PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
================================================================================
Independent Auditors' Report
The Board of Directors of Preferred Life Insurance Company of New York and
Contract Owners of Preferred Life Variable Account C:
We have audited the accompanying statements of assets and liabilities of the
sub-accounts of Preferred Life Variable Account C as of December 31, 1996, the
related statements of operations for the year then ended and the statements of
changes in net assets for each of the years in the two-years then ended. These
financial statements are the responsibility of the Variable Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Investment
securities held in custody for the benefit of the Variable Account were
confirmed to us by the Franklin Valuemark Funds. 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, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities of the sub-accounts of
Preferred Life Variable Account C at December 31, 1996, the results of their
operations for the year then ended and the changes in their net assets for
each of the years in the two-years then ended, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 24, 1997
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<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements
Statements of Assets and Liabilities
December 31, 1996
(In thousands except per unit data)
Money Growth and Precious High Real Estate U.S. Government
Market Income Metals Income Securities Securities
Fund Fund Fund Fund Fund Fund
------ ------- ------ ----- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Money Market Fund, 32,512 shares, cost $32,512................ $32,512 - - - - -
Growth and Income Fund, 5,631 shares, cost $83,512............ - 98,827 - - - -
Precious Metals Fund, 573 shares, cost $8,470................. - - 8,191 - - -
High Income Fund, 2,961 shares, cost $38,665.................. - - - 41,925 - -
Real Estate Securities Fund, 918 shares, cost $14,703......... - - - - 20,338 -
U.S. Government Securities Fund, 7,438 shares, cost $99,440... - - - - - 100,191
------- ------- ----- ------ ------- -------
Total assets.............................................. 32,512 98,827 8,191 41,925 20,338 100,191
------- ------- ----- ------ ------- -------
Liabilities:
Accrued mortality and expense risk charges..................... 4 5 2 4 3 5
Accrued administrative charges................................. - 1 - - - 1
------- ------ ----- ------ ------ -------
Total liabilities......................................... 4 6 2 4 3 6
------- ------ ----- ------ ------ -------
Net assets................................................ $32,508 98,821 8,189 41,921 20,335 100,185
======= ====== ===== ====== ====== =======
Contract owners' equity (note 5)................................ $32,508 98,821 8,189 41,921 20,335 100,185
======= ====== ===== ====== ====== =======
Accumulation units outstanding................................. 2,433 5,070 566 2,164 859 6,017
======= ====== ====== ====== ====== =======
Accumulation unit value per unit............................... $13.359 19.490 14.467 19.375 23.668 16.650
======= ====== ====== ====== ====== =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
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<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
December 31, 1996
(In thousands except per unit data)
Templeton
Utility Zero Zero Zero Global Income Income
Equity Coupon Coupon Coupon Securities Securities
Fund Fund - 2000 Fund - 2005 Fund - 2010 Fund Fund
------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Utility Equity Fund, 5,678 shares, cost $92,724.......... $103,231 - - - - -
Zero Coupon Fund - 2000, 1,652 shares, cost $23,884...... - 25,088 - - - -
Zero Coupon Fund - 2005, 537 shares, cost $8,057......... - - 8,780 - - -
Zero Coupon Fund - 2010, 460 shares, cost $6,894......... - - - 7,495 - -
Templeton Global Income Securities Fund, 1,668 shares,
cost $21,451............................................ - - - - 22,722 -
Income Securities Fund, 5,701 shares, cost $86,292....... - - - - - 98,115
-------- ------ ------ ------ ------ ------
Total assets......................................... 103,231 25,088 8,780 7,495 22,722 98,115
-------- ------ ------ ------ ------ ------
Liabilities:
Accrued mortality and expense risk charges................ 5 3 3 3 3 5
Accrued administrative charges............................ 1 - - - - 1
-------- ------ ------ ------ ------ ------
Total liabilities.................................... 6 3 3 3 3 6
-------- ------ ------ ------ ------ ------
Net assets........................................... $103,225 25,085 8,777 7,492 22,719 98,109
======== ====== ====== ====== ====== ======
Contract owners' equity (note 5)........................... $103,225 25,085 8,777 7,492 22,719 9
======== ====== ====== ====== ====== ======
Accumulation units outstanding............................ 4,998 1,358 428 348 1,354 4,519
======== ====== ====== ====== ====== ======
Accumulation unit value per unit.......................... $20.654 18.475 20.517 21.522 16.781 21.708
======== ====== ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
December 31, 1996
(In thousands except per unit data)
Templeton Templeton Templeton Templeton Templeton
Pacific Rising International Developing Global Global Asset
Growth Dividends Equity Markets Equity Growth Allocation
Fund Fund Fund Fund Fund Fund
------- -------- ----------- -------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Templeton Pacific Growth Fund, 1,772 shares, cost $24,758. $26,152 - - - - -
Rising Dividends Fund, 3,373 shares, cost $37,522......... - 51,938 - - - -
Templeton International Equity Fund, 4,555 shares,
cost $59,120............................................. - - 70,367 - - -
Templeton Developing Markets Equity Fund, 1,033 shares,
cost $10,766............................................. - - - 11,973 - -
Templeton Global Growth Fund, 2,109 shares, cost $24,277.. - - - - 29,106 -
Templeton Global Asset Allocation Fund, 299 shares,
cost $3,359.............................................. - - - - - 3,762
------- ------ ------ ------ ------ ------
Total assets.......................................... 26,152 51,938 70,367 11,973 29,106 3,762
------- ------ ------ ------ ------ ------
Liabilities:
Accrued mortality and expense risk charges................. 4 4 4 3 3 3
Accrued administrative charges............................. - - 1 - - -
------- ------ ------ ------ ------ ------
Total liabilities..................................... 4 4 5 3 3 3
------- ------ ------ ------ ------ ------
Net assets............................................ $26,148 51,934 70,362 11,970 29,103 3,759
======= ====== ====== ====== ====== ======
Contract owners' equity (note 5)............................ $26,148 51,934 70,362 11,970 29,103 3,759
======= ====== ====== ====== ====== ======
Accumulation units outstanding............................. 1,751 3,394 4,375 1,042 2,146 300
======= ====== ====== ====== ====== ======
Accumulation unit value per unit........................... $14.932 15.303 16.081 11.487 13.560 12.514
======= ====== ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
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<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
December 31, 1996
(In thousands except per unit data)
Templeton
International Mutual Mutual
Capital Smaller Discovery Shares Total
Small Cap Growth Companies Securities Securities All
Fund Fund Fund Fund Fund Funds
--------- ------- ----------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Small Cap Fund, 407 shares, cost $5,158........................... $5,372 - - - -
Capital Growth Fund, 223 shares, cost $2,448...................... - 2,532 - - -
Templeton International Smaller Companies Fund, 64 shares,
cost $677........................................................ - - 725 - -
Mutual Discovery Securities Fund, 27 shares, cost $275............ - - - 278 -
Mutual Shares Securities Fund, 43 shares, cost $434............... - - - - 442
------- ------ ------ ------ ------
Total assets.................................................. 5,372 2,532 725 278 442 770,062
------- ------ ------ ------ ------ -------
Liabilities:
Accrued mortality and expense risk charges......................... 3 3 3 - - 75
Accrued administrative charges..................................... - - - - - 5
------- ------ ------ ------ ------ -------
Total liabilities............................................. 3 3 3 - - 80
------- ------ ------ ------ ------ -------
Net assets.................................................... $5,369 2,529 722 278 442 769,982
======= ====== ====== ====== ====== =======
Contract owners' equity (note 5).................................... $5,369 2,529 722 278 442 769,982
======= ====== ====== ====== ====== =======
Accumulation units outstanding..................................... 416 225 65 27 43 43,898
======= ====== ====== ====== ====== =======
Accumulation unit value per unit................................... $12.913 11.254 11.145 10.180 10.330
======= ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations
For the year ended December 31, 1996
(In thousands)
Money Growth and Precious High Real Estate U.S. Government
Market Income Metals Income Securities Securities
Fund Fund Fund Fund Fund Fund
------ ---------- ------- ------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares.......................... $ 1,621 2,058 114 2,915 652 5,488
------- ------ ----- ------ ----- ------
Expenses:
Mortality and expense risk charges........................... 407 1,112 113 464 205 1,040
Administrative charges....................................... 49 133 14 56 25 125
------- ------ ----- ------ ----- ------
Total expenses.......................................... 456 1,245 127 520 230 1,165
------- ------ ----- ------ ----- ------
Investment income (loss), net........................... 1,165 813 (13) 2,395 422 4,323
Realized gains (losses) and unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions on mutual funds......... - 7,289 105 155 - -
------- ------ ----- ------ ----- ------
Realized gains (losses) on sales of investments:
Proceeds from sales........................................ 45,742 12,271 5,134 16,229 2,671 14,379
Cost of investments sold................................... (45,742) (10,552) (4,733) (15,052) (2,196) (14,419)
------- ------ ----- ------ ----- ------
Total realized gains (losses) on sales of
investments, net....................................... - 1,719 401 1,177 475 (40)
------- ------ ----- ------ ----- ------
Realized gains (losses) on investments, net............. - 9,008 506 1,332 475 (40)
Net change in unrealized appreciation (depreciation) on
investments................................................ - 960 (480) 754 3,748 (2,399)
------- ------ ----- ------ ----- ------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net........ - 9,968 26 2,086 4,223 (2,439)
------- ------ ----- ------ ----- ------
Net increase (decrease) in net assets from operations......... $ 1,165 10,781 13 4,481 4,645 1,884
======= ====== ===== ====== ===== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the year ended December 31, 1996
(In thousands)
Templeton Investment
Utility Zero Zero Zero Global Income Grade
Equity Coupon Coupon Coupon Securities Intermediate
Fund Fund-2000 Fund-2005 Fund-2010 Fund Bond Fund
------ --------- --------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares........................ $ 5,502 1,407 465 397 1,696 819
------ ------- ------- ------ ------- -------
Expenses:
Mortality and expense risk charges......................... 1,371 320 112 95 284 162
Administrative charges..................................... 164 38 13 11 34 19
------ ------- ------- ------ ------- -------
Total expenses........................................ 1,535 358 125 106 318 181
------ ------- ------- ------ ------- -------
Investment income (loss), net......................... 3,967 1,049 340 291 1,378 638
Realized gains (losses) and unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions on mutual funds....... - 14 - 108 - -
------ ------- ------- ------ ------- -------
Realized gains (losses) on sales of investments:
Proceeds from sales...................................... 21,660 3,492 1,880 2,947 3,972 17,097
Cost of investments sold................................. (20,008) (3,337) (1,747) (2,761) (3,865) (16,737)
------ ------- ------- ------ ------- -------
Total realized gains (losses) on sales of
investments, net..................................... 1,652 155 133 186 107 360
------ ------- ------- ------ ------- -------
Realized gains (losses) on investments, net........... 1,652 169 133 294 107 360
Net change in unrealized appreciation (depreciation) on
investments.............................................. (4) (990) (672) (957) 271 (737)
------ ------- ------- ------ ------- -------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net...... 1,648 (821) (539) (663) 378 (377)
------ ------- ------- ------ ------- -------
Net increase (decrease) in net assets from operations....... $ 5,615 228 (199) (372) 1,756 261
====== ======= ======= ====== ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the year ended December 31, 1996
(In thousands)
Templeton Templeton Templeton
Income Adjustable U.S. Pacific Rising International Developing
Securities Government Growth Dividends Equity Markets Equity
Fund Fund Fund Fund Fund Fund
---------- ------------- --------- --------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares...................... $ 4,813 1,013 799 912 1,626 92
------ -------- ------- ------ ------- -------
Expenses:
Mortality and expense risk charges....................... 1,186 144 345 566 796 129
Administrative charges................................... 142 17 41 68 96 15
------ -------- ------- ------ ------- -------
Total expenses...................................... 1,328 161 386 634 892 144
------ -------- ------- ------ ------- -------
Investment income (loss), net....................... 3,485 852 413 278 734 (52)
Realized gains (losses) and unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions on mutual funds..... 800 - 463 - 1,990 170
------ -------- ------- ------ ------- -------
Realized gains (losses) on sales of investments:
Proceeds from sales.................................... 10,171 17,081 12,517 4,769 9,752 2,310
Cost of investments sold............................... (9,284) (17,814) (11,609) (3,837) (8,796) (2,183)
------ -------- ------- ------ ------- -------
Total realized gains (losses) on sales of
investments, net................................... 887 (733) 908 932 956 127
------ -------- ------- ------ ------- -------
Realized gains (losses) on investments, net......... 1,687 (733) 1,371 932 2,946 297
Net change in unrealized appreciation (depreciation) on
investments............................................ 3,616 356 605 8,111 8,342 1,405
------ -------- ------- ------ ------- -------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net.... 5,303 (377) 1,976 9,043 11,288 1,702
------ -------- ------- ------ ------- -------
Net increase (decrease) in net assets from operations..... $ 8,788 475 2,389 9,321 12,022 1,650
====== ======== ======= ====== ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the year ended December 31, 1996
(In thousands)
Templeton
Templeton Templeton International Mutual Mutual
Global Global Asset Small Capital Smaller Discovery Shares Total
Growth Allocation Cap Growth Companies Securities Securities All
Fund Fund Fund Fund Fund Fund Fund Funds
------- ------------ ----- -------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares............ $ 365 1 - - - - - 32,755
------ ---- ------ ----- ------ --- --- -------
Expenses:
Mortality and expense risk charges............. 288 27 19 7 3 - - 9,195
Administrative charges......................... 35 3 2 1 - - - 1,101
------ ---- ------ ----- ------ --- --- -------
Total expenses............................ 323 30 21 8 3 - - 10,296
------ ---- ------ ----- ------ --- --- -------
Investment income (loss), net............. 42 (29) (21) (8) (3) - - 22,459
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on mutual
funds........................................ 365 2 - - - - - 11,461
------ ---- ------ ---- ------ --- --- -------
Realized gains (losses) on sales of investments:
Proceeds from sales.......................... 1,137 229 6,080 460 93 - - 212,073
Cost of investments sold..................... (1,007) (213) (5,985) (440) (91) - - (202,408)
------ ---- ------ ----- ------ --- --- -------
Total realized gains (losses) on sales of
investments, net......................... 130 16 95 20 2 - - 9,665
------ ---- ------ ----- ------ --- --- -------
Realized gains (losses) on investments, net 495 18 95 20 2 - - 21,126
Net change in unrealized appreciation
(depreciation) on investments............... 3,541 398 215 84 48 3 8 26,226
------ ---- ------ ----- ------ --- --- -------
Total realized gains (losses) and
unrealized appreciation (depreciation) on
investments, net........................ 4,036 416 310 104 50 3 8 47,352
------- ---- ------ ----- ------ --- --- -------
Net increase (decrease) in net assets from
operations..................................... $4,078 387 289 96 47 3 8 69,811
======= ==== ====== ===== ====== === === =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets
For the years ended December 31, 1996 and 1995
(In thousands)
Growth and Precious Real Estate
Money Market Fund Income Fund Metals Fund High Income Fund Securities Fund
----------------- ------------ ----------- ---------------- ---------------
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net............ $ 1,165 1,272 813 (131) (13) 1 2,395 1,556 422 258
Realized gains (losses) on
investments, net........................ - - 9,008 2,371 506 194 1,332 184 475 186
Net change in unrealized appreciation
(depreciation) on investments........... - - 960 13,509 (480) (159) 754 3,050 3,748 1,571
------ ------ ------ ------ ----- ----- ------ ------ ------ ------
Net increase (decrease) in net assets
from operations..................... 1,165 1,272 10,781 15,749 13 36 4,481 4,790 4,645 2,015
------ ------ ------ ------ ----- ----- ------ ------ ------ ------
Contract transactions (note 5):
Purchase payments........................ 14,336 10,218 15,819 9,814 1,159 519 5,922 5,160 1,633 855
Transfers between funds.................. (3,631) (4,384) 6,402 9,626 669 (1,029) 1,603 4,955 1,434 (1,207)
Surrenders and terminations.............. (7,844) (9,094) (9,128) (5,346) (915)(1,297) (5,831) (3,966) (1,728) (1,337)
Rescissions.............................. (83) (157) (264) (240) (13) (10) (53) (140) (21) (3)
Other transactions (note 2).............. (6) (14) (29) 21 (2) 9 (9) 26 28 (14)
------ ------ ------ ------ ----- ----- ------ ------ ------ ------
Net increase (decrease) in net assets
resulting from contract
transactions........................ 2,772 (3,431) 12,800 13,875 898 (1,808) 1,632 6,035 1,346 (1,706)
------ ------ ------ ------ ----- ----- ------ ------ ------ ------
Increase (decrease) in net assets.......... 3,937 (2,159) 23,581 29,624 911 (1,772) 6,113 10,825 5,991 309
Net assets at beginning of year............ 28,571 30,730 75,240 45,616 7,278 9,050 35,808 24,983 14,344 14,035
------ ------ ------ ------ ----- ----- ------ ------ ------ ------
Net assets at end of year.................. $32,508 28,571 98,821 75,240 8,189 7,278 41,921 35,808 20,335 14,344
====== ====== ====== ====== ===== ===== ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996 and 1995
(In thousands)
U.S. Government Zero Coupon Zero Coupon Zero Coupon
Securities Fund Utility Equity Fund Fund-1995 Fund-2000 Fund-2005
--------------- ------------------- ----------- ----------- -----------
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
------- ------ ------ ------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net............ $ 4,323 4,337 3,967 4,316 - 252 1,049 703 340 222
Realized gains (losses) on
investments, net........................ (40) 267 1,652 56 - (190) 169 127 133 93
Net change in unrealized appreciation
(depreciation) on investments........... (2,399) 8,141 (4) 22,858 - 189 (990) 2,954 (672) 1,761
------- ------ ------- ------- --- ----- ------ ------ ----- -----
Net increase (decrease) in net
assets from operations.............. 1,884 12,745 5,615 27,230 - 251 228 3,784 (199) 2,076
------- ------ ------- ------- --- ----- ------ ------ ----- -----
Contract transactions (note 5):
Purchase payments........................ 7,463 6,927 5,199 5,661 - 98 2,220 4,576 1,208 1,474
Transfers between funds.................. 19,458 192 (9,257) 13 - (4,137) (1,036) 1,668 (671) 234
Surrenders and terminations.............. (11,371) (10,634) (14,003) (12,439) - (1,151) (2,141) (1,821)(1,026) (674)
Rescissions.............................. (165) (103) (61) (78) - - (85) (85) (64) (57)
Other transactions (note 2).............. (19) 60 (11) (59) - (3) (10) (10) (2) (5)
------- ------ ------- ------- --- ----- ------ ------ ----- -----
Net increase (decrease) in net
assets resulting from contract
transactions........................ 15,366 (3,558) (18,133) (6,902) - (5,193) (1,052) 4,328 (555) 972
------- ------ ------- ------- --- ----- ------ ------ ----- -----
Increase (decrease) in net assets.......... 17,250 9,187 (12,518) 20,328 - (4,942) (824) 8,112 (754) 3,048
Net assets at beginning of year............ 82,935 73,748 115,743 95,415 - 4,942 25,909 17,797 9,531 6,483
------- ------ ------- ------- --- ----- ------ ------ ----- -----
Net assets at end of year.................. $100,185 82,935 103,225 115,743 - - 25,085 25,909 8,777 9,531
======= ====== ======= ======= === ===== ====== ====== ===== =====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996 and 1995
(In thousands)
Templeton Investment Grade Adjustable U.S.
Zero Coupon Global Income Intermediate Income Government
Fund - 2010 Securities Fund Bond Fund Securities Fund Fund
------------ --------------- ---------------- --------------- ---------------
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
------ ----- ------ ------ ------ ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net........... $ 291 104 1,378 532 638 408 3,485 3,335 852 834
Realized gains (losses) on
investments, net....................... 294 136 107 (1) 360 113 1,687 728 (733) 30
Net change in unrealized appreciation
(depreciation) on investments.......... (957) 1,835 271 2,221 (737) 742 3,616 10,992 356 408
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Net increase (decrease) in net
assets from operations............. (372) 2,075 1,756 2,752 261 1,263 8,788 15,055 475 1,272
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Contract transactions (note 5):
Purchase payments....................... 1,097 1,373 1,712 1,801 939 1,410 10,882 9,139 1,552 3,443
Transfers between funds................. (935) 1,450 (928) (2,122) (15,408) (567) (1,355) 3,107 (15,809) (6,777)
Surrenders and terminations............. (595) (546) (2,722) (2,408) (1,630) (1,685) (10,309) (9,000) (1,613) (1,984)
Rescissions............................. (27) (37) (1) (56) (14) (109) (259) (300) (53) (109)
Other transactions (note 2)............. (5) 6 50 (3) 40 30 (1) (26) 25 6
------ ----- ------ ------ ------ ------ ------ ------ ------ -----
Net increase (decrease) in net
assets resulting from contract
transactions....................... (465) 2,246 (1,889) (2,788) (16,073) (921) (1,042) 2,920 (15,898) (5,421)
------ ----- ------ ------ ------ ------ ------ ------ ------ -----
Increase (decrease) in net assets......... (837) 4,321 (133) (36) (15,812) 342 7,746 17,975 (15,423) (4,149)
Net assets at beginning of year........... 8,329 4,008 22,852 22,888 15,812 15,470 90,363 72,388 15,423 19,572
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Net assets at end of year................. $7,492 8,329 22,719 22,852 - 15,812 98,109 90,363 - 15,423
====== ===== ====== ====== ====== ====== ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996 and 1995
(In thousands)
Templeton
Templeton Developing Templeton
Templeton Pacific Rising International Markets Global
Growth Fund Dividends Fund Equity Fund Equity Fund Growth Fund
----------------- -------------- ------------- ----------- -----------
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net............ $ 413 122 278 234 734 137 (52) (67) 42 (108)
Realized gains (losses) on
investments, net........................ 1,371 178 932 172 2,946 1,571 297 (82) 495 40
Net change in unrealized appreciation
(depreciation) on investments........... 605 1,218 8,111 7,803 8,342 2,706 1,405 195 3,541 1,297
------ ------ ------ ------ ------ ------ ------ ----- ------ ------
Net increase (decrease) in net
assets from operations.............. 2,389 1,518 9,321 8,209 12,022 4,414 1,650 46 4,078 1,229
------ ------ ------ ------ ------ ------ ------ ----- ------ ------
Contract transactions (note 5):
Purchase payments........................ 2,063 2,320 5,191 3,197 6,974 6,496 2,224 1,669 6,947 4,462
Transfers between funds.................. 439 (3,819) 2,038 2,459 3,648 (1,789) 1,512 275 3,817 1,693
Surrenders and terminations.............. (3,400) (2,341) (4,321) (2,693) (6,296) (4,550) (633) (335) (1,698) (719)
Rescissions.............................. (20) (28) (78) (85) (18) (162) (32) - (114) (13)
Other transactions (note 2).............. (17) 7 13 (2) 14 1 (6) 11 13 8
------ ------ ------ ------ ------ ------ ------ ----- ------ ------
Net increase (decrease) in net
assets resulting from contract
transactions........................ (935) (3,861) 2,843 2,876 4,322 (4) 3,065 1,620 8,965 5,431
------ ------ ------ ------ ------ ------ ------ ----- ------ ------
Increase (decrease) in net assets.......... 1,454 (2,343) 12,164 11,085 16,344 4,410 4,715 1,666 13,043 6,660
Net assets at beginning of year............ 24,694 27,037 39,770 28,685 54,018 49,608 7,255 5,589 16,060 9,400
------ ------ ------ ------ ------ ------ ------ ----- ------ ------
Net assets at end of year.................. $26,148 24,694 51,934 39,770 70,362 54,018 11,970 7,255 29,103 16,060
====== ====== ====== ====== ====== ====== ====== ===== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996 and 1995
(In thousands)
Templeton
Templeton International Mutual Mutual
Global Asset Capital Smaller Discovery Shares
Allocation Small Growth Companies Securities Securities
Fund Cap Fund Fund Fund Fund Fund Total All Funds
----------- -------- ------- ----------- ---------- ---------- ---------------
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- --- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net...... $ (29) 6 (21) - (8) - (3) - - - - - 22,459 18,323
Realized gains (losses) on
investments, net.................. 18 - 95 - 20 - 2 - - - - - 21,126 6,173
Net change in unrealized
appreciation (depreciation) on
investments....................... 398 4 215 - 84 - 48 - 3 - 8 - 26,226 83,295
----- --- ----- --- ----- --- --- --- --- --- --- --- ------- -------
Net increase (decrease) in net
assets from operations....... 387 10 289 - 96 - 47 - 3 - 8 - 69,811 107,791
----- --- ----- --- ----- --- --- --- --- --- --- --- ------- -------
Contract transactions (note 5):
Purchase payments.................. 1,950 210 1,263 - 788 - 229 - 18 - 50 - 98,838 80,822
Transfers between funds............ 1,240 159 3,907 - 1,776 - 446 - 257 - 384 - - -
Surrenders and terminations........ (162) - (74) - (128) - - - - - - - (87,568) (74,020)
Rescissions........................ (35) - (15) - (3) - - - - - - - (1,478) (1,772)
Other transactions (note 2)........ - - (1) - - - - - - - - - 65 49
----- --- ----- --- ----- --- --- --- --- --- --- --- ------- -------
Net increase (decrease) in net
assets resulting from contract
transactions.................. 2,993 369 5,080 - 2,433 - 675 - 275 - 434 - 9,857 5,079
----- --- ----- --- ----- --- --- --- --- --- --- --- ------- -------
Increase (decrease) in net assets... 3,380 379 5,369 - 2,529 - 722 - 278 - 442 - 79,668 112,870
Net assets at beginning of year...... 379 - - - - - - - - - - - 690,314 577,444
----- --- ----- --- ----- --- --- --- --- --- --- --- ------- -------
Net assets at end of year........... $3,759 379 5,369 - 2,529 - 722 - 278 - 442 - 769,982 690,314
===== === ===== === ===== === === === === === === === ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
================================================================================
Notes to Financial Statements
December 31, 1996
1. Organization
Preferred Life Variable Account C (Variable Account) is a segregated investment
account of Preferred Life Insurance Company of New York (Preferred Life) and is
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940 (as
amended). The Variable Account was established by Preferred Life on February 26,
1988 and commenced operations September 6, 1991. Accordingly, it is an
accounting entity wherein all segregated account transactions are reflected.
The Variable Account's assets are the property of Preferred Life and are held
for the benefit of the owners and other persons entitled to payments under
variable annuity contracts issued through the Variable Account and underwritten
by Preferred Life. The assets of the Variable Account, equal to the reserves and
other liabilities of the Variable Account, are not chargeable with liabilities
that arise from any other business which Preferred Life may conduct.
The Variable Account's sub-accounts may invest, at net asset values, in one or
more of the funds of the Franklin Valuemark Funds (FVF), managed by Franklin
Advisers, Inc. or other of its affiliated adviser entities, in accordance with
the selection made by the contract owner.
Certain officers and trustees of the FVF are also officers and/or directors of
Franklin Advisers, Inc. and/or Preferred Life.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
Investments of the Variable Account are valued daily at market value using net
asset values provided by Franklin Advisers, Inc.
Realized investment gains include gains on the sale of fund shares as determined
by the average cost method. Dividend distributions received from the FVF are
reinvested in additional shares of the FVF and are recorded as income to the
Variable Account on the ex-dividend date.
The Templeton Global Asset Allocation Fund was added as an available investment
option on August 4, 1995. The Zero Coupon - 1995 Fund matured and was closed on
December 15, 1995. The Small Cap Fund, Capital Growth Fund and Templeton
International Smaller Companies Fund were added as available investment
options on June 10, 1996. The Mutual Discovery Securities Fund and Mutual Shares
Securities Fund were added as available investment options on December 2, 1996.
The Investment Grade Intermediate Bond Fund and Adjustable U.S. Government Fund
were closed on October 25, 1996 when shares of the U.S. Government Securities
Fund were substituted for all shares of both funds.
On May 1, 1995, the Equity Growth Fund name was changed to Growth and Income
Fund. The Global Income Fund name was changed to Templeton Global Income
Securities Fund on May 1, 1996.
Expenses
Asset Based Expenses
A mortality and expense risk charge is deducted from the Variable Account on a
daily basis equal, on an annual basis, to 1.25% of the daily net assets of the
Variable Account.
An administrative charge is deducted from the Variable Account on a daily basis
equal, on an annual basis, to 0.15% of the daily net assets of the Variable
Account.
Contract Based Expenses
A contract maintenance charge is paid by the contract owner annually from each
contract by liquidating contract units at the end of the contract year and at
the time of full surrender. The amount of the charge is $30 each year. Contract
maintenance charges deducted during the years ended December 31, 1996 and 1995
were $468,180 and $475,980, respectively. These contract charges are reflected
in the Statements of Changes in Net Assets as other transactions.
<PAGE>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
2. Significant Accounting Policies (cont.)
Contract Based Expenses (cont.)
A contingent deferred sales charge is deducted from the contract value at the
time of a surrender. This charge applies only to a surrender of purchase
payments received within five years of the date of surrender. For this purpose,
purchase payments are allocated on a first-in, first-out basis. The amount of
the contingent deferred sales charge is calculated by: (a) allocating purchase
payments to the amount surrendered; and (b) multiplying each allocated purchase
payment that has been held under the contract for the period shown below by the
charge shown below:
<TABLE>
<CAPTION>
Years Since Payment Charge
------------------- ------
<S> <C> <C>
0-1 5%
1-2 5%
2-3 4%
3-4 3%
4-5 1.5%
5+ 0%
</TABLE>
and (c) adding the products of each multiplication in (b) above.
A contract owner may, not more frequently than once annually on a cumulative
basis, make a surrender each contract year of fifteen percent (15%) of
purchase payments paid less any prior surrenders without incurring a contingent
deferred sales charge. For a partial surrender, the contingent deferred sales
charge will be deducted from the remaining contract value, if sufficient;
otherwise it will be deducted from the amount surrendered. Total contingent
deferred sales charges paid by the contract owners for the years ended December
31, 1996 and 1995 were $1,012,666 and $1,304,496, respectively.
Currently, twelve transfers are permitted each contract year. Thereafter, the
fee is $25 per transfer, or 2% of the amount transferred, if less. Currently,
transfers associated with the dollar cost averaging program are not counted.
Total transfer charges for the years ended December 31, 1996 and 1995 were
$11,086 and $9,505, respectively.
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the contract values. Preferred Life may, at its sole
discretion, pay taxes when due and deduct that amount from the contract value
at a later date. Payment at an earlier date does not waive any right Preferred
Life may have to deduct such amounts at a later date.
On certain contracts, a systematic withdrawal plan is available which allows an
owner to withdraw up to 9% of purchase payments less prior surrenders annually,
paid quarterly, without incurring a contingent deferred sales charge. The
exercise of the systematic withdrawal plan in any contract year replaces the 15%
penalty free privilege for that year.
A rescission is defined as a contract that is returned to the company and
canceled within the free-look period, generally within 10 days.
3. Investment Transactions
The sub-account purchases of fund shares, including reinvestment of dividend
distributions, were as follows during the year ended December 31, 1996 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Money Market Fund................................. $49,638
Growth and Income Fund............................ 33,090
Precious Metals Fund.............................. 6,115
High Income Fund.................................. 20,371
Real Estate Securities Fund....................... 4,423
U.S. Government Securities Fund................... 33,976
Utility Equity Fund............................... 7,363
Zero Coupon Fund - 2000........................... 3,474
Zero Coupon Fund - 2005........................... 1,655
Zero Coupon Fund - 2010........................... 2,872
Templeton Global Income Securities Fund........... 3,437
Investment Grade Intermediate Bond Fund........... 1,645
Income Securities Fund............................ 13,313
Adjustable U.S. Government Fund................... 2,012
Templeton Pacific Growth Fund..................... 12,431
Rising Dividends Fund............................. 7,847
Templeton International Equity Fund............... 16,740
Templeton Developing Markets Equity Fund.......... 5,486
Templeton Global Growth Fund...................... 10,491
Templeton Global Asset Allocation Fund............ 3,196
Small Cap Fund.................................... 11,143
Capital Growth Fund............................... 2,888
Templeton International Smaller Companies Fund.... 769
Mutual Discovery Securities Fund.................. 275
Mutual Shares Securities Fund..................... 434
</TABLE>
<PAGE>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
4. Federal Income Taxes
Operations of the Variable Account form a part of, and are taxed with,
operations of Preferred Life, which is taxed as a life insurance company under
the Internal Revenue Code.
Preferred Life does not expect to incur any federal income taxes in the
operation of the Variable Account. If, in the future, Preferred Life determines
that the Variable Account may incur federal income taxes, it may then assess a
charge against the Variable Account for such taxes.
5. Contract Transactions - Unit Activity (In thousands)
Transactions in units for each fund for the years ended December 31, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
Growth U.S. Zero Zero
Money and Precious High Real Estate Government Utility Coupon Coupon
Market Income Metals Income Securities Securities Equity Fund - Fund -
Fund Fund Fund Fund Fund Fund Fund 1995 2000
----- ---- ---- ------ ---------- ------ ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at December 31, 1994.... 2,487 3,452 647 1,710 900 5,331 6,317 344 1,158
Contract transactions:
Purchase payments..................................... 809 638 38 314 53 450 333 7 273
Transfers between funds............................... (344) 626 (75) 305 (76) 12 4 (273) 98
Surrenders and terminations........................... (721) (355) (94) (247) (82) (701) (730) (78) (107)
Rescissions........................................... (12) (16) (1) (9) - (7) (5) - (5)
Other transactions.................................... (1) 1 1 2 (1) 4 (3) - (1)
----- ----- ---- ----- ----- ----- ----- ----- -----
Net increase (decrease) in accumulation units
resulting from contract transactions............ (269) 894 (131) 365 (106) (242) (401) (344) 258
----- ----- ---- ----- ----- ----- ----- ----- -----
Accumulation units outstanding at December 31, 1995.... 2,218 4,346 516 2,075 794 5,089 5,916 - 1,416
===== ===== ==== ===== ===== ===== ===== ===== =====
Contract transactions:
Purchase payments..................................... 1,093 882 73 329 83 462 265 - 123
Transfers between funds............................... (274) 360 37 84 68 1,177 (471) - (56)
Surrenders and terminations........................... (597) (501) (59) (321) (87) (700) (708) - (119)
Rescissions........................................... (6) (15) (1) (3) (1) (10) (3) - (5)
Other transactions.................................... (1) (2) - - 2 (1) (1) - (1)
----- ----- ---- ----- ----- ----- ----- ----- -----
Net increase (decrease) in accumulation units
resulting from contract transactions............ 215 724 50 89 65 928 (918) - (58)
----- ----- ---- ----- ----- ----- ----- ----- -----
Accumulation units outstanding at December 31, 1996.... 2,433 5,070 566 2,164 859 6,017 4,998 - 1,358
===== ===== ==== ===== ===== ===== ===== ===== =====
</TABLE>
<PAGE>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
5. Contract Transactions - Unit Activity (In thousands) (cont.)
<TABLE>
<CAPTION>
Templeton
Zero Zero Global Investment Adjustable Templeton Templeton
Coupon Coupon Income Grade Income U.S. Pacific Rising International
Fund - Fund - Securities Intermediate Securities Government Growth Dividends Equity
2005 2010 Fund Bond Fund Fund Fund Fund Fund Fund
----- ----- ---------- ----------- ---------- ----------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at
December 31, 1994.................... 403 252 1,667 1,085 4,416 1,767 2,112 2,936 4,079
Contract transactions:
Purchase payments.................... 79 73 124 94 502 296 180 284 509
Transfers between funds.............. 14 76 (148) (38) 168 (591) (298) 215 (146)
Surrenders and terminations.......... (37) (27) (167) (114) (501) (172) (181) (246) (356)
Rescissions.......................... (3) (2) (4) (7) (17) (9) (2) (7) (13)
Other transactions................... - - - 2 (1) - - - -
----- ------ ------- ------- ------- ------- ------- ------ -------
Net increase (decrease) in
accumulation units resulting
from contract transactions..... 53 120 (195) (63) 151 (476) (301) 246 (6)
----- ----- ------- ------- ------- ------- ------- ------ -------
Accumulation units outstanding at
December 31, 1995.................... 456 372 1,472 1,022 4,567 1,291 1,811 3,182 4,073
===== ===== ======= ======= ======= ======= ======= ====== =======
Contract transactions:
Purchase payments.................... 61 54 109 61 537 128 140 388 479
Transfers between funds.............. (34) (47) (58) (980) (69) (1,284) 32 147 251
Surrenders and terminations.......... (52) (29) (172) (105) (503) (133) (230) (318) (428)
Rescissions.......................... (3) (1) - (1) (13) (4) (1) (6) (1)
Other transactions................... - (1) 3 3 - 2 (1) 1 1
----- ----- ------- ------- ------- ------- ------- ------ ------
Net increase (decrease) in
accumulation units resulting
from contract transactions..... (28) (24) (118) (1,022) (48) (1,291) (60) 212 302
----- ------ ------- ------- ------- ------- ------- ------ ------
Accumulation units outstanding at
December 31, 1996.................... 428 348 1,354 - 4,519 - 1,751 3,394 4,375
===== ===== ======= ======= ======= ======= ======= ====== ======
</TABLE>
<PAGE>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
5. Contract Transactions - Unit Activity (In thousands) (cont.)
<TABLE>
<CAPTION>
Templeton
Templeton Templeton Templeton International Mutual Mutual
Developing Global Global Asset Small Capital Smaller Discovery Shares Total
Markets Equity Growth Allocation Cap Growth Companies Securities Securities All
Fund Fund Fund Fund Fund Fund Fund Fund Funds
------------ --------- ------------ ----- ------ ----------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation units outstanding at
December 31, 1994...................... 591 922 - - - - - - 42,576
Contract transactions:
Purchase payments...................... 176 410 21 - - - - - 5,663
Transfers between funds................ 24 152 15 - - - - - (280)
Surrenders and terminations............ (35) (67) - - - - - - (5,018)
Rescissions............................ - (1) - - - - - - (120)
Other transactions..................... 1 1 - - - - - - 5
------- ------- ----- ----- ---- ------ ------ ------ ------
Net increase (decrease) in
accumulation units resulting
from contract transactions....... 166 495 36 - - - - - 250
------- ------- ----- ----- ---- ------ ------ ------ ------
Accumulation units outstanding at
December 31, 1995...................... 757 1,417 36 - - - - - 42,826
======= ======= ===== ===== ==== ====== ====== ====== ======
Contract transactions:
Purchase payments...................... 206 564 172 103 71 22 2 5 6,412
Transfers between funds................ 140 310 109 320 165 43 25 38 33
Surrenders and terminations............ (58) (136) (14) (6) (11) - - - (5,287)
Rescissions............................ (3) (10) (3) (1) - - - - (91)
Other transactions..................... - 1 - - - - - - 5
------- ------- ----- ----- ---- ------ ------- ------ ------
Net increase (decrease) in
accumulation units resulting
from contract transactions....... 285 729 264 416 225 65 27 43 1,072
------- ------- ----- ----- ---- ------ ------- ------ ------
Accumulation units outstanding at
December 31, 1996...................... 1,042 2,146 300 416 225 65 27 43 43,898
======= ======= ===== ===== ==== ====== ======= ====== ======
</TABLE>
<PAGE>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values
A summary of accumulation unit values and accumulation units outstanding for
variable annuity contracts and the expense ratios, including expenses of the
underlying funds, for each of the five years in the period ended December 31,
1996 follows.
<TABLE>
<CAPTION>
Accumulation Ratio of Expenses
Units Outstanding Accumulation Net Assets to Average
(in thousands) Unit Value (in thousands) Net Assets*
----------------- ------------ -------------- ----------
<S> <C> <C> <C> <C>
Money Market Fund
December 31,
1996........................................................... 2,433 $13.359 $ 32,508 1.83%
1995........................................................... 2,218 12.883 28,571 1.80
1994........................................................... 2,487 12.354 30,730 1.86
1993........................................................... 627 12.066 7,566 2.06
1992........................................................... 301 11.932 3,587 2.09
Growth and Income Fund
December 31,
1996........................................................... 5,070 19.490 98,821 1.90
1995........................................................... 4,347 17.310 75,240 1.92
1994........................................................... 3,452 13.215 45,616 1.94
1993........................................................... 2,402 13.677 32,857 1.98
1992........................................................... 1,227 12.574 15,424 2.02
Precious Metals Fund
December 31,
1996........................................................... 566 14.467 8,189 2.05
1995........................................................... 516 14.109 7,278 2.06
1994........................................................... 647 13.979 9,050 2.08
1993........................................................... 391 14.464 5,656 2.08
1992........................................................... 30 9.424 279 2.09
High Income Fund
December 31,
1996........................................................... 2,164 19.375 41,921 1.94
1995........................................................... 2,076 17.252 35,808 1.96
1994........................................................... 1,710 14.608 24,984 2.00
1993........................................................... 1,135 15.155 17,207 2.04
1992........................................................... 266 13.278 3,532 2.08
Real Estate Securities Fund
December 31,
1996........................................................... 859 23.668 20,335 1.97
1995........................................................... 794 18.073 14,344 1.99
1994........................................................... 900 15.594 14,035 2.02
1993........................................................... 437 15.369 6,712 2.07
1992........................................................... 77 13.095 1,012 2.09
U.S. Government Securities Fund
December 31,
1996........................................................... 6,017 16.650 100,185 1.91
1995........................................................... 5,089 16.298 82,935 1.92
1994........................................................... 5,331 13.835 73,747 1.93
1993........................................................... 6,108 14.698 89,774 1.94
1992........................................................... 2,266 13.586 30,781 1.99
</TABLE>
<PAGE>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values (cont.)
<TABLE>
<CAPTION>
Accumulation Ratio of Expenses
Units Outstanding Accumulation Net Assets to Average
(in thousands) Unit Value (in thousands) Net Assets*
----------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Utility Equity Fund
December 31,
1996........................................................... 4,998 $20.654 $103,225 1.90%
1995........................................................... 5,916 19.555 115,743 1.90
1994........................................................... 6,317 15.104 95,415 1.92
1993........................................................... 7,479 17.319 129,527 1.91
1992........................................................... 2,519 15.889 40,022 1.95
Zero Coupon Fund - 1995
December 31,
1995 1......................................................... 269 15.200 4,082 1.80+
1994........................................................... 344 14.380 4,942 1.80
1993........................................................... 270 14.480 3,906 1.76
1992........................................................... 171 13.665 2,343 1.65
Zero Coupon Fund - 2000
December 31,
1996........................................................... 1,358 18.475 25,085 1.80
1995........................................................... 1,416 18.294 25,910 1.80
1994........................................................... 1,158 15.373 17,797 1.80
1993........................................................... 795 16.717 13,297 1.77
1992........................................................... 397 14.595 5,789 1.65
Zero Coupon Fund - 2005
December 31,
1996........................................................... 428 20.517 8,777 1.80
1995........................................................... 456 20.914 9,531 1.80
1994........................................................... 403 16.096 6,483 1.80
1993........................................................... 341 18.050 6,159 1.77
1992........................................................... 108 14.975 1,622 1.65
Zero Coupon Fund - 2010
December 31,
1996........................................................... 348 21.522 7,492 1.80
1995........................................................... 371 22.431 8,329 1.80
1994........................................................... 252 15.930 4,008 1.80
1993........................................................... 193 18.144 3,502 1.65
1992........................................................... 60 14.670 885 1.65
Templeton Global Income Securities Fund
December 31,
1996........................................................... 1,354 16.781 22,719 2.01
1995........................................................... 1,472 15.522 22,851 2.04
1994........................................................... 1,667 13.726 22,888 2.11
1993........................................................... 1,045 14.650 15,302 2.13
1992........................................................... 406 12.733 5,164 2.07
Investment Grade Intermediate Bond Fund
December 31,
1996 2......................................................... 891 15.740 14,032 2.00+
1995........................................................... 1,023 15.463 15,812 2.01
1994........................................................... 1,085 14.257 15,470 2.03
1993........................................................... 893 14.389 12,850 2.06
1992........................................................... 352 13.442 4,725 2.08
</TABLE>
<PAGE>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values (cont.)
<TABLE>
<CAPTION>
Accumulation Ratio of Expenses
Units Outstanding Accumulation Net Assets to Average
(in thousands) Unit Value (in thousands) Net Assets*
----------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Income Securities Fund
December 31,
1996........................................................... 4,519 $21.708 $ 98,109 1.90%
1995........................................................... 4,567 19.785 90,364 1.91
1994........................................................... 4,416 16.392 72,389 1.94
1993........................................................... 2,634 17.734 46,707 1.96
1992........................................................... 668 15.163 10,128 2.07
Adjustable U.S. Government Fund
December 31,
1996 2......................................................... 912 12.389 11,298 1.99+
1995........................................................... 1,290 11.951 15,423 1.99
1994........................................................... 1,767 11.077 19,571 1.97
1993........................................................... 1,971 11.254 22,179 1.98
1992........................................................... 1,453 11.020 16,007 2.00
Templeton Pacific Growth Fund
December 31,
1996........................................................... 1,751 14.932 26,148 2.39
1995........................................................... 1,812 13.630 24,693 2.41
1994........................................................... 2,112 12.802 27,037 2.47
1993........................................................... 915 14.233 13,023 2.54
1992 3......................................................... 58 9.761 568 2.71+
Rising Dividends Fund
December 31,
1996........................................................... 3,394 15.303 51,934 2.16
1995........................................................... 3,182 12.498 39,770 2.18
1994........................................................... 2,936 9.769 28,685 2.20
1993........................................................... 2,772 10.327 28,623 2.19
1992 3......................................................... 617 10.848 6,696 2.07+
Templeton International Equity Fund
December 31,
1996........................................................... 4,375 16.081 70,362 2.29
1995........................................................... 4,073 13.263 54,018 2.32
1994........................................................... 4,079 12.161 49,607 2.39
1993........................................................... 1,346 12.226 16,451 2.52
1992 3......................................................... 88 9.642 849 3.17+
Templeton Developing Markets Equity Fund
December 31,
1996........................................................... 1,042 11.487 11,970 2.89
1995........................................................... 757 9.582 7,254 2.81
1994 4......................................................... 591 9.454 5,589 2.93+
Templeton Global Growth Fund
December 31,
1996........................................................... 2,146 13.560 29,103 2.33
1995........................................................... 1,416 11.339 16,061 2.37
1994 4......................................................... 922 10.201 9,400 2.54+
Templeton Global Asset Allocation Fund
December 31,
1996........................................................... 300 12.514 3,759 2.26
1995 5......................................................... 36 10.591 379 2.30+
</TABLE>
<PAGE>
PREFERRED LIFE VARIABLE ACCOUNT C
OF PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values (cont.)
<TABLE>
<CAPTION>
Accumulation Ratio of Expenses
Units Outstanding Accumulation Net Assets to Average
(in thousands) Unit Value (in thousands) Net Assets*
----------------- ------------ -------------- ----------
<S> <C> <C> <C> <C>
Small Cap Fund
December 31,
1996 6......................................................... 416 $12.913 $ 5,369 2.17+%
Capital Growth Fund
December 31,
1996 6......................................................... 225 11.254 2,529 2.17+
Templeton International Smaller Companies Fund
December 31,
1996 6......................................................... 65 11.145 722 2.18+
Mutual Discovery Securities Fund
December 31,
1996 7......................................................... 27 10.180 278 2.77+
Mutual Shares Securities Fund
December 31,
1996 7......................................................... 43 10.330 442 2.40+
<FN>
*For the year ended December 31, including the effect of the expenses of the
underlying funds.
+Annualized.
1Period from January 1, 1995 to December 15, 1995 (fund closure).
2Period from January 1, 1996 to October 25, 1996 (fund closure).
3Period from March 10, 1992 (fund commencement) to December 31, 1992.
4Period from April 25, 1994 (fund commencement) to December 31, 1994.
5Period from August 4, 1995 (fund commencement) to December 31, 1995.
6Period from June 10, 1996 (fund commencement) to December 31, 1996.
7Period from December 2, 1996 (fund commencement) to December 31, 1996.
</FN>
</TABLE>
