As filed with the Securities and Exchange Commission on April 30, 1998
REGISTRATION NO. 33-23251
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 15
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-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:
<TABLE>
<S> <C>
MICHAEL BERENSON, ESQ. EDWIN L. KERR, ESQ.
JORDEN BURT BOROS CICCHETTI 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
</TABLE>
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b);
[X] on May 1, 1998 pursuant to paragraph (b);
[ ] 60 days after filing pursuant to paragraph (a)(1); or
[ ] on pursuant to paragraph (a)(1) of Rule 485.
[ ] this Post-Effective Amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
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 Premium Payment; Allocation of Issue Premium; Right to Cancel Period
15 Allocation of Issue Premium; Transfer of Policy Value
16 Investments of the VUL Account
17 Surrenders
18 Allocation of Issue Premium; 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
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 Issue Premium; Determination of Subaccount Values
48 Not Applicable
49 Not Applicable
50 Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
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
</TABLE>
<PAGE>
VERSION A
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
May 1, 1998
This Prospectus describes Flexible Premium Variable Life Insurance Policies
(the "Policy" or "Policies"), offered by Phoenix Home Life Mutual Insurance
Company ("Phoenix"). An applicant chooses the amount of Issue Premium desired
and it is then shown in the Policy. Generally, the minimum Issue Premium Phoenix
will accept is 1/6 of the Planned Annual Premium. Phoenix may, in some cases,
accept less than that amount. The amount and payment frequency of planned
premiums are as shown in the Policy. If too much is paid in premium in the early
Policy Years, the Policy could become a modified endowment contract. This would
cause loans and other amounts received under the Policy to be subject to tax
and/or penalties. Currently, Phoenix notifies a Policyowner when a Policy
becomes a modified endowment contract.
Premium payments are allocated to one or more of the Subaccounts of the
Phoenix Home Life Variable Universal Life Account (the "VUL Account") or to the
Guaranteed Interest Account ("GIA"), as specified in the applicant's application
for insurance. The VUL Account is divided into Subaccounts, each of which
invests in a corresponding series of The Phoenix Edge Series Fund or Wanger
Advisors Trust (each the "Fund" or collectively, the "Funds"). For certain
Policyowners, the Issue Premium is first allocated to the Money Market
Subaccount before being allocated according to the instructions in the
application.
There is no guaranteed minimum Policy Value except for that portion of
Policy Value invested in the GIA, which has a 4% minimum interest rate
guarantee. The Policy Value not invested in the GIA will vary to reflect the
investment experience of the Subaccounts of the VUL Account to which premiums
have been allocated. A Policyowner bears the investment risk for all amounts so
allocated. 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 death benefit under the Policy equals the Policy's face amount on the
date of the Insured's death or, if greater, the Policy Value on the date of
death increased by the applicable percentage set forth in the Policy. Other
death benefit options also are available.
A Policyowner may cancel the Policy within 10 days (or longer in some
states), after the Policyowner receives it or 10 days after Phoenix mails or
delivers a written notice of withdrawal right to the Policyowner, or within 45
days of completing the application, whichever is latest.
IT MAY NOT BE ADVANTAGEOUS TO PURCHASE A POLICY AS A REPLACEMENT FOR AN
EXISTING LIFE INSURANCE POLICY OR ANNUITY CONTRACT. YOU SHOULD RECOGNIZE THAT A
POLICY THAT HAS BEEN IN EXISTENCE FOR A PERIOD OF TIME MIGHT HAVE CERTAIN
ADVANTAGES TO YOU OVER A NEW POLICY. ON THE OTHER HAND, THE PROPOSED POLICY MAY
OFFER NEW FEATURES WHICH ARE MORE IMPORTANT TO YOU.
IT IS IN YOUR BEST INTEREST TO HAVE ADEQUATE INFORMATION BEFORE A DECISION
TO REPLACE YOUR PRESENT LIFE INSURANCE COVERAGE BECOMES FINAL SO THAT YOU MAY
UNDERSTAND THE BASIC FEATURES OF BOTH THE PROPOSED POLICY AND YOUR EXISTING
COVERAGE.
IF YOU ARE REPLACING AN ANNUITY CONTRACT, IT IS IMPORTANT FOR YOU TO
UNDERSTAND THE FUNDAMENTAL DIFFERENCES BETWEEN ANNUITIES AND LIFE INSURANCE AND
HOW THEY ARE TREATED DIFFERENTLY UNDER THE TAX LAWS.
IN ALL CASES IT IS IMPORTANT TO KNOW IF THE REPLACEMENT WILL RESULT IN
CURRENT TAX LIABILITY.
This Prospectus provides information about the Policy that prospective
investors should know before investing and 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.
THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION OR CREDIT UNION AND ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY. INVESTMENTS IN
THE POLICIES ARE SUBJECT TO INVESTMENT RISK INCLUDING THE FLUCTUATION OF POLICY
VALUES AND THE POSSIBLE LOSS OF PRINCIPAL INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") NOR HAS THE SEC 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
Premium Payment ....................................... 8
Allocation of Issue Premium ........................... 8
Right to Cancel Period ................................ 8
Temporary Insurance Coverage .......................... 8
Transfer of Policy Value .............................. 9
Determination of Subaccount Values .................... 9
Death Benefit ......................................... 10
Surrenders ............................................ 10
Policy Loans .......................................... 11
Lapse ................................................. 12
Payment of Premiums During Period of Disability ....... 12
Additional Insurance Options .......................... 12
Additional Rider Benefits ............................. 12
INVESTMENTS OF THE VUL ACCOUNT ........................... 14
Participating Mutual Funds ............................ 14
Investment Advisers....................................... 14
Services of the Advisers............................. 15
Reinvestment and Redemption ........................... 15
Substitution of Investments ........................... 15
CHARGES AND DEDUCTIONS ................................... 15
Monthly Deduction ..................................... 16
Premium Taxes ......................................... 16
Federal Tax Charge..................................... 16
Mortality and Expense Risk Charge ..................... 16
Investment Management Charge .......................... 17
Other Charges ......................................... 17
GENERAL PROVISIONS ....................................... 18
Postponement of Payments .............................. 18
Payment by Check ................................... 18
The Contract .......................................... 18
Suicide ............................................... 18
Incontestability ...................................... 18
Change of Owner or Beneficiary ........................ 18
Assignment ............................................ 18
Misstatement of Age or Sex ............................ 18
Surplus ............................................... 18
PAYMENT OF PROCEEDS ...................................... 18
Surrender and Death Benefit Proceeds .................. 18
Payment Options ....................................... 19
FEDERAL TAX CONSIDERATIONS ............................... 19
Introduction .......................................... 19
Phoenix's Tax Status ................................ 20
Policy Benefits ....................................... 20
Business-Owned Policies................................ 20
Modified Endowment Contracts .......................... 20
Limitations on Unreasonable Mortality
and Expense Charges ................................ 21
Qualified Plans ....................................... 21
Diversification Standards ............................. 21
Change of Ownership or Insured or Assignment .......... 22
Other Taxes ........................................... 22
VOTING RIGHTS ............................................ 22
The Funds ............................................. 22
Phoenix ............................................... 22
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX .......... 22
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ................ 23
SALES OF POLICIES ........................................ 23
STATE REGULATION ......................................... 24
REPORTS .................................................. 24
LEGAL PROCEEDINGS ........................................ 24
LEGAL MATTERS ............................................ 24
REGISTRATION STATEMENT ................................... 24
YEAR 2000 ISSUE........................................... 24
FINANCIAL STATEMENTS ..................................... 24
APPENDIX A ............................................... 69
APPENDIX B ............................................... 70
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.
FUND(S): The Phoenix Edge Series Fund and Wanger Advisors Trust.
GENERAL ACCOUNT: The general asset account of Phoenix.
GUARANTEED INTEREST ACCOUNT (GIA): An allocation option under which amounts
deposited are guaranteed to earn a fixed rate of interest. Excess interest also
may be credited, in the sole discretion of Phoenix.
IN FORCE: Conditions under which the coverage under a Policy is in effect and
the Insured's life remains insured.
INSURED: The person upon whose life the Policy is issued.
IN WRITING (WRITTEN REQUEST): In a written form satisfactory to Phoenix and
delivered to VPMO.
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.
MULTIPLE LIFE POLICY: A Policy under which the number of Insureds is
greater than one (1) but no more than five (5), and under which the death
benefit is paid upon the death of the first Insured to die.
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.
PHOENIX: Phoenix Home Life Mutual Insurance Company, Hartford, Connecticut.
PLANNED ANNUAL PREMIUM: The premium amount that the Policyowner agrees to pay
each Policy Year. It must be at least equal to the Minimum Required Premium for
the face amount of insurance selected 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.
POLICYOWNER (OWNER): The Owner of a Policy.
POLICY VALUE: The sum of a Policy's share in the values of each Subaccount of
the VUL Account plus the Policy's share in the values of the GIA.
POLICY YEAR: The first Policy Year is the 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: Amounts allocated to Subaccounts on a proportionate basis are
allocated by increasing (or decreasing) a Policy's share in the value of the
affected Subaccounts so that such shares maintain the same ratio to each other
before and after the allocation.
SERIES: A separate investment portfolio of the Fund.
SINGLE LIFE POLICY: A Policy that covers the life of one (1) Insured.
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 Variable Products Mail Operation division of Phoenix that receives
and processes incoming mail for Variable Products Operations.
VUL ACCOUNT: Phoenix Home Life Variable Universal Life Account.
VULA: Variable and Universal Life Administration Division of Phoenix.
3
<PAGE>
SUMMARY
- -------------------------------------------------------------------------------
1. WHAT IS THE DIFFERENCE BETWEEN THE POLICY AND A CONVENTIONAL FIXED BENEFIT
LIFE INSURANCE POLICY?
Like conventional fixed benefit life insurance, so long as the Policy
remains In Force, the Policy will provide for: (1) the payment of a death
benefit to a Beneficiary upon the Insured's death; (2) the accumulation of cash
value; and (3) surrender rights and Policy loan privileges.
The Policy differs from conventional fixed benefit life insurance by
allowing Policyowners to allocate premiums to one or more Subaccounts of the VUL
Account or to the GIA. Each Subaccount invests exclusively in a designated
portfolio of the Funds. Also, under the Policy, the Policy Value invested in the
VUL Account is not guaranteed and may increase or decrease depending upon the
investment experience of the Subaccounts of the VUL Account. Accordingly, the
Policyowner bears the investment risk of any depreciation in value of the
underlying assets but reaps the benefits of any appreciation in value. See
"Policy Value."
In addition, unlike conventional fixed benefit life insurance, a Policyowner
also has the flexibility to make additional premium payments and to thereby
adjust the Policy Value. However, unlike conventional fixed benefit life
insurance, the Policy does not require a Policyowner to adhere to a fixed
premium payment schedule. Moreover, after the payment of the Issue Premium, the
failure to make additional premium payments will not in itself cause the Policy
to lapse. Conversely, the payment of additional premiums will not guarantee that
the Policy will remain In Force. Generally, lapse will occur when the Cash
Surrender Value is insufficient to pay certain charges deducted on the Monthly
Calculation Day, and a grace period expires without payment of the additional
amount required. See "Lapse."
If a Whole Life Exchange Option Rider is attached to the Policy, the Policy
may be exchanged for a fixed benefit whole life policy. See "Additional Rider
Benefits."
2. IS THERE A GUARANTEED ACCOUNT OPTION?
Yes. A Policyowner may elect to have premium payments allocated to the GIA.
Amounts allocated to the GIA earn a fixed rate of interest and Phoenix also may,
in its sole discretion, credit excess interest. See Appendix A.
3. WHAT IS THE DEATH BENEFIT UNDER THE POLICY?
The Policy provides for the payment of a benefit upon the death of the
Insured. Upon application for a Policy, an applicant designates an Issue
Premium. The Policy indicates the face amount of insurance. The death benefit
will equal the face amount on the date of the Insured's death or, if greater,
the Policy Value on the date of the Insured's death increased by the applicable
percentage set forth in the Policy. If the increased death benefit option is
selected, the death benefit will equal the face amount on the date of the
Insured's death plus the Policy Value or, if greater, the Policy Value on the
date of the Insured's death increased by the applicable percentage set forth in
the Policy. Guaranteed death benefit and living benefits riders also are
available. See "Death Benefit."
4. HOW LONG WILL THE POLICY REMAIN IN FORCE?
The Policy will lapse only when the Cash Surrender Value is insufficient to
pay the monthly deduction (see "Charges and Deductions--Monthly Deductions"),
and a grace period expires without payment of the additional amount required. In
this respect, the Policy differs in two important respects from a conventional
life insurance Policy. First, the failure to pay additional premiums will not
automatically cause the Policy to lapse. Second, the payment of premiums of any
prespecified amount does not guarantee that the Policy will remain In Force. A
rider is available to ensure that premium payments will continue during a period
of disability.
5. WHAT CHARGES ARE THERE IN CONNECTION WITH THE POLICY?
MONTHLY DEDUCTION: A deduction is made each Policy Month from the Policy
Value (excluding the value of the loaned portion of the GIA) to pay the cost of
insurance provided under the Policy; the cost of any rider benefits provided;
any unpaid balance of the issue expense charge; and an administrative charge as
shown on the Schedule Page of the Policy. The administrative charge may vary but
in no event will it exceed $10 per month. Currently, the administrative charge
is $5 per month. See "Charges and Deductions."
OTHER CHARGES: A fee equal to the lesser of $25 or 2% of the partial
surrender amount paid is deducted from the Policy Value for each partial
surrender. A partial surrender charge equal to a pro rata portion of the
applicable surrender charge that would apply to a full surrender, determined by
applying a formula, also is assessed against the VUL Account Subaccounts or the
GIA when a partial surrender is made.
No charges are currently made from the VUL Account or the GIA for federal or
state income taxes. If Phoenix determines that such taxes may be imposed, it may
make deductions from the VUL Account to pay these taxes.
Phoenix charges each Subaccount of the VUL Account the daily equivalent of
0.80% for the first 15 years and then 0.25% on an annual basis of the current
value of the Subaccount's net assets for its assumption of certain mortality and
expense risks incurred in connection with Single Life Policies and 0.80% on an
annual basis for Multiple Life Policies.
Premium amounts also are reduced by any applicable premium tax, a federal
tax charge of 1.50% on Single Life Policies and, for payments made during a
grace period, by the amount needed to cover any monthly deductions made during
the grace period.
In addition, certain charges are deducted from the assets of the Funds. For
investment advisory services, each Series of a Fund pays the adviser a separate
monthly fee calculated on the basis of its average daily net assets during the
year. See "Charges and Deductions--Other Charges."
6. IS THERE A RIGHT TO CANCEL PERIOD?
Yes. The Policyowner may cancel the Policy within 10 days after the
Policyowner receives it (or longer in some states), or 10 days after Phoenix
mails or delivers a written notice of withdrawal right to the Policyowner, or
within 45 days of completing the application, whichever is latest.
4
<PAGE>
7. HOW ARE PREMIUMS ALLOCATED?
If the applicant elects the Temporary Money Market Allocation Amendment in
the application, Phoenix will allocate the entire Issue Premium, less applicable
charges, to the Money Market Subaccount of the VUL Account. Phoenix requires
this election for all applicants in certain states and for applicants in certain
states who indicate on their application that they intend the Policy to replace
existing insurance. At the expiration of the Right to Cancel Period for such
Policyowners, the Policy Value will be allocated among the Subaccounts of the
VUL Account or to the GIA in accordance with the Policyowner's allocation
instructions in the application for insurance. All other Policyowners will have
their Issue Premium less applicable charges allocated according to the
instructions in the application on the date it is received without first having
the premium placed in the Money Market Subaccount. The Policy Value may be
allocated among the available Subaccounts of the VUL Account, each of which
invests in shares of a designated portfolio of the Funds, or to the GIA.
8. AFTER THE INITIAL ALLOCATION, MAY I CHANGE THE ALLOCATION OF POLICY VALUE?
Yes. A Policyowner may transfer amounts among the Sub- accounts of the VUL
Account or the GIA. Only one transfer per Policy Year is permitted from the
unloaned portion of the GIA. The amount of that transfer is limited to the
higher of $1,000 or 25% of the value of the Policy in the unloaned portion of
the GIA. Also, Phoenix reserves the right to require that transfers be made by
Written Request. Phoenix further reserves the right to permit transfers of less
than $500 only if the entire balance in the Subaccount of the VUL Account or the
GIA is transferred. A systematic transfer program also is available. See
"Transfer of Policy Value."
9. MAY THE POLICY BE SURRENDERED?
Yes. A Policyowner may totally surrender the Policy at any time and receive
the Cash Surrender Value. Subject to certain limitations, the Policyowner also
may partially surrender the Policy at any time prior to the Maturity Date. In
the future, Phoenix may set a minimum partial surrender amount, not to exceed
$500. See "Surrenders--Partial Surrenders." A partial surrender will result in a
decrease in the death benefit under the Policy. See "Death Benefit." If the
Policy is totally or partially surrendered during the first 10 Policy Years, a
surrender charge will apply. See "Surrender Charge." In addition, there may be
certain tax consequences as the result of a surrender. For example, a Policy may
be a modified endowment contract if the amount of premium paid during the first
seven Policy Years is more than the amount that would have been paid if the
Policy had provided for paid-up benefits after the payment of seven level annual
premiums. Distributions such as loans and full or partial surrenders under a
modified endowment contract may be taxable income to the extent they exceed the
premiums paid. If such income is distributed before the Policyowner attains age
59 1/2, a 10% penalty tax may be imposed. See "Federal Tax Considerations."
10. WHAT IS THE POLICY'S LOAN PRIVILEGE?
A Policyowner may obtain Policy loans in an amount up to 90% of the result
of subtracting the remaining surrender charge from the Policy Value. The
interest rate on a loan is at an effective annual rate as stated in the Policy,
compounded daily and payable on each Policy Anniversary in arrears. The
requested loan amount is transferred from the VUL Account to the loaned portion
of the GIA and is credited with interest at an effective annual rate as stated
in the Policy. Phoenix reserves the right not to allow loans of less than $500
unless the loans are to pay premiums on another policy issued by Phoenix. See
"The Policy--Policy Loans."
The proceeds of Policy loans may be subject to federal income tax under
certain circumstances. See "Federal Tax Considerations."
11. HOW ARE INSURANCE BENEFITS PAID?
Surrender and death benefits under the Policy may be paid in a lump sum or
under one of the payment options set forth in the Policy. See "Payment Options."
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 AND PREMIUM TAX 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
Mortality and Expense Risk charge on the VUL Account level.
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, 1997.
5
<PAGE>
Example:
Assumptions:
Value of hypothetical pre-existing account with
exactly one Unit at the beginning of the period:....... 1.439995
Value of the same account (excluding capital
changes) at the end of the seven-day period:.......... 1.441014
Calculation:
Ending account value ................................... 1.441014
Less beginning account value ........................... 1.439995
Net change in account value ............................ 0.001019
Base period return:
(adjusted change/beginning account value) .............. 0.000708
Current yield = return x (365/7) = ....................... 3.69%
Effective yield = [(1 + return)(365/7)] - 1 = ............ 3.76%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time or other investment companies, due to charges which will
be deducted on the Account level.
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 to the value of the investment at the end
of the period, assuming the reinvestment of all distributions at net asset value
and the deduction of the Mortality and Expense Risk, Issue Expense and Monthly
Administrative charges.
For those Subaccounts within the VUL Account that have not been available
for one of the quoted periods, the average annual total return quotations will
show the investment performance such Subaccount would have achieved (reduced by
the applicable charges) had it been available to invest in shares of the Fund
for the period quoted.
Below are quotations of average annual total return calculated as described
above. 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 12/31/97
-----------------------------
COMMENCE- 10 LIFE OF
SUBACCOUNT MENT DATE 1 YEAR 5 YEARS YEARS FUND
- ---------- --------- ------ ------- ----- ----
Multi-Sector..... 1/1/83 7.92% 9.31% 9.32% 9.66%
Balanced......... 5/1/92 14.61% 9.38% N/A 9.86%
Allocation....... 9/17/84 17.34% 9.46% 10.70% 11.80%
Growth........... 1/1/83 17.67% 14.94% 15.99% 17.20%
International.... 5/1/90 8.87% 13.34% N/A 7.32%
Money Market..... 10/10/82 2.17% 2.79% 4.17% 5.04%
Real Estate...... 5/1/95 18.61% N/A N/A 25.23%
Theme............ 1/29/96 13.86% N/A N/A 11.87%
Asia............. 9/17/96 (34.41%) N/A N/A (28.08%)
Enhanced Index... 7/15/97 N/A N/A N/A 3.57%
U.S. Small Cap... 5/1/95 25.80% N/A N/A 32.34%
Int'l. Small Cap. 5/1/95 (4.27%) N/A N/A 21.28%
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%
1997.... 10.21% 17.00% 19.78% 20.12% 11.16% 4.35%
REAL ENHANCED U.S. INT'L
YEAR ESTATE THEME ASIA INDEX SMALL CAP SMALL CAP
- ---- ------ ----- ---- ----- --------- ---------
1995.... 17.19%** N/A N/A N/A 16.01%** 33.96%**
1996.... 32.06% 9.55%** (0.06%)** N/A 45.64% 31.15%
1997.... 21.09% 16.25% (32.94%) 5.46%** 28.41% (2.24%)
* Sales Charges have not been deducted from the Annual Total Return.
** Since Inception.
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
iIlustrate 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, 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 returns, 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. ("Lipper"), CDA
Investment Technologies, Inc. ("CDA"), 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
6
<PAGE>
stock and bond market performance, such as the S&P 500, Dow Jones Industrial
Average, Europe Australia Far East Index (EAFE), Consumer 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.
PHOENIX AND THE VUL ACCOUNT
- -------------------------------------------------------------------------------
PHOENIX
Phoenix is a mutual life insurance company originally chartered in
Connecticut in 1851 and redomiciled to New York in 1992. Its executive office is
at One American Row, Hartford, Connecticut 06115 and its main administrative
office is at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. Its
New York principal office is at 10 Krey Boulevard, East Greenbush, New York
12144. Phoenix is the nation's 9th largest mutual life insurance company and has
consolidated assets of $18.5 billion. Phoenix sells insurance policies and
annuity contracts through its own field force of full time agents and through
brokers. Its operations are conducted in all 50 states, the District of
Columbia, Canada and Puerto Rico.
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 that Act. Such registration does
not involve supervision of the management of the VUL Account or Phoenix by the
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 the Funds allocable to one of the available Series, each 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 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% for Single Life Policies (4% on Single Life Policies in
New York), and 6% for Multiple Life Policies. Interest on the unloaned portion
of the GIA will be credited at an effective annual rate of not less than 4%.
Biweekly, 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. For
more complete information concerning the GIA, see Appendix A.
THE POLICY
- -------------------------------------------------------------------------------
INTRODUCTION
The Policy is a variable life insurance policy. 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 portfolio 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 up to the age of 75 is eligible to be insured under a newly
purchased Policy after providing acceptable evidence of insurability. A person
can purchase a Policy to insure the life of another person provided that the
Policyowner has an insurable interest in the life of the Insured, and the
Insured consents. A Policy also can be purchased to cover from two to five lives
under one Policy, for any person up to the age of 80. Under such a Multiple Life
Policy, the death benefit is paid upon the first death under the Policy; the
Policy then terminates. Such a Policy could be purchased on the lives of
spouses, family members, business partners or other related groups.
7
<PAGE>
PREMIUM PAYMENT
The minimum Issue Premium for a Policy is generally 1/6 of the Planned
Annual Premium. The Issue Premium is due on the Policy Date. The Insured must be
alive when the Issue Premium is paid. Thereafter, the amount and payment
frequency of planned premiums are as shown on the Schedule Page of the Policy.
All premiums are payable at VPMO, except that the Issue Premium may be paid to
an authorized agent of Phoenix for forwarding to the Underwriting Department of
Phoenix.
Any premium payments will be reduced by the applicable premium tax and
Single Life Policies also will be 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. The allocation schedule for
premium payments may be changed by calling VULA or writing to VPMO. Allocations
to the VUL Account Subaccounts or to the GIA must be expressed in terms of whole
percentages.
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.
A Policyowner may increase or decrease the planned premium amount or payment
frequency at any time by Written Request to VPMO. Phoenix reserves 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.
A Policyholder also may elect a Waiver of Premium Rider. This rider provides
for the waiver of certain premium payments under the Policy under certain
conditions during a period of total disability of the Insured. Under its terms,
the specified premium will be waived upon Phoenix's receipt of proof that the
Insured is totally disabled and that the disability occurred while the rider was
In Force.
The Policy contains a total premium limit as shown on the Schedule Page.
This limit is applied to the sum of all premiums paid under the Policy. If the
total premium limit is exceeded, the Policyowner will receive the excess, with
interest at an annual rate of not less than 4%, not later than 60 days after the
end of the Policy Year in which the limit was exceeded. The Policy Value then
will be adjusted to reflect the refund. The amount to be taken from each
Subaccount or the GIA will be allocated in the same manner as provided for
monthly deductions unless the Policyowner requests otherwise In Writing. The
total premium limit may be exceeded if additional premium is needed to prevent
lapse or if Phoenix determines that additional premium would be permitted by
federal laws or regulations.
A Policyowner may authorize his bank to draw $25 or more from his personal
checking account monthly to purchase Units in any available Subaccount. The
amount the Policyowner designates will be automatically invested in the
Subaccount of his choice on the date the bank draws on his account.
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 ISSUE PREMIUM
Phoenix will generally allocate the Issue Premium less applicable charges to
the VUL Account or to the GIA upon receipt of a completed application, in
accordance with the allocation instructions in the application for a Policy.
However, Policies issued in certain states, and Policies issued in certain
states pursuant to applications which state the Policy is intended to replace
existing insurance, are issued with a Temporary Money Market Allocation
Amendment. Under this Amendment, Phoenix temporarily allocates 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 the applicant's allocation instructions in the
application for insurance.
RIGHT TO CANCEL PERIOD
A Policy may be returned by mailing or delivering it to Phoenix within 10
days after the Policyowner receives it (or longer in some states); within 10
days after Phoenix mails or delivers a written notice of withdrawal right to the
Policyowner; or within 45 days after the applicant signs the application for
insurance, whichever occurs latest (the "Right to Cancel Period"). The returned
Policy is treated as if Phoenix never issued the Policy and, except for Policies
issued with a Temporary Money Market Allocation Amendment, Phoenix will return
the sum of the following as of the date Phoenix receives the returned Policy:
(i) the then current Policy Value less any unpaid loans and loan interest; plus
(ii) any monthly deductions, partial surrender fees, 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.
Phoenix reserves the right to disapprove an application for processing
within 7 days of receipt at Phoenix of the completed application for insurance,
in which event Phoenix will return the premium paid. Even after approval of the
application for processing, Phoenix reserves the right to decline issuance of
the Policy, in which event Phoenix will refund the applicant 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, Phoenix issues a Temporary Insurance
8
<PAGE>
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
A Policyowner 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. A Policyowner must have an
initial value of $1,000 in the GIA or the Subaccount that funds will be
transferred from ("Sending Subaccount") and if the value in that Subaccount or
the GIA drops below the elected transfer amount, the entire remaining balance
will be transferred and no more systematic transfers will be processed. Funds
may be transferred from only one Sending Subaccount or the GIA, but may be
allocated to multiple Subaccounts ("Receiving Subaccount"). Under the Systematic
Transfer Program, Policyowners 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 VULA at (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 business day.
NON-SYSTEMATIC TRANSFERS
Transfers among available Subaccounts or the GIA and changes in premium
payment allocations may be requested In Writing or by calling (800) 892-4885,
between the hours of 8:30 a.m. and 4:00 p.m. Eastern Time and will be executed
on the date the request is received at VPMO, except as noted below. Unless the
Policyowner elects In Writing not to authorize telephone transfers or allocation
changes, telephone transfer orders and allocation changes also will be accepted
on behalf of the Policyowner from his or her registered representative. Phoenix
and Phoenix Equity Planning Corporation ("PEPCO") will employ reasonable
procedures to confirm that telephone instructions are genuine. They will require
verification of account information and will record telephone instructions on
tape. All telephone transfers will be confirmed In Writing to the Policyowner.
To the extent that procedures reasonably designed to prevent unauthorized
transfers are not followed, Phoenix and PEPCO may be liable for following
telephone instructions for transfers that prove to be fraudulent. However, the
Policyowner would bear the risk of loss resulting from instructions entered by
an unauthorized third party that Phoenix and PEPCO reasonably believe to be
genuine. These telephone transfer 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.
Phoenix reserves 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.
Phoenix reserves 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. It further reserves the
right to require that the entire balance of a Subaccount or the GIA be
transferred if the value of the Policy's share in the Subaccount would,
immediately after the transfer, be less than $500.
Unless Phoenix agrees otherwise or the Systematic Transfer Program has been
elected, a Policyowner may make only one transfer per Policy Year from the
unloaned portion of the GIA and the amount that may be transferred 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. Non-systematic transfers from the
unloaned portion of the GIA will be effectuated on the date of receipt by VPMO.
Phoenix reserves the right to limit the number of Subaccounts you may elect
to a total of 18 at any one time and/or over the life of the Policy unless
required to be less to comply with changes in federal and/or state regulation,
including tax, securities and insurance law.
For policies issued with the Temporary Money Market Allocation Amendment,
transfers may not be made until termination of the Right to Cancel Period.
Because excessive trading can hurt Fund performance and harm Policyowners,
Phoenix reserves the right to temporarily or permanently terminate exchange
privileges or reject any specific order from anyone whose transactions seem to
follow a timing pattern, including those who request more than one exchange out
of a Subaccount within any 30-day period. Phoenix will not accept batch transfer
instructions from registered representatives (acting under powers of attorney
for multiple Policyowners), unless the registered representative's broker-dealer
firm and Phoenix have entered into a third party transfer service agreement.
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 6
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).
9
<PAGE>
(A) The value of the assets in the Subaccount on the current Valuation
Date, including accrued net investment income and realized and
unrealized capital gains and losses, but excluding the net value of any
transactions during the current Valuation Period.
(B) The amount of any dividend (or, if applicable, any capital gain
distribution) received by the Subaccount if the "ex-dividend" date for
shares of the Fund occurs during the current Valuation Period.
(C) The value of the assets in the Subaccount as of the just prior
Valuation Date, including accrued net investment income and realized
and unrealized capital gains and losses, and including the net value 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 1) equals the Policy's face amount on the
date of the Insured's death or, if greater, the minimum death benefit on the
date of death. On Single Life Policies, under Option 2, the death benefit equals
the Policy's face amount on the date of the Insured's death plus the Policy
Value. On Multiple Life Policies, under Option 2, the death benefit equals the
Policy's face amount on the date of the first Insured's death plus the Policy
Value to the later of the 10th Policy Anniversary or Policy Anniversary nearest
the oldest Insured's 65th birthday. Under either Option, the minimum death
benefit is the Policy Value on the date of death of the 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 1 will apply.
GUARANTEED DEATH BENEFIT OPTION
For Policies with a face amount of at least $50,000, a guaranteed death
benefit rider may be purchased. Under this Policy rider, if a Policyowner pays
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 increases or 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.
LIVING BENEFITS OPTION
In the event of a terminal illness of the Insured, an accelerated payment of
up to 75% of the Policy's death benefit (up to a maximum of $250,000) is
available if a Living Benefits Rider has been purchased. The minimum face amount
of the Policy after any such accelerated benefit payment is $10,000.
REQUESTS FOR INCREASE IN FACE AMOUNT
Any time after the first Policy Anniversary, a Policyowner may request an
increase in the face amount of insurance provided under the Policy. Requests for
face amount increases must be made In Writing, and Phoenix requires additional
evidence of insurability. The effective date of the increase generally will be
the Policy Anniversary following approval of the increase. The increase may not
be less than $25,000 and no increase will be permitted after the Insured's age
75. The charge for the increase is $1.50 per thousand of face amount increase
requested subject to a maximum of $600. No additional monthly administration
charge will be assessed for face amount increases. Phoenix will deduct any
charges associated with the increase (the increases in cost of insurance
charges), from the Policy Value, whether or not the Policyowner pays an
additional premium in connection with the increase. The surrender charge
applicable to the Policy also will increase. At the time of the increase, the
Cash Surrender Value must be sufficient to pay the monthly deduction on that
date, or additional premiums will be required to be paid on or before the
effective date. Also, a new Right to Cancel Period (see "The Policy--Right to
Cancel Period") will be established for the amount of the increase. For a
discussion of possible implications of a material change in the Policy resulting
from the increase, see "Material Change Rules."
PARTIAL SURRENDER AND DECREASES IN FACE AMOUNT: EFFECT ON DEATH BENEFIT
A partial surrender or a decrease in face amount generally decreases the
death benefit. Upon a decrease in face amount or partial surrender, a partial
surrender charge will be deducted from Policy Value based on the amount of the
decrease or partial surrender. 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
A Policyowner may request a decrease in face amount at any time after the
first Policy Year. Unless Phoenix agrees otherwise, the decrease must at least
equal $10,000 and the face amount remaining after the decrease must at least
equal $25,000. All face amount decrease requests must be In Writing and will be
effective on the first Monthly Calculation Day following the date Phoenix
approves 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 Insured(s) and while the Policy is In
Force, the Policyowner may partially or fully surrender the Policy by sending a
written release and surrender in a form satisfactory to Phoenix to VPMO, along
with the Policy if Phoenix so requires. The amount available for surrender is
the Cash Surrender Value at the end of the Valuation Period during which the
surrender request is received at VPMO.
10
<PAGE>
Upon partial or full surrender, Phoenix generally will pay the amount
surrendered to the Policyowner 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 VPMO, along with the written release and surrender of all claims in a form
satisfactory to Phoenix. A Policyowner may elect to have the amount paid in a
lump sum or under a payment option. See "Surrender Charge" and "Payment
Options."
PARTIAL SURRENDERS
A Policyowner may obtain a partial surrender of the Policy by requesting
that part of the Policy's Cash Surrender Value be paid. The Policyowner may do
this at any time during the lifetime of the Insured while the Policy is In Force
with a Written Request to VPMO. Phoenix reserves 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, Phoenix reserves 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 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
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) on Single Life Policies and 6% on Multiple Life Policies,
compounded daily and payable in arrears. At the end of each Policy Year and at
the time of any Debt repayment, interest credited to the loaned portion of the
GIA will be transferred to the unloaned portion of the GIA.
Debt may be repaid at any time during the lifetime of the Insured while the
Policy is In Force. Any Debt repayment received by Phoenix 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 such Account have not been previously repaid.
Otherwise, such balance will be transferred among the Subaccounts as the
Policyowner requests 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
Phoenix for the Policy will be applied directly to reduce the Debt unless
specified as a premium payment by the Policyowner. Until the Debt is fully
repaid, additional Debt repayments may be made at any time during the lifetime
of the Insured while the Policy is In Force.
Failure to repay a Policy loan or to pay loan interest will not terminate
the Policy 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.
The Policyowner 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:
11
<PAGE>
SINGLE LIFE POLICIES
--------------------
4% for Policy Years 1 through 10 (or the Insured's age 65 if earlier) 3% through
Policy Year 15 2 1/2% for Policy Years 16 and thereafter
SINGLE LIFE POLICIES--NEW YORK ONLY
-----------------------------------
6% for Policy Years 1 through 10 (or the Insured's age 65 if earlier) 5% through
Policy Year 15 4 1/2% for Policy Years 16 and thereafter
MULTIPLE LIFE POLICIES
----------------------
8% for Policy Years 1 through 10 7% for Policy Years 11 and thereafter
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 the Policyowner's 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 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
monthly deduction. If on any Monthly Calculation Day during any subsequent
Policy Year, the Cash Surrender Value (which has become positive) is less than
the required monthly deduction, a grace period of 61 days will be allowed for
the payment of an amount equal to three times the required monthly deduction.
However, during the first five Policy Years or until the Cash Surrender Value
becomes positive for the first time, the Policy will not lapse as long as all
premiums planned at issue have been paid.
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 Phoenix mailed
written notice to the Policyowner. If a premium payment for the additional
amount is received by Phoenix 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, Phoenix will deduct the premium tax and the
amount needed to cover any monthly deductions made during the grace period. If
the Insured dies during the grace period, the death benefit will equal the
amount of the death benefit immediately prior to the commencement of the grace
period.
PAYMENT OF PREMIUMS DURING PERIOD OF DISABILITY
A Policyholder also may elect a Waiver of Premium Rider. This rider provides
for the waiver of certain premium payments under the Policy under certain
conditions during a period of total disability of the Insured. Under its terms,
the specified premium will be waived upon Phoenix's receipt of proof that the
Insured is totally disabled and that the disability occurred while the rider was
In Force. The terms of this rider may vary by state.
ADDITIONAL INSURANCE OPTIONS
While the Policy is In Force and the Policyowner is insurable, the
Policyowner will have the option to purchase additional insurance on the same
Insured with the same guaranteed rates as the Policy without being assessed an
issue expense charge. Phoenix will require evidence of insurability and charges
will be adjusted for the Insured's new Attained Age and any change in risk
classification. However, if elected on the application, the Policyowners may, at
predetermined future dates, purchase additional insurance protection on the same
Insured without evidence of insurability. See "Purchase Protection Plan Riders."
In addition, once each Policy Year, for Single Life Policies only, a
Policyowner may request an increase in face amount. This request should be made
within 90 days prior to the Policy Anniversary and is subject to an issue
expense charge of $1.50 per $1,000 of increase in face amount, up to a maximum
of $600, and to Phoenix's receipt of adequate evidence of insurability. A Right
to Cancel Period as described in "The Policy" section of this Prospectus applies
to each increase in face amount.
ADDITIONAL RIDER BENEFITS
A Policyowner may elect additional benefits under a Policy. These benefits
are cancellable by the Policyowner at any time. A charge will be deducted
monthly from the Policy Value for each additional rider benefit chosen except
where noted below. More details will be included in the form of a rider to the
Policy if any of these benefits is chosen. The following benefits are currently
available; however, additional riders may be available as described in the
Policy.
SINGLE LIFE POLICIES:
O DISABILITY WAIVER OF SPECIFIED PREMIUM RIDER
Phoenix waives the specified premium if the Insured becomes totally
disabled and the disability continues for at least six months. Premiums will
be waived to the Policy Anniversary nearest the Insured's 65th birthday
(provided that the disability continues), unless premiums have been waived
continuously during the entire five years prior to such date in which case
the waiver will continue beyond that date. The premium will be waived upon
Phoenix's receipt of notice that the Insured is totally disabled and that
the
12
<PAGE>
disability occurred while the rider was In Force. The terms vary in New
York.
O ACCIDENTAL DEATH BENEFIT RIDER
An additional death benefit will be paid if the Insured dies from bodily
injury that results from an accident; if the Insured dies no later than 90
days after injury; and before the Policy Anniversary nearest the Insured's
75th birthday.
O DEATH BENEFIT PROTECTION RIDER
The purchase of this rider provides that the death benefit will be
guaranteed. The amount of the guaranteed death benefit is equal to the
initial face amount, or the face amount that later may be increased or
decreased by the Policyholder provided that certain minimum premiums are
paid. Unless Phoenix agrees otherwise, the initial face amount and the face
amount remaining after any decrease must at least equal $50,000 and the
minimum issue age of the Insured is 20. Three (3) Death Benefit Guarantee
periods are available in all states except New York. The minimum premium
required to maintain the guaranteed death benefit is based on the length of
the guarantee period as elected on the application. The three available
guarantee periods are:
Level: Expiry Date of Death Benefit Guaranteed, the later of:
1 The Policy Anniversary nearest the Insured's 70th
birthday or the 7th Policy Year
2 The Policy Anniversary nearest the Insured's 80th
birthday or the 10th Policy Year
3 The Policy Anniversary nearest the Insured's 95th birthday.
Level 1 or 2 guarantees may be extended provided that the Policy's Cash
Surrender Value is sufficient and the Policyowner pays the new Minimum Required
Premium.
For Policies issued in New York, two guarantee periods are available:
1 The Policy Anniversary nearest the Insured's 75th birthday
or the 10th Policy Year
2 The Policy Anniversary nearest the Insured's 95th birthday.
O WHOLE LIFE EXCHANGE OPTION RIDER
This rider permits the Policyowner to exchange the Policy for a fixed
benefit whole life policy at the later of age 65 or Policy Year 15. There is
no charge for this rider.
O PURCHASE PROTECTION PLAN RIDER
Under this rider a Policyowner may, at predetermined future dates,
purchase additional insurance protection without evidence of insurability.
O LIVING BENEFITS RIDER
Under certain conditions, in the event of the terminal illness of the
Insured, an accelerated payment of up to 75% of the Policy's death benefit
(up to a maximum of $250,000) is available. The minimum face amount of the
Policy after any such accelerated benefit payment is $10,000. There is no
charge for this rider. This benefit is available only when the Disability
Waiver of Specified Premium Rider is also elected.
O CASH VALUE ACCUMULATION RIDER
This rider generally permits a Policyowner to pay more in premium than
otherwise would be permitted. This rider must be elected before the Policy
is issued. There is no charge for this rider.
O CHILD TERM RIDER
This rider provides annually renewable term coverage on children of the
Insured who are between 14 days old and age 18. The term insurance is
renewable to age 25. Each child will be insured under a separate rider and
the amount of insurance must be the same. Coverage may be converted to a new
whole life or variable insurance policy at any time prior to the Policy
Anniversary nearest insured child's 25th birthday.
O FAMILY TERM RIDER
This rider provides annually renewable term insurance coverage to age 70
on the Insured or members of the Insured's immediate family who are at least
18 years of age. The rider is fully convertible through age 65 for each
Insured to either a fixed benefit or variable policy.
O BUSINESS TERM RIDER
This rider provides annually renewable term insurance coverage to age 95
on the life of the Insured under the base Policy. The face amount of the
term insurance may be level or increasing. The initial rider death benefit
cannot exceed 6 times the initial base Policy. This rider is only available
for Policies sold in the Corporate Owned Life Insurance or employer
sponsored life insurance market.
MULTIPLE LIFE POLICIES:
O DISABILITY BENEFIT RIDER
In the case of disability of the Insured, a specified monthly amount may
be credited to the Policy and the monthly deductions will be waived. A
Disability Benefit Rider may be provided on any or all eligible Insureds.
The specified amount selected must be the same for all who elect coverage.
O SURVIVOR PURCHASE OPTION RIDER
The survivor(s) may purchase a new Multiple Life Policy for a face
amount equal to that of the original Policy upon the first death. The new
Policy will be based upon Attained Age rates.
O TERM INSURANCE RIDER
The Term Insurance Rider enables the face amount of coverage on each
life to be individually specified. A rider is available for each Insured and
the face amount of coverage under the rider may differ for each Insured.
Based upon the Policyowner's election at issue, the rider will provide
coverage for all Insureds to either age 70 or maturity of the Policy. The
termination age specified must be the same for all Insureds.
O POLICY EXCHANGE OPTION RIDER
The Multiple Life Policy may be exchanged for Single Life Policies where
the total face amount under the Policies is no greater than that under the
original Policy. There is no charge for this rider.
13
<PAGE>
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: 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 Strategic
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.
ENGEMANN NIFTY FIFTY ("NIFTY FIFTY") SERIES: The investment objective of the
Nifty Fifty Series is to seek long-term capital appreciation by investing in
approximately 50 different securities which offer the best potential for long
term growth of capital. At least 75% of the Series' assets will be invested in
common stocks of high quality growth companies. The remaining portion will be
invested in common stocks of small corporations with rapidly growing earnings
per share or common stocks believed to be undervalued.
SENECA MID-CAP GROWTH ("SENECA MID-CAP") SERIES: The investment objective of
the Seneca Mid-Cap Series is to seek capital appreciation primarily through
investments in equity securities of companies that have the potential for above
average market appreciation. The Series seeks to outperform the Standard &
Poor's Mid-Cap 400 Index.
PHOENIX GROWTH AND INCOME ("GROWTH & INCOME") SERIES: The investment
objective of the Growth & Income Series is to seek dividend growth, current
income and capital appreciation by investing in common stocks. The Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
PHOENIX VALUE EQUITY ("VALUE") SERIES: The primary investment objective of
the Value Series is long-term capital appreciation, with a secondary investment
objective of current income. The Series seeks to achieve its objective by
investing in a diversified portfolio of common stocks that meet certain
quantitative standards that indicate above average financial soundness and
intrinsic value relative to price.
SCHAFER MID-CAP VALUE ("SCHAFER MID-CAP") SERIES: The primary investment
objective of the Schafer Mid-Cap Series is to seek long-term capital
appreciation, with current income as the secondary investment objective. The
Series will invest in common stocks of established companies having a strong
financial position and a low stock market valuation at the time of purchase
which are believed to offer the possibility of increase in value.
INVESTMENT ADVISERS
The investment adviser to all series except the Real Estate and Asia Series
is Phoenix Investment Counsel, Inc. ("PIC"). Pursuant to subadvisory agreements
with the Fund, PIC delegates certain investment decisions and research functions
with respect to the following series to the subadviser indicated:
14
<PAGE>
Enhanced Index Series J.P. Morgan Investment Management, Inc.
Nifty Fifty Series Roger Engemann & Associates, Inc. ("Engemann")
Seneca Mid-Cap Series Seneca Capital Management, LLC ("Seneca")
Schafer Mid-Cap Series Schafer Capital Management, Inc.
The investment adviser to the Real Estate Series is Duff & Phelps Investment
Management Co. ("DPIM").
The investment adviser to the Asia Series is Phoenix-Aberdeen International
Advisors LLC ("PAIA"). Pursuant to subadvisory agreements with the Fund, PAIA
delegates certain investment decisions and research functions with respect to
the Asia Series to PIC and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect, less than wholly-owned
subsidiaries of Phoenix Home Life. PAIA is jointly owned and managed by PM
Holdings, Inc., a subsidiary of Phoenix Home Life, and Aberdeen Fund Managers,
Inc.
WANGER ADVISORS TRUST
Certain Subaccounts of the VUL Account invest in corresponding Series of the
Wanger Advisors Trust. The investment adviser is Wanger Asset Management, L.P.
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 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.
SERVICES OF THE ADVISERS
The Advisers continuously furnish an investment program for each Series and
manage the investment and reinvestment of the assets of each Series subject at
all times to the authority and supervision of the Trustees. A detailed
discussion of the investment advisers and subadvisers, and the investment
advisory and subadvisory agreements, is contained in the accompanying prospectus
for the Funds.
REINVESTMENT AND REDEMPTION
All dividend distributions of the Fund are automatically reinvested in
shares of the Fund at their net asset value on the date of distribution; 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.
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
15
<PAGE>
Policy. The nature and amount of these charges are described more fully below.
1. 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, any unpaid balance of the issue expense charge, and
an administrative charge. This administrative charge is currently set at $5 per
month but it is guaranteed not to exceed $10 per month. The monthly deduction is
deducted on each Monthly Calculation Day. It is allocated among the 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 the Subaccounts 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 administration charge is
assessed on a pro rata basis in equal monthly installments over a
12-month period to compensate Phoenix for underwriting and start-up
expenses in connection with issuing a Policy. For Multiple Life
Policies, the issue expense charge is $150. For Single Life Policies,
the issue expense charge is $1.50 per $1,000 of face amount, up to a
maximum charge of $600. Phoenix may reduce or eliminate the issue
expense charge for Policies issued under group or sponsored
arrangements. Generally, administrative 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 amounts of any reductions will be considered on a case-by-case
basis and will reflect the reduced administration costs expected as a
result of sales to a particular group or sponsored arrangement.
(B) 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 1
if no selection is made) and the Policy Value. Generally, cost of
insurance rates for Single Life Policies are based on the sex, issue
age, duration and risk class; and for Multiple Life Policies the cost
of insurance rates are based on the sex, Attained Age and risk class of
the Insured(s). However, in certain states and for policies issued in
conjunction with certain qualified plans, cost of insurance rates are
not based on sex. The actual monthly cost of insurance rates are based
on Phoenix's 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 Insured's 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 preferred or standard risk class or a risk class
involving a higher mortality risk, depending upon the health of the
Insured as determined by medical information that Phoenix requests. In
an otherwise identical Policy, Insureds in the preferred or 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. A blended cost of insurance rate
is applied under Multiple Life Policies.
2. 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 Phoenix considers necessary to pay all
premium taxes imposed by such states and any subdivisions thereof, and Phoenix
does not expect to derive a profit from this charge. Multiple Life Policies will
be assessed at the tax rate charged by the state in which the Policy is issued
and Single Life Policies will be assessed a charge equal to 2.25% of the
premiums paid. These taxes are deducted from the Issue Premium, and from each
subsequent premium payment.
3. FEDERAL TAX CHARGE
On Single Life Policies, 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.
4. MORTALITY AND EXPENSE RISK CHARGE
Phoenix 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. For Single Life Policies, a
reduced annual rate of .25% will apply after the 15th Policy Year. This charge
is not deducted from the GIA.
The mortality risk assumed by Phoenix is that 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, Phoenix may profit
from this charge. Phoenix also assumes risks with respect to other
16
<PAGE>
contingencies including the incidence of Policy loans, which may cause Phoenix
to incur greater costs than anticipated when designing the Policies. To the
extent Phoenix profits from this charge, it 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.
5. 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.
6. 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, and a
contingent deferred issue charge designed to recover expenses for the
administration of Policies that are terminated by surrender before
administrative expenses have been recouped. These are contingent charges because
they are paid only if the Policy is surrendered (or the face amount is reduced
or the Policy lapses) during this period. They are deferred charges because they
are not deducted from premiums.
During the first 10 Policy Years, the full surrender charge as described
below will apply if the Policyowner either surrenders the Policy for its Cash
Surrender Value or lets the Policy lapse. The applicable surrender charge in any
Policy Month is the full surrender charge minus any surrender charges that have
been previously paid. There is no surrender charge after the 10th Policy Year.
During the first two Policy Years on Single Life Policies and during the first
10 Policy Years on Multiple Life Policies, the maximum surrender charge that a
Policyowner could pay while he or she owns the Policy is equal to either A plus
B (as defined below) or the amount shown in the Policy's Surrender Charge
Schedule, whichever is less. After the first two Policy Years on Single Life
Policies, the maximum surrender charge that a Policyowner could pay is based on
the amount shown in the Policy's Surrender Charge Schedule.
A (the contingent deferred sales charge) is equal to:
1) 28.5% of all premiums paid (up to and including the amount stated in the
Policy's Surrender Charge Schedule, which is calculated according to a
formula contained in a SEC rule); plus
2) 8.5% of all premiums paid in excess of this amount but not greater than
twice this amount; plus
3) 7.5% of all premiums paid in excess of twice this amount.
B (the contingent deferred issue charge) is equal to:
$5 per $1,000 of initial face amount.
As an example, the following illustrates the maximum surrender charge on a
$100,000 Single Life Policy for a male age 35 who has never smoked, who has paid
$3,000 in premium payments, and who surrenders the Policy in the 70th Policy
Month. The Policy's Surrender Charge Schedule would show that the maximum
surrender charge to be paid would be equal to either A plus B (shown below) or
the amount shown in the chart in the Policy (also shown below), whichever is
less:
Example: If this Policyowner surrenders his Policy in the 70th Policy Month
his surrender charge will be $1,186.78, as given in the table.
Example: If this Policyowner surrenders his Policy in the first two years he
may be eligible to receive a refund of a portion of the surrender charge,
depending on the amount of premium paid, or in other words his surrender charge
may be reduced. The surrender charge in the first 2 years would be equal to the
lesser of the amount in the surrender charge table and the sum of the following:
1) 28.5% of premiums paid up to $1,076.72, plus
2) 8.5% of premiums paid in excess of $1,076.72 but not greater than
$2,153.43, plus
3) 7.5% of premiums paid in excess of $2,153.43, plus $500
If this Policyowner surrendered his Policy in the 2nd year after paying
$2,000 of premiums his surrender charge would be the lesser of $1,307.54 from
the table, and $385.34, thus equaling $385.34. Thus, in this case, the
Policyowner would pay less surrender charge if he surrenders his Policy in the
first 2 Policy Years.
SURRENDER CHARGE TABLE
- ----------------------------------------------------------------
POLICY SURRENDER POLICY SURRENDER POLICY SURRENDER
MONTH CHARGE MONTH CHARGE MONTH CHARGE
1-60 $1307.54 80 $1066.03 100 $727.09
61 1295.46 81 1053.95 101 690.65
62 1283.39 82 1041.88 102 654.22
63 1271.31 83 1029.80 103 617.78
64 1259.24 84 1017.73 104 581.35
65 1247.16 85 1005.65 105 544.91
66 1235.08 86 993.58 106 508.48
67 1223.01 87 981.50 107 472.05
68 1210.93 88 969.43 108 435.61
69 1198.86 89 957.35 109 399.18
70 1186.78 90 945.28 110 362.74
71 1174.71 91 933.20 111 326.31
72 1162.63 92 921.13 112 289.97
73 1150.56 93 909.05 113 253.44
74 1138.48 94 896.97 114 217.01
75 1126.41 95 884.90 115 180.57
76 1114.33 96 872.82 116 144.14
77 1102.26 97 836.39 117 107.70
78 1090.18 98 799.95 118 71.27
79 1078.10 99 763.52 119 34.83
120 .00
Phoenix may reduce the surrender charge for Policies issued under group or
sponsored arrangements. The amount of reduction will be considered on a
case-by-case basis and will reflect the reduced costs to Phoenix expected as a
result of sales to a particular group or sponsored arrangement.
17
<PAGE>
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 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. Phoenix 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 the Insured commits suicide within two years after the Policy's Date of
Issue, Phoenix will pay only the Policy Value adjusted by the addition of any
monthly deductions and other fees and charges made under the Policy and the
subtraction of any Debt owed to Phoenix under the Policy.
INCONTESTABILITY
Phoenix cannot contest this Policy or any attached rider after it has been
In Force during the lifetime of the Insured for two years from the Policy Date.
CHANGE OF OWNER OR BENEFICIARY
The Beneficiary, as named in the Policy application or subsequently changed,
will receive the Policy benefits at the Insured's death. If the named
Beneficiary dies before the Insured, the contingent Beneficiary, if named,
becomes the Beneficiary. If no Beneficiary survives the Policyowner, the
benefits payable at the Insured's death will be paid to the Policyowner's
estate.
As long as the Policy is In Force, the Policyowner and the Beneficiary may
be changed by Written Request, satisfactory to Phoenix. A change in Beneficiary
will take effect as of the date the notice is signed, whether or not the Insured
is living when the notice is received by Phoenix. Phoenix will not, however, be
liable for any payment made or action taken before receipt of the notice.
ASSIGNMENT
The Policy may be assigned. Phoenix 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. Phoenix assumes no responsibility for
determining whether an assignment is valid.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated, the death benefit will
be adjusted based on what the cost of insurance charge for the most recent
monthly deduction would have purchased based on the correct age and sex.
SURPLUS
Policyowners 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
- -------------------------------------------------------------------------------
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 Phoenix receives 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.
18
<PAGE>
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 a Policy covering
multiple lives, the death proceeds will be paid upon the first death under the
Policy. In addition, under certain conditions, in the event of the terminal
illness of the Insured, an accelerated payment of up to 75% of the Policy's
Death Benefit (up to maximum of $250,000), is available under the Living
Benefits Rider. The minimum face amount remaining after any such accelerated
benefit payment is $10,000.
While the Insured is living, the Policyowner may elect a payment option for
payment of the death proceeds to the Beneficiary. The Policyowner 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 the
Policyowner has made an election which does not permit such further election or
changes by the Beneficiary.
A written form satisfactory to Phoenix is required to elect, change or
revoke a payment option.
The minimum amount of surrender or death proceeds that may be applied under
any option is $1,000.
If the Policy is assigned as collateral security, Phoenix 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 Phoenix 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
- -------------------------------------------------------------------------------
INTRODUCTION
The ultimate effect of federal income taxes on values under the VUL Account
and on the economic benefit to the Policyowner or 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 Phoenix's understanding of federal income tax
laws as they are currently interpreted, Phoenix 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 "IRS"). Phoenix
reserves 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.
19
<PAGE>
PHOENIX'S TAX STATUS
Phoenix is taxed as a life insurance company under the Internal Revenue Code
of 1986 (the "Code"), as amended. 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 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. In
addition, a benefit paid under a Living Benefit Rider may be taxable as income
in the year of receipt.
Code Section 7702 imposes certain conditions with respect to premiums
received under a Policy. 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. The benefit payment under the Living Benefits Rider is not considered
a partial surrender.
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
20
<PAGE>
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 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 the Policyowner.
QUALIFIED PLANS
A Policy may be used in conjunction with certain qualified plans. Since the
rules governing such use are complex, a purchaser should not use the Policy in
conjunction with a qualified plan until he has 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 Funds 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 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 Policyowners may direct their 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
21
<PAGE>
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 the
Policyowner 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 the Insured or an exchange or assignment of the
Policy may have tax consequences depending on the circumstances. Code Section
1035 provides that a life insurance Policy can be exchanged for another life
insurance contract, without recognition of gain or loss, assuming that no money
or other property is received in the exchange, and that the policies relate to
the same Insured. If the surrendered Policy is subject to a Policy loan, this
may be treated as the receipt of money on the exchange. Phoenix recommends that
any person contemplating such actions seek the advice of a qualified tax
consultant.
OTHER TAXES
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or Beneficiary. Phoenix does not make any
representations or guarantees regarding the tax consequences of any Policy with
respect to these types of taxes.
VOTING RIGHTS
- ------------------------------------------------------------------------------
THE FUNDS
Phoenix 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 the Policyowner. However, if the 1940 Act or any regulation
thereunder should be amended or if the present interpretation thereof should
change, and as a result Phoenix determines that it is permitted to vote the
Funds' shares at its own discretion, it may elect to do so.
The number of votes that a Policyowner has the right to cast will be
determined by applying the Policyowner's percentage interest in a Subaccount to
the total number of votes attributable to the Subaccount. In determining the
number of votes, fractional shares will be recognized.
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.
Each Policyowner will receive proxy materials, reports and other materials
relating to the Funds.
Phoenix 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 Phoenix determined that the change would have an adverse effect
on the General Account because the proposed investment policy for a portfolio
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
A Policyowner (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, a Policyholder (or payee) may cast
only one vote as the holder of a Policy, irrespective of Policy Value or the
number of the Policies held.
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
Arthur P. Byrne Chairman, President and Chief
Executive Officer, The Wiremold
Company
West Hartford, Connecticut
Richard N. Cooper Professor of International
Economics, Harvard University;
formerly Chairman, National
Intelligence Council, Central
Intelligence Agency
McLean, Virginia
22
<PAGE>
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
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
Robert F. Vizza President and Chief Executive
Officer, St. Francis Hospital
Roslyn, New York
Robert G. Wilson Chief Executive Officer,
CreditSource USA, Inc., Charlotte, North Carolina;
formerly Chairman and President, Ziani
International Capital, Inc., Miami, Florida, 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
Carl T. Chadburn Executive Vice President
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,
Distribution Planning
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,
Underwriting and Operations
Robert G. Lautensack, Jr. Senior Vice President,
Individual Financial
Maura L. Melley Senior Vice President, Public
Affairs
Scott C. Noble Senior Vice President
Robert E. Primmer Senior Vice President,
Individual Distribution
Frederick W. Sawyer, III Senior Vice President
Richard C. Shaw Senior Vice President
Simon Y. Tan Senior Vice President, Market and
Product Development
Anthony J. Zeppetella Senior Vice President, Corporate
Portfolio Management
Walter H. Zultowski Senior Vice President, Marketing
and Market Research; formerly
Senior Vice President, LIMRA
International,
Hartford, Connecticut
The above positions reflect the last held position in the organization.
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 Phoenix Duff & Phelps ("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
23
<PAGE>
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.
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.
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 Boros Cicchetti
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.
YEAR 2000 ISSUE
- ------------------------------------------------------------------------------
Many existing computer programs use only two digits to identify the year in
a date field. Commonly referred to as the "Year 2000 Issue," companies must
consider the impact of the upcoming change in the century on their computer
systems. The Year 2000 Issue, if not adequately addressed, could result in
computer system failures or miscalculations causing disruptions of operations
and the possible inability of companies to process transactions. Phoenix
believes that the Year 2000 Issue is an important business priority requiring
careful analysis of every business system in order to be assured that all
information systems applications are century compliant.
Phoenix has been addressing the Year 2000 Issue in earnest since 1995 when,
with consultants, a comprehensive inventory and assessment of all business
systems, including those of its subsidiaries, was conducted. Phoenix has
identified and is now actively pursuing a number of strategies to address the
issue, including:
- upgrading systems with compliant versions;
- developing or acquiring new systems to replace those that are obsolete;
- and remediating existing systems by converting code or hardware.
Based on current assessments, Phoenix expects to have its computer systems
compliant by the end of 1998, with testing to continue through 1999. In
addition, Phoenix is examining the status of its third-party vendors, obtaining
assurances that their software and hardware products will be century compliant
by 1999.
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The 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
for the Subaccounts available as of the period ended December 31, 1997.
24
<PAGE>
PHOENIX HOME LIFE VARIABLE
UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1997
25
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
---------------- ----------------- ----------------
<S> <C> <C> <C>
Assets
Investments at cost ........................................... $ 16,637,078 $ 223,382,611 $ 16,173,563
============ ============= ============
Investment in The Phoenix Edge Series Fund, at market ......... $ 16,637,078 $ 236,855,460 $ 16,582,895
------------ ------------- ------------
Total assets ................................................. 16,637,078 236,855,460 16,582,895
Liabilities
Accrued expenses to related party ............................. 9,797 156,810 10,808
------------ ------------- ------------
Net assets ..................................................... $ 16,627,281 $ 236,698,650 $ 16,572,087
============ ============= ============
Accumulation units outstanding ................................. 11,538,596 56,320,835 7,200,511
============ ============= ============
Unit value ..................................................... $ 1.441014 $ 4.202684 $ 2.301515
============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
Strategic
Allocation International Balanced
Sub-Account Sub-Account Sub-Account
---------------- --------------- ----------------
<S> <C> <C> <C>
Assets
Investments at cost ........................................... $ 35,170,967 $ 38,821,949 $ 19,629,676
============ ============ ============
Investment in The Phoenix Edge Series Fund, at market ......... $ 36,045,635 $ 43,146,110 $ 20,745,874
------------ ------------ ------------
Total assets ................................................. 36,045,635 43,146,110 20,745,874
Liabilities
Accrued expenses to related party ............................. 24,077 28,378 13,791
------------ ------------ ------------
Net assets ..................................................... $ 36,021,558 $ 43,117,732 $ 20,732,083
============ ============ ============
Accumulation units outstanding ................................. 12,947,264 23,810,180 11,686,186
============ ============ ============
Unit value ..................................................... $ 2.782175 $ 1.810895 $ 1.774067
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Aberdeen
Real Estate Strategic Theme New Asia
Sub-Account Sub-Account Sub-Account
--------------- ----------------- ---------------
<S> <C> <C> <C>
Assets
Investments at cost ........................................... $ 3,703,960 $ 4,532,000 $ 1,559,523
=========== =========== ===========
Investment in The Phoenix Edge Series Fund, at market ......... $ 4,148,357 $ 4,473,952 $ 1,049,925
----------- ----------- -----------
Total assets ................................................. 4,148,357 4,473,952 1,049,925
Liabilities
Accrued expenses to related party ............................. 2,644 2,907 695
----------- ----------- -----------
Net assets ..................................................... $ 4,145,713 $ 4,471,045 $ 1,049,230
=========== =========== ===========
Accumulation units outstanding ................................. 2,623,760 3,845,161 1,565,906
=========== =========== ===========
Unit value ..................................................... $ 1.580065 $ 1.162772 $ 0.670046
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Wanger
Enhanced International Wanger U.S.
Index Small Cap Small Cap
Sub-Account Sub-Account Sub-Account
--------------- --------------- ----------------
<S> <C> <C> <C>
Assets
Investments at cost ........................................... $ 1,911,997 $ 6,984,952 $ 14,388,061
=========== =========== ============
Investment in the Phoenix Edge Series Fund, at market ......... $ 1,952,250 -- --
Investment in Wanger Advisors Trust, at market ................ -- $ 6,538,176 $ 16,357,922
----------- ----------- ------------
Total assets ................................................. 1,952,250 6,538,176 16,357,922
Liabilities
Accrued expenses to related party ............................. 1,242 4,304 10,425
----------- ----------- ------------
Net assets ..................................................... $ 1,951,008 $ 6,533,872 $ 16,347,497
=========== =========== ============
Accumulation units outstanding ................................. 1,830,791 6,507,413 12,260,968
=========== =========== ============
Unit value ..................................................... $ 1.065664 $ 1.004066 $ 1.333296
=========== =========== ============
</TABLE>
See Notes to Financial Statements
26
<PAGE>
STATEMENT OF OPERATIONS
For the period ended December 31, 1997
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
-------------- --------------- -------------
<S> <C> <C> <C>
Investment income
Distributions ............................................... $787,128 $ 1,274,518 $1,024,853
Expenses
Mortality and expense risk charges .......................... 124,354 1,639,929 110,127
-------- ----------- ----------
Net investment income (loss) ................................. 662,774 (365,411) 914,726
-------- ----------- ----------
Net realized gain (loss) from share transactions ............. 34 (13,683) 4,696
Net realized gain distribution from Fund ..................... -- 36,351,738 401,988
Net unrealized appreciation on investment .................... -- 909,243 18,289
-------- ----------- ----------
Net gain on investments ...................................... 34 37,247,298 424,973
-------- ----------- ----------
Net increase in net assets resulting from operations ......... $662,808 $36,881,887 $1,339,699
======== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Strategic
Allocation International Balanced
Sub-Account Sub-Account Sub-Account
------------- --------------- ------------
<S> <C> <C> <C>
Investment income
Distributions ................................................... $ 681,837 $ 526,957 $ 561,561
Expenses
Mortality and expense risk charges .............................. 249,583 315,851 145,865
---------- ---------- ----------
Net investment income ............................................ 432,254 211,106 415,696
---------- ---------- ----------
Net realized gain (loss) from share transactions ................. 16,230 (38,944) 7,612
Net realized gain distribution from Fund ......................... 4,395,531 4,047,584 2,259,915
Net unrealized appreciation (depreciation) on investment ......... 604,211 (307,551) 120,786
---------- ---------- ----------
Net gain on investments .......................................... 5,015,972 3,701,089 2,388,313
---------- ---------- ----------
Net increase in net assets resulting from operations ............. $5,448,226 $3,912,195 $2,804,009
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Aberdeen
Real Estate Strategic Theme New Asia
Sub-Account Sub-Account Sub-Account
------------- ----------------- --------------
<S> <C> <C> <C>
Investment income
Distributions .......................................................... $ 91,995 $ 13,601 $ 46,168
Expenses
Mortality and expense risk charges ..................................... 20,395 26,037 11,151
-------- --------- ----------
Net investment income (loss) ............................................ 71,600 (12,436) 35,017
-------- --------- ----------
Net realized gain (loss) from share transactions ........................ 438 2,000 (13,900)
Net realized gain distribution from Fund ................................ 136,883 515,108 791
Net unrealized appreciation (depreciation) on investment ................ 332,563 (66,310) (502,645)
-------- --------- ----------
Net gain (loss) on investments .......................................... 469,884 450,798 (515,754)
-------- --------- ----------
Net increase (decrease) in net assets resulting from operations ......... $541,484 $ 438,362 $ (480,737)
======== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Wanger Wanger
Enhanced International U.S.
Index Small Cap Small Cap
Sub-Account(1) Sub-Account Sub-Account
-------------- -------- ----------
Investment income
Distributions .......................................................... $ 9,326 $ 68,447 $ 103,408
Expenses
Mortality and expense risk charges ..................................... 3,926 35,993 67,198
-------------- --------- ----------
Net investment income ................................................... 5,400 32,454 36,210
-------------- --------- ----------
Net realized loss from share transactions ............................... (334) (3,142) (13,408)
Net realized gain distribution from Fund ................................ 8,778 -- --
Net unrealized appreciation (depreciation) on investment ................ 40,253 (450,637) 1,960,796
-------------- --------- ----------
Net gain (loss) on investments .......................................... 48,697 (453,779) 1,947,388
-------------- --------- ----------
Net increase (decrease) in net assets resulting from operations ......... $ 54,097 $(421,325) $1,983,598
============== ========= ==========
(1) From inception July 18, 1997 to December 31, 1997
</TABLE>
See Notes to Financial Statements
27
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1997
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
---------------- ---------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income (loss) ............................................ $ 662,774 $ (365,411) $ 914,726
Net realized gain ....................................................... 34 36,338,055 406,684
Net unrealized appreciation ............................................. -- 909,243 18,289
------------- ------------- ------------
Net increase in net assets resulting from operations .................... 662,808 36,881,887 1,339,699
------------- ------------- ------------
From accumulation unit transactions
Participant deposits .................................................... 29,753,469 51,373,829 3,839,754
Participant transfers ................................................... (24,739,794) 461,474 1,758,903
Participant withdrawals ................................................. (4,583,895) (24,768,747) (1,594,349)
------------- ------------- ------------
Net increase in net assets resulting from participant transactions ...... 429,780 27,066,556 4,004,308
------------- ------------- ------------
Net increase in net assets .............................................. 1,092,588 63,948,443 5,344,007
Net assets
Beginning of period ..................................................... 15,534,693 172,750,207 11,228,080
------------- ------------- ------------
End of period ........................................................... $ 16,627,281 $ 236,698,650 $ 16,572,087
============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
Strategic
Allocation International Balanced
Sub-Account Sub-Account Sub-Account
--------------- --------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income ................................................... $ 432,254 $ 211,106 $ 415,696
Net realized gain ....................................................... 4,411,761 4,008,640 2,267,527
Net unrealized appreciation (depreciation) .............................. 604,211 (307,551) 120,786
------------ ------------ ------------
Net increase in net assets resulting from operations .................... 5,448,226 3,912,195 2,804,009
------------ ------------ ------------
From accumulation unit transactions
Participant deposits .................................................... 6,156,264 9,403,556 3,516,448
Participant transfers ................................................... 1,805,561 284,097 397,233
Participant withdrawals ................................................. (3,655,616) (4,537,485) (2,204,100)
------------ ------------ ------------
Net increase in net assets resulting from participant transactions ...... 4,306,209 5,150,168 1,709,581
------------ ------------ ------------
Net increase in net assets .............................................. 9,754,435 9,062,363 4,513,590
Net assets
Beginning of period ..................................................... 26,267,123 34,055,369 16,218,493
------------ ------------ ------------
End of period ........................................................... $ 36,021,558 $ 43,117,732 $ 20,732,083
============ ============ ============
</TABLE>
See Notes to Financial Statements
28
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Aberdeen
Real Estate Strategic Theme New Asia
Sub-Account Sub-Account Sub-Account
------------- ----------------- --------------
<S> <C> <C> <C>
From operations
Net investment income (loss) ............................................ $ 71,600 $ (12,436) $ 35,017
Net realized gain (loss) ................................................ 137,321 517,108 (13,109)
Net unrealized appreciation (depreciation) .............................. 332,563 (66,310) (502,645)
---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations ......... 541,484 438,362 (480,737)
---------- ---------- ----------
From accumulation unit transactions
Participant deposits .................................................... 1,089,983 1,476,759 522,055
Participant transfers ................................................... 1,984,226 1,197,938 (774,160)
Participant withdrawals ................................................. (357,873) (447,958) (159,479)
---------- ---------- ----------
Net increase (decrease) in net assets resulting from participant
transactions ........................................................... 2,716,336 2,226,739 (411,584)
---------- ---------- ----------
Net increase (decrease) in net assets ................................... 3,257,820 2,665,101 (892,321)
Net assets
Beginning of period ..................................................... 887,893 1,805,944 1,941,551
---------- ---------- ----------
End of period ........................................................... $4,145,713 $4,471,045 $1,049,230
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Wanger
Enhanced International Wanger U.S.
Index Small Cap Small Cap
Sub-Account(1) Sub-Account Sub-Account
---------------- --------------- --------------
<S> <C> <C> <C>
From operations
Net investment income ................................................... $ 5,400 $ 32,454 $ 36,210
Net realized gain (loss) ................................................ 8,444 (3,142) (13,408)
Net unrealized appreciation (depreciation) .............................. 40,253 (450,637) 1,960,796
---------- ---------- ------------
Net increase (decrease) in net assets resulting from operations ......... 54,097 (421,325) 1,983,598
---------- ---------- ------------
From accumulation unit transactions
Participant deposits .................................................... 334,421 2,372,417 3,760,805
Participant transfers ................................................... 1,632,282 4,882,238 11,222,509
Participant withdrawals ................................................. (69,792) (595,864) (1,086,412)
---------- ---------- ------------
Net increase in net assets resulting from participant transactions ...... 1,896,911 6,658,791 13,896,902
---------- ---------- ------------
Net increase in net assets .............................................. 1,951,008 6,237,466 15,880,500
Net assets
Beginning of period ..................................................... -- 296,406 466,997
---------- ---------- ------------
End of period ........................................................... $1,951,008 $6,533,872 $ 16,347,497
========== ========== ============
(1) From inception July 18, 1997 to December 31, 1997
</TABLE>
See Notes to Financial Statements
29
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1996
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
---------------- ---------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income ................................................... $ 548,378 $ 281,274 $ 593,496
Net realized gain ....................................................... -- 11,420,506 326,876
Net unrealized appreciation ............................................. -- 4,791,630 43,393
------------- ------------- ------------
Net increase in net assets resulting from operations .................... 548,378 16,493,410 963,765
------------- ------------- ------------
From accumulation unit transactions
Participant deposits .................................................... 26,004,635 47,202,324 2,811,259
Participant transfers ................................................... (21,268,222) 10,438,285 1,823,625
Participant withdrawals ................................................. (3,701,639) (19,333,192) (1,071,344)
------------- ------------- ------------
Net increase in net assets resulting from participant transactions ...... 1,034,774 38,307,417 3,563,540
------------- ------------- ------------
Net increase in net assets .............................................. 1,583,152 54,800,827 4,527,305
Net assets
Beginning of period ..................................................... 13,951,541 117,949,380 6,700,775
------------- ------------- ------------
End of period ........................................................... $ 15,534,693 $ 172,750,207 $ 11,228,080
============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
Strategic Allocation International Balanced
Sub-Account Sub-Account Sub-Account
---------------------- --------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income ................................................... $ 324,553 $ 245,322 $ 296,076
Net realized gain ....................................................... 1,622,713 747,494 1,394,172
Net unrealized appreciation (depreciation) .............................. (91,227) 3,401,467 (304,864)
------------ ------------ ------------
Net increase in net assets resulting from operations .................... 1,856,039 4,394,283 1,385,384
------------ ------------ ------------
From accumulation unit transactions
Participant deposits .................................................... 6,031,095 8,480,853 3,636,746
Participant transfers ................................................... 1,002,380 3,847,285 (651,439)
Participant withdrawals ................................................. (2,871,670) (3,414,225) (1,868,673)
------------ ------------ ------------
Net increase in net assets resulting from participant transactions ...... 4,161,805 8,913,913 1,116,634
------------ ------------ ------------
Net increase in net assets .............................................. 6,017,844 13,308,196 2,502,018
Net assets
Beginning of period ..................................................... 20,249,279 20,747,173 13,716,475
------------ ------------ ------------
End of period ........................................................... $ 26,267,123 $ 34,055,369 $ 16,218,493
============ ============ ============
</TABLE>
See Notes to Financial Statements
30
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1996
(Continued)
<TABLE>
<CAPTION>
Aberdeen
Real Estate Strategic Theme New Asia
Sub-Account(1) Sub-Account(1) Sub-Account(2)
---------------- ----------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income ................................................... $ 8,506 $ 910 $ 7,082
Net realized gain ....................................................... 22,646 1,002 919
Net unrealized appreciation (depreciation) .............................. 111,837 8,263 (6,953)
--------- ---------- ----------
Net increase in net assets resulting from operations .................... 142,989 10,175 1,048
--------- ---------- ----------
From accumulation unit transactions
Participant deposits .................................................... 114,179 507,159 137,347
Participant transfers ................................................... 648,017 1,412,288 1,825,934
Participant withdrawals ................................................. (17,292) (123,678) (22,778)
--------- ---------- ----------
Net increase in net assets resulting from participant transactions ...... 744,904 1,795,769 1,940,503
--------- ---------- ----------
Net increase in net assets .............................................. 887,893 1,805,944 1,941,551
Net assets
Beginning of period ..................................................... -- -- --
--------- ---------- ----------
End of period ........................................................... $ 887,893 $1,805,944 $1,941,551
========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Wanger
International Wanger U.S.
Small Cap Small Cap
Sub-Account(3) Sub-Account(3)
---------------- ----------------
<S> <C> <C>
From operations
Net investment loss ..................................................... $ (30) $ (65)
Net realized gain ....................................................... -- 29
Net unrealized appreciation ............................................. 3,861 9,066
-------- --------
Net increase in net assets resulting from operations .................... 3,831 9,030
-------- --------
From accumulation unit transactions
Participant deposits .................................................... 8,061 11,399
Participant transfers ................................................... 284,998 447,242
Participant withdrawals ................................................. (484) (674)
-------- --------
Net increase in net assets resulting from participant transactions ...... 292,575 457,967
-------- --------
Net increase in net assets .............................................. 296,406 466,997
Net assets
Beginning of period ..................................................... -- --
-------- --------
End of period ........................................................... $296,406 $466,997
======== ========
(1) From inception May 1, 1996 to December 31, 1996
(2) From inception September 18, 1996 to December 31, 1996
(3) From inception December 18, 1996 to December 31, 1996
</TABLE>
See Notes to Financial Statements
31
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Note 1--Organization
Phoenix Home Life Variable Universal Life Account (the "Account") is a
separate investment account of Phoenix Home Life Mutual Insurance Company
(Phoenix). The Account is offered as Flex Edge and Flex Edge Success for
individual variable life insurance and as Joint Edge for variable first-to-die
joint life insurance. The Account is registered as a unit investment trust
under the Investment Company Act of 1940, as amended, and currently consists of
twelve Sub-Accounts, that invest in a corresponding series of The Phoenix Edge
Series Fund, or Wanger Advisors Trust (the "Funds").
Each series has distinct investment objectives. The Money Market Series is
a short-term investment fund. The Growth Series is a growth common stock fund.
The Multi-Sector Fixed Income Series is a long-term debt fund. The Strategic
Allocation Series (formerly Total Return) invests in equity securities and long
and short-term debt. The International Series invests primarily in
internationally diversified equity securities. The Balanced Series is a
balanced fund which invests in growth stocks and at least 25% of its assets in
fixed income senior securities. The Real Estate Series invests in marketable
securities of publicly traded Real Estate Investment Trusts ("REITs") and
companies that are principally engaged in the real estate industry. The
Strategic Theme Series invests in securities of companies believed to benefit
from specific trends. The Aberdeen New Asia Series invests primarily in
diversified equity securities of issuers organized and principally operating in
Asia, excluding Japan. The Research Enhanced Index ("Enhanced Index") Series
invests in a broadly diversified portfolio of equity securities of large and
medium capitalization companies within market sectors reflected in the S & P
500. The Wanger International Small Cap Series invests in securities of
non-U.S. companies with a stock market capitalization of less than $1 billion
and the Wanger U.S. Small Cap Series invests in growth common stock of U.S.
companies with stock market capitalization of less than $1 billion.
Policyowners may also direct the allocation of their investments between the
account and the Guaranteed Interest Account of the general account of Phoenix.
Note 2--Significant Accounting Policies
A. Valuation of investments: Investments are made exclusively in the Funds and
are valued at the net asset values per share of the respective Series.
B. Investment transactions and related income: Realized gains and losses
include capital gain distributions from the Funds as well as gains and losses
on sales of shares in the Funds determined on the LIFO (last in, first out)
basis.
C. Income taxes: The Account is not a separate entity from Phoenix and, under
current federal income tax law, income arising from the Account is not taxed
since reserves are established equivalent to such income. Therefore, no
provision for related federal taxes is required.
D. Distributions: Distributions are recorded on the ex-dividend date.
Note 3--Purchases and Sales of Shares of the Funds
Purchases and sales of shares of the Funds for the period ended December
31, 1997 aggregated the following:
<TABLE>
<CAPTION>
Sub-Account Purchases Sales
- ----------------------------------------- -------------- --------------
<S> <C> <C>
The Phoenix Edge Series Fund:
Money Market ........................... $24,741,678 $23,649,364
Growth ................................. 74,873,217 11,780,750
Multi-Sector Fixed Income .............. 7,751,739 2,427,026
Strategic Allocation ................... 11,873,632 2,733,352
International .......................... 14,334,763 4,919,601
Balanced ............................... 6,251,920 1,863,892
Real Estate ............................ 3,551,387 624,453
Strategic Theme ........................ 3,086,981 355,827
Aberdeen New Asia ...................... 1,164,685 1,541,033
Enhanced Index ......................... 1,996,553 84,221
Wanger Advisors Trust:
Wanger International Small Cap ......... 7,495,468 799,948
Wanger U.S. Small Cap .................. 14,506,011 562,538
</TABLE>
Note 4--Participant Accumulation Unit Transactions (in units)
<TABLE>
<CAPTION>
Sub-Account
--------------------------------------------------------------------------------------------
Money Multi-Sector Strategic
Market Growth Fixed Income Allocation International Balanced
-------------- ------------ -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Flex Edge and Flex Edge Success:
Units outstanding, beginning of period . 10,724,432 47,488,023 5,233,038 10,993,304 20,012,736 10,200,782
Participant deposits ................... 19,441,883 12,224,278 1,660,100 2,243,760 4,956,751 1,966,680
Participant transfers .................. (16,331,954) (111,168) 768,740 631,459 76,649 208,481
Participant withdrawals ................ (2,946,179) (5,804,421) (692,262) (1,315,119) (2,354,334) (1,223,284)
------------- ---------- --------- ---------- ----------- -----------
Units outstanding, end of period ....... 10,888,182 53,796,712 6,969,616 12,553,404 22,691,802 11,152,659
============= ========== ========= ========== =========== ===========
Wanger
Strategic Aberdeen Enhanced International Wanger U.S.
Real Estate Theme New Asia Index Small Cap Small Cap
---------------- ---------- -------------- ------------- ---------------- -----------
Units outstanding, beginning of period . 661,261 1,662,135 1,908,225 -- 276,887 432,094
Participant deposits ................... 694,118 1,168,665 544,018 279,879 2,032,782 2,821,067
Participant transfers .................. 1,369,217 1,023,653 (839,908) 1,587,831 4,347,440 9,260,836
Participant withdrawals ................ (222,186) (329,249) (153,781) (67,917) (501,136) (756,874)
------------- ---------- ---------- ------------- ----------- -----------
Units outstanding, end of period ....... 2,502,410 3,525,204 1,458,554 1,799,793 6,155,973 11,757,123
============= ========== ========== ============= =========== ===========
</TABLE>
32
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Money Multi-Sector Strategic
Market Growth Fixed Income Allocation International Balanced
--------------- ------------- -------------- ------------- -------------- -----------
Joint Edge:
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of period ..... 524,887 1,887,862 145,848 315,311 891,214 495,615
Participant deposits ....................... 1,559,669 951,327 71,988 125,380 375,497 130,272
Participant transfers ...................... (1,247,797) 168,606 53,880 27,451 65,833 (9,439)
Participant withdrawals .................... (186,345) (483,672) (40,821) (74,282) (214,166) (82,921)
-------------- --------- -------- ------- ----------- --------
Units outstanding, end of period ........... 650,414 2,524,123 230,895 393,860 1,118,378 533,527
============== ========= ======== ======= =========== ========
Wanger
Strategic Aberdeen Enhanced International Wanger U.S
Real Estate Theme New Asia Index Small Cap Small Cap
--------------- --------- -------------- ---------- ---------------- ----------
Units outstanding, beginning of period ..... 19,197 143,329 34,915 -- 11,716 17,668
Participant deposits ....................... 63,663 168,852 54,008 20,878 152,815 212,241
Participant transfers ...................... 58,532 80,865 34,503 12,228 227,435 330,381
Participant withdrawals .................... (20,042) (73,089) (16,074) (2,108) (40,526) (56,445)
-------------- --------- -------- ---------- ------------ --------
Units outstanding, end of period ........... 121,350 319,957 107,352 30,998 351,440 503,845
============== ========= ======== ========== ============ ========
</TABLE>
Note 5--Policy Loans
Transfers are made to Phoenix's general account as a result of policy
loans. Policy provisions allow policyowners to borrow up to 90% of a policy's
cash value with an interest rate set in accordance with the contract due and
payable on each policy anniversary. At the time a loan is granted, an amount
equivalent to the amount of the loan is transferred from the Account to
Phoenix's general account as collateral for the outstanding loan. These
transfers are included in participant withdrawals in the accompanying financial
statements. Amounts in the general account are credited with interest at 2% for
Flex Edge success policies, and 6% for Joint Edge and Flex Edge policies. Loan
repayments result in a transfer of collateral back to the Account.
Note 6--Investment Advisory Fees and Related Party Transactions
Phoenix and its indirect, majority owned subsidiary, Phoenix Equity
Planning Corporation, a registered broker/dealer in securities, provide all
services to the Account.
The cost of insurance is charged to each policy on a monthly basis by a
withdrawal of participant units prorated among the elected Sub-Accounts. The
amount charged to each policy depends on a number of variables including sex,
age and risk class as well as the death benefit and cash value of the policy.
Such costs aggregated $24,715,463 during the year ended December 31, 1997.
Upon partial surrender of a policy, a surrender fee of the lesser of $25
or 2% of the partial surrender amount paid and a partial surrender charge equal
to a pro rata portion of the applicable surrender charge is deducted from the
policy value and paid to Phoenix.
Phoenix Equity Planning Corporation is the principal underwriter and
distributor of the Account. Phoenix Equity Planning Corporation is reimbursed
for its distribution and underwriting expenses by Phoenix.
Policies which are surrendered during the first ten policy years will
incur a 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, and a
contingent deferred issue charge designed to recover expenses for the
administration of Policies that are terminated by surrender before
administrative expenses have been recouped. These are contingent charges paid
only if the Policy is surrendered (or a partial withdrawal is taken or the Face
Amount is reduced or the Policy lapses) during the first ten policy years. The
charges are deferred (i.e. not deducted from premiums).
Phoenix assumes the mortality risk that insureds may live for a shorter
time than projected because of inaccuracies in the projecting process and,
accordingly, that an aggregate amount of death benefits greater than 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. In return for the assumption of these mortality and expense risks,
Phoenix charges the Account an annual rate of 0.80% of the average daily net
assets of the Account for mortality and expense risks assumed for Flex Edge and
Joint Edge. For Flex Edge Success, the Account is charged an annual rate of
0.80% for the first fifteen years and 0.25% thereafter.
Note 7--Diversification Requirements
Under the provisions of Section 817(h) of the Internal Revenue Code (the
"Code"), a variable universal life contract, other than a contract issued in
connection with certain types of employee benefit plans, will not be treated as
a universal life contract for federal tax purposes for any period for which the
investments of the segregated asset account on which the contract is based are
not adequately diversified. The Code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations
issued by the Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h)
of the Code. Phoenix believes that the Account satisfies the current
requirements of the regulations, and it intends that the Account will continue
to meet such requirements.
33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[Price Waterhouse LLP logotype] [LOGO]
To the Board of Directors of Phoenix Home Life Mutual Insurance Company and
Participants of Phoenix Home Life Variable Universal Life Account
In our opinion, the accompanying statement of assets and liabilities and the
related statement of operations and of changes in net assets present fairly, in
all material respects, the financial position of the Money Market Sub-Account,
Growth Sub-Account, Multi-Sector Fixed Income Sub-Account, Strategic Allocation
Sub-Account, International Sub-Account, Balanced Sub-Account, Real Estate
Sub-Account, Strategic Theme Sub-Account, Aberdeen New Asia Sub-Account,
Enhanced Index Sub-Account, Wanger International Small Cap Sub-Account and
Wanger U.S. Small Cap Sub-Account (constituting the Phoenix Home Life Variable
Universal Life Account, hereafter referred to as the "Account") at December 31,
1997 and the results of each of their operations and the changes in each of
their net assets for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Account's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at December 31, 1997 by
correspondence with the Funds' custodians, provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
Hartford, Connecticut
February 19, 1998
34
<PAGE>
PHOENIX HOME LIFE
VARIABLE UNIVERSAL LIFE ACCOUNT
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06115
Underwriter
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
Custodians
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
(International Series, Aberdeen New Asia Series)
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
(Real Estate Series, Enhanced Index Series)
P.O. Box 351
Boston, Massachusetts 02101
Independent Accountants
Price Waterhouse LLP
One Financial Plaza
Hartford, Connecticut 06103
35
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
36
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants ............................................38
Consolidated Balance Sheet at December 31, 1997 and 1996 .....................39
Consolidated Statement of Income and Equity for the Years Ended
December 31, 1997, 1996 and 1995 ...........................................40
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 ............................................41
Notes to Consolidated Financial Statements ................................42-68
37
<PAGE>
One Financial Plaza Telephone 860 240 2000
Hartford, CT 06103
[LOGO] PRICE WATERHOUSE LLP [LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
February 11, 1998
To the Board of Directors
and Policyholders of
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and equity and of cash flows present fairly,
in all material respects, the financial position of Phoenix Home Life Mutual
Insurance Company and its subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, 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
38
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 1,554,905 $ 1,555,685
Available-for-sale debt securities, at fair value 5,659,061 4,895,393
Equity securities, at fair value 373,388 235,351
Mortgage loans 927,501 947,076
Real estate 321,757 410,945
Policy loans 1,986,728 1,667,784
Other invested assets 262,675 218,119
Short-term investments 1,078,276 164,967
------------------ -----------------
Total investments 12,164,291 10,095,320
Cash and cash equivalents 159,307 172,895
Accrued investment income 149,566 135,475
Deferred policy acquisition costs 1,038,407 926,274
Premiums, accounts and notes receivable 99,468 79,354
Reinsurance recoverables 66,649 46,251
Property and equipment, net 156,190 137,231
Goodwill and other intangible assets, net 541,499 313,507
Other assets 61,087 134,589
Separate account assets 4,082,255 3,412,152
------------------ -----------------
Total assets $ 18,518,719 $ 15,453,048
================== =================
LIABILITIES
Policy liabilities and accruals $ 11,334,014 $ 9,462,039
Securities sold subject to repurchase agreements 137,473
Other indebtedness 471,085 490,430
Deferred income taxes 143,821 61,934
Other liabilities 585,467 499,940
Separate account liabilities 4,082,255 3,412,152
------------------ -----------------
Total liabilities 16,754,115 13,926,495
Contingent liabilities (Note 17)
MINORITY INTEREST IN NET ASSETS OF CONSOLIDATED SUBSIDIARIES 136,514 129,084
POLICYHOLDERS' EQUITY 1,628,090 1,397,469
------------------ -----------------
Total liabilities and policyholders' equity $ 18,518,719 $ 15,453,048
================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
39
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $ 1,640,606 $ 1,518,822 $ 1,456,875
Insurance and investment product fees 468,030 421,058 324,459
Net investment income 736,874 689,890 662,468
Net realized investment gains 142,770 95,265 74,738
--------------- --------------- --------------
Total revenues 2,988,280 2,725,035 2,518,540
--------------- --------------- --------------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses 1,633,633 1,529,573 1,471,030
Policyholder dividends 343,725 311,739 289,469
Policy acquisition expenses 248,726 242,363 221,339
Other operating expenses 531,597 452,399 419,231
--------------- --------------- --------------
Total benefits, losses and expenses 2,757,681 2,536,074 2,401,069
--------------- --------------- --------------
OPERATING INCOME 230,599 188,961 117,471
NON-OPERATING INCOME
Gain on merger transactions 40,580
--------------- --------------- --------------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 230,599 188,961 158,051
Income taxes 57,069 79,331 43,352
--------------- --------------- --------------
INCOME BEFORE MINORITY INTEREST 173,530 109,630 114,699
Minority interest in net income of consolidated subsidiaries 8,882 8,902 950
--------------- --------------- --------------
NET INCOME 164,648 100,728 113,749
Change in net unrealized investment gains, net of income taxes 65,973 15,154 99,518
--------------- --------------- --------------
INCREASE IN POLICYHOLDERS' EQUITY 230,621 115,882 213,267
POLICYHOLDERS' EQUITY, BEGINNING OF YEAR 1,397,469 1,281,587 1,068,320
--------------- --------------- --------------
POLICYHOLDERS' EQUITY, END OF YEAR $ 1,628,090 $ 1,397,469 $ 1,281,587
=============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
40
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 164,648 $ 100,728 $ 113,749
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATIONS
Net realized investment gains (142,770) (95,265) (74,738)
Net gain on mergers (40,580)
Amortization and depreciation 90,565 64,870 58,912
Deferred income taxes (benefit) 2,555 14,774 (16,236)
(Increase) decrease in receivables (49,172) 5,955 (30,130)
Increase in deferred policy acquisition costs (48,860) (61,985) (26,370)
Increase in policy liabilities and accruals 512,476 559,724 537,919
Increase (decrease) in other assets/other liabilities, net 44,269 (66,337) 95,880
Other, net 5,832 (652) 4,203
-------------- ----------------- --------------
Net cash provided by operating activities 579,543 521,812 622,609
-------------- ----------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from maturities or repayments of
available-for-sale debt securities 1,187,943 1,348,809 1,145,146
Proceeds from maturities or repayments of
held-to-maturity debt securities 217,302 118,596 143,773
Proceeds from disposals of equity securities 51,373 382,359 329,104
Proceeds from mortgage loan maturities or repayments 164,213 151,760 186,172
Proceeds from sale of other invested assets 218,874 127,440 148,546
Purchase of available-for-sale debt securities (1,689,479) (1,909,086) (1,614,387)
Purchase of held-to-maturity debt securities (225,722) (385,321) (247,354)
Purchase of equity securities (88,573) (215,104) (282,488)
Purchase of subsidiaries (246,400)
Purchase of mortgage loans (140,831) (200,683) (93,097)
Purchase of other invested assets (90,593) (157,077) (73,482)
Change in short term investments, net 58,384 110,503 (166,445)
Increase in policy loans (59,699) (49,912) (32,387)
Capital expenditures (41,504) (3,543) (18,449)
Other investing activities, net (1,750) (5,898) (12,704)
-------------- ----------------- --------------
Net cash used for investing activities (686,462) (687,157) (588,052)
-------------- ----------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (17,902) (6,301) (154,100)
Proceeds from securities sold subject to
repurchase agreements 137,472
Proceeds from borrowings 215,359 226,082 177,922
Repayment of borrowings (234,703) (2,400) (12,726)
Dividends paid to minority shareholders (6,895) (6,245) (31,215)
-------------- ----------------- --------------
Net cash provided by (used for) financing activities 93,331 211,136 (20,119)
-------------- ----------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (13,588) 45,791 14,438
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 172,895 127,104 112,666
-------------- ----------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 159,307 $ 172,895 $ 127,104
============== ================= ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 76,167 $ 76,157 $ 33,399
Interest paid on indebtedness $ 32,300 $ 19,214 $ 8,100
</TABLE>
The accompanying notes are an integral part of these statements.
41
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company (Phoenix) 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
Insurance, Group Life and Health Insurance, 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
significant subsidiaries. Less than majority-owned entities in which
Phoenix has at least a 20% interest or those where Phoenix 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, income taxes, contingencies and valuation allowances for
investment assets are discussed throughout the Notes to Consolidated
Financial Statements. Significant intercompany accounts and transactions
have been eliminated. Certain reclassifications have been made to the 1996
and 1995 amounts to conform with the 1997 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, asset-backed securities
including collateralized mortgage obligations and redeemable preferred
stocks. Phoenix classifies its debt securities as either held-to-maturity
or available-for-sale investments. Debt securities held-to-maturity consist
of private placement bonds reported at amortized cost, net of impairments,
that management intends and has the ability to hold until maturity. Debt
securities available-for-sale are reported at fair value with unrealized
gains or losses included in policyholders' equity and consist of public
bonds and preferred stocks that management may not hold until maturity.
Debt securities are considered impaired when a decline in value is
considered to be other than temporary.
Equity securities are reported at fair value based principally on their
quoted market prices with unrealized gains or losses included in
policyholders' equity. Equity securities are considered impaired when a
decline in value is considered to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances, net
of valuation reserves on impaired mortgages. A mortgage loan is considered
to be impaired if management believes it is probable that Phoenix will be
unable to collect all amounts of contractual interest and principal as
scheduled in the loan agreement. An impaired mortgage loan's fair value is
measured based on the present value of future cash flows discounted at the
loan's observable market price or at the fair value of the collateral. If
the fair value of a mortgage loan is less than the recorded investment in
the loan, the difference is recorded as a valuation reserve.
42
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Real estate, all of which is held for sale, is carried at the lower of cost
or current fair value less costs to sell. Fair value for real estate is
determined taking into consideration one or more of the following factors:
property valuation techniques utilizing discounted cash flows at the time
of stabilization including capital expenditures and stabilization costs;
sales of comparable properties; geographic location of the property and
related market conditions; and disposition costs.
Policy loans are generally carried at their unpaid principal balances and
are collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
fair value.
Other invested assets (primarily partnership interests) are carried at cost
adjusted for Phoenix's equity in undistributed earnings or losses since
acquisition, less allowances for other than temporary declines in value.
Realized investment gains and losses, other than those related to separate
accounts for which Phoenix does not bear the investment risk, are
determined by the specific identification method and reported as a
component of revenue. A realized investment loss is recorded when an
investment valuation reserve is determined. Valuation reserves are netted
against the asset categories to which they apply and changes in the
valuation reserves are included in realized investment gains and losses.
Unrealized investment gains and losses on debt securities and equity
securities classified as available-for-sale are included as a separate
component of policyholders' equity, net of deferred income taxes and
deferred policy acquisition costs.
FINANCIAL INSTRUMENTS
In the normal course of business, Phoenix enters into transactions
involving various types of financial instruments, including debt,
investments such as debt securities, mortgage loans and equity securities,
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.
43
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the cost of businesses acquired over the
fair value of their net assets. These costs are amortized on a
straight-line basis over periods, not exceeding 40 years, that correspond
with the benefits expected to be derived from the acquisitions. Other
intangible assets are amortized on a straight-line basis over the estimated
lives of such assets. Management periodically reevaluates the propriety of
the carrying value of goodwill and other intangible assets by comparing
estimates of future undiscounted cash flows to the carrying value of
assets. Assets are considered impaired if the carrying value exceeds the
expected future undiscounted cash flows.
SEPARATE ACCOUNTS
Separate account assets and liabilities are funds maintained in accounts to
meet specific investment objectives of contractholders who bear the
investment risk. Investment income and investment gains and losses accrue
directly to such contractholders. The assets of each account are legally
segregated and are not subject to claims that arise out of any other
business of Phoenix. The assets and liabilities are carried at market
value. Deposits, net investment income and realized investment gains and
losses for these accounts are excluded from revenues, and the related
liability increases are excluded from benefits and expenses. Amounts
assessed to the contractholders for management services are included in
revenues.
POLICY LIABILITIES AND ACCRUALS
Future policy benefits are liabilities for life, health and annuity
products. Such liabilities are established in amounts adequate to meet the
estimated future obligations of policies in force. Policy liabilities for
traditional life insurance are computed using the net level premium method
on the basis of actuarial assumptions as to 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.
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.
44
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
POLICYHOLDERS' DIVIDENDS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of Phoenix. The
amount of policyholders' dividends to be paid is determined annually by
Phoenix's board of directors. The aggregate amount of policyholders'
dividends is related to the actual interest, mortality, morbidity and
expense experience for the year and Phoenix's judgment as to the
appropriate level of statutory surplus to be retained. At the end of the
reporting period, Phoenix establishes a dividend liability for the pro-rata
portion of the dividends payable on the next anniversary of each policy.
Phoenix also establishes a liability for termination dividends.
INCOME TAXES
Phoenix and its eligible affiliated companies have elected to file a
life/nonlife consolidated federal income tax return for the years ended
December 31, 1997, 1996 and 1995. Entities included within the consolidated
group are segregated into either a life insurance or non-life insurance
company subgroup. The consolidation of these subgroups is subject to
certain statutory restrictions in the percentage of eligible non-life tax
losses that can be applied to offset life company taxable income.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities and accruals, policy acquisition expenses, investment
impairment reserves, reserves for postretirement benefits and unrealized
gains or losses on investments.
As a mutual life insurance company, Phoenix is required to reduce its
income tax deduction for policyholder dividends by the differential
earnings amount, defined as the difference between the earnings rates of
stock and mutual companies applied against an adjusted base of
policyholders' surplus.
3. SIGNIFICANT TRANSACTIONS
CONFEDERATION LIFE
On December 31, 1997, Phoenix acquired the individual life and
single-premium deferred annuity business of the former Confederation Life
Insurance Company. Confederation Life, a Canadian mutual life insurer, was
placed in liquidation during August of 1994. The blocks of business
acquired were part of Confederation Life's U.S. branch operations and were
covered under the rehabilitation plan approved by a Michigan circuit court.
Approximately 40,000 policies with annualized premium of $122.8 million
were included in the acquisition under an assumption reinsurance contract.
Pursuant to initiation of the contract and the closing on December 31,
1997, Phoenix recorded all balances reinsured using the purchase accounting
method. The value of reserves and liabilities acquired totaled $1.4 billion
and exceeded the assets received, principally cash and short-term
investments. The difference of $141.3 million was recorded as deferred
acquisition costs.
PHOENIX DUFF & PHELPS CORPORATION
On September 3, 1997, Phoenix Duff & Phelps acquired Pasadena Capital
Corporation, the parent company of Roger Engemann & Associates, Inc.
Pasadena Capital manages $6.3 billion in assets, primarily individual
accounts.
45
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
On July 17, 1997, Phoenix Duff & Phelps acquired a majority interest in
GMG/Seneca Capital Management LLC, renamed Seneca Capital Management.
Seneca Capital Management manages $4.2 billion in assets.
Effective January 1, 1995, the money management businesses of Phoenix were
completely transferred to Phoenix Securities Group, Inc. 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.,
merged Phoenix Securities Group into Duff & Phelps Corporation, forming
Phoenix Duff & Phelps Corporation. The transaction was accounted for as a
reverse merger with the purchase accounting method applied to Duff &
Phelps' assets and liabilities. The purchase price was $190.7 million and
Phoenix Duff & Phelps 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 Phoenix Duff & Phelps common stock. In
addition, PM Holdings owns 45% of Phoenix Duff & Phelps' 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
Statement of Income and Equity.
SURPLUS NOTES
On November 25, 1996, Phoenix 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 debt in
the Consolidated Balance Sheet.
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 ASSET MANAGEMENT PLC
On March 25, 1996, Phoenix purchased common shares of Aberdeen Asset
Management PLC, a Scottish asset management firm for $26.4 million. Phoenix
transferred these shares to PM Holding in 1996. As of December 31, 1997, PM
Holdings owned 10% of Aberdeen Asset Management's outstanding common stock.
The investment is reported on the equity basis and classified as other
invested assets in the Consolidated Balance Sheet.
In addition, on April 15, 1996, Phoenix purchased a 7% convertible
subordinated note issued by Aberdeen Asset Management for $37.5 million.
The note, which matures on March 29, 2003, may be converted into shares
which would be equivalent to approximately 11% of Aberdeen Asset
Management's then outstanding common stock. The note is classified as
equity securities in the Consolidated Balance Sheet.
In the spring of 1996, Phoenix and Aberdeen Asset Management joined
together to form Phoenix-Aberdeen International Advisors, LLC, an SEC
registered investment advisor that, in conjunction with Phoenix Duff &
Phelps and Aberdeen Asset Management, develops and markets investment
products in the United States and the United Kingdom.
46
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
DEBT AND EQUITY SECURITIES
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DEBT SECURITIES
HELD-TO-MATURITY:
State and political subdivision bonds $ 11,041 $ 569 $ (8) $ 11,602
Foreign government bonds 3,032 15 (115) 2,932
Corporate securities 1,521,033 103,267 (2,042) 1,622,258
Mortgage-backed securities 19,799 949 20,748
---------------- --------------- --------------- ----------------
Total 1,554,905 104,800 (2,165) 1,657,540
---------------- --------------- --------------- ----------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 501,190 25,020 (636) 525,574
State and political subdivision bonds 474,123 32,896 (3,477) 503,542
Foreign government bonds 248,831 26,303 (5,992) 269,142
Corporate securities 1,384,503 97,943 (4,403) 1,478,043
Mortgage-backed securities 2,786,278 99,785 (3,303) 2,882,760
---------------- --------------- --------------- ----------------
Total 5,394,925 281,947 (17,811) 5,659,061
---------------- --------------- --------------- ----------------
TOTAL DEBT SECURITIES $ 6,949,830 $ 386,747 $ (19,976) $ 7,316,601
================ =============== =============== ================
EQUITY SECURITIES $ 195,717 $ 190,669 $ (12,998) $ 373,388
================ =============== =============== ================
</TABLE>
47
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DEBT SECURITIES
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 DEBT SECURITIES $ 6,299,074 $ 252,729 $ (51,786) $ 6,500,017
================= ================= ================= =================
EQUITY SECURITIES $ 137,907 $ 100,258 $ (2,814) $ 235,351
================= ================= ================= =================
</TABLE>
48
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of debt securities, by contractual
maturity, as of December 31, 1997 are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties, or
Phoenix 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 $ 113,850 $ 116,684 $ 78,768 $ 79,054
Due after one year through five years 477,101 499,155 329,529 347,240
Due after five years through ten years 625,518 670,597 651,878 683,747
Due after ten years 318,637 350,357 1,548,472 1,666,260
Mortgage-backed securities 19,799 20,747 2,786,278 2,882,760
---------------- ---------------- ---------------- ----------------
Total $ 1,554,905 $ 1,657,540 $ 5,394,925 $ 5,659,061
================ ================ ================ ================
</TABLE>
Carrying values for investments in mortgage-backed securities, excluding
U.S. government guaranteed investments, were as follows:
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Planned amortization class $ 554,425 $ 618,953
Asset-backed 594,128 490,018
Mezzanine 328,539 322,812
Commercial 556,155 413,571
Sequential pay 680,397 552,512
Pass through 132,522 105,282
Other 56,393 58,604
-------------- --------------
Total mortgage-backed securities $ 2,902,559 $ 2,561,752
============== ==============
Phoenix had 30% and 37% at December 31, 1997 and 1996, respectively, in
planned amortization class and mezzanine mortgage-backed securities which
have reasonably predictable cash flows and a relatively high degree of
prepayment protection.
49
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MORTGAGE LOANS AND REAL ESTATE
Phoenix's mortgage loans and real estate are diversified by property type
and location and, for mortgage loans, by borrower. Mortgage loans are
collateralized by the related properties and are generally 75% of the
properties' value at the time the original loan is made.
Mortgage loans and real estate investments comprise the following property
types and geographic regions:
<TABLE>
<CAPTION>
MORTGAGE LOANS REAL ESTATE
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
PROPERTY TYPE:
Office buildings $ 246,500 $ 251,526 $ 180,743 $ 246,644
Retail 231,886 257,721 108,907 121,813
Apartment buildings 303,990 241,286 20,560 26,286
Industrial buildings 162,008 197,013 39,810 56,134
Other 18,917 47,929 238 7,577
Valuation allowances (35,800) (48,399) (28,501) (47,509)
--------------- -------------- ---------------- -------------
Total $ 927,501 $ 947,076 $ 321,757 $ 410,945
=============== ============== ================ =============
GEOGRAPHIC REGION:
Northeast $ 222,975 $ 260,146 $ 92,513 $ 103,761
Southeast 257,376 261,957 85,781 110,746
North central 189,163 158,902 63,751 86,070
South central 79,092 57,507 58,954 85,532
West 214,695 256,963 49,259 72,345
Valuation allowances (35,800) (48,399) (28,501) (47,509)
--------------- -------------- ---------------- -------------
Total $ 927,501 $ 947,076 $ 321,757 $ 410,945
=============== ============== ================ =============
</TABLE>
At December 31, 1997, scheduled mortgage loan maturities were as follows:
1998 - $151 million; 1999 - $88 million; 2000 - $97 million; 2001 - $92
million; 2002 - $41 million; and $494 million thereafter. Actual maturities
will differ from contractual maturities because borrowers may have the
right to prepay obligations with or without prepayment penalties and loans
may be refinanced. Phoenix refinanced $8.6 million and $28.9 million of its
mortgage loans during 1997 and 1996, respectively, based on terms which
differed from those granted to new borrowers.
50
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT VALUATION ALLOWANCES
Investment valuation allowances which have been deducted in arriving at
investment carrying values as presented in the Consolidated Balance Sheet
and changes thereto were as follows:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
JANUARY 1, ADDITIONS DEDUCTIONS DECEMBER 31,
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997
Mortgage loans $ 48,399 $ 6,731 $ (19,330) $ 35,800
Real estate 47,509 4,201 (23,209) 28,501
-------------- -------------------- --------------- --------------------
Total $ 95,908 $ 10,932 $ (42,539) $ 64,301
============== ==================== =============== ====================
1996
Mortgage loans $ 65,807 $ 7,640 $ (25,048) $ 48,399
Real estate 83,755 2,526 (38,772) 47,509
-------------- -------------------- --------------- --------------------
Total $ 149,562 $ 10,166 $ (63,820) $ 95,908
============== ==================== =============== ====================
</TABLE>
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $7.0
million and $4.5 million at December 31, 1997 and 1996, respectively. There
were no non-income producing bonds at December 31, 1997 or 1996.
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 $272.9 million and $73.1 million
at December 31, 1997 and 1996, respectively. Average received and average
paid rates were 7.00% and 6.63% for 1997.
These agreements do not require the exchange of underlying principal
amounts, and accordingly Phoenix's maximum exposure to credit risk is the
difference in interest payments exchanged. Management of Phoenix considers
the likelihood of any material loss on interest rate swaps to be remote.
51
<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 affiliates, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Venture capital equity partnerships $ 88,228 $ 66,284
Transportation and equipment leases 59,111 46,950
Investment in Aberdeen Asset Management 32,817 29,980
Investment in Beutel, Goodman & Co. Ltd. 31,214 34,541
Seed money in separate accounts 41,297 35,747
Other 10,008 4,617
------------- ------------
Total other invested assets $ 262,675 $ 218,119
============= ============
</TABLE>
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(in thousands)
<S> <C> <C> <C>
Debt securities $ 509,702 $ 469,713 $ 437,521
Equity securities 4,277 4,689 1,787
Mortgage loans 85,662 84,318 92,283
Policy loans 122,562 117,742 115,055
Real estate 18,939 21,799 20,910
Other invested assets (415) 332 871
Short-term investments 18,768 18,688 21,974
------------ ------------ -------------
Sub-total 759,495 717,281 690,401
Less investment expenses 22,621 27,391 27,933
------------ ------------ -------------
Net investment income $ 736,874 $ 689,890 $ 662,468
============ ============ =============
</TABLE>
Investment income of $.7 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1997. Phoenix does not
accrue interest income on impaired mortgage loans and impaired bonds when
the likelihood of collection is doubtful.
The payment terms of mortgage loans may from time to time be restructured
or modified. The investment in restructured mortgage loans, based on
amortized cost, amounted to $51.3 million and $61.5 million at December 31,
1997 and 1996, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $5.3 million, $3.1 million and $6.6 million in 1997, 1996
and 1995, respectively. Actual interest income on these loans included in
net investment income was $3.8 million, $5.2 million and $6.4 million in
1997, 1996 and 1995, respectively.
52
<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>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 112,194 $ (70,986) $ 476,352
Equity securities 74,547 40,803 24,527
Deferred policy acquisition costs (77,985) 51,528 (341,836)
Deferred income taxes 38,064 7,432 55,692
Other (Note 9) (4,719) 1,241 (3,833)
-------------- ------------------ ---------------
Net unrealized investment gains $ 65,973 $ 15,154 $ 99,518
============== ================== ===============
</TABLE>
Realized investment gains and losses for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 19,315 $ (10,476) $ 8,080
Equity securities 26,290 59,794 29,276
Mortgage loans 3,805 2,628 (262)
Real estate 44,668 24,711 20,535
Other invested assets 48,692 18,608 17,109
-------------- ------------------ ---------------
142,770 95,265 74,738
Income taxes 49,970 33,343 26,158
-------------- ------------------ ---------------
Net realized investment gains after taxes $ 92,800 $ 61,922 $ 48,580
============== ================== ===============
</TABLE>
The proceeds from sales of available-for-sale debt securities and the gross
realized gains and gross realized losses on those sales for the year ended
December 31, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from disposals $ 1,206,744 $ 1,348,809 $ 1,145,146
Gross gains on sales $ 48,100 $ 17,429 $ 27,980
Gross losses on sales $ 28,785 $ 27,905 $ 19,900
</TABLE>
53
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets were as follows:
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Goodwill $ 387,517 $ 231,135
Investment management contracts 167,788 56,700
Client listings 45,441 41,410
Non-compete covenants 5,000 5,000
Intangible asset related to
pension plan benefits 18,032 19,835
Other 1,499 1,220
------------ ------------
625,277 355,300
Accumulated amortization (83,778) (41,793)
------------ ------------
Total $ 541,499 $ 313,507
============ ============
Phoenix Duff & Phelps' amounts included above were as follows:
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Goodwill $ 321,932 $ 179,406
Investment management contracts 167,788 56,700
Non-compete covenants 5,000 5,000
Other 1,220 1,220
------------ ------------
495,940 242,326
Accumulated amortization (27,579) (13,198)
------------ ------------
Total $ 468,361 $ 229,128
============ ============
In 1997, American Phoenix Corporation wrote down the carrying value of its
goodwill and other intangible assets by $18.8 million. This impairment loss
is included in other operating expenses in the Consolidated Statement of
Income and Equity.
54
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Other than debt securities being held-to-maturity, financial instruments
that are subject to fair value disclosure requirements (insurance contracts
are excluded) are carried in the financial statements at amounts that
approximate fair value. The fair values presented for certain financial
instruments are estimates which, in many cases, may differ significantly
from the amounts which could be realized upon immediate liquidation. In
cases where market prices are not available, estimates of fair value are
based on discounted cash flow analyses which utilize current interest rates
for similar financial instruments which have comparable terms and credit
quality.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
DEBT SECURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
debt securities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values are calculated as the present value of scheduled payments, with
the discount based upon the Treasury rate comparable for the remaining loan
duration, plus a spread of between 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.
55
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair value of deferred annuities and supplementary contracts without
life contingencies with an interest guarantee of one year or less is valued
at the amount of the policy reserve. In determining the fair value of
deferred annuities and supplementary contracts without life contingencies
with interest guarantees greater than one year, a discount rate equal to
the appropriate Treasury rate, plus 150 basis points, was used to determine
the present value of the projected account value of the policy at the end
of the current guarantee period.
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest guarantees of less 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 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>
1997 1996
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 159,307 $ 159,307 $ 172,895 $ 172,895
Short-term investments 1,078,276 1,078,276 164,967 164,967
Debt securities 7,213,966 7,316,601 6,451,078 6,500,017
Equity securities 373,388 373,388 235,351 235,351
Mortgage loans 927,501 956,041 947,076 986,900
Policy loans 1,986,728 2,104,704 1,667,784 1,645,899
--------------- ---------------- -------------- --------------
Total financial assets $ 11,739,166 $ 11,988,317 $ 9,639,151 $ 9,706,029
=============== ================ ============== ==============
Financial liabilities:
Policy liabilities $ 902,200 $ 902,200 $ 875,200 $ 875,100
Securities sold subject to repurchase
agreements 137,473 137,473
Other indebtedness 471,085 471,085 490,430 490,430
--------------- ---------------- -------------- --------------
Total financial liabilities $ 1,510,758 $ 1,510,758 $ 1,365,630 $ 1,365,530
=============== ================ ============== ==============
</TABLE>
56
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. OTHER INDEBTEDNESS
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Short-term debt $ 15,539 $ 12,455
Bank borrowings 263,732 280,845
Notes payable 14,632 19,522
Surplus notes 175,000 175,000
Secured debt 2,182 2,608
------------ ------------
Total other indebtedness $ 471,085 $ 490,430
============ ============
Phoenix has various lines of credit established with major commercial
banks. As of December 31, 1997, Phoenix had outstanding balances totaling
$264.5 million. The total unused credit was $145.3 million. Interest rates
ranged from 5.42% to 6.63% in 1997.
On November 25, 1996, Phoenix issued $175 million of surplus notes (See
Note 3).
Maturities of other indebtedness are as follows: 1998 - $15.5 million; 1999
- $55 million; 2000 - $4 million; 2001 - $29 million; 2002 - $192 million;
2003 and thereafter - $175.5 million.
Interest expense was $32.5 million, $18.0 million and $7.7 million for the
years ended December 31, 1997, 1996 and 1995, respectively.
8. INCOME TAXES
A summary of income taxes (benefits) in the Consolidated Statement of
Income and Equity for the year ended December 31, was as follows:
1997 1996 1995
(IN THOUSANDS)
Income taxes
Current $ 54,514 $ 59,673 $ 59,590
Deferred 2,555 19,658 (16,238)
----------- ---------- ------------
Total $ 57,069 $ 79,331 $ 43,352
=========== ========== ============
57
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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>
1997 1996 1995
% % %
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $ 80,710 35 $ 66,136 35 $ 55,318 35
Non-taxable gain on Phoenix Duff &
Phelps merger (14,203) (9)
Dividend received deduction and
tax-exempt interest (2,513) (1) (2,107) (1) (623)
Other, net (8,017) (4) 2,736 1 2,860 1
------------ ----- ------------ ----- ------------ -----
70,180 30 66,765 35 43,352 27
Differential earnings (equity tax) (13,111) (5) 12,566 7
------------ ----- ------------ ----- ------------ -----
Income taxes $ 57,069 25 $ 79,331 42 $ 43,352 27
============ ===== ============ ===== ============ =====
</TABLE>
58
<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:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 303,500 $ 220,135
Unearned premium/deferred revenue (139,817) (131,513)
Impairment reserves (26,102) (43,331)
Pension and other postretirement benefits (56,643) (58,230)
Investments 77,202 50,219
Future policyholder benefits (140,980) (37,904)
Other 45,053 15,633
------------- -------------
62,213 15,009
Net unrealized investment gains 84,134 48,320
Minimum pension liability (2,526) (1,395)
Foreign tax credit (1,109)
------------- -------------
Deferred income tax liability, net
before valuation allowance 143,821 60,825
Valuation allowance 1,109
------------- -------------
Deferred income tax liability, net $ 143,821 $ 61,934
============= =============
</TABLE>
Gross deferred income tax assets totaled $366 million and $274 million at
December 31, 1997 and 1996, respectively. Gross deferred income tax
liabilities totaled $510 million and $336 million at December 31, 1997 and
1996, respectively. It is management's assessment, based on Phoenix's
earnings and projected future taxable income, that it is more likely than
not that deferred income tax assets at December 31, 1997 and 1996, with the
exception of the foreign tax credit, will be realized.
The Internal Revenue Service is currently examining Phoenix's tax returns
for 1995 and 1996. Management does not believe that there will be a
material adverse effect on the financial statements as a result of pending
tax matters.
59
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
Phoenix has a multi-employer, non-contributory, defined benefit pension
plan covering substantially all of its employees. Retirement benefits are a
function of both years of service and level of compensation. Phoenix also
sponsors a non-qualified supplemental defined benefit plan to provide
benefits in excess of amounts allowed pursuant to Internal Revenue Code.
Phoenix's funding policy is to contribute annually an amount equal to at
least the minimum required contribution in accordance with minimum funding
standards established by the Employee Retirement Income Security Act of
1974. Contributions are intended to provide not only for benefits
attributable to service to date, but also for service expected to be earned
in the future.
Components of net periodic pension cost for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 10,278 $ 10,076 $ 9,599
Interest accrued on projected benefit obligation 22,650 22,660 19,880
Actual return on assets (53,093) (38,788) (62,567)
Net amortization and deferral 30,488 17,318 45,807
------------ ------------- ------------
Net periodic pension cost $ 10,323 $ 11,266 $ 12,719
============ ============= ============
</TABLE>
In 1996, Phoenix offered an early retirement program which granted an
additional benefit of five years of age and service. As a result of the
early retirement program, Phoenix recorded an additional pension expense of
$8.7 million for the year ended December 31, 1996.
60
<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,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of vested benefit obligation $ 236,443 $ 213,148
Actuarial present value of non-vested benefit obligation 16,312 14,828
------------- ------------
Accumulated benefit obligation 252,755 227,976
Present value effect of future salary increases 32,316 33,910
------------- ------------
Projected benefit obligation $ 285,071 $ 261,886
============= ============
Plan assets at fair value $ 321,555 $ 292,070
============= ============
Plan assets in excess of projected benefit obligation $ (36,484) $ (30,184)
Unrecognized net gain from past experience 60,759 52,312
Unrecognized prior service benefit 52 240
Unamortized transition asset 16,586 19,745
------------- ------------
Net pension liability (included in other liabilities) $ 40,913 $ 42,113
============= ============
</TABLE>
At December 31, 1997 and 1996, the non-qualified plan was unfunded and had
projected benefit obligations of $50.4 million and $50.0 million,
respectively. The accumulated benefit obligations as of December 31, 1997
and 1996 related to this plan were $42.8 million and $37.4 million,
respectively, and are included in other liabilities.
Phoenix recorded, as a reduction of policyholders' equity, an additional
minimum pension liability of $4.7 million and $2.8 million, net of income
taxes, at December 31, 1997 and 1996, respectively, representing the excess
of accumulated benefit obligations over the fair value of plan assets and
accrued pension liabilities for the non-qualified plan. Phoenix has also
recorded an intangible asset of $18.0 million and $19.8 million as of
December 31, 1997 and 1996 related to the non-qualified plan.
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit
obligation were 7.0% and 4.0%, for 1997 and 7.5% and 4.5% for 1996. The
discount rate assumption for 1997 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%.
The pension plan's assets include corporate and government debt securities,
equity securities, real estate, venture capital funds, and shares of mutual
funds.
Phoenix 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. Phoenix contributes an additional amount, subject to limitation,
based on the voluntary contribution of the employee or agent. Company
contributions charged to expense with respect to these plans during the
years ended December 31, 1997, 1996 and 1995 were $3.8 million, $4.2
million and $4.2 million, respectively.
61
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to Phoenix's pension plans, Phoenix currently provides certain
health care and life insurance benefits to retired employees, spouses and
other eligible dependents through various plans sponsored by Phoenix. A
substantial portion of Phoenix's employees may become eligible for these
benefits upon retirement. The health care plans have varying copayments and
deductibles, depending on the plan. These plans are unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The plan's funded status reconciled with amounts recognized in Phoenix's
Consolidated Balance Sheet, was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 35,900 $ 30,576
Fully eligible active plan participants 6,889 11,466
Other active plan participants 23,829 21,614
------------ -----------
Total accumulated postretirement benefit obligation 66,618 63,656
Unrecognized net gain from past experience 28,037 29,173
------------ -----------
Accrued postretirement benefit liability $ 94,655 $ 92,829
============ ===========
</TABLE>
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during year $ 3,136 $ 2,765 $ 3,366
Interest cost accrued on benefit obligation 4,441 4,547 5,275
Net amortization (1,527) (1,577) (458)
---------- ---------- ---------
Net periodic postretirement benefit cost $ 6,050 $ 5,735 $ 8,183
========== ========== =========
</TABLE>
62
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In addition to the net periodic postretirement benefit cost, Phoenix
expensed an additional $3.0 million for postretirement benefits related to
the early retirement program for the year ended December 31, 1996.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.0% at December 31, 1997 and 7.5% at December 31,
1996.
For purposes of measuring the accumulated postretirement benefit obligation
at December 31, 1997, 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, 1996, health
care costs were assumed to increase 9.5% 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 $5.3
million and the annual service and interest cost by $.8 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
Phoenix recognizes the costs and obligations of severance, disability and
related life insurance and health care benefits to be paid to inactive or
former employees after employment but before retirement. Postemployment
benefit expense was $.4 million for 1997, $.4 million for 1996 and $.5
million for 1995.
63
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix operates principally in seven segments: Individual Insurance, Group
Life and Health Insurance, 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 include equity securities.
Summarized below is financial information with respect to the business
segments:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Individual Insurance $ 2,028,230 $ 1,796,572 $ 1,752,338
Group Life and Health Insurance 459,405 462,551 421,771
Life Reinsurance 162,843 143,314 128,813
General Lines Brokerage 64,093 61,809 40,977
Securities Management 177,894 164,966 112,206
Real Estate Management 15,319 13,550 13,562
Other Operations 80,496 82,273 48,873
----------------- ----------------- -----------------
Total $ 2,988,280 $ 2,725,035 $ 2,518,540
================= ================= =================
OPERATING INCOME
Individual Insurance $ 132,308 $ 63,013 $ 43,094
Group Life and Health Insurance 31,276 11,220 19,921
Life Reinsurance 10,592 8,078 17,656
General Lines Brokerage (21,652) (2,935) (1,887)
Securities Management 38,813 44,440 23,667
Real Estate Management (2,433) (3,783) (184)
Other Operations 41,695 68,928 15,204
----------------- ----------------- -----------------
Total $ 230,599 $ 188,961 $ 117,471
================= ================= =================
IDENTIFIABLE ASSETS
Individual Insurance $ 15,679,598 $ 12,961,648
Group Life and Health Insurance 655,800 596,800
Life Reinsurance 313,500 304,300
General Lines Brokerage 111,900 117,300
Securities Management 615,112 376,000
Real Estate Management 278,500 319,400
Other Operations 864,309 777,600
----------------- -----------------
Total $ 18,518,719 $ 15,453,048
================= =================
</TABLE>
64
<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 $14.9 million, $14.8 million and $14.6 million in
1997, 1996, and 1995, respectively. Future minimum rental payments under
non-cancelable operating leases were approximately $51.0 million as of
December 31, 1997, payable as follows: 1998 - $15.7 million; 1999 - $12.9
million; 2000 - $10.1 million; 2001 - $5.6 million; 2002 - $3.6 million;
and $3.1 million thereafter.
12. PROPERTY AND EQUIPMENT
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by Phoenix, are stated at depreciated cost. Real
estate occupied by Phoenix was $109.0 million and $97.2 million,
respectively, at December 31, 1997 and 1996. Phoenix provides for
depreciation using straight line and accelerated methods over the estimated
useful lives of the related assets which generally range from five to forty
years. Accumulated depreciation and amortization was $164.4 million and
$144.1 million at December 31, 1997 and 1996, respectively.
13. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix assumes and
cedes reinsurance as a means of diversifying underwriting risk. The maximum
amount of individual life insurance retained by Phoenix on any one life is
$8 million for single life and joint first-to-die policies and $10 million
for joint last-to-die policies, with excess amounts ceded to reinsurers.
For reinsurance ceded, Phoenix 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>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,592,800 $ 1,473,869 $ 1,455,459
Reinsurance assumed 329,927 276,630 271,498
Reinsurance ceded (282,121) (231,677) (270,082)
----------------- -------------------- -----------------
Net premiums $ 1,640,606 $ 1,518,822 $ 1,456,875
================= ==================== =================
Direct policy and contract claims incurred $ 626,834 $ 575,824 $ 605,545
Reinsurance assumed 410,704 170,058 256,529
Reinsurance ceded (373,127) (160,646) (292,357)
----------------- -------------------- -----------------
Net policy and contract claims incurred $ 664,411 $ 585,236 $ 569,717
================= ==================== =================
Direct life insurance in force $ 120,394,664 $ 108,816,856 $ 102,606,749
Reinsurance assumed 84,806,585 61,109,836 36,724,852
Reinsurance ceded (74,764,639) (51,525,976) (34,093,090)
----------------- -------------------- -----------------
Net insurance in force $ 130,436,610 $ 118,400,716 $ 105,238,511
================= ==================== =================
</TABLE>
65
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Irrevocable letters of credit aggregating $134.8 million at December 31,
1997 have been arranged with United States commercial banks in favor of
Phoenix to collateralize the ceded reserves.
14. PARTICIPATING LIFE INSURANCE
Participating life insurance in force was 79.6% and 80.0% of the face value
of total individual life insurance in force at December 31, 1997 and 1996,
respectively. The premiums on participating life insurance policies were
83.5%, 84.1% and 84.7% of total individual life insurance premiums in 1997,
1996 and 1995, respectively.
15. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 926,274 $ 816,128 $ 1,128,227
Acquisition cost deferred 295,189 153,873 143,519
Amortized to expense during the year (105,071) (95,255) (113,788)
Adjustment to equity during the year (77,985) 51,528 (341,830)
----------------- -------------- ----------------
Balance at end of year $ 1,038,407 $ 926,274 $ 816,128
================= ============== ================
</TABLE>
16. MINORITY INTEREST
Phoenix's interests in Phoenix Duff & Phelps Corporation and American
Phoenix Corporation, through its wholly-owned subsidiary PM Holdings are
represented by ownership of approximately 60% and 92%, respectively, of the
outstanding shares of common stock at December 31, 1997. Earnings and
policyholders' equity attributable to minority shareholders are included in
minority interest in the consolidated financial statements along with
Phoenix Duff & Phelps' preferred stock.
17. CONTINGENCIES
FINANCIAL GUARANTEES
Phoenix 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 Phoenix's maximum exposure to credit loss in the event
of nonperformance. The principal amount of bonds guaranteed by Phoenix at
December 31, 1997 and 1996 was $88.7 million and $88.8 million,
respectively. Management believes that any loss contingencies which may
arise from Phoenix's financial guarantees would not have a material adverse
effect on Phoenix's liquidity or financial condition.
66
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
LITIGATION
In 1996, Phoenix 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. Phoenix estimates the cost of settlement to be $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 Phoenix's consolidated financial position.
Phoenix 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 Phoenix's consolidated financial position.
18. 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, 1997, 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, surplus notes are not included in
policyholders' equity, postretirement benefit costs are based on different
assumptions and reflect a different method of adoption, life insurance
reserves are based on different assumptions and income tax expense reflects
only taxes paid or currently payable.
The following reconciles the statutory net income of Phoenix as reported to
regulatory authorities to the net income as reported in these financial
statements for the year ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 60,702 $ 72,961 $ 64,198
Deferred policy acquisition costs, net 48,821 58,618 29,766
Future policy benefits (9,145) (16,793) (15,763)
Pension and postretirement expenses (7,955) (23,275) (12,691)
Investment valuation allowances 88,813 76,631 56,745
Interest maintenance reserve 17,544 (5,158) 5,829
Deferred income taxes (36,250) (67,064) (10,021)
Other, net 2,118 4,808 (4,314)
------------ ------------- ------------
Net income, as reported $ 164,648 $ 100,728 $ 113,749
============ ============= ============
</TABLE>
67
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to policyholders'
equity as reported in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $ 1,152,820 $ 1,102,200
Deferred policy acquisition costs, net 1,227,782 1,037,664
Future policy benefits (395,436) (379,820)
Pension and postretirement expenses (169,383) (152,112)
Investment valuation allowances (40,032) (139,562)
Interest maintenance reserve 33,794 6,897
Deferred income taxes (12,051) 82,069
Surplus notes (157,500) (157,500)
Other, net (11,904) (2,367)
-------------- --------------
Policyholders' equity, as reported $ 1,628,090 $ 1,397,469
============== ==============
</TABLE>
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.
68
<PAGE>
APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
Contributions to the GIA under the Policy and transfers to the GIA become
part of 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%
on Single Life Policies (4% on Single Life Policies in New York), and 6% for
Multiple Life Policies. 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.
Biweekly, 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, ONE TRANSFER PER CONTRACT YEAR IS ALLOWED FROM THE GIA. THE
AMOUNT WHICH CAN BE TRANSFERRED IS LIMITED TO THE GREATER OF $1,000 OR 25% OF
THE CONTRACT VALUE IN THE GIA AT THE TIME OF THE TRANSFER. UNDER THE SYSTEMATIC
TRANSFER PROGRAM, TRANSFERS OF APPROXIMATELY EQUAL AMOUNTS MAY BE MADE OVER A
MINIMUM 18-MONTH PERIOD. NON-SYSTEMATIC TRANSFERS FROM THE GIA WILL BE
EFFECTUATED ON THE DATE OF RECEIPT BY VPMO, UNLESS OTHERWISE REQUESTED BY THE
CONTRACT OWNER.
69
<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%, 6% or 12% over a period of years but went
above or below those figures in individual Policy Years. The Policy benefits
also will differ, depending on your premium allocations to each Subaccount of
the VUL Account, if the overall actual rates of return averaged 0%, 6% or 12%,
but went above or below those figures for the individual Subaccounts. The tables
are for standard risk males and females who have never smoked. In states where
cost of insurance rates are not based on the Insured's sex, the tables
designated "male" apply to all standard risk insureds who have never smoked.
Account values and Cash Surrender Values may be lower for smokers or former
smokers or for risk classes involving higher mortality risk. Planned premium
payments are assumed to be paid at the beginning of each Policy Year. The
difference between the Policy Value and the Cash Surrender Value in the first 10
years is the surrender charge. 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 $150.
2. Monthly administrative charge of $5 per month ($10 per month guaranteed
maximum).
3. Premium tax charge of 2.25% (will vary from state to state on Multiple Life
Policies).
4. A federal tax charge of 1.5% (for Single Life Policies only).
5. Cost of insurance charge. The tables illustrate cost of insurance at both
the current rates and at the maximum rates guaranteed in the Policies. (See
"Charges and Deductions--Cost of Insurance.")
6. Mortality and expense risk charge, which is a daily charge equivalent to
.80% on an annual basis (or for Single Life Policies, .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%. All other Fund expenses, except capital items such as
brokerage commissions, are paid by the Adviser or Phoenix. Management may decide
to limit the amount of expense reimbursement in the future. If expense
reimbursement had not been in place for the fiscal year ended December 31, 1997,
average total operating expenses for the Series would have been approximately
.93% of the average net assets. See "Charges and Deductions--Investment
Management Charge."
Taking into account the mortality and expense risk charge and the investment
advisory fees and expenses, the gross annual investment return rates of 0%, 6%
and 12% on the Funds' assets are equivalent to net annual investment return
rates of approximately -1.72%, 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 0%, 6% and 12% rates.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the VUL Account in the future. If such tax charges
are imposed in the future, then in order to produce after tax returns equal to
those illustrated for 0%, 6% and 12%, a sufficiently higher amount in excess of
the hypothetical interest rates would have to be earned. (See "Charges and
Deductions--Other Charges--Taxes.")
The second column of each table shows the amount that would accumulate if an
amount equal to the premiums paid were invested to earn interest, after taxes,
at 5% compounded annually. These tables show that if a Policy is returned in its
very early years for payment of its Cash Surrender Value, that Cash Surrender
Value may be low in comparison to the amount of the premiums accumulated with
interest. Thus, the cost of owning a Policy for a relatively short time may be
high.
On request, we will furnish the Policyowner with a comparable illustration
based on the age and sex of the proposed insured person(s), standard risk
assumptions and the initial face amount and planned premium chosen.
70
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
THE FLEX EDGE SUCCESS -- A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 575 0 100,000 620 0 100,000 666 0 100,000
2 1,000 2,153 1,282 397 100,000 1,414 529 100,000 1,551 666 100,000
3 1,000 3,310 1,968 661 100,000 2,231 924 100,000 2,517 1,210 100,000
4 1,000 4,526 2,632 1,325 100,000 3,074 1,767 100,000 3,571 2,264 100,000
5 1,000 5,802 3,273 1,966 100,000 3,940 2,633 100,000 4,721 3,414 100,000
6 1,000 7,142 3,890 2,727 100,000 4,830 3,668 100,000 5,976 4,814 100,000
7 1,000 8,549 4,481 3,463 100,000 5,743 4,726 100,000 7,345 6,328 100,000
8 1,000 10,027 5,046 4,174 100,000 6,680 5,807 100,000 8,840 7,968 100,000
9 1,000 11,578 5,584 5,149 100,000 7,640 7,204 100,000 10,472 10,037 100,000
10 1,000 13,207 6,096 6,096 100,000 8,624 8,624 100,000 12,256 12,256 100,000
11 1,000 14,917 6,585 6,585 100,000 9,637 9,637 100,000 14,213 14,213 100,000
12 1,000 16,713 7,051 7,051 100,000 10,682 10,682 100,000 16,361 16,361 100,000
13 1,000 18,599 7,495 7,495 100,000 11,758 11,758 100,000 18,720 18,720 100,000
14 1,000 20,579 7,916 7,916 100,000 12,868 12,868 100,000 21,314 21,314 100,000
15 1,000 22,657 8,314 8,314 100,000 14,012 14,012 100,000 24,167 24,167 100,000
16 1,000 24,840 8,738 8,738 100,000 15,276 15,276 100,000 27,459 27,459 100,000
17 1,000 27,132 9,138 9,138 100,000 16,587 16,587 100,000 31,104 31,104 100,000
18 1,000 29,539 9,510 9,510 100,000 17,944 17,944 100,000 35,141 35,141 100,000
19 1,000 32,066 9,854 9,854 100,000 19,349 19,349 100,000 39,615 39,615 100,000
20 1,000 34,719 10,166 10,166 100,000 20,802 20,802 100,000 44,576 44,576 100,000
@ 65 1,000 69,761 10,629 10,629 100,000 38,040 38,040 100,000 136,375 136,375 166,378
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
34.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.73%
(includes mortality and expense risk charge of 0.8% for 15 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 GIA
providing interest at a minimum guaranteed rate of 4% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
71
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
THE FLEX EDGE SUCCESS -- A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 512 0 100,000 556 0 100,000 599 0 100,000
2 1,000 2,153 1,157 272 100,000 1,281 396 100,000 1,410 525 100,000
3 1,000 3,310 1,782 475 100,000 2,028 721 100,000 2,294 987 100,000
4 1,000 4,526 2,385 1,078 100,000 2,795 1,488 100,000 3,258 1,951 100,000
5 1,000 5,802 2,966 1,659 100,000 3,583 2,276 100,000 4,308 3,001 100,000
6 1,000 7,142 3,524 2,362 100,000 4,392 3,230 100,000 5,452 4,290 100,000
7 1,000 8,549 4,056 3,039 100,000 5,219 4,202 100,000 6,698 5,681 100,000
8 1,000 10,027 4,563 3,691 100,000 6,066 5,193 100,000 8,057 7,184 100,000
9 1,000 11,578 5,044 4,608 100,000 6,931 6,496 100,000 9,537 9,102 100,000
10 1,000 13,207 5,497 5,497 100,000 7,816 7,816 100,000 11,154 11,154 100,000
11 1,000 14,917 5,921 5,921 100,000 8,717 8,717 100,000 12,918 12,918 100,000
12 1,000 16,713 6,314 6,314 100,000 9,635 9,635 100,000 14,843 14,843 100,000
13 1,000 18,599 6,675 6,675 100,000 10,568 10,568 100,000 16,946 16,946 100,000
14 1,000 20,579 7,003 7,003 100,000 11,517 11,517 100,000 19,246 19,246 100,000
15 1,000 22,657 7,294 7,294 100,000 12,478 12,478 100,000 21,762 21,762 100,000
16 1,000 24,840 7,591 7,591 100,000 13,528 13,528 100,000 24,654 24,654 100,000
17 1,000 27,132 7,846 7,846 100,000 14,595 14,595 100,000 27,839 27,839 100,000
18 1,000 29,539 8,052 8,052 100,000 15,675 15,675 100,000 31,349 31,349 100,000
19 1,000 32,066 8,205 8,205 100,000 16,765 16,765 100,000 35,221 35,221 100,000
20 1,000 34,719 8,298 8,298 100,000 17,858 17,858 100,000 39,494 39,494 100,000
@ 65 1,000 69,761 4,144 4,144 100,000 27,807 27,807 100,000 118,357 118,357 144,396
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
34.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.73%
(includes mortality and expense risk charge of 0.8% for 15 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 GIA
providing interest at a minimum guaranteed rate of 4% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
72
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
FEMALE 35 NEVERSMOKE
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 602 0 100,000 648 0 100,000 695 0 100,000
2 1,000 2,153 1,335 481 100,000 1,470 616 100,000 1,611 757 100,000
3 1,000 3,310 2,046 851 100,000 2,317 1,122 100,000 2,611 1,415 100,000
4 1,000 4,526 2,736 1,541 100,000 3,191 1,995 100,000 3,703 2,508 100,000
5 1,000 5,802 3,402 2,207 100,000 4,090 2,894 100,000 4,895 3,700 100,000
6 1,000 7,142 4,045 2,981 100,000 5,015 3,951 100,000 6,197 5,133 100,000
7 1,000 8,549 4,661 3,729 100,000 5,965 5,032 100,000 7,618 6,686 100,000
8 1,000 10,027 5,253 4,452 100,000 6,941 6,140 100,000 9,171 8,370 100,000
9 1,000 11,578 5,820 5,420 100,000 7,944 7,545 100,000 10,870 10,470 100,000
10 1,000 13,207 6,363 6,363 100,000 8,977 8,977 100,000 12,731 12,731 100,000
11 1,000 14,917 6,888 6,888 100,000 10,047 10,047 100,000 14,777 14,777 100,000
12 1,000 16,713 7,395 7,395 100,000 11,155 11,155 100,000 17,028 17,028 100,000
13 1,000 18,599 7,884 7,884 100,000 12,303 12,303 100,000 19,505 19,505 100,000
14 1,000 20,579 8,356 8,356 100,000 13,492 13,492 100,000 22,233 22,233 100,000
15 1,000 22,657 8,810 8,810 100,000 14,725 14,725 100,000 25,238 25,238 100,000
16 1,000 24,840 9,297 9,297 100,000 16,091 16,091 100,000 28,707 28,707 100,000
17 1,000 27,132 9,767 9,767 100,000 17,516 17,516 100,000 32,554 32,554 100,000
18 1,000 29,539 10,219 10,219 100,000 19,001 19,001 100,000 36,821 36,821 100,000
19 1,000 32,066 10,652 10,652 100,000 20,549 20,549 100,000 41,553 41,553 100,000
20 1,000 34,719 11,065 11,065 100,000 22,163 22,163 100,000 46,806 46,806 100,000
@ 65 1,000 69,761 13,892 13,892 100,000 42,753 42,753 100,000 144,062 144,062 175,757
</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 15 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 GIA
providing interest at a minimum guaranteed rate of 4% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
73
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
FEMALE 35 NEVERSMOKE
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 534 0 100,000 578 0 100,000 622 0 100,000
2 1,000 2,153 1,199 345 100,000 1,326 472 100,000 1,457 604 100,000
3 1,000 3,310 1,844 648 100,000 2,095 900 100,000 2,368 1,173 100,000
4 1,000 4,526 2,466 1,271 100,000 2,887 1,691 100,000 3,361 2,165 100,000
5 1,000 5,802 3,066 1,871 100,000 3,699 2,504 100,000 4,442 3,247 100,000
6 1,000 7,142 3,642 2,578 100,000 4,533 3,470 100,000 5,622 4,558 100,000
7 1,000 8,549 4,193 3,260 100,000 5,387 4,455 100,000 6,906 5,974 100,000
8 1,000 10,027 4,718 3,917 100,000 6,262 5,461 100,000 8,307 7,506 100,000
9 1,000 11,578 5,219 4,819 100,000 7,159 6,759 100,000 9,837 9,437 100,000
10 1,000 13,207 5,695 5,695 100,000 8,079 8,079 100,000 11,511 11,511 100,000
11 1,000 14,917 6,147 6,147 100,000 9,024 9,024 100,000 13,342 13,342 100,000
12 1,000 16,713 6,574 6,574 100,000 9,992 9,992 100,000 15,349 15,349 100,000
13 1,000 18,599 6,975 6,975 100,000 10,985 10,985 100,000 17,547 17,547 100,000
14 1,000 20,579 7,348 7,348 100,000 12,002 12,002 100,000 19,957 19,957 100,000
15 1,000 22,657 7,693 7,693 100,000 13,043 13,043 100,000 22,602 22,602 100,000
16 1,000 24,840 8,053 8,053 100,000 14,187 14,187 100,000 25,646 25,646 100,000
17 1,000 27,132 8,382 8,382 100,000 15,364 15,364 100,000 29,010 29,010 100,000
18 1,000 29,539 8,677 8,677 100,000 16,572 16,572 100,000 32,727 32,727 100,000
19 1,000 32,066 8,932 8,932 100,000 17,810 17,810 100,000 36,838 36,838 100,000
20 1,000 34,719 9,149 9,149 100,000 19,080 19,080 100,000 41,390 41,390 100,000
@ 65 1,000 69,761 8,644 8,644 100,000 33,735 33,735 100,000 125,895 125,895 153,592
</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 15 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 GIA
providing interest at a minimum guaranteed rate of 4% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
74
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 574 0 100,574 619 0 100,620 665 0 100,665
2 1,000 2,153 1,279 393 101,279 1,410 525 101,410 1,547 661 101,547
3 1,000 3,310 1,961 654 101,961 2,223 916 102,223 2,507 1,200 102,508
4 1,000 4,526 2,619 1,312 102,620 3,058 1,751 103,059 3,553 2,246 103,554
5 1,000 5,802 3,253 1,946 103,254 3,915 2,608 103,916 4,691 3,384 104,692
6 1,000 7,142 3,861 2,699 103,862 4,793 3,631 104,794 5,930 4,768 105,930
7 1,000 8,549 4,442 3,424 104,442 5,691 4,673 105,691 7,276 6,259 107,276
8 1,000 10,027 4,995 4,122 104,995 6,608 5,735 106,608 8,740 7,868 108,741
9 1,000 11,578 5,518 5,082 105,518 7,543 7,107 107,543 10,332 9,897 110,333
10 1,000 13,207 6,011 6,011 106,012 8,496 8,496 108,497 12,065 12,065 112,065
11 1,000 14,917 6,480 6,480 106,481 9,473 9,473 109,474 13,957 13,957 113,957
12 1,000 16,713 6,924 6,924 106,925 10,474 10,474 110,475 16,023 16,023 116,024
13 1,000 18,599 7,343 7,343 107,344 11,500 11,500 111,501 18,282 18,282 118,282
14 1,000 20,579 7,737 7,737 107,738 12,551 12,551 112,551 20,751 20,751 120,752
15 1,000 22,657 8,105 8,105 108,106 13,626 13,626 113,626 23,452 23,452 123,453
16 1,000 24,840 8,495 8,495 108,496 14,809 14,809 114,809 26,554 26,554 126,555
17 1,000 27,132 8,857 8,857 108,858 16,025 16,025 116,025 29,966 29,966 129,967
18 1,000 29,539 9,188 9,188 109,188 17,271 17,271 117,272 33,718 33,718 133,718
19 1,000 32,066 9,486 9,486 109,487 18,548 18,548 118,549 37,844 37,844 137,844
20 1,000 34,719 9,748 9,748 109,749 19,853 19,853 119,853 42,381 42,381 142,381
@ 65 1,000 69,761 9,374 9,374 109,374 33,499 33,499 133,499 121,494 121,494 221,495
</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 15 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 GIA
providing interest at a minimum guaranteed rate of 4% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
75
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 511 0 100,512 554 0 100,555 598 0 100,598
2 1,000 2,153 1,154 269 101,155 1,277 392 101,278 1,406 521 101,406
3 1,000 3,310 1,775 468 101,775 2,019 712 102,020 2,285 978 102,285
4 1,000 4,526 2,373 1,066 102,374 2,781 1,474 102,781 3,241 1,934 103,241
5 1,000 5,802 2,948 1,640 102,948 3,560 2,253 103,561 4,279 2,972 104,280
6 1,000 7,142 3,497 2,335 103,498 4,357 3,195 104,358 5,408 4,246 105,408
7 1,000 8,549 4,020 3,002 104,020 5,170 4,152 105,170 6,632 5,615 106,633
8 1,000 10,027 4,515 3,643 104,516 5,998 5,126 105,999 7,963 7,090 107,963
9 1,000 11,578 4,981 4,546 104,982 6,840 6,405 106,841 9,406 8,971 109,407
10 1,000 13,207 5,419 5,419 105,419 7,696 7,696 107,697 10,975 10,975 110,975
11 1,000 14,917 5,824 5,824 105,824 8,563 8,563 108,564 12,676 12,676 112,677
12 1,000 16,713 6,195 6,195 106,195 9,439 9,439 109,439 14,523 14,523 114,524
13 1,000 18,599 6,531 6,531 106,532 10,322 10,322 110,323 16,527 16,527 116,528
14 1,000 20,579 6,831 6,831 106,831 11,211 11,211 111,212 18,703 18,703 118,704
15 1,000 22,657 7,091 7,091 107,091 12,102 12,102 112,102 21,063 21,063 121,064
16 1,000 24,840 7,352 7,352 107,352 13,,066 13,066 113,066 23,757 23,757 123,758
17 1,000 27,132 7,566 7,566 107,566 14,031 14,031 114,032 26,696 26,696 126,696
18 1,000 29,539 7,726 7,726 107,727 14,991 14,991 114,991 29,897 29,897 129,898
19 1,000 32,066 7,829 7,829 107,829 15,938 15,938 115,938 33,384 33,384 133,385
20 1,000 34,719 7,864 7,864 107,865 16,863 16,863 116,863 37,178 37,178 137,178
@ 65 1,000 69,761 2,894 2,894 102,894 22,504 22,504 122,504 98,872 98,872 198,872
</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 15 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 GIA
providing interest at a minimum guaranteed rate of 4% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
76
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
FEMALE 35 NEVERSMOKE
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 601 0 100,601 647 0 100,648 693 0 100,694
2 1,000 2,153 1,332 478 101,332 1,466 612 101,467 1,607 753 101,607
3 1,000 3,310 2,040 845 102,041 2,310 1,115 102,310 2,602 1,407 102,603
4 1,000 4,526 2,725 1,530 102,725 3,177 1,982 103,178 3,687 2,492 103,688
5 1,000 5,802 3,385 2,189 103,385 4,068 2,873 104,069 4,869 3,673 104,869
6 1,000 7,142 4,019 2,956 104,020 4,982 3,919 104,983 6,156 5,092 106,156
7 1,000 8,549 4,626 3,694 104,627 5,918 4,986 105,918 7,556 6,624 107,557
8 1,000 10,027 5,206 4,405 105,207 6,876 6,075 106,876 9,081 8,280 109,082
9 1,000 11,578 5,759 5,360 105,760 7,857 7,457 107,857 10,744 10,344 110,744
10 1,000 13,207 6,286 6,286 106,287 8,862 8,862 108,863 12,558 12,558 112,558
11 1,000 14,917 6,793 6,793 106,794 9,899 9,899 109,900 14,545 14,545 114,546
12 1,000 16,713 7,281 7,281 107,281 10,969 10,969 110,969 16,724 16,724 116,724
13 1,000 18,599 7,748 7,748 107,749 12,072 12,072 112,072 19,112 19,112 119,113
14 1,000 20,579 8,196 8,196 108,196 13,209 13,209 113,209 21,731 21,731 121,731
15 1,000 22,657 8,624 8,624 108,624 14,382 14,382 114,382 24,603 24,603 124,604
16 1,000 24,840 9,081 9,081 109,082 15,677 15,677 115,678 27,908 27,908 127,908
17 1,000 27,132 9,519 9,519 109,520 17,021 17,021 117,021 31,554 31,554 131,555
18 1,000 29,539 9,937 9,937 109,937 18,412 18,412 118,413 35,578 35,578 135,578
19 1,000 32,066 10,331 10,331 110,331 19,852 19,852 119,853 40,016 40,016 140,017
20 1,000 34,719 10,703 10,703 110,703 21,343 21,343 121,344 44,915 44,915 144,916
@ 65 1,000 69,761 12,890 12,890 112,890 39,275 39,275 139,275 132,920 132,920 232,921
</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 15 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 GIA
providing interest at a minimum guaranteed rate of 4% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
77
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
FEMALE 35 NEVERSMOKE
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 533 0 100,533 577 0 100,577 621 0 100,621
2 1,000 2,153 1,196 342 101,197 1,322 468 101,323 1,454 600 101,454
3 1,000 3,310 1,837 642 101,838 2,088 893 102,088 2,360 1,164 102,360
4 1,000 4,526 2,455 1,260 102,456 2,874 1,678 102,874 3,345 2,150 103,346
5 1,000 5,802 3,049 1,854 103,050 3,678 2,483 102,679 4,417 3,221 104,417
6 1,000 7,142 3,618 2,554 103,618 4,502 3,483 104,502 5,581 4,517 105,582
7 1,000 8,549 4,159 3,226 104,159 5,342 4,410 105,342 6,845 5,913 106,846
8 1,000 10,027 4,673 3,872 104,673 6,199 5,398 106,200 8,219 7,419 108,220
9 1,000 11,578 5,160 4,760 105,160 7,074 6,674 107,075 9,715 9,315 109,715
10 1,000 13,207 5,621 5,621 105,622 7,968 7,968 107,968 11,343 11,343 111,343
11 1,000 14,917 6,055 6,055 106,056 8,880 8,880 108,880 13,117 13,117 113,117
12 1,000 16,713 6,462 6,462 106,463 9,810 9,810 109,810 15,051 15,051 115,051
13 1,000 18,599 6,840 6,840 106,841 10,757 10,757 110,757 17,158 17,158 117,159
14 1,000 20,579 7,188 7,188 107,189 11,719 11,719 111,720 19,455 19,455 119,456
15 1,000 22,657 7,505 7,505 107,506 12,697 12,697 112,698 21,960 21,960 121,960
16 1,000 24,840 7,833 7,833 107,833 13,764 13,764 113,764 24,826 24,826 124,827
17 1,000 27,132 8,126 8,126 108,126 14,850 14,850 114,850 27,970 27,970 127,971
18 1,000 29,539 8,380 8,380 108,380 15,952 15,952 115,953 31,416 31,416 131,416
19 1,000 32,066 8,591 8,591 108,591 17,065 17,065 117,066 35,190 35,190 135,191
20 1,000 34,719 8,757 8,757 108,758 18,189 18,189 118,190 39,328 39,328 139,328
@ 65 1,000 69,761 7,497 7,497 107,497 29,438 29,438 129,439 111,012 111,012 211,012
</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 15 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 GIA
providing interest at a minimum guaranteed rate of 4% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
78
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
FEMALE 35 NEVERSMOKE
JOINT EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 513 0 100,000 557 0 100,000 601 0 100,000
2 1,000 2,153 1,156 174 100,000 1,281 299 100,000 1,412 429 100,000
3 1,000 3,310 1,778 697 100,000 2,025 945 100,000 2,294 1,213 100,000
4 1,000 4,526 2,378 1,207 100,000 2,790 1,619 100,000 3,255 2,084 100,000
5 1,000 5,802 2,954 1,748 100,000 3,574 2,367 100,000 4,302 3,096 100,000
6 1,000 7,142 3,506 2,444 100,000 4,377 3,315 100,000 5,441 4,380 100,000
7 1,000 8,549 4,033 3,116 100,000 5,199 4,282 100,000 6,684 5,767 100,000
8 1,000 10,027 4,533 3,836 100,000 6,038 5,342 100,000 8,036 7,340 100,000
9 1,000 11,578 5,008 4,531 100,000 6,899 6,422 100,000 9,514 9,037 100,000
10 1,000 13,207 5,454 5,454 100,000 7,776 7,776 100,000 11,126 11,126 100,000
11 1,000 14,917 5,870 5,870 100,000 8,670 8,670 100,000 12,885 12,885 100,000
12 1,000 16,713 6,248 6,248 100,000 9,573 9,573 100,000 14,799 14,799 100,000
13 1,000 18,599 6,585 6,585 100,000 10,482 10,482 100,000 16,883 16,883 100,000
14 1,000 20,579 6,879 6,879 100,000 11,396 11,396 100,000 19,154 19,154 100,000
15 1,000 22,657 7,127 7,127 100,000 12,313 12,313 100,000 21,632 21,632 100,000
16 1,000 24,840 7,328 7,328 100,000 13,231 13,231 100,000 24,340 24,340 100,000
17 1,000 27,132 7,482 7,482 100,000 14,151 14,151 100,000 27,303 27,303 100,000
18 1,000 29,539 7,584 7,584 100,000 15,069 15,069 100,000 30,550 30,550 100,000
19 1,000 32,066 7,630 7,630 100,000 15,981 15,981 100,000 34,112 34,112 100,000
20 1,000 34,719 7,614 7,614 100,000 16,882 16,882 100,000 38,022 38,022 100,000
@ 65 1,000 69,761 1,989 1,989 100,000 23,387 23,387 100,000 108,037 108,037 100,000
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
24.
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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
79
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
FEMALE 35 NEVERSMOKE
JOINT EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 386 0 100,000 426 0 100,000 466 0 100,000
2 1,000 2,153 899 0 100,000 1,007 25 100,000 1,121 139 100,000
3 1,000 3,310 1,383 302 100,000 1,594 513 100,000 1,823 743 100,000
4 1,000 4,526 1,837 667 100,000 2,183 1,012 100,000 2,575 1,404 100,000
5 1,000 5,802 2,258 1,052 100,000 2,772 1,565 100,000 3,378 2,172 100,000
6 1,000 7,142 2,645 1,584 100,000 3,358 2,297 100,000 4,236 3,174 100,000
7 1,000 8,549 2,992 2,076 100,000 3,937 3,020 100,000 5,149 4,233 100,000
8 1,000 10,027 3,301 2,604 100,000 4,508 3,811 100,000 6,125 5,428 100,000
9 1,000 11,578 3,569 3,092 100,000 5,068 4,592 100,000 7,167 6,690 100,000
10 1,000 13,207 3,796 3,796 100,000 5,618 5,618 100,000 8,284 8,284 100,000
11 1,000 14,917 3,979 3,979 100,000 6,152 6,152 100,000 9,480 9,480 100,000
12 1,000 16,713 4,116 4,116 100,000 6,668 6,668 100,000 10,762 10,762 100,000
13 1,000 18,599 4,203 4,203 100,000 7,161 7,161 100,000 12,136 12,136 100,000
14 1,000 20,579 4,237 4,237 100,000 7,626 7,626 100,000 13,611 13,611 100,000
15 1,000 22,657 4,214 4,214 100,000 8,059 8,059 100,000 15,195 15,195 100,000
16 1,000 24,840 4,129 4,129 100,000 8,452 8,452 100,000 16,898 16,898 100,000
17 1,000 27,132 3,974 3,974 100,000 8,796 8,796 100,000 18,726 18,726 100,000
18 1,000 29,539 3,738 3,738 100,000 9,078 9,078 100,000 20,687 20,687 100,000
19 1,000 32,066 3,411 3,411 100,000 9,285 9,285 100,000 22,791 22,791 100,000
20 1,000 34,719 2,983 2,983 100,000 9,403 9,403 100,000 25,051 25,051 100,000
@ 65 1,000 69,761 0 0 0 1,635 1,635 100,000 61,649 61,649 100,000
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
24.
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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
80
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
FEMALE 35 NEVERSMOKE
JOINT EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 512 0 100,512 555 0 100,556 599 0 100,600
2 1,000 2,153 1,151 169 101,151 1,275 293 101,276 1,405 423 101,406
3 1,000 3,310 1,768 687 101,768 2,014 933 102,014 2,281 1,200 102,281
4 1,000 4,526 2,360 1,190 102,361 2,769 1,598 102,769 3,230 2,060 103,231
5 1,000 5,802 2,928 1,721 102,928 3,541 2,335 103,541 4,261 3,055 104,262
6 1,000 7,142 3,468 2,407 103,469 4,328 3,267 104,329 5,379 4,318 105,380
7 1,000 8,549 3,982 3,065 103,982 5,130 4,213 105,131 6,592 5,675 106,592
8 1,000 10,027 4,466 3,769 104,466 5,945 5,248 105,945 7,906 7,209 107,907
9 1,000 11,578 4,923 4,466 104,923 6,775 6,298 106,775 9,334 8,857 109,335
10 1,000 13,207 5,348 5,348 105,348 7,615 7,615 107,616 10,882 10,882 110,883
11 1,000 14,917 5,740 5,740 105,741 8,464 8,464 108,465 12,561 12,561 112,561
12 1,000 16,713 6,090 6,090 106,091 9,313 9,313 109,314 14,373 14,373 114,373
13 1,000 18,599 6,396 6,396 106,396 10,158 10,158 110,158 16,328 16,328 116,328
14 1,000 20,579 6,654 6,654 106,655 10,995 10,995 110,996 18,438 18,438 118,439
15 1,000 22,657 6,863 6,863 106,863 11,822 11,822 111,822 20,715 20,715 120,715
16 1,000 24,840 7,020 7,020 107,020 12,633 12,633 112,633 23,172 23,172 123,173
17 1,000 27,132 7,125 7,125 107,126 13,429 13,429 113,429 25,828 25,828 125,829
18 1,000 29,539 7,175 7,175 107,175 14,202 14,202 114,202 28,697 28,697 128,697
19 1,000 32,066 7,164 7,164 107,165 14,947 14,947 114,947 31,795 31,795 131,795
20 1,000 34,719 7,087 7,087 107,088 15,654 15,654 115,654 35,137 35,137 135,137
@ 65 1,000 69,761 767 767 100,768 17,776 17,776 117,776 85,992 85,992 185,993
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
24.
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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
81
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
FEMALE 35 NEVERSMOKE
JOINT EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 384 0 100,384 424 0 100,424 463 0 100,464
2 1,000 2,153 893 0 100,894 1,001 19 101,002 1,114 132 101,464
3 1,000 3,310 1,372 291 101,372 1,581 500 101,581 1,808 728 101,809
4 1,000 4,526 1,818 648 101,819 2,160 989 102,161 1,548 1,377 102,548
5 1,000 5,802 2,230 1,023 102,230 2,736 1,529 102,736 3,333 2,127 103,334
6 1,000 7,142 2,640 1,543 102,605 3,305 2,243 103,305 4,167 3,106 104,168
7 1,000 8,549 2,937 2,020 102,937 3,861 2,945 103,862 5,048 4,131 105,048
8 1,000 10,027 3,228 2,531 103,229 4,405 3,708 104,405 5,981 5,284 105,981
9 1,000 11,578 3,476 2,999 103,476 4,932 4,455 104,932 6,967 6,491 106,968
10 1,000 13,207 3,681 3,681 103,681 5,441 5,441 105,441 8,013 8,013 108,014
11 1,000 14,917 3,839 3,839 103,839 5,927 5,927 105,927 9,120 9,120 109,121
12 1,000 16,713 3,948 3,948 103,948 6,385 6,385 106,386 10,290 10,290 110,290
13 1,000 18,599 4,004 4,004 104,005 6,811 6,811 106,812 11,525 11,525 111,526
14 1,000 20,579 4,006 4,006 104,006 7,199 7,199 107,200 12,829 12,829 112,829
15 1,000 22,657 3,948 3,948 103,948 7,542 7,542 107,543 14,202 14,202 114,202
16 1,000 24,840 3,826 3,826 103,826 7,833 7,833 107,833 15,646 15,646 115,646
17 1,000 27,132 3,632 3,632 103,632 8,060 8,060 108,060 17,158 17,158 117,158
18 1,000 29,539 3,357 3,357 103,357 8,208 8,208 108,209 18,734 18,734 118,734
19 1,000 32,066 2,990 2,990 102,990 8,263 8,263 108,264 20,368 20,368 120,368
20 1,000 34,719 2,523 2,523 102,523 8,211 8,211 108,212 22,055 22,055 122,055
@ 65 1,000 69,761 0 0 0 0 0 0 40,186 40,186 140,186
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
24.
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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
82
<PAGE>
VERSION B
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
One American Row MAIL OPERATIONS (VPMO):
Hartford, Connecticut PO Box 8027
Boston, MA 02266-8027
VARIABLE LIFE INSURANCE POLICY
PROSPECTUS
May 1, 1998
This Prospectus describes a Flexible Premium Variable Life Insurance Policy
(the "Policy"), offered by Phoenix Home Life Mutual Insurance Company
("Phoenix"). An applicant chooses the amount of Issue Premium desired and it is
then shown in the Policy. Generally, the minimum Issue Premium Phoenix will
accept is 1/6 of the Planned Annual Premium. Phoenix may, in some cases, accept
less than that amount. The amount and payment frequency of planned premiums are
as shown in the Policy. If too much is paid in premium in the early Policy
Years, the Policy could become a modified endowment contract. This would cause
loans and other amounts received under the Policy to be subject to tax and/or
penalties. Currently, Phoenix notifies a Policyowner when a Policy becomes a
modified endowment contract.
Premium payments are allocated to one or more of the Subaccounts of the
Phoenix Home Life Variable Universal Life Account (the "VUL Account") or to the
Guaranteed Interest Account ("GIA"), as specified in the applicant's application
for insurance. The VUL Account is divided into Subaccounts, each of which
invests in a corresponding series of the Phoenix Edge Series Fund or Wanger
Advisors Trust (each the "Fund" or collectively, the "Funds"). For certain
Policyowners, the Issue Premium is first allocated to the Money Market
Subaccount before being allocated according to the instructions in the
application.
There is no guaranteed minimum Policy Value except for that portion of
Policy Value invested in the GIA, which has a 4% minimum interest rate
guarantee. The Policy Value not invested in the GIA will vary to reflect the
investment experience of the Subaccounts of the VUL Account to which premiums
have been allocated. A Policyowner bears the investment risk for all amounts so
allocated. 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 death benefit under the Policy equals the Policy's face amount on the
date of the Insured's death or, if greater, the Policy Value on the date of
death increased by the applicable percentage set forth in the Policy. Other
death benefit options also are available.
A Policyowner may cancel the Policy within 10 days (or longer in some
states), after the Policyowner receives it or 10 days after Phoenix mails or
delivers a written notice of withdrawal right to the Policyowner, or within 45
days of completing the application, whichever is latest.
IT MAY NOT BE ADVANTAGEOUS TO PURCHASE A POLICY AS A REPLACEMENT FOR AN
EXISTING LIFE INSURANCE POLICY OR ANNUITY CONTRACT. YOU SHOULD RECOGNIZE THAT A
POLICY THAT HAS BEEN IN EXISTENCE FOR A PERIOD OF TIME MIGHT HAVE CERTAIN
ADVANTAGES TO YOU OVER A NEW POLICY. ON THE OTHER HAND, THE PROPOSED POLICY MAY
OFFER NEW FEATURES WHICH ARE MORE IMPORTANT TO YOU.
IT IS IN YOUR BEST INTEREST TO HAVE ADEQUATE INFORMATION BEFORE A DECISION
TO REPLACE YOUR PRESENT LIFE INSURANCE COVERAGE BECOMES FINAL SO THAT YOU MAY
UNDERSTAND THE BASIC FEATURES OF BOTH THE PROPOSED POLICY AND YOUR EXISTING
COVERAGE.
IF YOU ARE REPLACING AN ANNUITY CONTRACT, IT IS IMPORTANT FOR YOU TO
UNDERSTAND THE FUNDAMENTAL DIFFERENCES BETWEEN ANNUITIES AND LIFE INSURANCE AND
HOW THEY ARE TREATED DIFFERENTLY UNDER THE TAX LAWS.
IN ALL CASES IT IS IMPORTANT TO KNOW IF THE REPLACEMENT WILL RESULT IN
CURRENT TAX LIABILITY.
This Prospectus provides information about the Policy that prospective
investors should know before investing and 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.
THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION OR CREDIT UNION AND ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY. INVESTMENTS IN
THE POLICIES ARE SUBJECT TO INVESTMENT RISK INCLUDING THE FLUCTUATION OF POLICY
VALUES AND THE POSSIBLE LOSS OF PRINCIPAL INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") NOR HAS THE SEC 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 ................................................. 3
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
Premium Payment ...................................... 7
Allocation of Issue Premium .......................... 8
Right to Cancel Period ............................... 8
Temporary Insurance Coverage ......................... 8
Transfer of Policy Value ............................. 9
Determination of Subaccount Values ................... 9
Death Benefit ........................................ 10
Surrenders ........................................... 10
Policy Loans ......................................... 11
Lapse ................................................ 11
Payment of Premiums During Period of Disability ...... 12
Additional Insurance Options ......................... 12
Additional Rider Benefits ............................ 12
INVESTMENTS OF THE VUL ACCOUNT .......................... 13
Participating Mutual Funds ........................... 13
Investment Advisers................................. 14
Services of the Advisers............................ 14
Reinvestment and Redemption .......................... 15
Substitution of Investments .......................... 15
CHARGES AND DEDUCTIONS .................................. 15
Monthly Deduction .................................... 15
Premium Taxes ........................................ 15
Mortality and Expense Risk Charge .................... 16
Investment Management Charge ......................... 16
Other Charges ........................................ 16
GENERAL PROVISIONS ...................................... 17
Postponement of Payments ............................. 17
Payment by Check .................................. 17
The Contract ......................................... 17
Suicide .............................................. 17
Incontestability ...................................... 17
Change of Owner or Beneficiary ........................ 17
Assignment ............................................ 17
Misstatement of Age or Sex ............................ 17
Surplus ............................................... 17
PAYMENT OF PROCEEDS ...................................... 17
Surrender and Death Benefit Proceeds .................. 17
Payment Options ....................................... 18
FEDERAL TAX CONSIDERATIONS ............................... 18
Introduction .......................................... 18
Phoenix's Tax Status ................................ 19
Policy Benefits ....................................... 19
Business-Owned Policies................................ 19
Modified Endowment Contracts .......................... 19
Limitations on Unreasonable Mortality
and Expense Charges ................................ 20
Qualified Plans ....................................... 20
Diversification Standards ............................. 20
Change of Ownership or Insured or Assignment .......... 21
Other Taxes ........................................... 21
VOTING RIGHTS ............................................ 21
The Funds ............................................. 21
Phoenix ............................................... 21
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX .......... 21
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ................ 22
SALES OF POLICIES ........................................ 22
STATE REGULATION ......................................... 23
REPORTS .................................................. 23
LEGAL PROCEEDINGS ........................................ 23
LEGAL MATTERS ............................................ 23
REGISTRATION STATEMENT ................................... 23
YEAR 2000 ISSUE........................................... 23
FINANCIAL STATEMENTS ..................................... 23
APPENDIX A ............................................... 68
APPENDIX B ............................................... 69
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.
FUND(S): The Phoenix Edge Series Fund and Wanger Advisors Trust.
GENERAL ACCOUNT: The general asset account of Phoenix.
GUARANTEED INTEREST ACCOUNT (GIA): An allocation option under which amounts
deposited are guaranteed to earn a fixed rate of interest. Excess interest also
may be credited, in the sole discretion of Phoenix.
IN FORCE: Conditions under which the coverage under a Policy is in effect and
the Insured's life remains insured.
INSURED: The person upon whose life the Policy is issued.
IN WRITING (WRITTEN REQUEST): In a written form satisfactory to Phoenix and
delivered to VPMO.
ISSUE PREMIUM: The premium payment made in connection with the issue of the
Policy.
MATURITY DATE: The latest date that the Policy will terminate.
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.
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 (the "NYSE"), in which case it will be the next Valuation Date.
PHOENIX: Phoenix Home Life Mutual Insurance Company, Hartford, Connecticut.
PLANNED ANNUAL PREMIUM: The premium amount that the Policyowner agrees to pay
each Policy Year. It must be at least equal to the minimum 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.
POLICYOWNER (OWNER): The Owner of a Policy.
POLICY VALUE: The sum of a Policy's share in the values of each Subaccount of
the VUL Account plus the Policy's share in the values of the GIA.
POLICY YEAR: The first Policy Year is the 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: Amounts allocated to Subaccounts on a proportionate basis are
allocated by increasing (or decreasing) a Policy's share in the value of the
affected Subaccounts 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 Variable Products Mail Operation Division of Phoenix that
receives and processes incoming mail for Variable Products Operations.
VUL ACCOUNT: Phoenix Home Life Variable Universal Life Account.
VULA: Variable and Universal Life Administration Division of Phoenix.
SUMMARY
- ------------------------------------------------------------------------------
1. WHAT IS THE DIFFERENCE BETWEEN THE POLICY AND A CONVENTIONAL FIXED BENEFIT
LIFE INSURANCE POLICY?
Like conventional fixed benefit life insurance, so long as the Policy
remains In Force, the Policy will provide for: (1) the payment of a death
benefit to a Beneficiary upon the Insured's death; (2) the accumulation of cash
value; and (3) surrender rights and Policy loan privileges.
The Policy differs from conventional fixed benefit life insurance by
allowing Policyowners to allocate premiums to one or more Subaccounts of the VUL
Account or to the GIA. Each Subaccount invests exclusively in a designated
portfolio of the Fund. Also, under the Policy, the Policy Value invested in the
VUL Account is not guaranteed and may increase or decrease depending upon
3
<PAGE>
the investment experience of the Subaccounts of the VUL Account. Accordingly,
the Policyowner bears the investment risk of any depreciation in value of the
underlying assets but reaps the benefits of any appreciation in value. See
"Policy Value."
In addition, unlike conventional fixed benefit life insurance, a Policyowner
also has the flexibility to make additional premium payments and to thereby
adjust the Policy Value. However, unlike conventional fixed benefit life
insurance, the Policy does not require a Policyowner to adhere to a fixed
premium payment schedule. Moreover, after the payment of the Issue Premium, the
failure to make additional premium payments will not in itself cause the Policy
to lapse. Conversely, the payment of additional premiums will not guarantee that
the Policy will remain In Force. Generally, lapse will occur when the Cash
Surrender Value is insufficient to pay certain charges deducted on the Monthly
Calculation Day, and a grace period expires without payment of the additional
amount required. See "Lapse."
If a Whole Life Exchange Option Rider is attached to the Policy, the Policy
may be exchanged for a fixed benefit whole life policy. See "Additional Rider
Benefits."
2. IS THERE A GUARANTEED ACCOUNT OPTION?
Yes. A Policyowner may elect to have premium payments allocated to the GIA.
Amounts allocated to the GIA earn a fixed rate of interest and Phoenix also may,
in its sole discretion, credit excess interest. See Appendix A.
3. WHAT IS THE DEATH BENEFIT UNDER THE POLICY?
The Policy provides for the payment of a benefit upon the death of the
Insured. Upon application for a Policy, an applicant designates an Issue
Premium. The Policy indicates the face amount of insurance. The death benefit
will equal the face amount on the date of the Insured's death or, if greater,
the Policy Value on the date of the Insured's death increased by the applicable
percentage set forth in the Policy. If the enhanced death benefit option is
selected, the death benefit will equal the face amount on the date of the
Insured's death plus the Policy Value or, if greater, the Policy Value on the
date of the Insured's death increased by the applicable percentage set forth in
the Policy. Guaranteed death benefit and living benefits riders also are
available. See "Death Benefit."
4. HOW LONG WILL THE POLICY REMAIN IN FORCE?
The Policy will lapse only when the Cash Surrender Value is insufficient to
pay the monthly deduction (see "Charges and Deductions--Monthly Deductions"),
and a grace period expires without payment of the additional amount required. In
this respect, the Policy differs in two important respects from a conventional
life insurance Policy. First, the failure to pay additional premiums will not
automatically cause the Policy to lapse. Second, the payment of premiums of any
prespecified amount does not guarantee that the Policy will remain In Force
until the Maturity Date. A rider is available to ensure that premium payments
will continue during a period of disability.
5. WHAT CHARGES ARE THERE IN CONNECTION WITH THE POLICY?
MONTHLY DEDUCTION: A deduction is made each Policy Month from the Policy
Value (excluding the value of the loaned portion of the GIA) to pay the cost of
insurance provided under the Policy; the cost of any rider benefits provided;
any unpaid balance of the $150 issue expense charge; and an administrative
charge as shown on the Schedule Page of the Policy. The administrative charge
may vary but in no event will it exceed $10 per month. Currently, the
administrative charge is $5 per month. See "Charges and Deductions."
OTHER CHARGES: A fee equal to the lesser of $25 or 2% of the partial
surrender amount paid is deducted from the Policy Value for each partial
surrender. A partial surrender charge equal to a pro rata portion of the
applicable surrender charge that would apply to a full surrender, determined by
applying a formula, also is assessed against the VUL Account Subaccounts or the
GIA when a partial surrender is made.
No charges are currently made from the VUL Account or the GIA for federal or
state income taxes. If Phoenix determines that such taxes may be imposed, it may
make deductions from the VUL Account to pay these taxes.
Phoenix charges each Subaccount of the VUL Account the daily equivalent of
0.80% on an annual basis of the current value of the Subaccount's net assets for
its assumption of certain mortality and expense risks incurred in connection
with the Policy.
Premium amounts also are reduced by any applicable state premium tax based
on the Policyowner's last known address on record with VULA and, for payments
made during a grace period, by the amount needed to cover any monthly deductions
made during the grace period.
In addition, certain charges are deducted from the assets of the Funds. For
investment advisory services, each Series of a Fund pays the adviser a separate
monthly fee calculated on the basis of its average daily net assets during the
year. See "Charges and Deductions--Other Charges."
In addition, each Series pays a portion or all of its other operating
expenses other than the management fees: the Enhanced Index Series will pay up
to .10%; the Growth, Multi-Sector, Allocation, Money Market and Balanced Series
will pay up to .15%; the Real Estate, Theme and Asia Series will pay up to .25%;
the International Series will pay up to .40%; the Wanger U.S. Small Cap Series
will pay up to .50%; and the Wanger International Small Cap Series will pay up
to .60% of its average net assets annually.
See "Charges and Deductions."
6. IS THERE A RIGHT TO CANCEL PERIOD?
Yes. The Policyowner may cancel the Policy within 10 days after the
Policyowner receives it (or longer in some states), or 10 days after Phoenix
mails or delivers a written notice of withdrawal right to the Policyowner, or
within 45 days of completing the application, whichever is latest.
7. HOW ARE PREMIUMS ALLOCATED?
If the applicant elects the Temporary Money Market Allocation Amendment in
the application, Phoenix will allocate the entire Issue Premium less any
applicable charges to the Money Market Subaccount of the VUL Account. Phoenix
requires this election for all applicants in certain states and for applicants
in certain states who indicate on their application that they intend the Policy
to replace
4
<PAGE>
existing insurance. At the expiration of the Right to Cancel Period for such
Policyowners, the Policy Value will be allocated among the Subaccounts of the
VUL Account or to the GIA in accordance with the Policyowner's allocation
instructions in the application for insurance. All other Policyowners will have
their Issue Premium less any applicable charges allocated according to the
instructions in the application on the date it is received without first having
the premium placed in the Money Market Subaccount. The Policy Value may be
allocated among the available Subaccounts of the VUL Account, each of which
invests in shares of a designated portfolio of the Funds, or to the GIA.
8. AFTER THE INITIAL ALLOCATION, MAY I CHANGE THE ALLOCATION OF POLICY VALUE?
Yes. A Policyowner may transfer amounts among the Subaccounts of the VUL
Account or the GIA. Only one transfer per Policy Year is permitted from the
unloaned portion of the GIA. The amount of that transfer is limited to the
higher of $1,000 or 25% of the value of the Policy in the unloaned portion of
the GIA. Also, Phoenix reserves the right to require that transfers be made by
Written Request. Phoenix further reserves the right to permit transfers of less
than $500 only if the entire balance in the Subaccount of the VUL Account or the
GIA is transferred. A systematic transfer program also is available. See
"Transfer of Policy Value."
9. MAY THE POLICY BE SURRENDERED?
Yes. A Policyowner may totally surrender the Policy at any time and receive
the Cash Surrender Value. Subject to certain limitations, the Policyowner also
may partially surrender the Policy at any time prior to the Maturity Date. In
the future, Phoenix may set a minimum partial surrender amount, not to exceed
$500. See "Surrenders--Partial Surrenders." A partial surrender will result in a
decrease in the death benefit under the Policy. See "Death Benefit." If the
Policy is totally or partially surrendered during the first 10 Policy Years, a
surrender charge will apply. See "Surrender Charge." In addition, there may be
certain tax consequences as the result of a surrender. For example, a Policy may
be a modified endowment contract if the amount of premium paid during the first
seven Policy Years is more than the amount that would have been paid if the
Policy had provided for paid-up benefits after the payment of seven level annual
premiums. Distributions such as loans and full or partial surrenders under a
modified endowment contract may be taxable income to the extent they exceed the
premiums paid. If such income is distributed before the Policyowner attains age
59 1/2, a 10% penalty tax may be imposed. See "Federal Tax Considerations."
10. WHAT IS THE POLICY'S LOAN PRIVILEGE?
A Policyowner may obtain Policy loans in an amount up to 90% of the result
of subtracting the remaining surrender charge from the Policy Value. The
interest rate on a loan is at an effective annual rate as stated in the Policy,
compounded daily and payable on each Policy Anniversary in arrears. The
requested loan amount is transferred from the VUL Account to the loaned portion
of the GIA and is credited with interest at an effective annual rate as stated
in the Policy. Phoenix reserves the right not to allow loans of less than $500
unless the loans are to pay premiums on another policy issued by Phoenix. See
"The Policy--Policy Loans."
The proceeds of Policy loans may be subject to federal income tax under
certain circumstances. See "Federal Tax Considerations."
11. HOW ARE INSURANCE BENEFITS PAID?
Surrender and death benefits under the Policy may be paid in a lump sum or
under one of the payment options set forth in the Policy. See "Payment Options."
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 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 Mortality and
Expense Risk charge on the Account level.
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, 1997.
Assumptions:
Value of hypothetical pre-existing account with
exactly one Unit at the beginning of the period:................. 1.439995
Value of the same account (excluding capital changes) at the
end of the seven-day period:..................................... 1.441014
Calculation:
Ending account value ............................................ 1.441014
Less beginning account value .................................... 1.439995
Net change in account value ..................................... 0.001019
Base period return:
(adjusted change/beginning account value) ....................... 0.000708
Current yield = return x (365/7) = ................................ 3.69%
Effective yield = [(1 + return)(365/7)] - 1 = ....................... 3.76%
5
<PAGE>
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time, or other investment companies, due to charges which
will be deducted on the Account level.
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 to the value of the investment at the end
of the period, assuming the reinvestment of all distributions at net asset value
and the deduction of the Mortality and Expense Risk, Issue Expense and Monthly
Administrative charges.
For those Subaccounts within the VUL Account that have not been available
for one of the quoted periods, the average annual total return quotations will
show the investment performance such Subaccount would have achieved (reduced by
the applicable charges) had it been available to invest in shares of the Fund
for the period quoted.
Below are quotations of average annual total return calculated as described
above. 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 12/31/97
-----------------------------
COMMENCE- 10 LIFE OF
SUBACCOUNT MENT DATE 1 YEAR 5 YEARS YEARS FUND
- ---------- --------- ------ ------- ----- ----
Multi-Sector..... 1/1/83 7.92% 9.31% 9.27% 9.59%
Balanced......... 5/1/92 14.61% 9.38% N/A 9.86%
Allocation....... 9/17/84 17.34% 9.46% 10.63% 11.73%
Growth........... 1/1/83 17.67% 14.94% 15.94% 17.11%
International.... 5/1/90 8.87% 13.34% N/A 7.32%
Money Market..... 10/10/82 2.17% 2.79% 4.12% 4.96%
Real Estate...... 5/1/95 18.61% N/A N/A 25.23%
Theme............ 1/29/96 13.86% N/A N/A 11.87%
Asia............. 9/17/96 (34.41%) N/A N/A (28.08%)
Enhanced Index... 7/15/97 N/A N/A N/A 3.57%
U.S. Small Cap... 5/1/95 25.80% N/A N/A 32.34%
Int'l. Small Cap. 5/1/95 (4.27%) N/A N/A 21.28%
ANNUAL TOTAL RETURN*
--------------------
MULTI- ALLO- INTER- MONEY
YEAR SECTOR BALANCED CATION GROWTH NATIONAL MARKET
- ---- ------ -------- ------ ------ -------- -------
1983.... 5.06% N/A N/A 31.71% N/A 7.36%
1984.... 10.34% N/A (1.33%) 9.67% N/A 9.23%
1985.... 19.53% N/A 26.20% 33.71% N/A 7.06%
1986.... 18.22% N/A 14.65% 19.39% N/A 5.56%
1987.... 0.18% N/A 11.55% 5.97% N/A 5.55%
1988.... 9.50% N/A 1.42% 2.98% N/A 6.49%
1989.... 6.85% N/A 18.37% 34.43% N/A 7.93%
1990.... 4.43% N/A 5.05% 3.21% (8.91%) 7.41%
1991.... 18.54% N/A 28.14% 41.46% 18.67% 5.03%
1992.... 9.12% 8.77% 9.68% 9.30% (13.61%) 2.65%
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%
1997.... 10.21% 17.00% 19.78% 20.12% 11.16% 4.35%
REAL ENHANCED U.S. INT'L.
YEAR ESTATE THEME ASIA INDEX SMALL CAP SMALL CAP
1995.... 17.19%** N/A N/A N/A 16.01%** 33.96%**
1996.... 32.06% 9.55%** (0.06%)** N/A 45.64% 31.15%
1997.... 21.09% 16.25% (32.94%) 5.46%** 28.41% (2.24%)
* Sales Charges have not been deducted from the Annual Total Return.
** Since Inception.
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 returns, 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. ("Lipper"), CDA
Investment Technologies, Inc. ("CDA"), 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, Barron's, 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
6
<PAGE>
stock and bond market performance, such as the S&P 500, Dow Jones Industrial
Average, Europe Australia Far East Index (EAFE), Consumer 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.
PHOENIX AND THE VUL ACCOUNT
- -------------------------------------------------------------------------------
PHOENIX
Phoenix is a mutual life insurance company originally chartered in
Connecticut in 1851 and redomiciled to New York in 1992. Its executive office is
at One American Row, Hartford, Connecticut 06115 and its main administrative
office is at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. Its
New York principal office is at 10 Krey Boulevard, East Greenbush, New York
12144. Phoenix is the nation's 9th largest mutual life insurance company and has
consolidated assets of $18.5 billion. Phoenix sells insurance policies and
annuity contracts through its own field force of full time agents and through
brokers. Its operations are conducted in all 50 states, the District of
Columbia, Canada and Puerto Rico.
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 (the "1940 Act"), as amended, and it
meets the definition of a "separate account" under that Act. Such registration
does not involve supervision of the management of the VUL Account or Phoenix by
the 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 the Funds allocable to one of the available Series, each 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 Funds. 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 6%. Interest on the unloaned portion of the GIA will be
credited at an effective annual rate of not less than 4%.
Biweekly, 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, likewise, will remain in effect
for a guarantee period of one full year from the date the new rate is applied.
For more complete information concerning the GIA, see Appendix A.
THE POLICY
- -------------------------------------------------------------------------------
INTRODUCTION
The Policy is a variable life insurance policy. 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 portfolio 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 up to the age of 75 is eligible to be insured under a newly
purchased Policy after providing acceptable evidence of insurability. A person
can purchase a Policy to insure the life of another person provided that the
Policyowner has an insurable interest in the life of the Insured, and the
Insured consents.
PREMIUM PAYMENT
The minimum Issue Premium for a Policy is generally 1/6 of the Planned
Annual Premium. The Issue Premium is due on the Policy Date. The Insured must be
alive when the Issue Premium is paid. Thereafter, the amount and payment
frequency of planned premiums are as shown on the Schedule Page of the Policy.
All premiums are payable in advance to VPMO, except that the Issue Premium may
be
7
<PAGE>
paid to an authorized agent of Phoenix for forwarding to the Underwriting
Department of Phoenix.
Any premium payments will be reduced by the premium tax charge applicable in
the state of the Policyowner's last known address on record with VULA. The Issue
Premium also will be reduced by the issue expense charge of $150 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. The allocation schedule for
premium payments may be changed by calling VULA or writing to VPMO. Allocations
to the VUL Account Subaccounts or to the GIA must be expressed in terms of whole
percentages.
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.
A Policyowner may increase or decrease the planned premium amount or payment
frequency at any time by Written Request to VPMO. Phoenix reserves 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.
A Policyholder also may elect a Waiver of Premium Rider. This rider provides
for the waiver of certain premium payments under the Policy under certain
conditions during a period of total disability of the Insured. Under its terms,
the specified premium will be waived upon Phoenix's receipt of proof that the
Insured is totally disabled and that the disability occurred while the rider was
In Force.
The Policy contains a total premium limit as shown on the Schedule Page.
This limit is applied to the sum of all premiums paid under the Policy. If the
total premium limit is exceeded, the Policyowner will receive the excess, with
interest at an annual rate of not less than 4%, not later than 60 days after the
end of the Policy Year in which the limit was exceeded. The Policy Value will
then 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 the Policyowner requests otherwise In Writing. The
total premium limit may be exceeded if additional premium is needed to prevent
lapse or if Phoenix determines that additional premium would be permitted by
federal laws or regulations.
A Policyowner may authorize his bank to draw $25 or more from his personal
checking account monthly to purchase Units in any available Subaccount. The
amount the Policyowner designates will be automatically invested in the
Subaccount of his choice on the date the bank draws on his account.
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 ISSUE PREMIUM
Phoenix will generally allocate the Issue Premium less applicable charges to
the VUL Account or to the GIA upon receipt of a completed application, in
accordance with the allocation instructions in the application for a Policy.
However, Policies issued in certain states, and Policies issued in certain
states pursuant to applications which state the Policy is intended to replace
existing insurance, are issued with a Temporary Money Market Allocation
Amendment. Under this Amendment, Phoenix temporarily allocates 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 the applicant's allocation instructions in the
application for insurance.
RIGHT TO CANCEL PERIOD
A Policy may be returned by mailing or delivering it to Phoenix within 10
days after the Policyowner receives it (or longer in some states); within 10
days after Phoenix mails or delivers a written notice of withdrawal right to the
Policyowner; or within 45 days after the applicant signs the application for
insurance, whichever occurs latest (the "Right to Cancel Period"). The returned
Policy is treated as if Phoenix never issued the Policy and, except for Policies
issued with a Temporary Money Market Allocation Amendment, Phoenix will return
the sum of the following as of the date Phoenix receives the returned Policy:
(i) the then current Policy Value less any unpaid loans and loan interest; plus
(ii) any monthly deductions, partial surrender fees, 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.
Phoenix reserves the right to disapprove an application for processing
within seven days of receipt at Phoenix of the completed application for
insurance, in which event Phoenix will return the premium paid. Even after
approval of the application for processing, Phoenix reserves the right to
decline issuance of the Policy, in which event Phoenix will refund the applicant
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, Phoenix issues 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.
8
<PAGE>
TRANSFER OF POLICY VALUE
SYSTEMATIC TRANSFER PROGRAM
A Policyowner may elect to automatically transfer funds 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. A Policyowner must have an
initial value of $1,000 in the GIA or the Subaccount that funds will be
transferred from ("Sending Subaccount") and if the value in that Subaccount or
the GIA drops below the elected transfer amount, the entire remaining balance
will be transferred and no more systematic transfers will be processed. Funds
may be transferred from only one Sending Subaccount or the GIA, but may be
allocated to multiple Subaccounts ("Receiving Subaccounts"). Under the
Systematic Transfer Program, Policyowners may make more than one transfer per
Policy Year from the GIA, in approximate 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 VULA at (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 business day.
NON-SYSTEMATIC TRANSFERS
Transfers among available Subaccounts or the GIA and changes in premium
payment allocations may be requested In Writing or by calling (800) 892-4885,
between the hours of 8:30 a.m. and 4:00 p.m. Eastern Time and will be executed
on the date the request is received at VPMO, except as noted below. Unless the
Policyowner elects In Writing not to authorize telephone transfers or allocation
changes, telephone transfer orders and allocation changes also will be accepted
on behalf of the Policyowner from his or her registered representative. Phoenix
and Phoenix Equity Planning Corporation ("PEPCO") will employ reasonable
procedures to confirm that telephone instructions are genuine. They will require
verification of account information and will record telephone instructions on
tape. All telephone transfers will be confirmed In Writing to the Policyowner.
To the extent that procedures reasonably designed to prevent unauthorized
transfers are not followed, Phoenix and PEPCO may be liable for following
telephone instructions for transfers that prove to be fraudulent. However, the
Policyowner would bear the risk of loss resulting from instructions entered by
an unauthorized third party that Phoenix and PEPCO reasonably believe to be
genuine. These telephone transfer 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.
Phoenix reserves 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.
Phoenix reserves 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. It further reserves the
right to require that the entire balance of a Subaccount or the GIA be
transferred if the value of the Policy's share in that Subaccount would,
immediately after the transfer, be less than $500.
Unless Phoenix agrees otherwise or the Systematic Transfer Program has been
elected, a Policyowner may make only one transfer per Policy Year from the
unloaned portion of the GIA and the amount that may be transferred 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. Non-systematic transfers from the
unloaned portion of the GIA will be effectuated on the date of receipt by VPMO.
For policies issued with the Temporary Money Market Allocation Amendment,
transfers may not be made until termination of the Right to Cancel Period.
Phoenix reserves the right to limit the number of Subaccounts you may elect
to a total of 18 at any one time and/or over the life of the Policy unless
required to be less to comply with changes in federal and/or state regulation,
including tax, securities and insurance law.
Because excessive trading can hurt Fund performance and harm Policyowners,
Phoenix reserves the right to temporarily or permanently terminate exchange
privileges or reject any specific order from anyone whose transactions seem to
follow a timing pattern, including those who request more than one exchange out
of a Subaccount within any 30-day period. Phoenix will not accept batch transfer
instructions from registered representatives (acting under powers of attorney
for multiple Policyowners), unless the registered representative's broker-dealer
firm and Phoenix have entered into a third party transfer service agreement.
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
9
<PAGE>
excluding the net value of any transactions during the current
Valuation Period.
(B) The amount of any dividend (or, if applicable, any capital gain
distribution) received by the Subaccount if the "ex-dividend" date for
shares of the Fund occurs during the current Valuation Period.
(C) The value of the assets in the Subaccount as of the just prior
Valuation Date, including accrued net investment income and realized
and unrealized capital gains and losses, and including the net value 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 1) equals the Policy's face amount on the
date of the Insured's death or, if greater, the minimum death benefit on the
date of death. Under Option 2, the death benefit equals the Policy's face amount
on the date of the 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
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 1 will apply.
GUARANTEED DEATH BENEFIT OPTION
For Policies with a face amount of at least $50,000, a guaranteed death
benefit rider may be purchased. Under this Policy rider, if a Policyowner pays
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 increases or 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.
LIVING BENEFITS OPTION
In the event of a terminal illness of the Insured, an accelerated payment of
up to 75% of the Policy's death benefit (up to a maximum of $250,000) is
available if a Living Benefits Rider has been purchased. The minimum face amount
of the Policy after any such accelerated benefit payment is $10,000.
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
A Policyowner may request a decrease in face amount at any time after the
first Policy Year. Unless Phoenix agrees otherwise, the decrease must at least
equal $10,000 and the face amount remaining after the decrease must at least
equal $25,000. All face amount decrease requests must be In Writing and will be
effective on the first Monthly Calculation Day following the date Phoenix
approves the request. A partial surrender charge will be deducted from the
Policy Value based on the amount of the decrease, upon a decrease in face
amount. 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 Insured and while the Policy is In
Force, the Policyowner may partially or fully surrender the Policy by sending a
written release and surrender in a form satisfactory to VPMO, along with the
Policy if Phoenix so requires. The amount available for surrender is the Cash
Surrender Value at the end of the Valuation Period during which the surrender
request is received at VPMO.
Upon partial or full surrender, Phoenix generally will pay the amount
surrendered to the Policyowner 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 VPMO, along with the written release and surrender of all claims in a form
satisfactory to Phoenix. A Policyowner may elect to have the amount paid in a
lump sum or under a payment option. See "Surrender Charge" and "Payment
Options."
PARTIAL SURRENDERS
A Policyowner may obtain a partial surrender of the Policy by requesting
that part of the Policy's Cash Surrender Value be paid. The Policyowner may do
this at any time during the lifetime of the Insured while the Policy is In Force
with a Written Request to VPMO. Phoenix reserves 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, Phoenix reserves the right to
require that as part of any partial surrender, the entire remaining balance in
that Subaccount or the GIA be surrendered.
10
<PAGE>
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 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
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 6%,
compounded daily and payable in arrears. At the end of each Policy Year and at
the time of any Debt repayment, interest credited to the loaned portion of the
GIA will be transferred to the unloaned portion of the GIA.
Debt may be repaid at any time during the lifetime of the Insured while the
Policy is In Force. Any Debt repayment received by Phoenix 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 such Account have not previously been repaid.
Otherwise, such balance will be transferred among the Subaccounts as the
Policyowner requests 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
Phoenix for the Policy will be applied directly to reduce the Debt unless
specified as a premium payment by the Policyowner. Until the Debt is fully
repaid, additional Debt repayments may be made at any time during the lifetime
of the Insured while the Policy is In Force.
Failure to repay a Policy loan or to pay loan interest will not terminate
the Policy 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.
The Policyowner will pay interest on the loan at an effective annual rate,
compounded daily and payable in arrears. For the first ten Policy Years or until
the Policyowner reaches age 65, whichever occurs first, the rate will be 8% and
thereafter the rate will be 7%. 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 the
Policyowner's 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 6% per annum,
which is 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 6% per annum, 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 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
monthly deduction. If on any Monthly Calculation Day during any subsequent
Policy Year, the Cash Surrender Value (which has become positive) is less than
the required monthly deduction, a grace period of 61 days will be allowed for
the payment of an amount equal to three times the required monthly deduction.
However, during the first five Policy Years or until the Cash Surrender Value
becomes positive for the first time, the Policy will not lapse as long as all
premiums planned at issue have been paid.
11
<PAGE>
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 Phoenix mailed
written notice to the Policyowner. If a premium payment for the additional
amount is received by Phoenix 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, Phoenix will deduct the premium tax and the
amount needed to cover any monthly deductions made during the grace period. If
the Insured dies during the grace period, the death benefit will equal the
amount of the death benefit immediately prior to the commencement of the grace
period.
PAYMENT OF PREMIUMS DURING PERIOD OF DISABILITY
A Policyholder also may elect a Waiver of Premium Rider. This rider provides
for the waiver of certain premium payments under the Policy under certain
conditions during a period of total disability of the Insured. Under its terms,
the specified premium will be waived upon Phoenix's receipt of proof that the
Insured is totally disabled and that the disability occurred while the rider was
In Force. The terms of this rider may vary by state.
ADDITIONAL INSURANCE OPTIONS
While the Policy is In Force and the Policyowner is insurable, the
Policyowner will have the option to purchase additional insurance on the same
Insured with the same guaranteed rates as the Policy without being assessed an
issue expense charge. Phoenix will require evidence of insurability and charges
will be adjusted for the Insured's new Attained Age and any change in risk
classification. However, if elected on the application, the Policyowners may, at
predetermined future dates, purchase additional insurance protection on the same
Insured without evidence of insurability. See "Purchase Protection Plan Riders."
In addition, once each Policy Year, a Policyowner may request an increase in
face amount. This request should be made within 90 days prior to the Policy
Anniversary and is subject to an issue expense charge of $3 per $1,000 of
increase in face amount, up to a maximum of $150, and to Phoenix's receipt of
adequate evidence of insurability. A Right to Cancel Period as described in "The
Policy" section of this Prospectus applies to each increase in face amount.
ADDITIONAL RIDER BENEFITS
A Policyowner may elect additional benefits under a Policy. These benefits
are cancellable by the Policyowner at any time. A charge will be deducted
monthly from your Policy Value for each additional rider benefit chosen except
where noted below. Riders listed below that specify "no charge" are
automatically included in your Policy. More details will be included in the form
of a Policy rider if any of these benefits is chosen. The following benefits are
currently available; however, additional riders may be available as described in
the Policy.
O DISABILITY WAIVER OF SPECIFIED PREMIUM RIDER
Phoenix waives the specified premium if the Insured becomes totally
disabled and the disability continues for at least six months. Premiums
will be waived to the Policy Anniversary nearest the Insured's 65th
birthday (provided that the disability continues), unless premiums have
been waived continuously during the entire five years prior to such date
in which case the waiver will continue beyond that date. The premium
will be waived upon Phoenix's receipt of notice that the Insured is
totally disabled and that the disability occurred while the rider was In
Force. The terms may vary by State.
O ACCIDENTAL DEATH BENEFIT RIDER
An additional death benefit will be paid if the Insured dies from bodily
injury that results from an accident if the Insured dies no later than
90 days after injury; and before the Policy Anniversary nearest the
Insured's 75th birthday.
O DEATH BENEFIT PROTECTION RIDER
The purchase of this rider provides that the death benefit will be
guaranteed. The amount of the guaranteed death benefit is equal to the
initial face amount, or the face amount that later may be increased or
decreased by the Policyholder provided that certain minimum premiums are
paid. Unless Phoenix agrees otherwise, the initial face amount and the
face amount remaining after any decrease must at least equal $50,000 and
the minimum issue age of the Insured is 20. Three (3) Death Benefit
Guarantee periods are available in all states except New York. The
minimum premium required to maintain the guaranteed death benefit is
based on the length of the guarantee period as elected on the
application. The three available guarantee periods are:
Level: Expiry Date of Death Benefit Guaranteed, the later of:
1 The Policy Anniversary nearest the Insured's 70th
birthday or the 7th Policy Year
2 The Policy Anniversary nearest the Insured's 80th
birthday or the 10th Policy Year
3 The Policy Anniversary nearest the Insured's 95th birthday.
Level 1 or 2 guarantees may be extended provided that the Policy's Cash
Surrender Value is sufficient and the Policyowner pays the new Minimum Required
Premium.
For Policies issued in New York, two guarantee periods are available:
1 The Policy Anniversary nearest the Insured's 75th birthday or the
10th Policy Year
2 The Policy Anniversary nearest the Insured's 95th birthday.
O FACE AMOUNT OF INSURANCE INCREASE RIDER
Under the terms of this rider, any time after the first Policy
Anniversary, a Policyholder may request an increase in the face amount of
insurance provided under the Policy. Requests for face amount increases
must be made In Writing, and Phoenix requires additional evidence of
insurability. The effective date of the increase will generally be the
Policy Anniversary following approval of the increase. The increase may
not be less than $25,000 and no increase will be permitted after the
Insured's age 75. The charge for the
12
<PAGE>
increase is $3 per thousand of face amount increase requested subject to
a maximum of $150. No additional monthly administration charge will be
assessed for face amount increases. Phoenix will deduct any charges
associated with the increase (the increases in cost of insurance
charges), from the Policy Value, whether or not the Policyowner pays an
additional premium in connection with the increase. The surrender charge
applicable to the Policy also will increase. At the time of the increase,
the Cash Surrender Value must be sufficient to pay the monthly deduction
on that date, or additional premiums will be required to be paid on or
before the effective date. Also, a new Right to Cancel Period (see "The
Policy--Right to Cancel Period") will be established for the amount of
the increase. For a discussion of possible implications of a material
change in the Policy resulting from the increase, see "Material Change
Rules." There is no charge for this rider.
O WHOLE LIFE EXCHANGE OPTION RIDER
This rider permits the Policyowner to exchange the Policy for a fixed
benefit whole life policy at the later of age 65 or Policy Year 15. There
is no charge for this rider.
O PURCHASE PROTECTION PLAN RIDER
Under this rider a Policyowner may, at predetermined future dates,
purchase additional insurance protection without evidence of
insurability.
O LIVING BENEFITS RIDER
Under certain conditions, in the event of the terminal illness of the
Insured, an accelerated payment of up to 75% of the Policy's death
benefit (up to a maximum of $250,000) is available. The minimum face
amount of the Policy after any such accelerated benefit payment is
$10,000. There is no charge for this rider. This benefit is available
only when the Disability Waiver of Specified Premium Rider is elected.
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: 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.
ENGEMANN NIFTY FIFTY ("NIFTY FIFTY") SERIES: The investment objective of the
Nifty Fifty Series is to seek long-term capital appreciation by investing in
approximately 50 different securities which, in the opinion of the Adviser,
offer the best potential for long term growth of capital. At least 75% of the
Series' assets will be invested in common stocks of high quality growth
companies. The remaining portion will be invested in common stocks of small
13
<PAGE>
corporations with rapidly growing earnings per share or common stocks believed
to be undervalued.
SENECA MID-CAP GROWTH ("SENECA MID-CAP") SERIES: The investment objective of
the Seneca Mid-Cap Series is to seek capital appreciation primarily through
investments in equity securities of companies that have the potential for above
average market appreciation. The Series seeks to outperform the Standard &
Poor's Mid-Cap 400 Index.
PHOENIX GROWTH AND INCOME ("GROWTH & INCOME") SERIES: The investment
objective of the Growth & Income Series is to seek dividend growth, current
income and capital appreciation by investing in common stocks. The Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
PHOENIX VALUE EQUITY ("VALUE") SERIES: The primary investment objective of
the Value Series is long-term capital appreciation, with a secondary investment
objective of current income. The Series seeks to achieve its objective by
investing in a diversified portfolio of common stocks that meet certain
quantitative standards that indicate above average financial soundness and
intrinsic value relative to price.
SCHAFER MID-CAP VALUE ("SCHAFER MID-CAP") SERIES: The primary investment
objective of the Schafer Mid-Cap Series is to seek long-term capital
appreciation, with current income as the secondary investment objective. The
Series will invest in common stocks of established companies having a strong
financial position and a low stock market valuation at the time of purchase
which are believed to offer the possibility of increase in value.
INVESTMENT ADVISERS
The investment adviser to all series except the Real Estate and Asia Series
is Phoenix Investment Counsel, Inc. ("PIC"). Pursuant to subadvisory agreements
with the Fund, PIC delegates certain investment decisions and research functions
with respect to the following series to the subadviser indicated:
Enhanced Index Series J.P. Morgan Investment Management, Inc.
Nifty Fifty Series Roger Engemann & Associates, Inc. ("Engemann")
Seneca Mid-Cap Series Seneca Capital Management, LLC ("Seneca")
Schafer Mid-Cap Series Schafer Capital Management, Inc.
The investment adviser to the Real Estate Series is Duff & Phelps
Investment Management Co. ("DPIM").
The investment adviser to the Asia Series is Phoenix-Aberdeen International
Advisors LLC ("PAIA"). Pursuant to subadvisory agreements with the Fund, PAIA
delegates certain investment decisions and research functions with respect to
the Asia Series to PIC and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect, less than wholly-owned
subsidiaries of Phoenix Home Life. PAIA is jointly owned and managed by PM
Holdings, Inc., a subsidiary of Phoenix Home Life, and Aberdeen Fund Managers,
Inc.
WANGER ADVISORS TRUST
Certain Subaccounts of the VUL Account invest in corresponding Series of the
Wanger Advisors Trust. The investment adviser is Wanger Asset Management, L.P.
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 Fund 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 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 simultaneously. Although neither Phoenix nor the Fund
currently foresees any such disadvantages either to variable life insurance
Policyowners or to variable annuity Contract Owners, the Fund's 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 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.
SERVICES OF THE ADVISERS
The Advisers continuously furnish an investment program for each Series and
manage the investment and reinvestment of the assets of each Series subject at
all times to the authority and supervision of the Trustees. A detailed
discussion of the investment advisers and subadvisers, and the investment
advisory and subadvisory agreements, is contained in the accompanying prospectus
for the Funds.
14
<PAGE>
REINVESTMENT AND REDEMPTION
All dividend distributions of the Funds are automatically reinvested in
shares of the Funds at their net asset value on the date of distribution; all
capital gains distributions of the Funds, if any, are likewise reinvested at the
net asset value on the record date. Phoenix redeems Funds shares at their net
asset value to the extent necessary to make payments under the Policy.
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 solely in shares of a designated portfolio of the Funds 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 Funds 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 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.
1. 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, any unpaid balance of the issue expense charge, and
an administrative charge. This administrative charge is currently set at $5 per
month but it is guaranteed not to exceed $10 per month. The monthly deduction is
deducted on each Monthly Calculation Day. It is allocated among the 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 the Subaccounts 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 administration charge of $150
is assessed on a pro rata basis in equal monthly installments over a
12-month period to compensate Phoenix for underwriting and start-up
expenses in connection with issuing a Policy. Phoenix may reduce or
eliminate the issue expense charge for Policies issued under group or
sponsored arrangements. Generally, administrative 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 amounts of any reductions will be considered on a
case-by-case basis and will reflect the reduced administration costs
expected as a result of sales to a particular group or sponsored
arrangement.
(B) 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 1 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 Insured.
However, in certain states and for policies issued in conjunction with
certain qualified plans, cost of insurance rates are not based on sex.
The actual monthly cost of insurance rates are based on Phoenix's
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 Insured's 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 Insured 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 three categories: smokers and
nonsmokers and those who have never smoked. Non-smokers generally will
incur a lower cost of insurance than similarly situated Insureds who
smoke.
2. PREMIUM TAXES
Various states and subdivisions impose a tax on premiums received by
insurance companies. Premium taxes vary from state to state. The assessment made
for each premium paid is equal to the tax assessed by the state in which the
Policyowner resides according to Phoenix's records at the time of the payment.
Currently, the taxes imposed by states on premiums range from 0.75% to 4% of
15
<PAGE>
premiums paid. Moreover, certain municipalities in Louisiana, Kentucky and South
Carolina also impose taxes on premiums paid, in addition to the state taxes
imposed by these states. The premium tax charge represents an amount Phoenix
considers necessary to pay all premium taxes imposed by such states and any
subdivisions thereof, and Phoenix does not expect to derive a profit from this
charge. These taxes are deducted from the Issue Premium, and from each
subsequent premium payment.
3. MORTALITY AND EXPENSE RISK CHARGE
Phoenix 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. This charge is not deducted
from the GIA.
The mortality risk assumed by Phoenix is that 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, Phoenix may profit
from this charge. Phoenix also assumes risks with respect to other contingencies
including the incidence of Policy loans, which may cause Phoenix to incur
greater costs than anticipated when designing the Policies. To the extent
Phoenix profits from this charge, it 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.
4. INVESTMENT MANAGEMENT CHARGE
As compensation for their investment management services to the Fund, 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.
5. 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, and a
contingent deferred issue charge designed to recover expenses for the
administration of Policies that are terminated by surrender before
administrative expenses have been recouped. These are contingent charges because
they are paid only if the Policy is surrendered (or the face amount is reduced
or the Policy lapses) during the first 10 Policy Years. They are deferred
charges because they are not deducted from premiums.
In Policy Years one through ten, the full surrender charge as described
below will apply if the Policyowner either surrenders the Policy for its Cash
Surrender Value or lets 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.
The maximum surrender charge that a Policyowner could pay while he or she owns
the Policy is equal to either A plus B (as defined below) or the amount shown in
the table on Schedule Page 4 of the Policy, whichever is less.
A (the contingent deferred sales charge) is equal to:
1) 30% of all premiums paid (up to and including the amount stated on
Schedule Page 4 of the Policy, which is calculated according to a
formula contained in a SEC rule); plus
2) 10% of all premiums paid in excess of this amount but not greater than
twice this amount; plus 3) 9% of all premiums paid in excess of twice
this amount.
B (the contingent deferred issue charge) is equal to:
$5 per $1,000 of initial face amount.
As an example, the following illustrates the maximum surrender charge on a
$100,000 Policy for a male age 35 who has never smoked who has paid $3,000 in
premium payments, and who surrenders the Policy in the 70th Policy Month.
Schedule Page 4 of the Policy would show that the maximum surrender charge to be
paid would be equal to either A plus B (shown below) or the amount shown in the
chart in the Policy (also shown below), whichever is less:
A is equal to:
1) 30% of all premiums paid, up to $1,058.45 (equals $317.54); plus
2) 10% of all premiums paid in excess of $1,058.45 but not greater than
$2,116.90 (equals $105.83); plus
3) 9% of all premiums paid in excess of $2,116.90 (equals $79.48); plus
B which is equal to $500.
Therefore A plus B is equal to $1,002.87.
The chart that would be shown in the Policy is reproduced below:
MAXIMUM SURRENDER CHARGE TABLE
- -----------------------------------------------------------------
POLICY SURRENDER POLICY SURRENDER POLICY SURRENDER
MONTH CHARGE MONTH CHARGE MONTH CHARGE
1-60 $1029.22 80 $823.38 100 $531.90
61 1018.93 81 813.09 101 516.26
62 1008.64 82 802.80 102 500.61
63 998.35 83 792.50 103 484.97
64 988.06 84 782.21 104 469.33
65 977.76 85 766.57 105 453.68
66 967.47 86 750.92 106 438.04
67 957.18 87 735.28 107 422.39
68 946.89 88 719.63 108 406.75
69 936.59 89 703.99 109 372.85
70 926.30 90 688.35 110 338.96
71 916.01 91 672.70 111 305.06
72 905.72 92 657.06 112 271.17
73 895.43 93 641.41 113 237.27
74 885.13 94 625.77 114 203.37
75 874.84 95 610.12 115 169.48
76 864.55 96 594.48 116 135.58
77 854.26 97 578.84 117 101.69
78 843.96 98 563.19 118 67.79
79 833.67 99 547.55 119 33.90
120 .00
If the surrender occurred in Policy Month 70, the Policyowner would pay the
lesser of $1002.87 (as computed above) or $926.30 (amount in table above). This
Policyowner would pay a surrender charge of $926.30. Phoenix may reduce the
surrender charge for Policies issued under group or sponsored arrangements. The
16
<PAGE>
amounts of reductions 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.
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 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. Phoenix 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 SEC as a result of which disposal of securities is
not reasonably practicable or it is not reasonably practicable to determine the
value of the VUL Account's net assets. Transfers also may be postponed under
these circumstances.
PAYMENT BY CHECK
Payments under the Policy of any amounts derived from premiums paid by check
may be delayed until such time as the check has cleared 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 the Insured commits suicide within two years after the Policy's Date of
Issue, Phoenix will pay only the Policy Value adjusted by the addition of any
monthly deductions and other fees and charges made under the Policy and the
subtraction of any Debt owed to Phoenix under the Policy.
INCONTESTABILITY
Phoenix cannot contest this Policy or any attached rider after it has been
In Force during the lifetime of the Insured for two years from the Policy Date.
CHANGE OF OWNER OR BENEFICIARY
The Beneficiary, as named in the Policy application or subsequently changed,
will receive the Policy benefits at the Insured's death. If the named
Beneficiary dies before the Insured, the contingent Beneficiary, if named,
becomes the Beneficiary. If no Beneficiary survives the Policyowner, the
benefits payable at the Insured's death will be paid to the Policyowner's
estate.
As long as the Policy is In Force, the Policyowner and the Beneficiary may
be changed by Written Request, satisfactory to Phoenix. A change in Beneficiary
will take effect as of the date the notice is signed, whether or not the Insured
is living when the notice is received by Phoenix. Phoenix will not, however, be
liable for any payment made or action taken before receipt of the notice.
ASSIGNMENT
The Policy may be assigned. Phoenix 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. Phoenix assumes no responsibility for
determining whether an assignment is valid.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated, the death benefit will
be adjusted based on what the cost of insurance charge for the most recent
monthly deduction would have purchased based on the correct age and sex.
SURPLUS
Policyowners 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
- ------------------------------------------------------------------------------
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
17
<PAGE>
Phoenix receives 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. In
addition, under certain conditions, in the event of the terminal illness of the
Insured, an accelerated payment of up to 75% of the Policy's Death Benefit (up
to a maximum of $250,000), is available under the Living Benefits Rider. The
minimum face amount remaining after any such accelerated benefit payment is
$10,000.
While the Insured is living, the Policyowner may elect a payment option for
payment of the death proceeds to the Beneficiary. The Policyowner 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 the
Policyowner has made an election which does not permit such further election or
changes by the Beneficiary.
A written form satisfactory to Phoenix is required to elect, change or
revoke a payment option.
The minimum amount of surrender or death proceeds that may be applied under
any option is $1,000.
If the Policy is assigned as collateral security, Phoenix 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 Phoenix 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
- ------------------------------------------------------------------------------
INTRODUCTION
The ultimate effect of federal income taxes on values under the VUL Account
and on the economic benefit to the Policyowner or 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 Phoenix's understanding of federal income tax
laws as they are currently interpreted, Phoenix 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 "IRS"). Phoenix
reserves the right
18
<PAGE>
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 (the "Code"), as amended. 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 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. In
addition, a benefit paid under a Living Benefit Rider may be taxable as income
in the year of receipt.
Code Section 7702 imposes certain conditions with respect to premiums
received under a Policy. 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 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.
19
<PAGE>
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 will generally not be subject to the modified endowment
contract tax 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 592; (ii) which are attributable to the taxpayer's
disability (within the meaning 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 life insurance. 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 the Policyowner.
QUALIFIED PLANS
A Policy may be used in conjunction with certain qualified plans. Since the
rules governing such use are complex, a purchaser should not use the Policy in
conjunction with a qualified plan until he has 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 Funds 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 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
20
<PAGE>
guidance concerning the extent to which Policyowners may direct their
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 the Policyowner 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 the Insured or an exchange or assignment of the
Policy may have tax consequences depending on the circumstances. Code Section
1035 provides that a life insurance Policy can be exchanged for another life
insurance contract, without recognition of gain or loss, assuming that no money
or other property is received in the exchange, and that the policies relate to
the same Insured. If the surrendered Policy is subject to a Policy loan, this
may be treated as the receipt of money on the exchange. Phoenix recommends that
any person contemplating such actions seek the advice of a qualified tax
consultant.
OTHER TAXES
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or Beneficiary. Phoenix does not make any
representations or guarantees regarding the tax consequences of any Policy with
respect to these types of taxes.
VOTING RIGHTS
- -------------------------------------------------------------------------------
THE FUNDS
Phoenix will vote the Funds' shares held by the Subaccounts of the VUL
Account at any regular and special meetings of shareholders of the Funds, a
Massachusetts business trust. To the extent required by law, such voting will be
in accordance with instructions received from the Policyowner. However, if the
1940 Act or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result Phoenix determines that it
is permitted to vote the Funds' shares at its own discretion, it may elect to do
so.
The number of votes that a Policyowner has the right to cast will be
determined by applying the Policyowner's percentage interest in a Subaccount to
the total number of votes attributable to the Subaccount. In determining the
number of votes, fractional shares will be recognized.
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.
Each Policyowner will receive proxy materials, reports and other materials
relating to the Funds.
Phoenix 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 Advisers 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 Phoenix determined that the change would have an adverse effect
on the General Account because the proposed investment policy for a portfolio
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
A Policyowner (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, a Policyholder (or payee) may cast
only one vote as the holder of a Policy, irrespective of Policy Value or the
number of the Policies held.
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
Arthur P. Byrne Chairman, President and Chief
Executive Officer, The Wiremold
Company
West Hartford, Connecticut
21
<PAGE>
Richard N. Cooper Professor of International
Economics, Harvard University;
formerly Chairman, National
Intelligence Council, Central
Intelligence Agency
McLean, Virginia
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
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
Robert F. Vizza President and Chief Executive
Officer, St. Francis Hospital
Roslyn, New York
Robert G. Wilson Chief Executive Officer,
CreditSource USA, Inc., Charlotte, North Carolina;
formerly Chairman and President, Ziani
International Capital, Inc., Miami, Florida, 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
Carl T. Chadburn Executive Vice President
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,
Distribution Planning
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,
Underwriting and Operations
Robert G. Lautensack, Jr. Senior Vice President, Individual
Financial
Maura L. Melley Senior Vice President, Public
Scott C. Noble Affairs
Senior Vice President
Robert E. Primmer Senior Vice President,
Individual Distribution
Frederick W. Sawyer, III Senior Vice President
Richard C. Shaw Senior Vice President
Simon Y. Tan Senior Vice President, Market
and Product Development
Anthony J. Zeppetella Senior Vice President, Corporate
Portfolio Management
Walter H. Zultowski Senior Vice President, Marketing
and Market Research; formerly
Senior Vice President, LIMRA
International,
Hartford, Connecticut
The above positions reflect the last held position in the organization.
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
22
<PAGE>
subsidiary of Phoenix, is registered as a broker-dealer with the SEC under
the Securities Exchange Act of 1934 (the "1934 Act") and is a member of the
National Association of Securities Dealers, Inc. PEPCO serves as national
distributor of the Policies. PEPCO is an indirect subsidiary of Phoenix Duff &
Phelps ("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
agreement 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.
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.
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 Boros Cicchetti
Berenson & Johnson LLP.
REGISTRATION STATEMENT
- ------------------------------------------------------------------------------
A Registration Statement has been filed with the SEC, under the Securities
Act of 1933 (the "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.
YEAR 2000 ISSUE
- ------------------------------------------------------------------------------
Many existing computer programs use only two digits to identify the year in
a date field. Commonly referred to as the "Year 2000 Issue," companies must
consider the impact of the upcoming change in the century on their computer
systems. The Year 2000 Issue, if not adequately addressed, could result in
computer system failures or miscalculations causing disruptions of operations
and the possible inability of companies to process transactions. Phoenix
believes that the Year 2000 Issue is an important business priority requiring
careful analysis of every business system in order to be assured that all
information systems applications are century compliant.
Phoenix has been addressing the Year 2000 Issue in earnest since 1995 when,
with consultants, a comprehensive inventory and assessment of all business
systems, including those of its subsidiaries, was conducted. Phoenix has
identified and is now actively pursuing a number of strategies to address the
issue, including:
-- upgrading systems with compliant versions;
-- developing or acquiring new systems to replace those that are obsolete;
-- and remediating existing systems by converting code or hardware.
Based on current assessments, Phoenix expects to have its computer systems
compliant by the end of 1998, with testing to continue through 1999. In
addition, Phoenix is examining the status of its third-party vendors, obtaining
assurances that their software and hardware products will be century compliant
by 1999.
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
The consolidated financial statements of Phoenix as 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
for the Subaccounts available as of the period ended December 31, 1997.
23
<PAGE>
PHOENIX HOME LIFE VARIABLE
UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1997
24
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
---------------- ----------------- ----------------
<S> <C> <C> <C>
Assets
Investments at cost ........................................... $ 16,637,078 $ 223,382,611 $ 16,173,563
============ ============= ============
Investment in The Phoenix Edge Series Fund, at market ......... $ 16,637,078 $ 236,855,460 $ 16,582,895
------------ ------------- ------------
Total assets ................................................. 16,637,078 236,855,460 16,582,895
Liabilities
Accrued expenses to related party ............................. 9,797 156,810 10,808
------------ ------------- ------------
Net assets ..................................................... $ 16,627,281 $ 236,698,650 $ 16,572,087
============ ============= ============
Accumulation units outstanding ................................. 11,538,596 56,320,835 7,200,511
============ ============= ============
Unit value ..................................................... $ 1.441014 $ 4.202684 $ 2.301515
============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
Strategic
Allocation International Balanced
Sub-Account Sub-Account Sub-Account
---------------- --------------- ----------------
<S> <C> <C> <C>
Assets
Investments at cost ........................................... $ 35,170,967 $ 38,821,949 $ 19,629,676
============ ============ ============
Investment in The Phoenix Edge Series Fund, at market ......... $ 36,045,635 $ 43,146,110 $ 20,745,874
------------ ------------ ------------
Total assets ................................................. 36,045,635 43,146,110 20,745,874
Liabilities
Accrued expenses to related party ............................. 24,077 28,378 13,791
------------ ------------ ------------
Net assets ..................................................... $ 36,021,558 $ 43,117,732 $ 20,732,083
============ ============ ============
Accumulation units outstanding ................................. 12,947,264 23,810,180 11,686,186
============ ============ ============
Unit value ..................................................... $ 2.782175 $ 1.810895 $ 1.774067
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Aberdeen
Real Estate Strategic Theme New Asia
Sub-Account Sub-Account Sub-Account
--------------- ----------------- ---------------
<S> <C> <C> <C>
Assets
Investments at cost ........................................... $ 3,703,960 $ 4,532,000 $ 1,559,523
=========== =========== ===========
Investment in The Phoenix Edge Series Fund, at market ......... $ 4,148,357 $ 4,473,952 $ 1,049,925
----------- ----------- -----------
Total assets ................................................. 4,148,357 4,473,952 1,049,925
Liabilities
Accrued expenses to related party ............................. 2,644 2,907 695
----------- ----------- -----------
Net assets ..................................................... $ 4,145,713 $ 4,471,045 $ 1,049,230
=========== =========== ===========
Accumulation units outstanding ................................. 2,623,760 3,845,161 1,565,906
=========== =========== ===========
Unit value ..................................................... $ 1.580065 $ 1.162772 $ 0.670046
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Wanger
Enhanced International Wanger U.S.
Index Small Cap Small Cap
Sub-Account Sub-Account Sub-Account
--------------- --------------- ----------------
<S> <C> <C> <C>
Assets
Investments at cost ........................................... $ 1,911,997 $ 6,984,952 $ 14,388,061
=========== =========== ============
Investment in the Phoenix Edge Series Fund, at market ......... $ 1,952,250 -- --
Investment in Wanger Advisors Trust, at market ................ -- $ 6,538,176 $ 16,357,922
----------- ----------- ------------
Total assets ................................................. 1,952,250 6,538,176 16,357,922
Liabilities
Accrued expenses to related party ............................. 1,242 4,304 10,425
----------- ----------- ------------
Net assets ..................................................... $ 1,951,008 $ 6,533,872 $ 16,347,497
=========== =========== ============
Accumulation units outstanding ................................. 1,830,791 6,507,413 12,260,968
=========== =========== ============
Unit value ..................................................... $ 1.065664 $ 1.004066 $ 1.333296
=========== =========== ============
</TABLE>
See Notes to Financial Statements
25
<PAGE>
STATEMENT OF OPERATIONS
For the period ended December 31, 1997
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
-------------- --------------- -------------
<S> <C> <C> <C>
Investment income
Distributions ............................................... $787,128 $ 1,274,518 $1,024,853
Expenses
Mortality and expense risk charges .......................... 124,354 1,639,929 110,127
-------- ----------- ----------
Net investment income (loss) ................................. 662,774 (365,411) 914,726
-------- ----------- ----------
Net realized gain (loss) from share transactions ............. 34 (13,683) 4,696
Net realized gain distribution from Fund ..................... -- 36,351,738 401,988
Net unrealized appreciation on investment .................... -- 909,243 18,289
-------- ----------- ----------
Net gain on investments ...................................... 34 37,247,298 424,973
-------- ----------- ----------
Net increase in net assets resulting from operations ......... $662,808 $36,881,887 $1,339,699
======== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Strategic
Allocation International Balanced
Sub-Account Sub-Account Sub-Account
------------- --------------- ------------
<S> <C> <C> <C>
Investment income
Distributions ................................................... $ 681,837 $ 526,957 $ 561,561
Expenses
Mortality and expense risk charges .............................. 249,583 315,851 145,865
---------- ---------- ----------
Net investment income ............................................ 432,254 211,106 415,696
---------- ---------- ----------
Net realized gain (loss) from share transactions ................. 16,230 (38,944) 7,612
Net realized gain distribution from Fund ......................... 4,395,531 4,047,584 2,259,915
Net unrealized appreciation (depreciation) on investment ......... 604,211 (307,551) 120,786
---------- ---------- ----------
Net gain on investments .......................................... 5,015,972 3,701,089 2,388,313
---------- ---------- ----------
Net increase in net assets resulting from operations ............. $5,448,226 $3,912,195 $2,804,009
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Aberdeen
Real Estate Strategic Theme New Asia
Sub-Account Sub-Account Sub-Account
------------- ----------------- --------------
<S> <C> <C> <C>
Investment income
Distributions .......................................................... $ 91,995 $ 13,601 $ 46,168
Expenses
Mortality and expense risk charges ..................................... 20,395 26,037 11,151
-------- --------- ----------
Net investment income (loss) ............................................ 71,600 (12,436) 35,017
-------- --------- ----------
Net realized gain (loss) from share transactions ........................ 438 2,000 (13,900)
Net realized gain distribution from Fund ................................ 136,883 515,108 791
Net unrealized appreciation (depreciation) on investment ................ 332,563 (66,310) (502,645)
-------- --------- ----------
Net gain (loss) on investments .......................................... 469,884 450,798 (515,754)
-------- --------- ----------
Net increase (decrease) in net assets resulting from operations ......... $541,484 $ 438,362 $ (480,737)
======== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Wanger Wanger
Enhanced International U.S.
Index Small Cap Small Cap
Sub-Account(1) Sub-Account Sub-Account
-------------- -------- ----------
Investment income
Distributions .......................................................... $ 9,326 $ 68,447 $ 103,408
Expenses
Mortality and expense risk charges ..................................... 3,926 35,993 67,198
-------------- --------- ----------
Net investment income ................................................... 5,400 32,454 36,210
-------------- --------- ----------
Net realized loss from share transactions ............................... (334) (3,142) (13,408)
Net realized gain distribution from Fund ................................ 8,778 -- --
Net unrealized appreciation (depreciation) on investment ................ 40,253 (450,637) 1,960,796
-------------- --------- ----------
Net gain (loss) on investments .......................................... 48,697 (453,779) 1,947,388
-------------- --------- ----------
Net increase (decrease) in net assets resulting from operations ......... $ 54,097 $(421,325) $1,983,598
============== ========= ==========
(1) From inception July 18, 1997 to December 31, 1997
</TABLE>
See Notes to Financial Statements
26
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1997
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
---------------- ---------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income (loss) ............................................ $ 662,774 $ (365,411) $ 914,726
Net realized gain ....................................................... 34 36,338,055 406,684
Net unrealized appreciation ............................................. -- 909,243 18,289
------------- ------------- ------------
Net increase in net assets resulting from operations .................... 662,808 36,881,887 1,339,699
------------- ------------- ------------
From accumulation unit transactions
Participant deposits .................................................... 29,753,469 51,373,829 3,839,754
Participant transfers ................................................... (24,739,794) 461,474 1,758,903
Participant withdrawals ................................................. (4,583,895) (24,768,747) (1,594,349)
------------- ------------- ------------
Net increase in net assets resulting from participant transactions ...... 429,780 27,066,556 4,004,308
------------- ------------- ------------
Net increase in net assets .............................................. 1,092,588 63,948,443 5,344,007
Net assets
Beginning of period ..................................................... 15,534,693 172,750,207 11,228,080
------------- ------------- ------------
End of period ........................................................... $ 16,627,281 $ 236,698,650 $ 16,572,087
============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
Strategic
Allocation International Balanced
Sub-Account Sub-Account Sub-Account
--------------- --------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income ................................................... $ 432,254 $ 211,106 $ 415,696
Net realized gain ....................................................... 4,411,761 4,008,640 2,267,527
Net unrealized appreciation (depreciation) .............................. 604,211 (307,551) 120,786
------------ ------------ ------------
Net increase in net assets resulting from operations .................... 5,448,226 3,912,195 2,804,009
------------ ------------ ------------
From accumulation unit transactions
Participant deposits .................................................... 6,156,264 9,403,556 3,516,448
Participant transfers ................................................... 1,805,561 284,097 397,233
Participant withdrawals ................................................. (3,655,616) (4,537,485) (2,204,100)
------------ ------------ ------------
Net increase in net assets resulting from participant transactions ...... 4,306,209 5,150,168 1,709,581
------------ ------------ ------------
Net increase in net assets .............................................. 9,754,435 9,062,363 4,513,590
Net assets
Beginning of period ..................................................... 26,267,123 34,055,369 16,218,493
------------ ------------ ------------
End of period ........................................................... $ 36,021,558 $ 43,117,732 $ 20,732,083
============ ============ ============
</TABLE>
See Notes to Financial Statements
27
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Aberdeen
Real Estate Strategic Theme New Asia
Sub-Account Sub-Account Sub-Account
------------- ----------------- --------------
<S> <C> <C> <C>
From operations
Net investment income (loss) ............................................ $ 71,600 $ (12,436) $ 35,017
Net realized gain (loss) ................................................ 137,321 517,108 (13,109)
Net unrealized appreciation (depreciation) .............................. 332,563 (66,310) (502,645)
---------- ---------- ----------
Net increase (decrease) in net assets resulting from operations ......... 541,484 438,362 (480,737)
---------- ---------- ----------
From accumulation unit transactions
Participant deposits .................................................... 1,089,983 1,476,759 522,055
Participant transfers ................................................... 1,984,226 1,197,938 (774,160)
Participant withdrawals ................................................. (357,873) (447,958) (159,479)
---------- ---------- ----------
Net increase (decrease) in net assets resulting from participant
transactions ........................................................... 2,716,336 2,226,739 (411,584)
---------- ---------- ----------
Net increase (decrease) in net assets ................................... 3,257,820 2,665,101 (892,321)
Net assets
Beginning of period ..................................................... 887,893 1,805,944 1,941,551
---------- ---------- ----------
End of period ........................................................... $4,145,713 $4,471,045 $1,049,230
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Wanger
Enhanced International Wanger U.S.
Index Small Cap Small Cap
Sub-Account(1) Sub-Account Sub-Account
---------------- --------------- --------------
<S> <C> <C> <C>
From operations
Net investment income ................................................... $ 5,400 $ 32,454 $ 36,210
Net realized gain (loss) ................................................ 8,444 (3,142) (13,408)
Net unrealized appreciation (depreciation) .............................. 40,253 (450,637) 1,960,796
---------- ---------- ------------
Net increase (decrease) in net assets resulting from operations ......... 54,097 (421,325) 1,983,598
---------- ---------- ------------
From accumulation unit transactions
Participant deposits .................................................... 334,421 2,372,417 3,760,805
Participant transfers ................................................... 1,632,282 4,882,238 11,222,509
Participant withdrawals ................................................. (69,792) (595,864) (1,086,412)
---------- ---------- ------------
Net increase in net assets resulting from participant transactions ...... 1,896,911 6,658,791 13,896,902
---------- ---------- ------------
Net increase in net assets .............................................. 1,951,008 6,237,466 15,880,500
Net assets
Beginning of period ..................................................... -- 296,406 466,997
---------- ---------- ------------
End of period ........................................................... $1,951,008 $6,533,872 $ 16,347,497
========== ========== ============
(1) From inception July 18, 1997 to December 31, 1997
</TABLE>
See Notes to Financial Statements
28
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1996
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
---------------- ---------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income ................................................... $ 548,378 $ 281,274 $ 593,496
Net realized gain ....................................................... -- 11,420,506 326,876
Net unrealized appreciation ............................................. -- 4,791,630 43,393
------------- ------------- ------------
Net increase in net assets resulting from operations .................... 548,378 16,493,410 963,765
------------- ------------- ------------
From accumulation unit transactions
Participant deposits .................................................... 26,004,635 47,202,324 2,811,259
Participant transfers ................................................... (21,268,222) 10,438,285 1,823,625
Participant withdrawals ................................................. (3,701,639) (19,333,192) (1,071,344)
------------- ------------- ------------
Net increase in net assets resulting from participant transactions ...... 1,034,774 38,307,417 3,563,540
------------- ------------- ------------
Net increase in net assets .............................................. 1,583,152 54,800,827 4,527,305
Net assets
Beginning of period ..................................................... 13,951,541 117,949,380 6,700,775
------------- ------------- ------------
End of period ........................................................... $ 15,534,693 $ 172,750,207 $ 11,228,080
============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
Strategic Allocation International Balanced
Sub-Account Sub-Account Sub-Account
---------------------- --------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income ................................................... $ 324,553 $ 245,322 $ 296,076
Net realized gain ....................................................... 1,622,713 747,494 1,394,172
Net unrealized appreciation (depreciation) .............................. (91,227) 3,401,467 (304,864)
------------ ------------ ------------
Net increase in net assets resulting from operations .................... 1,856,039 4,394,283 1,385,384
------------ ------------ ------------
From accumulation unit transactions
Participant deposits .................................................... 6,031,095 8,480,853 3,636,746
Participant transfers ................................................... 1,002,380 3,847,285 (651,439)
Participant withdrawals ................................................. (2,871,670) (3,414,225) (1,868,673)
------------ ------------ ------------
Net increase in net assets resulting from participant transactions ...... 4,161,805 8,913,913 1,116,634
------------ ------------ ------------
Net increase in net assets .............................................. 6,017,844 13,308,196 2,502,018
Net assets
Beginning of period ..................................................... 20,249,279 20,747,173 13,716,475
------------ ------------ ------------
End of period ........................................................... $ 26,267,123 $ 34,055,369 $ 16,218,493
============ ============ ============
</TABLE>
See Notes to Financial Statements
29
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1996
(Continued)
<TABLE>
<CAPTION>
Aberdeen
Real Estate Strategic Theme New Asia
Sub-Account(1) Sub-Account(1) Sub-Account(2)
---------------- ----------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income ................................................... $ 8,506 $ 910 $ 7,082
Net realized gain ....................................................... 22,646 1,002 919
Net unrealized appreciation (depreciation) .............................. 111,837 8,263 (6,953)
--------- ---------- ----------
Net increase in net assets resulting from operations .................... 142,989 10,175 1,048
--------- ---------- ----------
From accumulation unit transactions
Participant deposits .................................................... 114,179 507,159 137,347
Participant transfers ................................................... 648,017 1,412,288 1,825,934
Participant withdrawals ................................................. (17,292) (123,678) (22,778)
--------- ---------- ----------
Net increase in net assets resulting from participant transactions ...... 744,904 1,795,769 1,940,503
--------- ---------- ----------
Net increase in net assets .............................................. 887,893 1,805,944 1,941,551
Net assets
Beginning of period ..................................................... -- -- --
--------- ---------- ----------
End of period ........................................................... $ 887,893 $1,805,944 $1,941,551
========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Wanger
International Wanger U.S.
Small Cap Small Cap
Sub-Account(3) Sub-Account(3)
---------------- ----------------
<S> <C> <C>
From operations
Net investment loss ..................................................... $ (30) $ (65)
Net realized gain ....................................................... -- 29
Net unrealized appreciation ............................................. 3,861 9,066
-------- --------
Net increase in net assets resulting from operations .................... 3,831 9,030
-------- --------
From accumulation unit transactions
Participant deposits .................................................... 8,061 11,399
Participant transfers ................................................... 284,998 447,242
Participant withdrawals ................................................. (484) (674)
-------- --------
Net increase in net assets resulting from participant transactions ...... 292,575 457,967
-------- --------
Net increase in net assets .............................................. 296,406 466,997
Net assets
Beginning of period ..................................................... -- --
-------- --------
End of period ........................................................... $296,406 $466,997
======== ========
(1) From inception May 1, 1996 to December 31, 1996
(2) From inception September 18, 1996 to December 31, 1996
(3) From inception December 18, 1996 to December 31, 1996
</TABLE>
See Notes to Financial Statements
30
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Note 1--Organization
Phoenix Home Life Variable Universal Life Account (the "Account") is a
separate investment account of Phoenix Home Life Mutual Insurance Company
(Phoenix). The Account is offered as Flex Edge and Flex Edge Success for
individual variable life insurance and as Joint Edge for variable first-to-die
joint life insurance. The Account is registered as a unit investment trust
under the Investment Company Act of 1940, as amended, and currently consists of
twelve Sub-Accounts, that invest in a corresponding series of The Phoenix Edge
Series Fund, or Wanger Advisors Trust (the "Funds").
Each series has distinct investment objectives. The Money Market Series is
a short-term investment fund. The Growth Series is a growth common stock fund.
The Multi-Sector Fixed Income Series is a long-term debt fund. The Strategic
Allocation Series (formerly Total Return) invests in equity securities and long
and short-term debt. The International Series invests primarily in
internationally diversified equity securities. The Balanced Series is a
balanced fund which invests in growth stocks and at least 25% of its assets in
fixed income senior securities. The Real Estate Series invests in marketable
securities of publicly traded Real Estate Investment Trusts ("REITs") and
companies that are principally engaged in the real estate industry. The
Strategic Theme Series invests in securities of companies believed to benefit
from specific trends. The Aberdeen New Asia Series invests primarily in
diversified equity securities of issuers organized and principally operating in
Asia, excluding Japan. The Research Enhanced Index ("Enhanced Index") Series
invests in a broadly diversified portfolio of equity securities of large and
medium capitalization companies within market sectors reflected in the S & P
500. The Wanger International Small Cap Series invests in securities of
non-U.S. companies with a stock market capitalization of less than $1 billion
and the Wanger U.S. Small Cap Series invests in growth common stock of U.S.
companies with stock market capitalization of less than $1 billion.
Policyowners may also direct the allocation of their investments between the
account and the Guaranteed Interest Account of the general account of Phoenix.
Note 2--Significant Accounting Policies
A. Valuation of investments: Investments are made exclusively in the Funds and
are valued at the net asset values per share of the respective Series.
B. Investment transactions and related income: Realized gains and losses
include capital gain distributions from the Funds as well as gains and losses
on sales of shares in the Funds determined on the LIFO (last in, first out)
basis.
C. Income taxes: The Account is not a separate entity from Phoenix and, under
current federal income tax law, income arising from the Account is not taxed
since reserves are established equivalent to such income. Therefore, no
provision for related federal taxes is required.
D. Distributions: Distributions are recorded on the ex-dividend date.
Note 3--Purchases and Sales of Shares of the Funds
Purchases and sales of shares of the Funds for the period ended December
31, 1997 aggregated the following:
<TABLE>
<CAPTION>
Sub-Account Purchases Sales
- ----------------------------------------- -------------- --------------
<S> <C> <C>
The Phoenix Edge Series Fund:
Money Market ........................... $24,741,678 $23,649,364
Growth ................................. 74,873,217 11,780,750
Multi-Sector Fixed Income .............. 7,751,739 2,427,026
Strategic Allocation ................... 11,873,632 2,733,352
International .......................... 14,334,763 4,919,601
Balanced ............................... 6,251,920 1,863,892
Real Estate ............................ 3,551,387 624,453
Strategic Theme ........................ 3,086,981 355,827
Aberdeen New Asia ...................... 1,164,685 1,541,033
Enhanced Index ......................... 1,996,553 84,221
Wanger Advisors Trust:
Wanger International Small Cap ......... 7,495,468 799,948
Wanger U.S. Small Cap .................. 14,506,011 562,538
</TABLE>
Note 4--Participant Accumulation Unit Transactions (in units)
<TABLE>
<CAPTION>
Sub-Account
--------------------------------------------------------------------------------------------
Money Multi-Sector Strategic
Market Growth Fixed Income Allocation International Balanced
-------------- ------------ -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Flex Edge and Flex Edge Success:
Units outstanding, beginning of period . 10,724,432 47,488,023 5,233,038 10,993,304 20,012,736 10,200,782
Participant deposits ................... 19,441,883 12,224,278 1,660,100 2,243,760 4,956,751 1,966,680
Participant transfers .................. (16,331,954) (111,168) 768,740 631,459 76,649 208,481
Participant withdrawals ................ (2,946,179) (5,804,421) (692,262) (1,315,119) (2,354,334) (1,223,284)
------------- ---------- --------- ---------- ----------- -----------
Units outstanding, end of period ....... 10,888,182 53,796,712 6,969,616 12,553,404 22,691,802 11,152,659
============= ========== ========= ========== =========== ===========
Wanger
Strategic Aberdeen Enhanced International Wanger U.S.
Real Estate Theme New Asia Index Small Cap Small Cap
---------------- ---------- -------------- ------------- ---------------- -----------
Units outstanding, beginning of period . 661,261 1,662,135 1,908,225 -- 276,887 432,094
Participant deposits ................... 694,118 1,168,665 544,018 279,879 2,032,782 2,821,067
Participant transfers .................. 1,369,217 1,023,653 (839,908) 1,587,831 4,347,440 9,260,836
Participant withdrawals ................ (222,186) (329,249) (153,781) (67,917) (501,136) (756,874)
------------- ---------- ---------- ------------- ----------- -----------
Units outstanding, end of period ....... 2,502,410 3,525,204 1,458,554 1,799,793 6,155,973 11,757,123
============= ========== ========== ============= =========== ===========
</TABLE>
31
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Money Multi-Sector Strategic
Market Growth Fixed Income Allocation International Balanced
--------------- ------------- -------------- ------------- -------------- -----------
Joint Edge:
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of period ..... 524,887 1,887,862 145,848 315,311 891,214 495,615
Participant deposits ....................... 1,559,669 951,327 71,988 125,380 375,497 130,272
Participant transfers ...................... (1,247,797) 168,606 53,880 27,451 65,833 (9,439)
Participant withdrawals .................... (186,345) (483,672) (40,821) (74,282) (214,166) (82,921)
-------------- --------- -------- ------- ----------- --------
Units outstanding, end of period ........... 650,414 2,524,123 230,895 393,860 1,118,378 533,527
============== ========= ======== ======= =========== ========
Wanger
Strategic Aberdeen Enhanced International Wanger U.S
Real Estate Theme New Asia Index Small Cap Small Cap
--------------- --------- -------------- ---------- ---------------- ----------
Units outstanding, beginning of period ..... 19,197 143,329 34,915 -- 11,716 17,668
Participant deposits ....................... 63,663 168,852 54,008 20,878 152,815 212,241
Participant transfers ...................... 58,532 80,865 34,503 12,228 227,435 330,381
Participant withdrawals .................... (20,042) (73,089) (16,074) (2,108) (40,526) (56,445)
-------------- --------- -------- ---------- ------------ --------
Units outstanding, end of period ........... 121,350 319,957 107,352 30,998 351,440 503,845
============== ========= ======== ========== ============ ========
</TABLE>
Note 5--Policy Loans
Transfers are made to Phoenix's general account as a result of policy
loans. Policy provisions allow policyowners to borrow up to 90% of a policy's
cash value with an interest rate set in accordance with the contract due and
payable on each policy anniversary. At the time a loan is granted, an amount
equivalent to the amount of the loan is transferred from the Account to
Phoenix's general account as collateral for the outstanding loan. These
transfers are included in participant withdrawals in the accompanying financial
statements. Amounts in the general account are credited with interest at 2% for
Flex Edge success policies, and 6% for Joint Edge and Flex Edge policies. Loan
repayments result in a transfer of collateral back to the Account.
Note 6--Investment Advisory Fees and Related Party Transactions
Phoenix and its indirect, majority owned subsidiary, Phoenix Equity
Planning Corporation, a registered broker/dealer in securities, provide all
services to the Account.
The cost of insurance is charged to each policy on a monthly basis by a
withdrawal of participant units prorated among the elected Sub-Accounts. The
amount charged to each policy depends on a number of variables including sex,
age and risk class as well as the death benefit and cash value of the policy.
Such costs aggregated $24,715,463 during the year ended December 31, 1997.
Upon partial surrender of a policy, a surrender fee of the lesser of $25
or 2% of the partial surrender amount paid and a partial surrender charge equal
to a pro rata portion of the applicable surrender charge is deducted from the
policy value and paid to Phoenix.
Phoenix Equity Planning Corporation is the principal underwriter and
distributor of the Account. Phoenix Equity Planning Corporation is reimbursed
for its distribution and underwriting expenses by Phoenix.
Policies which are surrendered during the first ten policy years will
incur a 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, and a
contingent deferred issue charge designed to recover expenses for the
administration of Policies that are terminated by surrender before
administrative expenses have been recouped. These are contingent charges paid
only if the Policy is surrendered (or a partial withdrawal is taken or the Face
Amount is reduced or the Policy lapses) during the first ten policy years. The
charges are deferred (i.e. not deducted from premiums).
Phoenix assumes the mortality risk that insureds may live for a shorter
time than projected because of inaccuracies in the projecting process and,
accordingly, that an aggregate amount of death benefits greater than 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. In return for the assumption of these mortality and expense risks,
Phoenix charges the Account an annual rate of 0.80% of the average daily net
assets of the Account for mortality and expense risks assumed for Flex Edge and
Joint Edge. For Flex Edge Success, the Account is charged an annual rate of
0.80% for the first fifteen years and 0.25% thereafter.
Note 7--Diversification Requirements
Under the provisions of Section 817(h) of the Internal Revenue Code (the
"Code"), a variable universal life contract, other than a contract issued in
connection with certain types of employee benefit plans, will not be treated as
a universal life contract for federal tax purposes for any period for which the
investments of the segregated asset account on which the contract is based are
not adequately diversified. The Code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations
issued by the Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h)
of the Code. Phoenix believes that the Account satisfies the current
requirements of the regulations, and it intends that the Account will continue
to meet such requirements.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[Price Waterhouse LLP logotype] [LOGO]
To the Board of Directors of Phoenix Home Life Mutual Insurance Company and
Participants of Phoenix Home Life Variable Universal Life Account
In our opinion, the accompanying statement of assets and liabilities and the
related statement of operations and of changes in net assets present fairly, in
all material respects, the financial position of the Money Market Sub-Account,
Growth Sub-Account, Multi-Sector Fixed Income Sub-Account, Strategic Allocation
Sub-Account, International Sub-Account, Balanced Sub-Account, Real Estate
Sub-Account, Strategic Theme Sub-Account, Aberdeen New Asia Sub-Account,
Enhanced Index Sub-Account, Wanger International Small Cap Sub-Account and
Wanger U.S. Small Cap Sub-Account (constituting the Phoenix Home Life Variable
Universal Life Account, hereafter referred to as the "Account") at December 31,
1997 and the results of each of their operations and the changes in each of
their net assets for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Account's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at December 31, 1997 by
correspondence with the Funds' custodians, provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
Hartford, Connecticut
February 19, 1998
33
<PAGE>
PHOENIX HOME LIFE
VARIABLE UNIVERSAL LIFE ACCOUNT
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06115
Underwriter
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
Custodians
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
(International Series, Aberdeen New Asia Series)
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
(Real Estate Series, Enhanced Index Series)
P.O. Box 351
Boston, Massachusetts 02101
Independent Accountants
Price Waterhouse LLP
One Financial Plaza
Hartford, Connecticut 06103
34
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
35
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants ............................................37
Consolidated Balance Sheet at December 31, 1997 and 1996 .....................38
Consolidated Statement of Income and Equity for the Years Ended
December 31, 1997, 1996 and 1995 ...........................................39
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 ............................................40
Notes to Consolidated Financial Statements ................................41-67
36
<PAGE>
One Financial Plaza Telephone 860 240 2000
Hartford, CT 06103
[LOGO] PRICE WATERHOUSE LLP [LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
February 11, 1998
To the Board of Directors
and Policyholders of
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and equity and of cash flows present fairly,
in all material respects, the financial position of Phoenix Home Life Mutual
Insurance Company and its subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, 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
37
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 1,554,905 $ 1,555,685
Available-for-sale debt securities, at fair value 5,659,061 4,895,393
Equity securities, at fair value 373,388 235,351
Mortgage loans 927,501 947,076
Real estate 321,757 410,945
Policy loans 1,986,728 1,667,784
Other invested assets 262,675 218,119
Short-term investments 1,078,276 164,967
------------------ -----------------
Total investments 12,164,291 10,095,320
Cash and cash equivalents 159,307 172,895
Accrued investment income 149,566 135,475
Deferred policy acquisition costs 1,038,407 926,274
Premiums, accounts and notes receivable 99,468 79,354
Reinsurance recoverables 66,649 46,251
Property and equipment, net 156,190 137,231
Goodwill and other intangible assets, net 541,499 313,507
Other assets 61,087 134,589
Separate account assets 4,082,255 3,412,152
------------------ -----------------
Total assets $ 18,518,719 $ 15,453,048
================== =================
LIABILITIES
Policy liabilities and accruals $ 11,334,014 $ 9,462,039
Securities sold subject to repurchase agreements 137,473
Other indebtedness 471,085 490,430
Deferred income taxes 143,821 61,934
Other liabilities 585,467 499,940
Separate account liabilities 4,082,255 3,412,152
------------------ -----------------
Total liabilities 16,754,115 13,926,495
Contingent liabilities (Note 17)
MINORITY INTEREST IN NET ASSETS OF CONSOLIDATED SUBSIDIARIES 136,514 129,084
POLICYHOLDERS' EQUITY 1,628,090 1,397,469
------------------ -----------------
Total liabilities and policyholders' equity $ 18,518,719 $ 15,453,048
================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
38
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $ 1,640,606 $ 1,518,822 $ 1,456,875
Insurance and investment product fees 468,030 421,058 324,459
Net investment income 736,874 689,890 662,468
Net realized investment gains 142,770 95,265 74,738
--------------- --------------- --------------
Total revenues 2,988,280 2,725,035 2,518,540
--------------- --------------- --------------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses 1,633,633 1,529,573 1,471,030
Policyholder dividends 343,725 311,739 289,469
Policy acquisition expenses 248,726 242,363 221,339
Other operating expenses 531,597 452,399 419,231
--------------- --------------- --------------
Total benefits, losses and expenses 2,757,681 2,536,074 2,401,069
--------------- --------------- --------------
OPERATING INCOME 230,599 188,961 117,471
NON-OPERATING INCOME
Gain on merger transactions 40,580
--------------- --------------- --------------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 230,599 188,961 158,051
Income taxes 57,069 79,331 43,352
--------------- --------------- --------------
INCOME BEFORE MINORITY INTEREST 173,530 109,630 114,699
Minority interest in net income of consolidated subsidiaries 8,882 8,902 950
--------------- --------------- --------------
NET INCOME 164,648 100,728 113,749
Change in net unrealized investment gains, net of income taxes 65,973 15,154 99,518
--------------- --------------- --------------
INCREASE IN POLICYHOLDERS' EQUITY 230,621 115,882 213,267
POLICYHOLDERS' EQUITY, BEGINNING OF YEAR 1,397,469 1,281,587 1,068,320
--------------- --------------- --------------
POLICYHOLDERS' EQUITY, END OF YEAR $ 1,628,090 $ 1,397,469 $ 1,281,587
=============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
39
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 164,648 $ 100,728 $ 113,749
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATIONS
Net realized investment gains (142,770) (95,265) (74,738)
Net gain on mergers (40,580)
Amortization and depreciation 90,565 64,870 58,912
Deferred income taxes (benefit) 2,555 14,774 (16,236)
(Increase) decrease in receivables (49,172) 5,955 (30,130)
Increase in deferred policy acquisition costs (48,860) (61,985) (26,370)
Increase in policy liabilities and accruals 512,476 559,724 537,919
Increase (decrease) in other assets/other liabilities, net 44,269 (66,337) 95,880
Other, net 5,832 (652) 4,203
-------------- ----------------- --------------
Net cash provided by operating activities 579,543 521,812 622,609
-------------- ----------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from maturities or repayments of
available-for-sale debt securities 1,187,943 1,348,809 1,145,146
Proceeds from maturities or repayments of
held-to-maturity debt securities 217,302 118,596 143,773
Proceeds from disposals of equity securities 51,373 382,359 329,104
Proceeds from mortgage loan maturities or repayments 164,213 151,760 186,172
Proceeds from sale of other invested assets 218,874 127,440 148,546
Purchase of available-for-sale debt securities (1,689,479) (1,909,086) (1,614,387)
Purchase of held-to-maturity debt securities (225,722) (385,321) (247,354)
Purchase of equity securities (88,573) (215,104) (282,488)
Purchase of subsidiaries (246,400)
Purchase of mortgage loans (140,831) (200,683) (93,097)
Purchase of other invested assets (90,593) (157,077) (73,482)
Change in short term investments, net 58,384 110,503 (166,445)
Increase in policy loans (59,699) (49,912) (32,387)
Capital expenditures (41,504) (3,543) (18,449)
Other investing activities, net (1,750) (5,898) (12,704)
-------------- ----------------- --------------
Net cash used for investing activities (686,462) (687,157) (588,052)
-------------- ----------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (17,902) (6,301) (154,100)
Proceeds from securities sold subject to
repurchase agreements 137,472
Proceeds from borrowings 215,359 226,082 177,922
Repayment of borrowings (234,703) (2,400) (12,726)
Dividends paid to minority shareholders (6,895) (6,245) (31,215)
-------------- ----------------- --------------
Net cash provided by (used for) financing activities 93,331 211,136 (20,119)
-------------- ----------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (13,588) 45,791 14,438
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 172,895 127,104 112,666
-------------- ----------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 159,307 $ 172,895 $ 127,104
============== ================= ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 76,167 $ 76,157 $ 33,399
Interest paid on indebtedness $ 32,300 $ 19,214 $ 8,100
</TABLE>
The accompanying notes are an integral part of these statements.
40
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company (Phoenix) 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
Insurance, Group Life and Health Insurance, 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
significant subsidiaries. Less than majority-owned entities in which
Phoenix has at least a 20% interest or those where Phoenix 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, income taxes, contingencies and valuation allowances for
investment assets are discussed throughout the Notes to Consolidated
Financial Statements. Significant intercompany accounts and transactions
have been eliminated. Certain reclassifications have been made to the 1996
and 1995 amounts to conform with the 1997 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, asset-backed securities
including collateralized mortgage obligations and redeemable preferred
stocks. Phoenix classifies its debt securities as either held-to-maturity
or available-for-sale investments. Debt securities held-to-maturity consist
of private placement bonds reported at amortized cost, net of impairments,
that management intends and has the ability to hold until maturity. Debt
securities available-for-sale are reported at fair value with unrealized
gains or losses included in policyholders' equity and consist of public
bonds and preferred stocks that management may not hold until maturity.
Debt securities are considered impaired when a decline in value is
considered to be other than temporary.
Equity securities are reported at fair value based principally on their
quoted market prices with unrealized gains or losses included in
policyholders' equity. Equity securities are considered impaired when a
decline in value is considered to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances, net
of valuation reserves on impaired mortgages. A mortgage loan is considered
to be impaired if management believes it is probable that Phoenix will be
unable to collect all amounts of contractual interest and principal as
scheduled in the loan agreement. An impaired mortgage loan's fair value is
measured based on the present value of future cash flows discounted at the
loan's observable market price or at the fair value of the collateral. If
the fair value of a mortgage loan is less than the recorded investment in
the loan, the difference is recorded as a valuation reserve.
41
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Real estate, all of which is held for sale, is carried at the lower of cost
or current fair value less costs to sell. Fair value for real estate is
determined taking into consideration one or more of the following factors:
property valuation techniques utilizing discounted cash flows at the time
of stabilization including capital expenditures and stabilization costs;
sales of comparable properties; geographic location of the property and
related market conditions; and disposition costs.
Policy loans are generally carried at their unpaid principal balances and
are collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
fair value.
Other invested assets (primarily partnership interests) are carried at cost
adjusted for Phoenix's equity in undistributed earnings or losses since
acquisition, less allowances for other than temporary declines in value.
Realized investment gains and losses, other than those related to separate
accounts for which Phoenix does not bear the investment risk, are
determined by the specific identification method and reported as a
component of revenue. A realized investment loss is recorded when an
investment valuation reserve is determined. Valuation reserves are netted
against the asset categories to which they apply and changes in the
valuation reserves are included in realized investment gains and losses.
Unrealized investment gains and losses on debt securities and equity
securities classified as available-for-sale are included as a separate
component of policyholders' equity, net of deferred income taxes and
deferred policy acquisition costs.
FINANCIAL INSTRUMENTS
In the normal course of business, Phoenix enters into transactions
involving various types of financial instruments, including debt,
investments such as debt securities, mortgage loans and equity securities,
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.
42
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the cost of businesses acquired over the
fair value of their net assets. These costs are amortized on a
straight-line basis over periods, not exceeding 40 years, that correspond
with the benefits expected to be derived from the acquisitions. Other
intangible assets are amortized on a straight-line basis over the estimated
lives of such assets. Management periodically reevaluates the propriety of
the carrying value of goodwill and other intangible assets by comparing
estimates of future undiscounted cash flows to the carrying value of
assets. Assets are considered impaired if the carrying value exceeds the
expected future undiscounted cash flows.
SEPARATE ACCOUNTS
Separate account assets and liabilities are funds maintained in accounts to
meet specific investment objectives of contractholders who bear the
investment risk. Investment income and investment gains and losses accrue
directly to such contractholders. The assets of each account are legally
segregated and are not subject to claims that arise out of any other
business of Phoenix. The assets and liabilities are carried at market
value. Deposits, net investment income and realized investment gains and
losses for these accounts are excluded from revenues, and the related
liability increases are excluded from benefits and expenses. Amounts
assessed to the contractholders for management services are included in
revenues.
POLICY LIABILITIES AND ACCRUALS
Future policy benefits are liabilities for life, health and annuity
products. Such liabilities are established in amounts adequate to meet the
estimated future obligations of policies in force. Policy liabilities for
traditional life insurance are computed using the net level premium method
on the basis of actuarial assumptions as to 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.
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.
43
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
POLICYHOLDERS' DIVIDENDS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of Phoenix. The
amount of policyholders' dividends to be paid is determined annually by
Phoenix's board of directors. The aggregate amount of policyholders'
dividends is related to the actual interest, mortality, morbidity and
expense experience for the year and Phoenix's judgment as to the
appropriate level of statutory surplus to be retained. At the end of the
reporting period, Phoenix establishes a dividend liability for the pro-rata
portion of the dividends payable on the next anniversary of each policy.
Phoenix also establishes a liability for termination dividends.
INCOME TAXES
Phoenix and its eligible affiliated companies have elected to file a
life/nonlife consolidated federal income tax return for the years ended
December 31, 1997, 1996 and 1995. Entities included within the consolidated
group are segregated into either a life insurance or non-life insurance
company subgroup. The consolidation of these subgroups is subject to
certain statutory restrictions in the percentage of eligible non-life tax
losses that can be applied to offset life company taxable income.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities and accruals, policy acquisition expenses, investment
impairment reserves, reserves for postretirement benefits and unrealized
gains or losses on investments.
As a mutual life insurance company, Phoenix is required to reduce its
income tax deduction for policyholder dividends by the differential
earnings amount, defined as the difference between the earnings rates of
stock and mutual companies applied against an adjusted base of
policyholders' surplus.
3. SIGNIFICANT TRANSACTIONS
CONFEDERATION LIFE
On December 31, 1997, Phoenix acquired the individual life and
single-premium deferred annuity business of the former Confederation Life
Insurance Company. Confederation Life, a Canadian mutual life insurer, was
placed in liquidation during August of 1994. The blocks of business
acquired were part of Confederation Life's U.S. branch operations and were
covered under the rehabilitation plan approved by a Michigan circuit court.
Approximately 40,000 policies with annualized premium of $122.8 million
were included in the acquisition under an assumption reinsurance contract.
Pursuant to initiation of the contract and the closing on December 31,
1997, Phoenix recorded all balances reinsured using the purchase accounting
method. The value of reserves and liabilities acquired totaled $1.4 billion
and exceeded the assets received, principally cash and short-term
investments. The difference of $141.3 million was recorded as deferred
acquisition costs.
PHOENIX DUFF & PHELPS CORPORATION
On September 3, 1997, Phoenix Duff & Phelps acquired Pasadena Capital
Corporation, the parent company of Roger Engemann & Associates, Inc.
Pasadena Capital manages $6.3 billion in assets, primarily individual
accounts.
44
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
On July 17, 1997, Phoenix Duff & Phelps acquired a majority interest in
GMG/Seneca Capital Management LLC, renamed Seneca Capital Management.
Seneca Capital Management manages $4.2 billion in assets.
Effective January 1, 1995, the money management businesses of Phoenix were
completely transferred to Phoenix Securities Group, Inc. 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.,
merged Phoenix Securities Group into Duff & Phelps Corporation, forming
Phoenix Duff & Phelps Corporation. The transaction was accounted for as a
reverse merger with the purchase accounting method applied to Duff &
Phelps' assets and liabilities. The purchase price was $190.7 million and
Phoenix Duff & Phelps 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 Phoenix Duff & Phelps common stock. In
addition, PM Holdings owns 45% of Phoenix Duff & Phelps' 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
Statement of Income and Equity.
SURPLUS NOTES
On November 25, 1996, Phoenix 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 debt in
the Consolidated Balance Sheet.
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 ASSET MANAGEMENT PLC
On March 25, 1996, Phoenix purchased common shares of Aberdeen Asset
Management PLC, a Scottish asset management firm for $26.4 million. Phoenix
transferred these shares to PM Holding in 1996. As of December 31, 1997, PM
Holdings owned 10% of Aberdeen Asset Management's outstanding common stock.
The investment is reported on the equity basis and classified as other
invested assets in the Consolidated Balance Sheet.
In addition, on April 15, 1996, Phoenix purchased a 7% convertible
subordinated note issued by Aberdeen Asset Management for $37.5 million.
The note, which matures on March 29, 2003, may be converted into shares
which would be equivalent to approximately 11% of Aberdeen Asset
Management's then outstanding common stock. The note is classified as
equity securities in the Consolidated Balance Sheet.
In the spring of 1996, Phoenix and Aberdeen Asset Management joined
together to form Phoenix-Aberdeen International Advisors, LLC, an SEC
registered investment advisor that, in conjunction with Phoenix Duff &
Phelps and Aberdeen Asset Management, develops and markets investment
products in the United States and the United Kingdom.
45
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
DEBT AND EQUITY SECURITIES
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DEBT SECURITIES
HELD-TO-MATURITY:
State and political subdivision bonds $ 11,041 $ 569 $ (8) $ 11,602
Foreign government bonds 3,032 15 (115) 2,932
Corporate securities 1,521,033 103,267 (2,042) 1,622,258
Mortgage-backed securities 19,799 949 20,748
---------------- --------------- --------------- ----------------
Total 1,554,905 104,800 (2,165) 1,657,540
---------------- --------------- --------------- ----------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 501,190 25,020 (636) 525,574
State and political subdivision bonds 474,123 32,896 (3,477) 503,542
Foreign government bonds 248,831 26,303 (5,992) 269,142
Corporate securities 1,384,503 97,943 (4,403) 1,478,043
Mortgage-backed securities 2,786,278 99,785 (3,303) 2,882,760
---------------- --------------- --------------- ----------------
Total 5,394,925 281,947 (17,811) 5,659,061
---------------- --------------- --------------- ----------------
TOTAL DEBT SECURITIES $ 6,949,830 $ 386,747 $ (19,976) $ 7,316,601
================ =============== =============== ================
EQUITY SECURITIES $ 195,717 $ 190,669 $ (12,998) $ 373,388
================ =============== =============== ================
</TABLE>
46
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DEBT SECURITIES
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 DEBT SECURITIES $ 6,299,074 $ 252,729 $ (51,786) $ 6,500,017
================= ================= ================= =================
EQUITY SECURITIES $ 137,907 $ 100,258 $ (2,814) $ 235,351
================= ================= ================= =================
</TABLE>
47
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of debt securities, by contractual
maturity, as of December 31, 1997 are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties, or
Phoenix 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 $ 113,850 $ 116,684 $ 78,768 $ 79,054
Due after one year through five years 477,101 499,155 329,529 347,240
Due after five years through ten years 625,518 670,597 651,878 683,747
Due after ten years 318,637 350,357 1,548,472 1,666,260
Mortgage-backed securities 19,799 20,747 2,786,278 2,882,760
---------------- ---------------- ---------------- ----------------
Total $ 1,554,905 $ 1,657,540 $ 5,394,925 $ 5,659,061
================ ================ ================ ================
</TABLE>
Carrying values for investments in mortgage-backed securities, excluding
U.S. government guaranteed investments, were as follows:
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Planned amortization class $ 554,425 $ 618,953
Asset-backed 594,128 490,018
Mezzanine 328,539 322,812
Commercial 556,155 413,571
Sequential pay 680,397 552,512
Pass through 132,522 105,282
Other 56,393 58,604
-------------- --------------
Total mortgage-backed securities $ 2,902,559 $ 2,561,752
============== ==============
Phoenix had 30% and 37% at December 31, 1997 and 1996, respectively, in
planned amortization class and mezzanine mortgage-backed securities which
have reasonably predictable cash flows and a relatively high degree of
prepayment protection.
48
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MORTGAGE LOANS AND REAL ESTATE
Phoenix's mortgage loans and real estate are diversified by property type
and location and, for mortgage loans, by borrower. Mortgage loans are
collateralized by the related properties and are generally 75% of the
properties' value at the time the original loan is made.
Mortgage loans and real estate investments comprise the following property
types and geographic regions:
<TABLE>
<CAPTION>
MORTGAGE LOANS REAL ESTATE
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
PROPERTY TYPE:
Office buildings $ 246,500 $ 251,526 $ 180,743 $ 246,644
Retail 231,886 257,721 108,907 121,813
Apartment buildings 303,990 241,286 20,560 26,286
Industrial buildings 162,008 197,013 39,810 56,134
Other 18,917 47,929 238 7,577
Valuation allowances (35,800) (48,399) (28,501) (47,509)
--------------- -------------- ---------------- -------------
Total $ 927,501 $ 947,076 $ 321,757 $ 410,945
=============== ============== ================ =============
GEOGRAPHIC REGION:
Northeast $ 222,975 $ 260,146 $ 92,513 $ 103,761
Southeast 257,376 261,957 85,781 110,746
North central 189,163 158,902 63,751 86,070
South central 79,092 57,507 58,954 85,532
West 214,695 256,963 49,259 72,345
Valuation allowances (35,800) (48,399) (28,501) (47,509)
--------------- -------------- ---------------- -------------
Total $ 927,501 $ 947,076 $ 321,757 $ 410,945
=============== ============== ================ =============
</TABLE>
At December 31, 1997, scheduled mortgage loan maturities were as follows:
1998 - $151 million; 1999 - $88 million; 2000 - $97 million; 2001 - $92
million; 2002 - $41 million; and $494 million thereafter. Actual maturities
will differ from contractual maturities because borrowers may have the
right to prepay obligations with or without prepayment penalties and loans
may be refinanced. Phoenix refinanced $8.6 million and $28.9 million of its
mortgage loans during 1997 and 1996, respectively, based on terms which
differed from those granted to new borrowers.
49
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT VALUATION ALLOWANCES
Investment valuation allowances which have been deducted in arriving at
investment carrying values as presented in the Consolidated Balance Sheet
and changes thereto were as follows:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
JANUARY 1, ADDITIONS DEDUCTIONS DECEMBER 31,
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997
Mortgage loans $ 48,399 $ 6,731 $ (19,330) $ 35,800
Real estate 47,509 4,201 (23,209) 28,501
-------------- -------------------- --------------- --------------------
Total $ 95,908 $ 10,932 $ (42,539) $ 64,301
============== ==================== =============== ====================
1996
Mortgage loans $ 65,807 $ 7,640 $ (25,048) $ 48,399
Real estate 83,755 2,526 (38,772) 47,509
-------------- -------------------- --------------- --------------------
Total $ 149,562 $ 10,166 $ (63,820) $ 95,908
============== ==================== =============== ====================
</TABLE>
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $7.0
million and $4.5 million at December 31, 1997 and 1996, respectively. There
were no non-income producing bonds at December 31, 1997 or 1996.
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 $272.9 million and $73.1 million
at December 31, 1997 and 1996, respectively. Average received and average
paid rates were 7.00% and 6.63% for 1997.
These agreements do not require the exchange of underlying principal
amounts, and accordingly Phoenix's maximum exposure to credit risk is the
difference in interest payments exchanged. Management of Phoenix considers
the likelihood of any material loss on interest rate swaps to be remote.
50
<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 affiliates, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Venture capital equity partnerships $ 88,228 $ 66,284
Transportation and equipment leases 59,111 46,950
Investment in Aberdeen Asset Management 32,817 29,980
Investment in Beutel, Goodman & Co. Ltd. 31,214 34,541
Seed money in separate accounts 41,297 35,747
Other 10,008 4,617
------------- ------------
Total other invested assets $ 262,675 $ 218,119
============= ============
</TABLE>
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(in thousands)
<S> <C> <C> <C>
Debt securities $ 509,702 $ 469,713 $ 437,521
Equity securities 4,277 4,689 1,787
Mortgage loans 85,662 84,318 92,283
Policy loans 122,562 117,742 115,055
Real estate 18,939 21,799 20,910
Other invested assets (415) 332 871
Short-term investments 18,768 18,688 21,974
------------ ------------ -------------
Sub-total 759,495 717,281 690,401
Less investment expenses 22,621 27,391 27,933
------------ ------------ -------------
Net investment income $ 736,874 $ 689,890 $ 662,468
============ ============ =============
</TABLE>
Investment income of $.7 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1997. Phoenix does not
accrue interest income on impaired mortgage loans and impaired bonds when
the likelihood of collection is doubtful.
The payment terms of mortgage loans may from time to time be restructured
or modified. The investment in restructured mortgage loans, based on
amortized cost, amounted to $51.3 million and $61.5 million at December 31,
1997 and 1996, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $5.3 million, $3.1 million and $6.6 million in 1997, 1996
and 1995, respectively. Actual interest income on these loans included in
net investment income was $3.8 million, $5.2 million and $6.4 million in
1997, 1996 and 1995, respectively.
51
<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>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 112,194 $ (70,986) $ 476,352
Equity securities 74,547 40,803 24,527
Deferred policy acquisition costs (77,985) 51,528 (341,836)
Deferred income taxes 38,064 7,432 55,692
Other (Note 9) (4,719) 1,241 (3,833)
-------------- ------------------ ---------------
Net unrealized investment gains $ 65,973 $ 15,154 $ 99,518
============== ================== ===============
</TABLE>
Realized investment gains and losses for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 19,315 $ (10,476) $ 8,080
Equity securities 26,290 59,794 29,276
Mortgage loans 3,805 2,628 (262)
Real estate 44,668 24,711 20,535
Other invested assets 48,692 18,608 17,109
-------------- ------------------ ---------------
142,770 95,265 74,738
Income taxes 49,970 33,343 26,158
-------------- ------------------ ---------------
Net realized investment gains after taxes $ 92,800 $ 61,922 $ 48,580
============== ================== ===============
</TABLE>
The proceeds from sales of available-for-sale debt securities and the gross
realized gains and gross realized losses on those sales for the year ended
December 31, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from disposals $ 1,206,744 $ 1,348,809 $ 1,145,146
Gross gains on sales $ 48,100 $ 17,429 $ 27,980
Gross losses on sales $ 28,785 $ 27,905 $ 19,900
</TABLE>
52
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets were as follows:
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Goodwill $ 387,517 $ 231,135
Investment management contracts 167,788 56,700
Client listings 45,441 41,410
Non-compete covenants 5,000 5,000
Intangible asset related to
pension plan benefits 18,032 19,835
Other 1,499 1,220
------------ ------------
625,277 355,300
Accumulated amortization (83,778) (41,793)
------------ ------------
Total $ 541,499 $ 313,507
============ ============
Phoenix Duff & Phelps' amounts included above were as follows:
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Goodwill $ 321,932 $ 179,406
Investment management contracts 167,788 56,700
Non-compete covenants 5,000 5,000
Other 1,220 1,220
------------ ------------
495,940 242,326
Accumulated amortization (27,579) (13,198)
------------ ------------
Total $ 468,361 $ 229,128
============ ============
In 1997, American Phoenix Corporation wrote down the carrying value of its
goodwill and other intangible assets by $18.8 million. This impairment loss
is included in other operating expenses in the Consolidated Statement of
Income and Equity.
53
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Other than debt securities being held-to-maturity, financial instruments
that are subject to fair value disclosure requirements (insurance contracts
are excluded) are carried in the financial statements at amounts that
approximate fair value. The fair values presented for certain financial
instruments are estimates which, in many cases, may differ significantly
from the amounts which could be realized upon immediate liquidation. In
cases where market prices are not available, estimates of fair value are
based on discounted cash flow analyses which utilize current interest rates
for similar financial instruments which have comparable terms and credit
quality.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
DEBT SECURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
debt securities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values are calculated as the present value of scheduled payments, with
the discount based upon the Treasury rate comparable for the remaining loan
duration, plus a spread of between 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.
54
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair value of deferred annuities and supplementary contracts without
life contingencies with an interest guarantee of one year or less is valued
at the amount of the policy reserve. In determining the fair value of
deferred annuities and supplementary contracts without life contingencies
with interest guarantees greater than one year, a discount rate equal to
the appropriate Treasury rate, plus 150 basis points, was used to determine
the present value of the projected account value of the policy at the end
of the current guarantee period.
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest guarantees of less 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 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>
1997 1996
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 159,307 $ 159,307 $ 172,895 $ 172,895
Short-term investments 1,078,276 1,078,276 164,967 164,967
Debt securities 7,213,966 7,316,601 6,451,078 6,500,017
Equity securities 373,388 373,388 235,351 235,351
Mortgage loans 927,501 956,041 947,076 986,900
Policy loans 1,986,728 2,104,704 1,667,784 1,645,899
--------------- ---------------- -------------- --------------
Total financial assets $ 11,739,166 $ 11,988,317 $ 9,639,151 $ 9,706,029
=============== ================ ============== ==============
Financial liabilities:
Policy liabilities $ 902,200 $ 902,200 $ 875,200 $ 875,100
Securities sold subject to repurchase
agreements 137,473 137,473
Other indebtedness 471,085 471,085 490,430 490,430
--------------- ---------------- -------------- --------------
Total financial liabilities $ 1,510,758 $ 1,510,758 $ 1,365,630 $ 1,365,530
=============== ================ ============== ==============
</TABLE>
55
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. OTHER INDEBTEDNESS
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Short-term debt $ 15,539 $ 12,455
Bank borrowings 263,732 280,845
Notes payable 14,632 19,522
Surplus notes 175,000 175,000
Secured debt 2,182 2,608
------------ ------------
Total other indebtedness $ 471,085 $ 490,430
============ ============
Phoenix has various lines of credit established with major commercial
banks. As of December 31, 1997, Phoenix had outstanding balances totaling
$264.5 million. The total unused credit was $145.3 million. Interest rates
ranged from 5.42% to 6.63% in 1997.
On November 25, 1996, Phoenix issued $175 million of surplus notes (See
Note 3).
Maturities of other indebtedness are as follows: 1998 - $15.5 million; 1999
- $55 million; 2000 - $4 million; 2001 - $29 million; 2002 - $192 million;
2003 and thereafter - $175.5 million.
Interest expense was $32.5 million, $18.0 million and $7.7 million for the
years ended December 31, 1997, 1996 and 1995, respectively.
8. INCOME TAXES
A summary of income taxes (benefits) in the Consolidated Statement of
Income and Equity for the year ended December 31, was as follows:
1997 1996 1995
(IN THOUSANDS)
Income taxes
Current $ 54,514 $ 59,673 $ 59,590
Deferred 2,555 19,658 (16,238)
----------- ---------- ------------
Total $ 57,069 $ 79,331 $ 43,352
=========== ========== ============
56
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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>
1997 1996 1995
% % %
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $ 80,710 35 $ 66,136 35 $ 55,318 35
Non-taxable gain on Phoenix Duff &
Phelps merger (14,203) (9)
Dividend received deduction and
tax-exempt interest (2,513) (1) (2,107) (1) (623)
Other, net (8,017) (4) 2,736 1 2,860 1
------------ ----- ------------ ----- ------------ -----
70,180 30 66,765 35 43,352 27
Differential earnings (equity tax) (13,111) (5) 12,566 7
------------ ----- ------------ ----- ------------ -----
Income taxes $ 57,069 25 $ 79,331 42 $ 43,352 27
============ ===== ============ ===== ============ =====
</TABLE>
57
<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:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 303,500 $ 220,135
Unearned premium/deferred revenue (139,817) (131,513)
Impairment reserves (26,102) (43,331)
Pension and other postretirement benefits (56,643) (58,230)
Investments 77,202 50,219
Future policyholder benefits (140,980) (37,904)
Other 45,053 15,633
------------- -------------
62,213 15,009
Net unrealized investment gains 84,134 48,320
Minimum pension liability (2,526) (1,395)
Foreign tax credit (1,109)
------------- -------------
Deferred income tax liability, net
before valuation allowance 143,821 60,825
Valuation allowance 1,109
------------- -------------
Deferred income tax liability, net $ 143,821 $ 61,934
============= =============
</TABLE>
Gross deferred income tax assets totaled $366 million and $274 million at
December 31, 1997 and 1996, respectively. Gross deferred income tax
liabilities totaled $510 million and $336 million at December 31, 1997 and
1996, respectively. It is management's assessment, based on Phoenix's
earnings and projected future taxable income, that it is more likely than
not that deferred income tax assets at December 31, 1997 and 1996, with the
exception of the foreign tax credit, will be realized.
The Internal Revenue Service is currently examining Phoenix's tax returns
for 1995 and 1996. Management does not believe that there will be a
material adverse effect on the financial statements as a result of pending
tax matters.
58
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
Phoenix has a multi-employer, non-contributory, defined benefit pension
plan covering substantially all of its employees. Retirement benefits are a
function of both years of service and level of compensation. Phoenix also
sponsors a non-qualified supplemental defined benefit plan to provide
benefits in excess of amounts allowed pursuant to Internal Revenue Code.
Phoenix's funding policy is to contribute annually an amount equal to at
least the minimum required contribution in accordance with minimum funding
standards established by the Employee Retirement Income Security Act of
1974. Contributions are intended to provide not only for benefits
attributable to service to date, but also for service expected to be earned
in the future.
Components of net periodic pension cost for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 10,278 $ 10,076 $ 9,599
Interest accrued on projected benefit obligation 22,650 22,660 19,880
Actual return on assets (53,093) (38,788) (62,567)
Net amortization and deferral 30,488 17,318 45,807
------------ ------------- ------------
Net periodic pension cost $ 10,323 $ 11,266 $ 12,719
============ ============= ============
</TABLE>
In 1996, Phoenix offered an early retirement program which granted an
additional benefit of five years of age and service. As a result of the
early retirement program, Phoenix recorded an additional pension expense of
$8.7 million for the year ended December 31, 1996.
59
<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,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of vested benefit obligation $ 236,443 $ 213,148
Actuarial present value of non-vested benefit obligation 16,312 14,828
------------- ------------
Accumulated benefit obligation 252,755 227,976
Present value effect of future salary increases 32,316 33,910
------------- ------------
Projected benefit obligation $ 285,071 $ 261,886
============= ============
Plan assets at fair value $ 321,555 $ 292,070
============= ============
Plan assets in excess of projected benefit obligation $ (36,484) $ (30,184)
Unrecognized net gain from past experience 60,759 52,312
Unrecognized prior service benefit 52 240
Unamortized transition asset 16,586 19,745
------------- ------------
Net pension liability (included in other liabilities) $ 40,913 $ 42,113
============= ============
</TABLE>
At December 31, 1997 and 1996, the non-qualified plan was unfunded and had
projected benefit obligations of $50.4 million and $50.0 million,
respectively. The accumulated benefit obligations as of December 31, 1997
and 1996 related to this plan were $42.8 million and $37.4 million,
respectively, and are included in other liabilities.
Phoenix recorded, as a reduction of policyholders' equity, an additional
minimum pension liability of $4.7 million and $2.8 million, net of income
taxes, at December 31, 1997 and 1996, respectively, representing the excess
of accumulated benefit obligations over the fair value of plan assets and
accrued pension liabilities for the non-qualified plan. Phoenix has also
recorded an intangible asset of $18.0 million and $19.8 million as of
December 31, 1997 and 1996 related to the non-qualified plan.
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit
obligation were 7.0% and 4.0%, for 1997 and 7.5% and 4.5% for 1996. The
discount rate assumption for 1997 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%.
The pension plan's assets include corporate and government debt securities,
equity securities, real estate, venture capital funds, and shares of mutual
funds.
Phoenix 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. Phoenix contributes an additional amount, subject to limitation,
based on the voluntary contribution of the employee or agent. Company
contributions charged to expense with respect to these plans during the
years ended December 31, 1997, 1996 and 1995 were $3.8 million, $4.2
million and $4.2 million, respectively.
60
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to Phoenix's pension plans, Phoenix currently provides certain
health care and life insurance benefits to retired employees, spouses and
other eligible dependents through various plans sponsored by Phoenix. A
substantial portion of Phoenix's employees may become eligible for these
benefits upon retirement. The health care plans have varying copayments and
deductibles, depending on the plan. These plans are unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The plan's funded status reconciled with amounts recognized in Phoenix's
Consolidated Balance Sheet, was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 35,900 $ 30,576
Fully eligible active plan participants 6,889 11,466
Other active plan participants 23,829 21,614
------------ -----------
Total accumulated postretirement benefit obligation 66,618 63,656
Unrecognized net gain from past experience 28,037 29,173
------------ -----------
Accrued postretirement benefit liability $ 94,655 $ 92,829
============ ===========
</TABLE>
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during year $ 3,136 $ 2,765 $ 3,366
Interest cost accrued on benefit obligation 4,441 4,547 5,275
Net amortization (1,527) (1,577) (458)
---------- ---------- ---------
Net periodic postretirement benefit cost $ 6,050 $ 5,735 $ 8,183
========== ========== =========
</TABLE>
61
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In addition to the net periodic postretirement benefit cost, Phoenix
expensed an additional $3.0 million for postretirement benefits related to
the early retirement program for the year ended December 31, 1996.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.0% at December 31, 1997 and 7.5% at December 31,
1996.
For purposes of measuring the accumulated postretirement benefit obligation
at December 31, 1997, 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, 1996, health
care costs were assumed to increase 9.5% 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 $5.3
million and the annual service and interest cost by $.8 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
Phoenix recognizes the costs and obligations of severance, disability and
related life insurance and health care benefits to be paid to inactive or
former employees after employment but before retirement. Postemployment
benefit expense was $.4 million for 1997, $.4 million for 1996 and $.5
million for 1995.
62
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix operates principally in seven segments: Individual Insurance, Group
Life and Health Insurance, 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 include equity securities.
Summarized below is financial information with respect to the business
segments:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Individual Insurance $ 2,028,230 $ 1,796,572 $ 1,752,338
Group Life and Health Insurance 459,405 462,551 421,771
Life Reinsurance 162,843 143,314 128,813
General Lines Brokerage 64,093 61,809 40,977
Securities Management 177,894 164,966 112,206
Real Estate Management 15,319 13,550 13,562
Other Operations 80,496 82,273 48,873
----------------- ----------------- -----------------
Total $ 2,988,280 $ 2,725,035 $ 2,518,540
================= ================= =================
OPERATING INCOME
Individual Insurance $ 132,308 $ 63,013 $ 43,094
Group Life and Health Insurance 31,276 11,220 19,921
Life Reinsurance 10,592 8,078 17,656
General Lines Brokerage (21,652) (2,935) (1,887)
Securities Management 38,813 44,440 23,667
Real Estate Management (2,433) (3,783) (184)
Other Operations 41,695 68,928 15,204
----------------- ----------------- -----------------
Total $ 230,599 $ 188,961 $ 117,471
================= ================= =================
IDENTIFIABLE ASSETS
Individual Insurance $ 15,679,598 $ 12,961,648
Group Life and Health Insurance 655,800 596,800
Life Reinsurance 313,500 304,300
General Lines Brokerage 111,900 117,300
Securities Management 615,112 376,000
Real Estate Management 278,500 319,400
Other Operations 864,309 777,600
----------------- -----------------
Total $ 18,518,719 $ 15,453,048
================= =================
</TABLE>
63
<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 $14.9 million, $14.8 million and $14.6 million in
1997, 1996, and 1995, respectively. Future minimum rental payments under
non-cancelable operating leases were approximately $51.0 million as of
December 31, 1997, payable as follows: 1998 - $15.7 million; 1999 - $12.9
million; 2000 - $10.1 million; 2001 - $5.6 million; 2002 - $3.6 million;
and $3.1 million thereafter.
12. PROPERTY AND EQUIPMENT
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by Phoenix, are stated at depreciated cost. Real
estate occupied by Phoenix was $109.0 million and $97.2 million,
respectively, at December 31, 1997 and 1996. Phoenix provides for
depreciation using straight line and accelerated methods over the estimated
useful lives of the related assets which generally range from five to forty
years. Accumulated depreciation and amortization was $164.4 million and
$144.1 million at December 31, 1997 and 1996, respectively.
13. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix assumes and
cedes reinsurance as a means of diversifying underwriting risk. The maximum
amount of individual life insurance retained by Phoenix on any one life is
$8 million for single life and joint first-to-die policies and $10 million
for joint last-to-die policies, with excess amounts ceded to reinsurers.
For reinsurance ceded, Phoenix 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>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,592,800 $ 1,473,869 $ 1,455,459
Reinsurance assumed 329,927 276,630 271,498
Reinsurance ceded (282,121) (231,677) (270,082)
----------------- -------------------- -----------------
Net premiums $ 1,640,606 $ 1,518,822 $ 1,456,875
================= ==================== =================
Direct policy and contract claims incurred $ 626,834 $ 575,824 $ 605,545
Reinsurance assumed 410,704 170,058 256,529
Reinsurance ceded (373,127) (160,646) (292,357)
----------------- -------------------- -----------------
Net policy and contract claims incurred $ 664,411 $ 585,236 $ 569,717
================= ==================== =================
Direct life insurance in force $ 120,394,664 $ 108,816,856 $ 102,606,749
Reinsurance assumed 84,806,585 61,109,836 36,724,852
Reinsurance ceded (74,764,639) (51,525,976) (34,093,090)
----------------- -------------------- -----------------
Net insurance in force $ 130,436,610 $ 118,400,716 $ 105,238,511
================= ==================== =================
</TABLE>
64
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Irrevocable letters of credit aggregating $134.8 million at December 31,
1997 have been arranged with United States commercial banks in favor of
Phoenix to collateralize the ceded reserves.
14. PARTICIPATING LIFE INSURANCE
Participating life insurance in force was 79.6% and 80.0% of the face value
of total individual life insurance in force at December 31, 1997 and 1996,
respectively. The premiums on participating life insurance policies were
83.5%, 84.1% and 84.7% of total individual life insurance premiums in 1997,
1996 and 1995, respectively.
15. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 926,274 $ 816,128 $ 1,128,227
Acquisition cost deferred 295,189 153,873 143,519
Amortized to expense during the year (105,071) (95,255) (113,788)
Adjustment to equity during the year (77,985) 51,528 (341,830)
----------------- -------------- ----------------
Balance at end of year $ 1,038,407 $ 926,274 $ 816,128
================= ============== ================
</TABLE>
16. MINORITY INTEREST
Phoenix's interests in Phoenix Duff & Phelps Corporation and American
Phoenix Corporation, through its wholly-owned subsidiary PM Holdings are
represented by ownership of approximately 60% and 92%, respectively, of the
outstanding shares of common stock at December 31, 1997. Earnings and
policyholders' equity attributable to minority shareholders are included in
minority interest in the consolidated financial statements along with
Phoenix Duff & Phelps' preferred stock.
17. CONTINGENCIES
FINANCIAL GUARANTEES
Phoenix 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 Phoenix's maximum exposure to credit loss in the event
of nonperformance. The principal amount of bonds guaranteed by Phoenix at
December 31, 1997 and 1996 was $88.7 million and $88.8 million,
respectively. Management believes that any loss contingencies which may
arise from Phoenix's financial guarantees would not have a material adverse
effect on Phoenix's liquidity or financial condition.
65
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
LITIGATION
In 1996, Phoenix 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. Phoenix estimates the cost of settlement to be $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 Phoenix's consolidated financial position.
Phoenix 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 Phoenix's consolidated financial position.
18. 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, 1997, 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, surplus notes are not included in
policyholders' equity, postretirement benefit costs are based on different
assumptions and reflect a different method of adoption, life insurance
reserves are based on different assumptions and income tax expense reflects
only taxes paid or currently payable.
The following reconciles the statutory net income of Phoenix as reported to
regulatory authorities to the net income as reported in these financial
statements for the year ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 60,702 $ 72,961 $ 64,198
Deferred policy acquisition costs, net 48,821 58,618 29,766
Future policy benefits (9,145) (16,793) (15,763)
Pension and postretirement expenses (7,955) (23,275) (12,691)
Investment valuation allowances 88,813 76,631 56,745
Interest maintenance reserve 17,544 (5,158) 5,829
Deferred income taxes (36,250) (67,064) (10,021)
Other, net 2,118 4,808 (4,314)
------------ ------------- ------------
Net income, as reported $ 164,648 $ 100,728 $ 113,749
============ ============= ============
</TABLE>
66
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to policyholders'
equity as reported in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $ 1,152,820 $ 1,102,200
Deferred policy acquisition costs, net 1,227,782 1,037,664
Future policy benefits (395,436) (379,820)
Pension and postretirement expenses (169,383) (152,112)
Investment valuation allowances (40,032) (139,562)
Interest maintenance reserve 33,794 6,897
Deferred income taxes (12,051) 82,069
Surplus notes (157,500) (157,500)
Other, net (11,904) (2,367)
-------------- --------------
Policyholders' equity, as reported $ 1,628,090 $ 1,397,469
============== ==============
</TABLE>
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.
67
<PAGE>
APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
Contributions to the GIA under the Policy and transfers to the GIA become
part of 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 6%.
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.
Biweekly, 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, ONE TRANSFER PER CONTRACT YEAR IS ALLOWED FROM THE GIA. THE AMOUNT
WHICH CAN BE TRANSFERRED IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
CONTRACT VALUE IN THE GIA AT THE TIME OF THE TRANSFER. UNDER THE SYSTEMATIC
TRANSFER PROGRAM, TRANSFERS OF APPROXIMATELY EQUAL AMOUNTS MAY BE MADE OVER A
MINIMUM 18-MONTH PERIOD. NON-SYSTEMATIC TRANSFERS FROM THE GIA WILL BE
EFFECTUATED ON THE DATE OF RECEIPT BY VPMO, UNLESS OTHERWISE REQUESTED BY THE
CONTRACT OWNER.
68
<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%, 6% or 12% over a period of years but went
above or below those figures in individual Policy Years. The Policy benefits
also will differ, depending on your premium allocations to each Subaccount of
the VUL Account, if the overall actual rates of return averaged 0%, 6% or 12%,
but went above or below those figures for the individual Subaccounts. The tables
are for standard risk males and females who have never smoked. In states where
cost of insurance rates are not based on the Insured's sex, the tables
designated "male" apply to all standard risk insureds who have never smoked.
Account values and Cash Surrender Values may be lower for smokers or former
smokers or for risk classes involving higher mortality risk. Planned premium
payments are assumed to be paid at the beginning of each Policy Year. The
difference between the Policy Value and the Cash Surrender Value in the first 10
years is the surrender charge. Illustrated 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 Multiple Life Policies.
The death benefit, account value and Cash Surrender Value amounts reflect
the following current charges:
1. Issue charge of $150.
2. Monthly administrative charge of $5 per month ($10 per month guaranteed
maximum).
3. Premium tax charge of 2.25% (will vary from state to state).
4. 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.")
5. Mortality and expense risk charge, which is a daily charge equivalent to
.80% on an annual basis 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%. All other Fund expenses, except capital items such as brokerage
commissions, are paid by the Adviser or by Phoenix. Management may decide to
limit the amount of expense reimbursement in the future. If expense
reimbursement had not been in place for the fiscal year ended December 31, 1996,
average total operating expenses for the Series would have been approximately
.93% of the average net assets. See "Charges and Deductions--Investment
Management Charge."
Taking into account the mortality and expense risk charge and the investment
advisory fees and expenses, the gross annual investment return rates of 0%, 6%
and 12% on the Funds' assets are equivalent to net annual investment return
rates of approximately -1.72%, 4.23% and 10.19%, respectively. For individual
illustrations, interest rates ranging between 0% and 12% may be selected in
place of the 0%, 6% and 12% rates.
The hypothetical returns shown in the tables are without any tax charges that
may be attributable to the VUL Account in the future. If such tax charges are
imposed in the future, then in order to produce after tax returns equal to those
illustrated for 0%, 6% and 12%, a sufficiently higher amount in excess of the
hypothetical interest rates would have to be earned. (See "Charges and
Deductions--Other Charges--Taxes.")
The second column of each table shows the amount that would accumulate if an
amount equal to the premiums paid were invested to earn interest, after taxes,
at 5% compounded annually. These tables show that if a Policy is returned in its
very early years for payment of its Cash Surrender Value, that Cash Surrender
Value may be low in comparison to the amount of the premiums accumulated with
interest. Thus, the cost of owning a Policy for a relatively short time may be
high.
On request, we will furnish the Policyowner with a comparable illustration based
on the age and sex of the proposed insured person(s), standard risk assumptions
and the initial face amount and planned premium chosen.
69
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 614 0 100,000 661 0 100,000 708 0 100,000
2 1,000 2,153 1,361 449 100,000 1,498 587 100,000 1,642 730 100,000
3 1,000 3,310 2,090 1,087 100,000 2,366 1,363 100,000 2,665 1,662 100,000
4 1,000 4,526 2,800 1,772 100,000 3,264 2,236 100,000 3,787 2,758 100,000
5 1,000 5,802 3,491 2,463 100,000 4,194 3,165 100,000 5,017 3,988 100,000
6 1,000 7,142 4,163 3,258 100,000 5,156 4,251 100,000 6,365 5,460 100,000
7 1,000 8,549 4,813 4,031 100,000 6,148 5,366 100,000 7,841 7,059 100,000
8 1,000 10,027 5,440 4,846 100,000 7,171 6,577 100,000 9,457 8,863 100,000
9 1,000 11,578 6,044 5,637 100,000 8,226 7,820 100,000 11,228 10,822 100,000
10 1,000 13,207 6,625 6,625 100,000 9,315 9,315 100,000 13,170 13,170 100,000
11 1,000 14,917 7,182 7,182 100,000 10,437 10,437 100,000 15,301 15,301 100,000
12 1,000 16,713 7,710 7,710 100,000 11,589 11,589 100,000 17,633 17,633 100,000
13 1,000 18,599 8,208 8,208 100,000 12,770 12,770 100,000 20,189 20,189 100,000
14 1,000 20,579 8,674 8,674 100,000 13,981 13,981 100,000 22,992 22,992 100,000
15 1,000 22,657 9,105 9,105 100,000 15,220 15,220 100,000 26,066 26,066 100,000
16 1,000 24,840 9,501 9,501 100,000 16,489 16,489 100,000 29,440 29,440 100,000
17 1,000 27,132 9,862 9,862 100,000 17,787 17,787 100,000 33,147 33,147 100,000
18 1,000 29,539 10,183 10,183 100,000 19,114 19,114 100,000 37,224 37,224 100,000
19 1,000 32,066 10,461 10,461 100,000 20,468 20,468 100,000 41,708 41,708 100,000
20 1,000 34,719 10,692 10,692 100,000 21,846 21,846 100,000 46,646 46,646 100,000
@ 65 1,000 69,761 9,434 9,434 100,000 36,658 36,658 100,000 134,451 134,451 164,030
</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% 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 GIA
providing interest at a minimum guaranteed rate of 4% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
70
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 531 0 100,000 575 0 100,000 620 0 100,000
2 1,000 2,153 1,194 282 100,000 1,321 409 100,000 1,453 542 100,000
3 1,000 3,310 1,836 834 100,000 2,088 1,086 100,000 2,362 1,360 100,000
4 1,000 4,526 2,457 1,428 100,000 2,878 1,850 100,000 3,354 2,325 100,000
5 1,000 5,802 3,055 2,027 100,000 3,689 2,661 100,000 4,434 3,405 100,000
6 1,000 7,142 3,630 2,725 100,000 4,522 3,617 100,000 5,612 4,707 100,000
7 1,000 8,549 4,179 3,397 100,000 5,374 4,593 100,000 6,895 6,113 100,000
8 1,000 10,027 4,703 4,109 100,000 6,248 5,654 100,000 8,295 7,701 100,000
9 1,000 11,578 5,199 4,793 100,000 7,141 6,734 100,000 9,822 9,415 100,000
10 1,000 13,207 5,669 5,669 100,000 8,054 8,054 100,000 11,489 11,489 100,000
11 1,000 14,917 6,109 6,109 100,000 8,986 8,986 100,000 13,308 13,308 100,000
12 1,000 16,713 6,518 6,518 100,000 9,936 9,936 100,000 15,295 15,295 100,000
13 1,000 18,599 6,895 6,895 100,000 10,902 10,902 100,000 17,467 17,467 100,000
14 1,000 20,579 7,238 7,238 100,000 11,886 11,886 100,000 19,843 19,843 100,000
15 1,000 22,657 7,544 7,544 100,000 12,885 12,885 100,000 22,443 22,443 100,000
16 1,000 24,840 7,813 7,813 100,000 13,897 13,897 100,000 25,292 25,292 100,000
17 1,000 27,132 8,039 8,039 100,000 14,919 14,919 100,000 28,412 28,412 100,000
18 1,000 29,539 8,215 8,215 100,000 15,947 15,947 100,000 31,830 31,830 100,000
19 1,000 32,066 8,338 8,338 100,000 16,975 16,975 100,000 35,579 35,579 100,000
20 1,000 34,719 8,400 8,400 100,000 17,999 17,999 100,000 39,694 39,694 100,000
@ 65 1,000 69,761 4,012 4,012 100,000 26,599 26,599 100,000 112,991 112,991 137,849
</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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
71
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 629 0 100,000 677 0 100,000 724 0 100,000
2 1,000 2,153 1,390 510 100,000 1,529 649 100,000 1,675 794 100,000
3 1,000 3,310 2,132 1,176 100,000 2,412 1,457 100,000 2,716 1,760 100,000
4 1,000 4,526 2,854 1,899 100,000 3,325 2,370 100,000 3,856 2,901 100,000
5 1,000 5,802 3,557 2,601 100,000 4,271 3,315 100,000 5,106 4,150 100,000
6 1,000 7,142 4,240 3,399 100,000 5,248 4,407 100,000 6,476 5,635 100,000
7 1,000 8,549 4,904 4,178 100,000 6,261 5,534 100,000 7,980 7,254 100,000
8 1,000 10,027 5,550 4,998 100,000 7,309 6,758 100,000 9,631 9,080 100,000
9 1,000 11,578 6,180 5,802 100,000 8,399 8,021 100,000 11,449 11,071 100,000
10 1,000 13,207 6,789 6,789 100,000 9,526 9,526 100,000 13,444 13,444 100,000
11 1,000 14,917 7,378 7,378 100,000 10,691 10,691 100,000 15,636 15,636 100,000
12 1,000 16,713 7,942 7,942 100,000 11,893 11,893 100,000 18,041 18,041 100,000
13 1,000 18,599 8,482 8,482 100,000 13,132 13,132 100,000 20,683 20,683 100,000
14 1,000 20,579 8,996 8,996 100,000 14,411 14,411 100,000 23,585 23,585 100,000
15 1,000 22,657 9,485 9,485 100,000 15,730 15,730 100,000 26,776 26,776 100,000
16 1,000 24,840 9,947 9,947 100,000 17,089 17,089 100,000 30,285 30,285 100,000
17 1,000 27,132 10,384 10,384 100,000 18,494 18,494 100,000 34,149 34,149 100,000
18 1,000 29,539 10,797 10,797 100,000 19,945 19,945 100,000 38,407 38,407 100,000
19 1,000 32,066 11,183 11,183 100,000 21,445 21,445 100,000 43,100 43,100 100,000
20 1,000 34,719 11,543 11,543 100,000 22,994 22,994 100,000 48,278 48,278 100,000
@ 65 1,000 69,761 12,683 12,683 100,000 41,062 41,062 100,000 140,291 140,291 171,155
</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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
72
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 552 0 100,000 597 0 100,000 643 0 100,000
2 1,000 2,153 1,236 355 100,000 1,365 485 100,000 1,501 620 100,000
3 1,000 3,310 1,898 942 100,000 2,156 1,200 100,000 2,436 1,481 100,000
4 1,000 4,526 2,538 1,582 100,000 2,970 2,014 100,000 3,457 2,501 100,000
5 1,000 5,802 3,155 2,199 100,000 3,805 2,850 100,000 4,569 3,613 100,000
6 1,000 7,142 3,748 2,907 100,000 4,664 3,823 100,000 5,782 4,941 100,000
7 1,000 8,549 4,315 3,589 100,000 5,543 4,817 100,000 7,103 6,377 100,000
8 1,000 10,027 4,857 4,305 100,000 6,444 5,892 100,000 8,545 7,994 100,000
9 1,000 11,578 5,374 4,996 100,000 7,369 6,991 100,000 10,121 9,743 100,000
10 1,000 13,207 5,866 5,866 100,000 8,318 8,318 100,000 11,845 11,845 100,000
11 1,000 14,917 6,334 6,334 100,000 9,292 9,292 100,000 13,732 13,732 100,000
12 1,000 16,713 6,777 6,777 100,000 10,293 10,293 100,000 15,800 15,800 100,000
13 1,000 18,599 7,193 7,193 100,000 11,319 11,319 100,000 18,067 18,067 100,000
14 1,000 20,579 7,582 7,582 100,000 12,371 12,371 100,000 20,553 20,553 100,000
15 1,000 22,657 7,942 7,942 100,000 13,449 13,449 100,000 23,281 23,281 100,000
16 1,000 24,840 8,271 8,271 100,000 14,551 14,551 100,000 26,276 26,276 100,000
17 1,000 27,132 8,569 8,569 100,000 15,679 15,679 100,000 29,567 29,567 100,000
18 1,000 29,539 8,830 8,830 100,000 16,829 16,829 100,000 33,183 33,183 100,000
19 1,000 32,066 9,052 9,052 100,000 17,999 17,999 100,000 37,160 37,160 100,000
20 1,000 34,719 9,233 9,233 100,000 19,191 19,191 100,000 41,538 41,538 100,000
@ 65 1,000 69,761 8,379 8,379 100,000 32,301 32,301 100,000 120,057 120,057 146,470
</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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
73
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 612 0 100,613 659 0 100,660 707 0 100,707
2 1,000 2,153 1,357 446 101,358 1,494 583 101,495 1,637 726 101,638
3 1,000 3,310 2,083 1,081 102,084 2,358 1,356 102,359 2,656 1,654 102,657
4 1,000 4,526 2,789 1,760 102,789 3,251 2,222 103,251 3,771 2,742 103,771
5 1,000 5,802 3,474 2,446 103,475 4,172 3,144 104,173 4,990 3,961 104,990
6 1,000 7,142 4,138 3,233 104,139 5,123 4,218 105,124 6,323 5,418 106,324
7 1,000 8,549 4,779 3,997 104,779 6,102 5,321 106,103 7,780 6,998 107,780
8 1,000 10,027 5,395 4,801 105,395 7,109 6,514 107,109 9,370 8,776 109,371
9 1,000 11,578 5,986 5,579 105,986 8,142 7,736 108,143 11,107 10,700 111,107
10 1,000 13,207 6,552 6,552 106,552 9,205 9,205 109,205 13,005 13,005 113,006
11 1,000 14,917 7,092 7,092 107,092 10,296 10,296 110,296 15,079 15,079 115,080
12 1,000 16,713 7,600 7,600 107,600 11,409 11,409 111,409 17,340 17,340 117,341
13 1,000 18,599 8,074 8,074 108,074 12,543 12,543 112,544 19,805 19,805 119,805
14 1,000 20,579 8,512 8,512 108,513 13,698 13,698 113,698 22,492 22,492 122,492
15 1,000 22,657 8,913 8,913 108,914 14,870 14,870 114,870 25,420 25,420 125,420
16 1,000 24,840 9,275 9,275 109,275 16,058 16,058 116,058 28,611 28,611 128,612
17 1,000 27,132 9,596 9,596 109,596 17,261 17,261 117,261 32,092 32,092 132,093
18 1,000 29,539 9,873 9,873 109,874 18,475 18,475 118,476 35,886 35,886 135,887
19 1,000 32,066 10,102 10,102 110,103 19,696 19,696 119,696 40,021 40,021 140,021
20 1,000 34,719 10,277 10,277 110,278 20,917 20,917 120,918 44,523 44,523 144,524
@ 65 1,000 69,761 8,102 8,102 108,103 31,773 31,773 131,773 118,658 118,658 218,658
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
32.
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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
74
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 529 0 100,530 574 0 100,574 618 0 100,619
2 1,000 2,153 1,190 279 101,191 1,317 405 101,317 1,449 538 101,450
3 1,000 3,310 1,829 826 101,829 2,080 1,078 102,081 2,353 1,350 102,353
4 1,000 4,526 2,445 1,416 102,445 2,864 1,835 102,864 3,336 2,308 103,337
5 1,000 5,802 3,036 2,008 103,037 3,666 2,637 103,666 4,405 3,376 104,405
6 1,000 7,142 3,602 2,697 103,603 4,487 3,582 104,487 5,567 4,662 105,567
7 1,000 8,549 4,141 3,360 104,142 5,324 4,542 105,324 6,828 6,046 106,828
8 1,000 10,027 4,653 4,059 104,653 6,178 5,584 106,179 8,199 7,604 108,199
9 1,000 11,578 5,135 4,728 105,135 7,047 6,641 107,048 9,687 9,280 109,687
10 1,000 13,207 5,588 5,588 105,588 7,932 7,932 107,932 11,304 11,304 111,305
11 1,000 14,917 6,008 6,008 106,009 8,828 8,828 108,828 13,060 13,060 113,061
12 1,000 16,713 6,395 6,395 106,395 9,734 9,734 109,735 14,966 14,966 114,967
13 1,000 18,599 6,746 6,746 106,746 10,649 10,649 110,650 17,036 17,036 117,037
14 1,000 20,579 7,060 7,060 107,061 11,571 11,571 111,572 19,284 19,284 119,285
15 1,000 22,657 7,334 7,334 107,335 12,497 12,497 112,497 21,724 21,724 121,725
16 1,000 24,840 7,567 7,567 107,568 13,424 13,424 113,424 24,374 24,374 124,374
17 1,000 27,132 7,753 7,753 107,753 14,345 14,345 114,345 27,247 27,247 127,248
18 1,000 29,539 7,884 7,884 107,885 15,253 15,253 115,253 30,359 30,359 130,360
19 1,000 32,066 7,957 7,957 107,958 16,141 16,141 116,141 33,728 33,728 133,729
20 1,000 34,719 7,963 7,963 107,964 16,999 16,999 116,999 37,371 37,371 137,371
@ 65 1,000 69,761 2,808 2,808 102,808 21,533 21,533 121,533 94,178 94,178 194,178
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
32.
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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
75
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 628 0 100,629 676 0 100,676 723 0 100,724
2 1,000 2,153 1,387 507 101,388 1,526 646 101,527 1,671 791 101,672
3 1,000 3,310 2,126 1,170 102,126 2,405 1,449 102,405 2,707 1,752 102,708
4 1,000 4,526 2,844 1,888 102,844 3,313 2,357 103,313 3,841 2,886 103,842
5 1,000 5,802 3,541 2,585 103,541 4,250 3,295 104,251 5,081 4,126 105,082
6 1,000 7,142 4,216 3,375 104,217 5,218 4,377 105,218 6,437 5,596 106,438
7 1,000 8,549 4,872 4,146 104,873 6,218 5,492 106,219 7,923 7,197 107,924
8 1,000 10,027 5,508 4,956 105,509 7,251 6,699 107,252 9,551 8,999 109,551
9 1,000 11,578 6,127 5,749 106,127 8,322 7,944 108,322 11,337 10,960 111,338
10 1,000 13,207 6,723 6,723 106,723 9,425 9,425 109,426 13,294 13,294 113,294
11 1,000 14,917 7,296 7,296 107,296 10,562 10,562 110,563 15,435 15,435 115,436
12 1,000 16,713 7,843 7,843 107,843 11,731 11,731 111,731 17,778 17,778 117,778
13 1,000 18,599 8,363 8,363 108,363 12,930 12,930 112,931 20,340 20,340 120,341
14 1,000 20,579 8,854 8,854 108,855 14,161 14,161 114,161 23,143 23,143 123,144
15 1,000 22,657 9,317 9,317 109,318 15,422 15,422 115,423 26,210 26,210 126,210
16 1,000 24,840 9,750 9,750 109,750 16,715 16,715 116,715 29,566 29,566 129,566
17 1,000 27,132 10,155 10,155 110,156 18,041 18,041 118,042 33,242 33,242 133,242
18 1,000 29,539 10,533 10,533 110,533 19,402 19,402 119,402 37,270 37,270 137,270
19 1,000 32,066 10,881 10,881 110,881 20,796 20,796 120,797 41,684 41,684 141,684
20 1,000 34,719 11,198 11,198 111,198 22,225 22,225 122,225 46,521 46,521 146,522
@ 65 1,000 69,761 11,577 11,577 111,578 37,257 37,257 137,257 128,528 128,528 228,529
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
37.
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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
76
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 551 0 100,552 596 0 100,597 641 0 100,642
2 1,000 2,153 1,232 352 101,233 1,362 481 101,362 1,497 616 101,497
3 1,000 3,310 1,891 936 101,892 2,148 1,193 102,149 2,428 1,472 102,428
4 1,000 4,526 2,527 1,571 102,527 2,956 2,001 102,957 3,441 2,485 103,441
5 1,000 5,802 3,137 2,182 103,138 3,784 2,828 103,784 4,542 3,587 104,543
6 1,000 7,142 3,723 2,882 103,723 4,631 3,790 104,632 5,740 4,899 105,741
7 1,000 8,549 4,280 3,554 104,281 5,496 4,770 105,497 7,041 6,315 107,041
8 1,000 10,027 4,810 4,259 104,811 6,379 5,827 106,380 8,455 7,904 108,456
9 1,000 11,578 5,314 4,936 105,314 7,281 6,904 107,282 9,995 9,617 109,996
10 1,000 13,207 5,790 5,790 105,791 8,203 8,203 108,204 11,672 11,672 111,673
11 1,000 14,917 6,240 6,240 106,240 9,144 9,144 109,145 13,501 13,501 113,501
12 1,000 16,713 6,662 6,662 106,663 10,105 10,105 110,106 15,494 15,494 115,494
13 1,000 18,599 7,055 7,055 107,055 11,084 11,084 111,085 17,667 17,667 117,668
14 1,000 20,579 7,417 7,417 107,418 12,080 12,080 112,080 20,036 20,036 120,037
15 1,000 22,657 7,749 7,749 107,749 13,092 13,092 113,093 22,621 22,621 122,621
16 1,000 24,840 8,046 8,046 108,047 14,118 14,118 114,118 25,437 25,437 125,438
17 1,000 27,132 8,307 8,307 108,308 15,155 15,155 115,156 28,508 28,508 128,509
18 1,000 29,539 8,529 8,529 108,530 16,201 16,201 116,201 31,855 31,855 131,856
19 1,000 32,066 8,707 8,707 108,708 17,248 17,248 117,249 35,500 35,500 135,501
20 1,000 34,719 8,840 8,840 108,841 18,298 18,298 118,298 39,472 39,472 139,472
@ 65 1,000 69,761 7,277 7,277 107,277 28,202 28,202 128,202 105,712 105,712 205,713
</TABLE>
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
37.
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% 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 GIA providing interest at
a minimum guaranteed rate of 4% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
77
<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 judgment in its favor, whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, by reason of the fact that he, his testator or
intestate, served such other corporation in any capacity at the request of the
indemnifying corporation.
Article VI Section 6.1 of the By-Laws of 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)(4) 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 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 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 2667 and riders thereto (Flex Edge), consisting of 82 pages.
The Prospectus describing Phoenix Home Life Mutual Insurance Company Policy
Forms V601 and V603 and riders thereto (Joint Edge and Flex Edge Success),
consisting of 77 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representations Description and Undertaking Pursuant to Paragraph
(b)(13)(iii)(F) of Rule 6e-3(T) under the Investment Company Act of 1940.
The signature page.
The Powers of Attorney.
Written consents of the following persons:
(a) Edwin L. Kerr, Esq.*
(b) Jorden Burt Boros Cicchetti Berenson & Johnson, LLP*
(c) Price Waterhouse LLP*
(d) Paul M. Fischer, FSA, CLU, ChFC*
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 Phoenix Mutual
establishing the VUL Account filed with registrant's Registration
Statement on July 21, 1988 and filed via Edgar herewith, is
incorporated herein by reference.
(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 herewith.
(b) Form of Broker-Dealer Supervisory Agreement between Phoenix
Equity Planning Corporation and Independent Brokers with
respect to the sale of Policies filed via Edgar herewith.
(c) Not Applicable.
(4) Not Applicable.
(5) Specimen Policies with optional riders.
(a) Flex Edge--Flexible Premium Variable Universal Life
Insurance Policy Form Number 2667 of Depositor, together
with Amendment Permitting Face Amount Increases VR01, Death
Benefit Protection Rider VR02, Variable Life Policy Exchange
Option Rider VR08, Death Benefit Option - Policy Amendment
VR23, Temporary Money Market Allocation Amendment VR130,
Accidental Death Benefit Rider VR147, Disability Payment of
Specified Annual Premium Amount Rider VR148, Death Benefit
Options - Policy Amendment VR149, Additional Purchase Option
Rider VR150, and Accelerated Living Benefit Rider VR162
filed via Edgar with registrant's Post-Effective Amendment
No. 12 on February 13, 1996, is incorporated herein by
reference.
II-2
<PAGE>
(b) Joint Edge--Flexible Premium Joint Variable Universal Life
Policy Form Number V601 of Depositor, together with
Temporary Money Market Allocation Amendment VR130, Survivor
Insurance Purchase Option Rider VR03, Variable Joint Life
Policy Exchange Option Rider VR04, Disability Benefit to Age
65 Rider VR05, and Term Insurance Rider VR06 filed via Edgar
with registrant's Post-Effective Amendment No. 12 on
February 13, 1996, is incorporated herein by reference.
(c) Flex Edge Success--Flexible Premium Variable Universal Life
Insurance Policy Form Number V603 of Depositor, together
with Temporary Money Market Allocation Amendment VR130,
Accidental Death Benefit Rider VR147, Disability Payment of
Specified Annual Premium Amount Rider VR148, Purchase
Protector Rider VR150, Living Benefit Rider VR162, Whole
Life Exchange Option Rider VR08, Cash Value Accumulation
Test Rider VR11 and Death Benefit Protection Rider VR14
filed via Edgar with registrant's Post-Effective Amendment
No. 12 on February 13, 1996, is incorporated herein by
reference.
(6) (a) Charter of Phoenix Home Life filed via Edgar with
registrant's Post-Effective Amendment No. 12 on February 13,
1996, is incorporated herein by reference.
(b) By-Laws of Phoenix Home Life filed via Edgar with
registrant's Post-Effective Amendment No. 12 on February 13,
1996, is incorporated herein by reference.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Forms of Application for each of Flex Edge, Joint Edge and Flex
Edge Success filed via Edgar with registrant's Post-Effective
Amendment No. 13 on April 26, 1996, are incorporated herein by
reference.
(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 herewith.*
2. See Exhibit 1.A(5).
3. Opinion of Edwin L. Kerr, Esq., Counsel of Depositor, as to the
legality of the securities being registered. (See Exhibit 9 below.)
4. Opinion of Paul M. Fischer, Actuary, as to Illustrations. (See Exhibit
10 below.)
5. Not Applicable. No financial statement will be omitted from the
Prospectus pursuant to Instruction 1(b) or (c) of Part I.
6. Not Applicable.
7. Consent of Jorden Burt Boros Cicchetti Berenson & Johnson, LLP.*
8. Consent of Independent Accounts.*
9. Opinion and Consent of Edwin L. Kerr, Esq.*
10. Opinion and Consent of Paul M. Fischer, FSA, CLU, ChFC*
- --------------
*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 certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
No. 15 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Hartford, State of
Connecticut on the 30th day of April, 1998.
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 and on this 30th day of April, 1998.
SIGNATURE TITLE
--------- -----
- ----------------------------------------
*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 Director
- ----------------------------------------
*Robert W. Fiondella Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
- ----------------------------------------
*Jerry J. Jasinowski Director
- ----------------------------------------
John W. Johnstone Director
- ----------------------------------------
*Marilyn E. LaMarche Director
- ----------------------------------------
*Philip R. McLoughlin Director
- ----------------------------------------
*Indra K. Nooyi Director
S-1(C)
<PAGE>
- ----------------------------------------
*Charles J. Paydos Director
- ----------------------------------------
*Robert F. Vizza Director
- ----------------------------------------
Wilson Wilde Director
- ----------------------------------------
*Robert G. Wilson Director
- ----------------------------------------
*David W. Searfoss Executive Vice President and Chief
Financial Officer (Principal
Accounting and Financial
Officer)
By: /s/ Dona D. Young
----------------------------------------
*Dona D. Young as Attorney in Fact pursuant to Powers of Attorney,
copies of which are filed herewith.
S-2(C)
POWERS OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Peter C. Browning, Director October 19, 1997
- ---------------------
Peter C. Browning
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Robert F. Vizza, Director October 19, 1997
- -------------------
Robert F. Vizza
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Robert G. Wilson, Director October 19, 1997
- --------------------
Robert G. Wilson
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ John C. Bacot, Director October 20, 1997
- -----------------
John C. Bacot
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Jerry J. Jasinowski, Director October 20, 1997
- -----------------------
Jerry J. Jasinowski
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Arthur P. Byrne, Director October 20, 1997
- -------------------
Arthur P. Byrne
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Sal H. Alfiero, Director October 21, 1997
- ------------------
Sal H. Alfiero
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Indra K. Nooyi, Director October 21, 1997
- ------------------
Indra K. Nooyi
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Marilyn E. LaMarche, Director October 21, 1997
- -----------------------
Marilyn E. LaMarche
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Gordon J. Davis, Director October 21, 1997
- -------------------
Gordon J. Davis
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Richard N. Cooper, Director October 21, 1997
- ---------------------
Richard N. Cooper
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Carol H. Baldi, Director October 21, 1997
- ------------------
Carol H. Baldi
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Home
Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them as my true
and lawful attorneys and agents with full power to sign for me in the capacity
indicated below, any or all Registration Statements or amendments thereto filed
with the Securities and Exchange Commission under the Securities Act of 1933
and/or the Investment Company Act of 1940 relating to securities issued or sold
by Phoenix Home Life Mutual Insurance Company or any of its separate accounts,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Philip R. McLoughlin, Director October 31, 1997
- ------------------------
Philip R. McLoughlin
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors and Officer of
Phoenix Home Life Mutual Insurance Company, hereby constitute and appoint John
H. Beers, Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them
as my true and lawful attorneys and agents with full power to sign for me in the
capacity indicated below, any or all Registration Statements or amendments
thereto filed with the Securities and Exchange Commission under the Securities
Act of 1933 and/or the Investment Company Act of 1940 relating to securities
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Robert W. Fiondella, Chairman, President and Chief Executive Officer
- -----------------------
Robert W. Fiondella October 23, 1997
<PAGE>
POWER OF ATTORNEY
I, the undersigned Officer of Phoenix Home Life Mutual Insurance
Company, hereby constitute and appoint John H. Beers, Donald E. Bertrand, Edwin
L. Kerr and Dona D. Young or either of them as my true and lawful attorneys and
agents with full power to sign for me in the capacity indicated below, any or
all Registration Statements or amendments thereto filed with the Securities and
Exchange Commission under the Securities Act of 1933 and/or the Investment
Company Act of 1940 relating to securities issued or sold by Phoenix Home Life
Mutual Insurance Company or any of its separate accounts, and hereby ratify and
confirm my signature as it may be signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
/s/ David W. Searfoss, Executive Vice President and Chief Financial Officer
- ---------------------
David W. Searfoss October 21, 1997
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors and Officer of
Phoenix Home Life Mutual Insurance Company, hereby constitute and appoint John
H. Beers, Donald E. Bertrand, Edwin L. Kerr and Dona D. Young or either of them
as my true and lawful attorneys and agents with full power to sign for me in the
capacity indicated below, any or all Registration Statements or amendments
thereto filed with the Securities and Exchange Commission under the Securities
Act of 1933 and/or the Investment Company Act of 1940 relating to securities
issued or sold by Phoenix Home Life Mutual Insurance Company or any of its
separate accounts, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
/s/ Charles J. Paydos, Director October 20, 1997
- ---------------------
Charles J. Paydos
EXHIBIT 1.A(1)
RESOLUTION OF THE BOARD OF DIRECTORS
<PAGE>
VOTED: That the Company, pursuant to the provisions of Sections 38-33a and
38-154a of the Connecticut General Statutes Annotated hereby
establishes a separate account designated initially as the "Phoenix
Mutual Variable Universal Life Account" (hereinafter "the Account"),
for the following use and purposes, and subject to such conditions as
hereinafter set forth; said use, purposes, and conditions to be in
full compliance with Sections 38-33a and 38-154a and all rules and
regulations of the Commissioner of Insurance of the State of
Connecticut; and
FURTHER
VOTED: That the Account shall be established for the purpose of providing for
the issuance by the Company of such variable life insurance contracts
("Variable Contracts") as the President may designate for such purpose
and shall constitute a separate account into which are allocated
amounts paid to the Company which are to be applied under the terms of
such Variable Contracts; and
FURTHER
VOTED: That the income, gains and losses, whether or not realized, from
assets allocated to the Account shall, in accordance with the terms of
the Variable Contracts, be credited to or charged against such Account
without regard to other income, gains, or losses of the Company; and
FURTHER
VOTED: That the fundamental investment policy of the Account shall be to
invest or reinvest the assets of the Account in securities issued by
investment companies registered under the Investment Company Act of
1940 as may be specified in the respective Variable Contracts; and
FURTHER
VOTED: That six separate investment divisions be, and hereby are, established
within the Account to which payments under the Variable Contracts will
be allocated in accordance with instructions received from
contractowners, and that the President be, and hereby is, authorized
to increase or decrease the number of investment divisions in the
Account as he deems necessary or appropriate; and
FURTHER
VOTED: That each such investment division shall invest only in the shares of
a single registered investment company, or a single portfolio of a
registered investment company organized as a series fund pursuant to
the Investment Company Act of 1940; and
FURTHER
VOTED: That the President or any Executive Officer of the Company be, and
each hereby is, authorized to transfer funds from time to time between
the Company's general account and the Account in order to establish
the Account, facilitate the commencement of the Account's operations
or to support the operation of the Variable Contracts with respect to
the Account as deemed necessary or appropriate and consistent with the
terms of the Contracts; and
<PAGE>
- 2 -
FURTHER
VOTED: That the President of the Company be, and hereby is, authorized to
change the designation of the Account to such other designation as he
may deem necessary or appropriate; and
FURTHER
VOTED: That the President or any Executive Officer of the Company and each of
them with full power to act without the others, and with such
assistance from the Company's auditors, legal counsel and independent
consultants or others as such Officer may require, be, and each hereby
is, authorized, empowered and directed to take all action necessary,
on behalf of the Account, and by the Company to: (a) register the
Account as a unit investment trust under the Investment Company Act of
1940, as amended; (b) register the Variable Contracts in such amounts,
which may be an indefinite amount, as such officers of the Company
shall from time to time deem appropriate under the Securities Act of
1933; and (c) take all other actions which are necessary in connection
with the offering and sale of said Contracts and for the operation of
the Account in order to comply with the Investment Company Act of
1940, the Securities Act of 1933 and other applicable Federal laws
including the filing of any amendments to registration statements, any
undertakings, any applications for exemptions from the Investment
Company Act of 1940 or other applicable Federal laws, and any and all
amendments to the foregoing as such Officers of the Company shall deem
necessary or appropriate; and
FURTHER
VOTED: That the Company be authorized and directed to obtain any required
approvals with respect to the establishment of the Account and
marketing of the Variable Contracts, from the Commissioner of
Insurance of Connecticut and any other statutory or regulatory
approvals which may be required; and
FURTHER
VOTED: That the Executive Officers of the Company be, and each hereby is,
authorized on behalf of the Account and on behalf of the Company to
take any and all action they may deem necessary or advisable in order
to sell the Variable Contracts, including any registrations, filings,
and qualifications of the Company, its officers, agents, employees,
and the Contracts, under the insurance and securities laws of any of
the states of the United States of America or other jurisdictions, and
in connection therewith to prepare, execute, deliver, and file all
such applications, reports, covenants, resolutions, applications for
exemptions, consents to service of process, and other papers and
instruments as may be required under such laws, and to take any and
all further action which said Officers may deem necessary or desirable
(including entering into whatever agreements may be necessary) in
order to maintain such registrations or qualifications for as long as
said officers or counsel deem it to be in the best interests of the
Account and the Company; and
<PAGE>
- 3 -
FURTHER
VOTED: That upon declaration of effectiveness of the Account's Registration
Statement by the Securities and Exchange Commission, or at such later
date as may be determined by the Executive Officers of the Company
acting with the advice of the Account's Underwriter, the Account will
offer and sell its Contracts on the terms set forth in the Prospectus
forming a part of said Registration Statement, as from time to time
supplemented or amended, and that such Contracts, when issued and paid
for in accordance with the terms of the Prospectus, shall be validly
issued, fully paid and nonassessable; and
FURTHER
VOTED: That the General Counsel of the Company is hereby appointed as agent
for service under registration statement filed with the Securities and
Exchange Commission and is duly authorized to receive communications
and notices from the Securities and Exchange Commission with respect
thereto; and
FURTHER
VOTED: That the Executive Officers of the Company be, and each hereby is,
authorized to execute and deliver all agreements, documents and papers
and to do or cause to be done all acts and things as they may deem
necessary or desirable to carry out the foregoing resolutions and the
intents and purposes thereof.
4.53
EXHIBIT 1.A(3)(a)
MASTER SERVICE AND DISTRIBUTION
COMPLIANCE AGREEMENT
<PAGE>
MASTER SERVICE AND DISTRIBUTION COMPLIANCE AGREEMENT
THIS AGREEMENT, made this 31st day of December, 1996, by and among
Phoenix Home Life Mutual Insurance Company ("Phoenix"), a New York company, on
behalf of itself and the following Separate Accounts: Phoenix Home Life Variable
Accumulation Account and Phoenix Home Life Variable Universal Life Account
("Separate Accounts") and Phoenix Equity Planning Corporation ("PEPCO"), a
Connecticut corporation.
WITNESSETH:
WHEREAS, Phoenix offers for sale variable annuity and variable life
contracts/policies funded through Separate Accounts of Phoenix registered as
unit investment trusts under the Investment Company Act of 1940, as amended
("1940 Act"), and pursuant to registration statements filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended
("Securities Act"), and listed on Schedule A of this Agreement (the
"Contracts/Policies"), and
WHEREAS, PEPCO is registered as a broker-dealer with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended ("1934 Act") and is a member of the National Association of Securities
Dealers, Inc. ("NASD"), and
WHEREAS, Phoenix desires to engage PEPCO to perform certain services
with respect to the books and records to be maintained in connection with the
sale of Contracts/Policies and certain administrative and other functions as set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties here to agree as follows:
I. Services of PEPCO
-----------------
A. APPOINTMENT. Phoenix hereby appoints PEPCO, and PEPCO hereby
accepts the appointment as, Master Service and Distributor of the
Contracts/Policies.
B. DUTIES. PEPCO shall perform those administrative, compliance
and other services with respect to the Contracts/Policies as described herein.
PEPCO agrees to use its best efforts in performing the activities outlined in
paragraphs I. C and I. F of this Agreement.
C. WRITTEN AGREEMENTS. PEPCO has and shall enter into written
agreements with broker-dealer firms whose registered representatives have been
or shall be properly licensed to sell registered securities and insurance
products including variable annuity and life licensed if required, and appointed
as life insurance agents of Phoenix. Phoenix shall pay all fees associated with
the appointments of such selected representatives as insurance agents of
Phoenix. Such agreements with broker-dealers shall provide that such
broker-dealer shall cause applications to be solicited for the purchase of the
Contracts/Policies. Such agreements shall include such terms and conditions as
PEPCO may determine not inconsistent with this Agreement, provided, however,
that any broker-
<PAGE>
-2-
dealer with whom PEPCO has entered into a written agreement must comply with the
following terms which shall be included in all such agreements:
The broker-dealer must -
(a) be a registered broker-dealer under the 1934 Act and be
a member of the NASD; and
(b) agree that, in connection with the solicitation of
applications for the purchase of Contracts/Policies,
the broker-dealer will in all respects conform to the
requirements of all state and federal laws and the
Rules of Fair Practice of the NASD relating to the sale
of the Contracts/Policies and will indemnify and hold
harmless PEPCO and Phoenix from any damage or expense
of any nature whatsoever on account of the negligence,
misconduct or wrongful act of such broker-dealer or any
employee, representative or agent of such
broker-dealer.
In obtaining and entering into written agreements with broker-dealers,
PEPCO will in all respects conform to the requirements of all state and federal
law, and the Rules of Fair Practice of the NASD.
D. RECORDKEEPING. PEPCO shall maintain and preserve, or cause to
be maintained and preserved, such accounts, books, and other documents as are
required of it under this Agreement, the 1934 Act and any other applicable laws
and regulations, including without limitation and to the extent applicable,
Rules 17a-3 and 17a-4 under the 1934 Act. The books, accounts and records of
PEPCO as to services provided hereunder, shall be maintained so as to disclose
clearly and accurately the nature and details of the transactions.
E. SUPERVISION. PEPCO shall select associated persons, who are
trained and qualified persons, to solicit applications for purchase of
Contracts/Policies in conformance with applicable state and federal laws. Any
such persons shall be registered representatives of PEPCO in accordance with the
rules of the NASD, be licensed to offer the Contract/Policy in accordance with
the insurance laws of any jurisdiction in which such person solicits
applications, be licensed with and appointed by Phoenix as an insurance agent to
solicit applications for the Contracts/Policies and have entered into the
appropriate Variable Contract/Policy Insurance Commission Agreement with
Phoenix. PFPCO will train and supervise its registered representatives to insure
that the purchase of a Contract/Policy is not recommended to an applicant in the
absence of reasonable grounds to believe that the purchase is suitable for that
applicant. PEPCO shall pay the fees to regulatory authorities in connection with
obtaining necessary securities licenses and authorizations for its registered
representatives to solicit applications for the purchase of Contracts/Policies.
PEPCO is
<PAGE>
-3-
not responsible for fees in connection with the appointment of registered
representatives as insurance agents of Phoenix.
F. SALES MATERIALS AND OTHER DOCUMENTS.
(a) PEPCO'S RESPONSIBILITIES. PEPCO shall be responsible
for the approval of promotional material by the SEC and
the NASD, where required.
(b) PHOENIX'S RESPONSIBILITIES. Phoenix shall be
responsible for:
(i) the design, preparation and printing of all
promotional material to be used in the
distribution of the Contracts/Policies;
(ii) the approval of promotional material by state and
other local insurance regulatory authorities.
(iii) confirming the issuance of the Contract/Policy to
the Contract/Policy Owner.
(c) RIGHT TO APPROVE. Neither party hereto nor any of its
agents or affiliates shall print, publish or distribute
any advertisement, circular or any document relating to
the Contracts/Policies or relating to the other party
unless such advertisement, circular or document shall
have been approved in writing by the other party.
However, nothing herein shall prohibit any party from
advertising annuities or life insurance in general or
on a generic basis, subject to compliance with all
applicable laws, rules and regulations. Each party
reserves the right to require modification of any such
material to comply with applicable laws, rules and
regulations and agrees to provide timely responses
regarding material submitted to it by the other party.
G. PAYMENTS TO BROKER-DEALERS. PEPCO shall serve as paying agent
for amounts due broker-dealers for sales commissions. Phoenix shall forward to
PEPCO any such amounts due broker-dealers from Phoenix and PEPCO shall be
responsible to pay such amounts to the persons entitled thereto as set forth
in the applicable written agreements with such broker-dealers, subject to all
applicable state insurance laws and regulations and all applicable federal
and/or state securities
<PAGE>
-4-
laws and NASD rules. PEPCO shall reflect such amounts on its books and records
as required by Paragraph D hereto.
H. COMPLIANCE. PEPCO shall, at all times, when performing its
functions under this Agreement, be registered as a securities broker-dealer with
the SEC and the NASD and be licensed or registered as a securities broker-dealer
in any jurisdiction where the performance of the duties contemplated by this
Agreement would require such licensing or registration. PEPCO represents and
warrants that it shall otherwise comply with provisions of federal and state law
in performing its duties hereunder.
I. PAYMENT OF EXPENSES BY PEPCO. PEPCO shall pay the expenses
incurred in connection with its provision of services hereunder and the
distribution of the Contracts/Policies.
II. General Provisions
A. INSPECTION OF BOOKS AND RECORDS. PEPCO and Phoenix agree that
all records relating to services provided hereunder shall be subject to
reasonable periodic, special or other audit or examination by the SEC, NASD, or
any state insurance commissioner or any other regulatory body having
jurisdiction. PEPCO and Phoenix agree to cooperate fully in any securities or
insurance regulatory or judicial investigation, inspection, inquiry or
proceeding arising in connection with the services provided under this
Agreement, or with respect to PEPCO or Phoenix or their affiliates, to the
extent related to the distribution of the Contracts/Policies. PEPCO and Phoenix
will notify each other promptly of any customer compliant or notice of
regulatory or judicial proceeding, and, in the case of a customer complaint,
will cooperate in arriving at a mutually satisfactory resolution thereof.
B. INDEMNIFICATION. PEPCO will indemnify and hold harmless
Phoenix and the Separate Accounts, from any and all expenses, losses, claims,
damages or liabilities (including attorney fees) incurred by reason of any
misrepresentation, wrongful or unauthorized act or omission, negligence of, or
failure of PEPCO, including any employee of PEPCO, to comply with the terms of
this Agreement, provided however, PEPCO shall not be required to indemnify for
any such expenses, losses, claims, damages or liabilities which have resulted
from the negligence, misconduct or wrongful act of the party seeking
indemnification. PEPCO shall also hold harmless and indemnify Phoenix and the
Separate Accounts for any and all expenses, losses, claims, damages, or
liability (including attorneys fees) arising from any misrepresentation,
wrongful or unauthorized act or omission, negligence of, or failure of a
broker-dealer or its employees, agents or registered representatives, to comply
with the terms of the written agreement entered into between PEPCO and such
broker-dealer but only to the extent that PEPCO is indemnified by the
broker-dealer under the terms of the written agreement. Phoenix will indemnify
and hold harmless PEPCO, for any expenses, losses, claims, damages or
liabilities (including attorneys fees) incurred by reason of any material
misrepresentation or omission in a registration statement or prospectus for the
<PAGE>
-5-
Contracts/Policies, or on account of any other misrepresentation, wrongful or
unauthorized act or omission, negligence of, or failure of Phoenix, including
any employee of Phoenix, to comply with the terms of this Agreement, provided
however, Phoenix shall not be required to indemnify for any expenses, losses,
claims, damages or liabilities which have resulted from the negligence,
misconduct or wrongful act of the party seeking indemnification.
C. COMPENSATION. Phoenix shall compensate PEPCO for the services
PEPCO performs hereunder as the parties shall agree from time to time and as
listed on Schedule A of this Agreement. PEPCO agrees to return promptly to
Phoenix all compensation received for any Contract/Policy returned within the
"free look" period as specified in the Contract/Policy.
D. TERMINATION. This Agreement shall become effective on the
date of this Agreement and shall continue to be in effect, except that:
(a) Any party hereto may terminate this Agreement on any
date by giving the other party at least thirty (30)
days' prior written notice of such termination
specifying the date fixed therefor.
(b) This Agreement may not be assigned by PEPCO without the
consent of Phoenix.
E. REGISTRATION. Phoenix agrees to use its best efforts to
effect and maintain the registration of the Contracts/Policies: under the
Securities Act and the Separate Accounts under the 1940 Act, and to qualify the
Contracts/Policies under the state securities and insurance laws, and to qualify
the Contracts/Policies as annuities/life insurance under the Internal Revenue
Code. Phoenix will pay or cause to be paid expenses (including the fees and
disbursements of its own counsel) of the registration and maintenance of the
Contracts/Policies under the Securities Act and of the Separate Accounts under
the 1940 Act, and to qualify the Contracts/Policies under the state securities
and insurance laws.
F. AUTHORITY. PEPCO shall have authority hereunder only as
expressly granted in this Agreement.
G. MISCELLANEOUS. Phoenix agrees to advise PEPCO immediately in
the case of an issuance by the SEC of any stop order suspending the
effectiveness of any prospectus for the Contracts/Policies, of all actions of
the SEC with respect to any amendments to the registration statement(s) which
may from time to time be filed with the SEC and of any material event which
makes untrue any statement made in the registration statements for the
Contracts/Policies, or which requires the making of a change in the registration
statements in order to make the statement therein not misleading. Phoenix agrees
to advise PEPCO in the event that formal administrative proceedings are
instituted against Phoenix by the SEC, or any state securities or insurance
<PAGE>
-6-
department or any other regulatory body regarding Phoenix's duties
under this Agreement, unless Phoenix determines in its sole judgment, exercised
in good faith, that any such administrative proceeding will not have a material
adverse effect upon its ability to perform its obligations under this Agreement.
PEPCO agrees to advise Phoenix in the event that formal administrative
proceedings are instituted against PEPCO by the SEC, NASD, or any state
securities or insurance department or any other regulatory body regarding
PEPCO's duties under this Agreement, unless PEPCO determines in its sole
judgment exercised in good faith, that any such administrative proceedings will
not have a material adverse effect upon its ability to perform its obligations
under this Agreement.
H. INDEPENDENT CONTRACTOR. PEPCO shall undertake and discharge
its obligations hereunder as an independent contractor and nothing herein shall
be construed as establishing: (I) an employer-employee relation between the
parties hereto; or (ii) a joint venture.
I. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties have hereunto set their hands on the
date first above written.
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
For itself and PHOENIX HOME LIFE VARIABLE ACCUMULATION ACCOUNT
And PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
By: /s/ Dona D. Young
-----------------------------------------
Title:
PHOENIX EQUITY PLANNING CORPORATION
By: /s/ Philip R. McLoughlin
-------------------------------
Title:
<PAGE>
Schedule A
----------
PEPCO has been appointed by Phoenix to perform certain administrative,
compliance and other services with respect to the following variable annuity
Contracts/Policies ("Contracts/Policies") issued by Phoenix insurance Company:
THE BIG EDGE AND BIG EDGE PLUS - Individual Deferred Variable
Accumulation Annuity Contracts issued by the Phoenix Home
Life Variable Accumulation Account of Phoenix. PEPCO shall
receive payments for services performed under this Agreement
equal to up to 7.25% of purchase payments made under The Big
Edge and Big Edge Plus Contracts. In addition, PEPCO shall
receive an underwriting fee of 75-100 bps on deposits under
The Big Edge and Big Edge Plus Contracts, for sales
assistance attributable to broker-dealers, other than WS
Griffith and Co. Inc. and PLANCO Financial Services Inc.
GROUP STRATEGIC EDGE - A Group Deferred Variable Accumulation
Contract issued by the Phoenix Home Life Variable
Accumulation Account of Phoenix. PEPCO shall receive payments
for services performed under this Agreement equal to up to 5%
of purchase payments made under the Group Strategic Edge
Contracts. In addition, PEPCO shall receive an underwriting
fee of 75-100 bps on deposits under Group Strategic Edge
Contracts, for sales assistance attributable to
broker-dealers, other than WS Griffith and Co. Inc. and
PLANCO Financial Services Inc.
FLEX EDGE, FLEX EDGE SUCCESS AND JOINT EDGE - Variable
Universal Life Insurance Policies issued by the Phoenix Home
Life Variable Universal Life Account of Phoenix. PEPCO shall
receive payment for services performed under this agreement
equal to up to 50% of premium payments made under the
Policies up to the commissionable premium amount, and up to
5% of such payments after the commissionable premium has been
paid in the first Policy Year.
PHOENIX EDGE - Variable Universal Life Insurance Policy
issued by the Phoenix Home Life Variable Universal Life
Account of Phoenix. PEPCO shall receive payment for services
performed under this agreement equal to 5% of premium
payments made under the Policy.
EXHIBIT 1.A.(3)(b)
FORM OF AGREEMENT BETWEEN PEPCO AND
INDEPENDENT BROKERS WITH RESPECT TO
THE SALES OF POLICIES
<PAGE>
[ logo ] Phoenix 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
2
<PAGE>
unauthorized, 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>
[ logo ] Phoenix 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>
[ logo ] Phoenix 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>
[ logo ] Phoenix 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>
[ logo ] Phoenix SCHEDULE C
Phoenix Home Life Mutual Insurance Company
- --------------------------------------------------------------------------------
THE BIG EDGE CHOICE (NY) - INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT (FORM
D602) issued by the Phoenix Home Life Variable Accumulation Account of Phoenix
Home Life Mutual Insurance Company. PEPCO, as paying agent for Phoenix Home Life
Mutual Insurance Company, shall pay the Broker-Dealer a service payment from one
of the three Commission Options available as described below. If more than one
Commission Option is chosen, Broker-Dealer agrees that its representatives may
select from the specified Commission Options at the time a contract is
purchased. Once a Commission Option has been selected, it cannot be changed in
the future. Broker-Dealer may also allow specified representatives to utilize a
Commission Option other than what is selected below on a contract by contract
basis by completing the section on the Commission Election form titled,
"Exception." Option 1 shall apply: if a Commission Option is not selected by the
Broker-Dealer; in the event that the Broker-Dealer has approved more than one
Commission Option and an application is received without a Commission Election
form; a Commission Election form is submitted with an Option not approved by the
Broker-Dealer; or an Exception Section of the Commission Election form is not
signed by the Broker-Dealer. If only one Commission Option is selected by the
Broker-Dealer, that Commission Option will always be invoked.
Please check one or more of the following Commission Options:
OPTION NUMBER* OPTION DESCRIPTION**
[ ] 1. 5.75% of premiums paid plus an annual trail
commission of .25% of Contract Value beginning in
the 8th year.
[ ] 2. 5% of premiums paid plus an annual trail
commission of .20% of Contract Value beginning the
2nd year and increasing to .30% beginning the
8th year.
[ ] 3. 3% of premiums paid plus an annual trail
commission of .35% of Contract Value beginning the
2nd year and increasing to .65% beginning the
8th year.
Trail commissions will be paid on the Contract Value on a calendar quarter basis
on deposits held under the Contract for a year or more.
* Sales of the contract to applicants over age 80 will be paid at 50% of the
Commission Option(s) chosen. Trail commissions will be paid at the full
percentage amount as listed.
** Contingent upon your Representative's Commission Contract with Phoenix a
different compensaiton schedule may apply.
HO3272E 4-97
EXHIBIT 7
CONSENT OF JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP
<PAGE>
JordenBurt [letterhead]
April 20, 1998
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06115
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 15 to the
Registration Statement on Form S-6 (File No. 33-23251) filed by Phoenix Home
Life Variable Universal Life Account with the Securities and Exchange Commission
under the Securities Act of 1933.
Very truly yours,
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
By /s/ Michael Berenson
------------------------------------
EXHIBIT 8
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 15 to the Registration Statement on Form S-6 of our
reports dated February 19, 1998 and February 11, 1998, relating to the financial
statements of Phoenix Home Life Variable Universal Life Account and the
consolidated financial statements of Phoenix Home Life Mutual Insurance Company,
respectively, which appear in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Hartford, Connecticut
April 29, 1998
EXHIBIT 9
CONSENT OF EDWIN L. KERR, ESQ.
<PAGE>
April 30, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Registration Statement No. 33-23251
Gentlemen:
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 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 10
CONSENT OF PAUL M. FISCHER, FSA, CLU, CHFC
<PAGE>
April 30, 1998
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. 33-23251) 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 section 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/ Paul M. Fischer
----------------------------------
Paul M. Fischer, FSA, CLU, ChFC
Vice President
