As filed with the Securities and Exchange Commission on September 10, 1997
REGISTRATION NO. 33-23171
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
---------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8 B-2
---------------
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
(EXACT NAME OF TRUST)
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
(NAME OF DEPOSITOR)
---------------
ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06115
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DONA D. YOUNG, ESQUIRE
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06115
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
---------------
COPIES TO:
MICHAEL BERENSON, ESQ. EDWIN L. KERR, ESQ.
JORDEN BURT BERENSON & JOHNSON LLP COUNSEL
1025 THOMAS JEFFERSON ST. N.W. PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
SUITE 400 EAST ONE AMERICAN ROW
WASHINGTON, D.C. 20007-0805 HARTFORD, CONNECTICUT 06115
---------------
Title and amount of securities being registered:
Flexible premium variable life insurance policies.
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration
Statement.
---------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has chosen to register an indefinite amount of securities being offered.
---------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
1 The VUL Account
2 Phoenix Home Life Mutual Insurance Company
3 Not Applicable
4 Sales of Policies
5 The VUL Account
6 The VUL Account
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 The Policy
11 Investments of the VUL Account
12 Investments of the VUL Account
13 Charges and Deductions; Investments of the VUL Account
14 Flexible Premiums; Allocation of Premium and Policy Value;
Right to Cancel Period
15 Allocation of Premium and Policy Value; Transfer of
Policy Value
16 Investments of the VUL Account
17 Surrenders
18 Allocation of Premium and Policy Value; Transfer of Policy
Value; Reinvestment and Redemption
19 Voting Rights; Reports
20 Not Applicable
21 Policy Loans
22 Not Applicable
23 Safekeeping of the VUL Account's Assets
24 Not Applicable
25 Phoenix Home Life Mutual Insurance Company
26 Charges and Other Deductions; Investments of the VUL Account
27 Phoenix Home Life Mutual Insurance Company
28 Phoenix Home Life Mutual Insurance Company; The Directors
and Executive Officers of Phoenix Home Life Mutual
Insurance Company
29 Not Applicable
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Phoenix Home Life Mutual Insurance Company
36 Not Applicable
37 Not Applicable
38 Sales of Policies
39 Sales of Policies
40 Not Applicable
41 Sales of Policies
42 Not Applicable
43 Not Applicable
44 Determination of Subaccount Values
45 Not Applicable
46 Determination of Subaccount Values
47 Allocation of Premium and Policy Value; Determination of
Subaccount Values
48 Not Applicable
49 Not Applicable
50 Not Applicable
<PAGE>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
51 Phoenix Home Life Mutual Insurance Company; The Policy;
Charges and Deductions
52 Investments of the VUL Account
53 Federal Tax Considerations
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Not Applicable
<PAGE>
These Policies may not yet be available in your state. For information, call
Variable Products Operations at (800) 447-4312.
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
One American Row MAIL OPERATIONS (VPMO):
Hartford, CT 06115 PO Box 8027
Boston, MA 02266-8027
VARIABLE LIFE INSURANCE POLICY
PROSPECTUS
September 16, 1997
This Prospectus describes a last survivor flexible premium variable life
insurance policy (the "Policy" or "Policies"), offered by Phoenix Home Life
Mutual Insurance Company ("Phoenix"). The Policy provides lifetime insurance
protection on the lives of two Insureds, with a death benefit payable when the
last surviving insured person dies. You may select either a fixed benefit equal
to the Face Amount of the Policy or a variable benefit which is equal to the
Face Amount plus the Policy Value. Within limits, you may reduce the Face Amount
and change the death benefit option. The Policy also may provide a Cash
Surrender Value if the Policy is surrendered during the lifetime of either
Insured.
You decide the amount and timing of premiums within limits. There are no
required premiums other than the Issue Premium. You may allocate premium
payments and Policy Value to the Guaranteed Interest Account ("GIA") and or one
or more of the Subaccounts of the Phoenix Home Life Variable Universal Life
Account (the "VUL Account"). The assets of the Subaccounts are used to purchase,
at Net Asset Value, shares of a designated underlying mutual fund (collectively,
the "Funds") in the following series of underlying VUL Account Fund options:
<TABLE>
<CAPTION>
FUNDS ADVISERS
====================================================================================================================================
THE PHOENIX EDGE SERIES FUND
<S> <C> <C>
o Money Market Series o Strategic Theme Series o Phoenix Investment Counsel, Inc.
o Growth Series o Research Enhanced Index Series o Phoenix Investment Counsel, Inc.
o Multi-Sector Fixed Income Series o Phoenix Investment Counsel, Inc.
o Strategic Allocation Series o Phoenix Investment Counsel, Inc.
o International Series o Phoenix Investment Counsel, Inc.
o Balanced Series o Phoenix Investment Counsel, Inc.
o Real Estate Securities Series o Phoenix Realty Securities, Inc.
o Aberdeen New Asia Series o Phoenix-Aberdeen International Advisors LLC
WANGER ADVISORS TRUST
o U.S. Small Cap Series o Wanger Asset Management, L.P.
o International Small Cap Series o Wanger Asset Management, L.P.
====================================================================================================================================
</TABLE>
The Policy Value allocated to the VUL Account is not guaranteed and will
vary with the investment performance of the underlying Fund. The Policy Value
allocated to the GIA will accumulate at rates we determine. The guaranteed rate
credited to the Policy Value in the GIA will, in no event, be less than 4%. The
Policy will remain in effect so long as the Policy Value or Cash Surrender Value
is sufficient to pay certain monthly charges imposed in connection with the
Policy.
The Policy has a free look period during which you may return the Policy if
you are not satisfied for any reason. (See "Right to Cancel Period.")
Ask your registered representative if replacing your existing insurance or
supplementing an existing life insurance policy with this Policy is to your
advantage.
This Prospectus is valid only if accompanied by or preceded by current
prospectuses for the Funds. This Prospectus and the prospectuses for the Funds
should be read and retained for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
Heading Page
- ---------------------------------------------------------------
VARIABLE LIFE INSURANCE POLICY ........................... 1
TABLE OF CONTENTS ........................................ 2
SPECIAL TERMS ............................................ 3
SUMMARY................................................... 4
PERFORMANCE HISTORY....................................... 5
PHOENIX AND THE VUL ACCOUNT .............................. 7
Phoenix ............................................... 7
The VUL Account ....................................... 7
The GIA................................................ 7
THE POLICY ............................................... 7
Introduction .......................................... 7
Eligible Purchasers ................................... 7
Flexible Premiums ..................................... 7
Allocation of Premium and Policy Value ................ 8
Right to Cancel Period ................................ 8
Temporary Insurance Coverage .......................... 8
Transfer of Policy Value .............................. 8
Determination of Subaccount Values .................... 9
Death Benefit ......................................... 10
Surrenders ............................................ 10
Policy Loans .......................................... 11
Lapse ................................................. 11
Additional Insurance Options .......................... 12
Additional Rider Benefits ............................. 12
INVESTMENTS OF THE VUL ACCOUNT ........................... 12
Participating Mutual Funds ............................ 12
Investment Advisers to The Phoenix Edge Series Fund.... 13
Investment Adviser to the Wanger Advisors Trust........ 13
Services of the Advisers............................... 13
Reinvestment and Redemption ........................... 13
Substitution of Investments ........................... 13
CHARGES AND DEDUCTIONS ................................... 14
Premium Sales Charge................................... 14
Monthly Deduction ..................................... 14
Premium Taxes ......................................... 15
Federal Tax Charge..................................... 15
Mortality and Expense Risk Charge ..................... 15
Investment Management Charge .......................... 15
Other Charges ......................................... 15
GENERAL PROVISIONS ....................................... 16
Postponement of Payments .............................. 16
The Contract .......................................... 16
Suicide ............................................... 16
Incontestability ...................................... 16
Change of Owner or Beneficiary ........................ 16
Assignment ............................................ 16
Misstatement of Age or Sex ............................ 16
Surplus ............................................... 16
PAYMENT OF PROCEEDS ...................................... 16
Surrender and Death Benefit Proceeds .................. 16
Payment Options ....................................... 17
FEDERAL TAX CONSIDERATIONS ............................... 17
Introduction .......................................... 17
Phoenix's Tax Status .................................. 17
Policy Benefits ....................................... 18
Business-Owned Policies................................ 18
Modified Endowment Contracts .......................... 18
Limitations on Unreasonable Mortality
and Expense Charges ................................ 19
Qualified Plans ....................................... 19
Diversification Standards ............................. 19
Change of Ownership or Insured or Assignment .......... 19
Other Taxes ........................................... 19
VOTING RIGHTS ............................................ 20
The Funds ............................................. 20
Phoenix ............................................... 20
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX 20
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS .................. 21
SALES OF POLICIES ........................................ 21
STATE REGULATION ......................................... 21
REPORTS .................................................. 22
LEGAL PROCEEDINGS ........................................ 22
LEGAL MATTERS ............................................ 22
REGISTRATION STATEMENT ................................... 22
FINANCIAL STATEMENTS ..................................... 22
APPENDIX A ............................................... 59
APPENDIX B ............................................... 60
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
2
<PAGE>
SPECIAL TERMS
- --------------------------------------------------------------------------------
As used in this Prospectus, the following terms have the indicated meanings:
ATTAINED AGE: The age of the Insured on the birthday nearest the most recent
Policy Anniversary.
BENEFICIARY: The person or persons specified by the Policyowner as entitled to
receive the death benefits under a Policy.
CASH SURRENDER VALUE: The Policy Value less any surrender charge that would
apply on the date of surrender and less any Debt.
DEATH BENEFIT GUARANTEE: An additional benefit rider available with the Policy
that guarantees a death benefit equal to the initial Face Amount or the Face
Amount as later increased or decreased, provided that Minimum Required Premiums
are paid. See "Additional Rider Benefits."
DEBT: Outstanding loans against a Policy, plus accrued interest on any
outstanding loans.
FACE AMOUNT: The initial amount of insurance coverage.
FUND(S): The Phoenix Edge Series Fund and Wanger Advisors Trust.
GENERAL ACCOUNT: The general asset account of Phoenix.
GIA (GUARANTEED INTEREST ACCOUNT): An allocation option under which amounts
deposited are guaranteed to earn a fixed rate of interest. Excess interest also
may be credited, in the sole discretion of Phoenix.
IN FORCE: Conditions under which the coverage under a Policy is in effect and
the Insureds' lives remain insured.
INSUREDS: The two persons on whose lives the Policy is issued.
ISSUE PREMIUM: The premium payment made in connection with the issue of the
Policy.
MINIMUM REQUIRED PREMIUM: The required premium as specified in the Policy. An
increase or decrease in the Face Amount of the Policy will change the Minimum
Required Premium amount.
MONTHLY CALCULATION DAY: The first Monthly Calculation Day is the same day as
the Policy Date. Subsequent Monthly Calculation Days are the same day of each
month thereafter or, if such day does not fall within a given month, the last
day of that month will be the Monthly Calculation Day.
NET ASSET VALUE: The worth of one share of a Series of a Fund at the end of a
valuation period. Net Asset Value is computed by adding the value of all a
Series' holdings plus other assets, minus liabilities and then dividing the
result by the number of shares outstanding.
OWNER (POLICYOWNER, YOU, YOUR): The person(s) who purchase(s) a Policy.
PAYMENT DATE: The Valuation Date on which a premium payment or loan repayment is
received at Phoenix, unless it is received after the close of the New York Stock
Exchange ("NYSE"), in which case it will be the next Valuation Date.
PLANNED ANNUAL PREMIUM: The premium amount that the Policyowner agrees to pay
each Policy Year. It must be at least equal to the minimum premium required for
the Face Amount of insurance selected and must be no greater than the maximum
premium allowed for the Face Amount selected.
POLICY ANNIVERSARY: Each anniversary of the Policy Date.
POLICY DATE: The Policy Date as shown on the Schedule Page of the Policy. It is
the date from which Policy Years and Policy Anniversaries are measured.
POLICY MONTH: The period from one Monthly Calculation Day up to, but not
including, the next Monthly Calculation Day.
POLICY VALUE: The sum of a Policy's share in the values of each Subaccount of
the VUL Account plus the Policy's share in the values of the GIA.
POLICY YEAR: The first Policy Year is the one-year period from the Policy Date
up to, but not including, the first Policy Anniversary. Each succeeding Policy
Year is the one-year period from the Policy Anniversary up to, but not
including, the next Policy Anniversary.
PROPORTIONATE (PRO RATA): Amounts allocated to Subaccounts on a pro rata basis
are allocated by increasing (or decreasing) a Policy's share in the value of the
affected Subaccounts and GIA so that such shares maintain the same ratio to each
other before and after the allocation.
SERIES: A separate investment portfolio of the Fund.
SUBACCOUNTS: Accounts within the VUL Account to which non-loaned assets under a
Policy are allocated.
UNIT: A standard of measurement used in determining the value of a Policy. The
value of a Unit for each Subaccount will reflect the investment performance of
that Subaccount and will vary in dollar amount.
VALUATION DATE: For any Subaccount, each date on which the net asset value of
the Fund is determined.
VALUATION PERIOD: For any Subaccount, the period in days from the end of one
Valuation Date through the next.
VPMO: The Phoenix Variable Products Mail Operations division that receives and
processes incoming mail for Variable Products Operations.
VPO: Variable Products Operations.
VUL ACCOUNT (ACCOUNT): Phoenix Home Life Variable Universal Life Account.
WE (OUR, US, COMPANY, PHOENIX): Phoenix Home Life Mutual Insurance Company,
Hartford, Connecticut.
3
<PAGE>
SUMMARY
- --------------------------------------------------------------------------------
The following summary of Prospectus information of the Policy should be read
in conjunction with the detailed information appearing elsewhere in this
Prospectus. (See Table of Contents and Special Terms.)
INVESTMENT FEATURES
FLEXIBLE PREMIUMS
You select a payment plan but are not required to pay premiums according to
the plan. You can vary the amount and frequency of your premium payments, within
limits. Other than the Issue Premium, there are no scheduled or required premium
payments. (However, under certain conditions, additional premiums may be
required to keep a Policy In Force.) See "Flexible Premiums."
ALLOCATION OF PREMIUMS AND POLICY VALUE
After certain charges are deducted from your premium payment, the balance
will be invested in one or more of the Subaccounts of the VUL Account and/or the
GIA. The assets of the Subaccounts are used to purchase, at Net Asset Value,
shares of a designated Fund. You also may change your allocation to the various
investment options by changing your allocation percentages or by making
transfers among the Subaccounts of the VUL Account and the GIA.
IN GENERAL, YOU CAN ONLY MAKE ONE TRANSFER PER YEAR FROM THE GIA. THE AMOUNT
THAT CAN BE TRANSFERRED OUT IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
POLICY VALUE IN THE GIA AS OF THE DATE OF THE TRANSFER. IF YOU ELECT THE
SYSTEMATIC TRANSFER PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT
OF THE GIA. ALSO, THE TOTAL POLICY VALUE ALLOCATED TO THE GIA MAY BE TRANSFERRED
OUT OF THE GIA TO ONE OR MORE OF THE SUBACCOUNTS OF THE VUL ACCOUNT OVER A
CONSECUTIVE FOUR-YEAR PERIOD ACCORDING TO THE FOLLOWING SCHEDULE:
YEAR ONE: 25% YEAR TWO: 33.3%
YEAR THREE: 50% YEAR FOUR: 100%
Transfers into the GIA and among the Subaccounts of the VUL Account may be
made at any time. Transfers from the GIA are subject to the rules discussed in
"Appendix A" and under "Transfer of Policy Value."
The Policy Value allocated to the VUL Account is not guaranteed and will
vary with the investment performance of the underlying Fund. The Policy Value
allocated to the GIA will depend on deductions taken from the GIA and accumulate
at rates we determine (4% minimum).
REDEMPTIONS
o Generally, loans may be taken against 90% of the Policy's Cash Surrender
Value subject to certain conditions, at a net interest rate of 2%,
declining to 1% after the first 10 Policy Years and .50% after Policy Year
15. Loan interest accrues daily at a rate determined annually and is
payable in arrears. See "Policy Loans."
o Partial surrenders may be taken at any time, provided there is
sufficient Cash Surrender Value remaining. An administrative
transaction charge of the lesser of $25 or 2% of the partial
surrender amount will apply.
o You may fully surrender this Policy at any time for its Cash
Surrender Value (Policy Value less any applicable surrender
charge and any loan and accrued interest). See "Surrenders."
INSURANCE PROTECTION FEATURES
DEATH BENEFITS
o Both a fixed and variable benefit is available under the Policy. The fixed
benefit is equal to the Policy's Face Amount (Option A), and the variable
benefit equals the Face Amount plus the Policy Value (Option B).
o After the first year, you may reduce the Face Amount, within limits.
Generally, the minimum Face Amount is $250,000.
o The death benefit is payable when the last surviving insured
person dies while the Policy is in effect. See "Death Benefit."
DEATH BENEFIT GUARANTEE
You may elect a guaranteed death benefit. The amount of the guaranteed death
benefit is equal to the initial Face Amount provided that certain minimum
payments are paid. The death benefit guarantee may not be available in some
jurisdictions. You should check with your registered representative to determine
if the minimum guaranteed death benefit is available in your state.
DEATH BENEFIT AT ENDOWMENT
After age 100 of the younger Insured, the death benefit equals the Policy
Value, and no further monthly deductions will be made. This allows you to keep
the Policy in force until the second death (if desired).
ADDITIONAL BENEFITS
The following additional benefits are available by rider: Disability
Benefit, Four Year Survivorship Term, Conditional Exchange Option and Policy
Split Option. Rider availability is subject to state approval.
DEDUCTIONS AND CHARGES
FROM PREMIUM PAYMENTS
o A 2.25% charge will be imposed on premiums for state premium taxes and
1.50% assessed against premiums for federal taxes. See "Premium Taxes."
o Premium Sales Charge in the first Policy Year is equal to 20% of premiums
paid up to one target annual premium ("TAP") and 5% of premiums paid in
excess of the TAP. The Premium Sales Charge in Policy Years 2 through 10
is equal to 5% of premiums, declining to 0% after the 10th Policy Year.
See "Deductions and Charges" for a detailed discussion, including an
explanation of target annual premium.
FROM POLICY VALUE
o An issue expense charge of $600 is assessed in the first Policy Year only,
payable in monthly installments of $50.
o In Policy Years 1 through 10 only, a monthly administrative charge of $20
per month for policies with Face Amounts of less than or equal to
$400,000; $0.50 per $1,000 for Face Amounts of $400,001 up to $1,600,000
and $80 per month for Face Amounts greater than $1,600,000.
4
<PAGE>
o A monthly cost of insurance charge will be assessed and, where applicable,
a monthly charge for any additional rider benefits.
o A transaction charge may be imposed for partial withdrawals
and certain transfers.
o A Surrender Charge will apply if the Policy is surrendered within the
first 10 Policy Years. See "Surrender Charge."
o After the first 10 Policy Years there will be a monthly guaranteed minimum
death benefit charge equal to $0.01 per $1,000 of Face Amount for Policies
issued with a Guaranteed Death Benefit rider.
FROM THE VUL ACCOUNT
A charge for certain mortality and expense risks of .80% annually for Policy
Years 1 through 15 declining to .25% in Policy Year 16 and thereafter.
FROM THE FUND
The assets of the VUL Account are used to purchase, at Net Asset Value,
shares of a designated underlying Fund. This Net Asset Value reflects investment
management fees and other direct expenses. See "Investment Management Charge."
VARIATIONS
Phoenix is subject to laws and regulations in every state in which the
Policy is sold. As a result, the terms of the Policy may vary from state to
state.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
You have the right to examine the Policy. If you are not satisfied with it,
you may cancel the Policy within 10 days (or longer in some states), after you
receive the Policy, or 10 days after we mail or deliver a written notice telling
you about your right to cancel or within 45 days of completing the application,
whichever is latest. See "Right to Cancel Period."
LAPSE
The Policy will remain in effect so long as the Policy Value or Cash
Surrender Value is sufficient to pay certain monthly charges imposed in
connection with the Policy. You will be notified of an impending lapse situation
and be given the opportunity to maintain the Policy In Force by paying the
amount specified in the notice.
TAX EFFECTS
Generally, under current federal income tax law, death benefits are not
subject to income tax and Policy Value earnings are not subject to income tax
until there is a distribution from the Policy. Loans, partial surrenders or
Policy termination may result in recognition of income for tax purposes.
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
From time to time, the VUL 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. THESE RATES OF RETURN ARE NOT AN
ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE. THEY DO NOT ILLUSTRATE HOW ACTUAL
PERFORMANCE WILL AFFECT THE BENEFITS UNDER A POLICY BECAUSE THEY DO NOT REFLECT
COST OF INSURANCE, PREMIUM TAX CHARGES, PREMIUM SALES CHARGES AND SURRENDER
CHARGES, IF APPLICABLE. FOR THIS INFORMATION SEE APPENDIX B "ILLUSTRATIONS OF
DEATH BENEFITS, POLICY VALUES AND CASH SURRENDER VALUES." Performance
information may be expressed as yield and effective yield of the Money Market
Subaccount, as yield of the Multi-Sector Subaccount and as total return of any
Subaccount. Current yield for the Money Market Subaccount will be based on the
income earned by the Subaccount over a given seven-day period (less a
hypothetical charge reflecting deductions for expenses taken during the period)
and then annualized, i.e., the income earned in the period is assumed to be
earned every seven days over a 52-week period and is stated in terms of an
annual percentage return on the investment. Effective yield is calculated
similarly but reflects the compounding effect of earnings on reinvested
dividends. Yield and effective yield reflect the recurring charges on the VUL
Account level including the monthly administrative charge.
Yield calculations of the Money Market Subaccount used for illustration
purposes are based on the consideration of a hypothetical participant's account
having a balance of exactly one Unit at the beginning of a seven-day period,
which period will end on the date of the most recent financial statements. The
yield for the Subaccount during this seven-day period will be the change in the
value of the hypothetical participant's account's original Unit. The following
is an example of this yield calculation for the Money Market Subaccount based on
a seven-day period ending December 31, 1996.
Example:
Assumptions:
Value of hypothetical pre-existing account with exactly one unit
at the beginning of the period:.............................. 1.379843
Value of the same account (excluding capital changes) at the
end of the seven-day period:.................................. 1.380945
Calculation:
Ending account value ......................................... 1.380945
Less beginning account value ................................. 1.379843
Net change in account value .................................. 0.001102
Base period return:
(adjusted change/beginning account value) .................... 0.000799
Current yield = return x (365/7) = ............................. 4.16%
Effective yield = [(1 + return)365/7] - 1 = .................... 4.25%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time, or other investment companies, due to charges which
will be deducted on the VUL Account level.
For the Multi-Sector Subaccount, quotations of yield will be based on all
investment income per unit earned during a given 30-day period (including
dividends and interest), less expenses accrued during the period ("net
investment income"), and are computed by dividing net investment income by the
maximum offering price per unit on the last day of the period.
When a Subaccount advertises its total return, it usually will be calculated
for one year, five years, and ten years or since inception if the Subaccount has
not been in existence for at least ten years. Total return is measured by
comparing the value of a hypothetical $10,000 investment in the Subaccount at
the beginning of the relevant period
5
<PAGE>
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
applicable Policy charges except for the cost of insurance, premium tax charges,
premium sales charges and any surrender charges.
For those Subaccounts within the VUL Account that have not been available
for one of the quoted periods, the standardized average annual total return
quotations will show the investment performance such Subaccount would have
achieved (reduced by the applicable charges) had it been available to invest in
shares of the Fund for the period quoted.
Below are quotations of average annual total return of Series
of the Phoenix Edge Series Fund. POLICY CHARGES (INCLUDING COST OF INSURANCE,
PREMIUM TAX CHARGES, PREMIUM SALES CHARGES AND SURRENDER CHARGES) ARE NOT
REFLECTED.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED 6/30/97
----------------------------
COMMENCEMENT LIFE OF
SERIES DATE 1 YEAR 5 YEARS 10 YEARS FUND
- ------ ---- ------ ------- -------- ----
Multi-Sector.... 1/1/83 13.34% 9.84% 9.02% 10.05%
Balanced........ 5/1/92 16.55% 10.47% N/A 10.25%
Allocation...... 9/17/84 13.82% 10.12% 9.50% 11.93%
Growth.......... 1/1/83 15.24% 16.12% 13.84% 17.46%
International... 5/1/90 17.56% 11.83% N/A 8.87%
Money Market.... 10/10/82 4.03% 3.39% 4.85% 5.57%
Real Estate..... 5/1/95 33.19% N/A N/A 26.10%
Theme........... 1/29/96 6.84% N/A N/A 10.61%
Asia............ 9/17/96 N/A N/A N/A 0.98%
U.S. Small Cap.. 5/1/95 23.25% N/A N/A 34.01%
Int'l. Small Cap 5/1/95 13.04% N/A N/A 35.40%
ANNUAL TOTAL RETURN*
--------------------
MULTI- ALLO- INTER- MONEY
YEAR SECTOR BALANCED CATION GROWTH NATIONAL MARKET
- ---- ------ -------- ------ ------ -------- ------
1983.... 5.16% N/A N/A 31.84% N/A 7.51%
1984.... 10.45% N/A (1.31%) 9.79% N/A 9.34%
1985.... 19.65% N/A 26.33% 33.85% N/A 7.17%
1986.... 18.34% N/A 14.77% 19.51% N/A 5.66%
1987.... 0.28% N/A 11.66% 6.08% N/A 5.67%
1988.... 9.61% N/A 1.53% 3.09% N/A 6.60%
1989.... 6.92% N/A 18.53% 34.53% N/A 8.03%
1990.... 4.54% N/A 5.15% 3.32% (8.59%) 7.51%
1991.... 18.66% N/A 28.27% 41.60% 18.79% 5.14%
1992.... 9.23% 9.06% 9.79% 9.41% (13.52%) 2.75%
1993.... 14.99% 7.75% 10.12% 18.75% 37.33% 2.06%
1994.... (6.21%) (3.61%) (2.19%) 0.66% (0.73%) 3.01%
1995.... 22.56% 22.37% 17.27% 29.85% 8.72% 4.86%
1996.... 11.52% 9.68% 8.18% 11.69% 17.71% 4.19%
REAL U.S. INT'L.
YEAR ESTATE THEME ASIA SMALL CAP SMALL CAP
- ---- ------ ----- ---- --------- ---------
1995.... 17.19% N/A N/A 16.01% 33.96%
1996.... 32.06% 9.55% (0.06%) 45.64% 31.15%
*Sales Charges have not been deducted from the Annual Total Return.
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
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"), Dow Jones
Industrial Average, First Boston High Yield Index and Solomon Brothers Corporate
and Government Bond Indices.
The VUL Account may, from time to time, include in advertisements containing
total return the ranking of those performance figures relative to such figures
for groups of Subaccounts having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc.
Additionally, the Funds may compare a Series performance results to other
investment or savings vehicles (such as certificates of deposit) and may refer
to results published in various publications such as Changing Times, Forbes,
Fortune, Money, Barrons, Business Week, Investor's Daily, The Stanger Register,
Stanger's Investment Adviser, The Wall Street Journal, The New York Times,
Consumer Reports, Registered Representative, Financial Planning, Financial
Services Weekly, Financial World, U.S. News and World Report, Standard & Poor's,
The Outlook and Personal Investor. The Funds may, from time to time, illustrate
the benefits of tax deferral by comparing taxable investments to investments
made through tax-deferred retirement plans. The total return also may be used to
compare the performance of a Series against certain widely acknowledged outside
standards or indices for stock and bond market performance, such as the S&P
500, Dow Jones Industrial Average, Europe Australia Far East Index (EAFE),
Consumers Price Index, Shearson Lehman Corporate Index and Shearson Lehman
T-Bond Index. The S&P 500 is a commonly quoted market value-weighted and
unmanaged index showing the changes in the aggregate market value of 500 common
stocks relative to the base period 1940-43. The S&P 500 is composed almost
entirely of common stocks of companies listed on the NYSE, although the common
stocks of a few companies listed on the American Stock Exchange or traded over
the counter are included. The 500 companies represented include 400 industrial,
60 transportation and 40 financial services concerns. The S&P 500 represents
about 70-80% of the market value of all issues traded on the NYSE.
The Funds' Annual Reports, available upon request and without charge,
contain a discussion of the performance of the Funds and a comparison of that
performance to a securities market index.
6
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PHOENIX AND THE VUL ACCOUNT
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PHOENIX
Phoenix is a mutual life insurance company originally chartered in
Connecticut in 1851. It was redomiciled to New York in 1992. Its executive
office is located at One American Row, Hartford, Connecticut 06115, and its main
administrative office is located at 100 Bright Meadow Boulevard, Enfield,
Connecticut 06083-1900. Its New York principal office is located at 10 Krey
Boulevard, Rennsselaer, New York 12144. Phoenix is the nation's 13th largest
mutual life insurance company and has admitted assets of approximately $13.2
billion. Phoenix sells insurance policies and annuity contracts through its own
field force of full time agents and through brokers. Its operations are
conducted in all 50 states, the District of Columbia, Canada and Puerto Rico.
THE VUL ACCOUNT
The VUL Account is a separate account of Phoenix formed on June 17, 1985 and
governed under the laws of New York. It is registered as a unit investment trust
under the Investment Company Act of 1940 ("1940 Act"), as amended, and it meets
the definition of a "separate account" under the 1940 Act. Such registration
does not involve supervision of the management of the VUL Account or Phoenix
by the Securities and Exchange Commission ("SEC").
The VUL Account is divided into Subaccounts, each of which is available for
allocation of Policy Value. If in the future Phoenix determines that marketing
needs and investment conditions warrant, Phoenix may establish additional
Subaccounts, which will be made available to existing Policyowners to the extent
and on a basis determined by Phoenix. Each Subaccount will invest solely in
shares of a corresponding series of a mutual fund, each Series having the
specified investment objective set forth under "Investments of the VUL
Account--Participating Mutual Funds."
Phoenix does not guarantee the investment performance of the VUL Account or
any of its Subaccounts. The Policy Value allocated to the VUL Account depends on
the investment performance of the chosen Fund. Thus, the Policyowner bears the
full investment risk for all monies invested in the VUL Account.
The VUL Account is administered and accounted for as part of the general
business of Phoenix, but the income, gains or losses of the VUL Account are
credited to or charged against the assets held in the VUL Account, without
regard to other income, gains or losses of any other business Phoenix may
conduct. Under New York law, the assets of the VUL Account are not chargeable
with liabilities arising out of any other business Phoenix may conduct.
Nevertheless all obligations arising under the Policy are general corporate
obligations of Phoenix.
THE GIA
The GIA is not part of the VUL Account. It is accounted for as part of the
General Account. Phoenix reserves the right to limit cumulative deposits,
including transfers, to the unloaned portion of the GIA to no more than $250,000
during any one-week period. Phoenix will credit interest daily on the amounts
allocated under the Policy to the GIA. The credited rate will be uniform by
class. The loaned portion of the GIA will be credited interest at an effective
annual fixed rate of 2% (4% in New York). Interest on the unloaned portion of
the GIA will be credited at an effective annual rate of not less than 4%.
Bi-weekly, Phoenix sets the interest rate that will apply to any net premium
or transferred amounts deposited to the unloaned portion of the GIA. That rate
will remain in effect for such deposits for an initial guarantee period of one
full year from the date of deposit. Upon expiration of the initial one-year
guarantee period (and each subsequent one-year guarantee period thereafter), the
rate to be applied to any deposits whose guarantee period has just ended shall
be the same rate as is applied to new deposits allocated to the GIA at the time
that the guarantee period expired. This rate will likewise remain in effect for
a guarantee period of one full year from the date the new rate is applied.
In general, you can only make one transfer per year from the GIA. The amount
that can be transferred out is limited to the greater of $1,000 or 25% of the
Policy Value in the GIA as of the date of the transfer. If you elect the
Systematic Transfer Program, approximately equal amounts may be transferred out
of the GIA. Also, the total Policy Value allocated to the GIA may be transferred
out of the GIA to one or more of the Subaccounts of the VUL Account over a
consecutive four-year period according to the following schedule:
Year One: 25% Year Two: 33.3%
Year Three: 50% Year Four: 100%
Transfers into the GIA and among the Subaccounts of the VUL Account may be
made at any time. Transfers from the GIA are subject to the rules discussed in
Appendix A and Transfer of Policy Value.
THE POLICY
- --------------------------------------------------------------------------------
INTRODUCTION
The Policy is a flexible premium variable life insurance policy issued on
the lives of two Insureds. The Policy has a death benefit, Cash Surrender Value
and loan privilege such as is associated with a traditional fixed benefit whole
life policy. The Policy differs from a fixed benefit whole life policy, however,
because the Policyowner specifies into which of several Subaccounts of the VUL
Account or the GIA net premium is to be allocated. Each Subaccount of the VUL
Account, in turn, invests its assets exclusively in a Series of the Funds. The
Policy Value varies according to the investment performance of the Series to
which Policy Value has been allocated.
ELIGIBLE PURCHASERS
Any person between the ages of 18 and 85 is eligible to be insured under a
newly purchased Policy after providing acceptable evidence of insurability. You
can purchase a Policy to insure the lives of two other individuals, provided
that you have an insurable interest in their lives, and the Insureds consent.
Such a Policy could be purchased on the lives of spouses, family members,
business partners or other related groups.
FLEXIBLE PREMIUMS
The Issue Premium required depends on a number of factors, such as the ages,
sexes and rate class of the proposed Insureds, the desired Face Amount, any
supplemental benefits and the planned premiums you propose to make. The minimum
Issue Premium generally must be at least 1/6 of the Planned Annual Premium. Both
Insureds must be alive when the Issue Premium is paid, and it is due on the
Policy Date. After the Issue Premium is paid, although
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premiums are flexible, the amount and frequency of Planned Annual Premiums are
as shown on the schedule page of the Policy. You determine the Planned Annual
Premium (within limits set by us) when you apply for the Policy. The Issue
Premium should be paid to your registered representative for forwarding to our
Underwriting Department. Additional payments should be sent to VPMO.
Any premium payments will be reduced by a 2.25% charge for state premium tax
and also reduced by a federal tax charge of 1.50%. The Issue Premium also will
be reduced by the Issue Expense Charge on a pro rata basis in equal monthly
installments over a 12-month period. Any unpaid balance of the Issue Expense
Charge will be paid to Phoenix upon Policy Lapse or termination.
Premium payments received during a grace period also will be reduced by the
amount needed to cover any monthly deductions during the grace period. The
remainder will be applied on the Payment Date to the various Subaccounts of the
VUL Account or to the GIA, based on the premium allocation schedule elected in
the application for the Policy or as later changed. See "Non-Systematic
Transfers and Changes in Payment Allocations."
The number of units credited to a Subaccount of the VUL Account will be
determined by dividing the portion of the net premium applied to that Subaccount
by the unit value of the Subaccount on the Payment Date.
You may increase or decrease the Planned Annual Premium amount (within
limits) or payment frequency at any time by written notice to VPMO. We reserve
the right to limit increases to such maximums as may be established from time to
time. Additional premium payments may be made at any time. Each premium payment
must at least equal $25 or, if made during a grace period, the payment must
equal the amount needed to prevent lapse of the Policy.
The Policy contains a total premium limit as shown on the Schedule Page.
This limit is applied to the sum of all premiums paid under the Policy. If the
total premium limit is exceeded, the Policyowner will receive the excess, with
interest at an annual rate of not less than 4%, not later than 60 days after the
end of the Policy Year in which the limit was exceeded. The Policy Value then
will be adjusted to reflect the refund. The amount to be taken from each
Subaccount or the GIA will be allocated in the same manner as provided for
monthly deductions unless you request otherwise in writing. The total premium
limit may be exceeded if additional premium is needed to prevent lapse or if we
determine that additional premium would be permitted by federal laws or
regulations.
You may authorize your bank to draw $25 or more monthly from your personal
checking account to be allocated among the available Subaccounts or the GIA. The
amount you choose automatically will be invested in accordance with your most
recent allocation schedule on file at VPO.
Policies sold to officers, directors and employees of Phoenix (and their
spouses and children) will be credited with an amount equal to the first-year
commission that would apply on the amount of premium contributed. This option
also is available to career agents of Phoenix (and their spouses and children).
ALLOCATION OF PREMIUM AND POLICY VALUE
We will generally allocate the Issue Premium less applicable charges to the
VUL Account or to the GIA upon receipt of a completed application, in accordance
with the allocation instructions in the application for the Policy. However,
Policies issued in certain states, and Policies issued which are intended to
replace existing insurance, are issued with a Temporary Money Market Allocation
Amendment. Under this Amendment, we temporarily allocate the entire Issue
Premium paid less applicable charges (along with any other premiums paid during
the Right to Cancel Period) to the Money Market Subaccount of the VUL Account,
and, at the expiration of the Right to Cancel Period, the Policy Value of the
Money Market Subaccount is allocated among the Subaccounts of the VUL Account or
to the GIA in accordance with your allocation instructions in the application
for insurance.
RIGHT TO CANCEL PERIOD
You may return a Policy by mailing or delivering it to us within 10 days
after you receive it (or longer in some states); within 10 days after we mail or
deliver a written notice of withdrawal right to you; or within 45 days after you
sign the application for insurance, whichever occurs latest (the "Right to
Cancel Period"). The returned Policy is treated as if we never issued the Policy
and, except for Policies issued without a Temporary Money Market Allocation
Amendment, we will return the sum of the following as of the date we receive the
returned Policy: (i) the then current Policy Value less any unpaid loans and
loan interest; plus (ii) any monthly deductions, partial surrender fees and
other charges made under the Policy, including investment advisory fees or any
Fund expenses deducted. The amount returned for Policies issued with the
Amendment will equal any premiums paid less any unrepaid loans and loan
interest, and less any partial surrender amounts paid.
We reserve the right to disapprove an application for processing within
seven days of our receipt of the completed application for insurance, in which
event we will return the premium paid. Even after approval of the application
for processing, we reserve the right to decline issuance of the Policy, in which
event we will refund to you the same amount as would have been refunded under
the Policy had it been issued but returned for refund during the Right to Cancel
Period.
TEMPORARY INSURANCE COVERAGE
On the date the application for a Policy is signed and submitted with the
Issue Premium, we issue a Temporary Insurance Receipt in connection with the
application. Under the Temporary Insurance Receipt, the insurance protection
applied for (subject to the limits of liability and in accordance with the terms
set forth in the Policy and in the Receipt) takes effect on the date of the
application.
TRANSFER OF POLICY VALUE
SYSTEMATIC TRANSFER PROGRAM
You may elect to transfer funds automatically among the Subaccounts or the
unloaned portion of the GIA on a monthly, quarterly, semi-annual or annual basis
under the Systematic Transfer Program for Dollar Cost Averaging ("Systematic
Transfer Program"). Under this Systematic Transfer Program, the minimum initial
and subsequent transfer amounts are $25 monthly, $75 quarterly, $150
semi-annually or $300 annually. You must have an initial value of $1,000 in the
GIA or the Subaccount that funds will be transferred
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<PAGE>
from ("Sending Subaccount") and if the value in that Subaccount or the GIA drops
below the elected transfer amount, the entire remaining balance will be
transferred and no more systematic transfers will be processed. Funds may be
transferred from only one Sending Subaccount or the GIA, but may be allocated to
multiple Subaccounts ("Receiving Subaccounts"). Under the Systematic Transfer
Program, you may make more than one transfer per Policy Year from the GIA, in
approximately equal amounts over a minimum 18-month period.
Only one Systematic Transfer Program can be active per Policy. After the
completion of the Systematic Transfer Program, you can call VPO at
1-800-892-4885 to begin a new Systematic Transfer Program.
All transfers under the Systematic Transfer Program will be executed on the
basis of the respective values as of the first of the month following receipt of
the 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.
NON-SYSTEMATIC TRANSFERS AND CHANGES IN PAYMENT
ALLOCATIONS
Transfers among available Subaccounts or the GIA and changes
in premium payment allocations may be requested in writing or by calling
1-800-892-4885, between the hours of 8:30 a.m. and 4:00 p.m. Eastern Time.
Written requests for transfers will be executed on the date the request is
received at VPMO. Telephone transfers will be effective on the date the request
is made except as noted below. Unless you elect in writing not to authorize
telephone transfers or allocation changes, telephone transfer orders and
allocation changes also will be accepted on behalf of you from your registered
representative. Phoenix and Phoenix Equity Planning Corporation ("PEPCO"), the
national distributor for Phoenix, will employ reasonable procedures to confirm
that telephone instructions are genuine. They will require verification of
account information and will record telephone instructions on tape. All
telephone transfers will be confirmed in writing to you. To the extent that
procedures reasonably designed to prevent unauthorized transfers are not
followed, Phoenix and PEPCO may be liable for following telephone instructions
for transfers that prove to be fraudulent. However, you will bear the risk of
loss resulting from instructions entered by an unauthorized third party that
Phoenix and PEPCO reasonably believe to be genuine. These telephone privileges
may be modified or terminated at any time and during times of extreme market
volatility, may be difficult to exercise. In such cases, the Policyowner should
submit a written request.
Although currently there is no charge for transfers, in the future, we may
charge a fee of $10 for each transfer after the first two transfers in a Policy
Year.
We reserve the right to permit transfers of less than $500 only if the
entire balance in the Subaccount or the GIA is transferred or if the Systematic
Transfer Program has been elected.
We also reserve the right to prohibit a transfer to any Subaccount of the
VUL Account where the resultant value of the Policy's share in that Subaccount
immediately after the transfer would be less than $500. We further reserve the
right to require that the entire balance of a Subaccount or the GIA be
transferred if the share of the Policy in the value of that Subaccount would,
immediately after the transfer, be less than $500.
Unless we agree otherwise or the Systematic Transfer Program has been
elected, you may make only one transfer per Policy Year from the unloaned
portion of the GIA. The amount you may transfer cannot exceed the greater of
$1,000 or 25% of the value of the Policy in the unloaned portion of the GIA at
the time of the transfer. Also, the total Policy Value allocated to the unloaned
portion of the GIA may be transferred out of the GIA to one or more of the
Subaccounts over a consecutive four-year period according to the following
schedule:
Year One: 25% Year Two: 33.3%
Year Three: 50% Year Four: 100%
Non-systematic transfers from the unloaned portion of the GIA will be
processed on the date of receipt by VPMO.
Transfers into the GIA and among the Subaccounts of the VUL Account may be
made at any time. We reserve the right to limit the number of Subaccounts you
may elect to a total of 18 at any one time and/or over the life of the Policy
unless required to be less to comply with changes in federal and/or state
regulation, including tax, securities and insurance law. As of the date of this
Prospectus, this limitation has no effect because fewer than 18 Subaccounts are
offered.
For policies issued with the Temporary Money Market Allocation Amendment,
transfers may not be made until termination of the Right to Cancel Period.
DETERMINATION OF SUBACCOUNT VALUES
The unit value of each Subaccount of the VUL Account was set by Phoenix on
the first valuation date of each such Subaccount. The unit value of a Subaccount
of the VUL Account on any other Valuation Date is determined by multiplying the
unit value of that Subaccount on the just prior Valuation Date by the Net
Investment Factor for that Subaccount for the then current Valuation Period. The
unit value of each Subaccount of the VUL Account on a day other than a Valuation
Date is the unit value on the next Valuation Date. Unit values are carried to
six decimal places. The unit value of each Subaccount of the VUL Account on a
Valuation Date is determined at the end of that day.
The Net Investment Factor for each Subaccount of the VUL Account is
determined by the investment performance of the assets held by the Subaccount
during the Valuation Period. Each valuation will follow applicable law and
accepted procedures. The Net Investment Factor is equal to item (D) below
subtracted from the result of dividing the sum of items (A) and (B) by item (C).
(A) The value of the assets in the Subaccount on the current Valuation Date,
including accrued net investment income and realized and unrealized
capital gains and losses, but excluding the net value of any
transactions during the current Valuation Period.
(B) The amount of any dividend (or, if applicable, any capital gain
distribution) received by the Subaccount if the "ex-dividend" date for
shares of the Fund occurs during the current Valuation Period.
(C) The value of the assets in the Subaccount as of the just prior Valuation
Date, including accrued net investment income and realized and
unrealized capital gains and losses, and
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including the net value of all transactions during the Valuation
Period ending on that date.
(D) The sum of the following daily charges multiplied by the number of days
in the current Valuation Period:
1. the mortality and expense risk charge; and
2. the charge, if any, for taxes and reserves for taxes on
investment income, and realized and unrealized capital
gains.
DEATH BENEFIT
GENERAL
The death benefit under Option A equals the Policy's Face Amount on the date
of the last surviving Insured's death or, if greater, the minimum death benefit
on their date of death. Under Option B, the death benefit equals the Policy's
Face Amount on the date of the last surviving Insured's death plus the Policy
Value. Under either Option, the minimum death benefit is the Policy Value on the
date of death of the last surviving Insured increased by the applicable
percentage from the table contained in the Policy, based on the Insured's
attained age at the beginning of the Policy Year in which the death occurs. If
no option is elected, Option A will apply.
GUARANTEED DEATH BENEFIT OPTION
A guaranteed death benefit rider is available. Under this Policy rider, if
you pay the required premium each year as specified in the rider, the death
benefit selected will be guaranteed for a certain specified number of years,
regardless of the investment performance of the Policy, and will equal either
the initial Face Amount or the Face Amount as later changed by decreases. In
order to keep this guaranteed death benefit In Force, there may be limitations
on the amount of partial surrenders or decreases in Face Amount permitted.
After the first 10 Policy Years, there will be a monthly guaranteed minimum
death benefit charge equal to $0.01 per $1,000 of Face Amount for policies
issued with a Guaranteed Death Benefit rider.
PARTIAL SURRENDER AND DECREASES IN FACE AMOUNT: EFFECT ON
DEATH BENEFIT
A partial surrender or a decrease in Face Amount generally
decreases the death benefit. Upon a decrease in Face Amount or partial
surrender, a partial surrender charge will be deducted from Policy Value based
on the amount of the decrease or partial surrender. With a decrease in Face
Amount, the death benefit under a Policy would be reduced on the next Monthly
Calculation Day. With a partial surrender, the death benefit under a Policy
would be reduced immediately. A decrease in the death benefit may have certain
tax consequences. See "Federal Tax Considerations."
REQUESTS FOR DECREASE IN FACE AMOUNT
You may request a decrease in Face Amount at any time after the first Policy
Year. Unless we agree otherwise, the decrease must at least equal $25,000 and
the Face Amount remaining after the decrease must at least equal $250,000. All
Face Amount decrease requests must be in writing and will be effective on the
first Monthly Calculation Day following the date we approve the request. A
partial surrender charge will be deducted from the Policy Value based on the
amount of the decrease. The charge will equal the applicable surrender charge
that would apply to a full surrender multiplied by a fraction (the decrease in
Face Amount divided by the Face Amount of the Policy before the decrease).
SURRENDERS
GENERAL
At any time during the lifetime of the Insureds and while the Policy is In
Force, you may partially or fully surrender the Policy by sending a written
release and surrender in a form satisfactory to us to VPMO, along with the
Policy if we so require. The amount available for surrender is the Cash
Surrender Value at the end of the Valuation Period during which the surrender
request is received at VPO.
Upon partial or full surrender, we generally will pay the amount surrendered
to you within seven days after Phoenix receives the written request for the
surrender. Under certain circumstances, the surrender payment may be postponed.
See "General Provisions--Postponement of Payments." For the federal tax effects
of partial and full surrenders, see "Federal Tax Considerations."
FULL SURRENDERS
If the Policy is being fully surrendered, the Policy itself must be returned
to us at VPMO, along with the written release and surrender of all claims in a
form satisfactory to us. You may elect to have the amount paid in a lump sum or
under a payment option. See "Surrender Charge" and "Payment Options."
PARTIAL SURRENDERS
You may obtain a partial surrender of the Policy by requesting that part of
the Policy's Cash Surrender Value be paid. You may do this at any time during
the lifetime of the Insureds while the Policy is In Force with a written request
to VPMO. We reserve the right to require that the Policy be returned before
payment is made. A partial surrender will be effective on the date the written
request is received or, if required, the date the Policy is received. Surrender
proceeds may be applied under any of the payment options described under
"Payment of Proceeds--Payment Options."
Phoenix reserves the right not to allow partial surrenders of less than
$500. In addition, if the share of the Policy Value in any Subaccount or in the
GIA that would be reduced as a result of a partial surrender would, immediately
after the partial surrender, be less than $500, we reserve the right to require
that as part of any partial surrender, the entire remaining balance in that
Subaccount or the GIA be surrendered.
Upon a partial surrender, the Policy Value will be reduced by the sum of the
following:
(i) The Partial Surrender Amount Paid. This amount comes from a reduction in
the Policy's share in the value of each Subaccount or the GIA based on
the allocation requested at the time of the partial surrender. If no
allocation request is made, the assessment to each Subaccount will be
made in the same manner as that provided for monthly deductions.
(ii) The Partial Surrender Fee. This fee is the lesser of $25 or 2% of the
partial surrender amount paid. The assessment to each Subaccount or the
GIA will be made in the same manner as provided for the partial
surrender amount paid.
(iii) A Partial Surrender Charge. This charge is equal to a pro rata
portion of the applicable surrender charge that would apply to
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a full surrender, determined by multiplying the applicable surrender
charge by a fraction (equal to the partial surrender amount payable
divided by the result of subtracting the applicable surrender charge
from the Policy Value). This amount is assessed against the Subaccount
or the GIA in the same manner as provided for the partial surrender
amount paid.
The Cash Surrender Value will be reduced by the partial surrender amount
paid plus the partial surrender fee. The Face Amount of the Policy also will be
reduced by the same amount as the Policy Value is reduced as described above.
POLICY LOANS
Generally, while the Policy is In Force, a loan may be obtained against the
Policy up to the available loan value. The loan value on any day is 90% of the
result of subtracting the then remaining surrender charge from the Policy Value.
The available loan value is the loan value on the current day less any
outstanding Debt.
The amount of any loan will be added to the loaned portion of the GIA and
subtracted from the Policy's share of the Subaccounts or the unloaned portion of
the GIA, based on the allocation requested at the time of the loan. The total
reduction will equal the amount added to the loaned portion of the GIA.
Allocations generally must be expressed in terms of whole percentages. If no
allocation request is made, the amount subtracted from the share of each
Subaccount or the unloaned portion of the GIA will be determined in the same
manner as provided for monthly deductions. Interest will be credited and the
loaned portion of the GIA will increase at an effective annual rate of 2% (4% in
New York only), compounded daily and payable in arrears. At the end of each
Policy Year and at the time of any Debt repayment, interest credited to the
loaned portion of the GIA will be transferred to the unloaned portion of the
GIA.
Debt may be repaid at any time during the lifetime of the Insureds while the
Policy is In Force. Any Debt repayment received by us during a grace period will
be reduced to cover any overdue monthly deductions and only the balance will be
applied to reduce the Debt. Such balance, in excess of any outstanding accrued
loan interest, will be applied to reduce the loaned portion of the GIA and will
be transferred to the unloaned portion of the GIA to the extent that loaned
amounts taken from the GIA have not been previously repaid. Otherwise, such
balance will be allocated among the Subaccounts as you request upon repayment
and, if no allocation request is made, according to the most recent premium
allocation schedule on file.
WHILE THERE IS OUTSTANDING DEBT ON THE POLICY, ANY PAYMENTS RECEIVED BY US
FOR THE POLICY WILL BE APPLIED DIRECTLY TO REDUCE THE DEBT UNLESS SPECIFIED AS A
PREMIUM PAYMENT BY YOU. Until the Debt is fully repaid, additional Debt
repayments may be made at any time during the lifetime of the Insureds while the
Policy is In Force.
Failure to repay a policy loan or to pay loan interest will not terminate
the Policy except as otherwise provided under the terms of the Policy concerning
the grace period and lapse.
The proceeds of Policy loans may be subject to federal income tax
under certain circumstances. See "Federal Tax Considerations."
In the future, Phoenix may not allow Policy loans of less than $500, unless
such loan is used to pay a premium on another Phoenix policy.
You will pay interest on the loan at an effective annual rate, compounded
daily and payable in arrears. The loan interest rates in effect are as follows:
FOR POLICIES ISSUED IN ALL STATES EXCEPT NEW YORK
- -------------------------------------------------
Policy Years 1-10: 4%
Policy Years 11-15: 3%
Policy Years 16 and thereafter: 2 1/2%
FOR POLICIES ISSUED IN NEW YORK ONLY
- ------------------------------------
Policy Years 1-10: 6%
Policy Years 11-15: 5%
Policy Years 16 and thereafter: 4 1/2%
At the end of each Policy Year, any interest due on the Debt will be treated
as a loan and will be offset by a transfer from your values to the value of the
loaned portion of the GIA.
A Policy loan, whether or not repaid, has a permanent effect on the Policy
Value because the investment results of the Subaccounts or unloaned portion of
the GIA will apply only to the amount remaining in the Subaccounts or the
unloaned portion of the GIA. The longer a loan is outstanding, the greater the
effect is likely to be. The effect could be favorable or unfavorable. If the
Subaccounts or the unloaned portion of the GIA earn more than the annual
interest rate for funds held in the loaned portion of the GIA, Policy Value does
not increase as rapidly as it would have had no loan been made. If the
Subaccounts or the GIA earn less than the annual interest rate for funds held in
the loaned portion of the GIA, Policy Value is greater than it would have been
had no loan been made. A Policy loan, whether or not repaid, also has an effect
on the Policy's Death Benefit due to any resulting differences in Cash Surrender
Value.
LAPSE
Unlike conventional life insurance policies, the payment of the Issue
Premium, no matter how large, or the payment of additional premiums will not
necessarily continue the Policy In Force to its Maturity Date.
If on any Monthly Calculation Day during the first three Policy Years the
Policy Value, or the Cash Surrender Value thereafter, is insufficient to cover
the monthly deduction, a grace period of 61 days will be allowed for the payment
of an amount equal to three times the required monthly deduction.
The Policy will continue In Force during any such grace period although,
Subaccount transfers, loans, partial or full surrenders will not be permitted.
Failure to pay the additional amount within the grace period will result in
lapse of the Policy, but not before 30 days have elapsed since we mail written
notice to you. If a premium payment for the additional amount is received by us
during the grace period, any amount of premium over what is required to prevent
lapse will be allocated among the Subaccounts of the VUL Account or to the GIA
in accordance with the then current premium allocation schedule. In determining
the amount of "excess" premium to be applied to the Subaccounts or the GIA, we
will deduct the premium tax and the amount needed to cover any monthly
deductions made during the
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grace period. If the last surviving Insured dies during the grace period, the
death benefit will equal the amount of the death benefit immediately prior to
the commencement of the grace period.
ADDITIONAL INSURANCE OPTIONS
While the Policy is In Force you will have the option to purchase additional
insurance on the same Insureds with the same guaranteed rates as the Policy
without being assessed an Issue Expense Charge. We will require evidence of
insurability and charges will be adjusted for the Insured's new attained age and
any change in risk classification.
ADDITIONAL RIDER BENEFITS
A Policyowner may purchase additional benefits under a Policy. These
benefits are cancellable by the Policyowner at any time. A charge may be
deducted monthly from the Policy Value for each additional rider benefit chosen.
More details will be included in the form of a rider to the Policy if any of
these benefits is chosen. Additional riders may be available as described in the
Policy.
INVESTMENTS OF THE VUL ACCOUNT
- --------------------------------------------------------------------------------
PARTICIPATING MUTUAL FUNDS
THE PHOENIX EDGE SERIES FUND
Certain Subaccounts of the VUL Account invest in corresponding Series of The
Phoenix Edge Series Fund. The Fund currently has the following Series available
through the Policies:
MONEY MARKET SERIES: The investment objective of the Money Market Series is
to provide maximum current income consistent with capital preservation and
liquidity.
GROWTH SERIES: The investment objective of the Growth Series is
to achieve intermediate and long-term growth of capital, with income
as a secondary consideration.
MULTI-SECTOR FIXED INCOME ("MULTI-SECTOR") SERIES: The investment objective
of the Multi-Sector Series is to seek long-term total return by investing in a
diversified portfolio of high yield (high risk) and high quality fixed income
securities. For a discussion of the risks associated with investing in high
yield bonds, please see the accompanying Fund prospectus.
STRATEGIC ALLOCATION ("ALLOCATION") SERIES, FORMERLY THE TOTAL RETURN
SERIES: The investment objective of the Allocation Series is to realize as high
a level of total rate of return over an extended period of time as is considered
consistent with prudent investment risk (total rate of return consists of
capital appreciation, current income, including dividends and interest, possible
premiums and short-term gains from purchasing and selling options and financial
futures).
INTERNATIONAL SERIES: The investment objective of the International Series
is to seek a high total return consistent with reasonable risk. The
International Series intends to invest primarily in an internationally
diversified portfolio of equity securities. It intends to reduce its risk by
engaging in hedging transactions involving options, futures contracts and
foreign currency transactions. The International Series provides a means for
investors to invest a portion of their assets outside the United States.
BALANCED SERIES: The investment objective of the Balanced Series is to seek
reasonable income, long-term capital growth and conservation of capital. The
Balanced Series intends to invest based on combined considerations of risk,
income, capital enhancement and protection of capital value.
REAL ESTATE SECURITIES ("REAL ESTATE") SERIES: The investment objective of
the Real Estate Series is to seek capital appreciation and income with
approximately equal emphasis. It intends under normal circumstances to invest in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
STRATEGIC THEME ("THEME") SERIES: The investment objective of the Theme
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
Theme Series intends to invest primarily in common stocks believed to have
substantial potential for capital growth.
ABERDEEN NEW ASIA ("ASIA") SERIES: The investment objective of the Asia
Series is to seek long-term capital appreciation. The Asia Series will invest
primarily in a diversified portfolio of equity securities of issuers organized
and principally operating in Asia, excluding Japan.
RESEARCH ENHANCED INDEX ("ENHANCED INDEX") SERIES: The investment objective
of the Enhanced Index 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. It is
intended that the Series will invest 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.
WANGER ADVISORS TRUST
Certain Subaccounts of the VUL Account invest in corresponding Series of the
Wanger Advisors Trust. The available Series and their fundamental objectives are
as follows:
WANGER U.S. SMALL CAP ("U.S. SMALL CAP") SERIES: The
investment objective of the U.S. Small Cap Series is to provide long-
term growth. The U.S. Small Cap Series will invest primarily in
securities of U.S. companies with total common stock market
capitalization of less than $1 billion.
WANGER INTERNATIONAL SMALL CAP ("INTERNATIONAL SMALL CAP") SERIES: The
investment objective of the International Small Cap Series is to provide
long-term growth. The International Small Cap Series will invest primarily in
securities of non-U.S. companies with total common stock market capitalization
of less than $1 billion.
Each Series will be subject to the market fluctuations and risks inherent in
the ownership of any security and there can be no assurance that any Series'
stated investment objective will be realized.
In addition to being sold to the VUL Account, shares of the Funds also are
sold to the Phoenix Home Life Variable Accumulation Account, a separate account
utilized by Phoenix to receive and invest premiums paid under certain variable
annuity contracts issued by
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Phoenix. Shares of the Fund also may be sold to other separate accounts of
Phoenix or its affiliates or of other insurance companies.
It is conceivable 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 Phoenix nor the Fund(s)
currently foresees 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 thereto. Material
conflicts could result from, for example, (1) changes in state insurance laws,
(2) changes in federal income tax laws, (3) changes in the investment management
of any portfolio of the Fund(s) or (4) differences in voting instructions
between those given by variable life insurance Policyowners and those given by
variable annuity Contract Owners. Phoenix will, at its own expense, remedy such
material conflict including, if necessary, segregating the assets underlying the
variable life insurance policies and the variable annuity contracts and
establishing a new registered investment company.
INVESTMENT ADVISERS TO THE PHOENIX EDGE SERIES FUND
The Phoenix Edge Series Fund's investment advisers are Phoenix Investment
Counsel, Inc. ("PIC"), Phoenix Realty Securities, Inc. ("PRS") and
Phoenix-Aberdeen International Advisors, LLC ("PAIA") (the "Advisers"), which
are located at 56 and 38 Prospect Street, Hartford, Connecticut 06115.
PIC was originally organized in 1932 as John P. Chase, Inc. In addition to
the Fund, it serves as investment adviser to the Phoenix Series Fund, Phoenix
Strategic Allocation Fund, Inc., Phoenix Strategic Equity Series Fund (all
Series other than Equity Opportunities Series), Phoenix Duff & Phelps
Institutional Mutual Funds (all portfolios other than the Real Estate Equity
Series Portfolio and Enhanced Reserves Portfolio) and Phoenix Multi-Portfolio
Fund and as subadviser to Sun America Series Trust. PIC also serves as
subadviser to the Asia Series.
All of the outstanding stock of PIC is owned by PEPCO, a subsidiary of
Phoenix Duff & Phelps Corporation ("PD&P"). Phoenix owns a controlling interest
in PD&P. PEPCO also performs bookkeeping, pricing and administrative services
for the Fund. PEPCO is registered as a broker-dealer in 50 states. The executive
offices of Phoenix are located at One American Row, Hartford, Connecticut 06115,
the executive offices of PD&P are located at 56 Prospect Street, Hartford,
Connecticut 06115 and the principal offices of PEPCO are located at 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
J.P. Morgan Investment Management, Inc. ("J.P. Morgan") a wholly-owned
subsidiary of J.P. Morgan & Co., Incorporated, serves as subadviser to the
Enhanced Index Series. J.P. Morgan's principal place of business is located at
522 Fifth Avenue, New York, New York 10036. J.P. Morgan presently serves as an
investment manager for corporate, public and union employee benefit funds,
foundation, endowments, insurance companies, government agencies and the
accounts of other institutional investors. J.P. Morgan was founded in 1984 and
as of March 31, 1997 had approximately $184 billion in assets under management.
PRS was formed in 1994 as an indirect subsidiary of Phoenix. In addition to
the Fund, it serves as investment adviser to the Real Estate Portfolio of the
Phoenix Multi-Portfolio Fund, the Real Estate Equity Securities Portfolio of the
Phoenix Duff & Phelps Institutional Mutual Funds and to the American Phoenix
Investment Portfolio. As of December 31, 1996, PRS had $1.4 billion in assets
under management.
Duff & Phelps Investment Management Co. ("DPIM"), an affiliate of the
Adviser, serves as subadviser to the Real Estate Series. DPIM is a subsidiary of
PD&P, an affiliate of the Adviser, and is located at 55 East Monroe Street,
Suite 3600, Chicago, Illinois 60603. PD&P is a company which is traded on the
NYSE. It provides investment management and related services to institutional
investors, corporations and individuals through operating subsidiaries. As of
December 31, 1996, DPIM had approximately $14 billion in assets under management
on a discretionary basis.
PAIA, a Delaware limited liability company formed in 1996 and jointly owned
and managed by PM Holdings, Inc., is a direct subsidiary of Phoenix and Aberdeen
Fund Managers, Inc., a wholly-owned subsidiary of Aberdeen Asset Management
plc. Aberdeen Fund Managers, Inc. has its principal offices located at 1
Financial Plaza, Suite 2210, NationsBank Tower, Fort Lauderdale, Florida 33394.
While many of the officers and directors of PAIA have extensive experience as
investment professionals, due to its recent formation, PAIA has no prior
operating history. Aberdeen Fund Managers also serves as subadviser to the Asia
Series.
Aberdeen Asset Management was founded in 1983 and through subsidiaries
operating from offices in Aberdeen, Scotland; London, England; Singapore; and
Fort Lauderdale, Florida, provides investment management services to unit and
investment trusts, segregated pension funds and other institutional and private
portfolios. As of February 28, 1997, Aberdeen Asset Management and its
advisory subsidiaries, had approximately $4.8 billion in assets under
management.
INVESTMENT ADVISER TO THE WANGER ADVISORS TRUST
The investment adviser to the Wanger Advisors Trust is Wanger Asset
Management, L.P. Wanger's principal place of business is located at 227 West
Monroe Street, Suite 3000, Chicago, Illinois 60606.
SERVICES OF THE ADVISERS
The Advisers continuously furnish an investment program for each Series and
manage the investment and reinvestment of the assets of each Series subject at
all times to the authority and supervision of the Trustees. A more detailed
discussion of the Advisers and the Investment Advisory Agreements is contained
in the accompanying prospectus for the Funds.
REINVESTMENT AND REDEMPTION
All dividend distributions of the Fund are automatically reinvested in
shares of the Fund at their net asset value on the date of distribution; all
capital gains distributions of the Fund, if any, are likewise reinvested at the
net asset value on the record date. Phoenix redeems Fund shares at their net
asset value to the extent necessary to make payments under the Policy.
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SUBSTITUTION OF INVESTMENTS
Phoenix reserves the right, subject to compliance with the law as currently
applicable or subsequently changed, to make additions to, deletions from or
substitutions for the investments held by the VUL Account. In the future,
Phoenix may establish additional Subaccounts within the VUL Account, each of
which will invest in shares of a designated portfolio of the Fund with a
specified investment objective. These portfolios will be established if, and
when, in the sole discretion of Phoenix, marketing needs and investment
conditions warrant, and will be made available under existing Policies to the
extent and on a basis to be determined by Phoenix.
If shares of any of the portfolios of the Fund should no longer be available
for investment, or if in the judgment of Phoenix's management further investment
in shares of any of the portfolios should become inappropriate in view of the
objectives of the Policy, then Phoenix may substitute shares of another mutual
fund for shares already purchased, or to be purchased in the future, under the
Policy. No substitution of mutual fund shares held by the VUL Account may take
place without prior approval of the SEC and prior notice to the Policyowner. In
the event of a substitution, the Policyowner will be given the option of
transferring the Policy Value of the Subaccount in which the substitution is to
occur to another Subaccount.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Charges are deducted in connection with the Policy to compensate Phoenix
for: (1) incurring expenses in distributing the Policy; (2) issuing the Policy;
(3) premium and federal taxes incurred on premiums received; (4) providing the
insurance benefits set forth in the Policy; and (5) assuming certain risks in
connection with the Policy. The nature and amount of these charges are described
more fully below.
We may reduce or eliminate the following charges for Policies issued under
group or sponsored arrangements: Sales Charge, Issue Expense Charge,
Administrative Charge and Surrender Charge. Generally, costs per Policy vary
with the size of the group or sponsored arrangement, its stability as indicated
by its term of existence and certain characteristics of its members, the
purposes for which the Policies are purchased and other factors. The amount of
reduction will be considered on a case-by-case basis and will reflect the
reduced costs to Phoenix expected as a result of sales to a particular group or
sponsored arrangement.
1. PREMIUM SALES CHARGE
A charge is made to compensate Phoenix for the cost of selling the Policy.
This cost includes registered representative's commissions, commission
overrides, advertising, the printing of the Policy Prospectus and sales
literature. The amount of the charge in any Policy Year cannot specifically be
tied to sales expenses for that year. We expect to recover our total sales
expenses over the period the Policy is In Force. To the extent that sales
charges are insufficient to cover total sales expenses, these expenses may be
recovered from other sources including gains from the charge for mortality and
expense risks and other gains with respect to the Policies, or from our general
assets.
The sales charge is assessed according to the following schedule:
Policy Year One: 20% of premiums paid up to the
first target annual premium ("TAP");
5% of premiums in excess of the
TAP
Policy Years Two-Ten: 5% of premium
Policy Years Eleven and over: 0% of premium
The TAP is established at issue and is the greater of: (a) the level premium
required to mature the Policy, calculated at an interest rate of 6.5% assuming
current mortality and expenses; and (b) $1,200.
2. MONTHLY DEDUCTION
A charge is deducted monthly from the Policy Value under a Policy ("monthly
deduction") to pay: the cost of insurance provided under the Policy, the cost of
any rider benefits provided, the Issue Expense Charge and an administrative
charge. The monthly deduction is deducted on each Monthly Calculation Day. It is
allocated among Subaccounts of the VUL Account and the unloaned portion of the
GIA based on the allocation schedule for monthly deductions specified by the
applicant in the application for a Policy or as later changed by the
Policyowner. In the event that the Policy's share in the value of a Subaccount
or the unloaned portion of the GIA is insufficient to permit the withdrawal of
the full monthly deduction, the remainder will be taken on a proportionate basis
from the Policy's share of each of the other Subaccounts and the unloaned
portion of the GIA. The number of units deducted will be determined by dividing
the portion of the monthly deduction allocated to each Subaccount or to the
unloaned portion of the GIA by the unit value on the Monthly Calculation Day.
Because portions of the monthly deduction, such as the cost of insurance, can
vary from month to month, the monthly deduction itself may vary in amount from
month to month.
(A) ISSUE EXPENSE CHARGE. A cost-based issue charge is assessed on a pro
rata basis in equal monthly installments of $50 over a 12-month period
to compensate Phoenix for underwriting and start-up expenses in
connection with issuing a Policy. The issue expense charge is $600.
(B) ADMINISTRATIVE CHARGE. A charge also is assessed to cover our variable
administrative costs such as the preparation of billings, statements
and mailings to Policyholders. The administrative charge is only
assessed in Policy Years one through ten and varies by the Face Amount
of the Policy as follows:
$20 per month for Policies with Face Amounts of less than or
equal to $400,000;
$0.05 per $1,000 for Policies with Face Amounts of
$400,000 up to $1,600,000; and
$80 per month for Policies with Face Amounts of greater
than $1,600,000
(C) COST OF INSURANCE. In order to calculate the cost of insurance charge,
Phoenix multiplies the applicable cost of insurance rate by the
difference between the death benefit selected (death benefit Option A
if no selection is made) and the Policy Value. Generally, cost of
insurance rates are based on the sex, Attained Age and risk class of
the Insureds. However, in certain states and for policies issued in
conjunction with
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certain qualified plans, cost of insurance rates are not based on sex.
The actual monthly cost of insurance rates are based on our
expectations of future mortality experience. They will not, however, be
greater than the guaranteed cost of insurance rates set forth in the
Policy. These guaranteed maximum rates are equal to 100% of the 1980
Commissioners Standard Ordinary ("CSO") Mortality Table, with
appropriate adjustment for the Insureds' risk classification. Any
change in the cost of insurance rates will apply to all persons of the
same sex, insurance age and risk class whose Policies have been In
Force for the same length of time. The risk class of an Insured may
affect the cost of insurance rate. Phoenix currently places Insureds
into a standard risk class or a risk class involving a higher mortality
risk, depending upon the health of the Insureds as determined by
medical information that Phoenix requests. In an otherwise identical
Policy, Insureds in the standard risk class will have a lower cost of
insurance than those in the risk class with the higher mortality risk.
The standard risk class also is divided into categories: smokers,
nonsmokers and those who have never smoked. Non-smokers will generally
incur a lower cost of insurance than similarly situated Insureds who
smoke.
3. PREMIUM TAXES
Various states and subdivisions impose a tax on premiums received by
insurance companies. Premium taxes vary from state to state. Currently, the
taxes imposed by states on premiums range from 0.75% to 4% of premiums paid.
Moreover, certain municipalities in Louisiana, Kentucky and South Carolina also
impose taxes on premiums paid, in addition to the state taxes imposed. The
premium tax charge represents an amount we consider necessary to pay all premium
taxes imposed by such states and any subdivisions thereof, and we do not expect
to derive a profit from this charge. Policies will be assessed a tax charge
equal to 2.25% of the premiums paid. These charges are deducted from the Issue
Premium, and from each subsequent premium payment.
4. FEDERAL TAX CHARGE
A charge equal to 1.50% of each premium will be deducted from each premium
payment to cover the estimated cost to Phoenix of the federal income tax
treatment of deferred acquisition costs.
5. MORTALITY AND EXPENSE RISK CHARGE
We will deduct a daily charge from the VUL Account at an annual rate of
0.80% of the average daily net assets of the VUL Account to compensate for
certain risks assumed in connection with the Policy. After the 15th Policy Year,
a reduced annual rate of .25% will apply. This charge is not deducted from the
GIA.
The mortality risk assumed by Phoenix is that the Insureds may live for a
shorter time than projected because of inaccuracies in that projecting process
and, accordingly, that an aggregate amount of death benefits greater than that
projected will be payable. The expense risk assumed is that expenses incurred in
issuing the Policies may exceed the limits on administrative charges set in the
Policies. If the expenses do not increase to an amount in excess of the limits,
or if the mortality projecting process proves to be accurate, we may profit from
this charge. We also assume risks with respect to other contingencies including
the incidence of Policy loans, which may cause us to incur greater costs than
anticipated when designing the Policies. To the extent we profit from this
charge, we may use those profits for any proper purpose, including the payment
of sales expenses or any other expenses that may exceed income in a given year.
6. INVESTMENT MANAGEMENT CHARGE
As compensation for investment management services to the Funds, the
Advisers are entitled to fees, payable monthly and based on an annual percentage
of the average aggregate daily net asset values of each Series.
These Fund charges and other expenses are described more fully in the
accompanying Fund prospectuses.
7. OTHER CHARGES
SURRENDER CHARGE
During the first 10 Policy Years, there is a difference between the amount
of Policy Value and the amount of Cash Surrender Value of the Policy. This
difference is the surrender charge, consisting of a contingent deferred sales
charge designed to recover expenses for the distribution of Policies that are
terminated by surrender before distribution expenses have been recouped. These
are contingent charges because they are paid only if the Policy is surrendered
(or the Face Amount is reduced or the Policy lapses) during this period. They
are deferred charges because they are not deducted from premiums.
During the first 10 Policy Years, the full Surrender Charge as described
below will apply if you either surrender the Policy for its Cash Surrender Value
or let the Policy lapse. The applicable Surrender Charge in any Policy Month is
the full Surrender Charge minus any surrender charges that have been previously
paid. There is no Surrender Charge after the 10th Policy Year. During the first
10 Policy Years, the maximum Surrender Charge that you can pay while you own the
Policy is equal to the percentage amount shown in the Surrender Charge Table as
defined below.
SURRENDER CHARGE TABLE
----------------------
SURRENDER SURRENDER SURRENDER
POLICY CHARGE POLICY CHARGE POLICY CHARGE
MONTH % OF TAP MONTH % OF TAP MONTH % OF TAP
----- -------- ----- -------- ----- --------
1-70 100% 87 66% 104 32%
71 98% 88 64% 105 30%
72 96% 89 62% 106 28%
73 94% 90 60% 107 26%
74 92% 91 58% 108 24%
75 90% 92 56% 109 22%
76 88% 93 54% 110 20%
77 86% 94 52% 111 18%
78 84% 95 50% 112 16%
79 82% 96 48% 113 14%
80 80% 97 46% 114 12%
81 78% 98 44% 115 10%
82 76% 99 42% 116 8%
83 74% 100 40% 117 6%
84 72% 101 38% 118 4%
85 70% 102 36% 119 2%
86 68% 103 34% 120 0%
PARTIAL SURRENDER FEE
A fee equal to the lesser of $25 or 2% of the amount withdrawn from the
Policy is deducted from the Policy Value upon a partial surrender of the Policy
to recover the actual costs of processing the partial surrender request. The
assessment to each Subaccount or to the GIA will be made in the same manner as
provided for the partial surrender amount paid. That is, that the Policy's share
in the value of
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each Subaccount or the GIA will be reduced based on the allocation made at the
time of the partial surrender. If no allocation request is made, the assessment
to each Subaccount and to the GIA will be made in the same manner as provided
for monthly deductions.
PARTIAL SURRENDER CHARGE
A charge as described below is deducted from the Policy Value upon a partial
surrender of the Policy. The charge is equal to a pro rata portion of the
applicable surrender charge that would apply to a full surrender, determined by
multiplying the applicable surrender charge by a fraction (equal to the partial
surrender amount payable divided by the result of subtracting the applicable
surrender charge from the Policy Value). This amount is assessed against the
Subaccounts or the GIA in the same manner as provided for with respect to the
partial surrender amount paid.
A partial surrender charge also is deducted from Policy Value upon a
decrease in Face Amount. The charge is equal to the applicable surrender charge
multiplied by a fraction (equal to the decrease in Face Amount divided by the
Face Amount of the Policy prior to the decrease).
TAXES
Currently no charge is made to the VUL Account for federal income taxes that
may be attributable to the VUL Account. We may, however, make such a charge in
the future. Charges for other taxes, if any, attributable to the VUL Account
also may be made.
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
POSTPONEMENT OF PAYMENTS
GENERAL
Payment of any amount upon complete or partial surrender, Policy loan or
benefits payable at death (in excess of the initial Face Amount) or maturity may
be postponed: (i) for up to six months from the date of the request, for any
transactions dependent upon the value of the GIA; (ii) whenever the NYSE is
closed other than for customary weekend and holiday closings or trading on the
NYSE is restricted as determined by the SEC; or (iii) whenever an emergency
exists, as determined by the Commission as a result of which disposal of
securities is not reasonably practicable or it is not reasonably practicable to
determine the value of the VUL Account's net assets. Transfers also may be
postponed under these circumstances.
PAYMENT BY CHECK
Payments under the Policy of any amounts derived from premiums paid by check
may be delayed until such time as the check has cleared the Policyowner's bank.
THE CONTRACT
The Policy and attached copy of the application are the entire contract.
Only statements in the application can be used to void the Policy. The
statements are considered representations and not warranties. Only an executive
officer of Phoenix can agree to change or waive any provisions of the Policy.
SUICIDE
If either of the Insureds commits suicide within two years after the
Policy's Date of Issue, the Policy will cease and become void. We will pay you
the Policy Value adjusted by the addition of any monthly deductions and other
fees and charges, minus any Debt owed to us under the Policy.
INCONTESTABILITY
We cannot contest this Policy or any attached rider after it has been In
Force during the Insureds' lifetimes for two years from the Policy Date.
CHANGE OF OWNER OR BENEFICIARY
The Beneficiary, as named in the Policy application or subsequently changed,
will receive the Policy benefits at the death of the last surviving Insured. If
the named Beneficiary dies before the death of the last surviving Insured, the
contingent Beneficiary, if named, becomes the Beneficiary. If no Beneficiary
survives the last surviving Insured, the death benefit payable under the Policy
will be paid to you or your estate.
As long as the Policy is In Force, the Policyowner and the Beneficiary may
be changed by written request, satisfactory to us. A change in Beneficiary will
take effect as of the date the notice is signed, whether or not the last
surviving Insured is living when the notice is received by us. We will not,
however, be liable for any payment made or action taken before receipt of the
notice.
ASSIGNMENT
The Policy may be assigned. We will not be bound by the assignment until a
written copy has been received and will not be liable with respect to any
payment made prior to receipt. We assume no responsibility for determining
whether an assignment is valid.
MISSTATEMENT OF AGE OR SEX
If the age or sex of either of the Insureds has been misstated, the death
benefit will be adjusted based on what the cost of insurance charge for the most
recent monthly deduction would have purchased based on the correct age and sex
of the Insureds.
SURPLUS
You may share in divisible surplus of Phoenix to the extent determined
annually by the Phoenix Board of Directors. However, it is not currently
anticipated that the Board will authorize these payments since Policyowners will
be participating directly in investment results.
PAYMENT OF PROCEEDS
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SURRENDER AND DEATH BENEFIT PROCEEDS
Death benefit proceeds and the proceeds of full or partial surrenders will
be processed at unit values next computed after we receive the request for
surrender or due proof of death, provided such request is complete and in good
order. Payment of surrender or death proceeds usually will be made in one lump
sum within seven days, unless another payment option has been elected. Payment
of the death proceeds, however, may be delayed if the claim for payment of the
death proceeds needs to be investigated; e.g., to ensure payment of the proper
amount to the proper payee. Any such delay will not be beyond that reasonably
necessary to investigate such claims consistent with insurance practices
customary in the life insurance industry. Under this Policy, the death proceeds
will be paid upon the death of the last surviving Insured.
16
<PAGE>
You may elect a payment option for payment of the death proceeds to the
Beneficiary. You may only do this before the second death. You may revoke or
change a prior election, unless such right has been waived. The Beneficiary may
make or change an election prior to payment of the death proceeds, unless you
have made an election which does not permit such further election or changes by
the Beneficiary.
A written request in a form satisfactory to us is required to elect, change
or revoke a payment option.
The minimum amount of surrender or death proceeds that may be applied under
any income option is $1,000.
If the Policy is assigned as collateral security, we will pay any amount due
the assignee in one lump sum. Any remaining proceeds will remain under the
option elected.
PAYMENT OPTIONS
All or part of the surrender or death proceeds of a Policy may be applied
under one or more of the following payment options or such other payment options
or alternative versions of the options listed as we may choose to make available
in the future.
OPTION 1--LUMP SUM.
Payment in one lump sum.
OPTION 2--LEFT TO EARN INTEREST.
A payment of interest during the payee's lifetime on the amount payable as a
principal sum. Interest rates are guaranteed to be at least 3% per year.
OPTION 3--PAYMENT FOR A SPECIFIC PERIOD.
Equal income installments are paid for a specified period of years whether
the payee lives or dies. The first payment will be on the date of settlement.
The assumed interest rate on the unpaid balance is guaranteed not to be less
than 3% per year.
OPTION 4--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN.
Equal installments are paid until the later of: (A) The death of the
payee; (B) The end of the period certain. The first payment will be on the date
of settlement. The period certain must be chosen at the time this option is
elected. The periods certain that may be chosen are as follows: (A) Ten years;
(B) Twenty years; (C) Until the installments paid refund the amount applied
under this option; and if the payee is not living when the final payment falls
due, that payment will be limited to the amount which needs to be added to the
payments already made to equal the amount applied under this option. If, for the
age of the payee, a period certain is chosen that is shorter than another period
certain paying the same installment amount, Phoenix will deem the longer period
certain as having been elected. Any life annuity provided under Option 4 is
calculated using an interest rate guaranteed to be no less than 3 3/8% per year,
except that any life annuity providing a period certain of 20 years or more is
calculated using an interest rate guaranteed to be no less than 3 1/4% per year.
OPTION 5--LIFE ANNUITY.
Equal installments are paid only during the lifetime of the payee. The first
payment will be on the date of settlement. Any life annuity as may be provided
under Option 5 is calculated using an interest rate guaranteed to be no less
than 3 1/2% per year.
OPTION 6--PAYMENTS OF A SPECIFIED AMOUNT.
Equal installments of a specified amount, out of the principal sum and
interest on that sum, are paid until the principal sum remaining is less than
the amount of the installment. When that happens, the principal sum remaining
with accrued interest will be paid as a final payment. The first payment will be
on the date of settlement. The payments will include interest on the principal
sum remaining at a rate guaranteed to be at least equal 3% per year. This
interest will be credited at the end of each year. If the amount of interest
credited at the end of the year exceeds the income payments made in the last 12
months, that excess will be paid in one sum on the date credited.
OPTION 7--JOINT SURVIVORSHIP ANNUITY WITH 10 YEAR PERIOD
CERTAIN.
The first payment will be on the date of settlement. Equal income
installments are paid until the latest of: (A) The end of the 10-year period
certain; (B) The death of the Insured; (C) The death of the other named
annuitant. The other annuitant must be named at the time this option is elected
and cannot later be changed. The other annuitant must have an attained age of at
least 40. Any joint survivorship annuity as may be provided under this option is
calculated using an interest rate guaranteed to be no less than 3 3/8% per year.
For additional information concerning the above payment options, see the
Policy.
FEDERAL TAX CONSIDERATIONS
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INTRODUCTION
The ultimate effect of federal income taxes on values under the VUL Account
and on the economic benefit to you or your Beneficiary depends on Phoenix's tax
status and upon the tax status of the individual concerned. The discussion
contained herein is general in nature and is not intended as tax advice. For
complete information on federal and state tax considerations, a qualified tax
adviser should be consulted. No attempt is made to consider any estate and
inheritance taxes, or any state, local or other tax laws. Because the discussion
herein is based upon our understanding of federal income tax laws as they are
currently interpreted, we cannot guarantee the tax status of any Policy. No
representation is made regarding the likelihood of continuation of current
federal income tax laws, Treasury regulations or of the current interpretations
by the Internal Revenue Service ("the Service"). We reserve the right to make
changes to the Policy in order to assure that it will continue to qualify as a
life insurance contract for federal income tax purposes.
PHOENIX'S TAX STATUS
Phoenix is taxed as a life insurance company under the Internal Revenue Code
of 1986, as amended (the "Code"). For federal income tax purposes, neither the
VUL Account nor the GIA is a separate entity from Phoenix and their operations
form a part of Phoenix.
Investment income and realized capital gains on the assets of the VUL
Account are reinvested and taken into account in determining the value of the
VUL Account. Investment income of the VUL Account, including realized net
capital gains, is not taxed to Phoenix. Due to Phoenix's tax status under
current provisions of the Code, no charge currently will be made to the VUL
Account for Phoenix's federal income taxes which may be attributable to the VUL
Account. Phoenix reserves the right to make a deduction for taxes if the federal
tax
17
<PAGE>
treatment of Phoenix is determined to be other than what Phoenix currently
believes it to be, if changes are made affecting the tax treatment to Phoenix of
variable life insurance contracts, or if changes occur in Phoenix's tax status.
If imposed, such charge would be equal to the federal income taxes attributable
to the investment results of the VUL Account.
POLICY BENEFITS
DEATH BENEFIT PROCEEDS. The Policy, whether or not it is a modified
endowment contract (see the discussion on modified endowment contracts below),
should be treated as meeting the definition of a life insurance contract for
federal income tax purposes, under Section 7702 of the Code. As such, the death
benefit proceeds thereunder should be excludable from the gross income of the
Beneficiary under Code Section 101(a)(1). Also, the Policyowner should not be
deemed to be in constructive receipt of the Cash Value, including increments
thereon. See, however, the sections below on possible taxation of amounts
received under the Policy, via full surrender, partial surrender or loan.
Code Section 7702 imposes certain conditions with respect to premiums
received under a Policy. Phoenix intends to monitor the premiums to assure
compliance with such conditions. However, in the event that the premium
limitation is exceeded during the year, Phoenix may return the excess premium,
with interest, to the Policyowner within 60 days after the end of the Policy
Year, and maintain the qualification of the Policy as life insurance for federal
income tax purposes.
FULL SURRENDER. Upon full surrender of a Policy for its Cash Value, the
excess, if any, of the Cash Value (unreduced by any outstanding indebtedness)
over the premiums paid will be treated as ordinary income for federal income tax
purposes. The full surrender of a Policy which is a modified endowment
contract may result in the imposition of an additional 10% tax on any income
received.
PARTIAL SURRENDER. If the Policy is a modified endowment contract,
partial surrenders are fully taxable to the extent of income in the Policy and
are possibly subject to an additional 10% tax. See the discussion on modified
endowment contracts below. If the Policy is not a modified endowment
contract, partial surrenders still may be taxable, as follows. Code Section
7702(f)(7) provides that where a reduction in death benefits occurs during the
first 15 years after a Policy is issued and there is a cash distribution
associated with that reduction, the Policyowner may be taxed on all or a part of
the amount distributed. A reduction in death benefits may result from a partial
surrender. After 15 years, the proceeds will not be subject to tax, except to
the extent such proceeds exceed the total amount of premiums paid but not
previously recovered. Phoenix suggests you consult with your tax adviser in
advance of a proposed decrease in death benefits or a partial surrender as to
the portion, if any, which would be subject to tax, and in addition as to the
impact such partial surrender might have under the new rules affecting
modified endowment contracts.
LOANS. Phoenix believes that any loan received under a Policy will be
treated as indebtedness of the Policyowner. If the Policy is a modified
endowment contract, loans are fully taxable to the extent of income in the
Policy and are possibly subject to an additional 10% tax. See the discussion on
modified endowment contracts below. If the Policy is not a modified
endowment contract, Phoenix believes that no part of any loan under a Policy
will constitute income to the Policyowner.
The deductibility by the Policyowner of loan interest under a Policy may be
limited under Code Section 264, depending on the circumstances. Any Policyowner
intending to fund premium payments through borrowing should consult a tax
adviser with respect to the tax consequences thereof. Under the "personal"
interest limitation provisions of the Code, interest on Policy loans used for
personal purposes is not tax deductible. Other rules may apply to allow all or
part of the interest expense as a deduction if the loan proceeds are used for
"trade or business" or "investment" purposes. See your tax adviser for further
guidance.
BUSINESS-OWNED POLICIES
If the Policy is owned by a business or a corporation, the Code may impose
additional restrictions. The Code limits the interest deduction on
business-owned Policy loans and may impose tax upon the inside build-up of
corporate-owned life insurance policies through the corporate alternative
minimum tax.
MODIFIED ENDOWMENT CONTRACTS
GENERAL. Pursuant to Code Section 72(e), loans and other amounts received
under modified endowment contracts will, in general, be taxed to the extent
of accumulated income (generally, the excess of Cash Value over premiums paid).
Policies are modified endowment contracts if they meet the definition of
life insurance, but fail the 7-pay test. This test essentially provides that
the cumulative premiums paid under the Policy at any time during the Policy's
first seven years cannot exceed the sum of the net level premiums that would
have been paid on or before that time had the Policy provided for paid-up future
benefits after the payment of seven level annual premiums. In addition, a
modified endowment contract includes any life insurance contract that is
received in exchange for a modified endowment contract. Premiums paid during a
Policy Year that are returned by Phoenix (with interest) within 60 days after
the end of the Policy Year will not cause the Policy to fail the 7-pay test.
REDUCTION IN BENEFITS DURING THE FIRST SEVEN YEARS. If there is a reduction
in benefits during the first seven Policy Years, the premiums are redetermined
for purposes of the 7-pay test as if the Policy originally had been issued at
the reduced death benefit level and the new limitation is applied to the
cumulative amount paid for each of the first seven Policy Years.
DISTRIBUTIONS AFFECTED. If a Policy fails to meet the 7-pay test, it is
considered a modified endowment contract only as to distributions in the year in
which the death benefit reduction takes effect and all subsequent Policy Years.
However, distributions made in anticipation of such failure (there is a
presumption that distributions made within two years prior to such failure were
"made in anticipation") also are considered distributions under a modified
endowment contract. If the Policy satisfies the 7-pay test for seven years,
distributions and loans generally will not be subject to the modified endowment
contract rules.
PENALTY TAX. Any amounts taxable under the modified endowment contract rule
will be subject to an additional 10% excise tax, with certain exceptions. This
additional tax will not apply in the case of distributions: (i) made on or after
the taxpayer attains age 59 1/2; (ii) which are attributable to the taxpayer's
disability (within the meaning
18
<PAGE>
of Code Section 72(m)(7)); or (iii) which are part of a series of substantially
equal periodic payments (not less frequently than annually) made for the life
(or life expectancy) of the taxpayer or the joint lives (or life expectancies)
of the taxpayer and his Beneficiary.
MATERIAL CHANGE RULES. Any determination of whether the Policy meets the
7-pay test will begin again any time the Policy undergoes a "material change,"
which includes any increase in death benefits or any increase in or addition of
a qualified additional benefit, with the following two exceptions. First, if an
increase is attributable to premiums paid "necessary to fund" the lowest death
benefit and qualified additional benefits payable in the first seven Policy
Years or to the crediting of interest or dividends with respect to these
premiums, the "increase" does not constitute a material change. Second, to the
extent provided in regulations, if the death benefit or qualified additional
benefit increases as a result of a cost-of-living adjustment based on an
established broad-based index specified in the Policy, this does not constitute
a material change if (1) the cost-of-living determination period does not exceed
the remaining premium payment period under the Policy, and (2) the
cost-of-living increase is funded ratably over the remaining premium payment
period of the Policy. A reduction in death benefits is not considered a material
change unless accompanied by a reduction in premium payments.
A material change may occur at any time during the life of the Policy
(within the first seven years or thereafter), and future taxation of
distributions or loans would depend upon whether the Policy satisfied the
applicable 7-pay test from the time of the material change. An exchange of
policies is considered to be a material change for all purposes.
SERIAL PURCHASE OF MODIFIED ENDOWMENT CONTRACTS. All modified endowment
contracts issued by the same insurer (or affiliated companies of the insurer) to
the same Policyowner within the same calendar year will be treated as one
modified endowment contract in determining the taxable portion of any loans or
distributions made to the Policyowner. The Treasury has been given specific
legislative authority to issue regulations to prevent the avoidance of the new
distribution rules for modified endowment contracts. A qualified tax adviser
should be consulted about the tax consequences of the purchase of more than one
modified endowment contract within any calendar year.
LIMITATIONS ON UNREASONABLE MORTALITY AND EXPENSE CHARGES
The Code imposes limitations on unreasonable mortality and expense charges
for purposes of ensuring that a Policy qualifies as a life insurance contract
for federal income tax purposes. The mortality charges taken into account to
calculate permissible premium levels may not exceed those charges required to be
used in determining the federal income tax reserve for the Policy, unless
Treasury regulations prescribe a higher level of charge. In addition, the
expense charges taken into account under the guideline premium test are required
to be reasonable, as defined by the Treasury regulations. Phoenix intends to
comply with the limitations in calculating the premium it is permitted to
receive from you.
QUALIFIED PLANS
A Policy may be used in conjunction with certain qualified plans. Since the
rules governing such use are complex, you should not use the Policy in
conjunction with a qualified plan until you have consulted a competent pension
consultant or tax adviser.
DIVERSIFICATION STANDARDS
To comply with the Diversification Regulations under Code Section 817(h),
("Diversification Regulations") each Series of the Funds is required to
diversify its investments. The Diversification Regulations generally require
that on the last day of each quarter of a calendar year no more than 55% of the
value of a Series' assets is represented by any one investment, no more than
70% is represented by any two investments, no more than 80% is represented by
any three investments and no more than 90% is represented by any four
investments. A "look-through" rule applies to treat a pro rata portion of each
asset of a Series as an asset of the VUL Account; therefore, each Series of
the Fund will be tested for compliance with the percentage limitations. For
purposes of these diversification rules, all securities of the same issuer are
treated as a single investment, but each United States Government agency or
instrumentality is treated as a separate issuer.
The general diversification requirements are modified if any of the assets
of the VUL Account are direct obligations of the United States Treasury. In this
case, there is no limit on the investment that may be made in Treasury
securities, and for purposes of determining whether assets other than Treasury
securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of the VUL Account's investment in
Treasury securities. Notwithstanding this modification of the general
diversification requirements, the portfolios of the Funds will be structured
to comply with the general diversification standards because they serve as an
investment vehicle for certain variable annuity contracts which must comply with
these standards.
In connection with the issuance of the Diversification Regulations, the
Treasury announced that such regulations do not provide guidance concerning the
extent to which you may direct your investments to particular divisions of a
separate account. It is possible that a revenue ruling or other form of
administrative pronouncement in this regard may be issued in the near future. It
is not clear, at this time, what such a revenue ruling or other pronouncement
will provide. It is possible that the Policy may need to be modified to comply
with such future Treasury announcements. For these reasons, Phoenix reserves the
right to modify the Policy, as necessary, to prevent you from being considered
the owner of the assets of the VUL Account.
Phoenix intends to comply with the Diversification Regulations to assure
that the Policies continue to qualify as a life insurance contract for federal
income tax purposes.
CHANGE OF OWNERSHIP OR INSURED OR ASSIGNMENT
Changing the Policyowner, or one or both of the Insureds or an
exchange or assignment of the Policy may have tax consequences depending on the
circumstances. Code Section 1035 provides that a life insurance contract can be
exchanged for another life insurance contract, without recognition of gain or
loss, assuming that no money or other property is received in the exchange, and
that the Policies relate to the same Insureds. If the surrendered Policy is
subject to a policy loan, this may be treated as the receipt of money on the
exchange. Phoenix recommends that any person contemplating such actions seek the
advice of a qualified tax consultant.
19
<PAGE>
OTHER TAXES
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or Beneficiary. We do not make any
representations or guarantees regarding the tax consequences of any Policy with
respect to these types of taxes.
VOTING RIGHTS
- --------------------------------------------------------------------------------
THE FUNDS
We will vote the Funds' shares held by the Subaccounts of the VUL Account at
any regular and special meetings of shareholders of the Funds. To the extent
required by law, such voting will be in accordance with instructions received
from you. However, if the 1940 Act or any regulation thereunder should be
amended or if the present interpretation thereof should change, and as a result
we determine that we are permitted to vote the Funds' shares at our own
discretion, we may elect to do so.
The number of votes that you have the right to cast will be determined by
applying your percentage interest in a Subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, fractional
shares will be recognized.
Funds shares held in a Subaccount for which no timely instructions are
received, and Funds shares which are not otherwise attributable to Policyowners,
will be voted by Phoenix in proportion to the voting instructions that are
received with respect to all Policies participating in that Subaccount. Voting
instructions to abstain on any item to be voted upon will be applied to reduce
the votes eligible to be cast by Phoenix.
You will receive proxy materials, reports and other materials relating to
the Funds.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the shares be voted so as
to cause a change in the subclassification or investment objective of one or
more of the portfolios of the Funds or to approve or disapprove an investment
advisory contract for the Funds. In addition, Phoenix itself may disregard
voting instructions in favor of changes initiated by a Policyowner in the
investment policies or the Investment Adviser of the Funds if Phoenix reasonably
disapproves of such changes. A change would be disapproved only if the proposed
change is contrary to state law or prohibited by state regulatory authorities or
we determine that the change would have an adverse effect on the General Account
because the proposed investment policy for a Series may result in overly
speculative or unsound investments. In the event Phoenix does disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next periodic report to Policyowners.
PHOENIX
You (or the payee entitled to payment under a payment option if a different
person) will have the right to vote at annual meetings of all Phoenix
policyholders for the election of members of the Board of Directors of Phoenix
and on other corporate matters, if any, where a policyholder's vote is taken. At
meetings of all of the Phoenix policyholders, you (or payee) may cast only one
vote as the holder of a Policy, irrespective of Policy Value or the number of
the Policies you hold.
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX
- --------------------------------------------------------------------------------
Phoenix is managed by its Board of Directors, the members of which are
elected by its Policyholders, including Owners of the Policies. See "Voting
Rights."
The following are the Directors and Executive Officers of Phoenix:
DIRECTORS PRINCIPAL OCCUPATION
Sal H. Alfiero Chairman and Chief Executive
Officer, Mark IV Industries, Inc.
Amherst, New York
J. Carter Bacot Chairman and Chief Executive
Officer, The Bank of New York
New York, New York
Carol H. Baldi President, Carol H. Baldi, Inc.
New York, New York
Peter C. Browning President and Chief Operating
Officer, Sunoco Products Company
Hartsville, South Carolina; formerly
Chairman, President and Chief
Executive Officer, Aancor Holland,
Inc. and National Gypsum Company
Arthur P. Byrne Group Executive, Danaher
Corporation
West Hartford, Connecticut
Richard N. Cooper Chairman, National Intelligence
Council, Central Intelligence Agency
McLean, Virginia; formerly
Professor of International
Economics, Harvard University
Gordon J. Davis, Esq. Partner, LeBoeuf, Lamb, Greene &
MacRae; formerly Partner, Lord Day
& Lord, Barret Smith
New York, New York
Robert W. Fiondella Chairman of the Board, President
and Chief Executive Officer, Phoenix
Home Life Mutual Insurance
Company
Hartford, Connecticut
Jerry J. Jasinowski President, National Association of
Manufacturers
Washington, D.C.
John W. Johnstone Chairman, President and Chief
Executive Officer, Olin Corporation
Norwalk, Connecticut
Marilyn E. LaMarche Limited Managing Director, Lazard
Freres & Company
New York, New York
Philip R. McLoughlin Executive Vice President and Chief
Investment Officer, Phoenix Home
Life Mutual Insurance Company
Hartford, Connecticut
20
<PAGE>
Indra K. Nooyi Senior Vice President, PepsiCo, Inc.,
Purchase, New York
Charles J. Paydos Executive Vice President, Phoenix
Home Life Mutual Insurance
Company
Hartford, Connecticut
Herbert Roth, Jr. Former Chairman, LFE Corporation
Clinton, Massachusetts
Robert F. Vizza President and Chief Executive
Officer, St. Francis Hospital
Roslyn, New York
Robert G. Wilson Chairman and President, Ziani
International Capital, Inc., Miami,
Florida, formerly Vice Chairman,
Carter Kaplan & Company,
Richmond, Virginia and Chairman
and Chief Executive Officer, Ecologic
Waste Services, Inc., Miami, Florida
EXECUTIVE OFFICERS PRINCIPAL OCCUPATION
Robert W. Fiondella Chairman of the Board, President
and Chief Executive Officer
Richard H. Booth Executive Vice President, Strategic
Development; formerly President,
Traveler's Insurance Company
Philip R. McLoughlin Executive Vice President and Chief
Investment Officer
Charles J. Paydos Executive Vice President
David W. Searfoss Executive Vice President and Chief
Financial Officer
Dona D. Young Executive Vice President, Individual
Insurance and General Counsel
Kelly J. Carlson Senior Vice President, Career
Organization
Carl T. Chadburn Senior Vice President
Robert G. Chipkin Senior Vice President and Corporate
Actuary
Martin J. Gavin Senior Vice President
Randall C. Giangiulio Senior Vice President, Group Sales
Joan E. Herman Senior Vice President
Edward P. Hourihan Senior Vice President, Information
Systems
Joseph E. Kelleher Senior Vice President
Robert G. Lautensack, Jr. Senior Vice President
Scott C. Noble Senior Vice President, Real Estate
Robert E. Primmer Senior Vice President,
Brokerage and PPGA Distribution
Frederick W. Sawyer, III Senior Vice President
Richard C. Shaw Senior Vice President, International
and Corporate Development
Simon Y. Tan Senior Vice President, Individual
Market Development
Anthony J. Zeppetella Senior Vice President
The above positions reflect the last held position in the organization
during the past five years.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
- --------------------------------------------------------------------------------
The assets of the VUL Account are held by Phoenix. The assets of the VUL
Account are kept physically segregated and held separate and apart from the
General Account of Phoenix. Phoenix maintains records of all purchases and
redemptions of shares of the Fund.
SALES OF POLICIES
- --------------------------------------------------------------------------------
Policies may be purchased from registered representatives of W.S. Griffith &
Co., Inc. ("W.S. Griffith"), a corporation formed under the laws of the state
of New York on August 7, 1970, licensed to sell Phoenix insurance policies as
well as policies, annuity contracts and funds of companies affiliated with
Phoenix. W.S. Griffith, an indirect subsidiary of Phoenix, is registered as a
broker-dealer with the SEC under the Securities Exchange Act of 1934 ("1934
Act") and is a member of the National Association of Securities Dealers, Inc.
PEPCO serves as national distributor of the Policies. PEPCO is an indirect
subsidiary of PD&P. Phoenix owns a majority interest in PD&P. Policies also
may be purchased from other broker-dealers registered under the 1934 Act whose
representatives are authorized by applicable law to sell Policies under terms of
agreements provided by PEPCO. Sales commissions will be paid to registered
representatives on purchase payments received by Phoenix under these Policies.
Total sales commission of a maximum of 50% of premiums will be paid by Phoenix
to PEPCO. To the extent that the sales charge under the Policies is less than
the sales commissions paid with respect to the Policies, Phoenix will pay the
shortfall from its General Account assets, which will include any profits it
may derive under the Policies.
Phoenix through PEPCO will sponsor sales contests, training and educational
meetings and provide to all qualifying dealers, from its own profits and
resources, additional compensation in the form of trips, merchandise or expense
reimbursement. Brokers and dealers other than PEPCO also may make customary
additional charges for their services in effecting purchases, if they notify the
Fund of their intention to do so.
STATE REGULATION
- --------------------------------------------------------------------------------
Phoenix is subject to the provisions of the New York insurance laws
applicable to mutual life insurance companies and to regulation and supervision
by the New York Superintendent of Insurance. Phoenix also is 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 it may make, including investments for the VUL Account and the GIA. It
does not include, however, any supervision over the investment policies of the
VUL Account.
21
<PAGE>
REPORTS
- --------------------------------------------------------------------------------
All Policyowners will be furnished with those reports required by the 1940
Act and regulations promulgated thereunder, or under any other applicable law or
regulation.
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
The VUL Account is not engaged in any litigation. Phoenix is not involved in
any litigation that would have a material adverse effect on the ability of
Phoenix to meet its obligations under the Policies.
LEGAL MATTERS
- --------------------------------------------------------------------------------
The organization of Phoenix, its authority to issue variable life insurance
Policies, and the validity of the Policy have been passed upon by Edwin L.
Kerr, Counsel, Phoenix. Legal matters relating to the federal securities and
income tax laws have been passed upon for Phoenix by Jorden Burt Berenson &
Johnson, LLP.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
A Registration Statement has been filed with the SEC, under the Securities
Act of 1933 ("1933 Act") as amended, with respect to the securities offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and amendments thereto and exhibits filed as a part
thereof, to all of which reference is made for further information concerning
the VUL Account, Phoenix and the Policy. Statements contained in this Prospectus
as to the content of the Policy and other legal instruments are summaries. For a
complete statement of the terms thereof, reference is made to such instruments
as filed.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The consolidated financial statements of Phoenix contained herein should be
considered only as bearing upon Phoenix's ability to meet its obligations under
the Policy, and they should not be considered as bearing on the investment
performance of the VUL Account. The financial statements of the VUL Account are
not yet available.
22
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
23
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Consolidated Balance Sheets at June 30, 1997 (unaudited) and December 31, 1996 .............................25
Consolidated Statements of Income for the Six Months Ended
June 30, 1997 and 1996 (unaudited)........................................................................26
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1997 and 1996 (unaudited) ........................................................................27
Notes to Condensed Consolidated Financial Statements (unaudited).........................................28-29
</TABLE>
24
<PAGE>
THE NEW YORK STATE INSURANCE DEPARTMENT RECOGNIZES ONLY STATUTORY
ACCOUNTING PRACTICES FOR DETERMINING AND REPORTING THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF AN INSURANCE COMPANY, FOR DETERMINING ITS
SOLVENCY UNDER NEW YORK INSURANCE LAW, AND FOR DETERMINING WHETHER ITS
FINANCIAL CONDITION WARRANTS THE PAYMENT OF A DIVIDEND TO ITS
POLICYHOLDERS. NO CONSIDERATION IS GIVEN BY THE DEPARTMENT TO FINANCIAL
STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN MAKING SUCH DETERMINATIONS.
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
(IN THOUSANDS)
ASSETS
Investments:
Fixed maturities:
<S> <C> <C>
Held-to-maturity, at amortized cost $ 1,492,938 $ 1,555,685
Available-for-sale, at fair value 5,121,905 4,895,393
Equity securities, at fair value 312,730 235,351
Mortgage loans 942,397 947,076
Real estate 372,411 410,945
Policy loans 1,685,325 1,667,784
Other invested assets 189,156 182,372
Short-term investments 222,727 164,967
----------------- -------------------
Total investments 10,339,589 10,059,573
Cash and cash equivalents 124,184 172,895
Accrued investment income 142,426 135,475
Deferred policy acquisition costs 966,702 926,274
Premiums, accounts and notes receivable 116,085 79,354
Reinsurance recoverables 51,954 46,251
Property and equipment, net 143,195 137,231
Other assets 99,233 134,589
Goodwill and intangibles, net 308,001 313,507
Separate account assets 3,867,541 3,447,899
----------------- -------------------
Total assets $ 16,158,910 $ 15,453,048
================= ===================
LIABILITIES
Policy liabilities and accruals $ 9,684,002 $ 9,462,039
Other liabilities 509,705 470,595
Long-term debt 404,330 490,430
Current income taxes 13,361 29,345
Deferred income taxes 100,460 61,934
Separate account liabilities 3,831,889 3,412,152
----------------- -------------------
Total liabilities 14,543,747 13,926,495
----------------- -------------------
Contingent liabilities
Minority interest 134,269 129,084
----------------- -------------------
EQUITY
Unrealized investment gains, net 119,192 89,791
Retained earnings 1,361,702 1,307,678
----------------- -------------------
Total equity 1,480,894 1,397,469
----------------- -------------------
Total liabilities and equity $ 16,158,910 $ 15,453,048
================= ===================
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
(IN THOUSANDS)
REVENUES
<S> <C> <C>
$ 773,150 $ 753,001
Premiums
Insurance and investment product fees 205,837 208,101
Net investment income 349,003 340,424
Net realized investment gains 52,248 31,397
---------------- --------------
Total revenues 1,380,238 1,332,923
---------------- --------------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses 775,137 753,992
Policyholder dividends 168,862 154,781
Policy acquisition expenses 90,868 92,399
Other operating expenses 251,693 260,395
---------------- --------------
Total benefits, losses and expenses 1,286,560 1,261,567
---------------- --------------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST 93,678 71,356
Income taxes 35,212 27,030
---------------- --------------
INCOME BEFORE MINORITY INTEREST 58,466 44,326
Minority interest (4,442) (5,986)
---------------- --------------
NET INCOME $ 54,024 $ 38,340
================ ==============
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
(IN THOUSANDS)
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 54,024 $ 38,340
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATIONS
Net realized investment gains (52,248) (31,397)
Amortization and depreciation 19,465 20,188
Deferred income taxes (benefit) 22,695 (10,207)
Increase in deferred policy acquisition costs (57,428) (28,036)
Increase in policy liabilities and accruals 239,335 236,132
Increase (decrease) in other assets/other liabilities, net (17,720) 3,499
Other, net 4,222 5,986
--------------- --------------
Net cash provided by operating activities 212,345 234,505
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposals of fixed maturities:
Available-for-sale 569,883 618,578
Held-to-maturity 148,955 45,449
Proceeds from disposals of equity securities 30,164 181,623
Proceeds from mortgage loan maturities or repayments 64,225 87,467
Purchase of fixed maturities:
Available-for-sale (744,350) (730,351)
Held-to-maturity (84,491) (209,148)
Purchase of equity securities (41,313) (162,481)
Purchase of mortgage loans (72,474) (75,701)
Change in short term investments, net (57,760) (54,323)
Increase in policy loans (17,541) (24,292)
Purchase of property and equipment (13,827) (9,744)
Other investing activities, net 47,018 (29,910)
--------------- --------------
Net cash used for investing activities (171,511) (362,833)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from borrowings 1,468 37,838
Repayment of borrowings (87,568)
Dividends paid to minority shareholders (3,445) (3,059)
Other financing activities 25,785
--------------- --------------
Net cash provided by (used for) financing activities (89,545) 60,564
NET DECREASE IN CASH AND CASH EQUIVALENTS (48,711) (67,764)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 172,895 127,104
--------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 124,184 $ 59,340
=============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
27
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of Phoenix
Home Life Mutual Insurance Company (Phoenix or the Company) and its
subsidiaries. Less than majority-owned entities in which the Company has at
least a 20% interest or those where the Company has significant influence are
reported on the equity basis.
These condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP). The information
furnished includes all adjustments and accruals consisting only of normal,
recurring accrual adjustments which are, in the opinion of management, necessary
for a fair statement of results for the interim period. The results of
operations for any interim period are not necessarily indicative of results for
the full year. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with GAAP have been
condensed or omitted. The June 30, 1997 Condensed Consolidated Financial
Statements should be read in conjunction with the accompanying December 31, 1996
Consolidated Financial Statements.
SIGNIFICANT ACCOUNTING PRONOUNCEMENTS
As a result of the issuance of the Statement of Financial Accounting Standard
(SFAS) No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises
and Insurance Enterprises for Certain Long-Duration Participating Contracts,"
and Financial Accounting Standards Board Interpretation (FIN) No. 40,
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises," financial statements of mutual life insurance
companies beginning after December 15, 1995, prepared on the basis of statutory
accounting are no longer characterized as in conformity with GAAP. The Company
applied the pronouncements of the Financial Accounting Standards Board (FASB) to
its financial statements in 1995, and, in accordance with SFAS No. 120 and FIN
No. 40, all prior periods presented were restated.
SUBSEQUENT EVENTS
On June 9, 1997, Phoenix Duff & Phelps Corporation announced that it had signed
a definitive agreement to acquire Pasadena Capital Corporation, the holding
company for Roger Engemann & Associates, Inc., a privately-owned money
management firm based in Pasadena, California with over $5.5 billion in assets
under management. The acquisition was completed on September 3, 1997.
On June 18, 1997, Phoenix Duff & Phelps Corporation announced that it had signed
a definitive agreement to acquire a majority share in GMG/Seneca Capital
Management LLC, a San Francisco-based money manager with more than $4 billion in
assets under management. The acquisition was completed on July 17, 1997.
Phoenix Duff & Phelps Corporation is financing the acquisitions in part through
existing resources and in part through borrowings under a $200 million bank
credit facility. The Company is guaranteeing the obligation.
28
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Pursuant to an assumption reinsurance agreement dated February 27, 1997, and
amended on June 12, 1997, the Company will acquire the individual life and
single-premium deferred annuity blocks of business from the former Confederation
Life Insurance Company (U.S.). The transaction is expected to close by December
31, 1997. These blocks of business represent approximately 44,000 policies with
$166 million of inforce premium and should increase the Company's assets and
policy reserves by an estimated $1.3 billion.
INCOME TAXES
In August, 1997, the Internal Revenue Service concluded its examination of the
Company's federal income tax returns for years 1991-1994, resulting in no
material adverse effects on the financial statements.
LITIGATION
The Company is a defendant in various legal proceedings arising in the normal
course of business. In the opinion of management, based on the advice of legal
counsel after consideration of the provisions made in these financial
statements, the ultimate resolution of these proceedings will not have a
material effect on the Company's consolidated financial position.
29
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
30
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants ....................................... 32
Consolidated Balance Sheets at December 31, 1996 and 1995 ................ 33
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994 ....................................... 34
Consolidated Statements of Equity for the Years Ended
December 31, 1996, 1995 and 1994 ....................................... 35
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 ........................................ 36
Notes to Consolidated Financial Statements ............................ 37-64
31
<PAGE>
One Financial Plaza Telephone 860 240 2000
Hartford, CT 06103
[logotype] Price Waterhouse LLP [logo]
REPORT OF INDEPENDENT ACCOUNTANTS
February 12, 1997
To the Board of Directors
and Policyholders of
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of equity and of cash flows present fairly,
in all material respects, the financial position of Phoenix Home Life Mutual
Insurance Company and its subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
<PAGE>
THIS NEW YORK STATE INSURANCE DEPARTMENT RECOGNIZES ONLY STATUTORY
ACCOUNTING PRACTICES FOR DETERMINING AND REPORTING THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF AN INSURANCE COMPANY, FOR DETERMINING ITS
SOLVENCY UNDER NEW YORK INSURANCE LAW, AND FOR DETERMINING WHETHER ITS
FINANCIAL CONDITION WARRANTS THE PAYMENT OF A DIVIDEND TO ITS
POLICYHOLDERS. NO CONSIDERATION IS GIVEN BY THE DEPARTMENT TO FINANCIAL
STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN MAKING SUCH DETERMINATIONS.
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
DECEMBER 31,
1996 1995
(IN THOUSANDS)
ASSETS
Investments:
Fixed maturities:
Held-to-maturity, at amortized cost $ 1,555,685 $ 1,334,447
Available-for-sale, at fair value 4,895,393 4,425,678
Equity securities, at fair value 235,351 254,278
Mortgage loans 947,076 897,192
Real estate 410,945 418,328
Policy loans 1,667,784 1,617,872
Other invested assets 182,372 144,778
Short-term investments 164,967 275,517
---------------- ----------------
Total investments 10,059,573 9,368,090
Cash and cash equivalents 172,895 127,104
Accrued investment income 135,475 128,139
Deferred policy acquisition costs 926,274 816,128
Premiums, accounts and notes receivable 79,354 64,880
Reinsurance recoverables 46,251 48,490
Property and equipment, net 137,231 134,880
Other assets 134,589 130,627
Goodwill and intangibles, net 313,507 313,069
Separate account assets 3,447,899 3,306,070
---------------- ----------------
Total assets $ 15,453,048 $ 14,437,477
================ ================
LIABILITIES
Policy liabilities and accruals $ 9,462,039 $ 8,974,885
Other liabilities 470,595 445,577
Long-term debt 490,430 268,337
Current income taxes 29,345 42,033
Deferred income taxes 61,934 34,176
Separate account liabilities 3,412,152 3,273,056
---------------- ----------------
Total liabilities 13,926,495 13,038,064
---------------- ----------------
Contingent liabilities (Note 15)
Minority interest 129,084 117,826
---------------- ----------------
EQUITY
Unrealized investment gains, net 89,791 75,878
Retained earnings 1,307,678 1,205,709
---------------- ----------------
Total equity 1,397,469 1,281,587
---------------- ----------------
Total liabilities and equity $ 15,453,048 $ 14,437,477
================ ================
The accompanying notes are an integral part of these statements.
33
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $ 1,518,822 $ 1,456,875 $ 1,396,002
Insurance and investment product fees 421,058 324,459 286,174
Net investment income 689,890 662,468 622,717
Net realized investment gains (losses) 95,265 74,738 (166)
---------------- ---------------- ----------------
Total revenues 2,725,035 2,518,540 2,304,727
---------------- ---------------- ----------------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses 1,529,573 1,471,030 1,412,686
Policyholder dividends 311,739 289,469 264,456
Policy acquisition expenses 242,363 221,339 237,768
Other operating expenses 452,399 419,231 319,090
---------------- ---------------- ----------------
Total benefits, losses and expenses 2,536,074 2,401,069 2,234,000
---------------- ---------------- ----------------
OPERATING INCOME 188,961 117,471 70,727
Non-operating income
Gain on merger transactions 40,580
---------------- ---------------- ----------------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST 188,961 158,051 70,727
Income taxes 79,331 43,352 40,062
---------------- ---------------- ----------------
INCOME BEFORE MINORITY INTEREST 109,630 114,699 30,665
Minority interest (8,902) (950) 13
---------------- ---------------- ----------------
NET INCOME $ 100,728 $ 113,749 $ 30,678
================ =============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
34
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
- --------------------------------------------------------------------------------
NET UNREALIZED
RETAINED INVESTMENT
EARNINGS GAINS (LOSSES) TOTAL
(IN THOUSANDS)
Balance at December 31, 1993 $ 1,065,115 $ 48,288 $ 1,113,403
Net income 30,678 30,678
Net unrealized loss (75,761) (75,761)
------------ ------------- -------------
Balance at December 31, 1994 1,095,793 (27,473) 1,068,320
Net income 113,749 113,749
Net unrealized gain 103,351 103,351
Minimum pension liability (3,833) (3,833)
------------ ------------- -------------
Balance at December 31, 1995 1,205,709 75,878 1,281,587
Net income 100,728 100,728
Net unrealized gain 13,913 13,913
Minimum pension liability 1,241 1,241
------------ ------------- -------------
Balance at December 31, 1996 $ 1,307,678 $ 89,791 $ 1,397,469
============ ============= =============
The accompanying notes are an integral part of these statements.
35
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 100,728 $ 113,749 $ 30,678
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATIONS
Net realized investment gains (95,265) (74,738) (166)
Net gain on merger (40,580)
Amortization and depreciation 64,870 58,912 51,894
Deferred income taxes (benefit) 14,774 (16,236) 68,936
(Increase) decrease in receivables (111,886) (30,130) 2,830
Increase in deferred policy acquisition costs (61,985) (26,370) (2,975)
Increase in policy liabilities and accruals 559,724 537,919 446,850
Increase (decrease) in other assets/other liabilities, net 39,594 95,880 (51,171)
Other, net 11,258 4,203 8,046
------------- ------------- -----------
Net cash provided by operating activities 521,812 622,609 554,922
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposals of fixed maturities:
Available-for-sale 1,348,809 1,145,146 985,858
Held-to-maturity 118,596 143,773 209,757
Proceeds from disposals of equity securities 382,359 329,104 347,884
Proceeds from mortgage loan maturities or repayments 151,760 186,172 160,882
Proceeds from sale of other invested assets 127,440 148,546 209,316
Purchase of fixed maturities:
Available-for-sale (1,909,086) (1,614,387) (1,396,902)
Held-to-maturity (385,321) (247,354) (383,207)
Purchase of equity securities (215,104) (282,488) (310,751)
Purchase of mortgage loans (200,683) (93,097) (31,214)
Purchase of other invested assets (157,077) (73,482) (173,988)
Change in short term investments, net 110,503 (166,445) 265,328
Increase in policy loans (49,912) (32,387) (55,143)
Capital expenditures (3,543) (18,449) (12,663)
Other investing activities, net (5,898) (12,704) (11,392)
------------- ------------- -----------
Net cash used for investing activities (687,157) (588,052) (196,235)
CASH FLOW FROM FINANCING ACTIVITIES
Withdrawals of contractholder deposit (6,301) (154,100) (314,100)
funds, net of deposits and interest credited
Proceeds from borrowings 226,082 177,922 3,417
Repayment of borrowings (2,400) (12,726) (19,742)
Dividends paid to minority shareholders (6,245) (31,215)
------------- ------------- -----------
Net cash provided by (used for) financing activities 211,136 (20,119) (330,425)
NET INCREASE IN CASH AND CASH EQUIVALENTS 45,791 14,438 28,262
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 127,104 112,666 84,404
------------- ------------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 172,895 $ 127,104 $ 112,666
============= ============= ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid (refunded), net $ 76,157 $ 33,399 $ (32,245)
Interest paid on debt $ 19,214 $ 8,100 $ 8,191
</TABLE>
The accompanying notes are an integral part of these statements.
36
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company (Phoenix or the Company) and its
subsidiaries market a wide range of insurance and investment products and
services including individual participating life insurance, variable life
insurance, group life and health insurance, life and health reinsurance,
annuities, investment advisory and mutual fund distribution services,
insurance agency and brokerage operations, primarily based in the United
States. These products and services are distributed among seven segments:
Individual, Group Life and Health, Life Reinsurance, General Lines
Brokerage, Securities Management, Real Estate Management and Other
Operations. See Note 10 for segment information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Phoenix and
all significant subsidiaries (collectively, the Company). Less than
majority-owned entities in which the Company has at least a 20% interest or
those where the Company has significant influence are reported on the
equity basis.
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates used in
determining insurance and contractholder liabilities, related reinsurance
recoverables, taxes, contingencies and valuation allowances for investment
assets are discussed throughout the Notes to Consolidated Financial
Statements. All significant intercompany accounts and transactions have
been eliminated. Certain reclassifications have been made to the 1995 and
1994 amounts to conform with the 1996 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
As a result of the issuance of the Statement of Financial Accounting
Standard (SFAS) No. 120, "Accounting and Reporting by Mutual Life Insurance
Enterprises and Insurance Enterprises for Certain Long-Duration
Participating Contracts," and Financial Accounting Standards Board
Interpretation (FIN) No. 40, "Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises,"
financial statements of mutual life insurance companies beginning after
December 15, 1995, prepared on the basis of statutory accounting are no
longer characterized as in conformity with GAAP. The Company applied the
pronouncements of the Financial Accounting Standards Board (FASB) to its
financial statements in 1995, and, in accordance with SFAS No. 120 and FIN
No. 40, all prior periods presented were restated.
37
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
VALUATION OF INVESTMENTS
Investments in fixed maturities include bonds, asset-backed securities
including collateralized mortgage obligations (CMOs) and preferred stocks.
The Company classifies all its fixed maturities as either held-to-maturity
or available-for-sale investments. Fixed maturities held-to-maturity
consist of private placement bonds presented at amortized cost, net of
impairments, that management intends and has the ability to hold until
maturity. Fixed maturities available-for-sale are presented at fair value
with unrealized gains or losses included in equity and consist of public
bonds and preferred stocks that management may not hold until maturity.
Fixed maturities are considered impaired when a decline in value is
considered to be other than temporary.
Equity securities are classified as available-for-sale securities. These
securities are reported at fair value based principally on their quoted
market prices. Equity securities are considered impaired when a decline in
value is considered to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances, net
of valuation reserves on impaired mortgages. A mortgage loan is considered
to be impaired if management believes it is probable that the Company will
be unable to collect all amounts of contractual interest and principal as
scheduled in the loan agreement. An impaired mortgage loan's fair value is
measured based on the present value of future cash flows discounted at the
loan's observable market price or at the fair value of the collateral. If
the fair value of a mortgage loan is less than the recorded investment in
the loan, the difference is recorded as a valuation reserve.
Real estate held for sale is carried at the lower of cost or current fair
value less costs to sell. Foreclosed real estate is carried at appraised
value at the time of foreclosure. Subsequent to foreclosure, these
investments are carried at the lower of cost or current fair value less
costs to sell. Fair value for real estate is determined taking into
consideration one or more of the following factors: (i) property valuation
techniques utilizing discounted cash flows at the time of stabilization
including capital expenditures and stabilization costs; (ii) sales of
comparable properties; (iii) geographic location of the property and
related market conditions; and (iv) disposition costs.
Policy loans are generally carried at their unpaid principal balances and
are collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
fair value.
Other invested assets (primarily partnerships) are carried at cost adjusted
for the Company's equity in undistributed earnings or losses since
acquisition, less allowances for other than temporary declines in value.
Realized investment gains and losses, other than those related to separate
accounts for which the Company does not bear the investment risk, are
determined by the specific identification method and reported as a
component of revenue. A realized investment loss is recorded when an
investment valuation reserve is determined. Valuation reserves are netted
against the asset categories to which they apply and changes in the
valuation reserves are included in realized investment gains and losses.
Unrealized investment gains and losses on fixed maturities and equity
securities classified as available-for-sale are included as a separate
component of equity, net of deferred income taxes and deferred policy
acquisition costs.
38
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
In the normal course of business, the Company enters into transactions
involving various types of financial instruments, including debt,
investments such as fixed maturities, mortgage loans and equity securities,
and off-balance-sheet financial instruments such as investment and loan
commitments, financial guarantees, and interest rate swaps. These
instruments have credit risk and also may be subject to risk of loss due to
interest rate and market fluctuations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and money market
instruments.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, underwriting,
distribution and policy issue expenses, all of which vary with and are
primarily related to the production of revenues, are deferred. Deferred
policy acquisition costs are subject to recoverability testing at the time
of policy issue and loss recognition at the end of each accounting period.
For individual participating life insurance business, deferred policy
acquisition costs are amortized in proportion to historical and anticipated
gross margins. Deviations from expected experience are reflected in
earnings in the period such deviations occur.
For universal life, limited pay and investment type contracts, deferred
policy acquisition costs are amortized in proportion to total estimated
gross profits over the expected average life of the contracts using
estimated gross margins arising principally from investment, mortality and
expense margins and surrender charges based on historical and anticipated
experience, updated at the end of each accounting period.
PROPERTY AND EQUIPMENT
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by the Company, are stated at depreciated cost,
less a reserve for impairments in value. Real estate occupied by the
Company was $97.2 million and $95.0 million, respectively, at December 31,
1996 and 1995. The Company provides for depreciation using straight line
and accelerated methods over the estimated useful lives of the related
assets which generally range from five to forty years. Accumulated
depreciation and amortization was $144.1 million and $129.6 million at
December 31, 1996 and 1995, respectively.
OTHER ASSETS
Other assets consist of prepaid expenses and accounts receivable,
principally investment management fees receivable less allowances for
estimated uncollectible amounts.
39
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the cost of businesses acquired over the
fair value of their net assets. These costs are amortized on a
straight-line basis over periods, not exceeding 40 years, that correspond
with the benefits expected to be derived from the acquisitions. Intangible
assets are amortized on a straight-line basis over the estimated lives of
such assets. Management periodically reevaluates the propriety of the
carrying value of goodwill and intangible assets by comparing estimates of
future undiscounted cash flows to the carrying value of assets. Assets are
considered impaired if the carrying value exceeds the expected future
undiscounted cash flows.
SEPARATE ACCOUNTS
Separate account assets and liabilities are funds maintained in accounts to
meet specific investment objectives of contractholders who bear the
investment risk. Investment income and investment gains and losses accrue
directly to such contractholders. The assets of each account are legally
segregated and are not subject to claims that arise out of any other
business of the Company. The assets and liabilities are carried at market
value. Deposits, net investment income and realized investment gains and
losses for these accounts are excluded from revenues, and the related
liability increases are excluded from benefits and expenses. Amounts
assessed to the contractholders for management services are included in
revenues.
On March 1, 1996, the pooled separate accounts of Phoenix, excluding the
real estate separate accounts, were terminated and the assets of these
separate accounts were transferred to Phoenix Duff & Phelps' institutional
mutual funds.
POLICY LIABILITIES AND ACCRUALS
Future policy benefits are liabilities for life, health and annuity
products. Such liabilities are established in amounts adequate to meet the
estimated future obligations of policies in force. Policy liabilities for
traditional life insurance are computed using the net level premium method
on the basis of actuarial assumptions as to assumed rates of interest,
mortality, morbidity and withdrawals. Liabilities for universal life
include deposits received from customers and investment earnings on their
fund balances, less administrative charges. Universal life fund balances
are also assessed mortality charges.
Liabilities for outstanding claims, losses and loss adjustment expenses are
amounts estimated to cover incurred losses. These liabilities are based on
individual case estimates for reported losses and estimates of unreported
losses based on past experience.
Unearned premiums relate primarily to individual participating life
insurance as well as group life, accident and health insurance premiums.
The premiums are reported as earned on a pro-rata basis over the contract
period. The unexpired portion of these premiums is recorded as unearned
premiums.
Contractholder deposit funds and other policy liabilities include
investment-related products such as guaranteed investment contracts,
deposit administration funds and immediate participation guarantee funds.
These funds consist of deposits received from customers and investment
earnings on their fund balances.
40
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PREMIUM AND FEE REVENUE AND RELATED EXPENSES
Life insurance premiums, other than premiums for universal life and certain
annuity contracts, are recorded as premium revenue on a pro-rata basis over
each policy year. Benefits, losses and related expenses are matched with
premiums over the related contract periods. Revenues for investment-related
products consist of net investment income and contract charges assessed
against the fund values. Related benefit expenses primarily consist of net
investment income credited to the fund values after deduction for
investment and risk charges. Revenues for universal life products consist
of net investment income and mortality, administration and surrender
charges assessed against the fund values during the period. Related benefit
expenses include universal life benefit claims in excess of fund values and
net investment income credited to universal life fund values.
POLICYHOLDERS' DIVIDENDS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of the Company. The
amount of policyholders' dividends to be paid is determined annually by the
Company's board of directors. The aggregate amount of policyholders'
dividends is related to the actual interest, mortality, morbidity and
expense experience for the year and the Company's judgment as to the
appropriate level of statutory surplus to be retained. The participating
life insurance in force was 80.0% and 80.5% of the face value of total
individual life insurance in force at December 31, 1996 and 1995,
respectively. The premiums on participating life insurance policies were
84.1%, 84.7% and 84.5% of total individual life insurance premiums in 1996,
1995 and 1994, respectively. Total policyholders' dividends were $312
million, $289 million and $264 million in 1996, 1995 and 1994,
respectively.
INCOME TAXES
Phoenix and its eligible affiliated companies have elected to file a
life/nonlife consolidated federal income tax return for the tax years ended
December 31, 1996, 1995 and 1994. Entities included within the consolidated
group are segregated into either a life insurance or non-life insurance
company subgroup. The consolidation of these subgroups is subject to
certain statutory restrictions in the percentage of eligible non-life tax
losses that can be applied to offset life company taxable income.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities and accruals, policy acquisition expenses, investment
impairment reserves, reserves for postretirement benefits and unrealized
gains or losses on investments.
41
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. SIGNIFICANT TRANSACTIONS
PHOENIX DUFF & PHELPS CORPORATION
Effective January 1, 1995, the money management businesses of Phoenix were
completely transferred to Phoenix Securities Group, Inc. (Phoenix
Securities Group), an indirect wholly-owned subsidiary. Phoenix Securities
Group entered into contracts to manage the investments of the general and
separate accounts of Phoenix. On November 1, 1995, Phoenix, through its
subsidiary, PM Holdings, Inc. (PM Holdings), merged Phoenix Securities
Group into Duff & Phelps Corporation (D&P), forming Phoenix Duff & Phelps
Corporation (PDP). The transaction was accounted for as a reverse merger
with the purchase accounting method applied to D&P's assets and
liabilities. The purchase price was $190.7 million and PDP recorded $93.1
million of goodwill, which is being amortized over forty years using the
straight-line method. PM Holdings owns approximately 60% of the outstanding
PDP common stock. In addition, PM Holdings owns 1.4 million shares (45%) of
PDP's series A convertible exchangeable preferred stock. PM Holdings
recognized a non-operating, non-cash, tax free gain on this transaction of
$36.9 million resulting from the realization of the appreciation of the
stock exchanged which is included in the gain on merger transactions in the
consolidated statements of income.
SURPLUS NOTES
On November 25, 1996, the Company issued $175 million of surplus notes with
a 6.95% interest rate scheduled to mature on December 1, 2006. There are no
sinking fund provisions in the notes. The notes are classified as long-term
debt in the Consolidated Balance Sheet at December 31, 1996.
The notes were issued in accordance with Section 1307 of the New York
Insurance Law and, accordingly, interest and principal payments cannot be
made without the approval of the New York Insurance Department.
The notes were issued pursuant to Rule 144A under the Securities Act of
1933 underwritten by Bear, Stearns & Co. Inc., Chase Securities Inc. and
Merrill Lynch & Co. and are administered by Bank of New York as
registrar/paying agent.
ABERDEEN TRUST PLC
On March 25, 1996, the Company purchased 12.2 million shares of Aberdeen
Trust PLC (Aberdeen), a Scottish asset management firm. As of December 31,
1996, the Company owned 13.1 million shares representing 12.5% of
Aberdeen's outstanding common stock. The total cost of these transactions
was $26.4 million. The investment is recorded at cost adjusted for the
Company's equity in undistributed earnings less dividends received.
In addition, on April 15, 1996, the Company purchased a 7% convertible
subordinated note issued by Aberdeen for $37.5 million. The note, which
matures on March 29, 2003, may be converted at a price of $2.15 per share,
which would be equivalent to approximately 14% of Aberdeen's outstanding
common stock.
42
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In the spring of 1996, the Company and Aberdeen joined together to form
Phoenix-Aberdeen International Advisors, LLC, an SEC registered investment
advisor that, in conjunction with PDP and Aberdeen, will develop and market
investment products in the United States and the United Kingdom.
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
FIXED MATURITIES AND EQUITY SECURITIES
The amortized cost and fair value of investments in fixed maturities and
equity securities as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FIXED MATURITIES:
HELD-TO-MATURITY:
State and political subdivision bonds $ 11,685 $ 5 $ (375) $ 11,315
Corporate securities 1,525,999 61,692 (13,405) 1,574,286
Mortgage-backed securities 18,001 1,037 (15) 19,023
----------------- ------------------ ---------------- ---------------
Total 1,555,685 62,734 (13,795) 1,604,624
----------------- ------------------ ---------------- ---------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 561,017 13,970 (1,610) 573,377
State and political subdivision bonds 406,679 13,831 (1,154) 419,356
Foreign government bonds 174,298 31,441 (1,457) 204,282
Corporate securities 1,092,163 70,432 (7,968) 1,154,627
Mortgage-backed securities 2,509,232 60,321 (25,802) 2,543,751
----------------- ------------------ ---------------- ---------------
Total 4,743,389 189,995 (37,991) 4,895,393
----------------- ------------------ ---------------- ---------------
Total fixed maturities $ 6,299,074 $ 252,729 $ (51,786) $ 6,500,017
================= ================== ================ ===============
Equity securities available-for-sale $ 137,907 $ 100,258 $ (2,814) $ 235,351
================= ================== ================ ===============
</TABLE>
43
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in fixed maturities and
equity securities as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FIXED MATURITIES:
HELD-TO-MATURITY:
State and political subdivision bonds $ 20,915 $ 779 $ (142) $ 21,552
Corporate securities 1,297,049 125,055 (1,114) 1,420,990
Mortgage-backed securities 16,483 2,057 (37) 18,503
----------------- ---------------- -------------- -------------
Total 1,334,447 127,891 (1,293) 1,461,045
----------------- ---------------- -------------- -------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 572,304 29,684 (1,029) 600,959
State and political subdivision bonds 314,407 26,072 (1) 340,478
Foreign government bonds 59,149 6,436 (1,804) 63,781
Corporate securities 987,210 91,741 (3,950) 1,075,001
Mortgage-backed securities 2,269,618 95,176 (19,335) 2,345,459
----------------- ---------------- -------------- -------------
Total 4,202,688 249,109 (26,119) 4,425,678
----------------- ---------------- -------------- -------------
Total fixed maturities $ 5,537,135 $ 377,000 $ (27,412) $ 5,886,723
================= ================ ============== =============
Equity securities available-for-sale $ 197,526 $ 62,658 $ (5,906) $ 254,278
================= ================ ============== =============
</TABLE>
44
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of fixed maturities, by contractual
maturity, as of December 31, 1996 are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties, or
the Company may have the right to put or sell the obligations back to the
issuers.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 34,496 $ 35,001 $ 50,888 $ 51,214
Due after one year through five years 339,989 350,702 360,543 374,212
Due after five years through ten years 616,197 643,166 712,255 738,950
Due after ten years 547,002 556,732 1,110,471 1,187,266
Mortgage-backed securities 18,001 19,023 2,509,232 2,543,751
----------------- --------------- ---------------- ---------------
Total $ 1,555,685 $ 1,604,624 $ 4,743,389 $ 4,895,393
================= =============== ================ ===============
</TABLE>
Carrying values for investments in mortgage-backed securities, excluding
U.S. government guaranteed investments, were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
MORTGAGE-BACKED SECURITIES
Planned amortization class $ 618,953 $ 787,840
Asset-backed 490,018 436,734
Mezzanine 322,812 365,034
Commercial 413,571 230,083
Sequential pay 552,512 397,950
Pass through 105,282 85,017
Other 58,604 59,284
----------------- -----------------
Total mortgage-backed securities $ 2,561,752 $ 2,361,942
================= =================
Phoenix had 37% and 49% at December 31, 1996 and 1995, respectively, in
planned amortization class and mezzanine mortgage-backed securities which
have reasonably predictable cash flows and a relatively high degree of
prepayment protection. Phoenix has limited exposure in the more volatile
residential derivative market such as interest-only, principal-only or
inverse float instruments.
45
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MORTGAGE LOANS AND REAL ESTATE
The Company's mortgage loans and real estate are diversified by property
type and location and, for mortgage loans, by borrower. Mortgage loans are
collateralized by the related properties and are generally 75% of the
properties' value at the time the original loan is made.
The carrying values of mortgage loans and real estate investments, net of
applicable reserves, were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Mortgage loans $ 947,076 $ 897,192
Real estate held for sale 410,945 418,328
------------------ -------------------
Total $ 1,358,021 $ 1,315,520
================== ===================
During 1996 and 1995, non-cash investing activities included real estate
acquired through foreclosure of mortgage loans and purchase money
mortgages, which had a fair value of $1.5 million and $35 million,
respectively.
46
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Mortgage loans and real estate investments are comprised of the following
property types and geographic regions:
MORTGAGE LOANS
DECEMBER 31,
1996 1995
(IN THOUSANDS)
PROPERTY TYPE:
Office buildings $ 251,526 $ 191,672
Retail 257,721 250,172
Apartment buildings 241,286 244,589
Industrial buildings 197,013 222,120
Other 47,928 54,446
Valuation allowances (48,398) (65,807)
----------------------- ---------------------
Total $ 947,076 $ 897,192
======================= =====================
GEOGRAPHIC REGION:
Northeast $ 260,146 $ 233,670
Southeast 261,956 250,019
North central 158,902 171,434
South central 57,507 50,819
West 256,963 257,057
Valuation allowances (48,398) (65,807)
----------------------- ---------------------
Total $ 947,076 $ 897,192
======================= =====================
REAL ESTATE
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Property type:
Office buildings $ 246,644 $ 267,505
Retail 121,813 127,500
Apartment buildings 26,286 36,644
Industrial buildings 56,134 61,667
Other 7,577 8,767
Valuation allowances (47,509) (83,755)
----------------------- ----------------------
Total $ 410,945 $ 418,328
======================= =====================
GEOGRAPHIC REGION:
Northeast $ 103,761 $ 102,249
Southeast 110,746 130,944
North central 86,070 85,470
South central 85,532 91,670
West 72,345 91,750
Valuation allowances (47,509) (83,755)
----------------------- ----------------------
Total $ 410,945 $ 418,328
======================= =====================
47
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
At December 31, 1996, scheduled mortgage loan maturities were as follows:
1997 - $176 million; 1998 - $138 million; 1999 - $99 million; 2000 - $106
million; 2001 - $98 million; and $378 million thereafter. Actual maturities
could differ from contractual maturities because borrowers may have the
right to prepay obligations with or without prepayment penalties and loans
may be refinanced. The Company refinanced $28.9 million and $100.4 million
of its mortgage loans during 1996 and 1995, respectively, based on terms
which differed from those granted to new borrowers.
INVESTMENT VALUATION ALLOWANCES
Investment valuation allowances which have been deducted in arriving at
investment carrying values as presented in the consolidated balance sheets
and changes thereto were as follows:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
JANUARY 1, ADDITIONS DEDUCTIONS DECEMBER 31,
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996
Mortgage loans $ 65,807 $ 7,640 $ (25,049) $ 48,398
Real estate 83,755 2,526 (38,772) 47,509
------------------ ------------------ --------------------- -------------------
Total $ 149,562 $ 10,166 $ (63,821) $ 95,907
================== ================== ===================== ===================
1995
Mortgage loans $ 118,970 $ (53,163) $ 65,807
Real estate 108,652 $ 8,604 (33,501) 83,755
------------------ ------------------ --------------------- -------------------
Total $ 227,622 $ 8,604 $ (86,664) $ 149,562
================== ================== ===================== ===================
</TABLE>
NON-INCOME PRODUCING MORTGAGES LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $4.5
million and $3.8 million at December 31, 1996 and 1995, respectively.
There were no non-income producing bonds at December 31, 1996 and 1995.
INTEREST RATE SWAPS
Phoenix enters into interest rate swap agreements, generally having
maturities of seven years or less, to hedge certain variable rate
investment income streams matched against fixed rate liability streams. The
notional amounts of these investments were $60.1 million and $18 million at
December 31, 1996 and 1995, respectively. Average received and average paid
rates were 8.04% and 5.65% for 1996.
The Company has also guaranteed an interest rate swap that has the effect
of the Company paying a fixed interest rate on a notional amount of $184.7
million of the Company's debt.
These agreements do not require the exchange of underlying principal
amounts, and accordingly the Company's maximum exposure to credit risk is
the difference in interest payments exchanged. Management of Phoenix
considers the likelihood of any material loss on these guarantees or
interest rate swaps to be remote.
48
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
OTHER INVESTED ASSETS
Other invested assets, consisting primarily of partnership interests and
equity in unconsolidated subsidiaries, were as follows:
DECEMBER 31,
1996 1995
(in thousands)
Venture capital equity partnerships $ 66,284 $ 50,919
Transportation and equipment leases 46,950 47,810
Investment in Aberdeen Trust, PLC 29,980
Investment in Beutel, Goodman & Co. LTD 34,541 39,730
Other 4,617 6,319
------------- ---------------
Total other invested assets $ 182,372 $ 144,778
============= ===============
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Fixed maturities $ 469,713 $ 437,521 $ 395,192
Equity securities 4,689 1,787 3,312
Mortgage loans 84,318 92,283 111,122
Policy loans 117,742 115,055 105,678
Real estate 21,799 20,910 17,087
Other invested assets 332 871 1,212
Short-term investments 18,688 21,974 11,673
----------------- ----------------- ----------------
Sub-total 717,281 690,401 645,276
Less investment expenses 27,391 27,933 22,559
----------------- ----------------- ----------------
Net investment income $ 689,890 $ 662,468 $ 622,717
================= ================= ================
</TABLE>
Investment income of $.4 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1996. The Company does
not accrue interest income on impaired mortgage loans and impaired bonds
when the likelihood of collection is doubtful.
The payment terms of mortgage loans may from time to time be restructured
or modified. The investment in restructured mortgage loans, based on
amortized cost, amounted to $61.5 million and $76 million at December 31,
1996 and 1995, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $3.1 million, $6.6 million and $10.1 million in 1996,
1995 and 1994, respectively. Actual interest income on these loans included
in net investment income aggregated $5.2 million, $6.4 million and $11.3
million in 1996, 1995 and 1994, respectively.
49
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Unrealized gains and losses on investments carried at fair value for the
year ended December 31, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Unrealized investment gains (losses)
Fixed maturities $ (70,986) $ 476,352 $ (411,694)
Equity securities 40,803 24,527 2,706
------------------ ------------------ -------------------
(30,183) 500,879 (408,988)
Deferred policy acquisition costs 51,528 (341,836) 292,423
Deferred income taxes (benefits) 7,432 55,692 (40,804)
------------------ ------------------ -------------------
Net unrealized investment gains (losses) $ 13,913 $ 103,351 $ (75,761)
==================== ================== =====================
</TABLE>
Realized investment gains and losses for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities $ (10,476) $ 8,080 $ (20,554)
Equity securities 59,794 29,276 (8,950)
Mortgage loans 2,628 (262) 485
Real estate 24,711 20,535 16,063
Other invested assets 18,608 17,109 12,790
-------------------- ------------------ ---------------------
95,265 74,738 (166)
Income taxes (benefits) 33,343 26,158 (58)
-------------------- ------------------ ---------------------
Net realized investment gains (losses) $ 61,922 $ 48,580 $ (108)
==================== ================== =====================
</TABLE>
The proceeds from sales of available-for-sale fixed maturities and the
gross realized gains and gross realized losses on those sales for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from sales $ 1,525,011 $ 1,201,700 $ 733,800
Gross gains on sales $ 15,966 $ 30,300 $ 16,500
Gross losses on sales $ (27,905) $ (19,900) $ (45,500)
</TABLE>
50
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Goodwill $ 231,135 $ 211,084
Investment management contracts 56,700 60,700
Client listings 41,410 31,437
Non-compete covenants 5,000 9,314
Intangible asset related to
pension plan benefits 19,835 22,540
Other 1,220 4,066
----------------- -------------------
355,300 339,141
Accumulated amortization (41,793) (26,072)
----------------- -------------------
Total $ 313,507 $ 313,069
================= ===================
PDP's amounts included above were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Goodwill $ 179,406 $ 167,014
Investment management contracts 56,700 60,700
Non-compete covenants 5,000 5,000
Other 1,220 4,066
----------------- ------------------
242,326 236,780
Accumulated amortization (13,198) (6,211)
----------------- ------------------
Total $ 229,128 $ 230,569
================= ==================
6. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Financial instruments that are subject to fair value disclosure
requirements (insurance contracts are excluded) are carried in the
financial statements at amounts that approximate fair value. The fair
values presented for certain financial instruments are estimates which, in
many cases, may differ significantly from the amounts which could be
realized upon immediate liquidation. In cases where market prices are not
available, estimates of fair value are based on discounted cash flow
analyses which utilize current interest rates for similar financial
instruments which have comparable terms and credit quality.
51
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
FIXED MATURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
fixed maturities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values are calculated as the present value of scheduled payments, with
the discount based upon (1) the Treasury rate comparable for the remaining
loan duration, plus (2) a spread of between 175 and 450 basis points,
depending on the internal quality rating of the loan. For loans in
foreclosure or default, values were determined assuming principal recovery
was the lower of the loan balance or the estimated value of the underlying
property.
POLICY LOANS
Fair values are estimated as the present value of loan interest and policy
loan repayments discounted at the ten year Treasury rate. Loan repayments
were assumed only to occur as a result of anticipated policy lapses, and it
was assumed that annual policy loan interest payments were made at the
guaranteed loan rate less 17.5 basis points. Discounting was at the ten
year Treasury rate, except for policy loans with a variable policy loan
rate. Variable policy loans have an interest rate that is reset annually
based upon market rates and therefore, book value is a reasonable
approximation of fair value.
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair value of deferred annuities and supplementary contracts without
life contingencies with an interest guarantee of one year or less is valued
at the amount of the policy reserve. In determining the fair value of
deferred annuities and supplementary contracts without life contingencies
with interest guarantees greater than one year, a discount rate equal to
the appropriate Treasury rate, plus 150 basis points, was used to determine
the present value of the projected account value of the policy at the end
of the current guarantee period.
52
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest guarantees of less than one year for which
interest credited is closely tied to rates earned on owned assets. For such
liabilities, fair value is assumed to be equal to the stated liability
balances.
DEBT
The carrying value of long-term debt reported on the balance sheet
approximates fair value.
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1996 1995
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash $ 172,895 $ 172,895 $ 127,104 $ 127,104
equivalents
Short-term investments 164,967 164,967 275,517 275,517
Fixed maturities 6,451,078 6,500,017 5,760,125 5,886,723
Equity securities 235,351 235,351 254,278 254,278
Mortgage loans 947,076 986,900 897,192 955,800
Policy loans 1,667,784 1,645,899 1,617,872 1,658,000
--------------- ----------------- -------------------- ------------------
Total financial assets $ 9,639,151 $ 9,706,029 $ 8,932,088 $ 9,157,422
=============== ================= ==================== ==================
Financial liabilities:
Policy liabilities $ 875,200 $ 875,100 $ 955,600 $ 955,800
Long-term debt 492,020 492,020 268,337 268,337
--------------- ----------------- -------------------- ------------------
Total financial liabilities $ 1,367,220 $ 1,367,120 $ 1,223,937 $ 1,224,137
=============== ================= ==================== ==================
</TABLE>
7. DEBT
Long-term debt was as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Unsecured debt
Bank borrowings $ 287,365 $ 241,157
Notes payable 25,457 23,995
Other 58
------------------ ----------------
Total unsecured debt 312,822 265,210
Surplus notes 175,000
Secured debt 2,608 3,127
------------------ ----------------
Total long-term debt $ 490,430 $ 268,337
================== ================
53
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company has various lines of credit established with major commercial
banks. As of December 31, 1996, the Company had outstanding balances
totaling $287.4 million. The total unused credit was $120.9 million. The
Company records commitment fees as a component of interest expense.
Interest rates range from 5.73% to 8.25% in 1996.
On November 25, 1996, the Company issued $175 million of surplus notes (See
Note 3).
Maturities of long-term debt are as follows: 1997 - $17 million; 1998 - $90
million; 1999 - $7 million; 2000 - $177 million; 2001 - $24 million; 2002
and thereafter - $175 million.
Interest expense on long-term debt was $18.0 million, $7.7 million and $9.0
million for the years ended December 31, 1996, 1995 and 1994, respectively.
8. INCOME TAXES
A summary of income taxes (benefits) in the consolidated statements of
income for the year ended December 31, was as follows:
1996 1995 1994
(in thousands)
Income taxes
Current 59,673 59,590 (28,874)
Deferred 19,658 (16,238) 68,936
---------------- --------------- ---------------
Total 79,331 43,352 40,062
================ =============== ===============
The income taxes attributable to the consolidated results of operations are
different than the amounts determined by multiplying income before taxes by
the statutory income tax rate. The sources of the difference and the tax
effects of each for the year ended December 31, were as follows (in
thousands, aside from the percentages):
<TABLE>
<CAPTION>
1996 1995 1994
% % %
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $ 66,136 35 $ 55,318 35 $ 24,754 35
Non-taxable gain on PDP merger (14,203) (9)
Dividend received deduction &
tax-exempt interest (2,107) (1) (623) (1,177) (2)
Other, net 2,736 1 2,860 1 (4,082) (5)
-------------- -------- ------------- -------- ------------- ----------
66,765 35 43,352 27 19,495 28
Differential earnings (equity tax) 12,566 7 20,567 29
-------------- -------- ------------- -------- ------------- ----------
Income taxes $ 79,331 42 $ 43,352 27 $ 40,062 57
============== ======== ============= ======== ============= ==========
</TABLE>
54
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The deferred income tax liability (asset) represents the tax effects of
temporary differences attributable to the consolidated tax return group.
The components were as follows:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Deferred policy acquisition costs $ 220,135 $ 221,034
Unearned premium/deferred revenue (131,513) (127,699)
Impairment reserves (43,331) (58,314)
Pension and other postretirement benefits (58,230) (51,985)
Investments 50,219 50,542
Future policyholder benefits (37,904) (47,800)
Other 15,633 (13,716)
----------------- --------------
15,009 (27,938)
Net unrealized investment gains 48,320 40,888
PDP purchase accounting adjustment 23,290
Minimum pension liability (1,395) (2,064)
Foreign tax credit (1,109) (1,057)
------------------ --------------
Deferred tax liability, net
before valuation allowance 60,825 33,119
Valuation allowance 1,109 1,057
------------------ --------------
Deferred tax liability, net $ 61,934 $ 34,176
================== ==============
It is management's assessment, based on the Company's earnings and
projected future taxable income, that it is more likely than not that the
deferred tax assets at December 31, 1996 and 1995, with the exception of
the foreign tax credit, will be realized.
Gross deferred income tax assets totaled $274 million and $301 million at
December 31, 1996 and 1995, respectively. Gross deferred income tax
liabilities totaled $336 million and $335 million at December 31, 1996 and
1995, respectively.
The Internal Revenue Service (IRS) is currently examining the Company's tax
returns for 1991-1994. Management does not believe that there will be a
material adverse effect on the financial statements as a result of pending
tax matters.
55
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
The Company has a non-contributory, defined benefit pension plan covering
substantially all of its employees. Retirement benefits are a function of
both years of service and level of compensation. The Company also sponsors
a non-qualified supplemental defined benefit plan to provide benefits in
excess of amounts allowed pursuant to Internal Revenue Code Section
401(a)(17). Phoenix's funding policy is to contribute annually an amount
equal to at least the minimum required contribution in accordance with
minimum funding standards established by the Employee Retirement Income
Security Act of 1974. Contributions are intended to provide not only for
benefits attributable to service to date, but also for service expected to
be earned in the future.
Components of net periodic pension cost for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 10,076 $ 9,599 $ 10,181
Interest accrued on projected benefit obligation 22,660 19,880 19,181
Actual return on assets (38,788) (62,567) (18,073)
Net amortization and deferral 17,318 45,807 (613)
--------------- ---------------- ---------------
Net periodic pension cost $ 11,266 $ 12,719 $ 10,676
=============== ================ ===============
</TABLE>
In 1996, the Company offered an early retirement window which granted an
additional benefit of five years of age and service. As a result of the
early retirement window, the Company recorded an additional pension expense
of $8.7 million for the year ended December 31, 1996.
56
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The funded status of the plan for which assets exceeded accumulated
benefit obligations was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 213,148 $ 171,077
Non-vested benefit obligation 14,828 16,248
-------------------- ---------------------
Accumulated benefit obligation $ 227,976 $ 187,325
==================== =====================
Pension liability included in other liabilities:
Projected benefit obligation $ 261,886 $ 227,585
Plan assets at fair value 292,070 267,013
-------------------- ---------------------
Plan assets in excess of
projected benefit obligation 30,184 39,428
Unrecognized net gain from past experience (52,312) (46,960)
Unrecognized prior service benefit (240) (273)
Unamortized transition asset (19,745) (22,214)
-------------------- ---------------------
Net pension liability $ (42,113) $ (30,019)
==================== =====================
</TABLE>
At December 31, 1996 and 1995, the non-qualified plan was unfunded and had
projected benefit obligations of $50.0 million and $43.4 million,
respectively. The accumulated benefit obligations as of December 31, 1996
and 1995 related to this plan were $37.4 million and $36.2 million,
respectively, and are included in other liabilities.
The Company recorded, as a reduction of policyholders' equity, an
additional minimum pension liability of $2.8 million and $3.8 million, net
of Federal income taxes, at December 31, 1996 and 1995, respectively,
representing the excess of accumulated benefit obligations over the fair
value of plan assets and accrued pension liabilities for the non-qualified
plan. The Company has also recorded an intangible asset of $19.8 million
and $22.5 million as of December 31, 1996 and 1995 related to pension plan
benefits.
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit
obligation were 7.5% and 4.5%, for 1996 and 8.0% and 5.0% for 1995. The
discount rate assumption for 1996 was determined based on a study that
matched available high quality investment securities with the expected
timing of pension liability payments. The expected long-term rate of return
on retirement plan assets was 8.0%.
57
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The pension plan's assets include corporate and government debt
securities, equity securities, real estate, venture capital funds, and
shares of mutual funds.
The Company also sponsors savings plans for its employees and agents which
are qualified under Internal Revenue Code Section 401(k). Employees and
agents may contribute a portion of their annual salary, subject to
limitation, to the plans. The Company contributes an additional amount,
subject to limitation, based on the voluntary contribution of the employee
or agent. Company contributions charged to expense with respect to these
plans during the years ended December 31, 1996, 1995 and 1994 were $4.2
million, $4.2 million and $4.0 million, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to the Company's pension plans, the Company currently provides
certain health care and life insurance benefits to retired employees,
spouses and other eligible dependents through various plans sponsored by
Phoenix. A substantial portion of Phoenix's employees may become eligible
for these benefits upon retirement. The health care plans have varying
copayments and deductibles, depending on the plan. These plans are
unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The plan's funded status reconciled with amounts recognized in the
Company's consolidated balance sheet, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 30,576 $ 37,900
Fully eligible active plan participants 11,466 10,500
Other active plan participants 21,614 24,856
----------------- -----------------
63,656 73,256
Unrecognized net gain
from past experience 29,173 14,102
----------------- -----------------
Accrued postretirement benefit liability $ 92,829 $ 87,358
================= =================
</TABLE>
58
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during year $ 2,765 $ 3,366 $ 2,942
Interest cost accrued on benefit obligation 4,547 5,275 5,179
Net amortization (1,577) (458)
--------------- --------------- ---------------
Net periodic postretirement benefit cost $ 5,735 $ 8,183 $ 8,121
=============== =============== ===============
</TABLE>
In addition to the net periodic postretirement benefit cost, the Company
expensed an additional $3.0 million for postretirement benefits related to
the early retirement window.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5% at December 31, 1996 and 8.0% at December 31,
1995.
For purposes of measuring the accumulated postretirement benefit obligation
at December 31, 1996, health care costs were assumed to increase 9.5% in
1997, declining thereafter until the ultimate rate of 5.5% is reached in
2002 and remains at that level thereafter. For purposes of measuring the
accumulated postretirement benefit obligation at December 31, 1995, health
care costs were assumed to increase 11% in 1996, declining thereafter until
the ultimate rate of 5.5% is reached in 2002 and remained at that level
thereafter. The health care cost trend rate assumption has a significant
effect on the amounts reported. For example, increasing the assumed health
care cost trend rates by one percentage point in each year would increase
the accumulated postretirement benefit obligation by $3.9 million and the
annual service and interest cost by $.6 million, before taxes. Gains and
losses that occur because actual experience differs from the estimates are
amortized over the average future service period of employees.
OTHER POSTEMPLOYMENT BENEFITS
The Company recognizes the costs and obligations of severance, disability
and related life insurance and health care benefits to be paid to inactive
or former employees after employment but before retirement. Postemployment
benefit expense was $.6 million for 1996, $.5 million for 1995 and $(1.9)
million for 1994.
59
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix operates principally in seven segments: Individual, Group Life and
Health, Life Reinsurance, General Lines Brokerage, Securities Management,
Real Estate Management and Other Operations.
Other Operations includes unallocated investment income, expenses and
realized investment gains related to capital in excess of segment
requirements; assets primarily consist of equity securities.
Summarized below is financial information with respect to the business
segments:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Individual $ 1,796,572 $ 1,752,338 $ 1,643,074
Group Life and Health 462,551 421,771 409,883
Life Reinsurance 143,314 128,813 102,120
General Lines Brokerage 61,809 40,977 22,382
Securities Management 164,966 112,206 104,429
Real Estate Management 13,550 13,562 12,439
Other Operations 82,273 48,873 10,400
--------------------- ------------------ -----------------
Total $ 2,725,035 $ 2,518,540 $ 2,304,727
===================== ================== =================
DECEMBER 31,
1996 1995 1994
(IN THOUSANDS)
OPERATING INCOME
Individual $ 65,226 $ 45,858 $ 23,306
Group Life and Health 9,092 17,422 14,584
Life Reinsurance 7,993 17,391 11,492
General Lines Brokerage (2,935) (1,887) (521)
Securities Management 27,506 23,667 27,285
Real Estate Management (3,783) (184) 727
Other Operations 85,862 15,204 (6,146)
--------------------- ------------------ -----------------
Total $ 188,961 $ 117,471 $ 70,727
===================== ================== =================
</TABLE>
DECEMBER 31,
1996 1995
(IN THOUSANDS)
IDENTIFIABLE ASSETS
Individual $ 13,547,132 $ 12,104,989
Group Life and Health 590,545 542,139
Life Reinsurance 294,441 273,036
General Lines Brokerage 117,340 115,558
Securities Management 294,803 811,438
Real Estate Management 319,406 297,166
Other Operations 289,381 293,151
--------------------- ------------------
Total $ 15,453,048 $ 14,437,477
===================== ==================
60
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. LEASES AND RENTALS
Rental expenses for operating leases, principally with respect to
buildings, amounted to $14.8 million, $14.6 million and $13.8 million in
1996, 1995, and 1994, respectively. Future minimum rental payments under
non-cancelable operating leases were approximately $41.9 million as of
December 31, 1996, payable as follows: 1997 - $15.8 million; 1998 - $11.6
million; 1999 - $7.5 million; 2000 - $4.7 million; 2001 - $1.8 million;
and $.5 million thereafter.
12. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix assumes and
cedes reinsurance as a means of diversifying underwriting risk. The
maximum amount of individual life insurance retained by the Company on any
one life is $8,000,000 for single life and joint first-to-die policies and
$10,000,000 for joint last-to-die policies, with excess amounts ceded to
reinsurers. For reinsurance ceded, the Company remains liable in the event
that assuming reinsurers are unable to meet the contractual obligations.
Amounts recoverable from reinsurers are estimated in a manner consistent
with the claim liability associated with the reinsured policy.
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,473,869 $ 1,455,459 $ 1,455,467
Reinsurance assumed 276,630 271,498 205,387
Reinsurance ceded (231,677) (270,082) (264,852)
-------------------- ------------------- --------------------
Net premiums $ 1,518,822 $ 1,456,875 $ 1,396,002
==================== =================== ====================
Direct policy and contract claims incurred $ 575,824 $ 605,545 $ 610,004
Reinsurance assumed 170,058 256,529 167,276
Reinsurance ceded (160,646) (292,357) ( 217,911)
-------------------- ------------------- --------------------
Net policy and contract claims incurred $ 585,236 $ 569,717 $ 559,369
==================== =================== ====================
Direct life insurance in force $ 108,816,856 $ 102,606,749 $ 95,717,768
Reinsurance assumed 61,109,836 36,724,852 27,428,529
Reinsurance ceded (51,525,976) (34,093,090) (24,372,415)
-------------------- ------------------- --------------------
Net insurance in force $ 118,400,716 $ 105,238,511 $ 98,773,882
==================== =================== ====================
</TABLE>
Irrevocable letters of credit aggregating $5.2 million at December 31,
1996 have been arranged with United States commercial banks in favor of
Phoenix to collateralize the ceded reserves.
61
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
13. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred
and amortized for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 816,128 $ 1,128,227 $ 832,839
Acquisition expense deferred 153,873 143,519 150,326
Amortized to expense during the year (95,255) (113,788) (147,361)
Adjustment to equity during the year 51,528 (341,830) 292,423
------------------ ------------------ ------------------
Balance at end of year $ 926,274 $ 816,128 $ 1,128,227
================== ================== ==================
</TABLE>
14. MINORITY INTEREST
The Company's interests in Phoenix Duff and Phelps Corporation and
American Phoenix Corporation, through its wholly-owned subsidiary PM
Holdings is represented by ownership of approximately 60% and 92%,
respectively, of the outstanding shares of common stock at December 31,
1996. Earnings and stockholders' equity attributable to minority
shareholders are included in minority interest in the consolidated
financial statements along with PDP's preferred stock.
15. CONTINGENCIES
FINANCIAL GUARANTEES
The Company is contingently liable for financial guarantees provided in
the ordinary course of business on the repayment of principal and
interest on certain industrial revenue bonds. The contractual amounts of
financial guarantees reflect the Company's maximum exposure to credit
loss in the event of nonperformance. The principal amount of bonds
guaranteed by the Company at December 31, 1996 and 1995 was $88.8 million
and $87.6 million, respectively. Management believes that any loss
contingencies which may arise from the Company's financial guarantees
would not have a material adverse effect on the Company's liquidity or
financial condition.
LITIGATION
In 1996, the Company announced the settlement of a class action suit which
was approved by a New York State Supreme Court judge on January 3, 1997.
The suit related to the sale of individual participating life insurance and
universal life insurance policies from 1980 to 1995. An after tax provision
of $25 million was recorded in 1995. In addition, $7 million after-tax was
expensed in 1996. The Company estimates the cost of settlement to be
between $35 million and $40 million after tax. Management believes, after
consideration of the provisions made in these financial statements, this
suit will not have a material effect on the Company's financial position.
62
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company is a defendant in various legal proceedings arising in the
normal course of business. In the opinion of management, based on the
advice of legal counsel after consideration of the provisions made in
these financial statements, the ultimate resolution of these proceedings
will not have a material effect on the Company's consolidated financial
position.
16. STATUTORY FINANCIAL INFORMATION
The insurance subsidiaries are required to file annual statements with
state regulatory authorities prepared on an accounting basis prescribed
or permitted by such authorities. As of December 31, 1996, there were no
material practices not prescribed by the Insurance Department of the
State of New York. Statutory surplus differs from policyholders' equity
reported in accordance with GAAP for life insurance companies primarily
because policy acquisition costs are expensed when incurred, investment
reserves are based on different assumptions, postretirement benefit costs
are based on different assumptions and reflect a different method of
adoption, life insurance reserves are based on different assumptions and
income tax expense reflects only taxes paid or currently payable.
The following reconciles the statutory net income of the Company as
reported to regulatory authorities to the net income as reported in these
financial statements for the year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 72,961 $ 64,198 $ 4,152
Deferred policy acquisition costs, net 58,618 29,766 2,965
Future policy benefits (16,793) (15,763) (3,443)
Pension and postretirement expenses (23,275) (12,691) (8,350)
Investment valuation allowances 76,631 56,745 60,747
Interest maintenance reserve (5,158) 5,829 (19,545)
Deferred income taxes (67,064) (10,021) (11,626)
Other, net 4,808 (4,314) 5,778
----------------- ---------------- --------------
Net income, as reported $ 100,728 $ 113,749 $ 30,678
================= ================ ==============
</TABLE>
63
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following reconciles the statutory surplus and asset valuation
reserve (AVR) of the Company as reported to regulatory authorities to
equity as reported in these financial statements:
DECEMBER 31,
1996 1995
(IN THOUSANDS)
Statutory surplus and AVR $ 1,102,200 $ 875,322
Deferred policy acquisition costs, net 897,096 864,505
Future policy benefits (239,252) (249,141)
Pension and postretirement expenses (152,112) (133,452)
Investment valuation allowances (139,562) (171,889)
Interest maintenance reserve 6,897 11,872
Deferred income taxes 82,069 87,418
Surplus notes (157,500)
Other, net (2,367) (3,048)
----------------- --------------
Equity, as reported $ 1,397,469 $ 1,281,587
================= ==============
64
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
INTERIM FINANCIAL STATEMENTS
JUNE 30, 1997
<PAGE>
PHOENIX HOME LIFE
VARIABLE UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
The Subaccounts of Phoenix Home Life Variable Universal Life Account to which
allocations under the Policy may be made will be activated upon the effective
date of this registration statement, therefore, financial data with respect to
these Subaccounts is not available.
65
<PAGE>
APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
Contributions to the GIA under the Policy and transfers to the GIA become
part of the Phoenix General Account (the "General Account"), which supports
insurance and annuity obligations. Because of exemptive and exclusionary
provisions, interest in the General Account has not been registered under the
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. Premium payments will be allocated
to the GIA and, therefore, the General Account, as elected by the Policyowner at
the time of purchase or as subsequently changed. 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.
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 Policies will vary from
year to year in the sole discretion of Phoenix. However, Phoenix guarantees that
it will credit interest at a rate of not less than 4% per year, compounded
annually, to amounts allocated to the unloaned portion of the GIA. The loaned
portion of the GIA will be credited interest at an effective annual rate of 2%
(4% on Policies issued in New York). Phoenix may credit interest at a rate in
excess of 4% per year; however, it is not obligated to credit any interest in
excess of 4% per year.
Bi-weekly, Phoenix will set the excess interest rate, if any, that will
apply to amounts deposited to the GIA. That rate will remain in effect for such
deposits for an initial guarantee period of one full year from the date of
deposit. Upon expiration of the initial one-year guarantee period (and each
subsequent one-year guarantee period thereafter), the rate to be applied to any
deposits whose guaranteed period has just ended will be the same rate as is
applied to new deposits allocated at that time to the GIA. This rate will
likewise remain in effect for a guarantee period of one full year from the date
the new rate is applied.
Excess interest, if any, will be determined by Phoenix based on information
as to expected investment yields. Some of the factors that Phoenix may consider
in determining whether to credit interest to amounts allocated to the GIA and
the amount thereof, are general economic trends, rates of return currently
available and anticipated on investments, regulatory and tax requirements and
competitive factors. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE GIA IN
EXCESS OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF 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 OF 4%
FOR ANY GIVEN YEAR.
Phoenix is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in Phoenix's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
Policyholders and Contract Owners.
Excess interest, if any, will be credited on the GIA Policy Value. Phoenix
guarantees that, at any time, the GIA Policy Value will not be less than the
amount of premium payments allocated to the GIA, plus interest at the rate of 4%
per year, compounded annually, plus any additional interest which Phoenix may,
in its discretion, credit to the GIA, less the sum of all annual administrative
or surrender charges, any applicable premium taxes, and less any amounts
surrendered or loaned. If the Policyowner surrenders the Policy, the amount
available from the GIA will be reduced by any applicable surrender charge and
annual administration charge. See "Deductions and Charges."
IN GENERAL, YOU CAN MAKE ONLY ONE TRANSFER PER YEAR FROM THE GIA. THE AMOUNT
THAT CAN BE TRANSFERRED OUT IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
POLICY VALUE IN THE GIA AS OF THE DATE OF THE TRANSFER. IF YOU ELECT THE
SYSTEMATIC TRANSFER PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT
OF THE GIA. ALSO, THE TOTAL POLICY VALUE ALLOCATED TO THE GIA MAY BE TRANSFERRED
OUT OF THE GIA TO ONE OR MORE OF THE SUBACCOUNTS OF THE VUL ACCOUNT OVER A
CONSECUTIVE FOUR-YEAR PERIOD ACCORDING TO THE FOLLOWING SCHEDULE:
YEAR ONE: 25% YEAR TWO: 33.3%
YEAR THREE: 50% YEAR FOUR: 100%
66
<PAGE>
APPENDIX B
ILLUSTRATIONS OF DEATH BENEFITS, POLICY VALUES ("ACCOUNT VALUES")
AND CASH SURRENDER VALUES
The tables on the following pages illustrate how a Policy's death benefits,
account values and Cash Surrender Value could vary over time assuming constant
hypothetical gross (after tax) annual investment returns of 0%, 6% and 12%. The
Policy benefits will differ from those shown in the tables if the annual
investment returns are not absolutely constant. That is, the figures will be
different if the returns averaged 0% to 12% over a period of years but went
above or below those figures in individual Policy Years. The Policy benefits
also will differ, depending on your premium allocations to each Subaccount of
the VUL Account, if the overall actual rates of return averaged 0% to 12% but
went above or below those figures for the individual Subaccounts. The tables are
for standard risk males and females who have never smoked. In states where cost
of insurance rates are not based on the Insured's sex, the tables designated
"male" apply to all standard risk Insureds who have never smoked. Account values
and Cash Surrender Values may be lower for smokers or former smokers or for risk
classes involving higher mortality risk. Planned premium payments are assumed to
be paid at the beginning of each Policy Year. The difference between the Policy
Value and the Cash Surrender Value in the first 10 years is the surrender
charge. Tables are included for death benefit Option 1 and Option 2. Tables also
are included to reflect the blended cost of insurance charge applied under a
multiple life Policy.
The death benefit, account value and Cash Surrender Value amounts reflect
the following current charges:
1. Issue Charge of $600.
2. Monthly Administrative Charge of $20 per month for Face Amounts of less than
or equal to $400,000; $0.05 per thousand for Face Amounts of $400,000 up to
$1,600,000; and $80 per month for Face Amounts over $1,600,000.
3. Premium Tax Charge of 2.25%.
4. A Federal Tax Charge of 1.5%.
5. Cost of Insurance Charge. The tables illustrate cost of insurance at both
the current rates and at the maximum rates guaranteed in the Policies. (See
"Charges and Deductions--Cost of Insurance.")
6. Mortality and Expense Risk Charge, which is a daily charge equivalent to
.80% on an annual basis (.25% on an annual basis after the 15th Policy
Year), against the VUL Account for mortality and expense risks. (See
"Charges and Deductions--Mortality and Expense Risk Charge.")
These illustrations also assume an average investment advisory fee of .72%
on an annual basis, of the average daily net asset value of each of the Series
of the Funds. These illustrations also assume other ongoing average Fund
expenses of .21%. Management may decide to limit the amount of expense
reimbursement in the future. If this reimbursement had not been in place for the
fiscal year ended December 31, 1996, total operating expenses for the Growth,
Multi-Sector, Allocation, Money Market, Balanced, Real Estate, Theme, Asia,
International, U.S. Small Cap and International Small Cap Series would have been
approximately .72%, .67%, .70%, .55%, .68%, 1.43%, 1.28%, 2.87%, 1.04%, 1.21%
and 1.79%, respectively, of the average net assets of the Series. (See "Charges
and Deductions--Investment Management Charge.")
Taking into account the Mortality and Expense Risk Charge and the investment
advisory fees and expenses, the gross annual investment return rates of 0%, 6%
and 12% on the Funds' assets are equivalent to net annual investment return
rates of approximately -1.72%, 4.23% and 10.19%, respectively (applicable
for the first 15 Policy Years for Single Life Policies and -1.18%, 4.81% and
10.79%, respectively, after the 15th Policy Year for Single Life Policies). For
individual illustrations, interest rates ranging between 0% and 12% may be
selected in place of the 12% rate.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the VUL Account in the future. If such tax charges
are imposed in the future, then in order to produce after tax returns equal to
those illustrated for 0%, 6% and 12%, a sufficiently higher amount in excess of
the hypothetical interest rates would have to be earned. (See "Charges and
Deduction--Other Charges--Taxes.")
The second column of each table shows the amount that would accumulate if an
amount equal to the premiums paid were invested to earn interest, after taxes,
at 5% compounded annually. These tables show that if a Policy is returned in its
very early years for payment of its Cash Surrender Value, that Cash Surrender
Value may be low in comparison to the amount of the premiums accumulated with
interest. Thus, the cost of owning a Policy for a relatively short time may be
high.
On request, we will furnish the Policyowner with a comparable illustration
based on the age and sex of the proposed insured person(s), standard risk
assumptions and the initial face amount and planned premium chosen.
67
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $250,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,200
<TABLE>
ESTATE EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,200 1,260 67 0 250,000 95 0 250,000 123 0 250,000
2 1,200 2,583 904 0 250,000 994 0 250,000 1,088 0 250,000
3 1,200 3,972 1,727 527 250,000 1,932 732 250,000 2,152 952 250,000
4 1,200 5,431 2,535 1,335 250,000 2,909 1,709 250,000 3,324 2,124 250,000
5 1,200 6,962 3,329 2,129 250,000 3,927 2,727 250,000 4,616 3,416 250,000
6 1,200 8,570 4,110 2,958 250,000 4,989 3,837 250,000 6,039 4,887 250,000
7 1,200 10,259 4,876 4,012 250,000 6,095 5,231 250,000 7,606 6,742 250,000
8 1,200 12,032 5,629 5,053 250,000 7,247 6,671 250,000 9,332 8,756 250,000
9 1,200 13,893 6,368 6,080 250,000 8,447 8,159 250,000 11,234 10,946 250,000
10 1,200 15,848 7,094 7,094 250,000 9,698 9,698 250,000 13,329 13,329 250,000
11 1,200 17,901 8,104 8,104 250,000 11,308 11,308 250,000 15,955 15,955 250,000
12 1,200 20,056 9,095 9,095 250,000 12,986 12,986 250,000 18,849 18,849 250,000
13 1,200 22,318 10,068 10,068 250,000 14,734 14,734 250,000 22,035 22,035 250,000
14 1,200 24,694 11,023 11,023 250,000 16,554 16,554 250,000 25,545 25,545 250,000
15 1,200 27,189 11,959 11,959 250,000 18,449 18,449 250,000 29,410 29,410 250,000
16 1,200 29,808 12,948 12,948 250,000 20,536 20,536 250,000 33,853 33,853 250,000
17 1,200 32,559 13,923 13,923 250,000 22,719 22,719 250,000 38,773 38,773 250,000
18 1,200 35,447 14,882 14,882 250,000 25,005 25,005 250,000 44,221 44,221 250,000
19 1,200 38,479 15,826 15,826 250,000 27,395 27,395 250,000 50,253 50,253 250,000
20 1,200 41,663 16,753 16,753 250,000 29,896 29,896 250,000 56,932 56,932 250,000
@ 65 1,200 83,713 24,730 24,730 250,000 61,839 61,839 250,000 178,997 178,997 250,000
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in
year 33.
Death benefit, account value, and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
premium payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.73%
(includes mortality and expense risk charge of 0.8% for fifteen years, then
0.25% and average fund operating expenses of 0.93% applicable to the
investment Subaccounts of the VUL Separate Account). Hypothetical gross interest
rates are presented for illustrative purposes only to illustrate funds allocated
entirely to the investment Subaccounts of the VUL Separate Account and do not in
any way represent actual results or suggest that such results will be achieved
in the future. Actual values will differ from those shown whenever actual
investment results differ from hypothetical gross interest rates illustrated. A
Guaranteed Interest Account providing interest at a minimum guaranteed rate of
4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
68
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $250,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,200
<TABLE>
ESTATE EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,200 1,260 67 0 250,000 94 0 250,000 122 0 250,000
2 1,200 2,583 902 0 250,000 992 0 250,000 1,086 0 250,000
3 1,200 3,972 1,721 521 250,000 1,926 726 250,000 2,146 946 250,000
4 1,200 5,431 2,524 1,324 250,000 2,898 1,698 250,000 3,312 2,112 250,000
5 1,200 6,962 3,311 2,111 250,000 3,908 2,708 250,000 4,595 3,395 250,000
6 1,200 8,570 4,082 2,930 250,000 4,959 3,807 250,000 6,005 4,853 250,000
7 1,200 10,259 4,837 3,973 250,000 6,050 5,186 250,000 7,555 6,691 250,000
8 1,200 12,032 5,574 4,998 250,000 7,184 6,608 250,000 9,260 8,684 250,000
9 1,200 13,893 6,294 6,006 250,000 8,361 8,073 250,000 11,133 10,845 250,000
10 1,200 15,848 6,997 6,997 250,000 9,582 9,582 250,000 13,192 13,192 250,000
11 1,200 17,901 7,978 7,978 250,000 11,157 11,157 250,000 15,773 15,773 250,000
12 1,200 20,056 8,935 8,935 250,000 12,791 12,791 250,000 18,610 18,610 250,000
13 1,200 22,318 9,866 9,866 250,000 14,486 14,486 250,000 21,727 21,727 250,000
14 1,200 24,694 10,772 10,772 250,000 16,243 16,243 250,000 25,153 25,153 250,000
15 1,200 27,189 11,651 11,651 250,000 18,063 18,063 250,000 28,917 28,917 250,000
16 1,200 29,808 12,570 12,570 250,000 20,057 20,057 250,000 33,234 33,234 250,000
17 1,200 32,559 13,462 13,462 250,000 22,131 22,131 250,000 38,004 38,004 250,000
18 1,200 35,447 14,324 14,324 250,000 24,286 24,286 250,000 43,271 43,271 250,000
19 1,200 38,479 15,153 15,153 250,000 26,522 26,522 250,000 49,089 49,089 250,000
20 1,200 41,663 15,944 15,944 250,000 28,839 28,839 250,000 55,512 55,512 250,000
@ 65 1,200 83,713 20,364 20,364 250,000 56,047 56,047 250,000 171,434 171,434 250,000
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
39.
Death benefit, account value, and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
premium payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.73%
(includes mortality and expense risk charge of 0.8% for fifteen years, then
0.25% and average fund operating expenses of 0.93% applicable to the investment
Subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds allocated entirely
to the investment Subaccounts of the VUL Separate Account and do not in any way
represent actual results or suggest that such results will be achieved in the
future. Actual values will differ from those shown whenever actual investment
results differ from hypothetical gross interest rates illustrated. A Guaranteed
Interest Account providing interest at a minimum guaranteed rate of 4% also is
available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
69
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $250,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,200
<TABLE>
ESTATE EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,200 1,260 67 0 250,068 95 0 250,095 123 0 250,123
2 1,200 2,583 904 0 250,905 994 0 250,995 1,088 0 251,089
3 1,200 3,972 1,727 527 251,727 1,932 732 251,932 2,152 952 252,153
4 1,200 5,431 2,535 1,335 252,535 2,909 1,709 252,909 3,324 2,124 253,325
5 1,200 6,962 3,329 2,129 253,329 3,927 2,727 253,928 4,616 3,416 254,616
6 1,200 8,570 4,109 2,957 254,110 4,988 3,836 254,989 6,038 4,886 256,039
7 1,200 10,259 4,876 4,012 254,876 6,094 5,230 256,095 7,606 6,742 257,606
8 1,200 12,032 5,629 5,053 255,629 7,246 6,670 257,247 9,332 8,756 259,332
9 1,200 13,893 6,368 6,080 256,368 8,446 8,158 258,447 11,233 10,945 261,234
10 1,200 15,848 7,094 7,094 257,094 9,697 9,697 259,697 13,328 13,328 263,328
11 1,200 17,901 8,103 8,103 258,104 11,307 11,307 261,308 15,954 15,954 265,954
12 1,200 20,056 9,094 9,094 259,095 12,985 12,985 262,985 18,846 18,846 268,847
13 1,200 22,318 10,067 10,067 260,067 14,732 14,732 264,733 22,032 22,032 272,033
14 1,200 24,694 11,021 11,021 261,022 16,552 16,552 266,552 25,541 25,541 275,541
15 1,200 27,189 11,957 11,957 261,958 18,446 18,446 268,447 29,404 29,404 279,405
16 1,200 29,808 12,946 12,946 262,946 20,531 20,531 270,532 33,845 33,845 283,846
17 1,200 32,559 13,919 13,919 263,920 22,713 22,713 272,714 38,762 38,762 288,762
18 1,200 35,447 14,878 14,878 264,878 24,996 24,996 274,997 44,205 44,205 294,206
19 1,200 38,479 15,820 15,820 265,820 27,384 27,384 277,384 50,231 50,231 300,231
20 1,200 41,663 16,745 16,745 266,745 29,880 29,880 279,880 56,900 56,900 306,901
@ 65 1,200 83,713 24,623 24,623 274,624 61,550 61,550 311,551 178,120 178,120 428,120
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
33.
Death benefit, account value, and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
premium payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.73%
(includes mortality and expense risk charge of 0.8% for fifteen years, then
0.25% and average fund operating expenses of 0.93% applicable to the investment
Subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds allocated entirely
to the investment Subaccounts of the VUL Separate Account and do not in any way
represent actual results or suggest that such results will be achieved in the
future. Actual values will differ from those shown whenever actual investment
results differ from hypothetical gross interest rates illustrated. A Guaranteed
Interest Account providing interest at a minimum guaranteed rate of 4% also is
available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
70
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $250,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,200
<TABLE>
ESTATE EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,200 1,260 67 0 250,067 94 0 250,094 122 0 250,122
2 1,200 2,583 902 0 250,902 992 0 250,992 1,086 0 251,086
3 1,200 3,972 1,721 521 251,722 1,926 726 251,926 2,146 946 252,146
4 1,200 5,431 2,524 1,324 252,525 2,897 1,697 252,898 3,312 2,112 253,312
5 1,200 6,962 3,311 2,111 253,312 3,908 2,708 253,908 4,594 3,394 254,595
6 1,200 8,570 4,082 2,930 254,082 4,958 3,806 254,958 6,004 4,852 256,005
7 1,200 10,259 4,836 3,972 254,836 6,049 5,185 256,049 7,554 6,690 257,554
8 1,200 12,032 5,573 4,997 255,574 7,182 6,606 257,183 9,258 8,682 259,258
9 1,200 13,893 6,292 6,004 256,293 8,358 8,070 258,359 11,129 10,841 261,130
10 1,200 15,848 6,994 6,994 256,995 9,578 9,578 259,579 13,186 13,186 263,187
11 1,200 17,901 7,974 7,974 257,975 11,152 11,152 261,152 15,765 15,765 265,765
12 1,200 20,056 8,929 8,929 258,930 12,783 12,783 262,784 18,597 18,597 268,598
13 1,200 22,318 9,859 9,859 259,859 14,475 14,475 264,475 21,709 21,709 271,709
14 1,200 24,694 10,762 10,762 260,763 16,227 16,227 266,227 25,126 25,126 275,127
15 1,200 27,189 11,638 11,638 261,638 18,041 18,041 268,041 28,879 28,879 278,879
16 1,200 29,808 12,552 12,552 262,553 20,026 20,026 270,027 33,180 33,180 283,181
17 1,200 32,559 13,439 13,439 263,439 22,089 22,089 272,090 37,927 37,927 287,928
18 1,200 35,447 14,294 14,294 264,294 24,229 24,229 274,230 43,164 43,164 293,165
19 1,200 38,479 15,113 15,113 265,114 26,446 26,446 276,446 48,939 48,939 298,940
20 1,200 41,663 15,893 15,893 265,893 28,738 28,738 278,739 55,306 55,306 305,306
@ 65 1,200 83,713 19,916 19,916 269,916 54,748 54,748 304,749 167,331 167,331 417,331
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
38.
Death benefit, account value, and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
premium payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.73%
(includes mortality and expense risk charge of 0.8% for fifteen years, then
0.25% and average fund operating expenses of 0.93% applicable to the investment
Subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds allocated entirely
to the investment Subaccounts of the VUL Separate Account and do not in any way
represent actual results or suggest that such results will be achieved in the
future. Actual values will differ from those shown whenever actual investment
results differ from hypothetical gross interest rates illustrated. A Guaranteed
Interest Account providing interest at a minimum guaranteed rate of 4% also is
available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
71
<PAGE>
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
RULE 484 UNDERTAKING
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 judgement 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 Phoenix Home Life provides that:
"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.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
UNDER THE INVESTMENT COMPANY ACT OF 1940.
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, Phoenix Home Life Mutual Insurance Company represents that the fees and
charges deducted under the Policies, 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.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Form S-6 Registration Statement comprises the following papers and
documents:
The facing sheet.
The cross-reference sheet to Form N-8B-2.
The Prospectus describing Phoenix Home Life Mutual Insurance Company Policy
Form V602 and riders thereto, "Estate Edge," consisting of 71 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representation Pursuant to Section 26(e)(2)(A) of the Investment Company Act
of 1940.
The signature page.
The powers of attorney are incorporated herein by reference to
Post-Effective Amendment No. 13 to Form S-6, Registration No. 33-23251,
filed on April 26, 1996.
Written consents of the following persons:
(a) Edwin L. Kerr, Esq.
(b) Jorden Burt Berenson & Johnson LLP
(c) Price Waterhouse, LLP
(d) M. Spencer Hamilton, F.S.A.
The following exhibits:
1. The following exhibits correspond to those required by paragraph A to the
instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of the Board of Directors of Depositor establishing the
VUL Account is incorporated herein by reference to Registration
Statement on Form S-6, Registration No. 33-23251, filed on July
21, 1988.
(2) Not Applicable.
(3) Distribution of Policies:
(a) Master Service and Distribution Compliance Agreement between
Depositor and Phoenix Equity Planning Corporation dated
December 31, 1996, filed via Edgar with Registrant's
Registration Statement on Form S-6 filed on March 12, 1997.
(b) Form of Broker Dealer Supervisory and Service Agreement
between Phoenix Equity Planning Corporation and Independent
Brokers with respect to the sale of Policies.*
(c) Not Applicable.
(4) Not Applicable.
(5) Specimen Policies with optional riders.
Flexible Premium Variable Universal Life Insurance Policy Form
Number V602 of Depositor, filed via Edgar with Registrant's
Registration Statement on Form S-6 filed on March 12, 1997.
(6) (a) Charter of Phoenix Home Life Mutual Insurance Company is
incorporated herein by reference to Post-Effective Amendment
No. 12 to Form S-6, Registration No. 33-23251, filed on
February 13, 1996.
(b) By-Laws of Phoenix Home Life Mutual Insurance Company is
incorporated herein by reference to Post-Effective Amendment
No. 12 to Form S-6, Registration No. 33-23251, filed on
February 13, 1996.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Form of application for Estate Edge.*
II-2
<PAGE>
(11) Memorandum describing transfer and redemption procedures and
method of computing adjustments in payments and cash values upon
conversion to fixed benefit policies, filed via Edgar with
Registrant's Registration Statement on Form S-6 filed on March 12,
1997.
2. Opinion of Edwin L. Kerr, Esq., Counsel of Depositor as to the legality
of the securities being registered. (See number 9 below.)
3. Not Applicable. No financial statement will be omitted from the
Prospectus pursuant to Instruction 1(b) or (c) of Part I.
4. Not Applicable.
5. Not Applicable.
6. Consent of Jorden Burt Berenson & Johnson, LLP.*
7. Consent of Price Waterhouse, LLP.*
8. Opinion and Consent of Edwin L. Kerr, Esq.*
9. Consent of M. Spencer Hamilton, F.S.A.*
- --------------
* Filed herewith.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Phoenix Home Life Variable Universal Life Account has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Hartford, State of Connecticut on the 10th day
of September, 1997.
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
-------------------------------------------------
(Registrant)
By: PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
---------------------------------------------
(Depositor)
By: /s/ Dona D. Young
---------------------------------------------
*Dona D. Young, Executive Vice President,
Individual Insurance and General Counsel
ATTEST: /s/John H. Beers
-------------------------------------
John H. Beers, Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities on the 10th day of September, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Director
- --------------------------------------
*Sal H. Alfiero
Director
- --------------------------------------
*J. Carter Bacot
Director
- --------------------------------------
*Carol H. Baldi
Director
- --------------------------------------
*Peter C. Browning
Director
- --------------------------------------
Arthur P. Byrne
Director
- --------------------------------------
*Richard N. Cooper
Director
- --------------------------------------
*Gordon J. Davis
Chairman of the Board, President and Chief
- --------------------------------------
*Robert W. Fiondella Executive Officer (Principal Executive Officer)
Director
- --------------------------------------
*Jerry J. Jasinowski
Director
- --------------------------------------
*Marilyn E. LaMarche
Director
- --------------------------------------
*Philip R. McLoughlin
Director
- --------------------------------------
Indra Nooyi
</TABLE>
S-1(c)
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Director
- --------------------------------------
*Charles J. Paydos
Director
- --------------------------------------
^*Herbert Roth, Jr.
Executive Vice President and Chief Financial
- --------------------------------------
*David W. Searfoss Officer (Principal Accounting and Financial
Officer)
Director
- --------------------------------------
*Robert F. Vizza
Director
- --------------------------------------
*Robert G. Wilson
</TABLE>
By: /s/ Dona D. Young
-----------------------------------------------------
*Dona D. Young as Attorney-in-Fact pursuant to Powers of Attorney,
previously filed. (Refer to page II-2.)
S-2(c)
EXHIBIT 1.A.(3)(B)
FORM OF BROKER DEALER SUPERVISORY AND SERVICE AGREEMENT
BETWEEN PHOENIX EQUITY PLANNING CORPORATION AND INDEPENDENT BROKERS
WITH RESPECT TO THE SALE OF POLICIES.
<PAGE>
[ Phoenix logo goes here ] BROKER-DEALER VARIABLE CONTRACT
SUPERVISORY AND SERVICE AGREEMENT
- --------------------------------------------------------------------------------
Phoenix Equity Planning Corporation ("PEPCO"), the master servicer and
distributor for the Contracts hereunder described and the undersigned
broker-dealer (the "Broker-Dealer"), enter into this Agreement as of the date
indicated, for the purpose of appointing the Broker-Dealer to perform the
services hereunder described, subject to the following provisions:
1. Except as provided below, PEPCO hereby appoints the Broker-Dealer to provide
sales assistance with respect to, and to cause applications to be solicited
for the purchase of variable annuity contracts and/or variable life policies
issued by Phoenix Home Life Mutual Insurance Company, Phoenix Life and
Annuity Company and/or PHL Variable Insurance Company (the "Insurer")
through Separate Accounts including the Phoenix Home Life Variable
Accumulation Account, Phoenix Home Life Variable Universal Life Account,
Phoenix Life and Annuity Variable Universal Life Account and PHL Variable
Accumulation Account and listed on Schedules A1, A2, B and C. Broker-Dealer
accepts such appointment and agrees to use its best efforts to provide sales
assistance to producers of the Insurer and to cause applications for the
purchase of contracts and/or policies to be solicited by such producers.
Broker-Dealer agrees to pay a commission to such producers.
2. The Broker-Dealer will promptly forward to the appropriate office of
Phoenix, or its authorized designee, all contract and/or policy applications
along with other documents, if any, and any payments received with such
applications and will have no rights of set off for any reason. Any Contract
application which is rejected, together with any payment made and other
documents submitted, shall be returned to the Broker-Dealer.
3. PEPCO shall pay the Broker-Dealer service payments relating to applications
submitted by Broker-Dealer. The amount to be paid by PEPCO is specified on
Schedule A1, A2, B and C of this Agreement. The Broker-Dealer agrees to
return promptly to PEPCO, all compensation received for any Contract
returned within the "free look" period as specified in the Contract.
4. The Broker-Dealer represents that it is a registered broker-dealer under the
Securities Exchange Act of 1934, a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"), and is registered as a
broker-dealer under state law to the extent required in order to provide the
services described in this Agreement. Broker-Dealer agrees to abide by all
rules and regulations of the NASD, including its Rules of Fair Practice, and
to comply with all applicable state and federal laws and the rules and
regulations of authorized regulatory agencies affecting the sale of the
contracts and/or policies, including the prospectus delivery requirements
under the Securities Act of 1933 for the contracts and/or policies and any
underlying mutual fund. The Broker-Dealer agrees to notify PEPCO promptly of
any change, termination, or suspension of its status. Broker-Dealer shall
immediately notify PEPCO with respect to: i) the initiation and disposition
of any form of disciplinary action by the NASD or any other agency or
instrumentality having jurisdiction with respect to the subject matter
hereof against Broker-Dealer or any of its employees or agents; ii) the
issuance of any form of deficiency notice by the NASD or any such agency
regarding Broker-Dealer's training, supervision or sales practices; and/or
iii) the effectuation of any consensual order with respect thereto.
5. In connection with the solicitation of applications for the purchase of
contracts and/or policies, Broker-Dealer agrees to indemnify and hold
harmless PEPCO and the Insurer from any damage or expense as a result of:
(a) the negligence, misconduct or wrongful act of Broker-Dealer or any
employee, representative or agent of the Broker-Dealer; and/or (b) any
actual or alleged violation of any securities or insurance laws, regulations
or orders. Any indebtedness or obligation of the Broker-Dealer to PEPCO or
the Insurer, whether arising hereunder or otherwise, and any liabilities
incurred or monies paid by PEPCO or the Insurer to any person as a result of
any misrepresentation, wrongful or unauthorized act or omission, negligence
of, or failure of Broker-Dealer or its employees, producers, and registered
representatives to comply with this Agreement, shall be set off against any
compensation payable under this Agreement. Notwithstanding the foregoing,
Broker-Dealer shall not indemnify and hold harmless PEPCO and the Insurer
from any damage or expense on account of the negligence, misconduct or
wrongful act of Broker-Dealer or any employee, representative or producer of
Broker-Dealer if such negligence, misconduct or wrongful act arises out of
or is based upon any untrue statement or alleged untrue statement of
material fact, or the omission or alleged omission of a material fact in:
(i) any registration statement, including any
1
HO3272 4-97
<PAGE>
prospectus or any post-effective amendment thereto; or (ii) any material
prepared and/or supplied by PEPCO or the Insurer for use in conjunction with
the offer or sale of Contracts; or (iii) any state registration or other
document filed in any state or jurisdiction in order to qualify any contract
and/or policy under the securities laws of such state or jurisdiction. The
terms of this provision shall not be impaired by termination of this
Agreement.
In connection with the solicitation of applications for the purchase of
contracts and/or policies, PEPCO and the Insurer agree to indemnify and hold
harmless Broker-Dealer from any damage or expense on account of the
negligence, misconduct or wrongful act of PEPCO or the Insurer or any
employee, representative or producer of PEPCO or the Insurer, including but
not limited to, any damage or expense which arises out of or is based upon
any untrue statement or alleged untrue statement of material fact, or the
omission or alleged omission of a material fact in: (i) any registration
statement, including any prospectus or any post-effective amendment thereto;
or (ii) any material prepared and/or supplied by PEPCO or the Insurer for
use in conjunction with the offer or sale of the contracts and/or policies;
or (iii) any state registration or other document filed in any state or
other jurisdiction in order to qualify any contract and/or policy under the
securities laws of such state or jurisdiction. The terms of this provision
shall not be impaired by termination of this Agreement.
6. The Broker-Dealer will itself be, or will select persons associated with it
who are, trained and qualified to solicit applications for purchase of
contracts and/or policies in conformance with applicable state and federal
laws. Any such persons shall be registered representatives of the
Broker-Dealer in accordance with the rules of the NASD, be licensed to offer
the contract and/or policy in accordance with the insurance laws of any
jurisdiction in which such person solicits applications, be licensed with
and appointed by the Insurer to solicit applications for the contracts
and/or policies and have entered into the appropriate Variable Contracts
Insurance Commission Agreement with the Insurer, if applicable. Under the
Variable Contracts Insurance Commission Agreement, the Insurer will make
payments to insurance producers. Broker-Dealer will train and supervise its
representatives to insure that purchase of a contract and/or policy is not
recommended to an applicant in the absence of reasonable grounds to believe
that the purchase of a contract and/or policy is suitable for that
applicant. Broker-Dealer shall pay the fees to regulatory authorities in
connection with obtaining necessary securities licenses and authorizations
for registered representatives to solicit applications for the purchase of
contracts and/or policies. Broker-Dealer is not responsible for fees in
connection with the appointment of registered representatives as insurance
agents of the Insurer.
7. The activities of all producers referred to in Paragraph 6 will be under the
direct supervision and control of the Broker-Dealer. The right of such
producers to solicit applications for the purchase of contracts and/or
policies is subject to their continued compliance with the rules and
procedures which may be established by the Broker-Dealer, PEPCO or the
Insurer, including those set forth in this Agreement.
8. The Broker-Dealer shall ensure that applications for the purchase of
contracts and/or policies are solicited only in the states where the
contracts and/or policies are qualified for sale, and only in accordance
with the terms and conditions of the then current prospectus applicable to
the contracts and/or policies and will make no representations not included
in the prospectus, Statement of Additional Information, or in any authorized
supplemental material supplied by PEPCO. With regard to the contracts and/or
policies, the Broker-Dealer shall not use or permit its producers to use any
sales promotion materials or any form of advertising other than that
supplied or approved by PEPCO. Broker-Dealer shall ensure that the
prospectus delivery requirements under the Securities Act of 1933 and all
other applicable securities and insurance laws, rules and regulations are
met and that delivery of any prospectus for the contracts and/or policies
will be accompanied by delivery of the prospectus for the underlying mutual
funds.
9. The Broker-Dealer understands and agrees that in performing the services
covered by this Agreement, it is acting in the capacity of an independent
contractor and not as an agent or employee of PEPCO, and that it is not
authorized to act for, or make any representation on behalf of, PEPCO or the
Insurer except as specified herein. Broker-Dealer understands and agrees
that PEPCO shall execute telephone transfer orders only in accordance with
the terms and conditions of the then current prospectus applicable to the
contracts and/or policies and agrees that, in consideration for the
Broker-Dealer's right to exercise the telephone transfer privilege, neither
PEPCO nor the Insurer will be liable for any loss, injury or damage incurred
as a result of acting upon, nor will they be held responsible for the
authenticity of, any telephone instructions containing unauthorized,
incorrect or incomplete information. Broker-Dealer agrees to indemnify and
hold harmless PEPCO and the Insurer against any loss, injury or damage
resulting from any telephone exchange instruction containing unauthorized,
2
<PAGE>
incorrect or incomplete information received from Broker-Dealer or any of
its registered representatives. (Telephone instructions are recorded on
tape.)
10. This Agreement may not be assigned by the Broker-Dealer without the prior
consent of PEPCO. Any party hereto may cancel this Agreement at any time
upon written notice. This Agreement shall automatically terminate if the
Broker-Dealer voluntarily or involuntarily ceases to be or is suspended from
being, a member in good standing of the NASD. Provided further, PEPCO
reserves the right to terminate this Agreement in the event that any
employee or agent of Broker-Dealer is suspended, disciplined or found to be
in violation of governing insurance or securities laws, rules or
regulations. Furthermore, PEPCO reserves the right to revise the payments
for services described in this Agreement as set forth in Paragraph 3 at any
time upon the mailing of written notice to the Broker-Dealer. Failure of any
party to terminate this Agreement for any of the causes set forth in this
Agreement shall not constitute a waiver of the right to terminate this
Agreement at a later time for any such causes.
11. This Agreement on the part of the Broker-Dealer runs to PEPCO and the
Insurer and is for the benefit of and enforceable by each. This Agreement
shall be governed by and construed in accordance with the laws of the State
of Connecticut. This Agreement supersedes any agreement in effect prior to
May 1, 1995. Your first contract/policy sale after receipt of this Agreement
shall constitute your acceptance of its terms. If Agreement is not returned,
"default" Commission Option 1 will be applied. If you do not wish to
participate in solicitating applications for one of the available products,
you must complete Section 12.
12. Applications for the following products will not be solicited by any
representative, employee or agent of the Broker-Dealer:
A. [ ] Phoenix Home Life Mutual Insurance Company
[ ] Variable Annuities
[ ] Variable Universal Life
B. [ ] PHL Variable Insurance Company
[ ] Variable Annuities
C. [ ] Phoenix Life and Annuity Company
[ ] Variable Universal Life
Broker-Dealer Firm:
Name of Firm: _____________________________________________________________
By: _______________________________________________________________________
Print Name & Title: _______________________________________________________
Date: __________________________ NASD CRD Number __________________________
Phoenix Equity Planning Corporation
By: _______________________________________________________________________
Title: ____________________________________________________________________
Date: _____________________________________________________________________
3
<PAGE>
[ Phoenix logo goes here ]
PHOENIX IS:
Phoenix Home Life Mutual Insurance Company
Phoenix Life and Annuity Company
PHL Variable Insurance Company
Phoenix Equity Planning Corporation
MAIN ADMINISTRATIVE OFFICE:
Hartford, Connecticut
<PAGE>
[ Phoenix logo goes here ] Schedule A-1 (Variable Annuities)
Phoenix Home Life Mutual Insurance Company
- --------------------------------------------------------------------------------
Broker-Dealer has been appointed by PEPCO to provide sales assistance to
producers of Phoenix Home Life Mutual Insurance Company and to cause to be
solicited applications for the purchase of the following contracts ("Contracts")
issued by Phoenix Home Life Mutual Insurance Company:
THE BIG EDGE - INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS (FORM 2545) issued
by the Phoenix Home Life Variable Accumulation Account of Phoenix Home Life
Mutual Insurance Company. PEPCO, as paying agent for Phoenix Home Life Mutual
Insurance Company, shall pay the Broker-Dealer a service payment equal to 5.0%
of premiums paid under The Big Edge contracts.
THE BIG EDGE AND BIG EDGE PLUS - INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
(FORMS 2645 & 2646, RESPECTIVELY) issued by the Phoenix Home Life Variable
Accumulation Account of Phoenix Home Life Mutual Insurance Company. PEPCO, as
paying agent for Phoenix Home Life Mutual Insurance Company, shall pay the
Broker-Dealer a service payment equal to 6.0% of premiums paid under The Big
Edge contracts.
THE GROUP STRATEGIC EDGE - UNALLOCATED GROUP DEFERRED VARIABLE ANNUITY CONTRACTS
(FORM GD603) issued by the Phoenix Home Life Variable Accumulation Account of
Phoenix Home Life Mutual Insurance Company. PEPCO, as paying agent for Phoenix
Home Life Mutual Insurance Company, shall pay the Broker-Dealer a service
payment equal to 5% of first $20,000 of premiums paid, 4% of the next $30,000 of
premiums paid, and 3.5% of such premiums paid over $50,000. Banded compensation
will be processed on a calendar year basis, based upon aggregate premiums paid
under the contract in that calendar year. A persistency bonus is payable on a
calendar quarterly basis, beginning in the second calendar year for each
contract, at an effective annual rate of .20% of net assets.
THE GROUP STRATEGIC EDGE - ALLOCATED GROUP DEFERRED VARIABLE ANNUITY CONTRACTS
(FORM GD601) issued by the Phoenix Home Life Variable Accumulation Account of
Phoenix Home Life Mutual Insurance Company. PEPCO, as paying agent for Phoenix
Home Life Mutual Insurance Company shall pay the Broker-Dealer a service payment
from one of the three Commission Options available as described below. If more
than one Commission Option is chosen, Broker-Dealer agrees that its
representatives may select from the specified Commissions Options at the time a
Contract is purchased. Once a Commission Option has been selected it cannot be
changed in the future. Broker-Dealer may also allow specified representatives to
utilize a Commission Option other than what is selected below on a contract by
contract basis by completing the section on the Commission Election form titled
"Exception." Option 1 shall apply: if a Commission Option is not selected by the
Broker-Dealer; in the event that the Broker-Dealer has approved more than one
Commission Option and an application is received without a Commission Election
form; a Commission Election form is submitted with an Option not approved by the
Broker-Dealer; or an Exception Section of the Commission Election form is not
signed by the Broker Dealer. If only one Commission Option is selected by the
Broker-Dealer, that Option will always be invoked.
Please check one or more of the following Commission Options:
OPTION NUMBER OPTION DESCRIPTION
[ ] 1. 5% of first $20,000 of premiums paid, 4% of the
next $30,000 of premiums paid, and 3.5% of such
premiums paid over $50,000.
[ ] 2. 3% of first $20,000 of premiums paid, 2.5% of
such premiums paid over $20,000 with an annual
trail commission of .25% beginning in the 2nd
year.
[ ] 3. 1% of premiums paid plus a trail commission of
.50% beginning in the 2nd year.
Banded compensation will be processed on a calendar year basis, based upon
aggregate premiums paid under the contract in that calendar year.
Trail commissions will be paid on the Contract Value on a calendar quarter basis
on deposits held under the Contract for a year or more.
HO3272VA 4-97
<PAGE>
[ Phoenix logo goes here ] SCHEDULE A-2 (VARIABLE LIFE)
Phoenix Home Life Mutual Insurance Company
- --------------------------------------------------------------------------------
THE PHOENIX EDGE - INDIVIDUAL VARIABLE LIFE INSURANCE POLICIES (FORM 5000)
issued by the Phoenix Variable Universal Life Account of Phoenix Home Life
Mutual Insurance Company. PEPCO, as paying agent for Phoenix Home Life Mutual
Insurance Company, shall pay the Broker-Dealer a service payment equal to 5% of
premium payments made under The Phoenix Edge policies.
FLEX EDGE SUCCESS (FORM V603) AND FLEX EDGE (FORM 2667) - FLEXIBLE PREMIUM
INDIVIDUAL VARIABLE LIFE INSURANCE POLICIES issued by the Phoenix Variable
Universal Life Account of Phoenix Home Life Mutual Insurance Company. PEPCO, as
paying agent for Phoenix Home Life Mutual Insurance Company, shall pay the
Broker-Dealer a service payment equal to 50% of premium payments made under The
Flex Edge policies, up to the commissionable premium amount, and 4% of such
payments after the commissionable premium has been paid, in the first Policy
Year. However, if the Broker-Dealer or a registered representative of the
Broker-Dealer is a career producer of Phoenix Home Life Mutual Insurance
Company, then PEPCO, as paying agent for Phoenix Home Life Mutual Insurance
Company, shall pay the Broker-Dealer a service payment equal to 50% of premium
payments made, up to the commissionable premium amount, and 5% of such payments
after the commissionable premium has been paid, in the first Policy Year.
Commissionable premium is the lesser of (1) the Policy's target premium and (2)
the subsequent premium specified on the application.
ESTATE EDGE (FORM V604) - SECOND TO DIE VARIABLE UNIVERSAL LIFE INSURANCE
POLICIES AND JOINT EDGE (FORM V601) - FLEXIBLE PREMIUM MULTIPLE VARIABLE LIFE
INSURANCE POLICIES issued by the Phoenix Variable Universal Life Account of
Phoenix Home Life Mutual Insurance Company. PEPCO, as paying agent for Phoenix
Home Life Mutual Insurance Company, shall pay the Broker-Dealer a service
payment equal to 50% of premium payments made under the policies, up to the
commissionable premium amount, and 4% of such payments after the
commissionable premium has been paid, in the first Policy Year. However, if the
Broker-Dealer or a registered representative of the Broker-Dealer is a career
producer of Phoenix Home Life Mutual Insurance Company, then PEPCO, as paying
agent for Phoenix Home Life Mutual Insurance Company, shall pay the
Broker-Dealer a service payment equal to 50% of premium payments made, up to the
commissionable premium amount, and 5% of such payments after the commissionable
premium has been paid, in the first Policy Year. Commissionable premium is the
lesser of (1) the Policy's target premium and (2) the subsequent premium
specified on the application.
HO3272VL 5-97
<PAGE>
{ Phoenix logo goes here ] SCHEDULE B
PHL Variable Life Insurance Company
- --------------------------------------------------------------------------------
THE BIG EDGE CHOICE - INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT (FORM D601)
issued by the PHL Variable Accumulation Account of PHL Variable Insurance
Company. PEPCO, as paying agent for PHL Variable Insurance Company, shall pay
the Broker-Dealer a service payment from one of the three Commission Options
available as described below. If more than one Commission Option is chosen,
Broker-Dealer agrees that its representatives may select from the specified
Commission Options at the time a contract is purchased. Once a Commission Option
has been selected, it cannot be changed in the future. Broker-Dealer may also
allow specified representatives to utilize a Commission Option other than what
is selected below on a contract by contract basis by completing the section on
the Commission Election form titled, "Exception." Option 1 shall apply: if a
Commission Option is not selected by the Broker-Dealer; in the event that the
Broker-Dealer has approved more than one Commission Option and an application is
received without a Commission Election form; a Commission Election form is
submitted with an Option not approved by the Broker-Dealer; or an Exception
Section of the Commission Election form is not signed by the Broker-Dealer. If
only one Commission Option is selected by the Broker-Dealer, that Commission
Option will always be invoked.
Please check one or more of the following Commission Options:
OPTION NUMBER OPTION DESCRIPTION*
[ ] 1. 5.75% of premiums paid plus an annual trail
commission of .25% of Contract Value beginning in
the 8th year.**
[ ] 2. 5% of premiums paid plus an annual trail
commission of .30% of Contract Value beginning
the 2nd year and increasing to .50% beginning the
8th year.
[ ] 3. 3% of premiums paid plus an annual trail
commission of .50% of Contract Value beginning the
2nd year and increasing to 1.00% beginning the
8th year.
Trail commissions will be paid on the Contract Value on a calendar quarter basis
on deposits held under the Contract for a year or more.
* Sales of the contract to applicants over age 80 will be paid at 50% of the
Commission Option selected. Trail commissions will be paid at the full
percentage amounts listed.
** This Option 1 will be effective January 1, 1998. The current Option 1
which provides for the payment of 6% of premiums paid (no trail
commission) will be discontinued at that time. Broker-Dealers who had
previously elected Option 1 will continue to be compensated under its
terms.
HO3272B 5-97
<PAGE>
[ Phoenix logo goes here ] SCHEDULE C
Phoenix Home Life Mutual Insurance Company
- --------------------------------------------------------------------------------
THE BIG EDGE CHOICE (NY) - INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT (FORM
D602) issued by the Phoenix Home Life Variable Accumulation Account of Phoenix
Home Life Mutual Insurance Company. PEPCO, as paying agent for Phoenix Home Life
Mutual Insurance Company, shall pay the Broker-Dealer a service payment from one
of the three Commission Options available as described below. If more than one
Commission Option is chosen, Broker-Dealer agrees that its representatives may
select from the specified Commission Options at the time a contract is
purchased. Once a Commission Option has been selected, it cannot be changed in
the future. Broker-Dealer may also allow specified representatives to utilize a
Commission Option other than what is selected below on a contract by contract
basis by completing the section on the Commission Election form titled,
"Exception." Option 1 shall apply: if a Commission Option is not selected by the
Broker-Dealer; in the event that the Broker-Dealer has approved more than one
Commission Option and an application is received without a Commission Election
form; a Commission Election form is submitted with an Option not approved by the
Broker-Dealer; or an Exception Section of the Commission Election form is not
signed by the Broker-Dealer. If only one Commission Option is selected by the
Broker-Dealer, that Commission Option will always be invoked.
Please check one or more of the following Commission Options:
OPTION NUMBER* OPTION DESCRIPTION**
[ ] 1. 5.75% of premiums paid plus an annual trail
commission of .25% of Contract Value beginning in
the 8th year.
[ ] 2. 5% of premiums paid plus an annual trail
commission of .20% of Contract Value beginning the
2nd year and increasing to .30% beginning the
8th year.
[ ] 3. 3% of premiums paid plus an annual trail
commission of .35% of Contract Value beginning the
2nd year and increasing to .65% beginning the
8th year.
Trail commissions will be paid on the Contract Value on a calendar quarter basis
on deposits held under the Contract for a year or more.
* Sales of the contract to applicants over age 80 will be paid at 50% of the
Commission Option(s) chosen. Trail commissions will be paid at the full
percentage amount as listed.
** Contingent upon your Representative's Commission Contract with Phoenix a
different compensation schedule may apply.
HO3272E 4-97
EXHIBIT 1.A.(10)
Form of Application
<PAGE>
<TABLE>
PHOENIX HOME LIFE LIFE INSURANCE APPLICATION PART I TO THE
MUTUAL INSURANCE COMPANY PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
- -----------------------------------------------------------------------------------------------------------------------------------
FOR MULTI-LIFE PLANS ONLY: When this application is used for a Multi-life Plan such as SLP or JLP, the term "insured" and all
relationships shown shall be read to refer to the first insured, except as otherwise specifically noted as in Application supplement
Sections 6 and 7 which refer to the second insured.
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 1 - PROPOSED INSURED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. FULL NAME OF PROPOSED INSURED (First, Middle, Last) 2. SEX 3. DATE OF BIRTH (Mo., Day, Year)
/ / Male / / Female
- -----------------------------------------------------------------------------------------------------------------------------------
4. PLACE OF BIRTH (City and State or Country) 5. SOCIAL SECURITY NUMBER 6. UNITED STATES CITIZEN
/ / Yes / / No
- -----------------------------------------------------------------------------------------------------------------------------------
7. MARITAL STATUS 8. TELEPHONE NUMBER(S)
/ / Single / / Married / / Widowed / / Divorced / / Separated Home: ( ) Business: ( )
- -----------------------------------------------------------------------------------------------------------------------------------
9. PROPOSED INSURED'S RESIDENCE ADDRESS (Apt. #, No., Street, City, State, Zip Code) 10. NUMBER OF YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
11. EMPLOYER OR FIRM (If employed) 12. NATURE OF BUSINESS
- -----------------------------------------------------------------------------------------------------------------------------------
13. PROPOSED INSURED'S BUSINESS ADDRESS (No., Street, City, State, Zip Code) 14. NUMBER OF YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
15. PROPOSED INSURED'S OCCUPATION AND DUTIES INVOLVED
- -----------------------------------------------------------------------------------------------------------------------------------
16. DO YOU PLAN ANY CHANGE IN OCCUPATION OR DO YOU HAVE ANY OTHER OCCUPATION?
/ / Yes / / No If "Yes", explain
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 2 - OWNER
- -----------------------------------------------------------------------------------------------------------------------------------
PLEASE CHECK ONE (If none checked, A will apply)
/ / A. Insured / / D. Partnership (complete Section H below and include names of all
/ / B. Successive owners while living in sequence partners - if partnership is limited, indicate which partners are
(complete Section G below) general partners)
/ / C. Corporation, its successors or assigns / / E. Sole Proprietorship (complete Section H below and include
(complete Section H below and include state name of sole proprietor)
of incorporation)
/ / F. Trust (complete Section H below and include name and date of
trust, name of trustee(s) and of grantor)
- -----------------------------------------------------------------------------------------------------------------------------------
G. PRIMARY OWNER (complete 1, J, K below) RELATIONSHIP
SUCCESSIVE
OWNERS ----------------------------------------------------------------------------------------------------------------------
CONTINGENT OWNER RELATIONSHIP
----------------------------------------------------------------------------------------------------------------------
ULTIMATE OWNER (Check one. If none checked, insured will be ultimate owner.)
/ / Insured / / Executor or administrator of the survivor of the primary and contingent owners
- -----------------------------------------------------------------------------------------------------------------------------------
H. (complete I, J, K below)
AUTHORIZED
NAME
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
I. ADDRESS (No., Street, City, State, Zip Code) J. OWNER'S SOC. SEC. NO. OR TAX I.D. NUMBER
- -----------------------------------------------------------------------------------------------------------------------------------
K. IF SOMEONE IN ADDITION TO THE OWNER SHOULD RECEIVE PREMIUM NOTICES, GIVE NAME AND ADDRESS
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 3 - BENEFICIARY
- -----------------------------------------------------------------------------------------------------------------------------------
/ / A. Same as Owner
- -----------------------------------------------------------------------------------------------------------------------------------
PRIMARY BENEFICIARY RELATIONSHIP TO INSURED SOCIAL SECURITY NUMBER
/ / B. ----------------------------------------------------------------------------------------------------------------------------
CONTINGENT BENEFICIARY RELATIONSHIP TO INSURED SOCIAL SECURITY NUMBER
----------------------------------------------------------------------------------------------------------------------------
TRUST DATE OF TRUST
/ / C. / / Trust under insured's will
/ / Inter vivos - Provide name of trustee
-------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
ADDRESS OF BENEFICIARY (No., Street, City, State, Zip Code)
- -----------------------------------------------------------------------------------------------------------------------------------
OL 415 6-91 1 of 6
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 4 - PLAN INFORMATION
- -----------------------------------------------------------------------------------------------------------------------------------
TRADITIONAL PLANS OF INSURANCE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. PLAN OF INSURANCE (CHECK ONE): 2. BASIC FACE AMOUNT
/ / MLP / / GLP / / SLP
/ / TLP / / PLP / / JLP
/ / EEA / / LP at age ____ / / Other ____________
- -----------------------------------------------------------------------------------------------------------------------------------
3. DIVIDEND OPTION (CHECK ONE): 4. OPTIONTERM AMOUNT
/ / Paid Up Additions / / Cash / / Optionterm (if checked,
/ / Reduce Premium / / Accumulate note amount in # 4)
/ / One Year Term with the balance to (check one):
/ / Cash / / Paid up Additions / / Reduce Premiums
- -----------------------------------------------------------------------------------------------------------------------------------
Add the Basic Face Amount and the Optionterm Amount (if selected) and enter 5. TOTAL INITIAL DEATH BENEFIT
the total in # 5.
- -----------------------------------------------------------------------------------------------------------------------------------
6. PREMIUM MODE (CHECK ONE):
/ / Annual / / Quarterly / / Discount Salary Allotment
/ / Semi-annual / / Phoenix Check-o-matic / / Monthly Corporate Pay
/ / Monthly E.I.C.S. # ______________________ / / List Bill # __________________________ (prem. mode ______________________)
- -----------------------------------------------------------------------------------------------------------------------------------
7. RIDERS AND FEATURES:
/ / Accidental Death Benefit _______________ / /PAPOR (check one)
/ / Disability Waiver of Premium / /A-Flexible / / B-Flexible with Optionterm
/ / Acceleration Number of years payable ___________
/ / Conditional Exchange Option (SLP only) Intended premium payments for the first 7 years:
/ / 4 Year Term (SLP only) Year 1 ____________ Year 5 _______________
/ / Survivor Insurability Purchase Option Year 2 ____________ Year 6 _______________
(JLP only) Year 3 ____________ Year 7 _______________
___________ units Year 4 ____________
/ / Purchase Protector ______ units Maximum Amount $ _______________
/ / Family Protection _______ units
/ / Children's Protection _____ units
/ / Other ______________________________
(For proposed insureds ages 18 and older) I am applying for: / / Smoker Class / / Nonsmoker Class / / Neversmoked Class
Automatic Premium Loan will be effective if applicable unless checked here. / /
Cost of Living Rider will be effective if applicable unless checked here. / /
Policy Loan Interest Rate will be variable unless otherwise specified here. / / Fixed
- -----------------------------------------------------------------------------------------------------------------------------------
UNIVERSAL LIFE PLANS
- -----------------------------------------------------------------------------------------------------------------------------------
8. / / FLEX 80
- -----------------------------------------------------------------------------------------------------------------------------------
9. FIRST PREMIUM (INCLUDING EXCESS PREMIUM) 10. SUBSEQUENT ANNUAL PREMIUM 11. BASIC FACE AMOUNT
$ $
- -----------------------------------------------------------------------------------------------------------------------------------
12. PREMIUM MODE (CHECK ONE):
/ / Annual / / Semi-annual / / Quarterly / / Phoenix Check-o-matic
- -----------------------------------------------------------------------------------------------------------------------------------
13. DEATH BENEFIT OPTION (CHECK ONE):
/ / Option # 1 - Level Face Amount / / Option # 2 - Increasing Face Amount
- -----------------------------------------------------------------------------------------------------------------------------------
14. RIDERS AND FEATURES:
/ / Accidental Death Benefit / / Disability Payment of A Specified Annual Premium Amount
/ / Other ___________________ Annual Amount $ __________________
(For proposed insureds ages 18 and older) I am applying for: / / Smoker Class / / Nonsmoker Class / / Neversmoked Class
Note that all dividends shall be paid in cash.
- -----------------------------------------------------------------------------------------------------------------------------------
OL 415 6-91 2 of 6
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
15. __ ESTATE BUILDER LIFE (EBL)
- ----------------------------------------------------------------------------------------------------------------------------------
16. PREMIUM MODE (CHECK ONE): 17. BASIC FACE AMOUNT
__ Annual __ Semi-annual __ Quarterly __Phoenix Check-o-matic
- -----------------------------------------------------------------------------------------------------------------------------------
18. RIDERS AND FEATURES:
__ Accidental Death Benefit __ Waiver of Premium
__ Automatic Premium Loan __ Other
(For proposed insureds ages 18 and older) I am applying for: __ Smoker Class __ Nonsmoker Class __ Neversmoked Class
- -----------------------------------------------------------------------------------------------------------------------------------
19. DIVIDEND OPTION (CHECK ONE): __ Cash __ Accumulation __ Paid up Additions __ Reduce Premium
- -----------------------------------------------------------------------------------------------------------------------------------
20. __ EVP (ONLY FOR STATES WHERE INDIVIDUAL CONTRACT FORM HAS BEEN APPROVED)
- -----------------------------------------------------------------------------------------------------------------------------------
21. ANNUAL PREMIUM 22. BASIC FACE AMOUNT
$
- -----------------------------------------------------------------------------------------------------------------------------------
23. PREMIUM MODE (CHECK ONE):
__ Annual __ Semi-annual __ Quarterly __ Phoenix Check-o-matic __ List Bill # ____________ (prem. mode ____________)
- -----------------------------------------------------------------------------------------------------------------------------------
24. DEATH BENEFIT OPTION (CHECK ONE): __ Option # 1 - Level Face Amount __ Option # 2 - Increasing Face Amount
- -----------------------------------------------------------------------------------------------------------------------------------
25. RIDERS AND FEATURES:
__ Disability Payment of A Specified Annual Premium Amount
Annual Amount $_____________ __ Other _________________________
(For proposed insureds age 18 and older) I am applying for __ Smoker Class __ Nonsmoker Class __ Neversmoked Class
Note that all dividends shall be paid in cash.
- -----------------------------------------------------------------------------------------------------------------------------------
VARIABLE LIFE PLANS
- -----------------------------------------------------------------------------------------------------------------------------------
26. __ FLEX EDGE
- -----------------------------------------------------------------------------------------------------------------------------------
27. PREMIUM SUBMITTED WITH APPLICATION 28. SUBSEQUENT PLANNED ANNUAL PREMIUM 29. BASIC FACE AMOUNT
$ $
- -----------------------------------------------------------------------------------------------------------------------------------
30. PREMIUM MODE (CHECK ONE): __ Annual __ Quarterly __ Semi-annual __ Phoenix Check-o-matic
- -----------------------------------------------------------------------------------------------------------------------------------
31. DEATH BENEFIT OPTION (CHECK ONE): __ Option # 1 - Level Face Amount __ Option # 2 - Increasing Face Amount
- -----------------------------------------------------------------------------------------------------------------------------------
32. RIDERS AND FEATURES:
__ Accidental Death Benefit __ Disability Waiver of Premium
__ Other _____________________ Amount to be waived $____________________
(For proposed insureds ages 18 and older) I am applying for: __ Smoker Class __ Nonsmoker Class __ Neversmoked Class
- -----------------------------------------------------------------------------------------------------------------------------------
33. SUB-ACCOUNT ALLOCATION (USE WHOLE PERCENTS ONLY): MONTHLY DEDUCTIONS*
__ Money Market _____________________% __ * Designate sub-accounts from which monthly
deductions will be taken. If no designation is
__ Stock _____________________% __ made, the sub-accounts to which premiums
are allocated will be designated sub-accounts.
__ Bond _____________________% __ If the sub-accounts designated for monthly
deductions are insufficient, deductions will be
__ Total Vest _____________________% __ taken from all available sub-accounts. All
deductions are taken pro-rata based on value.
__ International _____________________% __
__ Guaranteed Interest _____________________% __
__ Other _____________________% __
Total 100%
- -----------------------------------------------------------------------------------------------------------------------------------
34. TEMPORARY MONEY MARKET ALLOCATION:
__ Yes __ No I elect to temporarily allocate my premiums to the variable insurance Money Market Sub-Account until termination of
the Right to Cancel period as stated in the policy.
- -----------------------------------------------------------------------------------------------------------------------------------
35. SUITABILITY:
YES NO
__ __ A. Did you receive copies of the applicable prospectus(es)?
__ __ B. Do you understand that for variable insurance: the death benefit cash value and duration of coverage may
increase or decrease based on the investment experience of the underlying sub-accounts?
__ __ C. Do you believe that the insurance selected will meet your financial objectives?
- -----------------------------------------------------------------------------------------------------------------------------------
36. TELEPHONE TRANSFERS/EXCHANGES:
__Yes __ No Telephone transfers/exchanges are subject to the terms of the prospectus. If you check the "yes" box, telephone
orders will be accepted from you and your registered representative and you agree that, because we cannot verify
the authenticity of telephone instructions, we will not be liable for any loss caused by our acting on telephone
instructions, unless caused by our negligence.
- -----------------------------------------------------------------------------------------------------------------------------------
37. CONFIRM STATEMENTS AND PROXIES TO: __ Owner __ Insured __ Other _______________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
OL 415 6-91 3 Of 6
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 5 - SLP SUPPLEMENT (TO BE COMPLETED ONLY IF APPLYING FOR SLP PRODUCT PAYABLE ON SECOND DEATH)
- -----------------------------------------------------------------------------------------------------------------------------------
SECOND PROPOSED INSURED (ALSO COMPLETE INSURABILITY SECTION FOR SECOND PROPOSED INSURED)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. FULL NAME OF PROPOSED INSURED (First, Middle, Last) 2. SEX 3. DATE OF BIRTH (Mo., Day, Year)
__ Male __ Female
- -----------------------------------------------------------------------------------------------------------------------------------
4. PLACE OF BIRTH (City and State or Country) 5. SOCIAL SECURITY NUMBER 6. UNITED STATES CITIZEN
__ Yes __ No
- -----------------------------------------------------------------------------------------------------------------------------------
7. MARITAL STATUS 8. TELEPHONE NUMBER(S)
__ Single __ Married __ Widowed __ Divorced __ Separated Home: ( ) Business: ( )
- -----------------------------------------------------------------------------------------------------------------------------------
9. PROPOSED INSURED'S RESIDENCE ADDRESS (Apt. #, No., Street, City, State, Zip Code) 10. NUMBER OF YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
11. EMPLOYER OR FIRM (If employed) 12. NATURE OF BUSINESS
- -----------------------------------------------------------------------------------------------------------------------------------
13. PROPOSED INSURED'S BUSINESS ADDRESS (No., Street, City, State, Zip Code) 14. NUMBER OF YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
15. PROPOSED INSURED'S OCCUPATION AND DUTIES INVOLVED
- -----------------------------------------------------------------------------------------------------------------------------------
16. DO YOU PLAN ANY CHANGE IN OCCUPATION OR DO YOU HAVE ANY OTHER OCCUPATION?
__ Yes __ No If "Yes", explain
- -----------------------------------------------------------------------------------------------------------------------------------
17. (FOR PROPOSED INSUREDS AGES 18 AND OLDER) I AM APPLYING FOR: 18.
__ Smoker Class __ Nonsmoker Class __ Neversmoked Class Waiver of premium will not apply unless checked here. __
- -----------------------------------------------------------------------------------------------------------------------------------
19. OTHER RIDERS OR FEATURES, IF AVAILABLE
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 6 - JLP SUPPLEMENT (TO BE COMPLETED ONLY IF APPLYING FOR JLP PRODUCT PAYABLE ON FIRST DEATH)
- -----------------------------------------------------------------------------------------------------------------------------------
SECOND PROPOSED INSURED (ALSO COMPLETE INSURABILITY SECTION FOR SECOND PROPOSED INSURED)
- -----------------------------------------------------------------------------------------------------------------------------------
1. FULL NAME OF PROPOSED INSURED (First, Middle, Last) 2. SEX 3. DATE OF BIRTH (Mo., Day, Year)
__ Male __ Female
- -----------------------------------------------------------------------------------------------------------------------------------
4. PLACE OF BIRTH (City and State or Country) 5. SOCIAL SECURITY NUMBER 6. UNITED STATES CITIZEN
__ Yes __ No
- -----------------------------------------------------------------------------------------------------------------------------------
7. MARITAL STATUS 8. TELEPHONE NUMBER(S)
__ Single __ Married __ Widowed __ Divorced __ Separated Home: ( ) Business: ( )
- -----------------------------------------------------------------------------------------------------------------------------------
9. PROPOSED INSURED'S RESIDENCE ADDRESS (Apt.#, No., Street, City, State, Zip Code) 10. NUMBER OF YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
11. EMPLOYER OR FIRM (if employed) 12. NATURE OF BUSINESS
- -----------------------------------------------------------------------------------------------------------------------------------
13. PROPOSED INSURED'S BUSINESS ADDRESS (No., Street, City, State, Zip Code) 14. NUMBER OF YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
15. PROPOSED INSURED'S OCCUPATION AND DUTIES INVOLVED
- -----------------------------------------------------------------------------------------------------------------------------------
16. DO YOU PLAN ANY CHANGE IN OCCUPATION OR DO YOU HAVE ANY OTHER OCCUPATION?
__ Yes __ No If "Yes", explain
- -----------------------------------------------------------------------------------------------------------------------------------
17. (FOR PROPOSED INSUREDS AGES 18 AND OLDER) I AM APPLYING FOR: 18.
__ Smoker Class __ Nonsmoker Class __ Neversmoked Class Waiver of premium will not apply unless checked here. __
- -----------------------------------------------------------------------------------------------------------------------------------
19. OTHER RIDERS OR FEATURES, IF AVAILABLE
- -----------------------------------------------------------------------------------------------------------------------------------
A. BASIC FACE AMOUNT
20. Basic Face Amount (Carry over amount from first
proposed insured)
- -----------------------------------------------------------------------------------------------------------------------------------
B. OPTIONTERM AMOUNT
If Optionterm is selected as dividend method, enter amount for
second proposed insured here:
- -----------------------------------------------------------------------------------------------------------------------------------
C. TOTAL INITIAL DEATH BENEFIT
Add the Basic Face Amount and the Optionterm Amount (if
selected) and enter the total in 20C.
- -----------------------------------------------------------------------------------------------------------------------------------
OL 415 6-91 4 of 6
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<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 7 - INSURABILITY INFORMATION (ATTACH ADDITIONAL SHEET IF NEEDED)
- -----------------------------------------------------------------------------------------------------------------------------------
FIRST INSURED SECOND INSURED (MULTI-LIFE PLANS ONLY)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. TOTAL LIFE INSURANCE IN FORCE (if none, so indicate) 13. TOTAL LIFE INSURANCE IN FORCE (if none, so indicate)
$ __ None $ __ None
- -----------------------------------------------------------------------------------------------------------------------------------
2. TOTAL AMOUNT OF ACCIDENTAL DEATH BENEFIT (ADB) IN FORCE 14. TOTAL AMOUNT OF ACCIDENTAL DEATH BENEFIT (ADB) IN FORCE
(if none, so indicate) (if none, so indicate)
$ __ None $ __ None
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR
3. NAME OF COMPANY PURCHASED AMOUNT 15. NAME OF COMPANY PURCHASED AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
P
E $ $
- -----------------------------------------------------------------------------------------------------------------------------------
R
S $ $
- -----------------------------------------------------------------------------------------------------------------------------------
O
N $ $
- -----------------------------------------------------------------------------------------------------------------------------------
A
L $ $
- -----------------------------------------------------------------------------------------------------------------------------------
B
U $ $
- -----------------------------------------------------------------------------------------------------------------------------------
S
I $ $
- -----------------------------------------------------------------------------------------------------------------------------------
N
E $ $
- -----------------------------------------------------------------------------------------------------------------------------------
S
S $ $
- -----------------------------------------------------------------------------------------------------------------------------------
FIRST INSURED PROVIDE DETAILS OF ALL "YES" ANSWERS TO QUESTIONS IN # 25. SECOND INSURED
- -----------------------------------------------------------------------------------------------------------------------------------
YES NO YES NO
4. __ __ Do you now smoke cigarettes or have you smoked cigarettes anytime in the past 12 months? 16. __ __
5. __ __ Have you used tobacco at anytime during the last 15 years? 17. __ __
6. __ __ Do you plan to replace (in whole or in part) (now or in the future)) any existing insurance or 18. __ __
annuity in force on your life, or do you plan to borrow from an existing contract to pay this
premium? (If "Yes", provide full details of planned replacement or purchase below).
7. __ __ Do you or any other proposed insured plan any foreign residence or travel? (If "Yes", state where 19. __ __
and for how long).
8. __ __ Have you flown during the past three years as a pilot, student pilot or crew member? (If "Yes", 20. __ __
complete Aviation Questionnaire, form FN 7).
9. __ __ Have you ever applied for life, accident, or health insurance and been declined, postponed, or 21. __ __
been offered a policy differing in plan, amount or premium rate from that applied for? (If "Yes",
give date, company and reason).
10. __ __ Are you negotiating for other insurance? (If "Yes", name companies and total amount to be placed 22. __ __
in force.)
11. __ __ Have you or any other proposed insured participated in the past 3 years or plan to engage in any 23. __ __
hazardous activity such as motor vehicle, motorcycle or motorboat racing, parachute jumping, skin
or scuba diving or other underwater activity, hang gliding or other hazardous avocation? (If "Yes",
complete Avocation Questionnaire, form OL 1064).
12. __ __ Have you in the past three years been the driver of a motor vehicle involved in an accident, or 24. __ __
charged with a moving violation of any motor vehicle law, or had your driver's license suspended
or revoked? (If "Yes", give dates, full details and driver's license number).
- -----------------------------------------------------------------------------------------------------------------------------------
25. DETAILS AND REMARKS. PLEASE PROVIDE QUESTION NUMBERS.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
OL 415 6-91 5 of 6
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<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
SECTION 8 - CERTIFICATION AND SIGNATURES
- -----------------------------------------------------------------------------------------------------------------------------------
NEVERSMOKED CLASSIFICATION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
I understand that the issuance of a Traditional Plan of Insurance as noted in section #4 on a neversmoked risk classification
basis does not guarantee me enhanced policy benefits beyond those that are guaranteed to persons only applying for non-smoker
class under section # 4 (and # 5 or # 6 if applicable). The neversmoked classification would simply classify me as eligible for
enhanced dividends based on the company's current dividend scale which is not guaranteed to continue into the future. I
further understand that a change in the dividend scale may result in a decrease in benefits or an increase in required cash
net-premium outlay beyond such amounts shown to me in sales illustrations presented at the time of sale.
- -----------------------------------------------------------------------------------------------------------------------------------
FOR H.O. OR ADMIN. OFFICE USE ONLY
- -----------------------------------------------------------------------------------------------------------------------------------
Minor Corrections. (No change will be made in amount, amount of premium, age at issue, class, plan or benefits unless agreed to in
writing.)
- -----------------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS
- -----------------------------------------------------------------------------------------------------------------------------------
Any insurance policy issued hereunder in the state of Missouri or Oklahoma shall be considered a Missouri or Oklahoma
contract, respectively, and its terms, including those concerning the receiving of information by the agent, shall be construed
in accordance with the laws of the state of Missouri or Oklahoma, respectively.
- -----------------------------------------------------------------------------------------------------------------------------------
$__________ has been paid by _________________________________ to the agent named below for proposed insurance applied for in this
application. This sum is to be applied in accordance with and subject to the terms of the Temporary Insurance Receipt bearing the
same number as this application.
I understand that i) no statement made to, or information acquired by any agent who takes this application, shall bind the
Company unless stated in Part I and Part II of this application; ii) the agent has no authority to make, modify, alter or
discharge any contract hereby applied for and; iii) the insurance applied for shall not take effect until the issuance of a
contract and payment of the issue premium due.
I have read the prospectus(es) for the investment choices I have made.
I have reviewed this application, and I hereby verify that all information given here and any in Part II of this application is
true and complete to the best of my knowledge and belief, and has been fully and correctly recorded.
Under penalty of perjury, I certify that the number given is my correct social security or taxpayer identification number and that
I am not subject to backup withholding (strike this out and initial if not true).
Any person who, with intent to defraud or knowing that he/she is facilitating a fraud against an insurer, submits an application
or files a claim containing a false or deceptive statement is guilty of insurance fraud. This application should be carefully
reviewed by the undersigned to verify that any and all information given to the agent taking this application has been fully
and correctly entered.
The right is reserved to the Company to call for a medical examination by an appointed medical examiner should further
evidence of insurability be deemed necessary. The agent taking this application certifies that he/she has truly and
accurately recorded on the application the information supplied by the proposed insured(s).
THE DEATH BENEFIT AND CASH VALUES UNDER ANY VARIABLE POLICY APPLIED FOR MAY INCREASE OR DECREASE IN AMOUNT OR
DURATION BASED ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNTS
- -----------------------------------------------------------------------------------------------------------------------------------
SIGNED AT WITNESS DATE
- -----------------------------------------------------------------------------------------------------------------------------------
FIRST INSURED (both insureds must sign if a multiple life plan is being applied for) SECOND INSURED (if any)
- -----------------------------------------------------------------------------------------------------------------------------------
SIGNED AT WITNESS DATE
- -----------------------------------------------------------------------------------------------------------------------------------
PURCHASER (if other than proposed insured)
- -----------------------------------------------------------------------------------------------------------------------------------
Is this insurance intended to replace (in whole or in part) any existing insurance or annuity in this or any other __ Yes __ No
company?
The Agent hereby certifies that the Applicant signed this application in his/her presence; that he/she has truly and accurately
recorded on the application the information supplied by the proposed insured(s); and that he/she is qualified and authorized to
discuss the contract herein applied for.
- -----------------------------------------------------------------------------------------------------------------------------------
AGENT'S SIGNATURE DATE AGENT/BROKER I.D. NUMBER
- -----------------------------------------------------------------------------------------------------------------------------------
AGENT/BROKER NAME (please print full name) TELEPHONE NUMBER
- -----------------------------------------------------------------------------------------------------------------------------------
BROKER DEALER NAME & ADDRESS BROKER/DEALER NUMBER
- -----------------------------------------------------------------------------------------------------------------------------------
INSURANCE AGENCY NAME AND ADDRESS (if other than above) BRANCH OFFICE NUMBER
- -----------------------------------------------------------------------------------------------------------------------------------
BRANCH OFFICE NAME AND ADDRESS BRANCH OFFICE TELEPHONE NUMBER
- -----------------------------------------------------------------------------------------------------------------------------------
OL 415 6-91 6 of 6
</TABLE>
EXHIBIT 6
CONSENT OF JORDEN BURT BERENSON & JOHNSON, LLP
<PAGE>
September 3, 1997
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06115
Ladies and Gentlemen:
We hereby consent to the use of our name under the caption "Legal Matters" in
the Prospectus contained in Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-6 (Registration No. 33-23171) filed by Phoenix Home Life
Mutual Insurance Company and Phoenix Home Life Variable Universal Life Account
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended.
Very truly yours,
/s/ Jorden Burt Berenson & Johnson LLP
Jorden Burt Berenson & Johnson LLP
EXHIBIT 7
CONSENT OF PRICE WATERHOUSE, LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-6 of our
report dated February 12, 1997, relating to the consolidated financial
statements of Phoenix Home Life Mutual Insurance Company, which appears in such
Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Hartford, Connecticut
September 9, 1997
EXHIBIT 8
OPINION AND CONSENT OF EDWIN L. KERR
<PAGE>
September 3, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
REGISTRATION STATEMENT NO. 333-23171
Dear Sirs:
As Counsel to the depositor, I am familiar with the flexible premium
variable life insurance policies (the "Policies") which are the subject of the
above-captioned Registration Statement on Form S-6.
In connection with this opinion, I have reviewed the Policies, the
Registration Statement, the Charter and By-Laws of the Company, relevant
proceedings of the Board of Directors, and the provisions of New York insurance
law relevant to the issuance of the Policies.
Based upon this review, I am of the opinion that each of the Policies, when
issued, will have been validly issued, and will constitute a legal and binding
obligation of Phoenix Home Life Mutual Insurance Company.
I further consent to the use of this opinion as an exhibit to the
above-captioned Registration Statement and to my being named under "Legal
Matters" therein.
Very truly yours,
/s/ Edwin L. Kerr
-----------------------------
Edwin L. Kerr, Counsel
Phoenix Home Life
Mutual Insurance Company
EXHIBIT 9
CONSENT OF M. SPENSER HAMILTON, F.S.A.
<PAGE>
September 3, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
This opinion is furnished in connection with the registration of flexible
premium variable life insurance policies ("Policies") under the Securities Act
of 1933. The prospectuses included in the Registration Statement on Form S-6
(SEC File No. 333-23171) describes the Policies. The forms of Policies were
prepared under my direction, and I am familiar with the Registration Statement
and Exhibits thereto.
In my opinion, the illustrations of death benefits and cash values included
in the sections entitled "Illustrations of Death Benefits, Policy Values
("Account Values"), and Cash Surrender Values" in Appendix B of the
prospectuses, based on the assumptions stated in the illustrations, are
consistent with the provisions of the respective forms of the Policies.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ M. Spencer Hamilton
M. Spencer Hamilton
Associate Actuary
