<PAGE> 1
File Nos. 33-19293
811-5474
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. 10 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ X ]
Amendment No. 11
(Check appropriate box or boxes)
PRESIDENTIAL VARIABLE ACCOUNT ONE
(Exact Name of Registrant)
PRESIDENTIAL LIFE INSURANCE COMPANY
(Name of Depositor)
69 Lydecker Street
Nyack, New York 10960
(Address of Depositor's Principal Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (914) 358-2300
Herbert Kurz, President
Presidential Life Insurance Company
69 Lydecker Street
Nyack, New York 10960
(Name and Address of Agent for Service)
Title of Securities Being Registered
------------------------------------
Flexible Payment
Deferred Annuity Contracts
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
-----
X on May 1, 1998 pursuant to paragraph (b) on Rule 485
-----
60 days after filing pursuant to paragraph (a) of Rule 485
-----
on (date) pursuant to paragraph (a) of Rule 485
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<PAGE> 2
PRESIDENTIAL VARIABLE ACCOUNT ONE
Cross Reference Sheet
Part A - Prospectus
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
- ----------------------- -------
<S> <C>
1. Cover Page ............................... Cover Page
2. Definitions .............................. Definitions
3. Synopsis ................................. Highlights; Fee Tables;
Examples; Explanation of
Fee Tables and Examples
4. Condensed Financial Information .......... Condensed Financial
Information - Accumulation
Unit Values
5. General Description of Registrant,
Depositor and Portfolio Companies........ Description of the Company
and the Separate Account;
Anchor Series Trust
6. Deductions ............................... Contract Charges
7. General Description of Variable Annuity
Contracts ................................ Description of the
Contracts
8. Annuity Period ........................... Annuity Period
9. Death Benefit ............................ Description of the
Contracts; Annuity Period
10. Purchases and Contract Value ............ Purchases and Contract
Value
11. Redemptions ............................. Purchases and Contract
Value
12. Taxes ................................... Taxes
13. Legal Proceedings ....................... Legal Proceedings
14. Table of Contents of Statement
of Additional Information................ Table of Contents of the
Statement of Additional
Information
</TABLE>
<PAGE> 3
Part B - Statement of Additional Information
Certain information required in Part B of the Registration Statement
has been included within the Prospectus forming part of this Registration
Statement. The cross-references suffixed with a "P" are made by reference to
the captions in the Prospectus.
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption
- ----------------------- -------
<S> <C>
15. Cover Page .............................. Cover Page
16. Table of Contents........................ Table of Contents
17. General Information and History.......... Company
18. Services ................................ Not Applicable
19. Purchase of Securities Being Offered .... Purchase Payments(P)
20. Underwriters ............................ Distributors
21. Calculation of Performance Data ......... Yield Calculations for
Money Market Division
22. Annuity Payments ........................ Annuity Payments
23. Financial Statements .................... Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE> 4
PROSPECTUS - MAY 1, 1998
- --------------------------------------------------------------------------------
FLEXIBLE PAYMENT VARIABLE ANNUITY
CONTRACTS
- --------------------------------------------------------------------------------
ISSUED BY
PRESIDENTIAL LIFE INSURANCE COMPANY
IN CONNECTION WITH
PRESIDENTIAL VARIABLE ACCOUNT ONE
<TABLE>
<S> <C>
HOME OFFICE:
69 LYDECKER STREET
NYACK, NEW YORK 10960
(914) 358-2300
CORRESPONDENCE ACCOMPANIED ALL OTHER CORRESPONDENCE,
BY PAYMENTS: ANNUITY SERVICE CENTER:
P.O. BOX 100357 P.O. BOX 54299
PASADENA, CALIFORNIA 91189-0357 LOS ANGELES, CALIFORNIA 90054-0299
TELEPHONE NUMBER: (800) 537-3642
</TABLE>
The Variable Annuity Contracts ("Contract(s)") offered by this Prospectus
provide for accumulation of Contract Values and payment of annuity benefits on a
variable basis. The Contracts are available for retirement plans which do not
qualify for the special Federal tax advantages available under the Internal
Revenue Code ("Non-Qualified Plans") and for retirement plans which do qualify
for the Federal tax advantages available under the Internal Revenue Code
("Qualified Plans"). See "Taxes -- Qualified Plans" for a detailed discussion.
The minimum initial Purchase Payment for a Contract issued on a
Non-Qualified basis is $1,000. Additional Purchase Payments may be made in
amounts of at least $500. The minimum Purchase Payment for a Contract issued on
a Qualified basis is $100.
Purchase Payments are allocated among eleven of the twelve Divisions of
Presidential Variable Account One ("Separate Account"), a separate account of
Presidential Life Insurance Company ("Company") and/or the Company's General
Account, as directed by the Contract Owner. Each of the eleven Divisions of the
Separate Account is invested solely in the shares of one of the eleven
Portfolios of Anchor Series Trust ("Trust"). The Trust is registered under the
Investment Company Act of 1940.
The eleven Portfolios currently available are Foreign Securities Portfolio,
Capital Appreciation Portfolio, Growth Portfolio, Natural Resources Portfolio,
Growth and Income Portfolio, Strategic Multi-Asset Portfolio, Multi-Asset
Portfolio, High Yield Portfolio, Fixed Income Portfolio, Government and Quality
Bond Portfolio and Money Market Portfolio. Purchase payments may no longer be
allocated to the Target '98 Portfolio.
The current General Account allocation option pays a fixed rate of interest
declared by the Company for one year from the date amounts are allocated to it.
Contract Owners bear the complete investment risk for all Purchase Payments
allocated to the Separate Account.
This Prospectus concisely sets forth the information a prospective investor
ought to know before investing. Additional information about the Contracts is
contained in the Statement of Additional Information which is available at no
charge. The Table of Contents of the Statement of Additional Information can be
found on Page 24 of the Prospectus. For a copy of the Statement of Additional
Information, call or write the Company at the Annuity Service Center.
INQUIRIES:
Any inquiries may be made over the telephone to the Annuity Service Center
listed above or to the representative from whom this Prospectus was obtained.
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.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE
REFERENCE.
THE CONTRACTS OFFERED BY THIS PROSPECTUS WILL ONLY BE MADE AVAILABLE IN THE
STATE OF NEW YORK.
This Prospectus is dated May 1, 1998.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
DEFINITIONS................................................. 2
HIGHLIGHTS.................................................. 4
FEE TABLES.................................................. 6
EXAMPLES.................................................... 7
EXPLANATION OF FEE TABLES AND EXAMPLES...................... 7
CONDENSED FINANCIAL INFORMATION -- ACCUMULATION UNIT
VALUES.................................................... 8
YIELD CALCULATION FOR MONEY MARKET DIVISION................. 9
DESCRIPTION OF THE COMPANY AND THE SEPARATE ACCOUNT......... 9
Company................................................ 9
Separate Account....................................... 9
FINANCIAL STATEMENTS........................................ 10
ANCHOR SERIES TRUST......................................... 10
Equity Portfolios...................................... 10
Managed Portfolios..................................... 10
Fixed Income Portfolios................................ 11
Contract Owners in Target '98 Portfolio................ 11
Voting Rights.......................................... 12
Substitution of Securities............................. 12
CONTRACT CHARGES............................................ 12
Mortality and Expense Risk Charge...................... 12
Administrative Charges................................. 12
Administrative Expense Charge........................ 12
Annual Contract Charge............................... 12
Sales Charges.......................................... 13
Withdrawal Charge.................................... 13
Annuity Charge....................................... 13
Deduction for Separate Account Income Taxes............ 13
Other Expenses......................................... 13
Reduction of Charges, Credits or Bonus Guaranteed
Interest Rates for Sales to Certain Groups............ 13
DESCRIPTION OF THE CONTRACTS................................ 14
Voting Rights of Contract Owner........................ 14
Transfer During Accumulation Period.................... 14
Modification of the Contract........................... 14
Assignment............................................. 14
Death of the Annuitant................................. 15
Death of the Contract Owner............................ 15
Beneficiary............................................ 15
ANNUITY PERIOD.............................................. 16
Annuity Date........................................... 16
Annuity Options........................................ 16
Other Options.......................................... 17
Allocation of Annuity Payments......................... 17
Transfer During Annuity Period......................... 18
PURCHASES AND CONTRACT VALUE................................ 18
Minimum Purchase Payment............................... 18
Allocation of Purchase Payments........................ 18
Accumulation Unit Value................................ 19
Distribution of Contracts.............................. 19
Withdrawals (Redemptions).............................. 19
ERISA Plans............................................ 20
ADMINISTRATION.............................................. 20
TAXES....................................................... 21
General................................................ 21
Withholding Tax on Distributions....................... 21
Diversification........................................ 22
Multiple Contracts..................................... 22
Tax Treatment of Assignments........................... 22
Tax Treatment of Withdrawals -- Non-Qualified
Contracts............................................. 22
Qualified Plans........................................ 23
Tax Treatment of Withdrawals -- Qualified Contracts.... 24
Tax Sheltered Annuities -- Withdrawal Limitations...... 24
LEGAL PROCEEDINGS........................................... 24
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION............................................... 25
</TABLE>
(i)
<PAGE> 6
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DEFINITIONS
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The following terms, as used in this Prospectus, have the indicated
meanings:
ACCUMULATION PERIOD --
The period between the Issue Date of the Contract and the Annuity Date, the
build-up phase of the Contract.
ACCUMULATION UNIT --
A unit of measurement which the Company uses to calculate Contract Value
during the Accumulation Period.
ANNUITANT --
The person designated in the application to receive or who actually receives
annuity payments. Annuity payments involving life contingencies depend on the
continuation of the Annuitant's life.
ANNUITIZATION --
The process by which a Contract Owner converts from the Accumulation Period
to the Annuity Period. Upon Annuitization, the Contract is converted from the
build-up phase to the phase during which the Annuitant receives periodic annuity
payments.
ANNUITY DATE --
The date on which annuity payments are to begin.
ANNUITY PERIOD --
The period starting on the Annuity Date.
ANNUITY UNIT --
A unit of measurement which the Company uses to calculate the amount of
Variable Annuity payments.
BENEFICIARY --
The person designated to receive any benefits under a Contract upon the
death of the Annuitant or the Contract Owner.
CONTRACT(S) --
The flexible payment variable annuity contracts offered by this Prospectus.
CONTRACT OWNER OR OWNER --
The Contract Owner is named in the application, unless changed, and has all
rights under the Contract.
CONTRACT VALUE --
The sum of the values of the Contract Owner's interest in the General
Account and Separate Account Divisions.
CONTRACT YEAR --
The period between anniversaries of the Issue Date of a Contract.
DIVISION OR SEPARATE ACCOUNT DIVISION --
A Division of the Separate Account invested wholly in shares of one of the
Portfolios of the Trust.
DUE PROOF OF DEATH --
(1) A certified copy of a death certificate; or (2) a certified copy of a
decree of a court of competent jurisdiction as to the finding of death; or (3) a
written statement by a medical doctor who attended the deceased at time of
death; or (4) any other proof satisfactory to the Company.
FIXED ANNUITY --
A series of payments that are fixed in amount and made during the Annuity
Period to a payee under a Contract.
GENERAL ACCOUNT --
The Company's general investment account which contains all the assets of
the Company, with the exception of the Separate Account and other segregated
asset accounts.
ISSUE DATE --
The date on which the first Contract Year begins.
NON-QUALIFIED PLAN --
A retirement plan which does not receive favorable tax treatment under
Sections 403(b) or 408 of the Internal Revenue Code.
2
<PAGE> 7
PORTFOLIO --
One of the investment options available in the Trust.
PURCHASE PAYMENTS --
Amounts paid to the Company by a Contract Owner.
QUALIFIED PLAN --
A retirement plan which receives favorable tax treatment under Sections
403(b) or 408 of the Internal Revenue Code.
SEPARATE ACCOUNT OR ACCOUNT --
A segregated investment account entitled "Presidential Variable Account One"
established by the Company.
TRUST --
Anchor Series Trust.
VALUATION DATE --
The Separate Account will be valued each day that the New York Stock
Exchange is open for trading.
VALUATION PERIOD --
The period commencing at 4:00 p.m. New York time on each Valuation Date and
ending at 4:00 p.m. New York time on the next succeeding Valuation Date.
VARIABLE ANNUITY --
A series of payments made during the Annuity Period which varies in amount
in accordance with the investment experience of the Separate Account Divisions.
WITHDRAWAL CHARGE --
The contingent deferred sales charge assessed against certain withdrawals or
annuitizations.
WITHDRAWAL VALUE --
Contract Value, less any premium tax payable if the Contract is being
annuitized, minus any applicable Withdrawal Charge.
3
<PAGE> 8
- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------
This Prospectus describes the uses and objectives of the Contracts, their
costs, and the rights and privileges of the Owner. It also contains information
about the Company, the Separate Account and its Divisions, and the Portfolios in
which the Divisions invest. We urge you to read it carefully and retain it and
the Prospectus for the Trust for future reference. (The Prospectus for the Trust
is attached to and follows this Prospectus).
WHAT IS THE CONTRACT?
The Contract offered is a tax deferred annuity which provides fixed
benefits, variable benefits or a combination of both. Individuals wishing to
purchase a Contract must complete an application and provide an initial Purchase
Payment which will be sent to the Company at its Administrative Service Center
or in such other manner as deemed acceptable to the Company. The minimum and
maximum of Purchase Payments vary depending upon the type of Contract purchased.
WHAT IS THE DIFFERENCE BETWEEN A VARIABLE ANNUITY AND A FIXED ANNUITY?
The Contract has appropriate provisions relating to variable and fixed
accumulation values and variable and fixed annuity payments. A Variable Annuity
and a Fixed Annuity have certain similarities. Both provide that Purchase
Payments, less certain deductions, will be accumulated prior to the Annuity
Date. After the Annuity Date, annuity payments will be made to a designated
payee for the life of the Annuitant or a period certain or a combination
thereof. The Company assumes mortality and expense risks under the Contracts,
for which it receives certain compensation.
The most significant difference between a Variable Annuity and a Fixed
Annuity is that under a Variable Annuity, all investment risk before and after
the Annuity Date is assumed by the Owner or other payee; the amounts of the
annuity payments vary with the investment performance of the Divisions of the
Separate Account selected by the Owner. Under a Fixed Annuity, in contrast, the
investment risk after the Annuity Date is assumed by the Company and the amounts
of the annuity payments do not vary.
HOW MAY PURCHASE PAYMENTS BE ALLOCATED?
Purchase Payments for the Contracts may be allocated pursuant to
instructions in the application to one or more Divisions of the Separate
Account, and/or to the Company's General Account. The Separate Account invests
in shares of the following Portfolios (see "Anchor Series Trust"):
<TABLE>
<S> <C>
* FOREIGN SECURITIES * MULTI-ASSET
* CAPITAL APPRECIATION * HIGH-YIELD
* GROWTH * FIXED INCOME
* NATURAL RESOURCES * GOVERNMENT AND QUALITY BOND
* GROWTH AND INCOME * MONEY MARKET
* STRATEGIC MULTI-ASSET
</TABLE>
Purchase Payments allocated to the General Account will earn interest at the
current rate then being offered by the Company for a one year period beginning
on the date amounts are allocated to it.
Prior to the Annuity Date, transfers may be made among the Divisions and/or
the General Account. Fifteen transfers are permitted before a transfer fee will
be assessed. (See "Description of the Contracts -- Transfer During Accumulation
Period").
MAY WITHDRAWALS BE MADE BEFORE ANNUITIZATION?
Except as explained below, Contract Value may be withdrawn at any time
during the Accumulation Period. In addition to potential losses due to
investment risks, withdrawals may be reduced by a Withdrawal Charge, and a
penalty tax and income tax may apply. Contracts in connection with Qualified
Plans may be subject to additional restrictions imposed by the plan. There is a
free withdrawal amount which applies to the first withdrawal during a Contract
Year after the first Contract Year. (See "Contract Charges -- Sales
Charges -- Withdrawal Charge"). Certain Owners of Nonqualified Plan Contracts
and Contracts issued in connection with Individual Retirement Annuities ("IRAs")
may choose to withdraw amounts which in the aggregate add up to 10% of their
Purchase Payments annually pursuant to a systematic withdrawal program without
charge. (See "Purchases and Contract Value -- Systematic Withdrawal Program").
Withdrawals are taxable and a 10% federal tax penalty may apply to withdrawals
before age 59 1/2.
4
<PAGE> 9
Owners should consult their own tax counsel or other tax adviser regarding
any withdrawals or distributions.
CAN I EXAMINE THE CONTRACT?
The Contract Owner may return the Contract to the Company within 10 days
after it is received by delivering or mailing it to the Company's Administrative
Service Center. If the Contract is returned to the Company, it will be
terminated and the Company will pay the Owner an amount equal to the Contract
Value represented by the Contract on the date it is received by the Company.
WHAT ARE THE CHARGES AND DEDUCTIONS UNDER A CONTRACT?
A mortality and expense risk charge is assessed daily against the assets of
each Division at an annual rate of 1.25%. An administrative expense charge is
assessed daily against the assets of each Divisions at an annual rate of 0.15%.
The Contracts also provide for certain deductions and charges, including an
Annual Contract Charge of $30 annually, which is guaranteed not to increase. The
Contract permits up to 15 free transfers each Contract Year, after which point a
$25 transfer fee is applicable to each subsequent transfer. Additionally, a
Withdrawal Charge may be assessed against the Contract Value when a withdrawal
is made within six years of making the Purchase payment (6% of the amount
withdrawn). (See "Contract Charges").
DOES THE CONTRACT PAY ANY DEATH BENEFITS?
A death benefit is provided in the event of the death of the Owner during
the Accumulation Period. The death benefit is equal to the greater of: (1) the
Contract Value upon receipt of Due Proof of Death or (2) the total of Purchase
Payments made prior to the death of the Owner, minus any partial withdrawals
and/or partial annuitizations and contract charges. (See "Description of the
Contracts -- Death of the Annuitant").
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT?
There are three available annuity options under the Contract. They include
an annuity for life with installments guaranteed, a joint and survivor annuity,
and monthly payments for a specified number of years. If a Contract Owner does
not elect otherwise, monthly annuity payments generally will be made under the
first option to provide a life annuity with 120 monthly payments certain. (See
"Annuity Period -- Annuity Options").
DOES THE OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT?
Owners will have the right to vote on matters affecting the Portfolios to
the extent that proxies are solicited by the Trust. If the Owner does not vote,
the Company will vote such interests in the same proportion as it votes shares
for which it has received instructions. (See "Anchor Series Trust -- Voting
Rights").
5
<PAGE> 10
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FEE TABLES
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
(a) Withdrawal Charge (as a percentage of amount
withdrawn, not to exceed 9% of Purchase Payments) 6% for six Contract Years
(b) Annual Contract Charge $30
(c) Transfer Fee (only applies if more than 15 transfers
are made in any Contract Year.) $25
</TABLE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE)
<TABLE>
<S> <C> <C>
(a) Mortality and Expense
Risk Charge 1.25% annually
(b) Administrative Expense
Charge + .15% annually
---------
(c) Total Expense Charge 1.40% annually
=========
</TABLE>
- --------------------------------------------------------------------------------
ANCHOR SERIES TRUST ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997.)
<TABLE>
<CAPTION>
STRA-
CAPITAL GROWTH TEGIC
FOREIGN APPRECI- NATURAL AND MULTI- MULTI- HIGH TARGET
SECURITIES ATION GROWTH RESOURCES INCOME ASSET ASSET YIELD '98
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(a) MANAGEMENT
FEE............................ .90% .65% .72% .75% .70% 1.00% 1.00% .70% .63%
- -------------------------------------------------------------------------------------------------------------------------------
(b) OTHER
EXPENSES....................... .48% .06% .06% .14% .12% .41% .08% .18% .37%
- -------------------------------------------------------------------------------------------------------------------------------
(c) TOTAL ANNUAL
EXPENSES....................... 1.38% .71% .78% .89% .82% 1.41% 1.08% .88% 1.00%
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GOV'T
&
FIXED QUALITY MONEY
INCOME BOND MARKET
<S> <C> <C> <C>
(a) MANAGEMENT
FEE............................ .63% .62% .50%
- ---------------------------------------------------------------
(b) OTHER
EXPENSES....................... .28% .09% .08%
- ---------------------------------------------------------------
(c) TOTAL ANNUAL
EXPENSES....................... .91% .71% .58%
- ---------------------------------------------------------------
</TABLE>
THE FEE TABLE RELATING TO THE TRUST WAS PROVIDED TO THE COMPANY AND THE SEPARATE
ACCOUNT BY THE TRUST. NEITHER THE COMPANY NOR THE SEPARATE ACCOUNT HAS
INDEPENDENTLY VERIFIED THE ACCURACY OF SUCH INFORMATION.
6
<PAGE> 11
- --------------------------------------------------------------------------------
EXAMPLES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPARATE CONDITIONS
ACCOUNT A Contract Owner would pay the following expenses on a $1,000 TIME PERIODS
DIVISION INVESTMENT ASSUMING 5% ANNUAL RETURN ON ASSETS: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOREIGN (a) upon surrender at the end of the stated time period. $90 $147 $212 $319
SECURITIES
(b) if the Contract WAS NOT surrendered 29 89 151 319
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SAME $84 $128 $180 $253
APPRECIATION 22 69 118 253
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH SAME $85 $130 $184 $260
23 71 121 260
- -----------------------------------------------------------------------------------------------------------------------------------
NATURAL SAME $86 $133 $189 $271
RESOURCES 24 74 127 271
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND SAME $85 $131 $186 $264
INCOME 23 72 123 264
- -----------------------------------------------------------------------------------------------------------------------------------
STRATEGIC SAME $90 $147 $213 $322
MULTI-ASSET 29 90 152 322
- -----------------------------------------------------------------------------------------------------------------------------------
MULTI-ASSET SAME $87 $138 $198 $290
26 80 136 290
- -----------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD SAME $86 $133 $188 $270
24 74 126 270
- -----------------------------------------------------------------------------------------------------------------------------------
TARGET '98 SAME $87 $136 $194 $282
25 77 132 282
- -----------------------------------------------------------------------------------------------------------------------------------
FIXED SAME $86 $133 $190 $273
INCOME 24 75 128 273
- -----------------------------------------------------------------------------------------------------------------------------------
GOV'T & SAME $84 $128 $180 $253
QUALITY BOND 22 69 118 253
- -----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET SAME $83 $124 $174 $239
21 65 111 239
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
EXPLANATION OF FEE TABLES
AND EXAMPLES
- --------------------------------------------------------------------------------
1. The purpose of the foregoing table and examples is to assist the Contract
Owner in understanding the various costs and expenses that he or she will
bear directly or indirectly. The table reflects expenses of the Separate
Account as well as the Trust. For additional information see "Contract
Charges," in this Prospectus and the Prospectus for the Trust. The examples
do not illustrate the tax consequences of surrendering a Contract.
2. The examples assume that there were no transactions which would result in
the imposition of the Transfer Fee. The Contracts are presently sold in New
York only. New York does not assess premium taxes, so premium taxes are not
reflected.
3. For purposes of the amounts reported in the examples, the Annual Contract
Charge is reflected by dividing the total amount of Contract fees collected
during the year by the total average net assets of the Separate Account's
Divisions.
4. The examples reflect the fact that, after the first Contract Year, a
Contract Owner may withdraw up to 10% of the difference of the aggregate
Purchase Payments less prior withdrawals, without charge.
5. NEITHER THE FEE TABLES NOR THE EXAMPLES ARE REPRESENTATIONS OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
7
<PAGE> 12
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/2/88
(INCEPTION) FISCAL YEAR ENDED
TO --------------------------------------------------------------------
ICAP DIVISION 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
------------- ----------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Foreign Securities Division
Beginning Unit Value......... $ 9.72 $10.47 $13.32 $11.45 $11.26 $ 9.64 $12.39 $11.83
Ending Unit Value............ $10.47 $13.32 $11.45 $11.26 $ 9.64 $12.39 $11.83 $13.13
Number of Accum. Units
Outstanding................ 3,628 17,052 24,999 31,241 31,574 38,816 47,472 39,747
Capital Appreciation Division
Beginning Unit Value......... $ 9.69 $ 9.80 $12.08 $ 9.97 $15.36 $19.09 $22.79 $21.62
Ending Unit Value............ $ 9.80 $12.08 $ 9.97 $15.36 $19.09 $22.79 $21.62 $28.68
Number of Accum. Units
Outstanding................ 3,342 19,098 16,080 15,521 14,406 34,323 35,218 32,160
Growth Division
Beginning Unit Value......... $14.83 $15.43 $19.79 $18.99 $26.36 $27.40 $29.12 $27.36
Ending Unit Value............ $15.43 $19.79 $18.99 $26.36 $27.40 $29.12 $27.36 $34.08
Number of Accum. Units
Outstanding................ 3,641 21,562 29,865 30,932 30,390 41,656 41,036 35,168
Natural Resources Division
Beginning Unit Value......... $11.12 $11.02 $12.86 $10.77 $11.13 $11.25 $15.11 $15.05
Ending Unit Value............ $11.02 $12.86 $10.77 $11.13 $11.25 $15.11 $15.05 $17.43
Number of Accum. Units
Outstanding................ 4,108 15,862 12,612 9,475 8,347 8,797 10,889 8,124
Growth and Income Division
Beginning Unit Value......... $ 9.68 $ 9.76 $11.04 $10.50 $13.12 $15.55 $18.70 $16.67
Ending Unit Value............ $ 9.76 $11.04 $10.50 $13.12 $15.55 $18.70 $16.67 $19.16
Number of Accum. Units
Outstanding................ 3,271 24,751 23,408 20,775 21,549 20,694 18,889 6,868
Strategic Multi-Asset Division
Beginning Unit Value......... $ 9.80 $10.26 $12.13 $11.06 $13.55 $13.88 $15.78 $15.16
Ending Unit Value............ $10.26 $12.13 $11.06 $13.55 $13.88 $15.78 $15.16 $18.35
Number of Accum. Units
Outstanding................ 10,592 55,985 49,505 40,079 38,790 41,817 37,667 31,915
Multi-Asset Division
Beginning Unit Value......... $ 9.79 $10.09 $11.91 $11.93 $14.98 $15.97 $16.90 $16.39
Ending Unit Value............ $10.09 $11.91 $11.93 $14.98 $15.97 $16.90 $16.39 $20.19
Number of Accum. Units
Outstanding................ 11,829 53,295 72,163 53,932 43,310 81,114 69,541 48,948
High Yield Division
Beginning Unit Value......... $12.43 $13.00 $12.48 $11.01 $14.44 $16.24 $19.07 $17.96
Ending Unit Value............ $13.00 $12.48 $11.01 $14.44 $16.24 $19.07 $17.96 $21.03
Number of Accum. Units
Outstanding................ 6,989 37,759 31,311 11,357 10,343 11,281 11,361 8,181
Target '98 Division
Beginning Unit Value......... $10.00 $10.63 $12.29 $12.89 $15.11 $15.97 $17.52 $16.57
Ending Unit Value............ $10.63 $12.29 $12.89 $15.11 $15.97 $17.52 $16.57 $18.72
Number of Accum. Units
Outstanding................ 114,732 204,163 182,726 54,000 37,969 35,665 31,973 23,657
Fixed Income Division
Beginning Unit Value......... $14.73 $15.08 $16.78 $17.84 $20.31 $21.34 $22.71 $21.67
Ending Unit Value............ $15.08 $16.78 $17.84 $20.31 $21.34 $22.71 $21.67 $25.46
Number of Accum. Units
Outstanding................ 5,437 15,964 13,752 9,452 7,850 6,653 6,700 6,759
<CAPTION>
FISCAL YEAR ENDED
------------------
ICAP DIVISION 12/31/96 12/31/97
------------- -------- --------
<S> <C> <C>
Foreign Securities Division
Beginning Unit Value......... $13.13 $14.43
Ending Unit Value............ $14.43 $14.08
Number of Accum. Units
Outstanding................ 35,830 18,506
Capital Appreciation Division
Beginning Unit Value......... $28.68 $35.39
Ending Unit Value............ $35.39 $43.78
Number of Accum. Units
Outstanding................ 25,696 14,845
Growth Division
Beginning Unit Value......... $34.08 $42.03
Ending Unit Value............ $42.03 $54.05
Number of Accum. Units
Outstanding................ 30,113 21,523
Natural Resources Division
Beginning Unit Value......... $17.43 $19.61
Ending Unit Value............ $19.61 $17.68
Number of Accum. Units
Outstanding................ 5,081 3,455
Growth and Income Division
Beginning Unit Value......... $19.16 $22.69
Ending Unit Value............ $22.69 $28.81
Number of Accum. Units
Outstanding................ 5,788 6,864
Strategic Multi-Asset Division
Beginning Unit Value......... $18.35 $20.78
Ending Unit Value............ $20.78 $23.43
Number of Accum. Units
Outstanding................ 28,148 22,997
Multi-Asset Division
Beginning Unit Value......... $20.19 $22.67
Ending Unit Value............ $22.67 $27.09
Number of Accum. Units
Outstanding................ 33,152 24,182
High Yield Division
Beginning Unit Value......... $21.03 $23.17
Ending Unit Value............ $23.17 $25.42
Number of Accum. Units
Outstanding................ 7,304 6,161
Target '98 Division
Beginning Unit Value......... $18.72 $19.15
Ending Unit Value............ $19.15 $19.86
Number of Accum. Units
Outstanding................ 18,209 17,036
Fixed Income Division
Beginning Unit Value......... $25.46 $25.73
Ending Unit Value............ $25.73 $27.76
Number of Accum. Units
Outstanding................ 2,908 2,953
</TABLE>
8
<PAGE> 13
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/2/88
(INCEPTION) FISCAL YEAR ENDED
TO --------------------------------------------------------------------
ICAP DIVISION 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
------------- ----------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Government and Quality Bond
Division
Beginning Unit Value.......... $14.22 $14.95 $17.04 $18.15 $21.00 $22.13 $23.63 $22.60
Ending Unit Value............. $14.95 $17.04 $18.15 $21.00 $22.13 $23.63 $22.60 $26.60
Number of Accum. Units
Outstanding................. 21,095 99,633 97,386 129,211 108,229 46,206 33,336 23,426
Money Market Division
Beginning Unit Value.......... $12.28 $12.78 $13.73 $14.61 $15.23 $15.53 $15.72 $16.10
Ending Unit Value............. $12.78 $13.73 $14.61 $15.23 $15.53 $15.72 $16.10 $16.77
Number of Accum. Units
Outstanding................. 7,937 92,606 97,530 42,418 21,712 12,556 21,881 20,336
<CAPTION>
FISCAL YEAR ENDED
------------------
ICAP DIVISION 12/31/96 12/31/97
------------- -------- --------
<S> <C> <C>
Government and Quality Bond
Division
Beginning Unit Value.......... $26.60 $26.99
Ending Unit Value............. $26.99 $29.16
Number of Accum. Units
Outstanding................. 15,893 11,372
Money Market Division
Beginning Unit Value.......... $16.77 $17.36
Ending Unit Value............. $17.36 $18.00
Number of Accum. Units
Outstanding................. 15,403 9,843
</TABLE>
- --------------------------------------------------------------------------------
YIELD CALCULATION FOR MONEY MARKET DIVISION
- --------------------------------------------------------------------------------
From time to time the Separate Account may advertise its Money Market
Division's "yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Money Market Division refers to the net income generated for a
Contract funded by an investment in the Division over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Division is assumed
to be reinvested at the end of each seven-day period. The "effective yield" will
be slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. Neither the yield nor the effective yield takes into
consideration the effect of any capital changes that might have occurred during
the seven-day period, nor do they reflect the impact of premium taxes or any
Annuity Charges or Withdrawal Charges. The impact of other, recurring charges on
both yield figures is, however, reflected in them to the same extent it would
affect the yield (or effective yield) for a Contract of average size.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE COMPANY AND
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
COMPANY
The Company is a stock life insurance company organized under the laws of
New York in 1965. All of the outstanding stock of the Company is held by
Presidential Life Corporation, a publicly owned holding company. The Company
offers life insurance and annuities and is admitted to do business in 48 states
and the District of Columbia.
SEPARATE ACCOUNT
The Separate Account was established pursuant to New York insurance law on
August 26, 1987. This segregated asset account has been designated "Presidential
Variable Account One" ("Separate Account"). The Separate Account is registered
with the Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
of the management of the Separate Account or the Company by the Securities and
Exchange Commission.
The assets of the Separate Account are the property of the Company. However,
the assets of the Separate Account, equal to the reserves and other contract
liabilities of the Separate Account, are not chargeable with liabilities arising
out of any other business the Company may conduct. The Company's obligations
arising under the Contracts are general corporate obligations of the Company.
9
<PAGE> 14
Income, gains and losses, whether or not realized, are, in accordance with
the Contracts, credited to or charged against the Separate Account without
regard to other income, gains or losses of the Company.
The Separate Account is divided into Divisions, with the assets of each
Division invested in the shares of one of the twelve Portfolios of the Trust.
The Company does not guarantee the investment performance of the Separate
Account or its Divisions. Contract Values allocated to the Separate Account and
the amount of Variable Annuity payments will vary with the value of shares of
the Portfolios and the Contract charges.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Financial statements of the Company and the Separate Account appear in the
Statement of Additional Information. A copy of the Statement of Additional
Information may be obtained by contacting the Company's Annuity Service Center.
- --------------------------------------------------------------------------------
ANCHOR SERIES TRUST
- --------------------------------------------------------------------------------
Each of the eleven Divisions of the Separate Account is invested solely in
the shares of one of the eleven Portfolios of Anchor Series Trust. The Trust is
an open-end diversified management investment company registered under the
Investment Company Act of 1940. While a brief summary of the investment
objectives is set forth below, more comprehensive information, including a
discussion of potential risks, is found in the Prospectus for the Trust which is
included with this Prospectus. Additional copies of this Prospectus, the Trust's
Prospectus and the Statement of Additional Information can be obtained by
calling the Annuity Service Center shown on the cover page of this Prospectus.
Both prospectuses should be read carefully to understand all aspects of the
Contract, the Separate Account and the Portfolios. SunAmerica Asset Management
Corp. ("SAAM") (an indirect wholly owned subsidiary of SunAmerica Inc.) is the
investment manager for the Trust. Wellington Management Company, LLP ("WMC"),
which is not affiliated with the Company, serves as sub-adviser for the Trust.
(See the Trust Prospectus for information concerning the investment management
fees.)
The eleven Portfolios and their investment objectives are:
EQUITY PORTFOLIOS
FOREIGN SECURITIES PORTFOLIO seeks long-term capital appreciation. This
Portfolio will invest primarily in a diversified group of equity securities
issued by foreign companies and primarily denominated in foreign currencies.
CAPITAL APPRECIATION PORTFOLIO seeks long-term capital appreciation. This
Portfolio will invest in growth equity securities which are widely diversified
by industry and company and may engage in transactions involving stock index
futures and options thereon as a hedge against changes in market conditions.
GROWTH PORTFOLIO seeks long-term capital appreciation through investments in
growth equity securities. This Portfolio may also engage in transactions
involving stock index futures and options thereon as a hedge against changes in
market conditions.
NATURAL RESOURCES PORTFOLIO seeks total return in excess of the U.S. rate of
inflation as represented by the Consumer Price Index. This Portfolio will invest
primarily in equity securities of companies which are expected to provide
favorable returns in periods of rising inflation.
GROWTH AND INCOME PORTFOLIO seeks high current income and long-term capital
appreciation. This Portfolio will invest primarily in securities that provide
the potential for growth and offer income, such as dividend-paying stocks and
securities convertible into common stock. The Portfolio may also engage in
transactions involving stock index futures and options thereon as a hedge
against changes in market conditions.
MANAGED PORTFOLIOS
STRATEGIC MULTI-ASSET PORTFOLIO seeks high long-term total investment
return. This Portfolio will invest in a diversified group of securities of the
following types: growth equity and aggressive growth equity securities,
including the securities of smaller companies which may be newer and less
seasoned, investment grade and high-yield, high-risk bonds,
10
<PAGE> 15
international securities and money market instruments. The Portfolio may also
engage in transactions involving stock index futures contracts and options
thereon and Financial Futures Contracts and options thereon, as a hedge against
changes in market conditions.
MULTI-ASSET PORTFOLIO seeks long-term total investment return consistent
with moderate investment risk. This Portfolio will invest in a diversified group
of securities, including: growth equity securities, convertible securities,
investment grade fixed income securities and money market securities. The
Portfolio also may engage in transactions involving stock index futures
contracts and options thereon and Financial Futures Contracts and options
thereon, as a hedge against changes in market conditions.
FIXED INCOME PORTFOLIOS
HIGH YIELD PORTFOLIO seeks high current income. A secondary investment
objective is capital appreciation. This Portfolio will seek its objectives by
investing, except for temporary defensive purposes, at least 65% of its assets
in high-yielding, high-risk, income-producing corporate bonds, which generally
carry ratings lower than those assigned to investment grade bonds by Moody's
Investor's Service, Inc. ("Moody's") or Standard & Poor's Corporation ("Standard
& Poor's"), or which are unrated. This Portfolio may also engage in transactions
involving Financial Futures Contracts and options thereon as a hedge against
changes in market conditions. High-yield, high-risk bonds typically are subject
to greater risks than are investments in lower-yielding, higher-rated bonds. See
the Trust's Prospectus for more information.
FIXED INCOME PORTFOLIO seeks high level of current income consistent with
preservation of capital. This Portfolio will invest primarily in investment
grade, fixed income securities and may engage in Financial Futures Contracts and
options thereon as a hedge against changes in market conditions.
GOVERNMENT AND QUALITY BOND PORTFOLIO seeks relatively high current income,
liquidity and security of principal. This Portfolio will invest in obligations
issued, guaranteed or insured by the U.S. Government, its agencies or
instrumentalities and in corporate debt securities rated Aa or better by Moody's
or AA or better by Standard & Poor's.
MONEY MARKET PORTFOLIO seeks current income consistent with stability of
principal through investment in a diversified portfolio of money market
instruments maturing in 397 days or less. The Portfolio will maintain a dollar-
weighted average portfolio maturity of not more than 90 days.
There is no assurance that the investment objectives of any of the
Portfolios will be met. Contract Owners bear the complete investment risk for
Purchase Payments allocated to a Division. Contract Values will fluctuate in
accordance with the investment performance of the Division(s) to which Purchase
Payments are allocated, and in accordance with the imposition of the fees and
charges assessed under the Contracts.
Shares of the Trust are issued and redeemed only in connection with
investments in and payments under variable contracts sold by the Company, Anchor
National Life Insurance Company, Phoenix Mutual Life Insurance Company and First
SunAmerica Life Insurance Company. The Company is not affiliated with such other
entities. No disadvantage to Contract Owners is seen to arise from the fact that
the Trust offers its shares in this fashion. See the Trust's Prospectus for
additional information.
CONTRACT HOLDERS IN TARGET '98 PORTFOLIO
As of January 1, 1998, no further purchase payments or transfers into Target
'98 were accepted. Purchase payments may be allocated among the other eleven
Divisions of the separate Account and/or Fixed Account.
Contract Owners currently in the Target '98 Division must provide the
Company with reallocation instructions before November 15, 1998. If the Company
does not receive reallocation instructions before November 15, 1998, Contract
Values will be automatically reallocated to the Money Market Division.
Reallocations of Contract Values from the Target '98 Division will not be
considered "transfers" for purposes of determining any applicable transfer fees.
Other transfers out of the Target '98 Division will not be permitted after
October 15, 1998. None of the foregoing constraints affect a Contract Owner's
right to redeem his or her Contract Value at any time (See "Purchases and
Contract Value -- Withdrawals (Redemption)").
Additional Portfolios may be established and, with the prior approval of the
Superintendent of Insurance of the State of New York, may be made available to
Contract Owners. However, there is no assurance that this will occur.
11
<PAGE> 16
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote
the shares of the Trust held in the Separate Account at special meetings of the
shareholders of the Trust in accordance with instructions received from persons
having the voting interest in the Separate Account. The Company will vote shares
for which it has not received instructions in the same proportion as it votes
shares for which it has received instructions. The Trust does not hold regular
meetings of shareholders.
The number of shares which a person has a right to vote will be determined
as of a date to be chosen by the Company not more than sixty (60) days prior to
the meeting of the Trust's shareholders. Voting instructions will be solicited
by written communication at least fourteen (14) days prior to such meeting. The
person having such voting rights will be the Contract Owner before the Annuity
Date or the death of the Annuitant; thereafter the payee entitled to receive
payments under the Contract. Voting rights attributable to a Contract will
generally decrease as Contract Values decrease.
SUBSTITUTION OF SECURITIES
If the shares of any of the Portfolios should no longer be available for
investment by the Separate Account or if, in the judgment of the Company's Board
of Directors, further investment in the shares of a Portfolio is no longer
appropriate in view of the purpose of the Contract, the Company may substitute
shares of another mutual fund or Portfolio for Portfolio shares already
purchased or to be purchased in the future by Purchase Payments under the
Contract. No substitution of securities may take place without prior approval of
the Securities and Exchange Commission and under such requirements as it may
impose.
- --------------------------------------------------------------------------------
CONTRACT CHARGES
- --------------------------------------------------------------------------------
MORTALITY AND EXPENSE RISK CHARGE
The Company deducts a risk charge from each Division of the Separate Account
during each Valuation Period. The risk charge is equal, on an annual basis, to
1.25% of the daily net asset value of each Division (approximately .90% is for
mortality risks and approximately .35% for expense risks). The mortality risks
assumed by the Company arise from its contractual obligations to make annuity
payments after the Annuity Date for the life of the Annuitant, to waive the
Withdrawal Charge in the event of the death of the Annuitant and to provide the
death benefit prior to the Annuity Date. The expense risk assumed by the Company
is that the costs of administering the Contracts and the Separate Account will
exceed the amount received from the Annual Contract Charge and the
Administrative Expense Charge. (See "Administrative Charges"). This charge is
guaranteed by the Company and cannot be increased.
ADMINISTRATIVE CHARGES
ADMINISTRATIVE EXPENSE CHARGE
The Company deducts an Administrative Expense Charge from each Division of
the Separate Account which is equal, on an annual basis, to .15% of the daily
net asset value of each Division. This charge is designed to cover those
administrative expenses which exceed the revenues from the Annual Contract
Charge. The Company does not intend to profit from this charge. The Company
believes that the Administrative Expense Charge has been set at a level that
will recover no more than the actual costs associated with administering the
Contract. In the event that it exceeds the amount necessary to reimburse the
Company for its administrative expenses the charge will be appropriately
reduced. In no event will this charge be increased. The Administrative Expense
Charge is assessed during both the Accumulation Period and the Annuity Period.
ANNUAL CONTRACT CHARGE
An Annual Contract Charge of $30 is charged against each Contract. The
amount of this charge is guaranteed and cannot be increased by the Company. This
charge is not assessed during the Annuity Period. This charge reimburses the
Company for expenses incurred in establishing and maintaining the records
relating to a Contract. If the Contract is surrendered for its full value on a
date other than an anniversary of the Issue Date of the Contract, the full
Annual Contract Charge will be deducted at the date of surrender without
proration.
12
<PAGE> 17
SALES CHARGES
The Withdrawal Charge and the Annuity Charge are sales charges.
WITHDRAWAL CHARGE
Effective January 1, 1989, federal tax law limits withdrawals from annuity
contracts issued in connection with 403(b) Qualified Plans. Subject to those
limitations, the Contract Value may be withdrawn at any time during the
Accumulation Period. Contract Owners should consult their own tax counsel or
other tax adviser regarding any withdrawals.
There is a Free Withdrawal Amount which applies to the first withdrawal
during a Contract Year after the first Contract Year. The Free Withdrawal Amount
is equal to 10% of the aggregate Purchase Payments less prior withdrawals.
However, should a withdrawal exceed the Free Withdrawal Amount, a sales charge,
which is referred to as the Withdrawal Charge, may be imposed.
The Withdrawal Charge is deducted from the remaining Contract Value so that
the actual reduction in Contract Value as a result of the withdrawal will be
greater than the withdrawal amount requested and paid.
The Withdrawal Charge is 6% of the amount withdrawn if such withdrawal is
made within six years of making the Purchase Payment. The Withdrawal Charge
shall not exceed 9% of total Purchase Payments. Free withdrawals and other
withdrawals will be allocated to Purchase Payments on a first-in-first-out
basis.
The amounts obtained from the Withdrawal Charge will be used to pay sales
commissions and other promotional or distribution expenses associated with the
marketing of the Contracts. To the extent that the Withdrawal Charge is
insufficient to cover all sales commissions and other promotional or
distribution expenses, the Company may use any of its corporate assets,
including potential profit which may arise from the Mortality and Expense Risk
Charge, to make up any difference.
ANNUITY CHARGE
If a Contract Owner elects to have annuity payments made under annuity
option 1, Life Income with Installments Guaranteed or annuity option 2, Joint
and Survivor Annuity (See "Annuity Period -- Annuity Options"), no Annuity
Charge applies and 100% of the Contract Value is applied.
If a Contract Owner elects annuity option 3, Income for a Specified Period,
and if Purchase Payments were made in the Contract Year in which annuity
payments are to begin or any of the five preceding Contract Years, an Annuity
Charge may apply. This Annuity Charge equals the Withdrawal Charge that would
apply if the Contract were being surrendered. Further, no Annuity Charge will be
assessed if annuity option 3 is elected by a Beneficiary under the death
benefit.
The Annuity Charge also applies to certain annuitizations of Contract Values
allocated to the General Account.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
While the Company is not currently maintaining a provision for taxes, the
Company has reserved the right to establish such a provision for taxes in the
future if it determines, in its sole discretion, that it will incur a tax as a
result of the operation of the Separate Account. The Company will deduct for any
taxes incurred by it as a result of the operation of the Separate Account
whether or not there was a provision for taxes and whether or not it was
sufficient. (See "Taxes").
OTHER EXPENSES
There are other deductions from and expenses paid out of the assets of the
Trust which are described in the accompanying Trust Prospectus.
REDUCTION OF CHARGES FOR SALES TO CERTAIN GROUPS
The Company may reduce the charges on individual Contracts sold to certain
groups of individuals, or to a trustee, employer or other entity representing a
group, where it is expected that such multiple sales will result in savings of
sales or administrative expenses. The Company determines the eligibility of
groups for such reduced charges, and the amount of such reductions for
particular groups, by considering the following factors: (1) the size of the
group; (2) the total
13
<PAGE> 18
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 Company believes to be relevant to determining
whether reduced sales or administrative expenses may be expected. None of the
reductions in charges for group sales is contractually guaranteed. Such
reductions may be withdrawn or modified by the Company on a uniform basis. The
Company's reductions in charges for group sales will not be unfairly
discriminatory to the interests of any Contract Owners. The Company will not
reduce the charges for any group sales until such reduction is approved by the
Insurance Department of the State of New York.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
VOTING RIGHTS OF CONTRACT OWNER
Contract Owners have a voting interest in each of the Separate Account
Divisions to which they have allocated Contract Values. The voting interest in a
Division is based upon the Contract Owner's proportionate interest in the
Division as measured by Accumulation and Annuity Units. (See "Anchor Series
Trust -- Voting Rights").
TRANSFER DURING ACCUMULATION PERIOD
During the Accumulation Period, the Contract Owner may transfer Contract
Values among Divisions and/or the General Account, by written request or
telephone authorization. Telephone transfers are automatically accepted unless
the Company is otherwise instructed by the Contract Owner. The Company has in
place procedures which are designed to provide reasonable assurance that
telephone authorizations are genuine, including tape recording all telephone
communications and requesting identifying information. Accordingly, the Company
and its affiliates disclaim all liability for any claim, loss or expense
resulting from any alleged error or mistake in connection with a telephone
transfer which was not properly authorized by the Contract Owner. However, if
the Company fails to employ reasonable procedures to ensure that all telephone
transfers are properly authorized, the Company may be held liable for such
losses. Telephone calls authorizing transfers must be completed by 4:00 p.m.
Eastern time in order to effect the transfer the day of receipt. All other
transfers will be processed on the next business day. The Company reserves the
right to terminate or modify the telephone transfer service at any time.
Transactions effecting transfer may not be made more often than fifteen
times in any Contract Year without charge. A charge of $25 per transaction is
assessed against any transaction effecting transfer in excess of the fifteen
permitted without charge in any Contract Year or, if all or part of a Contract
Owner's interest in a Division is transferred to another Division, within 30
days of the Issue Date. The fee will be deducted from Contract Values which
remain in the Division from which the transfer was made. If the remaining
Contract Value is insufficient to pay the transfer fee, then the fee will be
deducted from transferred Contract Values. The transfer fee is at cost with no
margin included for profit.
This transfer privilege may be suspended, modified or terminated at any time
without notice. (See "Taxes -- Diversification").
The minimum partial transfer amount is $500. No partial transfer may be made
if the value of the Contract Owner's interest in the Division from which a
transfer is being made would be less than $500 after the transfer. As with
initial Purchase Payments, at least $500 must be allocated to a Division before
another Division is selected. The Company may waive the minimum partial transfer
amount in connection with pre-authorized automatic transfer programs.
Transfers from the General Account to the Divisions of the Separate Account
are permitted subject to limitations which are set out in a rider to the
Contract.
MODIFICATION OF THE CONTRACT
Only the Company's President or Secretary may approve a change or waive the
provisions of the Contract. Any change or waiver must be in writing. No agent
has the authority to change or waive the provisions of the Contract.
ASSIGNMENT
Contracts issued pursuant to Non-Qualified Plans that are not subject to
Title 1 of the Employee Retirement Income Security Act of 1974 ("ERISA") may be
assigned by the Contract Owner at any time during the lifetime of the
14
<PAGE> 19
Annuitant prior to the Annuity Date. The Company will not be bound by any
assignment until written notice is received by the Company, at its Annuity
Service Center. The Company is not responsible for the validity, or tax or other
legal consequences, of any assignment. An assignment will not affect any
payments the Company may make or actions it may take before it receives notice
of the assignment.
If the Contract is issued pursuant to a Qualified Plan (or a Non-Qualified
Plan that is subject to Title 1 of ERISA), it may not be assigned, pledged or
otherwise transferred except under such conditions as may be allowed under
applicable law.
BECAUSE AN ASSIGNMENT MAY BE A TAXABLE EVENT, CONTRACT OWNERS SHOULD CONSULT
COMPETENT TAX ADVISERS SHOULD THEY WISH TO ASSIGN THEIR CONTRACTS.
DEATH OF THE ANNUITANT
In the event of the death of the Annuitant prior to the Annuity Date, a
death benefit will be paid to the Beneficiary designated by the Contract Owner.
If a single sum payment is requested, the proceeds will be paid within seven
days. If an annuity option is desired, election must be made by the Beneficiary
within sixty days of the date of receipt of Due Proof of Death; otherwise a
single sum payment will be made to the Beneficiary at the end of such sixty-day
period.
The amount of the death benefit is equal to the greater of: (1) the Contract
Value at the end of the Valuation Period during which Due Proof of Death and an
election of the type of payment by the Beneficiary is received by the Company at
the Annuity Service Center; or (2) the total dollar amount of Purchase Payments
minus any partial withdrawals made, all Contract Owner transaction expenses
deducted during the term of the Contract prior to the date of death, and any
partial annuitizations.
If the payee dies after the Annuity Date while the Contract is in force, the
death proceeds, if any, will depend upon the annuity option in effect at the
time of the payee's death. If the Owner or Annuitant, if different, dies after
the Annuity Date and before the entire interest in the Contract has been
distributed, the remaining interest, if any, as provided for in the annuity
option selected will be distributed at least as rapidly as under the method of
distribution in effect at the Owner's or Annuitant's death.
DEATH OF THE CONTRACT OWNER
If the Contract Owner dies prior to the Annuity Date, the death benefit
provision, as described above under "Death of the Annuitant" is modified to
provide the following:
If the Contract Owner dies before the Annuity Date, the entire Contract
Value must be distributed within five (5) years of the date of death,
unless:
(1) it is payable over the lifetime of a designated Beneficiary with
distribution beginning within one (1) year of the date of death; or
(2) the designated Beneficiary is the Contract Owner's spouse and he or
she continues the Contract in his or her own name.
If the Contract is issued pursuant to a Qualified Plan, similar provisions
will apply upon the death of the Contract Owner. Purchasers acquiring Contracts
pursuant to Qualified Plans should consult a qualified pension or tax adviser.
BENEFICIARY
The Beneficiary(ies) is/are named in the application, unless changed. A
Beneficiary is entitled to receive the benefits to be paid at the death of the
Annuitant or Contract Owner, as applicable. Unless the Contract Owner provides
otherwise, the death benefit will be paid in equal shares or all to the survivor
as follows:
(1) to the primary Beneficiary(ies) who survive(s) the Annuitant's or
Contract Owner's death (as applicable); or if there are none,
(2) to the Contingent Beneficiary(ies) who survive(s) the Annuitant's or
Contract Owner's death, as applicable; or, if there are none,
(3) to the Contract Owner, or to the Contract Owner's estate.
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The Contract Owner may change a Beneficiary or Contingent Beneficiary at any
time during his or her lifetime or that of the Annuitant's. A change may be made
by filing a written request with the Company at its Annuity Service Center,
unless any irrevocable Beneficiary designation was previously filed. The change
will take effect as of the date the Company records the change. The Company is
not liable for any payment made or action taken before it records the change.
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ANNUITY PERIOD
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ANNUITY DATE
The Contract Owner selects an Annuity Date (the date on which annuity
payments are to begin) at the time of application. The Annuity Date must always
be the first day of a calendar month. The Contract Owner may change the Annuity
Date during the lifetime of the Annuitant. An election to change the Annuity
Date must be in written form received by the Company at the Annuity Service
Office before the first annuity payment date.
The actual dollar amount of variable annuity payments is dependent upon (1)
the Contract Value at the time of annuitization, (2) the annuity table specified
in the Contract, (3) the annuity option selected, and (4) the investment
performance of the Division selected. In addition, if annuity option 3, Income
for a Specified Period, is selected, an Annuity Charge may apply. (See "Contract
Charges -- Annuity Charge").
The annuity tables contained in the Contract are based on a five percent
(5%) assumed investment rate. If the actual net investment rate exceeds five
percent (5%), payments will increase. Conversely, if the actual rate is less
than five percent (5%), annuity payments will decrease. If a higher assumed
investment rate were used, the initial payment would be higher, but the actual
net investment rate would have to be higher in order for annuity payments to
increase.
The Annuitant receives the value of a fixed number of Annuity Units each
month. The value of a fixed number of Annuity Units will reflect the investment
performance of the Divisions selected, and the amount of each annuity payment
will vary accordingly.
ANNUITY OPTIONS
The Contract Owner, or any Beneficiary who is so entitled, may elect to
receive a lump sum at the end of the Accumulation Period. However, a lump sum
distribution may be deemed to be a withdrawal, and at least a portion of it may
be subject to federal income tax (See "Taxes -- Tax Treatment of
Withdrawals -- Non-Qualified Contracts" and "Tax Treatment of
Withdrawals -- Qualified Contracts"). Alternatively, an annuity option may be
elected. The Contract Owner may elect an annuity option or change an annuity
option at any time during the lifetime of the Annuitant prior to the Annuity
Date. The Annuitant may make the election on the Annuity Date unless the
Contract Owner has restricted the right to make such an election. The
Beneficiary may elect an annuity option upon the death of the Annuitant or the
Contract Owner unless the Contract Owner has restricted this right.
If no other annuity option is elected, monthly annuity payments will be made
in accordance with annuity option 1 below with a ten (10) year period certain.
Generally, annuity payments will be made in monthly installments. However, if
the amount available to apply under an annuity option is less than $2,000, the
Company has the right to pay the annuity in one lump sum. In addition, if the
first payment provided would be less than $20, the Company shall have the right
to change the frequency of payments to quarterly, semi-annual or annual
intervals so as to result in an initial payment of at least $20.
The following annuity options are generally available under the Contract.
However, there may be restrictions in the retirement plan pursuant to which a
Contract issued on a qualified basis has been purchased.
OPTION 1 -- LIFE INCOME WITH INSTALLMENTS GUARANTEED
An annuity payable monthly during the lifetime of the payee. Upon election a
guaranteed payment period of either 10 years or 20 years may be chosen. If the
payee dies before the end of the guaranteed period, the present value, based on
a five percent (5%) annual interest rate, of any remaining guaranteed payments
will be paid to the payee's estate or to the Beneficiary.
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OPTION 2 -- JOINT AND SURVIVOR ANNUITY
An annuity payable monthly while both payees are living. Upon the death of
either payee, the monthly income payable will continue during the lifetime of
the surviving payee at the percentage of the full amount chosen at the time of
election of this option. This is the automatic form of annuity where joint
Annuitants are named, but a different option may be elected.
Annuity payments terminate automatically and immediately upon the death of
the surviving payee without regard to the number or total amount of payments
received.
There is no minimum number of guaranteed payments and it is possible to have
only one annuity payment if both payees die before the due date of the second
payment.
No Annuity Charge applies if either option 1 or option 2 is elected.
OPTION 3 -- INCOME FOR A SPECIFIED PERIOD
An Income for a Specified Period may be elected only if at least $20,000 in
Contract Value, less any Annuity Charge, is to be applied. If Purchase Payments
were made in the Contract Year in which annuity payments are to begin, or in any
of the five preceding Contract Years, an Annuity Charge may apply. That Annuity
Charge equals the Withdrawal Charge that would apply if the Contract were being
surrendered. No Annuity Charge will be assessed if option 3 is elected by a
Beneficiary under the death benefit.
Under this option, a payee can elect an annuity payable monthly for any
period of years from 5 to 30. This election must be made for full 12 month
periods. In the event the payee dies before the specified number of payments has
been made, the Beneficiary may elect to continue receiving the scheduled
payments or may alternatively elect to receive the present value, based on a
five percent (5%) annual interest rate, of any remaining guaranteed payments.
Because Contract Values are redeemable even after the Annuity Date under this
option at any time while payments are being made, the payee may elect to receive
the present value of the remaining payments, commuted at the interest rate used
to create the annuity factor for this option.
The value of an Annuity Unit, regardless of the option chosen, takes into
account the Mortality and Expense Risk Charge. (See "Contract
Charges -- Mortality and Expense Risk Charge"). Since annuity option 3, Income
for a Specified Period, does not contain an element of mortality risk, the payee
is not getting the benefit of this charge. There shall be no right to terminate
the Contract during the Annuity Period if the option selected contains an
element of mortality risk.
OTHER OPTIONS
At the sole discretion of the Company, other annuity options may be made
available to the Contract Owner. However, to the extent that Withdrawal Charges
would otherwise apply to a withdrawal or termination, the identical Withdrawal
Charge may apply with respect to any additional options.
With respect to Contracts issued under Sections 401, 403(b) or 408 of the
Internal Revenue Code, any payments will be made only to the Annuitant and the
Annuitant's spouse.
ALLOCATION OF ANNUITY PAYMENTS
If all of the Contract Value on the seventh calendar day before the Annuity
Date is allocated to the General Account, the Annuity will be paid as a Fixed
Annuity. If all of the Contract Value on that date is allocated to the Separate
Account, the Annuity will be paid as a Variable Annuity. If the Contract Value
on that date is allocated to both the General Account and the Separate Account,
the Annuity will be paid as a combination of a Fixed Annuity and a Variable
Annuity to reflect the allocation between the accounts. Variable Annuity
payments will reflect the investment performance of the Separate Account
Divisions. The payee(s) may, by written notice to the Company, convert Variable
Annuity payments to Fixed Annuity payments. However, Fixed Annuity payments may
not be converted to Variable Annuity payments.
The payee may elect to have payments made from one or more Divisions.
Transfers during the Annuity Period are permitted subject to stated limitations.
(See "Transfer During Annuity Period").
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TRANSFER DURING ANNUITY PERIOD
During the Annuity Period, the payee alone has the sole right to transfer
the Contract Value to the General Account and/or among Separate Account
Division(s) by written request to the Annuity Service Center subject to the
following limitations:
a. no transfer to a Separate Account Division may be made during the
first year of the Annuity Period. Thereafter, only one transfer per Division
is permitted during each Contract Year of the Annuity Period;
b. payee's entire Contract Value in a Separate Account Division must be
transferred;
c. the request for transfer must be received by the Company, at its
Annuity Service Center, during the 45 days preceding the anniversary of the
Contract's Issue Date. The transfer will be effected at the next Annuity
Unit value calculation after receipt of a valid transfer request which meets
the limitations and conditions as are prescribed for transfers during the
Accumulation Period (See "Transfer During Accumulation Period");
d. the amount allocated to the General Account in the event of a
transfer from a Separate Account Division will be equal to the annuity
reserve for the payee's interest in that Separate Account Division. The
annuity reserve is the product of "(A)" multiplied by "(B)" multiplied by
"(C)", where "(A)" is the number of Annuity Units representing the payee's
interest in the Separate Account Division per annuity payment; "(B)" is the
Annuity Unit value for the Separate Account Division; and "(C)" is the
present value of $1.00 per payment period as of the adjusted age of the
payee attained at the time of transfer, determined by using the 1983 Table
A, projected at Scale G with interest at the rate of 5% per annum. Amounts
transferred to the General Account will be applied under the annuity option
originally elected, except that adjustment will be made for the time elapsed
since the Annuity Date. All amounts and Annuity Unit values will be
determined as of the end of the Valuation Period preceding the effective
date of transfer;
e. the transfer privilege may be suspended or discontinued at any time.
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PURCHASES AND CONTRACT VALUE
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MINIMUM PURCHASE PAYMENT
The minimum initial Purchase Payment for Contracts issued pursuant to a
Non-Qualified Plan is $1,000. Minimum additional Purchase Payments may be made
in amounts of $500. The minimum Purchase Payment for a Contract issued pursuant
to a Qualified Plan is $100. A minimum of $500 must be allocated to one Division
or the General Account before transfers are permitted. (See "Description of the
Contracts -- Transfer During Accumulation Period"). The Company reserves the
right to refuse any Purchase Payment at any time.
ALLOCATION OF PURCHASE PAYMENTS
Purchase Payments are allocated to the General Account and/or the
Division(s) of the Separate Account selected by the Contract Owner. The current
General Account allocation option pays a fixed rate of interest declared by the
Company for one year from the date amounts are allocated to it. The Company, at
its sole discretion, may offer other General Account allocation options which
are subject to different terms and conditions than apply to the current option.
Contract Owners making initial Purchase Payments should be sure to specify
their allocations on the application for a Contract. If the application is in
good order, the Company will apply the initial Purchase Payment to the General
Account and the selected Division(s), and credit the Contract with Accumulation
Units within two business days of receipt. The number of Accumulation Units in a
Division attributable to a Purchase Payment is determined by dividing that
portion of the Purchase Payment which is allocated to the Division by the
Division's Accumulation Unit value during the Valuation Period when the
allocation occurs.
Any Purchase Payment made to acquire an Individual Retirement Annuity
("IRA") will be allocated to the Money Market Division of the Separate Account
until the expiration of fifteen (15) days from the day the Contract is mailed to
the Company's Annuity Service Center. Thereafter, the Purchase Payment shall be
allocated in accordance with the instructions specified by the Contract Owner in
the application for a Contract, and the Contract Owner shall bear the investment
risk for the Purchase Payment.
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IF THE APPLICATION DOES NOT SPECIFY AN ALLOCATION, THE APPLICATION IS NOT IN
GOOD ORDER.
If the application for a Contract is not in good order, the Company will
attempt to rectify it within five business days of its receipt. The Company will
credit the initial Purchase Payment within two business days after the
application has been rectified. Unless the Contract Owner consents otherwise,
the application and the initial Purchase Payment will be returned if the
application cannot be put in good order within five business days of its
receipt.
Just like Contract Owners making initial Purchase Payments, Contract Owners
making subsequent Purchase Payments should be sure to specify how they want
their payments allocated. OTHERWISE, THE COMPANY WILL AUTOMATICALLY PROCESS THE
PURCHASE PAYMENT BASED ON THE PREVIOUS ALLOCATION.
A Contract Owner may elect to increase, decrease or change the frequency or
amount of Purchase Payments. The application and any Purchase Payments should be
sent to the Company at its Annuity Service Center.
ACCUMULATION UNIT VALUE
Accumulation and Annuity Unit values are determined each day that the New
York Stock Exchange is open for trading. This is referred to as a Valuation
Date. A Valuation Period commences at 4:00 pm New York time on each Valuation
Date and ends at 4:00 pm New York time for the next succeeding Valuation Date.
A separate Accumulation Unit value is determined for each Division. If the
Company elects or is required to assess a charge for taxes, a separate
Accumulation Unit value may be calculated for Non-Qualified and Qualified
Contracts within each Division.
The net assets are determined by calculating the total value of each
Division's assets, (that is, the aggregate value of the shares of the Portfolio
of the Trust held by the Division). After calculation of the net assets of a
Division, that amount is reduced by the accrued but unpaid daily charge for
mortality and expense risks and administration expense charge (which together
amount to 1.40% per annum) and any provision for taxes which may occur. After
that calculation, the resulting number is then divided by the number of
Accumulation Units outstanding at the end of the Valuation Period to determine
Accumulation Unit value.
The Accumulation Unit value for each Division will vary with the price of a
share in the underlying Portfolio and in accordance with the Mortality and
Expense Risk Charge, Administrative Expense Charge and any provision for taxes.
Assessments of premium tax, Withdrawal Charges and Annual Contract Charges are
made separately for each Contract. They do not affect the Accumulation Unit
value.
DISTRIBUTION OF CONTRACTS
Currently, the Contracts will only be made available in the State of New
York.
The Contracts are sold by licensed insurance agents, who are registered
representatives of broker-dealers which are registered under the Securities
Exchange Act of 1934, as amended, and are members of the National Association of
Securities Dealers, Inc.
SunAmerica Capital Services, Inc. located at 733 Third Avenue, New York, New
York 10017, serves as distributor of the Contracts. SunAmerica Capital Services,
Inc., an indirect wholly owned subsidiary of SunAmerica Inc., is registered as a
broker-dealer under the Securities Exchange Act of 1934, as amended, and is a
member of the National Association of Securities Dealers, Inc.
WITHDRAWALS (REDEMPTIONS)
Except as explained below, the Contract Owner may redeem a Contract for all
or a portion of the Contract Value during the Accumulation Period. The Contract
Owner may also redeem Contract Values after the Annuity Date if annuity option 3
is elected. Withdrawal Charges may be assessed. (See "Contract
Charges -- Withdrawal Charge").
Effective January 1, 1989, withdrawals of amounts attributable to
contributions made pursuant to a salary reduction agreement (as defined in
Section 403 (b)(11) of the Code) are limited to circumstances only: when the
Contract Owner attains age 59 1/2, separates from service, dies, becomes
disabled (within the meaning of Section 72(m)(7) of the Code), or in the case of
hardship. Withdrawals for hardship are restricted to the portion of the Contract
Owner's Contract Value which represents contributions made by the Contract Owner
and does not include any investment results. These limitations on withdrawals
apply only to: (1) salary reduction contributions made after December 31, 1988;
(2) income
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attributable to such contributions; and (3) income attributable to amounts held
as of December 31, 1988. The limitations on withdrawals do not effect rollovers
or exchanges between certain Qualified Plans. Tax penalties may also apply. (See
"Taxes -- Tax Sheltered Annuities -- Withdrawal Limitations").
While the foregoing limitations only apply to certain Contracts issued in
connection with 403(b) Qualified Plans, all Contract Owners should seek
competent tax advice regarding any withdrawals or distributions.
The minimum partial withdrawal amount is $500, or the Contract Owner's
entire interest in the Division from which a withdrawal is requested. The
Contract Owner's interest in the Division from which the withdrawal is requested
must be at least $500 after the withdrawal is completed if anything is left in
that Division.
A written withdrawal request must be sent to the Company at its Annuity
Service Center. The withdrawal request will not be in good order unless it
includes the Contract Owner's Tax I.D. Number (e.g. Social Security Number) and
provides instructions regarding withholding of income taxes. The Company
provides withdrawal request forms.
If the request is for total withdrawal, the Contract or a Lost Contract
Affidavit (which may be obtained by calling the Annuity Service Center) must be
submitted as well. The Withdrawal Value is determined on the basis of the
Accumulation Unit values next computed following receipt of a request in proper
order. The Withdrawal Value will be paid within seven days after the day a
proper request is received by the Company. However the Company may suspend the
right of withdrawal or delay payment more than seven (7) days: (1) during any
period when the New York Stock Exchange is closed (other than customary weekend
and holiday closings); (2) when trading in the markets the Separate Account or a
Portfolio normally utilizes is restricted or an emergency exists as determined
by the Securities and Exchange Commission so that disposal of the Separate
Account's or a Portfolio's investments or determination of Accumulation Unit
value is not reasonably practicable; or (3) for such other periods as the
Securities and Exchange Commission, by order, may permit for protection of
Contract Owners.
ERISA PLANS
Spousal consent may be required when a married Contract Owner seeks a
distribution from a Contract that has been issued in connection with a Qualified
Plan or Non-Qualified Plan that is subject to Title I of ERISA. Contract Owners
should obtain competent advice.
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ADMINISTRATION
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While the Company has primary responsibility for all administration of the
Contracts and the Separate Account, it has retained the services of First
SunAmerica Life Insurance Company ("First SunAmerica"), 733 Third Avenue, 4th
Floor, New York, New York 10017; (800) 537-3642 to administer its Annuity
Service Center. First SunAmerica is not affiliated with the Company. First
SunAmerica is an indirect wholly owned subsidiary of SunAmerica Inc.
The administrative services provided include, but are not limited to:
issuance of the Contracts; maintenance of Contract Owner records; Contract Owner
services; calculation of unit values; and preparation of Contract Owner reports.
Contract statements and transaction confirmations are mailed to Contract
Owners at least quarterly. Contract Owners should read their statements
carefully and verify their accuracy. Questions about periodic statements should
be communicated to the Annuity Service Center promptly. The Annuity Service
Center will investigate all complaints and make any necessary adjustments
retroactively, provided that it has received notice of a potential error within
30 days after the date the Contract Owner receives the questioned statement. If
the Annuity Service Center has not received notice of a potential error within
this time, any adjustment shall be made as of the date that the Annuity Service
Center received notice of the potential error.
The Company initiated the process of preparing its computer systems and
applications for the Year 2000 in 1994. This process involves modifying or
replacing certain hardware and software maintained by the Company as well as
communicating with external service providers to ensure that they are taking the
appropriate action to remedy their Year 2000 issues. The modification process of
all significant applications will be completed by December 31, 1998. Management
expects to have substantially all of the system and application changes
completed during the second half of 1999.
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TAXES
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NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS.
GENERAL
From time to time, Federal initiatives are proposed that could affect the
tax treatment of insurance products. Recent administration budget proposals
include the proposed taxation of exchanges involving variable annuity contracts,
reallocations within variable annuity contracts, and certain other proposals
relating to annuities. Please consult your tax advisor for additional
information.
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), the recipient is taxed on the portion of the
payment that exceeds the cost basis of the Contract. For a payment received as a
withdrawal (partial redemption), federal tax liability is determined on a
last-in-first-out basis, meaning taxable income is withdrawn before the cost
basis of the Contract is withdrawn. For Non-Qualified Contracts, the 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. Tax penalties may also apply.
For annuity payments, the taxable portion is determined by a formula which
establishes the ratio that the cost basis of the Contract bears to the total
value of annuity payments for the term of the annuity Contract. The taxable
portion is taxed at ordinary income tax rates. For certain types of Qualified
Plans there may be no cost basis in the Contract within the meaning of Section
72 of the Code. Contract Owners, Annuitants and Beneficiaries under the
Contracts should seek competent financial advice about the tax consequences of
distributions under the retirement plan under which the Contracts are purchased.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company and its operations form a part of the Company.
WITHHOLDING TAX ON DISTRIBUTIONS
The Code generally requires the Company (or, in some cases, a plan
administrator) to withhold tax on the taxable portion of any distribution or
withdrawal from a Contract. For "eligible rollover distributions" from Contracts
issued under certain types of Qualified Plans, 20% of the distribution must be
withheld, unless the payee elects to have the distribution "rolled over" to
another eligible plan in a direct "trustee to trustee" transfer. This
requirement is mandatory and cannot be waived by the Contract Owner. Withholding
on other types of distributions can be waived.
An "eligible rollover distribution" is the estimated taxable portion of any
amount received by a covered employee from a plan qualified under section 401(a)
or 403(a) of the Code, or from a tax-sheltered annuity qualified under section
403(b) of the Code (other than (1) annuity payments for the life (or life
expectancy) of the employee, or joint lives (or joint life expectancies) of the
employee and his or her designated beneficiary, or for a specified period of ten
years or more; and (2) distributions required to be made under the Code).
Failure to "roll over" the entire amount of an eligible rollover distribution
(including an amount equal to the 20% portion of the distribution that was
withheld) could have adverse tax consequences, including the imposition of a
penalty tax on premature withdrawals, described later in this section.
Withdrawals or distributions from a Contract other than eligible rollover
distributions are also subject to withholding on the estimated taxable portion
of the distribution, but the Contract Owner may elect in such cases to waive the
withholding requirement. If not waived, withholding is imposed (1) for periodic
payments, at the rate that would be imposed if the payments were wages, or (2)
for other distributions at 10%. If no withholding exemption certificate is in
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effect for the payee, the rate under (1) above is computed by treating the payee
as a married individual claiming 3 withholding exemptions.
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 close 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.
Section 1.817-5), which establish 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 (i) no more than 55% of the value of the total assets
of the portfolio is represented by any one investment; (ii) no more than 70% of
the value of the total assets of the portfolio is represented by any two
investments; (iii) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (iv) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Technical and Miscellaneous Revenue Act of 1988 (the "1988 Act")
provides that for purposes of determining whether or not the diversification
standards imposed on the underlying assets of variable contracts by Section
817(h) of the Code have been met, "each United States government agency or
instrumentality shall be treated as a separate issuer."
The Company intends that each Portfolio of the Trust underlying the
Contracts will be managed by the investment adviser for the Trust in such a
manner as to comply with these diversification requirements.
MULTIPLE CONTRACTS
The 1988 Act provides that multiple annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Contract Owners should consult a tax adviser prior to
purchasing more than one annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment of a Contract may be a taxable event and may be prohibited by
ERISA in some circumstances. Contract Owners should therefore consult competent
tax advisers should they wish to assign their Contracts.
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 not in the form of an annuity payment 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 a taxpayer's gross income. Section 72 further provides that a ten
percent (10%) penalty will apply to the income portion of any premature
distribution. The penalty is not imposed on amounts received: (1) after the
taxpayer reaches 59 1/2; (2) upon the death of the Contract Owner; (3) if the
taxpayer is totally disabled; (4) in a series of substantially equal periodic
payments made for the life of the taxpayer or for the joint lives of the
taxpayer and his Beneficiary; (5) under an immediate annuity; or (6) which are
allocable to purchase payments made prior to August 14, 1982.
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The above information applies to Qualified Contracts issued pursuant to
Section 457 of the Code, but does not apply to other Qualified Contracts.
Separate tax withdrawal penalties and restrictions apply to Qualified Contracts.
(See "Tax Treatment of Withdrawals -- Qualified Contracts").
QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for use
under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and terms and conditions of each
specific plan. 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.
Following are general descriptions of the types of Qualified Plans with
which the Contracts may be used. Such descriptions are not exhaustive and are
for general informational purposes only. The tax rules regarding Qualified Plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice prior
to purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available and described in
this Prospectus. 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) TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and
scientific organizations described in Section 501 (c)(3) of the Code. These
qualifying employers may make contributions to the Contracts for the benefit
of their employees. Such contributions are not includible in the gross
income of the 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"). Any employee
should obtain competent tax advice as to the tax treatment and suitability
of such an investment.
(B) INDIVIDUAL RETIREMENT ANNUITIES
Section 408(b) of the Code permits eligible individuals to contribute to
an individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to
an IRA which will be deductible from the individual's 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 IRAs should obtain competent tax advice as to the tax treatment
and suitability of such an investment.
(C) ROTH IRAS
Section 408A of the Code permits an individual to contribute to an
individual retirement program called a Roth IRA. Unlike contributions to a
regular IRA under Section 408(b) of the Code, contributions to a Roth IRA
are not made on tax-deferred basis, but distributions are tax-free if
certain requirements are satisfied. Like regular IRAs, Roth IRAs are subject
to limitations on the amount that may be contributed, those who may be
eligible and the time when distributions may commence. A regular IRA may be
converted into a Roth IRA, and the resulting income tax shall be spread over
four years if the conversion occurs before January 1, 1999. If and when
Contracts are made available for use with Roth IRAs, they may be subject to
special requirements imposed by the Internal Revenue Service. Purchasers of
the Contracts for this purpose will be provided with such supplementary
information as may be required by the Internal Revenue Service or other
appropriate agency.
23
<PAGE> 28
TAX TREATMENT OF WITHDRAWALS -- QUALIFIED CONTRACTS
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion
of any early distribution from qualified retirement plans, including contracts
issued and qualified under Code Sections 403(b) (Tax-Sheltered Annuities) and
408(b) (IRAs).
The tax penalty will not apply to the following distributions: (1) if
distribution is made on or after the date on which the Contract Owner or
Annuitant (as applicable) reaches age 59 1/2; (2) distributions following the
death or disability of the Contract Owner or Annuitant (as applicable) (for this
purpose "disability" is defined in Section 72(m)(7) of the Code); (3)
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 or her
designated beneficiary; (4) distributions to a Contract Owner or Annuitant (as
applicable) who has separated from service after he or she has attained age 55;
(5) 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; and (6) distributions
made to an alternate payee pursuant to a qualified domestic relations order; and
(7) distributions from an IRA made to the owner of Annuitant (as applicable) to
the extent such distributions do not exceed the Qualified Higher Education
expense (as defined in Section 72(t)(7) of the Code) or the Owner or Annuitant
(as applicable) for the taxable year; and (8) distribution from an IRA made to
the Owner of Annuitant (as applicable) which are Qualified First Time Home Buyer
distributions (as defined in Section 72(t)(8) of the Code).
The exceptions stated in items (4), (5) and (6) above do not apply in the
case of an IRA.
The taxable portion of a withdrawal or distribution from Contracts issued
under certain types of plans may, under some circumstances, be "rolled over"
into another eligible plan so as to continue to defer income tax on the taxable
portion. Effective January 1, 1993, such treatment is available for any
"eligible rollover distribution" made by certain types of plans (as described
above under "Taxes -- Withholding Tax on Distributions") that is transferred
within 60 days of receipt into a plan qualified under section 401(a) or 403(a)
of the Code, a tax-sheltered annuity, an IRA, or an individual retirement
account described in section 408(a) of the Code. Plans making such eligible
rollover distributions are also required, with some exceptions specified in the
Code, to provide for a direct "trustee to trustee" transfer of the distribution
to the transferee plan designated by the recipient.
TAX SHELTERED ANNUITIES -- WITHDRAWAL LIMITATIONS
The Tax Reform Act of 1986, effective January 1, 1989, limits the withdrawal
of amounts attributed 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 attains age 59 1/2, separates from service, dies,
becomes disabled (within the meaning of Section 72(m)(7) of the Code), or in the
case of hardship. 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. These limitations on
withdrawals apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions, and to income attributable
to amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or exchanges between certain Qualified Plans. Contract Owners
should consult their own tax counsel or other tax adviser regarding any
distributions.
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
There are no legal proceedings to which the Separate Account is a party or
to which the assets of the separate Account are subject. The Company is engaged
in various kinds of routine litigation that in the Company's judgment will not
have a material adverse impact upon the Company's financial position.
24
<PAGE> 29
- --------------------------------------------------------------------------------
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
COMPANY..................................................... 1
INDEPENDENT ACCOUNTANTS..................................... 1
DISTRIBUTORS................................................ 1
YIELD CALCULATIONS FOR MONEY MARKET DIVISION................ 2
ANNUITY PAYMENTS............................................ 3
Annuity Unit Value........................................ 3
Amount of Annuity Payments................................ 3
Subsequent Monthly Payments............................... 4
FINANCIAL STATEMENTS........................................ 4
</TABLE>
25
<PAGE> 30
Please forward a copy (without charge) of the Statement of Additional
Information concerning ICAP II Variable Annuity Contracts to:
(Please print or type and fill in all information.)
------------------------------------------------------------------
Name
------------------------------------------------------------------
Address
------------------------------------------------------------------
City/State/Zip
------------------------------------------------------------------
Date: Signed:
--------------- ------------------------------------
Return to: Presidential Life Insurance Company, c/o Annuity
Service Center, P.O. Box 54299, Los Angeles, California
90054-0299.
<PAGE> 31
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACTS
issued by
PRESIDENTIAL VARIABLE ACCOUNT ONE
of
PRESIDENTIAL LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION
SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE
PREMIUM DEFERRED 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 DATED
APRIL 30,1997, CALL OR WRITE THE COMPANY IN CARE OF ITS ANNUITY SERVICE CENTER,
P.O. Box 54299, LOS ANGELES, CALIFORNIA 90054-0299, 1-800-537-3642.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1997.
<PAGE> 32
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
COMPANY .................................................................. 1
INDEPENDENT ACCOUNTANTS .................................................. 1
DISTRIBUTORS ............................................................. 1
YIELD CALCULATION FOR MONEY MARKET DIVISION .............................. 2
ANNUITY PAYMENTS ......................................................... 3
Annuity Unit Value ................................................... 3
Amount of Annuity Payments ........................................... 3
Subsequent Monthly Payments .......................................... 4
FINANCIAL STATEMENTS ..................................................... 4
</TABLE>
<PAGE> 33
COMPANY
Information regarding Presidential Life Insurance Company (the
"Company") and its ownership is contained in the Prospectus.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements for the three years ended December
31, 1997 of Presidential Life Corporation and subsidiaries have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and are included in reliance upon the report of such firm,
given upon their authority as experts in accounting and auditing. The
consolidated financial statements of Presidential Life Corporation and
subsidiaries should be considered only as bearing on the ability of the Company
to meet its obligations under the Contracts.
The financial statements of Presidential Variable Account One (the
"Separate Account") as of December 31, 1997 and for each of the two years in the
period ended December 31, 1997 also are included in this Statement of Additional
Information. Price Waterhouse LLP, 400 South Hope Street, Los Angeles,
California 90071, serves as the independent accountants for the Separate
Account. The financial statements of the Separate Account referred to above
included in this Statement of Additional Information have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
DISTRIBUTORS
The Contracts are sold by licensed insurance agents, where the Contracts
may be lawfully sold, who are registered representatives of broker-dealers which
are registered under the Securities Exchange Act of 1934 and are members of the
National Association of Securities Dealers, Inc.
The offering is on a continuous basis.
Effective April 29, 1994, the Contracts were offered through the
distributor for the Separate Account, SunAmerica Capital Services, Inc.
("SunAmerica Capital Services"), 733 Third Avenue, New York, New York 10017.
The Company is not affiliated with the distributor. Prior to this time,
SunAmerica Securities, Inc. ("SunAmerica Securities") and Royal Alliance
Associates, Inc. ("Royal Alliance"), acted as co-distributors of the Contract.
SunAmerica Securities, Inc. and Royal Alliance Associates, Inc. are each an
indirect, wholly owned subsidiary of SunAmerica Inc.
For the year ended December 31, 1994, the aggregate amount of
underwriting commission paid to SunAmerica Capital Services was $11,361, of
which $1,217 was retained by it. For the years ended December 31, 1995 and
December 31, 1996, no underwriting commission was paid to SunAmerica Capital
Services.
-1-
<PAGE> 34
YIELD CALCULATION FOR MONEY MARKET DIVISION
The annualized current yield and the effective yield for the Money
Market Division for the 7 day period ended December 31, 1996 were 3.28% and
3.33% respectively.
Current yield is computed by first determining the Base Period Return
attributable to a hypothetical Contract having a balance of one Accumulation
Unit at the beginning of a 7 day period using the formula:
Base Period Return = (EV-SV-RMC)/(SV)
where:
SV = value of one Accumulation Unit at the start of a 7 day period
EV = value of one Accumulation Unit at the end of the 7 day period
RMC = an allocated portion of the $3 0 Annual Contract Charge,
prorated for 7 days.
The change in the value of an Accumulation Unit during the 7 day period
reflects the income received, minus any expenses accrued, during such 7 day
period. The Annual Contract Charge is first allocated among the Divisions and
the General Account so that each Division's allocated portion of the charge is
proportional to the percentage of the number of Contract Owners' accounts that
have money allocated to that Division. The portion of the Charge allocable to
the Money Market Division is further reduced, for purposes of the yield
computation, by multiplying it by the ratio that the value of the hypothetical
Contract bears to the value of an account of average size for Contracts funded
by the Money Market Division. Finally, the result is multiplied by the fraction
7/365 to arrive at the portion attributable to the 7 day period.
The current yield is then obtained by annualizing the Base Period
Return:
Current Yield = (Base Period Return) x (365/7)
The Money Market Division also quotes an "effective yield" that differs
from the current yield given above in that it takes into account the effect of
dividend reinvestment in the Money Market Division. The effective yield, like
the current yield, is derived from the Base Period Return over a 7 day period.
However, the effective yield accounts for dividend reinvestment by compounding
the current yield according to the formula:
365/7
Effective Yield = [(Base Period Return + 1) -1].
Net investment income for yield quotation purposes does not include
either realized capital gains and losses or unrealized appreciation and
depreciation, whether reinvested or not. The yield quotations also do not
reflect any impact of transfer fees or Withdrawal or Annuity Charges.
-2-
<PAGE> 35
The yields quoted should not be considered a representation of the yield
of the Money Market Division in the future since the yield is not fixed. Actual
yields will depend not only on the type, quality and maturities of the
investments held by the Money Market Division and changes in interest rates on
such investments, but also on factors such as a Contract Owner's account size
(since the impact of fixed dollar charges will be greater for small accounts
than for larger accounts).
Yield information may be useful in reviewing the performance of the Money
Market Division and for providing a basis for comparison with other investment
alternatives. However, the Money Market Division's yield fluctuates, unlike bank
deposits or other investments that typically pay a fixed yield for a stated
period of time.
ANNUITY PAYMENTS
ANNUITY UNIT VALUE
The value of an Annuity Unit is determined independently for each Separate
Account Division.
For each Division, the value of an Annuity Unit for any Valuation Period
is determined by multiplying the Annuity Unit value for the immediately
preceding Valuation Period by the net investment factor for the Valuation Period
for which the Annuity Unit Value is being calculated and multiplying the result
by an interest factor which offsets the effect of the investment earnings rate
of five percent (5%) per annum that is assumed in the annuity table contained in
the Contract.
The net investment factor for each Division for a Valuation Period is
determined by dividing (a) by (b) and subtracting (c) from the result where: (a)
is the value of an Accumulation Unit from the applicable Division as of the end
of the current Valuation Period; (b) is the value of an Accumulation Unit for
the applicable Division as of the end of the immediately preceding Valuation
Period; and (c) is a factor representing the daily charge for mortality and
expense risks and administration of one and four-tenths percent (1.40%) per
annum.
AMOUNT OF ANNUITY PAYMENTS
The initial annuity payment is determined by applying the Contract Value,
less any premium tax, less any Annuity Charge (if annuity option 3 is elected),
to the annuity table specified in the Contract. Those tables are based on a set
amount per $1,000 of proceeds applied. The appropriate rate must be determined
by the sex and adjusted age of the Annuitant and joint Annuitant, if any. The
adjusted age is determined from the actual age to the nearest birthday at the
Annuity Date according to the table below. The Adjusted Age Table is used to
correct for population mortality improvements over time.
-3-
<PAGE> 36
<TABLE>
<CAPTION>
ADJUSTED AGE TABLE
CALENDAR ADJUSTMENT TO CALENDAR ADJUSTMENT TO
YEAR OF BIRTH ACTUAL AGE YEAR OF BIRTH ACTUAL AGE
------------- ------------- ------------- -------------
<S> <C> <C> <C>
1899-1905 +6 1946-1951 -1
1906-1911 +5 1952-1958 -2
1912-1918 +4 1959-1965 -3
1919-1925 +3 1966-1972 -4
1926-1932 +2 1973-1979 -5
1933-1938 +1 1980-1985 -6
1939-1945 0 1986-1992 -7
</TABLE>
The dollars applied are then divided by 1,000 and multiplied by the
appropriate annuity factor to indicate the amount of the first annuity payment.
That amount is divided by the value of an Annuity Unit as of the Annuity Date to
establish the number of Annuity Units representing each annuity payment. The
number of Annuity Units determined for the first annuity payment remains
constant for the second and subsequent monthly payments.
SUBSEQUENT MONTHLY PAYMENTS
The amount of the second and subsequent annuity payments is determined by
multiplying the number of Annuity Units by the Annuity Unit value as of the
Valuation Period next preceding the date on which each annuity payment is due.
The dollar amount of the first annuity payment determined as above is divided by
the value of an Annuity Unit as of the Annuity Date to establish the number of
Annuity Units representing each annuity payment. The number of Annuity Units
determined for the first annuity payment remains constant for the second and
subsequent monthly payments.
FINANCIAL STATEMENTS
The consolidated financial statements of Presidential Life Corporation and
subsidiaries included herein should be considered only as bearing upon the
ability of the Company to meet its obligations under the Contracts. The
financial statements of the Separate Account are also included in this Statement
of Additional Information.
-4-
<PAGE> 37
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Presidential Life Corporation
Nyack, New York 10960
We have audited the accompanying consolidated balance sheets of Presidential
Life Corporation and subsidiaries ("the Company") as of December 31, 1997
and 1996 and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1997 and 1996 and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York,
February 12, 1998
-5-
<PAGE> 38
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31
ASSETS: 1997 1996
---------- ----------
<S> <C> <C>
Investments:
Fixed maturities:
Available for sale $1,909,924 $1,823,349
Common stocks 45,773 42,059
Mortgage Loans 17,865 18,622
Real Estate 417 426
Policy Loans 18,120 18,068
Short-term investments 264,098 240,038
Other invested assets 208,162 176,103
---------- ----------
Total investments 2,464,359 2,318,665
Cash and cash equivalents 13,480 819
Accrued investment income 28,167 32,474
Deferred policy acquisition costs 37,685 39,783
Furniture and equipment, net 567 329
Amounts due from reinsurers 8,249 7,775
Other assets 1,222 1,532
Assets held in separate account 4,612 5,548
---------- ----------
TOTAL ASSETS $2,558,341 $2,406,925
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Policy Liabilities:
Policyholders' account balances $1,280,900 $1,260,545
Future policy benefits:
Annuity 380,109 365,321
Life and accident and health 50,848 49,859
Other policy liabilities 3,124 2,690
---------- ----------
Total policy liabilities 1,714,981 1,678,415
Dollar repurchase agreements 205,202 200,883
Notes payable 50,000 50,000
Short term note payable 20,000 5,000
Deposits on policies to be issued 2,436 1,270
Deferred federal income taxes 46,575 31,649
General expenses and taxes accrued 7,074 7,294
Other liabilities 4,807 3,803
Liabilities related to separate account 4,612 5,548
---------- ----------
Total liabilities 2,055,687 1,983,862
---------- ----------
Shareholders' Equity:
Capital stock ($.01 par value, authorized
100,000,000 shares, issued and
outstanding 32,621,549 shares in
1997 and 32,992,835 shares in 1996) 326 330
Additional paid-in-capital 18,274 24,023
Net unrealized investment gains 71,540 40,294
Retained earnings 412,514 358,416
---------- ----------
Total Shareholders' Equity 502,654 423,063
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,558,341 $2,406,925
========== ==========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
-6-
<PAGE> 39
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Insurance revenues:
Premiums $ 3,976 $ 4,244 $ 4,408
Annuity considerations 19,655 8,461 3,780
Universal life and investment type
policy fee income 1,988 2,090 1,934
Net investment income 191,818 186,180 170,780
Realized investment gains 26,039 20,020 17,216
Other income 4,228 2,679 1,746
------------ ------------ ------------
TOTAL REVENUES 247,704 223,674 199,864
------------ ------------ ------------
BENEFITS AND EXPENSES:
Death and other life insurance benefits 7,236 6,887 7,366
Annuity benefits 37,867 36,510 36,016
Interest credited to policyholders'
account balances 76,202 75,252 78,802
Interest expense on notes payable 5,850 5,049 5,045
Other interest and other charges 445 330 427
Increase (decrease) in liability for
future policy benefits 15,248 5,281 1,312
Commissions to agents, net 4,357 3,215 3,025
General expenses and taxes 12,813 13,944 11,940
Decrease (increase) in deferred
policy acquisition costs (2,872) 849 (459)
------------ ------------ ------------
TOTAL BENEFITS AND EXPENSES 157,146 147,317 143,474
------------ ------------ ------------
Income before income taxes 90,558 76,357 56,390
------------ ------------ ------------
Provision (benefit) for income taxes:
Current 31,165 23,199 9,495
Deferred (1,899) (1,363) (2,163)
------------ ------------ ------------
29,266 21,836 7,332
------------ ------------ ------------
NET INCOME $ 61,292 $ 54,521 $ 49,058
============ ============ ============
Weighted average number of shares
outstanding during the year 32,734,733 33,184,294 33,631,719
============ ============ ============
Earnings per common share $ 1.87 $ 1.64 $ 1.46
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
-7-
<PAGE> 40
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Net
Additional Unrealized
Capital Paid-in- Investment Retained
Stock Capital Gains (Losses) Earnings Total
------ --------- --------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Balance at
January 1,
1995 $ 337 $ 31,751 $ (39,463) $ 263,328 $ 255,953
Net income 49,058 49,058
Increase in
Unrealized
Investment
Gains, Net 101,195 101,195
Purchase and
Retirement
of Stock (2) (1,704) (1,706)
Issuance of
Shares under
Stock Option
Plan 83 83
Dividends
Paid to
Shareholders
($.105 per
share) (3,523) (3,523)
------ --------- ---------- ---------- ---------
Balance at
December 31,
1995 335 30,130 61,732 308,863 401,060
Net income 54,521 54,521
Change in
Unrealized
Investment
Gains, Net (21,438) (21,438)
Purchase and
Retirement
of Stock (7) (7,031) (7,038)
Issuance of
Shares under
Stock Option
Plan 2 924 926
Dividends
Paid to
Shareholders
($.15 per
share) (4,968) (4,968)
------ --------- ---------- ---------- ---------
Balance at
December 31,
1996 330 24,023 40,294 358,416 423,063
Net income 61,292 61,292
Change in
Unrealized
Investment
Gains, Net 31,246 31,246
Purchase and
Retirement
of Stock (4) (5,758) (5,762)
Issuance of
Shares under
Stock Option
Plan 9 9
Dividends
Paid to
Shareholders
($.22 per
share) (7,194) (7,194)
------ --------- ---------- ---------- ---------
Balance at
December 31,
1997 $ 326 $ 18,274 $ 71,540 $ 412,514 $ 502,654
====== ========= ========== ========== =========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
-8-
<PAGE> 41
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------
1997 1996 1995
----------- ------------ ------------
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 61,292 $ 54,521 $ 49,058
Adjustments to reconcile net income to
net cash provided by operating activities:
Benefit for deferred income taxes (1,899) (1,363) (2,163)
Depreciation and amortization 474 439 499
Net accrual of discount on fixed maturities (4,181) (1,184) (1,108)
Realized investment gains (26,039) (20,020) (17,216)
Changes in:
Accrued investment income 4,307 1,854 (11,531)
Deferred policy acquisition costs (2,872) 849 (459)
Federal income tax recoverable 0 477 8,657
Liability for future policy benefits 15,777 5,689 1,588
Other items 436 2,612 2,911
----------- ------------ ------------
Net Cash Provided by
Operating Activities 47,295 43,928 30,241
----------- ------------ ------------
INVESTING ACTIVITIES:
Fixed Maturities:
Available for Sale:
Acquisitions (338,058) (302,778) (326,630)
Sales 29,325 13,713 44,453
Maturities, calls and repayments 252,383 259,108 90,147
Common Stocks:
Acquisitions (18,722) (15,663) (25,087)
Sales 68,377 54,369 73,449
Decrease (increase) in short term
investments and policy loans (24,112) (46,884) (62,357)
Other Invested Assets:
Additions to other invested assets (110,760) (62,045) (31,655)
Distributions from other invested assets 78,701 36,274 23,812
Purchase of property and equipment (409) (154) (41)
Mortgage loan on real estate 757 393 (1,392)
Amounts due from security transactions 0 0 52,588
----------- ------------ ------------
Net Cash Used in
Investing Activities (62,518) (63,667) (162,713)
----------- ------------ ------------
FINANCING ACTIVITIES:
Proceeds from Dollar Repurchase Agreements 2,429,540 2,308,967 1,670,600
Repayment of Dollar Repurchase Agreements (2,425,221) (2,268,500) (1,549,547)
Proceeds from line of credit 15,000 5,000 0
Increase (decrease) in policyholders'
account balances 20,355 (9,353) 14,207
Repurchase of common stock (5,762) (7,038) (1,706)
Deposits on policies to be issued (1,166) (1,677) 1,342
Dividends paid to shareholders (7,194) (4,967) (3,526)
----------- ------------ ------------
Net Cash Provided by
Financing Activities 27,884 22,432 131,370
----------- ------------ ------------
Increase (Decrease) in Cash and Cash
Equivalents 12,661 2,693 (1,102)
Cash and Cash Equivalents at Beginning of Year 819 (1,874) (772)
----------- ------------ ------------
Cash and Cash Equivalents at End of Year $ 13,480 $ 819 $ (1,874)
=========== ============ ============
Supplemental Cash Flow Disclosure:
Income Taxes Paid $ 27,700 $ 27,303 $ 6,887
=========== ============ ============
Interest Paid $ 5,508 $ 4,750 $ 4,750
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
-9-
<PAGE> 42
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BUSINESS
Presidential Life Corporation ("the Company"), through its
wholly-owned subsidiary Presidential Life Insurance Company ("the Insurance
Company"), is engaged in the sale of life insurance and annuities.
B. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting principles ("GAAP").
Intercompany transactions and balances have been eliminated in consolidation.
Certain amounts have been reclassified to conform to the current year's
presentation. The preparation of financial statements in conformity with
generally accepted accounting principles requires that management make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
C. INVESTMENTS
Fixed maturity investments available for sale represent
investments which may be sold in response to changes in various economic
conditions. These investments are carried at estimated market value and net
unrealized gains (losses), net of the effects of amortization of deferred policy
acquisition costs and deferred Federal income taxes are credited or charged
directly to shareholders' equity, unless a decline in market value is considered
to be other than temporary in which case the investment is reduced to its net
realizable value. Equity securities include common stocks and non-redeemable
preferred stocks and are carried at estimated market, with the related
unrealized gains and losses, net of deferred income tax effect, if any, charged
or credited directly to shareholders' equity, unless a decline in market value
is deemed to be other than temporary in which case the investment is reduced to
its net realizable value.
"Other invested assets" are recorded at the lower of cost or
market, or equity as appropriate, and primarily include interests in limited
partnerships, which principally are engaged in real estate, international
opportunities, acquisitions of private growth companies, debt restructuring and
merchant banking. In general, risks associated with such limited partnerships
include those related to their underlying investments (i.e., equity securities,
debt securities and real estate), plus a level of illiquidity, which is
mitigated by the ability of the Company to take annual distributions of
partnership earnings. To evaluate the appropriateness of the carrying value of a
limited partnership interest, management maintains ongoing discussions with the
investment manager and considers the limited partnership's operation, its
current and near term projected financial condition, earnings capacity, and
distributions received by the Company during the year. Because it is not
practicable to obtain an independent valuation for each limited partnership
interest, for purposes of disclosure the market value of a limited partnership
interest is estimated at book value. Management believes that the net realizable
value of such limited partnership interests, in the aggregate, exceeds their
related carrying value as of December 31, 1997 and 1996. As of December 31,
1997, the Company was committed to contribute, if called upon, an aggregate of
approximately $73.7 million of additional capital to certain of these limited
partnerships.
-10-
<PAGE> 43
In evaluating whether an investment security or other investment
has suffered an impairment in value which is deemed to be "other than
temporary", management considers all available evidence. When a decline in the
value of an investment security or other investment is considered to be other
than temporary, the investment is reduced to its net realizable value, (which
contemplates the price that can be obtained from the sale of such asset in the
ordinary course of business) which becomes the new cost basis. The amount of
reduction is recorded as a realized loss. A recovery from the adjusted cost
basis is recognized as a realized gain only at sale.
The Company participates in "dollar roll" repurchase agreement
transactions to enhance investment income. Dollar roll transactions involve the
sale of certain mortgage backed securities to a holding institution and a
simultaneous agreement to purchase substantially similar securities for forward
settlement at a lower dollar price. The proceeds are invested in short-term
securities at a positive spread until the settlement date of the similar
securities. During this period, the holding institution receives all income and
prepayments for the security. Dollar roll repurchase agreement transactions are
treated as financing transactions for financial reporting purposes.
Realized gains and losses on disposal of investments are
determined for fixed maturities and equity securities by the
specific-identification method.
Investments in short-term securities, which consist primarily of
United States Treasury Notes and corporate debt issues maturing in less than one
year, are recorded at amortized cost which approximates market. Mortgage loans
are stated at their amortized indebtedness. Policy loans are stated at their
unpaid principal balance.
The Company's investments in real estate include two buildings in
Nyack, New York, which are occupied entirely by the Company. The investments are
carried at cost less accumulated depreciation. Depreciation has been provided on
a straight line basis at the rate of 4% per annum for one building and 5% per
annum for the other. Accumulated depreciation amounted to $204,400 and $201,200
at December 31, 1997 and 1996, respectively, and related depreciation expense
for the years ended December 31, 1997, 1996 and 1995 was $3,200, $3,200 and
$3,200, respectively.
D. FURNITURE AND EQUIPMENT
Furniture and equipment is carried at cost and depreciated on a
straight line basis over a period of five to ten years except for automobiles
which are depreciated over a period of three years. Accumulated depreciation
amounted to $219,300 and $4,100,000 at December 31, 1997 and 1996, respectively,
and related depreciation expense for each of the three years in the period ended
December 31, 1997 was $163,700, $187,200 and $192,000, respectively.
E. RECOGNITION OF INSURANCE INCOME AND RELATED EXPENSES
Premiums from traditional life and annuity policies with life
contingencies are recognized generally as income over the premium paying period.
Benefits and expenses are matched with such income so as to result in the
recognition of profits over the life of the contracts. This matching is
accomplished by means of the provision for liabilities for future policy
benefits and the deferral and subsequent amortization of policy acquisition
costs.
For contracts with a single premium or a limited number of
premium payments due over a significantly shorter period than the total period
over which benefits are provided ("limited payment contracts"), premiums are
recorded as income when due with any excess profit deferred and recognized in
income in a constant relationship to insurance in force or, for annuities, the
amount of expected future benefit payments.
-11-
<PAGE> 44
E. RECOGNITION OF INSURANCE INCOME AND RELATED EXPENSES - CONTINUED
Premiums from universal life and investment-type contracts are
reported as deposits to policyholders' account balances. Revenues from these
contracts consist of amounts assessed during the period against policyholders'
account balances for mortality charges and surrender charges. Policy benefits
and claims that are charged to expense include benefit claims incurred in the
period in excess of related policyholders' account balances and interest
credited to policyholders' account balances.
For the fiscal years ended December 31, 1997, 1996, and 1995,
approximately 67.3%, 78.3% and 83.5%, respectively, of premiums from traditional
life, annuity, universal life and investment-type contracts received by the
Company were attributable to sales to annuitants and policyholders residing in
the State of New York. In addition, approximately 0%, 0% and 12.5% of the
Company's total insurance revenues from those respective years were attributable
to sales through an agency principally owned by a director of the Company until
his death in December 1995. Management believes that the Company's transactions
with such agency were made on terms at least as fair to the Company as could be
obtained from unaffiliated third parties. Compensation of agents is strictly
regulated by the New York State Department of Insurance.
F. DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business (principally commissions,
certain underwriting, agency and policy issue expenses), all of which vary with
and are primarily related to the production of new business, have generally been
deferred. When a policy is surrendered, the remaining unamortized cost is
written off. Deferred policy acquisition costs are subject to recoverability
testing at time of policy issue and loss recognition testing at the end of each
fiscal year.
For immediate annuities with life contingencies, deferred policy
acquisition costs are amortized over the life of the contract, in proportion to
expected future benefit payments.
For traditional life policies, deferred policy acquisition costs
are amortized over the premium paying periods of the related policies using
assumptions that are consistent with those used in computing the liability for
future policy benefits. Assumptions as to anticipated premiums are estimated at
the date of policy issue and are consistently applied during the life of the
contracts. For these contracts the amortization periods generally are for the
scheduled life of the policy, not to exceed 30 years.
Deferred policy acquisition costs are amortized over periods
ranging from 15 to 25 years for universal life products and investment-type
products as a constant percentage of estimated gross profits arising principally
from surrender charges and interest and mortality margins based on historical
and anticipated future experience, updated regularly. The effects of revisions
to reflect actual experience on previous amortization of deferred policy
acquisition costs, subject to the limitation that the accrued interest on the
deferred acquisition costs balance may not exceed the amount of amortization for
the year, are reflected in earnings in the period estimated gross profits are
revised.
Unamortized deferred policy acquisition costs for the years ended
December 31, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Balance at the beginning of year $ 39,783 $ 33,330
Current year's costs deferred 9,783 6,307
--------- ---------
Total 49,566 39,637
Less, amortization for the year 6,581 7,150
--------- ---------
Total 42,985 32,487
Change in amortization (benefit)
related to unrealized gain
(loss) in investments 5,300 (7,296)
--------- ---------
Balance at the end of the year $ 37,685 $ 39,783
========= =========
</TABLE>
-12-
<PAGE> 45
G. FUTURE POLICY BENEFITS
Future policy benefits for traditional life insurance policies
are computed using a net level premium method on the basis of actuarial
assumptions as to mortality, persistency and interest established at policy
issue. Assumptions established at policy issue as to mortality and persistency
are based on anticipated experience which, together with interest and expense
assumptions, provide a margin for adverse deviation. Benefit liabilities for
deferred annuities during the accumulation period are equal to accumulated
contractholders' fund balances and after annuitization are equal to the present
value of expected future payments. During the three years in the period ended
December 31, 1997, interest rates used in establishing such liabilities range
from 4.5% to 11% for life insurance liabilities and from 5.5% to 13.60% for
annuity liabilities.
H. POLICYHOLDERS' ACCOUNT BALANCES
Policyholders' account balances for universal life and
investment-type contracts are equal to the policy account values. The policy
account values represent an accumulation of gross premium payments plus credited
interest less mortality and expense charges and withdrawals.
These account balances are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ -------------
(in thousands)
<S> <C> <C> <C>
Account balances at beginning of year $ 1,260,545 $ 1,269,898 $ 1,255,691
Additions to account balances 209,568 190,559 199,510
------------- ------------ -------------
Total 1,470,113 1,460,457 1,455,201
Deductions from account balances 189,213 199,912 185,303
------------- ------------ -------------
Account balances at end of year $ 1,280,900 $ 1,260,545 $ 1,269,898
============= ============ =============
</TABLE>
Interest rates credited to account balances ranged from 4% to
12.5% in 1997, 1996 and 1995.
I. FEDERAL INCOME TAXES
The Company and its subsidiaries file a consolidated Federal
income tax return. The asset and liability method in recording income taxes on
all transactions that have been recognized in the financial statements is used.
Deferred taxes are adjusted to reflect tax rates at which future tax liabilities
or assets are expected to be settled or realized.
J. SEPARATE ACCOUNTS
Separate Accounts are established in conformity with New York
State Insurance Law and represent funds for which investment income and
investment gains and losses accrue to the policyholders. Assets and liabilities
(stated at market value) of the Separate Account, representing net deposits and
accumulated net investment earnings less fees, held primarily for the benefit of
contractholders, are shown as separate captions in the consolidated balance
sheets.
Deposits to the Separate Account are reported as increases in
Separate Account liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges to the Separate Account are included in
revenues.
-13-
<PAGE> 46
K. EARNINGS PER COMMON SHARE
The Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings Per Share" (SFAS No. 128) which specifies the
computation, presentation and disclosure requirements of earnings per share for
entities with publicly held common stock and potential common stock. Earnings
per share (EPS) presented on the face on the consolidated income statement has
been calculated to reflect the adoption of SFAS No. 128 by the Company. Basic
EPS is computed based upon the weighted average number of common shares
outstanding during the year. Diluted EPS is computed based upon the weighted
average number of common shares including contingently issuable shares and other
dilutive items. The weighted average number of common shares used to compute
diluted EPS for the year ending December 31, 1997 was 32,736,202. The dilution
from the potential exercise of stock options outstanding did not change basic
EPS.
L. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and amounts due
from banks with an original maturity of three months or less.
M. NEW ACCOUNTING PRONOUNCEMENTS
In December 1996, the FASB issued SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125." SFAS No. 127
amends SFAS No. 125 by deferring for one year the effective date of paragraph 15
of SFAS No. 125, addressing secured borrowings and collateral, and for
repurchase agreement, dollar roll, security lending and similar transactions, of
paragraphs 9 through 12 and 237(b) of SFAS No. 125. SFAS No. 127 is effective
for certain transactions occurring after December 31, 1997, and must be applied
prospectively. Management is evaluating the impact of SFAS 125 and 127 on the
Company.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), which
establishes standards for displaying comprehensive income and its components in
a full set of general-purpose financial statements. SFAS 130 is effective for
fiscal years beginning after December 15, 1997.
Also in June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 131 establishes standards for reporting
information about operating segments in annual financial statements and requires
reporting selected information about operating segments in interim financial
reports issued to shareholders. SFAS 131 is effective for fiscal years beginning
after December 15, 1997. The Company's current definition of its operating
segments will not change.
2. INVESTMENTS
The following information summarizes the components of net investment
income and realized investment gains (losses).
Net Investment Income:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------
1997 1996 1995
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Fixed maturities $ 134,740 $ 132,467 $ 128,310
Common stocks 1,341 1,315 733
Short-term investments 14,368 14,226 14,010
Other investment income 48,797 44,141 32,497
---------- ---------- ----------
199,246 192,149 175,550
Less investment expenses 7,428 5,969 4,770
---------- ---------- ----------
Net investment income $ 191,818 $ 186,180 $ 170,780
========== ========== ==========
</TABLE>
The carrying value of fixed maturities which were non-income producing
for more than twelve months at December 31, 1997, 1996 and 1995 was $0 million,
$0 million and $1.5 million, respectively.
-14-
<PAGE> 47
2. INVESTMENTS - CONTINUED
Realized Investment Gains (Losses):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1997 1996 1995
--------- --------- --------
(in thousands)
<S> <C> <C> <C>
Fixed maturities $ 12,080 $ 6,735 $ 5,458
Common stocks 13,959 13,285 11,758
--------- --------- ---------
Total realized gains
on investments $ 26,039 $ 20,020 $ 17,216
========= ========= =========
</TABLE>
Unrealized Investment Gains (Losses):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
---------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Fixed maturities $ 109,995 $ 61,931 $ 107,521
Common stocks 13,752 8,438 3,668
---------- --------- -----------
Unrealized investment
gains $ 123,747 $ 70,369 $ 111,189
Amortization of deferred
acquisition costs (13,686) (8,378) (16,012)
Deferred federal income
taxes (38,521) (21,697) (33,445)
---------- --------- -----------
Net unrealized investment gain 71,540 40,294 61,732
========== ========= ===========
Change in net unrealized
investment gains $ 31,246 $ (21,438) $ 101,195
========== ========= ===========
</TABLE>
The change in unrealized investment gains (losses) shown above resulted
primarily from changes in general economic conditions which directly influenced
investment security markets. These changes were also impacted by writedowns of
investment securities for declines in market values deemed to be other than
temporary.
The following tables provide additional information relating to
investments held by the Company:
DECEMBER 31, 1997:
AVAILABLE FOR SALE:
<TABLE>
<CAPTION>
Amortized Gross Unrealized Market
Type of Investment Cost Gains Losses Value
- ----------------------------- ------------- ---------- ---------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds and Notes:
United States government
and government agencies
and authorities $ 518,997 $ 21,815 $ (256) $ 540,556
States, municipalities and
political subdivisions 26,709 3,574 0 30,283
Foreign governments 12,160 2,190 0 14,350
Public utilities 189,555 14,142 (425) 203,272
All other corporate bonds 855,347 74,441 (5,908) 923,880
Preferred stocks, primarily
corporate 197,161 8,047 (7,625) 197,583
------------- ---------- ---------- -------------
Total Fixed Maturities: $ 1,799,929 $ 124,209 $ (14,214) $ 1,909,924
============= ========== ========== =============
Common Stocks $ 32,021 $ 14,202 $ (450) $ 45,773
============= ========== ========== =============
</TABLE>
-15-
<PAGE> 48
2. INVESTMENTS - CONTINUED
DECEMBER 31, 1996:
AVAILABLE FOR SALE:
<TABLE>
<CAPTION> Gross Unrealized
Amortized ----------------------- Market
Type of Investment Cost Gains Losses Value
- ----------------------------- ----------- ---------- ---------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds and Notes:
United States government
and government agencies
and authorities $ 29,643 $ 2,287 $ (74) $ 31,856
States, municipalities and
political subdivisions 567,423 10,062 (2,354) 575,130
Foreign governments 12,014 686 0 12,700
Public utilities 221,755 4,165 (4,966) 220,954
All other corporate bonds 774,094 52,386 (9,444) 817,036
Preferred stocks, primarily
corporate 156,488 13,624 (4,439) 165,673
------------ ---------- ---------- ------------
Total Fixed Maturities: $ 1,761,417 $ 83,210 $ (21,277) $ 1,823,349
============ ========== ========== ============
Common Stocks $ 33,621 $ 8,993 $ (555) $ 42,059
============ ========== ========== ============
</TABLE>
The estimated fair value of fixed maturities available for sale at
December 31, 1997, by contractual maturity, are as follows. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without penalties.
<TABLE>
<CAPTION>
Estimated Fair Value
--------------------
(in thousands)
<S> <C>
Due in one year or less $ 11,410
Due after one year through five years 143,204
Due after five years through ten years 112,127
Due after ten years 1,445,600
-------------
Total debt securities 1,712,341
Preferred stock 197,583
-------------
Total $ 1,909,924
=============
</TABLE>
-16-
<PAGE> 49
2. INVESTMENTS - CONTINUED
Proceeds from sales of fixed maturities during 1997, 1996 and 1995 were
$718.4 million, $757.7 million and $506.7 million, respectively. During 1997,
1996 and 1995, respectively, gross gains of $16.4 million, $7.3 million and $4.8
million and gross losses of $4.5 million, $7.2 million and $14.7 million were
realized on those sales.
During 1996, the Company restructured or modified the terms of certain
fixed maturity investments. Certain of these restructures included debt for
equity exchanges. The fixed maturity portfolio, based on carrying value,
includes $8.6 million at December 31, 1996 of such restructured securities.
These restructures and modifications had no significant impact on gross interest
income on these fixed maturities (which is included in net investment income).
During 1997, the Company did not restructure or modify the terms of any fixed
maturity investments.
As of December 31, 1997, the Company's mortgage loans were
collateralized by commercial office buildings in New York and Pennsylvania.
Investments in U.S. Government and Government Agencies with an aggregate
carrying value of $518,997,000 represents investments owned in any one issuer
that aggregate 10% or more of shareholders' equity as of December 31, 1997.
As of December 31, 1997 securities with a carrying value of
approximately $5.5 million were on deposit with various state insurance
departments to comply with applicable insurance laws.
As part of a proposed rehabilitation plan for Fidelity Mutual Life
Insurance Company ("Fidelity"), on January 11, 1995 the Insurance Company signed
a definitive purchase agreement with the Pennsylvania Insurance Commissioner and
Fidelity to invest up to $45 million for a minority (49.9%) stake in a Fidelity
subsidiary insurance holding company. In addition, the Company had agreed to
purchase $25 million of Senior Notes of such company.
The Company was informed by the Pennsylvania Insurance Commissioner that
in response to the significant improvement in the invested assets of Fidelity,
she has reopened the process to select an equity investor for the
recapitalization and rehabilitation of Fidelity. The Company disagreed with the
Insurance Commissioner's actions and commenced litigation which was settled in
the second quarter of 1997. As part of the settlement, the Company received $1.7
million.
3. NOTES PAYABLE
Notes payable at December 31, 1997 and 1996 consist of $50 million, 9
1/2% senior notes due December 15, 2000. Interest is payable June 15 and
December 15. Debt issue costs are being amortized on the interest method over
the term of the notes. As of December 31, 1997, such unamortized costs were $874
thousand. There are no principal payments required for the senior notes over the
next three years and the total principal is due on December 15, 2000. The senior
notes are callable after December 14, 1998.
The indenture governing the senior notes contains covenants relating to
limitations on additional indebtedness, restricted payments, liens and sale or
issuance of capital stock of the Insurance Company. In the event the Company
violates such covenants as defined in the indenture, the Company is obligated to
offer to repurchase 25% of the outstanding principal amount of such notes. The
Company believes that it is in compliance with all of the covenants.
The short-term note payable is a bank line of credit in the amount of
$25,000,000 and provides for interest on borrowings based on market indices. At
December 31, 1997 and 1996 the Company had $20,000,000 and $5,000,000
outstanding, respectively. The short-term note payable outstanding at December
31, 1997 and 1996 had a weighted average interest rate of 6.625% and 6.281%,
respectively.
-17-
<PAGE> 50
4. SHAREHOLDERS' EQUITY
The Company is authorized to issue 100,000,000 shares of its $.01 par
value Common Stock. At December 31, 1997 32,621,549 shares were outstanding and
at December 31, 1996 32,992,835 shares were outstanding.
During the third quarter of 1997, the Company's Board of Directors
increased the quarterly dividend rate to $.06 per share. During 1997 and 1996,
the Company purchased and retired 372,300 and 724,000 shares of common stock,
respectively. The Company is authorized pursuant to a resolution of the Board of
Directors to purchase an additional 232,000 shares of common stock.
Payment of dividends to the Company by the Insurance Company are
effectively restricted by the provisions of the New York Insurance Law
("Insurance Law"). All dividend payments are subject to the review and
disapproval by the New York Insurance Department. Under the New York State
Insurance Law, the New York Superintendent has broad discretion to determine
whether the financial condition of a stock life insurance company would support
the payment of dividends to its shareholders.
The New York Insurance Department has established informal guidelines
for the Superintendent's determinations which focus upon, among other things,
the overall financial condition and profitability of the insurer under statutory
accounting practices. During 1997, 1996 and 1995, the Insurance Company paid
dividends of $24.8 million, $15 million and $5 million, respectively, to the
Company.
5. EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS
(a) Employee Retirement Plan
The Company has a noncontributory defined benefit pension plan covering
all eligible employees. The Company is both sponsor and administrator of this
plan. The plan provides for pension benefits based on average pay and years of
service. It is the Company's general policy to fund accrued pension costs as
required under ERISA. In 1997, 1996 and 1995 the Company contributed $50,000,
$450,000, and $120,500, respectively to the plan.
Net pension cost included the following components:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service cost $ 436 $ 405 $ 379
Interest cost 370 330 293
Actual return on plan assets (343) (298) (293)
Other 16 11 0
----- ----- -----
Net pension cost $ 479 $ 448 $ 379
===== ===== =====
</TABLE>
-18-
<PAGE> 51
5. EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS - CONTINUED
The funded status of the plan at December 31, 1997 and 1996 was as
follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Projected benefits obligation $ (5,923) $ (5,269)
Plan assets at fair value 4,558 4,444
--------- ---------
Assets less than projected benefit (1,365) (825)
Unrecognized prior service cost 167 195
Unrecognized net gain (619) (757)
--------- ---------
Accrued pension costs $ (1,817) $ (1,387)
========= =========
Accumulated benefit obligation:
Vested $ 4,868 $ 4,259
Nonvested 8 33
--------- ---------
$ 4,876 $ 4,292
========= =========
</TABLE>
The following rates were used in computing the pension cost for the
years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted-average discount rate 7.0% 7.0% 7.0%
Assumed rate of compensation increases 3.0% 3.0% 3.0%
Expected long-term rates of return 7.5% 7.5% 7.5%
</TABLE>
(b) Employee Savings Plan
The Company adopted an Internal Revenue Code (IRC) Section 401(k) plan
for its employees effective January 1, 1992. Under the plan, participants may
contribute up to a maximum of 15% of their pre-tax earnings or the dollar limit
as prescribed by IRC Section 415(d). A portion of participants' pre-tax earnings
may be matched by the Company. For the years ended December 31, 1997, 1996 and
1995, the Company's contribution was approximately $43,700, $40,500 and $14,000,
respectively.
(c) Employee Stock Option Plan
The Company has adopted an incentive stock option plan recommended by
the Board of Directors and approved by the shareholders. This plan grants
options to purchase up to 1,000,000 shares of common stock of the Company to
officers and key employees. Option prices are 100% of the fair market value at
date of grant. The following schedule shows all options granted, exercised,
expired and exchanged under the Company's Incentive Stock Option Plan as of
December 31, 1997.
-19-
<PAGE> 52
5. EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS - CONTINUED
Information relating to the options is as follows:
<TABLE>
<CAPTION>
Option Price
Number Amount Total
of Shares Per Share Price
----------- --------- -------------
<S> <C> <C> <C>
Outstanding, January 1, 1995 194,740 $ 4.93 $ 961,105
Granted 45,200 7.53 340,200
Exercised (17,128) 4.88 (83,499)
Cancelled (1,191) 4.88 (5,806)
---------- -------------
Outstanding, December 31, 1995 221,621 $ 5.47 $ 1,212,000
Granted 44,400 9.69 430,125
Exercised (170,433) 4.88 (830,861)
Cancelled (46,188) 7.20 (332,516)
---------- -------------
Outstanding, December 31, 1996 49,400 $ 9.08 $ 448,748
Granted 66,150 17.49 1,180,706
Exercised (1,014) 9.69 (9,826)
Cancelled (2,525) 12.43 (31,398)
---------- --------------
Outstanding, December 31, 1997 112,011 $14.20 $ 1,588,230
========== =============
</TABLE>
At December 31, 1997, 14,761 options for shares of common stock were
exercisable.
The Company applies Accounting Principles Board Opinion No. 25 and
related Interpretations in accounting for its stock option plan. Accordingly, no
compensation cost has been recognized for its fixed stock option plan. Had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant dates for awards under the plan consistent with the
method of FASB Statement 123, the Company's net income and earnings per common
share for the year ended December 31, 1997 would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
Net income (in thousands)
<S> <C>
As reported $61,292
Pro forma 61,188
Earnings per common share
As reported $1.87
Pro forma 1.87
</TABLE>
The fair value of options granted under the Company's fixed stock option
plan during 1997 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used:
dividend yield of 1.19%, expected volatility of 29.81%, risk free interest rate
of 7.0%, and expected lives of 4 years.
-20-
<PAGE> 53
6. INCOME TAXES
The following is a reconciliation of income taxes computed using the
Federal statutory rate with the provision for income taxes for the years ended
December 31,:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
(in thousands)
Provision for income taxes computed
at Federal statutory rate $ 31,695 $ 26,725 $ 19,737
Increase (decrease) in income taxes
resulting from:
Utilization of prior unrecognized
deferred tax asset relating to
investment losses (868) (5,767) (7,858)
Losses producing no current benefit 81 1,590 1,262
Other (1,642) (712) (5,809)
--------- --------- ---------
Provision for Federal
income taxes $ 29,266 $ 21,836 $ 7,332
========= ========= =========
</TABLE>
The Company provides for deferred income taxes resulting from temporary
differences which arise from recording certain transactions in different years
for income tax reporting purposes than for financial reporting purposes. The
sources of these differences and the tax effect of each were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- --------
(in thousands)
<S> <C> <C> <C>
Deferred policy acquisition costs $ 341 $ (742) $ 333
Policyholders' account balances 5 (216) (189)
Investment adjustments (481) 135 (1,510)
Previously accrued expenses
currently deductible 0 0 0
Other (1,764) (540) (797)
-------- --------- --------
Deferred Federal income tax benefit $ (1,899) $ (1,363) $ (2,163)
======== ========= ========
</TABLE>
Deferred federal income taxes reflect the net tax effects of (a)
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, and
(b) operating loss carryforwards. Significant components of the Company's net
deferred tax (asset) liability as of December 31, 1997 and 1996 are as follows
(in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred income tax asset:
Investments $ (6,003) $ (5,522)
Insurance reserves (6,508) (5,584)
Operating loss carryforwards (1,669) (1,903)
Other (249) (292)
---------- ----------
(14,429) (13,301)
Valuation allowance 5,322 6,072
---------- ----------
Net deferred income tax asset $ (9,107) $ (7,229)
---------- ----------
Deferred income tax liability:
Deferred policy acquisition costs $ 16,305 $ 15,964
Net unrealized investment gains 38,521 21,697
Policyholder account balances 90 85
Other 766 1,132
---------- ----------
Deferred income tax liability 55,682 38,878
---------- ----------
Net deferred income tax liability $ 46,575 $ 31,649
========== ==========
</TABLE>
-21-
<PAGE> 54
6. INCOME TAXES - CONTINUED
The valuation allowance relates principally to investment writedowns
recorded for financial reporting purposes, which have not been recognized for
income tax purposes, due to the uncertainty associated with their realizability
for income tax purposes. Changes in the valuation allowance for the years ended
December 31, 1997 and 1996 primarily reflect the reduction in the deferred tax
asset as a result of the utilization of previously unrecognized investment
losses.
Prior to 1984, Federal income tax law allowed life insurance companies
to exclude from taxable income and set aside certain amounts in a tax memorandum
account known as the Policyholder Surplus Account ("PSA"). Under the tax law,
the PSA has been frozen at its December 31, 1983 balance of $2,900,000 which may
under certain circumstances become taxable in the future. The Insurance Company
does not believe that any significant portion of the amount in this account will
be taxed in the foreseeable future. Accordingly, no provision for income taxes
has been made thereon. If the amount in the PSA were to become taxable, the
resulting liability using current rates would be approximately $1,015,000.
Under current tax law, there are certain limitations on the utilization
of non-life insurance company losses ("non-life losses") against life insurance
company income ("life income") in a consolidated federal income tax return. The
utilization of non-life losses against life income in any year is limited to the
lesser of 35 percent of life income or 35 percent of non-life losses. Any
unutilized balance of non-life losses is carried over to subsequent tax years.
The Company has net operating loss carryforwards of approximately
$7,337,000 at December 31, 1997 of which $2,949,000 expire in 2009; $2,487,000
in 2010; $1,671,000 in 2011; and $230,000 in 2012.
7. REINSURANCE
Reinsurance allows life insurance companies to share risks on a case by
case or aggregate basis with other insurance and reinsurance companies. The
Insurance Company cedes insurance to the reinsurer and compensates the reinsurer
for its assumption of risk. The maximum amount of individual life insurance
normally retained by the Company on any one life is $50,000 per policy and
$100,000 per life. The maximum retention with respect to impaired risk policies
typically is the same. The Insurance Company cedes insurance primarily on an
"automatic" basis, under which risks are ceded to a reinsurer on specific blocks
of business where the underlying risks meet certain predetermined criteria, and
on a "facultative" basis, under which the reinsurer's prior approval is required
on each risk reinsured.
The reinsurance of a risk does not discharge the primary liability of
the insurance company ceding that risk, but the reinsured portion of the claim
is recoverable from the reinsurer. The major reinsurance treaties into which the
Insurance Company has entered can be characterized as follows:
Reinsurance ceded from the Insurance Company to Life Reassurance
Corporation of America and Swiss Re Life & Health America Inc. at December 31,
1997 and 1996 consists of coinsurance agreements aggregating face amounts of
$230.6 million and $257.0 million, respectively, representing the amount of
individual life insurance contracts that were ceded to the reinsurers. The term
"coinsurance" refers to an arrangement under which the Insurance Company pays
the reinsurers the gross premiums on the portion of the policy to be reinsured
and the reinsurers grant a ceding commission to the Insurance Company to cover
its acquisition costs plus a margin for profit.
Reinsurance premiums ceded for 1997, 1996 and 1995 amounted to
approximately $4.5 million, $4.6 million, and $4.5 million, respectively.
-22-
<PAGE> 55
8. STATUTORY FINANCIAL STATEMENTS
Accounting practices used to prepare statutory financial statements for
regulatory filings of stock life insurance companies differ from GAAP. Material
differences resulting from these accounting practices include: deferred policy
acquisition costs, deferred Federal income taxes and statutory non-admitted
assets are recognized under GAAP accounting while statutory investment valuation
reserves are not; premiums for universal life and investment-type products are
recognized as revenues for statutory purposes and as deposits to policyholders'
accounts under GAAP; different assumptions are used in calculating future
policyholders' benefits; and different methods are used for calculating
valuation allowances for statutory and GAAP purposes; fixed maturities are
recorded principally at market value or amortized cost as appropriate under GAAP
while under statutory accounting practices they are recorded principally at
amortized cost.
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Statutory surplus $296,725 $250,869 $205,135
======== ======== ========
Statutory net income $ 57,081 $ 41,972 $ 38,834
======== ======== ========
</TABLE>
9. LITIGATION
From time to time, the Company is involved in litigation relating to
claims arising out of its operations in the normal course of business. The
Company is not a party to any legal proceedings, the adverse outcome of which,
in management's opinion, individually or in the aggregate, would have a material
adverse effect on the Company's financial condition or results of operations.
10. FAIR VALUE INFORMATION
The following estimated fair value disclosures of financial instruments
have been determined using available market information, current pricing
information and appropriate valuation methodologies. If quoted market prices
were not readily available for a financial instrument, management determined an
estimated fair value. Accordingly, the estimates may not be indicative of the
amounts the Company could have realized in a market transaction.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value.
For fixed maturities and common stocks, estimated fair values were based
primarily upon independent pricing services. For a limited number of privately
placed securities, where prices are not available from independent pricing
services, the Company estimates market values using a matrix pricing model,
based on the issuer's credit standing and the security's interest rate spread
over U.S. Treasury bonds. Because it is not practicable to obtain an independent
valuation for each limited partnership interest for purposes of disclosure, the
market value of a limited partnership interest is estimated to approximate the
carrying value. As of December 31, 1997, the Company was committed to
contribute, if called upon, an aggregate of approximately $73.7 million of
additional capital to certain of these limited partnerships. The market value of
short-term investments, mortgage loans and policy loans is estimated to
approximate the carrying value.
Estimated fair values of policyholders' account balances for investment
type products (i.e., deferred annuities, immediate annuities without life
contingencies and universal life contracts) are calculated by projecting the
contract cash flows and then discounting them back to the valuation date at the
appropriate discount rate. For immediate annuities without life contingencies,
the cash flows are defined contractually. For all other products, projected cash
flows are based on an assumed
-23-
<PAGE> 56
10. FAIR VALUE INFORMATION- CONTINUED
lapse rate and crediting rate (based on the current treasury curve), adjusted
for any anticipated surrender charges. The discount rate is based on the current
duration-matched treasury curve, plus an adjustment to reflect the anticipated
spread above treasuries on investment grade fixed maturity securities, less an
expense and profit spread.
<TABLE>
<CAPTION>
December 31, 1997 Carrying Value Estimated Fair Value
- ----------------- -------------- --------------------
Assets (in thousands)
<S> <C> <C>
Fixed Maturities:
Available for Sale 1,909,924 1,909,924
Common Stock 45,773 45,773
Mortgage Loans 17,865 17,865
Policy Loans 18,120 18,120
Cash and Short-Term Investments 277,578 277,578
Other Invested Assets 208,162 208,162
Liabilities
Policyholders' Account Balances 1,280,900 1,288,551
Note Payable 50,000 52,500
Short-Term Note Payable 20,000 20,000
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996 Carrying Value Estimated Fair Value
- ----------------- -------------- --------------------
Assets (in thousands)
<S> <C> <C>
Fixed Maturities:
Available for Sale 1,823,349 1,823,349
Common Stock 42,059 42,059
Mortgage Loans 18,622 18,622
Policy Loans 18,068 18,068
Cash and Short-Term Investments 240,857 240,857
Other Invested Assets 176,103 176,103
Liabilities
Policyholders' Account Balances 1,260,545 1,225,654
Other Notes Payable 50,000 50,000
Short-Term Note Payable 5,000 5,000
</TABLE>
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is presented below. Certain amounts
have been reclassified to conform to the current year's presentation.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------
1997 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
(in thousands, except per share)
<S> <C> <C> <C> <C>
Premiums and other
insurance revenues $ 6,390 $ 6,637 $ 9,024 $ 7,796
Net investment income 48,623 49,399 44,444 49,352
Realized investment
gains 2,510 8,503 9,518 5,508
-------- -------- --------- ---------
Total revenues 57,523 64,539 62,986 62,656
======== ======== ========= =========
Benefits and expenses 38,951 41,022 40,128 37,045
======== ======== ========= =========
Net income 12,548 16,372 16,018 16,354
======== ======== ========= =========
Net income per share $ .38 $ .50 $ .49 $ .50
======== ======== ========= =========
</TABLE>
-24-
<PAGE> 57
11. QUARTERLY FINANCIAL DATA (UNAUDITED)- CONTINUED
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------
1996 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
(in thousands, except per share)
<S> <C> <C> <C> <C>
Premiums and other
insurance revenues $ 2,691 $ 3,447 $ 5,533 $ 5,803
Net investment income 49,753 44,188 42,958 49,281
Realized investment
gains 1,479 8,249 7,484 2,808
-------- -------- --------- ---------
Total revenues 53,923 55,884 55,975 57,892
======== ======== ========= =========
Benefits and expenses 36,865 35,418 36,049 38,985
======== ======== ========= =========
Net income 10,358 14,316 14,084 15,763
======== ======== ========= =========
Net income per share $ .31 $ .43 $ .42 $ .44
======== ======== ========= =========
</TABLE>
-25-
<PAGE> 58
REPORT OF INDEPENDENT ACCOUNTANTS
April 22, 1998
To the Board of Directors of Presidential Life Insurance Company and the
Contractholders of its separate account, Presidential Variable Account One
In our opinion, the accompanying statement of net assets, including the schedule
of portfolio investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of each of the Variable Accounts constituting Presidential Variable
Account One, a separate account of Presidential Life Insurance Company (the
"Separate Account") at December 31, 1997, the results of their operations for
the year then ended, and the changes in their net assets for the two years then
ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Separate Account's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1997 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
-26-
<PAGE> 59
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
Foreign Capital Natural Growth and Strategic
Securities Appreciation Growth Resources Income Multi-Asset Multi-Asset
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $260,577 $649,841 $1,163,183 $61,080 $197,769 $538,742 $654,872
Liabilities 0 0 0 0 0 0 0
-----------------------------------------------------------------------------------
Net Assets $260,577 $649,841 $1,163,183 $61,080 $197,769 $538,742 $654,872
===================================================================================
Accumulation units outstanding 18,506 14,845 21,523 3,455 6,864 22,997 24,182
===================================================================================
Unit value of accumulation units $ 14.08 $ 43.78 $ 54.05 $ 17.68 $ 28.81 $ 23.43 $ 27.09
===================================================================================
</TABLE>
See accompanying notes to financial statements.
-27-
<PAGE> 60
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Government and Money
High Yield Target'98 Fixed Income Quality Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio TOTAL
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments in Anchor Series Trust,
at market value $156,636 $338,374 $81,981 $331,569 $177,211 $4,611,835
Liabilities 0 0 0 0 0 0
--------------------------------------------------------------------------
Net Assets $156,636 $338,374 $81,981 $331,569 $177,211 $4,611,835
==========================================================================
Accumulation units outstanding 6,161 17,036 2,953 11,372 9,843
=============================================================
Unit value of accumulation units $ 25.42 $ 19.86 $ 27.76 $ 29.16 $ 18.00
=============================================================
</TABLE>
See accompanying notes to financial statements.
-28-
<PAGE> 61
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
Market Value Market
Variable Accounts Shares Per Share Value Cost
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Foreign Securities Portfolio 22,854 $11.40 $ 260,577 $ 252,864
Capital Appreciation Portfolio 20,173 32.21 649,841 405,978
Growth Portfolio 43,011 27.04 1,163,183 854,261
Natural Resources Portfolio 4,236 14.42 61,080 57,121
Growth and Income Portfolio 11,539 17.14 197,769 145,639
Strategic Multi-Asset Portfolio 47,754 11.28 538,742 554,964
Multi-Asset Portfolio 48,433 13.52 654,872 618,672
High Yield Portfolio 18,701 8.38 156,636 148,173
Target '98 Portfolio 30,559 11.07 338,374 366,672
Fixed Income Portfolio 6,173 13.28 81,981 81,480
Government and Quality Bond Portfolio 23,746 13.96 331,569 309,325
Money Market Portfolio 177,211 1.00 177,211 177,211
------------------------
$4,611,835 $3,972,360
========================
</TABLE>
See accompanying notes to financial statements.
-29-
<PAGE> 62
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
December 31, 1997
<TABLE>
<CAPTION>
Foreign Capital Natural Growth and Strategic
Securities Appreciation Growth Resources Income Multi-Asset Multi-Asset
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 44,462 $ 73,975 $ 127,293 $ 6,070 $ 3,349 $ 120,978 $ 127,297
-------------------------------------------------------------------------------------
Total investment income 44,462 73,975 127,293 6,070 3,349 120,978 127,297
-------------------------------------------------------------------------------------
Expenses:
Mortality risk charge (3,728) (7,489) (10,722) (842) (1,500) (5,430) (6,699)
Expense risk charge (1,450) (2,912) (4,170) (327) (584) (2,112) (2,605)
Administrative expense charge (621) (1,248) (1,787) (140) (250) (905) (1,116)
-------------------------------------------------------------------------------------
Total expenses (5,799) (11,649) (16,679) (1,309) (2,334) (8,447) (10,420)
-------------------------------------------------------------------------------------
Net investment income 38,663 62,326 110,614 4,761 1,015 112,531 116,877
-------------------------------------------------------------------------------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 284,517 522,532 512,518 41,822 31,889 130,408 310,485
Cost of shares sold (250,961) (332,590) (386,059) (35,608) (25,009) (132,097) (288,519)
-------------------------------------------------------------------------------------
Net realized gains (losses) from securities
transactions 33,556 189,942 126,459 6,214 6,880 (1,689) 21,966
-------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments:
Beginning of period 85,582 315,249 249,326 23,624 22,659 22,580 40,525
End of period 7,713 243,863 308,922 3,959 52,130 (16,222) 36,200
-------------------------------------------------------------------------------------
Change in net unrealized appreciation/
depreciation of investments (77,869) (71,386) 59,596 (19,665) 29,471 (38,802) (4,325)
-------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations $ (5,650) $ 180,882 $ 296,669 $ (8,690) $ 37,366 $ 72,040 $ 134,518
=====================================================================================
</TABLE>
See accompanying notes to financial statements.
-30-
<PAGE> 63
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Government and Money
High Yield Target'98 Fixed Income Quality Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio TOTAL
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends and capital gains distributions $ 15,944 $ 32,835 $ 6,952 $ 29,828 $ 10,832 $ 599,815
------------------------------------------------------------------------------
Total investment income 15,944 32,835 6,952 29,828 10,832 599,815
------------------------------------------------------------------------------
Expenses:
Mortality risk charge (1,456) (3,085) (702) (3,655) (1,940) (47,248)
Expense risk charge (567) (1,200) (273) (1,421) (755) (18,376)
Administrative expense charge (243) (514) (117) (609) (323) (7,873)
------------------------------------------------------------------------------
Total expenses (2,266) (4,799) (1,092) (5,685) (3,018) (73,497)
------------------------------------------------------------------------------
Net investment income 13,678 28,036 5,860 24,143 7,814 526,318
------------------------------------------------------------------------------
Net realized gains (losses) from securities
transactions:
Proceeds from shares sold 30,785 32,655 1,133 150,035 101,559 2,150,338
Cost of shares sold (28,037) (33,404) (1,117) (143,621) (101,559) (1,758,581)
------------------------------------------------------------------------------
Net realized gains (losses) from securities
transactions 2,748 (749) 16 6,414 0 391,757
------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments:
Beginning of period 9,905 (13,522) 384 21,864 0 778,176
End of period 8,463 (28,298) 501 22,244 0 639,475
------------------------------------------------------------------------------
Change in net unrealized appreciation/
depreciation of investments (1,442) (14,776) 117 380 0 (138,701)
------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 14,984 $ 12,511 $ 5,993 $ 30,937 $ 7,814 $ 779,374
==============================================================================
</TABLE>
See accompanying notes to financial statements.
-31-
<PAGE> 64
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
December 31, 1997
<TABLE>
<CAPTION>
Foreign Capital Natural Growth and Strategic
Securities Appreciation Growth Resources Income Multi-Asset Multi-Asset
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 38,663 $ 62,326 $ 110,614 $ 4,761 $ 1,015 $ 112,531 $ 116,877
Net realized gains (losses) from
securities transactions 33,556 189,942 126,459 6,214 6,880 (1,689) 21,966
Change in net unrealized appreciation/
depreciation
of investments (77,869) (71,386) 59,596 (19,665) 29,471 (38,802) (4,325)
-----------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations (5,650) 180,882 296,669 (8,690) 37,366 72,040 134,518
-----------------------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 14,359 16,207 9,780 165 848 6,921 2,781
Cost of units redeemed (284,417) (494,547) (484,516) (40,402) (25,719) (125,131) (187,787)
Net transfers 19,402 37,891 75,568 10,378 53,880 0 (46,251)
-----------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions (250,656) (440,449) (399,168) (29,859) 29,009 (118,210) (231,257)
-----------------------------------------------------------------------------------------
Increase (decrease) in net assets (256,306) (259,567) (102,499) (38,549) 66,375 (46,170) (96,739)
Net assets at beginning of period 516,883 909,408 1,265,682 99,629 131,394 584,912 751,611
-----------------------------------------------------------------------------------------
Net assets at end of period $ 260,577 $ 649,841 $1,163,183 $ 61,080 $197,769 $ 538,742 $ 654,872
========================================================================================
ANALYSIS OF INCREASE (DECREASE) IN
UNITS OUTSTANDING:
Units sold 664 115 159 15 33 187 46
Units redeemed (19,341) (11,953) (10,265) (2,168) (998) (5,338) (7,110)
Units transferred 1,353 987 1,516 527 2,041 0 (1,906)
-----------------------------------------------------------------------------------------
Increase (decrease) in units outstanding (17,324) (10,851) (8,590) (1,626) 1,076 (5,151) (8,970)
Beginning units 35,830 25,696 30,113 5,081 5,788 28,148 33,152
-----------------------------------------------------------------------------------------
Ending units 18,506 14,845 21,523 3,455 6,864 22,997 24,182
========================================================================================
</TABLE>
See accompanying notes to financial statements.
-32-
<PAGE> 65
'
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Government and Money
High Yield Target '98 Fixed Income Quality Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio TOTAL
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 13,678 $ 28,036 $ 5,860 $ 24,143 $ 7,814 $ 526,318
Net realized gains (losses) from
securities transactions 2,748 (749) 16 6,414 0 391,757
Change in net unrealized appreciation/
depreciation of investments (1,442) (14,776) 117 380 0 (138,701)
---------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 14,984 12,511 5,993 30,937 7,814 779,374
---------------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 37 0 1,199 518 4 52,819
Cost of units redeemed (25,451) (22,802) (47) (72,982) (30,190) (1,793,991)
Net transfers (2,199) (12) 0 (55,614) (67,827) 25,216
---------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions (27,613) (22,814) 1,152 (128,078) (98,013 (1,715,956)
---------------------------------------------------------------------------------
Increase (decrease) in net assets (12,629) (10,303) 7,145 (97,141) (90,199) (936,582)
Net assets at beginning of period 169,265 348,677 74,836 428,710 267,410 5,548,417
---------------------------------------------------------------------------------
Net assets at end of period $156,636 $338,374 $81,981 $ 331,569 $177,211 $ 4,611,835
=================================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 0 0 47 10 0
Units redeemed (1,049) (1,173) (2) (2,570) (1,734)
Units transferred (94) 0 0 (1,961) (3,826)
--------------------------------------------------------------------
Increase (decrease) in units outstanding (1,143) (1,173) 45 (4,521) (5,560)
Beginning units 7,304 18,209 2,908 15,893 15,403
--------------------------------------------------------------------
Ending units 6,161 17,036 2,953 11,372 9,843
====================================================================
</TABLE>
See accompanying notes to financial statements.
-33-
<PAGE> 66
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
December 31, 1996
<TABLE>
<CAPTION>
Foreign Capital Natural Growth and Strategic
Securities Appreciation Growth Resources Income Multi-Asset Multi-Asset
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 1,262 $ 22,116 $ 40,645 $ 619 $ 5,899 $ 47,836 $ 66,100
Net realized gains (losses) from
securities transactions 10,972 98,111 31,855 14,242 3,844 1,774 19,146
Change in net unrealized appreciation/
depreciation of investments 37,000 79,752 186,596 (3) 12,283 21,956 10,641
-----------------------------------------------------------------------------------------
Increase in net assets from
operations 49,234 199,979 259,096 14,858 22,026 71,566 95,887
-----------------------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 5,711 125 7,248 1,337 877 3,220 1,413
Cost of units redeemed (69,974) (219,376) (212,884) (60,393) (33,088) (75,566) (347,361)
Net transfers 10,067 6,243 13,819 2,229 10,000 0 13,254
-----------------------------------------------------------------------------------------
Decrease in net assets from
capital transactions (54,196) (213,008) (191,817) (56,827) (22,211) (72,346) (332,694)
-----------------------------------------------------------------------------------------
Increase (decrease) in net assets (4,962) (13,029) 67,279 (41,969) (185) (780) (236,807)
Net assets at beginning of period 521,845 922,437 1,198,403 141,598 131,579 585,692 988,418
-----------------------------------------------------------------------------------------
Net assets at end of period $516,883 $ 909,408 $1,265,682 $ 99,629 $131,394 $584,912 $751,611
=========================================================================================
ANALYSIS OF INCREASE (DECREASE) IN
UNITS OUTSTANDING:
Units sold 412 17 214 59 39 167 114
Units redeemed (5,076) (6,674) (5,667) (3,218) (1,631) (3,934) (16,583)
Units transferred 747 193 398 116 512 0 673
-----------------------------------------------------------------------------------------
Decrease in units outstanding (3,917) (6,464) (5,055) (3,043) (1,080) (3,767) (15,796)
Beginning units 39,747 32,160 35,168 8,124 6,868 31,915 48,948
-----------------------------------------------------------------------------------------
Ending units 35,830 25,696 30,113 5,081 5,788 28,148 33,152
=========================================================================================
</TABLE>
See accompanying notes to financial statements.
-34-
<PAGE> 67
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
December 31, 1996
(Continued)
<TABLE>
<CAPTION>
Government and Money
High Yield Target '98 Fixed Income Quality Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio TOTAL
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 14,239 $ 38,680 $ 6,479 $ 27,681 $ 9,993 $ 281,549
Net realized gains (losses) from
securities transactions 2,624 (1,181) 5,062 13,569 0 200,018
Change in net unrealized appreciation/
depreciation of investments (462) (28,511) (11,382) (35,620) 0 272,250
------------------------------------------------------------------------------
Increase in net assets from operations 16,401 8,988 159 5,630 9,993 753,817
------------------------------------------------------------------------------
From capital transactions:
Net proceeds from units sold 1,939 (30) 1,198 2,176 1,999 27,213
Cost of units redeemed (36,181) (97,591) (103,622) (201,948) (16,080) (1,474,064)
Net transfers 15,000 (5,641) 5,000 0 (69,471) 500
------------------------------------------------------------------------------
Decrease in net assets from capital
transactions (19,242) (103,262) (97,424) (199,772) (83,552) (1,446,351)
------------------------------------------------------------------------------
Increase (decrease) in net assets (2,841) (94,274) (97,265) (194,142) (73,559) (692,534)
Net assets at beginning of period 172,106 442,951 172,101 622,852 340,969 6,240,951
------------------------------------------------------------------------------
Net assets at end of period $169,265 $ 348,677 $ 74,836 $ 428,710 $267,410 $ 5,548,417
==============================================================================
ANALYSIS OF INCREASE (DECREASE) IN UNITS
OUTSTANDING:
Units sold 91 0 41 76 117
Units redeemed (1,664) (5,153) (4,087) (7,609) (941)
Units transferred 696 (295) 195 0 (4,109)
-----------------------------------------------------------------
Decrease in units outstanding (877) (5,448) (3,851) (7,533) (4,933)
Beginning units 8,181 23,657 6,759 23,426 20,336
-----------------------------------------------------------------
Ending units 7,304 18,209 2,908 15,893 15,403
=================================================================
</TABLE>
See accompanying notes to financial statements.
-35-
<PAGE> 68
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presidential Variable Account One of Presidential Life Insurance Company
(the "Separate Account") is a segregated investment account of Presidential
Life Insurance Company (the "Company") which was established pursuant to
New York insurance law on August 26, 1987, with units first offered for
sale on May 2, 1988. The Separate Account is registered as a segregated
unit investment trust pursuant to the provisions of the Investment Company
Act of 1940, as amended.
The Separate Account is composed of twelve variable portfolios (the
"Variable Accounts"). Each of the Variable Accounts is invested solely in
the shares of a designated portfolio of the Anchor Series Trust (the
"Trust"). The Trust is a diversified, open-end investment company, which
retains an investment advisor to assist in the investment activities of the
Trust. The contractholder may elect to have payments allocated to a
guaranteed-interest fund of the Company (the "General Account"), which is
not a part of the Separate Account. The financial statements include
balances allocated by the contractholder to the twelve Variable Accounts
and do not include balances allocated to the General Account.
The investment objectives and policies of the twelve portfolios of the
Trust are summarized below:
The FOREIGN SECURITIES PORTFOLIO seeks long-term capital appreciation. This
portfolio invests primarily in a diversified group of equity securities
issued by foreign companies and primarily denominated in foreign
currencies.
The CAPITAL APPRECIATION PORTFOLIO seeks long-term capital appreciation.
This portfolio invests in growth equity securities which are widely
diversified by industry and company and may engage in transactions
involving stock index futures and options thereon as a hedge against
changes in market conditions.
The GROWTH PORTFOLIO seeks capital appreciation. This portfolio invests in
growth equity securities and may engage in transactions involving stock
index futures and options thereon as a hedge against changes in market
conditions.
-36-
<PAGE> 69
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The NATURAL RESOURCES PORTFOLIO seeks a total return in excess of the U.S.
rate of inflation as represented by the Consumer Price Index. This
portfolio invests primarily in equity securities of U.S. or foreign
companies which are expected to provide favorable returns in periods of
rising inflation.
The GROWTH AND INCOME PORTFOLIO seeks to provide high current income and
long-term capital appreciation. This portfolio invests primarily in
securities that provide the potential for growth and offer income, such as
dividend-paying stocks and securities convertible into common stock. This
portfolio may also engage in transactions involving stock index futures and
options thereon as a hedge against changes in market conditions.
The STRATEGIC MULTI-ASSET PORTFOLIO seeks high long-term total investment
return. This portfolio invests in growth equity securities, aggressive
growth equity securities, investment grade bonds, high-yield, high-risk
bonds, international equity securities and money market instruments. This
portfolio may also engage in transactions involving stock index futures
contracts and options thereon, and transactions involving the future
delivery of fixed-income securities ("Financial Futures Contracts") and
options thereon as a hedge against changes in market conditions.
The MULTI-ASSET PORTFOLIO seeks long-term total investment return
consistent with moderate investment risk. This portfolio invests in growth
equity securities, convertible securities, investment grade fixed-income
securities and money market securities. This portfolio may also engage in
transactions involving stock index futures contracts and options thereon,
and Financial Futures Contracts and options thereon as a hedge against
changes in market conditions.
The HIGH YIELD PORTFOLIO seeks high current income. A secondary investment
objective is capital appreciation. This portfolio invests at least 65% of
its assets in high-yielding, high-risk, income-producing corporate bonds,
which generally carry ratings lower than those assigned to investment grade
bonds by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P"), or which are unrated. This portfolio may also engage
in transactions involving Financial Futures Contracts and options thereon
as a hedge against changes in market conditions.
-37-
<PAGE> 70
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The TARGET '98 PORTFOLIO seeks a predictable compounded investment return
for the specified time period, consistent with preservation of capital.
This portfolio invests primarily in zero coupon securities and current,
interest-bearing, investment grade debt obligations which are issued by the
U.S. Government, its agencies and instrumentalities, and both domestic and
foreign corporations. These investments will generally mature no later than
November 15, 1998. Accordingly, effective January 1, 1998, no purchase
payments or transfers into this portfolio are being accepted.
The FIXED INCOME PORTFOLIO seeks a high level of current income consistent
with preservation of capital. This portfolio invests primarily in
investment grade, fixed-income securities and may engage in Financial
Futures Contracts and options thereon as a hedge against changes in market
conditions.
The GOVERNMENT AND QUALITY BOND PORTFOLIO seeks relatively high current
income, liquidity and security of principal. This portfolio invests in
obligations issued, guaranteed or insured by the U.S. Government, its
agencies or instrumentalities and in corporate debt securities rated Aa or
better by Moody's or AA or better by S&P.
The MONEY MARKET PORTFOLIO seeks current income consistent with stability
of principal through investment in a diversified portfolio of money market
instruments maturing in 397 days or less. The portfolio will maintain a
dollar-weighted average portfolio maturity of not more than 90 days.
Purchases and sales of shares of the portfolios of the Trust are valued at
the net asset values of the shares on the date the shares are purchased or
sold. Dividends and capital gains distributions are recorded when received.
Realized gains and losses on the sale of investments in the Trust are
recognized at the date of sale and are determined on an average cost basis.
Accumulation unit values are computed daily based on the total net assets
of the Variable Accounts.
-38-
<PAGE> 71
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS
Charges and deductions are applied against the current value of the
Separate Account and are paid as follows:
WITHDRAWAL CHARGE: The contract value may be withdrawn at any time during
the accumulation period. There is a free withdrawal amount for the first
withdrawal during a contract year after the first contract year. The free
withdrawal amount is equal to 10% of aggregate purchase payments that
remain subject to the withdrawal charge and that have not previously been
withdrawn. Should a withdrawal exceed the free withdrawal amount, a
withdrawal charge, in certain circumstances, is imposed and paid to the
Company.
The withdrawal charge is 6% of the amount withdrawn if such withdrawal is
made within six years of making the purchase payment, but will not exceed
9% of total purchase payments. The withdrawal charge is deducted from the
remaining contract value so that the actual reduction in contract value as
a result of the withdrawal will be greater than the withdrawal amount
requested and paid. For purposes of determining the withdrawal charge,
withdrawals will be allocated to the oldest purchase payments first so that
all withdrawals are allocated to purchase payments to which the lowest (if
any) withdrawal charge applies.
ANNUITY CHARGE: Contractholders may elect a lump sum payment or one of
three annuity options. Option 1 provides a life income with installments
guaranteed, Option 2 provides a joint and survivor annuity, and Option 3
provides income for a specified period. No annuity charge is assessed if
Option 1 or Option 2 is elected. If a contractholder elects Option 3, an
annuity charge equal to the withdrawal charge if the contract were
surrendered may be applied. No annuity charge will be assessed if Option 3
is elected by a beneficiary under the death benefit.
ANNUAL CONTRACT CHARGE: An annual contract charge of $30 is charged against
each contract, which reimburses the Company for expenses incurred in
establishing and maintaining records relating to a contract. The annual
contract charge will be assessed on each anniversary of the issue date of
the contract. In the event that a total surrender of contract value is
made, the charge will be assessed as of the date of surrender without
proration.
-39-
<PAGE> 72
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CHARGES AND DEDUCTIONS (continued)
TRANSFER FEE: A transfer fee of $25 per transaction is assessed on each
transfer of funds in excess of fifteen transactions within a contract year
or if a transfer is made within 30 days of the issue date of the contract.
PREMIUM TAXES: Premium taxes or other taxes payable to a state or other
governmental entity will be charged against the contract values. Some
states assess premium taxes at the time purchase payments are made; others
assess premium taxes at the time annuity payments begin. The Company
currently intends to deduct premium taxes at the time of surrender, upon
death of the contractholder or upon annuitization; however, it reserves the
right to deduct any premium taxes when incurred.
MORTALITY AND EXPENSE RISK CHARGE: The Company deducts mortality and
expense risk charges, which total to an annual rate of 1.25% of the net
asset value of each portfolio, computed on a daily basis. The mortality
risk charge is compensation for the mortality risks assumed by the Company
from its contractual obligations to make annuity payments after the
contract has annuitized for the life of the annuitant, to waive the
withdrawal charge in the event of the death of the annuitant and to provide
a death benefit if the annuitant dies prior to the date annuity payments
begin. The expense risk charge is compensation for the risk assumed by the
Company that the cost of administering the contracts will exceed the amount
received from the annual contract charge and the administrative expense
charge. Both of these charges are guaranteed by the Company and cannot be
increased.
ADMINISTRATIVE EXPENSE CHARGE: The Company deducts an administrative
expense charge at an annual rate of 0.15% of the net asset value of each
portfolio, computed on a daily basis. The administrative expense charge is
designed to cover those expenses which exceed the revenues from the annual
contract charge.
SEPARATE ACCOUNT INCOME TAXES: The Company currently does not maintain a
provision for taxes, but has reserved the right to establish such a
provision for taxes in the future if it determines, in its sole discretion,
that it will incur a tax as a result of the operation of the Separate
Account.
-40-
<PAGE> 73
PRESIDENTIAL VARIABLE ACCOUNT ONE
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT IN ANCHOR SERIES TRUST
The aggregate cost of the Trust's shares acquired and the aggregate
proceeds from shares sold during the year ended December 31, 1997 consist
of the following:
<TABLE>
<CAPTION>
Cost of Shares Proceeds from
Variable Accounts Acquired Shares Sold
------------------------------ -------------- -------------
<S> <C> <C>
Foreign Securities Portfolio $ 72,522 $284,517
Capital Appreciation Portfolio 144,410 522,532
Growth Portfolio 223,964 512,518
Natural Resources Portfolio 16,724 41,822
Growth and Income Portfolio 61,913 31,889
Strategic Multi-Asset Portfolio 124,729 130,408
Multi-Asset Portfolio 196,105 310,485
High Yield Portfolio 16,850 30,785
Target '98 Portfolio 37,877 32,655
Fixed Income Portfolio 8,146 1,133
Government and Quality Bond
Portfolio 46,100 150,035
Money Market Portfolio 11,360 101,559
======== ========
</TABLE>
4. FEDERAL INCOME TAXES
The Company qualifies for federal income tax treatment granted to life
insurance companies under subchapter L of the Internal Revenue Service Code
(the "Code"). The operations of the Separate Account are part of the total
operations of the Company and are not taxed separately. The Separate
Account is not treated as a regulated investment company under the Code.
-41-
<PAGE> 74
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following financial statements are included in Part A of the
Registration Statement:
None
The following financial statements are included in Part B of the
Registration Statement:
Consolidated Financial Statements of Presidential Life Corporation and
subsidiaries for the year ended December 31, 1997
Financial Statements of Presidential Variable Account One for the year
ended December 31, 1997
(b) Exhibits
<TABLE>
<S> <C>
(1) Resolution Establishing Separate Account Filed Herewith
(2) Custody Agreements Not Applicable
(3) (a) Distribution Contracts Filed Herewith
(b) Selling Agreement Filed Herewith
(4) Variable Annuity Contract Filed Herewith
(5) Application for Contract Filed Herewith
(6) Depositor - Corporate Documents
(a) Certificate of Incorporation Filed Herewith
(b) By-Laws Filed Herewith
(7) Reinsurance Contract Not Applicable
(6) Service Agreement
(8) (a) Fund Participation Agreement Filed Herewith
(8) (b) Service Agreement
(9) Opinion of Counsel Filed Herewith
Consent of Counsel Filed Herewith
(10) Consents of Independent Accountants Filed Herewith
(11) Financial Statements Omitted from Item 23 Not Applicable
(12) Initial Capitalization Agreement Not Applicable
(13) Performance Computations Previously Filed*
(14) Diagram and Listing of All Persons directly
or indirectly controlled by or under common
control with Presidential Life Insurance
Company, the Depositor or Registrant Filed Herewith
(15) Powers of Attorney Filed Herewith
(14) Financial Data Schedules Not Applicable
</TABLE>
- ----------------------
* All previously filed exhibits to this Registration Statement and all
post-effective amendments thereto are specifically incorporated herein by
reference.
<PAGE> 75
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The officers and directors of Presidential Life Insurance Company are
listed below. Their principal business address is 69 Lydecker Street, Nyack,
New York 10960.
<TABLE>
<CAPTION>
Name Position
----- --------
<S> <C>
Herbert Kurz Chairman of the Board, Chief Executive
Officer, President & Director
Shirley Jordan Executive Vice President & Director
Michael V. Oporto Chief Financial Officer & Treasurer
Jerrold Scher Senior Vice President, Actuary & Director
Donna Monacelli Secretary
Donald Barnes Senior Vice President
Michael Reich Senior Vice President
Stanley Rubin Senior Vice President
Donald Barnes Senior Vice President & Director
Charles Snyder Controller & Assistant Vice President
Mark Abrams Vice President
Maria Kramer Vice President
Lawrence Lowell Vice President
Andrew Tuck Vice President
Kenneth B. Clark Director
Richard Giesser Director
Melvin Gold Director
W. Thomas Knight Director
Jerome Johnson Director
George McGovern Director
Paul Pape Director
Irving Schwartz Director
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT
Presidential Life Corporation
-----------------------------
<TABLE>
<S> <C> <C> <C>
Presidential Asset Presidential Life Presidential Securities P.L. Assigned
Management Company Insurance Company Corporation Services,Inc.
</TABLE>
Item 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1997, the number of Contract Owners of Presidential
Variable Account One was 134, of which 71 represented Qualified Contracts and
63 represented Non-Qualified Contracts.
Item 28. INDEMNIFICATION
So far as permitted by the laws of the State of New York, any person
made a party to any action, suit, or proceeding by reason of the fact that he,
his testator or intestate, is or was a director, officer or employee of the
Company, or of any corporation which he served as such at the request of the
Company, shall be indemnified by the Company against the reasonable expenses,
including attorneys' fee, actually and necessarily incurred by him in
connection with the defense of such action, suit, or proceeding, or in
connection with any appeal therein, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such officer,
director or employee is liable for negligence or misconduct in the performance
of his duties. If said action, suit or proceeding shall be settled with the
approval of the Board of Directors and the Court, such director, officer or
employee, upon application for payment of such indemnity, shall be entitled to
such indemnity in such amount that the court shall approve as reasonable;
provided, however, that in the judgment of the Board of Directors, said
director, officer, or employee had not in any substantial way been derelict in
the performance of his duties as charged in such action, suit or proceeding.
The foregoing right to indemnification shall be in addition to other rights to
which any such director, officer or employee may be entitled as a matter of
law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted directors and officers or controlling
persons of the Company pursuant to the foregoing, or otherwise, the Company
<PAGE> 76
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in such 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 such 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 said Act and will be governed by the
final adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
SunAmerica Capital Services, Inc. serves as distributor for the
Registrant. Its principal business address is 733 Third Avenue, 4th Floor, New
York, New York 10017.
The following are the directors and executive officers of SunAmerica
Capital Services, Inc.:
Name Position with Distributor
---- --------------------------
J. Steven Neamtz Director and President
Robert M. Zakem Director, Executive Vice
President, General Counsel and
Assistant Secretary
Peter Harbeck Director
Steven Rothstein Treasurer
Susan L. Harris Secretary
Lorin M. Fife Assistant Secretary
James Nichols Vice President
Per Furmark Vice President
<TABLE>
<CAPTION>
Net Distribution Compensation on
Name of Discounts and Redemption or Brokerage
Distributor Commissions Annuitization Commissions Commissions*
- ----------- ---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
SunAmerica None None None None
Capital
Services, Inc.
</TABLE>
__________________
*Distribution fee is paid by Presidential Life Insurance Company
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Presidential Life Insurance Company, the Depositor for the Registrant,
is located at 69 Lydecker Street, Nyack, New York 10960. SunAmerica Capital
Services, Inc., is located at 733 Third Avenue, 4th Floor, New York, New York
10017. Each maintains those accounts and records required to be maintained by
each pursuant to Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02100, maintains certain accounts and records pursuant to the
instructions of the Registrant.
Item 31. MANAGEMENT SERVICES
Not Applicable.
Item 32. UNDERTAKINGS
Registrant undertakes to file post-effective amendments to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16
months old for so long as payments under the variable annuity Contracts may be
accepted. Registrant 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
<PAGE> 77
Information, or (2) a written communication in the Prospectus that the
Applicant can remove to send for a Statement of Additional Information.
Registrant also undertakes to deliver any Statement of Additional Information
and any financial statements required to be made available under this Form N-4
promptly upon written or oral request.
Further, the Company undertakes to deduct mortality and expense risk
charges, distribution expense charges, withdrawal charges (contingent deferred
sales charges), contract maintenance fees and transfer fees that are in the
aggregate (1) reasonable in relation to the risks assumed by the Company,
(2) reasonable in relation to services rendered, and (3) reasonable in relation
to the expenses expected to be incurred. Those determinations are based on the
Company's analysis of publicly available information about similar industry
practices, and by taking into consideration factors such as current charge
levels and benefits provided, the existence of expense charge guarantees and
guaranteed annuity rates.
<PAGE> 78
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of the Registration Statement and
has caused this Post-Effective Amendment to the Registration Statement to be
signed on its behalf, in the City of Nyack, and the State of New York, on this
28th day of April, 1998.
PRESIDENTIAL VARIABLE ACCOUNT ONE
(Registrant)
By: PRESIDENTIAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ HERBERT KURZ
-----------------------------------
Herbert Kurz
Principal Executive Officer
As required by the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed by the following
persons in the capacity and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ HERBERT KURZ Chairman of the Board, Chief April 28, 1998
- ----------------------- Executive Officer, President
Herbert Kurz and Director
(Principal Executive Officer)
/s/ MICHAEL V. OPORTO Chief Financial Officer April 28, 1998
- ----------------------- Treasurer and Director
Michael V. Oporto (Principal Financial Officer)
/s/ CHARLES SNYDER Controller April 28, 1998
- ----------------------- (Chief Accounting Officer)
Charles Snyder
/s/ SHIRLEY JORDAN Executive Vice President April 28, 1998
- ----------------------- and Director
Shirley Jordan
/s/ JERROLD SCHER Senior Vice President, April 28, 1998
- ----------------------- Actuary and Director
Jerrold Scher
Donald Barnes Senior Vice President
- ------------------------ and Director
Donald Barnes
Kenneth B. Clark* Director
- ------------------------
Kenneth B. Clark
Richard Giesser* Director
- ------------------------
Richard Giesser
Melvin Gold* Director
- ------------------------
Melvin Gold
Jerome Johnson* Director
- ------------------------
Jerome Johnson
/s/ W. THOMAS KNIGHT Director April 28, 1998
- ------------------------
W. Thomas Knight
</TABLE>
<PAGE> 79
<TABLE>
<S> <C>
Paul Pape* Director
- ------------------------
Paul Pape
Irving Schwartz* Director
- ------------------------
Irving Schwartz
*By: /s/ HERBERT KURZ Attorney-in-Fact
-------------------
Herbert Kurz
</TABLE>
Date: April 28, 1998
<PAGE> 80
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C> <C>
(1) Resolution Establishing Separate Account Filed Herewith
(2) Custody Agreements Not Applicable
(3) (a) Distribution Contracts Filed Herewith
(b) Selling Agreement Filed Herewith
(4) Variable Annuity Contract Filed Herewith
(5) Application for Contract Filed Herewith
(6) Depositor - Corporate Documents
(a) Certificate of Incorporation Filed Herewith
(b) By-Laws Filed Herewith
(7) Reinsurance Contract Not Applicable
(8) (a) Fund Participation Agreement Filed Herewith
(b) Service Agreement Filed Herewith
(9) Opinion of Counsel Filed Herewith
Consent of Counsel Filed Herewith
(10) Consents of Independent Accountants Filed Herewith
(11) Financial Statements Omitted from Item 23 Not Applicable
(12) Initial Capitalization Agreement Not Applicable
(13) Performance Computations Previously Filed*
(14) Diagram and Listing of All Persons directly
or indirectly controlled by or under common
control with Presidential Life Insurance
Company, the Depositor or Registrant Filed Herewith
(15) Powers of Attorney Filed Herewith
(27) Financial Data Schedules Not Applicable
</TABLE>
- ----------------------
* All previously filed exhibits to this Registration Statement and all
post-effective amendments thereto are specifically incorporated herein by
reference.
<PAGE> 1
EXHIBIT 1
[PRESIDENTIAL LIFE INSURANCE COMPANY LOGO]
NYACK, NEW YORK 10960
914-358-2300
CERTIFICATE
I, DONNA STONER, Assistant Secretary of PRESIDENTIAL LIFE INSURANCE
COMPANY (the "Corporation"), a New York corporation, DO HEREBY CERTIFY that the
attached copies of resolutions and extracts of a meeting of the directors of the
Company are true and complete copies of such resolutions and such extracts of
minutes and that the resolutions and actions set forth therein were duly adopted
by the Board of Directors of the Corporation at a meeting duly called and held
on the 26th day of August, 1987, at which meeting a quorum was present and
acting throughout.
I FURTHER. CERTIFY that the attached resolutions have not been amended
or rescinded and that each and every part thereof is in full force and effect on
the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Corporation this 15th day of October, 1987.
/s/ DONNA STONER
-----------------------------------------
DONNA STONER, Assistant Secretary
(SEAL)
<PAGE> 2
PRESIDENTIAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT RESOLUTION
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 the said accounts; and
FURTHER RESOLVED, That the Chairman of this Company or such other
Executive Officer of this Company as shall be designated by the Chairman 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; and
FURTHER, RESOLVED, That the Chairman of this Company or such other
Executive Officer of this Company as shall be designated by the Chairman 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; and
FURTHER RESOLVED, That the Chairman 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 intent of this
resolution.
<PAGE> 3
PRESIDENTIAL LIFE INSURANCE COMPANY
RESOLUTION
VARIABLE ANNUITY CONTRACTS
WHEREAS, the Company is desirous of developing and marketing certain
types of variable and fixed annuity contracts which may be required to be
registered with the Securities and Exchange Commission pursuant to the various
securities laws; and
WHEREAS, it will be necessary to take certain actions including, but
not limited to, establishing separate accounts for segregation of assets and
seeking approval of regulatory authorities;
NOW THEREFORE, BE IT RESOLVED, that the Company is hereby authorized to
develop the necessary program in order to effectuate the issuance and sale of
variable and fixed annuity contracts; and further
RESOLVED, that the Company is hereby authorized to establish and to
designate one or more separate accounts of the Company in accordance with the
provisions of state insurance law. The purpose of any such separate account
shall be to provide an investment medium for such variable and fixed annuity
contracts issued by the Company as may be designated as participating therein.
Any such separate account shall receive, hold, invest and reinvest only the
monies arising from (i) premiums, contributions or payments made pursuant to the
variable and fixed annuity contracts participating therein; (ii) such assets of
the Company as shall be deemed appropriate to be invested in the same manner as
the assets applicable to the Company's reserve liability under the variable and
fixed annuity contracts participating in such separate accounts; or as may be
necessary for the establishment of such separate accounts; (iii) the dividends,
interest and gains produced by the foregoing; and further
RESOLVED, that the proper officers of the Company are hereby authorized:
(i) to register the variable and fixed annuity contracts
participating in any such separate accounts under the provisions
of the Securities Act of 1933 to the extent that it shall be
determined that such registration is necessary;
(ii) to register any such separate accounts with the Securities and
Exchange Commission under the provisions of the Investment
Company Act of 1940 to the extent that it shall be determined
that such registration is necessary;
(iii) to prepare, execute and file such amendments to any registration
statements filed under the aforementioned Acts (including
post-effective amendments), supplements and exhibits thereto as
they may be deemed necessary or desirable;
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<PAGE> 4
(iv) to apply for exemption from those provisions of the
aforementioned Acts as shall be deemed necessary and to take any
and all other actions which shall be deemed necessary,
desirable, or appropriate in connection with such Act;
(v) to file the variable and fixed annuity contracts participating
in any such separate accounts with the appropriate state
insurance departments and to prepare and execute all necessary
documents to obtain approval of the insurance departments;
(vi) to prepare or have prepared and execute all necessary documents
to obtain approval of, or clearance with, or other appropriate
actions required, of any other regulatory authority that may be
necessary; and further
RESOLVED, that for the purposes of facilitating the execution and filing
of any registration statement and of remedying any deficiencies therein by
appropriate amendments (including post-effective amendments) or supplements
thereto, the Chairman of the Company and the Secretary of the Company, and each
of them, are hereby designated as attorneys and agents of the Company; and the
appropriate officers of the Company be, and they hereby are, authorized and
directed to grant the power of attorney of the Company to the Chairman of the
Company and the Secretary of the Company by executing and delivering to such
individuals, on behalf of the Company, a power of attorney; and further
RESOLVED, that in connection with the offering and sale of the fixed and
variable annuity contracts in the various States of the United States, as and to
the extent necessary, the appropriate officers of the Company be, and they
hereby are, authorized to take any and all such action, including but not
limited to the preparation, execution and filing with proper State authorities,
on behalf of and in the name of the Company, of such applications, notices,
certificates, affidavits, powers of attorney, consents to service of process,
issuer's covenants, certified copies of minutes of shareholders' and directors'
meetings, bonds, escrow and impounding agreements and other writings and
instruments, as may be required in order to render permissible the offering and
sale of the fixed and variable annuity contracts in such jurisdictions; and
further
RESOLVED, that the forms of any resolutions required by any State
authority to be filed in connection with any of the documents or instruments
referred to in any of the preceding resolutions be, and the same hereby are,
adopted as if fully set forth herein if (1) in the opinion of the appropriate
officers of the Company, the adoption of the resolutions is advisable and (2)
the Secretary or any Assistant Secretary of the Company evidences such adoption
by inserting into these minutes copies of such resolutions; and further
RESOLVED, that the officers of the Company, and each of them, are hereby
authorized to prepare and to execute the necessary documents and to take such
further actions as may be deemed necessary or appropriate, in their discretion,
to implement the purpose of these resolutions.
-2-
<PAGE> 1
EXHIBIT 3.(a)
DISTRIBUTION AGREEMENT
THIS AGREEMENT entered into on this 18th day of January, 1990, by and
between PRESIDENTIAL LIFE INSURANCE COMPANY ("Presidential Life"), a life
insurance company organized under the laws of the State of New York, on behalf
of itself and PRESIDENTIAL VARIABLE ACCOUNT ONE ("Separate Account"), a Separate
Account established by Presidential Life pursuant to the New York insurance law
in 1987, and SUNAMERICA SECURITIES, INC. ("Distributor"), a corporation
organized under the laws of the State of Delaware.
WITNESSETH:
WHEREAS, Presidential Life proposes to issue to the public certain
variable annuity contracts identified on the contract specification sheet
attached hereto as Attachment A ("Contracts"); and
WHEREAS, the Separate Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment trust under the
Investment Company Act of 1940 (File No. 811-5474); and
WHEREAS, the Contracts issued by Presidential Life will be registered
with the Commission for offer and sale to the public, and otherwise will be in
compliance with all applicable laws; and
WHEREAS, Distributor, a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc., proposes to act as a co-distributor on an agency basis in the
marketing and distribution of said Contracts; and
WHEREAS, Presidential Life desires to obtain the services of Distributor
as a distributor of said Contracts issued by Presidential Life through the
Separate Account;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, Presidential Life, the Separate Account, and Distributor hereby
agree as follows:
1. Distributor will serve as co-distributor on an agency basis for
the Contracts which will be issued by Presidential Life through the
Separate Account and will be registered with the Commission for offer
and sale to the public.
<PAGE> 2
2. Distributor, as co-distributor of the Contracts, will use its
best efforts to provide information and marketing assistance to licensed
insurance agents and broker-dealers on a continuing basis. However,
Distributor shall be responsible for compliance with the requirements of
state broker-dealer regulations and the Securities Exchange Act of 1934
as each applies to Distributor in connection with its duties as
co-distributor of said Contracts. Moreover, Distributor shall conduct
its affairs in accordance with the rules of Fair Practice of the
National Association of Securities Dealers, Inc.
3. Subject to the agreement of Presidential Life, Distributor may
enter into dealer agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and authorized by applicable law to sell
variable annuity contracts issued by Presidential Life through the
Separate Account. Any such contractual arrangement is expressly made
subject to this Agreement, and Distributor will at all times be
responsible to Presidential Life for purposes of the federal securities
laws for the distribution of Contracts issued through the Separate
Account. Distributor will use its best efforts to provide information
and marketing assistance to such broker-dealers on a continuing basis.
4. Warranties
(a) Presidential Life represents and warrants to Distributor
that:
(i) A Registration Statement on Form N-4 under the
Securities Act of 1933 for each of the contracts
indicated on Attachment A and an amendment to the
Separate Account's registration under the Investment
Company Act of 1940 (File No. 811-5474) have been filed
with the Commission in the form previously delivered to
Distributor and that copies of any and all amendments
thereto will be forwarded to Distributor at the time
that they are filed with the Commission;
(ii) The Registration Statement and any further
amendments or supplements thereto will, when they become
effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, and the rules and
regulations of the Commission thereunder, and will not
contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein
or necessary to make the statements therein not
misleading: provided, however, that this representation
and warranty shall
-2-
<PAGE> 3
not apply to any statements or omissions made in
reliance upon and in conformity with information
furnished in writing to Presidential Life by Distributor
expressly for-use therein;
(iii) Presidential Life is validly existing as a stock
life insurance company in good standing under the laws
of the State of New York, with power (corporate or
other) to own its properties and conduct its business as
described in the Prospectus, and has been duly qualified
for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it
owns or leases properties, or conducts any business, so
as to require such qualification;
(iv) The Contracts to be issued through the Separate
Account and offered for sale by Distributor on behalf
of Presidential Life hereunder have been duly and
validly authorized and, when issued and delivered
against payment therefor as provided herein, will be
duly and validly issued and will conform to the
description of such Contracts contained in the
Prospectuses relating thereto;
(v) The performance of this Agreement and the
consummation of the transactions herein contemplated
will not result in a breach or violation of any of the
terms or provisions of, or constitute a default under
any statute, any indenture, mortgage, deed of trust,
note agreement or other agreement or instrument to which
Presidential Life is a party or by which Presidential
Life is bound. Presidential Life's Charter as a stock
life insurance company or By-laws, or any order, rule or
regulation of any court or governmental agency or body
having jurisdiction over Presidential Life or any of its
properties; and no consent, approval, authorization or
order of any court or governmental agency or body is
required for the consummation by Presidential Life of
the transactions contemplated by this Agreement, except
such as may be required under the Securities Exchange
Act of 1934 or state insurance or securities laws in
connection with the distribution of the Contracts by
Distributor; and
(vi) There are no material legal or governmental
proceedings pending to which Presidential Life or the
Separate Account is a party or of which any property of
Presidential Life or the Separate Account is the
subject, other than as set forth in the Prospectus
relating to the Contracts, and other than
litigation-incident to the kind of business
-3-
<PAGE> 4
conducted by Presidential Life which, if determined
adversely to Presidential Life, would individually or in
the aggregate have a material adverse effect on the
financial position, surplus or operations of
Presidential Life.
(b) Distributor represents and warrants to Presidential Life
that:
(i) It is a broker-dealer duly registered with the
Commission pursuant to the Securities Exchange Act of
1934 and a member in good standing of the National
Association of Securities Dealers, Inc. and is in
compliance with the securities laws, in those states in
which it conducts business as a broker-dealer;
(ii) It shall permit the offer and sale of Contracts
to the public only by and through persons who are
appropriately licensed under both the securities laws
and state insurance laws and who are appointed in
writing by Presidential Life to be authorized insurance
agents. Presidential Life shall not be required to bear
the costs of licensing or maintaining the securities
licenses of those persons who offer and sell the
Contracts to the public;
(iii) The performance of this Agreement and the
consummation of the transactions herein contemplated
will not result in a breach or violation of any of the
terms or provisions of or constitute a default under any
statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which
Distributor is a party or by which Distributor is bound,
the Certificate of Incorporation or By-laws of
Distributor, or any order, rule or regulation of any
court or governmental agency or body having jurisdiction
over Distributor or its property;
(iv) No offering, sale or other disposition of any
Contracts will be made until Distributor is notified by
Presidential Life that the Contracts are fully
registered with the Commission for issuance and sale;
and such offering, sale or other disposition shall be
limited to those jurisdictions that have approved or
otherwise permit the offer and sale of the Contracts by
Presidential Life; and
(v) To the extent that any statements or omissions
made in the Registration Statement, or any amendment or
supplement thereto are made in reliance upon and
-4-
<PAGE> 5
in conformity with written information furnished to
Presidential Life by Distributor expressly for use
therein, such Registration Statement and any amendments
or supplements thereto will, when they become effective
or are filed with the Commission, as the case may be,
conform in all material respects to the requirements of
the Securities Act of 1933 and the rules and regulations
of the Commission thereunder and will not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary
to make the statements therein not misleading.
5. Distributor shall keep, in a manner and form prescribed or
approved by Presidential Life and in accordance with Rules 17a-3 and
17a-4 under the Securities Exchange Act of 1934, correct records and
books of account as required to be maintained by a registered
broker-dealer, acting as distributor, of all transactions entered into
on behalf of Presidential Life and with respect to its activities under
this agreement for Presidential Life. Distributor shall make such
records and books of account available for inspection by the Commission,
and Presidential Life shall have the right to inspect, make copies of or
take possession of such records and books of account at any time on
demand.
6. Subsequent to having been authorized to commence the activities
contemplated herein, Distributor will utilize the currently effective
Prospectus relating to the subject Contracts in connection with its
marketing and distribution efforts. As to the other types of sales
material, Distributor agrees that it will use only sales materials as
have been authorized for use by Presidential Life and which conform to
the requirements of federal and state laws and regulations, and which
have been filed where necessary with the appropriate regulatory
authorities, including the National Association of Securities Dealers,
Inc.
7. Distributor will not distribute any Prospectus, sales
literature, or any other printed matter or material in the marketing and
distribution of any Contract if, to the knowledge of Distributor, any of
the foregoing misstates the duties, obligation or liabilities of
Presidential Life or Distributor.
8. Distributor will bear all of its expenses of providing services
pursuant to this Agreement including the cost of sales presentations,
mailings, advertising and any other marketing efforts it conducts in
connection with the distribution or sale of the Contracts.
-5-
<PAGE> 6
9. Distributor, as co-distributor of the Contracts, shall be
entitled to such remuneration for its services and for the services of
its salaried employees and such reimbursement for its charges and
expenses as will be contained in such Schedules of Remuneration as
attached hereto as Attachment B. Said Schedules of Remuneration may be
amended from time to time at the mutual consent of the undersigned
parties.
10. Distributor shall ensure that all premium payments Collected on
the sale of the Contracts are properly transmitted to the Annuity
Service Office of Presidential Life for immediate allocation to the
Separate Account in accordance with the directions furnished by the
purchasers of such Contracts at the time of purchase.
11. If any purchase payment premiums shall be required to be
returned by Presidential Life or should Presidential Life become liable
for the return thereof for any cause other than surrenders or
withdrawals by Contract Owners pursuant to the terms of the Contracts
either before or after termination of this agreement, Distributor agrees
to pay Presidential Life the amount of remuneration previously paid over
to it by Presidential Life with respect to such premiums.
12. Distributor makes no representation or warranties regarding the
number of Contracts to be sold by licensed broker-dealers and insurance
agents or the amount to be paid thereunder. Distributor does, however,
represent that it will actively engage in its duties under this
agreement on a continuous basis while there is an effective registration
with the Commission.
13. It is understood and agreed that Distributor may render similar
services or act as a distributor or dealer in the distribution of other
variable contracts.
14. Distributor will use its best efforts to ensure that the
Contracts shall be offered for sale by licensed broker-dealers and
insurance agents on the terms described in the currently effective
Prospectus describing such Contracts.
15. Presidential Life will use its best efforts to assure that the
Contracts are continuously registered under the Securities Act of 1933
and, should it ever be required, under state Blue Sky Laws and to file
for approval under state insurance laws when necessary.
16. Presidential Life reserves the right at any time to suspend or
limit the public offering of the subject Contracts upon one day's
written notice to Distributor.
-6-
<PAGE> 7
17. Presidential Life agrees to advise Distributor immediately of:
(a) any request by the Commission (i) for amendment of the
Securities Act Registration Statement relating to the Contracts
or (ii) for additional information;
(b) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement
relating to the Contracts or the initiation of any proceedings
for that purpose; and
(c) the happening of any material event, if known, which
makes untrue any statement made in the Registration Statement
relating to the Contracts or which requires the making of a
change therein in order to make any statement made therein not
misleading.
18. Presidential Life will furnish to Distributor such information
with respect to the Separate Account and the Contracts in such form and
signed by such of its officers as Distributor may reasonably request;
and will warrant that the statements therein contained when so signed
will be true and correct.
19. Each of the undersigned parties agrees to notify the other in
writing upon being apprised of the institution of any proceeding,
investigation or hearing involving the offer or sale of the subject
Contracts.
20. This Agreement will terminate automatically upon its assignment.
This Agreement shall terminate, without the payment of any penalty by
either party:
(a) at the option of Presidential Life upon sixty days,
advance written notice to Distributor; or
(b) at the option of Distributor upon sixty days' written
notice to Presidential Life; or
(c) at the option of Presidential Life upon institution of
formal proceedings against Distributor by the National
Association of Securities Dealers, Inc. or by the commission; or
(d) at the option of Presidential Life, if Distributor or
any representative thereof at any time (i) employs any device,
scheme, or artifice to defraud; makes any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements made, in light of the circumstances
under which they were made not misleading; or engages in any
act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person; (ii) fails to
account
-7-
<PAGE> 8
and pay over promptly to Presidential Life money due it
according to its records; or (iii) violates the conditions of
this Agreement.
21. Each notice required by this Agreement may be given by wire and
confirmed in writing.
22. This Agreement shall be subject to the laws of the State of New
York and construed so as to interpret the Contracts as insurance
contracts written within the business operation of Presidential Life.
23. This Agreement covers and includes all agreements, verbal and
written, between Presidential Life and Distributor with regard to the
marketing and distribution of the Contracts, and supercedes and annuls
any and all agreements between the parties with regard to the
distribution of the Contracts; except that this Agreement shall not
affect the operation of previous or future agreements entered into
between Presidential Life and Distributor unrelated to the sale of the
Contracts.
24. This agreement is not exclusive in regard to the distribution of
the Contracts. It is understood and agreed that Presidential Life may
enter into a similar agreement or agreements for the distribution of the
Contracts on the basis that such other distributors shall also act in
the capacity of co-distributor.
This Agreement, along with any Schedules of Remuneration attached hereto
and incorporated herein by reference, may be amended from time to time by the
mutual agreement and consent of the undersigned parties; provided that such
amendment shall not affect the rights of existing Contract Owners, and that such
amendment be in writing and duly executed.
This Agreement shall become effective upon the execution hereof by both
parties.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed and their respective corporate seals to be hereunto affixed
and attested and this Agreement to be effective on the date first stated
above.
Presidential Life Insurance Company
Attest:
___________________ By: [SIG]
-------------------------------------
Variable Annuity Account One
By: Presidential Life Insurance Company
Attest:
___________________ By: [SIG]
-------------------------------------
SunAmerica Securities, Inc.
Attest: By: [SIG]
-------------------------------------
[SIG]
- -------------------------
-9-
<PAGE> 10
Attachment A
CONTRACT SPECIFICATION SHEET
The following variable annuity contracts are the subject of the Distribution
Agreement between Presidential Life Insurance Company and SunAmerica Securities,
Inc. dated January 18, 1990 regarding the sale of contracts funded in Variable
Annuity Account One:
ICAP - Contract A01088NY
Individual Flexible Purchase Payment Deferred Variable Annuity
Contract (together with all Riders and Endorsements relating
thereto).
<PAGE> 11
Attachment B
Schedule of Remuneration
Pursuant to the Distribution Agreement between Presidential Life Insurance
Company and SunAmerica Securities, Inc. dated January 18, 1990 regarding the
sale of contracts funded in Variable Annuity Account One, the following
remuneration will be paid for the services rendered by the Distributor of the
indicated contracts:
Contract Remuneration
ICAP - Contract A01088NY 5% of premium payments
received under the
Contract
<PAGE> 1
EXHIBIT 3.(b)
PRESIDENTIAL LIFE INSURANCE COMPANY
FLEXIBLE PAYMENT VARIABLE ANNUITY SELLING AGREEMENT
- --------------------------------------------------------------------------------
This Agreement, dated of __________, 19____, is by and among Presidential Life
Insurance Company ("Insurer") and the following registered broker/dealers,
Anchor National Financial Services, Inc., SunAmerica Securities, Inc. and Royal
Alliance Associates, Inc. (individually and collectively, "Distributor") and
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("Broker/Dealer")
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("General Agent")
This Agreement is for the purpose of arranging for the distribution of flexible
premium variable annuity contracts ("Contracts") issued by Insurer in connection
with Presidential Variable Account One through sales people who are licensed
agents of the Insurer and associated with General Agent and are also registered
representatives of Broker/Dealer.
In consideration of the mutual promises and covenants contained in this
Agreement, Insurer and Distributor appoint Broker/Dealer and those persons
associated with the General Agent who are registered representatives of
Broker/Dealer and licensed agents of the Insurer to solicit and procure
applications for the Contracts specified in the attached Schedule(s) of
Commissions. This appointment is not deemed to be exclusive in any manner and
only extends to those jurisdictions where the Contracts specified in the
attached Commission Schedule(s) have been approved for sale. Applications shall
be taken only on the preprinted application forms supplied by the Insurer. All
completed applications, supporting documents and initial and subsequent payments
are the sole property of the Insurer and must be promptly delivered to the
Insurer at such address as it may from time to time designate. All applications
are subject to acceptance by the Insurer in its sole discretion.
(1) SUBAGENTS
General Agent is authorized to appoint Subagents to solicit sales of the
Contracts specified in the attached Schedules. General Agent warrants that each
such Subagent shall be fully licensed under the applicable insurance laws and a
duly registered representative of Broker/Dealer.
Broker/Dealer and General Agent will provide Distributor with a letter of
recommendation for each Subagent. This letter must provide Distributor with
assurance that all background investigations which are required by state and
federal laws have been made and that Broker/Dealer and General Agent affirm that
Subagent should be appointed by Distributor. The letter must also warrant that
Subagent has all licenses necessary to transact business with the Distributor.
(2) SALES MATERIAL
General Agent and Broker/Dealer shall not use any written or audio-visual sales
material unless such material has been provided or approved by the Insurer. In
accordance with the requirements of federal and certain state laws, General
Agent and Broker/Dealer shall maintain complete records indicating the manner
and extent of distribution of any such solicitation material. This material
shall be made available to appropriate federal and state regulatory agencies as
required by law or regulation. General Agent and Broker/Dealer jointly and
severally hold Insurer, Distributor and their affiliates harmless from any
liability arising from the use of any material which has not been specifically
approved in writing.
<PAGE> 2
(3) PROSPECTUSES
For any Contract which is a registered security, Broker/Dealer and General Agent
warrant that solicitation will be made by use of a currently effective
Prospectus, that a Prospectus will be delivered concurrently with each sales
presentation and that no statements shall be made to a client superseding or
controverting any statement made in the Prospectus. Insurer and Distributor
shall furnish Broker/Dealer and General Agent, at no cost to Broker/Dealer or
General Agent, reasonable quantities of Prospectuses.
(4) BROKER/DEALER COMPLIANCE
Broker/Dealer will fully comply with the requirements of the National
Association of Securities Dealers, Inc. and of the Securities Exchange Act of
1934 and such other applicable federal or state laws, including insurance laws,
and will establish rules, procedures, supervisory and inspection techniques
necessary to diligently supervise the activities of its registered
representatives who are licensed agents of the Insurer. Upon request by
Distributor or Insurer, Broker/Dealer will furnish appropriate records as are
necessary to establish diligent supervision.
(5) INDEMNIFICATION
Broker/Dealer and General Agent agree to hold harmless and indemnify Distributor
and Insurer and their affiliates against any and all claims, liabilities and
expenses which any such party may incur from liabilities arising out of or based
upon any alleged untrue or untrue statement, other than statements contained in
the registration statement, prospectus or approved sales material for any
Contract.
(6) FIDELITY BOND
General Agent represents that all Directors, Officers, Employees and Subagents
of General Agent licensed pursuant to this Agreement or who have access to funds
of the Insurer are and will continue to be covered by a blanket fidelity bond
including coverage for larceny, embezzlement and other defalcation, issued by a
reputable bonding company. This bond shall be maintained at General Agent's
expense. Such bond shall be at least equivalent to the minimal coverage required
under the NASD rules of fair practice, endorsed to extend coverage to life
insurance and annuity transactions. General Agent acknowledges that the Insurer
may require evidence that such coverage is in force and General Agent shall
promptly give notice to Insurer of any notice of cancellation or change of
coverage.
General Agent assigns any proceeds received from the fidelity bond company to
Insurer to the extent of the Insurer's loss due to activities covered by the
bond. If there is any deficiency, General Agent will promptly pay Insurer that
amount on demand and General Agent indemnifies and holds harmless the Insurer
from any deficiency and from the cost of collection.
(7) LIMITATIONS OF AUTHORITY
The Contract forms are the sole property of the Insurer. No person other than
the Insurer has the authority to make, alter or discharge any policy, Contract,
certificate, supplemental contract or form issued by the Insurer. No person
other than the Insurer has the right to waive any provision with respect to any
Contract or policy. No person other than the Insurer has the authority to enter
into any proceeding in a court of law or before a regulatory agency in the name
of or on behalf of the Insurer.
<PAGE> 3
(8) GENERAL PROVISIONS
(A) Waiver
Waiver of any of the parties to promptly insist upon strict
compliance with any of the obligations of any other party under
this Agreement will not be deemed to constitute a waiver of the
right to enforce strict compliance.
(B) Independent Contractors
Broker/Dealer and General Agent are independent contractors and
not employees or subsidiaries of Distributor or Insurer.
(C) Independent Assignment
No assignment of this Agreement or of commissions or other
payments under this Agreement shall be valid without the prior
written consent of the Insurer.
(D) Notice
Any notice pursuant to this Agreement shall be mailed, postage
paid, to the last address communicated by the receiving party to
the other parties to this Agreement.
(E) Severability
To the extent this Agreement may be in conflict with any
applicable law or regulation, this Agreement shall be construed
in a manner not inconsistent with such law or regulation. The
invalidity or illegality of any provision of this Agreement
shall not be deemed to effect the validity or legality of any
other provision of this Agreement.
(F) Amendment This Agreement may be amended in writing signed by the
Insurer.
(G) Termination
This Agreement may be terminated by any party upon written
notice and termination shall be effective immediately.
(H) New York Law
This Agreement shall be construed in accordance with the laws of
the state of New York.
Date:____________________
Broker/Dealer:__________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
By:
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Name and Title
<PAGE> 4
General Agent:__________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
By:
----------------------------------------------------------------------------
Name and Title
Presidential Life Insurance Company
69 Lydecker Street
Nyack, New York 10960-2199
By:
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Name and Title
Anchor National Financial Services, Inc.
2201 East Camelback Road
Phoenix, Arizona 85016
By: /s/ EDWARD J. HARRISON III
---------------------------
President
Royal Alliance Associates, Inc.
10 Union Square East
New York, New York 10003
By: [SIG]
---------------------------
President
SunAmerica Securities, Inc.
1601 LBJ Freeway, Suite 630
Dallas, Texas 75234
By: /s/ EDWARD J. HARRISON III
---------------------------
President
<PAGE> 5
FLEXIBLE PAYMENT VARIABLE ANNUITY SELLING AGREEMENT
COMMISSION SCHEDULE
This Commission Schedule is attached to and part of the Variable Contract
Selling Agreement to which it is appended. It is subject to the terms and
conditions of the Agreement. In no event shall the Insurer be liable for the
payment of any commissions with respect to any solicitation made, in whole or in
part, by any person not appropriately licensed and registered prior to the
commencement of such solicitation.
With respect to Contracts issued with respect to Presidential Variable Account
One, commissions will be paid to the General Agent in the amount of five percent
(5%) of the aggregate purchase payments received in check and accepted by the
Insurer with a properly executed application or as a subsequent purchase payment
under the Contracts after the Contract is in force.
If a Contract is returned to Insurer pursuant to the "Free Look" provision of
the Contract, the full commission paid by Insurer will be returned to the
Insurer or, in the absence of such return, charged back to the recipient of the
commission. General Agent agrees to promptly deliver Contracts and holds Insurer
harmless from and against any claim arising from market loss resulting from late
delivery by General Agent to the owner of the Contract.
Further, with respect to any Contract that is rescinded by an Insurer, as
determined by the Insurer in its sole discretion, 100% of commissions will be
charged back.
<PAGE> 1
EXHIBIT 4
SAMPLE
PRESIDENTIAL
LIFE INSURANCE COMPANY
69 Lydecker Street
Nyack, NY 10960
- --------------------------------------------------------------------------------
PRESIDENTIAL LIFE INSURANCE COMPANY ("We, Us, Our") will make annuity payments
to the Annuitant as set forth in this Contract beginning on the Annuity Date.
This Contract is owned by you the Contract Owner.
This Contract has been issued in return for the application and for the Initial
purchase payment made. A copy of the application is attached to this Contract
and is part of the Contract.
TEN DAY FREE LOOK
Within ten days of the day you receive this Contract, it may be returned by
delivering it or mailing it to us, at our Annuity Service Office set out on the
Contract Data Page. When this Contract is received by us, it will be voided as
if it had never been in force. Within seven days of receipt of this Contract by
us, we will refund the Contract Value as of the date of surrender.
Signed for the Company
/s/ [SIG] /s/ [SIG]
- ------------------------------------ --------------------------------
Callman Gottesman Herbert Kurz
Secretary Chairman
APPROVED INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
STATE OF NEW YORK DEFERRED VARIABLE ANNUITY CONTRACT
JUNE 17, 1988
[SIG] NONPARTICIPATING
SUPERINTENDENT OF NO DIVIDENDS
INSURANCE
ANNUITY PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT ARE VARIABLE AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT.
ANNUITY PAYMENTS WILL NOT DECREASE AS LONG AS THE INVESTMENT RETURN OF THE
SEPARATE ACCOUNT ASSETS EQUALS OR EXCEEDS 6.40% ON AN ANNUAL BASIS.
THE VARIABLE PROVISIONS OF THIS CONTRACT CAN BE FOUND ON PAGES 4, 5, 7 AND 8.
PRESIDENTIAL Page 1
<PAGE> 1
EXHIBIT 5
SAMPLE
CONTRACT DATA PAGE
ANNUITANT:
CONTRACT NUMBER:
CONTRACT OWNER:
ISSUE DATE:
ANNUITY DATE:
ANNUAL CONTRACT CHARGE: $30.00 each Contract Year
prior to the Annuity Date
MORTALITY AND EXPENSE RISK CHARGE: Equal on an annual basis to 1.25% of the
daily net asset value of each Division of the
Separate Account.
ADMINISTRATIVE EXPENSE CHARGE: Equal on an annual basis to .15% of the daily
net asset value of each Division of the Separate
Account.
WITHDRAWAL CHARGE: A Withdrawal Charge is assessed upon any withdrawal in
excess of the Free Withdrawal. The Withdrawal Charge is 8%
of the amount withdrawn if such withdrawal is made within
six years of making the purchase payment.
TRANSFER FEE: No transfer fee is imposed if at least 30 days have elapsed since
any previous transfer or at least 30 days has elapsed since the
Issue Date. If the Contract Owner makes a transfer within 30 days
of a prior transfer or within 30 days of the Issue Date, a
transfer fee of $25 is imposed.
MINIMUM PURCHASE PAYMENTS: The minimum initial purchase payment for a Contract
issued on a Non-Qualified basis is $1,000 with
minimum additional payments of $500. The minimum
purchase payment for a Contract issued on a
Qualified basis is $100.
ELIGIBLE INVESTMENTS: Integrated Resources Series Trust
IR Growth Portfolio
IR Aggressive Growth Portfolio
IR Foreign Securities Portfolio
IR Convertible Securities Portfolio
IR Money Market Portfolio
IR Government and Quality Bond Portfolio
IR Fixed Income Portfolio
IR High Yield Portfolio
IR Multi-Asset Portfolio
IR Aggressive Multi-Asset Portfolio
IR Natural Resources Portfolio
IR Target '98 Portfolio
ANNUITY SERVICE OFFICE:
Presidential Life Insurance Company
c/o IASC
P.O. Box 8927
Denver, Colorado 80201
1331 17th Street
Suite 800
Denver, Colorado 80202
800/922-0876
FOR USE WITH PRESIDENTIAL VARIABLE ACCOUNT ONE
A SEPARATE INVESTMENT ACCOUNT OF
PRESIDENTIAL LIFE INSURANCE COMPANY
PRESIDENTIAL
Page 2
<PAGE> 2
[S A M P L E]
<TABLE>
<S> <C>
RESIDENTIAL LIFE INSURANCE COMPANY SEND APPLICATION AND CHECK TO:
Lydecker St., Nyack, New York 10960 PRESIDENTIAL LIFE INSURANCE COMPANY
C/O INTEGRATED ADMINISTRATIVE SERVICES CORP.
P.O. BOX 8927
VARIABLE ANNUITY APPLICATION DENVER, COLORADO 80201
- ----------------------------------------------------------------------------------------------------------------------------------
1. Annuitant
(a) Name John Doe (d) Soc. Sec. No. 123-45-6789
----------------------------------------------- ----------------------------------------------
(b) Address 100 Main Street (e) Date of Birth June 1, 1953
-------------------------------------------- ----------------------------------------------
City Albany State NY Zip 10001 (f) Place of Birth New York
------------------------ ------- -------- ---------------------------------------------
(c) M [X] F [ ] Monthly Annuity Payments to begin on the date listed here: 4/1/2018
-----------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
2. Ownership (Complete only if different from Annuitant) (c) Soc. Sec. No.
----------------------------------------------
3. Name (d) Date of Birth
------------------------------------------------------- ----------------------------------------------
4. Address City State Zip
--------------------------------- ---------------- ------------ -----------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
5. Beneficiaries (Show full name(s), relationship(s) and percentage each is to receive)
Primary Beneficiary Mary Doe, Wife, 100%
-------------------------------------------------------------------------------------------------------------
Contingent Beneficiary ------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1. Type of Plan 5. Qualified Tax Deferred Retirement Plans
2. [] Qualified (Complete Item 5) [] Terminal [] Direct Funding from Qualified Plan
[] Non-Qualified [] 1035 Exchange Funding [] 1035 Exchange
3. Initial Purchase Payment $10,000 [] 401 Qualified [] Keogh (H-19) Plan [] 401 (k)
Planned Subsequent Purchase Payments $1,000 Plan [] Corporate Plan
Subsequent purchase payments will be allocated Has the appropriate plan
as shown unless otherwise directed. been established? [] Yes [] No
-----------------------------------------------
4. Total Allocation must equal 100% [] 403 (b) (a) [] Periodic Purchase [] 1035 Exchange
Portfolios 15A (b) [] Public School
IR Money Market Portfolio................... 10% [] 501 (c) Non-Profit Organization
IR Government and Quality Bond Portfolio.... 10% ---------------------------------------------
IR Fixed Income Portfolio................... 10% [] Deferred
IR Growth Portfolio......................... 10% Compen- [] Periodic Purchase [] 1035 Exchange
IR High Yield Portfolio..................... 10% sation [] Non-Qualified
IR Aggressive Growth Portfolio.............. 10% ----------------------------------------------
IR Foreign Securities Portfolio............. 10% [] 408 IRA
IR Convertible Securities Portfolio......... 10% Type of Plan [] Employee [] Working Spouse
IR Multi-Asset Portfolio.................... 5% (See reverse) [] Non-Working Spouse
IR Aggressive Multi-Asset Portfolio......... 5% Single [] SEP-IRA Rollover
IR Natural Resources Portfolio.............. 5% Contribution [] IRA Rollover from Qualified Plan
IR Target '98 Portfolio..................... 5% Continuing [] Regular IRA Year ____________________________
--- Contribution [] Regular IRA Rollover
Total Allocation 100% [] Regular SEP-IRA Year ________________________
=== --------------------------------------------------------------------------------
6. Customer Identification No.: if applicable.
- -----------------------------------------------------------------------------------------------------------------------------------
7. Special Requests
- -----------------------------------------------------------------------------------------------------------------------------------
8. Check here if you wish to receive a copy of the Statement of Additional Information. []
- -----------------------------------------------------------------------------------------------------------------------------------
9. Is the annuity applied for to replace or change any existing life insurance or annuity? [] Yes [X] No
- -----------------------------------------------------------------------------------------------------------------------------------
10. I (WE) ACKNOWLEDGE RECEIPT OF THE CURRENT PROSPECTUS OF PRESIDENTIAL VARIABLE ACCOUNT ONE AND INTEGRATED RESOURCES SERIES
TRUST, PAYMENTS AND VALUES PROVIDED BY THE CONTRACT FOR WHICH APPLICATION IS MADE ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR
AMOUNT. I (WE) CERTIFY THAT THE ABOVE SOCIAL SECURITY NUMBER IS CORRECT.
This application has been signed in Albany , New York
-----------------------------------------------------------------------------------------------
City State
on June month 15th day 1988
------------------------------ --------------------------- -------------------------------------------------------
Signature Signature
of Annuitant John Doe of Owner
--------------------------------- -------------------------------------------------------------------------
(Owner unless otherwise indicated) (If other than Annuitant)
- -----------------------------------------------------------------------------------------------------------------------------------
1. Agent's Report If yes, Indicate which, cost basis and [] Life insurance
Is the annuity to replace or change [ ] Yes submit any required replacement [] Annuity
any existing life insurance or annuity? [X] No forms. Cost Basis $_______________
Signature of Agent Richard Roe Phone Number (518) 123-4567
------------------------------------- -----------------------------------------------------------
Name and Number of Agent Richard Roe 1234
----------------------------------------------------------------------------------------------------------
Name and Address of Firm Roe Agency, 456 Main Street
----------------------------------------------------------------------------------------------------------
City Albany State New York Zip 10001
------------------------------------------------------------------ ------------------ -----------------------------
</TABLE>
PRESIDENTIAL Page 5
<PAGE> 3
INDIVIDUAL RETIREMENT ANNUITIES
408 IRA TYPE OF PLAN
If you are applying for an Individual Retirement Annuity (IRA), please note
that all allocations will be made to the IR Money Market Portfolio until the
expiration of the free-look period. Thereafter, your Purchase Payment will be
allocated in accordance with the instructions specified in item 4(c) of this
Application.
<PAGE> 4
DEFINITIONS
ACCUMULATION PERIOD -- The period between the Issue Date of this Contract and
the Annuity Date.
ACCUMULATION UNIT -- A unit of measurement which we use to calculate the
Contract Value during the Accumulation Period.
ANNUITANT -- The person designated in the Application and shown on the Contract
Data Page to receive or who is actually receiving annuity payments.
ANNUITY DATE -- The date on which annuity payments are to begin.
ANNUITY PERIOD -- The period starting on the Annuity Date.
ANNUITY UNIT -- A unit of measurement we use to calculate the amount of
Variable Annuity payments.
CONTRACT ANNIVERSARY -- An anniversary of the Issue Date of this Contract.
CONTRACT OWNER -- The Contract Owner is named in the application, unless
changed, and has all rights under this Contract.
CONTRACT VALUE -- The dollar value as of any Valuation Date of all amounts
accumulated under the Contract.
CONTRACT YEAR -- The period between Contract Anniversaries.
DIVISION OR SEPARATE ACCOUNT DIVISION -- A Division of the Separate Account
invested wholly in shares of one of the Eligible Investments or Eligible
Portfolios.
ELIGIBLE INVESTMENTS -- An investment entity shown on the Contract Data Page
and into which Contract Values can be invested.
ELIGIBLE PORTFOLIO(S) -- A segment of an Eligible Investment which constitutes
a separate and distinct class of shares.
ISSUE DATE -- The date shown on the Contract Data Page on which the first
Contract Year begins.
NON-QUALIFIED PLAN -- A retirement plan which does not receive favorable tax
treatment under Sections 401, 403(b) or 408 of the Internal Revenue Code.
QUALIFIED PLAN -- A retirement plan which receives favorable tax treatment under
Sections 401, 403(b) or 408 of the Internal Revenue Code.
SEPARATE ACCOUNT -- A segregated investment account named on the Contract Data
Page.
VALUATION DATE -- The Separate 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.
WITHDRAWAL VALUE -- The Contract Value, less any premium tax payable if the
Contract is being annuitized, minus any applicable Withdrawal Charge.
PURCHASE PAYMENTS
Purchase payments are flexible. Subject to the minimum and maximum purchase
payments set out on the Contract Data Page, you may change the amount and the
frequency of the purchase payments.
Purchase payments will be allocated to one or more Divisions of the Separate
Account. Allocations must be in whole numbers. At least $500 must be allocated
to a Division before another Division is selected.
OWNERSHIP, ASSIGNMENT
You as the Contract Owner have all rights and may receive all the benefits under
this Contract. While you are alive and during the lifetime of the Annuitant
prior to the Annuity Date you, as the person so designated in the application,
will be the Contract Owner, unless changed. Prior to the Annuity Date, upon the
death of the Contract Owner. On and after the Annuity Date the Annuitant becomes
the Contract Owner. After the Annuity Date, upon the death of the Annuitant,
the Beneficiary becomes the Contract Owner.
You may change the Contract Owner at any time. A change of Contract Owner will
automatically revoke any prior designation of Contract Owner. A request for
change of Contract Owner must be: (1) made in writing; and (2) received at our
Annuity Service Office. The change will become effective as of the date the
written request is signed. A new desig-
PRESIDENTIAL Page 3
<PAGE> 5
OWNERSHIP, ASSIGNMENT (CONTINUED)
nation of Contract Owner will not apply to any payment or action taken by the
Company prior to the time it was received.
ASSIGNMENT -- You, as the Contract Owner, may assign this Contract at any time
during the lifetime of Annuitant prior to the Annuity Date. We will not be bound
by any assignment until written notice is received by us at our Annuity Service
Office. We are not responsible for the validity of any assignment. We will not
be liable as to any payment or other settlement made by us before receipt of the
assignment.
BENEFICIARY PROVISIONS
BENEFICIARY -- The Beneficiary is named in the application, unless changed, and
is entitled to receive the benefits to be paid at the death of the Annuitant or
Contract Owner, as applicable.
Unless you, as Contract Owner, provide otherwise, the death benefit will be
paid in equal shares or all to the survivor as follows:
(1) to the primary Beneficiaries who survive the Annuitant's or Contract
Owner's death (as applicable): or if there are none,
(2) to the Contingent Beneficiary who survives the Annuitant's or Contract
Owner's death, as applicable; or, if there are none,
(3) to you, the Contract Owner, or to your estate.
CHANGE OF BENEFICIARY -- You, as Contract Owner, may change the Beneficiary or
Contingent Beneficiary at anytime during your lifetime or that of the
Annuitant. A change may be made by filing a written request with us at our
Annuity Service Office, unless an irrevocable Beneficiary designation was
previously filed. The change will take effect as of the date the notice is
signed. We will not be liable for any payment made or action taken before we
record the change.
SEPARATE ACCOUNT PROVISIONS
THE SEPARATE ACCOUNT -- The Separate Account is a separate investment account
of ours. It is shown on the Contract Data Page. We have allocated a part of our
assets for this and certain other contracts to this Separate Account. The
Assets of the Separate Account are our property. However, they are not
chargeable with the liabilities arising out of any other business we may
conduct.
INVESTMENTS OF THE SEPARATE ACCOUNT -- Purchase payments and Contract Values
applied to the Separate Account will be allocated to the Eligible Investment(s)
and the Eligible Portfolio(s) shown on the Contract Data Page. The allocation
will be made in accordance with the selection made by you in the application or
as subsequently changed. Allocation of purchase payments and Contract Values is
subject to the terms and conditions imposed by us.
The assets of the Separate Account are segregated by Eligible Investments and
Eligible Portfolios. Therefore, a series of Divisions is established within the
Separate Account. We may, from time to time, and with the prior approval of the
Superintendent of Insurance of the State of New York, add additional Eligible
Investments or Eligible Portfolios to those shown on the Contract Data Page.
You may be permitted to allocate future purchase payments and/or transfer
Contract Values to the additional Eligible Investments or Eligible Portfolios.
If the shares of any of the Eligible Investment(s) or Eligible Portfolio(s)
become unavailable for investment by the Separate Account, or our Board of
Directors deems further investment in these shares inappropriate, we may
substitute shares of another Eligible Investment or Eligible Portfolio for
shares already purchased or to be purchased by purchase payments under the
Contract.
VALUATION OF ASSETS -- Assets of Eligible Investments or Eligible Portfolios
within each Division are valued at their net asset value.
CONTRACT VALUE -- Purchase payments are allocated among the various Divisions
within the Separate Account. Purchase payments are converted into Accumulation
Units. The number of Accumulation Units credited to the Contract is determined
by dividing the purchase payments allocated to the Division by the value of the
Accumulation Unit for the Division. Surrenders will result in the cancellation
of Accumulation Units. The value of the Contract is the sum of the values for
each Division. The value of each Division is determined by multiplying the
number of Accumulation Units attributable to the Division by the Accumulation
Unit value for the Division.
ACCUMULATION UNIT -- Purchase payments are converted into Accumulation Units by
dividing each purchase payment by the Accumulation Unit value for the Valuation
Period during which the purchase payment is allocated to the Variable Account.
The Accumulation Unit value for any Valuation Period is determined by
subtracting (b) from (a) and dividing the result by (c) where:
PRESIDENTIAL Page 4
<PAGE> 6
SEPARATE ACCOUNT PROVISIONS (Continued)
(a) is the net result of
(1) the assets of the Division; i.e. the aggregate value of the underlying
Eligible Investment shares held at the end of such Valuation Period; plus or
minus
(2) the cumulative credit or charge for taxes reserved which is
determined by us to have resulted from the operation of the Division;
(b) is the cumulative unpaid charge for the Mortality and Expense Risk Charge
and for the Administrative Expense Charge, which are shown on the Contract Data
Page; and
(c) is the number of Accumulation Units outstanding at the end of the
Valuation Period.
The Accumulation Unit value may increase or decrease from Valuation Period to
Valuation Period.
MORTALITY AND EXPENSE RISK CHARGE -- We deduct a Mortality and Expense Risk
Charge equal, on an annual basis, to the amount shown on the Contract Data
Page. The Mortality and Expense Risk Charge compensates us for assuming the
mortality and expense risks under the Contract.
ADMINISTRATIVE EXPENSE CHARGE -- We deduct an Administrative Expense Charge
equal, on an annual basis, to the amount shown on the Contract Data Page. The
Administrative Expense Charge compensates us for the costs associated with the
administration of the Contract and the Separate Account.
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.
TRANSFERS
TRANSFER DURING ACCUMULATION PERIOD -- During the Accumulation Period, you may
transfer all or a part of your interest in a Division to another Division, free
of charge, provided that at least 30 days has elapsed since any previous
transfer or at least 30 days has elapsed since the Issue Date. In the event you
transfer all or part of your interest in a Division to another Division within
30 days of a prior transfer or within 30 days of the Issue Date, a transfer fee
of $25 will be imposed. This fee will be deducted from Contract Values which
remain in the Division; if the remaining Contract Value is insufficient, then
the fee will be deducted from transferred Contract Values.
The minimum partial transfer amount is $500. No partial transfer may be made if
the value of your interest in the Division from which a transfer is being made
would be less than $500 after the transfer. At least $500 must be allocated to
a Division before another Division is selected.
TRANSFER DURING ANNUITY PERIOD -- During the Annuity Period, the payee alone
has the sole right to transfer the value of the payee's Contract interest in a
Separate Account Division(s) by written request to our Annuity Service Office
subject to the following limitations:
(a) no transfer to a Separate Account Division may be made during the first
year of the Annuity Period; subsequent transfers are limited to one per
Division during each Contract Year of the Annuity Period;
(b) a payee's entire Contract interest in a Separate Account Division must be
transferred;
(c) a transfer to a Separate Account Division will be effected at the next
Annuity Unit value calculated after receipt by us at our Annuity Service Office
of a valid transfer request.
(d) the request for transfer must be received by us at our Annuity Service
Office at least 45 days before the anniversary of the Issue Date of the
Contract of which the transfer will take effect.
ANNUAL CONTRACT CHARGE
DEDUCTION FOR ANNUAL CONTRACT CHARGE -- We deduct an Annual Contract Charge
shown on the Contract Data Page from the Contract Value by cancelling
Accumulation Units to reimburse it for expenses relating to maintenance of the
Contract. The Annual Contract Charge will be deducted from the Contract Value
on each Contract Anniversary while this Contract is in force. The number of
Accumulation Units to be cancelled will be from each applicable Division in the
ratio that the value of each Division bears to the total Contract Value.
If this Contract is surrendered for its full value on other than the Contract
Anniversary, the full Annual Contract Charge will be deducted at the time of
surrender. No Annual Contract Charge is assessed after the Annuity Date.
Page 5
<PAGE> 7
WITHDRAWALS
TOTAL WITHDRAWAL DURING THE ACCUMULATION PERIOD - You may, during the
Accumulation Period, withdraw all the Contract Value remaining after deduction
of any Withdrawal Charge.
An election for total withdrawal must be made in writing to us at our Annuity
Service Office and must be accompanied by this Contract. Payment made by us in
honoring an election for total withdrawal prior to receipt by us of notice of
your death or the death of the Annuitant will discharge our obligations under
this Contract.
PARTIAL WITHDRAWALS DURING THE ACCUMULATION PERIOD - You may, during the
Accumulation Period, withdraw portions of the Contract Value, subject to the
following conditions:
(1) each partial withdrawal must be for an amount which is not less than $500
or, if smaller, the remaining value in a Separate Account Division;
(2) the remaining value in each Separate Account Division from which a partial
withdrawal is requested must be at least $500 after the partial withdrawal is
completed.
(3) an election to make a partial withdrawal must be made in writing to us at
our Annuity Service Office;
(4) the election must indicate the amount(s) and the Separate Account
Division(s) from which the partial withdrawal is requested;
(5) the maximum amount of partial withdrawal will be equal to the Contract
Value in the Division minus the amount of any Withdrawal Charge; and
(6) you have the right to specify the Division from which a withdrawal is to be
made.
Any payment made by us for partial withdrawal prior to receipt by us of notice
of the death of the Annuitant or the Contract Owner will discharge our
obligation under this Contract to the extent of the payment.
If a Withdrawal Charge is applicable, the reduction in the Contract Value
required to produce the amount of the partial withdrawal requested will be
greater than the amount actually paid by us to you. The actual dollar amount of
a partial withdrawal requested will be the amount paid to you.
FREE WITHDRAWAL AND WITHDRAWAL CHARGES -
(1) all Purchase Payment in a given Contract Year are totalled and are used
separately in calculated applicable Withdrawal Charges.
(2) all withdrawals will be assessed first against purchase payments in the
earliest Contract Years.
(3) the amount which may be withdrawn in any Contract Year without a Withdrawal
Charge is 10% of aggregate purchase payments less all prior withdrawals made as
of the date of the partial withdrawal. A free withdrawal can be made only once
per Contract Year and must be the first withdrawal in that Contract Year. No
free withdrawal is permitted during the first Contract Year.
(4) any amount withdrawn which exceeds the limitations specified in (3) above
will be subject to a Withdrawal Charge of 6% of the amount withdrawn if such
withdrawal is made within six years of making the purchase payment.
WITHDRAWAL PROCEDURES - The Accumulation Units credited to a Contract in a
Separate Account Division will be reduced based on the Accumulation Unit value
at the end of the Valuation Period during which an election of withdrawal
completely containing all required information is received by us at our Annuity
Service Office. An amount withdrawn will be paid within seven calendar days
after the date proper written election is received by us, except as provided
below.
DEATH BENEFIT
DEATH OF THE ANNUITANT - In the event of the death of the Annuitant prior to
the Annuity Date, a death benefit will be paid to the Beneficiary designated by
you. If a single sum payment is requested, the proceeds will be paid within
seven days. If an Annuity Option is desired, election may be made by the
Beneficiary during the sixty-day period commencing with the date of receipt of
proof of death; otherwise a single sum payment will be made to the Beneficiary
at the end of such sixty-day period.
The amount of the death benefit is equal to the greater of: (1) the Contract
Value at the end of the Valuation Period during which due proof of death and an
election of the type of payment by the Beneficiary is received by us at our
Annuity Service Office; or (2) the total dollar amount of purchase payments
minus the total dollar amount of partial withdrawals made and minus the total
dollar amounts applied to annuity options.
If the payee dies after the Annuity Date while the Contract is in force, the
death proceeds, if any, will depend upon the form of annuity payment in effect
at the time of the payee's death. If the Annuitant dies after the Annuity Date
and before the entire
Page 6
<PAGE> 8
DEATH BENEFIT (Continued)
interest in the Contract has been distributed, the remaining interest, if any,
as provided for in the Option selected will be distributed at least as rapidly
as under the method of distribution in effect at the Annuitant's death.
DEATH OF THE CONTRACT OWNER -- If you, as the Contract Owner, die prior to the
Annuity Date, the death benefit provision, as described above under "Death of
the Annuitant" is modified to provide the following:
If you die before the Annuity Date, the entire Contract Value must be
distributed within five (5) years of the date of death, unless:
(a) it is payable over the lifetime of a designated Beneficiary with
distributions beginning within one (1) year of the date of death; or
(b) the designated Beneficiary is your spouse and he or she continues the
Contract in his or her own name.
ANNUITY PERIOD
ELECTION OF ANNUITY OPTION AND ALLOCATION OF ANNUITY PAYMENTS -- Election of an
Annuity Option must be made by written notice to us at our Annuity Service
Office. The election may be made:
(1) by the Contract Owner prior to the Annuity Date and Annuitant's death:
(2) by the Annuitant on the Annuity Date unless the Contract Owner has
restricted the right to make an election; or
(3) by the Beneficiary upon the Annuitant's or Contract Owner's death unless
the Contract Owner has restricted the right to make an election.
If the Contract Value to be applied is less than $2,000, we may make payment in
one lump sum. If the amount of the first scheduled payment is less than $20, we
may increase the interval between payments to a quarterly, semi-annual or
annual payment to make the first payment at least $20. Option 3 may be elected
only if the Contract Value to be applied is at least $20,000. Payments must be
made to a natural person referred to as the payee.
The amount we use in determining annuity payments under Options 1, 2 and 3,
subject to adjustment for any applicable Withdrawal Charge and premium taxes,
is the Contract Value at the end of the Valuation Period which includes the
Annuity Date. If Option 1 or 2 is elected, no Withdrawal Charge will apply.
Payment under Option 3 or in accordance with the Other Settlement Arrangements
section may subject the Contract Value to a Withdrawal Charge. If Option 3 is
elected, the Contract Value may be subject to a Withdrawal Charge in accordance
with the Withdrawal Charge Provision.
ANNUITY OPTIONS -- The amount payable may be paid under one of the following
options or in any other manner agreed to by us:
OPTION 1 -- LIFE ANNUITY WITH INSTALLMENTS GUARANTEED -- We will make monthly
payments for the guaranteed period elected and then for the remaining lifetime
of the payee. The period elected may be only 10 or 20 years.
OPTION 2 -- JOINT AND SURVIVOR ANNUITY -- We will pay the full monthly income
while both payees are living. Upon the death of either payee, income will
continue during the lifetime of the surviving payee.
OPTION 3 -- INCOME FOR SPECIFIED PERIOD -- We will make monthly payments for
the period elected but not less than 5 years or more than 30 years. The
election must be made for full twelve-month periods.
OTHER SETTLEMENT ARRANGEMENTS -- Our agreement is necessary for other payment
methods.
VARIABLE ANNUITY -- The Contract Value at the end of the Valuation Period
immediately preceding the Valuation Period which includes the Annuity Date will
first be reduced by the dollar amount of any Withdrawal Charge (with respect to
Option 3 only) and then by any applicable premium taxes. The remaining value
will be used to calculate the first monthly annuity payment. For Annuity
Options 1, 2 and 3, the first monthly annuity payment will be based upon the
Annuity Option elected and the appropriate Annuity Option Table.
With respect to Options 1, 2 and 3, the number of Annuity Units for each
Separate Account Division for purposes of determining subsequent annuity
payments is determined by dividing the amount of the first monthly annuity
payment attributable to the Contract Value in that Separate Account Division by
the Annuity Unit Value for the Division at the end of the Valuation Period
immediately preceding the Valuation Period which includes the Annuity Date.
PRESIDENTIAL Page 7
<PAGE> 9
ANNUITY PERIOD (Continued)
The number of Annuity Units payment will remain fixed unless a transfer is
made. The amount of any subsequent annuity payments will be determined by
multiplying the number of Annuity Units per payment in each Separate Account
Division by the Annuity Unit Value for that Division at the end of the Valuation
Period immediately preceding the Valuation Period which includes the date on
which payment is to be made and then adding the resultant value. The Annuity
Unit Value may increase or decrease from Valuation Period to Valuation Period.
We guarantee that the dollar amount of each annuity payment after the first
will not be adversely affected by variations in actual expenses or by
variations in mortality experience from the expense and mortality assumptions
on which the first payment is based.
The Annuity Tables are based on the 1983 Table A, projected at Scale G with
interest at the rate of 5% per annum and assume births in year 1942. The amount
of each annuity payment will depend upon the sex and adjusted age of the
Annuitant, the joint annuitant, if any, or other payee. The adjusted age is
determined from the actual age nearest birthday at the time the first monthly
annuity payment is due according to the Table A below.
TABLE A
<TABLE>
<CAPTION>
ADJUSTMENT ADJUSTMENT
CALENDAR TO ACTUAL CALENDAR TO ACTUAL
YEAR OF BIRTH AGE YEAR OF BIRTH AGE
- ------------- ---------- ------------- ----------
<S> <C> <C> <C>
1899 - 1905 +6 1946 - 1951 -1
1906 - 1911 +5 1952 - 1958 -2
1912 - 1918 +4 1959 - 1965 -3
1919 - 1925 +3 1966 - 1972 -4
1926 - 1932 +2 1973 - 1979 -5
1933 - 1938 +1 1980 - 1985 -6
1939 - 1945 0 1986 - 1992 -7
</TABLE>
ANNUITY UNIT VALUE -- For each Separate Account Division, the value of an
Annuity Unit at the end of any Valuation Period is determined by multiplying the
Annuity Unit Value for the immediately preceding Valuation Period by the net
investment factor for the Valuation Period for which the Annuity Unit Value is
being calculated, and multiplying the result by an interest factor of .999866337
per calendar day of such Valuation Period to offset the effect of the assumed
rate of 5.00% per annum in the Annuity Option Table.
The net investment factor for each Division for any Valuation Period is
determined by dividing:
(1) the value of an Accumulation Unit of the applicable Division as of the end
of the current Valuation Period; by
(2) the value of an Accumulation Unit of the applicable Division as of the end
of the immediately preceding Valuation Period.
SUPPLEMENTARY ANNUITY AGREEMENT -- An Annuity Agreement will be issued to
reflect payments to be made under an Annuity Option. If settlement is a result
of the Annuitant's death or the Contract Owner's death, the effective date of
the Annuity Agreement will be the date of receipt of Due Proof of death, as
defined above. Otherwise, the effective date will be the date specified in the
Annuity Agreement.
CHANGE OF ANNUITY DATE -- You may elect to change the Annuity date during the
lifetime of the Annuitant. An election to change the Annuity Date must be in
written form received by us at the Annuity Service Office before the first
annuity payment date.
EVIDENCE OF AGE, SEX AND SURVIVAL -- We may require satisfactory evidence of:
(1) The age and sex of any person(s) on whose life the annuity payments are to
be based; and
(2) the continued survival of any person(s) on whose life the annuity payments
are based.
DISBURSEMENT OF FUNDS UPON DEATH OF PAYEE -- At the payee's death, unless
otherwise provided in the Annuity Agreement, the commuted value, based on 5.00%
interest of any remaining unpaid guaranteed installments, will be paid in one
sum to the Beneficiary. The value (to be commuted) of the remaining
installments will be determined by using (for all payments) the Annuity Unit
Value next determined after Due Proof of death is received by us.
PROTECTION OF BENEFITS -- Unless otherwise provided in the Annuity Agreement,
the payee may not commute, anticipate, assign, alienate or otherwise encumber
any payment to be made.
CREDITORS -- Proceeds under this Contract and any payment under any of the
above options will be exempt from the claims of creditors and from legal
process to the extent permitted by law.
PRESIDENTIAL Page 8
<PAGE> 10
TABLES OF MONTHLY INSTALLMENTS UNDER OPTION 1
Monthly installments for ages not shown will be furnished on request.
OPTION 1 Life Annuity with Installments Guaranteed
Guaranteed Period -- 10 Years
<TABLE>
<CAPTION>
Adjusted Adjusted
Age Monthly Installment Age Monthly Installment
- ------------- for each $1,000 of ------------- for each $1,000 of
Male Female Amount Applied Male Female Amount Applied
- ----------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C>
40 46 $4.74 58 64 $5.63
41 47 4.77 59 65 5.70
42 48 4.81 60 66 5.79
43 49 4.84 61 67 5.87
44 50 4.88 62 68 5.96
45 51 4.92 63 69 6.06
46 52 4.96 64 70 6.15
47 53 5.00 65 71 6.26
48 54 5.05 66 72 6.36
49 55 5.09 67 73 6.48
50 56 5.14 68 74 6.59
51 57 5.19 69 75 6.71
52 58 5.24 70 6.84
53 59 5.30 71 6.97
54 60 5.36 72 7.10
55 61 5.42 73 7.23
56 62 5.49 74 7.37
57 63 5.56 75 7.51
</TABLE>
OPTION 1 Life Annuity with Installments Guaranteed
Guaranteed Period -- 20 Years
<TABLE>
<CAPTION>
Adjusted Adjusted
Age Monthly Installment Age Monthly Installment
- ------------- for each $1,000 of ------------- for each $1,000 of
Male Female Amount Applied Male Female Amount Applied
- ----------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C>
40 46 $4.69 58 64 $5.39
41 47 4.72 59 65 5.44
42 48 4.75 60 66 5.49
43 49 4.78 61 67 5.54
44 50 4.81 62 68 5.59
45 51 4.84 63 69 5.65
46 52 4.87 64 70 5.70
47 53 4.91 65 71 5.75
48 54 4.95 66 72 5.81
49 55 4.98 67 73 5.86
50 56 5.02 68 74 5.91
51 57 5.06 69 75 5.96
52 58 5.11 70 6.01
53 59 5.15 71 6.06
54 60 5.19 72 6.10
55 61 5.24 73 6.15
56 62 5.29 74 6.19
57 63 5.34 75 6.22
</TABLE>
Page 9
<PAGE> 11
TABLE OF MONTHLY INSTALLMENTS UNDER OPTION 2
Monthly installments for ages or combination of ages not shown will be furnished
on request.
OPTION 2 Joint and Survivor Annuity
Adjusted Adjusted Female Age
Male
Age 50 55 60 65 70 75
--------------------------------------------------
50 4.60 4.69 4.77 4.85 4.93 4.99
55 4.66 4.76 4.88 4.99 5.09 5.19
60 4.71 4.84 4.98 5.13 5.28 5.42
65 4.76 4.91 5.08 5.27 5.47 5.67
70 4.80 4.97 5.16 5.40 5.66 5.94
75 4.82 5.01 5.24 5.51 5.83 6.19
-------------------------------------------------------------
TABLE OF MONTHLY INSTALLMENTS UNDER OPTION 3
OPTION 3 Income for Specified Period
Specified Monthly Installment Specified Monthly Installment
Period for each $1,000 of Period for each $1,000 of
(Years) Amount Applied (Years) Amount Applied
- --------- ------------------- --------- -------------------
5 $18.74 18 $6.94
6 15.99 19 6.71
7 14.02 20 6.51
8 12.56 21 6.33
9 11.42 22 6.17
10 10.51 23 6.02
11 9.77 24 5.88
12 9.16 25 5.76
13 8.64 26 5.65
14 8.20 27 5.54
15 7.82 28 5.45
16 7.49 29 5.36
17 7.20 30 5.28
- --------------------------------------------------------------------------------
A01088NY PRESIDENTIAL Page 10
<PAGE> 12
GENERAL PROVISIONS
THE CONTRACT -- This Contract and the attached Application constitute the entire
contract between the parties. All statements made in the Application will be
deemed representations and not warranties. No statement will void this Contract
or be used as a defense to a claim unless it is contained in the Application.
MODIFICATION OF CONTRACT -- Only our Chairman or Secretary have the power to
approve a change in or waive the provisions of this Contract. Any change or
waiver must be in writing. No agent has authority to change or waive the
provisions of this Contract. If the state insurance laws or regulations, the
federal securities laws or regulations, or any laws or regulations under which
the Contract would qualify as an annuity change, the Company will amend the
Contract to comply with these changes.
INCONTESTABILITY -- This contract will be incontestable after it has been in
force for a period of two years from the Issue Date.
MISSTATEMENT OF AGE OR SEX -- If a payee's age or sex has been misstated, any
amount to be paid based on the misstated age or sex will be adjusted. The
adjustment will be made on the basis of the corrected information without
changing the date of the first payment. The amount of any underpayment will be
paid in full, at 6% per annum, immediately. The amount of any overpayment will
be deducted from payments subsequently accruing.
OWNERSHIP OF THE SEPARATE ACCOUNT ASSETS -- We have exclusive ownership and
control of all assets in the Separate Account.
LIABILITIES OF SEPARATE ACCOUNTS -- The assets held in the Separate Account
will not be chargeable with liabilities arising out of any other business we
may conduct. The assets are held and applied exclusively for the benefit of
Contract Owners, Annuitants, Beneficiaries or payees of the variable annuity
contracts.
NONPARTICIPATION IN SURPLUS -- This Contract will not share in any distribution
of our profits or surplus.
SUSPENSION OF PAYMENTS -- We may suspend or postpone payments if any of the
following occur:
(1) during any period when the New York Stock Exchange is closed (other than
customary weekend and holiday closings);
(2) when trading in the markets the Account or a Portfolio normally utilizes is
restricted or an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Account's or a Portfolio's investment or
determination of Accumulation Unit Value is not reasonably practicable; or
(3) for such other period as the Securities and Exchange Commission by order
may permit for protection of the Contract Owners.
REPORTS -- Once each Contract Year, we will furnish you with an Annual Report
of the Separate Account and a statement showing the Contract Value.
<PAGE> 13
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
NONPARTICIPATING
NO DIVIDENDS
PRESIDENTIAL
LIFE INSURANCE COMPANY
69 Lydecker Street
Nyack, NY 10960
- -------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 6.(A)
SHORT CERTIFICATE
STATE OF NEW YORK
INSURANCE DEPARTMENT
SALVATORE R. CURIALE
SUPERINTENDENT OF INSURANCE
It is hereby certified that the annexed copy of Declaration of Intention and
Charter of PRESIDENTIAL LIFE INSURANCE COMPANY, of Nyack, New York, as filed in
this Department May 19, 1965, with amendments to date,
has been compared with the original on file in this Department and that it is a
correct transcript therefrom and of the whole of said original.
In Witness Whereof, I have hereunto set
my hand and affixed the official seal of
this Department at the City of Albany,
this 20th day of May, 1994.
[SEAL] [SIG]
Deputy Superintendent Insurance
<PAGE> 2
DECLARATION OF INTENTION AND CHARTER OF
PRESIDENTIAL LIFE INSURANCE COMPANY
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 one of us a
resident of the State of New York, do hereby declare our intention to form a
corporation for the purpose of doing the kinds of insurance business authorized
by Paragraphs 1, 2 and 3 of Section 46 of the Insurance Law of the State of New
York, and for that purpose do adopt the following Charter, to wit:-
CHARTER
Section 1. The name of this corporation shall be PRESIDENTIAL LIFE
INSURANCE COMPANY.
Section 2. The principal office of this company shall be located in New
City, County of Rockland, State of New York.
Section 3. The kinds of insurance business to be transacted by the
corporation shall be as authorized by Section 46, Paragraphs 1, 2 and 3 of the
Insurance Law of the State of New York.
i. "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
<PAGE> 3
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.
ii. "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.
Any such agreement made in connection with a qualified pension,
profit-sharing or annuity plan may provide that any amounts paid to the
insurer to provide annuities shall be allocated by the insurer to one or
more separate accounts.
iii. "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
-2-
<PAGE> 4
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 4. The mode and manner in which the corporate powers of this
corporation shall be exercised are through a board of directors and through
such officers and agents as such board shall empower.
Section 5. The number of the directors of this corporation shall be
not less than thirteen (13) nor more than nineteen (19), and in no case shall
the number of directors be less than thirteen (13).
Section 6. The directors of the corporation shall be elected at the
annual meeting of stockholders of the corporation.
The annual meeting of the stockholders of the corporation shall be held on
the first Tuesday of April each and every year, or if the first Tuesday of
April in any year be a legal holiday then the next succeeding business
day. At such annual meeting not less than thirteen directors shall be
elected for the ensuing year, the directors to take office immediately
upon election and to hold office until the next annual meeting and until
their successors are elected. At each annual meeting, each stock-
-3-
<PAGE> 5
holder of record on the books of the corporation, who shall have held his
shares in his own name for at least thirty days prior to the meeting,
shall be entitled to one vote in person or by proxy for each share of
stock so held by him. Directors shall be chosen and elected by plurality of
the whole number of shares voted at the meeting.
Whenever any vacancies occur in the board of directors by death,
resignation or removal or otherwise, the remaining members of the board,
at a meeting called for that purpose, or at any regular meeting shall
elect a director or directors to fill the vacancy or vacancies thus
occasioned, and each director so elected shall hold office for the
unexpired term of the director whose place he has taken.
Section 7. Each director shall be at least 21 years of age and at
all times a majority of the directors of this corporation shall be citizens and
residents of this State or of adjoining States, and not less than three thereof
shall be residents of this State.
Section 8. The names and post office addresses of the directors who
shall serve until the first annual meeting of this Corporation are:
HERBERT KURZ residing at 9 Richard Drive
West Nyack, New York
AARON L. JACOBY residing at 15 Clark Street
Brooklyn, New York
4
<PAGE> 6
B. BERNARD GREIDINGER residing at 8100 Bay Parkway
Brooklyn, New York
FREDERICK PALMER residing at North Broadway
Upper Nyack, New York
CALLMAN GOTTESMAN residing at 391 Eastwood Road
Woodmere, New York
HAROLD LEVIN residing at 912 Fifth Avenue
New York, New York
DAVID SCRIBNER residing at 160 East 88th Street
New York City, N.Y.
SIDNEY RIVKIN residing at 3 Washington Square Village
New York, New York
ALBERT C. STEHLE residing at 37 Praire Avenue
Suffern, New York
WILLIAM NEEDLE residing at 229 Storer Avenue
New Rochelle, New York
KENNETH B. CLARK residing at 17 Pinecrest Drive
Hastings-on-Hudson, New York
MORTON B. SILBERMAN residing at 270 Blauvelt Road
Pearl River, New York
BURTON H. HANFT residing at 23 Pebble Lane,
Roslyn Heights, New York
IRVING L. SCHWARTZ residing at 10 East End Avenue
New York, New York
Section 9. The duration of the corporate existence of this corporation
shall be perpetual.
Section 10. The amount of the capital of this corporation shall be One
Million Dollars ($1,000,000) to consist of Five hundred thousand (500,000)
shares of capital stock each having a par value of Two Dollars ($2.00).
-5-
<PAGE> 7
Section 11. The Board of Directors, at a meeting held at any time prior to
the first annual meeting of the members, and thereafter at its annual meeting,
which shall be held immediately after the annual meeting of the members, shall
elect from its own number a President, a Secretary and a Treasurer, and it may
at its option at any time appoint or elect such other officers as shall be
provided in the by-laws. In case a quorum is not present at such meeting, the
same shall be adjourned to another day by the directors present. Officers
elected by the Board shall respectively hold office until the next annual
meeting, and until their successors are chosen and have qualified. Other
officers shall serve at the pleasure of the Board, unless otherwise provided in
the by-laws. Vacancies in the elective offices occurring in the interval
between annual meetings may be filled at any time by the Board of Directors,
and a person so elected shall hold office until his successor is chosen and
has qualified.
IN WITNESS WHEREOF, we have hereunto subscribed our names and affixed our
seals this 18th day of March , .
/s/ HERBERT KURZ, L.S.
----------------------------------------
HERBERT KURZ
/s/ AARON L. JACOBY L.S.
----------------------------------------
AARON L. JACOBY
-6-
<PAGE> 8
/s/ B. BERNARD GREIDINGER L.S.
----------------------------------------
B. BERNARD GREIDINGER
/s/ FREDERICK PALMER L.S.
----------------------------------------
FREDERICK PALMER
/s/ CALLMAN GOTTESMAN L.S.
----------------------------------------
CALLMAN GOTTESMAN
/s/ HAROLD LEVIN L.S.
----------------------------------------
HAROLD LEVIN
/s/ DAVID SCRIBNER L.S.
----------------------------------------
DAVID SCRIBNER
/s/ SIDNEY RIVKIN L.S.
----------------------------------------
SIDNEY RIVKIN
/s/ ALBERT C. STEHLE L.S.
----------------------------------------
ALBERT C. STEHLE
/s/ WILLIAM NEEDLE L.S.
----------------------------------------
WILLIAM NEEDLE
/s/ KENNETH B. CLARK L.S.
----------------------------------------
KENNETH B. CLARK
/s/ MORTON B. SILBERMAN L.S.
----------------------------------------
MORTON B. SILBERMAN
/s/ JOHN J. LYNCH L.S.
----------------------------------------
JOHN J. LYNCH
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 18th day of March, 1965, before me personally came HERBERT KURZ,
AARON L. JACOBY, B. BERNARD GREIDINGER, FREDERICK PALMER, CALLMAN GOTTESMAN,
HAROLD LEVIN, JOHN J. LYNCH, DAVID SCRIBNER, SIDNEY RIVKIN, ALBERT C. STEHLE,
WILLIAM NEEDLE, KENNETH B. CLARK, MORTON B. SILBERMAN, to me personally known
and known to me to be the persons who executed the foregoing instrument, and
they severally duly acknowledged before me that they executed the same.
/s/ IRVING PORTNOY
----------------------------------------
Notary Public
IRVING PORTNOY
NOTARY PUBLIC, STATE OF NEW YORK
NO. [ILLEGIBLE]
QUALIFIED IN [ILLEGIBLE] COUNTY
[ILLEGIBLE]
COMMISSION EXPIRES [ILLEGIBLE]
<PAGE> 9
CERTIFICATE OF AMENDMENT OF CHARTER
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
(Under Section 805 of the Business Corporation Law)
We, the undersigned, HERBERT KURZ, Chairman of the Board, and DONNA
MONACELLI, Secretary, respectively, of PRESIDENTIAL LIFE INSURANCE COMPANY,
hereby certify:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE COMPANY.
2. The charter of the corporation was filed with the New York State
Insurance Department on the 19th day of March, 1965.
3. In accordance with Section 801 (b)(14) of the Business Corporation
Law, the Charter is hereby amended as follows:
"Section 11. The Board of Directors, at a meeting held at any time
prior to the first annual meeting of the members, and thereafter at
its annual meeting, which shall be held immediately after the annual
meeting of the members, shall elect a President, a Secretary and a
Treasurer, and it may at its option at any time appoint or elect such
other officers as shall be provided in the by-laws. Any two or more
offices may be held by the same person, except the offices of
President and Secretary. In case a quorum is not present at such
meeting, the same shall be adjourned to another day by the directors
present. Officers elected by the Board shall respectively hold office
until the next annual meeting, and until their successors are chosen
and have qualified. Other officers shall serve at the pleasure of the
Board, unless otherwise provided in the by-laws. Vacancies in the
elective offices occurring in the internal between annual meetings may
be filled at any time by the Board of Directors, and a person so
elected shall hold office until his successors is chosen and has
qualified."
4. The foregoing amendment to the charter was authorized by vote of the
holders of a majority of all the outstanding shares entitled to vote thereon at
a meeting of the shareholders.
<PAGE> 10
IN WITNESS WHEREOF, this certificate has been signed this 22nd
day of March, 1994.
/s/ HERBERT KURZ
-----------------------------------
Herbert Kurz, Chairman of the Board
/s/ DONNA MONACELLI
-----------------------------------
Donna Monacelli, Secretary
STATE OF NEW YORK )
:SS
COUNTY OF NEW YORK )
DONNA MONACELLI, being duly sworn, deposes and says that she is
the Secretary of Presidential Life Insurance Company, the corporation named in
the within Certificate of Amendment; that she has read the foregoing certificate
and knows the contents thereof; that the same is true to her own knowledge.
/s/ DONNA MONACELLI
---------------------------------
Donna Monacelli
Sworn to before me this
22nd day of March, 1994.
/s/ DOREEN T. POMPA
- ----------------------------------
Notary Public
DOREEN T. POMPA
Notary Public, State of New York
No. 01P05016377
Qualified in Oranco County
Commission Expires August 9, 1995
<PAGE> 11
CERTIFICATE OF AMENDMENT OF CHARTER
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
(Under Section 805 of the Business Corporation Law)
We, the undersigned, HERBERT KURZ, President, and CALLMAN GOTTESMAN,
Secretary, respectively, of PRESIDENTIAL LIFE INSURANCE COMPANY, hereby certify:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE COMPANY.
2. The charter of the corporation was filed with the New York State
Insurance Department on the 19th day of March, 1965.
3. The charter is amended as authorized by Section 801(b)(9) of the
Business Corporation Law, to increase the par value of the authorized and
issued shares of capital stock from Four and 22/100 Dollars ($4.22) to Five and
265/100 Dollars ($5.265) per share.
4. Section 10 of the charter, which contains the statement with
respect to authorized shares, is hereby amended as follows:
"Section 10. The amount of the capital of this
corporation shall be $2,500,875, to consist of 475,000
shares of capital stock each share having a par value of
$5.265."
5. The foregoing amendment to the charter was authorized by vote of
the holders of a majority of all the
<PAGE> 12
outstanding shares entitled to vote thereon at a meeting of the shareholders.
IN WITNESS WHEREOF, this certificate has been signed this 4th
day of April, 1990.
/s/ HERBERT KURZ
--------------------------------
HERBERT KURZ, President
/s/ CALLMAN GOTTESMAN
--------------------------------
CALLMAN GOTTESMAN, Secretary
STATE OF NEW YORK )
:SS
COUNTY OF NEW YORK )
CALLMAN GOTTESMAN, being duly sworn, deposes and says that he is
the Secretary of Presidential Life Insurance Company, the corporation named in
the within Certificate of Amendment; that he has read the foregoing certificate
and knows the contents thereof; that the same is true to his own knowledge.
/s/ CALLMAN GOTTESMAN
---------------------------------
CALLMAN GOTTESMAN
Sworn to before me this
4th day of April, 1990.
/s/ JOYCE FORTUNE LACHTER
- ----------------------------------
Notary Public
JOYCE FORTUNE LACHTER
Notary Public, State of New York
No. 41-2227800
Qualified in Queens County
Commission Expires Oct. 31, 1991
<PAGE> 13
CERTIFICATE OF AMENDMENT OF CHARTER
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
(Under Section 805 of the Business Corporation Law)
WE, the undersigned, HERBERT KURZ, President, and CALLMAN GOTTESMAN,
Secretary, respectively, of PRESIDENTIAL LIFE INSURANCE COMPANY, hereby certify:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE COMPANY.
2. The charter of the corporation was filed with the New York State
Insurance Department on the 19th day of March, 1965.
3. The charter is amended, as authorized by Section 801(b)(9) of the
Business Corporation Law, to increase the par value of the authorized and
issued shares of capital stock from Three and 16/100 Dollars ($3.16) to Four
and 22/100 Dollars ($4.22) per share.
4. Section 10 of the charter, which contains the statement with respect to
authorized shares, is hereby amended as follows:
"Section 10. The amount of the capital of this
corporation shall be $2,004,500, to consist of 475,000
shares of capital stock, each share having a par value
of $4.22."
5. The foregoing amendment to the charter was authorized by vote of the
holders of a majority of all the
<PAGE> 14
outstanding shares entitled to vote thereon at a meeting of the shareholders.
IN WITNESS WHEREOF, this certificate has been signed this 18th
day of November, 1981.
/s/ HERBERT KURZ
--------------------------------
HERBERT KURZ, President
/s/ CALLMAN GOTTESMAN
--------------------------------
CALLMAN GOTTESMAN, Secretary
STATE OF NEW YORK )
:SS
COUNTY OF NEW YORK )
CALLMAN GOTTESMAN, being duly sworn, deposes and says that he is
the Secretary of Presidential Life Insurance Company, the corporation named in
the within Certificate of Amendment; that he has read the foregoing certificate
and knows the contents thereof; that the same is true to his own knowledge.
/s/ CALLMAN GOTTESMAN
---------------------------------
CALLMAN GOTTESMAN
Sworn to before me this
18th day of November, 1981.
/s/ THEODORE A. PALMER
- ----------------------------------
Notary Public
THEODORE A. PALMER
Notary Public, State of New York
No. 51-4624852
Qualified in New York County
Commission Expires March 30, 1982
<PAGE> 15
CERTIFICATE OF AMENDMENT OF CHARTER
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
(Under Section 805 of the Business Corporation Law)
WE, the undersigned, HERBERT KURZ, President, and CALLMAN GOTTESMAN,
Secretary, respectively, of PRESIDENTIAL LIFE INSURANCE COMPANY, hereby certify:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE COMPANY.
2. The charter of the corporation was filed with the New York State
Insurance Department on the 19th day of March, 1965.
3. The charter is amended, as authorized by Section 801(b)(9) of the
Business Corporation Law, to increase the par value of the authorized and
issued shares of capital stock from Two and 53/100 Dollars ($2.53) to Three and
16/100 Dollars ($3.16) per share.
4. Section 10 of the charter, which contains the statement with respect
to authorized shares, is hereby amended as follows:
"Section 10. The amount of the capital of this corporation shall be
$1,501,000, to consist of 475,000 shares of capital stock, each share
having a par value of $3.16."
5. The foregoing amendment to the charter was authorized by vote of the
holders of a majority of all the
<PAGE> 16
outstanding shares entitled to vote thereon at a meeting of the shareholders.
IN WITNESS WHEREOF, this certificate has been signed this 17th
day of August, 1981.
/s/ HERBERT KURZ
--------------------------------
HERBERT KURZ, President
/s/ CALLMAN GOTTESMAN
--------------------------------
CALLMAN GOTTESMAN, Secretary
STATE OF NEW YORK )
:SS
COUNTY OF NEW YORK )
CALLMAN GOTTESMAN, being duly sworn, deposes and says that he is
the Secretary of Presidential Life Insurance Company, the corporation named in
the within Certificate of Amendment; that he has read the foregoing certificate
and knows the contents thereof; that the same is true to his own knowledge.
/s/ CALLMAN GOTTESMAN
---------------------------------
CALLMAN GOTTESMAN
Sworn to before me this
17th day of August, 1981.
/s/ THEODORE A. PALMER
- ----------------------------------
Notary Public
THEODORE A. PALMER
Notary Public, State of New York
No. 51-4624852
Qualified in New York County
Commission Expires March 30, 1982
<PAGE> 17
CERTIFICATE OF AMENDMENT OF CHARTER
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
(Under Section 805 of the Business Corporation Law)
WE, the undersigned, HERBERT KURZ, President, and CALLMAN GOTTESMAN,
Secretary, respectively, of PRESIDENTIAL LIFE INSURANCE COMPANY, hereby certify:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE
COMPANY.
2. The charter of the corporation was filed with the New York State
Insurance Department on the 19th day of March, 1965.
3. The charter is amended, as authorized by Section 801(b)(9) of
the Business Corporation Law, to increase the par value of the authorized and
issued shares of capital stock from Two and 32/100 Dollars ($2.32) per share to
Two and 53/100 Dollars ($2.53) per share.
4. Section 10 of the charter, which contains the statement with
respect to authorized shares, is hereby amended as follows:
"Section 10. The amount of the capital of this corporation shall
be $1,201,750, to consist of 475,000 shares of capital stock, each share
having a par value of $2.53."
5. The foregoing amendment to the charter was authorized by vote of
the holders of a majority of all the
<PAGE> 18
outstanding shares entitled to vote thereon at a meeting of the shareholders.
IN WITNESS WHEREOF, this certificate has been signed this 21st day of
April, 1981.
/s/ HERBERT KURZ
----------------------------
HERBERT KURZ, President
/s/ CALLMAN GOTTESMAN
----------------------------
CALLMAN GOTTESMAN, Secretary
STATE OF NEW YORK )
:SS
COUNTY OF NEW YORK )
CALLMAN GOTTESMAN, being duly sworn, deposes and says that he is the
Secretary of PRESIDENTIAL LIFE INSURANCE COMPANY, the corporation named in the
within Certificate of Amendment: that he has read the foregoing certificate and
knows the contents thereof; that the same is true to his own knowledge.
/s/ CALLMAN GOTTESMAN
----------------------------
CALLMAN GOTTESMAN
Sworn to before me this
21st day of April, 1981
/s/ THEODORE A. PALMER
- ------------------------
Notary Public
THEODORE A. PALMER
Notary Public State of New York
[ILLEGIBLE]
Qualified in New York County
Commission Expires [ILLEGIBLE] 1982
<PAGE> 19
CERTIFICATE OF AMENDMENT OF CHARTER
of
PRESIDENTIAL LIFE INSURANCE COMPANY
(Under Section 805 of the Business Corporation Law)
WE, the undersigned, HERBERT KURZ, President, and CALLMAN GOTTESMAN,
Secretary, respectively, of PRESIDENTIAL LIFE INSURANCE COMPANY, hereby certify:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE COMPANY.
2. The charter of the corporation was filed with the New York State
Insurance Department on the 19th day of March, 1965.
3. The charter is amended, as authorized by Section 801(b)(9) of the
Business Corporation Law, to increase the par value of the authorized and
issued shares of capital stock from Two and 12/100 Dollars ($2.12) per share to
Two and 32/100 Dollars ($2.32) per share.
4. Section 10 of the charter, which contains the statement with respect
to authorized shares is hereby amended as follows:
"Section 10. The amount of the capital of this corporation shall be
$1,102,000, to consist of 475,000 shares of capital stock, each share
having a par value of $2.32."
<PAGE> 20
5. The foregoing amendment to the charter was authorized by vote of the
holders of a majority of all the outstanding shares entitled to vote thereon at
a meeting of the shareholders.
IN WITNESS WHEREOF, this certificate has been signed this 17th day of
April, 1978.
/s/ HERBERT KURZ
--------------------------
HERBERT KURZ, President
/s/ CALLMAN GOTTESMAN
---------------------------
CALLMAN GOTTESMAN, Secretary
STATE OF NEW YORK )
:SS
COUNTY OF NEW YORK )
CALLMAN GOTTESMAN, being duly sworn, deposes and says that he is the
Secretary of Presidential Life Insurance Company, the corporation named in the
within Certificate of Amendment; that he has read the foregoing certificate and
knows the contents thereof; that the same is true to his own knowledge.
/s/ CALLMAN GOTTESMAN
----------------------------
CALLMAN GOTTESMAN
Sworn to before me this
17th day of April, 1978
[SIG]
- -----------------------
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
<PAGE> 21
CERTIFICATE OF AMENDMENT OF CHARTER
of
PRESIDENTIAL LIFE INSURANCE COMPANY
Under Section 805 of the Business Corporation Law
WE, the undersigned, HERBERT KURZ, President, and CALLMAN GOTTESMAN,
Secretary, respectively, of PRESIDENTIAL LIFE INSURANCE COMPANY, hereby certify:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE COMPANY.
2. The charter of the corporation was filed with the New York State
Insurance Department on the 19th day of March, 1965.
3. The charter is amended, as authorized by Section 801(b)(9) of the
Business Corporation Law, to increase the par value of the authorized and
issued shares of capital stock from Two Dollars ($2.00) per share to Two and
12/100 Dollars ($2.12) per share.
4. Section 10 of the charter, which contains the statement with respect
to authorized shares is hereby amended as follows:
<PAGE> 22
"Section 10. The amount of the capital of this corporation
shall be $1,007,000 to consist of 475,000 shares of capital stock,
cash share having a par value of $2.12."
5. The foregoing amendment to the charter was authorized by vote of
the holders of a majority of all the outstanding shares entitled to vote
thereon at a meeting of the shareholders.
IN WITNESS WHEREOF, this certificate has been signed this 21st day of
March, 1974.
/s/ HERBERT KURZ
----------------------------
HERBERT KURZ, President
/s/ CALLMAN GOTTESMAN
----------------------------
CALLMAN GOTTESMAN, Secretary
STATE OF NEW YORK )
: SS
COUNTY OF NEW YORK )
CALLMAN GOTTESMAN, being duly sworn, deposes and says that he is
the Secretary of PRESIDENTIAL LIFE INSURANCE COMPANY, the corporation named in
the within Certificate of Amendment; that he has read the foregoing certificate
and knows the contents thereof; that the same is true to his own knowledge.
/s/ CALLMAN GOTTESMAN
----------------------------
CALLMAN GOTTESMAN
Sworn to before me this
21st day of March, 1974
[SIG]
- --------------------------
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
<PAGE> 23
CERTIFICATE OF AMENDMENT OF CHARTER
of
PRESIDENTIAL LIFE INSURANCE COMPANY
-----------------------------------
Under Section 805 of the Business Corporation Law
WE, the undersigned, HERBERT KURZ, President, and CALLMAN GOTTESMAN,
Secretary, respectively, of PRESIDENTIAL LIFE INSURANCE COMPANY, hereby certify:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE COMPANY.
2. The charter of the corporation was filed with the New York State
Insurance Department on the 19th day of March, 1965.
3. The charter is amended, as authorized by Section 801 of the
Business Corporation Law, to effect the following amendment:
Section 10 of the charter, which contains the statement with
respect to authorized shares is hereby amended as follows:
"Section 10. The amount of the capital of this corporation shall be
$950,000, to consist of 475,000 shares of capital stock, each share
having a par value of $2.00. The stated capital of the corporation
is reduced from $1,000,000 to $950,000."
<PAGE> 24
4. The foregoing amendment to the charter was authorized by vote of
the holders of a majority of all the outstanding shares entitled to vote
thereon at a meeting of the shareholders.
IN WITNESS EHEREOF, this certificate has been signed this 12th day
of December, 1973.
IN WITNESS WHEREOF, this certificate has been signed this 21st day of
March, 1974.
/s/ HERBERT KURZ
----------------------------
HERBERT KURZ, PRESIDENT
/s/ CALLMAN GOTTESMAN
----------------------------
CALLMAN GOTTESMAN, Secretary
STATE OF NEW YORK )
: SS
COUNTY OF NEW YORK )
CALLMAN GOTTESMAN, being duly sworn, deposes and says that he is
the Secretary of PRESIDENTIAL LIFE INSURANCE COMPANY, the corporation named in
the within Certificate of Amendment; that he has read the foregoing certificate
and knows the contents thereof; that the same is true to his own knowledge.
/s/ CALLMAN GOTTESMAN
----------------------------
CALLMAN GOTTESMAN
Sworn to before me this
21st day of March, 1974
[SIG]
- --------------------------
Notary Public
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
[ILLEGIBLE]
<PAGE> 25
CERTIFICATE OF AMENDMENT OF CHARTER
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
-----------------------------------
Under Section 805 of the Business Corporation Law
WE, the undersigned, HERBERT KURZ, President, and CALLMAN
GOTTESMAN, Secretary, respectively of PRESIDENTIAL LIFE INSURANCE COMPANY,
hereby certify:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE
COMPANY.
2. The charter of the corporation was filed with the New York
State Insurance Department on the 19th day of March, 1965.
3. The charter is amended, as authorized by Section 801 of the
Business Corporation Law, to effect the following amendment:
Section 10 of the charter, which contains the statement with
respect to authorized shares is hereby amended as follows:
"Section 10. The amount of the capital of this corporation
shall be $1,000,000, to consist of 500,000 shares of the capital
stock, each share having a par value of $2.00. The stated capital
of the corporation is increased from $950,000 to $1,000,000."
<PAGE> 26
4. The foregoing amendment to the charter was authorized by vote of the
holders of a majority of all the outstanding shares entitled to vote thereon at
a meeting of the shareholders.
IN WITNESS WHEREOF, this certificate has been signed this 27th day of May,
1968.
/s/ HERBERT KURZ
---------------------------
HERBERT KURZ, President
/s/ CALLMAN GOTTESMAN
----------------------------
CALLMAN GOTTESMAN, Secretary
STATE OF NEW YORK )
:SS
COUNTY OF NEW YORK )
CALLMAN GOTTESMAN, being duly sworn, deposes and says that he is the
Secretary of PRESIDENTIAL LIFE INSURANCE COMPANY, the corporation named in the
within Certificate of Amendment; that he has read the foregoing certificate and
knows the contents thereof; that the same is true to his own knowledge.
/s/ CALLMAN GOTTESMAN
----------------------------
CALLMAN GOTTESMAN
Sworn to before me this
27th day of May, 1968
- --------------------------------
Notary Public
ARNOLD C. ABRAMOWITZ
Notary Public, State of New York
No. [ILLEGIBLE]
Qualified in [ILLEGIBLE] only
Cert. filed in New York County
Commission Expires March 30, 1970
<PAGE> 27
CERTIFICATE OF CHANGE AS TO
PRESIDENTIAL LIFE INSURANCE COMPANY
Under Section 805 of the Business Corporation Law
WE, the undersigned, HERBERT KURZ, President, and CALLMAN GOTTESMAN,
Secretary, respectively of PRESIDENTIAL LIFE INSURANCE COMPANY, hereby certify
as follows:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE COMPANY.
2. The charter of the corporation was filed with the New York State
Insurance Department on the 19th day of March 1965.
3. The charter is changed by changing Section 2 which sets forth the
location of the company's office to read as follows:
"Section 2. The principal office of this company shall be located in
the County of Rockland, State of New York."
4. The change of the charter of the corporation was approved by or
pursuant to authorization of the board of directors.
<PAGE> 28
IN WITNESS WHEREOF, this certificate has been signed this 15th
day of April, 1967.
/s/ HERBERT KURZ
--------------------------------
HERBERT KURZ, President
/s/ CALLMAN GOTTESMAN
--------------------------------
CALLMAN GOTTESMAN, Secretary
STATE OF NEW YORK )
:SS
COUNTY OF NEW YORK )
CALLMAN GOTTESMAN, being duly sworn, deposes and says that he
is the Secretary of PRESIDENTIAL LIFE INSURANCE COMPANY, the corporation named
in the within Certificate of Change; that he has read the foregoing certificate
and knows the contents thereof; that the same is true to his own knowledge.
/s/ CALLMAN GOTTESMAN
---------------------------------
CALLMMAN GOTTESMAN
Sworn to before me this
15th day of April, 1967.
/s/ ARNOLD C. ABRAMOWITZ
- ----------------------------------
Notary Public
ARNOLD C. ABRAMOWITZ
Notary Public, State of New York
No. 41-[ILLEGIBLE] in Queens Co.
Cert. filed in New York County
Commission Expires March 30, 1968
<PAGE> 29
CERTIFICATE OF AMENDMENT OF CHARTER
of
PRESIDENTIAL LIFE INSURANCE COMPANY
Under Section 805 of the Business Corporation Law
WE, the undersigned, HERBERT KURZ, President, and CALLMAN GOTTESMAN,
Secretary, respectively of PRESIDENTIAL LIFE INSURANCE COMPANY, hereby certify:
1. The name of the corporation is PRESIDENTIAL LIFE INSURANCE COMPANY.
2. The charter of the corporation was filed with the New York State
Insurance Department on the 19th day of March, 1965.
3. The charter is amended, as authorized by Section 801 of the Business
Corporation law, to effect the following amendment:
Section 10 of the charter, which contains the statement with respect
to authorized shares is hereby amended as follows:
"Section 10. The amount of the capital of this corporation shall be
$950,000 to consist of 475,000 shares of capital stock, each share
having a par value of $2.00. The stated capital of the corporation is
reduced from $1,000,000 to $950,000."
<PAGE> 30
4. The foregoing amendment to the charter was authorized by
vote of the holders of a majority of all the outstanding shares entitled to
vote thereon at a meeting of the shareholders.
IN WITNESS WHEREOF, this certificate has been signed this 18th
day of April, 1967.
/s/ HERBERT KURZ
--------------------------------
HERBERT KURZ, President
/s/ CALLMAN GOTTESMAN
--------------------------------
CALLMAN GOTTESMAN, Secretary
STATE OF NEW YORK )
:SS
COUNTY OF NEW YORK )
CALLMAN GOTTESMAN, being duly sworn, deposes and says that he
is the Secretary of PRESIDENTIAL LIFE INSURANCE COMPANY, the corporation named
in the within Certificate of Change; that he has read the foregoing certificate
and knows the contents thereof; that the same is true to his own knowledge.
/s/ CALLMAN GOTTESMAN
---------------------------------
CALLMMAN GOTTESMAN
Sworn to before me this
18th day of April, 1967.
/s/ ARNOLD C. ABRAMOWITZ
- ----------------------------------
Notary Public
ARNOLD C. ABRAMOWITZ
Notary Public, State of New York
No. 41-[ILLEGIBLE] in Queens Co.
Cert. filed in New York County
Commission Expires March 30, 1968
<PAGE> 1
EXHIBIT 6.(b)
SHORT CERTIFICATE
STATE OF NEW YORK
INSURANCE DEPARTMENT
SALVATORE R. CURIALE
SUPERINTENDENT OF INSURANCE
It is hereby certified that the annexed copy of Amended By-Laws of PRESIDENTIAL
LIFE INSURANCE COMPANY, of Nyack, New York, as approved by this Department
January 2, 1986, as amended to date,
has been compared with the original on file in this Department and that it is a
correct transcript therefrom and of the whole of said original.
(SEAL)
IN WITNESS WHEREOF, I have hereunto
set my hand and affixed the
official seal of this Department
at the City of Albany, this
20th day of May, 1994.
[SIG]
Deputy Superintendent of Insurance
<PAGE> 2
EXHIBIT "A"
-----------
BY-LAWS
OF
PRESIDENTIAL LIFE INSURANCE COMPANY
Section 1. The annual meeting of the stockholders of the corporation shall
be held at the principal office of the corporation in Nyack, Rockland County,
New York, or at such other place within the State of New York as the Board of
Directors may from time to time specify, on such business day in April or May
of each year and at such hour as may be designated by the Board of Directors.
Section 2. Special meetings of the stockholders may be held upon call of
the Chairman of the Board, a majority of the number of directors in office, or
of stockholders holding a majority of the outstanding shares of stock entitled
to vote at such meeting.
Section 3. Notice of the time and place of every meeting of stockholders
shall be given in the manner provided by law.
Section 4. The holders of a majority of the outstanding shares of stock of
the corporation entitled to vote at any meeting of stockholders must be present
in
<PAGE> 3
person or by proxy at such meeting to constitute a quorum less than such
quorum, however, having power to adjourn any meeting from time to time without
notice.
The Board of Directors, may before any meeting of stockholders, appoint
two inspectors of election to serve at such meeting. If the Board fails to make
such appointment, or if their appointees or either of them fail to appear at
such meeting, the chairman of the meeting may appoint inspectors or an
inspector to act at such meeting.
Section 5. Meetings shall be presided over by the Chairman of the Board or
in his absence, the President, or in his absence, the Vice-President. The
Secretary or an assistant Secretary of the corporation shall act as Secretary
at such meeting, if present, and in the absence of all of them, the Chairman of
the meeting may appoint a Secretary.
Section 6. The stock of the corporation shall be transferable or
assignable on the books of the corporation by the holders in person or by
attorney on surrender of the certificates therefor duly endorsed. Certificates
of stock shall be in such form and executed in such manner as may be prescribed
by law and the Board of Directors.
Section 7. The directors shall be elected at the annual meeting of
stockholders or as soon thereafter as practicable by a plurality of the votes
at such election
2.
<PAGE> 4
and shall hold office until the next annual meeting of the stockholders and
until their successors are elected and qualified.
The number of directors of the Company shall not be less than thirteen nor
more than nineteen. Each director shall hold office until the next annual
meeting of the stockholders and until his successor shall have been elected and
qualified.
If any vacancies shall occur in the Board of Directors, the remaining
members of the Board at a meeting called for that purpose on such notice as is
provided for in these By-Laws, or at any regular meeting, shall elect a
director or directors to fill the vacancy or vacancies occasioned and each
director so elected shall hold office until the next annual meeting of
stockholders. Notice of any election of a director or directors under the
provisions of this Section shall be given to the Superintendent of Insurance of
the State of New York.
At all times a majority of the directors shall be citizens and residents
of New York or adjoining states and not less than three thereof shall be
residents of New York. The directors need not be stockholders of the Company.
Each director shall be at least twenty-one years of age.
Not less than one-third of the directors shall be persons who are not
officers or employees of the Company or any
3.
<PAGE> 5
entity controlling, controlled by, or under common control with the Company and
who are not beneficial owners of a controlling interest in the voting stock of
the Company or of any such entity. At least one such person must be included in
any quorum for the transaction of business at any meeting of the Board of
Directors.
Section 8. Meetings of the Board of Directors shall be held at the time
fixed by the Board or upon call of the Chairman of the Board or a majority of
the number of directors in office and may be held at any place within or
without the state of New York. The Secretary or other officer performing his
duties shall give reasonable notice (which need not in any event exceed two
days) of all meetings of directors, provided that a meeting may be held without
notice immediately after the annual election and notice need not be given of
regular meetings held at the times fixed by resolution of the Board. Meetings
may be held at any time without notice if all the directors are present or if
those not present waive notice either before or after the meeting. A majority
of the whole Board shall constitute a quorum and the act of such a majority of
the whole Board at any meeting shall be the act of the Board. Less than such
quorum shall have power to adjourn any meeting from time to time without notice.
Section 9. The Board of Directors shall establish one or more committees
comprised solely of directors who are not
4.
<PAGE> 6
officers or employees of the Company or of any entity controlling, controlled
by, or under common control with the Company and who are not beneficial owners
of the controlling interest on the voting stock of the Company or any such
entity. Such committee or committees shall have responsibility for recommending
the selection of independent certified public accountants, reviewing the
Company's financial conditions, the scope and results of the independent audit
and any internal audit, nominating candidates for director for election by
shareholders or policy holders, and evaluating the performance of officers
deemed to be principal officers of the Company and recommending to the Board of
Directors the selection and compensation of such principal officers.
The Board of Directors may, by resolution passed by a majority of the
whole Board, designate additional committees, each committee to consist of two
or more directors of the Company which, to the extent provided in such
resolution, shall have and may exercise the powers of the Board of Directors
and the management of the business and affairs of the corporation. Each such
committee shall make its own rules of procedure and shall report its
proceedings to the Board when required.
Not less than one-third of the members of each such committee shall be
persons who are not officers or employees of the Company or of any entity
controlling, controlled by, or under common control with the Company and who
are not beneficial owners of a controlling interest in the voting stock of the
Company or any such entity. At least one such person must be included in any
quorum for the transaction of business of any such committee.
5.
<PAGE> 7
REVISED SECTION 11
APPROVED BY THE BOARD OF DIRECTORS
ON FEBRUARY 23, 1994
Section 11. The Board of Directors, as soon as may be convenient after the
election of directors in each year shall appoint a Chairman of the Board and
also appoint a President and a Secretary and may from time to time, appoint an
Executive Vice-President, one or more Vice-Presidents and such other officers
as they may deem proper. Any two or more offices may be held by the same
person, except the offices of President and Secretary.
<PAGE> 8
Section 10. The directors shall not receive any stated salary for their
services as directors or as member of a committee of directors, but, by
resolution of the Board, a fixed fee and expenses of attendance may be allowed
for attendance at each meeting of the Board of Directors or at a meeting of a
committee of the Board of Directors. Nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity as officer, agent or otherwise and receiving compensation therefor.
The members of the Board may name as Directors Emeritus persons who
formerly served as directors of the company. Directors Emeritus may attend and
participate in meetings of the Board of Directors but shall have no vote. They
shall receive such compensation as may be fixed by the Board of Directors.
Section 11. The Board of Directors, as soon as may be convenient after
the election of directors in each year-shall appoint one of their number,
Chairman of the Board and also appoint a President and a Secretary and may from
time to time, appoint an Executive Vice-President, one or more Vice-Presidents
and such other officers as they may deem proper. The same person may be
appointed to more than one office.
Section 12. The term of office of all officers shall be until next
election of directors and until their
6.
<PAGE> 9
respective successors are chosen and qualify, but any officer may be removed
from office at any time by the Board of Directors. Vacancies in the offices
shall be filled by the Board of Directors.
Section 13. The Chairman of the Board shall be the chief executive
officer of the corporation, shall preside at all meetings of the Board of
Directors, shall have general supervision of the affairs of the corporation,
and shall report to and be responsible to the Board of Directors and the
stockholders.
The President of the Corporation shall be the chief operating officer of
the corporation and subject to the direction and control of the Chairman of the
Board shall supervise the activities of the departments, other officers,
assistants and employees of the corporation.
The other officers of the corporation shall have such powers and duties
except as modified by the Board of Directors, as generally pertain to their
offices respectively, as well as such powers and duties as from time to time
shall be conferred by the Board of Directors.
Section 14. The company shall not pay any salary, compensation or
emolument to any officer, trustee or director thereof, nor any salary,
compensation or emolument amounting in any year to more than the maximum amount
specified in Section 214 of the New York Insurance Law, unless such payment be
first authorized by a vote of the Board of Directors.
7.
<PAGE> 10
REVISED SECTION 15
APPROVED BY THE BOARD OF DIRECTORS
ON NOVEMBER 28, 1990
Section 15. The corporation shall indemnify all directors and officers of
the corporation as follows in accordance with the provisions of Section 722 of
the Business Corporation Law:
(a) The corporation shall indemnify any person made, or threatened to be
made, a party to an action or proceeding (other than one by or in the right of
the corporation to procure a judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted in good
faith, for a purpose which he reasonably believed to be in, or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful.
(b) The termination of any such civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalents, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which he reasonably believed
to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the corporation or that he had reasonable
cause to believe that his conduct was unlawful.
(c) The corporation shall indemnify any person made, or threatened to be
made, a party to an action by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he, his testator or intestate,
is or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer of any other corporation of
any type or kind, domestic or foreign, of any partnership, joint venture,
trust, employee benefit plan or other enterprise, against amounts paid in
settlement and reasonable expenses, including attorneys' fees, actually and
necessarily incurred by him in connection with the defense or settlement of
such action, or in connection with an appeal therein, if such director or
officer acted, in good faith, for a purpose which he reasonably believed to be
in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed
to, the best interests of the corporation, except that no indemnification under
this paragraph shall be made in respect of (1) a threatened action, or a
pending action which is settled or otherwise disposed of, or (2) any claim,
issue or matter as to which such person shall have been adjudged to be liable
to the corporation, unless and only to the extent that the court in which the
action was brought, or, if no action was brought, any court of competent
jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnify for such portion of the settlement amount and expenses as the court
deems proper.
The corporation shall also indemnify the directors and officers of the
corporation to the extent authorized in Sections 723, 724 and 725 of the
Business Corporation Law of the State of New York.
8.
<PAGE> 11
Section 15. So far as permitted by the laws of the State of New York, any
person made a party to any action, suit, or proceeding by reason of the fact
that he, his testator or intestate, is or was a director, officer or employee
of the corporation or of any company which he served as such at the request of
the company, shall be indemnified by the company against the reasonable
expenses, including attorneys' fees, actually and necessarily incurred by him
in connection with the defense of such action, suit, or proceeding, or in
connection with any appeal therein, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such officer,
director or employee is liable for negligence or misconduct in the performance
of his duties. If said action, suit or proceedings shall be settled with the
approval of the Board of Directors and the Court, such director, officer or
employee, upon application for payment of such indemnity shall be entitled to
such indemnity in such amount that the Court shall approve as reasonable;
provided, however, that in the judgment of the Board of Directors, said
director, officer, or employee had not in any substantial way been derelict in
the performance of his duties as charged in such action, suit or proceeding.
The foregoing right to indemnification shall be in addition to the other rights
to which any such director, officer or employee may be entitled as a matter of
law.
Section 16. No director, officer, or responsible employee shall have a
substantial or pecuniary interest, or
9.
<PAGE> 12
hold an office or position in any other business entity which might result in a
conflict of interest between such entity, the individual and this company
without full timely disclosure thereof to the Board of Directors.
Section 17. These By-Laws may, at any time, be added to, amended or
repealed in whole or in part by the affirmative vote of a majority of the
number of directors in office given at a duly convened meeting of the Board,
the notice of which includes notice of such proposed action. No such notice
need be given if all members of the Board of Directors are present at the
meeting.
All By-Laws, including any By-Laws made, amended or repealed by the
directors, shall be subject to amendment, repeal or re-enactment by the
stockholders entitled to vote at any annual meeting or at any such meeting
called for that purpose.
10.
<PAGE> 1
EXHIBIT 8
FUND PARTICIPATION AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, is made on this 23rd day of
January, 1996, between PRESEDENTIAL LIFE INSURANCE COMPANY ("Presidential"), a
life insurance company organized under the laws of the State of New York, on
behalf of itself and on behalf of PRESIDENTIAL VARIABLE ACCOUNT ONE ("Variable
Account"), a separate account of Presidential existing pursuant to the laws of
the State of New York, and ANCHOR SERIES TRUST ("the Fund"), an open-end
management investment company established pursuant to the laws of the
Commonwealth of Massachusetts under a Declaration of Trust, as amended, dated
August 26, 1983, which is composed of multiple investment series ("Portfolios").
WITNESSETH:
WHEREAS, Presidential has established the Variable Account on its books
of account for the purpose of funding certain variable annuity contracts issued
by it; and
WHEREAS, the Variable Account is divided into various portfolios
("Divisions") under which the income, gains and losses, whether or not realized,
from assets allocated to each such Division are, in accordance with the
applicable variable annuity contracts, credited to or charged against such
Division without regard to any income, gains or losses of other Divisions or
separate accounts of Presidential; and
WHEREAS, the Variable Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940, as amended ("Act"); and
WHEREAS, the Fund, a registered, open-end, diversified management
investment company, is divided into various Portfolios, each Portfolio being
subject to separate investment objectives and restrictions which may not be
changed without a majority vote of the shareholders of each such Portfolio; and
WHEREAS, the Variable Account desires to purchase shares of the Fund in
connection with the issuance of certain variable annuity contracts to be
marketed under the name ICAP (collectively with other contracts and policies
that may be funded through the Fund, "Contracts"); and
WHEREAS, the Fund agrees to make shares of certain of its Portfolios
available to serve as underlying investment media for the corresponding
Divisions of the Variable Account; and
WHEREAS, SUNAMERICA SECURITIES, INC. ("Distributor"), which serves as
the distributor for the Contracts funded in the Variable Account pursuant to an
agreement with Presidential on behalf of itself and the Variable Account is a
broker-dealer registered as such under
<PAGE> 2
the Securities Exchange Act of 1934, as amended, and a member of the National
Association of Securities Dealers, Inc.;
NOW, THEREFORE, in consideration of the foregoing and of mutual
covenants and conditions set forth herein and for other good and valuable
consideration, Presidential (on behalf of itself and the Variable Account) and
the Fund hereby agree as follows:
1. The Contracts funded by the Variable Account will provide for
the allocation of net amounts among certain Divisions of the Variable Account
for investment in the shares of the particular portfolio of the Fund underlying
each such Division. The selection of a particular Division is to be made (and
such selection may be changed) in accordance with the terms of the applicable
Contract.
2. No representation is made as to the number or amount of such
Contracts to be sold. Presidential, pursuant to its agreement with Distributor,
will make reasonable efforts to market those Contracts it determines from time
to time to offer for sale and, although it is not required to offer for sale new
Contracts, Presidential will accept payments and otherwise service existing
Contracts funded in the Variable Account.
3. Fund shares to be made available to-the respective Divisions of
the Variable Account shall be sold by each of the respective Portfolios of the
Fund and purchased by Presidential that Division at the net asset value
next-computed after receipt of each order, as established in accordance with the
provisions of the then-current prospectus of the Fund. Shares of a particular
Portfolio of the Fund shall be ordered in such quantities and at such times as
determined by Presidential to be necessary to meet the requirements of those
Contracts having amounts allocated to the Division for which the Fund Portfolio
shares serve as the underlying investment medium. Orders and payments for shares
purchased will be sent promptly to the Fund and will be made payable in the
manner established from time to time by the Fund for the receipt of such
payments. The Fund reserves the right to delay transfer of its shares until the
payment check has cleared. The Fund has the obligation to insure that its shares
to be made available to the appropriate Division(s) under the Contracts are
registered at all times under the Securities Act of 1933, as amended ("1933
Act").
4. The Fund will redeem the shares of the various Portfolios when
requested by Presidential on behalf of the corresponding Division of the
Variable Account at the net asset value next computed after receipt of each
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Fund. The Fund will make payment in the manner
established from time to time by the Fund for the receipt of such redemption
requests, but in no event shall payment be delayed for a greater period than is
permitted by the Act.
5. Transfer of the Fund's shares will be by book-entry only. No
stock certificates will be issued to the Variable Account. Shares ordered from a
particular Portfolio to the Fund will be recorded in an appropriate title for
the corresponding Division of the Variable Account.
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<PAGE> 3
6. The Fund shall furnish notice promptly to Presidential of any
dividend or distribution payable on its shares which are subject to this
Agreement. All of such dividends and distributions as are payable on each of
the Portfolio shares in the title for the corresponding Division of the Variable
Account shall be automatically reinvested in additional shares of that Portfolio
of the Fund. The Fund shall notify Presidential of the number of shares so
issued.
7. All expenses incident to the performance of the Fund under this
Agreement shall be paid by the Fund. The Fund shall ensure that all of its
shares which are subject to this Agreement are registered and authorized for
issue in accordance with applicable federal and state laws prior to their
purchase by the Variable Account. Presidential shall bear none of the expenses
for the cost of registration of the Fund's shares, preparation of the Fund's
prospectuses, proxy materials and reports, the distribution of such items to
shareholders, the preparation of all statements and notices required by any
federal or state law or any taxes on the issue or transfer of the Fund's shares
subject to this Agreement.
8. Presidential, either directly or through Distributor, shall make
no representations concerning the Fund's shares which are subject to this
Agreement other than those contained in the then current prospectus of the Fund
and in printed information subsequently issued by the Fund as supplemental to
such prospectus.
9. Presidential and the Fund acknowledge that, the Fund's shares
have been made or may become available for investment by separate accounts of
other insurance companies, which may or may not be affiliated persons (as that
term is defined in the Act) of Presidential (collectively with Presidential,
"Participating Insurers"). In such event, (a) the Fund shall undertake that its
Board of Trustees ("Board") will monitor the Fund for the existence of material
irreconcilable conflicts that may arise between the Contract owners of
Participating Insurers, for the purpose of identifying and remedying any such
conflict and (b) paragraphs 10, 11 and 12 shall apply. In discharging its
responsibilities under paragraphs 10, 11 and 12 hereinafter, Presidential will
cooperate and coordinate, to the extent necessary, with the Board and with other
Participating Insurers. The Fund agrees that it will require, as a condition to
participation, that all Participating Insurers shall have obligations and
responsibilities regarding conflicts of interest corresponding to those that are
agreed to herein by Presidential pursuant to such paragraphs 10, 11 and 12 and
pursuant to this paragraph 9.
10. Presidential shall provide pass-through voting privileges to all
variable Contract owners so long as the U.S. Securities and Exchange Commission
continues to interpret the Act to require pass-through voting privileges for
variable Contract owners. Presidential shall be responsible for assuring that
the Variable Account calculates voting privilege in a manner consistent with
separate accounts of other Participating Insurers, as determined by the Board.
Presidential will vote shares for which it has not received voting instructions
in the same proportion as it votes shares for which it has received
instructions.
11. Presidential will report to the Board any potential or existing
conflicts of which it is or becomes aware between any of its Contract owners or
between any of its Contract owners and
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<PAGE> 4
Contract owners of other Participating Insurers. Presidential will be
responsible for assisting the Board in carrying out its responsibilities to
identify material conflicts by providing the Board with all information
available to it that is reasonably necessary for the Board to consider any
issues raised, including information as to a decision by Presidential to
disregard voting instructions of its Contract owners.
12. The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly by it to
Presidential and other Participating Insurers. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance tax, or securities laws or regulations, or a public ruling,
private letter ruling, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity Contract owners and variable life insurance Contract owners or by
Contract owners of different Participating Insurers; or (f) a decision by a
Participating Insurer to disregard the voting instructions of variable Contract
owners.
13. If it is determined by a majority of the Board or a majority of
its disinterested Trustees that a material irreconcilable conflict exists that
affects the interests of Presidential Contract owners, Presidential shall, in
cooperation with other Participating Insurers whose Contract owners' interests
are also affected by the conflict, take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, which steps could include:
(a) withdrawing the assets allocable to the Variable Account from the Fund or
any portfolio and reinvesting such assets in a different investment medium,
including another Portfolio of the Fund, or submitting the question of whether
such segregation should be implemented to a vote of all affected Contract owners
and, as appropriate, segregating the assets of any particular group (eg.,
annuity Contract owners or life insurance Contract owners) that votes in favor
of such segregation, or offering to the affected Contract owners of the option
of making such a change; and (b) establishing a new registered management
investment company or managed separate account. Presidential shall take such
steps at its expense if the conflict affects solely the interests of the owners
of Presidential Contracts, but shall bear only its equitable portion of any such
expense if the conflict also affects the interest of the Contract owners of one
or more Participating Insurers other than Presidential, provided: that this
sentence shall not be construed to require the Fund to bear any portion of such
expense. If a material irreconcilable conflict arises because of Presidential's
decision to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, Presidential
may be required, at Fund's election, to withdraw the Variable Account's
investment in the Fund, and no charge or penalty will be imposed against the
Variable Account as a result of such a withdrawal. Presidential agrees to take
such remedial action as may be required under this paragraph 13 with a view only
to the interests of its Contract owners. For purposes of this paragraph 13, a
majority of the disinterested members of the Board shall determine whether or
not any proposed action adequately remedies any irreconcilable conflict, but in
no event will Fund be required to establish a new funding medium for any
variable Contracts. Presidential shall not be required by this paragraph
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<PAGE> 5
13 to establish a new funding medium for any variable Contract if an offer to do
so has been declined by vote of a majority of affected Contract owners.
14. This Agreement shall terminate:
(a) at the option of Presidential or the Fund upon 60 days'
advance written notice to all other parties to this
Agreement; or
(b) at the option of Presidential if any of the Fund's
shares are not reasonably available to meet the
requirements of the Contracts funded in the Variable
Account as determined by Presidential. Prompt notice of
election to terminate shall be furnished by
Presidential; or
(c) at the option of Presidential upon institution of formal
proceedings against the Fund by the Securities and
Exchange Commission; or
(d) upon the vote of Contract owners having an interest in a
particular Division of the Variable Account to
substitute the shares of another investment company for
the corresponding Fund Portfolio shares in accordance
with the terms of the Contracts for which those Fund
shares had been selected to serve as the underlying
investment medium. Presidential will give 30 days' prior
written notice to the Fund of the date of any proposed
action to replace the Fund's shares; or
(e) in the event the Fund's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such
shares as the underlying investment medium of the
Contracts funded in the Variable Account. Prompt notice
shall be given by each party to all other parties in the
event that the conditions stated in subsections (b), (c)
or (d) or this paragraph 14 should occur.
15. Notwithstanding any other provisions of this Agreement, the
obligations of the Fund hereunder are not personally binding upon any of the
trustees, shareholders, officers, employees or agents of the Fund; resort in
satisfaction of such obligations shall be had only to the assets and property of
the Fund and not to the private property of any of such Fund's trustees,
shareholders, officers, employees or agents.
16. This Agreement shall be construed in accordance with the laws of
the State of New York.
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PRESIDENTIAL L1FE INSURANCE COMPANY
By: /s/ MICHAEL OPORTO
-------------------------------------
Name: Michael Oporto
Title: Chief Financial Officer
PRESIDENTIAL VARIABLE ACCOUNT ONE
By: PRESIDENTIAL LIFE INSURANCE COMPANY
By: /s/ MICHAEL V. OPORTO
----------------------------------
Name: Michael V. Oporto
Title: Chief Financial Officer
ANCHOR SERIES TRUST
By: /s/ ROBERT M. ZAKEM
-------------------------------------
Name: Robert M. Zakem
Title: Secretary
Acknowledged and Agreed:
SUNAMERICA SECURITIES, INC.
By: /s/ BRIDGET M. GAUGHAN Dated: 1/25/96
------------------------------ --------------------
Bridget M. Gaughan
Sr. Vice President
General Counsel
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<PAGE> 1
AMENDMENT NO. 3
TO
SERVICE AGREEMENT
WHEREAS, Presidential Life Insurance Company ("Presidential") and Integrated
Administrative Services Corporation ("IASC") entered into that certain Service
Agreement dated as of October 14, 1987 and amended by Amendment No. 1 dated as
of December 1, 1988 and Amendment No. 2 (the "Service Agreement") concerning
administrative services to be performed by IASC for certain variable annuity
contracts issued by Presidential;
WHEREAS, IASC subsequently changed its name to Anchor National Services, Inc.
("ANSI"); and
WHEREAS, ANSI subsequently notified Presidential that effective
September 3, 1991 it was assigning its rights and obligations under the Service
Agreement to its affiliated company, First SunAmerica Life Insurance Company
("First SunAmerica") pursuant to Section 11.01 of the Service Agreement;
NOW, THEREFORE, Presidential and First SunAmerica acknowledge that such
assignment has been made; and
First SunAmerica agrees to assume ANSI's rights and obligations under the
Service Agreement, provided that the acceptance of such assignment or the
execution of this Amendment No. 3 by First SunAmerica does not affect in any way
First SunAmerica's or ANSI's position set forth in: 1) the letter dated March
22, 1991 from Andrew Chua to Phillip Siegel; 2) the letter dated April 17, 1991
from Robert P. Saltzman to Herbert Kurz; or 3) the letter dated October 15, 1991
from Robert P. Saltzman to Herbert Kurz.
IN WITNESS WHEREOF, Presidential and First SunAmerica have caused this
Amendment No. 3 to the Service Agreement to be executed by and through their
duly authorized officers as of the date set forth below.
Presidential Life Insurance Company
Date: March 30, 1993
By: [SIG]
----------------------------------
Name:
Title:
First SunAmerica Life Insurance Company
Date: March 23, 1993 By: /s/ SCOTT GILLIS
------------------------------------
Name: Scott Gillis
Title: Vice President & Controller
<PAGE> 2
SERVICE AGREEMENT
AGREEMENT made as of the 14th day of October, 1987, by and between
the Presidential Life Insurance Company ("Presidential"), a New York
corporation, having its principal office and place of business at 69 Lydecker
Street, Nyack, New York, and Integrated Administrative Services Corporation
("IASC"), a Delaware corporation, having its principal office and place of
business at 1331 Seventeenth Street, Denver, Colorado.
WHEREAS, IASC is in the business of performing administrative
services in connection with certain variable annuity contracts issued by life
insurance companies affiliated with IASC and;
WHEREAS, IASC has contracted for the use of one or more computerized
data processing recordkeeping systems for annuity processing and administration
(hereinafter sometimes referred to as the "IASC System") and has the necessary
data processing equipment and personnel (hereinafter sometimes referred to as
the "Facilities" or "IASC's Facilities") to provide and support remote terminal
access to the IASC System and Facilities for the maintenance of annuity records,
processing of information and the generation of output and reports with respect
thereto; and
WHEREAS, Presidential desires to appoint and retain IASC as its
agent to perform the administrative services set forth in
<PAGE> 3
this Agreement with respect to certain variable annuity contracts to be offered
by it (the "Contracts") and IASC desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
SECTION 1 Appointment of IASC
1.01 Subject to the provisions of this Agreement, Presidential
hereby appoints and retains IASC as its agent to perform the administrative
services described in Exhibit A with respect to the Contracts, and IASC hereby
agrees to perform such administrative services, subject to the provisions of
this Agreement. IASC hereby agrees to use such System and Facilities to maintain
records of information and data transmitted to it by Presidential with respect
to the Contracts and to deliver or transmit to Presidential and/or its
policyholders such output as is described on Exhibit A.
1.02 Presidential shall provide to IASC at IASC's Facilities in
Denver, Colorado, such information and data as is required to maintain the
records and generate the output and perform the administrative services required
hereunder with respect to the Contracts.
1.03 IASC agrees to use its best efforts to provide training for
Presidential personnel at Denver, Colorado in connection with the use and
operation of the IASC System. IASC shall provide, without cost to Presidential,
any necessary training at IASC's Facility. All travel and out-of-pocket expense
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<PAGE> 4
incurred by Presidential personnel in connection with and during training at
IASC's Facility shall be borne by Presidential.
1.04 IASC will make on-line access to the IASC System available to
Presidential between the hours of 6:00 a.m. and 6:00 p.m., Mountain Time, Monday
through Friday, except for such holidays as are indicated in the prospectus for
any Contract subject to this Agreement. Access to the System at other times will
be by mutual agreement.
SECTION 2 Term
2.01 Subject to termination as hereinafter provided, this Agreement
shall remain in force and effect for an initial term of three (3) years plus the
interval from the date of this Agreement to the date when the first Contract is
actually issued, and shall continue in force and effect from year to year
thereafter until terminated as herein provided, each such additional year being
an additional term of this Agreement.
2.02 To the extent that this Agreement is terminated as hereinafter
provided, IASC agrees that, in order to assist in providing uninterrupted
service to Presidential, IASC shall provide necessary assistance to Presidential
in converting the records of Presidential from the IASC System to whatever
service or system is selected by Presidential (subject to reimbursement to IASC
for its out-of-pocket expenses such as postage and special request charges
levied by vendors in rendering such assistance), except that all records, files,
and documents relating to the Contracts, both machine readable and non-machine
readable, are the property of Presidential and shall be given to Presidential at
no charge.
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<PAGE> 5
SECTION 3 Fees and Expenses
3.01 Presidential shall pay to IASC the fees and charges described
in Exhibit B, as modified in accordance with the provisions of Section 9.03
hereof, if applicable.
3.02 Presidential shall also reimburse IASC for all reasonable
out-of-pocket expenses incurred by IASC in the performance of this Agreement
(except that the start up costs related to commencement of services hereunder
shall be borne by IASC). Such out-of-pocket expenses shall include, without
limitation, the cost of obtaining customized letterhead, envelopes, forms and
other stock bearing the name of Presidential, provided that such expenses
relating to Presidential stock are approved in advance by Presidential. While it
is anticipated that Presidential will make its own arrangements for the
installation of transmission facilities or equipment at Presidential's
locations, in the event that Presidential requests IASC to obtain any such
facilities or equipment for Presidential they shall be provided at cost;
provided that such expenses are approved in advance by Presidential.
SECTION 4 Representations and Warranties of IASC
IASC represents and warrants to Presidential as follows:
4.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware.
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<PAGE> 6
4.02 It is empowered under applicable laws and by its charter and
bylaws to enter into and perform the services contemplated in this Agreement.
4.03 All requisite corporate proceedings have been taken to
authorize it to enter into and perform the services contemplated in this
Agreement.
4.04 It has and will continue to have and maintain the necessary
facilities, systems, equipment, and personnel to perform its duties and
obligations under this Agreement, including but not limited to outputs and
services as outlined on Exhibit A in accordance with the prospectus and
applicable State and Federal laws and regulations.
SECTION 5 Representations and Warranties of Presidential
Presidential represents and warrants to IASC as follows:
5.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of New York.
5.02 It is qualified and licensed to carry on its business in those
jurisdictions in which it transacts business and is required to be qualified or
licensed.
5.03 It is empowered under the applicable laws and regulations and
by its charter and bylaws to enter into and perform this Agreement, subject to
appropriate SEC clearance and New York State Insurance Department approval.
5.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
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<PAGE> 7
5.05 Each registration statement required under the Securities Act
of 1933, as amended, with respect to the Contracts will, so long during the term
hereof as such Contracts are offered, be, in effect.
5.06 Each Separate Account relating to the Contracts will, so long
during the term hereof as such Separate Account is outstanding, continue to be
registered under the Investment Company Act of 1940, as amended.
5.07 It will comply and will continue to be in compliance in all
material respects with insurance or securities laws applicable to it and the
offering, sale and maintenance of the Contracts.
SECTION 6 Indemnification
6.01 IASC shall not be responsible for, and Presidential shall
indemnify and hold IASC and its officers, directors, shareholders, employees and
agents harmless from and against, any and all costs, expenses, losses, damages,
charges, counsel fees, payments and liabilities arising out of or attributable
to:
a) Any actions taken by IASC in good faith and due diligence in
compliance with the terms of this Agreement;
b) Any failure by Presidential to comply with Federal, state or
local laws or regulations with respect to the Contracts or
records maintained, which is not
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<PAGE> 8
caused, directly or indirectly, by IASC's acts or failure to
act;
c) Presidential's willful refusal or failure to comply with the
terms of this Agreement, or which arise out of Presidential's
gross negligence or willful misconduct or which arise out of
the breach of any representation or warranty of Presidential
hereunder;
d) Presidential's errors and mistakes in the use of the System,
Facilities and control procedures;
e) IASC's reliance on, or use of, in performing its duties and
obligations hereunder, information, data, records and
documents received by IASC from Presidential;
f) The reliance on, or the carrying out of, any instructions or
requests of Presidential pertaining to the normal day-to-day
operations and functions of the IASC System made by any
persons whose names are furnished to IASC as "Authorized
Personnel" by Presidential from time to time.
6.02 Presidential shall not be responsible for, and IASC shall
indemnify and hold Presidential and its officers, directors, shareholders,
employees and agents harmless from and against, any
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<PAGE> 9
and all costs, expenses, losses, damages, charges, counsel fees, payments and
liabilities arising out of or attributable to:
a) Any actions taken by Presidential in good faith and due
diligence in compliance with the terms of this Agreement;
b) IASC'S willful refusal or failure to comply with the terms of
this Agreement, or which arise out of IASC's gross negligence
or willful misconduct or which arise out of the breach of any
representation or warranty of IASC hereunder;
c) IASC's errors and mistakes in the System, Facilities and
control procedures, or in the use thereof;
d) Presidential's reliance on or use of, in performing its duties
and obligations hereunder, information, data, records and
documents received by Presidential from IASC;
e) Any breach by IASC of the terms of this Agreement.
6.03 Upon receiving notice of a claim for which one party (the
"Indemnifying Party") may be required to indemnify the other (the "Indemnified
Party"), the Indemnified Party shall promptly give notice thereof to the
Indemnifying Party; provided,
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<PAGE> 10
however, that the obligation of the Indemnifying Party shall not be reduced on
account of the failure or delay of the Indemnified Party to give such notice,
except to the extent of the failure or delay. The Indemnifying Party may
participate in the defense of such claim, and if it elects to so participate,
the Indemnified Party will not compromise or settle such claim without the
prior written consent of the Indemnifying Party.
6.04 Any provision of this Agreement to the contrary
notwithstanding, IASC shall have no liability to Presidential arising out of any
action or failure to act by IASC:
(a) Based upon any opinion of Presidential's counsel, any
instruction furnished to it by Presidential or any order or
decree of any court, regulatory body or administrative agency;
(b) Caused by any act of God, strike, equipment or transmission
failure or damage, or other event beyond its control; or
(c) In connection with any legal obligation as a result of
services provided hereunder to register, qualify or obtain a
license to act as a broker/dealer, transfer agent, insurance
company, or agency thereof, unless Presidential is materially
and adversely affected thereby.
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<PAGE> 11
6.05 In the event IASC is unable to perform its obligations under
the terms of this Agreement because of any act of God, strike, equipment or
transmission failure or damage, or other event beyond its control, IASC will use
its best efforts to assist Presidential to obtain alternate sources of service.
6.06 At any time IASC may apply to a person whose name has been
furnished to IASC by Presidential as a person authorized to give instructions
under this section with respect to any matter arising in connection with this
Agreement. IASC shall not be liable for, and shall be indemnified by
Presidential against, any action taken or omitted by IASC in good faith in
reliance upon such instructions.
6.07 Presidential shall immediately provide IASC with written notice
of any change of authority of persons authorized to provide IASC with
instructions or directions relating to services to be performed by IASC under
this Agreement.
6.08 In the event malfunction of the IASC System causes an error or
mistake in any record, report, data, information or output under the terms of
this Agreement, IASC shall at its expense immediately correct and reprocess such
records; provided that Presidential shall, upon detection of an error or
mistake, promptly notify IASC of such error or mistake, such notice to be
subsequently confirmed in writing.
SECTION 7 Covenants of IASC
7.01 IASC shall maintain the appropriate computer files of all
information and data provided by Presidential. It is
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<PAGE> 12
expressly understood that all such data provided by Presidential and maintained
remains the exclusive property of Presidential.
7.02 IASC shall assure that back up computer tape files are
maintained on a daily basis stored in an off-premises locations and that
alternative equipment and transmission facilities are available in the event the
primary equipment or transmission facilities are damaged or unavailable for
whatever reason. The purpose of back up and recovery procedures is to permit
file recovery in the event of destruction of normal processing files.
Presidential may review the procedures in effect and inspect the storage
facility upon demand.
7.03 IASC shall maintain in effect the insurance coverages described
in Exhibit C attached hereto provided that such coverage is available from a
domestic insurance carrier at a reasonable cost to IASC. Reasonable cost shall
mean the cost of similar coverage in like amounts to similar entities. IASC
shall not voluntarily cause any termination, reduction or alteration of these
coverages without thirty (30) days prior written notice to Presidential.
7.04 All information furnished by Presidential to IASC hereunder is
confidential and IASC shall not disclose such information, directly or
indirectly to any third party except to the extent that it is necessary for IASC
to do so in order to perform its duties and obligations under this Agreement or
to the extent that IASC is required by law to make such disclosure.
7.05 IASC will obtain in writing the consent of the owners of the
one or more computerized data processing recordkeeping systems for annuity
processing and administration referred to in this Agreement to use such systems
for the benefit
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<PAGE> 13
of Presidential in accordance with the terms of this Agreement. Such written
consents shall be secured from existing and future providers of systems to IASC
when they are so contracted and a copy thereof shall be furnished to
Presidential.
SECTION 8 Covenants of Presidential
8.01 Presidential shall utilize and employ, as applicable, all
control procedures available under the IASC System of which Presidential is
advised and Presidential shall promptly advise IASC of any errors or mistakes in
the data or information provided to IASC, the records maintained or output
generated hereunder.
8.02 Presidential shall provide to IASC, in the formats and form
specified by IASC, all information and data necessary or required in connection
therewith so that the output produced by the system shall be complete and
accurate when it is generated by IASC's System and Facilities.
8.03 In the event Presidential shall erroneously provide information
or shall provide incorrect information or data to IASC, Presidential shall
correct such information and data promptly.
8.04 Presidential acknowledges that IASC has certain rights in and
to the IASC System and that the IASC System constitutes confidential material
and trade secrets of IASC; and it agrees to maintain the confidentiality of the
IASC System.
8.05 Presidential shall use its best efforts to cause the
registration statement under the Securities Act of 1933 relating to the
Contracts to become effective and the Contracts,
-12-
<PAGE> 14
and the Separate Account relating thereto, to be approved by the New York
Insurance Department.
SECTION 9 Termination of Agreement
9.01 This Agreement may be terminated or amended by mutual agreement
in writing at any time.
9.02 This Agreement may be terminated by either party by written
notice to the other not less than 180 days prior to the end of the initial term
or any subsequent one-year term; provided, however, that any such notice of
termination by Presidential shall be inapplicable to Variable Annuity Contracts
issued prior to the effective date of such termination. Except as may otherwise
be agreed by the parties, IASC shall continue to service all Presidential
Contracts outstanding on the effective date of such termination for as long as
any of such Contracts remains outstanding and the provisions of this Agreement
shall continue in all respects to govern the relationship between Presidential
and IASC with respect to such Contracts.
9.03 At least ninety (90) days prior to the end of any term hereof,
IASC shall give Presidential written notice if IASC desires to increase its fees
or charges to Presidential, or to change the manner of payment, commencing with
the next term. IASC shall only be allowed to raise such fees which are paid
directly by policyholders. if IASC and Presidential do not agree to fees and
charges before the end of the term during which such notice is given by IASC,
this Agreement shall terminate at the end of such term.
-13-
<PAGE> 15
9.04 If either of the parties hereto shall materially breach this
Agreement or be materially in default in the performance of any of its duties
and obligations hereunder (the defaulting party), the other party hereto may
give written notice thereof to the defaulting party and if such default or
breach shall not have been remedied within thirty (30) days after such written
notice is given, then the party giving such written notice may terminate this
Agreement by giving thirty (30) days written notice of such termination to the
defaulting party, provided, however, that, if IASC elects to terminate this
Agreement for other than nonpayment of fees and charges and if Presidential
shall so request in writing, IASC shall continue to provide the services
described herein to Presidential for a period of six (6) months following such
termination, such service to be provided in accordance with the terms of this
Agreement and at 100 percent of the fees in effect for the term immediately
preceding such six (6) month period. Termination of this Agreement by default or
breach by Presidential shall not constitute a waiver of any rights of IASC in
reference to services performed prior to such termination or rights of IASC to
be reimbursed for out-of-pocket expenditures; termination of this Agreement by
default or breach by IASC shall not constitute a waiver by Presidential of any
other rights it might have under this Agreement.
SECTION 10 Changes and Modifications
10.01 During any term of this Agreement, IASC will make available
for Presidential's use without additional cost all modifications and
improvements to the IASC System and, at
-14-
<PAGE> 16
Presidential's expense, IASC will use its best efforts to make any reasonable
changes requested by Presidential. Incremental operating charges attendant to
such system changes requested by Presidential shall be determined by mutual
agreement, except that changes occasioned by the requirements of any regulatory
agency having jurisdiction over the parties or the contracts shall be borne by
IASC.
10.02 IASC shall have the right, at any time, and from time to time,
to alter and modify any systems, programs, procedures or facilities used or
employed in performing its duties and obligations hereunder; provided that
alterations or modifications which may materially change or affect the
operations and procedures of Presidential in using or employing IASC's System or
Facilities thereunder shall be discussed with Presidential prior to commencement
in order that the parties be given the opportunity to explore alternatives that
will prove less disruptive, and further provided that such alterations or
modifications are consistent with the requirements outlined in Exhibit A and the
other provisions of this Agreement.
SECTION 11 Assignment
11.01 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party hereto without the prior written
consent of the other; provided, however, that IASC may assign this Agreement,
upon notification to Presidential, to any affiliated company that agrees in
writing to perform all of IASC's obligations hereunder and has administrative
capabilities at least equal to IASC, unless the New York Insurance Department
objects to such assignment.
-15-
<PAGE> 17
11.02 This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
11.03 IASC has disclosed to Presidential that it will subcontract
for some services with DST, Inc. and/or its subsidiary, Policyholder Service
Corporation, as well as other vendors. In the event of such subcontracting, IASC
shall remain primarily responsible for the performance of such services. In the
event that this Agreement is terminated, IASC will not take any action to
preclude Presidential from obtaining services from DST, Inc. or any of its
subsidiaries, or at Presidential's discretion from acquiring such services from
any other vendor.
SECTION 12 Arbitration
12.01 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration in New York City
in accordance with the rules of the American Arbitration Association. IASC and
Presidential, before entering into arbitration, shall each appoint an arbitrator
to be a member of the panel. Should the two arbitrators not be able to agree on
a choice of the third, then the American Arbitration Association shall make the
appointment of a person who is neutral to the parties in controversy. None of
the arbitrators shall be a current or former officer or employee of the parties
to this Agreement or their affiliates. If either party fails to choose an
arbitrator within 30 days after receiving the written request of the other party
to do so, the latter shall choose both arbitrators, who shall choose the third
arbitrator.
-16-
<PAGE> 18
The arbitrators shall be impartial and shall be present or former officers of
life insurance or life reinsurance companies.
12.02 The party requesting arbitration (the "Petitioner") shall
submit its brief to the arbitrators with 30 days after notice of the selection
of the third arbitrator. Upon receipt of the Petitioner's brief, the other party
(the "Respondent") shall have 30 days to file a reply brief. On receipt of the
Respondent's brief, the Petitioner shall have 20 days from the receipt of
Respondent's brief to file its rebuttal brief. The arbitrators may extend the
time for filing of briefs at the request of either party.
12.03 The arbitrators are relieved from judicial formalities and, in
addition to considering the rules of law and the customs and practices of the
insurance and reinsurance business, shall make their award with a view to
effecting the intent of this Agreement. The decision of the majority shall be
final and binding upon the parties.
12.04 The costs of arbitration, including the fees of the
arbitrators, shall be shared equally unless the arbitrators decide otherwise.
12.05 The arbitration shall be held at the times and places agreed
upon by the arbitrators.
12.06 The arbitration award shall be in writing and shall be signed
by at least a majority of the arbitrators. The award shall be made promptly by
the arbitrators and, unless otherwise agreed by the parties, shall be delivered
to the parties either personally or by mail not later than 30 days from the date
of the close of the arbitration proceedings.
-17-
<PAGE> 19
SECTION 13 Miscellaneous
13.01 Presidential or its duly authorized independent auditors will
have the right under this Agreement to perform on-site audits of records and
accounts directly pertaining to the annuity policies serviced by IASC's
Facilities hereunder at IASC's Facilities in accordance with reasonable
procedures and at reasonable frequencies. At the request of Presidential, IASC
will make available to Presidential's auditors and representatives of the
appropriate regulatory agencies all reasonably requested records, data, and
access to operating procedures.
13.02 The parties hereto agree that all tapes, books, reference
manuals, instructions, records, information and data pertaining to the business
of the other party, IASC's System and the policyowners serviced by Presidential
hereunder which are exchanged or received pursuant to the negotiation of and/or
the carrying out of this Agreement shall remain confidential and shall not be
voluntarily disclosed to any other person, except to the extent that it is
necessary for IASC or Presidential to do so in order to perform their duties and
obligations under this Agreement or to the extent that IASC is required by law
to do so, and that all such tapes, books, reference manuals, instructions,
records, information and data in the possession of each of the parties hereto
shall be returned to the party from whom it was obtained upon the termination or
expiration of this Agreement.
13.03 It is understood and agreed that all services performed
hereunder by IASC shall be as an independent contractor and not as an employee
of Presidential.
-18-
<PAGE> 20
13.04 The consideration due hereunder does not include any amount
for taxes. IASC will be responsible for the payment of any sales, use, excise or
other tax arising from this Agreement.
13.05 Any notice, request, instruction or other communication at any
time hereunder required or permitted to be given or furnished by either party
hereto to the other shall be effective if in writing and mailed by registered
mail, return receipt requested, or actually delivered to the party to be
notified. The addresses of the parties hereto for the foregoing purposes are as
set forth on the first page of the Agreement, unless either party notifies the
other as provided herein.
13.06 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof, whether oral or written, and this Agreement may not be modified
except in a written instrument executed by both of the parties hereto.
13.07 This Agreement shall be governed by the laws of the State of
New York.
-19-
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by and through their duly authorized officers as of the day and
year first above written.
PRESIDENTIAL LIFE INSURANCE COMPANY
By: [SIG]
-------------------------------------
INTEGRATED ADMINISTRATIVE SERVICES
CORPORATION
By: [SIG]
-------------------------------------
-20-
<PAGE> 22
EXHIBIT A
PRESIDENTIAL LIFE INSURANCE COMPANY
VARIABLE ANNUITY RECORDKEEPING SYSTEM
OUTPUTS AND SERVICES
DAILY OUTPUT
1. Daily Cash Recap
2. Daily Unit Recap
3. Master File Update Error Report
4. Control Totals
5. Daily Price File Update
6. As Of Transaction Report
7. Daily Production Report
8. Maintenance Journals
9. Investment Vehicle Earnings Report
10. Daily Batch Balance
11. Error Listing
12. Annuity New Policy Register
13. Daily Disbursement Check Register
14. Daily Check Reconciliation Update Register
15. Contract Preparation and issue
MONTHLY OUTPUT
1. Monthly Production Report
2. Monthly Reserve Report
3. Premium Tax Report
4. Monthly Recap of Daily Transaction Reports
CUSTOM FORM OUTPUT
1. Confirmation Statements
2. Specification Page
3. Commission Statements
4. Commission Checks
5. Disbursement Checks
ADDITIONAL SERVICES
1. Error Rectification
2. Policyholder Inquiries
3. Broker/Agent Inquiries
4. Contract Filing and Registration Assistance
5. Training
6. Licensing
7. Marketing Assistance
-21-
<PAGE> 23
CONTRACT ISSUE
1. Review application for completeness and apply issue criteria to
application. Print and maintain supply of policies.
2. Prepare contract data page, issue contract and confirmation for
paid business and mail to policyholders and/or agents .
3. Establish and maintain all policyholder records, as applicable,
on computer and microfilm systems.
4. Notify agent or PRESIDENTIAL LIFE INSURANCE COMPANY of any error
or missing data needed to establish policyholder records and
attempt to clarify before third business day after receipt.
5. Deposit monies received with application into appropriate
accounts.
6. Print and maintain inventory of all issue-related forms,
policies, endorsements, and transaction request forms.
BILLING AND COLLECTION
1. Receive purchase payments and process amount paid to
policyholder records and appropriate accounts.
2. Prepare and mail confirmations.
3. Update the master records and all other records to reflect
payments received, and perform accounting distribution of each
payment received.
BANKING
1. Balance, edit, endorse and prepare daily deposit.
2. Place deposits into a depository account.
3. Prepare checks for partial and full surrenders, as well as for
death claims.
4. Transfer funds from and to the appropriate accounts.
5. On dishonored items, reverse all transactions, prepare reports
and communicate with policyholder or agent.
ACCOUNTING/AUDITING
1. Prepare daily account reports for all policies for each day with
cash transactions.
-22-
<PAGE> 24
2. Retain system-generated reports in accordance with a retention
schedule to be mutually established. Provide access to such
reports for internal and external auditing.
VALUATION OF POLICIES
1. Calculate cash value, when needed, based on variable interest
rates, cash transactions, and appropriate deductions.
2. Deduct cost of mortality, expenses and administration based on
contract provisions.
POLICYHOLDER SERVICE/RECORD MAINTENANCE
1. Receive and implement all policyholder service requests and
changes of any other information maintained on the system other
than those undertaken by Presidential Life.
2. Research all inquiries using both data stored in the system and
microfilm records. Respond directly to any questions or
inquiries as mutually defined.
3. Prepare a set of daily journals confirming all changes made to
policyholder records. Microfilm or file all copies of
communications from policyholders.
4. Originate and review forms. Print and maintain adequate supply.
DISBURSEMENTS (SURRENDERS, LOANS AND CLAIMS)
1. Receive requests for partial or full surrenders and death claims
from policyholder, agent or home office. Retain and account for
any policy administrative charges.
2. Process all surrender requests and death claims on policyholder
master files.
3. Prepare checks for surrenders and death claims and forward to
policyholder or beneficiary (including confirmation).
4. Prepare reports on surrenders and death claims.
5. Review and maintain adequate supply of checks and confirmations.
6. Prepare appropriate I.R.S. forms as required for disbursements.
COMMISSIONS
1. Calculate commissions based on tables agreed to by PRESIDENTIAL
LIFE INSURANCE COMPANY.
2. Report commissions semi-monthly.
-23-
<PAGE> 25
PERIODIC REPORTS TO POLICYHOLDERS
1. Prepare and mail statement of account to each policyholder
quarterly, or more often as agreed to.
REGULATORY STATEMENT REPORTS
1. Provide data for Separate Account Exhibit for PRESIDENTIAL LIFE
INSURANCE COMPANY'S annual reporting.
2. Prepare appropriate I.R.S. reports for withdrawals and
distributions and mail to policyholder and IRS.
PREMIUM TAXES
1. Collect and account for premium taxes as appropriate.
-24-
<PAGE> 26
EXHIBIT B
PRESIDENTIAL LIFE INSURANCE COMPANY
FEE SCHEDULE
ONGOING SERVICE FEE:
$30.00 - Per Contract Per Year - Flat
IASC will bill 1/12th the annual charge on a monthly basis for any policy that
contains assets at any time during the month; plus
.435% per year of the aggregate assets held under the Contracts, payable monthly
based upon the value of such assets as of the close of each month.
EXPENSES:
IASC will bill out-of-pocket expenses as they are incurred. "Out-of-pocket
expenses" shall include charges by outside vendors for services specifically
requested by Presidential.
-25-
<PAGE> 27
EXHIBIT C
INSURANCE COVERAGE
Insurance Coverages Maintained with respect to IASC and the IASC System:
<TABLE>
<CAPTION>
TYPE LIMITS DEDUCTIBLE DATE CARRIER BROKER
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Directors & Officers $10,000,000 $1,000,000 7/31/88 National Union Walter Kaye Associates, I
Liability
- ----------------------------------------------------------------------------------------------------------------------------
Crime 1,000,000 2,500 12/31/87 Fidelity & Deposit Fred S. James & Co.
Co. of Maryland
- ----------------------------------------------------------------------------------------------------------------------------
Excess Crime 5,000,000 -- 6/1/88 National Union Walter Kaye Associates, I
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive General 1,000,000 2,500 11/1/87 Atlas Assurance Fred S. James & Co.
Liability Company
- ----------------------------------------------------------------------------------------------------------------------------
Umbrella Liability 10,000,000 -- Various Various Walter Kaye Associates, In
- ----------------------------------------------------------------------------------------------------------------------------
Property Blanket 10,000 Various Various Walter Kaye Associates, In
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
AMENDMENT NO. 1
TO
SERVICE AGREEMENT
WHEREAS, Presidential Life Insurance Company ("Presidential") and
Integrated Administrative Services Corporation ("IASC") entered into a Service
Agreement dated as of October 14, 1987 (the "Service Agreement") with respect to
the performance of administrative services by IASC in connection with certain
variable annuity contracts to be issued by Presidential; and
WHEREAS, Presidential and IASC wish to make certain changes in the
fees payable to IASC under the Service Agreement;
NOW, THEREFORE, the parties agree that, effective as of December 1,
1988, Exhibit B to the Service Agreement shall be amended to read in its
entirety as set forth on the following page.
PRESIDENTIAL LIFE INSURANCE
COMPANY
by /s/ JOSEPH F. KOLODNEY
-------------------------------------
Joseph F. Kolodney
President
INTEGRATED ADMINISTRATIVE
SERVICES CORPORATION
by /s/ JOEL S. FELDMAN
--------------------------------------
Joel S. Feldman
President
<PAGE> 29
EXHIBIT B
PRESIDENTIAL LIFE INSURANCE COMPANY
FEE SCHEDULE
ONGOING SERVICE FEE:
1. $30.00 per contract per year. IASC will bill 1/12th the annual
charge on a monthly basis for any Contract that contains assets at any time
during the month; plus
2. $25.00 for each transfer of a Contract Owner's interest from one
Separate Account Division to another which is made within thirty (30) days of a
prior transfer or within thirty (30) days of the Issue Date; plus
3. .355% per year of the aggregate assets held under all Contracts in
force for more than three (3) years, payable monthly based upon the value of
such assets as of the close of each month; plus
4. An amount equal to 20% of all Withdrawal Charges payable under the
Contracts as a result of partial withdrawals made by Contract Owners in excess
of Free Withdrawal Amounts and Contract surrenders within six (6) years of the
Issue Date, such amounts to be paid to IASC as they become due and payable.
EXPENSES:
IASC will bill out-of-pocket expenses as they are incurred.
"out-of-pocket expenses" shall include charges by outside vendors for services
specifically requested by Presidential.
As amended
effective
12/1/88
<PAGE> 30
AMENDMENT NO. 2
TO
SERVICE AGREEMENT
WHEREAS, Presidential Life Insurance Company ("Presidential") and
Integrated Administrative Services Corporation ("IASC") entered into a Service
Agreement dated as of October 14, 1987, and amended as of December 1, 1988, (the
"Service Agreement") with respect to the performance of administrative services
by IASC in connection with certain variable annuity contracts ("Contracts") to
be issued by Presidential; and
WHEREAS, Presidential desires to expand the options available under
the Contracts to permit the allocation of assets to its General Account; and
WHEREAS, Presidential and IASC wish to make certain changes to the
Schedule of Services to be provided by IASC and to the Schedule of fees payable
to IASC under the Service Agreement in light of the foregoing;
NOW, THEREFORE, the parties agree that Exhibits A and B to the
Service Agreement shall be amended to read as set forth on the attached five (5)
pages.
PRESIDENTIAL LIFE INSURANCE
COMPANY
by [SIG]
------------------------------------
President
INTEGRATED ADMINISTRATIVE
SERVICES CORPORATION
by /s/ JOSEPH L. BLATTNER, JR.
--------------------------------------
Joseph L. Blattner, Jr.
Executive Vice President
<PAGE> 31
EXHIBIT A
PRESIDENTIAL LIFE INSURANCE COMPANY
VARIABLE ANNUITY RECORDKEEPING SYSTEM
OUTPUTS AND SERVICES
DAILY OUTPUT
1. Daily Cash Recap
2. Daily Unit Recap
3. Master File Update Error Report
4. Control Totals
5. Daily Price File Update
6. As of Transaction Report
7. Daily Production Report
8. Maintenance Journals
9. Investment Vehicle Earnings Report
10. Daily Batch Balance
ll. Error Listing
12. Annuity New Policy Register
13. Daily Disbursement Check Register
14. Daily Check Reconciliation Update Register
15. Contract Preparation and issue
MONTHLY OUTPUT
1. Monthly Production
2. Monthly Reserve Report
3. Premium Tax Report
4. Monthly Recap of Daily Transaction Reports
CUSTOM FORM OUTPUT
1. Confirmation Statements
2. Specification Page
3. Commission Statements
4. Commission Checks
5. Disbursement Checks
ADDITIONAL SERVICES
1. Error Rectification
2. Policyholder Inquiries
3. Broker/Agent Inquiries
4. Contract Filing and Registration Assistance
5. Training
6. Licensing
7. Marketing Assistance
-21-
<PAGE> 32
CONTRACT ISSUE
1. Review application for completeness and apply issue criteria to
application. Print and maintain supply of policies and all
endorsements and riders thereto.
2. Prepare contract data page, issue contract, appropriate riders
or endorsements, confirmation for paid business and mail to
policyholders and/or agents.
3. Establish and maintain all policyholder records, as applicable,
on computer and microfilm systems.
4. Notify agent or PRESIDENTIAL LIFE INSURANCE COMPANY of any error
or missing data needed to establish policyholder records and
attempt to clarify before third business day after receipt.
5. Deposit monies received with application into appropriate
accounts.
6. Print and maintain inventory of all issue-related forms,
policies, endorsements, and transaction request forms.
BILLING AND COLLECTION
1. Receive purchase payments and process amount paid to
policyholder records and appropriate accounts.
2. Prepare and mail confirmations.
3. Update the master records and all other records to reflect
payments received, and perform accounting distribution of each
payment received.
BANKING
1. Balance, edit, endorse and prepare daily deposit.
2. Place deposits into a depository account.
3. Prepare checks for partial and full surrenders, as well as for
death claims.
4 Transfer funds from and to the appropriate accounts.
5. On dishonored items, reverse all transactions, prepare reports
and communicate with policyholder or agent.
ACCOUNTING/AUDITING
1. Prepare daily account reports for all policies for each day with
cash transactions.
-22-
<PAGE> 33
2. Retain system-generated reports in accordance with a retention
schedule to be mutually established. Provide access to such
reports for internal and external auditing.
VALUATION OF POLICIES
1. Calculate cash value, when needed, based on variable interest
rates, General Account interest rate, cash transactions, and
appropriate deductions.
2. Deduct cost of mortality, expenses and administration based on
contract provisions.
POLICYHOLDER SERVICE/RECORD MAINTENANCE
1. Receive and implement all policyholder service requests and
changes of any other information maintained on the system other
than those undertaken by Presidential Life.
2. Research all inquiries using both data stored in the system and
microfilm records. Respond directly to any questions or
inquiries as mutually defined.
3. Prepare a set of daily journals confirming all changes made to
policyholder records. Microfilm or file all copies of
communications from policyholders.
4. Originate and review forms. Print and maintain adequate supply.
DISBURSEMENTS (SURRENDERS, LOANS AND CLAIMS)
1. Receive requests for partial or full surrenders and death claims
from policyholder, agent or home office. Retain and account for
any policy administrative charges.
2. Process all surrender requests and death claims on policyholder
master files.
3. Prepare checks for surrenders and death claims and forward to
policyholder or beneficiary (including confirmation).
4. Prepare reports on surrenders and death claims.
5. Review and maintain adequate supply of checks and confirmations.
6. Prepare appropriate I.R.S. forms as required for disbursements.
COMMISSIONS
1. Calculate commissions based on tables agreed to by PRESIDENTIAL
LIFE INSURANCE COMPANY.
2. Report commissions semi-monthly.
-23-
<PAGE> 34
PERIODIC REPORTS TO POLICYHOLDERS
1. Prepare and mail statement of account to each policyholder
quarterly, or more often as agreed to.
REGULATORY STATEMENT REPORTS
1. Provide data for Separate Account Exhibit for PRESENDENTIAL LIFE
INSURANCE COMPANY'S annual reporting.
2. Prepare appropriate I.R.S. reports for withdrawals and
distributions and mail to policyholder and IRS.
PREMIUM TAXES
1. Collect and account for premium taxes as appropriate.
-24-
<PAGE> 35
EXHIBIT B
PRESIDENTIAL LIFE INSURANCE COMPANY
FEE SCHEDULE
ONGOING SERVICE FEE:
1. $30.00 per contract per year. IASC will bill 1/12th the annual
charge an a monthly basis for any Contract that contains assets, at any time
during the month; plus
2. $25.00 for each transfer of a Contract Owner's interest among
Presidential's General Account or the Separate Account Divisions which is made
within thirty (30) days of a prior transfer or within thirty (30) days of the
Issue Date; plus
3. .355% per year of the aggregate assets allocated to the Separate
Account and held under all Contracts in force for more than three (3) years,
payable monthly based upon the value of such assets as of the close of each
month; plus
4. .50% per year of the aggregate assets allocated to Presidential's
General Account and held under all Contracts during their first three (3)
Contract Years, and .855% per year of such aggregate assets thereafter. In all
Contract Years, this fee is payable monthly based upon the value of such assets
as of the close of each month; plus
5. An amount equal to 20% of all Withdrawal Charges payable under the
Contracts as a result of partial withdrawals made by Contract Owners in excess
of Free Withdrawal Amounts and Contract surrenders within six (6) years of the
Issue Date, such amounts to be paid to IASC as they become due and payable.
EXPENSES:
IASC will bill out-of-pocket expenses as they are incurred.
"Out-of-pocket expenses" shall include charges by outside vendors for services
specifically requested by Presidential.
As amended
effective
/ /89
<PAGE> 1
EXHIBIT 9
[BLAZZARD, GRODD & HASENAUER, P.C. LETTERHEAD]
December 14, 1987
Board of Directors
Presidential Life Insurance Company
69 Lydecker Street
Nyack, NY 10960
Re: Opinion of Counsel - Presidential Variable Account one
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing
with the Securities and Exchange Commission of a Registration Statement on Form
N-4 for the Individual Flexible Purchase Payment Deferred Variable Annuity
Contracts (the "Contracts") to be issued by Presidential Life Insurance Company
and its separate account, Presidential Variable Account One.
We have made such examination of the law and have examined such records
and documents as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below.
We are of the following opinion:
1. Presidential Life Insurance Company is a valid and existing
stock life insurance company of the State of New York.
2. Presidential Variable Account one is a separate investment
account of Presidential Life Insurance Company created and
validly existing pursuant to the New York Insurance Laws and the
Regulations thereunder.
3. All of the prescribed corporate procedures for the issuance of
the Contracts have been followed, and, when such Contracts are
issued in accordance with the Prospectus contained in the
Registration Statement, all state requirements relating to such
Contracts will have been complied with.
4. Upon the acceptance of Purchase Payments made by a Contract
owner pursuant to a Contract issued in accordance with the
Prospectus contained in the Registration statement and upon
compliance with applicable law such a Contract owner will have a
<PAGE> 2
BLAZZARD, GRODD & HASENAUER, P.C.
Board Of Directors
December 14, 1987
Page 2
legally-issued, fully paid, non-assessable contractual interest
under such Contract.
You may use this opinion letter, or a copy hereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption 'Legal
Opinions" contained in the Prospectus which forms a part of the Registration
Statement.
Very truly yours,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /s/ JUDITH A. HASENAUER
-------------------------------------
Judith A. Hasenauer
JAH:csg
<PAGE> 1
EXHIBIT 10
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 10 to Registration
Statement No. 33-19293 of Presidential Variable Account One on Form N-4 of our
report dated February 12, 1998 relating to Presidential Life Corporation for
the year ended December 31, 1997, and to the reference to us under the heading
"Independent Accountants" appearing in the Statement of Additional Information
of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
New York, New York
April 28, 1998
<PAGE> 2
EXHIBIT 10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus and Statement of Additional
Information constituting part of this Registration Statement on Form N-4 for
Presidential Variable Account One of Presidential Life Insurance Company, of
our report dated April 22, 1998 relating to the financial statements of
Presidential Variable Account One of Presidential Life Insurance Company, which
appears in such Statement of Additional Information. We also consent to the
reference to us under the heading of "Independent Accountants" in such
Statement of Additional Information.
/s/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
Los Angeles, California
April 28, 1998
<PAGE> 1
EXHIBIT 14
OFFICERS AND DIRECTORS
OFFICERS AND DIRECTORS OF PRESIDENTIAL LIFE CORPORATION
<TABLE>
<CAPTION>
<S> <C>
Herbert Kurz President and Director
- -+ Peter Cohen Director
- Jules Kroll Director
- -+ Lawrence Rivkin Director
+ Morton B. Silberman Director
Michael V. Oporto Treasurer
Donna Monacelli Secretary
Sandra Wheeler Assistant Secretary
- Member of Audit Committee of Presidential Life Corporation
+ Member of Compensation Committee of Presidential Life Corporation
OFFICERS OF PRESIDENTIAL LIFE INSURANCE COMPANY
Herbert Kurz Chairman of the Board, President & Chief Executive Officer
Shirley Jordan Executive Vice President
Michael V. Oporto Treasurer, Chief Financial Officer
Donna Monacelli Secretary
Donald Barnes Senior Vice President
Michael Reich Senior Vice President
Stanley Rubin Senior Vice President
Jerrold Scher Senior Vice President
Mark Abrams Vice President
Kate Dash Vice President
Maria Kramer Vice President
John Ng Vice President
Charles Snyder Vice President & Controller
Andrew Tuck Vice President
Linda Burger First Vice President
Joseph Colangelo First Vice President
Donna Jones First Vice President
Joseph Monacelli First Vice President
Marilyn Shenn First Vice President
David Wiener First Vice President
Louise Del Juidice Second Vice President
John Leone Second Vice President
Claire Pizzuti Second Vice President
David Taub Second Vice President
Assistant Vice Presidents Assistant Secretaries
Diana Barbas Demetra Anayannis
Doreen Pompa John Bohuniek
Joseph Sorrentino Alissa Bowles
Linda Studley Eileen DeGilio
Annette O'Brien
Michael Underwood
Sandra Wheeler
BOARD OF DIRECTORS OF PRESIDENTIAL LIFE INSURANCE COMPANY
Donald Barnes Senior Vice President
- Kenneth B. Clark President, Kenneth B. Clark & Associates
+ Richard A. Giesser Business Consultant, Former Chairman of Massachusetts
Port Authority
+ Melvin L. Gold Actuary
- Jerome Johnson Attorney
+ Shirley Jordan Executive Vice President
* W. Thomas Knight Attorney
*+ Herbert Kurz Chairman of the Board & President
* George McGovern Professor of Politics and Government
* Michael V. Oporto Treasurer, Chief Financial Officer
+ Paul Frederick Pape, Jr. Private Investor
Jerrold Scher Senior Vice President
* Irving L. Schwartz, M.D. Lamport Distinguished Professor, Mt. Sinai School of Medicine
- Member of the Audit and Benefit Committee of Presidential Life Insurance Company
* Member of the Executive Committee of Presidential Life Insurance Company
+ Member of the Finance Committee of Presidential Life Insurance Company
</TABLE>
<PAGE> 1
LIMITED POWER OF ATTORNEY
I, Herbert Kurz, Chairman of the Board and Director of Presidential Life
Insurance Company, a corporation duly organized under the laws of the State of
New York, appoint Joseph F. Kolodney as my attorney and agent, for me, and in my
name as a Director of Presidential Life Insurance Company with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for the registration of securities or amendment to the
registration of securities under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and to perform each and every act
that is deemed necessary or advisable to comply with the intent of the
Securities Act of 1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this __ day of
November, 1987.
/s/ HERBERT KURZ
----------------------------
Herbert Kurz
<PAGE> 2
LIMITED POWER OF ATTORNEY
I, Jay L. Kaplove, Executive Vice President and Director of Presidential
Life Insurance Company, a corporation duly organized under the laws of the State
of New York, appoint Joseph F. Kolodney as my attorney and agent, for me, and in
my name as a Director of Presidential Life Insurance Company with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for the registration of securities or amendment to the
registration of securities under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and to perform each and every act
that is deemed necessary or advisable to comply with the intent of the
Securities Act of 1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 7th day of
December, 1987.
/s/ JAY L. KAPLOVE
----------------------------
Jay L. Kaplove
<PAGE> 3
LIMITED POWER OF ATTORNEY
I, Jerry Warshaw, Executive Vice President and Director of Presidential
Life Insurance Company, a corporation duly organized under the laws of the State
of New York, appoint Joseph F. Kolodney as my attorney and agent, for me, and in
my name as a Director of Presidential Life Insurance Company with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for the registration of securities or amendment to the
registration of securities under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and to perform each and every act
that is deemed necessary or advisable to comply with the intent of the
Securities Act of 1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 7th day of
December, 1987.
/s/ JERRY WARSHAW
----------------------------
Jerry Warshaw
<PAGE> 4
LIMITED POWER OF ATTORNEY
I, Ronnie Duffey, Senior Vice President and Director of Presidential Life
Insurance Company, a corporation duly organized under the laws of the State of
New York, appoint Joseph F. Kolodney as my attorney and agent, for me, and in my
name as a Director of Presidential Life Insurance Company with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for the registration of securities or amendment to the
registration of securities under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and to perform each and every act
that is deemed necessary or advisable to comply with the intent of the
Securities Act of 1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 7th day of
December, 1987.
/s/ RONNIE DUFFEY
----------------------------
Ronnie Duffey
<PAGE> 5
LIMITED POWER OF ATTORNEY
I, Charles Fausel, Treasurer of Presidential Life Insurance Company, a
corporation duly organized under the laws of the State of New York, appoint
Joseph F. Kolodney as my attorney and agent, for me, and in my name as a
Director of Presidential Life Insurance Company with full power to execute,
deliver and file with the Securities and Exchange Commission all documents
required for the registration of securities or amendment to the registration of
securities under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and to perform each and every act that is
deemed necessary or advisable to comply with the intent of the Securities Act of
1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 7th day of
December, 1987.
/s/ CHARLES FAUSEL
----------------------------
Charles Fausel
<PAGE> 6
LIMITED POWER OF ATTORNEY
I, Callman Gottesman, Secretary and Director of Presidential Life Insurance
Company, a corporation duly organized under the laws of the State of New York,
appoint Joseph F. Kolodney as my attorney and agent, for me, and in my name as a
Director of Presidential Life Insurance Company with full power to execute,
deliver and file with the Securities and Exchange Commission all documents
required for the registration of securities or amendment to the registration of
securities under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and to perform each and every act that is
deemed necessary or advisable to comply with the intent of the Securities Act of
1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 8th day of
November, 1987.
/s/ CALLMAN GOTTESMAN
----------------------------
Callman Gottesman
<PAGE> 7
LIMITED POWER OF ATTORNEY
I, Kenneth B. Clark, Director of Presidential Life Insurance Company, a
corporation duly organized under the laws of the State of New York, appoint
Joseph F. Kolodney as my attorney and agent, for me, and in my name as a
Director of Presidential Life Insurance Company with full power to execute,
deliver and file with the Securities and Exchange Commission all documents
required for the registration of securities or amendment to the registration of
securities under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and to perform each and every act that is
deemed necessary or advisable to comply with the intent of the Securities Act of
1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 8th day of
December, 1987.
/s/ KENNETH B. CLARK
----------------------------
Kenneth B. Clark
<PAGE> 8
LIMITED POWER OF ATTORNEY
I, Francis X. Cody, Senior Vice President and Director of Presidential Life
Insurance Company, a corporation duly organized under the laws of the State of
New York, appoint Joseph F. Kolodney as my attorney and agent, for me, and in my
name as a Director of Presidential Life Insurance Company with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for the registration of securities or amendment to the
registration of securities under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and to perform each and every act
that is deemed necessary or advisable to comply with the intent of the
Securities Act of 1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 7th day of
December, 1987.
/s/ FRANCIS X. CODY
----------------------------
Francis X. Cody
<PAGE> 9
LIMITED POWER OF ATTORNEY
I, Jerome Johnson, Director of Presidential Life Insurance Company, a
corporation duly organized under the laws of the State of New York, appoint
Joseph F. Kolodney as my attorney and agent, for me, and in my name as a
Director of Presidential Life Insurance Company with full power to execute,
deliver and file with the Securities and Exchange Commission all documents
required for the registration of securities or amendment to the registration of
securities under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and to perform each and every act that is
deemed necessary or advisable to comply with the intent of the Securities Act of
1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 8th day of
December, 1987.
/s/ JEROME JONSON
----------------------------
Jerome Jonson
<PAGE> 10
LIMITED POWER OF ATTORNEY
I, Shirley Jordan, Director of Presidential Life Insurance Company, a
corporation duly organized under the laws of the State of New York, appoint
Joseph F. Kolodney as my attorney and agent, for me, and in my name as a
Director of Presidential Life Insurance Company with full power to execute,
deliver and file with the Securities and Exchange Commission all documents
required for the registration of securities or amendment to the registration of
securities under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and to perform each and every act that is
deemed necessary or advisable to comply with the intent of the Securities Act of
1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 7th day of
December, 1987.
/s/ HERBERT KURZ
----------------------------
Herbert Kurz
<PAGE> 11
LIMITED POWER OF ATTORNEY
I, Jules Kroll, Director of Presidential Life Insurance Company, a
corporation duly organized under the laws of the State of New York, appoint
Joseph F. Kolodney as my attorney and agent, for me, and in my name as a
Director of Presidential Life Insurance Company with full power to execute,
deliver and file with the Securities and Exchange Commission all documents
required for the registration of securities or amendment to the registration of
securities under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and to perform each and every act that is
deemed necessary or advisable to comply with the intent of the Securities Act of
1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 8th day of
December, 1987.
/s/ JULES KROLL
----------------------------
Jules Kroll
<PAGE> 12
LIMITED POWER OF ATTORNEY
I, Sol Langberg, Director of Presidential Life Insurance Company, a
corporation duly organized under the laws of the State of New York, appoint
Joseph F. Kolodney as my attorney and agent, for me, and in my name as a
Director of Presidential Life Insurance Company with full power to execute,
deliver and file with the Securities and Exchange Commission all documents
required for the registration of securities or amendment to the registration of
securities under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and to perform each and every act that is
deemed necessary or advisable to comply with the intent of the Securities Act of
1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 8th day of
December, 1987.
/s/ SOL LANGBERG
----------------------------
Sol Langberg
<PAGE> 13
LIMITED POWER OF ATTORNEY
I, Irving L. Schwartz, M.D., Director of Presidential Life Insurance
Company, a corporation duly organized under the laws of the State of New York,
appoint Joseph F. Kolodney as my attorney and agent, for me, and in my name as a
Director of Presidential Life Insurance Company with full power to execute,
deliver and file with the Securities and Exchange Commission all documents
required for the registration of securities or amendment to the registration of
securities under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and to perform each and every act that is
deemed necessary or advisable to comply with the intent of the Securities Act of
1933 or the Investment Company Act of 1940.
IN WITNESS, I have signed this Power of Attorney on this 9th day of
December, 1987.
/s/ IRVING L. SCHWARTZ, M.D.
----------------------------
Irving L. Schwartz, M.D.
