARGE: Upon a surrender of Contract Value a Contingent Deferred Sales Charge as set forth on the Contract Schedule may be assessed. Under certain circumstances, we allow surrenders without the Contingent Deferred Sales Charge as set forth on the Contract Schedule. PROCEEDS PAYABLE ON DEATH DEATH OF CONTRACT OWNER DURING THE ACCUMULATION PERIOD: Upon the death of the Contract Owner, or any Joint Owner, during the Accumulation Period, the death benefit will be paid to the Beneficiary(ies) designated by the Contract Owner. Upon the death of a Joint Owner, the surviving Joint Owner, if any, will be treated as the primary Beneficiary. Any other Beneficiary designation on record at the time of death will be treated as a contingent Beneficiary. DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD: The death benefit will be the Adjusted Contract Value determined as of the end of the Valuation Period during which the Company receives both due proof of death and an election for the payment method. DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD: A Beneficiary may request that the death benefit be paid under one of the Death Benefit Options below. In addition, if the Beneficiary is the spouse of the Contract Owner, he or she may elect to continue the Contract in his or her own name and exercise all the Contract Owner's rights under the Contract. In this event, the Contract Value for the Valuation Period during which this election is implemented will be adjusted to equal the death benefit. Option A - lump sum payment of the death benefit; or Option B - the payment of the entire death benefit within 5 years of the date of the death of the Contract Owner or any Joint Owner; or Option C - payment of the death benefit under an Annuity Option over the lifetime of the Beneficiary or over a period not extending beyond the life expectancy of the Beneficiary with distribution beginning within one year of the date of death of the Contract Owner or any Joint Owner. Any portion of the death benefit not applied under Option C within one year of the date of the Contract Owners' death, must be distributed within five years of the date of death. If a lump sum payment is requested, the amount will be paid within seven (7) days of receipt of proof of death and the election, unless the Suspension or Deferral of Payments Provision is in effect. Payment to the Beneficiary, other than in a lump sum, may only be elected during the sixty-day period beginning with the date of receipt of proof of death. DEATH OF CONTRACT OWNER DURING THE ANNUITY PERIOD: If you, or any Joint Owner, dies during the Annuity Period, and you are not an Annuitant, any remaining payments under the Annuity Option elected will continue at least as rapidly as under the method of distribution in effect at such Contract Owner's death. Upon your death during the Annuity Period, the Beneficiary becomes the Contract Owner. DEATH OF ANNUITANT: Upon the death of an Annuitant, who is not the Contract Owner, during the Accumulation Period, you may designate a new Annuitant, subject to our underwriting rules then in effect. If no designation is made within 30 days of the death of the Annuitant, you will become the Annuitant. If the Contract Owner is a non-individual, the death of the Annuitant will be treated as the death of the Contract Owner and a new Annuitant may not be designated. Upon the death of the Annuitant during the Annuity Period, the death benefit, if any, will be as specified in the Annuity Option elected. Death benefits will be paid at least as rapidly as under the method of distribution in effect at the Annuitant's death. PAYMENT OF DEATH BENEFIT: The Company will require due proof of death before any death benefit is paid. Due proof of death will be: 1. a certified death certificate; or 2. a certified decree of a court of competent jurisdiction as to the finding of death; or 3. any other proof satisfactory to the Company. All death benefits will be paid in accordance with applicable law or regulations governing death benefit payments. BENEFICIARY: The Beneficiary designation in effect on the Issue Date will remain in effect until changed. The Beneficiary is entitled to receive the benefits to be paid at your death. Unless you provide otherwise, the death benefit will be paid in equal shares to the survivor(s) as follows: 1. to the primary Beneficiary(ies) who survive you and/or the Annuitant's death, as applicable; or if there are none 2. to the contingent Beneficiary(ies) who survive you and/or the Annuitant's death, as applicable; or if there are none 3. to your estate. CHANGE OF BENEFICIARY: Subject to the rights of any irrevocable Beneficiary(ies), you may change the primary Beneficiary(ies) or contingent Beneficiary(ies). A change may be made by Authorized Request. The change will take effect as of the date the Authorized Request is signed. The Company will not be liable for any payment made or action taken before it records the change. SUSPENSION OR DEFERRAL OF PAYMENTS PROVISION The Company reserves the right to suspend or postpone payments from the Variable Account for a surrender or transfer for any period when: 1. the New York Stock Exchange is closed (other than customary weekend and holiday closings); 2. trading on the New York Stock Exchange is restricted; 3. an emergency exists as a result of which disposal of securities held in the Variable Account is not reasonably practicable or it is not reasonably practicable to determine the value of the Variable Account's net assets; or 4. during any other period when the Securities and Exchange Commission, by order, so permits for the protection of Contract Owners; provided that applicable rules and regulations of the Securities and Exchange Commission will govern as to whether the conditions described in (2) and (3) exist. CONTRACT OWNER, ANNUITANT, ASSIGNMENT PROVISIONS CONTRACT OWNER: As the Contract Owner you have all the interest and rights under this Contract. The Contract Owner is the person designated as such on the Issue Date, unless changed. You may change Owners of the Contract at any time by Authorized Request. A change of Contract Owner will automatically revoke any prior designation of Contract Owner. The change will become effective as of the date the Authorized Request is signed. We will not be liable for any payment made or action taken before the change is recorded. JOINT OWNER: A Contract may be owned by Joint Owners. If Joint Owners are named, any Joint Owner must be the spouse of the other Contract Owner. Upon the death of either Contract Owner, the surviving spouse will be the primary Beneficiary. Any other Beneficiary designation will be treated as a contingent Beneficiary unless otherwise indicated in an Authorized Request. ANNUITANT: The Annuitant is the person on whose life Annuity Payments are based. The Annuitant is the person designated by you subject to our underwriting rules then in effect. The Annuitant may not be changed in a Contract which is owned by a non-individual. ASSIGNMENT OF A CONTRACT: An Authorized Request specifying the terms of an assignment of a Contract must be provided to the Valuemark Service Center. We will not be liable for any payment made or action taken before we record the assignment. We will not be responsible for the validity or tax consequences of any assignment. Any assignment made after the death benefit has become payable will be valid only with our consent. If the Contract is assigned, your rights may only be exercised with the consent of the assignee of record. ANNUITY PROVISIONS GENERAL: On the Income Date, the Adjusted Contract Value will be applied under the Annuity Option you have selected. You may elect to have the Adjusted Contract Value applied to provide a Fixed Annuity, a Variable Annuity or a combination Fixed and Variable Annuity. If a combination is elected, you must specify what part of the Adjusted Contract Value is to be applied to the Fixed and Variable Annuity Options. INCOME DATE: You select an Income Date at the time of issue. The Income Date must always be the first day of a calendar month. The earliest Income Date you can select is [two] years after the Issue Date. The latest Income Date you can select is the later of the first day of the first calendar month following the Annuitant's 90th birthday. You may, at any time prior to the Income Date, change the Income Date by Authorized Request 30 days in advance. SELECTION OF AN ANNUITY OPTION: You can select an Annuity Option by Authorized Request. If no Annuity Option is selected, Option 2, with 60 Monthly Payments Guaranteed, will automatically be applied. You may, at any time prior to the Income Date, by Authorized Request 30 days in advance, select and/or change the Annuity Option. ANNUITY OPTIONS: This Contract provides for Annuity Payments under one of the Annuity Options described below. Any other Annuity Option acceptable to us may be selected. OPTION 1 - LIFE ANNUITY. We will make monthly Annuity Payments during the life of the Annuitant and ceasing with the last Annuity Payment due prior to the Annuitant's death. OPTION 2 - LIFE ANNUITY WITH 60, 120, 180, OR 240 MONTHLY ANNUITY PAYMENTS GUARANTEED. We will make monthly Annuity Payments during the life of the Annuitant with a guarantee that if at the Annuitant's death there have been less than 60, 120, 180, or 240 monthly Annuity Payments made as selected, monthly Annuity Payments will continue for the remainder of the guaranteed period. You may elect to have the present value of the guaranteed monthly Annuity Payments remaining, as of the date notice of the Annuitant's death is received at the Valuemark Service Center, commuted at the Assumed Investment Return selected for a Variable Annuity or for a Fixed Annuity the Statutory Calendar Year Interest Rate based on the New York's Standard Valuation Law for Single Premium Immediate Annuities corresponding to the Income Date. We will require the return of this Contract and proof of death prior to the payment of any commuted values. OPTION 3 - JOINT AND LAST SURVIVOR ANNUITY. We will make monthly Annuity Payments during the joint lifetime of the Annuitant and the Joint Annuitant. Upon the death of the Annuitant, if the Joint Annuitant is then living, Annuity Payments will continue to be paid during the remaining lifetime of the Joint Annuitant at a level of 100%, 75% or 50% of the previous level, as selected. Monthly Annuity Payments cease with the final Annuity Payment due prior to the last survivor's death. OPTION 4 - JOINT AND LAST SURVIVOR ANNUITY WITH 60, 120, 180, OR 240 MONTHLY ANNUITY PAYMENTS GUARANTEED. We will make monthly Annuity Payments during the joint lifetime of the Annuitant and the Joint Annuitant. Monthly Annuity Payments will continue to be paid during the remaining lifetime of the Joint Annuitant at 100% of the previous level, as selected. If at the last death of the Annuitant and the Joint Annuitant, there have been less than 60, 120, 180, or 240 monthly Annuity Payments made as selected, monthly Annuity Payments will continue to be made for the remainder of the guaranteed period. You or your designated payee may elect to have the present value of the guaranteed monthly Annuity Payments remaining, as of the date notice of the Annuitant's death is received by us, commuted at the Assumed Investment Return selected for a Variable Annuity or for a Fixed Annuity the Statutory Calendar Year Interest Rate based on the New York's Standard Valuation Law for Single Premium Immediate Annuities corresponding to the Income Date. We will require the return of this Contract and proof of death prior to the payment of any commuted values. OPTION 5 - REFUND LIFE ANNUITY. We will make monthly Annuity Payments during the lifetime of the Annuitant ceasing with the last Annuity Payment due prior to the Annuitant's death with a guarantee that at the Annuitant's death, you will receive a refund. For a Fixed Annuity the amount of the refund will be any excess of the amount of the Adjusted Contract Value applied under this Option over the total of all Annuity Payments made under this Option. For a Variable Annuity the amount of the refund will be the then dollar value of the number of Annuity Units equal to (1) the Adjusted Contract Value applied to this Option divided by the Annuity Unit value used to determine the first Annuity Payment, minus (2) the product of the number of the Annuity Units represented by each monthly Annuity Payment and the number of payments made. This calculation will be based upon the assumption that the allocation of Annuity Units actually in-force at the time of the Annuitant's death had been the allocation of Annuity Units at issue and at all times thereafter. If the refund calculated above is not greater than zero there will be no refund paid. ANNUITY: If you select a Fixed Annuity, the Adjusted Contract Value is allocated to the General Account and the Annuity is paid as a Fixed Annuity. If you select a Variable Annuity, the Adjusted Contract Value will be allocated to the Funds of the Variable Account in accordance with your selection, and the Annuity will be paid as a Variable Annuity. Unless you designate another payee, you will be the payee of the Annuity Payments. The Adjusted Contract Value will be applied to the applicable Annuity Table contained in this Contract based upon the Annuity Option you have selected. We may offer more favorable rates than those guaranteed here at the time your first annuity payment is calculated. Where permitted, Annuity Payments will depend on the Age and sex of the Annuitant. FIXED ANNUITY: You may elect to have the Adjusted Contract Value applied to provide a Fixed Annuity. The dollar amount of each Fixed Annuity Payment shall be determined in accordance with Annuity Tables contained in this Contract which are based on the minimum guaranteed interest rate of 2 1/2% per year.
GUARANTEED MONTHLY PAYMENT PER $1,000 OF PROCEEDS Fixed Payouts Age of Annt. Option 2 Option 2 Option 2 Option 2 Nearest BDay ____________ ____________ ____________ ____________ ____________ When 1st Pmt Option 1 5 Years 10 Years 15 Years 20 Years is Made Minimum Minimum Minimum Minimum Male Female Male Female Male Female Male Female Male Female ____________ ____________ ____________ ____________ ____________ ____________ 30 2.84 2.71 2.84 2.71 2.84 2.71 2.84 2.71 2.83 2.71 31 2.87 2.74 2.87 2.73 2.87 2.73 2.86 2.73 2.86 2.73 32 2.90 2.76 2.90 2.76 2.89 2.76 2.89 2.75 2.88 2.75 33 2.92 2.78 2.92 2.78 2.92 2.78 2.92 2.78 2.91 2.77 34 2.95 2.80 2.95 2.80 2.95 2.80 2.95 2.80 2.94 2.80 35 2.98 2.83 2.98 2.83 2.98 2.83 2.98 2.82 2.97 2.82 36 3.02 2.85 3.02 2.85 3.01 2.85 3.01 2.85 3.00 2.85 37 3.05 2.88 3.05 2.88 3.05 2.88 3.04 2.88 3.03 2.87 38 3.09 2.91 3.09 2.91 3.08 2.91 3.08 2.91 3.06 2.90 39 3.12 2.94 3.12 2.94 3.12 2.94 3.11 2.93 3.10 2.93 40 3.16 2.97 3.16 2.97 3.16 2.97 3.15 2.96 3.13 2.96 41 3.20 3.00 3.20 3.00 3.20 3.00 3.19 3.00 3.17 2.99 42 3.25 3.04 3.24 3.04 3.24 3.03 3.23 3.03 3.21 3.02 43 3.29 3.07 3.29 3.07 3.28 3.07 3.27 3.06 3.25 3.06 44 3.34 3.11 3.33 3.11 3.33 3.10 3.31 3.10 3.29 3.09 45 3.39 3.15 3.38 3.15 3.37 3.14 3.36 3.14 3.33 3.13 46 3.44 3.19 3.43 3.19 3.42 3.18 3.41 3.18 3.38 3.16 47 3.49 3.23 3.49 3.23 3.48 3.22 3.45 3.22 3.42 3.20 48 3.55 3.27 3.54 3.27 3.53 3.27 3.51 3.26 3.47 3.24 49 3.60 3.32 3.60 3.32 3.58 3.31 3.56 3.30 3.52 3.29 50 3.66 3.37 3.66 3.37 3.64 3.36 3.62 3.35 3.57 3.33 51 3.73 3.42 3.72 3.42 3.71 3.41 3.67 3.40 3.62 3.38 52 3.80 3.47 3.79 3.47 3.77 3.46 3.73 3.45 3.68 3.42 53 3.87 3.53 3.86 3.53 3.84 3.52 3.80 3.50 3.74 3.48 54 3.94 3.59 3.93 3.59 3.91 3.58 3.86 3.56 3.79 3.53 55 4.02 3.65 4.01 3.65 3.98 3.64 3.93 3.62 3.85 3.58 56 4.10 3.72 4.09 3.71 4.06 3.70 4.00 3.68 3.91 3.64 57 4.19 3.79 4.18 3.78 4.14 3.77 4.08 3.74 3.98 3.70 58 4.28 3.86 4.27 3.86 4.23 3.84 4.16 3.81 4.04 3.76 59 4.38 3.94 4.37 3.93 4.32 3.91 4.24 3.88 4.11 3.82 60 4.49 4.02 4.47 4.02 4.42 3.99 4.32 3.95 4.17 3.88 61 4.60 4.11 4.58 4.10 4.52 4.08 4.41 4.03 4.24 3.95 62 4.72 4.20 4.69 4.19 4.63 4.16 4.50 4.11 4.31 4.02 63 4.84 4.30 4.82 4.29 4.74 4.26 4.59 4.19 4.38 4.09 64 4.98 4.41 4.95 4.39 4.86 4.36 4.69 4.28 4.44 4.16 65 5.12 4.52 5.09 4.50 4.98 4.46 4.79 4.37 4.51 4.23 66 5.28 4.64 5.24 4.62 5.11 4.57 4.89 4.47 4.58 4.31 67 5.44 4.76 5.39 4.75 5.24 4.69 4.99 4.57 4.64 4.38 68 5.61 4.90 5.56 4.88 5.38 4.81 5.09 4.67 4.70 4.45 69 5.80 5.04 5.73 5.02 5.53 4.94 5.19 4.78 4.76 4.53 70 6.00 5.20 5.92 5.17 5.68 5.07 5.30 4.88 4.82 4.60 71 6.21 5.37 6.12 5.34 5.84 5.22 5.40 4.99 4.88 4.67 72 6.43 5.55 6.32 5.51 6.00 5.37 5.50 5.11 4.93 4.74 73 6.66 5.75 6.54 5.70 6.16 5.53 5.60 5.22 4.97 4.80 74 6.91 5.96 6.77 5.90 6.33 5.69 5.70 5.34 5.02 4.86 75 7.18 6.18 7.01 6.11 6.50 5.87 5.79 5.45 5.06 4.92 76 7.49 6.43 7.28 6.34 6.69 6.05 5.89 5.56 5.09 4.97 77 7.80 6.69 7.55 6.58 6.86 6.23 5.97 5.67 5.12 5.01 78 8.13 6.97 7.83 6.84 7.04 6.42 6.05 5.78 5.15 5.06 79 8.49 7.27 8.13 7.11 7.22 6.61 6.13 5.88 5.17 5.09 80 8.87 7.60 8.44 7.40 7.39 6.81 6.20 5.97 5.20 5.13 81 9.27 7.95 8.77 7.71 7.57 7.01 6.26 6.06 5.21 5.15 82 9.70 8.33 9.10 8.03 7.73 7.21 6.32 6.14 5.23 5.18 83 10.16 8.74 9.45 8.38 7.90 7.40 6.37 6.21 5.24 5.20 84 10.65 9.18 9.81 8.74 8.05 7.59 6.42 6.28 5.25 5.22 85 11.18 9.66 10.19 9.12 8.20 7.77 6.46 6.34 5.26 5.23
GUARANTEED MONTHLY PAYMENT PER $1,000 OF PROCEEDS - cont'd. Fixed Payouts Option 5 Male Female ____ ________ 2.82 2.71 2.84 2.73 2.87 2.75 2.89 2.77 2.92 2.79 2.95 2.81 2.98 2.84 3.01 2.86 3.04 2.89 3.07 2.92 3.10 2.95 3.14 2.97 3.17 3.01 3.21 3.04 3.25 3.07 3.29 3.10 3.33 3.14 3.38 3.18 3.42 3.22 3.47 3.26 3.52 3.30 3.57 3.34 3.62 3.39 3.68 3.44 3.74 3.49 3.80 3.54 3.86 3.60 3.93 3.65 4.00 3.71 4.07 3.78 4.14 3.84 4.23 3.91 4.31 3.99 4.39 4.06 4.49 4.14 4.58 4.23 4.68 4.31 4.78 4.41 4.89 4.50 5.01 4.60 5.13 4.72 5.25 4.83 5.38 4.95 5.51 5.07 5.66 5.20 5.82 5.35 5.97 5.49 6.14 5.65 6.31 5.81 6.50 5.97 6.69 6.15 6.89 6.34 7.10 6.53 7.32 6.74 7.55 6.95 7.80 7.17
GUARANTEED MONTHLY PAYMENT PER $1,000 OF PROCEEDS FIXED PAYOUT
OPTION 3 FEMALE AGE 30 40 50 60 70 80 MALE AGE ____________ ____________ ____________ ____________ ____________ ____________ 30 2.61 2.70 2.77 2.81 2.83 2.84 40 2.66 2.82 2.96 3.06 3.12 3.15 50 2.69 2.89 3.14 3.36 3.52 3.61 60 2.70 2.94 3.26 3.65 4.03 4.30 70 2.71 2.96 3.32 3.86 4.56 5.27 80 2.71 2.97 3.35 3.96 4.94 6.32
OPTION 4 5 YEARS MINIMUM FEMALE AGE 30 40 50 60 70 80 MALE AGE ____________ ____________ ____________ ____________ ____________ ____________ 30 2.61 2.70 2.77 2.81 2.83 2.84 40 2.66 2.82 2.96 3.06 3.12 3.15 50 2.69 2.89 3.14 3.36 3.52 3.61 60 2.70 2.94 3.26 3.65 4.03 4.30 70 2.71 2.96 3.32 3.86 4.56 5.26 80 2.71 2.97 3.35 3.96 4.93 6.30
OPTION 4 10 YEARS MINIMUM FEMALE AGE 30 40 50 60 70 80 MALE AGE ____________ ____________ ____________ ____________ ____________ ____________ 30 2.61 2.70 2.77 2.81 2.83 2.84 40 2.66 2.82 2.96 3.06 3.12 3.14 50 2.69 2.89 3.14 3.36 3.52 3.60 60 2.70 2.94 3.26 3.65 4.03 4.29 70 2.71 2.96 3.32 3.86 4.55 5.22 80 2.71 2.96 3.35 3.95 4.90 6.13
OPTION 4 15 YEARS MINIMUM FEMALE AGE 30 40 50 60 70 80 MALE AGE ____________ ____________ ____________ ____________ ____________ ____________ 30 2.61 2.70 2.77 2.81 2.83 2.84 40 2.66 2.82 2.96 3.06 3.12 3.14 50 2.69 2.89 3.13 3.36 3.52 3.59 60 2.70 2.94 3.26 3.65 4.01 4.24 70 2.71 2.96 3.32 3.84 4.50 5.05 80 2.71 2.96 3.34 3.93 4.79 5.70
OPTION 4 20 YEARS MINIMUM FEMALE AGE 30 40 50 60 70 80 MALE AGE ____________ ____________ ____________ ____________ ____________ ____________ 30 2.61 2.70 2.77 2.81 2.83 2.83 40 2.66 2.82 2.96 3.06 3.11 3.13 50 2.69 2.89 3.13 3.35 3.50 3.56 60 2.70 2.94 3.25 3.63 3.97 4.14 70 2.71 2.95 3.31 3.81 4.38 4.74 80 2.71 2.96 3.33 3.87 4.57 5.06
VARIABLE ANNUITY: You may elect to have the Adjusted Contract Value applied to provide a Variable Annuity. Variable Annuity Payments reflect the investment performance of the Variable Account in accordance with the allocation of the Adjusted Contract Value to the Funds during the Annuity Period. Variable Annuity Payments are not guaranteed as to dollar amount. On the Income Date a fixed number of Annuity Units will be purchased as follows: The first Annuity Payment is equal to the Adjusted Contract Value, divided first by $1000 and then multiplied by the appropriate Annuity Payment amount for each $1000 of value for the Annuity Option selected. In each Fund the fixed number of Annuity Units is determined by dividing the amount of the initial Annuity Payment determined for each Fund by the Annuity Unit value on the Income Date. Thereafter, the number of Annuity Units in each Fund remains unchanged unless you elect to transfer between Funds. All calculations will appropriately reflect the Annuity Payment frequency selected. On each subsequent Annuity Payment date, the total Annuity Payment is the sum of the Annuity Payments for each Fund. The Annuity Payment in each Fund is determined by multiplying the number of Annuity Units then allocated to such Fund by the Annuity Unit value for that Fund. On each subsequent Valuation Date, the value of an Annuity Unit is determined in the following way: First: The Net Investment Factor is determined as described under "Variable Account - Net Investment Factor" above. Second: The value of an Annuity Unit for a Valuation Period is equal to: a. the value of the Annuity Unit for the immediately preceding Valuation Period; b. multiplied by the Net Investment Factor for the current Valuation Period; c. divided by the Assumed Net Investment Factor (see below) for the Valuation Period. The Assumed Net Investment Factor is equal to one plus the Assumed Investment Return which is used in determining the basis for the purchase of an Annuity, adjusted to reflect the particular Valuation Period. The Assumed Investment Return that we will use is 5%. However, we may agree with you to use a different value.
GUARANTEED INITIAL MONTHLY PAYMENT PER $1,000 OF PROCEEDS Variable Payouts Based on 5% AIR Age of Annt. Option 2 Option 2 Option 2 Option 2 Nearest BDay ____________ ____________ ____________ ____________ ____________ When 1st Pmt Option 1 5 Years 10 Years 15 Years 20 Years is Made Minimum Minimum Minimum Minimum Male Female Male Female Male Female Male Female Male Female ____________ ____________ ____________ ____________ ____________ ____________ 30 4.46 4.36 4.46 4.36 4.46 4.35 4.45 4.35 4.44 4.35 31 4.48 4.37 4.48 4.37 4.48 4.37 4.47 4.37 4.46 4.36 32 4.50 4.39 4.50 4.39 4.50 4.38 4.49 4.38 4.48 4.38 33 4.52 4.40 4.52 4.40 4.52 4.40 4.51 4.40 4.50 4.39 34 4.55 4.42 4.55 4.42 4.54 4.42 4.53 4.41 4.52 4.41 35 4.57 4.44 4.57 4.44 4.57 4.44 4.56 4.43 4.55 4.43 36 4.60 4.46 4.60 4.46 4.59 4.45 4.58 4.45 4.57 4.45 37 4.63 4.48 4.63 4.48 4.62 4.48 4.61 4.47 4.60 4.46 38 4.66 4.50 4.66 4.50 4.65 4.50 4.64 4.49 4.62 4.49 39 4.69 4.52 4.69 4.52 4.68 4.52 4.67 4.51 4.65 4.51 40 4.72 4.55 4.72 4.55 4.71 4.54 4.70 4.54 4.68 4.53 41 4.76 4.57 4.75 4.57 4.75 4.57 4.73 4.56 4.71 4.55 42 4.79 4.60 4.79 4.60 4.78 4.60 4.76 4.59 4.74 4.58 43 4.83 4.63 4.83 4.63 4.82 4.62 4.80 4.62 4.77 4.60 44 4.88 4.66 4.87 4.66 4.86 4.65 4.84 4.64 4.80 4.63 45 4.92 4.69 4.91 4.69 4.90 4.69 4.87 4.68 4.84 4.66 46 4.97 4.73 4.96 4.73 4.94 4.72 4.91 4.71 4.88 4.69 47 5.01 4.76 5.01 4.76 4.99 4.75 4.96 4.74 4.92 4.72 48 5.06 4.80 5.06 4.80 5.04 4.79 5.00 4.78 4.96 4.76 49 5.12 4.84 5.11 4.84 5.09 4.83 5.05 4.81 5.00 4.79 50 5.17 4.88 5.16 4.88 5.14 4.87 5.10 4.85 5.04 4.83 51 5.23 4.93 5.22 4.93 5.19 4.91 5.15 4.89 5.09 4.87 52 5.30 4.98 5.28 4.97 5.25 4.96 5.20 4.94 5.13 4.91 53 5.36 5.03 5.35 5.02 5.31 5.01 5.26 4.98 5.18 4.95 54 5.43 5.08 5.42 5.08 5.38 5.06 5.32 5.03 5.23 4.99 55 5.51 5.14 5.49 5.13 5.45 5.11 5.38 5.08 5.28 5.04 56 5.58 5.20 5.57 5.19 5.52 5.17 5.44 5.14 5.33 5.09 57 5.67 5.26 5.65 5.26 5.60 5.23 5.51 5.19 5.39 5.14 58 5.76 5.33 5.74 5.32 5.68 5.30 5.58 5.25 5.44 5.19 59 5.85 5.41 5.83 5.40 5.76 5.37 5.65 5.32 5.50 5.24 60 5.95 5.48 5.93 5.47 5.85 5.44 5.73 5.38 5.56 5.30 61 6.06 5.57 6.03 5.55 5.95 5.52 5.81 5.45 5.62 5.36 62 6.18 5.65 6.15 5.64 6.05 5.60 5.89 5.52 5.67 5.42 63 6.30 5.75 6.27 5.73 6.16 5.68 5.97 5.60 5.73 5.48 64 6.44 5.85 6.40 5.83 6.27 5.78 6.06 5.68 5.79 5.54 65 6.58 5.96 6.53 5.94 6.38 5.87 6.15 5.76 5.85 5.60 66 6.74 6.07 6.68 6.05 6.51 5.98 6.24 5.85 5.91 5.67 67 6.90 6.20 6.83 6.17 6.63 6.09 6.33 5.94 5.96 5.73 68 7.08 6.33 7.00 6.30 6.77 6.20 6.42 6.03 6.02 5.80 69 7.27 6.47 7.17 6.44 6.91 6.32 6.52 6.13 6.07 5.86 70 7.46 6.63 7.35 6.59 7.05 6.45 6.61 6.23 6.12 5.92 71 7.68 6.80 7.55 6.75 7.20 6.59 6.70 6.33 6.17 5.98 72 7.90 6.98 7.75 6.92 7.35 6.74 6.79 6.43 6.21 6.04 73 8.14 7.18 7.97 7.11 7.50 6.89 6.88 6.54 6.25 6.10 74 8.39 7.39 8.19 7.30 7.66 7.05 6.97 6.64 6.29 6.15 75 8.66 7.62 8.43 7.52 7.82 7.21 7.06 6.74 6.32 6.20 76 8.99 7.87 8.70 7.74 8.00 7.38 7.14 6.85 6.35 6.24 77 9.30 8.13 8.97 7.98 8.16 7.56 7.22 6.94 6.38 6.28 78 9.64 8.42 9.25 8.24 8.33 7.74 7.29 7.04 6.40 6.32 79 9.99 8.72 9.54 8.51 8.49 7.92 7.36 7.13 6.42 6.35 80 10.38 9.06 9.84 8.80 8.65 8.11 7.42 7.21 6.44 6.38 81 10.79 9.41 10.16 9.10 8.82 8.29 7.48 7.29 6.46 6.41 82 11.23 9.80 10.49 9.43 8.97 8.48 7.53 7.36 6.47 6.43 83 11.69 10.22 10.83 9.77 9.12 8.66 7.58 7.43 6.48 6.45 84 12.19 10.68 11.19 10.13 9.27 8.83 7.62 7.49 6.49 6.46 85 12.73 11.17 11.55 10.50 9.41 9.00 7.66 7.54 6.50 6.47
GUARANTEED INITIAL MONTHLY PAYMENT PER $1,000 OF PROCEEDS - cont' Variable Payouts Based on 5% AIR Option 5 Male Female ____ ________ 4.46 4.36 4.48 4.38 4.50 4.39 4.52 4.41 4.54 4.43 4.57 4.44 4.59 4.46 4.62 4.48 4.64 4.50 4.67 4.52 4.70 4.55 4.73 4.57 4.76 4.60 4.80 4.62 4.83 4.65 4.87 4.68 4.91 4.71 4.95 4.75 4.99 4.78 5.04 4.82 5.08 4.85 5.13 4.89 5.19 4.94 5.24 4.98 5.30 5.03 5.37 5.08 5.43 5.13 5.50 5.19 5.57 5.25 5.65 5.31 5.73 5.38 5.81 5.45 5.90 5.52 6.00 5.60 6.10 5.69 6.20 5.77 6.31 5.87 6.43 5.97 6.55 6.07 6.67 6.18 6.81 6.30 6.95 6.43 7.10 6.56 7.26 6.70 7.42 6.85 7.60 7.01 7.78 7.18 7.97 7.35 8.18 7.54 8.39 7.74 8.61 7.95 8.85 8.17 9.09 8.40 9.36 8.65 9.63 8.91 9.92 9.17
GUARANTEED INITIAL MONTHLY PAYMENT PER $1,000 OF PROCEEDS VARIABLE PAYOUT BASED ON 5% AIR
OPTION 3 FEMALE AGE 30 40 50 60 70 80 MALE AGE ____________ ____________ ____________ ____________ ____________ ____________ 30 4.26 4.33 4.38 4.41 4.44 4.45 40 4.30 4.40 4.51 4.60 4.66 4.70 50 4.32 4.47 4.65 4.84 4.99 5.09 60 4.34 4.51 4.76 5.09 5.44 5.72 70 4.35 4.53 4.82 5.29 5.93 6.63 80 4.35 4.54 4.86 5.40 6.31 7.65
OPTION 4 5 YEARS MINIMUM FEMALE AGE 30 40 50 60 70 80 MALE AGE ____________ ____________ ____________ ____________ ____________ ____________ 30 4.26 4.33 4.38 4.41 4.44 4.45 40 4.30 4.40 4.51 4.60 4.66 4.70 50 4.32 4.47 4.65 4.84 4.99 5.09 60 4.34 4.51 4.76 5.09 5.44 5.72 70 4.35 4.53 4.82 5.29 5.93 6.62 80 4.35 4.54 4.86 5.40 6.31 7.63
OPTION 4 10 YEARS MINIMUM FEMALE AGE 30 40 50 60 70 80 MALE AGE ____________ ____________ ____________ ____________ ____________ ____________ 30 4.26 4.33 4.38 4.41 4.44 4.45 40 4.30 4.40 4.51 4.60 4.66 4.69 50 4.32 4.47 4.65 4.84 4.99 5.09 60 4.34 4.50 4.76 5.09 5.43 5.70 70 4.35 4.53 4.82 5.28 5.91 6.56 80 4.35 4.54 4.86 5.39 6.26 7.43
OPTION 4 15 YEARS MINIMUM FEMALE AGE 30 40 50 60 70 80 MALE AGE ____________ ____________ ____________ ____________ ____________ ____________ 30 4.26 4.33 4.38 4.41 4.44 4.45 40 4.30 4.40 4.51 4.60 4.66 4.69 50 4.32 4.47 4.65 4.83 4.98 5.07 60 4.34 4.50 4.75 5.08 5.42 5.64 70 4.35 4.53 4.82 5.27 5.86 6.37 80 4.35 4.54 4.84 5.36 6.13 6.96
OPTION 4 20 YEARS MINIMUM FEMALE AGE 30 40 50 60 70 80 MALE AGE ____________ ____________ ____________ ____________ ____________ ____________ 30 4.26 4.33 4.38 4.41 4.43 4.44 40 4.30 4.40 4.51 4.60 4.65 4.67 50 4.32 4.46 4.64 4.83 4.97 5.03 60 4.34 4.50 4.75 5.06 5.36 5.52 70 4.34 4.52 4.80 5.23 5.72 6.04 80 4.35 4.53 4.82 5.29 5.89 6.32
GENERAL PROVISIONS THE CONTRACT: The entire Contract consists of this Contract, and any attached application endorsements or riders. This Contract may be changed or altered only by our President or Secretary. Any change, modification or waiver must be made in writing. NON-PARTICIPATING IN SURPLUS: This Contract does not share in any distribution of our profits or surplus. INCONTESTABILITY: We will not contest this Contract from its Issue Date. MISSTATEMENT OF AGE OR SEX: We may require proof of Age of the Annuitant before making any life contingent Annuity Payment provided for by this Contract. If the Age or sex of the Annuitant has been misstated the amount payable will be the amount that the Contract Value would have provided at the true Age or sex. Once Annuity Payments have begun, any underpayments will be made up in one sum with the next Annuity Payment, and overpayments will be deducted from the future Annuity Payments until the total is repaid. CONTRACT SETTLEMENT: This Contract must be returned to us upon any settlement. Prior to any settlement as a death claim, due proof of death must be submitted to us. Any paid-up annuity, cash surrender or death benefits that may be available are not less than the minimum benefits required by statute. REPORTS: We will furnish you with a report showing the Contract Value at least once each calendar year. This report will be sent to your last known address. TAXES: Any taxes paid to any governmental entity will be charged against the Contract Value. We will, in our sole discretion, determine when taxes have resulted from: the investment experience of the Variable Account; receipt by us of the Purchase Payment(s); or commencement of Annuity Payments. We may, at our discretion, pay taxes when due and deduct that amount from the Contract Value at a later date. Payment at an earlier date does not waive any right we may have to deduct amounts at a later date. We reserve the right to establish a provision for federal income taxes if we determine, in our sole discretion, that we will incur a tax as a result of the operation of the Variable Account. We will deduct for any income taxes incurred by it as a result of the operation of the Variable Account whether or not there was a provision for taxes and whether or not it was sufficient. The Company will deduct any withholding taxes required by applicable law. EVIDENCE OF SURVIVAL: Where any benefits under this Contract are contingent upon the recipient being alive on a given date, we may require proof satisfactory to us that the condition has been met. PROTECTION OF PROCEEDS: No Beneficiary may commute, encumber, alienate or assign any payments under this Contract before they are due. To the extent permitted by law, no payments will be subject to the debts, contracts or engagements of any Beneficiary or to any judicial process to levy upon or attach the same for payment thereof. MODIFICATION OF CONTRACT: This Contract may not be modified by us without your consent except as may be required by applicable law. EX-99.B4A 4 WAIVER OF CONTINGENT DEFERRED SALES CHARGE ENDORSEMENT WAIVER OF CONTINGENT DEFERRED SALES CHARGE ENDORSEMENT This Endorsement forms a part of the Contract to which it is attached. This Endorsement is effective on the Issue Date of the Contract to which this Endorsement is attached. In the case of a conflict with any provisions in the Contract, the provisions of this Endorsement will control. The following provisions are hereby added to the Contract: A. The Contingent Deferred Sales Charge will not apply under the following conditions occurring after the first Contract Anniversary: [1) Terminal Illness Benefit: a) The Contract Owner or Joint Owner is diagnosed as having a Terminal Illness; and b) a licensed physician certifies in writing to such diagnosis. Terminal Illness means an illness or physical condition which results in the prognosis by a licensed physician that life expectancy is 12 months or less. To utilize this benefit, you must make a total surrender of the Contract. The Contract must be returned to us before any proceeds will be paid. This waiver will not apply if the Contract Owner or Joint Owner is first diagnosed as having a Terminal Illness prior to the Issue Date. Proof of diagnosis must be provided in a form satisfactory to the Company.] [2) Total Disability Benefit: a) The Contract Owner or Joint Owner is disabled; b) such disability lasts for a period of at least 90 consecutive days; and c) a licensed physician certifies to such disability. Disability shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. This waiver shall not apply if the Contract Owner or Joint Owner was disabled on the Issue Date. Proof of disability will be required in a form satisfactory to the Company. The proof required by the Company for any of the above Benefits shall include, but not be limited to, written certification from a licensed physician performing within the scope of his or her license. The licensed physician must not be the Contract Owner, Joint Owner, the Annuitant, or the spouse, parent or child of the Contract Owner, Joint Owner or Annuitant.] [B. Unemployment Benefit: The amount of the Contract Value which can be withdrawn after the first Contract Anniversary without incurring a Contingent Deferred Sales Charge will be increased for one time only to [50%] of the Contract Value under the following condition: The Contract Owner or Joint Owner is unemployed for a continuous period of at least 90 days. Proof of unemployment must be provided in a form satisfactory to the Company which proof will include but not be limited to a written statement from the applicable state unemployment agency indicating that the Contract Owner or Joint Owner qualifies for and is receiving unemployment benefits.] [Withdrawals of amounts under the Contract may be subject to a 10% tax penalty in addition to any income taxes due. You should consult your tax advisor before making a withdrawal.] PREFERRED LIFE INSURANCE COMPANY OF NEW YORK /s/ Alan A. Grove /s/ Thomas J. Lynch Secretary President EX-99.B4B 5 ENHANCED DEATH BENEFIT ENDORSEMENT ENHANCED DEATH BENEFIT ENDORSEMENT This endorsement forms a part of the Contract to which it is attached. The Effective Date is the Issue Date shown in the Contract Schedule of the Contract to which this Endorsement is attached. In the case of a conflict with any provision in the Contract, the provisions of this Endorsement will control. The following hereby amends and supersedes the section of the Contract captioned "Proceeds Payable On Death - Death Benefit Amount During The Accumulation Period." PROCEEDS PAYABLE ON DEATH DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD: The death benefit will be the greater of: 1. The Contract Value, less any applicable Premium Tax, determined as of the end of the Valuation Period during which we received at the Valuemark Service Center both due proof of death and an election of the payment method; or 2. The Guaranteed Minimum Death Benefit as defined below, less any applicable Premium Tax, determined as of the end of the Valuation Period during which we received at the Valuemark Service Center both due proof of death and an election of the payment method. The Guaranteed Minimum Death Benefit death is the greater of (a) and (b) below: a) The sum of all Purchase Payments made less any surrenders and any Contingent Deferred Sales Charge paid on such surrenders. b) The greatest Anniversary Value for Contract Anniversaries prior to the deceased's attained age 76. The Anniversary Value is equal to the Contract Value on a Contract Anniversary, increased by the dollar amount of any Purchase Payments made since that Anniversary and decreased by the dollar amount of any such surrenders and Contingent Deferred Sales Charges paid on such surrenders since that Anniversary. If Joint Owners are named, the Age of the older Owner will be used to determine the Guaranteed Minimum Death Benefit. If the Contract is owned by a non-natural person, then Contract Owner shall mean Annuitant. PREFERRED LIFE INSURANCE COMPANY OF NEW YORK EX-99.B5 6 APPLICATION FOR INDIVIDUAL VA CONTRACT FLEXIBLE PREMIUM VARIABLE ANNUITY APPLICATION NEW YORK Issued by Preferred Life Insurance Company of New York GA__________ ______________________________________________________________________________ 1. OWNER Must be age 85 or younger Name Last First Middle _________________________________________________________________________ (If the Owner is a trust, please include Trust Name, Trust Date, and the Trust Beneficial Owner(s)) Address Street Address Apartment Number City State Zip Code Social Security Number Date of Birth Sex ____Female (If the owner is a trust, ____Male Daytime Telephone ( ) list the date(s) of birth for the beneficial owner(s)) ______________________________________________________________________________ 2. JOINT OWNER (Optional) Spouse Only-Must be age 85 or younger Name Last First Middle Social Security Number Date of Birth Sex ____Female ____Male Daytime Telephone ( ) ______________________________________________________________________________ 3. ANNUITANT If different than owner. Must be age 85 or younger Name Last First Middle Address Street Address Apartment Number City State Zip Code Social Security Number Date of Birth Sex ____Female ____Male Daytime Telephone ( ) Relationship to Owner ______________________________________________________________________________ 4. PURCHASE PAYMENT ____Purchase Payment Enclosed ____This contract will be funded by a with Application 1035 Exchange, Tax-Qualified Transfer/ Rollover, or Mutual Fund Redemption. Purchase Payment Amount $__________________ ______________________________________________________________________________ 5. PURCHASE PAYMENT ALLOCATION You may select up to TEN FUNDS. Use WHOLE PERCENTAGES. The allocations you indicate below will become your allocations on all future payments until such time as you notify us of a change. MONEY MARKET FIXED ACCOUNTS ___Money Market Fund ___Preferred Life Fixed Account INCOME FUNDS CAPITAL GROWTH FUNDS ___High Income Fund ___Capital Growth Fund ___Templeton Global Income ___Precious Metals Fund Securities Fund ___Small Cap Fund ___U.S. Government Securities Fund ___Templeton Developing Markets ___Zero Coupon Fund - 2000 Equity Fund ___Zero Coupon Fund - 2005 ___Templeton Global Growth Fund ___Zero Coupon Fund - 2010 ___Templeton International Equity Fund GROWTH AND INCOME FUNDS ___Templeton International Smaller ___Growth and Income Fund Companies Fund ___Income Securities Fund ___Templeton Pacific Growth Fund ___Real Estate Securities Fund ___Rising Dividends Fund ___Templeton Global Asset Allocation Fund ___Utility Equity Fund ___TOTAL (Must Equal 100%) P40112 ______________________________________________________________________________ 6. DOLLAR COST AVERAGING (Optional) Please Dollar Cost Average $_____($500 min.) ___Monthly for ___months/quarters ___Quarterly (6 month minimum) ___Until Sending Fund is depleted FROM the following fund (PLEASE NOTE: YOU MUST ALREADY HAVE A PORTION OF YOUR INVESTMENT IN SECTION 5 IN THE SENDING FUND):_________________________________ Indicate below how you would like to allocate your Dollar Cost Averaging Funds. Use either dollar amounts or whole percentages. The Sending Fund may not be chosen below: MONEY MARKET FIXED ACCOUNTS ___Money Market Fund ___Preferred Life Fixed Account INCOME FUNDS CAPITAL GROWTH FUNDS ___High Income Fund ___Capital Growth Fund ___Templeton Global Income ___Precious Metals Fund Securities Fund ___Small Cap Fund ___U.S. Government Securities Fund ___Templeton Developing Markets ___Zero Coupon Fund - 2000 Equity Fund ___Zero Coupon Fund - 2005 ___Templeton Global Growth Fund ___Zero Coupon Fund - 2010 ___Templeton International Equity Fund GROWTH AND INCOME FUNDS ___Templeton International Smaller ___Growth and Income Fund Companies Fund ___Income Securities Fund ___Templeton Pacific Growth Fund ___Real Estate Securities Fund ___Rising Dividends Fund ___Templeton Global Asset Allocation Fund ___Utility Equity Fund ___TOTAL (Must Equal 100% or Dollar Cost Average Amount) ______________________________________________________________________________ 7. INCOME DATE Selected Income Date ___- 01 -___The Income Date (Annuitization Date) may be no earlier than two years after the issue date. ______________________________________________________________________________ 8. REPLACEMENT Is this Annuity intended to replace or change existing ___No life insurance or annuity? ___Yes ______________________________________________________________________________ 9. TAX QUALIFIED PLANS For Tax Qualified Plans, please indicate one of the following: Is this annuity part of a Tax IRA: Qualified Plan? ____ Yes ____No ___Transfer/Rollover ___403(b)TSA ___Regular Contribution ___401 for Tax Year __ (Corporate Plan) ___SEP IRA ___Other______ ______________________________________________________________________________ 10. BENEFICIARY(IES) DESIGNATION Primary Beneficiary(ies): (In the event of death of Name Relationship to Owner the Owner, the surviving Joint Owner becomes the Name Relationship to Owner Primary Beneficiary.) Contingent Beneficiary(ies): Name Relationship to Owner Name Relationship to Owner P40012 ______________________________________________________________________________ 11. BY SIGNING BELOW, THE OWNER UNDERSTANDS THAT OR AGREES TO I received a Prospectus and have determined that the variable annuity applied for is not unsuitable for my insurance investment objectives, financial situation, and financial needs. It is a long term commitment to meet insurance needs and financial goals. I understand that the annuity value for payments allocated to the variable sub-accounts may increase or decrease depending on the contract's investment results, and that no minimum cash value is guaranteed on the variable sub-accounts. To the best of my knowledge and belief, all statements and answers in this application are complete and true. It is further agreed that these statements and answers will become a part of any contract to be issued. No representative is authorized to modify this agreement or waive any of Preferred Life's rights or requirements. ___________________________________ ______________________________________ Owner's Signature(or Trustee, if Joint Owner's Signature (or Trustee, applicable) if applicable) ___________________________________ ______________________________________ Signed At (City and State) Date Signed ____Please send me a Statement of Additional Information ______________________________________________________________________________ 12. BY SIGNING BELOW, THE REGISTERED REPRESENTATIVE/AGENT CERTIFIES THAT I am NASD registered and state licensed for variable annuity contracts in the state where this application is written and delivered; and I provided the Owner(s) with the most current Prospectus; and TO THE BEST OF MY KNOWLEDGE AND BELIEF, THIS APPLICATION ___DOES___DOES NOT INVOLVE REPLACEMENT OF EXISTING LIFE INSURANCE OR ANNUITIES. IF REPLACEMENT, ATTACH A COPY OF EACH DISCLOSURE STATEMENT AND A LIST OF COMPANIES INVOLVED. ___________________________________ ______________________________________ Registered Representative Name (Print) Registered Representative Name (Print) ___________________________________ ______________________________________ Registered Representative Signature Registered Representative Signature ___________________________________ ______________________________________ Broker Dealer Branch Telephone Number ______________________________________________________________________________ Branch Address ______________________________________________________________________________ 13. MAIL APPLICATIONS TO Preferred Life Insurance Company For Overnight Delivery: of New York Preferred Life Insurance Company P.O. Box 11129 of New York Church Street Station Lock Box Department-3W New York, NY 10286-1129 P.O. Box 11129 101 Barclay Street New York, NY 10286-1129 ______________________________________________________________________________ 14. HOME OFFICE USE ONLY If Preferred Life Insurance Company of New York makes a change in this space in order to correct any apparent errors or omissions, it will be approved by acceptance of this contract by the Owner(s); however, any material change must be accepted in writing by the Owner(s). EX-99.B6(I) 7 DECLARATION OF INTENTION AND CHARTER CERTIFICATE OF AMENDMENT OF CHARTER OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK Under Section 1205 of the Insurance Law of the State of New York and Section 805 of the Business Corporation Law of the State of New York Pursuant to the provisions of Section 1206 of the Insurance Law of the State of New York, the undersigned President and Secretary of Preferred Life Insurance Company of New York hereby certify: 1. The name of the Corporation is Preferred Life Insurance Company of New York. 2. The Charter of the Corporation was filed with the Insurance Department of the State of New York in December 21, 1982. 3. The amendment to the Charter effected by this certificate is to amend Article V, Section 6, to effect a change in the director residency requirements to conform to New York Law, Article 12, Section 1201. 4. In order to effect such amendment, Article V, Section 6 of the Charter is amended in its entirety to read as follows: SECTION 6: At all times a majority of the directors shall be citizens and residents of the United States, not less than three (3) thereof, shall be residents of the State of New York, and each director shall be at least eighteen (18) years of age. 5. The amendment of the Charter of the Corporation was authorized by unanimous consent of the Board of Directors of the Corporation at a meeting of the Board held on September 16, 1988 at Minneapolis, Minnesota in accordance with Section 1206 of the New York Insurance Law and Section 708(b) of the Business Corporation Law of the State of New York, followed by the unanimous consent of the sole shareholder of the Corporation at a special Shareholders Meeting held on September 16, 1988 at Minneapolis, Minnesota in accordance with Section 615(b) of the Business Corporation. IN WITNESS WHEREOF, we hereunto sign our names and affirm that the statements herein are true under the penalties of perjury this 5th day of October, 1988. PREFERRED LIFE INSURANCE COMPANY OF NEW YORK By: /s/ Ronald Wobbeking _______________________ Ronald Wobbeking - President Attest: /s/ Alan A Grove ________________________ Alan A Grove - Secretary DECLARATION OF INTENTION AND CHARTER OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK We, the undersigned, all being natural persons of full age, and at least two-thirds of us citizens of the United States, and at least three (3) of us being residents of the State of New York, do hereby declare our intention to form a stock corporation for the purpose of doing the kinds of insurance business authorized by Paragraphs "1", "2" and "3", respectively, of Section 46 of the Insurance Law of the State of New York, and for that purpose do hereby adopt the following charter: CHARTER ARTICLE I The name of this Corporation shall be: PREFERRED LIFE INSURANCE COMPANY OF NEW YORK ARTICLE II The principal office of this Corporation shall be located in the County of New York in the State of New York. ARTICLE III SECTION 1. The kind or kinds of insurance to be transacted by the Corporation are those kinds specified in Paragraphs "1", "2" and "3", Section 46, of Article IV of the Insurance Law of the State of New York, as follows: 1. "Life insurance," meaning every insurance upon the lives of human beings and every insurance appertaining thereto. The business of life insurance shall be deemed to include the granting of endowment benefits; additional benefits in the event of death by accident or accidental means; additional benefits operating to safeguard the contract from lapse, or to provide a special surrender value, in the event of total and permanent disability of the insured; and optional modes of settlement of proceeds. Amounts paid to the Corporation for life insurance and proceeds applied under optional modes of settlement or under dividend options may be allocated by the Corporation to one or more separate accounts pursuant to section two hundred twenty-seven. 2. "Annuities," meaning all agreements to make periodical payments where the making or continuance of all or of some of a series of such payments, or the amount of any such payment, is dependent upon the continuance of human life, except payments made under the authority of paragraph one. Amounts paid to the Corporation to provide annuities and proceeds applied under optional modes of settlement or under dividend options may be allocated by the Corporation to one or more separate accounts pursuant to section two hundred twenty-seven. 3. "Accident and health insurance," meaning (a) Insurance against death or personal injury by accident or by any specified kind or kinds of accident and insurance against sickness, ailment or bodily injury, including insurance providing disability benefits pursuant to article nine of the workmen's compensation law, except as specified in subparagraph (b) following; and (b) Non-cancellable disability insurance, meaning insurance against disability resulting from sickness, ailment or bodily injury (but not including insurance solely against accidental injury) under any contract which does not give the insurer the option to cancel or otherwise terminate the contract at or after one year from its effective date or renewal date. SECTION 2. The Corporation may also engage in the reinsurance of the kinds of insurance business it is authorized to do. SECTION 3. The foregoing enumeration of specific kinds of insurance shall not be held to limit or restrict the powers of the Corporation to carry on any other business to the extent necessarily or properly incidental to such kinds of insurance. SECTION 4. The Corporation shall have full power and authority to cede and assume reinsurance of any risks subject to the Insurance Law and the rules and regulations of the Insurance Department of the State of New York. SECTION 5. The Corporation shall have and may exercise such other powers as are conferred upon it by law. ARTICLE IV The mode and manner in which the corporate powers of the Corporation shall be exercised is through a Board of Directors and through such Committees of the Board of Directors, officers and agents as such Board and the By-Laws of the Corporation shall empower. ARTICLE V SECTION 1. The number of the directors of the Corporation shall be not less than thirteen (13) nor more than twenty-three (23) and shall be determined by the provisions of the By-Laws. In no case shall the number of directors be less than thirteen (13). In no case shall a decrease in the number of directors shorten the term of any incumbent director. SECTION 2. The directors shall be elected at each annual meeting of the stockholders of the Corporation, and the directors so elected shall hold office for one year and until their respective successors shall have been elected and shall have qualified. The directors shall be chosen and elected by a plurality of the whole number of shares voted. SECTION 3. Any director may be removed with or without cause by the majority vote of the stockholders present in person or by proxy at any meeting of stockholders. Not less than one-third of the directors may call a Special Meeting for the purpose of removing any director for cause and at such Special Meeting so called, such director may be removed by the affirmative vote of two-thirds of the remaining directors. SECTION 4. Whenever any vacancy in the Board of Directors shall occur by death, resignation, removal or otherwise, and whenever the number of directors is increased, such vacancy may be filled and such additional directors may be elected, for the remainder of the term in which such event shall happen, by a majority vote of the directors then in office in such manner as may be prescribed by the By-Laws. SECTION 5. If the directors shall not be elected in any year at the annual meeting of stockholders as hereinabove provided, or if, because of a vacancy or vacancies on the Board of Directors, the number of the Board shall be less than thirteen (13), the Corporation shall not for that reason be dissolved, but every director shall continue to hold office and discharge his duties until his successor shall have been elected. SECTION 6. At all times a majority of the directors shall be citizens and residents of the State of New York or of adjoining states, not less than three (3) thereof shall be residents of the State of New York, and each director shall be at least twenty-one (21) years of age. ARTICLE VI The annual meeting of shareholders shall be held on the Thursday following the first Tuesday on or after the first day of April in each year, if not a legal holiday, and if a legal holiday, then on the next succeeding business day, at 10:30 o'clock a.m. or at such other hour as may from time to time be designated by the Board of Directors. ARTICLE VII Except as otherwise provided by law, the presence in person or by proxy at any meeting of stockholders of the holders of a majority of shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat shall constitute a quorum. If, however, such majority shall not be represented at any meeting of the stockholders, the holders of a majority of the shares present or represented and entitled to vote thereat shall have power to adjourn the meeting from time to time without notice until the requisite amount of shares entitled to vote at such meeting shall be represented. At such adjourned meeting at which the requisite number of shares entitled to vote thereat shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. ARTICLE VIII The names and post office residence addresses of the directors who shall serve until the first annual meeting of the Corporation, are as follows:
Post Office Residence Addresses Lowell C Anderson 1731 S Victoria Road, Mendota Heights, MN Howard E Barnhill 475 Highcroft Rd, Wayzata, MN Alfred F Fox 64 Cotter Beech Rd, St James, NY James J Furey 2 Wexler Court, Garnerville, NY Alan A Grove 16385 Ringer Rd, Wayzata, MN Thomas J Kilcher 19 Winding Hill Rd, Hopatcong, NJ Edward A Magliaro 189 Valleyview Drive, Rockaway, NJ Richard M. Martin 35 Skylark Lane, Stonybrook, NY Edward A Monaco 31 N Nancy Place, N Massapequa, NY Ralph I Oasheim 5168 Abercrombie Drive, Edina, MN Ronald E Ryan 5909 Sun Road, Edina, MN Wallace H Watkins RD 1 Box 666 Pequest RD, Andover, NJ Ronald L Wobbeking 2645 Fountain Lane, Plymouth, MN
ARTICLE IX The duration of the corporate existence of this Corporation shall be perpetual. ARTICLE X The holders of stock of the Corporation shall not have any pre-emptive, preferential or other right to subscribe for or purchase or acquire any shares of any class of stock or any other securities of the Corporation, whether now or hereafter authorized, and whether or not convertible into, or evidencing or carrying the right to purchase, shares of stock of any class or any other securities now or hereafter authorized and whether the same shall be issued for cash, services or property, or by way of dividend, or otherwise, other than such right, if any, as the Board of Directors in its discretion from time to time may determine; but all such shares of stock or other securities may be issued and disposed of by the Board of Directors, to the extent permitted by law, in such manner to such person or persons, on such terms, for such consideration and for such corporate purposes as the Board of Directors may deem advisable. ARTICLE XI The amount of the authorized capital of this Corporation shall be TWO MILLION ($2,000,000) DOLLARS, to consist of TWO HUNDRED THOUSAND (200,000) shares of stock of the par value of TEN ($10.00) DOLLARS per share. ARTICLE XII The Corporation may establish, maintain and operate offices and agencies and conduct business outside of the State of New York and in other states, countries, territories, dependencies, protectorates and in the District of Columbia, in such form and manner as the Board of Directors may determine. ARTICLE XIII The Board of Directors shall adopt By-Laws for its own regulation and that of the conduct of the business of the Corporation , which By-Laws shall not be inconsistent with this Charter or with the laws of the State of New York, and which By-Laws may be modified, rescinded or amended from time to time by majority vote of the Board of Directors at any special meeting called for that purpose, or at any regular meeting. IN WITNESS WHEREOF, we have hereunto subscribed our names and affixed our seals this 26th day of August, 1982.
/s/ Lowell C Anderson /s/Richard M. Martin ________________________ ________________________ Lowell C. Anderson Richard M Martin /s/ Howard E. Barnhill /s/ Edward A. Monaco ________________________ ________________________ Howard E Barnihll Edward A. Monaco /s/ Alfred F. Fox /s/ Ralph I Oasheim ________________________ ________________________ Alfred F. Fox Ralph I Oasheim /s/ James J. Furey /s/ Ronald E Ryan ________________________ _________________________ James J. Furey Ronald E Ryan /s/ Alan A Grove /s/Wallace H Watkins ________________________ _________________________ Alan A Grove Wallace H Watkins /s/Thomas J Kilcher /s/ Ronald L Wobbeking ________________________ _________________________ Thomas J Kilcher Ronald L Wobbeking /s/Edward A Magliaro ________________________ Edward A Magliaro
EX-99.B8 8 FORM OF FUND PARTICIPATION AGREEMENT PARTICIPATION AGREEMENT Between FRANKLIN VALUEMARK FUNDS and NORTH AMERICAN LIFE AND CASUALTY COMPANY THIS AGREEMENT, effective the 1st day of January, 1990 by and between North American Life and Casualty Company, a Minnesota corporation (hereinafter the "Company") on its own behalf and on behalf of one or more segregated asset accounts of the Company or its affiliates (hereinafter the "Account"), and Franklin Valuemark Funds, a Massachusetts business trust (hereinafter the "Trust"). WHEREAS, the Trust engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts (collectively, the "Variable Insurance Products") to be offered by the Company and its affiliates (hereinafter the "Company"); and WHEREAS, the beneficial Interest in the Trust is divided into several series of shares, each designated a "Fund" and each representing the interests in a particular managed pool of securities and other assets; and WHEREAS, the Trust has obtained an order from the Securities and Exchange Commission, dated September 7, 1989 (File No. 812-7303), granting the Company and variable annuity and variable life insurance separate accounts exemptions from certain provisions of the Investment Company Act of 1940, as amended, (hereinafter the "1940 Act") and certain Rules 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 the Company (hereinafter the "Mixed Funding Exemptive Order"); and WHEREAS, the Trust is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and WHEREAS, the company has registered or will register certain variable annuity and/or life insurance contracts under the 1933 Act (hereinafter "Contracts"); and WHEREAS, the Account is a duly organized, validly existing segregated asset account, established by resolution of the Board of Directors of the Company, to set aside and invest assets attributable to the aforesaid variable contracts (the Contract(s) and the Account(s) covered by this Agreement, and the corresponding Funds covered by this Agreement in which the Account(s) invest, are specified in Schedule A attached hereto as may be modified from time to time); and WHEREAS, the Company has registered or will register the Account as a unit investment trust under the 1940 Act; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Fund on behalf of the Account to fund the Contracts; NOW, THEREFORE, in consideration or their mutual promises, the Trust and the Company agree as follows: ARTICLE 1. SALE OF TRUST SHARES 1.1 The Trust agrees to sell to the company those shares of the Trust which the Account orders, executing such orders on a daily basis at the net value next computed after receipt by the Trust or its designee of the order for the shares of the Trust. For purposes of this Section 1.1, the Company shall be the designee of the Trust for receipt of such orders and receipt by such designee shall constitute receipt by the Trust; provided that the Trust received notice of such order by 9:30 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. 1.2. The Trust agrees to make Trust shares available for the duration or this Agreement for purchase at the applicable net asset value per share by the Company and its Account on those days on which the Trust calculates its net asset value pursuant to rules of the Securities and Exchange Commission and the Trust shall use reasonable efforts to calculate such net asset value on each day on which the New York Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of Trustees of the Trust (hereinafter the "Trustees") may refuse to sell shares of any Funds to any person, or suspend or terminate the offering of shares of any Fund if such action is required by law or 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 Fund. 1.3. The Trust agrees that shares of the Trust will be sold only to the Company and their separate accounts. No shares of any Fund will be sold to the general public. 1.4. The Trust agrees to redeem for cash, on the Company's request, any full or fractional shares of the Trust held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt by the Trust or its designee of the request for redemption. For purposes of this Section 1.4, the Company shall be the designee of the Trust for receipt of requests for redemption and receipt by such designee shall constitute receipt by the Trust provided that the Trust receives notice of such request for redemption by 9:30 a.m. New York time on the next following Business Day. 1.5. The company shall pay for the Trust shares on the next Business Day after an order to purchase shares is made in accordance with the provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire or by a credit for any shares redeemed. 1.6. 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 an appropriate title for the Account or the appropriate subaccount of the Account. 1.7. The Trust shall furnish same day notice (by wire or telephone followed by written confirmation) 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 dividends and distributions as are payable on the Fund shares in additional shares of that Fund. The Company reserves the right to revoke this election and to receive all such dividends and distributions in cash. The Trust shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.8. 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 6:30 p.m. New York time. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants that the Contracts are or will be registered under the 1933 Act (or exempt therefrom), that the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws and that the sale of the Contracts shall comply in all material respects with state insurance suitability requirements. The Company further represents and warrants that it is an insurance company duly organized and in good standing under applicable law and that it has legally and validly established the Account as a segregated asset account under Minnesota law and has registered or, prior to any issuance or sale of the Contracts, will register the Account as a unit investment trust in accordance with the provisions of the 1940 Act (unless exempt therefrom) to serve as a segregated investment account for the Contracts. 2.2. The Trust represents and warrants that Trust shares sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold in compliance with the laws or Massachusetts and all applicable federal and state securities laws and that the Trust is and shall remain registered under the 1940 Act. The Trust shall amend the Registration Statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to affect the continuous offering of its shares. The Trust shall register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Trust. 2.3. The Trust represents that the Trust is currently qualified as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, (the "Code") and that every effort will be made to maintain such qualifications (under Subchapter M or any successor or similar provision) and that the Trust will notify the Company immediately upon having a reasonable basis for believing that the Trust has ceased to so qualify or that the Trust might not so qualify in the future. 2.4. The Trust undertakes to have a Board of Trustees, a majority of whom are not interested persons of the Trust, formulate and approve of any plan under Rule 12b-1 to finance distribution expenses. 2.5. The Trust represents that it will sell and distribute the Trust shares in accordance with all applicable state and federal securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. 2.6. The Trust represents that it is lawfully organized and validly existing under the laws of the State of Massachusetts and that it does and will comply with the 1940 Act. ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING 3.1. The Trust shall provide the Company (at the Trust's expense) with as many copies of the Trust's current prospectus as the Company may reasonably request. If requested by the Company in lieu thereof, the Trust shall provide such documentation (including a final "camera ready" copy of the new prospectus as set in type at the Trust's expense) and other assistance as is reasonably necessary in order for the Company once a year (or more frequently if the prospectus for the Trust is supplemented or amended) to have the prospectus for the Contracts and the Trust's prospectus printed together in one document (such printing to be at the Trust's expense). 3.2. The Trust's prospectus shall state that the Statement of Additional Information for the Trust is available from the Trust. The Trust, at its expense, shall print and provide such Statement free of charge to the Company and to any owner of a contract or prospective owner who requests such Statement. 3.3. The Trust, at its expense, shall provide the Company with copies of its proxy material, reports to stockholders and other communications to stockholders in such quantity as the Company shall reasonably require for distributing to Contract owners. 3.4. If and to the extent required by law (or the Mixed Funding Exemptive Order) the Company shall: 1. solicit voting instructions from contract owners; 2. vote the Trust shares in accordance with instructions received from Contract owners; and 3. vote Trust shares for which no instructions have been received in the same proportion as Trust shares of such Fund for which instructions have been received; so long as and to the extent that the Securities and Exchange Commission continues to interpret the 1940 Act to require pass-through voting privileges or variable contract owners. The Company reserves the right to vote Trust shares held in any segregated asset account in its own right, to the extent permitted by law. The Company shall be responsible, with the guidance and assistance of the Trust, assuring that each of their separate account participating in the Trust calculates voting privileges in a manner consistent with the standards set forth on Schedule B attached hereto. ARTICLE IV. SALES MATERIAL AND INFORMATION 4.1. 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, its investment adviser or underwriter is named, a reasonable time prior to its use. No such material shall be used if the Trust or its designee object to such use within 15 Business Days after receipt of such material. 4.2. The Company shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus for the Trust shares, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Trust, or in sales literature or other promotional material approved by the Trust or its designee except with the permission of the Trust. 4.3. The Trust shall furnish, or shall cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material in which the Company and/or its separate account(s), is named a reasonable time prior to its use. No such material shall be used if the Company or its designee object to such use within 15 Business Days after receipt or such material. 4.4. The Trust shall not give any information or make any representations on behalf of the Company or concerning the Company, the Account, or the Contracts other than information or representations contained in a registration statement or prospectus for the Contracts, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports for the Account approved by the Company for distribution to Contract owners, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company. 4.5. The Trust will provide to the Company at least one complete copy of all registration statements, prospectuses, Statements of Additional Information, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no action letters, and all amendments to any of the above, that relate to the Trust or its shares, prior to or contemporaneously with the filing of such document with the Securities and Exchange Commission or other regulatory authorities. The Trust shall also promptly inform the Company of the results or any examination by the Securities and Exchange Commission (or other regulatory authorities), and shall provide the Company with a copy of any "deficiency letter" or other correspondence or written report regarding any such examination. 4.6. For purposes of this Article IV, the phrase "sales literature or other promotional material" means advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboard), and sales literature (such as brochures, circulars, market letters and form letters), distributed or made generally available to customers or the public. ARTICLE V. FEES AND EXPENSES 5.1. The Trust shall pay no Fee or other compensation to the Company under this Agreement, and the Company shall pay no fee or other compensation to the Trust. 5.2. All expenses incident to performance by the Trust under this Agreement shall be paid by the Trust. The Trust shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Trust, in accordance with applicable state laws prior to their sale. The Trust shall bear the expenses for the cost of registration and qualification of the Trust's shares, preparation and filing of the Trust's prospectus and registration statement, proxy materials and reports, setting the prospectus in type, setting in type and printing the proxy materials and reports to shareholders (including the costs of printing a prospectus that constitutes an annual report), the preparation of all statements and notices required by federal or state law, and all taxes on the issuance or transfer of the Trust's shares. 5.3. The Trust shall bear the expenses of printing and distributing the Trust's prospectus to owners of Contracts issued by the Company and or distributing the Trust's proxy materials and reports to such Contract owners. 5.4. In the event the Trust adds one or more additional Funds and the Company desires to make such Funds available to its Contract owners as an underlying investment medium, a new Schedule A or an amendment to this Agreement shall be executed by the parties authorizing the issuance of shares or the new Funds to the Account. ARTICLE VI. DIVERSIFICATION 6.1. The Trust represents, and warrants that the Trust will at all times invest its assets in such a manner as to ensure that the Contracts will be treated as annuity, endowment, or life insurance contracts under the code and the regulations issued thereunder. Without limiting the scope of the foregoing, the Trust will at all times comply with Section 817(h) of the Code and the Regulations Section 1.817-5, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications to such Section or Regulation. ARTICLE VII. POTENTIAL CONFLICTS 7.1. The Board of Trustees of the Trust (the "Board") will monitor the Trust for the existence of any material irreconcilable conflict between the interest of the Contract owners of all separate accounts investing in the Trust. A material irreconcilable 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 interpretive 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 Fund 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 or Contract owners. The Board shall promptly inform the Company to determine that a material irreconcilable conflict exists and the implications thereof. 7.2. If it is determined by a majority of the Board, or a majority of its disinterested Trustees, that a material irreconcilable conflict exists, the Company shall, at its expense, and to the extent reasonably practicable (as determined by a majority or the disinterested Trustees) take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including: (1) withdrawing the assets, allocable to some or all of the separate accounts from the Trust or any Fund and reinvesting such assets in a different investment medium, including (but not limited to) another Fund of the Trust, or submitting the question whether 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 or life insurance Contract owners) that votes in favor of such Segregation, or offering to the affected Contract owners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account. 7.3. 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 Account's investment in the Trust and terminate this Agreement within six months after the Board informs 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 members of the Board. Until the end of the foregoing six month period, the Trust shall continue to accept and implement orders by the Company for the purchase and redemption of shares of the Trust. 7.4. For purposes of Section 7.2 though 7.4 of this Agreement, a majority of the disinterested members of the Board shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Trust be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 7.2 to establish a new funding medium for the Contracts, if an offer to do so has been declined by vote of a majority or Contract owners materially adversely affected by the irreconcilable material conflict. In the event that the Board determines that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account's investment in the Fund and terminate this Agreement within six (6) months after the Board informs 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 members of the Board. ARTICLE VIII. INDEMNIFICATION 8.1 INDEMNIFICATION BY THE COMPANY 8.1(a). The Company agrees to indemnify and hold harmless the Trust and each of its Trustees and officers 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 Section 8.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Trust's shares or the Contracts and: 1. 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 Contracts or contained in the Contracts or sales literature for the Contracts (or any amendment or supplement to any of the foregoing), 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 agreement to indemnify 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 in conformity with information furnished to the Company by or on behalf of the Trust for use in the Registration Statement or prospectus for the Contracts or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Trust shares; or 2. arise out of or as a result of statements or representations (other than statements or representations contained in the Registration Statement, prospectus or sales literature of the Trust not supplied by the Company, or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Trust Shares; or 3. arise out of any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, prospectus, or sales literature of the Trust or any amendment thereof or supplement thereto 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 information furnished to the Trust by or on behalf of the company; or 4. 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, except to the extent provided in Sections 8.1(b) and 8.1(c) hereof. 8.1(b). The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross 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 or to the Trust, whichever is applicable. 8.1(c) The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at its own expense, in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Company to such party of the Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will be not liable to such 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. 8.l(d). The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Trust Shares or the Contracts or the operation of the Trust and the Indemnified Parties will provide the Company with all relevant information and documents requested by the Company. For purposes of this Section 8.1(d), the "commencement" of proceedings shall include any informal or formal communications from the Securities and Exchange Commission or its staff (or the receipt of information from any other persons or entities) indicating that enforcement action by said Commission or staff may be contemplated or forthcoming. ARTICLE IX. APPLICABLE LAW 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws or Minnesota. 9.2 This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the Securities and Exchange Commission may grant (including, but not limited to, the Mixed Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE X. TERMINATION 10.1. This Agreement shall terminate with respect to one, some, or all Funds for one, some, or all Contracts or Accounts: 1. at the option of any party upon six month's advance written notice to the other parties; 2. at the option of the Company to the extent that shares of Funds are not reasonably available to meet the requirements of the Contracts or are not appropriate funding vehicles for the Contracts, as determined by the Company reasonably and in good faith. Prompt notice of the election to terminate for such cause and an explanation or such cause shall be furnished by the Company; or 3. as provided in Article VII. 10.2. The notice shall specify the Fund(s) and Contract(s) or Account(s) as to which the Agreement is to be terminated. 10.3. It is understood and agreed that the right of any party hereto to terminate this Agreement pursuant to Section 1O.1 (a) may be exercised for cause or for no cause. 10.4. Effect of Termination. Notwithstanding any termination of this Agreement, the Trust shall at the option of the Company, continue to make available additional shares of the Trust pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, the owners of the existing contracts shall be permitted to reallocate investments in the Trust, redeem investments in the Trust and/or invest in the Trust upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.4 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement. ARTICLE XI. 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: Deborah Gatzek, Vice President Franklin Resources, Inc. 777 Mariners Island Boulevard San Mateo, California 94404 If to the Company: Mr. Robert S. James, President-Financial Markets North American Life and Casualty Company 1750 Hennepin Avenue Minneapolis, Minnesota 55403 ARTICLE XII. MISCELLANEOUS 12.1. Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses and other confidential information without the express written consent of the affected party until such time as it may come into the public domain. 12.2. 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. 12.3. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 12.4. If any provision or 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. 12.5. The Schedules attached hereto, as modified from time to time, are incorporated herein by reference and are part of this Agreement. 12.6. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitations the Securities and Exchange Commission, the NASD 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. 12.7. 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. IN WITNESS WHEREOF, each of the parties has cause this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as or the date specified below. Company: By two authorized officers, By: /s/Robert S. James Title: President, Financial Markets Division Date: 5/24/92 By: /s/Michael T. Westermeyer Title: Second Vice President and Senior Counsel Date: 5/20/92 Trust: By its authorized officers, By: /s/Deborah Gatzek Title: Secretary Date: 3/31/92 SCHEDULE A Franklin Valuemark Funds (Trust) is a diversified, open-end management investment company consisting of the following separate Funds: Adjustable U.S. Government Fund Equity Growth Fund Global Income Fund High Income Fund Income Securities Fund Investment Grade Intermediate Bond Fund Money Market Fund Precious Metals Funds Real Estate Securities Fund U.S. Government Securities Fund Utility Equity Fund Zero Coupon Fund - 1995 Zero Coupon Fund - 2000 Zero Coupon Fund - 2005 Zero Coupon Fund - 2010 Effective March 1, 1992: Rising Dividend Fund International Equity Fund Pacific Growth Fund Amendment to Participation Agreement Effective as of the dates specified below, Allianz Life Insurance Company of North America, formerly known as North American Life and Casualty Company, a Minnesota corporation, and Franklin Valuemark Funds, a Massachusetts business trust, hereby amend Schedule A of their Participation Agreement effective January 1, 1990, by adding the following language to the bottom of the list of the Funds which make up the Franklin Valuemark Funds: "Effective March 15, 1994: Templeton Developing Markets Equity Fund Templeton Global Growth Fund" "Effective May 1, 1995: Templeton Global Asset Allocation Fund" IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be executed in its name and on its behalf by its duly authorized representatives as of the date specified below. Allianz Life Insurance Company of North America By: /s/James P. Kelso James P. Kelso Title: Vice President, Variable Products Date: 6/30/95 Franklin Valuemark Funds By: /s/Karen L. Skidmore Karen L. Skidmore Title: Assistant Vice President & Assistant Secretary Date: 6/16/95 Amendment to Participation Agreement Effective as of the dates specified below, Allianz Life Insurance Company of North America, formerly known as North American Life and Casualty Company, a Minnesota corporation, and Franklin Valuemark Funds, a Massachusetts business trust, hereby amend Schedule A of their Participation Agreement effective January 1, 1990, by adding the following language to the bottom of the list of the Funds which make up the Franklin Valuemark Funds: "Effective November 1, 1995: Small Cap Fund" IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be executed in its name and on its behalf by its duly authorized representatives as of the date specified below. Allianz Life Insurance Company of North America By: /s/James P. Kelso James P. Kelso Title: Vice President, Variable Products Franklin Valuemark Funds By: /s/Karen L. Skidmore Karen L. Skidmore Title: Assistant Vice President & Assistant Secretary Amendment to Participation Agreement Effective as of the dates specified below, Allianz Life Insurance Company of North America, formerly known as North American Life and Casualty Company, a Minnesota corporation, and Franklin Valuemark Funds, a Massachusetts business trust, hereby amend Schedule A of their Participation Agreement effective January 1, 1990, by adding the following language to the bottom of the list of the Funds which make up the Franklin Valuemark Funds: "Effective May 1, 1996: Capital Growth Fund Templeton International Smaller Companies Fund" IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be executed in its name and on its behalf by its duly authorized representatives as of the date specified below. Allianz Life Insurance Company of North America By: /s/James P. Kelso James P. Kelso Title: Vice President, Variable Products Franklin Valuemark Funds By: /s/Karen L. Skidmore Karen L. Skidmore Title: Assistant Vice President & Assistant Secretary EX-99.B14 9 COMPANY ORGANIZATIONAL CHART Organizational Chart Allianz Aktiengesellschaft Holding (abbreviated as Allianz AG Holding), of Munich, Germany, is the controlling owner of Allianz of America, Inc. Allianz of America, Inc. is sole owner of Allianz Life Insurance Company of North America. Allianz Life is controlling owner of NALAC Financial Plans, LLC. Allianz Life Insurance Company of North America is sole owner of Preferred Life Insurance Company of New York. -----END PRIVACY-ENHANCED MESSAGE-----