As filed with the Securities and Exchange Commission on November 20, 2000
File No. 333-31320
811-03488
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. 1 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 |X|
(Check appropriate box or boxes.)
----------
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
(Exact Name of Registrant)
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
(Name of Depositor)
----------
One American Row, Hartford, Connecticut 06102-5056
(Address of Depositor's Principal Executive Offices) (Zip Code)
(800) 447-4312
(Depositor's Telephone Number, Including Area Code)
----------
Dona D. Young
Phoenix Home Life Mutual Insurance Company
One American Row, PO Box 5056
Hartford, Connecticut 06102-5056
(Name and Address of Agent for Service)
----------
Copy to:
Edwin L. Kerr, Esq.
Phoenix Home Life Mutual Insurance Company
One American Row, PO Box 5056
Hartford, CT 06102-5056
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It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
| | on ____________ pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on ____________ pursuant to paragraph (a)(1) 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.
----------
================================================================================
<PAGE>
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
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/SAI CAPTION
------------- ----------------------
<S> <C>
PART A INFORMATION REQUIRED IN A PROSPECTUS
1. Cover Page .................................................. Cover Page
2. Definitions ................................................. Special Terms
3. Synopsis..................................................... Summary of Expenses; Contract Summary
4. Condensed Financial Information ............................. Financial Highlights
5. General Description of Registrant, Depositor and
Portfolio Companies....................................... Phoenix and the Account; Investments of the Account;
Voting Rights
6. Deductions and Expenses ..................................... Deductions and Charges; Sales of Variable
Accumulation Contracts
7. General Description of Variable Annuity Contracts............ The Variable Accumulation Annuity; Purchase of Contracts;
The Accumulation Period; Miscellaneous Provisions
8. Annuity Period .............................................. The Annuity Period
9. Death Benefits............................................... Payment Upon Death Before Maturity Date; Payment
Upon Death After 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 Proceedings............................................ Legal Matters
14. Table of Contents of the Statement of Additional
Information............................................... SAI
PART B INFORMATION REQUIRED IN A 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 Performance Data.............................. Calculation of Yield and Return
22. Annuity Payments............................................. Calculation of Annuity Payments
23. Financial Statements ........................................ Financial Statements
</TABLE>
<PAGE>
PHOENIX RETIREMENT
PLANNER'S EDGE
FOR NEW YORK
VARIABLE ANNUITY
Issued by
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT:
[envelope] PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS NOVEMBER 20, 2000
This prospectus describes a variable accumulation deferred annuity contract.
The contract is designed to provide you with retirement income in the future.
The contract offers a variety of variable and fixed investment options.
You may allocate payments and contract value to one or more of the
subaccounts of the Phoenix Home Life Variable Accumulation Account ("Account")
or the Guaranteed Interest Account ("GIA"). The assets of each subaccount will
be used to purchase, at net asset value, shares of a series in the following
designated funds:
THE PHOENIX EDGE SERIES FUND
----------------------------
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Aberdeen New Asia Series
[diamond] Phoenix-Bankers Trust Dow 30 Series
[diamond] Phoenix-Bankers Trust Nasdaq 100-Index(R) Series
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
[diamond] Phoenix-Engemann Capital Growth Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Engemann Small & Mid-Cap Growth Series
[diamond] Phoenix-Federated U.S. Government Bond Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-J.P. Morgan Research Enhanced Index Series
[diamond] Phoenix-Janus Equity Income Series
[diamond] Phoenix-Janus Flexible Income Series
[diamond] Phoenix-Janus Growth Series
[diamond] Phoenix-Morgan Stanley Focus Equity Series
[diamond] Phoenix-Oakhurst Balanced Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Oakhurst Strategic Allocation Series
[diamond] Phoenix-Sanford Bernstein Global Value Series
[diamond] Phoenix-Sanford Bernstein Mid-Cap Value Series
[diamond] Phoenix-Sanford Bernstein Small-Cap Value Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Phoenix-Seneca Strategic Theme Series
THE ALGER AMERICAN FUND
-----------------------
[diamond] Alger American Leveraged AllCap Portfolio
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
-----------------------------------
[diamond] EAFE(R) Equity Index Fund
FEDERATED INSURANCE SERIES
--------------------------
[diamond] Federated Fund for U.S. Government Securities II
[diamond] Federated High Income Bond Fund II
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
---------------------------------------
[diamond] VIP Contrafund(R) Portfolio
[diamond] VIP Growth Opportunities Portfolio
[diamond] VIP Growth Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
----------------------------------------------------
[diamond] Mutual Shares Securities Fund -- Class 2
[diamond] Templeton Asset Strategy Fund -- Class 2
[diamond] Templeton Developing Markets Securities Fund -- Class 2
[diamond] Templeton Growth Securities Fund -- Class 2
[diamond] Templeton International Securities Fund -- Class 2
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
---------------------------------------
[diamond] Technology Portfolio
WANGER ADVISORS TRUST
---------------------
[diamond] Wanger Foreign Forty
[diamond] Wanger International Small Cap
[diamond] Wanger Twenty
[diamond] Wanger U.S. Small Cap
1
<PAGE>
It may not be in your best interest to purchase a contract to replace an
existing annuity contract or life insurance policy. You must understand the
basic features of the proposed contract and your existing coverage before you
decide to replace your present coverage. You must also know if the replacement
will result in any tax liability.
This prospectus is valid only if accompanied or preceded by current
prospectuses for the funds. You should read and keep these prospectuses for
future reference.
The contract is not a deposit or obligation of, underwritten or guaranteed
by, any financial institution, credit union or affiliate. It is not federally
insured by the Federal Deposit Insurance Corporation or any other state or
federal agency. Contract investments are subject to risk, including the
fluctuation of contract values and possible loss of principal.
The Securities and Exchange Commission ("SEC") has not approved or
disapproved these securities, nor passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
This prospectus provides important information that a prospective investor
ought to know before investing. This prospectus should be kept for future
reference. A Statement of Additional Information ("SAI") has been filed with the
SEC and is available free of charge by calling Variable Annuity Operations at
800/541-0171.
2
<PAGE>
TABLE OF CONTENTS
Heading Page
---------------------------------------------------------------
SPECIAL TERMS............................................. 4
SUMMARY OF EXPENSES....................................... 6
CONTRACT SUMMARY.......................................... 11
FINANCIAL HIGHLIGHTS...................................... 12
PERFORMANCE HISTORY....................................... 12
THE VARIABLE ACCUMULATION ANNUITY......................... 12
PHOENIX AND THE ACCOUNT .................................. 12
INVESTMENTS OF THE ACCOUNT................................ 12
The Phoenix Edge Series Fund........................... 12
The Alger American Fund................................ 14
Deutsche Asset Management VIT Funds.................... 14
Federated Insurance Series ............................ 14
Fidelity(R) Variable Insurance Products................ 14
Franklin Templeton Variable Insurance Products Trust... 15
The Universal Institutional Funds, Inc................. 15
Wanger Advisors Trust.................................. 15
Investment Advisors.................................... 16
Services of the Advisors............................... 17
PURCHASE OF CONTRACTS..................................... 17
DEDUCTIONS AND CHARGES.................................... 17
Daily Deductions from the Separate Account............. 17
Premium Tax.......................................... 17
Mortality and Expense Risk Fee....................... 17
Administrative Fee................................... 18
Administrative Charge................................ 18
Reduced Charges, Credits and Bonus Guaranteed
Interest Rates....................................... 18
Other Charges........................................ 18
THE ACCUMULATION PERIOD................................... 18
Accumulation Units..................................... 18
Accumulation Unit Values............................... 19
Transfers ............................................. 19
Optional Programs and Benefits......................... 19
Dollar Cost Averaging Program........................ 19
Asset Rebalancing Program............................ 20
Surrender of Contract; Partial Withdrawals............. 20
Lapse of Contract...................................... 20
Payment Upon Death Before Maturity Date ............... 20
THE ANNUITY PERIOD........................................ 21
Variable Accumulation Annuity Contracts................ 21
Annuity Payment Options ............................... 21
Other Options and Rates.............................. 23
Other Conditions..................................... 23
Payment Upon Death After Maturity Date................. 23
VARIABLE ACCOUNT VALUATION PROCEDURES..................... 23
Valuation Date......................................... 23
Valuation Period....................................... 23
Accumulation Unit Value................................ 24
Net Investment Factor.................................. 24
MISCELLANEOUS PROVISIONS.................................. 24
Assignment............................................. 24
Deferment of Payment .................................. 24
Free Look Period....................................... 24
Amendments to Contracts................................ 24
Substitution of Fund Shares............................ 24
Ownership of the Contract.............................. 25
FEDERAL INCOME TAXES...................................... 25
Introduction........................................... 25
Income Tax Status...................................... 25
Taxation of Annuities in General--Non-Qualified Plans... 25
Surrenders or Withdrawals Prior to the Contract
Maturity Date..................................... 25
Surrenders or Withdrawals On or After the
Contract Maturity Date............................ 25
Penalty Tax on Certain Surrenders and Withdrawals.... 26
Additional Considerations.............................. 26
Diversification Standards ............................. 27
Qualified Plans........................................ 28
Tax Sheltered Annuities ("TSAs") .................... 28
Keogh Plans.......................................... 29
Individual Retirement Accounts....................... 29
Corporate Pension and Profit-Sharing Plans........... 29
Penalty Tax on Certain Surrenders and
Withdrawals from Qualified Plans.................. 29
Seek Tax Advice...................................... 30
SALES OF VARIABLE ACCUMULATION CONTRACTS.................. 30
STATE REGULATION.......................................... 30
REPORTS................................................... 30
VOTING RIGHTS............................................. 30
LEGAL MATTERS............................................. 31
SAI....................................................... 31
APPENDIX A-PERFORMANCE HISTORY............................ 32
APPENDIX B-THE GUARANTEED INTEREST ACCOUNT................ 36
APPENDIX C-DEDUCTIONS FOR PREMIUM TAXES................... 37
3
<PAGE>
SPECIAL TERMS
--------------------------------------------------------------------------------
The following is a list of terms and their meanings when used in this
prospectus.
ACCOUNT (VA ACCOUNT): Phoenix Home Life Variable Accumulation Account.
ACCOUNT VALUE: The value of all assets held in the Account.
ACCUMULATION UNIT: A standard of measurement for each subaccount used to
determine the value of a contract and the interest in the subaccounts prior to
the start 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.
ADJUSTED PARTIAL WITHDRAWALS: The result of multiplying the ratio of the partial
withdrawal to the contract value and the death benefit (prior to the withdrawal)
on the date of the withdrawal.
ANNUAL STEP-UP AMOUNT (STEP-UP AMOUNT): In the first contract year the step-up
amount is the greater of (1) 100% of purchase payments less Adjusted Partial
Withdrawals; or (2) the contract value. After that, in any following contract
year the step-up amount equals the greater of (1) the step-up amount at the end
of the prior contract year, plus 100% of premium payments, less Adjusted Partial
Withdrawals made since the end of the last contract year; or (2) the contract
value.
ANNUITANT: The person whose life is used as the measuring life under the
contract. The annuitant will be the primary annuitant as shown on the contract's
Schedule Page while that person is living, and will then be the contingent
annuitant, if that person is living at the death of the primary annuitant.
ANNUITY OPTION: The provisions under which we make a series of annuity payments
to the annuitant or other payee, such as Life Annuity with Ten Years Certain.
See "Annuity Payment Options."
ANNUITY UNIT: A standard of measurement used in determining the amount of each
periodic payment under the variable payment annuity options I, J, K, M and N.
CLAIM DATE: The valuation date following receipt of a certified copy of the
death certificate at VPMO.
CONTRACT: The deferred variable accumulation annuity contract described in this
prospectus.
CONTRACT OWNER (OWNER, YOU, YOUR): Usually the person or entity to whom we issue
the contract. The contract owner has the sole right to exercise all rights and
privileges under the contract as provided in the contract. The owner may be the
annuitant, an employer, a trust or any other individual or entity specified in
the contract application. However, under contracts used with certain tax
qualified plans, the owner must be the annuitant. If no owner is named in the
application, the annuitant will be the owner.
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. For
tax-sheltered annuity plans (as described in Internal Revenue Code (IRC) 403(b))
with loans, the contract value is the sum of all accumulation units held in the
subaccounts of the Account and the value held in the GIA plus the value held in
the Loan Security Account, and less any Loan Debt.
FIXED PAYMENT ANNUITY: A benefit providing periodic payments of a fixed dollar
amount throughout the annuity period. This benefit does not vary with or reflect
the investment performance of any subaccount.
FUNDS: The Phoenix Edge Series Fund, The Alger American Fund, Deutsche Asset
Management VIT Funds, Federated Insurance Series, Franklin Templeton Variable
Insurance Products Trust, Fidelity(R)Variable Insurance Products, The Universal
Institutional Funds, Inc. and Wanger Advisors Trust.
GIA: An investment option under which premium amounts are guaranteed to earn a
fixed rate of interest.
ISSUE DATE: The date that the initial premium payment is invested under a
contract.
LOAN DEBT: Loan Debt is equal to the sum of the outstanding loan balance plus
any accrued loan interest.
LOAN SECURITY ACCOUNT: The Loan Security Account is part of the general account
and is the sole security for Tax-sheltered Annuity (as described in IRC 403(b))
loans. It is increased with all loan amounts taken and reduced by all repayments
of loan principal.
MATURITY DATE: The date elected by the owner as to when annuity payments will
begin. The maturity date will not be any earlier than the fifth contract
anniversary and no later than the annuitant's 95th birthday unless you and we
agree otherwise. The election is subject to certain conditions described in "The
Annuity Period."
MINIMUM INITIAL PAYMENT: The amount that you pay when you purchase a contract.
We require minimum initial payments of:
[diamond] Non-qualified plans--$20,000
[diamond] Individual Retirement Annuity (Rollover IRA only)--$20,000
[diamond] Bank draft program--$500
[diamond] Qualified plans--$20,000 annually
4
<PAGE>
MINIMUM SUBSEQUENT PAYMENT: The least amount that you may pay when you make any
subsequent payments, after the minimum initial payment (see above). The minimum
subsequent payment for all contracts is $500.
NET ASSET VALUE: Net asset value of a series' shares is computed by dividing the
value of the net assets of the series by the total number of series outstanding
shares.
PAYMENT UPON DEATH: The obligation of Phoenix under a contract to make a payment
on the death of the owner or annuitant anytime: (a) before the maturity date of
a contract (see "Payment Upon Death Before Maturity Date") or (b) after the
maturity date of a contract (see "Payment Upon Death After Maturity Date").
PHOENIX (OUR, US, WE, COMPANY): Phoenix Home Life Mutual Insurance Company.
SERIES: A separate investment portfolio of a fund.
VALUATION DATE: A valuation date is every day the New York Stock Exchange
("NYSE") is open for trading.
VAO: Variable Annuity Operations.
VARIABLE PAYMENT ANNUITY: An annuity providing payments that vary in amounts,
according to the investment experience of the selected subaccounts.
VPMO: Variable Products Mail Operations, the division of Phoenix that receives
and processes incoming mail for Variable Annuity Operations.
5
<PAGE>
SUMMARY OF EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES ALL SUBACCOUNTS
---------------
Sales Charges Imposed on Purchases......................... None
Deferred Surrender Charges................................. None
Subaccount Transfer Charge................................. None*
* The company has reserved the right to charge up to $10 per transfer in excess
of two transfers per contract year.
ANNUAL ADMINISTRATIVE CHARGE
Maximum................................................ $35
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
Mortality and Expense Risk Fee......................... 1.275%
Daily Administrative Fee............................... .125%
------
Total Separate Account Annual Expenses................. 1.40%
6
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
FUND ANNUAL EXPENSES (AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Other Expenses Total Expenses
Management Rule 12b-1 Before Before Total Expenses After
Series Fees Fees Reimbursement(1) Reimbursement Reimbursement(2)
------------------------------------------------------------------------------------------------------------------------------------
THE PHOENIX EDGE SERIES FUND
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International .75% N/A .26% 1.01% 1.01%
Phoenix-Aberdeen New Asia 1.00% N/A 1.39% 2.39% 1.25%
Phoenix-Bankers Trust Dow 30 .35% N/A 1.61%(3) 1.96%(3) .50%
Phoenix-Bankers Trust Nasdaq-100 Index(R) .35% N/A .45% .80% .50%
Phoenix-Duff & Phelps Real Estate Securities .75% N/A .56% 1.31% 1.00%
Phoenix-Engemann Capital Growth .62% N/A .06% .68% .68%
Phoenix-Engemann Nifty Fifty .90% N/A .53% 1.43% 1.05%
Phoenix-Engemann Small & Mid-Cap Growth .90% N/A .70% 1.60% 1.15%
Phoenix-Federated U.S. Government Bond .60% N/A 2.46%(3) 3.06%(3) .75%
Phoenix-Goodwin Money Market .40% N/A .17% .57% .55%
Phoenix-Goodwin Multi-Sector Fixed Income .50% N/A .21% .71% .65%
Phoenix-Hollister Value Equity .70% N/A 1.33% 2.03% .85%
Phoenix-J.P. Morgan Research Enhanced Index .45% N/A .30% .75% .55%
Phoenix-Janus Equity Income .85% N/A 2.70%(3) 3.55%(3) 1.00%
Phoenix-Janus Flexible Income .80% N/A 2.18%(3) 2.98%(3) .95%
Phoenix-Janus Growth .85% N/A 1.05% 1.90% 1.00%
Phoenix-Morgan Stanley Focus Equity .85% N/A 2.34%(3) 3.19%(3) 1.00%
Phoenix-Oakhurst Balanced .54% N/A .16% .70% .70%
Phoenix-Oakhurst Growth and Income .70% N/A .31% 1.01% .85%
Phoenix-Oakhurst Strategic Allocation .58% N/A .12% .70% .70%
Phoenix-Sanford Bernstein Global Value .90% N/A .85% 1.75% 1.05%
Phoenix-Sanford Bernstein Mid-Cap Value 1.05% N/A 1.53% 2.58% 1.20%
Phoenix-Sanford Bernstein Small-Cap Value 1.05% N/A .85% 1.90% 1.20%
Phoenix-Seneca Mid-Cap Growth .80% N/A 1.24% 2.04% 1.05%
Phoenix-Seneca Strategic Theme .75% N/A .22% .97% .97%
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</TABLE>
(1) Each series pays a portion or all of its expenses other than the management
fee. The Phoenix-J.P. Morgan Research Enhanced Index Series will pay up to
.10%; the Phoenix-Engemann Capital Growth, Phoenix-Goodwin Multi-Sector
Fixed Income, Phoenix-Oakhurst Strategic Allocation, Phoenix-Goodwin Money
Market, Phoenix-Oakhurst Balanced, Phoenix-Engemann Nifty Fifty,
Phoenix-Oakhurst Growth and Income, Phoenix-Hollister Value Equity,
Phoenix-Sanford Bernstein Mid-Cap Value, Phoenix-Bankers Trust Dow 30,
Phoenix-Federated U.S. Government Bond, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Janus Growth, Phoenix-Morgan Stanley
Focus Equity, Phoenix-Sanford Bernstein Global Value and Phoenix-Sanford
Bernstein Small-Cap Value Series will pay up to .15%; the Phoenix-Duff &
Phelps Real Estate Securities, Phoenix-Seneca Strategic Theme,
Phoenix-Aberdeen New Asia, and Phoenix-Seneca Mid-Cap Growth Series will
pay up to .25%; and the Phoenix-Aberdeen International Series will pay up
to .40%.
(2) Reflects the effect of any management fee waivers and reimbursement of
expenses by the investment advisor.
(3) Other expenses and total annual series' operating expenses are based on
annualized actual 6-month expenses without reimbursements which were
incurred in the period ending June 30, 2000.
7
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
FUND ANNUAL EXPENSES (AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Rule Other Expenses Total Expenses Total Expenses
Management 12b-1 Before Before After
Series Fees Fees Reimbursement Reimbursement Reimbursement(2)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE ALGER AMERICAN FUND
------------------------------------------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio .85% N/A .08%(4,7) .93%(4) .93%
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
------------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund .45% N/A .69% 1.15% .65%
FEDERATED INSURANCE SERIES
------------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II .60% N/A .24% .84% .84%
Federated High Income Bond Fund II .60% N/A .19% .79% .79%
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
------------------------------------------------------------------------------------------------------------------------------------
VIP Contrafund(R) Portfolio(8) .58% N/A .10%(4) .78%(4) .75%(10)
VIP Growth Opportunities Portfolio(9) .58% N/A .11%(4) .79%(4) .78%(10)
VIP Growth Portfolio(9) .58% N/A .09%(4) .77%(4) .75%(10)
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
------------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund--Class 2(6) .60% .25%(3) .19% 1.04% 1.04%
Templeton Asset Strategy Fund--Class 2(5,6) .60% .25%(3) .18% 1.03% 1.03%
Templeton Developing Markets Securities Fund--Class 2(5,6) 1.25% .25%(3) .31% 1.81% 1.81%
Templeton Growth Securities Fund--Class 2(6) .83% .25%(3) .05% 1.13% 1.13%
Templeton International Securities Fund--Class 2(5,6) .69% .25%(3) .19% 1.13% 1.13%
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
------------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio .80% N/A 1.85%(4) 2.65%(4) 1.15%
WANGER ADVISORS TRUST
------------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 1.00% N/A 2.45%(1) 3.45% 1.45%
Wanger International Small Cap 1.25% N/A .24%(1) 1.49% 1.49%
Wanger Twenty .95% N/A 1.17%(1) 2.12% 1.35%
Wanger U.S. Small Cap .95% N/A .07%(1) 1.02% 1.02%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each series pays a portion or all of its expenses other than the management
fee. The Wanger Foreign Forty will pay up to .45%, the Wanger U.S. Small
Cap Series will pay up to .50%, the Wanger International Small Cap Series
will pay up to .60% and the Wanger Twenty Series will pay up to .40%.
(2) Reflects the effect of any management fee waivers and reimbursement of
expenses.
(3) The fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in
the fund's prospectus.
(4) These figures are estimates; these series have been available for less than
12 months as of the date of this prospectus.
(5) On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with a similar fund of the Franklin Templeton Variable Insurance
Products Trust, effective 5/1/00.
(6) The table shows total expenses based on the new fees and assets as of
12/31/99 and not the assets of the combined funds. The following table
estimates what the total expenses would be based on the assets of the
combined funds as of 5/1/00:
<TABLE>
<CAPTION>
---------------------------------------------------- ------------------ --------------- --------------- ----------------------
ESTIMATED ANNUAL EXPENSES FROM 5/1/00 MANAGEMENT FEES RULE 12B-1 OTHER EXPENSES TOTAL OPERATING
FEES EXPENSES
---------------------------------------------------- ------------------ --------------- --------------- ----------------------
<S> <C> <C> <C> <C>
Mutual Shares Securities Fund - Class 2 .60% .25% .19% 1.04%
---------------------------------------------------- ------------------ --------------- --------------- ----------------------
Templeton Asset Strategy Fund - Class 2 .60% .25% .14% .99%
---------------------------------------------------- ------------------ --------------- --------------- ----------------------
Templeton Developing Markets Securities Fund - 1.25% .25% .29% 1.79%
Class 2
---------------------------------------------------- ------------------ --------------- --------------- ----------------------
Templeton Growth Securities Fund - Class 2 .80% .25% .05% 1.10%
---------------------------------------------------- ------------------ --------------- --------------- ----------------------
Templeton International Securities Fund - Class 2 .65% .25% .20% 1.10%
---------------------------------------------------- ------------------ --------------- --------------- ----------------------
</TABLE>
(7) Included in "Other Expenses" is .01% of interest expense.
(8) Effective November 3, 1997, the advisor has voluntarily agreed to reimburse
the fund to the extent that total operating expenses (excluding interest,
taxes, certain securities lending costs, brokerage commissions, and
extraordinary expenses), as a percentage of its average net assets, exceed
1.10%. This arrangement can be discontinued at any time.
(9) Effective November 3, 1997, the advisor has voluntarily agreed to reimburse
the fund to the extent that total operating expenses (excluding interest,
taxes, certain securities lending costs, brokerage commissions, and
extraordinary expenses), as a percentage of its average net assets, exceed
1.60%. This arrangement can be discontinued at any time.
(10) A portion of the brokerage commissions that the fund pays is used to reduce
the fund's expenses. In addition, through arrangements with the fund's
custodian, credits realized as a result of uninvested cash balances are
used to reduce custodian expenses.
8
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
It is impossible to show you what expenses you would incur if you purchased
a contract because there are so many different factors which affect expenses.
However, the following three tables are meant to help demonstrate how certain
decisions or choices by you could result in different levels of expense.
EXAMPLES: Whether you surrender, annuitize or do not surrender, you would pay
the following expenses on a $1,000 investment. We have assumed a constant 5%
annual return on the invested assets for all of the series.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Phoenix-Aberdeen International Series........................... $ 26 $ 80 $136 $290
---------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series................................ 40 120 202 416
---------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series(2).......................... 35 108 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Nasdaq-100 Index(R) Series(4)............. 24 73 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series............. 29 89 151 319
---------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series.......................... 23 70 119 256
---------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series............................. 30 92 157 330
---------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Small & Mid-Cap Growth Series(4)............... 32 97 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series(2)................ 46 139 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series............................. 22 66 114 245
---------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 23 71 121 260
---------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series........................... 36 110 185 384
---------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 38 116 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series(2)........................... 51 153 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series(2)......................... 45 137 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series(2).................................. 23 72 123 264
---------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series(2)................... 47 143 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series................................ 23 70 120 258
---------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series....................... 26 80 136 290
---------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series.................... 23 70 120 258
---------------------------------------------------------------------------------------------------------------------
Phoenix-Sanford Bernstein Global Value Series(5)................ 33 102 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Phoenix-Sanford Bernstein Mid-Cap Value Series.................. 41 126 211 431
---------------------------------------------------------------------------------------------------------------------
Phoenix-Sanford Bernstein Small-Cap Value Series(5)............. 35 106 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series............................ 36 110 186 385
---------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series........................... 26 78 134 286
---------------------------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio(3).................... 25 77 N/A N/A
---------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund(1).................................... 27 84 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II(1)............. 24 75 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II(1)........................... 24 73 N/A N/A
---------------------------------------------------------------------------------------------------------------------
VIP Contrafund(R) Portfolio(3)................................... 24 73 N/A N/A
---------------------------------------------------------------------------------------------------------------------
VIP Growth Opportunities Portfolio(3)........................... 24 73 N/A N/A
---------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio(3)......................................... 24 72 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2........................ 26 81 138 292
---------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2........................ 26 80 137 291
---------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2......... 34 103 175 365
---------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2..................... 27 83 142 301
---------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2.............. 27 83 142 301
---------------------------------------------------------------------------------------------------------------------
Technology Portfolio(2)......................................... 42 128 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty............................................ 50 150 250 500
---------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap.................................. 31 94 160 336
---------------------------------------------------------------------------------------------------------------------
Wanger Twenty................................................... 37 112 190 392
---------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap........................................... 26 80 137 290
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S>
<C>
(1) Inclusion of this subaccount began on August 2, 1999. (4) Inclusion of this subaccount began on August 15, 2000.
(2) Inclusion of this subaccount began on December 20, 1999. (5) Inclusion of this subaccount began on November 20, 2000.
(3) Inclusion of this subaccount began on June 5, 2000.
</TABLE>
The purpose of the tables above is to assist you in understanding the
various costs and expenses that your contract will bear directly or indirectly.
It is based on historical fund expenses, as a percentage of net assets for the
year ended December 31, 1999, except as indicated. The tables reflect expenses
of the Account as well as the funds. See "Deductions and Charges" in this
prospectus and in the fund prospectuses.
9
<PAGE>
Premium taxes, which are not reflected in the table above, may apply. We
will charge any premium or other taxes levied by any governmental entity with
respect to your contract against the contract values based on a percentage of
premiums paid. Certain states currently impose premium taxes on the contracts
and range from 0% to 3.5% of premiums paid. See "Deductions and Charges--Premium
Tax" and Appendix C.
The Examples should not be considered a representation of future expenses.
Actual expenses may be greater or less than those shown. See "Deductions and
Charges."
10
<PAGE>
CONTRACT SUMMARY
--------------------------------------------------------------------------------
This summary describes the general provisions of the contract.
Certain provisions of the contract described in this prospectus may differ
in a particular state because of specific state requirements.
If there is ever a difference between the provisions within this prospectus
and the provisions of the contract, the contract provisions will control.
OVERVIEW
The contract offers a dynamic idea in retirement planning. It's designed to
provide you with retirement income at a future date, while allowing maximum
flexibility in obtaining your investment goals.
The contract offers a combination of investment options, both variable and
fixed. Investments in the variable options provide results which vary and depend
upon the performance of the underlying fund, while investments in the GIA
provide guaranteed interest earnings subject to certain conditions. Please refer
to "Appendix B" for a detailed discussion of the GIA.
The contract also provides for the payment of a death benefit upon the death
of either the owner or the annuitant anytime before the contract matures.
INVESTMENT FEATURES
FLEXIBLE PAYMENTS
[diamond] You may make payments anytime until the maturity date.
[diamond] You can vary the amount and frequency of your payments.
[diamond] Other than the Minimum Initial Payment, there are no required
payments.
MINIMUM CONTRIBUTION
[diamond] Generally, the Minimum Initial Payment is $20,000.
ALLOCATION OF PREMIUMS AND CONTRACT VALUE
[diamond] Payments are invested in one or more of the subaccounts and the
GIA.
[diamond] Transfers between the subaccounts and into the GIA can be made
anytime. Transfers from the GIA are subject to rules discussed in
Appendix B and in "The Accumulation Period--Transfers."
[diamond] The contract value varies with the investment performance of the
funds and is not guaranteed.
[diamond] The contract value allocated to the GIA will depend on deductions
taken from the GIA and interest accumulation at rates set by us
(minimum--3%).
WITHDRAWALS
[diamond] You may partially or fully surrender the contract anytime for its
contract value less any applicable premium tax.
DEATH BENEFIT
The contract provides for payment on the death of the owner or the annuitant
at anytime prior to the maturity date. The amount payable differs depending on
whether the annuitant or owner/annuitant has reached age 80. See "Payment Upon
Death Before Maturity."
DEDUCTIONS AND CHARGES
FROM THE ACCOUNT
[diamond] Mortality and expense risk fee--1.275% annually. See "Charges for
Mortality and Expense Risks."
[diamond] The daily administrative fee--.125% annually. See "Charges for
Administrative Services."
OTHER CHARGES OR DEDUCTIONS
[diamond] Premium Taxes--taken from the Contact value upon annuitization.
o Phoenix will reimburse itself for such taxes on the date of a
partial withdrawal, surrender of the contract, maturity date or
payment of death proceeds. See "Premium Tax."
[diamond] Administrative Fee--maximum of $35 each year.
See "Deductions and Charges" for a detailed description of contract charges.
In addition, certain charges are deducted from the assets of the funds for
investment management services. See the prospectuses for the funds for more
information.
ADDITIONAL INFORMATION
FREE LOOK PERIOD
You have the right to review the Contract. If you are not satisfied you may
return it within 10 days after you receive it and cancel the Contract. You will
receive in cash the adjusted value of the initial payment, however, if
applicable state law requires, we will return the full amount of the initial
payment.
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.
11
<PAGE>
PHOENIX HOME LIFE VARIABLE
ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The subaccounts commenced operations after December 31, 1999; therefore,
data for these subaccounts is not yet available.
PERFORMANCE HISTORY
--------------------------------------------------------------------------------
We may include the performance history of the 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.
THE VARIABLE ACCUMULATION ANNUITY
--------------------------------------------------------------------------------
The individual deferred variable accumulation annuity contract (the
"contract") issued by us is significantly different from a fixed annuity
contract in that, unless the GIA is selected, it is the owner and annuitant
under a contract who bear the risk of investment gain or loss rather than
Phoenix. To the extent that payments are not allocated to the GIA, the amounts
that will be available for annuity payments under a contract will depend on the
investment performance of the amounts allocated to the subaccounts. Upon the
maturity of a contract, the amounts held under a contract will continue to be
invested in the Account or the GIA and monthly annuity payments will vary in
accordance with the investment experience of the investment options selected.
However, a fixed annuity may be elected, in which case we will guarantee
specified monthly annuity payments.
You select the investment objective of each contract on a continuing basis
by directing the allocation of payments and the reallocation of the contract
value among the subaccounts or GIA.
PHOENIX AND THE ACCOUNT
--------------------------------------------------------------------------------
We are a mutual life insurance company originally chartered in Connecticut
in 1851 and redomiciled to New York in 1992. Our executive office is located at
One American Row, Hartford, Connecticut 06115 and our main administrative office
is located at 100 Bright Meadow Boulevard, Enfield, Connecticut 06082. The
principal office is located at 10 Krey Boulevard, East Greenbush, New York
12144. Phoenix sells variable annuity contracts through its own field force of
agents and through brokers.
On April 17, 2000, the Board of Directors of Phoenix Home Life Mutual
Insurance Company authorized management to develop a plan for conversion from a
mutual to a publicly traded stock company. If such a plan is developed and
adopted by the Board, it would be subject to the approval of the New York
Insurance Department and other regulators and submitted to policyholders for
approval. The plan would go into effect only after all of these requirements had
been met. There is no assurance that any such plan will be adopted, and if
adopted, there is no guarantee as to the amount or nature of consideration to
eligible policyholders.
On June 21, 1982, we established the Account, a separate account created
under the insurance laws of Connecticut. The Account is registered with the 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 by the SEC of the
management or investment practices or policies of the Account or of 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 must be credited to or
charged against the amounts placed in the Account without regard to the other
income, gains and losses from any other business or activity of Phoenix. The
assets of the Account may not be used to pay liabilities arising out of any
other business that we 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 B.
INVESTMENTS OF THE ACCOUNT
--------------------------------------------------------------------------------
PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
The following subaccounts invest in corresponding series of The Phoenix Edge
Series Fund:
PHOENIX-ABERDEEN INTERNATIONAL SERIES: the investment objective of the
series is to seek a high total return consistent with reasonable risk. The
series invests primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions. The
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES seeks long-term capital appreciation. The
series invests primarily in a diversified portfolio of equity securities of
issuers organized and principally operating in Asia, excluding Japan.
12
<PAGE>
PHOENIX-BANKERS TRUST DOW 30 SERIES: the series seeks to track the total
return of the Dow Jones Industrial Average(SM)(the "DJIA(SM)") before fund
expenses.
PHOENIX-BANKERS TRUST NASDAQ-100 INDEX(R) SERIES: this non-diversified
series seeks to track the total return of the Nasdaq-100 Index(R) ("Index")
before fund expenses. The series is "passively" managed (it invests in the same
companies in the same proportions as the Index). The series may invest in equity
equivalents in an attempt to improve cash flow and reduce transaction costs,
while replicating investments in the Index.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: the investment
objective of the series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES: the investment objective of the
series is to achieve intermediate and long-term growth of capital, with income
as a secondary consideration. The Phoenix-Engemann Capital Growth Series invests
principally in common stocks of corporations believed by management to offer
growth potential.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: the investment objective of the series
is to seek long-term capital appreciation by investing in approximately 50
different securities that offer the best potential for long-term growth of
capital. At least 75% of the series' assets will be invested in common stocks of
high quality growth companies. The remaining portion will be invested in common
stocks of small corporations with rapidly growing earnings per share or common
stocks believed to be undervalued.
PHOENIX-ENGEMANN SMALL & MID-CAP GROWTH SERIES: the series seeks to achieve
its objective of long-term growth of capital by normally investing at least 65%
of assets in equities of "small-cap" and "mid-cap" companies (market
capitalization under $1.5 billion). Expected emphasis will be on investments in
common stocks of U.S. corporations that have rapidly growing earnings per share.
Stocks are generally sold when characteristics such as growth rate, competitive
advantage, or price, render the stock unattractive. The advisor may change the
asset allocation or temporarily take up a defensive investment strategy
depending on market conditions.
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SERIES seeks to maximize total return
by investing primarily in debt obligations of the U.S. Government, its agencies
and instrumentalities.
PHOENIX-GOODWIN MONEY MARKET SERIES: the investment objective of the series
is to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: the investment objective
of the series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: the primary investment objective of
the series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity Series seeks to
achieve its objective by investing in a diversified portfolio of common stocks
that meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price.
PHOENIX-J.P. MORGAN RESEARCH ENHANCED INDEX SERIES: the investment objective
of the series is to seek high total return by investing in a broadly diversified
portfolio of equity securities of large and medium capitalization companies
within market sectors reflected in the S&P 500. The series invests in a
portfolio of undervalued common stocks and other equity securities which appear
to offer growth potential and an overall volatility of return similar to that of
the S&P 500.
PHOENIX-JANUS EQUITY INCOME SERIES: the investment objective of the series
is to seek current income and long-term growth of capital.
PHOENIX-JANUS FLEXIBLE INCOME SERIES: the investment objective of the series
is to seek to obtain maximum total return, consistent with preservation of
capital.
PHOENIX-JANUS GROWTH SERIES: the investment objective of the series is to
seek long-term growth of capital, in a manner consistent with the preservation
of capital.
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES: the investment objective of the
series is to seek capital appreciation by investing primarily in equity
securities.
PHOENIX-OAKHURST BALANCED SERIES: the investment objective of the series is
to seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Oakhurst Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
13
<PAGE>
PHOENIX-OAKHURST GROWTH AND INCOME SERIES: the investment objective of the
series is to seek dividend growth, current income and capital appreciation by
investing in common stocks. The Phoenix-Oakhurst Growth and Income Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES: the investment objective of
the series is to realize as high a level of total return over an extended period
of time as is considered consistent with prudent investment risk. The
Phoenix-Oakhurst Strategic Allocation Series invests in stocks, bonds and money
market instruments in accordance with the investment advisor's appraisal of
investments most likely to achieve the highest total return.
PHOENIX-SANFORD BERNSTEIN GLOBAL VALUE SERIES seeks long-term capital
appreciation through investing in foreign and domestic equity securities. The
advisor uses a value-oriented approach with a focus on non-U.S. companies in
developed countries in Europe and the Far East, Australia and Canada. The
advisor may invest a portion of the series' assets in developing market
companies.
PHOENIX-SANFORD BERNSTEIN MID-CAP VALUE SERIES: the primary investment
objective of the series is to seek long-term capital appreciation, with current
income as the secondary investment objective. The Phoenix-Sanford Bernstein
Mid-Cap Value Series will invest in common stocks of established companies
having a strong financial position and a low stock market valuation at the time
of purchase, which are believed to offer the possibility of increase in value.
PHOENIX-SANFORD BERNSTEIN SMALL-CAP VALUE SERIES seeks long-term capital
appreciation by investing primarily in small-capitalization stocks the advisor
believes are undervalued.
PHOENIX-SENECA MID-CAP GROWTH SERIES: The investment objective of the series
is to seek capital appreciation primarily through investments in equity
securities of companies that have the potential for above average market
appreciation. The series seeks to outperform the Standard & Poor's Mid-Cap 400
Index.
PHOENIX-SENECA STRATEGIC THEME SERIES: the investment objective of the
series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Phoenix-Seneca Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
THE ALGER AMERICAN FUND
The following subaccount invests in the corresponding portfolio of The Alger
American Fund:
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO: The investment objective of the
portfolio is long-term capital appreciation. It invests primarily in equity
securities, such as common or preferred stocks, which are listed on U.S.
exchanges or in the over-the-counter market. The portfolio invests primarily in
"growth" stocks. Under normal circumstances, the portfolio invests in the equity
securities of companies of any size, which demonstrate promising growth
potential. The portfolio can leverage, that is, borrow money, up to one-third of
its total assets to buy additional securities.
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
The following subaccount invests in a corresponding fund of Deutsche Asset
Management VIT Funds:
EAFE(R) EQUITY INDEX FUND: The fund seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index ("EAFE(R) Index"), which
emphasizes major market stock performance of companies in Europe, Australia and
the Far East. The fund invests in a statistically selected sample of the
securities found in the EAFE(R) Index.
FEDERATED INSURANCE SERIES
Certain subaccounts invest in a corresponding fund of the Federated
Insurance Series. The following funds are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment objective
of the fund is to seek current income by investing primarily in U.S. government
securities, including mortgage-backed securities issued by U.S. government
agencies.
FEDERATED HIGH INCOME BOND FUND II: The investment objective of the fund is
to seek high current income by investing primarily in a diversified portfolio of
high-yield, lower-rated corporate bonds.
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
The following subaccounts invest in corresponding portfolios of the
Fidelity(R) Variable Insurance Products:
VIP CONTRAFUND(R) PORTFOLIO: The investment objective of the portfolio is to
seek long-term capital appreciation. Principal investment strategies include:
o Normally investing primarily in common stocks.
o Investing in securities of companies whose value it believes is not fully
recognized by the public.
o Investing in domestic and foreign issuers.
o Investing in either "growth" stocks or "value" stocks or both.
o Using fundamental analysis of each issuer's financial condition and industry
position and market and economic conditions to select investments.
14
<PAGE>
VIP GROWTH OPPORTUNITIES PORTFOLIO: The investment objective of the
portfolio is to seek to provide capital growth. Principal investment strategies
include:
o Normally investing primarily in common stocks.
o Potentially investing in other types of securities, including bonds which
may be lower-quality debt securities.
o Investing in domestic and foreign issuers.
o Investing in either "growth" stocks or "value" stocks or both.
o Using fundamental analysis of each issuer's financial condition and industry
position and market and economic conditions to select investments.
VIP GROWTH PORTFOLIO: The investment objective of the portfolio is to seek
to achieve long-term capital appreciation. Principal investment strategie
include:
o Normally investing primarily in common stocks.
o Investing in companies that it believes have above-average growth potential.
o Investing in securities of domestic and foreign issuers.
o Using fundamental analysis of each issuer's financial condition and industry
position and market and economic conditions to select investments.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
The following subaccounts invest in Class 2 shares of the corresponding fund
of the Franklin Templeton Variable Insurance Products Trust:
MUTUAL SHARES SECURITIES FUND: The primary investment objective of the fund
is capital appreciation with income as a secondary objective. The Mutual Shares
Securities Fund invests primarily in domestic equity securities that the manager
believes are significantly undervalued.
TEMPLETON ASSET STRATEGY FUND: The investment objective of the fund is a
high level of total return. The Templeton Asset Strategy Fund invests in stocks
of companies of any nation, bonds of companies and governments of any nation and
in money market instruments. Changes in the asset mix will be made in an attempt
to capitalize on total return potential produced by changing economic conditions
throughout the world, including emerging market countries.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND: The investment objective of
the fund is long-term capital appreciation. The Templeton Developing Markets
Securities Fund invests primarily in emerging market equity securities.
TEMPLETON INTERNATIONAL SECURITIES FUND: The investment objective of the
fund is long-term capital growth. The Templeton International Securities Fund
invests primarily in stocks of companies located outside the United States,
including emerging markets.
TEMPLETON GROWTH SECURITIES FUND: The investment objective of the fund is
long-term capital growth. The Templeton Growth Securities Fund invests primarily
in common stocks issued by companies in various nations throughout the world,
including the U.S. and emerging markets.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
A certain subaccount invests in a corresponding portfolio of The Universal
Institutional Funds, Inc. The following portfolio is currently available:
TECHNOLOGY PORTFOLIO: The investment objective of the portfolio is to seek
long-term capital appreciation by investing primarily in equity securities of
companies that the investment advisor expects to benefit from their involvement
in technology and technology-related industries.
WANGER ADVISORS TRUST
The following subaccounts invest in corresponding series of the Wanger
Advisors Trust:
WANGER FOREIGN FORTY: The investment objective of the series is to seek
long-term capital growth. The Wanger Foreign Forty invests primarily in equity
securities of foreign companies with market capitalization of $1 billion to $10
billion and focuses its investments in 40 to 60 companies in the developed
markets.
WANGER INTERNATIONAL SMALL CAP: The investment objective of the series is to
seek long-term capital growth. The Wanger International Small Cap invests
primarily in securities of non-U.S. companies with total common stock market
capitalization of less than $1 billion.
WANGER TWENTY: The investment objective of the series is to seek long-term
capital growth. The Wanger Twenty invests primarily in the stocks of U.S.
companies with market capitalization of $1 billion to $10 billion and ordinarily
focuses its investments in 20 to 25 U.S. companies.
WANGER U.S. SMALL CAP: The investment objective of the series is to seek
long-term capital growth. The Wanger U.S. Small Cap invests primarily in
securities of U.S. companies with total common stock market capitalization of
less than $1 billion.
Each series will be subject to market fluctuations and the risks that come
with the ownership of any security, and there can be no assurance that any
series will achieve its stated investment objective.
In addition to being sold to the Account, shares of the funds also may be
sold to other separate accounts of Phoenix or its affiliates or to the separate
accounts of other insurance companies.
15
<PAGE>
It is possible that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the fund(s) simultaneously. Although neither we nor the fund(s)
trustees currently foresee any such disadvantages either to variable life
insurance policyowners or to variable annuity contract owners, the funds'
trustees intend to monitor events in order to identify any material conflicts
between variable life insurance policyowners and variable annuity contract
owners and to determine what action, if any, should be taken in response to such
conflicts. Material conflicts could, for example, result from (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(s) or (4) differences in
voting instructions between those given by variable life insurance policyowners
and those given by variable annuity contract owners. We will, at our own
expense, remedy such material conflicts, including, if necessary, segregating
the assets underlying the variable life insurance policies and the variable
annuity contracts and establishing a new registered investment company.
INVESTMENT ADVISORS
The following are the investment advisors and subadvisors for the variable
investment options:
--------------------------------------------------------------------------------
PHOENIX INVESTMENT COUNSEL, INC. ("PIC")
--------------------------------------------------------------------------------
Phoenix-Aberdeen International
Phoenix-Engemann Capital Growth
Phoenix-Engemann Nifty Fifty
Phoenix-Engemann Small & Mid-Cap Growth
Phoenix-Goodwin Money Market
Phoenix-Goodwin Multi-Sector Fixed Income
Phoenix-Hollister Value Equity
Phoenix-Oakhurst Balanced
Phoenix-Oakhurst Growth and Income
Phoenix-Oakhurst Strategic Allocation
Phoenix-Seneca Mid-Cap Growth
Phoenix-Seneca Strategic Theme
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PIC SUBADVISORS
--------------------------------------------------------------------------------
Phoenix-Aberdeen International Advisors, LLC ("PAIA")
o Phoenix-Aberdeen International
Roger Engemann & Associates, Inc. ("Engemann")
o Phoenix-Engemann Capital Growth
o Phoenix-Engemann Nifty Fifty
o Phoenix-Engemann Small & Mid-Cap Growth
Seneca Capital Management, LLC ("Seneca")
o Phoenix-Seneca Mid-Cap Growth
o Phoenix-Seneca Strategic Theme
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PHOENIX VARIABLE ADVISORS, INC. ("PVA")
--------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30
Phoenix-Bankers Trust Nasdaq-100(R) Index
Phoenix-Federated U.S. Government Bond
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PHOENIX VARIABLE ADVISORS, INC. ("PVA")
--------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index
Phoenix-Janus Equity Income
Phoenix-Janus Flexible Income
Phoenix-Janus Growth
Phoenix-Morgan Stanley Focus Equity
Phoenix-Sanford Bernstein Global Value
Phoenix-Sanford Bernstein Mid-Cap Value
Phoenix-Sanford Bernstein Small Cap Value
Phoenix-Oakhurst Strategic Allocation
--------------------------------------------------------------------------------
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PVA SUBADVISORS
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Bankers Trust Company
o Phoenix-Bankers Trust Dow 30
o Phoenix-Bankers Trust Nasdaq-100 Index(R)
Federated Investment Management Company
o Phoenix-Federated U.S. Government Bond
J.P. Morgan Investment Management, Inc.
o Phoenix-J.P. Morgan Research Enhanced Index
Janus Capital Corporation
o Phoenix-Janus Equity Income
o Phoenix-Janus Flexible Income
o Phoenix-Janus Growth
Morgan Stanley Asset Management
o Phoenix-Morgan Stanley Focus Equity
Alliance Capital Management L.P.
o Phoenix-Sanford Bernstein Global Value
o Phoenix-Sanford Bernstein Mid-Cap Value
o Phoenix-Sanford Bernstein Small Cap Value
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DUFF & PHELPS INVESTMENT MANAGEMENT CO. ("DPIM")
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Phoenix-Duff & Phelps Real Estate Securities
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Based on subadvisory agreements with the fund, PIC and PVA as investment
advisors delegate certain investment decisions and research functions to
subadvisors.
PIC, DPIM, Engemann and Seneca are indirect less than wholly owned
subsidiaries of Phoenix. PAIA is jointly owned and managed by PM Holdings, Inc.,
a subsidiary of Phoenix, and by Aberdeen Fund Managers, Inc. PVA is a wholly
owned subsidiary of PM Holdings, Inc.
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OTHER ADVISORS
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Fred Alger Management, Inc.
o Alger American Leveraged AllCap Portfolio
Bankers Trust Company
o EAFE(R) Equity Index Fund
Federated Investment Management Company
o Federated Fund for U.S. Government
Securities II
o Federated High Income Bond Fund II
Fidelity Management and Research Company
o VIP Contrafund(R) Portfolio
o VIP Growth Opportunities Portfolio
o VIP Growth Portfolio
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OTHER ADVISORS (continued)
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Franklin Mutual Advisers, LLC
o Mutual Shares Securities Fund
Morgan Stanley Asset Management
o Technology Portfolio
Templeton Asset Management, Ltd.
o Templeton Developing Markets Securities Fund
Templeton Global Advisors Limited
o Templeton Growth Securities Fund
Templeton Investment Counsel, Inc.
o Templeton Asset Strategy Fund
o Templeton International Securities Fund
Wanger Asset Management, L.P.
o Wanger Foreign Forty
o Wanger International Small Cap
o Wanger Twenty
o Wanger U.S. Small Cap
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SERVICES OF THE ADVISORS
The advisors continually furnish an investment program for each series and
manage the investment and reinvestment of the assets of each series subject at
all times to the authority and supervision of the Trustees. A detailed
discussion of the investment advisors and subadvisors, and the investment
advisory and subadvisory agreements, is contained in the accompanying prospectus
for the funds.
PURCHASE OF CONTRACTS
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Generally, we require minimum initial payments of:
[diamond] Non-qualified plans--$20,000
[diamond] Individual Retirement Annuity (Rollover IRAs only)--$20,000
[diamond] Bank draft program--$500
o You may authorize your bank to draw $500 or more from your
personal checking account monthly to purchase units in any
available subaccount, or for deposit in the GIA. The amount you
designate will be automatically invested on the date the bank
draws on your account. If Check-o-matic is elected, the minimum
initial payment is $500. This payment must accompany the
application (if any). Each subsequent payment under a contract
must be at least $500.
[diamond] Qualified plans--$20,000 annually
o If contracts are purchased in connection with tax-qualified or
employer-sponsored plans, a minimum annual payment of $20,000 is
required.
Generally, a contract may not be purchased for a proposed annuitant who is
86 years of age or older. Total payments in excess of $1,000,000 cannot be made
without our permission. While the annuitant is living and the contract is in
force, payments may be made anytime before the maturity date of a contract.
Payments received under the contracts will be allocated in any combination
to any subaccount or GIA, in the proportion specified in the application for the
contract or as otherwise indicated by you from time to time. Initial payments
may, under certain circumstances, be allocated to the Phoenix-Goodwin Money
Market Subaccount. See "Free Look Period." Changes in the allocation of payments
will be effective as of receipt by VPMO of notice of election in a form
satisfactory to us and will apply to any payments accompanying such notice or
made subsequent to the receipt of the notice, unless otherwise requested by you.
In certain circumstances we may reduce the initial or subsequent premium
payment amount we accept for a contract. Factors in determining qualifications
for any such reduction include:
(1) the make-up and size of the prospective group; or
(2) the method and frequency of premium payments; and
(3) the amount of compensation to be paid to Registered Representatives on each
premium payment.
Any reduction will not unfairly discriminate against any person. We will
make any such reduction according to our own rules in effect at the time the
premium payment is received. We reserve the right to change these rules from
time to time.
DEDUCTIONS AND CHARGES
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DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
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, our
status within those states and the insurance tax laws of those states. Premium
Taxes on contracts currently range from 0% to 3.5%. We will pay any premium tax
due and will reimburse ourselves only upon the earlier of either full or partial
surrender of the contract, the maturity date or payment of death proceeds. For a
list of states and premium taxes, see Appendix C to this prospectus.
MORTALITY AND EXPENSE RISK FEE
We make a daily deduction from each subaccount for the mortality and expense
risk charge. The fee is based on an annual rate of 1.275% and is taken against
the net assets of the subaccounts.
Although you bear the investment risk of the series in which you invest,
once you begin receiving annuity payments that carry life contingencies the
annuity payments are guaranteed by us to continue for as long as the annuitant
lives. We assume the risk that annuitants as a
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class may live longer than expected (requiring a greater number of annuity
payments) and that our actual expenses may be higher than the expense charges
provided for in the contract.
In assuming the mortality risk, we promise to make these lifetime annuity
payments to the owner or other payee for as long as the annuitant lives
according to the annuity tables and other provisions of the contract.
No mortality and expense risk charge is deducted from the GIA. If the
charges prove insufficient to cover actual administrative costs, then the loss
will be borne by us; conversely, if the amount deducted proves more than
sufficient, the excess will be a profit to us. Any such profit may be used, as
part of our General Account assets, to meet sales expenses, if any.
We have concluded that there is a reasonable likelihood that the
distribution financing arrangement being used in connection with the contract
will benefit the Account and the contract owners.
ADMINISTRATIVE FEE
We make a daily deduction from the Account value to cover the costs of
administration. This fee is based, on an annual rate of .125% and is taken
against the net assets of the subaccounts. It compensates the Company for
administrative expenses that exceed revenues from the Administrative Charge
described below. (This fee is not deducted from the GIA.)
ADMINISTRATIVE CHARGE
We deduct an administrative charge from the contract value. This charge is
used to reimburse us for some of the administrative expenses we incur in
establishing and maintaining the contracts.
The maximum administrative maintenance charge under a contract is $35. This
charge is deducted annually on the contract anniversary date. It is deducted on
a pro rata basis from the subaccounts or GIA in which you have an interest. Any
portion of the Administrative Charge from the GIA cannot exceed $30. If you
fully surrender your contract, the full administrative fee if applicable, will
be deducted at the time of withdrawal. The administrative charge will not be
deducted (either annually or upon withdrawal) if your contract value is $50,000
or more on the day the administrative charge is due. This charge may be
decreased but will never increase. If you elect payment options I, J, K, M or N,
the annual administrative charge after the maturity date will be deducted from
each annuity payment in equal amounts.
REDUCED CHARGES, CREDITS AND BONUS GUARANTEED INTEREST RATES
We may reduce or eliminate the mortality and expense risk fee and annual
administrative charge, credit additional amounts or grant bonus Guaranteed
Interest Rates when sales of the contracts are made to certain individuals or
groups of individuals that result in savings of sales expenses. We will consider
the following characteristics:
(1) the size and type of the group of individuals to whom the contract is
offered;
(2) the amount of anticipated premium payments;
(3) whether there is a preexisting relationship with the Company such as being
an employee of the Company or its affiliates and their spouses; or to
employees or agents who retire from the Company or its affiliates or Phoenix
Equity Planning Corporation ("PEPCO"), or its affiliates or to registered
representatives of the principal underwriter and registered representatives
of broker-dealers with whom PEPCO has selling agreements; and
(4) internal transfers from other contracts issued by the Company or an
affiliate, or making transfers of amounts held under qualified plans
sponsored by the Company or an affiliate.
Any reduction or elimination of surrender or administrative charge will not
be unfairly discriminatory against any person. We will make any reduction
according to our own rules in effect at the time the contract is issued. We
reserve the right to change these rules from time to time.
OTHER CHARGES
As compensation for investment management services, the advisors are
entitled to a fee, payable monthly and based on an annual percentage of the
average daily net asset values of each series. These fund charges and other fund
expenses are described more fully in the accompanying fund prospectuses.
THE ACCUMULATION PERIOD
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The accumulation period is that time before annuity payments begin during
which your payments into the contract remain invested.
ACCUMULATION UNITS
Your Initial payments will be applied within two days of our receipt if the
application for a contract is complete. If an incomplete application is
completed within five business days of receipt by VPMO, your payment will be
applied within two days of the completion of the application. If VPMO does not
accept the application within five business days or if an order form is not
completed within five business days of receipt by VPMO, then your payment will
be immediately returned unless you request us to hold it while the application
is completed. Additional payments allocated to the GIA are deposited on the date
of receipt of payment at VPMO. Additional payments allocated to subaccounts are
used to purchase accumulation units of the subaccount(s), at the value of such
units next determined after the receipt of the payment at VPMO. The number of
accumulation units of
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a subaccount purchased with a specific payment will be determined by dividing
the payment by the value of an accumulation unit in that subaccount next
determined after receipt of the 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 expenses charged against the fund and the
charges and deductions made against the subaccount.
ACCUMULATION UNIT VALUES
On any date before the maturity date of the contract, the total value of the
accumulation units in a subaccount can be computed by multiplying the number of
such units by the value of an accumulation unit on that 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
credited to you in each subaccount and their current value will be reported to
you at least annually.
TRANSFERS
You may at anytime prior to the maturity date of your contract, elect to
transfer all or any part of the contract value among one or more subaccounts and
the GIA. A transfer from a subaccount will result in the redemption of
accumulation units and, if another subaccount is selected, in the purchase of
accumulation units. The exchange will be based on the values of the accumulation
units next determined after the receipt by VPMO of written notice of election in
a form satisfactory to us. A transfer among subaccounts and GIA does not
automatically change the payment allocation schedule of your contract.
You may request transfers and changes in payment allocations among available
subaccounts and GIA by writing to Phoenix Variable Products Mail Operations, PO
Box 8027, Boston, MA 02266-8027.
Unless we otherwise agree or unless the Dollar Cost Averaging Program has
been elected, you may make only one transfer per contract year from the GIA.
Nonsystematic transfers from the GIA will be made on the date of receipt by VPMO
except as you may otherwise request. For nonsystematic 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.
Because excessive trading can hurt Fund performance and harm all contract
owners, we reserve the right to temporarily or permanently terminate exchange
privileges or reject any specific order from anyone whose transactions seem to
follow a timing pattern, including those who request more than one exchange out
of a subaccount within any 30-day period. We will not accept batch transfer
instructions from registered representatives (acting under powers of attorney
for multiple contract owners), unless we have entered into a third-party
transfer service agreement with the registered representative's broker-dealer
firm.
Currently, there is no charge for transfers; however, we reserve the right
to charge a transfer fee of $10 per transfer after the first two transfers in
each contract year to defray administrative costs. Currently, unlimited
transfers are permitted; however, we reserve the right to change our policy to
limit the number of transfers made during each contract year. However, you will
be permitted at least six transfers during each contract year. If the Temporary
Money Market Allocation Amendment is in effect, no transfers may be made until
the end of the free look period. See "Free Look Period." There are additional
restrictions on transfers from the GIA as described above and in Appendix B.
We reserve the right to limit the number of subaccounts you may elect to a
total of 18 over the life of the contract unless changes in federal and/or state
regulation, including tax, securities and insurance law require us to impose a
lower limit.
Currently, contracts in the annuity period are not able to make transfers
between subaccounts.
OPTIONAL PROGRAMS AND BENEFITS
DOLLAR COST AVERAGING PROGRAM
You also may elect to transfer funds automatically among the subaccounts or
GIA on a monthly, quarterly, semiannual or annual basis under the Dollar Cost
Averaging Program. Generally, the minimum initial and subsequent transfer
amounts are $25 monthly, $75 quarterly, $150 semiannually or $300 annually. You
must have an initial value of $2,000 in the GIA or in the subaccount from which
funds will be transferred (sending subaccount), and if the value in that
subaccount or the GIA drops below the amount to be transferred, the entire
remaining balance will be transferred and no more systematic transfers will be
processed. Also, payments of $1,000,000 or more require our approval before we
will accept them for processing. Funds may be transferred from only one sending
subaccount or from the GIA but may be allocated to multiple receiving
subaccounts. Under the Dollar Cost Averaging Program, you may transfer
approximately equal amounts from the GIA over a period of 6 months or longer.
Transfers under the Dollar Cost Averaging Program are not subject to the general
restrictions on transfers from the GIA.
Upon completion of the Dollar Cost Averaging Program, you must notify VAO at
800/541-0171 or in writing to VPMO to start another Dollar Cost Averaging
Program.
All transfers under the Dollar Cost Averaging Program will be executed on
the basis of values as of the first of the month rather than on the basis of
values next determined after receipt of the transfer request. If the first of
the month falls on a holiday or weekend, then the transfer will be processed on
the next succeeding business day. Transfers under this program do not count
against any limits on transfers that might otherwise be applicable.
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The Dollar Cost Averaging Program is not available to individuals who
invest via a bank draft program or while the Asset Rebalancing Program is in
effect.
The Dollar Cost Averaging Program does not ensure a profit nor guarantee
against a loss in a declining market. There is no charge associated with
participation in this program.
ASSET REBALANCING PROGRAM
Under the Asset Rebalancing Program, we transfer funds among the subaccounts
to maintain the percentage allocation you have selected among these subaccounts.
At your election, we will make these transfers on a monthly, quarterly,
semiannual or annual basis. Transfers under this program do not count against
any limits on transfers that might otherwise be applicable.
Asset Rebalancing does not permit transfers to or from the GIA.
The Asset Rebalancing Program does not ensure a profit nor guarantee against
a loss in a declining market. There is no charge associated with participation
in this program.
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, you may withdraw the
contract value in either a lump sum or by multiple scheduled or unscheduled
partial withdrawals. A signed written request for withdrawal must be sent to
VPMO. If you have not yet reached age 59 1/2, a 10% penalty tax may 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 us. accumulation units redeemed in a partial withdrawal from multiple
subaccounts will be redeemed on a pro rata basis unless you designate otherwise.
contract values in the GIA will also be withdrawn on a pro rata basis unless you
designate otherwise. 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 "Miscellaneous
Provisions--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.
Although loans are available under 403(b) plans only, certain limitations may
apply. See "Qualified Plans"; "Tax Sheltered Annuities."
Any request for a withdrawal from, or complete surrender of, a contract
should be mailed to Phoenix Variable Products Mail Operations, PO Box 8027,
Boston, Massachusetts 02266-8027.
LAPSE OF CONTRACT
The contract will terminate and lapse without value, if on any valuation
date:
[diamond] the contract value is zero; or
[diamond] the annual Administrative Charge or premium tax reimbursement due on
either a full or partial surrender is greater than or equal to the
contract value (unless any contract value has been applied under one
of the variable payment options).
Phoenix will notify you in writing that the contract has lapsed.
PAYMENT UPON DEATH BEFORE MATURITY DATE
WHO RECEIVES PAYMENT
[diamond] DEATH OF AN OWNER/ANNUITANT
If the owner/annuitant dies before the contract maturity date, the
death benefit will be paid under the contract to the annuitant's
beneficiary.
[diamond] DEATH OF AN ANNUITANT WHO IS NOT THE OWNER
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.
[diamond] SPOUSAL BENEFICIARY CONTRACT CONTINUANCE
If the spousal beneficiary continues the contract at the death of the
an owner/annuitant or owner who is not also the annuitant, the
spousal beneficiary becomes the annuitant. The benefit option in
effect at the death of an owner/annuitant or an owner will also apply
to the spousal beneficiary.
[diamond] CONTINGENT ANNUITANT CONTRACT CONTINUANCE
Upon the death of the annuitant who is not the owner provided a
contingent annuitant was named prior to the death of the annuitant
the contract will continue with the contingent annuitant becoming the
annuitant. The benefit option in effect at the death of the annuitant
will also apply to the contingent annuitant.
[diamond] QUALIFIED CONTRACTS
Under Qualified contracts, the death benefit is paid at the death of
the participant who is the annuitant under the contract.
Death benefit payments must satisfy distribution rules (See
"Qualified Plans" for a detailed discussion).
[diamond] OWNERSHIP OF THE CONTRACT BY A NON-NATURAL PERSON
If the owner is not an individual, the death of the annuitant is
treated as the death of the owner.
PAYMENT AMOUNT
[diamond] DEATH OF AN OWNER WHO IS THE ANNUITANT
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Upon the death of the annuitant or owner/annuitant who has not yet
reached age 80.
- 100% of payments, less adjusted partial withdrawals; or
- the contract value on the claim date; and
- the annual step-up amount on the claim date.
After the annuitant's 80th birthday, the death benefit (less any
deferred premium tax) equals the contract value on the Claim Date.
[diamond] DEATH OF AN OWNER WHO IS NOT THE ANNUITANT
Upon the death of an owner who is not the annuitant, the death
proceeds will be paid to the owner's beneficiary. The amount of death
benefit payable is equal to the greater of:
- 100% of payments, less withdrawals; and - the contract value on
the Claim Date.
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" under "Federal Income Taxes."
THE ANNUITY PERIOD
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The annuity period is that period of time beginning after the end of the
accumulation period and during which payments to you are made.
VARIABLE ACCUMULATION ANNUITY CONTRACTS
Annuity payments will begin on the contract's maturity date if the annuitant
is alive and the contract is still in force. Beginning on the maturity date,
investment in the Account is continued unless a Fixed Payment Annuity is
elected. Each contract will provide, at the time of its issuance, for a Variable
Payment Life Expectancy Annuity (Option L) unless a different annuity option is
elected by you. See "Annuity Payment Options." Under a Variable Payment Life
Expectancy Annuity, payments are made on a monthly basis over the annuitant's
annually recalculated life expectancy or the annually recalculated life
expectancy of the annuitant and joint annuitant. A contract owner may at anytime
request unscheduled withdrawals representing part or all of the remaining
contract value. Upon the death of the annuitant (and joint annuitant, if there
is a joint annuitant), the remaining contract value will be paid in a lump sum
to the annuitant's beneficiary.
If the amount to be applied on the maturity date is less than $2,000, we 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, we may
make a single sum payment equal to the total contract value on the date the
initial payment would be payable, or make periodic payments quarterly,
semiannually or annually in place of monthly payments.
Each contract specifies a provisional maturity date at the time of its
issuance and is elected by you in the application. You may subsequently elect a
different maturity date. The maturity date may not be earlier than the fifth
contract anniversary or later than the contract anniversary nearest the
annuitant's 95th 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 must be made by written notice and must be
received by VPMO 30 days before the provisional maturity date. If a maturity
date, which is different from the provisional maturity date, is not elected by
you, 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 (TSA), a Keogh Plan or an IRA plan. See "Tax Sheltered
Annuities," "Keogh Plans" and "Individual Retirement Accounts."
ANNUITY PAYMENT 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
applied to provide a Variable Payment Life Expectancy Annuity (Option L) as
described below. Upon the death of the annuitant and joint annuitant if any, the
remaining contract value will be paid in a lump sum to the annuitant's
beneficiary.
With the exception of the Fixed Payment Options and Option L--Variable
Payment Life Expectancy Annuity, 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 payment rate. The contract
is issued with guaranteed minimum annuity payment rates, however, if the current
rate is higher, we'll apply the higher rate. The payment rate differs according
to the payment option selected and the age of the annuitant. The annuity payment
rate is applied and will determine all payments for the fixed annuity payment
options and the first payment for the variable annuity payment options. The
value of the annuity units will vary with the investment performance of each
subaccount to which annuity units are credited. The initial payment will be
calculated based on an assumed interest rate of 4 1/2% per year. This rate is a
fulcrum return around which variable annuity payments will vary to reflect
whether actual investment experience of the subaccount is better or worse than
the assumed interest rate. The assumed interest rate and the calculation of
variable income payments for 10-year period certain variable payment life
annuity and for
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Options J and K described below are described in more detail in the contract and
in the SAI.
Instead of the Variable Payment Life Expectancy Annuity, (see "Option L"
below), you may, by written request received by VPMO on or before the maturity
date, elect any of the other annuity payment options described below.
The level of annuity payments payable under the following options is based
upon the option selected. In addition, such factors as the age at which payments
begin, the form of annuity, annuity payment rates, assumed interest rate (for
variable payment annuities) and the frequency of payments will effect the level
of annuity payments. The assumed interest rate is 4.5% per year. We use this
rate to determine the first payment under Variable Payment Annuity Options I, J,
K, M and N.
We deduct a daily charge for mortality and expense risks and a daily
administrative fee from contract values held in the subaccounts. See "Charges
For Mortality and Expense Risks" and "Charges for Administrative Services."
Therefore, electing Option K will result in a deduction being made even though
we assume no mortality risk under that option.
The following are descriptions of the annuity options available under a
contract. These descriptions should allow you to understand the basic
differences between the options, however, you should contact VPMO well in
advance of the date you wish to elect an option to obtain estimates of payments
under each 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 10-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 paid to the survivor is 100% 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 surviving 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 10-YEAR 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 10-year period, the
annuity income will continue to the named beneficiary until the end of the
10-year period certain.
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 10-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 10-year period. The 10-year period
provides a total of 120 monthly payments. Payments will vary as to dollar
amount, based on the investment experience of the subaccounts in which proceeds
are invested.
OPTION J--JOINT SURVIVOR VARIABLE PAYMENT LIFE ANNUITY WITH 10-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 in which proceeds are invested. The joint
annuitant must be named at the time
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the option is elected and cannot be changed. The joint annuitant must have
reached an adjusted age of 40, as defined in the contract. This option is not
available for payment of any death benefit under 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 at anytime request
unscheduled withdrawals representing part or all of the remaining contract
value.
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 at anytime
request unscheduled withdrawals representing part or all of the remaining
contract value. Upon the death of the annuitant (and joint annuitant, if there
is a joint annuitant), the remaining contract value will be paid in a lump sum
to the annuitant's beneficiary.
OPTION M--UNIT REFUND VARIABLE PAYMENT LIFE ANNUITY
Provides variable monthly payments as long as the annuitant lives. If the
annuitant dies, the annuitant's beneficiary will receive the value of the
remaining annuity units in a lump sum.
OPTION N--VARIABLE PAYMENT NON-REFUND LIFE ANNUITY
Provides a variable monthly income for the life of the annuitant. No income
or payment to a beneficiary is paid after the death of the annuitant.
OTHER OPTIONS AND RATES
We may offer other annuity options at the time a contract reaches its
maturity date. In addition, in the event that annuity payment rates for
contracts are at that time more favorable than the applicable rates guaranteed
under the contract, the then 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.
Federal income tax requirements also provide that participants in regular or
SIMPLE IRAs must begin minimum distributions by April 1 of the year following
the year in which they attain age 70 1/2. Minimum distribution requirements do
not apply to Roth IRAs. Distributions from qualified plans generally must begin
by the later of actual retirement or April 1 of the year following the year
participants attain age 70 1/2. Any required minimum 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.
If the initial monthly annuity payment under an annuity option would be less
than $20, we may make a single sum payment equal to the contract value on the
date the initial payment would be payable, in place of all other benefits
provided by the contract, or, may make periodic payments quarterly, semiannually
or annually in place of monthly payments.
Currently, transfers between subaccounts are not available for amounts
allocated to any of the variable payment annuity options.
PAYMENT UPON DEATH AFTER MATURITY DATE
If an owner who also is the annuitant dies on or after the maturity date,
except as may otherwise be provided under any supplementary contract between the
owner and us, we 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, we 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, we 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 NYSE is open for trading. The NYSE is
scheduled to be closed on the following days: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The Board of Directors of the
NYSE reserves the right to change this schedule as conditions warrant. On each
valuation date, the value of the Account is determined at the close of the NYSE
(currently 4:00 p.m. Eastern Time).
VALUATION PERIOD
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.
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ACCUMULATION UNIT VALUE
The value of one accumulation unit was set at $1.0000 on the date assets
were first allocated to a 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. After the first valuation
period, the accumulation unit value reflects the cumulative investment
experience of that subaccount.
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 depending on whether the assets gained
or lost value that day. 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 and daily
administration fee, 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 to us.
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 VPMO. However, we may postpone payment
of the value of any accumulation units at times (a) when the NYSE is closed,
other than customary weekend and holiday closings, (b) when trading on the NYSE
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 over us 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
We may mail the contract to you or we may deliver it to you in person. You
may surrender a contract for any reason within 10 days after you receive it and
receive in cash the adjusted value of your initial payment. (A longer Free Look
Period may be required by your state.) You may receive more or less than the
initial payment depending on investment experience within the subaccounts during
the Free Look Period. If a portion or all of your initial payment has been
allocated to the GIA, we also will refund any earned interest. If applicable
state law requires, we will return the full amount of any payments we received.
During periods of extreme market volatility, we reserve the right to make
the Temporary Money Market Allocation Amendment available. In states that
require return of premium during the Free Look Period, we will allocate those
portions of your initial payment designated for the subaccounts to the
Phoenix-Goodwin Money Market Subaccount and those portions designated for the
GIA will be allocated to that Account. At the expiration of the Free Look
Period, the value of the accumulation units held in the Phoenix-Goodwin Money
Market Subaccount will be allocated among the available subaccounts in
accordance with your allocation instructions on the application.
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 SAI must be filed with the SEC.
SUBSTITUTION OF FUND SHARES
Although infrequent, it is possible that in the judgment of our 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 or because of
poor performance. In that event, we may seek to substitute or merge the shares
of another series or the shares of an entirely different fund. Before this can
be done, the approval of the SEC, and possibly one or more state insurance
departments, will be required.
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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. Transfer of the
ownership of a contract may involve federal income tax consequences, and a
qualified advisor 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, (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
our income 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. The income tax rules are complicated and this discussion can only make
you aware of the issues. Each person concerned should consult a competent tax
advisor. No attempt is made to consider any estate or inheritance taxes or any
applicable state, local or other income tax laws. Moreover, the discussion is
based upon our 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 "IRS"). We do not guarantee the income 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 funds, please see the
accompanying prospectuses for the funds.
INCOME TAX STATUS
We are taxed as a life insurance company under Part 1 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 us. We reserve the right to make a deduction for taxes should
they be imposed on us with respect to such items in the future.
TAXATION OF ANNUITIES IN GENERAL--NON-QUALIFIED PLANS
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. 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."
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 payments
(premiums paid) by or on behalf of an individual under a contract that have not
been 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 amount received on account of a total or partial surrender of a
contract. 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.
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 advisor if you
think you may qualify for "lump sum distribution" treatment. The 5-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
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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 VPMO of that election.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS
Amounts surrendered or distributed before the taxpayer reaches age 59 1/2
are subject to a penalty tax 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 or her 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 penalty of 25% applicable specifically to
SIMPLE IRAs or other special penalties applicable to Roth 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) within 5 years from the date of the first payment,
or (b) before the taxpayer reaches age 59 1/2.
Separate tax withdrawal penalties apply to qualified plans. See "Penalty Tax
on Surrenders and Withdrawals from Qualified Contracts."
ADDITIONAL CONSIDERATIONS
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 or life expectancy of
that beneficiary and payments must begin 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. However, a number of restrictions, limitations and special rules apply to
qualified plans and contract owners should consult with their tax advisor.
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, distribution will be required at the death of the first
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.
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.
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
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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, or where the contract is purchased on behalf of an employee upon
termination of a qualified plan, and nor if the annuity contract is an immediate
annuity.
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 generally 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 are, in a Code Section 1035 exchange,
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 advisors.
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 advisor before purchasing more than one contract
or other annuity contracts.
DIVERSIFICATION STANDARDS
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 calendar quarter
that the series' assets be invested in no more than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
A "look-through" rule applies to treat a pro rata portion of each asset of a
series as an asset of the 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 IRS in which was held that the
policyowner 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 generally will 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, we reserve the right to modify the
contract in an attempt to maintain favorable tax treatment.
We represent that we intend to comply with the Diversification Regulations
to assure that the contracts continue to be treated as annuity contracts for
federal income tax purposes.
DIVERSIFICATION REGULATIONS AND QUALIFIED PLANS
Code Section 817(h) applies to a variable annuity contract other than a
pension plan contract. The
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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 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 here 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 roll-over 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.
The new mandatory withholding rules apply to all taxable distributions from
qualified plans or TSAs (not including 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 includable 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 also will be available for use in
connection with certain non-qualified deferred compensation plans.
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, 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.
TAX SHELTERED ANNUITIES ("TSAS")
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 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 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 distribution amount
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.
Effective May 4, 1998, loans may be made available under Internal Revenue
Code Section 403(b) tax-sheltered annuity programs. If the program permits
loans, a loan from the participant's contract value may be requested. The loan
must be at least $1,000 and the maximum loan
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amount is the greater of: (a) 90% of the first $10,000 of contract value; and
(b) 50% of the contract value. The maximum loan amount is $50,000. If loans are
outstanding from any other tax-qualified plan then the maximum loan amount of
the contract may be reduced from the amount stated above in order to comply with
the maximum loan amount requirements under Section 72(p) of the Internal Revenue
Code. Amounts borrowed from the GIA are subject to the same limitations as
applies to transfers from the GIA; thus no more than the greater of $1,000 and
25% of the contract value in the GIA may be borrowed at any one time.
Loan repayments will first pay any accrued loan interest. The balance will
be applied to reduce the outstanding loan balance and will also reduce the
amount of the Loan Security Account by the same amount that the outstanding loan
balance is reduced. The balance of loan repayments, after payment of accrued
loan interest, will be credited to the subaccounts of the Separate Account or
the GIA in accordance with the participant's most recent premium allocation on
file with Us.
If a loan repayment is not received by us before 90 days after the payment
was due, then the entire loan balance plus accrued interest will be in default.
In the case of default, the outstanding loan balance plus accrued interest will
be deemed a distribution for income tax purposes, and will be reported as such
to the extent required by law. At the time of such deemed distribution-interest
will continue to accrue until such time as an actual distribution occurs under
the contract.
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 IRS.
INDIVIDUAL RETIREMENT ACCOUNTS
Code Sections 408 and 408A permit 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) no longer may be established. Effective January 1, 1998,
individuals may establish Roth IRAs. Special rules also apply to contributions
to and withdrawals from Roth IRAs.
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 includable 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.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS FROM QUALIFIED PLANS
In the case of a withdrawal under a qualified plan, 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
plan. 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 other than Roth IRAs. 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
includable 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
29
<PAGE>
her designated beneficiary; (d) distributions to a contract owner or annuitant
(as applicable) who has separated 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; (g)
distributions from an IRA 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; and (h) distributions from IRAs for first-time home purchase
expenses (maximum $10,000) or certain qualified educational expenses of the
contract owner, spouse, children or grandchildren of the contract owner. 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 IRA. The exception stated in item (c) applies to an IRA
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 a regular or SIMPLE IRA and
the required distribution rules do not apply to Roth IRAs. 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.
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 meant to alert you to the issues 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 advisor, with regard to the suitability of the
contract as an investment vehicle for the qualified plan.
SALES OF VARIABLE ACCUMULATION CONTRACTS
--------------------------------------------------------------------------------
The principal underwriter of the contracts is PEPCO. Contracts may be
purchased through registered representatives of W.S. Griffith & Company, Inc.
("WSG") who are licensed to sell Phoenix annuity contracts. WSG is an indirect
wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company. PEPCO is
an indirect, majority owned subsidiary of Phoenix Home Life Mutual Insurance
Company. Contracts also may be purchased through other broker-dealers or
entities registered under or exempt 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.
In addition to reimbursing PEPCO for its expenses, we pay PEPCO an amount
equal to up to 7.25% of the payments made under the contract. PEPCO pays any
qualified distribution organization an amount which may not exceed 7.25% of the
payments under the contract. Any such amount paid with respect to contracts sold
through other broker-dealers will be paid by us to or through PEPCO. The amounts
paid are not deducted from the payments.
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.
STATE REGULATION
--------------------------------------------------------------------------------
We are subject to the provisions of the New York insurance laws applicable
to life insurance companies and to regulation and supervision by the New York
Superintendent of Insurance. We also are 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
policies of the Account.
REPORTS
--------------------------------------------------------------------------------
Reports showing the contract value and containing the financial statements
of the Account will be furnished to you at least annually.
VOTING RIGHTS
--------------------------------------------------------------------------------
As stated above, all of the assets held in an available subaccount will be
invested in shares of a corresponding series of the funds. We are the legal
owner of those shares and as such has the right to vote to elect the Board of
Trustees of the funds, 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,
30
<PAGE>
we intend 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.
We currently intend to vote fund shares attributable to any of our 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 us 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 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.
The number of votes that you have the right to cast will be determined by
applying your percentage interest in a subaccount to the total number of votes
attributable to the subaccount. In determining the number of votes, fractional
shares will be recognized. The number of votes for which you may give us
instructions will be determined as of the record date for fund shareholders
chosen by the Board of Trustees of a fund. We will furnish you with proper forms
and proxies to enable them to give these instructions.
LEGAL MATTERS
--------------------------------------------------------------------------------
Edwin L. Kerr, Counsel, Phoenix Home Life Mutual Insurance Company, has
provided advice on certain matters relating to the federal securities and income
tax laws in connection with the contracts described in this prospectus.
SAI
--------------------------------------------------------------------------------
The SAI contains more specific information and financial statements relating
to the Account and Phoenix. The Table of Contents of the SAI is set forth below:
Underwriter
Calculation of Yield and Return
Calculation of Annuity Payments
Experts
Financial Statements
Contract owner inquiries and requests for a SAI should be directed, in
writing, to Phoenix Variable Products Mail Operations at P.O. Box 8027, Boston,
Massachusetts 02266-8027, or by calling VAO at 800/541-0171.
31
<PAGE>
APPENDIX A
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 Phoenix-Goodwin Money Market Subaccount, as
yield of the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount and as total
return of any subaccount. For the Phoenix-Goodwin Multi-Sector Fixed Income
Subaccount, quotations of yield will be based on all investment income per unit
earned during a given 30-day period (including dividends and interest), less
expenses accrued during the period ("net investment income") and are computed by
dividing 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 usually will be calculated
for one year, five years and ten years or since inception if the subaccount has
not been in existence for at least ten years. Total return is measured by
comparing the value of a hypothetical $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.
Average Annual Total Return for the Period Ended December 31, 1999(1,2)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series 05/01/90 27.60% 17.53% 11.24%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series 09/17/96 48.78% -2.09%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series 12/20/99 3.14%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Nasdaq-100 Index(R) Series 08/15/00
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series 05/01/95 3.21% 8.76%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 12/31/82 27.77% 22.83% 17.87% 18.15%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series 03/02/98 30.22% 30.40%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Small & Mid-Cap Growth Series 08/15/00
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series 12/20/99 -0.07%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 10/08/82 3.25% 3.60% 3.47% 4.77%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 12/31/82 3.88% 7.68% 7.40% 8.22%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series 03/02/98 22.49% 17.45%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series 07/14/97 17.06% 21.00%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series 12/20/99 4.21%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series 12/20/99 -0.06%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series 12/20/99 4.24%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series 12/20/99 4.66%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series 05/01/92 9.91% 14.69% 10.96%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth & Income Series 03/02/98 15.27% 18.93%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 09/17/84 9.60% 14.21% 11.59% 11.96%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Sanford Bernstein Global Value Series 11/20/00
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Sanford Bernstein Mid-Cap Value Series 03/02/98 -11.65% -12.99%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Sanford Bernstein Small-Cap Value Series 11/20/00
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series 03/02/98 43.51% 34.80%
-----------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series 01/29/96 52.74% 29.36%
-----------------------------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio 06/05/00
-----------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund 07/15/99 17.46%
-----------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 07/15/99 -0.55%
-----------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 07/15/99 -2.16%
-----------------------------------------------------------------------------------------------------------------------
VIP Contrafund(R) Portfolio 06/05/00
-----------------------------------------------------------------------------------------------------------------------
VIP Growth Opportunities Portfolio 06/05/00
-----------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio 06/05/00
-----------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) 05/01/00
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Templeton Asset Strategy Fund -- Class 2(2) 11/28/88 20.74% 15.09% 11.16% 11.18%
-----------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- 09/27/96 51.06% -5.66%
Class 2(2)
------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2) 05/01/00
-----------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2(2) 05/11/92 21.42% 15.19% 13.51%
-----------------------------------------------------------------------------------------------------------------------
Technology Portfolio 12/20/99 7.42%
-----------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 02/01/99 81.64%
-----------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap 05/01/95 123.26% 36.80%
-----------------------------------------------------------------------------------------------------------------------
Wanger Twenty 02/01/99 32.63%
-----------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap 05/01/95 23.23% 24.82%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The average annual total return is the annual compound return that results
from holding an initial investment of $1,000 for the time period indicated.
Returns are net of investment management fees, daily and annual
administrative fees, and mortality and expense risk charges. The investment
return and principal value of the variable contract will fluctuate so that
the accumulated value, when redeemed, may be worth more or less than the
original cost.
(2) Returns reflect the effect of any applicable management fee waivers and
reimbursements, which may increase total return.
33
<PAGE>
<TABLE>
<CAPTION>
Annual Total Return (1,3)
------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series 18.07% -14.04% 36.55% -1.34% 8.08% 17.01% 10.49% 26.16% 27.72%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series -33.35% -5.78% 48.90%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Nasdaq-100 Index(R) Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities 31.26% 20.37% -22.31% 3.33%
Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 2.60% 40.79% 8.77% 18.05% 0.06% 29.08% 11.02% 19.41% 28.21% 27.89%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series 30.34%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Small & Mid-Cap Growth Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 6.72% 4.51% 2.14% 1.45% 2.40% 4.23% 3.56% 3.72% 3.64% 3.37%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income 3.76% 17.94% 8.55% 14.31% -6.78% 21.83% 10.85% 9.55% -5.48% 3.99%
Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series 22.61%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index 29.86% 17.18%
Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity-Income Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series 7.10% -4.19% 21.64% 9.02% 16.31% 17.37% 10.03%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth & Income Series 15.39%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 4.29% 27.54% 9.12% 9.47% -2.81% 16.60% 7.53% 19.07% 19.12% 9.72%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Sanford Bernstein Global Value Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Sanford Bernstein Mid-Cap Value Series -11.54%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Sanford Bernstein Small-Cap Value
Series
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series 43.63%
------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series 15.56% 42.70% 52.86%
------------------------------------------------------------------------------------------------------------------------------------
Alger American Leveraged AllCap Portfolio 10.47% 18.02% 55.64% 75.59%
------------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund 19.92% 25.86%
------------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities 7.26% 2.75% 7.07% 6.16% -1.98%
II
------------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 18.71% 12.71% 12.25% 1.27% 0.89%
------------------------------------------------------------------------------------------------------------------------------------
VIP Contrafund(R) Portfolio 28.13% 22.42%
------------------------------------------------------------------------------------------------------------------------------------
VIP Growth Opportunities Portfolio 22.78% 2.73%
------------------------------------------------------------------------------------------------------------------------------------
VIP Growth Portfolio 37.44% 35.38%
------------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund Class 2 17.67% 0.01% 13.80%
------------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund Class 2 -9.49% 25.66% 6.33% 24.12% -4.57% 20.57% 16.93% 13.69% 4.63% 20.85%
------------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -30.37% -22.15% 51.18%
Class 2
------------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund Class 2 10.88% 19.28% 11.64% 7.19% 19.16%
------------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund Class 44.97% -3.85% 13.88% 22.03% 12.08% 7.53% 21.54%
2
------------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty
------------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap 30.19% -2.83% 14.72% 123.38%
------------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty
------------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap 44.59% 27.64% 7.18% 23.34%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Rates are net of the investment management fee, daily administrative fees,
and mortality and expense risk charges of the subaccounts. Percent change
doesn't include the effect of the surrender charges or the annual
administrative fees.
(2) Because Class 2 shares were not offered until May 1, 1997 (November 10,
1998 for Mutual Shares Securities), performance shown for periods prior to
that date represents the historical results of Class 1 shares. Performance
since that date reflects Class 2's higher annual fees and expenses
resulting from its Rule 12b-1 plan. Maximum annual plan expenses are
0.25%.
(3) Returns reflect the effect of any applicable management fee waivers and
reimbursements, which may increase total return.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
34
<PAGE>
Current yield for the Phoenix-Goodwin Money Market Subaccount is based upon
the income earned by the subaccount over a 7-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 excluding the annual administrative fee.
Yield calculations of the Phoenix-Goodwin Money Market Subaccount used for
illustration purposes are based on the consideration of a hypothetical contract
owner's account having a balance of exactly 1 unit at the beginning of a 7-day
period, which period will end on the date of the most recent financial
statements. The yield for the subaccount during this 7-day period will be the
change in the value of the hypothetical contract owner's account's original
unit. The following is an example of how these yield quotations are calculated:
Example:
Value of hypothetical pre-existing account with
exactly one unit at the beginning of the
period:....................................... $1.000000
Value of the same account (excluding capital
changes) at the end of the 7-day period:...... 1.000732
Calculation:
Ending account value.......................... 1.000732
Less beginning account value.................. 1.000000
Net change in account value................... 0.000732
Base period return:
(net change/beginning account value).......... 0.000732
Current yield = return x (365/7) =............... 3.81%
Effective yield = [(1 + return)(365/7)] - 1 =.... 3.89%
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(SM), 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 annuity accounts as reported by
services such as Lipper Analytical Services, Inc. ("Lipper"), CDA Investment
Technologies, Inc. ("CDA") and Morningstar, Inc. or in other various
publications. Lipper and CDA are widely recognized independent rating/ranking
services. A subaccount's performance also may 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(SM), First Boston High Yield Index and Salomon
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 FUNDS AND A COMPARISON OF THAT
PERFORMANCE TO A SECURITIES MARKET INDEX.
35
<PAGE>
APPENDIX B
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 SEC 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. 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 3% per year 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.
On the last business day of each calendar week, 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
1 full year from the date of deposit. Upon expiration of the initial 1-year
guarantee period (and each subsequent 1-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 1full
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 3% 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 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, contract owners and shareholders.
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 payments allocated to the GIA, plus interest at the rate of 3% per
year, compounded annually, plus any additional interest which Phoenix may, in
its discretion, credit to the GIA, less the sum of all applicable 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."
For 403(b) plans with loans, amounts borrowed from the GIA will be treated
as transfers to the Loan Security Account and subject to the same limitations as
applies to transfers from the GIA (see "Qualified Plans").
IN GENERAL, YOU CAN MAKE ONLY ONE TRANSFER PER YEAR FROM THE GIA. THE AMOUNT
THAT CAN BE TRANSFERRED OUT IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
CONTRACT VALUE IN THE GIA AT THE TIME OF THE TRANSFER. IF YOU ELECT THE DOLLAR
COST AVERAGING PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT OF
THE GIA OVER A MINIMUM 18-MONTH PERIOD. ALSO, THE TOTAL CONTRACT VALUE ALLOCATED
TO THE GIA MAY BE TRANSFERRED OUT OF THE GIA TO ONE OR MORE OF THE SUBACCOUNTS
OF THE ACCOUNT OVER A CONSECUTIVE FOUR-YEAR PERIOD ACCORDING TO THE FOLLOWING
ANNUALLY RENEWABLE SCHEDULE:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ONE: 25% YEAR TWO: 33% YEAR THREE: 50% YEAR FOUR: 100%
</TABLE>
36
<PAGE>
APPENDIX C
DEDUCTIONS FOR 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%
Kentucky(2)..........................................
Maine................................................ X 2.00
Nevada............................................... X 3.50
South Dakota......................................... X 1.25
West Virginia........................................ X 1.00 1.00
Wyoming.............................................. X 1.00
Commonwealth of Puerto Rico......................... X 1.00% 1.00%
</TABLE>
NOTE: The above premium tax deduction rates are as of January 1, 2000. No
premium tax deductions are made for states not listed above. However,
premium tax statutes are subject to amendment by legislative act and
to judicial and administrative interpretation, which may affect both
the above list of states and the applicable tax rates. Consequently,
we reserve 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, payment of death proceeds or Maturity Date.
(2) Effective January 1, 2000, Kentucky no longer charges Premium Tax on
variable annuities.
--------------------------------------------------------------------------------
37
<PAGE>
PART B
<PAGE>
RETIREMENT PLANNER'S EDGE FOR NEW YORK
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
One American Row MAIL OPERATIONS ("VPMO")
Hartford, Connecticut P.O. Box 8027
Boston, Massachusetts 02266-8027
PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
VARIABLE ACCUMULATION DEFERRED ANNUITY CONTRACT
STATEMENT OF ADDITIONAL INFORMATION
November 20, 2000
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus, dated November 20, 2000. You may obtain a
copy of the prospectus without charge by contacting Phoenix Home Life Mutual
Insurance Company at the above address or by calling 800.541.0171.
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
--------------------------------------------------------------------------------
PEPCO, an affiliate of Phoenix Home Life Mutual Insurance Company
("Phoenix"), offers these contracts on a continuous basis. No contracts were
sold during the fiscal years ended December 31, 1997, 1998 and 1999; therefore
PEPCO was not paid and retained $0 for sales of these contracts.
CALCULATION OF YIELD AND RETURN
--------------------------------------------------------------------------------
Yield of the Phoenix-Goodwin Money Market Subaccount. We summarize the
following information in the prospectus under the heading "Performance History."
We calculate the yield of the Phoenix-Goodwin Money Market Subaccount for a
7-day "base period" by determining the "net change in value" of a hypothetical
pre-existing account. We assume the hypothetical account had an initial balance
of one share at the beginning of the base period. We then determine what the
value of the hypothetical account would have been at the end of the 7-day base
period. The end value minus the initial value gives us the net change in value
for the hypothetical account. The net change in value can then be divided by the
initial value giving us the base period return (one week's return). To find the
equivalent annual return we multiply the base period return by 365/7. The
equivalent effective annual yield differs from the annual return because we
assume all returns are reinvested in the subaccount. We carry results to the
nearest hundredth of one percent.
The net change in value of the hypothetical account includes the daily net
investment income of the account (after expenses), but does not include realized
gains or losses or unrealized appreciation or depreciation on the underlying
fund shares.
The yield/return calculations include a mortality and expense risk charge
equal to 1.275% on an annual basis, and a daily administrative fee equal to
0.125% on an annual basis.
The Phoenix-Goodwin Money Market Subaccount return and effective yield will
vary in response to fluctuations in interest rates and in the expenses of the
subaccount.
We do not include the maximum annual administrative fee in calculating the
current return and effective yield. Should such a fee apply to your account,
current return and/or effective yield for your account could be reduced.
Example Calculation:
The following is an example of how return/yield calculations for the
Phoenix-Goodwin Money Market Subaccount are made:
Value of hypothetical pre-existing account with
exactly one Unit at the beginning of the period: $1.000000
Value of the same account (excluding capital
changes) at the end of the 7-day period:...... 1.000732
Calculation:
Ending account value.......................... 1.000732
Less beginning account value.................. 1.000000
Net change in account value................... 0.000732
Base period return:
(net change/beginning account value).......... 0.000732
Current yield = return x (365/7) =............... 3.81%
Effective yield = [(1 + return)(365/7)] - 1 =.... 3.89%
Yields and total returns may be higher or lower than in the past and there
is no assurance that any historical results will continue.
Calculation of Total Return. We summarize the following information in the
prospectus under the heading, "Performance History." Total return measures the
change in value of a subaccount investment over a stated period. We compute
total returns by finding the average annual compounded rates of return over the
1-, 5- and 10-year periods that would equate the initial amount invested to the
ending redeemable value according to a formula. The formula for total return
includes the following steps:
(1) We assume a hypothetical $1,000 initial investment in the subaccount;
(2) We determine the value the hypothetical initial investment would have were
it redeemed at the end of each period. All recurring fees and any applicable
contingent deferred sales charge are deducted. This figure is the ending
redeemable value (ERV in the formula given below);
(3) We divide this value by the initial $1,000 investment, resulting in ratio of
the ending redeemable value to the initial value for that period;
(4) To get the average annual total return we take the n(th) root of the ratio
from step (3), where n equals the number of years in that period (e.g., 1,
5, 10), and subtract one.
B-2
<PAGE>
The formula in mathematical terms is:
R = ((ERV / II)(1/n)) - 1
Where:
II = a hypothetical initial payment of $1,000
R = average annual total return for the period
n = number of years in the period
ERV = ending redeemable value of the hypothetical
$1,000 for the period [see (2) and (3) above]
We normally calculate total return for 1-year, 5-year and 10-year periods
for each subaccount. If a subaccount has not been available for at least 10
years, we will provide total returns for other relevant periods.
PERFORMANCE INFORMATION
Advertisements, sale literature and other communications may contain
information about series' or advisor's current investment strategies and
management style. An advisor may alter investment strategies and style in
response to changing market and economic conditions. A fund may wish to make
known a series' specific portfolio holdings or holdings in specific industries.
A fund may also separately illustrate the income and capital gain portions of a
series' total return. Performance might also be advertised by breaking down
returns into equity and debt components. A series may compare its equity or bond
return figure to any of a number of well-known benchmarks of market performance,
including, but not limited to:
The Dow Jones Industrial Average(SM)(1)
First Boston High Yield Index
Salomon Brothers Corporate Index
Salomon Brothers Government Bond Index
The Standard & Poor's 500 Index (S&P 500)(2)
Each subaccount may include its yield and total return in advertisements or
communications with current or prospective contract owners. Each subaccount may
also include in such advertisements, its ranking or comparison to similar mutual
funds by such organizations as:
Lipper Analytical Services
Morningstar, Inc.
Thomson Financial
A fund may also compare a series' performance to other investment or savings
vehicles (such as certificates of deposit) and may refer to results published in
such publications as:
Barrons
Business Week
Changing Times
Forbes
Fortune
Consumer Reports
Investor's Business Daily
Financial Planning
Financial Services Weekly
Financial World
Money
The New York Times
Personal Investor
Registered Representative
Stanger's Investment Adviser
The Stanger Register
U.S. News and World Report
The Wall Street Journal
A fund may also illustrate the benefits of tax deferral by comparing taxable
investments with investments through tax-deferred retirement plans.
The total return and yield may be used to compare the performance of the
subaccounts with certain commonly used standards for stock and bond market
performance. Such indexes include, but are not limited to:
The Dow Jones Industrial Average(SM)(1)
First Boston High Yield Index
Salomon Brothers Corporate Index
Salomon Brothers Government Bond Index
The S&P 500(2)
CALCULATION OF ANNUITY PAYMENTS
--------------------------------------------------------------------------------
See your prospectus in the section titled "The Annuity Period" for a
description of the annuity options and restrictions.
You may elect a payment option by written request as described in your
prospectus. If you do not elect an option, amounts held under the contract will
be applied to provide a Variable Payment Life Expectancy Annuity (Option L) on
the maturity date. You may not change your election after the first annuity
payment.
FIXED ANNUITY PAYMENTS
Fixed annuity payments are determined by the total dollar value for all
subaccounts' accumulation units and all amounts held in the GIA. For each
contract the resulting dollar value is then multiplied by the applicable annuity
purchase rate, which reflects the age (and sex for nontax-qualified plans) of
the annuitant or annuitants, for the fixed payment annuity option selected. The
guaranteed annuity payment rates 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(4)
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; an interest rate of 3-1/2% under Options B
and D. Under Options G and H the guaranteed interest rate is 3%.
It is possible that we may have more favorable (i.e., higher-paying) rates
in effect on the maturity date.
B-3
<PAGE>
VARIABLE ANNUITY PAYMENTS
Under all variable options except Option L, the first payment is based on an
assumed annual investment rate of 4-1/2%. All subsequent payments may be higher
or lower depending on investment experience of the subaccounts.
Under Options I, J, K, M and N, we determine the first payment by
multiplying the amounts held under the selected option in each subaccount by the
applicable payment option rate, which reflects the age (and sex for
nontax-qualified plans) of the annuitant or annuitants. The first payment equals
the total of such amounts determined for each subaccount. We determine future
payments under these options by multiplying the contract value in each
subaccount (Number of Annuity Units times the Annuity Unit Value) by the
applicable payment option's rate on the payment calculation date. The payment
will equal the sum of the amounts provided by each subaccount investment.
Under Option L, we determine the amount of the annual distribution by
dividing the amount of contract value held under this option on December 31 of
the previous year by the life expectancy of the annuitant or the joint life
expectancy of the annuitant and joint annuitant at that time.
Under Options I, J, M and N, the applicable options rate used to determine
the first payment amount will not be less than the rate based on the 1983 Table
A (1983 IAM)(4) projected with Projection Scale G to the year 2040, and with
continued projection thereafter, and on the assumed investment rate. Under
Option K, the rate will be based on the number of payments to be made during the
specified period and the assumed investment rate.
We deduct a daily charge for mortality and expense risks and a daily
administrative fee from contract values held in the subaccounts. See your
prospectus in the section titled "Deductions and Charges." Electing Option K
will result in a mortality risk deduction being made even though we assume no
mortality risk under that option.
EXPERTS
--------------------------------------------------------------------------------
The consolidated financial statements of Phoenix Home Life Mutual Insurance
Company as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 included in this prospectus have been so included
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
Edwin L. Kerr, Counsel, Phoenix Home Life Mutual Insurance Company, has
provided advice on certain matters relating to the federal securities and income
tax laws in connection with the contracts described in this prospectus.
(1) The Dow Jones Industrial Average(SM)(DJIA(SM)) is an unweighted(3) index of
30 industrial "blue chip" U.S. stocks. It is the oldest continuing U.S.
market index. The 30 stocks now in the DJIA(SM) are both widely-held and a
major influence in their respective industries. The average is computed in
such a way as to preserve its historical continuity and account for such
factors as stock splits and periodic changes in the components of the index.
The editors of The Wall Street Journal select the component stocks of the
DJIA(SM).
(2) The S&P 500 is a market-value weighted(3) index composed of 500 stocks
chosen for market size, liquidity, and industry group representation. It is
one of the most widely used indicators of U.S. Stock Market performance. As
of December 31, 1999 it contained 376 industrial, 41 utility, 72 financial
and 11 transportation issues. The composition of the S&P 500 changes from
time to time. Standard & Poor's Index Committee makes all decisions about
the S&P 500.
(3) Weighted and unweighted indexes: A market-value, or capitalization, weighted
index uses relative market value (share price multiplied by the number of
shares outstanding) to "weight" the influence of a stock's price on the
index. Simply put, larger companies' stock prices influence the index more
than smaller companies' stock prices. An unweighted index (such as the Dow
Jones Industrial Average(SM)) uses stock price alone to determine the index
value. A company's relative size has no bearing on its impact on the index.
(4) The Society of Actuaries developed these tables to provide payment rates for
annuities based on a set of mortality tables acceptable to most regulating
authorities.
B-4
<PAGE>
PHOENIX HOME LIFE VARIABLE
ACCUMULATION ACCOUNT
FINANCIAL STATEMENTS
THE SUBACCOUNTS BEGAN OPERATIONS AS OF THE DATE OF THIS PROSPECTUS;
THEREFORE, DATA FOR THESE SUBACCOUNTS ARE NOT YET AVAILABLE.
B-5
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
F-1
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Report of Independent Accountants ...........................................F-3
Consolidated Balance Sheet at December 31, 1999 and 1998.....................F-4
Consolidated Statement of Income, Comprehensive Income and Equity
for the Years Ended December 31, 1999, 1998 and 1997 ......................F-5
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ..........................................F-6
Notes to Consolidated Financial Statements ...........................F-7 - F-45
F-2
<PAGE>
[LOGO] PRICEWATERHOUSECOOPERS
--------------------------------------------------------------------------------
PricewaterhouseCoopers LLP
100 Pearl Street
Hartford CT 06103-4508
Telephone (860) 241 7000
Facsimile (860) 241 7590
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, comprehensive income and 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,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States of America. 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
auditing standards generally accepted in the United States of America, 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 our opinion.
/s/PRICEWATERHOUSECOOPERS LLP
February 15, 2000
F-3
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 1,990.2 $ 1,725.4
Available-for-sale debt securities, at fair value 5,506.7 5,987.5
Equity securities, at fair value 461.6 301.6
Mortgage loans 716.8 797.3
Real estate 92.0 92.0
Policy loans 2,042.6 2,008.3
Venture capital partnerships 338.1 191.2
Other invested assets 300.5 232.1
Short-term investments 133.4 186.0
------------------ -----------------
Total investments 11,581.9 11,521.4
Cash and cash equivalents 187.6 115.2
Accrued investment income 174.9 164.8
Deferred policy acquisition costs 1,306.7 1,049.9
Premiums, accounts and notes receivable 119.2 61.5
Reinsurance recoverables 18.8 18.9
Property and equipment, net 137.8 142.2
Goodwill and other intangible assets, net 593.3 477.9
Net assets of discontinued operations (Note 11) 187.6 283.8
Other assets 51.4 36.9
Separate account assets 5,923.9 4,798.9
------------------ -----------------
Total assets $ 20,283.1 $ 18,671.4
================== =================
LIABILITIES
Policy liabilities and accruals $ 11,438.0 $ 11,110.3
Notes payable 499.4 386.6
Deferred income taxes 86.3 116.1
Other liabilities 474.2 431.0
Separate account liabilities 5,923.9 4,798.9
------------------ -----------------
Total liabilities 18,421.8 16,842.9
------------------ -----------------
Contingent liabilities (Note 18)
MINORITY INTEREST IN NET ASSETS
OF CONSOLIDATED SUBSIDIARIES 100.0 91.9
------------------ -----------------
EQUITY
Retained earnings 1,731.2 1,642.3
Accumulated other comprehensive income 30.1 94.3
------------------ -----------------
Total equity 1,761.3 1,736.6
------------------ -----------------
Total liabilities and equity $ 20,283.1 $ 18,671.4
================== =================
The accompanying notes are an integral part of these statements.
</TABLE>
F-4
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(in millions)
<S> <C> <C> <C>
Revenues
Premiums $ 1,175.7 $ 1,175.8 $ 1,087.7
Insurance and investment product fees 552.7 468.6 339.7
Net investment income 960.9 861.0 722.9
Net realized investment gains 35.7 58.2 111.0
--------------- ---------------- ---------------
Total revenues 2,725.0 2,563.6 2,261.3
--------------- ---------------- ---------------
BENEFITS AND EXPENSES
Policy benefits and increase in policy liabilities 1,373.1 1,409.7 1,201.9
Policyholder dividends 360.5 351.7 343.6
Amortization of deferred policy acquisition costs 146.6 137.7 102.6
Amortization of goodwill and other intangible assets 38.0 23.1 9.4
Interest expense 32.6 25.8 24.3
Other operating expenses 512.9 427.9 359.2
--------------- ---------------- ---------------
Total benefits and expenses 2,463.7 2,375.9 2,041.0
--------------- ---------------- ---------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST 261.3 187.7 220.3
Income taxes 107.9 65.1 47.3
--------------- ---------------- ---------------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST 153.4 122.6 173.0
Minority interest in net income of consolidated subsidiaries 10.1 10.5 10.6
--------------- ---------------- ---------------
NET INCOME FROM CONTINUING OPERATIONS 143.3 112.1 162.4
DISCONTINUED OPERATIONS (NOTE 11)
Gain from operations, net of income taxes 17.6 25.0 7.3
Loss on disposal, net of income taxes (72.0)
--------------- ---------------- ---------------
NET INCOME 88.9 137.1 169.7
--------------- ---------------- ---------------
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF INCOME TAXES
Unrealized (losses) gains on securities (61.2) (46.9) 98.2
Reclassification adjustment for net realized gains
included in net income (1.5) (13.0) (30.2)
Minimum pension liability adjustment (1.5) (1.5) (2.1)
--------------- ---------------- ---------------
Total other comprehensive (loss) income (64.2) (61.4) 65.9
--------------- ---------------- ---------------
COMPREHENSIVE INCOME 24.7 75.7 235.6
--------------- ---------------- ---------------
EQUITY, BEGINNING OF YEAR 1,736.6 1,660.9 1,425.3
--------------- ---------------- ---------------
EQUITY, END OF YEAR $ 1,761.3 $ 1,736.6 $ 1,660.9
=============== ================ ===============
The accompanying notes are an integral part of these statements.
</TABLE>
F-5
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOW FROM CONTINUING OPERATIONS ACTIVITIES
Net income from continuing operations $ 143.3 $ 112.1 $ 162.4
Net (loss) income from discontinued operations (54.4) 25.0 7.3
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY CONTINUING OPERATIONS:
Net realized investment gains (35.7) (58.2) (111.0)
Amortization and depreciation 69.4 51.1 61.9
Equity in undistributed earnings of affiliates and partnerships (138.2) (44.1) (38.6)
Deferred income taxes (benefit) (14.1) .4 25.3
(Increase) in receivables (67.7) (23.8) (46.2)
Increase (decrease) in deferred policy acquisition costs 3.5 (26.9) (44.4)
Increase in policy liabilities and accruals 329.6 368.4 494.5
Increase in other assets/other liabilities, net 53.9 58.8 53.7
Other, net 2.8 1.7 7.8
----------- ---------- -----------
Net cash provided by operating activities of continuing operations 346.8 439.5 565.4
Net cash (used for) provided by operating activities of discontinued operations (105.5) 104.5 88.9
----------- ---------- -----------
CASH FLOW FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Proceeds from sales, maturities or repayments
of available-for-sale debt securities 1,702.9 1,322.4 1,082.1
Proceeds from maturities, repayments and sales of held-to-maturity debt securities 186.7 267.7 200.9
Proceeds from disposals of equity securities 163.5 45.2 51.4
Proceeds from mortgage loan maturities or repayments 124.9 200.4 164.2
Proceeds from sale of real estate and other invested assets 38.0 439.9 213.2
Proceeds from distributions of venture capital partnerships 26.7 18.6 5.7
Proceeds from sale of subsidiaries and affiliates 15.0 16.3
Purchase of available-for-sale debt securities (1,672.6) (2,400.1) (1,547.8)
Purchase of held-to-maturity debt securities (427.5) (585.4) (183.4)
Purchase of equity securities (162.4) (85.0) (88.6)
Purchase of subsidiaries (187.6) (6.6) (246.3)
Purchase of mortgage loans (25.3) (76.0) (140.8)
Purchase of real estate and other invested assets (71.4) (134.2) (50.6)
Purchase of venture capital partnerships (108.5) (67.2) (40.0)
Change in short term investments, net 52.6 855.1 23.1
Increase in policy loans (34.3) (21.5) (59.7)
Capital expenditures (20.5) (25.1) (44.4)
Other investing activities, net 1.7 (6.5) (1.8)
----------- ---------- -----------
Net cash used for investing activities of continuing operations (398.1) (242.0) (662.8)
Net cash provided by (used for) investing activities of discontinued operations 157.3 (101.5) (93.2)
----------- ---------- -----------
CASH FLOW FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (1.9) (11.1) (17.9)
Proceeds from repayment of securities sold
subject to repurchase agreements 28.4 (137.5) 137.5
Proceeds from borrowings 169.5 .1 215.4
Repayment of borrowings (56.7) (55.6) (243.3)
Dividends paid to minority shareholders in consolidated subsidiaries (4.2) (4.9) (6.9)
Other financing activities (.4) (5.7) (1.3)
----------- ---------- -----------
Net cash provided by (used for) financing activities of continuing operations 134.7 (214.7) 83.5
Net cash (used for) provided by financing activities of discontinued operations (62.7) (7.7) 4.5
----------- ---------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS 83.4 (17.2) (13.9)
NET CHANGE IN CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS (11.0) (4.7) .2
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 115.2 137.1 150.8
----------- ---------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 187.6 $ 115.2 $ 137.1
----------- ---------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 106.4 $ 44.5 $ 76.2
Interest paid on indebtedness $ 34.8 $ 32.8 $ 32.3
The accompanying notes are an integral part of these statements.
</TABLE>
F-6
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company and its subsidiaries (Phoenix)
market a wide range of insurance and investment products and services
including individual participating life insurance, term, universal and
variable life insurance, annuities, and investment advisory and mutual fund
distribution services. These products and services are managed within four
reportable segments: Life and Annuity, Investment Management, Venture
Capital and Corporate & Other. See Note 10 - "Segment Information."
Additionally, in 1999, Phoenix discontinued the operations of four of its
business units: the Life Reinsurance Operations, the Property and Casualty
Distribution Operations, the Real Estate Management Operations and the Group
Life and Health Operations. See Note 11 - "Discontinued Operations."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Phoenix and
its subsidiaries. Less than majority-owned entities in which Phoenix has
significant influence over operating and financial policies, and generally
at least a 20% ownership interest, are reported on the equity basis.
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (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 revenues 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, income taxes, contingencies and valuation
allowances for investment assets are discussed throughout the Notes to
Consolidated Financial Statements. Significant inter-company accounts and
transactions have been eliminated. Certain reclassifications have been made
to the 1998 and 1997 amounts to conform with the 1999 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, mortgage-backed and
asset-backed securities. Phoenix classifies its debt securities as either
held-to-maturity or available-for-sale investments. Debt securities
held-to-maturity consist of private placement bonds reported at amortized
cost, net of impairments, that management intends and has the ability to
hold until maturity. Debt securities available-for-sale are reported 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. Debt securities are considered impaired when a decline in value is
considered to be other than temporary.
For the mortgage-backed and asset-backed bond portion of the debt security
portfolio, Phoenix recognizes income using a constant effective yield based
on anticipated prepayments and the estimated economic life of the
securities. When actual prepayments differ significantly from anticipated
prepayments, the effective yield is recalculated to reflect actual payments
to date, and anticipated future payments and any resulting adjustment is
included in net investment income.
F-7
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Equity securities are classified as available-for-sale and are reported at
fair value, based principally on their quoted market prices, with unrealized
gains or losses included in equity. 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 Phoenix 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, all of which is held for sale, is 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:
property valuation techniques utilizing discounted cash flows at the time of
stabilization including capital expenditures and stabilization costs; sales
of comparable properties; geographic location of the property and related
market conditions; and 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.
Venture capital partnership and other partnership interests are carried at
cost adjusted for Phoenix's equity in undistributed earnings or losses since
acquisition, less allowances for other than temporary declines in value.
These earnings or losses are included in investment income. Venture capital
partnerships generally account for the underlying investments held in the
partnerships at fair value. These investments can include public and private
common and preferred stock, notes, warrants and other investments.
Investments that are publicly traded are valued at closing market prices.
Investments that are not publicly traded, which are usually subject to
restrictions on resale, are generally valued at cost or at estimated fair
value, as determined in good faith by the general partner after giving
consideration to operating results, financial conditions, recent sales
prices of issuers' securities and other pertinent information. These
valuations subject the earnings to volatility. Phoenix includes equity in
undistributed unrealized capital gains and losses on investments held in the
venture capital partnerships in net investment income.
Other invested assets include leveraged lease investments. These investments
represent the net of the estimated residual value of the lease assets,
rental receivables, and unearned and deferred income to be allocated over
the lease term. Investment income is calculated using the interest method
and is recognized only in periods in which the net investment is positive.
Realized investment gains and losses, other than those related to separate
accounts for which Phoenix 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 debt securities and equity securities classified as
available-for-sale are included as a component of equity, net of deferred
income taxes and deferred policy acquisition costs.
F-8
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
In the normal course of business, Phoenix enters into transactions involving
various types of financial instruments including debt, investments such as
debt securities, mortgage loans and equity securities, off-balance sheet
financial instruments such as investment and loan commitments, financial
guarantees, interest rate swaps, interest rate caps, interest rate floors
and swaptions. These instruments have credit risk and also may be subject to
risk of loss due to interest rate and market fluctuations.
Phoenix enters into interest rate swap agreements to reduce market risks
from changes in interest rates. Phoenix does not enter into interest rate
swap agreements for trading purposes. Under interest rate swap agreements,
Phoenix exchanges cashflows with another party, at specified intervals, for
a set length of time based on a specified notional principal amount.
Typically, one of the cash flow streams is based on a fixed interest rate
set at the inception of the contract, and the other is a variable rate that
periodically resets. Generally, no premium is paid to enter into the
contract and no payment of principal is made by either party. The amounts to
be received or paid on these swap agreements are accrued and recognized in
net investment income.
Phoenix enters into interest rate floor, interest rate cap and swaption
contracts as a hedge for its assets and liabilities against substantial
changes in interest rates. Phoenix does not enter into interest rate floor,
interest rate cap and swaption contracts for trading purposes. Interest rate
floor and interest rate cap agreements are contracts with a counterparty
which require the payment of a premium and give Phoenix the right to receive
over the maturity of the contract, the difference between the floor or cap
interest rate and a market interest rate on specified future dates based on
an underlying notional principal. Swaption contracts are options to enter
into an interest rate swap transaction on a specified future date and at a
specified price. Upon the exercise of a swaption, Phoenix would either
receive a swap agreement at the pre-specified terms or cash for the market
value of the swap. Phoenix pays the premium for these instruments on a
quarterly basis over the maturity of the contract, and recognizes these
payments in net investment income.
Phoenix enters into foreign currency swap agreements to hedge against
fluctuations in foreign currency exposure. Under these agreements, Phoenix
agrees to exchange with another party, principal and periodic interest
payments denominated in foreign currency for payments denominated in U.S.
dollars. The amounts to be received or paid on these foreign currency swap
agreements is recognized in net investment income. To reduce counterparty
credit risks and diversify counterparty exposure, Phoenix only enters into
derivative contracts with highly rated financial institutions.
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 new business, are deferred. Deferred
policy acquisition costs (DAC) 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 policies, deferred
policy acquisition costs are amortized in proportion to historical and
anticipated gross margins. Deviations from expected experience are
F-9
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
reflected in earnings in the period such deviations occur. Internal
replacements are treated as surrenders.
For universal life insurance policies and investment type contracts,
deferred policy acquisition costs are amortized in proportion to total
estimated gross profits over the expected 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.
GOODWILL AND OTHER 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. Other intangible
assets are amortized on a straight-line basis over their estimated lives.
Whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable, management reevaluates the recoverability of
the carrying value of goodwill and other 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 Phoenix. 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.
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 guaranteed rates of interest,
mortality and morbidity. 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.
F-10
<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 when due. 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 Phoenix. The
amount of policyholders' dividends to be paid is determined annually by
Phoenix'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 Phoenix's judgment as to the appropriate
level of statutory surplus to be retained. At the end of the reporting
period, Phoenix establishes a dividend liability for the pro-rata portion of
the dividends payable on the next anniversary date of each policy. Phoenix
also establishes a liability for termination dividends.
INCOME TAXES
Phoenix and its eligible affiliated companies have elected to file a
life/nonlife consolidated federal income tax return for 1999 and prior
years. 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.
As a mutual life insurance company, Phoenix is required to reduce its income
tax deduction for policyholder dividends by the differential earnings
amount, defined as the difference between the earnings rates of stock and
mutual companies applied against an adjusted base of policyholders' surplus.
RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1999, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS
No. 133". Because of the complexities associated with transactions involving
derivative instruments and their prevalent use as hedging instruments and,
because of the difficulties associated with the implementation of Statement
133, the effective date of SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" was delayed until fiscal years beginning
after June 15, 2000. SFAS No. 133, initially issued on June 15, 1998,
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it
is, the type of hedge transaction. For fair-
F-11
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
value hedge transactions in which Phoenix is hedging changes in an asset's,
liability's or firm commitment's fair value, changes in the fair value of
the derivative instrument will generally be offset in the income statement
by changes in the hedged item's fair value. For cash-flow hedge
transactions, in which Phoenix is hedging the variability of cashflows
related to a variable-rate asset, liability, or a forecasted transaction,
changes in the fair value of the derivative instrument will be reported in
other comprehensive income. The gains and losses on the derivative
instrument that are reported in other comprehensive income will be
reclassified as earnings in the period in which earnings are impacted by the
variability of the cash flows of the hedged item. The ineffective portion of
all hedges will be recognized in current period earnings.
Phoenix has not yet determined the impact that the adoption of SFAS 133 will
have on its earnings or statement of financial position.
On January 1, 1999, Phoenix adopted Statement of Position (SOP) 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 provides guidance for assessments related to
insurance activities. The adoption of SOP 97-3 did not have a material
impact on Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides
guidance for determining when an entity should capitalize or expense
external and internal costs of computer software developed or obtained for
internal use. The adoption of SOP 98-1 did not have a material impact on
Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires that start-up costs capitalized
prior to January 1, 1999 should be written off and any future start-up costs
be expenses as incurred. The adoption of SOP 98-5 did not have a material
impact on Phoenix's results from operations or financial position.
3. SIGNIFICANT TRANSACTIONS
DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units; the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. Disclosures concerning the financial impact of these
transactions are contained in Note 11 - "Discontinued Operations."
PFG HOLDINGS, INC.
On October 29, 1999, PM Holdings, a wholly-owned subsidiary of Phoenix,
purchased 100% of PFG Holdings, Inc. 8% cumulative preferred stock
convertible into a 67% interest in common stock for $5 million in cash. In
addition Phoenix has an option to purchase all the outstanding common stock
during year six at a value to 80% of the appraised value of the common stock
at that time. As of the statement date this option had not been executed.
Since Phoenix officers hold board voting control, the entity has been
consolidated with a minority interest established for outside shareholders.
The transaction resulted in goodwill of $3.8 million to be amortized over 10
years.
PFG Holdings was formed to purchase three of The Guarantee Life Companies'
operating subsidiaries: AGL Life Assurance Company, PFG Distribution Company
and Philadelphia Financial Group. These subsidiaries develop, market and
underwrite specialized private placement variable life and annuity products.
F-12
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
AGL Life Assurance Company must maintain at least $10 million of capital and
surplus to satisfy certain regulatory minimum capital requirements. PM
Holdings provided financing at the purchase date of $11 million to PFG
Holdings in order for AGL Life Assurance to meet this minimum requirement.
The debt is an 8.34% senior secured note maturing in 2009.
EMPRENDIMIENTO COMPARTIDO, S.A., (EMCO)
At January 1, 1999 PM Holdings held 9.1 million shares of EMCO, representing
a 35% ownership interest the Argentine financial services company that
provides pension management, annuities and life insurance products. On June
23, 1999, PM Holdings became the majority owner of EMCO when it purchased
13.9 million shares of common stock from the Banco del Suquia, S.A. for
$29.5 million, plus $10.0 million for a five year covenant not-to-compete.
Payment for the stock will be made in three installments: $10.0 million, 180
days from closing; $10.0 million, 360 days from closing; and $9.5 million,
540 days from closing, all subject to interest of 7.06%. The covenant was
paid at the time of closing.
In addition, EMCO purchased, for its treasury, 3.0 million shares of its
outstanding common stock held by two banks. This, in combination with the
purchase described above, increased PM Holdings ownership interest from 35%
to 100% of the then outstanding stock.
On November 12, 1999, PM Holdings sold 11.5 million shares (50% interest) of
EMCO common stock for $40.0 million generating a pre-tax gain of $11.3
million. PM Holdings received $15.0 million in cash plus a $9.0 million
two-year 8% interest bearing note, and a $16.0 million five-year 8% interest
bearing note. PM Holdings uses the equity method of accounting to account
for its remaining 50% interest in EMCO.
After the sale, the remaining excess of the purchase price over the fair
value of the acquired net tangible assets totaled $17.0 million. That
consisted of a covenant not-to-compete of $5.0 million which is being
amortized over five years and goodwill of $12.0 million which is being
amortized over ten years.
PHOENIX NEW ENGLAND TRUST
On October 29, 1999, PM Holdings indirectly acquired 100% of the common
stock of New London Trust, a banking subsidiary of Sun Life of Canada, for
$30.0 million in cash. New London Trust, renamed Phoenix New England Trust,
is a New Hampshire based federal savings bank that operates a trust division
with assets under management of approximately $1 billion. Immediately
following this acquisition, on November 1, 1999, PM Holdings sold the New
London Trust's New Hampshire retail banking operations to Lake Sunapee Bank
and Mascoma Savings Bank in New Hampshire and the Connecticut branches to
Westbank Corporation, for a total of $25.2 million in cash. No gain or loss
was recognized on this sale. PM Holdings retained the trust business and
four trust offices of New London Trust, located in New Hampshire and
Vermont.
LOMBARD INTERNATIONAL ASSURANCE, S.A.
On November 5, 1999, PM Holdings purchased 12% of the common stock of
Lombard International Assurance, S.A., a Pan-European financial services
company, for $29.1 million in cash. Lombard provides investment-linked
insurance products to high-net-worth individuals in eight European
countries. This investment is carried at cost and classified as equity
securities in the Consolidated Balance Sheet.
F-13
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
PHOENIX INVESTMENT PARTNERS, LTD.
On March 1, 1999, Phoenix Investment Partners acquired the retail mutual
fund and closed-end fund business of the New York City based Zweig Group.
Under the terms of the agreement, Phoenix Investment Partners paid $135.0
million at closing and will pay up to an additional $29.0 million over the
next three years based on revenue growth of the Zweig funds. The excess of
purchase price over the fair value of acquired net tangible assets of Zweig
totaled $136.1 million. Of this excess purchase price, $77.2 million has
been allocated to intangible assets, primarily associated with investment
management contracts, which are being amortized using the straight line
method over an average estimated useful life of approximately 12 years. The
remaining excess purchase price of $58.9 million has been classified as
goodwill and is being amortized over 40 years using the straight-line
method. The Zweig Group managed approximately $3.3 billion of assets as of
December 31,1999.
On December 3, 1998, Phoenix Investment Partners completed the sale of its
49% interest in Canadian investment firm Beutel, Goodman & Company, Ltd. for
$47.0 million. Phoenix Investment Partners received $37.0 million in cash
and a $10.0 million three-year interest bearing note. The transaction
resulted in a pre-tax gain of approximately $17.5 million.
Phoenix owns approximately 60% of the outstanding Phoenix Investment
Partners' common stock. In addition, Phoenix owns 45% of Phoenix Investment
Partners' convertible subordinated debentures which are eliminated through
consolidation.
ABERDEEN ASSET MANAGEMENT PLC
On February 18, 1999, PM Holdings purchased an additional 15.1 million
shares of the common stock of Aberdeen Asset Management for $29.4 million.
As of December 31, 1999, PM Holdings owned 21% of the outstanding common
stock of Aberdeen Asset Management, a Scottish asset management firm. The
investment is reported on the equity basis and classified as other invested
assets in the Consolidated Balance Sheet.
DIVIDEND SCALE REDUCTION
In consideration of the decline of interest rates in the financial markets,
Phoenix's Board of Directors voted in October of 1998 to adopt a reduced
dividend scale, effective for dividends payable on or after January 1, 1999.
Dividends for individual participating policies were reduced 60 basis points
in most cases, an average reduction of approximately 8%. The effect was a
decrease of approximately $15.7 million in the policyholder dividends
expense in 1998. In October 1999, Phoenix's Board of Directors voted to
maintain the dividend scale for dividends payable on or after January 1,
2000.
REAL ESTATE SALES
On December 15, 1998, Phoenix sold 47 commercial real estate properties with
a carrying value of $269.8 million, and 4 joint venture real estate
partnerships with a carrying value of $10.5 million, for approximately $309
million in cash. This transaction, along with the sale of 18 other
properties and partnerships during 1998, which had a carrying value of $36.7
million, resulted in pre-tax gains of approximately $67.5. million. As of
December 31, 1999, Phoenix had 3 commercial real estate properties remaining
with a carrying value of $42.9 million and 5 joint venture real estate
partnerships with a carrying value of $49.1 million, and both are reported
as real estate on the Consolidated Balance Sheet.
F-14
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
DEBT AND EQUITY SECURITIES
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN MILLIONS)
DEBT SECURITIES
<S> <C> <C> <C> <C>
HELD-TO-MATURITY:
State and political subdivision bonds $ 27.6 $ .4 $ (1.0) $ 27.0
Foreign government bonds 3.0 (.8) 2.2
Corporate securities 1,776.2 12.9 (95.7) 1,693.4
Mortgage-backed and asset-backed securities 285.4 1.4 (19.2) 267.6
---------- ---------- ----------- ----------
Total held-to-maturity securities 2,092.2 14.7 (116.7) 1,990.2
Less: held-to-maturity securities of discontinued operations 102.0 .7 (5.8) 96.9
---------- ---------- ----------- ----------
Total held-to-maturity securities of continuing operations 1,990.2 14.0 (110.9) 1,893.3
---------- ---------- ----------- ----------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 283.7 2.0 (6.5) 279.1
State and political subdivision bonds 495.9 4.8 (21.8) 478.9
Foreign government bonds 273.9 23.7 (4.0) 293.6
Corporate securities 2,353.2 18.6 (102.8) 2,269.0
Mortgage-backed and asset-backed securities 2,977.1 17.9 (103.3) 2,891.8
---------- ---------- ----------- ----------
Total available-for-sale securities 6,383.8 66.9 (238.3) 6,212.4
Less: available-for-sale securities of discontinued operations 725.1 7.6 (27.1) 705.6
---------- ---------- ----------- ----------
Total available-for-sale securities of continuing operations 5,658.7 59.3 (211.2) 5,506.8
---------- ---------- ----------- ----------
TOTAL DEBT SECURITIES OF CONTINUING OPERATIONS $ 7,648.9 $ 73.3 $ (322.1) $ 7,400.1
========== ========== =========== ==========
EQUITY SECURITIES $ 311.1 $ 176.6 $ (24.2)$ 463.5
Less: equity securities of discontinued operations 1.9 1.9
---------- ---------- ----------- ----------
TOTAL EQUITIY SECURITIES OF CONTINUING OPERATIONS $ 309.2 $ 176.6 $ (24.2) $ 461.6
========== ========== =========== ==========
</TABLE>
F-15
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN MILLIONS)
DEBT SECURITIES
<S> <C> <C> <C> <C>
HELD-TO-MATURITY:
State and political subdivision bonds $ 10.6 $ .6 $ (.1) $ 11.1
Foreign government bonds 3.0 (.7) 2.3
Corporate securities 1,695.8 98.9 (13.8) 1,780.9
Mortgage-backed and asset-backed securities 172.3 6.2 (.0) 178.5
------------- ------------ ------------- -------------
Total held-to-maturity securities 1,881.7 105.7 (14.7) 1,972.8
Less: held-to-maturity securities of discontinued operations 156.2 8.8 (1.2) 163.8
------------- ------------ ------------- -------------
Total held-to-maturity securities of continuing operations 1,725.4 97.0 (13.4) 1,809.0
------------- ------------ ------------- -------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 497.1 34.5 (.4) 531.1
State and political subdivision bonds 530.0 43.6 (.1) 573.5
Foreign government bonds 294.0 28.8 (18.7) 304.1
Corporate securities 1,993.7 110.5 (36.7) 2,067.6
Mortgage-backed and asset-backed securities 3,121.7 110.2 (14.6) 3,217.2
------------- ------------ ------------- -------------
Total available-for-sale securities 6,436.4 327.6 (70.5) 6,693.5
Less: available-for-sale securities of discontinued operations 679.0 34.6 (7.4) 706.1
------------- ------------ ------------- -------------
Total available-for-sale securities of continuing operations 5,757.5 293.0 (63.1) 5,987.4
------------- ------------ ------------- -------------
TOTAL DEBT SECURITIES OF CONTINUING OPERATIONS $ 7,482.9 $ 390.0 $ (76.5) $ 7,796.4
============= ============ ============= =============
EQUITY SECURITIES $ 223.9 $ 102.0 $ (21.4) $ 304.5
Less: equity securities of discontinued operations 2.9 2.9
------------- ------------ ------------- -------------
TOTAL EQUITIY SECURITIES OF CONTINUING OPERATIONS $ 221.0 $ 102.0 $ (21.4) $ 301.6
============= ============ ============= =============
</TABLE>
The sale of fixed maturities held-to-maturity relate to certain securities,
with amortized cost of $3.9 million, $19.6 million and $59.1 million, for
the years ended December 31, 1999, 1998 and 1997, respectively, which were
sold specifically due to a significant decline in the issuers' credit
quality. Net realized losses were $0.2 million, $0.8 million and $10.1
million in 1999, 1998 and 1997, respectively.
F-16
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The amortized cost and fair value of debt securities, by contractual sinking
fund payment and maturity, as of December 31, 1999 are shown below. Actual
maturity may differ from contractual maturity because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties, or Phoenix 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 MILLIONS)
<S> <C> <C> <C> <C>
Due in one year or less $ 118.2 $ 117.0 $ 43.2 $ 43.5
Due after one year through five years 583.1 564.2 534.4 532.7
Due after five years through ten years 587.6 566.5 1,146.8 1,104.6
Due after ten years 517.9 474.9 1,682.3 1,639.8
Mortgage-backed and asset-backed securities 285.4 267.6 2,977.1 2,891.8
---------------- ---------------- --------------- ----------------
Total $ 2,092.2 $ 1,990.2 $ 6,383.8 $ 6,212.4
Less: securities of discontinued operations 102.0 96.9 725.1 705.7
---------------- ---------------- --------------- ----------------
Total securities of continuing operations $ 1,990.2 $ 1,893.3 $ 5,658.7 $ 5,506.7
================ ================ =============== ================
</TABLE>
Carrying values for investments in mortgage-backed and asset-backed
securities, excluding U.S. government guaranteed investments, were as
follows:
DECEMBER 31,
1999 1998
(IN MILLIONS)
Planned amortization class $ 168.0 $ 433.7
Asset-backed 956.9 910.6
Mezzanine 194.9 280.1
Commercial 735.2 641.5
Sequential pay 1,039.0 982.6
Pass through 77.2 119.0
Other 6.0 22.0
----------- -----------
Total mortgage-backed and asset-backed securities $ 3,177.2 $ 3,389.5
=========== ===========
F-17
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
MORTGAGE LOANS AND REAL ESTATE
Phoenix'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.
Mortgage loans and real estate investments comprise the following property
types and geographic regions:
<TABLE>
<CAPTION>
MORTGAGE LOANS REAL ESTATE
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
PROPERTY TYPE:
Office buildings $ 183.9 $ 221.2 $ 30.5 $ 38.3
Retail 208.6 203.9 14.1 36.9
Apartment buildings 252.9 261.9 41.7 21.6
Industrial buildings 82.7 121.8 1.6
Other 3.0 19.1 8.9 .0
Valuation allowances (14.3) (30.6) (3.2) (6.4)
----------------- ---------------- ----------------- -----------------
Total $ 716.8 $ 797.3 $ 92.0 $ 92.0
================= ================ ================= =================
GEOGRAPHIC REGION:
Northeast $ 149.3 $ 169.4 $ 59.6 $ 47.7
Southeast 198.6 213.9
North central 164.2 176.7 .7 11.5
South central 105.1 98.9 21.2 22.7
West 114.0 169.0 13.7 16.5
Valuation allowances (14.3) (30.6) (3.2) (6.4)
----------------- ---------------- ----------------- -----------------
Total $ 716.8 $ 797.3 $ 92.0 $ 92.0
================= ================ ================= =================
</TABLE>
At December 31, 1999, scheduled mortgage loan maturities were as follows:
2000 - $92 million; 2001 - $87 million; 2002 - $32 million; 2003 - $109
million; 2004 - $38 million; 2005 - $35 million, and $338 million
thereafter. Actual maturities will differ from contractual maturities
because borrowers may have the right to prepay obligations with or without
prepayment penalties and loans may be refinanced. Phoenix refinanced $6.7
million and $2.3 million of its mortgage loans during 1999 and 1998,
respectively, based on terms which differed from those granted to new
borrowers.
The carrying value of delinquent and in process of foreclosure mortgage
loans at December 31, 1999 and 1998 is $6.0 million and $17.2 million,
respectively. There are valuation allowances of $5.4 million and $14.7
million, respectively, on these mortgages.
F-18
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
INVESTMENT VALUATION ALLOWANCES
Investment valuation allowances which have been deducted in arriving at
investment carrying values as presented in the Consolidated Balance Sheet
and changes thereto were as follows:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
JANUARY 1, ADDITIONS DEDUCTIONS DECEMBER 31,
(IN MILLIONS)
<S> <C> <C> <C> <C>
1999
Mortgage loans $ 30.6 $ 9.7 $ (26.0) $ 14.3
Real estate 6.4 .2 (3.4) 3.2
-------------------- -------------------- -------------------- --------------------
Total $ 37.0 $ 9.9 $ (29.4) $ 17.5
==================== ==================== ==================== ====================
1998
Mortgage loans $ 35.8 $ 50.6 $ (55.8) $ 30.6
Real estate 28.5 5.1 (27.2) 6.4
-------------------- -------------------- -------------------- --------------------
Total $ 64.3 $ 55.7 $ (83.0) $ 37.0
==================== ==================== ==================== ====================
1997
Mortgage loans $ 48.4 $ 6.7 $ (19.3) $ 35.8
Real estate 47.5 4.2 (23.2) 28.5
-------------------- -------------------- -------------------- --------------------
Total $ 95.9 $ 10.9 $ (42.5) $ 64.3
==================== ==================== ==================== ====================
</TABLE>
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $0.0
million and $15.6 million at December 31, 1999 and 1998, respectively. The
net carrying value of non-income producing bonds were $0.0 million and $22.3
at December 31, 1999 and 1998, respectively.
F-19
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS
Derivative instruments at December 31, are summarized below:
1999 1998
($ IN MILLIONS)
Swaptions:
Notional amount $ 1,600.0
Weighted average strike rate 5.02%
Index rate (1) 10 Yr. CMS
Fair value $ (8.2)
Interest rate floors:
Notional amount $ 1,210.0 $ 570.0
Weighted average strike rate 4.57% 4.59%
Index rate (1) 2-10 Yr. CMT/CMS 5-10 Yr. CMT
Fair value $ (7.5) $ 1.4
Interest rate swaps:
Notional amount $ 474.0 $ 424.6
Weighted average received rate 6.33% 6.27%
Weighted average paid rate 6.09% 5.82%
Fair value $ 1.5 $ 11.0
Foreign currency swaps:
Notional amount $ 8.1
Weighted average received rate 12.04%
Weighted average paid rate 10.00%
Fair value $ 0.2
Interest rate caps:
Notional amount $ 50.0 $ 50.0
Weighted average strike rate 7.95% 7.95%
Index rate (1) 10 Yr. CMT 10 Yr. CMT
Fair value $ 0.8 $ (0.1)
(1) Constant maturity treasury yields (CMT) and constant maturity swap
yields (CMS).
The increase in net investment income related to interest rate swap
contracts was $1.0 million and $2.1 million for the years ended December 31,
1999 and 1998, respectively. The decrease in net investment income related
to interest rate floor, interest rate cap and swaption contracts was $2.3
million and $0.2 million for the years ended December 31, 1999 and 1998,
respectively, representing quarterly premium payments on these instruments
which are being paid over the life of the contracts. The estimated fair
value of these instruments represent what Phoenix would have to pay or
receive if the contracts were terminated.
Phoenix is exposed to credit risk in the event of nonperformance by
counterparties to these financial instruments, but management of the Phoenix
does not expect counterparties to fail to meet their financial obligations,
given their high credit ratings. The credit exposure of these instruments is
the positive fair value at the reporting date.
Management of Phoenix considers the likelihood of any material loss on these
instruments to be remote.
F-20
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
VENTURE CAPITAL PARTNERSHIPS
Phoenix invests in venture capital limited partnerships. These partnerships
focus on early-stage ventures, primarily in the information technology and
life science industries, as well as direct equity investments in leveraged
buyouts and corporate acquisitions.
Phoenix records its equity in the earnings of the partnerships in net
investment income.
The components of net investment income due to venture capital partnerships
for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
Operating losses $ (8.9) $ (2.7) $ (2.1)
Realized gains on cash and stock distributions 84.7 23.4 31.3
Unrealized gains on investments held in the partnerships 64.1 19.0 4.5
---------------- ---------------- ----------------
Total venture capital partnership net investment income $ 139.9 $ 39.6 $ 33.7
================ ================ ================
</TABLE>
OTHER INVESTED ASSETS
Other invested assets, consisting primarily of partnership interests and equity
in unconsolidated affiliates, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN MILLIONS)
<S> <C> <C>
Transportation and equipment leases $ 82.1 $ 80.9
Affordable housing partnerships 22.2 10.8
Investment in Aberdeen Asset Management 99.1 72.3
Investment in EMCO of Argentina 13.4 10.7
Investment in other affiliates 12.4 12.7
Seed money in separate accounts 33.3 26.6
Other partnership interests 42.0 22.7
------------------ -------------------
Total other invested assets 304.4 236.7
Less: other invested assets of discontinued operations 4.0 4.6
------------------ -------------------
Total other invested assets of continuing operations $ 300.5 $ 232.1
------------------ -------------------
</TABLE>
F-21
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
Debt securities $ 641.1 $ 598.9 $ 509.7
Equity securities 8.3 6.5 4.3
Mortgage loans 66.3 83.1 85.6
Policy loans 149.0 146.5 122.6
Real estate 9.7 38.3 18.9
Leveraged leases 2.2 2.8 2.7
Venture capital partnerships 139.9 39.6 33.7
Other invested assets 2.5 1.8 2.2
Short-term investments 22.6 23.8 18.8
---------------- ---------------- ---------------
Sub-total 1,041.6 941.3 798.5
Less investment expenses 13.0 14.0 14.1
---------------- ---------------- ---------------
Net investment income 1,028.6 927.3 784.4
Less: net investment income of discontinued operations 67.7 66.3 61.5
---------------- ---------------- ---------------
Total net investment income of continuing operations $ 960.9 $ 861.0 $ 722.9
================ ================ ===============
</TABLE>
Investment income of $2.7 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1999. Phoenix 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 $36.5 million and $40.8 million at December 31,
1999 and 1998, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $4.1 million, $4.9 million and $5.3 million in 1999, 1998
and 1997, respectively. Actual interest income on these loans included in
net investment income was $3.5 million, $4.0 million and $3.8 million in
1999, 1998 and 1997, respectively.
INVESTMENT GAINS AND LOSSES
Net unrealized gains and (losses) on securities available-for-sale and
carried at fair value for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
Debt securities $ (428.5) $ (7.0) $ 112.2
Equity securities 71.8 (91.9) 74.5
Deferred policy acquisition costs 260.3 6.7 (80.6)
Deferred income taxes (33.7) (32.3) 38.1
------------------ --------------- -----------------
Net unrealized investment (losses) gains
on securities available-for-sale $ (62.7) $ (59.9) $ 68.0
================== =============== =================
</TABLE>
F-22
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Realized investment gains and losses for the year ended December 31, were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
Debt securities $ (20.4) $ (4.3) $ 19.3
Equity securities 16.6 11.9 26.3
Mortgage loans 18.5 (6.9) 3.8
Real estate 2.9 67.5 44.7
Other invested assets 18.5 (4.6) 17.3
------------------ --------------- -----------------
Net realized investment gains 36.2 63.7 111.4
Less realized from discontinued operations .4 5.4 .4
------------------ --------------- -----------------
Net realized investment gains from continuing operations $ 35.7 $ 58.2 $ 111.0
------------------ --------------- -----------------
</TABLE>
The proceeds from sales of available-for-sale debt securities and the gross
realized gains and gross realized losses on those sales for the year ended
December 31, were as follows:
1999 1998 1997
(IN MILLIONS)
Proceeds from disposals $ 1,106.9 $ 912.7 $ 821.3
Gross gains on sales $ 21.8 $ 17.4 $ 28.0
Gross losses on sales $ 39.1 $ 33.6 $ 5.3
F-23
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN MILLIONS)
<S> <C> <C>
Phoenix Investment Partners gross amounts:
Goodwill $ 384.6 $ 321.8
Investment management contracts 236.0 169.0
Non-compete covenant 5.0 5.0
Other 10.9 .5
----------------- ------------------
Totals 636.5 496.3
----------------- ------------------
Other gross amounts:
Goodwill 32.6 16.6
Intangible asset related to pension plan benefits 11.7 16.2
Other 1.2 .7
----------------- ------------------
Totals 45.5 33.5
----------------- ------------------
Total gross goodwill and other intangible assets 682.0 529.8
Accumulated amortization - Phoenix Investment Partners (79.9) (49.6)
Accumulated amortization - other (8.8) (2.3)
----------------- ------------------
Total net goodwill and other intangible assets $ 593.3 $ 477.9
================= ===================
</TABLE>
In 1999, Phoenix wrote off $2.6 million of goodwill associated with its
acquisition of Phoenix National Life Insurance Company in 1998 and $2.0
million associated with an acquisition by Phoenix New England Trust in 1999.
6. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN MILLIONS)
<S> <C> <C>
Short-term debt $ 21.6 $ 1.9
Bank borrowings, blended rate 6.7%
due in varying amounts to 2004 260.3 168.3
Notes payable 1.1
Subordinated debentures, 6% due 2015 41.4 41.4
Surplus notes , 6.95%, due 2006 175.0 175.0
--------------------- -----------------------
Total notes payable $ 499.4 $ 386.6
===================== =======================
</TABLE>
F-24
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Phoenix has several lines of credits established with major commercial
banks. The first facility has a $100 million line of credit maturing October
4, 2001. Drawdowns may be executed in domestic U.S. dollars or Eurodollars.
Domestic dollar loans bear interest at the greater of the Bank of Montreal's
prime commercial rate or the effective federal funds rate plus .5%.
Eurodollar loans bear interest at a LIBOR based rate that varies depending
on the Eurodollar Reserve Percentage. The credit agreement contains
customary financial and operating covenants. At December 31, 1999, Phoenix
had no outstanding borrowings under this agreement.
The second facility has a $100.0 million line that matures November 1, 2001.
Loans bear interest at Bank of New York's commercial prime rate or
certificate of deposit rate plus .285%. The agreement contains customary
financial and operating covenants. At December 31, 1999, Phoenix had no
outstanding borrowing under this agreement.
The third facility has (pound)20.0 million line that matures on July 1,
2001. Loans under this facility bear interest at LIBOR plus .17%. The credit
agreement contains customary financial and operating covenants. As of
December 31, 1999, Phoenix had $25.3 million outstanding under this
agreement.
The fourth facility has $200.0 million that matures August 2002. Loans under
this facility have variable rates with a choice of Certificate of Deposit,
Eurodollar or the banks' base lending rate. The credit agreement contains
customary financial and operating covenants. As of December 31, 1999,
Phoenix had $ 200.0 million outstanding under this agreement.
The fifth facility is a $175.0 million line maturing in March 2004. Loans
under this facility have variable rates with a choice of Certificate of
Deposit, Eurodollar or the banks' base lending rate. The agreement
contains customary financial and operating covenants. As of December 31,
1999 Phoenix had $35.0 million outstanding under this agreement.
In November 1996, Phoenix issued $175 million principal amount of 6.95%
surplus notes due December 1, 2006. Each payment of interest on principal of
the notes requires the prior approval of the Superintendent of Insurance of
the State of New York, and may be made only out of surplus funds which the
Superintendent determines to be available for such payment under the New
York Insurance Law. As of December 31, 1999, Phoenix had $175 million in
surplus notes outstanding.
As of December 31, 1999, Phoenix had outstanding $41.4 million principal
amount of 6% convertible subordinated debentures due 2015, issued by PXP and
held by outside third parties. PXP issued these debentures in April 1998 in
exchange for all outstanding shares of its Series A convertible exchangeable
preferred stock. Each $25.00 principal amount of these debentures is
convertible into 3.11 shares of PXP common stock at any time upon the
holder's election, and the debentures may be redeemed by PXP, in whole or in
part, at any time upon 15 days' notice beginning November 1, 2000.
Additionally, Phoenix has access to several other, smaller credit lines. The
total unused credit was $369.0 million. Interest rates ranged from 5.26% to
7.48% in 1999.
Maturities of other indebtedness are as follows: 2000 - $21.6 million; 2001
- $26.0 million; 2002 $200.0 million; 2003 - $0.0 million; 2004 - $35.0
million; 2005 and thereafter - $216.8 million.
Interest expense was $32.6 million, $25.8 million and $24.3 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
F-25
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
7. INCOME TAXES
A summary of income taxes (benefits) applicable to income before income
taxes and minority interest for the year ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
Income taxes
<S> <C> <C> <C>
Current $ 121.5 $ 61.9 $ 39.6
Deferred (13.6) 3.2 7.7
------------------ ------------------ -----------------
Total $ 107.9 $ 65.1 $ 47.3
================== ================== =================
</TABLE>
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
millions, aside from the percentages):
<TABLE>
<CAPTION>
1999 1998 1997
% % %
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $ 91.4 35 $ 65.7 35 $ 77.1 35
Dividend received deduction and
tax-exempt interest (3.0) (1) (3.3) (2) (1.7) (1)
Other, net 7.9 3 2.7 2 (15.0) (7)
-------------- ------- --------------- ------- --------------- --------
96.3 37 65.1 35 60.4 27
Differential earnings (equity tax) 11.6 4 (13.1) (6)
-------------- ------- --------------- ------- --------------- --------
Income taxes $ 107.9 41% $ 65.1 35% $ 47.3 21%
-------------- ------- --------------- ------- --------------- --------
</TABLE>
F-26
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The net deferred income tax liability represents the tax effects of
temporary differences attributable to the consolidated tax return group. The
components were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN MILLIONS)
<S> <C> <C>
Deferred policy acquisition costs $ 282.7 $ 294.9
Unearned premium/deferred revenue (135.1) (139.3)
Impairment reserves (15.6) (23.1)
Pension and other postretirement benefits (68.9) (57.7)
Investments 177.2 122.0
Future policyholder benefits (181.2) (151.2)
Other 4.7 31.6
------------------- --------------------
63.8 77.2
Net unrealized investment gains 26.6 42.3
Minimum pension liability (4.1) (3.4)
------------------- --------------------
Deferred income tax liability, net $ 86.3 $ 116.1
=================== ====================
</TABLE>
Gross deferred income tax assets totaled $405 million and $375 million at
December 31, 1999 and 1998, respectively. Gross deferred income tax
liabilities totaled $491 million and $491 million at December 31, 1999 and
1998, respectively. It is management's assessment, based on Phoenix's
earnings and projected future taxable income, that it is more likely than
not that deferred income tax assets at December 31, 1999 and 1998 will be
realized.
8. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
Phoenix has a multi-employer, 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. Phoenix also
sponsors a non-qualified supplemental defined benefit plan to provide
benefits in excess of amounts allowed pursuant to the Internal Revenue Code.
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.
F-27
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Components of net periodic pension cost for the years ended December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 11.9 $ 11.0 $ 10.3
Interest cost 24.7 23.0 22.7
Curtailments 21.6
Expected return on plan assets (28.5) (25.1) (22.1)
Amortization of net transition asset (2.4) (2.4) (2.4)
Amortization of prior service cost 1.8 1.8 1.8
Amortization of net (gain) loss (2.7) (1.2) .0
------------------- -------------------- ------------------
Net periodic benefit cost $ 26.4 $ 7.1 $ 10.3
------------------- -------------------- ------------------
</TABLE>
In 1999, Phoenix offered a special retirement program under which qualified
participants' benefits under the employee pension plan were enhanced by
adding five years to age and five years to pension plan service. Of the 320
eligible employees, 146 accepted the special retirement program. As a result
of the special retirement program, Phoenix recorded an additional pension
expense of $21.6 million for the year ended December 31, 1999.
F-28
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The aggregate change in projected benefit obligation, change in plan assets,
and funded status of the plan were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN MILLIONS)
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 353.5 $ 335.4
Service cost 11.9 11.0
Interest cost 24.7 23.0
Plan amendments 23.9
Curtailments (6.4)
Actuarial loss (4.9) 2.0
Benefit payments (19.8) (17.9)
-------------------- ---------------------
Benefit obligation at end of year $ 382.9 $ 353.5
-------------------- ---------------------
Change in plan assets
Fair value of plan assets at beginning of year $ 364.9 $ 321.6
Actual return on plan assets 79.0 58.2
Employer contributions 3.9 3.0
Benefit payments (19.8) (17.9)
-------------------- ---------------------
Fair value of plan assets at end of year $ 428.0 $ 364.9
-------------------- ---------------------
Funded status of the plan $ 45.0 $ 11.5
Unrecognized net transition asset (11.8) (14.2)
Unrecognized prior service cost 11.7 16.2
Unrecognized net gain (130.0) (76.0)
-------------------- ---------------------
Net amount recognized $ (85.1) $ (62.6)
==================== =====================
Amounts recognized in the Consolidated Balance
Sheet consist of:
Accrued benefit liability $ (108.7) $ (88.4)
Intangible asset 11.7 16.2
Accumulated other comprehensive income 11.9 9.6
-------------------- ---------------------
$ (85.1) $ (62.6)
==================== =====================
</TABLE>
At December 31, 1999 and 1998, the non-qualified plan was not funded and had
projected benefit obligations of $72.3 million and $57.2 million,
respectively. The accumulated benefit obligations as of December 31, 1999
and 1998 related to this plan were $60.1 million and $48.4 million,
respectively, and are included in other liabilities.
Phoenix recorded, as a reduction of equity, an additional minimum pension
liability of $7.7 million and $6.2 million, net of income taxes, at December
31, 1999 and 1998, respectively, representing the excess of accumulated
benefit obligations over the fair value of plan assets and accrued pension
liabilities for the non-qualified plan. Phoenix has also recorded an
intangible asset of $11.7 million and $16.2 million as of December 31, 1999
and 1998 related to the non-qualified plan.
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% and 7.0% for 1999 and 1998,
respectively. The discount rate assumption for 1999 was determined based on
a study that matched available high quality investment
F-29
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
securities with the expected timing of pension liability payments. The rate
of increase in future compensation levels used in determining the actuarial
present value of the projected benefit obligation was 4.5% and 4.0% for 1999
and 1998, respectively. The expected long-term rate of return on retirement
plan assets was 8.0% in 1999 and 1998.
The assets within the pension plan include corporate and government debt
securities, equity securities, real estate, venture capital partnerships,
and shares of mutual funds.
Phoenix also sponsors savings plans for its employees and agents that are
qualified under Internal Revenue Code Section 401(k). Employees and agents
may contribute a portion of their annual salary, subject to certain
limitations, to the plans. Phoenix 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, 1999, 1998 and 1997 were $4.0 million, $4.1
million and $3.8 million, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to Phoenix's pension plans, Phoenix 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 components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 3.3 $ 3.4 $ 3.1
Interest cost 4.6 4.6 4.4
Curtailments 5.5
Amortization of net gain (1.6) (1.2) (1.4)
------------------- -------------------- ------------------
Net periodic benefit cost $ 11.8 $ 6.8 $ 6.1
=================== ==================== ==================
</TABLE>
As a result of the special retirement program, Phoenix recorded an
additional postretirement benefit expense of $5.5 million for the year ended
December 31, 1999.
F-30
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The plan's change in projected benefit obligation, change in plan assets,
and funded status were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN MILLIONS)
<S> <C> <C>
Change in projected postretirement benefit obligation
Projected benefit obligation at beginning of year $ 70.9 $ 66.6
Service cost 3.3 3.4
Interest cost 4.6 4.6
Plan Amendments 5.8
Curtailments (.3)
Actuarial (gain) loss (8.6) .4
Benefit payments (4.5) (4.1)
-------------------- ---------------------
Projected benefit obligation at end of year 71.2 70.9
-------------------- ---------------------
Change in plan assets
Employer contributions 4.5 4.1
Benefit payments (4.5) (4.1)
-------------------- ---------------------
Fair value of plan assets at end of year -- --
-------------------- ---------------------
Funded status of the plan (71.2) (70.9)
Unrecognized net gain (33.5) (26.5)
-------------------- ---------------------
Accrued benefit liability $ (104.7) $ (97.4)
-------------------- ---------------------
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 7.0% at December 31, 1999 and 1998, respectively.
For purposes of measuring the accumulated postretirement benefit obligation
the health care costs were assumed to increase 7.5% and 8.5% in 1999 and
1998, respectively, declining thereafter until the ultimate rate of 5.5% is
reached in 2002 and remains 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 $4.3 million and the annual service and
interest cost by $0.6 million, before income taxes. Decreasing the assumed
health care cost trend rates by one percentage point in each year would
decrease the accumulated postretirement benefit obligation by $4.1 million
and the annual service and interest cost by $0.5 million, before income
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
Phoenix 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. Other
postemployment benefit expenses were $0.5 million for 1999, ($0.5) million
for 1998 and $0.4 million for 1997.
F-31
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
9. COMPREHENSIVE INCOME
The components of, and related income tax effects for, other comprehensive
income for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount $ (94.2) $ (72.3) $ 151.2
Income tax (benefit) expense (33.0) (25.4) 53.0
------------- ----------------- ----------------
Totals (61.2) (46.9) 98.2
------------- ----------------- ----------------
RECLASSIFICATION ADJUSTMENT FOR NET GAINS
REALIZED IN NET INCOME:
Before-tax amount (2.2) (20.0) (46.5)
Income tax (benefit) (.7) (7.0) (16.3)
------------- ----------------- ----------------
Totals (1.5) (13.0) (30.2)
------------- ----------------- ----------------
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount (96.5) (92.2) 104.7
Income tax (benefit) expense (33.7) (32.4) 36.7
------------- ----------------- ----------------
Totals $ (62.8) $ (59.8) $ 68.0
============= ================= ================
MINIMUM PENSION LIABILITY ADJUSTMENT:
Before-tax amount $ (2.3) $ (2.3) $ (3.2)
Income tax (benefit) (.8) (.8) (1.1)
------------- ----------------- ----------------
Totals $ (1.5) $ (1.5) $ (2.1)
============= ================= ================
</TABLE>
The following table summarizes accumulated other comprehensive income for
the years ended December 31:
<TABLE>
<CAPTION>
BALANCE AS OF DECEMBER 31,
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Balance, beginning of year $ 100.5 $ 160.4 $ 92.4
Change during period (62.7) (59.8) 68.1
------------- ----------------- ----------------
Balance, end of year 37.8 100.5 160.5
------------- ----------------- ----------------
MINIMUM PENSION LIABILITY ADJUSTMENT:
Balance, beginning of year (6.2) (4.7) (2.6)
Change during period (1.5) (1.5) (2.1)
------------- ----------------- ----------------
Balance, end of year (7.7) (6.2) (4.7)
------------- ----------------- ----------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year 94.3 155.7 89.8
Change during period (64.2) (61.5) 66.0
------------- ----------------- ----------------
Balance, end of year $ 30.1 $ 94.3 $ 155.8
============= ================= ================
</TABLE>
F-32
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix offers a wide range of financial products and services. These
businesses have been grouped into four reportable segments.
The Life and Annuity segment includes the individual life insurance and
annuity products including participating whole life, universal life,
variable life, term life and variable annuities.
The Investment Management segment includes retail and institutional mutual
fund management and distribution including managed accounts, open-end funds
and closed-end funds.
The Venture Capital segment includes the operating income and the realized
and unrealized investment gains of the Phoenix's venture capital partnership
investments.
Corporate and Other contains several smaller subsidiaries and investment
activities which do not meet the thresholds of reportable segments as
defined in SFAS No. 131. They include international operations and the
runoff of our group pension and guaranteed investment contract businesses.
The majority of Phoenix's revenue is derived in the United States. Revenue
derived from outside the United States is not material and revenue derived
from any single customer does not exceed ten percent of total consolidated
revenues.
The accounting policies of the segments are the same as those described in
Note 2 - "Summary of Significant Accounting Policies." Phoenix evaluates
segment performance on the basis of after tax operating income which
excludes the effect of net realized investment gains and losses and
nonrecurring items. Phoenix does not include certain nonrecurring items in
the segments. They are reported as unallocated items and include expenses
associated with an early retirement program and realized gains associated
with the sales of subsidiaries. We allocate capital to Investment Management
on a historical cost basis and to insurance products based on 200% of
company action level risked-based capital. We allocate net investment income
based on the assets allocated to each segment. We allocate other costs and
operating expenses to each segment based on a review of the nature of such
costs, cost allocations using time studies and other allocation
methodologies. See Note 8 - " Pension and Other Postretirement and
Postemployment Benefit Plans."
Included in the following tables is certain information with respect to
Phoenix's operating segments as of and for each of the years ended December
31, 1999, 1998 and 1997, as well as amounts not allocated to the segments
which was described previously.
F-33
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
TOTAL ASSETS:
Life and Annuity $ 18,025.7 $ 16,930.5 $ 15,711.3
Investment Management 747.4 591.9 647.9
Venture Capital 338.1 191.2 88.2
Corporate & Other 984.3 674.0 1,034.7
Discontinued operations 187.6 283.8 250.9
-------------- -------------- --------------
Total 20,283.1 18,671.4 17,733.0
-------------- -------------- --------------
DEFERRED POLICY ACQUISITION COSTS:
Life and Annuity $ 1,306.7 $ 1,049.9 $ 1,016.3
-------------- -------------- --------------
POLICY LIABILITIES AND ACCRUALS:
Life and Annuity $ 11,293.3 $ 10,952.6 $ 10,583.7
Corporate & Other 144.7 157.7 169.2
-------------- -------------- --------------
Total $ 11,438.0 $ 11,110.3 $ 10,752.9
-------------- -------------- --------------
1999 1998 1997
(IN MILLIONS)
PREMIUMS:
Life and Annuity $ 1,175.7 $ 1,175.8 $ 1,087.7
-------------- -------------- --------------
Total 1,175.7 1,175.8 1,087.7
-------------- -------------- --------------
INSURANCE AND INVESTMENT PRODUCT FEES:
Life and Annuity 281.5 251.0 174.1
Investment Management 278.4 225.3 168.0
Corporate & Other 16.5 11.9 13.9
Less: inter-segment revenues (23.7) (19.6) (16.3)
-------------- -------------- --------------
Total 552.7 468.6 339.7
-------------- -------------- --------------
NET INVESTMENT INCOME:
Life and Annuity 768.3 768.8 640.5
Investment Management 6.0 1.1 0.6
Venture Capital 139.9 39.6 33.7
Corporate & Other 36.2 42.1 39.6
Less: inter-segment revenues 10.5 9.4 8.5
-------------- -------------- --------------
Total 960.9 861.0 722.9
-------------- -------------- --------------
NET REALIZED INVESTMENT GAINS:
Life and Annuity 15.9 (17.8) 65.7
Investment Management 9.9
Corporate & Other 3.9 10.5 35.4
Gains on sale of subsidiaries 15.9 65.5
-------------- -------------- --------------
Total $ 35.7 $ 58.2 $ 111.0
-------------- -------------- --------------
</TABLE>
F-34
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
POLICY BENEFITS AND DIVIDENDS
Life and Annuity $ 1,723.6 $ 1,743.6 $ 1,522.1
Corporate & Other 10.0 17.8 23.4
-------------- -------------- --------------
Total 1,733.6 1,761.4 1,545.5
-------------- -------------- --------------
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS
Life and Annuity 146.6 137.7 102.6
-------------- -------------- --------------
Total 146.6 137.7 102.6
-------------- -------------- --------------
AMORTIZATION OF GOODWILL AND INTANGIBLES
Life and Annuity 6.7 0.8 0.2
Investment Management 30.3 22.0 9.1
Corporate & Other 1.0 0.3 0.1
-------------- -------------- --------------
Total 38.0 23.1 9.4
-------------- -------------- --------------
INTEREST EXPENSE
Investment Management 16.8 11.5 5.2
Corporate & Other 15.8 14.3 19.1
-------------- -------------- --------------
Total 32.6 25.8 24.3
-------------- -------------- --------------
OTHER OPERATING EXPENSES
Life and Annuity 276.4 256.4 219.1
Investment Management 188.0 150.4 123.3
Corporate & Other 34.6 31.3 24.6
Unallocated amounts 27.1 0.0 0.0
Less: inter-segment expenses (13.2) (10.2) (7.8)
-------------- -------------- --------------
Total 512.9 427.9 359.2
-------------- -------------- --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST
Life and Annuity 88.1 39.3 124.0
Investment Management 49.3 42.5 40.9
Venture Capital 139.9 39.6 33.7
Corporate & Other (4.8) 0.8 21.7
Unallocated amounts (11.2) 65.5 0.0
-------------- -------------- --------------
Total 261.3 187.7 220.3
-------------- -------------- --------------
INCOME TAXES
Life and Annuity 31.1 13.9 43.3
Investment Management 21.6 19.2 19.8
Venture Capital 49.0 13.9 11.8
Corporate & Other (1.4) (4.9) (14.4)
Unallocated amounts & inter-segment eliminations 7.6 23.0 (13.2)
-------------- -------------- --------------
Total 107.9 65.1 47.3
-------------- -------------- --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST
Life and Annuity 57.0 25.4 80.7
Investment Management 27.7 23.3 21.1
Venture Capital 90.9 25.7 21.9
Corporate & Other (3.4) 5.7 36.1
Unallocated amounts (18.8) 42.5 13.2
-------------- -------------- --------------
Total $ 153.4 $ 122.6 $ 173.0
-------------- -------------- --------------
</TABLE>
F-35
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
11. DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units which in prior years had been reflected as reportable business
segments: the Life Reinsurance Operations, the Property and Casualty
Distribution Operations, the Real Estate Management Operations and the Group
Life and Health Operations. The discontinuation of these business units
resulted from the sale of several operations, a signed agreement to sell one
of the operations and the implementation of plans to withdraw from the
remaining businesses.
LIFE REINSURANCE OPERATIONS
During 1999, Phoenix completed a comprehensive strategic review of its life
reinsurance segment and decided to exit these operations through a
combination of sale, reinsurance and placement of certain components into
run-off. Accordingly, Phoenix estimated sales proceeds, reinsurance premiums
and net claims run-off, resulting in the recognition of a $173 million
pre-tax loss on the disposal of life reinsurance discontinued operations.
The life reinsurance segment consisted primarily of individual life
reinsurance operations as well as group personal accident and group health
reinsurance business. The significant components of the loss on the disposal
of life reinsurance discontinued operations in 1999 were as follows:
On August 1, 1999, Phoenix sold its individual life reinsurance operations
and certain group health reinsurance business to Employers Reinsurance
Corporation for $130 million. The transaction was structured as a
reinsurance and asset sale transaction, resulting in a pre-tax gain of $113
million. The pre-tax income from operations for the seven months prior to
disposal was $19 million.
On June 30, 1999, PM Holdings sold 100% of the common stock of Financial
Administrative Services, Inc. (FAS), its third-party administration
subsidiary, to CYBERTEK, a wholly-owned subsidiary of Policy Management
Systems Corporation. Proceeds from the sale were $8.0 million for the common
stock plus $1.0 million for a covenant not-to-compete, resulting in an
pre-tax gain of $3.8 million.
Phoenix recorded a note receivable for $4.0 million, which under the terms
of the agreement, CYBERTEK will repay in six equal annual installments
commencing March 31, 2001 through March 31, 2006. The purchase price will be
determined annually based upon earnings, but in total, will range from a
minimum of $4.0 million to a maximum of $16.0 million.
During 1999, Phoenix placed the remaining group personal accident and group
health reinsurance operations into run-off. Management has adopted a formal
plan to terminate the related treaties as early as contractually permitted
and is not entering into any new contracts. Based upon the most recent
information available, Phoenix reviewed the run-off block and estimated the
amount and timing of future net premiums, claims and expenses. Consequently,
Phoenix increased reserve estimates on the run-off block by $180 million. In
addition, as part of the exit strategy, Phoenix purchased aggregate excess
of loss reinsurance to further protect Phoenix from unfavorable results in
the run-off block. The finite reinsurance is subject to an aggregate
retention of $100 million on the run-off block. Phoenix may commute the
agreement at any time after September 30, 2004, subject to automatic
commutation effective September 30, 2019. Phoenix incurred an initial
expense of $130 million.
The additional estimated reserves and finite reinsurance coverage are
expected to cover the run-off of the business; however, the nature of the
underlying risks is such that the claims may
F-36
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
take years to reach the reinsurers involved. Therefore, Phoenix expects to
pay claims out of existing estimated reserves over a number of years as the
level of business diminishes.
Additionally, certain group personal accident reinsurance business has
become the subject of disputes concerning the placement of the business with
reinsurers and the recovery of the reinsurance. This business primarily
concerns certain occupational accident reinsurance "facilities" and a
reinsurance pool (the Unicover Pool) underwritten and managed by Unicover
Managers, Inc. (Unicover). Phoenix participated as a reinsurer in the
Unicover Pool. The Unicover Pool and "facilities" were reinsured in large
part by a reinsurance facility underwritten and managed by Centaur
Underwriting Limited (Centaur) in which Phoenix also participated. Phoenix
terminated its participation in the Centaur facility effective October 1,
1998 and in the Unicover Pool effective March 1, 1999. However, claims
arising from business underwritten while Phoenix was a participant continue
to run off. On September 21, 1999, Phoenix initiated arbitration proceedings
seeking to rescind certain contracts arising from its participation in the
Centaur facility with respect to reinsurance of the Unicover business. In
January 2000, Phoenix settled two Unicover-related matters (see Note 20 -
"Subsequent Events"). A substantial portion of the risk associated with the
Unicover Pool and "facilities" and the Centaur program was further
retroceded by Phoenix to other unaffiliated insurance entities, providing
Phoenix with significant security. Certain of these retrocessionaires have
given notice that they challenge their obligations under their contracts and
are in arbitration or litigation with Phoenix.
Additionally, certain group personal accident excess of loss reinsurance
contracts created in the London market during 1994 - 1997 have become the
subject of disputes concerning the placement of the business with reinsurers
and the recovery of reinsurance. Several arbitration proceedings are
currently pending.
Given the uncertainty associated with litigation and other dispute
resolution proceedings, and the expected long term development of net claims
payments, the estimated amount of the loss on disposal of life reinsurance
discontinued operations may differ from actual results. However, it is
management's opinion, after consideration of the provisions made in these
financial statements, as described above, that future developments will not
have a material effect on Phoenix's consolidated financial position.
PROPERTY AND CASUALTY DISTRIBUTION OPERATIONS
On July 1, 1999, PM Holdings sold its property and casualty distribution
business to Hilb, Rogal and Hamilton Company (HRH) for $48.1 million
including $0.2 million for a covenant not-to-compete. Total proceeds
consisted of $32.0 million in convertible debentures, $15.9 million for
865,042 shares of HRH common stock, valued at $18.38 per share on the sale
date, and $0.2 million in cash. The pre-tax gain realized on the sale was
$40.1 million. The HRH common stock is classified as common stock and the
convertible debentures are classified as bonds in the Consolidated Balance
Sheet. As of December 31, 1999 Phoenix owns 7% of the outstanding HRH common
stock, 15% on a diluted basis.
REAL ESTATE MANAGEMENT OPERATIONS
On March 31, 1999, Phoenix sold its real estate management subsidiary,
Phoenix Realty Advisors, to Henderson Investors International Holdings, B.V.
for $7.9 million in cash. The pre-tax gain realized on this transaction was
$7.1 million.
F-37
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
GROUP LIFE AND HEALTH OPERATIONS
On December 9, 1999, Phoenix signed a definitive agreement to sell its Group
Life and Health business, including five companies, Phoenix American Life,
Phoenix Dental Services, Phoenix Group Services, California Benefits and
Clinical Disability Management, to GE Financial Assurance Holdings, Inc.
Proceeds from the sale are estimated to be $285 million, including cash of
$240 million and 3.1% of the common stock of GE Life and Annuity Assurance
Company. Phoenix expects the transaction to be completed in the second
quarter of 2000, subject to regulatory approval.
The assets and liabilities of the discontinued operations have been excluded
from the assets and liabilities of continuing operations and separately
identified on the Consolidated Balance Sheet. Net assets of the discontinued
operations totaled $187.6 million and $283.8 million as of December 31, 1999
and 1998, respectively. Asset and liability balances of the continuing
operation as of December 31, 1998, have been restated to conform with the
current year presentation. Likewise, the Consolidated Statement of Income,
Comprehensive Income and Equity has been restated for 1998 and 1997 to
exclude the operating results of discontinued operations from continuing
operations. The operating results of discontinued operations and the gain or
loss on disposal are presented below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
GAIN (LOSS) FROM OPERATIONS OF
DISCONTINUED OPERATIONS
Revenues:
Life Reinsurance Operations $ 298.7 $ 163.5
Group Life and Health Operations $ 453.8 503.8 484.0
Property and Casualty Distribution Operations 26.0 72.6 64.1
Real Estate Management Operations 1.2 12.7 15.3
--------------- ---------------- ---------------
Total revenues 481.0 887.8 726.9
--------------- ---------------- ---------------
Gain (loss) from operations:
Life Reinsurance Operations 14.1 10.6
Group Life and Health Operations 28.7 29.2 31.7
Property and Casualty Distribution Operations 1.5 2.5 (19.9)
Real Estate Management Operations (2.6) (4.0) (2.6)
--------------- ---------------- ---------------
Gain from discontinued operations before income taxes 27.6 41.8 19.8
Income taxes 10.0 16.8 12.5
--------------- ---------------- ---------------
Gain from discontinued operations, net of taxes $ 17.6 $ 25.0 $ 7.3
--------------- ---------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
(IN MILLIONS)
<S> <C>
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS
(Loss) gain on disposal:
Life Reinsurance Operations $ (173.1)
Property and Casualty Distribution Operations 40.1
Real Estate Management Operations 5.9
----------------
Loss on disposal of discontinued operations before income taxes (127.1)
Income taxes (55.1)
----------------
Loss on disposal of discontinued operations, net of income taxes $ (72.0)
----------------
</TABLE>
F-38
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
12. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by Phoenix, are stated at depreciated cost. Real
estate occupied by Phoenix was $101.7 million and $106.7 million at December
31, 1999 and 1998, respectively. Phoenix 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 $182.3 million and $161.2 million at
December 31, 1999 and 1998, respectively.
Rental expenses for operating leases, principally with respect to buildings,
amounted to $16.3 million, $16.9 million and $16.9 million in 1999, 1998,
and 1997, respectively, for continuing operations. Future minimum rental
payments under non-cancelable operating leases for continuing operations
were approximately $40.2 million as of December 31, 1999, payable as
follows: 2000 - $13.5 million; 2001 - $10.5 million; 2002 - $7.3 million;
2003 - $5.1 million; 2004 - $2.8 million; and $1.0 million thereafter.
13. 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. To the
extent that reinsuring companies may not be able to meet their obligations
under reinsurance agreements in effect, Phoenix remains liable. For direct
issues, the maximum of individual life insurance retained by Phoenix on any
one life is $8 million for single life and joint first-to-die policies and
to $10 million for joint last-to-die policies, with excess amounts ceded to
reinsurers. Phoenix reinsures 80% of the mortality risk on the inforce block
of the Confederation Life business acquired on December 31, 1997, and 90% of
the mortality risk on certain new issues of term and universal life
products. In addition, Phoenix entered into a separate reinsurance agreement
on October 1, 1998 to reinsure 80% of the mortality risk on a substantial
portion of its otherwise retained individual life insurance business. In
1999, Phoenix reinsured the mortality risk on the remaining 20% of this
business. Amounts recoverable from reinsurers are estimated in a manner
consistent with the claim liability associated with the reinsured policy.
F-39
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums $ 1,677.5 $ 1,719.4 $ 1,592.8
Reinsurance assumed 416.2 505.3 329.9
Reinsurance ceded (323.0) (371.9) (282.1)
----------------------- ----------------------- ----------------------
Net premiums 1,770.7 1,852.8 1,640.6
Less net premiums of discontinued operations (595.0) (677.0) (552.9)
----------------------- ----------------------- ----------------------
Net premiums of continuing operations $ 1,175.7 $ 1,175.8 $ 1,087.7
======================= ======================= ======================
Percentage of amount assumed to net 24% 27% 20%
======================= ======================= ======================
Direct policy and contract claims incurred $ 622.3 $ 728.1 $ 629.1
Reinsurance assumed 563.8 433.2 410.7
Reinsurance ceded (285.4) (407.8) (373.1)
----------------------- ----------------------- ----------------------
Net policy and contract claims incurred 900.7 753.5 666.7
Less net incurred claims of discontinued operations (661.7) (465.1) (422.4)
----------------------- ----------------------- ----------------------
Net policy and contract claims incurred
of continuing operations $ 239.0 $ 288.4 $ 244.3
======================= ======================= ======================
Direct life insurance in force $ 131,052.1 $ 121,442.0 $ 120,394.7
Reinsurance assumed 139,649.9 110,632.1 84,806.6
Reinsurance ceded (207,192.0) (135,818.0) (74,764.6)
----------------------- ----------------------- ----------------------
Net insurance in force 63,510.0 96,256.1 130,436.7
Less insurance in force of discontinued operations (1,619.5) (24,330.2) (13,811.4)
----------------------- ----------------------- ----------------------
Net insurance in force of continuing operations $ 61,890.5 $ 71,925.9 $ 116,625.3
======================= ======================= ======================
Percentage of amount assumed to net 220% 115% 65%
======================= ======================= ======================
</TABLE>
Irrevocable letters of credit aggregating $36.2 million at December 31, 1999
have been arranged with United States commercial banks in favor of Phoenix
to collateralize the ceded reserves.
14. PARTICIPATING LIFE INSURANCE
Participating life insurance in force was 66.9% and 72.3% of the face value
of total individual life insurance in force at December 31, 1999 and 1998,
respectively. The premiums on participating life insurance policies were
76.8%, 79.4% and 83.5% of total individual life insurance premiums in 1999,
1998, and 1997, respectively.
F-40
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
15. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
Balance at beginning of year $ 1,049.9 $ 1,016.3 $ 908.6
Acquisition cost deferred 143.1 164.6 288.3
Amortized to expense during the year (146.6) (137.7) (102.6)
Adjustment to net unrealized investment
gains (losses) included in other
comprehensive income 260.3 6.7 (78.0)
---------------- ----------------- -----------------
Balance at end of year $ 1,306.7 $ 1,049.9 $ 1,016.3
================ ================= =================
</TABLE>
Amortized to expense during the year for 1999 includes a $6.3 million
adjustment due to worse than expected persistency in one of the variable
annuity product lines and a $6.9 million adjustment to traditional life due
to an adjustment to death claims used in determining DAC amortization.
16. MINORITY INTEREST
Phoenix's interests in Phoenix Investment Partners and PFG Holdings, through
its wholly-owned subsidiary PM Holdings, are represented by ownership of
approximately 60% and 67%, respectively, of the outstanding shares of common
stock at December 31, 1999. Earnings and equity attributable to minority
shareholders are included in minority interest in the consolidated financial
statements.
17. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Other than debt securities being held-to-maturity, financial instruments
that are subject to fair value disclosure requirements (insurance contracts
are excluded) are carried in the consolidated 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 analysis which utilize current
interest rates for similar financial instruments which have comparable terms
and credit quality.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
F-41
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
DEBT SECURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
debt securities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
DERIVATIVE INSTRUMENTS
Phoenix's derivative instruments include interest rate swap, cap and floor
agreements, swaptions and foreign currency swap agreements. Fair values for
these contracts are based on current settlement values. These values are
based on brokerage quotes that utilize pricing models or formulas based upon
current assumptions for the respective agreements.
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 the Treasury rate comparable for the remaining loan
duration, plus a spread of between 130 and 800 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.
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
F-42
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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.
NOTES PAYABLE
The fair value of notes payable is determined based on contractual cash
flows discounted at market rates.
FAIR VALUE SUMMARY
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN MILLIONS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 187.6 $ 187.6 $ 115.2 $ 115.2
Short-term investments 133.4 133.4 186.0 186.0
Debt securities 7,496.9 7,400.1 7,712.9 7,796.4
Equity securities 461.6 461.6 301.6 301.6
Mortgage loans 716.8 680.6 797.3 831.9
Derivative instruments (13.2) 12.3
Policy loans 2,042.6 2,040.4 2,008.3 2,122.4
-------------------- ---------------------- --------------------- ---------------------
Total financial assets $ 11,038.9 $ 10,890.5 $ 11,121.3 $ 11,365.8
==================== ====================== ===================== =====================
Financial liabilities:
Policy liabilities $ 709.7 $ 709.4 $ 783.4 $ 783.4
Notes payable 499.4 490.8 386.6 395.7
-------------------- ---------------------- --------------------- ---------------------
Total financial liabilities $ 1,209.1 $ 1,200.2 $ 1,170.0 $ 1,179.1
==================== ====================== ===================== =====================
</TABLE>
18. CONTINGENCIES
LITIGATION
Certain group personal accident reinsurance business has become the subject
of disputes concerning the placement of the business with reinsurers and the
recovery of the reinsurance (see Note 11 - "Discontinued Operations" and
Note 20 - "Subsequent Events")
19. 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. Except for the accounting policy involving
federal income taxes described next, there were no material practices not
prescribed by the State of New York Insurance Department (the Insurance
Department), as of December 31, 1999, 1998 and 1997. Phoenix's statutory
federal income tax liability is principally based on estimates of federal
income tax due. A deferred income tax liability has also been established
for estimated taxes on unrealized gains for common stock and venture capital
equity partnerships. Current New York law does not allow the recording of
F-43
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
deferred income taxes. Phoenix has received approval from the Insurance
Department for this practice.
Statutory surplus differs from 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, surplus notes are included in surplus, rather than debt,
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 Phoenix as reported to
regulatory authorities to the net income as reported in these financial
statements for the year ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
Statutory net income $ 131.3 $ 108.7 $ 66.6
Deferred policy acquisition costs, net (28.1) 18.5 48.8
Future policy benefits (23.7) (53.8) (9.1)
Pension and postretirement expenses (8.6) (17.3) (8.0)
Investment valuation allowances 15.1 107.2 87.9
Interest maintenance reserve (7.2) 1.4 17.5
Deferred income taxes 3.9 (40.0) (36.3)
Other, net 6.2 12.4 2.3
--------------- -------------- --------------
Net income, as reported $ 88.9 $ 137.1 $ 169.7
============== ============== ==============
</TABLE>
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to equity as reported
in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN MILLIONS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $ 1,427.3 $ 1,205.6
Deferred policy acquisition costs, net 1,231.2 1,259.3
Future policy benefits (478.2) (465.3)
Pension and postretirement expenses (193.0) (174.3)
Investment valuation allowances (206.5) 34.9
Interest maintenance reserve 24.8 35.3
Deferred income taxes 65.6 (25.6)
Surplus notes (159.4) (157.5)
Other, net 49.5 24.2
-------------------- -------------------
Equity, as reported $ 1,761.3 $ 1,736.6
==================== ===================
</TABLE>
The 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
F-44
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
financial condition warrants the payment of a dividend to its policyholders.
No consideration is given by the Insurance Department to financial
statements prepared in accordance with generally accepted accounting
principles in making such determinations.
20. SUBSEQUENT EVENTS
OCCUPATIONAL ACCIDENT REINSURANCE
On January 21, 2000, Phoenix, in connection with its participation in the
Centaur facility, and two other companies completed a settlement agreement
with Reliance Insurance Company (Reliance) with respect to certain
reinsurance contracts covering occupational accident business reinsured by
Reliance as a Unicover-managed "facility." The Reliance business was the
largest portion of occupational accident reinsurance business underwritten
by Unicover. Under the terms of the settlement agreement, Phoenix ended the
contracts for a total payment of $115.0 million.
On January 13, 2000, Phoenix and four other companies, in connection with
their participation in the Unicover Pool, completed a settlement agreement
with EBI Indemnity Company and other affiliates of the Orion Group (EBI)
with respect to certain reinsurance contracts covering occupational accident
business which EBI ceded to the Unicover Pool. These contracts represented
the largest source of premium to the Unicover Pool. Under the terms of the
settlement agreement, the Unicover Pool members ended the contracts for a
total payment of $43.0 million, of which Phoenix's share was approximately
$10.0 million.
Phoenix included the cost of these settlements, net of reinsurance, in its
estimate of the loss on discontinued life reinsurance operations. See Note
11 - "Discontinued Operations."
F-45
<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
Consolidated financial information is included in Part A. The
financial statements are included in Part B.
(b) Exhibits
(1) Resolution of Board of Directors Establishing Separate
Account filed via Edgar with registrant's Post-Effective
Amendment No. 30 on November 29, 1999, Registration No.
2-78020 and is incorporated herein by reference.
(2) Rules and Regulations of Phoenix Mutual Variable
Accumulation Account filed via Edgar with Post-Effective
Amendment No. 26 on April 30, 1997, Registration No.
2-78020 is incorporated herein by reference.
(3)(a) Master Service and Distribution Compliance Agreement
between Depositor and Phoenix Equity Planning Corporation
dated December 31, 1996 and filed via Edgar with
registrant's Post-Effective Amendment No. 25 on February
28, 1997, Registration No. 2-78020 is incorporated herein
by reference.
(3)(b) Form of Dealer Agreement filed via Edgar with
registrant's Post-Effective Amendment No. 26 on April 30,
1997, Registration No. 2-78020 is incorporated herein by
reference.
(4)(a) Form of Contract (Retirement Planner's Edge).
(5)(a) Form of Application (Retirement Planner's Edge).
(6) Charter and by-laws of Phoenix Home Life Mutual Insurance
Company filed with registrant's Post-Effective Amendment
No. 18 on June 22, 1992, Registration No. 2-78020 and
filed via Edgar with Post-Effective Amendment No. 26 on
April 30, 1997, Registration No. 2-78020 are incorporated
herein by reference.
(7) Not Applicable.
(8) Not Applicable.
(9) Opinion of Edwin L. Kerr, Esq., filed via Edgar herewith.
(10)(a) Written Consent as to Legality of Securities Being
Registered of Edwin L. Kerr, Esq., filed via Edgar
herewith.
(10)(b) Written Consent of PricewaterhouseCoopers 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, Registration No.
2-78020 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, Registration No. 2-78020 and is
incorporated herein by reference.
C-1
<PAGE>
<TABLE>
<CAPTION>
ITEM 25. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEPOSITOR
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
Arthur P. Byrne Group Executive Director
Danaher Corporation
West Hartford, CT
Richard N. Cooper, Ph.D. Professor Director
Harvard University
Cambridge, MA
Gordon J. Davis, Esq. Partner Director
LeBoeuf, Lamb, Greene & MacRae
New York, NY
Robert W. Fiondella* Phoenix Home Life Mutual Director, Chairman of the
Insurance Company Board and Chief Executive
Hartford, CT Officer
John E. Haire President Director
The Fortune Group
New York, NY
Jerry J. Jasinowski President Director
National Association of Manufacturers
Washington, D.C.
John W. Johnstone Chairman Director
Goverance & Nominating Committees
Arch Chemicals, Inc.
Westport, CT
Marilyn E. LaMarche Limited Managing Director Director
Lazard Freres & Co. LLP
New York, NY
Philip R. McLoughlin*** Phoenix Home Life Director, Executive Vice
Mutual Insurance Company President, Chief Investment
Hartford, CT Officer
Indra K. Nooyi Senior Vice President Director
Pepsico, Inc.
Purchase, NY
Robert F. Vizza President & Chief Executive Officer Director
The Dematteis Center of St. Francis
Hospital
Old Brookfield, NY
Robert G. Wilson Retired, formerly Chairman & Director
Chief Executive Officer,
Ecologic Waste Services, Inc.
Miami, Florida
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITIONS WITH DEPOSITOR
---- -------------------------- ------------------------
<S> <C> <C>
Dona D. Young* Phoenix Home Life Mutual Director, President
Insurance Company
Hartford, CT
Carl T. Chadburn** Executive Vice President
Randall C. Giangiulio** Senior Vice President
Group Life & Health
Michael J. Gilotti* Senior Vice President
Edward P. Hourihan* Senior Vice President
Information Systems
Joseph E. Kelleher** Senior Vice President
Underwriting & Operations
Robert G. Lautensack, Jr.* Senior Vice President
Individual Line Financial
Maura L. Melley* Senior Vice President
Public Affairs
Charles L. Olsen**** Senior Vice President
Robert E. Primmer* Senior Vice President
Distribution & Sales
Tracy L. Rich* Senior Vice President and
General Counsel
Joel D. Sanders** Senior Vice President
Frederick W. Sawyer, III* Senior Vice President
David W. Searfoss* Executive Vice President,
Chief Financial Officer
John F. Solan, Jr.* Senior Vice President
Simon Y. Tan* Executive Vice President
Life & Annuity
Products & Operations
Walter H. Zultowski* Senior Vice President
</TABLE>
* The principal business address of this individual is One
American Row, Hartford, Connecticut.
** The principal business address of this individual is 100 Bright
Meadow Boulevard, Enfield, Connecticut.
*** The principal business address of this individual is 56 Prospect
Street, Hartford, Connecticut.
**** The principal business address of this individual is 38 Prospect
Street, Hartford, Connecticut.
ITEM 26. NOT APPLICABLE
C-3
<PAGE>
ITEM 27. NUMBER OF CONTRACTOWNERS
On April 30, 2000, there were 0 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
<TABLE>
<CAPTION>
<S> <C>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
---------------- ----------------
Michael E. Haylon** Director
Philip R. McLoughlin** Director and Chairman
William R. Moyer* Director, Executive Vice President, Chief
Financial Officer & Treasurer
Barry Mandinach** Executive Vice President, Chief Marketing Officer,
Retail Division
John F. Sharry* President, Retail Distribution
Robert R. Tousignant* Executive Vice President, Chief Sales Officer,
Retail Division
----------
</TABLE>
* 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 this individual is
56 Prospect Street, Hartford, Connecticut 06115-0480.
C-4
<PAGE>
(c) Compensation received by PEPCO during Registrant's last fiscal
year:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NAME OF NET UNDERWRITING COMPENSATION
PRINCIPAL DISCOUNTS AND ON BROKERAGE
UNDERWRITER COMMISSIONS REDEMPTION COMMISSIONS COMPENSATION
----------- ---------------- ---------- ----------- -----------
PEPCO $0 $-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
<TABLE>
<CAPTION>
<S> <C>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
---------------- ----------------
Philip R. McLoughlin*** Director
Robert E. Primmer* Director
David W. Searfoss* Director
Simon Y. Tan* Director
Dona D. Young* Director
Richard D. Keidan* President, Chief Operating Officer
Peter S. Deering** Vice President and Chief Marketing Officer
Laura E. Miller** Vice President, Chief Financial Officer and Treasurer
Michael A. Gilliland* Assistant Vice President, Compliance Officer & Assistant
Secretary
----------
</TABLE>
* The principal business address of this individual is One
American Row, Hartford, Connecticut 06102-5056.
** The principal business address of each of these
individuals is 2355 Northside Drive, Suite 260, San
Diego, California 92108.
*** The principal business address of this individual is 56
Prospect Street, Hartford, Connecticut 06115-0480.
(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.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 are maintained at the
administrative offices of Phoenix Home Life Mutual Insurance Company located at
100 Bright Meadow Boulevard, Enfield, Connecticut 06083-2200 and 101 Munson
Street, Greenfield, Massachusetts 01302-0810.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
C-5
<PAGE>
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 20th day of November, 2000.
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
20th day of November, 2000.
SIGNATURE TITLE
--------- -----
____________________________________ Director
*Sal H. Alfiero
____________________________________ Director
*J. Carter Bacot
____________________________________ Director
*Arthur P. Byrne
____________________________________ Director
*Richard N. Cooper
____________________________________ Director
*Gordon J. Davis
____________________________________ Chairman of the Board and
*Robert W. Fiondella Chief Executive Officer
(Principal Executive Officer)
____________________________________ Director
*John E. Haire
S-1
<PAGE>
SIGNATURE TITLE
--------- -----
____________________________________ Director
*Jerry J. Jasinowski
____________________________________ Director
*John W. Johnstone
____________________________________ Director
*Marilyn E. LaMarche
____________________________________ Director
*Philip R. McLoughlin
____________________________________ Director
*Indra K. Nooyi
____________________________________ Director
*Robert F. Vizza
____________________________________ Director
*Robert G. Wilson
____________________________________ Director, President
*Dona D. Young
By: /s/ Dona D. Young
-----------------
*Dona D. Young, as Attorney in Fact pursuant to Powers of Attorney.
S-2
