FLEX EDGE SUCCESS[registered trademark]
VARIABLE UNIVERSAL LIFE
INSURANCE POLICY
Issued by
PHOENIX LIFE
AND ANNUITY COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT:
[envelope] PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS MAY 1, 1999
AS SUPPLEMENTED JULY 15, 1999
This Prospectus describes a flexible premium variable universal life insurance
policy. The Policy provides lifetime insurance protection.
The Policy is not a deposit or obligation of, underwritten or guaranteed by, any
financial institution or credit union. It is not federally insured or endorsed
by the Federal Deposit Insurance Corporation or any other state or federal
agency. Policy investments are subject to risk, including the fluctuation of
Policy Values and possible loss of principal invested or premiums paid.
The Securities and Exchange Commission has not approved or disapproved these
securities, nor passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
This Prospectus is valid only if accompanied or preceded by current prospectuses
for the Funds. You should read and keep these prospectuses for future reference.
THE PHOENIX EDGE SERIES FUND
- ----------------------------
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix Research Enhanced Index Series
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Balanced Series
[diamond] Phoenix-Goodwin Growth Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Goodwin Strategic Allocation Series
[diamond] Phoenix-Goodwin Strategic Theme Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Schafer Mid-Cap Value Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
MANAGED BY PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
[diamond] Phoenix-Aberdeen New Asia Series
MANAGED BY DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
BT INSURANCE FUNDS TRUST
- ------------------------
MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE[registered trademark] Equity Index FunD
FEDERATED INSURANCE SERIES
- --------------------------
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
[diamond] Federated Fund for U.S. Government Securities II
[diamond] Federated High Income Bond Fund II
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- ---------------------------------------
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Allocation Fund -- Class 2
[diamond] Templeton International Fund -- Class 2
[diamond] Templeton Stock Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Fund -- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, INC.
[diamond] Mutual Shares Investments Fund -- Class 2
WANGER ADVISORS TRUST
- ---------------------
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
[diamond] Wanger Foreign Forty
[diamond] Wanger International Small Cap
[diamond] Wanger Twenty
[diamond] Wanger U.S. Small Cap
It may not be in your best interest to purchase a policy to replace an
existing life insurance policy or annuity contract. You must understand the
basic features of the proposed Policy and your existing coverage before you
decide to replace your present coverage. You must also know if the replacement
will result in any taxes.
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TABLE OF CONTENTS
Heading Page
- ------------------------------------------------------------
SPECIAL TERMS ......................................... 3
SUMMARY ............................................... 4
PERFORMANCE HISTORY.................................... 5
PHOENIX LIFE AND ANNUITY COMPANY AND
THE VUL ACCOUNT..................................... 5
PLAC ............................................... 5
The VUL Account .................................... 5
The GIA ............................................ 5
THE POLICY ............................................ 6
Introduction ....................................... 6
Eligible Purchasers ................................ 6
Flexible Premiums .................................. 6
Allocation of Issue Premium ........................ 7
Right to Cancel Period ............................. 7
Temporary Insurance Coverage ....................... 7
Transfer of Policy Value ........................... 7
Systematic Transfer Program....................... 7
Nonsystematic Transfers .......................... 8
Determination of Subaccount Values ................. 9
Death Benefit ...................................... 9
Surrenders ......................................... 10
Policy Loans ....................................... 11
Lapse .............................................. 11
Payment of Premiums During Period of Disability .... 12
Additional Insurance Options ....................... 12
Additional Rider Benefits .......................... 12
INVESTMENTS OF THE VUL ACCOUNT ........................ 13
Participating Investment Funds...................... 13
Investment Advisers................................. 15
Services of the Advisers ........................... 16
Reinvestment and Redemption ........................ 16
Substitution of Investments ........................ 16
CHARGES AND DEDUCTIONS ................................ 16
General............................................. 16
Charges Deducted Once .............................. 16
Premium Tax Charge................................ 16
Federal Tax Charge................................ 16
Periodic Charges.................................... 17
Conditional Charges................................. 17
Investment Management Charge........................ 18
Other Taxes ........................................ 18
GENERAL PROVISIONS .................................... 18
Postponement of Payments ........................... 18
Payment by Check ................................... 19
The Contract ....................................... 19
Suicide ............................................ 19
Incontestability ................................... 19
Change of Owner or Beneficiary ..................... 19
Assignment ......................................... 19
Misstatement of Age or Sex ......................... 19
Surplus............................................. 19
PAYMENT OF PROCEEDS ................................... 19
Surrender and Death Benefit Proceeds ............... 19
Payment Options .................................... 19
FEDERAL TAX CONSIDERATIONS ............................ 20
Introduction ....................................... 20
PLAC's Tax Status .................................. 20
Policy Benefits .................................... 21
Business-Owned Policies............................. 21
Modified Endowment Contracts ....................... 21
Limitations on Unreasonable Mortality
and Expense Charges .............................. 22
Qualified Plans .................................... 23
Diversification Standards .......................... 23
Change of Ownership or Insured or Assignment ....... 23
Other Taxes ........................................ 23
VOTING RIGHTS ......................................... 23
THE DIRECTORS AND EXECUTIVE OFFICERS OF PLAC........... 24
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ............... 24
SALES OF POLICIES ..................................... 24
STATE REGULATION ...................................... 24
REPORTS ............................................... 25
LEGAL PROCEEDINGS ..................................... 25
LEGAL MATTERS ......................................... 25
REGISTRATION STATEMENT ................................ 25
YEAR 2000 ISSUE........................................ 25
FINANCIAL STATEMENTS .................................. 25
APPENDIX A ............................................ 41
APPENDIX B ............................................ 45
APPENDIX C............................................. 46
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESPERSON, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
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SPECIAL TERMS
- --------------------------------------------------------------------------------
The following is a list of terms and their meanings when used in this
prospectus.
ATTAINED AGE: The age of the Insured on the birthday nearest the most recent
Policy Anniversary.
BENEFICIARY: The person or persons specified by the Policyowner as entitled to
receive the death benefits under a Policy.
CASH SURRENDER VALUE: The Policy Value less any surrender charge that would
apply on the date of surrender and less any Debt.
DEATH BENEFIT GUARANTEE: An additional benefit rider available with the Policy
that guarantees a death benefit equal to the initial face amount or the face
amount as later increased or decreased, provided that Minimum Required Premiums
are paid. See "Additional Rider Benefits."
DEBT: Outstanding loans against a Policy, plus accrued interest.
FUNDS: The Phoenix Edge Series Fund, BT Insurance Funds Trust, Federated
Insurance Series, Templeton Variable Products Series Fund and Wanger Advisors
Trust.
GENERAL ACCOUNT: The general asset account of PLAC.
GIA (GUARANTEED INTEREST ACCOUNT): An investment option under which amounts
deposited are guaranteed to earn a fixed rate of interest. Excess interest also
may be credited, at the sole discretion of PLAC.
IN FORCE: Conditions under which the coverage under a Policy is in effect and
the Insured's life remains insured.
INSURED: The person upon whose life the Policy is issued.
IN WRITING (WRITTEN REQUEST): In a written form satisfactory to PLAC and
delivered to VPMO.
ISSUE PREMIUM: The premium payment made in connection with issuing the Policy.
MINIMUM REQUIRED PREMIUM: The required premium as specified in the Policy. An
increase or decrease in the face amount of the Policy will change the Minimum
Required Premium amount.
MONTHLY CALCULATION DAY: The first Monthly Calculation Day is the same day as
the Policy Date. Subsequent Monthly Calculation Days are the same day of each
month thereafter or, if such day does not fall within a given month, the last
day of that month will be the Monthly Calculation Day.
NET ASSET VALUE: The worth of one share of a Series of a Fund at the end of a
valuation period. Net Asset Value is computed by adding the value of a Series'
holdings plus other assets, minus liabilities and then dividing the result by
the number of shares outstanding.
PAYMENT DATE: The Valuation Date on which we receive a premium payment or loan
repayment, unless it is received after the close of the New York Stock Exchange
("NYSE"), in which case it will be the next Valuation Date.
PLAC (COMPANY, OUR, US, WE): Phoenix Life and Annuity Company, Hartford,
Connecticut.
PLANNED ANNUAL PREMIUM: The premium amount that the Policyowner agrees to pay
each Policy Year. It must be at least equal to the minimum required premium for
the face amount of insurance selected but may be no greater than the maximum
premium allowed for the face amount selected.
POLICY ANNIVERSARY: Each anniversary of the Policy Date.
POLICY DATE: The Policy Date as shown on the Schedule Page of the Policy. It is
the date from which we measure Policy Years and Policy Anniversaries.
POLICY MONTH: The period from one Monthly Calculation Day up to, but not
including, the next Monthly Calculation Day.
POLICYOWNER (OWNER, YOU, YOUR): The person(s) who purchase(s) a Policy.
POLICY VALUE: The sum of a Policy's share in the values of each Subaccount of
the VUL Account plus the Policy's share in the values of the GIA.
POLICY YEAR: The first Policy Year is the 1-year period from the Policy Date up
to, but not including, the first Policy Anniversary. Each succeeding Policy Year
is the 1-year period from the Policy Anniversary up to, but not including, the
next Policy Anniversary.
PROPORTIONATE (PRO RATA): Amounts allocated to Subaccounts on a pro rata basis
are allocated by increasing or decreasing a Policy's share in the value of the
affected Subaccounts and GIA so that such shares maintain the same ratio to each
other before and after the allocation.
SERIES: A separate investment portfolio of the Fund.
SUBACCOUNTS: Accounts within the VUL Account to which nonloaned assets under a
Policy are allocated.
UNIT: A standard of measurement used to set the value of a Policy. The value of
a Unit for each Subaccount will reflect the investment performance of that
Subaccount and will vary in dollar amount.
VALUATION DATE: For any Subaccount, each date on which we calculate the net
asset value of a Fund.
VALUATION PERIOD: For any Subaccount, the period in days from the end of one
Valuation Date through the next.
VPMO: Variable Products Mail Operations division of Phoenix that receives and
processes incoming mail for Variable Products Operations.
VPO: Variable Products Operations.
VUL ACCOUNT (ACCOUNT): PLAC Variable Universal Life Account, a separate account
of the company.
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<PAGE>
SUMMARY
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This is a summary of the Policy and does not contain all of the detailed
information that may be important to you. You should carefully read the entire
Prospectus before making any decision.
INVESTMENT FEATURES
FLEXIBLE PREMIUMS
The only premiums you have to pay are the Issue Premium and any payments
required to prevent the policy from lapse. See "Flexible Premiums" and "Lapse."
ALLOCATION OF PREMIUMS AND POLICY VALUE
After we deduct certain charges from your premium payment, we will invest
the balance in one or more of the Subaccounts of the VUL Account and/or the GIA
as you will have instructed us.
You may make transfers into the GIA and among the Subaccounts at anytime.
Transfers from the GIA are subject to the rules discussed in "Appendix B" and
under "Transfer of Policy Value."
The Policy Value varies with the investment performance of the Funds and is
not guaranteed.
The Policy Value allocated to the GIA will depend on deductions taken from
the GIA to pay expenses and will accumulate interest at rates we periodically
establish, but never less than 4%.
LOANS AND SURRENDERS
[diamond] Generally, you may take loans against 90% of the Policy's Cash
Surrender Value subject to certain conditions. See "Policy Loans."
[diamond] You may partially surrender any part of the policy anytime. A partial
surrender charge of the lesser of $25 or 2% of the partial surrender
amount will apply. A separate surrender charge also may be imposed.
See "Surrenders."
[diamond] You may fully surrender this Policy anytime for its Cash Surrender
Value. A surrender charge may be imposed. See "Surrenders."
INSURANCE PROTECTION FEATURES
DEATH BENEFITS
[diamond] Both a fixed and variable benefit is available under the Policy.
[bullet] The fixed benefit is equal to the Policy's Face Amount
(Option 1)
[bullet] The variable benefit equals the Face Amount plus the Policy
Value (Option 2)
[diamond] After the first year, you may reduce the Face Amount. Certain
restrictions apply, and generally, the minimum Face Amount is
$250,000.
[diamond] The death benefit is payable when the Insured dies. See "Death
Benefit."
DEATH BENEFIT GUARANTEE
You may elect a guaranteed death benefit. The guaranteed death benefit is
equal to the initial face amount or the face amount as later changed by
increases or decreases regardless of investment performance. The Death Benefit
Guarantee may not be available in some states.
ADDITIONAL BENEFITS
The following additional benefits are available by rider:
[diamond] Disability Waiver of Specified Premium
[diamond] Accidental Death Benefit
[diamond] Death Benefit Protection
[diamond] Whole Life Exchange Option
[diamond] Purchase Protection Plan
[diamond] Living Benefits
[diamond] Cash Value Accumulation
[diamond] Child Term
[diamond] Family Term
[diamond] Business Term
Availability of these Riders depends upon state approval and may involve an
extra cost.
DEDUCTIONS AND CHARGES
FROM PREMIUM PAYMENTS
[diamond] Taxes
[bullet] State Premium Tax Charge--2.25%
[bullet] Federal Tax Charge--1.50%
See "Deductions and Charges" for a detailed discussion.
FROM POLICY VALUE
[diamond] Issue Expense Charge--Deducted in the first Policy Year only and
payable in 12 monthly installments.
[diamond] Administrative Charge--The Administrative Charge is currently set at
$5 per month and is guaranteed not to exceed $10 per month. This
charge is to reimburse PLAC for daily administration, monthly
processing, updating daily values and for annual/quarterly statements.
[diamond] Cost of Insurance--Amount deducted monthly. Cost of insurance rates
apply to the Policy and certain riders. The rates vary and are based
on certain personal factors such as sex, attained age and risk class
of the Insured.
[diamond] Surrender Charge--Deducted if the Policy is surrendered within the
first 10 Policy Years. See "Surrender Charge."
[diamond] Partial Surrender Charge--may be deducted for partial surrenders.
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FROM THE VUL ACCOUNT
Mortality and Expense Risk Charge:
[diamond] Policy Years 1 through 15--.80% annually;
[diamond] Policy Years 16 and after--.25% annually.
FROM THE FUND
The assets of the VUL Account are used to purchase, at Net Asset Value,
shares of your selected underlying Funds. The Net Asset Value reflects
investment management fees and other direct expenses of the Fund. See
"Investment Management Charge."
See "Charges and Deductions" for a more detailed description of how each is
applied.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
You have the right to review the Policy. If you are not satisfied with it,
you may cancel the Policy:
[diamond] within 10 days after you receive the Policy, or
[diamond] within 10 days after we mail or deliver a written notice telling you
about your right to cancel, or
[diamond] within 45 days of completing the application;
whichever is latest.
See "Right to Cancel Period."
RISK OF LAPSE
The Policy will remain in force as long as the Cash Surrender Value is
enough to pay the necessary monthly charges incurred under the Policy. When the
Cash Surrender Value is no longer enough, the policy lapses, or ends. We will
let you know of an impending lapse situation. We will give you the opportunity
(a "grace period") to keep the Policy in force by paying a specified amount.
Please see "Lapse" for more detail.
TAX EFFECTS
Generally, under current federal income tax law, death benefits are not
subject to income tax. Earnings on the premiums invested in the VUL Account or
the GIA are not subject to income tax until there is a distribution from the
Policy. Loans, partial surrenders or Policy termination may result in
recognition of income for tax purposes.
VARIATIONS
The Policy is subject to laws and regulations in every state where the
Policy is sold. Therefore, the terms of the Policy may vary from state to state.
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
We may include the performance history of the VUL Account Subaccounts in
advertisements, sales literature or reports. Performance information about each
Subaccount is based on past performance only and is not an indication of future
performance. See "Appendix A" for more information.
PHOENIX LIFE AND ANNUITY COMPANY AND
THE VUL ACCOUNT
- --------------------------------------------------------------------------------
PLAC
We are an indirect subsidiary of Phoenix Home Life Mutual Insurance Company
("Phoenix"). Our executive office is located at One American Row, Hartford,
Connecticut 06102-5056, and our main administrative office is located at 100
Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. We are a Connecticut
stock company, formed to write life insurance and annuity contracts. Formerly,
Phoenix was Savers Life Insurance Company of America, chartered in Missouri in
1981. We redomesticated to Connecticut in April, 1997.
THE VUL ACCOUNT
The VUL Account is a separate account of PLAC, established on July 1, 1996
and governed under the laws of Connecticut. It is registered with the SEC as a
unit investment trust under the Investment Company Act of 1940, as amended, and
meets the definition of a "separate account" under that Act. This registration
does not involve supervision of the management of the VUL Account or PLAC by the
SEC.
The VUL Account is divided into Subaccounts each of which is available for
allocation of Policy Value. Each Subaccount will invest solely in shares of a
specific series of a mutual fund. In the future, we may establish additional
Subaccounts which will be made available to existing Policyowners to the extent
and on a basis decided by us. See "Investments of the VUL Account--Participating
Investment Funds."
PLAC does not guarantee the investment performance of the VUL Account or any
of its Subaccounts. Contributions to the overall Policy Value allocated to the
VUL Account depend on the chosen Fund's investment performance. Thus, you bear
the full investment risk for all monies invested in the VUL Account.
The VUL Account is part of the general business of PLAC, but the gains or
losses of the VUL Account belong solely to the VUL Account. The gains or losses
of any other business we may conduct do not affect the VUL Account. Under
Connecticut law, the assets of the VUL Account may not be taken to pay
liabilities arising out of any other business we may conduct. Nevertheless, all
obligations arising under the Policy are general corporate obligations of PLAC.
THE GIA
The GIA is not part of the VUL Account. It is accounted for as part of the
General Account. PLAC reserves the right to limit total deposits, including
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transfers, to the GIA to no more than $250,000 during any one-week period. PLAC
will credit interest daily on the amounts allocated under the Policy to the GIA.
The credited rate will be the same for all monies deposited at the same time.
The loaned portion of the GIA will be credited interest at an effective annual
fixed rate of 2%. Interest on the unloaned portion of the GIA will be credited
at an effective annual rate of not less than 4%.
On the last business day of each calendar week, PLAC sets the interest rate
that will apply to any net premium or transferred amounts deposited to the
unloaned portion of the GIA. That rate will remain in effect for such deposits
for an initial guarantee period of one full year from the date of deposit. Upon
the end of the initial one-year guarantee period (and each subsequent one-year
guarantee period thereafter), the rate to be applied to any deposits whose
guarantee period has just ended shall be the same rate then being applied to new
deposits to the GIA. This rate will remain in effect for a guaranteed period of
one full year from the date the new rate is applied.
In general, you can make only one transfer per year from the GIA. The amount
that can be transferred out is limited to the greater of $1,000 or 25% of the
Policy Value in the GIA as of the date of the transfer. If you elect the
Systematic Transfer Program, approximately equal amounts may be transferred out
of the GIA. Also, the total Policy Value allocated to the GIA may be transferred
out of the GIA to one or more of the Subaccounts of the VUL Account over a
consecutive four-year period according to the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of remaining value
[diamond] Year Three: 50% of remaining value
[diamond] Year Four: 100% of remaining value
Transfers into the GIA and among the Subaccounts of the VUL Account may be
made at any time. Transfers from the GIA are subject to the rules discussed in
"Appendix B" and "Transfer of Policy Value--Systematic Transfer Program."
THE POLICY
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INTRODUCTION
The Policy is a flexible premium variable universal life insurance policy.
The Policy has a death benefit, Cash Surrender Value and loan privilege as does
a traditional fixed benefit whole life policy. The Policy differs from a fixed
benefit whole life policy, however, because you can allocate your premium into
one or more of several Subaccounts of the VUL Account or the GIA. Each
Subaccount of the VUL Account, in turn, invests its assets exclusively in a
portfolio of the Fund. The Policy Value varies according to the investment
performance of the Series to which premiums have been allocated.
ELIGIBLE PURCHASERS
Any person up to the age of 75 is eligible to be insured under a newly
purchased Policy after providing suitable evidence of insurability. You can
purchase a Policy to insure the life of another person provided that you have an
insurable interest in that life and the prospective Insured consents.
FLEXIBLE PREMIUMS
The Issue Premium required depends on a number of factors, such as:
[diamond] age;
[diamond] sex;
[diamond] rate class of proposed Insured;
[diamond] desired Face Amount;
[diamond] supplemental benefit; and
[diamond] planned premiums.
The minimum Issue Premium for a Policy is generally 1/6 of the Planned
Annual Premium. The Issue Premium is due on the Policy Date. The Insured must be
alive when the Issue Premium is paid. Thereafter, the amount and payment
frequency of planned premiums are as shown on the Schedule Page of the Policy.
The Issue Premium payment should be delivered to your registered representative
for forwarding to our Underwriting Department. Additional payments should be
sent to VPMO.
Premium payments received by us will be reduced by a 2.25% charge for state
premium tax and also by a federal tax charge of 1.50%. The Issue Premium also
will be reduced by the issue expense charge deducted in equal monthly
installments over a 12-month period. Any unpaid balance of the issue expense
charge will be paid to PLAC upon policy lapse or termination.
Premium payments received during a grace period, after deduction of state
and federal tax charges and any sales charge, will be first used to fund any
monthly deductions during the grace period. Any balance will be applied on the
Payment Date to the various Subaccounts of the VUL Account or to the GIA, based
on the premium allocation schedule elected in the application for the Policy or
by your most recent instructions. See "Nonsystematic Transfers."
The number of units credited to a Subaccount of the VUL Account will be
determined by dividing the portion of the net premium applied to that Subaccount
by the unit value of the Subaccount on the Payment Date.
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<PAGE>
You may increase or decrease the planned premium amount (within limits) or
payment frequency at any time by writing to VPMO. We reserve the right to limit
increases to such maximums as may be established from time to time. Additional
premium payments may be made at any time. Each premium payment must at least
equal $25 or, if made during a grace period, the payment must equal the amount
needed to prevent lapse of the Policy.
You also may elect a Waiver of Premium Rider. This rider provides for the
waiver of certain premium payments under the Policy under certain conditions
during a period of total disability of the Insured. Under its terms, the
specified premium will be waived upon our receipt of proof that the Insured is
totally disabled and that the disability occurred while the rider was in force.
The Policy contains a total premium limit as shown on the Schedule Page.
This limit is applied to the sum of all premiums paid under the Policy. If the
total premium limit is exceeded, the Policyowner will receive the excess, with
interest at an annual rate of not less than 4%, not later than 60 days after the
end of the Policy Year in which the limit was exceeded. The Policy Value then
will be adjusted to reflect the refund. To pay such refund, amounts taken from
each Subaccount or the GIA will be done in the same manner as for monthly
deductions. You may write to us and give us different instructions. The total
premium limit may be exceeded if additional premium is needed to prevent lapse
or if we subsequently determine that additional premium would be permitted by
federal laws or regulations.
You may authorize your bank to draw $25 or more from your personal checking
account to be allocated among the available Subaccounts or the GIA. Your monthly
payment will be invested according to your most recent instructions on file at
VPO.
Policies sold to officers, directors and employees of PLAC (and their
spouses and children) will be credited with an amount equal to the first-year
commission that would apply on the amount of premium contributed. This option
also is available to career agents of PLAC (and their spouses and children).
ALLOCATION OF ISSUE PREMIUM
We will generally allocate the Issue Premium less applicable charges to the
VUL Account or to the GIA upon receipt of a completed application, in accordance
with the allocation instructions in the application for a Policy. However,
Policies issued in certain states, and Policies issued in certain states
pursuant to applications which state the Policy is intended to replace existing
insurance, are issued with a Temporary Money Market Allocation Amendment. Under
this Amendment, we temporarily allocate the entire issue premium paid less
applicable charges (along with any other premiums paid during the right to
cancel period) to the Phoenix-Goodwin Money Market Subaccount of the VUL
Account, and, at the expiration of the right to cancel period, the policy value
of the Money Market Subaccount is allocated among the Subaccounts of the VUL
Account or to the GIA in accordance with the applicant's allocation instructions
in the application for insurance.
RIGHT TO CANCEL PERIOD
You have the right to review the Policy. If you are not satisfied with it,
you may cancel the Policy:
[diamond] by mailing it to us within 10 days after you receive it (or longer in
some states); or
[diamond] within 10 days after we mail or deliver a written notice telling
you about your right to cancel; or
[diamond] within 45 days after completing the application,
whichever occurs latest (the "Right to Cancel Period").
We treat a returned Policy as if we never issued it and, except for Policies
issued with a Temporary Money Market Allocation Amendment, we will return the
sum of the following as of the date we receive the returned Policy: (1) the then
current Policy Value less any unpaid loans and loan interest; plus (2) any
monthly deductions, partial surrender fees and other charges made under the
Policy. For Policies issued with the Temporary Money Market Amendment the amount
returned will equal any premiums paid less any unrepaid loans and loan interest,
and less any partial surrender amounts paid.
We retain the right to decline to process an application within seven days
of our receipt of the completed application for insurance. If we decline to
process the application, we will return the premium paid. Even if we have
approved the application for processing, we retain the right to decline to issue
the Policy. If we decline to issue the Policy, we will refund to you the same
amount as would have been refunded under the Policy had it been issued but
returned for refund during the Right to Cancel Period.
TEMPORARY INSURANCE COVERAGE
On the date the application for a Policy is signed and submitted with the
Issue Premium, we issue a Temporary Insurance Receipt to you. Under the
Temporary Insurance Receipt, the insurance protection applied for (subject to
the limits of liability and subject to the terms set forth in the Policy and in
the Receipt) takes effect on the date of the application.
TRANSFER OF POLICY VALUE
SYSTEMATIC TRANSFER PROGRAM
You may elect to transfer funds automatically among the Subaccounts or the
unloaned portion of the GIA on a monthly, quarterly, semiannual or annual basis
under the Systematic Transfer Program for Dollar Cost Averaging ("Systematic
Transfer Program"). Under this Systematic Transfer Program, the minimum transfer
amounts are $25
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monthly, $75 quarterly, $150 semiannually or $300 annually. You
must have an initial value of $1,000 in the GIA or the Subaccount from which
funds will be transferred ("Sending Subaccount") and if the value in that
Subaccount or the GIA drops below the amount to be transferred, the entire
remaining balance will be transferred and all systematic transfers stop. Funds
may be transferred from only one Sending Subaccount or the GIA, but may be
allocated to more than one Subaccount ("Receiving Subaccounts"). Under the
Systematic Transfer Program, Policyowners may make more than one transfer per
Policy Year from the GIA. These transfers must be in approximately equal amounts
and made over a minimum 18-month period.
Only one Systematic Transfer Program can be active at any time. After the
completion of the Systematic Transfer Program, you can call VPO at 800/541-0171
to begin a new Systematic Transfer Program.
All transfers under the Systematic Transfer Program will be made on the
basis of the GIA and Subaccount on the first day of the month following our
receipt of the transfer request. If the first day of the month falls on a
holiday or weekend, then the transfer will be processed on the next business
day.
NONSYSTEMATIC TRANSFERS
Transfers among available Subaccounts or the GIA and changes in premium
payment allocations may be requested in writing or by calling 800/541-0171,
between the hours of 8:30 a.m. and 4:00 p.m. Eastern Time. Written requests for
transfers will be executed on the date the request is received at VPMO.
Telephone transfers will be effective on the date the request is made except as
noted below. Unless you elect in writing not to authorize telephone transfers or
premium allocation changes, telephone transfer orders and premium allocation
changes also will be accepted on your behalf from your registered
representative. PLAC and Phoenix Equity Planning Corporation ("PEPCO"), the
national distributor for PLAC, will employ reasonable procedures to confirm that
telephone instructions are genuine. They will require verification of account
information and will record telephone instructions on tape. All telephone
transfers will be confirmed in writing to you. To the extent that PLAC and PEPCO
fail to follow procedures reasonably designed to prevent unauthorized transfers,
PLAC and PEPCO may be liable for following telephone instructions for transfers
that prove to be fraudulent. However, you will bear the risk of loss resulting
from instructions entered by an unauthorized third party that PLAC and PEPCO
reasonably believe to be genuine. The telephone transfer and allocation change
privileges may be modified or terminated at any time. During times of extreme
market volatility, these privileges may be difficult to exercise. In such cases,
you should submit a written request.
Although currently there is no charge for transfers, in the future, we may
charge a fee of $10 for each transfer after the first two transfers in a Policy
Year.
We reserve the right to refuse to transfer amounts less than $500 unless:
[diamond] the entire balance in the Subaccount or the GIA is being transferred;
or
[diamond] the transfer is part of the Systematic Transfer Program.
We also reserve the right to prohibit a transfer to any Subaccount of the
VUL Account if the value of your investment in that Subaccount immediately after
the transfer would be less than $500. We further reserve the right to require
that the entire balance of a Subaccount or the GIA be transferred if the value
of your investment in that Subaccount would, immediately after the transfer, be
less than $500.
You may make only one transfer per Policy Year from the unloaned portion of
the GIA unless (1) the transfer(s) are made as part of a Systematic Transfer
Program, or (2) we agree to make an exception to this rule. The amount you may
transfer cannot exceed the greater of $1,000 or 25% of the value of the unloaned
portion of the GIA at the time of the transfer. In addition, you may transfer
the total value allocated to the unloaned portion of the GIA out of the GIA to
one or more of the Subaccounts over a consecutive four-year period according to
the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of the remaining value
[diamond] Year Three: 50% of the remaining value
[diamond] Year Four: 100% of the remaining value
A nonsystematic transfer from the unloaned portion of the GIA will be
processed on the day such request is received by VPMO.
Transfers into the GIA and among the Subaccounts may be made anytime. We
reserve the right to limit the number of Subaccounts you may invest in to a
total of 18 at any one time or over the life of the Policy. We may limit you to
less than 18 if we are required to do so by any federal or state law.
Because excessive exchanges between Subaccounts can hurt Fund performance,
we reserve the right to temporarily or even permanently terminate exchange
privileges or reject any specific exchange order from anyone whose transactions
appear to us to follow a timing pattern, including those who request more than
one exchange out of a Subaccount within any 30-day period. We will not accept
batched transfer instructions from registered representatives (acting under
powers of attorney for multiple Policy Owners), unless the registered
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representative's broker-dealer firm and PLAC have entered into a third-party
transfer service agreement.
If a policy has been issued with a Temporary Money Market Allocation
Amendment, no transfers may be made until the end of the Right to Cancel Period.
DETERMINATION OF SUBACCOUNT VALUES
We establish the unit value of each Subaccount of the VUL Account on the
first Valuation Date of that Subaccount. The unit value of a Subaccount on any
other Valuation Date is determined by multiplying the unit value of that
Subaccount on the just prior Valuation Date by the Net Investment Factor for
that Subaccount for the then current Valuation Period. The unit value of each
Subaccount on a day other than a Valuation Date is the unit value on the next
Valuation Date. Unit values are carried to six decimal places. The unit value of
each Subaccount on a Valuation Date is determined at the end of that day.
The Net Investment Factor for each Subaccount is determined by the
investment performance of the assets held by the Subaccount during the Valuation
Period. Each valuation will follow applicable law and accepted procedures. The
Net Investment Factor is determined by the formula:
(A) + (B)
--------- - (D) where:
(C)
(A) The value of the assets in the Subaccount on the current Valuation Date,
including accrued net investment income and realized and unrealized
capital gains and losses, but excluding the net value of any transactions
during the current Valuation Period.
(B) The amount of any dividend (or, if applicable, any capital gain
distribution) received by the Subaccount if the "ex-dividend" date for
shares of the Fund occurs during the current Valuation Period.
(C) The value of the assets in the Subaccount as of the just prior Valuation
Date, including accrued net investment income and realized and unrealized
capital gains and losses, and including the net value amount of any
deposits and withdrawals made during the Valuation Period ending on that
date.
(D) The sum of the following daily charges multiplied by the number of days in
the current Valuation Period:
1. the mortality and expense risk charge; and
2. the charge, if any, for taxes and reserves for taxes on investment
income, and realized and unrealized capital gains.
DEATH BENEFIT
GENERAL
The death benefit under Option 1 equals the Policy's Face Amount on the date
of the death of the Insured or, if greater, the minimum death benefit on the
date of death.
Under Option 2, the death benefit equals the Policy's Face Amount on the
date of the death of the Insured, plus the Policy Value or, if greater, the
minimum death benefit on that date.
Under either Option, the minimum death benefit is the Policy Value on the
date of death of the Insured increased by a percentage determined from a table
contained in the Policy. This percentage will be based on the Insured's attained
age at the beginning of the Policy Year in which the death occurs. If no option
is elected, Option 1 will apply.
GUARANTEED DEATH BENEFIT OPTION
A Guaranteed Death Benefit Rider is available. Under this Policy rider, if
you pay the required premium each year as specified in the rider, the death
benefit selected will be guaranteed for a certain specified number of years,
regardless of the investment performance of the Policy, and will equal either
the initial Face Amount or the Face Amount as later changed by decreases. To
keep this guaranteed death benefit in force, there may be limitations on the
amount of partial surrenders or decreases in Face Amount permitted.
After the first 10 Policy Years, there will be a monthly charge equal to
$0.01 per $1,000 of Face Amount for policies issued with a Guaranteed Death
Benefit Rider.
LIVING BENEFITS OPTION
In the event of a terminal illness of the Insured, an accelerated payment of
up to 75% of the Policy's death benefit (up to a maximum of $250,000) is
available if a Living Benefits Rider has been purchased. The minimum face amount
of the Policy after any such accelerated benefit payment is $10,000.
REQUESTS FOR INCREASE IN FACE AMOUNT
Any time after the first Policy Anniversary, you may request an increase in
the face amount of insurance provided under the Policy. Requests for face amount
increases must be made in writing, and we require additional evidence of
insurability. The effective date of the increase generally will be the Policy
Anniversary following approval of the increase. The increase may not be less
than $25,000 and no increase will be permitted after the Insured's age 75. The
charge for the increase is $1.50 per $1,000 of face amount increase requested
subject to a maximum of $600. No additional monthly administration charge will
be assessed for face amount increases. We will deduct any charges associated
with the increase (the increases in cost of insurance charges), from the Policy
Value, whether or not you pay an additional premium in
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connection with the increase. The surrender charge applicable to the Policy also
will increase. At the time of the increase, the Cash Surrender Value must be
sufficient to pay the monthly deduction on that date, or additional premiums
will be required to be paid on or before the effective date. Also, a new Right
to Cancel Period (see "The Policy--Right to Cancel Period") will be established
for the amount of the increase. For a discussion of possible implications of a
material change in the Policy resulting from the increase, see "Material Change
Rules."
PARTIAL SURRENDER AND DECREASES IN FACE AMOUNT: EFFECT
ON DEATH BENEFIT
A partial surrender or a decrease in Face Amount generally decreases the
death benefit. Upon a decrease in Face Amount or partial surrender, a partial
surrender charge will be deducted from Policy Value based on the amount of the
decrease or partial surrender. If the change is a decrease in Face Amount, the
death benefit under a Policy would be reduced on the next Monthly Calculation
Day. If the change is a partial surrender, the death benefit under a Policy
would be reduced immediately. A decrease in the death benefit may have certain
tax consequences. See "Federal Tax Considerations."
REQUESTS FOR DECREASE IN FACE AMOUNT
You may request a decrease in Face Amount at any time after the first Policy
Year. Unless we agree otherwise, the decrease must be at least equal to $10,000
and the face amount remaining after the decrease must be at least $25,000. All
face amount decrease requests must be in writing and will be effective on the
first Monthly Calculation Day following the date we approve the request. A
partial surrender charge will be deducted from the Policy Value based on the
amount of the decrease. The charge will equal the applicable surrender charge
that would apply to a full surrender multiplied by a fraction (which is equal to
the decrease in face amount divided by the face amount of the Policy before the
decrease).
SURRENDERS
GENERAL
At any time during the lifetime of the Insured and while the Policy is in
force, you may partially or fully surrender the Policy by sending to VPMO a
written release and surrender in a form satisfactory to us. We may also require
you to send the Policy to us. The amount available for surrender is the Cash
Surrender Value at the end of the Valuation Period during which the surrender
request is received at VPMO.
Upon partial or full surrender, we generally will pay to you the amount
surrendered within seven days after we receive the written request for the
surrender. Under certain circumstances, the surrender payment may be postponed.
See "General Provisions--Postponement of Payments." For the federal tax effects
of partial and full surrenders, see "Federal Tax Considerations."
FULL SURRENDERS
If the Policy is being fully surrendered, the Policy itself must be returned
to VPMO, along with the written release and surrender of all claims in a form
satisfactory to us. You may elect to have the amount paid in a lump sum or under
a payment option. See "Conditional Charges--Surrender Charge" and "Payment
Options."
PARTIAL SURRENDERS
You may obtain a partial surrender of the Policy by requesting payment of
the Policy's Cash Surrender Value. It is possible to do this at any time during
the lifetime of the Insured, while the Policy is in force, with a written
request to VPMO. We may require the return of the Policy before payment is made.
A partial surrender will be effective on the date the written request is
received or, if required, the date the Policy is received by us. Surrender
proceeds may be applied under any of the payment options described under
"Payment of Proceeds--Payment Options."
We reserve the right not to allow partial surrenders of less than $500. In
addition, if the share of the Policy Value in any Subaccount or in the GIA is
reduced as a result of a partial surrender and is less than $500, we reserve the
right to require surrender of the entire remaining balance in that Subaccount or
the GIA.
Upon a partial surrender, the Policy Value will be reduced by the sum of the
following:
(1) The Partial Surrender Amount Paid. This amount comes from a reduction in the
Policy's share in the value of each Subaccount or the GIA based on the
allocation requested at the time of the partial surrender. If no allocation
request is made, the withdrawals from each Subaccount will be made in the
same manner as that provided for monthly deductions.
(2) The Partial Surrender Fee. This fee is the lesser of $25 or 2% of the
partial surrender amount paid. The assessment to each Subaccount or the GIA
will be made in the same manner as provided for the partial surrender amount
paid.
(3) A Partial Surrender Charge. This charge is equal to a pro rata portion of
the applicable surrender charge that would apply to a full surrender,
determined by multiplying the applicable surrender charge by a fraction
(equal to the partial surrender amount payable divided by the result of
subtracting the applicable surrender charge from the Policy Value). This
amount is assessed against the Subaccount or the GIA in the same manner as
provided for the partial surrender amount paid.
The Cash Surrender Value will be reduced by the partial surrender amount
paid plus the partial surrender fee. The Face Amount of the Policy will be
reduced by the
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same amount as the Policy Value is reduced as described above.
POLICY LOANS
Generally, while the Policy is in force, a loan may be taken against the
Policy up to the available loan value. The loan value on any day is 90% of the
Policy Value reduced by an amount equal to the surrender charge. The available
loan value is the loan value on the current day less any outstanding Debt.
The amount of any loan will be added to the loaned portion of the GIA and
subtracted from the Policy's share of the Subaccounts or the unloaned portion of
the GIA, based on the allocation requested at the time of the loan. The total
reduction will equal the amount added to the loaned portion of the GIA.
Allocations generally must be expressed in terms of whole percentages. If no
allocation request is made, the amount subtracted from the share of each
Subaccount or the unloaned portion of the GIA will be determined in the same
manner as provided for monthly deductions. Interest will be credited and the
loaned portion of the GIA will increase at an effective annual rate of 2%,
compounded daily and payable in arrears. At the end of each Policy Year and at
the time of any Debt repayment, interest credited to the loaned portion of the
GIA will be transferred to the unloaned portion of the GIA.
Debt may be repaid at any time during the lifetime of the Insured while the
Policy is in force. Any Debt repayment received by us during a grace period will
be reduced to pay any overdue monthly deductions and only the balance will be
applied to reduce the Debt. Such balance will first be used to pay any
outstanding accrued loan interest, and then will be applied to reduce the loaned
portion of the GIA. The unloaned portion of the GIA will be increased by the
same amount the loaned portion is decreased. If the amount of a loan repayment
exceeds the remaining loan balance and accrued interest, the excess will be
allocated among the Subaccounts as you may request at the time of the repayment
and, if no allocation request is made, according to the most recent premium
allocation schedule on file.
Payments received by us for the Policy will be applied directly to reduce
outstanding Debt unless specified as a premium payment by you. Until the Debt is
fully repaid, additional Debt repayments may be made at any time during the
lifetime of the Insured while the Policy is In Force.
Failure to repay a policy loan or to pay loan interest will not terminate
the Policy unless the Policy Value becomes insufficient to maintain the Policy
in force.
The proceeds of Policy loans may be subject to federal income tax. See
"Federal Tax Considerations."
In the future, PLAC may not allow Policy loans of less than $500, unless
such loan is used to pay a premium on another PLAC policy.
You will pay interest on the loan at an effective annual rate, compounded
daily and payable in arrears. The loan interest rates in effect are as follows:
Policy Years 1-10: 4%
Policy Years 11-15: 3%
Policy Years 16 and thereafter: 2 1/2%
At the end of each Policy Year, any interest due on the Debt will be treated
as a new loan and will be offset by a transfer from your Subaccounts and the
unloaned portion of the GIA to the loaned portion of the GIA.
A Policy loan, whether or not repaid, has a permanent effect on the Policy
Value because the investment results of the Subaccounts or unloaned portion of
the GIA will apply only to the amount remaining in the Subaccounts or the
unloaned portion of the GIA. The longer a loan is outstanding, the greater the
effect is likely to be. The effect could be favorable or unfavorable. If the
Subaccounts or the unloaned portion of the GIA earn more than the annual
interest rate for funds held in the loaned portion of the GIA, the Policy Value
does not increase as rapidly as it would have had no loan been made. If the
Subaccounts or the GIA earn less than the annual interest rate for funds held in
the loaned portion of the GIA, the Policy Value is greater than it would have
been had no loan been made. A Policy loan, whether or not repaid, also has a
similar effect on the Policy's Death Benefit due to any resulting differences in
Cash Surrender Value.
LAPSE
Unlike conventional life insurance policies, the payment of the Issue
Premium, no matter how large, or the payment of additional premiums will not
necessarily continue the Policy in force to its Maturity Date.
If on any Monthly Calculation Day during the first 3 Policy Years, the
Policy Value is insufficient to cover the monthly deduction, a grace period of
61 days will be allowed for the payment of an amount equal to three times the
required monthly deduction. If on any Monthly Calculation Day during any
subsequent Policy Year, the Cash Surrender Value (which should have become
positive) is less than the required monthly deduction, a grace period of 61 days
will be allowed for the payment of an amount equal to three times the required
monthly deduction. However, during the first five Policy Years or until the Cash
Surrender Value becomes positive for the first time, the Policy will not lapse
as long as all premiums planned at issue have been paid.
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During the grace period, the Policy will continue In Force but Subaccount
transfers, loans, partial or full surrenders will not be permitted. Failure to
pay the additional amount within the grace period will result in lapse of the
Policy, but not before 30 days after we have mailed written notice to you. If a
premium payment for the additional amount is received by us during the grace
period, any amount of premium over what is required to prevent lapse will be
allocated among the Subaccounts or to the GIA according to the current premium
allocation schedule. In determining the amount of "excess" premium to be applied
to the Subaccounts or the GIA, we will deduct the premium tax and the amount
needed to cover any monthly deductions made during the grace period. If the
Insured dies during the grace period, the death benefit will equal the amount of
the death benefit immediately prior to the commencement of the grace period.
PAYMENT OF PREMIUMS DURING PERIOD OF DISABILITY
You may also elect a Waiver of Premium Rider. This rider provides for the
waiver of certain premium payments under the Policy under certain conditions
during a period of total disability of the Insured. Under its terms, the
specified premium will be waived upon our receipt of proof that the Insured is
totally disabled and that the disability occurred while the rider was in force.
The terms of this rider may vary by state.
ADDITIONAL INSURANCE OPTIONS
While the Policy is in force and the Insured is insurable, the Policyowner
will have the option to purchase additional insurance on the same Insured with
the same guaranteed rates as the Policy without being assessed an issue expense
charge. We will require evidence of insurability and charges will be adjusted
for the Insured's new attained age and any change in risk classification.
However, if elected on the application, the Policyowner may, at predetermined
future dates, purchase additional insurance protection on the same Insured
without evidence of insurability. See "Additional Rider Benefits--Purchase
Protection Plan Rider."
In addition, once each Policy Year you may request an increase in face
amount. This request should be made within 90 days prior to the Policy
Anniversary and is subject to an issue expense charge of $1.50 per $1,000 of
increase in face amount, up to a maximum of $600, and to our receipt of adequate
insurability evidence. A Right to Cancel Period as described in "The Policy"
section of this Prospectus applies to each increase in face amount.
ADDITIONAL RIDER BENEFITS
You may elect additional benefits under a Policy, and you may cancel these
benefits at anytime. A charge will be deducted monthly from the policy value for
each additional rider benefit chosen except where noted below. More details will
be included in the form of a rider to the Policy if any of these benefits is
chosen. The following benefits are currently available and additional riders may
be available as described in the Policy (if approved in your state).
[diamond] DISABILITY WAIVER OF SPECIFIED PREMIUM RIDER. We waive the specified
premium if the Insured becomes totally disabled and the disability
continues for at least six months. Premiums will be waived to the
Policy Anniversary nearest the Insured's 65th birthday (provided that
the disability continues). If premiums have been waived continuously
during the entire five years prior to such date, the waiver will
continue beyond that date. The premium will be waived upon our receipt
of notice that the Insured is totally disabled and that the disability
occurred while the rider was in force.
[diamond] ACCIDENTAL DEATH BENEFIT RIDER. An additional death benefit will be
paid (1) if the Insured dies from bodily injury that results from an
accident; (2) if the Insured dies no later than 90 days after injury;
and (3) before the Policy Anniversary nearest the Insured's 75th
birthday.
[diamond] DEATH BENEFIT PROTECTION RIDER. The purchase of this rider provides
that the death benefit will be guaranteed. The amount of the
guaranteed death benefit is equal to the initial face amount, or the
face amount that you may increase or decrease provided that certain
minimum premiums are paid. Unless we agree otherwise, the initial face
amount and the face amount remaining after any decrease must at least
equal $50,000 and the minimum issue age of the Insured must be 20.
Three Death Benefit Guarantee periods are available. The minimum
premium required to maintain the guaranteed death benefit is based on
the length of the guarantee period as elected on the application. The
three available guarantee periods are:
Expiry Date of Death Benefit Guaranteed, the
Level later of:
1 The Policy Anniversary nearest the Insured's 70th birthday or the
7th Policy Year
2 The Policy Anniversary nearest the Insured's 80th birthday or the
10th Policy Year
3 The Policy Anniversary nearest the Insured's 95th birthday.
Level 1 or 2 guarantees may be extended provided that the Policy's Cash
Surrender Value is sufficient and you pay the new Minimum Required Premium.
[diamond] WHOLE LIFE EXCHANGE OPTION RIDER. This rider permits you to exchange
the Policy for a fixed benefit whole life policy at the later of age
65 or Policy Year 15. There is no charge for this rider.
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[diamond] PURCHASE PROTECTION PLAN RIDER. Under this rider you may, at
predetermined future dates, purchase additional insurance protection
without evidence of insurability.
[diamond] LIVING BENEFITS RIDER. Under certain conditions, in the event of the
terminal illness of the Insured, an accelerated payment of up to 75%
of the Policy's death benefit (up to a maximum of $250,000) is
available. The minimum face amount of the Policy after any such
accelerated benefit payment is $10,000. There is no charge for this
rider.
[diamond] CASH VALUE ACCUMULATION RIDER. This rider generally permits you to pay
more in premium than otherwise would be permitted. This rider must be
elected before the Policy is issued. There is no charge for this
rider.
[diamond] CHILD TERM RIDER. This rider provides annually renewable term coverage
on children of the Insured who are between 14 days old and age 18. The
term insurance is renewable to age 25. Each child will be insured
under a separate rider and the amount of insurance must be the same.
Coverage may be converted to a new whole life or variable insurance
policy at any time prior to the Policy Anniversary nearest insured
child's 25th birthday.
[diamond] FAMILY TERM RIDER. This rider provides annually renewable term
insurance coverage to age 70 on the Insured or members of the
Insured's immediate family who are at least 18 years of age. The rider
is fully convertible through age 65 for each Insured to either a fixed
benefit or variable policy.
[diamond] BUSINESS TERM RIDER. This rider provides annually renewable term
insurance coverage to age 95 on the life of the Insured under the base
Policy. The face amount of the term insurance may be level or
increasing. The initial rider death benefit cannot exceed 6 times the
initial base Policy. This rider is available only for Policies sold in
the corporate-owned life insurance market, employer-sponsored life
insurance market or other business-related life insurance market.
INVESTMENTS OF THE VUL ACCOUNT
- --------------------------------------------------------------------------------
PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
Certain Subaccounts invest in corresponding Series of The Phoenix Edge
Series Fund. The following Series are currently available:
PHOENIX RESEARCH ENHANCED INDEX SERIES: The investment objective of the
Series is to seek high total return by investing in a broadly diversified
portfolio of equity securities of large and medium capitalization companies
within market sectors reflected in the S&P 500. The Series invests in a
portfolio of undervalued common stocks and other equity securities which appear
to offer growth potential and an overall volatility of return similar to that of
the S&P 500.
PHOENIX-ABERDEEN INTERNATIONAL SERIES: The investment objective of the
Series is to seek a high total return consistent with reasonable risk. The
Series invests primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions. The
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES: The investment objective of the Series is
to seek long-term capital appreciation. The Series invests primarily in a
diversified portfolio of equity securities of issuers organized and principally
operating in Asia, excluding Japan.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the Series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the Series
is to seek long-term capital appreciation by investing in approximately 50
different securities which offer the best potential for long-term growth of
capital. At least 75% of the Series' assets will be invested in common stocks of
high quality growth companies. The remaining portion will be invested in common
stocks of small corporations with rapidly growing earnings per share or common
stocks believed to be undervalued.
PHOENIX-GOODWIN BALANCED SERIES: The investment objective of the Series is
to seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Goodwin Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
PHOENIX-GOODWIN GROWTH SERIES: The investment objective of the Series is to
achieve intermediate and long-term growth of capital, with income as a secondary
consideration. The Phoenix-Goodwin Growth Series invests principally in common
stocks of corporations believed by management to offer growth potential.
PHOENIX-GOODWIN MONEY MARKET SERIES: The investment objective of the Series
is to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series
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invests exclusively in high quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the Series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-GOODWIN STRATEGIC ALLOCATION SERIES: The investment objective of the
Series is to realize as high a level of total return over an extended period of
time as is considered consistent with prudent investment risk. The
Phoenix-Goodwin Strategic Allocation Series invests in stocks, bonds and money
market instruments in accordance with the Investment Adviser's appraisal of
investments most likely to achieve the highest total return.
PHOENIX-GOODWIN STRATEGIC THEME SERIES: The investment objective of the
Series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Phoenix-Goodwin Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the Series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity Series seeks to
achieve its objective by investing in a diversified portfolio of common stocks
that meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price.
PHOENIX-OAKHURST GROWTH AND INCOME SERIES: The investment objective of the
Series is to seek dividend growth, current income and capital appreciation by
investing in common stocks. The Phoenix-Oakhurst Growth and Income Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
PHOENIX-SCHAFER MID-CAP VALUE SERIES: The primary investment objective of
the Series is to seek long-term capital appreciation, with current income as the
secondary investment objective. The Phoenix-Schafer Mid-Cap Value Series will
invest in common stocks of established companies having a strong financial
position and a low stock market valuation at the time of purchase which are
believed to offer the possibility of increase in value.
PHOENIX-SENECA MID-CAP GROWTH SERIES: The investment objective of the Series
is to seek capital appreciation primarily through investments in equity
securities of companies that have the potential for above average market
appreciation. The Series seeks to outperform the Standard & Poor's Mid-Cap 400
Index.
BT INSURANCE FUNDS TRUST
A certain Subaccount invests in a corresponding Series of the BT Insurance
Funds Trust. The following Series is currently available:
EAFE[registered trademark] EQUITY INDEX FUND: The Series seeks to match the
performance of the Morgan Stanley Capital International
EAFE[registered trademark] Index ("EAFE[registered trademark] Index"), which
emphasizes major market stock performance of companies in Europe, Australia and
the Far East. The Series invests in a statistically selected sample of the
securities found in the EAFE[registered trademark] Index.
FEDERATED INSURANCE SERIES
Certain Subaccounts invest in corresponding Series of the Federated
Insurance Series. The following Series are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment objective
of the Series is to seek current income by investing primarily in U.S.
government securities, including mortgage-backed securities issued by U.S.
government agencies.
FEDERATED HIGH INCOME BOND FUND II: The investment objective of the Series
is to seek high current income by investing primarily in a diversified portfolio
of high-yield, lower-rated corporate bonds.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Certain Subaccounts invest in Class 2 Shares of a corresponding Series of
the Templeton Variable Products Series Fund. The following Series are currently
available:
MUTUAL SHARES INVESTMENT FUND: The primary investment objective of the
Series is capital appreciation with income as a secondary objective. The Mutual
Shares Investments Series invests in domestic equity securities that the manager
believes are significantly undervalued.
TEMPLETON ASSET ALLOCATION FUND: The investment objective of the Series is a
high level of total return. The Templeton Asset Allocation Series invests in
stocks of companies of any nation, bonds of companies and governments of any
nation and in money market instruments. Changes in the asset mix will be made in
an attempt to capitalize on total return potential produced by changing economic
conditions throughout the world.
TEMPLETON DEVELOPING MARKETS FUND: The investment objective of the Series is
long-term capital appreciation. The Templeton Developing Markets Series invests
primarily in emerging market equity securities.
TEMPLETON INTERNATIONAL FUND: The investment objective of the Series is
long-term capital. The Templeton International Series invests primarily in
stocks of companies located outside the United States, including emerging
markets. Any income realized will be incidental. It also may invest in debt
securities of governments and companies located anywhere in the world.
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TEMPLETON STOCK FUND: The investment objective of the Series is long-term
capital growth. The Templeton Stock Series invests primarily in common stocks
issued by companies in various nations throughout the world, including the U.S.
and emerging markets.
WANGER ADVISORS TRUST
Certain Subaccounts invest in corresponding Series of the Wanger Advisors
Trust. The following Series are currently available:
WANGER FOREIGN FORTY: The investment objective of the Series is to seek
long-term capital growth. The Wanger Foreign Forty Series invests primarily in
equity securities of foreign companies with market capitalization of $1 billion
to $10 billion and focuses its investments in 40 to 60 companies in the
developed markets.
WANGER INTERNATIONAL SMALL CAP: The investment objective of the Series is to
seek long-term capital growth. The Wanger International Small Cap Series invests
primarily in securities of non-U.S. companies with total common stock market
capitalization of less than $1 billion.
WANGER TWENTY: The investment objective of the Series is to seek long-term
capital growth. The Wanger Twenty Series invests primarily in the stocks of U.S.
companies with market capitalization of $1 billion to $10 billion and ordinarily
focuses its investments in 20 to 25 U.S. companies.
WANGER U.S. SMALL CAP: The investment objective of the Series is to seek
long-term capital growth. The Wanger U.S. Small Cap Series invests primarily in
securities of U.S. companies with total common stock market capitalization of
less than $1 billion.
Each Series will be subject to market fluctuations and the risks that come
with the ownership of any security, and there can be no assurance that any
Series will achieve its stated investment objective.
In addition to being sold to the Account, shares of the Funds also may be
sold to other separate accounts of Phoenix or its affiliates or to the separate
accounts of other insurance companies.
It is possible that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Fund(s) simultaneously. Although neither PLAC nor the Fund(s)
trustees currently foresee any such disadvantages either to variable life
insurance Policyowners or to variable annuity Contract Owners, the Funds'
trustees intend to monitor events in order to identify any material conflicts
between variable life insurance Policyowners and variable annuity Contract
Owners and to determine what action, if any, should be taken in response to such
conflicts. Material conflicts could, for example, result from:
[diamond] changes in state insurance laws;
[diamond] changes in federal income tax laws;
[diamond] changes in the investment management of any portfolio of the Fund(s);
or
[diamond] differences in voting instructions between those given by variable
life insurance Policyowners and those given by variable annuity
Contract Owners.
We will, at our expense, remedy such material conflicts including, if
necessary, segregating the assets underlying the variable life insurance
policies and the variable annuity contracts and establishing a new registered
investment company.
INVESTMENT ADVISERS
Phoenix Investment Counsel, Inc. ("PIC") is the investment adviser to all
Series in The Phoenix Edge Series Fund except the Phoenix-Duff & Phelps Real
Estate Securities and Phoenix-Aberdeen New Asia Series. Based on subadvisory
agreements with the Fund, PIC delegates certain investment decisions and
research functions to subadvisers for the following Series:
[diamond] J.P. Morgan Investment Management, Inc.
[bullet] Phoenix Research Enhanced Index Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
[bullet] Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
[bullet] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Schafer Capital Management, Inc.
[bullet] Phoenix-Schafer Mid-Cap Value Series
The investment adviser to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment adviser to the Phoenix-Aberdeen New Asia Series is
Phoenix-Aberdeen International Advisors LLC ("PAIA"). Pursuant to subadvisory
agreements with the Fund, PAIA delegates certain investment decisions and
research functions with respect to the Phoenix-Aberdeen New Asia Series to PIC
and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect, less than wholly-owned
subsidiaries of Phoenix. PAIA is jointly owned and managed by PM Holdings, Inc.,
a subsidiary of Phoenix, and by Aberdeen Fund Managers, Inc.
The other investment advisers are:
[diamond] Bankers Trust Company
[bullet] EAFE[registered trademark] Equity Index Fund
[diamond] Federated Investment Management Company
[bullet] Federated Fund for U.S. Government Securities II
[bullet] Federated High Income Bond Fund II
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[diamond] Templeton Investment Counsel, Inc.
[bullet] Templeton Asset Allocation Fund
[bullet] Templeton International Fund
[bullet] Templeton Stock Fund
[diamond] Templeton Asset Management, Ltd.
[bullet] Templeton Developing Markets Fund
[diamond] Franklin Mutual Advisers, Inc.
[bullet] Mutual Shares Investments Fund
[diamond] Wanger Asset Management, L.P.
[bullet] Wanger Foreign Forty
[bullet] Wanger International Small Cap
[bullet] Wanger Twenty
[bullet] Wanger U.S. Small Cap
SERVICES OF THE ADVISERS
The Advisers continuously furnish an investment program for each Series and
manage the investment and reinvestment of the assets of each Series subject at
all times to the authority and supervision of the Trustees. A detailed
discussion of the investment advisers and subadvisers, and the investment
advisory and subadvisory agreements, is contained in the accompanying prospectus
for the Funds.
REINVESTMENT AND REDEMPTION
All dividend distributions of the Fund are automatically reinvested in
shares of the Fund at their net asset value on the date of distribution.
Likewise, all capital gains distributions of the Fund, if any, are reinvested at
the net asset value on the record date. We redeem Fund shares at their net asset
value to the extent necessary to make payments under the Policy.
SUBSTITUTION OF INVESTMENTS
We reserve the right to make additions to, deletions from, or substitutions
for the investments held by the VUL Account, subject to compliance with the law
as currently applicable or as subsequently changed. In the future, we may
establish additional Subaccounts within the VUL Account, each of which will
invest in shares of a designated portfolio of the Fund with a specified
investment objective. If and when marketing needs and investment conditions
warrant, and at our discretion, we may establish additional portfolios. These
will be made available under existing Policies to the extent and on a basis
determined by us.
If shares of any of the portfolios of the Fund should be no longer available
for investment or, if in the judgment of our management, further investment in
shares of any of the portfolios become inappropriate due to Policy objectives,
we may then substitute shares of another mutual fund for shares already
purchased, or to be purchased in the future. No substitution of mutual fund
shares held by the VUL Account may take place without prior approval of the
Securities and Exchange Commission and prior notice to you. In the event of a
change, you will be given the option of transferring the Policy Value of the
Subaccount in which the substitution is to occur to another Subaccount.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
GENERAL
Charges are deducted in connection with the Policy to compensate us for:
[diamond] our expenses in selling the Policy;
[diamond] underwriting and issuing the Policy;
[diamond] premium and federal taxes incurred on premiums received;
[diamond] providing the insurance benefits set forth in the Policy; and
[diamond] assuming certain risks in connection with the Policy.
The nature and amount of these charges are more fully described in sections
below.
When we issue Policies under group or sponsored arrangements, we may reduce
or eliminate the:
[diamond] issue expense charge; and/or
[diamond] surrender charge.
Sales to a group or through sponsored arrangement often result in lower per
policy costs and often involve a greater stability of premiums paid into the
policies. Under such circumstances, PLAC tries to pass these savings onto the
purchasers. The amount of reduction will be determined on a case-by-case basis
and will reflect the cost reduction we expect as a result of these group or
sponsored sales.
Certain charges are deducted only once, others are deducted periodically,
while certain others are deducted only if certain events occur.
CHARGES DEDUCTED ONCE
[diamond] PREMIUM TAX CHARGE. Various states (and countries and cities) impose
a tax on premiums received by insurance companies. Premium taxes vary
from state to state. Currently, these taxes range from 0.75% to 4% of
premiums paid. Moreover, certain municipalities in Louisiana, Kentucky
and South Carolina also impose taxes on premiums paid, in addition to
the state taxes imposed. The premium tax charge represents an amount
we consider necessary to pay all premium taxes imposed by these taxing
authorities, and we do not expect to derive a profit from this charge.
Policies will be assessed a tax charge equal to 2.25% of the premiums
paid. These charges are deducted from each premium payment.
[diamond] FEDERAL TAX CHARGE. A charge equal to 1.50% of each premium will be
deducted from each premium payment
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to cover the estimated cost to us of the federal income tax treatment of
deferred acquisition costs.
PERIODIC CHARGES
MONTHLY
[diamond] ISSUE EXPENSE CHARGE. The issue expense charge is $1.50 per $1,000 of
face amount up to a maximum of $600. This charge is to reimburse PLAC
for underwriting and start-up expenses in connection with issuing a
Policy. Rather than deduct the full amount at once, the issue expense
charge is deducted in equal monthly installments over the first 12
months of the Policy.
[diamond] ADMINISTRATIVE CHARGE. The Administrative Charge is currently set at
$5 per month and is guaranteed not to exceed $10 per month. This
charge is to reimburse PLAC for daily administration, monthly
processing, updating daily values and for annual/quarterly statements.
[diamond] COST OF INSURANCE. To determine this expense, we multiply the
appropriate cost of insurance rate by the difference between your
Policy's death benefit and the Policy Value. Generally, cost of
insurance rates are based on the sex, Attained Age and risk class of
the Insured. However, in certain states and for policies issued in
conjunction with certain qualified plans, cost of insurance rates are
not based on sex. The actual monthly costs of insurance rates are
based on our expectations of future mortality experience. They will
not, however, be greater than the guaranteed cost of insurance rates
set forth in the Policy. These guaranteed maximum rates are equal to
100% of the 1980 Commissioners Standard Ordinary ("CSO") Mortality
Table, with appropriate adjustment for the Insureds' risk
classification. Any change in the cost of insurance rates will apply
to all persons of the same sex, insurance age and risk class whose
Policies have been In Force for the same length of time. Your risk
class may affect your cost of insurance rate. We currently place
Insureds into a standard risk class or a risk class involving a higher
mortality risk, depending upon the health of the Insureds as
determined by medical information that we request. For otherwise
identical Policies, Insureds in the standard risk class will have a
lower cost of insurance than those in the risk class with the higher
mortality risk. The standard risk class also is divided into
categories: smokers, nonsmokers and those who have never smoked.
Nonsmokers will generally incur a lower cost of insurance than
similarly situated Insureds who smoke.
[diamond] COST OF ANY RIDERS TO YOUR POLICY. Certain policy riders require the
payment of additional premiums to pay for the benefit provided by the
rider.
Monthly deductions are made on each Monthly Calculation Day. The amount
deducted is allocated among Subaccounts and the unloaned portion of the GIA
based on an allocation schedule specified by you.
You initially chose this schedule in your application, but can later change
it from time to time. If any Subaccount or the unloaned portion of the GIA is
insufficient to permit the full withdrawal of the monthly deduction, the
withdrawals from the other Subaccounts or GIA will be proportionally increased.
DAILY
[diamond] MORTALITY AND EXPENSE RISK CHARGE. A charge at an annual rate of 0.80%
is deducted daily from the VUL Account. After the 15th policy year,
the charge is reduced to an annual rate of 0.25%. No portion of this
charge is deducted from the GIA.
The mortality risk assumed by us is that collectively our Insureds may
live for a shorter time than projected because of inaccuracies in that
projecting process and, therefore, that the total amount of death
benefits that we will pay out will be greater than that we expected.
The expense risk assumed is that expenses incurred in issuing and
maintaining the Policies may exceed the limits on administrative
charges set in the Policies. If the expenses do not increase to an
amount in excess of the limits, or if the mortality projecting process
proves to be accurate, we may profit from this charge. We also assume
risks with respect to other contingencies including the incidence of
Policy loans, which may cause us to incur greater costs than expected
when we designed the Policies. To the extent we profit from this
charge, we may use those profits for any proper purpose, including the
payment of sales expenses or any other expenses that may exceed income
in a given year.
CONDITIONAL CHARGES
These are other charges that are imposed only if certain events occur.
[diamond] SURRENDER CHARGE. During the first 10 Policy Years, there is a
difference between the amount of Policy Value and the amount of cash
surrender value of the Policy. This difference is the surrender
charge, consisting of a contingent deferred sales charge designed to
recover the expenses for the distribution of Policies that are
terminated by surrender before distribution expenses have been
recouped, and a contingent deferred issue charge designed to recover
expenses for the administration of Policies that are terminated by
surrender before administrative expenses have been recouped. These are
contingent charges because they are paid only if the Policy is
surrendered (or the face amount is reduced or the Policy lapses)
during this period. They are deferred charges because they are not
deducted from premiums.
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During the first 10 Policy Years, the full surrender charge described
below will apply if you either surrender the Policy for its cash
surrender value or let the Policy lapse. The applicable surrender
charge in any Policy Month is the full surrender charge minus any
surrender charges that have been previously paid. There is no
surrender charge after the 10th Policy Year. During the first two
Policy Years, the maximum surrender charge that you could pay while
you own the Policy is equal to either A plus B (as defined below) or
the amount shown in the Policy's Surrender Charge Table, whichever is
less. After the first two Policy Years, the maximum surrender charge
that you could pay is based on the amount shown in the Policy's
Surrender Charge Table.
A (the contingent deferred sales charge) is equal to:
[bullet] 28.5% of all premiums paid (up to and including the amount stated
in the Policy's Surrender Charge Schedule, which is calculated
according to a formula contained in a SEC rule); plus
[bullet] 8.5% of all premiums paid in excess of this amount but not greater
than twice this amount; plus
[bullet] 7.5% of all premiums paid in excess of twice this amount.
B (the contingent deferred issue charge) is equal to:
$5 per $1,000 of initial face amount.
SURRENDER CHARGE TABLE
----------------------
POLICY SURRENDER POLICY SURRENDER POLICY SURRENDER
MONTH CHARGE MONTH CHARGE MONTH CHARGE
----- ------ ----- ------ ----- ------
1-60 $1307.54 80 $1066.03 100 $727.09
61 1295.46 81 1053.95 101 690.65
62 1283.39 82 1041.88 102 654.22
63 1271.31 83 1029.80 103 617.78
64 1259.24 84 1017.73 104 581.35
65 1247.16 85 1005.65 105 544.91
66 1235.08 86 993.58 106 508.48
67 1223.01 87 981.50 107 472.05
68 1210.93 88 969.43 108 435.61
69 1198.86 89 957.35 109 399.18
70 1186.78 90 945.28 110 362.74
71 1174.71 91 933.20 111 326.31
72 1162.63 92 921.13 112 289.97
73 1150.56 93 909.05 113 253.44
74 1138.48 94 896.97 114 217.01
75 1126.41 95 884.90 115 180.57
76 1114.33 96 872.82 116 144.14
77 1102.26 97 836.39 117 107.70
78 1090.18 98 799.95 118 71.27
79 1078.10 99 763.52 119 34.83
120 .00
PLAC may reduce the surrender charge for Policies issued under group or
sponsored arrangements. The amount of reduction will be considered on a
case-by-case basis and will reflect the reduced costs to Phoenix expected as
a result of sales to a particular group or sponsored arrangement.
[diamond] PARTIAL SURRENDER FEE. In the case of a partial surrender, but not a
decrease in Face Amount, an additional fee is imposed. The fee is
equal to 2% of the amount withdrawn but not more than $25. The fee is
intended to recover the actual costs of processing the partial
surrender request. The fee will be deducted from each Subaccount and
GIA in the same proportion as the withdrawal is allocated. If no
allocation is made at the time of the request for the partial
surrender, withdrawal allocation will be made in the same manner as
are monthly deductions.
[diamond] PARTIAL SURRENDER CHARGE. If less than all of the Policy is
surrendered, the amount withdrawn is a "partial surrender." A charge
as described below is deducted from the Policy Value upon a partial
surrender of the Policy. The charge is a fraction of the applicable
surrender charge that would apply to a full surrender, determined by
how much of the full Cash Surrender Value is being withdrawn. This
amount is assessed against the Subaccounts and the GIA in the same
proportion as the withdrawal is allocated.
A partial surrender charge also is deducted from Policy Value upon a
decrease in Face Amount. The charge is equal to the applicable
surrender charge multiplied by a fraction equal to the decrease in
Face Amount divided by the Face Amount of the Policy prior to the
decrease.
INVESTMENT MANAGEMENT CHARGE
As compensation for investment management services to the Funds, the
Advisers are entitled to fees, payable monthly and based on an annual percentage
of the average aggregate daily net asset values of each Series.
These Fund charges and other expenses are described more fully in the
accompanying Fund prospectuses.
OTHER TAXES
Currently no charge is made to the VUL Account for federal income taxes that
may be attributable to the VUL Account. We may, however, make such a charge in
the future for these or any other taxes attributable to the VUL Account.
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
POSTPONEMENT OF PAYMENTS
GENERAL
Payment of any amount upon complete or partial surrender, Policy loan, or
benefits payable at death (in excess of the initial face amount) or maturity may
be postponed:
[diamond] for up to six months from the date of the request, for any
transactions dependent upon the value of the GIA;
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[diamond] whenever the NYSE is closed other than for customary weekend and
holiday closings or trading on the NYSE is restricted as determined by
the SEC; or
[diamond] whenever an emergency exists, as decided by the SEC as a result of
which disposal of securities is not reasonably practicable or it is
not reasonably practicable to determine the value of the VUL Account's
net assets.
Transfers also may be postponed under these circumstances.
PAYMENT BY CHECK
Payments under the Policy of any amounts derived from premiums paid by check
may be delayed until such time as the check has cleared your bank.
THE CONTRACT
The Policy and attached copy of the application are the entire contract.
Only statements in the application can be used to void the Policy. The
statements are considered representations and not warranties. Only an executive
officer of PLAC can agree to change or waive any provisions of the Policy.
SUICIDE
If the Insured commits suicide within two years after the Policy's Date of
Issue, the Policy will stop and become void. We will pay you the Policy Value
adjusted by the addition of any monthly deductions and other fees and charges,
minus any debt owed to us under the Policy.
INCONTESTABILITY
We cannot contest this Policy or any attached rider after it has been in
force during the Insured's lifetime or for two years from the policy date.
CHANGE OF OWNER OR BENEFICIARY
The Beneficiary, as named in the Policy application or subsequently changed,
will receive the Policy benefits at the Insured's death. If the named
Beneficiary dies before the Insured, the contingent Beneficiary, if named,
becomes the Beneficiary. If no Beneficiary survives the Insured, the death
benefit payable under the Policy will be paid to your estate.
As long as the Policy is in force, the Policyowner and the Beneficiary may
be changed in writing, satisfactory to us. A change in Beneficiary will take
effect as of the date the notice is signed, whether or not the Insured is living
when we receive the notice. We will not, however, be liable for any payment made
or action taken before receipt of the notice.
ASSIGNMENT
The Policy may be assigned. We will not be bound by the assignment until a
written copy has been received and we will not be liable with respect to any
payment made prior to receipt. We assume no responsibility for determining
whether an assignment is valid.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated, the death benefit will
be adjusted based on what the cost of insurance charge for the most recent
monthly deduction would have purchased based on the correct age and sex.
SURPLUS
You may share in the divisible surplus of PLAC to the extent decided
annually by the Board of Directors. However, it is not currently expected that
the Board will authorize these payments since you will be participating directly
in investment results.
PAYMENT OF PROCEEDS
- --------------------------------------------------------------------------------
SURRENDER AND DEATH BENEFIT PROCEEDS
Death benefit proceeds and the proceeds of full or partial surrenders will
be processed at unit values next computed after we receive the request for
surrender or due proof of death, provided such request is complete and in good
order. Payment of surrender or death proceeds usually will be made in one lump
sum within seven days, unless another payment option has been elected. Payment
of the death proceeds, however, may be delayed if the claim for payment of the
death proceeds needs to be investigated, e.g., to ensure payment of the proper
amount to the proper payee. Any such delay will not be beyond that reasonably
necessary to investigate such claims consistent with insurance practices
customary in the life insurance industry.
You may elect a payment option for payment of the death proceeds to the
Beneficiary. You may revoke or change a prior election, unless such right has
been waived. The Beneficiary may make or change an election before payment of
the death proceeds, unless you have made an election that does not permit such
further election or changes by the Beneficiary.
A written request in a form satisfactory to us is required to elect, change
or revoke a payment option.
The minimum amount of surrender or death benefit proceeds that may be
applied under any payment option is $1,000.
If the Policy is assigned as collateral security, we will pay any amount due
the assignee in one lump sum. Any remaining proceeds will remain under the
option elected.
PAYMENT OPTIONS
All or part of the surrender or death proceeds of a Policy may be applied
under one or more of the following payment options or such other payment options
or
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alternative versions of the options listed as we may choose to make available
in the future.
OPTION 1--LUMP SUM.
Payment in one lump sum.
OPTION 2--LEFT TO EARN INTEREST.
A payment of interest during the payee's lifetime on the amount payable as a
principal sum. Interest rates are guaranteed to be at least 3% per year.
OPTION 3--PAYMENT FOR A SPECIFIC PERIOD.
Equal installments are paid for a specified period of years whether the
payee lives or dies. The first payment will be on the date of settlement. The
assumed interest rate on the unpaid balance is guaranteed not to be less than 3%
per year.
OPTION 4--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN.
Equal installments are paid until the later of:
[diamond] the death of the payee; or
[diamond] the end of the period certain.
The first payment will be on the date of settlement.
The period certain must be chosen at the time this option is elected. The
periods certain that you may choose from are as follows:
[diamond] ten years;
[diamond] twenty years; or
[diamond] until the installments paid refund the amount applied under this
option.
If the payee is not living when the final payment falls due, that payment
will be limited to the amount which needs to be added to the payments already
made to equal the amount applied under this option.
If, for the age of the payee, a period certain is chosen that is shorter
than another period certain paying the same installment amount, we will consider
the longer period certain as having been elected.
Any life annuity provided under Option 4 is computed using an interest rate
guaranteed to be no less than 3-3/8% per year, but any life annuity providing a
period certain of 20 years or more is computed using an interest rate guaranteed
to be no less than 3-1/4% per year.
OPTION 5--LIFE ANNUITY.
Equal installments are paid only during the lifetime of the payee. The first
payment will be on the date of settlement. Any life annuity as may be provided
under Option 5 is computed using an interest rate guaranteed to be no less than
3-1/2% per year.
OPTION 6--PAYMENTS OF A SPECIFIED AMOUNT.
Equal installments of a specified amount, out of the principal sum and
interest on that sum, are paid until the principal sum remaining is less than
the amount of the installment. When that happens, the principal sum remaining
with accrued interest will be paid as a final payment. The first payment will be
on the date of settlement. The payments will include interest on the remaining
principal at a guaranteed rate of at least 3% per year. This interest will be
credited at the end of each year. If the amount of interest credited at the end
of the year exceeds the income payments made in the last 12 months, that excess
will be paid in one sum on the date credited.
OPTION 7--JOINT SURVIVORSHIP ANNUITY WITH 10-YEAR PERIOD CERTAIN.
The first payment will be on the date of settlement. Equal installments are
paid until the latest of:
[diamond] the end of the 10-year period certain;
[diamond] the death of the Insured; or
[diamond] the death of the other named annuitant.
The other annuitant must have attained age 40, must be named at the time
this option is elected and cannot later be changed. Any joint survivorship
annuity that may be provided under this option is computed using a guaranteed
interest rate to equal at least 3-3/8% per year.
For additional information concerning the above payment options, see the
Policy.
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
INTRODUCTION
The ultimate effect of federal income taxes on values under the VUL Account
and on the economic benefit to you or your Beneficiary depends on our tax status
and upon the tax status of the individual concerned. The discussion contained
herein is general in nature and is not intended as tax advice. For complete
information on federal and state tax considerations, a qualified tax adviser
should be consulted. No attempt is made to consider any estate and inheritance
taxes, or any state, local or other tax laws. Because the discussion herein is
based upon our understanding of federal income tax laws as they are currently
interpreted, we cannot guarantee the tax status of any Policy. The Internal
Revenue Service (the "IRS") makes no representation regarding the likelihood of
continuation of current federal income tax laws, Treasury regulations or of the
current interpretations. We reserve the right to make changes to the Policy to
assure that it will continue to qualify as a life insurance contract for federal
income tax purposes.
PLAC'S TAX STATUS
We are taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). For federal income tax purposes, neither the VUL
Account nor the GIA is a separate entity from PLAC and their operations form a
part of PLAC.
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Investment income and realized capital gains on the assets of the VUL
Account are reinvested and taken into account in determining the value of the
VUL Account. Investment income of the VUL Account, including realized net
capital gains, is not taxed to us. Due to our tax status under current
provisions of the Code, no charge currently will be made to the VUL Account for
our federal income taxes which may be attributable to the VUL Account. We
reserve the right to make a deduction for taxes if our federal tax treatment is
determined to be other than what we currently believe it to be, if changes are
made affecting the tax treatment to our variable life insurance contracts, or if
changes occur in our tax status. If imposed, such charge would be equal to the
federal income taxes attributable to the investment results of the VUL Account.
POLICY BENEFITS
DEATH BENEFIT PROCEEDS
The Policy, whether or not it is a "modified endowment contract" (see the
discussion on modified endowment contracts), should be treated as meeting the
definition of a life insurance contract for federal income tax purposes under
Section 7702 of the Code. As such, the death benefit proceeds thereunder should
be excludable from the gross income of the Beneficiary under Code Section
101(a)(1). Also, a Policyowner should not be considered to be in constructive
receipt of the cash value, including investment income. See, however, the
sections below on possible taxation of amounts received under the Policy, via
full surrender, partial surrender or loan. In addition, a benefit paid under a
Living Benefits Rider may be taxable as income in the year of receipt.
Code Section 7702 imposes certain conditions with respect to premiums
received under a Policy. We monitor the premiums to assure compliance with such
conditions. However, if the premium limitation is exceeded during the year, we
may return the excess premium, with interest, to the Policyowner within 60 days
after the end of the Policy Year, and maintain the qualification of the Policy
as life insurance for federal income tax purposes.
FULL SURRENDER
Upon full surrender of a Policy for its cash value, the excess, if any, of
the cash value (unreduced by any outstanding indebtedness) over the premiums
paid will be treated as ordinary income for federal income tax purposes. The
full surrender of a Policy that is a modified endowment contract may result in
the imposition of an additional 10% tax on any income received.
PARTIAL SURRENDER
If the Policy is a modified endowment contract, partial surrenders are fully
taxable to the extent of income in the Policy and are possibly subject to an
additional 10% tax. See the discussion on modified endowment contracts below. If
the Policy is not a modified endowment contract, partial surrenders still may be
taxable, as follows. Code Section 7702(f)(7) provides that where a reduction in
death benefits occurs during the first 15 years after a Policy is issued and
there is a cash distribution associated with that reduction, the Policyowner may
be taxed on all or a part of the amount distributed. A reduction in death
benefits may result from a partial surrender. After 15 years, the proceeds will
not be subject to tax, except to the extent such proceeds exceed the total
amount of premiums paid but not previously recovered. We suggest you consult
with your tax adviser in advance of a proposed decrease in death benefits or a
partial surrender as to the portion, if any, which would be subject to tax, and
in addition as to the impact such partial surrender might have under the new
rules affecting modified endowment contracts. The benefit payment under the
Living Benefits Rider is not considered a partial surrender.
LOANS
We believe that any loan received under a Policy will be treated as your
indebtedness. If the Policy is a modified endowment contract, loans are fully
taxable to the extent of income in the Policy and are possibly subject to an
additional 10% tax. See the discussion on modified endowment contracts. If the
Policy is not a modified endowment contract, we believe that no part of any loan
under a Policy will constitute income to you.
The deductibility by a Policyowner of loan interest under a Policy may be
limited under Code Section 264, depending on the circumstances. A Policyowner
intending to fund premium payments through borrowing should consult a tax
adviser with respect to the tax consequences thereof. Under the "personal"
interest limitation provisions of the Code, interest on Policy loans used for
personal purposes is not tax deductible. Other rules may apply to allow all or
part of the interest expense as a deduction if the loan proceeds are used for
"trade or business" or "investment" purposes. See your tax adviser for further
guidance.
BUSINESS-OWNED POLICIES
If a business or a corporation owns the Policy, the Code may impose
additional restrictions. The Code limits the interest deduction on
business-owned Policy loans and may impose tax upon the inside build-up of
corporate-owned life insurance policies through the corporate alternative
minimum tax.
MODIFIED ENDOWMENT CONTRACTS
GENERAL
Pursuant to Code Section 72(e), loans and other amounts received under
modified endowment contracts will, in general, be taxed to the extent of
accumulated income (generally, the excess of cash value over premiums paid).
Life insurance policies can be modified endowment contracts if they fail to meet
what is known as "the 7-pay test." The measuring stick for this test is a
hypothetical life
21
<PAGE>
insurance policy of equal face amount which requires 7 equal annual premiums but
which, after the seventh year is "fully paid-up," continuing to provide a level
death benefit without the need for any further premiums. A Policy becomes a
modified endowment contract, if, at any time during the first seven years, the
cumulative premium paid on the Policy exceeds the cumulative premium that would
have been paid under the hypothetical policy. Premiums paid during a Policy Year
but which are returned by us with interest within 60 days after the end of the
Policy Year will be excluded from the 7-pay test. A life insurance policy
received in exchange for a modified endowment contract will be treated as a
modified endowment contract.
REDUCTION IN BENEFITS DURING THE FIRST SEVEN YEARS
If there is a reduction in death benefits during the first seven Policy
Years, the premiums are redetermined for purposes of the 7-pay test as if the
Policy originally had been issued at the reduced death benefit level and the new
limitation is applied to the cumulative amount paid for each of the first seven
Policy Years.
DISTRIBUTIONS AFFECTED
If a Policy fails to meet the 7-pay test, it is considered a modified
endowment contract only as to distributions in the year in which the test is
failed and all subsequent Policy Years. However, distributions made in
anticipation of such failure (there is a presumption that distributions made
within two years prior to such failure were "made in anticipation") also are
considered distributions under a modified endowment contract. If the Policy
satisfies the 7-pay test for seven years, distributions and loans generally will
not be subject to the modified endowment contract rules.
PENALTY TAX
Any amounts taxable under the modified endowment contract rule will be
subject to an additional 10% excise tax, with certain exceptions. This
additional tax will not apply in the case of distributions that are:
[diamond] made on or after the taxpayer attains age 59 1/2;
[diamond] attributable to the taxpayer's disability (within the meaning of Code
Section 72(m)(7)); or
[diamond] part of a series of substantially equal periodic payments (not less
often than annually) made for the life (or life expectancy) of the
taxpayer or the joint lives (or life expectancies) of the taxpayer and
his Beneficiary.
MATERIAL CHANGE RULES
Any determination of whether the Policy meets the 7-pay test will begin
again any time the Policy undergoes a "material change," which includes any
increase in death benefits or any increase in or addition of a qualified
additional benefit, with the following two exceptions.
[diamond] First, if an increase is attributable to premiums paid "necessary to
fund" the lowest death benefit and qualified additional benefits
payable in the first seven Policy Years or to the crediting of
interest or dividends with respect to these premiums, the "increase"
does not constitute a material change.
[diamond] Second, to the extent provided in regulations, if the death benefit or
qualified additional benefit increases as a result of a cost-of-living
adjustment based on an established broad-based index specified in the
Policy, this does not constitute a material change if:
[bullet] the cost-of-living determination period does not exceed the
remaining premium payment period under the Policy; and
[bullet] the cost-of-living increase is funded ratably over the
remaining premium period of the Policy.
A reduction in death benefits is not considered a material change unless
accompanied by a reduction in premium payments.
A material change may occur at any time during the life of the Policy
(within the first seven years or thereafter), and future taxation of
distributions or loans would depend upon whether the Policy satisfied the
applicable 7-pay test from the time of the material change. An exchange of
policies is considered to be a material change for all purposes.
SERIAL PURCHASE OF MODIFIED ENDOWMENT CONTRACTS
All modified endowment contracts issued by the same insurer (or affiliated
companies of the insurer) to the same Policyowner within the same calendar year
will be treated as one modified endowment contract in determining the taxable
portion of any loans or distributions made to the Policyowner. The Treasury has
been given specific legislative authority to issue regulations to prevent the
avoidance of the new distribution rules for modified endowment contracts. A
qualified tax adviser should be consulted about the tax consequences of the
purchase of more than one modified endowment contract within any calendar year.
LIMITATIONS ON UNREASONABLE MORTALITY AND EXPENSE CHARGES
The Code imposes limitations on unreasonable mortality and expense charges
for purposes of ensuring that a Policy qualifies as a life insurance contract
for federal income tax purposes. The mortality charges taken into account to
compute permissible premium levels may not exceed those charges required to be
used in determining the federal income tax reserve for the Policy, unless
Treasury regulations prescribe a higher level of charge. In addition, the
expense charges taken into account under the guideline premium test are required
to be reasonable, as defined by the Treasury regulations. We will comply with
the limitations for calculating the premium we are permitted to receive from
you.
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<PAGE>
QUALIFIED PLANS
A Policy may be used in conjunction with certain qualified plans. Since the
rules governing such use are complex, you should not use the Policy in
conjunction with a qualified plan until you have consulted a competent pension
consultant or tax adviser.
DIVERSIFICATION STANDARDS
To comply with the Diversification Regulations under Code Section 817(h),
("Diversification Regulations") each Series of the Fund is required to diversify
its investments. The Diversification Regulations generally require that on the
last day of each calendar quarter the Series assets be invested in no more than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
A "look-through" rule applies to treat a pro rata portion of each asset of a
Series as an asset of the VUL Account; therefore, each Series of the Fund will
be tested for compliance with the percentage limitations. For purposes of these
diversification rules, all securities of the same issuer are treated as a single
investment, but each United States government agency or instrumentality is
treated as a separate issuer.
The general diversification requirements are modified if any of the assets
of the VUL Account are direct obligations of the United States Treasury. In this
case, there is no limit on the investment that may be made in Treasury
securities, and for purposes of determining whether assets other than Treasury
securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of the VUL Account's investment in
Treasury securities. Notwithstanding this modification of the general
diversification requirements, the portfolios of the Funds will be structured to
comply with the general diversification standards because they serve as an
investment vehicle for certain variable annuity contracts that must comply with
these standards.
In connection with the issuance of the Diversification Regulations, the
Treasury announced that such regulations do not provide guidance concerning the
extent to which you may direct your investments to particular divisions of a
separate account. It is possible that a revenue ruling or other form of
administrative pronouncement in this regard may be issued in the near future. It
is not clear, at this time, what such a revenue ruling or other pronouncement
will provide. It is possible that the Policy may need to be modified to comply
with such future Treasury announcements. For these reasons, we reserve the right
to modify the Policy, as necessary, to prevent you from being considered the
owner of the assets of the VUL Account.
We intend to comply with the Diversification Regulations to assure that the
Policies continue to qualify as a life insurance contract for federal income tax
purposes.
CHANGE OF OWNERSHIP OR INSURED OR ASSIGNMENT
Changing the Policyowner or the Insured or an exchange or assignment of the
Policy may have tax consequences depending on the circumstances. Code Section
1035 provides that a life insurance contract can be exchanged for another life
insurance contract, without recognition of gain or loss, assuming that no money
or other property is received in the exchange, and that the Policies relate to
the same Insured. If the surrendered Policy is subject to a policy loan, this
may be treated as the receipt of money on the exchange. We recommend that any
person contemplating such actions seek the advice of a qualified tax consultant.
OTHER TAXES
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or Beneficiary. We do not make any
representations or guarantees regarding the tax consequences of any Policy with
respect to these types of taxes.
VOTING RIGHTS
- --------------------------------------------------------------------------------
We will vote the Funds' shares held by the Subaccounts at any regular and
special meetings of shareholders of the Funds. To the extent required by law,
such voting will be pursuant to instructions received from you. However, if the
1940 Act or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result, we decide that we are
permitted to vote the Funds' shares at our own discretion, we may elect to do
so.
The number of votes that you have the right to cast will be determined by
applying your percentage interest in a Subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, fractional
shares will be recognized.
Funds' shares held in a Subaccount for which no timely instructions are
received, and Funds' shares which are not otherwise attributable to
Policyowners, will be voted by PLAC in proportion to the voting instructions
that are received with respect to all Policies participating in that Subaccount.
Instructions to abstain on any item to be voted upon will be applied to reduce
the votes eligible to be cast by PLAC.
You will receive proxy materials, reports and other materials related to the
Funds.
23
<PAGE>
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the shares be voted so as
to cause a change in the subclassification or investment objective of one or
more of the portfolios of the Funds or to approve or disapprove an investment
advisory contract for the Funds. In addition, PLAC itself may disregard voting
instructions in favor of changes initiated by a Policyowner in the investment
policies or the Investment Adviser of the Funds if PLAC reasonably disapproves
of such changes. A change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities or we decide
that the change would have an adverse effect on the General Account because the
proposed investment policy for a Series may result in overly speculative or
unsound investments. In the event PLAC does disregard voting instructions, a
summary of that action and the reasons for such action will be included in the
next periodic report to Policyowners.
THE DIRECTORS AND
EXECUTIVE OFFICERS OF PLAC
- --------------------------------------------------------------------------------
PLAC is managed by its Board of Directors. The following are the Directors
and Executive Officers of PLAC:
NAME AND TITLE PRINCIPAL OCCUPATION
Robert W. Fiondella, Chairman of the Board,
Chairman and President President and Chief
Executive Officer
Richard H. Booth, Executive Vice President,
Director and Executive Strategic Development;
Vice President formerly President, Traveler's
Insurance Company
Robert G. Chipkin Senior Vice President and
Director Corporate Actuary - Phoenix
Philip R. McLoughlin, Executive Vice President and
Director and Executive Chief Investment Officer
Vice President
David W. Searfoss, Executive Vice President and
Director and Executive Chief Financial Officer
Vice President and CFO
Dona D. Young, Executive Vice President,
Director and Executive Individual Insurance and
Vice President General Counsel
Joseph E. Kelleher, Senior Vice President
Director and Senior
Vice President
Robert G. Lautensack, Senior Vice President
Director and Senior
Vice President
Simon Y. Tan, Senior Vice President,
Director and Senior Individual Market
Vice President Development
The above positions reflect the last held position in our parent company,
Phoenix Home Life Mutual Insurance Company, during the last five years.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
- --------------------------------------------------------------------------------
We hold the assets of the VUL Account. The assets of the VUL Account are
kept physically segregated and held separate and apart from our General Account.
We maintain records of all purchases and redemptions of shares of the Funds.
SALES OF POLICIES
- --------------------------------------------------------------------------------
Policies may be purchased from registered representatives of W.S. Griffith &
Co., Inc. ("WSG"), a New York corporation incorporated on August 7, 1970,
licensed to sell Phoenix insurance policies as well as policies, annuity
contracts and funds of companies affiliated with Phoenix. WSG, an indirect
subsidiary of Phoenix, is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and is a member of the National
Association of Securities Dealers, Inc. PEPCO serves as national distributor of
the Policies. PEPCO is an indirect subsidiary of Phoenix Investment Partners,
Ltd. ("PXP"), in which Phoenix owns a majority interest.
Policies also may be purchased from other broker-dealers registered under
the 1934 Act whose representatives are authorized by applicable law to sell
Policies under terms of agreements provided by PEPCO. Sales commissions will be
paid to registered representatives on purchase payments we receive under these
Policies. PLAC will pay a maximum total sales commission of 50% of premiums to
PEPCO. To the extent that the sales charge under the Policies is less than the
sales commissions paid with respect to the Policies, we will pay the shortfall
from our General Account assets, which will include any profits we may derive
under the Policies.
STATE REGULATION
- --------------------------------------------------------------------------------
We are subject to the provisions of the Connecticut insurance laws
applicable to stock life insurance companies and to regulation and supervision
by the Connecticut Superintendent of Insurance. We also are subject to the
applicable insurance laws of all the other states and jurisdictions in which we
do insurance business.
State regulation of PLAC includes certain limitations on the investments
which we may make, including investments for the VUL Account and the GIA. This
regulation does not include, however, any supervision over the investment
policies of the VUL Account.
24
<PAGE>
REPORTS
- --------------------------------------------------------------------------------
All Policyowners will be furnished with those reports required by the 1940
Act and related regulations or by any other applicable law or regulation.
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
The VUL Account is not engaged in any litigation. PLAC is not involved in
any litigation that would have a material adverse effect on our ability to meet
our obligations under the Policies.
LEGAL MATTERS
- --------------------------------------------------------------------------------
Edwin L. Kerr, Counsel of Phoenix Home Life Mutual Insurance Company, has
passed upon the organization of PLAC, its authority to issue variable life
insurance Policies and the validity of the Policy, and upon legal matters
relating to the federal securities and income tax laws for PLAC.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
A Registration Statement has been filed with the SEC, under the Securities
Act of 1933 ("1933 Act") with respect to the securities offered. This Prospectus
is a summary of the contents of the Policy and other legal documents and does
not contain all the information set forth in the Registration Statement and its
exhibits. We refer you to the registration statement and its exhibits for
further information concerning the VUL Account, PLAC and the Policy.
YEAR 2000 ISSUE
- --------------------------------------------------------------------------------
Many existing computer programs use only two digits to identify the year in
a date field. This is commonly referred to as the "Year 2000 Issue." Companies
must consider the impact of the upcoming change in the century on their computer
systems. The Year 2000 Issue, if not adequately addressed, could result in
computer system failures or miscalculations causing disruptions of operations
and the possible inability of companies to process transactions. We believe that
the Year 2000 Issue is an important business priority requiring careful analysis
of every business system in order to be assured that all information systems
applications are century compliant.
We have been addressing the Year 2000 Issue in earnest since 1995 when, with
consultants, a comprehensive inventory and assessment of all business systems,
including those of our subsidiaries, was conducted. We have identified and are
now actively pursuing a number of strategies to address the issue, including:
[diamond] upgrading systems with compliant versions;
[diamond] developing or acquiring new systems to replace those that are
obsolete;
[diamond] and remediating existing systems by converting code or hardware.
Based on current assessments, we expect to have our computer systems
remediated and tested by June 1999. In addition, PLAC is examining the status of
its third-party vendors, obtaining assurances that their software and hardware
products will be century compliant by 1999.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements of PLAC contained herein should be considered only
as bearing upon PLAC's ability to meet its obligations under the Policy, and
they should not be considered as bearing on the investment performance of the
VUL Account. The financial statements of the VUL Account are for the Subaccounts
available for the period ended December 31, 1998.
25
<PAGE>
PHOENIX LIFE AND
ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
FINANCIAL STATEMENTS DECEMBER 31, 1998
26
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
FINANCIAL STATEMENTS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Report of Independent Accountants............................................28
Balance Sheet................................................................29
Statement of Income, Comprehensive Income and Equity.........................30
Statement of Cash Flows......................................................31
Notes to Financial Statements.............................................32-39
27
<PAGE>
[PriceWaterhouseCoopers Logo & Address]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholder of
Phoenix Life and Annuity Company
In our opinion, the accompanying balance sheet and the related statements of
income, comprehensive income and equity and of cash flows present fairly, in all
material respects, the financial position of Phoenix Life and Annuity Company at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years ended December 31, 1998 and 1997 and for the periods from March
30, 1996 to December 31, 1996 and from January 1, 1996 to March 29, 1996, in
conformity with generally accepted accounting principles. 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 of these 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 provide a reasonable basis for the opinion expressed
above.
/s/PriceWaterhouseCoopers LLP
February 11, 1999
28
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
BALANCE SHEET
- --------------------------------------------------------------------------------
DECEMBER 31,
1998 1997
(IN THOUSANDS)
ASSETS
Available-for-sale debt securities, at fair value $ 9,781 $ 7,209
Short-term investments 1,754 3,671
------- -------
Total investments 11,535 10,880
Cash and cash equivalents 99 48
Accrued investment income 169 152
Goodwill 701 798
Other assets 13
------- -------
Total assets $12,517 $11,878
======= =======
LIABILITIES
Deferred income taxes $ 151 $ 66
Other liabilities 2 3
------- -------
Total liabilities 153 69
EQUITY
Common stock, $100 par value, 40,000 shares
authorized, 25,000 shares issued and outstanding 2,500 2,500
Additional paid-in-capital 8,664 8,664
Retained earnings 867 514
Accumulated other comprehensive income 333 131
------- -------
Total equity 12,364 11,809
------- -------
Total liabilities and equity $12,517 $11,878
======= =======
The accompanying notes are an integral part of these statements.
29
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND PERIODS FROM MARCH 30, 1996 TO
DECEMBER 31, 1996 (SUCCESSOR PERIOD) AND JANUARY 1, 1996 TO MARCH 29, 1996
(PREDECESSOR PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1996
SUCCESSOR SUCCESSOR SUCCESSOR PREDECESSOR
PERIOD PERIOD PERIOD PERIOD
(IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUES
Net investment income $ 688 $ 624 $ 433 $ 95
Net realized investment losses (1)
------- ------- ------- -------
Total revenues 688 624 432 95
------- ------- ------- -------
EXPENSES
Amortization of goodwill 97 90 81
Other operating expenses 63 4 (3)
------- ------- ------- -------
Total expenses 160 94 81 (3)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 528 530 351 98
Income taxes 175 189 129
------- ------- ------- -------
NET INCOME 353 341 222 98
------- ------- ------- -------
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX
Unrealized gains on securities arising during period 202 86 39
Reclassification adjustment for losses included
in net income 6
------- ------- ------- -------
Total other comprehensive income 202 86 45
------- ------- ------- -------
COMPREHENSIVE INCOME 555 427 267 98
Acquisition adjustment to record purchase price (107) 1,076
Capital contribution 49 4,000
------- ------- ------- -------
NET INCREASE IN EQUITY 555 369 5,343 98
EQUITY, BEGINNING OF PERIOD 11,809 11,440 6,097 5,999
------- ------- ------- -------
EQUITY, END OF PERIOD $12,364 $11,809 $11,440 $ 6,097
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
30
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND PERIODS FROM MARCH 30, 1996 TO
DECEMBER 31, 1996 (SUCCESSOR PERIOD) AND JANUARY 1, 1996 TO MARCH 29, 1996
(PREDECESSOR PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1996
SUCCESSOR SUCCESSOR SUCCESSOR PREDECESSOR
PERIOD PERIOD PERIOD PERIOD
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 353 $ 341 $ 222 $ 98
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATIONS
Goodwill amortization 97 90 81
Deferred income taxes (24) (2) (2)
Increase in accrued investment income (17) (34) (104) (9)
Decrease in receivable from affiliate 899
Other, net (29) (60) (18)
------- ------- ------- -------
Net cash provided by operating activities 380 335 179 988
------- ------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of available-for-sale debt securities (2,246) (1,527) (5,167)
Change in short-term investments, net 1,917 1,036 (1,002)
------- ------- ------- -------
Net cash used for investing activities (329) (491) (6,169)
------- ------- ------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contribution from parent 49 4,000
------- ------- ------- -------
Net cash provided by financing activities 49 4,000
------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 51 (107) (1,990) 988
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 48 155 2,145 1,157
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 99 $ 48 $ 155 $ 2,145
======= ======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 213 $ 182 $ 113 $
------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Life and Annuity Company is a life insurance company domiciled in
the State of Connecticut and is licensed in 35 states. On March 29, 1996, PM
Holdings, Inc. acquired Savers Life Insurance Company of America from
Central United Life Insurance Company, renamed the acquired company Phoenix
Life and Annuity Company and redomiciled the company from Missouri to
Connecticut. PM Holdings accounted for the acquisition of Phoenix Life and
Annuity under the purchase method of accounting. The assets and liabilities
of Phoenix Life and Annuity were recorded at their fair value as of the date
of acquisition and intangible assets associated with the acquisition were
recorded in the accounts of the acquired company. PM Holdings is a
wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements have been prepared in accordance with generally
accepted accounting principles (GAAP). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
The financial statements for the period subsequent to the March 29, 1996
acquisition are sometimes referred to as the "successor period." The
financial statements for the period prior to the acquisition are sometimes
referred to as the "predecessor period."
VALUATION OF INVESTMENTS
Investments in debt securities include U.S. government and agency bonds.
Phoenix Life and Annuity classifies its debt security investments as
available-for-sale. These investments are presented at fair value with
unrealized gains or losses included as a separate component of equity. Debt
securities are considered impaired when a decline in value is considered to
be other than temporary.
Short-term investments are carried at amortized cost, which approximates
market value. Phoenix considers highly liquid investments purchased with a
maturity date of one year or less to be short-term investments.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and money market
instruments.
GOODWILL
Goodwill represents the excess of the cost of the business acquired on March
29, 1996 over the fair value of its tangible net assets. During 1997,
Phoenix Life and Annuity recorded a $58 thousand dollar reduction in
goodwill, representing a refund and a subsequent adjustment of a portion of
the purchase price. Goodwill is amortized on a straight-line method over a
period of 10 years, the expected period of benefit from the acquisition.
Management periodically reevaluates the propriety of the carrying value of
long-lived assets including goodwill. Assets are considered impaired if
carrying value exceeds the expected future undiscounted cash flows. Such
analyses are performed at least annually or more frequently if warranted by
events or circumstances affecting Phoenix Life and Annuity's business. At
this time, management believes that no impairment of goodwill has occurred
and that no reduction of the carrying value is warranted.
32
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INCOME TAXES
Phoenix Life and Annuity is included in the life/nonlife consolidated
federal income tax return filed by Phoenix. In accordance with a tax sharing
agreement with Phoenix, the provision for federal income taxes is computed
as if Phoenix Life and Annuity were filing a separate federal income tax
return, except those benefits arising from income tax credits and net
operating and capital losses are allocated to those subsidiaries producing
such attributes to the extent they are utilized in Phoenix's consolidated
federal income tax return.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from unrealized gains
or losses on investments and goodwill.
RECENT ACCOUNTING PRONOUNCEMENTS
Phoenix Life and Annuity adopted Statement of Financial Accounting Standard
(SFAS) No. 130, "Reporting Comprehensive Income," as of January 1, 1998.
This statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of financial
statements. This statement defines the components of comprehensive income as
those items that were previously reported only as components of equity and
were excluded from net income.
3. INVESTMENTS
Information pertaining to Phoenix Life and Annuity's investments, net
investment income and unrealized investment gains and losses follows:
DEBT SECURITIES
The amortized cost and fair value of investments in debt securities as of
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED FAIR
COST GAINS VALUE
(IN THOUSANDS)
<S> <C> <C> <C>
AVAILABLE-FOR-SALE:
U.S. government and agency bonds $5,127 $ 340 $5,467
Corporate securities 4,143 171 4,314
------ ------ ------
TOTAL DEBT SECURITIES $9,270 $ 511 $9,781
====== ====== ======
</TABLE>
The amortized cost and fair value of investments in debt securities as of
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED FAIR
COST GAINS VALUE
(IN THOUSANDS)
AVAILABLE-FOR-SALE:
<S> <C> <C> <C>
U.S. government and agency bonds $6,008 $ 177 $6,185
Corporate securities 999 25 1,024
------ ------ ------
TOTAL DEBT SECURITIES $7,007 $ 202 $7,209
====== ====== ======
</TABLE>
33
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of these investments, by contractual
maturity, as of December 31, 1998 are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties, or
Phoenix Life and Annuity may have the right to put or sell the obligations
back to the issuers.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
(IN THOUSANDS)
<S> <C> <C>
Due after one year through five years $5,128 $5,468
Due after five years through ten years 1,057 1,058
Due after ten years 3,085 3,255
------ ------
Total $9,270 $9,781
====== ======
</TABLE>
NET INVESTMENT INCOME
The components of net investment income for the years ended December 31,
1998 and 1997 and from March 30, 1996 to December 31, 1996 (successor
period) and January 1, 1996 to March 29, 1996 (predecessor period) were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996 1996
SUCCESSOR SUCCESSOR SUCCESSOR PREDECESSOR
PERIOD PERIOD PERIOD PERIOD
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Debt security investments $583 $376 $226
Short-term investments 115 259 214 $ 95
---- ---- ---- ----
698 635 440 95
Less investment expenses 10 11 7
---- ---- ---- ----
Net investment income $688 $624 $433 $ 95
==== ==== ==== ====
</TABLE>
UNREALIZED INVESTMENT GAINS AND LOSSES
Unrealized gains on investments carried at fair value at December 31, were
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Unrealized investment gains $311 $132 $ 60
Deferred income taxes 109 46 21
---- ---- ----
Net unrealized investment gains $202 $ 86 $ 39
==== ==== ====
</TABLE>
34
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. GOODWILL
Phoenix Life and Annuity, formerly Savers Life Insurance Company of America,
was acquired by way of a stock purchase agreement on March 29, 1996 and was
accounted for under the purchase method of accounting. The assets and
liabilities were recorded at fair value as of the date of acquisition and
goodwill of approximately $1.0 million was pushed-down to Phoenix Life and
Annuity from PM Holdings.
Goodwill was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Goodwill $969 $969
Accumulated amortization (268) (171)
---- ----
Total $701 $798
==== ====
</TABLE>
5. INCOME TAXES
A summary of income taxes in the Statement of Income, Comprehensive Income
and Equity for the years ended December 31, 1998 and 1997 and the period
from March 30, 1996 to December 31, 1996 (successor period) is presented
below. No income taxes were recorded for the period from January 1, 1996 to
March 29, 1996 (predecessor period).
<TABLE>
<CAPTION>
1998 1997 1996
SUCCESSOR SUCCESSOR SUCCESSOR
PERIOD PERIOD PERIOD
(IN THOUSANDS)
<S> <C> <C> <C>
Current income taxes $199 $191 $131
Deferred income taxes (24) (2) (2)
---- ---- ----
Total $175 $189 $129
==== ==== ====
</TABLE>
35
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The income taxes attributable to the successor and predecessor periods are
different than the amounts determined by multiplying income before taxes by
the statutory income tax rate. In the predecessor period, Savers Life was a
consolidated subsidiary of a thrift under the control of the Resolution
Trust Corporation. During the predecessor period, an interagency agreement
between the Resolution Trust Corporation and the Internal Revenue Service
stated that the Internal Revenue Service would not impose income taxes on
consolidated subsidiaries of thrifts under Resolution Trust Corporation
control. Accordingly, no provision for the predecessor period was recorded.
The sources and the tax effect of the differences between the provision and
the result of multiplying the income before taxes by the statutory federal
income tax rate for the years ended December 31, 1998 and 1997 and periods
from March 30, 1996 to December 31, 1996 (successor period) and January 1,
1996 to March 29, 1996 (predecessor period) were as follows:
<TABLE>
<CAPTION>
1998 1997 1996 1996
SUCCESSOR SUCCESSOR SUCCESSOR PREDECESSOR
PERIOD PERIOD PERIOD PERIOD
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income tax expense
at statutory rate $185 35% $186 35% $123 35% $ 34 35%
Goodwill (10) (2%) 3 1% 7 2%
Other (1) 0% (34) (35%)
---- ---- ---- ----
Income taxes $175 33% $189 36% $129 37% $ 0%
==== ==== ==== ====
</TABLE>
The deferred income tax liability represents the tax effects of temporary
differences. The components were as follows:
<TABLE>
<CAPTION>
1998 1997
SUCCESSOR SUCCESSOR
PERIOD PERIOD
(IN THOUSANDS)
<S> <C> <C>
Net unrealized investment gains $179 $ 70
Investments 9 12
Goodwill (37) (16)
---- ----
Deferred tax liability, net $151 $ 66
==== ====
</TABLE>
36
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. COMPREHENSIVE INCOME
The components of, and related tax effects for, other comprehensive income
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
SUCCESSOR SUCCESSOR SUCCESSOR
PERIOD PERIOD PERIOD
(IN THOUSANDS)
<S> <C> <C> <C>
UNREALIZED GAINS ON SECURITIES
AVAILABLE-FOR-SALE ARISING DURING PERIOD:
Before-tax amount $311 $132 $ 60
Tax expense 109 46 21
---- ---- ----
Net-of-tax amount 202 86 39
---- ---- ----
RECLASSIFICATION ADJUSTMENT FOR GAINS OR
LOSSES REALIZED IN NET INCOME:
Before-tax amount 9
Tax expense 3
---- ---- ----
Net-of-tax amount 6
---- ---- ----
NET UNREALIZED GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount 311 132 69
Tax expense 109 46 24
---- ---- ----
Net-of-tax amount $202 $ 86 $ 45
==== ==== ====
</TABLE>
The following table summarizes accumulated other comprehensive income
balances:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
SUCCESSOR SUCCESSOR
PERIOD PERIOD
(IN THOUSANDS)
<S> <C> <C>
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year $131 $ 45
Change during period 202 86
---- ----
Balance, end of year $333 $131
</TABLE>
7. RELATED PARTY TRANSACTIONS
Phoenix and its affiliates provide services and facilities to Phoenix Life
and Annuity and are reimbursed through a cost allocation process. Investment
related expenses are allocated to Phoenix Life and Annuity from PM Holdings.
Phoenix Investment Counsel, Inc., a wholly-owned subsidiary of Phoenix
Investment Partners entered into a contract to manage the general account
investments of Phoenix Life and Annuity. PM Holdings owns approximately 60%
of the outstanding common stock of Phoenix Investment Partners.
37
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Financial instruments that are subject to fair value disclosure requirements
(insurance contracts are excluded) are carried in the financial statements
at amounts that approximate fair value. The fair values presented for
certain financial instruments are estimates which, in many cases, may differ
significantly from the amounts which could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of
fair value are based on discounted cash flow analyses which utilize current
interest rates for similar financial instruments which have comparable terms
and credit quality.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
SHORT-TERM INVESTMENTS, CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
DEBT SECURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
debt securities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
9. STATUTORY FINANCIAL INFORMATION
Phoenix's insurance subsidiaries are required to file annual statements with
state regulatory authorities prepared on an accounting basis prescribed or
permitted by such authorities. As of December 31, 1998, Phoenix Life and
Annuity had no material practices that were not prescribed by the Insurance
Department of the State of Connecticut. Statutory equity differs from equity
reported in accordance with generally accepted accounting principles for
life insurance companies primarily because investment reserves are based on
different assumptions and income tax expense reflects only taxes paid or
currently payable.
The following is a reconciliation of the statutory net income of Phoenix
Life and Annuity, as reported to regulatory authorities, to the net income
as reported in these financial statements:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $426 $428 $369
Amortization of goodwill (97) (90) (81)
Deferred income taxes 24 3
Other, net 32
---- ---- ----
Net income, as reported $353 $341 $320
==== ==== ====
</TABLE>
38
<PAGE>
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following is a reconciliation of the statutory equity and asset
valuation reserve of Phoenix Life and Annuity, as reported to regulatory
authorities, to equity as reported in these financial statements at:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Statutory equity and asset valuation reserve $11,301 $10,875
Goodwill 701 798
Investment valuation allowances 513 202
Deferred income tax and other liabilities (151) (66)
------- -------
Equity, as reported $12,364 $11,809
======= =======
</TABLE>
The Connecticut Insurance Holding Act limits the maximum amount of annual
dividends or other distributions available to stockholders of Connecticut
insurance companies without prior approval of the Insurance Commissioner.
Under current law, the maximum dividend distribution which may be made by
Phoenix Life and Annuity during 1998 without prior approval is subject to
restrictions relating to statutory surplus.
10. INDEMNIFICATION
Prior to the acquisition, Savers Life had reinsurance contracts with three
unaffiliated reinsurers which it had assumed between 1986 and 1989 and which
it assigned to Winterthur Life Re Insurance Company in October 1995. Under
the terms of the stock purchase agreement, Central United Life has
indemnified Phoenix for any liability in excess of $15,000 resulting from
these reinsurance contracts. Phoenix considers any liability to Phoenix Life
and Annuity as a result of these contracts to be remote and has indemnified
Phoenix Life and Annuity.
39
<PAGE>
PHOENIX LIFE AND ANNUITY
VARIABLE UNIVERSAL LIFE ACCOUNT
As of December 31, 1998, there had been no sales of the product described in
this Prospectus and, therefore, no deposits were made to Phoenix Life and
Annuity Variable Universal Life Account. Accordingly, no financial statements
are available for the VUL Account.
40
<PAGE>
APPENDIX A
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE
PERFORMANCE. THEY DO NOT ILLUSTRATE HOW ACTUAL PERFORMANCE WILL AFFECT THE
BENEFITS UNDER A POLICY BECAUSE THEY DO NOT REFLECT COST OF INSURANCE, PREMIUM
TAX CHARGES, PREMIUM SALES CHARGES AND SURRENDER CHARGES, IF APPLICABLE. FOR
THIS INFORMATION SEE APPENDIX C "ILLUSTRATIONS OF DEATH BENEFITS, POLICY VALUES
AND CASH SURRENDER VALUES." Performance information may be expressed as yield
and effective yield of the Phoenix-Goodwin Money Market Subaccount, as yield of
the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount and as total return of
any Subaccount. Current yield for the Phoenix-Goodwin Money Market Subaccount
will be based on the income earned by the Subaccount over a given 7-day period
(less a hypothetical charge reflecting deductions for expenses taken during the
period) and then annualized, i.e., the income earned in the period is assumed to
be earned every seven days over a 52-week period and is stated in terms of an
annual percentage return on the investment. Effective yield is calculated
similarly but reflects the compounding effect of earnings on reinvested
dividends. Yield and effective yield reflect the Mortality and Expense Risk
charge on the VUL Account level.
Yield calculations of the Phoenix-Goodwin Money Market Subaccount used for
illustration purposes are based on the consideration of a hypothetical
participant's account having a balance of exactly one Unit at the beginning of a
7-day period, which period will end on the date of the most recent financial
statements. The yield for the Subaccount during this 7-day period will be the
change in the value of the hypothetical participant's account's original Unit.
The following is an example of this yield calculation for the Phoenix-Goodwin
Money Market Subaccount based on a 7-day period ending December 31, 1998.
Example:
Assumptions:
Value of hypothetical pre-existing account with exactly one
unit at the beginning of the period:................ 1.501512
Value of the same account (excluding capital changes) at the
end of the 7-day period:............................ 1.50245
Calculation:
Ending account value ............................... 1.50245
Less beginning account value ....................... 1.501512
Net change in account value ........................ 0.000938
Base period return:
(adjusted change/beginning account value) .......... 0.000625
Current yield = return x (365/7) = ................... 3.26%
Effective yield = [(1 + return)(365/7)] - 1 = ........ 3.31%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time, or other investment companies, due to charges which
will be deducted on the VUL Account level.
For the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount, quotations of
yield will be based on all investment income per unit earned during a given
30-day period (including dividends and interest), less expenses accrued during
the period ("net investment income"), and are computed by dividing net
investment income by the maximum offering price per unit on the last day of the
period.
When a Subaccount advertises its total return, it usually will be calculated
for one year, five years, and ten years or since inception if the Subaccount has
not been in existence for at least ten years. Total return is measured by
comparing the value of a hypothetical $10,000 investment in the Subaccount at
the beginning of the relevant period to the value of the investment at the end
of the period, assuming the reinvestment of all distributions at net asset value
and the deduction of the Mortality and Expense Risk, Issue Expense and Monthly
Administrative Charges.
For those Subaccounts within the VUL Account that have not been available
for one of the quoted periods, the average annual total return quotations will
show the investment performance such Subaccount would have achieved (reduced by
the applicable charges) had it been available to invest in shares of the Fund
for the period quoted.
The following performance tables display historical investment results of
the Subaccounts of the VUL Account. This information may be useful in helping
potential investors in deciding which Subaccounts to choose and in assessing the
competence of the investment advisers. The performance figures shown should be
considered in light of the investment objectives and policies, characteristics
and quality of the Subaccounts and market conditions during the periods of time
quoted. The performance figures should not be considered as estimates or
predictions of future performance. Investment return of the Subaccounts are not
guaranteed and will fluctuate. Below are quotations of average annual total
return calculated as described above for all Subaccounts with at least one year
of results. POLICY CHARGES (INCLUDING COST OF INSURANCE, PREMIUM TAX CHARGES,
PREMIUM SALES CHARGES AND SURRENDER CHARGES) ARE NOT REFLECTED.
41
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1998(1,4)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series..................... 7/15/97 27.99% N/A N/A 22.48%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series...................... 5/1/90 24.38% 11.47% N/A 9.41%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series........................... 9/17/96 -7.25% N/A N/A -19.21%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series........ 5/1/95 -23.54% N/A N/A 10.03%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series........................ 3/2/98 N/A N/A N/A 22.97%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series............................ 5/1/92 15.64% 11.41% N/A 11.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series.............................. 1/1/83 26.35% 16.84% 18.67% 17.90%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series........................ 10/10/82 2.09% 3.24% 3.93% 4.97%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series........... 1/1/83 -6.92% 5.20% 7.78% 8.67%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series................ 9/17/84 17.36% 11.33% 12.59% 12.34%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series..................... 1/29/96 40.62% N/A N/A 21.65%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series...................... 3/2/98 N/A N/A N/A 7.87%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series.................. 3/2/98 N/A N/A N/A 17.31%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series....................... 3/2/98 N/A N/A N/A -13.78%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series....................... 3/2/98 N/A N/A N/A 18.57%
- -----------------------------------------------------------------------------------------------------------------------------------
EAFE[registered trademark]Equity Index Fund................ 8/22/97 18.18% N/A N/A 7.07%
- -----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II........... 3/28/94 4.58% N/A N/A 4.89%
- -----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II......................... 3/1/94 -0.25% N/A N/A 7.72%
- -----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(2,3).............. 5/1/98 N/A N/A N/A 0.98%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund-- Class 2(2,3)............. 11/28/88 3.07% 9.64% 10.40% 10.24%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund-- Class 2(2,3)........... 9/15/96 -23.45% N/A N/A -24.14%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton International Fund-- Class 2(2,3)................ 5/1/92 5.95% 9.77% N/A 12.28%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund-- Class 2(2,3)........................ 11/4/88 -1.86% 9.18% 10.48% 10.18%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty....................................... 2/1/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap............................. 5/1/95 13.06% N/A N/A 19.55%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty.............................................. 2/1/99 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap...................................... 5/1/95 5.59% N/A N/A 25.06%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The average annual total return is the annual compound return that results
from holding an initial investment of $10,000 for the time period indicated.
Returns are net of $150 Issue Expense Charge, $5 Monthly Administrative Fee,
Investment Management Fees and Mortality and Expense Risk Charges.
(2) Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Investments), performance shown for periods prior to that
date represent the historical results of Class 1 shares. Performance since
that date reflect Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
(3) The manager is limiting fund expenses, which increases total returns.
(4) Performance data quoted represents the investment return of the appropriate
Series adjusted for the PLAC Flex Edge Success charges had the Subaccount
started on the inception date of the appropriate Series.
42
<PAGE>
Advertisements, sales literature and other communications may contain
information about any Series' or Adviser's current investment strategies and
management style. Current strategies and style may change to respond to a
changing market and economic conditions. From time to time, the Series may
discuss specific portfolio holdings or industries in such communications. To
illustrate components of overall performance, the Series may separate their
cumulative and average annual returns into income results and capital gains or
losses; or cite separately, as a return figure, the equity or bond portion of a
Series' portfolio; or compare a Series' equity or bond return figure to
well-known indices of market performance including, but not limited to, the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"), Dow Jones
Industrial Average, First Boston High Yield Index and Salomon Brothers Corporate
and Government Bond Indices.
Occasionally, The VUL Account may include in advertisements containing total
return, the ranking of those performance figures relating to such figures for
groups of Subaccounts having similar investment objectives as categorized by
ranking services such as:
Lipper Analytical Services, Inc. Morningstar, Inc.
CDA Investment Technologies, Inc. Weisenberger Financial Services, Inc.
Additionally, the Funds may compare a Series' performance results to other
investment or savings vehicles (such as certificates of deposit) and may refer
to results published in various publications such as:
Changing Times Forbes
Fortune Money
Barrons Business Week
Investor's Business Daily The Stanger Register
Stanger's Investment Adviser The Wall Street Journal
The New York Times Consumer Reports
Registered Representative Financial Planning
Financial Services Weekly Financial World
U.S. News and World Report Standard & Poor's
The Outlook Personal Investor
The Funds may occasionally illustrate the benefits of tax deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans. The total return also may be used to compare the performance
of a Series against certain widely acknowledged outside standards or indices for
stock and bond market performance such as:
S&P 500 Dow Jones Industrial Average
Europe Australia Far East Index (EAFE) Consumers Price Index
Shearson Lehman Corporate Index Shearson Lehman T-Bond Index
The S&P 500 is a commonly quoted market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 common stocks relative
to the base period 1940-43. The S&P 500 is composed almost entirely of common
stocks of companies listed on the NYSE, although the common stocks of a few
companies listed on the American Stock Exchange or traded over the counter are
included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
70-80% of the market value of all issues traded on the NYSE.
The Funds' Annual Reports, available upon request and without charge,
contain a discussion of the performance of the Funds and a comparison of that
performance to a securities market index.
43
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,4)
- --------------------------------------------------------------------------------------------------------------------------
SERIES 1983 1984 1985 1986 1987 1988 1989 1990 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A -8.63% 18.79%
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series 31.84% 9.79% 33.85% 19.51% 6.08% 3.09% 34.53% 3.32% 41.60%
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 7.51% 9.34% 7.17% 5.66% 5.67% 6.60% 8.03% 7.51% 5.14%
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 5.16% 10.45% 19.65% 18.34% 0.28% 9.61% 6.92% 4.54% 18.66%
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series N/A -1.31% 26.33% 14.77% 11.66% 1.53% 18.53% 5.15% 28.27%
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
EAFE[registered trademark] Equity Index Fund N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund -- Class 2(2,3) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund -- Class 2(2,3) N/A N/A N/A N/A N/A 0.21% 12.13% -8.95% 26.42%
- --------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund -- Class 2(2,3) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Templeton International Fund -- Class 2(2,3) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund -- Class 2(2,3) N/A N/A N/A N/A N/A -0.99% 13.48% -11.99% 26.22%
- --------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,4) (continued)
- ------------------------------------------------------------------------------------------------------------
SERIES 1992 1993 1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series N/A N/A N/A N/A N/A 5.46% 30.64%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series -13.52% 37.33% -0.73% 8.72% 17.71% 11.16% 26.92%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A -0.06% -32.94% -5.21%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A 17.19% 32.10% 21.09% -21.83%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A 25.45%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series 9.06% 7.75% -3.61% 22.37% 9.68% 17.00% 18.07%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series 9.41% 18.75% 0.66% 29.85% 11.69% 20.12% 28.98%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 2.75% 2.06% 3.01% 4.86% 4.19% 4.35% 4.26%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 9.23% 14.99% -6.21% 22.56% 11.52% 10.21% -4.91%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series 9.79% 10.12% -2.19% 17.27% 8.18% 19.78% 19.84%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series N/A N/A N/A N/A 9.55% 16.25% 43.55%
- ------------------------------------------------------------------------------------------------------------
hoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A 10.07%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A 19.67%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A -11.95%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A 20.97%
- ------------------------------------------------------------------------------------------------------------
EAFE[registered trademark] Equity Index Fund N/A N/A N/A N/A N/A -6.87% 20.64%
- ------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A 1.99% 7.90% 3.37% 7.71% 6.80%
- ------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A -4.26% 19.42% 13.40% 12.92% 1.88%
- ------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund -- Class 2(2,3) N/A N/A N/A N/A N/A N/A 2.62%
- ------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund -- Class 2(2,3) 6.97% 24.86% -4.00% 21.29% 17.64% 14.37% 5.27%
- ------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund -- Class 2(2,3) N/A N/A N/A N/A 1.05% -29.95% -21.69%
- ------------------------------------------------------------------------------------------------------------
Templeton International Fund -- Class 2(2,3) -6.80% 45.85% -3.27% 14.56% 22.77% 12.76% 8.17%
- ------------------------------------------------------------------------------------------------------------
Templeton Stock Fund -- Class 2(2,3) 6.02% 32.68% -3.25% 23.97% 21.17% 10.75% 0.24%
- ------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A 33.96% 31.15% -2.24% 15.41%
- ------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A 16.01% 45.64% 28.41% 7.83%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Rates are net of Mortality and Expense Risk Charges and Investment
Management fees for the Subaccounts.
(2) Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Investments), performance shown for periods prior to that
date represent the historical results of Class 1 shares. Performance since
that date reflect Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
(3) The manager is limiting fund expenses, which increases total returns.
(4) Performance data quoted represents the investment return of the
appropriate Series adjusted for the PLAC Flex Edge Success charges had the
Subaccount started on the inception date of the appropriate Series.
These rates of return are not an estimate or guarantee of future performance.
44
<PAGE>
APPENDIX B
THE GUARANTEED INTEREST ACCOUNT
- --------------------------------------------------------------------------------
Contributions to the GIA under the Policy and transfers to the GIA become
part of the PLAC General Account (the "General Account"), which supports
insurance and annuity obligations. Because of exemptive and exclusionary
provisions, interest in the General Account has not been registered under the
Securities Act of 1933 ("1933 Act") nor is the General Account registered as an
investment company under the Investment Company Act of 1940 ("1940 Act").
Accordingly, neither the General Account nor any interest therein is
specifically subject to the provisions of the 1933 or 1940 Acts and the staff of
the Securities and Exchange Commission has not reviewed the disclosures in this
Prospectus concerning the GIA. Disclosures regarding the GIA and the General
Account, however, may be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
The General Account is made up of all of the general assets of PLAC other
than those allocated to any separate account. Premium payments will be allocated
to the GIA and, therefore, the General Account, as elected by the Policyowner at
the time of purchase or as subsequently changed. PLAC will invest the assets of
the General Account in assets chosen by it and allowed by applicable law.
Investment income from General Account assets is allocated between PLAC and the
contracts participating in the General Account, in accordance with the terms of
such contracts.
Investment income from the General Account allocated to PLAC includes
compensation for mortality and expense risks borne by it in connection with
General Account contracts.
The amount of investment income allocated to the Policies will vary from
year to year in the sole discretion of PLAC. However, PLAC guarantees that it
will credit interest at a rate of not less than 4% per year, compounded
annually, to amounts allocated to the unloaned portion of the GIA. The loaned
portion of the GIA will be credited interest at an effective annual rate of 2%.
PLAC may credit interest at a rate in excess of 4% per year; however, it is not
obligated to credit interest in excess of 4% per year.
On the last business day of each calendar week, PLAC will set the excess
interest rate, if any, that will apply to premium payments made to the GIA. That
rate will remain in effect for such premium payments for an initial guarantee
period of one full year from the date of premium payment. Upon expiration of the
initial one-year guarantee period (and each subsequent one-year guarantee period
thereafter), the rate to be applied to any premium payments whose guaranteed
period has just ended will be the same rate as is applied to new premium
payments allocated at that time to the GIA. This rate will likewise remain in
effect for a guarantee period of one full year from the date the new rate is
applied.
Excess interest, if any, will be determined by PLAC based on information as
to expected investment yields. Some of the factors that PLAC may consider in
determining whether to credit interest to amounts allocated to the GIA and the
amount thereof, are general economic trends, rates of return currently available
and anticipated on investments, regulatory and tax requirements and competitive
factors. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE GIA IN EXCESS OF 4%
PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF PLAC AND WITHOUT REGARD TO
ANY SPECIFIC FORMULA. THE POLICY OWNER ASSUMES THE RISK THAT INTEREST CREDITED
TO GIA ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 4% FOR ANY GIVEN
YEAR.
PLAC is aware of no statutory limitations on the maximum amount of interest
it may credit, and the Board of Directors has set no limitations. However,
inherent in PLAC's exercise of discretion in this regard is the equitable
allocation of distributable earnings and surplus among its various
Policyholders, Contract Owners and shareholders.
Excess interest, if any, will be credited on the GIA Policy Value. PLAC
guarantees that, at any time, the GIA Policy Value will not be less than the
amount of premium payments allocated to the GIA, plus interest at the rate of 4%
per year, compounded annually, plus any additional interest which PLAC may, in
its discretion, credit to the GIA, less the sum of all annual administrative or
surrender charges, any applicable premium taxes, and less any amounts
surrendered or loaned. If the Policyowner surrenders the Policy, the amount
available from the GIA will be reduced by any applicable surrender charge and
annual administration charge. See "Deductions and Charges."
IN GENERAL, YOU CAN MAKE ONLY ONE TRANSFER PER YEAR FROM THE GIA. THE AMOUNT
THAT CAN BE TRANSFERRED OUT IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
POLICY VALUE IN THE GIA AT THE TIME OF THE TRANSFER. IF YOU ELECT THE SYSTEMATIC
TRANSFER PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT OF THE GIA
OVER A MINIMUM 18-MONTH PERIOD. ALSO, THE TOTAL POLICY VALUE ALLOCATED TO THE
GIA MAY BE TRANSFERRED OUT OF THE GIA TO ONE OR MORE OF THE SUBACCOUNTS OF THE
VUL ACCOUNT OVER A CONSECUTIVE FOUR-YEAR PERIOD ACCORDING TO THE FOLLOWING
ANNUALLY RENEWABLE SCHEDULE:
YEAR ONE: 25% YEAR TWO: 33%
YEAR THREE: 50% YEAR FOUR: 100%
45
<PAGE>
APPENDIX C
ILLUSTRATIONS OF DEATH BENEFITS, POLICY VALUES ("ACCOUNT VALUES") AND CASH
SURRENDER VALUES
- --------------------------------------------------------------------------------
The tables on the following pages illustrate how a Policy's death benefits,
account values and Cash Surrender Value could vary over time assuming constant
hypothetical gross (after tax) annual investment returns of 0%, 6% and 12%. The
Policy benefits will differ from those shown in the tables if the annual
investment returns are not absolutely constant. That is, the figures will be
different if the returns averaged 0%, 6% or 12% over a period of years but went
above or below those figures in individual Policy Years. The Policy benefits
also will differ, depending on your premium allocations to each Subaccount of
the VUL Account, if the overall actual rates of return averaged 0%, 6% or 12%,
but went above or below those figures for the individual Subaccounts. The tables
are for standard risk males and females who have never smoked. In states where
cost of insurance rates are not based on the Insured's sex, the tables
designated "male" apply to all standard risk insureds who have never smoked.
Account Values and Cash Surrender Values may be lower for smokers or former
smokers or for risk classes involving higher mortality risk. Planned premium
payments are assumed to be paid at the beginning of each Policy Year. The
difference between the Policy Value and the Cash Surrender Value in the first 10
years is the Surrender Charge.
The death benefit, account value and Cash Surrender Value amounts reflect
the following current charges:
1. Issue Charge of $150.
2. Monthly Administrative Charge of $5 per month ($10 per month guaranteed
maximum).
3. Premium Tax Charge of 2.25%.
4. A Federal Tax Charge of 1.5%.
5. Cost of Insurance Charge. The tables illustrate cost of insurance at
both the current rates and at the maximum rates guaranteed in the
Policies. See "Charges and Deductions--Cost of Insurance."
6. Mortality and Expense Risk Charge, which is a daily charge equivalent
to .80% on an annual basis (or .25% on an annual basis after the 15th
Policy Year), against the VUL Account for mortality and expense risks.
See "Charges and Deductions--Mortality and Expense Risk Charge."
These illustrations also assume an average investment advisory fee of .70%
on an annual basis, of the average daily net asset value of each of the Series
of the Funds. These illustrations also assume other ongoing average Fund
expenses of .30%. All other Fund expenses, except capital items such as
brokerage commissions, are paid by the Adviser or PLAC. Management may decide to
limit the amount of expense reimbursement in the future. If expense
reimbursement had not been in place for the fiscal year ended December 31, 1998,
average total operating expenses for the Series would have been approximately
1.43% of the average net assets. See "Charges and Deductions--Investment
Management Charge."
Taking into account the Mortality and Expense Risk Charge and the investment
advisory fees and expenses, the gross annual investment return rates of 0%, 6%
and 12% on the Funds' assets are equivalent to net annual investment return
rates of approximately -1.79%, 4.16% and 10.12%, respectively (applicable for
the first 15 Policy Years and -1.25%, 4.66% and 10.72%, respectively, after the
15th Policy Year). For individual illustrations, interest rates ranging between
0% and 12% may be selected in place of the 0%, 6% and 12% rates.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the VUL Account in the future. If such tax charges
are imposed in the future, then in order to produce after tax returns equal to
those illustrated for 0%, 6% and 12%, a sufficiently higher amount in excess of
the hypothetical interest rates would have to be earned. See "Charges and
Deductions--Other Charges--Taxes."
The second column of each table shows the amount that would accumulate if an
amount equal to the premiums paid were invested to earn interest, after taxes,
at 5% compounded annually. These tables show that if a Policy is returned in its
very early years for payment of its Cash Surrender Value, that Cash Surrender
Value may be low in comparison to the amount of the premiums accumulated with
interest. Thus, the cost of owning a Policy for a relatively short time may be
high.
On request, we will furnish the Policyowner with a comparable illustration
based on the age and sex of the proposed insured person(s), standard risk
assumptions and the initial face amount and planned premium chosen.
46
<PAGE>
<TABLE>
<CAPTION>
PHOENIX LIFE AND ANNUITY COMPANY PAGE 1 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS -- A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @6% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 575 0 100,000 620 0 100,000 665 0 100,000
2 1,000 2,153 1,281 396 100,000 1,412 527 100,000 1,549 664 100,000
3 1,000 3,310 1,965 658 100,000 2,228 921 100,000 2,513 1,206 100,000
4 1,000 4,526 2,627 1,320 100,000 3,068 1,761 100,000 3,565 2,258 100,000
5 1,000 5,802 3,265 1,958 100,000 3,931 2,624 100,000 4,711 3,404 100,000
6 1,000 7,142 3,880 2,718 100,000 4,818 3,656 100,000 5,962 4,800 100,000
7 1,000 8,549 4,468 3,450 100,000 5,726 4,709 100,000 7,324 6,307 100,000
8 1,000 10,027 5,030 4,157 100,000 6,658 5,786 100,000 8,812 7,939 100,000
9 1,000 11,578 5,564 5,129 100,000 7,612 7,176 100,000 10,434 9,998 100,000
10 1,000 13,207 6,071 6,071 100,000 8,589 8,589 100,000 12,206 12,206 100,000
11 1,000 14,917 6,556 6,556 100,000 9,594 9,594 100,000 14,148 14,148 100,000
12 1,000 16,713 7,018 7,018 100,000 10,629 10,629 100,000 16,279 16,279 100,000
13 1,000 18,599 7,456 7,456 100,000 11,695 11,695 100,000 18,618 18,618 100,000
14 1,000 20,579 7,873 7,873 100,000 12,794 12,794 100,000 21,188 21,188 100,000
15 1,000 22,657 8,265 8,265 100,000 13,924 13,924 100,000 24,011 24,011 100,000
16 1,000 24,840 8,683 8,683 100,000 15,174 15,174 100,000 27,269 27,269 100,000
17 1,000 27,132 9,077 9,077 100,000 16,469 16,469 100,000 30,873 30,873 100,000
18 1,000 29,539 9,442 9,442 100,000 17,807 17,807 100,000 34,861 34,861 100,000
19 1,000 32,066 9,780 9,780 100,000 19,192 19,192 100,000 39,279 39,279 100,000
20 1,000 34,719 10,085 10,085 100,000 20,622 20,622 100,000 44,174 44,174 100,000
@ 65 1,000 69,761 10,033 10,033 100,000 39,349 39,349 100,000 149,429 149,429 179,316
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
34.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
47
<PAGE>
<TABLE>
<CAPTION>
PHOENIX LIFE AND ANNUITY COMPANY PAGE 2 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS -- A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @6% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 512 0 100,000 555 0 100,000 599 0 100,000
2 1,000 2,153 1,156 271 100,000 1,280 394 100,000 1,409 524 100,000
3 1,000 3,310 1,779 472 100,000 2,025 718 100,000 2,291 984 100,000
4 1,000 4,526 2,381 1,074 100,000 2,790 1,483 100,000 3,252 1,945 100,000
5 1,000 5,802 2,959 1,652 100,000 3,575 2,268 100,000 4,299 2,992 100,000
6 1,000 7,142 3,515 2,353 100,000 4,381 3,218 100,000 5,438 4,276 100,000
7 1,000 8,549 4,044 3,027 100,000 5,204 4,186 100,000 6,678 5,661 100,000
8 1,000 10,027 4,548 3,676 100,000 6,046 5,173 100,000 8,030 7,158 100,000
9 1,000 11,578 5,025 4,590 100,000 6,905 6,470 100,000 9,502 9,067 100,000
10 1,000 13,207 5,475 5,475 100,000 7,783 7,783 100,000 11,108 11,108 100,000
11 1,000 14,917 5,895 5,895 100,000 8,677 8,677 100,000 12,858 12,858 100,000
12 1,000 16,713 6,284 6,284 100,000 9,587 9,587 100,000 14,768 14,768 100,000
13 1,000 18,599 6,640 6,640 100,000 10,511 10,511 100,000 16,852 16,852 100,000
14 1,000 20,579 6,963 6,963 100,000 11,449 11,449 100,000 19,130 19,130 100,000
15 1,000 22,657 7,250 7,250 100,000 12,399 12,399 100,000 21,620 21,620 100,000
16 1,000 24,840 7,541 7,541 100,000 13,435 13,435 100,000 24,479 24,479 100,000
17 1,000 27,132 7,791 7,791 100,000 14,487 14,487 100,000 27,627 27,627 100,000
18 1,000 29,539 7,992 7,992 100,000 15,551 15,551 100,000 31,093 31,093 100,000
19 1,000 32,066 8,139 8,139 100,000 16,622 16,622 100,000 34,913 34,913 100,000
20 1,000 34,719 8,226 8,226 100,000 17,696 17,696 100,000 39,126 39,126 100,000
@ 65 1,000 69,761 2,779 2,779 100,000 27,921 27,921 100,000 129,447 129,447 155,337
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
34.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
48
<PAGE>
<TABLE>
<CAPTION>
PHOENIX LIFE AND ANNUITY COMPANY PAGE 1 OF 2
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS -- A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @6% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 601 0 100,000 648 0 100,000 694 0 100,000
2 1,000 2,153 1,333 480 100,000 1,468 614 100,000 1,609 755 100,000
3 1,000 3,310 2,043 848 100,000 2,314 1,119 100,000 2,607 1,412 100,000
4 1,000 4,526 2,731 1,536 100,000 3,185 1,990 100,000 3,697 2,501 100,000
5 1,000 5,802 3,395 2,199 100,000 4,081 2,886 100,000 4,885 3,690 100,000
6 1,000 7,142 4,034 2,971 100,000 5,002 3,938 100,000 6,182 5,118 100,000
7 1,000 8,549 4,648 3,715 100,000 5,948 5,015 100,000 7,597 6,664 100,000
8 1,000 10,027 5,236 4,435 100,000 6,918 6,117 100,000 9,141 8,340 100,000
9 1,000 11,578 5,799 5,399 100,000 7,916 7,516 100,000 10,830 10,430 100,000
10 1,000 13,207 6,337 6,337 100,000 8,941 8,941 100,000 12,679 12,679 100,000
11 1,000 14,917 6,858 6,858 100,000 10,002 10,002 100,000 14,710 14,710 100,000
12 1,000 16,713 7,360 7,360 100,000 11,101 11,101 100,000 16,943 16,943 100,000
13 1,000 18,599 7,845 7,845 100,000 12,238 12,238 100,000 19,399 19,399 100,000
14 1,000 20,579 8,311 8,311 100,000 13,415 13,415 100,000 22,101 22,101 100,000
15 1,000 22,657 8,759 8,759 100,000 14,634 14,634 100,000 25,077 25,077 100,000
16 1,000 24,840 9,240 9,240 100,000 15,985 15,985 100,000 28,511 28,511 100,000
17 1,000 27,132 9,703 9,703 100,000 17,393 17,393 100,000 32,315 32,315 100,000
18 1,000 29,539 10,149 10,149 100,000 18,859 18,859 100,000 36,531 36,531 100,000
19 1,000 32,066 10,574 10,574 100,000 20,386 20,386 100,000 41,205 41,205 100,000
20 1,000 34,719 10,980 10,980 100,000 21,976 21,976 100,000 46,389 46,389 100,000
@ 65 1,000 69,761 13,738 13,738 100,000 44,634 44,634 100,000 158,002 158,002 189,603
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
39.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
49
<PAGE>
<TABLE>
<CAPTION>
PHOENIX LIFE AND ANNUITY COMPANY PAGE 2 OF 2
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS -- A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @6% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 533 0 100,000 577 0 100,000 622 0 100,000
2 1,000 2,153 1,198 344 100,000 1,324 470 100,000 1,456 602 100,000
3 1,000 3,310 1,841 646 100,000 2,092 897 100,000 2,365 1,169 100,000
4 1,000 4,526 2,462 1,266 100,000 2,881 1,686 100,000 3,355 2,160 100,000
5 1,000 5,802 3,059 1,864 100,000 3,691 2,496 100,000 4,433 3,238 100,000
6 1,000 7,142 3,633 2,569 100,000 4,522 3,458 100,000 5,608 4,544 100,000
7 1,000 8,549 4,180 3,248 100,000 5,372 4,439 100,000 6,886 5,954 100,000
8 1,000 10,027 4,702 3,901 100,000 6,241 5,440 100,000 8,280 7,479 100,000
9 1,000 11,578 5,199 4,800 100,000 7,133 6,733 100,000 9,801 9,401 100,000
10 1,000 13,207 5,672 5,672 100,000 8,046 8,046 100,000 11,463 11,463 100,000
11 1,000 14,917 6,120 6,120 100,000 8,983 8,983 100,000 13,281 13,281 100,000
12 1,000 16,713 6,542 6,542 100,000 9,943 9,943 100,000 15,271 15,271 100,000
13 1,000 18,599 6,938 6,938 100,000 10,926 10,926 100,000 17,450 17,450 100,000
14 1,000 20,579 7,307 7,307 100,000 11,932 11,932 100,000 19,837 19,837 100,000
15 1,000 22,657 7,647 7,647 100,000 12,961 12,961 100,000 22,455 22,455 100,000
16 1,000 24,840 8,001 8,001 100,000 14,091 14,091 100,000 25,467 25,467 100,000
17 1,000 27,132 8,325 8,325 100,000 15,252 15,252 100,000 28,792 28,792 100,000
18 1,000 29,539 8,613 8,613 100,000 16,444 16,444 100,000 32,464 32,464 100,000
19 1,000 32,066 8,863 8,863 100,000 17,663 17,663 100,000 36,522 36,522 100,000
20 1,000 34,719 9,073 9,073 100,000 18,912 18,912 100,000 41,011 41,011 100,000
@ 65 1,000 69,761 8,000 8,000 100,000 34,760 34,760 100,000 137,914 137,914 165,497
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
39.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
50
<PAGE>
<TABLE>
<CAPTION>
PHOENIX LIFE AND ANNUITY COMPANY PAGE 1 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS -- A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @6% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 573 0 100,574 619 0 100,619 664 0 100,664
2 1,000 2,153 1,277 392 101,278 1,408 523 101,409 1,545 660 101,545
3 1,000 3,310 1,958 651 101,958 2,220 913 102,220 2,504 1,197 102,504
4 1,000 4,526 2,615 1,308 102,615 3,053 1,746 103,053 3,547 2,240 103,548
5 1,000 5,802 3,246 1,939 103,246 3,907 2,600 103,907 4,681 3,374 104,682
6 1,000 7,142 3,852 2,689 103,852 4,781 3,619 104,782 5,915 4,753 105,916
7 1,000 8,549 4,429 3,412 104,429 5,674 4,657 105,675 7,255 6,238 107,256
8 1,000 10,027 4,978 4,106 104,979 6,586 5,714 106,587 8,712 7,840 108,712
9 1,000 11,578 5,498 5,062 105,498 7,515 7,080 107,516 10,295 9,859 110,295
10 1,000 13,207 5,987 5,987 105,988 8,462 8,462 108,462 12,016 12,016 112,016
11 1,000 14,917 6,452 6,452 106,452 9,431 9,431 109,431 13,893 13,893 113,894
12 1,000 16,713 6,891 6,891 106,892 10,423 10,423 110,424 15,943 15,943 115,944
13 1,000 18,599 7,306 7,306 107,306 11,439 11,439 111,439 18,182 18,182 118,182
14 1,000 20,579 7,695 7,695 107,695 12,479 12,479 112,479 20,628 20,628 120,629
15 1,000 22,657 8,058 8,058 108,058 13,541 13,541 113,542 23,302 23,302 123,302
16 1,000 24,840 8,442 8,442 108,443 14,710 14,710 114,711 26,371 26,371 126,371
17 1,000 27,132 8,798 8,798 108,799 15,911 15,911 115,911 29,744 29,744 129,744
18 1,000 29,539 9,123 9,123 109,124 17,140 17,140 117,141 33,450 33,450 133,451
19 1,000 32,066 9,415 9,415 109,416 18,398 18,398 118,399 37,524 37,524 137,524
20 1,000 34,719 9,671 9,671 109,672 19,683 19,683 119,683 42,000 42,000 142,000
@ 65 1,000 69,761 8,668 8,668 108,669 34,126 34,126 134,127 132,080 132,080 232,080
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
33.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
51
<PAGE>
<TABLE>
<CAPTION>
PHOENIX LIFE AND ANNUITY COMPANY PAGE 2 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS -- A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @6% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 511 0 100,511 554 0 100,554 597 0 100,598
2 1,000 2,153 1,153 267 101,153 1,276 391 101,276 1,404 519 101,405
3 1,000 3,310 1,772 465 101,773 2,017 710 102,017 2,282 975 102,282
4 1,000 4,526 2,369 1,062 102,369 2,776 1,469 102,776 3,235 1,928 103,236
5 1,000 5,802 2,941 1,634 102,942 3,553 2,246 103,553 4,270 2,963 104,271
6 1,000 7,142 3,488 2,326 103,489 4,346 3,184 104,347 5,394 4,232 105,395
7 1,000 8,549 4,008 2,990 104,008 5,155 4,137 105,155 6,613 5,596 106,614
8 1,000 10,027 4,500 3,628 104,501 5,978 5,106 105,979 7,936 7,064 107,937
9 1,000 11,578 4,963 4,528 104,963 6,815 6,379 106,815 9,371 8,936 109,372
10 1,000 13,207 5,397 5,397 105,397 7,665 7,665 107,665 10,929 10,929 110,930
11 1,000 14,917 5,798 5,798 105,798 8,524 8,524 108,525 12,618 12,618 112,619
12 1,000 16,713 6,165 6,165 106,166 9,392 9,392 109,392 14,450 14,450 114,450
13 1,000 18,599 6,497 6,497 106,498 10,266 10,266 110,267 16,436 16,436 116,436
14 1,000 20,579 6,792 6,792 106,793 11,145 11,145 111,146 18,590 18,590 118,591
15 1,000 22,657 7,048 7,048 107,048 12,025 12,025 112,026 20,926 20,926 120,927
16 1,000 24,840 7,304 7,304 107,304 12,977 12,977 112,977 23,590 23,590 123,591
17 1,000 27,132 7,513 7,513 107,513 13,928 13,928 113,929 26,493 26,493 126,494
18 1,000 29,539 7,668 7,668 107,669 14,872 14,872 114,873 29,654 29,654 129,655
19 1,000 32,066 7,766 7,766 107,766 15,803 15,803 115,804 33,094 33,094 133,094
20 1,000 34,719 7,796 7,796 107,797 16,710 16,710 116,711 36,832 36,832 136,833
@ 65 1,000 69,761 1,487 1,487 101,487 21,851 21,851 121,852 106,404 106,404 206,404
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
33.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
52
<PAGE>
<TABLE>
<CAPTION>
PHOENIX LIFE AND ANNUITY COMPANY PAGE 1 OF 2
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS -- A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @6% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 600 0 100,601 647 0 100,647 693 0 100,693
2 1,000 2,153 1,330 476 101,331 1,465 611 101,465 1,605 751 101,605
3 1,000 3,310 2,037 842 102,037 2,307 1,111 102,307 2,599 1,403 102,599
4 1,000 4,526 2,720 1,525 102,720 3,172 1,977 103,172 3,681 2,486 103,681
5 1,000 5,802 3,377 2,182 103,378 4,060 2,864 104,060 4,859 3,663 104,859
6 1,000 7,142 4,009 2,945 104,010 4,970 3,906 104,971 6,141 5,077 106,141
7 1,000 8,549 4,613 3,681 104,614 5,901 4,969 105,902 7,535 6,602 107,535
8 1,000 10,027 5,189 4,388 105,190 6,854 6,053 106,854 9,052 8,251 109,052
9 1,000 11,578 5,739 5,339 105,739 7,828 7,429 107,829 10,705 10,305 110,705
10 1,000 13,207 6,261 6,261 106,262 8,827 8,827 108,827 12,507 12,507 112,507
11 1,000 14,917 6,764 6,764 106,764 9,855 9,855 109,856 14,480 14,480 114,480
12 1,000 16,713 7,247 7,247 107,247 10,915 10,915 110,916 16,641 16,641 116,642
13 1,000 18,599 7,709 7,709 107,710 12,008 12,008 112,009 19,009 19,009 119,009
14 1,000 20,579 8,151 8,151 108,152 13,134 13,134 113,134 21,603 21,603 121,603
15 1,000 22,657 8,574 8,574 108,574 14,294 14,294 114,294 24,447 24,447 124,447
16 1,000 24,840 9,026 9,026 109,026 15,575 15,575 115,575 27,717 27,717 127,718
17 1,000 27,132 9,457 9,457 109,458 16,902 16,902 116,902 31,323 31,323 131,324
18 1,000 29,539 9,868 9,868 109,869 18,275 18,275 118,276 35,299 35,299 135,300
19 1,000 32,066 10,256 10,256 110,256 19,695 19,695 119,696 39,682 39,682 139,683
20 1,000 34,719 10,621 10,621 110,622 21,165 21,165 121,165 44,517 44,517 144,518
@ 65 1,000 69,761 12,646 12,646 112,646 40,675 40,675 140,675 145,172 145,172 245,173
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
38.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
53
<PAGE>
<TABLE>
<CAPTION>
PHOENIX LIFE AND ANNUITY COMPANY PAGE 2 OF 2
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS -- A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @6% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 532 0 100,533 576 0 100,577 620 0 100,621
2 1,000 2,153 1,195 341 101,195 1,321 467 101,321 1,452 598 101,453
3 1,000 3,310 1,834 639 101,835 2,085 889 102,085 2,356 1,161 102,357
4 1,000 4,526 2,451 1,256 102,451 2,868 1,673 102,869 3,339 2,144 103,340
5 1,000 5,802 3,042 1,847 103,043 3,670 2,475 103,671 4,407 3,212 104,408
6 1,000 7,142 3,608 2,545 103,609 4,491 3,427 104,491 5,567 4,503 105,568
7 1,000 8,549 4,147 3,214 104,147 5,326 4,394 105,327 6,826 5,893 106,826
8 1,000 10,027 4,657 3,856 104,658 6,179 5,378 106,179 8,193 7,392 108,193
9 1,000 11,578 5,141 4,741 105,142 7,048 6,648 107,048 9,679 9,279 109,679
10 1,000 13,207 5,598 5,598 105,599 7,935 7,935 107,936 11,296 11,296 111,297
11 1,000 14,917 6,029 6,029 106,029 8,840 8,840 108,840 13,057 13,057 113,058
12 1,000 16,713 6,431 6,431 106,432 9,762 9,762 109,762 14,975 14,975 114,976
13 1,000 18,599 6,805 6,805 106,806 10,699 10,699 110,700 17,064 17,064 117,065
14 1,000 20,579 7,148 7,148 107,149 11,651 11,651 111,652 19,339 19,339 119,339
15 1,000 22,657 7,461 7,461 107,461 12,618 12,618 112,618 21,818 21,818 121,818
16 1,000 24,840 7,783 7,783 107,783 13,671 13,671 113,672 24,654 24,654 124,654
17 1,000 27,132 8,070 8,070 108,071 14,743 14,743 114,743 27,761 27,761 127,761
18 1,000 29,539 8,319 8,319 108,320 15,829 15,829 115,830 31,164 31,164 131,165
19 1,000 32,066 8,525 8,525 108,525 16,925 16,925 116,926 34,889 34,889 134,890
20 1,000 34,719 8,686 8,686 108,686 18,030 18,030 118,030 38,970 38,970 138,970
@ 65 1,000 69,761 6,767 6,767 106,768 29,852 29,852 129,852 120,545 120,545 220,545
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
38.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
54
