As filed with the Securities and Exchange Commission on April 30, 1997
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. 26 |X|
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 28
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:
LYNN STONE, ESQUIRE RICHARD J. WIRTH, ESQ.
BLAZZARD, GRODD & HASENAUER, P.C. PHOENIX HOME LIFE
943 POST ROAD EAST MUTUAL INSURANCE COMPANY
WESTPORT, CT 06880 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, 1997 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
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 FOR REGISTRANT'S MOST RECENT
FISCAL YEAR WAS FILED ON FEBRUARY 21, 1997.
================================================================================
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
POST-EFFECTIVE AMENDMENT NO. 26 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 and the Account; The Fund; Voting Rights
Portfolio Companies
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
Subaccounts .................................................... 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>
THE NEW YORK INDIVIDUAL CONTRACT ISSUED ON OR
AFTER MAY 1, 1997 AS DESCRIBED ON PAGE 21 IS
PENDING STATE APPROVAL. FOR INFORMATION,
PLEASE CALL (800) 447-4312.
P-1
<PAGE>
[VERSION A]
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
One American Row MAIL OPERATIONS (VPMO):
Hartford, CT 06115 P.O. Box 8027
Boston, MA 02266-8027
VARIABLE ACCUMULATION DEFFERED ANNUITY CONTRACTS
PROSPECTUS
May 1, 1997
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").
The Contracts provide for both an Accumulation Period and an Annuity Period.
Purchase payments under the Contract are flexible. Contracts may be purchased by
individuals or on a group basis by employers to fund tax-qualified pension
profit-sharing or tax sheltered annuity (TSAs) plans. For information on
Individual Contracts issued in New York on or after May 1, 1997, see "New York
Individual Contracts issued on or after May 1, 1997," and 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 ("check-o-matic" as described under "Purchase of Contracts") is
elected, the minimum initial purchase payment required is $25. For Individual
Retirement Accounts (IRAs) including SEP IRAs and SIMPLE 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
Subaccounts of the Phoenix Home Life Variable Accumulation Account (the
"Account") and/or to the Guaranteed Interest Account ("GIA") (see Appendix A) as
specified by the Contract Owner in the application for the Contract. The Account
is divided into Subaccounts, each of which invests in a corresponding series
of The Phoenix Edge Series Fund, Wanger Advisors Trust or Templeton Variable
Products Series Fund (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 Subaccount 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 GIA, 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 a
current Prospectus for each of 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 ("SEC") in a Statement of Additional Information, dated
May 1, 1997, 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 at the address or telephone number set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
Heading Page
SUMMARY OF EXPENSES....................................... 3
FINANCIAL HIGHLIGHTS...................................... 8
SPECIAL TERMS............................................. 11
SUMMARY .................................................. 11
PERFORMANCE HISTORY....................................... 13
THE VARIABLE ACCUMULATION ANNUITY ........................ 15
PHOENIX AND THE ACCOUNT................................... 15
THE PHOENIX EDGE SERIES FUND.............................. 16
WANGER ADVISORS TRUST..................................... 16
TEMPLETON VARIABLE PRODUCTS SERIES FUND................... 16
PURCHASE OF CONTRACTS .................................... 17
DEDUCTIONS AND CHARGES.................................... 17
Premium Tax .......................................... 17
Sales Charges ........................................ 17
Charges for Mortality and Expense Risks .............. 18
Charges for Administrative Services .................. 18
Other Charges ........................................ 18
THE ACCUMULATION PERIOD................................... 19
Accumulation Units ................................... 19
Accumulation Unit Values ............................. 19
Transfers ............................................ 19
Surrender of Contract; Partial Withdrawals ........... 20
Lapse of Contract .................................... 20
Payment Upon Death Before Maturity Date .............. 20
NEW YORK INDIVIDUAL CONTRACTS ISSUED ON OR AFTER
MAY 1, 1997............................................... 21
Sales Charges......................................... 21
Daily Administrative Fee.............................. 21
Maturity Date......................................... 21
Payment Upon Death Before Maturity Date............... 21
GROUP CONTRACTS........................................... 22
Allocated Group Contracts ............................ 22
Unallocated Group Contracts .......................... 22
THE ANNUITY PERIOD ....................................... 23
Variable Accumulation Annuity Contracts............... 23
Annuity Options ...................................... 23
Option A--Life Annuity With Specified Period Certain.. 24
Option B--Non-Refund Life Annuity .................... 24
Option D--Joint and Survivor Life Annuity ............ 24
Option E--Installment Refund Life Annuity ............ 24
Option F--Joint and Survivor Life Annuity With
Specified Period Certain .......................... 24
Option G--Payments for Specified Period .............. 24
Option H--Payments of Specified Amount ............... 24
Option I--Variable Payment Life Annuity with Ten Year
Period Certain .................................... 24
Option J--Joint Survivor Variable Payment Life Annuity
with Ten Year Period Certain ...................... 24
Option K--Variable Payment Annuity for a Specified
Period ............................................ 24
Option L--Variable Payment Life Expectancy Annuity.... 24
Option M--Unit Refund Variable Payment Life Annuity... 25
Option N--Variable Payment Non-Refund Life Annuity.... 25
Other Options and Rates............................... 25
Other Conditions ..................................... 25
Payment Upon Death After Maturity Date ............... 25
VARIABLE ACCOUNT VALUATION PROCEDURES..................... 25
MISCELLANEOUS PROVISIONS ................................. 25
Assignment............................................ 25
Deferment of Payment ................................. 25
Free Look Period...................................... 26
Amendments to Contracts .............................. 26
Substitution of Fund Shares .......................... 26
Ownership of the Contract ............................ 26
FEDERAL INCOME TAXES ..................................... 26
Introduction ......................................... 26
Tax Status............................................ 26
Taxation of Annuities in General...................... 26
Surrenders or Withdrawals Prior to the Contract
Maturity Date ................................... 27
Surrenders or Withdrawals On or After the Contract
Maturity Date ................................... 27
Penalty Tax on Certain Surrenders and Withdrawals . 27
Additional Considerations............................. 27
Diversification Standards ............................ 28
Qualified Plans....................................... 29
Tax Sheltered Annuities ........................... 29
Keogh Plans........................................ 29
Individual Retirement Accounts .................... 30
Corporate Pension and Profit-Sharing Plans ........ 30
Deferred Compensation Plans with Respect to
Service for State and Local Governments and
Tax Exempt Organizations ........................ 30
Penalty Tax on Certain Surrenders and Withdrawals
from Qualified Contracts......................... 30
Seek Tax Advice.................................... 30
SALES OF VARIABLE ACCUMULATION CONTRACTS ................. 31
STATE REGULATION ......................................... 31
REPORTS .................................................. 31
VOTING RIGHTS ............................................ 31
TEXAS OPTIONAL RETIREMENT PROGRAM ........................ 31
LITIGATION ............................................... 32
LEGAL MATTERS ............................................ 32
STATEMENT OF ADDITIONAL INFORMATION....................... 32
APPENDIX A ............................................... 33
APPENDIX B ............................................... 34
2
<PAGE>
<TABLE>
SUMMARY OF EXPENSES(1)
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES ALL SUBACCOUNTS
---------------
<S> <C>
Sales Charge Imposed on Purchases................................................ None
Deferred Sales Load (as a percentage of amount surrendered):(2)
Age of Payment in Complete Years 0-1......................................... 6%
Age of Payment in Complete Years 1-2......................................... 5%
Age of Payment in Complete Years 2-3......................................... 4%
Age of Payment in Complete Years 3-4......................................... 3%
Age of Payment in Complete Years 4-5......................................... 2%
Age of Payment in Complete Years 5-6......................................... 1%
Age of Payment in Complete Years 7 and thereafter............................ None
Exchange Fee
Current...................................................................... 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)(3)
Account Fees and Expenses..................................................... None
Total Separate Account Annual Expenses........................................ 1.25% or 1.00% (depending on Contract form)(3)
</TABLE>
<TABLE>
FUND ANNUAL EXPENSES
(as a percentage of Fund average net assets)
<CAPTION>
OTHER EXPENSES(4)
INVESTMENT RULE 12B-1 (AFTER EXPENSE TOTAL ANNUAL
SERIES MANAGEMENT FEES FEES REIMBURSEMENT) EXPENSES
- ------ --------------- ---- -------------- --------
<S> <C> <C> <C> <C>
Growth Series................................. .63% N/A .09% .72%
Multi-Sector Fixed Income Series.............. .50% N/A .15% .65%
Strategic Allocation Series .................. .58% N/A .12% .70%
Money Market Series........................... .40% N/A .15% .55%
International Series ......................... .75% N/A .29% 1.04%
Balanced Series............................... .55% N/A .13% .68%
Real Estate Securities Series................. .75% N/A .25% 1.00%
Strategic Theme Series........................ .75% N/A .25% 1.00%
Aberdeen New Asia Series...................... 1.00% N/A .25% 1.25%
Wanger U.S. Small Cap Series.................. .99% N/A .22% 1.21%
Wanger International Small Cap Series......... 1.30% N/A .49% 1.79%
Templeton Stock Series(5,6)................... .70% .25% .18% 1.13%
Templeton Asset Allocation Series(5,6)........ .61% .25% .17% 1.03%
Templeton International Series(5,6)........... .70% .25% .18% 1.13%
Templeton Developing Markets Series(5,7)...... 1.25% .25% .53% 2.03%
</TABLE>
(1) The information included on this page does not apply to New York Individual
Contracts issued on or after May 1, 1997 or Group Contracts.
(2) 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.")
(3) 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.")
(4) Each Series pays a portion or all of its total operating expenses other than
the management fee. The Growth, Multi-Sector, Allocation, Money Market and
Balanced Series will pay up to .15%; the International Series will pay up to
.40%; the Real Estate, Theme and Asia 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%. Absent expense reimbursement, total fund operating
expenses were .67%, 1.43%, 1.28% and 2.87%, for Multi-Sector, Real Estate,
Theme and Asia, respectively. Expenses may be higher or lower than those
shown but are subject to expense limitations as noted.
(5) Inclusion of this Subaccount began on May 1, 1997. Because Class 2 shares
were not offered until May 1, 1997, the figures for "Management Fees" and
"Other Expenses" are based on the historical expenses of the Fund's Class 1
shares for the fiscal year ended December 31, 1996, except as otherwise
noted. Class 2 shares of the Fund have a distribution plan or "Rule 12b-1
Plan" which is described in the Fund's prospectus.
(6) Management fees and total operating expenses have been restated to reflect
the management fee schedule which was approved by shareholders and which
takes effect on May 1, 1997. Actual management fees and total fund operating
expenses before May 1, 1997 were lower.
(7) The Adviser waived a portion of its fees during 1996. After the reduction,
actual management fees and total operating expenses of the portfolio in 1996
were 1.17% and 1.95% of net assets, respectively. This agreement has been
terminated.
3
<PAGE>
SUMMARY OF EXPENSES(1)
EXAMPLES:
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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth Series................................................... $ 68 $ 96 $125 $245
Multi-Sector Fixed Income Series................................ 67 94 121 238
Strategic Allocation Series.................................... 68 96 124 243
Money Market Series............................................. 66 91 116 227
International Series............................................ 71 106 141 278
Balanced Series................................................. 68 95 123 241
Real Estate Securities Series................................... 71 105 139 274
Strategic Theme Series.......................................... 71 105 139 274
Aberdeen New Asia Series........................................ 73 112 151 299
Wanger U.S. Small Cap Series.................................... 73 111 149 295
Wanger International Small Cap Series........................... 78 127 178 350
Templeton Stock Series(2)....................................... 72 108 145 287
Templeton Asset Allocation Series(2)............................ 71 105 140 277
Templeton International Series(2)............................... 72 108 145 287
Templeton Developing Markets Series(2).......................... 81 134 189 372
</TABLE>
If you do not surrender your Contract: You would pay the following expenses
on a $1,000 investment assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth Series................................................... $ 22 $ 67 $115 $245
Multi-Sector Fixed Income Series................................ 21 65 111 238
Strategic Allocation Series.................................... 22 66 114 243
Money Market Series............................................. 20 62 106 227
International Series............................................ 25 77 131 278
Balanced Series................................................. 21 66 113 241
Real Estate Securities Series................................... 25 75 129 274
Strategic Theme Series.......................................... 25 75 129 274
Aberdeen New Asia Series........................................ 27 83 141 299
Wanger U.S. Small Cap Series.................................... 27 82 139 295
Wanger International Small Cap Series........................... 32 99 168 350
Templeton Stock Series(2)....................................... 26 79 135 287
Templeton Asset Allocation Series(2)............................ 25 76 130 277
Templeton International Series(2)............................... 26 79 135 287
Templeton Developing Markets Series(2).......................... 35 106 179 372
</TABLE>
(1) The information included on this page does not apply to New York Individual
Contracts issued on or after May 1, 1997 or Group Contracts.
(2) Inclusion of this Subaccount began on May 1, 1997.
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 tables reflect expenses of the 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" and Appendix B.)
The Examples 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.")
4
<PAGE>
SUMMARY OF EXPENSES
INDIVIDUAL CONTRACTS ISSUED IN NEW YORK ON OR AFTER MAY 1, 1997
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES ALL SUBACCOUNTS
---------------
<S> <C>
Sales Charge Imposed on Purchases................................................... None
Deferred Sales Load (as a percentage of amount surrendered):(1)
Age of Payment in Complete Years 0-1............................................ 7%
Age of Payment in Complete Years 1-2............................................ 6%
Age of Payment in Complete Years 2-3............................................ 5%
Age of Payment in Complete Years 3-4............................................ 4%
Age of Payment in Complete Years 4-5............................................ 3%
Age of Payment in Complete Years 5-6............................................ 2%
Age of Payment in Complete Years 6-7............................................ 1%
Age of Payment in Complete Years 7+thereafter................................... None
Exchange Fee
Current......................................................................... 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%
Account Fees and Expenses
Daily Administrative Fee..................................................... 0.125%
Total Separate Account Annual Expenses.......................................... 1.375%
</TABLE>
FUND ANNUAL EXPENSES
(as a percentage of Fund average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES(2)
INVESTMENT RULE 12B-1 (AFTER EXPENSE TOTAL ANNUAL
SERIES MANAGEMENT FEES FEES REIMBURSEMENT) EXPENSES
- ------ --------------- ---- -------------- --------
<S> <C> <C> <C> <C>
Growth Series................................. .63% N/A .09% .72%
Multi-Sector Fixed Income Series.............. .50% N/A .15% .65%
Strategic Allocation Series................... .58% N/A .12% .70%
Money Market Series........................... .40% N/A .15% .55%
International Series.......................... .75% N/A .29% 1.04%
Balanced Series............................... .55% N/A .13% .68%
Real Estate Securities Series................. .75% N/A .25% 1.00%
Strategic Theme Series........................ .75% N/A .25% 1.00%
Aberdeen New Asia Series...................... 1.00% N/A .25% 1.25%
Wanger U.S. Small Cap Series.................. .99% N/A .22% 1.21%
Wanger International Small Cap Series......... 1.30% N/A .49% 1.79%
Templeton Stock Series(3,4)................... .70% .25% .18% 1.13%
Templeton Asset Allocation Series(3,4)........ .61% .25% .17% 1.03%
Templeton International Series(3,4)........... .70% .25% .18% 1.13%
Templeton Developing Markets Series(3,5)...... 1.25% .25% .53% 2.03%
</TABLE>
(1) A sales charge is 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.")
(2) Each Series pays a portion or all of its total operating expenses other than
the management fee. The Growth, Multi-Sector, Allocation, Money Market and
Balanced Series will pay up to .15%; the International Series will pay up to
.40%; the Real Estate, Theme and Asia 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%. Absent expense reimbursement, total fund operating
expenses were .67%, 1.43%, 1.28% and 2.87%, for Multi-Sector, Real Estate,
Theme and Asia, respectively. Expenses may be higher or lower than those
shown but are subject to expense limitations as noted.
(3) Inclusion of this Subaccount began on May 1, 1997. Because Class 2 shares
were not offered until May 1, 1997, the figures for "Management Fees" and
"Other Expenses" are based on the historical expenses of the Fund's Class 1
shares for the fiscal year ended December 31, 1996, except as otherwise
noted. Class 2 shares of the Fund have a distribution plan or "Rule 12b-1
Plan" which is described in the Fund's prospectus.
(4) Management fees and total operating expenses have been restated to reflect
the management fee schedule which was approved by shareholders and which
takes effect on May 1, 1997. Actual management fees and total fund operating
expenses before May 1, 1997 were lower.
(5) The Adviser waived a portion of its fees during 1996. After the reduction,
actual management fees and total operating expenses of the portfolio in 1996
were 1.17% and 1.95% of net assets, respectively. This agreement has been
terminated.
5
<PAGE>
SUMMARY OF EXPENSES
INDIVIDUAL CONTRACTS ISSUED IN NEW YORK ON OR AFTER MAY 1, 1997
EXAMPLES:
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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth Series................................................... $ 78 $110 $142 $258
Multi-Sector Fixed Income Series................................ 78 108 138 251
Strategic Allocation Series.................................... 78 109 141 256
Money Market Series............................................. 77 105 133 241
International Series............................................ 81 119 157 290
Balanced Series................................................. 78 109 140 254
Real Estate Securities Series................................... 81 118 155 286
Strategic Theme Series.......................................... 81 118 155 286
Aberdeen New Asia Series........................................ 83 125 168 311
Wanger U.S. Small Cap Series.................................... 83 124 166 307
Wanger International Small Cap Series........................... 89 140 193 362
Templeton Stock Series(1)....................................... 82 122 162 299
Templeton Asset Allocation Series(1)............................ 81 119 157 289
Templeton International Series(1)............................... 82 122 162 299
Templeton Developing Markets Series(1).......................... 91 147 204 383
</TABLE>
If you annuitize 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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth Series................................................... $ 78 $110 $121 $258
Multi-Sector Fixed Income Series................................ 78 108 117 251
Strategic Allocation Series.................................... 78 109 120 256
Money Market Series............................................. 77 105 112 241
International Series............................................ 81 119 137 290
Balanced Series................................................. 78 109 119 254
Real Estate Securities Series................................... 81 118 135 286
Strategic Theme Series.......................................... 81 118 135 286
Aberdeen New Asia Series........................................ 83 125 147 311
Wanger U.S. Small Cap Series.................................... 83 124 145 307
Wanger International Small Cap Series........................... 89 140 174 362
Templeton Stock Series(1)....................................... 82 122 141 299
Templeton Asset Allocation Series(1)............................ 81 119 137 289
Templeton International Series(1)............................... 82 122 141 299
Templeton Developing Markets Series(1).......................... 91 147 185 383
</TABLE>
(1) Inclusion of this Subaccount began on May 1, 1997.
6
<PAGE>
SUMMARY OF EXPENSES
INDIVIDUAL CONTRACTS ISSUED IN NEW YORK ON OR AFTER MAY 1, 1997
EXAMPLE:
If you do not surrender your Contract: You would pay the following expenses on a
$1,000 investment assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth Series................................................... $ 23 $ 71 $121 $258
Multi-Sector Fixed Income Series................................ 22 69 117 251
Strategic Allocation Series.................................... 23 70 120 256
Money Market Series............................................. 21 66 112 241
International Series............................................ 26 80 137 290
Balanced Series................................................. 23 70 119 254
Real Estate Securities Series................................... 26 79 135 286
Strategic Theme Series.......................................... 26 79 135 286
Aberdeen New Asia Series........................................ 28 87 147 311
Wanger U.S. Small Cap Series.................................... 28 85 145 307
Wanger International Small Cap Series........................... 34 103 174 362
Templeton Stock Series(1)....................................... 27 83 141 299
Templeton Asset Allocation Series(1)............................ 26 80 137 289
Templeton International Series(1)............................... 27 83 141 299
Templeton Developing Markets Series(1).......................... 36 110 185 383
</TABLE>
(1) Inclusion of this Subaccount began on May 1, 1997.
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 tables reflect expenses of the Account as well as
the Funds. (See "Deductions and Charges" in this Prospectus and in the Fund
Prospectuses.)
The Examples 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.")
7
<PAGE>
PHOENIX VARIABLE ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
Following are the financial highlights for the period indicated. As used
below, the designation "VA1" refers to Contracts assessing an expense risk
charge of .60% and "VA2," "VA3" and "GSE" refer to Contracts assessing an
expense risk charge of .85% and not including a daily administration fee. (See
"Deductions and Charges.") For Contracts issued in New York on or after May 1,
1997, no data is shown in this table.
<TABLE>
MONEY MARKET SUBACCOUNT
VA1
------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period............ $2.045097 $1.954211 $1.900873 $1.866308 $1.820007 $1.734559 $1.619595 $1.497413 $1.407621 $1.334900
Unit value, end of
period............... $2.126440 $2.045097 $1.954211 $1.900873 $1.866308 $1.820007 $1.734559 $1.619595 $1.497413 $1.407621
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000).... 3,460 3,457 4,649 4,617 8,601 10,289 13,110 13,319 12,813 6,829
</TABLE>
<TABLE>
MONEY MARKET SUBACCOUNT
VA2, VA3 & GSE
------------------------------------------------------------------------------------------------------
<CAPTION>
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 1/29/87 TO
1996 1995 1994 1993 1992 1991 1990 1989 1988 12/31/87
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period............ $2.000092 $1.915930 $1.868172 $1.838756 $1.797544 $1.717328 $1.607305 $1.489598 $1.403711 $1.339975
Unit value, end of
period............... $2.074515 $2.000092 $1.915930 $1.868172 $1.838756 $1.797544 $1.717328 $1.607305 $1.489598 $1.403711
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000).... 40,530 37,026 38,007 30,143 27,132 15,331 8,723 4,057 1,741 290
</TABLE>
<TABLE>
GROWTH SUBACCOUNT
VA1
------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period............ $8.273644 $6.384494 $6.355486 $5.362579 $4.910837 $3.474821 $3.373255 $2.501870 $2.431756 $2.296978
Unit value, end of
period............... $9.222031 $8.273644 $6.384494 $6.355486 $5.362579 $4.910837 $3.474821 $3.373255 $2.501870 $2.431756
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000) 7,215 8,153 8,351 8,671 8,652 7,280 6,658 6,726 6,243 7,046
</TABLE>
<TABLE>
GROWTH SUBACCOUNT
VA2, VA3 & GSE
-------------------------------------------------------------------------------------------------------
<CAPTION>
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 1/29/87 TO
1996 1995 1994 1993 1992 1991 1990 1989 1988 12/31/87
---- ---- ---- ---- ---- ---- ---- ---- ---- --------
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period............ $8.093932 $6.261062 $6.248053 $5.284626 $4.851447 $3.440659 $3.348325 $2.489403 $2.425706 $2.555569
Unit value, end of
period............... $8.999162 $8.093932 $6.261062 $6.248053 $5.284626 $4.851447 $3.440659 $3.348325 $2.489403 $2.425706
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000).... 100,883 94,344 76,226 52,751 29,531 12,343 4,415 1,792 655 376
</TABLE>
<TABLE>
MULTI-SECTOR SUBACCOUNT (FORMERLY THE "BOND" SUBACCOUNT)
VA1
-----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period........... $3.379335 $2.762836 $2.952674 $2.572692 $2.360698 $1.993832 $1.913888 $1.786177 $1.632777 $1.631508
Unit value, end of
period............... $3.761132 $3.379335 $2.762836 $2.952674 $2.572692 $2.360698 $1.993832 $1.913888 $1.786177 $1.632777
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000).... 4,114 4,418 4,839 5,798 5,539 5,541 5,085 6,195 5,585 4,991
</TABLE>
8
<PAGE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
MULTI-SECTOR SUBACCOUNT (FORMERLY THE "BOND" SUBACCOUNT)
VA2, VA3 & GSE
-------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, FROM
----------------------- INCEPTION
1/29/87 TO
1996 1995 1994 1993 1992 1991 1990 1989 1988 12/31/87
---- ---- ---- ---- ---- ---- ---- ---- ---- --------
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period............ $3.306804 $2.710153 $2.902941 $2.535693 $2.332392 $1.974705 $1.900136 $1.777482 $1.628898 $1.679498
Unit value, end of
period............... $3.671202 $3.306804 $2.710153 $2.902941 $2.535693 $2.332392 $1.974705 $1.900136 $1.777482 $1.628898
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000)...... 27,079 25,435 20,608 19,839 10,612 3,480 1,438 856 396 120
</TABLE>
<TABLE>
ALLOCATION SUBACCOUNT (FORMERLY THE "TOTAL RETURN" SUBACCOUNT)
VA1
-----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period............ $3.520947 $3.008513 $3.081973 $2.804149 $2.559543 $1.999109 $1.909058 $1.608209 $1.587193 $1.424283
Unit value, end of
period............... $3.801441 $3.520947 $3.008513 $3.081973 $2.804149 $2.559543 $1.999109 $1.909058 $1.608209 $1.587193
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000).... 15,341 18,038 19,981 23,027 23,424 22,916 22,667 24,606 31,107 33,612
</TABLE>
<TABLE>
ALLOCATION SUBACCOUNT (FORMERLY THE "TOTAL RETURN " SUBACCOUNT)
VA2, VA3 & GSE
----------------------------------------------------------------------------------------------------------
<CAPTION>
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 1/29/87 TO
1996 1995 1994 1993 1992 1991 1990 1989 1988 12/31/87
---- ---- ---- ---- ---- ---- ---- ---- ---- --------
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period............ $3.442824 $2.948151 $3.028790 $2.762529 $2.527829 $1.979067 $1.894604 $1.600110 $1.583050 $1.587758
Unit value, end of
period............... $3.707833 $3.442824 $2.948151 $3.028790 $2.762529 $2.527829 $1.979067 $1.894604 $1.600110 $1.583050
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000).... 69,901 73,165 68,860 53,869 30,431 13,524 7,031 3,797 3,139 1,604
</TABLE>
<TABLE>
INTERNATIONAL SUBACCOUNT
VA1
-------------------------------------------------------------------------
<CAPTION>
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 5/1/90 TO
1996 1995 1994 1993 1992 1991 12/31/90
---- ---- ---- ---- ---- ---- --------
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C>
of period............ $1.375527 $1.267735 $1.279733 $0.933515 $1.081746 $0.912543 $1.000000
Unit value, end of
period............... $1.615890 $1.375527 $1.267735 $1.279733 $0.933515 $1.081746 $0.912543
========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000).... 3,337 3,762 5,926 3,309 1,401 816 490
</TABLE>
<TABLE>
INTERNATIONAL SUBACCOUNT
VA2, VA3 & GSE
-------------------------------------------------------------------------
<CAPTION>
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 5/1/90 TO
1996 1995 1994 1993 1992 1991 12/31/90
---- ---- ---- ---- ---- ---- --------
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C>
of period............ $1.356645 $1.253391 $1.268491 $0.927578 $1.077492 $0.911158 $1.000000
Unit value, end of
period............... $1.589771 $1.356645 $1.253391 $1.268491 $0.927578 $1.077492 $0.911158
========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000).... 80,535 78,985 88,400 39,929 12,307 4,364 1,616
</TABLE>
9
<PAGE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
BALANCED SUBACCOUNT
---------------------------------------------------------------------------------------------------------
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
1996 1995 1994 1993 12/31/92 1996 1995 1994 1993 12/31/92
---- ---- ---- ---- -------- ---- ---- ---- ---- --------
Unit value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period............ $1.373104 $1.124370 $1.168840 $1.086965 $1.000000 $1.360620 $1.116862 $1.163951 $1.085113 $1.000000
Unit value, end of
period............... $1.503025 $1.373104 $1.124370 $1.168840 $1.086965 $1.485649 $1.360620 $1.116862 $1.163951 $1.085113
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Number of units
outstanding (000).... 3,271 4,027 4,732 5,601 3,283 118,572 126,919 130,797 123,929 39,740
</TABLE>
<TABLE>
REAL ESTATE SUBACCOUNT
-----------------------------------------------------------
VA1 VA2, VA3 & GSE
--------------------------- ---------------------------
<CAPTION>
FROM INCEPTION FROM INCEPTION
YEAR ENDED 5/1/95 TO YEAR ENDED 5/1/95 TO
12/31/96 12/31/95 12/31/96 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Unit value, beginning of period..................... $1.155453 $1.000000 $1.168262 $1.000000
Unit value, end of period........................... $1.522792 $1.155453 $1.535829 $1.168262
========= ========= ========= =========
Number of units outstanding (000)................... 189 34 12,614 7,009
</TABLE>
<TABLE>
INTERNATIONAL SMALL CAP SUBACCOUNT
-----------------------------------------------------------
VA1 VA2, VA3 & GSE
--------------------------- ---------------------------
<CAPTION>
FROM INCEPTION FROM INCEPTION
YEAR ENDED 5/1/95 TO YEAR ENDED 5/1/95 TO
12/31/96 12/31/95 12/31/96 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Unit value, beginning of period..................... $1.239576 $1.000000 $1.334598 $1.000000
Unit value, end of period........................... $1.620307 $1.239576 $1.740203 $1.334598
========= ========= ========= =========
Number of units outstanding (000)................... 1,632 194 37,820 7,738
</TABLE>
<TABLE>
U.S. SMALL CAP SUBACCOUNT
----------------------------------------------------------
VA1 VA2, VA3 & GSE
-------------------------- ---------------------------
<CAPTION>
FROM INCEPTION FROM INCEPTION
YEAR ENDED 5/1/95 TO YEAR ENDED 5/1/95 TO
12/31/96 12/31/95 12/31/96 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Unit value, beginning of period...................... $1.157802 $1.000000 $1.155807 $1.000000
Unit value, end of period............................ $1.680622 $1.157802 $1.673666 $1.155807
========= ========= ========= =========
Number of units outstanding (000).................... 2,888 460 58,623 17,039
</TABLE>
<TABLE>
THEME SUBACCOUNT
-----------------------------------------------
VA1 VA2, VA3 & GSE
-------------- --------------
<CAPTION>
FROM INCEPTION FROM INCEPTION
1/29/96 TO 1/29/96 TO
12/31/96 12/31/96
-------- --------
<S> <C> <C>
Unit value, beginning of period............................ $1.000000 $1.000000
Unit value, end of period.................................. $1.086084 $1.090843
========== =========
Number of units outstanding (000).......................... 621 17,311
</TABLE>
<TABLE>
ASIA SUBACCOUNT
-----------------------------------------------
VA1 VA2, VA3 & GSE
-------------- --------------
<CAPTION>
FROM INCEPTION FROM INCEPTION
9/17/96 TO 9/17/96 TO
12/31/96 12/31/96
-------- --------
<S> <C> <C>
Unit value, beginning of period............................ $1.000000 $1.000000
Unit value, end of period.................................. $0.997626 $0.998026
========= =========
Number of units outstanding (000).......................... 395 8,125
</TABLE>
TEMPLETON STOCK SUBACCOUNT
TEMPLETON ASSET ALLOCATION SUBACCOUNT
TEMPLETON INTERNATIONAL SUBACCOUNT
TEMPLETON DEVELOPING MARKETS SUBACCOUNT
These Subaccounts commenced operations as of May 1, 1997; accordingly,
data for these Subaccounts is not yet available.
10
<PAGE>
SPECIAL TERMS
- --------------------------------------------------------------------------------
As used in this Prospectus, the following terms have the indicated meanings:
ACCOUNT: Phoenix Home Life Variable Accumulation Account.
ACCOUNT VALUE: The value of all assets held in the Account.
ACCUMULATION UNIT: A standard of measurement with respect to each Subaccount
used in determining the value of a Contract and the interest in the
Subaccounts prior to the commencement of annuity payments.
ACCUMULATION UNIT VALUE: The value of one Accumulation Unit was set at $1.0000
on the date assets were first allocated to each Subaccount. 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.
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 all Accumulation Units
held in the Subaccounts of the Account and the value held in the GIA.
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 Subaccount.
FUNDS: The Phoenix Edge Series Fund, the Wanger Advisors Trust and the Templeton
Variable Products Series Fund.
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.
GIA: An allocation option under which amounts deposited are guaranteed to earn
a fixed rate of interest. Excess interest also may be credited, in the sole
discretion of Phoenix.
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 and
$10,000 annually is 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 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: Phoenix Home Life Mutual Insurance Company.
VALUATION DATE: A Valuation Date is every day the New York Stock Exchange is
open for trading.
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 Subaccounts.
VPMO: The Phoenix Variable Products Mail Operation Division of Phoenix that
receives and processes incoming mail for Variable Products Operations.
VPO: The Variable Products Operations Division of Phoenix.
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
Account consists of several Subaccounts, which invest their assets exclusively
in specified Series of the Funds. Each Series has a distinct investment
objective. You choose the Subaccount or Subaccounts in which you wish to
invest among the available Subaccounts and/or the GIA when you make your
purchase payments under the Contract. You also may transfer amounts held under
the Contract among the available Subaccounts and/or the GIA. 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.
11
<PAGE>
The Contract is eligible for purchase as non-tax qualified retirement plans
by individuals. Contracts also are 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) IRA plans satisfying the requirements of Section 408 of the Code 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 Subaccount(s) and/or are deposited in the
GIA, as chosen by the Owner. (See "Purchases of Contracts" and "The Accumulation
Period.")
IS THERE A GUARANTEED OPTION?
Yes. A Contract Owner may elect to have payments allocated to the
GIA. Amounts allocated to the GIA earn a fixed rate of interest and
Phoenix also may, in its sole discretion, credit excess interest. (See
Appendix A.)
WHAT ARE THE INVESTMENT OPTIONS UNDER THE CONTRACT?
The Contract currently offers a number of series of The Phoenix
Edge Series Fund, Wanger Advisors Trust and Templeton Variable Products Series
Fund as investment options. Each series has a specific investment objective.
(For a complete list of the series offered and a brief discussion of their
respective investment objectives, see "The Phoenix Edge Series Fund," "Wanger
Advisors Trust" and "Templeton Variable Products Series Fund.")
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. No sales charge will be imposed in the event that the Annuitant
dies before the date that annuity payments will commence. 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 is a mortality and expense risk fee and a daily administrative fee
assessed against the Account. The daily administrative fee applies only to
Individual Contracts issued in New York on or after May 1, 1997. (See "Charges
for Administrative Services.")
ARE THERE ANY OTHER CHARGES OR DEDUCTIONS?
In most states, premium taxes are imposed when a Contract is annuitized
rather than when purchase payments are made by the Contract Owner. Phoenix will
reimburse itself on the date of a partial withdrawal, surrender of the Contract,
Maturity Date or payment of death proceeds. (See "Premium Tax.")
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. (See "Other Charges.")
For a more complete description of the fees chargeable to the
Account, see "Deductions and Charges."
WHAT ARE THE MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS?
For non-tax qualified and IRA 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 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 IRAs, a minimum annual premium of $1,000 must be paid.
For Contracts with a Maturity Date in the first Contract year, a minimum
initial purchase payment of $10,000 is required.
MAY I ALLOCATE MY PURCHASE PAYMENTS AMONG AVAILABLE OPTIONS?
You may choose the amount of each purchase payment to be
directed to each Subaccount and/or to the GIA, provided that the minimum
initial purchase payment requirements have been met.
(See "Purchase of Contracts.")
MAY I TRANSFER AMOUNTS ALLOCATED TO A SUBACCOUNT OR THE GIA?
You may transfer some or all of the Contract Value among one
or more available Subaccounts and/or the GIA 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. Currently, there is not a
limit to the number of transfers per Contract Year, however, Phoenix may in the
future 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 GIA as
described in Appendix A.
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<PAGE>
DOES THE CONTRACT PROVIDE FOR PAYMENT UPON DEATH?
The Contract provides that if the Owner and Annuitant are the same and the
Owner/Annuitant dies before annuity payments begin and there is no surviving
Joint Owner, payment to the 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 Subaccounts 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 GIA, 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 GIA 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. The fixed payment schedule is a
part of the Contract and the Owner also may be given the opportunity to choose
another annuity option available from Phoenix 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
assessed in connection with withdrawals (see "Federal Income Taxes").
CAN THE CONTRACT LAPSE?
If on any Valuation Date the total Contract Value equals zero, or, the
premium tax reimbursement due on a surrender or partial withdrawal is greater
than or equal to the Contract Value, 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.
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
From time to time the Account may include the performance history of any or
all Subaccounts in advertisements, sales literature or reports. PERFORMANCE
INFORMATION ABOUT EACH SUBACCOUNT IS BASED ON PAST PERFORMANCE ONLY AND IS NOT
AN INDICATION OF FUTURE PERFORMANCE. Performance information may be expressed as
yield and effective yield of the Money Market Subaccount, as yield of the
Multi-Sector Subaccount and as total return of any Subaccount. For the
Multi-Sector Subaccount, quotations of yield will be based on all investment
income per unit earned during a given 30-day period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing the net investment income by the maximum offering
price per unit on the last day of the period.
When a Subaccount advertises its total return, it will usually be calculated
for one year, five years and ten years or since inception if the Subaccount has
not been in existence for at least ten years. Total return is measured by
comparing the value of a hypothetical $1,000 investment in the Subaccount at the
beginning of the relevant period to the value of the investment at the end of
the period, assuming the reinvestment of all distributions at net asset value
and the deduction of all applicable Contract charges except for premium taxes
(which vary by state) at the beginning of the relevant period.
For those Subaccounts 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 Subaccount 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 which are not subject to a daily
administration fee, calculated as described above.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED 12/31/96
-----------------------------
COMMENCE- 10 LIFE OF
SUBACCOUNT MENT DATE 1 YEAR 5 YEARS YEARS FUND
- ---------- --------- ------ ------- ----- ----
Multi-Sector........ 1/1/83 5.85% 9.14% 8.31% 9.54%
Balanced............ 5/1/92 4.10% N/A N/A 8.26%
Strategic Allocation 9/17/84 2.68% 7.61% 9.92% 11.09%
Growth.............. 1/1/83 6.00% 12.80% 14.52% 16.82%
International....... 5/1/90 11.73% 7.73% N/A 7.03%
Money Market........ 10/10/82 (1.12%) 2.55% 4.36% 5.06%
Real Estate......... 5/1/95 25.34% N/A N/A 25.58%
Theme............... 1/29/96 N/A N/A N/A 2.54%
Asia................ 9/17/96 N/A N/A N/A (6.19%)
U.S. Small Cap...... 5/1/95 38.10% N/A N/A 31.87%
Int'l. Small Cap.... 5/1/95 23.27% N/A N/A 34.74%
TPT Asset Alloc.(1). 11/28/88 11.94% 12.26% N/A 10.76%
TPT Stock(1)........ 11/4/88 15.29% 14.78% N/A 11.79%
TPT International(1) 5/1/92 16.82% N/A N/A 13.32%
TPT Dev. Mkts.(1)... 9/15/96 N/A N/A N/A (5.12%)
(1) Because Templeton Class 2 shares were not offered until May 1, 1997,
performance shown for periods prior to that date represents the historical
results of Class 1 shares. These returns have not been adjusted to reflect
the Rule 12b-1 fee for Class 2, which is 0.25% annually. There was no Rule
12b-1 fee for Class 1 shares. The returns for Class 2 shares, had they been
available during the period shown, would have been reduced by the amount of
the Rule 12b-1 fees, compounded over the relevant period, and will be
affected in the future by these fees.
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<PAGE>
ANNUAL TOTAL RETURN(1)
----------------------
MULTI- ALLO- INTER- MONEY
YEAR SECTOR BALANCED CATION GROWTH NATIONAL MARKET
- ---- ------ -------- ------ ------ -------- ------
1983.... 4.64% N/A N/A 31.26% N/A 7.03%
1984.... 10.02% N/A (1.45%) 9.29% N/A 8.85%
1985.... 19.02% N/A 25.76% 33.26% N/A 6.69%
1986.... 17.82% N/A 14.25% 18.98% N/A 5.19%
1987.... (0.18%) N/A 11.18% 5.61% N/A 5.13%
1988.... 8.01% N/A 1.08% 2.63% N/A 6.12%
1989.... 6.90% 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%
1996.... 11.02% 9.19% 7.70% 11.18% 17.18% 3.72%
REAL U.S. INT'L.
YEAR ESTATE THEME ASIA SMALL CAP SMALL CAP
- ---- ------ ----- ---- --------- ---------
1995.... 16.83% N/A N/A 15.07% 33.41%
1996.... 31.46% 9.08%(1) (0.20%)(1) 44.80% 30.39%
1 From inception
TPT TPT TPT TPT
YEAR ALLOCATION(2) STOCK(2) INT'L(2) DEV. MKTS.(2)
- ---- ------------ ------- ------- ------------
1989.... 11.91% 13.26% N/A N/A
1990.... (9.13%) (12.17%) N/A N/A
1991.... 26.16% 25.97% N/A N/A
1992.... 6.76% 5.81% (5.92%) N/A
1993.... 24.61% 32.41% 45.55% N/A
1994.... (4.19%) (3.44%) (3.47%) N/A
1995.... 21.05% 23.72% 14.34% N/A
1996.... 17.41% 20.92% 22.52% 0.99%
(1) Sales Charges have not been deducted from the Annual Total Return.
(2) Because Templeton Class 2 shares were not offered until May 1, 1997,
performance shown for periods prior to that date represents the historical
results of Class 1 shares. These returns have not been adjusted to reflect
the Rule 12b-1 fee for Class 2, which is 0.25% annually. There was no Rule
12b-1 fee for Class 1 shares. The returns for Class 2 shares, had they been
available during the period shown, would have been reduced by the amount of
the Rule 12b-1 fees, compounded over the relevant period, and will be
affected in the future by these fees.
Below are quotations of average annual total return for New York Contracts
issued on or after May 1, 1997. These figures have been restated to reflect an
average annual total return assuming the assessment of an .85% expense charge
and .125% daily administration fee, calculated as described above based on past
performance of existing Subaccounts as data for these Subaccounts are not yet
available.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED 12/31/96
-----------------------------
COMMENCE- 10 LIFE OF
SUBACCOUNT MENT DATE 1 YEAR 5 YEARS YEARS FUND
- ---------- --------- ------ ------- ----- ----
Multi-Sector....... 1/1/83 4.73% 8.81% 8.17% 9.39%
Balanced........... 5/1/92 3.00% N/A N/A 7.93%
Allocation......... 9/17/84 1.59% 7.29% 9.79% 10.96%
Growth............. 1/1/83 4.89% 12.45% 14.38% 16.66%
International...... 5/1/90 10.56% 7.40% N/A 6.74%
Money Market....... 10/10/82 (2.16%) 2.23% 4.23% 4.93%
Real Estate........ 5/1/95 24.01% N/A N/A 24.72%
Theme.............. 1/29/96 N/A N/A N/A 2.12%
Asia............... 9/17/96 N/A N/A N/A (6.52%)
U.S. Small Cap..... 5/1/95 36.64% N/A N/A 30.96%
Int'l. Small Cap... 5/1/95 23.03% N/A N/A 34.42%
TPT Asset Alloc.(2) 11/28/88 10.74% 11.92% N/A 10.73%
AVERAGE ANNUAL TOTAL RETURN (CONT'D)
FOR THE PERIOD ENDED 12/31/96
-----------------------------
COMMENCE- 10 LIFE OF
SUBACCOUNT MENT DATE 1 YEAR 5 YEARS YEARS FUND
- ---------- --------- ------ ------- ----- ----
TPT Stock(2)........ 11/4/88 14.07% 14.43% N/A 11.66%
TPT International(2) 5/1/92 15.58% N/A N/A 12.97%
TPT Dev. Mkts.(2)... 9/15/96 N/A N/A N/A (5.45%)
ANNUAL TOTAL RETURN(1)
----------------------
MULTI- ALLO- INTER- MONEY
YEAR SECTOR BALANCED CATION GROWTH NATIONAL MARKET
- ---- ------ -------- ------ ------ -------- ------
1983.... 4.56% N/A N/A 31.10% N/A 6.85%
1984.... 9.82% N/A (1.51%) 9.16% N/A 8.72%
1985.... 18.97% N/A 25.61% 33.09% N/A 6.56%
1986.... 17.67% N/A 14.11% 18.83% N/A 5.06%
1987.... (0.30%) N/A 11.02% 5.47% N/A 5.05%
1988.... 8.98% N/A 0.94% 2.50% N/A 5.98%
1989.... 6.76% N/A 18.28% 34.35% N/A 7.71%
1990.... 3.78% N/A 4.32% 2.62% (8.98%) 6.74%
1991.... 17.96% N/A 27.56% 40.81% 18.11% 4.53%
1992.... 8.58% 8.43% 9.15% 8.79% (14.03%) 2.16%
1993.... 14.35% 7.13% 9.50% 18.08% 36.59% 1.47%
1994.... (6.78%) (4.17%) (2.75%) 0.08% (1.31%) 2.42%
1995.... 21.89% 21.69% 16.63% 29.13% 8.12% 4.23%
1996.... 10.89% 9.06% 7.57% 11.06% 17.05% 3.60%
REAL U.S. INT'L.
YEAR ESTATE THEME ASIA SMALL CAP SMALL CAP
- ---- ------ ----- ---- --------- ---------
1995.... 16.75% N/A N/A 14.97% 33.35%
1996.... 31.31% 8.98% (0.23%) 44.64% 30.24%
TPT TPT TPT TPT
YEAR ALLOCATION(2) STOCK(2) INT'L(2) DEV. MKTS.(2)
- ---- ------------- ------- ------- ------------
1989.... 11.77% 13.12% N/A N/A
1990.... (9.24%) (12.28%) N/A N/A
1991.... 26.01% 25.81% N/A N/A
1992.... 6.62% 5.68% (7.00%) N/A
1993.... 24.46% 32.25% 45.37% N/A
1994.... (4.31%) (3.56%) (3.59%) N/A
1995.... 20.90% 23.57% 14.19% N/A
1996.... 17.26% 20.77% 22.37% 0.96%
(1) Sales Charges have not been deducted from the Annual Total Return.
(2) Because Templeton Class 2 shares were not offered until May 1, 1997,
performance shown for periods prior to that date represents the historical
results of Class 1 shares. These returns have not been adjusted to reflect
the Rule 12b-1 fee for Class 2, which is 0.25% annually. There was no Rule
12b-1 fee for Class 1 shares. The returns for Class 2 shares, had they been
available during the period shown, would have been reduced by the amount of
the Rule 12b-1 fees, compounded over the relevant period, and will be
affected in the future by these fees.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
Current yield for the Money Market Subaccount is based upon the income
earned by the Subaccount 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 Subaccount 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 Subaccount used for
illustration purposes are based on the consideration of a hypothetical
14
<PAGE>
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 Subaccount 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
Subaccount based on a seven-day period ending December 31, 1996.
Assumptions:
CONTRACTS
CONTRACTS ASSESSING .85%
ASSESSING EXPENSE CHARGE
.85% EXPENSE & .125% DAILY
CHARGE ADMIN. FEE
------ ----------
Value of hypothetical pre-existing account
with exactly one unit at the beginning of
the period:..................... 2.073039 1.050796
Value of the same account (excluding
capital changes) at the end of the
seven-day period:............... 2.074515 1.051525
Calculation:
Ending account value............... 2.074515 1.051525
Less beginning account value....... 2.073039 1.050796
Net change in account value........ 0.001476 0.000729
Base period return:
(adjusted change/beginning account
value).......................... 0.000712 0.000694
Current yield = return x (365/7) =. 3.71% 3.62%
Effective yield = [(1 + return)365/7] -1 = 3.78% 3.68%
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 Subaccount'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 Composite Stock Price Index ("S&P
500") and the Europe Australia Far East Index, and also may 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 publications. Lipper and CDA are
widely recognized independent rating/ranking services. A Subaccount's
performance may also be compared to that of other investment or savings
vehicles.
Advertisements, sales literature and other communications may contain
information about any Series' or Advisers' current investment strategies and
management style. Current strategies and style may change to respond to a
changing market and economic conditions. From time to time, the Series may
discuss specific portfolio holdings or industries in such communications. To
illustrate components of overall performance, the Series may separate their
cumulative and average annual returns into income results and capital gains or
losses; or cite separately as a return figure the equity or bond portion of a
Series' portfolio; or compare a Series' equity or bond return figure to
well-known indices of market performance including but not limited to the S&P
500, Dow Jones Industrial Average, First Boston High Yield Index, and Solomon
Brothers Corporate and Government Bond indices.
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.
THE VARIABLE ACCUMULATION ANNUITY
- --------------------------------------------------------------------------------
The individual deferred variable accumulation annuity contract (the
"Contract") issued by Phoenix may be significantly different from a fixed
annuity contract in that, unless the GIA is selected, it is the Owner and
Annuitant under a Contract who assume the risk of investment gain or loss rather
than Phoenix. To the extent that payments are not allocated to the GIA, the
amounts which will be available for annuity payments under a Contract will
depend on the investment performance of the amounts allocated to the
Subaccounts of the Account. Upon the maturity of a Contract, the amounts held
under a Contract will continue to be invested in the Account and the GIA and
monthly annuity payments will vary in accordance with the investment experience
of the selected Subaccounts. However, a fixed annuity may be elected, in which
case Phoenix 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 Contract Value
among the GIA or the Multi-Sector, Money Market, Growth, Allocation,
International, Balanced, Real Estate, Theme, Asia, U.S. Small Cap, International
Small Cap, Templeton Stock, Templeton Asset Allocation, Templeton
International and Templeton Developing Markets Subaccounts.
PHOENIX AND THE ACCOUNT
- --------------------------------------------------------------------------------
Phoenix 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 is
the nation's 14th largest mutual life insurance company and has total assets
of approximately $15.5 billion. Phoenix 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 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 1940 Act. Registration under the 1940 Act does
not involve supervision of the management or investment practices or policies of
the Account or Phoenix.
On July 1, 1992, the Account's domicile was transferred to New York. Under
New York law and the Contracts, 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. The assets of the Account may not be charged with liabilities arising
out of any other business that Phoenix may conduct. Obligations under the
Contracts are obligations of Phoenix.
15
<PAGE>
Contributions to the GIA are not invested in the Account; rather, they
become part of the Phoenix general account (the "General Account"). The General
Account supports all insurance and annuity obligations of Phoenix 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 GIA,
see Appendix A.
THE PHOENIX EDGE SERIES FUND
- --------------------------------------------------------------------------------
Certain Subaccounts of the Account invest in corresponding Series of The
Phoenix Edge Series Fund. The investment adviser of all of the Series (except
Real Estate and Asia Series) is Phoenix Investment Counsel, Inc. ("PIC"). The
investment adviser of the Real Estate Series is Phoenix Realty Securities, Inc.
("PRS") and for the Asia Series, the adviser is Phoenix-Aberdeen International
Advisors, LLC ("PAIA"). The investment objective of each of the Series of the
Fund is as follows:
(1) MULTI-SECTOR FIXED INCOME ("MULTI-SECTOR") SERIES, FORMERLY THE "BOND"
SERIES: The investment objective of the Multi-Sector 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 invests
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 invests principally in
common stocks of corporations believed by management to offer growth
potential.
(4) STRATEGIC ALLOCATION ("ALLOCATION") SERIES, FORMERLY THE "TOTAL
RETURN" SERIES: The investment objective of the Allocation 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 Allocation Series invests in stocks, bonds and money market
instruments in accordance with the 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 SECURITIES ("REAL ESTATE") SERIES: The investment objective
of the 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.
(8) STRATEGIC THEME ("THEME") SERIES: The investment objective of the
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.
(9) ABERDEEN NEW ASIA ("ASIA") SERIES: The investment objective of the Asia
Series is to seek long-term capital appreciation. It is intended that
this Series will invest primarily in a diversified portfolio of equity
securities of issuers located in at least three different countries
throughout Asia, excluding Japan.
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 investment objective of
each of the Series is as follows:
(1) WANGER U.S. SMALL CAP ("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) WANGER INTERNATIONAL SMALL CAP ("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.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- --------------------------------------------------------------------------------
The investment adviser for the Templeton Stock, Templeton Asset
Allocation and Templeton International Series is Templeton
Investment Counsel, Inc. ("TICI"). Templeton Asset Management, Ltd.
is the investment adviser for the Templeton Developing Markets
Series. The investment objectives and polices of each of the Series
follows:
(1) TEMPLETON STOCK ("TPT STOCK") SERIES: Pursues capital growth through a
policy of investing primarily in common stocks issued by companies, large and
small, in various nations throughout the world.
(2) TEMPLETON ASSET ALLOCATION ("TPT ALLOCATION") SERIES: Seeks a high level
of total return through a flexible policy of investing globally 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
16
<PAGE>
capitalize on total return potential produced by changing economic conditions
throughout the world.
(3) TEMPLETON INTERNATIONAL ("TPT INTERNATIONAL") SERIES: 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 also may 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.
(4) TEMPLETON DEVELOPING MARKETS ("TPT DEV. MKTS.") SERIES:
Seeks long-term capital appreciation by investing primarily in equity
securities of issuers in countries having developing markets.
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 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 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 (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 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 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 Subaccount or in the GIA. 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. 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
Subaccount and/or to the GIA, 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 VPMO by notice of election in a form satisfactory to Phoenix
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 within those states and the insurance tax laws of those
states. Phoenix 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."
SALES CHARGES
A deduction for contingent deferred sales charges (also referred to in this
Prospectus as sales or 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 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, follows:
AGE OF DEPOSIT IN CONTINGENT DEFERRED
COMPLETE YEARS FROM SALES CHARGE AS A
PAYMENT DATE UNIT PERCENTAGE OF
RELEASED WAS CREDITED AMOUNT WITHDRAWN
--------------------- ----------------
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6 and over 0%
17
<PAGE>
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 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 Subaccounts and the GIA on a
pro rata basis. Any distribution costs not paid for by sales charges will be
paid by Phoenix 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 over the expense charges provided for in the Contracts. Phoenix
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 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 charges each Subaccount the daily equivalent of 0.40% on an
annual basis of the current value of the Subaccount'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 GIA. If the percentage charges prove insufficient to cover
actual insurance underwriting costs and excess administrative costs, then the
loss will be borne by Phoenix; conversely, if the amount deducted proves more
than sufficient, the excess will be a profit to Phoenix. Any such profit may
be used, as a part of Phoenix'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 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 is responsible for administering the Contract. In this connection,
Phoenix, 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 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.
To cover its fixed cost of administration, such as preparation of billings
and statements of account, Phoenix generally charges each Contract $35 each
year prior to the Contract's Maturity Date. This cost-based charge is deducted
from each Subaccount and/or the GIA holding the assets of the Owner or on a
pro rata basis from two or more Subaccounts or the GIA 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, where applicable, the entire annual administrative
charge is deducted regardless of when the surrender occurs. If Annuity Options
I, J, K, M or N are elected, the $35 charge will be deducted from each annuity
payment in equal amounts after the Maturity Date.
Phoenix may reduce the sales charge or annual administrative charges for
Contracts issued under tax-qualified plans other than IRAs and 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 administrative costs expected
as a result of sales to a particular group or sponsored arrangement. In
addition, Phoenix may reduce the annual administrative charge under a Contract
to reflect lower administrative costs.
No sales or annual administrative charges will be deducted for Contracts
sold to registered representatives of the principal underwriter or to officers,
directors and employees of Phoenix and their spouses; or to employees or
agents who retire from Phoenix 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%
Allocation.... .60% .55% .50%
Growth.......... .70% .65% .60%
International... .75% .70% .65%
Theme......... .75% .70% .65%
PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
--------------------------------------------
SERIES
- ------
Asia............ 1.00%
18
<PAGE>
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%
TEMPLETON INVESTMENT COUNSEL, INC.
----------------------------------
RATE FOR
RATE $200,000,000 RATE FOR
UP TO UP TO EXCESS OVER
SERIES $200,000,000 $1,300,000,000 $1,300,000,000
- ------ ------------ -------------- --------------
TPT Stock....... .75% .65% .60%
TPT Allocation.. .65% .585% .52%
TPT International .75% .65% .60%
TEMPLETON ASSET MANAGEMENT, LTD.
--------------------------------
SERIES
- ------
TPT Dev. Mkts... 1.25%
The TPT Stock, TPT Allocation, TPT International and TPT Dev. Mkts. Series
are subject to a Distribution Plan under which the Series may pay distributors,
the insurance company or others for activities primarily intended to sell
contracts offering these Series. Payments under the Plan may not exceed .25% per
year of each Series' average daily net assets.
Each Series pays a portion or all of its other operating expenses other
than the management fees: the Growth, Multi-Sector, Allocation, Money Market
and Balanced Series will pay up to .15%; the Real Estate, Theme and Asia Series
will pay up to .25%; the International Series will pay up to .40%; the U.S.
Small Cap Series will pay up to .50%; and the International Small Cap Series
will pay up to .60% of its average net assets annually. Any amounts in excess
are reimbursed by the Adviser for the Series and/or Phoenix. In the absence of
such reimbursements, the total operating expenses as a percentage of the average
net assets of each of the foregoing Series, as of December 31, 1996, are: .72%,
.67%, .70%, .55%, .68%, 1.43%, 1.28%, 2.87%, 1.04%, 1.21% and 1.79%,
respectively.
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 VPMO, the initial purchase payment
will be applied within two days of the completion of the application. In the
event that VPMO does not accept the application within five business days or
if an application is not completed within five business days of receipt by
VPMO, then the purchase payment will be immediately returned. If the GIA is
chosen, additional purchase payments are deposited on the date of receipt of
such purchase payment at VPMO. If one or more of the Subaccounts is chosen,
additional purchase payments are applied to the purchase of Accumulation Units
of the Subaccount(s) chosen, at the value of such Units next determined after
the receipt of such purchase payment at VPMO. The number of Accumulation Units
of a Subaccount purchased with a specific purchase payment will be determined
by dividing the applied purchase payment by the value of an Accumulation Unit in
that Subaccount next determined after receipt of the purchase payment. The
value of the Accumulation Units of a Subaccount will vary depending upon the
investment performance of the applicable Series of the Funds, the fees charged
against the Fund and the charges and deductions made against the Subaccount.
ACCUMULATION UNIT VALUES
At any date prior to the Maturity Date of the Contract, the total value of
the Accumulation Units in a Subaccount 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 Subaccount 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 Subaccounts or the GIA. Any such transfer from a
Subaccount will result in the redemption of Accumulation Units and, if another
Subaccount is selected, in the purchase of Accumulation Units on the basis of
the respective values next determined after the receipt by VPMO of written
notice of election in a form satisfactory to Phoenix. A transfer among
Subaccounts or the GIA 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 Subaccounts or the GIA 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 also will be accepted
on behalf of the Contract Owner from his or her registered representative.
Phoenix and Phoenix Equity Planning Corporation ("PEPCO") will employ reasonable
procedures to confirm that telephone instructions are genuine. They will require
verification of account information and will record telephone instructions on
tape. All telephone transfers and allocation changes will be confirmed in
writing to the Contract Owner. To the extent that procedures reasonably designed
to prevent unauthorized transfers are not followed, Phoenix and PEPCO may be
liable for following telephone instructions for transfers that prove to be
fraudulent. However, the Contract Owner would bear the risk of loss resulting
from instructions entered by an unauthorized third party that Phoenix and PEPCO
reasonably believe to be genuine. 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 also may elect to transfer funds automatically among the
Subaccounts or the GIA on a monthly, quarterly,
19
<PAGE>
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 GIA or the Subaccount that funds will be
transferred from (sending Subaccount), and if the value in that Subaccount or
the GIA 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 sending Subaccount or the GIA, but may be
allocated to multiple receiving Subaccounts. Under the Systematic Transfer
Program, Contract Owners may transfer approximately equal amounts from the GIA
over a minimum 18-month period.
Upon completion of the Systematic Transfer Program, the Contract Owner must
notify VPMO at (800) 447-4312 or in writing to VPMO to implement another
Systematic Transfer Program.
All transfers under the Systematic Transfer Program will be executed on the
basis of the respective values as of the first of the month following receipt
of the Systematic Transfer Program request. If the first of the month falls on a
holiday or weekend, then the transfer will be processed on the next business
day.
Unless Phoenix agrees otherwise or the Systematic Transfer Program has
been elected, a Contract Owner may make only one transfer per Contract year from
the GIA. Non-systematic transfers from the GIA will be effectuated on the
date of receipt by VPMO except as otherwise may be requested by the Contract
Owner. For non-systematic transfers, the amount that may be transferred from the
GIA at any one time cannot exceed the greater of $1,000 or 25% of the Contract
Value in the GIA at the time of transfer.
Phoenix 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 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, Phoenix 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, Phoenix 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 GIA AS DESCRIBED ABOVE AND IN APPENDIX A.
Phoenix reserves the right to limit the number of Subaccounts you may elect
to a total of 18 at any one time and/or over the life of the Contract unless
required to be less to comply with changes in federal and/or state regulation,
including tax, securities and insurance law. As of the date of this Prospectus,
this limitation has no effect because fewer Subaccounts are offered.
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 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 VPMO. 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 Subaccount will be redeemed at
their value next determined after the receipt by VPMO of a written notice in a
form satisfactory to Phoenix. Unless the Owner designates otherwise,
Accumulation Units redeemed in a partial withdrawal will be redeemed in each
Subaccount in the same proportion as the value of the Accumulation Units of the
Contract is then allocated among the Subaccounts. Also, Contract Values in the
GIA will be withdrawn in a partial withdrawal in the same proportion as the
Contract Value is then allocated to the GIA, 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 Subaccount. 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 Phoenix Variable Products Mail Operation, PO Box 8027,
Boston, Massachusetts 02266-8027.
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 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 six years following the
Contract date, this payment would be equal to the greater of: (a) the sum of all
20
<PAGE>
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 VPMO. If the death occurred during any subsequent six-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 six-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 VPMO.
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 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.
NEW YORK INDIVIDUAL CONTRACTS ISSUED ON OR AFTER MAY 1, 1997
- --------------------------------------------------------------------------------
Individual Contracts issued in New York on or after May 1, 1997, have
certain differences from the other individual Contracts described in this
Prospectus. Other than the differences noted in this section, the Contracts are
the same as the other individual Contracts. These differences are reflected in
the "Summary of Expenses for Individual Contracts Issued in New York on or after
May 1, 1997."
SALES CHARGES
A deduction for contingent deferred sales charges for these Contracts may be
taken from proceeds of withdrawals from, or complete surrender of, the Contract
if assets are not held under the Contract for a certain period (see the chart
below). Sales charges are not taken after the Annuity Period has begun, except
with respect to unscheduled withdrawals under Options K or L (see Annuity
Options). A sales charge is not imposed on amounts payable because of the death
of the Annuitant or Owner.
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 imposition of the sales
charge. During the first Contract Year, the 10% will be based on the Contract
Value at the time of the first partial surrender. In subsequent years, the 10%
will be based on the previous Contract anniversary value. The deduction for
sales charges, expressed as a percentage of the amounts redeemed greater than
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
RELEASED WAS CREDITED AMOUNT WITHDRAWN
---------------------- ----------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and over 0%
In the event of the death of the Annuitant or Owner before the Maturity
Date, the sales charge described in the table above will not apply.
DAILY ADMINISTRATIVE FEE
Phoenix charges each Subaccount the daily equivalent of 0.125% annually of
the accumulated value of the Subaccount to cover its variable costs of
administration (such as printing and distribution of materials pertaining to
Contract Owner meetings). This cost-based fee is not deducted from the GIA nor
from Contracts sold to registered representatives of PEPCO or broker/dealers
with whom PEPCO has selling agreements, or to officers, directors and employees
of Phoenix or its affiliates and their spouses or to employees or agents who
retire from Phoenix or its affiliates or PEPCO.
MATURITY DATE
The Maturity Date cannot be earlier than five years from the inception of
the Contract, nor later than the Contract anniversary nearest the Annuitant's
95th birthday.
PAYMENT UPON DEATH BEFORE MATURITY DATE
If the Owner/Annuitant 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. Upon the death of the Annuitant or an Owner/Annuitant who has not
yet attained age 85, the death benefit (less any deferred premium tax) is
calculated according to the following method:
1. Death occuring in the first Contract Year -- the greater of:
a. 100% of purchase payments, less any withdrawals; or
b. the Contract Value next determined following receipt of a
certified copy of the death certificate at VPMO.
2. Death occuring in the second Contract Year or any subsequent
Contract Year -- the greater of:
a. the death benefit at the end of the previous Contract Year,
plus 100% of purchase payments, less any withdrawals
made since that date; or
b. the Contract Value next determined following receipt of a
certified copy of the death certificate at VPMO.
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<PAGE>
After the Annuitant's age 85, the death benefit (less any deferred premium
tax) equals the Contract Value (no surrender charge is imposed) next determined
following receipt of a certified copy of the death certificate at VPMO.
Upon the death of an Owner who is not the Annuitant, provided that there is
no surviving joint Owner, the death proceeds will be paid to the Owner's
Beneficiary. The amount of death benefit payable is equal to the greater of:
a. 100% of purchase payments, less withdrawals; or
b. the Contract Value next determined following receipt of a
certified copy of the death certificate at VPMO.
If the Owner or Owner/Annuitant's beneficiary elects to defer payment of the
death proceeds for a period longer than one Contract Year, the death proceeds
that will be payable upon distribution is equal to the greater of:
a. 100% of purchase payments, less withdrawals; or
b. the Contract Value next determined following written
authorization for distribution and; receipt of a certified copy
of the death certificate at VPMO.
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 and the death benefit may be reduced by any premium tax due (see
"Premium Tax"). See also "Distribution at Death Rules" under Federal Income Tax.
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 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 GIA, all of the Series of The Phoenix Edge Series Fund, Wanger Advisors
Trust and Templeton Variable Products Series Fund 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 Subaccounts, and transfer amounts between Subaccounts.
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 in the section,
"Deductions and Charges--Sales Charges," unless the withdrawal is for payment of
a plan benefit upon a plan participant's death, disability, demonstration of
financial hardship, 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 another annuity
contract, a Retired Life Certificate or election of a Life Expectancy
Distribution option from Phoenix. A sales charge will apply to all other
withdrawals within a certain number of years after deposit as described in the
section, "Deductions and Charges--Sales Charges;" 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). In addition, if the Contract has
been in force for at least twenty years and Phoenix terminates the Contract, no
sales charge will apply.
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
six 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 six-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 six-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 contract value may be requested. The
partial withdrawal for the loan must be at least $1,000 and the participant's
remaining contract 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 Subaccounts 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 also must be at least $5,000. The
annual administrative service charge under an
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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 an individual
annuity contract or Life Expectancy Distribution option from Phoenix. 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). In addition, if the Contract has
been in force for at least twenty years and Phoenix terminates the Contract, no
sales charge will apply.
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
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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
Subaccount 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 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 also 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, 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 85th birthday unless the
Contract is issued in connection with certain qualified plans. Generally,
under qualified plans, the Maturity Date must be such that distributions begin
no later than April 1st of the calendar year following the later of: (a) the
year in which the employee attains age 70 1/2; or (b) the calendar year in which
the employee retires. The date set forth in (b) does not apply to an IRA.
The Maturity Date election shall be made by written notice and must be
received by VPMO 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 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 be
automatically 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 Subaccount to be credited is based
on the value of the Accumulation Units in that Subaccount 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 Subaccount 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 Subaccount 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.
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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 VPMO 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 deducts a daily charge for mortality and expense risks from
Contract Values held in the Subaccounts (see "Charges For Mortality and
Expense Risks"). Therefore, electing Option K will result in a deduction being
made even though Phoenix 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
five 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 Subaccounts 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 Subaccounts 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.
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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 may offer other annuity options at the Maturity Date of a
Contract. In addition, in the event that current settlement rates are more
favorable than the applicable rates guaranteed under Group Contracts issued in
New York only and for all Contracts regardless of state of issue, the more
favorable 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 most qualified
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 or designated beneficiary.
Generally, federal income tax requirements also provide that participants
in qualified plans must begin minimum distributions by April 1 of the
calendar year following the later of: (a) the year in which the employee retires
or (b) the year in which the employee attains age 70 1/2. The date set forth in
(a) does not apply to IRAs. 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 the LED program, regardless of Contract Year, 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"). Also, 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.
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, Phoenix 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 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 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.
VARIABLE ACCOUNT VALUATION PROCEDURES
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VALUATION DATE--A Valuation Date is every day the New York Stock Exchange and
Phoenix 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 Subaccount. 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
Subaccount, the following steps are taken: (a) the aggregate accrued
investment income and capital gains and losses, whether realized or unrealized,
of the Subaccount 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 Subaccount at the beginning of the Valuation Period.
MISCELLANEOUS PROVISIONS
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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 VPMO 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.
DEFERMENT OF PAYMENT
Payment of the Contract Value in a single sum upon a withdrawal from, or
complete surrender of, a Contract ordinarily will be made within seven days
after receipt of the written request by VPMO. However, payment of the value of
any Accumulation Units may be
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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 SEC, if any, are applicable and will govern as to whether conditions
described in (b), (c) or (d) exist.
FREE LOOK PERIOD
Phoenix 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 Subaccount 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 temporarily allocates the initial purchase payment to the
Money Market Subaccount. 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 Subaccount is allocated among the
available Subaccounts of the Account or the GIA 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 GIA, 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 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 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
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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'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'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"). Phoenix does not guarantee the tax status of
the Contracts. Purchasers bear the complete risk that the Contracts may not be
treated as "annuity contracts" under federal income tax laws. For a discussion
of federal income taxes as they relate to the Fund, please see the
accompanying Prospectuses for the Funds.
TAX STATUS
Phoenix is taxed as a life insurance company under Part 1 of Sub-chapter L
of the Code. Since the Account is not a separate entity from Phoenix and its
operations form a part of Phoenix, 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. Phoenix 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."
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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. The five year averaging rule for lump sum
distribution has been repealed for tax years beginning after 1999.
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. For certain types of
qualified plans, there may be no investment in the Contract resulting in the
full amount of the payments being taxable. A simplified method of
determining the exclusion ratio is effective with respect to qualified plan
annuities starting after November 18, 1996.
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
and to a special 25% penalty applicable specifically to SIMPLE IRAs); (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 five 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. Separate tax withdrawal penalties apply to Qualified Contracts.
(See "Penalty Tax on Surrenders and Withdrawals from Qualified Contracts.")
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 generally must 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. However, a number of
restrictions, limitations and special rules apply to Qualified Plans and a
Contract Owner should consult with a tax adviser.
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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 Primary
Annuitant, is treated as 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 first death of the Contract Owners.
If the Contract Owner or a Joint Contract Owner dies on or after the
Maturity Date, the remaining payments if any, under the Annuity Option
selected will be made at least as rapidly as under the method of
distribution in effect at the time of death.
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 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.
The Treasury Department has indicated that the diversification
Regulations do not provide guidance regarding the circumstances in which
Contract Owner control of the investments of the Account will cause the
Contract Owner to be treated as the owner of the assets of the Account,
thereby resulting in the loss of favorable tax treatment for the Contract.
At this time it cannot be determined whether additional guidance will be
provided and what standards may be contained in such guidance. The amount of
Contract Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published
rulings issued by the Internal Revenue Service in which was held that the
policy owner was not the owner of the assets of the separate account. It is
unknown whether these differences, such as the Contract Owner's ability to
transfer among investment choices or the number and type of investment
choices available, would cause the Contract Owner to be considered as the
owner of the assets of the Account resulting in the imposition of federal
income tax to the Contract Owner with respect to earnings allocable to the
Contract prior to receipt of payments under the Contract.
In any event any forthcoming guidance or ruling is considered to set
forth a new position, such guidance or ruling will generally
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be applied only prospectively, However, if such ruling or guidance was not
considered to set forth a new position, it may be applied retroactively
resulting in the Contract Owner being retroactively determined to be the
owner of the assets of the Account.
Due to the uncertainty in this area, Phoenix reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.
Phoenix 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 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, 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
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) TSA arrangements. Taxable distributions eligible to be rolled-over
generally will be subject to 20 percent income tax withholding. Mandatory
withholding can be avoided only if the employee arranges for a direct rollover
to another qualified pension or profit-sharing plan or to an IRA.
On July 6, 1983, the Supreme Court dediced in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by Phoenix in connection with
certain Qualified Plans will utilize annuity tables which do not differentiate
on the basis of sex. Such annuity tables will also be available for use in
connection with certain non-qualified deferred compensation plans.
The new mandatory withholding rules apply to all taxable distributions from
qualified plans or TSAs, but not IRAs except a) distributions required under the
Code; b) substantially equal distributions made over the life (or life
expectancy) of the employee or for a term certain of 10 years or more; and c)
the portion of distributions not includible in gross income (i.e., return of
after tax contributions).
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
general 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.
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. Contract Owner loans are not allowed under the
Contracts.
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
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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. Effective January 1, 1997, employers may
establish a new type of IRA called SIMPLE (Savings Incentive Match Plan for
Employees). Special rules apply to participants contributions to and
withdrawals from SIMPLE IRAs. Also effective January 1, 1997, salary
reduction (SARSEP) may no longer be established.
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").
These retirement plans may permit the purchase of the Contracts to
provide benefits under the Plan. Contributions to the Plan for the benefit
of employees will not be includible in the gross income of the employee
until distributed from the Plan. The tax consequences to participants may
vary, depending upon the particular Plan design. However, the Code places
limitations and restrictions on all Plans, including on such items as:
amount of allowable contributions; form, manner and timing of distributions;
transferability of benefits; vesting and nonforfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment of
distributions, withdrawals and surrenders. Participant loans are not allowed
under the Contracts purchased in connection with these Plans. Purchasers of
Contracts for use with Corporate Pension or Profit-Sharing Plans should
obtain competent tax advice as to the tax treatment and suitability of such
an investment.
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 if issued to tax exempt organizations, 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. Effective in 1997 for new state and local government
plans, such plans must be funded through a tax exempt annuity contract held
for the exclusive benefit of plan participants.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS FROM QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including Contracts
issued and qualified under Code Sections 401 (Keogh and Corporate Pension and
Profit-Sharing Plans), Tax-Sheltered Annuities and Individual Retirement
Annuities. The penalty is increased to 25% instead of 10% for SIMPLE IRAs if
distribution occurs within the first two years of the Contract Owner's
participation in the SIMPLE IRA. To the extent amounts are not includible in
gross income because they have been properly rolled over to an IRA or to another
eligible Qualified Plan, no tax penalty will be imposed. The tax penalty will
not apply to the following distributions: (a) if distribution is made on or
after the date on which the Contract Owner or Annuitant (as applicable) reaches
age 59 1/2; (b) distributions following the death or disability of the Contract
Owner or Annuitant (as applicable) (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (c) after separation from service, distributions
that are part of substantially equal periodic payments made not less frequently
than annually for the life (or life expectancy) of the Contract Owner or
Annuitant (as applicable) or the joint lives (or joint life expectancies) of
such Contract Owner or Annuitant (as applicable) and his or her designated
beneficiary; (d) distributions to a Contract Owner or Annuitant (as applicable)
who has separated April 26, 1997 from service after he has attained age 55; (e)
distributions made to the Contract Owner or Annuitant (as applicable) to the
extent such distributions do not exceed the amount allowable as a deduction
under Code Section 213 to the Contract Owner or Annuitant (as applicable) for
amounts paid during the taxable year for medical care; (f) distributions made to
an alternate payee pursuant to a qualified domestic relations order; and (g)
distributions from an Individual Retirement Annuity for the purchase of medical
insurance (as described in Section 213(d)(1)(D) of the Code) for the Contract
Owner and his or her spouse and dependents if the Contract Owner has received
unemployment compensation for at least 12 weeks. This exception will no longer
apply after the Contract Owner has been reemployed for at least 60 days. The
exceptions stated in items (d) and (f) above do not apply in the case of an
Individual Retirement Annuity. The exception stated in item (c) applies to an
Individual Retirement Annuity without the requirement that there be a separation
from service.
Generally, distributions from a Qualified Plan must commence no later than
April 1 of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
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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
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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 insurance policies and annuity contracts. W. S. Griffith is an
indirect wholly-owned subsidiary of Phoenix. PEPCO is an indirect,
majority-owned subsidiary of Phoenix. Contracts also may 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.
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 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 to or through PEPCO.
The amounts paid by Phoenix are not deducted from the purchase payments.
Deductions for sales charges (as described under "Sales Charges") may be used to
reimburse Phoenix for commission payments to broker-dealers.
Phoenix 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 also may make
customary additional charges for their services in effecting purchases, if they
notify the Funds of their intention to do so.
STATE REGULATION
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Phoenix 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 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 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
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Reports showing the Contract Value and containing the financial statements
of the Account will be furnished at least annually to an Owner.
VOTING RIGHTS
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As stated above, all of the assets held in an available Subaccount will be
invested in shares of a corresponding Series of the Funds. Phoenix 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
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 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 currently intends to vote Fund shares attributable to any Phoenix
assets and Fund shares held in each Subaccount for which no timely
instructions from Owners are received in the same proportion as those shares in
that Subaccount for which instructions are received. In the future, to the
extent applicable federal securities laws or regulations permit Phoenix 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 Subaccount(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
Subaccount to the total number of votes attributable to the Subaccount. In
determining the number of votes, fractional shares will be recognized. The
number of votes for which each Owner may give Phoenix instructions will be
determined as of the record date for Fund shareholders chosen by the Board of
Trustees of a Fund. Phoenix will furnish Owners with proper forms and proxies
to enable them to give these instructions.
TEXAS OPTIONAL RETIREMENT PROGRAM
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Participants in the Texas Optional Retirement Program may not receive the
proceeds of a withdrawal from, or complete surrender of, a Contractor apply
them to provide annuity options prior to retirement except in the case of
termination of employment in the Texas public
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institutions of higher education, death or total disability. Such proceeds may,
however, be used to fund another eligible retirement vehicle.
LITIGATION
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Phoenix, 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
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Blazzard, Grodd & Hasenauer, P.C. of Westport, Connecticut has provided
advice on certain matters relating to the federal securities and income tax laws
in connection to the Contracts described in this Prospectus.
STATEMENT OF ADDITIONAL INFORMATION
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The Statement of Additional Information contains more specific information
and financial statements relating to the Account and Phoenix. 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 Phoenix Variable Products Mail Operation in
writing at P.O. Box 8027, Boston, Massachusetts 02266-8027, or by calling
Variable Products Operations at (800) 447-4312.
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APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
Contributions to the GIA under the Contract and transfers to the GIA
become part of the general account of Phoenix (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 GIA. Disclosures regarding the GIA and the General Account,
however, may be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses.
The General Account is made up of all of the general assets of Phoenix
other than those allocated to any separate account. Purchase payments will be
allocated to the GIA and, therefore, the General Account, as elected by the
Owner at the time of purchase or as subsequently changed. Phoenix 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 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 assumes this "mortality risk"
by virtue of annuity rates incorporated in the Contract that cannot be changed.
In addition, Phoenix 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 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. However, Phoenix 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 GIA. Phoenix 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 will set the excess interest rate, if any, that will
apply to amounts deposited to the GIA. That rate will remain in effect for
such deposits for an initial guarantee period of one full year from the date of
deposit. Upon 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 GIA 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 based on
information as to expected investment yields. Some of the factors that Phoenix
may consider in determining whether to credit excess interest to amounts
allocated to the GIA and the amount thereof, are general economic trends,
rates of return currently available and anticipated on investments, regulatory
and tax requirements and competitive factors. ANY INTEREST CREDITED TO AMOUNTS
ALLOCATED TO THE GIA IN EXCESS OF 4% PER YEAR FOR INDIVIDUAL CONTRACTS AND 3%
PER YEAR FOR GROUP CONTRACTS WILL BE DETERMINED IN THE SOLE DISCRETION OF
PHOENIX AND WITHOUT REGARD TO ANY SPECIFIC FORMULA. THE CONTRACT OWNER ASSUMES
THE RISK THAT INTEREST CREDITED TO GIA ALLOCATIONS MAY NOT EXCEED THE MINIMUM
GUARANTEE FOR ANY GIVEN YEAR.
Phoenix 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'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 GIA Contract Value.
Phoenix guarantees that, at any time, the GIA Contract Value will not be
less than the amount of purchase payments allocated to the GIA, 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
may, in its discretion, credit to the GIA, less the sum of all annual
administrative or surrender charges, any applicable premium taxes and less any
amounts surrendered. If the Owner surrenders the Contract, the amount available
from the GIA 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 GIA. THE AMOUNT
WHICH CAN BE TRANSFERRED IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
CONTRACT VALUE IN THE GIA AT THE TIME OF THE TRANSFER. UNDER THE SYSTEMATIC
TRANSFER PROGRAM, TRANSFERS OF APPROXIMATELY EQUAL AMOUNTS MAY BE MADE OVER A
MINIMUM 18-MONTH PERIOD. NON-SYSTEMATIC TRANSFERS FROM THE GIA WILL BE
EFFECTUATED ON THE DATE OF RECEIPT BY VPMO, UNLESS OTHERWISE REQUESTED BY THE
CONTRACT OWNER.
33
<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 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 May 1, 1997. No premium
tax deductions are made for states not listed above. For Kentucky
contracts, premium taxes will be deducted upon purchases effective for
annuity considerations received on or after July 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 a more detailed explanation of the assessment of Premium Taxes see
"Deductions and Charges, Premium Tax."
(1) "Purchase" in this chart refers to the earlier of partial withdrawal,
surrender of the Contract, Maturity Date or payment of death proceeds or
Maturity Date.
34
<PAGE>
<PAGE>
[VERSION B]
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
<TABLE>
<S> <C>
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
One American Row MAIL OPERATIONS (VPMO):
Hartford, CT 06115 P.O. Box 8027
Boston, MA 02266-8027
</TABLE>
VARIABLE ACCUMULATION DEFERRED ANNUITY CONTRACTS
PROSPECTUS
May 1, 1997
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"). The Contracts provide for both an
Accumulation Period and an Annuity Period. Purchase 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 (IRAs) including SEP IRAs
and SIMPLE IRAs, the minimum initial purchase payment required is $25. For
contracts issued under tax-qualified or employer sponsored plans other than
IRAs, 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 Subaccounts
of the Phoenix Home Life Variable Accumulation Account (the "Account") and/or
to the Guaranteed Interest Account ("GIA") as specified by the Contract Owner
in the application for the Contract. Each available Subaccount of the Account
invests exclusively in Class 1 of a Series of the Templeton Variable Products
Series Fund (the "Fund") except the Money Market Fund, which has a single
class of shares. 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, Templeton International Fund and the
Templeton Developing Markets 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 Subaccount 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 GIA, 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, 1997, 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 at the address or telephone number set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
HEADING PAGE
- -------------------------------------------------------------------------------
<S> <C>
SUMMARY OF EXPENSES...................................................... 3
FINANCIAL HIGHLIGHTS..................................................... 5
SPECIAL TERMS............................................................ 6
SUMMARY.................................................................. 6
PERFORMANCE HISTORY...................................................... 8
THE VARIABLE ACCUMULATION ANNUITY........................................ 10
PHOENIX AND THE ACCOUNT.................................................. 10
TEMPLETON VARIABLE PRODUCTS SERIES FUND.................................. 10
PURCHASE OF CONTRACTS.................................................... 11
DEDUCTIONS AND CHARGES................................................... 12
Premium Tax............................................................. 12
Sales Charges........................................................... 12
Charges for Mortality and Expense Risks................................. 12
Charges for Administrative Services..................................... 13
Other Charges........................................................... 13
THE ACCUMULATION PERIOD.................................................. 13
Accumulation Units...................................................... 13
Accumulation Unit Values................................................ 14
Transfers............................................................... 14
Surrender of Contract; Partial Withdrawals.............................. 15
Lapse of Contract....................................................... 15
Payment Upon Death Before Maturity Date................................. 15
THE ANNUITY PERIOD....................................................... 16
Variable Accumulation Annuity Contracts................................. 16
Annuity Options......................................................... 16
Option A--Life Annuity With Specified Period Certain.................... 17
Option B--Non-Refund Life Annuity....................................... 17
Option D--Joint and Survivor Life Annuity............................... 17
Option E--Installment Refund Life Annuity............................... 17
Option F--Joint and Survivor Life Annuity With Specified Period
Certain................................................................ 17
Option G--Payments for Specified Period................................. 17
Option H--Payments of Specified Amount.................................. 17
Option I--Variable Payment Life Annuity With Ten Year Period Certain.... 17
Option J--Joint Survivor Variable Payment Life Annuity With Ten Year
Period Certain......................................................... 17
Option K--Variable Payment Annuity for a Specified Period............... 17
Other Options and Rates................................................. 18
Other Conditions........................................................ 18
</TABLE>
<TABLE>
<CAPTION>
HEADING PAGE
<S> <C>
Payment Upon Death After Maturity Date.................................. 18
VARIABLE ACCOUNT VALUATION PROCEDURES.................................... 18
MISCELLANEOUS PROVISIONS................................................. 19
Assignment.............................................................. 19
Deferment of Payment.................................................... 19
Free Look Period........................................................ 19
Amendments to Contracts................................................. 19
Substitution of Fund Shares............................................. 19
Ownership of the Contract............................................... 19
FEDERAL INCOME TAXES..................................................... 19
Introduction............................................................ 19
Tax Status.............................................................. 20
Taxation of Annuities in General--Non-Qualified Plans................... 20
Surrenders or Withdrawals Prior to the Contract Maturity Date........... 20
Surrenders or Withdrawals on or after the Contract Maturity Date........ 20
Penalty Tax on Certain Surrenders and Withdrawals....................... 20
Additional Considerations............................................... 21
Diversification Standards............................................... 22
Qualified Plans......................................................... 23
Tax Sheltered Annuities................................................. 23
Keogh Plans............................................................. 23
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
Penalty Tax on Certain Surrenders and Withdrawals from Qualified
Contracts.............................................................. 24
Seek Tax Advice......................................................... 25
SALES OF VARIABLE ACCUMULATION CONTRACTS................................. 25
STATE REGULATION......................................................... 25
REPORTS.................................................................. 25
VOTING RIGHTS............................................................ 25
TEXAS OPTIONAL RETIREMENT PROGRAM........................................ 26
LITIGATION............................................................... 26
LEGAL MATTERS............................................................ 26
STATEMENT OF ADDITIONAL INFORMATION...................................... 26
APPENDIX A............................................................... 27
APPENDIX B............................................................... 28
</TABLE>
2
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES ALL SUBACCOUNTS
<S> <C>
Sales Charge Imposed on Purchases............................. None
Deferred Sales Charge (as a percentage of amount
surrendered)/(1)/:
Age of Payment in Complete Years 0-1......................... 6%
Age of Payment in Complete Years 1-2......................... 5%
Age of Payment in Complete Years 2-3......................... 4%
Age of Payment in Complete Years 3-4......................... 3%
Age of Payment in Complete Years 4-5......................... 2%
Age of Payment in Complete Years 5-6......................... 1%
Age of Payment 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>
FUND ANNUAL EXPENSES
(as a percentage of Fund average net assets)
<TABLE>
<CAPTION>
ASSET DEVELOPING
ALLOCATION MARKETS
MONEY BOND STOCK CLASS INTERNATIONAL CLASS
MARKET CLASS 1 CLASS 1/(3)/ 1/(3)/ CLASS 1/(3)/ 1/(2)/
------ ------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment Management
Fees.................. .35% .50% .70% .61% .70% 1.25%
Other Expenses/(4)/.... .20% .18% .18% .17% .18% .53%
Total Fund Annual
Expenses............... .55% .68% .88% .78% .88% 1.78%
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:
3 years............. $ 95 99 105 102 105 131
5 years............. $123 129 139 134 139 183
10 years............. $241 254 274 264 274 361
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.............. $ 21 23 25 24 25 34
3 years............. $ 66 70 76 73 76 102
5 years............. $112 119 129 124 129 173
10 years............. $241 254
</TABLE>
(1) A sales charge is 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.")
(2) Figures are estimates for 1997 based on annualized 1996 figures. The Fund
began operations in March 1996. Figures do not reflect the investment
manager's agreement in advance to waive a portion of its fees during 1996.
This arrangement has been terminated. After the waiver, actual management
fees and total operating expenses of the portfolio in 1996 were 1.17% and
1.95% of net assets, respectively.
(3) Management Fees and total fund portfolio operating expenses have been
restated to reflect the new management fee schedule which was approved by
shareholders and which takes effect on May 1, 1997. Actual fees and
operating expenses before May 1, 1997 were lower.
(4) Each Series pays a portion of all of its total operating expenses other
than the management fee. "Other Expenses" are based upon the actual
operating expenses incurred by the Fund for the fiscal year ended December
31, 1996 [unless otherwise noted].
3
<PAGE>
SUMMARY OF EXPENSES
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 tables reflect expenses of the 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".)
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".)
4
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
Following are the financial highlights for the period indicated.
<TABLE>
<CAPTION>
TEMPLETON STOCK SUBACCOUNT
-------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD FROM
------------------------------------------------------------------------------- 11/4/88*
1996 1995 1994 1993 1992 1991 1990 1989 TO 12/31/88
--------- --------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period................. $2.057549 $1.665152 $1.726593 $1.305609 $1.235446 $ .981990 $1.119352 $ .989563 $ 1.00000
Unit value, end of
period................. $2.484883 $2.057549 $1.665152 $1.726593 $1.305609 $1.235446 $ .981990 $1.119352 $ .989563
Number of accumulation
units outstanding at
end of period (000).... 132,392 142,234 144,872 137,108 118,456 94,307 74,885 44,084 2,812
<CAPTION>
TEMPLETON ASSET ALLOCATION SUBACCOUNT
-------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD FROM
------------------------------------------------------------------------------- 11/28/88*
1996 1995 1994 1993 1992 1991 1990 1989 TO 12/31/88
--------- --------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period................. $1.965734 $1.625952 $1.699180 $1.365257 $1.280431 $1.016125 $1.119543 $1.001691 $1.000000
Unit value, end of
period................. $2.304966 $1.965734 $1.625952 $1.699180 $1.365257 $1.280431 $1.016125 $1.119543 $1.001691
Number of accumulation
units outstanding at
end of period (000).... 65,843 72,985 74,901 66,903 46,950 27,918 21,974 11,455 130
<CAPTION>
TEMPLETON MONEY MARKET SUBACCOUNT
-------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD FROM
------------------------------------------------------------------------------- 12/2/88*
1996 1995 1994 1993 1992 1991 1990 1989 TO 12/31/88
--------- --------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period................. $1.287771 $1.238474 $1.213373 $1.201078 $1.181114 $1.134278 $1.069449 $1.003591 $1.000000
Unit value, end of
period................. $1.333545 $1.287771 $1.238474 $1.213373 $1.201078 $1.181114 $1.134278 $1.069449 $1.003591
Number of accumulation
units outstanding at
end of period (000).... 10,597 16,077 26,566 13,892 17,734 18,533 15,540 5,324 423
<CAPTION>
TEMPLETON BOND SUBACCOUNT
---------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD FROM
--------------------------------------------------------------------- 1/4/89*
1996 1995 1994 1993 1992 1991 1990 TO 12/31/89
--------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period... $1.549167 $1.366504 $1.456861 $1.324996 $1.272743 $1.113263 $1.061263 $1.000000
Unit value, end of period......... $1.672413 $1.549167 $1.366504 $1.456861 $1.324996 $1.272743 $1.113263 $1.061263
Number of accumulation units
outstanding at end of
period (000)..................... 11,875 12,633 13,111 13,578 8,937 5,611 2,889 1,455
<CAPTION>
TEMPLETON INTERNATIONAL SUBACCOUNT
---------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD FROM
--------------------------------------- 5/1/92*
1996 1995 1994 1993 TO 12/31/92
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period................................. $1.488540 $1.303520 $1.351997 $ .930016 $1.000000
Unit value, end of period....................................... $1.821499 $1.488540 $1.303520 $1.351997 $ .930016
Number of accumulation units outstanding at end of period (000). 62,848 59,587 58,214 32,362 7,562
<CAPTION>
TEMPLETON DEVELOPING MARKETS SUBACCOUNT
---------------------------------------
PERIOD FROM
9/15/96*
TO 12/31/96
-----------
<S> <C>
Unit value, beginning of period.......................................................................... $1.000000
Unit value, end of period................................................................................ $1.009604
Number of accumulation units outstanding at end of period (000).......................................... 1,040
</TABLE>
* Date of inception
5
<PAGE>
SPECIAL TERMS
- -------------------------------------------------------------------------------
As used in this Prospectus, the following terms have the indicated meanings:
ACCOUNT: Phoenix Home Life Variable Accumulation Account.
ACCOUNT VALUE: The value of all assets held in the Account.
ACCUMULATION UNIT: A standard of measurement with respect to each Subaccount
used in determining the value of a Contract and the interest in the Subaccount
prior to the commencement of annuity payments.
ACCUMULATION UNIT VALUE: The value of one Accumulation Unit was set at $1.0000
on the date assets were first allocated to each Subaccount. 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.
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 all Accumulation Units
held in the Subaccounts of the Account and the value held in the GIA.
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 Subaccount.
THE FUND: Templeton Variable Products Series Fund, a Massachusetts business
trust.
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.
ISSUE DATE: The date that the initial purchase payment is invested in a
Subaccount.
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 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: Phoenix Home Life Mutual Insurance Company.
VALUATION DATE: A Valuation Date is every day the New York Stock Exchange is
open for trading.
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 Subaccounts.
VPMO: The Phoenix Variable Products Mail Operation division of Phoenix that
receives and processes incoming mail for Variable Products Operations.
VPO: The Variable Products Operations Division of Phoenix.
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
6
<PAGE>
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 Account consists of several Subaccounts, which invest
their assets exclusively in specified Series of the Funds. Each Series has a
distinct investment objective. You choose the Subaccount or Subaccounts in
which you wish to invest among the available Subaccounts and/or the GIA when
you make your purchase payments under the Contract. You also may transfer
amounts held under the Contract among the available Subaccounts and/or the
GIA. 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.
The Contract is eligible for purchase as non-tax qualified retirement plans
by individuals. Contracts also are 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) IRA plans satisfying the requirements of Section 408
of the Code 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 Subaccount(s) and/or are deposited in the
GIA, as chosen by the Owner. (See "Purchases of Contracts" and "The
Accumulation Period.")
IS THERE A GUARANTEED OPTION?
Yes. A Contract Owner may elect to have payments allocated to the GIA.
Amounts allocated to the GIA earn a fixed rate of interest and Phoenix also
may, in its sole discretion, credit excess interest. (See Appendix A.)
WHAT ARE THE INVESTMENT OPTIONS UNDER THE CONTRACT?
The Contract currently offers a number of series of the Templeton Variable
Products Series Fund as investment options. Each series has a specific
investment objective. (For a complete list of the series offered and a brief
discussion of their respective investment objectives, see "THE TEMPLETON
VARIABLE PRODUCTS SERIES FUND.")
FOR ADDITIONAL INFORMATION CONCERNING THE FUND, SEE THE ACCOMPANYING FUND
PROSPECTUS, 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 Option K. If a sales charge is imposed, it is imposed on a
first-in, first-out basis. No sales charge will be imposed in the event that
the Annuitant dies before the date that annuity payments will commence. 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 is a mortality and expense risk fee and a daily administrative fee
assessed against the Account. (See "Charges for Administrative Services.")
ARE THERE ANY OTHER CHARGES OR DEDUCTIONS?
In most states, premium taxes are imposed when a Contract is annuitized
rather than when purchase payments are made by the Contract Owner. Phoenix
will reimburse itself on the earlier date of a partial withdrawal, surrender
of the Contract, Maturity Date or payment of death proceeds. (See "Premium
Tax.")
In addition, certain charges are deducted from the assets of the Fund. 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. (See "Other Charges.")
For a more complete description of the fees chargeable to the Account, see
"Deductions and Charges."
WHAT ARE THE MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS?
For non-tax qualified plans and IRA's, the following minimum purchase
payments apply (unless investments are made pursuant to a bank draft
investment program):
<TABLE>
<S> <C>
Initial minimum per Contract: $1,000
Subsequent minimum per Contract: $ 25
</TABLE>
For Contracts issued in connection with Individual Retirement Accounts or
pursuant to a bank draft
7
<PAGE>
investment program, the following minimum purchase payments apply:
<TABLE>
<S> <C>
Initial minimum per Con-
tract: $25
Subsequent minimum per Con-
tract: $25
</TABLE>
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?
You may choose the amount of each purchase payment to be directed to each
Subaccount and/or to the GIA, provided that the minimum initial purchase
payment requirements have been met. (See "Purchase of Contracts.")
MAY I TRANSFER AMOUNTS ALLOCATED TO A SUBACCOUNT OR THE GIA?
You may transfer some or all of the Contract Value among one or more
available Subaccounts and/or the GIA 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. Currently, there is not a limit to
the number of transfers per Contract Year, however, Phoenix may in the future
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 GIA as described in
Appendix A.
DOES THE CONTRACT PROVIDE FOR PAYMENT UPON DEATH?
The Contract provides that if the Owner and Annuitant are the same and the
Owner/Annuitant dies before annuity payments begin and there is no surviving
Joint Owner, payment to the 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 Subaccounts 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 GIA,
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 GIA 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. The fixed payment schedule is a
part of the Contract and the Owner also may be given the opportunity to choose
another annuity option available from Phoenix 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 Option K. Certain limitations apply to Contracts held under
403(b) plans (see "Qualified Plans; Tax Sheltered Annuities"). There may be a
federal tax penalty assessed in connection with withdrawals (see "Federal
Income Taxes").
CAN THE CONTRACT LAPSE?
If on any Valuation Date the total Contract Value equals zero, or, the
premium tax reimbursement due on a surrender or partial withdrawal is greater
than or equal to the Contract Value, 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.
PERFORMANCE HISTORY
- -------------------------------------------------------------------------------
From time to time the Account may include the performance history of any or
all Subaccounts in advertisements, sales literature or reports. PERFORMANCE
INFORMATION ABOUT EACH SUBACCOUNT IS BASED ON PAST PERFORMANCE ONLY AND IS NOT
AN INDICATION OF FUTURE PERFORMANCE. Performance information may be expressed
as yield and effective yield of the Money Market Subaccount, as yield of the
Bond Subaccount and as total return of any Subaccount. For the Bond
Subaccount, quotations of yield will be based on all investment income per
unit earned during a given 30-day period (including dividends and interest),
less expenses accrued during the period ("net investment income"), and are
computed by dividing the net investment income by the maximum offering price
per unit on the last day of the period.
8
<PAGE>
When a Subaccount advertises its total return, it will usually be calculated
for one year, five years, and ten years or since inception if the Subaccount
has not been in existence for at least ten years. Total return is measured by
comparing the value of a hypothetical $1,000 investment in the Subaccount at
the beginning of the relevant period to the value of the investment at the end
of the period, assuming the reinvestment of all distributions at net asset
value and the deduction of all applicable Contract charges except for premium
taxes (which vary by state) at the beginning of the relevant period.
For those subaccounts 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 subaccount 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 calculated as described above.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDING 12/31/96
<TABLE>
<CAPTION>
COMMENCE-
MENT LIFE OF
SERIES DATE 1 YEAR 3 YEARS 5 YEARS FUND
- ------ --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Stock-Class 1......................... 11/04/88 15.17% 11.71% 14.65% 11.66%
Asset Allocation- Class 1............. 11/28/88 15.17% 11.71% 14.85% 10.73%
Money Market.......................... 12/02/88 (1.27)% 2.09% 2.10% 3.47%
Bond-Class 1.......................... 01/04/89 2.93% 3.58% 5.26% 8.52%
International-
Class 1.............................. 05/01/92 16.69% 9.27% N/A 13.22%
Developing Markets-
Class 1.............................. 09/15/96 N/A N/A N/A (4.49)%
</TABLE>
ANNUAL TOTAL RETURNS*
<TABLE>
<CAPTION>
DEV
ASSET MKT
STOCK ALLOC. MONEY BOND INTL. CLASS
YEAR CLASS 1 CLASS 1 MARKET CLASS 1 CLASS 1 1
- ---- -------- ------- ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
1989.............................. 13.12% 11.77% 6.56% 6.13% N/A N/A
1990.............................. (12.28)% (9.24)% 6.06% 4.89% N/A N/A
1991.............................. 25.81% 26.01% 4.13% 14.33% N/A N/A
1992.............................. 5.68% 6.62% 1.69% 4.11% (7.00)% N/A
1993.............................. 32.25% 24.46% 1.02% 9.95% 45.37% N/A
1994.............................. (3.56)% (4.31)% 2.07% (6.20)% (3.59)% N/A
1995.............................. 23.57% 20.90% 3.98% 13.37% 14.19% N/A
1996.............................. 20.77% 17.26% 3.55% 7.96% 22.37% 0.96%
</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 Subaccount is based upon the income
earned by the Subaccount 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 Subaccount 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 Subaccount used for illustration
purposes are based on the consideration of a hypothetical Contract Owner'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 Subaccount 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 Subaccount based on a seven day period ending December 31, 1996.
Example:
<TABLE>
<CAPTION>
<S> <C>
Assumptions:
Value of hypothetical pre-existing account with exactly one unit at
the beginning of the period......................................... 1.332697
Value of the same account (excluding capital changes) at the end of
the seven day period................................................ 1.333545
Calculation:
Ending account value................................................. 1.333545
Less beginning account value......................................... 1.332697
Net change in account value.......................................... .000848
Base period return:
(adjusted change/beginning account value)............................ .000636
Current yield = return X /(365/7)/ = ................................. 3.32%
Effective yield = [(1 + return)/365/7/] -- 1 = ....................... 3.37%
</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 Subaccount'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 Composite Stock Price Index
("S&P 500"), 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 publications.
Lipper and CDA are widely recognized independent rating/ranking services. A
Subaccount's performance may also be compared to that of other investment or
savings vehicles.
9
<PAGE>
Advertisements, sales literature and other communications may contain
information about any Funds' or Advisers' current investment strategies and
management style. Current strategies and style may change to respond to a
changing market and economic conditions. From time to time, the Funds may
discuss specific portfolio holdings or industries in such communications. To
illustrate components of overall performance, the Funds may separate their
cumulative and average annual returns into income results and capital gains or
losses; or cite separately as a return figure the equity or bond portion of a
Funds' portfolio; or compare a Funds' equity or bond return figure to well-
known indices of market performance including but not limited to: S&P 500
Index, Dow Jones Industrial Average, First Boston High Yield Index and Solomon
Brothers Corporate and Government Bond Indices.
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.
THE VARIABLE ACCUMULATION ANNUITY
- -------------------------------------------------------------------------------
The individual deferred variable accumulation annuity contract (the
"Contract") issued by Phoenix may be significantly different from a fixed
annuity contract in that, unless the GIA is selected, it is the Owner and
Annuitant under a Contract who assume the risk of investment gain or loss
rather than Phoenix. 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 GIA, the amounts which will be
available for annuity payments under a Contract will depend on the investment
performance of the Subaccounts 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 Subaccounts. However, a fixed annuity may be elected, in which case
Phoenix 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 GIA or the Money Market Subaccount, Bond Subaccount, Stock
Subaccount, Asset Allocation Subaccount, International Subaccount and
Developing Markets Subaccount. Each of the Subaccounts invests exclusively
in shares of a corresponding Series of the Templeton Variable Products Series
Fund (the "Fund").
PHOENIX AND THE ACCOUNT
- -------------------------------------------------------------------------------
Phoenix 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 is the nation's 14th
largest mutual life insurance company and has admitted assets of approximately
$15.5 billion. Phoenix 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 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.
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. The assets of
the Account may not be charged with liabilities arising out of any other
business that Phoenix may conduct. Obligations under the Contracts are
obligations of Phoenix.
Contributions to the GIA are not invested in the Account; rather, they
become part of the general account of Phoenix (the "General Account"). The
General Account supports all insurance and annuity obligations of Phoenix 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 GIA, see Appendix A.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Each available Subaccount of the Account invests exclusively in Class 1 of a
corresponding Series of the Fund. The investment manager of Templeton Stock,
Templeton Asset Allocation, Templeton International, Templeton Bond and
Templeton Money Market Series is Templeton Investment Counsel, Inc.; and
Templeton Asset Management Ltd. is the investment manager for
10
<PAGE>
Templeton Developing Markets Series. The investment objective of each of the
Series of the Fund is as follows:
(1) TEMPLETON MONEY MARKET SERIES--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 SERIES--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 SERIES--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 SERIES--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 SERIES--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.
(6) TEMPLETON DEVELOPING MARKETS SERIES--Seeks long-term capital
appreciation by investing primarily in equity securities of issuers in
countries having developing markets.
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."
Shares of the Fund may be sold to other separate accounts of Phoenix 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 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 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.
11
<PAGE>
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. 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 Subaccount, Bond Subaccount, Stock Subaccount, Asset Allocation
Subaccount, International Subaccount, Developing Markets SubAccount 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 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 within those states and the insurance tax laws of those
states. Phoenix 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 contingent deferred sales charges (also referred to in this
Prospectus as surrender or sales 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:
<TABLE>
<CAPTION>
AGE OF DEPOSIT IN CONTINGENT DEFERRED
COMPLETE YEARS FROM SALES CHARGE AS A
PAYMENT DATE UNIT PERCENTAGE OF
RELEASED WAS CREDITED AMOUNT WITHDRAWN
--------------------- -------------------
<S> <C>
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6 and over 0%
</TABLE>
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 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 Subaccounts and the GIA on a
pro-rata basis. Any distribution costs not paid for by sales charges will be
paid by Phoenix 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 over the expense charges provided for in the
Contracts. Phoenix 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 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 charges each Subaccount the daily equivalent of 0.40% on an annual
basis of the current value of the Subaccount'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 GIA. If
the percentage charges prove insufficient to cover actual insurance
underwriting costs and excess administrative costs then the loss will be borne
by Phoenix; conversely, although it is not anticipated, if the amount deducted
proves more than sufficient, the excess will be a profit to Phoenix. Any
12
<PAGE>
such profit may be used, as a part of Phoenix'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 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 is responsible for administering the Account. In this connection,
Phoenix, 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.
To cover its fixed costs of administration, such as preparation of billings
and statements of account, Phoenix 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 Subaccount or the GIA holding the
assets of the Owner or on a pro-rata basis from two or more Subaccounts or the
GIA 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 also charges each Subaccount available through a Contract the daily
equivalent of 0.125% on an annual basis of the accumulated value of the
Subaccount 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 GIA.
Phoenix 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.
It also receives compensation from the Investment Manager (out of the
manager's own resources) for administrative services provided to the
Developing Markets Fund Class I.
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:
<TABLE>
<CAPTION>
TEMPLETON INVESTMENT COUNSEL, INC.
----------------------------------
RATE FOR RATE FOR RATE
UP TO UP TO EXCESS OVER
SERIES $200,000,000 $1,300,000,000 $1,300,000,000
- ------ ------------ -------------- --------------
<S> <C> <C> <C>
Stock--Class 1....................... 0.75% 0.675% 0.60%
Asset Allocation--Class 1............ 0.65% 0.585% 0.52%
International--Class 1............... 0.75% 0.675% 0.60%
Bond--Class 1........................ 0.50% 0.45% 0.40%
Money Market......................... 0.35% 0.30% 0.25%
<CAPTION>
TEMPLETON ASSET MANAGEMENT, LTD.
--------------------------------
SERIES
- ------
<S> <C>
Developing Mkts.--Class 1............ 1.25%
</TABLE>
For its fund administration 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 billion.
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 VPMO, 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 VPMO, then the purchase payment will be immediately
returned. If the GIA is chosen, additional purchase payments are deposited on
the date of receipt of such purchase payment at VPMO. If one or more of the
Subaccounts is chosen, additional purchase payments are applied to the
purchase of Accumulation Units of the Subaccount(s) chosen, at the value of
such Accumulation Units next determined after
13
<PAGE>
the receipt of such purchase payment at Variable Products Operations. The
number of Accumulation Units of a Subaccount purchased with a specific
purchase payment will be determined by dividing the applied purchase payment
by the value of an Accumulation Unit in that Subaccount next determined after
receipt of the purchase payment. The value of the Accumulation Units of a
Subaccount 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 Subaccount.
ACCUMULATION UNIT VALUES
At any date prior to the Maturity Date of the Contract, the total value of
the Accumulation Units in a Subaccount 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 Subaccount 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 Subaccounts or the GIA. THERE ARE ADDITIONAL
RESTRICTIONS ON TRANSFERS FROM THE GUARANTEED INTEREST ACCOUNT AS DESCRIBED
BELOW AND IN APPENDIX A. Any such transfer from a Subaccount will result in
the redemption of Accumulation Units, and if another Subaccount is selected,
in the purchase of Accumulation Units on the basis of the respective values
next determined after the receipt by VPMO of written notice of election in a
form satisfactory to Phoenix. A transfer among Subaccounts or the GIA 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 Subaccounts or the GIA 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.
Phoenix will employ reasonable procedures to confirm that telephone
instructions are genuine. They will require verification of account
information and will record telephone instructions on tape. All telephone
transfers will be confirmed in writing to the Contract Owner. To the extent
that procedures reasonably designed to prevent unauthorized transfers are not
followed, Phoenix may be liable for following telephone instructions for
transfers that prove to be fraudulent. However, the Contract Owner would bear
the risk of loss resulting from instructions entered by an unauthorized third
party that Phoenix reasonably believes to be genuine. 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
Subaccounts or the GIA 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 GIA or the Subaccount that funds will be transferred from,
and if the value in that Subaccount or the GIA 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
Subaccount or the GIA, but may be allocated to multiple Subaccounts. Under the
Systematic Transfer Program, Contract Owners may transfer approximately equal
amounts from the GIA over a minimum 18 month period.
Upon completion of the Systematic Transfer Program, the Contract Owner must
notify VPO at (800) 447-4312 or in writing to VPMO to implement another
Systematic Transfer Program.
All transfers under the Systematic Transfer Program will be executed on the
basis of the respective values as of the first of the month following receipt
of the Systematic Transfer Program 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 agrees otherwise or the Systematic Transfer Program has been
elected, a Contract Owner may make only one transfer per Contract year from
the GIA. Transfers will be effectuated on the date the transfer request was
received at VPMO, unless made pursuant to the Systematic Transfer Program as
noted above. For non-systematic transfers, the amount that may be transferred
from the GIA at any one time cannot exceed the greater of $1,000 or 25% of the
Contract Value in the GIA at the time of transfer.
Phoenix 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 have entered into a third party transfer service agreement.
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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").
Phoenix reserves the right to limit the number of Subaccounts you may elect
to a total of 18 at any one time and/or over the life of the Contract unless
required to be less to comply with changes in federal and/or state regulation,
including tax, securities and insurance law. As of the date of this
prospectus, this limitation has no effect because fewer Subaccounts are
offered.
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. Unless the Owner designates otherwise, the Accumulation Units
redeemed in a partial withdrawal will be redeemed in each Subaccount in the
same proportion as the value of the Accumulation Units of the Contract is then
allocated among the Subaccounts. Also, Contract Values in the GIA will be
withdrawn in a partial withdrawal in the same proportion as the Contract Value
is then allocated to the GIA, 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 Subaccount. 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 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 Phoenix Variable Products Mail Operations, P.O. Box 8027,
Boston, Massachusetts 02266-8027.
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 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 VPMO. 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.
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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 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. See also, "Distribution at Death Rules"
under Federal Income Taxes.
THE ANNUITY PERIOD
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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 provides,
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 Subaccounts 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 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 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. Generally, under qualified plans, the Maturity Date must be such that
distributions begin no later than April 1st of the calendar year following the
later of: (a) the year in which the employee attains age 70 1/2; or (b) the
calendar year in which the employee retires. The date set forth in (b) does
not apply to an IRA.
The Maturity Date election shall be made by written notice and must be
received by VPMO 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 Subaccount
to be credited is based on the value of the Accumulation Units in that
Subaccount 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
Subaccount 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 Subaccount is better or worse than the assumed investment return. The
assumed investment return 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.
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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 deducts a daily charge for mortality and expense risks from Contract
Values held in the Subaccounts (see "Charges For Mortality and Expense
Risks"). Therefore, electing Option K will result in a deduction being made
even though Phoenix 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 Subaccounts 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 Subaccounts 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.
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OTHER OPTIONS AND RATES
Phoenix 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 most qualified 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.
Generally, 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. Participants in
qualified plans, other than 5% owners, may defer distribution until the later
of actual retirement or April 1 of the year following the year 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 the LED program, regardless of Contract Year, 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"). Also, 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.
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, Phoenix 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 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 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
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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 Subaccount. 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 Subaccount, the following steps are taken: (a) the aggregate
accrued investment income and capital gains and losses, realized or
unrealized, of the Subaccount 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 Subaccount at the beginning of the Valuation
Period.
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MISCELLANEOUS PROVISIONS
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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.
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 Subaccounts 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 may mail the Contract to the Owner or it may be delivered in person.
An Owner may return 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 Subaccount 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 temporarily allocates the initial purchase
payment to the Money Market Subaccount. 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 Subaccount is
allocated among the available Subaccounts of the Account or the GIA 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 GIA, 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 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 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
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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's tax status,
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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'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"). Phoenix does not guarantee the
tax status of the Contracts. Purchasers bear the complete risk that the
Contracts may not be treated as "annuity contracts" under federal income tax
laws. For a discussion of Federal income taxes as they relate to the Fund,
please see the accompanying Prospectus for the Fund.
TAX STATUS
Phoenix 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 and its
operations form a part of Phoenix, 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. Phoenix 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.
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. The five year averaging rule for lump sum
distribution has been repealed for tax years beginning after 1999.
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. For certain types of qualified plans, there
may be no investment in the Contract resulting in the full amount of the
payments being taxable. A simplified method of determining the exclusion ratio
is effective with respect to qualified plan annuities starting after November
18, 1996.
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
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"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 and to a special 25% penalty applicable
specifically to SIMPLE IRAs); (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 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. Separate tax withdrawal
penalties apply to Qualified Contracts. (See "Penalty Tax on Surrenders and
Withdrawals from Qualified Contracts.")
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. Similar distribution requirements apply to annuity contracts under
Qualified Plans (other than Code Section 457 Plans). However, a number of
restrictions, limitations and special rules apply to Qualified Plans and a
Contract Owner should consult with a tax adviser.
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.
If the Contract Owner is not an individual, the death of the primary
Annuitant is treated as 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 first
death of the Contract Owners.
If the Contract Owner or a joint Contract Owner dies on or after the
Maturity Date, the remaining payments if any, under the Annuity Option
selected will be made at least as rapidly as under the method distribution in
effect at the time of death.
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
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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. 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.
The Treasury Department has indicated that the diversification Regulations
do not provide guidance regarding the circumstances in which Contract Owner
control of the investments of the Account will cause the Contract Owner to be
treated as the owner of the assets of the Account, thereby resulting in the
loss of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance. The amount of Contract Owner control which may
be exercised under the Contract is different in some respects from the
situations addressed in published rulings issued by the Internal Revenue
Service in which was held that the policy owner was not the owner of the
assets of the separate account. It is unknown whether these differences, such
as the Contract Owner's ability to transfer among investment choices or the
number and type of investment choices available, would cause the Contract
Owner to be considered as the owner of the assets of the Account resulting in
the imposition of federal income tax to the Contract Owner with respect to
earnings allocable to the Contract prior to receipt of payments under the
Contract.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the
Contract Owner being retroactively determined to be the owner of the assets of
the Account.
Due to the uncertainty in this area, Phoenix reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
Phoenix 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
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.
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QUALIFIED PLANS
The Contracts may be used with several types of qualified plans. TSAs,
Keoghs, IRAs, Corporate Pension and Profit Sharing Plans and State Deferred
Compensation ans 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 utioned 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 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 TSAs but not IRAs, except a) distributions required under
the Code; b) substantially equal distributions made over the life (or life
expectancy) of the employee, or for a term certain of 10 years or more; and
(c) the portion of distributions not includible in gross income (i.e. return
of after tax contributions).
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by Phoenix in connection with
certain Qualified Plans will utilize annuity tables which do not differentiate
on the basis of sex. Such annuity tables will also be available for use in
connection with certain non-qualified deferred compensation plans.
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".
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. Contract Owner loans are not allowed under the Contracts.
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.
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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. Effective January 1, 1997, employers may establish a new type of
IRA called SIMPLE (Savings Incentive Match Plan for Employees). Special rules
apply to participants contributions to and withdrawals from SIMPLE IRAs. Also
effective January 1, 1997, salary reduction IRAs (SARSEP) may no longer be
established.
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.
These retirement plans may permit the purchase of the Contracts to provide
benefits under the Plan. Contributions to the Plan for the benefit of
employees will not be includible in the gross income of the employee until
distributed from the Plan. The tax consequences to participants may vary,
depending upon the particular Plan design. However, the Code places
limitations and restrictions on all Plans, including on such items as: amount
of allowable contributions; form, manner and timing of distributions;
transferability of benefits; vesting and nonforfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment of
distributions, withdrawals and surrenders. Participant loans are not allowed
under the Contracts purchased in connection with these Plans. Purchasers of
Contracts for use with Corporate Pension or Profit-Sharing Plans should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
5. DEFERRED COMPENSATION PLANS WITH RESPECT TO SERVICE FOR STATE AND LOCAL
GOVERNMENTS AND TAX EMPT 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 if issued to tax exempt organizations 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. Effective in 1997 for new state and local government plans, such
plans must be funded through a tax exempt annuity contract held for the
exclusive benefit of plan participants.
6. PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS FROM QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Sections 401 (Keogh and
Corporate Pension and Profit-Sharing Plans), Tax-Sheltered Annuities and
Individual Retirement Annuities. The penalty is increased to 25% instead of
10% for SIMPLE IRAs if distribution occurs within the first two years of the
Contract Owner's participation in the SIMPLE IRA. To the extent amounts are
not includible in gross income because they have been properly rolled over to
an IRA or to another eligible Qualified Plan, no tax penalty will be imposed.
The tax penalty will not apply to the following distributions: (a) if
distribution is made on or after the date on which the Contract Owner or
Annuitant (as applicable) reaches age 59 1/2; (b) distributions following the
death or disability of the Contract Owner or Annuitant (as applicable) (for
this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
after separation from service, distributions that are part of substantially
equal periodic payments made not less frequently than annually for the life
(or life expectancy) of the Contract Owner or Annuitant (as applicable) or the
joint lives (or joint life expectancies) of such Contract Owner or Annuitant
(as applicable) and his or her designated beneficiary; (d) distributions to a
Contract Owner or Annuitant (as applicable) who has separate from service
after he has attained age 55; (e) distributions made to the Contract Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Contract Owner
or Annuitant (as applicable) for amounts paid during the taxable year for
medical care; (f) distributions made to an alternate payee pursuant to a
qualified domestic relations order; and (g) distributions from an Individual
Retirement Annuity for the purchase of medical insurance (as described in
Section 213(d)(1)(D) of the Code) for the Contract Owner and his or her spouse
and dependents if the Contract Owner has received unemployment compensation
for at least 12 weeks. This exception will no longer apply after the Contract
Owner has been re-employed for at least 60 days. The exceptions stated in
items (d) and (f) above do not apply in the case of an Individual Retirement
Annuity. The exception stated in item (c) applies to an Individual Retirement
Annuity without the requirement that there be a separation from service.
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Generally, distributions from a Qualified Plan must commence no later than
April 1 of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
7. 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
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The master servicer and distributor of the Contracts is W.S. Griffith & Co.,
Inc. ("WSG"). WSG is an indirect wholly-owned subsidiary of Phoenix. Contracts
are 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 with WSG and terms of agreement provided by
Phoenix. For services it renders, Phoenix pays WSG or such other person if
required under applicable law, an amount equal to 5.25% of the purchase
payments under the Contracts. Phoenix, through WSG or such other person,
generally pays dealers who sell Contracts an amount equal to 5% of the
purchase payments under the Contracts. The amounts paid by Phoenix are not
deducted from the purchase payments. Deductions for sales charges (as
described under "Sales Charges") may be used to reimburse Phoenix for
commission payments to broker-dealers.
STATE REGULATION
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Phoenix 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 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 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
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Reports showing the Contract Value and containing the financial statements
of the Account will be furnished at least annually to an Owner.
VOTING RIGHTS
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As stated above, all of the assets held in an available Subaccount will be
invested in shares of a corresponding Series of the Fund. Phoenix 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 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 currently intends to vote Fund shares attributable to any Phoenix
assets and Fund shares held in each Subaccount for which no timely
instructions from Owners are received in the same proportion as those shares
in that Subaccount for which instructions are received. In the future, to the
extent applicable Federal securities laws or regulations permit Phoenix 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 Subaccount(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
Subaccount to the total
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number of votes attributable to the Subaccount. In determining the number of
votes, fractional shares will be recognized. The number of votes for which each
Owner may give Phoenix instructions will be determined as of the record date
for Fund shareholders chosen by the Board of Trustees of the Fund. Phoenix will
furnish Owners with proper forms and proxies to enable them to give these
instructions.
TEXAS OPTIONAL RETIREMENT PROGRAM
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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
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Phoenix, the Account and WSG are not parties to any litigation that would
have a material adverse effect upon the Account or the Contracts.
LEGAL MATTERS
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Blazzard, Grodd & Hasenauer, P.C. of Westport, Connecticut has provided
advice on certain matters relating to the Federal securities and income tax
laws in connection to the Contracts described in this Prospectus.
STATEMENT OF ADDITIONAL INFORMATION
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The Statement of Additional Information contains more specific information
and financial statements relating to the Account and Phoenix. 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 Phoenix Variable Products Mail Operations in
writing at P.O. Box 8027, Boston, Massachusetts 02266-8027, or by calling
Variable Products Operations at (800) 243-4840.
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APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
Contributions to the GIA under the Contract and transfers to the GIA become
part of the general account of Phoenix (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 GIA.
Disclosures regarding the GIA and the General Account, however, may be subject
to certain generally applicable provisions of the federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
The General Account is made up of all of the general assets of Phoenix other
than those allocated to any separate account. Purchase payments will be
allocated to the GIA and, therefore, the General Account, as elected by the
Owner at the time of purchase or as subsequently changed. Phoenix 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 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 assumes this "mortality risk"
by virtue of annuity rates incorporated in the Contract that cannot be
changed. In addition, Phoenix 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 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. However, Phoenix guarantees
that it will credit interest at a rate of not less than 4% per year,
compounded annually, to amounts allocated to the GIA. Phoenix 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 will set the excess interest rate, if any, that will
apply to amounts deposited to the GIA. That rate will remain in effect for
such deposits for an initial guarantee period of one full year from the date
of deposit. Upon 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 GIA 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 based on information
as to expected investment yields. Some of the factors that Phoenix may
consider in determining whether to credit excess interest to amounts allocated
to the GIA and the amount thereof, are general economic trends, rates of
return currently available and anticipated on investments, regulatory and tax
requirements and competitive factors. ANY INTEREST CREDITED TO AMOUNTS
ALLOCATED TO THE GUARANTEED INTEREST ACCOUNT IN EXCESS OF 4% PER YEAR WILL BE
DETERMINED IN THE SOLE DISCRETION OF PHOENIX 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 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'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 GIA Contract Value. Phoenix
guarantees that, at any time, the GIA Contract Value will not be less than the
amount of purchase payments allocated to the GIA, plus interest at the rate of
4% per year, compounded annually, plus any additional interest which Phoenix
may, in its discretion, credit to the GIA, less the sum of all annual
administrative or surrender charges, any applicable premium taxes, and less
any amounts surrendered. If the Owner surrenders the Contract, the amount
available from the GIA 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 OR 25% OF THE CONTRACT VALUE IN THE GIA AT THE TIME OF THE
TRANSFER. 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
<TABLE>
<CAPTION>
UPON UPON NON-
STATE PURCHASE* ANNUITIZATION QUALIFIED QUALIFIED
- ----- --------- ------------- --------- ---------
<S> <C> <C> <C> <C>
California.......................... x 2.35% 0.50%
D.C. ............................... x 2.25 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 May 1, 1997. No premium
tax deductions are made for states not listed above. For Kentucky
Contracts, premium taxes will be deducted upon purchase, effective for
annuity considerations received on or after July 1, 1997. 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 interpretations.
For an explanation of the assessment of Premium Taxes see "Deductions and
Charges, Premium Tax."
/1/ "Purchase" in this chart refers to the earlier of partial withdrawal,
surrender of the Contract, payment of death proceeds or Maturity Date.
28
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
[VERSION A]
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
One American Row MAIL OPERATIONS (VPMO):
Hartford, CT 06115 P.O. Box 8027
Boston, MA 02266-8027
VARIABLE ACCUMULATION DEFFERED ANNUITY CONTRACTS
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, 1997 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, 1997
-----------------
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"). In 1994, 1995 and 1996, aggregate underwriting
commissions paid to PEPCO on the sales of the Contracts were $31,557,402,
$27,332,540 and $26,437,438, respectively, and retained $0 in 1996.
CALCULATION OF YIELD AND RETURN
- --------------------------------------------------------------------------------
Yield of the Money Market Subaccount. As summarized in the Prospectus
under the heading "Performance History," the yield of the Money Market
Subaccount 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 Subaccount yield and effective yield will vary in
response to fluctuations in interest rates and in the expenses of the
Subaccount.
The current yield and effective yield reflect recurring charges at the
Account level, including the maximum annual administrative fee.
Example:
Money Market Subaccount
The following is an example of this yield calculation for the Subaccount
based on a seven-day period ending December 31, 1996.
Assumptions:
CONTRACTS
CONTRACTS ASSESSING
ASSESSING .85% EXPENSE
.85% EXPENSE CHARGE & .125%
CHARGE DAILY ADMIN. FEE
------ ----------------
Value of a hypothetical pre-existing
account with exactly one
unit at the beginning of the period: 2.073039 1.050796
Value of the same account (excluding
capital changes) at the
end of the seven-day period ... 2.074515 1.051525
Calculation:
Ending account value .......... 2.074515 1.051525
Less beginning account value .. 2.073039 1.050796
Net change in account value ... 0.001476 0.000729
Base period return:
(adjusted change/beginning
account value)................. 0.000712 0.000694
Current yield = return X (365/7) = 3.71% 3.62%
Effective yield = [(1 + return) 365/7] - 1 = 3.78% 3.68%
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
Subaccount differs from the method used by the Subaccount 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 Subaccount 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 Subaccount 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 Subaccount; (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 Subaccount has not been in existence for at least 10 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 Subaccount may, from time to time, include its yield and total return
in advertisements or information furnished to present or prospective Contract
Owners. Each Subaccount may, from time to time, include in advertisements
containing total return (and yield in the case of certain Subaccounts) 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
Representative, Financial Planning, Financial Services Weekly, Financial World,
U.S. News and World Report, Standard & Poor's, The
B-2
<PAGE>
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 also may be used to compare the performance of
the Subaccounts 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 Subaccount, where applicable, through December 31, 1996 for
Contracts assessing a .85% expense charge and no daily administration fee.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED 12/31/96
COMMENCE- 10 LIFE OF
SUBACCOUNT MENT DATE 1 YEAR 5 YEARS YEARS FUND
- ---------- --------- ------ ------- ----- ----
Multi-Sector..... 1/1/83 5.85% 9.14% 8.31% 9.54%
Balanced......... 5/1/92 4.10% N/A N/A 8.26%
Strategic Allocation 9/17/84 2.68% 7.61% 9.92% 11.09%
Growth........... 1/1/83 6.00% 12.80% 14.52% 16.82%
International.... 5/1/90 11.73% 7.73% N/A 7.03%
Money Market..... 10/10/82 (1.12%) 2.55% 4.36% 5.06%
Real Estate...... 5/1/95 25.34% N/A N/A 25.58%
Theme............ 1/29/96 N/A N/A N/A 2.54%
Asia............. 9/17/96 N/A N/A N/A (6.19%)
U.S. Small Cap... 5/1/95 38.10% N/A N/A 31.87%
Int'l. Small Cap. 5/1/95 23.27% N/A N/A 34.74%
TPT Asset Alloc.(1) 11/28/88 11.94% 12.26% N/A 10.76%
TPT Stock (1).... 11/4/88 15.29% 14.78% N/A 11.79%
TPT International (1) 5/1/92 16.82% N/A N/A 13.32%
TPT Dev. Mkts.(1) 9/15/96 N/A N/A N/A (5.12%)
Below are quotations of average annual total return for Contracts issued on
or after May 1, 1997, assessing an .85% expense charge and .125% daily
administration fee, calculated as described above.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED 12/31/96
COMMENCE- 10 LIFE OF
SUBACCOUNT MENT DATE 1 YEAR 5 YEARS YEARS FUND
- ---------- --------- ------ ------- ----- ----
Multi-Sector.... 1/1/83 4.73% 8.81% 8.17% 9.39%
Balanced........ 5/1/92 3.00% N/A N/A 7.93%
Allocation...... 9/17/84 1.59% 7.29% 9.79% 10.96%
Growth.......... 1/1/83 4.89% 12.45% 14.38% 16.66%
International... 5/1/90 10.56% 7.40% N/A 6.74%
Money Market.... 10/10/82 (2.16%) 2.23% 4.23% 4.93%
Real Estate..... 5/1/95 24.01% N/A N/A 24.72%
Theme........... 1/29/96 N/A N/A N/A 2.12%
Asia............ 9/17/96 N/A N/A N/A (6.52%)
U.S. Small Cap.. 5/1/95 36.64% N/A N/A 30.96%
Int'l. Small Cap 5/1/95 23.03% N/A N/A 34.42%
TPT Asset Alloc.(1) 11/28/88 10.74% 11.92% N/A 10.73%
AVERAGE ANNUAL TOTAL RETURN (CONT'D)
FOR THE PERIOD ENDED 12/31/96
COMMENCE- 10 LIFE OF
SUBACCOUNT MENT DATE 1 YEAR 5 YEARS YEARS FUND
- ---------- --------- ------ ------- ----- ----
TPT Stock(1)..... 11/4/88 14.07% 14.43% N/A 11.66%
TPT International(1) 5/1/92 15.58% N/A N/A 12.97%
TPT Dev. Mkts.(1) 9/15/96 N/A N/A N/A (5.45%)
(1) Because Templeton Class 2 shares were not offered until May 1, 1997,
performance shown for periods prior to that date represents the historical
results of Class 1 shares. These returns have not been adjusted to reflect
the Rule 12b-1 fee for Class 2, which is 0.25% annually. There was no Rule
12b-1 fee for Class 1 shares. The returns for Class 2 shares, had they been
available during the period shown, would have been reduced by the amount of
the Rule 12b-1 fees, compounded over the relevant period, and will be
affected in the future by these fees.
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 Contract Value on the Maturity Date will be
automatically 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 shall have the
right to pay such amount in one lump sum in lieu of providing the annuity
payments. Phoenix also will have the right to change the annuity payment
frequency to annually if the monthly annuity payment otherwise would 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 is using when the first payment is
due. They will not be less than those shown in the Variable Income Table.
B-3
<PAGE>
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 Subaccount are multiplied by the rates Phoenix
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 Subaccount.
Future payments are measured in Annuity Units and are determined by
multiplying the Annuity Units in each Subaccount with assets under the
Variable Payment Option by the Annuity Unit Value for each Subaccount on the
Payment Calculation Date that applies. The number of Annuity Units in each
Subaccount with assets under a Variable Payment Option is equal to the portion
of the first payment provided from that Subaccount divided by the Annuity Unit
Value for that Subaccount on the first Payment Calculation Date. The payment
will equal the sum of such amounts from each Subaccount.
All Annuity Unit Values in each Subaccount were set at $1.000000 on the
first Valuation Date selected by Phoenix. The value of an Annuity Unit on any
date thereafter is equal to (a) the Net Investment Factor for that Subaccount
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 Subaccount will depend on the relationship between the assumed
investment return and the actual investment performance of the Subaccount. 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
purchase payments may be made with respect to any assets held under Variable
Payment Options I and J. Although no transfers or additional purchase 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 Subaccounts' Accumulation Units credited
to the Contract on the Maturity Date by the appropriate Unit Value for each
Subaccount on the Maturity Date. The dollar value for all Subaccounts'
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'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 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 from time to
time.
Blazzard, Grodd & Hasenauer, P.C. of Westport, Connecticut has provided
advice on certain matters relating to the federal securities and income tax laws
in connection to the Contracts described in this Prospectus.
B-4
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1996
B-5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
Money Market Growth
Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Assets
Investments at cost $ 7,363,985 $ 84,167,085 $44,185,453 $798,667,564
============ ============= ============ =============
Investment in The Phoenix Edge Series
Fund, at market $ 7,363,985 $ 84,167,085 $66,596,242 $908,841,991
------------ ------------- ------------ -------------
Total assets 7,363,985 84,167,085 66,596,242 908,841,991
Liabilities
Accrued expenses to related party 6,712 86,683 57,885 977,624
------------ ------------- ------------ -------------
Net assets $ 7,357,273 $ 84,080,402 $66,538,357 $907,864,367
============ ============= ============ =============
Accumulation units outstanding 3,459,902 40,530,150 7,215,152 100,883,217
============ ============= ============ =============
Unit value $ 2.126440 $ 2.074515 $ 9.222031 $ 8.999162
============ ============= ============ =============
<CAPTION>
Multi-Sector Fixed Income Total Return
Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Assets
Investments at cost $15,130,959 $ 94,967,604 $45,838,264 $250,510,261
============ ============== ============ =============
Investment in The Phoenix Edge Series
Fund, at market $15,487,641 $ 99,518,328 $58,367,148 $259,457,802
------------ -------------- ------------ -------------
Total assets 15,487,641 99,518,328 58,367,148 259,457,802
Liabilities
Accrued expenses to related party 12,698 104,432 50,216 277,715
------------ -------------- ------------ -------------
Net assets $15,474,943 $ 99,413,896 $58,316,932 $259,180,087
============ ============== ============ =============
Accumulation units outstanding 4,114,438 27,079,387 15,340,867 69,900,691
============ ============== ============ =============
Unit value $ 3.761132 $ 3.671202 $ 3.801411 $ 3.707833
============ ============== ============ =============
<CAPTION>
International Balanced
Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
----------------------------- ------------------------------
<S> <C> <C> <C> <C>
Assets
Investments at cost $ 3,950,560 $102,835,369 $ 4,295,160 $161,540,166
============ ============= ============ =============
Investment in The Phoenix Edge Series
Fund, at market $ 5,395,995 $128,164,938 $ 4,920,977 $176,344,947
------------ ------------- ------------ -------------
Total assets 5,395,995 128,164,938 4,920,977 176,344,947
Liabilities
Accrued expenses to related party 4,502 132,253 4,223 188,469
------------ ------------- ------------ -------------
Net assets $ 5,391,493 $128,032,685 $ 4,916,754 $176,156,478
============ ============= ============ =============
Accumulation units outstanding 3,336,546 80,535,316 3,271,238 118,572,031
============ ============= ============ =============
Unit value $ 1.615890 $ 1.589771 $ 1.503025 $ 1.485649
============ ============= ============ =============
</TABLE>
See Notes to Financial Statements
B-6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(Continued)
<TABLE>
<CAPTION>
Real Estate Strategic Theme
Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
-------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Assets
Investments at cost $ 241,867 $15,352,449 $ 653,816 $18,148,272
=========== ============ =========== =============
Investment in The Phoenix Edge Series
Fund, at market $ 287,658 $19,391,381 $ 674,557 $18,904,174
----------- ------------ ----------- -------------
Total assets 287,658 19,391,381 674,557 18,904,174
Liabilities
Accrued expenses to related party 227 18,124 569 20,145
----------- ------------ ----------- -------------
Net assets $ 287,431 $19,373,257 $ 673,988 $18,884,029
=========== ============ =========== =============
Accumulation units outstanding 188,753 12,614,201 620,567 17,311,417
=========== ============ =========== =============
Unit value $ 1.522792 $ 1.535829 $ 1.086084 $ 1.090843
=========== ============ =========== =============
<CAPTION>
Aberdeen New Asia
Sub-Account
VA1 VA2, VA3 & GSE
-------------------------------
<S> <C> <C>
Assets
Investments at cost $ 396,202 $ 8,129,643
============ =============
Investment in The Phoenix Edge Series
Fund, at market $ 394,425 $ 8,117,014
------------ -------------
Total assets 394,425 8,117,014
Liabilities
Accrued expenses to related party 330 8,321
------------ -------------
Net assets $ 394,095 $ 8,108,693
============ =============
Accumulation units outstanding 395,033 8,124,731
============ =============
Unit value $ 0.997626 $ 0.998026
============ =============
<CAPTION>
Wanger International Small Cap Wanger U.S. Small Cap
Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Assets
Investments at cost $2,369,355 $57,330,199 $4,042,798 $79,402,555
============ ============= =========== =============
Investment in Wanger Advisors Trust,
at market $2,646,515 $65,881,913 $4,857,021 $98,214,300
------------ ------------- ----------- -------------
Total assets 2,646,515 65,881,913 4,857,021 98,214,300
Liabilities
Accrued expenses to related party 2,148 67,199 3,938 98,140
------------ ------------- ----------- -------------
Net assets $2,644,367 $65,814,714 $4,853,083 $98,116,160
============ ============= =========== =============
Accumulation units outstanding 1,632,016 37,820,126 2,887,671 58,623,497
============ ============= =========== =============
Unit value $ 1.620307 $ 1.740203 $ 1.680622 $ 1.673666
============ ============= =========== =============
</TABLE>
See Notes to Financial Statements
B-7
<PAGE>
STATEMENT OF OPERATIONS
For the period ended December 31, 1996
<TABLE>
<CAPTION>
Money Market Growth
Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
-------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Investment income
Distributions $ 397,081 $ 3,586,484 $ 638,220 $ 8,253,068
Expenses
Mortality and expense risk charges 81,535 917,302 679,057 10,690,584
----------- ------------ ----------- -------------
Net investment income (loss) 315,546 2,669,182 (40,837) (2,437,516)
----------- ------------ ----------- -------------
Net realized gain from share transactions -- -- 461,426 551,462
Net realized gain distribution from Fund -- -- 4,488,201 60,788,375
Net unrealized appreciation on investment -- -- 2,358,935 31,685,702
----------- ------------ ----------- -------------
Net gain on investments -- -- 7,308,562 93,025,539
----------- ------------ ----------- -------------
Net increase in net assets resulting from
operations $ 315,546 $ 2,669,182 $7,267,725 $90,588,023
=========== ============ ========== =============
<CAPTION>
Multi-Sector Fixed Income Total Return
Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Investment income
Distributions $ 986,913 $ 6,798,736 $1,316,386 $ 5,639,587
Expenses
Mortality and expense risk charges 133,316 1,140,813 609,637 3,244,376
----------- ------------ ----------- ------------
Net investment income 853,597 5,657,923 706,749 2,395,211
----------- ------------ ----------- ------------
Net realized gain from share transactions 542,863 9,603 551,516 563,339
Net realized gain distribution from Fund 458,554 2,940,178 3,644,787 16,147,390
Net unrealized appreciation (depreciation) on
investment (396,876) 940,530 (264,359) 143,413
----------- ------------ ----------- ------------
Net gain on investments 604,541 3,890,311 3,931,944 16,854,142
----------- ------------ ----------- ------------
Net increase in net assets resulting from
operations $1,458,138 $ 9,548,234 $4,638,693 $19,249,353
=========== ============ =========== ============
<CAPTION>
International Balanced
Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
---------------------------- -----------------------------
<S> <C> <C> <C> <C>
Investment income
Distributions $ 77,368 $ 1,823,480 $ 139,715 $ 4,866,871
Expenses
Mortality and expense risk charges 53,836 1,509,486 51,093 2,197,070
----------- ------------ ----------- ------------
Net investment income 23,532 313,994 88,622 2,669,801
----------- ------------ ----------- ------------
Net realized gain from share transactions 65,503 169,042 47,111 393,139
Net realized gain distribution from Fund 120,338 2,835,420 443,754 15,731,997
Net unrealized appreciation (depreciation) on
investment 649,224 15,512,070 (130,224) (3,383,807)
----------- ------------ ----------- -------------
Net gain on investments 835,065 18,516,532 360,641 12,741,329
----------- ------------ ----------- -------------
Net increase in net assets resulting from
operations $ 858,597 $18,830,526 $ 449,263 $15,411,130
=========== ============ =========== =============
</TABLE>
See Notes to Financial Statements
B-8
<PAGE>
STATEMENT OF OPERATIONS
For the period ended December 31, 1996
(Continued)
<TABLE>
<CAPTION>
Real Estate Strategic Theme
Sub-Account Sub-Account(1)
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
-------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Investment income
Distributions $ 4,917 $ 477,780 $ 2,434 $ 66,692
Expenses
Mortality and expense risk charges 1,068 140,105 3,322 142,262
----------- ------------- ---------- -------------
Net investment income (loss) 3,849 337,675 (888) (75,570)
----------- ------------- ---------- -------------
Net realized gain from share transactions 338 10,558 1,447 131,998
Net realized gain distribution from Fund 3,037 199,911 -- --
Net unrealized appreciation on investment 42,397 3,218,688 20,742 755,902
----------- ------------- ---------- -------------
Net gain on investments 45,772 3,429,157 22,189 887,900
----------- ------------- ---------- -------------
Net increase in net assets resulting from
operations $ 49,621 $3,766,832 $ 21,301 $ 812,330
=========== ============= ========== =============
<CAPTION>
Aberdeen New Asia
Sub-Account(2)
VA1 VA2, VA3 & GSE
-------------------------------
<S> <C> <C>
Investment income
Distributions $ 2,008 $ 41,156
Expenses
Mortality and expense risk charges 950 22,524
--------- -----------
Net investment income 1,058 18,632
--------- -----------
Net realized gain (loss) from share
transactions (15) 1,853
Net unrealized depreciation on investment (1,776) (12,629)
--------- -----------
Net loss on investments (1,791) (10,776)
--------- -----------
Net increase (decrease) in net assets
resulting from operations $ (733) $ 7,856
========= ===========
<CAPTION>
Wanger International Small Cap Wanger U.S. Small Cap
Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Investment income
Distributions $ 1,241 $ 50,527 $ 1,323 $ 58,386
Expenses
Mortality and expense risk charges 15,376 493,284 30,173 710,845
----------- ------------- ---------- ------------
Net investment loss (14,135) (442,757) (28,850) (652,459)
----------- ------------- ---------- ------------
Net realized gain (loss) from share
transactions (734) (2,372) 1,581 (31,819)
Net unrealized appreciation on investment 258,110 7,549,473 790,450 18,432,196
----------- ------------- ---------- ------------
Net gain on investments 257,376 7,547,101 792,031 18,400,377
----------- ------------- ---------- ------------
Net increase in net assets resulting from
operations $243,241 $7,104,344 $763,181 $17,747,918
=========== ============= ========== ============
</TABLE>
(1) From inception February 7, 1996 to December 31, 1996
(2) From inception September 29, 1996 to December 31, 1996
See Notes to Financial Statements
B-9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1996
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
---------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
From operations
Net investment
income (loss) $ 315,546 $ 2,669,182 $ (40,837) $ (2,437,516) $ 853,597 $ 5,657,923
Net realized gain -- -- 4,949,627 61,339,837 1,001,417 2,949,781
Net unrealized
appreciation
(depreciation) -- -- 2,358,935 31,685,702 (396,876) 940,530
------------ ------------- ----------- -------------- ------------- -------------
Net increase in net
assets resulting
from operations 315,546 2,669,182 7,267,725 90,588,023 1,458,138 9,548,234
------------ ------------- ----------- -------------- ------------- -------------
From accumulation
unit transactions
Participant deposits 413,122 62,414,283 1,163,841 98,787,397 265,897 12,251,810
Participant
transfers 2,086,813 (38,766,038) (3,027,275) (9,399,903) (34,417) 544,623
Participant
withdrawals (2,528,258) (16,292,176) (6,317,461) (35,720,970) (1,143,820) (7,038,518)
------------- ------------- ----------- -------------- ------------ -------------
Net increase
(decrease) in net
assets resulting
from participant
transactions (28,323) 7,356,069 (8,180,895) 53,666,524 (912,340) 5,757,915
------------- ------------- ----------- -------------- ------------ -------------
Net increase
(decrease) in net
assets 287,223 10,025,251 (913,170) 144,254,547 545,798 15,306,149
Net assets
Beginning of period 7,070,050 74,055,151 67,451,527 763,609,820 14,929,145 84,107,747
------------ ------------- ----------- -------------- ------------- -------------
End of period $ 7,357,273 $ 84,080,402 $66,538,357 $907,864,367 $15,474,943 $ 99,413,896
========== ============= =========== ============== ============ =============
<CAPTION>
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
---------------------------- ---------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
From operations
Net investment
income $ 706,749 $ 2,395,211 $ 23,532 $ 313,994 $ 88,622 $ 2,669,801
Net realized gain 4,196,303 16,710,729 185,841 3,004,462 490,865 16,125,136
Net unrealized
appreciation
(depreciation) (264,359) 143,413 649,224 15,512,070 (130,224) (3,383,807)
------------ -------------- ------------ -------------- ------------ --------------
Net increase in net
assets resulting
from operations 4,638,693 19,249,353 858,597 18,830,526 449,263 15,411,130
------------ -------------- ------------ -------------- ------------ --------------
From accumulation
unit transactions
Participant deposits 921,673 21,807,365 123,786 9,967,892 69,850 13,546,555
Participant
transfers (4,520,404) (17,991,179) (238,308) (340,043) (770,120) (12,855,150)
Participant
withdrawals (6,234,965) (15,780,165) (527,123) (7,580,723) (362,102) (12,633,674)
------------ -------------- ------------ -------------- ----------- --------------
Net increase
(decrease) in net
assets resulting
from participant
transactions (9,833,696) (11,963,979) (641,645) 2,047,126 (1,062,372) (11,942,269)
------------ -------------- ------------ -------------- ----------- --------------
Net increase
(decrease) in net
assets (5,195,003) 7,285,374 216,952 20,877,652 (613,109) 3,468,861
Net assets
Beginning of period 63,511,935 251,894,713 5,174,541 107,155,033 5,529,863 172,687,617
------------ -------------- ------------ -------------- ------------ --------------
End of period $58,316,932 $259,180,087 $ 5,391,493 $128,032,685 $ 4,916,754 $176,156,478
============ ============== ============ ============== ============ ==============
</TABLE>
See Notes to Financial Statements
B-10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1996
(Continued)
<TABLE>
<CAPTION>
Real Estate Strategic Theme Aberdeen New Asia
Sub-Account Sub-Account(1) Sub-Account(2)
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
------------------------------- ---------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
From operations
Net investment income
(loss) $ 3,849 $ 337,675 $ (888) $ (75,570) $ 1,058 $ 18,632
Net realized gain 3,375 210,469 1,447 131,998 (15) 1,853
Net unrealized
appreciation
(depreciation) 42,397 3,218,688 20,742 755,902 (1,776) (12,629)
------------ ------------- ----------- ------------- --------- -------------
Net increase
(decrease) in net
assets resulting
from operations 49,621 3,766,832 21,301 812,330 (733) 7,856
------------ ------------- ----------- ------------- --------- -------------
From accumulation unit
transactions
Participant deposits 21,937 1,419,253 97,264 11,116,071 -- 744,784
Participant transfers 203,153 6,126,595 557,249 7,104,135 396,531 7,370,328
Participant
withdrawals (26,582) (127,550) (1,826) (148,507) (1,703) (14,275)
------------ ------------- ----------- ------------- --------- -------------
Net increase in net
assets resulting
from participant
transactions 198,508 7,418,298 652,687 18,071,699 394,828 8,100,837
------------ ------------- ----------- ------------- --------- -------------
Net increase in net
assets 248,129 11,185,130 673,988 18,884,029 394,095 8,108,693
Net assets
Beginning of period 39,302 8,188,127 0 0 0 0
------------ ------------- ----------- ------------- --------- -------------
End of period $ 287,431 $19,373,257 $ 673,988 $18,884,029 $394,095 $8,108,693
============ ============= =========== ============= ========= =============
<CAPTION>
Wanger International Small Cap Wanger U.S. Small Cap
Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
From operations
Net investment loss $ (14,135) $ (442,757) $ (28,850) $ (652,459)
Net realized gain
(loss) (734) (2,372) 1,581 (31,819)
Net unrealized
appreciation 258,110 7,549,473 790,450 18,432,196
------------ ------------- ----------- --------------
Net increase in net
assets resulting
from operations 243,241 7,104,344 763,181 17,747,918
------------ ------------- ----------- --------------
From accumulation unit
transactions
Participant deposits 234,155 15,960,884 269,408 20,013,816
Participant transfers 2,018,521 33,617,187 3,368,454 42,773,428
Participant
withdrawals (92,790) (1,194,205) (80,915) (2,113,335)
------------ ------------- ----------- --------------
Net increase in net
assets resulting
from participant
transactions 2,159,886 48,383,866 3,556,947 60,673,909
------------ ------------- ----------- --------------
Net increase in net
assets 2,403,127 55,488,210 4,320,128 78,421,827
Net assets
Beginning of period 241,240 10,326,504 532,955 19,694,333
------------ ------------- ----------- --------------
End of period $2,644,367 $65,814,714 $4,853,083 $98,116,160
============ ============= =========== ==============
</TABLE>
(1) From inception February 7, 1996 to December 31, 1996
(2) From inception September 29, 1996 to December 31, 1996
See Notes to Financial Statements
B-11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE VA1 VA2, VA3 & 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
============ ============== ============ ============== ============ ==============
<CAPTION>
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE VA1 VA2, VA3 & GSE
----------------------------- --------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
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-12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
From inception May 1, 1995 to December 31, 1995
(Continued)
<TABLE>
<CAPTION>
Real Estate Wanger International Small Wanger U.S. Small Cap
Sub-Account Cap Sub-Account Sub-Account
VA1 VA2, VA3 & 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 0 0 0 0 0 0
---------- ------------- --------- ------------ --------- -----------
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-13
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Note 1--Organization
Phoenix Home Life Variable Accumulation Account (the "Account") is a
separate investment account of Phoenix Home Life Mutual Insurance Company
(Phoenix) registered as a unit investment trust. The Account currently has
eleven 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, Multi-Sector Fixed Income (formerly
Bond), Total Return, International, Balanced, Real Estate, Strategic Theme,
Aberdeen New Asia, Wanger International Small Cap and Wanger U.S. Small Cap
Sub-accounts are subdivided into two pools designated "VA1" and "VA2, VA3 &
GSE". VA2, VA3 and GSE contracts include a higher expense risk charge than the
VA1 contract.
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 Multi-Sector Fixed Income 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. The Strategic Theme Series
invests in securities of companies believed to benefit from specific trends. The
Aberdeen New Asia Series invests primarily in diversified equity securities of
issuers organized and principally operating in Asia, excluding Japan. 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.
Contract owners may also direct the allocation of their investments between the
Account and the Guaranteed Interest Account (of the General Account of Phoenix)
through participant transfers.
Note 2--Significant Accounting Policies
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 and under
current federal income tax law, income arising from 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 period ended December
31, 1996 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 $15,874,923 $15,586,607 $ 84,974,398 $74,933,945
Growth 9,692,151 13,420,971 206,997,081 94,744,516
Multi-Sector Fixed Income 9,912,247 9,511,838 32,391,800 18,015,431
Total Return 5,577,505 11,059,655 35,318,110 28,708,789
International 1,385,836 1,883,202 18,095,839 12,871,108
Balanced 1,080,239 1,610,321 29,227,305 22,748,091
Real Estate 232,405 26,813 9,997,652 2,031,388
Strategic Theme 720,463 68,094 24,907,339 6,891,065
Aberdeen New Asia 398,440 2,223 9,330,672 1,202,882
Wanger Advisors Trust:
Wanger International Small Cap 2,708,195 560,469 50,827,925 2,825,276
Wanger U.S. Small Cap 6,377,168 2,845,543 63,038,392 2,938,002
</TABLE>
B-14
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Note 4--Participant Accumulation Unit Transactions (in units)
<TABLE>
<CAPTION>
Sub-Account
---------------------------------------------------------------------------------------
Money Multi-Sector Total
Market Growth Fixed Income Return International Balanced
------------- ------------- -------------- ------------ ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
VA1
Units outstanding,
beginning of period 3,457,073 8,152,578 4,417,776 18,038,311 3,761,861 4,027,273
Participant deposits 197,520 134,660 77,074 253,627 83,754 49,966
Participant transfers 1,018,162 (345,050) (55,510) (1,245,054) (158,084) (549,310)
Participant withdrawals (1,212,853) (727,036) (324,902) (1,706,017) (350,985) (256,691)
----------- ----------- ------------- ----------- -------------- -----------
Units outstanding, end
of period 3,459,902 7,215,152 4,114,438 15,340,867 3,336,546 3,271,238
=========== =========== ============= =========== ============== ===========
VA2, VA3
Big Edge Plus:
Units outstanding,
beginning of period 36,241,891 92,694,585 24,782,657 71,834,899 77,277,010 124,814,290
Participant deposits 29,510,056 10,108,038 3,246,569 5,622,400 6,163,694 8,723,388
Participant transfers (21,526,181) (942,697) 121,097 (4,867,129) (288,064) (9,024,338)
Participant withdrawals (5,343,725) (5,740,812) (1,924,673) (4,267,779) (4,901,106) (8,698,694)
----------- ----------- ------------- ----------- -------------- -----------
Units outstanding, end
of period 38,882,041 96,119,114 26,225,650 68,322,391 78,251,534 115,814,646
=========== =========== ============= =========== ============== ===========
Group Strategic Edge:
Units outstanding,
beginning of period 783,988 1,648,909 652,101 1,330,249 1,708,309 2,104,015
Participant deposits 1,593,445 3,401,352 301,274 526,051 484,703 724,326
Participant transfers 1,045,503 (2,467) 41,728 (95,905) 265,560 191,883
Participant withdrawals (1,774,827) (283,691) (141,366) (182,095) (174,790) (262,839)
----------- ----------- ------------- ----------- -------------- -----------
Units outstanding, end
of period 1,648,109 4,764,103 853,737 1,578,300 2,283,782 2,757,385
=========== =========== ============= =========== ============== ===========
</TABLE>
<TABLE>
<CAPTION>
Strategic Aberdeen Wanger International Wanger U.S.
Real Estate Theme New Asia Small Cap Small Cap
-------------- ------------- ------------ -------------------- --------------
<S> <C> <C> <C> <C> <C>
VA1
Units outstanding, beginning
of period 34,014 0 0 194,615 460,316
Participant deposits 16,219 93,421 -- 153,393 185,088
Participant transfers 156,851 528,857 396,754 1,345,568 2,297,687
Participant withdrawals (18,331) (1,711) (1,721) (61,560) (55,420)
------------ ----------- ---------- ------------------- ------------
Units outstanding, end of
period 188,753 620,567 395,033 1,632,016 2,887,671
============ =========== ========== =================== ============
VA2, VA3
Big Edge Plus:
Units outstanding, beginning
of period 6,971,291 0 0 7,737,540 17,039,472
Participant deposits 1,046,143 10,557,214 742,070 9,247,962 13,215,584
Participant transfers 4,442,965 6,511,719 7,380,189 20,878,871 28,707,048
Participant withdrawals (102,950) (67,958) (14,275) (754,253) (1,451,778)
------------ ----------- ---------- ------------------- ------------
Units outstanding, end of
period 12,357,449 17,000,975 8,107,984 37,110,120 57,510,326
============ =========== ========== =================== ============
Group Strategic Edge:
Units outstanding, beginning
of period 37,517 0 0 0 0
Participant deposits 55,139 188,421 9,045 398,085 520,942
Participant transfers 164,178 195,948 7,702 316,457 641,009
Participant withdrawals (82) (73,927) -- (4,536) (48,780)
------------ ----------- ---------- ------------------- ------------
Units outstanding, end of
period 256,752 310,442 16,747 710,006 1,113,171
============ =========== ========== =================== ============
</TABLE>
B-15
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Note 5--Investment Advisory Fees and Related Party Transactions
Phoenix and its indirect, majority owned subsidiary, Phoenix Equity
Planning Corporation, a registered broker/dealer in securities, provide all
services to the Account.
Phoenix 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 its deductions for such expenses. In return for the
assumption of these mortality and expense risks, Phoenix charges the
Sub-Accounts designated VA1 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 0.60% 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 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, 1996 aggregated $1,549,937 and are funded by and included in participant
withdrawals.
Phoenix Equity Planning Corporation is the principal underwriter and
distributor for the Account. Phoenix 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 as reimbursement for services
provided. Contingent deferred sales charges deducted and paid to Phoenix
aggregated $1,958,067 for the year ended December 31, 1996.
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 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
[Logotype] Price Waterhouse LLP [Logo]
To the Board of Directors of Phoenix Home Life Mutual Insurance Company and
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, Multi-Sector Fixed Income Sub-Account
(formerly the Bond Sub-Account), Total Return Sub-Account, International
Sub-Account, Balanced Sub-Account, Real Estate Sub-Account, Strategic Theme
Sub-Account, Aberdeen New Asia 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, 1996, the results of each of their operations for
the periods 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, which included confirmation of investments at December 31, 1996
by correspondence with the Funds, provide a reasonable basis for the opinion
expressed above.
/s/ Price Waterhouse LLP
Hartford, Connecticut
February 12, 1997
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
Custodians
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
(International Series, Aberdeen New Asia Series)
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
(Real Estate Series)
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, 1996 AND 1995
B-19
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants ....................................... B-21
Consolidated Balance Sheets at December 31, 1996 and 1995 ................ B-22
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 ....................................... B-23
Consolidated Statements of Equity for the Years Ended
December 31, 1996, 1995 and 1994 ....................................... B-24
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 ........................................ B-25
Notes to Consolidated Financial Statements .......................... B-26-B-53
B-20
<PAGE>
One Financial Plaza Telephone 860 240 2000
Hartford, CT 06103
[logotype]Price Waterhouse LLP [logo]
REPORT OF INDEPENDENT ACCOUNTANTS
February 12, 1997
To the Board of Directors
and Policyholders of
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of equity and of cash flows present fairly,
in all material respects, the financial position of Phoenix Home Life Mutual
Insurance Company and its subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
<PAGE>
THIS NEW YORK STATE INSURANCE DEPARTMENT RECOGNIZES ONLY STATUTORY
ACCOUNTING PRACTICES FOR DETERMINING AND REPORTING THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF AN INSURANCE COMPANY, FOR DETERMINING ITS
SOLVENCY UNDER NEW YORK INSURANCE LAW, AND FOR DETERMINING WHETHER ITS
FINANCIAL CONDITION WARRANTS THE PAYMENT OF A DIVIDEND TO ITS
POLICYHOLDERS. NO CONSIDERATION IS GIVEN BY THE DEPARTMENT TO FINANCIAL
STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN MAKING SUCH DETERMINATIONS.
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
DECEMBER 31,
1996 1995
(IN THOUSANDS)
ASSETS
Investments:
Fixed maturities:
Held-to-maturity, at amortized cost $ 1,555,685 $ 1,334,447
Available-for-sale, at fair value 4,895,393 4,425,678
Equity securities, at fair value 235,351 254,278
Mortgage loans 947,076 897,192
Real estate 410,945 418,328
Policy loans 1,667,784 1,617,872
Other invested assets 182,372 144,778
Short-term investments 164,967 275,517
---------------- ----------------
Total investments 10,059,573 9,368,090
Cash and cash equivalents 172,895 127,104
Accrued investment income 135,475 128,139
Deferred policy acquisition costs 926,274 816,128
Premiums, accounts and notes receivable 79,354 64,880
Reinsurance recoverables 46,251 48,490
Property and equipment, net 137,231 134,880
Other assets 134,589 130,627
Goodwill and intangibles, net 313,507 313,069
Separate account assets 3,447,899 3,306,070
---------------- ----------------
Total assets $ 15,453,048 $ 14,437,477
---------------- ----------------
LIABILITIES
Policy liabilities and accruals $ 9,462,039 $ 8,974,885
Other liabilities 470,595 445,577
Long-term debt 490,430 268,337
Current income taxes 29,345 42,033
Deferred income taxes 61,934 34,176
Separate account liabilities 3,412,152 3,273,056
---------------- ----------------
Total liabilities 13,926,495 13,038,064
================ ================
Contingent liabilities (Note 15)
Minority interest 129,084 117,826
---------------- ----------------
EQUITY
Unrealized investment gains, net 89,791 75,878
Retained earnings 1,307,678 1,205,709
---------------- ----------------
Total equity 1,397,469 1,281,587
---------------- ----------------
Total liabilities and equity $ 15,453,048 $ 14,437,477
================ ================
The accompanying notes are an integral part of these statements.
B-22
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $ 1,518,822 $ 1,456,875 $ 1,396,002
Insurance and investment product fees 421,058 324,459 286,174
Net investment income 689,890 662,468 622,717
Net realized investment gains (losses) 95,265 74,738 (166)
---------------- ---------------- ----------------
Total revenues 2,725,035 2,518,540 2,304,727
---------------- ---------------- ----------------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses 1,529,573 1,471,030 1,412,686
Policyholder dividends 311,739 289,469 264,456
Policy acquisition expenses 242,363 221,339 237,768
Other operating expenses 452,399 419,231 319,090
---------------- ---------------- ----------------
Total benefits, losses and expenses 2,536,074 2,401,069 2,234,000
---------------- ---------------- ----------------
OPERATING INCOME 188,961 117,471 70,727
Non-operating income
Gain on merger transactions 40,580
---------------- ---------------- ----------------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST 188,961 158,051 70,727
Income taxes 79,331 43,352 40,062
---------------- ---------------- ----------------
INCOME BEFORE MINORITY INTEREST 109,630 114,699 30,665
Minority interest (8,902) (950) 13
---------------- ---------------- ----------------
NET INCOME $ 100,728 $ 113,749 $ 30,678
================ =============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
B-23
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
- --------------------------------------------------------------------------------
NET UNREALIZED
RETAINED INVESTMENT
EARNINGS GAINS (LOSSES) TOTAL
(IN THOUSANDS)
Balance at December 31, 1993 $ 1,065,115 $ 48,288 $ 1,113,403
Net income 30,678 30,678
Net unrealized loss (75,761) (75,761)
------------ ------------- -------------
Balance at December 31, 1994 1,095,793 (27,473) 1,068,320
Net income 113,749 113,749
Net unrealized gain 103,351 103,351
Minimum pension liability (3,833) (3,833)
------------ ------------- -------------
Balance at December 31, 1995 1,205,709 75,878 1,281,587
Net income 100,728 100,728
Net unrealized gain 13,913 13,913
Minimum pension liability 1,241 1,241
------------ ------------- -------------
Balance at December 31, 1996 $ 1,307,678 $ 89,791 $ 1,397,469
============ ============= =============
The accompanying notes are an integral part of these statements.
B-24
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 100,728 $ 113,749 $ 30,678
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATIONS
Net realized investment gains (95,265) (74,738) (166)
Net gain on merger (40,580)
Amortization and depreciation 64,870 58,912 51,894
Deferred income taxes (benefit) 14,774 (16,236) 68,936
(Increase) decrease in receivables (111,886) (30,130) 2,830
Increase in deferred policy acquisition costs (61,985) (26,370) (2,975)
Increase in policy liabilities and accruals 559,724 537,919 446,850
Increase (decrease) in other assets/other liabilities, net 39,594 95,880 (51,171)
Other, net 11,258 4,203 8,046
------------- ------------- -----------
Net cash provided by operating activities 521,812 622,609 554,922
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposals of fixed maturities:
Available-for-sale 1,348,809 1,145,146 985,858
Held-to-maturity 118,596 143,773 209,757
Proceeds from disposals of equity securities 382,359 329,104 347,884
Proceeds from mortgage loan maturities or repayments 151,760 186,172 160,882
Proceeds from sale of other invested assets 127,440 148,546 209,316
Purchase of fixed maturities:
Available-for-sale (1,909,086) (1,614,387) (1,396,902)
Held-to-maturity (385,321) (247,354) (383,207)
Purchase of equity securities (215,104) (282,488) (310,751)
Purchase of mortgage loans (200,683) (93,097) (31,214)
Purchase of other invested assets (157,077) (73,482) (173,988)
Change in short term investments, net 110,503 (166,445) 265,328
Increase in policy loans (49,912) (32,387) (55,143)
Capital expenditures (3,543) (18,449) (12,663)
Other investing activities, net (5,898) (12,704) (11,392)
------------- ------------- -----------
Net cash used for investing activities (687,157) (588,052) (196,235)
CASH FLOW FROM FINANCING ACTIVITIES
Withdrawals of contractholder deposit (6,301) (154,100) (314,100)
funds, net of deposits and interest credited
Proceeds from borrowings 226,082 177,922 3,417
Repayment of borrowings (2,400) (12,726) (19,742)
Dividends paid to minority shareholders (6,245) (31,215)
------------- ------------- -----------
Net cash provided by (used for) financing activities 211,136 (20,119) (330,425)
NET INCREASE IN CASH AND CASH EQUIVALENTS 45,791 14,438 28,262
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 127,104 112,666 84,404
------------- ------------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 172,895 $ 127,104 $ 112,666
============= ============= ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid (refunded), net $ 76,157 $ 33,399 $ (32,245)
Interest paid on debt $ 19,214 $ 8,100 $ 8,191
</TABLE>
The accompanying notes are an integral part of these statements.
B-25
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company (Phoenix 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, primarily based in the United
States. These products and services are distributed among seven segments:
Individual, Group Life and Health, Life Reinsurance, General Lines
Brokerage, Securities Management, Real Estate Management and Other
Operations. See Note 10 for segment information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Phoenix and
all significant subsidiaries (collectively, the Company). Less than
majority-owned entities in which the Company has at least a 20% interest or
those where the Company has significant influence are reported on the
equity basis.
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates used in
determining insurance and contractholder liabilities, related reinsurance
recoverables, taxes, contingencies and valuation allowances for investment
assets are discussed throughout the Notes to Consolidated Financial
Statements. All significant intercompany accounts and transactions have
been eliminated. Certain reclassifications have been made to the 1995 and
1994 amounts to conform with the 1996 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
As a result of the issuance of the Statement of Financial Accounting
Standard (SFAS) No. 120, "Accounting and Reporting by Mutual Life Insurance
Enterprises and Insurance Enterprises for Certain Long-Duration
Participating Contracts," and Financial Accounting Standards Board
Interpretation (FIN) No. 40, "Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises,"
financial statements of mutual life insurance companies beginning after
December 15, 1995, prepared on the basis of statutory accounting are no
longer characterized as in conformity with GAAP. The Company applied the
pronouncements of the Financial Accounting Standards Board (FASB) to its
financial statements in 1995, and, in accordance with SFAS No. 120 and FIN
No. 40, all prior periods presented were restated.
B-26
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
VALUATION OF INVESTMENTS
Investments in fixed maturities include bonds, asset-backed securities
including collateralized mortgage obligations (CMOs) and preferred stocks.
The Company classifies all its fixed maturities as either held-to-maturity
or available-for-sale investments. Fixed maturities held-to-maturity
consist of private placement bonds presented at amortized cost, net of
impairments, that management intends and has the ability to hold until
maturity. Fixed maturities available-for-sale are presented at fair value
with unrealized gains or losses included in equity and consist of public
bonds and preferred stocks that management may not hold until maturity.
Fixed maturities are considered impaired when a decline in value is
considered to be other than temporary.
Equity securities are classified as available-for-sale securities. These
securities are reported at fair value based principally on their quoted
market prices. Equity securities are considered impaired when a decline in
value is considered to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances, net
of valuation reserves on impaired mortgages. A mortgage loan is considered
to be impaired if management believes it is probable that the Company will
be unable to collect all amounts of contractual interest and principal as
scheduled in the loan agreement. An impaired mortgage loan's fair value is
measured based on the present value of future cash flows discounted at the
loan's observable market price or at the fair value of the collateral. If
the fair value of a mortgage loan is less than the recorded investment in
the loan, the difference is recorded as a valuation reserve.
Real estate held for sale is carried at the lower of cost or current fair
value less costs to sell. Foreclosed real estate is carried at appraised
value at the time of foreclosure. Subsequent to foreclosure, these
investments are carried at the lower of cost or current fair value less
costs to sell. Fair value for real estate is determined taking into
consideration one or more of the following factors: (i) property valuation
techniques utilizing discounted cash flows at the time of stabilization
including capital expenditures and stabilization costs; (ii) sales of
comparable properties; (iii) geographic location of the property and
related market conditions; and (iv) disposition costs.
Policy loans are generally carried at their unpaid principal balances and
are collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
fair value.
Other invested assets (primarily partnerships) are carried at cost adjusted
for the Company's equity in undistributed earnings or losses since
acquisition, less allowances for other than temporary declines in value.
Realized investment gains and losses, other than those related to separate
accounts for which the Company does not bear the investment risk, are
determined by the specific identification method and reported as a
component of revenue. A realized investment loss is recorded when an
investment valuation reserve is determined. Valuation reserves are netted
against the asset categories to which they apply and changes in the
valuation reserves are included in realized investment gains and losses.
Unrealized investment gains and losses on fixed maturities and equity
securities classified as available-for-sale are included as a separate
component of equity, net of deferred income taxes and deferred policy
acquisition costs.
B-27
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
In the normal course of business, the Company enters into transactions
involving various types of financial instruments, including debt,
investments such as fixed maturities, mortgage loans and equity securities,
and off-balance-sheet financial instruments such as investment and loan
commitments, financial guarantees, and interest rate swaps. These
instruments have credit risk and also may be subject to risk of loss due to
interest rate and market fluctuations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and money market
instruments.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, underwriting,
distribution and policy issue expenses, all of which vary with and are
primarily related to the production of revenues, are deferred. Deferred
policy acquisition costs are subject to recoverability testing at the time
of policy issue and loss recognition at the end of each accounting period.
For individual participating life insurance business, deferred policy
acquisition costs are amortized in proportion to historical and anticipated
gross margins. Deviations from expected experience are reflected in
earnings in the period such deviations occur.
For universal life, limited pay and investment type contracts, deferred
policy acquisition costs are amortized in proportion to total estimated
gross profits over the expected average life of the contracts using
estimated gross margins arising principally from investment, mortality and
expense margins and surrender charges based on historical and anticipated
experience, updated at the end of each accounting period.
PROPERTY AND EQUIPMENT
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by the Company, are stated at depreciated cost,
less a reserve for impairments in value. Real estate occupied by the
Company was $97.2 million and $95.0 million, respectively, at December 31,
1996 and 1995. The Company provides for depreciation using straight line
and accelerated methods over the estimated useful lives of the related
assets which generally range from five to forty years. Accumulated
depreciation and amortization was $144.1 million and $129.6 million at
December 31, 1996 and 1995, respectively.
OTHER ASSETS
Other assets consist of prepaid expenses and accounts receivable,
principally investment management fees receivable less allowances for
estimated uncollectible amounts.
B-28
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the cost of businesses acquired over the
fair value of their net assets. These costs are amortized on a
straight-line basis over periods, not exceeding 40 years, that correspond
with the benefits expected to be derived from the acquisitions. Intangible
assets are amortized on a straight-line basis over the estimated lives of
such assets. Management periodically reevaluates the propriety of the
carrying value of goodwill and intangible assets by comparing estimates of
future undiscounted cash flows to the carrying value of assets. Assets are
considered impaired if the carrying value exceeds the expected future
undiscounted cash flows.
SEPARATE ACCOUNTS
Separate account assets and liabilities are funds maintained in accounts to
meet specific investment objectives of contractholders who bear the
investment risk. Investment income and investment gains and losses accrue
directly to such contractholders. The assets of each account are legally
segregated and are not subject to claims that arise out of any other
business of the Company. The assets and liabilities are carried at market
value. Deposits, net investment income and realized investment gains and
losses for these accounts are excluded from revenues, and the related
liability increases are excluded from benefits and expenses. Amounts
assessed to the contractholders for management services are included in
revenues.
On March 1, 1996, the pooled separate accounts of Phoenix, excluding the
real estate separate accounts, were terminated and the assets of these
separate accounts were transferred to Phoenix Duff & Phelps' institutional
mutual funds.
POLICY LIABILITIES AND ACCRUALS
Future policy benefits are liabilities for life, health and annuity
products. Such liabilities are established in amounts adequate to meet the
estimated future obligations of policies in force. Policy liabilities for
traditional life insurance are computed using the net level premium method
on the basis of actuarial assumptions as to assumed rates of interest,
mortality, morbidity and withdrawals. Liabilities for universal life
include deposits received from customers and investment earnings on their
fund balances, less administrative charges. Universal life fund balances
are also assessed mortality charges.
Liabilities for outstanding claims, losses and loss adjustment expenses are
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.
Unearned premiums relate primarily to individual participating life
insurance as well as group life, accident and health insurance premiums.
The premiums are reported as earned on a pro-rata basis over the contract
period. The unexpired portion of these premiums is recorded as unearned
premiums.
Contractholder deposit funds and other policy liabilities include
investment-related products such as guaranteed investment contracts,
deposit administration funds and immediate participation guarantee funds.
These funds consist of deposits received from customers and investment
earnings on their fund balances.
B-29
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PREMIUM AND FEE REVENUE AND RELATED EXPENSES
Life insurance premiums, other than premiums for universal life and certain
annuity contracts, are recorded as premium revenue on a pro-rata basis over
each policy year. Benefits, losses and related expenses are matched with
premiums over the related contract periods. Revenues for investment-related
products consist of net investment income and contract charges assessed
against the fund values. Related benefit expenses primarily consist of net
investment income credited to the fund values after deduction for
investment and risk charges. Revenues for universal life products consist
of net investment income and mortality, administration and surrender
charges assessed against the fund values during the period. Related benefit
expenses include universal life benefit claims in excess of fund values and
net investment income credited to universal life fund values.
POLICYHOLDERS' DIVIDENDS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of the Company. The
amount of policyholders' dividends to be paid is determined annually by the
Company's board of directors. The aggregate amount of policyholders'
dividends is related to the actual interest, mortality, morbidity and
expense experience for the year and the Company's judgment as to the
appropriate level of statutory surplus to be retained. The participating
life insurance in force was 80.0% and 80.5% of the face value of total
individual life insurance in force at December 31, 1996 and 1995,
respectively. The premiums on participating life insurance policies were
84.1%, 84.7% and 84.5% of total individual life insurance premiums in 1996,
1995 and 1994, respectively. Total policyholders' dividends were $312
million, $289 million and $264 million in 1996, 1995 and 1994,
respectively.
INCOME TAXES
Phoenix and its eligible affiliated companies have elected to file a
life/nonlife consolidated federal income tax return for the tax years ended
December 31, 1996, 1995 and 1994. Entities included within the consolidated
group are segregated into either a life insurance or non-life insurance
company subgroup. The consolidation of these subgroups is subject to
certain statutory restrictions in the percentage of eligible non-life tax
losses that can be applied to offset life company taxable income.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities and accruals, policy acquisition expenses, investment
impairment reserves, reserves for postretirement benefits and unrealized
gains or losses on investments.
B-30
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. SIGNIFICANT TRANSACTIONS
PHOENIX DUFF & PHELPS CORPORATION
Effective January 1, 1995, the money management businesses of Phoenix 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. On November 1, 1995, Phoenix, through its
subsidiary, PM Holdings, Inc. (PM Holdings), merged Phoenix Securities
Group into Duff & Phelps Corporation (D&P), forming Phoenix Duff & Phelps
Corporation (PDP). The transaction was accounted for as a reverse merger
with the purchase accounting method applied to D&P's assets and
liabilities. The purchase price was $190.7 million and PDP recorded $93.1
million of goodwill, which is being amortized over forty years using the
straight-line method. PM Holdings owns approximately 60% of the outstanding
PDP common stock. In addition, PM Holdings owns 1.4 million shares (45%) of
PDP's series A convertible exchangeable preferred stock. PM Holdings
recognized a non-operating, non-cash, tax free gain on this transaction of
$36.9 million resulting from the realization of the appreciation of the
stock exchanged which is included in the gain on merger transactions in the
consolidated statements of income.
SURPLUS NOTES
On November 25, 1996, the Company issued $175 million of surplus notes with
a 6.95% interest rate scheduled to mature on December 1, 2006. There are no
sinking fund provisions in the notes. The notes are classified as long-term
debt in the Consolidated Balance Sheet at December 31, 1996.
The notes were issued in accordance with Section 1307 of the New York
Insurance Law and, accordingly, interest and principal payments cannot be
made without the approval of the New York Insurance Department.
The notes were issued pursuant to Rule 144A under the Securities Act of
1933 underwritten by Bear, Stearns & Co. Inc., Chase Securities Inc. and
Merrill Lynch & Co. and are administered by Bank of New York as
registrar/paying agent.
ABERDEEN TRUST PLC
On March 25, 1996, the Company purchased 12.2 million shares of Aberdeen
Trust PLC (Aberdeen), a Scottish asset management firm. As of December 31,
1996, the Company owned 13.1 million shares representing 12.5% of
Aberdeen's outstanding common stock. The total cost of these transactions
was $26.4 million. The investment is recorded at cost adjusted for the
Company's equity in undistributed earnings less dividends received.
In addition, on April 15, 1996, the Company purchased a 7% convertible
subordinated note issued by Aberdeen for $37.5 million. The note, which
matures on March 29, 2003, may be converted at a price of $2.15 per share,
which would be equivalent to approximately 14% of Aberdeen's outstanding
common stock.
B-31
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In the spring of 1996, the Company and Aberdeen joined together to form
Phoenix-Aberdeen International Advisors, LLC, an SEC registered investment
advisor that, in conjunction with PDP and Aberdeen, will develop and market
investment products in the United States and the United Kingdom.
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
FIXED MATURITIES AND EQUITY SECURITIES
The amortized cost and fair value of investments in fixed maturities and
equity securities as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FIXED MATURITIES:
HELD-TO-MATURITY:
State and political subdivision bonds $ 11,685 $ 5 $ (375) $ 11,315
Corporate securities 1,525,999 61,692 (13,405) 1,574,286
Mortgage-backed securities 18,001 1,037 (15) 19,023
----------------- ------------------ ---------------- ---------------
Total 1,555,685 62,734 (13,795) 1,604,624
----------------- ------------------ ---------------- ---------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 561,017 13,970 (1,610) 573,377
State and political subdivision bonds 406,679 13,831 (1,154) 419,356
Foreign government bonds 174,298 31,441 (1,457) 204,282
Corporate securities 1,092,163 70,432 (7,968) 1,154,627
Mortgage-backed securities 2,509,232 60,321 (25,802) 2,543,751
----------------- ------------------ ---------------- ---------------
Total 4,743,389 189,995 (37,991) 4,895,393
----------------- ------------------ ---------------- ---------------
Total fixed maturities $ 6,299,074 $ 252,729 $ (51,786) $ 6,500,017
================= ================== ================ ===============
Equity securities available-for-sale $ 137,907 $ 100,258 $ (2,814) $ 235,351
================= ================== ================ ===============
</TABLE>
B-32
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in fixed maturities and
equity securities as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FIXED MATURITIES:
HELD-TO-MATURITY:
State and political subdivision bonds $ 20,915 $ 779 $ (142) $ 21,552
Corporate securities 1,297,049 125,055 (1,114) 1,420,990
Mortgage-backed securities 16,483 2,057 (37) 18,503
----------------- ---------------- -------------- -------------
Total 1,334,447 127,891 (1,293) 1,461,045
----------------- ---------------- -------------- -------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 572,304 29,684 (1,029) 600,959
State and political subdivision bonds 314,407 26,072 (1) 340,478
Foreign government bonds 59,149 6,436 (1,804) 63,781
Corporate securities 987,210 91,741 (3,950) 1,075,001
Mortgage-backed securities 2,269,618 95,176 (19,335) 2,345,459
----------------- ---------------- -------------- -------------
Total 4,202,688 249,109 (26,119) 4,425,678
----------------- ---------------- -------------- -------------
Total fixed maturities $ 5,537,135 $ 377,000 $ (27,412) $ 5,886,723
================= ================ ============== =============
Equity securities available-for-sale $ 197,526 $ 62,658 $ (5,906) $ 254,278
================= ================ ============== =============
</TABLE>
B-33
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of fixed maturities, by contractual
maturity, as of December 31, 1996 are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties, or
the Company may have the right to put or sell the obligations back to the
issuers.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 34,496 $ 35,001 $ 50,888 $ 51,214
Due after one year through five years 339,989 350,702 360,543 374,212
Due after five years through ten years 616,197 643,166 712,255 738,950
Due after ten years 547,002 556,732 1,110,471 1,187,266
Mortgage-backed securities 18,001 19,023 2,509,232 2,543,751
----------------- --------------- ---------------- ---------------
Total $ 1,555,685 $ 1,604,624 $ 4,743,389 $ 4,895,393
================= =============== ================ ===============
</TABLE>
Carrying values for investments in mortgage-backed securities, excluding
U.S. government guaranteed investments, were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
MORTGAGE-BACKED SECURITIES
Planned amortization class $ 618,953 $ 787,840
Asset-backed 490,018 436,734
Mezzanine 322,812 365,034
Commercial 413,571 230,083
Sequential pay 552,512 397,950
Pass through 105,282 85,017
Other 58,604 59,284
----------------- -----------------
Total mortgage-backed securities $ 2,561,752 $ 2,361,942
================= =================
Phoenix had 37% and 49% at December 31, 1996 and 1995, 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 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
- --------------------------------------------------------------------------------
MORTGAGE LOANS AND REAL ESTATE
The Company's mortgage loans and real estate are diversified by property
type and location and, for mortgage loans, by borrower. Mortgage loans are
collateralized by the related properties and are generally 75% of the
properties' value at the time the original loan is made.
The carrying values of mortgage loans and real estate investments, net of
applicable reserves, were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Mortgage loans $ 947,076 $ 897,192
Real estate held for sale 410,945 418,328
------------------ -------------------
Total $ 1,358,021 $ 1,315,520
================== ===================
During 1996 and 1995, non-cash investing activities included real estate
acquired through foreclosure of mortgage loans and purchase money
mortgages, which had a fair value of $1.5 million and $35 million,
respectively.
B-35
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Mortgage loans and real estate investments are comprised of the following
property types and geographic regions:
MORTGAGE LOANS
DECEMBER 31,
1996 1995
(IN THOUSANDS)
PROPERTY TYPE:
Office buildings $ 251,526 $ 191,672
Retail 257,721 250,172
Apartment buildings 241,286 244,589
Industrial buildings 197,013 222,120
Other 47,928 54,446
Valuation allowances (48,398) (65,807)
----------------------- ---------------------
Total $ 947,076 $ 897,192
======================= =====================
GEOGRAPHIC REGION:
Northeast $ 260,146 $ 233,670
Southeast 261,956 250,019
North central 158,902 171,434
South central 57,507 50,819
West 256,963 257,057
Valuation allowances (48,398) (65,807)
----------------------- ---------------------
Total $ 947,076 $ 897,192
======================= =====================
REAL ESTATE
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Property type:
Office buildings $ 246,644 $ 267,505
Retail 121,813 127,500
Apartment buildings 26,286 36,644
Industrial buildings 56,134 61,667
Other 7,577 8,767
Valuation allowances (47,509) (83,755)
----------------------- ----------------------
Total $ 410,945 $ 418,328
======================= =====================
GEOGRAPHIC REGION:
Northeast $ 103,761 $ 102,249
Southeast 110,746 130,944
North central 86,070 85,470
South central 85,532 91,670
West 72,345 91,750
Valuation allowances (47,509) (83,755)
----------------------- ----------------------
Total $ 410,945 $ 418,328
======================= =====================
B-36
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
At December 31, 1996, scheduled mortgage loan maturities were as follows:
1997 - $176 million; 1998 - $138 million; 1999 - $99 million; 2000 - $106
million; 2001 - $98 million; and $378 million thereafter. Actual maturities
could differ from contractual maturities because borrowers may have the
right to prepay obligations with or without prepayment penalties and loans
may be refinanced. The Company refinanced $28.9 million and $100.4 million
of its mortgage loans during 1996 and 1995, respectively, based on terms
which differed from those granted to new borrowers.
INVESTMENT VALUATION ALLOWANCES
Investment valuation allowances which have been deducted in arriving at
investment carrying values as presented in the consolidated balance sheets
and changes thereto were as follows:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
JANUARY 1, ADDITIONS DEDUCTIONS DECEMBER 31,
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996
Mortgage loans $ 65,807 $ 7,640 $ (25,049) $ 48,398
Real estate 83,755 2,526 (38,772) 47,509
------------------ ------------------ --------------------- -------------------
Total $ 149,562 $ 10,166 $ (63,821) $ 95,907
================== ================== ===================== ===================
1995
Mortgage loans $ 118,970 $ (53,163) $ 65,807
Real estate 108,652 $ 8,604 (33,501) 83,755
------------------ ------------------ --------------------- -------------------
Total $ 227,622 $ 8,604 $ (86,664) $ 149,562
================== ================== ===================== ===================
</TABLE>
NON-INCOME PRODUCING MORTGAGES LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $4.5
million and $3.8 million at December 31, 1996 and 1995, respectively.
There were no non-income producing bonds at December 31, 1996 and 1995.
INTEREST RATE SWAPS
Phoenix enters into interest rate swap agreements, generally having
maturities of seven years or less, to hedge certain variable rate
investment income streams matched against fixed rate liability streams. The
notional amounts of these investments were $60.1 million and $18 million at
December 31, 1996 and 1995, respectively. Average received and average paid
rates were 8.04% and 5.65% for 1996.
The Company has also guaranteed an interest rate swap that has the effect
of the Company paying a fixed interest rate on a notional amount of $184.7
million of the Company'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
considers the likelihood of any material loss on these guarantees or
interest rate swaps to be remote.
B-37
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
OTHER INVESTED ASSETS
Other invested assets, consisting primarily of partnership interests and
equity in unconsolidated subsidiaries, were as follows:
DECEMBER 31,
1996 1995
(in thousands)
Venture capital equity partnerships $ 66,284 $ 50,919
Transportation and equipment leases 46,950 47,810
Investment in Aberdeen Trust, PLC 29,980
Investment in Beutel, Goodman & Co. LTD 34,541 39,730
Other 4,617 6,319
------------- ---------------
Total other invested assets $ 182,372 $ 144,778
============= ===============
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Fixed maturities $ 469,713 $ 437,521 $ 395,192
Equity securities 4,689 1,787 3,312
Mortgage loans 84,318 92,283 111,122
Policy loans 117,742 115,055 105,678
Real estate 21,799 20,910 17,087
Other invested assets 332 871 1,212
Short-term investments 18,688 21,974 11,673
----------------- ----------------- ----------------
Sub-total 717,281 690,401 645,276
Less investment expenses 27,391 27,933 22,559
----------------- ----------------- ----------------
Net investment income $ 689,890 $ 662,468 $ 622,717
================= ================= ================
</TABLE>
Investment income of $.4 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1996. The Company does
not accrue interest income on impaired mortgage loans and impaired bonds
when the likelihood of collection is doubtful.
The payment terms of mortgage loans may from time to time be restructured
or modified. The investment in restructured mortgage loans, based on
amortized cost, amounted to $61.5 million and $76 million at December 31,
1996 and 1995, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $3.1 million, $6.6 million and $10.1 million in 1996,
1995 and 1994, respectively. Actual interest income on these loans included
in net investment income aggregated $5.2 million, $6.4 million and $11.3
million in 1996, 1995 and 1994, respectively.
B-38
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Unrealized gains and losses on investments carried at fair value for the
year ended December 31, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Unrealized investment gains (losses)
Fixed maturities $ (70,986) $ 476,352 $ (411,694)
Equity securities 40,803 24,527 2,706
------------------ ------------------ -------------------
(30,183) 500,879 (408,988)
Deferred policy acquisition costs 51,528 (341,836) 292,423
Deferred income taxes (benefits) 7,432 55,692 (40,804)
------------------ ------------------ -------------------
Net unrealized investment gains (losses) $ 13,913 $ 103,351 $ (75,761)
------------------ ------------------ -------------------
</TABLE>
Realized investment gains and losses for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities $ (10,476) $ 8,080 $ (20,554)
Equity securities 59,794 29,276 (8,950)
Mortgage loans 2,628 (262) 485
Real estate 24,711 20,535 16,063
Other invested assets 18,608 17,109 12,790
-------------------- ------------------ ---------------------
95,265 74,738 (166)
Income taxes (benefits) 33,343 26,158 (58)
-------------------- ------------------ ---------------------
Net realized investment gains (losses) $ 61,922 $ 48,580 $ (108)
==================== ================== =====================
</TABLE>
The proceeds from sales of available-for-sale fixed maturities and the
gross realized gains and gross realized losses on those sales for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from sales $ 1,525,011 $ 1,201,700 $ 733,800
Gross gains on sales $ 15,966 $ 30,300 $ 16,500
Gross losses on sales $ (27,905) $ (19,900) $ (45,500)
</TABLE>
B-39
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Goodwill $ 231,135 $ 211,084
Investment management contracts 56,700 60,700
Client listings 41,410 31,437
Non-compete covenants 5,000 9,314
Intangible asset related to
pension plan benefits 19,835 22,540
Other 1,220 4,066
----------------- -------------------
355,300 339,141
Accumulated amortization (41,793) (26,072)
----------------- -------------------
Total $ 313,507 $ 313,069
================= ===================
PDP's amounts included above were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Goodwill $ 179,406 $ 167,014
Investment management contracts 56,700 60,700
Non-compete covenants 5,000 5,000
Other 1,220 4,066
----------------- ------------------
242,326 236,780
Accumulated amortization (13,198) (6,211)
----------------- ------------------
Total $ 229,128 $ 230,569
================= ==================
6. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Financial instruments that are subject to fair value disclosure
requirements (insurance contracts are excluded) are carried in the
financial statements at amounts that approximate fair value. The fair
values presented for certain financial instruments are estimates which, in
many cases, may differ significantly from the amounts which could be
realized upon immediate liquidation. In cases where market prices are not
available, estimates of fair value are based on discounted cash flow
analyses which utilize current interest rates for similar financial
instruments which have comparable terms and credit quality.
B-40
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
FIXED MATURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
fixed maturities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values 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 on 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.
POLICY LOANS
Fair values are 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. 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 value.
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair 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 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.
B-41
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 value is assumed to be equal to the stated liability
balances.
DEBT
The carrying value of long-term debt reported on the balance sheet
approximates fair value.
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1996 1995
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash $ 172,895 $ 172,895 $ 127,104 $ 127,104
equivalents
Short-term investments 164,967 164,967 275,517 275,517
Fixed maturities 6,451,078 6,500,017 5,760,125 5,886,723
Equity securities 235,351 235,351 254,278 254,278
Mortgage loans 947,076 986,900 897,192 955,800
Policy loans 1,667,784 1,645,899 1,617,872 1,658,000
--------------- ----------------- -------------------- ------------------
Total financial assets $ 9,639,151 $ 9,706,029 $ 8,932,088 $ 9,157,422
=============== ================= ==================== ==================
Financial liabilities:
Policy liabilities $ 875,200 $ 875,100 $ 955,600 $ 955,800
Long-term debt 492,020 492,020 268,337 268,337
--------------- ----------------- -------------------- ------------------
Total financial liabilities $ 1,367,220 $ 1,367,120 $ 1,223,937 $ 1,224,137
=============== ================= ==================== ==================
</TABLE>
7. DEBT
Long-term debt was as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Unsecured debt
Bank borrowings $ 287,365 $ 241,157
Notes payable 25,457 23,995
Other 58
------------------ ----------------
Total unsecured debt 312,822 265,210
Surplus notes 175,000
Secured debt 2,608 3,127
------------------ ----------------
Total long-term debt $ 490,430 $ 268,337
================== ================
B-42
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company has various lines of credit established with major commercial
banks. As of December 31, 1996, the Company had outstanding balances
totaling $287.4 million. The total unused credit was $120.9 million. The
Company records commitment fees as a component of interest expense.
Interest rates range from 5.73% to 8.25% in 1996.
On November 25, 1996, the Company issued $175 million of surplus notes (See
Note 3).
Maturities of long-term debt are as follows: 1997 - $17 million; 1998 - $90
million; 1999 - $7 million; 2000 - $177 million; 2001 - $24 million; 2002
and thereafter - $175 million.
Interest expense on long-term debt was $18.0 million, $7.7 million and $9.0
million for the years ended December 31, 1996, 1995 and 1994, respectively.
8. INCOME TAXES
A summary of income taxes (benefits) in the consolidated statements of
income for the year ended December 31, was as follows:
1996 1995 1994
(in thousands)
Income taxes
Current 59,673 59,590 (28,874)
Deferred 19,658 (16,238) 68,936
---------------- --------------- ---------------
Total 79,331 43,352 40,062
================ =============== ===============
The income taxes attributable to the consolidated results of operations are
different than the amounts determined by multiplying income before taxes by
the statutory income tax rate. The sources of the difference and the tax
effects of each for the year ended December 31, were as follows (in
thousands, aside from the percentages):
<TABLE>
<CAPTION>
1996 1995 1994
% % %
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $ 66,136 35 $ 55,318 35 $ 24,754 35
Non-taxable gain on PDP merger (14,203) (9)
Dividend received deduction &
tax-exempt interest (2,107) (1) (623) (1,177) (2)
Other, net 2,736 1 2,860 1 (4,082) (5)
-------------- -------- ------------- -------- ------------- ----------
66,765 35 43,352 27 19,495 28
Differential earnings (equity tax) 12,566 7 20,567 29
-------------- -------- ------------- -------- ------------- ----------
Income taxes $ 79,331 42 $ 43,352 27 $ 40,062 57
============== ======== ============= ======== ============= ==========
</TABLE>
B-43
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The deferred income tax liability (asset) represents the tax effects of
temporary differences attributable to the consolidated tax return group.
The components were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Deferred policy acquisition costs $ 220,135 $ 221,034
Unearned premium/deferred revenue (131,513) (127,699)
Impairment reserves (43,331) (58,314)
Pension and other postretirement benefits (58,230) (51,985)
Investments 50,219 50,542
Future policyholder benefits (37,904) (47,800)
Other 15,633 (13,716)
----------------- --------------
15,009 (27,938)
Net unrealized investment gains 48,320 40,888
PDP purchase accounting adjustment 23,290
Minimum pension liability (1,395) (2,064)
Foreign tax credit (1,109) (1,057)
------------------ --------------
Deferred tax liability, net
before valuation allowance 60,825 33,119
Valuation allowance 1,109 1,057
------------------ --------------
Deferred tax liability, net $ 61,934 $ 34,176
================== ==============
It is management's assessment, based on the Company's earnings and
projected future taxable income, that it is more likely than not that the
deferred tax assets at December 31, 1996 and 1995, with the exception of
the foreign tax credit, will be realized.
Gross deferred income tax assets totaled $274 million and $301 million at
December 31, 1996 and 1995, respectively. Gross deferred income tax
liabilities totaled $336 million and $335 million at December 31, 1996 and
1995, respectively.
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.
B-44
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
The Company has a non-contributory, defined benefit pension plan covering
substantially all of its employees. Retirement benefits are a function of
both years of service and level of compensation. The Company also sponsors
a non-qualified supplemental defined benefit plan to provide benefits in
excess of amounts allowed pursuant to Internal Revenue Code Section
401(a)(17). Phoenix's funding policy is to contribute annually an amount
equal to at least the minimum required contribution in accordance with
minimum funding standards established by the Employee Retirement Income
Security Act of 1974. Contributions are intended to provide not only for
benefits attributable to service to date, but also for service expected to
be earned in the future.
Components of net periodic pension cost for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 10,076 $ 9,599 $ 10,181
Interest accrued on projected benefit obligation 22,660 19,880 19,181
Actual return on assets (38,788) (62,567) (18,073)
Net amortization and deferral 17,318 45,807 (613)
--------------- ---------------- ---------------
Net periodic pension cost $ 11,266 $ 12,719 $ 10,676
=============== ================ ===============
</TABLE>
In 1996, the Company offered an early retirement window which granted an
additional benefit of five years of age and service. As a result of the
early retirement window, the Company recorded an additional pension expense
of $8.7 million for the year ended December 31, 1996.
B-45
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The funded status of the plan for which assets exceeded accumulated
benefit obligations was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 213,148 $ 171,077
Non-vested benefit obligation 14,828 16,248
-------------------- ---------------------
Accumulated benefit obligation $ 227,976 $ 187,325
==================== =====================
Pension liability included in other liabilities:
Projected benefit obligation $ 261,886 $ 227,585
Plan assets at fair value 292,070 267,013
==================== =====================
Plan assets in excess of
projected benefit obligation 30,184 39,428
Unrecognized net gain from past experience (52,312) (46,960)
Unrecognized prior service benefit (240) (273)
Unamortized transition asset (19,745) (22,214)
-------------------- ---------------------
Net pension liability $ (42,113) $ (30,019)
==================== =====================
</TABLE>
At December 31, 1996 and 1995, the non-qualified plan was unfunded and had
projected benefit obligations of $50.0 million and $43.4 million,
respectively. The accumulated benefit obligations as of December 31, 1996
and 1995 related to this plan were $37.4 million and $36.2 million,
respectively, and are included in other liabilities.
The Company recorded, as a reduction of policyholders' equity, an
additional minimum pension liability of $2.8 million and $3.8 million, net
of Federal income taxes, at December 31, 1996 and 1995, respectively,
representing the excess of accumulated benefit obligations over the fair
value of plan assets and accrued pension liabilities for the non-qualified
plan. The Company has also recorded an intangible asset of $19.8 million
and $22.5 million as of December 31, 1996 and 1995 related to pension plan
benefits.
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit
obligation were 7.5% and 4.5%, for 1996 and 8.0% and 5.0% for 1995. The
discount rate assumption for 1996 was determined based on a study that
matched available high quality investment securities with the expected
timing of pension liability payments. The expected long-term rate of return
on retirement plan assets was 8.0%.
B-46
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The pension plan's assets include corporate and government debt
securities, equity securities, real estate, venture capital funds, and
shares of mutual funds.
The Company also sponsors savings plans for its employees and agents which
are qualified under Internal Revenue Code Section 401(k). Employees and
agents may contribute a portion of their annual salary, subject to
limitation, to the plans. The Company contributes an additional amount,
subject to limitation, based on the voluntary contribution of the employee
or agent. Company contributions charged to expense with respect to these
plans during the years ended December 31, 1996, 1995 and 1994 were $4.2
million, $4.2 million and $4.0 million, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to the Company's pension plans, the Company currently provides
certain health care and life insurance benefits to retired employees,
spouses and other eligible dependents through various plans sponsored by
Phoenix. A substantial portion of Phoenix's employees may become eligible
for these benefits upon retirement. The health care plans have varying
copayments and deductibles, depending on the plan. These plans are
unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The plan's funded status reconciled with amounts recognized in the
Company's consolidated balance sheet, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 30,576 $ 37,900
Fully eligible active plan participants 11,466 10,500
Other active plan participants 21,614 24,856
----------------- -----------------
63,656 73,256
Unrecognized net gain
from past experience 29,173 14,102
----------------- -----------------
Accrued postretirement benefit liability $ 92,829 $ 87,358
================= =================
</TABLE>
B-47
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during year $ 2,765 $ 3,366 $ 2,942
Interest cost accrued on benefit obligation 4,547 5,275 5,179
Net amortization (1,577) (458)
--------------- --------------- ---------------
Net periodic postretirement benefit cost $ 5,735 $ 8,183 $ 8,121
=============== =============== ===============
</TABLE>
In addition to the net periodic postretirement benefit cost, the Company
expensed an additional $3.0 million for postretirement benefits related to
the early retirement window.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5% at December 31, 1996 and 8.0% at December 31,
1995.
For purposes of measuring the accumulated postretirement benefit obligation
at December 31, 1996, health care costs were assumed to increase 9.5% in
1997, declining thereafter until the ultimate rate of 5.5% is reached in
2002 and remains at that level thereafter. For purposes of measuring the
accumulated postretirement benefit obligation at December 31, 1995, health
care costs were assumed to increase 11% in 1996, declining thereafter until
the ultimate rate of 5.5% is reached in 2002 and remained at that level
thereafter. The health care cost trend rate assumption has a significant
effect on the amounts reported. For example, increasing the assumed health
care cost trend rates by one percentage point in each year would increase
the accumulated postretirement benefit obligation by $3.9 million and the
annual service and interest cost by $.6 million, before taxes. Gains and
losses that occur because actual experience differs from the estimates are
amortized over the average future service period of employees.
OTHER POSTEMPLOYMENT BENEFITS
The Company recognizes the costs and obligations of severance, disability
and related life insurance and health care benefits to be paid to inactive
or former employees after employment but before retirement. Postemployment
benefit expense was $.6 million for 1996, $.5 million for 1995 and $(1.9)
million for 1994.
B-48
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix operates principally in seven segments: Individual,
Group Life and Health, Life Reinsurance, General Lines
Brokerage, Securities Management, Real Estate Management and
Other Operations.
Other Operations includes unallocated investment income,
expenses and realized investment gains related to capital in excess of
segment requirements; assets primarily consist of equity securities.
Summarized below is financial information with respect to the business
segments:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Individual $ 1,796,572 $ 1,752,338 $ 1,643,074
Group Life and Health 462,551 421,771 409,883
Life Reinsurance 143,314 128,813 102,120
General Lines Brokerage 61,809 40,977 22,382
Securities Management 164,966 112,206 104,429
Real Estate Management 13,550 13,562 12,439
Other Operations 82,273 48,873 10,400
--------------------- ------------------ -----------------
Total $ 2,725,035 $ 2,518,540 $ 2,304,727
===================== ================== =================
DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
OPERATING INCOME
Individual $ 65,226 $ 45,858 $ 23,306
Group Life and Health 9,092 17,422 14,584
Life Reinsurance 7,993 17,391 11,492
General Lines Brokerage (2,935) (1,887) (521)
Securities Management 27,506 23,667 27,285
Real Estate Management (3,783) (184) 727
Other Operations 85,862 15,204 (6,146)
--------------------- ------------------ -----------------
Total $ 188,961 $ 117,471 $ 70,727
===================== ================== =================
</TABLE>
DECEMBER 31,
1996 1995
(IN THOUSANDS)
IDENTIFIABLE ASSETS
Individual $ 13,547,132 $ 12,104,989
Group Life and Health 590,545 542,139
Life Reinsurance 294,441 273,036
General Lines Brokerage 117,340 115,558
Securities Management 294,803 811,438
Real Estate Management 319,406 297,166
Other Operations 289,381 293,151
--------------------- ------------------
Total $ 15,453,048 $ 14,437,477
===================== ==================
B-49
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. LEASES AND RENTALS
Rental expenses for operating leases, principally with respect to
buildings, amounted to $14.8 million, $14.6 million and $13.8 million in
1996, 1995, and 1994, respectively. Future minimum rental payments under
non-cancelable operating leases were approximately $41.9 million as of
December 31, 1996, payable as follows: 1997 - $15.8 million; 1998 - $11.6
million; 1999 - $7.5 million; 2000 - $4.7 million; 2001 - $1.8 million;
and $.5 million thereafter.
12. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix 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 is $8,000,000 for single life and joint first-to-die policies and
$10,000,000 for joint last-to-die policies, 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.
Amounts recoverable from reinsurers are estimated in a manner consistent
with the claim liability associated with the reinsured policy.
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,473,869 $ 1,455,459 $ 1,455,467
Reinsurance assumed 276,630 271,498 205,387
Reinsurance ceded (231,677) (270,082) (264,852)
-------------------- ------------------- --------------------
Net premiums $ 1,518,822 $ 1,456,875 $ 1,396,002
==================== =================== ====================
Direct policy and contract claims incurred $ 575,824 $ 605,545 $ 610,004
Reinsurance assumed 170,058 256,529 167,276
Reinsurance ceded (160,646) (292,357) ( 217,911)
-------------------- ------------------- --------------------
Net policy and contract claims incurred $ 585,236 $ 569,717 $ 559,369
==================== =================== ====================
Direct life insurance in force $ 108,816,856 $ 102,606,749 $ 95,717,768
Reinsurance assumed 61,109,836 36,724,852 27,428,529
Reinsurance ceded (51,525,976) (34,093,090) (24,372,415)
-------------------- ------------------- --------------------
Net insurance in force $ 118,400,716 $ 105,238,511 $ 98,773,882
==================== =================== ====================
</TABLE>
Irrevocable letters of credit aggregating $5.2 million at December 31,
1996 have been arranged with United States commercial banks in favor of
Phoenix to collateralize the ceded reserves.
B-50
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
13. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred
and amortized for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 816,128 $ 1,128,227 $ 832,839
Acquisition expense deferred 153,873 143,519 150,326
Amortized to expense during the year (95,255) (113,788) (147,361)
Adjustment to equity during the year 51,528 (341,830) 292,423
------------------ ------------------ ------------------
Balance at end of year $ 926,274 $ 816,128 $ 1,128,227
================== ================== ==================
</TABLE>
14. MINORITY INTEREST
The Company's interests in Phoenix Duff and Phelps Corporation and
American Phoenix Corporation, through its wholly-owned subsidiary PM
Holdings is represented by ownership of approximately 60% and 92%,
respectively, of the outstanding shares of common stock at December 31,
1996. Earnings and stockholders' equity attributable to minority
shareholders are included in minority interest in the consolidated
financial statements along with PDP's preferred stock.
15. CONTINGENCIES
FINANCIAL GUARANTEES
The Company is contingently liable for financial guarantees provided in
the ordinary course of business on the repayment of principal and
interest on certain industrial revenue bonds. The contractual amounts of
financial guarantees reflect the Company's maximum exposure to credit
loss in the event of nonperformance. The principal amount of bonds
guaranteed by the Company at December 31, 1996 and 1995 was $88.8 million
and $87.6 million, respectively. Management believes that any loss
contingencies which may arise from the Company's financial guarantees
would not have a material adverse effect on the Company's liquidity or
financial condition.
LITIGATION
In 1996, the Company announced the settlement of a class action suit which
was approved by a New York State Supreme Court judge on January 3, 1997.
The suit related to the sale of individual participating life insurance and
universal life insurance policies from 1980 to 1995. An after tax provision
of $25 million was recorded in 1995. In addition, $7 million after-tax was
expensed in 1996. The Company estimates the cost of settlement to be
between $35 million and $40 million after tax. Management believes, after
consideration of the provisions made in these financial statements, this
suit will not have a material effect on the Company's financial position.
B-51
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company is a defendant in various legal proceedings arising in the
normal course of business. In the opinion of management, based on the
advice of legal counsel after consideration of the provisions made in
these financial statements, the ultimate resolution of these proceedings
will not have a material effect on the Company's consolidated financial
position.
16. STATUTORY FINANCIAL INFORMATION
The insurance subsidiaries are required to file annual statements with
state regulatory authorities prepared on an accounting basis prescribed
or permitted by such authorities. As of December 31, 1996, there were no
material practices not prescribed by the Insurance Department of the
State of New York. Statutory surplus differs from policyholders' equity
reported in accordance with GAAP for life insurance companies primarily
because policy acquisition costs are expensed when incurred, investment
reserves are based on different assumptions, postretirement benefit costs
are based on different assumptions and reflect a different method of
adoption, life insurance reserves are based on different assumptions and
income tax expense reflects only taxes paid or currently payable.
The following reconciles the statutory net income of the Company as
reported to regulatory authorities to the net income as reported in these
financial statements for the year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 72,961 $ 64,198 $ 4,152
Deferred policy acquisition costs, net 58,618 29,766 2,965
Future policy benefits (16,793) (15,763) (3,443)
Pension and postretirement expenses (23,275) (12,691) (8,350)
Investment valuation allowances 76,631 56,745 60,747
Interest maintenance reserve (5,158) 5,829 (19,545)
Deferred income taxes (67,064) (10,021) (11,626)
Other, net 4,808 (4,314) 5,778
----------------- ---------------- --------------
Net income, as reported $ 100,728 $ 113,749 $ 30,678
================= ================ ==============
</TABLE>
B-52
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following reconciles the statutory surplus and asset valuation
reserve (AVR) of the Company as reported to regulatory authorities to
equity as reported in these financial statements:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Statutory surplus and AVR $ 1,102,200 $ 875,322
Deferred policy acquisition costs, net 897,096 864,505
Future policy benefits (239,252) (249,141)
Pension and postretirement expenses (152,112) (133,452)
Investment valuation allowances (139,562) (171,889)
Interest maintenance reserve 6,897 11,872
Deferred income taxes 82,069 87,418
Surplus notes (157,500)
Other, net (2,367) (3,048)
----------------- --------------
Equity, as reported $ 1,397,469 $ 1,281,587
================= ==============
B-53
<PAGE>
[VERSION B]
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
One American Row MAIL OPERATIONS (VPMO):
Hartford, CT 06115 P.O. Box 8027
Boston, MA 02266-8027
VARIABLE ACCUMULATION DEFFERED ANNUITY CONTRACTS
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, 1997, which is available
without charge by contacting Phoenix Home Life at the above address or at
the above telephone number.
May 1, 1997
------------------
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
- --------------------------------------------------------------------------------
Effective May 1, 1997, the master servicer and distributor of the
Contracts is W.S. Griffith & Co., Inc. Previously, the offering of Contracts
was 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
1994 $5,333,943 $565,949
1995 $1,720,728 $172,178
1996 $1,255,102 $125,510
CALCULATION OF YIELD AND RETURN
- --------------------------------------------------------------------------------
Yield of the Money Market Subaccount. As summarized in the Prospectus
under the heading "Performance History," the yield of the Money Market
Subaccount 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 deprecia tion on the underlying fund shares.
The Money Market Subaccount yield and effective yield will vary in
response to fluctuations in interest rates and in the expenses of the
Subaccount.
The current yield and effective yield reflect recurring charges at the
Account level, including the maximum annual and daily administrative fees.
Example:
Money Market Subaccount
The following is an example of this yield calculation for the Subaccount
based on a seven-day period ending December 31, 1996.
Assumptions:
Value of a hypothetical pre-existing account with exactly one
unit at the beginning of the period ........ 1.332697
Value of the same account (excluding capital changes) at the
end of the seven-day period ................ 1.333545
Calculation:
Ending account value ......................... 1.333545
Less beginning account value ................. 1.332697
Net change in account value .................. 0.000848
Base period return:
(adjusted change/beginning account value)..... 0.000636
Current yield = return X (365/7) =............ 3.32%
Effective yield = [(1 + return) X 365/7]-1 = 3.37%
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 Subaccount 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 Subaccount; (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 Subaccount 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 Subaccount may from time to time include its yield and total return
in advertisements or information furnished to present or prospective Contract
Owners. Each Subaccount may from time to time include in advertisements
containing total return (and yield in the case of certain Subaccounts) 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
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 also may be used to compare the performance of
the Subaccounts against certain widely acknowl edged 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
B-2(T)
<PAGE>
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 compa nies 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 Subaccount, from inception through December 31, 1996.
AVERAGE ANNUAL TOTAL RETURN
PERIODS ENDED 12/31/96
COMMENCE-
MENT FROM
SUBACCOUNT DATE 1 YEAR 5 YEAR INCEPTION
- ---------- ---- ------ ------ ---------
Bond................. 01/04/89 2.93% 5.26% 8.52%
Stock................ 11/04/88 15.17% 14.65% 11.66%
Asset Allocation..... 11/28/88 15.17% 14.85% 10.73%
Money Market......... 12/02/88 (1.27%) 2.10% 3.47%
International........ 05/01/92 16.69% N/A 13.22%
Developing Markets... 09/15/96 N/A N/A (4.49%)
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 Contract Value 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 Subaccount 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 Subaccount.
Future payments are measured in Annuity Units and are deter mined by
multiplying the Annuity Units in each Subaccount with assets under the
Variable Payment Option by the Annuity Unit Value for each Subaccount on the
Payment Calculation Date that applies. The number of Annuity Units in each
Subaccount with assets under a Variable Payment Option is equal to the portion
of the first payment provided from that Subaccount divided by the Annuity Unit
Value for that Subaccount on the first Payment Calculation Date. The payment
will equal the sum of such amounts from each Subaccount.
All Annuity Unit Values in each Subaccount 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
Subaccount 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 Subaccount will depend on the relationship between the assumed
investment return and the actual investment performance of the Subaccount. If
a 4 1/2% rate would
B-3(T)
<PAGE>
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
purchase payments may be made with respect to any assets held under Variable
Payment Options I and J. Although no transfers or additional purchase 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 Subaccount'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 commence ment of fixed annuity payments.
Under a Contract, the amount of the fixed annuity payment is calculated by
first multiplying the number of the Subaccounts' Accumulation Units credited
to the Contract on the Maturity Date by the appropriate Unit Value for each
Subaccount on the Maturity Date. The dollar value for all Subaccounts'
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 consolidated financial statements of Phoenix and 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 from time to time.
Blazzard, Grodd & Hasenauer, P.C. of Westport, Connecticut has provided
advice on certain matters relating to the federal securities and income tax laws
in connection to the Contracts described in this Prospectus.
B-4(T)
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1996
B-5(T)
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
TEMPLETON STOCK SUB-ACCOUNT
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets:
Investments in Templeton Stock Fund (identified cost
$179,384,808) $329,352,936
------------
Liabilities:
Accrued expenses due related parties 374,333
------------
Net assets $328,978,603
============
Accumulation units outstanding 132,391,979
============
Net asset value per unit $ 2.484883
============
</TABLE>
STATEMENT OF OPERATIONS
for the period ended December 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
Dividends $ 5,615,980
Expenses:
Mortality and expense risk and administrative
charges 4,230,315
------------
Net investment income 1,385,665
Realized and unrealized gain on investments:
Net realized gain from share transactions $ 1,719,446
Net realized gain distribution from Fund 25,763,307
Net change in unrealized appreciation 29,236,460
--------------
Net realized and unrealized gain 56,719,213
------------
Net increase in net assets from operations $58,104,878
============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the periods ended December 31,
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 1,385,665 $ 241,153
Net realized gain 27,482,753 2,684,934
Net change in unrealized appreciation 29,236,460 54,558,056
-------------- ------------
Net increase in net assets from operations 58,104,878 57,484,143
Accumulation unit transactions:
Participant deposits 13,456,097 13,155,785
Participant transfers 2,720,653 10,498,003
Participant withdrawals (37,955,669) (29,718,626)
-------------- ------------
Net decrease from participant transactions (21,778,919) (6,064,838)
-------------- ------------
Total increase in net assets 36,325,959 51,419,305
Net assets:
Beginning of period 292,652,644 241,233,339
-------------- ------------
End of period $328,978,603 $292,652,644
============== ============
Participant accumulation unit transactions (in units):
Participant deposits 6,175,518 7,097,806
Participant transfers 931,089 6,158,732
Participant withdrawals (16,948,229) (15,894,569)
</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, 1996
<TABLE>
<S> <C>
Assets:
Investments in Templeton International Fund (identified
cost $77,152,940) $114,608,473
------------
Liabilities:
Accrued expenses due related parties 130,328
------------
Net assets $114,478,145
============
Accumulation units outstanding 62,848,326
============
Net asset value per unit $ 1.821499
============
</TABLE>
STATEMENT OF OPERATIONS
for the period ended December 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
Dividends $ 1,489,608
Expenses:
Mortality and expense risk and administrative
charges 1,410,917
-----------
Net investment income 78,691
Realized and unrealized gain on investments:
Net realized gain from share transactions $ 108,745
Net realized gain distribution from Fund 434,469
Net change in unrealized appreciation 20,199,153
-----------
Net realized and unrealized gain 20,742,367
-----------
Net increase in net assets from operations $20,821,058
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the periods ended December 31,
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Increase in net assets:
Operations:
Net investment income (loss) $ 78,691 $ (537,933)
Net realized gain 543,214 419,177
Net change in unrealized appreciation 20,199,153 11,150,673
------------ ------------
Net increase in net assets from operations 20,821,058 11,031,917
Accumulation unit transactions:
Participant deposits 4,729,888 5,709,743
Participant transfers 6,476,217 257,059
Participant withdrawals (6,247,179) (4,184,076)
------------ -----------
Net increase from participant transactions 4,958,926 1,782,726
------------ -----------
Total increase in net assets 25,779,984 12,814,643
Net assets:
Beginning of period 88,698,161 75,883,518
------------ -----------
End of period $114,478,145 $88,698,161
============ ===========
Participant accumulation unit transactions (in units):
Participant deposits 2,934,164 4,160,659
Participant transfers 4,100,617 190,011
Participant withdrawals (3,773,826) (2,977,608)
</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, 1996
<TABLE>
<S> <C>
Assets:
Investments in Templeton Asset Allocation Fund (identified
cost $93,469,428) $151,940,988
------------
Liabilities:
Accrued expenses due related parties 175,261
------------
Net assets $151,765,727
============
Accumulation units outstanding 65,842,936
============
Net asset value per unit $ 2.304966
============
</TABLE>
STATEMENT OF OPERATIONS
for the period ended December 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
Dividends $ 4,389,083
Expenses:
Mortality and expense risk and administrative
charges 2,027,587
-----------
Net investment income 2,361,496
Realized and unrealized gain on investments:
Net realized gain from share transactions $ 1,922,688
Net realized gain distribution from fund 3,443,160
Net change in unrealized appreciation 15,661,290
-----------
Net realized and unrealized gain 21,027,138
-----------
Net increase in net assets from operations $23,388,634
-----------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the periods ended December 31,
<TABLE>
<CAPTION>
1996 1995
----------- -------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 2,361,496 $ 1,357,636
Net realized gain 5,365,848 701,083
Net change in unrealized appreciation 15,661,290 23,331,096
------------ -------------
Net increase in net assets resulting from operations 23,388,634 25,389,815
Accumulation unit transactions:
Participant deposits 3,814,080 6,249,518
Participant transfers (4,371,058) 649,951
Participant withdrawals (14,534,788) (10,605,951)
------------ ------------
Net decrease from participant transactions (15,091,766) (3,706,482)
------------ ------------
Total increase in net assets 8,296,868 21,683,333
Net assets:
Beginning of period 143,468,859 121,785,526
------------ ------------
End of period $151,765,727 $143,468,859
============ ============
Participant accumulation unit transactions (in units):
Participant deposits 1,824,205 3,513,751
Participant transfers (2,087,602) 396,067
Participant withdrawals (6,878,558) (5,825,984)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-8(T)
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
TEMPLETON DEVELOPING MARKETS SUB-ACCOUNT
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets:
Investment in Templeton Developing Markets Fund (identified
cost $1,043,799) $1,050,901
----------
Liabilities:
Accrued expenses due related parties 1,195
----------
Net assets $1,049,706
==========
Accumulation units outstanding 1,039,721
==========
Net asset value per unit $ 1.009604
==========
</TABLE>
STATEMENT OF OPERATIONS
for the period March 4, 1996 (commencement of operations) to December 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
Dividends $ --
Expenses:
Mortality and expense risk and administrative charges 2,887
-------
Net investment loss (2,887)
Realized and unrealized gain on investments:
Net realized gain from share transactions $ 440
Net change in unrealized appreciation 7,102
------
Net realized and unrealized gain 7,542
-------
Net increase in net assets from operations $ 4,655
=======
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the period March 4, 1996 (commencement of operations) to December 31, 1996
<TABLE>
<S> <C>
Increase in net assets:
Operations:
Net investment loss $ (2,887)
Net realized gain 440
Net change in unrealized appreciation 7,102
----------
Net increase in net assets resulting from operations 4,655
Accumulation unit transactions:
Participant deposits 12,452
Participant transfers 1,032,869
Participant withdrawals (270)
----------
Net increase from participant transactions 1,045,051
----------
Total increase in net assets 1,049,706
Net assets:
Beginning of period --
----------
End of period $1,049,706
==========
Participant accumulation unit transactions (in units):
Participant deposits 12,449
Participant transfers 1,027,542
Participant withdrawals (270)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-9(T)
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
TEMPLETON BOND SUB-ACCOUNT
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets:
Investments in Templeton Bond Fund (identified cost
$19,188,417) $19,882,257
---------
Liabilities:
Accrued expenses due related parties 23,133
---------
Net assets $19,859,124
=========
Accumulation units outstanding 11,874,532
=========
Net asset value per unit $ 1.672413
=========
</TABLE>
STATEMENT OF OPERATIONS
for the period ended December 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
Dividends $2,034,457
Expenses:
Mortality and expense risk and administrative
charges 266,513
--------
Net investment income 1,767,944
Realized and unrealized gain (loss) on
investments:
Net realized gain from share transactions $ 65,010
Net change in unrealized depreciation (339,894)
-------
Net realized and unrealized loss (274,884)
--------
Net increase in net assets from operations $1,493,060
========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the periods ended December 31,
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 1,767,944 $ 629,024
Net realized gain 65,010 35,668
Net change in unrealized appreciation (depreciation) (339,894) 1,695,419
--------- ---------
Net increase in net assets from operations 1,493,060 2,360,111
Accumulation unit transactions:
Participant deposits 395,604 981,131
Participant transfers 426,791 (228,814)
Participant withdrawals (2,027,353) (1,456,958)
--------- ---------
Net decrease from participant transactions (1,204,958) (704,641)
--------- ---------
Total increase in net assets 288,102 1,655,470
Net assets:
Beginning of period 19,571,022 17,915,552
--------- ---------
End of period $19,859,124 $19,571,022
========= =========
Participant accumulation unit transactions (in units):
Participant deposits 253,615 665,160
Participant transfers 268,583 (153,130)
Participant withdrawals (1,280,919) (989,280)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-10(T)
<PAGE>
PHOENIX HOME LIFE ACCUMULATION ACCOUNT
TEMPLETON MONEY MARKET SUB-ACCOUNT
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets:
Investments in Templeton Money Market Fund (identified cost
$14,085,861) $14,085,861
Dividends receivable 62,971
-----------
Total assets 14,148,832
-----------
Liabilities:
Accrued expenses due related parties 17,292
-----------
Net assets $14,131,540
===========
Accumulation units outstanding 10,596,971
===========
Net asset value per unit $ 1.333545
===========
</TABLE>
STATEMENT OF OPERATIONS
for the period ended December 31, 1996
<TABLE>
<S> <C>
Investment income:
Dividends $771,482
Expenses:
Mortality and expense risk and administrative charges 218,563
--------
Net investment income $552,919
========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
for the periods ended December 31,
<TABLE>
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 552,919 $ 827,420
----------- ------------
Accumulation unit transactions:
Participant deposits 6,603,501 5,338,600
Participant transfers (4,354,547) (12,987,410)
Participant withdrawals (9,373,530) (5,376,150)
----------- ------------
Net decrease from participant transactions (7,124,576) (13,024,960)
----------- ------------
Total decrease in net assets (6,571,657) (12,197,540)
Net assets:
Beginning of period 20,703,197 32,900,737
----------- ------------
End of period $14,131,540 $ 20,703,197
=========== ============
Participant accumulation unit transactions (in units):
Participant deposits 5,010,494 4,238,896
Participant transfers (3,285,148) (10,471,911)
Participant withdrawals (7,205,144) (4,255,761)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B-11(T)
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. ORGANIZATION
Phoenix Home Life Variable Accumulation Account (the Account) is a separate
investment account of Phoenix Home Life Mutual Insurance Company (Phoenix)
registered as a unit investment trust. The Account currently has six
Sub-accounts to which Templeton Investment Plus contract values may be allocated
and include the Templeton Stock, Templeton International, Templeton Developing
Markets, Templeton Asset Allocation, Templeton Bond and Templeton Money Market
which invest solely in a designated portfolio of Templeton Variable Products
Series Fund (the Fund). 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 Developing Markets Fund
seeks long-term capital appreciation by investing in equity securities of
issuers in countries having developing markets; 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
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 and under current federal
income tax law, income arising from 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.
3. PURCHASES AND SALES OF SHARES OF TEMPLETON VARIABLE PRODUCTS SERIES FUND
Purchases and sales of the Fund for the period ended December 31, 1996
aggregated the following:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Templeton Stock Fund $ 59,440,249 $ 54,013,551
Templeton International Fund 22,431,305 16,923,750
Templeton Developing Markets Fund 1,181,062 137,703
Templeton Asset Allocation Fund 10,414,906 19,681,875
Templeton Bond Fund 4,752,914 4,187,984
Templeton Money Market Fund 35,621,649 42,182,027
</TABLE>
4. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
Phoenix provides all administrative services to the Account.
Phoenix 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 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 for the
Templeton Stock, Templeton International, Templeton Developing Markets,
Templeton Asset Allocation, Templeton Bond and Templeton Money Market
Sub-accounts aggregated $3,845,741, $1,282,652, $2,625, $1,843,261, $242,285 and
$198,694, respectively, for the year ended December 31, 1996.
B-12(T)
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
Notes to Financial Statements
- --------------------------------------------------------------------------------
As compensation for administrative services provided to the Account, Phoenix
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
$487,811 for administrative services provided for the year ended December 31,
1996.
Phoenix 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 for the Templeton Stock, Templeton International, Templeton Developing
Markets, Templeton Asset Allocation, Templeton Bond and Templeton Money Market
Sub-accounts aggregated $384,574, $128,265, $262, $184,326, $24,228 and $19,869,
respectively, for the year ended December 31, 1996.
Franklin Templeton Funds Distributors, Inc. is the principal underwriter and
distributor for the Templeton Sub-accounts of the Account. Phoenix reimburses
Franklin Templeton Funds Distributors for expenses incurred as underwriter. On
surrender of a contract, surrender charges, which vary from 0-6% depending upon
the duration of each contract deposit, are deducted from the proceeds and are
paid to Phoenix as reimbursement for services provided. The surrender charges
deducted and paid to Phoenix were $644,944 for the year ended December 31, 1996.
Templeton Investment Counsel, Inc. (TICI) serves as investment manager of the
Templeton Stock, International, and Asset Allocation Funds; Templeton Global
Bond Manager, a division of TICI, serves as investment manager of the Templeton
Bond and Money Market Funds; and Templeton Asset Management Ltd., an independent
wholly owned subsidiary of Franklin Resources, Inc. ("Franklin"), serves as
investment manager of the Templeton Developing Markets Fund. 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 excess of $1.3 billion. Templeton Developing Markets Fund pays a
monthly investment management fee equal on an annual basis to 1.25% of its daily
net assets; the Templeton Developing Markets Fund investment manager has agreed
in advance to reduce its fee so as to limit the total expenses of the Fund to an
annual rate of 1.70% of the Fund's average daily net assets until May 1, 1997.
Templeton Money Market Fund pays a monthly investment management fee equal on an
annual basis to 0.35% of its average daily net assets 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
facilities and services for the Funds.
5. 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.
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
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 Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of the
Code. Phoenix believes that the Account satisfies the current requirements of
the regulations, and it intends that the Account will continue to meet such
requirements.
B-13(T)
<PAGE>
PRICE WATERHOUSE LLP [LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of Phoenix Home Life Mutual Insurance Company and
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 Developing Markets
Sub-account, Templeton Asset Allocation Sub-account, Templeton Bond Sub-account
and Templeton Money Market Sub-account (constituting the Phoenix Home Life
Variable Accumulation Account, hereafter referred to as the "Account") at
December 31, 1996, the results of each of their operations for the periods 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.
[PRICE WATERHOUSE LLP SIGNATURE]
Hartford, Connecticut
February 12, 1997
B-14(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
B-15(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants .................................... B-17(T)
Consolidated Balance Sheets at December 31, 1996 and 1995 ............. B-18(T)
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 .................................... B-19(T)
Consolidated Statements of Equity for the Years Ended
December 31, 1996, 1995 and 1994 .................................... B-20(T)
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 ..................................... B-21(T)
Notes to Consolidated Financial Statements .................... B-22(T)-B-49(T)
B-16(T)
<PAGE>
One Financial Plaza Telephone 860 240 2000
Hartford, CT 06103
[logotype]Price Waterhouse LLP [logo]
REPORT OF INDEPENDENT ACCOUNTANTS
February 12, 1997
To the Board of Directors
and Policyholders of
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of equity and of cash flows present fairly,
in all material respects, the financial position of Phoenix Home Life Mutual
Insurance Company and its subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
<PAGE>
THIS NEW YORK STATE INSURANCE DEPARTMENT RECOGNIZES ONLY STATUTORY
ACCOUNTING PRACTICES FOR DETERMINING AND REPORTING THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF AN INSURANCE COMPANY, FOR DETERMINING ITS
SOLVENCY UNDER NEW YORK INSURANCE LAW, AND FOR DETERMINING WHETHER ITS
FINANCIAL CONDITION WARRANTS THE PAYMENT OF A DIVIDEND TO ITS
POLICYHOLDERS. NO CONSIDERATION IS GIVEN BY THE DEPARTMENT TO FINANCIAL
STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN MAKING SUCH DETERMINATIONS.
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
DECEMBER 31,
1996 1995
(IN THOUSANDS)
ASSETS
Investments:
Fixed maturities:
Held-to-maturity, at amortized cost $ 1,555,685 $ 1,334,447
Available-for-sale, at fair value 4,895,393 4,425,678
Equity securities, at fair value 235,351 254,278
Mortgage loans 947,076 897,192
Real estate 410,945 418,328
Policy loans 1,667,784 1,617,872
Other invested assets 182,372 144,778
Short-term investments 164,967 275,517
---------------- ----------------
Total investments 10,059,573 9,368,090
Cash and cash equivalents 172,895 127,104
Accrued investment income 135,475 128,139
Deferred policy acquisition costs 926,274 816,128
Premiums, accounts and notes receivable 79,354 64,880
Reinsurance recoverables 46,251 48,490
Property and equipment, net 137,231 134,880
Other assets 134,589 130,627
Goodwill and intangibles, net 313,507 313,069
Separate account assets 3,447,899 3,306,070
---------------- ----------------
Total assets $ 15,453,048 $ 14,437,477
---------------- ----------------
LIABILITIES
Policy liabilities and accruals $ 9,462,039 $ 8,974,885
Other liabilities 470,595 445,577
Long-term debt 490,430 268,337
Current income taxes 29,345 42,033
Deferred income taxes 61,934 34,176
Separate account liabilities 3,412,152 3,273,056
---------------- ----------------
Total liabilities 13,926,495 13,038,064
================ ================
Contingent liabilities (Note 15)
Minority interest 129,084 117,826
---------------- ----------------
EQUITY
Unrealized investment gains, net 89,791 75,878
Retained earnings 1,307,678 1,205,709
---------------- ----------------
Total equity 1,397,469 1,281,587
---------------- ----------------
Total liabilities and equity $ 15,453,048 $ 14,437,477
================ ================
The accompanying notes are an integral part of these statements.
B-18(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $ 1,518,822 $ 1,456,875 $ 1,396,002
Insurance and investment product fees 421,058 324,459 286,174
Net investment income 689,890 662,468 622,717
Net realized investment gains (losses) 95,265 74,738 (166)
---------------- ---------------- ----------------
Total revenues 2,725,035 2,518,540 2,304,727
---------------- ---------------- ----------------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses 1,529,573 1,471,030 1,412,686
Policyholder dividends 311,739 289,469 264,456
Policy acquisition expenses 242,363 221,339 237,768
Other operating expenses 452,399 419,231 319,090
---------------- ---------------- ----------------
Total benefits, losses and expenses 2,536,074 2,401,069 2,234,000
---------------- ---------------- ----------------
OPERATING INCOME 188,961 117,471 70,727
Non-operating income
Gain on merger transactions 40,580
---------------- ---------------- ----------------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST 188,961 158,051 70,727
Income taxes 79,331 43,352 40,062
---------------- ---------------- ----------------
INCOME BEFORE MINORITY INTEREST 109,630 114,699 30,665
Minority interest (8,902) (950) 13
---------------- ---------------- ----------------
NET INCOME $ 100,728 $ 113,749 $ 30,678
================ =============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
B-19(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
- --------------------------------------------------------------------------------
NET UNREALIZED
RETAINED INVESTMENT
EARNINGS GAINS (LOSSES) TOTAL
(IN THOUSANDS)
Balance at December 31, 1993 $ 1,065,115 $ 48,288 $ 1,113,403
Net income 30,678 30,678
Net unrealized loss (75,761) (75,761)
------------ ------------- -------------
Balance at December 31, 1994 1,095,793 (27,473) 1,068,320
Net income 113,749 113,749
Net unrealized gain 103,351 103,351
Minimum pension liability (3,833) (3,833)
------------ ------------- -------------
Balance at December 31, 1995 1,205,709 75,878 1,281,587
Net income 100,728 100,728
Net unrealized gain 13,913 13,913
Minimum pension liability 1,241 1,241
------------ ------------- -------------
Balance at December 31, 1996 $ 1,307,678 $ 89,791 $ 1,397,469
============ ============= =============
The accompanying notes are an integral part of these statements.
B-20(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 100,728 $ 113,749 $ 30,678
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATIONS
Net realized investment gains (95,265) (74,738) (166)
Net gain on merger (40,580)
Amortization and depreciation 64,870 58,912 51,894
Deferred income taxes (benefit) 14,774 (16,236) 68,936
(Increase) decrease in receivables (111,886) (30,130) 2,830
Increase in deferred policy acquisition costs (61,985) (26,370) (2,975)
Increase in policy liabilities and accruals 559,724 537,919 446,850
Increase (decrease) in other assets/other liabilities, net 39,594 95,880 (51,171)
Other, net 11,258 4,203 8,046
------------- ------------- -----------
Net cash provided by operating activities 521,812 622,609 554,922
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposals of fixed maturities:
Available-for-sale 1,348,809 1,145,146 985,858
Held-to-maturity 118,596 143,773 209,757
Proceeds from disposals of equity securities 382,359 329,104 347,884
Proceeds from mortgage loan maturities or repayments 151,760 186,172 160,882
Proceeds from sale of other invested assets 127,440 148,546 209,316
Purchase of fixed maturities:
Available-for-sale (1,909,086) (1,614,387) (1,396,902)
Held-to-maturity (385,321) (247,354) (383,207)
Purchase of equity securities (215,104) (282,488) (310,751)
Purchase of mortgage loans (200,683) (93,097) (31,214)
Purchase of other invested assets (157,077) (73,482) (173,988)
Change in short term investments, net 110,503 (166,445) 265,328
Increase in policy loans (49,912) (32,387) (55,143)
Capital expenditures (3,543) (18,449) (12,663)
Other investing activities, net (5,898) (12,704) (11,392)
------------- ------------- -----------
Net cash used for investing activities (687,157) (588,052) (196,235)
CASH FLOW FROM FINANCING ACTIVITIES
Withdrawals of contractholder deposit (6,301) (154,100) (314,100)
funds, net of deposits and interest credited
Proceeds from borrowings 226,082 177,922 3,417
Repayment of borrowings (2,400) (12,726) (19,742)
Dividends paid to minority shareholders (6,245) (31,215)
------------- ------------- -----------
Net cash provided by (used for) financing activities 211,136 (20,119) (330,425)
NET INCREASE IN CASH AND CASH EQUIVALENTS 45,791 14,438 28,262
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 127,104 112,666 84,404
------------- ------------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 172,895 $ 127,104 $ 112,666
============= ============= ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid (refunded), net $ 76,157 $ 33,399 $ (32,245)
Interest paid on debt $ 19,214 $ 8,100 $ 8,191
</TABLE>
The accompanying notes are an integral part of these statements.
B-21(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company (Phoenix 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, primarily based in the United
States. These products and services are distributed among seven segments:
Individual, Group Life and Health, Life Reinsurance, General Lines
Brokerage, Securities Management, Real Estate Management and Other
Operations. See Note 10 for segment information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Phoenix and
all significant subsidiaries (collectively, the Company). Less than
majority-owned entities in which the Company has at least a 20% interest or
those where the Company has significant influence are reported on the
equity basis.
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates used in
determining insurance and contractholder liabilities, related reinsurance
recoverables, taxes, contingencies and valuation allowances for investment
assets are discussed throughout the Notes to Consolidated Financial
Statements. All significant intercompany accounts and transactions have
been eliminated. Certain reclassifications have been made to the 1995 and
1994 amounts to conform with the 1996 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
As a result of the issuance of the Statement of Financial Accounting
Standard (SFAS) No. 120, "Accounting and Reporting by Mutual Life Insurance
Enterprises and Insurance Enterprises for Certain Long-Duration
Participating Contracts," and Financial Accounting Standards Board
Interpretation (FIN) No. 40, "Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises,"
financial statements of mutual life insurance companies beginning after
December 15, 1995, prepared on the basis of statutory accounting are no
longer characterized as in conformity with GAAP. The Company applied the
pronouncements of the Financial Accounting Standards Board (FASB) to its
financial statements in 1995, and, in accordance with SFAS No. 120 and FIN
No. 40, all prior periods presented were restated.
B-22(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
VALUATION OF INVESTMENTS
Investments in fixed maturities include bonds, asset-backed securities
including collateralized mortgage obligations (CMOs) and preferred stocks.
The Company classifies all its fixed maturities as either held-to-maturity
or available-for-sale investments. Fixed maturities held-to-maturity
consist of private placement bonds presented at amortized cost, net of
impairments, that management intends and has the ability to hold until
maturity. Fixed maturities available-for-sale are presented at fair value
with unrealized gains or losses included in equity and consist of public
bonds and preferred stocks that management may not hold until maturity.
Fixed maturities are considered impaired when a decline in value is
considered to be other than temporary.
Equity securities are classified as available-for-sale securities. These
securities are reported at fair value based principally on their quoted
market prices. Equity securities are considered impaired when a decline in
value is considered to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances, net
of valuation reserves on impaired mortgages. A mortgage loan is considered
to be impaired if management believes it is probable that the Company will
be unable to collect all amounts of contractual interest and principal as
scheduled in the loan agreement. An impaired mortgage loan's fair value is
measured based on the present value of future cash flows discounted at the
loan's observable market price or at the fair value of the collateral. If
the fair value of a mortgage loan is less than the recorded investment in
the loan, the difference is recorded as a valuation reserve.
Real estate held for sale is carried at the lower of cost or current fair
value less costs to sell. Foreclosed real estate is carried at appraised
value at the time of foreclosure. Subsequent to foreclosure, these
investments are carried at the lower of cost or current fair value less
costs to sell. Fair value for real estate is determined taking into
consideration one or more of the following factors: (i) property valuation
techniques utilizing discounted cash flows at the time of stabilization
including capital expenditures and stabilization costs; (ii) sales of
comparable properties; (iii) geographic location of the property and
related market conditions; and (iv) disposition costs.
Policy loans are generally carried at their unpaid principal balances and
are collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
fair value.
Other invested assets (primarily partnerships) are carried at cost adjusted
for the Company's equity in undistributed earnings or losses since
acquisition, less allowances for other than temporary declines in value.
Realized investment gains and losses, other than those related to separate
accounts for which the Company does not bear the investment risk, are
determined by the specific identification method and reported as a
component of revenue. A realized investment loss is recorded when an
investment valuation reserve is determined. Valuation reserves are netted
against the asset categories to which they apply and changes in the
valuation reserves are included in realized investment gains and losses.
Unrealized investment gains and losses on fixed maturities and equity
securities classified as available-for-sale are included as a separate
component of equity, net of deferred income taxes and deferred policy
acquisition costs.
B-23(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
In the normal course of business, the Company enters into transactions
involving various types of financial instruments, including debt,
investments such as fixed maturities, mortgage loans and equity securities,
and off-balance-sheet financial instruments such as investment and loan
commitments, financial guarantees, and interest rate swaps. These
instruments have credit risk and also may be subject to risk of loss due to
interest rate and market fluctuations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and money market
instruments.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, underwriting,
distribution and policy issue expenses, all of which vary with and are
primarily related to the production of revenues, are deferred. Deferred
policy acquisition costs are subject to recoverability testing at the time
of policy issue and loss recognition at the end of each accounting period.
For individual participating life insurance business, deferred policy
acquisition costs are amortized in proportion to historical and anticipated
gross margins. Deviations from expected experience are reflected in
earnings in the period such deviations occur.
For universal life, limited pay and investment type contracts, deferred
policy acquisition costs are amortized in proportion to total estimated
gross profits over the expected average life of the contracts using
estimated gross margins arising principally from investment, mortality and
expense margins and surrender charges based on historical and anticipated
experience, updated at the end of each accounting period.
PROPERTY AND EQUIPMENT
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by the Company, are stated at depreciated cost,
less a reserve for impairments in value. Real estate occupied by the
Company was $97.2 million and $95.0 million, respectively, at December 31,
1996 and 1995. The Company provides for depreciation using straight line
and accelerated methods over the estimated useful lives of the related
assets which generally range from five to forty years. Accumulated
depreciation and amortization was $144.1 million and $129.6 million at
December 31, 1996 and 1995, respectively.
OTHER ASSETS
Other assets consist of prepaid expenses and accounts receivable,
principally investment management fees receivable less allowances for
estimated uncollectible amounts.
B-24(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the cost of businesses acquired over the
fair value of their net assets. These costs are amortized on a
straight-line basis over periods, not exceeding 40 years, that correspond
with the benefits expected to be derived from the acquisitions. Intangible
assets are amortized on a straight-line basis over the estimated lives of
such assets. Management periodically reevaluates the propriety of the
carrying value of goodwill and intangible assets by comparing estimates of
future undiscounted cash flows to the carrying value of assets. Assets are
considered impaired if the carrying value exceeds the expected future
undiscounted cash flows.
SEPARATE ACCOUNTS
Separate account assets and liabilities are funds maintained in accounts to
meet specific investment objectives of contractholders who bear the
investment risk. Investment income and investment gains and losses accrue
directly to such contractholders. The assets of each account are legally
segregated and are not subject to claims that arise out of any other
business of the Company. The assets and liabilities are carried at market
value. Deposits, net investment income and realized investment gains and
losses for these accounts are excluded from revenues, and the related
liability increases are excluded from benefits and expenses. Amounts
assessed to the contractholders for management services are included in
revenues.
On March 1, 1996, the pooled separate accounts of Phoenix, excluding the
real estate separate accounts, were terminated and the assets of these
separate accounts were transferred to Phoenix Duff & Phelps' institutional
mutual funds.
POLICY LIABILITIES AND ACCRUALS
Future policy benefits are liabilities for life, health and annuity
products. Such liabilities are established in amounts adequate to meet the
estimated future obligations of policies in force. Policy liabilities for
traditional life insurance are computed using the net level premium method
on the basis of actuarial assumptions as to assumed rates of interest,
mortality, morbidity and withdrawals. Liabilities for universal life
include deposits received from customers and investment earnings on their
fund balances, less administrative charges. Universal life fund balances
are also assessed mortality charges.
Liabilities for outstanding claims, losses and loss adjustment expenses are
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.
Unearned premiums relate primarily to individual participating life
insurance as well as group life, accident and health insurance premiums.
The premiums are reported as earned on a pro-rata basis over the contract
period. The unexpired portion of these premiums is recorded as unearned
premiums.
Contractholder deposit funds and other policy liabilities include
investment-related products such as guaranteed investment contracts,
deposit administration funds and immediate participation guarantee funds.
These funds consist of deposits received from customers and investment
earnings on their fund balances.
B-25(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PREMIUM AND FEE REVENUE AND RELATED EXPENSES
Life insurance premiums, other than premiums for universal life and certain
annuity contracts, are recorded as premium revenue on a pro-rata basis over
each policy year. Benefits, losses and related expenses are matched with
premiums over the related contract periods. Revenues for investment-related
products consist of net investment income and contract charges assessed
against the fund values. Related benefit expenses primarily consist of net
investment income credited to the fund values after deduction for
investment and risk charges. Revenues for universal life products consist
of net investment income and mortality, administration and surrender
charges assessed against the fund values during the period. Related benefit
expenses include universal life benefit claims in excess of fund values and
net investment income credited to universal life fund values.
POLICYHOLDERS' DIVIDENDS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of the Company. The
amount of policyholders' dividends to be paid is determined annually by the
Company's board of directors. The aggregate amount of policyholders'
dividends is related to the actual interest, mortality, morbidity and
expense experience for the year and the Company's judgment as to the
appropriate level of statutory surplus to be retained. The participating
life insurance in force was 80.0% and 80.5% of the face value of total
individual life insurance in force at December 31, 1996 and 1995,
respectively. The premiums on participating life insurance policies were
84.1%, 84.7% and 84.5% of total individual life insurance premiums in 1996,
1995 and 1994, respectively. Total policyholders' dividends were $312
million, $289 million and $264 million in 1996, 1995 and 1994,
respectively.
INCOME TAXES
Phoenix and its eligible affiliated companies have elected to file a
life/nonlife consolidated federal income tax return for the tax years ended
December 31, 1996, 1995 and 1994. Entities included within the consolidated
group are segregated into either a life insurance or non-life insurance
company subgroup. The consolidation of these subgroups is subject to
certain statutory restrictions in the percentage of eligible non-life tax
losses that can be applied to offset life company taxable income.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities and accruals, policy acquisition expenses, investment
impairment reserves, reserves for postretirement benefits and unrealized
gains or losses on investments.
B-26(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. SIGNIFICANT TRANSACTIONS
PHOENIX DUFF & PHELPS CORPORATION
Effective January 1, 1995, the money management businesses of Phoenix 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. On November 1, 1995, Phoenix, through its
subsidiary, PM Holdings, Inc. (PM Holdings), merged Phoenix Securities
Group into Duff & Phelps Corporation (D&P), forming Phoenix Duff & Phelps
Corporation (PDP). The transaction was accounted for as a reverse merger
with the purchase accounting method applied to D&P's assets and
liabilities. The purchase price was $190.7 million and PDP recorded $93.1
million of goodwill, which is being amortized over forty years using the
straight-line method. PM Holdings owns approximately 60% of the outstanding
PDP common stock. In addition, PM Holdings owns 1.4 million shares (45%) of
PDP's series A convertible exchangeable preferred stock. PM Holdings
recognized a non-operating, non-cash, tax free gain on this transaction of
$36.9 million resulting from the realization of the appreciation of the
stock exchanged which is included in the gain on merger transactions in the
consolidated statements of income.
SURPLUS NOTES
On November 25, 1996, the Company issued $175 million of surplus notes with
a 6.95% interest rate scheduled to mature on December 1, 2006. There are no
sinking fund provisions in the notes. The notes are classified as long-term
debt in the Consolidated Balance Sheet at December 31, 1996.
The notes were issued in accordance with Section 1307 of the New York
Insurance Law and, accordingly, interest and principal payments cannot be
made without the approval of the New York Insurance Department.
The notes were issued pursuant to Rule 144A under the Securities Act of
1933 underwritten by Bear, Stearns & Co. Inc., Chase Securities Inc. and
Merrill Lynch & Co. and are administered by Bank of New York as
registrar/paying agent.
ABERDEEN TRUST PLC
On March 25, 1996, the Company purchased 12.2 million shares of Aberdeen
Trust PLC (Aberdeen), a Scottish asset management firm. As of December 31,
1996, the Company owned 13.1 million shares representing 12.5% of
Aberdeen's outstanding common stock. The total cost of these transactions
was $26.4 million. The investment is recorded at cost adjusted for the
Company's equity in undistributed earnings less dividends received.
In addition, on April 15, 1996, the Company purchased a 7% convertible
subordinated note issued by Aberdeen for $37.5 million. The note, which
matures on March 29, 2003, may be converted at a price of $2.15 per share,
which would be equivalent to approximately 14% of Aberdeen's outstanding
common stock.
B-27(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In the spring of 1996, the Company and Aberdeen joined together to form
Phoenix-Aberdeen International Advisors, LLC, an SEC registered investment
advisor that, in conjunction with PDP and Aberdeen, will develop and market
investment products in the United States and the United Kingdom.
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
FIXED MATURITIES AND EQUITY SECURITIES
The amortized cost and fair value of investments in fixed maturities and
equity securities as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FIXED MATURITIES:
HELD-TO-MATURITY:
State and political subdivision bonds $ 11,685 $ 5 $ (375) $ 11,315
Corporate securities 1,525,999 61,692 (13,405) 1,574,286
Mortgage-backed securities 18,001 1,037 (15) 19,023
----------------- ------------------ ---------------- ---------------
Total 1,555,685 62,734 (13,795) 1,604,624
----------------- ------------------ ---------------- ---------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 561,017 13,970 (1,610) 573,377
State and political subdivision bonds 406,679 13,831 (1,154) 419,356
Foreign government bonds 174,298 31,441 (1,457) 204,282
Corporate securities 1,092,163 70,432 (7,968) 1,154,627
Mortgage-backed securities 2,509,232 60,321 (25,802) 2,543,751
----------------- ------------------ ---------------- ---------------
Total 4,743,389 189,995 (37,991) 4,895,393
----------------- ------------------ ---------------- ---------------
Total fixed maturities $ 6,299,074 $ 252,729 $ (51,786) $ 6,500,017
================= ================== ================ ===============
Equity securities available-for-sale $ 137,907 $ 100,258 $ (2,814) $ 235,351
================= ================== ================ ===============
</TABLE>
B-28(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in fixed maturities and
equity securities as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FIXED MATURITIES:
HELD-TO-MATURITY:
State and political subdivision bonds $ 20,915 $ 779 $ (142) $ 21,552
Corporate securities 1,297,049 125,055 (1,114) 1,420,990
Mortgage-backed securities 16,483 2,057 (37) 18,503
----------------- ---------------- -------------- -------------
Total 1,334,447 127,891 (1,293) 1,461,045
----------------- ---------------- -------------- -------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 572,304 29,684 (1,029) 600,959
State and political subdivision bonds 314,407 26,072 (1) 340,478
Foreign government bonds 59,149 6,436 (1,804) 63,781
Corporate securities 987,210 91,741 (3,950) 1,075,001
Mortgage-backed securities 2,269,618 95,176 (19,335) 2,345,459
----------------- ---------------- -------------- -------------
Total 4,202,688 249,109 (26,119) 4,425,678
----------------- ---------------- -------------- -------------
Total fixed maturities $ 5,537,135 $ 377,000 $ (27,412) $ 5,886,723
================= ================ ============== =============
Equity securities available-for-sale $ 197,526 $ 62,658 $ (5,906) $ 254,278
================= ================ ============== =============
</TABLE>
B-29(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of fixed maturities, by contractual
maturity, as of December 31, 1996 are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties, or
the Company may have the right to put or sell the obligations back to the
issuers.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 34,496 $ 35,001 $ 50,888 $ 51,214
Due after one year through five years 339,989 350,702 360,543 374,212
Due after five years through ten years 616,197 643,166 712,255 738,950
Due after ten years 547,002 556,732 1,110,471 1,187,266
Mortgage-backed securities 18,001 19,023 2,509,232 2,543,751
----------------- --------------- ---------------- ---------------
Total $ 1,555,685 $ 1,604,624 $ 4,743,389 $ 4,895,393
================= =============== ================ ===============
</TABLE>
Carrying values for investments in mortgage-backed securities, excluding
U.S. government guaranteed investments, were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
MORTGAGE-BACKED SECURITIES
Planned amortization class $ 618,953 $ 787,840
Asset-backed 490,018 436,734
Mezzanine 322,812 365,034
Commercial 413,571 230,083
Sequential pay 552,512 397,950
Pass through 105,282 85,017
Other 58,604 59,284
----------------- -----------------
Total mortgage-backed securities $ 2,561,752 $ 2,361,942
================= =================
Phoenix had 37% and 49% at December 31, 1996 and 1995, 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 has limited exposure in the more volatile
residential derivative market such as interest-only, principal-only or
inverse float instruments.
B-30(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MORTGAGE LOANS AND REAL ESTATE
The Company's mortgage loans and real estate are diversified by property
type and location and, for mortgage loans, by borrower. Mortgage loans are
collateralized by the related properties and are generally 75% of the
properties' value at the time the original loan is made.
The carrying values of mortgage loans and real estate investments, net of
applicable reserves, were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Mortgage loans $ 947,076 $ 897,192
Real estate held for sale 410,945 418,328
------------------ -------------------
Total $ 1,358,021 $ 1,315,520
================== ===================
During 1996 and 1995, non-cash investing activities included real estate
acquired through foreclosure of mortgage loans and purchase money
mortgages, which had a fair value of $1.5 million and $35 million,
respectively.
B-31(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Mortgage loans and real estate investments are comprised of the following
property types and geographic regions:
MORTGAGE LOANS
DECEMBER 31,
1996 1995
(IN THOUSANDS)
PROPERTY TYPE:
Office buildings $ 251,526 $ 191,672
Retail 257,721 250,172
Apartment buildings 241,286 244,589
Industrial buildings 197,013 222,120
Other 47,928 54,446
Valuation allowances (48,398) (65,807)
----------------------- ---------------------
Total $ 947,076 $ 897,192
======================= =====================
GEOGRAPHIC REGION:
Northeast $ 260,146 $ 233,670
Southeast 261,956 250,019
North central 158,902 171,434
South central 57,507 50,819
West 256,963 257,057
Valuation allowances (48,398) (65,807)
----------------------- ---------------------
Total $ 947,076 $ 897,192
======================= =====================
REAL ESTATE
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Property type:
Office buildings $ 246,644 $ 267,505
Retail 121,813 127,500
Apartment buildings 26,286 36,644
Industrial buildings 56,134 61,667
Other 7,577 8,767
Valuation allowances (47,509) (83,755)
----------------------- ----------------------
Total $ 410,945 $ 418,328
======================= =====================
GEOGRAPHIC REGION:
Northeast $ 103,761 $ 102,249
Southeast 110,746 130,944
North central 86,070 85,470
South central 85,532 91,670
West 72,345 91,750
Valuation allowances (47,509) (83,755)
----------------------- ----------------------
Total $ 410,945 $ 418,328
======================= =====================
B-32(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
At December 31, 1996, scheduled mortgage loan maturities were as follows:
1997 - $176 million; 1998 - $138 million; 1999 - $99 million; 2000 - $106
million; 2001 - $98 million; and $378 million thereafter. Actual maturities
could differ from contractual maturities because borrowers may have the
right to prepay obligations with or without prepayment penalties and loans
may be refinanced. The Company refinanced $28.9 million and $100.4 million
of its mortgage loans during 1996 and 1995, respectively, based on terms
which differed from those granted to new borrowers.
INVESTMENT VALUATION ALLOWANCES
Investment valuation allowances which have been deducted in arriving at
investment carrying values as presented in the consolidated balance sheets
and changes thereto were as follows:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
JANUARY 1, ADDITIONS DEDUCTIONS DECEMBER 31,
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996
Mortgage loans $ 65,807 $ 7,640 $ (25,049) $ 48,398
Real estate 83,755 2,526 (38,772) 47,509
------------------ ------------------ --------------------- -------------------
Total $ 149,562 $ 10,166 $ (63,821) $ 95,907
================== ================== ===================== ===================
1995
Mortgage loans $ 118,970 $ (53,163) $ 65,807
Real estate 108,652 $ 8,604 (33,501) 83,755
------------------ ------------------ --------------------- -------------------
Total $ 227,622 $ 8,604 $ (86,664) $ 149,562
================== ================== ===================== ===================
</TABLE>
NON-INCOME PRODUCING MORTGAGES LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $4.5
million and $3.8 million at December 31, 1996 and 1995, respectively.
There were no non-income producing bonds at December 31, 1996 and 1995.
INTEREST RATE SWAPS
Phoenix enters into interest rate swap agreements, generally having
maturities of seven years or less, to hedge certain variable rate
investment income streams matched against fixed rate liability streams. The
notional amounts of these investments were $60.1 million and $18 million at
December 31, 1996 and 1995, respectively. Average received and average paid
rates were 8.04% and 5.65% for 1996.
The Company has also guaranteed an interest rate swap that has the effect
of the Company paying a fixed interest rate on a notional amount of $184.7
million of the Company'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
considers the likelihood of any material loss on these guarantees or
interest rate swaps to be remote.
B-33(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
OTHER INVESTED ASSETS
Other invested assets, consisting primarily of partnership interests and
equity in unconsolidated subsidiaries, were as follows:
DECEMBER 31,
1996 1995
(in thousands)
Venture capital equity partnerships $ 66,284 $ 50,919
Transportation and equipment leases 46,950 47,810
Investment in Aberdeen Trust, PLC 29,980
Investment in Beutel, Goodman & Co. LTD 34,541 39,730
Other 4,617 6,319
------------- ---------------
Total other invested assets $ 182,372 $ 144,778
============= ===============
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Fixed maturities $ 469,713 $ 437,521 $ 395,192
Equity securities 4,689 1,787 3,312
Mortgage loans 84,318 92,283 111,122
Policy loans 117,742 115,055 105,678
Real estate 21,799 20,910 17,087
Other invested assets 332 871 1,212
Short-term investments 18,688 21,974 11,673
----------------- ----------------- ----------------
Sub-total 717,281 690,401 645,276
Less investment expenses 27,391 27,933 22,559
----------------- ----------------- ----------------
Net investment income $ 689,890 $ 662,468 $ 622,717
================= ================= ================
</TABLE>
Investment income of $.4 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1996. The Company does
not accrue interest income on impaired mortgage loans and impaired bonds
when the likelihood of collection is doubtful.
The payment terms of mortgage loans may from time to time be restructured
or modified. The investment in restructured mortgage loans, based on
amortized cost, amounted to $61.5 million and $76 million at December 31,
1996 and 1995, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $3.1 million, $6.6 million and $10.1 million in 1996,
1995 and 1994, respectively. Actual interest income on these loans included
in net investment income aggregated $5.2 million, $6.4 million and $11.3
million in 1996, 1995 and 1994, respectively.
B-34(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Unrealized gains and losses on investments carried at fair value for the
year ended December 31, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Unrealized investment gains (losses)
Fixed maturities $ (70,986) $ 476,352 $ (411,694)
Equity securities 40,803 24,527 2,706
------------------ ------------------ -------------------
(30,183) 500,879 (408,988)
Deferred policy acquisition costs 51,528 (341,836) 292,423
Deferred income taxes (benefits) 7,432 55,692 (40,804)
------------------ ------------------ -------------------
Net unrealized investment gains (losses) $ 13,913 $ 103,351 $ (75,761)
------------------ ------------------ -------------------
</TABLE>
Realized investment gains and losses for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities $ (10,476) $ 8,080 $ (20,554)
Equity securities 59,794 29,276 (8,950)
Mortgage loans 2,628 (262) 485
Real estate 24,711 20,535 16,063
Other invested assets 18,608 17,109 12,790
-------------------- ------------------ ---------------------
95,265 74,738 (166)
Income taxes (benefits) 33,343 26,158 (58)
-------------------- ------------------ ---------------------
Net realized investment gains (losses) $ 61,922 $ 48,580 $ (108)
==================== ================== =====================
</TABLE>
The proceeds from sales of available-for-sale fixed maturities and the
gross realized gains and gross realized losses on those sales for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from sales $ 1,525,011 $ 1,201,700 $ 733,800
Gross gains on sales $ 15,966 $ 30,300 $ 16,500
Gross losses on sales $ (27,905) $ (19,900) $ (45,500)
</TABLE>
B-35(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Goodwill $ 231,135 $ 211,084
Investment management contracts 56,700 60,700
Client listings 41,410 31,437
Non-compete covenants 5,000 9,314
Intangible asset related to
pension plan benefits 19,835 22,540
Other 1,220 4,066
----------------- -------------------
355,300 339,141
Accumulated amortization (41,793) (26,072)
----------------- -------------------
Total $ 313,507 $ 313,069
================= ===================
PDP's amounts included above were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Goodwill $ 179,406 $ 167,014
Investment management contracts 56,700 60,700
Non-compete covenants 5,000 5,000
Other 1,220 4,066
----------------- ------------------
242,326 236,780
Accumulated amortization (13,198) (6,211)
----------------- ------------------
Total $ 229,128 $ 230,569
================= ==================
6. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Financial instruments that are subject to fair value disclosure
requirements (insurance contracts are excluded) are carried in the
financial statements at amounts that approximate fair value. The fair
values presented for certain financial instruments are estimates which, in
many cases, may differ significantly from the amounts which could be
realized upon immediate liquidation. In cases where market prices are not
available, estimates of fair value are based on discounted cash flow
analyses which utilize current interest rates for similar financial
instruments which have comparable terms and credit quality.
B-36(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
FIXED MATURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
fixed maturities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values 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 on 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.
POLICY LOANS
Fair values are 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. 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 value.
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair 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 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.
B-37(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 value is assumed to be equal to the stated liability
balances.
DEBT
The carrying value of long-term debt reported on the balance sheet
approximates fair value.
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1996 1995
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash $ 172,895 $ 172,895 $ 127,104 $ 127,104
equivalents
Short-term investments 164,967 164,967 275,517 275,517
Fixed maturities 6,451,078 6,500,017 5,760,125 5,886,723
Equity securities 235,351 235,351 254,278 254,278
Mortgage loans 947,076 986,900 897,192 955,800
Policy loans 1,667,784 1,645,899 1,617,872 1,658,000
--------------- ----------------- -------------------- ------------------
Total financial assets $ 9,639,151 $ 9,706,029 $ 8,932,088 $ 9,157,422
=============== ================= ==================== ==================
Financial liabilities:
Policy liabilities $ 875,200 $ 875,100 $ 955,600 $ 955,800
Long-term debt 492,020 492,020 268,337 268,337
--------------- ----------------- -------------------- ------------------
Total financial liabilities $ 1,367,220 $ 1,367,120 $ 1,223,937 $ 1,224,137
=============== ================= ==================== ==================
</TABLE>
7. DEBT
Long-term debt was as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Unsecured debt
Bank borrowings $ 287,365 $ 241,157
Notes payable 25,457 23,995
Other 58
------------------ ----------------
Total unsecured debt 312,822 265,210
Surplus notes 175,000
Secured debt 2,608 3,127
------------------ ----------------
Total long-term debt $ 490,430 $ 268,337
================== ================
B-38(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company has various lines of credit established with major commercial
banks. As of December 31, 1996, the Company had outstanding balances
totaling $287.4 million. The total unused credit was $120.9 million. The
Company records commitment fees as a component of interest expense.
Interest rates range from 5.73% to 8.25% in 1996.
On November 25, 1996, the Company issued $175 million of surplus notes (See
Note 3).
Maturities of long-term debt are as follows: 1997 - $17 million; 1998 - $90
million; 1999 - $7 million; 2000 - $177 million; 2001 - $24 million; 2002
and thereafter - $175 million.
Interest expense on long-term debt was $18.0 million, $7.7 million and $9.0
million for the years ended December 31, 1996, 1995 and 1994, respectively.
8. INCOME TAXES
A summary of income taxes (benefits) in the consolidated statements of
income for the year ended December 31, was as follows:
1996 1995 1994
(in thousands)
Income taxes
Current 59,673 59,590 (28,874)
Deferred 19,658 (16,238) 68,936
---------------- --------------- ---------------
Total 79,331 43,352 40,062
================ =============== ===============
The income taxes attributable to the consolidated results of operations are
different than the amounts determined by multiplying income before taxes by
the statutory income tax rate. The sources of the difference and the tax
effects of each for the year ended December 31, were as follows (in
thousands, aside from the percentages):
<TABLE>
<CAPTION>
1996 1995 1994
% % %
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $ 66,136 35 $ 55,318 35 $ 24,754 35
Non-taxable gain on PDP merger (14,203) (9)
Dividend received deduction &
tax-exempt interest (2,107) (1) (623) (1,177) (2)
Other, net 2,736 1 2,860 1 (4,082) (5)
-------------- -------- ------------- -------- ------------- ----------
66,765 35 43,352 27 19,495 28
Differential earnings (equity tax) 12,566 7 20,567 29
-------------- -------- ------------- -------- ------------- ----------
Income taxes $ 79,331 42 $ 43,352 27 $ 40,062 57
============== ======== ============= ======== ============= ==========
</TABLE>
B-39(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The deferred income tax liability (asset) represents the tax effects of
temporary differences attributable to the consolidated tax return group.
The components were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Deferred policy acquisition costs $ 220,135 $ 221,034
Unearned premium/deferred revenue (131,513) (127,699)
Impairment reserves (43,331) (58,314)
Pension and other postretirement benefits (58,230) (51,985)
Investments 50,219 50,542
Future policyholder benefits (37,904) (47,800)
Other 15,633 (13,716)
----------------- --------------
15,009 (27,938)
Net unrealized investment gains 48,320 40,888
PDP purchase accounting adjustment 23,290
Minimum pension liability (1,395) (2,064)
Foreign tax credit (1,109) (1,057)
------------------ --------------
Deferred tax liability, net
before valuation allowance 60,825 33,119
Valuation allowance 1,109 1,057
------------------ --------------
Deferred tax liability, net $ 61,934 $ 34,176
================== ==============
It is management's assessment, based on the Company's earnings and
projected future taxable income, that it is more likely than not that the
deferred tax assets at December 31, 1996 and 1995, with the exception of
the foreign tax credit, will be realized.
Gross deferred income tax assets totaled $274 million and $301 million at
December 31, 1996 and 1995, respectively. Gross deferred income tax
liabilities totaled $336 million and $335 million at December 31, 1996 and
1995, respectively.
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.
B-40(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
The Company has a non-contributory, defined benefit pension plan covering
substantially all of its employees. Retirement benefits are a function of
both years of service and level of compensation. The Company also sponsors
a non-qualified supplemental defined benefit plan to provide benefits in
excess of amounts allowed pursuant to Internal Revenue Code Section
401(a)(17). Phoenix's funding policy is to contribute annually an amount
equal to at least the minimum required contribution in accordance with
minimum funding standards established by the Employee Retirement Income
Security Act of 1974. Contributions are intended to provide not only for
benefits attributable to service to date, but also for service expected to
be earned in the future.
Components of net periodic pension cost for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 10,076 $ 9,599 $ 10,181
Interest accrued on projected benefit obligation 22,660 19,880 19,181
Actual return on assets (38,788) (62,567) (18,073)
Net amortization and deferral 17,318 45,807 (613)
--------------- ---------------- ---------------
Net periodic pension cost $ 11,266 $ 12,719 $ 10,676
=============== ================ ===============
</TABLE>
In 1996, the Company offered an early retirement window which granted an
additional benefit of five years of age and service. As a result of the
early retirement window, the Company recorded an additional pension expense
of $8.7 million for the year ended December 31, 1996.
B-41(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The funded status of the plan for which assets exceeded accumulated
benefit obligations was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 213,148 $ 171,077
Non-vested benefit obligation 14,828 16,248
-------------------- ---------------------
Accumulated benefit obligation $ 227,976 $ 187,325
==================== =====================
Pension liability included in other liabilities:
Projected benefit obligation $ 261,886 $ 227,585
Plan assets at fair value 292,070 267,013
==================== =====================
Plan assets in excess of
projected benefit obligation 30,184 39,428
Unrecognized net gain from past experience (52,312) (46,960)
Unrecognized prior service benefit (240) (273)
Unamortized transition asset (19,745) (22,214)
-------------------- ---------------------
Net pension liability $ (42,113) $ (30,019)
==================== =====================
</TABLE>
At December 31, 1996 and 1995, the non-qualified plan was unfunded and had
projected benefit obligations of $50.0 million and $43.4 million,
respectively. The accumulated benefit obligations as of December 31, 1996
and 1995 related to this plan were $37.4 million and $36.2 million,
respectively, and are included in other liabilities.
The Company recorded, as a reduction of policyholders' equity, an
additional minimum pension liability of $2.8 million and $3.8 million, net
of Federal income taxes, at December 31, 1996 and 1995, respectively,
representing the excess of accumulated benefit obligations over the fair
value of plan assets and accrued pension liabilities for the non-qualified
plan. The Company has also recorded an intangible asset of $19.8 million
and $22.5 million as of December 31, 1996 and 1995 related to pension plan
benefits.
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit
obligation were 7.5% and 4.5%, for 1996 and 8.0% and 5.0% for 1995. The
discount rate assumption for 1996 was determined based on a study that
matched available high quality investment securities with the expected
timing of pension liability payments. The expected long-term rate of return
on retirement plan assets was 8.0%.
B-42(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The pension plan's assets include corporate and government debt
securities, equity securities, real estate, venture capital funds, and
shares of mutual funds.
The Company also sponsors savings plans for its employees and agents which
are qualified under Internal Revenue Code Section 401(k). Employees and
agents may contribute a portion of their annual salary, subject to
limitation, to the plans. The Company contributes an additional amount,
subject to limitation, based on the voluntary contribution of the employee
or agent. Company contributions charged to expense with respect to these
plans during the years ended December 31, 1996, 1995 and 1994 were $4.2
million, $4.2 million and $4.0 million, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to the Company's pension plans, the Company currently provides
certain health care and life insurance benefits to retired employees,
spouses and other eligible dependents through various plans sponsored by
Phoenix. A substantial portion of Phoenix's employees may become eligible
for these benefits upon retirement. The health care plans have varying
copayments and deductibles, depending on the plan. These plans are
unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The plan's funded status reconciled with amounts recognized in the
Company's consolidated balance sheet, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 30,576 $ 37,900
Fully eligible active plan participants 11,466 10,500
Other active plan participants 21,614 24,856
----------------- -----------------
63,656 73,256
Unrecognized net gain
from past experience 29,173 14,102
----------------- -----------------
Accrued postretirement benefit liability $ 92,829 $ 87,358
================= =================
</TABLE>
B-43(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during year $ 2,765 $ 3,366 $ 2,942
Interest cost accrued on benefit obligation 4,547 5,275 5,179
Net amortization (1,577) (458)
--------------- --------------- ---------------
Net periodic postretirement benefit cost $ 5,735 $ 8,183 $ 8,121
=============== =============== ===============
</TABLE>
In addition to the net periodic postretirement benefit cost, the Company
expensed an additional $3.0 million for postretirement benefits related to
the early retirement window.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5% at December 31, 1996 and 8.0% at December 31,
1995.
For purposes of measuring the accumulated postretirement benefit obligation
at December 31, 1996, health care costs were assumed to increase 9.5% in
1997, declining thereafter until the ultimate rate of 5.5% is reached in
2002 and remains at that level thereafter. For purposes of measuring the
accumulated postretirement benefit obligation at December 31, 1995, health
care costs were assumed to increase 11% in 1996, declining thereafter until
the ultimate rate of 5.5% is reached in 2002 and remained at that level
thereafter. The health care cost trend rate assumption has a significant
effect on the amounts reported. For example, increasing the assumed health
care cost trend rates by one percentage point in each year would increase
the accumulated postretirement benefit obligation by $3.9 million and the
annual service and interest cost by $.6 million, before taxes. Gains and
losses that occur because actual experience differs from the estimates are
amortized over the average future service period of employees.
OTHER POSTEMPLOYMENT BENEFITS
The Company recognizes the costs and obligations of severance, disability
and related life insurance and health care benefits to be paid to inactive
or former employees after employment but before retirement. Postemployment
benefit expense was $.6 million for 1996, $.5 million for 1995 and $(1.9)
million for 1994.
B-44(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix operates principally in seven segments: Individual,
Group Life and Health, Life Reinsurance, General Lines
Brokerage, Securities Management, Real Estate Management and
Other Operations.
Other Operations includes unallocated investment income,
expenses and realized investment gains related to capital in excess of
segment requirements; assets primarily consist of equity securities.
Summarized below is financial information with respect to the business
segments:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Individual $ 1,796,572 $ 1,752,338 $ 1,643,074
Group Life and Health 462,551 421,771 409,883
Life Reinsurance 143,314 128,813 102,120
General Lines Brokerage 61,809 40,977 22,382
Securities Management 164,966 112,206 104,429
Real Estate Management 13,550 13,562 12,439
Other Operations 82,273 48,873 10,400
--------------------- ------------------ -----------------
Total $ 2,725,035 $ 2,518,540 $ 2,304,727
===================== ================== =================
DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
OPERATING INCOME
Individual $ 65,226 $ 45,858 $ 23,306
Group Life and Health 9,092 17,422 14,584
Life Reinsurance 7,993 17,391 11,492
General Lines Brokerage (2,935) (1,887) (521)
Securities Management 27,506 23,667 27,285
Real Estate Management (3,783) (184) 727
Other Operations 85,862 15,204 (6,146)
--------------------- ------------------ -----------------
Total $ 188,961 $ 117,471 $ 70,727
===================== ================== =================
</TABLE>
DECEMBER 31,
1996 1995
(IN THOUSANDS)
IDENTIFIABLE ASSETS
Individual $ 13,547,132 $ 12,104,989
Group Life and Health 590,545 542,139
Life Reinsurance 294,441 273,036
General Lines Brokerage 117,340 115,558
Securities Management 294,803 811,438
Real Estate Management 319,406 297,166
Other Operations 289,381 293,151
--------------------- ------------------
Total $ 15,453,048 $ 14,437,477
===================== ==================
B-45(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. LEASES AND RENTALS
Rental expenses for operating leases, principally with respect to
buildings, amounted to $14.8 million, $14.6 million and $13.8 million in
1996, 1995, and 1994, respectively. Future minimum rental payments under
non-cancelable operating leases were approximately $41.9 million as of
December 31, 1996, payable as follows: 1997 - $15.8 million; 1998 - $11.6
million; 1999 - $7.5 million; 2000 - $4.7 million; 2001 - $1.8 million;
and $.5 million thereafter.
12. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix 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 is $8,000,000 for single life and joint first-to-die policies and
$10,000,000 for joint last-to-die policies, 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.
Amounts recoverable from reinsurers are estimated in a manner consistent
with the claim liability associated with the reinsured policy.
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,473,869 $ 1,455,459 $ 1,455,467
Reinsurance assumed 276,630 271,498 205,387
Reinsurance ceded (231,677) (270,082) (264,852)
-------------------- ------------------- --------------------
Net premiums $ 1,518,822 $ 1,456,875 $ 1,396,002
==================== =================== ====================
Direct policy and contract claims incurred $ 575,824 $ 605,545 $ 610,004
Reinsurance assumed 170,058 256,529 167,276
Reinsurance ceded (160,646) (292,357) ( 217,911)
-------------------- ------------------- --------------------
Net policy and contract claims incurred $ 585,236 $ 569,717 $ 559,369
==================== =================== ====================
Direct life insurance in force $ 108,816,856 $ 102,606,749 $ 95,717,768
Reinsurance assumed 61,109,836 36,724,852 27,428,529
Reinsurance ceded (51,525,976) (34,093,090) (24,372,415)
-------------------- ------------------- --------------------
Net insurance in force $ 118,400,716 $ 105,238,511 $ 98,773,882
==================== =================== ====================
</TABLE>
Irrevocable letters of credit aggregating $5.2 million at December 31,
1996 have been arranged with United States commercial banks in favor of
Phoenix to collateralize the ceded reserves.
B-46(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
13. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred
and amortized for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 816,128 $ 1,128,227 $ 832,839
Acquisition expense deferred 153,873 143,519 150,326
Amortized to expense during the year (95,255) (113,788) (147,361)
Adjustment to equity during the year 51,528 (341,830) 292,423
------------------ ------------------ ------------------
Balance at end of year $ 926,274 $ 816,128 $ 1,128,227
================== ================== ==================
</TABLE>
14. MINORITY INTEREST
The Company's interests in Phoenix Duff and Phelps Corporation and
American Phoenix Corporation, through its wholly-owned subsidiary PM
Holdings is represented by ownership of approximately 60% and 92%,
respectively, of the outstanding shares of common stock at December 31,
1996. Earnings and stockholders' equity attributable to minority
shareholders are included in minority interest in the consolidated
financial statements along with PDP's preferred stock.
15. CONTINGENCIES
FINANCIAL GUARANTEES
The Company is contingently liable for financial guarantees provided in
the ordinary course of business on the repayment of principal and
interest on certain industrial revenue bonds. The contractual amounts of
financial guarantees reflect the Company's maximum exposure to credit
loss in the event of nonperformance. The principal amount of bonds
guaranteed by the Company at December 31, 1996 and 1995 was $88.8 million
and $87.6 million, respectively. Management believes that any loss
contingencies which may arise from the Company's financial guarantees
would not have a material adverse effect on the Company's liquidity or
financial condition.
LITIGATION
In 1996, the Company announced the settlement of a class action suit which
was approved by a New York State Supreme Court judge on January 3, 1997.
The suit related to the sale of individual participating life insurance and
universal life insurance policies from 1980 to 1995. An after tax provision
of $25 million was recorded in 1995. In addition, $7 million after-tax was
expensed in 1996. The Company estimates the cost of settlement to be
between $35 million and $40 million after tax. Management believes, after
consideration of the provisions made in these financial statements, this
suit will not have a material effect on the Company's financial position.
B-47(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company is a defendant in various legal proceedings arising in the
normal course of business. In the opinion of management, based on the
advice of legal counsel after consideration of the provisions made in
these financial statements, the ultimate resolution of these proceedings
will not have a material effect on the Company's consolidated financial
position.
16. STATUTORY FINANCIAL INFORMATION
The insurance subsidiaries are required to file annual statements with
state regulatory authorities prepared on an accounting basis prescribed
or permitted by such authorities. As of December 31, 1996, there were no
material practices not prescribed by the Insurance Department of the
State of New York. Statutory surplus differs from policyholders' equity
reported in accordance with GAAP for life insurance companies primarily
because policy acquisition costs are expensed when incurred, investment
reserves are based on different assumptions, postretirement benefit costs
are based on different assumptions and reflect a different method of
adoption, life insurance reserves are based on different assumptions and
income tax expense reflects only taxes paid or currently payable.
The following reconciles the statutory net income of the Company as
reported to regulatory authorities to the net income as reported in these
financial statements for the year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 72,961 $ 64,198 $ 4,152
Deferred policy acquisition costs, net 58,618 29,766 2,965
Future policy benefits (16,793) (15,763) (3,443)
Pension and postretirement expenses (23,275) (12,691) (8,350)
Investment valuation allowances 76,631 56,745 60,747
Interest maintenance reserve (5,158) 5,829 (19,545)
Deferred income taxes (67,064) (10,021) (11,626)
Other, net 4,808 (4,314) 5,778
----------------- ---------------- --------------
Net income, as reported $ 100,728 $ 113,749 $ 30,678
================= ================ ==============
</TABLE>
B-48(T)
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following reconciles the statutory surplus and asset valuation
reserve (AVR) of the Company as reported to regulatory authorities to
equity as reported in these financial statements:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Statutory surplus and AVR $ 1,102,200 $ 875,322
Deferred policy acquisition costs, net 897,096 864,505
Future policy benefits (239,252) (249,141)
Pension and postretirement expenses (152,112) (133,452)
Investment valuation allowances (139,562) (171,889)
Interest maintenance reserve 6,897 11,872
Deferred income taxes 82,069 87,418
Surplus notes (157,500)
Other, net (2,367) (3,048)
----------------- --------------
Equity, as reported $ 1,397,469 $ 1,281,587
================= ==============
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
(1) Resolution of Board of Directors Establishing Separate
Account filed with registrant's Post-Effective Amendment
No. 1 to Form N-1 Registration Statement on April
30, 1983, is incorporated herein by reference.
(2) Rules and Regulations of Phoenix Mutual Variable
Accumulation Account filed with registrant's Post-
Effective Amendment No. 1 to its Form N-1 Registration
Statement on April 30, 1983 and filed via Edgar herewith,
is incorporated herein by reference.
(3)(a) Master Service and Distribution Compliance Agreement
between Depositor and Phoenix Equity Planning
Corporation dated December 31, 1996 filed via Edgar with
registrant's Post-Effective Amendment No. 25 on
February 28, 1997, is incorporated herein by reference.
(3)(b) Form of Dealer Agreement filed via Edgar herewith.
(3)(c) Form of Underwriting Agreement and Form of Dealer
Agreement (Templeton Investment Plus) filed with
registrant's Post-Effective Amendment No. 13 to its Form
N-4 Registration Statement on May 2, 1988 and filed via
Edgar herewith, are incorporated herein by reference.
(4)(a) Form of Contract (Big Edge) filed with registrant's
Post-Effective Amendment No. 9 to its Form N-4
Registration Statement on October 23, 1986 and filed
via Edgar herewith, is incorporated herein by reference.
(4)(b) Form of Contract (Big Edge Plus) filed with registrant's
Post-Effective Amendment No. 13 to its Form N-4
Registration Statement on May 2, 1988 and filed via Edgar
herewith, is incorporated herein by reference.
(4)(c) Form of Contract (Group Strategic Edge) filed with
registrant's Post-Effective Amendment No. 21 to its Form
N-4 Registration Statement on April 29, 1993 and filed
via Edgar herewith, is incorporated herein by reference.
(4)(d) Form of Contract (Big Edge Choice) filed via Edgar with
registrant's Post-Effective Amendment No. 25 to its
Form N-4 Registration Statement on February 28, 1997,
is incorporated herein by reference.
(5)(a) Form of Application (Big Edge) filed with registrant's
Post-Effective Amendment No. 9 to its Form N-4
Registration Statement on October 23, 1986 and filed via
Edgar herewith, is incorporated herein by reference.
(5)(b) Form of Application (Big Edge Plus) filed with
registrant's Post-Effective Amendment No. 13 to its Form
N-4 Registration Statement on May 2, 1988 and filed via
Edgar herewith, is incorporated herein by reference.
(5)(c) Form of Application (Group Strategic Edge) filed with
registrant's Post-Effective Amendment No. 21 to its Form
N-4 Registration Statement on April 29, 1993 and filed
via Edgar herewith, is incorporated herein by reference.
(5)(d) Form of Application (Big Edge Choice) filed via Edgar
with registrant's Post-Effective Amendment No. 25 to its
Form N-4 Registration Statement on February 28, 1997, is
incorporated herein by reference.
(6) Charter and By-Laws of Phoenix Home Life Mutual
Insurance Company filed with registrant's Post-Effective
Amendment No. 18 to its Form N-4 Registration Statement
on June 22, 1992 and filed via Edgar herewith, are
incorporated herein by reference.
(7) Not Applicable
(8) Product Development and Fund Participation Agreement
(TIP) filed with registrant's Post-Effective Amendment
No. 13 to its Form N-4 Registration Statement on May
2, 1988 and filed via Edgar herewith, is incorporated
herein by reference.
(9) See Exhibit 10(a).
(10)(a) Written Consent and Opinion as to Legality of Securities
Being Registered of Blazzard, Grodd & Hasenauer, P.C.
filed via Edgar herewith.
C-1
<PAGE>
(10)(b) Written Consent of Price Waterhouse LLP filed via Edgar
herewith.
(11) Not Applicable
(12) Not Applicable
(13)(a) Explanation of Yield and Effective Yield Calculation
filed via Edgar with registrant's Post-Effective
Amendment No. 24 on April 24, 1996 and is incorporated
herein by reference.
(13)(b) Explanation of Total Return Calculation filed via Edgar
with registrant's Post-Effective Amendment No. 24 on
April 24, 1996 and is incorporated herein by reference.
(14) Not Applicable
(15) Powers of Attorney filed via Edgar with registrant's
Post-Effective Amendment No. 24 on April 29, 1996,
are incorporated herein by reference.
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 Director
Carol H. Baldi, Inc.
New York, NY
Peter C. Browning President Director
Sonoco Products Company
Hartsville, SC
Arthur P. Byrne Group Executive Director
Danaher Corporation
West Hartford, CT
Richard N. Cooper, Ph.D. Chairman, National Intelligence Council Director
Central Intelligence Agency
Washington, D.C.
Gordon J. Davis, Esq. Partner Director
LeBoeuf, Lamb, Greene & 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
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C> <C>
Philip R. McLoughlin Phoenix Home Life Director, Executive Vice
Mutual Insurance Company President and Chief
Hartford, CT Investment Officer
Indra K. Nooyi Senior Vice President Director
PepisCo, Inc.
Purchase, NY
Charles J. Paydos Phoenix Home Life Director and Executive
Mutual Insurance Company Vice President
Hartford, CT
Herbert Roth, Jr. Former Chairman Director
LFE Corporation
Clinton, MA
Robert F. Vizza President and Chief Executive Officer Director
St. Francis Hospital
Roslyn, NY
Robert G. Wilson Chairman and Presient Director
Ziani International Capital, Inc.
Miami, FL
Richard H. Booth* Executive Vice President
Strategic Development
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
Carl T. Chadburn** Senior Vice President
Robert G. Chipkin* Senior Vice President and
Corporate Actuary
Martin J. Gavin* Senior Vice President
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
Robert G. Lautensack, Jr.* Senior Vice President
Scott C. Noble* Senior Vice President
Real Estate
Robert E. Primmer* Senior Vice President
Brokerage and PPGA
Distribution
Frederick W. Sawyer, III* Senior Vice President
Richard C. Shaw* Senior Vice President
International and
Corporate Development
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C>
Simon Y. Tan* Senior Vice President
Individual Market
Development
Anthony J. Zeppetella Senior Vice President
</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, 1997, there were 71,289 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 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") (Principal
Underwriter as to Contracts described in Prospectus Version A.)
(a) PEPCO currently distributes securities of the Phoenix Duff &
Phelps Funds, Phoenix Funds, Phoenix Home Life Variable
Universal Life Account, PHL Variable Accumulation Account and
Phoenix Life and Annuity Variable Universal Life Account in
addition to those of the Registrant.
(b) Directors and Officers of PEPCO
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
- ---------------- ----------------
Michael E. Haylon*** Director
Philip R. McLoughlin* Director and President
David R. Pepin** Director and Executive Vice President
Paul Atkins*** Senior Vice President and Sales Manager
Maris Lambergs** Senior Vice President, Insurance and
Independent Division
William R. Moyer** Senior Vice President and Chief
Financial Officer
Leonard J. Saltiel** Managing Director, Operations and
Service
C-4
<PAGE>
John F. Sharry** Managing Director, Mutual Fund Distribution
G. Jeffrey Bohne**** Vice President, Mutual Fund Customer
Service
Eugene A. Charon** Vice President and Controller
Nancy G. Curtiss*** Vice President and Treasurer, Fund
Accounting
Elizabeth R. Sadowinski** Vice President, Administration
Thomas N. Steenburg* Vice President, Counsel and Secretary
- ---------------------
* 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 DISCOUNTS AND COMMISSIONS ON REDEMPTION COMMISSIONS
UNDERWRITER COMPENSATION
- ----------- ------------
<S> <C> <C> <C>
PEPCO $26,437,438 -0- -0- -0-
</TABLE>
PEPCO received no other out-of-pocket compensation from Phoenix Home Life.
2. W.S. Griffith & Co., Inc. ("WSG") (Principal Underwriter as to
Contracts described in Prospectus Version B.)
(a) WSG currently distributes securities of the Phoenix Duff &
Phelps Funds, Phoenix Funds, Phoenix Home Life Variable
Universal Life Account, PHL Variable Accumulation Account and
Phoenix Life and Annuity Variable Universal Life Account in
addition to those of the Registrant.
(b) Directors and Officers of WSG
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
---------------- ----------------
Kelly J. Carlson* Director and President
Martin J. Gavin* Director
Philip R. McLoughlin** Director
Charles J. Paydos*** Director
David W. Searfoss* Director
Dona D. Young* Director
Gerard A. Rocchi* Senior Vice President and
Chief Operating Officer
Peter S. Deering**** Vice President, Marketing
Laura E. Miller**** Vice President, Finance and
Treasurer
Michael A. Gilliland* Assistant Vice President and
Compliance Officer
- ---------------------
* The principal business address of each of these individuals is One
American Row, Hartford, Connecticut 06102-5056.
** The principal business address of this individual is 56 Prospect Street,
Hartford, Connecticut 06115-0480.
*** The principal business address of this individual is 100 Bright Meadow
Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
**** The principal business address of each of these individuals is 2355
Northside Drive, Suite 260, San Diego, California 92108.
(c) WSG received no compensation from Registrant during Registrant's
last fiscal year for sale of Contracts which are the subject of this
Registration Statement and for which WSG acts as principal
underwriter.
C-5
<PAGE>
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.
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life")
represents that the fees and charges deducted under the Contracts, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred and the risks to be assumed thereunder by Phoenix Home
Life Mutual Insurance Company.
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 30th day of April, 1997.
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
30th day of April, 1997.
Signature Title
--------- -----
- --------------------------- Director
*Sal H. Alfiero
- --------------------------- Director
*J. Carter Bacot
- --------------------------- Director
*Carol H. Baldi
- --------------------------- Director
*Peter C. Browning
- --------------------------- Director
Arthur P. Byrne
- --------------------------- Director
*Richard N. Cooper
- --------------------------- Director
*Gordon J. Davis
- --------------------------- Chairman of the Board,
*Robert W. Fiondella President and Chief Executive Officer
(Principal Executive Officer)
S-1
<PAGE>
- --------------------------- Director
*Jerry J. Jasinowski
- --------------------------- Director
*John W. Johnstone
- --------------------------- Director
*Marilyn E. LaMarche
- --------------------------- Director
*Philip R. McLoughlin
- --------------------------- Director
Indra K. Nooyi
- --------------------------- 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 were filed previously.
S-2
Exhibit 2
Rules and Regulations
<PAGE>
THE RULES AND REGULATIONS
OF
PHOENIX MUTUAL VARIABLE ACCUMULATION ACCOUNT
ARTICLE I
Definitions
-----------
The following terms have the indicated meanings as used in these Rules and
Regulations:
1. ACCOUNT: Phoenix Mutual Variable Accumulation Account.
2. Annuitant: The person on whose life the variable accumulation contract is
issued.
3. BOARD OF MANAGERS: Those persons originally appointed by Phoenix Mutual and
subsequently elected annually by the owners, and who shall have those
responsibilities and duties as set forth herein.
4. CONTRACT: Variable accumulation contract.
5. OWNERS: The person or entity, usually the one to whom the variable
accumulation contract is issued, who has the sole right to exercise all
rights and privileges under an outstanding variable contract except as
otherwise provided in the contract.
6. OUTSTANDING CONTRACT: A contract which has not reached the maturity date
shown on the schedule page of the contract or as may be later agreed upon in
writing.
7. PHOENIX MUTUAL: Phoenix Mutual Life Insurance Company.
8. Unit: A standard of measurement used in determining the beneficial ownership
interest in a Sub-account of the Account.
<PAGE>
ARTICLE II
Meetings of Owners
------------------
Section 1. ANNUAL MEETING. The annual meeting of Owners for: (1) the election
of members of the Board of Managers of the Account; (2)
ratification of the selection of an independent public accountant
for the Account; (3) approval, amendments or other action with
respect to the investment advisory agreement; (4) changes in
fundamental investment policies and restrictions of the Account;
and (5) such other business as may properly be brought before the
meeting shall be held within each fiscal year of the Account; such
date shall be designated annually by the Board of Managers. Any
business of the Account may be transacted at the annual meeting
without being specifically designated in the notice, except such
business as is specifically required to be stated in the notice.
Section 2. SPECIAL MEETINGS. Special Meetings of the Owners, unless otherwise
provided by law, may be called for any purpose or purposes by a
majority of the Board of Managers.
Section 3. PLACE OF MEETINGS. The annual meeting, and any special meetings,
of the Owners shall be held at such place within the United States
as the Board of Managers may from time to time determine.
Section 4. NOTICE OF MEETINGS; WAIVER OF NOTICE. Notice of the place, date,
and time of the holding of each annual or special meeting of the
Owners and the purpose or purposes of each such annual meeting of
the Owners and the purpose or purposes of each such special
meeting shall be given personally or by mail, not less than ten or
more than sixty days before the date of such meeting. Notice by
mail shall be deemed to be duly given when deposited in the United
States mail addressed to the Owner at his address as it appears on
the records of the Account, with postage thereon prepaid.
Notice of any meeting of Owners shall be deemed waived by any
Owner who shall attend such meeting in person or by proxy, or who
shall, either before or after the meeting, submit a signed waiver
of notice that is filed with the records of the meeting. When a
meeting is adjourned to another time and place, unless the Board
of Managers, after the adjournment, shall fix a new record date
for an adjourned meeting, or unless the adjournment is for more
than thirty days in the aggregate, notice of such adjourned
meeting need not be given if the time and place to which the
meeting shall be adjourned were announced at the meeting at which
the adjournment is taken.
<PAGE>
Section 5. QUORUM. At all meetings of the Owners, the holders of a majority
of the number of votes represented by outstanding contracts
entitled to vote at the meeting who are present in person or by
proxy shall constitute a quorum for the transaction of any
business except as otherwise provided by statute or these Rules
and Regulations. In the absence of a quorum no business may be
transacted except that the holders of a majority of the number of
votes represented by outstanding Contracts who are present in
person or by proxy and who are entitled to vote may adjourn the
meeting from time to time without notice other than announcement
thereat except as otherwise required by these Rules and
Regulations, until the holders of the requisite number of votes
shall be so present. At any such re-convened meeting at which a
quorum may be present, any business may be transacted that might
have been transacted at the meeting as originally called. The
absence from any meeting, in person or by proxy, of holders of the
number of votes of outstanding contracts in excess of a majority
thereof that may be required by the Investment Company Act of
1940, as amended, or other applicable statute, or these Rules and
Regulations for action upon any given matter shall not prevent
action at such meeting upon any other matter or matters that may
properly come before the meeting if there shall be present
thereat, in person or by proxy, holders of the number of votes
required for action in respect of such other matter or matters.
Section 6. ORGANIZATION. At each meeting of the Owners, the Chairman of the
Board of Managers, or in his absence or inability to act, the Vice
Chairman of the Board of Managers shall act as chairman of the
meeting. The Secretary, or in his absence or inability to act, any
person appointed by the chairman of the meeting, shall act as
secretary of the meeting and keep the minutes thereof.
Section 7. ORDER OF BUSINESS. The order of business at all meetings of the
Owners shall be as determined by the chairman of the meeting.
Section 8. VOTING. Except as otherwise provided herein or by statute, each
Owner of record entitled to vote at such meeting shall be entitled
at each meeting of the Owners to one vote for each full Unit (with
proportionate voting for fractional Units) credited on the record
date to each Contract owned by such Owner under which annuity
payments have not commenced. The record date shall be determined
pursuant to Section 9 of this Article II, or if such record date
shall not have been so fixed, then at the later of (i) the close
of business on the day on which notice of the meeting is mailed or
(ii) the thirtieth day before the meeting.
<PAGE>
Each Owner entitled to vote at any meeting of Owners may authorize
another person or persons to act for him by a proxy signed by such
Owner or his attorney-in-fact. Every proxy shall be revocable at
the pleasure of the Owner executing it, except in those cases
where such proxy states that it is irrevocable and where an
irrevocable proxy is permitted by law or the Contract.
Notwithstanding anything to the contrary, an Annuitant or other
payee may instruct the Owner as to the voting of that number of
votes which is attributable to purchase payments, if any,
contributed by such Annuitant (and any additional votes to the
extent authorized by the tax qualified plan). In such case Owners
are to cast votes in accordance with such instructions and are to
cast votes for which instructions have not been received from
persons entitled to give them in the same proportions as other
votes of the Owner which are to be voted in accordance with
instructions received. Any other votes attributable to a Contract
may be cast as the Owner may determine. Owners shall be furnished
with proxy soliciting materials for distribution to Annuitants and
other payees, if any, who are permitted to give voting
instructions. The Account, the Board of Managers and Phoenix
Mutual do not have any obligation to determine whether or not
voting instructions are requested or received by an Owner or
whether or not any Owner has cast votes in accordance with
instructions given.
Except as otherwise provided by statute, or these Rules and
Regulations, any action to be taken by vote of the Owners shall be
authorized by a majority of the total votes cast at a meeting of
Owners by the holders of outstanding contracts present in person
or represented by proxy and entitled to vote on such action;
provided that, if any action is required to be taken by the
Majority Vote of the Outstanding Contracts, then such action shall
be taken if approved by the vote of Owners having more than 50% of
the number of votes represented by out-standing Contracts or, if
it is less, having 67% or more of the votes represented at a
meeting at which more than 50% of such number of votes are present
or represented by proxy.
Unless required by statute or these Rules and Regulations, or
determined by the chairman of the meeting to be advisable, any
vote need not be by ballot. On a vote by ballot, each ballot shall
be signed by the Owner voting, or by his proxy, if there be such
proxy, and shall state the number of units voted.
Section 9. FIXING OF RECORD DATE. The Board of Managers may fix, in advance,
a record date not more than sixty nor less than ten days before
the date then fixed for the holding of any meeting of the Owners.
All persons who were Owners of record of outstanding contracts at
such time, and no
<PAGE>
others, shall be entitled to vote at such meeting and any
adjournment thereof.
Section 10. INSPECTORS. The Board of Managers may, in advance of any meeting
of Owners, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so
appointed or if any of them shall fail to appear or act, the
chairman of the meeting may appoint inspectors. Each inspector,
before entering upon the discharge of his duties, shall take and
sign an oath to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of his
ability. The inspectors shall determine the number of Contracts
outstanding and the number of votes under each Contract, the
number of votes represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive
votes, ballots, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and
do such acts as are proper to conduct the election or vote in
fairness to all Owners. On request of the chairman of the meeting,
the inspectors shall make a report in writing of any challenge,
request, or matter determined by them and shall execute a
certificate of any fact found by them. No member of the Board of
Managers or candidate for same shall act as inspector of an
election of managers. Inspectors need not be Owners.
Section 11. CONSENT OF OWNERS IN LIEU OF MEETING. Except as otherwise
provided by statutes, any action required to be taken at any
annual or special meeting of Owners, or any action that may be
taken at any annual or special meeting of such Owners, may be
taken without a meeting, without prior notice, and without a vote,
if the following are filed with the permanent records of Owners'
meetings: (i) a unanimous written consent that sets forth the
action and is signed by each Owner entitled to vote on the matter
and (ii) a written waiver of any right to dissent signed by each
Owner entitled to notice of the meeting but not entitled to vote
thereat.
ARTICLE III
Board of Managers
-----------------
Section 1. GENERAL POWERS. The principal duties and functions of the Board of
Managers are to represent the interests of Phoenix Mutual, Owners
of Contracts and others having a beneficial interest in the
Account to the extent required by State or Federal law. The Board
of Managers is also responsible for supervising the parties having
contracts and agreements with the Account and supervising the
investment and reinvestment of the assets of each
<PAGE>
sub-account to the extent required by the Investment Company Act
of 1940. The Board of Managers shall, at the option of Phoenix
Mutual, be relieved of such duties and responsibilities if and
when the State law or the Investment Company Act of 1940 or the
rules and regulations promulgated thereunder is revised to enable
such actions by Phoenix Mutual.
Section 2. NUMBER OF MANAGERS. The number of members of the Board of Managers
initially shall be five (5) but such number may be changed from
time to time by resolution of the Board of Managers adopted by a
majority of the Managers then in office; provided, however, that
the number of members of the Board shall in no event be less than
three (3). Any vacancy created by an increase in managers may be
filed in accordance with Section 7 of this Article III. No
reduction in the number of managers shall have the effect of
removing any manager from office before the expiration of his term
unless such manager is specifically removed pursuant to Section 6
of this Article III at the time of such reduction. Members of the
Board of Managers need not be Owners but the Board of Managers
shall be comprised of persons eligible to so serve under the
Investment Company Act of 1940, as amended.
Section 3. ELECTION AND TERM OF BOARD OF MANAGERS. Managers shall be elected
to one year terms. Such elections shall be at the annual meeting
of Owners or a special meeting held for that purpose. The term of
office of each Manager shall begin from the time of his election
and qualification until his successor shall have been elected and
shall have qualified, or, if earlier, the death, resignation, or
removal of such Manager as hereinafter provided in these Rules and
Regulations or as otherwise provided by statute.
Section 4. ELECTION OF SECRETARY. The Secretary to the Board of Managers
shall be elected by the Board and shall hold office for the term
of one year or until his successor is duly elected. The initial
Secretary shall be appointed by Phoenix Mutual.
Section 5. RESIGNATION. A Manager of the Account may resign at any time by
giving written notice of his resignation to the Board of Managers.
Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective is not
specified therein, immediately upon its receipt and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
<PAGE>
Section 6. REMOVAL OF MANAGERS. Any Manager of the Account may be removed by
the Owners by a vote of a majority of the votes entitled to be
cast on the matter at any meeting of Owners, duly called and at
which a quorum is present.
Section 7. VACANCIES. Any vacancies in the Board of Managers, whether
arising from death, resignation, removal, an increase in the
number of managers, or from any other cause, shall be filled by a
majority vote of the Board of Managers if immediately after so
filling any such vacancy at least two-thirds of the Managers then
holding office shall have been elected to such office by the
Owners at any annual or special meeting.
Section 8. PLACE OF MEETINGS. Meetings of the Board may be held at such
place as the Board may from time to time determine or as shall be
specified in the notice of such a meeting.
Section 9. REGULAR MEETINGS. Regular meetings of the Board may be held
without notice at such time as may be determined by the Board of
Managers.
Section 10. SPECIAL MEETINGS. Special meetings of the Board of Managers may be
called by two or more Managers of the Account or by the Chairman
of the Board of Managers.
Section 11. ANNUAL MEETING. The annual meeting of each newly elected Board
of Managers shall be held as soon as practicable after the meeting
of Owners at which the managers were elected. No notice of such
annual meeting shall be necessary if held immediately after the
adjournment, and at the site, of the meeting of Owners. If not so
held, notice shall be given as hereinafter provided for special
meetings of the Board of Managers.
Section 12. NOTICE OF SPECIAL MEETINGS. Notice of each special meeting of
the Board shall be given by the Secretary as hereinafter provided,
in which notice shall be stated the time and place of the meeting.
Notice of each such meeting shall be delivered to each Manager,
either personally or by telephone, cable, or wireless, at least
twenty-four hours before the time at which such meeting is to be
held, or by first-class mail, postage prepaid, addressed to him at
his residence or usual place of business, at least three days
before the day on which such meeting is to be held.
Section 13. WAIVER OF NOTICE OF MEETINGS. Notice of any special meeting
need not be given to any Manager who shall, either before or after
the meeting, sign a written waiver of notice or who shall attend
such meeting. Except as otherwise specifically required by these
Rules and Regulations, a notice or waiver of notice of any meeting
need not state the purposes of such meeting.
<PAGE>
Section 14. QUORUM AND VOTING. A majority of the Managers of the entire Board
shall be present in person at any meeting of the Board in order to
constitute a quorum for the transaction of business at such
meeting, and, except as otherwise expressly required by these
Rules and Regulations, the Investment Company Act of 1940, as
amended, or other applicable statute, the act of a majority of the
Managers present at any meeting at which a quorum is present shall
be the act of the Board. In the absence of a quorum at any meeting
of the Board, a majority of the Managers present thereat may
adjourn such meeting to another time and place until a quorum
shall be present thereat. Notice of the time and place of any such
adjourned meeting shall be given to the Managers who were not
present at the time of the adjournment and, unless such time and
place were announced at the meeting at which the adjournment was
taken, to the other Managers. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have
been transacted at the meeting as originally called.
Section 15. ORGANIZATION. The Board of Managers shall designate a Chairman of
the Board, who shall preside at each meeting of the Board, and a
Vice Chairman who, in the absence or inability of the Chairman of
the Board to preside at a meeting shall act as chairman of the
meeting and preside thereat. In the absence or inability of the
Chairman or Vice Chairman to preside at a meeting, another Manager
chosen by a majority of the Managers present, shall act as a
chairman of the meeting and preside thereat. The Secretary (or, in
his absence or inability to act, any person appointed by the
chairman) shall act as secretary of the meeting and keep the
minutes thereof.
Section 16. WRITTEN CONSENT OF MANAGERS IN LIEU OF A MEETING. Any action
required or permitted to be taken at any meeting of the Board of
Managers or of any committee thereof may be taken without a
meeting if all members of the Board or of the committee, as the
case may be, consent thereto in writing, and the writing or
writings are filed with minutes of the proceedings of the Board of
Managers or any committee thereof.
Section 17. COMPENSATION. Phoenix Mutual, not the Account, is responsible for
the payment of the compensation of members of the Board of
Managers and its Secretary.
Section 18. INVESTMENT POLICIES. It shall be the duty of the Board of
Managers to ensure that the purchase, sale, retention and disposal
of portfolio securities and the other investment practices of each
Sub-account of the Account are at all times consistent with the
investment policies and restrictions with respect to securities
investments and otherwise of each Sub-account and the Account, as
recited in these Rules and Regulations and the current Prospectus
of the Account filed from time
<PAGE>
to time with the Securities and Exchange Commission and as
required by the Investment Company Act of 1940, as amended. The
Board of Managers, however, may delegate the duty of management of
the assets to an investment adviser pursuant to a written contract
or contracts which have obtained the requisite approvals,
including the requisite approvals of renewals thereof, of the
Board of Managers or the Owners in accordance with the provisions
of the Investment Company Act of 1940, as amended.
ARTICLE IV
Indemnification
---------------
Phoenix Mutual, not the Account, shall indemnify each member of the Board of
Managers against losses by reason of failure (other than through willful
misfeasance, bad faith, reckless disregard or gross negligence) to take any
action relating to the investment or reinvestment of assets in the Account.
ARTICLE V
Fiscal Year
-----------
Unless otherwise determined by the Board of Managers, the fiscal year of the
Account shall end on the 31st day of December each year.
ARTICLE VI
Custodians
----------
All securities, other investments and cash shall be deposited in the safekeeping
of such banks or other companies as the Board of Managers of the Account may
from time to time determine. Every arrangement entered into with any bank or
other company for the safekeeping of the securities and investments of the
Account shall contain provisions complying with the Investment Company Act of
1940, as amended, and the general rules and regulations thereunder.
<PAGE>
ARTICLE VII
Independent Public Accountants
------------------------------
The firm of independent public accountants that will sign or certify the
financial statements of the Account that are filed with the Securities and
Exchange Commission shall be selected annually by the Board of Managers and
ratified by the Owners in accordance with the provisions of the Investment
Company Act of 1940, as amended.
ARTICLE VIII
Annual Reports
--------------
Section 1. ANNUAL FINANCIAL STATEMENT. The books of account of the Account
shall be examined by an independent firm of public accountants at
the close of each annual period of the Account and at such other
times as may be directed by the Board of Managers. A report to the
Owners based upon each such examination shall be mailed to each
Owner of the Contracts of record on such date with respect to each
report as may be determined by the Board, at his address as the
same appears on the books of the Account. Such annual statement
shall also be available at the annual meeting of Owners, and
placed on file at the Account's principal office in the State of
Connecticut. Each such report shall show the assets and
liabilities of the Account as of the close of the annual or other
period covered by the report and the securities in which the funds
of the Account were then invested. Such report shall also show the
Account's income and expenses for the period from the end of the
Account's preceding fiscal year to the close of the annual or
other period covered by the report and any other information
required by the Investment Company Act of 1940, as amended, and
shall set forth such other matters as the Board of Managers or
such firm of independent public accountants shall determine.
Section 2. REPORT OF UNITS CREDITED TO CONTRACTS. The number of Units in
each sub-account credited to each Contract and their current value
shall be reported to each Owner at least annually.
ARTICLE IX
Fundamental Policies
--------------------
Section 1. POLICIES APPLICABLE TO SUB-ACCOUNTS.
(a) It is the fundamental policy of the Account to follow for
each Sub-account the investment policies that are applicable
to such Sub-accounts as are set forth in the Prospectus
contained in the Registration Statement of the Account at
the time such Registration Statement initially was declared
effective.
<PAGE>
(b) It is the fundamental policy of the Account that no
Sub-account will:
1. Purchase real estate or any interest therein, except
through the purchase of corporate or certain government
securities (including securities secured by a mortgage
or a leasehold interest or other interest in real
estate). A security issued by a real estate or mortgage
investment trust is not treated as an interest in real
estate.
2. Make loans unless secured by cash or cash equivalents
for the full value of securities; any interest earned
from securities lending will inure to the benefit of
the Sub-account which holds such securities.
3. Invest in commodities or in commodity contracts or in
options, provided, however, that it may write covered
call option contracts.
4. Engage in the underwriting of securities of other
issuers, except to the extent any Sub-account may be
deemed an underwriter in selling as part of an offering
registered under the Securities Act of 1933 securities
which it has acquired.
5. Borrow money, except as a temporary measure where such
borrowings would not exceed 5% of the market value of
total assets at the time each such borrowing is made.
6. Invest in restricted securities, which when combined
with investment in other restricted securities, exceeds
an amount greater than 10% of the value of any Sub-
account portfolio at the time any such investment is
made.
7. Purchase securities on margin, except for short-term
credits as may be necessary for the clearance of
purchases or sales of securities, or effect a short
sale of any security.
8. Invest for the purposes of exercising control over or
management of any company.
9. Unless received as a dividend or as a result of an
offer of exchange approved by the Securities and
Exchange Commission or of a plan of reorganization,
purchase or otherwise acquire any security issued by an
investment company if the Sub-account would immediately
thereafter own (a) more than 3% of the outstanding
voting Stock
<PAGE>
of the investment company, (b) securities of the
investment company having an aggregate value in excess
of 5% of the Sub-account's total assets, (c)
securities of investment companies having an aggregate
value in excess of 10% of the Sub-account's total
assets, or (d) together with investment companies
having the same investment adviser as the Account (and
companies controlled by such investment companies),
more than 10% of the outstanding voting stock of any
registered closed-end investment company.
10. (a) Invest more than 5% of its total assets (taken at
market value at the time of each investment) in the
securities (other than United States government or
government agency securities) of any one issuer
(including repurchase agreements with any one bank);
and (b) purchase more than either (i) 10% in principal
amount of the outstanding debt securities of an
insurer, or (ii) 10% of the outstanding voting
securities of an issuer, except that such restrictions
shall not apply to securities issued or guaranteed by
the United States government or its agencies, bank
money instruments or bank repurchase agreements.
11. Concentrate the portfolio investments in any one
industry. No security may be purchased for a
Sub-account if such purchase would cause the value of
the aggregate investment in any one industry to exceed
25% of the Account's total assets. However, the Money
Market Sub-account may invest more than 25% of its
assets in the Banking industry.
12. Issue senior securities.
13. Enter into repurchase agreements which would cause more
than 10% of any Sub-account's total assets (taken at
market value) to be subject to repurchase agreements
maturing in more than seven days.
Section 2. CHANGING INVESTMENT POLICIES AND RESTRICTIONS. As to each
sub-account, the investment policies and restrictions set forth in
Section 1 above, may not be changed without approval by a majority
vote of the outstanding contracts holding units in such
sub-account.
<PAGE>
ARTICLE X
Amendments
----------
These Rules and Regulations or any of them may be amended, altered, or repealed
at any regular meeting of the Owners or at any special meeting of the Owners at
which a quorum is present or represented, provided that notice of the proposed
amendment, alteration, or repeal be contained in the notice of such special
meeting. These Rules and Regulations, or any of them except Article IX hereof,
may also be amended, altered, or repealed by the affirmative vote of a majority
of the Board of Managers at any regular or special meeting of the Board of
Managers. Article IX of these Rules and Regulations may be amended, altered, or
repealed as it affects each Sub-account only by the vote of majority of the
outstanding contracts holding Units of such Sub-account of the Account, at a
regular or special meeting of the Owners, the notice of which contains the
proposed amendment, alteration, or repeal. A certified copy of these Rules and
Regulations, as they may be amended from time to time, shall be kept at the
principal office of the Account.
ARTICLE XI
Termination of Registration
---------------------------
Phoenix Mutual reserves the right to terminate registration under the Investment
Company Act of 1940 to the extent permitted by law or to reorganize and qualify
as a unit investment trust under such act, in each case upon approval by a
majority vote of the outstanding contracts.
Exhibit 3b
Form of Dealer Agreement
<PAGE>
[ Phoenix logo goes here ] BROKER-DEALER VARIABLE CONTRACT
SUPERVISORY AND SERVICE AGREEMENT
- --------------------------------------------------------------------------------
Phoenix Equity Planning Corporation ("PEPCO"), the master servicer and
distributor for the Contracts hereunder described and the undersigned
broker-dealer (the "Broker-Dealer"), enter into this Agreement as of the date
indicated, for the purpose of appointing the Broker-Dealer to perform the
services hereunder described, subject to the following provisions:
1. Except as provided below, PEPCO hereby appoints the Broker-Dealer to provide
sales assistance with respect to, and to cause applications to be solicited
for the purchase of variable annuity contracts and/or variable life policies
issued by Phoenix Home Life Mutual Insurance Company, Phoenix Life and
Annuity Company and/or PHL Variable Insurance Company (the "Insurer")
through Separate Accounts including the Phoenix Home Life Variable
Accumulation Account, Phoenix Home Life Variable Universal Life Account,
Phoenix Life and Annuity Variable Universal Life Account and PHL Variable
Accumulation Account and listed on Schedules A1, A2, B and C. Broker-Dealer
accepts such appointment and agrees to use its best efforts to provide sales
assistance to producers of the Insurer and to cause applications for the
purchase of contracts and/or policies to be solicited by such producers.
Broker-Dealer agrees to pay a commission to such producers.
2. The Broker-Dealer will promptly forward to the appropriate office of
Phoenix, or its authorized designee, all contract and/or policy applications
along with other documents, if any, and any payments received with such
applications and will have no rights of set off for any reason. Any Contract
application which is rejected, together with any payment made and other
documents submitted, shall be returned to the Broker-Dealer.
3. PEPCO shall pay the Broker-Dealer service payments relating to applications
submitted by Broker-Dealer. The amount to be paid by PEPCO is specified on
Schedule A1, A2, B and C of this Agreement. The Broker-Dealer agrees to
return promptly to PEPCO, all compensation received for any Contract
returned within the "free look" period as specified in the Contract.
4. The Broker-Dealer represents that it is a registered broker-dealer under the
Securities Exchange Act of 1934, a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"), and is registered as a
broker-dealer under state law to the extent required in order to provide the
services described in this Agreement. Broker-Dealer agrees to abide by all
rules and regulations of the NASD, including its Rules of Fair Practice, and
to comply with all applicable state and federal laws and the rules and
regulations of authorized regulatory agencies affecting the sale of the
contracts and/or policies, including the prospectus delivery requirements
under the Securities Act of 1933 for the contracts and/or policies and any
underlying mutual fund. The Broker-Dealer agrees to notify PEPCO promptly of
any change, termination, or suspension of its status. Broker-Dealer shall
immediately notify PEPCO with respect to: i) the initiation and disposition
of any form of disciplinary action by the NASD or any other agency or
instrumentality having jurisdiction with respect to the subject matter
hereof against Broker-Dealer or any of its employees or agents; ii) the
issuance of any form of deficiency notice by the NASD or any such agency
regarding Broker-Dealer's training, supervision or sales practices; and/or
iii) the effectuation of any consensual order with respect thereto.
5. In connection with the solicitation of applications for the purchase of
contracts and/or policies, Broker-Dealer agrees to indemnify and hold
harmless PEPCO and the Insurer from any damage or expense as a result of:
(a) the negligence, misconduct or wrongful act of Broker-Dealer or any
employee, representative or agent of the Broker-Dealer; and/or (b) any
actual or alleged violation of any securities or insurance laws, regulations
or orders. Any indebtedness or obligation of the Broker-Dealer to PEPCO or
the Insurer, whether arising hereunder or otherwise, and any liabilities
incurred or monies paid by PEPCO or the Insurer to any person as a result of
any misrepresentation, wrongful or unauthorized act or omission, negligence
of, or failure of Broker-Dealer or its employees, producers, and registered
representatives to comply with this Agreement, shall be set off against any
compensation payable under this Agreement. Notwithstanding the foregoing,
Broker-Dealer shall not indemnify and hold harmless PEPCO and the Insurer
from any damage or expense on account of the negligence, misconduct or
wrongful act of Broker-Dealer or any employee, representative or producer of
Broker-Dealer if such negligence, misconduct or wrongful act arises out of
or is based upon any untrue statement or alleged untrue statement of
material fact, or the omission or alleged omission of a material fact in:
(i) any registration statement, including any
1
HO3272 4-97
<PAGE>
prospectus or any post-effective amendment thereto; or (ii) any material
prepared and/or supplied by PEPCO or the Insurer for use in conjunction with
the offer or sale of Contracts; or (iii) any state registration or other
document filed in any state or jurisdiction in order to qualify any contract
and/or policy under the securities laws of such state or jurisdiction. The
terms of this provision shall not be impaired by termination of this
Agreement.
In connection with the solicitation of applications for the purchase of
contracts and/or policies, PEPCO and the Insurer agree to indemnify and hold
harmless Broker-Dealer from any damage or expense on account of the
negligence, misconduct or wrongful act of PEPCO or the Insurer or any
employee, representative or producer of PEPCO or the Insurer, including but
not limited to, any damage or expense which arises out of or is based upon
any untrue statement or alleged untrue statement of material fact, or the
omission or alleged omission of a material fact in: (i) any registration
statement, including any prospectus or any post-effective amendment thereto;
or (ii) any material prepared and/or supplied by PEPCO or the Insurer for
use in conjunction with the offer or sale of the contracts and/or policies;
or (iii) any state registration or other document filed in any state or
other jurisdiction in order to qualify any contract and/or policy under the
securities laws of such state or jurisdiction. The terms of this provision
shall not be impaired by termination of this Agreement.
6. The Broker-Dealer will itself be, or will select persons associated with it
who are, trained and qualified to solicit applications for purchase of
contracts and/or policies in conformance with applicable state and federal
laws. Any such persons shall be registered representatives of the
Broker-Dealer in accordance with the rules of the NASD, be licensed to offer
the contract and/or policy in accordance with the insurance laws of any
jurisdiction in which such person solicits applications, be licensed with
and appointed by the Insurer to solicit applications for the contracts
and/or policies and have entered into the appropriate Variable Contracts
Insurance Commission Agreement with the Insurer, if applicable. Under the
Variable Contracts Insurance Commission Agreement, the Insurer will make
payments to insurance producers. Broker-Dealer will train and supervise its
representatives to insure that purchase of a contract and/or policy is not
recommended to an applicant in the absence of reasonable grounds to believe
that the purchase of a contract and/or policy is suitable for that
applicant. Broker-Dealer shall pay the fees to regulatory authorities in
connection with obtaining necessary securities licenses and authorizations
for registered representatives to solicit applications for the purchase of
contracts and/or policies. Broker-Dealer is not responsible for fees in
connection with the appointment of registered representatives as insurance
agents of the Insurer.
7. The activities of all producers referred to in Paragraph 6 will be under the
direct supervision and control of the Broker-Dealer. The right of such
producers to solicit applications for the purchase of contracts and/or
policies is subject to their continued compliance with the rules and
procedures which may be established by the Broker-Dealer, PEPCO or the
Insurer, including those set forth in this Agreement.
8. The Broker-Dealer shall ensure that applications for the purchase of
contracts and/or policies are solicited only in the states where the
contracts and/or policies are qualified for sale, and only in accordance
with the terms and conditions of the then current prospectus applicable to
the contracts and/or policies and will make no representations not included
in the prospectus, Statement of Additional Information, or in any authorized
supplemental material supplied by PEPCO. With regard to the contracts and/or
policies, the Broker-Dealer shall not use or permit its producers to use any
sales promotion materials or any form of advertising other than that
supplied or approved by PEPCO. Broker-Dealer shall ensure that the
prospectus delivery requirements under the Securities Act of 1933 and all
other applicable securities and insurance laws, rules and regulations are
met and that delivery of any prospectus for the contracts and/or policies
will be accompanied by delivery of the prospectus for the underlying mutual
funds.
9. The Broker-Dealer understands and agrees that in performing the services
covered by this Agreement, it is acting in the capacity of an independent
contractor and not as an agent or employee of PEPCO, and that it is not
authorized to act for, or make any representation on behalf of, PEPCO or the
Insurer except as specified herein. Broker-Dealer understands and agrees
that PEPCO shall execute telephone transfer orders only in accordance with
the terms and conditions of the then current prospectus applicable to the
contracts and/or policies and agrees that, in consideration for the
Broker-Dealer's right to exercise the telephone transfer privilege, neither
PEPCO nor the Insurer will be liable for any loss, injury or damage incurred
as a result of acting upon, nor will they be held responsible for the
authenticity of, any telephone instructions containing unauthorized,
incorrect or incomplete information. Broker-Dealer agrees to indemnify and
hold harmless PEPCO and the Insurer against any loss, injury or damage
resulting from any telephone exchange instruction containing unauthorized,
2
<PAGE>
incorrect or incomplete information received from Broker-Dealer or any of
its registered representatives. (Telephone instructions are recorded on
tape.)
10. This Agreement may not be assigned by the Broker-Dealer without the prior
consent of PEPCO. Any party hereto may cancel this Agreement at any time
upon written notice. This Agreement shall automatically terminate if the
Broker-Dealer voluntarily or involuntarily ceases to be or is suspended from
being, a member in good standing of the NASD. Provided further, PEPCO
reserves the right to terminate this Agreement in the event that any
employee or agent of Broker-Dealer is suspended, disciplined or found to be
in violation of governing insurance or securities laws, rules or
regulations. Furthermore, PEPCO reserves the right to revise the payments
for services described in this Agreement as set forth in Paragraph 3 at any
time upon the mailing of written notice to the Broker-Dealer. Failure of any
party to terminate this Agreement for any of the causes set forth in this
Agreement shall not constitute a waiver of the right to terminate this
Agreement at a later time for any such causes.
11. This Agreement on the part of the Broker-Dealer runs to PEPCO and the
Insurer and is for the benefit of and enforceable by each. This Agreement
shall be governed by and construed in accordance with the laws of the State
of Connecticut. This Agreement supersedes any agreement in effect prior to
May 1, 1995. Your first contract/policy sale after receipt of this Agreement
shall constitute your acceptance of its terms. If Agreement is not returned,
"default" Commission Option 1 will be applied. If you do not wish to
participate in solicitating applications for one of the available products,
you must complete Section 12.
12. Applications for the following products will not be solicited by any
representative, employee or agent of the Broker-Dealer:
A. / / Phoenix Home Life Mutual Insurance Company
/ / Variable Annuities
/ / Variable Universal Life
B. / / PHL Variable Insurance Company
/ / Variable Annuities
C. / / Phoenix Life and Annuity Company
/ / Variable Universal Life
Broker-Dealer Firm:
Name of Firm: _____________________________________________________________
By: _______________________________________________________________________
Print Name & Title: _______________________________________________________
Date: __________________________ NASD CRD Number __________________________
Phoenix Equity Planning Corporation
By: _______________________________________________________________________
Title: ____________________________________________________________________
Date: _____________________________________________________________________
3
<PAGE>
[ Phoenix logo goes here ]
PHOENIX IS:
Phoenix Home Life Mutual Insurance Company
Phoenix Life and Annuity Company
PHL Variable Insurance Company
Phoenix Equity Planning Corporation
MAIN ADMINISTRATIVE OFFICE:
Hartford, Connecticut
<PAGE>
[ Phoenix logo goes here ] Schedule A-1 (Variable Annuities)
Phoenix Home Life Mutual Insurance Company
- --------------------------------------------------------------------------------
Broker-Dealer has been appointed by PEPCO to provide sales assistance to
producers of Phoenix Home Life Mutual Insurance Company and to cause to be
solicited applications for the purchase of the following contracts ("Contracts")
issued by Phoenix Home Life Mutual Insurance Company:
THE BIG EDGE - INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS (FORM 2545) issued
by the Phoenix Home Life Variable Accumulation Account of Phoenix Home Life
Mutual Insurance Company. PEPCO, as paying agent for Phoenix Home Life Mutual
Insurance Company, shall pay the Broker-Dealer a service payment equal to 5.0%
of premiums paid under The Big Edge contracts.
THE BIG EDGE AND BIG EDGE PLUS - INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
(FORMS 2645 & 2646, RESPECTIVELY) issued by the Phoenix Home Life Variable
Accumulation Account of Phoenix Home Life Mutual Insurance Company. PEPCO, as
paying agent for Phoenix Home Life Mutual Insurance Company, shall pay the
Broker-Dealer a service payment equal to 6.0% of premiums paid under The Big
Edge contracts.
THE GROUP STRATEGIC EDGE - UNALLOCATED GROUP DEFERRED VARIABLE ANNUITY CONTRACTS
(FORM GD603) issued by the Phoenix Home Life Variable Accumulation Account of
Phoenix Home Life Mutual Insurance Company. PEPCO, as paying agent for Phoenix
Home Life Mutual Insurance Company, shall pay the Broker-Dealer a service
payment equal to 5% of first $20,000 of premiums paid, 4% of the next $30,000 of
premiums paid, and 3.5% of such premiums paid over $50,000. Banded compensation
will be processed on a calendar year basis, based upon aggregate premiums paid
under the contract in that calendar year. A persistency bonus is payable on a
calendar quarterly basis, beginning in the second calendar year for each
contract, at an effective annual rate of .20% of net assets.
THE GROUP STRATEGIC EDGE - ALLOCATED GROUP DEFERRED VARIABLE ANNUITY CONTRACTS
(FORM GD601) issued by the Phoenix Home Life Variable Accumulation Account of
Phoenix Home Life Mutual Insurance Company. PEPCO, as paying agent for Phoenix
Home Life Mutual Insurance Company shall pay the Broker-Dealer a service payment
from one of the three Commission Options available as described below. If more
than one Commission Option is chosen, Broker-Dealer agrees that its
representatives may select from the specified Commissions Options at the time a
Contract is purchased. Once a Commission Option has been selected it cannot be
changed in the future. Broker-Dealer may also allow specified representatives to
utilize a Commission Option other than what is selected below on a contract by
contract basis by completing the section on the Commission Election form titled
"Exception." Option 1 shall apply: if a Commission Option is not selected by the
Broker-Dealer; in the event that the Broker-Dealer has approved more than one
Commission Option and an application is received without a Commission Election
form; a Commission Election form is submitted with an Option not approved by the
Broker-Dealer; or an Exception Section of the Commission Election form is not
signed by the Broker Dealer. If only one Commission Option is selected by the
Broker-Dealer, that Option will always be invoked.
Please check one or more of the following Commission Options:
OPTION NUMBER OPTION DESCRIPTION
/ / 1. 5% of first $20,000 of premiums paid, 4% of the
next $30,000 of premiums paid, and 3.5% of such
premiums paid over $50,000.
/ / 2. 3% of first $20,000 of premiums paid, 2.5% of
such premiums paid over $20,000 with an annual
trail commission of .25% beginning in the 2nd
year.
/ / 3. 1% of premiums paid plus a trail commission of
.50% beginning in the 2nd year.
Banded compensation will be processed on a calendar year basis, based upon
aggregate premiums paid under the contract in that calendar year.
Trail commissions will be paid on the Contract Value on a calendar quarter basis
on deposits held under the Contract for a year or more.
HO3272VA 4-97
<PAGE>
[ Phoenix logo goes here ] SCHEDULE A-2 (VARIABLE LIFE)
Phoenix Home Life Mutual Insurance Company
- --------------------------------------------------------------------------------
THE PHOENIX EDGE - INDIVIDUAL VARIABLE LIFE INSURANCE POLICIES (FORM 5000)
issued by the Phoenix Variable Universal Life Account of Phoenix Home Life
Mutual Insurance Company. PEPCO, as paying agent for Phoenix Home Life Mutual
Insurance Company, shall pay the Broker-Dealer a service payment equal to 5% of
premium payments made under The Phoenix Edge policies.
FLEX EDGE SUCCESS (FORM V603) AND FLEX EDGE (FORM 2667) - FLEXIBLE PREMIUM
INDIVIDUAL VARIABLE LIFE INSURANCE POLICIES issued by the Phoenix Variable
Universal Life Account of Phoenix Home Life Mutual Insurance Company. PEPCO, as
paying agent for Phoenix Home Life Mutual Insurance Company, shall pay the
Broker-Dealer a service payment equal to 50% of premium payments made under The
Flex Edge policies, up to the commissionable premium amount, and 4% of such
payments after the commissionable premium has been paid, in the first Policy
Year. However, if the Broker-Dealer or a registered representative of the
Broker-Dealer is a career producer of Phoenix Home Life Mutual Insurance
Company, then PEPCO, as paying agent for Phoenix Home Life Mutual Insurance
Company, shall pay the Broker-Dealer a service payment equal to 50% of premium
payments made, up to the commissionable premium amount, and 5% of such payments
after the commissionable premium has been paid, in the first Policy Year.
Commissionable premium is the lesser of (1) the Policy's target premium and (2)
the subsequent premium specified on the application.
ESTATE EDGE (FORM V604) - SECOND TO DIE VARIABLE UNIVERSAL LIFE INSURANCE
POLICIES AND JOINT EDGE (FORM V601) - FLEXIBLE PREMIUM MULTIPLE VARIABLE LIFE
INSURANCE POLICIES issued by the Phoenix Variable Universal Life Account of
Phoenix Home Life Mutual Insurance Company. PEPCO, as paying agent for Phoenix
Home Life Mutual Insurance Company, shall pay the Broker-Dealer a service
payment equal to 50% of premium payments made under The Flex Edge policies, up
to the commissionable premium amount, and 4% of such payments after the
commissionable premium has been paid, in the first Policy Year. However, if the
Broker-Dealer or a registered representative of the Broker-Dealer is a career
producer of Phoenix Home Life Mutual Insurance Company, then PEPCO, as paying
agent for Phoenix Home Life Mutual Insurance Company, shall pay the
Broker-Dealer a service payment equal to 50% of premium payments made, up to the
commissionable premium amount, and 5% of such payments after the commissionable
premium has been paid, in the first Policy Year. Commissionable premium is the
lesser of (1) the Policy's target premium and (2) the subsequent premium
specified on the application.
HO3272VL 4-97
<PAGE>
{ Phoenix logo goes here ] SCHEDULE B
PHL Variable Life Insurance Company
- --------------------------------------------------------------------------------
THE BIG EDGE CHOICE - INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT (FORM D601)
issued by the PHL Variable Accumulation Account of PHL Variable Insurance
Company. PEPCO, as paying agent for PHL Variable Insurance Company, shall pay
the Broker-Dealer a service payment from one of the three Commission Options
available as described below. If more than one Commission Option is chosen,
Broker-Dealer agrees that its representatives may select from the specified
Commission Options at the time a contract is purchased. Once a Commission Option
has been selected, it cannot be changed in the future. Broker-Dealer may also
allow specified representatives to utilize a Commission Option other than what
is selected below on a contract by contract basis by completing the section on
the Commission Election form titled, "Exception." Option 1 shall apply: if a
Commission Option is not selected by the Broker-Dealer; in the event that the
Broker-Dealer has approved more than one Commission Option and an application is
received without a Commission Election form; a Commission Election form is
submitted with an Option not approved by the Broker-Dealer; or an Exception
Section of the Commission Election form is not signed by the Broker-Dealer. If
only one Commission Option is selected by the Broker-Dealer, that Commission
Option will always be invoked.
Please check one or more of the following Commission Options:
OPTION NUMBER OPTION DESCRIPTION*
/ / 1. 5.75% of premiums paid plus an annual trail
commission of .25% of Contract Value beginning in
the 8th year.**
/ / 2. 5% of premiums paid plus an annual trail
commission of .30% of Contract Value beginning
the 2nd year and increasing to .50% beginning the
8th year.
/ / 3. 3% of premiums paid plus an annual trail
commission of .50% of Contract Value beginning the
2nd year and increasing to 1.00% beginning the
8th year.
Trail commissions will be paid on the Contract Value on a calendar quarter basis
on deposits held under the Contract for a year or more.
* Sales of the contract to applicants over age 80 will be paid at 50% of the
Commission Option selected. Trail commissions will be paid at the full
percentage amounts listed.
** Former Option 1 which provided for the payment of 6% of premiums paid (no
trail commission) has been discontinued. Broker-Dealers who had previously
elected Option 1 will continue to be compensated under its terms.
HO3272B 4-97
<PAGE>
[ Phoenix logo goes here ] SCHEDULE C
Phoenix Home Life Mutual Insurance Company
- --------------------------------------------------------------------------------
THE BIG EDGE CHOICE (NY) - INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT (FORM
D602) issued by the Phoenix Home Life Variable Accumulation Account of Phoenix
Home Life Mutual Insurance Company. PEPCO, as paying agent for Phoenix Home Life
Mutual Insurance Company, shall pay the Broker-Dealer a service payment from one
of the three Commission Options available as described below. If more than one
Commission Option is chosen, Broker-Dealer agrees that its representatives may
select from the specified Commission Options at the time a contract is
purchased. Once a Commission Option has been selected, it cannot be changed in
the future. Broker-Dealer may also allow specified representatives to utilize a
Commission Option other than what is selected below on a contract by contract
basis by completing the section on the Commission Election form titled,
"Exception." Option 1 shall apply: if a Commission Option is not selected by the
Broker-Dealer; in the event that the Broker-Dealer has approved more than one
Commission Option and an application is received without a Commission Election
form; a Commission Election form is submitted with an Option not approved by the
Broker-Dealer; or an Exception Section of the Commission Election form is not
signed by the Broker-Dealer. If only one Commission Option is selected by the
Broker-Dealer, that Commission Option will always be invoked.
Please check one or more of the following Commission Options:
OPTION NUMBER* OPTION DESCRIPTION**
/ / 1. 5.75% of premiums paid plus an annual trail
commission of .25% of Contract Value beginning in
the 8th year.
/ / 2. 5% of premiums paid plus an annual trail
commission of .20% of Contract Value beginning the
2nd year and increasing to .30% beginning the
8th year.
/ / 3. 3% of premiums paid plus an annual trail
commission of .35% of Contract Value beginning the
2nd year and increasing to .65% beginning the
8th year.
Trail commissions will be paid on the Contract Value on a calendar quarter basis
on deposits held under the Contract for a year or more.
* Sales of the contract to applicants over age 80 will be paid at 50% of the
Commission Option(s) chosen. Trail commissions will be paid at the full
percentage amount as listed.
** Contingent upon your Representative's Commission Contract with Phoenix a
different compensaiton schedule may apply.
HO3272E 4-97
Exhibit 3c
Form of Underwriting Agreement
and
Form of Dealer Agreement
<PAGE>
UNDERWRITING AGREEMENT
THIS AGREEMENT, made this ____ day of ________, ____, by and among
Phoenix Mutual Life Insurance Company ("Phoenix Mutual"), a Connecticut mutual
life insurance company, Phoenix Mutual Variable Accumulation Account ("VA
Account"), a separate account of Phoenix Mutual, and Templeton Funds
Distributor, Inc., a Florida corporation ("The Underwriter").
WITNESSETH
WHEREAS, Phoenix Mutual offers for sale certain variable life insurance
and variable annuity contracts listed on Schedule A of this Agreement (the
"Contracts"), and funded through the VA Account, a unit investment trust
registered under the Investment Company Act of 1940 ("1940 Act"), pursuant to an
effective registration statement filed with the Securities and Exchange
Commission under the Securities Act of 1933 ("Securities Act").
NOW THEREFORE, in consideration of the mutual covenants herein
contained, Phoenix Mutual, the VA Account and the Underwriter agree as follows:
1. APPOINTMENT. Phoenix Mutual and the VA Account hereby appoint the
Underwriter as the exclusive Principal Underwriter for the distribution of the
Contracts and grant to it the exclusive right during the term of this agreement
to solicit applications for the purchase of the Contracts. In exercising this
right, the Underwriter may solicit applications from prospective purchasers
through broker-dealer firms with which it has entered into written agreements
complying with the requirements of paragraph 7 hereof.
The Underwriter accepts such appointment and agrees, for the
compensation herein provided, to use its best efforts (in states where the
Contracts are approved or qualified for sale under applicable securities and
insurance law) to obtain from prospective purchasers applications for Contracts
which comply with the then current prospectus for the Contracts, although the
Underwriter is under no obligation to obtain applications for any specified
number of the Contracts. The Underwriter is registered as a broker-dealer under
the Securities Exchange Act of 1934, is and will remain a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD"), and
will promote the Contracts in compliance with all applicable federal and state
law.
<PAGE>
2. DOCUMENTS. Phoenix Mutual shall furnish TFD with copies of all
Prospectuses, and other documents which TFD reasonably requests in connection
with the distribution of the Contracts. Phoenix Mutual agrees to advise TFD
immediately in the case of an issuance by the Securities and Exchange Commission
("SEC") of any stop order suspending the effectiveness of the Prospectus, of the
happening of any material event which makes untrue any statement made in the
Registration Statement for the Contracts, or which requires the making of a
change in the Registration Statement in order to make the statements therein not
misleading, and of all action of the SEC with respect to any amendments to the
Registration Statement which may from time to time be filed with the SEC.
3. APPLICATIONS. Phoenix Mutual and the VA Account agree to approve and
accept all applications accompanied by the initial premium payment, tendered to
them by the Underwriter or broker-dealer firm that has entered into a Selling
Agreement with TFD, which comply in all material respects with the terms of the
offering and with all applicable laws, and to issue Contracts to such purchasers
thereof as promptly as practicable thereafter.
4. REGISTRATION. Phoenix Mutual and the VA Account agree to use their
best efforts to effect and maintain the registration of the Contracts under the
Securities Act and of the VA Account under the 1940 Act, and to qualify the
Contracts under the state securities and insurance laws, and to qualify the
Contracts as annuities under the Internal Revenue Code. Phoenix Mutual will pay
or cause to be paid expenses (including the fees and disbursements of its own
counsel) of the registration and maintenance of the Contracts under the
Securities Act and of the VA Account under the 1940 Act, and to qualify the
Contracts under the state securities and insurance laws.
5. EXPENSES. The Underwriter will pay the expenses incurred in
connection with the offering and sale of the Contracts, including but not
limited to, the expenses incurred in connection with printing the prospectus for
Templeton Variable Products Series Fund ("the Fund") to be used in connection
with the sale of the Contracts, and the sales literature and promotional
materials for the Contracts, and for the sale and delivery of the Contracts.
6. COMPENSATION. Phoenix Mutual shall pay to the Underwriter an amount
equal to 5.50% of the premium payments paid under Contracts sold during the term
of this Agreement. However, in the alternative, Phoenix Mutual shall, at the
option of the Underwriter and to the extent permissible under federal securities
laws, pay to the Underwriter an amount equal to 5.00%, and to such entity
designated by TFD to perform wholesaling services, a wholesaling fee equal to
0.50%, of the premium payments paid under Contracts sold during the term of this
- 2 -
<PAGE>
Agreement. TFD will, in turn, compensate broker-dealer firms with which TFD has
entered into an Agreement pursuant to Section 7 in an amount mutually agreed
upon between the parties.
7. BROKER-DEALERS. The Underwriter may enter into written agreements
with broker-dealers for the purpose of soliciting applications for the purchase
of the Contracts on such terms and conditions as the Underwriter may determine
not inconsistent with this agreement. Any such broker-dealer must:
(a) be a registered broker-dealer under the Securities Exchange Act
of 1934 and a member of the National Association of Securities
Dealers, Inc.; and
(b) agree that, in connection with the solicitation of applications
for the purchase of Contracts, the broker-dealer will in all
respects conform to the requirements of all state and federal
laws and the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., relating to the sale of the
Contracts and will indemnify and hold harmless the Underwriter
from any damage or expense on account of the negligence,
misconduct or wrongful act of such broker-dealer or any employee,
representative or agent of such broker-dealer.
8. INSURANCE AGENTS. Phoenix Mutual and the VA Account will permit
selected agents of a broker-dealer firm which have entered into a Selling
Agreement with the Underwriter to be licensed and appointed as life insurance
agents of Phoenix Mutual. Phoenix Mutual shall pay all fees to regulatory
authorities associated with the appointment of such selected agents as insurance
agents of Phoenix Mutual.
9. INDEMNIFICATION. Phoenix Mutual will indemnify and hold harmless the
Underwriter, for any expenses, losses, claims, damages or liabilities (including
attorneys fees) incurred by reason of any material misrepresentation or omission
in a registration statement, or prospectus for the Contracts, or on account of
any other misrepresentation, wrongful or unauthorized act or omission,
negligence of, or failure of Phoenix Mutual including any employee of Phoenix
Mutual, to comply with the terms of this Agreement, but Phoenix Mutual shall not
be required to indemnify for any expenses, losses, claims, damages or
liabilities which have resulted from the negligence, misconduct or wrongful act
of the party seeking indemnification.
In soliciting applications for the purchase of Contracts, the
Underwriter will in all respects conform to the requirements of all state and
federal law, and the Rules of Fair Practice of the NASD relating to such
solicitation. Underwriter will indemnify and hold harmless Phoenix Mutual and
the VA Account
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<PAGE>
from expenses, losses, claims, damages or liabilities (including attorneys fees)
incurred by reason of any material misrepresentation or omission in a
registration statement or prospectus for the Fund, or in sales literature or
promotional materials developed by Underwriter for the Contracts, or on account
of any other misrepresentation, wrongful or unauthorized act or omission,
negligence of, or failure of Underwriter, or any employee of the Underwriter to
comply with the terms of this Agreement. Underwriter shall also hold harmless
and indemnify Phoenix Mutual and the VA Account for any expenses, losses,
claims, damages, or liability (including attorneys fees) arising from any
misrepresentation, wrongful or unauthorized act or omission, negligence of, or
failure of a broker-dealer or its employees, agents or registered
representatives, to comply with the terms of the Selling Agreement entered into
with the Underwriter, but only to the extent that Underwriter is indemnified by
the broker-dealer for the expense, loss, claim, damage or liability of Phoenix
and the VA Account, pursuant to the terms of the Selling Agreement between the
two parties.
10. RECORDKEEPING AND REGULATORY INVESTIGATION. Phoenix Mutual and TFD
shall cause to be maintained and preserved such accounts, books, and other
documents as are required of them by the 1940 Act, the Securities and Exchange
Act of 1934, and any other applicable laws and regulations. The books, accounts
and records of Phoenix Mutual, of the VA Account, and of TFD as to transactions
hereunder, shall be maintained so as to disclose clearly and accurately the
nature and details of the transactions. Phoenix Mutual and TFD agree that all
records relating to transactions hereunder shall be subject to reasonable
periodic, special or other audit or examination by the SEC, NASD, or any state
insurance commissioner or any other regulatory bodies having jurisdiction.
Phoenix Mutual and TFD agree to cooperate fully in any securities, insurance or
judicial regulatory investigation, inspection, inquiry or proceeding arising in
connection with the Contracts distributed under this Agreement, or with respect
to Phoenix Mutual, TFD, or their affiliates, to the extent related to the
distribution of the Contracts. Phoenix Mutual and TFD will notify each other
promptly of any customer complaint or notice of any regulatory proceeding with
respect to each other, and, in the case of a customer complaint, will cooperate
in arriving at a mutually satisfactory response.
11. TERMINATION. This agreement shall become effective on the
date of this agreement and shall continue to be in effect, except that:
(a) Any party hereto may terminate this agreement on any date by
giving the other party at least thirty (30) days' prior written
notice of such termination specifying the date fixed therefor.
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<PAGE>
(b) This agreement may not be assigned by the Underwriter without the
consent of Phoenix Mutual.
12. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have hereunto met their hands on the
date first above written.
PHOENIX MUTUAL LIFE INSURANCE COMPANY
AND
PHOENIX MUTUAL VARIABLE ACCUMULATION
ACCOUNT
By_________________________________
Title:
TEMPLETON FUNDS DISTRIBUTOR, INC.
By_________________________________
Title:
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<PAGE>
SELLING AGREEMENT
-----------------
Templeton Funds Distributor, Inc. ("TFD"), the exclusive principal underwriter
for the Contracts hereunder described and __________, (the "Dealer") enter into
this Agreement this _____ day of _____, 19__, for the purpose of authorizing the
Dealer to offer and sell the Contracts hereunder described, subject to the
following provisions:
1. TFD hereby appoints Dealer to act as a nonexclusive distributor for the sale
of and solicitation of applications for certain variable annuity contracts
and/or variable life insurance policies ("Contracts") issued by Phoenix
Mutual Life Insurance Company ("Phoenix Mutual") through the Phoenix Mutual
Variable Accumulation Account or other segregated asset account of Phoenix
Mutual, listed on schedule A of this Agreement. Dealer accepts such
appointment and agrees to use its best efforts to find purchasers acceptable
to Phoenix Mutual. Dealer shall deliver the policies, collect the first
premiums thereon, and service said business subject to the terms of this
Agreement. The Dealer is authorized to recruit Registered Representatives to
carry out the purposes of this Agreement.
2. The Dealer will promptly forward to Phoenix Mutual, Variable Annuity Service
Unit, One American Row, Hartford, Connecticut 06115, or its authorized
designee, all Contract applications along with other documents if any, and
any payments received with such applications, without deductions for
compensation. Pursuant to an Underwriting Agreement dated __________, by and
between TFD and Phoenix Mutual, Phoenix Mutual has agreed to approve and
accept all applications, accompanied by the initial payment, tendered to
them which comply in all material respects with the terms of the offering
and with all applicable laws and to issue Contracts to such purchasers
thereof as promptly as practicable thereafter. Any Contract application
which is rejected, together with any payment made and other documents
submitted, shall be returned to the Dealer. TFD will cause Phoenix Mutual,
on behalf of the Dealer, to confirm the issue of the Contract to the
Contract Owner.
3. TFD shall pay the Dealer within fifteen (15) days after the end of the
calendar month in which purchase payments were received under Contracts sold
through the Dealer, an amount equal to 5.00% of purchase or premium payments
made under the Contracts.
4. The Dealer agrees to return promptly to TFD, all amounts received under
paragraph 3 above for any Contract tendered for redemption within ten (10)
days after the delivery of the Contract to the Contract Owner or within such
longer period as specified in the Contracts' "free look" provision (prorata
return for partial redemption).
5. Both the Dealer and TFD represent that they are a registered broker/dealer
under the Securities Exchange Act of 1934 and members of the National
Association of Securities Dealers, Inc. ("NASD") and agree to abide by all
rules and regulations of the NASD, including its Rules of Fair Practice, and
to comply with all applicable state and Federal laws and the rules and
regulations of authorized regulatory agencies affecting the sale of the
Contracts, including the prospectus delivery requirements under the
Securities Act of 1933 for the Contracts and any underlying mutual fund. The
Dealer agrees to notify TFD promptly of any change, termination, or
suspension of its status.
6. Any indebtedness or obligation of the Dealer to TFD or Phoenix Mutual,
whether arising hereunder or otherwise, and any liabilities incurred or
monies paid by TFD or Phoenix Mutual to any person as a result of any
misrepresentation, wrongful or unauthorized act or omission, negligence of,
or failure of Dealer or its employees, agents, and Registered
Representatives to comply with this Agreement, shall be set
<PAGE>
off against any compensation payable under this Agreement with TFD. The
Dealer shall further indemnify and save harmless TFD and Phoenix Mutual for
any losses or indebtedeness described hereunder not previously reimbursed.
The terms of this provision shall not be impaired by termination of this
Agreement.
7. The Dealer will select persons associated with it who are to be trained and
qualified agents to solicit applications for the Contracts in conformance
with applicable state and Federal laws. Any such persons shall be registered
representatives of the Dealer in accordance with the rules of the NASD, be
licensed to offer the Contract in accordance with the insurance laws of
jurisdictions where the Contract may be lawfully sold, and be licensed with
and appointed by Phoenix Mutual as a contracted insurance agent to solicit
applications for the Contracts. Dealer will train and supervise agents to
insure that purchase of a Contract is not recommended to an applicant in the
absence of reasonable grounds to believe that the purchase of a Contract is
suitable for that applicant.
8. The activities of all agents referred to in Paragraph 7 will be under the
direct supervision and control of the Dealer. The right of such agents to
sell the Contracts is subject to their continued compliance with the rules
and procedures which may be established by the Dealer or TFD, including
those set forth in this Agreement.
9. The Dealer will offer and sell the Contracts only in states where the
Contracts are qualified for sale, and only in accordance with the terms and
conditions of the then current prospectus applicable to the Contracts and
will make no representations not included in the prospectus, Statement of
Additional Information, or in any authorized supplemental material supplied
by TFD. With regard to the Contracts, the Dealer shall not use or permit its
agents to use any sales promotion materials or any form of advertising other
than that supplied or approved by TFD.
10. The Dealer understands and agrees that in performing the services covered by
this Agreement, it is acting in the capacity of an independent contractor
and not as an agent or employee of TFD, and that it is not authorized to act
for TFD except as specified herein nor make any representations on behalf of
TFD or Phoenix Mutual.
11. This agreement may not be assigned by the Dealer without the consent of TFD.
Any party hereto may cancel this Agreement upon ten days written notice.
This Agreement shall automatically terminate if the Dealer voluntarily or
involuntarily ceases to be, or is suspended from being, an NASD member or a
registered broker/dealer. Furthermore, TFD reserves the right to revise the
sales commissions set forth in paragraph 3 at any time upon the mailing of
written notice of the Dealer. Failure of any party to terminate this
Agreement for any of the causes set forth in this Agreement shall not
constitute a waiver of the right to terminate this Agreement at a later time
for any such causes.
12. This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida. This Agreement shall become effective upon
execution as of the day and year written above.
Dealer _____________________________ Templeton Funds Distributor, Inc.
By: ________________________________ By: ________________________________
Title: _____________________________ Title: _____________________________
(Seal) Attest:______________________ (Seal) Attest:______________________
Exhibit 4a
Form of Contract
<PAGE>
PHOENIX MUTUAL LIFE INSURANCE COMPANY
Annuitant Age
Policy Number Date of Issue
Initial Premium Maturity Date
Dear Annuitant:
We agree to pay the benefits of this policy in accordance with its provisions.
It is important to us that you are satisfied with your policy. For service or
information on this policy contact the agent who sold the policy, any of our
agency offices, or our Investment Products Division at the following address:
Phoenix Mutual Life Insurance Company
Investment Products Division
One American Row
Hartford, Connecticut 06115
RIGHT TO CANCEL. You have a right to return this policy. If for any reason you
are not satisfied with this policy, you may return it to us at our Investment
Products Division within 10 days after it is delivered to you for a refund of
the Accumulated Value plus any charges made under this policy.
The Accumulated Value will be determined as of the nearest Valuation Date
coincident with or following the date we receive the returned policy at our
Investment Products Division.
This policy provides for the payment of a deferred life annuity with a 10-year
period certain based on the values accumulated during the variable accumulation
period prior to the Maturity Date. The amount of accumulated values and
resulting benefits will depend on the investment experience of the underlying
sub-account(s) during the accumulation period and may vary in amount. However,
the annuity payments will be a fixed amount based on this policy's Accumulated
Value on the Maturity Date and the annuity purchase rates stated herein.
Signed for Phoenix Mutual Life Insurance Company at its Home Office in Hartford,
Connecticut.
Sincerely yours,
Secretary President
Registrar
Flexible Premium Variable Accumulation Deferred Annuity.
Non-participating
1017
<PAGE>
SCHEDULE PAGE
Annuitant: :Age
Policy Number: :Date of Issue
Initial Premium: :Maturity Date
Subsequent Premiums:
Payment Intervals:
Mortality and
Expense Risk
Charge on Date
of Issue: .00342% (based on annual
rate of 1.25%)
SUB-ACCOUNT ALLOCATION SCHEDULE
Money Market Sub-Account #1 _______________%
Stock Sub-Account #2 _______________%
Bond Sub-Account #3 _______________%
Total-Vest Sub-Account #4 _______________%
Except as may otherwise be provided herein, no premiums may be applied or
transfer made to any sub-account whose Accumulated Value, immediately after the
payment or transfer, would be less than $150.
Beneficiary: as stated in the application or as later changed.
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<PAGE>
SCHEDULE PAGE (continued)
Annuitant: John M. Phoenix 00000001 :Policy Number
DESCRIPTION OF SUB-ACCOUNTS
MONEY MARKET The investment objective of the MONEY MARKET
sub-account is to provide maximum current income
consistent with capital preservation and liquidity.
STOCK The investment objective of the STOCK sub-account is
to achieve intermediate and long-term growth of
capital, with income as a secondary consideration.
BOND The primary investment objective of the BOND
sub-account is to seek high current income. Capital
growth is a secondary objective which will also be
considered when consistent with the objective of
high current income.
TOTAL-VEST The investment objective of the TOTAL-VEST
sub-account 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.
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<PAGE>
SCHEDULE PAGE (continued)
Annuitant: John M. Phoenix 00000001 :Policy Number
POLICY SUMMARY
About This Summary This summary briefly highlights some of the major
policy provisions. Since this is only a summary, the
detailed provisions of the policy will control. See
those provisions for full information and any limits
or restrictions that apply. To locate this policy's
provisions, use the Table of Contents. Your policy
is a legal contract between you and us. You should,
therefore, READ YOUR POLICY CAREFULLY.
Check the Schedule Page of this policy to make sure
it reflects the premium allocation requested. Please
call on your agent or us at any time you have
questions about your policy.
The Type of Policy This policy provides for payment of a deferred life
annuity with 10-year period certain based on the
value accumulated during the variable accumulation
period prior to the Maturity Date. However, the
amount of each annuity payment will be fixed based
on the Accumulated Value on that date.
Premiums Allocated The values that accumulate under this policy prior
to Sub-Accounts to the Maturity Date are based on the amount and
number of premium payments made and the investment
experience of the sub-account(s) to which the
premium payments are allocated by you. The
sub-accounts are part of the Phoenix Mutual Variable
Accumulation Account (VA Account) and have differing
investment objectives as shown on the Schedule Page.
We have the right to add additional sub-accounts
subject to approval by the Securities and Exchange
Commission and where required, other regulatory
authorities. Subject to the terms of this policy,
you may transfer the policy's Accumulated Value
between and among the various sub-accounts.
The VA Account is a Separate Account established by
us under Connecticut Law and is registered as a unit
investment trust under the Investment Company Act of
1940. All income, gains and losses, realized and
unrealized, of the VA Account are credited to or
charged against the amounts placed in the VA Account
without reference to other income, gains and losses
of our General Account. The assets of the VA Account
are owned solely by us and we are not a trustee with
respect to such assets.
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<PAGE>
SCHEDULE PAGE (continued)
Annuitant: John M. Phoenix 00000001 :Policy Number
We use the assets of the VA Account to buy shares of
the Big Edge Series Fund (Fund) according to your
most recent allocation instruction on file with us
at our IPD. The Fund is registered under the 1940
Act as an open end, diversified management
investment company. The Fund has separate Series
that correspond to the sub-accounts of the VA
Account. Assets of each sub-account are invested in
shares of the corresponding Fund Series.
Withdrawal Privilege Subject to the terms of this policy, the Accumulated
Value of this policy, less any applicable deferred
sales charge, may be withdrawn in whole or in part
on or before the Maturity Date.
Other Benefits This policy provides a death benefit in the event of
your death during the accumulation period. The death
benefit equals the Accumulated Value on the date we
receive a certified copy of the certificate of
death. This policy also provides alternative annuity
settlement options.
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<PAGE>
TABLE OF CONTENTS
Part Page
Schedule Page
Policy Summary
1 Definitions
2 About This Policy
3 Premiums and Allocations to Sub-Accounts
4 Transfers and Withdrawals
5 Expense Charges
6 Determining the Accumulated and Unit Values
7 Annuity Benefits
8 Death Benefits
9 Payment Options
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<PAGE>
PART 1: DEFINITIONS
You (Your) The annuitant under this policy as shown on the
Schedule Page. You the annuitant, are the owner of
this policy and control this policy during your
lifetime. Unless you and we agree otherwise, you may
exercise your rights provided under this policy
without the consent of anyone else. Your exercise of
any of these rights will to the extent thereof
assign, release, or surrender the interest of all
beneficiaries under this policy.
We (Our, Us) Phoenix Mutual Life Insurance Company Hartford,
Connecticut
Accumulated Value The total value of all sub-account Units
standing to the credit of this policy or of a
sub-account where so noted.
Annuity A contract promising a periodic series of payments.
Assigns Any person to whom you assign an interest in this
policy if we have notice of the assignment in
accordance with the provisions stated in Part 2.
Date of Issue The date of issue as shown on the Schedule Page.
Fixed Annuity An annuity providing payments which do not vary in
amount after the first payment is made.
IPD Our Investment Products Division. The address is
shown on the cover page of this policy.
Maturity Date The Maturity Date shown on the Schedule Page or
such changed Maturity Date as we may later agree in
writing, but in no event earlier than the first
policy anniversary or later than the policy
anniversary nearest the annuitant's 85th birthday.
Payment Date The Valuation Date on which a premium payment
is received at our Investment Products Division
unless it is received after the close of the New
York Stock Exchange, in which case it will be the
next Valuation Date.
Policy Anniversary The anniversary of the Date of Issue.
Policy Year The first policy year is the one-year period
from the Date of Issue. Each succeeding policy year
is the one-year period from the policy anniversary
to the next policy anniversary.
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<PAGE>
Unit A standard of measurement, as described in Part 3,
used to measure the value of each sub-account.
Valuation Date For any sub-account, every day the New York
Stock Exchange is open for business.
Valuation Period For any sub-account, it is the period in days
beginning with the day following the last Valuation
Date of that sub-account and ending on that
sub-account's next succeeding Valuation Date.
Written Request A request in writing in a form satisfactory to us
(Written Notice) and received by us at our IPD.
PART 2: ABOUT THIS POLICY
The Effective Date This policy will begin in effect on the Date of
Issue provided the initial premium due is paid while
you are alive.
The Policy and This policy and the written application, a copy of
Application which is attached to and made a part of this policy,
are the entire contract between you and us. Any
change in the terms of this policy, to be in effect,
must be signed by one of our executive officers and
countersigned by our Registrar or one of our
executive officers. This policy is issued at our
Home Office in Hartford, Connecticut. Any benefits
payable under this policy are payable at our Home
Office.
Limits on Our Right We rely on all statements made by or for you in the
to Contest This written application. These statements are considered
Policy to be representations and not warranties. We can
contest the validity of this policy for any material
misrepresentation of a fact. To do so, however, the
misrepresentation must be contained in the written
application and a copy of the application must be
attached to this policy when it is issued.
We cannot contest the validity of this policy, after
it has been in force during your lifetime for one
year from its Date of Issue.
Required Proof of Proof of your age must be filed with us before any
Age and Survival annuity payments will begin. We also have the right
to require proof of the identity, age and survival
of any person entitled to any payment under this
policy or upon whose life any payments depend.
Claim of Creditors To the extent permitted by law, no amount payable
under this policy will be subject to any legal
process to satisfy the claims of creditors.
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<PAGE>
Adjustment if Age If your age has been misstated, any benefits payable
Misstated will be limited to the amount that the premium paid
would have purchased at the correct age. Any
overpayments and underpayments made by us will be
charged or credited against future payments under
the policy.
Assignments We will not be considered to have notice of any
assignment of an interest in this policy until we
receive the original or copy of the assignment at
our IPD. In no event will we be responsible for its
validity.
Statement of Account We will furnish you, at least annually, a statement
of the Accumulated Value of this policy in each of
the sub-accounts. We will also furnish you a
statement of the investments held by each
sub-account.
PART 3: PREMIUMS AND ALLOCATIONS TO SUB-ACCOUNTS
Premium Amounts The initial premium is due on the Date of Issue. You
must be alive when the first initial premium is
paid. Thereafter, the premium amount and payment
intervals are as shown on the Schedule Page unless
later changed as described below. A receipt for
premium payments signed by one of our executive
officers is available upon request.
You may vary the amount and payment intervals for
subsequent premiums, and additional premium payments
may be made within the following limits:
a. Each additional premium payment must at least
equal $150.
b. No more than $1,000,000 in total premiums may
be paid on this policy unless we agree
otherwise.
c. The premium payment intervals may be changed to
annual, semi-annual, quarterly, monthly,
flexible, or any other arrangement agreed to by
us.
We reserve the right to waive any and all of the
above limits.
Net Premium The net premium is equal to the premium paid less
Allocation the applicable premium tax. As of the Date of Issue,
the premium tax for your policy, if any, is as shown
on the Schedule Page. The net premium will be
applied on the Payment Date to the various
sub-accounts in accordance with the allocation
schedule elected in the application.
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<PAGE>
The number of Units credited to each sub-account
will be determined by dividing the net premium
applied to that sub-account by the Unit Value of
that sub-account on the Payment Date.
You may change the allocation schedule with respect
to subsequent or additional premium payments by
written notice filed with us. However, unless we
agree otherwise, no premium may be applied to any
sub-account whose Accumulated Value, immediately
after the payment, would be less than $150.
PART 4: TRANSFERS AND WITHDRAWALS
Transfers among You may transfer all or a portion of the
Sub-Accounts Accumulated Value of this policy among one or more
of the sub-accounts. We reserve the right to require
that such transfers be made by written request and
to limit the number of additional transfers made
during a policy year. You will be permitted at least
six transfers per policy year. A $10 transfer fee
will be imposed for each transfer. No transfer may
be made to a sub-account if the resultant
Accumulated Value of that sub-account immediately
after the transfer would be less than $150. If the
Accumulated value of any sub-account from which a
transfer is to be made would, immediately after the
transfer, be less than $150, the entire Accumulated
Value of that sub-account will be transferred to the
same sub-account to which the requested transfer
amount is to be transferred. The Accumulated Value
of each sub-account will be determined on the
Valuation Date that coincides with the date of
transfer. Any new Units credited to a sub-account as
a result of any transfer shall bear the same Payment
Date as the Units released to effectuate such
transfer.
Withdrawals and You may withdraw in cash the Accumulated Value of
Full Surrender this policy in whole or in part, less any applicable
deferred sales charge, any time prior to the
Maturity Date, subject to the following provisions
and limitations. Such withdrawals must be by written
request in a form satisfactory to us and must
include such tax withholding information as we may
reasonably require. The withdrawal will be
accomplished by surrender and release of Units
credited to the sub-account(s) from which the
withdrawal is to be made. No withdrawal other than a
full surrender may be made if the Accumulated Value
of this policy would, immediately after the
withdrawal, be less than $2,000. If the Accumulated
Value of any sub-account from which the withdrawal
is to be made would, immediately after the
withdrawal, be less than $150, the remaining Units
in each sub-account will be released and surrendered
and included in the amount withdrawn. If as the
result
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<PAGE>
of a withdrawal, no Accumulated Value remains under
this policy, the policy will be deemed fully
surrender and of no further value or effect. The
Accumulated Value of each sub-account will be
determined on the Valuation Date that coincides with
the date of the withdrawal.
After the first policy year, an amount up to 10% of
the Accumulated Value of this policy as of the
beginning of the policy year may be withdrawn
without restriction or charge. Any amount withdrawn
during the first policy year or in excess of such
10% during later policy years will be subject to the
following deferred sales charge, expressed as a
percentage of the amount withdrawn:
Age of Deposit in Complete Contingent
Years from Payment Date Unit Deferred
Released was Credited Sales Charge
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6 and over 0%
In no event, however, will the total of all
surrender charges applied under this policy exceed
9% of the total premiums paid on this policy.
You may elect to apply the amount withdrawn or
surrendered to the various payment options described
in Part 9.
Rules and Limitations The Units released for transfer or withdrawal will
be determined on a First-In, First-Out (FIFO)
basis.
No transfers, withdrawals, or full surrender may be
made after the Maturity Date, since the policy's
Accumulated Value will then be used to provide an
annuity as stated in Part 7.
Delay Due to If a withdrawal or transfer is to be made during any
Impossibility period when regular banking activities have been
suspended; or when there is restricted trading on
any stock exchange, the securities of which are held
by any sub-account; or for any period when an
emergency or other circumstances beyond our control
exists and as a result of which the disposal of
securities or other assets, including sale, delivery
or receipt of payment by us is not reasonably
practicable or as a result of which it is not
reasonably practicable to determine the
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<PAGE>
value of any sub-account; such withdrawal or
transfer shall be deferred to the earliest
succeeding Valuation Date as of which the above
described circumstances no longer exist. Rules and
regulations of the Securities and Exchange
Commission under the Investment Company Act of 1940,
if any are applicable, will govern determinations as
to suspended or restricted trading on a stock
exchange or emergencies limiting disposal of
securities.
PART 5: EXPENSE CHARGES
Charges to cover expenses incurred by us in the
distribution and administration of this policy are
made in the manner described below. However, we
reserve the right to vary the amount of such charges
to amounts not exceeding the maximum amounts stated
below.
Distribution Charges Charges to cover expenses incurred in the
distribution of this policy are taken in the form of
a contingent deferred sales charge as provided in
Part 4 which is applied to any withdrawals or full
surrender made within the six-year period following
the Payment Date the Units released were credited.
Mortality and Expense The mortality and expense risk assumed by us is
Risk Charge taken in the form of a daily charge against each
sub-account. The charge as of the Date of Issue of
this policy is as shown on the Schedule Page. The
charge may vary to reflect the most recent mortality
and expense risk charge approved by the Securities
and Exchange Commission for use by us under this
type of variable accumulation deferred annuity, but
in no event will exceed a daily charge of .00479%
(based on an annual rate of 1.75%). We will send you
a written notice of any change in the charge at
least 30 days in advance of such change.
Administrative Fee An administrative fee of $35 will be deducted
annually at the end of each policy year from the
total Accumulated Value of the policy with each
sub-account bearing a pro-rata share of such expense
based on the proportionate Accumulated Value of each
of the sub-accounts. By agreement with us, you may,
instead, elect to pay this charge to us in cash.
PART 6: DETERMINING THE ACCUMULATED AND UNIT VALUES
Crediting of When a premium payment is received by us, we will
Sub-Account Units apply the net premium on the Payment Date to credit
Units to one or more sub-accounts under this policy
in accordance with the most recent allocation
schedule on
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<PAGE>
file with us. The. number of Units credited to each
sub-account will be determined by dividing the net
premium applied to that sub-account by the then
current Unit Value of that sub-account.
Determination of This The Accumulated Value of a sub-account at any time
Policy's Accumulated prior to the Maturity Date is determined by
Value multiplying the total number of units under this
policy for that sub-account by the current Unit
Value of that sub-account. The total Accumulated
Value under this policy equals the sum of the
Accumulated Values of each of the sub-accounts.
Determination of the The Unit Value of each sub-account was set by us on
Current Share Value the first Valuation Date under the sub-account. The
current Unit Value of a sub-account on any
subsequent Valuation Date is determined by
multiplying the Unit Value of the sub-account on the
immediately preceding Valuation Date by the Net
Investment Factor for that sub-account for the
Valuation Period just ended.
Determination of the The Net Investment Factor for a sub-account is
Net Investment Factor determined by the investment performance of the
assets underlying the sub-account for the Valuation
Period just ended. The Net Investment Factor for any
sub-account for any Valuation Period is equal to
1.0000000 plus the applicable net investment rate
for the period. The net investment rate is
determined by:
a. taking the sum of the accrued net investment
income and capital gains and losses, realized
or unrealized, of the sub-account for the
Valuation Period; and
b. for each calendar day in the Valuation Period
subtracting an amount equal to the mortality
and expense risk charge for each day of the
Valuation Period; and
c. dividing the result of (a) and (b) by the
Accumulated Value of the sub-account at the
beginning of the Valuation Period.
The Valuation of The values of the assets in each sub-account will be
Sub-account determined in accordance with applicable law and
accepted procedures.
PART 7: ANNUITY BENEFITS
Unless you elect an alternative annuity payment
option as described in Part 9 on or before the
Maturity Date, the Accumulated Value of this policy
on the Maturity Date will automatically be applied
to provide you a
- 13 -
<PAGE>
10-year period certain monthly life annuity based on
your life underpayment payment Option A as described
in Part 9. Any annuity payments falling due after
your 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, we shall have the
right to pay such amount to you in one lump sum in
lieu of providing such annuity. We also have the
right to change the annuity payment frequency to
annual if the monthly annuity payment would
otherwise be less than $20.
Maturity Date The amount of monthly annuity payment for each
Guaranteed Rates $l,000 of Accumulated Value applied on the Maturity
Date to purchase a 10-year period certain life
annuity on your life under Payment Option A will be
based on the rates shown below for your age and sex.
These rates are based on the a-49 Annuity Table
projected to 1985 with Projection Scale B and an
interest rate of 3 3/8%. However, if our current
rates in effect for this policy on the Maturity Date
are more favorable, we will use those rates.
*Age Male Female
55 4.95 4.47
60 5.54 4.96
65 6.30 5.63
70 7.24 6.50
75 8.26 7.56
80 9.12 8.60
85 9.60 9.31
*Based on your age on your birthday nearest the
Maturity Date.
PART 8: DEATH BENEFITS
How the Death Benefit In the event of your death, we will determine the
is Determined amount of the death benefit as follows:
A. Death before Maturity Date - If you die before
the Maturity Date, the death benefit will equal
the Accumulated Value of this policy on the
date of our receipt of a certified copy of the
certificate of death. In lieu of receiving the
death benefit in a lump sum cash payment, the
beneficiary may elect certain alternative
payment options as described below.
- 14 -
<PAGE>
B. Death on or after Maturity Date - If the you
die on or after the Maturity Date any death
benefit will be determined in accordance with
the provisions of the applicable payment option
elected by you.
If you die before the Maturity Date, the beneficiary
of any death benefit then payable may elect to apply
his or her respective share of the death benefit
under any of the Payment Options described in Part
9, subject to the following limitations. These
limitations are imposed to satisfy the annuity
contract definition requirements of the Internal
Revenue Code of 1954 (the Code) as now or later
amended. The beneficiary's election shall be limited
to the following options:
a. an Option A life annuity on the life of such
beneficiary with a specified period certain of
at least 5 years; or
b. an Option B life annuity on the life of such
beneficiary; or
c. an Option G installment payout providing for
payments for a specified period of 5 years.
We reserve the right to extend the options offered
or further restrict the options offered to the
extent consistent with future changes in the Code
and any regulations or rulings under such Code.
If you die before the Maturity Date and your spouse
is the beneficiary, in lieu of any of the above
settlements, he of she may elect to continue this
policy on his or her life as the substitute
annuitant as if no death had occurred. We shall have
the right to first require return of the policy to
us so that we may amend it to reflect this change.
The Beneficiary Unless otherwise provided, any death benefit or
income payment that falls due after your death will
be payable in equal shares to such primary
beneficiaries as are then living. But if none is
then living, payment will be made in equal shares to
such contingent beneficiaries as are then living.
But if no beneficiary is then living, payment will
be made to the executor or administrator.
Unless otherwise stated, the relationship of a
beneficiary is the relationship to you.
How to Change the You may change the beneficiary by written notice
Beneficiary signed by you and filed with us at our IPD. When we
receive it, the change will relate back and take
effect as of
- 15 -
<PAGE>
the date it was signed by you. However, the change
will be subject to any payments made or actions
taken by us before we received the notice at our
IPD.
PART 9: PAYMENT OPTIONS
The election of an alternative payment option must
be in a written form satisfactory to us. We have the
right to require proof of age of any person on whose
life payments depend, as well as proof of the
continued survival of any such person. We further
have the right to require that the amount applied on
the settlement date to any payment option elected at
least equal $2,000 and result in a monthly payment
of at least $20.
The guaranteed annuity payment rates under the
following options will be no less favorable than the
following:
Under Options A, B, D, E and F rates are
based on the a-49 Annuity Table projected to
1985 with Projection Scale B. We use an
interest rate of 3-3/8% for 5 and 10 year
certain periods under Option A, for the 10
year certain period under Option F, and for
Option E; an interest rate of 3-1/4% for the
20 year certain period under Options A and
F; and an interest rate of 3-1/2% under
Options B and D. Under Options G and H the
guaranteed interest rate is 3%.
Option A - Life A fixed annuity payable monthly while the annuitant
Annuity with is living or, if later, the end of the period
Specified Period certain specified by you. The period certain may be
Certain specified as 5, 10 or 20 years. The period certain
must be elected at the time that this option is
elected.
Option B - A fixed annuity payable monthly while the annuitant
Non-Refund is living and ending with the last payment due
Life Annuity preceding the date of the annuitant's death.
Option D - Joint A fixed annuity payable monthly while the annuitant
and Survivorship and the designated joint annuitant are living, and
Life Annuity continuing thereafter during lifetime of the
survivor. The amount to be continued to the survivor
may be 100% or 50% of the joint annuity payment, as
specified at the time this option is elected. The
designated joint annuitant must be designated at the
time this option is elected and must have an
adjusted age of at least 40. The adjusted age is the
person's age on his or her birthday nearest the
settlement date.
- 16 -
<PAGE>
Option E - Install- A fixed annuity payable monthly while the annuitant
ment Refund Life is living or, it later, the date the annuity
Annuity payments made under this option total an amount
which refunds the entire amount applied under this
option. If the annuitant is not living when the
final payment falls due, that payment will be
limited to the amount which needs to be added to the
payments already made to equal the entire amount
applied under this option.
Option F - Joint and A fixed annuity payable monthly while either the
Survivorship Life annuitant or designated joint annuitant is living,
Annuity with or if later, the end of the specified period
Specified Period certain. The period certain specified may be 10 or
Certain 20 years. The period certain must be specified at
the time this option is elected. The designated
joint annuitant must be designated at the time this
option is elected and must have an adjusted age of
at least 40. The adjusted age is the person's age on
his or her birthday nearest the settlement date.
Option G - Payments Equal income installments for a specified period of
for a Specified years are paid whether the payee lives or dies. The
Period period certain specified must be in whole number of
years from 5 to 30.
Option H - Payments Equal income installments of a specified amount are
of a Specified paid until the principal sum remaining under this
Amount option from the amount applied is less than the
amount of the installment. When that happens, the
principal sum remaining will be paid as a final
payment. The amount specified must provide for
payments for a period of at least 5 years.
Other Options We may offer other payment options or alternative
versions of the options listed above.
80911
- 17 -
<PAGE>
Policy Amendment for Installment Plans
This amendment is issued as part of the policy to
which it is attached.
Definitions The Definitions in Part 1 are amended to add the
following definition:
Installment Period The period ending 31 days after
the end of the first policy year or, if earlier, the
date the total premiums paid on this policy first
equals $2000.
Premium Amounts, The second paragraph of the provision entitled
Grace Period, "Premium Amounts" in Part 3 is amended to read
and Additional as follows:
Premiums
Prior to expiry of the installment period, except
for additional premiums as described below, neither
the amount nor payment intervals of subsequent
premiums may be changed unless we agree to the
change. After expiry of the installment period, you
may vary the amount of subsequent premiums subject
to the same conditions described below for
additional premiums.
If on any premium due date during the installment
period, the total premiums paid on this policy fails
to equal or exceed the sum of the initial premium
and all subsequent premiums due under this policy as
of that due date, then this policy will lapse.
However, before we lapse the policy, you will be
granted a grace period of 31 days after that premium
due date in which to pay the outstanding premium
amount due. This grace period is not granted for the
initial premium. Your policy will remain in full
force during the grace period.
Additional premiums, may be changed subject to the
following limits:
a. Each premium payment must at least equal $150.
b. No more than $1,000,000 in total premiums may
be paid on this policy unless we agree
otherwise.
c. The premium payment intervals may be changed to
annual, semi-annual, quarterly, monthly,
flexible, or any other arrangement agreed to by
us.
1017
<PAGE>
We reserve the right to waive any and all of the
above limits.
Policy Lapse Part 4 is amended to add the following new
provision:
If this policy lapses due to non-payment of any
premium falling due during the installment period,
then this policy will lapse effective as of the
Valuation Date next following the end of the grace
period provided for payment of the outstanding
premium amount due. Such Valuation Date shall be
referred to as the date of lapse.
If your policy lapses as described above, its
Accumulated Value on the date of lapse, less any
applicable deferred sales charge, will be applied to
provide an immediate 10-year period certain monthly
life annuity under Option A as described in Part 7.
If the amount to be applied on the date of lapse is
less than $2000, or if the amount of each monthly
payment under that option would be less than $20, we
shall have the right to pay such amount to you in
one lump sum in lieu of providing such annuity.
Limitation on The policy is amended to provide as follows:
Choice of
Sub-Accounts, Notwithstanding any terms of this policy to the
Transfers, and contrary, until expiry of the installment period,
Withdrawals your choice of Sub-Accounts to which premiums are to
be allocated is limited to either the Money Market
sub-account exclusively or the Bond Sub-Account
exclusively and may not later be changed for
subsequent or additional premium payments made
during the installment period. In addition, no
transfers or withdrawals, other than a full
surrender, may be made during the installment
period.
Phoenix Mutual Life Insurance Company
Secretary President
Registrar
2.58
<PAGE>
Policy Amendment for Individual Retirement Annuities
This amendment is issued as part of the policy to which it is attached.
Notwithstanding any provisions of the policy to the contrary, this policy is
amended as specified below to comply as an Individual Retirement Annuity under
the terms of the Internal Revenue Code of 1954 (the Code) as ammended:
NONFORFEITABILITY Your rights in this policy shall be nonforfeitable
to the extent provided herein.
NONTRANSFERABILITY The provision entitled "Assignments" in Part 2 is
amended to read as follows:
Your policy 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 to us.
LIMITATION ON
PREMIUM AMOUNTS The provision entitled "Premium Amounts" in Part 3
is amended to add the following limitation:
Except in the case of "rollover contributions" as
described in Sections 402(a)(5), 402(a)(7),
403(a)(4), 403(b)(8), or 408(d)(3) of the Code, or
an employer contribution to a simplified employee
pension as defined in Section 408(k), no more than
$2000 in premium may be paid or applied under this
policy for any taxable year of the annuitant. Unless
you in writing notify us otherwise, your taxable
year will be assumed to coincide with the calendar
year.
Any premium refund, other than amounts refunded to
you as excess contributions, will be applied as
additional premium.
MATURITY DATE The definitions in Part 1 are amended to redefine
Maturity Date as follows:
The Maturity Date shown on the Schedule Page or such
changed Maturity Date as we may later agree in
writing, but in no event earlier than the first
policy anniversary or later than the date you are
age 70-1/2 or such later date as may be permitted
pursuant to a spousal election as provided below
under Death Benefits.
1017
<PAGE>
Page Two
LIMITATION ON Part 7 entitled "Annuity Benefits" and Part 9
PAYMENT OPTIONS entitled "Payment Options" are amended to the extent
needed to conform to the following:
The payment period for the following Payment
Options, including any annuity automatically payable
on the Maturity Date under Payment Option A, may not
exceed the life expectancy of the annuitant(s) or,
with respect to Options G & H, the life expectancy
of the person electing such option:
1. the period certain under Payment Option A and
F; and
2. the refund period under Payment Option E; and
3. the payment periods under Payment Options G
and H;
DEATH BENEFITS The second paragraph of the provision entitled "How
the Death Benefit is Determined" in Part 8 is
amended to permit the beneficiary of any death
benefit payable if you die before the Maturity Date
to elect any alternative annuity payment option
described in Part 9, subject to the limitation on
Payment Options described above.
The last paragraph of the provision entitled "How
the Death Benefit is Determined" is amended to
permit any spouse electing to continue the policy on
his or her life as substitute annuitant to adjust
the Maturity Date to any date to whichever may
agree, but not beyond the later of such spouse's age
70-1/2 or the deceased spouse's age 70-1/2.
MODIFICATIONS We reserve the right to modify this amendment to
comply with future changes in the Code and any
regulations or rulings issued under such Code. We
shall provide you a copy of any such modifications.
Secretary President
Registrar
2.52
<PAGE>
Policy Amendment for Qualified Plans Other Than IRA's
This amendment is issued as part of the policy to which it is attached.
THE OWNER The definitions in Part 1 are amended to redefine
You and Your to mean the plan trustee or plan
sponsor designated as owner in the application for
this policy whenever such terms are used to
reference any rights otherwise exercisable by the
annuitant under this policy.
NONTRANSFERABILITY The provision entitled "Assignments" in Part 2 is
amended to read as follows:
Your policy 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 to us.
LIMITATION ON The beneficiary provisions in Part 8 are amended to
RIGHT TO CHANGE provide that the owner shall also be the beneficiary
BENEFICIARY and to provide that, except with respect to the
election of Payment Options as described in Part 9,
no change may be made in the beneficiary.
Upon election of any such Payment Option, the owner
may, on the date of settlement, designate such
persons as are to be the beneficiaries under such
supplementary contracts distributed by us reflecting
the terms of the Payment Option elected.
SUPPLEMENTARY The first paragraph of Part 9 entitled "Payment
CONTRACTS Options" is amended to add the following:
We reserve the right to require that the election of
a Payment Option be in the form of a supplementary
contract betwen you and us reflecting the terms of
the Payment Option elected.
Secretary President
Registrar
2.60
Exhibit 4b
Form of Contract
<PAGE>
DRAFT: APRIL 14, 1988
PHOENIX MUTUAL LIFE INSURANCE COMPANY
Home Office: One American Row, Hartford, Connecticut 06115
Annuitant Age and Sex
Policy Number Policy Date
Initial Premium Maturity Date
Dear Policyowner:
We agree to pay the benefits of this policy in accordance with its provisions.
It is important to us that you are satisfied with your policy. For service or
information on this policy contact the agent who sold the policy or our
Investment Products Division at the following address:
Phoenix Mutual Life Insurance Company
Investment Products Division
One American Row
Hartford, Connecticut 06115
RIGHT TO CANCEL. You have a right to return this policy. If for any reason you
are not satisfied with this policy, you may return it to us at our Investment
Products Division within 10 days after it is delivered to you for a refund of
the Accumulated Value plus any charges made under this policy.
The Accumulated Value will be determined as of the nearest Valuation Date
coincident with or following the date we received the returned policy at our
Investment Products Division.
This policy provides for the payment of a deferred life annuity with a 10-year
period certain based on the values accumulated during the variable accumulation
period prior to the Maturity Date. The amount of accumulated values and
resulting benefits will depend on the investment experience of the underlying
sub-account(s) during the accumulation period and may vary in amount. The
annuity payments will be based on this policy's Accumulated Value on the
Maturity Date and the annuity purchase rates stated herein.
Signed for Phoenix Mutual Life Insurance Company at its Home Office in Hartford,
Connecticut.
Sincerely yours,
Secretary President
Registrar
Flexible Premium Variable Accumulation Deferred Annuity.
THE ACCUMULATED VALUE AND RESULTING BENEFITS ARE VARIABLE. THEY WILL
DEPEND ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNT(S)
DURING THE ACCUMULATION PERIOD AND MAY INCREASE OR DECREASE IN AMOUNT.
SEE PART 7 FOR A DESCRIPTION OF HOW THE ACCUMULATED VALUES ARE
DETERMINED, AND PART 9 FOR A DESCRIPTION OF HOW THE DEATH BENEFITS ARE
DETERMINED.
2646 Non-participating
0461B
<PAGE>
PHOENIX MUTUAL LIFE INSURANCE COMPANY
Home Office: One American Row, Hartford, Connecticut 06115
Annuitant Age and Sex
Policy Number Date of Issue
Initial Premium Maturity Date
YOU HAVE A RIGHT TO CANCEL THIS POLICY. You may cancel it by returning the
policy to the agent through whom it was purchased or by delivering or mailing a
written notice or telegram to our Investment Products Division at the following
address:
Phoenix Mutual Life Insurance Company
Investment Products Division
One American Row
Hartford, Connecticut 06115
before midnight of the tenth day after this policy is delivered to you.
Notice given by mail and return of the policy or contract by mail are effective
on being postmarked, properly addressed, and postage prepaid.
If cancelled, the policy will be considered void from the beginning and we will
return any payments made for this policy, less any partial surrender amounts
paid. Such payment will be made within ten days after we receive notice of
cancellation and the return policy.
This policy provides for the payment of a deferred life annuity with a 10-year
period certain based on the values accumulated during the variable accumulation
period prior to the Maturity Date. The annuity payments will be based on this
policy's Accumulated Value on the Maturity Date and the annuity purchase rates
stated herein.
Signed for Phoenix Mutual Life Insurance Company at its Home Office in Hartford,
Connecticut.
Sincerely yours,
Secretary President
Registrar
Flexible Premium Variable Accumulation Deferred Annuity.
THE ACCUMULATED VALUE AND RESULTING BENEFITS ARE VARIABLE. THEY WILL
DEPEND ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNT(S)
DURING THE ACCUMULATION PERIOD AND MAY INCREASE OR DECREASE IN AMOUNT.
SEE PART 6 FOR A DESCRIPTION OF HOW THE ACCUMULATED VALUES ARE
DETERMINED, AND PART 8 FOR A DESCRIPTION OF HOW THE DEATH BENEFITS ARE
DETERMINED.
Non-Participating
2646 MN
<PAGE>
PHOENIX MUTUAL LIFE INSURANCE COMPANY
Home Office: One American Row, Hartford, Connecticut 06115
Annuitant Age and Sex
Policy Number Date of Issue
Initial Premium Maturity Date
Dear Annuitant:
We agree to pay the benefits of this policy in accordance with its provisions.
It is important to us that you are satisfied with your policy. For service or
information on this policy contact the agent who sold the policy or our
Investment Products Division at the following address:
Phoenix Mutual Life Insurance Company
Investment Products Division
One American Row
Hartford, Connecticut 06115
RIGHT TO CANCEL. You have a right to return this policy. If for any reason you
are not satisfied with this policy, you may return it to us at our Investment
Products Division within 10 days after it is delivered to you for a refund of
the Accumulated Value plus any charges made under this policy.
The Accumulated Value will be determined as of the nearest Valuation Date
coincident with or following the date we received the returned policy at our
Investment Products Division.
This policy provides for the payment of a deferred life annuity with a 10-year
period certain based on the values accumulated during the variable accumulation
period prior to the Maturity Date. The annuity payments will be based on this
policy's Accumulated Value on the Maturity Date and the annuity purchase rates
stated herein.
Signed for Phoenix Mutual Life Insurance Company at its Home Office in Hartford,
Connecticut.
Sincerely yours,
Secretary President
Registrar
Flexible Premium Variable Accumulation Deferred Annuity.
THE ACCUMULATED VALUE AND RESULTING BENEFITS ARE VARIABLE. THEY WILL
DEPEND ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNT(S)
DURING THE ACCUMULATION PERIOD AND MAY INCREASE OR DECREASE IN AMOUNT.
SEE PART 6 FOR A DESCRIPTION OF HOW THE ACCUMULATED VALUES ARE
DETERMINED, AND PART 8 FOR A DESCRIPTION OF HOW THE DEATH BENEFITS ARE
DETERMINED.
Non-Participating
2646
<PAGE>
PHOENIX MUTUAL LIFE INSURANCE COMPANY
Home Office: One American Row, Hartford, Connecticut 06115
Annuitant Age and Sex
Policy Number Date of Issue
Initial Premium Maturity Date
Dear Annuitant:
We agree to pay the benefits of this policy in accordance with its provisions.
It is important to us that you are satisfied with your policy. For service or
information on this policy contact the agent who sold the policy or our
Investment Products Division at the following address:
Phoenix Mutual Life Insurance Company
Investment Products Division
One American Row
Hartford, Connecticut 06115
RIGHT TO CANCEL. You have a right to return this policy. If for any reason you
are not satisfied with this policy, you may return it to us at our Investment
Products Division within 10 days after it is delivered to you for a refund of
the Accumulated Value plus any charges made under this policy.
The Accumulated Value will be determined as of the nearest Valuation Date
coincident with or following the date we received the returned policy at our
Investment Products Division.
This policy provides for the payment of a deferred life annuity with a 10-year
period certain based on the values accumulated during the variable accumulation
period prior to the Maturity Date.
Signed for Phoenix Mutual Life Insurance Company at its Home Office in Hartford,
Connecticut.
Sincerely yours,
Secretary President
Registrar
Flexible Premium Variable Accumulation Deferred Annuity.
THE ACCUMULATED VALUE AND RESULTING BENEFITS ARE VARIABLE. THEY WILL
DEPEND ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNT(S)
DURING THE ACCUMULATION PERIOD AND MAY INCREASE OR DECREASE IN AMOUNT.
SEE PART 6 FOR A DESCRIPTION OF HOW THE ACCUMULATED VALUES ARE
DETERMINED, AND PART 8 FOR A DESCRIPTION OF HOW THE DEATH BENEFITS ARE
DETERMINED.
Participating
2646 PAR
<PAGE>
POLICY SUMMARY
ABOUT THIS SUMMARY This summary briefly highlights some of the major
policy provisions. Since this is only a summary,
the detailed provisions of the policy will control.
See those provisions for full information and any
limits or restrictions that apply. To locate this
policy's provisions, use the Table of Contents.
Your policy is a legal contract between you and us.
You should, therefore, READ YOUR POLICY CAREFULLY.
Check the Schedule Page of this policy to make sure
it reflects the premium allocation requested.
Please call on your agent or us at any time you
have questions about your policy.
THE TYPE OF POLICY This policy provides for payment of a deferred life
annuity with 10-year period certain based on the
value accumulated during the variable accumulation
period prior to the Maturity Date. The amount of
each annuity payment will be based on the
Accumulated Value on that date.
PREMIUMS ALLOCATED The values that accumulate under this policy prior
TO SUB-ACCOUNTS to the Maturity Date are based on the amount and
number of premium payments made and the investment
experience of the sub-account(s) to which the
premium payments are allocated by you. The
sub-accounts are part of the Phoenix Mutual
Variable Accumulation Account (VA Account) and have
differing investment objectives as shown on the
Schedule Page. We have the right to add additional
sub-accounts subject to approval by the Securities
and Exchange Commission and where required, other
regulatory authorities. Subject to the terms of
this policy, you may transfer the policy's
Accumulated Value between and among the various
sub-accounts.
<PAGE>
The VA Account is a Separate Account established by
our company under Connecticut Law and is registered
as a unit investment trust under the Investment
Company Act of 1940. All income, gains and losses,
realized and unrealized, of the VA Account are
credited to or charged against the amounts placed
in the VA Account without reference to other
income, gains and losses of our General Account.
The assets of the VA Account are owned solely by us
and we are not a trustee with respect to such
assets.
We use the assets of the VA Account to buy shares
of the Fund identified on the Schedule Page of this
policy according to your most recent allocation
instruction on file with us at our IPD. The Fund is
registered under the 1940 Act as an open end,
diversified management investment company. The Fund
has separate Series that correspond to the
sub-accounts of the VA Account. Assets of each
sub-account are invested in shares of the
corresponding Fund Series.
WITHDRAWAL PRIVILEGE Subject to the terms of this policy, the
Accumulated Value of this policy, less any
applicable contingent deferred sales charge, may be
withdrawn in whole or in part on or before the
Maturity Date.
OTHER BENEFITS This policy provides a death benefit in the event
of the annuitant's death during the accumulation
period. The death benefit equals the greater of:
(a) the sum of all premium payments made under this
policy less any prior partial withdrawals or (b)
the Accumulated Value on the date we receive a
certified copy of the certificate of death. This
policy also provides alternative annuity settlement
options.
0641B
<PAGE>
SCHEDULE PAGE
Annuitant: :Age and Sex
Policy Number: :Policy Date
Owner:
Beneficiary: as stated in the application or as later changed.
Initial Premium: :Maturity Date
Subsequent Premiums:
Payment Intervals:
SUB-ACCOUNT FEES
Mortality and Expense Risk
Fee on Policy Date: .00342% (based on annual rate of 1.25%)
Daily Administrative Fee: 0.00000%
POLICY CHARGES
Annual Administrative Charge: $35
Transfer Charge: $l0 per transfer, in excess of the first two transfers per
policy year.
Contingent Deferred Sales Charge: See Part 5 for a description of how this
charge is determined.
SUB-ACCOUNT ALLOCATION SCHEDULE
Money Market Sub-Account #1 _______________%
Bond Sub-Account #3 _______________%
Stock Sub-Account #2 _______________%
Total-Vest Sub-Account #4 _______________%
2646B
<PAGE>
SCHEDULE PAGE (CONTINUED)
Annuitant: :Policy Number
DESCRIPTION OF SUB-ACCOUNTS
FUND: BIG EDGE SERIES FUND
MONEY MARKET The investment objective of the MONEY MARKET
sub-account is to provide maximum current income
consistent with capital preservation and liquidity.
STOCK The investment objective of the STOCK sub-account
is to achieve intermediate and long-term growth of
capital, with income as a secondary consideration.
BOND The primary investment objective of the BOND
sub-account is to seek high current income. Capital
growth is a secondary objective which will also be
considered when consistent with the objective of
high current income.
TOTAL-VEST The investment objective of the TOTAL-VEST
sub-account is to realize as high a level of total
rate of return over and extended period of time as
is considered consistent with prudent investment
risk.
2646B
<PAGE>
TEMPLETON INVESTMENT PLUS
Flexible Premium Variable Accumulation Deferred Annuity
SCHEDULE PAGE
Annuitant: :Age and Sex
Policy Number: :Policy Date
Owner:
Beneficiary: as stated in the application or as later changed.
Initial Premium: :Maturity Date
Subsequent Premiums:
Payment Intervals:
SUB-ACCOUNT FEES
Mortality and Expense Risk
Fee on Policy Date: .00342% (based on annual rate of 1.25%)
Daily Administrative Fee: .000342% (based on an annual rate of .125%)
POLICY CHARGES
Annual Administrative Charge: $35
Transfer Charge: $l0.00 per transfer, in excess of the first two transfers
per policy year.
Contingent Deferred Sales Charge: See Part 5 for a description of how this
charge is determined.
SUB-ACCOUNT ALLOCATION SCHEDULE
Templeton Money Market Sub-Account #131 _______________%
Templeton Bond Sub-Account #133 _______________%
Templeton Stock Sub-Account #132 _______________%
Templeton Asset Allocation Sub-Account #135 _______________%
2646T
<PAGE>
SCHEDULE PAGE (CONTINUED)
Annuitant: :Policy Number
DESCRIPTION OF SUB-ACCOUNTS
FUND: Templeton Variable Products Series Fund
TEMPLETON The investment objective of the TEMPLETON MONEY
MONEY MARKET MARKET sub-account is current income, stability of
principal, and liquidity.
TEMPLETON The investment objective of the TEMPLETON BOND
BOND sub-account is high current income.
TEMPLETON The investment objective of the TEMPLETON STOCK
STOCK sub-account is to pursue capital growth.
TEMPLETON The investment objective of the TEMPLETON ASSET
ASSET ALLOCATION ALLOCATION sub-account is long-term capital growth.
2646T
<PAGE>
TABLE OF CONTENTS
PART PAGE
Schedule Page
Policy Summary
1 Definitions
2 About This Policy
3 The Owner
4 Premiums and Allocations to Sub-Accounts
5 Transfers, Withdrawals, and Lapse
6 Expense Charges
7 Determining the Accumulated and Unit Values
8 Annuity Benefits
9 Death Benefits
10 Payment Options
0641B
<PAGE>
PART 1: DEFINITIONS
YOU (YOUR) The owner of this policy.
WE (OUR, US) Phoenix Mutual Life Insurance Company
Hartford, Connecticut
ACCUMULATED VALUE The total value of this policy's share, if any, of
all sub-accounts.
ANNUITY A contract promising a periodic series of payments.
ASSIGNS Any person to whom you assign an interest in this
policy if we have notice of the assignment in
accordance with the provisions stated in Part 2.
FIXED PAYOUT ANNUITY An annuity providing payments which do not vary in
amount after the first payment is made.
IPD Our Investment Products Division. The address is
shown on the cover page of this policy.
MATURITY DATE The Maturity Date shown on the Schedule Page
or such changed Maturity Date as we may later agree
in writing, but in no event earlier than the first
policy anniversary or later than the policy
anniversary nearest the annuitant's 85th birthday.
PAYMENT DATE The Valuation Date on which a premium payment
is received at our Investment Products Division
unless it is received after the close of the New
York Stock Exchange, in which case it will be the
next Valuation Date.
POLICY ANNIVERSARY The anniversary of the Policy Date.
POLICY DATE The policy date as shown on the Schedule Page.
It is the date from which policy years and
anniversaries are measured.
POLICY YEAR The first policy year is the one-year period
from the Policy Date. Easy succeeding policy year
is the one-year period from the policy anniversary
to the next policy anniversary.
UNIT A standard of measurement, as described in Part 4,
used to measure the value of each sub-account.
2646 -1-
<PAGE>
VALUATION DATE For any sub-account, every day the New York
Stock Exchange is open for trading and Phoenix
Mutual is open for business.
VALUATION PERIOD For any sub-account, it is the period in days
beginning with the day following the last Valuation
Date of that sub-account and ending on that
sub-account's next succeeding Valuation Date.
WRITTEN REQUEST A request in writing in a form satisfactory to us
(WRITTEN NOTICE) and received by us at our IPD.
PART 2: ABOUT THIS POLICY
THE EFFECTIVE DATE This policy will begin in effect on the Policy Date
provided the initial premium due is paid while the
annuitant is alive.
THE POLICY AND This policy and the written application, a copy of
APPLICATION which is attached to and made a part of this
policy, are the entire contract between you and us.
Any change in the terms of this policy, to be in
effect, must be signed by one of our executive
officers and countersigned by our Registrar or one
of our executive officers. This policy is issued at
our Home Office in Hartford, Connecticut. Any
benefits payable under this policy are payable at
our Home Office.
LIMITS ON OUR RIGHT We rely on all statements made by or for the
TO CONTEST THIS annuitant in the written application. These
POLICY statements are considered to be representations and
not warranties. We can contest the validity of this
policy for any material misrepresentation of a
fact. To do so, however, the misrepresentation must
be contained in the written application and a copy
of the application must be attached to this policy
when it is issued.
We cannot contest the validity of this policy,
after it has been in force during the annuitant's
lifetime for one year from its Policy Date.
REQUIRED PROOF OF Proof of the annuitant's age must be filed with us
AGE AND SURVIVAL before any annuity payments will begin. We also
have the right to require proof of the identity,
age and survival of any person entitled to any
payment under this policy or upon whose life any
payments depend.
CLAIM OF CREDITORS To the extent permitted by law, no amount payable
under this policy will be subject to any legal
process to satisfy the claims of creditors.
2646 -2-
<PAGE>
ADJUSTMENT FOR If the age or sex of the annuitant has been
MISSTATEMENT OF AGE misstated, any benefits payable will be adjusted
OR SEX to the amount that the premium paid would have
purchased based on the annuitant's correct age and
sex. Any overpayments and underpayments made by us
will be charged or credited against future payments
to be made under the policy.
ASSIGNMENTS We will not be considered to have notice of any
assignment of an interest in this policy until we
receive the original or copy of the assignment at
our IPD. In no event will we be responsible for its
validity. This policy may not be assigned or
transferred to any person or entity such that the
annuitant would not be considered the holder of the
contract for purposes of the distribution at death
of holder rules under Internal Revenue Code Section
72, as amended by the Tax Reform Act of 1986, or
the corresponding section of any new tax code. Such
section, as presently interpreted, would permit
assignment to the annuitant, a non-individual, or a
trust or other entity as agent for the annuitant.
STATEMENT OF ACCOUNT We will furnish you, at least annually, a statement
of the Accumulated Value of this policy in each of
the sub-accounts. We will also furnish you a
statement of the investments held by each
sub-account.
PART 3: THE OWNER
WHO IS THE OWNER The owner is the person named as owner in the
application, unless later changed as provided in
this policy. Ownership may not be changed to any
person or entity such that the annuitant would not
be considered the holder of the contract for
purposes of the distribution at death of holder
rules under Internal Revenue Code Section 72, as
amended by the Tax Reform Act of 1986, or the
corresponding section of any new tax or code. Such
section, as presently interpreted, would permit
ownership by the annuitant, a non-individual, or a
trust or other entity as agent for the annuitant.
The annuitant will be the owner, if no other person
is named as owner.
WHAT ARE THE RIGHTS You control this policy during the annuitant's
OF THE OWNER lifetime but not until this policy begins in force.
Unless you and we agree otherwise, you may exercise
all rights provided under this policy without the
consent of anyone else. Your rights include the
right to:
-3-
2646
<PAGE>
a. Receive any amounts payable under this policy
during the annuitant's lifetime.
b. Change the owner or the interest of any owner
subject to the restrictions stated in this
part.
c. Change the premium amount and payment
intervals. See Part 4.
d. Change the sub-account allocation schedule for
premium payments. See Part 4.
e. Transfer accumulated values between and among
the various sub-accounts. See Part 5.
f. Make withdrawals from the various sub-accounts
or fully surrender the policy for its
surrender value. See Part 6.
g. Select an annuity payment option for amounts
payable upon a withdrawal or full surrender.
h. Select an alternative annuity payment option
to commence on the Maturity Date. See Part 8.
i. Change the beneficiary of the death benefit.
See Part 9.
j. Assign, subject to the restrictions stated in
Part 2, release, or surrender any interest in
this policy. See Parts 2 and 5.
You may exercise these rights only while the
annuitant is alive. Your exercise of any rights
will, to the extent thereof, assign, release, or
surrender the interest of the annuitant and all
beneficiaries and owners under this policy.
HOW TO CHANGE THE To change the owner you must submit a written
OWNER request satisfactory to us.
PART 4: PREMIUMS AND ALLOCATIONS TO SUB-ACCOUNTS
PREMIUM AMOUNTS The initial premium is due on the Policy Date. The
annuitant must be alive when the initial premium is
paid. Thereafter, the premium amount and payment
intervals are as shown on the Schedule Page unless
later changed as described below. All premiums are
payable in advance at our Investment Products
Department, except that the initial premium may be
paid to an authorized agent of ours for forwarding
to our Investment Products Department. No benefit
associated with any such premium will be provided
until it is actually received by us at our
Investment Products Department.
-4-
2646
<PAGE>
You may vary the amount and payment intervals for
subsequent premiums, and additional premium
payments may be made within the following limits:
a. Each additional premium payment must at least
equal $25.
b. No more than $1,000,000 in total premiums may
be paid on this policy unless we agree
otherwise.
c. The premium payment intervals may be changed
to annual, semi-annual, quarterly, monthly,
flexible, or any other arrangement agreed to
by us.
We reserve the right to waive any or all of the
above limits.
NET PREMIUM The net premium is equal to the premium paid less
ALLOCATION the applicable premium tax, if any is assessable at
the time of payment of the premium. As of the
Policy Date, the premium tax for your policy, if
any, is as shown on the Schedule Page. The net
premium will be applied on the Payment Date to the
various sub-accounts in accordance with the
allocation schedule elected in the application.
The number of Units credited to each sub-account
will be determined by dividing the net premium
applied to that sub-account by the Unit Value of
that sub-account on the Payment Date.
You may change the allocation schedule with respect
to subsequent or additional premium payments by
written notice filed with us. We reserve the right
to waive the requirement of written notice.
PART 5: TRANSFERS, WITHDRAWALS, AND LAPSE
TRANSFERS AMONG You may transfer all or a portion of the
SUB-ACCOUNTS Accumulated Value of this policy among one or more
of the sub-accounts. You can make at least six
transfers per policy year. We reserve the right to
require that such transfers be made by written
request and to limit the number of additional
transfers made during a policy year. A transfer fee
will be imposed as shown on the Schedule Page. The
Accumulated Value of each sub-account will be
determined on the Valuation Date that coincides
with the date of transfer. Any new Units credited
to a sub-account as a result of any transfer shall
bear the same Payment Date as the Units released to
effectuate such transfer.
-5-
2646
064lB
<PAGE>
WITHDRAWALS AND You may withdraw in cash the Accumulated Value of
FULL SURRENDER this policy, less any applicable contingent
deferred sales charge, in whole or in part any time
prior to the Maturity Date. Such withdrawals must
be by written request in a form satisfactory to us
and must include such tax withholding information
as we may reasonably require. The withdrawal will
be accomplished by surrender and release of Units
credited to the sub-account(s) from which the
withdrawal is to be made. If as the result of a
withdrawal, no Accumulated Value remains under this
policy, the policy will be deemed fully surrendered
and of no further value or effect. The Accumulated
Value of each sub-account will be determined on the
Valuation Date that coincides with the date of the
withdrawal.
After the first policy year, and each year
thereafter, an amount up to 10% of the Accumulated
Value of this policy as of the end of the prior
policy year may be withdrawn free of any contingent
deferred sales charge. Any amount withdrawn during
the first policy year or in excess of such 10%
during later policy years will be subject to the
following contingent deferred sales charge,
expressed as a percentage of the amount withdrawn:
Age of Deposit in Complete Contingent
Years from Payment Date Unit Deferred
Released was Credited Sales Charge
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6 and over 0%
In no event, however, will the total of all
contingent deferred sales charges applied under
this policy exceed 9% of the total premiums paid on
this policy.
You may elect to apply the amount withdrawn or
surrendered to the various payment options
described in Part 9.
LAPSE If on any Valuation Date the Accumulated Value of
this policy becomes zero, the policy will
immediately terminate and lapse without value. We
will mail to you, at your most recent post office
address on file with us at our IPD, a written
notice of lapse within 30 days after any such
Valuation Date.
-6-
2646
<PAGE>
RULES AND LIMITATIONS The Units released for transfer or withdrawal will
be determined on a First-In, First-Out (FIFO)
basis.
No transfers, withdrawals, or full surrender may be
made after commencement of an annuity on the
Maturity Date or with respect to any funds applied
under a payment option.
DEFERRAL OF Transfers, withdrawals, or a request for a full
PAYMENT surrender will usually be processed within 7 days
after we receive the written request at our IPD.
However, we may postpone the processing of any such
transactions for any of the following as allowed
under the Investment Company Act of 1940:
(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 Units in the subaccounts; or
(d) when a governmental body having jurisdiction
over the account by order permits such
suspension.
Rules and regulations of the Securities and
Exchange Commission, if any, are applicable and
will govern as to whether conditions described in
(b) or (c) or (d) exist.
PART 6: EXPENSE CHARGES
Charges to cover expenses incurred by us in the
distribution and administration of this policy are
made in the manner described below. However, we
reserve the right to vary the amount of such
charges to amounts not exceeding the maximum
amounts stated below.
DISTRIBUTION CHARGES Charges to cover expenses incurred in the
distribution of this policy are taken in the form
of a contingent deferred sales charge as described
in Part 5 which is applied to any withdrawals or
full surrender made within the six-year period
following the Payment date the Units released were
credited.
MORTALITY AND EXPENSE The mortality and expense risk assumed by us is
RISK FEE taken in the form of a daily fee against each
sub-account in such amount as shown on the Schedule
Page.
-7-
2646
<PAGE>
DAILY A portion of the administrative expense incurred
ADMINISTRATIVE FEE by us is assessed in the form of a daily fee
against each sub-account in such amount as shown on
the Schedule Page.
ANNUAL A portion of the administrative expense incurred
ADMINISTRATIVE CHARGE by us is assessed in the form of an annual charge
as shown on the Schedule Page. Such charge will be
deducted at the end of each policy year from the
total Accumulated Value of this policy with each
sub-account bearing a pro-rata share of such
expense based on the proportionate Accumulated
Value of each of the sub-accounts. By agreement
with us, you may, instead, elect to pay this charge
to us in cash.
-8-
2646
<PAGE>
PART 7: DETERMINING THE ACCUMULATED AND UNIT VALUES
CREDITING OF When a premium payment is received by us, we will
SUB-ACCOUNT UNITS apply the premium paid less the applicable premium
tax on the Payment Date to credit Units to one or
more sub-accounts under this policy in accordance
with the most recent allocation schedule on file
with us. The number of Units credited to each
sub-account will be determined by dividing the
premium net of any applicable premium taxes,
applied to that sub-account by the then current
Unit Value of that sub-account.
DETERMINATION OF THIS The Accumulated Value of a sub-account at any time
POLICY'S ACCUMULATED prior to the Maturity Date is determined by
VALUE multiplying the total number of units under this
policy for that sub-account by the current Unit
Value of that sub-account. The total Accumulated
Value under this policy equals the sum of the
Accumulated Values of each of the sub-accounts.
DETERMINATION OF THE The Unit Value of each sub-account was set by us
CURRENT SHARE VALUE on the first Valuation Date under the sub-account.
The current Unit Value of a sub-account on any
subsequent Valuation Date is determined by
multiplying the Unit Value of the sub-account on
the immediately preceding Valuation Date by the Net
Investment Factor for that sub-account for the
Valuation Period just ended.
DETERMINATION OF THE The Net Investment Factor for a sub-account is
NET INVESTMENT FACTOR determined by the investment performance of the
assets underlying the sub-account for the Valuation
Period just ended. The Net Investment Factor of a
sub-account for any Valuation Period is equal to
1.0000000 plus the applicable net investment rate
for the period. The net investment rate is
determined by:
a. taking the sum of the accrued net investment
income and capital gains and losses, realized
or unrealized, of the sub-account for the
Valuation Period; and
b. for each calendar day in the Valuation Period
subtracting an amount equal to the mortality
and expense risk fee plus the daily
administrative fee; and
c. dividing the result of (a) and (b) by the
Accumulated Value of the sub-account at the
beginning of the Valuation Period.
THE VALUATION OF The values of the assets in each sub-account
SUB-ACCOUNT will be calculated in accordance with
applicable law and accepted procedures.
2646 -9-
<PAGE>
PART 8: ANNUITY BENEFITS
Unless you elect an alternative annuity payment
option as described in Part 10 on or before the
Maturity Date, the Accumulated Value of this policy
on the Maturity Date will automatically be applied
to provide you a 10-year period certain fixed
payout monthly life annuity based on the
annuitant's life under Payment Option A as
described in Part 10. 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, we shall have the right
to pay such amount to you in one lump sum in lieu
of providing such annuity. We also have the right
to change the annuity payment frequency to annual
if the monthly annuity payment would otherwise be
less than $20.
MATURITY DATE The amount of monthly annuity payment for each
GUARANTEED RATES $l,000 of Accumulated Value applied on the Maturity
Date to purchase a 10-year period certain life
annuity on the annuitant's life under Payment
Option A will be based on the rates shown below for
your age and sex. These rates are based on the a-49
Annuity Table projected to 1985 with Projection
Scale B and an interest rate of 3 3/8%. However, if
our current rates in effect for this policy on the
Maturity Date are more favorable, we well use those
rates.
*Age Male Female
55 4.95 4.57
60 5.54 5.09
65 6.30 5.79
70 7.24 6.70
75 8.26 7.79
80 9.12 8.83
85 9.60 9.50
*Based on the annuitant's age on his or her
birthday nearest the Maturity Date.
PART 9: DEATH BENEFITS
HOW THE DEATH BENEFIT In the event of the annuitant's death, we will
IS DETERMINED determine the amount of the death benefit as
follows:
A. Death before Maturity Date - If the annuitant dies
before the Maturity Date, the death benefit will
equal the greater of (1) the sum of all premium
payments made under this policy less any prior
partial withdrawals or (2) the Accumulated Value of
this policy on the date of our receipt of a
certified
2646 -10-
<PAGE>
copy of the certificate of death. In lieu of
receiving the death benefit in a lump sum cash
payment, the beneficiary may elect certain
alternative payment options as described below.
B. Death on or after Maturity Date - If the annuitant
dies on or after the Maturity Date, any death
benefit will be determined in accordance with the
provisions of the applicable payment option elected
by you.
If the annuitant dies before the Maturity Date, the
beneficiary of any death benefit then payable may
elect to apply his or her respective share of the
death benefit under any of the Payment Options
described in Part 10, subject to the following
limitations. These limitations are imposed to
satisfy the annuity contract definition
requirements of the Internal Revenue Code of 1986.
The beneficiary's election shall be limited to the
following options:
a. an Option A life annuity on the life of such
beneficiary with a specified period certain of at
least 5 years but not beyond the life expectancy of
such beneficiary; or
b. an Option B life annuity on the life of such
beneficiary; or
c. an Option E installment refund life annuity
providing for a refund period of at least 5 years
but not beyond the life expectancy of such
beneficiary; or
d. an Option G installment payout providing for
payments for a specified period of at least 5 years
but not beyond the life expectancy of such
beneficiary; or
e. an Option H installment payout providing for
payment of a specified amount for a period of at
least 5 years but not beyond the life expectancy of
such beneficiary.
We reserve the right to extend the options offered
or further restrict the options offered to the
extent consistent with future changes in the
Internal Revenue Code and any regulations or
rulings under such Code.
SUBSTITUTE ANNUITANT If the annuitant dies before the Maturity Date and
the annuitant's spouse is the beneficiary, in lieu
of any of the above settlements, he of she may
elect to continue this policy on his or her life as
the substitute annuitant as if no death had
occurred.
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<PAGE>
We shall have the right to first require return of
the policy to us so that we may amend it to reflect
this change.
THE BENEFICIARY Unless otherwise provided, any death benefit or
income payment that falls due after the annuitant's
death will be payable in equal shares to such
primary beneficiaries as are then living. But if
none is then living, payment will be made in equal
shares to such contingent beneficiaries as are then
living. But if no beneficiary is then living,
payment will be made to the executor or
administrator of the survivor of the annuitant and
all beneficiaries.
Unless otherwise stated, the relationship of a
beneficiary is the relationship to the annuitant.
HOW TO CHANGE THE At any time prior to death of the annuitant, you
BENEFICIARY may change the the beneficiary by written notice
signed by you and filed with us at our IPD. When we
receive it, the change will relate back and take
effect as of the date it was signed by you.
However, the change will be subject to any payments
made or actions taken by us before we received the
notice at our IPD.
PART 10: PAYMENT OPTIONS
The election of a payment option must be in a
written form satisfactory to us. We reserve the
right to require that the election of a payment
option be in the form of a supplementary contract
distributed by us reflecting the terms of the
payment - option elected. We have the right to
require proof of age and sex of any person on whose
life payments depend, as well as proof of the
continued survival of any such person. We further
have the right to require that the amount applied
on the settlement date to any payment option
elected at least equal $2,000 and result in a
monthly payment of at least $20. As regards the
election of a payment option by the beneficiary of
any death benefit payable under this policy,
limited as described in Part 9, the term
"annuitant" as used below shall refer to such
beneficiary.
The guaranteed annuity payment rates under the
following options will be based on the annuitant's
age and sex, and will be no less favorable than the
following:
Under Options A, B, D, E and F rates are based
on the a-49 Annuity Table projected to 1985
with Projection Scale B. We use an interest
rate of 3-3/8% for 5 and 10 year certain
periods under Option A, for the 10 year
certain period under Option F, and for Option
E; an interest rate of 3-1/4% for the 20 year
certain period under Options A and F; and
interest rate of 3-1/2% under Options B and D.
Under Options G and H the guaranteed interest
rate is 3%.
2646 -12-
<PAGE>
OPTION A - LIFE A fixed payout annuity payable monthly while the
ANNUITY WITH annuitant is living or, if later, the end of the
SPECIFIED PERIOD specified period certain. The period certain may be
CERTAIN specified as 5, 10, or 20 years. The period certain
must be elected at the time that this option is
elected.
OPTION B - A fixed payout annuity payable monthly while the
NON-REFUND annuitant is living and ending with the last
LIFE ANNUITY payment due preceding the date of the annuitant's
death.
OPTION D - JOINT A fixed payout annuity payable monthly while the
AND SURVIVORSHIP annuitant and the designated joint annuitant are
LIFE ANNUITY living, and continuing thereafter during the
lifetime of the survivor. The amount to be
continued to the survivor may be 100% or 50% of the
joint annuity payment, as specified at the time
this option is elected. The designated joint
annuitant must be designated at the time this
option is elected and must have an adjusted age of
at least 40. The adjusted age is the person's age
on his or her birthday nearest the settlement date.
OPTION E - INSTALLMENT A fixed payout annuity payable monthly while the
REFUND LIFE ANNUITY annuitant is living or, if later, the date the
annuity payments made under this option total an
amount which refunds the entire amount applied
under this option. If the annuitant is not living
when the final payment falls due, that payment will
be limited to the amount which needs to be added to
the payments already made to equal the entire
amount applied under this option.
OPTION F - JOINT AND A fixed payout annuity payable monthly while either
SURVIVORSHIP LIFE the annuitant or designated joint annuitant is
ANNUITY WITH living, or if later, the end of the specified
SPECIFIED PERIOD period certain. The period certain specified may be
CERTAIN 10 or 20 years. The period certain must be
specified at the time this option is elected. The
designated joint annuitant must be designated at
the time this option is elected and must have an
adjusted age of at least 40 years. The adjusted age
is the person's age on his or her birthday nearest
the settlement date.
OPTION G - PAYMENTS Equal income installments for a specified period
FOR A SPECIFIED of years are paid whether the payee lives or dies.
PERIOD The period certain specified must be in whole
number of years from 5 to 30.
2646 -13-
0641B/21
<PAGE>
OPTION H - PAYMENTS Equal income installments of a specified amount are
OF A SPECIFIED paid until the principal sum remaining under this
AMOUNT option from the amount applied is less than the
amount of the installment. When that happens, the
principal sum remaining will be paid as a final
payment. The amount specified must provide for
payments for a period of at least 5 years.
OTHER OPTIONS We may offer other payment options or alternative
versions of the options listed above.
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2646
0641B/22
<PAGE>
POLICY AMENDMENT FOR QUALIFIED PLANS OTHER THAN IRA'S OR TSA'S
THIS AMENDMENT IS ISSUED AS PART OF THE POLICY TO
WHICH IT IS ATTACHED.
THE OWNER The definitions in Part 1 are amended to redefine
You and Your to mean the plan trustee or plan
sponsor designated as owner in the application for
this policy whenever such terms are used to
reference any rights otherwise exercisable by the
annuitant under this policy.
NONTRANSFERABILITY The provision entitled "Assignments" in Part 2 is
amended to read as follows:
Your policy 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, except
pursuant to a Qualified Domestic Relations
Order as defined in the Internal Revenue Code
of 1954 as now or later amended.
LIMITATION ON YOUR The beneficiary provisions in Part 8 are amended to
RIGHT TO CHANGE provide that the owner shall also be the
THE BENEFICIARY beneficiary and to provide that, except with
respect to the election of Payment Options as
described in Part 9, no change may be made in the
beneficiary.
Upon election of any such Payment Option, the owner
may, on the date of settlement, designate such
persons as are to be the beneficiaries under such
supplementary contracts distributed by us
reflecting the terms of the Payment Option elected.
SUPPLEMENTARY The first paragraph of Part 9 entitled "Payment
CONTRACTS Options" is amended to add the following:
We reserve the right to require that the
election of a Payment Option be in the form of
a supplementary contract between you and us
reflecting the terms of the Payment Option
elected.
Phoenix Mutual Life Insurance Company
Secretary President
Registrar
R612
0641B/23
<PAGE>
POLICY AMENDMENT FOR INDIVIDUAL RETIREMENT ANNUITANTS
THIS AMENDMENT IS ISSUED AS PART OF THE POLICY TO
WHICH IT IS ATTACHED. NOTWITHSTANDING ANY
PROVISIONS OF THE POLICY TO THE CONTRARY, THIS
POLICY IS AMENDED AS SPECIFIED BELOW TO COMPLY AS
AN INDIVIDUAL RETIREMENT ANNUITY UNDER THE TERMS OF
THE INTERNAL REVENUE CODE OF 1954 (THE CODE) AS NOW
OR LATER AMENDED:
NONFORFEITABILITY Your rights in this policy shall be nonforfeitable
to the extent provided herein.
NONTRANSFERABILITY The provision entitled "Assignments" in Part 2 is
amended to read is follows:
Your policy may not be sold, assigned,
discounted or pledged as collateral for a loan
or as security for the performance of any
obligation, or for any other purpose.
LIMITATION ON
PREMIUM AMOUNTS The provision entitled "Premium Amounts" in Part 3
is amended to add the following limitation:
Except in the case of "rollover contributions"
as described in Sections 402(a)(5), 402(a)(7),
403(a)(4) , 403(b)(8), or 408(d)(3) of the
Code, or an employer contribution to a
simplified employee pension as defined in
Section 408(k), no more than $2,000 in premium
may be paid or applied under this policy for
any taxable year of the annuitant. Unless you
in writing notify us otherwise, your taxable
year will be assumed to coincide with the
calendar year.
Any premium refund, other than amounts
refunded to you as excess contributions, will
be applied as additional premium or to provide
additional benefits.
MATURITY DATE The definitions in Part I are amended to redefine
Maturity Date as follows:
The Maturity Date shown on the Schedule Page
or such changed Maturity Date as we may later
agree in writing, but in no event earlier than
the first policy anniversary or later than the
first day of April following the calendar year
in which you attain age 70-1/2 or such later
date as may be permitted pursuant to spousal
election as provided below under Death
Benefits.
R614 -1-
0641B/24
<PAGE>
LIMITATION ON Part 7 entitled "Annuity Benefits" and Part 9
PAYMENT OPTIONS entitled "Payment Options" are amended to the
extent needed to conform to the following:
The following payment periods, including the
period certain under any annuity automatically
payable on the Maturity Date under Payment
Option A, may not exceed the life expectancy
of the annuitant(s) or, with respect to
Options G & H, the life expectancy of the
BENEFICIARY UNDER such option:
1. the period certain under Payment
Option A and F; and
2. the refund period under Payment Option
E; and
3. the payment periods under Payment
Options G and H.
Joint and survivorship Payment Options D and F
are only available for annuity on the life of
you and the designated beneficiary.
DEATH BENEFITS The second paragraph of the provision entitled "How
the Death Benefit is Determined" in Part 8 is
amended to further require, in the event of your
death prior to the Maturity Date, that payments
under any payment option elected by the beneficiary
commence no later than one year after the date of
your death.
Payment of the death proceeds in any manner other
than as described under Payment Options in Part 9
must result in distribution of the entire death
proceeds within 5 years after your death.
The last paragraph of the provision entitled "How
the Death Benefit is Determined" is amended to
permit any spouse beneficiary electing to continue
the policy on his or her life as substitute
annuitant to further elect to either:
a. reat the policy as his or her own policy
and thus enjoy all rights of annuitant as
stated in the policy, including the right
to pay premiums or to request an adjustment
of the Maturity Date to a date not beyond
the first day of April following the
calendar year in which such substitute
annuitant attains age 70-1/2; or
R614 -2-
0641B/25
<PAGE>
b. reat the policy as remaining the deceased
spouse's policy, in which event the
substitute annuitant may enjoy all rights
of annuitant as stated in the policy except
that no additional premium payments may be
made and the Maturity Date may not be
adjusted beyond the first day of April
following the calendar year in which the
deceased spouse would have attained age
70-1/2.
If you die before the Maturity Date, your
spouse is the beneficiary, and he or she
makes no other settlement selection or
makes a regular IRA or rollover
contribution to or from the policy, he or
she will be deemed as having made an
election to continue the policy as his or
her own policy under a. above.
MODIFICATIONS We reserve the right to modify this amendment to
comply with future changes in the Code and any
regulations or rulings issued under such code. We
shall provide you a copy of any such modifications.
Phoenix Mutual Life Insurance Company
Secretary President
Registrar
R614 -3-
0641B/26
<PAGE>
POLICY AMENDMENT FOR TAX SHELTERED ANNUITIES
THIS AMENDMENT IS ISSUED AS PART OF THE POLICY TO
WHICH IT IS ATTACHED. NOTWITHSTANDING ANY
PROVISIONS OF THE POLICY TO THE CONTRARY, THIS
POLICY IS AMENDED AS SPECIFIED BELOW TO COMPLY AS A
TAX SHELTERED 403(B) ANNUITY UNDER THE TERMS OF THE
INTERNAL REVENUE CODE OF 1954 (THE CODE) AS NOW OR
LATER AMENDED:
NONFORFEITABILITY Your rights in this policy shall be nonforfeitable
to the extent provided herein.
NONTRANSFERABILITY The provision entitled "Assignments" in Part 2 is
amended to read as follows:
Your policy 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.
LIMITATION ON The provision entitled "Premium Amounts" in Part 3
PREMIUM AMOUNTS is amended to add the following limitation:
Except in the case of amount transferred by
reason of a "rollover contribution" as
described in Code Sections 403(b)(8) or
408(d)3(a)(iii), (as permitted in Code Section
403(b)(l)) contributions made by the
annuitant's taxable year may not exceed the
lesser of:
a. the annuitant's exclusion allowance as
determined for that year in accordance with
the provisions of Code Section 403(b)(2);
b. the amount permitted to be contributed
under Code Section 415; or
c. $9,500, as adjusted by the provisions of
Code Section 402(g)(5) (Cost of living
adjustment) unless a higher amount is
permitted under Code Section 402(g)(8).
MATURITY DATE The definitions in Part I are amended to redefine
Maturity Date as follows:
The Maturity Date shown on the Schedule Page
or such changed Maturity Date as we may later
agree in writing, but in no event earlier than
the first policy anniversary or later than the
first day of April following the calendar year
in which you attain age 70-1/2.
R615 -1-
0641B/27
<PAGE>
LIMITATION ON Part 7 entitled "Annuity Benefits" and Part 9
PAYMENT OPTIONS entitled "Payment Options" are amended to the
extent needed to conform to the following:
The following payment periods, including the
period certain under any annuity automatically
payable on the Maturity Date under Payment
Option A, may not exceed the life expectancy
of the annuitant(s) or, with respect to
Options G & H, the life expectancy of the
beneficiary under such option:
1. the period certain under Payment Option
A and F; and
2. the refund period under Payment Option
E; and
3. the payment periods under Payment
Options G and H.
Joint and survivorship Payment Options D and F
are only available for an annuity on the life
of you and the designated beneficiary.
Payment of the death proceeds in any manner
other than as described under Payment Options
in Part 9 must result in distribution of the
entire death proceeds within 5 years after
your death.
DEATH BENEFITS The second paragraph of the provision entitled "How
the Death Benefit is Determined" in Part 8 is
amended to further require, in the event of your
death prior to the Maturity Date, that payments
under any payment option elected by the beneficiary
commence no later than one year after the date of
your death.
MODIFICATIONS We reserve the right to modify this amendment to
comply with future changes in the Code and any
regulations or rulings issued under such Code. We
shall provide you a copy of any such modifications.
Phoenix Mutual Life Insurance Company
Secretary President
Registrar
R615 -2-
0641B/28
<PAGE>
POLICY AMENDMENT
THIS AMENDMENT IS ISSUED AS PART OF THE POLICY TO WHICH IT IS ATTACHED.
The section entitled "Maturity Date Guaranteed Rates" is amended to read as
follows:
The amount of monthly annuity payment for each $l,000 of Accumulated Value
applied on the Maturity Date to purchase a 10-year period certain life
annuity on the annuitant's life under Payment Option A will be based on
the a-49 female Annuity Table projected to 1985 with Projection Scale B
and an interest rate 3 3/8%. However, if our current rates in effect for
this policy on the Maturity Date are more favorable, we will use those
current rates.
*Age
55 4.57
60 5.09
65 5.79
70 6.70
75 7.79
80 8.83
85 9.50
*Based on the annuitant's age on his or her birthday nearest the
Maturity Date.
The first two paragraphs of Part 10 "Payment Options" are amended to read as
follows:
The election of a payment option must be in a written form satisfactory to
us. We have the right to require proof of age of any person on whose life
payments depend, as well as proof of the continued survival of any such
person. We further have the right to require that the amount applied on
the settlement date to any payment option elected at least equal $2,000
and result in a monthly payment of at least $20. As regards the election
of a payment option by the beneficiary of any death benefit payable under
this policy, limited as described in Part 9, the term "annuitant" as used
below shall refer to such beneficiary.
The guaranteed annuity payment rates under the following options will be
no less favorable than the following:
Under Options A, B, D, E and F rates are based on the a-49 female Annuity
Table projected to 1985 with Projection Scale B. We use an interest rate
of 3-3/8% for 5 and 10 year certain periods under Option A, for the 10
year certain period under Option F, and for Option E; an interest rate of
3-1/4% for the 20 year certain period under Options A and F and interest
rate of 3-1/2% under Options B and D. Under Options G and H the guaranteed
interest rate is 3%.
The provision entitled "Adjustment for Misstatement of Age or Sex" in Part 2 is
amended to read as follows:
If the annuitant's age has been misstated, any benefits payable will be adjusted
to the amount that the premium paid would have purchased based on the annuitants
correct age. Any overpayments and underpayments made by us will be charged or
credited against future payments to be made under the policy.
Phoenix Mutual Life Insurance Company
Secretary Chairman of the Board
Registrar
R639 0641B/29
<PAGE>
TEMPORARY MONEY MARKET ALLOCATION AMENDMENT
THIS AMENDMENT IS ISSUED AS PART OF THE POLICY TO
WHICH IT IS ATTACHED IF IT IS LISTED ON THE
SCHEDULE PAGE OF THE POLICY OR IN AN ENDORSEMENT
AFTER THAT PAGE. YOU SHOULD THEREFORE REVIEW THE
POLICY'S SCHEDULE PAGE FOR APPLICABILITY.
REFUND RIGHT AND The refund right stated in the Right to Cancel
TEMPORARY MONEY provision on the cover page of the policy is
MARKET SUB-ACCOUNT amended to provide for a full refund of any premium
ALLOCATION paid less any partial surrender amounts paid, if
the returned policy is received by us at our
Investment Products Division prior to termination
of the Right to Cancel Period.
PREMIUM ALLOCATION The provision in Part 3, entitled "Net Premium
Allocation" is amended to provide that the net
premium will temporarily be applied on its Payment
Date entirely to the Money Market sub-account until
termination of the Right to Cancel period stated on
the cover page of the policy. Upon termination of
such period without prior receipt at our Investment
Products Division of the returned policy for a
refund, the then value of this policy's share in
the Money Market sub-account will automatically be
reallocated based on the premium allocation
schedule elected in the application or as later
changed by you. The resultant share of this policy
in the value of each of the respective sub-accounts
on the date of transfer shall be in the same
percentages of the then total Accumulated Value as
the premium allocation percentages elected in the
application or as later changed by you.
TRANSFERS The provision in Part 4, entitled "Transfers Among
Sub-Accounts", is amended to provide that no
transfers may be made until termination of the
Right to Cancel period stated on the cover page.
Phoenix Mutual Life Insurance Company
Secretary President
Registrar
R617
0641B/28
Exhibit 4c
Form of Contract
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
Main Administrative Office: One American Row, Hartford,
Connecticut 06115
Statutory Home Office: 99 Troy Road, East Greenbush,
New York, 12061
--------------------------------------------------------
Policyholder: Trustees of the ABC Company
Employee Pension Plan Trust
Name of Plan: ABC Company Employee Pension
Plan and Trust
Policy/Plan No.: 0001
Effective Date: June 1, 1993
--------------------------------------------------------
Phoenix Home Life Mutual Insurance Company agrees to pay the benefits of this
Policy in accordance with its terms, in consideration of the application of the
Policyholder and of the payment of premiums as provided herein. It will take
effect on the Policy Effective Date. Except as otherwise provided by law, this
Policy is governed by the laws of the state where it is delivered.
For service or information on this Policy, please contact our Variable Products
Operations Division at the following address:
Phoenix Home Life Mutual Insurance Company
Variable Products Operations Division
101 Munson Street, P.O. Box 942
Greenfield, MA 01302
RIGHT TO CANCEL: As Policyholder, you have the right to cancel this Policy
within 10 days after it is delivered to you, by returning it to our Variable
Products Operations Division, for a refund of the Contract Value plus any
charges made under this Policy.
Values and benefits provided under the Policy are variable to the extent they
are based on the investment experience of the Separate Account, and are not
guaranteed as to dollar amount. See Part 6 for a description of how Accumulated
Values are determined; Part 7 for how the variable payments are determined; and
Part 8 for a description of how Participant Account death benefits are
determined.
Secretary Chairman of the Board
Registrar
GROUP FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
Allocated Participant Accounts
GD601
<PAGE>
GROUP FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
SCHEDULE PAGES
Policyholder: Trustees of the ABC Company Employee Pension Plan Trust
Name of Plan: ABC Company Employee Pension Plan and Trust
Policy/Plan No.: 0001
Effective Date: June 1, 1993
CONTRACT SPECIFICATIONS:
------------------------
STATEMENTS OF ACCOUNT: Statements of Account for each Participant Account will
be provided at quarterly intervals.
PREMIUM PAYMENT INTERVALS: Premiums may be paid to this Policy not more
frequently than bi-weekly.
ALLOCATION OF PARTICIPANT ACCOUNTS: If the Policyholder has so elected in the
Application for this Policy, Participants for whom Participant Accounts are
maintained are authorized to direct the allocation of premiums applied to such
Participant Accounts, and transfers of the value of such Participant Account, by
and between the Sub-accounts and the Guaranteed Interest Account, as set forth
in Part 3 of this Policy.
TRANSFERS: There are no limitations on the number of transfers of the value of a
Participant Account between or among the Sub-accounts and to the Guaranteed
Interest Account. Except as expressly provided otherwise in Part 4, not more
than four transfers may be made from the Guaranteed Interest Account in any
Participant Account Year, and only one such transfer may be made in any
three-consecutive month period. The amount of such transfers in any one
Participant Account Year from the Guaranteed Interest Account may not exceed the
greater of $1,000 or 25% of the value of Participant Account Value in the
Guaranteed Interest Account.
PARTICIPANT ACCOUNT ALLOCATIONS: There are no limitations on the number of times
the allocation of premiums credited to a Participant Account to Sub-accounts and
the Guaranteed Interest Account may be changed.
RIGHT OF TERMINATION: We reserve the right to terminate this Policy for any
reason, in accordance with procedures described in Part 2 of this Policy, at any
time after the twentieth anniversary of the Policy Effective Date.
GD601
<PAGE>
SEPARATE ACCOUNT FEE:
---------------------
DAILY MORTALITY AND EXPENSE FEE: .00342% (based on annual rate of 1.25%)
CONTRACT FEES AND CHARGES:
--------------------------
ANNUAL ADMINISTRATIVE CHARGE: $15 per Participant Account per Participant
Account Year. We reserve the right to increase the Annual Administrative Charge
on written prior notice to the Policyholder.
TRANSFER CHARGE: No charge will be imposed in respect to transfers among and
between Sub-accounts and the Guaranteed Interest Account. We reserve the right
to impose a Transfer Charge in instances where more than six transfers of the
value of a Participant Account are made between or among the Sub-accounts and
the Guaranteed Interest Account during a Participant Account Year, upon written
prior notice to the Policyholder.
ALLOCATION CHARGE: No charge will be imposed in respect to changes in the
allocation of Premiums and Deposits to the Sub-accounts and the Guaranteed
Interest Account. We reserve the right to impose an Allocation Charge in
instances where more than six allocation changes in respect to a Participant
Account are made during a Participant Account Year, upon written prior notice to
the Policyholder.
CONTINGENT DEFERRED SALES CHARGE: Any amount withdrawn from a Participant
Account or Unallocated Account maintained under this Policy will be subject to
the following Contingent Deferred Sales Charge, expressed as a percentage of the
amount withdrawn:
Age of Deposit in Complete Contingent Deferred
-------------------------- -------------------
Years From Pavment Date Sales Charge
----------------------- ------------
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6, or more 0%
The Contingent Deferred Sales Charge shall be waived in respect to a withdrawal
from a Participant Account upon a satisfactory demonstration by the Policyholder
that the amount withdrawn will be applied to provide benefits under the Plan in
respect to the Participant in whose name that Participant Account is maintained,
under the following circumstances:
a. the death or disability of the Participant; GD6Ol
GD601
<PAGE>
b. the purchase of an Individual Annuity Contract (as described in Part
7);
c. an election of Life Expectancy Distributions (as described in Part
7); or
d. the separation from service or retirement of such Participant
provided, however, that the Contingent Deferred Sales Charge shall be
waived in respect to such a withdrawal during the first five
Participant Account Years only if such Participant has attained age 55
by the date on which the withdrawal is made.
In no event will the total of all Contingent Deferred Charges applied to
withdrawals from this Policy exceed 9% of the total premium paid.
PREMIUM TAX CHARGE: 0.0000% of each premium paid. The Premium Tax Charge will be
assessed upon surrender of this Policy, or upon purchase of an Individual
Annuity Contract.
DESCRIPTION OF SEPARATE ACCOUNT SUB-ACCOUNTS
--------------------------------------------
FUND: THE PHOENIX EDGE SERIES FUND
BOND: The investment objective of the Bond Sub-account is to seek long-term
total return by investing in a diversified portfolio of high-yield (high-risk)
and high quality fixed income securities.
MONEY MARKET: The investment objective of the Money Market Sub-account is to
provide maximum current income consistent with capital preservation and
liquidity.
GROWTH: The investment objective of the Growth Sub-account is to achieve
intermediate and long-term growth of capital, with income as a secondary
consideration.
TOTAL RETURN: The investment objective of the Total Return Sub-account 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.
INTERNATIONAL: The International Sub-account seeks as its investment objective
of a high total return consistent with reasonable risk.
BALANCED: The investment objective of the Balanced Sub-account is to seek
reasonable income, long-term capital growth and conservation of capital.
We reserve the right to terminate any variable Sub-account on 60
GD601
<PAGE>
days written notice to the Policyholder, subject to compliance with applicable
law and regulations.
DESCRIPTION OF GUARANTEED INTEREST ACCOUNT:
-------------------------------------------
GUARANTEED INTEREST ACCOUNT: The Guaranteed Interest Account is not part of the
Separate Account. It is accounted for as part of our general account. We will
credit interest daily on any amounts held under the Guaranteed Interest Account
at such rates as we shall determine, but in no event will the effective annual
rate of interest be less than 3%.
On the last working day of each calendar week we will set the interest rate that
will apply to any Deposits made to the Guaranteed Interest Account during the
following calendar week. That rate will remain in effect for such Deposits, or
their resulting Adjusted Deposits, for an initial guarantee period on one full
year. Upon expiry of the initial one-year guarantee period, and each subsequent
one-year guarantee period thereafter, the rate applicable for any Deposits or
Adjusted Deposits whose guarantee period has just ended shall be the same rate
that applies to new Deposits made during the calendar week in which the
guarantee period expired. Such rate shall likewise remain in effect for such
Adjusted Deposits for a subsequent guarantee period on one full year.
We reserve the right to limit cumulative Deposits made to the Guaranteed
Interest Account during any one-week period to no more than $250,000. We reserve
the right to terminate the Guaranteed Interest Account at the end of any Policy
Year, upon not less than 60 days written notice to the Policyholder and
compliance with applicable law and regulations.
GD601
<PAGE>
Table of Contents
Part Page
1. Definitions................................................. 1
2. About the Policy
Policy the Entire Contract.................................. 3
The Policyholder's Rights .................................. 4
Conflicting Instructions ................................... 5
Participant Account Notice.................................. 5
Effect of Waiver of Policy
Provision.............................................. 5
Contestability.............................................. 5
Required Proof of Age and
Survival............................................... 5
Adjustment for Misstatement of Age.......................... 6
Claims of Creditors......................................... 6
Non-Assignability Provision................................. 6
Policyholder Account........................................ 6
Participant Accounts........................................ 6
Statements of Account....................................... 6
Divisibility of Surplus..................................... 6
Termination of This Policy.................................. 7
Effect of Termination....................................... 7
3. Allocation of Premiums
Premium Amounts........................................ 8
Premium Allocation..................................... 8
Premiums Allocated To
The Sub-accounts.................................. 9
The VA Account......................................... 9
The Guaranteed Interest Account........................ 10
4. Transfers, Withdrawals and Lapse
Transfers among Sub-accounts and
Guaranteed Interest Account............................ 10
Participant-Directed Account
Transfers and Allocations.............................. 12
Withdrawals and Surrender................................... 12
Lapse....................................................... 13
Rules and Limitations....................................... 13
Deferral of Payment......................................... 13
5. Expense Charges and Fees
Charges and Fees....................................... 14
Payment of Charges and Fees............................ 14
6. Determining the Accumulation Unit Values
Crediting of Account Accumulation
Units............................................. 14
Determination of Accumulated Value.......................... 14
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<PAGE>
Determination of the Current
Accumulation Unit Value................................ 14
Determination of Net
Investment Factor...................................... 14
Valuation of Sub-accounts................................... 15
7. Annuity Benefits
Purchase of Individual Annuity
Contract............................................... 15
Payment Option I............................................ 15
Calculation of Variable
Income Payments........................................ 16
Annuity Units............................................... 16
Annuity Unit Value.......................................... 16
Assumed Investment Rate..................................... 17
Payment Calculation Date.................................... 17
Restrictions................................................ 17
Variable Income Table....................................... 17
Life Expectancy Distributions............................... 18
8. Death Benefits
Death of Participant.................................... 18
Amount of Death Benefit................................. 19
GD601
<PAGE>
PART 1: DEFINITIONS
You (Your): The Policyholder named in this Policy.
We (Our, Us): Phoenix Home Life Mutual Insurance Company.
Account: Phoenix Home Life Variable Accumulation Account,
also referred to as the "VA Account."
Accumulation Value: The total value of this Policy's share, if any; in
all Sub-accounts.
Accumulation Unit: A standard of measurement, also referred to as a
"Unit" and described in Part 6, used to measure the
value of each Sub-account.
Adjusted Deposit: Any Deposit to the Guaranteed Interest Account, as
adjusted to include any interest credited on, and
any Policy charges or withdrawals deducted from,
such Deposit while held under such Sub-account.
Annuitant: A Participant for whom an Individual Annuity
Contract has been purchased under this Policy, and
whose life is the measuring life under such
Individual Annuity Contract.
Annuity: A contract promising a periodic series of payments
for a specified term.
Annuity Unit: A standard of measurement, as described in Part 7
used to measure the amount of each variable monthly
income payments, as described in Part 7.
Deposit: Any premium or transferred amount applied to the
Guaranteed Interest Account.
Guaranteed Interest
Account: An allocation option under this Policy, described
in the Schedule Pages, under which amounts
deposited are guaranteed to earn a fixed rate of
interest.
Individual Annuity
Contract: An individual Annuity contract purchased by the
Policyholder under this Policy to for a Participant
or for a Participant's beneficiary, in order to
provide benefits accrued under the Plan.
GD601 1
<PAGE>
Participant: An individual designated by the Policyholder as a
participant in the Plan, and for whom a Participant
Account is to be maintained under this Policy, or
in respect to whom an Individual Annuity Contract
has been issued under this Policy.
Participant Account: An account maintained under this Policy with
respect to a Participant, based upon information
provided to us by the Policyholder, and subject to
all the terms and conditions of the Plan.
Participant Account
Year: The twelve-consecutive month period beginning on
the date on which a Participant Account is
established under this Policy, and on each
anniversary of such date.
Payment Date: The Valuation Date on which a premium payment is
received at our Variable Products Operations
Division, unless it is received after the close of
the New York Stock Exchange, in which case it will
be the next Valuation Date.
Plan: The Plan named on the Schedule Pages of this
Policy.
Policy: This Group Flexible Premium Variable Deferred
Annuity Policy.
Policy Effective Date: The date on which the initial premium is paid under
this Policy.
Policy Value: The value of the Policyholder Account.
Policy Year: The twelve-consecutive month period beginning
on the Policy Effective Date, and each subsequent
anniversary of such date. In the event this Policy
is terminated, the final Policy Year shall begin on
the anniversary of the Policy Effective Date, and
shall end on the date of termination.
Policyholder: The Policyholder identified on the Schedule Pages.
Policyholder Account: An account maintained by us, which is the sum of
all Participant Accounts maintained under this
Policy and the Unallocated Account.
Schedule Pages: The pages containing Contract Specifications,
GD601 2
<PAGE>
Separate Account Fees, Contract Fees and Charges,
and Description of the Guaranteed Interest Account
and Phoenix Edge Series Funds Sub-accounts.
Sub-Account: The accounts within our Separate Account (described
in the Schedule Pages) to which premiums may be
allocated under this Policy.
Surrender Value: In respect to this Policy, the Policy Value, less
any applicable fees or charges. In respect to any
Participant Account, the value of such Participant
Account as determined under this Policy, less any
applicable fees or charges.
Unallocated Account: An account maintained under this Policy, to which
premiums, and other amounts not otherwise accounted
for, will be applied in the absence of specific
instructions from the Policyholder. Provisions of
this Policy applicable to Participant Accounts
shall be applicable to the Unallocated Account.
Amounts allocated to the Unallocated Account shall
be applied to the Money Market Sub-account.
Valuation Date: Every day the New York Stock Exchange is open for
trading and our Variable Products Operation
Division is open for business.
Valuation Period: For any Sub-account, it is the period in days
beginning with the day following the last Valuation
Date of that Sub-account and ending on that
Sub-account's next succeeding Valuation Date.
PART 2: ABOUT THE POLICY
Policy the Entire The Policy and the written application of the
Contract Policyholder, a copy of which is attached to and
made a part of the Policy, are the entire contract
between the Policyholder and us. Any change in the
provisions of the Policy must be signed by one of
our executive officers and countersigned by our
Registrar or one of our executive officers. No
other person, including an agent, may change or
waive any of the Policy provisions; nor can he or
she make any agreement which would be binding on
us. We reserve the right to change the provisions
of the contract upon 90 days advance notice to the
Policyholder, but any such change will only apply
as of the
GD601 3
<PAGE>
effective date of such change.
The Policyholder's The Policyholder may act for and on behalf of any
Rights and all Participants in matters pertaining to the
Policy; and every act done by the Policyholder, or
notice given by us to the Policyholder or by the
Policyholder to us, shall be binding on all such
Participants. Notwithstanding, no provision of this
Policy shall invalidate or impair any rights that
the Policyholder may be granted under applicable
state insurance law.
The Policyholder's rights, subject to the terms of
the Plan, include the right to:
a. Make premium payments to this Policy in such
amounts and at such times as Policyholder deems to
be appropriate under the Plan, subject to the
Premium Payment Interval provision set forth in the
Schedule Pages of this Policy;
b. Designate individuals who are participants in
the Plan and in respect to whom Participant
Accounts are to be maintained under this Policy;
c. Allocate premiums paid among Participant
Accounts, and to direct the investment of amounts
allocated to Participant Accounts among the
investment Sub-accounts and the Guaranteed Interest
Account available under this Policy;
d. Authorize the individual in whose name a
Participant Account is maintained to make
allocations of premiums applied to such Participant
Account among and between Sub-accounts and the
Guaranteed Interest Account, and transfer the all
or part of the value of such Account among and
between Sub-accounts and the Guaranteed Interest
Account, subject to the terms of this Policy and of
the Plan;
e. Make withdrawals from Participant Accounts, or
to fully surrender any Participant Account for its
Surrender Value;
f. Direct that the value of a terminated
Participant Account be re-allocated to other
Participant Accounts;
g. Direct that the value of a Participant Account
be applied to the purchase of an Individual Annuity
Contract, as described in Part
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7 of this Policy;
h. Change the name of the individual in respect to
whom a Participant Account is maintained; and
i. Terminate this Policy for its Surrender Value.
Conflicting In the event we receive conflicting instructions
Instructions from the Participant and from the Policyholder, the
instructions of the Policyholder shall prevail.
Notwithstanding, if the Policyholder has elected in
the application for this Policy to permit
Participants to allocate the value of the
Participant Account maintained in their name, we
may take allocation instructions from such
Participant until specifically instructed otherwise
in writing by the Policyholder.
Participant Account If requested by the Policyholder, we shall issue a
Instructions Participant Account Notice to each individual in
whose name a Participant Account is maintained
under this Policy. Each such notice shall state
that we are maintaining a Participant Account at
the Policyholder's direction and subject to the
terms of the Plan, based on information provided to
us by the Policyholder on an enrollment form. Such
notice shall assign a Participant Number to such
individual. Participant Account Notices shall be
delivered to the Policyholder as soon as
administratively possible following the
establishment of a Participant Accounts.
Effect of Waiver of If at any time we choose not to enforce a Policy
Policy Provision provision, we still retain our right to enforce
that provision at any other time.
Contestability We rely on all statements made by or for the
Policyholder in the application for this Policy, or
any enrollment form. These statements are
considered to be representations and not
warranties. We can contest the validity of this
Policy for any material misrepresentation or
misstatement of fact.
Required Proof of In respect to an Individual Annuity Contract issued
Age and Survival applied for under this Policy, proof of the
Annuitant's age must be filed with us before such
contract will be issued. We also have the right to
require proof of the identity, age and survival of
any person entitled to any payment under the policy
or upon whose life any Annuity
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payments depend.
Adjustment for If the age of the Annuitant has been misstated,
Misstatement of Age any benefits payable under the Individual Annuity
Contract issued to that Annuitant will be adjusted
to the amount that the Premium paid would have
purchased based on the Annuitant's correct age. Any
overpayments and underpayments made by us will be
charged or credited against future payments to be
made under the Individual Annuity Contract with
respect to that Annuitant.
Claims of To the extent permitted by law, no amount payable
Creditors under this Policy will be subject to any legal
process to satisfy the claims of creditors.
Non-Assignability This Policy, the Policyholder Account, any
Provision Participant Account, or any Individual Annuity
Contract issued under this Policy, is and shall not
be assignable or transferable.
Policyholder Account For the convenience of the Policyholder, we
shall maintain a Policyholder Account, which shall
be the sum of all Participant Accounts, and the
Unallocated Account, maintained under this Policy,
and shall show the aggregate allocation of all such
Accounts to all and each of the Sub-accounts and
the Guaranteed Interest Account.
Participant Accounts We will maintain a Participant Account for each
Participant named by the Policyholder, to which the
Policyholder may apply premium amounts.
If so elected by the Policyholder in the
application for this Policy, a Participant may
direct the allocation of the Participant Account
maintained for such Participant among and between
the Sub-accounts and the Guaranteed Interest
Account. Under no circumstances shall a Participant
be entitled to direct withdrawals from this Policy,
or terminate a Participant Account for its
surrender value, those rights being reserved
exclusively to the Policyholder.
Statements of We will furnish the Policyholder a statement of the
Account Policy Value not less frequently than annually. We
will periodically furnish statements for each
Participant Account maintained under this Policy at
the intervals specified in the Schedule Pages.
Divisibility of We shall annually ascertain and apportion
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Surplus any divisible surplus accruing on this Policy.
However, due to the nature of this Policy, it is
not anticipated that divisible surplus will accrue
to this Policy.
Termination of At any time, for any reason, the Policyholder may
This Policy terminate this Policy on written notice to our
Variable Products Operations Division by registered
or certified mail. Such notice shall be effective
on the date received by us.
We may terminate this Policy upon the occurrence of
any of the following events:
a. The Plan fails to meet the requirements of
qualification under the Internal Revenue Code of
1986, as amended, or the Employee Retirement
Security Act, as amended ("ERISA"), or any
successor statutes thereto, or if performance under
the Policy would violate any provision of law
applicable to us;
b. The Policyholder fails to provide any
information reasonably requested by us in respect
to this Policy;
c. The sum of all amounts withdrawn from the Policy
exceeds the Policy Value; or
d. Aggregate premiums paid under this Policy do not
equal at least $1,000 for three consecutive Policy
Years; or if withdrawals during any Policy Year
exceed 50% of the Policy Value at the beginning of
such Policy Year; or is the Policy Value, as of any
day after the fourth anniversary of the Policy
Effective Date, is less than $30,000.
Notice of termination by us will specify a date of
termination which will not be earlier than 10 days
from the date of receipt by the Policyholder of
such notice, mailed by registered or certified mail
to the Policyholder.
Effect of Upon termination of this Policy, we shall promptly
Termination pay its Surrender Value to the Policyholder.
Termination of this Policy will have no effect upon
payments to an Annuitant under an Individual
Annuity Contract under this Policy prior to its
termination.
Upon termination of this Policy, the Policyholder
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may elect to apply the Policy Value to the purchase
of Individual Annuity Contracts for Participants
(or their beneficiaries), or may elect to receive
the Surrender Value in a single sum payment.
PART 3: ALLOCATION OF PREMIUMS
Premium Amounts Subject to the limitations set forth in this
Policy, the Policyholder may pay premiums in such
amounts as the Policyholder deems to be appropriate
under the Plan, but not more frequently than the
payment intervals shown on the Schedule Pages. All
premiums are payable at our Variable Products
Operations Division, except that the initial
premium may be paid to our authorized agent for
forwarding to our Variable Products Operations
Division. Payments will be credited to this Policy
and allocated to Participant Accounts as of the
date received at our Variable Products Operations
Division.
The Policyholder may vary the amount and payment
intervals for subsequent premiums, and additional
premium payments may be made within the following
limits:
a. Each premium payment must at least equal $25.
b. No more than $1,000,000 in total premiums may be
contributed, unless we agree otherwise.
Premium The premium will be applied on the Payment Date to
Allocation the various Participant Accounts maintained under
this Policy as the Policyholder shall direct,
subject to the following limitations:
a. Each allocation to a Participant Account must be
at least $25.
b. No more than $1,000,000, in the aggregate, may
be allocated to any Participant Account, unless we
agree otherwise.
If the Policyholder has so elected in the
Application for this Policy, the Participant in
whose name a Participant Account is maintained may
direct the investment of the value of such
Participant Account among and between Sub-accounts
and the Guaranteed Interest Account. If
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we receive no specific instructions as to how
amounts allocated to a Participant Account are to
be applied, such amounts shall be applied in
accordance with the most recent premium allocation
on file with us.
The number of Accumulation Units credited to each
Sub-account will be determined by dividing the
premium applied to that Sub-account by the
Accumulation Unit Value of that Sub-account on the
Payment Date. The amount of a Deposit to the
Guaranteed Interest Account will equal the amount
of any premium so applied on the Payment Date. Any
Units credited to a Separate Account Sub-account,
or Deposits credited to the Guaranteed Interest
Account, as the result of a premium payment will
bear the same Payment Date as the premium applied
to create such Accumulation Unit or Deposit.
Interest included as part of an Adjusted Deposit
shall bear the same Payment Date as the Deposit.
The Policyholder or Participant (if authorized) may
change the allocation schedule with respect to
subsequent or additional premium payments by
written notice filed with us. We reserve the right
to waive the requirement of written notice.
Premiums Allocated The values that accumulate under this Policy are
To Sub-accounts based on the amount of premium payments made, the
rates of interest credited on any amount allocated
to the Guaranteed Interest Account, and the
investment experience of the Separate Account
Sub-accounts to which the premium payments have
been allocated. Except for the Guaranteed Interest
Account, the Sub-accounts are part of the Phoenix
Home Life Variable Accumulation Account ("VA
Account"). They invest in Mutual Funds which have
differing investment objectives as in the
Description of Separate Account Sub-Accounts in
the Schedule Pages.
We have the right to add additional Sub-accounts
subject to approval by the Securities and Exchange
Commission and, where required, by the insurance
supervisory official of the state where the policy
was delivered.
The VA Account The VA Account is a Separate Account established by
us under New York Law and is registered as a unit
investment trust under the Investment Company Act
of 1940. All income, gains and
GD601 9
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losses, realized and unrealized, of the VA Account
are credited to or charged against the amounts
placed in the VA Account without reference to other
income, gains and losses of our General Account.
The assets of the VA Account are owned solely by us
and we are not a trustee with respect to such
assets.
We use the assets of the VA Account to buy shares
of the Phoenix Edge Series Fund according to the
most recent allocation instruction on file with us
at our Variable Products Operations Division. The
Fund is registered under the 1940 Act as an open
end, diversified management investment company. The
Fund has separate Series that correspond to the
Sub-accounts. Assets of each Sub-account are
invested in shares of the corresponding Fund
Series.
The Guaranteed In addition to Separate Account Sub-accounts, this
Interest Account Policy also provides a Guaranteed Interest Account
to which premiums may be allocated. The Guaranteed
Interest Account is not part of the Separate
Account; it is accounted for as part of our general
account. We will credit interest on the amount in
the Guaranteed Interest Account at such rate(s) as
provided for under the terms of this Policy.
PART 4: TRANSFERS, WITHDRAWALS, AND LAPSE
Transfers Among Subject to the terms of this Policy and the Plan,
Sub-Accounts and the the Policyholder or Participant (if authorized)
Guaranteed Interest may transfer all or portion of the value of
Account Participant Accounts among one or more of the Sub-
accounts and the Guaranteed Interest Account.
The Policyholder or Participant (if authorized) may
also direct the systematic transfer of specified
amounts from a Sub-account or the Guaranteed
Interest Account to the other options available
under this Policy. The amount and frequency of the
systematic transfer amounts will be as the
Policyholder or Participant shall direct in
writing, subject to the following limitations:
a. The minimum initial and subsequent transfer
amounts are $25 monthly, $75 quarterly, $150
semi-annually, or $300 annually.
GD601 10
<PAGE>
b. Under a systematic transfer, amounts may be
transferred from only one of the Sub-accounts or
the Guaranteed Interest Account, but may be
allocated to multiple Sub-accounts and the
Guaranteed Interest Account.
c. To be eligible for systematic withdrawals, the
Participant Account must have an initial value of
at least $2,000 in the Sub-account (or Guaranteed
Interest Account, if applicable) from which funds
are to be systematically transferred.
d. The amount transferred in any one Participant
Account Year from the Guaranteed Interest Account
may not exceed the greater of $1,000 or 25% of the
value of the Participant Account as of the last day
of the prior Participant Account Year.
If the value in the Sub-account (or Guaranteed
Interest Account, if applicable) from which
systematic transfers are to be made is less that
the elected transfer amount, the remaining balance
will be transferred and no more systematic
transfers will be made.
Notwithstanding any other provision of this Policy,
under a systematic transfer election, you may make
more than one systematic transfer from the
Guaranteed Interest Account in any one Participant
Account Year.
Non-systematic transfers from the Guaranteed
Interest Account will be effectuated by us on the
last Valuation Date to occur in the calendar
quarter during which the transfer request was
received by our Variable Products Operations
Division. All systematic transfers will be
effectuated by us on the first Valuation Date of
the calendar month following receipt by us of the
systematic transfer request.
We reserve the right to require that requests for
transfers be made in writing. A transfer charge may
be imposed as shown on the Schedule Pages. Any such
charge will be deducted from the Sub-accounts from
which the amounts are to be transferred in the same
proportion as the amounts to be transferred to each
Sub-account and the Guaranteed Interest Account
bear to the total amount transferred. The
Accumulated Value of each Sub-account and the
Guaranteed Interest
GD601 11
<PAGE>
Account will be determined on the Valuation Date
that coincides with the date of transfer. Any new
Units credited to a Sub-account, and Adjusted
Deposits held under the Guaranteed Interest
Account, as a result of any transfer shall bear the
same Payment Date as the Units or Adjusted Deposits
released to effectuate such transfer.
Participant-Directed If the Policyholder has so elected in the
Account Transfers Application for this Policy, and the Schedule
and Allocations Pages of this Policy so indicate, a Participant may
direct us as to the allocation of Premiums applied
by the Policyholder to the Participant Account
maintained for such Participant between and among
the Sub-accounts and the Guaranteed Interest
Account. In additional, a Participant may direct
the allocation of the value of such Participant
Account between and among the Sub-accounts and the
Guaranteed Interest Account. Such
Participant-directed transfers and allocations
shall be binding on us, until such time as the
Policyholder provides specific written instructions
that we are not to take allocation or transfer
instructions from a named Participant. In no event
shall a Participant be permitted to surrender or
make withdrawals from a Participant Account.
Withdrawals and The Policyholder may withdraw in cash the
Surrender surrender value of any Participant Account
maintained under this Policy, less any applicable
State Premium Tax Charge assessable at time of
withdrawal, in whole or in part at any time. Such
withdrawals must be by written request in a form
satisfactory to us and must include such income tax
withholding information as we may reasonably
require.
The amount withdrawn from any Sub-account of the
Separate Account will be accomplished by the
surrender and release of Accumulation Units
credited to the Sub-accounts(s) from which the
withdrawal is to be made, in such amount as
required to effectuate such withdrawal, including
any applicable fee or charge.
Any amount withdrawn from the Guaranteed Interest
Account will be taken by the release of Adjusted
Deposits in the amount needed to effectuate such
withdrawal, including any applicable fee or charge.
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If, as the result of a withdrawal, no value remains
under a Participant Account, the Participant
Account will be deemed fully surrendered and
terminated. The value of a Participant Account will
be determined on the Valuation Date that coincides
with the date of the withdrawal.
Withdrawals are subject to the Contingent Deferred
Sales Charge set forth in the Schedule Pages and
described in Part 5 of this Policy.
Lapse If on any Valuation Date the value of a Participant
Account becomes zero, such account will immediately
terminate and lapse without value.
Rules and The Accumulation Units and Adjusted Deposits
Limitations released for transfer or withdrawal will be
determined on a First-1n, First-Out (FIFO) basis,
based on Payment Date.
Deferral of Transfers, withdrawals, and payment of the
Payment proceeds due upon a request for a full surrender
will usually be processed within 7 days. However,
we may postpone the processing of any such
transactions for any of the following reasons (as
provided under the Investment Company Act of 1940):
a. when the New York Stock Exchange is closed,
other than customary weekend and holiday closings;
b. when trading on the exchange is restricted by
the Securities and Exchange Commission;
c. when the Securities and Exchange Commission
declares that 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 Securities and
Exchange Commission, if any, are applicable and
will govern as to whether conditions described in
(b), (c) or (d) exist.
GD601 13
<PAGE>
PART 5: EXPENSE CHARGES AND FEES
Charges and Fees Charges and fees to cover expenses incurred by us
in the distribution and administration of this
Policy and its Participant Accounts are described
in the Schedule Pages of this Policy.
Payment of Charges If outstanding Charges or Fees have not otherwise
been paid by the Policyholder, the amount of
outstanding Fees and Charges will be deducted, on a
pro-rata basis, from Participant Accounts
maintained under this Policy.
PART 6: DETERMINING THE ACCUMULATION UNIT VALUES
Crediting of When a premium payment for a Participant Account
Account Accumulation is received by us and allocated, as the
Units Policyholder or Participant (if authorized) shall
direct, we will apply the premium paid on the
Payment Date to credit Accumulation Units to such
Account. The number of Accumulation Units credited
will be determined by dividing the premium applied
to that Account by the then current Accumulation
Unit Value of the appropriate Sub-account. The
Accumulation Unit Value of each Sub-account on a
Valuation Date is determined at the end of that
day.
Determination of The Accumulated Value of this Policy, or a
Accumulated Value Participant Account maintained under this Policy,
is determined by multiplying the total number of
Units under this Policy, or such Participant
Account, for that Sub-account by the current
Accumulation Unit Value of that Sub-account. The
total Accumulated Value under this Policy, or such
Participant Account, equals the sum of the
Accumulated Values of each of the Sub-accounts.
Determination of the The Accumulation Unit Value of each Sub-account
Current Accumulation was set by us on the first Valuation Date under
Unit Value each Sub-account. The current Accumulation Unit
Value of a Sub-account on any subsequent Valuation
Date is determined by multiplying the Accumulation
Unit Value of the Sub-account on the immediately
preceding Valuation Date by the Net Investment
Factor for that Sub-account for the Valuation
Period just ended.
Determination of The Net Investment Factor for a Sub-account is
Net Investment Factor determined by the investment performance of the
GD601 14
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assets underlying the Sub-account for the Valuation
Period just ended. The Net Investment Factor of a
Sub-account for any Valuation Period is equal to
1.0000000 plus the applicable net investment rate
for the period. The net investment rate is
determined by:
a. taking the sum of the accrued net investment
income and capital gains and losses, realized or
unrealized, of the Sub-account for the Valuation
Period; and
b. dividing the result of (a) by the Accumulated
Value of the Sub-account at the beginning of the
Valuation Period; and
c. for each calendar day in the Valuation Period,
subtracting the Daily Mortality and Expense Fee
shown in the Schedule Pages.
The Valuation of The values of the assets in each Sub-account will
Sub-accounts be calculated in accordance with applicable law and
accepted procedures.
PART 7: ANNUITY BENEFITS
Purchase of Individual The Policyholder may elect to apply the value
Annuity Contract of a Participant Account to the purchase of an
Individual Annuity Contract. Any such Individual
Annuity Contract shall be nontransferable and non-
assignable. Notwithstanding, if the amount to be so
applied is less than $2,000 or would result in
monthly annuity payments of less than $20, we shall
have the right to pay such amount in one lump sum
in lieu of providing such an Annuity. We also have
the right to change the Annuity payment frequency
to annual if the monthly Annuity payment would
otherwise be less than $20. The Participant may
elect any of the Payment Options available under
such Contract at the time of purchase. If the
Participant has not made a written election of any
other option by the Maturity Date of such Contract,
payments will commence under a life annuity with
variable monthly payments, with a period certain of
10 years ("Payment Option I"). Annuity payments
falling due after the Annuitant's death during the
period certain will be paid to the Annuitant's
beneficiary, as determined under such Contract.
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Payment Option I Payment Option I is a life annuity with variable
monthly payments, with a period certain of 10
years. The first monthly payment is due on the
Annuity Commencement Date specified in the
application for the Individual Annuity Contract.
Future payments will be due on the same day of the
month as the first payment is due, or if such date
does not fall within a month then the first
Valuation Date to occur in the following month.
Payments will continue during the lifetime of the
Annuitant, or, if later, the end of the 10-year
period certain starting with the date the first
payment is due.
Calculation of The Variable Income Table below shows the minimum
Variable Income amount of the first monthly payment for each
Payments $1,000 applied. The minimum first payments shown
are based on the 1983 Annuity Table projected to
the year 2000, and with projection Scale G
thereafter, and an effective annual interest rate
of 4 1/2%. The actual payments will be based on the
monthly payment rates we are using when the first
payment is due. They will not be less than shown in
the table.
In determining the first payment, the amounts held
under this option in each Sub-account are
multiplied by the rates we are using for this
option on the first Payment Calculation Date. The
first payment equals the total of such figures
determined for each Sub-account.
Future payments are measured by Annuity Units and
are determined by multiplying the Annuity Units for
the Account in each Sub-account with assets under
this option by the Annuity Unit Value for each
Sub-account on the Payment Calculation Date that
applies. The payment will equal the sum of the
amounts provided by each such Sub-account.
Annuity Units The number of Annuity Units in each Sub-account
with assets under this option is equal to the
portion of the first payment provided by that Sub-
account divided by the Annuity Unit Value for that
Sub-account on the first Payment Calculation Date.
Annuity Unit Value All Annuity Unit Values in each Sub-account of the
Separate Account were set at $1.0000000 on the
first Valuation Date selected by us. The value on
any date thereafter is equal to (a) the Net
GD601
16
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Investment Factor for that Sub-account for the
Valuation Period divided by (b) the sum of
1.0000000 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 Rate, and multiplied by (c) the
corresponding Annuity Unit Value on the preceding
Valuation Date.
Assumed Investment The Assumed Investment Rate of 4 1/2% per year is
Rate the annual interest rate assumed in determining the
first payment. The amount of each subsequent
payment from each Sub-account of the Separate
Account will depend on the relationship between the
Assumed Investment Rate and the actual investment
performance of that 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 which will comply with
that law.
Payment Calculation Payments are calculated on a Payment Calculation
Date Date. That date is the earliest Valuation Date
which is not more than 10 days before the due date
of the payment.
Restrictions Unless we agree otherwise, withdrawals, partial or
full surrenders, transfers, or additional premium
payments may not be made under this Payment Option.
Variable Income Table The following Variable Income Table shows the
Minimum Monthly Payment Rate for first payment, for
each $1000 Applied (Based on 4 1/2% Assumed
Investment Rate):
Adjusted Age* Rate**
40 4.14
45 4.28
50 4.47
55 4.73
60 5.07
65 5.53
70 6.17
75 7.00
80 8.01
85 9.04
* Adjusted Age is attained age on birthday nearest
due date of the first payment. Monthly payment
rates for ages not shown will be furnished on
request.
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** Rates shown are applicable to both male and
female Annuitants.
Life Expectancy In respect to a Participant who is required
Distributions to take minimum distributions upon attainment of
age 70 1/2, under the terms of the Plan and as
required under section 401(a)(9) of the Internal
Revenue Code, the Policyholder may elect to take
Life Expectancy Distributions ("LED") from the
Participant Account maintained for that
Participant. If elected by the Policyholder, we
will make annual distribution to the Policyholder
in an amount not less than the minimum required
distribution for such Participant, or such
Participant and a designated beneficiary, as the
Policyholder may direct. We will calculate the
minimum required annual distribution amount under
regulations issued by the Internal Revenue Service
from information provided by the Policyholder. We
will not be responsible for any income tax
liabilities, penalties, or interest arising from an
underdistribution resulting from inaccurate or
incomplete information provided to us by the
Policyholder.
The Policyholder may stop distributions from a
Participant Account under the LED option at any
time by written notice to us. LED distributions
will cease upon surrender by the Policyholder of
the Participant Account from which such
distributions are made. Upon not less than 60 days
written notice to the Policyholder, we may
terminate the LED payment schedule.
PART 8: DEATH BENEFITS
Death of Participant If a Participant in respect to whom a Participant
Account is maintained under the Policy dies, at the
Policyholder's request, we will fully surrender
such Account, and pay to the Policyholder the death
benefit described below, less any applicable state
premium taxes.
If the Annuitant dies after an Individual Annuity
Contract has been issued and delivered, the death
benefit (if any) payable in respect to any
Annuitant shall be paid according to the terms of
such Individual Annuity Contract.
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Amount of Death Benefit If the Participant in respect to whom a Participant
Account is maintained under this Policy dies during
the first 6-Participant Account Year period, and
prior to the issuance of an Individual Annuity
Contract for such Participant, the death benefit
payable under this Policy in respect to such
Participant will equal the greater of (1) the sum
of all premium payments made to the Participant
Account less any prior partial withdrawals or (2)
the value of the Participant Account on the date of
our receipt of a certified copy of the certificate
of death. Such death benefit shall be paid to the
Policyholder.
If the Participant dies during any subsequent
6-Participant Account Year period following the
first, the death benefit will equal the greater of
(1) the death benefit that would have been payable
at the end of the immediately preceding
6-Participant Account Year period plus any
additional premiums paid, less any partial
withdrawals since such date or (2) the value of the
Participant Account on the date of our receipt of a
certified copy of the certificate of death. Such
death benefit shall be paid to the Policyholder.
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<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
Main Administrative Office: One American Row, Hartford,
Connecticut 06115
Statutory Home Office: 99 Troy Road, East Greenbush,
New York, 12061
-----------------------------------------------------------------------
Policyholder: Trustees of the ABC Company
Employee Pension Plan Trust
Name of Plan: ABC Company Employee Pension
Plan and Trust
Policy/Plan No.: 0001
Effective Date: June 1, 1993
-----------------------------------------------------------------------
Phoenix Home Life Mutual Insurance Company agrees to pay the benef its of this
Policy in accordance with its terms, in consideration of the application of the
Policyholder and of the payment of premiums as provided herein. It will take
effect on the Policy Effective Date. Except as otherwise provided by law, this
Policy is governed by the laws of the state where it is delivered.
For service or information on this Policy, please contact our Variable Products
Operations Division at the following address:
Phoenix Home Life Mutual Insurance Company
Variable Products Operations Division
101 Munson Street, P.O. Box 942
Greenfield, MA 01302
RIGHT TO CANCEL: As Policyholder, you have the right to cancel this Policy
within 10 days after it is delivered to you, by returning it to our Variable
Products Operations Division, for a refund of the Contract Value plus any
charges made under this Policy.
Values and benefits provided under the Policy are variable to the extent they
are based on the investment experience of the Separate Account, and are not
guaranteed as to dollar amount. See Part 6 for a description of how Accumulated
Values are determined, and Part 7 for how the variable payments are determined.
Secretary Chairman of the Board
Registrar
GROUP FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
Unallocated Accounts
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GROUP FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
SCHEDULE PAGES
Policyholder: Trustees of the ABC Company Employee Pension Plan Trust
Name of Plan: ABC Company Employee Pension Plan and Trust
Policy/Plan No.: 0001
Effective Date: June 1, 1993
CONTRACT SPECIFICATIONS:
------------------------
PREMIUM PAYMENT INTERVALS: Premiums may be paid to this Policy not more
frequently than bi-weekly.
TRANSFERS: There are no limitations on the number of transfers between or among
the Sub-accounts and to the Guaranteed Interest Account. Except as expressly
provided otherwise in Part 4, not more than four transfers may be made from the
Guaranteed Interest Account in any Policy Year, and only one such transfer may
be made in any three-consecutive month period. The amount of such transfers in
any one Policy Year from the Guaranteed Interest Account may not exceed the
greater of $1,000 or 25% of the value of the Guaranteed Interest Account.
ALLOCATIONS: There are no limitations on the number of times the allocation of
premiums credited to Sub-accounts and the Guaranteed Interest Account may be
changed.
RIGHT OF TERMINATION: We reserve the right to terminate this Policy for any
reason, in accordance with procedures described in Part 2 of this Policy, at any
time after the twentieth anniversary of the Policy Effective Date.
SEPARATE ACCOUNT FEE:
---------------------
DAILY MORTALITY AND EXPENSE FEE: .00342% (based on annual rate of 1.25%)
CONTRACT FEES AND CHARGES:
--------------------------
ANNUAL ADMINISTRATIVE CHARGE: An Annual Administrative Charge of $300 will be
charged to this Policy for each Policy Year. We reserve the right to increase
the Annual Administrative Charge on written prior notice to the Policyholder.
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TRANSFER CHARGE: No charge will be imposed in respect to transfers among and
between Sub-accounts and the Guaranteed Interest Account. We reserve the right
to impose a Transfer Charge in instances where more than six transfers are made
between or among the Sub-accounts and the Guaranteed Interest Account during a
Policy Year, upon written prior notice to the Policyholder.
ALLOCATION CHARGE: No charge will be imposed in respect to changes in the
allocation of Premiums and Deposits to the Sub-accounts and the Guaranteed
Interest Account. We reserve the right to impose an Allocation Charge in
instances where more than six allocation changes are made during a Policy Year,
upon written prior notice to the Policyholder.
CONTINGENT DEFERRED SALES CHARGE: Any amount withdrawn from this Policy will be
subject to the following Contingent Deferred Sales Charge, expressed as a
percentage of the amount withdrawn:
Age of Policy in Contingent Deferred
---------------- -------------------
Complete Policy Years Sales Charge
--------------------- ------------
0 6%
1 6%
2 6%
3 6%
4 6%
5 5%
6 4%
7 3%
8 2%
9 1%
10, or more 0%
The Contingent Deferred Sales Charge shall be waived in respect to a withdrawal
upon a satisfactory demonstration by the Policyholder that the amount withdrawn
will be applied to provide benefits under the Plan in respect to the death, or
disability of a Participant, or applied to the purchase of an Individual Annuity
Contract (as described in Part 7), or an election of Life Expectancy
Distributions (as described in Part 7).
In addition, the Contingent Deferred Sales Charge will be waived upon a
satisfactory demonstration by the Policyholder that the amount withdrawn will be
applied to provide benefits under the Plan in respect to the separation from
service or retirement of a Participant, provided that withdrawals, in the
aggregate, do not exceed the applicable limitation. In the first Policy Year,
the applicable limitation shall be an amount equal to 15% of aggregate Premiums
paid under this Policy. In any Policy Year thereafter, the applicable limitation
shall be an amount equal to 15% of the Policy Value as of the last anniversary
of the Policy Effective Date.
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In no event will the total of all Contingent Deferred Charges applied to
withdrawals from this Policy exceed 9% of the total premium paid.
PREMIUM TAX CHARGE: 0.0000% of each premium paid. The Premium Tax Charge will be
assessed upon surrender of this Policy, or upon purchase of an Individual
Annuity Contract.
DESCRIPTION OF SEPARATE ACCOUNT SUB-ACCOUNTS
--------------------------------------------
FUND: THE PHOENIX EDGE SERIES FUND
BOND: The investment objective of the Bond Sub-account is to seek long-term
total return by investing in a diversified portfolio of high-yield (high-risk)
and high quality fixed income securities.
MONEY MARKET: The investment objective of the Money Market Sub-account is to
provide maximum current income consistent with capital preservation and
liquidity.
GROWTH: The investment objective of the Growth Sub-account is to achieve
intermediate and long-term growth of capital, with income as a secondary
consideration.
TOTAL RETURN: The investment objective of the Total Return Sub-account 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.
INTERNATIONAL: The International Sub-account seeks as its investment objective
of a high total return consistent with reasonable risk.
BALANCED: The investment objective of the Balanced Sub-account is to seek
reasonable income, long-term capital growth and conservation of capital.
We reserve the right to terminate any variable Sub-account on 60 days written
notice to the Policyholder, subject to compliance with applicable law and
regulations.
DESCRIPTION OF GUARANTEED INTEREST ACCOUNT:
-------------------------------------------
GUARANTEED INTEREST ACCOUNT: The Guaranteed Interest Account is not part of the
Separate Account. It is accounted for as part of our general account. We will
credit interest daily on any amounts held under the Guaranteed Interest Account
at such rates as we shall determine, but in no event will the effective annual
rate of interest be less than 3%.
On the last working day of each calendar week we will set the
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interest rate that will apply to any Deposits made to the Guaranteed Interest
Account during the following calendar week. That rate will remain in effect for
such Deposits, or their resulting Adjusted Deposits, for an initial guarantee
period on one full year. Upon expiry of the initial one-year guarantee period,
and each subsequent one-year guarantee period thereafter, the rate applicable
for any Deposits or Adjusted Deposits whose guarantee period has just ended
shall be the same rate that applies to new Deposits made during the calendar
week in which the guarantee period expired. Such rate shall likewise remain in
effect for such Adjusted Deposits for a subsequent guarantee period of one full
year.
We reserve the right to limit cumulative Deposits made to the Guaranteed
Interest Account during any one-week period to no more than $250,000. We reserve
the right to terminate the Guaranteed Interest Account at the end of any Policy
Year, upon not less than 60 days written notice to the Policyholder and
compliance with applicable law and regulations.
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Table of Contents
Part Page
1. Definitions............................................... 1
2. About the Policy
Policy the Entire Contract......................... 3
The Policyholder's Rights.......................... 3
Effect of Waiver of Policy
Provision..................................... 4
Contestability..................................... 4
Required Proof of Age and
Survival...................................... 4
Adjustment for Misstatement of Age................. 4
Claims of Creditors................................ 4
Non-Assignability Provision........................ 4
Statement of Account............................... 4
Divisibility of Surplus............................ 4
Termination of This Policy......................... 5
Effect of Termination.............................. 5
3. Allocation of Premiums
Premium Amounts.................................... 6
Premium Allocation................................. 6
Premiums Allocated To
The Sub-accounts.............................. 7
The VA Account..................................... 7
The Guaranteed Interest Account.................... 8
4. Transfers, Withdrawals and Lapse
Transfers among Sub-accounts and
Guaranteed Interest Account................... 8
Withdrawals and Surrender.......................... 9
Lapse.............................................. 10
Rules and Limitations.............................. 10
Deferral of Payment................................ 10
5. Expense Charges and Fees
Charges and Fees................................... 11
Payment of Charges and Fees........................ 11
6. Determining the Accumulation Unit Values
Crediting of Account Accumulation
Units......................................... 11
Determination of Accumulated Value. ............... 11
Determination of the Current
Accumulation Unit Value....................... 11
Determination of Net
Investment Factor............................. 12
The Valuation of Sub-accounts ..................... 12
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7. Annuity Benefits
Purchase of Individual Annuity
Contract...................................... 12
Payment Option I................................... 13
Calculation of Variable
Income Payments............................... 13
Annuity Units...................................... 13
Annuity Unit Value................................. 14
Assumed Investment Rate............................ 14
Payment Calculation Date........................... 14
Restrictions....................................... 14
Variable Income Table.............................. 14
Life Expectancy Distributions ..................... 15
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PART 1: DEFINITIONS
You (Your): The Policyholder named in this Policy.
We (Our, Us): Phoenix Home Life Mutual Insurance Company.
Account: Phoenix Home Life Variable Accumulation Account,
also referred to as the "VA Account."
Accumulation Value: The total value of this Policy's share, if any, in
all Sub-accounts.
Accumulation Unit: A standard of measurement, also referred to as a
"Unit" and described in Part 6, used to measure the
value of each Sub-account.
Adjusted Deposit: Any Deposit to the Guaranteed Interest Account, as
adjusted to include any interest credited on, and
any Policy charges or withdrawals deducted from,
such Deposit while held under such Sub-account.
Annuitant: A Participant for whom an Individual Annuity
Contract has been purchased under this Policy, and
whose life is the measuring life under such
Individual Annuity Contract.
Annuity: A contract promising a periodic series of payments
for a specified term.
Annuity Unit: A standard of measurement, as described in Part 7
used to measure the amount of each variable monthly
income payments, as described in Part 7.
Deposit: Any premium or transferred amount applied to the
Guaranteed Interest Account.
Guaranteed Interest
Account: An allocation option under this Policy, described
in the Schedule Pages, under which amounts
deposited are guaranteed to earn a fixed rate of
interest.
Individual Annuity
Contract: An individual Annuity contract purchased by the
Policyholder under this Policy to for a Participant
or for a Participant's beneficiary, in order to
provide benefits accrued under the Plan.
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Participant: An individual designated by the Policyholder as a
participant in the Plan, or in respect to whom an
Individual Annuity Contract has been issued under
this Policy.
Payment Date: The Valuation Date on which a premium payment is
received at our Variable Products Operations
Division, unless it is received after the close of
the New York Stock Exchange, in which case it will
be the next Valuation Date.
Plan: The Plan named on the Schedule Pages of this
Policy.
Policy: This Group Flexible Premium Variable Deferred
Annuity Policy.
Policy Effective Date: The date on which the initial premium is paid under
this Policy.
Policy Value: The value of the Policyholder Account.
Policy Year: The twelve-consecutive month period beginning on
the Policy Effective Date, and each subsequent
anniversary of such date. In the event this Policy
is terminated, the final Policy Year shall begin on
the anniversary of the Policy Effective Date, and
shall end on the date of termination.
Policyholder: The Policyholder identified on the Schedule Pages.
Policyholder Account: An account maintained by us, which is the sum of
all Accounts and the Guaranteed Interest Account
maintained under this Policy.
Schedule Pages: The pages containing Contract Specifications,
Separate Account Fees, Contract Fees and Charges,
and Description of the Guaranteed Interest Account
and Phoenix Edge Series Funds Sub-accounts.
Sub-Account: The accounts within our Separate Account (described
in the Schedule Pages) to which premiums may be
allocated under this Policy.
Surrender Value: In respect to this Policy, the Policy Value, less
any applicable fees or charges.
Valuation Date: Every day the New York Stock Exchange is open for
trading and our Variable Products Operation
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Division is open for business.
Valuation Period: For any Sub-account, it is the period in days
beginning with the day following the last Valuation
Date of that Sub-account and ending on that
Sub-account's next succeeding Valuation Date.
PART 2: ABOUT THE POLICY
Policy the Entire The Policy and the written application of the
Contract Policyholder, a copy of which is attached to and
made a part of the Policy, are the entire contract
between the Policyholder and us. Any change in the
provisions of the Policy must be signed by one of
our executive officers and countersigned by our
Registrar or one of our executive officers. No
other person, including an agent, may change or
waive any of the Policy provisions; nor can he or
she make any agreement which would be binding on
us. We reserve the right to change the provisions
of the contract upon 90 days advance notice to the
Policyholder, but any such change will only apply
as of the effective date of such change.
The Policyholder's The Policyholder may act for and on behalf of any
Rights and all Participants in matters pertaining to the
Policy; and every act done by the Policyholder, or
notice given by us to the Policyholder or by the
Policyholder to us, shall be binding on all such
Participants. Notwithstanding, no provision of this
Policy shall invalidate or impair any rights that
the Policyholder may be granted under applicable
state insurance law.
The Policyholder's rights, subject to the terms of
the Plan, include the right to:
a. Make premium payments to this Policy in such
amounts and at such times as Policyholder deems to
be appropriate under the Plan, subject to the
Premium Payment Interval provision set forth in the
Schedule Pages of this Policy.
b. Allocate premiums paid among and between the
Sub-accounts and the Guaranteed Interest Account.
c. Make withdrawals from this Policy, or to fully
surrender this Policy for its Surrender Value.
GD603 3
<PAGE>
f. Direct that all or any part of the value of this
Policy be applied to the purchase of an Individual
Annuity Contract, as described in Part 7 of this
Policy.
Effect of Waiver of If at any time we choose not to enforce a Policy
Policy Provision provision, we still retain our right to enforce
that provision at any other time.
Contestability We rely on all statements made by or for the
Policyholder in the application for this Policy, or
any enrollment form. These statements are
considered to be representations and not
warranties. We can contest the validity of this
Policy for any material misrepresentation or
misstatement of fact.
Required Proof of In respect to an Individual Annuity Contract
Age and Survival issued applied for under this Policy, proof of the
Annuitant's age must be filed with us before such
contract will be issued. We also have the right to
require proof of the identity, age and survival of
any person entitled to any payment under the policy
or upon whose life any Annuity payments depend.
Adjustment for If the age of the Annuitant has been misstated,
Misstatement of Age any benefits payable under the Individual Annuity
Contract issued to that Annuitant will be adjusted
to the amount that the Premium paid would have
purchased based on the Annuitant's correct age. Any
overpayments and underpayments made by us will be
charged or credited against future payments to be
made under the Individual Annuity Contract with
respect to that Annuitant.
Claims of To the extent permitted by law, no amount payable
Creditors under this Policy will be subject to any legal
process to satisfy the claims of creditors.
Non-Assignability This Policy, the Policyholder Account or any
Provision Individual Annuity Contract issued under this
Policy, is and shall not be assignable or
transferable.
Statement of We will furnish the Policyholder a statement of
Account the Policy Value not less frequently than annually.
Divisibility of We shall annually ascertain and apportion any
Surplus divisible surplus accruing on this Policy. However,
due to the nature of this Policy, it is
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<PAGE>
not anticipated that divisible surplus will accrue
to this Policy.
Termination of At any time, for any reason, the Policyholder may
This Policy terminate this Policy on written notice to our
Variable Products Operations Division by registered
or certified mail. Such notice shall be effective
on the date received by us.
We may terminate this Policy upon the occurrence of
any of the following events:
a. the Plan fails to meet the requirements of
qualification under the Internal Revenue Code of
1986, as amended, or the Employee Retirement
Security Act, as amended ("ERISA"), or any
successor statutes thereto, or if performance under
the Policy would violate any provision of law
applicable to us;
b. the Policyholder fails to provide any
information reasonably requested by us in respect
to this Policy;
c. the sum of all amounts withdrawn from the Policy
exceeds the Policy Value;
d. aggregate premiums paid under this Policy do not
equal at least $1,000 for three consecutive Policy
Years, or if withdrawals during any Policy Year
exceed 50% of the Policy Value at the beginning of
such Policy Year.
e. the Policy Value, as of any day following the
fourth anniversary of the Policy Effective Date, is
less than $30,000.
Notice of termination by us will specify a date of
termination which will not be earlier than 10 days
from the date of receipt by the Policyholder of
such notice, mailed by registered or certified mail
to the Policyholder.
Effect of Upon termination of this Policy, we shall promptly
Termination pay its Surrender Value to the Policyholder.
Termination of this Policy will have no effect upon
payments to an Annuitant under an Individual
Annuity Contract under this Policy prior to its
termination.
Upon termination of this Policy, the Policyholder
may elect to apply the Policy Value to the
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purchase of Individual Annuity Contracts for
Participants (or their beneficiaries), or may elect
to receive the Surrender Value in a single sum
payment.
PART 3: ALLOCATION OF PREMIUMS
Premium Amounts Subject to the limitations set forth in this
Policy, the Policyholder may pay premiums in such
amounts as the Policyholder deems to be appropriate
under the Plan, but not more frequently than the
payment intervals shown on the Schedule Pages. All
premiums are payable at our Variable Products
Operations Division, except that the initial
premium may be paid to our authorized agent for
forwarding to our Variable Products Operations
Division. Payments will be credited to this Policy
and allocated as of the date received at our
Variable Products Operations Division.
The Policyholder may vary the amount and payment
intervals for subsequent premiums, and additional
premium payments may be made within the following
limits:
a. Each premium payment must at least equal $25.
b. No more than $1,000,000 in total premiums may be
contributed, unless we agree otherwise.
Premium The premium will be applied on the Payment Date
Allocation among and between the Sub-accounts and the
Guaranteed Interest Account, as the Policyholder
shall direct, subject to the following limitations:
a. Each allocation to a Sub-account or the
Guaranteed Interest Account must be at least $25.
b. No more than $1,000,000, in the aggregate, may
be allocated to any Sub-account or the Guaranteed
Interest Account, unless we agree otherwise.
The number of Accumulation Units credited to each
Sub-account will be determined by dividing the
premium applied to that Sub-account by the
Accumulation Unit Value of that Sub-account on the
Payment Date. The amount of a Deposit to the
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<PAGE>
Guaranteed Interest Account will equal the amount
of any premium so applied on the Payment Date. Any
Units credited to a Separate Account Sub-account,
or Deposits credited to the Guaranteed Interest
Account, as the result of a premium payment will
bear the same Payment Date as the premium applied
to create such Accumulation Unit or Deposit.
Interest included as part of an Adjusted Deposit
shall bear the same Payment Date as the Deposit.
The Policyholder may change the allocation schedule
with respect to subsequent or additional premium
payments by written notice filed with us. We
reserve the right to waive the requirement of
written notice.
Premiums Allocated The values that accumulate under this Policy are
To Sub-accounts based on the amount of premium payments made, the
rates of interest credited on any amount allocated
to the Guaranteed Interest Account, and the
investment experience of the Separate Account
Sub-accounts to which the premium payments have
been allocated. Except for the Guaranteed Interest
Account, the Sub-accounts are part of the Phoenix
Home Life Variable Accumulation Account ("VA
Account"). They invest in Mutual Funds which have
differing investment objectives as in the
Description of Separate Account Sub-Accounts in the
Schedule Pages.
We have the right to add additional Sub-accounts
subject to approval by the Securities and Exchange
Commission and, where required, by the insurance
supervisory official of the state where the policy
was delivered.
The VA Account The VA Account is a Separate Account established by
us under New York Law and is registered as a unit
investment trust under the Investment Company Act
of 1940. All income, gains and losses, realized and
unrealized, of the VA Account are credited to or
charged against the amounts placed in the VA
Account without reference to other income, gains
and losses of our General Account. The assets of
the VA Account are owned solely by us and we are
not a trustee with respect to such assets.
We use the assets of the VA Account to buy shares
of the Phoenix Edge Series Fund according to the
most recent allocation instruction on file with
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<PAGE>
us at our Variable Products Operations Division.
The Fund is registered under the 1940 Act as an
open end, diversified management investment
company. The Fund has separate Series that
correspond to the Sub-accounts. Assets of each
Sub-account are invested in shares of the
corresponding Fund Series.
The Guaranteed In addition to Separate Account Sub-accounts,
Interest Account this Policy also provides a Guaranteed Interest
Account to which premiums may be allocated. The
Guaranteed Interest Account is not part of the
Separate Account; it is accounted for as part of
our general account. We will credit interest on the
amount in the Guaranteed Interest Account at such
rate(s) as provided for under the terms of this
Policy.
PART 4: TRANSFERS, WITHDRAWALS, AND LAPSE
Transfers Among Subject to the terms of this Policy and the Plan,
Sub-Accounts and the the Policyholder may transfer all or any portion
Guaranteed Interest of the value of the Sub-accounts and the Guaranteed
Interest Account.
The Policyholder may also direct the systematic
transfer of specified amounts from a Sub-account or
the Guaranteed Interest Account to the other
options available under this Policy. The amount and
frequency of the systematic transfer amounts will
be as the Policyholder shall direct in writing,
subject to the following limitations:
a. The minimum initial and subsequent transfer
amounts are $25 monthly, $75 quarterly, $150
semi-annually, or $300 annually.
b. Under a systematic transfer, amounts may be
transferred from only one of the Sub-accounts or
the Guaranteed Interest Account, but may be
allocated to multiple Sub-accounts and the
Guaranteed Interest Account.
c. To be eligible for systematic withdrawals, a
value of at least $2,000 in the Sub-account (or
Guaranteed Interest Account, if applicable) from
which funds are to be systematically transferred is
required.
d. The amount transferred from the Guaranteed
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Interest Account may not exceed the greater of
$1,000 or 25% of the value of the Guaranteed
Interest Account as of the last day of the prior
Policy Year.
If the value in the Sub-account (or Guaranteed
Interest Account, if applicable) from which
systematic transfers are to be made is less that
the elected transfer amount, the remaining balance
will be transferred and no more systematic
transfers will be made.
Notwithstanding any other provision of this Policy,
under a systematic transfer election, you may make
more than one systematic transfer from the
Guaranteed Interest Account in any one Policy Year.
Non-systematic transfers from the Guaranteed
Interest Account will be effectuated by us on the
last Valuation Date to occur in the calendar
quarter during which the transfer request was
received by our Variable Products Operations
Division. All systematic transfers will be
effectuated by us on the first Valuation Date of
the calendar month following receipt by us of the
systematic transfer request.
We reserve the right to require that requests for
transfers be made in writing. A transfer charge may
be imposed as shown on the Schedule Pages. Any such
charge will be deducted from the Sub-accounts from
which the amounts are to be transferred in the same
proportion as the amounts to be transferred to each
Sub-account and the Guaranteed Interest Account
bear to the total amount transferred. The
Accumulated Value of each Sub-account and the
Guaranteed Interest Account will be determined on
the Valuation Date that coincides with the date of
transfer. Any new Units credited to a Sub-account,
and Adjusted Deposits held under the Guaranteed
Interest Account, as a result of any transfer shall
bear the same Payment Date as the Units or Adjusted
Deposits released to effectuate such transfer.
Withdrawals and The Policyholder may withdraw all or any part
Surrender of the Surrender Value of this Policy, less any
applicable State Premium Tax Charge assessable at
time of withdrawal, in whole or in part at any
time. Such withdrawals must be by written request
in a form satisfactory to us and must include
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such income tax withholding information as we may
reasonably require.
The amount withdrawn from any Sub-account of the
Separate Account will be accomplished by the
surrender and release of Accumulation Units
credited to the Sub-accounts(s) from which the
withdrawal is to be made, in such amount as
required to effectuate such withdrawal, including
any applicable fee or charge.
Any amount withdrawn from the Guaranteed Interest
Account will be taken by the release of Adjusted
Deposits in the amount needed to effectuate such
withdrawal, including any applicable fee or charge.
If, as the result of a withdrawal, no value remains
under this Policy, the Policy will be deemed fully
surrendered and terminated.
Withdrawals are subject to the Contingent Deferred
Sales Charge set forth in the Schedule Pages and
described in Part 5 of this Policy.
Lapse If on any Valuation Date the value of this Policy
becomes zero, such account will immediately
terminate and lapse without value.
Rules and The Accumulation Units and Adjusted Deposits
Limitations released for transfer or withdrawal will be
determined on a First-In, First-Out (FIFO) basis,
based on Payment Date.
Deferral of Transfers, withdrawals, and payment of the
Payment proceeds due upon a request for a full surrender
will usually be processed within 7 days. However,
we may postpone the processing of any such
transactions for any of the following reasons (as
provided under the Investment Company Act of 1940):
a. when the New York Stock Exchange is closed,
other than customary weekend and holiday closings;
b. when trading on the exchange is restricted by
the Securities and Exchange Commission;
c. when the Securities and Exchange Commission
declares that an emergency exists as a result of
which disposal of securities in the Fund is not
reasonably practicable or it is not reasonably
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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 Securities and
Exchange Commission, if any, are applicable and
will govern as to whether conditions described in
(b), (c) or (d) exist.
PART 5: EXPENSE CHARGES AND FEES
Charges and Fees Charges and fees to cover expenses incurred by us
in the distribution and administration of this
Policy are described in the Schedule Pages of this
Policy.
Payment of Charges If outstanding Charges or Fees have not otherwise
been paid by the Policyholder, the amount of
outstanding Fees and Charges will be deducted, on a
pro-rata basis from the Sub-accounts and the
Guaranteed Interest Account.
PART 6: DETERMINING THE ACCUMULATION UNIT VALUES
Crediting of When a premium payment is received by us, and
Account Accumulation allocated to a Sub-account as the Policyholder
Units shall direct, we will apply the premium paid on the
Payment Date to credit Accumulation Units to such
Account. The number of Accumulation Units credited
will be determined by dividing the premium applied
to that Account by the then current Accumulation
Unit Value of the appropriate Sub-account. The
Accumulation Unit Value of each Sub-account on a
Valuation Date is determined at the end of that
day.
Determination of The Accumulated Value of this Policy is determined
Accumulated Value by multiplying the total number of Units under this
Policy for that Sub-account by the current
Accumulation Unit Value of that Sub-account. The
total Accumulated Value under this Policy equals
the sum of the Accumulated Values of each of the
Sub-accounts.
Determination of the The Accumulation Unit Value of each Sub-account
Current Accumulation was set by us on the first Valuation Date under
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Unit Value each Sub-account. The current Accumulation Unit
Value of a Sub-account on any subsequent Valuation
Date is determined by multiplying the Accumulation
Unit Value of the Sub-account on the immediately
preceding Valuation Date by the Net Investment
Factor for that Sub-account for the Valuation
Period just ended.
Determination of The Net Investment Factor for a Sub-account is
Net Investment Factor determined by the investment performance of the
assets underlying the Sub-account for the
Valuation Period just ended. The Net Investment
Factor of a Sub-account for any Valuation Period is
equal to 1.0000000 plus the applicable net
investment rate for the period. The net investment
rate is determined by:
a. taking the sum of the accrued net investment
income and capital gains and losses, realized or
unrealized, of the Sub-account for the Valuation
Period; and
b. dividing the result of (a) by the Accumulated
Value of the Sub-account at the beginning of the
Valuation Period; and
c. for each calendar day in the Valuation Period,
subtracting the Daily Mortality and Expense Fee
shown in the Schedule Pages.
The Valuation of The values of the assets in each Sub-account will
Sub-accounts be calculated in accordance with applicable law and
accepted procedures.
PART 7: ANNUITY BENEFITS
Purchase of Individual The Policyholder may elect to apply all or any
Annuity Contract part of the value of this Policy to the purchase of
an Individual Annuity Contract. Any such Individual
Annuity Contract shall be nontransferable and
non-assignable. Notwithstanding, if the amount to
be so applied is less than $2,000 or would result
in monthly annuity payments of less than $20, we
shall have the right to pay such amount in one lump
sum in lieu of providing such an Annuity. We also
have the right to change the Annuity payment
frequency to annual if the monthly Annuity payment
would otherwise be less than $20. The Participant
may elect any of the Payment Options available
under
GD603 12
<PAGE>
such Contract at the time of purchase. If the
Participant has not made a written election of any
other option by the Maturity Date of such Contract,
payments will commence under a life annuity with
variable monthly payments, with a period certain of
10 years ("Payment Option I"). Annuity payments
falling due after the Annuitant's death during the
period certain will be paid to the Annuitant's
beneficiary, as determined under such Contract.
Payment Option I Payment Option I is a life annuity with variable
monthly payments, with a period certain of 10
years. The first monthly payment is due on the
Annuity Commencement Date specified in the
application for the Individual Annuity Contract.
Future payments will be due on the same day of the
month as the first payment is due, or if such date
does not fall within a month then the first
Valuation Date to occur in the following month.
Payments will continue during the lifetime of the
Annuitant, or, if later, the end of the 10-year
period certain starting with the date the first
payment is due.
Calculation of The Variable Income Table below shows the minimum
Variable Income amount of the first monthly payment for each
Payments $1,000 applied. The minimum first payments shown
are based on the 1983 Annuity Table projected to
the year 2000, and with projection Scale G
thereafter, and an effective annual interest rate
of 4 1/2%. The actual payments will be based on the
monthly payment rates we are using when the first
payment is due. They will not be less than shown in
the table.
In determining the first payment, the amounts held
under this option in each Sub-account are
multiplied by the rates we are using for this
option on the first Payment Calculation Date. The
first payment equals the total of such figures
determined for each Sub-account.
Future payments are measured by Annuity Units and
are determined by multiplying the Annuity Units for
the Account in each Sub-account with assets under
this option by the Annuity Unit Value for each
Sub-account on the Payment Calculation Date that
applies. The payment will equal the sum of the
amounts provided by each such Sub-account.
Annuity Units The number of Annuity Units in each Sub-account
GD603 13
<PAGE>
with assets under this option is equal to the
portion of the first payment provided by that
Sub-account divided by the Annuity Unit Value for
that Sub-account on the first Payment Calculation
Date.
Annuity Unit Value All Annuity Unit Values in each Sub-account of the
Separate Account were set at $l.0000000 on the
first Valuation Date selected by us. The value 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
1.0000000 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 Rate, and multiplied by (c) the
corresponding Annuity Unit Value on the preceding
Valuation Date.
Assumed Investment The Assumed Investment Rate of 4 1/2% per year is
Rate the annual interest rate assumed in determining the
first payment. The amount of each subsequent
payment from each Sub-account of the Separate
Account will depend on the relationship between the
Assumed Investment Rate and the actual investment
performance of that 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 which will comply with
that law.
Payment Calculation Payments are calculated on a Payment Calculation
Date Date. That date is the earliest Valuation Date
which is not more than 10 days before the due date
of the payment.
Restrictions Unless we agree otherwise, withdrawals, partial or
full surrenders, transfers, or additional premium
payments may not be made under this Payment Option.
Variable Income Table The following Variable Income Table shows the
Minimum Monthly Payment Rate for first payment, for
each $1000 Applied (Based on 4 1/2% Assumed
Investment Rate):
Adjusted Age* Rate**
40 4.14
45 4.28
50 4.47
55 4.73
60 5.07
GD603
14
<PAGE>
65 5.53
70 6.17
75 7.00
80 8.01
85 9.04
* Adjusted Age is attained age on birthday nearest
due date of the first payment. Monthly payment
rates for ages not shown will be furnished on
request.
** Rates shown are applicable to both male and
female Annuitants.
Life Expectancy In respect to a Participant who is required
Distributions to take minimum distributions upon attainment of
age 70 1/2, under the terms of the Plan and as
required under section 401(a)(9) of the Internal
Revenue Code, the Policyholder may elect to take
Life Expectancy Distributions ("LED") from this
Policy for that Participant. If elected by the
Policyholder, we will make annual distributions to
the Policyholder in an amount not less than the
minimum required distribution for such Participant,
or such Participant and a designated beneficiary,
as the Policyholder may direct. We will calculate
the minimum required annual distribution amount
under regulations issued by the Internal Revenue
Service from information provided by the
Policyholder. We will not be responsible for any
income tax liabilities, penalties, or interest
arising from an underdistribution resulting from
inaccurate or incomplete information provided to us
by the Policyholder.
The Policyholder may stop distributions under the
LED option at any time by written notice to us. LED
distributions will cease upon surrender of this
Policy. Upon not less than 60 days written notice
to the Policyholder, we may terminate the LED
payment schedule.
GD603 15
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
Main Administrative Office: One American Row, Hartford CT 06115
Statutory Home Office: 99 Troy Road, East Greenbush, NY 12061
POLICY ENDORSEMENT FOR INDIVIDUAL ANNUITY CONTRACTS ISSUED UNDER
GROUP FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
Group Policy Number: 000001
Name of Plan: ABC Company Employee Pension Plan and Trust
This amendment is issued as part of the Policy to which it is attached. As
amended, this Policy is an Individual Annuity Contract, as that term is used in
the Group Policy referenced above. Notwithstanding any provision of the Policy
to the contrary, this Policy is amended as specified in this Endorsement to
comply with the requirements of the Internal Revenue Code in respect to
distributions from qualified pension and profit-sharing plans.
Owner of this Policy The provision in Part 3 of the Policy entitled "Who
is the Owner," is amended to read as follows:
"The Annuitant shall be the Owner of this Policy,
except that upon the Annuitant's death a
Beneficiary who is the surviving spouse of the
Annuitant may elect to continue this Policy as
Substitute Annuitant (as described in Part 9 of
this Policy), subject to the distribution
requirements set forth below."
Not Transferable The provision in Part 2 of the Policy, entitled
"Assignments," is amended to read as follows:
"This policy 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 Mutual Insurance Company, except pursuant
to a Qualified Domestic Relations Order described
in section 414(m) of the Internal Revenue Code of
1986, as amended."
Maturity Date The following paragraph is added to the definition
of "Maturity Date," in Part 1 of the Policy:
"Notwithstanding any other provision of
GDR01
<PAGE>
this Policy, the Maturity Date may not be a date
later than December 31 of the year in which the
Annuitant to whom this Policy is issued attains (or
would have attained) age 70 1/2."
Limitation on Annuity Notwithstanding any other provision of
Distribution Periods Part 10 of this Policy, "Payment Options,"
Annuity payments may only be made over one, or any
combination, of the following periods:
(a) the life of the Annuitant;
(b) the life of the Annuitant and a designated
Beneficiary;
(c) a period certain not exceeding the life
expectancy of the Annuitant; or
(d) a period certain not exceeding the joint and
last survivor expectancy of the Annuitant and a
designated Beneficiary.
Required Annuity The amount of any Annuity payment made under this
Distribution Amounts Policy after the Maturity Date will be in an amount
at least equal to the greater of the amount
required under the minimum distribution
requirements of Internal Revenue Regulations
section 1.401(a)(9)-i, or the minimum distribution
incidental benefit requirement (MDIB) of Internal
Revenue Regulations section 1.401(a)(9)-2.
Distributions After If the Annuitant dies after Annuity payments have
Annuitant's Death begun, the remaining Annuity payments (if any) will
continue to be distributed as least as rapidly as
under the Annuity payment option being used prior
to the Annuitant's death.
If the Annuitant dies before the Maturity Date, the
entire value of this Policy shall be paid to the
Beneficiary by December 31 of the calendar year
containing the fifth anniversary of the Annuitant's
death, except to the extent that an election is
made to receive distributions in accordance with
(a) or (b) below:
GDR01
<PAGE>
(a) the Beneficiary may elect to receive Annuity
payments for life or for a period certain not
exceeding the life expectancy of the
Beneficiary, provided that Annuity payments
begin not later than December 31 of the
calendar year immediately following the year
in which the Annuitant died.
b) if the Beneficiary is the Annuitant's
surviving spouse, such spouse may elect to
defer the beginning of Annuity payments
described in (a) above to a date not later
than the later of:
(i) December 31 of the calendar year
immediately following the year in which
the Annuitant died; or
(ii) December 31 of the calendar year in which
the Annuitant would have attained age
70 1/2.
Determination of The amount of Annuity payments required under the
Annuity Amounts provisions of this Endorsement shall be determined
according to the rules of section 401(a)(9) of the
Internal Revenue Code and regulations promulgated
thereunder.
Life Expectancy Instead of electing a Payment Option to commence
Distributions (MDIB) at the Maturity Date, the Annuitant may elect to
receive annual Life Expectancy Distributions. The
amount of payment under this election will be
determined by us under the Minimum Distribution
Incidental Benefit (MDIB) Rules of Proposed Income
Tax Regulation section 1.401(a)(9)-2.
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
Registrar Secretary
GDR01
<PAGE>
TEMPORARY MONEY MARKET ALLOCATION AMENDMENT
THIS AMENDMENT IS ISSUED AS PART OF THE POLICY TO WHICH IT IS ATTACHED.
REFUND RIGHT AND The refund right stated in the Right to Cancel
TEMPORARY MONEY provision on the cover page of the Policy is
MAZKET SUB-ACCOUNT amended to provide for a full refund of any
ALLOCATION premium paid less any partial surrender amounts
paid, if the returned Policy is received by us at
our Variable Products Operations Division prior to
termination of the Right to Cancel period.
PREMIUM ALLOCATION The provision in Part 3, entitled "Premium
Allocation" is amended to provide that the premium
will temporarily be applied on its Payment Date
entirely to the Money Market Sub-account until
termination of the Right to Cancel period stated on
the cover page of the Policy. Upon termination of
such period without prior receipt at our Variable
Products Operations Division of the returned Policy
for a refund, the then value of this Policy's share
in the Money Market Sub-account will automatically
be reallocated based on the premium allocation
schedule elected in the application or as later
changed by you. The resultant share of this Policy
in the value of each of the respective Sub-accounts
on the date of transfer shall be in the same
percentages of the then total Accumulation Value as
the premium allocation percentages elected in the
application or as later changed by you.
TRANSFERS The provision in Part 4, entitled "Transfers Among
Sub-accounts", is amended to provide that no
transfers may be made until termination of the
Right to Cancel period stated on the cover page.
Phoenix Home Life Mutual Insurance Company
Secretary
GDR02
Exhibit 5a
Form of Application
<PAGE>
[ Phoenix logo here ] VARIABLE ANNUITY APPLICATION
<TABLE>
/ / Phoenix Home Life Insurance Company
/ / PHL Variable Insurance Company For Main Administrative Office Use Only: Case Contract Number __________
====================================================================================================================================
1. ANNUITANT(S) If no Contract Owner is specified below, the Annuitant will be the Contract Owner
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY ANNUITANT CONTINGENT ANNUITANT (USE IF ANNUITANT & OWNER ARE DIFFERENT)
_____________________________________________________________ _____________________________________________________________
Name Name
_____________________________________________________________ _____________________________________________________________
Address (No., Street) Address (No., Street)
_____________________________________________________________ _____________________________________________________________
(City, State, Zip Code) (City, State, Zip Code)
_____________________________________________________________ _____________________________________________________________
Phone Social Security Number Phone Social Security Number
_____________________________________________________________ _____________________________________________________________
Sex Date of Birth Sex Date of Birth
/ / Male / / Female / / Male / / Female
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
2. CONTRACT OWNER(S) Complete only if different from Annuitant. 3. BENEFICIARY DESIGNATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CONTRACT OWNER (JOINT OWNER - BETWEEN SPOUSES ONLY)
_____________________________________________________________ _____________________________________________________________
Name Annuitant's Primary Beneficiary & Relationship (If Corporate
Plan, must be Trustee)
_____________________________________________________________ _____________________________________________________________
Address (No., Street) Annuitant's Contingent Beneficiary & Relationship
_____________________________________________________________ _____________________________________________________________
(City, State, Zip Code) Owner's Beneficiary & Relationship (Complete ONLY if owner
differs from annuitant)
_____________________________________________________________ _____________________________________________________________
Phone Social Security Number Owner's Contingent Beneficiary & Relationship
_____________________________________________________________ _____________________________________________________________
Sex Date of Birth
/ / Male / / Female
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
4. TYPE OF PLAN
- ------------------------------------------------------------------------------------------------------------------------------------
/ / NON-QUALIFIED / / QUALIFIED
/ / IRA: / / Regular Contributory / / Direct Rollover / / Transfer / / Spousal IRA / / Simple IRA / / Sep IRA
Tax year to which contributions apply ____________________ / / Owner acknowledges receipt of PHL Disclosure Statement
/ / Section 403(b) TSA - Employer must sign as Applicant and states that it is an educational organization as described in
Internal Revenue Code section 170(b)(1)(A)(ii); a tax-exempt organization as described in Code section 501(c)(3); or a State,
political subdivision of a State or an agency or instrumentality of one of the foregoing. (The Employer further states that
only amounts deferred by the Owner/Annuitant under a salary reduction agreement with the Employer will be applied to this
annuity contract.)
/ / Section 457 Deferred Compensation Plan - Owner states that it is an "eligible employer," as defined in section 457 (e)(1)
of the Internal Revenue Code, and will remain the sole owner of any contract issued under this application until distributed
under the terms of the plan.
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
5. ANNUITY TYPE & PURCHASE PAYMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
/ / DEFERREED / / IMMEDIATE: Maturity Date ___________ Payout Option ___________ Initial Purchase Payment: $ __________
Subsequent purchase payments will be flexible unless otherwise noted as follows: $____________
/ / Annual / / Semi-Annual / / Quarterly / / Monthly / / Check-O-Matic
/ / Billing Notices are requested. Send bills to:
Name: _________________________________________________________________________________________________________________________
Address: ______________________________________________________________________________________________________________________
NOTE: If Check-O-Matic has been elected, please complete authorization form and include a void check.
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
6. SUB-ACCOUNT ALLOCATION Use full percentages (Must equal 100%)
- ------------------------------------------------------------------------------------------------------------------------------------
_____%Aberdeen New Asia _____%Templeton Asset Alloc. _____%Phoenix Balanced _____%Gia
_____%Templeton Dev. Mkts. _____%Templeton stock _____%Phoenix Real Estate _____%MVA - 3 Year
_____%Phoenix Int'l. _____%Phoenix Growth _____%Phoenix Multi-Sector _____%MVA - 5 Year
_____%Templeton Int'l. _____%Phoenix Allocation _____%Phoenix Money Market _____%MVA - 7 Year
_____%Wanger Int'l. Sm. Cap _____%Phoenix Theme _____%Other _______________ _____%MVA - 10 Year
_____%Other _______________ _____%Wanger U.S. Sm. Cap _____%Other _______________ _____%Other _______________
TEMPORARY MONEY MARKET ALLOCATION / / Yes / / No If yes, I elect to temporarily allocate my premiums to the Money Market
sub-account until termination of the Right to Cancel period as stated in the contract. In addition, certain states of issue
will have premiums temporarily allocated to the Money Market subaccount until termination of the Right to Cancel period as
stated in the contract.
- ------------------------------------------------------------------------------------------------------------------------------------
OL2502 Send completed form - with a check payable to "Phoenix" to: Phoenix Variable Products Mail Operation, 3-97
P.O. Box 8027, Boston, MA 02266-8027.
</TABLE>
<PAGE>
<TABLE>
====================================================================================================================================
7. DOLLAR COST AVERAGING (DCA) All transfers will be executed on the first of the month following receipt of the dollar cost
averaging request
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
a. Transfer Amount $__________($2,000 minimum balance in sending sub-account); Frequency: / / Monthly / / Quarterly
/ / Semi-Annual / / Annual
b. Sending Sub-account, (choose one): / / Money Market / / Guaranteed Interest Account / / Other _________________________
c. Receiving Sub-accounts: Sub-account Transfer Amount Sub-account Transfer Amount
----------- --------------- ----------- ---------------
______________ $ ___________________ ______________ $ ___________________
______________ $ ___________________ ______________ $ ___________________
______________ $ ___________________ ______________ $ ___________________
______________ $ ___________________ ______________ $ ___________________
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
8. TELEPHONE TRANSFERS AND CHANGE IN PAYMENT ALLOCATION
- ------------------------------------------------------------------------------------------------------------------------------------
/ / Yes / / No Telephone transfers and changes in payment allocation are subject to the terms of the Prospectus. If you
check the "yes" box, telephone orders will be accepted from you and your registered representative and you agree that, because
we cannot verify the authenticity of telephone instructions, we will not be liable for any loss caused by our acting on
telephone instructions, unless caused by our gross negligence.
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
9. MATURITY DATE (OPTIONAL)
- ------------------------------------------------------------------------------------------------------------------------------------
The Maturity Date shall be the latest date allowed under the terms of the contract unless earlier date noted as follows (the
latest allowable date for IRA and TSA qualified plans is age 70-1/2: _________________________
====================================================================================================================================
10. MISCELLANEOUS INSTRUCTION/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
_______________________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
11. STATEMENT OF OWNER/APPLICANT AND ANNUITANT
- ------------------------------------------------------------------------------------------------------------------------------------
ALL STATEMENTS ON THIS APPLICATION ARE TRUE TO THE BEST OF OUR KNOWLEDGE AND BELIEF. ANY PERSON WHO, WITH INTENT TO DEFRAUD OR
KNOWING THAT HE IS FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR
DECEPTIVE STATEMENT IS QUILTY OF INSURANCE FRAUD. WE AGREE THAT THIS APPLICATION SHALL BE PART OF THE ANNUITY CONTRACT. WE
HEREBY VERIFY OUR UNDERSTANDING THAT ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF
THE FUND, ARE VARIABLE AND NOT GUARANTEED. WE ACKNOWLEDGE RECEIPT OF CURRENT PROSPECTUSES FOR THE VARIABLE ANNUITY AND THE
FUND.
WILL THE PROPOSED CONTRACT REPLACE ANY EXISTING ANNUITY OR LIFE INSURANCE? / / YES / / NO. IF YES, LIST COMPANY NAME, PLAN
AND YEAR ISSUED IN # 10.
/ / Statement of Additional Information Requested
Signed at _________________________________________________________________ On ___________________________
(CITY, STATE) (DATE)
Under penalty of perjury, I (the owner) certify that my Social Security/Taxpayer ID number is correct as it appears on this
application.
Signature of Owner _________________________________ Signature of Annuitant (if other than owner) _____________________________
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
12. STATEMENT OF REPRESENTATIVE (Use full percentages - must equal 100%)
- ------------------------------------------------------------------------------------------------------------------------------------
Will this contract replace any existing insurance or annuity? / / Yes / / No
This replacement is meant to be a tax-free exchange under Section 1035: / / Yes / / No If "yes", please give particulars
above in #10.
The Agent hereby certifies that the Owner signed this applciation in his/her presence; he/she has truly and accurately recorded
on this form the information supplied by the proposed annuitant; and that he/she is qualified and authorized to discuss the
contract herein applied for.
__________________________________ _______________ __________________________________ _______________ _______________
REPRESNETATIVE'S SIGNATURE DATE BROKER-DEALER FIRM REP # % SHARE
__________________________________ _______________ __________________________________ _______________ _______________
REPRESNETATIVE'S SIGNATURE DATE BROKER-DEALER FIRM REP # % SHARE
__________________________________ _______________ __________________________________ _______________ _______________
REPRESNETATIVE'S SIGNATURE DATE BROKER-DEALER FIRM REP # % SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
13. REGISTERED REPRESENTATIVE ELECTION
- ------------------------------------------------------------------------------------------------------------------------------------
Chose one Option: / / Option 1 / / Option 2 / / Option 3
====================================================================================================================================
Complete only if an exception to your Broker-Dealer's Option election is requested.
Broker-Dealer hereby elects to permit an Option Exception for this Contract and representative(s) as noted above and as
confirmed by Signature below.
Broker-Dealer Firm ____________________________________________________________________________________________________________
Broker-Dealer's Signature _____________________________________________________________________________________________________
Print Name & Title _______________________________________________________________ Broker-Dealer Number _______________________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Send completed form - with a check payable to "Phoenix" to: Phoenix Variable
Products Mail Operation, P.O. Box 8027, Boston, MA 02266-8027.
Exhibit 5b
Form of Application
<PAGE>
<TABLE>
TEMPLETON INVESTMENT PLUS
[ Phoenix logo here ] APPLICATION FOR FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY CONTRACT
TO THE PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
====================================================================================================================================
For Main Administrative Office Use Only: Contract Number ___________________________________________________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
Please make check payable to Phoenix Home Life Mutual Insurance Company. Send check and application to: Phoenix Home Life Mutual
Insurance Company, Variable Products Operation Division, 101 Munson Street, P.O. Box 942, Greenfield, MA 01302-0942.
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE PRINT PART I. CONTRACT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Primary Annuitant (may not be corporation or trust)
- ------------------------------------------------------------------------------------------------------------------------------------
NAME (First, Middle, Last)
- ------------------------------------------------------------------------------------------------------------------------------------
SEX U.S. CITIZEN BIRTHDATE AGE AT LAST BIRTHDAY SOCIAL SECURITY NUMBER
/ / Male / / Female / / Yes / / No
- ------------------------------------------------------------------------------------------------------------------------------------
ADDRESS FOR MAIL (No., Street, City, County, State, Zip Code)
- ------------------------------------------------------------------------------------------------------------------------------------
2. Contingent Annuitant
- ------------------------------------------------------------------------------------------------------------------------------------
NAME (First, Middle, Last)
- ------------------------------------------------------------------------------------------------------------------------------------
SEX U.S. CITIZEN BIRTHDATE AGE AT LAST BIRTHDAY SOCIAL SECURITY NUMBER
/ / Male / / Female / / Yes / / No
- ------------------------------------------------------------------------------------------------------------------------------------
ADDRESS FOR MAIL (No., Street, City, County, State, Zip Code)
- ------------------------------------------------------------------------------------------------------------------------------------
3. Annuitant's Beneficiary
- ------------------------------------------------------------------------------------------------------------------------------------
PRIMARY RELATIONSHIP TO ANNUITANT
- ------------------------------------------------------------------------------------------------------------------------------------
ADDRESS (No., Street, City, State, Zip Code)
- ------------------------------------------------------------------------------------------------------------------------------------
CONTINGENT RELATIONSHIP TO ANNUITANT
- ------------------------------------------------------------------------------------------------------------------------------------
ADDRESS (No., Street, City, State, Zip Code)
- ------------------------------------------------------------------------------------------------------------------------------------
4. Owner(s) (Complete if Owner is other than the Primary Annuitant as Primary Annuitant will be Owner; Joint Ownership allowed
between Spouses only.)
- ------------------------------------------------------------------------------------------------------------------------------------
NAME S. S. NO./TAXPAYER I.D. NO.
- ------------------------------------------------------------------------------------------------------------------------------------
ADDRESS (No., Street, City, State, Zip Code)
- ------------------------------------------------------------------------------------------------------------------------------------
5. Owner's Beneficiary (Must be completed when Owner is other than the Annuitant)
- ------------------------------------------------------------------------------------------------------------------------------------
PRIMARY RELATIONSHIP TO ANNUITANT
- ------------------------------------------------------------------------------------------------------------------------------------
ADDRESS (No., Street, City, State, Zip Code)
- ------------------------------------------------------------------------------------------------------------------------------------
CONTINGENT RELATIONSHIP TO ANNUITANT
- ------------------------------------------------------------------------------------------------------------------------------------
ADDRESS (No., Street, City, State, Zip Code)
- ------------------------------------------------------------------------------------------------------------------------------------
6. Contract Specifications
- ------------------------------------------------------------------------------------------------------------------------------------
a. Initial Purchase Payment $ _______________ Minimum initial purchase payment for Non Tax-Qualified personal investment plans,
except Check-O-Matic is $1,000 ($25 for Tax Qualified, Employer Sponsored or Check-O-Matic plans.) Subsequent payments must be
$25 or more.
- ------------------------------------------------------------------------------------------------------------------------------------
b. Reminder Notices (Billing) Requested / / Yes / / No (If yes, complete the information below)
- ------------------------------------------------------------------------------------------------------------------------------------
c. Subsequent purchase payments shall be flexible unless otherwise noted as follows: Monthly Check-O-Matic $___________________
Monthly $___________________ Quarterly $__________________ Semi-Annual $__________________ Annual $__________________
- ------------------------------------------------------------------------------------------------------------------------------------
REMINDER NOTICES (Name) ADDRESS (No., Street, City, State, Zip Code)
- ------------------------------------------------------------------------------------------------------------------------------------
d. Maturity Date shall be the policy anniversary nearest the Annuitant's attainment of age 85 for Non-Tax-Qualified Plans (age
70-1/2 for Tax-Qualified Plans) unless earlier age noted as follows ________________________________.
- ------------------------------------------------------------------------------------------------------------------------------------
e. / / Check here if $35 Annual Administrative Charge is to be paid in cash, rather than deducted automatically from sub-account(s)
on policy anniversary.
- ------------------------------------------------------------------------------------------------------------------------------------
f. Sub-Account Allocation Instructions. Use full %'s. Written authorization is required to change an allocation schedule.
/ / Templeton Asset Allocation_____% / / Templeton Bond_____% / / Templeton Stock_____% / / Templeton Money Market_____%
/ / Templeton International_____%
- ------------------------------------------------------------------------------------------------------------------------------------
g. Temporary Money Market Allocation Amendment / / Yes / / No
I authorize that any purchase payment amounts to be temporarily applied entirely to the Templeton Money Market sub-sccount until
termination of the Right to Cancel period provided in the policy and then automatically reallocated to the above designed sub-
account(s) if by the end of Right to Cancel period the policy has not been return to the Company's Variable Products Operations
Division for a refund.
- ------------------------------------------------------------------------------------------------------------------------------------
7. Plan Type / / Tax-Qualified Plan (Complete Part II.) / / Non Tax-Qualified personal investment plan
- ------------------------------------------------------------------------------------------------------------------------------------
8. / / Please send me a Statement of Additional Information.
- ------------------------------------------------------------------------------------------------------------------------------------
9. Will the annuity applied for replace any existing insurance or annuities? / / Yes / / No
(If "yes", submit full details, including name of company, plan and amount, date issued and reasons for replacement; also
replacement material if required.)
====================================================================================================================================
OL 1340 1-90 8-93
</TABLE>
<PAGE>
<TABLE>
====================================================================================================================================
<S> <C>
10. Telephone Transfer / / Yes / /No
Telephone transfers are subject to the terms of the prospectus. If you check the "yes" box, telephone orders will be accepted
from you and your registered representative and you agree that, becuase we cannot verify the authenticity of telephone
instructions, we will not be liable for any loss caused by our acting on telephone instructions, unless caused by our gross
negligence.
- ------------------------------------------------------------------------------------------------------------------------------------
PART II. TAX-QUALIFIED PLAN INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
1. Individual Retirement Annuity
/ / Regular Contributory Tax Year to which contribution applies: ____________________
/ / Rollover / / Qualified Pension Plan
FROM:
/ / Transfer / / Existing IRA
/ / Simplified Employee Pension - SEP /IRA Complete IRS Form 5305 - SEP
The Annuitant, as proposed owner of the policy, acknowledges receipt of a current Phoenix Home Life IRA disclosure statement.
- ------------------------------------------------------------------------------------------------------------------------------------
2. / / Tax Sheltered 403(b) Annuity
NOTE: The employer must sign this application certifying that a salary reduction agreement is in place between the sponsoring
organization and the employee. This contract is designed for salary reduction contributions only. No other Employer or Employee
contributions may be made. Complete Forms PT 319H Statement by Employer.
- ------------------------------------------------------------------------------------------------------------------------------------
3. / / Corporate / / Keogh / / 401(k) 4. / / Deferred Compensation Section 457 Plan
NOTE: Complete Form PT 352 A, Pension Trust Qualified Submission NOTE: Complete Form OL 1340 C Statement by Employer
- ------------------------------------------------------------------------------------------------------------------------------------
PART III. MISCELLANEOUS INSTRUCTIONS / COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Any policy issued hereunder in the state of Missouri or Oklahoma shall be considered a Missouri or Oklahoma contract respectively
and its terms, including those concerning the receiving of information by the agent, shall be construed in accordance with the laws
of the state of Missouri or Oklahoma respectively.
- ------------------------------------------------------------------------------------------------------------------------------------
PART IV. APPLICANT SIGNATURE AND CERTIFICATION
- ------------------------------------------------------------------------------------------------------------------------------------
On the date of this application, the undersigned applicant paid to the agent named hereunder $ __________________ on account of the
premium for annuity applied for. I declare that the statements in the application are true and complete to the best of my knowledge
and belief. I further agree that this application shall be the basis of and a part of the policy; that this application and policy
will constitute the entire contract; that a current prospectus discussing the policy and The Templeton Variable Products Series
Fund has been received by me; that the policy shall not take effect until its date of issue; and that the agent taking this
application has no authority to make, modify, alter, or discharge any contract hereby applied for. Under penalty of perjury, I
certify (1) that the number shown on this form is my correct taxpayer identification number and (2) that I am not subject to backup
withholding either because I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as
a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup
withholding. If you have been notified by the IRS that you are currently subject to backup withholding, strike out phrase (2) above
and initial the deletion.
THE ACCUMULATED VALUE OF THE POLICY APPLIED FOR WILL BE BASED ON THE INVESTMENT EXPERIENCE OF THE APPLICABLE SUB-ACCOUNTS. THIS
VALUE IS VARIABLE AND IS NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
Signed at ______________________________________________________ this ____________________ date of _________________________________
_______________________________________________________________ _______________________________________________________________
SIGNATURE OF PRIMARY ANNUITANT SIGNATURE OF OWNER (IF OTHER THAN PRIMARY ANNUITANT)
_______________________________________________________________ _______________________________________________________________
WITNESS (AGENT) SIGNATURE OF APPLICANT IF OTHER THAN OWNER
- ------------------------------------------------------------------------------------------------------------------------------------
PART V. AGENT'S STATEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
This replacement is meant to be a tax-free exchange under Section 1035. / / Yes / / No
Will this contract replace any existing insurance or annuity? / / Yes / / No (If "Yes", please give particulars below)
The Agent hereby certifies that he / she has truly and accurately recorded on the application the information supplied by the
proposed annuitant; and that he / she is qualified and authorized to discuss the contract herein applied for.
______________________________________________________________________ _________________________
AGENT'S SIGNATURE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
AGENT / BROKER NAME AND I. D. NO. (Please Print Full Name) BROKER DEALER NAME AND ADDRESS AGENT/BROKER PHONE NO.
( )
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE AGENCY'S NAME AND ADDRESS (If other than above.) BRANCH OFFICE NAME AND ADDRESS BRANCH OFFICE PHONE NO.
( )
====================================================================================================================================
</TABLE>
Exhibit 5c
Form of Application
<PAGE>
<TABLE>
[ Phoenix logo here ] Phoenix Home Life Mutual Insurance Company GROUP VARIABLE ANNUITY
PHL Variable Insurance Company OWNER MASTER APPLICATION
====================================================================================================================================
Please check appropriate plan type (Check only one): / / Allocated / / Unallocated
H.O. Use Only: Case # _______________
====================================================================================================================================
<S> <C>
1. PLAN NAME
- ------------------------------------------------------------------------------------------------------------------------------------
Name Plan Tax ID Number
- ------------------------------------------------------------------------------------------------------------------------------------
Address (No., Street, City, State, Zip Code) Employer Phone Number
====================================================================================================================================
2. CONTRACT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
PLAN TYPE: / / Defined Benefit (003) / / Money Purchase (003) / / Profit Sharing (004) / / Target Benefit (019) / / 401(k) (020)
/ / Form PT 352 enclosed (If not, explain in Miscellaneous Instructions/Comments Section)
SUB-ACCOUNT TRANSFERS AND ALLOCATION CHANGES BY PHONE : / / None / / Trustee Only / / Trustee or Participant (For Allocated
Plans only) Sub-account transfers and changes in payment allocation by phone are subject to the terms of the Prospectus. Telephone
instructions will be accepted from the Trustee(s) and plan participants. You agree that, because the Company cannot verify the
authenticity of telephone instructions, the Company will not be liable for any loss caused by acting on telephone instructions,
unless caused by the Company's gross negligence. If you check "none", telephone instructions will not be accepted.
TEMPORARY MONEY MARKET ALLOCATION: / / Yes / / No
If "yes", premiums are temporarily allocated to the Money Market Sub-account until end of the Right to Cancel period as stated in
the contract.
====================================================================================================================================
ALLOCATED UNALLOCATED (OR ALLOCATED WITH EMPLOYER CHOICE OF SUB-ACCOUNTS)
- ------------------------------------------------------------------------------------------------------------------------------------
Will Participants be allowed to choose sub-account
allocations. / / Yes / / No Please complete the following Sub-account allocation elections:*
(FULL PERCENTAGES MUST BE USED AND MUST TOTAL 100%)
If yes, please refer participants to section 3 on the _____% Money Market (141) _____% Growth (142)
Participant Account Insormation (Form OL 1871). _____% Bond (143) _____% Guaranteed Interest Account (144)
_____% Total Return (145) _____% International(146)
If no, please fill out the sub-account allocation _____% Balanced(147) _____% Real Estate Securities (148)
elections to the right. _____% Wanger US Small Cap (153)
_____% Wanger International Small Cap (154)
*Would you like your contract to _____% Other ___________________________________________________________
have a loan provision? / / Yes / / No _____% Other ___________________________________________________________
(Subject to State approval.) _____% Other ___________________________________________________________
Participant Annual Administrative charge should
automatically be deducted from which Contribution
Source: / / Employer / / Employee
====================================================================================================================================
3. OPTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
SYSTEMATIC TRANSFER DOLLAR COST AVERAGING
- ------------------------------------------------------------------------------------------------------------------------------------
ALLOCATED
Will systematic transfers be offered to Plan Participants? / / Yes / / No
If "yes", please instruct Plan Participants to complete section 4 on Participant Account Information (Form OL 1871).
- ------------------------------------------------------------------------------------------------------------------------------------
UNALLOCATED
Transfer Amount $ _______________ ($2,000 minimum initial value in sending Sub-account)
Indicate Frequency of Transfer: / / Monthly / / Quarterly / / Semi-Annual / / Annual
SELECT ONE SENDING SUB-ACCOUNT:
/ / Money Market (141) / / Growth (142) / / Bond (143)
/ / Guaranteed Interest Account (144) / / Total Return (145) / / International(146)
/ / Balanced(147) / / Real Estate Securities (148) / / Wanger US Small Cap (153)
/ / Wanger International Small Cap (154) / / Other ________________________________________________________________________
SELECT SUB-ACCOUNTS THAT WILL RECEIVE TRANSFERS:
Sub-account Transfer Amount Sub-account Transfer Amount
_________________________ $_________________________ _________________________ $_________________________
_________________________ $_________________________ _________________________ $_________________________
_________________________ $_________________________ _________________________ $_________________________
* Please see Service Guide for apporvals and instructions.
- ------------------------------------------------------------------------------------------------------------------------------------
OL2318 9-95
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3. OPTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
FOR ALLOCATED AND UNALLOCATED
PAYROLL:
Company Remittance Frequency: / / 12 per year / / 24 per year / / 26 per year
Would you like Billing Notices to be sent? / / Yes / / No
CONFIRMATION NOTICES/QUARTERLY STATEMENTS:
Mail CONFIRMATION Notices to: / / Employer / / Third Party Administrator
Mail QUARTERLY Statements to: (check maximum of 2) / / Employer / / Third Party Administrator / / Participants
Would you like to receive a Statement of Additional Information? / / Yes / / No
====================================================================================================================================
4. REPLACEMENTS/TRANSFERS:
- ------------------------------------------------------------------------------------------------------------------------------------
Will the proposed contract replace any existing annuity or life insurance contract? / / Yes / / No
If yes, list company name, plan and year issued: ___________________________________________________________________________________
====================================================================================================================================
5. MISCELLANEOUS INSTRUCTIONS/COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
====================================================================================================================================
Any policy issued hereunder in the State of Missouri or Oklahoma shall be considered a Missouri or Oklahoma contract respectively
and its terms, including those concerning the receiving of information by the agent, shall be construed in accordance with the laws
of the State of Missouri or Oklahoma respectively.
====================================================================================================================================
6. SIGNATURES
- ------------------------------------------------------------------------------------------------------------------------------------
All statements made in this application are true to the best of our knowledge and belief, and we agree that they are adopted by and
are binding on us and shall form the basis for any annuity contract issued by the Company (Note: as used in this form, the Company
means the company that issued the contract.) We understand that the contract applied for shall not take effect until the later of,
(1) the issuance of the contract, (2) receipt of the first required contract payment by the Company. No investment dealer or agent
can make or change a contract, or waiver any of the Company's rights or requirements. The Company has the unilateral right, (1) to
determine whether any contract shall be issued on the basis of this application, and (2) to waive or modify any terms or conditions
of this application or any of the Company's requirements. We further agree that this application shall be affixed to and become
part of the annuity contract and verify our understanding that ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE PHOENIX EDGE SERIES FUND AND WANGER ADVISOR'S TRUST, ARE VARIABLE AND NOT GUARANTEED AS TO DOLLAR
AMOUNT. We acknowledge receipt of current prospectuses for the Variable Annuity and the Funds. The plan designated in Section 1
meets the requirements for qualification under Internal Revenue Code section 401 and, under penalty of perjury, the contract owner
certifies that the taxpayer identification number is correct as it appears in this application and that the Plan is not subject to
backup withholding.
_______________________________________________________________ _________________ _________________________________________
Signed at City State Date
_______________________________________________________________ _______________________________________________________________
Signature of Plan Trustee Signature of Plan Trustee
______________________________________________________________ _______________________________________________________________
Signature of Plan Trustee Signature of Plan Trustee
The representative hereby certifies he/she witnessed the Trustee(s) signature(s) and that all information contained in this
application is true to the best of his/her knowledge and belief.
Representative: Were the terms and conditions of this contract thoroughly explained to the applicant? / / Yes / / No
Representative: Will the proposed contract replace any existing annuity or life insurance contract? / / Yes / / No
Representative's Signature: _____________________________________________________________ Date: ___________________________________
====================================================================================================================================
7. REPRESENTATIVE INFORMATION (Please type or print)
- ------------------------------------------------------------------------------------------------------------------------------------
Representative's Name ____________________________________________________ Rep. # ______________________ % Share ___________________
Representative's Name ____________________________________________________ Rep. # ______________________ % Share ___________________
Representative's Name ____________________________________________________ Rep. # ______________________ % Share ___________________
Service Address: ___________________________________________________________________________________________________________________
City, State, ZIP Code ______________________________________________________________________ Rep. Tel. No. _________________________
Broker/Dealer Name ________________________________________________________________ Broker/Dealer Tel. No. (_____)__________________
Broker/Dealer (City, State) _____________________________________ Agency No. ______________________ Branch No. _____________________
====================================================================================================================================
Please make check payable to Phoenix Home Life Companies. Send completed application with check to Variable Products Operations,
Phoenix Home Life, 101 Munson Street, P.O. Box 942, Greenfield, MA 01302-0942
====================================================================================================================================
</TABLE>
Exhibit 6
Charter and By-Laws
<PAGE>
CHARTER
of
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
ARTICLE I. The name of the Corporation shall hereafter CORPORATE NAME
be "Phoenix Home Life Mutual Insurance Company". The
Corporation shall be a continuation of the corporate
existence of Phoenix Mutual Life Insurance Company
(originally incorporated under the name American
Temperance Life Insurance Company) by the Connecticut
General Assembly at its 1851 session and, immediately
prior hereto, redomesticated as a New York corporation
pursuant to Article 71 of the Insurance Law of the State
of New York following its merger pursuant to Article 71
of the Insurance Law of the State of New York with Home
Life Insurance Company.
ARTICLE II. The Corporation shall have a principal office PRINCIPAL OFFICE
in East Greenbush, County of Rensselaer in the State of
New York.
ARTICLE III. The business of the Corporation shall be BUSINESS OF THE
life insurance, endowments, annuities, accident CORPORATION
insurance, health insurance and any other business or
type of business as may be authorized by and under
Paragraphs 1, 2 and 3 of Section 1113(a) of the
Insurance Law of the State of New York; and the
Corporation is specifically empowered to accept and to
cede reinsurance of any such risks or hazards. The
Corporation may undertake such other reinsurance
business as may be permitted to it by Section 1114 of
said Insurance Law and such other kinds of business as
permitted under Section 4205 of said Insurance Law.
The Corporation shall also have the power and authority
to provide general investment advisory and financial
management services and to conduct and carry on any
other kind or kinds of business permitted to be
conducted by mutual life insurance companies under the
Insurance Law of the State of New York, and to invest
in affiliated entities to the extent permitted by said
Insurance Law, and shall have the right and authority
to undertake and provide such additional kinds of
reinsurance and other coverages as may hereafter be
permitted by said Insurance Law, as well as the
general rights, powers and privileges now or hereafter
granted by the Insurance Law of the State of New York
or any other law applicable to mutual life insurance
companies having power to do the kinds of business
herein above referred to and any and all other
rights, powers and privileges of the Corporation as
the same may now or hereafter be declared by
applicablc law.
The Corporation may exercise such powers outside of
New York to the extent permitted by the laws of the
particular jurisdiction. Policies or other contracts
may be issued stipulated to be participating or non-
participating; and they may be with or without seal.
ARTICLE IV. The Corporation shall have no capital MUTUAL COMPANY
stock but shall be a mutual company.
-1-
<PAGE>
ARTICLE V. The care and direction of the affairs,
business and property of the Corporation shall be
vested in a Board of Directors consisting of not
fewer than thirteen (13) nor more than thirty (30)
Directors, as may be determined from time to time
by the Board of Directors.
Each Director shall be at least eighteen (18) years
of age and at all times the majority shall be citizens
and residents of the United States. Not fewer than
three (3) Directors shall be residents of the State of
New York.
The Board of Directors will have the power to make
from time to time such bylaws, rules and regulations
for the transaction of the business of the Corporation
and the conduct of its affairs, not inconsistent with
this Charter and the laws of the State of New York,
as may be deemed expedient, and to amend or repeal
such bylaws, rules and regulations.
ARTICLE VI. The Directors of the Corporation shall be ELECTION OF DIRECTORS
elected by those persons entitled to vote as
prescribed by law, voting by ballot alone and not by
proxy. The Officers of the Corporation shall be
elected or appointed by the Board of Directors.
An annual election of Directors shall be held
on the third Tuesday of February each year at the home
office of the Corporation in the manner prescribed by
law. The Directors shall be divided into three (3)
classes, as nearly equal in number as may be, so that
each class shall be elected for terms of three (3)
years and the terms of office of only one (1) class
shall expire at each annual election of Directors,
and as the respective terms of office of Directors
shall expire, their successors shall be elected for
terms of three (3) years, except as otherwise
contemplated by this Article VI. Any newly created
Directorships or any decrease in Directorships shall
be so apportioned by the Board of Directors among
the classes of Directors as to make all classes as
nearly equal number as may be. Whenever the number
of Directors is increased by the Board of Directors
and any vacancies resulting from the newly created
Directorships are filled by the Board of Directors,
there shall not be any classification of the
additional Directors until the next annual election
of Directors.
Vacancies on the Board of Directors, including
vacancies resulting from any increase in the
authorized number of Directors, may be filled by the
Board of Directors.
ARTICLE VII. The duration of the Corporation shall PERPETUAL DURATION
be perpetual.
ARTICLE VIII. No Director shall be personally liable LIMITATION OF
to the Corporation or any of its of policyholders for LIABILITY
damages for any breach of duty as a Director; provided,
however, that the foregoing provision shall not
eliminate or limit (i) the liability of a Director if
a judgment or other final adjudication adverse to the
Director establishes that the Director personally
gained in fact a financial profit or other advantage
to which he or she was not legally entitled or that
the Director's acts or omissions were in bad faith or
involved intentional misconduct or were acts or
omissions (a) which the Director knew or reasonably
should have known violated the Insurance Law of the
State of New York, or (b) which violated a specific
standard of care imposed on Directors directly, and
not by reference, by a provision of the Insurance
Law of
-2-
<PAGE>
the State of New York (or any regulations promulgated
thereunder), or (c) which constituted a knowing violation
of any other law; or (ii) the liability of a Director
for any act or omission prior to the adoption of this
Article VIII.
-3 -
<PAGE>
BYLAWS
of
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
ARTICLE I
Meetings of the Comnany
-----------------------
ANNUAL MEETING;
SECTION 1.1 The Annual Meeting of the Company for the SPECIAL MEETINGS
transaction of such business as the Board of Directors
shall from time to time prescribe, shall be held on the
fourth Monday of February of each year and at such time
and place as the Board of Directors by resolution adopted
at least sixty (60) days prior to such Annual Meeting
shall specify. Special meetings may be called at any
time at the direction of the Chief Executive Officer
and shall be called at any time in accordance with the
vote of the Directors, or at the written request of
any six (6) of them.
SECTION 1.2 At each Annual Meeting there shall be STATEMENTS OF
presented to the policyholders of the Company a report OPERATIONS AND
of the operations of the Company for the preceding CONDITIONS
calendar year and a statement of its financial
condition.
SECTION 1.3 Notice of the Annual Meeting or any NOTICE OF
special meeting shall be given to policyholders of MEETINGS
the Company by publication in the same manner as
prescribed by the New York Insurance Law for
notice of the election of Directors or by such other
means as the Board may from time to time prescribe.
SECTION 1.4 At any meeting of the Company those QUORUM
policyholders present in person shall constitute a
quorum.
SECTION 1.5 The person designated pursuant to CHAIRMAN AND
Section 2.10 hereof to preside at meetings of SECRETARY OF
the Board of Directors shall act as Chairman of MEETINGS
the meeting. The Secretary of the Board of Directors,
unless he or she is absent or elects not to serve,
shall act as the secretary of the meeting. Unless
otherwise voted, the order of business at the
meeting shall be as prescribed by the Chief
Executive Officer or by such other person as may be
presiding.
ARTICLE II
Board of Directors
------------------
SECTION 2.1 The authorized number of Directors of the NUMBER,
Company shall be such number, not less than thirteen QUORUM AND
(13) nor more than thirty (30), as may be determined ADJOURNMENTS
by a majority of the authorized number of Directors
immediately prior to any such determination. No
decrease in the authorized number of Directors shall
shorten the term of any incumbent Director. At least
two (2) of the principal Officers of the Company shall
be Directors but the number of officers and salaried
employees who are Directors shall at all time be less
than a quorum of the Board of Directors. A majority of
the authorized number of Directors, at least one (1)
-1-
<PAGE>
of whom shall be a person as described in Section
1202(b)(1) of the New York Insurance Law (hereinafter
referred to in these Bylaws as "Independent Director(s)"),
shall constitute a quorum for the transaction of business.
Except as otherwise provided by law or these Bylaws, the
vote of a majority of the Directors present at the time
of the vote, if a quorum is present at such time, shall
be the act of the Board. A majority of the Directors
present, whether or not a quorum shall be present, may
adjourn any meeting. Notice of the time and place of an
adjourned meeting of the Board shall be given if and as
determined by a majority of the Directors present at the
time of the adjournment.
SECTION 2.2 No fewer than four (4) regular meetings of REGULAR
the Board of Directors shall be held each year at such BOARD
place within the State of New York, on such dates and MEETINGS
at such hours as the Board may from time to time
determine. Additional regular meetings of the Board for
the transaction of any business shall be held at such
places and on such dates and at such hours as the Board
may from time to time determine. Provided that no fewer
than four (4) regular meetings of the Board shall have
been or will be held in the State of New York during any
calendar year, one (1) of such additional regular
meetings during such calendar year may be held elsewhere
within the United States or Canada in a jurisdiction in
which the Company is licensed to do business. Except as
otherwise required by law or these Bylaws, notice of
regular meetings need not be given.
SECTION 2.3 Special meetings of the Board shall be SPECIAL
held whenever called by the Chief Executive Officer or BOARD
by any three (3) Directors. Notice of each such special MEETINGS
meeting shall be mailed to each Director at such WAIVER OF
Director's residence or usual place of business or NOTICE
other address filed with the Secretary to the Board for
such purpose, or shall be sent to such Director by any
form of telecommunication, or be delivered or given to
such Director personally or by telephone, not later
than the second day preceding the day on which such
meeting is to be held. Notice of any meeting of the
Board need not, however, be given to any Director who
submits a signed waiver of notice, whether before or
after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the
lack of notice. Every such notice shall state the time
and place but, except as otherwise required by law or
these Bylaws, need not state the purpose of the meeting.
SECTION 2.4
The annual election of Directors shall be held on the ELECTION OF
third Tuesday of February of each year. The Directors DIRECTORS
of the Company shall be elected by policyholders as
prescribed by law.
SECTION 2.5 No person may stand for election or QUALIFICATION
re-election or be appointed as a Director if during the OF DIRECTORS
three (3) years following election he or she would AND TERM
attain the age of seventy (70) years. All Directors
shall serve through the third Annual Meeting of the
Company following their election, unless elected or
appointed for a lesser term, and until their successors
are elected and qualified, provided, however, that
with the exception of the Chief Executive Officer,
the term of a Director who is an Officer of the Company
shall expire on the date that such Director retires or
resigns as an Officer of the Company. The foregoing
notwithstanding, to the extent any Director fails to
conduct himself or herself in accordance with such
written standards as may be established from time to
time by the Board of Directors, then such Director may
be removed through affirmative vote of at least
two-thirds of the remaining Directors.
SECTION 2.6 As soon as practicable following the Annual ORGANIZATION
Meeting of the Company, the Directors shall commence a MEETING OF
regular meeting of the Board which shall be the
Organization
-2-
<PAGE>
Meeting of the Board. At such meeting the Board shall DIRECTORS
elect Officers and take such other actions as they deem
appropriate, including a review of the annual report,
appointment of auditor, and appointment of Directors to
Board committees.
SECTION 2.7 Any one (1) or more members of the Board or PARTICIPA-
any committee thereof may participate in any meeting of TION BY
the Board or such committee by means of a conference TELEPHONE
telephone or similar communications equipment allowing
all persons participating in the meeting to hear each
other at the same time. Participation by such means shall
constitute presence in person at a meeting of the Board
or such committee for quorum and voting purposes.
SECTION 2.8 If in the opinion of the Chief Executive ACTION WITHOUT
Officer circumstances exist which require the immediate A BOARD
taking of any action which is required or permitted to MEETING
be taken by the Board or any committee thereof, such
action may be taken without a meeting if all members of
the Board or such committee consent in writing to the
adoption of a resolution authorizing the action. The
resolution and the written consents thereto by the
members of the Board or such committee shall be filed
with the minutes of the proceedings of the Board or
committee.
SECTION 2.9 Any vacancy in the Board, including any BOARD
vacancy resulting from an increase in the authorized VACANCIES
number of Directors, may be filled, until the next
annual election of Directors, at any regular or
special meeting of the Board by the affirmative vote
of a majority of the remaining Directors.
SECTION 2.10 At the Organization Meeting, the Board CHAIRMAN OF THE
may elect a Chairman of the Board of Directors or a BOARD; VICE
Chairman and Vice Chairman of the Board of Directors, CHAIRMAN;
who shall be Officers of the Company and each of whom SECRETARY
shall discharge such duties as may be assigned from
time to time by the Directors. The Chairman shall
preside at the meetings of the Board and, in his or
her absence, the Vice Chairman, if any, shall preside.
In all other cases the President of the Company shall
preside. In the absence of the persons above
designated to preside at a meeting, the Board shall
appoint a Chairman pro tem.
At the Organization Meeting, the Board of Directors
shall elect a Secretary of the Board, who shall
attend the meetings of the Board of Directors, shall
keep the minutes of such meetings, shall send notices
thereof, if any, and shall perform such other duties
as may be attendant to such office. The Secretary of
the Board need not be a member of the Board. In case
the Secretary is absent or unable to discharge such
duties, the Board shall appoint a Secretary pro tem.
ARTICLE III
Committees
----------
SECTION 3.1 The Board shall have the following standing STANDING
committees, each consisting of not fewer than five (5) COMMITTEES
Directors, as shall be determined by the Board:
Executive Committee
Investment Committee
-3-
<PAGE>
Audit Committee
Human Resources Committee
Policyholder and External Affairs Committee
Nominating Committee
All members of the Audit Committee, the Human Resources
Committee and the Nominating Committee shall be
Independent Directors. At least one-third of the
members of any other committee shall be Independent
Directors.
SECTION 3.2 At its Organization Meeting each year, DESIGNATION
the Board, by resolution adopted by a majority of the OF MEMBERS
then authorized number of Directors, shall designate AND CHAIRMEN
from among the Directors the members of the standing OF STANDING
committees and from among the members of each such COMMITTEES
committee a chairperson thereof, each of whom shall
serve as such, at the pleasure of the Board, so long
as they shall continue in office as Directors, and
through the next succeeding Annual Meeting of the
Company. The Board may by similar resolution designate
one (1) or more Directors as alternate members of
such committees, who may replace any absent
member or members at any meeting of such committees,
but only an Independent Director may be designated as
an alternate member of the Audit Committee, the Human
Resources Committee or the Nominating Committee.
Vacancies in the membership or chair of any standing
committee may be filled in the same manner as the
original designations at any regular or special
meeting of the Board, and the Chief Executive Officer
may designate from among the remaining members of any
standing committee whose chair is vacant a
chairperson who shall serve until a successor is
designated by the Board.
SECTION 3.3 Meetings of each standing committee shall NOTICE OF
be held upon call of the Chief Executive Officer, or TIMES OF
upon call of the chairperson of such standing MEETINGS OF
committee or of two members of such standing committee. STANDING
Meetings of each standing committee may also be held at COMMITTEES
such other times as such committee may determine. AND PRESIDING
Meetings of a standing committee shall be held at such MEMBERS
places and upon such notice as such committee may
determine or as may be specified in the calls of such
meetings. Any such chairperson, if present, or such
member or members of each committee as may be
designated by the Chief Executive Officer, shall
preside at meetings thereof or, in the event of the
absence or disability of any thereof or failing such
designation, the committee shall select from among its
members present a presiding Member.
SECTION 3.4 At each meeting of any standing committee QUORUM
there shall be present to constitute a quorum for the
transaction of business at least a majority of the
members of such committee, at least one (1) of whom
is an Independent Director. Any alternate member who
is replacing an absent member shall be counted in
determining whether a quorum is present. The vote of
a majority of the members present at a meeting of any
standing committee at the time of the vote, if a
quorum is present at such time, shall be the act of
such committee.
SECTION 3.5 Each of the standing committees shall keep STANDING
minutes of its meetings, which shall be reported to the COMMITTEE
Board at its regular meetings and, if called for by the MINUTES
Board, at any special meeting.
SECTION 3.6 The Executive Committee shall consist of EXECUTIVE
five (5) or more Directors, as the Board of Directors COMMITTEE
may determine from time to time, a majority of whom
shall be
-4-
<PAGE>
Independent Directors. This Committee shall have
general power to act for the Board of Directors in
the intervals between meetings of the Board on all
matters of policy and direction relating to the
conduct of the affairs of the Company, subject to
such limitations as the Board may from time to time
impose.
SECTION 3.7 The Investment Committee shall consist of INVESTMENT
five (5) or more Directors, as the Board of Directors COMMITTEE
may determine from time to time, a majority of whom
shall be Independent Directors. This Committee shall
review the investment policies and programs of the
Company, including, but not limited to, the purchase
and sale of bonds, stocks, other securities, real estate,
mortgages and all other investments. The Investment
Committee shall supervise the financial affairs of the
Company. Except as otherwise ordered by the Board (i)
no investment or loan, other than a policy loan, and no
sale, assignment, exchange, extension or transfer
thereof, shall be made unless the same has been
authorized or approved by the Investment Committee;
and (ii) the Investment Committee shall designate from
time to time depositories of the Company's funds.
SECTION 3.8 The Audit Committee shall consist of five (5) AUDIT
or more Directors, as the Board of Directors may COMMITTEE
determine from time to time, all of whom shall be
Independent Directors. The Audit Committee shall, prior
to the last meeting of the Board of Directors in
each calendar year, recommend to the Board of Directors
the selection of independent certified public accountants
for the ensuing fiscal year. This Committee shall engage
such independent certified public accountants selected
by the Board of Directors to audit and examine the
financial position of the Company and shall prescribe
the scope of such audit and of any internal audit. It
shall review the Company's financial condition, and the
scope and results of the independent audit and any
internal audit, and shall from time to time confer with
such independent certified public accountants and with
management and review recommendations of such
independent accountants and management with respect to
the business of the Company and the business of any
majority-owned subsidiary of the Company. The Audit
Committee shall report to the Board of Directors
upon the annual report of such independent certified
public accountants and at such other times as the
Audit Committee may deem necessary.
SECTION 3.9 The Human Resources Committee shall HUMAN
consist of five (5) or more Directors, as the Board RESOURCES
of Directors may determine from time to time, all COMMITTEE
of whom shall be Independent Directors. This Committee
shall exercise general supervision of compensation and
personnel administration and all activities conducted
by the Company in the interest of the health, welfare
and safety of field and office personnel, shall
evaluate the performance of Officers deemed by such
Committee to be principal Officers, and shall make
recommendations to the Board of Directors as to the
selection of and compensation payable to such
principal Officers.
SECTION 3.10 The Policyholder and External Affairs POLICYHOLDER AND
Committee shall consist of five (5) or more Directors EXTERNAL AFFAIRS
as the Board of Directors may determine from time to COMMITTEE
time, a majority of whom shall be Independent
Directors. This Committee shall be responsible for
matters relating to the interest of the policyholders
and customers of the Company and shall exercise
general supervision of the dividend and surplus policies
and practices of the Company. Annually the Committee
shall make a written report to the Board recommending
for the ensuing year the apportionment of divisible
surplus on participating policies issued by the Company
and interest rates payable on funds held by the Company
under policies or other
-5-
<PAGE>
contracts entitled by their terms to such interest.
This Committee shall review generally the activities of
the various businesses conducted by the Company and
shall also exercise general supervision of the
Company's external activities including, but not
limited to, government relations, charitable
contributions, public benefit programs and compliance
with policies on ethical business conduct and other
corporate responsibility matters.
SECTION 3.11 The Nominating Committee shall consist of NOMINATING
five (5) or more Directors, as the Board of Directors COMMITTEE
may determine from time to time, all of whom shall be
Independent Directors. This Committee shall have
responsibility for nominating candidates for Director
for election by policyholders and shall make
recommendations to the Board with respect to the
filling of vacancies on the Board.
ARTICLE IV
Officers
--------
SECTION 4.1 The Board shall determine who shall act PRINCIPAL
as Chief Executive Officer of the Company. In its OFFICERS
discretion, the Board may also designate a Chief
Operating Officer. The Board in its discretion may
also from time to time designate one or more other
Officers as Principal Officers.
SECTION 4.2 The Chief Executive Officer of the CHIEF
Company shall have the general executive management EXECUTIVE
of its affairs, and may decide upon and execute all OFFICER
matters not otherwise covered by action of the
Board of Directors or Executive Committee or more
specifically provided for in the Bylaws. In the
absence of action by the Board of Directors, the
Chief Executive Officer may from time to time
prescribe and assign such duties, functions and
authority among Officers or other employees and
representatives as he or she shall determine are
necessary or desirable for the proper conduct of
the business of the Company.
SECTION 4.3 The Chief Operating Officer, if any, CHIEF
shall assist the Chief Executive Officer in the OPERATING
execution of his or her duties and shall have such OFFICER
other duties as the Board of Directors or the Chief
Executive Officer may from time to time determine.
SECTION 4.4 At each Organization Meeting, the PRESIDENT
Board shall elect a President, who shall hold AND OTHER
office until the next Organization Meeting and OFFICERS
until the election of a successor or until his or
her earlier death, removal or resignation. The
President may also serve as the Chief Executive
Officer or Chief Operating Officer. If a vacancy
occurs in the office of the President for any
reason, such vacancy shall be filled by the Board
at any regular or special meeting of the Board.
In addition to the President, the Board shall
elect or appoint such other Officers, including a
Secretary, one (1) or more Assistant Secretaries
and one (1) or more Vice Presidents as it may
determine for the conduct of the business of the
Company. Any two (2) or more offices may be held
by the same person, except the offices of President
and Secretary. Officers other than the Chief Executive
Officer shall have such powers and perform such
duties as may be assigned to them by these Bylaws or
by or pursuant to authorization of the Board or the
Chief Executive Officer.
-6-
<PAGE>
The Board of Directors may, in its discretion,
delegate to the Chief Executive Officer authority to
appoint and discharge any Officers other than principal
Officers. Notwithstanding any such delegation to the
Chief Executive Officer, all Officers shall hold office
at the pleasure of the Board of Directors, which
retains authority to terminate any Officer at any time.
A vacancy in any office may be filled by the Board at
any meeting.
ARTICLE V
Execution of Papers
-------------------
SECTION 5.1 Any employee designated for the purpose by INSTRUMENTS
the Chief Executive Officer or the Board, and any
Officers designated by the Board shall have power
to execute all instruments in writing necessary or
desirable for the Company to execute in the transaction
and management of its business and affairs and to
affix the corporate seal.
SECTION 5.2 All funds of the Company deposited in its DISPOSITION
name shall be subject to disposition by check or OF FUNDS
other means, in such manner as the Board may from time
to time determine.
SECTION 5.3 The Chief Executive Officer may appoint CAPTION SIGNATURES
one (1) or more Registrars. All policies of insurance ON POLICIES AND
and annuity contracts shall be signed by the Chairman CERTAIN OTHER
of the Board of Directors (if any), the Vice Chairman CONTRACTS
of the Board of Directors (if any), the President, a
Vice President, the Secretary, or an Assistant Secretary.
Such signatures may be in facsimile, provided such
policies and contracts are countersigned by a Registrar
or a Vice President. All policy endorsements and
modifications (other than endorsement of the exercise
of a right or option provided for in a policy) and all
contracts incident, related or supplementary to
policies of insurance and annuity contracts shall be
signed by the Chairman of the Board of Directors (if
any), the Vice Chairman of the Board of Directors (if
any), the President, a Vice President, the Secretary,
or an Assistant Secretary. Any such signature may be
in facsimile provided there is a countersignature by
a Registrar or a Vice President.
ARTCLE VI
General
-------
SECTION 6.1 To the full extent permitted by the laws INDEMNIFICA-
of the State of New York, the Company shall indemnify TION OF
any person made or threatened to be made a party to DIRECTORS
any action, proceeding or investigation, whether AND OFFICERS
civil or criminal, by reason of the fact that such
person, or such person's testator or intestate:
(1) is or was a Director or Officer of the
Company; or
(2) 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
-7-
<PAGE>
against judgments, fines, amounts paid in settlement
and reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with
or as a result of such action or proceeding, or any
appeal therein.
The Company shall also indemnify any person made or
threatened to be made such party by reason of the
fact that such person or such person's testator or
intestate is or was an employee of the Company or
serves another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise at
the request of the Company and also is an employee of
the Company to the same extent as if such person were
an Officer or Director of the Company. The
indemnification provided in this Article VI shall
not be deemed to be exclusive of any other rights to
which a Director or Officer of the Company seeking
indemnification may be entitled whether contained in
(i) a resolution of Directors, or (ii) an agreement
providing for such indemnification, provided that no
indemnification may be made to or on behalf of any
Director or Officer if a judgment or other final
adjudication adverse to the Director or Officer
establishes that his or her acts were committed
in bad faith or were the result of active and
deliberate dishonesty and were material to the
cause of action so adjudicated, or that he or she
personally gained in fact a financial profit or
other advantage to which he or she was not legally
entitled. The Company may indemnify persons other
than Officers or Directors of the Company, to such
greater extent as the Board of Directors may from
time to time by resolution prescribe.
ARTICLE VII
Amendment of Bylaws
-------------------
SECTION 7.1 These Bylaws or any of them may be amended,
altered or repealed by a vote of two-thirds of the
Directors present at any regular or special meeting,
provided that any such proposed amendment, alteration
or repeal shall have been submitted in writing and
filed with the Secretary of the Board at least sixty
(60) days before being presented at such a meeting.
The notice of the meeting at which action may be taken
upon such proposal to amend, change or repeal these Bylaws
shall contain a statement in general terms that such action
has been proposed. Notwithstanding the foregoing, Section
6.1 of these Bylaws may not be amended, altered or
repealed by the Board so as to effect adversely any then
existing rights of any Director, Officer or other
persons designated therein.
-8-
Exhibit 8
Product Development and
Fund Participation Agreement
<PAGE>
PRODUCT DEVELOPMENT AND FUND PARTICIPATION AGREEMENT
----------------------------------------------------
THIS AGREEMENT is made this 8th day of January, 1988 by and between Phoenix
Mutual Life Insurance Company ("The Phoenix"), Phoenix Mutual Variable
Accumulation Account (the "VA Account"), Templeton Investment Counsel, Inc.
("TICI"), Templeton Funds Distributor, Inc. ("TFD"), Templeton, Galbraith &
Hansberger Ltd. ("TGH"), Templeton Funds Management, Inc. ("TFM"); and the
Templeton Variable Products Series Fund (hereinafter "Fund") provided that the
Agreement is adopted by and executed in behalf of the Fund.
WHEREAS, the VA Account is registered as a unit investment trust under
the Investment Company Act of 1940 ("1940 Act") and it is intended that certain
variable annuity contracts ("Contracts") shall be funded by the VA Account; and
WHEREAS, it is the intention of the parties to this Agreement that the
Fund will serve as the sole funding vehicle for certain sub-accounts of the VA
Account under the Contracts; and
WHEREAS, the undersigned further contemplate The Phoenix's eventual
development of a variable life insurance policy likewise utilizing the Fund as
the underlying investment vehicle, except to such extent as otherwise provided
in this Agreement; and
THEREFORE, in consideration of the mutual agreements herein made and
intending to be legally bound hereby, the parties agree as follows:
General:
- --------
1. The Contract when offered utilizing the Fund as the underlying
investment vehicle shall hereinafter be referred to as the "Product."
2. The undersigned agree to use their good faith best efforts to make the
Product available to the public as soon as reasonably practicable.
3. The trade name of the Product shall be as mutually agreed to by The
Phoenix and TFD.
4. The Product will be offered through a prospectus for the Contracts
drafted by The Phoenix and a prospectus for the Fund drafted by TFD.
Each prospectus will be at all times part of a currently effective
registration statement on file with the Securities and Exchange
Commission ("SEC"). The Phoenix will be responsible for maintaining
such registration with respect to the Contract and the VA Account and
the Fund will be responsible for maintaining such registration
statement with respect to the Fund. The Phoenix and TFD will use
<PAGE>
- 2 -
4. Cont'd
their best efforts to insure that the registration statements will
conform in all respects to the requirements of the 1933 Act and the
rules and regulations of the SEC and that at no time will the
registration statements include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The
undersigned will cooperate with the other parties in the preparation of
the respective registration statements and in supplying any other
information as may be required by federal and state regulators.
5. Each party will be responsible for its own expenses in carrying out its
respective responsibilities for the Product, except to such extent as
may otherwise be provided under this Agreement or as may subsequently
be agreed to in writing by the party to bear the expense.
6. While the offering of the Product is not possible without the combined
efforts of the parties as provided herein, it is not intended by this
Agreement to create a partnership or joint venture but rather simply an
arrangement between independent contracting parties for the mutual
performance of services. No provision of this Agreement shall be
construed to obligate TGH to perform any services in the United States.
The Fund:
- ---------
7. TFM will organize the Fund as a business trust under the laws of the
Commonwealth of Massachusetts. The VA Account, as the initial
shareholder, shall select the initial trustees and officers of the Fund
from those persons that TFM, in its sole discretion, recommends. TFD
agrees to comply with all federal and state law applicable to the
offering of Fund shares and TFM, TICI and TGH agree to comply with all
federal and state law applicable to the administration of the Fund.
8. The Fund agrees that it will sell shares of each portfolio of the Fund,
redeem Fund shares and exchange such shares of any portfolio for shares
of any other portfolio, all in such amount as The Phoenix, on behalf of
the VA Account, may from time to time direct and upon the terms set
forth in the registration statement of the Fund as declared effective
by the SEC and as it may be from time to time amended.
9. The Fund will have such separate investment portfolios as TFM shall
determine, but shall at least include a money market portfolio for The
Phoenix's administration of its premium refund obligations as required
under various state insurance laws.
<PAGE>
- 3 -
10. TFM will advance The Phoenix without interest obligation, such initial
capital as TFM deems advisable, but not less than a total of $250,000,
for The Phoenix's initial purchase of shares in the Fund. The Phoenix
shall repay the advanced amount in accordance with an amortization
schedule as agreed to by the The Phoenix and TFD and as permitted by
federal and state law for The Phoenix's withdrawal of seed capital from
the Fund. Any gain or loss on the Fund shares held by The Phoenix in
the Fund shall be borne by The Phoenix without consequence to its
obligation for repayment of the advanced amount.
11. TICI and TGH will be the investment advisors for the Fund, subject to
the approval of Fund shareholders and the continuing approval of the
trustees as required under the Investment Company Act of 1940. For its
investment advisory services with respect to each investment portfolio
of the Fund, TICI or TGH will be entitled to an investment management
fee from the Fund in an amount not to exceed .50% of the average daily
net asset value of each portfolio. It is further contemplated that the
Fund shall pay TFM a business management fee in an amount not to exceed
0.15% of the average daily net asset value of the Fund.
12. TFD, as principal underwriter for the Fund and the Contracts, will
assume responsibility for distribution of the prospectuses for the Fund
and the Contracts. The cost of printing the Fund prospectus shall be
borne by TFD or the Fund as appropriate under law and the cost of
printing the Contract prospectus shall be borne by The Phoenix or the
VA Account as appropriate under law. The Phoenix or the VA Account, as
appropriate under law, shall be responsible for the preparation and
costs of all reports and other filings with respect to the Contract
required by regulatory authorities. Each contract owner will receive
proxy materials, reports and such other information about the Fund as
required under the 1940 Act which shall be prepared by TFM with the
assistance of The Phoenix and distributed by The Phoenix. It is
contemplated that the printing and distribution costs of such proxy
materials, reports and other information shall be borne by TFD or the
Fund as appropriate under law.
13. The Fund's organizational and filing expenses will be advanced by TFM.
To the extent consistent with federal securities law, it is
contemplated the Fund will reimburse TFM for such amounts as promptly
as reasonably possible.
14. Except as otherwise noted in this Agreement, it is contemplated that
the Fund will bear all normal expenses of operation of an open-end
registered investment company including, without limitation, fees paid
to the Fund's custodian, transfer agent, independent auditors and
outside counsel.
<PAGE>
- 4 -
15. Chase Manhattan Bank will serve as custodian for the Fund subject to
the continuing approval of the Fund's trustees. McGladrey Hendrickson
and Pullen will serve as independent auditors subject to the continuing
approval of the Fund's trustees and shareholders. The Fund shall serve
as its own transfer agent. Dechert Price & Rhoads will serve as outside
counsel.
16. The Fund will inform The Phoenix in advance of all regular and special
meetings of the Fund's Board of Trustees. The Phoenix may be present at
such meetings and upon reasonable notice, make a presentation to the
Board of Trustees of the Fund. Permission to make a presentation shall
not be unreasonably withheld.
The Contract:
- -------------
17. The Product will be offered utilizing a contract generally of the type
presently distributed by Phoenix Equity Planning Corporation and as
described in the Prospectus dated May 1, 1987 for the Phoenix Mutual
Variable Accumulation Account (the "VA Prospectus"). In addition, the
Contract shall provide a guaranteed death benefit under which, in the
event of the death of the annuitant during the accumulation period
under the Contract, The Phoenix shall pay to the beneficiary under the
Contract the greater of the accumulated value or the amount of the
premiums paid to date under the Contract. The Phoenix also agrees,
within one year of the effective date of the registration statement, to
develop and file with the states for approval to issue, an amendment to
the Contract providing for at least one variable pay-out option (based
upon the investment experience of one or more sub-accounts of the VA
Account). The Phoenix shall comply with all federal and state law
applicable to the offering and administration of the Product.
18. Premiums paid for the Product will be allocated, according to
Contractowner instructions, to the sub-accounts of the Separate Account
corresponding to the Fund's investment portfolios, and each sub-account
will invest exclusively in the corresponding Fund portfolio.
19. The Phoenix shall be entitled under the Contract to charges, fees and
taxes of the type described in the VA Prospectus, and as shown on the
attached schedule of charges and fees (Exhibit 1).
20. The Phoenix will use its best efforts to secure and shall bear the cost
of any necessary state insurance regulatory approvals for sale of the
Product in such states as The Phoenix customarily offers its individual
insurance products. TICI, TGH, TFM, TFD, and the Fund will cooperate
with The Phoenix in furnishing such information as may be required by
appropriate state regulatory authorities in connection with such
Product efforts. It is understood The Phoenix may make minor changes to
the Contracts to comply with various state insurance
<PAGE>
- 5 -
20. Cont'd
law requirements as may be requested in connection with such filings
for state approval, without the consent of the Fund or TFD, but The
Phoenix shall promptly notify TFD of any such changes. No substantial
changes shall be made without TFD's consent, which consent shall not be
unreasonably withheld.
21. The Product shall further include such amendatory riders, features,
applications and related contract forms as are consented to by TFD,
which consent shall not be unreasonably withheld, and shall not include
a fixed return option without the consent of TFD. Riders presently
contemplated include a Temporary Money Market Allocation Amendment to
accommodate premium refund obligations as required under various state
insurance laws, and an IRA amendment and tax-qualified plan amendment
to satisfy federal tax law requirements.
22. The undersigned expressly contemplate The Phoenix's later development
of a variable life insurance policy which would also use the Fund as
the underlying investment vehicle. All terms of this Agreement shall
apply to any such policy, except that the terms otherwise covered by
items 1, 10, 17, 19, 21, and 26 of this Agreement shall as to any such
variable life insurance policy be as later agreed to by the undersigned
parties. The undersigned shall make a good faith effort to agree upon
the terms of such items as they are to apply to the variable life
policy.
23. In the event that the Fund offers its shares to a separate account that
is a funding vehicle for variable life insurance policies or to a
separate account of an insurer other than The Phoenix or an affiliate
thereof that is a funding vehicle for variable life insurance policies,
then the parties agree to comply with any conditions imposed under law
upon the use of an open-end management investment company as the common
investment medium for both variable life insurance policies and
variable annuity contracts or for variable life insurance policies
issued by one insurer and another variable insurance product issued by
another insurer, as such conditions are:
(i) specified in Rule 6e-2 or Rule 6e-3(T) under the 1940 Act or, if
permanently adopted, Rule 6e-3, whichever is applicable, or, if
appropriate,
(ii) required by an exemptive order from the Securities and Exchange
Commission to permit such use of an investment company as a common
investment medium.
Administration:
- ---------------
24. With the exception of matters pertaining solely to the Fund, which
shall be in the sole control and discretion of the Fund, The Phoenix
<PAGE>
- 6 -
24. Cont'd
shall be solely responsible for the issuance, administration,
maintenance, claims processing and customer dispute handling and
disposition of all matters pertaining to the Product.
Marketing:
- ----------
25. TFD shall be the exclusive principal underwriter for the Product,
subject to the continuing approval of the Trustees as required under
the 1940 Act, and shall promote the Product in compliance with all
applicable federal and state law. TFD shall use its best efforts to
sell the Product. The Phoenix will appoint TFD or one or more persons
designated by TFD and acceptable to the Phoenix as agent or agents of
The Phoenix authorized to sell the Product.
26. The Phoenix will compensate TFD for sales of the Product at the rate
set forth in Exhibit I (Item II). TFD shall in turn compensate any
broker/dealers engaged by TFD to sell the Product at a rate mutually
agreed upon by TFD and the broker-dealer. It is understood that any
such broker/dealers shall be contracted insurance agents with The
Phoenix and properly state-licensed to sell variable annuity contracts
and, if applicable, variable life insurance policies. The Phoenix will
pay the initial costs associated with contracting and appointing agents
with The Phoenix who are already variable annuity licensed.
27. The Phoenix will furnish TFD information concerning the Product for use
in TFD's training of broker/dealers engaged by TFD to sell the Product,
and shall make a good faith effort to provide representatives to attend
such product information seminars for broker/dealers as TFD may
reasonably request.
28. TFD will develop and bear the cost of all advertising and promotional
material for the Product. The Phoenix's name shall not be used in any
promotional material without its consent, nor shall any material about
the Product be used in any manner without the prior review and consent
of The Phoenix. It is understood that, except for reference by name of
any of the entities responsible for performing services in connection
with the Product, use of the name "Templeton" is only available through
license from Templeton, Galbraith & Hansberger Ltd.
Offerings with Other Companies
- ------------------------------
29. The Fund may serve as the investment vehicle for other variable annuity
or variable life insurance policies offered by The Phoenix or parties
other than The Phoenix.
30. The Phoenix may offer the Contract or other variable annuity or
variable life insurance policies to serve as "wrap-around" contracts
for investment funds managed by parties other than TICI or TGH;
however, with respect to the Product, the VA Account will not invest in
any medium other than the Fund and its portfolios unless otherwise
agreed to by The Phoenix and TFD, provided, that The Phoenix may
<PAGE>
- 7 -
30. Cont'd
substitute another or other investment medium for the Fund or any
investment portfolio thereof if one or more portfolios of the Fund
becomes unsuitable for investment by Contractowners because of a change
in investment policy as determined by The Phoenix in accordance with
Rule 6e-3(T)(b)(5) under the 1940 Act, a change in the tax laws,
because the shares are no longer available for investment, or if the
substitution is required by law, by any regulatory authority or by the
terms of the Contract. Before this is done the approval of the SEC and
one or more state insurance departments will be required.
31. The Phoenix may offer other variable annuity contracts or variable life
insurance policies using an investment medium other than the Fund,
which contracts or policies may be substantially similar to the
Contract or to the variable life insurance policy described in item 23,
provided that such contracts or policies are offered by a prospectus
other than the prospectus for the Contract or for the variable life
insurance policy described in item 23.
Miscellaneous
- -------------
32. The undersigned will provide such records, reports or other materials
relative to the development, distribution and administration of the
Product as may reasonably be required by another party to this
Agreement in performance of its respective obligations for the Product,
or as may be required by any governmental authority. Each party shall
further cooperate with the others and all appropriate governmental
authorities (including without limitation the SEC, the National
Association of Securities Dealers, Inc. ("NASD") and state insurance
regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry
relating to this Agreement or the activities contemplated hereunder,
provided such access is consistent with federal and state law.
33. Any information, documents and materials, other than those included in
the registration statements for the Contract and the Fund or otherwise
in the public domain, shall be treated as confidential and not given to
any third-party without the written consent of the party to whom the
information pertains.
34. Each party shall have the right to rely on information provided to it
by the party about whom the information pertains.
35. The undersigned agree to be accountable for the complete and accurate
performance of the duties under this Agreement including, but not
limited to accountability for any fraudulent or dishonest acts,
negligence, errors, or omissions committed by any of its employees or
other agents. Each party agrees to indemnify and hold harmless the
others from all damages, including punitive damages, expenses, and
<PAGE>
- 8 -
35. Cont'd
attorney's fees to which the party may be subject, arising out of the
performance of its duties under this Agreement. In addition, TICI, TGH,
TFD and TFM will indemnify and hold harmless The Phoenix against any
and all losses, claims, damages, liabilities, or expenses (including,
without limitation, any expenses reasonably incurred in investigating
or defending against any litigation commenced or threatened, or any
claim) to which The Phoenix may become subject arising out of or based
upon (i) any untrue statement or alleged untrue statement relating to
the Fund contained in the Registration Statement or any amendment or
supplement thereto, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the
Fund, TICI, TGH, TFD and TFM shall not be liable in any such case under
(i) and (ii) above to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in
good faith reliance upon and in conformity with written information
furnished by The Phoenix specifically for use in the preparation
thereof. Moreover, the Phoenix will indemnify and hold harmless the
Fund, TICI, TGH, TFD and TFM against any and all losses, claims,
damages, liabilities, or expenses (including without limitation, any
expenses reasonably incurred in investigating or defending against any
litigation commenced or threatened, or any claim) to which the Fund,
TICI, TGH, TFD or TFM become subject arising out of or based upon (i)
any untrue statement or alleged untrue statement relating to the VA
Account or the Contracts contained in the Registration Statement or any
amendment or supplement thereto, or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided,
however, The Phoenix shall not be liable to the extent that any such
loss, claim, damage, liability or expense arises out of or is based
upon the Fund's failure to comply with the investment policies and
restrictions set forth in its Registration Statement. No party shall be
required to indemnify another for any losses, claims, damages, or
expense contributed by the otherwise indemnified party's willful
misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of such otherwise indemnified party's reckless
disregard of its obligations and duties under this Agreement. Nor shall
a party be liable under this indemnification provision with respect to
any claim made against the otherwise indemnified party unless the party
seeking indemnification shall have notified the other in writing within
a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
party seeking indemnification. Failure to provide notice as provided
above shall not relieve a party from any liability that it may
otherwise have against another without regard to this indemnification
provision. The indemnifying party shall be entitled to participate, at
its own expense, in the defense of the action.
<PAGE>
- 9 -
35. Cont'd
The indemnifying party shall also be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action.
After notice from the indemnifying party to the other of the
indemnifying party's election to assume the defense thereof, the party
seeking indemnification shall bear the fees and expenses of any
additional counsel retained by it.
36. Any claims or disputes between the parties arising out of or relating
to this Agreement or the breach thereof, shall be submitted to
arbitration for resolution in accordance with the Commercial
Arbitration Rules of the American Arbitration Association as in effect
on the date of delivery of demand for arbitration. Judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
37. In no event shall The Phoenix be liable to TFD, TFM, TICI, TGH or the
Fund, nor shall TFD, TFM, TICI, TGH or the Fund be liable to The
Phoenix for damages for breach of this Agreement for an aggregate
amount in excess of $200,000, except as may regard indemnification as
provided above for expenses, costs, damages, or liabilities in favor of
third-parties. Such amount is hereby stipulated as the parties'
reasonable assessment of the maximum aggregate monetary value of such
damages. Nothing contained in this item shall be held to deny or
prevent recovery of any Product charges, fees, or amounts to which a
party is entitled under items 10, 11, 19, or 26 of this Agreement.
38. The undersigned expressly contemplate the execution of a separate
agreement between The Phoenix, the VA Account and TFD ("Underwriter
Agreement"). It is agreed that upon execution, the provisions of the
Underwriter Agreement shall override any contrary provisions contained
in this Agreement.
39. The undersigned agree that under applicable law as currently
interpreted by the SEC, The Phoenix will exercise its voting rights
attributable to the shares of the Fund held in the sub-accounts of the
VA Account corresponding to Fund portfolios based on instructions
received from owners of the Contracts. The Phoenix further agrees that
voting rights attributable to such Contracts for which no timely voting
instructions are received will be voted in the same proportion as the
voting instructions that are received in a timely manner from the
owners of the Contracts, and that voting rights from assets, if any, in
the Fund held by the VA Account that are not attributable to such
Contracts will be voted in the same proportion as the voting
instructions that are received in a timely manner from the owners of
such Contracts, and that voting rights from assets, if any, in the Fund
held by the general account of The Phoenix will be voted in the same
proportion as the voting instructions that are received in a timely
manner from the owners of such Contracts and from the owners of other
contracts or policies issued by The Phoenix for which the Fund serves
as an investment medium. The Phoenix further agrees to
<PAGE>
- 10 -
39. Cont'd
provide a list of the names and addresses of owners of the Contracts
and other contracts or policies for which the Fund serves as an
investment medium to any other party to this Agreement so requesting
within five (5) days of receipt of a written request for such list. The
party requesting such list shall bear the reasonable cost incurred by
The Phoenix in preparing and/or providing such list, which shall be
paid upon delivery of the list. The Phoenix agrees that in the event it
or any of its affiliates has reason to know about a meeting of owners
of the Contracts or shareholders of the Fund respecting the voting or
providing instructions respecting the voting of the shares of the Fund,
The Phoenix will provide notice to the Fund and the Templeton Companies
respecting such meeting promptly after The Phoenix or its affiliate has
reason to know of such meeting.
40. No party hereto shall have any authority to enter into any agreements
or make any commitments on behalf of any of the others, except as may
be authorized in writing or by applicable federal securities law.
41. Failure of any party to enforce any provision of this Agreement shall
not constitute a course of conduct or waiver in the future of the right
to enforce the same or any other provision.
42. In the event that any provision of this Agreement is for any reason
held to be unenforceable, such unenforceability will not affect any of
the other provisions of this Agreement, but this Agreement will be
construed and enforced as if such unenforceable provision had never
been contained herein.
43. The headings in this Agreement are only inserted as a guide to assist
in the location of items and they are not to be construed as any
indication of the meaning or content of the respective items.
44. This Agreement may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original and such
counterparts together shall constitute of one and the same contract
which shall be sufficiently evidenced by any such original counterpart.
45. Each party agrees to deliver any notices or communications related to
this Agreement to the persons that are listed on the attached schedule
(Exhibit 2).
46. This Agreement shall be construed in accordance with the laws of the
State of Connecticut.
47. This Agreement may be terminated for any reason upon written notice by
any party to the others at least one year prior to the date that such
termination is to take effect. It may further be terminated for the
following reasons upon 30 days' prior written notice to the other:
<PAGE>
- 11 -
47. Cont'd
a. At the option of TGH, TICI, TFD, TFM or the Fund, in the event
that formal administrative proceedings are instituted against The
Phoenix by the SEC, or any state securities or insurance
department or any other regulatory body regarding The Phoenix's
duties under this Agreement or related to the sale or
administration of the Contract, the operation of the VA Account,
or the purchase of Fund shares, provided, however, that the party
electing termination determines in its sole judgment exercised in
good faith, that any such administrative proceeding will have a
material adverse effect upon the ability of The Phoenix to perform
its obligations under this Agreement;
b. At the option of The Phoenix, in the event that formal
administrative proceedings are instituted against TFD, TFM, TICI,
TGH, or the Fund by the SEC, NASD, or any state securities or
insurance department or any other regulatory body regarding that
party's duties under this Agreement or related to the issuance of
Fund shares or administration of the Fund, provided, however, that
The Phoenix determines in its sole judgment exercised in good
faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the party to perform
its obligations under this Agreement.
48. Any termination of this Agreement by any party shall be without
prejudice to any rights or obligations accrued to the other parties
prior to the effective date of any such termination or to already
existing policyholders. The Fund agrees that notwithstanding
termination of this Agreement, the Fund shall continue to make its
shares available for investment by the VA Account of monies derived
from additional premium payments attributable to the Contracts in
effect on the effective date of termination, provided that making such
shares available is not, in the view of the Trustees of the Fund,
inconsistent with the best interests of the Fund and the fiduciary duty
owed to the owners of the Contracts. The Phoenix agrees that
notwithstanding termination of this Agreement, and presuming the Fund
makes its shares available as contemplated above, the Separate Account
shall invest in the Fund the monies derived from additional premium
payments attributable to Contracts in effect on the effective date of
termination, provided such investment is not inconsistent with The
Phoenix's duties owed to the owners of the Contracts under federal or
state law. Notwithstanding termination of this Agreement, and
regardless of the cause or reason for such termination, the provisions
of Paragraph 35 shall survive and be binding upon the parties for a
period of 20 years following such termination and upon the Fund for a
period of 20 years following such termination or until its
deregistration as an investment company under the 1940 Act, whichever
comes first.
<PAGE>
- 12 -
49. This Agreement shall be the complete and total understanding of the
parties and shall not be amended except in writing executed by the
parties. This Agreement supersedes all prior or contemporaneous
agreements, letters of intent, discussions, or understandings between
the parties concerning the Product or The Phoenix's offering of
variable annuity or variable life policies wrapped around funds managed
by TICI and/or TGH.
50. The parties hereto have taken all actions necessary to authorize the
execution, delivery and performance of this Agreement and have caused
this Agreement to be duly executed as of the day and year first written
above. TFM agrees to submit this Agreement to the Board of Trustees of
the Fund after the organization of the Fund for consideration by the
Board in behalf of the Fund. If adopted by the Fund and executed on
behalf of the Fund by an authorized person, the undersigned agree that
the Fund will be a party to this Agreement, subject to the rights and
bound by the obligations of this Agreement.
51. A copy of the Agreement and Declaration of Trust of the Fund is on file
with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Fund by
an officer of the Fund as officer and not individually and that the
obligations of or arising out of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but binding
only upon the assets and property of the Fund.
TEMPLETON FUNDS DISTRIBUTOR, INC. TEMPLETON INVESTMENT COUNSEL, INC.
By: /s/ Daniel Calabria By: /s/ Martin T. Regan
------------------------------- ----------------------------------------
Title: President Title: Senior Vice President & Treasurer
---------------------------- ---------------------------------
Date: February 25, 1988 Date: February 26, 1988
----------------------------- ----------------------------------
TEMPLETON, GALBRAITH & TEMPLETON FUNDS MANAGEMENT, INC.
HANSBERGER LTD.
Executed in Nassau, Bahamas
By: /s/ Thomas L. Hansberger By: /s/ John W. Galbraith
------------------------------- ----------------------------------------
Title: President Title: Chairman
---------------------------- ---------------------------------
Date: February 26, 1988 Date: February 22, 1988
----------------------------- ----------------------------------
<PAGE>
- 13 -
PHOENIX MUTUAL LIFE INSURANCE COMPANY
By: /s/ Philip R. McLoughlin
---------------------------------
Title: Executive Vice President
------------------------------
Date: January 8, 1988
-------------------------------
The undersigned Fund hereby enters into this Agreement and consents to be bound
by all of its obligations hereunder.
Fund Name: Templeton Variable Products Series Fund
---------------------------------------
By: /s/ John W. Galbraith
---------------------------------------
Title: Vice President
---------------------------------------
Date: February 22, 1988
---------------------------------------
A 1.2
<PAGE>
EXHIBIT 1
ITEM I. VARIABLE ANNUITY PRODUCT CHARGES AND FEES
-------------------------------------------------
1. Investment Management Fee - up to .50% per portfolio on an annual basis.
2. Business Management Fee - 0.15% on an annual basis.
3. Mortality and Expense Risk Charge
a. Mortality Risk .40% on an annual basis
b. Expense Risk .850% on an annual basis
4. Administrative Charge - 0.125% on an annual basis.
5. Administrative Service Fee - $35.00 each year
6. Contingent Deferred Sales Charge
No deductions are made from payments beyond the deduction of any applicable
premium taxes. 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. 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. After the first year, 10% of the value of the Contract at the
last anniversary may be withdrawn free of sales charges. 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 Whole Years: 0 1 2 3 4 5 6
Percentage of Sales Charge to be Applied: 6 5 4 3 2 1 0
In no event, however, will the total of all surrender charges applied to
the Contract exceed 9% of the total premiums paid on the Contract. No sales
charge will be imposed on any death benefits payable due to the Annuitant's
death before the date annuity payments commence.
<PAGE>
EXHIBIT 1 (Cont'd)
7. Premium Tax
Phoenix Mutual will deduct the amount of any premium taxes levied by any
government entity when paid, unless Phoenix Mutual opts to defer such
deduction. Such premium taxes depend on, among other things, the state of
residence of the Owner, the state of residence of the Annuitant, the status
of Phoenix Mutual within such states and the insurance tax laws of such
states. Currently, such premium taxes range from 0% to 3.0%.
ITEM II. VARIABLE ANNUITY SALES COMPENSATION
--------------------------------------------
Phoenix will pay Templeton Funds Distributor, Inc., the principal
underwriter of the Contracts, an amount equal to 5-1/2% of the purchase
payments under the Contracts.
<PAGE>
EXHIBIT 2
Notices or communications relating to the Agreement shall be given to the
following persons:
Templeton Variable Product Series
----------------------------------
Templeton, Galbraith & Hansberger Ltd. Fund
- -------------------------------------- --------------------------------------
Templeton Investment Counsel, Inc.
- ----------------------------------
Templeton Funds Distributor, Inc.
- ----------------------------------
Templeton Funds Management, Inc.
- ----------------------------------
Daniel Calabria
President
Templeton Funds Management, Inc. PHOENIX MUTUAL LIFE INSURANCE
700 Central Avenue COMPANY AND PHOENIX MUTUAL
St. Petersburg, Florida 33701 VARIABLE ACCUMULATION ACCOUNT
c/o Richard P. Austin Philip R. McLoughlin
Templeton Funds Annuity Company Phoenix Mutual Life
700 Central Avenue Insurance Company
St. Petersburg, Florida 33701 One American Row
Hartford, CT 06115
A 1.6
Exhibit 10(a)
Written Consent and Opinion as to Legality of Securities Being Registered of
Blazzard, Grodd & Hasenauer, P.C.
<PAGE>
April 28, 1997
Board of Directors
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, CT 06115
RE: Opinion of Counsel
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing
with the Securities and Exchange Commission of Post-Effective Amendment No. 26
to a Registration Statement on Form N-4 (File Nos. 2-78020 and 811-3488) with
respect to certain variable annuity contracts (the "Contracts") to be issued
by Phoenix Home Life Variable Accumulation Account.
We have made such examination of the law and have examined such records
and documents as in our judgment are necessary or appropriate to enable us
to render the following opinion:
Upon the acceptance of purchase payments made by an Owner pursuant
to a Contract issued in accordance with the Prospectus contained in
the Registration Statement and upon compliance with applicable law,
such an Owner will have a legally-issued, fully paid, non-assessable
contractual interest under Contract.
This opinion is limited soley to its use as an exhibit to your Post-
Effective Amendment No. 26 to Form N-4 (File Nos. 2-78020 and 811-3488).
We consent to the reference to our Firm under the captions "Legal Matters"
in the Prospectus and "Experts" in the Statement of Additional Information
which forms a part of the Registration Statement.
Sincerely
BLAZZARD, GRODD & HASENAUER, P.C.
By: /s/Lynn Korman Stone
-----------------------------------
Lynn Korman Stone
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. 26 to the registration
statement on Form N-4 (the "Registration Statement") of our reports dated
February 12, 1997, relating to the financial statements of Phoenix Home Life
Variable Accumulation Account and the consolidated 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 25, 1997
