V2NY* P1
FRANKLIN VALUEMARK II
PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
PREFERRED LIFE VARIABLE ACCOUNT C
Supplement Dated December 15, 1998 to
Prospectus dated May 1, 1998
The Prospectus is revised to include the addition of a fixed account investment
option described as follows:
The Contract contains a Fixed Option (referred to in the Contract as the "Fixed
Account"). The Fixed Option offers an interest rate that is guaranteed by
Preferred Life for all deposits made within the twelve month period. This
interest rate is set monthly and is guaranteed for 12 months. Preferred Life
guarantees that the interest credited to the Fixed Option will not be less than
3% per year. If a Contract Owner selects the Fixed Option, the purchase payment
will be placed with the other general assets of Preferred Life. Also, if a
Contract Owner selects the Fixed Option, the amount of money accumulated in the
Contract during the Accumulation Phase depends upon the total interest credited
to the Contract. A Contract Owner can make a transfer to or from the Fixed
Option and to or from any Portfolio prior to the Income Date. After the Income
Date, a Contract Owner may make at least one transfer from a Variable Annuity
Option to a Fixed Annuity Option. We reserve the right to modify the transfer
provisions of the Contract without notice. All transfers are subject to the
applicable charges as described in the Prospectus in the section entitled
"Charges and Deductions - Deduction for Transfer Fee" and the applicable
restrictions as described in the Prospectus in the section entitled "Purchase
Payments and Contract Value - Transfer of Contract Values".
The following information replaces the section entitled "Surrenders - Systematic
Withdrawal" contained in the Prospectus:
Systematic Withdrawal Program
If the value of a Contract is at least $25,000, Preferred Life offers a plan
which provides automatic monthly or quarterly payments to a Contract Owner from
the Contract each year. The total systematic withdrawals which can be made each
year without Preferred Life deducting a contingent deferred sales charge is
limited to 9% of the value of the Contract determined on the Valuation Date
before we receive the request. A Contract Owner may surrender any amount under
this program if the payments are no longer subject to the contingent deferred
sales charge. If a Contract Owner makes surrenders under this plan, the 15% free
surrender amount may not be used that year. For a discussion of the contingent
deferred sales charge and the 15% free surrender amount, see "Charges and
Deductions - Deductions for Contingent Deferred Sales Charge (Sales Load)". All
systematic withdrawals will be made on the 9th day of the month unless that day
is not a business day. If it is not, then the surrender will be made the
previous Valuation Date.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO SYSTEMATIC
WITHDRAWALS.
The following information replaces the section entitled "Purchase Payments and
Contract Value - Dollar Cost Averaging" contained in the prospectus:
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows a Contract Owner to systematically
transfer a set amount of money each month or quarter from any one Portfolio or
the Fixed Option to up to eight of the other Portfolios. By allocating amounts
on a regularly scheduled basis, as opposed to allocating the total amount at one
particular time, a Contract may be less susceptible to the impact of market
fluctuations. A Contract Owner may only participate in this program prior to the
Income Date.
There are two Dollar Cost Averaging options. The first option is the Dollar Cost
Averaging Fixed Option and it is available for new Contracts and additional
Purchase Payments to new and existing Contracts which will receive a special
fixed rate guaranteed for one year by Preferred Life. Dollar Cost Averaging will
take place over twelve months and requires a minimum investment of $6,000.
The second option is the Standard Dollar Cost Averaging Option which requires a
$3,000 minimum investment and participation for at least six months (or two
quarters).
All Dollar Cost Averaging transfers will be made on the 10th day of the month
unless that day is not a Valuation Date. If it is not, then the transfer will be
made the next Valuation Date. The Portfolio(s) a Contract Owner transfers from
may not be the Portfolio(s) a Contract Owner transfers to in this program. A
Contract Owner may elect either program by properly completing the Dollar Cost
Averaging form provided by Preferred Life.
A Contract Owner's participation in the program will end when any of the
following occurs:
(1) the number of desired transfers have been made;
(2) a Contract Owner does not have enough money in the Portfolio(s) or Fixed
Option to make the transfer (if less money is available, that amount will be
dollar cost averaged and the program will end);
(3) a Contract Owner requests to terminate the program (a request must be
received by Preferred Life by the first of the month to terminate that month);
or
(4) the Contract is terminated.
Ifa Contract Owner participates in the Dollar Cost Averaging Program, the
transfers made under the program are not taken into account in determining any
transfer fee. A Contract Owner may not participate in the Dollar Cost Averaging
Program and Flexible Rebalancing at the same time.
The following information replaces the section entitled "Purchase Payments and
Contract Value - Automatic Investment Plan" contained in the prospectus:
Automatic Investment Plan
The Automatic Investment Plan (AIP) is a program which allows a Contract Owner
to make additional Purchase Payments to the Contract on a monthly or quarterly
basis by electronic transfer of funds from a Contract Owner's savings or
checking account. A Contract owner may participate in this program by completing
the appropriate form. Preferred Life must receive the form by the first of the
month in order for AIP to begin that same month. Investments will take place on
the 20th of the month, or the next Valuation Date. The minimum investment that
can be made by AIP is $100. A Contract Owner may stop AIP at any time.
Notification must be given by a Contract Owner to Preferred Life by the first of
the month in order to stop or change AIP that month. If AIP is used for a
Qualified Contract, a Contract Owner should consult a tax adviser for advice
regarding maximum contributions.
The following provision is added to the Prospectus after "Purchase Payments and
Contract Value - Dollar Cost Averaging":
Flexible Rebalancing
Once a Contract Owner's money has been invested, the performance of the
Portfolios may cause the chosen allocation to shift. Flexible Rebalancing is
designed to help a Contract Owner maintain a specified allocation mix among the
different Portfolios. A Contract Owner can direct Preferred Life to readjust the
Contract Value on a quarterly, semi-annual or annual basis to return to the
original Portfolio allocations. Flexible Rebalancing transfers will be made on
the 20th day of the month unless that day is not a Valuation Date. If it is not,
then the transfer will be made on the previous day. If a Contract Owner
participates in Flexible Rebalancing, the transfers made under the program are
not taken into account in determining any transfer fee. The Fixed Option is not
part of Flexible Rebalancing.
The following provision is added to the Prospectus after "Surrenders -
Systematic Withdrawal":
Minimum Distribution Program
Ifa Contract is an Individual Retirement Annuity (IRA), a Contract Owner may
select the Minimum Distribution Program. Under this program, Preferred Life will
make payments to a Contract Owner from the Contract that are designed to meet
the applicable minimum distribution requirements imposed by the Internal Revenue
Code for IRAs. If the value of a Contract is at least $25,000, Preferred Life
will make payments to a Contract Owner on a monthly or quarterly basis. The
payments will not be subject to the contingent deferred sales charge and will be
instead of the 15% free surrender amount.
The following changes are made to the Preferred Life Variable Account C Fee
Table in the Franklin Valuemark Funds' Annual Expenses section:
1)The following chart restates certain Portfolios' "Management and Portfolio
Administration Fees" and the "Other Expenses" as indicated below. The
Portfolio Administration Fees for these Portfolios were inadvertently included
under "Other Expenses" rather than under "Management and Portfolio
Administration Fees." Please note that "Total Annual Expenses" for each
Portfolio shown below are the same as in the May 1, 1998 prospectus.
<TABLE>
<CAPTION>
Management
and Portfolio Other Total Annual
Portfolio Administration Fees Expenses Expenses
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mutual Discovery Securities Fund ............... .95%* .11% 1.06%
Mutual Shares Securities Fund .................. .75%* .05% .80%
Templeton Global Asset Allocation Fund ......... .80%* .14% .94%
Templeton International Smaller Companies Fund.. 1.00%* .06% 1.06%
<FN>
*Includes a .15% Administration Fee which is a direct expense of the Portfolio.
</FN>
</TABLE>
2) Add the following language to footnote 2:
For the Global Health Care Securities and Value Securities Funds, Franklin
Advisers, Inc. and Franklin Advisory Services, Inc., the Portfolios'
respective investment managers, and Franklin Templeton Services, Inc., their
Administrator, have agreed in advance to waive or limit their Management and
Portfolio Administration Fees and to assume as their own expense certain
expenses otherwise payable by these portfolios as necessary so that through at
least December 31, 1998, the total expenses of each portfolio do not exceed
1.00% of its average net assets.
