[VERSION A]
FLEX EDGE SUCCESS(registered trademark)
JOINT EDGE(registered trademark)
VARIABLE UNIVERSAL LIFE
INSURANCE POLICY
Issued by
PHOENIX HOME LIFE
MUTUAL INSURANCE COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT:
[envelope] PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS MAY 1, 1999
AS SUPPLEMENTED JULY 15, 1999
This Prospectus describes a flexible premium variable universal life insurance
policy. The Policy provides lifetime insurance protection.
The Policy is not a deposit or obligation of, underwritten or guaranteed by, any
financial institution or credit union. It is not federally insured or endorsed
by the Federal Deposit Insurance Corporation or any other state or federal
agency. Policy investments are subject to risk, including the fluctuation of
policy values and possible loss of principal invested or premiums paid.
The Securities and Exchange Commission has not approved or disapproved these
securities, nor passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
This Prospectus is valid only if accompanied or preceded by current prospectuses
for the Funds. You should read and keep these prospectuses for future reference.
THE PHOENIX EDGE SERIES FUND
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MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix Research Enhanced Index Series
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Balanced Series
[diamond] Phoenix-Goodwin Growth Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Goodwin Strategic Allocation Series
[diamond] Phoenix-Goodwin Strategic Theme Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Schafer Mid-Cap Value Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
MANAGED BY PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
[diamond] Phoenix-Aberdeen New Asia Series
MANAGED BY DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
BT INSURANCE FUNDS TRUST
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MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE[registered trademark] Equity Index Fund
FEDERATED INSURANCE SERIES
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MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
[diamond] Federated Fund for U.S. Government Securities II
[diamond] Federated High Income Bond Fund II
TEMPLETON VARIABLE PRODUCTS SERIES FUND
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MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Allocation Fund -- Class 2
[diamond] Templeton International Fund -- Class 2
[diamond] Templeton Stock Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Fund -- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, INC.
[diamond] Mutual Shares Investments Fund -- Class 2
WANGER ADVISORS TRUST
- ---------------------
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
[diamond] Wanger Foreign Forty
[diamond] Wanger International Small Cap
[diamond] Wanger Twenty
[diamond] Wanger U.S. Small Cap
It may not be in your best interest to purchase a policy to replace an
existing life insurance policy or annuity contract. You must understand the
basic features of the proposed Policy and your existing coverage before you
decide to replace your present coverage. You must also know if the replacement
will result in any taxes.
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TABLE OF CONTENTS
Heading Page
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SPECIAL TERMS ......................................... 3
SUMMARY ............................................... 5
PERFORMANCE HISTORY.................................... 6
PHOENIX AND THE VUL ACCOUNT............................ 6
Phoenix ............................................ 6
The VUL Account .................................... 6
The GIA ............................................ 7
THE POLICY ............................................ 7
Introduction ....................................... 7
Eligible Purchasers ................................ 7
Flexible Premiums .................................. 7
Allocation of Issue Premium ........................ 8
Right to Cancel Period ............................. 8
Temporary Insurance Coverage ....................... 9
Transfer of Policy Value ........................... 9
Systematic Transfer Program....................... 9
Nonsystematic Transfers .......................... 9
Determination of Subaccount Values ................. 10
Death Benefit ...................................... 10
Surrenders ......................................... 11
Policy Loans ....................................... 12
Lapse .............................................. 13
Payment of Premiums During Period of Disability .... 13
Additional Insurance Options ....................... 13
Additional Rider Benefits .......................... 13
INVESTMENTS OF THE VUL ACCOUNT ........................ 15
Participating Investment Funds...................... 15
Investment Advisers................................. 17
Services of the Advisers ........................... 17
Reinvestment and Redemption ........................ 17
Substitution of Investments ........................ 17
CHARGES AND DEDUCTIONS ................................ 18
General............................................. 18
Charges Deducted Once .............................. 18
Premium Tax Charge ............................... 18
Federal Tax Charge................................ 18
Periodic Charges.................................... 18
Conditional Charges................................. 19
Investment Management Charge........................ 20
Other Taxes ........................................ 20
GENERAL PROVISIONS .................................... 20
Postponement of Payments ........................... 20
Payment by Check ................................... 20
The Contract ....................................... 20
Suicide ............................................ 20
Incontestability ................................... 21
Change of Owner or Beneficiary ..................... 21
Assignment ......................................... 21
Misstatement of Age or Sex ......................... 21
Surplus............................................. 21
PAYMENT OF PROCEEDS ................................... 21
Surrender and Death Benefit Proceeds ............... 21
Payment Options .................................... 21
FEDERAL TAX CONSIDERATIONS ............................ 22
Introduction ....................................... 22
Phoenix's Tax Status ............................... 22
Policy Benefits .................................... 22
Business-Owned Policies............................. 23
Modified Endowment Contracts ....................... 23
Limitations on Unreasonable Mortality
and Expense Charges .............................. 24
Qualified Plans .................................... 24
Diversification Standards .......................... 24
Change of Ownership or Insured or Assignment ....... 25
Other Taxes ........................................ 25
VOTING RIGHTS ......................................... 25
Phoenix............................................. 26
THE DIRECTORS AND EXECUTIVE OFFICERS
OF PHOENIX.......................................... 26
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ............... 27
SALES OF POLICIES ..................................... 27
STATE REGULATION ...................................... 27
REPORTS ............................................... 27
LEGAL PROCEEDINGS ..................................... 28
LEGAL MATTERS ......................................... 28
REGISTRATION STATEMENT ................................ 28
YEAR 2000 ISSUE........................................ 28
FINANCIAL STATEMENTS .................................. 28
APPENDIX A ............................................ 83
APPENDIX B ............................................ 87
APPENDIX C............................................. 88
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.
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SPECIAL TERMS
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The following is a list of terms and their meanings when used in this
prospectus.
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.
FUNDS: The Phoenix Edge Series Fund, BT Insurance Funds Trust, Federated
Insurance Series, Templeton Variable Products Series Fund and Wanger Advisors
Trust.
GENERAL ACCOUNT: The general asset account of Phoenix.
GIA (GUARANTEED INTEREST ACCOUNT): An investment option under which premium
payment amounts are guaranteed to earn a fixed rate of interest. Excess interest
also may be credited, at 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.
IN WRITING (WRITTEN REQUEST): In a written form satisfactory to Phoenix and
delivered to VPMO.
INSURED: The person upon whose life the Policy is issued.
ISSUE PREMIUM: The premium payment made in connection with issuing 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.
NET ASSET VALUE: The worth of one share of a Series of a Fund at the end of a
valuation period. Net Asset Value is computed by adding the value of a Series'
holdings plus other assets, minus liabilities and then dividing the result by
the number of shares outstanding.
PAYMENT DATE: The Valuation Date on which we receive a premium payment or loan
repayment, 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 (COMPANY, OUR, US, WE): 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 but may 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 we measure policy years and policy anniversaries.
POLICY MONTH: The period from one monthly calculation day up to, but not
including, the next monthly calculation day.
POLICYOWNER (OWNER, YOU, YOUR): The person(s) who purchase(s) 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 1-year period from the policy date up
to, but not including, the first policy anniversary. Each succeeding policy year
is the 1-year period from the policy anniversary up to, but not including, the
next policy anniversary.
PROPORTIONATE (PRO RATA): Amounts allocated to Subaccounts on a pro rata basis
are allocated by increasing or decreasing a Policy's share in the value of the
affected Subaccounts and GIA so that such shares maintain the same ratio to each
other before and after the allocation.
SERIES: A separate investment portfolio of the Fund.
SINGLE LIFE POLICY: A Policy that covers the life of one (1) Insured.
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SUBACCOUNTS: Accounts within the VUL Account to which nonloaned assets under a
Policy are allocated.
UNIT: A standard of measurement used to set 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 we calculate the net
asset value of a Fund.
VALUATION PERIOD: For any Subaccount, the period in days from the end of one
Valuation Date through the next.
VPMO: Variable Products Mail Operations division of Phoenix that receives and
processes incoming mail for Variable Products Operations.
VPO: Variable Products Operations.
VUL ACCOUNT (ACCOUNT): Phoenix Home Life Variable Universal Life Account, a
separate account of the company.
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SUMMARY
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This is a summary of the Policy and does not contain all of the detailed
information that may be important to you. You should carefully read the entire
Prospectus before making any decision.
INVESTMENT FEATURES
FLEXIBLE PREMIUMS
The only premiums you have to pay are the issue premium and any payments
required to prevent the policy from lapse. See "Flexible Premiums" and "Lapse."
ALLOCATION OF PREMIUMS AND POLICY VALUE
After we deduct certain charges from your premium payment, we will invest
the balance in one or more of the Subaccounts of the VUL Account and/or the GIA
as you will have instructed us.
You may make transfers into the GIA and among the Subaccounts at anytime.
Transfers from the GIA are subject to the rules discussed in "Appendix B" and
under "Transfer of Policy Value."
The policy value varies with the investment performance of the Funds and is
not guaranteed.
The policy value allocated to the GIA will depend on deductions taken from
the GIA to pay expenses and will accumulate interest at rates we periodically
establish, but never less than 4%.
LOANS AND SURRENDERS
[diamond] Generally, you may take loans against 90% of the Policy's cash
surrender value subject to certain conditions. See "Policy Loans."
[diamond] You may partially surrender any part of the policy anytime. A partial
surrender fee of the lesser of $25 or 2% of the partial surrender
amount will apply. A separate surrender charge also may be imposed.
See "Surrenders."
[diamond] You may fully surrender this Policy anytime for its cash surrender
value. A surrender charge may be imposed. See "Surrenders."
INSURANCE PROTECTION FEATURES
DEATH BENEFITS
[diamond] Both a fixed and variable benefit is available under the Policy.
[bullet] The fixed benefit is equal to the Policy's face amount
(Option 1)
[bullet] The variable benefit equals the face amount plus the policy
value (Option 2)
[diamond] After the first year, you may reduce the face amount. Certain
restrictions apply, and generally, the minimum face amount is
$250,000.
[diamond] The death benefit is payable when the insured dies. See "Death
Benefit."
DEATH BENEFIT GUARANTEE
You may elect a guaranteed death benefit. The guaranteed death benefit is
equal to the initial face amount or the face amount as later changed by
increases or decreases regardless of investment performance. The death benefit
guarantee may not be available in some states.
ADDITIONAL BENEFITS
The following additional benefits are available by rider:
[diamond] Single Life Policies:
[bullet] Disability Waiver of Specified Premium
[bullet] Accidental Death Benefit
[bullet] Death Benefit Protection
[bullet] Whole Life Exchange Option
[bullet] Purchase Protection Plan
[bullet] Living Benefits
[bullet] Cash Value Accumulation
[bullet] Child Term
[bullet] Family Term
[bullet] Business Term
[diamond] Multiple Life Policies:
[bullet] Disability Benefit
[bullet] Survivor Purchase Option
[bullet] Term Insurance
[bullet] Policy Exchange Option
Availability of these Riders depends upon state approval and may involve an
extra cost.
DEDUCTIONS AND CHARGES
FROM PREMIUM PAYMENTS
[diamond] Taxes
[bullet] State Premium Tax Charge--2.25% on Single Life Policies
Varies by state on Multiple Life Policies
[bullet] Federal Tax Charge--1.50% on Single Life Policies See
"Charges and Deductions" for a detailed discussion.
FROM POLICY VALUE
[diamond] Issue Expense Charge--Deducted in the first policy year only and
payable in 12 monthly installments.
[diamond] Administrative Charge--The Administrative Charge is currently set at
$5 per month and is guaranteed not to exceed $10 per month. This
charge is to reimburse Phoenix for daily administration, monthly
processing, updating daily values and for annual/quarterly statements.
[diamond] Cost of Insurance--Amount deducted monthly. Cost of insurance rates
apply to the Policy and certain riders. The rates vary and are based
on certain personal factors such as sex, attained age and risk class
of the Insureds.
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[diamond] Surrender charge--Deducted if the Policy is surrendered within the
first 10 policy years. See "Surrender Charge."
[diamond] Partial Surrender Fee--Deducted to recover costs of processing
request. The fee is equal to 2% of withdrawal, but not more than $25.
[diamond] Partial surrender charge--Deducted for partial surrenders and decrease
in face amount.
FROM THE VUL ACCOUNT
Mortality and Expense Risk Charge:
Single Life Policies:
[diamond] Policy years 1 through 15--.80% annually;
[diamond] Policy years 16 and after--.25% annually.
Multiple Life Policies:
[diamond] For all policy years--.80% annually
FROM THE FUND
The assets of the VUL Account are used to purchase, at Net Asset Value,
shares of your selected underlying Funds. The Net Asset Value reflects
investment management fees and other direct expenses of the Fund. See
"Investment Management Charge."
See "Charges and Deductions" for a more detailed description of how each is
applied.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
You have the right to review the Policy. If you are not satisfied with it,
you may cancel the Policy:
[diamond] within 10 days after you receive the Policy, or
[diamond] within 10 days after we mail or deliver a written notice telling you
about your right to cancel, or
[diamond] within 45 days of completing the application;
whichever is latest.
See "Right to Cancel Period."
RISK OF LAPSE
The Policy will remain in force as long as the cash surrender value is
enough to pay the necessary monthly charges incurred under the Policy. When the
cash surrender value is no longer enough, the policy lapses, or ends. We will
let you know of an impending lapse situation. We will give you the opportunity
(a "grace period") to keep the Policy in force by paying a specified amount.
Please see "Lapse" for more detail.
TAX EFFECTS
Generally, under current federal income tax law, death benefits are not
subject to income tax. Earnings on the premiums invested in the VUL Account or
the GIA are not subject to income tax until there is a distribution from the
Policy. Loans, partial surrenders or Policy termination may result in
recognition of income for tax purposes.
VARIATIONS
The Policy is subject to laws and regulations in every state where the
Policy is sold. Therefore, the terms of the Policy may vary from state to state.
PERFORMANCE HISTORY
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We may include the performance history of the VUL Account 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. See "Appendix A" for more information.
PHOENIX AND THE VUL ACCOUNT
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PHOENIX
We are a mutual life insurance company originally chartered in Connecticut
in 1851 and redomiciled to New York in 1992. Our executive office is at One
American Row, Hartford, Connecticut 06102-5056 and our main administrative
office is at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. Our
New York principal office is at 10 Krey Boulevard, East Greenbush, New York
12144. We sell insurance policies and annuity contracts through our own field
force of full time agents and through brokers.
THE VUL ACCOUNT
The VUL Account is a separate account of Phoenix, established 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 meets the definition of a "separate account" under that Act. This
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. Each Subaccount will invest solely in shares of a
specific series of a mutual fund. In the future, we may establish additional
Subaccounts which will be made available to existing Policyowners to the extent
and on a basis decided by us. See "Investments of the VUL Account--Participating
Investment Funds."
We do not guarantee the investment performance of the VUL Account or any of
its Subaccounts. Contributions to the overall policy value allocated to the VUL
Account depend on the chosen Fund's investment performance. Thus, you bear the
full investment risk for all monies invested in the VUL Account.
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The VUL Account is part of the general business of Phoenix, but the gains or
losses of the VUL Account belong solely to the VUL Account. The gains or losses
of any other business we may conduct do not affect the VUL Account. Under New
York law, the assets of the VUL Account may not be taken to pay liabilities
arising out of any other business we 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 total deposits, including
transfers, to 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 the same for all monies deposited at the same
time. The loaned portion of the GIA will be credited interest at an effective
annual fixed rate of 2% for Single Life Policies (4% 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%.
On the last business day of each calendar week, 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
the end 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 then being applied to new
deposits to the GIA. This rate will remain in effect for a guaranteed period of
one full year from the date the new rate is applied.
In general, you can make only one transfer per year from the GIA. The amount
that can be transferred out is limited to the greater of $1,000 or 25% of the
policy value in the GIA as of the date of the transfer. If you elect the
Systematic Transfer Program, approximately equal amounts may be transferred out
of the GIA. Also, the total policy value allocated to the GIA may be transferred
out of the GIA to one or more of the Subaccounts of the VUL Account over a
consecutive four-year period according to the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of remaining value
[diamond] Year Three: 50% of remaining value
[diamond] Year Four: 100% of remaining value
Transfers into the GIA and among the Subaccounts of the VUL Account may be
made at any time. Transfers from the GIA are subject to the rules discussed in
"Appendix B" and "Transfer of Policy Value--Systematic Transfer Program."
THE POLICY
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INTRODUCTION
The Policy is a flexible premium variable universal life insurance policy.
The Policy has a death benefit, cash surrender value and loan privilege as does
a traditional fixed benefit whole life policy. The Policy differs from a fixed
benefit whole life policy, however, because you can allocate your premium into
one or more of several Subaccounts of the VUL Account or the GIA. Each
Subaccount of the VUL Account, in turn, invests its assets exclusively in a
portfolio of the Fund. The policy value varies according to the investment
performance of the Series to which premiums have been allocated.
ELIGIBLE PURCHASERS
Any person up to the age of 75 is eligible to be insured under a newly
purchased Policy after providing suitable evidence of insurability. You can
purchase a Policy to insure the life of another person provided that you have an
insurable interest in that life and the prospective 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.
FLEXIBLE PREMIUMS
The issue premium required depends on a number of factors, such as:
[diamond] age;
[diamond] sex;
[diamond] rate class of proposed insured;
[diamond] desired face amount;
[diamond] supplemental benefit; and
[diamond] planned premiums
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.
The issue premium payment should be delivered to your registered representative
for forwarding to our Underwriting
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Department. Additional payments should be sent to VPMO.
Premium payments received by us will be reduced by the applicable charge for
state premium tax. Single Life Policies will also be reduced by a federal tax
charge of 1.50%. The issue premium also will be reduced by the issue expense
charge deducted 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, after deduction of state
and federal tax charges and any sales charge, will be first used to cover any
monthly deductions during the grace period. Any balance 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
by your most recent instructions. See "Nonsystematic Transfers."
The number of units credited to a Subaccount of the VUL Account will be
determined by dividing the portion of the net premium applied to that Subaccount
by the unit value of the Subaccount on the payment date.
You may increase or decrease the planned premium amount (within limits) or
payment frequency at any time by writing to VPMO. We reserve the right to limit
increases to such maximums as may be established from time to time. Additional
premium payments may be made at any time. Each premium payment must at least
equal $25 or, if made during a grace period, the payment must equal the amount
needed to prevent lapse of the Policy.
You 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 our 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. To pay such refund, amounts taken from
each Subaccount or the GIA will be done in the same manner as for monthly
deductions. You may write to us and give us different instructions. The total
premium limit may be exceeded if additional premium is needed to prevent lapse
or if we subsequently determine that additional premium would be permitted by
federal laws or regulations.
You may authorize your bank to draw $25 or more from your personal checking
account to be allocated among the available Subaccounts or the GIA. Your monthly
payment will be invested according to your most recent instructions on file at
VPO.
Policies sold to officers, directors and employees of Phoenix (and their
spouses and children) will be credited with an amount equal to the first-year
commission that would apply on the amount of premium contributed. This option
also is available to career agents of Phoenix (and their spouses and children).
ALLOCATION OF ISSUE PREMIUM
We will generally allocate the issue premium less applicable charges to the
VUL Account or to the GIA upon receipt of a completed application, in accordance
with the allocation instructions in the application for 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, we temporarily allocate the entire issue premium paid less
applicable charges (along with any other premiums paid during the right to
cancel period) to the Phoenix-Goodwin Money Market Subaccount of the VUL
Account, and, at the expiration of the right to cancel period, the policy value
of the Phoenix-Goodwin 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
You have the right to review the Policy. If you are not satisfied with it,
you may cancel the Policy:
[diamond] by mailing it to us within 10 days after you receive it (or longer in
some states); or
[diamond] within 10 days after we mail or deliver a written notice telling you
about your right to cancel; or
[diamond] within 45 days after completing the application, whichever occurs
latest (the "Right to Cancel Period").
We treat a returned Policy as if we never issued it and, except for Policies
issued with a Temporary Money Market Allocation Amendment, we will return the
sum of the following as of the date we receive the returned Policy: (1) the
current policy value less any unpaid loans and loan interest; plus (2) any
monthly deductions, partial surrender fees and other charges made under the
Policy. For Policies issued with the Temporary Money Market Amendment the amount
returned will equal any premiums paid less any unrepaid loans and loan interest,
and less any partial surrender amounts paid.
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We retain the right to decline to process an application within seven days
of our receipt of the completed application for insurance. If we decline to
process the application, we will return the premium paid. Even if we have
approved the application for processing, we retain the right to decline to issue
the Policy. If we decline to issue the Policy, we will refund to you the same
amount as would have been refunded under the Policy had it been issued but
returned for refund during the Right to Cancel Period.
TEMPORARY INSURANCE COVERAGE
On the date the application for a Policy is signed and submitted with the
issue premium, we issue a Temporary Insurance Receipt. Under the Temporary
Insurance Receipt, the insurance protection applied for (subject to the limits
of liability and subject to the terms set forth in the Policy and in the
Receipt) takes effect on the date of the application.
TRANSFER OF POLICY VALUE
SYSTEMATIC TRANSFER PROGRAM
You may elect to transfer funds automatically among the Subaccounts or the
unloaned portion of the GIA on a monthly, quarterly, semiannual or annual basis
under the Systematic Transfer Program for Dollar Cost Averaging ("Systematic
Transfer Program"). Under this Systematic Transfer Program, the minimum transfer
amounts are $25 monthly, $75 quarterly, $150 semiannually or $300 annually. You
must have an initial value of $1,000 in the GIA or the Subaccount from which
funds will be transferred ("Sending Subaccount") and if the value in that
Subaccount or the GIA drops below the amount to be transferred, the entire
remaining balance will be transferred and all systematic transfers stop. Funds
may be transferred from only one Sending Subaccount or the GIA, but may be
allocated to more than one Subaccount ("Receiving Subaccounts"). Under the
Systematic Transfer Program, Policyowners may make more than one transfer per
policy year from the GIA. These transfers must be in approximately equal amounts
and made over a minimum 18-month period.
Only one Systematic Transfer Program can be active at any time. After the
completion of the Systematic Transfer Program, you can call VPO at 800/541-0171
to begin a new Systematic Transfer Program.
All transfers under the Systematic Transfer Program will be made on the
basis of the GIA and Subaccount on the first day of the month following our
receipt of the transfer request. If the first day of the month falls on a
holiday or weekend, then the transfer will be processed on the next business
day.
NONSYSTEMATIC TRANSFERS
Transfers among available Subaccounts or the GIA and changes in premium
payment allocations may be requested in writing or by calling 800/541-0171,
between the hours of 8:30 a.m. and 4:00 p.m. Eastern Time. Written requests for
transfers will be executed on the date we receive the request. Telephone
transfers will be effective on the date the request is made except as noted
below. Unless you elect in writing not to authorize telephone transfers or
premium allocation changes, telephone transfer orders and premium allocation
changes also will be accepted on your behalf from your registered
representative. Phoenix and Phoenix Equity Planning Corporation ("PEPCO"), the
national distributor for Phoenix, will employ reasonable procedures to confirm
that telephone instructions are genuine. They will require verification of
account information and will record telephone instructions on tape. All
telephone transfers will be confirmed in writing to you. To the extent that
Phoenix and PEPCO fail to follow procedures reasonably designed to prevent
unauthorized transfers, Phoenix and PEPCO may be liable for following telephone
instructions for transfers that prove to be fraudulent. However, you will bear
the risk of loss resulting from instructions entered by an unauthorized third
party that Phoenix and PEPCO reasonably believe to be genuine. The telephone
transfer and allocation change privileges may be modified or terminated at any
time. During times of extreme market volatility, these privileges may be
difficult to exercise. In such cases, you should submit a written request.
Although currently there is no charge for transfers, in the future, we may
charge a fee of $10 for each transfer after the first two transfers in a policy
year.
We reserve the right to refuse to transfer amounts less than $500 unless:
[diamond] the entire balance in the Subaccount or the GIA is being transferred;
or
[diamond] the transfer is part of the Systematic Transfer Program.
We also reserve the right to prohibit a transfer to any Subaccount of the
VUL Account if the value of your investment in that Subaccount immediately after
the transfer would be less than $500. We further reserve the right to require
that the entire balance of a Subaccount or the GIA be transferred if the value
of your investment in that Subaccount would, immediately after the transfer, be
less than $500.
You may make only one transfer per policy year from the unloaned portion of
the GIA unless (1) the transfer(s) are made as part of a Systematic Transfer
Program, or (2) we agree to make an exception to this rule. The amount you may
transfer cannot exceed the greater of $1,000 or 25% of the value of the unloaned
portion of the GIA at the time of the transfer. In addition, you may transfer
the total value allocated to the unloaned portion of the GIA out of the GIA to
one or more of the Subaccounts over a
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consecutive four-year period according to the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of the remaining value
[diamond] Year Three: 50% of the remaining value
[diamond] Year Four: 100% of the remaining value
A nonsystematic transfer from the unloaned portion of the GIA will be
processed on the day such request is received by VPMO.
Transfers into the GIA and among the Subaccounts may be made anytime. We
reserve the right to limit the number of Subaccounts you may invest in to a
total of 18 at any one time or over the life of the Policy. We may limit you to
less than 18 if we are required to do so by any federal or state law.
Because excessive exchanges between Subaccounts can hurt Fund performance,
we reserve the right to temporarily or even permanently terminate exchange
privileges or reject any specific exchange order from anyone whose transactions
appear to us to follow a timing pattern, including those who request more than
one exchange out of a Subaccount within any 30-day period. We will not accept
batched 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.
If a policy has been issued with a Temporary Money Market Allocation
Amendment, no transfers may be made until the end of the Right to Cancel Period.
DETERMINATION OF SUBACCOUNT VALUES
We establish the unit value of each Subaccount of
the VUL Account on the first valuation date of that Subaccount. The unit value
of a Subaccount 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 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 on a valuation date is determined at the end
of that day.
The Net Investment Factor for each Subaccount 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 determined by the formula:
(A) + (B)
--------- - (D) where:
(C)
(A) The value of the assets in the Subaccount on the current valuation date,
including accrued net investment income and realized and unrealized
capital gains and losses, but excluding the net value of any transactions
during the current valuation period.
(B) The amount of any dividend (or, if applicable, any capital gain
distribution) received by the Subaccount if the "ex-dividend" date for
shares of the Fund occurs during the current valuation period.
(C) The value of the assets in the Subaccount as of the just prior valuation
date, including accrued net investment income and realized and unrealized
capital gains and losses, and including the net value amount of any
deposits and withdrawals made 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 death of the Insured 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 death of the Insured, plus the policy value or, if greater, the
minimum death benefit on that date.
Under either Option, the minimum death benefit is the policy value on the
date of death of the Insured increased by a percentage determined from a table
contained in the Policy. This percentage will be 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
A guaranteed death benefit rider is available. Under this Policy rider, if
you pay the required premium each year as specified in the rider, the death
benefit selected will be guaranteed for a certain specified number of years,
regardless of the investment performance of the Policy, and will equal either
the initial face amount or the face amount as later changed by decreases. To
keep this guaranteed death benefit in force, there may be limitations on the
amount of partial surrenders or decreases in face amount permitted.
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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, you 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 we require 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 $1,000 of face amount increase requested
subject to a maximum of $600. No additional monthly administration charge will
be assessed for face amount increases. We will deduct any charges associated
with the increase (the increases in cost of insurance charges), from the policy
value, whether or not you pay 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. If the change is a decrease in face amount, the
death benefit under a Policy would be reduced on the next monthly calculation
day. If the change is a partial surrender, the death benefit under a Policy
would be reduced immediately. A decrease in the death benefit may have certain
tax consequences. See "Federal Tax Considerations."
REQUESTS FOR DECREASE IN FACE AMOUNT
You may request a decrease in face amount at any time after the first policy
year. Unless we agree otherwise, the decrease must be at least equal to $10,000
and the face amount remaining after the decrease must be at least $25,000. All
face amount decrease requests must be in writing and will be effective on the
first monthly calculation day following the date we approve the request. A
partial surrender charge will be deducted from the policy value based on the
amount of the decrease. The charge will equal the applicable surrender charge
that would apply to a full surrender multiplied by a fraction (which is equal to
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, you may partially or fully surrender the Policy by sending to VPMO a
written release and surrender in a form satisfactory to us. We may also require
you to send the Policy to us. 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, we generally will pay to you the amount
surrendered within seven days after we receive 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 us. You may elect to have the amount paid in a lump sum or under
a payment option. See "Conditional Charges--Surrender Charge" and "Payment
Options."
PARTIAL SURRENDERS
You may obtain a partial surrender of the Policy by requesting payment of
the Policy's cash surrender value. It is possible to do this at any time during
the lifetime of the Insured, while the Policy is in force, with a written
request to VPMO. We may require the return of the Policy 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 by us. Surrender
proceeds may be applied under any of the payment options described under
"Payment of Proceeds--Payment Options."
We reserve 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 is
reduced as a result of a partial surrender and is less than $500, we reserve the
right to require surrender of the entire remaining balance in that Subaccount or
the GIA.
Upon a partial surrender, the policy value will be reduced by the sum of the
following:
[diamond] 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.
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If no allocation request is made, the withdrawals from each Subaccount
will be made in the same manner as that provided for monthly
deductions.
[diamond] 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.
[diamond] 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 will be
reduced by the same amount as the policy value is reduced as described above.
POLICY LOANS
Generally, while the Policy is in force, a loan may be taken against the
Policy up to the available loan value. The loan value on any day is 90% of the
policy value reduced by an amount equal to the surrender charge. 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 and New Jersey 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 us during a grace period will
be reduced to pay any overdue monthly deductions and only the balance will be
applied to reduce the debt. Such balance will first be used to pay any
outstanding accrued loan interest, and then will be applied to reduce the loaned
portion of the GIA. The unloaned portion of the GIA will be increased by the
same amount the loaned portion is decreased. If the amount of a loan repayment
exceeds the remaining loan balance and accrued interest, the excess will be
allocated among the Subaccounts as you may request at the time of the repayment
and, if no allocation request is made, according to the most recent premium
allocation schedule on file.
Payments received by us for the Policy will be applied directly to reduce
outstanding debt unless specified as a premium payment by you. Until the debt is
fully repaid, additional debt repayments may be made at any time during the
lifetime of the Insured while the Policy is in force.
Failure to repay a policy loan or to pay loan interest will not terminate
the Policy unless the policy value becomes insufficient to maintain the Policy
in force.
The proceeds of policy loans may be subject to federal income tax. See
"Federal Tax Considerations."
In the future, we may not allow policy loans of less than $500, unless such
loan is used to pay a premium on another Phoenix policy.
You will pay interest on the loan at an effective annual rate, compounded
daily and payable in arrears. The loan interest rates in effect are as follows:
[diamond] Single Life Policies
[bullet] Policy years 1-10 (or Insured's age 65 if earlier): 4%
[bullet] Policy years 11-15: 3%
[bullet] Policy years 16 and thereafter: 2 1/2%
[diamond] Single Life Policies--New York & New Jersey only
[bullet] Policy years 1-10 (or Insured's age 65 if earlier): 6%
[bullet] Policy years 11-15: 5%
[bullet] Policy years 16 and thereafter: 4 1/2%
[diamond] Multiple Life Policies
[bullet] Policy years 1-10: 8%
[bullet] Policy years 11 and thereafter: 7%
At the end of each policy year, any interest due on the debt will be treated
as a new loan and will be offset by a transfer from your Subaccounts and the
unloaned portion of the GIA to 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, the policy value
does not increase as rapidly as it
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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, the
policy value is greater than it would have been had no loan been made. A policy
loan, whether or not repaid, also has a similar 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 3 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
required monthly deduction. If on any monthly calculation day during any
subsequent policy year, the cash surrender value (which should have 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.
During the grace period, the Policy will continue in force but 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 until 30 days has passed after we have mailed a written notice
to you. If a premium payment for the additional amount is received by us during
the grace period, any amount of premium over what is required to prevent lapse
will be allocated among the Subaccounts or to the GIA according to the current
premium allocation schedule. In determining the amount of "excess" premium to be
applied to the Subaccounts or the GIA, we will deduct the premium tax and the
amount needed to cover any monthly deductions made during the 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
You may also 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 our 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 Insured 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. We 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 Policyowner may, at predetermined
future dates, purchase additional insurance protection on the same Insured
without evidence of insurability. See "Additional Rider Benefits--Purchase
Protection Plan Rider."
In addition, once each policy year you 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 our receipt of adequate
insurability evidence. A Right to cancel period as described in "The Policy"
section of this prospectus applies to each increase in face amount.
ADDITIONAL RIDER BENEFITS
You may elect additional benefits under a Policy, and you may cancel these
benefits at anytime. 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 and additional riders may
be available as described in the Policy (if approved in your state).
SINGLE LIFE POLICIES:
[diamond] DISABILITY WAIVER OF SPECIFIED PREMIUM RIDER. We waive 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). If premiums have been waived continuously
during the entire five years prior to such date, the waiver will
continue beyond that date. The premium will be waived upon our receipt
of notice that the Insured is totally disabled and that the disability
occurred while the rider was in force.
[diamond] ACCIDENTAL DEATH BENEFIT RIDER. An additional death benefit will be
paid before the policy anniversary nearest the Insured's 75th
birthday, if:
[bullet] the Insured dies from bodily injury that results from
an accident; and
[bullet] the Insured dies no later than 90 days after injury.
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[diamond] 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 you may increase or decrease provided that certain
minimum premiums are paid. Unless we agree 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 must be 20.
Three death benefit guarantee periods are available. 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:
Expiry Date of Death Benefit Guaranteed, the
Level later of:
1 The policy anniversary nearest the Insured's 70th birthday or the
7th policy year; or
2 The policy anniversary nearest the Insured's 80th birthday or the
10th policy year; or
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 you pay the new minimum required premium.
For Policies issued in New York, two guaranteed periods are available:
1 The policy anniversary nearest the Insured's 75th birthday or the
10th policy year; or
2 The policy anniversary nearest the Insured's 95th birthday.
[diamond] WHOLE LIFE EXCHANGE OPTION RIDER. This rider permits you 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.
[diamond] PURCHASE PROTECTION PLAN RIDER. Under this rider you may, at
predetermined future dates, purchase additional insurance protection
without evidence of insurability.
[diamond] 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.
[diamond] CASH VALUE ACCUMULATION RIDER. This rider generally permits you 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.
[diamond] 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.
[diamond] 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.
[diamond] 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 available only for Policies sold in
the corporate-owned life insurance market, employer-sponsored life
insurance market or other business-related life insurance market.
MULTIPLE LIFE POLICIES:
[diamond] 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.
[diamond] 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.
[diamond] 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.
[diamond] 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.
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INVESTMENTS OF THE VUL ACCOUNT
- --------------------------------------------------------------------------------
PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
Certain Subaccounts invest in corresponding Series of The Phoenix Edge
Series Fund. The following Series are currently available:
PHOENIX RESEARCH ENHANCED INDEX SERIES: The investment objective of the
Series is to seek high total return by investing in a broadly diversified
portfolio of equity securities of large and medium capitalization companies
within market sectors reflected in the S&P 500. The Series invests in a
portfolio of undervalued common stocks and other equity securities which appear
to offer growth potential and an overall volatility of return similar to that of
the S&P 500.
PHOENIX-ABERDEEN INTERNATIONAL SERIES: The investment objective of the
Series is to seek a high total return consistent with reasonable risk. The
Series invests primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions. The
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES: The investment objective of the Series is
to seek long-term capital appreciation. The Series invests primarily in a
diversified portfolio of equity securities of issuers organized and principally
operating in Asia, excluding Japan.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the Series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the 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.
PHOENIX-GOODWIN BALANCED SERIES: The investment objective of the Series is
to seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Goodwin Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
PHOENIX-GOODWIN GROWTH SERIES: The investment objective of the Series is to
achieve intermediate and long-term growth of capital, with income as a secondary
consideration. The Phoenix-Goodwin Growth Series invests principally in common
stocks of corporations believed by management to offer growth potential.
PHOENIX-GOODWIN MONEY MARKET SERIES: The investment objective of the Series
is to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the Series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-GOODWIN STRATEGIC ALLOCATION SERIES: The investment objective of the
Series is to realize as high a level of total return over an extended period of
time as is considered consistent with prudent investment risk. The
Phoenix-Goodwin Strategic Allocation Series invests in stocks, bonds and money
market instruments in accordance with the Investment Adviser's appraisal of
investments most likely to achieve the highest total return.
PHOENIX-GOODWIN STRATEGIC THEME SERIES: The investment objective of the
Series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Phoenix-Goodwin Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the Series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity Series seeks to
achieve its objective by investing in a diversified portfolio of common stocks
that meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price.
PHOENIX-OAKHURST GROWTH AND INCOME SERIES: The investment objective of the
Series is to seek dividend growth, current income and capital appreciation by
investing in common stocks. The Phoenix-Oakhurst Growth and Income Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
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<PAGE>
PHOENIX-SCHAFER MID-CAP VALUE SERIES: The primary investment objective of
the Series is to seek long-term capital appreciation, with current income as the
secondary investment objective. The Phoenix-Schafer Mid-Cap Value Series will
invest in common stocks of established companies having a strong financial
position and a low stock market valuation at the time of purchase which are
believed to offer the possibility of increase in value.
PHOENIX-SENECA MID-CAP GROWTH SERIES: The investment objective of the Series
is to seek capital appreciation primarily through investments in equity
securities of companies that have the potential for above average market
appreciation. The Series seeks to outperform the Standard & Poor's Mid-Cap 400
Index.
BT INSURANCE FUNDS TRUST
A certain Subaccount invests in a corresponding Series of the BT Insurance
Funds Trust. The following Series is currently available:
EAFE(registered trademark) EQUITY INDEX FUND: The Series seeks to match the
performance of the Morgan Stanley Capital International EAFE(registered
trademark) Index ("EAFE(registered trademark) Index"), which emphasizes major
market stock performance of companies in Europe, Australia and the Far East. The
Series invests in a statistically selected sample of the securities found in the
EAFE(registered trademark) Index.
FEDERATED INSURANCE SERIES
Certain Subaccounts invest in corresponding Series of the Federated
Insurance Series. The following Series are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment objective
of the Series is to seek current income by investing primarily in U.S.
government securities, including mortgage-backed securities issued by U.S.
government agencies.
FEDERATED HIGH INCOME BOND FUND II: The investment objective of the Series
is to seek high current income by investing primarily in a diversified portfolio
of high-yield, lower-rated corporate bonds.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Certain Subaccounts invest in Class 2 Shares of a corresponding Series of
the Templeton Variable Products Series Fund. The following Series are currently
available:
MUTUAL SHARES INVESTMENTS FUND: The primary investment objective of the
Series is capital appreciation with income as a secondary objective. The Mutual
Shares Investments Series invests primarily in domestic equity securities that
the manager believes are significantly undervalued.
TEMPLETON ASSET ALLOCATION FUND: The investment objective of the Series is a
high level of total return. The Templeton Asset Allocation Series invests in
stocks of companies of any nation, bonds of companies and governments of any
nation and in money market instruments. Changes in the asset mix will be made in
an attempt to capitalize on total return potential produced by changing economic
conditions throughout the world.
TEMPLETON DEVELOPING MARKETS FUND: The investment objective of the Series is
long-term capital appreciation. The Templeton Developing Markets Series invests
primarily in emerging markets equity securities.
TEMPLETON INTERNATIONAL FUND: The investment objective of the Series is
long-term capital. The Templeton International Series invests primarily in
stocks of companies located outside the United States, including emerging
markets. Any income realized will be incidental. It also may invest in debt
securities of governments and companies located anywhere in the world.
TEMPLETON STOCK FUND: The investment objective of the Series is long-term
capital growth. The Templeton Stock Series invests primarily in common stocks
issued by companies in various nations throughout the world, including the U.S.
and emerging markets.
WANGER ADVISORS TRUST
Certain Subaccounts invest in corresponding Series of the Wanger Advisors
Trust. The following Series are currently available:
WANGER FOREIGN FORTY: The investment objective of the Series is to seek
long-term capital growth. The Wanger Foreign Forty Series invests primarily in
equity securities of foreign companies with market capitalization of $1 billion
to $10 billion and focuses its investments in 40 to 60 companies in the
developed markets.
WANGER INTERNATIONAL SMALL CAP: The investment objective of the Series is to
seek long-term capital growth. The Wanger International Small Cap Series invests
primarily in securities of non-U.S. companies with total common stock market
capitalization of less than $1 billion.
WANGER TWENTY: The investment objective of the Series is to seek long-term
capital growth. The Wanger Twenty Series invests primarily in the stocks of U.S.
companies with market capitalization of $1 billion to $10 billion and ordinarily
focuses its investments in 20 to 25 U.S. companies.
WANGER U.S. SMALL CAP: The investment objective of the Series is to seek
long-term capital growth. The Wanger U.S. Small Cap Series invests primarily in
securities of U.S. companies with total common stock market capitalization of
less than $1 billion.
Each Series will be subject to market fluctuations and the risks that come
with the ownership of any security, and there can be no assurance that any
Series will achieve its stated investment objective.
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<PAGE>
In addition to being sold to the Account, shares of the Funds also may be
sold to other separate accounts of Phoenix or its affiliates or to the separate
accounts of other insurance companies.
It is possible that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Fund(s) simultaneously. Although neither Phoenix nor the Fund(s)
trustees currently foresee any such disadvantages either to variable life
insurance Policyowners or to variable annuity Contract Owners, the Funds'
trustees intend to monitor events in order to identify any material conflicts
between variable life insurance Policyowners and variable annuity Contract
Owners and to determine what action, if any, should be taken in response to such
conflicts. Material conflicts could, for example, result from:
[diamond] changes in state insurance laws;
[diamond] changes in federal income tax laws;
[diamond] changes in the investment management of any portfolio of the Fund(s);
or
[diamond] differences in voting instructions between those given by variable
life insurance Policyowners and those given by variable annuity
Contract Owners.
We will, at our expense, remedy such material conflicts including, if
necessary, segregating the assets underlying the variable life insurance
policies and the variable annuity contracts and establishing a new registered
investment company.
INVESTMENT ADVISERS
Phoenix Investment Counsel, Inc. ("PIC") is the investment adviser to all
Series in The Phoenix Edge Series Fund except the Phoenix-Duff & Phelps Real
Estate Securities and Phoenix-Aberdeen New Asia Series. Based on subadvisory
agreements with the Fund, PIC delegates certain investment decisions and
research functions to subadvisers for the following Series:
[diamond] J.P. Morgan Investment Management, Inc.
[bullet] Phoenix Research Enhanced Index Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
[bullet] Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
[bullet] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Schafer Capital Management, Inc.
[bullet] Phoenix-Schafer Mid-Cap Value Series
The investment adviser to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment adviser to the Phoenix-Aberdeen New 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 Phoenix-Aberdeen New Asia Series to PIC
and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect, less than wholly-owned
subsidiaries of Phoenix. PAIA is jointly owned and managed by PM Holdings, Inc.,
a subsidiary of Phoenix and by Aberdeen Fund Managers, Inc.
The other investment advisers are:
[diamond] Bankers Trust Company
[bullet] EAFE(registered trademark) Equity Index Fund
[diamond] Federated Investment Management Company
[bullet] Federated Fund for U.S. Government Securities II
[bullet] Federated High Income Bond Fund II
[diamond] Templeton Investment Counsel, Inc.
[bullet] Templeton Asset Allocation Fund
[bullet] Templeton International Fund
[bullet] Templeton Stock Fund
[diamond] Templeton Asset Ltd.
[bullet] Templeton Developing Markets Fund
[diamond] Franklin Mutual Advisers, Inc.
[bullet] Mutual Shares Investments Fund
[diamond] Wanger Asset Management, L.P.
[bullet] Wanger Foreign Forty o Wanger International Small Cap
[bullet] Wanger Twenty
[bullet] Wanger U.S. Small Cap
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.
Likewise, all capital gains distributions of the Fund, if any, are reinvested at
the net asset value on the record date. We redeem Fund shares at their net asset
value to the extent necessary to make payments under the Policy.
SUBSTITUTION OF INVESTMENTS
We reserve the right to make additions to, deletions from, or substitutions
for the investments held by the VUL Account, subject to compliance with the law
as currently applicable or as subsequently changed. In the future, we may
establish additional Subaccounts within the VUL
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<PAGE>
Account, each of which will invest in shares of a designated portfolio of the
Fund with a specified investment objective. If and when marketing needs and
investment conditions warrant, and at our discretion, we may establish
additional portfolios. These will be made available under existing Policies to
the extent and on a basis determined by us.
If shares of any of the portfolios of the Fund should no longer be available
for investment or, if in the judgment of our management, further investment in
shares of any of the portfolios become inappropriate due to Policy objectives,
we may then substitute shares of another mutual fund for shares already
purchased, or to be purchased in the future. No substitution of mutual fund
shares held by the VUL Account may take place without prior approval of the
Securities and Exchange Commission and prior notice to you. In the event of a
change, you 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
- --------------------------------------------------------------------------------
GENERAL
Charges are deducted in connection with the Policy to compensate us for:
[diamond] our expenses in selling the Policy;
[diamond] underwriting and issuing the Policy;
[diamond] premium and federal taxes incurred on premiums received;
[diamond] providing the insurance benefits set forth in the Policy; and
[diamond] assuming certain risks in connection with the Policy.
The nature and amount of these charges are more fully described in sections
below.
When we issue Policies under group or sponsored arrangements, we may reduce
or eliminate the:
[diamond] issue expense charge; and/or
[diamond] surrender charge.
Sales to a group or through sponsored arrangement often result in lower per
policy costs and often involve a greater stability of premiums paid into the
policies. Under such circumstances, Phoenix tries to pass these savings onto the
purchasers. The amount of reduction will be determined on a case-by-case basis
and will reflect the cost reduction we expect as a result of these group or
sponsored sales.
Certain charges are deducted only once, others are deducted periodically,
while certain others are deducted only if certain events occur.
CHARGES DEDUCTED ONCE
[diamond] PREMIUM TAX CHARGE. Various states (and countries and cities) impose a
tax on premiums received by insurance companies. Premium taxes vary
from state to state. Currently, these taxes range from 0.75% to 4% of
premiums paid. Moreover, certain municipalities in Louisiana, Kentucky
and South Carolina also impose taxes on premiums paid, in addition to
the state taxes imposed. The premium tax charge represents an amount
we consider necessary to pay all premium taxes imposed by these taxing
authorities, and we do not expect to derive a profit from this charge.
Policies will be assessed a tax charge equal to 2.25% of the premiums
paid. These charges are deducted from each premium payment.
[diamond] FEDERAL TAX CHARGE. A charge equal to 1.50% of each premium will be
deducted from each premium payment to cover the estimated cost to us
of the federal income tax treatment of deferred acquisition costs.
PERIODIC CHARGES
MONTHLY
[diamond] ISSUE EXPENSE CHARGE. This charge is to reimburse Phoenix for
underwriting and start-up expenses in connection with issuing a
Policy.
[bullet] SINGLE LIFE POLICIES: the issue expense charge is $1.50 per
$1,000 of face amount up to a maximum of $600.
[bullet] MULTIPLE LIFE POLICIES: the issue expense charge is $150.
Rather than deduct the full amount at once, the issue expense charge is
deducted in equal monthly installments over the first 12 months of the
Policy. 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 member characteristics, 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.
[diamond] ADMINISTRATIVE CHARGE. The Administrative Charge is currently set at
$5 per month and is guaranteed not to exceed $10 per month. This
charge is to reimburse Phoenix for daily administration, monthly
processing, updating daily values and for annual/quarterly statements.
[diamond] COST OF INSURANCE. To determine this expense, we multiply the
appropriate cost of insurance rate by the difference between your
Policy's death benefit and the policy value. Generally, cost of
insurance rates for Single Life Policies are based on the sex,
attained age,
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<PAGE>
duration and risk class of the Insured; and for Multiple Life Policies
the cost of insurance rates are based on the sex, attained age and
risk class of the Insureds. However, in certain states and for
policies issued in conjunction with certain qualified plans, cost of
insurance rates are not based on sex. The actual monthly costs of
insurance rates are based on our expectations of future mortality
experience. They will not, however, be greater than the guaranteed
cost of insurance rates set forth in the Policy. These guaranteed
maximum rates are equal to 100% of the 1980 Commissioners Standard
Ordinary ("CSO") Mortality Table, with appropriate adjustment for the
Insureds' risk classification. Any change in the cost of insurance
rates will apply to all persons of the same sex, insurance age and
risk class whose Policies have been in force for the same length of
time. Your risk class may affect your cost of insurance rate. We
currently place Insureds into a standard risk class or a risk class
involving a higher mortality risk, depending upon the health of the
Insureds as determined by medical information that we request. For
otherwise identical Policies, Insureds in the standard risk class will
have a lower cost of insurance than those in the risk class with the
higher mortality risk. The standard risk class also is divided into
categories: smokers, nonsmokers and those who have never smoked.
Nonsmokers will generally incur a lower cost of insurance than
similarly situated Insureds who smoke.
[diamond] COST OF ANY RIDERS TO YOUR POLICY. Certain policy riders require the
payment of additional premiums to pay for the benefit provided by the
rider.
Monthly deductions are made on each monthly calculation day. The amount
deducted is allocated among Subaccounts and the unloaned portion of the GIA
based on an allocation schedule specified by you.
You initially chose this schedule in your application, and you can change it
later from time to time. If any Subaccount or the unloaned portion of the GIA is
insufficient to permit the full withdrawal of the monthly deduction, the
withdrawals from the other Subaccounts or GIA will be proportionally increased.
DAILY
[diamond] MORTALITY AND EXPENSE RISK CHARGE. A charge at an annual rate of 0.80%
is deducted daily from the VUL Account. For Single Life Policies,
after the 15th policy year, the charge is reduced to an annual rate of
0.25%. No portion of this charge is deducted from the GIA.
The mortality risk assumed by us is that collectively our Insureds may
live for a shorter time than projected because of inaccuracies in that
projecting process and, therefore, that the total amount of death
benefits that we will pay out will be greater than that we expected.
The expense risk assumed is that expenses incurred in issuing and
maintaining the Policies may exceed the limits on administrative
charges set in the Policies. If the expenses do not increase to an
amount in excess of the limits, or if the mortality projecting process
proves to be accurate, we may profit from this charge. We also assume
risks with respect to other contingencies including the incidence of
policy loans, which may cause us to incur greater costs than expected
when we designed the Policies. To the extent we profit from this
charge, we may use those profits for any proper purpose, including the
payment of sales expenses or any other expenses that may exceed income
in a given year.
CONDITIONAL CHARGES
These are other charges that are imposed only if certain events occur.
[diamond] 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, which is a contingent deferred sales charge. The surrender
charge is designed to recover the expense of distributing Policies
that are terminated before distribution expenses have been recouped
from revenue generated by these policies. 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 surrender charge described below
will apply if you either surrender the Policy for its cash surrender
value or let the Policy lapse. 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 the amount shown in the Policy's
surrender charge Schedule, or equal to either A plus B (as defined
below), 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.
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<PAGE>
B. The contingent deferred issue charge is equal to $5 per $1,000 of
initial face amount.
SURRENDER CHARGE SCHEDULE
-------------------------
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
[diamond] PARTIAL SURRENDER FEE. In the case of a partial surrender, but not a
decrease in face amount, an additional fee is imposed. This fee is
equal to 2% of the amount withdrawn but not more than $25. It is
intended to recover the actual costs of processing the partial
surrender request and will be deducted from each Subaccount and GIA in
the same proportion as the withdrawal is allocated. If no allocation
is made at the time of the request for the partial surrender,
withdrawal allocation will be made in the same manner as are monthly
deductions.
[diamond] PARTIAL SURRENDER CHARGE. If less than all of the Policy is
surrendered, the amount withdrawn is a "partial surrender." A charge
as described below is deducted from the policy value upon a partial
surrender of the Policy. The charge is 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 which is 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
and the GIA in the same proportion as the withdrawal is allocated.
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.
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.
OTHER TAXES
Currently no charge is made to the VUL Account for federal income taxes that
may be attributable to the VUL Account. We may, however, make such a charge in
the future for these or any other taxes attributable to the VUL Account.
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:
[diamond] for up to six months from the date of the request, for any
transactions dependent upon the value of the GIA;
[diamond] 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
[diamond] whenever an emergency exists, as decided 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 your 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, the Policy will stop and become void. We will pay you the Policy value
adjusted by the addition of any monthly deductions and other fees and charges,
minus any debt owed to us under the Policy.
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<PAGE>
INCONTESTABILITY
We cannot contest this Policy or any attached rider after it has been in
force during the Insured's lifetime or 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 Insured, the death
benefit payable under the Policy will be paid to your estate.
As long as the Policy is in force, the Policyowner and the Beneficiary may
be changed in writing, satisfactory to us. A change in Beneficiary will take
effect as of the date the notice is signed, whether or not the Insured is living
when we receive the notice. We will not, however, be liable for any payment made
or action taken before receipt of the notice.
ASSIGNMENT
The Policy may be assigned. We will not be bound by the assignment until a
written copy has been received and we will not be liable with respect to any
payment made prior to receipt. We assume no responsibility for determining
whether an assignment is valid.
MISSTATEMENT OF AGE OR SEX
If the age or sex of 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
You may share in the divisible surplus of Phoenix to the extent decided
annually by the Board of Directors. However, it is not currently expected that
the Board will authorize these payments since you 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 we receive the request for
surrender or due proof of death, provided such request is complete and in good
order. Payment of surrender or death proceeds usually will be made in one lump
sum within seven days, unless another payment option has been elected. Payment
of the death proceeds, however, may be delayed if the claim for payment of the
death proceeds needs to be investigated, e.g., to ensure payment of the proper
amount to the proper payee. Any such delay will not be beyond that reasonably
necessary to investigate such claims consistent with insurance practices
customary in the life insurance industry.
Under 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, you may elect a payment option for payment of
the death proceeds to the Beneficiary. You may revoke or change a prior
election, unless such right has been waived. The Beneficiary may make or change
an election before payment of the death proceeds, unless you have made an
election that does not permit such further election or changes by the
Beneficiary.
A written request in a form satisfactory to us is required to elect, change
or revoke a payment option.
The minimum amount of surrender or death benefit proceeds that may be
applied under any payment option is $1,000.
If the Policy is assigned as collateral security, we will pay any amount due
the assignee in one lump sum. Any remaining proceeds will remain under the
option elected.
PAYMENT OPTIONS
All or part of the surrender or death proceeds of a Policy may be applied
under one or more of the following payment options or such other payment options
or alternative versions of the options listed as we may choose to make available
in the future.
OPTION 1--LUMP SUM
Payment in one lump sum.
OPTION 2--LEFT TO EARN INTEREST
A payment of interest during the payee's lifetime on the amount payable as a
principal sum. Interest rates are guaranteed to be at least 3% per year.
OPTION 3--PAYMENT FOR A SPECIFIC PERIOD
Equal 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:
[diamond] the death of the payee; or
[diamond] the end of the period certain.
The first payment will be on the date of settlement.
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<PAGE>
The period certain must be chosen at the time this option is elected. The
periods certain that you may choose from are as follows:
[diamond] ten years;
[diamond] twenty years; or
[diamond] until the installments paid refund the amount applied under this
option.
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, we will consider
the longer period certain as having been elected.
Any life annuity provided under Option 4 is computed using an interest rate
guaranteed to be no less than 3-3/8% per year, but any life annuity providing a
period certain of 20 years or more is computed 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 computed 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 remaining
principal at a guaranteed rate of at least 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 installments are
paid until the latest of:
[diamond] the end of the 10-year period certain;
[diamond] the death of the Insured; or
[diamond] the death of the other named annuitant.
The other annuitant must have attained age 40, must be named at the time
this option is elected and cannot later be changed. Any joint survivorship
annuity that may be provided under this option is computed using a guaranteed
interest rate to equal at least 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 you or your Beneficiary depends on our tax status
and upon the tax status of the individual concerned. The discussion contained
herein is general in nature and is not intended as tax advice. For complete
information on federal and state tax considerations, a qualified tax adviser
should be consulted. No attempt is made to consider any estate and inheritance
taxes, or any state, local or other tax laws. Because the discussion herein is
based upon our understanding of federal income tax laws as they are currently
interpreted, we cannot guarantee the tax status of any Policy. The Internal
Revenue Service (the "IRS") makes no representation regarding the likelihood of
continuation of current federal income tax laws, Treasury regulations or of the
current interpretations. We reserve the right to make changes to the Policy to
assure that it will continue to qualify as a life insurance contract for federal
income tax purposes.
PHOENIX'S TAX STATUS
We are taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). For federal income tax purposes, neither the VUL
Account nor the GIA is a separate entity from Phoenix and their operations form
a part of Phoenix.
Investment income and realized capital gains on the assets of the VUL
Account are reinvested and taken into account in determining the value of the
VUL Account. Investment income of the VUL Account, including realized net
capital gains, is not taxed to us. Due to our tax status under current
provisions of the Code, no charge currently will be made to the VUL Account for
our federal income taxes which may be attributable to the VUL Account. We
reserve the right to make a deduction for taxes if our federal tax treatment is
determined to be other than what we currently believe it to be, if changes are
made affecting the tax treatment to our variable life insurance contracts, or if
changes occur in our 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), should be treated as meeting the
22
<PAGE>
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, a Policyowner should not be considered to be in constructive
receipt of the cash value, including investment income. 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 Benefits 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. We monitor the premiums to assure compliance with such
conditions. However, if the premium limitation is exceeded during the year, we
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 that 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. We suggest 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
We believe that any loan received under a Policy will be treated as your
indebtedness. 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. If the
Policy is not a modified endowment contract, we believe that no part of any loan
under a Policy will constitute income to you.
The deductibility by a Policyowner of loan interest under a Policy may be
limited under Code Section 264, depending on the circumstances. A 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 a business or a corporation owns the Policy, 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).
Life insurance policies can be modified endowment contracts if they fail to meet
what is known as "the 7-pay test." The measuring stick for this test is a
hypothetical life insurance policy of equal face amount which requires 7 equal
annual premiums but which, after the seventh year is "fully paid-up," continuing
to provide a level death benefit without the need for any further premiums. A
Policy becomes a modified endowment contract, if, at any time during the first
seven years, the cumulative premium paid on the Policy exceeds the cumulative
premium that would have been paid under the hypothetical policy. Premiums paid
during a policy year but which are returned by us with interest within 60 days
after the end of the policy year will be excluded from the 7-pay test. A life
insurance policy received in exchange for a modified endowment contract will be
treated as a modified endowment contract.
REDUCTION IN BENEFITS DURING THE FIRST SEVEN YEARS
If there is a reduction in death 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.
23
<PAGE>
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 test is
failed 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 that are:
[diamond] made on or after the taxpayer attains age 59 1/2;
[diamond] attributable to the taxpayer's disability (within the meaning of Code
Section 72(m)(7)); or
[diamond] part of a series of substantially equal periodic payments (not less
often 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.
[diamond] 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.
[diamond] 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:
[bullet] the cost-of-living determination period does not exceed the
remaining premium payment period under the Policy; and
[bullet] 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
compute 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. We will comply with
the limitations for calculating the premium we are permitted to receive from
you.
QUALIFIED PLANS
A Policy may be used in conjunction with certain qualified plans. Since the
rules governing such use are complex, you should not use the Policy in
conjunction with a qualified plan until you have consulted a competent pension
consultant or tax adviser.
DIVERSIFICATION STANDARDS
To comply with the Diversification Regulations under Code Section 817(h),
("Diversification Regulations") each Series of the Fund is required to diversify
its investments. The Diversification Regulations generally require that on the
last day of each calendar quarter the Series assets be invested in no more than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
24
<PAGE>
A "look-through" rule applies to treat a pro rata portion of each asset of a
Series as an asset of the VUL Account; therefore, each Series of the Fund will
be tested for compliance with the percentage limitations. For purposes of these
diversification rules, all securities of the same issuer are treated as a single
investment, but each United States government agency or instrumentality is
treated as a separate issuer.
The general diversification requirements are modified if any of the assets
of the VUL Account are direct obligations of the United States Treasury. In this
case, there is no limit on the investment that may be made in Treasury
securities, and for purposes of determining whether assets other than Treasury
securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of the VUL Account's investment in
Treasury securities. Notwithstanding this modification of the general
diversification requirements, the portfolios of the Funds will be structured to
comply with the general diversification standards because they serve as an
investment vehicle for certain variable annuity contracts that must comply with
these standards.
In connection with the issuance of the Diversification Regulations, the
Treasury announced that such regulations do not provide guidance concerning the
extent to which you may direct your investments to particular divisions of a
separate account. It is possible that a revenue ruling or other form of
administrative pronouncement in this regard may be issued in the near future. It
is not clear, at this time, what such a revenue ruling or other pronouncement
will provide. It is possible that the Policy may need to be modified to comply
with such future Treasury announcements. For these reasons, we reserve the right
to modify the Policy, as necessary, to prevent you from being considered the
owner of the assets of the VUL Account.
We intend 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 contract can be exchanged for another life
insurance contract, without recognition of gain or loss, assuming that no money
or other property is received in the exchange, and that the Policies relate to
the same Insured. If the surrendered Policy is subject to a policy loan, this
may be treated as the receipt of money on the exchange. We recommend 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. We do not make any
representations or guarantees regarding the tax consequences of any Policy with
respect to these types of taxes.
VOTING RIGHTS
- --------------------------------------------------------------------------------
We will vote the Funds' shares held by the Subaccounts at any regular and
special meetings of shareholders of the Funds. To the extent required by law,
such voting will be pursuant to instructions received from you. However, if the
1940 Act or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result, we decide that we are
permitted to vote the Funds' shares at our own discretion, we may elect to do
so.
The number of votes that you have the right to cast will be determined by
applying your percentage interest in a Subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, fractional
shares will be recognized.
Funds' shares held in a Subaccount for which no timely instructions are
received, and Funds' shares which are not otherwise attributable to
Policyowners, will be voted by Phoenix in proportion to the voting instructions
that are received with respect to all Policies participating in that Subaccount.
Instructions to abstain on any item to be voted upon will be applied to reduce
the votes eligible to be cast by Phoenix.
You will receive proxy materials, reports and other materials related to the
Funds.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the shares be voted so as
to cause a change in the subclassification or investment objective of one or
more of the portfolios of the Funds or to approve or disapprove an investment
advisory contract for the Funds. In addition, Phoenix itself may disregard
voting instructions in favor of changes initiated by a Policyowner in the
investment policies or the Investment Adviser of the Funds if Phoenix reasonably
disapproves of such changes. A change would be disapproved only if the proposed
change is contrary to state law or prohibited by state regulatory authorities or
we decide that the change would have an adverse effect on the General Account
because the proposed investment policy for a Series may result in overly
speculative or unsound investments. In the event Phoenix does disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next periodic report to Policyowners.
25
<PAGE>
PHOENIX
You (or the payee entitled to payment under a payment option if a different
person) will have the right to vote at annual meetings of all Phoenix
policyholders for the election of members of the Board of Directors of Phoenix
and on other corporate matters, if any, where a policyholder's vote is taken. At
meetings of all the Phoenix policyholders, you (or payee) may cast only one vote
as the holder of a Policy, irrespective of policy value or the number of the
Policies you hold.
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX
- --------------------------------------------------------------------------------
Phoenix is managed by its Board of Directors. The 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
Richard H. Booth Executive Vice President,
Strategic Development, Phoenix
Home Life Mutual Insurance
Company, Hartford, Connecticut;
formerly President, Travelers
Insurance Company
Peter C. Browning President and Chief Operating
Officer, Sonoco 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
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
Robert F. Vizza President and Chief Executive
Officer, St. Francis Hospital
Roslyn, New York
Robert G. Wilson Chairman and Chief Financial
Officer, Lending Tree, Inc.,
Charlotte, North Carolina;
Chairman and President, Ziani
International Capital, Inc.,
Miami, Florida; formerly General
Partner, Goldman Sachs & Company,
New York, New York; Vice
Chairman, Carter Kaplan &
Company, Richmond, Virginia; and
Chairman and Chief Executive
Officer, Ecologic
Waste Services, Inc.
Miami, Florida
Dona D. Young Executive Vice President,
Individual Insurance and General
Counsel
EXECUTIVE OFFICERS PRINCIPAL OCCUPATION
Robert W. Fiondella Chairman of the Board, President
and Chief Executive Officer
Richard H. Booth Executive Vice President,
Strategic Development
26
<PAGE>
Carl T. Chadburn Executive Vice President
Philip R. McLoughlin Executive Vice President and
Chief Investment Officer
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, Business
Practices
Robert G. Chipkin Senior Vice President and
Corporate Actuary
Martin J. Gavin Senior Vice President, Trust
Operations
Randall C. Giangiulio Senior Vice President, Group Life
and Health
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
David R. Pepin Senior Vice President
Robert E. Primmer Senior Vice President, Individual
Distribution
Frederick W. Sawyer, III 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 Phoenix during the
last five years.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
- --------------------------------------------------------------------------------
We hold the assets of the VUL Account. The assets of the VUL Account are
kept physically segregated and held separate and apart from our General Account.
We maintain records of all purchases and redemptions of shares of the Funds.
SALES OF POLICIES
- --------------------------------------------------------------------------------
Policies may be purchased from registered representatives of W.S. Griffith &
Co., Inc. ("WSG"), a New York corporation incorporated on August 7, 1970,
licensed to sell Phoenix insurance policies as well as policies, annuity
contracts and funds of companies affiliated with Phoenix. WSG, 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 Investment Partners,
Ltd. ("PXP"), in which Phoenix owns a majority interest.
Policies also may be purchased from other broker-dealers registered under
the 1934 Act whose representatives are authorized by applicable law to sell
Policies under terms of agreements provided by PEPCO. Sales commissions will be
paid to registered representatives on purchase payments we receive under these
Policies. Phoenix will pay a maximum total sales commission of 50% of premiums
to PEPCO. To the extent that the sales charge under the Policies is less than
the sales commissions paid with respect to the Policies, we will pay the
shortfall from our General Account assets, which will include any profits we may
derive under the Policies.
STATE REGULATION
- --------------------------------------------------------------------------------
We are 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. We also are subject to the applicable
insurance laws of all the other states and jurisdictions in which we do
insurance business.
State regulation of Phoenix includes certain limitations on the investments
which we may make, including investments for the VUL Account and the GIA. This
regulation 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 related regulations or by any other applicable law or regulation.
27
<PAGE>
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 our ability to meet
our obligations under the Policies.
LEGAL MATTERS
- --------------------------------------------------------------------------------
Edwin L. Kerr, Counsel of Phoenix Home Life Mutual Insurance Company, has
passed upon the organization of Phoenix, its authority to issue variable life
insurance Policies and the validity of the Policy, and upon legal matters
relating to the federal securities and income tax laws for Phoenix.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
A Registration Statement has been filed with the SEC, under the Securities
Act of 1933 ("1933 Act") with respect to the securities offered. This Prospectus
is a summary of the contents of the Policy and other legal documents and does
not contain all the information set forth in the Registration Statement and its
exhibits. We refer you to the registration statement and its exhibits for
further information concerning the VUL Account, Phoenix and the Policy.
YEAR 2000 ISSUE
- --------------------------------------------------------------------------------
Many existing computer programs use only two digits to identify the year in
a date field. This is 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. We believe 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.
We have 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 our subsidiaries, was conducted. We have identified and are
now actively pursuing a number of strategies to address the issue, including:
[diamond] upgrading systems with compliant versions;
[diamond] developing or acquiring new systems to replace those that are
obsolete;
[diamond] and remediating existing systems by converting code or hardware.
Based on current assessments, we expect to have our computer systems
remediated and tested by June 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 the end of 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 for the period ended December 31, 1998.
28
<PAGE>
PHOENIX HOME LIFE VARIABLE
UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1998
29
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments at cost................................................ $ 29,233,552 $254,437,583 $ 18,020,712
============ ============ ============
Investment in The Phoenix Edge Series Fund, at market.............. $ 29,233,552 $331,086,585 $ 16,340,834
------------ ------------ ------------
Total assets.................................................... 29,233,552 331,086,585 16,340,834
LIABILITIES
Accrued expenses to related party.................................. 17,287 209,893 11,253
------------ ------------ ------------
NET ASSETS............................................................ $ 29,216,265 $330,876,692 $ 16,329,581
============ ============ ============
Accumulation units outstanding........................................ 19,445,741 61,038,521 7,465,200
============ ============ ============
Unit value............................................................ $ 1.502450 $ 5.420786 $ 2.187421
============ ============ ============
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $ 38,006,641 $ 52,877,225 $ 23,277,178
============ ============ ============
Investment in The Phoenix Edge Series Fund, at market.............. $ 42,884,376 $ 59,477,822 $ 27,176,858
------------ ------------ ------------
Total assets.................................................... 42,884,376 59,477,822 27,176,858
LIABILITIES
Accrued expenses to related party.................................. 27,626 38,654 17,606
------------ ------------ ------------
NET ASSETS............................................................ $ 42,856,750 $ 59,439,168 $ 27,159,252
============ ============ ============
Accumulation units outstanding........................................ 12,854,218 25,861,683 12,965,944
============ ============ ============
Unit value............................................................ $ 3.334058 $ 2.298356 $ 2.094661
============ ============ ============
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $ 4,634,701 $ 6,220,582 $ 2,033,105
============ ============ ============
Investment in The Phoenix Edge Series Fund, at market.............. $ 3,886,791 $ 8,065,971 $ 1,479,400
------------ ------------ ------------
Total assets.................................................... 3,886,791 8,065,971 1,479,400
LIABILITIES
Accrued expenses to related party.................................. 1,214 5,016 983
------------ ------------ ------------
NET ASSETS............................................................ $ 3,885,577 $ 8,060,955 $ 1,478,417
============ ============ ============
Accumulation units outstanding........................................ 3,145,785 4,829,333 2,327,758
============ ============ ============
Unit value............................................................ $ 1.235169 $ 1.669165 $ 0.635131
============ ============ ============
SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $11,431,268 $1,490,895 $ 819,776
============ ============ ============
Investment in the Phoenix Edge Series Fund, at market.............. $12,738,930 $1,743,031 $ 949,988
------------ ------------ ------------
Total assets.................................................... 12,738,930 1,743,031 949,988
LIABILITIES
Accrued expenses to related party.................................. 11,879 1,024 555
------------ ------------ ------------
NET ASSETS............................................................ $12,727,051 $1,742,007 $ 949,433
============ ============ ============
Accumulation units outstanding........................................ 9,141,857 1,388,592 801,887
============ ============ ============
Unit value............................................................ $ 1.392173 $ 1.254504 $ 1.184001
============ ============ ============
</TABLE>
See Notes to Financial Statements
30
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
GROWTH SCHAFER
AND INCOME VALUE EQUITY MID-CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments at cost................................................ $ 2,982,276 $ 742,160 $ 907,393
=========== =========== ===========
Investment in The Phoenix Edge Series Fund, at market.............. $ 3,334,697 $ 817,347 $ 892,867
----------- ----------- -----------
Total assets.................................................... 3,334,697 817,347 892,867
LIABILITIES
Accrued expenses to related party.................................. 1,932 527 550
----------- ----------- -----------
NET ASSETS............................................................ $ 3,332,765 $ 816,820 $ 892,317
=========== =========== ===========
Accumulation units outstanding........................................ 2,784,908 748,006 1,013,461
=========== =========== ===========
Unit value............................................................ $ 1.196724 $ 1.091997 $ 0.880465
=========== =========== ===========
WANGER WANGER
U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $28,429,006 $10,613,991 $ 26,984
=========== =========== ===========
Investment in Wanger Advisors Trust, at market..................... $31,256,495 $11,219,048 --
Investment in Templeton Variable Products Series Fund, at market... -- -- $ 27,400
----------- ----------- -----------
Total assets.................................................... 31,256,495 11,219,048 27,400
----------- ----------- -----------
LIABILITIES
Accrued expenses to related party.................................. 19,828 7,180 8
----------- ----------- -----------
NET ASSETS............................................................ $31,236,667 $11,211,868 $ 27,392
=========== =========== ===========
Accumulation units outstanding........................................ 21,727,449 9,675,387 27,534
=========== =========== ===========
Unit value............................................................ $ 1.437659 $ 1.158764 $ 0.995090
=========== =========== ===========
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT
---------- ----------
ASSETS
Investments at cost................................................ $ 37,201 $ 52,253
========= =========
Investment in Templeton Variable Products Series Fund, at market... $ 37,568 $ 53,499
--------- ---------
Total assets.................................................... 37,568 53,499
LIABILITIES
Accrued expenses to related party.................................. 9 31
--------- ---------
NET ASSETS............................................................ $ 37,559 $ 53,468
========= =========
Accumulation units outstanding........................................ 37,229 51,415
========= =========
Unit value............................................................ $1.008866 $1.039927
========= =========
TEMPLETON MUTUAL SHARES
DEVELOPING MARKETS INVESTMENTS
SUBACCOUNT SUBACCOUNT
---------- ----------
ASSETS
Investments at cost................................................ $ 10,614 $ 53,204
========= =========
Investment in Templeton Variable Products Series Fund, at market... $ 10,670 $ 53,804
--------- ---------
Total assets.................................................... 10,670 53,804
LIABILITIES
Accrued expenses to related party.................................. 5 33
--------- ---------
NET ASSETS............................................................ $ 10,665 $ 53,771
========= =========
Accumulation units outstanding........................................ 10,074 54,032
========= =========
Unit value............................................................ $1.058660 $0.995163
========= =========
</TABLE>
See Notes to Financial Statements
31
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
Investment income
Distributions.................................................... $ 982,207 $ 342,838 $ 1,284,827
Expenses
Mortality, expense risk and administrative charges............... 157,449 2,170,154 138,095
----------- ----------- ----------
Net investment income (loss)........................................ 824,758 (1,827,316) 1,146,732
----------- ----------- ----------
Net realized gain (loss) from share transactions.................... -- (127,873) 18,767
Net realized gain distribution from Fund............................ -- 11,409,998 104,945
Net unrealized appreciation (depreciation) on investment............ -- 63,176,153 (2,089,209)
----------- ----------- ----------
Net gain (loss) on investments...................................... -- 74,458,278 (1,965,497)
----------- ----------- ----------
Net increase (decrease) in net assets resulting from operations..... $ 824,758 $72,630,962 $ (818,765)
=========== =========== ==========
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
Investment income
Distributions.................................................... $ 736,394 $ -- $ 583,227
Expenses
Mortality, expense risk and administrative charges............... 309,722 425,434 184,043
----------- ----------- ----------
Net investment income (loss)........................................ 426,672 (425,434) 399,184
----------- ----------- ----------
Net realized gain (loss) from share transactions.................... (41,194) (52,504) 6,011
Net realized gain distribution from Fund............................ 2,776,286 10,074,498 814,962
Net unrealized appreciation (depreciation) on investment............ 4,003,067 2,276,436 2,783,483
----------- ----------- ----------
Net gain (loss) on investments...................................... 6,738,159 12,298,430 3,604,456
----------- ----------- ----------
Net increase (decrease) in net assets resulting from operations..... $ 7,164,831 $11,872,996 $4,003,640
=========== =========== ==========
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
Investment income
Distributions.................................................... $ 200,097 $ 4,366 $ 6,267
Expenses
Mortality, expense risk and administrative charges............... 32,577 44,756 10,002
----------- ----------- ----------
Net investment income (loss)........................................ 167,520 (40,390) (3,735)
----------- ----------- ----------
Net realized gain (loss) from share transactions.................... (25,938) 9,537 13,286
Net realized gain distribution from Fund............................ 4,891 468,250 --
Net unrealized appreciation (depreciation) on investment............ (1,192,311) 1,903,438 (44,106)
----------- ----------- ----------
Net gain (loss) on investments...................................... (1,213,358) 2,381,225 (30,820)
----------- ----------- ----------
Net increase (decrease) in net assets resulting from operations..... $(1,045,838) $ 2,340,835 $ (34,555)
=========== =========== ==========
SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
---------- ------------- -------------
Investment income
Distributions.................................................... $ 89,559 $ 676 $ 771
Expenses
Mortality, expense risk and administrative charges............... 55,576 4,388 2,272
----------- ----------- ----------
Net investment income (loss) ....................................... 33,983 (3,712) (1,501)
----------- ----------- ----------
Net realized gain (loss) from share transactions.................... (1,698) (2,426) (1,568)
Net realized gain distribution from Fund............................ 535,197 -- --
Net unrealized appreciation (depreciation) on investment............ 1,267,409 252,136 130,212
----------- ----------- ----------
Net gain (loss) on investments...................................... 1,800,908 249,710 128,644
----------- ----------- ----------
Net increase (decrease) in net assets resulting from operations..... $ 1,834,891 $ 245,998 $ 127,143
=========== =========== ==========
</TABLE>
(1) From inception March 3, 1998 to December 31, 1998
(2) From inception March 11, 1998 to December 31, 1998
See Notes to Financial Statements
32
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
GROWTH VALUE SCHAFER
AND INCOME EQUITY MID-CAP
SUBACCOUNT(1) SUBACCOUNT(2) SUBACCOUNT(1)
------------- ------------- -------------
<S> <C> <C> <C>
Investment income
Distributions.................................................... $ 12,489 $ 3,183 $ 2,642
Expenses
Mortality, expense risk and administrative charges............... 7,627 2,697 2,556
----------- ----------- ---------
Net investment income (loss)........................................ 4,862 486 86
----------- ----------- ---------
Net realized gain (loss) from share transactions.................... 594 (4,166) 10
Net realized gain distribution from Fund............................ -- -- --
Net unrealized appreciation (depreciation) on investment............ 352,421 75,187 (14,526)
----------- ----------- ---------
Net gain (loss) on investments...................................... 353,015 71,021 (14,516)
----------- ----------- ---------
Net increase (decrease) in net assets resulting from operations..... $ 357,877 $ 71,507 $(14,430)
=========== =========== =========
WANGER WANGER
U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT(3)
---------- ---------- -------------
Investment income
Distributions.................................................... $ 1,133,695 $ 93,297 $ --
Expenses
Mortality, expense risk and administrative charges............... 196,294 74,180 8
----------- ----------- --------
Net investment income (loss)........................................ 937,401 19,117 (8)
----------- ----------- --------
Net realized gain (loss) from share transactions.................... (5,625) 3,286 148
Net realized gain distribution from Fund............................ -- -- --
Net unrealized appreciation (depreciation) on investment............ 857,628 1,051,832 416
----------- ----------- --------
Net gain (loss) on investments...................................... 852,003 1,055,118 564
----------- ----------- --------
Net increase (decrease) in net assets resulting from operations..... $ 1,789,404 $ 1,074,235 $ 556
=========== =========== ========
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT(3) SUBACCOUNT(4)
------------- -------------
Investment income
Distributions.................................................... $ -- $ --
Expenses
Mortality, expense risk and administrative charges............... 9 31
----------- -----------
Net investment income (loss)........................................ (9) (31)
----------- -----------
Net realized gain (loss) from share transactions.................... (12) 862
Net realized gain distribution from Fund............................ -- --
Net unrealized appreciation (depreciation) on investment............ 367 1,246
----------- -----------
Net gain (loss) on investments...................................... 355 2,108
----------- -----------
Net increase (decrease) in net assets resulting from operations..... $ 346 $ 2,077
=========== ===========
TEMPLETON
DEVELOPING MUTUAL SHARES
MARKETS INVESTMENTS
SUBACCOUNT(5) SUBACCOUNT(6)
------------- -------------
Investment income
Distributions.................................................... $ -- $ --
Expenses
Mortality, expense risk and administrative charges............... 5 33
----------- -----------
Net investment income (loss)........................................ (5) (33)
----------- -----------
Net realized gain (loss) from share transactions.................... 1,117 59
Net realized gain distribution from Fund............................ -- --
Net unrealized appreciation (depreciation) on investment............ 56 600
----------- -----------
Net gain (loss) on investments...................................... 1,173 659
----------- -----------
Net increase (decrease) in net assets resulting from operations..... $ 1,168 $ 626
=========== ===========
</TABLE>
(1) From inception March 3, 1998 to December 31, 1998
(2) From inception March 11, 1998 to December 31, 1998
(3) From inception December 1, 1998 to December 31, 1998
(4) From inception November 18, 1998 to December 31, 1998
(5) From inception November 11, 1998 to December 31, 1998
(6) From inception November 24, 1998 to December 31, 1998
See Notes to Financial Statements
33
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 824,758 $ (1,827,316) $ 1,146,732
Net realized gain (loss)......................................... -- 11,282,125 123,712
Net unrealized appreciation (depreciation)....................... -- 63,176,153 (2,089,209)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations.. 824,758 72,630,962 (818,765)
------------ ------------ ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 40,115,775 55,187,189 3,021,981
Participant transfers............................................ (21,256,952) 366,385 (1,554,114)
Participant withdrawals.......................................... (7,094,597) (34,006,494) (891,608)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 11,764,226 21,547,080 576,259
------------ ------------ ------------
Net increase (decrease) in net assets............................ 12,588,984 94,178,042 (242,506)
NET ASSETS
Beginning of period.............................................. 16,627,281 236,698,650 16,572,087
------------ ------------ ------------
End of period.................................................... $ 29,216,265 $330,876,692 $ 16,329,581
============ ============ ============
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 426,672 $ (425,434) $ 399,184
Net realized gain (loss)......................................... 2,735,092 10,021,994 820,973
Net unrealized appreciation (depreciation)....................... 4,003,067 2,276,436 2,783,483
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations.. 7,164,831 11,872,996 4,003,640
------------ ------------ ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 6,376,125 10,365,754 4,954,718
Participant transfers............................................ (877,514) (165,682) 123,719
Participant withdrawals.......................................... (5,828,250) (5,751,632) (2,654,908)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. (329,639) 4,448,440 2,423,529
------------ ------------ ------------
Net increase (decrease) in net assets............................ 6,835,192 16,321,436 6,427,169
NET ASSETS
Beginning of period.............................................. 36,021,558 43,117,732 20,732,083
------------ ------------ ------------
End of period.................................................... $ 42,856,750 $ 59,439,168 $ 27,159,252
============ ============ ============
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 167,520 $ (40,390) $ (3,735)
Net realized gain (loss)......................................... (21,047) 477,787 13,286
Net unrealized appreciation (depreciation)....................... (1,192,311) 1,903,438 (44,106)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations.. (1,045,838) 2,340,835 (34,555)
------------ ------------ ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 1,623,011 1,846,888 497,841
Participant transfers............................................ (313,564) 103,603 124,820
Participant withdrawals.......................................... (523,745) (701,416) (158,919)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 785,702 1,249,075 463,742
------------ ------------ ------------
Net increase (decrease) in net assets............................ (260,136) 3,589,910 429,187
NET ASSETS
Beginning of period.............................................. 4,145,713 4,471,045 1,049,230
------------ ------------ ------------
End of period.................................................... $ 3,885,577 $ 8,060,955 $ 1,478,417
============ ============ ============
</TABLE>
See Notes to Financial Statements
34
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
---------- ------------- -------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 33,983 $ (3,712) $ (1,501)
Net realized gain (loss)......................................... 533,499 (2,426) (1,568)
Net unrealized appreciation (depreciation)....................... 1,267,409 252,136 130,212
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 1,834,891 245,998 127,143
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 2,291,221 526,600 384,143
Participant transfers............................................ 7,258,586 1,045,208 485,598
Participant withdrawals.......................................... (608,655) (75,799) (47,451)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 8,941,152 1,496,009 822,290
----------- ----------- -----------
Net increase (decrease) in net assets............................ 10,776,043 1,742,007 949,433
NET ASSETS
Beginning of period.............................................. 1,951,008 0 0
----------- ----------- -----------
End of period.................................................... $12,727,051 $ 1,742,007 $ 949,433
=========== =========== ===========
GROWTH SCHAFER
AND INCOME VALUE EQUITY MID-CAP
SUBACCOUNT(1) SUBACCOUNT(2) SUBACCOUNT(1)
------------- ------------- -------------
FROM OPERATIONS
Net investment income (loss)..................................... $ 4,862 $ 486 $ 86
Net realized gain (loss)......................................... 594 (4,166) 10
Net unrealized appreciation (depreciation)....................... 352,421 75,187 (14,526)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 357,877 71,507 (14,430)
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 891,760 349,399 538,439
Participant transfers............................................ 2,236,565 431,964 415,611
Participant withdrawals.......................................... (153,437) (36,050) (47,303)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 2,974,888 745,313 906,747
----------- ----------- -----------
Net increase (decrease) in net assets............................ 3,332,765 816,820 892,317
NET ASSETS
Beginning of period.............................................. 0 0 0
----------- ----------- -----------
End of period.................................................... $ 3,332,765 $ 816,820 $ 892,317
=========== =========== ===========
WANGER WANGER
U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT(3)
---------- ---------- -------------
FROM OPERATIONS
Net investment income (loss)..................................... $ 937,401 $ 19,117 $ (8)
Net realized gain (loss)......................................... (5,625) 3,286 148
Net unrealized appreciation (depreciation)....................... 857,628 1,051,832 416
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 1,789,404 1,074,235 556
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 9,117,666 3,222,916 1,490
Participant transfers............................................ 6,575,005 1,456,920 25,903
Participant withdrawals.......................................... (2,592,905) (1,076,075) (557)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 13,099,766 3,603,761 26,836
----------- ----------- -----------
Net increase (decrease) in net assets............................ 14,889,170 4,677,996 27,392
NET ASSETS
Beginning of period.............................................. 16,347,497 6,533,872 0
----------- ----------- -----------
End of period.................................................... $31,236,667 $11,211,868 $ 27,392
=========== =========== ===========
</TABLE>
(1) From inception March 3, 1998 to December 31, 1998
(2) From inception March 11, 1998 to December 31, 1998
(3) From inception December 1, 1998 to December 31, 1998
See Notes to Financial Statements
35
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT(3) SUBACCOUNT(4)
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ (9) $ (31)
Net realized gain (loss)......................................... (12) 862
Net unrealized appreciation (depreciation)....................... 367 1,246
-------- --------
Net increase (decrease) in net assets resulting from operations.. 346 2,077
-------- --------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 2,271 4,687
Participant transfers............................................ 35,556 47,443
Participant withdrawals.......................................... (614) (739)
-------- --------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 37,213 51,391
-------- --------
Net increase (decrease) in net assets............................ 37,559 53,468
NET ASSETS
Beginning of period.............................................. 0 0
-------- --------
End of period.................................................... $ 37,559 $ 53,468
======== ========
TEMPLETON
DEVELOPING MUTUAL SHARES
MARKETS INVESTMENTS
SUBACCOUNT(5) SUBACCOUNT(6)
------------- -------------
FROM OPERATIONS
Net investment income (loss)..................................... $ (5) $ (33)
Net realized gain (loss)......................................... 1,117 59
Net unrealized appreciation (depreciation)....................... 56 600
-------- --------
Net increase (decrease) in net assets resulting from operations.. 1,168 626
-------- --------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 1,665 4,558
Participant transfers............................................ 7,864 53,136
Participant withdrawals.......................................... (32) (4,549)
-------- --------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 9,497 53,145
-------- --------
Net increase (decrease) in net assets............................ 10,665 53,771
NET ASSETS
Beginning of period.............................................. 0 0
-------- --------
End of period.................................................... $ 10,665 $ 53,771
======== ========
</TABLE>
(3) From inception December 1, 1998 to December 31, 1998
(4) From inception November 18, 1998 to December 31, 1998
(5) From inception November 11, 1998 to December 31, 1998
(6) From inception November 24, 1998 to December 31, 1998
See Notes to Financial Statements
36
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<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
=========== ============ ===========
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
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
37
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1997
(CONTINUED)
<TABLE>
<CAPTION>
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<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
========== =========== ===========
WANGER
ENHANCED INTERNATIONAL WANGER U.S.
INDEX SMALL CAP SMALL CAP
SUBACCOUNT(1) SUBACCOUNT SUBACCOUNT
------------- ---------- ----------
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.............................................. 0 296,406 466,997
---------- ---------- -----------
End of period.................................................... $1,951,008 $6,533,872 $16,347,497
========== ========== ===========
</TABLE>
(1) From inception July 18, 1997 to December 31, 1997
See Notes to Financial Statements
38
<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 22
Subaccounts, that invest in a corresponding series (the "Series") of The Phoenix
Edge Series Fund, Wanger Advisors Trust and the Templeton Variable Products
Series Fund (the "Funds").
Each Series has distinct investment objectives. The Money Market Series seeks
to provide maximum current income consistent with capital preservation and
liquidity. The Growth Series seeks to achieve intermediate and long-term growth
of capital, with income as a secondary consideration. The Multi-Sector Fixed
Income Series seeks to provide long-term total return by investing in a
diversified portfolio of high yield and high quality fixed income securities.
The Strategic Allocation Series seeks 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 by investing in three market segments: stocks, bonds and
money market instruments. The International Series seeks as its investment
objective a high total return consistent with reasonable risk by investing
primarily in an internationally diversified portfolio of equity securities. The
Balanced Series seeks to provide reasonable income, long-term growth and
conservation of capital. The Real Estate Series seeks to achieve capital
appreciation and income with approximately equal emphasis through investments in
real estate investment trusts and companies that operate, manage, develop or
invest in real estate. The Strategic Theme Series seeks long-term appreciation
of capital by investing in securities that the adviser believes are well
positioned to benefit from cultural, demographic, regulatory, social or
technological changes worldwide. The Aberdeen New Asia Series seeks to provide
long-term capital appreciation by investing primarily in diversified equity
securities of issuers organized and principally operating in Asia, excluding
Japan. The Enhanced Index Series seeks 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 Standard &
Poor's 500 Composite Stock Price Index. The Engemann Nifty Fifty Series seeks to
achieve long-term capital appreciation investing in approximately 50 different
securities which offer the potential for long-term growth of capital. The Seneca
Mid-Cap Growth Series seeks capital appreciation primarily through investments
in equity securities of companies that have the potential for above average
market appreciation. The Growth and Income Series seeks as its investment
objective, dividend growth, current income and capital appreciation by investing
in common stocks. The Value Equity Series seeks to achieve long-term capital
appreciation and income by investing in a diversified portfolio of common stocks
which meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price. The Schafer Mid-Cap Series
seeks to achieve long-term capital appreciation with current income as the
secondary investment objective by investing 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. 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. The Wanger
International Small Cap Series invests in securities of non-U.S. companies with
a stock market capitalization of less than $1 billion. The Templeton Stock
Series is a capital growth common stock fund. The Templeton Asset Allocation
Series invests in stocks and debt obligations of companies and governments and
money market instruments seeking high total return. The Templeton International
Series invests in stocks and debt obligations of companies and governments
outside the United States. The Templeton Developing Markets Series seeks
long-term capital appreciation by investing in equity securities of issuers in
countries having developing markets. The Mutual Shares Investments Series is a
capital appreciation fund with income as a secondary objective. Policyowners
also may 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.
39
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 3--PURCHASES AND SALES OF SHARES OF THE FUNDS
Purchases and sales of shares of the Funds for the period ended December 31,
1998 aggregated the following:
<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
<S> <C> <C>
The Phoenix Edge Series Fund:
Money Market................................................................... $31,853,252 $19,256,778
Growth......................................................................... 49,284,935 18,102,090
Multi-Sector Fixed Income...................................................... 5,350,134 3,521,752
Strategic Allocation........................................................... 8,277,641 5,400,772
International.................................................................. 22,081,567 7,973,787
Balanced....................................................................... 5,741,504 2,100,013
Real Estate.................................................................... 2,362,768 1,406,089
Strategic Theme................................................................ 2,670,131 991,086
Aberdeen New Asia.............................................................. 1,098,420 638,124
Enhanced Index................................................................. 9,931,894 410,925
Engemann Nifty Fifty........................................................... 1,727,380 234,060
Seneca Mid-Cap Growth.......................................................... 899,775 78,430
Growth and Income.............................................................. 3,124,752 143,071
Value Equity .................................................................. 812,090 65,764
Schafer Mid-Cap................................................................ 956,377 48,994
Wanger Advisors Trust:
U.S. Small Cap................................................................. 15,711,241 1,664,671
International Small Cap........................................................ 4,491,053 865,300
Templeton Variable Products Series Fund:
Stock.......................................................................... 45,944 19,108
Asset Allocation............................................................... 37,827 614
International.................................................................. 75,110 23,719
Developing Markets............................................................. 30,632 21,135
Mutual Shares Investments...................................................... 67,242 14,097
</TABLE>
NOTE 4--PARTICIPANT ACCUMULATION UNIT TRANSACTIONS (IN UNITS)
<TABLE>
<CAPTION>
SUBACCOUNT
----------------------------------------------------------------------------------------
MONEY MULTI-SECTOR STRATEGIC
MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED
------ ------ ------------ ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
FLEX EDGE & FLEX EDGE SUCCESS
Units outstanding, beginning of period 10,888,182 53,796,712 6,969,616 12,553,404 22,691,802 11,152,659
Participant deposits................. 25,232,325 10,943,361 1,612,375 1,983,152 4,321,346 1,820,359
Participant transfers................ (13,413,441) 21,924 (641,776) (310,963) (9,321) 703,668
Participant withdrawals.............. (3,942,355) (6,691,981) (794,000) (1,864,672) (2,401,968) (1,282,042)
----------- ---------- --------- ---------- ---------- ----------
Units outstanding, end of period..... 18,764,711 58,070,016 7,146,215 12,360,921 24,601,859 12,394,644
=========== ========== ========= ========== ========== ==========
MONEY MULTI-SECTOR STRATEGIC
MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED
------ ------ ------------ ---------- ------------- --------
JOINT EDGE
Units outstanding, beginning of period 650,414 2,524,123 230,895 393,860 1,118,378 533,527
Participant deposits................. 1,247,784 930,424 109,413 131,317 304,285 133,364
Participant transfers................ (1,005,432) 64,060 23,533 11,609 33,078 1,554
Participant withdrawals.............. (211,736) (550,102) (44,856) (43,489) (195,917) (97,145)
----------- ---------- --------- ---------- ---------- ---------
Units outstanding, end of period..... 681,030 2,968,505 318,985 493,297 1,259,824 571,300
=========== ========== ========= ========== ========== =========
SENECA
STRATEGIC ABERDEEN ENHANCED ENGEMANN MID-CAP
REAL ESTATE THEME NEW ASIA INDEX NIFTY FIFTY GROWTH
----------- ----- -------- ----- ----------- ------
FLEX EDGE & FLEX EDGE SUCCESS
Units outstanding, beginning of period 2,502,410 3,525,204 1,458,554 1,799,793 0 0
Participant deposits................. 1,037,325 1,263,895 687,377 1,725,325 400,612 252,441
Participant transfers................ (280,388) 31,327 219,381 5,787,200 992,193 513,395
Participant withdrawals.............. (319,584) (450,102) (194,425) (458,191) (54,757) (26,335)
----------- ---------- --------- ---------- ---------- ---------
Units outstanding, end of period..... 2,939,763 4,370,324 2,170,887 8,854,127 1,338,048 739,501
=========== ========== ========= ========== ========== =========
</TABLE>
40
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SENECA
STRATEGIC ABERDEEN ENHANCED ENGEMANN MID-CAP
REAL ESTATE THEME NEW ASIA INDEX NIFTY FIFTY GROWTH
----------- ----- -------- ----- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
JOINT EDGE
Units outstanding, beginning of period 121,350 319,957 107,352 30,998 0 0
Participant deposits................. 113,951 161,092 85,676 148,090 14,103 75,052
Participant transfers................ 13,592 56,807 (1,658) 142,233 39,696 26,849
Participant withdrawals.............. (42,871) (78,847) (34,499) (33,591) (3,255) (39,515)
------- ------- ------- ------- ------ -------
Units outstanding, end of period..... 206,022 459,009 156,871 287,730 50,544 62,386
======= ======= ======= ======= ====== =======
GROWTH VALUE SCHAFER WANGER WANGER TEMPLETON
AND INCOME EQUITY MID-CAP U.S. INTERNATIONAL STOCK
---------- ------ ------- ---- ------------- -----
FLEX EDGE & FLEX EDGE SUCCESS
Units outstanding, beginning of period 0 0 0 11,757,123 6,155,973 0
Participant deposits................. 588,751 193,279 400,967 5,947,597 2,569,304 1,584
Participant transfers................ 2,152,823 523,931 607,611 4,569,528 1,144,508 26,379
Participant withdrawals.............. (117,030) (22,598) (34,699) (1,637,206) (825,549) (436)
--------- ------- ------- ---------- --------- ------
Units outstanding, end of period..... 2,624,544 694,612 973,879 20,637,042 9,044,236 27,527
========= ======= ======= ========== ========= ======
GROWTH VALUE SCHAFER WANGER WANGER TEMPLETON
AND INCOME EQUITY MID-CAP U.S. INTERNATIONAL STOCK
---------- ------ ------- ---- ------------- -----
JOINT EDGE
Units outstanding, beginning of period 0 0 0 503,845 351,440 0
Participant deposits................. 73,871 31,173 34,931 509,418 270,057 0
Participant transfers................ 104,626 32,233 16,146 278,250 111,481 7
Participant withdrawals.............. (18,133) (10,012) (11,495) (201,106) (101,827) (0)
--------- ------- ------- ---------- --------- ------
Units outstanding, end of period..... 160,364 53,394 39,582 1,090,407 631,151 7
========= ======= ======= ========== ========= ======
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
---------- ------------- ------- -----------
FLEX EDGE & FLEX EDGE SUCCESS
Units outstanding, beginning of period 0 0 0 0
Participant deposits................. 2,343 4,538 1,493 4,698
Participant transfers................ 35,402 44,851 8,537 53,945
Participant withdrawals.............. (620) (617) (31) (4,611)
------ ------ ----- ------
Units outstanding, end of period..... 37,125 48,772 9,999 54,032
====== ====== ===== ======
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
---------- ------------- ------- -----------
JOINT EDGE
Units outstanding, beginning of period 0 0 0 0
Participant deposits................. 0 0 75 0
Participant transfers................ 121 2,719 0 0
Participant withdrawals.............. (17) (76) (0) (0)
------ ------ ----- ------
Units outstanding, end of period..... 104 2,643 75 0
====== ====== ===== ======
</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.
41
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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 Subaccounts. 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 $30,323,330 during the year ended December 31, 1998. 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.
42
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[PricewaterhouseCoopers 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 statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts: Money
Market, Growth, Multi-Sector Fixed Income, Strategic Allocation, International,
Balanced, Real Estate, Strategic Theme, Aberdeen New Asia, Enhanced Index,
Engemann Nifty Fifty, Seneca Mid-Cap Growth, Growth and Income, Value Equity,
Schafer Mid-Cap, Wanger U.S. Small Cap, Wanger International Small Cap,
Templeton Stock, Templeton Asset Allocation, Templeton International, Templeton
Developing Markets and Mutual Shares Investments (constituting the Phoenix Home
Life Variable Universal Life Account, hereafter referred to as the "Account") at
December 31, 1998, 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 audit. We conducted our
audit 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
audit, which included confirmation of investments at December 31, 1998 by
correspondence with fund custodians or transfer agents, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
February 17, 1999
43
<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.
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Financial Plaza
Hartford, Connecticut 06103
44
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
45
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants.............................................47
Consolidated Balance Sheet at December 31, 1998 and 1997......................48
Consolidated Statement of Income, Comprehensive Income and Equi49
for the Years Ended December 31, 1998, 1997 and 1996 ........................49
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.............................................50
Notes to Consolidated Financial Statements ................................51-82
46
<PAGE>
[PRICEWATERHOUSECOOPERS logo and address]
REPORT OF INDEPENDENT ACCOUNTANTS
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, comprehensive income and equity and of cash
flows present fairly, in all material respects, the financial position of
Phoenix Home Life Mutual Insurance Company and its subsidiaries at December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, 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.
As indicated in Note 19, the company has revised the accounting for leveraged
leases.
/s/ PricewaterhouseCoopers LLP
February 11, 1999, except as to Note 20, which is as of April 27, 1999
47
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 1,881,687 $ 1,554,905
Available-for-sale debt securities, at fair value 6,693,540 5,659,061
Equity securities, at fair value 304,545 335,888
Mortgage loans 797,343 927,501
Real estate 91,975 321,757
Policy loans 2,008,260 1,986,728
Other invested assets 377,326 319,088
Short-term investments 240,911 1,078,276
----------- -----------
Total investments 12,395,587 12,183,204
Cash and cash equivalents 132,634 159,307
Accrued investment income 173,312 149,566
Deferred policy acquisition costs 1,076,635 1,038,407
Premiums, accounts and notes receivable 120,928 99,468
Reinsurance recoverables 96,676 66,649
Property and equipment, net 153,425 156,190
Goodwill and other intangible assets, net 527,029 541,499
Other assets 46,060 61,087
Separate account assets 4,798,949 4,082,255
----------- -----------
Total assets $19,521,235 $18,537,632
=========== ===========
LIABILITIES
Policy liabilities and accruals $11,810,202 $11,334,014
Securities sold subject to repurchase agreements 137,473
Notes payable 449,252 471,085
Deferred income taxes 111,912 150,440
Other liabilities 555,352 585,467
Separate account liabilities 4,798,949 4,082,255
----------- -----------
Total liabilities 17,725,667 16,760,734
----------- -----------
Contingent liabilities (Note 17)
MINORITY INTEREST IN NET ASSETS
OF CONSOLIDATED SUBSIDIARIES
91,884 136,514
----------- -----------
EQUITY
Retained earnings 1,609,393 1,484,620
Accumulated other comprehensive income 94,291 155,764
----------- -----------
Total equity 1,703,684 1,640,384
----------- -----------
Total liabilities and equity $19,521,235 $18,537,632
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
48
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $1,852,801 $1,640,606 $1,518,822
Insurance and investment product fees 619,476 468,030 421,058
Net investment income 898,884 771,346 711,595
Net realized investment gains 63,562 111,465 77,422
---------- ---------- ----------
Total revenues 3,434,723 2,991,447 2,728,897
---------- ---------- ----------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses 1,930,384 1,633,633 1,529,573
Policyholder dividends 351,805 343,725 311,739
Policy acquisition expenses 290,585 192,886 172,379
Amortization of goodwill and other intangible assets 29,248 16,393 15,610
Interest expense 29,889 28,147 17,570
Other operating expenses 592,420 542,897 489,203
---------- ---------- ----------
Total benefits, losses and expenses 3,224,331 2,757,681 2,536,074
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 210,392 233,766 192,823
Income taxes 75,152 58,177 80,683
---------- ---------- ----------
INCOME BEFORE MINORITY INTEREST 135,240 175,589 112,140
Minority interest in net income of consolidated subsidiaries 10,467 8,882 8,902
---------- ---------- ----------
NET INCOME 124,773 166,707 103,238
---------- ---------- ----------
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAXES
Unrealized (losses) gains on securities (46,967) 98,287 42,493
Reclassification adjustment for net realized gains
included in net income (12,980) (30,213) (28,580)
Minimum pension liability adjustment (1,526) (2,101) 1,241
---------- ---------- ----------
Total other comprehensive income (loss) (61,473) 65,973 15,154
---------- ---------- ----------
COMPREHENSIVE INCOME 63,300 232,680 118,392
---------- ---------- ----------
EQUITY, BEGINNING OF YEAR - RESTATED (NOTE 19) 1,640,384 1,407,704 1,289,312
---------- ---------- ----------
EQUITY, END OF YEAR $1,703,684 $1,640,384 $1,407,704
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
49
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 124,773 $ 166,707 $ 103,238
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATIONS
Net realized investment gains (63,562) (111,465) (77,422)
Amortization and depreciation 60,580 90,565 64,870
Equity in undistributed earnings of affiliates and partnerships (25,110) (34,057) (22,037)
Deferred income taxes (benefit) (9,274) 3,663 16,126
(Increase) decrease in receivables (75,233) (49,172) 5,955
Increase in deferred policy acquisition costs (31,534) (48,860) (61,985)
Increase in policy liabilities and accruals 487,312 512,476 559,724
Increase (decrease) in other assets/other liabilities, net 53,194 44,269 (66,337)
Other, net 3,412 5,417 (320)
--------- ---------- ----------
Net cash provided by operating activities 524,558 579,543 521,812
--------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sales, maturities or repayments
of available-for-sale debt securities 1,446,990 1,187,943 1,348,809
Proceeds from maturities or repayments of held-to-maturity
debt securities 306,183 217,302 118,596
Proceeds from disposals of equity securities 45,204 51,373 382,359
Proceeds from mortgage loan maturities or repayments 200,419 164,213 151,760
Proceeds from sale of real estate and other invested assets 458,467 218,874 127,440
Purchase of available-for-sale debt securities (2,568,971) (1,689,479) (1,909,086)
Purchase of held-to-maturity debt securities (631,974) (225,722) (385,321)
Purchase of equity securities (86,472) (88,573) (215,104)
Purchase of subsidiaries (6,647) (246,400)
Purchase of mortgage loans (75,974) (140,831) (200,683)
Purchase of real estate and other invested assets (201,424) (90,593) (157,077)
Change in short-term investments, net 837,365 58,384 110,503
Increase in policy loans (21,532) (59,699) (49,912)
Capital expenditures (23,935) (41,504) (3,543)
Other investing activities, net (6,540) (1,750) (5,898)
--------- ---------- ----------
Net cash used for investing activities (328,841) (686,462) (687,157)
--------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (11,124) (17,902) (6,301)
(Repayment of)/proceeds from securities sold
subject to repurchase agreements (137,472) 137,472
Proceeds from borrowings 136 215,359 226,082
Repayment of borrowings (63,328) (234,703) (2,400)
Dividends paid to minority shareholders in consolidated subsidiaries (4,938) (6,895) (6,245)
Other financing activities (5,664)
--------- ---------- ----------
Net cash provided by (used for) financing activities (222,390) 93,331 211,136
--------- ---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (26,673) (13,588) 45,791
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 159,307 172,895 127,104
--------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 132,634 $ 159,307 $ 172,895
========= ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 44,508 $ 76,167 $ 76,157
Interest paid on indebtedness $ 32,834 $ 32,300 $ 19,214
</TABLE>
The accompanying notes are an integral part of these statements.
50
<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 and insurance
agency and brokerage operations, primarily based in the United States. These
products and services are distributed among five reportable segments:
Individual Insurance, Life Reinsurance, Group Life and Health Insurance,
Securities Management and All Other. 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 significant influence over operating and financial policies and
generally at least a 20% ownership interest are reported on the equity
basis.
These consolidated financial statements have been prepared in accordance
with 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.
Amounts for 1997 and 1996 have been retroactively restated to account for
income from leveraged lease investments (see Note 19). Certain
reclassifications have been made to the 1997 and 1996 amounts to conform
with the 1998 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 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 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.
51
<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.
Partnership interests are carried at cost adjusted for Phoenix's equity in
undistributed earnings or losses since acquisition, less allowances for
other than temporary declines in value. These earnings or losses are
included in investment income. Prior to 1998, for venture capital
partnerships, this activity was reflected in capital gains and losses. Such
earnings and losses included in prior year financial statements have been
reclassified to reflect this change.
Beginning in 1998, leveraged lease investments represent the net of the
estimated residual value of the lease assets, rental receivables, and
unearned and deferred income to be allocated over the lease term. Investment
income is calculated using the interest method and is recognized only in
periods in which the net investment is positive. Prior to 1998, leveraged
lease investments were carried at cost adjusted for Phoenix's equity in
undistributed earnings or losses since acquisition, less allowances for
other than temporary declines in value. Prior years have been restated to
reflect these changes (see Note 19).
Realized investment gains and losses, other than those related to separate
accounts for which Phoenix does not bear the investment risk, are determined
by the specific identification method and reported as a component of
revenue. A realized investment loss is recorded when an investment valuation
reserve is determined. Valuation reserves are netted against the asset
categories to which they apply and changes in the valuation reserves are
included in realized investment gains and losses. Unrealized investment
gains and losses on debt securities and equity securities classified as
available-for-sale are included as a component of equity, net of deferred
income taxes and deferred policy acquisition costs.
FINANCIAL INSTRUMENTS
In the normal course of business, Phoenix enters into transactions involving
various types of financial instruments including debt, investments such as
debt securities, mortgage loans and equity securities, off-balance sheet
financial instruments such as investment and loan commitments, financial
guarantees, interest rate swaps and interest rate floors. These instruments
have credit risk and also may be subject to risk of loss due to interest
rate and market fluctuations.
Phoenix also uses interest rate swaps and futures contracts as hedges for
asset/liability management of fixed income investments and certain
liabilities. Realized gains and losses on these contracts are deferred and
amortized over the life of the hedged asset or liability.
Phoenix enters into interest rate floor contracts to hedge against
significant declines in interest rates by locking in a minimum interest rate
amount that will be received on future reinvestments in terms of an
underlying treasury yield. Phoenix does not enter into interest rate floor
contracts for trading purposes. The excess of a predetermined (strike) rate
over a reference (index) rate is recognized in investment income when
received or paid.
52
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
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.
53
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
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 1998 and prior
years. Entities included within the consolidated group are segregated into
either a life insurance or nonlife insurance company subgroup. The
consolidation of these subgroups is subject to certain statutory
restrictions in the percentage of eligible nonlife tax losses that can be
applied to offset life company taxable income.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities and accruals, policy acquisition expenses, investment impairment
reserves, reserves for postretirement benefits and unrealized gains or
losses on investments.
As a mutual life insurance company, Phoenix is required to reduce its income
tax deduction for policyholder dividends by the differential earnings
amount, defined as the difference between the earnings rates of stock and
mutual companies applied against an adjusted base of policyholders' surplus.
RECENT ACCOUNTING PRONOUNCEMENTS
Phoenix adopted Statement of Financial Accounting Standard (SFAS) No. 130,
"Reporting Comprehensive Income," as of January 1, 1998. This statement
establishes standards for the reporting and display of comprehensive income
and its components in a full set of financial statements. This statement
defines the components of comprehensive income as those items that were
previously reported only as components of equity and were excluded from net
income.
In 1998, Phoenix adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a
54
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Business Enterprise," replacing the "industry segment" approach with the
"management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of Phoenix's reportable segments. The
adoption of this statement did not affect the results of operations or
financial position but did affect the disclosure of segment information.
In 1998, Phoenix adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which amends SFAS No. 87,
"Employers' Accounting for Pensions," No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits," and No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." The new statement revises and
standardizes employers' disclosures about pension and other postretirement
benefit plans. Adoption of this statement did not affect the results of
operations or financial position of the company.
On June 15, 1998, The Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement, effective for all years beginning after June 15, 1999, requires
that all derivative instruments be recorded on the balance sheet at their
fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designed as part of a hedge transaction and, if it
is, the type of hedge transaction. Management anticipates that, due to its
limited use of derivative instruments, the adoption of this statement will
not have a significant effect on Phoenix's results of operations or its
financial position.
3. SIGNIFICANT TRANSACTIONS
DIVIDEND SCALE REDUCTION
Due to the decline of interest rates in the financial markets to historic
lows and the strong likelihood that such levels will be sustained, Phoenix
carefully reviewed and considered a change in its dividend scale. As a
result, in October 1998, Phoenix's Board of Directors voted to adopt a
reduced dividend scale, effective for dividends payable on or after January
1, 1999. Dividends for individual participating policies are being reduced
60 basis points in most cases, an average reduction of approximately 8%. The
effect was a decrease of approximately $15.7 million in the policyholder
dividends expense in 1998.
REAL ESTATE SALES
On December 15, 1998, Phoenix sold 47 commercial real estate properties with
a carrying value of $269.8 million, and 4 joint venture real estate
partnerships with a carrying value of $10.5 million, for approximately $309
million in cash. This transaction, along with the sale of 18 other
properties and partnerships during the year, which had a carrying value of
$36.7 million, resulted in after-tax gains of approximately $49.6 million.
As of December 31,1998, Phoenix has 7 commercial real estate properties
remaining with a carrying value of $55.7 million and 10 joint venture real
estate partnerships with a carrying value of $36.3 million.
PHOENIX INVESTMENT PARTNERS, LTD.
On December 3, 1998, Phoenix Investment Partners completed the sale of its
49% interest in Canadian investment firm Beutel, Goodman & Company, Ltd. for
$47 million. Phoenix Investment Partners received $37 million in cash and a
$10 million three-year interest bearing note. The transaction resulted in a
before-tax gain of approximately $17.5 million. Phoenix's interest
represents an after-tax realized gain of approximately $6.8 million.
55
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
On September 3, 1997, Phoenix Investment Partners acquired Pasadena Capital
Corporation, the parent company of Roger Engemann & Associates, Inc. for
approximately $214 million. Pasadena Capital managed over $7 billion in
assets at December 31, 1998, primarily individual accounts.
On July 17, 1997, Phoenix Investment Partners acquired a majority interest
in GMG/Seneca Capital Management LLC, renamed Seneca Capital Management, for
approximately $37.5 million. Seneca Capital Management managed $6 billion in
assets at December 31, 1998.
The purchase price for Pasadena Capital and Seneca Capital Management
represented the consideration paid and the direct costs incurred by Phoenix
Investment Partners to purchase Pasadena Capital and a majority interest in
Seneca Capital Management. The excess of the purchase price over the fair
value of the acquired net tangible assets of these companies totaled
approximately $212.8 million. Of this excess purchase price, $110.2 million
was classified as identifiable intangible assets, primarily associated with
investment management contracts, which are being amortized over their
estimated average useful life of 13 years using the straight line method.
The remaining excess purchase price of $142.5 million was classified as
goodwill and is being amortized over 40 years using the straight line
method.
Phoenix owns approximately 60% of the outstanding Phoenix Investment
Partners' common stock. In addition, Phoenix owns 45% of Phoenix Investment
Partners' convertible subordinated debentures.
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 $141.3 million difference, which does not exceed the
estimated present value of future profits of the acquired business, was
recorded as deferred acquisition costs.
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 notes
payable in the Consolidated Balance Sheet.
The notes were issued in accordance with Section 1307 (Contingent Liability
for Borrowings) 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 (Private Resales of Securities
to Institutions) 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
As of December 31, 1998, PM Holdings owned 10% of the outstanding common
stock of Aberdeen Asset Management, a Scottish asset management firm. The
investment is reported on the equity basis and classified as other invested
assets in the Consolidated Balance Sheet.
56
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 10% of Aberdeen Asset Management's then
outstanding common stock. The note is also classified as other invested
assets 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 Investment Partners and
Aberdeen Asset Management, develops and markets investment products in the
United States and the United Kingdom.
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
DEBT AND EQUITY SECURITIES
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DEBT SECURITIES
HELD-TO-MATURITY:
State and political subdivision bonds $ 10,562 $ 643 $ (78) $ 11,127
Foreign government bonds 3,036 (743) 2,293
Corporate securities 1,695,789 98,896 (13,823) 1,780,862
Mortgage-backed securities 172,300 6,201 (12) 178,489
---------- ---------- ----------- ----------
Total 1,881,687 105,740 (14,656) 1,972,771
---------- ---------- ----------- ----------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 497,089 34,454 (422) 531,121
State and political subdivision bonds 529,977 43,622 (104) 573,495
Foreign government bonds 293,968 28,814 (18,691) 304,091
Corporate securities 1,993,720 110,525 (36,656) 2,067,589
Mortgage-backed securities 3,121,690 110,172 (14,618) 3,217,244
---------- ---------- ----------- ----------
Total 6,436,444 327,587 (70,491) 6,693,540
---------- ---------- ----------- ----------
TOTAL DEBT SECURITIES $8,318,131 $ 433,327 $ (85,147) $8,666,311
---------- ---------- ----------- ----------
EQUITY SECURITIES $ 223,915 $ 102,018 $ (21,388) $ 304,545
========== ========== =========== ==========
</TABLE>
57
<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, 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 $ 158,217 $ 190,669 $ (12,998) $ 335,888
========== ========= ========== ==========
</TABLE>
The amortized cost and fair value of debt securities, by contractual sinking
fund payment and maturity, as of December 31, 1998 are shown below. Actual
maturity may differ from contractual maturity because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties, or Phoenix may have the right to put or sell the obligations back
to the issuers.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 75,505 $ 66,367 $ 58,513 $ 59,953
Due after one year through five years 512,131 535,084 460,182 481,790
Due after five years through ten years 672,533 710,988 948,676 983,590
Due after ten years 449,218 481,843 1,847,383 1,950,963
Mortgage-backed securities 172,300 178,489 3,121,690 3,217,244
----------- ----------- ----------- -----------
Total $ 1,881,687 $ 1,972,771 $ 6,436,444 $ 6,693,540
=========== =========== =========== ===========
</TABLE>
58
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Carrying values for investments in mortgage-backed securities, excluding
U.S. government guaranteed investments, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Planned amortization class $ 433,668 $ 554,425
Asset-backed 910,594 594,128
Mezzanine 280,162 328,539
Commercial 641,485 556,155
Sequential pay 982,576 680,397
Pass through 119,065 132,522
Other 21,994 56,393
---------- ----------
Total mortgage-backed securities $3,389,544 $2,902,559
========== ==========
</TABLE>
59
<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,
1998 1997 1998 1997
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
PROPERTY TYPE:
Office buildings $221,244 $246,500 $ 38,343 $180,743
Retail 203,927 231,886 36,858 108,907
Apartment buildings 261,894 303,990 21,553 20,560
Industrial buildings 121,789 162,008 1,600 39,810
Other 19,089 18,917 32 238
Valuation allowances (30,600) (35,800) (6,411) (28,501)
-------- -------- -------- --------
Total $797,343 $927,501 $ 91,975 $321,757
======== ======== ======== ========
GEOGRAPHIC REGION:
Northeast $169,368 $222,975 $ 47,709 $ 92,513
Southeast 213,916 257,376 32 85,781
North central 176,683 189,163 11,453 63,751
South central 98,956 79,092 22,649 58,954
West 169,020 214,695 16,543 49,259
Valuation allowances (30,600) (35,800) (6,411) (28,501)
-------- -------- -------- --------
Total $797,343 $927,501 $ 91,975 $321,757
======== ======== ======== ========
</TABLE>
At December 31, 1998, scheduled mortgage loan maturities were as follows:
1999--$99 million; 2000--$81 million; 2001--$87 million; 2002--$29 million;
2003--$107 million; and $394 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 $2.3 million and $8.6 million of its mortgage
loans during 1998 and 1997, respectively, based on terms which differed from
those granted to new borrowers.
60
<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>
1998
Mortgage loans $ 35,800 $ 50,603 $(55,803) $30,600
Real estate 28,501 5,108 (27,198) 6,411
-------- -------- -------- -------
Total $ 64,301 $ 55,711 $(83,001) $37,011
======== ======== ======== =======
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>
NONINCOME-PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of nonincome-producing mortgage loans were $15.6
million and $7.0 million at December 31, 1998 and 1997, respectively. The
net carrying value of nonincome-producing bonds was $22.3 million at
December 31, 1998. There were no nonincome-producing bonds at December 31,
1997.
INTEREST RATE SWAPS AND INTEREST RATE FLOORS
The notional amounts of Phoenix's interest rate swaps were $416.0 million
and $272.9 million at December 31, 1998 and 1997, respectively. Weighted
average received and paid rates were 6.24% and 5.79%, for 1998. The increase
in net investment income related to interest rate swap contracts was $1.9
million and $.7 million for the years ended December 31, 1998 and 1997,
respectively. The fair value of these interest rate swap agreements as of
December 31, 1998 and 1997 were $11.0 million and $9.4 million,
respectively. 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.
During 1998, Phoenix entered into several interest rate floor contracts. The
notional amount of Phoenix's interest rate floor contracts was $570.0
million at December 31, 1998. The weighted average strike rate was 4.59% for
1998. The excess of the strike rates over the index rates (5- and 10-year
constant maturity treasury yields) was not significant. The fair value of
these interest rate floors at December 31, 1998 was $1.4 million. These
contracts do not require payment of notional principal.
Management of Phoenix considers the likelihood of any material loss on these
guarantees or interest rate swaps or floors to be remote.
61
<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,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Venture capital equity partnerships $140,591 $ 88,228
Transportation and equipment leases 80,953 78,024
Affordable housing partnerships 10,854
Investment in Aberdeen Asset Management 72,257 70,317
Investment in Beutel, Goodman & Co. Ltd. 31,214
Investment in other affiliates 23,387 5,453
Seed money in separate accounts 26,587 41,297
Other partnership interests 22,697 4,555
-------- --------
Total other invested assets $377,326 $319,088
======== ========
</TABLE>
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $598,892 $509,702 $469,713
Equity securities 6,469 4,277 4,689
Mortgage loans 83,101 85,662 84,318
Policy loans 146,477 122,562 117,742
Real estate 38,338 18,939 21,799
Leveraged leases 2,746 2,692 3,286
Other invested assets 22,364 31,365 18,751
Short-term investments 23,825 18,768 18,688
-------- -------- --------
Sub-total 922,212 793,967 738,986
Less investment expenses 23,328 22,621 27,391
-------- -------- --------
Net investment income $898,884 $771,346 $711,595
======== ======== ========
</TABLE>
Investment income of $8.4 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1998. 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 $40.8 million and $51.3 million at December 31,
1998 and 1997, respectively. Interest income on restructured
62
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
mortgage loans that would have been recorded in accordance with the original
terms of such loans amounted to $4.9 million, $5.3 million and $3.1 million
in 1998, 1997 and 1996, respectively. Actual interest income on these loans
included in net investment income was $4.0 million, $3.8 million and $5.2
million in 1998, 1997 and 1996, respectively.
INVESTMENT GAINS AND LOSSES
Net unrealized gains and (losses) on securities available-for-sale and
carried at fair value for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (7,040) $112,194 $(70,986)
Equity securities (91,880) 74,547 40,803
Deferred policy acquisition costs 6,694 (80,603) 51,528
Deferred income taxes (32,279) 38,064 7,432
-------- -------- --------
Net unrealized investment (losses) gains
on securities available-for-sale $(59,947) $ 68,074 $ 13,913
======== ======== ========
</TABLE>
Realized investment gains and losses for the year ended December 31, were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $(4,295) $ 19,315 $(10,476)
Equity securities 11,939 26,290 59,794
Mortgage loans (6,895) 3,805 2,628
Real estate 67,522 44,668 24,711
Other invested assets (4,709) 17,387 765
-------- -------- --------
Net realized investment gains $ 63,562 $111,465 $ 77,422
======== ======== ========
</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>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from disposals $912,696 $821,339 $1,118,594
Gross gains on sales $ 17,442 $ 27,954 $ 12,547
Gross losses on sales $ 33,641 $ 5,309 $ 25,575
</TABLE>
63
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Phoenix Investment Partners' gross amounts:
Goodwill $321,793 $321,932
Investment management contracts 169,006 167,788
Noncompete covenant 5,000 5,000
Other 472 1,220
-------- --------
Totals 496,271 495,940
-------- --------
Other gross amounts:
Goodwill 79,217 65,585
Client listings 48,111 45,441
Intangible asset related to pension plan benefits 16,229 18,032
Other 1,690 279
-------- --------
Totals 145,247 129,337
-------- --------
Total gross goodwill and other intangible assets 641,518 625,277
Accumulated amortization - Phoenix Investment Partners (49,615) (27,579)
Accumulated amortization - other (64,874) (56,199)
-------- --------
Total net goodwill and other intangible assets $527,029 $541,499
======== ========
</TABLE>
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, Comprehensive Income and Equity.
64
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Short-term debt $ 20,463 $ 15,539
Bank borrowings 205,778 263,732
Notes payable 5,438 14,632
Subordinated debentures 41,359
Surplus notes 175,000 175,000
Secured debt 1,214 2,182
-------- --------
Total notes payable $449,252 $471,085
======== ========
</TABLE>
Phoenix has various lines of credit established with major commercial banks.
As of December 31, 1998, Phoenix had outstanding balances totaling $219.7
million. The total unused credit was $190.7 million. Interest rates ranged
from 5.24% to 7.98% in 1998.
Maturities of other indebtedness are as follows: 1999--$20.5 million;
2000--$38.3 million; 2001--$29.2 million; 2002--$318.3 million; 2003--$1.1
million; 2004 and thereafter--$41.9 million.
Interest expense was $29.9 million, $32.5 million and $18.0 million for the
years ended December 31, 1998, 1997 and 1996, respectively.
7. INCOME TAXES
A summary of income taxes (benefits) applicable to income before income
taxes and minority interest for the year ended December 31, was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes
Current $80,322 $54,514 $59,673
Deferred (5,170) 3,663 21,010
------- ------- -------
Total $75,152 $58,177 $80,683
======= ======= =======
</TABLE>
The income taxes attributable to the consolidated results of operations are
different than the amounts determined by multiplying income before taxes by
the statutory income tax rate. The
65
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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>
1998 1997 1996
% % %
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $73,637 35 $81,818 35 $67,488 35
Dividend received deduction and
tax-exempt interest (3,691) (1) (2,513) (1) (2,107) (1)
Other, net 5,206 2 (8,017) (4) 2,736 1
------- -- ------- -- ------ --
75,152 36 71,288 30 68,117 35
Differential earnings (equity tax) (13,111) (5) 12,566 7
------- -- ------- -- ------ --
Income taxes $75,152 36 $58,177 25 $80,683 42
======= == ======= == ======= ==
</TABLE>
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,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 301,337 $ 303,500
Unearned premium/deferred revenue (148,112) (139,817)
Impairment reserves (23,393) (26,102)
Pension and other postretirement benefits (59,164) (56,643)
Investments 105,395 83,821
Future policyholder benefits (141,130) (140,980)
Other 28,730 45,053
---------- ----------
63,663 68,832
Net unrealized investment gains 51,597 84,134
Minimum pension liability (3,348) (2,526)
---------- ----------
Deferred income tax liability, net $ 111,912 $ 150,440
========== ==========
</TABLE>
Gross deferred income tax assets totaled $375 million and $366 million at
December 31, 1998 and 1997, respectively. Gross deferred income tax
liabilities totaled $487 million and $516 million at December 31, 1998 and
1997, 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, 1998 and 1997 will be
realized.
The Internal Revenue Service is currently examining Phoenix's tax returns
for 1995 through 1997. Management does not believe that there will be a
material adverse effect on the financial statements as a result of pending
tax matters.
66
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
Phoenix has a multi-employer, noncontributory, 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 nonqualified supplemental defined benefit plan to provide
benefits in excess of amounts allowed pursuant to the Internal Revenue Code.
Phoenix's funding policy is to contribute annually an amount equal to at
least the minimum required contribution in accordance with minimum funding
standards established by the Employee Retirement Income Security Act of
1974. Contributions are intended to provide not only for benefits
attributable to service to date, but also for service expected to be earned
in the future.
Components of net periodic pension cost for the years ended December 31,
were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 11,046 $ 10,278 $ 10,076
Interest cost 22,958 22,650 22,661
Expected return on plan assets (25,083) (22,055) (20,847)
Amortization of net transition asset (2,369) (2,369) (2,468)
Amortization of prior service cost 1,795 1,795 (22)
Amortization of net (gain) loss (1,247) 25 1,867
-------- -------- --------
Net periodic benefit cost $ 7,100 $ 10,324 $ 11,267
======== ======== ========
</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.
67
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The aggregate change in projected benefit obligation, change in plan assets,
and funded status of the plan were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 335,436 $ 301,245
Service cost 11,046 10,278
Interest cost 22,958 22,650
Plan amendments 171
Actuarial loss 1,958 18,644
Benefit payments (17,936) (17,552)
--------- ---------
Benefit obligation at end of year $ 353,462 $ 335,436
========= =========
Change in plan assets
Fair value of plan assets at beginning of year $ 321,555 $ 283,245
Actual return on plan assets 58,225 53,093
Employer contributions 2,975 2,769
Benefit payments (17,936) (17,552)
--------- ---------
Fair value of plan assets at end of year $ 364,819 $ 321,555
========= =========
Funded status of the plan $ 11,357 $ (13,881)
Unrecognized net transition asset (14,217) (16,586)
Unrecognized prior service cost 16,185 17,980
Unrecognized net gain (75,921) (45,986)
--------- ---------
Net amount recognized $ (62,596) $ (58,473)
========= =========
Amounts recognized in the Consolidated Balance
Sheet consist of:
Accrued benefit liability $ (88,391) $ (83,724)
Intangible asset 16,229 18,032
Accumulated other comprehensive income 9,566 7,219
--------- ---------
$ (62,596) $ (58,473)
========= =========
</TABLE>
At December 31, 1998 and 1997, the nonqualified plan was unfunded and had
projected benefit obligations of $57.2 million and $50.4 million,
respectively. The accumulated benefit obligations as of December 31, 1998
and 1997 related to this plan were $48.4 million and $42.8 million,
respectively, and are included in other liabilities.
68
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Phoenix recorded, as a reduction of equity, an additional minimum pension
liability of $6.2 million and $4.7 million, net of income taxes, at December
31, 1998 and 1997, respectively, representing the excess of accumulated
benefit obligations over the fair value of plan assets and accrued pension
liabilities for the nonqualified plan. Phoenix has also recorded an
intangible asset of $16.2 million and $18.0 million as of December 31, 1998
and 1997 related to the nonqualified 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 1998 and 1997. The discount rate assumption for 1998
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% in 1998 and 1997.
The pension plan's assets include corporate and government debt securities,
equity securities, real estate, venture capital partnerships, and shares of
mutual funds.
Phoenix also sponsors savings plans for its employees and agents 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, 1998, 1997 and 1996 were $4.1 million, $3.8 million
and $4.2 million, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to Phoenix's pension plans, Phoenix currently provides certain
health care and life insurance benefits to retired employees, spouses and
other eligible dependents through various plans sponsored by Phoenix. A
substantial portion of Phoenix's employees may become eligible for these
benefits upon retirement. The health care plans have varying copayments and
deductibles, depending on the plan. These plans are unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost $3,436 $3,136 $2,765
Interest cost 4,572 4,441 4,547
Amortization of net gain (1,232) (1,527) (1,576)
------ ------ ------
Net periodic benefit cost $6,776 $6,050 $5,736
====== ====== ======
</TABLE>
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.
69
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The plan's change in projected benefit obligation, change in plan assets,
and funded status were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Change in projected postretirement benefit obligation
Projected benefit obligation at beginning of year $ 66,618 $ 63,656
Service cost 3,436 3,136
Interest cost 4,572 4,441
Actuarial (gain) loss 397 (518)
Benefit payments (4,080) (4,098)
-------- --------
Projected benefit obligation at end of year $ 70,943 $ 66,617
-------- --------
Change in plan assets
Employer contributions $ 4,080 $ 4,098
Benefit payments (4,080) (4,098)
-------- --------
Fair value of plan assets at end of year $ $
-------- --------
Funded status of the plan $(70,943) $(66,617)
Unrecognized net gain (26,408) (28,037)
-------- --------
Accrued benefit liability $(97,351) $(94,654)
======== ========
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.0% at December 31, 1998 and 1997.
70
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For purposes of measuring the accumulated postretirement benefit obligation
the 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. Based on this assumption the health care costs were
assumed to increase 8.5% in 1998.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation by $4.6 million and the annual service and
interest cost by $.7 million, before taxes. Decreasing the assumed health
care cost trend rates by one percentage point in each year would decrease
the accumulated postretirement benefit obligation by $4.3 million and the
annual service and interest cost by $.6 million, before taxes. Gains and
losses that occur because actual experience differs from the estimates are
amortized over the average future service period of employees.
OTHER POSTEMPLOYMENT BENEFITS
Phoenix recognizes the costs and obligations of severance, disability and
related life insurance and health care benefits to be paid to inactive or
former employees after employment but before retirement. Other
postemployment benefit expense was ($.5) million for 1998, $.4 million for
1997 and $.4 million for 1996.
71
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. COMPREHENSIVE INCOME
The components of, and related tax effects for, other comprehensive income
for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount $(72,255) $151,210 $ 65,374
Tax expense (benefit) (25,288) 52,923 22,881
-------- -------- --------
Totals (46,967) 98,287 42,493
-------- -------- --------
RECLASSIFICATION ADJUSTMENT FOR NET GAINS
REALIZED IN NET INCOME:
Before-tax amount (19,970) (46,481) (43,969)
Tax (benefit) (6,990) (16,268) (15,389)
-------- -------- --------
Totals (12,980) (30,213) (28,580)
-------- -------- --------
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount (92,225) 104,729 21,405
Tax expense (benefit) (32,278) 36,655 7,492
-------- -------- --------
Totals $(59,947) $ 68,074 $ 13,913
-------- -------- --------
MINIMUM PENSION LIABILITY ADJUSTMENT:
Before-tax amount $ (2,347) $ (3,232) $ 1,910
Tax expense (benefit) (821) (1,131) 669
-------- -------- --------
Totals $ (1,526) $ (2,101) $ 1,241
======== ======== ========
</TABLE>
72
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes accumulated other comprehensive income for
the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Balance, beginning of year $160,457 $ 92,383 $ 78,470
Change during period (59,947) 68,074 13,913
-------- -------- --------
Balance, end of year 100,510 160,457 92,383
-------- -------- --------
MINIMUM PENSION LIABILITY ADJUSTMENT:
Balance, beginning of year (4,693) (2,592) (3,833)
Change during period (1,526) (2,101) 1,241
-------- -------- --------
Balance, end of year (6,219) (4,693) (2,592)
-------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year 155,764 89,791 74,637
Change during period (61,473) 65,973 15,154
-------- -------- --------
Balance, end of year $ 94,291 $155,764 $ 89,791
======== ======== ========
</TABLE>
10. SEGMENT INFORMATION
Phoenix is organized by lines of business that include similar product
groupings. Lines of businesses have been grouped into the following
reportable segments: Individual Insurance, Life Reinsurance, Group Life and
Health Insurance and Securities Management. The category "Individual
Insurance" aggregates the Individual Traditional, Universal Life, Variable
Universal Life and Variable Annuity lines of business. The category "All
Other" includes the combined financial results of segments that individually
are below the quantitative thresholds. Those segments include General Lines
Brokerage and several small individual insurance lines. In addition, the
category "All Other" contains unallocated investment income, unallocated
expenses and realized investment gains related to capital in excess of
segment requirements, as well as certain assets such as equity securities
and venture capital. Phoenix calculates taxes at a flat rate of 35% on the
operating income of its insurance line segments and therefore, does not
allocate permanent tax differences to these segments. Also, Phoenix does not
allocate unusual or extraordinary items to its segments.
73
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes significant financial amounts by reportable
segment:
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED
DECEMBER 31, 1998 GROUP LIFE
(IN MILLIONS) INDIVIDUAL LIFE & HEALTH SECURITIES ALL
INSURANCE REINSURANCE INSURANCE MANAGEMENT OTHER TOTALS
---------- ----------- ---------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external sources $ 1,354 $ 64 $440 $214 $400 $ 2,472
Intersegment revenues 18 41 59
Net investment income 708 19 45 2 75 849
Interest expense 15 1 16
Policyholder dividends 344 344
Increase in DAC (9) (5) (5) (19)
Depreciation and amortization expense 4 1 26 14 45
Other noncash items:
Increase in policy liabilities and accruals 596 38 16 36 686
Minority interest in operating income 14 5 19
Segment operating income (a) $ 50 $ 12 $ 26 $ 23 $ 1 $ 112
======= ==== ==== ==== ==== =======
Deferred policy acquisition costs $ 1,035 $ 27 $ 18 $ 1,080
Total segment assets $16,177 $398 $701 $557 $938 $18,771
======= ==== ==== ==== ==== =======
AT AND FOR THE YEAR ENDED
DECEMBER 31, 1997 GROUP LIFE
(IN MILLIONS) INDIVIDUAL LIFE & HEALTH SECURITIES ALL
INSURANCE REINSURANCE INSURANCE MANAGEMENT OTHER TOTALS
---------- ----------- ---------- ---------- ----- ------
Revenues from external sources $ 1,200 $ 57 $428 $124 $ 298 $ 2,107
Intersegment revenues 16 30 46
Net investment income 586 19 42 2 101 750
Interest expense 4 1 5
Policyholder dividends 328 328
Increase in DAC (32) (5) (13) (50)
Depreciation and amortization expense 3 1 12 36 52
Other noncash items:
Increase in policy liabilities and accruals 508 3 24 50 585
Minority interest in operating income 12 2 14
Segment operating income (a) $ 59 $ 10 $ 33 $ 16 $ (17) $ 101
======= ==== ==== ==== ==== =======
Deferred policy acquisition costs $ 1,014 $ 22 $ 6 $ 1,042
Total segment assets $14,946 $318 $656 $615 $1,101 $17,636
======= ==== ==== ==== ====== =======
</TABLE>
(a) Before income taxes and after policyholder dividends on Individual
Insurance.
74
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED
DECEMBER 31, 1996 GROUP LIFE
(IN MILLIONS) INDIVIDUAL LIFE & HEALTH SECURITIES ALL
INSURANCE REINSURANCE INSURANCE MANAGEMENT OTHER TOTALS
---------- ----------- ---------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external sources $ 1,111 $121 $415 $153 $ 140 $ 1,940
Intersegment revenues 14 33 47
Net investment income 562 16 37 2 91 708
Interest expense 3 2 5
Policyholder dividends 297 297
Increase in DAC (39) (2) (20) (61)
Depreciation and amortization expense 3 1 11 11 26
Other noncash items:
Increase in policy liabilities and
accruals 465 8 40 49 562
Minority interest in operating income 17 (3) 14
Segment operating income (a) $ 59 $ 9 $ 12 $ 28 $ (9) $ 99
======= ==== ==== ==== ====== =======
Deferred policy acquisition costs $ 905 $ 18 $ 21 $ 944
Total segment assets $12,302 $304 $597 $366 $ 965 $14,534
======= ==== ==== ==== ====== =======
</TABLE>
(a) Before income taxes and after policyholder dividends on Individual
Insurance.
75
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SEGMENT RECONCILIATION
The following is a reconciliation of the totals of reportable segment
revenues, operating income and assets to Phoenix's consolidated totals:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Total revenues for reportable segments $ 3,380 $ 2,903 $ 2,695
Realized investment gains 64 111 77
Unallocated net investment income 50 24 4
Elimination of intersegment revenues (59) (47) (47)
------- ------- -------
Total consolidated revenues $ 3,435 $ 2,991 $ 2,729
======= ======= =======
OPERATING INCOME
Total operating income for reportable segments $ 112 $ 101 $ 99
Realized investment gains 64 111 77
Unallocated amounts:
Net investment income 50 22 4
Interest expense (14) (23) (13)
Other unallocated amounts (14) 9 9
Reclassification of minority interest 12 14 17
------- ------- -------
Total consolidated operating income $ 210 $ 234 $ 193
======= ======= =======
ASSETS
Total assets for reportable segments $18,771 $17,636 $14,534
Unallocated amounts:
Investments and accrued investment income
attributable to unallocated capital 725 846 859
Goodwill and other intangible assets 15 21 20
Other unallocated amounts 10 35 41
------- ------- -------
Total consolidated assets $19,521 $18,538 $15,454
======= ======= =======
</TABLE>
11. 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 $106.7 million and $109.0 million,
respectively, at December 31, 1998 and 1997. 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 $173.5 million and
$164.4 million at December 31, 1998 and 1997, respectively.
Rental expenses for operating leases, principally with respect to buildings,
amounted to $14.5 million, $14.9 million and $14.8 million in 1998, 1997,
and 1996, respectively. Future minimum rental payments under noncancelable
operating leases were approximately $45.3 million as of December 31, 1998,
payable as follows: 1999--$14.8 million; 2000--$12.0 million; 2001--$7.9
million; 2002--$5.8 million; 2003--$3.2 million; and $1.6 million
thereafter.
76
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix assumes and
cedes reinsurance as a means of diversifying underwriting risk. For direct
issues, the maximum of individual life insurance retained by Phoenix on any
one life is $8 million for single life and joint first-to-die policies and
to $10 million for joint last-to-die policies, with excess amounts ceded to
reinsurers. Phoenix reinsures 80% of the mortality risk on the inforce block
of the Confederation Life business acquired on December 31, 1997, and 90% of
the mortality risk on certain new issues of term and universal life
products. In addition, Phoenix entered into a separate reinsurance agreement
on October 1, 1998 to reinsure 80% of the mortality risk on a substantial
portion of its otherwise retained individual life insurance business.
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>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,719,393 $ 1,592,800 $ 1,473,869
Reinsurance assumed 505,262 329,927 276,630
Reinsurance ceded (371,854) (282,121) (231,677)
------------ ------------ ------------
Net premiums $ 1,852,801 $ 1,640,606 $ 1,518,822
============ ============ ============
Direct policy and contract claims incurred $ 728,062 $ 626,834 $ 575,824
Reinsurance assumed 433,242 410,704 170,058
Reinsurance ceded (407,780) (373,127) (160,646)
------------ ------------ ------------
Net policy and contract claims incurred $ 753,524 $ 664,411 $ 585,236
============ ============ ============
Direct life insurance in force $121,442,041 $ 120,394,664 $108,816,856
Reinsurance assumed 110,632,110 84,806,585 61,109,836
Reinsurance ceded (135,817,986) (74,764,639) (51,525,976)
------------ ------------ ------------
Net insurance in force $ 96,256,165 $130,436,610 $118,400,716
============ ============ ============
</TABLE>
Irrevocable letters of credit aggregating $5.3 million at December 31, 1998
have been arranged with United States commercial banks in favor of Phoenix
to collateralize the ceded reserves.
13. PARTICIPATING LIFE INSURANCE
Participating life insurance in force was 72.3% and 79.6% of the face value
of total individual life insurance in force at December 31, 1998 and 1997,
respectively. The premiums on participating life insurance policies were
75.7%, 83.5% and 84.1% of total individual life insurance premiums in 1998,
1997 and 1996, respectively.
77
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
14. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $1,038,407 $ 926,274 $ 816,128
Acquisition cost deferred 171,618 295,189 153,873
Amortized to expense during the year (140,084) (105,071) (95,255)
Adjustment to net unrealized investment
gains (losses) included in other
comprehensive income 6,694 (77,985) 51,528
---------- ---------- ---------
Balance at end of year $1,076,635 $1,038,407 $ 926,274
========== ========== =========
</TABLE>
15. MINORITY INTEREST
Phoenix's interests in Phoenix Investment Partners and American Phoenix
Corporation, through its wholly-owned subsidiary PM Holdings, are
represented by ownership of approximately 60% and 85%, respectively, of the
outstanding shares of common stock at December 31, 1998. Earnings and equity
attributable to minority shareholders are included in minority interest in
the consolidated financial statements.
16. 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.
78
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values are calculated as the present value of scheduled payments, with
the discount based upon the Treasury rate comparable for the remaining loan
duration, plus a spread of between 130 and 800 basis points, depending on
the internal quality rating of the loan. For loans in foreclosure or
default, values were determined assuming principal recovery was the lower of
the loan balance or the estimated value of the underlying property.
POLICY LOANS
Fair values are estimated as the present value of loan interest and policy
loan repayments discounted at the ten-year Treasury rate. Loan repayments
were assumed only to occur as a result of anticipated policy lapses, and it
was assumed that annual policy loan interest payments were made at the
guaranteed loan rate less 17.5 basis points. Discounting was at the ten-year
Treasury rate, except for policy loans with a variable policy loan rate.
Variable policy loans have an interest rate that is reset annually based
upon market rates and therefore, book value is a reasonable approximation of
fair value.
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair value of deferred annuities and supplementary contracts without
life contingencies with an interest guarantee of one year or less is valued
at the amount of the policy reserve. In determining the fair value of
deferred annuities and supplementary contracts without life contingencies
with interest guarantees greater than one year, a discount rate equal to the
appropriate Treasury rate, plus 150 basis points, was used to determine the
present value of the projected account value of the policy at the end of the
current guarantee period.
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest guarantees of less 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.
79
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FAIR VALUE SUMMARY
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1998 1997
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 132,634 $ 132,634 $ 159,307 $ 159,307
Short-term investments 240,911 240,911 1,078,276 1,078,276
Debt securities 8,575,227 8,666,311 7,213,966 7,316,601
Equity securities 304,545 304,545 335,888 335,888
Mortgage loans 797,343 831,919 927,501 956,041
Policy loans 2,008,260 2,122,389 1,986,728 2,104,704
----------- ----------- ----------- -----------
Total financial assets $12,058,920 $12,298,709 $11,701,666 $11,950,817
=========== =========== =========== ===========
Financial liabilities:
Policy liabilities $ 783,400 $ 783,400 $ 902,200 $ 902,200
Securities sold subject to repurchase
agreements 137,473 137,473
Notes payable 449,252 449,252 471,085 471,085
----------- ----------- ----------- -----------
Total financial liabilities $ 1,232,652 $ 1,232,652 $ 1,510,758 $ 1,510,758
=========== =========== =========== ===========
</TABLE>
17. CONTINGENCIES
FINANCIAL GUARANTEES
As a result of the sale of real estate properties, in December 1998, Phoenix
is no longer 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 principal amount of bonds guaranteed
by Phoenix at December 31, 1997 was $88.7 million.
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. Phoenix estimates the
cost of settlement to be $40 million after tax. A $25 million after tax
liability was recorded in 1995. In addition, $7 million after tax was
expensed in 1996. The after tax costs of $12.5 million for 1997 and $6.7
million for 1998 were directly offset by a release of the liability in those
years. 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.
80
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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, 1998, 1997 and 1996, there
were no material practices not prescribed by the Insurance Department of the
State of New York. Statutory surplus differs from equity reported in
accordance with GAAP for life insurance companies primarily because policy
acquisition costs are expensed when incurred, investment reserves are based
on different assumptions, surplus notes are not included in 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>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $108,652 $ 66,599 $ 70,261
Deferred policy acquisition costs, net 18,538 48,821 58,618
Future policy benefits (53,847) (9,145) (16,793)
Pension and postretirement expenses (17,334) (7,955) (23,275)
Investment valuation allowances 94,873 84,975 81,841
Interest maintenance reserve 1,415 17,544 (5,158)
Deferred income taxes (39,983) (36,250) (67,064)
Other, net 12,459 2,118 4,808
-------- -------- --------
Net income, as reported $124,773 $166,707 $103,238
======== ======== ========
</TABLE>
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to equity as reported
in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $1,205,635 $1,152,820
Deferred policy acquisition costs, net 1,259,316 1,227,782
Future policy benefits (465,268) (395,436)
Pension and postretirement expenses (174,273) (169,383)
Investment valuation allowances 2,002 (27,738)
Interest maintenance reserve 35,303 33,794
Deferred income taxes (25,593) (12,051)
Surplus notes (157,500) (157,500)
Other, net 24,062 (11,904)
---------- ----------
Equity, as reported $1,703,684 $1,640,384
========== ==========
</TABLE>
81
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
19. PRIOR PERIOD ADJUSTMENT
In 1998, Phoenix revised the accounting for partnerships involved in
leveraged lease arrangements for 1997 and 1996. Opening retained earnings at
December 31, 1995 has been increased by $7.7 million. The Consolidated
Balance Sheet as of December 31, 1997 was revised by increasing the
following balances: other invested assets by $18.9 million, deferred income
taxes by $6.6 million and retained earnings by $12.3 million. The effect on
the Consolidated Statement of Income, Comprehensive Income and Equity was an
increase in net income of $2.1 million and $2.5 million for the years ended
1997 and 1996, respectively.
20. SUBSEQUENT EVENTS
PHOENIX INVESTMENT PARTNERS, LTD.
On March 2, 1999, Phoenix Investment Partners completed its acquisition of
the retail mutual fund and closed-end fund business of the New York City
based Zweig Group. Under the terms of the agreement, Phoenix Investment
Partners paid $135.0 million at closing and will pay up to an additional
$29.0 million over the next three years based on revenue growth of the Zweig
funds. The acquisition increases Phoenix Investment Partners' assets under
management by approximately $4.4 billion.
OCCUPATIONAL ACCIDENT REINSURANCE
Effective March 1, 1995, Phoenix became a participant in an occupational
accident reinsurance pool. In addition, effective October 1, 1996, Phoenix
and American Phoenix Life and Reassurance Company, an indirect wholly owned
subsidiary of Phoenix, became a participant in a reinsurance facility of
occupational accident reinsurance. A significant portion of the risk
associated with the occupational accident reinsurance pool and the
reinsurance facility is further retroceded by Phoenix and American Phoenix
Life to several other unaffiliated insurance entities. Phoenix has
terminated membership in the pool effective March 1, 1999 while American
Phoenix Life and Phoenix terminated participation in the reinsurance
facility effective October 1, 1998.
Management's assessment of the reinsurance arrangements and related
financial exposure to Phoenix and American Phoenix Life is ongoing. Based on
current facts and circumstances, management believes these transactions will
not materially affect the financial condition of Phoenix or American Phoenix
Life.
82
<PAGE>
APPENDIX A
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE
PERFORMANCE. THEY DO NOT ILLUSTRATE HOW ACTUAL PERFORMANCE WILL AFFECT THE
BENEFITS UNDER A POLICY BECAUSE THEY DO NOT REFLECT COST OF INSURANCE, PREMIUM
TAX CHARGES, PREMIUM SALES CHARGES AND SURRENDER CHARGES, IF APPLICABLE. FOR
THIS INFORMATION SEE APPENDIX C "ILLUSTRATIONS OF DEATH BENEFITS, POLICY VALUES
AND CASH SURRENDER VALUES." Performance information may be expressed as yield
and effective yield of the Phoenix-Goodwin Money Market Subaccount, as yield of
the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount and as total return of
any Subaccount. Current yield for the Phoenix-Goodwin Money Market Subaccount
will be based on the income earned by the Subaccount over a given 7-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 Phoenix-Goodwin 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
7-day period, which period will end on the date of the most recent financial
statements. The yield for the Subaccount during this 7-day period will be the
change in the value of the hypothetical participant's account's original Unit.
The following is an example of this yield calculation for the Phoenix-Goodwin
Money Market Subaccount based on a 7-day period ending December 31, 1998.
Example:
Assumptions:
Value of hypothetical pre-existing account with exactly one
unit at the beginning of the period:...................... 1.501512
Value of the same account (excluding capital changes) at the
end of the 7-day period:.................................. 1.50245
Calculation:
Ending account value ..................................... 1.50245
Less beginning account value ............................. 1.501512
Net change in account value .............................. 0.000938
Base period return:
(adjusted change/beginning account value) ................ 0.000625
Current yield = return x (365/7) = ......................... 3.26%
Effective yield = [(1 + return)(365/7)] - 1 = .............. 3.31%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time, or other investment companies, due to charges which
will be deducted on the VUL Account level.
For the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount, quotations of
yield will be based on all investment income per unit earned during a given
30-day period (including dividends and interest), less expenses accrued during
the period ("net investment income"), and are computed by dividing 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.
83
<PAGE>
The following performance tables display historical investment results of
the Subaccounts of the VUL Account. This information may be useful in helping
potential investors in deciding which Subaccounts to choose and in assessing the
competence of the investment advisers. The performance figures shown should be
considered in light of the investment objectives and policies, characteristics
and quality of the Subaccounts and market conditions during the periods of time
quoted. The performance figures should not be considered as estimates or
predictions of future performance. Investment return of the Subaccounts are not
guaranteed and will fluctuate. Below are quotations of average annual total
return calculated as described above for all Subaccounts with at least one year
of results. POLICY CHARGES (INCLUDING COST OF INSURANCE, PREMIUM TAX CHARGES,
PREMIUM SALES CHARGES AND SURRENDER CHARGES) ARE NOT REFLECTED.
<TABLE>
==================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1998(1,4)
==================================================================================================================================
<CAPTION>
SERIES INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
==================================================================================================================================
<S>
<C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series................... 7/15/97 27.99% N/A N/A 22.48%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series.................... 5/1/90 24.38% 11.47% N/A 9.41%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series......................... 9/17/96 -7.25% N/A N/A -19.21%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series...... 5/1/95 -23.54% N/A N/A 10.03%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series...................... 3/2/98 N/A N/A N/A 22.97%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series.......................... 5/1/92 15.64% 11.41% N/A 11.00%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series............................ 1/1/83 26.35% 16.84% 18.67% 17.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series...................... 10/10/82 2.09% 3.24% 3.93% 4.97%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series......... 1/1/83 -6.92% 5.20% 7.78% 8.67%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series.............. 9/17/84 17.36% 11.33% 12.59% 12.34%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series................... 1/29/96 40.62% N/A N/A 21.66%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series.................... 3/2/98 N/A N/A N/A 7.87%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series................ 3/2/98 N/A N/A N/A 17.31%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series..................... 3/2/98 N/A N/A N/A -13.78%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series..................... 3/2/98 N/A N/A N/A 18.57%
- ----------------------------------------------------------------------------------------------------------------------------------
EAFE(registered trademark)Equity Index Fund.............. 8/22/97 18.18% N/A N/A 7.07%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II......... 3/28/94 4.58% N/A N/A 4.89%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II....................... 3/1/94 -0.25% N/A N/A 7.72%
- ----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund -- Class 2(2,3)........... 5/1/98 N/A N/A N/A 0.98%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund -- Class 2(2,3).......... 11/28/88 3.07% 9.64% 10.40% 10.31%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund -- Class 2(2,3)........ 9/15/96 -23.45% N/A N/A -24.14%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton International Fund -- Class 2(2,3)............. 5/1/92 5.95% 9.77% N/A 12.28%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund -- Class 2(2,3)..................... 11/4/88 -1.86% 9.18% 10.48% 10.18%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty..................................... 2/1/99 N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap........................... 5/1/95 13.06% N/A N/A 19.55%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty............................................ 2/1/99 N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap.................................... 5/1/95 5.59% N/A N/A 25.06%
==================================================================================================================================
</TABLE>
(1) The average annual total return is the annual compound return that results
from holding an initial investment of $10,000 for the time period indicated.
Returns are net of $150 Issue Expense Charge, $5 Monthly Administrative
Charge, Investment Management Fees and Mortality and Expense Risk Charges.
(2) Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Investments), performance shown for periods prior to that
date represent the historical results of Class 1 shares. Performance since
that date reflect Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
(3) The manager is limiting fund expenses, which increases total returns.
(4) Performance data quoted represents the investment return of the appropriate
Series adjusted for Flex Edge Success and Joint Edge charges had the
Subaccount started on the inception date of the appropriate Series.
Advertisements, sales literature and other communications may contain
information about any Series' or Adviser's current investment strategies and
management style. Current strategies and style may change to 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 Salomon Brothers Corporate
and Government Bond Indices.
84
<PAGE>
Occasionally, The VUL Account may include in advertisements containing total
return, the ranking of those performance figures relating to such figures for
groups of Subaccounts having similar investment objectives as categorized by
ranking services such as:
Lipper Analytical Services, Inc. Morningstar, Inc.
CDA Investment Technologies, Inc. Weisenberger Financial Services, 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 Business 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 Personal Investor
The Funds may occasionally illustrate the benefits of tax deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans. The total return also may be used to compare the performance
of a Series against certain widely acknowledged outside standards or indices for
stock and bond market performance such as:
S&P 500 Dow Jones Industrial Average
Europe Australia Far East Index (EAFE) Consumers Price Index
Shearson Lehman Corporate Index 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.
85
<PAGE>
<TABLE>
ANNUAL TOTAL RETURN(1,4)
======================================================================================================================
<CAPTION>
Series 1983 1984 1985 1986 1987 1988 1989 1990
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A -8.63%
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate
Securities Series N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series 31.84% 9.79% 33.85% 19.51% 6.08% 3.09% 34.53% 3.32%
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 7.51% 9.34% 7.17% 5.66% 5.67% 6.60% 8.03% 7.51%
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income
Series 5.16% 10.45% 19.65% 18.34% 0.28% 9.61% 6.92% 4.54%
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series N/A -1.31% 26.33% 14.77% 11.66% 1.53% 18.53% 5.15%
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
EAFE(registered trademark)Equity Index Fund N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government N/A N/A N/A N/A N/A N/A N/A N/A
Securities II
- ----------------------------------------------------------------------------------------------------------------------
Federated high Income Bond Fund II N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund --
Class 2(2,3) N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund --
Class 2(2,3) N/A N/A N/A N/A N/A 0.21% 12.13% -8.95%
- ----------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund --
Class 2(2,3) N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Templeton International Fund-- Class 22,3 N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund -- Class 2(2,3) N/A N/A N/A N/A N/A -0.99% 13.48% -11.99%
- ----------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
======================================================================================================================
</TABLE>
<TABLE>
ANNUAL TOTAL RETURN (continued)(1,4)
========================================================================================================================
<CAPTION>
Series 1991 1992 1993 1994 1995 1996 1997 1998
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series N/A N/A N/A N/A N/A N/A 5.46% 30.64%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series 18.79% -13.52% 37.33% -0.73% 8.72% 17.71% 11.16% 26.92%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A -0.06% -32.94% -5.21%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate
Securities Series N/A N/A N/A N/A 17.19% 32.10% 21.09% -21.83
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A 25.45%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series N/A 9.06% 7.75% -3.61% 22.37% 9.68% 17.00% 18.07%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series 41.06% 9.41% 18.75% 0.66% 29.85% 11.69% 20.12% 28.98%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 5.14% 2.75% 2.06% 3.01% 4.86% 4.19% 4.35% 4.26%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income
Series 18.66% 9.23% 14.99% -6.21% 22.56% 11.52% 10.21% -4.91%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series 28.27% 9.79% 10.12% -2.19% 17.27% 8.18% 19.78% 19.84%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series N/A N/A N/A N/A N/A 9.56% 16.25% 43.55%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A 10.07%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A 19.67%
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A -11.95
- ------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A 20.97%
- ------------------------------------------------------------------------------------------------------------------------
EAFE(registered trademark)Equity Index Fund N/A N/A N/A N/A N/A N/A -6.87% 20.64%
- ------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government N/A N/A N/A 1.99% 7.90% 3.37% 7.71% 6.80%
Securities II
- ------------------------------------------------------------------------------------------------------------------------
Federated high Income Bond Fund II N/A N/A N/A -4.26% 19.42% 13.40% 12.92% 1.88%
- ------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund --
Class 2(2,3) N/A N/A N/A N/A N/A N/A N/A 2.62%
- ------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund --
Class 2(2,3) 26.42% 6.97% 24.86% -4.00% 21.29% 17.64% 14.37% 5.27%
- ------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund --
Class 2(2,3) N/A N/A N/A N/A N/A 1.05% -29.95% -21.69
- ------------------------------------------------------------------------------------------------------------------------
Templeton International Fund-- Class 22,3 N/A -6.80% 45.85% -3.27% 14.56% 22.77% 12.76% 8.17%
- ------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund -- Class 2(2,3) 26.22% 6.02% 32.68% -3.25% 23.97% 21.17% 10.75% 0.24%
- ------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A 33.96% 31.15% -2.24% 15.41%
- ------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A N/A 16.01% 45.64% 28.41% 7.83%
========================================================================================================================
</TABLE>
(1) Rates are net of Mortality and Expense Risk Charges and Investment
Management fees for the Subaccounts.
(2) Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Investments), performance shown for periods prior to that
date represent the historical results of Class 1 shares. Performance since
that date reflect Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
(3) The manager is limiting fund expenses, which increases total returns.
(4) Performance data quoted represents the investment return of the appropriate
Series adjusted for Flex Edge Success and Joint Edge charges had the
Subaccount started on the inception date of the appropriate Series.
These rates of return are not an estimate or guarantee of future performance.
86
<PAGE>
APPENDIX B
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.
On the last business day of each calendar week, Phoenix will set the excess
interest rate, if any, that will apply to premium payments made to the GIA. That
rate will remain in effect for such premium payments for an initial guarantee
period of one full year from the date of premium payment. Upon expiration of the
initial one-year guarantee period (and each subsequent one-year guarantee period
thereafter), the rate to be applied to any premium payment whose guaranteed
period has just ended will be the same rate as is applied to new premium payment
allocated at that time to the GIA. This rate will likewise remain in effect for
a guarantee period of one full year from the date the new rate is applied.
Excess interest, if any, will be determined by Phoenix based on information
as to expected investment yields. Some of the factors that Phoenix may consider
in determining whether to credit interest to amounts allocated to the GIA and
the amount thereof, are general economic trends, rates of return currently
available and anticipated on investments, regulatory and tax requirements and
competitive factors. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE GIA IN
EXCESS OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF PHOENIX AND
WITHOUT REGARD TO ANY SPECIFIC FORMULA. THE CONTRACT OWNER ASSUMES THE RISK THAT
INTEREST CREDITED TO GIA ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 4%
FOR ANY GIVEN YEAR.
Phoenix is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in Phoenix's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
Policyholders and Contract Owners.
Excess interest, if any, will be credited on the GIA Policy Value. Phoenix
guarantees that, at any time, the GIA Policy Value will not be less than the
amount of premium payments allocated to the GIA, plus interest at the rate of 4%
per year, compounded annually, plus any additional interest which Phoenix may,
in its discretion, credit to the GIA, less the sum of all annual administrative
or surrender charges, any applicable premium taxes, and less any amounts
surrendered or loaned. If the Policyowner surrenders the Policy, the amount
available from the GIA will be reduced by any applicable surrender charge and
annual administration charge. See "Deductions and Charges."
IN GENERAL, YOU CAN MAKE ONLY ONE TRANSFER PER YEAR FROM THE GIA. THE AMOUNT
THAT CAN BE TRANSFERRED OUT IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
POLICY VALUE IN THE GIA AT THE TIME OF THE TRANSFER. IF YOU ELECT THE SYSTEMATIC
TRANSFER PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT OF THE GIA
OVER A MINIMUM 18-MONTH PERIOD. ALSO, THE TOTAL POLICY VALUE ALLOCATED TO THE
GIA MAY BE TRANSFERRED OUT OF THE GIA TO ONE OR MORE OF THE SUBACCOUNTS OF THE
VUL ACCOUNT OVER A CONSECUTIVE FOUR-YEAR PERIOD ACCORDING TO THE FOLLOWING
ANNUALLY RENEWABLE SCHEDULE:
YEAR ONE: 25% YEAR TWO: 33%
YEAR THREE: 50% YEAR FOUR: 100%
87
<PAGE>
APPENDIX C
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 .70%
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 .30%. 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, 1998,
average total operating expenses for the Series would have been approximately
1.43% 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 -1.79%, 4.16% and 10.12%, respectively (applicable for
the first 15 Policy Years for Single Life Policies and -1.25%, 4.66% and 10.72%,
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 6% rate.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the VUL Account in the future. If such tax charges
are imposed in the future, then in order to produce after tax returns equal to
those illustrated for 0%, 6% and 12%, a sufficiently higher amount in excess of
the hypothetical interest rates would have to be earned. (See "Charges and
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.
88
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 1 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 575 0 100,000 620 0 100,000 665 0 100,000
2 1,000 2,153 1,281 396 100,000 1,412 527 100,000 1,549 664 100,000
3 1,000 3,310 1,965 658 100,000 2,228 921 100,000 2,513 1,206 100,000
4 1,000 4,526 2,627 1,320 100,000 3,068 1,761 100,000 3,565 2,258 100,000
5 1,000 5,802 3,265 1,958 100,000 3,931 2,624 100,000 4,711 3,404 100,000
6 1,000 7,142 3,880 2,718 100,000 4,818 3,656 100,000 5,962 4,800 100,000
7 1,000 8,549 4,468 3,450 100,000 5,726 4,709 100,000 7,324 6,307 100,000
8 1,000 10,027 5,030 4,157 100,000 6,658 5,786 100,000 8,812 7,939 100,000
9 1,000 11,578 5,564 5,129 100,000 7,612 7,176 100,000 10,434 9,998 100,000
10 1,000 13,207 6,071 6,071 100,000 8,589 8,589 100,000 12,206 12,206 100,000
11 1,000 14,917 6,556 6,556 100,000 9,594 9,594 100,000 14,148 14,148 100,000
12 1,000 16,713 7,018 7,018 100,000 10,629 10,629 100,000 16,279 16,279 100,000
13 1,000 18,599 7,456 7,456 100,000 11,695 11,695 100,000 18,618 18,618 100,000
14 1,000 20,579 7,873 7,873 100,000 12,794 12,794 100,000 21,188 21,188 100,000
15 1,000 22,657 8,265 8,265 100,000 13,924 13,924 100,000 24,011 24,011 100,000
16 1,000 24,840 8,683 8,683 100,000 15,174 15,174 100,000 27,269 27,269 100,000
17 1,000 27,132 9,077 9,077 100,000 16,469 16,469 100,000 30,873 30,873 100,000
18 1,000 29,539 9,442 9,442 100,000 17,807 17,807 100,000 34,861 34,861 100,000
19 1,000 32,066 9,780 9,780 100,000 19,192 19,192 100,000 39,279 39,279 100,000
20 1,000 34,719 10,085 10,085 100,000 20,622 20,622 100,000 44,174 44,174 100,000
@ 65 1,000 69,761 10,033 10,033 100,000 39,349 39,349 100,000 149,429 149,429 179,316
</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 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
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%.
89
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 2 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 512 0 100,000 555 0 100,000 599 0 100,000
2 1,000 2,153 1,156 271 100,000 1,280 394 100,000 1,409 524 100,000
3 1,000 3,310 1,779 472 100,000 2,025 718 100,000 2,291 984 100,000
4 1,000 4,526 2,381 1,074 100,000 2,790 1,483 100,000 3,252 1,945 100,000
5 1,000 5,802 2,959 1,652 100,000 3,575 2,268 100,000 4,299 2,992 100,000
6 1,000 7,142 3,515 2,353 100,000 4,381 3,218 100,000 5,438 4,276 100,000
7 1,000 8,549 4,044 3,027 100,000 5,204 4,186 100,000 6,678 5,661 100,000
8 1,000 10,027 4,548 3,676 100,000 6,046 5,173 100,000 8,030 7,158 100,000
9 1,000 11,578 5,025 4,590 100,000 6,905 6,470 100,000 9,502 9,067 100,000
10 1,000 13,207 5,475 5,475 100,000 7,783 7,783 100,000 11,108 11,108 100,000
11 1,000 14,917 5,895 5,895 100,000 8,677 8,677 100,000 12,858 12,858 100,000
12 1,000 16,713 6,284 6,284 100,000 9,587 9,587 100,000 14,768 14,768 100,000
13 1,000 18,599 6,640 6,640 100,000 10,511 10,511 100,000 16,852 16,852 100,000
14 1,000 20,579 6,963 6,963 100,000 11,449 11,449 100,000 19,130 19,130 100,000
15 1,000 22,657 7,250 7,250 100,000 12,399 12,399 100,000 21,620 21,620 100,000
16 1,000 24,840 7,541 7,541 100,000 13,435 13,435 100,000 24,479 24,479 100,000
17 1,000 27,132 7,791 7,791 100,000 14,487 14,487 100,000 27,627 27,627 100,000
18 1,000 29,539 7,992 7,992 100,000 15,551 15,551 100,000 31,093 31,093 100,000
19 1,000 32,066 8,139 8,139 100,000 16,622 16,622 100,000 34,913 34,913 100,000
20 1,000 34,719 8,226 8,226 100,000 17,696 17,696 100,000 39,126 39,126 100,000
@ 65 1,000 69,761 2,779 2,779 100,000 27,921 27,921 100,000 129,447 129,447 155,337
</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 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
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%.
90
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 1 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 601 0 100,000 648 0 100,000 694 0 100,000
2 1,000 2,153 1,333 480 100,000 1,468 614 100,000 1,609 755 100,000
3 1,000 3,310 2,043 848 100,000 2,314 1,119 100,000 2,607 1,412 100,000
4 1,000 4,526 2,731 1,536 100,000 3,185 1,990 100,000 3,697 2,501 100,000
5 1,000 5,802 3,395 2,199 100,000 4,081 2,886 100,000 4,885 3,690 100,000
6 1,000 7,142 4,034 2,971 100,000 5,002 3,938 100,000 6,182 5,118 100,000
7 1,000 8,549 4,648 3,715 100,000 5,948 5,015 100,000 7,597 6,664 100,000
8 1,000 10,027 5,236 4,435 100,000 6,918 6,117 100,000 9,141 8,340 100,000
9 1,000 11,578 5,799 5,399 100,000 7,916 7,516 100,000 10,830 10,430 100,000
10 1,000 13,207 6,337 6,337 100,000 8,941 8,941 100,000 12,679 12,679 100,000
11 1,000 14,917 6,858 6,858 100,000 10,002 10,002 100,000 14,710 14,710 100,000
12 1,000 16,713 7,360 7,360 100,000 11,101 11,101 100,000 16,943 16,943 100,000
13 1,000 18,599 7,845 7,845 100,000 12,238 12,238 100,000 19,399 19,399 100,000
14 1,000 20,579 8,311 8,311 100,000 13,415 13,415 100,000 22,101 22,101 100,000
15 1,000 22,657 8,759 8,759 100,000 14,634 14,634 100,000 25,077 25,077 100,000
16 1,000 24,840 9,240 9,240 100,000 15,985 15,985 100,000 28,511 28,511 100,000
17 1,000 27,132 9,703 9,703 100,000 17,393 17,393 100,000 32,315 32,315 100,000
18 1,000 29,539 10,149 10,149 100,000 18,859 18,859 100,000 36,531 36,531 100,000
19 1,000 32,066 10,574 10,574 100,000 20,386 20,386 100,000 41,205 41,205 100,000
20 1,000 34,719 10,980 10,980 100,000 21,976 21,976 100,000 46,389 46,389 100,000
@ 65 1,000 69,761 13,738 13,738 100,000 44,634 44,634 100,000 158,002 158,002 189,603
</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 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
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%.
91
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 2 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 533 0 100,000 577 0 100,000 622 0 100,000
2 1,000 2,153 1,198 344 100,000 1,324 470 100,000 1,456 602 100,000
3 1,000 3,310 1,841 646 100,000 2,092 897 100,000 2,365 1,169 100,000
4 1,000 4,526 2,462 1,266 100,000 2,881 1,686 100,000 3,355 2,160 100,000
5 1,000 5,802 3,059 1,864 100,000 3,691 2,496 100,000 4,433 3,238 100,000
6 1,000 7,142 3,633 2,569 100,000 4,522 3,458 100,000 5,608 4,544 100,000
7 1,000 8,549 4,180 3,248 100,000 5,372 4,439 100,000 6,886 5,954 100,000
8 1,000 10,027 4,702 3,901 100,000 6,241 5,440 100,000 8,280 7,479 100,000
9 1,000 11,578 5,199 4,800 100,000 7,133 6,733 100,000 9,801 9,401 100,000
10 1,000 13,207 5,672 5,672 100,000 8,046 8,046 100,000 11,463 11,463 100,000
11 1,000 14,917 6,120 6,120 100,000 8,983 8,983 100,000 13,281 13,281 100,000
12 1,000 16,713 6,542 6,542 100,000 9,943 9,943 100,000 15,271 15,271 100,000
13 1,000 18,599 6,938 6,938 100,000 10,926 10,926 100,000 17,450 17,450 100,000
14 1,000 20,579 7,307 7,307 100,000 11,932 11,932 100,000 19,837 19,837 100,000
15 1,000 22,657 7,647 7,647 100,000 12,961 12,961 100,000 22,455 22,455 100,000
16 1,000 24,840 8,001 8,001 100,000 14,091 14,091 100,000 25,467 25,467 100,000
17 1,000 27,132 8,325 8,325 100,000 15,252 15,252 100,000 28,792 28,792 100,000
18 1,000 29,539 8,613 8,613 100,000 16,444 16,444 100,000 32,464 32,464 100,000
19 1,000 32,066 8,863 8,863 100,000 17,663 17,663 100,000 36,522 36,522 100,000
20 1,000 34,719 9,073 9,073 100,000 18,912 18,912 100,000 41,011 41,011 100,000
@ 65 1,000 69,761 8,000 8,000 100,000 34,760 34,760 100,000 137,914 137,914 165,497
</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 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
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%.
92
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 1 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 573 0 100,574 619 0 100,619 664 0 100,664
2 1,000 2,153 1,277 392 101,278 1,408 523 101,409 1,545 660 101,545
3 1,000 3,310 1,958 651 101,958 2,220 913 102,220 2,504 1,197 102,504
4 1,000 4,526 2,615 1,308 102,615 3,053 1,746 103,053 3,547 2,240 103,548
5 1,000 5,802 3,246 1,939 103,246 3,907 2,600 103,907 4,681 3,374 104,682
6 1,000 7,142 3,852 2,689 103,852 4,781 3,619 104,782 5,915 4,753 105,916
7 1,000 8,549 4,429 3,412 104,429 5,674 4,657 105,675 7,255 6,238 107,256
8 1,000 10,027 4,978 4,106 104,979 6,586 5,714 106,587 8,712 7,840 108,712
9 1,000 11,578 5,498 5,062 105,498 7,515 7,080 107,516 10,295 9,859 110,295
10 1,000 13,207 5,987 5,987 105,988 8,462 8,462 108,462 12,016 12,016 112,016
11 1,000 14,917 6,452 6,452 106,452 9,431 9,431 109,431 13,893 13,893 113,894
12 1,000 16,713 6,891 6,891 106,892 10,423 10,423 110,424 15,943 15,943 115,944
13 1,000 18,599 7,306 7,306 107,306 11,439 11,439 111,439 18,182 18,182 118,182
14 1,000 20,579 7,695 7,695 107,695 12,479 12,479 112,479 20,628 20,628 120,629
15 1,000 22,657 8,058 8,058 108,058 13,541 13,541 113,542 23,302 23,302 123,302
16 1,000 24,840 8,442 8,442 108,443 14,710 14,710 114,711 26,371 26,371 126,371
17 1,000 27,132 8,798 8,798 108,799 15,911 15,911 115,911 29,744 29,744 129,744
18 1,000 29,539 9,123 9,123 109,124 17,140 17,140 117,141 33,450 33,450 133,451
19 1,000 32,066 9,415 9,415 109,416 18,398 18,398 118,399 37,524 37,524 137,524
20 1,000 34,719 9,671 9,671 109,672 19,683 19,683 119,683 42,000 42,000 142,000
@ 65 1,000 69,761 8,668 8,668 108,669 34,126 34,126 134,127 132,080 132,080 230,080
</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 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
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%.
93
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 2 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 511 0 100,511 554 0 100,554 597 0 100,598
2 1,000 2,153 1,153 267 101,153 1,276 391 101,276 1,404 519 101,405
3 1,000 3,310 1,772 465 101,773 2,017 710 102,017 2,282 975 102,282
4 1,000 4,526 2,369 1,062 102,369 2,776 1,469 102,776 3,235 1,928 103,236
5 1,000 5,802 2,941 1,634 102,942 3,553 2,246 103,553 4,270 2,963 104,271
6 1,000 7,142 3,488 2,326 103,489 4,346 3,184 104,347 5,394 4,232 105,395
7 1,000 8,549 4,008 2,990 104,008 5,155 4,137 105,155 6,613 5,596 106,614
8 1,000 10,027 4,500 3,628 104,501 5,978 5,106 105,979 7,936 7,064 107,937
9 1,000 11,578 4,963 4,528 104,963 6,815 6,379 106,815 9,371 8,936 109,372
10 1,000 13,207 5,397 5,397 105,397 7,665 7,665 107,665 10,929 10,929 110,930
11 1,000 14,917 5,798 5,798 105,798 8,524 8,524 108,525 12,618 12,618 112,619
12 1,000 16,713 6,165 6,165 106,166 9,392 9,392 109,392 14,450 14,450 114,450
13 1,000 18,599 6,497 6,497 106,498 10,266 10,266 110,267 16,436 16,436 116,436
14 1,000 20,579 6,792 6,792 106,793 11,145 11,145 111,146 18,590 18,590 118,591
15 1,000 22,657 7,048 7,048 107,048 12,025 12,025 112,026 20,926 20,926 120,927
16 1,000 24,840 7,304 7,304 107,304 12,977 12,977 112,977 23,590 23,590 123,591
17 1,000 27,132 7,513 7,513 107,513 13,928 13,928 113,929 26,493 26,493 126,494
18 1,000 29,539 7,668 7,668 107,669 14,872 14,872 114,873 29,654 29,654 129,655
19 1,000 32,066 7,766 7,766 107,766 15,803 15,803 115,804 33,094 33,094 133,094
20 1,000 34,719 7,796 7,796 107,797 16,710 16,710 116,711 36,832 36,832 136,833
@ 65 1,000 69,761 1,487 1,487 101,487 21,851 21,851 121,852 106,404 106,404 206,404
</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 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
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%.
94
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 1 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 600 0 100,601 647 0 100,647 693 0 100,693
2 1,000 2,153 1,330 476 101,331 1,465 611 101,465 1,605 751 101,605
3 1,000 3,310 2,037 842 102,037 2,307 1,111 102,307 2,599 1,403 102,599
4 1,000 4,526 2,720 1,525 102,720 3,172 1,977 103,172 3,681 2,486 103,681
5 1,000 5,802 3,377 2,182 103,378 4,060 2,864 104,060 4,859 3,663 104,859
6 1,000 7,142 4,009 2,945 104,010 4,970 3,906 104,971 6,141 5,077 106,141
7 1,000 8,549 4,613 3,681 104,614 5,901 4,969 105,902 7,535 6,602 107,535
8 1,000 10,027 5,189 4,388 105,190 6,854 6,053 106,854 9,052 8,251 109,052
9 1,000 11,578 5,739 5,339 105,739 7,828 7,429 107,829 10,705 10,305 110,705
10 1,000 13,207 6,261 6,261 106,262 8,827 8,827 108,827 12,507 12,507 112,507
11 1,000 14,917 6,764 6,764 106,764 9,855 9,855 109,856 14,480 14,480 114,480
12 1,000 16,713 7,247 7,247 107,247 10,915 10,915 110,916 16,641 16,641 116,642
13 1,000 18,599 7,709 7,709 107,710 12,008 12,008 112,009 19,009 19,009 119,009
14 1,000 20,579 8,151 8,151 108,152 13,134 13,134 113,134 21,603 21,603 121,603
15 1,000 22,657 8,574 8,574 108,574 14,294 14,294 114,294 24,447 24,447 124,447
16 1,000 24,840 9,026 9,026 109,026 15,575 15,575 115,575 27,717 27,717 127,718
17 1,000 27,132 9,457 9,457 109,458 16,902 16,902 116,902 31,323 31,323 131,324
18 1,000 29,539 9,868 9,868 109,869 18,275 18,275 118,276 35,299 35,299 135,300
19 1,000 32,066 10,256 10,256 110,256 19,695 19,695 119,696 39,682 39,682 139,683
20 1,000 34,719 10,621 10,621 110,622 21,165 21,165 121,165 44,517 44,517 144,518
@ 65 1,000 69,761 12,646 12,646 112,646 40,675 40,675 140,675 145,172 145,172 245,173
</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 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
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%.
95
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 2 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 532 0 100,533 576 0 100,577 620 0 100,621
2 1,000 2,153 1,195 341 101,195 1,321 467 101,321 1,452 598 101,453
3 1,000 3,310 1,834 639 101,835 2,085 889 102,085 2,356 1,161 102,357
4 1,000 4,526 2,451 1,256 102,451 2,868 1,673 102,869 3,339 2,144 103,340
5 1,000 5,802 3,042 1,847 103,043 3,670 2,475 103,671 4,407 3,212 104,408
6 1,000 7,142 3,608 2,545 103,609 4,491 3,427 104,491 5,567 4,503 105,568
7 1,000 8,549 4,147 3,214 104,147 5,326 4,394 105,327 6,826 5,893 106,826
8 1,000 10,027 4,657 3,856 104,658 6,179 5,378 106,179 8,193 7,392 108,193
9 1,000 11,578 5,141 4,741 105,142 7,048 6,648 107,048 9,679 9,279 109,679
10 1,000 13,207 5,598 5,598 105,599 7,935 7,935 107,936 11,296 11,296 111,297
11 1,000 14,917 6,029 6,029 106,029 8,840 8,840 108,840 13,057 13,057 113,058
12 1,000 16,713 6,431 6,431 106,432 9,762 9,762 109,762 14,975 14,975 114,976
13 1,000 18,599 6,805 6,805 106,806 10,699 10,699 110,700 17,064 17,064 117,065
14 1,000 20,579 7,148 7,148 107,149 11,651 11,651 111,652 19,339 19,339 119,339
15 1,000 22,657 7,461 7,461 107,461 12,618 12,618 112,618 21,818 21,818 121,818
16 1,000 24,840 7,783 7,783 107,783 13,671 13,671 113,672 24,654 24,654 124,654
17 1,000 27,132 8,070 8,070 108,071 14,743 14,743 114,743 27,761 27,761 127,761
18 1,000 29,539 8,319 8,319 108,320 15,829 15,829 115,830 31,164 31,164 131,165
19 1,000 32,066 8,525 8,525 108,525 16,925 16,925 116,926 34,889 34,889 134,890
20 1,000 34,719 8,686 8,686 108,686 18,030 18,030 118,030 38,970 38,970 138,970
@ 65 1,000 69,761 6,767 6,767 106,768 29,852 29,852 129,852 120,545 120,545 220,545
</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 1.80%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of 1.00%
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%.
96
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 1 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
JOINT EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 505 0 100,000 548 0 100,000 592 0 100,000
2 1,000 2,153 1,138 156 100,000 1,262 280 100,000 1,391 409 100,000
3 1,000 3,310 1,750 670 100,000 1,995 914 100,000 2,261 1,180 100,000
4 1,000 4,526 2,338 1,168 100,000 2,746 1,576 100,000 3,206 2,036 100,000
5 1,000 5,802 2,903 1,698 100,000 3,515 2,310 100,000 4,234 3,029 100,000
6 1,000 7,142 3,442 2,382 100,000 4,301 3,241 100,000 5,352 4,292 100,000
7 1,000 8,549 3,956 3,040 100,000 5,105 4,189 100,000 6,569 5,653 100,000
8 1,000 10,027 4,442 3,746 100,000 5,925 5,229 100,000 7,893 7,197 100,000
9 1,000 11,578 4,902 4,426 100,000 6,762 6,286 100,000 9,336 8,860 100,000
10 1,000 13,207 5,333 5,333 100,000 7,615 7,615 100,000 10,910 10,910 100,000
11 1,000 14,917 5,732 5,732 100,000 8,481 8,481 100,000 12,623 12,623 100,000
12 1,000 16,713 6,092 6,092 100,000 9,353 9,353 100,000 14,485 14,485 100,000
13 1,000 18,599 6,410 6,410 100,000 10,229 10,229 100,000 16,510 16,510 100,000
14 1,000 20,579 6,684 6,684 100,000 11,107 11,107 100,000 18,713 18,713 100,000
15 1,000 22,657 6,910 6,910 100,000 11,984 11,984 100,000 21,113 21,113 100,000
16 1,000 24,840 7,088 7,088 100,000 12,857 12,857 100,000 23,731 23,731 100,000
17 1,000 27,132 7,216 7,216 100,000 13,728 13,728 100,000 26,592 26,592 100,000
18 1,000 29,539 7,292 7,292 100,000 14,592 14,592 100,000 29,723 29,723 100,000
19 1,000 32,066 7,311 7,311 100,000 15,446 15,446 100,000 33,153 33,153 100,000
20 1,000 34,719 7,266 7,266 100,000 16,283 16,283 100,000 36,914 36,914 100,000
@ 65 1,000 69,761 0 0 0 21,614 21,614 100,000 114,914 114,914 137,898
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
97
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 2 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
JOINT EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 387 0 100,000 427 0 100,000 467 0 100,000
2 1,000 2,153 900 0 100,000 1,009 27 100,000 1,123 141 100,000
3 1,000 3,310 1,385 304 100,000 1,596 515 100,000 1,826 745 100,000
4 1,000 4,526 1,839 669 100,000 2,185 1,015 100,000 2,577 1,407 100,000
5 1,000 5,802 2,260 1,055 100,000 2,773 1,568 100,000 3,380 2,175 100,000
6 1,000 7,142 2,646 1,585 100,000 3,359 2,298 100,000 4,237 3,176 100,000
7 1,000 8,549 2,992 2,076 100,000 3,936 3,020 100,000 5,148 4,232 100,000
8 1,000 10,027 3,299 2,603 100,000 4,505 3,809 100,000 6,121 5,425 100,000
9 1,000 11,578 3,566 3,089 100,000 5,064 4,587 100,000 7,160 6,684 100,000
10 1,000 13,207 3,792 3,792 100,000 5,611 5,611 100,000 8,272 8,272 100,000
11 1,000 14,917 3,973 3,973 100,000 6,142 6,142 100,000 9,462 9,462 100,000
12 1,000 16,713 4,108 4,108 100,000 6,653 6,653 100,000 10,737 10,737 100,000
13 1,000 18,599 4,193 4,193 100,000 7,142 7,142 100,000 12,102 12,102 100,000
14 1,000 20,579 4,226 4,226 100,000 7,602 7,602 100,000 13,566 13,566 100,000
15 1,000 22,657 4,201 4,201 100,000 8,030 8,030 100,000 15,137 15,137 100,000
16 1,000 24,840 4,114 4,114 100,000 8,417 8,417 100,000 16,823 16,823 100,000
17 1,000 27,132 3,957 3,957 100,000 8,754 8,754 100,000 18,632 18,632 100,000
18 1,000 29,539 3,720 3,720 100,000 9,029 9,029 100,000 20,571 20,571 100,000
19 1,000 32,066 3,392 3,392 100,000 9,228 9,228 100,000 22,649 22,649 100,000
20 1,000 34,719 2,962 2,962 100,000 9,338 9,338 100,000 24,877 24,877 100,000
@ 65 1,000 69,761 0 0 0 0 0 0 66,430 66,430 100,000
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
98
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 1 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
JOINT EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 503 0 100,503 546 0 100,547 590 0 100,590
2 1,000 2,153 1,133 151 101,134 1,256 274 101,257 1,385 403 101,385
3 1,000 3,310 1,739 659 101,740 1,982 902 101,983 2,247 1,166 102,247
4 1,000 4,526 2,321 1,151 102,321 2,725 1,554 102,725 3,181 2,011 103,181
5 1,000 5,802 2,876 1,671 102,876 3,481 2,276 103,482 4,193 2,988 104,193
6 1,000 7,142 3,404 2,343 103,404 4,251 3,191 104,252 5,288 4,228 105,288
7 1,000 8,549 3,904 2,988 103,904 5,035 4,119 105,035 6,475 5,559 106,476
8 1,000 10,027 4,374 3,678 104,374 5,829 5,133 105,829 7,759 7,063 107,760
9 1,000 11,578 4,815 4,339 104,816 6,635 6,159 106,636 9,152 8,676 109,153
10 1,000 13,207 5,225 5,225 105,225 7,451 7,451 107,451 10,661 10,661 110,661
11 1,000 14,917 5,600 5,600 105,600 8,272 8,272 108,272 12,293 12,293 112,293
12 1,000 16,713 5,931 5,931 105,932 9,089 9,089 109,090 14,051 14,051 114,051
13 1,000 18,599 6,218 6,218 106,218 9,900 9,900 109,900 15,945 15,945 115,945
14 1,000 20,579 6,456 6,456 106,457 10,700 10,700 110,701 17,985 17,985 117,985
15 1,000 22,657 6,643 6,643 106,644 11,485 11,485 111,486 20,181 20,181 120,181
16 1,000 24,840 6,776 6,776 106,777 12,251 12,251 112,251 22,546 22,546 122,546
17 1,000 27,132 6,857 6,857 106,857 12,996 12,996 112,997 25,096 25,096 125,097
18 1,000 29,539 6,881 6,881 106,881 13,716 13,716 113,716 27,846 27,846 127,846
19 1,000 32,066 6,843 6,843 106,843 14,402 14,402 114,403 30,808 30,808 130,809
20 1,000 34,719 6,738 6,738 106,738 15,047 15,047 115,047 33,998 33,998 133,999
@ 65 1,000 69,761 0 0 0 15,317 15,317 116,135 88,515 88,515 181,675
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
99
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 2 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
JOINT EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 385 0 100,385 425 0 100,425 465 0 100,465
2 1,000 2,153 895 0 100,895 1,003 21 101,003 1,116 134 101,117
3 1,000 3,310 1,373 293 101,374 1,583 502 101,583 1,811 731 101,811
4 1,000 4,526 1,820 650 101,821 2,162 992 102,163 2,550 1,380 102,551
5 1,000 5,802 2,231 1,026 102,231 2,737 1,532 102,738 3,335 2,130 103,336
6 1,000 7,142 2,605 1,544 102,605 3,306 2,245 103,306 4,168 3,107 104,168
7 1,000 8,549 2,937 2,021 102,937 3,861 2,945 103,861 5,047 4,131 105,047
8 1,000 10,027 3,227 2,531 103,227 4,403 3,707 104,403 5,977 5,281 105,978
9 1,000 11,578 3,473 2,997 103,474 4,927 4,451 104,928 6,961 6,484 106,961
10 1,000 13,207 3,677 3,677 103,677 5,434 5,434 105,434 8,002 8,002 108,003
11 1,000 14,917 3,833 3,833 103,834 5,917 5,917 105,917 9,103 9,103 109,104
12 1,000 16,713 3,940 3,940 103,941 6,372 6,372 106,372 10,266 10,266 110,267
13 1,000 18,599 3,996 3,996 103,996 6,794 6,794 106,794 11,493 11,493 111,494
14 1,000 20,579 3,995 3,995 103,996 7,177 7,177 107,178 12,787 12,787 112,787
15 1,000 22,657 3,936 3,936 103,936 7,516 7,516 107,516 14,148 14,148 114,148
16 1,000 24,840 3,812 3,812 103,813 7,801 7,801 107,802 15,578 15,578 115,578
17 1,000 27,132 3,617 3,617 103,618 8,022 8,022 108,023 17,073 17,073 117,074
18 1,000 29,539 3,341 3,341 103,341 8,165 8,165 108,166 18,630 18,630 118,631
19 1,000 32,066 2,973 2,973 102,974 8,214 8,214 108,215 20,242 20,242 120,242
20 1,000 34,719 2,505 2,505 102,506 8,155 8,155 108,156 21,903 21,903 121,904
@ 65 1,000 69,761 0 0 0 0 0 0 40,851 40,851 139,495
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
100
<PAGE>
[VERSION B]
FLEX EDGE[service mark]
VARIABLE UNIVERSAL LIFE
INSURANCE POLICY
Issued by
PHOENIX HOME LIFE
MUTUAL INSURANCE COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT:
[envelope] PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS MAY 1, 1999
AS SUPPLEMENTED JULY 15, 1999
This Prospectus describes a flexible premium variable universal life insurance
policy. The Policy provides lifetime insurance protection.
The Policy is not a deposit or obligation of, underwritten or guaranteed by, any
financial institution or credit union. It is not federally insured or endorsed
by the Federal Deposit Insurance Corporation or any other state or federal
agency. Policy investments are subject to risk, including the fluctuation of
Policy Values and possible loss of principal invested or premiums paid.
The Securities and Exchange Commission has not approved or disapproved these
securities, nor passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
This Prospectus is valid only if accompanied or preceded by current prospectuses
for the Funds. You should read and keep these prospectuses for future reference.
THE PHOENIX EDGE SERIES FUND
- ----------------------------
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix Research Enhanced Index Series
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Balanced Series
[diamond] Phoenix-Goodwin Growth Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Goodwin Strategic Allocation Series
[diamond] Phoenix-Goodwin Strategic Theme Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Schafer Mid-Cap Value Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
MANAGED BY PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
[diamond] Phoenix-Aberdeen New Asia Series
MANAGED BY DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
BT INSURANCE FUNDS TRUST
- ------------------------
MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE[registered trademark] Equity Index Fund
FEDERATED INSURANCE SERIES
- --------------------------
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
[diamond] Federated Fund for U.S. Government Securities II
[diamond] Federated High Income Bond Fund II
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- ---------------------------------------
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Allocation Fund -- Class 2
[diamond] Templeton International Fund -- Class 2
[diamond] Templeton Stock Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Fund -- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[diamond] Mutual Shares Investments Fund -- Class 2
WANGER ADVISORS TRUST
- ---------------------
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
[diamond] Wanger Foreign Forty
[diamond] Wanger International Small Cap
[diamond] Wanger Twenty
[diamond] Wanger U.S. Small Cap
It may not be in your best interest to purchase a policy to replace an
existing life insurance policy or annuity contract. You must understand the
basic features of the proposed Policy and your existing coverage before you
decide to replace your present coverage. You must also know if the replacement
will result in any taxes.
1
<PAGE>
TABLE OF CONTENTS
Heading Page
- ------------------------------------------------------------
SPECIAL TERMS ......................................... 3
SUMMARY ............................................... 5
PERFORMANCE HISTORY.................................... 6
PHOENIX AND THE VUL ACCOUNT............................ 6
Phoenix ............................................ 6
The VUL Account .................................... 6
The GIA ............................................ 6
THE POLICY ............................................ 7
Introduction ....................................... 7
Eligible Purchasers ................................ 7
Flexible Premiums .................................. 7
Allocation of Issue Premium ........................ 8
Right to Cancel Period ............................. 8
Temporary Insurance Coverage ....................... 8
Transfer of Policy Value ........................... 8
Systematic Transfer Program....................... 8
Nonsystematic Transfers .......................... 9
Determination of Subaccount Values ................. 10
Death Benefit ...................................... 10
Surrenders ......................................... 11
Policy Loans ....................................... 11
Lapse .............................................. 12
Payment of Premiums During Period of Disability .... 12
Additional Insurance Options ....................... 12
Additional Rider Benefits .......................... 13
INVESTMENTS OF THE VUL ACCOUNT ........................ 14
Participating Investment Funds...................... 14
Investment Advisers................................. 16
Services of the Advisers ........................... 16
Reinvestment and Redemption ........................ 16
Substitution of Investments ........................ 17
CHARGES AND DEDUCTIONS ................................ 17
General............................................. 17
Charges Deducted Once .............................. 17
Premium Tax Charge ............................... 17
Federal Tax Charge................................ 17
Periodic Charges.................................... 17
Conditional Charges................................. 18
Investment Management Charge........................ 19
Other Taxes ........................................ 19
GENERAL PROVISIONS .................................... 19
Postponement of Payments ........................... 19
Payment by Check ................................... 19
The Contract ....................................... 19
Suicide ............................................ 20
Incontestability ................................... 20
Change of Owner or Beneficiary ..................... 20
Assignment ......................................... 20
Misstatement of Age or Sex ......................... 20
Surplus............................................. 20
PAYMENT OF PROCEEDS ................................... 20
Surrender and Death Benefit Proceeds ............... 20
Payment Options .................................... 20
FEDERAL TAX CONSIDERATIONS ............................ 21
Introduction ....................................... 21
Phoenix's Tax Status ............................... 21
Policy Benefits .................................... 22
Business-Owned Policies............................. 22
Modified Endowment Contracts ....................... 22
Limitations on Unreasonable Mortality
and Expense Charges .............................. 23
Qualified Plans .................................... 23
Diversification Standards .......................... 23
Change of Ownership or Insured or Assignment ....... 24
Other Taxes ........................................ 24
VOTING RIGHTS ......................................... 24
Phoenix............................................. 25
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX ....... 25
SAFEKEEPING OF THE VUL ACCOUNT's Assets ............... 26
SALES OF POLICIES ..................................... 26
STATE REGULATION ...................................... 26
REPORTS ............................................... 26
LEGAL PROCEEDINGS ..................................... 26
LEGAL MATTERS ......................................... 26
REGISTRATION STATEMENT ................................ 27
YEAR 2000 ISSUE........................................ 27
FINANCIAL STATEMENTS .................................. 27
APPENDIX A ............................................ 82
APPENDIX B ............................................ 86
APPENDIX C............................................. 87
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.
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SPECIAL TERMS
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The following is a list of terms and their meanings when used in this
prospectus.
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.
FUNDS: The Phoenix Edge Series Fund, BT Insurance Funds Trust, Federated
Insurance Series, Templeton Variable Products Series Fund and Wanger Advisors
Trust.
GENERAL ACCOUNT: The general asset account of Phoenix.
GIA (GUARANTEED INTEREST ACCOUNT): An investment option under which premium
payment amounts are guaranteed to earn a fixed rate of interest. Excess interest
also may be credited, at 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.
IN WRITING (WRITTEN REQUEST): In a written form satisfactory to Phoenix and
delivered to VPMO.
INSURED: The person upon whose life the Policy is issued.
ISSUE PREMIUM: The premium payment made in connection with issuing the Policy.
MINIMUM REQUIRED PREMIUM: The required premium as specified in the Policy. An
increase or decrease in the face amount of the Policy will change the Minimum
Required Premium amount.
MONTHLY CALCULATION DAY: The first Monthly Calculation Day is the same day as
the Policy Date. Subsequent Monthly Calculation Days are the same day of each
month thereafter or, if such day does not fall within a given month, the last
day of that month will be the Monthly Calculation Day.
NET ASSET VALUE: The worth of one share of a Series of a Fund at the end of a
valuation period. Net Asset Value is computed by adding the value of a Series'
holdings plus other assets, minus liabilities and then dividing the result by
the number of shares outstanding.
PAYMENT DATE: The Valuation Date on which we receive a premium payment or loan
repayment, 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 (COMPANY, OUR, US, WE): 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 but may 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 we measure Policy Years and Policy Anniversaries.
POLICY MONTH: The period from one Monthly Calculation Day up to, but not
including, the next Monthly Calculation Day.
POLICYOWNER (OWNER, YOU, YOUR): The person(s) who purchase(s) 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 1-year period from the Policy Date up
to, but not including, the first Policy Anniversary. Each succeeding Policy Year
is the 1-year period from the Policy Anniversary up to, but not including, the
next Policy Anniversary.
PROPORTIONATE (PRO RATA): Amounts allocated to Subaccounts on a pro rata basis
are allocated by increasing or decreasing a Policy's share in the value of the
affected Subaccounts and GIA so that such shares maintain the same ratio to each
other before and after the allocation.
SERIES: A separate investment portfolio of the Fund.
SUBACCOUNTS: Accounts within the VUL Account to which nonloaned assets under a
Policy are allocated.
UNIT: A standard of measurement used to set 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.
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VALUATION DATE: For any Subaccount, each date on which we calculate the net
asset value of a Fund.
VALUATION PERIOD: For any Subaccount, the period in days from the end of one
Valuation Date through the next.
VPMO: Variable Products Mail Operations division of Phoenix that receives and
processes incoming mail for Variable Products Operations.
VPO: Variable Products Operations.
VUL ACCOUNT (ACCOUNT): Phoenix Home Life Variable Universal Life Account, a
separate account of the company.
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SUMMARY
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This is a summary of the Policy and does not contain all of the detailed
information that may be important to you. You should carefully read the entire
Prospectus before making any decision.
INVESTMENT FEATURES
FLEXIBLE PREMIUMS
The only premiums you have to pay are the Issue Premium and any payments
required to prevent the policy from lapse. See "Flexible Premiums" and "Lapse."
ALLOCATION OF PREMIUMS AND POLICY VALUE
After we deduct certain charges from your premium payment, we will invest
the balance in one or more of the Subaccounts of the VUL Account and/or the GIA
as you will have instructed us.
You may make transfers into the GIA and among the Subaccounts at anytime.
Transfers from the GIA are subject to the rules discussed in "Appendix B" and
under "Transfer of Policy value."
The Policy value varies with the investment performance of the Funds and is
not guaranteed.
The Policy value allocated to the GIA will depend on deductions taken from
the GIA to pay expenses and will accumulate interest at rates we periodically
establish, but never less than 4%.
LOANS AND SURRENDERS
[diamond] Generally, you may take loans against 90% of the Policy's cash
surrender value subject to certain conditions. See "Policy Loans."
[diamond] You may partially surrender any part of the policy anytime. A partial
surrender fee of the lesser of $25 or 2% of the partial surrender
amount will apply. A separate surrender charge also may be imposed.
See "Surrenders."
[diamond] You may fully surrender this Policy anytime for its cash surrender
value. A surrender charge may be imposed. See "Surrenders."
INSURANCE PROTECTION FEATURES
DEATH BENEFITS
[diamond] Both a fixed and variable benefit is available under the Policy.
[bullet] The fixed benefit is equal to the Policy's face amount
(Option 1)
[bullet] The variable benefit equals the face amount plus the Policy
value (Option 2)
[diamond] After the first year, you may reduce the face amount. Certain
restrictions apply, and generally, the minimum face amount is
$250,000.
[diamond] The death benefit is payable when the insured dies. See "Death
Benefit."
DEATH BENEFIT GUARANTEE
You may elect a guaranteed death benefit. The guaranteed death benefit is
equal to the initial face amount or the face amount as later changed by
increases or decreases regardless of investment performance. The death benefit
guarantee may not be available in some states.
ADDITIONAL BENEFITS
The following additional benefits are available by rider:
[diamond] Disability Waiver of Specified Premium
[diamond] Accidental Death Benefit
[diamond] Death Benefit Protection
[diamond] Face Amount of Insurance Increase
[diamond] Whole life Exchange Option
[diamond] Purchase Protection Plan
[diamond] Living Benefits
Availability of these Riders depends upon state approval and may involve an
extra cost.
DEDUCTIONS AND CHARGES
FROM PREMIUM PAYMENTS
[diamond] Taxes
[bullet] State Premium Tax Charge--Varies by State
[bullet] Federal Tax Charge--Currently not applicable
See "Charges and Deductions" for a detailed discussion.
FROM POLICY VALUE
[diamond] Issue Expense Charge--$150. Deducted in the first Policy year only
and payable in 12 monthly installments.
[diamond] Administrative Charge--The Administrative Charge is currently set at
$5 per month and is guaranteed not to exceed $10 per month. This
charge is to reimburse Phoenix for daily administration, monthly
processing, updating daily values and for annual/quarterly
statements.
[diamond] Cost of Insurance--Amount deducted monthly. Cost of insurance rates
apply to the Policy and certain riders. The rates vary and are based
on certain personal factors such as sex, attained age and risk class
of the Insureds.
[diamond] Surrender Charge--Deducted if the Policy is surrendered within the
first 10 Policy years. See "Surrender Charge."
[diamond] Partial Surrender Fee--Deducted to recover costs of processing
request. The fee is equal to 2% of withdrawal, but not more than $25.
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[diamond] Partial Surrender Charge--Deducted for partial surrenders and
decrease in face amount.
FROM THE VUL ACCOUNT
Mortality and Expense Risk Charge--.80% annually
FROM THE FUND
The assets of the VUL Account are used to purchase, at Net Asset Value,
shares of your selected underlying Funds. The Net Asset Value reflects
investment management fees and other direct expenses of the Fund. See
"Investment Management Charge."
See "Charges and Deductions" for a more detailed description of how each is
applied.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
You have the right to review the Policy. If you are not satisfied with it,
you may cancel the Policy:
[diamond] within 10 days after you receive the Policy, or
[diamond] within 10 days after we mail or deliver a written notice telling you
about your right to cancel, or
[diamond] within 45 days of completing the application; whichever is latest.
See "Right to Cancel Period."
RISK OF LAPSE
The Policy will remain in force as long as the cash surrender value is
enough to pay the necessary monthly charges incurred under the Policy. When the
cash surrender value is no longer enough, the policy lapses, or ends. We will
let you know of an impending lapse situation. We will give you the opportunity
(a "grace period") to keep the Policy in force by paying a specified amount.
Please see "Lapse" for more detail.
TAX EFFECTS
Generally, under current federal income tax law, death benefits are not
subject to income tax. Earnings on the premiums invested in the VUL Account or
the GIA are not subject to income tax until there is a distribution from the
Policy. Loans, partial surrenders or Policy termination may result in
recognition of income for tax purposes.
VARIATIONS
The Policy is subject to laws and regulations in every state where the
Policy is sold. Therefore, the terms of the Policy may vary from state to state.
PERFORMANCE HISTORY
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We may include the performance history of the VUL Account 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. See "Appendix A" for more information.
PHOENIX AND THE VUL ACCOUNT
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PHOENIX
We are a mutual life insurance company originally chartered in Connecticut
in 1851 and redomiciled to New York in 1992. Our executive office is at One
American Row, Hartford, Connecticut 06102-5056 and our main administrative
office is at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. Our
New York principal office is at 10 Krey Boulevard, East Greenbush, New York
12144. We sell insurance policies and annuity contracts through our own field
force of full-time agents and through brokers.
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. Each Subaccount will invest solely in shares of a
specified series of a mutual fund. In the future, we may establish additional
Subaccounts which will be made available to existing Policyowners to the extent
and on a basis decided by us. See "Investments of the VUL Account--Participating
Investment Funds."
We do not guarantee the investment performance of the VUL Account or any of
its Subaccounts. Contributions to the overall policy value allocated to the VUL
Account depend on the chosen Fund's investment performance. Thus, you bear the
full investment risk for all monies invested in the VUL Account.
The VUL Account is part of the general business of Phoenix, but the gains or
losses of the VUL Account belong solely to the VUL Account. The gains or losses
of any other business we may conduct do not affect the VUL Account. Under New
York law, the assets of the VUL Account may not be taken to pay liabilities
arising out of any other business we 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 total deposits, including
transfers, to the GIA to no more than $250,000 during any
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one-week period. Phoenix will credit interest daily on the amounts allocated
under the Policy to the GIA. The credited rate will be the same for all monies
deposited at the same time. The loaned portion of the GIA will be credited
interest at an effective annual fixed rate of 2%. Interest on the unloaned
portion of the GIA will be credited at an effective annual rate of not less than
4%.
On the last working day of the calendar week, we set 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 the end
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 then being applied to new deposits
to the GIA. This rate will remain in effect for a guaranteed period of one full
year from the date the new rate is applied.
In general, you can make only one transfer per year from the GIA. The amount
that can be transferred out is limited to the greater of $1,000 or 25% of the
Policy value in the GIA as of the date of the transfer. If you elect the
Systematic Transfer Program, approximately equal amounts may be transferred out
of the GIA. Also, the total Policy value allocated to the GIA may be transferred
out of the GIA to one or more of the Subaccounts of the VUL Account over a
consecutive four-year period according to the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of remaining value
[diamond] Year Three: 50% of remaining value
[diamond] Year Four: 100% of remaining value
Transfers into the GIA and among the Subaccounts of the VUL Account may be
made at any time. Transfers from the GIA are subject to the rules discussed in
"Appendix B" and "Transfer of Policy Value--Systematic Transfer Program."
THE POLICY
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INTRODUCTION
The Policy is a flexible premium variable universal life insurance policy.
The Policy has a death benefit, cash surrender value and loan privilege as does
a traditional fixed benefit whole life policy. The Policy differs from a fixed
benefit whole life policy, however, because you can allocate your premium into
one or more of several Subaccounts of the VUL Account or the GIA. Each
Subaccount of the VUL Account, in turn, invests its assets exclusively in a
portfolio of the Fund. The Policy value varies according to the investment
performance of the Series to which premiums have been allocated.
ELIGIBLE PURCHASERS
Any person up to the age of 75 is eligible to be insured under a newly
purchased Policy after providing suitable evidence of insurability. You can
purchase a Policy to insure the life of another person provided that you have an
insurable interest in that life and the prospective Insured consents.
FLEXIBLE PREMIUMS
The Issue Premium required depends on a number of factors, such as:
[diamond] age;
[diamond] sex;
[diamond] rate class of proposed insured;
[diamond] desired face amount;
[diamond] supplemental benefit; and
[diamond] planned premiums
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.
The Issue Premium payment should be delivered to your registered representative
for forwarding to our Underwriting Department. Additional payments should be
sent to VPMO.
Premium payments received by us will be reduced by the applicable premium
tax charge. The Issue Premium also will be reduced by the $150 issue expense
charge deducted 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, after deduction of state
premium tax charges and any sales charge, will be first used to cover any
monthly deductions during the grace period. Any balance 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
by your most recent instructions. See "Nonsystematic Transfers."
The number of units credited to a Subaccount of the VUL Account will be
determined by dividing the portion of the net premium applied to that Subaccount
by the unit value of the Subaccount on the Payment Date.
You may increase or decrease the planned premium amount (within limits) or
payment frequency at any time by writing to VPMO. We reserve the right to limit
increases to such maximums as may be established from time to time. Additional
premium payments may be made
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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.
You 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 our 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. To pay such refund, amounts taken from
each Subaccount or the GIA will be done in the same manner as for monthly
deductions. You may write to us and give us different instructions. The total
premium limit may be exceeded if additional premium is needed to prevent lapse
or if we subsequently determine that additional premium would be permitted by
federal laws or regulations.
You may authorize your bank to draw $25 or more from your personal checking
account to be allocated among the available Subaccounts or the GIA. Your monthly
payment will be invested according to your most recent instructions on file at
VPO.
Policies sold to officers, directors and employees of Phoenix (and their
spouses and children) will be credited with an amount equal to the first-year
commission that would apply on the amount of premium contributed. This option
also is available to career agents of Phoenix (and their spouses and children).
ALLOCATION OF ISSUE PREMIUM
We will generally allocate the Issue Premium less applicable charges to the
VUL Account or to the GIA upon receipt of a completed application, in accordance
with the allocation instructions in the application for 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, we temporarily allocate the entire issue premium paid less
applicable charges (along with any other premiums paid during the right to
cancel period) to the Phoenix-Goodwin Money Market Subaccount of the VUL
Account, and, at the expiration of the right to cancel period, the policy value
of the Phoenix-Goodwin 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
You have the right to review the Policy. If you are not satisfied with it,
you may cancel the Policy:
[diamond] by mailing it to us within 10 days after you receive it (or longer in
some states); or
[diamond] within 10 days after we mail or deliver a written notice telling you
about your right to cancel; or
[diamond] within 45 days after completing the application,
whichever occurs latest (the "Right to Cancel Period").
We treat a returned Policy as if we never issued it and, except for Policies
issued without a Temporary Money Market Allocation Amendment, we will return the
sum of the following as of the date we receive the returned Policy: (1) the
current Policy value less any unpaid loans and loan interest; plus (2) any
monthly deductions, partial surrender fees and other charges made under the
Policy. For Policies issued with the Temporary Money Market Amendment the amount
returned will equal any premiums paid less any unrepaid loans and loan interest,
and less any partial surrender amounts paid.
We retain the right to decline to process an application within seven days
of our receipt of the completed application for insurance. If we decline to
process the application, we will return the premium paid. Even if we have
approved the application for processing, we retain the right to decline to issue
the Policy. If we decline to issue the Policy, we will refund to you the same
amount as would have been refunded under the Policy had it been issued but
returned for refund during the Right to Cancel Period.
TEMPORARY INSURANCE COVERAGE
On the date the application for a Policy is signed and submitted with the
issue premium, we issue a Temporary Insurance Receipt. Under the Temporary
Insurance Receipt, the insurance protection applied for (subject to the limits
of liability and subject to the terms set forth in the Policy and in the
Receipt) takes effect on the date of the application.
TRANSFER OF POLICY VALUE
SYSTEMATIC TRANSFER PROGRAM
You may elect to transfer funds automatically among the Subaccounts or the
unloaned portion of the GIA on a monthly, quarterly, semiannual or annual basis
under the Systematic Transfer Program for Dollar Cost Averaging ("Systematic
Transfer Program"). Under this Systematic Transfer Program, the minimum transfer
amounts are $25 monthly, $75 quarterly, $150 semiannually or $300 annually. You
must have an initial value of $1,000 in the GIA or the Subaccount from which
funds will be
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transferred ("Sending Subaccount") and if the value in that Subaccount or the
GIA drops below the amount to be transferred, the entire remaining balance will
be transferred and all systematic transfers stop. Funds may be transferred from
only one Sending Subaccount or the GIA, but may be allocated to more than one
Subaccount ("Receiving Subaccounts"). Under the Systematic Transfer Program,
Policyowners may make more than one transfer per Policy year from the GIA. These
transfers must be in approximately equal amounts and made over a minimum
18-month period.
Only one Systematic Transfer Program can be active at any time. After the
completion of the Systematic Transfer Program, you can call VPO at 800/541-0171
to begin a new Systematic Transfer Program.
All transfers under the Systematic Transfer Program will be made on the
basis of the GIA and Subaccount on the first day of the month following our
receipt of the transfer request. If the first day of the month falls on a
holiday or weekend, then the transfer will be processed on the next business
day.
NONSYSTEMATIC TRANSFERS
Transfers among available Subaccounts or the GIA and changes in premium
payment allocations may be requested in writing or by calling 800/541-0171,
between the hours of 8:30 a.m. and 4:00 p.m. Eastern Time. Written requests for
transfers will be executed on the date we receive the request. Telephone
transfers will be effective on the date the request is made except as noted
below. Unless you elect in writing not to authorize telephone transfers or
premium allocation changes, telephone transfer orders and premium allocation
changes also will be accepted on your behalf from your registered
representative. Phoenix and Phoenix Equity Planning Corporation ("PEPCO"), the
national distributor for Phoenix, will employ reasonable procedures to confirm
that telephone instructions are genuine. They will require verification of
account information and will record telephone instructions on tape. All
telephone transfers will be confirmed in writing to you. To the extent that
Phoenix and PEPCO fail to follow procedures reasonably designed to prevent
unauthorized transfers, Phoenix and PEPCO may be liable for following telephone
instructions for transfers that prove to be fraudulent. However, you will bear
the risk of loss resulting from instructions entered by an unauthorized third
party that Phoenix and PEPCO reasonably believe to be genuine. The telephone
transfer and allocation change privileges may be modified or terminated at any
time. During times of extreme market volatility, these privileges may be
difficult to exercise. In such cases, you should submit a written request.
Although currently there is no charge for transfers, in the future, we may
charge a fee of $10 for each transfer after the first two transfers in a Policy
Year.
We reserve the right to refuse to transfer amounts less than $500 unless:
[diamond] the entire balance in the Subaccount or the GIA is being transferred;
or
[diamond] the transfer is part of the Systematic Transfer Program.
We also reserve the right to prohibit a transfer to any Subaccount of the
VUL Account if the value of your investment in that Subaccount immediately after
the transfer would be less than $500. We further reserve the right to require
that the entire balance of a Subaccount or the GIA be transferred if the value
of your investment in that Subaccount would, immediately after the transfer, be
less than $500.
You may make only one transfer per Policy year from the unloaned portion of
the GIA unless (1) the transfer(s) are made as part of a Systematic Transfer
Program, or (2) we agree to make an exception to this rule. The amount you may
transfer cannot exceed the greater of $1,000 or 25% of the value of the unloaned
portion of the GIA at the time of the transfer. In addition, you may transfer
the total value allocated to the unloaned portion of the GIA out of the GIA to
one or more of the Subaccounts over a consecutive four-year period according to
the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of the remaining value
[diamond] Year Three: 50% of the remaining value
[diamond] Year Four: 100% of the remaining value
A nonsystematic transfer from the unloaned portion of the GIA will be
processed on the day such request is received by VPMO.
Transfers into the GIA and among the Subaccounts may be made anytime. We
reserve the right to limit the number of Subaccounts you may invest in to a
total of 18 at any one time or over the life of the Policy. We may limit you to
less than 18 if we are required to do so by any federal or state law.
Because excessive exchanges between Subaccounts can hurt Fund performance,
we reserve the right to temporarily or even permanently terminate exchange
privileges or reject any specific exchange order from anyone whose transactions
appear to us to follow a timing pattern, including those who request more than
one exchange out of a Subaccount within any 30-day period. We will not accept
batched 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.
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If a policy has been issued with a Temporary Money Market Allocation
Amendment, no transfers may be made until the end of the Right to Cancel Period.
DETERMINATION OF SUBACCOUNT VALUES
We establish the unit value of each Subaccount of the VUL Account on the
first valuation date of that Subaccount. The unit value of a Subaccount 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 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 on a valuation date is determined at the end of that day.
The Net Investment Factor for each Subaccount 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 determined by the formula:
(A) + (B) - (D) where:
--------
(C)
(A) The value of the assets in the Subaccount on the current valuation date,
including accrued net investment income and realized and unrealized
capital gains and losses, but excluding the net value of any transactions
during the current valuation period.
(B) The amount of any dividend (or, if applicable, any capital gain
distribution) received by the Subaccount if the "ex-dividend" date for
shares of the Fund occurs during the current valuation period.
(C) The value of the assets in the Subaccount as of the just prior valuation
date, including accrued net investment income and realized and unrealized
capital gains and losses, and including the net value amount of any
deposits and withdrawals made 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 death of the Insured 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 death of the Insured, plus the Policy value or, if greater, the
minimum death benefit on that date.
Under either Option, the minimum death benefit is the policy value on the
date of death of the Insured increased by a percentage determined from a table
contained in the Policy. This percentage will be 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
A guaranteed death benefit rider is available. Under this Policy rider, if
you pay the required premium each year as specified in the rider, the death
benefit selected will be guaranteed for a certain specified number of years,
regardless of the investment performance of the Policy, and will equal either
the initial face amount or the face amount as later changed by decreases. 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
The charge for the increase is $3.00 per $1,000 of face amount increase
requested subject to a maximum of $150.
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. If the change is a decrease in face amount, the
death benefit under a Policy would be reduced on the next Monthly Calculation
Day. If the change is a partial surrender, the death benefit under a Policy
would be reduced immediately. A decrease in the death benefit may have certain
tax consequences. See "Federal Tax Considerations."
REQUESTS FOR DECREASE IN FACE AMOUNT
You may request a decrease in face amount at any time after the first Policy
year. Unless we agree otherwise, the decrease must be at least equal to $10,000
and the face amount remaining after the decrease must be at least $25,000. All
face amount decrease requests must be in writing and will be effective on the
first monthly calculation day following the date we approve the request.
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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 (which is equal to
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, you may partially or fully surrender the Policy by sending to VPMO a
written release and surrender in a form satisfactory to us. We may also require
you to send the Policy to us. 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, we generally will pay to you the amount
surrendered within seven days after we receive 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 us. You may elect to have the amount
paid in a lump sum or under a payment option. See "Conditional
Charges--Surrender Charge" and "Payment Options."
PARTIAL SURRENDERS
You may obtain a partial surrender of the Policy by requesting payment of
the Policy's cash surrender value. It is possible to do this at any time during
the lifetime of the Insured, while the Policy is in force, with a written
request to VPMO. We may require the return of the Policy 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 by us. Surrender
proceeds may be applied under any of the payment options described under
"Payment of Proceeds--Payment Options."
We reserve 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 is
reduced as a result of a partial surrender and is less than $500, we reserve the
right to require surrender of the entire remaining balance in that Subaccount or
the GIA.
Upon a partial surrender, the Policy value will be reduced by the sum of the
following:
[diamond] 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 withdrawals from
each Subaccount will be made in the same manner as that provided for
monthly deductions.
[diamond] 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.
[diamond] 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 will be
reduced by the same amount as the Policy value is reduced as described above.
POLICY LOANS
Generally, while the Policy is in force, a loan may be taken against the
Policy up to the available loan value. The loan value on any day is 90% of the
Policy value reduced by an amount equal to the surrender charge. 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 us during a grace period will
be reduced to pay any overdue monthly deductions and only the balance will be
applied to reduce the debt. Such balance will first be used to pay any
outstanding accrued loan interest, and then will be applied to reduce the loaned
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portion of the GIA. The unloaned portion of the GIA will be increased by the
same amount the loaned portion is decreased. If the amount of a loan repayment
exceeds the remaining loan balance and accrued interest, the excess will be
allocated among the Subaccounts as you may request at the time of the repayment
and, if no allocation request is made, according to the most recent premium
allocation schedule on file.
Payments received by us for the Policy will be applied directly to reduce
outstanding debt unless specified as a premium payment by you. Until the debt is
fully repaid, additional debt repayments may be made at any time during the
lifetime of the Insured while the Policy is in force.
Failure to repay a policy loan or to pay loan interest will not terminate
the Policy unless the Policy value becomes insufficient to maintain the Policy
in force.
The proceeds of Policy loans may be subject to federal income tax.
See "Federal Tax Considerations."
In the future, we may not allow Policy loans of less than $500, unless such
loan is used to pay a premium on another Phoenix policy.
You will pay interest on the loan at an effective annual rate, compounded
daily and payable in arrears. The loan interest rates in effect are as follows:
Policy Years 1-10 (or Insured's age 65 if earlier): 8%
Policy Years 11 and thereafter: 7%
At the end of each Policy Year, any interest due on the debt will be treated
as a new loan and will be offset by a transfer from your Subaccounts and the
unloaned portion of the GIA to 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, the 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, the Policy
value is greater than it would have been had no loan been made. A Policy loan,
whether or not repaid, also has a similar 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 3 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
required monthly deduction. If on any monthly calculation day during any
subsequent Policy year, the cash surrender value (which should have 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.
During the grace period, the Policy will continue in force but 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 until 30 days has passed after we have mailed a written notice
to you. If a premium payment for the additional amount is received by us during
the grace period, any amount of premium over what is required to prevent lapse
will be allocated among the Subaccounts or to the GIA according to the then
current premium allocation schedule. In determining the amount of "excess"
premium to be applied to the Subaccounts or the GIA, we will deduct the premium
tax and the amount needed to cover any monthly deductions made during the 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
You may also 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 our 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 Insured 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. We 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 Policyowner may, at predetermined
future dates, purchase additional
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insurance protection on the same Insured without evidence of insurability. See
"Additional Rider Benefits--Purchase Protection Plan Rider."
In addition, once each Policy year you 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 our receipt of adequate
insurability evidence. A right to cancel period as described in "The Policy"
section of this prospectus applies to each increase in face amount.
ADDITIONAL RIDER BENEFITS
You may elect additional benefits under a Policy, and you may cancel these
benefits 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 and additional riders
may be available as described in the Policy (if approved in your state).
[diamond] DISABILITY WAIVER OF SPECIFIED PREMIUM RIDER. We waive 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). If premiums have been waived continuously
during the entire five years prior to such date, the waiver will
continue beyond that date. The premium will be waived upon our
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.
[diamond] ACCIDENTAL DEATH BENEFIT RIDER. An additional death benefit will be
paid
[bullet] if the Insured dies from bodily injury that results from an
accident;
[bullet] if the Insured dies no later than 90 days after injury; and
[bullet] before the Policy anniversary nearest the Insured's 75th
birthday.
[diamond] 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 you may increase or decrease provided that certain
minimum premiums are paid. Unless we agree 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 must be
20. Three 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:
Expiry Date of Death Benefit Guaranteed, the
Level 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 you pay the new Minimum Required Premium.
[diamond] FACE AMOUNT OF INSURANCE INCREASE RIDER. Under the terms of this
rider, any time after the first Policy anniversary, you 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 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.
[diamond] 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.
[diamond] PURCHASE PROTECTION PLAN RIDER. Under this rider a Policyowner may,
at predetermined future dates, purchase additional insurance
protection without evidence of insurability.
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[diamond] 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.
INVESTMENTS OF THE VUL ACCOUNT
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PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
Certain Subaccounts invest in corresponding Series of The Phoenix Edge
Series Fund. The following Series are currently available:
PHOENIX RESEARCH ENHANCED INDEX SERIES: The investment objective of the
Series is to seek high total return by investing in a broadly diversified
portfolio of equity securities of large and medium capitalization companies
within market sectors reflected in the S&P 500. The Series invests in a
portfolio of undervalued common stocks and other equity securities which appear
to offer growth potential and an overall volatility of return similar to that of
the S&P 500.
PHOENIX-ABERDEEN INTERNATIONAL SERIES: The investment objective of the
Series is to seek a high total return consistent with reasonable risk. The
Series invests primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions. The
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES: The investment objective of the Series is
to seek long-term capital appreciation. The Series invests primarily in a
diversified portfolio of equity securities of issuers organized and principally
operating in Asia, excluding Japan.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the Series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the 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.
PHOENIX-GOODWIN BALANCED SERIES: The investment objective of the Series is
to seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Goodwin Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
PHOENIX-GOODWIN GROWTH SERIES: The investment objective of the Series is to
achieve intermediate and long-term growth of capital, with income as a secondary
consideration. The Phoenix-Goodwin Growth Series invests principally in common
stocks of corporations believed by management to offer growth potential.
PHOENIX-GOODWIN MONEY MARKET SERIES: The investment objective of the Series
is to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the Series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-GOODWIN STRATEGIC ALLOCATION SERIES: The investment objective of the
Series is to realize as high a level of total return over an extended period of
time as is considered consistent with prudent investment risk. The
Phoenix-Goodwin Strategic Allocation Series invests in stocks, bonds and money
market instruments in accordance with the Investment Adviser's appraisal of
investments most likely to achieve the highest total return.
PHOENIX-GOODWIN STRATEGIC THEME SERIES: The investment objective of the
Series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Phoenix-Goodwin Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the Series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity Series seeks to
achieve its objective by investing in a diversified portfolio of common stocks
that meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price.
PHOENIX-OAKHURST GROWTH AND INCOME SERIES: The investment objective of the
Series is to seek dividend
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growth, current income and capital appreciation by investing in common stocks.
The Phoenix-Oakhurst Growth and Income Series seeks to achieve its objective by
selecting securities primarily from equity securities of the 1,000 largest
companies traded in the United States, ranked by market capitalization.
PHOENIX-SCHAFER MID-CAP VALUE SERIES: The primary investment objective of
the Series is to seek long-term capital appreciation, with current income as the
secondary investment objective. The Phoenix-Schafer Mid-Cap Value Series will
invest in common stocks of established companies having a strong financial
position and a low stock market valuation at the time of purchase which are
believed to offer the possibility of increase in value.
PHOENIX-SENECA MID-CAP GROWTH SERIES: The investment objective of the Series
is to seek capital appreciation primarily through investments in equity
securities of companies that have the potential for above average market
appreciation. The Series seeks to outperform the Standard & Poor's Mid-Cap 400
Index.
BT INSURANCE FUNDS TRUST
A certain Subaccount invests in a corresponding Series of the BT Insurance
Funds Trust. The following Series is currently available:
EAFE[registered trademark] EQUITY INDEX FUND: The Series seeks to match the
performance of the Morgan Stanley Capital International EAFE[registered
trademark] Index ("EAFE[registered trademark] Index"), which emphasizes major
market stock performance of companies in Europe, Australia and the Far East. The
Series invests in a statistically selected sample of the securities found in the
EAFE[registered trademark] Index.
FEDERATED INSURANCE SERIES
Certain Subaccounts invest in corresponding Series of the Federated
Insurance Series. The following Series are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment
objective of the Series is to seek current income by investing
primarily in U.S. government securities, including mortgage-backed
securities issued by U.S. government agencies.
FEDERATED HIGH INCOME BOND FUND II: The investment objective of the Series
is to seek high current income by investing primarily in a diversified portfolio
of high-yield, lower-rated corporate bonds.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Certain Subaccounts invest in Class 2 Shares of a corresponding Series of
the Templeton Variable Products Series Fund. The following Series are currently
available:
MUTUAL SHARES INVESTMENTS FUND: The primary investment objective of the
Series is capital appreciation with income as a secondary objective. The Mutual
Shares Investments Series invests in domestic equity securities that the manager
believes are significantly undervalued.
TEMPLETON ASSET ALLOCATION FUND: The investment objective of the Series is a
high level of total return. The Templeton Asset Allocation Series invests in
stocks of companies of any nation, bonds of companies and governments of any
nation and in money market instruments. Changes in the asset mix will be made in
an attempt to capitalize on total return potential produced by changing economic
conditions throughout the world.
TEMPLETON DEVELOPING MARKETS FUND: The investment objective of the
Series is long-term capital appreciation. The Templeton Developing
Markets Series invests primarily in emerging market equity.
TEMPLETON INTERNATIONAL FUND: The investment objective of the Series is
long-term capital. The Templeton International Series invests primarily in
stocks of companies located outside the United States, including emerging
markets. Any income realized will be incidental. It also may invest in debt
securities of governments and companies located anywhere in the world.
TEMPLETON STOCK FUND: The investment objective of the Series is
long-term capital growth. The Templeton Stock Series invests primarily
in common stocks issued by companies in various nations throughout the
world, including the U.S. and emerging markets.
WANGER ADVISORS TRUST
Certain Subaccounts invest in corresponding Series of the Wanger Advisors
Trust. The following Series are currently available:
WANGER FOREIGN FORTY: The investment objective of the Series is to seek
long-term capital growth. The Wanger Foreign Forty Series invests primarily in
equity securities of foreign companies with market capitalization of $1 billion
to $10 billion and focuses its investments in 40 to 60 companies in the
developed markets.
WANGER INTERNATIONAL SMALL CAP: The investment objective of the Series is to
seek long-term capital growth. The Wanger International Small Cap Series invests
primarily in securities of non-U.S. companies with total common stock market
capitalization of less than $1 billion.
WANGER TWENTY: The investment objective of the Series is to seek long-term
capital growth. The Wanger Twenty Series invests primarily in the stocks of U.S.
companies with market capitalization of $1 billion to $10 billion and ordinarily
focuses its investments in 20 to 25 U.S. companies.
WANGER U.S. SMALL CAP: The investment objective of the Series is to
seek long-term capital growth. The Wanger U.S. Small Cap Series invests
primarily in securities of U.S. companies with total common stock
market capitalization of less than $1 billion.
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Each Series will be subject to market fluctuations and the risks that come
with the ownership of any security, and there can be no assurance that any
Series will achieve its stated investment objective.
In addition to being sold to the Account, shares of the Funds also may be
sold to other separate accounts of Phoenix or its affiliates or to the separate
accounts of other insurance companies.
It is possible that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Fund(s) simultaneously. Although neither Phoenix nor the Fund(s)
trustees currently foresee any such disadvantages either to variable life
insurance Policyowners or to variable annuity Contract Owners, the Funds'
trustees intend to monitor events in order to identify any material conflicts
between variable life insurance Policyowners and variable annuity Contract
Owners and to determine what action, if any, should be taken in response to such
conflicts. Material conflicts could, for example, result from:
[diamond] changes in state insurance laws;
[diamond] changes in federal income tax laws;
[diamond] changes in the investment management of any portfolio of the Fund(s);
or
[diamond] differences in voting instructions between those given by variable
life insurance Policyowners and those given by variable annuity
Contract Owners.
We will, at our expense, remedy such material conflicts including, if
necessary, segregating the assets underlying the variable life insurance
policies and the variable annuity contracts and establishing a new registered
investment company.
INVESTMENT ADVISERS
Phoenix Investment Counsel, Inc. ("PIC") is the investment adviser to all
Series in The Phoenix Edge Series Fund except the Phoenix-Duff & Phelps Real
Estate Securities Series and Phoenix-Aberdeen New Asia Series. Based on
subadvisory agreements with the Fund, PIC delegates certain investment decisions
and research functions to subadvisers for the following Series:
[diamond] J.P. Morgan Investment Management, Inc.
[bullet] Phoenix Research Enhanced Index Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
[bullet] Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
[bullet] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Schafer Capital Management, Inc.
[bullet] Phoenix-Schafer Mid-Cap Value Series
The investment adviser to the Phoenix-Duff & Phelps Real Estate
Securities Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment adviser to the Phoenix-Aberdeen New 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 Phoenix-Aberdeen New Asia Series to PIC
and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect, less than wholly-owned
subsidiaries of Phoenix. PAIA is jointly owned and managed by PM Holdings, Inc.,
a subsidiary of Phoenix, and by Aberdeen Fund Managers, Inc.
The other investment advisers are:
[diamond] Bankers Trust Company
[bullet] EAFE[registered trademark] Equity Index Fund
[diamond] Federated Investment Management Company
[bullet] Federated Fund for U.S. Government Securities II
[bullet] Federated High Income Bond Fund II
[diamond] Templeton Investment Counsel, Inc.
[bullet] Templeton Asset Allocation Fund
[bullet] Templeton International Fund
[bullet] Templeton Stock Fund
[diamond] Templeton Asset Management, Ltd.
[bullet] Templeton Developing Markets Fund
[diamond] Franklin Mutual Advisers, LLC
[bullet] Mutual Shares Investments Fund
[diamond] Wanger Asset Management, L.P.
[bullet] Wanger Foreign Forty
[bullet] Wanger International Small Cap
[bullet] Wanger Twenty
[bullet] Wanger U.S. Small Cap
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.
Likewise, all capital gains distributions of the Fund, if any, are reinvested at
the net asset value on the record date. We redeem Fund shares at their net asset
value to the extent necessary to make payments under the Policy.
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SUBSTITUTION OF INVESTMENTS
We reserve the right to make additions to, deletions from, or substitutions
for the investments held by the VUL Account, subject to compliance with the law
as currently applicable or as subsequently changed. In the future, we 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. If and when marketing needs and investment conditions
warrant, and at our discretion, we may establish additional portfolios. These
will be made available under existing Policies to the extent and on a basis
determined by us.
If shares of any of the portfolios of the Fund should be no longer available
for investment or, if in the judgment of our management, further investment in
shares of any of the portfolios become inappropriate due to Policy objectives,
we may then substitute shares of another mutual fund for shares already
purchased, or to be purchased in the future. No substitution of mutual fund
shares held by the VUL Account may take place without prior approval of the
Securities and Exchange Commission and prior notice to you. In the event of a
change, you 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
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GENERAL
Charges are deducted in connection with the Policy to compensate us for:
[diamond] our expenses in selling the Policy;
[diamond] underwriting and issuing the Policy;
[diamond] premium and federal taxes incurred on premiums received;
[diamond] providing the insurance benefits set forth in the Policy; and
[diamond] assuming certain risks in connection with the Policy.
The nature and amount of these charges are more fully described in sections
below.
When we issue Policies under group or sponsored arrangements, we may reduce
or eliminate the:
[diamond] issue expense charge; and/or
[diamond] surrender charge.
Sales to a group or through sponsored arrangement often result in lower per
policy costs and often involve a greater stability of premiums paid into the
policies. Under such circumstances, we try to pass these savings onto the
purchasers. The amount of reduction will be determined on a case-by-case basis
and will reflect the cost reduction we expect as a result of these group or
sponsored sales.
Certain charges are deducted only once, others are deducted periodically,
while certain others are deducted only if certain events occur.
CHARGES DEDUCTED ONCE
[diamond] PREMIUM TAX CHARGE. Various states (and countries and cities) impose
a tax on premiums received by insurance companies. Premium taxes vary
from state to state. Currently, these taxes range from 0.75% to 4% of
premiums paid. Moreover, certain municipalities in Louisiana,
Kentucky and South Carolina also impose taxes on premiums paid, in
addition to the state taxes imposed. The premium tax charge
represents an amount we consider necessary to pay all premium taxes
imposed by these taxing authorities, and we do not expect to derive a
profit from this charge. These charges are deducted from each premium
payment.
[diamond] FEDERAL TAX CHARGE. Currently not applicable.
PERIODIC CHARGES
MONTHLY
[diamond] ISSUE EXPENSE CHARGE. This $150 charge is to reimburse Phoenix for
underwriting and start-up expenses in connection with issuing a
Policy. It is deducted in the first policy year and is payable in 12
monthly installments.
We 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.
[diamond] ADMINISTRATIVE CHARGE. The Administrative Charge is currently set at
$5 per month and is guaranteed not to exceed $10 per month. This
charge is to reimburse Phoenix for daily administration, monthly
processing, updating daily values and for annual/quarterly
statements.
[diamond] COST OF INSURANCE. To determine this expense, we multiply the
applicable cost of insurance rate by the difference between your
Policy's 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 Insureds. 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 costs of insurance rates are based on our expectations of
future mortality experience. They will not, however, be greater than
the
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guaranteed cost of insurance rates set forth in the Policy. These
guaranteed maximum rates are equal to 100% of the 1980 Commissioners
Standard Ordinary ("CSO") Mortality Table, with appropriate
adjustment for the Insureds' risk classification. Any change in the
cost of insurance rates will apply to all persons of the same sex,
insurance age and risk class whose Policies have been in force for
the same length of time. Your risk class may affect your cost of
insurance rate. We currently place Insureds into a standard risk
class or a risk class involving a higher mortality risk, depending
upon the health of the Insureds as determined by medical information
that we request. For otherwise identical Policies, Insureds in the
standard risk class will have a lower cost of insurance than those in
the risk class with the higher mortality risk. The standard risk
class also is divided into categories: smokers, nonsmokers and those
who have never smoked. Nonsmokers will generally incur a lower cost
of insurance than similarly situated Insureds who smoke.
[diamond] COST OF ANY RIDERS TO YOUR POLICY. Certain policy riders require the
payment of additional premiums to pay for the benefit provided by the
rider.
Monthly deductions are made on each monthly calculation day. The amount
deducted is allocated among Subaccounts and the unloaned portion of the GIA
based on an allocation schedule specified by you.
You initially select this schedule in your application, but can later change
it from time to time. If any Subaccount or the unloaned portion of the GIA is
insufficient to permit the full withdrawal of the monthly deduction, the
withdrawals from the other Subaccounts or GIA will be proportionally increased.
DAILY
[diamond] MORTALITY AND EXPENSE RISK CHARGE. A charge at an annual rate of
0.80% of the average daily net assets is deducted daily from the VUL
Account. No portion of this charge is deducted from the GIA.
The mortality risk assumed by us is that collectively our Insureds
may live for a shorter time than projected because of inaccuracies in
that projecting process and, therefore, that the total amount of
death benefits that we will pay out will be greater than that we
expected. The expense risk assumed is that expenses incurred in
issuing and maintaining the Policies may exceed the limits on
administrative charges set in the Policies. If the expenses do not
increase to an amount in excess of the limits, or if the mortality
projecting process proves to be accurate, we may profit from this
charge. We also assume risks with respect to other contingencies
including the incidence of Policy loans, which may cause us to incur
greater costs than expected when we designed the Policies. To the
extent we profit from this charge, we may use those profits for any
proper purpose, including the payment of sales expenses or any other
expenses that may exceed income in a given year.
CONDITIONAL CHARGES
These are other charges that are imposed only if certain events occur.
[diamond] 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, which is a contingent deferred sales charge. The surrender
charge is designed to recover the expense of distributing Policies
that are terminated before distribution expenses have been recouped
from revenue generated by these policies. 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.
In Policy years one through ten, the full surrender charge as
described below will apply if you either surrender the Policy for its
cash surrender value or permit the Policy to lapse. The applicable
surrender charge in any Policy month is the full surrender charge
minus any surrender charges previously paid. There is no surrender
charge after the 10th Policy year. During the first 10 Policy years,
the maximum surrender charge that you can pay while you own the
Policy is equal to either A+B (defined below) or the amount shown in
the table.
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.
The surrender charges table that appears in the Policy is reproduced below:
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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
We may reduce the surrender charge for Policies issued under group or
sponsored arrangements. The 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.
[diamond] PARTIAL SURRENDER FEE. In the case of a partial surrender, but not a
decrease in Face Amount, an additional fee is imposed. The fee is
equal to 2% of the amount withdrawn but not more than $25. The fee is
intended to recover the actual costs of processing the partial
surrender request. The fee will be deducted from each Subaccount and
GIA in the same proportion as the withdrawal is allocated. If no
allocation is made at the time of the request for the partial
surrender, withdrawal allocation will be made in the same manner as
are monthly deductions.
[diamond] PARTIAL SURRENDER CHARGE. If less than all of the Policy is
surrendered, the amount withdrawn is a "partial surrender." 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 (which is 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 and the GIA in the same proportion as the withdrawal is
allocated.
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.
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.
OTHER TAXES
Currently no charge is made to the VUL Account for federal income taxes that
may be attributable to the VUL Account. We may, however, make such a charge in
the future for these or any other taxes attributable to the VUL Account.
GENERAL PROVISIONS
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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:
[diamond] for up to six months from the date of the request, for any
transactions dependent upon the value of the GIA;
[diamond] 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
[diamond] whenever an emergency exists, as decided 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 may also 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 your 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.
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SUICIDE
If the Insured commits suicide within two years after the Policy's Date of
Issue, the policy will stop and become void. We will pay you the Policy value
adjusted by the addition of any monthly deductions and other fees and charges,
minus any debt owed to us under the Policy.
INCONTESTABILITY
We cannot contest this Policy or any attached rider after it has been in
force during the Insured's lifetime or 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 Insured, the death
benefit payable under the Policy will be paid to your estate.
As long as the Policy is in force, the Policyowner and the Beneficiary may
be changed in writing, satisfactory to us. A change in Beneficiary will take
effect as of the date the notice is signed, whether or not the Insured is living
when we receive the notice. We will not, however, be liable for any payment made
or action taken before receipt of the notice.
ASSIGNMENT
The Policy may be assigned. We will not be bound by the assignment until a
written copy has been received and we will not be liable with respect to any
payment made prior to receipt. We assume no responsibility for determining
whether an assignment is valid.
MISSTATEMENT OF AGE OR SEX
If the age or sex of 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
You may share in the divisible surplus of Phoenix to the extent decided
annually by the Board of Directors. However, it is not currently expected that
the Board will authorize these payments since you will be participating directly
in investment results.
PAYMENT OF PROCEEDS
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SURRENDER AND DEATH BENEFIT PROCEEDS
Death benefit proceeds and the proceeds of full or partial surrenders will
be processed at unit values next computed after we receive the request for
surrender or due proof of death, provided such request is complete and in good
order. Payment of surrender or death proceeds usually will be made in one lump
sum within seven days, unless another payment option has been elected. Payment
of the death proceeds, however, may be delayed if the claim for payment of the
death proceeds needs to be investigated, e.g., to ensure payment of the proper
amount to the proper payee. Any such delay will not be beyond that reasonably
necessary to investigate such claims consistent with insurance practices
customary in the life insurance industry.
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, you may elect a payment option for payment of
the death proceeds to the Beneficiary. You may revoke or change a prior
election, unless such right has been waived. The Beneficiary may make or change
an election before payment of the death proceeds, unless you have made an
election that does not permit such further election or changes by the
Beneficiary.
A written request in a form satisfactory to us is required to elect, change
or revoke a payment option.
The minimum amount of surrender or death benefit proceeds that may be
applied under any payment option is $1,000.
If the Policy is assigned as collateral security, we will pay any amount due
the assignee in one lump sum. Any remaining proceeds will remain under the
option elected.
PAYMENT OPTIONS
All or part of the surrender or death proceeds of a Policy may be applied
under one or more of the following payment options or such other payment options
or alternative versions of the options listed as we may choose to make available
in the future.
OPTION 1--LUMP SUM
Payment in one lump sum.
OPTION 2--LEFT TO EARN INTEREST
A payment of interest during the payee's lifetime on the amount payable as a
principal sum. Interest rates are guaranteed to be at least 3% per year.
OPTION 3--PAYMENT FOR A SPECIFIC PERIOD
Equal 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:
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[diamond] the death of the payee; or
[diamond] 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 you may choose from are as follows:
[diamond] ten years;
[diamond] twenty years; or
[diamond] until the installments paid refund the amount applied under this
option.
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, we will consider
the longer period certain as having been elected.
Any life annuity provided under Option 4 is computed using an interest rate
guaranteed to be no less than 3-3/8% per year, but any life annuity providing a
period certain of 20 years or more is computed 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 computed 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 remaining
principal at a guaranteed rate of at least 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 installments are
paid until the latest of:
[diamond] the end of the 10-year period certain;
[diamond] the death of the Insured; or
[diamond] the death of the other named annuitant.
The other annuitant must have attained age 40, must be named at the time
this option is elected and cannot later be changed. Any joint survivorship
annuity that may be provided under this option is computed using a guaranteed
interest rate to equal at least 3-3/8% per year.
For additional information concerning the above payment options, see the
Policy.
FEDERAL TAX CONSIDERATIONS
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INTRODUCTION
The ultimate effect of federal income taxes on values under the VUL Account
and on the economic benefit to you or your Beneficiary depends on our tax status
and upon the tax status of the individual concerned. The discussion contained
herein is general in nature and is not intended as tax advice. For complete
information on federal and state tax considerations, a qualified tax adviser
should be consulted. No attempt is made to consider any estate and inheritance
taxes, or any state, local or other tax laws. Because the discussion herein is
based upon our understanding of federal income tax laws as they are currently
interpreted, we cannot guarantee the tax status of any Policy. The Internal
Revenue Service (the "IRS") makes no representation regarding the likelihood of
continuation of current federal income tax laws, Treasury regulations or of the
current interpretations. We reserve the right to make changes to the Policy to
assure that it will continue to qualify as a life insurance contract for federal
income tax purposes.
PHOENIX'S TAX STATUS
We are taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). For federal income tax purposes, neither the VUL
Account nor the GIA is a separate entity from Phoenix and their operations form
a part of Phoenix.
Investment income and realized capital gains on the assets of the VUL
Account are reinvested and taken into account in determining the value of the
VUL Account. Investment income of the VUL Account, including realized net
capital gains, is not taxed to us. Due to our tax status under current
provisions of the Code, no charge currently will be made to the VUL Account for
our federal income taxes which may be attributable to the VUL Account. We
reserve the right to make a deduction for taxes if our federal tax treatment is
determined to be other than what we currently believe it to be, if changes are
made affecting the tax treatment to our variable life insurance contracts, or if
changes occur in our tax status. If imposed, such charge would be equal to the
federal income taxes attributable to the investment results of the VUL Account.
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<PAGE>
POLICY BENEFITS
DEATH BENEFIT PROCEEDS
The Policy, whether or not it is a "modified endowment contract" (see the
discussion on modified endowment contracts), 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, a Policyowner should not be considered to be in constructive
receipt of the cash value, including investment income. 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 Benefits 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. We monitor the premiums to assure compliance with such
conditions. However, if the premium limitation is exceeded during the year, we
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 that 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. We suggest 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
We believe that any loan received under a Policy will be treated as your
indebtedness. 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. If the
Policy is not a modified endowment contract, we believe that no part of any loan
under a Policy will constitute income to you.
The deductibility by a Policyowner of loan interest under a Policy may be
limited under Code Section 264, depending on the circumstances. A 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 a business or a corporation owns the Policy, 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).
Life insurance policies can be modified endowment contracts if they fail to meet
what is known as "the 7-pay test." The measuring stick for this test is a
hypothetical life insurance policy of equal face amount which requires seven
equal annual premiums but which, after the seventh year is "fully paid-up,"
continuing to provide a level death benefit without the need for any further
premiums. A Policy becomes a modified endowment contract, if, at any time during
the first seven years, the cumulative premium paid on the Policy exceeds the
cumulative premium that would have been paid under the hypothetical policy.
Premiums paid during a Policy Year but which are returned by us with interest
within 60 days after the end of the Policy Year will be excluded from the 7-pay
test. A life insurance policy received in exchange for a modified endowment
contract will be treated as a modified endowment contract.
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<PAGE>
REDUCTION IN BENEFITS DURING THE FIRST SEVEN YEARS
If there is a reduction in death benefits during the first seven
Policy years, the premiums are predetermined 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 test is
failed 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 that are:
[diamond] made on or after the taxpayer attains age 59 1/2;
[diamond] attributable to the taxpayer's disability (within the meaning of Code
Section 72(m)(7)); or
[diamond] part of a series of substantially equal periodic payments (not less
often 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.
[diamond] 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.
[diamond] 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:
[bullet] the cost-of-living determination period does not exceed
the remaining premium payment period under the Policy; and
[bullet] 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
compute 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. We will comply with
the limitations for calculating the premium we are permitted to receive from
you.
QUALIFIED PLANS
A Policy may be used in conjunction with certain qualified plans. Since the
rules governing such use are complex, you should not use the Policy in
conjunction with a qualified plan until you have consulted a competent pension
consultant or tax adviser.
DIVERSIFICATION STANDARDS
To comply with the Diversification Regulations under Code Section 817(h),
("Diversification Regulations") each Series of the Fund is required to diversify
its investments. The Diversification Regulations generally require that on
23
<PAGE>
the last day of each calendar quarter the Series assets be invested in no more
than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
A "look-through" rule applies to treat a pro rata portion of each asset of a
Series as an asset of the 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 United States Treasury. In this
case, there is no limit on the investment that may be made in Treasury
securities, and for purposes of determining whether assets other than Treasury
securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of the VUL Account's investment in
Treasury securities. Notwithstanding this modification of the general
diversification requirements, the portfolios of the Funds will be structured to
comply with the general diversification standards because they serve as an
investment vehicle for certain variable annuity contracts that must comply with
these standards.
In connection with the issuance of the Diversification Regulations, the
Treasury announced that such regulations do not provide guidance concerning the
extent to which you may direct your investments to particular divisions of a
separate account. It is possible that a revenue ruling or other form of
administrative pronouncement in this regard may be issued in the near future. It
is not clear, at this time, what such a revenue ruling or other pronouncement
will provide. It is possible that the Policy may need to be modified to comply
with such future Treasury announcements. For these reasons, we reserve the right
to modify the Policy, as necessary, to prevent you from being considered the
owner of the assets of the VUL Account.
We intend 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 contract can be exchanged for another life
insurance contract, without recognition of gain or loss, assuming that no money
or other property is received in the exchange, and that the Policies relate to
the same Insured. If the surrendered Policy is subject to a policy loan, this
may be treated as the receipt of money on the exchange. We recommend 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. We do not make any
representations or guarantees regarding the tax consequences of any Policy with
respect to these types of taxes.
VOTING RIGHTS
- -------------------------------------------------------------------------
We will vote the Funds' shares held by the Subaccounts at any regular and
special meetings of shareholders of the Funds. To the extent required by law,
such voting will be pursuant to instructions received from you. However, if the
1940 Act or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result, we decide that we are
permitted to vote the Funds' shares at our own discretion, we may elect to do
so.
The number of votes that you have the right to cast will be determined by
applying your percentage interest in a Subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, fractional
shares will be recognized.
Funds' shares held in a Subaccount for which no timely instructions are
received, and Funds' shares which are not otherwise attributable to
Policyowners, will be voted by Phoenix in proportion to the voting instructions
that are received with respect to all Policies participating in that Subaccount.
Instructions to abstain on any item to be voted upon will be applied to reduce
the votes eligible to be cast by Phoenix.
You will receive proxy materials, reports and other materials related to the
Funds.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the shares be voted so as
to cause a change in the subclassification or investment objective of one or
more of the portfolios of the Funds or to approve or disapprove an investment
advisory contract for the Funds. In addition, Phoenix itself may disregard
voting instructions in favor of changes initiated by a Policyowner in the
investment policies or the Investment Adviser of the Funds if Phoenix reasonably
disapproves of such changes. A change would be disapproved only if the proposed
change is contrary to state law or prohibited by state regulatory authorities or
we decide that the change would have an adverse effect on the General Account
because the
24
<PAGE>
proposed investment policy for a Series may result in overly speculative or
unsound investments. In the event Phoenix does disregard voting instructions, a
summary of that action and the reasons for such action will be included in the
next periodic report to Policyowners.
PHOENIX
You (or the payee entitled to payment under a payment option if a different
person) will have the right to vote at annual meetings of all Phoenix
policyholders for the election of members of the Board of Directors of Phoenix
and on other corporate matters, if any, where a policyholder's vote is taken. At
meetings of all the Phoenix policyholders, you (or payee) may cast only one vote
as the holder of a Policy, irrespective of Policy Value or the number of the
Policies you hold.
THE DIRECTORS AND
EXECUTIVE OFFICERS OF PHOENIX
- -------------------------------------------------------------------------
Phoenix is managed by its Board of Directors. The 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
Richard H. Booth Executive Vice President,
Strategic Development, Phoenix
Home Life Mutual Insurance
Company, Hartford, Connecticut;
formerly President, Travelers
Insurance Company
Peter C. Browning President and Chief Operating
Officer, Sonoco 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
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
Robert F. Vizza President and Chief Executive
Officer, St. Francis Hospital
Roslyn, New York
Robert G. Wilson Chairman and Chief Financial
Officer, Lending Tree, Inc.,
Charlotte, North Carolina;
Chairman and President,
Ziani International Capital,
Inc., Miami, Florida; formerly
General Partner, Goldman Sachs &
Company, New York, New York;
Vice Chairman, Carter Kaplan &
Company, Richmond, Virginia; and
Chairman and Chief Executive
Officer, Ecologic Waste Services,
Inc.
Miami, Florida
Dona D. Young Executive Vice President,
Individual Insurance and General
Counsel, Phoenix Home Life Mutual
Insurance Company Hartford,
Connecticut
EXECUTIVE OFFICERS PRINCIPAL OCCUPATION
Robert W. Fiondella Chairman of the Board, President
and Chief Executive Officer
Richard H. Booth Executive Vice President,
Strategic Development
Carl T. Chadburn Executive Vice President
Philip R. McLoughlin Executive Vice President and
Chief Investment Officer
25
<PAGE>
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, Business
Practices
Robert G. Chipkin Senior Vice President and
Corporate Actuary
Martin J. Gavin Senior Vice President,
Trust Operations
Randall C. Giangiulio Senior Vice President,
Group Life and Health
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 Line Financial
Maura L. Melley Senior Vice President,
Public Affairs
Scott C. Noble Senior Vice President
David R. Pepin Senior Vice President
Robert E. Primmer Senior Vice President,
Distribution and Sales
Frederick W. Sawyer, III 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 Phoenix during the
last five years.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
- -------------------------------------------------------------------------
We hold the assets of the VUL Account. 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 Funds.
SALES OF POLICIES
- -------------------------------------------------------------------------
Policies may be purchased from registered representatives of W.S. Griffith &
Co., Inc. ("WSG"), a New York corporation incorporated on August 7, 1970,
licensed to sell Phoenix insurance policies as well as policies, annuity
contracts and funds of companies affiliated with Phoenix. WSG, 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 Investment Partners,
Ltd. ("PXP"), in which Phoenix owns a majority interest.
Policies also may be purchased from other broker-dealers registered under
the 1934 Act whose representatives are authorized by applicable law to sell
Policies under terms of agreements provided by PEPCO. Sales commissions will be
paid to registered representatives on purchase payments we receive under these
Policies. Phoenix will pay a maximum total sales commission of 50% of premiums
to PEPCO. To the extent that the sales charge under the Policies is less than
the sales commissions paid with respect to the Policies, we will pay the
shortfall from our General Account assets, which will include any profits we may
derive under the Policies.
STATE REGULATION
- -------------------------------------------------------------------------
We are 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. We also are subject to the applicable
insurance laws of all the other states and jurisdictions in which we do
insurance business.
State regulation of Phoenix includes certain limitations on the investments
which we may make, including investments for the VUL Account and the GIA. This
regulation 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 related regulations or by 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 our ability to meet
our obligations under the Policies.
LEGAL MATTERS
- -------------------------------------------------------------------------
Edwin L. Kerr, Counsel of Phoenix Home Life Mutual Insurance Company, has
passed upon the organization of Phoenix, its authority to issue variable life
insurance Policies and the validity of the Policy, and upon legal matters
relating to the federal securities and income tax laws for Phoenix.
26
<PAGE>
REGISTRATION STATEMENT
- -------------------------------------------------------------------------
A Registration Statement has been filed with the SEC, under the Securities
Act of 1933 ("1933 Act") with respect to the securities offered. This Prospectus
is a summary of the contents of the Policy and other legal documents and does
not contain all the information set forth in the Registration Statement and its
exhibits. We refer you to the registration statement and its exhibits for
further information concerning the VUL Account, Phoenix and the Policy.
YEAR 2000 ISSUE
- -------------------------------------------------------------------------
Many existing computer programs use only two digits to identify the year in
a date field. This is 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. We believe 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.
We have 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 our subsidiaries, was conducted. We have identified and are
now actively pursuing a number of strategies to address the issue, including:
[diamond] upgrading systems with compliant versions;
[diamond] developing or acquiring new systems to replace those that are
obsolete;
[diamond] and remediating existing systems by converting code or hardware.
Based on current assessments, we expect to have our computer systems
remediated and tested by June 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 the end of 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 for the period ended December 31, 1998.
27
<PAGE>
PHOENIX HOME LIFE VARIABLE
UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1998
28
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments at cost................................................ $ 29,233,552 $254,437,583 $ 18,020,712
============ ============ ============
Investment in The Phoenix Edge Series Fund, at market.............. $ 29,233,552 $331,086,585 $ 16,340,834
------------ ------------ ------------
Total assets.................................................... 29,233,552 331,086,585 16,340,834
LIABILITIES
Accrued expenses to related party.................................. 17,287 209,893 11,253
------------ ------------ ------------
NET ASSETS............................................................ $ 29,216,265 $330,876,692 $ 16,329,581
============ ============ ============
Accumulation units outstanding........................................ 19,445,741 61,038,521 7,465,200
============ ============ ============
Unit value............................................................ $ 1.502450 $ 5.420786 $ 2.187421
============ ============ ============
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $ 38,006,641 $ 52,877,225 $ 23,277,178
============ ============ ============
Investment in The Phoenix Edge Series Fund, at market.............. $ 42,884,376 $ 59,477,822 $ 27,176,858
------------ ------------ ------------
Total assets.................................................... 42,884,376 59,477,822 27,176,858
LIABILITIES
Accrued expenses to related party.................................. 27,626 38,654 17,606
------------ ------------ ------------
NET ASSETS............................................................ $ 42,856,750 $ 59,439,168 $ 27,159,252
============ ============ ============
Accumulation units outstanding........................................ 12,854,218 25,861,683 12,965,944
============ ============ ============
Unit value............................................................ $ 3.334058 $ 2.298356 $ 2.094661
============ ============ ============
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $ 4,634,701 $ 6,220,582 $ 2,033,105
============ ============ ============
Investment in The Phoenix Edge Series Fund, at market.............. $ 3,886,791 $ 8,065,971 $ 1,479,400
------------ ------------ ------------
Total assets.................................................... 3,886,791 8,065,971 1,479,400
LIABILITIES
Accrued expenses to related party.................................. 1,214 5,016 983
------------ ------------ ------------
NET ASSETS............................................................ $ 3,885,577 $ 8,060,955 $ 1,478,417
============ ============ ============
Accumulation units outstanding........................................ 3,145,785 4,829,333 2,327,758
============ ============ ============
Unit value............................................................ $ 1.235169 $ 1.669165 $ 0.635131
============ ============ ============
SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $11,431,268 $1,490,895 $ 819,776
============ ============ ============
Investment in the Phoenix Edge Series Fund, at market.............. $12,738,930 $1,743,031 $ 949,988
------------ ------------ ------------
Total assets.................................................... 12,738,930 1,743,031 949,988
LIABILITIES
Accrued expenses to related party.................................. 11,879 1,024 555
------------ ------------ ------------
NET ASSETS............................................................ $12,727,051 $1,742,007 $ 949,433
============ ============ ============
Accumulation units outstanding........................................ 9,141,857 1,388,592 801,887
============ ============ ============
Unit value............................................................ $ 1.392173 $ 1.254504 $ 1.184001
============ ============ ============
</TABLE>
See Notes to Financial Statements
29
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
GROWTH SCHAFER
AND INCOME VALUE EQUITY MID-CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments at cost................................................ $ 2,982,276 $ 742,160 $ 907,393
=========== =========== ===========
Investment in The Phoenix Edge Series Fund, at market.............. $ 3,334,697 $ 817,347 $ 892,867
----------- ----------- -----------
Total assets.................................................... 3,334,697 817,347 892,867
LIABILITIES
Accrued expenses to related party.................................. 1,932 527 550
----------- ----------- -----------
NET ASSETS............................................................ $ 3,332,765 $ 816,820 $ 892,317
=========== =========== ===========
Accumulation units outstanding........................................ 2,784,908 748,006 1,013,461
=========== =========== ===========
Unit value............................................................ $ 1.196724 $ 1.091997 $ 0.880465
=========== =========== ===========
WANGER WANGER
U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $28,429,006 $10,613,991 $ 26,984
=========== =========== ===========
Investment in Wanger Advisors Trust, at market..................... $31,256,495 $11,219,048 --
Investment in Templeton Variable Products Series Fund, at market... -- -- $ 27,400
----------- ----------- -----------
Total assets.................................................... 31,256,495 11,219,048 27,400
----------- ----------- -----------
LIABILITIES
Accrued expenses to related party.................................. 19,828 7,180 8
----------- ----------- -----------
NET ASSETS............................................................ $31,236,667 $11,211,868 $ 27,392
=========== =========== ===========
Accumulation units outstanding........................................ 21,727,449 9,675,387 27,534
=========== =========== ===========
Unit value............................................................ $ 1.437659 $ 1.158764 $ 0.995090
=========== =========== ===========
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT
---------- ----------
ASSETS
Investments at cost................................................ $ 37,201 $ 52,253
========= =========
Investment in Templeton Variable Products Series Fund, at market... $ 37,568 $ 53,499
--------- ---------
Total assets.................................................... 37,568 53,499
LIABILITIES
Accrued expenses to related party.................................. 9 31
--------- ---------
NET ASSETS............................................................ $ 37,559 $ 53,468
========= =========
Accumulation units outstanding........................................ 37,229 51,415
========= =========
Unit value............................................................ $1.008866 $1.039927
========= =========
TEMPLETON MUTUAL SHARES
DEVELOPING MARKETS INVESTMENTS
SUBACCOUNT SUBACCOUNT
---------- ----------
ASSETS
Investments at cost................................................ $ 10,614 $ 53,204
========= =========
Investment in Templeton Variable Products Series Fund, at market... $ 10,670 $ 53,804
--------- ---------
Total assets.................................................... 10,670 53,804
LIABILITIES
Accrued expenses to related party.................................. 5 33
--------- ---------
NET ASSETS............................................................ $ 10,665 $ 53,771
========= =========
Accumulation units outstanding........................................ 10,074 54,032
========= =========
Unit value............................................................ $1.058660 $0.995163
========= =========
</TABLE>
See Notes to Financial Statements
30
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
Investment income
Distributions.................................................... $ 982,207 $ 342,838 $ 1,284,827
Expenses
Mortality, expense risk and administrative charges............... 157,449 2,170,154 138,095
----------- ----------- ----------
Net investment income (loss)........................................ 824,758 (1,827,316) 1,146,732
----------- ----------- ----------
Net realized gain (loss) from share transactions.................... -- (127,873) 18,767
Net realized gain distribution from Fund............................ -- 11,409,998 104,945
Net unrealized appreciation (depreciation) on investment............ -- 63,176,153 (2,089,209)
----------- ----------- ----------
Net gain (loss) on investments...................................... -- 74,458,278 (1,965,497)
----------- ----------- ----------
Net increase (decrease) in net assets resulting from operations..... $ 824,758 $72,630,962 $ (818,765)
=========== =========== ==========
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
Investment income
Distributions.................................................... $ 736,394 $ -- $ 583,227
Expenses
Mortality, expense risk and administrative charges............... 309,722 425,434 184,043
----------- ----------- ----------
Net investment income (loss)........................................ 426,672 (425,434) 399,184
----------- ----------- ----------
Net realized gain (loss) from share transactions.................... (41,194) (52,504) 6,011
Net realized gain distribution from Fund............................ 2,776,286 10,074,498 814,962
Net unrealized appreciation (depreciation) on investment............ 4,003,067 2,276,436 2,783,483
----------- ----------- ----------
Net gain (loss) on investments...................................... 6,738,159 12,298,430 3,604,456
----------- ----------- ----------
Net increase (decrease) in net assets resulting from operations..... $ 7,164,831 $11,872,996 $4,003,640
=========== =========== ==========
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
Investment income
Distributions.................................................... $ 200,097 $ 4,366 $ 6,267
Expenses
Mortality, expense risk and administrative charges............... 32,577 44,756 10,002
----------- ----------- ----------
Net investment income (loss)........................................ 167,520 (40,390) (3,735)
----------- ----------- ----------
Net realized gain (loss) from share transactions.................... (25,938) 9,537 13,286
Net realized gain distribution from Fund............................ 4,891 468,250 --
Net unrealized appreciation (depreciation) on investment............ (1,192,311) 1,903,438 (44,106)
----------- ----------- ----------
Net gain (loss) on investments...................................... (1,213,358) 2,381,225 (30,820)
----------- ----------- ----------
Net increase (decrease) in net assets resulting from operations..... $(1,045,838) $ 2,340,835 $ (34,555)
=========== =========== ==========
SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
---------- ------------- -------------
Investment income
Distributions.................................................... $ 89,559 $ 676 $ 771
Expenses
Mortality, expense risk and administrative charges............... 55,576 4,388 2,272
----------- ----------- ----------
Net investment income (loss) ....................................... 33,983 (3,712) (1,501)
----------- ----------- ----------
Net realized gain (loss) from share transactions.................... (1,698) (2,426) (1,568)
Net realized gain distribution from Fund............................ 535,197 -- --
Net unrealized appreciation (depreciation) on investment............ 1,267,409 252,136 130,212
----------- ----------- ----------
Net gain (loss) on investments...................................... 1,800,908 249,710 128,644
----------- ----------- ----------
Net increase (decrease) in net assets resulting from operations..... $ 1,834,891 $ 245,998 $ 127,143
=========== =========== ==========
</TABLE>
(1) From inception March 3, 1998 to December 31, 1998
(2) From inception March 11, 1998 to December 31, 1998
See Notes to Financial Statements
31
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
GROWTH VALUE SCHAFER
AND INCOME EQUITY MID-CAP
SUBACCOUNT(1) SUBACCOUNT(2) SUBACCOUNT(1)
------------- ------------- -------------
<S> <C> <C> <C>
Investment income
Distributions.................................................... $ 12,489 $ 3,183 $ 2,642
Expenses
Mortality, expense risk and administrative charges............... 7,627 2,697 2,556
----------- ----------- ---------
Net investment income (loss)........................................ 4,862 486 86
----------- ----------- ---------
Net realized gain (loss) from share transactions.................... 594 (4,166) 10
Net realized gain distribution from Fund............................ -- -- --
Net unrealized appreciation (depreciation) on investment............ 352,421 75,187 (14,526)
----------- ----------- ---------
Net gain (loss) on investments...................................... 353,015 71,021 (14,516)
----------- ----------- ---------
Net increase (decrease) in net assets resulting from operations..... $ 357,877 $ 71,507 $(14,430)
=========== =========== =========
WANGER WANGER
U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT(3)
---------- ---------- -------------
Investment income
Distributions.................................................... $ 1,133,695 $ 93,297 $ --
Expenses
Mortality, expense risk and administrative charges............... 196,294 74,180 8
----------- ----------- --------
Net investment income (loss)........................................ 937,401 19,117 (8)
----------- ----------- --------
Net realized gain (loss) from share transactions.................... (5,625) 3,286 148
Net realized gain distribution from Fund............................ -- -- --
Net unrealized appreciation (depreciation) on investment............ 857,628 1,051,832 416
----------- ----------- --------
Net gain (loss) on investments...................................... 852,003 1,055,118 564
----------- ----------- --------
Net increase (decrease) in net assets resulting from operations..... $ 1,789,404 $ 1,074,235 $ 556
=========== =========== ========
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT(3) SUBACCOUNT(4)
------------- -------------
Investment income
Distributions.................................................... $ -- $ --
Expenses
Mortality, expense risk and administrative charges............... 9 31
----------- -----------
Net investment income (loss)........................................ (9) (31)
----------- -----------
Net realized gain (loss) from share transactions.................... (12) 862
Net realized gain distribution from Fund............................ -- --
Net unrealized appreciation (depreciation) on investment............ 367 1,246
----------- -----------
Net gain (loss) on investments...................................... 355 2,108
----------- -----------
Net increase (decrease) in net assets resulting from operations..... $ 346 $ 2,077
=========== ===========
TEMPLETON
DEVELOPING MUTUAL SHARES
MARKETS INVESTMENTS
SUBACCOUNT(5) SUBACCOUNT(6)
------------- -------------
Investment income
Distributions.................................................... $ -- $ --
Expenses
Mortality, expense risk and administrative charges............... 5 33
----------- -----------
Net investment income (loss)........................................ (5) (33)
----------- -----------
Net realized gain (loss) from share transactions.................... 1,117 59
Net realized gain distribution from Fund............................ -- --
Net unrealized appreciation (depreciation) on investment............ 56 600
----------- -----------
Net gain (loss) on investments...................................... 1,173 659
----------- -----------
Net increase (decrease) in net assets resulting from operations..... $ 1,168 $ 626
=========== ===========
</TABLE>
(1) From inception March 3, 1998 to December 31, 1998
(2) From inception March 11, 1998 to December 31, 1998
(3) From inception December 1, 1998 to December 31, 1998
(4) From inception November 18, 1998 to December 31, 1998
(5) From inception November 11, 1998 to December 31, 1998
(6) From inception November 24, 1998 to December 31, 1998
See Notes to Financial Statements
32
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 824,758 $ (1,827,316) $ 1,146,732
Net realized gain (loss)......................................... -- 11,282,125 123,712
Net unrealized appreciation (depreciation)....................... -- 63,176,153 (2,089,209)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations.. 824,758 72,630,962 (818,765)
------------ ------------ ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 40,115,775 55,187,189 3,021,981
Participant transfers............................................ (21,256,952) 366,385 (1,554,114)
Participant withdrawals.......................................... (7,094,597) (34,006,494) (891,608)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 11,764,226 21,547,080 576,259
------------ ------------ ------------
Net increase (decrease) in net assets............................ 12,588,984 94,178,042 (242,506)
NET ASSETS
Beginning of period.............................................. 16,627,281 236,698,650 16,572,087
------------ ------------ ------------
End of period.................................................... $ 29,216,265 $330,876,692 $ 16,329,581
============ ============ ============
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 426,672 $ (425,434) $ 399,184
Net realized gain (loss)......................................... 2,735,092 10,021,994 820,973
Net unrealized appreciation (depreciation)....................... 4,003,067 2,276,436 2,783,483
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations.. 7,164,831 11,872,996 4,003,640
------------ ------------ ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 6,376,125 10,365,754 4,954,718
Participant transfers............................................ (877,514) (165,682) 123,719
Participant withdrawals.......................................... (5,828,250) (5,751,632) (2,654,908)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. (329,639) 4,448,440 2,423,529
------------ ------------ ------------
Net increase (decrease) in net assets............................ 6,835,192 16,321,436 6,427,169
NET ASSETS
Beginning of period.............................................. 36,021,558 43,117,732 20,732,083
------------ ------------ ------------
End of period.................................................... $ 42,856,750 $ 59,439,168 $ 27,159,252
============ ============ ============
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 167,520 $ (40,390) $ (3,735)
Net realized gain (loss)......................................... (21,047) 477,787 13,286
Net unrealized appreciation (depreciation)....................... (1,192,311) 1,903,438 (44,106)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations.. (1,045,838) 2,340,835 (34,555)
------------ ------------ ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 1,623,011 1,846,888 497,841
Participant transfers............................................ (313,564) 103,603 124,820
Participant withdrawals.......................................... (523,745) (701,416) (158,919)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 785,702 1,249,075 463,742
------------ ------------ ------------
Net increase (decrease) in net assets............................ (260,136) 3,589,910 429,187
NET ASSETS
Beginning of period.............................................. 4,145,713 4,471,045 1,049,230
------------ ------------ ------------
End of period.................................................... $ 3,885,577 $ 8,060,955 $ 1,478,417
============ ============ ============
</TABLE>
See Notes to Financial Statements
33
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
---------- ------------- -------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 33,983 $ (3,712) $ (1,501)
Net realized gain (loss)......................................... 533,499 (2,426) (1,568)
Net unrealized appreciation (depreciation)....................... 1,267,409 252,136 130,212
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 1,834,891 245,998 127,143
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 2,291,221 526,600 384,143
Participant transfers............................................ 7,258,586 1,045,208 485,598
Participant withdrawals.......................................... (608,655) (75,799) (47,451)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 8,941,152 1,496,009 822,290
----------- ----------- -----------
Net increase (decrease) in net assets............................ 10,776,043 1,742,007 949,433
NET ASSETS
Beginning of period.............................................. 1,951,008 0 0
----------- ----------- -----------
End of period.................................................... $12,727,051 $ 1,742,007 $ 949,433
=========== =========== ===========
GROWTH SCHAFER
AND INCOME VALUE EQUITY MID-CAP
SUBACCOUNT(1) SUBACCOUNT(2) SUBACCOUNT(1)
------------- ------------- -------------
FROM OPERATIONS
Net investment income (loss)..................................... $ 4,862 $ 486 $ 86
Net realized gain (loss)......................................... 594 (4,166) 10
Net unrealized appreciation (depreciation)....................... 352,421 75,187 (14,526)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 357,877 71,507 (14,430)
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 891,760 349,399 538,439
Participant transfers............................................ 2,236,565 431,964 415,611
Participant withdrawals.......................................... (153,437) (36,050) (47,303)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 2,974,888 745,313 906,747
----------- ----------- -----------
Net increase (decrease) in net assets............................ 3,332,765 816,820 892,317
NET ASSETS
Beginning of period.............................................. 0 0 0
----------- ----------- -----------
End of period.................................................... $ 3,332,765 $ 816,820 $ 892,317
=========== =========== ===========
WANGER WANGER
U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT(3)
---------- ---------- -------------
FROM OPERATIONS
Net investment income (loss)..................................... $ 937,401 $ 19,117 $ (8)
Net realized gain (loss)......................................... (5,625) 3,286 148
Net unrealized appreciation (depreciation)....................... 857,628 1,051,832 416
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 1,789,404 1,074,235 556
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 9,117,666 3,222,916 1,490
Participant transfers............................................ 6,575,005 1,456,920 25,903
Participant withdrawals.......................................... (2,592,905) (1,076,075) (557)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 13,099,766 3,603,761 26,836
----------- ----------- -----------
Net increase (decrease) in net assets............................ 14,889,170 4,677,996 27,392
NET ASSETS
Beginning of period.............................................. 16,347,497 6,533,872 0
----------- ----------- -----------
End of period.................................................... $31,236,667 $11,211,868 $ 27,392
=========== =========== ===========
</TABLE>
(1) From inception March 3, 1998 to December 31, 1998
(2) From inception March 11, 1998 to December 31, 1998
(3) From inception December 1, 1998 to December 31, 1998
See Notes to Financial Statements
34
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT(3) SUBACCOUNT(4)
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ (9) $ (31)
Net realized gain (loss)......................................... (12) 862
Net unrealized appreciation (depreciation)....................... 367 1,246
-------- --------
Net increase (decrease) in net assets resulting from operations.. 346 2,077
-------- --------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 2,271 4,687
Participant transfers............................................ 35,556 47,443
Participant withdrawals.......................................... (614) (739)
-------- --------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 37,213 51,391
-------- --------
Net increase (decrease) in net assets............................ 37,559 53,468
NET ASSETS
Beginning of period.............................................. 0 0
-------- --------
End of period.................................................... $ 37,559 $ 53,468
======== ========
TEMPLETON
DEVELOPING MUTUAL SHARES
MARKETS INVESTMENTS
SUBACCOUNT(5) SUBACCOUNT(6)
------------- -------------
FROM OPERATIONS
Net investment income (loss)..................................... $ (5) $ (33)
Net realized gain (loss)......................................... 1,117 59
Net unrealized appreciation (depreciation)....................... 56 600
-------- --------
Net increase (decrease) in net assets resulting from operations.. 1,168 626
-------- --------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 1,665 4,558
Participant transfers............................................ 7,864 53,136
Participant withdrawals.......................................... (32) (4,549)
-------- --------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 9,497 53,145
-------- --------
Net increase (decrease) in net assets............................ 10,665 53,771
NET ASSETS
Beginning of period.............................................. 0 0
-------- --------
End of period.................................................... $ 10,665 $ 53,771
======== ========
</TABLE>
(3) From inception December 1, 1998 to December 31, 1998
(4) From inception November 18, 1998 to December 31, 1998
(5) From inception November 11, 1998 to December 31, 1998
(6) From inception November 24, 1998 to December 31, 1998
See Notes to Financial Statements
35
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<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
=========== ============ ===========
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
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
36
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1997
(CONTINUED)
<TABLE>
<CAPTION>
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<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
========== =========== ===========
WANGER
ENHANCED INTERNATIONAL WANGER U.S.
INDEX SMALL CAP SMALL CAP
SUBACCOUNT(1) SUBACCOUNT SUBACCOUNT
------------- ---------- ----------
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.............................................. 0 296,406 466,997
---------- ---------- -----------
End of period.................................................... $1,951,008 $6,533,872 $16,347,497
========== ========== ===========
</TABLE>
(1) From inception July 18, 1997 to December 31, 1997
See Notes to Financial Statements
37
<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 22
Subaccounts, that invest in a corresponding series (the "Series") of The Phoenix
Edge Series Fund, Wanger Advisors Trust and the Templeton Variable Products
Series Fund (the "Funds").
Each Series has distinct investment objectives. The Money Market Series seeks
to provide maximum current income consistent with capital preservation and
liquidity. The Growth Series seeks to achieve intermediate and long-term growth
of capital, with income as a secondary consideration. The Multi-Sector Fixed
Income Series seeks to provide long-term total return by investing in a
diversified portfolio of high yield and high quality fixed income securities.
The Strategic Allocation Series seeks 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 by investing in three market segments: stocks, bonds and
money market instruments. The International Series seeks as its investment
objective a high total return consistent with reasonable risk by investing
primarily in an internationally diversified portfolio of equity securities. The
Balanced Series seeks to provide reasonable income, long-term growth and
conservation of capital. The Real Estate Series seeks to achieve capital
appreciation and income with approximately equal emphasis through investments in
real estate investment trusts and companies that operate, manage, develop or
invest in real estate. The Strategic Theme Series seeks long-term appreciation
of capital by investing in securities that the adviser believes are well
positioned to benefit from cultural, demographic, regulatory, social or
technological changes worldwide. The Aberdeen New Asia Series seeks to provide
long-term capital appreciation by investing primarily in diversified equity
securities of issuers organized and principally operating in Asia, excluding
Japan. The Enhanced Index Series seeks 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 Standard &
Poor's 500 Composite Stock Price Index. The Engemann Nifty Fifty Series seeks to
achieve long-term capital appreciation investing in approximately 50 different
securities which offer the potential for long-term growth of capital. The Seneca
Mid-Cap Growth Series seeks capital appreciation primarily through investments
in equity securities of companies that have the potential for above average
market appreciation. The Growth and Income Series seeks as its investment
objective, dividend growth, current income and capital appreciation by investing
in common stocks. The Value Equity Series seeks to achieve long-term capital
appreciation and income by investing in a diversified portfolio of common stocks
which meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price. The Schafer Mid-Cap Series
seeks to achieve long-term capital appreciation with current income as the
secondary investment objective by investing 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. 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. The Wanger
International Small Cap Series invests in securities of non-U.S. companies with
a stock market capitalization of less than $1 billion. The Templeton Stock
Series is a capital growth common stock fund. The Templeton Asset Allocation
Series invests in stocks and debt obligations of companies and governments and
money market instruments seeking high total return. The Templeton International
Series invests in stocks and debt obligations of companies and governments
outside the United States. The Templeton Developing Markets Series seeks
long-term capital appreciation by investing in equity securities of issuers in
countries having developing markets. The Mutual Shares Investments Series is a
capital appreciation fund with income as a secondary objective. Policyowners
also may 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.
38
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 3--PURCHASES AND SALES OF SHARES OF THE FUNDS
Purchases and sales of shares of the Funds for the period ended December 31,
1998 aggregated the following:
<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
<S> <C> <C>
The Phoenix Edge Series Fund:
Money Market................................................................... $31,853,252 $19,256,778
Growth......................................................................... 49,284,935 18,102,090
Multi-Sector Fixed Income...................................................... 5,350,134 3,521,752
Strategic Allocation........................................................... 8,277,641 5,400,772
International.................................................................. 22,081,567 7,973,787
Balanced....................................................................... 5,741,504 2,100,013
Real Estate.................................................................... 2,362,768 1,406,089
Strategic Theme................................................................ 2,670,131 991,086
Aberdeen New Asia.............................................................. 1,098,420 638,124
Enhanced Index................................................................. 9,931,894 410,925
Engemann Nifty Fifty........................................................... 1,727,380 234,060
Seneca Mid-Cap Growth.......................................................... 899,775 78,430
Growth and Income.............................................................. 3,124,752 143,071
Value Equity .................................................................. 812,090 65,764
Schafer Mid-Cap................................................................ 956,377 48,994
Wanger Advisors Trust:
U.S. Small Cap................................................................. 15,711,241 1,664,671
International Small Cap........................................................ 4,491,053 865,300
Templeton Variable Products Series Fund:
Stock.......................................................................... 45,944 19,108
Asset Allocation............................................................... 37,827 614
International.................................................................. 75,110 23,719
Developing Markets............................................................. 30,632 21,135
Mutual Shares Investments...................................................... 67,242 14,097
</TABLE>
NOTE 4--PARTICIPANT ACCUMULATION UNIT TRANSACTIONS (IN UNITS)
<TABLE>
<CAPTION>
SUBACCOUNT
----------------------------------------------------------------------------------------
MONEY MULTI-SECTOR STRATEGIC
MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED
------ ------ ------------ ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
FLEX EDGE & FLEX EDGE SUCCESS
Units outstanding, beginning of period 10,888,182 53,796,712 6,969,616 12,553,404 22,691,802 11,152,659
Participant deposits................. 25,232,325 10,943,361 1,612,375 1,983,152 4,321,346 1,820,359
Participant transfers................ (13,413,441) 21,924 (641,776) (310,963) (9,321) 703,668
Participant withdrawals.............. (3,942,355) (6,691,981) (794,000) (1,864,672) (2,401,968) (1,282,042)
----------- ---------- --------- ---------- ---------- ----------
Units outstanding, end of period..... 18,764,711 58,070,016 7,146,215 12,360,921 24,601,859 12,394,644
=========== ========== ========= ========== ========== ==========
MONEY MULTI-SECTOR STRATEGIC
MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED
------ ------ ------------ ---------- ------------- --------
JOINT EDGE
Units outstanding, beginning of period 650,414 2,524,123 230,895 393,860 1,118,378 533,527
Participant deposits................. 1,247,784 930,424 109,413 131,317 304,285 133,364
Participant transfers................ (1,005,432) 64,060 23,533 11,609 33,078 1,554
Participant withdrawals.............. (211,736) (550,102) (44,856) (43,489) (195,917) (97,145)
----------- ---------- --------- ---------- ---------- ---------
Units outstanding, end of period..... 681,030 2,968,505 318,985 493,297 1,259,824 571,300
=========== ========== ========= ========== ========== =========
SENECA
STRATEGIC ABERDEEN ENHANCED ENGEMANN MID-CAP
REAL ESTATE THEME NEW ASIA INDEX NIFTY FIFTY GROWTH
----------- ----- -------- ----- ----------- ------
FLEX EDGE & FLEX EDGE SUCCESS
Units outstanding, beginning of period 2,502,410 3,525,204 1,458,554 1,799,793 0 0
Participant deposits................. 1,037,325 1,263,895 687,377 1,725,325 400,612 252,441
Participant transfers................ (280,388) 31,327 219,381 5,787,200 992,193 513,395
Participant withdrawals.............. (319,584) (450,102) (194,425) (458,191) (54,757) (26,335)
----------- ---------- --------- ---------- ---------- ---------
Units outstanding, end of period..... 2,939,763 4,370,324 2,170,887 8,854,127 1,338,048 739,501
=========== ========== ========= ========== ========== =========
</TABLE>
39
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SENECA
STRATEGIC ABERDEEN ENHANCED ENGEMANN MID-CAP
REAL ESTATE THEME NEW ASIA INDEX NIFTY FIFTY GROWTH
----------- ----- -------- ----- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
JOINT EDGE
Units outstanding, beginning of period 121,350 319,957 107,352 30,998 0 0
Participant deposits................. 113,951 161,092 85,676 148,090 14,103 75,052
Participant transfers................ 13,592 56,807 (1,658) 142,233 39,696 26,849
Participant withdrawals.............. (42,871) (78,847) (34,499) (33,591) (3,255) (39,515)
------- ------- ------- ------- ------ -------
Units outstanding, end of period..... 206,022 459,009 156,871 287,730 50,544 62,386
======= ======= ======= ======= ====== =======
GROWTH VALUE SCHAFER WANGER WANGER TEMPLETON
AND INCOME EQUITY MID-CAP U.S. INTERNATIONAL STOCK
---------- ------ ------- ---- ------------- -----
FLEX EDGE & FLEX EDGE SUCCESS
Units outstanding, beginning of period 0 0 0 11,757,123 6,155,973 0
Participant deposits................. 588,751 193,279 400,967 5,947,597 2,569,304 1,584
Participant transfers................ 2,152,823 523,931 607,611 4,569,528 1,144,508 26,379
Participant withdrawals.............. (117,030) (22,598) (34,699) (1,637,206) (825,549) (436)
--------- ------- ------- ---------- --------- ------
Units outstanding, end of period..... 2,624,544 694,612 973,879 20,637,042 9,044,236 27,527
========= ======= ======= ========== ========= ======
GROWTH VALUE SCHAFER WANGER WANGER TEMPLETON
AND INCOME EQUITY MID-CAP U.S. INTERNATIONAL STOCK
---------- ------ ------- ---- ------------- -----
JOINT EDGE
Units outstanding, beginning of period 0 0 0 503,845 351,440 0
Participant deposits................. 73,871 31,173 34,931 509,418 270,057 0
Participant transfers................ 104,626 32,233 16,146 278,250 111,481 7
Participant withdrawals.............. (18,133) (10,012) (11,495) (201,106) (101,827) (0)
--------- ------- ------- ---------- --------- ------
Units outstanding, end of period..... 160,364 53,394 39,582 1,090,407 631,151 7
========= ======= ======= ========== ========= ======
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
---------- ------------- ------- -----------
FLEX EDGE & FLEX EDGE SUCCESS
Units outstanding, beginning of period 0 0 0 0
Participant deposits................. 2,343 4,538 1,493 4,698
Participant transfers................ 35,402 44,851 8,537 53,945
Participant withdrawals.............. (620) (617) (31) (4,611)
------ ------ ----- ------
Units outstanding, end of period..... 37,125 48,772 9,999 54,032
====== ====== ===== ======
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
---------- ------------- ------- -----------
JOINT EDGE
Units outstanding, beginning of period 0 0 0 0
Participant deposits................. 0 0 75 0
Participant transfers................ 121 2,719 0 0
Participant withdrawals.............. (17) (76) (0) (0)
------ ------ ----- ------
Units outstanding, end of period..... 104 2,643 75 0
====== ====== ===== ======
</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.
40
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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 Subaccounts. 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 $30,323,330 during the year ended December 31, 1998. 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.
41
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[PricewaterhouseCoopers 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 statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts: Money
Market, Growth, Multi-Sector Fixed Income, Strategic Allocation, International,
Balanced, Real Estate, Strategic Theme, Aberdeen New Asia, Enhanced Index,
Engemann Nifty Fifty, Seneca Mid-Cap Growth, Growth and Income, Value Equity,
Schafer Mid-Cap, Wanger U.S. Small Cap, Wanger International Small Cap,
Templeton Stock, Templeton Asset Allocation, Templeton International, Templeton
Developing Markets and Mutual Shares Investments (constituting the Phoenix Home
Life Variable Universal Life Account, hereafter referred to as the "Account") at
December 31, 1998, 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 audit. We conducted our
audit 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
audit, which included confirmation of investments at December 31, 1998 by
correspondence with fund custodians or transfer agents, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
February 17, 1999
42
<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.
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Financial Plaza
Hartford, Connecticut 06103
43
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
44
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants.............................................46
Consolidated Balance Sheet at December 31, 1998 and 1997......................47
Consolidated Statement of Income, Comprehensive Income and Equity
for the Years Ended December 31, 1998, 1997 and 1996 ........................48
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.............................................49
Notes to Consolidated Financial Statements ................................50-81
45
<PAGE>
[PRICEWATERHOUSECOOPERS logo and address]
REPORT OF INDEPENDENT ACCOUNTANTS
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, comprehensive income and equity and of cash
flows present fairly, in all material respects, the financial position of
Phoenix Home Life Mutual Insurance Company and its subsidiaries at December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, 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.
As indicated in Note 19, the company has revised the accounting for leveraged
leases.
/s/ PricewaterhouseCoopers LLP
February 11, 1999, except as to Note 20, which is as of April 27, 1999
46
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 1,881,687 $ 1,554,905
Available-for-sale debt securities, at fair value 6,693,540 5,659,061
Equity securities, at fair value 304,545 335,888
Mortgage loans 797,343 927,501
Real estate 91,975 321,757
Policy loans 2,008,260 1,986,728
Other invested assets 377,326 319,088
Short-term investments 240,911 1,078,276
----------- -----------
Total investments 12,395,587 12,183,204
Cash and cash equivalents 132,634 159,307
Accrued investment income 173,312 149,566
Deferred policy acquisition costs 1,076,635 1,038,407
Premiums, accounts and notes receivable 120,928 99,468
Reinsurance recoverables 96,676 66,649
Property and equipment, net 153,425 156,190
Goodwill and other intangible assets, net 527,029 541,499
Other assets 46,060 61,087
Separate account assets 4,798,949 4,082,255
----------- -----------
Total assets $19,521,235 $18,537,632
=========== ===========
LIABILITIES
Policy liabilities and accruals $11,810,202 $11,334,014
Securities sold subject to repurchase agreements 137,473
Notes payable 449,252 471,085
Deferred income taxes 111,912 150,440
Other liabilities 555,352 585,467
Separate account liabilities 4,798,949 4,082,255
----------- -----------
Total liabilities 17,725,667 16,760,734
----------- -----------
Contingent liabilities (Note 17)
MINORITY INTEREST IN NET ASSETS
OF CONSOLIDATED SUBSIDIARIES
91,884 136,514
----------- -----------
EQUITY
Retained earnings 1,609,393 1,484,620
Accumulated other comprehensive income 94,291 155,764
----------- -----------
Total equity 1,703,684 1,640,384
----------- -----------
Total liabilities and equity $19,521,235 $18,537,632
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
47
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $1,852,801 $1,640,606 $1,518,822
Insurance and investment product fees 619,476 468,030 421,058
Net investment income 898,884 771,346 711,595
Net realized investment gains 63,562 111,465 77,422
---------- ---------- ----------
Total revenues 3,434,723 2,991,447 2,728,897
---------- ---------- ----------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses 1,930,384 1,633,633 1,529,573
Policyholder dividends 351,805 343,725 311,739
Policy acquisition expenses 290,585 192,886 172,379
Amortization of goodwill and other intangible assets 29,248 16,393 15,610
Interest expense 29,889 28,147 17,570
Other operating expenses 592,420 542,897 489,203
---------- ---------- ----------
Total benefits, losses and expenses 3,224,331 2,757,681 2,536,074
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 210,392 233,766 192,823
Income taxes 75,152 58,177 80,683
---------- ---------- ----------
INCOME BEFORE MINORITY INTEREST 135,240 175,589 112,140
Minority interest in net income of consolidated subsidiaries 10,467 8,882 8,902
---------- ---------- ----------
NET INCOME 124,773 166,707 103,238
---------- ---------- ----------
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAXES
Unrealized (losses) gains on securities (46,967) 98,287 42,493
Reclassification adjustment for net realized gains
included in net income (12,980) (30,213) (28,580)
Minimum pension liability adjustment (1,526) (2,101) 1,241
---------- ---------- ----------
Total other comprehensive income (loss) (61,473) 65,973 15,154
---------- ---------- ----------
COMPREHENSIVE INCOME 63,300 232,680 118,392
---------- ---------- ----------
EQUITY, BEGINNING OF YEAR - RESTATED (NOTE 19) 1,640,384 1,407,704 1,289,312
---------- ---------- ----------
EQUITY, END OF YEAR $1,703,684 $1,640,384 $1,407,704
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
48
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 124,773 $ 166,707 $ 103,238
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATIONS
Net realized investment gains (63,562) (111,465) (77,422)
Amortization and depreciation 60,580 90,565 64,870
Equity in undistributed earnings of affiliates and partnerships (25,110) (34,057) (22,037)
Deferred income taxes (benefit) (9,274) 3,663 16,126
(Increase) decrease in receivables (75,233) (49,172) 5,955
Increase in deferred policy acquisition costs (31,534) (48,860) (61,985)
Increase in policy liabilities and accruals 487,312 512,476 559,724
Increase (decrease) in other assets/other liabilities, net 53,194 44,269 (66,337)
Other, net 3,412 5,417 (320)
--------- ---------- ----------
Net cash provided by operating activities 524,558 579,543 521,812
--------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sales, maturities or repayments
of available-for-sale debt securities 1,446,990 1,187,943 1,348,809
Proceeds from maturities or repayments of held-to-maturity
debt securities 306,183 217,302 118,596
Proceeds from disposals of equity securities 45,204 51,373 382,359
Proceeds from mortgage loan maturities or repayments 200,419 164,213 151,760
Proceeds from sale of real estate and other invested assets 458,467 218,874 127,440
Purchase of available-for-sale debt securities (2,568,971) (1,689,479) (1,909,086)
Purchase of held-to-maturity debt securities (631,974) (225,722) (385,321)
Purchase of equity securities (86,472) (88,573) (215,104)
Purchase of subsidiaries (6,647) (246,400)
Purchase of mortgage loans (75,974) (140,831) (200,683)
Purchase of real estate and other invested assets (201,424) (90,593) (157,077)
Change in short-term investments, net 837,365 58,384 110,503
Increase in policy loans (21,532) (59,699) (49,912)
Capital expenditures (23,935) (41,504) (3,543)
Other investing activities, net (6,540) (1,750) (5,898)
--------- ---------- ----------
Net cash used for investing activities (328,841) (686,462) (687,157)
--------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (11,124) (17,902) (6,301)
(Repayment of)/proceeds from securities sold
subject to repurchase agreements (137,472) 137,472
Proceeds from borrowings 136 215,359 226,082
Repayment of borrowings (63,328) (234,703) (2,400)
Dividends paid to minority shareholders in consolidated subsidiaries (4,938) (6,895) (6,245)
Other financing activities (5,664)
--------- ---------- ----------
Net cash provided by (used for) financing activities (222,390) 93,331 211,136
--------- ---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (26,673) (13,588) 45,791
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 159,307 172,895 127,104
--------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 132,634 $ 159,307 $ 172,895
========= ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 44,508 $ 76,167 $ 76,157
Interest paid on indebtedness $ 32,834 $ 32,300 $ 19,214
</TABLE>
The accompanying notes are an integral part of these statements.
49
<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 and insurance
agency and brokerage operations, primarily based in the United States. These
products and services are distributed among five reportable segments:
Individual Insurance, Life Reinsurance, Group Life and Health Insurance,
Securities Management and All Other. 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 significant influence over operating and financial policies and
generally at least a 20% ownership interest are reported on the equity
basis.
These consolidated financial statements have been prepared in accordance
with 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.
Amounts for 1997 and 1996 have been retroactively restated to account for
income from leveraged lease investments (see Note 19). Certain
reclassifications have been made to the 1997 and 1996 amounts to conform
with the 1998 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 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 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.
50
<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.
Partnership interests are carried at cost adjusted for Phoenix's equity in
undistributed earnings or losses since acquisition, less allowances for
other than temporary declines in value. These earnings or losses are
included in investment income. Prior to 1998, for venture capital
partnerships, this activity was reflected in capital gains and losses. Such
earnings and losses included in prior year financial statements have been
reclassified to reflect this change.
Beginning in 1998, leveraged lease investments represent the net of the
estimated residual value of the lease assets, rental receivables, and
unearned and deferred income to be allocated over the lease term. Investment
income is calculated using the interest method and is recognized only in
periods in which the net investment is positive. Prior to 1998, leveraged
lease investments were carried at cost adjusted for Phoenix's equity in
undistributed earnings or losses since acquisition, less allowances for
other than temporary declines in value. Prior years have been restated to
reflect these changes (see Note 19).
Realized investment gains and losses, other than those related to separate
accounts for which Phoenix does not bear the investment risk, are determined
by the specific identification method and reported as a component of
revenue. A realized investment loss is recorded when an investment valuation
reserve is determined. Valuation reserves are netted against the asset
categories to which they apply and changes in the valuation reserves are
included in realized investment gains and losses. Unrealized investment
gains and losses on debt securities and equity securities classified as
available-for-sale are included as a component of equity, net of deferred
income taxes and deferred policy acquisition costs.
FINANCIAL INSTRUMENTS
In the normal course of business, Phoenix enters into transactions involving
various types of financial instruments including debt, investments such as
debt securities, mortgage loans and equity securities, off-balance sheet
financial instruments such as investment and loan commitments, financial
guarantees, interest rate swaps and interest rate floors. These instruments
have credit risk and also may be subject to risk of loss due to interest
rate and market fluctuations.
Phoenix also uses interest rate swaps and futures contracts as hedges for
asset/liability management of fixed income investments and certain
liabilities. Realized gains and losses on these contracts are deferred and
amortized over the life of the hedged asset or liability.
Phoenix enters into interest rate floor contracts to hedge against
significant declines in interest rates by locking in a minimum interest rate
amount that will be received on future reinvestments in terms of an
underlying treasury yield. Phoenix does not enter into interest rate floor
contracts for trading purposes. The excess of a predetermined (strike) rate
over a reference (index) rate is recognized in investment income when
received or paid.
51
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
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.
52
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
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 1998 and prior
years. Entities included within the consolidated group are segregated into
either a life insurance or nonlife insurance company subgroup. The
consolidation of these subgroups is subject to certain statutory
restrictions in the percentage of eligible nonlife tax losses that can be
applied to offset life company taxable income.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities and accruals, policy acquisition expenses, investment impairment
reserves, reserves for postretirement benefits and unrealized gains or
losses on investments.
As a mutual life insurance company, Phoenix is required to reduce its income
tax deduction for policyholder dividends by the differential earnings
amount, defined as the difference between the earnings rates of stock and
mutual companies applied against an adjusted base of policyholders' surplus.
RECENT ACCOUNTING PRONOUNCEMENTS
Phoenix adopted Statement of Financial Accounting Standard (SFAS) No. 130,
"Reporting Comprehensive Income," as of January 1, 1998. This statement
establishes standards for the reporting and display of comprehensive income
and its components in a full set of financial statements. This statement
defines the components of comprehensive income as those items that were
previously reported only as components of equity and were excluded from net
income.
In 1998, Phoenix adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a
53
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Business Enterprise," replacing the "industry segment" approach with the
"management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of Phoenix's reportable segments. The
adoption of this statement did not affect the results of operations or
financial position but did affect the disclosure of segment information.
In 1998, Phoenix adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which amends SFAS No. 87,
"Employers' Accounting for Pensions," No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits," and No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." The new statement revises and
standardizes employers' disclosures about pension and other postretirement
benefit plans. Adoption of this statement did not affect the results of
operations or financial position of the company.
On June 15, 1998, The Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement, effective for all years beginning after June 15, 1999, requires
that all derivative instruments be recorded on the balance sheet at their
fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designed as part of a hedge transaction and, if it
is, the type of hedge transaction. Management anticipates that, due to its
limited use of derivative instruments, the adoption of this statement will
not have a significant effect on Phoenix's results of operations or its
financial position.
3. SIGNIFICANT TRANSACTIONS
DIVIDEND SCALE REDUCTION
Due to the decline of interest rates in the financial markets to historic
lows and the strong likelihood that such levels will be sustained, Phoenix
carefully reviewed and considered a change in its dividend scale. As a
result, in October 1998, Phoenix's Board of Directors voted to adopt a
reduced dividend scale, effective for dividends payable on or after January
1, 1999. Dividends for individual participating policies are being reduced
60 basis points in most cases, an average reduction of approximately 8%. The
effect was a decrease of approximately $15.7 million in the policyholder
dividends expense in 1998.
REAL ESTATE SALES
On December 15, 1998, Phoenix sold 47 commercial real estate properties with
a carrying value of $269.8 million, and 4 joint venture real estate
partnerships with a carrying value of $10.5 million, for approximately $309
million in cash. This transaction, along with the sale of 18 other
properties and partnerships during the year, which had a carrying value of
$36.7 million, resulted in after-tax gains of approximately $49.6 million.
As of December 31,1998, Phoenix has 7 commercial real estate properties
remaining with a carrying value of $55.7 million and 10 joint venture real
estate partnerships with a carrying value of $36.3 million.
PHOENIX INVESTMENT PARTNERS, LTD.
On December 3, 1998, Phoenix Investment Partners completed the sale of its
49% interest in Canadian investment firm Beutel, Goodman & Company, Ltd. for
$47 million. Phoenix Investment Partners received $37 million in cash and a
$10 million three-year interest bearing note. The transaction resulted in a
before-tax gain of approximately $17.5 million. Phoenix's interest
represents an after-tax realized gain of approximately $6.8 million.
54
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
On September 3, 1997, Phoenix Investment Partners acquired Pasadena Capital
Corporation, the parent company of Roger Engemann & Associates, Inc. for
approximately $214 million. Pasadena Capital managed over $7 billion in
assets at December 31, 1998, primarily individual accounts.
On July 17, 1997, Phoenix Investment Partners acquired a majority interest
in GMG/Seneca Capital Management LLC, renamed Seneca Capital Management, for
approximately $37.5 million. Seneca Capital Management managed $6 billion in
assets at December 31, 1998.
The purchase price for Pasadena Capital and Seneca Capital Management
represented the consideration paid and the direct costs incurred by Phoenix
Investment Partners to purchase Pasadena Capital and a majority interest in
Seneca Capital Management. The excess of the purchase price over the fair
value of the acquired net tangible assets of these companies totaled
approximately $212.8 million. Of this excess purchase price, $110.2 million
was classified as identifiable intangible assets, primarily associated with
investment management contracts, which are being amortized over their
estimated average useful life of 13 years using the straight line method.
The remaining excess purchase price of $142.5 million was classified as
goodwill and is being amortized over 40 years using the straight line
method.
Phoenix owns approximately 60% of the outstanding Phoenix Investment
Partners' common stock. In addition, Phoenix owns 45% of Phoenix Investment
Partners' convertible subordinated debentures.
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 $141.3 million difference, which does not exceed the
estimated present value of future profits of the acquired business, was
recorded as deferred acquisition costs.
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 notes
payable in the Consolidated Balance Sheet.
The notes were issued in accordance with Section 1307 (Contingent Liability
for Borrowings) 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 (Private Resales of Securities
to Institutions) 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
As of December 31, 1998, PM Holdings owned 10% of the outstanding common
stock of Aberdeen Asset Management, a Scottish asset management firm. The
investment is reported on the equity basis and classified as other invested
assets in the Consolidated Balance Sheet.
55
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 10% of Aberdeen Asset Management's then
outstanding common stock. The note is also classified as other invested
assets 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 Investment Partners and
Aberdeen Asset Management, develops and markets investment products in the
United States and the United Kingdom.
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
DEBT AND EQUITY SECURITIES
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DEBT SECURITIES
HELD-TO-MATURITY:
State and political subdivision bonds $ 10,562 $ 643 $ (78) $ 11,127
Foreign government bonds 3,036 (743) 2,293
Corporate securities 1,695,789 98,896 (13,823) 1,780,862
Mortgage-backed securities 172,300 6,201 (12) 178,489
---------- ---------- ----------- ----------
Total 1,881,687 105,740 (14,656) 1,972,771
---------- ---------- ----------- ----------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 497,089 34,454 (422) 531,121
State and political subdivision bonds 529,977 43,622 (104) 573,495
Foreign government bonds 293,968 28,814 (18,691) 304,091
Corporate securities 1,993,720 110,525 (36,656) 2,067,589
Mortgage-backed securities 3,121,690 110,172 (14,618) 3,217,244
---------- ---------- ----------- ----------
Total 6,436,444 327,587 (70,491) 6,693,540
---------- ---------- ----------- ----------
TOTAL DEBT SECURITIES $8,318,131 $ 433,327 $ (85,147) $8,666,311
---------- ---------- ----------- ----------
EQUITY SECURITIES $ 223,915 $ 102,018 $ (21,388) $ 304,545
========== ========== =========== ==========
</TABLE>
56
<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, 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 $ 158,217 $ 190,669 $ (12,998) $ 335,888
========== ========= ========== ==========
</TABLE>
The amortized cost and fair value of debt securities, by contractual sinking
fund payment and maturity, as of December 31, 1998 are shown below. Actual
maturity may differ from contractual maturity because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties, or Phoenix may have the right to put or sell the obligations back
to the issuers.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 75,505 $ 66,367 $ 58,513 $ 59,953
Due after one year through five years 512,131 535,084 460,182 481,790
Due after five years through ten years 672,533 710,988 948,676 983,590
Due after ten years 449,218 481,843 1,847,383 1,950,963
Mortgage-backed securities 172,300 178,489 3,121,690 3,217,244
----------- ----------- ----------- -----------
Total $ 1,881,687 $ 1,972,771 $ 6,436,444 $ 6,693,540
=========== =========== =========== ===========
</TABLE>
57
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Carrying values for investments in mortgage-backed securities, excluding
U.S. government guaranteed investments, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Planned amortization class $ 433,668 $ 554,425
Asset-backed 910,594 594,128
Mezzanine 280,162 328,539
Commercial 641,485 556,155
Sequential pay 982,576 680,397
Pass through 119,065 132,522
Other 21,994 56,393
---------- ----------
Total mortgage-backed securities $3,389,544 $2,902,559
========== ==========
</TABLE>
58
<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,
1998 1997 1998 1997
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
PROPERTY TYPE:
Office buildings $221,244 $246,500 $ 38,343 $180,743
Retail 203,927 231,886 36,858 108,907
Apartment buildings 261,894 303,990 21,553 20,560
Industrial buildings 121,789 162,008 1,600 39,810
Other 19,089 18,917 32 238
Valuation allowances (30,600) (35,800) (6,411) (28,501)
-------- -------- -------- --------
Total $797,343 $927,501 $ 91,975 $321,757
======== ======== ======== ========
GEOGRAPHIC REGION:
Northeast $169,368 $222,975 $ 47,709 $ 92,513
Southeast 213,916 257,376 32 85,781
North central 176,683 189,163 11,453 63,751
South central 98,956 79,092 22,649 58,954
West 169,020 214,695 16,543 49,259
Valuation allowances (30,600) (35,800) (6,411) (28,501)
-------- -------- -------- --------
Total $797,343 $927,501 $ 91,975 $321,757
======== ======== ======== ========
</TABLE>
At December 31, 1998, scheduled mortgage loan maturities were as follows:
1999--$99 million; 2000--$81 million; 2001--$87 million; 2002--$29 million;
2003--$107 million; and $394 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 $2.3 million and $8.6 million of its mortgage
loans during 1998 and 1997, respectively, based on terms which differed from
those granted to new borrowers.
59
<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>
1998
Mortgage loans $ 35,800 $ 50,603 $(55,803) $30,600
Real estate 28,501 5,108 (27,198) 6,411
-------- -------- -------- -------
Total $ 64,301 $ 55,711 $(83,001) $37,011
======== ======== ======== =======
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>
NONINCOME-PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of nonincome-producing mortgage loans were $15.6
million and $7.0 million at December 31, 1998 and 1997, respectively. The
net carrying value of nonincome-producing bonds was $22.3 million at
December 31, 1998. There were no nonincome-producing bonds at December 31,
1997.
INTEREST RATE SWAPS AND INTEREST RATE FLOORS
The notional amounts of Phoenix's interest rate swaps were $416.0 million
and $272.9 million at December 31, 1998 and 1997, respectively. Weighted
average received and paid rates were 6.24% and 5.79%, for 1998. The increase
in net investment income related to interest rate swap contracts was $1.9
million and $.7 million for the years ended December 31, 1998 and 1997,
respectively. The fair value of these interest rate swap agreements as of
December 31, 1998 and 1997 were $11.0 million and $9.4 million,
respectively. 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.
During 1998, Phoenix entered into several interest rate floor contracts. The
notional amount of Phoenix's interest rate floor contracts was $570.0
million at December 31, 1998. The weighted average strike rate was 4.59% for
1998. The excess of the strike rates over the index rates (5- and 10-year
constant maturity treasury yields) was not significant. The fair value of
these interest rate floors at December 31, 1998 was $1.4 million. These
contracts do not require payment of notional principal.
Management of Phoenix considers the likelihood of any material loss on these
guarantees or interest rate swaps or floors to be remote.
60
<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,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Venture capital equity partnerships $140,591 $ 88,228
Transportation and equipment leases 80,953 78,024
Affordable housing partnerships 10,854
Investment in Aberdeen Asset Management 72,257 70,317
Investment in Beutel, Goodman & Co. Ltd. 31,214
Investment in other affiliates 23,387 5,453
Seed money in separate accounts 26,587 41,297
Other partnership interests 22,697 4,555
-------- --------
Total other invested assets $377,326 $319,088
======== ========
</TABLE>
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $598,892 $509,702 $469,713
Equity securities 6,469 4,277 4,689
Mortgage loans 83,101 85,662 84,318
Policy loans 146,477 122,562 117,742
Real estate 38,338 18,939 21,799
Leveraged leases 2,746 2,692 3,286
Other invested assets 22,364 31,365 18,751
Short-term investments 23,825 18,768 18,688
-------- -------- --------
Sub-total 922,212 793,967 738,986
Less investment expenses 23,328 22,621 27,391
-------- -------- --------
Net investment income $898,884 $771,346 $711,595
======== ======== ========
</TABLE>
Investment income of $8.4 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1998. 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 $40.8 million and $51.3 million at December 31,
1998 and 1997, respectively. Interest income on restructured
61
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
mortgage loans that would have been recorded in accordance with the original
terms of such loans amounted to $4.9 million, $5.3 million and $3.1 million
in 1998, 1997 and 1996, respectively. Actual interest income on these loans
included in net investment income was $4.0 million, $3.8 million and $5.2
million in 1998, 1997 and 1996, respectively.
INVESTMENT GAINS AND LOSSES
Net unrealized gains and (losses) on securities available-for-sale and
carried at fair value for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (7,040) $112,194 $(70,986)
Equity securities (91,880) 74,547 40,803
Deferred policy acquisition costs 6,694 (80,603) 51,528
Deferred income taxes (32,279) 38,064 7,432
-------- -------- --------
Net unrealized investment (losses) gains
on securities available-for-sale $(59,947) $ 68,074 $ 13,913
======== ======== ========
</TABLE>
Realized investment gains and losses for the year ended December 31, were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $(4,295) $ 19,315 $(10,476)
Equity securities 11,939 26,290 59,794
Mortgage loans (6,895) 3,805 2,628
Real estate 67,522 44,668 24,711
Other invested assets (4,709) 17,387 765
-------- -------- --------
Net realized investment gains $ 63,562 $111,465 $ 77,422
======== ======== ========
</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>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from disposals $912,696 $821,339 $1,118,594
Gross gains on sales $ 17,442 $ 27,954 $ 12,547
Gross losses on sales $ 33,641 $ 5,309 $ 25,575
</TABLE>
62
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Phoenix Investment Partners' gross amounts:
Goodwill $321,793 $321,932
Investment management contracts 169,006 167,788
Noncompete covenant 5,000 5,000
Other 472 1,220
-------- --------
Totals 496,271 495,940
-------- --------
Other gross amounts:
Goodwill 79,217 65,585
Client listings 48,111 45,441
Intangible asset related to pension plan benefits 16,229 18,032
Other 1,690 279
-------- --------
Totals 145,247 129,337
-------- --------
Total gross goodwill and other intangible assets 641,518 625,277
Accumulated amortization - Phoenix Investment Partners (49,615) (27,579)
Accumulated amortization - other (64,874) (56,199)
-------- --------
Total net goodwill and other intangible assets $527,029 $541,499
======== ========
</TABLE>
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, Comprehensive Income and Equity.
63
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Short-term debt $ 20,463 $ 15,539
Bank borrowings 205,778 263,732
Notes payable 5,438 14,632
Subordinated debentures 41,359
Surplus notes 175,000 175,000
Secured debt 1,214 2,182
-------- --------
Total notes payable $449,252 $471,085
======== ========
</TABLE>
Phoenix has various lines of credit established with major commercial banks.
As of December 31, 1998, Phoenix had outstanding balances totaling $219.7
million. The total unused credit was $190.7 million. Interest rates ranged
from 5.24% to 7.98% in 1998.
Maturities of other indebtedness are as follows: 1999--$20.5 million;
2000--$38.3 million; 2001--$29.2 million; 2002--$318.3 million; 2003--$1.1
million; 2004 and thereafter--$41.9 million.
Interest expense was $29.9 million, $32.5 million and $18.0 million for the
years ended December 31, 1998, 1997 and 1996, respectively.
7. INCOME TAXES
A summary of income taxes (benefits) applicable to income before income
taxes and minority interest for the year ended December 31, was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes
Current $80,322 $54,514 $59,673
Deferred (5,170) 3,663 21,010
------- ------- -------
Total $75,152 $58,177 $80,683
======= ======= =======
</TABLE>
The income taxes attributable to the consolidated results of operations are
different than the amounts determined by multiplying income before taxes by
the statutory income tax rate. The
64
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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>
1998 1997 1996
% % %
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $73,637 35 $81,818 35 $67,488 35
Dividend received deduction and
tax-exempt interest (3,691) (1) (2,513) (1) (2,107) (1)
Other, net 5,206 2 (8,017) (4) 2,736 1
------- -- ------- -- ------ --
75,152 36 71,288 30 68,117 35
Differential earnings (equity tax) (13,111) (5) 12,566 7
------- -- ------- -- ------ --
Income taxes $75,152 36 $58,177 25 $80,683 42
======= == ======= == ======= ==
</TABLE>
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,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 301,337 $ 303,500
Unearned premium/deferred revenue (148,112) (139,817)
Impairment reserves (23,393) (26,102)
Pension and other postretirement benefits (59,164) (56,643)
Investments 105,395 83,821
Future policyholder benefits (141,130) (140,980)
Other 28,730 45,053
---------- ----------
63,663 68,832
Net unrealized investment gains 51,597 84,134
Minimum pension liability (3,348) (2,526)
---------- ----------
Deferred income tax liability, net $ 111,912 $ 150,440
========== ==========
</TABLE>
Gross deferred income tax assets totaled $375 million and $366 million at
December 31, 1998 and 1997, respectively. Gross deferred income tax
liabilities totaled $487 million and $516 million at December 31, 1998 and
1997, 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, 1998 and 1997 will be
realized.
The Internal Revenue Service is currently examining Phoenix's tax returns
for 1995 through 1997. Management does not believe that there will be a
material adverse effect on the financial statements as a result of pending
tax matters.
65
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
Phoenix has a multi-employer, noncontributory, 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 nonqualified supplemental defined benefit plan to provide
benefits in excess of amounts allowed pursuant to the Internal Revenue Code.
Phoenix's funding policy is to contribute annually an amount equal to at
least the minimum required contribution in accordance with minimum funding
standards established by the Employee Retirement Income Security Act of
1974. Contributions are intended to provide not only for benefits
attributable to service to date, but also for service expected to be earned
in the future.
Components of net periodic pension cost for the years ended December 31,
were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 11,046 $ 10,278 $ 10,076
Interest cost 22,958 22,650 22,661
Expected return on plan assets (25,083) (22,055) (20,847)
Amortization of net transition asset (2,369) (2,369) (2,468)
Amortization of prior service cost 1,795 1,795 (22)
Amortization of net (gain) loss (1,247) 25 1,867
-------- -------- --------
Net periodic benefit cost $ 7,100 $ 10,324 $ 11,267
======== ======== ========
</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.
66
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The aggregate change in projected benefit obligation, change in plan assets,
and funded status of the plan were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 335,436 $ 301,245
Service cost 11,046 10,278
Interest cost 22,958 22,650
Plan amendments 171
Actuarial loss 1,958 18,644
Benefit payments (17,936) (17,552)
--------- ---------
Benefit obligation at end of year $ 353,462 $ 335,436
========= =========
Change in plan assets
Fair value of plan assets at beginning of year $ 321,555 $ 283,245
Actual return on plan assets 58,225 53,093
Employer contributions 2,975 2,769
Benefit payments (17,936) (17,552)
--------- ---------
Fair value of plan assets at end of year $ 364,819 $ 321,555
========= =========
Funded status of the plan $ 11,357 $ (13,881)
Unrecognized net transition asset (14,217) (16,586)
Unrecognized prior service cost 16,185 17,980
Unrecognized net gain (75,921) (45,986)
--------- ---------
Net amount recognized $ (62,596) $ (58,473)
========= =========
Amounts recognized in the Consolidated Balance
Sheet consist of:
Accrued benefit liability $ (88,391) $ (83,724)
Intangible asset 16,229 18,032
Accumulated other comprehensive income 9,566 7,219
--------- ---------
$ (62,596) $ (58,473)
========= =========
</TABLE>
At December 31, 1998 and 1997, the nonqualified plan was unfunded and had
projected benefit obligations of $57.2 million and $50.4 million,
respectively. The accumulated benefit obligations as of December 31, 1998
and 1997 related to this plan were $48.4 million and $42.8 million,
respectively, and are included in other liabilities.
67
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Phoenix recorded, as a reduction of equity, an additional minimum pension
liability of $6.2 million and $4.7 million, net of income taxes, at December
31, 1998 and 1997, respectively, representing the excess of accumulated
benefit obligations over the fair value of plan assets and accrued pension
liabilities for the nonqualified plan. Phoenix has also recorded an
intangible asset of $16.2 million and $18.0 million as of December 31, 1998
and 1997 related to the nonqualified 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 1998 and 1997. The discount rate assumption for 1998
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% in 1998 and 1997.
The pension plan's assets include corporate and government debt securities,
equity securities, real estate, venture capital partnerships, and shares of
mutual funds.
Phoenix also sponsors savings plans for its employees and agents 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, 1998, 1997 and 1996 were $4.1 million, $3.8 million
and $4.2 million, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to Phoenix's pension plans, Phoenix currently provides certain
health care and life insurance benefits to retired employees, spouses and
other eligible dependents through various plans sponsored by Phoenix. A
substantial portion of Phoenix's employees may become eligible for these
benefits upon retirement. The health care plans have varying copayments and
deductibles, depending on the plan. These plans are unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost $3,436 $3,136 $2,765
Interest cost 4,572 4,441 4,547
Amortization of net gain (1,232) (1,527) (1,576)
------ ------ ------
Net periodic benefit cost $6,776 $6,050 $5,736
====== ====== ======
</TABLE>
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.
68
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The plan's change in projected benefit obligation, change in plan assets,
and funded status were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Change in projected postretirement benefit obligation
Projected benefit obligation at beginning of year $ 66,618 $ 63,656
Service cost 3,436 3,136
Interest cost 4,572 4,441
Actuarial (gain) loss 397 (518)
Benefit payments (4,080) (4,098)
-------- --------
Projected benefit obligation at end of year $ 70,943 $ 66,617
-------- --------
Change in plan assets
Employer contributions $ 4,080 $ 4,098
Benefit payments (4,080) (4,098)
-------- --------
Fair value of plan assets at end of year $ $
-------- --------
Funded status of the plan $(70,943) $(66,617)
Unrecognized net gain (26,408) (28,037)
-------- --------
Accrued benefit liability $(97,351) $(94,654)
======== ========
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.0% at December 31, 1998 and 1997.
69
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For purposes of measuring the accumulated postretirement benefit obligation
the 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. Based on this assumption the health care costs were
assumed to increase 8.5% in 1998.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation by $4.6 million and the annual service and
interest cost by $.7 million, before taxes. Decreasing the assumed health
care cost trend rates by one percentage point in each year would decrease
the accumulated postretirement benefit obligation by $4.3 million and the
annual service and interest cost by $.6 million, before taxes. Gains and
losses that occur because actual experience differs from the estimates are
amortized over the average future service period of employees.
OTHER POSTEMPLOYMENT BENEFITS
Phoenix recognizes the costs and obligations of severance, disability and
related life insurance and health care benefits to be paid to inactive or
former employees after employment but before retirement. Other
postemployment benefit expense was ($.5) million for 1998, $.4 million for
1997 and $.4 million for 1996.
70
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. COMPREHENSIVE INCOME
The components of, and related tax effects for, other comprehensive income
for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount $(72,255) $151,210 $ 65,374
Tax expense (benefit) (25,288) 52,923 22,881
-------- -------- --------
Totals (46,967) 98,287 42,493
-------- -------- --------
RECLASSIFICATION ADJUSTMENT FOR NET GAINS
REALIZED IN NET INCOME:
Before-tax amount (19,970) (46,481) (43,969)
Tax (benefit) (6,990) (16,268) (15,389)
-------- -------- --------
Totals (12,980) (30,213) (28,580)
-------- -------- --------
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount (92,225) 104,729 21,405
Tax expense (benefit) (32,278) 36,655 7,492
-------- -------- --------
Totals $(59,947) $ 68,074 $ 13,913
-------- -------- --------
MINIMUM PENSION LIABILITY ADJUSTMENT:
Before-tax amount $ (2,347) $ (3,232) $ 1,910
Tax expense (benefit) (821) (1,131) 669
-------- -------- --------
Totals $ (1,526) $ (2,101) $ 1,241
======== ======== ========
</TABLE>
71
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes accumulated other comprehensive income for
the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Balance, beginning of year $160,457 $ 92,383 $ 78,470
Change during period (59,947) 68,074 13,913
-------- -------- --------
Balance, end of year 100,510 160,457 92,383
-------- -------- --------
MINIMUM PENSION LIABILITY ADJUSTMENT:
Balance, beginning of year (4,693) (2,592) (3,833)
Change during period (1,526) (2,101) 1,241
-------- -------- --------
Balance, end of year (6,219) (4,693) (2,592)
-------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year 155,764 89,791 74,637
Change during period (61,473) 65,973 15,154
-------- -------- --------
Balance, end of year $ 94,291 $155,764 $ 89,791
======== ======== ========
</TABLE>
10. SEGMENT INFORMATION
Phoenix is organized by lines of business that include similar product
groupings. Lines of businesses have been grouped into the following
reportable segments: Individual Insurance, Life Reinsurance, Group Life and
Health Insurance and Securities Management. The category "Individual
Insurance" aggregates the Individual Traditional, Universal Life, Variable
Universal Life and Variable Annuity lines of business. The category "All
Other" includes the combined financial results of segments that individually
are below the quantitative thresholds. Those segments include General Lines
Brokerage and several small individual insurance lines. In addition, the
category "All Other" contains unallocated investment income, unallocated
expenses and realized investment gains related to capital in excess of
segment requirements, as well as certain assets such as equity securities
and venture capital. Phoenix calculates taxes at a flat rate of 35% on the
operating income of its insurance line segments and therefore, does not
allocate permanent tax differences to these segments. Also, Phoenix does not
allocate unusual or extraordinary items to its segments.
72
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes significant financial amounts by reportable
segment:
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED
DECEMBER 31, 1998 GROUP LIFE
(IN MILLIONS) INDIVIDUAL LIFE & HEALTH SECURITIES ALL
INSURANCE REINSURANCE INSURANCE MANAGEMENT OTHER TOTALS
---------- ----------- ---------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external sources $ 1,354 $ 64 $440 $214 $400 $ 2,472
Intersegment revenues 18 41 59
Net investment income 708 19 45 2 75 849
Interest expense 15 1 16
Policyholder dividends 344 344
Increase in DAC (9) (5) (5) (19)
Depreciation and amortization expense 4 1 26 14 45
Other noncash items:
Increase in policy liabilities and accruals 596 38 16 36 686
Minority interest in operating income 14 5 19
Segment operating income (a) $ 50 $ 12 $ 26 $ 23 $ 1 $ 112
======= ==== ==== ==== ==== =======
Deferred policy acquisition costs $ 1,035 $ 27 $ 18 $ 1,080
Total segment assets $16,177 $398 $701 $557 $938 $18,771
======= ==== ==== ==== ==== =======
AT AND FOR THE YEAR ENDED
DECEMBER 31, 1997 GROUP LIFE
(IN MILLIONS) INDIVIDUAL LIFE & HEALTH SECURITIES ALL
INSURANCE REINSURANCE INSURANCE MANAGEMENT OTHER TOTALS
---------- ----------- ---------- ---------- ----- ------
Revenues from external sources $ 1,200 $ 57 $428 $124 $ 298 $ 2,107
Intersegment revenues 16 30 46
Net investment income 586 19 42 2 101 750
Interest expense 4 1 5
Policyholder dividends 328 328
Increase in DAC (32) (5) (13) (50)
Depreciation and amortization expense 3 1 12 36 52
Other noncash items:
Increase in policy liabilities and accruals 508 3 24 50 585
Minority interest in operating income 12 2 14
Segment operating income (a) $ 59 $ 10 $ 33 $ 16 $ (17) $ 101
======= ==== ==== ==== ==== =======
Deferred policy acquisition costs $ 1,014 $ 22 $ 6 $ 1,042
Total segment assets $14,946 $318 $656 $615 $1,101 $17,636
======= ==== ==== ==== ====== =======
</TABLE>
(a) Before income taxes and after policyholder dividends on Individual
Insurance.
73
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED
DECEMBER 31, 1996 GROUP LIFE
(IN MILLIONS) INDIVIDUAL LIFE & HEALTH SECURITIES ALL
INSURANCE REINSURANCE INSURANCE MANAGEMENT OTHER TOTALS
---------- ----------- ---------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external sources $ 1,111 $121 $415 $153 $ 140 $ 1,940
Intersegment revenues 14 33 47
Net investment income 562 16 37 2 91 708
Interest expense 3 2 5
Policyholder dividends 297 297
Increase in DAC (39) (2) (20) (61)
Depreciation and amortization expense 3 1 11 11 26
Other noncash items:
Increase in policy liabilities and
accruals 465 8 40 49 562
Minority interest in operating income 17 (3) 14
Segment operating income (a) $ 59 $ 9 $ 12 $ 28 $ (9) $ 99
======= ==== ==== ==== ====== =======
Deferred policy acquisition costs $ 905 $ 18 $ 21 $ 944
Total segment assets $12,302 $304 $597 $366 $ 965 $14,534
======= ==== ==== ==== ====== =======
</TABLE>
(a) Before income taxes and after policyholder dividends on Individual
Insurance.
74
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SEGMENT RECONCILIATION
The following is a reconciliation of the totals of reportable segment
revenues, operating income and assets to Phoenix's consolidated totals:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Total revenues for reportable segments $ 3,380 $ 2,903 $ 2,695
Realized investment gains 64 111 77
Unallocated net investment income 50 24 4
Elimination of intersegment revenues (59) (47) (47)
------- ------- -------
Total consolidated revenues $ 3,435 $ 2,991 $ 2,729
======= ======= =======
OPERATING INCOME
Total operating income for reportable segments $ 112 $ 101 $ 99
Realized investment gains 64 111 77
Unallocated amounts:
Net investment income 50 22 4
Interest expense (14) (23) (13)
Other unallocated amounts (14) 9 9
Reclassification of minority interest 12 14 17
------- ------- -------
Total consolidated operating income $ 210 $ 234 $ 193
======= ======= =======
ASSETS
Total assets for reportable segments $18,771 $17,636 $14,534
Unallocated amounts:
Investments and accrued investment income
attributable to unallocated capital 725 846 859
Goodwill and other intangible assets 15 21 20
Other unallocated amounts 10 35 41
------- ------- -------
Total consolidated assets $19,521 $18,538 $15,454
======= ======= =======
</TABLE>
11. 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 $106.7 million and $109.0 million,
respectively, at December 31, 1998 and 1997. 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 $173.5 million and
$164.4 million at December 31, 1998 and 1997, respectively.
Rental expenses for operating leases, principally with respect to buildings,
amounted to $14.5 million, $14.9 million and $14.8 million in 1998, 1997,
and 1996, respectively. Future minimum rental payments under noncancelable
operating leases were approximately $45.3 million as of December 31, 1998,
payable as follows: 1999--$14.8 million; 2000--$12.0 million; 2001--$7.9
million; 2002--$5.8 million; 2003--$3.2 million; and $1.6 million
thereafter.
75
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix assumes and
cedes reinsurance as a means of diversifying underwriting risk. For direct
issues, the maximum of individual life insurance retained by Phoenix on any
one life is $8 million for single life and joint first-to-die policies and
to $10 million for joint last-to-die policies, with excess amounts ceded to
reinsurers. Phoenix reinsures 80% of the mortality risk on the inforce block
of the Confederation Life business acquired on December 31, 1997, and 90% of
the mortality risk on certain new issues of term and universal life
products. In addition, Phoenix entered into a separate reinsurance agreement
on October 1, 1998 to reinsure 80% of the mortality risk on a substantial
portion of its otherwise retained individual life insurance business.
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>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,719,393 $ 1,592,800 $ 1,473,869
Reinsurance assumed 505,262 329,927 276,630
Reinsurance ceded (371,854) (282,121) (231,677)
------------ ------------ ------------
Net premiums $ 1,852,801 $ 1,640,606 $ 1,518,822
============ ============ ============
Direct policy and contract claims incurred $ 728,062 $ 626,834 $ 575,824
Reinsurance assumed 433,242 410,704 170,058
Reinsurance ceded (407,780) (373,127) (160,646)
------------ ------------ ------------
Net policy and contract claims incurred $ 753,524 $ 664,411 $ 585,236
============ ============ ============
Direct life insurance in force $121,442,041 $ 120,394,664 $108,816,856
Reinsurance assumed 110,632,110 84,806,585 61,109,836
Reinsurance ceded (135,817,986) (74,764,639) (51,525,976)
------------ ------------ ------------
Net insurance in force $ 96,256,165 $130,436,610 $118,400,716
============ ============ ============
</TABLE>
Irrevocable letters of credit aggregating $5.3 million at December 31, 1998
have been arranged with United States commercial banks in favor of Phoenix
to collateralize the ceded reserves.
13. PARTICIPATING LIFE INSURANCE
Participating life insurance in force was 72.3% and 79.6% of the face value
of total individual life insurance in force at December 31, 1998 and 1997,
respectively. The premiums on participating life insurance policies were
75.7%, 83.5% and 84.1% of total individual life insurance premiums in 1998,
1997 and 1996, respectively.
76
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
14. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $1,038,407 $ 926,274 $ 816,128
Acquisition cost deferred 171,618 295,189 153,873
Amortized to expense during the year (140,084) (105,071) (95,255)
Adjustment to net unrealized investment
gains (losses) included in other
comprehensive income 6,694 (77,985) 51,528
---------- ---------- ---------
Balance at end of year $1,076,635 $1,038,407 $ 926,274
========== ========== =========
</TABLE>
15. MINORITY INTEREST
Phoenix's interests in Phoenix Investment Partners and American Phoenix
Corporation, through its wholly-owned subsidiary PM Holdings, are
represented by ownership of approximately 60% and 85%, respectively, of the
outstanding shares of common stock at December 31, 1998. Earnings and equity
attributable to minority shareholders are included in minority interest in
the consolidated financial statements.
16. 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.
77
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values are calculated as the present value of scheduled payments, with
the discount based upon the Treasury rate comparable for the remaining loan
duration, plus a spread of between 130 and 800 basis points, depending on
the internal quality rating of the loan. For loans in foreclosure or
default, values were determined assuming principal recovery was the lower of
the loan balance or the estimated value of the underlying property.
POLICY LOANS
Fair values are estimated as the present value of loan interest and policy
loan repayments discounted at the ten-year Treasury rate. Loan repayments
were assumed only to occur as a result of anticipated policy lapses, and it
was assumed that annual policy loan interest payments were made at the
guaranteed loan rate less 17.5 basis points. Discounting was at the ten-year
Treasury rate, except for policy loans with a variable policy loan rate.
Variable policy loans have an interest rate that is reset annually based
upon market rates and therefore, book value is a reasonable approximation of
fair value.
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair value of deferred annuities and supplementary contracts without
life contingencies with an interest guarantee of one year or less is valued
at the amount of the policy reserve. In determining the fair value of
deferred annuities and supplementary contracts without life contingencies
with interest guarantees greater than one year, a discount rate equal to the
appropriate Treasury rate, plus 150 basis points, was used to determine the
present value of the projected account value of the policy at the end of the
current guarantee period.
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest guarantees of less 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.
78
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FAIR VALUE SUMMARY
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1998 1997
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 132,634 $ 132,634 $ 159,307 $ 159,307
Short-term investments 240,911 240,911 1,078,276 1,078,276
Debt securities 8,575,227 8,666,311 7,213,966 7,316,601
Equity securities 304,545 304,545 335,888 335,888
Mortgage loans 797,343 831,919 927,501 956,041
Policy loans 2,008,260 2,122,389 1,986,728 2,104,704
----------- ----------- ----------- -----------
Total financial assets $12,058,920 $12,298,709 $11,701,666 $11,950,817
=========== =========== =========== ===========
Financial liabilities:
Policy liabilities $ 783,400 $ 783,400 $ 902,200 $ 902,200
Securities sold subject to repurchase
agreements 137,473 137,473
Notes payable 449,252 449,252 471,085 471,085
----------- ----------- ----------- -----------
Total financial liabilities $ 1,232,652 $ 1,232,652 $ 1,510,758 $ 1,510,758
=========== =========== =========== ===========
</TABLE>
17. CONTINGENCIES
FINANCIAL GUARANTEES
As a result of the sale of real estate properties, in December 1998, Phoenix
is no longer 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 principal amount of bonds guaranteed
by Phoenix at December 31, 1997 was $88.7 million.
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. Phoenix estimates the
cost of settlement to be $40 million after tax. A $25 million after tax
liability was recorded in 1995. In addition, $7 million after tax was
expensed in 1996. The after tax costs of $12.5 million for 1997 and $6.7
million for 1998 were directly offset by a release of the liability in those
years. 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.
79
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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, 1998, 1997 and 1996, there
were no material practices not prescribed by the Insurance Department of the
State of New York. Statutory surplus differs from equity reported in
accordance with GAAP for life insurance companies primarily because policy
acquisition costs are expensed when incurred, investment reserves are based
on different assumptions, surplus notes are not included in 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>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $108,652 $ 66,599 $ 70,261
Deferred policy acquisition costs, net 18,538 48,821 58,618
Future policy benefits (53,847) (9,145) (16,793)
Pension and postretirement expenses (17,334) (7,955) (23,275)
Investment valuation allowances 94,873 84,975 81,841
Interest maintenance reserve 1,415 17,544 (5,158)
Deferred income taxes (39,983) (36,250) (67,064)
Other, net 12,459 2,118 4,808
-------- -------- --------
Net income, as reported $124,773 $166,707 $103,238
======== ======== ========
</TABLE>
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to equity as reported
in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $1,205,635 $1,152,820
Deferred policy acquisition costs, net 1,259,316 1,227,782
Future policy benefits (465,268) (395,436)
Pension and postretirement expenses (174,273) (169,383)
Investment valuation allowances 2,002 (27,738)
Interest maintenance reserve 35,303 33,794
Deferred income taxes (25,593) (12,051)
Surplus notes (157,500) (157,500)
Other, net 24,062 (11,904)
---------- ----------
Equity, as reported $1,703,684 $1,640,384
========== ==========
</TABLE>
80
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
19. PRIOR PERIOD ADJUSTMENT
In 1998, Phoenix revised the accounting for partnerships involved in
leveraged lease arrangements for 1997 and 1996. Opening retained earnings at
December 31, 1995 has been increased by $7.7 million. The Consolidated
Balance Sheet as of December 31, 1997 was revised by increasing the
following balances: other invested assets by $18.9 million, deferred income
taxes by $6.6 million and retained earnings by $12.3 million. The effect on
the Consolidated Statement of Income, Comprehensive Income and Equity was an
increase in net income of $2.1 million and $2.5 million for the years ended
1997 and 1996, respectively.
20. SUBSEQUENT EVENTS
PHOENIX INVESTMENT PARTNERS, LTD.
On March 2, 1999, Phoenix Investment Partners completed its acquisition of
the retail mutual fund and closed-end fund business of the New York City
based Zweig Group. Under the terms of the agreement, Phoenix Investment
Partners paid $135.0 million at closing and will pay up to an additional
$29.0 million over the next three years based on revenue growth of the Zweig
funds. The acquisition increases Phoenix Investment Partners' assets under
management by approximately $4.4 billion.
OCCUPATIONAL ACCIDENT REINSURANCE
Effective March 1, 1995, Phoenix became a participant in an occupational
accident reinsurance pool. In addition, effective October 1, 1996, Phoenix
and American Phoenix Life and Reassurance Company, an indirect wholly owned
subsidiary of Phoenix, became a participant in a reinsurance facility of
occupational accident reinsurance. A significant portion of the risk
associated with the occupational accident reinsurance pool and the
reinsurance facility is further retroceded by Phoenix and American Phoenix
Life to several other unaffiliated insurance entities. Phoenix has
terminated membership in the pool effective March 1, 1999 while American
Phoenix Life and Phoenix terminated participation in the reinsurance
facility effective October 1, 1998.
Management's assessment of the reinsurance arrangements and related
financial exposure to Phoenix and American Phoenix Life is ongoing. Based on
current facts and circumstances, management believes these transactions will
not materially affect the financial condition of Phoenix or American Phoenix
Life.
81
<PAGE>
APPENDIX A
PERFORMANCE HISTORY
- -------------------------------------------------------------------------
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE
PERFORMANCE. THEY DO NOT ILLUSTRATE HOW ACTUAL PERFORMANCE WILL AFFECT THE
BENEFITS UNDER A POLICY BECAUSE THEY DO NOT REFLECT COST OF INSURANCE, PREMIUM
TAX CHARGES, PREMIUM SALES CHARGES AND SURRENDER CHARGES, IF APPLICABLE. FOR
THIS INFORMATION SEE "Appendix C--Illustrations of Death Benefits, Policy Values
and Cash Surrender VALUES." Performance information may be expressed as yield
and effective yield of the Phoenix-Goodwin Money Market Subaccount, as yield of
the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount and as total return of
any Subaccount. Current yield for the Phoenix-Goodwin Money Market Subaccount
will be based on the income earned by the Subaccount over a given 7-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 Phoenix-Goodwin 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
7-day period, which period will end on the date of the most recent financial
statements. The yield for the Subaccount during this 7-day period will be the
change in the value of the hypothetical participant's account's original Unit.
The following is an example of this yield calculation for the Phoenix-Goodwin
Money Market Subaccount based on a 7-day period ending December 31, 1998.
Example:
Assumptions:
Value of hypothetical pre-existing account
with exactly one
unit at the beginning of the period:................ 1.501512
Value of the same account (excluding capital
changes) at the
end of the 7-day period:............................ 1.50245
Calculation:
Ending account value ............................... 1.50245
Less beginning account value ....................... 1.501512
Net change in account value ........................ 0.000938
Base period return:
(adjusted change/beginning account value) .......... 0.000625
Current yield = return x (365/7) = ................... 3.26%
Effective yield = [(1 + return)(365/7)] - 1 = ........ 3.31%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time, or other investment companies, due to charges which
will be deducted on the VUL Account level.
For the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount, quotations of
yield will be based on all investment income per unit earned during a given
30-day period (including dividends and interest), less expenses accrued during
the period ("net investment income"), and are computed by dividing 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.
The following performance tables display historical investment results of
the Subaccounts of the VUL Account. This information may be useful in helping
potential investors in deciding which Subaccounts to choose and in assessing the
competence of the investment advisers. The performance figures shown should be
considered in light of the investment objectives and policies, characteristics
and quality of the Subaccounts and market conditions during the periods of time
82
<PAGE>
quoted. The performance figures should not be considered as estimates or
predictions of future performance. Investment return of the Subaccounts are not
guaranteed and will fluctuate. Below are quotations of average annual total
return calculated as described above for all Subaccounts with at least one year
of results. POLICY CHARGES (INCLUDING COST OF INSURANCE, PREMIUM TAX CHARGES,
PREMIUM SALES CHARGES AND SURRENDER CHARGES) ARE NOT REFLECTED.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1998(1, 4)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series................... 7/15/97 27.99% N/A N/A 22.48%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series.................... 5/1/90 24.38% 11.47% N/A 9.37%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series......................... 9/17/96 -7.25% N/A N/A -19.21%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series...... 5/1/95 -23.54% N/A N/A 10.03%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series...................... 3/2/98 N/A N/A N/A 22.97%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series.......................... 5/1/92 15.64% 11.41% N/A 10.99%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series............................ 1/1/83 26.35% 16.84% 18.63% 17.83%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series...................... 10/10/82 2.09% 3.24% 3.89% 4.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series......... 1/1/83 -6.92% 5.20% 7.74% 8.60%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series.............. 9/17/84 17.36% 11.33% 12.54% 12.27%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series................... 1/29/96 40.62% N/A N/A 21.66%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series.................... 3/2/98 N/A N/A N/A 7.87%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series................ 3/2/98 N/A N/A N/A 17.31%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series..................... 3/2/98 N/A N/A N/A -13.78%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series..................... 3/2/98 N/A N/A N/A 18.57%
- ----------------------------------------------------------------------------------------------------------------------------------
EAFE[registered trademark] Equity Index Fund............. 8/22/97 18.18% N/A N/A 7.07%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II......... 3/28/94 4.58% N/A N/A 4.89%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II....................... 3/1/94 -0.25% N/A N/A 7.72%
- ----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund -- Class 2(2,3)........... 5/1/98 N/A N/A N/A 0.98%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund -- Class 2(2,3).......... 11/28/88 3.07% 9.64% 10.40% 10.31%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund -- Class 2(2,3)........ 9/15/96 -23.45% N/A N/A -24.14%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton International Fund -- Class 2(2,3)............. 5/1/92 5.95% 9.77% N/A 12.28%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund -- Class 2(2,3)..................... 11/4/88 -1.86% 9.18% 10.48% 10.18%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty..................................... 2/1/99 N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap........................... 5/1/95 13.06% N/A N/A 19.55%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty............................................ 2/1/99 N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap.................................... 5/1/95 5.59% N/A N/A 25.06%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The average annual total return is the annual compound return that results
from holding an initial investment of $10,000 for the time period indicated.
Returns are net of $150 Issue Expense Charge, $5 Monthly Administrative
Charge, Investment Management Fees and Mortality and Expense Risk Charges.
(2) Because Class 2 shares were not offered until May 1, 1997 (November
10, 1998 for Mutual Shares Investments), performance shown for periods
prior to that date represent the historical results of Class 1 shares.
Performance since that date reflect Class 2's high annual fees and
expenses resulting from its Rule 12b-1 plan. Maximum annual plan expenses
are 0.25%.
(3) The manager is limiting fund expenses, which increases total returns.
(4) Performance data quoted represents the investment return of the
appropriate Series adjusted for Flex Edge charges had the Subaccount
started on the inception date of the appropriate Series.
Advertisements, sales literature and other communications may contain
information about any Series' or Adviser's current investment strategies and
management style. Current strategies and style may change to 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 Salomon Brothers Corporate
and Government Bond Indices.
83
<PAGE>
Occasionally, The VUL Account may include in advertisements containing total
return, the ranking of those performance figures relating to such figures for
groups of Subaccounts having similar investment objectives as categorized by
ranking services such as:
Lipper Analytical Services, Inc. Morningstar, Inc.
CDA Investment Technologies, Inc. Weisenberger Financial Services, 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 Business 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 Personal Investor
The Funds may occasionally illustrate the benefits of tax deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans. The total return also may be used to compare the performance
of a Series against certain widely acknowledged outside standards or indices for
stock and bond market performance such as:
S&P 500 Dow Jones Industrial Average
Europe Australia Far East Index (EAFE) Consumers Price Index
Shearson Lehman Corporate Index 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.
84
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1, 4)
- ---------------------------------------------------------------------------------------------------------------------------
Series 1983 1984 1985 1986 1987 1988 1989 1990 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A -8.69% 18.67% %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series 31.71% 9.67% 33.71% 19.39% 5.97% 2.98% 34.43% 3.21% 41.46% %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 7.36% 9.23% 7.06% 5.56% 5.55% 6.49% 7.93% 7.41% 5.03% %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 5.06% 10.34% 19.53% 18.22% 0.18% 9.50% 6.85% 4.43% 18.54% %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series N/A -1.33% 26.20% 14.65% 11.55% 1.42% 18.37% 5.05% 28.14% %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
EAFE[registered trademark] Equity Index Fund N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund -- Class 2(2,3) N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund -- Class 2(2,3) N/A N/A N/A N/A N/A 0.21% 12.13% -8.95% 26.42% %
- ---------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund -- Class 2(2,3) N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Templeton International Fund -- Class 2(2,3) N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund -- Class 2 (2,3) N/A N/A N/A N/A N/A -0.99% 13.48% -11.99% 26.22% %
- ---------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A N/A N/A N/A N/A N/A N/A %
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1, 4)
- ----------------------------------------------------------------------------------------------------------
Series 1992 1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series N/A N/A N/A N/A N/A 5.46% 30.64%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series -13.61% 37.33% -0.73% 8.72% 17.71% 11.16% 26.92%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A -0.06% -32.94% -5.21%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A 17.19% 32.10% 21.09% -21.83%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A 25.45%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series 8.99% 7.75% -3.61% 22.37% 9.68% 17.00% 18.07%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series 9.30% 18.75% 0.66% 29.85% 11.69% 20.12% 28.98%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 2.65% 2.06% 3.01% 4.86% 4.19% 4.35% 4.26%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 9.12% 14.99% -6.21% 22.56% 11.52% 10.21% -4.91%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series 9.68% 10.12% -2.19% 17.27% 8.18% 19.78% 19.84%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series N/A N/A N/A N/A 9.56% 16.25% 43.55%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A 10.07%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A 19.67%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A -11.95%
- ----------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A 20.97%
- ----------------------------------------------------------------------------------------------------------
EAFE[registered trademark] Equity Index Fund N/A N/A N/A N/A N/A -6.87% 20.64%
- ----------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A 1.99% 7.90% 3.37% 7.71% 6.80%
- ----------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A -4.26% 19.42% 13.40% 12.92% 1.88%
- ----------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund -- Class 2(2,3) N/A N/A N/A N/A N/A N/A 2.62%
- ----------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund -- Class 2(2,3) 6.97% 24.86% -4.00% 21.29% 17.64% 14.37% 5.27%
- ----------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund -- Class 2(2,3) N/A N/A N/A N/A 1.05% -29.95% -21.69%
- ----------------------------------------------------------------------------------------------------------
Templeton International Fund -- Class 2(2,3) -6.80% 45.85% -3.27% 14.56% 22.77% 12.76% 8.17%
- ----------------------------------------------------------------------------------------------------------
Templeton Stock Fund -- Class 2 (2,3) 6.02% 32.68% -3.25% 23.97% 21.17% 10.75% 0.24%
- ----------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A 33.96% 31.15% -2.24% 15.41%
- ----------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A 16.01% 45.64% 28.41% 7.83%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Rates are net of Mortality and Expense Risk Charges and Investment
Management fees for the Subaccounts.
(2) Because Class 2 shares were not offered until May 1, 1997 (November 10,
1998 for Mutual Shares Investments), performance shown for periods prior
to that date represent the historical results of Class 1 shares.
Performance since that date reflect Class 2's high annual fees and
expenses resulting from its Rule 12b-1 plan. Maximum annual plan expenses
are 0.25%.
(3) The manager is limiting fund expenses, which increases total returns.
(4) Performance data quoted represents the investment return of the
appropriate Series adjusted for Flex Edge charges had the Subaccount
started on the inception date of the appropriate
Series.
These rates of return are not an estimate or guarantee of future performance.
85
<PAGE>
APPENDIX B
THE GUARANTEED INTEREST ACCOUNT
- -------------------------------------------------------------------------
Contributions to the GIA under the Policy and transfers to the GIA become
part of the Phoenix General Account (the "General Account"), which supports
insurance and annuity obligations. Because of exemptive and exclusionary
provisions, interest in the General Account has not been registered under the
Securities Act of 1933 ("1933 Act") nor is the General Account registered as an
investment company under the Investment Company Act of 1940 ("1940 Act").
Accordingly, neither the General Account nor any interest therein is
specifically subject to the provisions of the 1933 or 1940 Acts and the staff of
the Securities and Exchange Commission has not reviewed the disclosures in this
Prospectus concerning the GIA. Disclosures regarding the GIA and the General
Account, however, may be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
The General Account is made up of all of the general assets of Phoenix other
than those allocated to any separate account. 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.
On the last business day of each calendar week, Phoenix will set the excess
interest rate, if any, that will apply to premium payments made to the GIA. That
rate will remain in effect for such premium payments for an initial guarantee
period of one full year from the date of premium payments. Upon expiration of
the initial one-year guarantee period (and each subsequent one-year guarantee
period thereafter), the rate to be applied to any premium payments whose
guaranteed period has just ended will be the same rate as is applied to new
premium payments 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 POLICY 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, Contract Owners and shareholders.
Excess interest, if any, will be credited on the GIA Policy Value. Phoenix
guarantees that, at any time, the GIA Policy Value will not be less than the
amount of premium payments allocated to the GIA, plus interest at the rate of 4%
per year, compounded annually, plus any additional interest which Phoenix may,
in its discretion, credit to the GIA, less the sum of all annual administrative
or surrender charges, any applicable premium taxes, and less any amounts
surrendered or loaned. If the Policyowner surrenders the Policy, the amount
available from the GIA will be reduced by any applicable surrender charge and
annual administration charge. See "Deductions and Charges."
IN GENERAL, YOU CAN MAKE ONLY ONE TRANSFER PER YEAR FROM THE GIA. THE AMOUNT
THAT CAN BE TRANSFERRED OUT IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
POLICY VALUE IN THE GIA AT THE TIME OF THE TRANSFER. IF YOU ELECT THE SYSTEMATIC
TRANSFER PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT OF THE GIA
OVER A MINIMUM 18-MONTH PERIOD. ALSO, THE TOTAL POLICY VALUE ALLOCATED TO THE
GIA MAY BE TRANSFERRED OUT OF THE GIA TO ONE OR MORE OF THE SUBACCOUNTS OF THE
VUL ACCOUNT OVER A CONSECUTIVE FOUR-YEAR PERIOD ACCORDING TO THE FOLLOWING
ANNUALLY RENEWABLE SCHEDULE:
YEAR ONE: 25% YEAR TWO: 33%
YEAR THREE: 50% YEAR FOUR: 100%
86
<PAGE>
APPENDIX C
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 1.75% (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 .70%
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 .30%. 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, 1998,
average total operating expenses for the Series would have been approximately
1.43% 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 -1.79%, 4.16% and 10.12%, respectively. For individual
illustrations, interest rates ranging between 0% and 12% may be selected in
place of the 6% rate.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the VUL Account in the future. If such tax charges
are imposed in the future, then in order to produce after tax returns equal to
those illustrated for 0%, 6% and 12%, a sufficiently higher amount in excess of
the hypothetical interest rates would have to be earned. (See "Charges and
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.
87
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 1 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
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 0 100,000 662 0 100,000 709 0 100,000
2 1,000 2,153 1,362 451 100,000 1,500 589 100,000 1,643 732 100,000
3 1,000 3,310 2,091 1,089 100,000 2,367 1,365 100,000 2,666 1,664 100,000
4 1,000 4,526 2,800 1,773 100,000 3,265 2,237 100,000 3,788 2,760 100,000
5 1,000 5,802 3,491 2,463 100,000 4,193 3,166 100,000 5,016 3,988 100,000
6 1,000 7,142 4,161 3,256 100,000 5,153 4,248 100,000 6,361 5,457 100,000
7 1,000 8,549 4,808 4,027 100,000 6,142 5,361 100,000 7,833 7,053 100,000
8 1,000 10,027 5,433 4,839 100,000 7,162 6,568 100,000 9,445 8,851 100,000
9 1,000 11,578 6,034 5,628 100,000 8,212 7,806 100,000 11,209 10,802 100,000
10 1,000 13,207 6,612 6,612 100,000 9,296 9,296 100,000 13,142 13,142 100,000
11 1,000 14,917 7,166 7,166 100,000 10,411 10,411 100,000 15,261 15,261 100,000
12 1,000 16,713 7,690 7,690 100,000 11,556 11,556 100,000 17,580 17,580 100,000
13 1,000 18,599 8,183 8,183 100,000 12,728 12,728 100,000 20,119 20,119 100,000
14 1,000 20,579 8,644 8,644 100,000 13,929 13,929 100,000 22,901 22,901 100,000
15 1,000 22,657 9,071 9,071 100,000 15,157 15,157 100,000 25,951 25,951 100,000
16 1,000 24,840 9,462 9,462 100,000 16,413 16,413 100,000 29,295 29,295 100,000
17 1,000 27,132 9,817 9,817 100,000 17,698 17,698 100,000 32,968 32,968 100,000
18 1,000 29,539 10,133 10,133 100,000 19,009 19,009 100,000 37,004 37,004 100,000
19 1,000 32,066 10,406 10,406 100,000 20,345 20,345 100,000 41,440 41,440 100,000
20 1,000 34,719 10,631 10,631 100,000 21,704 21,704 100,000 46,320 46,320 100,000
@ 65 1,000 69,761 9,315 9,315 100,000 36,190 36,190 100,000 132,793 132,793 162,008
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
88
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 2 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
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 1,050 531 0 100,000 576 0 100,000 621 0 100,000
2 1,000 2,153 1,195 284 100,000 1,322 411 100,000 1,455 544 100,000
3 1,000 3,310 1,837 835 100,000 2,090 1,088 100,000 2,364 1,362 100,000
4 1,000 4,526 2,458 1,430 100,000 2,879 1,852 100,000 3,355 2,327 100,000
5 1,000 5,802 3,055 2,027 100,000 3,689 2,662 100,000 4,434 3,407 100,000
6 1,000 7,142 3,628 2,724 100,000 4,520 3,616 100,000 5,610 4,706 100,000
7 1,000 8,549 4,176 3,395 100,000 5,370 4,590 100,000 6,890 6,109 100,000
8 1,000 10,027 4,698 4,104 100,000 6,241 5,647 100,000 8,286 7,692 100,000
9 1,000 11,578 5,192 4,786 100,000 7,130 6,724 100,000 9,806 9,400 100,000
10 1,000 13,207 5,659 5,659 100,000 8,039 8,039 100,000 11,466 11,466 100,000
11 1,000 14,917 6,096 6,096 100,000 8,965 8,965 100,000 13,276 13,276 100,000
12 1,000 16,713 6,502 6,502 100,000 9,909 9,909 100,000 15,252 15,252 100,000
13 1,000 18,599 6,875 6,875 100,000 10,868 10,868 100,000 17,410 17,410 100,000
14 1,000 20,579 7,214 7,214 100,000 11,844 11,844 100,000 19,769 19,769 100,000
15 1,000 22,657 7,517 7,517 100,000 12,833 12,833 100,000 22,348 22,348 100,000
16 1,000 24,840 7,782 7,782 100,000 13,835 13,835 100,000 25,171 25,171 100,000
17 1,000 27,132 8,003 8,003 100,000 14,846 14,846 100,000 28,262 28,262 100,000
18 1,000 29,539 8,176 8,176 100,000 15,860 15,860 100,000 31,646 31,646 100,000
19 1,000 32,066 8,294 8,294 100,000 16,875 16,875 100,000 35,354 35,354 100,000
20 1,000 34,719 8,352 8,352 100,000 17,882 17,882 100,000 39,420 39,420 100,000
@ 65 1,000 69,761 3,928 3,928 100,000 26,218 26,218 100,000 111,559 111,559 136,103
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
89
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 1 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
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 1,050 630 0 100,000 678 0 100,000 725 0 100,000
2 1,000 2,153 1,391 511 100,000 1,531 651 100,000 1,676 796 100,000
3 1,000 3,310 2,133 1,178 100,000 2,413 1,458 100,000 2,717 1,762 100,000
4 1,000 4,526 2,854 1,899 100,000 3,326 2,371 100,000 3,857 2,902 100,000
5 1,000 5,802 3,556 2,601 100,000 4,269 3,314 100,000 5,105 4,150 100,000
6 1,000 7,142 4,237 3,396 100,000 5,245 4,404 100,000 6,472 5,631 100,000
7 1,000 8,549 4,899 4,174 100,000 6,254 5,529 100,000 7,972 7,246 100,000
8 1,000 10,027 5,543 4,991 100,000 7,300 6,748 100,000 9,618 9,067 100,000
9 1,000 11,578 6,170 5,792 100,000 8,384 8,007 100,000 11,429 11,051 100,000
10 1,000 13,207 6,776 6,776 100,000 9,506 9,506 100,000 13,415 13,415 100,000
11 1,000 14,917 7,360 7,360 100,000 10,664 10,664 100,000 15,595 15,595 100,000
12 1,000 16,713 7,921 7,921 100,000 11,858 11,858 100,000 17,986 17,986 100,000
13 1,000 18,599 8,456 8,456 100,000 13,089 13,089 100,000 20,611 20,611 100,000
14 1,000 20,579 8,966 8,966 100,000 14,358 14,358 100,000 23,492 23,492 100,000
15 1,000 22,657 9,449 9,449 100,000 15,665 15,665 100,000 26,657 26,657 100,000
16 1,000 24,840 9,906 9,906 100,000 17,011 17,011 100,000 30,136 30,136 100,000
17 1,000 27,132 10,338 10,338 100,000 18,401 18,401 100,000 33,965 33,965 100,000
18 1,000 29,539 10,745 10,745 100,000 19,837 19,837 100,000 38,181 38,181 100,000
19 1,000 32,066 11,125 11,125 100,000 21,318 21,318 100,000 42,825 42,825 100,000
20 1,000 34,719 11,479 11,479 100,000 22,848 22,848 100,000 47,944 47,944 100,000
@ 65 1,000 69,761 12,552 12,552 100,000 40,576 40,576 100,000 138,588 138,588 169,078
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
90
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 2 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
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 1,050 553 0 100,000 598 0 100,000 644 0 100,000
2 1,000 2,153 1,237 357 100,000 1,367 486 100,000 1,502 622 100,000
3 1,000 3,310 1,899 944 100,000 2,157 1,202 100,000 2,438 1,483 100,000
4 1,000 4,526 2,538 1,583 100,000 2,970 2,015 100,000 3,458 2,503 100,000
5 1,000 5,802 3,154 2,199 100,000 3,805 2,850 100,000 4,569 3,614 100,000
6 1,000 7,142 3,746 2,906 100,000 4,662 3,821 100,000 5,779 4,939 100,000
7 1,000 8,549 4,312 3,586 100,000 5,538 4,813 100,000 7,098 6,372 100,000
8 1,000 10,027 4,851 4,300 100,000 6,436 5,885 100,000 8,535 7,984 100,000
9 1,000 11,578 5,366 4,988 100,000 7,357 6,980 100,000 10,105 9,728 100,000
10 1,000 13,207 5,856 5,856 100,000 8,302 8,302 100,000 11,821 11,821 100,000
11 1,000 14,917 6,320 6,320 100,000 9,271 9,271 100,000 13,699 13,699 100,000
12 1,000 16,713 6,760 6,760 100,000 10,265 10,265 100,000 15,755 15,755 100,000
13 1,000 18,599 7,172 7,172 100,000 11,283 11,283 100,000 18,006 18,006 100,000
14 1,000 20,579 7,557 7,557 100,000 12,326 12,326 100,000 20,474 20,474 100,000
15 1,000 22,657 7,913 7,913 100,000 13,395 13,395 100,000 23,181 23,181 100,000
16 1,000 24,840 8,239 8,239 100,000 14,486 14,486 100,000 26,150 26,150 100,000
17 1,000 27,132 8,531 8,531 100,000 15,601 15,601 100,000 29,410 29,410 100,000
18 1,000 29,539 8,788 8,788 100,000 16,738 16,738 100,000 32,991 32,991 100,000
19 1,000 32,066 9,005 9,005 100,000 17,894 17,894 100,000 36,925 36,925 100,000
20 1,000 34,719 9,182 9,182 100,000 19,069 19,069 100,000 41,253 41,253 100,000
@ 65 1,000 69,761 8,280 8,280 100,000 31,898 31,898 100,000 118,577 118,577 144,664
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
91
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 1 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
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 1,050 613 0 100,614 660 0 100,661 708 0 100,708
2 1,000 2,153 1,359 448 101,359 1,496 585 101,496 1,639 728 101,640
3 1,000 3,310 2,804 1,082 102,085 2,359 1,357 102,360 2,658 1,656 102,658
4 1,000 4,526 2,789 1,762 102,790 3,251 2,224 103,252 3,772 2,744 103,772
5 1,000 5,802 3,473 2,446 103,474 4,172 3,144 104,172 4,989 3,962 104,990
6 1,000 7,142 4,136 3,231 104,136 5,121 4,216 105,121 6,320 5,416 106,320
7 1,000 8,549 4,774 3,993 104,775 6,097 5,316 106,097 7,773 6,992 107,773
8 1,000 10,027 5,388 4,794 105,388 7,099 6,506 107,100 9,358 8,764 109,358
9 1,000 11,578 5,976 5,570 105,976 8,129 7,722 108,129 11,088 10,682 111,088
10 1,000 13,207 6,539 6,539 106,539 9,186 9,186 109,186 12,977 12,977 112,978
11 1,000 14,917 7,075 7,075 107,076 10,270 10,270 110,271 15,040 15,040 115,041
12 1,000 16,713 7,579 7,579 107,580 11,376 11,376 111,377 17,288 17,288 117,289
13 1,000 18,599 8,049 8,049 108,050 12,502 12,502 112,502 19,736 19,736 119,737
14 1,000 20,579 8,484 8,484 108,484 13,647 13,647 113,647 22,403 22,403 122,404
15 1,000 22,657 8,880 8,880 108,881 14,808 14,808 114,809 25,308 25,308 125,308
16 1,000 24,840 9,237 9,237 109,237 15,984 15,984 115,985 28,472 28,472 128,472
17 1,000 27,132 9,553 9,553 109,554 17,174 17,174 117,175 31,919 31,919 131,920
18 1,000 29,539 9,825 9,825 109,826 18,374 18,374 118,374 35,675 35,675 135,676
19 1,000 32,066 10,049 10,049 110,050 19,579 19,579 119,579 39,764 39,764 139,765
20 1,000 34,719 10,219 10,219 110,220 20,782 20,782 120,783 44,214 44,214 144,215
@ 65 1,000 69,761 8,000 8,000 108,000 31,368 31,368 131,368 117,118 117,118 217,118
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
92
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 2 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
MALE 35 NEVERSMOKE FACE AMOUNT: $100,000
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 1,050 530 0 100,531 575 0 100,575 619 0 100,620
2 1,000 2,153 1,192 281 101,192 1,318 407 101,319 1,451 540 101,451
3 1,000 3,310 1,830 828 101,831 2,082 1,080 102,082 2,355 1,353 102,355
4 1,000 4,526 2,445 1,418 102,446 2,865 1,837 102,865 3,338 2,310 103,338
5 1,000 5,802 3,036 2,008 103,036 3,666 2,638 103,666 4,405 3,378 104,406
6 1,000 7,142 3,601 2,697 103,601 4,485 3,581 104,486 5,565 4,661 105,565
7 1,000 8,549 4,138 3,357 104,139 5,320 4,539 105,321 6,823 6,042 106,823
8 1,000 10,027 4,648 4,054 104,648 6,171 5,578 106,172 8,189 7,596 108,190
9 1,000 11,578 5,128 4,722 105,128 7,037 6,631 107,037 9,672 9,226 109,672
10 1,000 13,207 5,578 5,578 105,579 7,917 7,917 107,917 11,282 11,282 111,283
11 1,000 14,917 5,996 5,996 105,996 8,808 8,808 108,808 13,029 13,029 113,029
12 1,000 16,713 6,379 6,379 106,379 9,708 9,708 109,708 14,924 14,924 114,924
13 1,000 18,599 6,727 6,727 106,727 10,616 10,616 110,617 16,980 16,980 116,981
14 1,000 20,579 7,038 7,038 107,038 11,531 11,531 111,531 19,212 19,212 119,212
15 1,000 22,657 7,308 7,308 107,309 12,447 12,447 112,448 21,632 21,632 121,633
16 1,000 24,840 7,537 7,537 107,538 13,364 13,364 113,365 24,259 24,259 124,259
17 1,000 27,132 7,719 7,719 107,719 14,275 14,275 114,275 27,104 27,104 127,105
18 1,000 29,539 7,847 7,847 107,847 15,171 15,171 115,171 30,184 30,184 130,185
19 1,000 32,066 7,916 7,916 107,916 16,046 16,046 116,046 33,515 33,515 133,516
20 1,000 34,719 7,918 7,918 107,919 16,890 16,890 116,890 37,114 37,114 137,115
@ 65 1,000 69,761 2,740 2,740 102,740 21,219 21,219 121,219 92,912 92,912 192,912
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
93
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 1 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
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 1,050 629 0 100,629 676 0 100,677 724 0 100,725
2 1,000 2,153 1,388 508 101,389 1,527 647 101,528 1,673 792 101,673
3 1,000 3,310 2,127 1,172 102,127 2,406 1,451 102,407 2,709 1,754 102,709
4 1,000 4,526 2,844 1,889 102,844 3,313 2,358 103,314 3,842 2,887 103,842
5 1,000 5,802 3,540 2,585 103,540 4,249 3,294 104,250 5,080 4,125 105,081
6 1,000 7,142 4,214 3,373 104,214 5,215 4,374 105,215 6,433 5,593 106,434
7 1,000 8,549 4,868 4,142 104,868 6,212 5,486 106,212 7,915 7,190 107,916
8 1,000 10,027 5,501 4,949 105,501 7,241 6,690 107,242 9,538 8,986 109,538
9 1,000 11,578 6,116 5,739 106,117 8,307 7,930 108,308 11,317 10,940 111,318
10 1,000 13,207 6,709 6,709 106,710 9,406 9,406 109,406 13,265 13,265 113,265
11 1,000 14,917 7,279 7,279 107,279 10,536 10,536 110,537 15,395 15,395 115,396
12 1,000 16,713 7,822 7,822 107,822 11,697 11,697 111,697 17,724 17,724 117,725
13 1,000 18,599 8,337 8,337 108,338 12,888 12,888 112,888 20,270 20,270 120,270
14 1,000 20,579 8,824 8,824 108,825 14,109 14,109 114,109 23,052 23,052 123,053
15 1,000 22,657 9,282 9,282 109,283 15,359 15,359 115,360 26,095 26,095 126,095
16 1,000 24,840 9,710 9,710 109,711 16,639 16,639 116,639 29,421 29,421 129,422
17 1,000 27,132 10,111 10,111 110,111 17,951 17,951 117,952 33,064 33,064 133,064
18 1,000 29,539 10,482 10,482 110,483 19,297 19,297 119,297 37,051 37,051 137,052
19 1,000 32,066 10,825 10,825 110,825 20,674 20,674 120,675 41,419 41,419 141,419
20 1,000 34,719 11,136 11,136 111,137 22,084 22,084 122,085 46,201 46,201 146,202
@ 65 1,000 69,761 11,459 11,459 111,459 36,819 36,819 136,819 126,912 126,912 226,912
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
94
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY Page 2 of 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FEMALE 35 NEVERSMOKE FACE AMOUNT: $100,000
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 1,050 552 0 100,552 597 0 100,598 642 0 100,643
2 1,000 2,153 1,234 354 101,234 1,363 483 101,364 1,498 618 101,499
3 1,000 3,310 1,892 937 101,893 2,150 1,195 102,150 2,429 1,474 102,430
4 1,000 4,526 2,527 1,572 102,528 2,957 2,002 102,958 3,442 2,487 103,442
5 1,000 5,802 3,137 2,182 103,138 3,784 2,829 103,784 4,542 3,587 104,542
6 1,000 7,142 3,721 2,881 103,722 4,629 3,789 104,630 5,738 4,897 105,738
7 1,000 8,549 4,277 3,551 104,277 5,492 4,766 105,492 7,035 6,310 107,036
8 1,000 10,027 4,805 4,253 104,805 6,372 5,820 106,372 8,445 7,894 108,446
9 1,000 11,578 5,306 4,928 105,306 7,270 6,893 107,270 9,979 9,602 109,980
10 1,000 13,207 5,780 5,780 105,780 8,187 8,187 108,188 11,649 11,649 111,650
11 1,000 14,917 6,226 6,226 106,227 9,123 9,123 109,124 13,468 13,468 113,468
12 1,000 16,713 6,645 6,645 106,646 10,078 10,078 110,078 15,449 15,449 115,450
13 1,000 18,599 7,035 7,035 107,035 11,049 11,049 111,050 17,608 17,608 117,609
14 1,000 20,579 7,394 7,394 107,394 12,037 12,037 112,037 19,960 19,960 119,961
15 1,000 22,657 7,721 7,721 107,722 13,040 13,040 113,041 22,524 22,524 122,524
16 1,000 24,840 8,014 8,014 108,015 14,005 14,055 114,056 25,316 25,316 125,317
17 1,000 27,132 8,271 8,271 108,272 15,081 15,081 115,082 28,359 28,359 128,359
18 1,000 29,539 8,489 8,489 108,490 16,114 16,114 116,115 31,672 31,672 131,672
19 1,000 32,066 8,663 8,663 108,663 17,148 17,148 117,149 35,277 35,277 135,277
20 1,000 34,719 8,791 8,791 108,792 18,182 18,182 118,183 39,202 39,202 139,203
@ 65 1,000 69,761 7,191 7,191 107,191 27,852 27,852 127,852 104,361 104,361 204,361
</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 1.80%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of 1.00% 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 1.75%.
95
