1933 Act/Rule 485(b)
April 24, 1996
VIA EDGAR
- ---------
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
FILE NOS. 2-78020 AND 811-3488
POST-EFFECTIVE AMENDMENT NO. 24
Gentlemen:
On behalf of Phoenix Home Life Variable Accumulation Account (the
"Registrant"), pursuant to Rule 485(b) under the Securities Act of 1933, as
amended (the "1933 Act") and the Investment Company Act of 1940, as amended,
transmitted herewith is Post-Effective Amendment No. 24 to the above named
registration statement. Also enclosed is an opinion of counsel representing that
this amendment does not contain disclosures which would render it ineligible to
become effective pursuant to paragraph (b) of Rule 485 under the 1933 Act.
This amendment is filed for the purpose of updating the financial
statements and certain other information. Please note that no Financial Data
Schedules are filed as an EDGAR exhibit. This is in reliance upon an April 16th
letter from Lawrence A. Friend, Chief Accountant of the Division of Investment
Management, to George N. Gingold, Esq. stating that the staff would raise no
objection if such Schedules were not filed.
This amendment is to become effective immediately upon filing pursuant
to paragraph (b) of Rule 485.
Please call the undersigned at (860) 403-5788 if you have questions
concerning this amendment.
Very truly yours,
/s/ Richard J. Wirth
Richard J. Wirth, Counsel
Phoenix Home Life
Mutual Insurance Company
Enc.
<PAGE>
April 24, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Phoenix Home Life Mutual Insurance Company
Phoenix Home Life Variable Accumulation Account
Post-Effective Amendment No. 24
File Nos. 2-78020 and 811-3488
Dear Sirs:
We hereby represent that Post-Effective Amendment No. 24 to the above
company's Registration Statement under the above file numbers do not contain
disclosures which would render it ineligible to become effective pursuant to
paragraph (b) of Rule 485 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Richard J. Wirth
Richard J. Wirth, Counsel
Phoenix Home Life
Mutual Insurance Company
<PAGE>
As filed with the Securities and Exchange Commission on April 24, 1996
Registration Nos. 2-78020
811-3488
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [x]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 24 [x]
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 26
(CHECK APPROPRIATE BOX OR BOXES.)
---------------------
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
(EXACT NAME OF REGISTRANT)
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
(NAME OF DEPOSITOR)
ONE AMERICAN ROW, HARTFORD, CONNECTICUT 06115
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(800) 447-4312
(DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------------
DONA D. YOUNG, ESQ.
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06115
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
COPIES TO:
JAMES F. JORDEN, ESQ. RICHARD J. WIRTH, ESQ.
JORDEN BURT BERENSON & JOHNSON LLP PHOENIX HOME LIFE
1025 THOMAS JEFFERSON STREET, N.W. MUTUAL INSURANCE COMPANY
WASHINGTON, D.C. 20007-0805 ONE AMERICAN ROW
HARTFORD, CT 06115
---------------------
It is proposed that this filing will become effective (check appropriate space)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on pursuant to paragraph (a)(i) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
REGISTRANT HAS CHOSEN TO REGISTER AN INDEFINITE NUMBER OF SECURITIES IN
ACCORDANCE WITH RULE 24F-2. THE RULE 24F-2 NOTICE OF REGISTRANT'S MOST RECENT
FISCAL YEAR WAS FILED ON FEBRUARY 27, 1996.
- --------------------------------------------------------------------------------
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
POST-EFFECTIVE AMENDMENT NO. 23 TO REGISTRATION
STATEMENT ON FORM N-4
CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS
AND STATEMENT OF ADDITIONAL INFORMATION
AS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
FORM N-4 ITEM PROSPECTUS CAPTION
<S> <C> <C>
1. Cover Page ..................................................... Cover Page
2. Definitions..................................................... Special Terms
3. Synopsis or Highlights ......................................... Summary of Expenses; Summary
4. Condensed Financial Information ................................ Financial Highlights
5. General Description of Registrant, Depositor, and............... Phoenix Home Life and the Variable Accumulation
Portfolio Companies Account; The Fund; Voting Rights
6. Deductions and Expenses......................................... Deductions and Charges; Sales of Variable Accumulation
Contracts
7. General Description of Variable Annuity Contracts .............. The Variable Accumulation Annuity; Purchase of Contracts;
The Accumulation Period; Miscellaneous Provisions
8. Annuity Period ................................................. The Annuity Period
9. Death Benefits ................................................. Payment Upon Death Before Maturity Date
10. Purchases and Contract Value ................................... Purchase of Contracts; The Accumulation Period; Variable
Account Valuation Procedures; Sales of Variable
Accumulation Contracts
11. Redemptions .................................................... Surrender of Contracts; Partial Withdrawals; Free Look
Period
12. Taxes .......................................................... Federal Income Taxes
13. Legal Proceeding ............................................... Litigation
14. Table of Contents of Statement of Additional Information ....... Statement of Additional Information
15. Cover Page ..................................................... Cover Page
16. Table of Contents .............................................. Table of Contents
17. General Information and History ................................ Not Applicable
18. Services ....................................................... Not Applicable
19. Purchase of Securities Being Offered ........................... Appendix
20. Underwriters ................................................... Underwriter
21. Calculation of Yield Quotations of Money Market
Sub-accounts .................................................. Calculation of Yield and Return
22. Annuity Payments................................................ Calculation of Annuity Payments
23. Financial Statements............................................ Financial Statements
</TABLE>
- ---------------------
Note: This Registration Statement contains two prospectuses. One
describes a variation of the Contract funded by The Phoenix Edge Series
Fund (Version A) and the other describes a variation of the Contract
funded by the Templeton Variable Products Series Fund (Version B). This
Registration Statement also contains two Statements of Additional
Information; one corresponds to Prospectus Version A and the other
corresponds to Prospectus Version B.
<PAGE>
A Contract allowing for a Maturity Date within the first Contract year; variable
payment Annuity Options L, M and N; and loans and hardship withdrawals on the
Group Strategic Edge Contract may not yet be available in your state. For
further information, please call 800-447-4312.
[VERSION A]
PROSPECTUS
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
Variable Accumulation Annuity Contracts
issued by
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
VARIABLE PRODUCTS OPERATIONS
101 MUNSON STREET
P.O. BOX 942
GREENFIELD, MASSACHUSETTS 01302-0942
TELEPHONE: (800) 447-4312
FOR TAX QUALIFIED AND NON-TAX QUALIFIED ANNUITY PLANS
This Prospectus describes variable accumulation annuity contracts
("Contracts") issued by Phoenix Home Life Mutual Insurance Company ("Phoenix
Home Life"). The Contracts provide for both an Accumulation Period and an
Annuity Period. Premium payments under the Contract are flexible. Contracts may
be purchased by individuals or on a group basis by employers to fund
tax-qualified pension and profit-sharing plans. For information on Contracts
issued on a group basis, see "Group Contracts."
Generally, a minimum initial purchase payment of $1,000 is required and each
subsequent purchase payment must be at least $25. If the bank draft investment
program ("checko-matic" as described under "Purchase of Contracts") is elected,
the minimum initial purchase payment required is $25. For Individual Retirement
Accounts (IRAs), the minimum initial purchase payment required is $25. For
individual contracts issued under tax-qualified or employer sponsored plans
other than IRAs, a minimum annual payment of $1,000 must be made. For Contracts
with a Maturity Date in the first Contract year, a minimum initial purchase
payment of $10,000 is required. Generally, a Contract may not be purchased with
respect to a proposed Annuitant who is eighty years of age or older.
Purchase payments are allocated to one or more of the available
Sub-accounts of the Phoenix Home Life Variable Accumulation Account (the
"Account") and/or to the Guaranteed Interest Account (see Appendix A) as
specified by the Contract Owner in the application for the Contract. The Account
is divided into Sub-accounts, each of which invests in a corresponding series
of The Phoenix Edge Series Fund or Wanger Advisors Trust (collectively, the
"Funds").
You may surrender a Contract for any reason within 10 days after its receipt
and receive in cash the adjusted value of the initial purchase payment. You may
receive more or less than the initial payment depending on investment experience
within the Sub-account during the 10-day period, unless the Contract was
issued with the Temporary Money Market Allocation Amendment, in which case your
initial purchase payment is refunded. If the initial purchase payment, or any
portion thereof, was allocated to the Guaranteed Interest Account, that payment
(or portion) and any earned interest is refunded. (See "Free Look Period.")
This Prospectus provides information a prospective investor ought to know
before investing and should be kept for future reference. It is accompanied by
current Prospectuses for the Funds. No offer is being made of a Contract funded
by any Fund for which a current Prospectus has not been delivered.
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, CREDIT UNION OR AFFILIATED ENTITY AND ARE NOT FEDERALLY INSURED OR
OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY AND INVOLVE INVESTMENT RISKS INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
Additional information about the Account has been filed with the
Securities and Exchange Commission in a Statement of Additional Information,
dated May 1, 1996, which is incorporated herein by reference. The Statement of
Additional Information, the table of contents of which is set forth in this
Prospectus, is available without charge upon request by writing or telephoning
Phoenix Home Life at the address or telephone number set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
MAY 1, 1996
1
<PAGE>
TABLE OF CONTENTS
Heading Page
- ---------------------------------------------------------------
SUMMARY OF EXPENSES....................................... 3
FINANCIAL HIGHLIGHTS...................................... 4
PERFORMANCE HISTORY....................................... 7
SPECIAL TERMS............................................. 8
SUMMARY .................................................. 9
THE VARIABLE ACCUMULATION ANNUITY ........................ 11
PHOENIX HOME LIFE AND THE VARIABLE
ACCUMULATION ACCOUNT ................................. 11
THE PHOENIX EDGE SERIES FUND.............................. 12
WANGER ADVISORS TRUST..................................... 12
PURCHASE OF CONTRACTS .................................... 13
DEDUCTIONS AND CHARGES.................................... 13
Premium Tax .......................................... 13
Sales Charges ........................................ 13
Charges for Mortality and Expense Risks............... 13
Charges for Administrative Services .................. 14
Other Charges ........................................ 14
THE ACCUMULATION PERIOD................................... 14
Accumulation Units ................................... 14
Accumulation Unit Values ............................. 15
Transfers ............................................ 15
Surrender of Contract; Partial Withdrawals ........... 15
Lapse of Contract .................................... 16
Payment Upon Death Before Maturity Date .............. 16
GROUP CONTRACTS........................................... 16
Allocated Group Contracts ............................ 16
Unallocated Group Contracts .......................... 17
THE ANNUITY PERIOD ....................................... 17
Variable Accumulation Annuity Contracts............... 17
Annuity Options ...................................... 18
Option A--Life Annuity With Specified Period Certain.. 18
Option B--Non-Refund Life Annuity .................... 18
Option D--Joint and Survivor Life Annuity ............ 18
Option E--Installment Refund Life Annuity ............ 18
Option F--Joint and Survivor Life Annuity With
Specified Period Certain .......................... 18
Option G--Payments for Specified Period .............. 18
Option H--Payments of Specified Amount ............... 18
Option I--Variable Payment Life Annuity with Ten Year
Period Certain .................................... 19
Option J--Joint Survivor Variable Payment Life Annuity
with Ten Year Period Certain ...................... 19
Option K--Variable Payment Annuity for a Specified
Period ............................................ 19
Option L--Variable Payment Life Expectancy Annuity ... 19
Option M--Unit Refund Variable Payment Life Annuity .. 19
Option N--Variable Payment Non-Refund Life Annuity ... 19
Other Options and Rates............................... 19
Other Conditions ..................................... 19
Payment Upon Death After Maturity Date ............... 19
VARIABLE ACCOUNT VALUATION PROCEDURES..................... 20
MISCELLANEOUS PROVISIONS ................................. 20
Assignment............................................ 20
Deferment of Payment ................................. 20
Free Look Period...................................... 20
Amendments to Contracts .............................. 20
Substitution of Fund Shares .......................... 20
Ownership of the Contract ............................ 21
FEDERAL INCOME TAXES ..................................... 21
Introduction ......................................... 21
Tax Status............................................ 21
Taxation of Annuities in General...................... 21
Surrenders or Withdrawals Prior to the Contract
Maturity Date ................................... 21
Surrenders or Withdrawals On or After the Contract
Maturity Date ................................... 21
Penalty Tax on Certain Surrenders and Withdrawals.. 21
Additional Considerations............................. 22
Diversification Standards ............................ 23
Qualified Plans....................................... 23
Tax Sheltered Annuities ........................... 23
Keogh Plans........................................ 24
Individual Retirement Accounts .................... 24
Corporate Pension and Profit-Sharing Plans ........ 24
Deferred Compensation Plans with Respect to
Service for State and Local Governments and
Tax-Exempt Organizations ........................ 24
Seek Tax Advice.................................... 24
SALES OF VARIABLE ACCUMULATION CONTRACTS ................. 24
STATE REGULATION ......................................... 25
REPORTS .................................................. 25
VOTING RIGHTS ............................................ 25
TEXAS OPTIONAL RETIREMENT PROGRAM ........................ 25
LITIGATION ............................................... 25
LEGAL MATTERS ............................................ 25
STATEMENT OF ADDITIONAL INFORMATION....................... 25
APPENDIX A ............................................... 26
APPENDIX B ............................................... 27
2
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES ALL SUB-ACCOUNTS
<S> <C>
Sales Load Imposed on
Purchases (as a percentage of purchase payments) None
Deferred Sales Load (as a percentage of amount surrendered):*
Age of Deposit in Complete Years 0-1 6%
Age of Deposit in Complete Years 1-2 5%
Age of Deposit in Complete Years 2-3 4%
Age of Deposit in Complete Years 3-4 3%
Age of Deposit in Complete Years 4-5 2%
Age of Deposit in Complete Years 5-6 1%
Age of Deposit in Complete Years 6 and thereafter None
Exchange Fee
Current Fee None
Maximum Allowable Charge Per Exchange: $10
ANNUAL CONTRACT FEE
Current $35
Maximum $35
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Fees 1.25% or 1.00% (depending on Contract form)**
Account Fees and Expenses None
Total Separate Account Annual Expenses 1.25% or 1.00% (depending on Contract form)**
</TABLE>
<TABLE>
<CAPTION>
MULTI- TOTAL MONEY REAL STRATEGIC WANGER U.S. WANGER INT'L
SUB-ACCOUNTS GROWTH SECTOR RETURN MARKET INT'L. BALANCED ESTATE THEME SMALL CAP SMALL CAP
- ------------ ------ ------ ------ ------ ------ -------- ------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES
(as a percentage of fund average net assets)
Investment Management Fees .65% .50% .59% .40% .75% .55% .75% .75% 1.00% 1.30%
Other Expenses
(after expense reimbursement)*** .10% .15% .08% .13% .32% .10% .25% .25% .35% .50%
Total Fund Annual Expenses .75% .65% .67% .53% 1.07% .65% 1.00% 1.00% 1.35% 1.80%
EXAMPLE
If you surrender your Contract at the end of the applicable time
period: You would pay the following expenses on a $1,000
investment assuming 5% annual return on assets:
1 year $ 68 $ 67 $ 68 $ 66 $ 71 $ 67 $ 71 $ 71 $ 74 $ 78
3 years 97 94 95 91 107 94 105 105 115 128
5 years 126 121 122 115 142 121 139 139 156 178
10 years 248 238 240 225 281 238 274 274 309 351
If you do not surrender your Contract: You would pay the following expenses on a
$1,000 investment assuming 5% annual return on assets:
1 year $ 22 $ 21 $ 21 $ 20 $ 25 $ 21 $ 25 $ 25 $ 28 $ 33
3 years 68 65 65 61 78 65 75 75 86 99
5 years 116 111 112 105 132 111 129 129 146 168
10 years 248 238 240 225 281 238 274 274 309 351
</TABLE>
*A sales charge may be taken from the proceeds when a Contract is
surrendered or when an amount is withdrawn, if assets have not been held under
the Contract for a certain period of time. An amount up to 10% of the Contract
Value may be withdrawn each year without a sales charge. (See " Deductions and
Charges--Sales Charges.")
**The expense risk charge under a Contract is either .60% or .85%,
depending on when the Contract was issued. (See "Deductions and Charges--Charges
for Mortality and Expense Risks.")
***Each Series pays a portion or all of its total operating expenses other
than the management fee. The Growth, Multi-Sector, Total Return, Money Market
and Balanced Series will pay up to .15%; the International Series will pay up to
40%; the Real Estate Securities and Strategic Theme Series will pay up to .25%;
the Wanger U.S. Small Cap Series will pay up to .50%; and the Wanger
International Small Cap Series will pay up to .60%. Absent expense
reimbursements, total fund operating expenses were (or expected to be) .73%,
1.98%, 1.33%, 2.35% and 4.20%, respectively for Multi-Sector, Real Estate,
Strategic Theme, Wanger U.S. Small Cap and Wanger International Small Cap.
Wanger "Other Expenses" are estimated for the current year and are not based on
past experience since these funds have not completed a full year of operation.
Expenses may be higher or lower than those shown but are subject to expense
limitations as noted.
+ The inclusion of this Sub-account began on January 29, 1996. Accordingly,
annualized expenses have been projected for the fiscal period ending December
31, 1996.
The purpose of the tables set forth above is to assist the Contract Owner
in understanding the various costs and expenses that a Contract Owner will bear
directly or indirectly. The table reflects expenses of the VA Account as well as
the Funds. (See "Deductions and Charges" in this Prospectus and in the Fund
Prospectuses.)
Premium or other taxes levied by any governmental entity with respect to
the Contract will be charged against the Contract Values based on a percentage
of premiums paid. Premium taxes currently imposed by certain states on the
Contracts range from 0% to 3.5% of premiums paid. (See "Deductions and
Charges--Premium Tax.")
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The $35
annual administrative charge is reflected in the Example as $1.75 since the
average Contract account size is greater than $1,000 and the expense effect is
reduced accordingly. (See "Deductions and Charges.")
3
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
Following are the financial highlights for the period indicated. As used
below, the designation "VA 1" refers to Contracts assessing an expense risk
charge of .60% and "VA 2," "VA 3," and GSE refers to Contracts assessing an
expense risk charge of .85%. (See "Deductions and Charges.")
<TABLE>
MONEY MARKET SUB-ACCOUNT
VA1
------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
2/8/86 TO
1995 1994 1993 1992 1991 1990 1989 1988 1987 12/31/86
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value,
beginning of period $1.954211 $1.900873 $1.866308 $1.820007 $1.734559 $1.619595 $1.497413 $1.407621 $1.334900 $1.330386
Unit value, end of period.. $2.045097 $1.954211 $1.900873 $1.866308 $1.820007 $1.734559 $1.619595 $1.497413 $1.407621 $1.334900
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000) 3,457 4,649 4,617 8,601 10,289 13,110 13,319 12,813 6,829 2,719
</TABLE>
<TABLE>
MONEY MARKET SUB-ACCOUNT
VA2, VA3 & GSE
------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
1/29/87 TO
1995 1994 1993 1992 1991 1990 1989 1988 12/31/87
---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period. $1.915930 $1.868172 $1.838756 $1.797544 $1.717328 $1.607305 $1.489598 $1.403711 $1.339975
Unit value, end of period ...... $2.000092 $1.915930 $1.868172 $1.838756 $1.797544 $1.717328 $1.607305 $1.489598 $1.403711
========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units outstanding (000) 37,026 38,007 30,143 27,132 15,331 8,723 4,057 1,741 290
</TABLE>
<TABLE>
GROWTH SUB-ACCOUNT
VA1
-----------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
12/8/86 TO
1995 1994 1993 1992 1991 1990 1989 1988 1987 12/31/86
---- ---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value,
beginning of period $6.384494 $6.355486 $5.362579 $4.910837 $3.474821 $3.373255 $2.501870 $2.431756 $2.296978 $2.334879
Unit value,
end of period........ $8.273644 $6.384494 $6.355486 $5.362579 $4.910837 $3.474821 $3.373255 $2.501870 $2.431756 $2.296978
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000) 8,153 8,351 8,671 8,652 7,280 6,658 6,726 6,243 7,046 5,696
</TABLE>
<TABLE>
GROWTH SUB-ACCOUNT
VA2, VA3 & GSE
--------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
1/29/87 TO
1995 1994 1993 1992 1991 1990 1989 1988 12/31/87
---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period $6.261062 $6.248053 $5.284626 $4.851447 $3.440659 $3.348325 $2.489403 $2.425706 $2.555569
Unit value, end of period..... $8.093932 $6.261062 $6.248053 $5.284626 $4.851447 $3.440659 $3.348325 $2.489403 $2.425706
========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units outstanding (000) 94,344 76,226 52,751 29,531 12,343 4,415 1,792 655 376
</TABLE>
<TABLE>
MULTI-SECTOR SUB-ACCOUNT (FORMERLY THE "BOND" SUB-ACCOUNT)
VA1
-----------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
12/8/86 TO
1995 1994 1993 1992 1991 1990 1989 1988 1987 12/31/86
---- ---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value,
beginning of period $2.762836 $2.952674 $2.572692 $2.360698 $1.993832 $1.913888 $1.786177 $1.632777 $1.631508 $1.621539
UNIT value,
end of period....... $3.379335 $2.762836 $2.952674 $2.572692 $2.360698 $1.993832 $1.913888 $1.786177 $1.632777 $1.631508
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000) 4,418 4,839 5,798 5,539 5,541 5,085 6,195 5,585 4,991 4,452
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
MULTI-SECTOR SUB-ACCOUNT (FORMERLY THE "BOND" SUB-ACCOUNT)
VA2, VA3 & GSE
--------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
1/29/87 TO
1995 1994 1993 1992 1991 1990 1989 1988 12/31/87
---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period $2.710153 $2.902941 $2.535693 $2.332392 $1.974705 $1.900136 $1.777482 $1.628898 $1.679498
Unit value, end of period...... $3.306804 $2.710153 $2.902941 $2.535693 $2.332392 $1.974705 $1.900136 $1.777482 $1.628898
========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units outstanding (000) 25,435 20,608 19,839 10,612 3,480 1,438 856 396 120
</TABLE>
<TABLE>
TOTAL RETURN SUB-ACCOUNT
VA1
---------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
12/8/86 TO
1995 1994 1993 1992 1991 1990 1989 1988 1987 12/31/86
---- ---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value,
beginning of period $3.008513 $3.081973 $2.804149 $2.559543 $1.999109 $1.909058 $1.608209 $1.587193 $1.424283 $1.446640
Unit value,
end of period...... $3.520947 $3.008513 $3.081973 $2.804149 $2.559543 $1.999109 $1.909058 $1.608209 $1.587193 $1.424283
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000) 18,038 19,981 23,027 23,424 22,916 22,667 24,606 31,107 33,612 17,412
</TABLE>
<TABLE>
TOTAL RETURN SUB-ACCOUNT
VA2, VA3 & GSE
--------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
1/29/87 TO
1995 1994 1993 1992 1991 1990 1989 1988 12/31/87
---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period. $2.948151 $3.028790 $2.762529 $2.527829 $1.979067 $1.894604 $1.600110 $1.583050 $1.587758
Unit value, end of period....... $3.442824 $2.948151 $3.028790 $2.762529 $2.527829 $1.979067 $1.894604 $1.600110 $1.583050
========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units outstanding (000) 73,165 68,860 53,869 30,431 13,524 7,031 3,797 3,139 1,604
</TABLE>
<TABLE>
INTERNATIONAL SUB-ACCOUNT
VA1
--------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
5/1/90 TO
1995 1994 1993 1992 1991 12/31/90
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period. $1.267735 $1.279733 $0.933515 $1.081746 $0.912543 $1.000000
Unit value, end of period ...... $1.375527 $1.267735 $1.279733 $0.933515 $1.081746 $0.912543
========= ========= ========= ========= ========= =========
Number of units outstanding (000) 3,762 5,926 3,309 1,401 816 490
</TABLE>
<TABLE>
INTERNATIONAL SUB-ACCOUNT
VA2, VA3 & GSE
--------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
5/1/90 TO
1995 1994 1993 1992 1991 12/31/90
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period.. $1.253391 $1.268491 $0.927578 $1.077492 $0.911158 $1.000000
Unit value, end of period ....... $1.356645 $1.253391 $1.268491 $0.927578 $1.077492 $0.911158
========= ========= ========= ========= ========= =========
Number of units outstanding (000) 78,985 88,400 39,929 12,307 4,364 1,616
</TABLE>
5
<PAGE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
BALANCED SUB-ACCOUNT
-------------------------------------------------------------------------------------------------
VA1 VA2, VA3 & GSE
------------------------------------------ ------------------------------------------
<CAPTION>
FROM FROM
YEAR ENDED DECEMBER 31, INCEPTION YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 5/1/92 TO ----------------------- 5/1/92 TO
1995 1994 1993 12/31/92 1995 1994 1993 12/31/92
---- ---- ---- -------- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period. $1.124370 $1.168840 $1.086965 $1.000000 $1.116862 $1.163951 $1.085113 $1.000000
Unit value, end of period....... $1.373104 $1.124370 $1.168840 $1.086965 $1.360620 $1.116862 $1.163951 $1.085113
========= ========= ========= ========= ========= ========= ========= =========
Number of units outstanding (000) 4,027 4,732 5,601 3,283 126,919 130,797 123,929 39,740
</TABLE>
<TABLE>
REAL ESTATE SECURITIES SUB-ACCOUNT
------------------------------------------
VA1 VA2, VA3 & GSE
--------------- --------------
<CAPTION>
FROM FROM
INCEPTION INCEPTION
5/1/95 TO 5/1/95 TO
12/31/95 12/31/95
--------- ---------
<S> <C> <C>
Unit value, beginning of period......................................................... $1.000000 $1.000000
Unit value, end of period............................................................... $1.155453 $1.168262
========= =========
Number of units outstanding (000)....................................................... 34 7,009
</TABLE>
<TABLE>
WANGER INTERNATIONAL SMALL CAP
SUB-ACCOUNT
------------------------------------------
VA1 VA2, VA3 & GSE
--------------- --------------
<CAPTION>
FROM FROM
INCEPTION INCEPTION
5/1/95 TO 5/1/95 TO
12/31/95 12/31/95
--------- ---------
<S> <C> <C>
Unit value, beginning of period......................................................... $1.000000 $1.000000
Unit value, end of period............................................................... $1.239576 $1.334598
========= =========
Number of units outstanding (000)....................................................... 194 7,738
</TABLE>
<TABLE>
WANGER U.S. SMALL CAP SUB-ACCOUNT
------------------------------------------
VA1 VA2, VA3 & GSE
--------------- --------------
<CAPTION>
FROM FROM
INCEPTION INCEPTION
5/1/95 TO 5/1/95 TO
12/31/95 12/31/95
--------- ---------
<S> <C> <C>
Unit value, beginning of period........................................................... $1.000000 $1.000000
Unit value, end of period................................................................. $1.157802 $1.155807
========= =========
Number of units outstanding (000)......................................................... 460 17,039
</TABLE>
STRATEGIC THEME SUB-ACCOUNT
THIS SUB-ACCOUNT COMMENCED OPERATIONS AS OF JANUARY 29, 1996;
ACCORDINGLY, DATA FOR THIS SUB-ACCOUNT IS NOT YET AVAILABLE.
6
<PAGE>
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
From time to time the Account may include the performance history of any or
all Sub-accounts in advertisements, sales literature or reports. PERFORMANCE
INFORMATION ABOUT EACH SUB-ACCOUNT IS BASED ON PAST PERFORMANCE ONLY AND IS NOT
AN INDICATION OF FUTURE PERFORMANCE. Performance information may be expressed as
yield and effective yield of the Money Market Sub-account, as yield of the
Multi-Sector Sub-account and as total return of any Sub-account. For the
Multi-Sector Sub-account, 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 the net investment income by the maximum offering
price per unit on the last day of the period.
When a Sub-account advertises its total return, it will usually be
calculated for one year, five years, and ten years or since inception if the
Sub-account has not been in existence for at least ten years. Total return is
measured by comparing the value of a hypothetical $1,000 investment in the
Sub-account 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 all applicable Contract
charges except for premium taxes (which vary by state) at the beginning of the
relevant period.
For those Sub-accounts within the Account that have not been available for
one of the quoted periods, the standardized average annual total return
quotations may show the investment performance such Sub-account would have
achieved (reduced by the applicable charges) had it been available to invest in
shares of the Fund for the period quoted.
Below are quotations of standardized average annual total return for
contracts assessing an .85% expense charge, calculated as described above.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED 12/31/95
COMMENCE- 10 LIFE OF
SUB-ACCOUNT MENT DATE 1 YEAR 5 YEARS YEARS FUND
- ------------ ----------- ------ ------- ----- ----
Multi-Sector... 01/01/83 16.34% 10.51% 8.96% 9.42%
Balanced....... 05/01/92 16.16% N/A N/A 7.78%
Total Return... 09/01/84 11.35% 11.37% 10.58% 11.41%
Growth......... 01/01/83 23.27% 18.32% 15.30% 17.28%
International.. 05/01/90 3.19% 7.94% N/A 5.19%
Money Market... 10/29/82 (0.48%) 2.74% 4.51% 5.17%
Real Estate.... 05/01/95 N/A N/A N/A 9.82%
Wanger U.S.
Small Cap...... 05/01/95 N/A N/A N/A 8.16%
Wanger Int'l
Small Cap...... 05/01/95 N/A N/A N/A 25.40%
ANNUAL TOTAL RETURN*
MULTI- BAL- TOTAL INTER- MONEY
YEAR SECTOR ANCED RETURN GROWTH NATIONAL MARKET
- ---- ------ ----- ------ ------ -------- ------
1983........ 4.69% N/A N/A 31.26% N/A 7.03%
1984........ 9.96% N/A (1.45)% 9.29% N/A 8.85%
1985........ 19.11% N/A 25.76% 33.26% N/A 6.69%
1986........ 17.82% N/A 14.25% 18.98% N/A 5.19%
1987........ 2.47% N/A 11.18% 5.61% N/A 5.13%
1988........ 8.01% N/A 1.08% 2.63% N/A 6.12%
1989........ 5.22% N/A 18.41% 34.51% N/A 7.86%
1990........ 3.92% N/A 4.45% 2.75% (8.88)% 6.88%
1991........ 18.11% N/A 27.73% 41.00% 18.25% 4.67%
1992........ 8.72% 8.51% 9.28% 8.93% (13.91)% 2.29%
1993........ 14.48% 7.27% 9.64% 18.23% 36.75% 1.60%
1994........ (6.64)% (4.05)% (2.66)% 0.21% (1.19)% 2.56%
1995........ 22.02% 21.83% 16.78% 29.27% 8.24% 4.39%
WANGER U.S. WANGER INT'L.
YEAR REAL ESTATE SMALL CAP SMALL CAP
- ---- ----------- -------- ---------
1983........ N/A N/A N/A
1984........ N/A N/A N/A
1985........ N/A N/A N/A
1986........ N/A N/A N/A
1987........ N/A N/A N/A
1988........ N/A N/A N/A
1989........ N/A N/A N/A
1990........ N/A N/A N/A
1991........ N/A N/A N/A
1992........ N/A N/A N/A
1993........ N/A N/A N/A
1994........ N/A N/A N/A
1995........ 16.83% 15.07% 33.41%
*Sales Charges have not been deducted from the Annual Total Return.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE
Current yield for the Money Market Sub-account is based upon the income
earned by the Sub-account over a seven-day 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 stated as a percentage of the investment. Effective yield is
calculated similarly but when annualized, the income earned by the investment is
assumed to be reinvested in Sub-account Units and thus compounded in the course
of a 52-week period. Yield and effective yield reflect the recurring charges on
the Account level including the annual administrative fee.
Yield calculations of the Money Market Sub-account 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 seven-day period,
which period will end on the date of the most recent financial statements. The
yield for the Sub-account during this seven-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 Money Market
Sub-account based on a seven-day period ending December 31, 1995.
7
<PAGE>
Assumptions: CONTRACTS
ASSESSING
.85% EXPENSE
CHARGE
Value of hypothetical pre-existing account with 1.998416
exactly one unit at the beginning of the period:
Value of the same account (excluding capital 2.000092
changes) at the end of the seven-day period:
Calculation:
Ending account value....................... 2.000092
Less beginning account value............... 1.998416
Net change in account value................ 0.001676
Base period return:
(adjusted change/beginning account value) 0.000839
Current yield = return x (365/7) =....... 4.37%
Effective yield = [(1 + return)365/7] -1 =. 4.47%
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 Account level.
A Sub-account's performance may be compared to that of the Consumer Price
Index or various unmanaged equity or bond indices such as the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, and the Europe
Australia Far East Index, and may also be compared to the performance of the
other variable annuities as reported by services such as Lipper Analytical
Services, Inc. ("Lipper"), CDA Investment Technologies, Inc. ("CDA") and
Morningstar, Inc. or in other various publications. Lipper and CDA are widely
recognized independent rating/ranking services. A Sub-account's performance
may also be compared to that of other investment or savings vehicles.
Each Fund's Annual Report, available upon request and without charge,
contains a discussion of the performance of the Fund and a comparison of that
performance to a securities market index.
SPECIAL TERMS
- --------------------------------------------------------------------------------
As used in this Prospectus, the following terms have the indicated meanings:
ACCOUNT: Phoenix Home Life Variable Accumulation Account.
ACCUMULATION UNIT: A standard of measurement with respect to each Sub-account
used in determining the value of a Contract and the interest in the
Sub-accounts prior to the commencement of annuity payments.
ACCUMULATION VALUE: The value of a Contract on or prior to its Maturity Date,
equal to the sum of the products obtained by multiplying the number of
Accumulation Units in each Sub-account then credited to the Contract by the
appropriate Accumulation Unit Value.
ANNUITANT: The person whose life is used as the measuring life under the
Contract. The primary Annuitant as shown on the Contract's Schedule Page while
the primary Annuitant is living, and then the contingent Annuitant designated on
the application for the Contract or as later changed by the Owner, if the
contingent Annuitant is living at the death of the primary Annuitant.
ANNUITY OPTION: The provisions under which a series of annuity payments is made
to the Annuitant or other payee, such as Life Annuity with Ten Years Certain.
(See "Annuity Options.")
ANNUITY UNIT: A standard of measurement used in determining the amount of each
variable income payment under the variable payment Annuity Options I, J, K, M
and N.
CONTRACT: The deferred variable accumulation annuity contracts described in
this Prospectus.
CONTRACT VALUE: Prior to the Maturity Date, the sum of the value under a
Contract of all Accumulation Units held in the Sub-accounts of the Account and
the value held in the Guaranteed Interest Account.
FIXED PAYMENT ANNUITY: A benefit providing periodic payments of a fixed dollar
amount throughout the Annuity Period that does not vary with or reflect the
investment performance of any Sub-account.
FUNDS: The Phoenix Edge Series Fund and the Wanger Advisors Trust.
GROUP CONTRACT: The deferred variable accumulation annuity contract, offered to
employers or trusts to fund tax-qualified plans for groups of participants,
described in this Prospectus.
GUARANTEED INTEREST ACCOUNT (GIA): An allocation option under which amounts
deposited are guaranteed to earn a fixed rate of interest. Excess interest may
also be credited, in the sole discretion of Phoenix Home Life Mutual Insurance
Company.
ISSUE DATE: The date that the initial purchase payment is invested under a
Contract.
MATURITY DATE: The date elected by the Owner pursuant to the Contract as of
which annuity payments will commence. The election is subject to certain
conditions described in "THE ANNUITY PERIOD."
MINIMUM INITIAL PURCHASE PAYMENT: The amount which must be paid when a Contract
is purchased. Minimum initial purchase payments of $1,000, $25, $25, $1,000
annually and $10,000 are required for non-qualified, IRA, bank draft program,
qualified plan Contracts and Contracts with a Maturity Date in the first
Contract year, respectively.
MINIMUM SUBSEQUENT PAYMENT: The amount which must be paid when any subsequent
payments are made, after the minimum initial purchase payment has been made (see
above). The minimum subsequent payment for all Contracts is $25.
OWNER: The person or entity, usually the one to whom the Contract is issued,
who has the sole right to exercise all rights and privileges under the Contract
except as otherwise provided in the Contract. The Owner may be the Annuitant,
an employer, a trust or any other individual or entity specified in the
application for the Contract. However, under Contracts used with certain tax
qualified plans, the Owner must be the Annuitant. A husband and wife may be
designated as joint owners, and if such a joint owner dies, the other joint
owner becomes the sole Owner of the Contract. If no Owner is named, the
Annuitant will be the Owner.
PAYMENT UPON DEATH: The obligation of Phoenix Home Life under a Contract to make
a payment on the death of the Owner or Annuitant at any time before the Maturity
Date of a Contract (see "Payment Upon
8
<PAGE>
Death Before Maturity Date") or after the Maturity Date of a Contract (see
"Payment Upon Death After Maturity Date").
PHOENIX HOME LIFE: Phoenix Home Life Mutual Insurance Company.
VARIABLE PAYMENT ANNUITY: An annuity providing payments that vary in amount
after the first payment is made, in accordance with the investment experience of
the selected Sub-accounts.
VARIABLE PRODUCTS OPERATIONS: The Variable Products Operations Division of
Phoenix Home Life Mutual Insurance Company.
SUMMARY
- --------------------------------------------------------------------------------
The individual deferred accumulation annuity contracts ("Contract")
described in this Prospectus present a dynamic concept in retirement planning
designed to give you maximum flexibility in attaining your investment goals.
There are no deductions from your purchase payments so that your entire payment
is put to work in the investment portfolio(s) of your choice. Currently, the
Phoenix Home Life Variable Accumulation Account ("Account") consists of several
Sub-accounts, which invest their assets exclusively in specified Series of The
Phoenix Edge Series Fund and the Wanger Advisors Trust (collectively the
"Funds"). Each Series has a distinct investment objective. You choose the
Sub-account or Sub-accounts you wish to invest in among the available
Sub-accounts and/or the Guaranteed Interest Account when you make your purchase
payments under the Contract. You may also transfer amounts held under the
Contract among the available Sub-accounts and/or the Guaranteed Interest
Account. When the accumulation period ends, the then Contract Value will be
applied to furnish a Variable Payment Annuity unless a Fixed Payment Annuity is
elected. If a Fixed Payment Annuity is elected, payments will, thereafter, be
fixed and guaranteed by Phoenix Home Life Mutual Insurance Company ("Phoenix
Home Life").
The Contract is eligible for purchase as non-tax qualified retirement
plans by individuals. Contracts are also eligible for use in connection with
(1) pension or profit-sharing plans qualified under the Self-Employed
Individuals Tax Retirement Act of 1962, known as "HR 10" or "Keogh" plans, (2)
pension or profit-sharing plans qualified under Sections 401(a) and 401(k) of
the Internal Revenue Code of 1986, as amended (the "Code"), known as "corporate
plans," (3) annuity purchase plans adopted under the provisions of Section
403(b) of the Code by public school systems and certain other tax-exempt
organizations (TSA), (4) individual retirement account plans satisfying the
requirements of Section 408 of the Code (IRA), and (5) government plans and
deferred compensation plans maintained by a state or political subdivision
thereof under Section 457 of the Code. These plans are sometimes referred to in
this Prospectus as "tax qualified plans."
HOW ARE PAYMENTS MADE UNDER THE CONTRACTS?
A Contract Owner may make payments at any time until the Maturity Date
selected by the Owner pursuant to the terms of the Contract. The payments
purchase Accumulation Units of the Sub-account(s) and/or are deposited in the
Guaranteed Interest Account, as chosen by the Owner. (See "PURCHASE OF
CONTRACTS" and "THE ACCUMULATION PERIOD.")
IS THERE A GUARANTEED OPTION?
Yes. A Contract Owner may elect to have payments allocated to the
Guaranteed Interest Account. Amounts allocated to the GIA earn a fixed rate of
interest and Phoenix Home Life may also, in its sole discretion, credit excess
interest. (See Appendix A.)
WHAT ARE THE INVESTMENT OBJECTIVES OF THE SERIES?
THE PHOENIX EDGE SERIES FUND
The investment objective of the MULTI-SECTOR FIXED INCOME SERIES
("Multi-Sector Series") (formerly the Bond Series) is to seek long-term total
return by investing in a diversified portfolio of high yield (high risk) and
high quality fixed income securities.
The investment objective of the MONEY MARKET SERIES is to provide maximum
current income consistent with capital preservation and liquidity. The Money
Market Series will invest exclusively in high quality money market instruments.
The investment objective of the GROWTH SERIES is to achieve intermediate and
long-term growth of capital, with income as a secondary consideration. The
Growth Series will invest principally in common stocks of corporations believed
by management to offer growth potential.
The investment objective of the TOTAL RETURN SERIES is to realize as high a
level of total rate of return over an extended period of time as is considered
consistent with prudent investment risk. The Total Return Series will invest in
stocks, bonds and money market instruments in accordance with the Investment
Adviser's appraisal of investments most likely to achieve the highest total rate
of return.
The investment objective of the INTERNATIONAL SERIES is to seek a high total
return consistent with reasonable risk. The International Series intends to
invest 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 investment objective of the BALANCED SERIES is to seek reasonable
income, long-term capital growth and conservation of capital. The Balanced
Series intends to invest based on combined considerations of risk, income,
capital enhancement and protection of capital value.
The investment objective of the REAL ESTATE SECURITIES SERIES ("Real Estate
Series") is to seek capital appreciation and income with approximately equal
emphasis. It intends under normal circumstances to invest 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.
The investment objective of the STRATEGIC THEME SERIES is to seek long-term
appreciation of capital. This Series seeks to identify securities benefiting
from long-term trends present in the U.S. and abroad. The Series intends to
invest primarily in common stocks believed by the Adviser to have substantial
potential for capital growth. Since many trends may be early in their
development and no history growth patterns are available, securities owned may
present a high degree of risk.
9
<PAGE>
WANGER ADVISORS TRUST
The investment objective of the WANGER U.S. SMALL CAP SERIES ("U.S.
Small Cap Series") is to provide long-term growth. The U.S. Small Cap Series
will invest primarily in securities of U.S. Companies with total common stock
market capitalization of less than $1 billion.
The investment objective of the WANGER INTERNATIONAL SMALL CAP SERIES
("International Small Cap Series") is to provide long-term growth. The
International Small Cap Series will invest in securities of non-U.S. companies
with total stock market capitalization of less than $1 billion.
FOR ADDITIONAL INFORMATION CONCERNING THE FUNDS, SEE THE ACCOMPANYING FUND
PROSPECTUSES, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
WHAT SALES COSTS ARE CHARGED TO PURCHASE PAYMENTS UNDER THE CONTRACTS?
No deductions are made from purchase payments. A deduction for sales charges
may be taken from the proceeds when a Contract is surrendered or when an amount
is withdrawn, if assets have not been held under the Contract for a certain
period of time. However, no deduction for sales charges will be taken after the
Annuity Period has begun, unless unscheduled withdrawals are made under Annuity
Options K or L. If a sales charge is imposed, it is imposed on a first-in,
first-out basis.
If a withdrawal or surrender is made during the first year that a Contract
is in existence, a sales charge will apply to the total amount that is withdrawn
unless the Contract is issued on or after May 1, 1996. For these Contracts, up
to 10% of the Contract Value at the time of the first withdrawal may be
withdrawn without a sales charge. After the first year, and prior to the
Maturity Date, 10% of the value of the Contract at the last anniversary may be
withdrawn each year free of sales charge. A deduction for sales charges
expressed as a percentage of the amount withdrawn in excess of the 10% allowable
amount is as follows:
Age of Deposit in
Complete Years: 0 1 2 3 4 5 6 and over
Sales Charge to be
Applied: 6% 5% 4% 3% 2% 1% 0%
In the event that the Annuitant dies before the date that annuity payments
will commence, no sales charge will be imposed.
The total deferred sales charges on a Contract will never exceed 9% of the
total purchase payments (see "Sales Charges").
WHAT FEES ARE CHARGED TO THE ACCOUNT?
There are mortality and expense risk fees and annual administrative fees
assessed against the Account. The mortality risk fee is 0.40% and the expense
risk fee is 0.85%. For certain contracts issued prior to March 11, 1993, the
expense risk fee is 0.60%. (See the Contract's Schedule Pages.)
The mortality and expense risk fees are deducted from the aggregate average
daily accumulated values of the Sub-accounts but are not deducted from values
held in the Guaranteed Interest Account.
The Annual Administrative Charge is generally $35 and is deducted each year
(or any part thereof) under each Contract. A reduced Annual Administrative
Charge may apply to Contracts issued after September 1, 1994. This charge is
deducted on the Contract Anniversary Date from each Sub-account and/or the
Guaranteed Interest Account on a pro-rata basis, and is not subject to increase,
but may be subject to decrease.
ARE THERE ANY OTHER CHARGES OR DEDUCTIONS?
In most states, premium taxes are imposed when a Contract is annuitized
rather than when premium payments are made by the Contract Owner. Phoenix Home
Life will reimburse itself on the date of a partial withdrawal, surrender of the
Contract, Maturity Date, or payment of death proceeds (see "Premium Tax"). For a
more complete description of the fees chargeable to the Account, see "DEDUCTIONS
AND CHARGES."
In addition, certain charges are deducted from the assets of the Funds. For
investment management services, each Series of a Fund pays the investment
manager a separate monthly fee calculated on the basis of its average daily net
assets during the year.
Each Series pays a portion or all of its total operating expenses other than
the management fee. The Growth, Multi-Sector, Total Return, Money Market and
Balanced Series will pay up to .15%; the International Series will pay up to
.40%; the Real Estate and Strategic Theme Series will pay up to .25%; the U.S.
Small Cap Series will pay up to .17%; and the International Small Cap Series
will pay up to .27% of its total net assets.
WHAT ARE THE MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS?
For non-tax qualified plans, the following minimum purchase payments apply
(unless investments are made pursuant to a bank draft investment program):
Initial minimum per Contract: .......................$1,000
Subsequent minimum per Contract:..................... $ 25
For Contracts issued in connection with Individual Retirement Accounts or
pursuant to a bank draft investment program, the following minimum purchase
payments apply:
Initial minimum per Contract: .......................$ 25
Subsequent minimum per Contract: ....................$ 25
For Contracts issued specifying a Maturity Date in the first Contract year,
the following minimum purchase payments apply:
Initial minimum per Contract: ....................$10,000
Subsequent minimum per Contract: ....................$ 25
For contracts issued under tax-qualified or employer sponsored plans other
than individual retirement accounts, a minimum annual premium of $1,000 must be
paid.
MAY I ALLOCATE MY PURCHASE PAYMENTS AMONG AVAILABLE OPTIONS?
Yes. You may choose the amount of each purchase payment to be directed to
each Sub-account and/or to the Guaranteed Interest Account, provided that the
minimum initial purchase payment requirements have been met (see "PURCHASE OF
CONTRACTS").
10
<PAGE>
MAY I TRANSFER AMOUNTS ALLOCATED TO A SUB-ACCOUNT OR THE GUARANTEED INTEREST
ACCOUNT?
Yes. You may transfer some or all of the Contract Value among one or more
available Sub-accounts and/or the Guaranteed Interest Account provided that the
minimum initial purchase payment requirements have been met. Also, if elected,
the Temporary Money Market Allocation Amendment provides that no transfers may
be made until the termination of the Free Look Period. Phoenix Home Life may
limit the number of transfers allowed during a Contract year, but in no event
will the limit be less than six transfers per year (see "Transfers"). However,
there are additional restrictions on transfers from the Guaranteed Interest
Account as described in Appendix A.
DOES THE CONTRACT PROVIDE FOR PAYMENT UPON DEATH?
The Contract provides that if the Owner and the Annuitant are the same and
the Owner/Annuitant dies before annuity payments begin and there is no surviving
joint Owner, payment to the Owner/Annuitant's beneficiary will be made and no
surrender charge will be imposed. The Contract also provides for payment upon
death after the Contract Maturity Date (see "Payment Upon Death Before Maturity
Date" and "Payment Upon Death After Maturity Date").
IS THERE A SHORT-TERM CANCELLATION RIGHT?
An Owner may surrender a Contract for any reason within 10 days after its
receipt and receive in cash the adjusted value of the initial purchase payment.
The Owner may receive more or less than the initial payment depending on
investment experience within the Sub-account during the 10-day period, unless
the Contract is issued with a Temporary Money Market Allocation Amendment, in
which case the initial purchase payment is refunded. If the initial purchase
payment, or any portion thereof, was allocated to the Guaranteed Interest
Account, that payment (or portion) and any earned interest is refunded (see
"Free Look Period").
HOW WILL THE ANNUITY PAYMENTS BE DETERMINED ON THE MATURING OF A CONTRACT?
The Owner and Annuitant bear the risk of the investment performance during
the Accumulation Period unless the Guaranteed Interest Account is selected. Once
annuity payments commence, investment in the Account will continue and the Owner
and Annuitant will continue to bear the risk of investment unless a Fixed
Payment Annuity is elected. If a Fixed Payment Annuity is elected, payments will
be fixed, and guaranteed by the general assets of Phoenix Home Life. The fixed
payment schedule is a part of the Contract and the Owner may also be given the
opportunity to choose another annuity option available from Phoenix Home Life at
the maturity of the Contract. If the current practice settlement rates in effect
for Contracts are more favorable than the applicable rates guaranteed under the
Contract, the current rates shall be applied (see "The Annuity Period").
CAN MONEY BE WITHDRAWN FROM THE CONTRACT?
If the Annuitant is living, amounts held under the Contract may be withdrawn
in whole or in part prior to the Maturity Date, or after the Maturity Date under
Annuity Options K or L. Certain limitations apply to Contracts held under 403(b)
plans (see "Qualified Plans; Tax-Sheltered Annuities"). There may be a penalty
tax assessed in connection with withdrawals (see "FEDERAL INCOME TAXES").
CAN THE CONTRACT LAPSE?
If on any Valuation Date the total Contract Value equals zero, the Contract
will immediately terminate and lapse without value.
The foregoing summary information should be read in conjunction with the
detailed information appearing elsewhere in this Prospectus.
THE VARIABLE ACCUMULATION ANNUITY
- --------------------------------------------------------------------------------
The individual deferred variable accumulation annuity contract (the
"Contract") issued by Phoenix Home Life Mutual Insurance Company ("Phoenix Home
Life") may be significantly different from a fixed annuity contract in that,
unless the Guaranteed Interest Account is selected, it is the Owner and
Annuitant under a Contract who assume the risk of investment gain or loss rather
than Phoenix Home Life. To the extent that payments are not allocated to the
Guaranteed Interest Account, the amounts which will be available for annuity
payments under a Contract will depend on the investment performance of the
amounts allocated to the Sub-accounts of the Phoenix Home Life Variable
Accumulation Account (the "Account"). Upon the maturity of a Contract, the
amounts held under a Contract will continue to be invested in the Account and
monthly annuity payments will vary in accordance with the investment experience
of the selected Sub-accounts. However, a fixed annuity may be elected, in which
case Phoenix Home Life will guarantee specified monthly annuity payments.
The Owner selects the investment objective of each Contract on a continuing
basis by directing the allocation of purchase payments and accumulated value
among the Guaranteed Interest Account or the Multi-Sector Sub-account, Money
Market Sub-account, Growth Sub-account, Total Return Sub-account,
International Sub-account, Balanced Sub-account, Real Estate Sub-account,
Strategic Theme Sub-account, Wanger U.S. Small Cap Sub-account and the Wanger
International Small Cap Sub-account.
PHOENIX HOME LIFE AND THE VARIABLE
ACCUMULATION ACCOUNT
- --------------------------------------------------------------------------------
Phoenix Home Life is a mutual life insurance company originally chartered in
Connecticut in 1851. Its Executive Office is located at One American Row,
Hartford, Connecticut 06115 and its main administrative office is located at 100
Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. Its New York principal
office is located at 99 Troy Road, East Greenbush, New York 12061. Phoenix Home
Life is the nation's 13th largest mutual life insurance company and has total
assets of approximately $13.2 billion. Phoenix Home Life sells insurance
policies and annuity contracts through its own field force of full time agents
and through brokers. Its operations are conducted in all 50 states, the District
of Columbia, Canada and Puerto Rico.
On June 21, 1982, Phoenix Home Life established the Account, a separate
account created under the insurance laws of Connecticut. The Account is
registered with the Securities and Exchange Commission ("SEC") as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act") and
it meets the definition of a "separate account" under the Act. Registration
under the Act does not involve supervision of the management or investment
practices or policies of the Account or Phoenix Home Life.
11
<PAGE>
On July 1, 1992, the Account's domicile was transferred to New York.
Under New York law, all income, gains or losses of the Account, whether
realized or not, must be credited to or charged against the amounts placed in
the Account without regard to the other income, gains and losses of Phoenix Home
Life. The assets of the Account may not be charged with liabilities arising out
of any other business that Phoenix Home Life may conduct. Obligations under the
Contracts are obligations of Phoenix Home Life.
Contributions to the Guaranteed Interest Account are not invested in the
Account; rather, they become part of the general account of Phoenix Home Life
(the "General Account"). The General Account supports all insurance and annuity
obligations of Phoenix Home Life and is made up of all of its general assets
other than those allocated to any separate account such as the Account. For more
complete information concerning the Guaranteed Interest Account, see Appendix A.
THE PHOENIX EDGE SERIES FUND
- --------------------------------------------------------------------------------
Certain Sub-accounts of the Account invest in corresponding Series of The
Phoenix Edge Series Fund. The investment adviser of all of the Series (except
Real Estate) is Phoenix Investment Counsel, Inc. ("PIC"). The investment adviser
of the Real Estate Series is Phoenix Realty Securities, Inc. ("PRS"). The
fundamental investment objective of each of the Series of the Fund is as
follows:
(1) MULTI-SECTOR SERIES: The investment objective of the Multi-Sector
Fixed Income Series is to seek long-term total return by investing in a
diversified portfolio of high yield (high risk) and high quality fixed
income securities. For a discussion of the risks associated with
investing in high yield bonds, please see the accompanying Fund
prospectus.
(2) MONEY MARKET SERIES: The investment objective of the Money Market
Series is to provide maximum current income consistent with capital
preservation and liquidity. The Money Market Series will invest
exclusively in high quality money market instruments.
(3) GROWTH SERIES: The investment objective of the Growth Series is to
achieve intermediate and long-term growth of capital, with income as
a secondary consideration. The Growth Series will invest principally
in common stocks of corporations believed by management to offer
growth potential.
(4) TOTAL RETURN SERIES: The investment objective of the Total Return Series
is to realize as high a level of total rate of return over an extended
period of time as is considered consistent with prudent investment risk.
The Total Return Series will invest in stocks, bonds and money market
instruments in accordance with the Investment Adviser's appraisal of
investments most likely to achieve the highest total rate of return.
(5) INTERNATIONAL SERIES: The International Series seeks as its investment
objective a high total return consistent with reasonable risk. It
intends to achieve its objective by investing 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.
Investments may be made for capital growth or for income or any
combination thereof for the purpose of achieving a high overall return.
(6) BALANCED SERIES: The investment objective of the Balanced Series is to
seek reasonable income, long-term capital growth and conservation of
capital. The Balanced Series intends to invest based on combined
considerations of risk, income, capital enhancement and protection of
capital value.
(7) REAL ESTATE SERIES: The investment objective of the Real Estate
Securities Series is to seek capital appreciation and income with
approximately equal emphasis. It intends under normal circumstances to
invest 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.
(8) STRATEGIC THEME SERIES: The investment objective of the Strategic Theme
Series is to seek long-term appreciation of capital through investing in
securities of companies that the adviser believes are particularly well
positioned to benefit from cultural, demographic, regulatory, social or
technological changes worldwide.
WANGER ADVISORS TRUST
- --------------------------------------------------------------------------------
The investment adviser of the U.S. Small Cap and International Small Cap
Series is Wanger Asset Management, L.P. ("WAM"). The fundamental investment
objective of each of the Series is as follows:
(1) U.S. SMALL CAP SERIES: The investment objective of the U.S. Small Cap
Series is to provide long-term growth. The U.S. Small Cap Series will
invest primarily in securities of U.S. Companies with a total common
stock market capitalization of less than $1 billion.
(2) INTERNATIONAL SMALL CAP SERIES: The investment objective of the
International Small Cap Series is to provide long-term growth. The
International Small Cap Series will invest primarily in securities of
non-U.S. companies with a total common stock market capitalization of
less than $1 billion.
Each Series will be subject to the market fluctuations and risks inherent in
the ownership of any security and there can be no assurance that any Series'
stated investment objective will be realized.
Shares of the Funds may be sold to other separate accounts of Phoenix Home
Life or its affiliates or of other insurance companies funding variable annuity
or variable life insurance contracts. It is conceivable that it may be
disadvantageous for variable life insurance separate accounts and variable
annuity separate accounts to invest in the Funds simultaneously. Although
neither Phoenix Home Life nor the Funds currently foresees any such
disadvantages either to variable annuity Contract Owners or to variable life
insurance policyowners, the Funds' Trustees intend to monitor events in order to
identify any material conflict between variable annuity Contract Owners and
variable life insurance policyowners and to determine what action, if any,
should be taken in response thereto. Material conflicts could result from, for
example, (1) changes in state insurance laws, (2) changes in Federal income tax
laws, (3) changes in the investment management of any portfolio of a Fund, or
12
<PAGE>
(4) differences in voting instructions between those given by variable life
insurance policyowners and those given by variable annuity Contract Owners.
FOR ADDITIONAL INFORMATION CONCERNING THE FUNDS AND THEIR SERIES, PLEASE SEE
THE ACCOMPANYING PROSPECTUSES, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
PURCHASE OF CONTRACTS
- --------------------------------------------------------------------------------
The minimum initial purchase payment for each Contract purchased is $1,000.
However, for contracts purchased in connection with Individual Retirement
Accounts (IRAs), the minimum initial purchase payment is $25 and for contracts
purchased in connection with tax-qualified or employer sponsored plans, a
minimum annual payment of $1,000 is required. For Contracts with a Maturity Date
in the first Contract year, the minimum initial purchase payment is $10,000. In
addition, a Contract Owner may authorize his bank to draw $25 or more from his
personal checking account monthly to purchase Units in any available
Sub-account or in the Guaranteed Interest Account. The amount the Contract
Owner designates will be automatically invested on the date the bank draws on
his account. If this "check-o-matic" privilege is elected, the minimum initial
purchase payment is $25. This payment must accompany the application. Each
subsequent purchase payment under a Contract must be at least $25.
Generally, a Contract may not be purchased with respect to a proposed
Annuitant who is eighty years of age or older. Total purchase payments in excess
of $1,000,000 cannot be made without the permission of Phoenix Home Life. While
the Annuitant is living and the Contract is in force, purchase payments may be
resumed at any time before the Maturity Date of a Contract.
Purchase payments received under the Contracts will be allocated to any
Sub-account and/or to the Guaranteed Interest Account, or a combination thereof,
in the proportion specified in the application for the Contract or as indicated
by the Owner from time to time. Changes in the allocation of purchase payments
will be effective as of receipt by Variable Products Operations by notice of
election in a form satisfactory to Phoenix Home Life and will apply to any
purchase payments accompanying such notice or made subsequent to the receipt of
the notice, unless otherwise requested by the Contract Owner.
DEDUCTIONS AND CHARGES
- --------------------------------------------------------------------------------
PREMIUM TAX
Whether or not a premium tax is imposed will depend upon, among other
things, the Owner's state of residence, the Annuitant's state of residence, the
status of Phoenix Home Life within those states and the insurance tax laws of
those states. Phoenix Home Life will pay any premium tax due and will only
reimburse itself upon the earlier of partial withdrawal, surrender of the
Contract, the Maturity Date or payment of death proceeds. For a list of states
and premium taxes, see Appendix B to this Prospectus.
SALES CHARGES
A deduction for sales charges (also referred to in this Prospectus as
surrender charges) for these Contracts may be taken from proceeds of withdrawals
from, or complete surrender of, the Contracts if assets are not held under the
Contract for a certain period of time (see chart below). No sales charge will be
taken after the Annuity Period has begun except with respect to unscheduled
withdrawals under Options K or L below (see "Annuity Options"). Any sales charge
is imposed on a first-in, first-out basis.
With respect to withdrawals or surrenders, up to 10% of the Contract Value
may be withdrawn in a Contract Year, either in a lump sum or by multiple
scheduled or unscheduled partial surrenders, without the imposition of a sales
charge. During the first Contract Year, the 10% withdrawal without a sales
charge is only available on Contracts issued on or after May 1, 1996 and will be
determined based on the Contract Value at the time of the first partial
surrender. In all subsequent years the 10% will be based on the previous
Contract anniversary value. The deduction for sales charges, expressed as a
percentage of the amount redeemed in excess of the 10% allowable amount, is as
follows:
AGE OF DEPOSIT IN CONTINGENT DEFERRED
COMPLETE YEARS FROM SALES CHARGE AS A
PAYMENT DATE UNIT PERCENTAGE OF AMOUNT
RELEASED WAS CREDITED WITHDRAWN
---------------------- ----------
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6 and over 0%
In the event that the Annuitant dies before the Maturity Date of the
Contract, the sales charge described in the table above will not apply.
The total deferred sales charges on a Contract will never exceed 9% of the
total purchase payments, and the applicable level of sales charge cannot be
changed with respect to outstanding Contracts. Sales charges imposed in
connection with partial surrenders will be deducted from the Sub-accounts and
the Guaranteed Interest Account on a pro-rata basis. Any distribution costs not
paid for by sales charges will be paid by Phoenix Home Life from the assets of
the General Account.
CHARGES FOR MORTALITY AND EXPENSE RISKS
While fixed annuity payments to Annuitants will reflect the investment
performance of the applicable Series of the Fund during the Accumulation Period,
the amount of such payments will not be decreased because of adverse mortality
experience of Annuitants as a class or because of an increase in actual expenses
of Phoenix Home Life over the expense charges provided for in the Contracts.
Phoenix Home Life assumes the risk that Annuitants as a class may live longer
than expected (necessitating a greater number of annuity payments) and that its
expenses may be higher than the deductions for such expenses.
In assuming the mortality risks, Phoenix Home Life agrees to continue life
annuity payments, determined in accordance with the annuity tables and other
provisions of the Contract, to the Annuitant or other payee for as long as he or
she may live.
Phoenix Home Life charges each Sub-account the daily equivalent of 0.40% on
an annual basis of the current value of the Sub-account's net assets for
mortality risks assumed and the daily equivalent of 0.85% (0.60% for certain
contracts issued prior to March 11, 1993) on an annual basis for expense risks
assumed. (See the Contract's Schedule Pages). No mortality and expense risk
charge is deducted from the Guaranteed Interest Account. If the percentage
charges prove
13
<PAGE>
insufficient to cover actual insurance underwriting costs and excess
administrative costs, then the loss will be borne by Phoenix Home Life;
conversely, if the amount deducted proves more than sufficient, the excess will
be a profit to Phoenix Home Life. Any such profit may be used, as a part of
Phoenix Home Life's General Account's assets, to meet sales expenses, if any,
which are in excess of sales commission revenue generated from any sales
charges. Phoenix Home Life has concluded that there is a reasonable likelihood
that the distribution financing arrangement being used in connection with the
Contracts will benefit the Account and the Contract Owners.
CHARGES FOR ADMINISTRATIVE SERVICES
Phoenix Home Life is responsible for administering the Contract. In this
connection, Phoenix Home Life, among other things, maintains an account for each
Owner and Annuitant, makes all disbursements of benefits, furnishes
administrative and clerical services for each Contract, makes disbursements to
pay obligations chargeable to the Account, maintains the accounts, records, and
other documents relating to the business of the Account required by regulatory
authorities, causes the maintenance of the registration and qualification of the
Account under laws administered by the Securities and Exchange Commission,
prepares and distributes notices and reports to Owners, and the like. Phoenix
Home Life also reimburses Phoenix Equity Planning Corporation for any expenses
incurred by it as "principal underwriter." All organizational expenses of the
Account are paid by Phoenix Home Life.
For these and other administrative services, Phoenix Home Life charges each
Contract $35 each year. A reduced charge may apply to Contracts issued after
September 1, 1994. This cost-based charge is deducted from each Sub-account
and/or the Guaranteed Interest Account holding the assets of the Owner or on a
pro-rata basis from two or more Sub-accounts or the Guaranteed Interest
Account in relation to their values under the Contract, and is not subject to
increase but may be subject to decrease. This charge is deducted on the Contract
anniversary date for services rendered since the preceding Contract anniversary
date. Upon surrender of a Contract, the entire annual administrative charge is
deducted regardless of when the surrender occurs.
Phoenix Home Life may reduce the sales charge or annual administrative
charges for Contracts issued under group or sponsored arrangements in all states
except New York. Generally, sales costs per Contract vary with the size of the
group or sponsored arrangement, its stability as indicated by its term of
existence and certain characteristics of its members, the purposes for which the
Contracts are purchased and other factors. The amounts of reductions will be
considered on a case-by-case basis and will reflect the reduced sales costs
expected as a result of sales to a particular group or sponsored arrangement. In
addition, Phoenix Home Life may reduce the annual administrative charge under a
Contract to reflect lower administrative costs.
No sales or administrative charges will be deducted for Contracts sold to
registered representatives of the principal underwriter or to officers,
directors and employees of Phoenix Home Life and their spouses; or to employees
or agents who retire from Phoenix Home Life or Phoenix Equity Planning
Corporation; or to registered representatives of broker/dealers with whom
Phoenix Equity Planning Corporation has selling agreements, regardless as to
their state of residence.
OTHER CHARGES
As compensation for investment management services, the Advisers are
entitled to a fee, payable monthly and based on an annual percentage of the
average aggregate daily net asset values of each Series as summarized in the
tables below:
PHOENIX INVESTMENT COUNSEL, INC.
--------------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $250,000,000 $250,000,000 $500,000,000
- ------ ------------ ------------ -------------
Money Market....... .40% .35% .30%
Multi-Sector....... .50% .45% .40%
Balanced........... .55% .50% .45%
Total Return....... .60% .55% .50%
Growth............. .70% .65% .60%
International...... .75% .70% .65%
Strategic Theme.... .75% .70% .65%
PHOENIX REALTY SECURITIES, INC.
-------------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $1,000,000,000 $1,000,000,000 $2,000,000,000
- ------ -------------- -------------- --------------
Real Estate........ .75% .70% .65%
WANGER ASSET MANAGEMENT, L.P.
-----------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $100,000,000 $150,000,000 $250,000,000
- ------ ------------ ------------ ------------
U.S. Small Cap..... 1.00% .95% .90%
International
Small Cap.......... 1.30% 1.20% 1.10%
Each Series pays a portion or all of its total operating expenses other than
the management fee. The Growth, Multi-Sector, Total Return, Money Market and
Balanced Series will pay up to .15%; the International Series will pay up to
.40%; the Real Estate and Strategic Theme Series will pay up to .25%; the U.S.
Small Cap Series will pay up to .50%; and the International Small Cap Series
will pay up to .60% of its total net assets.
These Fund charges and other expenses are described more fully in the
accompanying Fund prospectuses.
THE ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
ACCUMULATION UNITS
Initial purchase payments will be applied within two days if the application
for a Contract is complete. If an incomplete application form is completed
within five business days of receipt by Variable Products Operations, the
initial purchase payment will be applied within two days of the completion of
the application. In the event that Variable Products Operations does not accept
the application within five business days or if an application is not completed
within five business days of receipt by Variable Products Operations, then the
purchase payment will be immediately returned. If the Guaranteed Interest
Account is chosen, additional purchase payments are deposited on the date of
receipt of such purchase payment at Variable Products Operations. If one or more
of the Sub-accounts is chosen, additional purchase payments are applied to the
purchase of Accumulation Units of the Sub-account(s) chosen, at the value of
such Units next determined after the receipt of such purchase payment at
14
<PAGE>
Variable Products Operations. The number of Accumulation Units of a Sub-account
purchased with a specific purchase payment will be determined by dividing the
applied purchase payment by the value of an Accumulation Unit in that
Sub-account next determined after receipt of the purchase payment. The value of
the Accumulation Units of a Sub-account will vary depending upon the investment
performance of the applicable Series of the Funds, the fee of the Fund's
investment adviser and the charges and deductions made against the Sub-account.
ACCUMULATION UNIT VALUES
At any date prior to the Maturity Date of the Contract, the total value of
the Accumulation Units in a Sub-account which has been credited under a
Contract can be computed by multiplying the number of such Units by the
appropriate value of an Accumulation Unit in effect for such date. The value of
an Accumulation Unit on a day other than a Valuation Date is the value of the
Accumulation Unit on the next Valuation Date. The number of Accumulation Units
in each Sub-account credited under each Contract and their current value will
be reported to the Owner at least annually.
TRANSFERS
A Contract Owner may, at any time but no later than 30 days prior to the
Maturity Date of a Contract, elect to transfer all or any part of the Contract
Value among one or more Sub-accounts or the Guaranteed Interest Account. Any
such transfer from a Sub-account will result in the redemption of Accumulation
Units and, if another Sub-account is selected, in the purchase of Accumulation
Units on the basis of the respective values next determined after the receipt by
Variable Products Operations of written notice of election in a form
satisfactory to Phoenix Home Life. A transfer among Sub-accounts or the
Guaranteed Interest Account does not automatically change the payment allocation
schedule of a contract.
A Contract Owner may also request transfers and changes in payment
allocations among available Sub-accounts or the Guaranteed Interest Account by
calling 800-447-4312 between the hours of 8:30 A.M. and 4:00 P.M. Eastern
Time. Unless the Contract Owner elects in writing not to authorize telephone
transfers or allocation changes, telephone transfer orders and allocation
changes will also be accepted on behalf of the Contract Owner from his or her
registered representative. Telephone transfer instructions and change in payment
allocation instructions will be recorded on tape; however, Phoenix Home Life
will not be able to verify the authenticity of any order received and will not
be liable for any loss incurred as a result of acting upon telephone transfer or
change in payment allocation instructions unless such loss results from the
erroneous processing of a telephone instruction. The staff of the SEC is
currently examining the propriety of such exculpatory policies. These telephone
privileges may be modified or terminated at any time and during times of extreme
market volatility, may be difficult to exercise. In such cases a Contract Owner
should submit a written request.
A Contract Owner may also elect to transfer funds automatically among the
Sub-accounts or the Guaranteed Interest Account on a monthly, quarterly,
semi-annual or annual basis under the Systematic Transfer Program for Dollar
Cost Averaging ("Systematic Transfer Program"). Under this Systematic Transfer
Program, the minimum initial and subsequent transfer amounts are $25 monthly,
$75 quarterly, $150 semi-annually, or $300 annually. A Contract Owner must have
an initial value of $2,000 in the Guaranteed Interest Account or the
Sub-account that funds will be transferred from, and if the value in that
Sub-account or the Guaranteed Interest Account drops below the elected transfer
amount, the entire remaining balance will be transferred and no more systematic
transfers will be processed. Funds may be transferred from only one Sub-account
or the Guaranteed Interest Account, but may be allocated to multiple
Sub-accounts. Under the Systematic Transfer Program, Contract Owners may
transfer approximately equal amounts from the Guaranteed Interest Account
over a minimum 18-month period.
All transfers under the Systematic Transfer Program will be executed on the
basis of the respective values as of the first of the month rather than on the
basis of the respective values next determined after receipt of the transfer
request. If the first of the month falls on a holiday or weekend, then the
transfer will be processed on the next succeeding business day.
Unless Phoenix Home Life agrees otherwise or the Systematic Transfer Program
has been elected, a Contract Owner may make only one transfer per Contract year
from the Guaranteed Interest Account. Non-systematic transfers from the
Guaranteed Interest Account will be effectuated on the date of receipt by
Variable Products Operations except as otherwise may be requested by the
Contract Owner. For non-systematic transfers, the amount that may be
transferred from the Guaranteed Interest Account at any one time cannot exceed
the greater of $1,000 or 25% of the Contract Value in the Guaranteed Interest
Account at the time of transfer.
Phoenix Home Life reserves the right not to accept batched transfer
instructions from registered representatives acting under powers of attorney for
multiple Contract Owners unless the registered representative's broker-dealer
firm and Phoenix Home Life have entered into a third party transfer service
agreement.
No sales charge will be assessed when a transfer is made. The date a payment
was credited for the purpose of calculating the sales charge will remain the
same notwithstanding the transfer. Currently, there is no charge for transfers;
however, the Account reserves the right to charge a transfer fee of $10.00 per
transfer after the first two in each Contract year to defray administrative
costs. Currently, unlimited transfers are permitted; however, the Account
reserves the right to limit the number of transfers made during each Contract
year a Contract is in existence. When the temporary Money Market Allocation
Amendment has been elected, no transfers may be made until the end of the free
look period (see "Free Look Period"). However, Contract Owners will be
permitted at least six transfers during each Contract year. THERE ARE ADDITIONAL
RESTRICTIONS ON TRANSFERS FROM THE GUARANTEED INTEREST ACCOUNT AS DESCRIBED
ABOVE AND IN APPENDIX A.
SURRENDER OF CONTRACT; PARTIAL WITHDRAWALS
If the Annuitant is living, amounts held under the Contract may be withdrawn
in whole or in part prior to the Maturity Date, or after the Maturity Date under
Annuity Options K or L. Prior to the Maturity Date, the Contract Owner may
withdraw up to 10% of the Contract Value in a Contract Year, either in a lump
sum or by multiple scheduled or unscheduled partial surrenders, without the
imposition of a sales charge. During the first Contract Year, the 10% withdrawal
without a sales charge is only available on Contracts issued on or after May 1,
1996 and will be determined based on the Contract Value at the time
15
<PAGE>
of the first partial surrender. In all subsequent years the 10% will be based
on the previous Contract anniversary value. A signed written request for
withdrawal must be sent to Variable Products Operations. If the Contract Owner
has not yet reached age 59 1/2, a 10% penalty tax will apply on taxable income
withdrawn (see "Federal Income Taxes"). The appropriate number of Accumulation
Units of a Sub-account will be redeemed at their value next determined after
the receipt by Variable Products Operations of a written notice in a form
satisfactory to Phoenix Home Life. Unless the Owner designates otherwise,
Accumulation Units redeemed in a partial withdrawal will be redeemed in each
Sub-account in the same proportion as the value of the Accumulation Units of
the Contract is then allocated among the Sub-accounts. Also, Contract Values in
the Guaranteed Interest Account will be withdrawn in a partial withdrawal in the
same proportion as the Contract Value is then allocated to the Guaranteed
Interest Account, unless the Owner designates otherwise. The redemption value of
Accumulation Units may be more or less than the purchase payments applied under
the Contract to purchase the Accumulation Units, depending upon the investment
performance in each Sub-account. The resulting cash payment will be made in a
single sum, ordinarily within seven days after receipt of such notice. However,
redemption and payment may be delayed under certain circumstances (see
"Deferment of Payment"). There may be adverse tax consequences to certain
surrenders and partial withdrawals (see "Surrenders or Withdrawals Prior to the
Contract Maturity Date"). Certain restrictions on redemptions are imposed on
Contracts used in connection with Internal Revenue Code Section 403(b) plans
(see "Qualified Plans"; "Tax-Sheltered Annuities"). A deduction for sales
charges may be imposed on partial withdrawals from, and complete surrender of, a
Contract (see "Sales Charges"). Any sales charge is imposed on a first-in,
first-out basis.
Any request for a withdrawal from, or complete surrender of, a Contract
should be mailed to Variable Products Operations, Phoenix Home Life Mutual
Insurance Company, 101 Munson Street, PO Box 942, Greenfield, Massachusetts
01302-0942.
LAPSE OF CONTRACT
If on any Valuation Date the Contract Value is zero, the Contract will
immediately terminate and lapse without value. Within 30 days after this
Valuation Date, Phoenix Home Life will notify the Contract Owner in writing that
the Contract has lapsed.
PAYMENT UPON DEATH BEFORE MATURITY DATE
If the Owner is the Annuitant and dies before the Contract Maturity Date,
the death benefit will be paid under the Contract to the Owner/Annuitant's
beneficiary. If the Owner and the Annuitant are not the same and the Annuitant
dies prior to the Maturity Date, the contingent Annuitant becomes the Annuitant.
If there is no contingent Annuitant, the death benefit will be paid to the
Annuitant's beneficiary. The death benefit is calculated according to the
following method. If the death occurred during the first 6 years following the
Contract date, this payment would be equal to the greater of: (a) the sum of all
purchase payments made under the Contract less any prior partial withdrawals
(see "Surrender of Contract; Partial Withdrawals"); or (b) the Contract Value
next determined following receipt of a certified copy of the death certificate
at Variable Products Operations. If the death occurred during any subsequent
6-year period, this payment would be equal to the greater of: (a) the death
benefit that would have been payable at the end of the immediately preceding
6-year period, plus any purchase payments made and less any partial withdrawals
since such date, or (b) the Contract Value next determined following receipt of
a certified copy of the death certificate at Variable Products Operations.
If the Owner and the Annuitant are not the same and the Owner dies prior to
the Maturity Date and there is no surviving joint Owner, upon receipt of due
proof of death, Phoenix Home Life will fully surrender the Contract and pay the
Cash Surrender Value (Contract Value less any applicable sales charge) to the
Owner's beneficiary (see "Sales Charges").
Payments will be made in a single sum to the beneficiary designated by the
Owner prior to the Annuitant's death unless an optional method of settlement had
been elected by the Owner. If an optional method of settlement had not been
elected by the Owner, the beneficiary may elect an optional method of settlement
in lieu of a single sum. No deduction is made for sales or other expenses upon
such election (see "Sales Charges"). Notwithstanding the foregoing, if the
amount to be paid is less than $2,000, it will be paid in a single sum (see
"Annuity Options"). Depending upon state law, the payment to the beneficiary may
avoid probate.
GROUP CONTRACTS
- --------------------------------------------------------------------------------
Contracts may be purchased by employers (or trusts) to fund tax-qualified
pension or profit-sharing plans such as defined contribution and defined benefit
plans ("Group Contracts"). Group Contracts may be purchased on an "allocated" or
"unallocated" basis. In most respects the Group Contracts are the same as the
Contracts purchased on an individual basis described elsewhere in this
Prospectus; however, there are certain differences as described in this section.
Phoenix Home Life may limit the payments made under a Group Contract to
$1,000,000 and reserves the right to terminate a Group Contract after 20 years.
The Guaranteed Interest Account ("GIA"), all of the Series of The Phoenix
Edge Series Fund and Wanger Advisors Trust are available for investment.
ALLOCATED GROUP CONTRACTS
Under an allocated Group Contract, the Contract Owner is the trust to whom
the Contract is issued. However, individual participant accounts are maintained
and the Contract Owner passes on certain rights to the plan participants such as
the right to choose Sub-accounts, and transfer amounts between Sub-accounts.
Under an allocated Group Contract, a minimum initial purchase payment of $25
per participant account is required. Subsequent payments per participant account
must be at least $25 and must total at least $300 per Contract year. The annual
administrative service charge under an allocated Group Contract is currently $15
per participant account; it is guaranteed not to exceed $30. If amounts are
withdrawn within a certain number of years after deposit, a sales charge will
apply as described with respect to individual Contracts on page 15, unless the
withdrawal is for payment of a plan benefit upon a plan participant's death,
disability, demonstration of financial hardship, or termination of employment or
retirement (provided the Group Contract participant account has been
maintained for at least five years or the participant is age 55 or older), or
for the purchase of
16
<PAGE>
another annuity contract or election of a Life Expectancy Distribution option
from Phoenix Home Life. A sales charge will apply to all other withdrawals
within a certain number of years after deposit as described on page 15; there
is no 10% free withdrawal privilege under allocated Group Contracts.
Under Group Contracts issued in New York, the sales charge will not be
applied to amounts exceeding the total of purchase payments made under the
Contract (calculated at their initial value).
Upon the death of a participant, a death benefit will be paid to the
Contract Owner. The Contract Owner may then distribute the death benefit in
accordance with the terms of the plan. If the death occurred during the first 6
years following the Contract date, this payment would be equal to the greater
of: (a) the sum of all purchase payments made by the participant less any prior
withdrawals or (b) the participant's accumulated value under the Contract. If
the death occurred during any subsequent 6-year period, this payment would equal
the greater of: (a) the death benefit that would have been payable at the end of
the immediately preceding 6-year period, plus any purchase payments made and
less any partial withdrawals since such date or (b) the participant's
accumulated value under the Contract.
Loans and hardship withdrawals will be available under Internal Revenue Code
of 1986 Section 401(k) plans after January 1, 1996. If the plan permits loans, a
partial withdrawal from the participant's account value may be requested. The
partial withdrawal for the loan must be at least $1,000 and the participant's
remaining account value must be at least $2,000. A contingent deferred sales
charge will not apply to such a partial withdrawal. A $125 administrative charge
per partial withdrawal will apply and this amount may be increased in the
future. Loan repayments, including any interest, will be allocated to the
participant's Sub-accounts in the same proportion as new payments.
UNALLOCATED GROUP CONTRACTS
Under an unallocated Group Contract, the Contract Owner is the trust to whom
the Contract is issued. The Contract Owner exercises all rights under the
Contract on behalf of plan participants; no participant accounts are maintained
under the Contract.
Under an unallocated Group Contract, a minimum initial purchase payment of
$5,000 is required and subsequent payments must also be at least $5,000. The
annual administrative service charge under an unallocated Group Contract is
currently $300; it is guaranteed not to exceed $500.
If amounts are withdrawn in the early Contract years, a sales charge may
apply unless the withdrawal is for the payment of a plan benefit related to the
death or disability of a plan participant or the purchase of another annuity
contract or Life Expectancy Distribution option from Phoenix Home Life. A
deduction for a sales charge for an unallocated Group Contract may be taken from
the proceeds of a withdrawal from, or complete surrender of, the Contract if the
withdrawal is not related to the payment of a plan benefit or the purchase of an
annuity as described above and the Contract has not been held for a certain
period of time (see chart below). However, withdrawals of up to 15% of the
payments made under a Contract in the first Contract year and up to 15% of the
Contract Value as of the previous Contract anniversary may be made each year
without imposition of a sales charge for payment of plan benefits related to
termination of employment or retirement. The deduction for sales charges,
expressed as a percentage of the amount redeemed in excess of the 15% allowable
amount, is as follows:
CONTINGENT DEFERRED SALES CHARGE
CONTRACT YEAR AS A PERCENTAGE OF AMOUNT WITHDRAWN
------------- -----------------------------------
0 6%
1 6%
2 6%
3 6%
4 6%
5 5%
6 4%
7 3%
8 2%
9 1%
10 and over 0%
The total deferred sales charges on a Contract will never exceed 9% of the
total purchase payments, and the applicable level of sales charge cannot be
changed with respect to outstanding Contracts.
Under Group Contracts issued in New York, the sales charge will not be
applied to amounts exceeding the total of purchase payments made under the
Contract (calculated at their initial value).
Upon the death of a participant, a death benefit will be paid to the
Contract Owner. The Contract Owner may then distribute the death benefit in
accordance with the terms of the plan.
THE ANNUITY PERIOD
- --------------------------------------------------------------------------------
VARIABLE ACCUMULATION ANNUITY CONTRACTS
Annuity payments will commence on the Contract's Maturity Date if the
Annuitant is then living and the Contract is then in force. On the Maturity Date
and thereafter, investment in the Account is continued unless a Fixed Payment
Annuity is elected. No sales charge is taken. Each Contract will provide, at the
time of its issuance, for a Variable Payment Life Annuity with Ten Year Period
Certain unless a different annuity option is elected by the Owner (see "Annuity
Options"). Under a Variable Payment Life Annuity with Ten Year Period Certain,
annuity payments, which may vary in amount based on the performance of the
Sub-account selected, are made monthly for life and, if the Annuitant dies
within ten years after the Maturity Date, the Annuitant's beneficiary will be
paid the payments remaining in the ten-year period. A different form of annuity
may be elected by the Owner prior to the Maturity Date. Once annuity payments
have commenced, the Annuity Option may not be changed.
If the amount to be applied on the Maturity Date is less than $2,000,
Phoenix Home Life may pay such amount in one lump sum in lieu of providing an
annuity. If the initial monthly annuity payment under an Annuity Option would be
less than $20, Phoenix Home Life may also make a single sum payment equal to the
total Contract Value on the date the initial payment would be payable, in place
of all other benefits provided by the Contract, or, make periodic payments
quarterly, semi-annually or annually in place of monthly payments.
Each Contract specifies a provisional Maturity Date at the time of its
issuance. The Owner may subsequently elect a different Maturity Date. The
Maturity Date shall not be earlier than the first Contract anniversary unless a
variable payment option is elected (Options I, J, K, L, M or N), or later than
the Contract anniversary nearest the Annuitant's eighty-fifth birthday unless
the Contract is issued in connection with certain qualified plans. Under
qualified plans, the
17
<PAGE>
Maturity Date must be such that distributions begin no later than April 1st
following the Annuitant's attained age 70 1/2, unless you and Phoenix Home Life
agree otherwise.
The Maturity Date election shall be made by written notice and must be
received by Variable Products Operations thirty days before the provisional
Maturity Date. If a Maturity Date, which is different from the provisional
Maturity Date of the Contract, is not elected by the Owner, the provisional
Maturity Date becomes the Maturity Date. Particular care should be taken in
electing the Maturity Date of a Contract issued under a Tax-Sheltered Annuity,
a Keogh Plan or an Individual Retirement Account (IRA) plan. (See
"Tax-Sheltered Annuities," "Keogh Plans" and "Individual Retirement
Accounts.")
ANNUITY OPTIONS
Unless an alternative annuity payment option is elected on or before the
Maturity Date, the amounts held under a Contract on the Maturity Date will
automatically be applied to provide a 10-year period certain variable payment
monthly life annuity based on the life of the Annuitant under Option I described
below. Any annuity payments falling due after the death of the Annuitant during
the period certain will be paid to the Annuitant's beneficiary. Each annuity
payment will be based upon the value of the Annuity Units credited to the
Contract. The number of Annuity Units in each Sub-account to be credited is
based on the value of the Accumulation Units in that Sub-account and the
applicable annuity purchase rate. The purchase rate differs according to the
payment option selected and the age of the Annuitant. The value of the Annuity
Units will vary with the investment performance of each Sub-account to which
Annuity Units are credited based on an assumed investment return of 4 1/2% per
year. This rate is a fulcrum rate around which Variable Annuity payments will
vary to reflect whether actual investment experience of the Sub-account is
better or worse than the assumed investment return. The assumed investment rate
and the calculation of variable income payments for such 10-year period certain
variable payment life annuity and for Options J and K described below are
described in more detail in the Contract and in the Statement of Additional
Information.
In lieu of the 10-year period certain variable payment life annuity (see
"Option I--Variable Payment Life Annuity with Ten Year Period Certain"), the
Owner may, by written request received by Variable Products Operations on or
before the Maturity Date of the Contract, elect any of the other annuity payment
options described below. If the Maturity Date occurs in the first Contract year,
only Options I, J, K, L, M or N may be elected. No surrender charge will be
assessed under any annuity option unless unscheduled withdrawals are made under
Annuity Options K or L.
The level of annuity payments payable under the following options is based
upon the option selected and, depending on the option chosen, such factors as
the age at which payments begin, the form of annuity, annuity purchase rates,
assumed investment return (for variable payment annuities), and the frequency of
payments.
Phoenix Home Life deducts a daily charge for mortality and expense risks
from Contract Values held in the Sub-accounts (see "Charges For Mortality and
Expense Risks"). Therefore, electing Option K will result in a deduction being
made even though Phoenix Home Life assumes no mortality risk under that option.
OPTION A--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN
Provides a monthly income for the life of the Annuitant. In the event of
death of the Annuitant, the annuity income will be paid to the beneficiary until
the end of the specified period certain. For example, a ten year period certain
will provide a total of 120 monthly payments. The certain period may be 5, 10,
or 20 years.
OPTION B--NON-REFUND LIFE ANNUITY
Provides a monthly income for the lifetime of the Annuitant. No income is
payable after the death of the Annuitant.
OPTION C--DISCONTINUED
OPTION D--JOINT AND SURVIVOR LIFE ANNUITY
Provides a monthly income for the lifetimes of both the Annuitant and a
joint annuitant as long as either is living. In the event of the death of the
Annuitant or joint annuitant, the annuity income will continue for the life of
the survivor. The amount to be continued to the survivor may be 100% or 50% of
the amount of the joint annuity payment, as elected at the time the annuity
option is chosen. No income is payable after the death of the survivor
annuitant.
Under Option D, the joint annuitant must be named at the time the option is
elected and cannot be changed. The joint annuitant must have reached an adjusted
age of 40, as defined in the Contract.
OPTION E--INSTALLMENT REFUND LIFE ANNUITY
Provides a monthly income for the life of the Annuitant. In the event of the
Annuitant's death, the annuity income will continue to the Annuitant's
beneficiary until the amount applied to purchase the annuity has been
distributed.
OPTION F--JOINT AND SURVIVOR LIFE ANNUITY WITH SPECIFIED
PERIOD CERTAIN
Provides a monthly income for the lifetime of both the Annuitant and a joint
annuitant as long as either is living. In the event of the death of the
Annuitant or joint annuitant, the annuity income will continue for the life of
the survivor. If the survivor dies prior to the end of the elected period
certain, the annuity income will continue to the named beneficiary until the end
of the elected period certain. For example, a ten year period certain will
provide a total of 120 monthly payments. A period certain of either 10 or 20
years may be chosen.
Under Option F, the joint annuitant must be named at the time the option is
elected and cannot be changed. The joint annuitant must have reached an adjusted
age of 40, as defined in the Contract.
OPTION G--PAYMENTS FOR SPECIFIED PERIOD
Provides equal income installments for a specified period of years whether
the Annuitant lives or dies. Any specified whole number of years from 5 to 30
years may be elected.
OPTION H--PAYMENTS OF SPECIFIED AMOUNT
Provides equal installments of a specified amount over a period of at least
5 years. The specified amount may not be greater than the total annuity amount
divided by five annual installment payments. If the Annuitant dies prior to the
end of the elected period certain, annuity payments will continue to the
Annuitant's beneficiary until the end of the elected period certain.
18
<PAGE>
OPTION I--VARIABLE PAYMENT LIFE ANNUITY WITH TEN
YEAR PERIOD CERTAIN
Unless another annuity option has been elected, this option will
automatically apply to any Contract proceeds payable on the Maturity Date. It
provides a variable payout monthly annuity based on the life of the Annuitant.
In the event of the death of the Annuitant, the annuity payments are made to the
Annuitant's beneficiary until the end of the ten year period. The ten-year
period provides a total of 120 monthly payments. Payments will vary as to dollar
amount, based on the investment experience of the Sub-accounts to which
proceeds are applied.
OPTION J--JOINT SURVIVOR VARIABLE PAYMENT LIFE ANNUITY
WITH TEN YEAR PERIOD CERTAIN
Provides a variable payout monthly annuity while the Annuitant and the
designated joint annuitant are living and continues thereafter during the
lifetime of the survivor or, if later, until the end of a 10-year period
certain. Payments will vary as to dollar amount, based on the investment
experience of the Sub-accounts to which proceeds are applied. Under Option J,
the joint annuitant must be named at the time the option is selected and cannot
be changed. The joint annuitant must have reached an adjusted age of 40, as
defined in the Contract.
OPTION K--VARIABLE PAYMENT ANNUITY FOR A SPECIFIED PERIOD
Provides variable payout monthly income installments for a specified period
of time, whether the Annuitant lives or dies. The period certain specified must
be in whole numbers of years from 5 to 30. However, the period certain selected
by the beneficiary of any death benefit under the Contract may not extend beyond
the life expectancy of such beneficiary. A Contract Owner may request an
unscheduled withdrawal representing part or all of the remaining Contract Value
(less any applicable contingent deferred sales charge) at any time under Option
K.
OPTION L--VARIABLE PAYMENT LIFE EXPECTANCY ANNUITY
Provides a variable payout monthly income payable over the Annuitant's
annually recalculated life expectancy or the annually recalculated life
expectancy of the Annuitant and joint annuitant. A Contract Owner may request an
unscheduled withdrawal representing part or all of the remaining Contract Value
at anytime under Option L. Upon the death of the Annuitant (and joint annuitant,
if there is a joint annuitant), the remaining Contract Value (less any
applicable contingent deferred sales charge) will be paid in a lump sum to the
Annuitant's beneficiary.
OPTION M--UNIT REFUND VARIABLE PAYMENT LIFE ANNUITY
Provides variable monthly payments as long as the Annuitant lives. If the
Annuitant dies, the Annuitant's beneficiary will receive the value of the
remaining Annuity Units in a lump sum.
OPTION N--VARIABLE PAYMENT NON-REFUND LIFE ANNUITY
Provides a variable monthly income for the life of the Annuitant. No income
or payment to a beneficiary is paid after the death of the Annuitant.
OTHER OPTIONS AND RATES
Phoenix Home Life may offer other annuity options at the Maturity Date of a
Contract. In addition, in the event that current settlement rates for Contracts
are more favorable than the applicable rates guaranteed under the Contract, the
current settlement rates shall be used in determining the amount of any annuity
payment under the Annuity Options above.
OTHER CONDITIONS
Federal income tax requirements currently applicable to Keogh and Individual
Retirement Account plans provide that the period of years guaranteed under joint
and survivorship annuities with specified periods certain (see "Option F" and
"Option J" above) cannot be any greater than the joint life expectancies of the
payee and his or her spouse.
Federal income tax requirements also provide that participants in qualified
plans or IRAs must begin minimum distributions by April 1 of the year following
the year in which they attain age 70 1/2. The distributions must be such that
the full amount in the contract will be distributed over a period not greater
than the participant's life expectancy, or the combined life expectancy of the
participant and his or her spouse or designated beneficiary. Distributions made
under this method are generally referred to as Life Expectancy Distributions
(LEDs). An LED program is available to participants in qualified plans or IRAs.
Requests to elect this program must be made in writing.
Under an LED, if a distribution is required in the first Contract year, the
amount of the distribution will be subtracted from the first year payments. In
subsequent Contract years, under the LED program, amounts up to the required
minimum distribution may be withdrawn without a deduction for sales charges,
even if the minimum distribution exceeds the 10% allowable amount (see "Sales
Charges"). In any Contract year, any amounts withdrawn that have not been held
under a Contract for at least six years and are in excess of the greater of the
minimum distribution and the 10% free available amount will be subject to any
applicable sales charge.
If the initial monthly annuity payment under an Annuity Option would be less
than $20, Phoenix Home Life may make a single sum payment equal to the Contract
Value on the date the initial payment would be payable, in place of all other
benefits provided by the Contract, or, may make periodic payments quarterly,
semi-annually or annually in place of monthly payments.
PAYMENT UPON DEATH AFTER MATURITY DATE
If an Owner who is also the Annuitant dies on or after the Maturity Date,
except as may otherwise be provided under any supplementary contract between the
Owner and Phoenix Home Life, Phoenix Home Life will pay to the Owner/Annuitant's
beneficiary any annuity payments due during any applicable period certain under
the Annuity Option in effect on the Annuitant's death. If the Annuitant who is
not the Owner dies on or after the Maturity Date, Phoenix Home Life will pay any
remaining annuity payments to the Annuitant's beneficiary according to the
payment option in effect at the time of the Annuitant's death. If an Owner who
is not the Annuitant dies on or after the Maturity Date, Phoenix Home Life will
pay any remaining annuity payments to the Owner's beneficiary according to the
payment option in effect at the time of the Owner's death.
19
<PAGE>
VARIABLE ACCOUNT VALUATION PROCEDURES
- --------------------------------------------------------------------------------
VALUATION DATE--A Valuation Date is every day the New York Stock Exchange is
open for trading. The New York Stock Exchange is scheduled to be closed for
trading on the following days: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Board of Directors of the Exchange reserves the right to change this
schedule as conditions warrant. On each Valuation Date, the value of the
Separate Account is determined at the close of the New York Stock Exchange
(currently 4:00 p.m. Eastern Time).
VALUATION PERIOD--A Valuation Period is that period of time from the beginning
of the day following a Valuation Date to the end of the next following Valuation
Date.
ACCUMULATION UNIT VALUE--The value of one Accumulation Unit was set at $1.0000
on the date assets were first allocated to each Sub-account. The value of one
Accumulation Unit on any subsequent Valuation Date is determined by multiplying
the immediately preceding Accumulation Unit Value by the applicable Net
Investment Factor for the Valuation Period ending on such Valuation Date.
NET INVESTMENT FACTOR--The Net Investment Factor for any Valuation Period is
equal to 1.000000 plus the applicable net investment rate for such Valuation
Period. A Net Investment Factor may be more or less than 1.000000. To determine
the net investment rate for any Valuation Period for the funds allocated to each
Sub-account, the following steps are taken: (a) the aggregate accrued
investment income and capital gains and losses, whether realized or unrealized,
of the Sub-account for such Valuation Period is computed, (b) the amount in (a)
is then adjusted by the sum of the charges and credits for any applicable income
taxes and the deductions at the beginning of the Valuation Period for mortality
and expense risk charges (see "Charges For Mortality and Expense Risks") and (c)
the results of (a) as adjusted by (b) are divided by the aggregate Unit Values
in the Sub-account at the beginning of the Valuation Period.
MISCELLANEOUS PROVISIONS
- --------------------------------------------------------------------------------
ASSIGNMENT
Owners of Contracts issued in connection with non-tax qualified plans may
assign their interest in the Contract without the consent of the beneficiary. A
written notice of such assignment must be filed with Variable Products
Operations before it will be honored.
A pledge or assignment of a Contract is treated as payment received on
account of a partial surrender of a Contract. (See "Surrenders or Withdrawals
Prior to the Contract Maturity Date.")
In order to qualify for favorable tax treatment, Contracts issued in
connection with tax qualified plans may not be sold, assigned, discounted or
pledged as collateral for a loan or as security for the performance of an
obligation, or for any other purpose, to any person other than Phoenix Home
Life.
DEFERMENT OF PAYMENT
Payment of the Contract Value in a single sum upon a withdrawal from, or
complete surrender of, a Contract will ordinarily be made within seven days
after receipt of the written request by Variable Products Operations. However,
payment of the value of any Accumulation Units may be postponed at times (a)
when the New York Stock Exchange is closed, other than customary weekend and
holiday closings, (b) when trading on the Exchange is restricted, (c) when an
emergency exists as a result of which disposal of securities in the Fund is not
reasonably practicable or it is not reasonably practicable to determine the
Contract Value or (d) when a governmental body having jurisdiction by order
permits such suspension. Rules and regulations of the Securities and Exchange
Commission ("SEC"), if any, are applicable and will govern as to whether
conditions described in (b), (c) or (d) exist.
FREE LOOK PERIOD
Phoenix Home Life may mail the Contract to the Owner or it may be delivered
in person. An Owner may surrender a Contract for any reason within 10 days after
its receipt and receive in cash the adjusted value of the initial purchase
payment. (A longer free look period may be provided in the Contract Owner's
State.) The Owner may receive more or less than the initial payment depending on
investment experience within the Sub-account during the free look period,
unless the Contract was issued with a Temporary Money Market Allocation
Amendment, in which case the initial purchase payment will be refunded.
If the Contract Owner elected on the application to have the Temporary Money
Market Allocation Amendment issued with the Contract, or resides in a state that
requires the Contract to be issued with the Temporary Money Market Allocation
Amendment, Phoenix Home Life temporarily allocates the initial purchase payment
to the Money Market Sub-account. Under this Amendment, if the Contract Owner
surrenders the Contract during the Free Look Period, the initial purchase
payment is refunded. At the expiration of the Free Look Period, the value of the
Accumulation Units held in the Money Market Sub-account is allocated among the
available Sub-accounts of the VA Account or the Guaranteed Interest Account in
accordance with the Contract Owner's allocation instructions on the application.
If the initial purchase payment, or any portion thereof, was allocated to
the Guaranteed Interest Account, that payment (or portion) and any earned
interest is refunded.
AMENDMENTS TO CONTRACTS
Contracts may be amended to conform to changes in applicable law or
interpretations of applicable law, or to accommodate design changes. Changes in
the Contract may need to be approved by Contract Owners and state insurance
departments. A change in the Contract which necessitates a corresponding change
in the Prospectus or the Statement of Additional Information must be filed with
the SEC.
SUBSTITUTION OF FUND SHARES
Although Phoenix Home Life believes it to be highly unlikely, it is possible
that in the judgment of its management, one or more of the Series of the Funds
may become unsuitable for investment by Contract Owners because of a change in
investment policy, or a change in the tax laws, or because the shares are no
longer available for investment. In that event, Phoenix Home Life may seek to
substitute the shares of another Series or the shares of an entirely different
mutual fund. Before this can be done, the approval of the SEC, and possibly one
or more state insurance departments, will be required.
20
<PAGE>
OWNERSHIP OF THE CONTRACT
Ordinarily, the purchaser of a Contract is both the Owner and the Annuitant
and is entitled to exercise all the rights under the Contract. However, the
Owner may be an individual or entity other than the Annuitant. Spouses may own a
Contract as joint Owners. Transfer of the ownership of a Contract may involve
Federal income tax consequences, and a qualified adviser should be consulted
before any such transfer is attempted.
FEDERAL INCOME TAXES
- --------------------------------------------------------------------------------
INTRODUCTION
The Contracts are designed for use with retirement plans which may or may
not be tax-qualified plans ("Qualified Plans") under the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). The ultimate effect of
Federal income taxes on the amounts held under a Contract, on annuity payments,
and on the economic benefits of the Contract Owner, Annuitant or beneficiary
depends on Phoenix Home Life's tax status, on the type of retirement plan for
which the Contract is purchased, and upon the tax and employment status of the
individual concerned.
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No attempt
is made to consider any estate or inheritance taxes or any applicable state,
local or other tax laws. Moreover, the discussion is based upon Phoenix Home
Life's understanding of the Federal income tax laws as they are currently
interpreted. No representation is made regarding the likelihood of continuation
of the Federal income tax laws or the current interpretations by the Internal
Revenue Service (the "Service"). For a discussion of Federal income taxes as
they relate to the Fund, please see the accompanying Prospectuses for the Funds.
TAX STATUS
Phoenix Home Life is taxed as a life insurance company under Part I of
Sub-chapter L of the Code. Since the Account is not a separate entity from
Phoenix Home Life and its operations form a part of Phoenix Home Life, it will
not be taxed separately as a "regulated investment company" under Sub-chapter M
of the Code. Investment income and realized capital gains on the assets of the
Account are reinvested and taken into account in determining the Contract Value.
Under existing Federal income tax law, the Account's investment income,
including realized net capital gains, is not taxed to Phoenix Home Life. Phoenix
Home Life reserves the right to make a deduction for taxes should they be
imposed with respect to such items in the future.
TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities. In general, a Contract
Owner is not taxed on increases in value of the Units held under a Contract
until some form of distribution is made under the Contract. However, in certain
cases, the increase in value may be subject to tax currently. In the case of
Contracts not owned by natural persons, see "Contracts Owned by Non-Natural
Persons." In the case of Contracts not meeting the diversification
requirements, see "Diversification Standards."
1. SURRENDERS OR WITHDRAWALS PRIOR TO THE CONTRACT
MATURITY DATE.
Code Section 72 provides that a total or partial surrender from a
Contract prior to the Contract Maturity Date will be treated as taxable
income to the extent the amounts held under the Contract exceed the
"investment in the Contract." The "investment in the Contract" is that
portion, if any, of purchase payments (premiums paid) by or on behalf of an
individual under a Contract that is not excluded from the individual's gross
income. However, under certain types of Qualified Plans there may be no
investment in the Contract within the meaning of Code Section 72, so that the
total amount of all payments received will be taxable. The taxable portion is
taxed as ordinary income in an amount equal to the value of the Contract or
portion thereof that is pledged or assigned. For purposes of this rule, a
pledge or assignment of a Contract is treated as a payment received on
account of a partial surrender of a Contract. Similar rules apply to
amounts received under Qualified Plans, in most cases.
2. SURRENDERS OR WITHDRAWALS ON OR AFTER THE CONTRACT
MATURITY DATE.
Upon receipt of a lump sum payment under the Contract, the recipient is
taxed on the portion of the payment that exceeds the investment in the
Contract. Ordinarily, such taxable portion is taxed as ordinary income.
Under certain circumstances, the proceeds of a surrender of a Contract may
qualify for "lump sum distribution" treatment under Qualified Plans. See your
tax adviser if you think you may qualify for "lump sum distribution"
treatment.
For fixed annuity payments, the taxable portion of each payment is
determined by using a formula known as the "exclusion ratio," which
establishes the ratio that the investment in the Contract bears to the total
expected amount of annuity payments for the term of the Contract. That ratio
is then applied to each payment to determine the non-taxable portion of the
payment. The remaining portion of each payment is taxed as ordinary income.
For variable annuity payments, the taxable portion is determined by a formula
that establishes a specific dollar amount of each payment that is not taxed.
The dollar amount is determined by dividing the investment in the Contract by
the total number of expected periodic payments. The remaining portion of each
payment is taxed as ordinary income. Once the excludable portion of annuity
payments equals the investment in the Contract, the balance of the annuity
payments will be fully taxable.
Withholding of Federal income taxes on all distributions may be required
unless the recipient elects not to have any amounts withheld and properly
notifies Variable Products Operations of that election.
3. PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS.
With respect to amounts surrendered or distributed before the taxpayer
reaches age 59 1/2, a penalty tax is imposed equal to ten percent (10%) of
the portion of such amount that is includable in gross income. However, the
penalty tax will not apply to withdrawals: (I) made on or after the death of
the Contract Owner (or where the Contract Owner is not an individual, the
death of the "Primary Annuitant," who is defined as the individual the events
in whose life are of primary importance in affecting the timing and
21
<PAGE>
amount of the payout under the Contract); (ii) attributable to the taxpayer's
becoming totally disabled within the meaning of Code Section 72(m)(7); (iii)
which are part of a series of substantially equal periodic payments made (not
less frequently than annually) for the life (or life expectancy) of the
taxpayer, or the joint lives (or joint life expectancies) of the taxpayer
and his beneficiary; (iv) from certain qualified plans (such distributions
may, however, be subject to a similar penalty under Code Section 72(t)
relating to distributions from qualified retirement plans.); (v) allocable to
investment in the contract before August 14, 1982; (vi) under a qualified
funding asset (as defined in Code Section 130(d)); (vii) under an immediate
annuity contract (as defined in Code Section 72(u)(4)); or (viii) that are
purchased by an employer on termination of certain types of qualified plans
and which are held by the employer until the employee separates from service.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the first
year when the modification occurs will be increased by an amount (determined
by the Treasury regulations) equal to the tax that would have been imposed
but for item (iii) above, plus interest for the deferral period, but only if
the modification takes place: (a) before the close of the period which is 5
years from the date of the first payment and after the taxpayer attains age
59 1/2, or (b) before the taxpayer reaches age 59 1/2.
ADDITIONAL CONSIDERATIONS
1. DISTRIBUTION-AT-DEATH RULES.
In order to be treated as an annuity contract for Federal income tax
purposes, a Contract must provide the following two distribution rules: (A)
if the Contract Owner dies on or after the Contract Maturity Date, and before
the entire interest in the Contract has been distributed, the remainder of
the Contract Owner's interest will be distributed at least as quickly as the
method in effect on the Contract Owner's death; and (B) if a Contract Owner
dies before the Contract Maturity Date, the Contract Owner's entire interest
must generally be distributed within five (5) years after the date of death,
or if payable to a designated beneficiary may be annuitized over the life of
that beneficiary or over a period not extending beyond the life expectancy of
that beneficiary, and must commence within one (1) year after the Contract
Owner's date of death. If the beneficiary is the spouse of the Contract
Owner, the Contract (together with the deferral of tax on the accrued and
future income thereunder) may be continued in the name of the spouse as
Contract Owner. These distribution requirements do not apply to annuity
contracts under Qualified Plans (other than Code Section 457 Plans).
If the Annuitant, who is not the Contract Owner, dies before the Maturity
Date and there is no Contingent Annuitant, the Annuitant's beneficiary must
elect within 60 days whether to receive the death benefit in a lump sum or in
periodic payments commencing within one (1) year.
If the Contract Owner is not an individual, the death of the Annuitant,
is considered to be the death of the Contract Owner. In addition, when the
Contract Owner is not an individual, a change in the primary Annuitant is
treated as the death of the Contract Owner. Finally, in the case of
non-spousal joint Contract Owners the distribution will be required at the
death of the first of the Contract Owners.
2. TRANSFER OF ANNUITY CONTRACTS.
Transfers of non-qualified Contracts prior to the Maturity Date for less
than full and adequate consideration to the Contract Owner at the time of
such transfer, will trigger tax on the gain in the Contract, with the
transferee getting a step-up in basis for the amount included in the
Contract Owner's income. This provision does not apply to transfers between
spouses or incident to a divorce.
3. CONTRACTS OWNED BY NON-NATURAL PERSONS.
If the Contract is held by a non-natural person (for example, a
corporation) the income on that Contract (generally the increase in the net
surrender value less the premium paid) is includable in income each year. The
rule does not apply where the non-natural person is the nominal owner of a
Contract and the beneficial owner is a natural person. The rule also does not
apply where the annuity contract is acquired by the estate of a decedent,
where the Contract is held under a qualified plan, a Tax Sheltered Annuity
program, or an IRA, where the Contract is a qualified funding asset for
structured settlements, where the Contract is purchased on behalf of an
employee upon termination of a qualified plan, and in the case of an
immediate annuity.
4. SECTION 1035 EXCHANGES.
Code Section 1035 provides, in general, that no gain or loss shall be
recognized on the exchange of one annuity contract for another. A replacement
contract obtained in a tax-free exchange of contracts succeeds to the status
of the surrendered contract. If the surrendered contract was issued prior to
August 14, 1982, the tax rules that formerly provided that the surrender was
taxable only to the extent the amount received exceeds the Contract Owner's
investment in the Contract, will continue to apply. In contrast, Contracts
issued on or after January 19, 1985, in a Code Section 1035 exchange, are
treated as new Contracts for purposes of the distribution-at-death rules.
Special rules and procedures apply to Code Section 1035 transactions.
Prospective Contract Owners wishing to take advantage of Code Section 1035
should consult their tax advisers.
5. MULTIPLE CONTRACTS.
Code Section 72(e)(11)(A)(ii) provides that for Contracts entered into
after October 21, 1988, for purposes of determining the amount of any
distribution under Code Section 72(e) (amounts not received as annuities)
that is includable in gross income, all non-qualified deferred annuity
contracts issued by the same insurer (or affiliate) to the same Contract
Owner during any calendar year are to be aggregated and treated as one
contract. Thus, any amount received under any such contract prior to the
Contract Maturity Date, such as a withdrawal, dividend or loan, will be
taxable (and possibly subject to the 10% penalty tax) to the extent of the
combined income in all such contracts.
The Treasury Department has specific authority to issue regulations that
prevent the avoidance of Code Section 72(e) through the serial purchase of
annuity contracts or otherwise. In addition, there may be situations where
the Treasury may conclude
22
<PAGE>
that it would be appropriate to aggregate two or more contracts purchased by
the same Contract Owner. Accordingly, a Contract Owner should consult a
competent tax adviser before purchasing more than one Contract or other
annuity contracts.
DIVERSIFICATION STANDARDS
1. DIVERSIFICATION REGULATIONS.
To comply with the diversification regulations under Code Section 817(h)
("Diversification Regulations"), after a start-up period, each Series of the
Funds will be required to diversify its investments. The Diversification
Regulations generally require that, on the last day of each quarter of a
calendar year no more than 55% of the value of the assets of the Funds are
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. A "look-through" rule
applies to treat a pro-rata portion of each asset of the Funds as an asset
of the Account, and each Series of the Funds are tested for compliance with
the percentage limitations. All securities of the same issuer are treated as
a single investment. As a result of the 1988 Act, each Government agency or
instrumentality will be treated as a separate issuer for purposes of these
limitations.
In connection with the issuance of the Diversification Regulations, the
Treasury announced that such regulations do not provide guidance concerning
the extent to which Contract Owners may direct their investments to
particular divisions of a separate account. Regulations or a revenue ruling
in this regard may be issued in the future. It is not clear, at this time,
what these regulations or the revenue ruling will provide. It is possible
that when issued, the Contract may need to be modified to comply with such
rules. For these reasons, Phoenix Home Life reserves the right to modify the
Contract, as necessary, to prevent the Contract Owner from being considered
the owner of the assets of the Account.
Phoenix Home Life has represented that it intends to comply with the
Diversification Regulations to assure that the Contracts continue to be
treated as annuity contracts for Federal income tax purposes.
2. DIVERSIFICATION REGULATIONS AND QUALIFIED PLANS.
Code Section 817(h) applies to a variable annuity contract other than a
pension plan contract. The Diversification Regulations reiterate that the
diversification requirements do not apply to a pension plan contract. All of
the Qualified Plans (described below) are defined as pension plan contracts
for these purposes. Notwithstanding the exception of Qualified Plan Contracts
from application of the diversification rules, all investments of the Phoenix
Home Life Qualified Plan Contracts (i.e., the Funds) will be structured to
comply with the diversification standards because the Funds serve as the
investment vehicle for non-qualified Contracts as well as Qualified Plan
Contracts.
QUALIFIED PLANS
The Contracts may be used with several types of Qualified Plans. TSAs,
Keoghs, Individual Retirement Accounts ("IRAs"), Corporate Pension and
Profit-Sharing Plans and State Deferred Compensation Plans will be treated, for
purposes of this discussion, as Qualified Plans. The tax rules applicable to
participants in such Qualified Plans vary according to the type of plan and the
terms and conditions of the plan itself. No attempt is made herein to provide
more than general information about the use of the Contracts with the various
types of Qualified Plans. Participants under such Qualified Plans as well as
Contract Owners, Annuitants, and beneficiaries, are cautioned that the rights of
any person to any benefits under such Qualified Plans may be subject to the
terms and conditions of the plans themselves or limited by applicable law,
regardless of the terms and conditions of the Contract issued in connection
therewith. For example, Phoenix Home Life will accept beneficiary designations
and payment instructions under the terms of the Contract without regard to any
spousal consents that may be required under the Retirement Equity Act (REA).
Consequently, a Contract Owner's beneficiary designation or elected payment
option may not be enforceable.
Effective January 1, 1993, Section 3405 of the Internal Revenue Code was
amended to change the rollover rules applicable to the taxable portions of
distributions from qualified pension and profitsharing plans and Section
403(b) TSA arrangements. Taxable distributions eligible to be rolled-over will
generally be subject to 20 percent income tax withholding. Mandatory withholding
can only be avoided if the employee arranges for a direct rollover to another
qualified pension or profit-sharing plan or to an IRA.
The new mandatory withholding rules apply to all taxable distributions from
qualified plans or TSAs, except a) distributions required under the Code, and b)
substantially equal distributions made over the life (or life expectancy) of the
employee, or for a term certain of 10 years or more.
Numerous changes have been made to the income tax rules governing Qualified
Plans as a result of legislation enacted during the past several years,
including rules with respect to: coverage, participation, and maximum
contributions; required distributions; penalty taxes on early or insufficient
distributions, and income tax withholding on distributions. The following are
brief descriptions of the various types of Qualified Plans and of the use of the
contracts in connection therewith.
1. TAX-SHELTERED ANNUITIES.
Code Section 403(b) permits public school systems and certain types of
charitable, educational and scientific organizations, generally specified in
Code Section 501(c)(3) to purchase annuity contracts on behalf of their
employees and, subject to certain limitations, allows employees of those
organizations to exclude the amount of purchase payments from gross income
for Federal income tax purposes. These annuity contracts are commonly
referred to as "TSAs."
For taxable years beginning after December 31, 1988, Code Section
403(b)(11) imposes certain restrictions on a Contract Owner's ability to make
partial withdrawals from, or surrenders of, Code Section 403(b) Contracts, if
the cash withdrawn is attributable to purchase payments made under a salary
reduction agreement. Specifically, Code Section 403(b)(11) allows a Contract
Owner to make a surrender or partial withdrawal only (A) when the employee
attains age 59 1/2, separates from service, dies, or becomes disabled (as
defined in the Code), or (B) in the case of hardship. In the case of
hardship, the amount distributable cannot include any income earned under the
Contract.
23
<PAGE>
The 1988 Act amended the effective date of Code Section 403(b)(11), so
that it applies only with respect to distributions from Code Section 403(b)
Contracts which are attributable to assets other than assets held as of the
close of the last year beginning before January 1, 1989. Thus, the
distribution restrictions do not apply to assets held as of December 31,
1988.
In addition, in order for certain types of contributions under a Code
Section 403(b) Contract to be excluded from taxable income, the employer
must comply with certain nondiscrimination requirements. Contract Owners
should consult their employers to determine whether the employer has
complied with these rules.
2. KEOGH PLANS.
The Self-Employed Individual Tax Retirement Act of 1962, as amended,
permits self-employed individuals to establish "Keoghs," or qualified plans
for themselves and their employees. The tax consequences to participants
under such a plan depend upon the terms of the plan. In addition, such plans
are limited by law with respect to the maximum permissible contributions,
distribution dates, nonforfeitability of interests, and tax rates applicable
to distributions. In order to establish such a plan, a plan document must be
adopted and implemented by the employer, as well as approved by the Internal
Revenue Service.
3. INDIVIDUAL RETIREMENT ACCOUNTS.
Code Section 408 permits eligible individuals to contribute to an
individual retirement program known as an "IRA." These IRAs are subject to
limitations on the amount which may be contributed, the persons who may be
eligible, and on the time when distributions may commence. In addition,
distributions from certain other types of Qualified Plans may be placed on a
tax-deferred basis into an IRA.
4. CORPORATE PENSION AND PROFIT-SHARING PLANS.
Code Section 401(a) permits corporate employers to establish various
types of retirement plans for employees. Such retirement plans may permit the
purchase of Contracts to provide benefits thereunder (see "Group Contracts").
As a general rule, the maximum amount which an employer may contribute on
behalf of a Participant to a defined benefit plan is the amount necessary to
fund an annual benefit equal to the lesser of 100% of compensation or
$120,000. If the plan is a defined contribution plan, the maximum
contribution is the lesser of 25% of compensation or $30,000 for each
Participant. If the plan is a profit-sharing plan, the amount which the
employer may deduct cannot exceed 15% of the compensation otherwise paid to
participating employees in the taxable year. Under a profit-sharing plan
which includes a cash or deferral provision described in Section 401(k) of
the Code, elective deferral contributions are limited to $9,500 a year, or
less in the case of a highly compensated employee (as defined by the code)
where certain non-discriminatory percentage tests require a lower limit.
5. DEFERRED COMPENSATION PLANS WITH RESPECT TO SERVICE FOR
STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.
Code Section 457 provides for certain deferred compensation plans with
respect to service for state and local governments and certain other
entities. The Contracts may be used in connection with these plans; however,
under these plans the Contract Owner is the plan sponsor, and the individual
participants in the plans are the Annuitants. Under such Contracts, the
rights of individual plan participants are governed solely by their
agreements with the plan sponsor and not by the terms of the Contracts.
6. SEEK TAX ADVICE.
The above description of Federal income tax consequences of the different
types of Qualified Plans which may be funded by the Contracts offered by this
Prospectus is only a brief summary and is not intended as tax advice. The
rules governing the provisions of Qualified Plans are extremely complex and
often difficult to comprehend. Anything less than full compliance with the
applicable rules, all of which are subject to change, may have adverse tax
consequences. A prospective Contract Owner considering adoption of a
Qualified Plan and purchase of a Contract in connection therewith should
first consult a qualified tax adviser, with regard to the suitability of the
Contract as an investment vehicle for the Qualified Plan.
SALES OF VARIABLE ACCUMULATION CONTRACTS
- --------------------------------------------------------------------------------
The principal underwriter of the Contracts is Phoenix Equity Planning
Corporation ("PEPCO"). Contracts may be purchased through registered
representatives of W. S. Griffith & Co., Inc. ("W. S. Griffith") licensed to
sell Phoenix Home Life insurance policies and annuity contracts. W. S. Griffith
is an indirect wholly-owned subsidiary of Phoenix Home Life. PEPCO is an
indirect, majority-owned subsidiary of Phoenix Home Life. Contracts may also be
purchased through other broker-dealers or entities registered under the
Securities Exchange Act of 1934, whose representatives are authorized by
applicable law to sell Contracts under terms of agreement provided by PEPCO and
terms of agreement provided by Phoenix Home Life.
Although the Glass-Steagall Act prohibits banks and bank affiliates from
engaging in the business of underwriting securities, banking regulators have not
indicated that such institutions are prohibited from purchasing variable annuity
contracts upon the order and for the account of their customers. In addition to
reimbursing PEPCO for its expenses, Phoenix Home Life pays PEPCO an amount equal
to up to 7.25% of the purchase payments under the Contracts. PEPCO pays any
distribution organization an amount which may not exceed up to 7.25% of
purchase payments made under the contract. Any such amount paid with respect to
Contracts sold through other broker/dealers will be paid by Phoenix Home Life to
or through PEPCO. The amounts paid by Phoenix Home Life are not deducted from
the purchase payments. Deductions for sales charges (as described under "Sales
Charges") may be used to reimburse Phoenix Home Life for commission payments to
broker-dealers.
Phoenix Home Life through PEPCO will sponsor sales contests, training and
educational meetings and provide to all qualifying dealers, from its own profits
and resources, additional compensation in the form of trips, merchandise or
expense reimbursement. Brokers and dealers other than PEPCO may also make
customary additional charges for their services in effecting purchases, if they
notify the Funds of their intention to do so.
24
<PAGE>
STATE REGULATION
- --------------------------------------------------------------------------------
Phoenix Home Life is subject to the provisions of the New York insurance
laws applicable to mutual life insurance companies and to regulation and
supervision by the New York Superintendent of Insurance. Phoenix Home Life is
also subject to the applicable insurance laws of all the other states and
jurisdictions in which it does an insurance business.
State regulation of Phoenix Home Life includes certain limitations on the
investments which may be made for its General Account and separate accounts,
including the Account. It does not include, however, any supervision over the
investment policy of the Account.
REPORTS
- --------------------------------------------------------------------------------
Reports showing the Contract Value and containing the financial statements
of the Account will be furnished at least annually to an Owner.
VOTING RIGHTS
- --------------------------------------------------------------------------------
As stated above, all of the assets held in an available Sub-account will be
invested in shares of a corresponding Series of the Funds. Phoenix Home Life is
the legal owner of those shares and as such has the right to vote to elect the
Board of Trustees of each Fund, to vote upon certain matters that are required
by the Investment Company Act of 1940 ("1940 Act") to be approved or ratified by
the shareholders of a mutual fund and to vote upon any other matter that may be
voted upon at a shareholders' meeting. However, Phoenix Home Life intends to
vote the shares of the Funds at regular and special meetings of the shareholders
of the Funds in accordance with instructions received from Owners of the
Contracts.
Phoenix Home Life currently intends to vote Fund shares attributable to any
Phoenix Home Life assets and Fund shares held in each Sub-account for which no
timely instructions from Owners are received in the same proportion as those
shares in that Sub-account for which instructions are received. In the future,
to the extent applicable Federal securities laws or regulations permit Phoenix
Home Life to vote some or all shares of the Funds in its own right, it may elect
to do so.
Matters on which Owners may give voting instructions may include the
following: (1) election of the Board of Trustees of a Fund; (2) ratification of
the independent accountant for a Fund; (3) approval or amendment of the
investment advisory agreement for the Series of the Fund corresponding to the
Owner's selected Sub-account(s); (4) any change in the fundamental investment
policies or restrictions of each such Series; and (5) any other matter requiring
a vote of the Shareholders of a Fund. With respect to amendment of any
investment advisory agreement or any change in a Series' fundamental investment
policy, Owners participating in such Series will vote separately on the matter,
pursuant to the requirements of the 1940 Act.
The number of votes that a Contract Owner has the right to cast will be
determined by applying the Contract Owner's percentage interest in a
Sub-account to the total number of votes attributable to the Sub-account. In
determining the number of votes, fractional shares will be recognized. The
number of votes for which each Owner may give Phoenix Home Life instructions
will be determined as of the record date for Fund shareholders chosen by the
Board of Trustees of a Fund. Phoenix Home Life will furnish Owners with proper
forms and proxies to enable them to give these instructions.
TEXAS OPTIONAL RETIREMENT PROGRAM
- --------------------------------------------------------------------------------
Participants in the Texas Optional Retirement Program may not receive the
proceeds of a withdrawal from, or complete surrender of, a Contract, or apply
them to provide annuity options prior to retirement except in the case of
termination of employment in the Texas public institutions of higher education,
death or total disability. Such proceeds may, however, be used to fund another
eligible retirement vehicle.
LITIGATION
- --------------------------------------------------------------------------------
Phoenix Home Life, the Account and PEPCO are not parties to any litigation
that would have a material adverse effect upon the Account or the Contracts.
LEGAL MATTERS
- --------------------------------------------------------------------------------
Legal matters involving Federal securities and income tax laws in connection
with the Contracts described in this Prospectus have been passed upon by Jorden
Burt Berenson & Johnson LLP, Washington, D.C.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The Statement of Additional Information contains more specific information
and financial statements relating to the Account and Phoenix Home Life. The
Table of Contents of the Statement of Additional Information is set forth below:
Underwriter
Calculation of Yield and Return
Calculation of Annuity Payments
Experts
Financial Statements
Contract Owner inquiries and requests for a Statement of Additional
Information should be directed to Variable Products Operations in writing at
101 Munson Street, P.O. Box 942, Greenfield, Massachusetts 01302-0942, or by
calling Variable Products Operations at (800) 447-4312.
25
<PAGE>
APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
Contributions to the Guaranteed Interest Account under the Contract and
transfers to the Guaranteed Interest Account become part of the general account
of Phoenix Home Life (the "General Account"), which supports insurance and
annuity obligations. Because of exemptive and exclusionary provisions, interests
in the General Account have not been registered under the Securities Act of 1933
("1933 Act") nor is the General Account registered as an investment company
under the 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 Guaranteed Interest Account.
Disclosures regarding the Guaranteed Interest Account 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 Phoenix Home
Life other than those allocated to any separate account. Premium payments will
be allocated to the Guaranteed Interest Account and, therefore, the General
Account, as elected by the Owner at the time of purchase or as subsequently
changed. Phoenix Home Life 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 Phoenix Home Life and the contracts
participating in the General Account, in accordance with the terms of such
contracts.
Fixed annuity payments made to Annuitants under the Contract will not be
affected by the mortality experience (death rate) of persons receiving such
payments or of the general population. Phoenix Home Life assumes this "mortality
risk" by virtue of annuity rates incorporated in the Contract that cannot be
changed. In addition, Phoenix Home Life guarantees that it will not increase
charges for maintenance of the Contracts regardless of its actual expenses.
Investment income from the General Account allocated to Phoenix Home Life
includes compensation for mortality and expense risks borne by it in connection
with General Account contracts.
The amount of investment income allocated to the Contracts will vary from
year to year in the sole discretion of Phoenix Home Life. However, Phoenix Home
Life guarantees that it will credit interest at a rate of not less than 4% per
year for individual Contracts and 3% per year for Group Contracts, compounded
annually, to amounts allocated to the Guaranteed Interest Account. Phoenix Home
Life may credit interest at a rate in excess of these rates; however, it is not
obligated to credit any interest in excess of these rates.
Bi-weekly, Phoenix Home Life will set the excess interest rate, if any,
that will apply to amounts deposited to the Guaranteed Interest Account. That
rate will remain in effect for such deposits for an initial guarantee period of
one full year from the date of deposit. Upon expiration of the initial one-year
guarantee period (and each subsequent one-year guarantee period thereafter),
the rate to be applied to any deposits whose guaranteed period has just ended
will be the same rate as is applied to new deposits allocated to the Guaranteed
Interest Account at that time. 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 Phoenix Home Life based on
information as to expected investment yields. Some of the factors that Phoenix
Home Life may consider in determining whether to credit excess interest to
amounts allocated to the Guaranteed Interest Account 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 GUARANTEED INTEREST ACCOUNT IN
EXCESS OF 4% PER YEAR FOR INDIVIDUAL CONTRACTS AND 3% PER YEAR FOR GROUP
CONTRACTS WILL BE DETERMINED IN THE SOLE DISCRETION OF PHOENIX HOME LIFE AND
WITHOUT REGARD TO ANY SPECIFIC FORMULA. THE CONTRACT OWNER ASSUMES THE RISK THAT
INTEREST CREDITED TO GUARANTEED INTEREST ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
MINIMUM GUARANTEE FOR ANY GIVEN YEAR.
Phoenix Home Life 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 Phoenix Home Life's exercise of discretion in this regard
is the equitable allocation of distributable earnings and surplus among its
various policyholders and contract owners.
Excess interest, if any, will be credited on the Guaranteed Interest Account
Contract Value. Phoenix Home Life guarantees that, at any time, the Guaranteed
Interest Account Contract Value will not be less than the amount of purchase
payments allocated to the Guaranteed Interest Account, plus interest at the rate
of 4% per year for individual Contracts and 3% per year for Group Contracts,
compounded annually, plus any additional interest which Phoenix Home Life may,
in its discretion, credit to the Guaranteed Interest Account, less the sum of
all annual administrative or surrender charges, any applicable premium taxes,
and less any amounts surrendered. If the Owner surrenders the Contract, the
amount available from the Guaranteed Interest Account will be reduced by any
applicable surrender charge and annual administration charge (see "Deductions
and Charges").
IN GENERAL, ONE TRANSFER PER CONTRACT YEAR IS ALLOWED FROM THE GUARANTEED
INTEREST ACCOUNT. THE AMOUNT WHICH CAN BE TRANSFERRED IS LIMITED TO THE GREATER
OF $1,000 AND 25% OF THE CONTRACT VALUE IN THE GUARANTEED INTEREST ACCOUNT AS OF
THE LAST CONTRACT ANNIVERSARY. UNDER THE SYSTEMATIC TRANSFER PROGRAM, TRANSFERS
OF APPROXIMATELY EQUAL AMOUNTS MAY BE MADE OVER A MINIMUM 18-MONTH PERIOD.
NON-SYSTEMATIC TRANSFERS FROM THE GUARANTEED INTEREST ACCOUNT WILL BE
EFFECTUATED ON THE DATE OF RECEIPT BY VARIABLE PRODUCTS OPERATIONS, UNLESS
OTHERWISE REQUESTED BY THE CONTRACT OWNER.
26
<PAGE>
APPENDIX B
DEDUCTIONS FOR STATE PREMIUM TAXES
QUALIFIED AND NON-QUALIFIED ANNUITY CONTRACTS
<TABLE>
<CAPTION>
UPON UPON
STATE PURCHASE(1) ANNUITIZATION NON-QUALIFIED QUALIFIED
- ----- ----------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
California .......................................... X 2.35% 0.50%
D.C.................................................. X 2.25
Kansas............................................... X 2.00
Kentucky............................................. X 2.00 2.00
Maine................................................ X 2.00
Nevada............................................... X 3.50
South Dakota......................................... X 1.25
West Virginia........................................ X 1.00 1.00
Wyoming.............................................. X 1.00
</TABLE>
NOTE: The above premium tax deduction rates are as of January 1, 1996. No
premium tax deductions are made for states not listed above. However,
premium tax statutes are subject to amendment by legislative act and
to judicial and administrative interpretation, which may affect both
the above list of states and the applicable tax rates. Consequently,
the company reserves the right to deduct premium tax when necessary
to reflect changes in state tax laws or interpretation.
For an explanation of the assessment of Premium Taxes see "Deductions
and Charges, Premium Tax."
(1) "Purchase" refers to the earlier of partial withdrawal, surrender
of the Contract, Maturity Date or payment of death proceeds.
27
<PAGE>
[VERSION B]
PROSPECTUS -- MAY 1, 1996
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
TEMPLETON INVESTMENT PLUS
Individual Deferred
Variable Accumulation Annuity Contracts
issued by
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
101 Munson Street
P.O. Box 942
Greenfield, Massachusetts 01302-0942
Telephone: (800) 243-4840
FOR TAX QUALIFIED AND NON-TAX QUALIFIED ANNUITY PLANS
This Prospectus describes Templeton Investment Plus, individual deferred
variable accumulation annuity contracts ('Contracts') issued by Phoenix Home
Life Mutual Insurance Company ('Phoenix Home Life'). The Contracts provide for
both an Accumulation Period and an Annuity Period. Premium payments under the
Contract are flexible. Generally, a minimum initial purchase payment of $1,000
is required and each subsequent purchase payment must be at least $25. If the
bank draft investment program is elected, the minimum initial purchase payment
required is $25. For Individual Retirement Accounts (IRA's), the minimum initial
purchase payment required is $25. For contracts issued under tax-qualified or
employer sponsored plans other than IRA's, a minimum annual payment of $1,000
must be made. Generally, a Contract may not be purchased with respect to a
proposed Annuitant who is eighty years of age or older.
Purchase payments are allocated to one or more of the available Sub-accounts
of the Phoenix Home Life Variable Accumulation Account (the 'Account') and/or to
the Guaranteed Interest Account (See Appendix A) as specified by the Contract
Owner in the application for the Contract. Each available Sub-account of the
Account invests exclusively in a Series of the Templeton Variable Products
Series Fund (the 'Fund'). The Fund is a mutual fund whose Series presently
include the Templeton Money Market Fund, Templeton Bond Fund, Templeton Stock
Fund, Templeton Asset Allocation Fund and Templeton International Fund.
You may surrender a Contract for any reason within 10 days after its receipt
and receive in cash the adjusted value of the initial purchase payment. You may
receive more or less than the initial payment depending on investment experience
within the Sub-account during the 10-day period, unless the Contract was issued
with a Temporary Money Market Allocation Amendment, in which case your initial
purchase payment is refunded. If the initial purchase payment, or any portion
thereof, was allocated to the Guaranteed Interest Account, that payment (or
portion) and any earned interest is refunded. (See 'Free Look Period.')
This Prospectus provides information a prospective investor should know
before investing and should be kept for future reference. It is accompanied by a
current Prospectus for the Fund. No offer is being made of a Contract funded by
any Series of the Fund for which a current Prospectus has not been delivered.
Contracts are not deposits or obligations of, or guaranteed or endorsed by,
any bank, credit union or affiliated entity and are not federally insured or
otherwise protected by the Federal Deposit Insurance Corporation (FDIC), Federal
Reserve Board, or any other agency and involve investment risks including
possible loss of principal.
Additional information about the Contracts has been filed with the
Securities and Exchange Commission in a Statement of Additional Information,
dated May 1, 1996, which is incorporated herein by reference. The Statement of
Additional Information, the table of contents of which is set forth in this
Prospectus, is available without charge upon request by writing or telephoning
Phoenix Home Life at the address or telephone number set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
HEADING PAGE
SUMMARY OF EXPENSES................................ 3
FINANCIAL HIGHLIGHTS............................... 4
PERFORMANCE HISTORY................................ 6
SPECIAL TERMS...................................... 7
SUMMARY............................................ 8
THE VARIABLE ACCUMULATION
ANNUITY.......................................... 11
PHOENIX HOME LIFE AND THE VARIABLE ACCUMULATION
ACCOUNT.......................................... 11
TEMPLETON VARIABLE PRODUCTS
SERIES FUND...................................... 11
PURCHASE OF CONTRACTS.............................. 12
DEDUCTIONS AND CHARGES............................. 13
Premium Tax.................................... 13
Sales Charges.................................. 13
Charges for Mortality and Expense
Risks....................................... 13
Charges for Administrative Services............ 14
Other Charges.................................. 14
THE ACCUMULATION PERIOD............................ 15
Accumulation Units............................. 15
Accumulation Unit Values....................... 15
Transfers...................................... 15
Surrender of Contract; Partial
Withdrawals................................. 16
Lapse of Contract.............................. 16
Payment Upon Death Before
Maturity Date............................... 16
THE ANNUITY PERIOD................................. 17
Variable Accumulation Annuity
Contracts................................... 17
Annuity Options................................ 17
Option A--Life Annuity With Specified Period
Certain..................................... 18
Option B--Non-Refund Life Annuity.............. 18
Option D--Joint and Survivor Life
Annuity..................................... 18
Option E--Installment Refund Life
Annuity..................................... 18
Option F--Joint and Survivor Life Annuity
With Specified Period Certain............... 18
Option G--Payments for Specified
Period...................................... 18
Option H--Payments of Specified
Amount...................................... 18
Option I--Variable Payment Life Annuity With
Ten Year Period Certain................... 18
Option J--Joint Survivor Variable
Payment Life Annuity With Ten Year Period
Certain................................... 18
Option K--Variable Payment Annuity
for a Specified Period...................... 18
HEADING PAGE
Other Options and Rates........................ 18
Other Conditions............................... 18
Payment Upon Death After
Maturity Date............................... 19
VARIABLE ACCOUNT VALUATION PROCEDURES.............. 19
MISCELLANEOUS PROVISIONS........................... 19
Assignment..................................... 19
Deferment of Payment........................... 20
Free Look Period............................... 20
Amendments to Contracts........................ 20
Substitution of Fund Shares.................... 20
Ownership of the Contract...................... 20
FEDERAL INCOME TAXES............................... 20
Introduction................................... 20
Tax Status..................................... 21
Taxation of Annuities in General--
Non-Qualified Plans......................... 21
Surrenders or Withdrawals Prior to the Contract
Maturity Date............................. 21
Surrenders or Withdrawals on or after
the Contract Maturity Date.................. 21
Penalty Tax on Certain Surrenders
and Withdrawals............................. 21
Additional Considerations...................... 22
Diversification Standards...................... 23
Qualified Plans................................ 23
Tax-Sheltered Annuities........................ 23
Keogh Plans.................................... 24
Individual Retirement Accounts................. 24
Corporate Pension and Profit
Sharing Plans............................... 24
Deferred Compensation Plans with
Respect to Service for State and
Local Governments and Tax-Exempt
Organizations............................... 24
Seek Tax Advice................................ 24
SALES OF VARIABLE ACCUMULATION CONTRACTS........... 24
STATE REGULATION................................... 25
REPORTS............................................ 25
VOTING RIGHTS...................................... 25
TEXAS OPTIONAL RETIREMENT
PROGRAM.......................................... 25
LITIGATION......................................... 25
LEGAL MATTERS...................................... 25
STATEMENT OF ADDITIONAL
INFORMATION...................................... 26
APPENDIX A......................................... 27
APPENDIX B......................................... 28
2
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES ALL SUB-ACCOUNTS
- -------------------------------------------------------------------------------------------------------------- ----------------
<S> <C>
Sales Load Imposed on Purchases............................................................................... None
Deferred Sales Load (as a percentage of amount surrendered):
Age of Deposit in Complete Years 0-1...................................................................... 6%
Age of Deposit in Complete Years 1-2...................................................................... 5%
Age of Deposit in Complete Years 2-3...................................................................... 4%
Age of Deposit in Complete Years 3-4...................................................................... 3%
Age of Deposit in Complete Years 4-5...................................................................... 2%
Age of Deposit in Complete Years 5-6...................................................................... 1%
Age of Deposit in Complete Years 6 and thereafter......................................................... None
Exchange Fee
Current Fee............................................................................................... None
Maximum Allowable Charge Per Exchange..................................................................... $10
CONTRACT FEES
Current Annual Administrative............................................................................. $35
Maximum Annual Administrative............................................................................. $35
SEPARATE ACCOUNT EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Fees........................................................................... 1.25%
Account Fees and Expenses
Daily Administrative Fee............................................................................... 0.125%
Total Separate Account Annual Expenses.................................................................... 1.375%
</TABLE>
<TABLE>
<CAPTION>
MONEY ASSET
SUB-ACCOUNTS MARKET BOND STOCK ALLOCATION INTERNATIONAL
- ------------------------------------------------------------------------ ------ ---- ----- ---------- -------------
<S> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES
(as a percentage of Fund average net assets)
Investment Management Fees.......................................... .35% .50% .47% .48% .49%
Other Expenses (after expense reimbursement)*....................... .28% .28% .19% .18% .22%
Total Fund Annual Expenses.............................................. .63% .78% .66% .66% .71%
EXAMPLE
If you surrender your Contract at the end of the
applicable time period:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets:
1 year......................................................... $ 68 70 69 69 69
3 years........................................................ $ 97 102 98 98 100
5 years........................................................ $ 127 134 128 128 131
10 years........................................................ $ 249 264 252 252 257
If you do not surrender your Contract:
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return on assets:
1 year......................................................... $ 22 24 22 22 23
3 years........................................................ $ 68 73 69 69 70
5 years........................................................ $ 116 124 118 118 120
10 years........................................................ $ 249 264 252 252 257
</TABLE>
3
<PAGE>
The purpose of the table set forth above is to assist the Contract Owner in
understanding the various costs and expenses that a Contract Owner will bear
directly or indirectly. The table reflects expenses of the VA Account as well as
the Fund. (See 'Deductions and Charges' in this Prospectus and 'Management of
the Trust' in the Fund Prospectus.)
Any premium or other taxes levied by any governmental entity with respect to
the Contracts will be charged against the Contract Values based on a percentage
of premiums paid. Premium taxes currently imposed by certain states on the
Contracts range from 0% to 3.5% of premiums paid. (See 'Deductions and
Charges--Premium Tax'.)
*'Other Expenses' are based upon the actual operating expenses incurred by
the Fund for the fiscal year ended December 31, 1995. For the fiscal year ended
December 31, 1995, it was not necessary that the Fund be reimbursed for
operating expenses for the Stock, Bond, Money Market, Asset Allocation or
International Series.
A sales charge may be taken from the proceeds when a Contract is surrendered
or when an amount is withdrawn, if assets have not been held under the Contract
for a certain period of time. An amount up to 10% of the Contract Value may be
withdrawn each year without a sales charge. (See 'Deductions and Charges--Sales
Charge'.)
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The $35
annual administrative charge is reflected in the Example as $1.75 since the
average Contract account size is greater than $1,000 and the expense effect is
reduced accordingly. (See 'Deductions and Charges'.)
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
Following are the financial highlights for the period indicated.
<TABLE>
<CAPTION>
TEMPLETON STOCK
SUB-ACCOUNT
---------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period........................ $1.665152 $1.726593 $1.305609 $1.235446 $ .981990 $1.119352 $ .989563
Unit value, end of period..... $2.057549 $1.665152 $1.726593 $1.305609 $1.235446 $ .981990 $1.119352
Number of accumulation units
outstanding at end of period
(000)........................ 142,234 144,872 137,108 118,456 94,307 74,885 44,084
<CAPTION>
PERIOD FROM
NOVEMBER 4,
1988*
TO DECEMBER 31,
1988
---------------
<S> <C>
Unit value, beginning of
period........................ $ 1.00000
Unit value, end of period..... $ .989563
Number of accumulation units
outstanding at end of period
(000)........................ 2,812
</TABLE>
*Date of inception
<TABLE>
<CAPTION>
TEMPLETON ASSET ALLOCATION
SUB-ACCOUNT
---------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period....................... $1.625952 $1.699180 $1.365257 $1.280431 $1.016125 $1.119543 $1.001691
Unit value, end of period..... $1.965734 $1.625952 $1.699180 $1.365257 $1.280431 $1.016125 $1.119543
Number of accumulation units
outstanding at end of period
(000)........................ 72,985 74,901 66,903 46,950 27,918 21,974 11,455
<CAPTION>
PERIOD FROM
NOVEMBER 28,
1988*
TO DECEMBER 31,
1988
---------------
<S> <C>
Unit value, beginning of
period....................... $ 1.000000
Unit value, end of period..... $ 1.001691
Number of accumulation units
outstanding at end of period
(000)........................ 130
</TABLE>
*Date of inception
<TABLE>
<CAPTION>
TEMPLETON MONEY MARKET
SUB-ACCOUNT
---------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period....................... $1.238474 $1.213373 $1.201078 $1.181114 $1.134278 $1.069449 $1.003591
Unit value, end of period..... $1.287771 $1.238474 $1.213373 $1.201078 $1.181114 $1.134278 $1.069449
Number of accumulation units
outstanding at end of period
(000)........................ 16,077 26,566 13,892 17,734 18,533 15,540 5,324
<CAPTION>
PERIOD FROM
DECEMBER 2,
1988*
TO DECEMBER 31,
1988
---------------
<S> <C>
Unit value, beginning of
period....................... $ 1.000000
Unit value, end of period..... $ 1.003591
Number of accumulation units
outstanding at end of period
(000)........................ 423
</TABLE>
*Date of inception
4
<PAGE>
<TABLE>
<CAPTION>
TEMPLETON BOND
SUB-ACCOUNT
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period........... $1.366504 $1.456861 $1.324996 $1.272743 $1.113263 $1.061263
Unit value, end of period................. $1.549167 $1.366504 $1.456861 $1.324996 $1.272743 $1.113263
Number of accumulation units outstanding
at end of period (000)................... 12,633 13,111 13,578 8,937 5,611 2,889
<CAPTION>
PERIOD FROM
JANUARY 4,
1989*
TO DECEMBER 31,
1989
---------------
<S> <C>
Unit value, beginning of period........... $ 1.000000
Unit value, end of period................. $ 1.061263
Number of accumulation units outstanding
at end of period (000)................... 1,455
</TABLE>
*Date of inception
<TABLE>
<CAPTION>
TEMPLETON INTERNATIONAL
SUB-ACCOUNT
-------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Unit value, beginning of period........................................... $1.303520 $1.351997 $ .930016
Unit value, end of period................................................. 1.488540 1.303520 1.351997
Number of accumulation units outstanding at end of period (000)........... 59,587 58,214 32,362
<CAPTION>
PERIOD FROM
MAY 1,
1982*
TO DECEMBER 31,
1992
--------------
<S> <C>
Unit value, beginning of period........................................... $ 1.000000
Unit value, end of period................................................. .930016
Number of accumulation units outstanding at end of period (000)........... 7,562
</TABLE>
*Date of inception
5
<PAGE>
PERFORMANCE HISTORY
From time to time the Account may include the performance history of any or all
Sub-accounts in advertisements, sales literature or reports. PERFORMANCE
INFORMATION ABOUT EACH SUB-ACCOUNT IS BASED ON PAST PERFORMANCE ONLY AND IS NOT
AN INDICATION OF FUTURE PERFORMANCE. Performance information may be expressed as
yield and effective yield of the Money Market Sub-account, as yield of the Bond
Sub-account and as total return of any Sub-account. For the Bond Sub-account,
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 the net investment income by the maximum offering price per unit on the
last day of the period.
When a Sub-account advertises its total return, it will usually be
calculated for one year, five years, and ten years or since inception if the
Sub-account has not been in existence for at least ten years. Total return is
measured by comparing the value of a hypothetical $1,000 investment in the
Sub-account 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 all applicable Contract
charges except for premium taxes (which vary by state) at the beginning of the
relevant period.
For those sub-accounts within the Account that have not been available for
one of the quoted periods, the standardized average annual total return
quotations may show the investment performance such sub-account would have
achieved (reduced by the applicable charges) had it been available to invest in
shares of the Fund for the period quoted.
Below are quotations of standardized average annual total return for
contracts assessing an .85% expense charge, calculated as described above.
<TABLE>
<CAPTION>
TEMPLETON
----------------------------------
AS OF DECEMBER 31, 1995 AVERAGE ANNUAL TOTAL RETURN
INCEPTION ----------------------------------
TEMPLETON SUB-ACCOUNT DATE 1 YEAR 3 YEAR 5 YEAR
- ------------------------------------------------------------ --------- ------ ------ ------
<S> <C> <C> <C> <C>
Stock....................................................... 11/04/88 17.82% 15.16% 15.60%
Asset Allocation............................................ 11/28/88 15.28% 11.73% 13.76%
Money Market................................................ 12/02/88 (0.87)% 1.25% 2.25%
Bond........................................................ 01/04/89 8.09% 4.22% 6.48%
International............................................... 05/01/92 8.88% 15.76% N/A
<CAPTION>
AS OF DECEMBER 31, 1995
TEMPLETON SUB-ACCOUNT LIFE OF FUND
- ------------------------------------------------------------ ------------
<S> <C>
Stock....................................................... 10.45%
Asset Allocation............................................ 9.85%
Money Market................................................ 3.48%
Bond........................................................ 6.32%
International............................................... 11.27%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS*
YEAR STOCK ASSET MONEY BOND
- ----------------------------------------------------------------- ------ ----- ----- -----
<S> <C> <C> <C> <C>
1989............................................................. 13.10% 11.80% 6.60% 6.10%
1990............................................................. (12.30)% (9.20)% 6.10% 4.90%
1991............................................................. 25.80% 26.00% 4.10% 14.30%
1992............................................................. 5.68% 6.62% 1.69% 4.11%
1993............................................................. 32.25% 24.46% 1.02% 9.95%
1994............................................................. (3.56)% (4.31)% 2.07% (6.20)%
1995............................................................. 23.57% 20.90% 3.98% 13.37%
<CAPTION>
ANNUAL TOTAL RETURNS
YEAR INTERNATIONAL
- ----------------------------------------------------------------- -------------
<S> <C>
1989............................................................. N/A
1990............................................................. N/A
1991............................................................. N/A
1992............................................................. (7.00)%
1993............................................................. 45.37%
1994............................................................. (3.59)%
1995............................................................. 14.19%
</TABLE>
*Sales charges have not been deducted from the Annual Total Return
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains.
Current yield for the Money Market Sub-account is based upon the income
earned by the Sub-account over a seven-day 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 stated as a percentage of the investment. Effective yield is
calculated similarly but when annualized, the income earned by the investment is
assumed to be reinvested in Sub-account Units and thus compounded in the course
of a 52-week period. Yield and effective yield reflect the recurring charges on
the Account level including the annual administrative fee.
Yield calculations of the Money Market Sub-account 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 seven day period,
which period will end on the date of the most recent financial statements. The
yield for the Sub-account during this seven 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 Money Market Sub-account based
on a seven day period ending December 31, 1995.
6
<PAGE>
Example:
<TABLE>
<CAPTION>
CONTRACTS
ASSESSING
.85% EXPENSE
CHARGE
------------
<S> <C>
Assumptions:
Value of hypothetical pre-existing account with exactly one unit
at the beginning of the period........................................................................... 1.286811
Value of the same account (excluding capital changes)
at the end of the seven day period....................................................................... 1.287771
Calculation:
Ending account value........................................................................................ 1.287771
Less beginning account value................................................................................ 1.286811
Net change in account value................................................................................. .000960
Base period return:
(adjusted change/beginning account value)..................................................................... .000746
Current yield = return X (365/7) =.............................................................................. 3.89%
Effective yield = [ (1 + return) 365/7 ] - 1 =.................................................................. 3.97%
</TABLE>
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 Account level.
A Sub-account's performance may be compared to that of the Consumer Price
Index or various unmanaged equity or bond indices such as the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, and the Europe
Australia Far East Index, and may also be compared to the performance of the
other variable annuity accounts as reported by services such as Lipper
Analytical Services, Inc. ('Lipper'), CDA Investment Technologies, Inc. ('CDA')
and Morningstar, Inc. or in other various publications. Lipper and CDA are
widely recognized independent rating/ranking services. A Sub-account's
performance may also be compared to that of other investment or savings
vehicles.
Each Fund's Annual Report, available upon request and without charge,
contains a discussion of the performance of the Fund and a comparison of that
performance to a securities market index.
SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCOUNT: Phoenix Home Life Variable Accumulation Account.
ACCUMULATION UNIT: A standard of measurement with respect to each Sub-account
used in determining the value of a Contract and the interest in the Sub-account
prior to the commencement of annuity payments.
ACCUMULATION VALUE: The value of a Contract on or prior to its Date of
Maturity, equal to the sum of the products obtained by multiplying the number of
Accumulation Units in each Sub-account then credited to the Contract by the
appropriate Accumulation Unit Value.
ANNUITANT: The person whose life is used as the measuring life under the
Contract. The primary Annuitant as shown on the Contract's Schedule Page, while
the primary Annuitant is living, and then the contingent Annuitant designated on
the application for the Contract or as later changed by the Owner, if the
contingent Annuitant is living at the death of the primary Annuitant.
ANNUITY OPTION: The provisions under which a series of annuity payments is made
to the Annuitant or other payee, such as Life Annuity with Ten Years Certain.
(See 'Annuity Options.')
ANNUITY UNIT: A standard of measurement used in determining the amount of each
variable income payment under the variable payment annuity options.
CONTRACT: The individual deferred variable accumulation annuity contract
described in this Prospectus.
CONTRACT VALUE: Prior to the Maturity Date, the sum of the value under a
Contract of all Accumulation Units held in the Sub-accounts of the Account and
the value held in the Guaranteed Interest Account.
FIXED PAYMENT ANNUITY: A benefit providing for periodic payments of a fixed
dollar amount throughout the Annuity Period that does not vary with or reflect
the investment performance of any Sub-account.
THE FUND: Templeton Variable Products Series Fund, a Massachusetts business
trust.
7
<PAGE>
GUARANTEED INTEREST ACCOUNT (GIA): An allocation option under which amounts
deposited are guaranteed to earn a fixed rate of interest. Excess interest may
also be credited, in the sole discretion of Phoenix Home Life Mutual Insurance
Company.
ISSUE DATE: The date that the initial purchase payment is invested in a
Sub-account.
MATURITY DATE: The date elected by the Owner pursuant to the Contract as of
which annuity payments will commence. The election is subject to certain
conditions described in 'THE ANNUITY PERIOD.'
MINIMUM INITIAL PURCHASE PAYMENT: The amount which must be paid when a Contract
is purchased. Minimum initial purchase payments of $1,000, $25, $25, and $1,000
annually are required for non-qualified, IRA, bank draft program, and qualified
plan contracts respectively.
MINIMUM SUBSEQUENT PAYMENT: The amount which must be paid when any subsequent
payments are made, after the minimum initial purchase payment has been made (see
above). The minimum subsequent payment for all Contracts is $25.
OWNER: The person or entity, usually the one to whom the Contract is issued,
who has the sole right to exercise all rights and privileges under the Contract
except as otherwise provided in the Contract. The Owner may be the Annuitant, an
employer, a trust or any other individual or entity specified in the application
for the Contract. However, under Contracts used with certain tax qualified
plans, the Owner must be the Annuitant. A husband and wife may be designated as
joint owners, and if such a joint owner dies, the other joint owner becomes the
sole Owner of the Contract. If no Owner is named, the Annuitant will be the
Owner.
PAYMENT UPON DEATH: The obligation of Phoenix Home Life under a Contract to
make a payment on the death of the Owner or Annuitant at any time before the
Maturity Date of a Contract (see 'Payment Upon Death Before Maturity Date') or
after the Maturity Date of a Contract (see 'Payment Upon Death After Maturity
Date').
PHOENIX HOME LIFE: Phoenix Home Life Mutual Insurance Company.
VARIABLE PAYMENT ANNUITY: An annuity providing payments that vary in amount,
after the first payment is made, in accordance with the investment experience of
the selected Sub-accounts.
VARIABLE PRODUCTS OPERATIONS: The Variable Products Operations Division of
Phoenix Home Life Mutual Insurance Company.
SUMMARY
The individual deferred accumulation annuity contracts ('Contract') funded by
the Phoenix Home Life Variable Accumulation Account ('Account') present a
dynamic concept in retirement planning designed to give you maximum flexibility
in attaining your investment goals. There are no deductions from your purchase
payments so that your entire payment is put to work in the investment
portfolio(s) of your choice. The Account consists of several Sub-accounts; the
Sub-accounts available for Templeton Investment Plus invest their assets
exclusively in specified Series of Templeton Variable Products Series Fund (the
'Fund'). Each Series of the Fund has a distinct investment objective. You choose
the Sub-account or Sub-accounts you wish to invest in among the available
Sub-accounts and/or the Guaranteed Interest Account when you make your purchase
payments under the Contracts. You may also transfer amounts held under the
Contracts among the available Sub-accounts and/or the Guaranteed Interest
Account. When the accumulation period ends, the then Contract Value will be
applied to furnish a Variable Payment Annuity unless a Fixed Payment Annuity is
elected. If a Fixed Payment Annuity is elected, payments will, thereafter, be
fixed and guaranteed by Phoenix Home Life Mutual Insurance Company ('Phoenix
Home Life').
The Contracts are eligible for purchase as non-tax qualified retirement
plans by individuals. The Contracts are also eligible for use in connection with
(1) pension or profit-sharing plans qualified under the Self-Employed
Individuals Tax Retirement Act of 1962, known as 'HR 10' or 'Keogh' plans, (2)
pension or profit-sharing plans qualified under Sections 401(a) and 401(k), of
the Internal Revenue Code of 1986, as amended (the 'Code'), known as 'corporate
plans,' (3) annuity purchase plans adopted under the provisions of Section
403(b) of the Code by public school systems and certain other tax-exempt
organizations (TSA), (4) individual retirement account plans satisfying the
requirements of Section 408 of the Code (IRA), and (5) government plans and
deferred compensation plans maintained by a state or political subdivision
thereof under Section 457 of the Code. These plans are sometimes referred to in
this Prospectus as 'tax qualified plans.'
HOW ARE PAYMENTS MADE UNDER THE CONTRACTS?
A Contract Owner may make payments at any time until the Maturity Date selected
by the Owner pursuant to the terms of the Contract. The payments purchase
Accumulation Units of the Sub-account(s) and/or are deposited in the Guaranteed
Interest Account, as chosen by the Owner. (See 'PURCHASE OF CONTRACTS' and 'THE
ACCUMULATION PERIOD.')
WHAT ARE THE INVESTMENT OBJECTIVES OF THE SERIES OF THE FUND?
The investment objective of the Templeton Money Market Fund is current income,
stability of principal, and liquidity which it seeks to achieve by investing in
money market instruments with maturities not exceeding 397 days, consisting
primarily of
8
<PAGE>
short term U.S. Government securities, certificates of deposit, time deposits,
bankers' acceptances, commercial paper, and repurchase agreements.
The investment objective of the Templeton Bond Fund is high current income
which it seeks to achieve through a flexible policy of investing primarily in
debt securities of companies, governments, and government agencies of various
nations throughout the world and in debt securities which are convertible into
common stock of such companies. The debt securities selected may be rated in any
category by Standard & Poor's Corporation ('S&P') or Moody's Investors Service,
Inc. ('Moody's') as well as securities which are unrated by any rating agency.
The investment objective of the Templeton Stock Fund is to pursue capital
growth which it seeks to achieve through a policy of investing primarily in
common stocks issued by companies, large and small, in various nations
throughout the world.
The investment objective of the Templeton Asset Allocation Fund is a high
level of total return which it seeks to achieve through a flexible policy of
investing in stocks of companies in any nation, debt securities 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.
The investment objective of the Templeton International Fund is to seek
long-term capital growth through a flexible policy of investing in stocks and
debt obligations of companies and governments outside the United States. Any
income realized will be incidental. Although the Fund generally invests in
common stock, it may also invest in preferred stocks and certain debt securities
such as convertible bonds which are rated in any category by S&P or Moody's or
which are unrated by any rating agency.
FOR ADDITIONAL INFORMATION CONCERNING THE FUND, SEE THE ACCOMPANYING FUND
PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
IS THERE A GUARANTEED OPTION?
Yes. A Contract Owner may elect to have payments allocated to the Guaranteed
Interest Account. Amounts allocated to the Guaranteed Interest Account earn a
fixed rate of interest and Phoenix Home Life may also, in its sole discretion,
credit excess interest. (See Appendix A.)
WHAT SALES COSTS ARE CHARGED TO PURCHASE PAYMENTS UNDER THE CONTRACTS?
No deductions are made from purchase payments. A deduction for sales charges may
be taken from the proceeds when a Contract is surrendered or when an amount is
withdrawn, if assets have not been held in the Account for a certain period of
time. However, no deduction for sales charge will be taken after the Annuity
Period has begun. If a sales charge is imposed, it is imposed on a first-in,
first-out basis.
If a withdrawal or surrender is made during the first year that a Contract
is in existence, a sales charge will apply to the total amount that is withdrawn
unless the Contract is issued on or after May 1, 1996. For these Contracts, up
to 10% of the Contract Value at the time of the first withdrawal may be
withdrawn without a sales charge. After the first year, and prior to the
Maturity Date, 10% of the value of the Contract at the last anniversary may be
withdrawn each year free of sales charge. A deduction for sales charges
expressed as a percentage of the amount withdrawn in excess of the 10% allowable
amount is as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Age of Deposit in Complete Years: 0 1 2 3 4 5 6 and over
Sales Charge to be Applied: 6% 5% 4% 3% 2% 1% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In the event that the Annuitant dies before the date that annuity payments
will commence, no sales charge will be imposed.
The total deferred sales charges on a Contract will never exceed 9% of the
total purchase payments (see 'Sales Charges').
WHAT FEES ARE CHARGED TO THE ACCOUNT?
The mortality and expense risk fees, administrative fees and annual contract
administrative charge assessed against the Account are as follows:
a. Mortality Risk Fee 0.40% on an annual basis
b. Expense Risk Fee 0.85% on an annual basis
c. Daily Administrative Fee 0.125% on an annual basis
d. Annual Administrative Charge $35 per year
The mortality and expense risk fees and daily administrative fee are
deducted from the aggregate average daily accumulated values of the
Sub-accounts, but are not deducted from values held in the Guaranteed Interest
Account.
The Annual Administrative Charge is generally $35 and is deducted each year
(or any part thereof) prior to the Contract's Date of Maturity. A reduced Annual
Administrative Charge may apply to Contracts issued after September 1, 1994.
This charge is used to cover fixed cost items. This charge may be paid in cash.
9
<PAGE>
ARE THERE ANY OTHER CHARGES OR DEDUCTIONS?
In most states, premium taxes are imposed when a Contract is annuitized rather
than when premium payments are made by the Contract Owner. Phoenix Home Life
will reimburse itself on the earlier of the date of a partial withdrawal,
surrender of the Contract, Maturity Date or payment of death proceeds (see
'Premium Tax'). For a more complete description of the fees chargeable to the
Account, see 'DEDUCTIONS AND CHARGES.'
In addition, certain charges are deducted from the assets in the Series of
the Fund. For investment management services, each Series pays the investment
manager a separate monthly fee calculated on the basis of its average daily net
assets during the year. In addition, the Fund's business manager receives a
monthly fee based on the combined average daily net assets of all Series. (See
'Other Charges').
WHAT ARE THE MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS?
For non-tax qualified plans, the following minimum purchase payments apply
(unless investments are made pursuant to a bank draft investment program):
Initial minimum per Contract: $1,000
Subsequent minimum per Contract: $25
For Contracts issued in connection with Individual Retirement Accounts or
pursuant to a bank draft investment program, the following minimum purchase
payments apply:
Initial minimum per Contract: $25
Subsequent minimum per Contract: $25
For contracts issued under tax-qualified or employer sponsored plans other
than Individual Retirement Accounts, a minimum annual premium of $1,000 must be
paid.
MAY I ALLOCATE MY PURCHASE PAYMENTS AMONG AVAILABLE SUB-ACCOUNTS AND/OR THE
GUARANTEED INTEREST ACCOUNT?
Yes. You may choose the amount of each purchase payment to be directed to each
Sub-account and/or to the Guaranteed Interest Account, provided that the minimum
initial purchase payment requirements have been met (see 'PURCHASE OF
CONTRACTS').
MAY I TRANSFER AMOUNTS ALLOCATED TO A SUB-ACCOUNT OR THE GUARANTEED INTEREST
ACCOUNT?
Yes. You may transfer some or all of the Contract Value among one or more
available Sub-accounts and/or the Guaranteed Interest Account provided that the
minimum initial purchase payment requirements have been met. Also, if elected,
the Temporary Money Market Allocation Amendment provides that no transfers may
be made until the termination of the Free Look Period.
Phoenix Home Life may limit the number of transfers allowed during a
Contract year, but in no event will the limit be less than six transfers per
year (see 'Transfers'). However, there are additional restrictions on transfers
from the Guaranteed Interest Account as described in Appendix A.
DOES THE CONTRACT PROVIDE FOR PAYMENT UPON DEATH?
The Contract provides that if the Owner and the Annuitant are the same and the
Owner/Annuitant dies before annuity payments begin, payment to the
Owner/Annuitant's beneficiary will be made and no surrender charge will be
imposed. The Contract also provides for payment upon death after the Contract
Maturity Date (see 'Payment Upon Death Before Maturity Date', and 'Payment Upon
Death After Maturity Date').
IS THERE A SHORT-TERM CANCELLATION RIGHT?
An Owner may surrender a Contract for any reason within 10 days after its
receipt and receive in cash the adjusted value of the initial purchase payment.
The Owner may receive more or less than the initial payment depending on
investment experience within the Sub-account during the 10-day period, unless
the Contract is issued with a Temporary Money Market Allocation Amendment, in
which case the initial purchase payment is refunded. If the initial purchase
payment, or any portion thereof, was allocated to the Guaranteed Interest
Account, that payment (or portion) and any earned interest is refunded (see
'Free Look Period').
HOW WILL THE ANNUITY PAYMENTS BE DETERMINED ON THE MATURING OF A CONTRACT?
The Owner and Annuitant bear the risk of the investment performance during the
Accumulation Period unless the Guaranteed Interest Account is selected. Once
annuity payments commence, investment in the Account will continue and the Owner
and Annuitant will continue to bear the risk of investment unless a Fixed
Payment Annuity is elected. If a Fixed Payment Annuity is elected, payments will
be fixed, and guaranteed by the general assets of Phoenix Home Life. The fixed
payment schedule is a part of the Contract and the Owner may also be given the
opportunity to choose another annuity option available from Phoenix Home Life at
the maturity of the Contract. If the current practice settlement rates in effect
for Contracts are more favorable than the applicable rates guaranteed under the
Contract, the current rates shall be applied (see 'THE ANNUITY PERIOD').
10
<PAGE>
CAN MONEY BE WITHDRAWN PRIOR TO MATURITY?
At any time before annuity payments begin, if the Annuitant is living, the
amounts held under the Contract may be withdrawn in whole or in part by the
Contract Owner (if the Contract is not held under a 403(b) plan), subject to
certain limitations (see 'Surrender of Contract; Partial Withdrawals'). There
may be a penalty tax assessed in connection with withdrawals (see 'FEDERAL
INCOME TAXES').
CAN THE CONTRACT LAPSE?
If on any Valuation Date the total Contract Value equals zero, the Contract will
immediately terminate and lapse without value.
The foregoing summary information should be read in conjunction with the
detailed information appearing elsewhere in this Prospectus.
THE VARIABLE ACCUMULATION ANNUITY
The individual deferred variable accumulation annuity contract (the 'Contract')
issued by Phoenix Home Life Mutual Insurance Company ('Phoenix Home Life') may
be significantly different from a fixed annuity contract in that, unless the
Guaranteed Interest Account is selected, it is the Owner and Annuitant under a
Contract who assume the risk of investment gain or loss rather than Phoenix Home
Life. Under a fixed annuity contract the insurance company guarantees a
specified interest rate and specified monthly annuity payments. However, except
for payments allocated to the Guaranteed Interest Account, the amounts which
will be available for annuity payments under a Contract will depend on the
investment performance of the Sub-accounts of the Phoenix Home Life Variable
Accumulation Account (the 'Account'). Upon the maturity of a Contract, the
amounts held under a Contract will continue to be invested in the Account and
monthly annuity payments will vary in accordance with the investment experience
of the selected Sub-accounts. However, a fixed annuity may be elected, in which
case Phoenix Home Life will guarantee specified monthly annuity payments.
The Owner selects the investment objective of each Contract on a continuing
basis by directing the allocation of purchase payments and accumulated value
among the Guaranteed Interest Account or the Money Market Sub-account, Bond
Sub-account, Stock Sub-account, Asset Allocation Sub-account, and International
Sub-account. Each of the five Sub-accounts invests exclusively in shares of a
corresponding Series of the Templeton Variable Products Series Fund (the
'Fund').
PHOENIX HOME LIFE AND THE VARIABLE ACCUMULATION ACCOUNT
Phoenix Home Life is a mutual life insurance company originally chartered in
Connecticut in 1851. Its Executive Office is at One American Row, Hartford,
Connecticut 06115 and its main administrative office is at 100 Bright Meadow
Boulevard, Enfield, Connecticut 06083-1900. Its New York principal office is at
99 Troy Road, East Greenbush, New York 12061. Phoenix Home Life is the nation's
13th largest mutual life insurance company and has admitted assets of
approximately $13.2 billion. Phoenix Home Life sells insurance policies and
annuity contracts through its own field force of full time agents and through
brokers. Its operations are conducted in all 50 states, the District of
Columbia, Canada and Puerto Rico.
On June 21, 1982, Phoenix Home Life established the Account, a separate
account created under the insurance laws of Connecticut. The Account is
registered with the Securities and Exchange Commission ('SEC') as a unit
investment trust under the Investment Company Act of 1940 (the '1940 Act') and
it meets the definition of a 'separate account' under the Act. Registration
under the Act does not involve supervision of the management or investment
practices or policies of the Account or Phoenix Home Life.
On July 1, 1992, the Account's domicile was transferred to New York. Under
New York law, all income, gains or losses of the Account, whether realized or
not, must be credited to or charged against the amounts placed in the Account
without regard to the other income, gains and losses of Phoenix Home Life. The
assets of the Account may not be charged with liabilities arising out of any
other business that Phoenix Home Life may conduct. Obligations under the
Contracts are obligations of Phoenix Home Life.
Contributions to the Guaranteed Interest Account are not invested in the
Account; rather, they become part of the general account of Phoenix Home Life
(the 'General Account'). The General Account supports all insurance and annuity
obligations of Phoenix Home Life and is made up of all of its general assets
other than those allocated to any separate account such as the Account. For more
complete information concerning the Guaranteed Interest Account, see Appendix A.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Each available Sub-Account of the Account invests exclusively in a corresponding
Series of the Fund. The investment manager of Templeton Stock, Templeton Asset
Allocation and Templeton International Funds is Templeton Investment Counsel,
Inc. Templeton Global Bond Managers, a division of Templeton Investment Counsel,
Inc., is the investment manager for Templeton Bond and Templeton Money Market
Funds. The investment objective and policies of each of the Series of the Fund
is as follows:
11
<PAGE>
(1) TEMPLETON MONEY MARKET FUND--Seeks current income, stability of
principal, and liquidity by investing in money market instruments with
maturities not exceeding 397 days, consisting primarily of short term U.S.
Government securities, certificates of deposit, time deposits, bankers'
acceptances, commercial paper and repurchase agreements.
(2) TEMPLETON BOND FUND--Seeks high current income through a flexible policy
of investing primarily in debt securities of companies, governments, and
government agencies of various nations throughout the world and in debt
securities which are convertible into common stock of such companies. The
debt securities selected may be rated in any category by Standard & Poor's
Corporation ('S&P') or Moody's Investors Service, Inc. ('Moody's') as well as
securities which are unrated by any rating agency.
(3) TEMPLETON STOCK FUND--Pursues capital growth through a policy of
investing primarily in common stocks issued by companies, large and small, in
various nations throughout the world.
(4) TEMPLETON ASSET ALLOCATION FUND--Seeks a high level of total return
through a flexible policy of investing in stocks of companies in any nation,
debt securities 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.
(5) TEMPLETON INTERNATIONAL FUND--Seeks long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments outside the United States. Any income realized will be
incidental. Although the Fund generally invests in common stock, it may also
invest in preferred stocks and certain debt securities such as convertible
bonds which are rated in any category by S&P or Moody's or which are unrated
by any rating agency.
Each Series will be subject to the market fluctuations and risks inherent in
the ownership of any security and there can be no assurance that any Series'
stated investment objective will be realized. For a discussion of the risks
associated with investing in high yield bonds and the special risks inherent in
foreign investing, including currency fluctuation and political uncertainty,
please see the accompanying Fund Prospectuses under 'Risk Factors.'
In the future, shares of the Fund may be sold to other separate accounts of
Phoenix Home Life or its affiliates or to other insurance companies funding
variable annuity or variable life insurance contracts. It is conceivable that it
may be disadvantageous for variable life insurance separate accounts and
variable annuity separate accounts to invest in the Fund simultaneously.
Although neither Phoenix Home Life nor the Fund currently foresees any such
disadvantages either to variable annuity Contract Owners or to variable life
insurance policyowners, the Fund's Trustees intend to monitor events in order to
identify any material conflict between variable annuity Contract Owners and
variable life insurance policyowners and to determine what action, if any,
should be taken in response thereto. Material conflicts could result from, for
example, (1) changes in state insurance laws, (2) changes in Federal income tax
laws, (3) changes in the investment management of any portfolio of the Fund, or
(4) differences in voting instructions between those given by variable life
insurance policyowners and those given by variable annuity Contract Owners.
FOR ADDITIONAL INFORMATION CONCERNING THE FUND AND ITS SERIES, PLEASE SEE
THE ACCOMPANYING FUND PROSPECTUSES, WHICH SHOULD BE READ CAREFULLY BEFORE
INVESTING.
PURCHASE OF CONTRACTS
The minimum initial purchase payment for each Contract purchased is $1,000.
However, for contracts purchased in connection with Individual Retirement
Accounts (IRAs), the minimum initial purchase payment is $25 and for contracts
purchased in connection with tax-qualified or employer sponsored plans, a
minimum annual payment of $1,000 is required. In addition, a Contract Owner may
authorize his bank to draw $25 or more from his personal checking account
monthly to purchase Units in any available Sub-account or in the Guaranteed
Interest Account. The amount the Contract Owner designates will be automatically
invested on the date the bank draws on his account. If this 'check-o-matic'
privilege is selected, the minimum initial purchase payment is $25. This payment
must accompany the application. Each subsequent purchase payment under a
Contract must be at least $25.
Generally, a Contract may not be purchased with respect to a proposed
Annuitant who is eighty years of age or older. Total purchase payments in excess
of $1,000,000 cannot be made without the permission of Phoenix Home Life. While
the Annuitant is living and the Contract is in force, purchase payments may be
resumed at any time before the Maturity Date of a Contract.
Purchase payments received under the Contracts will be allocated to the
Money Market Sub-account, Bond Sub-account, Stock Sub-account, Asset Allocation
Sub-account, International Sub-account, and/or to the Guaranteed Interest
Account, or a combination thereof, in the proportion specified in the
application for the Contract or as indicated by the Owner from time to time.
Changes in the allocation of purchase payments will be effective as of receipt
by Variable Products Operations of written notice of election in a form
satisfactory to Phoenix Home Life and will apply to any purchase payments
accompanying such notice or made subsequent to the receipt of the notice, unless
otherwise requested by the Contract Owner.
12
<PAGE>
DEDUCTIONS AND CHARGES
PREMIUM TAX
Whether or not a premium tax is imposed will depend upon, among other things,
the Owner's state of residence, the Annuitant's state of residence, the status
of Phoenix Home Life within those states and the insurance tax laws of those
states. Phoenix Home Life will pay any premium tax due and will only reimburse
itself upon the earlier of partial withdrawal, surrender of the Contract, the
Maturity Date or payment of death proceeds. For a list of states and premium
taxes, see Appendix B to this Prospectus.
SALES CHARGES
A deduction for sales charges (also referred to in this Prospectus as surrender
charges) for these Contracts may be taken from proceeds of withdrawals from, or
complete surrender of, the Contracts if assets are not held in the Account for a
certain period of time (see chart below). No sales charge will be taken after
the Annuity Period has begun except with respect to unscheduled withdrawals
under Option K (see 'Annuity Options'). Any sales charge is imposed on a
first-in, first-out basis.
With respect to withdrawals or surrenders, up to 10% of the Contract Value
may be withdrawn in a Contract year, either in a lump sum or by multiple
scheduled or unscheduled partial surrenders without the imposition of a sales
charge. During the first Contract year, the 10% withdrawal without a sales
charge is only available on Contracts issued on or after May 1, 1996 and will be
determined based on the Contract Value at the time of the first partial
surrender. In all subsequent years, the 10% will be based on the previous
Contract anniversary value. The deduction for sales charges, expressed as a
percentage of the amount redeemed in excess of the 10% allowable amount, is as
follows:
AGE OF DEPOSIT IN COMPLETE CONTINGENT DEFERRED SALES
YEARS FROM PAYMENT DATE UNIT CHARGE AS A PERCENTAGE OF
RELEASED WAS CREDITED AMOUNT WITHDRAWN
- --------------------------------------------------------------------------------
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6 and over 0%
- --------------------------------------------------------------------------------
In the event that the Annuitant dies before the Maturity Date of the
Contract, the sales charge described in the table above will not apply.
The total deferred sales charges on a Contract will never exceed 9% of the
total purchase payments, and the applicable level of sales charge cannot be
changed with respect to outstanding Contracts. Sales charges imposed in
connection with partial surrenders will be deducted from the Sub-accounts and
the Guaranteed Interest Account on a pro-rata basis. Any distribution costs not
paid for by sales charges will be paid by Phoenix Home Life from the assets of
its General Account.
CHARGES FOR MORTALITY AND EXPENSE RISKS
While fixed annuity payments to Annuitants will reflect the investment
performance of the applicable Series of the Fund during the Accumulation Period,
the amount of such payments will not be decreased because of adverse mortality
experience of Annuitants as a class or because of an increase in actual expenses
of Phoenix Home Life over the expense charges provided for in the Contracts.
Phoenix Home Life assumes the risk that Annuitants as a class may live longer
than expected (necessitating a greater number of annuity payments) and that its
expenses may be higher than the deductions for such expenses.
In assuming the mortality risks, Phoenix Home Life agrees to continue life
annuity payments, determined in accordance with the annuity tables and other
provisions of the Contract, to the Annuitant or other payee for as long as he or
she may live.
Phoenix Home Life charges each Sub-account the daily equivalent of 0.40% on
an annual basis of the current value of the Sub-account's net assets for
mortality risks assumed and the daily equivalent of 0.85% on an annual basis for
expense risks assumed. No mortality and expense risk charges are deducted from
the Guaranteed Interest Account. If the percentage charges prove insufficient to
cover actual insurance underwriting costs and excess administrative costs then
the loss will be borne by Phoenix Home Life; conversely, although it is not
anticipated, if the amount deducted proves more than sufficient, the excess will
be a profit to Phoenix Home Life. Any such profit may be used, as a part of
Phoenix Home Life's General Account's assets to meet sales expenses, if any,
which are in excess of sales commission revenue generated from any sales
charges. Phoenix Home Life has concluded that there is a reasonable likelihood
that the distribution financing arrangement being used in connection with the
Contracts will benefit the Account and the Contract Owners.
13
<PAGE>
CHARGES FOR ADMINISTRATIVE SERVICES
Phoenix Home Life is responsible for administering the Account. In this
connection, Phoenix Home Life, among other things, maintains an account for each
Owner and Annuitant, makes all disbursements of benefits, furnishes
administrative and clerical services for each Contract, makes disbursements from
the Account to pay obligations chargeable to the Account, maintains the
accounts, records, and other documents relating to the business of the Account
required by regulatory authorities, causes the maintenance of the registration
and qualification of the Account under laws administered by the Securities and
Exchange Commission, prepares and distributes notices and reports to Owners, and
the like. All organizational expenses of the Account are paid by Phoenix Home
Life.
To cover its fixed costs of administration, such as preparation of billings
and statements of account, Phoenix Home Life charges each annuity contract $35
each year. A reduced charge may apply to Contracts issued after September 1,
1994. This cost-based charge is deducted from the Sub-account or the Guaranteed
Interest Account holding the assets of the Owner or on a pro-rata basis from two
or more Sub-accounts or the Guaranteed Interest Account in relation to their
values under the Contract, and is not subject to increase but may be subject to
decrease. This charge is deducted on the Contract anniversary date for services
rendered since the preceding Contract anniversary date. Upon a surrender of a
Contract, the entire annual administrative charge of $35 is deducted regardless
of when the surrender occurs.
Phoenix Home Life also charges each Sub-account available through a Contract
the daily equivalent of 0.125% on an annual basis of the accumulated value of
the Sub-account to cover its variable costs of administration, such as printing
and distribution of Contract Owner mailings. This cost-based fee is not deducted
from the Guaranteed Interest Account.
Phoenix Home Life may reduce the annual administrative charge or the daily
administrative fee for Contracts issued under group or sponsored arrangements.
Generally, administrative costs per Contract vary with the size of the group or
sponsored arrangement, its stability as indicated by its term of existence and
certain characteristics of its members, the purposes for which the Contracts are
purchased and other factors. The amounts of reductions will be considered on a
case-by-case basis and will reflect the reduced administrative costs expected as
a result of sales to a particular group or sponsored arrangement.
OTHER CHARGES
Charges for investment and business management are paid out of the assets of the
Fund.
For investment management services, each Series pays a separate monthly fee
calculated on the basis of its average daily net assets during the year as
follows:
TEMPLETON BOND, STOCK,
TEMPLETON MONEY MARKET INTERNATIONAL
FUND AND ASSET ALLOCATION FUNDS
- --------------------------------------------------------------------------------
0.35% up to $200 million 0.50% up to $200 million
0.30% $200-$1,300 million 0.45% $200-$1,300 million
0.25% over $1,300 million 0.40% over $1,300 million
- --------------------------------------------------------------------------------
For its business management services to the Fund, Templeton Funds Annuity
Company receives a monthly fee from the Fund equivalent on an annual basis to
0.15% of the combined average daily net assets of the Funds, reduced to 0.135%
of such assets in excess of $200 million; 0.10% of such assets in excess of $700
million, and 0.075% of such assets in excess of $1,200 million.
These Fund charges and other expenses are described more fully in the
accompanying Fund Prospectus.
14
<PAGE>
THE ACCUMULATION PERIOD
ACCUMULATION UNITS
Initial purchase payments will be applied within two days if the application for
a Contract is complete. If an incomplete application form is completed within
five business days of receipt by Variable Products Operations, the initial
purchase payment will be applied within two days of the completion of the
application. In the event that Variable Products Operations does not accept the
application within five business days or if an application is not completed
within five business days of receipt by Variable Products Operations, then the
purchase payment will be immediately returned. If the Guaranteed Interest
Account is chosen, additional purchase payments are deposited on the date of
receipt of such purchase payment at Variable Products Operations. If one or more
of the Sub-accounts is chosen, additional purchase payments are applied to the
purchase of Accumulation Units of the Sub-account(s) chosen, at the value of
such Accumulation Units next determined after the receipt of such purchase
payment at Variable Products Operations. The number of Accumulation Units of a
Sub-account purchased with a specific purchase payment will be determined by
dividing the applied purchase payment by the value of an Accumulation Unit in
that Sub-account next determined after receipt of the purchase payment. The
value of the Accumulation Units of a Sub-account will vary depending upon the
investment performance of the applicable Series of the Fund, the fee of the
Fund's investment adviser and the charges and deductions made against the
Sub-account.
ACCUMULATION UNIT VALUES
At any date prior to the Maturity Date of the Contract, the total value of the
Accumulation Units in a Sub-account which has been credited under a Contract can
be computed by multiplying the number of such Units by the appropriate value of
an Accumulation Unit in effect for such date. The value of an Accumulation Unit
on a day other than a Valuation Date is the value of the Accumulation Unit on
the next Valuation Date. The number of Accumulation Units in each Sub-account
credited under each Contract and their current value will be reported to the
Owner at least annually.
TRANSFERS
A Contract Owner may, at any time but no later than 30 days prior to the
Maturity Date of a Contract, elect to transfer all or any part of the Contract
Value among one or more Sub-accounts or the Guaranteed Interest Account. THERE
ARE ADDITIONAL RESTRICTIONS ON TRANSFERS FROM THE GUARANTEED INTEREST ACCOUNT AS
DESCRIBED BELOW AND IN APPENDIX A. Any such transfer from a Sub-account will
result in the redemption of Accumulation Units, and if another Sub-account is
selected, in the purchase of Accumulation Units on the basis of the respective
values next determined after the receipt by Variable Products Operations of
written notice of election in a form satisfactory to Phoenix Home Life. A
transfer among Sub-accounts or the Guaranteed Interest Account does not
automatically change the payment allocation schedule of a contract.
A Contract Owner may also request transfers and changes in payment
allocations among available Sub-accounts or the Guaranteed Interest Account by
calling 1-800-243-4840 between the hours of 8:30 A.M. and 4:00 P.M. Eastern
Time. Unless the Contract Owner elects in writing not to authorize telephone
transfers or allocation changes, telephone transfer and allocation change orders
will also be accepted on behalf of the Contract Owner from his or her registered
representative. Telephone transfer instructions and change in payment allocation
instructions will be recorded on tape; however, Phoenix Home Life will not be
able to verify the authenticity of any order received and will not be liable for
any loss incurred as a result of acting upon telephone transfer or change in
payment allocation instructions unless such loss results from the erroneous
processing of a telephone instruction. The staff of the SEC is currently
examining the propriety of such exculpatory policies. These Telephone Privileges
may be modified or terminated at any time. During times of extreme market
volatility, it may be difficult to exercise and a Contract Owner should submit a
written request.
A Contract Owner may also elect to transfer funds automatically among the
Sub-accounts or the Guaranteed Interest Account on a monthly, quarterly,
semi-annual or annual basis under the Systematic Transfer Program for Dollar
Cost Averaging ('Systematic Transfer Program'). Under this Systematic Transfer
Program, the minimum initial and subsequent transfer amounts are $25 monthly,
$75 quarterly, $150 semi-annually, or $300 annually. A Contract Owner must have
an initial value of $2,000 in the Guaranteed Interest Account or the Sub-account
that funds will be transferred from, and if the value in that Sub-account or the
Guaranteed Interest Account drops below the elected transfer amount, the entire
remaining balance will be transferred and no more systematic transfers will be
processed. Funds may be transferred from only one Sub-Account or the Guaranteed
Interest Account, but may be allocated to multiple Sub-accounts. Under the
Systematic Transfer Program, Contract Owners may transfer approximately equal
amounts from the Guaranteed Interest Account over a minimum 18 month period.
All transfers under the Systematic Transfer Program will be executed on the
basis of the respective values as of the first of the month rather than on the
basis of the respective values next determined after receipt of the transfer
request. If the first of the month falls on a holiday or weekend, then the
transfer will be processed on the next succeeding business day.
Unless Phoenix Home Life agrees otherwise or the Systematic Transfer Program
has been elected, a Contract Owner may make only one transfer per contract year
from the Guaranteed Interest Account. Transfers will be effectuated on the date
the transfer request was received at Variable Products Operations, unless made
pursuant to the Systematic Transfer Program as noted above. For non-systematic
transfers, the amount that may be transferred from the Guaranteed Interest
15
<PAGE>
Account at any one time cannot exceed the greater of $1,000 or 25% of the
Contract Value in the Guaranteed Interest Account at the time of transfer.
Phoenix Home Life reserves the right not to accept batched transfer
instructions from registered representatives acting under powers of attorney for
multiple Contract Owners unless the registered representative's broker-dealer
firm and Phoenix Home Life have entered into a third party transfer service
agreement.
No sales charge will be assessed when a transfer is made. The date a payment
was credited for the purpose of calculating the sales charge will remain the
same notwithstanding the transfer. Currently, there is no charge for transfers;
however, the Account reserves the right to charge a transfer fee of $10.00 per
transfer after the first two in each Contract Year to defray administrative
costs. Currently, unlimited transfers are permitted; however, the Account
reserves the right to limit the number of transfers made during each contract
year a Contract is in existence. However, Contract Owners will always be
permitted at least six transfers during each Contract year. When the Temporary
Money Market Allocation Amendment has been elected, no transfers may be made
until the end of the free look period (see 'Free Look Period').
SURRENDER OF CONTRACT; PARTIAL WITHDRAWALS
Prior to the Maturity Date, if the Annuitant is living, a Contract Owner may
surrender the Contract for a cash payment representing the Contract Value or may
make partial withdrawals of cash in amounts representing less than the Contract
Value. Prior to the Maturity Date, the Contract Owner may withdraw up to 10% of
the Contract Value in a Contract year, either in a lump sum or by multiple
scheduled or unscheduled partial surrenders without the imposition of a sales
charge. During the first Contract year, the 10% withdrawal without a sales
charge is only available on Contracts issued on or after May 1, 1996 and will be
determined based on the Contract Value at the time of the first partial
surrender. In all subsequent years, the 10% will be based on the previous
Contract anniversary value. A signed written request for withdrawal must be sent
to Variable Products Operations. If the Contract Owner has not yet reached age
59 1/2, a 10% penalty tax will apply on taxable income withdrawn (see 'Federal
Income Taxes'). The appropriate number of Accumulation Units will be redeemed at
their value next determined after the receipt by Variable Products Operations of
a written notice in a form satisfactory to Phoenix Home Life. Unless the Owner
designates otherwise, the Accumulation Units redeemed in a partial withdrawal
will be redeemed in each Sub-account in the same proportion as the value of the
Accumulation Units of the Contract is then allocated among the Sub-accounts.
Also, Contract Values in the Guaranteed Interest Account will be withdrawn in a
partial withdrawal in the same proportion as the Contract Value is then
allocated to the Guaranteed Interest Account, unless the Owner designates
otherwise. The redemption value of Accumulation Units may be more or less than
the purchase payments applied under the Contract to purchase the Accumulation
Units, depending upon the investment performance in each Sub-account. The
resulting cash payment will be made in a single sum, ordinarily within seven
days after receipt of such notice. However, redemption and payment may be
delayed under certain circumstances (see 'Deferment of Payment'). There may be
adverse tax consequences to certain surrenders and partial withdrawals (see
'Surrenders or Withdrawals Prior to the Contract Maturity Date'). Certain
restrictions on redemptions are imposed on Contracts used in connection with
Internal Revenue Code Section 403(b) plans (see 'Qualified Plans';
'Tax-Sheltered Annuities').
A deduction for sales charges may be imposed on partial withdrawals from,
and complete surrender of, a Contract (see 'Sales Charges'). Any sales charge is
imposed on a first-in, first-out basis.
Any request for a withdrawal from, or complete surrender of, a Contract
should be mailed to Variable Products Operations, Phoenix Home Life Mutual
Insurance Company, 101 Munson Street, P.O. Box 942, Greenfield, Massachusetts
01302-0942.
LAPSE OF CONTRACT
If on any Valuation Date (see 'Valuation Date'), the Contract Value is zero, the
Contract will immediately terminate and lapse without value. Within 30 days
after this Valuation Date, Phoenix Home Life will notify the Contract Owner in
writing that the Contract has lapsed.
PAYMENT UPON DEATH BEFORE MATURITY DATE
If the Owner is the Annuitant and dies before the Maturity Date, the death
benefit will be paid under the Contract to the Owner/Annuitant's beneficiary. If
the Owner and the Annuitant are not the same and the Annuitant dies prior to the
Maturity Date, the contingent Annuitant becomes the Annuitant. If there is no
contingent Annuitant, the death benefit will be paid to the Annuitant's
beneficiary. The death benefit is calculated according to the following method.
If the death occurred during the first 6 years following the Contract date, this
payment would be equal to the greater of: (a) the sum of all purchase payments
made under the Contract less any prior partial withdrawals (see 'Surrender of
Contract; Partial Withdrawals'); or (b) the Contract Value next determined
following receipt of a certified copy of the death certificate at Variable
Products Operations. If the death occurred during any subsequent 6 year period,
this payment would be equal to the greater of: (a) the death benefit that would
have been payable at the end of the immediately preceding 6 year period, plus
any purchase payments made and less any partial withdrawals since such date, or
(b) the Contract Value next determined following receipt of a certified copy of
the death certificate at Variable Products Operations.
16
<PAGE>
If the Owner and the Annuitant are not the same and the Owner dies prior to
the Maturity Date and there is no surviving joint Owner, upon receipt of due
proof of death, Phoenix Home Life will fully surrender the Contract and pay the
Cash Surrender Value (Contract Value less any applicable sales charge) to the
Owner's beneficiary (see 'Sales Charges').
Payments will be made in a single sum to the beneficiary designated by the
Owner prior to the Annuitant's death unless an optional method of settlement had
been elected by the Owner. If an optional method of settlement had not been
elected by the Owner, the beneficiary may elect an optional method of settlement
in lieu of a single sum. No deduction is made for sales or other expenses upon
such election (see 'Sales Charges'). Notwithstanding the foregoing, if the
amount to be paid is less than $2,000, it will be paid in a single sum (see
'Annuity Options'). Depending upon state law, the payment to the beneficiary may
avoid probate.
THE ANNUITY PERIOD
VARIABLE ACCUMULATION ANNUITY CONTRACTS
Annuity payments will commence on the Contract's Maturity Date if the Annuitant
is then living and the Contract is then in force. On the Maturity Date and
thereafter, investment in the Account is continued unless a Fixed Payment
Annuity is elected. No sales charge is taken. Each Contract will provide, at the
time of its issuance, for a Variable Payment Life Annuity with Ten Year Period
Certain unless a different annuity option is elected by the Owner (see 'Annuity
Options'). Under a Variable Payment Life Annuity with Ten Year Period Certain,
annuity payments, which may vary in amount based on the performance of the
Sub-accounts selected, are made monthly for life and, if the Annuitant dies
within ten years after the Maturity Date, the Annuitant's beneficiary will be
paid the payments remaining in the ten-year period. A different form of annuity
may be elected by the Owner prior to the Maturity Date. Once annuity payments
have commenced, the Annuity Option may not be changed.
If the amount to be applied on the Maturity Date is less than $2,000,
Phoenix Home Life may pay such amount in one lump sum in lieu of providing an
annuity. If the initial monthly annuity payment under an Annuity Option would be
less than $20, Phoenix Home Life may also make a single sum payment equal to the
total Contract Value on the date the initial payment would be payable, in place
of all other benefits provided by the Contract, or make periodic payments
quarterly, semi-annually or annually in place of monthly payments.
Each Contract specifies a provisional Maturity Date at the time of its
issuance. The Owner may subsequently elect a different Maturity Date. The
Maturity Date shall not be earlier than the first Contract anniversary or later
than the Contract anniversary nearest the Annuitant's eighty-fifth birthday,
unless the Contract is issued in connection with certain qualified plans. Under
qualified plans, the Maturity Date must be such that distributions begin no
later than April 1st following the Annuitants attained age 70 1/2, unless you
and Phoenix Home Life agree otherwise.
The Maturity Date election shall be made by written notice and must be
received by Variable Products Operations thirty days before the provisional
Maturity Date. If a Maturity Date, which is different from the provisional
Maturity Date of the Contract is not elected by the Owner, the provisional
Maturity Date becomes the Maturity Date. Particular care should be taken in
electing the Maturity Date of a Contract issued under a Tax-Sheltered Annuity, a
Keogh Plan or an Individual Retirement Account (IRA) plan. (See 'Tax-Sheltered
Annuities', 'Keogh Plans' and 'Individual Retirement Accounts'.)
ANNUITY OPTIONS
Unless an alternative annuity payment option is elected on or before the
Maturity Date, the amounts held under a Contract on the Maturity Date will
automatically be applied to provide a 10-year period certain variable payment
monthly life annuity based on the life of the Annuitant under Option I described
below. Any annuity payments falling due after the death of the Annuitant during
the period certain will be paid to the Annuitant's beneficiary. Each annuity
payment will be based upon the value of the Annuity Units credited to the
Contract. The number of Annuity Units in each Sub-account to be credited is
based on the value of the Accumulation Units in that Sub-account and the
applicable annuity purchase rate. The purchase rate differs according to the
payment option selected and the age of the Annuitant. The value of the Annuity
Units will vary with the investment performance of each Sub-account to which
Annuity Units are credited based on an assumed investment return of 4 1/2% per
year. This rate is a fulcrum rate around which Variable Annuity payments will
vary to reflect whether actual investment experience of the Sub-account is
better or worse than the assumed investment return. The assumed investment rate
and the calculation of variable income payments for such 10-year period certain
variable payment life annuity and for Options J and K described below are
described in more detail in Part 8 of the Contract and in the Statement of
Additional Information.
In lieu of the 10-year period certain variable payment life annuity (see
'Option I--Variable Payment Life Annuity with Ten Year Period Certain' below),
the Owner may, by written request received by Variable Products Operations on or
before the Maturity Date of the Contract, elect any of the other annuity payment
options described below. No surrender charge will be assessed under any annuity
option.
The level of annuity payments payable under the following options is based
upon the option selected and, depending on the option chosen, such factors as
the age at which payments begin, the form of annuity, annuity purchase rates,
assumed investment return (for variable payment annuities), and the frequency of
payments.
17
<PAGE>
Phoenix Home Life deducts a daily charge for mortality and expense risks
from Contract Values held in the Sub-accounts (see 'Charges For Mortality and
Expense Risks'). Therefore, electing Option K will result in a deduction being
made even though Phoenix Home Life assumes no mortality risk under that option.
OPTION A--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN Provides a monthly income
for the life of the Annuitant. In the event of death of the Annuitant, the
annuity income will be paid to the beneficiary until the end of the specified
period certain. For example, a ten year period certain will provide a total of
120 monthly payments. The certain period may be 5, 10, or 20 years.
OPTION B--NON-REFUND LIFE ANNUITY Provides a monthly income for the lifetime of
the Annuitant. No income is payable after the death of the Annuitant.
OPTION D--JOINT AND SURVIVOR LIFE ANNUITY Provides a monthly income for the
lifetimes of both the Annuitant and a joint annuitant as long as either is
living. In the event of the death of the Annuitant or joint annuitant, the
annuity income will continue for the life of the survivor. The amount to be
continued to the survivor may be 100% or 50% of the amount of the joint annuity
payment, as elected at the time the annuity option is chosen. No income is
payable after the death of the survivor annuitant.
Under Option D, the joint annuitant must be named at the time the option is
elected and cannot be changed. The joint annuitant must have reached an adjusted
age of 40, as defined in the Contract.
OPTION E--INSTALLMENT REFUND LIFE ANNUITY Provides a monthly income for the
life of the Annuitant. In the event of the Annuitant's death, the annuity income
will continue to the Annuitant's beneficiary until the amount applied to
purchase the annuity has been distributed.
OPTION F--JOINT AND SURVIVOR LIFE ANNUITY WITH SPECIFIED PERIOD
CERTAIN Provides a monthly income for the lifetime of both the Annuitant and a
joint annuitant as long as either is living. In the event of the death of the
Annuitant or joint annuitant, the annuity income will continue for the life of
the survivor. If the survivor dies prior to the end of the elected period
certain, the annuity income will continue to the named beneficiary until the end
of the elected period certain. For example, a ten year period certain will
provide a total of 120 monthly payments. A period certain of either 10 or 20
years may be chosen.
Under Option F, the joint annuitant must be named at the time the option is
elected and cannot be changed. The joint annuitant must have reached an adjusted
age of 40, as defined in the Contract.
OPTION G--PAYMENTS FOR SPECIFIED PERIOD Provides equal income installments for
a specified period of years whether the Annuitant lives or dies. Any specified
whole number of years from 5 to 30 years may be elected.
OPTION H--PAYMENTS OF SPECIFIED AMOUNT Provides equal installments of a
specified amount over a period of at least 5 years. The specified amount may not
be greater than the total annuity amount divided by five annual installment
payments. If the Annuitant dies prior to the end of the elected period certain,
annuity payments will continue to the Annuitant's beneficiary until the end of
the elected period certain.
OPTION I--VARIABLE PAYMENT LIFE ANNUITY WITH TEN YEAR PERIOD CERTAIN Unless
another annuity option has been elected, this option will automatically apply to
any Contract proceeds payable on the Maturity Date. It provides a variable
payout monthly annuity based on the life of the Annuitant. In the event of the
death of the Annuitant, the annuity payments are made to the Annuitant's
beneficiary until the end of the ten year period. The ten year period provides a
total of 120 monthly payments. Payments will vary as to dollar amount, based on
the investment experience of the Sub-accounts to which proceeds are applied.
OPTION J--JOINT SURVIVOR VARIABLE PAYMENT LIFE ANNUITY WITH TEN YEAR PERIOD
CERTAIN Provides a variable payout monthly annuity while the Annuitant and the
designated joint Annuitant are living and continues thereafter during the
lifetime of the survivor or, if later, until the end of a ten year period
certain. Payments will vary as to dollar amount, based on the investment
experience of the Sub-accounts to which proceeds are applied. Under Option J,
the joint Annuitant must be named at the time the option is selected and cannot
be changed. The joint Annuitant must have reached an adjusted age of 40 as
defined in the Contract.
OPTION K--VARIABLE PAYMENT ANNUITY FOR A SPECIFIED PERIOD Provides variable
payout monthly income installments for a specified period of time, whether the
Annuitant lives or dies. The period certain specified must be in whole numbers
of years from 5 to 30. However, the period certain selected by the beneficiary
of any death benefit under the Contract may not extend beyond the life
expectancy of such beneficiary. A Contract Owner may request an unscheduled
withdrawal representing part or all of the remaining Contract Value (less any
applicable contingent deferred sales charge) at any time under Option K.
OTHER OPTIONS AND RATES
Phoenix Home Life may offer other annuity options at the Maturity Date of a
Contract. In addition, in the event that current settlement rates for Contracts
are more favorable than the applicable rates guaranteed under the Contract, the
current settlement rates shall be used in determining the amount of any annuity
payment under the Annuity Options above.
18
<PAGE>
OTHER CONDITIONS
Federal income tax requirements currently applicable to Keogh and Individual
Retirement Account plans provide that the period of years guaranteed under joint
and survivorship annuities with specified periods certain (see 'Option F' and
'Option J' above) cannot be any greater than the joint life expectancies of the
payee and his or her spouse.
Federal income tax requirements also provide that participants in qualified
plans or IRAs must begin minimum distributions by April 1 of the year following
the one in which they attain age 70 1/2. The distributions must be such that the
full amount in the contract will be distributed over a period not greater than
the participant's life expectancy, or the combined life expectancy of the
participant and his or her spouse or designated beneficiary. Distributions made
under this method are generally referred to as Life Expectancy Distributions
(LEDs). An LED program is available to participants in qualified plans or IRAs.
Requests to elect this program must be made in writing.
Under an LED, if a distribution is required in the first Contract year, the
amount of the distribution will be subtracted from the first year payments. In
subsequent Contract years, under the LED program, amounts up to the required
minimum distribution may be withdrawn without a deduction for sales charges,
even if the minimum distribution exceeds the 10% allowable amount (see 'Sales
Charges'). In any Contract year, any amounts withdrawn that have not been held
under a Contract for at least six years and are in excess of the greater of the
minimum distribution and the 10% free available amount will be subject to any
applicable sales charge.
If the initial monthly annuity payment under an Annuity Option would be less
than $20, Phoenix Home Life may make a single sum payment equal to the total
Contract Value on the date the initial payment would be payable, in place of all
other benefits provided by the Contract, or, may make periodic payments
quarterly, semi-annually or annually in place of monthly payments.
PAYMENT UPON DEATH AFTER MATURITY DATE
If an Owner who is also the Annuitant dies on or after the Maturity Date, except
as may otherwise be provided under any supplementary contract between the Owner
and Phoenix Home Life, Phoenix Home Life will pay to the Owner/Annuitant's
beneficiary any annuity payments due during any applicable period certain under
the Annuity Option in effect on the Annuitant's death. If an Owner who is not
the Annuitant dies on or after the Maturity Date, Phoenix Home Life will pay any
remaining annuity payments to the Owner's beneficiary according to the payment
option in effect at the time of the Owner's death. If the Annuitant who is not
the Owner dies on or after the Maturity Date, Phoenix Home Life will pay any
remaining annuity payments to the Annuitant's beneficiary according to the
payment option in effect at the time of the Annuitant's death.
VARIABLE ACCOUNT VALUATION PROCEDURES
VALUATION DATE--A Valuation Date is every day the New York Stock Exchange is
open for trading. The New York Stock Exchange is scheduled to be closed for
trading on the following days: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Board of Directors of the Exchange reserves the right to change this
schedule as conditions warrant. On each Valuation Date, the value of the
Separate Account is determined at the close of the New York Stock Exchange
(currently 4:00 p.m. Eastern Time).
VALUATION PERIOD--A Valuation Period is that period of time from the beginning
of the day following a Valuation Date to the end of the next following Valuation
Date.
ACCUMULATION UNIT VALUE--The value of one Accumulation Unit was set at $1.0000
on the date assets were first allocated to each Sub-account. The value of one
Accumulation Unit on any subsequent Valuation Date is determined by multiplying
the immediately preceding Accumulation Unit Value by the applicable Net
Investment Factor for the Valuation Period ending on such Valuation Date.
NET INVESTMENT FACTOR--The Net Investment Factor for any Valuation Period is
equal to 1.000000 plus the applicable net investment rate for such Valuation
Period. A Net Investment Factor may be more or less than 1.000000. To determine
the net investment rate for any Valuation Period for the funds allocated to each
Sub-account, the following steps are taken: (a) the aggregate accrued investment
income and capital gains and losses, whether realized or unrealized, of the
Sub-account for such Valuation Period is computed, (b) the amount in (a) is then
adjusted by the sum of the charges and credits for any applicable income taxes
and the deductions at the beginning of the Valuation Period for mortality and
expense risk charges and daily administrative fee, and (c) the results of (a) as
adjusted by (b) are divided by the aggregate Accumulation Unit Values in the
Sub-account at the beginning of the Valuation Period.
MISCELLANEOUS PROVISIONS
ASSIGNMENT
Owners of Contracts issued in connection with non-tax qualified plans may assign
their interest in the Contract without the consent of the beneficiary. A written
notice of such assignment must be filed with Variable Products Operations before
it will be honored.
19
<PAGE>
A pledge or assignment of a Contract is treated as payment received on
account of a partial surrender of a Contract (see 'Surrenders or Withdrawals
Prior to the Contract Maturity Date').
In order to qualify for favorable tax treatment, Contracts issued in
connection with tax qualified plans may not be sold, assigned, discounted or
pledged as collateral for a loan or as security for the performance of an
obligation, or for any other purpose, to any person other than Phoenix Home
Life.
DEFERMENT OF PAYMENT
Payment of the Contract Value in a single sum upon a withdrawal from, or
complete surrender of, a Contract will ordinarily be made within seven days
after receipt of the written request by Variable Products Operations. However,
payment of the value of any Accumulation Units may be postponed at times (a)
when the New York Stock Exchange is closed, other than customary weekend and
holiday closings, (b) when trading on the Exchange is restricted, (c) when an
emergency exists as a result of which disposal of securities in the Fund is not
reasonably practicable or it is not reasonably practicable to determine the
value of the Accumulation Units in the Sub-accounts or (d) when a governmental
body having jurisdiction over the Account by order permits such suspension.
Rules and regulations of the SEC, if any, are applicable and will govern as to
whether conditions described in (b), (c) or (d) exist.
FREE LOOK PERIOD
Phoenix Home Life may mail the Contract to the Owner or it may be delivered in
person. An Owner may surrender a Contract for any reason within 10 days after
its receipt and receive in cash the adjusted value of the initial purchase
payment. (A longer free look period may be provided in the Contract Owner's
state). The Owner may receive more or less than the initial payment depending on
investment experience within the Sub-account during the free look period, unless
the Contract was issued with a Temporary Money Market Allocation Amendment, in
which case the initial purchase payment will be refunded.
If the Contract Owner elects on the application to have the Temporary Money
Market Allocation Amendment issued with the Contract, or resides in a state that
requires the Contract to be issued with the Temporary Money Market Allocation
Amendment, Phoenix Home Life temporarily allocates the initial purchase payment
to the Money Market Sub-account. Under this Amendment, if the Contract Owner
surrenders the Contract during the Free Look Period, the initial purchase
payment is refunded. At the expiration of the Free Look Period, the value of the
Accumulation Units held in the Money Market Sub-account is allocated among the
available Sub-accounts of the Account or the Guaranteed Interest Account in
accordance with the Contract Owner's allocation instructions on the application.
If the initial purchase payment, or any portion thereof, was allocated to
the Guaranteed Interest Account, that payment (or portion) and any earned
interest is refunded.
AMENDMENTS TO CONTRACTS
Contracts may be amended to conform to changes in applicable law or
interpretations of applicable law, or to accommodate design changes. Changes in
the Contract may need to be approved by Contract Owners and state insurance
departments. A change in the Contract which necessitates a corresponding change
in the Prospectus or the Statement of Additional Information must be filed with
the SEC.
SUBSTITUTION OF FUND SHARES
Although Phoenix Home Life believes it to be highly unlikely, it is possible
that in the judgment of its management, one or more of the Series of the Fund
may become unsuitable for investment by Contract Owners because of a change in
investment policy, or a change in the tax laws, or because the shares are no
longer available for investment. In that event, Phoenix Home Life may seek to
substitute the shares of another Series or the shares of an entirely different
mutual fund. Before this can be done, the approval of the SEC, and possibly one
or more state insurance departments, will be required.
OWNERSHIP OF THE CONTRACT
Ordinarily, the Purchaser of a Contract is both the Owner and the Annuitant and
is entitled to exercise all the rights under the Contract. However, the Owner
may be an individual or entity other than the Annuitant. Spouses may own a
Contract as joint Owners. Transfer of the ownership of a Contract may involve
Federal income tax consequences, and a qualified adviser should be consulted
before any such transfer is attempted.
FEDERAL INCOME TAXES
INTRODUCTION
The Contracts are designed for use by individuals in retirement plans which may
or may not be tax-qualified plans ('Qualified Plans') under the provisions of
the Internal Revenue Code of 1986, as amended (the 'Code'). The ultimate effect
of Federal income taxes on the amounts held under a Contract, on annuity
payments, and on the economic benefits of the Contract Owner, Annuitant or
beneficiary depends on Phoenix Home Life's tax status, on the type of retirement
plan for which the Contract is purchased, and upon the tax and employment status
of the individual concerned.
20
<PAGE>
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No attempt
is made to consider any estate or inheritance taxes or any applicable state,
local or other tax laws. Moreover, the discussion is based upon Phoenix Home
Life's understanding of the Federal income tax laws as they are currently
interpreted. No representation is made regarding the likelihood of continuation
of the Federal income tax laws or the current interpretations by the Internal
Revenue Service (the 'Service'). For a discussion of Federal income taxes as
they relate to the Fund, please see the accompanying Prospectus for the Fund.
TAX STATUS
Phoenix Home Life is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Account is not a separate entity from
Phoenix Home Life and its operations form a part of Phoenix Home Life, it will
not be taxed separately as a 'regulated investment company' under Subchapter M
of the Code. Investment income and realized capital gains on the assets of the
Account are reinvested and taken into account in determining the Contract Value.
Under existing Federal income tax law, the Account's investment income,
including realized net capital gains, is not taxed to Phoenix Home Life. Phoenix
Home Life reserves the right to make a deduction for taxes should they be
imposed with respect to such items in the future.
TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities. In general, a Contract
Owner is not taxed on increases in value of the Units held under a Contract
until some form of distribution is made under the Contract. However, in certain
cases, the increase in value may be subject to tax currently. In the case of
Contracts not owned by natural persons, see 'Contracts Owned By Non-Natural
Persons'. In the case of Contracts not meeting the diversification requirements,
see 'Diversification Standards.'
1. SURRENDERS OR WITHDRAWALS PRIOR TO THE CONTRACT MATURITY DATE.
Code Section 72 provides that a total or partial surrender from a Contract prior
to the Contract Maturity Date will be treated as taxable income to the extent
the amounts held under the Contract exceed the 'investment in the Contract.' The
'investment in the Contract' is that portion, if any, of purchase payments
(premiums paid) by or on behalf of an individual under a Contract that is not
excluded from the individual's gross income. However, under certain types of
Qualified Plans there may be no investment in the Contract within the meaning of
Code Section 72, so that the total amount of all payments received will be
taxable to the Contract Owner. The taxable portion is taxed as ordinary income
in an amount equal to the value of the Contract or portion thereof that is
pledged or assigned. For purposes of this rule, a pledge or assignment of a
Contract is treated as a payment received on account of a partial surrender of a
Contract. Similiar rules apply to amounts received under Qualified Plans, in
most cases.
2. SURRENDERS OR WITHDRAWALS ON OR AFTER THE CONTRACT MATURITY DATE.
Upon receipt of a lump sum payment or an annuity payment under the Contract, the
recipient is taxed on the portion of the payment that exceeds the investment in
the Contract. Ordinarily, such taxable portion is taxed as ordinary income.
Under certain circumstances, the proceeds of a surrender of a Contract may
qualify for 'lump sum distribution' treatment under Qualified Plans. See your
tax adviser if you think you may qualify for 'lump sum distribution' treatment.
For fixed annuity payments, the taxable portion of each payment is
determined by using a formula known as the 'exclusion ratio,' which establishes
the ratio that the investment in the Contract bears to the total expected amount
of annuity payments for the term of the Contract. That ratio is then applied to
each payment to determine the non-taxable portion of the payment. The remaining
portion of each payment is taxed as ordinary income. For variable annuity
payments, the taxable portion is determined by a formula that establishes a
specific dollar amount of each payment that is not taxed. The dollar amount is
determined by dividing the investment in the Contract by the total number of
expected periodic payments. The remaining portion of each payment is taxed as
ordinary income. Once the excludable portion of annuity payments equals the
investment in the Contract, the balance of the annuity payments will be fully
taxable.
Withholding of Federal income taxes on all distributions may be required
unless the recipient elects not to have any amounts withheld and properly
notifies Variable Products Operations of that election.
3. PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS.
With respect to amounts surrendered or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to ten percent (10%) of the portion
of such amount that is includable in gross income. However, the penalty tax will
not apply to withdrawals: (i) made on or after the death of the Contract Owner
(or where the Contract Owner is not an individual, the death of the 'Primary
Annuitant,' who is defined as the individual the events in whose life are of
primary importance in affecting the timing and amount of the payout under the
Contract); (ii) attributable to the taxpayer's becoming totally disabled within
the meaning of Code Section 72(m)(7); (iii) which are part of a series of
substantially equal periodic payments made (not less frequently than annually)
for the life (or life expectancy) of the taxpayer, or the joint lives (or joint
life expectancies) of the taxpayer and his beneficiary; (iv) from certain
qualified plans (Such distributions may, however, be subject to a similar
penalty under Code Section 72(t) relating to distributions from qualified
retirement plans.); (v) allocable to investment in the contract before August
14, 1982; (vi) under a qualified funding asset (as defined in Code Sec. 130(d));
(vii) under an immediate annuity contract (as defined in Code Section 72(u)(4));
or (viii) that are purchased by an employer
21
<PAGE>
on termination of certain types of qualified plans and which are held by the
employer until the employee separates from service.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the first
year when the modification occurs will be increased by an amount (determined by
the Treasury regulations) equal to the tax that would have been imposed but for
item (iii) above, plus interest for the deferral period, but only if the
modification takes place: (a) before the close of the period which is 5 years
from the date of the first payment and after the taxpayer attains age 59 1/2, or
(b) before the taxpayer reaches age 59 1/2.
ADDITIONAL CONSIDERATIONS
1. DISTRIBUTION-AT-DEATH RULES.
In order to be treated as an annuity contract, for Federal income tax purposes,
a Contract must provide the following two distribution rules: (A) if the
Contract Owner dies on or after the Contract Maturity Date, and before the
entire interest in the Contract has been distributed, the remainder of the
Contract Owner's interest will be distributed at least as quickly as the method
in effect on the Contract Owner's death; and (B) if a Contract Owner dies before
the Contract Maturity Date, the Contract Owner's entire interest must generally
be distributed within five (5) years after the date of death, or if payable to a
designated beneficiary may be annuitized over the life of that beneficiary or
over a period not extending beyond the life expectancy of that beneficiary, and
must commence within one (1) year after the Contract Owner's date of death. If
the beneficiary is the spouse of the Contract Owner, the Contract (together with
the deferral of tax on the accrued and future income thereunder) may be
continued in the name of the spouse as Contract Owner. These distribution
requirements do not apply to annuity contracts under Qualified Plans (other than
Code Section 457 Plans).
Under the Contract, if the Annuitant, who is not the Contract Owner, dies
before the Maturity Date and there is no contingent Annuitant, the Annuitant's
beneficiary must elect within 60 days whether to receive the death benefit in a
lump sum or in periodic payments commencing within one (1) year.
Upon the death of the Annuitant, if the Contract Owner is not an individual,
the primary Annuitant is considered the Contract Owner. In addition, when the
Contract Owner is not an individual, a change in the primary Annuitant is
treated as the death of the Contract Owner. Finally, in the case of non-spousal
joint Contract Owners, the distribution will be required at the death of the
first of the Contract Owners.
2. TRANSFER OF ANNUITY CONTRACTS.
Transfers of non-qualified Contracts prior to the Maturity Date for less than
full and adequate consideration to the Contract Owner at the time of such
transfer, will trigger tax on the gain in the Contract with the transferee
getting a step-up in basis for the amount included in the Contract Owner's
income. This provision does not apply to transfers between spouses or incident
to a divorce.
3. CONTRACTS OWNED BY NON-NATURAL PERSONS.
If the Contract is held by a non-natural person (for example, a corporation),
the income on that Contract (generally the increase in the net surrender value
less the premium paid) is includable in income each year. The rule does not
apply where the non-natural person is the nominal owner of a Contract and the
beneficial owner is a natural person. The rule also does not apply where the
annuity contract is acquired by the estate of a decedent, where the Contract is
held under a qualified plan, a TSA program, or an IRA, where the Contract is a
qualified funding asset for structured settlements, where the Contract is
purchased on behalf of an employee upon termination of a qualified plan, and in
the case of an immediate annuity.
4. SECTION 1035 EXCHANGES.
Code Section 1035 provides, in general, that no gain or loss shall be recognized
on the exchange of one annuity contract for another. A replacement contract
obtained in a tax-free exchange of contracts succeeds to the status of the
surrendered contract. If the surrendered contract was issued prior to August 14,
1982, the tax rules that formerly provided that the surrender was taxable only
to the extent the amount received exceeds the Contract Owner's investment in the
Contract, will continue to apply. In contrast, Contracts issued on or after
January 19, 1985, in a Code Section 1035 exchange, are treated as new Contracts
for purposes of the distribution-at-death rules. Special rules and procedures
apply to Code Section 1035 transactions. Prospective Contract Owners wishing to
take advantage of Code Section 1035 should consult their tax advisers.
5. MULTIPLE CONTRACTS
Code Section 72(e)(11)(A)(ii) provides that for Contracts entered into after
October 21, 1988, for purposes of determining the amount of any distribution
under Code Section 72(e) (amounts not received as annuities) that is includable
in gross income, all non-qualified deferred annuity contracts issued by the same
insurer (or affiliate) to the same Contract Owner during any calendar year are
to be aggregated and treated as one contract. Thus, any amount received under
any such contract prior to the Contract Maturity Date, such as a withdrawal,
dividend or loan, will be taxable (and possibly subject to the 10% penalty tax)
to the extent of the combined income in all such contracts.
The Treasury Department has specific authority to issue regulations that
prevent the avoidance of Code Section 72(e) through the serial purchase of
annuity contracts or otherwise. In addition, there may be situations where the
Treasury may conclude that it would be appropriate to aggregate two or more
contracts purchased by the same Contract Owner.
22
<PAGE>
Accordingly, a Contract Owner should consult a competent tax adviser before
purchasing more than one Contract or other annuity contracts.
DIVERSIFICATION STANDARDS
1. DIVERSIFICATION REGULATIONS.
To comply with the diversification regulations under Code Section 817(h)
('Diversification Regulations'), after a start-up period, each Series of the
Fund will be required to diversify its investments. The Diversification
Regulations generally require that, on the last day of each quarter of a
calendar year no more than 55% of the value of the assets of the Fund is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. A 'look-through' rule
applies to treat a pro-rata portion of each asset of the Fund as an asset of the
Account, and each Series of the Fund is tested for compliance with the
percentage limitations. All securities of the same issuer are treated as a
single investment. As a result of the 1988 Act, each Government agency or
instrumentality will be treated as a separate issuer for purposes of these
limitations.
In connection with the issuance of the Diversification Regulations, the
Treasury announced that such regulations do not provide guidance concerning the
extent to which Contract Owners may direct their investments to particular
divisions of a separate account. Regulations or a revenue ruling in this regard
may be issued in the future. It is not clear, at this time, what these
regulations or the revenue ruling will provide. It is possible that when issued,
the Contract may need to be modified to comply with such rules. For these
reasons, Phoenix Home Life reserves the right to modify the Contract, as
necessary, to prevent the Contract Owner from being considered the owner of the
assets of the Account.
Phoenix Home Life has represented that it intends to comply with the
Diversification Regulations to assure that the Contracts continue to be treated
as annuity contracts for Federal income tax purposes.
2. DIVERSIFICATION REGULATIONS AND QUALIFIED PLANS.
Code Section 817(h) applies to a variable annuity contract other than a pension
plan contract. The Diversification Regulations reiterate that the
diversification requirements do not apply to a pension plan contract. All of the
qualified plans (described below) are defined as pension plan contracts for
these purposes. Notwithstanding the exception of qualified plan contracts from
application of the diversification rules, the investments of the Phoenix Home
Life qualified plan Contracts (i.e. the Fund) will be structured to comply with
the diversification standards because the Fund serves as the investment vehicle
for non-qualified Contracts as well as qualified plan Contracts.
QUALIFIED PLANS
The Contracts may be used with several types of qualified plans. TSAs, Keoghs,
Individual Retirement Accounts ('IRAs'), Corporate Pension and Profit Sharing
Plans and State Deferred Compensation Plans will be treated, for purposes of
this discussion, as Qualified Plans. The tax rules applicable to participants in
such Qualified Plans vary according to the type of plan and the terms and
conditions of the plan itself. No attempt is made herein to provide more than
general information about the use of the Contracts with the various types of
Qualified Plans. Participants under such Qualified Plans as well as Contract
Owners, Annuitants, and beneficiaries, are cautioned that the rights of any
person to any benefits under such Qualified Plans may be subject to the terms
and conditions of the plans themselves or limited by applicable law, regardless
of the terms and conditions of the Contract issued in connection therewith. For
example, Phoenix Home Life will accept beneficiary designations and payment
instructions under the terms of the Contract without regard to any spousal
consents that may be required under the Retirement Equity Act (REA).
Consequently, a Contract Owner's beneficiary designation or elected payment
option may not be enforceable.
Effective January 1, 1993, Section 3405 of the Internal Revenue Code was
amended to change the rollover rules applicable to the taxable portions of
distributions from qualified pension and profit-sharing plans and Section 403(b)
Tax-Sheltered Annuities arrangements. Taxable distributions eligible to be
rolled-over will generally be subject to 20 percent income tax withholding.
Mandatory withholding can only be avoided if the employee arranges for a direct
rollover to another qualified pension or profit-sharing plan or to an IRA.
The new mandatory withholding rules apply to all taxable distributions from
qualified plans or TSA's, except a) distributions required under the Code, and
b) substantially equal distributions made over the life (or life expectancy) of
the employee, or for a term certain of 10 years or more.
Numerous changes have been made to the tax rules governing Qualified Plans
as a result of tax legislation enacted during the last several years including
rules with respect to: maximum contributions; minimum, maximum and timing of
distributions; anti-discrimination; and increasing the penalty tax on premature
distributions. The following are brief descriptions of the various types of
Qualified Plans and of the use of the Contracts in connection therewith.
1. TAX-SHELTERED ANNUITIES.
Code Section 403(b) permits public school systems and certain types of
charitable, educational and scientific organizations, generally specified in
Code Section 501(c)(3) to purchase annuity contracts on behalf of their
employees and, subject to certain limitations, allows employees of those
organizations to exclude the amount of purchase payments from gross income for
Federal income tax purposes. These annuity contracts are commonly referred to as
'TSAs'.
23
<PAGE>
For taxable years beginning after December 31, 1988, Code Section 403(b)(11)
imposes certain restrictions on a Contract Owner's ability to make partial
withdrawals from, or surrenders of, Code Section 403(b) Contracts, if the cash
withdrawn is attributable to purchase payments made under a salary reduction
agreement. Specifically, Code Section 403(b)(11) allows a Contract Owner to make
a surrender or partial withdrawal only (A) when the employee attains age 59 1/2,
separates from service, dies, or becomes disabled (as defined in the Code), or
(B) in the case of hardship. In the case of hardship, the amount distributable
cannot include any income earned under the Contract.
The 1988 Act amended the effective date of Code Section 403(b)(11), so that
it applies only with respect to distributions from Code Section 403(b) Contracts
which are attributable to assets other than assets held as of the close of the
last year beginning before January l, 1989. Thus, the distribution restrictions
do not apply to assets held as of December 31, 1988.
In addition, in order for certain types of contributions under a Code
Section 403(b) Contract to be excluded from taxable income, the employer must
comply with certain nondiscrimination requirements. Contract Owners should
consult their employers to determine whether the employer has complied with
these rules.
2. KEOGH PLANS.
The Self-Employed Individual Tax Retirement Act of 1962, as amended, permits
self-employed individuals to establish 'Keoghs,' or qualified plans for
themselves and their employees. The tax consequences to participants under such
a plan depend upon the terms of the plan. In addition, such plans are limited by
law with respect to the maximum permissible contributions, distribution dates,
nonforfeitability of interests, and tax rates applicable to distributions. In
order to establish such a plan, a plan document must be adopted and implemented
by the employer, as well as approved by the Internal Revenue Service.
3. INDIVIDUAL RETIREMENT ACCOUNTS.
Code Section 408 permits eligible individuals to contribute to an individual
retirement program known as an 'IRA'. These IRAs are subject to limitations on
the amount which may be contributed, the persons who may be eligible, and on the
time when distributions may commence. In addition, distributions from certain
other types of Qualified Plans may be placed on a tax-deferred basis into an
IRA.
4. CORPORATE PENSION AND PROFIT-SHARING PLANS.
Code Section 401(a) permits corporate employers to establish various types of
retirement plans for employees. Such retirement plans may permit the purchase of
Contracts to provide benefits thereunder.
As a general rule, the maximum amount which an employer may contribute on
behalf of a Participant to a defined benefit plan is the amount necessary to
fund an annual benefit equal to the lesser of 100% of compensation or $120,000.
If the plan is a defined contribution plan, the maximum contribution is the
lesser of 25% of compensation or $30,000 for each Participant. If the plan is a
profit-sharing plan, the amount which the employer may deduct cannot exceed 15%
of the compensation otherwise paid to participating employees in the taxable
year. Under a profit-sharing plan which includes a cash or deferred provision
described in Section 401(k) of the Code, elective deferral contributions are
limited to $9,500 a year, or less in the case of a highly compensated employee
(as defined by the Code) where certain non-discriminatory percentage tests
require a lower limit.
5. DEFERRED COMPENSATION PLANS WITH RESPECT TO SERVICE FOR STATE AND LOCAL
GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.
Code Section 457 provides for certain deferred compensation plans with respect
to service for state and local governments and certain other entities. The
Contracts may be used in connection with these plans; however, under these plans
the Contract Owner is the plan sponsor, and the individual participants in the
plans are the Annuitants. Under such Contracts, the rights of individual plan
participants are governed solely by their agreements with the plan sponsor and
not by the terms of the Contracts.
6. SEEK TAX ADVICE
The above description of Federal income tax consequences of the different types
of qualified plans which may be funded by the Contracts offered by this
Prospectus is only a brief summary and is not intended as tax advice. The rules
governing the provisions of qualified plans are extremely complex and often
difficult to comprehend. Anything less than full compliance with the applicable
rules, all of which are subject to change, may have adverse tax consequences. A
prospective Contract Owner considering adoption of a qualified plan and purchase
of a Contract in connection therewith should first consult a qualified and
competent tax adviser, with regard to the suitability of the Contract as an
investment vehicle for the qualified plan.
SALES OF VARIABLE ACCUMULATION CONTRACTS
The master servicer and distributor of the Contracts is Franklin Templeton
Distributors, Inc. ('FTD'). FTD is an indirect wholly-owned subsidiary of
Franklin Resources, Inc. Contracts will be sold through broker-dealers
registered under the Securities Exchange Act of 1934, whose representatives are
authorized by applicable law to sell Contracts under terms of agreement provided
by FTD and terms of agreement provided by Phoenix Home Life. For services it
renders, Phoenix Home Life pays FTD or such other person if required under
applicable law, an amount equal to 5.5% of the purchase payments
24
<PAGE>
under the Contracts. Phoenix Home Life, through FTD or such other person,
generally pays dealers who sell Contracts an amount equal to 5% of the purchase
payments under the Contracts. However, Phoenix Home Life, through FTD or such
other person, may at its discretion for temporary periods pay selected dealers
amounts up to 5.5% of purchase payments and may pay an amount equal to 5.25% of
purchase payments to dealers who meet sales goals of $12,500,000 or more per
quarter. Any such amount paid with respect to Contracts sold through other
broker-dealers will be paid by Phoenix Home Life to or through FTD or such other
person. The amounts paid by Phoenix Home Life are not deducted from the purchase
payments. Deductions for sales charges (as described under 'Sales Charges') may
be used to reimburse Phoenix Home Life for commission payments to
broker-dealers.
STATE REGULATION
Phoenix Home Life is subject to the provisions of the New York insurance laws
applicable to mutual life insurance companies and to regulation and supervision
by the New York Superintendent of Insurance. Phoenix Home Life is also subject
to the applicable insurance laws of all the other states and jurisdictions in
which it does an insurance business.
State regulation of Phoenix Home Life includes certain limitations on the
investments which may be made for its General Account and separate accounts,
including the Account. It does not include, however, any supervision over the
investment policy of the Account.
REPORTS
Reports showing the Contract Value and containing the financial statements of
the Account will be furnished at least annually to an Owner.
VOTING RIGHTS
As stated above, all of the assets held in an available Sub-account will be
invested in shares of a corresponding Series of the Fund. Phoenix Home Life is
the legal owner of those shares and as such has the right to vote to elect the
Board of Trustees of the Fund, to vote upon certain matters that are required by
the Investment Company Act of 1940 ('1940 Act') to be approved or ratified by
the shareholders of a mutual fund and to vote upon any other matter that may be
voted upon at a shareholders' meeting. However, Phoenix Home Life intends to
vote the shares of the Fund at regular and special meetings of the shareholders
of the Fund in accordance with instructions received from Owners of the
Contracts.
Phoenix Home Life currently intends to vote Fund shares attributable to any
Phoenix Home Life assets and Fund shares held in each Sub-account for which no
timely instructions from Owners are received in the same proportion as those
shares in that Sub-account for which instructions are received. In the future,
to the extent applicable Federal securities laws or regulations permit Phoenix
Home Life to vote some or all shares of the Fund in its own right, it may elect
to do so.
Matters on which Owners may give voting instructions may include the
following: (1) election of the Board of Trustees of the Fund; (2) ratification
of the independent accountant for the Fund; (3) approval or amendment of the
investment advisory agreement for the Series of the Fund corresponding to the
Owner's selected Sub-account(s); (4) any change in the fundamental investment
policies or restrictions of each such Series; and (5) any other matter requiring
a vote of the Shareholders of the Fund. With respect to amendment of any
investment advisory agreement or any change in a Series' fundamental investment
policy, Owners participating in such Series will vote separately on the matter,
pursuant to the requirements of the 1940 Act.
The number of votes that a Contract Owner has the right to cast will be
determined by applying the Contract Owner's percentage interest in a Sub-account
to the total number of votes attributable to the Sub-account. In determining the
number of votes, fractional shares will be recognized. The number of votes for
which each Owner may give Phoenix Home Life instructions will be determined as
of the record date for Fund shareholders chosen by the Board of Trustees of the
Fund. Phoenix Home Life will furnish Owners with proper forms and proxies to
enable them to give these instructions.
TEXAS OPTIONAL RETIREMENT PROGRAM
Participants in the Texas Optional Retirement Program may not receive the
proceeds of a withdrawal from, or complete surrender of, a Contract, or apply
them to provide annuity options prior to retirement except in the case of
termination of employment in the Texas public institutions of higher education,
death or total disability. Such proceeds may, however, be used to fund another
eligible retirement vehicle.
LITIGATION
Phoenix Home Life, the Account and FTD are not parties to any litigation that
would have a material adverse effect upon the Account or the Contracts.
LEGAL MATTERS
Legal matters involving Federal securities and income tax laws in connection
with the Contracts described in this Prospectus have been passed upon by Jorden
Burt Berenson & Johnson LLP, Washington, D.C.
25
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information and
financial statements relating to the Account and Phoenix Home Life. The Table of
Contents of the Statement of Additional Information is set forth below:
Underwriter
Calculation of Yield and Return
Calculation of Annuity Payments
Experts
Financial Statements
Contract Owner inquiries and requests for a Statement of Additional
Information should be directed to Variable Products Operations in writing at 101
Munson Street, P.O. Box 942, Greenfield, Massachusetts 01302-0942, or by callin
Variable Products Operations at (800) 243-4840.
26
<PAGE>
APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
Contributions to the Guaranteed Interest Account under the Contract and
transfers to the Guaranteed Interest Account become part of the general account
of Phoenix Home Life (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 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 Guaranteed Interest Account.
Disclosures regarding the Guaranteed Interest Account 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 Phoenix Home
Life other than those allocated to any separate account. Purchase payments will
be allocated to the Guaranteed Interest Account and, therefore, the General
Account, as elected by the Owner at the time of purchase or as subsequently
changed. Phoenix Home Life 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 Phoenix Home Life and the contracts
participating in the General Account, in accordance with the terms of such
contracts.
Fixed annuity payments made to Annuitants under the Contract will not be
affected by the mortality experience (death rate) of persons receiving such
payments or of the general population. Phoenix Home Life assumes this 'mortality
risk' by virtue of annuity rates incorporated in the Contract that cannot be
changed. In addition, Phoenix Home Life guarantees that it will not increase
charges for maintenance of the Contracts regardless of its actual expenses.
Investment income from the General Account allocated to Phoenix Home Life
includes compensation for mortality and expense risks borne by it in connection
with General Account contracts.
The amount of investment income allocated to the Contracts will vary from
year to year in the sole discretion of Phoenix Home Life. However, Phoenix Home
Life guarantees that it will credit interest at a rate of not less than 4% per
year, compounded annually, to amounts allocated to the Guaranteed Interest
Account. Phoenix Home Life may credit interest at a rate in excess of 4% per
year; however, it is not obligated to credit any interest in excess of 4% per
year.
Bi-weekly, Phoenix Home Life will set the excess interest rate, if any, that
will apply to amounts deposited to the Guaranteed Interest Account. That rate
will remain in effect for such deposits for an initial guarantee period of one
full year from the date of deposit. Upon expiration of the initial one-year
guarantee period (and each subsequent one-year guarantee period thereafter), the
rate to be applied to any deposits whose guaranteed period has just ended will
be the same rate as is applied to new deposits allocated to the Guaranteed
Interest Account at that time. 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 Phoenix Home Life based on
information as to expected investment yields. Some of the factors that Phoenix
Home Life may consider in determining whether to credit excess interest to
amounts allocated to the Guaranteed Interest Account 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 GUARANTEED INTEREST ACCOUNT IN
EXCESS OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF PHOENIX HOME
LIFE AND WITHOUT REGARD TO ANY SPECIFIC FORMULA. THE CONTRACT OWNER ASSUMES THE
RISK THAT INTEREST CREDITED TO GUARANTEED INTEREST ACCOUNT ALLOCATIONS MAY NOT
EXCEED THE MINIMUM GUARANTEE OF 4% FOR ANY GIVEN YEAR.
Phoenix Home Life 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 Phoenix Home Life's exercise of discretion in this regard
is the equitable allocation of distributable earnings and surplus among its
various policyholders and contract owners.
Excess interest, if any, will be credited on the Guaranteed Interest Account
Contract Value. Phoenix Home Life guarantees that, at any time, the Guaranteed
Interest Account Contract Value will not be less than the amount of purchase
payments allocated to the Guaranteed Interest Account, plus interest at the rate
of 4% per year, compounded annually, plus any additional interest which Phoenix
Home Life may, in its discretion, credit to the Guaranteed Interest Account,
less the sum of all annual administrative or surrender charges, any applicable
premium taxes, and less any amounts surrendered. If the Owner surrenders the
Contract, the amount available from the Guaranteed Interest Account will be
reduced by any applicable surrender charge and annual administration charge (see
'Deductions and Charges').
IN GENERAL, ONE TRANSFER PER CONTRACT YEAR IS ALLOWED FROM THE GUARANTEED
INTEREST ACCOUNT. THE AMOUNT WHICH CAN BE TRANSFERRED IS LIMITED TO THE GREATER
OF $1,000 AND 25% OF THE CONTRACT VALUE IN THE GUARANTEED INTEREST ACCOUNT AS OF
THE LAST CONTRACT ANNIVERSARY. UNDER THE SYSTEMATIC TRANSFER PROGRAM, TRANSFERS
OF APPROXIMATELY EQUAL AMOUNTS MAY BE MADE OVER A MINIMUM 18 MONTH PERIOD.
NON-SYSTEMATIC TRANSFERS FROM THE GUARANTEED INTEREST ACCOUNT WILL BE
EFFECTUATED ON THE DATE OF RECEIPT BY VARIABLE PRODUCTS OPERATIONS, UNLESS
OTHERWISE REQUESTED BY THE CONTRACT OWNER.
27
<PAGE>
APPENDIX B
DEDUCTIONS FOR STATE PREMIUM TAXES
QUALIFIED AND NON-QUALIFIED ANNUITY CONTRACTS
- --------------------------------------------------------------------------------
UPON UPON
STATE PURCHASE* ANNUITIZATION NON-QUALIFIED QUALIFIED
- --------------------------------------------------------------------------------
California x 2.35% 0.50%
D.C. x 2.25
Kansas x 2.00
Kentucky x 2.00 2.00
Maine x 2.00
Nevada x 3.50
South Dakota x 1.25
West Virginia x 1.00 1.00
Wyoming x 1.00
- --------------------------------------------------------------------------------
NOTE: The above premium tax deduction rates are as of January 1, 1996. No
premium tax deductions are made for states not listed above. However,
premium tax statutes are subject to amendment by legislative act and to
judicial and administrative interpretation, which may affect both the
above list of states and the applicable tax rates. Consequently, the
Company reserves the right to deduct premium tax when necessary to reflect
changes in state tax law or interpretations.
For an explanation of the assessment of Premium Taxes see ('Deductions and
Charges, Premium Tax').
* 'Purchase' refers to the earlier of partial withdrawal, surrender of
the Contract, Maturity Date or payment of death proceeds.
28
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
[VERSION A]
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
VARIABLE ACCUMULATION ANNUITY CONTRACTS
ISSUED BY
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
101 Munson St.
P.O. Box 942
Greenfield, Massachusetts 03102-0942
Telephone (800) 447-4312
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Prospectus, dated May 1, 1996, which is available
without charge by contacting Phoenix Home Life Mutual Insurance Company at the
above address or at the above telephone number.
May 1, 1996
TABLE OF CONTENTS
PAGE
Underwriter.......................................................... B-2
Calculation of Yield and Return ..................................... B-2
Calculation of Annuity Payments ..................................... B-3
Experts ............................................................. B-4
Financial Statements................................................. B-5
B-1
<PAGE>
UNDERWRITER
The offering of Contracts is made on a continuous basis by Phoenix Equity
Planning Corporation ("PEPCO"), an affiliate of Phoenix Home Life Mutual
Insurance Company ("Phoenix Home Life"). Phoenix Home Life is the successor by
merger of Phoenix Mutual Life Insurance Company and Home Life Insurance Company
on July 1, 1992. In 1993, 1994 and 1995, aggregate underwriting commissions paid
to PEPCO on the sales of the Contracts were $17,988,629, $31,557,402 and
$27,332,540, respectively, and retained $0.
CALCULATION OF YIELD AND RETURN
Yield of the Money Market Sub-account. As summarized in the Prospectus under
the heading "Performance History", the yield of the Money Market Sub-account for
a seven-day period (the "base period") will be computed by determining the "net
change in value" (calculated as set forth below) of a hypothetical account
having a balance of one share at the beginning of the period, dividing the net
change in account value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period return
by 365/7 with the resulting yield figure carried to the nearest hundredth of one
percent. Net changes in value of a hypothetical account will include net
investment income of the account (accrued daily dividends as declared by the
underlying funds, less daily expense charges of the account) for the period, but
will not include realized gains or losses or unrealized appreciation or
depreciation on the underlying fund shares. Mortality and expense risk charges
of 0.40% and 0.85%, respectively, are reflected.
The Money Market Sub-account yield and effective yield will vary in response
to fluctuations in interest rates and in the expenses of the Sub-account.
The current yield and effective yield reflect recurring charges at the
Account level, including the maximum annual administrative fee.
Example:
Money Market Sub-account
The following is an example of this yield calculation for the Sub-account based
on a seven-day period ending December 31, 1995.
Assumptions:
CONTRACTS
ASSESSING
.85% EXPENSE
CHARGE
------
Value of a hypothetical pre-existing account with exactly one
unit at the beginning of the period: 1.998416
Value of the same account (excluding capital changes) at the
end of the seven-day period ................ 2.000092
Calculation:
Ending account value ...................... 2.000092
Less beginning account value .............. 1.998416
Net change in account value ............... 0.001676
Base period return:
(adjusted change/beginning account value) 0.000839
Current yield = return X (365/7) =........... 4.37%
Effective yield = [(1 + return) 365/7] - 1 = 4.47%
At any time in the future, yields and total return may be higher or lower
than past yields and there can be no assurance that any historical results will
continue.
The method of calculating yields described above for the Money Market
Sub-account differs from the method used by the Sub-account prior to May 1,
1988. The denominator of the fraction used to calculate yield was prior, to May
1, 1988, the average unit value for the period calculated. That denominator was
thereafter the unit value of the Sub-account on the last trading day of the
period calculated.
Calculation of Total Return. As summarized in the Prospectus under the
heading "Performance History", total return is a measure of the change in value
of an investment in a Sub-account over the period covered. The formula for total
return used herein includes four steps: (1) adding to the total number of units
purchased by a hypothetical $1,000 investment in the Sub-account; (2)
calculating the value of the hypothetical initial investment of $1,000 as of the
end of the period by multiplying the total number of units owned at the end of
the period by the unit value per unit on the last trading day of the period; (3)
assuming redemption at the end of the period and deducting any applicable
contingent deferred sales charge and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment. Total return will be
calculated for one year, five years and ten years or some other relevant periods
if a Sub-account has not been in existence for at least ten years.
PERFORMANCE INFORMATION
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 allow any Series to
respond quickly to changing market and economic conditions. From time to time
the Funds may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Fund may
separate its cumulative and average annual returns into income and capital gains
components; or cite separately as a return figure the equity or bond portion of
a portfolio; or compare a Series' equity or bond return figure to well-known
indices of market performance, including, but not limited to: the S&P 500 Index,
Dow Jones Industrial Average, First Boston High Yield Index and Salomon Brothers
Corporate and Government Bond Indices.
Each Sub-account may from time to time include its yield and total return in
advertisements or information furnished to present or prospective Contract
Owners. Each Sub-account may from time to time include in advertisements
containing total return (and yield in the case of certain Sub-accounts) the
ranking of those performance figures relative to such figures for groups of
mutual funds categorized as having the same investment objectives by Lipper
Analytical Services, CDA Investment Technologies, Inc., Weisenberger Financial
Services, Inc., Morningstar, Inc. and Tillinghast. Additionally, the fund 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 Daily, The Stanger Register, Stanger's Investment Adviser, The
Wall Street Journal, The New York Times, Consumer Reports, Registered
B-2
<PAGE>
Representative, Financial Planning, Financial Services Weekly, Financial World,
U.S. News and World Report, Standard & Poor's, The Outlook, and Personal
Investor. The Fund may from time to time illustrate the benefits of tax deferral
by comparing taxable investments to investments made through tax-deferred
retirement plans.
The total return and yield may also be used to compare the performance of
the Sub-accounts against certain widely acknowledged outside standards or
indices for stock and bond market performance. The Standard & Poor's Composite
Index of 500 Stocks (the "S&P 500") is a market value-weighted and unmanaged
index showing the changes in the aggregate market value of 500 stocks relative
to the base period 1941-43. The S&P 500 is composed almost entirely of common
stocks of companies listed on the New York Stock Exchange, 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 80% of the market value of all issues traded on the New York
Stock Exchange.
The manner in which total return and yield will be calculated is described
above. The following table summarizes the calculation of total return and yield
for each Sub-account, where applicable, through December 31, 1995.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1995
- -----------------------------------------------------
PERIODS ENDED
- -------------------------------------------------------------------
SUB-ACCOUNT 1 YEAR 5 YEAR 10 YEAR INCEPTION
- ------------------------------------------- --------- -------------
Money Market (0.48)% 2.74% 4.51% 5.17%
Growth 23.27% 18.32% 15.30% 17.28%
Multi-Sector 16.34% 10.51% 8.96% 9.42%
Total Return 11.35% 11.37% 10.58% 11.41%
International 3.19% 7.94% N/A 5.19%
Balanced 16.16% N/A N/A 7.78%
Real Estate N/A N/A N/A 9.82%
Wanger U.S. Small Cap N/A N/A N/A 8.16%
Wanger Int'l. Small Cap N/A N/A N/A 25.40%
NOTE: Average annual total return assumes a hypothetical initial payment of
$1,000. At the end of each period, a total surrender is assumed.
Administrative Charges and contingent deferred sales loads, if
applicable, are deducted to determine ending redeemable value of the
original payment. Then, the ending redeemable value is divided by the
original investment to calculate total return.
CALCULATION OF ANNUITY PAYMENTS
VARIABLE ANNUITY PAYMENTS
Unless an alternative annuity payment option is elected on or before the
Contract Maturity Date, the Accumulation Value of the Contract on the Maturity
Date will automatically be applied to provide a Variable Payment Life Annuity
with Ten Year Period Certain based on the Annuitant's life under annuity
payment Option I as described in the Prospectus. Any annuity payments falling
due after the Annuitant's death during the period certain will be paid to the
Beneficiary.
If the amount to be applied on the Maturity Date is less than $2,000 or
would result in monthly payments of less than $20, Phoenix Home Life shall have
the right to pay such amount in one lump sum in lieu of providing the annuity
payments. Phoenix Home Life will also have the right to change the annuity
payment frequency to annually if the monthly annuity payment would otherwise be
less than $20.
Under the Variable Payment Life Annuity with Ten Year Period Certain
(payment Option I), the first monthly income payment is due on the Maturity
Date. Thereafter, payments are due on the same day of the month as the first
payment was due, or if such date does not fall within a particular month, then
the future payment is due on the first Valuation Date to occur in the following
month. Payments will continue during the lifetime of the Annuitant, or, if
later, until the end of the Ten Year Period Certain starting with the date the
first payment is due.
The Variable Income Table below shows the minimum amount of the first
monthly payment for each $1,000 of Accumulation Value applied. The minimum first
payments shown are based on the 1983 table, an annuity table projected to the
year 2000 with Projection Scale G, and with Projection Scale G thereafter, and
an effective assumed investment return of 4 1/2%. The actual payments will be
based on the monthly payment rate Phoenix Home Life is using when the first
payment is due. They will not be less than those shown in the Variable Income
Table.
VARIABLE INCOME TABLE
Minimum Monthly Payment Rate for First Payment for Each $1,000 Applied.
Based on 4 1/2% Assumed Investment Return.
ADJUSTED AGE* MALE FEMALE
------------- ---- ------
40 4.31 4.14
45 4.51 4.28
50 4.76 4.47
55 5.09 4.73
60 5.52 5.07
65 6.10 5.53
70 6.83 6.17
75 7.69 7.00
80 8.62 8.01
85 9.46 9.04
* Age on birthday nearest due date of the first payment. Monthly payment rates
for ages not shown will be furnished on request.
In determining the amount of the first payment, the amounts held under the
Variable Payment Option in each Sub-account are multiplied by the rates Phoenix
Home Life is using for the Option on the first Payment Calculation Date. The
Payment Calculation Date is the earliest Valuation Date that is not more than 10
days before the due date of the payment. The first payment equals the total of
such figures determined for each Sub-account.
Future payments are measured in Annuity Units and are determined by
multiplying the Annuity Units in each Sub-account with assets under the Variable
Payment Option by the Annuity Unit Value for each Sub-account on the Payment
Calculation Date that applies. The number of Annuity Units in each Sub-account
with assets under a Variable Payment Option is equal to the portion of the first
payment provided from that Sub-account divided by the Annuity Unit Value for
B-3
<PAGE>
that Sub-account on the first Payment Calculation Date. The payment will equal
the sum of such amounts from each Sub-account.
All Annuity Unit Values in each Sub-account were set at $1.000000 on the
first Valuation Date selected by Phoenix Home Life. The value of an Annuity Unit
on any date thereafter is equal to (a) the Net Investment Factor for that
Sub-account for the Valuation Period divided by (b) the sum of 1.000000 and
the rate of interest for the number of days in the Valuation Period, based on an
effective annual rate of interest equal to the assumed investment return, and
multiplied by (c) the corresponding Annuity Unit Value on the preceding
Valuation Date.
The assumed investment return of 4 1/2% per year is the annual interest rate
assumed in determining the first payment. The amount of each subsequent payment
from each Sub-account will depend on the relationship between the assumed
investment return and the actual investment performance of the Sub-account. If a
4 1/2% rate would result in a first variable payment larger than that permitted
under applicable state law, we will select a lower rate that will comply with
such law.
No partial or full surrenders, withdrawals, transfers or additional premium
payments may be made with respect to any assets held under Variable Payment
Options I and J. Although no transfers or additional premium payments may be
made with respect to assets held under Option K, under this option partial or
full surrenders may be made.
FIXED ANNUITY PAYMENTS
Fixed monthly annuity payments under a Contract are determined by applying
the Contract Value to the respective annuity purchase rates on the Maturity Date
of a Contract or other date elected for commencement of fixed annuity payments.
Under a Contract, the amount of the fixed annuity payment is calculated by
first multiplying the number of the Sub-accounts' Accumulation Units credited
to the Contract on the Maturity Date by the appropriate Unit Value for each
Sub-account on the Maturity Date. The dollar value for all Sub-accounts'
Accumulation Units is then aggregated, along with the dollar value of any
investment in the Guaranteed Interest Account. For each Contract the resulting
dollar value is then multiplied by the applicable annuity purchase rate, which
reflects the age (and sex for non-tax qualified plans) of the Annuitant
specified in the Contract for the Fixed Payment Annuity Option selected. This
computation determines the amount of Phoenix Home Life's fixed monthly annuity
payment to the Annuitant.
The mortality table used as a basis for the applicable annuity purchase
rates is the a-49 Individual Annuity Mortality Table at 3 3/8% interest
projected to 1985 at Projection Scale B. More favorable rates may be available
on the Maturity Date or other dates elected for commencement of fixed annuity
payments.
EXPERTS
The consolidated financial statements of Phoenix Home Life and the financial
statements of the Account have been examined by Price Waterhouse LLP,
independent public accountants, whose reports are set forth herein, and the
financial statements have been included upon the authority of said firm as
experts in accounting and auditing. Price Waterhouse LLP, whose address is One
Financial Plaza, Hartford, Connecticut, also provides other accounting and
tax-related services as requested by the Account and Phoenix Home Life from time
to time.
Legal matters involving Federal securities laws in connection with the
Contracts have been passed upon by Jorden Burt Berenson & Johnson LLP,
Washington, D.C.
Legal matters relating to the validity of the securities being issued
have been passed upon by Richard J. Wirth, Counsel, Phoenix Home Life Mutual
Insurance Company, Hartford, CT.
B-4
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1995
B-5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
Money Market Growth Bond
Sub-Account Sub-Account Sub-Account
VA2, VA3 & VA2, VA3 &
VA1 GSE VA1 GSE VA1 VA2, VA3 & GSE
-------------------------- -------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments at
cost $ 7,075,669 $ 74,126,632 $47,452,847 $685,863,537 $14,187,687 $ 80,581,632
========= ========= ========= ========= ========= =============
Investment in The
Phoenix Edge
Series Fund, at
market $ 7,075,669 $ 74,126,632 $67,504,702 $764,352,262 $14,941,245 $ 84,191,827
--------- --------- --------- --------- --------- -------------
Total assets 7,075,669 74,126,632 67,504,702 764,352,262 14,941,245 84,191,827
Liabilities
Accrued expenses
to related party 5,619 71,481 53,175 742,442 12,100 84,080
--------- --------- --------- --------- --------- -------------
Net assets $ 7,070,050 $ 74,055,151 $67,451,527 $763,609,820 $14,929,145 $ 84,107,747
========= ========= ========= ========= ========= =============
Accumulation units
outstanding 3,457,073 37,025,879 8,152,578 94,343,494 4,417,776 25,434,758
========= ========= ========= ========= ========= =============
Unit value $ 2.045097 $ 2.000092 $ 8.273644 $ 8.093932 $ 3.379335 $ 3.306804
========= ========= ========= ========= ========= =============
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
VA2, VA3 & VA2, VA3 &
VA1 GSE VA1 GSE VA1 VA2, VA3 & GSE
------------------------ ------------------------ ----------------------------
Assets
Investments at
cost $50,768,898 $243,337,601 $ 4,382,423 $ 97,441,596 $ 4,778,131 $154,667,813
========= ========= ========= ========= ========= =============
Investment in The
Phoenix Edge
Series Fund, at
market $63,562,140 $252,141,739 $ 5,178,634 $107,259,095 $ 5,534,172 $172,856,400
--------- --------- --------- --------- --------- -------------
Total assets 63,562,140 252,141,739 5,178,634 107,259,095 5,534,172 172,856,400
Liabilities
Accrued expenses
to related party 50,205 247,026 4,093 104,062 4,309 168,783
--------- --------- --------- --------- --------- -------------
Net assets $63,511,935 $251,894,713 $ 5,174,541 $107,155,033 $ 5,529,863 $172,687,617
========= ========= ========= ========= ========= =============
Accumulation units
outstanding 18,038,311 73,165,148 3,761,861 78,985,319 4,027,273 126,918,305
========= ========= ========= ========= ========= =============
Unit value $ 3.520947 $ 3.442824 $ 1.375527 $ 1.356645 $ 1.373104 $1.360620
========= ========= ========= ========= ========= =============
Wanger International
Real Estate Small Cap Wanger U.S. Small Cap
Sub-Account Sub-Account Sub-Account
VA2, VA3 &
VA1 GSE VA1 VA2, VA3 VA1 VA2, VA3
------------------------ ------------------------ ----------------------------
Assets
Investments at
cost $ 35,937 $ 7,375,627 $ 222,363 $ 9,329,922 $ 509,592 $ 19,333,984
========= ========= ========= ========= ========= =============
Investment in The
Phoenix Edge
Series Fund, at
market $ 39,331 $ 8,195,872 $ -- $ -- $ -- $ --
Investment in
Wanger Advisors
Trust,
at market -- -- 241,412 10,332,164 533,365 19,713,532
--------- --------- --------- --------- --------- -------------
Total assets 39,331 8,195,872 241,412 10,332,164 533,365 19,713,532
Liabilities
Accrued expenses
to related party 29 7,745 172 5,660 410 19,199
--------- --------- --------- --------- --------- -------------
Net assets $ 39,302 $ 8,188,127 $ 241,240 $ 10,326,504 $ 532,955 $ 19,694,333
========= ========= ========= ========= ========= =============
Accumulation units
outstanding 34,014 7,008,808 194,615 7,737,540 460,316 17,039,472
========= ========= ========= ========= ========= =============
Unit value $ 1.155453 $ 1.168262 $ 1.239576 $ 1.334598 $ 1.157802 $ 1.155807
========= ========= ========= ========= ========= =============
</TABLE>
See Notes to Financial Statements
B-6
<PAGE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
Money Market Growth Bond
Sub-Account Sub-Account Sub-Account
VA2, VA3 & VA2, VA3 & VA2, VA3 &
VA1 GSE VA1 GSE VA1 GSE
-------------------------- -------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Distributions $ 438,870 $ 3,901,984 $ 675,598 $ 6,834,870 $1,158,485 $ 5,943,384
Expenses
Mortality and
expense risk
charges 79,010 876,855 610,428 7,675,328 140,732 871,219
--------- --------- --------- --------- --------- -----------
Net investment
income (loss) 359,860 3,025,129 65,170 (840,458) 1,017,753 5,072,165
--------- --------- --------- --------- --------- -----------
Net realized gain
from share
transactions -- -- 374,615 86,783 55,037 17,918
Net realized gain
distribution from
Fund -- -- 7,173,896 81,121,474 -- --
Net unrealized
appreciation on
investment -- -- 8,168,033 75,535,624 1,761,715 8,666,711
--------- --------- --------- --------- --------- -----------
Net gain on
investments -- -- 15,716,544 156,743,881 1,816,752 8,684,629
--------- --------- --------- --------- --------- -----------
Net increase in net
assets resulting
from operations $ 359,860 $ 3,025,129 $15,781,714 $155,903,423 $2,834,505 $13,756,794
========= ========= ========= ========= ========= ===========
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
VA2, VA3 & VA2, VA3 &
VA1 GSE VA1 GSE VA1 VA2, VA3 & GSE
------------------------ ------------------------ --------------------------
Investment income
Distributions $2,002,654 $ 7,466,447 $ 18,832 $ 367,112 $ 175,104 $ 5,416,894
Expenses
Mortality and
expense risk
charges 621,323 2,777,938 59,638 1,331,844 51,284 1,948,989
--------- --------- --------- --------- --------- -----------
Net investment
income (loss) 1,381,331 4,688,509 (40,806) (964,732) 123,820 3,467,905
--------- --------- --------- --------- --------- -----------
Net realized gain
(loss) from share
transactions 358,277 120,586 (171,167) (771,152) 24,416 198,363
Net realized gain
distribution from
Fund 3,860,000 15,262,627 108,612 2,117,297 109,783 3,430,492
Net unrealized
appreciation on
investment 4,176,429 14,852,737 540,494 7,779,441 767,657 23,829,474
--------- --------- --------- --------- --------- -----------
Net gain on
investments 8,394,706 30,235,950 477,939 9,125,586 901,856 27,458,329
--------- --------- --------- --------- --------- -----------
Net increase in net
assets resulting
from operations $9,776,037 $34,924,459 $ 437,133 $ 8,160,854 $1,025,676 $30,926,234
========= ========= ========= ========= ========= ===========
Wanger International Wanger U.S.
Real Estate((1)) Small Cap((1)) Small Cap((1))
Sub-Account Sub-Account Sub-Account
VA2, VA3 &
VA1 GSE VA1 VA2, VA3 VA1 VA2, VA3
------------------------ ------------------------ --------------------------
Investment income
Distributions $ 963 $ 211,854 $ -- $ -- $ -- $ --
Expenses
Mortality and
expense risk
charges 198 55,980 513 37,360 1,865 80,663
--------- --------- --------- --------- --------- -----------
Net investment
income (loss) 765 155,874 (513) (37,360) (1,865) (80,663)
--------- --------- --------- --------- --------- -----------
Net realized gain
(loss) from share
transactions 94 21,522 4 8,695 (747) (3,774)
Net realized gain
distribution from
Fund 198 43,534 -- -- -- --
Net unrealized
appreciation on
investment 3,394 820,245 19,049 1,002,242 23,773 379,548
--------- --------- --------- --------- --------- -----------
Net gain on
investments 3,686 885,301 19,053 1,010,937 23,026 375,774
--------- --------- --------- --------- --------- -----------
Net increase in net
assets resulting
from operations $ 4,451 $ 1,041,175 $ 18,540 $ 973,577 $ 21,161 $ 295,111
========= ========= ========= ========= ========= ===========
</TABLE>
((1)) From inception May 1, 1995 to December 31, 1995
See Notes to Financial Statements
B-7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
Money Market Growth Bond
Sub-Account Sub-Account Sub-Account
VA2, VA3 & VA2, VA3 & VA2, VA3 &
VA1 GSE VA1 GSE VA1 GSE
-------------------------- -------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
From operations
Net investment
income (loss) $ 359,860 $ 3,025,129 $ 65,170 $ (840,458) $ 1,017,753 $ 5,072,165
Net realized gain -- -- 7,548,511 81,208,257 55,037 17,918
Net unrealized
appreciation -- -- 8,168,033 75,535,624 1,761,715 8,666,711
--------- --------- --------- --------- --------- -----------
Net increase in net
assets resulting
from operations 359,860 3,025,129 15,781,714 155,903,423 2,834,505 13,756,794
--------- --------- --------- --------- --------- -----------
From accumulation
unit transactions
Participant
deposits 5,752 62,308,151 1,598,579 124,955,151 158,313 12,197,018
Participant
transfers (180,776) (53,470,824) 3,015,663 43,180,634 (3,366) 6,303,584
Participant
withdrawals (2,199,526) (10,625,595) (6,259,870) (37,686,221) (1,429,692) (4,002,038)
--------- --------- --------- --------- --------- -----------
Net increase
(decrease) in net
assets resulting
from participant
transactions (2,374,550) (1,788,268) (1,645,628) 130,449,564 (1,274,745) 14,498,564
--------- --------- --------- --------- --------- -----------
Net increase
(decrease) in net
assets (2,014,690) 1,236,861 14,136,086 286,352,987 1,559,760 28,255,358
Net assets
Beginning of period 9,084,740 72,818,290 53,315,441 477,256,833 13,369,385 55,852,389
--------- --------- --------- --------- --------- -----------
End of period $ 7,070,050 $ 74,055,151 $67,451,527 $763,609,820 $14,929,145 $ 84,107,747
========= ========= ========= ========= ========= ===========
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
VA2, VA3 & VA2, VA3 &
VA1 GSE VA1 GSE VA1 VA2, VA3 & GSE
------------------------ ------------------------ --------------------------
From operations
Net investment
income (loss) $ 1,381,331 $ 4,688,509 $ (40,806) $ (964,732) $ 123,820 $ 3,467,905
Net realized gain
(loss) 4,218,277 15,383,213 (62,555) 1,346,145 134,199 3,628,855
Net unrealized
appreciation 4,176,429 14,852,737 540,494 7,779,441 767,657 23,829,474
--------- --------- --------- --------- --------- -----------
Net increase in net
assets resulting
from operations 9,776,037 34,924,459 437,133 8,160,854 1,025,676 30,926,234
--------- --------- --------- --------- --------- -----------
From accumulation
unit transactions
Participant
deposits 1,028,187 32,735,047 148,158 16,055,112 127,367 15,492,037
Participant
transfers (1,572,062) (2,629,446) (2,352,617) (19,987,552) (387,341) (9,618,084)
Participant
withdrawals (5,833,027) (16,146,431) (569,829) (7,873,129) (555,779) (10,194,737)
--------- --------- --------- --------- --------- -----------
Net increase
(decrease) in net
assets resulting
from participant
transactions (6,376,902) 13,959,170 (2,774,288) (11,805,569) (815,753) (4,320,784)
--------- --------- --------- --------- --------- -----------
Net increase
(decrease) in net
assets 3,399,135 48,883,629 (2,337,155) (3,644,715) 209,923 26,605,450
Net assets
Beginning of period 60,112,800 203,011,084 7,511,696 110,799,748 5,319,940 146,082,167
--------- --------- --------- --------- --------- -----------
End of period $63,511,935 $251,894,713 $ 5,174,541 $107,155,033 $ 5,529,863 $172,687,617
========= ========= ========= ========= ========= ===========
</TABLE>
See Notes to Financial Statements
B-8
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
From inception May 1, 1995 to December 31, 1995
(continued)
<TABLE>
<CAPTION>
Wanger International Wanger U.S.
Real Estate Small Cap Small Cap
Sub-Account Sub-Account Sub-Account
VA2, VA3 &
VA1 GSE VA1 VA2, VA3 VA1 VA2, VA3
--------------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
From operations
Net investment income (loss) $ 765 $ 155,874 $ (513) $ (37,360) $ (1,865) $ (80,663)
Net realized gain (loss) 292 65,056 4 8,695 (747) (3,774)
Net unrealized appreciation 3,394 820,245 19,049 1,002,242 23,773 379,548
---- --------- ----- -------- ----- ---------
Net increase in net assets
resulting
from operations 4,451 1,041,175 18,540 973,577 21,161 295,111
---- --------- ----- -------- ----- ---------
From accumulation unit transactions
Participant deposits 416 5,827,754 20,936 3,531,791 36,476 7,685,414
Participant transfers 35,382 1,329,121 201,764 5,974,479 478,823 11,864,286
Participant withdrawals (947) (9,923) -- (153,343) (3,505) (150,478)
---- --------- ----- -------- ----- ---------
Net increase in net assets
resulting
from participant transactions 34,851 7,146,952 222,700 9,352,927 511,794 19,399,222
---- --------- ----- -------- ----- ---------
Net increase in net assets 39,302 8,188,127 241,240 10,326,504 532,955 19,694,333
Net assets
Beginning of period -- -- -- -- -- --
---- --------- ----- -------- ----- ---------
End of period $39,302 $8,188,127 $241,240 $10,326,504 $532,955 $19,694,333
==== ========= ===== ======== ===== =========
</TABLE>
See Notes to Financial Statements
B-9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1994
<TABLE>
<CAPTION>
Money Market Growth Bond
Sub-Account Sub-Account Sub-Account
VA2, VA3 & VA2, VA3 & VA2, VA3 &
VA1 GSE VA1 GSE VA1 GSE
-------------------------- -------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
From operations
Net investment
income $ 326,657 $ 1,748,288 $ 182,804 $ 653,647 $ 813,324 $ 3,716,810
Net realized gain
(loss) -- 2 2,976,234 26,133,090 (119,176) (103,382)
Net unrealized
depreciation -- -- (2,888,602) (27,412,518) (1,555,961) (7,606,399)
--------- --------- --------- --------- --------- -----------
Net increase
(decrease) in net
assets resulting
from operations 326,657 1,748,290 270,436 (625,781) (861,813) (3,992,971)
--------- --------- --------- --------- --------- -----------
From accumulation
unit transactions
Participant
deposits 672,977 82,740,250 1,650,544 120,706,294 334,527 16,036,535
Participant
transfers 2,074,604 (64,774,356) 529,383 39,687,809 (2,375,359) (11,882,665)
Participant
withdrawals (2,766,967) (3,208,509) (4,245,122) (12,102,289) (849,236) (1,898,032)
--------- --------- --------- --------- --------- -----------
Net increase
(decrease) in net
assets resulting
from participant
transactions (19,386) 14,757,385 (2,065,195) 148,291,814 (2,890,068) 2,255,838
--------- --------- --------- --------- --------- -----------
Net increase
(decrease) in net
assets 307,271 16,505,675 (1,794,759) 147,666,033 (3,751,881) (1,737,133)
Net assets
Beginning of period 8,777,469 56,312,615 55,110,200 329,590,800 17,121,266 57,589,522
--------- --------- --------- --------- --------- -----------
End of period $ 9,084,740 $ 72,818,290 $53,315,441 $477,256,833 $13,369,385 $ 55,852,389
========= ========= ========= ========= ========= ===========
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
VA2, VA3 & VA2, VA3 &
VA1 GSE VA1 GSE VA1 VA2, VA3 & GSE
------------------------ ------------------------ --------------------------
From operations
Net investment
income (loss) $ 1,145,450 $ 3,053,439 $ (52,431) $ (892,131) $ 128,320 $ 3,175,555
Net realized gain 2,318,730 6,532,018 42,991 2,569,529 44,505 1,250,217
Net unrealized
depreciation (5,099,091) (14,366,230) (356,376) (5,430,269) (387,117) (10,613,599)
--------- --------- --------- --------- --------- -----------
Net decrease in net
assets resulting
from operations (1,634,911) (4,780,773) (365,816) (3,752,871) (214,292) (6,187,827)
--------- --------- --------- --------- --------- -----------
From accumulation
unit transactions
Participant
deposits 1,680,952 49,970,179 661,080 37,744,141 221,507 33,865,296
Participant
transfers (3,842,234) 2,101,275 3,232,950 28,438,748 (1,051,098) (19,227,859)
Participant
withdrawals (7,060,752) (7,436,162) (251,907) (2,279,128) (183,646) (6,614,458)
--------- --------- --------- --------- --------- -----------
Net increase
(decrease) in net
assets resulting
from participant
transactions (9,222,034) 44,635,292 3,642,123 63,903,761 (1,013,237) 8,022,979
--------- --------- --------- --------- --------- -----------
Net increase
(decrease) in net
assets (10,856,945) 39,854,519 3,276,307 60,150,890 (1,227,529) 1,835,152
Net assets
Beginning of period 70,969,745 163,156,565 4,235,389 50,648,858 6,547,469 144,247,015
--------- --------- --------- --------- --------- -----------
End of period $ 60,112,800 $203,011,084 $ 7,511,696 $110,799,748 $ 5,319,940 $146,082,167
========= ========= ========= ========= ========= ===========
</TABLE>
See Notes to Financial Statements
B-10
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a unit outstanding throughout the indicated period)
(Unaudited)
<TABLE>
<CAPTION>
Money Market Sub-Account
VA1 VA2, VA3 & GSE
------------------------ -------------------------
Year Ended December 31, Year Ended December 31,
1995 1994 1995 1994
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Unit value, beginning of period $1.954211 $1.900873 $1.915930 $1.868172
Income from investment operations
Net investment income 0.090886 0.053338 0.084162 0.047758
-------- -------- -------- ----------
Total from investment operations 0.090886 0.053338 0.084162 0.047758
-------- -------- -------- ----------
Unit value, end of period $2.045097 $1.954211 $2.000092 $1.915930
======== ======== ======== ==========
Total return 4.65% 2.81% 4.39% 2.56%
Net assets, end of period (000) $ 7,070 $ 9,085 $ 74,055 $ 72,818
Growth Sub-Account
VA1 VA2, VA3 & GSE
------------------------ -------------------------
Year Ended December 31, Year Ended December 31,
1995 1994 1995 1994
---------- ---------- ---------- ------------
Unit value, beginning of period $6.384494 $6.355486 $ 6.261062 $ 6.248053
Income from investment operations
Net investment income 0.007800 0.019608 (0.009881) (0.013588)
Net realized and unrealized gain 1.881350 0.009400 1.842751 0.026597
-------- -------- -------- ----------
Total from investment operations 1.889150 0.029008 1.832870 0.013009
-------- -------- -------- ----------
Unit value, end of period $8.273644 $6.384494 $ 8.093932 $ 6.261062
======== ======== ======== ==========
Total return 29.59% 0.46% 29.27% 0.21%
Net assets, end of period (000) $ 67,452 $ 53,315 $ 763,610 $ 477,257
Bond Sub-Account
VA1 VA2, VA3 & GSE
Year Ended December 31, Year Ended December 31,
1995 1994 1995 1994
---------- ---------- ---------- ------------
Unit value, beginning of period $2.762836 $2.952674 $2.710153 $ 2.902941
Income from investment operations
Net investment income 0.221359 0.179157 0.219987 0.179454
Net realized and unrealized gain
(loss) 0.395140 (0.368995) 0.376664 (0.372242)
-------- -------- -------- ----------
Total from investment operations 0.616499 (0.189838) 0.596651 (0.192788)
-------- -------- -------- ----------
Unit value, end of period $3.379335 $ 2.762836 $3.306804 $ 2.710153
======== ======== ======== ==========
Total return 22.31% (6.43)% 22.02% (6.64)%
Net assets, end of period (000) $ 14,929 $ 13,369 $ 84,108 $ 55,852
Total Return Sub-Account
VA1 VA2, VA3 & GSE
------------------------ -------------------------
Year Ended December 31, Year Ended December 31,
1995 1994 1995 1994
---------- ---------- ---------- ------------
Unit value, beginning of period $3.008513 $ 3.081973 $2.948151 $ 3.028790
Income from investment operations
Net investment income 0.072406 0.051467 0.066408 0.051503
Net realized and unrealized gain
(loss) 0.440028 (0.124927) 0.428265 (0.132142)
-------- -------- -------- ----------
Total from investment operations 0.512434 (0.073460) 0.494673 (0.080639)
-------- -------- -------- ----------
Unit value, end of period $3.520947 $ 3.008513 $3.442824 $ 2.948151
======== ======== ======== ==========
Total return 17.03% (2.38)% 16.78% (2.66)%
Net assets, end of period (000) $ 63,512 $ 60,113 $ 251,895 $ 203,011
</TABLE>
See Notes to Financial Statements
B-11
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a unit outstanding throughout the indicated period)
(Unaudited)
<TABLE>
<CAPTION>
International Sub-Account
VA1 VA2, VA3 & GSE
----------------------- ------------------------
Year Ended December 31, Year Ended December 31,
1995 1994 1995 1994
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Unit value, beginning of period $ 1.267735 $ 1.279733 $ 1.253391 $ 1.268491
Income from investment operations
Net investment income (loss) (0.010062) (0.001720) (0.012206) (0.003590)
Net realized and unrealized gain (loss) 0.117854 (0.010278) 0.115460 (0.011510)
-------- -------- -------- ---------
Total from investment operations 0.107792 (0.011998) 0.103254 (0.015100)
-------- -------- -------- ---------
Unit value, end of period $ 1.375527 $ 1.267735 $ 1.356645 $ 1.253391
======== ======== ======== =========
Total return 8.50% (0.94)% 8.24% (1.19)%
Net assets, end of period (000) $ 5,175 $ 7,512 $ 107,155 $ 110,800
Balanced Sub-Account
VA1 VA2, VA3 & GSE
----------------------- ------------------------
Year Ended December 31, Year Ended December 31,
1995 1994 1995 1994
--------- --------- --------- -----------
Unit value, beginning of period $1.124370 $ 1.168840 $1.116862 $ 1.163951
Income from investment operations
Net investment income 0.030027 0.026629 0.027334 0.024166
Net realized and unrealized gain (loss) 0.218707 (0.071099) 0.216424 (0.071255)
-------- -------- -------- ---------
Total from investment operations 0.248734 (0.044470) 0.243758 (0.047089)
-------- -------- -------- ---------
Unit value, end of period $1.373104 $ 1.124370 $1.360620 $ 1.116862
======== ======== ======== =========
Total return 22.12% (3.80)% 21.83% (4.05)%
Net assets, end of period (000) $ 5,530 $ 5,320 $ 172,688 $ 146,082
</TABLE>
See Notes to Financial Statements
B-12
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a unit outstanding throughout the indicated period)
(Unaudited)
<TABLE>
<CAPTION>
Real Estate Sub-Account
VA1 VA2, VA3 & GSE
From
Inception From
5/1/95 to Inception
12/31/95 5/1/95 to 12/31/95
----------------- -------------------
<S> <C> <C>
Unit value, beginning of period $ 1.000000 $ 1.000000
Income from investment operations
Net investment income 0.026718 0.025191
Net realized and unrealized gain 0.128735 0.143071
--------------- -----------------
Total from investment operations 0.155453 0.168262
--------------- -----------------
Unit value, end of period $ 1.155453 $ 1.168262
=============== =================
Total return 15.55%((1)) 16.83%((1))
Net assets, end of period (000) $ 39 $ 8,188
Wanger International
Small Cap Sub-Account
VA1 VA2, VA3
From
Inception From
5/1/95 to Inception
12/31/95 5/1/95 to 12/31/95
--------------- -----------------
Unit value, beginning of period $ 1.000000 $ 1.000000
Income from investment operations
Net investment loss (0.006629) (0.012840)
Net realized and unrealized gain 0.246205 0.347438
--------------- -----------------
Total from investment operations 0.239576 0.334598
--------------- -----------------
Unit value, end of period $ 1.239576 $ 1.334598
=============== =================
Total return 23.96%((1)) 33.46%((1))
Net assets, end of period (000) $ 241 $ 10,327
Wanger U.S. Small Cap Sub-Account
VA1 VA2, VA3
--------------- -----------------
From
Inception From
5/1/95 to Inception
12/31/95 5/1/95 to 12/31/95
--------------- -----------------
Unit value, beginning of period $ 1.000000 $ 1.000000
Income from investment operations
Net investment loss (0.013908) (0.042587)
Net realized and unrealized gain 0.171710 0.198394
--------------- -----------------
Total from investment operations 0.157802 0.155807
--------------- -----------------
Unit value, end of period $ 1.157802 $ 1.155807
=============== =================
Total return 15.78%((1)) 15.58%((1))
Net assets, end of period (000) $ 533 $ 19,694
</TABLE>
((1)) Unannualized
See Notes to Financial Statements
B-13
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
Note 1--Organization
Phoenix Home Life Variable Accumulation Account (the Account) is a separate
investment account of Phoenix Home Life Mutual Insurance Company (Phoenix
Home Life) registered as a unit investment trust. The Account currently has
nine Sub-accounts to which contract values may be allocated and invest solely
in a designated portfolio of The Phoenix Edge Series Fund and/or Wanger
Advisors Trust (the "Funds"). The Account is offered as The Big Edge and The
Big Edge Plus to individuals (VA1, VA2 and VA3) and is also offered as Group
Strategic Edge ("GSE") to groups to fund certain tax-qualified pension plans
or profit sharing plans. The Money Market, Growth, Bond, Total Return,
International, Balanced, Real Estate, Wanger International Small Cap and
Wanger U.S. Small Cap Sub-accounts are subdivided into two pools designated
"VA1" and "VA2, VA3 & GSE". The Wanger International Small Cap and U.S. Small
Cap are not currently available on GSE contracts. VA2 and VA3 contracts
include a higher expense risk charge than the VA1 contract and have been
approved for new sales in certain states. VA3 and GSE contract holders may
also direct the allocation of their investments between the Account and the
Guaranteed Interest Account of the general account of Phoenix Home Life
through participant transfers. The Fund's Money Market, Growth, Bond, Total
Return, International and Balanced Series are successors to the investing
activities of the Phoenix Home Life Variable Accumulation Money Market,
Growth, Bond, Total Return, International and Balanced Sub-accounts.
Each Series has distinct investment objectives. The Money Market Series is
a pooled short-term investment fund, the Growth Series is a growth common
stock fund, the Bond Series is a long-term debt fund, the Total Return Series
invests in equity securities and long and short-term debt, the International
Series invests primarily in an internationally diversified portfolio of
equity securities and the Balanced Series is a balanced fund which invests in
growth stocks and at least 25% of its assets in fixed income senior
securities. The Real Estate Series invests in marketable securities of
publicly traded real estate investment trusts ("REITs") and companies that
are principally engaged in the real estate industry. Wanger International
Small Cap and Wanger U.S. Small Cap invest primarily in securities of
companies with a stock market capitalization of less than $1 billion.
Note 2--Significant Accounting Policies
Certain reclassifications have been made to prior year's amounts to conform
with the 1995 presentation.
A. Valuation of Investments: Investments are made exclusively in the Funds
and are valued at the net asset values per share of the respective Series.
B. Investment transactions and related income: Realized gains and losses
include capital gain distributions from the Funds as well as gains and losses
on sales of shares in the Funds determined on the LIFO (last in, first out)
basis.
C. Income taxes: The Account is not a separate entity from Phoenix Home Life
and under current federal income tax law, income in the Account is not taxed
since reserves are established equivalent to such income. Therefore, no
provision for related federal or state income taxes is required.
D. Distributions: Distributions are recorded as investment income on the
ex-dividend date.
Note 3--Purchases and Sales of Shares of The Funds
Purchases and sales of shares of the Funds for the year ended December 31,
1995 aggregated the following:
<TABLE>
<CAPTION>
VA1 VA2, VA3 & GSE
---------------------- --------------------------
Sub-Account Purchases Sales Purchases Sales
- ------------------------------ --------- --------- ---------- ------------
<S> <C> <C> <C> <C>
The Phoenix Edge Series Fund:
Money Market $ 3,751,275 $5,743,524 $ 96,896,824 $95,512,198
Growth 12,973,021 7,461,762 246,304,218 36,290,993
Bond 1,980,743 2,252,588 34,198,051 14,716,662
Total Return 6,630,597 7,868,692 60,179,289 26,649,745
International 759,121 3,480,710 17,383,329 28,275,151
Balanced 905,377 1,496,539 21,775,399 19,495,743
Real Estate 54,354 18,425 7,850,758 477,725
Wanger Advisors Trust:
Wanger International Small
Cap 222,665 306 11,195,708 1,874,481
Wanger U.S. Small Cap. 632,897 122,558 22,748,041 3,410,283
</TABLE>
B-14
<PAGE>
Note 4--Participant Accumulation Unit Transactions (in units)
<TABLE>
<CAPTION>
Sub-Account
----------------------------------------------------------------------------------------
Money Total
Market Growth Bond Return International Balanced
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
VA1
Units outstanding,
beginning of
period 4,648,802 8,350,770 4,839,008 19,980,901 5,925,289 4,731,485
Participant
deposits 995 216,532 51,135 318,944 115,230 99,289
Participant
transfers (91,931) 439,017 (4,975) (486,673) (1,849,913) (347,489)
Participant
withdrawals (1,100,793) (853,741) (467,392) (1,774,861) (428,745) (456,012)
--------- --------- --------- --------- --------- -----------
Units outstanding,
end of period 3,457,073 8,152,578 4,417,776 18,038,311 3,761,861 4,027,273
========= ========= ========= ========= ========= ===========
VA2, VA3 & GSE
Big Edge Plus:
Units outstanding,
beginning of
period 37,183,988 75,175,305 20,182,918 67,922,249 87,360,368 128,415,186
Participant
deposits 29,791,160 16,816,459 3,734,150 9,762,416 12,023,058 11,542,020
Participant
transfers (25,576,447) 5,786,731 2,062,794 (989,703) (16,005,415) (8,018,448)
Participant
withdrawals (5,156,810) (5,083,910) (1,197,205) (4,860,063) (6,101,001) (7,124,468)
--------- --------- --------- --------- --------- -----------
Units outstanding,
end of period 36,241,891 92,694,585 24,782,657 71,834,899 77,277,010 124,814,290
========= ========= ========= ========= ========= ===========
Group Strategic
Edge:
Units outstanding,
beginning of
period 822,771 1,050,874 425,656 938,228 1,039,619 2,381,785
Participant
deposits 1,968,619 621,657 257,939 428,244 722,442 917,834
Participant
transfers (1,732,216) 169,150 107,985 190,614 107,013 (136,271)
Participant
withdrawals (275,186) (192,772) (139,479) (226,837) (160,765) (1,059,333)
--------- --------- --------- --------- --------- -----------
Units outstanding,
end of period 783,988 1,648,909 652,101 1,330,249 1,708,309 2,104,015
========= ========= ========= ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Wanger
International Wanger U.S.
VA1 Real Estate Small Cap Small Cap
----------- ----------- -------------
<S> <C> <C> <C>
Units outstanding, beginning of period 0 0 0
Participant deposits 385 18,035 31,441
Participant transfers 34,518 176,580 431,910
Participant withdrawals (889) 0 (3,035)
--------- --------- -----------
Units outstanding, end of period 34,014 194,615 460,316
========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Wanger
International Wanger U.S.
VA2, VA3 Real Estate Small Cap Small Cap
----------- ----------- -------------
<S> <C> <C> <C>
Units outstanding, beginning of period 0 0 0
Participant deposits 5,743,523 2,896,751 6,682,832
Participant transfers 1,236,930 4,961,433 10,487,082
Participant withdrawals (9,162) (120,644) (130,442)
--------- --------- -----------
Units outstanding, end of period 6,971,291 7,737,540 17,039,472
========= ========= ===========
</TABLE>
Group Strategic Edge: Real Estate
-----------
Units outstanding, beginning of period 0
Participant deposits 18,079
Participant transfers 19,476
Participant withdrawals (38)
---------
Units outstanding, end of period 37,517
=========
Note 5--Investment Advisory Fees and Related Party Transactions
Phoenix Home Life and its indirect, less than wholly owned subsidiary,
Phoenix Equity Planning Corporation, a registered broker/dealer in
securities, provide all services to the Account.
Phoenix Home Life assumes the risk that annuitants as a class may live
longer than expected and that its expenses may be higher than its deductions
for such expenses. In return for the assumption of these mortality and
expense risks, Phoenix Home Life charges the sub- accounts designated VA1 the
daily equivalent of 0.40% on an annual basis of the current value of net
assets for mortality risks and the daily equivalent of 0.60% on an annual
basis for expense risks assumed. VA2, VA3 & GSE sub-accounts are charged the
daily equivalent of 0.40% and 0.85% on an annual basis for mortality and
expense risks, respectively.
As compensation for administrative services provided to the Account,
Phoenix Home Life additionally receives $35 per year from each contract,
which is deducted from the sub-account holding the assets of the participant,
or on a pro rata basis from two or more sub-accounts in relation to their
values under the contract. Fees for administrative services provided for the
year ended December 31, 1995 aggregated $1,488,990 and are funded by and
included in participant withdrawals.
Phoenix Equity Planning Corporation is the principal underwriter and
distributor for the Account. Phoenix Home Life reimburses Phoenix Equity
Planning Corporation for expenses incurred as underwriter. On surrender of a
contract, contingent deferred sales charges, which vary from 0-6% depending
upon the duration of each contract deposit, are deducted from the proceeds
and are paid to Phoenix Home Life as reimbursement for services provided.
Contingent deferred sales charges deducted and paid to Phoenix Home Life
aggregated $1,650,197 for the year ended December 31, 1995.
B-15
<PAGE>
Note 6--Distribution of Net Income
The Account does not expect to declare dividends to participants from
accumulated net income. The accumulated net income is distributed to
participants as part of withdrawals of amounts in the form of surrenders,
death benefits, transfers or annuity payments in excess of net purchase
payments.
Note 7--Diversification Requirements
Under the provisions of Section 817(h) of the Internal Revenue Code (the
Code), a variable annuity contract, other than a contract issued in
connection with certain types of employee benefit plans, will not be treated
as an annuity contract for federal tax purposes for any period for which the
investments of the segregated asset account on which the contract is based
are not adequately diversified. The Code provides that the "adequately
diversified" requirement may be met if the underlying investments satisfy
either a statutory safe harbor test or diversification requirements set forth
in regulations issued by the Secretary of the Treasury.
The Internal Revenue Service has issued regulations under Section 817(h)
of the Code. Phoenix Home Life believes that the Account satisfies the
current requirements of the regulations, and it intends that the Account will
continue to meet such requirements.
B-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP [logo]
To the Participants of
Phoenix Home Life Variable
Accumulation Account
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets present fairly,
in all material respects, the financial position of the Money Market
Sub-Account, Growth Sub-Account, Bond Sub-Account, Total Return Sub-Account,
International Sub-Account, Balanced Sub-Account, Real Estate Sub-Account,
Wanger International Small Cap Sub-Account and Wanger U.S. Small Cap
Sub-Account (constituting the Phoenix Home Life Variable Accumulation
Account, hereafter referred to as the "Account") at December 31, 1995, the
results of each of their operations for the period then ended and the changes
in each of their net assets for each of the periods indicated, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Account's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Hartford, CT 06103
February 13, 1996
B-17
<PAGE>
PHOENIX HOME LIFE
VARIABLE ACCUMULATION ACCOUNT
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06115
Underwriter
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
Custodian
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
International Series Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Real Estate Securities Custodian
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
Independent Accountants
Price Waterhouse LLP
One Financial Plaza
Hartford, Connecticut 06103
B-18
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
B-19
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Report of Independent Accountants........................................B-21
Consolidated Balance Sheet...............................................B-22
Consolidated Statement of Operations and Surplus.........................B-23
Consolidated Statement of Cash Flows.....................................B-24
Notes to Consolidated Financial Statements........................B-25 - B-49
B-20
<PAGE>
[logo: Price Waterhouse LLP] [logo: Price Waterhouse circle logo]
REPORT OF INDEPENDENT ACCOUNTANTS
February 14, 1996
To the Board of Directors
and Policyholders of
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and surplus and of cash flows present
fairly, in all material respects, the financial position of Phoenix Home Life
Mutual Insurance Company and its life insurance subsidiaries at December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, 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/ Price Waterhouse LLP
B-21
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- ------------------------------------------------------------------------------
DECEMBER 31,
1995 1994
(IN THOUSANDS)
ASSETS
Bonds, at amortized cost $ 5,463,867 $ 4,976,248
First mortgage loans 963,092 1,130,882
Policy loans 1,617,872 1,585,485
Real estate, at depreciated cost 560,580 644,085
Investments in affiliates 82,945 59,569
Common stocks, at market value 247,424 161,772
Preferred stocks, at cost 73,299 75,352
Cash and short-term investments,
at amortized cost 360,874 182,404
Other invested assets 105,018 104,177
------------ ------------
Total cash and invested assets 9,474,971 8,919,974
Deferred and uncollected premiums 174,938 173,382
Due and accrued investment income 128,790 121,491
Other assets 106,691 136,800
Separate account assets 3,306,070 2,658,382
------------ ------------
Total assets $ 13,191,460 $ 12,010,029
============ ============
LIABILITIES, AVR AND SURPLUS
Reserves for future policy benefits $ 7,133,557 $ 6,748,851
Policyholders' funds at interest 611,000 649,853
Dividends to policyholders 308,636 281,227
Policy benefits in course of settlement 122,798 105,072
Accrued expenses and general liabilities 162,928 121,593
Reinsurance funds withheld liability 692,291 698,261
Interest maintenance reserve 11,872 6,043
Separate account liabilities 3,273,056 2,626,729
------------ ------------
Total liabilities 12,316,138 11,237,629
============ ============
Asset valuation reserve (AVR) 199,656 174,142
Policyholders' surplus 675,666 598,258
------------ ------------
Total AVR and surplus 875,322 772,400
------------ ------------
Total liabilities, AVR and surplus $ 13,191,460 $ 12,010,029
============ ============
The accompanying notes are an integral part of these statements.
B-22
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS AND SURPLUS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME
Premium income and annuity considerations $ 1,679,717 $ 1,594,756 $ 1,677,640
Net investment income 670,699 631,668 648,234
----------- ----------- -----------
Total income 2,350,416 2,226,424 2,325,874
----------- ----------- -----------
CURRENT AND FUTURE BENEFITS
Death benefits 271,723 268,192 264,636
Disability and health benefits 248,996 239,135 305,204
Annuity benefits and matured endowments 27,320 33,067 43,499
Surrender benefits 413,580 402,540 364,772
Interest on policy or contract funds 79,241 82,621 122,626
Settlement option payments 34,637 37,166 38,331
Increase in reserves for future policy benefits
and policyholders' funds 459,693 405,071 369,504
----------- ----------- -----------
Total current and future benefits 1,535,190 1,467,792 1,508,572
----------- ----------- -----------
OPERATING EXPENSES
Commissions and expense allowances 119,147 117,148 143,046
Premium, payroll and miscellaneous taxes 44,285 35,312 52,351
Other operating expenses 269,838 261,015 276,714
Federal income tax expense (benefit) 33,329 28,436 (2,249)
----------- ----------- -----------
Total operating expenses 466,599 441,911 469,862
----------- ----------- -----------
OPERATING GAIN BEFORE DIVIDENDS AND
REALIZED CAPITAL GAINS (LOSSES) 348,627 316,721 347,440
Dividends to policyholders (297,999) (269,357) (251,647)
----------- ----------- -----------
OPERATING GAIN AFTER DIVIDENDS AND
BEFORE REALIZED CAPITAL GAINS (LOSSES) 50,628 47,364 95,793
Realized capital gains (losses), net of income
taxes and interest maintenance reserves 9,270 (46,712) (65,835)
----------- ----------- -----------
NET INCOME 59,898 652 29,958
Unrealized capital gains, net 37,412 50,354 40,583
Other surplus changes, net 5,612 1,378 (775)
----------- ----------- -----------
NET INCREASE IN AVR AND SURPLUS 102,922 52,384 69,766
AVR AND SURPLUS, beginning of year 772,400 720,016 650,250
----------- ----------- -----------
AVR AND SURPLUS, end of year $ 875,322 $ 772,400 $ 720,016
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
B-23
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
CASH AND SHORT-TERM INVESTMENT SOURCES
Operations:
Premiums collected $ 1,601,408 $ 1,523,021 $ 1,620,128
Initial consideration received on
reinsurance assumed 99,851
Investment and other income received 773,021 751,074 754,049
----------- ----------- -----------
Total received 2,374,429 2,274,095 2,474,028
----------- ----------- -----------
Claims and benefits paid 1,091,725 1,304,238 1,577,792
Commissions and other expenses paid 549,155 486,766 530,075
Dividends to policyholders paid 270,749 249,701 242,192
Increase in policy loans 32,387 55,143 21,438
Federal income taxes paid (received) 9,319 (37,266) 26,720
----------- ----------- -----------
Total paid 1,953,335 2,058,582 2,398,217
----------- ----------- -----------
Cash proceeds from operations 421,094 215,513 75,811
Proceeds from sales, maturities and
scheduled repayments of investments:
Bonds 1,381,080 1,198,131 1,451,279
Stocks 329,104 347,884 767,540
First mortgage loans 186,172 160,882 731,877
Real estate and other invested assets 148,546 209,316 322,284
Non-operating increase in
policyholders' funds 47,340 52,694 75,123
----------- ----------- -----------
Total sources 2,513,336 2,184,420 3,423,914
----------- ----------- -----------
CASH AND SHORT-TERM INVESTMENT USES
Acquisitions of investments:
Bonds 1,842,467 1,756,955 2,144,981
Stocks 282,488 310,751 650,187
First mortgage loans 93,097 31,214 93,480
Real estate and other invested assets 73,482 173,988 255,255
Other uses 43,332 155,780 254,095
----------- ----------- -----------
Total uses 2,334,866 2,428,688 3,397,998
----------- ----------- -----------
NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS 178,470 (244,268) 25,916
CASH AND SHORT-TERM INVESTMENTS, beginning of year 182,404 426,672 400,756
----------- ----------- -----------
CASH AND SHORT-TERM INVESTMENTS, end of year $ 360,874 $ 182,404 $ 426,672
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
B-24
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company (Phoenix Home Life or the
Company) and its subsidiaries market a wide range of insurance and
investment products and services including individual participating life
insurance, variable life insurance, group life and health insurance, life
and health reinsurance, annuities, investment advisory and mutual fund
distribution services, insurance agency and brokerage operations. These
products and services are distributed among six primary segments which
include: Individual, Group Life and Health, Life Reinsurance, General Lines
Brokerage, Securities Management and Real Estate Management. See Note 9 for
segment information.
Effective June 30, 1993, Phoenix Home Life sold Home Life Financial
Assurance Corporation (HLFAC), a group life and health insurance
subsidiary. Accordingly, these financial statements include the results of
operations of this business for the six months ended June 30, 1993. See
Note 8 for additional information.
Effective January 1, 1995, the money management businesses of Phoenix Home
Life were completely transferred to Phoenix Securities Group, Inc. (Phoenix
Securities Group), an indirect wholly-owned subsidiary. Phoenix Securities
Group entered into contracts to manage the investments of the general and
separate accounts of Phoenix Home Life. On November 1, 1995, Phoenix Home
Life, through its subsidiary, PM Holdings, Inc. (PM Holdings), merged
Phoenix Securities Group into Duff & Phelps Corporation, forming Phoenix
Duff & Phelps Corporation (PDP). PM Holdings owns approximately 60% of the
outstanding PDP common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Phoenix Home Life include the
domestic life insurance subsidiaries, Phoenix American Life Insurance
Company, American Phoenix Life and Reassurance Company, Phoenix Life
Insurance Company, PHL Variable Insurance Company and HLFAC, with
intercompany transactions eliminated. The non-insurance subsidiaries are
not consolidated in these financial statements. The significant accounting
policies which are used by Phoenix Home Life and its consolidated life
insurance subsidiaries in the preparation of the consolidated financial
statements are described below. Certain reclassifications have been made to
the 1994 and 1993 amounts to conform with the 1995 presentation.
BASIS OF PRESENTATION
Phoenix Home Life's policy is to prepare its financial statements on the
basis of accounting practices prescribed or permitted by the Insurance
Department of the State of New York. These practices are predominately
promulgated by the National Association of Insurance Commissioners (NAIC).
These practices currently are considered generally accepted accounting
principles (GAAP) for mutual life insurance companies. There were no
material practices not prescribed by the Insurance Department of the State
of New York.
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 revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
In April 1993, the Financial Accounting Standards Board issued
Interpretation No. 40, Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises, which
establishes a different definition of GAAP for mutual life insurance
companies. Under the Interpretation, financial statements of mutual life
insurance companies for periods beginning after December 15, 1995 which are
prepared on the basis of statutory accounting will no longer be
characterized as in conformity with GAAP.
B-25
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
Management of the Company has not finalized the effect on its December 31,
1995 financial statements of applying the Interpretation. The Company
intends to adopt the accounting changes required to present its financial
statements in conformity with GAAP in its 1996 financial statements. The
effect of the changes will be reported retroactively through restatement of
all previously issued financial statements. The cumulative effect of
adopting these changes will be included in the earliest year restated.
Effective January 1, 1995, the Company adopted the provisions of Statement
of Position 94-6 (SOP 94-6), Disclosure of Certain Significant Risks and
Uncertainties. SOP 94-6 requires disclosure about the nature of a reporting
entity's operations and the use of estimates in the preparation of
financial statements.
PREMIUM REVENUE AND RELATED EXPENSES
Generally, premium income and annuity considerations are recognized as
income over the premium paying periods of the policies or the annuity
contracts, respectively. Related underwriting expenses, commissions and
other costs of acquiring the policies and contracts are charged to
operations as incurred.
INSURANCE LIABILITIES
Benefit and loss reserves, included in reserves for future policy benefits,
are established in amounts adequate to meet estimated future obligations on
policies in force. Benefits to policyholders are charged to operations as
incurred.
Reserves for future policy benefits are determined using assumed rates of
interest, mortality and morbidity consistent with statutory requirements.
Most life insurance reserves for which the 1958 CSO and 1980 CSO mortality
tables are used as the mortality basis are determined using a modified
preliminary term reserve method. The net level premium method is used in
determining life insurance reserves based on earlier mortality tables.
Claim and loss liabilities, included in reserves for future policy
benefits, are established in amounts estimated to cover incurred losses.
These liabilities are based on individual case estimates for reported
losses and estimates of unreported losses based on past experience. Claim
and loss liabilities, net of ceded reinsurance, are not material.
As is customary practice in the insurance industry, Phoenix Home Life
assumes and cedes reinsurance as a means of diversifying underwriting risk.
The maximum amount of individual life insurance retained by the company on
any one life was increased from $5,000,000 to $8,000,000 for single life
and joint first-to-die policies and to $10,000,000 for joint last-to-die
policies on July 31, 1995, with excess amounts ceded to reinsurers. For
reinsurance ceded, the company remains liable in the event that assuming
reinsurers are unable to meet the contractual obligations.
INVESTMENTS
Investments are valued in accordance with methods prescribed by the NAIC.
Investments in bonds are generally carried at amortized cost and preferred
stocks, generally at cost.
Common stocks are carried at market value. Ownership interests in real
estate, venture capital, equity and oil and gas partnerships and joint
ventures are carried at equity in the underlying net assets. Mortgage loans
in good standing are valued at their unpaid principal balance. Prepayment
penalties are reported in investment income when received. Origination fees
and related expenses are recognized at the time of mortgage closings.
Policy loans are reported at their unpaid balances and are fully
collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
market value. The company considers highly liquid investments purchased
with a maturity of one year or less to be short-term investments.
B-26
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
The investments in affiliates represent both direct and indirect ownership
in the common and preferred stock of non-insurance subsidiaries. The common
stock of PDP is valued at the market value of shares owned less a discount
(15%), as determined by the NAIC Securities Valuation Office. The preferred
stock of PDP is valued at cost. The common stock of other unconsolidated
subsidiaries is valued at the equity in underlying net assets, determined
in accordance with GAAP. The Company's equity in the earnings of
affiliates, including PDP, is reflected in net investment income. Any
remaining adjustments such as those necessary to reflect changes in the
market value of PDP are recorded in unrealized capital gains, net.
Investment and Home Office real estate is generally valued at depreciated
cost less mortgage encumbrances. Foreclosed real estate is generally valued
at current market value at the date of foreclosure. Depreciation of real
estate is calculated using the straight line method over the estimated
lives of the assets (generally 45 years).
Realized capital gains and losses on investments are determined using the
specific identification method. Those realized capital gains and losses
resulting from interest rate changes are deferred and amortized to income
over the stated maturity of the disposed investment utilizing the Interest
Maintenance Reserve Group Method. Unrealized capital gains and losses,
resulting from changes in the difference between cost and the carrying
value of investments, are reflected in policyholders' surplus.
DERIVATIVES
Phoenix Home Life enters into interest rate swap agreements to hedge
certain variable rate investment income streams matched against fixed rate
liability streams. Such contracts generally have maturities of 7 years or
less and the counterparties are major international financial institutions.
The differential to be received on interest rate swap agreements is
recognized in investment income over the life of the agreements.
NON-ADMITTED ASSETS
In accordance with regulatory requirements, certain assets, including
unsecured loans or receivables, prepaid expenses and furniture and
equipment are not allowable and must be charged against surplus. Changes in
the write-off of these asset balances are reported in the consolidated
statement of operations and surplus in other surplus changes, net.
SEPARATE ACCOUNTS
Separate account assets are funds of separate account contractholders and
the company segregated into accounts with specific investment objectives.
The assets are generally carried at market value. An offsetting liability
is maintained to the extent of contractholders' interests in the assets.
Appreciation or depreciation of Phoenix Home Life's interest in the
separate accounts, including undistributed net investment income, is
reflected in policyholders' surplus. Contractholders' interests in net
investment income and realized and unrealized capital gains and losses on
separate account assets are not reflected in operations.
FEDERAL INCOME TAXES
Phoenix Home Life's statutory federal income tax liability is based on
estimates of federal income tax due. There are no provisions for deferred
taxes.
Phoenix Home Life and its eligible affiliated companies have elected to
file a life/nonlife consolidated federal income tax return for the tax
years ended December 31, 1995, 1994 and 1993.
B-27
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
POLICYHOLDERS' DIVIDENDS
Dividends on all individual coverages are provided on the basis of
estimated amounts payable in the following calendar year. Dividends on all
other coverages are provided on the basis of amounts incurred for the
current year.
APPROPRIATED SURPLUS
Phoenix Home Life's policyholders' surplus includes amounts available for
contingencies, some of which are required by state regulatory authorities.
The amounts as of December 31, 1995 and 1994 were approximately $44.5
million and $41.4 million, respectively.
EMPLOYEE BENEFIT PLANS
Phoenix Home Life sponsors pension and savings plans (the Plans) for its
employees and agents and those of its subsidiaries. Effective November 1,
1995, the Plans were reclassified from single-employer plans to
multi-employer plans in conjunction with the merger of Phoenix Securities
Group and Duff & Phelps Corporation. Former employees of Phoenix Securities
Group, who were participants of the Plans prior to the merger, have
remained as participants of the Plans. The qualified plans comply with
requirements established by the Employee Retirement Income Security Act of
1974 (ERISA) and excess benefit plans provide for that portion of pension
obligations which is in excess of amounts permitted by ERISA. Phoenix Home
Life also provides certain health care and life insurance benefits for
active and retired employees. In addition, Phoenix Home Life maintains
several deferred compensation incentive plans for its officers.
B-28
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. INSURANCE LIABILITIES
RESERVES FOR FUTURE POLICY BENEFITS
The basis of assumptions for Phoenix Home Life's major categories of
reserves for future policy benefits and claims and settlements at December
31, are summarized below.
1995 1994
(IN THOUSANDS)
Life insurance:
American Experience, 2.5% to 4% $ 54,515 $ 59,657
1941 CSO, 2.25% to 4% 476,736 499,593
1958 CSO, 2% to 6% 2,679,897 2,867,403
1980 CSO, 5% to 6% 2,254,892 1,944,126
1980 CSO Select, 4.5% 8,522 6,932
1980 CSO, 3.5% to 4.5% 1,581,897 1,194,601
Various 71,941 64,504
---------- ----------
Total life insurance 7,128,400 6,636,816
---------- ----------
Annuities 646,171 706,038
---------- ----------
Claim and loss liabilities:
Disability 218,381 208,547
Accident and health 575,987 545,918
---------- ----------
Total claim and loss liabilities 794,368 754,465
---------- ----------
Supplementary contracts with
life contingencies 45,757 45,947
---------- ----------
All other 23,971 23,850
---------- ----------
Total before reinsurance ceded 8,638,667 8,167,116
Less - reinsurance ceded 1,505,110 1,418,265
---------- ----------
Reserves for future policy benefits $7,133,557 $6,748,851
========== ==========
B-29
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. INSURANCE LIABILITIES (CONTINUED)
WITHDRAWAL CHARACTERISTICS
Withdrawal characteristics of annuity actuarial reserves and deposit
liabilities as of December 31, (in thousands aside from percentages) are as
follows:
<TABLE>
<CAPTION>
1995 1994
% OF TOTAL % OF TOTAL
-------------------------- ------------------------
<S> <C> <C> <C> <C>
SUBJECT TO DISCRETIONARY WITHDRAWAL -
WITH ADJUSTMENT
- with market value adjustment $ 38,067 1.0 $ 90,178 3.0
- at book value less
surrender charge 145,871 4.0 296,295 8.0
- at market value 2,918,544 74.0 2,390,895 68.0
------------- ------ ---------- -----
Subtotal 3,102,482 79.0 2,777,368 79.0
SUBJECT TO DISCRETIONARY WITHDRAWAL -
WITHOUT ADJUSTMENT
- at book value (minimal or no
charge or adjustment) 594,839 15.0 428,986 12.0
Not subject to discretionary
withdrawal provision 264,454 6.0 332,454 9.0
------------- ------ ---------- -----
Total Annuity actuarial reserves
and deposit liabilities 3,961,775 100.0 3,538,808 100.0
------ -----
Less-reinsurance ceded 61,728 15,881
------------- ----------
Annuity actuarial reserves
and deposit liabilities $ 3,900,047 $3,522,927
============= ==========
</TABLE>
POLICYHOLDERS' FUNDS AT INTEREST
Phoenix Home Life's policyholders' funds at interest, principally group
pension reserves for guaranteed interest contracts and deposit
administration and immediate participation guarantee funds, are at a
weighted average interest rate of approximately 8.9% and 8.1% at December
31, 1995 and 1994, respectively.
At December 31, 1995, Phoenix Home Life had guaranteed interest contracts
which totaled $54.6 million. These were scheduled to mature as follows:
1996 - $19.8 million; 1997 - $16.5 million; 1998 - $3.0 million; 1999 -
$11.7 million; 2000 and beyond - $3.6 million.
In determining the fair market value of guaranteed interest contracts, a
discount rate equal to the appropriate treasury rate, plus 150 basis
points, was used to determine the present value of projected contractual
liability payments through final maturity. At December 31, 1995, the book
value of guaranteed interest contracts approximated fair value. The book
value and fair value of guaranteed interest contracts as of December 31,
1994 were $142.8 million and $140.3 million respectively.
B-30
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. INSURANCE LIABILITIES (CONTINUED)
POLICYHOLDERS' FUNDS AT INTEREST (CONTINUED)
The fair market value of deferred annuities and supplementary contracts
without life contingencies with an interest guarantee of one year or less
is valued at the amount of the policy reserve. In determining the fair
market value of deferred annuities and supplementary contracts without life
contingencies with interest guarantees greater than one year, a discount
rate equal to the appropriate treasury rate, plus 150 basis points, was
used to determine the present value of the projected account value of the
policy at the end of the current guarantee period. The book value, which
approximates fair market value, of deferred annuities is $625.9 million and
$660.9 million at December 31, 1995 and 1994, respectively. The fair market
value and book value of supplementary contracts without life contingencies
as of December 31, 1995 are $49.6 million and $49.4 million, respectively.
The fair market value and book value of supplementary contracts without
life contingencies as of December 31, 1994 were $45.7 million and $45.9
million, respectively.
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest guarantees of less than one year for which
interest credited is closely tied to rates earned on owned assets. For such
liabilities, fair market value of liabilities is assumed to be equal to the
stated statutory liability balances.
REINSURANCE FUNDS WITHHELD LIABILITY
During 1993, a universal life reinsurance contract with an unaffiliated
reinsurer was amended to include certain American Experience and 1941 CSO
traditional life reserves on a 90% coinsurance basis. A reinsurance funds
withheld liability of $680.5 million and $669.0 million was held by Phoenix
Home Life at December 31, 1995 and 1994, respectively.
As described in Note 8, HLFAC was sold to an unaffiliated company during
1993. At December 31, 1995 and 1994, a reinsurance funds withheld liability
due HLFAC, as an unauthorized reinsurer, for group life and health reserves
ceded was $11.8 million and $29.2 million, respectively.
B-31
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. INSURANCE LIABILITIES (CONTINUED)
DIRECT BUSINESS WRITTEN AND REINSURANCE
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, is set forth below.
1995 1994 1993
(IN THOUSANDS)
Direct premiums $ 1,704,381 $ 1,693,494 $ 1,761,660
Reinsurance assumed 271,498 205,387 204,711
Reinsurance ceded (296,162) (304,125) (288,731)
------------ ------------ ------------
Net premiums $ 1,679,717 $ 1,594,756 $ 1,677,640
============ ============ ============
Direct commissions and expense
allowance $ 119,265 $ 133,138 $ 134,987
Reinsurance assumed 55,971 57,104 49,772
Reinsurance ceded (56,089) (73,094) (41,713)
------------ ------------ ------------
Net commissions and
expense allowance $ 119,147 $ 117,148 $ 143,046
============ ============ ============
Direct policy and contract
claims incurred $ 583,867 $ 591,029 $ 668,980
Reinsurance assumed 256,529 167,276 157,718
Reinsurance ceded (292,357) (217,911) (213,359)
------------ ------------ ------------
Net policy and contract
claims incurred $ 548,039 $ 540,394 $ 613,339
============ ============ ============
Direct policy and contract
claims payable $ 75,466 $ 72,037 $ 75,140
Reinsurance assumed 218,045 130,823 81,690
Reinsurance ceded (170,713) (97,788) (54,859)
------------ ------------ ------------
Net policy and contract
claims payable $ 122,798 $ 105,072 $ 101,971
============ ============ ============
Direct life insurance
in force $102,606,749 $ 95,717,768 $ 87,539,515
Reinsurance assumed 36,724,852 27,428,529 24,612,071
Reinsurance ceded (34,093,090) (24,372,415) (26,619,136)
------------ ------------ ------------
Net insurance in
force $105,238,511 $ 98,773,882 $ 85,532,450
============ ============ ============
Phoenix Home Life retroceded certain insurance coverages approximating $1.4
billion, $1.7 billion and $2.0 billion of life insurance in force at
December 31, 1995, 1994 and 1993 respectively, to an off-shore subsidiary.
Irrevocable letters of credit aggregating $7.0 million at December 31, 1995
have been arranged with United States commercial banks in favor of Phoenix
Home Life to collateralize the ceded reserves.
B-32
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. INVESTMENTS
Information pertaining to Phoenix Home Life's investments, net investment
income and capital gains and losses on investments follows:
BONDS, COMMON STOCKS AND PREFERRED STOCKS
Carrying values and alternate values at December 31, for investments in
bonds, preferred stocks and common stocks are set forth below. Bonds are
generally carried at amortized cost, common stocks, at market value and
preferred stocks, generally at cost. The alternate value for bonds and
preferred stocks is fair market value and for common stocks, cost.
<TABLE>
<CAPTION>
1995 1994
CARRYING ALTERNATE CARRYING ALTERNATE
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BONDS
US Treasury bonds
and obligations of
US government
corporations and
agencies $ 572,305 $ 600,959 $ 391,801 $ 376,383
Obligations of states
and political
subdivisions:
- taxable 240,279 258,872 66,815 63,143
- non-taxable 95,043 103,157 67,688 66,666
Bonds issued by
foreign governments 59,149 63,781 45,688 39,154
Corporate bonds 2,210,972 2,404,592 2,187,444 2,112,494
Mortgage-backed
securities 2,286,119 2,363,252 2,216,812 2,030,265
----------- ----------- ----------- ------------
TOTAL BONDS $ 5,463,867 $ 5,794,613 $ 4,976,248 $ 4,688,105
=========== =========== =========== ============
COMMON STOCKS $ 247,424 $ 203,495 $ 161,772 $ 142,128
=========== =========== =========== ============
PREFERRED STOCKS $ 73,299 $ 91,400 $ 75,352 $ 75,731
=========== =========== =========== ============
</TABLE>
The fair market value on bonds include amounts for publicly traded bonds
that are based on quoted market prices, where available, or quoted market
prices of comparable instruments. Fair values of private placement bonds
are estimated using discounted cash flows that apply interest rates
currently being offered with similar terms to borrowers of similar credit
quality.
B-33
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
BONDS, COMMON STOCKS AND PREFERRED STOCKS (CONTINUED)
Fair values for defaulted bonds and preferred stocks are those values as
provided by the NAIC.
The carrying value and alternate value of bonds at December 31, 1995, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
CARRYING ALTERNATE
VALUE VALUE
(IN THOUSANDS)
Due in one year or less $ 35,979 $ 36,635
Due after one year through five years 562,144 590,095
Due after five years through ten years 1,266,895 1,367,640
Due after ten years 1,312,730 1,436,991
Mortgage-backed securities 2,286,119 2,363,252
------------ ------------
Total bonds $ 5,463,867 $ 5,794,613
============ ============
The carrying value of Phoenix Home Life's defaulted bonds is $7.0 million
and is net of reserves of $3.0 million.
Carrying values at December 31, for investments in mortgage-backed
securities, excluding U.S. government guaranteed investments, are set forth
below.
CARRYING VALUE
(IN THOUSANDS)
1995 1994
Planned Amortization Class $ 759,239 $ 750,533
Asset Backed 421,076 407,296
Mezzanine 354,497 398,064
Commercial 240,860 303,684
Sequential Pay 372,169 217,322
Pass Through 84,706 88,228
Other 53,572 51,685
------------ ------------
$ 2,286,119 $ 2,216,812
============ ============
Phoenix Home Life has 49% and 52% at December 31, 1995 and 1994,
respectively, in Planned Amortization Class and Mezzanine mortgage backed
securities which have reasonably predictable cash flows and a relatively
high degree of prepayment protection. Phoenix Home Life has limited
exposure in the more volatile residential derivative market such as
interest only, principal only or inverse float instruments.
B-34
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
REAL ESTATE AND MORTGAGE LOANS
Real estate at December 31, carried net of accumulated depreciation and
encumbrances, is summarized below:
1995 1994
(IN THOUSANDS)
Investment real estate, less accumulated
depreciation of $64,279 and $59,256,
encumbrances of $2,362 and $2,380
and impairments of $23,699 and $44,249 $ 313,680 $ 389,050
Foreclosed properties, less accumulated
depreciation of $22,217 and $17,580 and
impairments of $29,571 and
$26,849 97,491 89,117
Real estate partnerships and ventures 54,378 84,831
Property used in Phoenix Home Life's
operations less accumulated depreciation
of $43,943 and $38,490 95,031 81,087
----------- -----------
Total real estate 560,580 644,085
Mortgage loans 963,092 1,130,882
----------- -----------
Total real estate and mortgage loans $ 1,523,672 $ 1,774,967
=========== ===========
The carrying value of mortgage loans includes impairment reserves for
mortgage loans in the process of foreclosure of $4.5 million and $0.6
million at December 31, 1995 and 1994, respectively.
Mortgage loans and real estate investments are diversified by property
type, location and issuer. Mortgage loans are collateralized by the related
properties and such collateral is generally 75% of the property's value at
the time the loan is made.
B-35
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
REAL ESTATE AND MORTGAGE LOANS (CONTINUED)
Mortgage loans and real estate investments at December 31, are comprised of
the following property types and geographic regions:
MORTGAGE LOANS REAL ESTATE
1995 1994 1995 1994
(IN THOUSANDS) (IN THOUSANDS)
PROPERTY TYPE:
Home office $ 95,031 $ 81,087
Office buildings $ 191,672 $ 276,973 230,972 263,467
Retail 250,264 306,251 127,500 122,439
Apartment buildings 244,589 220,325 36,644 93,803
Industrial buildings 222,120 266,305 61,667 70,962
Other 54,447 61,028 8,766 12,327
--------- ---------- --------- ---------
Total $ 963,092 $1,130,882 $ 560,580 $ 644,085
========= ========== ========= =========
GEOGRAPHIC REGION:
Home office $ 95,031 $ 81,087
Northeast $ 233,670 $ 271,088 102,249 106,550
Southeast 250,019 233,571 94,410 101,293
North central 171,434 238,514 85,470 128,043
South central 50,819 67,303 91,670 116,191
West 257,150 320,406 91,750 110,921
--------- ---------- --------- ---------
Total $ 963,092 $1,130,882 $560,580 $ 644,085
========= ========== ======== =========
At December 31, scheduled mortgage loan maturities are as follows:
1995 1994
(IN THOUSANDS)
1995 $ 314,324
1996 $ 198,507 151,956
1997 144,030 138,914
1998 150,412 180,856
1999 102,517 116,743
Thereafter 367,626 228,089
--------- ----------
Total $ 963,092 $1,130,882
========= ==========
B-36
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
REAL ESTATE AND MORTGAGE LOANS (CONTINUED)
The carrying value of delinquent and in process of foreclosure mortgage
loans at December 31, 1995 and 1994 is $9.4 million and $32.9 million,
respectively, and is net of impairment reserves of $4.5 million and $0.6
million, respectively.
Fair market values for mortgage loans in good standing are calculated as
the present value of scheduled payments, with the discount based upon (1)
the Treasury rate comparable for the remaining loan duration, plus (2) a
spread of between 175 and 450 basis points, depending upon the internal
quality rating of the loan. For loans in foreclosure or default, values
were determined assuming principal recovery was the lower of the loan
balance or the estimated value of the underlying property. The fair market
value of mortgage loans as of December 31, 1995 and 1994 is $955.8 million
and $1,081.0 million.
The maximum and minimum lending rates for mortgage loans during 1995 were
8.15% and 7.26%, respectively.
OTHER INVESTED ASSETS
Other invested assets at December 31, are summarized below.
1995 1994
(IN THOUSANDS)
Venture capital equity partnerships $ 50,919 $ 44,404
Stock income funds 763
Transportation and equipment leases 47,810 48,318
Oil and gas partnerships 4,305 8,575
Miscellaneous 1,984 2,117
---------- ----------
Total other invested assets $ 105,018 $ 104,177
========== ==========
B-37
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
INVESTMENT GUARANTEES, INTEREST RATE SWAPS, LINES OF CREDIT AND COMMITMENTS
Phoenix Home Life has various investment guarantees with regard to certain
subsidiary and partnership activities which totalled $310.9 million and
$242.8 million at December 31, 1995 and 1994, respectively.
Phoenix Home Life adopted the disclosure requirements of FAS 119 Disclosure
About Derivative Financial Instruments and Fair Value of Financial
Instruments. The definition of derivative financial instrument excludes all
on-balance sheet receivables and payables, including those that derived
their value or contractually required cash flows from the price of some
other security or index, such as mortgage-backed securities.
Phoenix Home Life enters into interest rate swap agreements, generally
having maturities of 7 years or less, to hedge certain variable rate
investment income streams matched against fixed rate liability streams. The
notional amounts of these instruments were $18.0 million and $34.0 million
at December 31, 1995 and 1994, respectively. Average received and average
pay rates were 9.01% and 5.92%, for 1995.
The increase in net investment income related to interest rate swap
contracts was $1.2 million, $3.1 million and $3.5 million for the years
ended December 31, 1995, 1994 and 1993, respectively. The fair value of
these interest rate swap agreements as of December 31, 1995 and 1994 was
not material.
The company has also guaranteed an interest rate swap agreement entered
into by a subsidiary. This agreement has the effect of the subsidiary
paying a fixed interest rate on a notional amount of $175 million of the
subsidiary's debt.
These agreements do not require the exchange of underlying principal
amounts, and accordingly the company's maximum exposure to credit risk is
the difference in interest payments exchanged. Management of Phoenix Home
Life considers the likelihood of any material loss on these guarantees or
interest rate swaps to be remote.
Phoenix Home Life has unused lines of credit with commercial banks totaling
$176.9 million at December 31, 1995.
At December 31, 1995, the company has leases covering certain facilities,
property and equipment which in no year exceeded $16.7 million and which
approximate $45.4 million in total. Such commitments extend through the
year 2000.
B-38
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of first mortgage loans and bonds which were
non-income producing for the preceding 12 months as of December 31, are as
follows:
1995 1994
(IN THOUSANDS)
First mortgage loans $ 3,805 $ 18,371
Bonds 322
---------- -----------
Total non-income producing mortgage loans
and bonds $ 3,805 $ 18,693
========== ===========
SEPARATE ACCOUNTS
Phoenix Home Life's investments in its separate accounts at December 31,
are summarized below.
<TABLE>
<CAPTION>
1995 1994
CARRYING CARRYING
VALUE COST VALUE COST
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Pooled separate accounts $ 22,575 $ 4,646 $ 26,030 $ 6,125
Closed end real estate account 4,597 4,460 5,623 6,314
Variable accumulation account 5,842 5,000
--------- -------- --------- --------
Total investments in
separate accounts $ 33,014 $ 14,106 $ 31,653 $ 12,439
========= ======== ========= ========
</TABLE>
Phoenix Home Life's investments at December 31, 1995 in the pooled separate
accounts represent seed money which was necessary to commence their
operations. Phoenix Home Life has a 10% investment in a separate account
which invests primarily in real estate properties and mortgage loans, a
100% investment in a separate account which invests in guaranteed interest
contracts with non-affiliates and a .4% investment in the real estate
sub-fund of a variable accumulation account.
POLICY LOANS
Fair market value of policy loans, $1,658 million and $1,474 million at
December 31, 1995 and 1994, respectively, was estimated as the present
value of loan interest and policy loan repayments discounted at the ten
year treasury rate. Loan repayments were assumed only to occur as a result
of anticipated policy lapses, and it was assumed that annual policy loan
interest payments were made at the guaranteed loan rate less 17.5 basis
points at December 31, 1995 and 1994, respectively. Discounting was at the
ten year treasury rate, except for policy loans with a variable policy loan
rate. Variable policy loans have an interest rate that is reset annually
based upon market rates and therefore, book value is a reasonable
approximation of fair market value.
B-39
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
NET INVESTMENT INCOME
The principal components of net investment income for the years ended
December 31, are set forth below.
<TABLE>
<CAPTION>
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Interest on bonds $ 419,859 $ 380,345 $ 322,378
Interest on first mortgage loans 92,283 109,457 176,687
Interest on policy loans 115,055 105,678 104,002
Interest on short-term investments 21,974 11,673 14,213
Income on real estate, net of expenses
of $79,565, $82,085 and $59,918 20,243 16,478 14,470
Equity in income of affiliates 17,850 17,050 30,368
Dividends on common stocks 1,787 3,312 2,303
Dividends on preferred stocks 6,886 7,378 8,848
Net loss from other invested
assets (1,239) (1,046) (835)
Miscellaneous income 2,110 2,258 1,243
Amortization of the interest
maintenance reserve 1,824 1,644 2,425
Less:
Interest expenses 164 161 313
Investment expenses 27,769 22,398 27,555
---------- ---------- ----------
Net investment income $ 670,699 $ 631,668 $ 648,234
========== ========== ==========
</TABLE>
Income on real estate includes $18.3 million for Phoenix Home Life's
occupancy of its own properties for 1995. An offsetting amount is included
in investment and operating expenses.
Interest income of $1.0 million was not accrued on certain delinquent first
mortgage loans and defaulted bonds at December 31, 1995.
B-40
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
CAPITAL GAINS AND LOSSES
The principal components of capital gains and (losses) on investments
reflected in surplus for the years December 31, are set forth below.
<TABLE>
<CAPTION>
REALIZED UNREALIZED
1995 1994 1993 1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Bonds $ 9,865 $ (30,299) $ 15,923 $ (8,560) $ 6,967 $ 11,968
First mortgage loans (43,377) (7,149) (84,441) (1,548) (4,292) 9,674
Real estate (62,685) (29,612) (50,889) 49,923 35,856 9,067
Common stock of
consolidated subsidiaries 50,496
Investments in affiliates 122,452 (28,808) 6,000 (7,002)
Common stocks 27,828 (8,877) 20,178 23,552 2,427 7,434
Preferred stocks 515 1,302 (2,287) 153 5,963
Other invested assets 5,344 3,400 4,686 1,865 (165) 4,263
Foreign exchange (1,948) 1,096 1,432 (784)
Miscellaneous 6,066 (8,405) 88 (108) 1,976
--------- --------- ---------- ---------- --------- ---------
66,008 (81,588) (46,246) 37,412 50,354 40,583
Transfer to interest
maintenance reserve (7,276) 19,338 (11,051)
Income tax (expense) benefits (49,462) 15,538 (8,538)
--------- --------- ---------- --------- --------- ---------
Net capital gains (losses) $ 9,270 (46,712) $ (65,835) $ 37,412 $ 50,354 $ 40,583
========= ========= ========== ========= ========= =========
</TABLE>
Proceeds from sales of Phoenix Home Life's investments in bonds were $1.4
billion, $1.2 billion and $1.3 billion during 1995, 1994 and 1993. Gross
gains of $29.6 million, $15.2 million and $42.1 million and gross losses of
$19.7 million, $45.5 million and $26.2 million were realized on these sales
during 1995, 1994 and 1993.
B-41
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
CAPITAL GAINS AND LOSSES (CONTINUED)
Gross unrealized gains and losses on bonds at December 31, not reflected in
surplus, are as follows:
<TABLE>
<CAPTION>
UNREALIZED GAINS UNREALIZED LOSSES
1995 1994 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C> <C>
US Treasury bonds and
obligations of US
government corporations
and agencies $ 29,682 $ 928 $ (1,028) $ (16,346)
Obligations of states and
political subdivisions:
- taxable 18,593 1 (3,673)
- non-taxable 8,257 619 (143) (1,641)
Bonds issued by foreign
governments 6,436 (1,804) (6,534)
Corporate bonds 198,684 34,216 (5,064) (109,166)
Mortgage-backed
securities 96,506 13,686 (19,373) (200,233)
---------- --------- --------- ----------
Total $ 358,158 $ 49,450 $ (27,412) $ (337,593)
========== ========= ========= ==========
</TABLE>
5. INVESTMENTS IN AFFILIATES
PM Holdings is a wholly-owned subsidiary organized to hold investments in
companies primarily engaged in the businesses of life insurance, mortgage
loan financing, investment advisory and mutual fund distribution services,
real estate and insurance agency and brokerage operations. As previously
disclosed, the life insurance subsidiaries of PM Holdings, which are
included on a consolidated basis in these financial statements, include the
following: Phoenix American Life Insurance Company, American Phoenix Life
and Reassurance Company, Phoenix Life Insurance Company and PHL Variable
Insurance Company. PM Holding's major non-life subsidiaries include:
Phoenix Realty Group, Inc., American Phoenix Corporation, Phoenix Founders,
Inc., W.S. Griffith & Company and Financial Administrative Services, Inc.
In addition, PM Holdings owns approximately 60% of the outstanding Phoenix
Duff & Phelps Corporation common stock.
B-42
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
5. INVESTMENTS IN AFFILIATES (CONTINUED)
Prior to July 1, 1993, HLFAC was a wholly-owned subsidiary of Phoenix Home
Life. As described in Note 8, effective June 30, 1993, HLFAC was sold to an
unaffiliated company, Community Mutual Insurance Company.
American Phoenix Life and Reassurance Company (formerly Phoenix Life and
Reassurance Company), previously a wholly-owned subsidiary of Phoenix Home
Life, organized for the purpose of holding and administering
non-participating reinsurance business, became a wholly-owned subsidiary of
PM Holdings on February 28, 1994.
Phoenix Life Insurance Company, formerly a wholly-owned subsidiary of
Phoenix Home Life, incorporated on June 3, 1992, became a wholly-owned
subsidiary of PM Holdings on February 28, 1994. On December 30, 1994, the
Company obtained licensing in the State of Connecticut and plans to market
interest sensitive products in the future.
PHL Variable Insurance Company was incorporated under the laws of
Connecticut on June 1, 1994 and has obtained licensing in several states
and began offering variable insurance products directly to the public in
1995.
During 1992 through 1994, Phoenix Mutual Mortgage Funding Corporation
(PMMFC), a former non-life subsidiary of PM Holdings, exercised its option
to double its sinking fund payments on existing debt. On September 12,
1994, PMMFC retired this debt and was liquidated.
On November 1, 1995, Phoenix Securities Group, Inc. (formerly PHL Mutual
Funds Holdings, Inc.), a wholly-owned subsidiary of PM Holdings merged with
Duff & Phelps Corporation. The merged company was named Phoenix Duff &
Phelps Corporation (PDP). PM Holdings owns approximately 60% of the
outstanding common stock of the new PDP. The investment in PDP common stock
is recorded at the market value of shares owned less a discount (15%), as
determined by the NAIC Securities Valuation Office.
PM Holding's consolidated entities invest primarily in bonds, first
mortgage loans and real estate. These investments are recorded using the
same accounting practices as the parent.
B-43
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
5. INVESTMENTS IN AFFILIATES (CONTINUED)
Summarized financial information of the non-insurance indirect subsidiaries
of Phoenix Home Life at December 31, and for the years ended is as follows:
1995 1994
(IN THOUSANDS)
BALANCE SHEET
Assets:
Common stock in affiliate $ 154,275
Preferred stock in affiliate 35,000
Other investments 67,010 $ 83,160
Other assets 138,374 142,684
--------- ---------
Total assets $ 394,659 $ 225,844
========= =========
Liabilities:
Notes and bonds payable $ 250,631 $ 98,066
Other liabilities 61,083 67,209
--------- ---------
Total liabilities 311,714 165,275
Stockholder's equity 82,945 60,569
--------- ---------
Total liabilities and
stockholder's equity 394,659 225,844
========= =========
SUMMARY OF OPERATIONS 1995 1994 1993
(IN THOUSANDS)
Revenue:
Commissions and fees $ 137,492 $ 95,419 $110,576
Net investment and other income 49,155 37,740 27,166
--------- --------- --------
Total revenue 186,647 133,159 137,742
--------- --------- --------
Expenses:
Commission expenses 37,195 14,298 33,159
Interest and other expenses 132,485 100,424 81,810
Federal income tax expense 5,654 8,519 5,455
--------- --------- --------
Total expenses 175,334 123,241 120,424
--------- --------- --------
OPERATING INCOME BEFORE REALIZED
CAPITAL GAIN (LOSS) AND
MINORITY INTEREST 11,313 9,918 17,318
Realized capital gain (loss),
net of income taxes 126,852 (1,400) 11,263
Minority interest (271) 15 273
--------- --------- --------
Net income $ 137,894 $ 8,533 $ 28,854
Capital (returned to) contributed
by parent, net (59,335) 1,134 (15,067)
Other surplus changes (56,183) 28
Stockholder's equity,
beginning of year 60,569 50,874 37,087
--------- --------- --------
Stockholder's equity, end of year $ 82,945 $ 60,569 $ 50,874
========= ========= ========
B-44
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
6. FEDERAL INCOME TAXES
The federal income tax provision for 1995, 1994 and 1993 totalled $82.8
million, $12.9 million and $6.3 million, respectively, which included tax
expense or (benefits) applicable to realized capital gains or losses of
$49.5 million, $(15.5) million and $8.5 million. Significant adjustments to
book net income before federal income taxes were made for the differential
earnings rate, reduction in the policyholder dividends deduction and to
reflect the tax bases for investments, life insurance reserves, dividend
received deduction and deferred policy acquisition costs. Phoenix Home Life
had a net current federal income tax payable of $56.7 million and $20.3
million at December 31, 1995 and 1994, respectively. The federal income tax
payable is included in accrued expenses and general liabilities at December
31, 1995 and 1994.
The Internal Revenue Service (IRS) is currently examining the Company's tax
returns for 1991-1994. Management does not believe that there will be a
material adverse effect on the financial statements as a result of pending
tax matters.
7. EMPLOYEE AND OTHER POSTEMPLOYMENT BENEFITS
The company recognizes the costs of postretirement benefits other than
pensions for current retirees and fully eligible or vested employees at
transition. This liability is measured by discounting the projected future
costs of health benefits based on an estimate of health care cost trend
rates. Prior to the adoption of this standard, the company recognized such
costs as an expense when paid. The company has elected the deferred
recognition method of adoption where the postretirement benefit obligation
will be amortized as a component of net periodic cost over a period of 20
years.
Phoenix Home Life provides certain health care and life insurance benefits
for retired employees. A substantial portion of the company's employees may
become eligible for these benefits upon retirement. The health care and
life insurance plans generally require retiree contributions. These
contributions are based on years of service with the company.
The expense related to the company's postretirement benefit plans is $7.4
million and $6.8 million for the years ended December 31, 1995 and 1994,
respectively.
B-45
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
7. EMPLOYEE AND OTHER POSTEMPLOYMENT BENEFITS (CONTINUED)
The following table shows the plan's funded status at December 31, 1995
(in thousands):
Accumulated postretirement benefit obligation
other than pensions (APBO):
Retirees $ 37,900
Fully eligible active plan participants 10,500
---------
Total APBO 48,400
Unrecognized net gain 6,600
Unrecognized transition obligation (40,200)
---------
Accrued postretirement benefit liability $ 14,800
=========
The accrued postretirement benefit liability is included in accrued
expenses and general liabilities. The estimated accumulated APBO for
non-vested employees at December 31, 1995 was $25.0 million. The net 1995
periodic postretirement benefit cost is included in other operating
expenses and consisted of the following components (in thousands):
Estimated eligibility cost - 1995 $ 1,400
Interest cost on APBO 3,700
Amortization of transition obligation over 20 years 2,400
Other (100)
---------
Net periodic postretirement benefit cost $ 7,400
=========
Determination of the accumulated postretirement benefit obligation was
based on an assumed discount rate of 8% and a long-term compensation
increase of 5%. The assumed rate of future increases in per capita cost of
health benefits (the health care cost trend) was 11% in 1996 grading to an
ultimate rate of 5.5% in 2002. The assumed health care cost trend reflects
the company's current claim experience and management's expectation that
future rates of growth will decline. Increasing the health care cost trend
by one percentage point for each future year would increase the accumulated
other postretirement benefit obligation by $2.3 million and the annual
service and interest cost by $0.3 million before taxes. Gains and losses
that occur because actual experience differs from that assumed are
reflected in unrealized gain and amortized over the average future service
period of employees.
As of January 1, 1995, Phoenix Home Life's defined benefit plan, the
Phoenix Home Life Mutual Insurance Company Employee Pension Plan (Employee
Pension Plan), was overfunded by approximately $2.2 million as measured
using the plan's then projected benefit obligation.
B-46
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
7. EMPLOYEE AND OTHER POSTEMPLOYMENT BENEFITS (CONTINUED)
The Company recognizes the costs and obligations of severance, disability,
life insurance and health care benefits when paid to inactive or former
employees.
Phoenix Home Life's charge to expense for retirement benefit plans for the
year ended December 31, 1995 and 1994 was approximately $6.0 million and
$8.2 million, respectively. Certain pension costs incurred by Phoenix Home
Life are allocated to its subsidiaries.
The estimated funded status of the Employee Pension Plan as of January 1,
1995 is summarized as follows (in thousands):
Actuarial present value of benefit obligations:
Vested benefit obligation $ 160,592
Present value of non-vested benefits 15,251
---------
Accumulated benefit obligation 175,843
Present value of future salary increases 37,793
---------
Projected benefit obligation $ 213,636
=========
Plan assets at fair value at January 1 $ 215,858
=========
Plan assets at fair value in excess of
projected benefit obligation $ 2,222
=========
For the Employee Pension Plan, the present value of accumulated plan
benefits was determined based on the actual salary and service history of
the covered employees as of the date of the computation. The actuarial
present value of the plan liabilities, which considers future estimated
salary increases and other factors, is approximately $213.6 million at
January 1, 1995, the date of the most recent actuarial valuation. Actuarial
amounts were determined using 8% assumed rates of return for the qualified
employees' plan.
The assets of the company's pension and savings plans at December 31, 1994,
were invested as follows (in thousands):
Separate accounts of Phoenix Home Life $ 49,142
Phoenix Series Fund sponsored by
Phoenix Home Life 113,654
Phoenix Multi-Sector Fixed Income Fund
sponsored by Phoenix Home Life 8,683
Phoenix Worldwide Opportunities Fund
sponsored by Phoenix Home Life 6,735
Phoenix Asset Reserve
sponsored by Phoenix Home Life 700
Pension Plan Trust Account 165,664
Cash Management Account 1,052
---------
Total invested assets of pension savings plans $ 345,630
=========
B-47
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
8. DISPOSITION OF HLFAC
Effective June 30, 1993, HLFAC was sold to an unaffiliated company,
Community Mutual Insurance Company, resulting in a pre-tax realized capital
gain of $50.5 million. Results on a divisional basis for the period from
January 1, 1993 through June 30, 1993, which are included in the
consolidated statement of operations, are as follows (in thousands):
1993
Net premiums $ 171,822
Net investment income 6,437
-----------
Total income 178,259
-----------
Policy benefits 105,024
Expenses 56,000
-----------
Total benefits and expenses 161,024
-----------
Gain from operations before federal income taxes $ 17,235
===========
9. SEGMENT INFORMATION
Phoenix Home Life operates principally in six segments: Individual, Group
Life and Health, Life Reinsurance, General Lines Brokerage, Securities
Management and Real Estate Management.
Summarized financial information with respect to the business segments for
the years ended December 31, was as follows (in thousands):
1995 1994 1993
REVENUES
Individual $ 1,680,641 $ 1,595,725 $ 1,542,755
Group Life and Health 411,076 405,564 377,432
Life Reinsurance 125,657 93,346 97,177
General Lines Brokerage 23,796 21,949 14,687
Securities Management
(including PDP operations) 95,684 97,401 101,853
Real Estate Management 13,562 12,439 13,711
Other operations (HLFAC) 178,259
----------- ----------- -----------
Total revenues $ 2,350,416 $ 2,226,424 $ 2,325,874
=========== =========== ===========
B-48
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
9. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INCOME BEFORE REALIZED CAPITAL GAINS
(LOSSES), DIVIDENDS AND INCOME TAXES
Individual $ 333,524 $ 294,987 $ 260,645
Group Life and Health 17,401 17,451 28,974
Life Reinsurance 8,829 7,355 4,028
General Lines Brokerage 2,633 2,306 755
Securities Management
(including PDP operations) 19,753 22,431 33,816
Real Estate Management (184) 627 (262)
Other operations (HLFAC) 17,235
Total income before realized capital gains
(losses), dividends and income taxes $ 381,956 $ 345,157 $ 345,191
=========== =========== ===========
1995 1994
IDENTIFIABLE ASSETS
Individual $11,519,751 $10,501,598
Group Life and Health 506,712 461,540
Life Reinsurance 176,520 174,337
General Lines Brokerage 112,348 33,534
Securities Management 621,150 604,968
Real Estate Management 254,979 234,052
Total identifiable assets $ 13,191,460 $12,010,029
============ ===========
</TABLE>
10. CONTINGENCIES
The Company is a defendant in various legal actions arising from the normal
conduct of business. Management believes that, after consideration of
provisions made in the Company's financial statements, none of the actions
will have a material effect on the Company's financial position.
B-49
<PAGE>
[VERSION B]
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
VARIABLE ACCUMULATION ANNUITY CONTRACTS
ISSUED BY
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
101 Munson Street
P.O. Box 942
Greenfield, Massachusetts 01302-0942
Telephone (800) 243-4840
STATEMENT OF ADDITIONAL INFORMATION FOR
TEMPLETON INVESTMENT PLUS
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Prospectus, dated May 1, 1996, which is available
without charge by contacting Phoenix Home Life at the above address or at the
above telephone number.
May 1, 1996
-----------------
TABLE OF CONTENTS
PAGE
Underwriter......................................................... B-2(T)
Calculation of Yield and Return .................................... B-2(T)
Calculation of Annuity Payments .................................... B-3(T)
Experts ............................................................ B-4(T)
Financial Statements................................................ B-5(T)
B-1(T)
<PAGE>
UNDERWRITER
The offering of Contracts is made on a continuous basis by Franklin
Templeton Distributors, Inc. ("FTD"). The offering of these Contracts commenced
on August 31, 1988. For sales of Contracts, FTD was paid and retained the
following amounts during the years indicated:
PAID RETAINED
1993 $5,648,876 $499,132
1994 $5,333,943 $565,949
1995 $1,720,728 $172,178
CALCULATION OF YIELD AND RETURN
Yield of the Money Market Sub-account. As summarized in the Prospectus under
the heading "Performance History", the yield of the Money Market Sub-account for
a seven-day period (the "base period") will be computed by determining the "net
change in value" (calculated as set forth below) of a hypothetical account
having a balance of one share at the beginning of the period, dividing the net
change in account value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period return
by 365/7 with the resulting yield figure carried to the nearest hundredth of one
percent. Net changes in value of a hypothetical account will include net
investment income of the account (accrued daily dividends as declared by the
underlying funds, less daily expense charges of the account) for the period, but
will not include realized gains or losses or unrealized appreciation or
depreciation on the underlying fund shares.
The Money Market Sub-account yield and effective yield will vary in response
to fluctuations in interest rates and in the expenses of the Sub-account.
The current yield and effective yield reflect recurring charges at the
Account level, including the maximum annual and daily administrative fees.
Example:
Money Market Sub-account
The following is an example of this yield calculation for the Sub-account based
on a seven-day period ending December 31, 1994.
Assumptions:
Value of a hypothetical pre-existing account
with exactly one unit at the beginning of
the period 1.286811
Value of the same account (excluding
capital changes) at the end of the
seven-day period 1.287771
Calculation:
Ending account value 1.287771
Less beginning account value 1.286811
Net change in account value 0.000960
Base period return:
(adjusted change/beginning account value) 0.000746
Current yield = return X (365/7) = 3.89%
Effective yield = [(1 + return) X (365/7)]-1 = 3.97%
At any time in the future, yields and total return may be higher or lower
than past yields and there can be no assurance that any historical results will
continue.
Calculation of Total Return. As summarized in the Prospectus under the
heading "Performance History", total return is a measure of the change in value
of an investment in a Sub-account over the period covered. The formula for total
return used herein includes four steps: (1) adding to the total number of units
purchased by a hypothetical $1,000 investment in the Sub-account; (2)
calculating the value of the hypothetical initial investment of $1,000 as of the
end of the period by multiplying the total number of units owned at the end of
the period by the unit value per unit on the last trading day of the period; (3)
assuming redemption at the end of the period and deducting any applicable
contingent deferred sales charge and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment. Total return will be
calculated for one year, five years and ten years or some other relevant periods
if a Sub-account has not been in existence for at least ten years.
PERFORMANCE INFORMATION
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 allow any Series to
respond quickly to changing market and economic conditions. From time to time
the Fund may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Fund may
separate its cumulative and average annual returns into income and capital gains
components; or cite separately as a return figure the equity or bond portion of
a portfolio; or compare a Series' equity or bond return figure to well-known
indices of market performance, including, but not limited to: the S&P 500 Index,
Dow Jones Industrial Average, First Boston High Yield Index and Salomon Brothers
Corporate and Government Bond Indices.
Each Sub-account may from time to time include its yield and total return in
advertisements or information furnished to present or prospective Contract
Owners. Each Sub-account may from time to time include in advertisements
containing total return (and yield in the case of certain Sub-accounts) the
ranking of those performance figures relative to such figures for groups of
mutual funds categorized as having the same investment objectives by Lipper
Analytical Services, CDA Investment Technologies, Inc., Weisenberger Financial
Services, Inc., Morningstar, Inc. and Tillinghast. Additionally, the fund 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 Daily, The Stanger Register, Stanger's Investment Adviser, The
Wall Street Journal, The New York Times, Consumer Reports, Registered
B-2(T)
<PAGE>
Representative, Financial Planning, Financial Services Weekly, Financial World,
U.S. News and World Report, Standard & Poor's, The Outlook, and Personal
Investor. The Fund may from time to time illustrate the benefits of tax deferral
by comparing taxable investments to investments made through tax-deferred
retirement plans.
The total return and yield may also be used to compare the performance of
the Sub-accounts against certain widely acknowledged outside standards or
indices for stock and bond market performance. The Standard & Poor's Composite
Index of 500 Stocks (the "S&P 500") is a market value-weighted and unmanaged
index showing the changes in the aggregate market value of 500 stocks relative
to the base period 1941-43. The S&P 500 is composed almost entirely of common
stocks of companies listed on the New York Stock Exchange, 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 80% of the market value of all issues traded on the New York
Stock Exchange.
The manner in which total return and yield will be calculated is described
above. The following table summarizes the calculation of total return and yield
for each Sub-account, from inception through December 31, 1995.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1995
PERIODS ENDED DECEMBER 31, 1995
YEAR ENDED FROM INCEPTION
SUB-ACCOUNT 12/31/95 5 YEAR TO 12/31/95
- ----------- ---------- ------ -------------
Bond 8.09% 6.48% 6.32%
Stock 17.82% 15.60% 10.45%
Asset Allocation 15.28% 13.76% 9.85%
International 8.88% N/A 11.27%
NOTE: Average annual total return assumes a hypothetical initial payment
of $1,000. At the end of the period, a total surrender is assumed.
Administrative charges and contingent deferred sales loads, if
applicable, are deducted to determine ending redeemable value of
the original payment. Then, the ending redeemable value is
divided by the original investment to calculate total return.
CALCULATION OF ANNUITY PAYMENTS
VARIABLE ANNUITY PAYMENTS
Unless an alternative annuity payment option is elected on or before the
Contract Maturity Date, the Accumulation Value of the Contract on the Maturity
Date will automatically be applied to provide a Variable Payment Life Annuity
with Ten Year Period Certain based on the Annuitant's life under annuity payment
Option I as described in the Prospectus. Any annuity payments falling due after
the Annuitant's death during the period certain will be paid to the Beneficiary.
If the amount to be applied on the Maturity Date is less than $2,000 or
would result in monthly payments of less than $20, Phoenix Home Life shall have
the right to pay such amount in one lump sum in lieu of providing the annuity
payments. Phoenix Home Life will also have the right to change the annuity
payment frequency to annually if the monthly annuity payment would otherwise be
less than $20.
Under the Variable Payment Life Annuity with Ten Year Period Certain
(payment Option I), the first monthly income payment is due on the Maturity
Date. Thereafter, payments are due on the same day of the month as the first
payment was due, or if such date does not fall within a particular month, then
the future payment is due on the first Valuation Date to occur in the following
month. Payments will continue during the lifetime of the Annuitant, or, if
later, until the end of the Ten Year Period Certain starting with the date the
first payment is due.
The Variable Income Table below shows the minimum amount of the first
monthly payment for each $1,000 of Accumulation Value applied. The minimum first
payments shown are based on the 1983 table, an annuity table projected to the
year 2000 with Projection Scale G, and with Projection Scale G thereafter, and
an effective assumed investment return of 4 1/2%. The actual payments will be
based on the monthly payment rates Phoenix Home Life is using when the first
payment is due. They will not be less than those shown in the Variable Income
Table.
VARIABLE INCOME TABLE
Minimum Monthly Payment Rate for First Payment for Each $1,000 Applied.
Based on 4 1/2% Assumed Investment Return.
ADJUSTED AGE* MALE FEMALE
------------- ---- ------
40 4.31 4.14
45 4.51 4.28
50 4.76 4.47
55 5.09 4.73
60 5.52 5.07
65 6.10 5.53
70 6.83 6.17
75 7.69 7.00
80 8.62 8.01
85 9.46 9.04
* Age on birthday nearest due date of the first payment. Monthly payment rates
for ages not shown will be furnished on request.
In determining the amount of the first payment, the amounts held under the
Variable Payment Option in each Sub-account are multiplied by the rates Phoenix
Home Life is using for the Option on the first Payment Calculation Date. The
Payment Calculation Date is the earliest Valuation Date that is not more than 10
days before the due date of the payment. The first payment equals the total of
such figures determined for each Sub-account.
Future payments are measured in Annuity Units and are determined by
multiplying the Annuity Units in each Sub-account with assets under the Variable
Payment Option by the Annuity Unit Value for each Sub-account on the Payment
Calculation Date that applies. The number of Annuity Units in each Sub-account
with assets under
B-3(T)
<PAGE>
a Variable Payment Option is equal to the portion of the first
payment provided from that Sub-account divided by the Annuity Unit Value for
that Sub-account on the first Payment Calculation Date. The payment will equal
the sum of such amounts from each Sub-account.
All Annuity Unit Values in each Sub-account were set at $1.000000 on the
first Valuation Date selected by Phoenix Home Life. The value of an Annuity Unit
on any date thereafter is equal to (a) the Net Investment Factor for that
Sub-account for the Valuation Period divided by (b) the sum of 1.000000 and
the rate of interest for the number of days in the Valuation Period, based on an
effective annual rate of interest equal to the assumed investment return, and
multiplied by (c) the corresponding Annuity Unit Value on the preceding
Valuation Date.
The assumed investment return of 4 1/2% per year is the annual interest rate
assumed in determining the first payment. The amount of each subsequent payment
from each Sub-account will depend on the relationship between the assumed
investment return and the actual investment performance of the Sub-account. If a
4 1/2% rate would result in a first variable payment larger than that permitted
under applicable state law, we will select a lower rate that will comply with
such law.
No partial or full surrenders, withdrawals, transfers or additional premium
payments may be made with respect to any assets held under Variable Payment
Options I and J. Although no transfers or additional premium payments may be
made with respect to assets held under Option K, under this option partial or
full surrenders may be made.
FIXED ANNUITY PAYMENTS
Fixed monthly annuity payments under a Contract are determined by applying
the Value of each Sub-account's Accumulation Units credited under a Contract to
the respective annuity purchase rates on the Maturity Date of a Contract or
other date elected for commencement of fixed annuity payments.
Under a Contract, the amount of the fixed annuity payment is calculated by
first multiplying the number of the Sub-accounts' Accumulation Units credited to
the Contract on the Maturity Date by the appropriate Unit Value for each
Sub-account on the Maturity Date. The dollar value for all Sub-accounts'
Accumulation Units is then aggregated. For each Contract the resulting dollar
value is then multiplied by the applicable annuity purchase rate, which reflects
the age (and sex for non-tax qualified plans) of the Annuitant specified in the
Contract for the Fixed Payment Annuity Option selected. This computation
determines the amount of Phoenix Home Life's fixed monthly annuity payment to
the Annuitant.
The mortality table used as a basis for the applicable annuity purchase
rates is the a-49 Individual Annuity Mortality Table at 3 3/8% interest
projected to 1985 at Projection Scale B. More favorable rates may be available
on the Maturity Date or other date selected for commencement of fixed annuity
payments.
EXPERTS
The financial statements of Phoenix Home Life and of the Account have been
examined by Price Waterhouse LLP, independent public accountants, whose reports
are set forth herein, and the financial statements have been included upon the
authority of said firm as experts in accounting and auditing. Price Waterhouse
LLP, whose address is One Financial Plaza, Hartford, Connecticut, also provides
other accounting and tax-related services as requested by the Account and
Phoenix Home Life from time to time.
Legal matters involving Federal securities laws in connection with the
Contracts have been passed upon by Jorden Burt Berenson & Johnson LLP,
Washington, D.C.
Legal matters relating to the validity of the securities being issued have
been passed upon by Richard J. Wirth, Counsel, Phoenix Home Life Mutual
Insurance Company, Hartford, CT.
B-4(T)
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1995
B-5(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Stock Sub-Account
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
Assets:
Investments in Templeton Stock Fund
(identified cost $172,238,664) $292,970,333
------------
Liabilities:
Accrued expenses due related parties 317,689
------------
Net assets $292,652,644
============
Accumulation units outstanding 142,233,601
============
Net asset value per unit $ 2.057549
============
</TABLE>
STATEMENT OF OPERATIONS
for the year ended December 31, 1995
<TABLE>
<S> <C> <C>
Investment income:
Dividends $ 3,995,240
Expenses:
Mortality and expense risk and administrative
charges 3,754,087
-----------
Net investment income 241,153
Realized and unrealized gain on investments:
Net realized gain from share transactions $ 2,167,044
Net realized gain distribution from Fund 517,890
Net change in unrealized appreciation 54,558,056
-----------
Net realized and unrealized gain 57,242,990
-----------
Net increase in net assets from operations $57,484,143
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended December 31,
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss) $ 241,153 $ (470,403)
Net realized gain (loss) 2,684,934 (543,455)
Net change in unrealized appreciation (deprecia-
tion) 54,558,056 (8,428,617)
------------ ------------
Net increase (decrease) in net assets from oper-
ations 57,484,143 (9,442,475)
Accumulation unit transactions:
Participant deposits 13,155,785 29,642,336
Participant transfers 10,498,003 (3,154,829)
Participant withdrawals (29,718,626) (12,541,172)
------------ ------------
Net increase (decrease) from participant trans-
actions (6,064,838) 13,946,335
------------ ------------
Total increase in net assets 51,419,305 4,503,860
Net assets:
Beginning of year 241,233,339 236,729,479
------------ ------------
End of year $292,652,644 $241,233,339
============ ============
Participant accumulation unit transactions (in
units):
Participant deposits 7,097,806 17,130,701
Participant transfers 6,158,732 (2,067,568)
Participant withdrawals (15,894,569) (7,299,381)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-6(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton International Sub-Account
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
Assets:
Investments in Templeton International Fund
(identified cost $71,536,640) $88,793,020
-----------
Liabilities:
Accrued expenses due related parties 94,859
-----------
Net assets $88,698,161
===========
Accumulation units outstanding 59,587,371
===========
Net asset value per unit $ 1.488540
===========
</TABLE>
STATEMENT OF OPERATIONS
for the year ended December 31, 1995
<TABLE>
<S> <C> <C>
Investment income:
Dividends $ 607,093
Expenses:
Mortality and expense risk and administrative charges 1,145,026
-----------
Net investment loss (537,933)
Realized and unrealized gain on investments:
Net realized gain from share transactions $ 158,994
Net realized gain distribution from Fund 260,183
Net change in unrealized appreciation 11,150,673
-----------
Net realized and unrealized gain 11,569,850
-----------
Net increase in net assets from operations $11,031,917
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended December 31,
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment loss $ (537,933) $ (612,277)
Net realized gain 419,177 536,772
Net change in unrealized appreciation (deprecia-
tion) 11,150,673 (2,769,264)
----------- -----------
Net increase (decrease) in net assets from opera-
tions 11,031,917 (2,844,769)
Accumulation unit transactions:
Participant deposits 5,709,743 29,007,117
Participant transfers 257,059 7,898,814
Participant withdrawals (4,184,076) (1,930,505)
----------- -----------
Net increase from participant transactions 1,782,726 34,975,426
----------- -----------
Total increase in net assets 12,814,643 32,130,657
Net assets:
Beginning of year 75,883,518 43,752,861
----------- -----------
End of year $88,698,161 $75,883,518
=========== ===========
Participant accumulation unit transactions (in
units):
Participant deposits 4,160,659 21,504,720
Participant transfers 190,011 5,771,206
Participant withdrawals (2,977,608) (1,423,282)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-7(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Asset Allocation Sub-Account
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
Assets:
Investments in Templeton Asset Allocation Fund
(identified cost $100,813,709) $143,623,979
------------
Liabilities:
Accrued expenses due related parties 155,120
------------
Net assets $143,468,859
============
Accumulation units outstanding 72,984,891
============
Net asset value per unit $ 1.965734
============
</TABLE>
STATEMENT OF OPERATIONS
for the year ended December 31, 1995
<TABLE>
<S> <C> <C>
Investment income:
Dividends $ 3,191,677
Expenses:
Mortality and expense risk and administrative charges 1,834,041
-----------
Net investment income 1,357,636
Realized and unrealized gain on investments:
Net realized gain from share transactions $ 701,083
Net change in unrealized appreciation 23,331,096
-----------
Net realized and unrealized gain 24,032,179
-----------
Net increase in net assets from operations $25,389,815
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended December 31,
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 1,357,636 $ 563,855
Net realized gain 701,083 481,511
Net change in unrealized appreciation
(depreciation) 23,331,096 (6,484,867)
------------ ------------
Net increase (decrease) in net assets from
operations 25,389,815 (5,439,501)
Accumulation unit transactions:
Participant deposits 6,249,518 18,348,190
Participant transfers 649,951 (1,298,081)
Participant withdrawals (10,605,951) (3,504,621)
------------ ------------
Net increase (decrease) from participant
transactions (3,706,482) 13,545,488
------------ ------------
Total increase in net assets 21,683,333 8,105,987
Net assets:
Beginning of year 121,785,526 113,679,539
------------ ------------
End of year $143,468,859 $121,785,526
============ ============
Participant accumulation unit transactions (in
units):
Participant deposits 3,513,751 10,912,869
Participant transfers 396,067 (814,228)
Participant withdrawals (5,825,984) (2,100,180)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-8(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Bond Sub-Account
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
Assets:
Investments in Templeton Bond Fund
(identified cost $18,558,477) $19,592,211
-----------
Liabilities:
Accrued expenses due related parties 21,189
-----------
Net assets $19,571,022
===========
Accumulation units outstanding 12,633,253
===========
Net asset value per unit $ 1.549167
===========
</TABLE>
STATEMENT OF OPERATIONS
for the year ended December 31, 1995
<TABLE>
<S> <C> <C>
Investment income:
Dividends $ 885,991
Expenses:
Mortality and expense risk and administrative charges 256,967
----------
Net investment income 629,024
Realized and unrealized gain on investments:
Net realized gain from share transactions $ 35,668
Net change in unrealized appreciation 1,695,419
----------
Net realized and unrealized gain 1,731,087
----------
Net increase in net assets from operations $2,360,111
==========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended December 31,
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 629,024 $ 690,916
Net realized gain 35,668 117,368
Net change in unrealized appreciation (deprecia-
tion) 1,695,419 (2,112,571)
----------- -----------
Net increase (decrease) in net assets from opera-
tions 2,360,111 (1,304,287)
Accumulation unit transactions:
Participant deposits 981,131 3,724,931
Participant transfers (228,814) (3,300,200)
Participant withdrawals (1,456,958) (985,996)
----------- -----------
Net decrease from participant transactions (704,641) (561,265)
----------- -----------
Total increase (decrease) in net assets 1,655,470 (1,865,552)
Net assets:
Beginning of year 17,915,552 19,781,104
----------- -----------
End of year $19,571,022 $17,915,552
=========== ===========
Participant accumulation unit transactions (in
units):
Participant deposits 665,160 2,641,788
Participant transfers (153,130) (2,398,127)
Participant withdrawals (989,280) (711,053)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-9(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Money Market Sub-Account
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
Assets:
Investments in Templeton Money Market Fund
(identified cost $20,646,239) $20,646,239
Dividends receivable 77,242
-----------
Total assets 20,723,481
-----------
Liabilities:
Accrued expenses due related parties 20,284
-----------
Net assets $20,703,197
===========
Accumulation units outstanding 16,076,769
===========
Net asset value per unit $ 1.287771
===========
</TABLE>
STATEMENT OF OPERATIONS
for the year ended December 31, 1995
<TABLE>
<S> <C>
Investment income:
Dividends $1,120,711
Expenses:
Mortality and expense risk and administrative charges 293,291
----------
Net investment income $ 827,420
==========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended December 31,
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 827,420 $ 535,293
------------ -----------
Accumulation unit transactions:
Participant deposits 5,338,600 19,201,805
Participant transfers (12,987,410) (889,691)
Participant withdrawals (5,376,150) (2,802,348)
------------ -----------
Net increase (decrease) from participant transac-
tions (13,024,960) 15,509,766
------------ -----------
Total increase (decrease) in net assets (12,197,540) 16,045,059
Net assets:
Beginning of year 32,900,737 16,855,678
------------ -----------
End of year $ 20,703,197 $32,900,737
============ ===========
Participant accumulation unit transactions (in
units):
Participant deposits 4,238,896 15,730,225
Participant transfers (10,471,911) (765,826)
Participant withdrawals (4,255,761) (2,290,446)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-10(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Stock Sub-Account
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
PER UNIT OPERATING PERFORMANCE
(for a unit outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-------------------
1995 1994
--------- ---------
<S> <C> <C>
Unit value, beginning of year $1.665152 $1.726593
--------- ---------
Income from investment operations:
Net investment income (loss) .001646 (.003061)
Net realized and unrealized gain (loss) .390751 (.058380)
--------- ---------
Change in unit value for the year .392397 (.061441)
--------- ---------
Unit value, end of year $2.057549 $1.665152
========= =========
Total Return 23.57% (3.56)%
Net assets at end of year (000) $ 292,653 $ 241,233
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-11(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton International Sub-Account
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
PER UNIT OPERATING PERFORMANCE
(for a unit outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------
1995 1994
--------- ---------
<S> <C> <C>
Unit value, beginning of year $1.303520 $1.351997
--------- ---------
Income from investment operations:
Net investment loss (.009022) (.010434)
Net realized and unrealized gain (loss) .194042 (.038043)
--------- ---------
Change in unit value for the year .185020 (.048477)
--------- ---------
Unit value, end of year $1.488540 $1.303520
========= =========
Total Return 14.19% (3.59)%
Net assets at end of year (000) $ 88,698 $ 75,884
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-12(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Asset Allocation Sub-Account
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
PER UNIT OPERATING PERFORMANCE
(for a unit outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------
1995 1994
--------- ---------
<S> <C> <C>
Unit value, beginning of year $1.625952 $1.699180
--------- ---------
Income from investment operations:
Net investment income .018169 .007591
Net realized and unrealized gain (loss) .321613 (.080819)
--------- ---------
Change in unit value for the year .339782 (.073228)
--------- ---------
Unit value, end of year $1.965734 $1.625952
========= =========
Total Return 20.90% (4.31)%
Net assets at end of year (000) $ 143,469 $ 121,786
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-13(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Bond Sub-Account
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
PER UNIT OPERATING PERFORMANCE
(for a unit outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------
1995 1994
--------- ---------
<S> <C> <C>
Unit value, beginning of year $1.366504 $1.456861
--------- ---------
Income from investment operations:
Net investment income .048684 .047865
Net realized and unrealized gain (loss) .133979 (.138222)
--------- ---------
Change in unit value for the year .182663 (.090357)
--------- ---------
Unit value, end of year $1.549167 $1.366504
========= =========
Total Return 13.37% (6.20)%
Net assets at end of year (000) $ 19,571 $ 17,916
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-14(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Money Market Sub-Account
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
PER UNIT OPERATING PERFORMANCE
(for a unit outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------
1995 1994
--------- ---------
<S> <C> <C>
Unit value, beginning of
year $1.238474 $1.213373
--------- ---------
Income from investment
operations:
Net investment income .049297 .025101
--------- ---------
Unit value, end of year $1.287771 $1.238474
========= =========
Total Return 3.98% 2.07%
Net assets at end of
year (000) $ 20,703 $ 32,901
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-15(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Notes to Financial Statements, December 31, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION
Phoenix Home Life Variable Accumulation Account (the Account) is a separate
investment account of Phoenix Home Life Mutual Insurance Company (Phoenix Home
Life) registered as a unit investment trust. The Account currently has five
Sub-accounts to which Templeton Investment Plus contract values may be
allocated and include the Templeton Stock, Templeton International, Templeton
Asset Allocation, Templeton Bond, and Templeton Money Market which invest
solely in a designated portfolio of Templeton Variable Products Series Fund
(the Fund). The other six Sub-accounts are presented in separate financial
statements. Each series of the Fund has distinct investment objectives.
Templeton Stock Fund is a capital growth common stock fund; the Templeton
International Fund invests in stocks and debt obligations of companies and
governments outside the United States; the Templeton Asset Allocation Fund
invests in stocks and debt obligations of companies and governments and money
market instruments seeking high total return; the Templeton Bond Fund seeks
high current income through investing in debt securities, rated and unrated, in
any category of companies, government and government agencies, and in debt
securities which are convertible into common stock of such companies; and the
Templeton Money Market Fund seeks current income, stability of principal and
liquidity by investing in short-term money market instruments.
2. SIGNIFICANT ACCOUNTING POLICIES
Certain reclassifications have been made to prior year's amounts to conform
with the 1995 presentation.
A. Valuation of Investments:
Investments are made exclusively in the Funds and are valued at the net asset
value per share of the Series.
B. Investment Transactions and Related Income:
Investment transactions are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the last-in, first-out (LIFO)
cost basis of the investment sold. Dividends from the Fund are recorded on the
ex-dividend date.
C. Income Taxes:
The Account is not a separate entity from Phoenix Home Life and under current
federal income tax law, income arising from the Account is not taxed since re-
serves are established equivalent to such income. Therefore, no provision for
related federal or state income taxes is required.
3. PURCHASES AND SALES OF SHARES OF TEMPLETON VARIABLE PRODUCTS SERIES FUND
Purchases and sales of the Fund for the year ended December 31, 1995 aggregated
the following:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Templeton Stock Fund $46,983,502 $52,827,300
Templeton International Fund 12,198,757 10,863,897
Templeton Asset Allocation Fund 9,635,823 12,255,358
Templeton Bond Fund 4,046,836 4,163,228
Templeton Money Market Fund 41,570,740 53,798,681
</TABLE>
4. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
Phoenix Home Life provides all administrative services to the Account.
Phoenix Home Life assumes the risk that annuitants as a class may live longer
than expected and that its expenses may be higher than its deductions for such
expenses. In return for the assumption of these mortality and expense risks,
Phoenix Home Life charges each Sub-account the daily equivalent of 0.40% on an
annual basis of the current value of the Sub-account's net assets for mortality
risks assumed and the daily equivalent of 0.85% on an annual basis for expense
risks assumed.
The fees charged for mortality and expense risks assumed by Phoenix Home Life
for the Templeton Stock Sub-account, the Templeton International Sub-account,
the Templeton Asset Allocation Sub-account, the Templeton Bond Sub-account, and
the Templeton Money Market Sub-account aggregated $3,412,806, $1,040,933,
$1,667,310, $233,606 and $266,628, respectively, for the year ended December
31, 1995.
As compensation for administrative services provided to the Account, Phoenix
Home Life additionally receives $35 per year from each annuity contract prior
to the contract's date of maturity. This cost-based charge is deducted from the
Sub-account holding the assets of the participant or on a pro-rata basis from
two or more Sub-accounts in relation to their values under the contract. Upon a
full surrender of a contract, the entire annual administrative charge of $35 is
deducted regardless of when the surrender occurs. Phoenix Home Life received
$496,455 for administrative services provided for the year ended December 31,
1995.
Phoenix Home Life also charges each Sub-account the daily equivalent of 0.125%
on an annual basis of the current value of the Sub-account's net assets to
cover its variable costs of administration, such as printing and distribution
of participant mailings. The variable costs of administrative services provided
by Phoenix Home Life for the Templeton Stock Sub-account, Templeton Interna-
tional Sub-account, Templeton Asset Allocation Sub-account, Templeton Bond Sub-
account and Templeton Money Market Sub-account aggregated $341,281, $104,093,
$166,731, $23,361 and $26,663, respectively, for the year ended December 31,
1995.
Franklin Templeton Funds Distributors, Inc. is the principal underwriter and
distributor for the Templeton Sub-accounts of the Account. Phoenix Home Life
reimburses Franklin Templeton Funds Distributor for expenses incurred as under-
writer. On surrender of a contract, surrender charges, which vary from 0-6% de-
pending upon the duration of each contract deposit, are deducted from the pro-
ceeds and are paid to Phoenix Home Life as reimbursement for services provided.
The surrender charges deducted and paid to Phoenix Home Life were $718,319 for
the year ended December 31, 1995.
B-16(T)
<PAGE>
Phoenix Home Life Variable Accumulation Account
Notes to Financial Statements, December 31, 1995 (continued)
- --------------------------------------------------------------------------------
Templeton Investment Counsel, Inc. (TICI) serves as investment manager of the
Templeton Stock, International, and Asset Allocation Funds; and Templeton
Global Bond Manager, a division of TICI, serves as investment manager of the
Templeton Bond and Money Market Funds. The investment managers furnish the
Funds with investment research and advice and supervise the investment programs
for the Funds in accordance with each Series' investment objective, policies
and restrictions. Templeton Stock, International, Asset Allocation and Bond
Funds each pay a monthly investment management fee, equal on an annual basis,
to 0.50% of the average daily net assets up to $200 million, 0.45% of such net
assets from $200 million up to $1.3 billion and 0.40% of such net assets in ex-
cess of $1.3 billion. Templeton Money Market Fund pays a monthly investment
management fee equal on an annual basis to 0.35% of its average daily net as-
sets up to $200 million, 0.30% of such net assets from $200 million up to $1.3
billion and 0.25% of such net assets in excess of $1.3 billion.
Each Fund pays the business manager, Templeton Fund Annuity Company (TFAC), a
monthly fee equivalent on an annual basis to 0.15% of the combined average
daily net assets of the Funds, reduced to 0.135% of such assets in excess of
$200 million, 0.10% of such assets in excess of $700 million, and 0.075% of
such assets in excess of $1.2 billion. TFAC provides certain administrative fa-
cilities and services for the Funds.
5. DISTRIBUTION OF NET INCOME
The Account does not expect to declare dividends to participants from accumu-
lated net income. The accumulated net income is distributed to participants as
part of withdrawals of amounts in the form of surrenders, death benefits,
transfers or annuity payments in excess of net purchase payments.
6. DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code (the Code),
a variable annuity contract, other than a contract issued in connection with
certain types of employee benefit plans, will not be treated as an annuity con-
tract for federal tax purposes for any period for which the investments of the
segregated asset account on which the contract is based are not adequately di-
versified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor
test or diversification requirements set forth in regulations issued by the
Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of the
Code. Phoenix Home Life believes that the Account satisfies the current re-
quirements of the regulations, and it intends that the Account will continue to
meet such requirements.
B-17(T)
<PAGE>
PRICE WATERHOUSE LLP [LOGO APPEARS HERE]
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Participants of
Phoenix Home Life Variable Accumulation Account
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly,
in all material respects, the financial position of the Templeton Stock Sub-
account, Templeton International Sub-account, Templeton Asset Allocation Sub-
account, Templeton Bond Sub-account and Templeton Money Market Sub-account
(constituting Phoenix Home Life Variable Accumulation Account, hereafter
referred to as the "Account") at December 31, 1995, the results of each of
their operations for the year then ended and the changes in each of their net
assets for each of the periods indicated, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Account's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Hartford, Connecticut 06103
February 14, 1996
B-18(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
B-19(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Report of Independent Accountants.......................................B-21(T)
Consolidated Balance Sheet..............................................B-22(T)
Consolidated Statement of Operations and Surplus........................B-23(T)
Consolidated Statement of Cash Flows....................................B-24(T)
Notes to Consolidated Financial Statements....................B-25(T) - B-49(T)
B-20(T)
<PAGE>
[logo: Price Waterhouse LLP] [logo: Price Waterhouse circle logo]
REPORT OF INDEPENDENT ACCOUNTANTS
February 14, 1996
To the Board of Directors
and Policyholders of
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and surplus and of cash flows present
fairly, in all material respects, the financial position of Phoenix Home Life
Mutual Insurance Company and its life insurance subsidiaries at December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, 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/ Price Waterhouse LLP
B-21(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- ------------------------------------------------------------------------------
DECEMBER 31,
1995 1994
(IN THOUSANDS)
ASSETS
Bonds, at amortized cost $ 5,463,867 $ 4,976,248
First mortgage loans 963,092 1,130,882
Policy loans 1,617,872 1,585,485
Real estate, at depreciated cost 560,580 644,085
Investments in affiliates 82,945 59,569
Common stocks, at market value 247,424 161,772
Preferred stocks, at cost 73,299 75,352
Cash and short-term investments,
at amortized cost 360,874 182,404
Other invested assets 105,018 104,177
------------ ------------
Total cash and invested assets 9,474,971 8,919,974
Deferred and uncollected premiums 174,938 173,382
Due and accrued investment income 128,790 121,491
Other assets 106,691 136,800
Separate account assets 3,306,070 2,658,382
------------ ------------
Total assets $ 13,191,460 $ 12,010,029
============ ============
LIABILITIES, AVR AND SURPLUS
Reserves for future policy benefits $ 7,133,557 $ 6,748,851
Policyholders' funds at interest 611,000 649,853
Dividends to policyholders 308,636 281,227
Policy benefits in course of settlement 122,798 105,072
Accrued expenses and general liabilities 162,928 121,593
Reinsurance funds withheld liability 692,291 698,261
Interest maintenance reserve 11,872 6,043
Separate account liabilities 3,273,056 2,626,729
------------ ------------
Total liabilities 12,316,138 11,237,629
============ ============
Asset valuation reserve (AVR) 199,656 174,142
Policyholders' surplus 675,666 598,258
------------ ------------
Total AVR and surplus 875,322 772,400
------------ ------------
Total liabilities, AVR and surplus $ 13,191,460 $ 12,010,029
============ ============
The accompanying notes are an integral part of these statements.
B-22(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS AND SURPLUS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME
Premium income and annuity considerations $ 1,679,717 $ 1,594,756 $ 1,677,640
Net investment income 670,699 631,668 648,234
----------- ----------- -----------
Total income 2,350,416 2,226,424 2,325,874
----------- ----------- -----------
CURRENT AND FUTURE BENEFITS
Death benefits 271,723 268,192 264,636
Disability and health benefits 248,996 239,135 305,204
Annuity benefits and matured endowments 27,320 33,067 43,499
Surrender benefits 413,580 402,540 364,772
Interest on policy or contract funds 79,241 82,621 122,626
Settlement option payments 34,637 37,166 38,331
Increase in reserves for future policy benefits
and policyholders' funds 459,693 405,071 369,504
----------- ----------- -----------
Total current and future benefits 1,535,190 1,467,792 1,508,572
----------- ----------- -----------
OPERATING EXPENSES
Commissions and expense allowances 119,147 117,148 143,046
Premium, payroll and miscellaneous taxes 44,285 35,312 52,351
Other operating expenses 269,838 261,015 276,714
Federal income tax expense (benefit) 33,329 28,436 (2,249)
----------- ----------- -----------
Total operating expenses 466,599 441,911 469,862
----------- ----------- -----------
OPERATING GAIN BEFORE DIVIDENDS AND
REALIZED CAPITAL GAINS (LOSSES) 348,627 316,721 347,440
Dividends to policyholders (297,999) (269,357) (251,647)
----------- ----------- -----------
OPERATING GAIN AFTER DIVIDENDS AND
BEFORE REALIZED CAPITAL GAINS (LOSSES) 50,628 47,364 95,793
Realized capital gains (losses), net of income
taxes and interest maintenance reserves 9,270 (46,712) (65,835)
----------- ----------- -----------
NET INCOME 59,898 652 29,958
Unrealized capital gains, net 37,412 50,354 40,583
Other surplus changes, net 5,612 1,378 (775)
----------- ----------- -----------
NET INCREASE IN AVR AND SURPLUS 102,922 52,384 69,766
AVR AND SURPLUS, beginning of year 772,400 720,016 650,250
----------- ----------- -----------
AVR AND SURPLUS, end of year $ 875,322 $ 772,400 $ 720,016
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
B-23(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
CASH AND SHORT-TERM INVESTMENT SOURCES
Operations:
Premiums collected $ 1,601,408 $ 1,523,021 $ 1,620,128
Initial consideration received on
reinsurance assumed 99,851
Investment and other income received 773,021 751,074 754,049
----------- ----------- -----------
Total received 2,374,429 2,274,095 2,474,028
----------- ----------- -----------
Claims and benefits paid 1,091,725 1,304,238 1,577,792
Commissions and other expenses paid 549,155 486,766 530,075
Dividends to policyholders paid 270,749 249,701 242,192
Increase in policy loans 32,387 55,143 21,438
Federal income taxes paid (received) 9,319 (37,266) 26,720
----------- ----------- -----------
Total paid 1,953,335 2,058,582 2,398,217
----------- ----------- -----------
Cash proceeds from operations 421,094 215,513 75,811
Proceeds from sales, maturities and
scheduled repayments of investments:
Bonds 1,381,080 1,198,131 1,451,279
Stocks 329,104 347,884 767,540
First mortgage loans 186,172 160,882 731,877
Real estate and other invested assets 148,546 209,316 322,284
Non-operating increase in
policyholders' funds 47,340 52,694 75,123
----------- ----------- -----------
Total sources 2,513,336 2,184,420 3,423,914
----------- ----------- -----------
CASH AND SHORT-TERM INVESTMENT USES
Acquisitions of investments:
Bonds 1,842,467 1,756,955 2,144,981
Stocks 282,488 310,751 650,187
First mortgage loans 93,097 31,214 93,480
Real estate and other invested assets 73,482 173,988 255,255
Other uses 43,332 155,780 254,095
----------- ----------- -----------
Total uses 2,334,866 2,428,688 3,397,998
----------- ----------- -----------
NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS 178,470 (244,268) 25,916
CASH AND SHORT-TERM INVESTMENTS, beginning of year 182,404 426,672 400,756
----------- ----------- -----------
CASH AND SHORT-TERM INVESTMENTS, end of year $ 360,874 $ 182,404 $ 426,672
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
B-24(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company (Phoenix Home Life or the
Company) and its subsidiaries market a wide range of insurance and
investment products and services including individual participating life
insurance, variable life insurance, group life and health insurance, life
and health reinsurance, annuities, investment advisory and mutual fund
distribution services, insurance agency and brokerage operations. These
products and services are distributed among six primary segments which
include: Individual, Group Life and Health, Life Reinsurance, General Lines
Brokerage, Securities Management and Real Estate Management. See Note 9 for
segment information.
Effective June 30, 1993, Phoenix Home Life sold Home Life Financial
Assurance Corporation (HLFAC), a group life and health insurance
subsidiary. Accordingly, these financial statements include the results of
operations of this business for the six months ended June 30, 1993. See
Note 8 for additional information.
Effective January 1, 1995, the money management businesses of Phoenix Home
Life were completely transferred to Phoenix Securities Group, Inc. (Phoenix
Securities Group), an indirect wholly-owned subsidiary. Phoenix Securities
Group entered into contracts to manage the investments of the general and
separate accounts of Phoenix Home Life. On November 1, 1995, Phoenix Home
Life, through its subsidiary, PM Holdings, Inc. (PM Holdings), merged
Phoenix Securities Group into Duff & Phelps Corporation, forming Phoenix
Duff & Phelps Corporation (PDP). PM Holdings owns approximately 60% of the
outstanding PDP common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Phoenix Home Life include the
domestic life insurance subsidiaries, Phoenix American Life Insurance
Company, American Phoenix Life and Reassurance Company, Phoenix Life
Insurance Company, PHL Variable Insurance Company and HLFAC, with
intercompany transactions eliminated. The non-insurance subsidiaries are
not consolidated in these financial statements. The significant accounting
policies which are used by Phoenix Home Life and its consolidated life
insurance subsidiaries in the preparation of the consolidated financial
statements are described below. Certain reclassifications have been made to
the 1994 and 1993 amounts to conform with the 1995 presentation.
BASIS OF PRESENTATION
Phoenix Home Life's policy is to prepare its financial statements on the
basis of accounting practices prescribed or permitted by the Insurance
Department of the State of New York. These practices are predominately
promulgated by the National Association of Insurance Commissioners (NAIC).
These practices currently are considered generally accepted accounting
principles (GAAP) for mutual life insurance companies. There were no
material practices not prescribed by the Insurance Department of the State
of New York.
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 revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
In April 1993, the Financial Accounting Standards Board issued
Interpretation No. 40, Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises, which
establishes a different definition of GAAP for mutual life insurance
companies. Under the Interpretation, financial statements of mutual life
insurance companies for periods beginning after December 15, 1995 which are
prepared on the basis of statutory accounting will no longer be
characterized as in conformity with GAAP.
B-25(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
Management of the Company has not finalized the effect on its December 31,
1995 financial statements of applying the Interpretation. The Company
intends to adopt the accounting changes required to present its financial
statements in conformity with GAAP in its 1996 financial statements. The
effect of the changes will be reported retroactively through restatement of
all previously issued financial statements. The cumulative effect of
adopting these changes will be included in the earliest year restated.
Effective January 1, 1995, the Company adopted the provisions of Statement
of Position 94-6 (SOP 94-6), Disclosure of Certain Significant Risks and
Uncertainties. SOP 94-6 requires disclosure about the nature of a reporting
entity's operations and the use of estimates in the preparation of
financial statements.
PREMIUM REVENUE AND RELATED EXPENSES
Generally, premium income and annuity considerations are recognized as
income over the premium paying periods of the policies or the annuity
contracts, respectively. Related underwriting expenses, commissions and
other costs of acquiring the policies and contracts are charged to
operations as incurred.
INSURANCE LIABILITIES
Benefit and loss reserves, included in reserves for future policy benefits,
are established in amounts adequate to meet estimated future obligations on
policies in force. Benefits to policyholders are charged to operations as
incurred.
Reserves for future policy benefits are determined using assumed rates of
interest, mortality and morbidity consistent with statutory requirements.
Most life insurance reserves for which the 1958 CSO and 1980 CSO mortality
tables are used as the mortality basis are determined using a modified
preliminary term reserve method. The net level premium method is used in
determining life insurance reserves based on earlier mortality tables.
Claim and loss liabilities, included in reserves for future policy
benefits, are established in amounts estimated to cover incurred losses.
These liabilities are based on individual case estimates for reported
losses and estimates of unreported losses based on past experience. Claim
and loss liabilities, net of ceded reinsurance, are not material.
As is customary practice in the insurance industry, Phoenix Home Life
assumes and cedes reinsurance as a means of diversifying underwriting risk.
The maximum amount of individual life insurance retained by the company on
any one life was increased from $5,000,000 to $8,000,000 for single life
and joint first-to-die policies and to $10,000,000 for joint last-to-die
policies on July 31, 1995, with excess amounts ceded to reinsurers. For
reinsurance ceded, the company remains liable in the event that assuming
reinsurers are unable to meet the contractual obligations.
INVESTMENTS
Investments are valued in accordance with methods prescribed by the NAIC.
Investments in bonds are generally carried at amortized cost and preferred
stocks, generally at cost.
Common stocks are carried at market value. Ownership interests in real
estate, venture capital, equity and oil and gas partnerships and joint
ventures are carried at equity in the underlying net assets. Mortgage loans
in good standing are valued at their unpaid principal balance. Prepayment
penalties are reported in investment income when received. Origination fees
and related expenses are recognized at the time of mortgage closings.
Policy loans are reported at their unpaid balances and are fully
collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
market value. The company considers highly liquid investments purchased
with a maturity of one year or less to be short-term investments.
B-26(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
The investments in affiliates represent both direct and indirect ownership
in the common and preferred stock of non-insurance subsidiaries. The common
stock of PDP is valued at the market value of shares owned less a discount
(15%), as determined by the NAIC Securities Valuation Office. The preferred
stock of PDP is valued at cost. The common stock of other unconsolidated
subsidiaries is valued at the equity in underlying net assets, determined
in accordance with GAAP. The Company's equity in the earnings of
affiliates, including PDP, is reflected in net investment income. Any
remaining adjustments such as those necessary to reflect changes in the
market value of PDP are recorded in unrealized capital gains, net.
Investment and Home Office real estate is generally valued at depreciated
cost less mortgage encumbrances. Foreclosed real estate is generally valued
at current market value at the date of foreclosure. Depreciation of real
estate is calculated using the straight line method over the estimated
lives of the assets (generally 45 years).
Realized capital gains and losses on investments are determined using the
specific identification method. Those realized capital gains and losses
resulting from interest rate changes are deferred and amortized to income
over the stated maturity of the disposed investment utilizing the Interest
Maintenance Reserve Group Method. Unrealized capital gains and losses,
resulting from changes in the difference between cost and the carrying
value of investments, are reflected in policyholders' surplus.
DERIVATIVES
Phoenix Home Life enters into interest rate swap agreements to hedge
certain variable rate investment income streams matched against fixed rate
liability streams. Such contracts generally have maturities of 7 years or
less and the counterparties are major international financial institutions.
The differential to be received on interest rate swap agreements is
recognized in investment income over the life of the agreements.
NON-ADMITTED ASSETS
In accordance with regulatory requirements, certain assets, including
unsecured loans or receivables, prepaid expenses and furniture and
equipment are not allowable and must be charged against surplus. Changes in
the write-off of these asset balances are reported in the consolidated
statement of operations and surplus in other surplus changes, net.
SEPARATE ACCOUNTS
Separate account assets are funds of separate account contractholders and
the company segregated into accounts with specific investment objectives.
The assets are generally carried at market value. An offsetting liability
is maintained to the extent of contractholders' interests in the assets.
Appreciation or depreciation of Phoenix Home Life's interest in the
separate accounts, including undistributed net investment income, is
reflected in policyholders' surplus. Contractholders' interests in net
investment income and realized and unrealized capital gains and losses on
separate account assets are not reflected in operations.
FEDERAL INCOME TAXES
Phoenix Home Life's statutory federal income tax liability is based on
estimates of federal income tax due. There are no provisions for deferred
taxes.
Phoenix Home Life and its eligible affiliated companies have elected to
file a life/nonlife consolidated federal income tax return for the tax
years ended December 31, 1995, 1994 and 1993.
B-27(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
POLICYHOLDERS' DIVIDENDS
Dividends on all individual coverages are provided on the basis of
estimated amounts payable in the following calendar year. Dividends on all
other coverages are provided on the basis of amounts incurred for the
current year.
APPROPRIATED SURPLUS
Phoenix Home Life's policyholders' surplus includes amounts available for
contingencies, some of which are required by state regulatory authorities.
The amounts as of December 31, 1995 and 1994 were approximately $44.5
million and $41.4 million, respectively.
EMPLOYEE BENEFIT PLANS
Phoenix Home Life sponsors pension and savings plans (the Plans) for its
employees and agents and those of its subsidiaries. Effective November 1,
1995, the Plans were reclassified from single-employer plans to
multi-employer plans in conjunction with the merger of Phoenix Securities
Group and Duff & Phelps Corporation. Former employees of Phoenix Securities
Group, who were participants of the Plans prior to the merger, have
remained as participants of the Plans. The qualified plans comply with
requirements established by the Employee Retirement Income Security Act of
1974 (ERISA) and excess benefit plans provide for that portion of pension
obligations which is in excess of amounts permitted by ERISA. Phoenix Home
Life also provides certain health care and life insurance benefits for
active and retired employees. In addition, Phoenix Home Life maintains
several deferred compensation incentive plans for its officers.
B-28(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. INSURANCE LIABILITIES
RESERVES FOR FUTURE POLICY BENEFITS
The basis of assumptions for Phoenix Home Life's major categories of
reserves for future policy benefits and claims and settlements at December
31, are summarized below.
1995 1994
(IN THOUSANDS)
Life insurance:
American Experience, 2.5% to 4% $ 54,515 $ 59,657
1941 CSO, 2.25% to 4% 476,736 499,593
1958 CSO, 2% to 6% 2,679,897 2,867,403
1980 CSO, 5% to 6% 2,254,892 1,944,126
1980 CSO Select, 4.5% 8,522 6,932
1980 CSO, 3.5% to 4.5% 1,581,897 1,194,601
Various 71,941 64,504
---------- ----------
Total life insurance 7,128,400 6,636,816
---------- ----------
Annuities 646,171 706,038
---------- ----------
Claim and loss liabilities:
Disability 218,381 208,547
Accident and health 575,987 545,918
---------- ----------
Total claim and loss liabilities 794,368 754,465
---------- ----------
Supplementary contracts with
life contingencies 45,757 45,947
---------- ----------
All other 23,971 23,850
---------- ----------
Total before reinsurance ceded 8,638,667 8,167,116
Less - reinsurance ceded 1,505,110 1,418,265
---------- ----------
Reserves for future policy benefits $7,133,557 $6,748,851
========== ==========
B-29(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. INSURANCE LIABILITIES (CONTINUED)
WITHDRAWAL CHARACTERISTICS
Withdrawal characteristics of annuity actuarial reserves and deposit
liabilities as of December 31, (in thousands aside from percentages) are as
follows:
<TABLE>
<CAPTION>
1995 1994
% OF TOTAL % OF TOTAL
-------------------------- ------------------------
<S> <C> <C> <C> <C>
SUBJECT TO DISCRETIONARY WITHDRAWAL -
WITH ADJUSTMENT
- with market value adjustment $ 38,067 1.0 $ 90,178 3.0
- at book value less
surrender charge 145,871 4.0 296,295 8.0
- at market value 2,918,544 74.0 2,390,895 68.0
------------- ------ ---------- -----
Subtotal 3,102,482 79.0 2,777,368 79.0
SUBJECT TO DISCRETIONARY WITHDRAWAL -
WITHOUT ADJUSTMENT
- at book value (minimal or no
charge or adjustment) 594,839 15.0 428,986 12.0
Not subject to discretionary
withdrawal provision 264,454 6.0 332,454 9.0
------------- ------ ---------- -----
Total Annuity actuarial reserves
and deposit liabilities 3,961,775 100.0 3,538,808 100.0
------ -----
Less-reinsurance ceded 61,728 15,881
------------- ----------
Annuity actuarial reserves
and deposit liabilities $ 3,900,047 $3,522,927
============= ==========
</TABLE>
POLICYHOLDERS' FUNDS AT INTEREST
Phoenix Home Life's policyholders' funds at interest, principally group
pension reserves for guaranteed interest contracts and deposit
administration and immediate participation guarantee funds, are at a
weighted average interest rate of approximately 8.9% and 8.1% at December
31, 1995 and 1994, respectively.
At December 31, 1995, Phoenix Home Life had guaranteed interest contracts
which totaled $54.6 million. These were scheduled to mature as follows:
1996 - $19.8 million; 1997 - $16.5 million; 1998 - $3.0 million; 1999 -
$11.7 million; 2000 and beyond - $3.6 million.
In determining the fair market value of guaranteed interest contracts, a
discount rate equal to the appropriate treasury rate, plus 150 basis
points, was used to determine the present value of projected contractual
liability payments through final maturity. At December 31, 1995, the book
value of guaranteed interest contracts approximated fair value. The book
value and fair value of guaranteed interest contracts as of December 31,
1994 were $142.8 million and $140.3 million respectively.
B-30(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. INSURANCE LIABILITIES (CONTINUED)
POLICYHOLDERS' FUNDS AT INTEREST (CONTINUED)
The fair market value of deferred annuities and supplementary contracts
without life contingencies with an interest guarantee of one year or less
is valued at the amount of the policy reserve. In determining the fair
market value of deferred annuities and supplementary contracts without life
contingencies with interest guarantees greater than one year, a discount
rate equal to the appropriate treasury rate, plus 150 basis points, was
used to determine the present value of the projected account value of the
policy at the end of the current guarantee period. The book value, which
approximates fair market value, of deferred annuities is $625.9 million and
$660.9 million at December 31, 1995 and 1994, respectively. The fair market
value and book value of supplementary contracts without life contingencies
as of December 31, 1995 are $49.6 million and $49.4 million, respectively.
The fair market value and book value of supplementary contracts without
life contingencies as of December 31, 1994 were $45.7 million and $45.9
million, respectively.
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest guarantees of less than one year for which
interest credited is closely tied to rates earned on owned assets. For such
liabilities, fair market value of liabilities is assumed to be equal to the
stated statutory liability balances.
REINSURANCE FUNDS WITHHELD LIABILITY
During 1993, a universal life reinsurance contract with an unaffiliated
reinsurer was amended to include certain American Experience and 1941 CSO
traditional life reserves on a 90% coinsurance basis. A reinsurance funds
withheld liability of $680.5 million and $669.0 million was held by Phoenix
Home Life at December 31, 1995 and 1994, respectively.
As described in Note 8, HLFAC was sold to an unaffiliated company during
1993. At December 31, 1995 and 1994, a reinsurance funds withheld liability
due HLFAC, as an unauthorized reinsurer, for group life and health reserves
ceded was $11.8 million and $29.2 million, respectively.
B-31(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. INSURANCE LIABILITIES (CONTINUED)
DIRECT BUSINESS WRITTEN AND REINSURANCE
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, is set forth below.
1995 1994 1993
(IN THOUSANDS)
Direct premiums $ 1,704,381 $ 1,693,494 $ 1,761,660
Reinsurance assumed 271,498 205,387 204,711
Reinsurance ceded (296,162) (304,125) (288,731)
------------ ------------ ------------
Net premiums $ 1,679,717 $ 1,594,756 $ 1,677,640
============ ============ ============
Direct commissions and expense
allowance $ 119,265 $ 133,138 $ 134,987
Reinsurance assumed 55,971 57,104 49,772
Reinsurance ceded (56,089) (73,094) (41,713)
------------ ------------ ------------
Net commissions and
expense allowance $ 119,147 $ 117,148 $ 143,046
============ ============ ============
Direct policy and contract
claims incurred $ 583,867 $ 591,029 $ 668,980
Reinsurance assumed 256,529 167,276 157,718
Reinsurance ceded (292,357) (217,911) (213,359)
------------ ------------ ------------
Net policy and contract
claims incurred $ 548,039 $ 540,394 $ 613,339
============ ============ ============
Direct policy and contract
claims payable $ 75,466 $ 72,037 $ 75,140
Reinsurance assumed 218,045 130,823 81,690
Reinsurance ceded (170,713) (97,788) (54,859)
------------ ------------ ------------
Net policy and contract
claims payable $ 122,798 $ 105,072 $ 101,971
============ ============ ============
Direct life insurance
in force $102,606,749 $ 95,717,768 $ 87,539,515
Reinsurance assumed 36,724,852 27,428,529 24,612,071
Reinsurance ceded (34,093,090) (24,372,415) (26,619,136)
------------ ------------ ------------
Net insurance in
force $105,238,511 $ 98,773,882 $ 85,532,450
============ ============ ============
Phoenix Home Life retroceded certain insurance coverages approximating $1.4
billion, $1.7 billion and $2.0 billion of life insurance in force at
December 31, 1995, 1994 and 1993 respectively, to an off-shore subsidiary.
Irrevocable letters of credit aggregating $7.0 million at December 31, 1995
have been arranged with United States commercial banks in favor of Phoenix
Home Life to collateralize the ceded reserves.
B-32(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. INVESTMENTS
Information pertaining to Phoenix Home Life's investments, net investment
income and capital gains and losses on investments follows:
BONDS, COMMON STOCKS AND PREFERRED STOCKS
Carrying values and alternate values at December 31, for investments in
bonds, preferred stocks and common stocks are set forth below. Bonds are
generally carried at amortized cost, common stocks, at market value and
preferred stocks, generally at cost. The alternate value for bonds and
preferred stocks is fair market value and for common stocks, cost.
<TABLE>
<CAPTION>
1995 1994
CARRYING ALTERNATE CARRYING ALTERNATE
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BONDS
US Treasury bonds
and obligations of
US government
corporations and
agencies $ 572,305 $ 600,959 $ 391,801 $ 376,383
Obligations of states
and political
subdivisions:
- taxable 240,279 258,872 66,815 63,143
- non-taxable 95,043 103,157 67,688 66,666
Bonds issued by
foreign governments 59,149 63,781 45,688 39,154
Corporate bonds 2,210,972 2,404,592 2,187,444 2,112,494
Mortgage-backed
securities 2,286,119 2,363,252 2,216,812 2,030,265
----------- ----------- ----------- ------------
TOTAL BONDS $ 5,463,867 $ 5,794,613 $ 4,976,248 $ 4,688,105
=========== =========== =========== ============
COMMON STOCKS $ 247,424 $ 203,495 $ 161,772 $ 142,128
=========== =========== =========== ============
PREFERRED STOCKS $ 73,299 $ 91,400 $ 75,352 $ 75,731
=========== =========== =========== ============
</TABLE>
The fair market value on bonds include amounts for publicly traded bonds
that are based on quoted market prices, where available, or quoted market
prices of comparable instruments. Fair values of private placement bonds
are estimated using discounted cash flows that apply interest rates
currently being offered with similar terms to borrowers of similar credit
quality.
B-33(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
BONDS, COMMON STOCKS AND PREFERRED STOCKS (CONTINUED)
Fair values for defaulted bonds and preferred stocks are those values as
provided by the NAIC.
The carrying value and alternate value of bonds at December 31, 1995, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
CARRYING ALTERNATE
VALUE VALUE
(IN THOUSANDS)
Due in one year or less $ 35,979 $ 36,635
Due after one year through five years 562,144 590,095
Due after five years through ten years 1,266,895 1,367,640
Due after ten years 1,312,730 1,436,991
Mortgage-backed securities 2,286,119 2,363,252
------------ ------------
Total bonds $ 5,463,867 $ 5,794,613
============ ============
The carrying value of Phoenix Home Life's defaulted bonds is $7.0 million
and is net of reserves of $3.0 million.
Carrying values at December 31, for investments in mortgage-backed
securities, excluding U.S. government guaranteed investments, are set forth
below.
CARRYING VALUE
(IN THOUSANDS)
1995 1994
Planned Amortization Class $ 759,239 $ 750,533
Asset Backed 421,076 407,296
Mezzanine 354,497 398,064
Commercial 240,860 303,684
Sequential Pay 372,169 217,322
Pass Through 84,706 88,228
Other 53,572 51,685
------------ ------------
$ 2,286,119 $ 2,216,812
============ ============
Phoenix Home Life has 49% and 52% at December 31, 1995 and 1994,
respectively, in Planned Amortization Class and Mezzanine mortgage backed
securities which have reasonably predictable cash flows and a relatively
high degree of prepayment protection. Phoenix Home Life has limited
exposure in the more volatile residential derivative market such as
interest only, principal only or inverse float instruments.
B-34(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
REAL ESTATE AND MORTGAGE LOANS
Real estate at December 31, carried net of accumulated depreciation and
encumbrances, is summarized below:
1995 1994
(IN THOUSANDS)
Investment real estate, less accumulated
depreciation of $64,279 and $59,256,
encumbrances of $2,362 and $2,380
and impairments of $23,699 and $44,249 $ 313,680 $ 389,050
Foreclosed properties, less accumulated
depreciation of $22,217 and $17,580 and
impairments of $29,571 and
$26,849 97,491 89,117
Real estate partnerships and ventures 54,378 84,831
Property used in Phoenix Home Life's
operations less accumulated depreciation
of $43,943 and $38,490 95,031 81,087
----------- -----------
Total real estate 560,580 644,085
Mortgage loans 963,092 1,130,882
----------- -----------
Total real estate and mortgage loans $ 1,523,672 $ 1,774,967
=========== ===========
The carrying value of mortgage loans includes impairment reserves for
mortgage loans in the process of foreclosure of $4.5 million and $0.6
million at December 31, 1995 and 1994, respectively.
Mortgage loans and real estate investments are diversified by property
type, location and issuer. Mortgage loans are collateralized by the related
properties and such collateral is generally 75% of the property's value at
the time the loan is made.
B-35(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
REAL ESTATE AND MORTGAGE LOANS (CONTINUED)
Mortgage loans and real estate investments at December 31, are comprised of
the following property types and geographic regions:
MORTGAGE LOANS REAL ESTATE
1995 1994 1995 1994
(IN THOUSANDS) (IN THOUSANDS)
PROPERTY TYPE:
Home office $ 95,031 $ 81,087
Office buildings $ 191,672 $ 276,973 230,972 263,467
Retail 250,264 306,251 127,500 122,439
Apartment buildings 244,589 220,325 36,644 93,803
Industrial buildings 222,120 266,305 61,667 70,962
Other 54,447 61,028 8,766 12,327
--------- ---------- --------- ---------
Total $ 963,092 $1,130,882 $ 560,580 $ 644,085
========= ========== ========= =========
GEOGRAPHIC REGION:
Home office $ 95,031 $ 81,087
Northeast $ 233,670 $ 271,088 102,249 106,550
Southeast 250,019 233,571 94,410 101,293
North central 171,434 238,514 85,470 128,043
South central 50,819 67,303 91,670 116,191
West 257,150 320,406 91,750 110,921
--------- ---------- --------- ---------
Total $ 963,092 $1,130,882 $560,580 $ 644,085
========= ========== ======== =========
At December 31, scheduled mortgage loan maturities are as follows:
1995 1994
(IN THOUSANDS)
1995 $ 314,324
1996 $ 198,507 151,956
1997 144,030 138,914
1998 150,412 180,856
1999 102,517 116,743
Thereafter 367,626 228,089
--------- ----------
Total $ 963,092 $1,130,882
========= ==========
B-36(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
REAL ESTATE AND MORTGAGE LOANS (CONTINUED)
The carrying value of delinquent and in process of foreclosure mortgage
loans at December 31, 1995 and 1994 is $9.4 million and $32.9 million,
respectively, and is net of impairment reserves of $4.5 million and $0.6
million, respectively.
Fair market values for mortgage loans in good standing are calculated as
the present value of scheduled payments, with the discount based upon (1)
the Treasury rate comparable for the remaining loan duration, plus (2) a
spread of between 175 and 450 basis points, depending upon the internal
quality rating of the loan. For loans in foreclosure or default, values
were determined assuming principal recovery was the lower of the loan
balance or the estimated value of the underlying property. The fair market
value of mortgage loans as of December 31, 1995 and 1994 is $955.8 million
and $1,081.0 million.
The maximum and minimum lending rates for mortgage loans during 1995 were
8.15% and 7.26%, respectively.
OTHER INVESTED ASSETS
Other invested assets at December 31, are summarized below.
1995 1994
(IN THOUSANDS)
Venture capital equity partnerships $ 50,919 $ 44,404
Stock income funds 763
Transportation and equipment leases 47,810 48,318
Oil and gas partnerships 4,305 8,575
Miscellaneous 1,984 2,117
---------- ----------
Total other invested assets $ 105,018 $ 104,177
========== ==========
B-37(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
INVESTMENT GUARANTEES, INTEREST RATE SWAPS, LINES OF CREDIT AND COMMITMENTS
Phoenix Home Life has various investment guarantees with regard to certain
subsidiary and partnership activities which totalled $310.9 million and
$242.8 million at December 31, 1995 and 1994, respectively.
Phoenix Home Life adopted the disclosure requirements of FAS 119 Disclosure
About Derivative Financial Instruments and Fair Value of Financial
Instruments. The definition of derivative financial instrument excludes all
on-balance sheet receivables and payables, including those that derived
their value or contractually required cash flows from the price of some
other security or index, such as mortgage-backed securities.
Phoenix Home Life enters into interest rate swap agreements, generally
having maturities of 7 years or less, to hedge certain variable rate
investment income streams matched against fixed rate liability streams. The
notional amounts of these instruments were $18.0 million and $34.0 million
at December 31, 1995 and 1994, respectively. Average received and average
pay rates were 9.01% and 5.92%, for 1995.
The increase in net investment income related to interest rate swap
contracts was $1.2 million, $3.1 million and $3.5 million for the years
ended December 31, 1995, 1994 and 1993, respectively. The fair value of
these interest rate swap agreements as of December 31, 1995 and 1994 was
not material.
The company has also guaranteed an interest rate swap agreement entered
into by a subsidiary. This agreement has the effect of the subsidiary
paying a fixed interest rate on a notional amount of $175 million of the
subsidiary's debt.
These agreements do not require the exchange of underlying principal
amounts, and accordingly the company's maximum exposure to credit risk is
the difference in interest payments exchanged. Management of Phoenix Home
Life considers the likelihood of any material loss on these guarantees or
interest rate swaps to be remote.
Phoenix Home Life has unused lines of credit with commercial banks totaling
$176.9 million at December 31, 1995.
At December 31, 1995, the company has leases covering certain facilities,
property and equipment which in no year exceeded $16.7 million and which
approximate $45.4 million in total. Such commitments extend through the
year 2000.
B-38(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of first mortgage loans and bonds which were
non-income producing for the preceding 12 months as of December 31, are as
follows:
1995 1994
(IN THOUSANDS)
First mortgage loans $ 3,805 $ 18,371
Bonds 322
---------- -----------
Total non-income producing mortgage loans
and bonds $ 3,805 $ 18,693
========== ===========
SEPARATE ACCOUNTS
Phoenix Home Life's investments in its separate accounts at December 31,
are summarized below.
<TABLE>
<CAPTION>
1995 1994
CARRYING CARRYING
VALUE COST VALUE COST
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Pooled separate accounts $ 22,575 $ 4,646 $ 26,030 $ 6,125
Closed end real estate account 4,597 4,460 5,623 6,314
Variable accumulation account 5,842 5,000
--------- -------- --------- --------
Total investments in
separate accounts $ 33,014 $ 14,106 $ 31,653 $ 12,439
========= ======== ========= ========
</TABLE>
Phoenix Home Life's investments at December 31, 1995 in the pooled separate
accounts represent seed money which was necessary to commence their
operations. Phoenix Home Life has a 10% investment in a separate account
which invests primarily in real estate properties and mortgage loans, a
100% investment in a separate account which invests in guaranteed interest
contracts with non-affiliates and a .4% investment in the real estate
sub-fund of a variable accumulation account.
POLICY LOANS
Fair market value of policy loans, $1,658 million and $1,474 million at
December 31, 1995 and 1994, respectively, was estimated as the present
value of loan interest and policy loan repayments discounted at the ten
year treasury rate. Loan repayments were assumed only to occur as a result
of anticipated policy lapses, and it was assumed that annual policy loan
interest payments were made at the guaranteed loan rate less 17.5 basis
points at December 31, 1995 and 1994, respectively. Discounting was at the
ten year treasury rate, except for policy loans with a variable policy loan
rate. Variable policy loans have an interest rate that is reset annually
based upon market rates and therefore, book value is a reasonable
approximation of fair market value.
B-39(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
NET INVESTMENT INCOME
The principal components of net investment income for the years ended
December 31, are set forth below.
<TABLE>
<CAPTION>
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Interest on bonds $ 419,859 $ 380,345 $ 322,378
Interest on first mortgage loans 92,283 109,457 176,687
Interest on policy loans 115,055 105,678 104,002
Interest on short-term investments 21,974 11,673 14,213
Income on real estate, net of expenses
of $79,565, $82,085 and $59,918 20,243 16,478 14,470
Equity in income of affiliates 17,850 17,050 30,368
Dividends on common stocks 1,787 3,312 2,303
Dividends on preferred stocks 6,886 7,378 8,848
Net loss from other invested
assets (1,239) (1,046) (835)
Miscellaneous income 2,110 2,258 1,243
Amortization of the interest
maintenance reserve 1,824 1,644 2,425
Less:
Interest expenses 164 161 313
Investment expenses 27,769 22,398 27,555
---------- ---------- ----------
Net investment income $ 670,699 $ 631,668 $ 648,234
========== ========== ==========
</TABLE>
Income on real estate includes $18.3 million for Phoenix Home Life's
occupancy of its own properties for 1995. An offsetting amount is included
in investment and operating expenses.
Interest income of $1.0 million was not accrued on certain delinquent first
mortgage loans and defaulted bonds at December 31, 1995.
B-40(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
CAPITAL GAINS AND LOSSES
The principal components of capital gains and (losses) on investments
reflected in surplus for the years December 31, are set forth below.
<TABLE>
<CAPTION>
REALIZED UNREALIZED
1995 1994 1993 1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Bonds $ 9,865 $ (30,299) $ 15,923 $ (8,560) $ 6,967 $ 11,968
First mortgage loans (43,377) (7,149) (84,441) (1,548) (4,292) 9,674
Real estate (62,685) (29,612) (50,889) 49,923 35,856 9,067
Common stock of
consolidated subsidiaries 50,496
Investments in affiliates 122,452 (28,808) 6,000 (7,002)
Common stocks 27,828 (8,877) 20,178 23,552 2,427 7,434
Preferred stocks 515 1,302 (2,287) 153 5,963
Other invested assets 5,344 3,400 4,686 1,865 (165) 4,263
Foreign exchange (1,948) 1,096 1,432 (784)
Miscellaneous 6,066 (8,405) 88 (108) 1,976
--------- --------- ---------- ---------- --------- ---------
66,008 (81,588) (46,246) 37,412 50,354 40,583
Transfer to interest
maintenance reserve (7,276) 19,338 (11,051)
Income tax (expense) benefits (49,462) 15,538 (8,538)
--------- --------- ---------- --------- --------- ---------
Net capital gains (losses) $ 9,270 (46,712) $ (65,835) $ 37,412 $ 50,354 $ 40,583
========= ========= ========== ========= ========= =========
</TABLE>
Proceeds from sales of Phoenix Home Life's investments in bonds were $1.4
billion, $1.2 billion and $1.3 billion during 1995, 1994 and 1993. Gross
gains of $29.6 million, $15.2 million and $42.1 million and gross losses of
$19.7 million, $45.5 million and $26.2 million were realized on these sales
during 1995, 1994 and 1993.
B-41(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
CAPITAL GAINS AND LOSSES (CONTINUED)
Gross unrealized gains and losses on bonds at December 31, not reflected in
surplus, are as follows:
<TABLE>
<CAPTION>
UNREALIZED GAINS UNREALIZED LOSSES
1995 1994 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C> <C>
US Treasury bonds and
obligations of US
government corporations
and agencies $ 29,682 $ 928 $ (1,028) $ (16,346)
Obligations of states and
political subdivisions:
- taxable 18,593 1 (3,673)
- non-taxable 8,257 619 (143) (1,641)
Bonds issued by foreign
governments 6,436 (1,804) (6,534)
Corporate bonds 198,684 34,216 (5,064) (109,166)
Mortgage-backed
securities 96,506 13,686 (19,373) (200,233)
---------- --------- --------- ----------
Total $ 358,158 $ 49,450 $ (27,412) $ (337,593)
========== ========= ========= ==========
</TABLE>
5. INVESTMENTS IN AFFILIATES
PM Holdings is a wholly-owned subsidiary organized to hold investments in
companies primarily engaged in the businesses of life insurance, mortgage
loan financing, investment advisory and mutual fund distribution services,
real estate and insurance agency and brokerage operations. As previously
disclosed, the life insurance subsidiaries of PM Holdings, which are
included on a consolidated basis in these financial statements, include the
following: Phoenix American Life Insurance Company, American Phoenix Life
and Reassurance Company, Phoenix Life Insurance Company and PHL Variable
Insurance Company. PM Holding's major non-life subsidiaries include:
Phoenix Realty Group, Inc., American Phoenix Corporation, Phoenix Founders,
Inc., W.S. Griffith & Company and Financial Administrative Services, Inc.
In addition, PM Holdings owns approximately 60% of the outstanding Phoenix
Duff & Phelps Corporation common stock.
B-42(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
5. INVESTMENTS IN AFFILIATES (CONTINUED)
Prior to July 1, 1993, HLFAC was a wholly-owned subsidiary of Phoenix Home
Life. As described in Note 8, effective June 30, 1993, HLFAC was sold to an
unaffiliated company, Community Mutual Insurance Company.
American Phoenix Life and Reassurance Company (formerly Phoenix Life and
Reassurance Company), previously a wholly-owned subsidiary of Phoenix Home
Life, organized for the purpose of holding and administering
non-participating reinsurance business, became a wholly-owned subsidiary of
PM Holdings on February 28, 1994.
Phoenix Life Insurance Company, formerly a wholly-owned subsidiary of
Phoenix Home Life, incorporated on June 3, 1992, became a wholly-owned
subsidiary of PM Holdings on February 28, 1994. On December 30, 1994, the
Company obtained licensing in the State of Connecticut and plans to market
interest sensitive products in the future.
PHL Variable Insurance Company was incorporated under the laws of
Connecticut on June 1, 1994 and has obtained licensing in several states
and began offering variable insurance products directly to the public in
1995.
During 1992 through 1994, Phoenix Mutual Mortgage Funding Corporation
(PMMFC), a former non-life subsidiary of PM Holdings, exercised its option
to double its sinking fund payments on existing debt. On September 12,
1994, PMMFC retired this debt and was liquidated.
On November 1, 1995, Phoenix Securities Group, Inc. (formerly PHL Mutual
Funds Holdings, Inc.), a wholly-owned subsidiary of PM Holdings merged with
Duff & Phelps Corporation. The merged company was named Phoenix Duff &
Phelps Corporation (PDP). PM Holdings owns approximately 60% of the
outstanding common stock of the new PDP. The investment in PDP common stock
is recorded at the market value of shares owned less a discount (15%), as
determined by the NAIC Securities Valuation Office.
PM Holding's consolidated entities invest primarily in bonds, first
mortgage loans and real estate. These investments are recorded using the
same accounting practices as the parent.
B-43(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
5. INVESTMENTS IN AFFILIATES (CONTINUED)
Summarized financial information of the non-insurance indirect subsidiaries
of Phoenix Home Life at December 31, and for the years ended is as follows:
1995 1994
(IN THOUSANDS)
BALANCE SHEET
Assets:
Common stock in affiliate $ 154,275
Preferred stock in affiliate 35,000
Other investments 67,010 $ 83,160
Other assets 138,374 142,684
--------- ---------
Total assets $ 394,659 $ 225,844
========= =========
Liabilities:
Notes and bonds payable $ 250,631 $ 98,066
Other liabilities 61,083 67,209
--------- ---------
Total liabilities 311,714 165,275
Stockholder's equity 82,945 60,569
--------- ---------
Total liabilities and
stockholder's equity 394,659 225,844
========= =========
SUMMARY OF OPERATIONS 1995 1994 1993
(IN THOUSANDS)
Revenue:
Commissions and fees $ 137,492 $ 95,419 $110,576
Net investment and other income 49,155 37,740 27,166
--------- --------- --------
Total revenue 186,647 133,159 137,742
--------- --------- --------
Expenses:
Commission expenses 37,195 14,298 33,159
Interest and other expenses 132,485 100,424 81,810
Federal income tax expense 5,654 8,519 5,455
--------- --------- --------
Total expenses 175,334 123,241 120,424
--------- --------- --------
OPERATING INCOME BEFORE REALIZED
CAPITAL GAIN (LOSS) AND
MINORITY INTEREST 11,313 9,918 17,318
Realized capital gain (loss),
net of income taxes 126,852 (1,400) 11,263
Minority interest (271) 15 273
--------- --------- --------
Net income $ 137,894 $ 8,533 $ 28,854
Capital (returned to) contributed
by parent, net (59,335) 1,134 (15,067)
Other surplus changes (56,183) 28
Stockholder's equity,
beginning of year 60,569 50,874 37,087
--------- --------- --------
Stockholder's equity, end of year $ 82,945 $ 60,569 $ 50,874
========= ========= ========
B-44(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
6. FEDERAL INCOME TAXES
The federal income tax provision for 1995, 1994 and 1993 totalled $82.8
million, $12.9 million and $6.3 million, respectively, which included tax
expense or (benefits) applicable to realized capital gains or losses of
$49.5 million, $(15.5) million and $8.5 million. Significant adjustments to
book net income before federal income taxes were made for the differential
earnings rate, reduction in the policyholder dividends deduction and to
reflect the tax bases for investments, life insurance reserves, dividend
received deduction and deferred policy acquisition costs. Phoenix Home Life
had a net current federal income tax payable of $56.7 million and $20.3
million at December 31, 1995 and 1994, respectively. The federal income tax
payable is included in accrued expenses and general liabilities at December
31, 1995 and 1994.
The Internal Revenue Service (IRS) is currently examining the Company's tax
returns for 1991-1994. Management does not believe that there will be a
material adverse effect on the financial statements as a result of pending
tax matters.
7. EMPLOYEE AND OTHER POSTEMPLOYMENT BENEFITS
The company recognizes the costs of postretirement benefits other than
pensions for current retirees and fully eligible or vested employees at
transition. This liability is measured by discounting the projected future
costs of health benefits based on an estimate of health care cost trend
rates. Prior to the adoption of this standard, the company recognized such
costs as an expense when paid. The company has elected the deferred
recognition method of adoption where the postretirement benefit obligation
will be amortized as a component of net periodic cost over a period of 20
years.
Phoenix Home Life provides certain health care and life insurance benefits
for retired employees. A substantial portion of the company's employees may
become eligible for these benefits upon retirement. The health care and
life insurance plans generally require retiree contributions. These
contributions are based on years of service with the company.
The expense related to the company's postretirement benefit plans is $7.4
million and $6.8 million for the years ended December 31, 1995 and 1994,
respectively.
B-45(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
7. EMPLOYEE AND OTHER POSTEMPLOYMENT BENEFITS (CONTINUED)
The following table shows the plan's funded status at December 31, 1995
(in thousands):
Accumulated postretirement benefit obligation
other than pensions (APBO):
Retirees $ 37,900
Fully eligible active plan participants 10,500
---------
Total APBO 48,400
Unrecognized net gain 6,600
Unrecognized transition obligation (40,200)
---------
Accrued postretirement benefit liability $ 14,800
=========
The accrued postretirement benefit liability is included in accrued
expenses and general liabilities. The estimated accumulated APBO for
non-vested employees at December 31, 1995 was $25.0 million. The net 1995
periodic postretirement benefit cost is included in other operating
expenses and consisted of the following components (in thousands):
Estimated eligibility cost - 1995 $ 1,400
Interest cost on APBO 3,700
Amortization of transition obligation over 20 years 2,400
Other (100)
---------
Net periodic postretirement benefit cost $ 7,400
=========
Determination of the accumulated postretirement benefit obligation was
based on an assumed discount rate of 8% and a long-term compensation
increase of 5%. The assumed rate of future increases in per capita cost of
health benefits (the health care cost trend) was 11% in 1996 grading to an
ultimate rate of 5.5% in 2002. The assumed health care cost trend reflects
the company's current claim experience and management's expectation that
future rates of growth will decline. Increasing the health care cost trend
by one percentage point for each future year would increase the accumulated
other postretirement benefit obligation by $2.3 million and the annual
service and interest cost by $0.3 million before taxes. Gains and losses
that occur because actual experience differs from that assumed are
reflected in unrealized gain and amortized over the average future service
period of employees.
As of January 1, 1995, Phoenix Home Life's defined benefit plan, the
Phoenix Home Life Mutual Insurance Company Employee Pension Plan (Employee
Pension Plan), was overfunded by approximately $2.2 million as measured
using the plan's then projected benefit obligation.
B-46(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
7. EMPLOYEE AND OTHER POSTEMPLOYMENT BENEFITS (CONTINUED)
The Company recognizes the costs and obligations of severance, disability,
life insurance and health care benefits when paid to inactive or former
employees.
Phoenix Home Life's charge to expense for retirement benefit plans for the
year ended December 31, 1995 and 1994 was approximately $6.0 million and
$8.2 million, respectively. Certain pension costs incurred by Phoenix Home
Life are allocated to its subsidiaries.
The estimated funded status of the Employee Pension Plan as of January 1,
1995 is summarized as follows (in thousands):
Actuarial present value of benefit obligations:
Vested benefit obligation $ 160,592
Present value of non-vested benefits 15,251
---------
Accumulated benefit obligation 175,843
Present value of future salary increases 37,793
---------
Projected benefit obligation $ 213,636
=========
Plan assets at fair value at January 1 $ 215,858
=========
Plan assets at fair value in excess of
projected benefit obligation $ 2,222
=========
For the Employee Pension Plan, the present value of accumulated plan
benefits was determined based on the actual salary and service history of
the covered employees as of the date of the computation. The actuarial
present value of the plan liabilities, which considers future estimated
salary increases and other factors, is approximately $213.6 million at
January 1, 1995, the date of the most recent actuarial valuation. Actuarial
amounts were determined using 8% assumed rates of return for the qualified
employees' plan.
The assets of the company's pension and savings plans at December 31, 1994,
were invested as follows (in thousands):
Separate accounts of Phoenix Home Life $ 49,142
Phoenix Series Fund sponsored by
Phoenix Home Life 113,654
Phoenix Multi-Sector Fixed Income Fund
sponsored by Phoenix Home Life 8,683
Phoenix Worldwide Opportunities Fund
sponsored by Phoenix Home Life 6,735
Phoenix Asset Reserve
sponsored by Phoenix Home Life 700
Pension Plan Trust Account 165,664
Cash Management Account 1,052
---------
Total invested assets of pension savings plans $ 345,630
=========
B-47(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
8. DISPOSITION OF HLFAC
Effective June 30, 1993, HLFAC was sold to an unaffiliated company,
Community Mutual Insurance Company, resulting in a pre-tax realized capital
gain of $50.5 million. Results on a divisional basis for the period from
January 1, 1993 through June 30, 1993, which are included in the
consolidated statement of operations, are as follows (in thousands):
1993
Net premiums $ 171,822
Net investment income 6,437
-----------
Total income 178,259
-----------
Policy benefits 105,024
Expenses 56,000
-----------
Total benefits and expenses 161,024
-----------
Gain from operations before federal income taxes $ 17,235
===========
9. SEGMENT INFORMATION
Phoenix Home Life operates principally in six segments: Individual, Group
Life and Health, Life Reinsurance, General Lines Brokerage, Securities
Management and Real Estate Management.
Summarized financial information with respect to the business segments for
the years ended December 31, was as follows (in thousands):
1995 1994 1993
REVENUES
Individual $ 1,680,641 $ 1,595,725 $ 1,542,755
Group Life and Health 411,076 405,564 377,432
Life Reinsurance 125,657 93,346 97,177
General Lines Brokerage 23,796 21,949 14,687
Securities Management
(including PDP operations) 95,684 97,401 101,853
Real Estate Management 13,562 12,439 13,711
Other operations (HLFAC) 178,259
----------- ----------- -----------
Total revenues $ 2,350,416 $ 2,226,424 $ 2,325,874
=========== =========== ===========
B-48(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
9. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INCOME BEFORE REALIZED CAPITAL GAINS
(LOSSES), DIVIDENDS AND INCOME TAXES
Individual $ 333,524 $ 294,987 $ 260,645
Group Life and Health 17,401 17,451 28,974
Life Reinsurance 8,829 7,355 4,028
General Lines Brokerage 2,633 2,306 755
Securities Management
(including PDP operations) 19,753 22,431 33,816
Real Estate Management (184) 627 (262)
Other operations (HLFAC) 17,235
Total income before realized capital gains
(losses), dividends and income taxes $ 381,956 $ 345,157 $ 345,191
=========== =========== ===========
1995 1994
IDENTIFIABLE ASSETS
Individual $11,519,751 $10,501,598
Group Life and Health 506,712 461,540
Life Reinsurance 176,520 174,337
General Lines Brokerage 112,348 33,534
Securities Management 621,150 604,968
Real Estate Management 254,979 234,052
Total identifiable assets $ 13,191,460 $12,010,029
============ ===========
</TABLE>
10. CONTINGENCIES
The Company is a defendant in various legal actions arising from the normal
conduct of business. Management believes that, after consideration of
provisions made in the Company's financial statements, none of the actions
will have a material effect on the Company's financial position.
B-49(T)
<PAGE>
PART C
OTHER INFORMATION
Registrant hereby represents that, in imposing certain restrictions upon
withdrawals from some annuity contracts, it is relying upon the no-action letter
given to the American Council of Life Insurance (publicly available November 28,
1988) (Ref. No. 1P-6-88) regarding compliance with Section 403(b) (ii) of the
Internal Revenue Code and that it is in compliance with the conditions for
reliance upon that letter set forth therein.
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The financial statements are included in Part B. Consolidated
financial information is included in Part A.
(b) Exhibits
Items (1) through (3) are incorporated by reference to
registrant's Post-Effective Amendment No. 1 to its Form N-1
Registration Statement dated April 30, 1983 ("Post-Effective
No. 1")
(3) Form of Underwriting Agreement (Templeton Investment Plus)
and Form of Dealer Agreement (Templeton Investment Plus) are
incorporated by reference to registrant's Post-Effective
Amendment No. 13 to its Form N-4 Registration Statement
dated May 1, 1988 ("Post-Effective No. 13")
Items (4) and (5) are incorporated by reference to registrant's
Post-Effective Amendment No. 9 to its Form N-4 Registration
Statement filed October 23, 1986. Additional forms of
Contracts and Applications are incorporated by reference to
registrant's Post-Effective No. 13 and Post-Effective No. 21.
(6) Articles and By-Laws of Phoenix Home Life are incorporated
by reference to registrants Post-Effective Amendment No. 18
to its Form N-4 Registration Statement filed June 22, 1992
(7) Not Applicable
Item (8) is incorporated by reference to registrant's
Post-Effective No. 13
(9) See Item 10(c) below.
(10)(a) Written Consent of Jorden Burt Berenson & Johnson LLP
(10)(b) Written Consent of Price Waterhouse LLP
(10)(c) Written Consent as to Legality of Securities Being
Registered
(11) Not Applicable
(12) Not Applicable
(13)(a) Explanation of Yield and Effective Yield Calculation
(b) Explanation of Total Return Calculation
(14) Not Applicable
(15) Powers of Attorney filed herewith.
ITEM 25. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITIONS WITH DEPOSITOR
<S> <C> <C>
Sal H. Alfiero Chairman and Chief Executive Officer, Director
Mark IV Industries, Inc.
Amherst, NY
J. Carter Bacot Chairman and Chief Executive Officer, Director
The Bank of New York
New York, NY
Carol H. Baldi President, Carol H. Baldi, Inc. Director
New York, NY
Peter C. Browning Executive Vice President Director
Sunoco Products Company
Hartsville, SC
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C> <C>
Richard N. Cooper, Ph.D. Chairman, National Intelligence Council Director
Central Intelligence Agency
Washington, D.C.
Gordon J. Davis, Esq. Partner, LeBoeuf, Lamb, Greene Director
& MacRae
New York, NY
Robert W. Fiondella Phoenix Home Life Mutual Chairman of the Board,
Insurance Company President and Chief
Hartford, CT Executive Officer
Jerry J. Jasinowski President Director
National Association of Manufacturers
Washington, D.C.
John W. Johnstone Chairman, President and Chief Director
Executive Officer, Olin Corporation
Stamford, CT
Marilyn E. LaMarche Limited Managing Director Director
Lazard Freres & Co. LLP
New York, NY
Philip R. McLoughlin Phoenix Home Life Director
Mutual Insurance Company
Hartford, CT
Charles J. Paydos Phoenix Home Life Director
Mutual Insurance Company
Hartford, CT
Herbert Roth, Jr. Former Chairman, LFE Corporation Director
Sherborn, MA
Robert F. Vizza President and Chief Executive Officer, Director
St. Francis Hospital
Roslyn, NY
Wilson Wilde Chairman, Executive Committee, Director
The Hartford Steam Boiler
Inspection and Insurance Company
Hartford, CT
Robert G. Wilson Former General Partner, Director
Goldman Sachs
New York, NY
Richard H. Booth* Executive Vice President,
Strategic Development
Philip R. McLoughlin* Executive Vice President
and Chief Investment
Officer
Charles J. Paydos** Executive Vice President
David W. Searfoss* Executive Vice President
and Chief Financial Officer
Dona D. Young* Executive Vice President,
Individual Insurance and
General Counsel
Kelly J. Carlson* Senior Vice President,
Career Organization
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C>
Carl T. Chadburn** Senior Vice President
Robert G. Chipkin* Senior Vice President and
Corporate Actuary
Randall C. Giangiulio** Senior Vice President,
Group Sales
Joan E. Herman* Senior Vice President
Edward P. Hourihan* Senior Vice President,
Information Systems
Joseph E. Kelleher** Senior Vice President
Gary J. Laughinghouse** Senior Vice President
Robert G. Lautensack, Jr.* Senior Vice President
Scott C. Noble* Senior Vice President,
Real Estate
Frederick W. Sawyer, III* Senior Vice President
Richard C. Shaw* Senior Vice President,
International, and
Corporate Development
Simon Y. Tan* Senior Vice President,
Individual Market
Development
</TABLE>
* The principal business address of each of these individuals is One American
Row, Hartford, Connecticut 06115.
** The principal business address of each of these individuals is 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06082-2200.
ITEM 26. NOT APPLICABLE
ITEM 27. NUMBER OF CONTRACTOWNERS
On March 30, 1996, there were 70,929 Owners of Contracts offered by
Registrant.
ITEM 28. INDEMNIFICATION
Section 723 of the New York Business Corporation Law, as made applicable to
insurance companies by Section 108 of the New York Insurance Law, provides that
a corporation may indemnify any director or officer of the corporation made, or
threatened to be made, a party to an action or proceeding other than one by or
in the right of the corporation to procure a judgment in its favor, whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, by reason of the fact that he, his testator or
intestate, served such other corporation in any capacity at the request of the
indemnifying corporation.
Article VI Section 6.1 of the By-Laws of the Phoenix Home Life Mutual
Insurance Company provides: "To the full extent permitted by the laws of the
State of New York, the Company shall indemnify any person made or threatened to
be made a party to any action, proceeding or investigation, whether civil or
criminal, by reason of the fact that such person...is or was a Director or
Officer of the Company; or...serves or served another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise in any capacity
at the request of the Company, and also is or was a Director or Officer of the
Company...The Company shall also indemnify any [such] person...by reason of the
fact that such person or such person's testator or intestate is or was an
employee or agent of the Company...."
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by
C-3
<PAGE>
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
1. Phoenix Equity Planning Corporation ("PEPCO")
(a) PEPCO currently distributes securities of the Phoenix Duff &
Phelps Funds, Phoenix Funds and Phoenix Home Life Variable
Universal Life Account in addition to those of the Registrant.
(b) Directors and Officers of PEPCO
<TABLE>
<S> <C>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
- ---------------- ----------------
Martin J. Gavin*** Director and Executive Vice President
Michael E. Haylon*** Director
Philip R. McLoughlin* Director and President
Leonard J. Saltiel** Senior Vice President
William R. Moyer** Senior Vice President, Finance, and
Treasurer
William J. Newman*** Senior Vice President
G. Jeffrey Bohne**** Vice President, Transfer Agent Operations
Nancy G. Curtiss*** Vice President, Fund Accounting
Maris Lambergs** Vice President/National Sales Manager
James M. Dolan** Vice President and Compliance Officer;
Assistant Secretary
Elizabeth R. Sadowinski** Vice President, Field and Investor Services
Thomas N. Steenburg* Secretary
Eugene A. Charon** Controller
</TABLE>
- ---------------------
* The principal business address of each of these individuals is One American
Row, Hartford, Connecticut 06102-5056.
** The principal business address of each of these individuals is 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
*** The principal business address of each of these individuals is 56 Prospect
Street, Hartford, Connecticut 06115-0480.
**** The principal business address is 101 Munson Street, Greenfield,
Massachusetts 01302-0810.
(c) Compensation received by PEPCO during Registrant's last fiscal
year:
<TABLE>
<CAPTION>
NAME OF NET UNDERWRITING COMPENSATION BROKERAGE
PRINCIPAL UNDERWRITER DISCOUNTS AND COMMISSIONS ON REDEMPTION COMMISSIONS COMPENSATION
- --------------------- ------------------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
PEPCO $27,332,540 -0- -0- -0-
</TABLE>
PEPCO received no other out-of-pocket compensation from Phoenix Home
Life.
C-4
<PAGE>
2. Franklin Templeton Distributors, Inc. ("FTD")
(a) FTD currently distributes securities of Templeton Global Investment
Trust, Templeton Growth Fund, Inc., Templeton Funds, Inc., Templeton Smaller
Companies Growth Fund, Inc., Templeton Income Trust, Templeton Real Estate
Securities Fund, Templeton Capital Accumulator Fund, Inc., Templeton Developing
Markets Trust, Templeton American Trust, Inc., Templeton Institutional Funds,
Inc., Templeton Global Opportunities Trust, AGE High Income Fund, Inc., Franklin
Balance Sheet Investment Fund, Franklin California Tax Free Income Fund, Inc.,
Franklin California Tax Free Trust, Franklin Custodian Funds, Inc., Franklin
Equity Fund, Franklin Federal Tax-Free Income Fund, Franklin Gold Fund, Franklin
Investors Securities Trust, Franklin Managed Trust, Franklin Municipal
Securities Trust, Franklin New York Tax-Free Income Fund, Franklin New York
Tax-Free Trust, Franklin Premier Return Fund, Franklin Strategic Series,
Franklin Tax-Advantaged High Yield Securities Fund, Franklin Tax-Advantaged
International Bond Fund, Franklin Tax-Advantaged U.S. Government Securities
Fund, Franklin Tax-Free Trust, Institutional Fiduciary Trust, Franklin Value
Investors Trust, Franklin Templeton International Trust, Franklin Templeton
Global Trust, Franklin Templeton Money Fund Trust, Franklin Money Fund, Franklin
Federal Money Fund, Franklin Tax Exempt Money Fund, Franklin Real Estate
Securities Trust and Franklin Templeton Japan Fund, in addition to those of
the Registrant.
(b) Directors and Officers of FTD
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH
BUSINESS ADDRESS UNDERWRITER
- ---------------- -----------
<S> <C>
Charles B. Johnson Director and Chairman of the Board
Gregory E. Johnson President
Rupert H. Johnson, Jr. Director and Executive Vice President
Harmon E. Burns Director and Executive Vice President
Kenneth V. Domingues Senior Vice President
Kenneth A. Lewis Treasurer
Deborah R. Gatzek Senior Vice President and Assistant Secretary
Charles E. Johnson Senior Vice President
William J. Lippman Senior Vice President
Edward V. McVey Senior Vice President
Richard C. Stoker Senior Vice President
James K. Blinn Vice President
Richard O. Conboy Vice President
Jimmy A. Escobedo Vice President
Loretta Fry Vice President
Robert N. Geppner Vice President
Michael Hackett Vice President
Peter Jones Vice President
Phil J. Kearns Vice President
Kenneth Leder Vice President
Jack Lemein Vice President
John R. McGee Vice President
Thomas M. Mistele Vice President
Harry G. Mumford Vice President
Vivian J. Palmieri Vice President
Kent P. Strazza Vice President
Leslie M. Kratter Secretary
John R. Kay Assistant Vice President
Karen DeBellis Assistant Treasurer
Phillip A. Scatena Assistant Treasurer
</TABLE>
The principal business address of each of these individuals is 700 Central
Avenue, St. Petersburg, Florida 33701.
(c) Compensation received by FTD during Registrant's last fiscal year:
C-5
<PAGE>
<TABLE>
<CAPTION>
NAME OF NET UNDERWRITING COMPENSATION BROKERAGE
PRINCIPAL UNDERWRITER DISCOUNTS AND COMMISSIONS ON REDEMPTION COMMISSIONS COMPENSATION
- --------------------- ------------------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
FTD $1,720,728 -0- -0- -0-
</TABLE>
FTD received no other out-of-pocket compensation from Phoenix Home Life.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Item 7, Part II of Registrant's Post-Effective Amendment No. 1 to Form N-1
is hereby incorporated by reference.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements contained therein are never more
than 16 months old for so long as payments under the Contracts
may be made;
(b) to include as part of any application to purchase a Contract
offered by the prospectus, a space that an applicant can check
to request a Statement of Additional Information;
(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this
form promptly upon written or oral request.
C-6
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused
this Amendment to its Registration Statement to be signed on its behalf, in the
City of Hartford and State of Connecticut on this 23rd day of April, 1996.
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By: *Robert W. Fiondella
-----------------------------
Robert W. Fiondella
Chief Executive Officer
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
By: *Robert W. Fiondella
-----------------------------
Robert W. Fiondella
Chief Executive Officer
of Phoenix Home Life Mutual Insurance Company
As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed below by the following persons in the
capacities indicated with Phoenix Home Life Mutual Insurance Company on this
23rd day of April, 1996.
Signature Title
--------- -----
- ----------------------------- Director
*Sal H. Alfiero
- ----------------------------- Director
*J. Carter Bacot
- ----------------------------- Director
*Carol H. Baldi
- ----------------------------- Director
*Peter C. Browning
- ----------------------------- Director
*Richard N. Cooper
- ----------------------------- Director
*Gordon J. Davis
- ----------------------------- Chairman of the Board,
*Robert W. Fiondella President and Chief
Executive Officer
(Principal Executive Officer)
- ----------------------------- Director
*Jerry J. Jasinowski
S-1
<PAGE>
- ----------------------------- Director
*John W. Johnstone
- ----------------------------- Director
*Marilyn E. LaMarche
- ----------------------------- Director
*Philip R. McLoughlin
- ----------------------------- Director
*Charles J. Paydos
- ----------------------------- Director
*Herbert Roth, Jr.
- ----------------------------- Director
*Robert F. Vizza
- ----------------------------- Director
*Wilson Wilde
- ----------------------------- Director
*Robert G. Wilson
By: /S/ DONA D. YOUNG
----------------------------------------
*DONA D. YOUNG, as Attorney in Fact Pursuant to Powers of Attorney, copies of
which are filed herewith.
S-2
<PAGE>
EXHIBIT 10(A)
WRITTEN CONSENT OF JORDEN BURT BERENSON & JOHNSON LLP
<PAGE>
JORDAN BURT BERENSON & JOHNSON LLP
1025 Thomas Jefferson Street, N.W.
Suite 400-East
Washington, D.C. 20007-0805
(202) 965-8100 Telecopier (202) 965-8104
April 19, 1996
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, CT 06102
Ladies and Gentlemen:
We hereby consent to the use of our name under the caption "Legal Matters"
in the Prospectus contained in Post-Effective Amendment No. 24 to the
Registration Statement on Form N-4 (Registration No. 2-78020 and 811-3488) filed
by Phoenix Home Life Mutual Insurance Company and Phoenix Home Life Variable
Accumulation Account with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended.
Very truly yours,
/s/ Jorden Burt Berenson & Johnson LLP
JORDEN BURT BERENSON & JOHNSON LLP
<PAGE>
EXHIBIT 10(B)
WRITTEN CONSENT OF PRICE WATERHOUSE LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 24 to the registration
statement on Form N-4 (the "Registration Statement") of our reports dated
February 13, 1996 and February 14, 1996, relating to the financial statements of
Phoenix Home Life Variable Accumulation Account and the financial statements of
Phoenix Home Life Mutual Insurance Company, respectively, which appear in such
Statement of Additional information, and to the incorporation by reference of
our reports into the Prospectus which constitutes part of this Registration
Statement. We also consent to the reference to us under the heading "Experts" in
such Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Hartford, Connecticut
April 17, 1996
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 24 to the registration
statement on Form N-4 (the "Registration Statement") of our reports dated
February 14, 1996, relating to the financial statements of Phoenix Home Life
Variable Accumulation Account and the financial statements of Phoenix Home Life
Mutual Insurance Company which appear in such Statement of Additional
information, and to the incorporation by reference of our reports into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Statement of
Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Hartford, Connecticut
April 17, 1996
<PAGE>
EXHIBIT 10(C)
WRITTEN CONSENT OF COUNSEL AS TO
LEGALITY OF SECURITIES BEING REGISTERED
<PAGE>
April 18, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
REGISTRATION NOS. 2-78020 AND 811-3488
Dear Sirs:
As Counsel to Phoenix Home Life Mutual Insurance Company, depositor
named in the herein referenced Registration Statement, and in order to render
the within opinion, we have reviewed those certain variable annuity contracts
(the "Contracts") which are the subject of the above-captioned registration, the
Form N-4 Registration Statement filed contemporaneously herewith, the Charter
and By-Laws of Phoenix Home Life Mutual Insurance Company effective as of the
date hereof, relevant proceedings of the Board of Directors thereof, and the
provisions of New York insurance law effective as of the date hereof, as we have
deemed to be relevant to the issuance of the Contracts.
Based upon the foregoing, we are of the opinion that each of the
Contracts, when issued, will have been validly issued, and will, subject to
governing law and judicial interpretations thereof, constitute a legal and
binding obligation of Phoenix Home Life Mutual Insurance Company.
We further consent to the use of this opinion as an exhibit to the
herein described Registration Statement and to the undersigned's being named as
an expert under "Experts" therein.
Very truly yours,
/s/ Richard J. Wirth
Richard J. Wirth, Counsel
Phoenix Home Life
Mutual Insurance Company
<PAGE>
EXHIBIT 13(A)
EXPLANATION OF YIELD AND EFFECTIVE YIELD CALCULATION
<PAGE>
EXPLANATION OF YIELD AND EFFECTIVE YIELD CALCULATION
MONEY MARKET SUB-ACCOUNT
The following is an example of this yield calculation for the Sub-account
based on a seven-day period ending December 31, 1995.
CONTRACTS
ASSESSING
.85% EXPENSE
CHARGE
------
Assumptions:
Value of a hypothetical pre-existing account with
exactly one unit at the beginning of the period............ 1.998416
Value of the same account (excluding capital changes)
at the end of the seven-day period......................... 2.000092
Calculation:
Ending account value.......................................... 2.000092
Less beginning account value.................................. 1.998416
Net change in account value................................... 0.001676
Base period return:
(adjusted change/beginning account value)..................... 0.000839
Current yield = return x (365/7) =................................ 4.37%
Effective yield = [(1 + return) 365/7] - 1 =...................... 4.47%
<PAGE>
EXHIBIT 13(B)
EXPLANATION OF TOTAL RETURN CALCULATION
<PAGE>
EXPLANATION OF TOTAL RETURN CALCULATION
BIG EDGE PLUS
GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
UNITS
WITHDRAWN
NUMBER OF TO PAY
UNITS PER ANNUAL 12/31/95 ENDING AVERAGE
BEGINNING INITIAL OFFERING INITIAL POLICY TOTAL 12/31/95 SURRENDER REAR END REDEMPTION CUM ANNUAL
DATE INVESTMENT PRICE PMT FEE(a) SHARES NAV VALUE LOAD(B) VALUE RETURN RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/90 5yrs 1,000.00 3.440679 290.640 1.593339 289.047 8.093932 2,339.53 21.06 2,318.47 131.85% 18.32%
</TABLE>
Computation of Average annual return:
R = ((ERV/II)^ (1/n))-1 where,
R = average annual total return
ERV = ending redeemable value
II =initial investment
N = number of years
(a) Represents the average charge for administrative fees per $1,000 invested.
For this example, the administrative fee is $1.75 which equals the $35
annual fee divided by average account dollars x $1,000. Fees are paid
each year through the redemption of units.
(b) Assumes rear end load of 1% in year five. For this example, the year 5
load is $21.06 or 1% on 90% of the surrender value. See "Sales Charges"
section in the prospectus.
<PAGE>
EXHIBIT 15
POWERS OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Sal H. Alfiero , Director April 15, 1996
- ----------------------------------
Sal H. Alfiero
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/J. Carter Bacot , Director April 15, 1996
- ----------------------------------
J. Carter Bacot
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Carol H. Baldi , Director April 15, 1996
- ----------------------------------
Carol H. Baldi
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Peter C. Browning , Director April 15, 1996
- -------------------------------
Peter C. Browning
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Richard N. Cooper , Director April 15, 1996
- -------------------------------
Richard N. Cooper
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Gordon J. Davis , Director April 15, 1996
- ---------------------------------
Gordon J. Davis
<PAGE>
POWER OF ATTORNEY
I, the undersigned Chairman of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Robert W. Fiondella , Chairman of the Board, April 15, 1996
- -------------------------------- President and Chief Executive
Robert W. Fiondella Officer
Phoenix Home Life Mutual
Insurance Company
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
/s/Jerry J. Jasinowski , Director April 15, 1996
- ---------------------------------
Jerry J. Jasinowski
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/John W. Johnstone , Director April 15, 1996
- -------------------------------
John W. Johnstone
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Marilyn E. LaMarche , Director April 15, 1996
- -----------------------------
Marilyn E. LaMarche
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Philip R. McLoughlin , Director April 15, 1996
- ------------------------------
Philip R. McLoughlin
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Charles J. Paydos , Director April 15, 1996
- ---------------------------------
Charles J. Paydos
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Herbert Roth, Jr. , Director April 15, 1996
- ---------------------------------
Herbert Roth, Jr.
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Robert F. Vizza , Director April 15, 1996
- ---------------------------------
Robert F. Vizza
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Wilson Wilde , Director April 15, 1996
- ---------------------------------
Wilson Wilde
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home Life
Mutual Insurance Company, hereby constitute and appoint Patricia O. McLaughlin,
Lewis A. Singer, Richard J. Wirth and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to variable annuity contracts
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given by
me with respect to said Phoenix Home Life Mutual Insurance Company, provided
that this revocation shall not affect the exercise of such prior powers prior to
the date hereof.
WITNESS my hand and seal on the date set forth below.
/s/Robert G. Wilson , Director April 15, 1996
- --------------------------------
Robert G. Wilson
