As filed with the Securities and Exchange Commission on April 28, 2000
REGISTRATION NO. 33-23251
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST-EFFECTIVE AMENDMENT NO. 19
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
(EXACT NAME OF TRUST)
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
(NAME OF DEPOSITOR)
----------------
ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06102-5056
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DONA D. YOUNG, ESQUIRE
PRESIDENT
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06102-5056
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
----------------
COPIES TO:
<TABLE>
<S> <C> <C>
MICHAEL BERENSON, ESQ. EDWIN L. KERR, ESQ.
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP COUNSEL
1025 THOMAS JEFFERSON ST. N.W. PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
SUITE 400 EAST ONE AMERICAN ROW
WASHINGTON, D.C. 20007-0805 HARTFORD, CONNECTICUT 06102-5056
</TABLE>
----------------
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b);
[X] on May 1, 2000 pursuant to paragraph (b);
[ ] 60 days after filing pursuant to paragraph (a)(1); or
[ ] on pursuant to paragraph (a)(1) of Rule 485.
[ ] this Post-Effective Amendment designates a new
effective date for a previously filed post-effective
amendment.
================================================================================
<PAGE>
[VERSION A]
FLEX EDGE SUCCESS(R)
JOINT EDGE(R)
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, 2000
This prospectus describes a flexible premium variable universal life insurance
policy. The policy provides lifetime insurance protection.
THE PHOENIX EDGE SERIES FUND
- ----------------------------
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Capital Growth Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Balanced Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Oakhurst Strategic Allocation Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Phoenix-Seneca Strategic Theme 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
MANAGED BY PHOENIX VARIABLE ADVISORS, INC.
[diamond] Phoenix-Bankers Trust Dow 30 Series
[diamond] Phoenix-Federated U.S. Government Bond Series
[diamond] Phoenix-J.P. Morgan Research Enhanced Index Series
[diamond] Phoenix-Janus Equity Income Series
[diamond] Phoenix-Janus Flexible Income Series
[diamond] Phoenix-Janus Growth Series
[diamond] Phoenix-Morgan Stanley Focus Equity Series
[diamond] Phoenix-Schafer Mid-Cap Value Series
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
- -----------------------------------
MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE(R) 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
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- ---------------------------------------
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
[diamond] Technology Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
- ----------------------------------------------------
MANAGED BY TEMPLETON GLOBAL ADVISORS LIMITED
[diamond] Templeton Growth Securities Fund -- Class 2
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Strategy Fund -- Class 2
[diamond] Templeton International Securities Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Securities Fund-- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[diamond] Mutual Shares Securities 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
1
<PAGE>
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 income taxes.
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.
2
<PAGE>
TABLE OF CONTENTS
Heading Page
- ------------------------------------------------------------
SPECIAL TERMS ......................................... 4
SUMMARY ............................................... 6
PERFORMANCE HISTORY.................................... 7
REDUCTION IN CHARGES................................... 7
PHOENIX AND THE VUL ACCOUNT............................ 8
Phoenix ............................................ 8
The VUL Account .................................... 8
The GIA ............................................ 8
THE POLICY ............................................ 9
Introduction ....................................... 9
Eligible Purchasers ................................ 9
Flexible Premiums .................................. 9
Allocation of Issue Premium ........................ 10
Free Look Period ................................... 10
Temporary Insurance Coverage ....................... 10
Transfer of Policy Value ........................... 10
Systematic Transfer Program....................... 10
Nonsystematic Transfers .......................... 11
Determination of Subaccount Values ................. 11
Death Benefit ...................................... 12
Surrenders ......................................... 13
Policy Loans ....................................... 13
Lapse .............................................. 14
Payment of Premiums During Period of Disability .... 14
Additional Insurance Options ....................... 15
Additional Rider Benefits .......................... 15
INVESTMENTS OF THE VUL ACCOUNT ........................ 16
Participating Investment Funds...................... 16
Investment Advisors................................. 19
Services of the Advisors ........................... 19
Reinvestment and Redemption ........................ 20
Substitution of Investments ........................ 20
CHARGES AND DEDUCTIONS ................................ 20
General............................................. 20
Charges Deducted Once .............................. 20
State Premium Tax Charge ......................... 20
Federal Tax Charge................................ 20
Periodic Charges.................................... 20
Conditional Charges................................. 21
Investment Management Charge........................ 22
Other Taxes ........................................ 22
GENERAL PROVISIONS .................................... 22
Postponement of Payments ........................... 22
Payment by Check ................................... 22
The Contract ....................................... 22
Suicide ............................................ 23
Incontestability ................................... 23
Change of Owner or Beneficiary ..................... 23
Assignment ......................................... 23
Misstatement of Age or Sex ......................... 23
Surplus............................................. 23
PAYMENT OF PROCEEDS ................................... 23
Surrender and Death Benefit Proceeds ............... 23
Payment Options .................................... 23
FEDERAL INCOME TAX CONSIDERATIONS ..................... 24
Introduction ....................................... 24
Phoenix's Income Tax Status ........................ 24
Policy Benefits .................................... 25
Business-Owned Policies............................. 25
Modified Endowment Contracts ....................... 25
Limitations on Unreasonable Mortality
and Expense Charges .............................. 26
Qualified Plans .................................... 26
Diversification Standards .......................... 27
Change of Ownership or Insured or Assignment ....... 27
Other Taxes ........................................ 27
VOTING RIGHTS ......................................... 27
Phoenix............................................. 28
THE DIRECTORS AND EXECUTIVE OFFICERS
OF PHOENIX.......................................... 28
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ............... 29
SALES OF POLICIES ..................................... 29
STATE REGULATION ...................................... 29
REPORTS ............................................... 29
LEGAL PROCEEDINGS ..................................... 29
LEGAL MATTERS ......................................... 29
REGISTRATION STATEMENT ................................ 30
FINANCIAL STATEMENTS .................................. 30
APPENDIX A ............................................ 94
APPENDIX B ............................................ 99
APPENDIX C............................................. 100
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.
3
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SPECIAL TERMS
- --------------------------------------------------------------------------------
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, Deutsche Asset Management VIT Funds,
Federated Insurance Series, The Universal Institutional Funds, Inc., Franklin
Templeton Variable Insurance Products Trust 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.
4
<PAGE>
SINGLE LIFE POLICY: A Policy that covers the life of one (1) Insured.
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.
5
<PAGE>
SUMMARY
- --------------------------------------------------------------------------------
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. o The
fixed benefit is equal to the Policy's face amount (Option 1) o The
variable benefit equals the face amount plus the policy value (Option
2)
o After the first year, you may reduce the face amount. Certain
restrictions apply, and generally, the minimum face amount is
$250,000.
o 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:
o Disability Waiver of Specified Premium
o Accidental Death Benefit
o Death Benefit Protection
o Whole Life Exchange Option
o Purchase Protection Plan
o Living Benefits Option
o Cash Value Accumulation
o Child Term
o Family Term
o Business Term
[diamond] Multiple Life Policies:
o Disability Benefit
o Survivor Purchase Option
o Term Insurance
o 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
o State Premium Tax Charge--2.25% on Single Life Policies Varies by
state on Multiple Life Policies
o 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.
6
<PAGE>
[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.
[diamond] Transfer Charge--Maximum of $10. See "Nonsystematic Transfers.
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 "Free Look 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
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
- --------------------------------------------------------------------------------
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.
REDUCTION IN CHARGES
- --------------------------------------------------------------------------------
The policy is available for purchase by individuals and groups. We may
reduce or eliminate the mortality and expense risk charge, monthly
administrative charge, monthly cost of insurance charges, surrender charges or
other charges normally assessed where it is expected that the size or nature of
such policy or policies will result in savings of sales, underwriting,
administrative or other costs.
Eligibility for the amount of these reductions will be determined by a
number of factors including:
[diamond] the number of insureds,
[diamond] the total premium expected to be paid,
[diamond] the total assets under management for the policyowner,
[diamond] the nature of the relationship among individual insureds,
[diamond] the purpose for which the policies are being purchased,
[diamond] whether there is a preexisting relationship with us, such as being an
employee of PHL or its affiliates and their spouses; employees or
agents who retire from PHL or its affiliates; Phoenix Equity Planning
Corporation ("PEPCO"), its affiliates or registered representatives of
the principal underwriter and registered representatives of
broker-dealers with whom PEPCO has selling agreements,
[diamond] internal transfers from other policies or contracts issued by the
Company or an affiliate, or making transfers of amounts held under
qualified plans sponsored by the Company or an affiliate; and
7
<PAGE>
other circumstances which in our opinion are rationally related to the
expected reduction in expenses. Any variations in the charge structure
will be determined in a uniform manner reflecting differences in costs
of services and not unfairly discriminatory to policyholders.
PHOENIX AND THE VUL ACCOUNT
- --------------------------------------------------------------------------------
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. On April 17, 2000, the Board of
Directors of Phoenix Home Life Mutual Insurance Company authorized management to
develop a plan for conversion from a mutual to a publicly traded stock company.
If such a plan is developed and adopted by the Board, it would be subject to the
approval of the New York Insurance Department and other regulators and submitted
to policyholders for approval. The plan would go into effect only after all
these requirements had been met. There is no assurance that any such plan will
be adopted, and if adopted, there is no guarantee as to the amount or nature of
consideration to eligible policyholders.
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.
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 4-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
8
<PAGE>
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
- --------------------------------------------------------------------------------
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 2 to 5 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 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 "Transfer of Policy Value--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, you 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.
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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 Free Look
Period) to the Phoenix-Goodwin Money Market Subaccount of the VUL Account, and,
at the expiration of the Free Look 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.
FREE LOOK 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 "Free Look 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.
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 Free Look 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:
[diamond] $25 monthly,
[diamond] $75 quarterly,
[diamond] $150 semiannually or
[diamond] $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
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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 2 transfers in a policy
year. Transfers under the Systematic Transfer Program do not count against these
limitations.
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 4-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 adversely affect 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 Free Look 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 6 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
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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
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 Free Look Period (see "The
Policy--Free Look 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 "Modified Endowment Contracts--Material Change
Rules."
PARTIAL SURRENDER AND DECREASES IN FACE AMOUNT: EFFECT 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
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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 7 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 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.
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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
o Policy years 1-10 (or Insured's age 65 if earlier): 4%
o Policy years 11-15: 3%
o Policy years 16 and thereafter: 2 1/2%
[diamond] Single Life Policies--New York & New Jersey only
o Policy years 1-10 (or Insured's age 65 if earlier): 6%
o Policy years 11-15: 5%
o Policy years 16 and thereafter: 4 1/2%
[diamond] Multiple Life Policies
o Policy years 1-10: 8%
o 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 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 3 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 3 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
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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 Free Look 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 6 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 5 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: o the Insured dies from bodily injury that results from
an accident; and o the Insured dies no later than 90 days after
injury.
[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
3 available guarantee periods are:
1 death benefit guaranteed until the later of the policy anniversary
nearest the Insured's 70th birthday or policy year 7;
2 death benefit guaranteed until the later of the policy anniversary
nearest the Insured's 80th birthday or policy year 10;
3 death benefit guaranteed until the later of the policy anniversary
nearest the Insured's 95th birthday.
Death benefit guarantee periods 1 or 2 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, 2 guarantee 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.
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[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.
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-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-BANKERS TRUST DOW 30 SERIES: The series seeks to track the total
return of the Dow Jones Industrial Average(SM) (the "DJIA(SM)") before fund
expenses.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES: The investment objective of the
series is to achieve intermediate and long-term growth of capital, with income
as a secondary consideration. The Phoenix-Engemann Capital Growth Series invests
principally in common stocks of corporations believed by management to offer
growth potential.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the series
is to seek long-term capital appreciation by investing in approximately 50
different securities 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.
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PHOENIX-FEDERATED U.S. GOVERNMENT BOND SERIES: The investment objective of
the series is to maximize total return by investing primarily in debt
obligations of the U.S. Government, its agencies and instrumentalities.
PHOENIX-GOODWIN MONEY MARKET SERIES: The investment objective of the series
is to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity Series seeks to
achieve its objective by investing in a diversified portfolio of common stocks
that meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price.
PHOENIX J.P. MORGAN RESEARCH ENHANCED INDEX SERIES: The investment objective
of the series is to seek high total return by investing in a broadly diversified
portfolio of equity securities of large and medium capitalization companies
within market sectors reflected in the S&P 500. The series invests in a
portfolio of undervalued common stocks and other equity securities which appear
to offer growth potential and an overall volatility of return similar to that of
the S&P 500.
PHOENIX-JANUS EQUITY INCOME SERIES: The investment objective of the series
is to seek current income and long-term growth of
capital.
PHOENIX-JANUS FLEXIBLE INCOME SERIES: The investment objective of the series
is to seek to obtain maximum total return, consistent with preservation of
capital.
PHOENIX-JANUS GROWTH SERIES: The investment objective of the series is to
seek long-term growth of capital, in a manner consistent with the preservation
of capital.
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES: The investment objective of the
series is to seek capital appreciation by investing primarily in equity
securities.
PHOENIX-OAKHURST BALANCED SERIES: The investment objective of the series is
to seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Oakhurst Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
PHOENIX-OAKHURST GROWTH AND INCOME SERIES: The investment objective of the
series is to seek dividend growth, current income and capital appreciation by
investing in common stocks. The Phoenix-Oakhurst Growth and Income Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES: The investment objective of
the series is to realize as high a level of total return over an extended period
of time as is considered consistent with prudent investment risk. The
Phoenix-Oakhurst Strategic Allocation Series invests in stocks, bonds and money
market instruments in accordance with the Investment Advisor's appraisal of
investments most likely to achieve the highest total return.
PHOENIX-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.
PHOENIX-SENECA STRATEGIC THEME SERIES: The investment objective of the
series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Phoenix-Seneca Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
A certain Subaccount invests in a corresponding series of the Deutsche Asset
Management VIT Funds. The following series is currently available:
EAFE(R) EQUITY INDEX FUND: The series seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index ("EAFE(R) Index"), which
emphasizes major market stock performance of companies in Europe, Australia and
the Far East. The series invests in a statistically selected sample of the
securities found in the EAFE(R) Index.
FEDERATED INSURANCE SERIES
Certain Subaccounts invest in corresponding series of the Federated
Insurance Series. The following series are currently available:
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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.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. A certain subaccount invests in a
corresponding series of The Universal Institutional Funds, Inc. The following
series is currently available:
TECHNOLOGY PORTFOLIO: The investment objective of the series is to seek
long-term capital appreciation by investing primarily in equity securities of
companies that the investment advisor expects to benefit from their involvement
in technology and technology-related industries.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Certain Subaccounts invest in Class 2 Shares of a corresponding fund of the
Franklin Templeton Variable Insurance Products Trust. The following funds are
currently available:
MUTUAL SHARES SECURITIES FUND: The primary investment objective of the fund
is capital appreciation with income as a secondary objective. The Mutual Shares
Securities Fund invests primarily in domestic equity securities that the manager
believes are significantly undervalued.
TEMPLETON ASSET STRATEGY FUND: The investment objective of the fund is a
high level of total return. The Templeton Asset Strategy Fund invests in stocks
of companies of any nation, bonds of companies and governments of any nation and
in money market instruments. Changes in the asset mix will be made in an attempt
to capitalize on total return potential produced by changing economic conditions
throughout the world, including emerging market countries.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND: The investment objective of
the fund is long-term capital appreciation. The Templeton Developing Markets
Securities Fund invests primarily in emerging markets equity securities.
TEMPLETON GROWTH SECURITIES FUND: The investment objective of the fund is
long-term capital growth. The Templeton Growth Securities Fund invests primarily
in common stocks issued by companies in various nations throughout the world,
including the U.S. and emerging markets.
TEMPLETON INTERNATIONAL SECURITIES FUND: The investment objective of the
fund is long-term capital growth. The Templeton International Securities Fund
invests primarily in stocks of companies located outside the United States,
including emerging markets.
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.
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 funds simultaneously. Although neither Phoenix nor the funds'
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;
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<PAGE>
[diamond] changes in the investment management of any portfolio of the Funds; 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 ADVISORS
Phoenix Investment Counsel, Inc. ("PIC") is an investment advisor to the
following series in The Phoenix Edge Series Fund:
o Phoenix-Goodwin Money Market Series
o Phoenix-Goodwin Multi-Sector Fixed Income Series
o Phoenix-Hollister Value Equity Series
o Phoenix-Oakhurst Balanced Series
o Phoenix-Oakhurst Growth and Income Series
o Phoenix-Oakhurst Strategic Allocation Series
Based on subadvisory agreements with the fund, PIC as an investment advisor
delegates certain investment decisions and research functions to subadvisors for
the following series:
[diamond] Phoenix-Aberdeen International Advisors, LLC ("PAIA")
o Phoenix-Aberdeen International Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
o Phoenix-Engemann Capital Growth Series
o Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
o Phoenix-Seneca Mid-Cap Growth Series
o Phoenix-Seneca Strategic Theme Series
Phoenix Variable Advisors, Inc. ("PVA") is also an investment advisor to The
Phoenix Edge Series Fund. Based on subadvisory agreements with the fund, PVA
delegates certain investment decisions and research functions to the following
subadvisors for the series listed:
[diamond] Bankers Trust Company
o Phoenix-Bankers Trust Dow 30 Series
[diamond] Federated Investment Management Company
o Phoenix-Federated U.S. Government Bond Series
[diamond] J.P. Morgan Investment Management, Inc.
o Phoenix-J.P. Morgan Research Enhanced Index Series
[diamond] Janus Capital Corporation
o Phoenix-Janus Equity Income Series
o Phoenix-Janus Flexible Income Series
o Phoenix-Janus Growth Series
[diamond] Morgan Stanley Asset Management Inc.
o Phoenix-Morgan Stanley Focus Equity Series
[diamond] Schafer Capital Management, Inc.
o Phoenix-Schafer Mid-Cap Value Series
The investment advisor to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment advisor to the Phoenix-Aberdeen New Asia Series is 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. PVA is a wholly
owned subsidiary of PM Holdings, Inc.
The other investment advisors and their respective funds are:
[diamond] Bankers Trust Company
o EAFE(R) Equity Index Fund
[diamond] Federated Investment Management Company
o Federated Fund for U.S. Government Securities II
o Federated High Income Bond Fund II
[diamond] Franklin Mutual Advisers, LLC
o Mutual Shares Securities Fund
[diamond] Morgan Stanley Asset Management Inc.
o Technology Portfolio
[diamond] Templeton Asset Management, Ltd.
o Templeton Developing Markets Securities Fund
[diamond] Templeton Global Advisors Limited
o Templeton Growth Securities Fund
[diamond] Templeton Investment Counsel, Inc.
o Templeton Asset Strategy Fund
o Templeton International Securities Fund
[diamond] Wanger Asset Management, L.P.
o Wanger Foreign Forty
o Wanger International Small Cap
o Wanger Twenty
o Wanger U.S. Small Cap
SERVICES OF THE ADVISORS
The advisors continually furnish an investment program for each series and
manage the investment and reinvestment of the assets of each series subject at
all times to the authority and supervision of the Trustees. A detailed
discussion of the investment advisors and subadvisors, and the investment
advisory and subadvisory agreements, is contained in the accompanying prospectus
for the funds.
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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 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.
Some charges are deducted only once, others are deducted periodically, and
others are deducted only if certain events occur.
CHARGES DEDUCTED ONCE
[diamond] STATE 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 and
states 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.
o SINGLE LIFE POLICIES: the issue expense charge is $1.50 per $1,000
of face amount up to a maximum of $600.
o 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.
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[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, 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. Single Life Policies have a
reduced annual rate charge of 0.25% starting in the 16th policy year.
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 2 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 2 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.
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A. The contingent deferred sales charge is equal to:
1. 28.5% of all premiums paid (up to and including the amount stated in
the Policy's Surrender Charge Schedule, which is calculated according
to a formula contained in a SEC rule); plus
2. 8.5% of all premiums paid in excess of this amount but not greater
than twice this amount; plus
3. 7.5% of all premiums paid in excess of twice this amount.
B. The contingent deferred issue charge is equal to
$5 per $1,000 of initial face amount.
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
advisors 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
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 6 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
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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 2 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 2 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 7 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.
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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.
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] 10 years;
[diamond] 20 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 INCOME 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 income tax
status and upon the income tax status of the individual concerned. The
discussion contained herein is general in nature and is not intended as income
tax advice. For complete information on federal and state income tax
considerations, a qualified income tax advisor 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 ("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 INCOME TAX STATUS
We are taxed as a life insurance company under the Internal Revenue Code of
1986, as amended ("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 income 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
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<PAGE>
taxes if our federal income tax treatment is determined to be other than what we
currently believe it to be, if changes are made affecting the income tax
treatment to our variable life insurance contracts, or if changes occur in our
income 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 ("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 advisor 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
advisor 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 advisor 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 7
years, the cumulative premium paid on the Policy exceeds the cumulative premium
that would
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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 7 YEARS
If there is a reduction in death benefits during the first 7 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 7
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 2 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 7 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 2 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 7 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:
o the cost-of-living determination period does not exceed the
remaining premium payment period under the Policy; and
o 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 7 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 advisor 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 advisor.
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<PAGE>
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
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. 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 Series 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
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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
27
<PAGE>
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.
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
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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
John C. Bacot Chairman and Chief Executive
Officer, The Bank of New York
New York, New York
Arthur P. Byrne Chairman, President and Chief
Executive Officer, The Wiremold Company
West Hartford, Connecticut
Richard N. Cooper Professor of International
Economics, Harvard University;
Cambridge, Massachusetts;
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 and
Chief Executive Officer, Phoenix
Home Life Mutual Insurance
Company
Hartford, Connecticut
John E. Haire President of
The Fortune Group
New York, New York
Jerry J. Jasinowski President, National Association
of Manufacturers
Washington, D.C.
John W. Johnstone Chairman, Governance &
Nominating Committees, Arch
Chemicals, Inc., Westport,
Connecticut; formerly
Chairman, President and Chief
Executive Officer, Olin Corporation
Norwalk, Connecticut
Marilyn E. LaMarche Limited Managing Director, Lazard
Freres & Company L.L.C.
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 Retired, formerly Chairman and
Chief Executive Officer, Ecologic
Waste Services, Inc. Miami,
Florida
Dona D. Young President, Phoenix Home Life
Mutual Insurance Company
Hartford, Connecticut
EXECUTIVE OFFICERS PRINCIPAL OCCUPATION
Robert W. Fiondella Chairman of the Board and Chief
Executive Officer
Dona D. Young President
Philip R. McLoughlin Executive Vice President and
Chief Investment Officer
Carl T. Chadburn Executive Vice President
David W. Searfoss Executive Vice President and
Chief Financial Officer
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Nathaniel C. Brinn Senior Vice President
Martin J. Gavin Senior Vice President,
Trust Operations
Randall C. Giangiulio Senior Vice President,
Group Life and Health
Michael J. Gilotti Senior Vice President
Edward P. Hourihan Senior Vice President,
Information Systems
Joseph E. Kelleher Senior Vice President,
Underwriting and Operations
Robert G. Lautensack, Jr. Senior Vice President,
Individual Financial
Maura L. Melley Senior Vice President,
Public Affairs
Charles L. Olsen Senior Vice President
Robert E. Primmer Senior Vice President,
Individual Distribution
Tracy L. Rich Senior Vice President
Joel D. Sanders Senior Vice President
Frederick W. Sawyer, III Senior Vice President
Jack F. Solan, Jr. Senior Vice President,
Strategic Development
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 listing reflects the positions held at Phoenix during the last 5
years.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
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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
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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
29
<PAGE>
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.
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, 1999.
30
<PAGE>
PHOENIX HOME LIFE VARIABLE
UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1999
31
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ENGEMANN GOODWIN OAKHURST
GOODWIN MONEY CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN
MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
<S> <C> <C> <C> <C> <C>
Investments at cost............... $ 36,172,745 $ 304,559,369 $ 20,646,125 $ 43,191,926 $ 63,645,004
============= ============== ============= ============= =============
Investments at market............. $ 36,172,745 $ 448,728,926 $ 18,455,528 $ 49,617,057 $ 77,234,406
------------- -------------- ------------- ------------- -------------
Total assets............... 36,172,745 448,728,926 18,455,528 49,617,057 77,234,406
LIABILITIES
Accrued expenses to related party. 22,449 291,917 12,302 33,157 50,070
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 36,150,296 $ 448,437,009 $ 18,443,226 $ 49,583,900 $ 77,184,336
============= ============== ============= ============= =============
Accumulation units outstanding.......... 23,137,709 64,302,622 8,059,238 13,473,562 26,138,742
============= ============== ============= ============= =============
Unit value.............................. $ 1.562397 $ 6.973853 $ 2.288458 $ 3.680088 $ 2.952871
============= ============== ============= ============= =============
DUFF & PHELPS SENECA RESEARCH
OAKHURST REAL ESTATE STRATEGIC ABERDEEN ENHANCED
BALANCED SECURITIES THEME NEW ASIA INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
Investments at cost............... $ 26,273,562 $ 4,793,113 $ 18,085,301 $ 2,741,828 $ 24,785,826
============= ============== ============= ============= =============
Investments at market............. $ 31,642,850 $ 4,020,674 $ 24,186,768 $ 3,057,608 $ 28,154,106
------------- -------------- ------------- ------------- -------------
Total assets.............. 31,642,850 4,020,674 24,186,768 3,057,608 28,154,106
LIABILITIES
Accrued expenses to related party. 21,131 2,567 14,929 2,018 18,617
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 31,621,719 $ 4,018,107 $ 24,171,839 $ 3,055,590 $ 28,135,489
============= ============== ============= ============= =============
Accumulation units outstanding.......... 13,638,575 3,129,571 9,417,741 3,212,043 17,142,029
============= ============== ============= ============= =============
Unit value.............................. $ 2.318550 $ 1.283916 $ 2.566628 $ 0.951292 $ 1.641316
============= ============== ============= ============= =============
SENECA OAKHURST
ENGEMANN MID-CAP GROWTH AND HOLLISTER SCHAFER
NIFTY FIFTY GROWTH INCOME VALUE EQUITY MID-CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
Investments at cost............... $ 6,933,141 $ 2,156,212 $ 8,743,326 $ 2,244,858 $ 1,647,078
============= ============== ============= ============= =============
Investments at market............. $ 8,812,180 $ 3,157,717 $ 10,108,660 $ 2,612,019 $ 1,502,253
------------- -------------- ------------- ------------- -------------
Total assets............... 8,812,180 3,157,717 10,108,660 2,612,019 1,502,253
LIABILITIES
Accrued expenses to related party. 5,722 1,903 6,591 1,665 1,189
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 8,806,458 $ 3,155,814 $ 10,102,069 $ 2,610,354 $ 1,501,064
============= ============== ============= ============= =============
Accumulation units outstanding.......... 5,353,879 1,844,737 7,271,955 1,937,918 1,915,460
============= ============== ============= ============= =============
Unit value.............................. $ 1.644874 $ 1.710712 $ 1.389182 $ 1.346989 $ 0.783657
============= ============== ============= ============= =============
WANGER TEMPLETON
WANGER U.S. INTERNATIONAL TEMPLETON ASSET TEMPLETON
SMALL CAP SMALL CAP STOCK ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
Investments at cost............... $ 34,000,619 $ 13,547,992 $ 255,329 $ 262,651 $ 1,140,606
============= ============== ============= ============= =============
Investments at market............. $ 41,762,466 $ 29,265,084 $ 298,740 $ 289,238 $ 1,271,691
------------- -------------- ------------- ------------- -------------
Total assets............... 41,762,466 29,265,084 298,740 289,238 1,271,691
LIABILITIES
Accrued expenses to related party. 26,850 17,620 184 187 779
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 41,735,616 $ 29,247,464 $ 298,556 $ 289,051 $ 1,270,912
============= ============== ============= ============= =============
Accumulation units outstanding.......... 23,396,320 11,233,769 234,852 235,662 999,489
============= ============== ============= ============= =============
Unit value.............................. $ 1.783854 $ 2.603531 $ 1.271250 $ 1.226552 $ 1.271562
============= ============== ============= ============= =============
</TABLE>
See Notes to Financial Statements
32
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(CONTINUED)
TEMPLETON
DEVELOPING MUTUAL SHARES WANGER WANGER EAFE
MARKETS INVESTMENTS TWENTY FOREIGN FORTY EQUITY INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------- ----------------
ASSETS
<S> <C> <C> <C> <C> <C>
Investments at cost............... $ 647,618 $ 401,439 $ 620,952 $ 388,605 $ 219,790
============ ============ ============ ============= ============
Investments at market............. $ 765,101 $ 411,374 $ 686,777 $ 603,018 $ 237,869
------------ ------------ ------------ ------------- ------------
Total assets............... 765,101 411,374 686,777 603,018 237,869
LIABILITIES
Accrued expenses to related party. 467 269 416 335 140
------------ ------------ ------------ ------------- ------------
NET ASSETS.............................. $ 764,634 $ 411,105 $ 686,361 $ 602,683 $ 237,729
============ ============ ============ ============= ============
Accumulation units outstanding.......... 474,876 380,974 496,070 317,402 200,992
============ ============ ============ ============= ============
Unit value.............................. $ 1.610176 $ 1.079090 $ 1.383596 $ 1.898803 $ 1.182776
============ ============ ============ ============= ============
FEDERATED FEDERATED
BANKERS U.S. GOV'T HIGH INCOME JANUS
TRUST DOW 30 SECURITIES II BOND FUND II EQUITY INCOME JANUS GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------- ----------------
ASSETS
Investments at cost............... $ 5,260 $ 79,497 $ 176,220 $ 13,190 $ 177,361
============ ============ ============ ============= ============
Investments at market............. $ 5,282 $ 79,711 $ 179,326 $ 13,399 $ 179,523
------------ ------------ ------------ ------------- ------------
Total assets............... 5,282 79,711 179,326 13,399 179,523
LIABILITIES
Accrued expenses to related party. 0 51 119 1 16
------------ ------------ ------------ ------------- ------------
NET ASSETS.............................. $ 5,282 $ 79,660 $ 179,207 $ 13,398 $ 179,507
============ ============ ============ ============= ============
Accumulation units outstanding.......... 5,241 78,777 179,788 13,204 172,171
============ ============ ============ ============= ============
Unit value.............................. $ 1.007802 $ 1.011204 $ 0.996767 $ 1.014664 $ 1.042609
============ ============ ============ ============= ============
JANUS
FLEXIBLE MORGAN STANLEY TECHNOLOGY
INCOME FOCUS EQUITY PORTFOLIO
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ----------------
ASSETS
Investments at cost............... $ 4,322 $ 1,999 $ 109,734
============ ============ ============
Investments at market............. $ 4,315 $ 2,073 $ 112,136
------------ ------------ ------------
Total assets............... 4,315 2,073 112,136
LIABILITIES
Accrued expenses to related party. 1 0 12
------------ ------------ ------------
NET ASSETS.............................. $ 4,314 $ 2,073 $ 112,124
============ ============ ============
Accumulation units outstanding.......... 4,312 2,000 104,360
============ ============ ============
Unit value.............................. $ 1.000255 $ 1.036684 $ 1.074396
============ ============ ============
</TABLE>
See Notes to Financial Statements
33
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
GOODWIN OAKHURST
GOODWIN MONEY ENGEMANN MULTI-SECTOR STRATEGIC
MARKET CAPITAL GROWTH FIXED INCOME ALLOCATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ---------------
Investment income
<S> <C> <C> <C> <C>
Distributions........................................ $ 1,401,659 $ 881,082 $ 1,426,094 $ 1,035,758
Expenses
Mortality, expense risk and administrative charges... 236,917 2,894,867 137,459 362,811
------------ ------------ ------------- ------------
Net investment income (loss)............................... 1,164,742 (2,013,785) 1,288,635 672,947
------------ ------------ ------------- ------------
Net realized gain (loss) from share transactions........... - 199,224 1,383 6,462
Net realized gain distribution from Fund................... - 33,712,379 - 2,422,170
Net unrealized appreciation (depreciation) on investment... - 67,520,555 (510,719) 1,547,396
------------ ------------ ------------- ------------
Net gain (loss) on investments............................. - 101,432,158 (509,336) 3,976,028
------------ ------------ ------------- ------------
Net increase (decrease) in net assets resulting from
operations................................................. $ 1,164,742 $ 99,418,373 $ 779,299 $ 4,648,975
============ ============ ============= ============
DUFF & PHELPS SENECA
ABERDEEN OAKHURST REAL ESTATE STRATEGIC
INTERNATIONAL BALANCED SECURITIES THEME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ---------------
Investment income
Distributions........................................ $ 1,559,263 $ 722,804 $ 201,455 $ -
Expenses
Mortality, expense risk and administrative charges... 513,193 235,015 31,223 114,711
------------ ------------ ------------- ------------
Net investment income (loss)................................ 1,046,070 487,789 170,232 (114,711)
------------ ------------ ------------- ------------
Net realized gain (loss) from share transactions............ 47,349 13,373 (8,551) (3,328)
Net realized gain distribution from Fund.................... 9,024,051 1,090,011 - 2,873,771
Net unrealized appreciation (depreciation) on investment.... 6,988,805 1,469,608 (25,923) 4,256,078
------------ ------------ ------------- ------------
Net gain (loss) on investments.............................. 16,060,205 2,572,992 (34,474) 7,126,521
------------ ------------ ------------- ------------
Net increase (decrease) in net assets resulting from
operations.................................................. $ 17,106,275 $ 3,060,781 $ 135,758 $ 7,011,810
============ ============ ============= ============
ABERDEEN RESEARCH ENGEMANN NIFTY SENECA
NEW ASIA ENHANCED INDEX FIFTY MID-CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ---------------
Investment income
Distributions........................................ $ 22,625 $ 209,690 $ - $ -
Expenses
Mortality, expense risk and administrative charges... 17,571 172,148 40,023 13,409
------------ ------------ ------------- ------------
Net investment income (loss)................................ 5,054 37,542 (40,023) (13,409)
------------ ------------ ------------- ------------
Net realized gain (loss) from share transactions............ 4,188 9,241 817 4,734
Net realized gain distribution from Fund.................... - 1,395,107 - 74,364
Net unrealized appreciation (depreciation) on investment.... 869,485 2,060,618 1,626,903 871,293
------------ ------------ ------------- ------------
Net gain (loss) on investments.............................. 873,673 3,464,966 1,627,720 950,391
------------ ------------ ------------- ------------
Net increase (decrease) in net assets resulting from
operations.................................................. $ 878,727 $ 3,502,508 $ 1,587,697 $ 936,982
============ ============ ============= ============
</TABLE>
See Notes to Financial Statements
34
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
OAKHURST
GROWTH AND HOLLISTER SCHAFER WANGER U.S.
INCOME VALUE EQUITY MID-CAP VALUE SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------
Investment income
<S> <C> <C> <C> <C>
Distributions...................................... $ 51,165 $ 6,780 $ 20,315 $ -
Expenses
Mortality, expense risk and administrative charges. 55,910 12,530 10,223 268,787
------------ ----------- ------------ -----------
Net investment income (loss).............................. (4,745) (5,750) 10,092 (268,787)
------------ ----------- ------------ -----------
Net realized gain (loss) from share transactions.......... (252) 3,904 (25,572) 72,743
Net realized gain distribution from Fund.................. 119,133 142,030 - 2,967,831
Net unrealized appreciation (depreciation) on investment.. 1,012,913 291,974 (130,299) 4,934,358
------------ ----------- ------------ -----------
Net gain (loss) on investments............................ 1,131,794 437,908 (155,871) 7,974,932
------------ ----------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations................................................ $ 1,127,049 $ 432,158 $ (145,779) $ 7,706,145
============ =========== ============ ===========
WANGER TEMPLETON
INTERNATIONAL TEMPLETON ASSET TEMPLETON
SMALL CAP STOCK ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------
Investment income
Distributions...................................... $ 190,889 $ 1,255 $ 844 $ 3,225
Expenses
Mortality, expense risk and administrative charges. 123,317 1,324 1,149 4,112
------------ ----------- ------------ -----------
Net investment income (loss).............................. 67,572 (69) (305) (887)
------------ ----------- ------------ -----------
Net realized gain (loss) from share transactions.......... 28,287 1,336 172 16,281
Net realized gain distribution from Fund.................. - 6,648 5,190 12,000
Net unrealized appreciation (depreciation) on investment.. 15,112,035 42,995 26,220 129,839
------------ ----------- ------------ -----------
Net gain (loss) on investments............................ 15,140,322 50,979 31,582 158,120
------------ ----------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations................................................ $ 15,207,894 $ 50,910 $ 31,277 $ 157,233
============ =========== ============ ===========
TEMPLETON
DEVELOPING MUTUAL SHARES WANGER WANGER
MARKETS INVESTMENTS TWENTY FOREIGN FORTY
SUBACCOUNT SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
--------------- ---------------- ---------------- ----------------
Investment income
Distributions...................................... $ 265 $ 156 $ - $ -
Expenses
Mortality, expense risk and administrative charges. 2,573 1,498 2,874 1,627
------------ ----------- ------------ -----------
Net investment income (loss).............................. (2,308) (1,342) (2,874) (1,627)
------------ ----------- ------------ -----------
Net realized gain (loss) from share transactions.......... (584) 382 12,711 7,285
Net realized gain distribution from Fund.................. - - - -
Net unrealized appreciation (depreciation) on investment.. 117,427 9,335 65,825 214,413
------------ ----------- ------------ -----------
Net gain (loss) on investments............................ 116,843 9,717 78,536 221,698
------------ ----------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations................................................ $ 114,535 $ 8,375 $ 75,662 $ 220,071
============ =========== ============ ===========
</TABLE>
(1) From inception February 5, 1999 to December 31, 1999
(2) From inception February 9, 1999 to December 31, 1999
See Notes to Financial Statements
35
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
FEDERATED FEDERATED
EAFE BANKERS U.S. GOV'T HIGH INCOME
EQUITY INDEX TRUST DOW 30 SECURITIES II BOND FUND II
SUBACCOUNT(3) SUBACCOUNT(4) SUBACCOUNT(5) SUBACCOUNT(6)
---------------- --------------- ---------------- ----------------
Investment income
<S> <C> <C> <C> <C>
Distributions.................................... $ 3,673 $ 6 $ - $ -
Expenses
Mortality, expense risk and administrative
charges.......................................... 364 0 144 287
------------ ---------- ------------ -----------
Net investment income (loss)............................ 3,309 6 (144) (287)
------------ ---------- ------------ -----------
Net realized gain (loss) from share transactions........ (2) - (0) (11)
Net realized gain distribution from Fund................ 6,862 - - -
Net unrealized appreciation (depreciation) on investment 18,079 22 214 3,106
------------ ---------- ------------ -----------
Net gain (loss) on investments.......................... 24,939 22 214 3,095
------------ ---------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations.............................................. $ 28,248 $ 28 $ 70 $ 2,808
============ ========== ============ ===========
JANUS JANUS FLEXIBLE MORGAN STANLEY
EQUITY INCOME JANUS GROWTH INCOME FOCUS EQUITY
SUBACCOUNT(7) SUBACCOUNT(8) SUBACCOUNT(9) SUBACCOUNT(10)
---------------- --------------- ---------------- ---------------
Investment income
Distributions.................................... $ - $ - $ 9 $ -
Expenses
Mortality, expense risk and administrative
charges.......................................... 1 16 1 0
------------ ---------- ------------ -----------
Net investment income (loss)............................ (1) (16) 8 -
------------ ---------- ------------ -----------
Net realized gain (loss) from share transactions........ - 0 (0) 1
Net realized gain distribution from Fund................ - - - -
Net unrealized appreciation (depreciation) on investment 209 2,162 (7) 74
------------ ---------- ------------ -----------
Net gain (loss) on investments.......................... 209 2,162 (7) 75
------------ ---------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations.............................................. $ 208 $ 2,146 $ 1 $ 75
============ ========== ============ ===========
</TABLE>
TECHNOLOGY
PORTFOLIO
SUBACCOUNT(11)
----------------
Investment income
Distributions.................................... $ -
Expenses
Mortality, expense risk and administrative
charges.......................................... 12
------------
Net investment income (loss)............................ (12)
------------
Net realized gain (loss) from share transactions........ (0)
Net realized gain distribution from Fund................ -
Net unrealized appreciation (depreciation) on investment 2,402
------------
Net gain (loss) on investments.......................... 2,402
------------
Net increase (decrease) in net assets resulting from
operations.............................................. $ 2,390
============
(3) From inception July 20, 1999 to December 31, 1999
(4) From inception December 23, 1999 to December 31, 1999
(5) From inception August 5, 1999 to December 31, 1999
(6) From inception August 2, 1999 to December 31, 1999
(7) From inception December 23, 1999 to December 31, 1999
(8) From inception December 20, 1999 to December 31, 1999
(9) From inception December 21, 1999 to December 31, 1999
(10) From inception December 21, 1999 to December 31, 1999
(11) From inception December 20, 1999 to December 31, 1999
See Notes to Financial Statements
36
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
GOODWIN
GOODWIN ENGEMANN MULTI-SECTOR
MONEY MARKET CAPITAL GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- ------------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss)........................... $ 1,164,742 $ (2,013,785) $ 1,288,635
Net realized gain (loss)............................... - 33,911,603 1,383
Net unrealized appreciation (depreciation)............. - 67,520,555 (510,719)
--------------- --------------- --------------
Net increase (decrease) resulting from operations...... 1,164,742 99,418,373 779,299
--------------- --------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 45,745,678 55,380,624 3,185,838
Participant transfers.................................. (32,514,036) 2,056,950 10,155
Participant withdrawals................................ (7,462,353) (39,295,629) (1,861,647)
--------------- --------------- --------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 5,769,289 18,141,945 1,334,346
--------------- --------------- --------------
Net increase (decrease) in net assets.................. 6,934,031 117,560,318 2,113,645
NET ASSETS
Beginning of period.................................... 29,216,265 330,876,691 16,329,581
--------------- --------------- --------------
End of period.......................................... $ 36,150,296 $ 448,437,009 $ 18,443,226
=============== =============== ==============
OAKHURST
STRATEGIC ABERDEEN OAKHURST
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 672,947 $ 1,046,070 $ 487,789
Net realized gain (loss)............................... 2,428,632 9,071,400 1,103,384
Net unrealized appreciation (depreciation)............. 1,547,396 6,988,805 1,469,608
--------------- --------------- --------------
Net increase (decrease) resulting from operations...... 4,648,975 17,106,275 3,060,781
--------------- --------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 5,766,295 8,895,302 4,014,520
Participant transfers.................................. 426,167 (2,116,044) 785,289
Participant withdrawals................................ (4,114,288) (6,140,365) (3,398,123)
--------------- --------------- --------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 2,078,174 638,893 1,401,686
--------------- --------------- --------------
Net increase (decrease) in net assets.................. 6,727,149 17,745,168 4,462,467
NET ASSETS
Beginning of period.................................... 42,856,751 59,439,168 27,159,252
--------------- --------------- --------------
End of period.......................................... $ 49,583,900 $ 77,184,336 $ 31,621,719
=============== =============== ==============
DUFF & PHELPS
REAL ESTATE SENECA ABERDEEN
SECURITIES STRATEGIC NEW ASIA
SUBACCOUNT THEME SUBACCOUNT SUBACCOUNT
------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 170,232 $ (114,711) $ 5,054
Net realized gain (loss)............................... (8,551) 2,870,443 4,188
Net unrealized appreciation (depreciation)............. (25,923) 4,256,078 869,485
--------------- --------------- --------------
Net increase (decrease) resulting from operations...... 135,758 7,011,810 878,727
--------------- --------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 1,205,811 3,459,133 500,215
Participant transfers.................................. (767,489) 7,228,439 378,701
Participant withdrawals................................ (441,550) (1,588,498) (180,470)
--------------- --------------- --------------
Net increase (decrease) in net assets resulting
from participant transactions.................. (3,228) 9,099,074 698,446
--------------- --------------- --------------
Net increase (decrease) in net assets.................. 132,530 16,110,884 1,577,173
NET ASSETS
Beginning of period.................................... 3,885,577 8,060,955 1,478,417
--------------- --------------- --------------
End of period.......................................... $ 4,018,107 $ 24,171,839 $ 3,055,590
=============== =============== ==============
</TABLE>
See Notes to Financial Statements
37
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
RESEARCH ENHANCED ENGEMANN SENECA
INDEX NIFTY FIFTY MID-CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- -----------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss)........................... $ 37,542 $ (40,023) $ (13,409)
Net realized gain (loss)............................... 1,404,348 817 79,098
Net unrealized appreciation (depreciation)............. 2,060,618 1,626,903 871,293
-------------- -------------- -------------
Net increase (decrease) resulting from operations...... 3,502,508 1,587,697 936,982
-------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 4,764,435 1,600,829 550,378
Participant transfers.................................. 9,507,736 4,539,540 896,097
Participant withdrawals................................ (2,366,241) (663,615) (177,076)
-------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 11,905,930 5,476,754 1,269,399
-------------- -------------- -------------
Net increase (decrease) in net assets.................. 15,408,438 7,064,451 2,206,381
NET ASSETS
Beginning of period.................................... 12,727,051 1,742,007 949,433
-------------- -------------- -------------
End of period.......................................... $ 28,135,489 $ 8,806,458 $ 3,155,814
============== ============== =============
OAKHURST HOLLISTER SCHAFER
GROWTH AND INCOME VALUE EQUITY MID-CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- -----------------
FROM OPERATIONS
Net investment income (loss)........................... $ (4,745) $ (5,750) $ 10,092
Net realized gain (loss)............................... 118,881 145,934 (25,572)
Net unrealized appreciation (depreciation)............. 1,012,913 291,974 (130,299)
-------------- -------------- -------------
Net increase (decrease) resulting from operations...... 1,127,049 432,158 (145,779)
-------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 2,435,487 547,053 436,822
Participant transfers.................................. 4,170,995 999,772 435,382
Participant withdrawals................................ (964,227) (185,449) (117,678)
-------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 5,642,255 1,361,376 754,526
-------------- -------------- -------------
Net increase (decrease) in net assets.................. 6,769,304 1,793,534 608,747
NET ASSETS
Beginning of period.................................... 3,332,765 816,820 892,317
-------------- -------------- -------------
End of period.......................................... $ 10,102,069 $ 2,610,354 $ 1,501,064
============== ============== =============
WANGER
WANGER U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- -----------------
FROM OPERATIONS
Net investment income (loss)........................... $ (268,787) $ 67,572 $ (69)
Net realized gain (loss)............................... 3,040,574 28,287 7,984
Net unrealized appreciation (depreciation)............. 4,934,358 15,112,035 42,995
-------------- -------------- -------------
Net increase (decrease) resulting from operations...... 7,706,145 15,207,894 50,910
-------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 7,502,489 3,435,101 154,926
Participant transfers.................................. (622,831) 956,598 102,914
Participant withdrawals................................ (4,086,854) (1,563,997) (37,586)
-------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 2,792,804 2,827,702 220,254
-------------- -------------- -------------
Net increase (decrease) in net assets.................. 10,498,949 18,035,596 271,164
NET ASSETS
Beginning of period.................................... 31,236,667 11,211,868 27,392
-------------- -------------- -------------
End of period.......................................... $ 41,735,616 $ 29,247,464 $ 298,556
============== ============== =============
</TABLE>
See Notes to Financial Statements
38
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
TEMPLETON
TEMPLETON ASSET TEMPLETON DEVELOPING
ALLOCATION INTERNATIONAL MARKETS
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------- ------------------- ------------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss)........................... $ (305) $ (887) $ (2,308)
Net realized gain (loss)............................... 5,362 28,281 (584)
Net unrealized appreciation (depreciation)............. 26,220 129,839 117,427
------------- ------------- -------------
Net increase (decrease) resulting from operations...... 31,277 157,233 114,535
------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 59,531 188,339 140,700
Participant transfers.................................. 180,739 950,796 564,459
Participant withdrawals................................ (20,055) (78,924) (65,725)
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 220,215 1,060,211 639,434
------------- ------------- -------------
Net increase (decrease) in net assets.................. 251,492 1,217,444 753,969
NET ASSETS
Beginning of period.................................... 37,559 53,468 10,665
------------- ------------- -------------
End of period.......................................... $ 289,051 $ 1,270,912 $ 764,634
============= ============= =============
MUTUAL SHARES WANGER
INVESTMENTS WANGER TWENTY FOREIGN FORTY
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
-------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ (1,342) $ (2,874) $ (1,627)
Net realized gain (loss)............................... 382 12,711 7,285
Net unrealized appreciation (depreciation)............. 9,335 65,825 214,413
------------- ------------- -------------
Net increase (decrease) resulting from operations...... 8,375 75,662 220,071
------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 131,902 173,164 61,520
Participant transfers.................................. 245,705 492,271 341,129
Participant withdrawals................................ (28,647) (54,736) (20,037)
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 348,960 610,699 382,612
------------- ------------- -------------
Net increase (decrease) in net assets.................. 357,334 686,361 602,683
NET ASSETS
Beginning of period.................................... 53,771 - -
------------- ------------- -------------
End of period.......................................... $ 411,105 $ 686,361 $ 602,683
============= ============= =============
BANKERS FEDERATED
EAFE TRUST U.S. GOV'T
EQUITY INDEX DOW 30 SECURITIES II
SUBACCOUNT(3) SUBACCOUNT(4) SUBACCOUNT(5)
-------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 3,309 $ 6 $ (144)
Net realized gain (loss)............................... 6,860 - (0)
Net unrealized appreciation (depreciation)............. 18,079 22 214
------------- ------------- -------------
Net increase (decrease) resulting from operations...... 28,248 28 70
------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 25,625 - 2,203
Participant transfers.................................. 185,637 5,262 79,165
Participant withdrawals................................ (1,781) (8) (1,778)
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 209,481 5,254 79,590
------------- ------------- -------------
Net increase (decrease) in net assets.................. 237,729 5,282 79,660
NET ASSETS
Beginning of period.................................... - - -
------------- ------------- -------------
End of period.......................................... $ 237,729 $ 5,282 $ 79,660
============= ============= =============
</TABLE>
See Notes to Financial Statements
39
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
FEDERATED
HIGH INCOME JANUS
BOND FUND II EQUITY INCOME JANUS GROWTH
SUBACCOUNT(6) SUBACCOUNT(7) SUBACCOUNT(8)
------------------- ---------------------------------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss).......................... $ (287) $ (1) $ (16)
Net realized gain (loss).............................. (11) - 0
Net unrealized appreciation (depreciation)............ 3,106 209 2,162
------------- ------------- ------------
Net increase (decrease) resulting from operations..... 2,808 208 2,146
------------- ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits.................................. 298 - 2,047
Participant transfers................................. 177,083 13,201 175,407
Participant withdrawals............................... (982) (11) (93)
------------- ------------- ------------
Net increase (decrease) in net assets resulting
from participant transactions................. 176,399 13,190 177,361
------------- ------------- ------------
Net increase (decrease) in net assets................. 179,207 13,398 179,507
NET ASSETS
Beginning of period................................... - - -
------------- ------------- ------------
End of period......................................... $ 179,207 $ 13,398 $ 179,507
============= ============= ============
JANUS MORGAN STANLEY TECHNOLOGY
FLEXIBLE INCOME FOCUS EQUITY PORTFOLIO
SUBACCOUNT(9) SUBACCOUNT(10) SUBACCOUNT(11)
------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 8 $ - $ (12)
Net realized gain (loss)............................... (0) 1 (0)
Net unrealized appreciation (depreciation)............. (7) 74 2,402
------------- ------------- ------------
Net increase (decrease) resulting from operations...... 1 75 2,390
------------- ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... - - 314
Participant transfers.................................. 4,355 2,045 109,577
Participant withdrawals................................ (42) (47) (157)
------------- ------------- ------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 4,313 1,998 109,734
------------- ------------- ------------
Net increase (decrease) in net assets.................. 4,314 2,073 112,124
NET ASSETS
Beginning of period.................................... - - -
------------- ------------- ------------
End of period.......................................... $ 4,314 $ 2,073 $ 112,124
============= ============= ============
</TABLE>
Footnotes for Statement of Changes in Net Assets for the period ended
December 31, 1999
(1) From inception February 5, 1999 to December 31, 1999
(2) From inception February 9, 1999 to December 31, 1999
(3) From inception July 20, 1999 to December 31, 1999
(4) From inception December 23, 1999 to December 31, 1999
(5) From inception August 5, 1999 to December 31, 1999
(6) From inception August 2, 1999 to December 31, 1999
(7) From inception December 23, 1999 to December 31, 1999
(8) From inception December 20, 1999 to December 31, 1999
(9) From inception December 21, 1999 to December 31, 1999
(10) From inception December 21, 1999 to December 31, 1999
(11) From inception December 20, 1999 to December 31, 1999
See Notes to Financial Statements
40
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
GOODWIN
GOODWIN ENGEMANN MULTI-SECTOR
MONEY MARKET CAPITAL GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------- ------------
FROM OPERATIONS
<S> <C> <C> <C>
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
============ ============ ============
OAKHURST
STRATEGIC ABERDEEN OAKHURST
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
============ ============ ============
DUFF & PHELPS
REAL ESTATE SENECA ABERDEEN
SECURITIES 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
41
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
RESEARCH SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
----------- ------------- -------------
FROM OPERATIONS
<S> <C> <C> <C>
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
=========== =========== ===========
OAKHURST GROWTH HOLLISTER VALUE SCHAFER
AND INCOME EQUITY MID-CAP VALUE
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)..................................... $ (196,294) $ 19,117 $ (8)
Net realized gain (loss)......................................... 1,128,070 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
42
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT(3) SUBACCOUNT(4)
------------- -------------
FROM OPERATIONS
<S> <C> <C>
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
43
<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, Flex Edge Success and Phoenix
Individual Edge(SM) for individual variable life insurance and as Joint Edge for
variable first-to-die joint life insurance. The Account was established January
1, 1987 and currently consists of 34 Subaccounts, that invest in a corresponding
series (the "Series") of The Phoenix Edge Series Fund, Wanger Advisors Trust,
the Templeton Variable Products Series Fund, BT Insurance Funds Trust, Federated
Insurance Series, and Morgan Stanley Dean Witter Universal Funds, Inc. (the
"Funds"). As of December 31, 1999, 33 of the available 34 Subaccounts were
invested in a corresponding series.
Each Series has distinct investment objectives. The Phoenix-Goodwin Money
Market Series seeks to provide maximum current income consistent with capital
preservation and liquidity. The Phoenix-Engemann Capital Growth Series seeks to
achieve intermediate and long-term growth of capital, with income as a secondary
consideration. The Phoenix-Goodwin 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 Phoenix-Oakhurst 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 Phoenix-Aberdeen 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
Phoenix-Oakhurst Balanced Series seeks to provide reasonable income, long-term
growth and conservation of capital. The Phoenix-Duff & Phelps Real Estate
Securities 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
Phoenix-Seneca 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 Phoenix-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
Phoenix Research 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 Phoenix-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 Phoenix-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 Phoenix-Oakhurst Growth and Income
Series seeks as its investment objective, dividend growth, current income and
capital appreciation by investing in common stocks. The Phoenix-Hollister 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 Phoenix-Schafer Mid-Cap Value 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 Fund
is a capital growth common stock fund. The Templeton Asset Allocation Fund
invests in stocks and debt obligations of companies and governments and money
market instruments seeking high total return. The Templeton International Fund
invests in stocks and debt obligations of companies and governments outside the
United States. The Templeton Developing Markets Fund seeks long-term capital
appreciation by investing in equity securities of issuers in countries having
developing markets. The Mutual Shares Investments Fund is a capital appreciation
fund with income as a secondary objective. The Wanger Twenty Series invests in
growth common stock of U.S. companies with market capitalizations of $1 billion
to $10 billion, focusing its investments in 20 to 25 U.S. companies. The Wanger
Foreign Forty Series invests in equity securities of foreign companies with
market capitalizations of $1 billion to $10 billion, focusing its investments in
40 to 60 companies in the developed markets. The EAFE(R) Equity Index Fund seeks
to match the performance of the Morgan Stanley Capital International EAFE(R)
Index, by investing in a statistically selected sample of the securities found
in the matching fund. The Phoenix-Bankers Trust Dow 30 Series seeks to track the
total return of the Dow Jones Industrial Average(SM) before fund expenses. The
Federated Fund for U.S. Government Securities II Series seeks high current
income by investing in U.S. government securities, including mortgage-backed
securities issued by U.S. government agencies. The Federated High Income Bond
Fund II Series seeks high current income by investing in a diversified portfolio
of high-yield, lower-rated corporate bonds. The Phoenix-Janus Equity Income
Series seeks current income and long-term capital growth. The Phoenix-Janus
Growth Series seeks long-term capital growth, consistent with the preservation
of capital. The Phoenix-Janus Flexible Income Series seeks to obtain maximum
total return, consistent with the preservation of capital. The Phoenix-Morgan
Stanley Focus Equity Series seeks capital appreciation by investing in equity
securities. The Technology Portfolio seeks long-term capital appreciation by
investing in equity securities involved with technology and technology-related
industries. The Phoenix-Federated U.S. Government Bond Series seeks to maximize
total return by investing in debt obligations of the U.S. Government, its
agencies and instrumentalities. Policyowners also may direct the allocation of
their investments between the Account and the Guaranteed Interest Account of the
general account of Phoenix.
44
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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: Investment transactions are
recorded on the trade date. 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 from the Funds are recorded on the
ex-dividend date.
E. USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
F. RECLASSIFICATION: Certain prior year amounts have been reclassified to
conform with the current year presentation.
G. NEW POLICY: The Phoenix Individual Edge(SM) policy for individual variable
life insurance became available on September 29, 1999.
45
<PAGE>
<TABLE>
<CAPTION>
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, 1999 aggregated the
following:
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
The Phoenix Edge Series Fund:
<S> <C> <C>
Goodwin Money Market............................................. $33,495,067 $26,555,874
Engemann Capital Growth ......................................... 74,033,835 24,111,273
Goodwin Multi-Sector Fixed Income ............................... 5,868,418 3,244,388
Oakhurst Strategic Allocation ................................... 9,076,076 3,897,253
Aberdeen International .......................................... 18,752,892 8,032,462
Oakhurst Balanced ............................................... 6,346,417 3,363,406
Duff & Phelps Real Estate Securities ............................ 1,330,693 1,163,730
Seneca Strategic Theme .......................................... 12,653,974 785,927
Aberdeen New Asia ............................................... 1,134,066 429,531
Research Enhanced Index ......................................... 15,082,056 1,736,738
Engemann Nifty Fifty ............................................ 5,731,136 289,707
Seneca Mid-Cap Growth ........................................... 1,649,525 317,823
Oakhurst Growth and Income ...................................... 6,420,518 659,216
Hollister Value Equity .......................................... 1,748,541 249,747
Schafer Mid-Cap Value ........................................... 1,411,397 646,140
Wanger Advisors Trust:
Wanger U.S. Small Cap ........................................... 10,400,568 4,901,698
Wanger International Small Cap .................................. 4,742,166 1,836,452
Templeton Variable Products Series Fund:
Templeton Stock ................................................. 351,351 124,342
Templeton Asset Allocation ...................................... 271,700 46,422
Templeton International ......................................... 2,054,415 982,343
Templeton Developing Markets .................................... 808,607 171,019
Mutual Shares Investments ....................................... 393,638 45,785
Wanger Advisors Trust:
Wanger Twenty ................................................... 889,150 280,909
Wanger Foreign Forty ............................................ 432,653 51,333
BT Insurance Funds Trust:
EAFE Equity Index ............................................... 222,009 2,217
The Phoenix Edge Series Fund:
Bankers Trust Dow 30............................................. 5,260 -
Federated Insurance Series:
Federated U.S. Gov't Securities II .............................. 80,752 1,255
Federated High Income Bond Fund II .............................. 177,166 935
The Phoenix Edge Series Fund:
Janus Equity Income ............................................. 13,190 -
Janus Growth .................................................... 177,370 9
Janus Flexible Income ........................................... 4,363 41
Morgan Stanley Focus Equity...................................... 2,045 47
Morgan Stanley Dean Witter Universal Funds, Inc.:
Technology Portfolio ............................................ 109,761 27
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 4--PARTICIPANT ACCUMULATION UNIT TRANSACTIONS FOR THE PERIOD ENDED DECEMBER 31, 1999 (IN UNITS)
SUBACCOUNT
-----------------------------------------------------------------------------------------------------------
FLEX EDGE, FLEX EDGE GOODWIN ENGEMANN GOODWIN OAKHURST DUFF & PHELPS SENECA
SUCCESS & PHOENIX MONEY CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN OAKHURST REAL ESTATE STRATEGIC ABERDEEN
INDIVIDUAL EDGE MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED SECURITIES THEME NEW ASIA
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of period 18,764,711 58,070,016 7,146,215 12,360,921 24,601,859 12,394,644 2,939,763 4,370,324 2,170,887
Participant deposits 27,953,338 8,920,090 1,344,384 1,568,311 3,334,503 1,708,170 841,453 1,567,951 584,634
Participant transfers (20,200,183) 312,980 3,872 142,045 (839,990) 466,023 (601,799) 3,457,469 474,138
Participant withdrawals (4,552,133) (6,342,974) (780,831) (1,128,849) (2,330,455)(1,486,306) (272,453) (688,258) (200,630)
---------- ---------- ------------ ---------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 21,965,733 60,960,112 7,713,640 12,942,428 24,765,917 13,082,531 2,906,964 8,707,486 3,029,029
========== ========== ============ =========== ============= ========== ============= ========= =========
GOODWIN ENGEMANN GOODWIN OAKHURST DUFF & PHELPS SENECA
MONEY CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN OAKHURST REAL ESTATE STRATEGIC ABERDEEN
JOINT EDGE MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED SECURITIES THEME NEW ASIA
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 681,030 2,968,505 318,985 493,297 1,259,824 571,300 206,022 459,009 156,871
Participant deposits 1,912,344 775,545 87,126 117,706 293,147 129,765 86,734 172,388 62,272
Participant transfers (1,105,218) 74,557 (6,514) (11,425) (9,104) (84,914) (22,474) 185,351 (6,604)
Participant withdrawals (316,180) (476,097) (53,999) (68,444) (171,042) (60,107) (47,675) (106,493) (29,525)
---------- ---------- ------------ ---------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 1,171,976 3,342,510 345,598 531,134 1,372,825 556,044 222,607 710,255 183,014
========== ========== ============ =========== ============= ========== ============= ========= =========
WANGER
FLEX EDGE, FLEX EDGE RESEARCH ENGEMANN SENECA OAKHURST HOLLISTER SCHAFER INTER-
SUCCESS & PHOENIX ENHANCED NIFTY MID-CAP GROWTH AND VALUE MID-CAP WANGER U.S. NATIONAL TEMPLETON
INDIVIDUAL EDGE INDEX FIFTY GROWTH INCOME EQUITY VALUE SMALL CAP SMALL CAP STOCK
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 8,854,127 1,338,048 739,501 2,624,544 694,612 973,879 20,637,042 9,044,236 27,527
Participant deposits 2,964,456 1,068,340 406,906 1,746,319 433,099 491,001 4,520,028 2,098,693 162,970
Participant transfers 6,184,903 3,105,959 700,507 3,149,035 843,409 456,676 (614,474) 212,261 104,654
Participant withdrawals (1,474,710) (425,892) (122,229) (678,841) (144,810) (125,623) (2,455,459) (935,725) (62,981)
---------- ---------- ------------ ---------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 16,528,776 5,086,455 1,724,685 6,841,057 1,826,310 1,795,933 22,087,137 10,419,465 232,170
========== ========== ============ =========== ============= ========== ============ ========== =========
WANGER
RESEARCH ENGEMANN SENECA OAKHURST HOLLISTER SCHAFER INTER-
ENHANCED NIFTY MID-CAP GROWTH AND VALUE MID-CAP WANGER U.S. NATIONAL TEMPLETON
JOINT EDGE INDEX FIFTY GROWTH INCOME EQUITY VALUE SMALL CAP SMALL CAP STOCK
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 287,730 50,544 62,386 160,364 53,394 39,582 1,090,407 631,151 7
Participant deposits 202,209 73,307 44,243 173,719 45,265 53,636 446,923 212,857 2,773
Participant transfers 219,285 194,347 33,474 173,119 35,912 49,425 (24,997) 71,943 500
Participant withdrawals (95,971) (50,774) (20,051) (76,304) (22,963) (23,116) (203,150) (101,647) (598)
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 613,253 267,424 120,052 430,898 111,608 119,527 1,309,183 814,304 2,682
========== ========== ============ =========== ============= ========== ============= ========= =========
FEDERATED
FLEX EDGE, FLEX EDGE TEMPLETON TEMPLETON TEMPLETON MUTUAL WANGER BANKERS U.S. GOV'T
SUCCESS & PHOENIX ASSET INTER- DEVELOPING SHARES WANGER FOREIGN EAFE EQUITY TRUST SECURITIES
INDIVIDUAL EDGE ALLOCATION NATIONAL MARKETS INVESTMENTS TWENTY FORTY INDEX DOW 30 II
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 37,125 48,772 9,999 54,032 - - - - -
Participant deposits 54,848 159,501 99,633 123,591 135,991 42,695 23,991 - 2,031
Participant transfers 162,049 831,226 389,495 224,829 374,340 287,804 166,371 5,249 76,174
Participant withdrawals (20,462) (65,860) (40,038) (28,918) (33,888) (17,034) (1,552) (8) (1,714)
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 233,560 973,639 459,089 373,534 476,443 313,465 188,810 5,241 76,491
========== ========== ============ =========== ============= ========== ============= ========= =========
FEDERATED
TEMPLETON TEMPLETON TEMPLETON MUTUAL WANGER BANKERS U.S. GOV'T
ASSET INTER- DEVELOPING SHARES WANGER FOREIGN EAFE EQUITY TRUST SECURITIES
JOINT EDGE ALLOCATION NATIONAL MARKETS INVESTMENTS TWENTY FORTY INDEX DOW 30 II
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 104 2,643 75 - - - - - -
Participant deposits 2,163 8,500 1,927 1,233 4,104 166 692 - 135
Participant transfers 476 17,758 21,497 6,716 24,814 4,134 11,598 - 2,188
Participant withdrawals (641) (3,051) (7,712) (509) (9,291) (363) (108) - (37)
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 2,102 25,850 15,787 7,440 19,627 3,937 12,182 - 2,286
========== ========== ============ =========== ============= ========== ============= ========= =========
FEDERATED
HIGH
FLEX EDGE, FLEX EDGE INCOME JANUS JANUS MORGAN
SUCCESS & PHOENIX BOND EQUITY JANUS FLEXIBLE STANLEY TECHNOLOGY
INDIVIDUAL EDGE FUND II INCOME GROWTH INCOME FOCUS EQUITY PORTFOLIO
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding,
beginning of period - - - - - -
Participant deposits 302 - 1,976 - - 300
Participant transfers 180,481 12,460 169,757 4,354 2,046 84,516
Participant withdrawals (995) (11) (130) (42) (46) (124)
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding, end
of period 179,788 12,449 171,603 4,312 2,000 84,692
========== ========== ============ =========== ============= ==========
FEDERATED
HIGH
INCOME JANUS JANUS MORGAN
BOND EQUITY JANUS FLEXIBLE STANLEY TECHNOLOGY
JOINT EDGE FUND II INCOME GROWTH INCOME FOCUS EQUITY PORTFOLIO
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding,
beginning of period - - - - - -
Participant deposits - - - - - -
Participant transfers - 755 - - - 19,693
Participant withdrawals - - 568 - - (25)
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding, end
of period - 755 568 - - 19,668
========== ========== ============ =========== ============= ==========
</TABLE>
47
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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 the policy value
reduced by an amount equal to the surrender charge with interest of [4% due in
policy years 1-10, 3% due in policy years 11-15, 2 1/2% in policy years 16 and
thereafter for Flex Edge Success policies], [4% due in policy years 1-10, 3% due
in policy years 11-15, 2 1/4% in policy years 16 and thereafter for Phoenix
Individual Edge(SM)] and [8% due in policy years 1-10 and 7% in policy years 11
and thereafter for Flex Edge and Joint Edge policies] 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 and Phoenix
Individual Edge(SM) policies, and 6% for Joint Edge and Flex Edge policies. Loan
repayments result in a transfer of collateral back to the Account.
NOTE 6--INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
Phoenix and its indirect, majority owned subsidiary, Phoenix Equity Planning
Corporation ("PEPCO"), 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 $36,655,692 during the year ended December 31, 1999. 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.
PEPCO is the principal underwriter and distributor of the Account. PEPCO 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 and Phoenix Individual Edge(SM), 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.
48
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO] PRICEWATERHOUSECOOPERS
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 statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts:
Goodwin Money Market, Engemann Capital Growth, Goodwin Multi-Sector Fixed
Income, Oakhurst Strategic Allocation, Aberdeen International, Oakhurst
Balanced, Duff & Phelps Real Estate Securities, Seneca Strategic Theme, Aberdeen
New Asia, Research Enhanced Index, Engemann Nifty Fifty, Seneca Mid-Cap Growth,
Oakhurst Growth and Income, Hollister Value Equity, Schafer Mid-Cap Value,
Wanger U.S. Small Cap, Wanger International Small Cap, Templeton Stock,
Templeton Asset Allocation, Templeton International, Templeton Developing
Markets, Mutual Shares Investments, Wanger Twenty, Wanger Foreign Forty, EAFE
Equity Index, Bankers Trust Dow 30, Federated U.S. Government Securities II,
Federated High Income Bond Fund II, Janus Equity Income, Janus Growth, Janus
Flexible Income, Morgan Stanley Focus Equity and Technology Portfolio
(constituting the Phoenix Home Life Variable Universal Life Account, hereafter
referred to as the "Account") at December 31, 1999, 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 accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Account's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at December 31, 1999 by
correspondence with fund custodians or transfer agents, provide a reasonable
basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
March 10, 2000
49
<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
100 Pearl Street
Hartford, Connecticut 06103
- ----------------------------
50
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
51
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants ........................................53
Consolidated Balance Sheet at December 31, 1999 and 1998..................54
Consolidated Statement of Income, Comprehensive Income and Equity
for the Years Ended December 31, 1999, 1998 and 1997 ....................55
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ........................................56
Notes to Consolidated Financial Statements ............................57-93
52
<PAGE>
[LOGO] PRICEWATERHOUSECOOPERS
- --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
100 Pearl Street
Hartford CT 06103-4508
Telephone (860)241 7000
Facsimile (860)241 7590
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
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,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, 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 20, the Company has revised the accounting for venture
capital partnerships.
/S/PricewaterhouseCoopers LLP
February 15, 2000
53
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
ASSETS
Investments:
<S> <C> <C>
Held-to-maturity debt securities, at amortized cost $ 1,990,169 $ 1,725,439
Available-for-sale debt securities, at fair value 5,506,779 5,987,426
Equity securities, at fair value 461,613 301,649
Mortgage loans 716,831 797,343
Real estate 92,027 91,975
Policy loans 2,042,557 2,008,259
Venture capital partnerships 338,122 191,162
Other invested assets 300,474 232,131
Short-term investments 133,367 185,983
------------------- -----------------
Total investments 11,581,939 11,521,367
Cash and cash equivalents 187,610 115,187
Accrued investment income 174,894 164,812
Deferred policy acquisition costs 1,306,728 1,049,934
Premiums, accounts and notes receivable 119,231 61,489
Reinsurance recoverables 18,772 18,908
Property and equipment, net 137,758 142,153
Goodwill and other intangible assets, net 593,267 477,895
Net assets of discontinued operations (Note 11) 187,595 283,793
Other assets 51,434 36,940
Separate account assets 5,923,888 4,798,949
------------------ -----------------
Total assets $ 20,283,116 $ 18,671,427
================== =================
LIABILITIES
Policy liabilities and accruals $ 11,438,032 $ 11,110,280
Notes payable 499,392 386,575
Deferred income taxes 86,262 116,104
Other liabilities 474,179 430,956
Separate account liabilities 5,923,888 4,798,949
------------------- -----------------
Total liabilities 18,421,753 16,842,864
------------------- -----------------
Contingent liabilities (Note 18)
MINORITY INTEREST IN NET ASSETS
OF CONSOLIDATED SUBSIDIARIES 100,112 92,008
------------------- -----------------
EQUITY
Retained earnings 1,731,146 1,642,264
Accumulated other comprehensive income 30,105 94,291
------------------- -----------------
Total equity 1,761,251 1,736,555
------------------- -----------------
Total liabilities and equity $ 20,283,116 $ 18,671,427
=================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
54
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
REVENUES
<S> <C> <C> <C>
Premiums $ 1,134,207 $ 1,154,730 $ 1,076,157
Insurance and investment product fees 591,786 493,415 367,540
Net investment income 950,344 851,603 714,367
Net realized investment gains 35,675 58,202 111,043
-------------- --------------- ------------
Total revenues 2,712,012 2,557,950 2,269,107
-------------- --------------- ------------
BENEFITS AND EXPENSES
Policy benefits and increase in policy liabilities 1,352,419 1,403,166 1,201,929
Policyholder dividends 360,509 351,653 343,611
Amortization of deferred policy acquisition costs 146,603 137,663 102,617
Amortization of goodwill and other intangible assets 37,963 23,126 9,366
Interest expense 32,659 25,911 24,300
Other operating expenses 520,603 428,756 367,016
-------------- --------------- ------------
Total benefits and expenses 2,450,756 2,370,275 2,048,839
-------------- --------------- ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST 261,256 187,675 220,268
Income taxes 107,881 65,046 47,241
-------------- --------------- ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST 153,375 122,629 173,027
Minority interest in net income of consolidated subsidiaries 10,064 10,512 10,623
-------------- --------------- ------------
NET INCOME FROM CONTINUING OPERATIONS 143,311 112,117 162,404
DISCONTINUED OPERATIONS (NOTE 11)
Gain from operations, net of income taxes 17,555 25,012 7,248
Loss on disposal, net of income taxes (71,984)
-------------- --------------- ------------
NET INCOME 88,882 137,129 169,652
-------------- --------------- ------------
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF INCOME TAXES
Unrealized (losses) gains on securities (61,246) (46,967) 98,287
Reclassification adjustment for net realized gains
included in net income (1,452) (12,980) (30,213)
Minimum pension liability adjustment (1,488) (1,526) (2,101)
-------------- --------------- ------------
Total other comprehensive (loss) income (64,186) (61,473) 65,973
-------------- --------------- ------------
COMPREHENSIVE INCOME 24,696 75,656 235,625
-------------- --------------- ------------
EQUITY, BEGINNING OF YEAR - RESTATED (NOTE 20) 1,736,555 1,660,899 1,425,274
-------------- --------------- ------------
EQUITY, END OF YEAR $ 1,761,251 $ 1,736,555 $ 1,660,899
============== ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
55
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
CASH FLOW FROM CONTINUING OPERATIONS ACTIVITIES
<S> <C> <C> <C>
Net income from continuing operations $ 143,311 $ 112,117 $ 162,404
Net (loss) income from discontinued operations (54,429) 25,012 7,248
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY CONTINUING OPERATIONS:
Net realized investment gains (35,675) (58,202) (111,465)
Amortization and depreciation 69,367 51,076 61,876
Equity in undistributed earnings of affiliates and partnerships (138,215) (44,119) (38,588)
Deferred income taxes (benefit) (14,102) 398 25,298
(Increase) in receivables (67,688) (23,846) (46,178)
Increase (decrease) in deferred policy acquisition costs 3,493 (26,945) (44,406)
Increase in policy liabilities and accruals 329,660 368,528 494,462
Increase in other assets/other liabilities, net 53,901 58,795 54,230
Other, net 2,752 1,660 7,752
----------- ------------ ------------
Net cash provided by operating activities of continuing operations 346,804 439,462 565,385
Net cash (used for) provided by operating activities of
discontinued operations (105,537) 104,512 88,907
----------- ------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Proceeds from sales, maturities or repayments
of available-for-sale debt securities 1,702,889 1,322,381 1,082,132
Proceeds from maturities or repayments of held-to-maturity debt
securities 186,710 267,746 200,946
Proceeds from disposals of equity securities 163,530 45,204 51,373
Proceeds from mortgage loan maturities or repayments 124,864 200,419 164,213
Proceeds from sale of real estate and other invested assets 37,952 439,917 213,224
Proceeds from distributions of venture capital partnerships 26,730 18,550 5,650
Proceeds from sale of subsidiaries and affiliates 15,000 16,300
Purchase of available-for-sale debt securities (1,672,705) (2,400,058) (1,547,855)
Purchase of held-to-maturity debt securities (427,472) (585,370) (183,371)
Purchase of equity securities (162,391) (85,002) (88,573)
Purchase of subsidiaries (187,621) (6,647) (246,400)
Purchase of mortgage loans (25,268) (75,974) (140,831)
Purchase of real estate and other invested assets (71,407) (134,224) (50,599)
Purchase of venture capital partnerships (108,461) (67,200) (39,994)
Change in short term investments, net 52,616 855,117 23,135
Increase in policy loans (34,298) (21,532) (59,699)
Capital expenditures (20,505) (25,052) (44,380)
Other investing activities, net 1,697 (6,540 (1,750)
------------- -------------- --------------
Net cash used for investing activities of continuing operations (398,140) (241,965) (662,779)
Net cash provided by (used for) investing activities of
discontinued
operations 157,267 (101,532) (93,239)
------------- -------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (1,908) (11,124) (17,902)
Proceeds from repayment of securities sold
subject to repurchase agreements 28,398 (137,473) 137,473
Proceeds from borrowings 124,500 136 215,359
Repayment of borrowings (11,683) (55,589) (243,293)
Dividends paid to minority shareholders in consolidated (4,240) (4,938) (6,895)
Other financing activities (361) (5,664) (1,250)
------------- -------------- --------------
Net cash provided by (used for) financing activities of continuing
operations 134,706 (214,652) 83,492
Net cash (used for) provided by financing activities of discontinued
operations (62,677) (7,739) 4,489
------------- -------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS 83,370 (17,155) (13,902)
NET CHANGE IN CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS (10,947) (4,759) 157
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 115,187 137,101 150,846
------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 187,610 $ 115,187 $ 137,101
============= ============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 106,372 $ 44,508 $ 76,167
Interest paid on indebtedness $ 34,791 $ 32,834 $ 32,300
</TABLE>
The accompanying notes are an integral part of these statements.
56
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company and its subsidiaries (Phoenix)
market a wide range of insurance and investment products and services
including individual participating life insurance, term, universal and
variable life insurance, annuities, and investment advisory and mutual fund
distribution services. These products and services are distributed among
three reportable segments: Individual, Investment Management and Corporate &
Other. See Note 10 - "Segment Information."
Additionally, in 1999, Phoenix discontinued the operations of four
of its business units: the Reinsurance Operations, the Property and
Casualty Brokerage Operations, the Real Estate Management
Operations and the Group Insurance Operations. See Note 11 -
"Discontinued Operations."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Phoenix and
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 accounting principles generally accepted in the United States (GAAP).
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Significant
estimates used in determining insurance and contractholder liabilities,
related reinsurance recoverables, income taxes, contingencies and valuation
allowances for investment assets are discussed throughout the Notes to
Consolidated Financial Statements. Significant inter-company accounts and
transactions have been eliminated. Amounts for 1998 and 1997 have been
retroactively restated to account for income from venture capital
partnership investments and leveraged lease investments. See Note 20 -
"Prior Period Adjustments" for venture capital investment and leveraged
lease investment information. Certain reclassifications have been made to
the 1998 and 1997 amounts to conform with the 1999 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, mortgage-backed and
asset-backed securities. Phoenix classifies its debt securities as either
held-to-maturity or available-for-sale investments. Debt securities
held-to-maturity consist of private placement bonds reported at amortized
cost, net of impairments, that management intends and has the ability to
hold until maturity. Debt securities available-for-sale are reported at fair
value with unrealized gains or losses included in equity and consist of
public bonds and preferred stocks that management may not hold until
maturity. Debt securities are considered impaired when a decline in value is
considered to be other than temporary.
57
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the mortgage-backed and asset-backed bond portion of the debt security
portfolio, Phoenix recognizes income using a constant effective yield based
on anticipated prepayments and the estimated economic life of the
securities. When actual prepayments differ significantly from anticipated
prepayments, the effective yield is recalculated to reflect actual payments
to date, and anticipated future payments and any resulting adjustment is
included in net investment income.
Equity securities are classified as available-for-sale and are reported at
fair value, based principally on their quoted market prices, with unrealized
gains or losses included in equity. Equity securities are considered
impaired when a decline in value is considered to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances, net
of valuation reserves on impaired mortgages. A mortgage loan is considered
to be impaired if management believes it is probable that Phoenix will be
unable to collect all amounts of contractual interest and principal as
scheduled in the loan agreement. An impaired mortgage loan's fair value is
measured based on the present value of future cash flows discounted at the
loan's observable market price or at the fair value of the collateral. If
the fair value of a mortgage loan is less than the recorded investment in
the loan, the difference is recorded as a valuation reserve.
Real estate, all of which is held for sale, is carried at the lower of cost
or current fair value less costs to sell. Fair value for real estate is
determined taking into consideration one or more of the following factors:
property valuation techniques utilizing discounted cash flows at the time of
stabilization including capital expenditures and stabilization costs; sales
of comparable properties; geographic location of the property and related
market conditions; and disposition costs.
Policy loans are generally carried at their unpaid principal balances and
are collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
fair value.
Venture capital partnership and other partnership interests are carried at
cost adjusted for Phoenix's equity in undistributed earnings or losses since
acquisition, less allowances for other than temporary declines in value.
These earnings or losses are included in investment income. Venture capital
partnerships generally account for the underlying investments held in the
partnerships at fair value. These investments can include public and private
common and preferred stock, notes, warrants and other investments.
Investments that are publicly traded are generally valued at closing market
prices. Investments that are not publicly traded, which are usually subject
to restrictions on resale, are generally valued at cost or at estimated fair
value, as determined in good faith by the general partner after giving
consideration to operating results, financial conditions, recent sales
prices of issuers' securities and other pertinent information. Some general
partners will discount the fair value of private investments held to reflect
these restrictions. These valuations subject the earnings to volatility.
Beginning in 1999, Phoenix includes equity in undistributed unrealized
capital gains and losses on investments held in the venture capital
partnerships in net investment income. Prior to 1999, these amounts were not
recorded. Prior years have been restated to reflect this change. See Note 20
- "Prior Period Adjustments" for additional information on venture capital
partnership investments.
58
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Other invested assets include leveraged lease investments. These investments
represent the net of the estimated residual value of the lease assets,
rental receivables, and unearned and deferred income to be allocated over
the lease term. Investment income is calculated using the interest method
and is recognized only in periods in which the net investment is positive.
Realized investment gains and losses, other than those related to separate
accounts for which Phoenix does not bear the investment risk, are determined
by the specific identification method and reported as a component of
revenue. A realized investment loss is recorded when an investment valuation
reserve is determined. Valuation reserves are netted against the asset
categories to which they apply and changes in the valuation reserves are
included in realized investment gains and losses. Unrealized investment
gains and losses on debt securities and equity securities classified as
available-for-sale are included as a component of equity, net of deferred
income taxes and deferred policy acquisition costs.
FINANCIAL INSTRUMENTS
In the normal course of business, Phoenix enters into transactions involving
various types of financial instruments including debt, investments such as
debt securities, mortgage loans and equity securities, off-balance sheet
financial instruments such as investment and loan commitments, financial
guarantees, interest rate swaps, interest rate caps, interest rate floors
and swaptions. These instruments have credit risk and also may be subject to
risk of loss due to interest rate and market fluctuations.
Phoenix enters into interest rate swap agreements to reduce market risks
from changes in interest rates. Phoenix does not enter into interest rate
swap agreements for trading purposes. Under interest rate swap agreements,
Phoenix exchanges cashflows with another party, at specified intervals, for
a set length of time based on a specified notional principal amount.
Typically, one of the cash flow streams is based on a fixed interest rate
set at the inception of the contract, and the other is a variable rate that
periodically resets. Generally, no premium is paid to enter into the
contract and no payment of principal is made by either party. The amounts to
be received or paid on these swap agreements are accrued and recognized in
net investment income.
Phoenix enters into interest rate floor, interest rate cap and swaption
contracts as a hedge for its assets and liabilities against substantial
changes in interest rates. Phoenix does not enter into interest rate floor,
interest rate cap and swaption contracts for trading purposes. Interest rate
floor and interest rate cap agreements are contracts with a counterparty
which require the payment of a premium and give Phoenix the right to receive
over the maturity of the contract, the difference between the floor or cap
interest rate and a market interest rate on specified future dates based on
an underlying notional principal. Swaption contracts are options to enter
into an interest rate swap transaction on a specified future date and at a
specified price. Upon the exercise of a swaption, Phoenix would either
receive a swap agreement at the pre-specified terms or cash for the market
value of the swap. Phoenix pays the premium for these instruments on a
quarterly basis over the maturity of the contract, and recognizes these
payments in net investment income.
Phoenix enters into foreign currency swap agreements to hedge against
fluctuations in foreign currency exposure. Under these agreements, Phoenix
agrees to exchange with another party, principal and periodic interest
payments denominated in foreign currency for payments denominated in U.S.
dollars. The amounts to be received or paid on these foreign currency swap
agreements is recognized in net investment income. To reduce counterparty
credit risks and
59
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
diversify counterparty exposure, Phoenix only enters into derivative
contracts with highly rated financial institutions.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and money market
instruments.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, underwriting,
distribution and policy issue expenses, all of which vary with and are
primarily related to the production of new business, are deferred. Deferred
policy acquisition costs (DAC) are subject to recoverability testing at the
time of policy issue and loss recognition at the end of each accounting
period. For individual participating life insurance policies, deferred
policy acquisition costs are amortized in proportion to historical and
anticipated gross margins. Deviations from expected experience are reflected
in earnings in the period such deviations occur.
For universal life insurance policies, 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 their estimated lives.
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
60
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
investment earnings on their fund balances, less administrative charges.
Universal life fund balances are also assessed mortality charges.
Liabilities for outstanding claims, losses and loss adjustment expenses are
amounts estimated to cover incurred losses. These liabilities are based on
individual case estimates for reported losses and estimates of unreported
losses based on past experience.
Unearned premiums relate primarily to individual participating life
insurance as well as group life, accident and health insurance premiums. The
premiums are reported as earned on a pro-rata basis over the contract
period. The unexpired portion of these premiums is recorded as unearned
premiums.
PREMIUM AND FEE REVENUE AND RELATED EXPENSES
Life insurance premiums, other than premiums for universal life and certain
annuity contracts, are recorded as premium revenue on a pro-rata basis over
each policy year. Benefits, losses and related expenses are matched with
premiums over the related contract periods. Revenues for investment-related
products consist of net investment income and contract charges assessed
against the fund values. Related benefit expenses primarily consist of net
investment income credited to the fund values after deduction for investment
and risk charges. Revenues for universal life products consist of net
investment income and mortality, administration and surrender charges
assessed against the fund values during the period. Related benefit expenses
include universal life benefit claims in excess of fund values and net
investment income credited to universal life fund values.
POLICYHOLDERS' DIVIDENDS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of Phoenix. The
amount of policyholders' dividends to be paid is determined annually by
Phoenix's board of directors. The aggregate amount of policyholders'
dividends is related to the actual interest, mortality, morbidity and
expense experience for the year and Phoenix's judgment as to the appropriate
level of statutory surplus to be retained. At the end of the reporting
period, Phoenix establishes a dividend liability for the pro-rata portion of
the dividends payable on the next anniversary date of each policy. Phoenix
also establishes a liability for termination dividends.
INCOME TAXES
Phoenix and its eligible affiliated companies have elected to file a
life/nonlife consolidated federal income tax return for 1999 and prior
years. Entities included within the consolidated group are segregated into
either a life insurance or non-life insurance company subgroup. The
consolidation of these subgroups is subject to certain statutory
restrictions in the percentage of eligible non-life tax losses that can be
applied to offset life company taxable income.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities and accruals, policy acquisition expenses, investment impairment
reserves, reserves for postretirement benefits and unrealized gains or
losses on investments.
61
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
As a mutual life insurance company, Phoenix is required to reduce its income
tax deduction for policyholder dividends by the differential earnings
amount, defined as the difference between the earnings rates of stock and
mutual companies applied against an adjusted base of policyholders' surplus.
RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1999, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS
No. 133". Because of the complexities associated with transactions involving
derivative instruments and their prevalent use as hedging instruments and,
because of the difficulties associated with the implementation of Statement
133, the effective date of SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" was delayed until fiscal years beginning
after June 15, 2000. SFAS No. 133, initially issued on June 15, 1998,
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it
is, the type of hedge transaction. For fair-value hedge transactions in
which Phoenix is hedging changes in an asset's, liability's or firm
commitment's fair value, changes in the fair value of the derivative
instrument will generally be offset in the income statement by changes in
the hedged item's fair value. For cash-flow hedge transactions, in which
Phoenix is hedging the variability of cashflows related to a variable-rate
asset, liability, or a forecasted transaction, changes in the fair value of
the derivative instrument will be reported in other comprehensive income.
The gains and losses on the derivative instrument that are reported in other
comprehensive income will be reclassified as earnings in the period in which
earnings are impacted by the variability of the cash flows of the hedged
item. The ineffective portion of all hedges will be recognized in current
period earnings.
Phoenix has not yet determined the impact that the adoption of SFAS 133 will
have on its earnings or statement of financial position.
Phoenix adopted 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 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," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits," and SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other than
Pensions". The new statement revises and standardizes
62
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
employers' disclosures about pension and other postretirement benefit plans.
Adoption of this statement did not affect the results of operations or
financial position of Phoenix.
On January 1, 1999, Phoenix adopted Statement of Position (SOP) 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 provides guidance for assessments related to
insurance activities. The adoption of SOP 97-3 did not have a material
impact on Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides
guidance for determining when an entity should capitalize or expense
external and internal costs of computer software developed or obtained for
internal use. The adoption of SOP 98-1 did not have a material impact on
Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires that start-up costs capitalized
prior to January 1, 1999 should be written off and any future start-up costs
be expenses as incurred. The adoption of SOP 98-5 did not have a material
impact on Phoenix's results from operations or financial position.
3. SIGNIFICANT TRANSACTIONS
DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units; the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. Disclosures concerning the financial impact of these
transactions are contained in Note 11 - "Discontinued Operations."
PFG HOLDINGS, INC.
On October 29, 1999, PM Holdings, a wholly-owned subsidiary of Phoenix,
purchased 100% of PFG Holdings, Inc. 8% cumulative preferred stock
convertible into a 67% interest in common stock for $5 million in cash. In
addition Phoenix has an option to purchase all the outstanding common stock
during year six at a value to 80% of the appraised value of the common stock
at that time. As of the statement date this option had not been executed.
Since the investment represents a majority interest Phoenix has consolidated
this entity for GAAP as if the preferred stock had been converted and
established a minority interest for outside shareholders. The transaction
resulted in goodwill of $3.8 million to be amortized over 10 years.
PFG Holdings was formed to purchase three of The Guarantee Life Companies'
operating subsidiaries: AGL Life Assurance Company, PFG Distribution Company
and Philadelphia Financial Group. These subsidiaries develop, market and
underwrite specialized private placement variable life and annuity products.
AGL Life Assurance Company must maintain at least $10 million of capital and
surplus to satisfy certain regulatory minimum capital requirements. PM
Holdings provided financing at the purchase date of $11 million to PFG
Holdings in order for AGL Life Assurance to meet this minimum requirement.
The debt is an 8.34% senior secured note maturing in 2009.
63
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EMPRENDIMIENTO COMPARTIDO, S.A., (EMCO)
At January 1, 1999 PM Holdings held 9.1 million shares of EMCO, representing
a 35% ownership interest the Argentine financial services company that
provides pension management, annuities and life insurance products. On June
23, 1999, PM Holdings became the majority owner of EMCO when it purchased
13.9 million shares of common stock from the Banco del Suquia, S.A. for
$29.5 million, plus $10.0 million for a five year covenant not-to-compete.
Payment for the stock will be made in three installments: $10.0 million, 180
days from closing; $10.0 million, 360 days from closing; and $9.5 million,
540 days from closing, all subject to interest of 7.06%. The covenant was
paid at the time of closing.
In addition, EMCO purchased, for its treasury, 3.0 million shares of its
outstanding common stock held by two banks. This, in combination with the
purchase described above, increased PM Holdings ownership interest from 35%
to 100% of the then outstanding stock.
On November 12, 1999, PM Holdings sold 11.5 million shares (50% interest) of
EMCO common stock for $40.0 million generating a pre-tax gain of $11.3
million. PM Holdings received $15.0 million in cash plus a $9.0 million
two-year 8% interest bearing note, and a $16.0 million five-year 8% interest
bearing note. PM Holdings uses the equity method of accounting to account
for its remaining 50% interest in EMCO.
After the sale, the remaining excess of the purchase price over the fair
value of the acquired net tangible assets totaled $17.0 million. That
consisted of a covenant not-to-compete of $5.0 million which is being
amortized over five years and goodwill of $12.0 million which is being
amortized over ten years.
PHOENIX NEW ENGLAND TRUST
On October 29, 1999, PM Holdings indirectly acquired 100% of the common
stock of New London Trust, a banking subsidiary of Sun Life of Canada, for
$30.0 million in cash. New London Trust, renamed Phoenix New England Trust,
is a New Hampshire based federal savings bank that operates a trust division
with assets under management of approximately $1 billion. Immediately
following this acquisition, on November 1, 1999, PM Holdings sold the New
London Trust's New Hampshire retail banking operations to Lake Sunapee Bank
and Mascoma Savings Bank in New Hampshire and the Connecticut branches to
Westbank Corporation, for a total of $25.2 million in cash. No gain or loss
was recognized on this sale. PM Holdings retained the trust business and
four trust offices of New London Trust, located in New Hampshire and
Vermont.
LOMBARD INTERNATIONAL ASSURANCE, S.A.
On November 5, 1999, PM Holdings purchased 12% of the common stock of
Lombard International Assurance, S.A., a Pan-European financial services
company, for $29.1 million in cash. Lombard provides investment-linked
insurance products to high-net-worth individuals in eight European
countries. This investment is classified as equity securities in the
Consolidated Balance Sheet.
64
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PHOENIX INVESTMENT PARTNERS, LTD.
On March 1, 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 Zweig Group managed approximately $3.3 billion of assets as of
December 31,1999.
On December 3, 1998, Phoenix Investment Partners completed the sale of its
49% interest in Canadian investment firm Beutel, Goodman & Company, Ltd. for
$47.0 million. Phoenix Investment Partners received $37.0 million in cash
and a $10.0 million three-year interest bearing note. The transaction
resulted in a before-tax gain of approximately $17.5 million. Phoenix's
interest represents an after-tax realized gain of approximately $6.8
million.
Phoenix owns approximately 60% of the outstanding Phoenix Investment
Partners' common stock. In addition, Phoenix owns 45% of Phoenix Investment
Partners' convertible subordinated debentures.
ABERDEEN ASSET MANAGEMENT PLC
On February 18, 1999, PM Holdings purchased an additional 15.1 million
shares of the common stock of Aberdeen Asset Management for $29.4 million.
As of December 31, 1999, PM Holdings owned 21% of the outstanding common
stock of Aberdeen Asset Management, a Scottish asset management firm. The
investment is reported on the equity basis and classified as other invested
assets in the Consolidated Balance Sheet.
DIVIDEND SCALE REDUCTION
In consideration of the decline of interest rates in the financial markets,
Phoenix's Board of Directors voted in October of 1998 to adopt a reduced
dividend scale, effective for dividends payable on or after January 1, 1999.
Dividends for individual participating policies were reduced 60 basis points
in most cases, an average reduction of approximately 8%. The effect was a
decrease of approximately $15.7 million in the policyholder dividends
expense in 1998. In October 1999, Phoenix's Board of Directors voted to
maintain the dividend scale for dividends payable on or after January 1,
2000.
REAL ESTATE SALES
On December 15, 1998, Phoenix sold 47 commercial real estate properties with
a carrying value of $269.8 million, and 4 joint venture real estate
partnerships with a carrying value of $10.5 million, for approximately $309
million in cash. This transaction, along with the sale of 18 other
properties and partnerships during 1998, which had a carrying value of $36.7
million, resulted in pre-tax gains of approximately $67.5 million. As of
December 31, 1999, Phoenix had 3 commercial real estate properties remaining
with a carrying value of $42.9 million and 5 joint venture real estate
partnerships with a carrying value of $49.1 million.
65
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
DEBT AND EQUITY SECURITIES
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
DEBT SECURITIES
HELD-TO-MATURITY:
<S> <C> <C> <C> <C>
State and political subdivision bonds $ 27,595 $ 416 $ (1,033) $ 26,978
Foreign government bonds 3,032 (796) 2,236
Corporate securities 1,776,174 12,945 (95,707) 1,693,412
Mortgage-backed and asset-backed
securities 285,387 1,361 (19,166) 267,582
--------------- -------------- -------------- --------------
Total held-to-maturity securities 2,092,188 14,722 (116,702) 1,990,208
Less: held-to-maturity securities of
discontinued operations 102,019 736 (5,835) 96,920
--------------- -------------- -------------- --------------
Total held-to-maturity securities of
continuing operations 1,990,169 13,986 (110,867) 1,893,288
--------------- -------------- -------------- --------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 283,697 1,955 (6,537) 279,115
State and political subdivision bonds 495,860 4,765 (21,751) 478,874
Foreign government bonds 273,868 23,700 (3,990) 293,578
Corporate securities 2,353,228 18,578 (102,773) 2,269,033
Mortgage-backed and asset-backed
securities 2,977,136 17,916 (103,264) 2,891,788
--------------- -------------- -------------- --------------
Total available-for-sale securities 6,383,789 66,914 (238,315) 6,212,388
Less: available-for-sale securities of
discontinued operations 725,077 7,600 (27,068) 705,609
--------------- -------------- -------------- --------------
Total available-for-sale securities of
continuing operations 5,658,712 59,314 (211,247) 5,506,779
--------------- -------------- -------------- --------------
TOTAL DEBT SECURITIES OF CONTINUING
OPERATIONS $ 7,648,881 $ 73,300 $ (322,114) $ 7,400,067
============== ============== ============= =============
EQUITY SECURITIES $ 311,100 $ 176,593 $ (24,211) $ 463,482
Less: equity securities of discontinued
operations 1,869 1,869
--------------- -------------- -------------- --------------
TOTAL EQUITY SECURITIES OF CONTINUING
OPERATIONS $ 309,231 $ 176,593 $ (24,211) $ 461,613
============== ============== ============= =============
</TABLE>
66
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
DEBT SECURITIES
HELD-TO-MATURITY:
<S> <C> <C> <C> <C>
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 and asset-backed
securities 172,300 6,201 (12) 178,489
--------------- -------------- -------------- --------------
Total held-to-maturity securities 1,881,687 105,740 (14,656) 1,972,771
Less: held-to-maturity securities of
discontinued operations 156,248 8,776 (1,216) 163,808
--------------- -------------- -------------- --------------
Total held-to-maturity securities of
continuing operations 1,725,439 96,964 (13,440) 1,808,963
--------------- -------------- -------------- --------------
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 and asset-backed
securities 3,121,690 110,172 (14,618) 3,217,244
--------------- -------------- -------------- --------------
Total available-for-sale securities 6,436,444 327,587 (70,491) 6,693,540
Less: available-for-sale securities of
discontinued operations 678,992 34,558 (7,436) 706,114
--------------- -------------- -------------- --------------
Total available-for-sale securities of
continuing operations 5,757,452 293,029 (63,055) 5,987,426
--------------- -------------- -------------- --------------
TOTAL DEBT SECURITIES OF CONTINUING
OPERATIONS $ 7,482,891 $ 389,993 $ (76,495) $ 7,796,389
============== ============= ============ =============
EQUITY SECURITIES $ 223,915 $ 102,018 $ (21,388) $ 304,545
Less: equity securities of discontinued
operations 2,896 2,896
--------------- -------------- -------------- --------------
TOTAL EQUITY SECURITIES OF CONTINUING
OPERATIONS $ 221,019 $ 102,018 $ (21,388) $ 301,649
============== ============= ============ =============
</TABLE>
67
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The sale of fixed maturities held-to-maturity relate to certain securities,
with amortized cost of $3.9 million, $19.6 million and $59.1 million, for
the years ended December 31, 1999, 1998 and 1997, respectively, which were
sold specifically due to a significant decline in the issuers' credit
quality. The related realized losses, net of the sales, were $0.2 million,
$0.8 million and $10.1 million in 1999, 1998 and 1997, respectively.
The amortized cost and fair value of debt securities, by contractual sinking
fund payment and maturity, as of December 31, 1999 are shown below. Actual
maturity may differ from contractual maturity because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties, or Phoenix may have the right to put or sell the obligations back
to the issuers.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 118,171 $ 116,992 $ 43,180 $ 43,483
Due after one year through five years 583,115 564,215 534,417 532,676
Due after five years through ten years 587,568 566,505 1,146,805 1,104,661
Due after ten years 517,946 474,913 1,682,250 1,639,771
Mortgage-backed and
asset-backed securities 285,388 267,583 2,977,137 2,891,797
--------------- --------------- ---------------- --------------
Total $ 2,092,188 $ 1,990,208 $ 6,383,789 $ 6,212,388
Less: securities of discontinued
operations 102,019 96,920 725,077 705,609
--------------- --------------- ---------------- --------------
Total securities of continuing $ 1,990,169 $ 1,893,288 $ 5,658,712 $ 5,506,779
operations =============== =============== ================ ==============
</TABLE>
Carrying values for investments in mortgage-backed and asset-backed
securities, excluding U.S. government guaranteed investments, were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Planned amortization class $ 168,027 $ 433,668
Asset-backed 956,892 910,594
Mezzanine 194,849 280,162
Commercial 735,238 641,485
Sequential pay 1,039,001 982,576
Pass through 77,154 119,065
Other 6,014 21,994
--------------- ---------------------
Total mortgage-backed and asset-backed securities $ 3,177,175 $ 3,389,544
=============== =====================
</TABLE>
68
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MORTGAGE LOANS AND REAL ESTATE
Phoenix's mortgage loans and real estate are diversified by property type
and location and, for mortgage loans, by borrower. Mortgage loans are
collateralized by the related properties and are generally 75% of the
properties' value at the time the original loan is made.
Mortgage loans and real estate investments comprise the following property
types and geographic regions:
<TABLE>
<CAPTION>
MORTGAGE LOANS REAL ESTATE
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
(IN THOUSANDS) (IN THOUSANDS)
PROPERTY TYPE:
<S> <C> <C> <C> <C>
Office buildings $ 183,912 $ 221,244 $ 30,545 $ 38,343
Retail 208,606 203,927 14,111 36,858
Apartment buildings 252,947 261,894 41,744 21,553
Industrial buildings 82,699 121,789 1,600
Other 2,950 19,089 8,859 32
Valuation allowances (14,283) (30,600) (3,232) (6,411)
------------------ ------------------ ------------------ ------------------
Total $ 716,831 $ 797,343 $ 92,027 $ 91,975
================== ================== ================== =================
GEOGRAPHIC REGION:
Northeast $ 149,336 $ 169,368 $ 59,582 $ 47,709
Southeast 198,604 213,916 32 32
North central 164,150 176,683 744 11,453
South central 105,062 98,956 21,232 22,649
West 113,962 169,020 13,669 16,543
Valuation allowances (14,283) (30,600) (3,232) (6,411)
------------------ ------------------ ------------------ ------------------
Total $ 716,831 $ 797,343 $ 92,027 $ 91,975
================== ================== ================== ==================
</TABLE>
At December 31, 1999, scheduled mortgage loan maturities were as follows:
2000 - $92 million; 2001 - $87 million; 2002 - $32 million; 2003 - $109
million; 2004 - $38 million; 2005 - $35 million, and $338 million
thereafter. Actual maturities will differ from contractual maturities
because borrowers may have the right to prepay obligations with or without
prepayment penalties and loans may be refinanced. Phoenix refinanced $6.7
million and $2.3 million of its mortgage loans during 1999 and 1998,
respectively, based on terms which differed from those granted to new
borrowers.
The carrying value of delinquent and in process of foreclosure mortgage
loans at December 31, 1999 and 1998 is $6.0 million and $17.2 million,
respectively. There are valuation allowances of $5.4 million and $14.7
million, respectively, on these mortgages.
69
<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)
1999
<S> <C> <C> <C> <C>
Mortgage loans $ 30,600 $ 9,697 $ (26,014) $ 14,283
Real estate 6,411 183 (3,362) 3,232
------------------ ------------------ ------------------- -------------------
Total $ 37,011 $ 9,880 $ (29,376) $ 17,515
================== ================== =================== ===================
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
================== ================== =================== ===================
</TABLE>
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $0.0
million and $15.6 million at December 31, 1999 and 1998, respectively. The
net carrying value of non-income producing bonds were $0.0 million and $22.3
at December 31, 1999 and 1998, respectively.
70
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS
Derivative instruments at December 31, are summarized below:
<TABLE>
<CAPTION>
1999 1998
($ IN THOUSANDS )
Swaptions:
<S> <C> <C>
Notional amount $ 1,600,000
Weighted average strike rate 5.02%
Index rate (1) 10 Yr. CMS
Fair value $ (8,200)
Interest rate floors:
Notional amount $ 1,210,000 $ 570,000
Weighted average strike rate 4.57% 4.59%
Index rate (1) 2-10 Yr. CMT/CMS 5-10 Yr. CMT
Fair value $ (7,542) $ 1,423
Interest rate swaps:
Notional amount $ 474,037 $ 424,573
Weighted average received rate 6.33% 6.27%
Weighted average paid rate 6.09% 5.82%
Fair value $ 1,476 $ 10,989
Foreign currency swaps:
Notional amount $ 8,074
Weighted average received rate 12.04%
Weighted average paid rate 10.00%
Fair value $ 213
Interest rate caps:
Notional amount $ 50,000 $ 50,000
Weighted average strike rate 7.95% 7.95%
Index rate (1) 10 Yr. CMT 10 Yr. CMT
Fair value $ 842 $ (96)
</TABLE>
(1) Constant maturity treasury yields (CMT) and constant maturity swap
yields (CMS).
The increase in net investment income related to interest rate swap
contracts was $1.0 million and $2.1 million for the years ended December 31,
1999 and 1998, respectively. The decrease in net investment income related
to interest rate floor, interest rate cap and swaption contracts was $2.3
million and $0.2 million for the years ended December 31, 1999 and 1998,
respectively, representing quarterly premium payments on these instruments
which are being paid over the life of the contracts. The estimated fair
value of these instruments represent what Phoenix would have to pay or
receive if the contracts were terminated.
71
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Phoenix is exposed to credit risk in the event of nonperformance by
counterparties to these financial instruments, but management of the Phoenix
does not expect counterparties to fail to meet their financial obligations,
given their high credit ratings. The credit exposure of these instruments is
the positive fair value at the reporting date.
Management of Phoenix considers the likelihood of any material loss on these
instruments to be remote.
VENTURE CAPITAL PARTNERSHIPS
Phoenix invests in venture capital limited partnerships. These partnerships
focus on early-stage ventures, primarily in the information technology and
life science industries, as well as direct equity investments in leveraged
buyouts and corporate acquisitions.
Phoenix records its equity in the earnings of the partnerships in net
investment income.
The components of net investment income due to venture capital partnerships
for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Operating losses $ (8,921) $ (2,746) $ (2,131)
Realized gains on cash and stock distributions 84,725 23,360 31,336
Unrealized gains on investments held in the partnerships 64,091 19,009 4,531
----------- ------------ -----------
Total venture capital partnership net investment income $ 139,895 $ 39,623 $ 33,736
=========== ============ ===========
</TABLE>
OTHER INVESTED ASSETS
Other invested assets, consisting primarily of partnership interests and
equity in unconsolidated affiliates, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Transportation and equipment leases $ 82,063 $ 80,953
Affordable housing partnerships 22,247 10,854
Investment in Aberdeen Asset Management 99,074 72,257
Investment in EMCO of Argentina 13,423 10,681
Investment in other affiliates 12,389 12,706
Seed money in separate accounts 33,279 26,587
Other partnership interests 41,953 22,697
------------------- -------------------
Total other invested assets $ 304,428 $ 236,735
Less: other invested assets of discontinued operations 3,954 4,604
------------------- -------------------
Total other invested assets of continuing operations $ 300,474 $ 232,131
=================== ===================
</TABLE>
72
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 641,076 $ 598,892 $ 509,702
Equity securities 8,272 6,469 4,277
Mortgage loans 66,285 83,101 85,662
Policy loans 148,998 146,477 122,562
Real estate 9,716 38,338 18,939
Leveraged leases 2,202 2,746 2,692
Venture capital partnerships 139,895 39,623 33,736
Other invested assets 2,544 1,750 2,160
Short-term investments 22,543 23,825 18,768
------------- ------------ -------------
Sub-total 1,041,531 941,221 798,498
Less investment expenses 23,505 23,328 22,621
------------- ------------ -------------
Net investment income $ 1,018,026 $ 917,893 $ 775,877
Less: net investment income of discontinued operations 67,682 66,290 61,510
------------- ------------ -------------
Total net investment income of continuing operations $ 950,344 $ 851,603 $ 714,367
============= ============ =============
</TABLE>
Investment income of $2.7 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1999. Phoenix does not
accrue interest income on impaired mortgage loans and impaired bonds when
the likelihood of collection is doubtful.
The payment terms of mortgage loans may, from time to time, be restructured
or modified. The investment in restructured mortgage loans, based on
amortized cost, amounted to $36.5 million and $40.8 million at December 31,
1999 and 1998, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $4.1 million, $4.9 million and $5.3 million in 1999, 1998
and 1997, respectively. Actual interest income on these loans included in
net investment income was $3.5 million, $4.0 million and $3.8 million in
1999, 1998 and 1997, respectively.
73
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Net unrealized gains and (losses) on securities available-for-sale and
carried at fair value for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (428,497) $ (7,040) $ 112,194
Equity securities 71,752 (91,880) 74,547
Deferred policy acquisition costs 260,287 6,694 (80,603)
Deferred income taxes (33,760) (32,279) 38,064
------------------ ----------------- -----------------
Net unrealized investment (losses) gains
on securities available-for-sale $ (62,698) $ (59,947) $ 68,074
================== ================= =================
</TABLE>
Realized investment gains and losses for the year ended December 31, were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (20,416) $ (4,295) $ 19,315
Equity securities 16,648 11,939 26,290
Mortgage loans 18,534 (6,895) 3,805
Real estate 2,915 67,522 44,668
Other invested assets 18,432 (4,709) 17,387
------------ ------------ ------------
Net realized investment gains 36,113 63,562 111,465
Less realized from discontinued operations 438 5,360 422
------------ ------------ ------------
Net realized investment gains from continuing
operations $ 35,675 $ 58,202 $ 111,043
============ ============ ============
</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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from disposals $ 1,106,929 $ 912,696 $ 821,339
Gross gains on sales $ 21,808 $ 17,442 $ 27,954
Gross losses on sales $ 39,122 $ 33,641 $ 5,309
</TABLE>
74
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Phoenix Investment Partners gross amounts:
<S> <C> <C>
Goodwill $ 384,576 $ 321,793
Investment management contracts 235,976 169,006
Non-compete covenant 5,000 5,000
Other 10,894 472
-------------- --------------
Totals 636,446 496,271
-------------- --------------
Other gross amounts:
Goodwill 32,554 16,631
Intangible asset related to pension plan benefits 11,739 16,229
Other 1,206 693
-------------- --------------
Totals 45,499 33,553
-------------- --------------
Total gross goodwill and other intangible assets 681,945 529,824
Accumulated amortization - Phoenix Investment Partners (79,912) (49,615)
Accumulated amortization - other (8,766) (2,314)
-------------- --------------
Total net goodwill and other intangible assets $ 593,267 $ 477,895
============== ==============
</TABLE>
6. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Short-term debt $ 21,598 $ 1,938
Bank borrowings 260,284 168,278
Notes payable 1,146
Subordinated debentures 41,364 41,359
Surplus notes 175,000 175,000
----------------- -----------------
Total notes payable $ 499,392 $ 386,575
================= ================
</TABLE>
Phoenix has various lines of credit established with major commercial banks.
As of December 31, 1999, Phoenix had outstanding balances totaling $436.7
million. The total unused credit was $369.0 million. Interest rates ranged
from 5.26% to 7.48% in 1999.
Maturities of other indebtedness are as follows: 2000 - $21.6 million; 2001
- $26.0 million; 2002 $200.0 million; 2003 - $0.0 million; 2004 - $35.0
million; 2005 and thereafter - $216.8 million.
Interest expense was $32.7 million, $25.9 million and $24.3 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
75
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. INCOME TAXES
A summary of income taxes (benefits) applicable to income before income
taxes and minority interest for the year ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
Income taxes
<S> <C> <C> <C>
Current $ 121,448 $ 61,889 $ 39,583
Deferred (13,567) 3,157 7,658
------------------ ------------------ ------------------
Total $ 107,881 $ 65,046 $ 47,241
================== ================== ==================
</TABLE>
The income taxes attributable to the consolidated results of operations are
different than the amounts determined by multiplying income before taxes by
the statutory income tax rate. The sources of the difference and the tax
effects of each for the year ended December 31, were as follows (in
thousands, aside from the percentages):
<TABLE>
<CAPTION>
1999 1998 1997
% % %
Income tax expense at statutory
<S> <C> <C> <C> <C> <C> <C>
rate $ 91,440 35 $ 65,685 35 $ 77,095 35
Dividend received deduction and
tax-exempt interest (3,034) (1) (3,273) (2) (1,684) (1)
Other, net 7,922 3 2,634 2 (15,059) (7)
------------- -------- ------------- -------- ------------- ---------
96,328 37 65,046 35 60,352 27
Differential earnings (equity tax) 11,553 4 (13,111) (6)
------------- -------- ------------- -------- ------------- ---------
Income taxes $ 107,881 41 $ 65,046 35 $ 47,241 21
============= ======== ============= ======== ============= =========
</TABLE>
76
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The deferred income tax liability (asset) represents the tax effects of
temporary differences attributable to the consolidated tax return group. The
components were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 282,725 $ 294,917
Unearned premium/deferred revenue (135,124) (139,346)
Impairment reserves (15,556) (23,111)
Pension and other postretirement benefits (68,902) (57,720)
Investments 177,204 122,032
Future policyholder benefits (181,205) (151,168)
Other 4,683 31,595
-------------- --------------
63,825 77,199
Net unrealized investment gains 26,587 42,254
Minimum pension liability (4,150) (3,349)
--------------- --------------
Deferred income tax liability, net $ 86,262 $ 116,104
=============== ==============
</TABLE>
Gross deferred income tax assets totaled $405 million and $375 million at
December 31, 1999 and 1998, respectively. Gross deferred income tax
liabilities totaled $491 million and $491 million at December 31, 1999 and
1998, respectively. It is management's assessment, based on Phoenix's
earnings and projected future taxable income, that it is more likely than
not that deferred income tax assets at December 31, 1999 and 1998 will be
realized.
8. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
Phoenix has a multi-employer, non-contributory, defined benefit pension plan
covering substantially all of its employees. Retirement benefits are a
function of both years of service and level of compensation. Phoenix also
sponsors a non-qualified supplemental defined benefit plan to provide
benefits in excess of amounts allowed pursuant to the Internal Revenue Code.
Phoenix's funding policy is to contribute annually an amount equal to at
least the minimum required contribution in accordance with minimum funding
standards established by the Employee Retirement Income Security Act of
1974. Contributions are intended to provide not only for benefits
attributable to service to date, but also for service expected to be earned
in the future.
Components of net periodic pension cost for the years ended December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
Components of net periodic benefit cost
<S> <C> <C> <C>
Service cost $ 11,887 $ 11,046 $ 10,278
Interest cost 24,716 22,958 22,650
Curtailments 21,604
Expected return on plan assets (28,544) (25,083) (22,055)
Amortization of net transition asset (2,369) (2,369) (2,369)
Amortization of prior service cost 1,795 1,795 1,795
Amortization of net (gain) loss (2,709) (1,247) 25
---------------- --------------- ---------------
Net periodic benefit cost $ 26,380 $ 7,100 $ 10,324
================ =============== ===============
</TABLE>
77
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In 1999, Phoenix offered a special retirement program under which qualified
participants' benefits under the employee pension plan were enhanced by
adding five years to age and five years to pension plan service. Of the 320
eligible employees, 146 accepted the special retirement program. As a result
of the special retirement program, Phoenix recorded an additional pension
expense of $21.6 million for the year ended December 31, 1999.
The aggregate change in projected benefit obligation, change in plan assets,
and funded status of the plan were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Change in projected benefit obligation
<S> <C> <C>
Projected benefit obligation at beginning of year $ 353,462 $ 335,436
Service cost 11,887 11,046
Interest cost 24,716 22,958
Plan amendments 23,871
Curtailments (6,380)
Actuarial loss (4,887) 1,958
Benefit payments (19,841) (17,936)
--------------- ----------------
Benefit obligation at end of year $ 382,828 $ 353,462
--------------- ----------------
Change in plan assets
Fair value of plan assets at beginning of year $ 364,819 $ 321,555
Actual return on plan assets 78,951 58,225
Employer contributions 3,883 2,975
Benefit payments (19,841) (17,936)
--------------- ----------------
Fair value of plan assets at end of year $ 427,812 $ 364,819
--------------- ----------------
Funded status of the plan $ 44,984 $ 11,357
Unrecognized net transition asset (11,847) (14,217)
Unrecognized prior service cost 11,705 16,185
Unrecognized net gain (129,936) (75,921)
--------------- ----------------
Net amount recognized $ (85,094) $ (62,596)
=============== ================
Amounts recognized in the Consolidated Balance Sheet consist of:
Accrued benefit liability $ (108,690) $ (88,391)
Intangible asset 11,739 16,229
Accumulated other comprehensive income 11,857 9,566
--------------- ----------------
$ (85,094) $ (62,596)
=============== ================
</TABLE>
At December 31, 1999 and 1998, the non-qualified plan was not funded and had
projected benefit obligations of $72.3 million and $57.2 million,
respectively. The accumulated benefit obligations as of December 31, 1999
and 1998 related to this plan were $60.1 million and $48.4 million,
respectively, and are included in other liabilities.
Phoenix recorded, as a reduction of equity, an additional minimum pension
liability of $7.7 million and $6.2 million, net of income taxes, at December
31, 1999 and 1998, respectively, representing the excess of accumulated
benefit obligations over the fair value of plan assets and accrued pension
liabilities for the non-qualified plan. Phoenix has also recorded an
intangible asset of $11.7 million and $16.2 million as of December 31, 1999
and 1998 related to the non-qualified plan.
78
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% and 7.0% for 1999 and 1998,
respectively. The discount rate assumption for 1999 was determined based on
a study that matched available high quality investment securities with the
expected timing of pension liability payments. The rate of increase in
future compensation levels used in determining the actuarial present value
of the projected benefit obligation was 4.5% and 4.0% for 1999 and 1998,
respectively. The expected long-term rate of return on retirement plan
assets was 8.0% in 1999 and 1998.
The assets within the pension plan include corporate and government debt
securities, equity securities, real estate, venture capital partnerships,
and shares of mutual funds.
Phoenix also sponsors savings plans for its employees and agents that are
qualified under Internal Revenue Code Section 401(k). Employees and agents
may contribute a portion of their annual salary, subject to certain
limitations, to the plans. Phoenix contributes an additional amount, subject
to limitation, based on the voluntary contribution of the employee or agent.
Company contributions charged to expense with respect to these plans during
the years ended December 31, 1999, 1998 and 1997 were $4.0 million, $4.1
million and $3.8 million, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to Phoenix's pension plans, Phoenix currently provides certain
health care and life insurance benefits to retired employees, spouses and
other eligible dependents through various plans sponsored by Phoenix. A
substantial portion of Phoenix's employees may become eligible for these
benefits upon retirement. The health care plans have varying copayments and
deductibles, depending on the plan. These plans are unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
Components of net periodic benefit cost
<S> <C> <C> <C>
Service cost $ 3,313 $ 3,436 $ 3,136
Interest cost 4,559 4,572 4,441
Curtailments 5,456
Amortization of net gain (1,493) (1,232) (1,527)
-------------- -------------- --------------
Net periodic benefit cost $ 11,835 $ 6,776 $ 6,050
============== ============== ==============
</TABLE>
As a result of the special retirement program, Phoenix recorded an
additional postretirement benefit expense of $5.5 million for the year ended
December 31, 1999.
79
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The plan's change in projected benefit obligation, change in plan assets,
and funded status were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Change in projected postretirement benefit obligation
<S> <C> <C>
Projected benefit obligation at beginning of year $ 70,943 $ 66,618
Service cost 3,313 3,436
Interest cost 4,559 4,572
Plan Amendments 5,785
Curtailments (328)
Actuarial (gain) loss (8,622) 397
Benefit payments (4,459) (4,080)
---------------- ----------------
Projected benefit obligation at end of year 71,191 70,943
---------------- ----------------
Change in plan assets
Employer contributions 4,459 4,080
Benefit payments (4,459) (4,080)
---------------- ----------------
Fair value of plan assets at end of year
---------------- ----------------
Funded status of the plan (71,191) (70,943)
Unrecognized net gain (33,538) (26,408)
---------------- ----------------
Accrued benefit liability $ (104,729) $ (97,351)
================ ================
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 7.0% at December 31, 1999 and 1998, respectively.
For purposes of measuring the accumulated postretirement benefit obligation
the health care costs were assumed to increase 7.5% and 8.5% in 1999 and
1998, respectively, declining thereafter until the ultimate rate of 5.5% is
reached in 2002 and remains at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation by $4.3 million and the annual service and
interest cost by $0.6 million, before income taxes. Decreasing the assumed
health care cost trend rates by one percentage point in each year would
decrease the accumulated postretirement benefit obligation by $4.1 million
and the annual service and interest cost by $0.5 million, before income
taxes. Gains and losses that occur because actual experience differs from
the estimates are amortized over the average future service period of
employees.
OTHER POSTEMPLOYMENT BENEFITS
Phoenix recognizes the costs and obligations of severance, disability and
related life insurance and health care benefits to be paid to inactive or
former employees after employment but before retirement. Other
postemployment benefit expenses were $0.5 million for 1999, ($0.5) million
for 1998 and $0.4 million for 1997.
80
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. COMPREHENSIVE INCOME
The components of, and related income tax effects for, other comprehensive
income for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
<S> <C> <C> <C>
Before-tax amount $ (94,224) $ (72,255) $ 151,210
Income tax (benefit) expense (32,978) (25,288) 52,923
--------------- --------------- ---------------
Totals (61,246) (46,967) 98,287
--------------- --------------- ---------------
RECLASSIFICATION ADJUSTMENT FOR NET GAINS
REALIZED IN NET INCOME:
Before-tax amount (2,234) (19,970) (46,481)
Income tax (benefit) (782) (6,990) (16,268)
--------------- --------------- ---------------
Totals (1,452) (12,980) (30,213)
--------------- --------------- ---------------
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount (96,458) (92,225) 104,729
Income tax (benefit) expense (33,760) (32,278) 36,655
--------------- --------------- ---------------
Totals $ (62,698) $ (59,947) $ 68,074
=============== =============== ===============
MINIMUM PENSION LIABILITY ADJUSTMENT:
Before-tax amount $ (2,289) $ (2,347) $ (3,232)
Income tax (benefit) (801) (821) (1,131)
--------------- --------------- ---------------
Totals $ (1,488) $ (1,526) $ (2,101)
=============== =============== ===============
</TABLE>
The following table summarizes accumulated other comprehensive income for
the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
<S> <C> <C> <C>
Balance, beginning of year $ 100,510 $ 160,457 $ 92,383
Change during period (62,698) (59,947) 68,074
--------------- --------------- ---------------
Balance, end of year 37,812 100,510 160,457
--------------- --------------- ---------------
MINIMUM PENSION LIABILITY ADJUSTMENT:
Balance, beginning of year (6,219) (4,693) (2,592)
Change during period (1,488) (1,526) (2,101)
--------------- --------------- ---------------
Balance, end of year (7,707) (6,219) (4,693)
--------------- --------------- ---------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year 94,291 155,764 89,791
Change during period (64,186) (61,473) 65,973
--------------- --------------- ---------------
Balance, end of year $ 30,105 $ 94,291 $ 155,764
=============== =============== ===============
</TABLE>
81
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix offers a wide range of financial products and services. These
businesses have been grouped into three reportable segments.
The Individual segment includes the individual life insurance and annuity
products including participating whole life, universal life, variable life,
term life and variable annuities.
The Investment Management segment includes retail and institutional mutual
fund management and distribution including open-end funds, closed-end funds
and wrap accounts.
Corporate and Other contains several smaller subsidiaries and investment
activities which do not meet the thresholds of reportable segments as
defined in SFAS No. 131. They include venture capital investments,
international operations, trust operations and other investments.
The majority of Phoenix's revenue is derived in the United States. Revenue
derived from outside the United States is not material and revenue derived
from any single customer does not exceed ten percent of total consolidated
revenues.
The accounting policies of the segments are the same as those described in
Note 2 - "Summary of Significant Accounting Policies." Phoenix evaluates the
performance of each operating segment based on profit or loss from
operations before income taxes and nonrecurring items. Phoenix does not
include certain nonrecurring items to the segments. They are reported as
unallocated items and include expenses associated with various lawsuits and
legal disputes, postretirement medical expenses associated with an early
retirement program and realized gains associated with the sales of
subsidiaries. See Note 8 - " Pension and Other Postretirement and
Postemployment Benefit Plans."
Included in the following tables is certain information with respect to
Phoenix's operating segments as of and for each of the years ended December
31, 1999, 1998 and 1997, as well as amounts not allocated to the segments
which was described previously.
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998 1997
(IN MILLIONS)
TOTAL ASSETS
<S> <C> <C> <C>
Individual $ 17,990.3 $ 16,919.5 $ 15,709.8
Investment Management 747.4 591.9 647.9
Corporate & Other 1,357.8 876.2 1,124.4
Discontinued operations 187.6 283.8 250.9
--------------- --------------- ---------------
Total 20,283.1 18,671.4 17,733.0
=============== =============== ===============
DEFERRED POLICY ACQUISITION COSTS
Individual $ 1,306.7 $ 1,049.9 $ 1,016.3
=============== =============== ===============
</TABLE>
82
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
PREMIUMS, INSURANCE AND INVESTMENT PRODUCT FEES
<S> <C> <C> <C>
Individual $ 1,361.4 $ 1,416.7 $ 1,259.2
Investment Management 293.9 231.0 140.7
Corporate & Other 115.2 41.1 84.1
Less: inter-segment revenues (44.5) (40.7) (40.3)
---------------- ---------------- ---------------
Total 1,726.0 1,648.1 1,443.7
---------------- ---------------- ---------------
INVESTMENT INCOME
Individual 768.2 768.5 640.3
Investment Management 6.0 2.7 3.0
Corporate & Other 176.1 80.4 71.1
---------------- ---------------- ---------------
Total 950.3 851.6 714.4
---------------- ---------------- ---------------
NET REALIZED INVESTMENT GAINS
Individual 15.9 (17.8) 65.7
Corporate & Other 3.9 10.5 45.3
Gains on sale of subsidiaries 16.0 65.5
---------------- ---------------- ---------------
Total 35.8 58.2 111.0
---------------- ---------------- ---------------
POLICY BENEFITS AND DIVIDENDS
Individual 1,611.3 1,718.2 1,499.7
Corporate & Other 101.6 36.6 45.8
---------------- ---------------- ---------------
Total 1,712.9 1,754.8 1,545.5
---------------- ---------------- ---------------
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS
Individual 146.6 137.7 102.6
---------------- ---------------- ---------------
Total 146.6 137.7 102.6
---------------- ---------------- ---------------
AMORTIZATION OF GOODWILL AND INTANGIBLES
Individual 4.2 0.3 0.5
Investment Management 30.3 22.0 9.1
Corporate & Other 3.5 0.8 (0.2)
---------------- ---------------- ---------------
Total 38.0 23.1 9.4
---------------- ---------------- ---------------
INTEREST EXPENSE
Investment Management 18.9 14.7 3.6
Corporate & Other 13.8 11.2 20.7
---------------- ---------------- ---------------
Total 32.7 25.9 24.3
---------------- ---------------- ---------------
OTHER OPERATING EXPENSES
Individual 289.4 268.1 234.6
Investment Management 203.5 156.1 101.9
Corporate & Other 65.0 40.7 69.2
Unallocated amounts 7.2 4.5 1.7
Less: inter segment expenses (44.5) (40.7) (40.4)
---------------- ---------------- ---------------
Total 520.6 428.7 367.0
---------------- ---------------- ---------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST
Individual 94.0 43.2 127.9
Investment Management 47.2 40.8 29.2
Corporate & Other 111.3 42.7 64.9
Unallocated amounts & inter-segment eliminations 8.8 61.0 (1.7)
---------------- ---------------- ---------------
Total $ 261.3 $ 187.7 $ 220.3
================ ================ ===============
</TABLE>
83
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units which in prior years had been reflected as reportable business
segments: the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. The discontinuation of these business units resulted from the
sale of several operations, a signed agreement to sell one of the operations
and the implementation of plans to withdraw from the remaining businesses.
REINSURANCE OPERATIONS
During 1999, Phoenix completed a comprehensive strategic review of its life
reinsurance segment and decided to exit these operations through a
combination of sale, reinsurance and placement of certain components into
run-off. Accordingly, Phoenix estimated sales proceeds, reinsurance premiums
and net claims run-off, resulting in the recognition of a $173 million
pre-tax loss ($113 million after-tax loss) on the disposal of life
reinsurance discontinued operations. The life reinsurance segment consisted
primarily of individual life reinsurance operations as well as group
personal accident and group health reinsurance business. The significant
components of the loss on the disposal of life reinsurance discontinued
operations in 1999 were as follows:
On August 1, 1999, Phoenix sold its individual life reinsurance operations
and certain group health reinsurance business to Employers Reinsurance
Corporation for $130 million. The transaction was structured as a
reinsurance and asset sale transaction, resulting in a pre-tax gain of $113
million. The pre-tax income from operations for the seven months prior to
disposal was $19 million.
On June 30, 1999, PM Holdings sold 100% of the common stock of Financial
Administrative Services, Inc. (FAS), its third-party administration
subsidiary, to CYBERTEK, a wholly-owned subsidiary of Policy Management
Systems Corporation. Proceeds from the sale were $8.0 million for the common
stock plus $1.0 million for a covenant not-to-compete, resulting in an
after-tax gain of $2.0 million.
Phoenix retained ownership of the preferred stock of FAS, which under the
terms of the agreement, CYBERTEK will purchase in six equal annual
installments commencing March 31, 2001 through March 31, 2006. The purchase
price will be determined annually based upon earnings, but in total, will
range from a minimum of $4.0 million to a maximum of $16.0 million.
During 1999, Phoenix placed the remaining group personal accident and group
health reinsurance operations into run-off. Management has adopted a formal
plan to terminate the related treaties as early as contractually permitted
and is not entering into any new contracts. Based upon the most recent
information available, Phoenix reviewed the run-off block and estimated the
amount and timing of future net premiums, claims and expenses. Consequently,
Phoenix increased reserve estimates on the run-off block by $180 million. In
addition, as part of the exit strategy, Phoenix purchased finite aggregate
excess of loss reinsurance to further protect Phoenix from unfavorable
results in the run-off block. The finite reinsurance is subject to an
aggregate retention of $100 million on the run-off block. Phoenix may
commute the agreement at any time after September 30, 2004, subject to
automatic commutation effective September 30, 2019. Phoenix paid an initial
premium of $130 million.
The additional estimated reserves and finite reinsurance coverage are
expected to cover the run-off of the business; however, the nature of the
underlying risks is such that the claims may take years to reach the
reinsurers involved. Therefore, Phoenix expects to pay claims out of
existing estimated reserves over a number of years as the level of business
diminishes.
84
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Additionally, certain group personal accident reinsurance business has
become the subject of disputes concerning the placement of the business with
reinsurers and the recovery of the reinsurance. This business primarily
concerns certain occupational accident reinsurance "facilities" and a
reinsurance pool (the Unicover Pool) underwritten and managed by Unicover
Managers, Inc. (Unicover). Phoenix participated as a reinsurer in the
Unicover Pool. The Unicover Pool and "facilities" were reinsured in large
part by a reinsurance facility underwritten and managed by Centaur
Underwriting Limited (Centaur) in which Phoenix also participated. Phoenix
terminated its participation in the Centaur facility effective October 1,
1998 and in the Unicover Pool effective March 1, 1999. However, claims
arising from business underwritten while Phoenix was a participant continue
to run off. On September 21, 1999, Phoenix initiated arbitration proceedings
seeking to rescind certain contracts arising from its participation in the
Centaur facility with respect to reinsurance of the Unicover business. In
January 2000, Phoenix settled two Unicover-related matters (see Note 21 -
"Subsequent Events"). A substantial portion of the risk associated with the
Unicover Pool and "facilities" and the Centaur program was further
retroceded by Phoenix to other unaffiliated insurance entities, providing
Phoenix with significant security. Certain of these retrocessionaires have
given notice that they challenge their obligations under their contracts and
are in arbitration or litigation with Phoenix.
Additionally, certain group personal accident excess of loss reinsurance
contracts created in the London market during 1994 - 1997 have become the
subject of disputes concerning the placement of the business with reinsurers
and the recovery of reinsurance. Several arbitration proceedings are
currently pending.
Given the uncertainty associated with litigation and other dispute
resolution proceedings, and the expected long term development of net claims
payments, the estimated amount of the loss on disposal of life reinsurance
discontinued operations may differ from actual results. However, it is
management's opinion, after consideration of the provisions made in these
financial statements, as described above, that future developments will not
have a material effect on Phoenix's consolidated financial position.
PROPERTY AND CASUALTY BROKERAGE OPERATIONS
On July 1, 1999, PM Holdings sold its property and casualty brokerage
business to Hilb, Rogal and Hamilton Company (HRH) for $48.1 million
including $0.2 million for a covenant not-to-compete. Total proceeds
consisted of $32.0 million in convertible debentures, $15.9 million for
865,042 shares of HRH common stock, valued at $18.38 per share on the sale
date, and $0.2 million in cash. The pre-tax gain realized on the sale was
$40.1 million. The HRH common stock is classified as common stock and the
convertible debentures are classified as bonds in the Consolidated Balance
Sheet. As of December 31, 1999 Phoenix owns 7% of the outstanding HRH common
stock, 15% on a diluted basis.
REAL ESTATE MANAGEMENT OPERATIONS
On March 31, 1999, Phoenix sold its real estate management subsidiary,
Phoenix Realty Advisors, to Henderson Investors International Holdings, B.V.
for $7.9 million in cash. The pre-tax gain realized on this transaction was
$7.1 million.
85
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GROUP INSURANCE OPERATIONS
On December 9, 1999, Phoenix signed a definitive agreement to sell its Group
Life and Health business, including five companies, Phoenix American Life,
Phoenix Dental Services, Phoenix Group Services, California Benefits and
Clinical Disability Management, to GE Financial Assurance Holdings, Inc.
Proceeds from the sale are estimated to be $285 million, including cash of
$240 million and 3.1% of the common stock of GE Life and Annuity Assurance
Company. Phoenix expects the transaction to be completed in the second
quarter of 2000, subject to regulatory approval.
The assets and liabilities of the discontinued operations have been excluded
from the assets and liabilities of continuing operations and separately
identified on the Consolidated Balance Sheet. Net assets of the discontinued
operations totaled $187.6 million and $283.8 million as of December 31, 1999
and 1998, respectively. Asset and liability balances of the continuing
operation as of December 31, 1998, have been restated to conform with the
current year presentation. Likewise, the Consolidated Statement of Income,
Comprehensive Income and Equity has been restated for 1998 and 1997 to
exclude the operating results of discontinued operations from continuing
operations. The operating results of discontinued operations and the gain or
loss on disposal are presented below.
<TABLE>
<CAPTION>
GAIN (LOSS) FROM OPERATIONS OF YEAR ENDED DECEMBER 31,
DISCONTINUED OPERATIONS 1999 1998 1997
(IN THOUSANDS)
Revenues:
<S> <C> <C> <C>
Reinsurance Operations $ 306,671 $ 163,503
Group Insurance Operations $ 453,813 503,825 483,956
Property and Casualty Brokerage Operations 25,968 72,579 64,093
Real Estate Management 1,189 12,707 15,319
--------------- -------------- ---------------
Total revenues 480,970 895,782 726,871
--------------- -------------- ---------------
Gain (loss) from operations:
Reinsurance Operations 14,081 10,611
Group Insurance Operations 28,672 29,212 31,686
Property and Casualty Brokerage Operations 1,534 2,515 (19,911)
Real Estate Management (2,645) (4,037) (2,616)
--------------- -------------- ---------------
Gain from discountinued operations before income
taxes 27,561 41,771 19,770
Income taxes 10,006 16,759 12,522
--------------- -------------- ---------------
Gain from discontinued operations, net of taxes $ 17,555 $ 25,012 $ 7,248
=============== ============== ===============
</TABLE>
86
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
YEAR ENDED
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS DECEMBER 31, 1999
(IN THOUSANDS)
(Loss) gain on disposal:
Reinsurance Operations $ (173,061)
Property and Casualty Brokerage Operations 40,131
Real Estate Management 5,870
--------------
Loss on disposal of discontinued operations before
income taxes (127,060)
Income taxes (55,076)
--------------
Loss on disposal of discontinued operations, net of
income taxes $ (71,984)
--------------
12. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by Phoenix, are stated at depreciated cost. Real
estate occupied by Phoenix was $101.7 million and $106.7 million at December
31, 1999 and 1998, respectively. Phoenix provides for depreciation using
straight-line and accelerated methods over the estimated useful lives of the
related assets which generally range from five to forty years. Accumulated
depreciation and amortization was $182.3 million and $161.2 million at
December 31, 1999 and 1998, respectively.
Rental expenses for operating leases, principally with respect to buildings,
amounted to $16.3 million, $16.9 million and $16.9 million in 1999, 1998,
and 1997, respectively, for continuing operations. Future minimum rental
payments under non-cancelable operating leases for continuing operations
were approximately $40.2 million as of December 31, 1999, payable as
follows: 2000 - $13.5 million; 2001 - $10.5 million; 2002 - $7.3 million;
2003 - $5.1 million; 2004 - $2.8 million; and $1.0 million thereafter.
13. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix assumes and
cedes reinsurance as a means of diversifying underwriting risk. For direct
issues, the maximum of individual life insurance retained by Phoenix on any
one life is $8 million for single life and joint first-to-die policies and
to $10 million for joint last-to-die policies, with excess amounts ceded to
reinsurers. Phoenix reinsures 80% of the mortality risk on the inforce block
of the Confederation Life business acquired on December 31, 1997, and 90% of
the mortality risk on certain new issues of term and universal life
products. In addition, Phoenix entered into a separate reinsurance agreement
on October 1, 1998 to reinsure 80% of the mortality risk on a substantial
portion of its otherwise retained individual life insurance business. In
1999, Phoenix reinsured the mortality risk on the remaining 20% of this
business. Amounts recoverable from reinsurers are estimated in a manner
consistent with the claim liability associated with the reinsured policy.
87
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,762,359 $ 1,719,393 $ 1,592,800
Reinsurance assumed 416,194 505,262 329,927
Reinsurance ceded (537,847) (371,854) (282,121)
--------------- ---------------- ---------------
Net premiums 1,640,706 1,852,801 1,640,606
Less net premiums of discontinued operations (506,499) (698,071) (564,449)
--------------- ---------------- ---------------
Net premiums of continuing operations $ 1,134,207 $ 1,154,730 $ 1,076,157
=============== ================ ===============
Direct policy and contract claims incurred $ 707,105 $ 728,062 $ 629,112
Reinsurance assumed 563,807 433,242 410,704
Reinsurance ceded (500,282) (407,780) (373,127)
--------------- ---------------- ---------------
Net policy and contract claims incurred 770,630 753,524 666,689
Less net incurred claims of discontinued operations (552,423) (471,688) (422,373)
--------------- ---------------- ---------------
Net policy and contract claims incurred
of continuing operations $ 218,207 $ 281,836 $ 244,316
=============== ================ ==============
Direct life insurance in force $ 131,052,050 $ 121,442,041 $ 120,394,664
Reinsurance assumed 139,649,850 110,632,110 84,806,585
Reinsurance ceded (207,192,046) (135,817,986) (74,764,639)
--------------- ---------------- ---------------
Net insurance in force 63,509,854 96,256,165 120,436,610
Less insurance in force of discontinued operations (1,619,452) (24,330,166) (13,811,408)
--------------- ---------------- ---------------
Net insurance in force of continuing operations $ 61,890,402 $ 71,925,999 $ 116,625,202
=============== ================ ===============
</TABLE>
Irrevocable letters of credit aggregating $36.2 million at December 31, 1999
have been arranged with United States commercial banks in favor of Phoenix
to collateralize the ceded reserves.
14. PARTICIPATING LIFE INSURANCE
Participating life insurance in force was 66.9% and 72.3% of the face value
of total individual life insurance in force at December 31, 1999 and 1998,
respectively. The premiums on participating life insurance policies were
76.8%, 79.4% and 83.5% of total individual life insurance premiums in 1999,
1998, and 1997, respectively.
88
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
15. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 1,049,934 $ 1,016,295 $ 908,616
Acquisition cost deferred 143,110 164,608 288,281
Amortized to expense during the year (146,603) (137,663) (102,617)
Adjustment to net unrealized investment
gains (losses) included in other
comprehensive income 260,287 6,694 (77,985)
------------------ ----------------- ------------------
Balance at end of year $ 1,306,728 $ 1,049,934 $ 1,016,295
================== ================= ==================
</TABLE>
Amortized to expense during the year for 1999 includes a $6.3 million
adjustment due to worse than expected persistency in one of the variable
annuity product lines and a $6.9 million adjustment to traditional life due
to an adjustment to death claims used in determining DAC amortization.
16. MINORITY INTEREST
Phoenix's interests in Phoenix Investment Partners and PFG Holdings, through
its wholly-owned subsidiary PM Holdings, are represented by ownership of
approximately 60% and 67%, respectively, of the outstanding shares of common
stock at December 31, 1999. Earnings and equity attributable to minority
shareholders are included in minority interest in the consolidated financial
statements.
17. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Other than debt securities being held-to-maturity, financial instruments
that are subject to fair value disclosure requirements (insurance contracts
are excluded) are carried in the consolidated financial statements at
amounts that approximate fair value. The fair values presented for certain
financial instruments are estimates which, in many cases, may differ
significantly from the amounts which could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of
fair value are based on discounted cash flow analysis which utilize current
interest rates for similar financial instruments which have comparable terms
and credit quality.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
89
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DEBT SECURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
debt securities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
DERIVATIVE INSTRUMENTS
Phoenix's derivative instruments include interest rate swap, cap and floor
agreements, swaptions and foreign currency swap agreements. Fair values for
these contracts are based on current settlement values. These values are
based on brokerage quotes that utilize pricing models or formulas based upon
current assumptions for the respective agreements.
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values are calculated as the present value of scheduled payments, with
the discount based upon the Treasury rate comparable for the remaining loan
duration, plus a spread of between 130 and 800 basis points, depending on
the internal quality rating of the loan. For loans in foreclosure or
default, values were determined assuming principal recovery was the lower of
the loan balance or the estimated value of the underlying property.
POLICY LOANS
Fair values are estimated as the present value of loan interest and policy
loan repayments discounted at the ten year Treasury rate. Loan repayments
were assumed only to occur as a result of anticipated policy lapses, and it
was assumed that annual policy loan interest payments were made at the
guaranteed loan rate less 17.5 basis points. Discounting was at the ten year
Treasury rate, except for policy loans with a variable policy loan rate.
Variable policy loans have an interest rate that is reset annually based
upon market rates and therefore, book value is a reasonable approximation of
fair value.
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair value of deferred annuities and supplementary contracts without
life contingencies with an interest guarantee of one year or less is valued
at the amount of the policy reserve. In determining the fair value of
deferred annuities and supplementary contracts without life contingencies
with interest guarantees greater than one year, a discount rate equal to the
appropriate Treasury rate, plus 150 basis points, was used to determine the
present value of the projected account value of the policy at the end of the
current guarantee period.
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest guarantees of less 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.
90
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES PAYABLE
The fair value of notes payable is determined based on contractual cash
flows discounted at market rates.
FAIR VALUE SUMMARY
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
Financial assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 187,610 $ 187,610 $ 115,187 $ 115,187
Short-term investments 133,367 133,367 185,983 185,983
Debt securities 7,496,948 7,400,067 7,712,865 7,796,389
Equity securities 461,613 461,613 301,649 301,649
Mortgage loans 716,831 680,569 797,343 831,919
Derivative instruments (13,211) 12,316
Policy loans 2,042,558 2,040,497 2,008,260 2,122,389
----------------- ----------------- ----------------- -----------------
Total financial assets $ 11,038,927 $ 10,890,512 $ 11,121,287 $ 11,365,832
================= ================= ================= =================
Financial liabilities:
Policy liabilities $ 709,696 $ 709,357 $ 783,400 $ 783,400
Notes payable 499,392 490,831 386,575 395,744
----------------- ----------------- ----------------- -----------------
Total financial liabilities $ 1,209,088 $ 1,200,188 $ 1,169,975 $ 1,179,144
================= ================= ================= ================
</TABLE>
18. CONTINGENCIES
LITIGATION
Certain group personal accident reinsurance business has become the subject
of disputes concerning the placement of the business with reinsurers and the
recovery of the reinsurance (see Note 11 - "Discontinued Operations" and
Note 21 - "Subsequent Events").
19. STATUTORY FINANCIAL INFORMATION
The insurance subsidiaries are required to file annual statements with state
regulatory authorities prepared on an accounting basis prescribed or
permitted by such authorities. Except for the accounting policy involving
federal income taxes described next, there were no material practices not
prescribed by the State of New York Insurance Department (the Insurance
Department), as of December 31, 1999, 1998 and 1997. Phoenix's statutory
federal income tax liability is principally based on estimates of federal
income tax due. A deferred income tax liability has also been established
for estimated taxes on unrealized gains for common stock and venture capital
equity partnerships. Current New York law does not allow the recording of
deferred income taxes. Phoenix has received approval from the Insurance
Department for this practice.
91
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 131,286 $ 108,652 $ 66,599
Deferred policy acquisition costs, net (28,099) 18,538 48,821
Future policy benefits (23,686) (53,847) (9,145)
Pension and postretirement expenses (8,638) (17,334) (7,955)
Investment valuation allowances 15,141 107,229 87,920
Interest maintenance reserve (7,232) 1,415 17,544
Deferred income taxes 3,919 (39,983) (36,250)
Other, net 6,191 12,459 2,118
--------------- --------------- ---------------
Net income, as reported $ 88,882 $ 137,129 $ 169,652
=============== =============== ===============
</TABLE>
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to equity as reported
in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $ 1,427,333 $ 1,205,635
Deferred policy acquisition costs, net 1,231,217 1,259,316
Future policy benefits (478,184) (465,268)
Pension and postretirement expenses (193,007) (174,273)
Investment valuation allowances (206,531) 34,873
Interest maintenance reserve 24,767 35,303
Deferred income taxes 65,595 (25,593)
Surplus notes (159,444) (157,500)
Other, net 49,505 24,062
------------------- -------------------
Equity, as reported $ 1,761,251 $ 1,736,555
=================== ===================
</TABLE>
The Insurance Department recognizes only statutory accounting practices for
determining and reporting the financial condition and results of operations
of an insurance company, for determining its solvency under New York
Insurance Law, and for determining whether its financial condition warrants
the payment of a dividend to its policyholders. No consideration is given by
the Insurance Department to financial statements prepared in accordance with
generally accepted accounting principles in making such determinations.
92
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
20. PRIOR PERIOD ADJUSTMENTS
In 1999, Phoenix revised the accounting for venture capital partnerships to
include unrealized capital gains and losses on investments held in the
partnerships. These gains and losses are recorded in investment income.
Opening retained earnings at December 31, 1996 has been increased by $17.6
million. The consolidated balance sheet as of December 31, 1998 was revised
by increasing the following balances: other invested assets by $50.6
million, deferred income taxes by $17.7 million and retained earnings by
$32.9 million. The effect on the Consolidated Statement of Income,
Comprehensive Income and Equity was an increase in net income of $12.4
million and $2.9 million for the years ended 1998 and 1997, respectively.
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.
21. SUBSEQUENT EVENTS
OCCUPATIONAL ACCIDENT REINSURANCE
On January 21, 2000, Phoenix, in connection with its participation in the
Centaur facility, and two other companies completed a settlement agreement
with Reliance Insurance Company (Reliance) with respect to certain
reinsurance contracts covering occupational accident business reinsured by
Reliance as a Unicover-managed "facility." The Reliance business was the
largest portion of occupational accident reinsurance business underwritten
by Unicover. Under the terms of the settlement agreement, Phoenix ended the
contracts for a total payment of $115.0 million.
On January 13, 2000, Phoenix and four other companies, in connection with
their participation in the Unicover Pool, completed a settlement agreement
with EBI Indemnity Company and other affiliates of the Orion Group (EBI)
with respect to certain reinsurance contracts covering occupational accident
business which EBI ceded to the Unicover Pool. These contracts represented
the largest source of premium to the Unicover Pool. Under the terms of the
settlement agreement, the Unicover Pool members ended the contracts for a
total payment of $43.0 million, of which Phoenix's share was approximately
$10.0 million.
Phoenix included the cost of these settlements, net of reinsurance, in its
estimate of the loss on discontinued life reinsurance operations. See Note
11 - "Discontinued Operations."
93
<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, 1999.
Example:
Value of hypothetical pre-existing account with exactly one
unit at the beginning of the period:...................... 1.561075
Value of the same account (excluding capital changes) at the
end of the 7-day period:.................................. 1.562397
Calculation:
Ending account value ..................................... 1.562397
Less beginning value ..................................... 1.561075
Net change in account value .............................. 0.001322
Base period return:
(adjusted change/beginning account value) ................ 0.000847
Current yield = return x (365/7)............................ 4.42%
Effective yield = [(1 + return)](365/7) - 1................. 4.51%
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.
94
<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 advisors. 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>
FLEX EDGE SUCCESS
- ----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SINCE
SERIES INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Phoenix-Aberdeen International Series........................ 5/1/90 27.57% 17.77% N/A 11.38%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series............................. 9/17/96 48.85% N/A N/A -2.35%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series.......................... 12/15/99 N/A N/A N/A 2.42%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series.......... 5/1/95 3.18% N/A N/A 8.93%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series....................... 12/31/82 27.74% 23.15% 18.26% 18.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series.......................... 3/2/98 30.23% N/A N/A 30.45%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series................ 12/15/99 N/A N/A N/A -1.57%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series.......................... 10/8/82 3.23% 3.73% 3.67% 4.98%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series............. 12/31/82 3.85% 7.90% 7.70% 8.51%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series........................ 3/2/98 22.46% N/A N/A 17.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series........... 7/14/92 17.08% N/A N/A 21.08%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series........................... 12/15/99 N/A N/A N/A 5.76%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series......................... 12/15/99 N/A N/A N/A -0.07%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series.................................. 12/15/99 N/A N/A N/A 5.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series................... 12/15/99 N/A N/A N/A 6.21%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series............................. 5/1/92 9.88% 14.95% N/A 11.12%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series.................... 3/2/98 15.26% N/A N/A 18.94%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series................. 9/17/84 9.57% 14.45% 11.92% 12.30%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series......................... 3/2/98 -11.73% N/A N/A -13.17%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series......................... 3/2/98 43.43% N/A N/A 34.79%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series........................ 1/29/96 52.79% N/A N/A 29.51%
- ----------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund.................................... 8/22/97 25.71% N/A N/A 15.37%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II............. 3/28/94 -2.13% 4.24% N/A 3.94%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II........................... 3/1/94 0.75% 9.08% N/A 6.81%
- ----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio......................................... 11/30/99 N/A N/A N/A 23.65%
- ----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2).................. 11/2/98 7.66% N/A N/A 8.89%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2).................. 11/28/88 20.73% 15.36% 11.45% 11.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2(2)... 9/27/96 51.15% N/A N/A -5.96%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2)............... 11/3/88 26.87% 15.82% 11.94% 11.77%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2(2)........ 5/11/92 21.41% 15.44% N/A 13.71%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty......................................... 2/1/99 N/A N/A N/A 81.57%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap............................... 5/1/95 123.36% N/A N/A 37.18%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty................................................ 2/1/99 N/A N/A N/A 32.60%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap........................................ 5/1/95 23.20% N/A N/A 25.16%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Performance data quoted represent the investment return of the appropriate
series adjusted for Flex Edge Success charges had the Subaccount started on
the inception date of the appropriate series. The average annual total return
is the annualized compounded return that results from holding an initial
investment of $10,000 for the time period indicated. Returns are net of $15
issue expense charge, $5 monthly administrative charge, investment management
fees and mortality and expense risk charges. The investment return and
principal value of the variable contract will fluctuate so that the
accumulated value, when redeemed, may be worth more or less than the original
cost.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that
date represents the historical results of Class 1 shares. Performance since
that date reflects Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
95
<PAGE>
<TABLE>
JOINT EDGE
- ----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 19991
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SINCE
SERIES INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Phoenix-Aberdeen International Series.......................... 5/1/90 25.92% 17.45% N/A 11.20%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series............................... 9/17/96 47.14% N/A N/A -2.77%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series............................ 12/15/99 N/A N/A N/A 2.29%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series............ 5/1/95 1.79% N/A N/A 8.64%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series......................... 12/31/82 26.07% 22.84% 18.09% 18.53%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series............................ 3/2/98 28.60% N/A N/A 29.55%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series.................. 12/15/99 N/A N/A N/A -1.69%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series............................ 10/8/82 1.85% 3.45% 3.53% 4.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series............... 12/31/82 2.46% 7.63% 7.55% 8.42%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series.......................... 3/2/98 20.84% N/A N/A 16.53%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series............. 7/14/92 15.59% N/A N/A 20.46%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series............................. 12/15/99 N/A N/A N/A 5.63%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series........................... 12/15/99 N/A N/A N/A -0.20%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series.................................... 12/15/99 N/A N/A N/A 5.77%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series..................... 12/15/99 N/A N/A N/A 6.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series............................... 5/1/92 8.41% 14.65% N/A 10.93%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series...................... 3/2/98 13.77% N/A N/A 18.12%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series................... 9/17/84 8.11% 14.16% 11.77% 12.20%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series........................... 3/2/98 -13.04% N/A N/A -13.92%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series........................... 3/2/98 41.49% N/A N/A 33.84%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series.......................... 1/29/96 50.97% N/A N/A 29.08%
- ----------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund...................................... 8/22/97 24.07% N/A N/A 14.71%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II............... 3/28/94 -3.47% 3.95% N/A 3.69%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II............................. 3/1/94 -0.60% 8.81% N/A 6.54%
- ----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio........................................... 11/30/99 N/A N/A N/A 23.53%
- ----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2).................... 11/2/98 6.27% N/A N/A 7.70%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2).................... 11/28/88 19.20% 15.06% 11.29% 11.27%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2(2)..... 9/27/96 49.40% N/A N/A -6.34%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2)................. 11/3/88 25.27% 15.53% 11.77% 11.63%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2(2).......... 5/11/92 19.85% 15.14% N/A 13.49%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty........................................... 2/1/99 N/A N/A N/A 79.55%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap................................. 5/1/95 120.87% N/A N/A 36.87%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty.................................................. 2/1/99 N/A N/A N/A 31.16%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap.......................................... 5/1/95 21.59% N/A N/A 24.85%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Performance data quoted represent the investment return of the appropriate
series adjusted for Joint Edge charges had the Subaccount started on the
inception date of the appropriate series. 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. The investment return and principal value
of the variable contract will fluctuate so that the accumulated value, when
redeemed, may be worth more or less than the original cost.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that
date represents the historical results of Class 1 shares. Performance since
that date reflects Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%. The manager is
limiting fund expenses, which increases total returns.
96
<PAGE>
Advertisements, sales literature and other communications may contain
information about any Series' or advisor'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(SM), First Boston High Yield Index and Salomon Brothers
Corporate and Government Bond Indices.
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(SM)
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.
97
<PAGE>
ANNUAL TOTAL RETURN(1)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Series 1983 1984 1985 1986 1987 1988 1989 1990 1991
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A -8.63% 18.79%
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 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 N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 31.84% 9.79% 33.85% 19.51% 6.08% 3.09% 34.53% 3.32% 41.60%
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 7.51% 9.34% 7.17% 5.66% 5.67% 6.60% 8.03% 7.51% 5.14%
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income 5.16% 10.45% 19.65% 18.34% 0.28% 9.61% 6.92% 4.54% 18.66%
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index N/A N/A N/A N/A N/A N/A N/A N/A N/A
Series
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced 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-Oakhurst Strategic Allocation Series N/A -1.31% 26.33% 14.77% 11.66% 1.53% 18.53% 5.15% 28.27%
- -----------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
EAFE(R)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 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
- -----------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class (2) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fun -- Class 2(2) N/A N/A N/A N/A N/A 0.21% 12.13% -8.95% 26.42%
- -----------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund --
Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A -0.99% 13.48% -11.99% 26.22%
- -----------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund --
Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
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>
ANNUAL TOTAL RETURN(1) (continued)
<TABLE>
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
Series 1992 1993 1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series -13.52% 37.33% -0.73% 8.72% 17.71% 11.16% 26.92% 28.48%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A -0.06%-32.94% -5.21% 49.78%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities N/A N/A N/A 17.19% 32.10% 21.09% -21.83% 3.95%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 9.41% 18.75% 0.66% 29.85% 11.69% 20.12% 28.98% 28.65%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A 25.45% 31.12%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 2.75% 2.06% 3.01% 4.86% 4.19% 4.35% 4.26% 3.99%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income 9.23% 14.99% -6.21% 22.56% 11.52% 10.21% -4.91% 4.62%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A 10.07% 23.35%
- -------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index N/A N/A N/A N/A N/A 5.46% 30.64% 17.90%
Series
- -------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series 9.06% 7.75% -3.61% 22.37% 9.68% 17.00% 18.07% 10.69%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A 19.67% 16.08%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 9.79% 10.12% -2.19% 17.27% 8.18% 19.78% 19.84% 10.38%
- --------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A -11.95%-11.00%
- --------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A 20.97% 44.49%
- --------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A 9.56% 16.25% 43.55% 53.77%
- --------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund N/A N/A N/A N/A N/A -6.87% 20.64% 26.61%
- --------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities N/A N/A 1.99% 7.90% 3.37% 7.71% 6.80% -1.38%
- --------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A -4.26% 19.42% 13.40% 12.92% 1.88% 1.50%
- --------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class (2) N/A N/A N/A N/A N/A N/A 2.62% 8.43%
- --------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fun -- Class 2(2) 6.97% 24.86% -4.00% 21.29% 17.64% 14.37% 5.27% 21.58%
- --------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund --
Class 2(2) N/A N/A N/A N/A 1.05%-29.95% -21.69% 52.10%
- --------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2) 6.02% 32.68% -3.25% 23.97% 21.17% 10.75% 0.24% 27.75%
- --------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund --
Class 2(2) -6.80% 45.85% -3.27% 14.56% 22.77% 12.76% 8.17% 22.27%
- --------------------------------------------------------------------------------------------------------------
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 33.96% 31.15% -2.24% 15.41%124.68%
- --------------------------------------------------------------------------------------------------------------
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 16.01% 45.64% 28.41% 7.83% 24.08%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
1 Rates are net of Mortality and Expense Risk Charges and Investment Management
fees for the Subaccounts. Percent change doesn't include the effect of issue
expense or monthly administrative charges. Performance data quoted represent
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.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that
date represents the historical results of Class 1 shares. Performance since
that date reflects Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%. The manager is
limiting fund expenses, which increases total returns.
These rates of return are not an estimate or guarantee of future performance.
98
<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%
99
<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 starting with the 16th 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 .75%
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 .22%. All other Fund expenses, except capital items such as
brokerage commissions, are paid by the Advisor 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, 1999,
average total operating expenses for the Series would have been approximately
.97% 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 -1.76%, 4.19% and 10.15%, respectively (applicable for
the first 15 Policy Years for Single Life Policies and -1.22%, 4.69% and 10.75%,
respectively, starting with the 16th 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.
100
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE 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 0 100,000 666 0 100,000
2 1,000 2,153 1,281 396 100,000 1,413 528 100,000 1,550 665 100,000
3 1,000 3,310 1,966 659 100,000 2,230 923 100,000 2,515 1,208 100,000
4 1,000 4,526 2,629 1,322 100,000 3,070 1,763 100,000 3,568 2,261 100,000
5 1,000 5,802 3,268 1,961 100,000 3,935 2,628 100,000 4,715 3,408 100,000
6 1,000 7,142 3,884 2,722 100,000 4,823 3,661 100,000 5,968 4,806 100,000
7 1,000 8,549 4,473 3,456 100,000 5,733 4,716 100,000 7,333 6,316 100,000
8 1,000 10,027 5,037 4,164 100,000 6,667 5,795 100,000 8,824 7,951 100,000
9 1,000 11,578 5,573 5,137 100,000 7,624 7,188 100,000 10,450 10,015 100,000
10 1,000 13,207 6,082 6,082 100,000 8,604 8,604 100,000 12,228 12,228 100,000
11 1,000 14,917 6,568 6,568 100,000 9,613 9,613 100,000 14,176 14,176 100,000
12 1,000 16,713 7,032 7,032 100,000 10,652 10,652 100,000 16,314 16,314 100,000
13 1,000 18,599 7,473 7,473 100,000 11,722 11,722 100,000 18,662 18,662 100,000
14 1,000 20,579 7,891 7,891 100,000 12,825 12,825 100,000 21,242 21,242 100,000
15 1,000 22,657 8,286 8,286 100,000 13,962 13,962 100,000 24,078 24,078 100,000
16 1,000 24,840 8,707 8,707 100,000 15,218 15,218 100,000 27,350 27,350 100,000
17 1,000 27,132 9,103 9,103 100,000 16,519 16,519 100,000 30,972 30,972 100,000
18 1,000 29,539 9,471 9,471 100,000 17,866 17,866 100,000 34,981 34,981 100,000
19 1,000 32,066 9,811 9,811 100,000 19,259 19,259 100,000 39,423 39,423 100,000
20 1,000 34,719 10,119 10,119 100,000 20,699 20,699 100,000 44,346 44,346 100,000
@ 65 1,000 69,761 10,539 10,539 100,000 37,717 37,717 100,000 135,252 135,252 165,008
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
101
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE 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 1,157 271 100,000 1,280 395 100,000 1,409 524 100,000
3 1,000 3,310 1,780 473 100,000 2,026 719 100,000 2,292 985 100,000
4 1,000 4,526 2,383 1,076 100,000 2,792 1,485 100,000 3,255 1,948 100,000
5 1,000 5,802 2,962 1,655 100,000 3,579 2,272 100,000 4,302 2,995 100,000
6 1,000 7,142 3,519 2,356 100,000 4,385 3,223 100,000 5,444 4,282 100,000
7 1,000 8,549 4,049 3,032 100,000 5,210 4,193 100,000 6,687 5,669 100,000
8 1,000 10,027 4,555 3,682 100,000 6,054 5,182 100,000 8,041 7,169 100,000
9 1,000 11,578 5,033 4,598 100,000 6,916 6,481 100,000 9,517 9,082 100,000
10 1,000 13,207 5,485 5,485 100,000 7,797 7,797 100,000 11,128 11,128 100,000
11 1,000 14,917 5,906 5,906 100,000 8,694 8,694 100,000 12,884 12,884 100,000
12 1,000 16,713 6,297 6,297 100,000 9,607 9,607 100,000 14,800 14,800 100,000
13 1,000 18,599 6,655 6,655 100,000 10,535 10,535 100,000 16,893 16,893 100,000
14 1,000 20,579 6,980 6,980 100,000 11,478 11,478 100,000 19,180 19,180 100,000
15 1,000 22,657 7,269 7,269 100,000 12,433 12,433 100,000 21,681 21,681 100,000
16 1,000 24,840 7,563 7,563 100,000 13,475 13,475 100,000 24,554 24,554 100,000
17 1,000 27,132 7,814 7,814 100,000 14,533 14,533 100,000 27,718 27,718 100,000
18 1,000 29,539 8,017 8,017 100,000 15,604 15,604 100,000 31,203 31,203 100,000
19 1,000 32,066 8,167 8,167 100,000 16,683 16,683 100,000 35,045 35,045 100,000
20 1,000 34,719 8,256 8,256 100,000 17,765 17,765 100,000 39,284 39,284 100,000
@ 65 1,000 69,761 4,071 4,071 100,000 27,518 27,518 100,000 117,325 117,325 143,137
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
102
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE 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 1,050 602 0 100,000 648 0 100,000 694 0 100,000
2 1,000 2,153 1,334 480 100,000 1,469 615 100,000 1,610 756 100,000
3 1,000 3,310 2,045 849 100,000 2,315 1,120 100,000 2,609 1,413 100,000
4 1,000 4,526 2,733 1,538 100,000 3,187 1,992 100,000 3,699 2,504 100,000
5 1,000 5,802 3,398 2,203 100,000 4,085 2,889 100,000 4,889 3,694 100,000
6 1,000 7,142 4,039 2,975 100,000 5,008 3,944 100,000 6,189 5,125 100,000
7 1,000 8,549 4,654 3,721 100,000 5,955 5,022 100,000 7,606 6,673 100,000
8 1,000 10,027 5,243 4,442 100,000 6,928 6,127 100,000 9,154 8,353 100,000
9 1,000 11,578 5,808 5,408 100,000 7,928 7,528 100,000 10,847 10,447 100,000
10 1,000 13,207 6,348 6,348 100,000 8,957 8,957 100,000 12,701 12,701 100,000
11 1,000 14,917 6,870 6,870 100,000 10,021 10,021 100,000 14,738 14,738 100,000
12 1,000 16,713 7,375 7,375 100,000 11,124 11,124 100,000 16,979 16,979 100,000
13 1,000 18,599 7,862 7,862 100,000 12,266 12,266 100,000 19,444 19,444 100,000
14 1,000 20,579 8,330 8,330 100,000 13,448 13,448 100,000 22,158 22,158 100,000
15 1,000 22,657 8,781 8,781 100,000 14,673 14,673 100,000 25,146 25,146 100,000
16 1,000 24,840 9,264 9,264 100,000 16,031 16,031 100,000 28,595 28,595 100,000
17 1,000 27,132 9,730 9,730 100,000 17,446 17,446 100,000 32,417 32,417 100,000
18 1,000 29,539 10,179 10,179 100,000 18,920 18,920 100,000 36,655 36,655 100,000
19 1,000 32,066 10,607 10,607 100,000 20,455 20,455 100,000 41,354 41,354 100,000
20 1,000 34,719 11,016 11,016 100,000 22,056 22,056 100,000 46,567 46,567 100,000
@ 65 1,000 69,761 13,794 13,794 100,000 42,416 42,416 100,000 142,897 142,897 174,335
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
103
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE 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 1,050 534 0 100,000 578 0 100,000 622 0 100,000
2 1,000 2,153 1,199 345 100,000 1,325 471 100,000 1,457 603 100,000
3 1,000 3,310 1,842 647 100,000 2,093 898 100,000 2,366 1,171 100,000
4 1,000 4,526 2,464 1,268 100,000 2,884 1,688 100,000 3,357 2,162 100,000
5 1,000 5,802 3,062 1,867 100,000 3,695 2,500 100,000 4,437 3,242 100,000
6 1,000 7,142 3,637 2,573 100,000 4,527 3,463 100,000 5,614 4,550 100,000
7 1,000 8,549 4,186 3,253 100,000 5,378 4,446 100,000 6,895 5,962 100,000
8 1,000 10,027 4,709 3,908 100,000 6,250 5,449 100,000 8,291 7,490 100,000
9 1,000 11,578 5,208 4,808 100,000 7,144 6,744 100,000 9,816 9,417 100,000
10 1,000 13,207 5,682 5,682 100,000 8,060 8,060 100,000 11,483 11,483 100,000
11 1,000 14,917 6,131 6,131 100,000 9,000 9,000 100,000 13,307 13,307 100,000
12 1,000 16,713 6,556 6,556 100,000 9,964 9,964 100,000 15,304 15,304 100,000
13 1,000 18,599 6,954 6,954 100,000 10,952 10,952 100,000 17,492 17,492 100,000
14 1,000 20,579 7,324 7,324 100,000 11,962 11,962 100,000 19,889 19,889 100,000
15 1,000 22,657 7,667 7,667 100,000 12,997 12,997 100,000 22,518 22,518 100,000
16 1,000 24,840 8,023 8,023 100,000 14,132 14,132 100,000 25,543 25,543 100,000
17 1,000 27,132 8,349 8,349 100,000 15,300 15,300 100,000 28,885 28,885 100,000
18 1,000 29,539 8,640 8,640 100,000 16,499 16,499 100,000 32,577 32,577 100,000
19 1,000 32,066 8,893 8,893 100,000 17,726 17,726 100,000 36,657 36,657 100,000
20 1,000 34,719 9,105 9,105 100,000 18,984 18,984 100,000 41,173 41,173 100,000
@ 65 1,000 69,761 8,564 8,564 100,000 33,436 33,436 100,000 124,835 124,835 152,299
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
104
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE 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 1,050 574 0 100,574 619 0 100,619 664 0 100,665
2 1,000 2,153 1,278 393 101,278 1,409 524 101,409 1,546 660 101,546
3 1,000 3,310 1,959 652 101,959 2,221 914 102,222 2,505 1,198 102,506
4 1,000 4,526 2,617 1,310 102,617 3,055 1,748 103,056 3,550 2,243 103,550
5 1,000 5,802 3,249 1,942 103,249 3,910 2,603 103,911 4,686 3,379 104,686
6 1,000 7,142 3,856 2,694 103,856 4,787 3,624 104,787 5,921 4,759 105,922
7 1,000 8,549 4,434 3,417 104,435 5,681 4,664 105,682 7,264 6,247 107,264
8 1,000 10,027 4,985 4,113 104,986 6,596 5,723 106,596 8,724 7,852 108,725
9 1,000 11,578 5,506 5,071 105,507 7,527 7,092 107,527 10,311 9,875 110,311
10 1,000 13,207 5,998 5,998 105,998 8,477 8,477 108,477 12,037 12,037 112,037
11 1,000 14,917 6,464 6,464 106,464 9,449 9,449 109,450 13,920 13,920 113,921
12 1,000 16,713 6,905 6,905 106,906 10,445 10,445 110,446 15,977 15,977 115,978
13 1,000 18,599 7,322 7,322 107,322 11,465 11,465 111,466 18,225 18,225 118,225
14 1,000 20,579 7,713 7,713 107,714 12,509 12,509 112,510 20,681 20,681 120,682
15 1,000 22,657 8,078 8,078 108,079 13,578 13,578 113,578 23,366 23,366 123,366
16 1,000 24,840 8,465 8,465 108,465 14,753 14,753 114,753 26,449 26,449 126,450
17 1,000 27,132 8,823 8,823 108,824 15,959 15,959 115,960 29,839 29,839 129,839
18 1,000 29,539 9,151 9,151 109,151 17,196 17,196 117,197 33,565 33,565 133,565
19 1,000 32,066 9,446 9,446 109,446 18,462 18,462 118,463 37,661 37,661 137,661
20 1,000 34,719 9,704 9,704 109,705 19,755 19,755 119,756 42,163 42,163 142,163
@ 65 1,000 69,761 9,294 9,294 109,295 33,214 33,214 133,214 120,450 120,450 220,450
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
105
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE 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 1,153 268 101,154 1,276 391 101,277 1,405 520 101,406
3 1,000 3,310 1,773 466 101,774 2,018 711 102,018 2,283 976 102,284
4 1,000 4,526 2,371 1,064 102,371 2,778 1,471 102,779 3,238 1,931 103,238
5 1,000 5,802 2,944 1,637 102,944 3,556 2,249 103,556 4,274 2,967 104,275
6 1,000 7,142 3,492 2,330 103,493 4,351 3,189 104,352 5,400 4,238 105,401
7 1,000 8,549 4,013 2,996 104,013 5,161 4,144 105,162 6,621 5,604 106,622
8 1,000 10,027 4,507 3,634 104,507 5,987 5,114 105,987 7,948 7,075 107,948
9 1,000 11,578 4,971 4,535 104,971 6,826 6,390 106,826 9,386 8,951 109,387
10 1,000 13,207 5,406 5,406 105,407 7,678 7,678 107,679 10,949 10,949 110,949
11 1,000 14,917 5,809 5,809 105,809 8,541 8,541 108,541 12,643 12,643 112,644
12 1,000 16,713 6,178 6,178 106,178 9,412 9,412 109,413 14,481 14,481 114,482
13 1,000 18,599 6,512 6,512 106,512 10,290 10,290 110,291 16,475 16,475 116,476
14 1,000 20,579 6,809 6,809 106,809 11,173 11,173 111,174 18,639 18,639 118,639
15 1,000 22,657 7,066 7,066 107,067 12,058 12,058 112,058 20,985 20,985 120,985
16 1,000 24,840 7,324 7,324 107,325 13,015 13,015 113,015 23,662 23,662 123,662
17 1,000 27,132 7,535 7,535 107,536 13,972 13,972 113,973 26,580 26,580 126,580
18 1,000 29,539 7,693 7,693 107,694 14,923 14,923 114,923 29,758 29,758 129,759
19 1,000 32,066 7,793 7,793 107,793 15,861 15,861 115,861 33,218 33,218 133,218
20 1,000 34,719 7,825 7,825 107,826 16,775 16,775 116,776 36,980 36,980 136,980
@ 65 1,000 69,761 2,834 2,834 102,834 22,265 22,265 122,265 97,952 97,952 197,952
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
106
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE 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 1,050 601 0 100,601 647 0 100,647 693 0 100,694
2 1,000 2,153 1,331 477 101,332 1,465 612 101,466 1,606 752 101,606
3 1,000 3,310 2,038 843 102,039 2,308 1,113 102,308 2,600 1,405 102,601
4 1,000 4,526 2,722 1,527 102,722 3,174 1,979 103,175 3,683 2,488 103,684
5 1,000 5,802 3,381 2,185 103,381 4,063 2,868 104,064 4,863 3,668 104,863
6 1,000 7,142 4,014 2,950 104,014 4,975 3,911 104,976 6,147 5,083 106,148
7 1,000 8,549 4,619 3,686 104,619 5,908 4,976 105,909 7,544 6,611 107,544
8 1,000 10,027 5,197 4,396 105,197 6,863 6,062 106,864 9,064 8,263 109,065
9 1,000 11,578 5,747 5,348 105,748 7,841 7,441 107,841 10,721 10,322 110,722
10 1,000 13,207 6,272 6,272 106,272 8,842 8,842 108,842 12,529 12,529 112,529
11 1,000 14,917 6,776 6,776 106,777 9,874 9,874 109,874 14,508 14,508 114,508
12 1,000 16,713 7,261 7,261 107,262 10,938 10,938 110,939 16,676 16,676 116,677
13 1,000 18,599 7,726 7,726 107,726 12,035 12,035 112,036 19,053 19,053 119,053
14 1,000 20,579 8,170 8,170 108,171 13,166 13,166 113,166 21,657 21,657 121,658
15 1,000 22,657 8,595 8,595 108,596 14,331 14,331 114,332 24,514 24,514 124,514
16 1,000 24,840 9,049 9,049 109,050 15,619 15,619 115,619 27,799 27,799 127,799
17 1,000 27,132 9,484 9,484 109,484 16,952 16,952 116,953 31,422 31,422 131,422
18 1,000 29,539 9,898 9,898 109,898 18,334 18,334 118,334 35,418 35,418 135,419
19 1,000 32,066 10,288 10,288 110,288 19,762 19,762 119,763 39,825 39,825 139,825
20 1,000 34,719 10,656 10,656 110,657 21,241 21,241 121,241 44,687 44,687 144,688
@ 65 1,000 69,761 12,801 12,801 112,801 38,968 38,968 138,968 131,817 131,817 231,817
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
107
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE 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 1,050 533 0 100,533 576 0 100,577 621 0 100,621
2 1,000 2,153 1,195 341 101,196 1,321 467 101,322 1,453 599 101,453
3 1,000 3,310 1,836 640 101,836 2,086 891 102,087 2,358 1,162 102,358
4 1,000 4,526 2,453 1,258 102,453 2,871 1,675 102,871 3,342 2,147 103,342
5 1,000 5,802 3,045 1,850 103,046 3,674 2,479 103,674 4,411 3,216 104,412
6 1,000 7,142 3,612 2,549 103,613 4,495 3,432 104,496 5,573 4,509 105,574
7 1,000 8,549 4,152 3,219 104,152 5,333 4,401 105,334 6,834 5,902 106,835
8 1,000 10,027 4,664 3,863 104,664 6,187 5,386 106,188 8,204 7,403 108,205
9 1,000 11,578 5,149 4,749 105,150 7,059 6,659 107,060 9,694 9,294 109,694
10 1,000 13,207 5,608 5,608 105,609 7,949 7,949 107,950 11,316 11,316 111,317
11 1,000 14,917 6,040 6,040 106,040 8,857 8,857 108,857 13,083 13,083 113,083
12 1,000 16,713 6,445 6,445 106,445 9,782 9,782 109,783 15,008 15,008 115,008
13 1,000 18,599 6,820 6,820 106,821 10,724 10,724 110,724 17,104 17,104 117,105
14 1,000 20,579 7,165 7,165 107,166 11,681 11,681 111,681 19,389 19,389 119,389
15 1,000 22,657 7,480 7,480 107,480 12,652 12,652 112,652 21,878 21,878 121,879
16 1,000 24,840 7,804 7,804 107,805 13,711 13,711 113,711 24,728 24,728 124,728
17 1,000 27,132 8,094 8,094 108,094 14,789 14,789 114,789 27,850 27,850 127,851
18 1,000 29,539 8,345 8,345 108,346 15,882 15,882 115,882 31,272 31,272 131,272
19 1,000 32,066 8,553 8,553 108,553 16,985 16,985 116,986 35,018 35,018 135,019
20 1,000 34,719 8,716 8,716 108,717 18,098 18,098 118,099 39,123 39,123 139,123
@ 65 1,000 69,761 7,426 7,426 107,427 29,177 29,177 129,177 110,039 110,039 210,039
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
108
<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
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 1,050 505 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%.
109
<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
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 1,050 387 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%.
110
<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
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 1,050 503 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%.
111
<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
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 1,050 385 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%.
112
<PAGE>
[VERSION B]
FLEX EDGE(SM)
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, 2000
This prospectus describes a flexible premium variable universal life insurance
policy. The policy provides lifetime insurance protection.
THE PHOENIX EDGE SERIES FUND
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Capital Growth Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Balanced Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Oakhurst Strategic Allocation Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Phoenix-Seneca Strategic Theme 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
MANAGED BY PHOENIX VARIABLE ADVISORS, INC.
[diamond] Phoenix-Bankers Trust Dow 30 Series
[diamond] Phoenix-Federated U.S. Government Bond Series
[diamond] Phoenix-J.P. Morgan Research Enhanced Index Series
[diamond] Phoenix-Janus Equity Income Series
[diamond] Phoenix-Janus Flexible Income Series
[diamond] Phoenix-Janus Growth Series
[diamond] Phoenix-Morgan Stanley Focus Equity Series
[diamond] Phoenix-Schafer Mid-Cap Value Series
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE(R) 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
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
[diamond] Technology Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
MANAGED BY TEMPLETON GLOBAL ADVISORS LIMITED
[diamond] Templeton Growth Securities Fund -- Class 2
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Strategy Fund -- Class 2
[diamond] Templeton International Securities Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Securities Fund -- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[diamond] Mutual Shares Securities 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
1
<PAGE>
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 income taxes.
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.
2
<PAGE>
TABLE OF CONTENTS
Heading Page
- ------------------------------------------------------------
SPECIAL TERMS ......................................... 4
SUMMARY ............................................... 6
PERFORMANCE HISTORY.................................... 7
PHOENIX AND THE VUL ACCOUNT............................ 7
Phoenix ............................................ 7
The VUL Account .................................... 7
The GIA ............................................ 8
THE POLICY ............................................ 8
Introduction ....................................... 8
Eligible Purchasers ................................ 8
Flexible Premiums .................................. 8
Allocation of Issue Premium ........................ 9
Free Look Period ................................... 9
Temporary Insurance Coverage ....................... 10
Transfer of Policy Value ........................... 10
Systematic Transfer Program....................... 10
Nonsystematic Transfers .......................... 10
Determination of Subaccount Values ................. 11
Death Benefit ...................................... 11
Surrenders ......................................... 12
Policy Loans ....................................... 13
Lapse .............................................. 13
Payment of Premiums During Period of Disability .... 14
Additional Insurance Options ....................... 14
Additional Rider Benefits .......................... 14
INVESTMENTS OF THE VUL ACCOUNT ........................ 15
Participating Investment Funds...................... 15
Investment Advisors................................. 18
Services of the Advisors ........................... 18
Reinvestment and Redemption ........................ 18
Substitution of Investments ........................ 19
CHARGES AND DEDUCTIONS ................................ 19
General............................................. 19
Charges Deducted Once .............................. 19
Premium Tax Charge ............................... 19
Federal Tax Charge................................ 19
Periodic Charges.................................... 19
Conditional Charges................................. 20
Investment Management Charge........................ 21
Other Taxes ........................................ 21
GENERAL PROVISIONS .................................... 21
Postponement of Payments ........................... 21
Payment by Check ................................... 21
The Contract ....................................... 21
Suicide ............................................ 22
Incontestability ................................... 22
Change of Owner or Beneficiary ..................... 22
Assignment ......................................... 22
Misstatement of Age or Sex ......................... 22
Surplus............................................. 22
PAYMENT OF PROCEEDS ................................... 22
Surrender and Death Benefit Proceeds ............... 22
Payment Options .................................... 22
FEDERAL INCOME TAX CONSIDERATIONS ..................... 23
Introduction ....................................... 23
Phoenix's Income Tax Status ........................ 23
Policy Benefits .................................... 24
Business-Owned Policies............................. 24
Modified Endowment Contracts ....................... 24
Limitations on Unreasonable Mortality
and Expense Charges .............................. 25
Qualified Plans .................................... 25
Diversification Standards .......................... 25
Change of Ownership or Insured or Assignment ....... 26
Other Taxes ........................................ 26
VOTING RIGHTS ......................................... 26
Phoenix............................................. 27
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX ....... 27
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ............... 28
SALES OF POLICIES ..................................... 28
STATE REGULATION ...................................... 28
REPORTS ............................................... 28
LEGAL PROCEEDINGS ..................................... 28
LEGAL MATTERS ......................................... 28
REGISTRATION STATEMENT ................................ 29
FINANCIAL STATEMENTS .................................. 29
APPENDIX A ............................................ 93
APPENDIX B ............................................ 97
APPENDIX C............................................. 98
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, Deutsche Asset Management VIT Funds,
Federated Insurance Series, The Universal Institutional Funds, Inc., Franklin
Templeton Variable Insurance Products Trust 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
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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
- --------------------------------------------------------------------------------
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.
o The fixed benefit is equal to the Policy's face amount (Option 1)
o 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 Option
Availability of these Riders depends upon state approval and may involve an
extra cost.
DEDUCTIONS AND CHARGES
FROM PREMIUM PAYMENTS
[diamond] Taxes
o State Premium Tax Charge--Varies by State
o 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 "Free Look 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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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. On April 17, 2000, the Board of
Directors of Phoenix Home Life Mutual Insurance Company authorized management to
develop a plan for conversion from a mutual to a publicly traded stock company.
If such a plan is developed and adopted by the Board, it would be subject to the
approval of the New York Insurance Department and other regulators and submitted
to policyholders for approval. The plan would go into effect only after all
these requirements had been met. There is no assurance that any such plan will
be adopted, and if adopted, there is no guarantee as to the amount or nature of
consideration to eligible policyholders.
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 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
7
<PAGE>
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%. 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 4-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
- --------------------------------------------------------------------------------
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.
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<PAGE>
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 "Transfer of Policy Value - 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 you 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 Free Look
Period) to the Phoenix-Goodwin Money Market Subaccount of the VUL Account, and,
at the expiration of the Free Look 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.
FREE LOOK 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 "Free Look 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 7 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 Free Look Period.
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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:
[diamond] $25 monthly,
[diamond] $75 quarterly,
[diamond] $150 semiannually or
[diamond] $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 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
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<PAGE>
[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 adversely affect 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 Free Look Period.
DETERMINATION OF SUBACCOUNT VALUES
We establish the unit value of each Subaccount 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 6 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.
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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. 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 7 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.
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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. The 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:
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 3 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 3 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
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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 $3 per $1,000 of
increase in face amount, up to a maximum of $150, and to our receipt of adequate
insurability evidence. A Free Look 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 6 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 5 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 before the Policy anniversary nearest the Insured's 75th birthday
if:
o the Insured dies from bodily injury that results from an accident;
and
o the Insured dies no later than 90 days after injury.
[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:
1 death benefit guaranteed until the later of the Policy Anniversary
nearest the Insured's 70th birthday or Policy Year 7;
2 death benefit guaranteed until the later of the Policy Anniversary
nearest the Insured's 80th birthday or Policy Year 10;
3 death benefit guaranteed until the later of the Policy Anniversary
nearest the Insured's 95th birthday.
Death benefit guarantee periods 1 or 2 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
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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 Free
Look Period (see "The Policy--Free Look 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 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.
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-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-BANKERS TRUST DOW 30 SERIES: The series seeks to track the total
return of the Dow Jones Industrial Average(SM) (the "DJIA(SM)") before fund
expenses.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES: The investment objective of the
series is to achieve intermediate and long-term growth of capital, with income
as a secondary consideration. The Phoenix-Engemann Capital Growth Series invests
principally in common stocks of corporations believed by management to offer
growth potential.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the series
is to seek long-term capital appreciation by investing in approximately 50
different securities 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-FEDERATED U.S. GOVERNMENT BOND SERIES:
The investment objective of the series is to maximize total return by investing
primarily in debt obligations of the U.S. Government, its agencies and
instrumentalities.
PHOENIX-GOODWIN MONEY MARKET SERIES: The investment objective of the series
is to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the series is long-term capital appreciation, with a secondary investment
objective of
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current income. The Phoenix-Hollister Value Equity Series seeks to achieve its
objective by investing in a diversified portfolio of common stocks that meet
certain quantitative standards that indicate above average financial soundness
and intrinsic value relative to price.
PHOENIX-J.P. MORGAN RESEARCH ENHANCED INDEX SERIES: The investment objective
of the series is to seek high total return by investing in a broadly diversified
portfolio of equity securities of large and medium capitalization companies
within market sectors reflected in the S&P 500. The series invests in a
portfolio of undervalued common stocks and other equity securities which appear
to offer growth potential and an overall volatility of return similar to that of
the S&P 500.
PHOENIX-JANUS EQUITY INCOME SERIES: The investment objective of the series
is to seek current income and long-term growth
of capital.
PHOENIX-JANUS FLEXIBLE INCOME SERIES: The investment objective of the series
is to seek to obtain maximum total return, consistent with preservation of
capital.
PHOENIX-JANUS GROWTH SERIES: The investment objective of the series is to
seek long-term growth of capital, in a manner consistent with the preservation
of capital.
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES: The investment objective of the
series is to seek capital appreciation by investing primarily in equity
securities.
PHOENIX-OAKHURST BALANCED SERIES: The investment objective of the series is
to seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Oakhurst Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
PHOENIX-OAKHURST GROWTH AND INCOME SERIES: The investment objective of the
series is to seek dividend growth, current income and capital appreciation by
investing in common stocks. The Phoenix-Oakhurst Growth and Income Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES: The investment objective of
the series is to realize as high a level of total return over an extended period
of time as is considered consistent with prudent investment risk. The
Phoenix-Oakhurst Strategic Allocation Series invests in stocks, bonds and money
market instruments in accordance with the Investment Advisor's appraisal of
investments most likely to achieve the highest total return.
PHOENIX-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.
PHOENIX-SENECA STRATEGIC THEME SERIES: The investment objective of the
series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Phoenix-Seneca Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
A certain Subaccount invests in a corresponding series of the Deutsche Asset
Management VIT Funds. The following series is currently available:
EAFE(R) EQUITY INDEX FUND: The series seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index ("EAFE(R) Index"), which
emphasizes major market stock performance of companies in Europe, Australia and
the Far East. The series invests in a statistically selected sample of the
securities found in the EAFE(R) 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.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
A certain subaccount invests in a corresponding series of the The Universal
Institutional Funds, Inc. The following series is currently available:
TECHNOLOGY PORTFOLIO: The investment objective of the series is to seek
long-term capital appreciation by investing primarily in equity securities of
companies that the
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investment advisor expects to benefit from their involvement in technology and
technology-related industries.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Certain Subaccounts invest in Class 2 Shares of a corresponding fund of the
Franklin Templeton Variable Insurance Products Trust. The following funds are
currently available:
MUTUAL SHARES SECURITIES FUND: The primary investment objective of the fund
is capital appreciation with income as a secondary objective. The Mutual Shares
Securities Fund invests in domestic equity securities that the manager believes
are significantly undervalued.
TEMPLETON ASSET STRATEGY FUND: The investment objective of the fund is a
high level of total return. The Templeton Asset Strategy Fund invests in stocks
of companies of any nation, bonds of companies and governments of any nation and
in money market instruments. Changes in the asset mix will be made in an attempt
to capitalize on total return potential produced by changing economic conditions
throughout the world, including emerging market countries.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND: The investment objective of
the fund is long-term capital appreciation. The Templeton Developing Markets
Securities Fund invests primarily in emerging market equity securities.
TEMPLETON INTERNATIONAL SECURITIES FUND: The investment objective of the
fund is long-term capital growth. The Templeton International Securities Fund
invests primarily in stocks of companies located outside the United States,
including emerging markets.
TEMPLETON GROWTH SECURITIES FUND: The investment objective of the fund is
long-term capital growth. The Templeton Growth Securities Fund invests primarily
in common stocks issued by companies in various nations throughout the world,
including the U.S. and emerging markets.
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.
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 funds; 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.
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INVESTMENT ADVISORS
Phoenix Investment Counsel, Inc. ("PIC") is an investment advisor to the
following series in The Phoenix Edge Series Fund:
o Phoenix-Goodwin Money Market Series
o Phoenix-Goodwin Multi-Sector Fixed Income Series
o Phoenix-Hollister Value Equity Series
o Phoenix-Oakhurst Balanced Series
o Phoenix-Oakhurst Growth and Income Series
o Phoenix-Oakhurst Strategic Allocation Series
Based on subadvisory agreements with the fund, PIC as an investment advisor
delegates certain investment decisions and research functions to subadvisors for
the following series:
[diamond] Phoenix-Aberdeen International Advisors, LLC ("PAIA")
o Phoenix-Aberdeen International Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
o Phoenix-Engemann Capital Growth Series
o Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
o Phoenix-Seneca Mid-Cap Growth Series
o Phoenix-Seneca Strategic Theme Series
Phoenix Variable Advisors, Inc. ("PVA") is also an investment advisor to The
Phoenix Edge Series Fund. Based on subadvisory agreements with the fund, PVA
delegates certain investment decisions and research functions to the following
subadvisors for the series listed:
[diamond] Bankers Trust Company
o Phoenix-Bankers Trust Dow 30 Series
[diamond] Federated Investment Management Company
o Phoenix-Federated U.S. Government Bond Series
[diamond] J.P. Morgan Investment Management, Inc.
o Phoenix-J.P. Morgan Research Enhanced Index Series
[diamond] Janus Capital Corporation
o Phoenix-Janus Equity Income Series
o Phoenix-Janus Flexible Income Series
o Phoenix-Janus Growth Series
[diamond] Morgan Stanley Asset Management Inc.
o Phoenix-Morgan Stanley Focus Equity Series
[diamond] Schafer Capital Management, Inc.
o Phoenix-Schafer Mid-Cap Value Series
The investment advisor to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment advisor to the Phoenix-Aberdeen New Asia Series is 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. PVA is a wholly
owned subsidiary of PM Holdings, Inc.
The other investment advisors and their respective funds are:
[diamond] Bankers Trust Company
o EAFE(R) Equity Index Fund
[diamond] Federated Investment Management Company
o Federated Fund for U.S. Government Securities II
o Federated High Income Bond Fund II
[diamond] Franklin Mutual Advisers, LLC
o Mutual Shares Securities Fund
[diamond] Morgan Stanley Asset Management Inc.
o Technology Portfolio
[diamond] Templeton Asset Management, Ltd.
o Templeton Developing Markets Securities Fund
[diamond] Templeton Global Advisors Limited
o Templeton Growth Securities Fund
[diamond] Templeton Investment Counsel, Inc.
o Templeton Asset Strategy Fund
o Templeton International Securities Fund
[diamond] Wanger Asset Management, L.P.
o Wanger Foreign Forty
o Wanger International Small Cap
o Wanger Twenty
o Wanger U.S. Small Cap
SERVICES OF THE ADVISORS
The advisors continually furnish an investment program for each series and
manage the investment and reinvestment of the assets of each series subject at
all times to the authority and supervision of the Trustees. A detailed
discussion of the investment advisors and subadvisors, and the investment
advisory and subadvisory agreements, is contained in the accompanying prospectus
for the funds.
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] STATE 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 and
states 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. 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. 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. 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
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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 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
Advisors 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 6 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 2 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 2 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 7 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 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] 10 years;
[diamond] 20 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 INCOME 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 income tax
status and upon the income tax status of the individual concerned. The
discussion contained herein is general in nature and is not intended as tax
income advice. For complete information on federal and state income tax
considerations, a qualified income tax advisor 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 ("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 INCOME TAX STATUS
We are taxed as a life insurance company under the Internal Revenue Code of
1986, as amended ("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 income 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 income 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 income 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 ("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 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, any excess of the cash
value (unreduced by 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. 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
advisor 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 also
regarding 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
advisor 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 advisor 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.
24
<PAGE>
REDUCTION IN BENEFITS DURING THE FIRST 7 YEARS
If there is a reduction in death benefits during the first 7 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 7
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 2 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 7 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 2 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 7 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:
o the cost-of-living determination period does not exceed the
remaining premium payment period under the Policy; and
o 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 7 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 advisor 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 advisor.
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:
25
<PAGE>
[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. 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 Series 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 Advisor 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
26
<PAGE>
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
John C. Bacot Chairman and Chief Executive
Officer, The Bank of New York
New York, New York
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
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 and
Chief Executive Officer,
Phoenix Home Life Mutual
Insurance Company
Hartford, Connecticut
John E. Haire President of
The Fortune Group
New York, New York
Jerry J. Jasinowski President, National Association
of Manufacturers
Washington, D.C.
John W. Johnstone Chairman, Governance & Nominating
Committees, Arch Chemicals, Inc.,
Westport, Connecticut; formerly
Chairman, President and
Chief Executive Officer,
Olin Corporation
Norwalk, Connecticut
Marilyn E. LaMarche Limited Managing Director,
Lazard Freres & Company, L.L.C.
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 Retired, formerly Chairman and
Chief Executive Officer,
Ecologic Waste Services, Inc.
Miami, Florida
Dona D. Young President, Phoenix Home Life
Mutual Insurance Company
Hartford, Connecticut
EXECUTIVE OFFICERS PRINCIPAL OCCUPATION
Robert W. Fiondella Chairman of the Board and Chief
Executive Officer
Dona D. Young President
Philip R. McLoughlin Executive Vice President and
Chief Investment Officer
Carl T. Chadburn Executive Vice President
David W. Searfoss Executive Vice President and
Chief Financial Officer
Nathaniel C. Brinn Senior Vice President
Martin J. Gavin Senior Vice President,
Trust Operations
Randall C. Giangiulio Senior Vice President,
Group Life and Health
27
<PAGE>
Michael J. Gilotti Senior Vice President
Edward P. Hourihan Senior Vice President,
Information Systems
Joseph E. Kelleher Senior Vice President,
Underwriting and Operations
Robert G. Lautensack, Jr. Senior Vice President,
Individual Financial
Maura L. Melley Senior Vice President,
Public Affairs
Charles L. Olsen Senior Vice President
Robert E. Primmer Senior Vice President,
Individual Distribution
Tracy L. Rich Senior Vice President
Joel D. Sanders Senior Vice President
Frederick W. Sawyer, III Senior Vice President
Jack F. Solan, Jr. Senior Vice President,
Strategic Development
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 listing reflects the positions held at 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.
28
<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.
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, 1999.
29
<PAGE>
PHOENIX HOME LIFE VARIABLE
UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1999
30
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ENGEMANN GOODWIN OAKHURST
GOODWIN MONEY CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN
MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
<S> <C> <C> <C> <C> <C>
Investments at cost............... $ 36,172,745 $ 304,559,369 $ 20,646,125 $ 43,191,926 $ 63,645,004
============= ============== ============= ============= =============
Investments at market............. $ 36,172,745 $ 448,728,926 $ 18,455,528 $ 49,617,057 $ 77,234,406
------------- -------------- ------------- ------------- -------------
Total assets............... 36,172,745 448,728,926 18,455,528 49,617,057 77,234,406
LIABILITIES
Accrued expenses to related party. 22,449 291,917 12,302 33,157 50,070
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 36,150,296 $ 448,437,009 $ 18,443,226 $ 49,583,900 $ 77,184,336
============= ============== ============= ============= =============
Accumulation units outstanding.......... 23,137,709 64,302,622 8,059,238 13,473,562 26,138,742
============= ============== ============= ============= =============
Unit value.............................. $ 1.562397 $ 6.973853 $ 2.288458 $ 3.680088 $ 2.952871
============= ============== ============= ============= =============
DUFF & PHELPS SENECA RESEARCH
OAKHURST REAL ESTATE STRATEGIC ABERDEEN ENHANCED
BALANCED SECURITIES THEME NEW ASIA INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
Investments at cost............... $ 26,273,562 $ 4,793,113 $ 18,085,301 $ 2,741,828 $ 24,785,826
============= ============== ============= ============= =============
Investments at market............. $ 31,642,850 $ 4,020,674 $ 24,186,768 $ 3,057,608 $ 28,154,106
------------- -------------- ------------- ------------- -------------
Total assets.............. 31,642,850 4,020,674 24,186,768 3,057,608 28,154,106
LIABILITIES
Accrued expenses to related party. 21,131 2,567 14,929 2,018 18,617
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 31,621,719 $ 4,018,107 $ 24,171,839 $ 3,055,590 $ 28,135,489
============= ============== ============= ============= =============
Accumulation units outstanding.......... 13,638,575 3,129,571 9,417,741 3,212,043 17,142,029
============= ============== ============= ============= =============
Unit value.............................. $ 2.318550 $ 1.283916 $ 2.566628 $ 0.951292 $ 1.641316
============= ============== ============= ============= =============
SENECA OAKHURST
ENGEMANN MID-CAP GROWTH AND HOLLISTER SCHAFER
NIFTY FIFTY GROWTH INCOME VALUE EQUITY MID-CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
Investments at cost............... $ 6,933,141 $ 2,156,212 $ 8,743,326 $ 2,244,858 $ 1,647,078
============= ============== ============= ============= =============
Investments at market............. $ 8,812,180 $ 3,157,717 $ 10,108,660 $ 2,612,019 $ 1,502,253
------------- -------------- ------------- ------------- -------------
Total assets............... 8,812,180 3,157,717 10,108,660 2,612,019 1,502,253
LIABILITIES
Accrued expenses to related party. 5,722 1,903 6,591 1,665 1,189
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 8,806,458 $ 3,155,814 $ 10,102,069 $ 2,610,354 $ 1,501,064
============= ============== ============= ============= =============
Accumulation units outstanding.......... 5,353,879 1,844,737 7,271,955 1,937,918 1,915,460
============= ============== ============= ============= =============
Unit value.............................. $ 1.644874 $ 1.710712 $ 1.389182 $ 1.346989 $ 0.783657
============= ============== ============= ============= =============
WANGER TEMPLETON
WANGER U.S. INTERNATIONAL TEMPLETON ASSET TEMPLETON
SMALL CAP SMALL CAP STOCK ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
Investments at cost............... $ 34,000,619 $ 13,547,992 $ 255,329 $ 262,651 $ 1,140,606
============= ============== ============= ============= =============
Investments at market............. $ 41,762,466 $ 29,265,084 $ 298,740 $ 289,238 $ 1,271,691
------------- -------------- ------------- ------------- -------------
Total assets............... 41,762,466 29,265,084 298,740 289,238 1,271,691
LIABILITIES
Accrued expenses to related party. 26,850 17,620 184 187 779
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 41,735,616 $ 29,247,464 $ 298,556 $ 289,051 $ 1,270,912
============= ============== ============= ============= =============
Accumulation units outstanding.......... 23,396,320 11,233,769 234,852 235,662 999,489
============= ============== ============= ============= =============
Unit value.............................. $ 1.783854 $ 2.603531 $ 1.271250 $ 1.226552 $ 1.271562
============= ============== ============= ============= =============
</TABLE>
See Notes to Financial Statements
31
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(CONTINUED)
TEMPLETON
DEVELOPING MUTUAL SHARES WANGER WANGER EAFE
MARKETS INVESTMENTS TWENTY FOREIGN FORTY EQUITY INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------- ----------------
ASSETS
<S> <C> <C> <C> <C> <C>
Investments at cost............... $ 647,618 $ 401,439 $ 620,952 $ 388,605 $ 219,790
============ ============ ============ ============= ============
Investments at market............. $ 765,101 $ 411,374 $ 686,777 $ 603,018 $ 237,869
------------ ------------ ------------ ------------- ------------
Total assets............... 765,101 411,374 686,777 603,018 237,869
LIABILITIES
Accrued expenses to related party. 467 269 416 335 140
------------ ------------ ------------ ------------- ------------
NET ASSETS.............................. $ 764,634 $ 411,105 $ 686,361 $ 602,683 $ 237,729
============ ============ ============ ============= ============
Accumulation units outstanding.......... 474,876 380,974 496,070 317,402 200,992
============ ============ ============ ============= ============
Unit value.............................. $ 1.610176 $ 1.079090 $ 1.383596 $ 1.898803 $ 1.182776
============ ============ ============ ============= ============
FEDERATED FEDERATED
BANKERS U.S. GOV'T HIGH INCOME JANUS
TRUST DOW 30 SECURITIES II BOND FUND II EQUITY INCOME JANUS GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------- ----------------
ASSETS
Investments at cost............... $ 5,260 $ 79,497 $ 176,220 $ 13,190 $ 177,361
============ ============ ============ ============= ============
Investments at market............. $ 5,282 $ 79,711 $ 179,326 $ 13,399 $ 179,523
------------ ------------ ------------ ------------- ------------
Total assets............... 5,282 79,711 179,326 13,399 179,523
LIABILITIES
Accrued expenses to related party. 0 51 119 1 16
------------ ------------ ------------ ------------- ------------
NET ASSETS.............................. $ 5,282 $ 79,660 $ 179,207 $ 13,398 $ 179,507
============ ============ ============ ============= ============
Accumulation units outstanding.......... 5,241 78,777 179,788 13,204 172,171
============ ============ ============ ============= ============
Unit value.............................. $ 1.007802 $ 1.011204 $ 0.996767 $ 1.014664 $ 1.042609
============ ============ ============ ============= ============
JANUS
FLEXIBLE MORGAN STANLEY TECHNOLOGY
INCOME FOCUS EQUITY PORTFOLIO
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ----------------
ASSETS
Investments at cost............... $ 4,322 $ 1,999 $ 109,734
============ ============ ============
Investments at market............. $ 4,315 $ 2,073 $ 112,136
------------ ------------ ------------
Total assets............... 4,315 2,073 112,136
LIABILITIES
Accrued expenses to related party. 1 0 12
------------ ------------ ------------
NET ASSETS.............................. $ 4,314 $ 2,073 $ 112,124
============ ============ ============
Accumulation units outstanding.......... 4,312 2,000 104,360
============ ============ ============
Unit value.............................. $ 1.000255 $ 1.036684 $ 1.074396
============ ============ ============
</TABLE>
See Notes to Financial Statements
32
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
GOODWIN OAKHURST
GOODWIN MONEY ENGEMANN MULTI-SECTOR STRATEGIC
MARKET CAPITAL GROWTH FIXED INCOME ALLOCATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ---------------
Investment income
<S> <C> <C> <C> <C>
Distributions........................................ $ 1,401,659 $ 881,082 $ 1,426,094 $ 1,035,758
Expenses
Mortality, expense risk and administrative charges... 236,917 2,894,867 137,459 362,811
------------ ------------ ------------- ------------
Net investment income (loss)............................... 1,164,742 (2,013,785) 1,288,635 672,947
------------ ------------ ------------- ------------
Net realized gain (loss) from share transactions........... - 199,224 1,383 6,462
Net realized gain distribution from Fund................... - 33,712,379 - 2,422,170
Net unrealized appreciation (depreciation) on investment... - 67,520,555 (510,719) 1,547,396
------------ ------------ ------------- ------------
Net gain (loss) on investments............................. - 101,432,158 (509,336) 3,976,028
------------ ------------ ------------- ------------
Net increase (decrease) in net assets resulting from
operations................................................. $ 1,164,742 $ 99,418,373 $ 779,299 $ 4,648,975
============ ============ ============= ============
DUFF & PHELPS SENECA
ABERDEEN OAKHURST REAL ESTATE STRATEGIC
INTERNATIONAL BALANCED SECURITIES THEME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ---------------
Investment income
Distributions........................................ $ 1,559,263 $ 722,804 $ 201,455 $ -
Expenses
Mortality, expense risk and administrative charges... 513,193 235,015 31,223 114,711
------------ ------------ ------------- ------------
Net investment income (loss)................................ 1,046,070 487,789 170,232 (114,711)
------------ ------------ ------------- ------------
Net realized gain (loss) from share transactions............ 47,349 13,373 (8,551) (3,328)
Net realized gain distribution from Fund.................... 9,024,051 1,090,011 - 2,873,771
Net unrealized appreciation (depreciation) on investment.... 6,988,805 1,469,608 (25,923) 4,256,078
------------ ------------ ------------- ------------
Net gain (loss) on investments.............................. 16,060,205 2,572,992 (34,474) 7,126,521
------------ ------------ ------------- ------------
Net increase (decrease) in net assets resulting from
operations.................................................. $ 17,106,275 $ 3,060,781 $ 135,758 $ 7,011,810
============ ============ ============= ============
ABERDEEN RESEARCH ENGEMANN NIFTY SENECA
NEW ASIA ENHANCED INDEX FIFTY MID-CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ---------------
Investment income
Distributions........................................ $ 22,625 $ 209,690 $ - $ -
Expenses
Mortality, expense risk and administrative charges... 17,571 172,148 40,023 13,409
------------ ------------ ------------- ------------
Net investment income (loss)................................ 5,054 37,542 (40,023) (13,409)
------------ ------------ ------------- ------------
Net realized gain (loss) from share transactions............ 4,188 9,241 817 4,734
Net realized gain distribution from Fund.................... - 1,395,107 - 74,364
Net unrealized appreciation (depreciation) on investment.... 869,485 2,060,618 1,626,903 871,293
------------ ------------ ------------- ------------
Net gain (loss) on investments.............................. 873,673 3,464,966 1,627,720 950,391
------------ ------------ ------------- ------------
Net increase (decrease) in net assets resulting from
operations.................................................. $ 878,727 $ 3,502,508 $ 1,587,697 $ 936,982
============ ============ ============= ============
</TABLE>
See Notes to Financial Statements
33
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
OAKHURST
GROWTH AND HOLLISTER SCHAFER WANGER U.S.
INCOME VALUE EQUITY MID-CAP VALUE SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------
Investment income
<S> <C> <C> <C> <C>
Distributions...................................... $ 51,165 $ 6,780 $ 20,315 $ -
Expenses
Mortality, expense risk and administrative charges. 55,910 12,530 10,223 268,787
------------ ----------- ------------ -----------
Net investment income (loss).............................. (4,745) (5,750) 10,092 (268,787)
------------ ----------- ------------ -----------
Net realized gain (loss) from share transactions.......... (252) 3,904 (25,572) 72,743
Net realized gain distribution from Fund.................. 119,133 142,030 - 2,967,831
Net unrealized appreciation (depreciation) on investment.. 1,012,913 291,974 (130,299) 4,934,358
------------ ----------- ------------ -----------
Net gain (loss) on investments............................ 1,131,794 437,908 (155,871) 7,974,932
------------ ----------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations................................................ $ 1,127,049 $ 432,158 $ (145,779) $ 7,706,145
============ =========== ============ ===========
WANGER TEMPLETON
INTERNATIONAL TEMPLETON ASSET TEMPLETON
SMALL CAP STOCK ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------
Investment income
Distributions...................................... $ 190,889 $ 1,255 $ 844 $ 3,225
Expenses
Mortality, expense risk and administrative charges. 123,317 1,324 1,149 4,112
------------ ----------- ------------ -----------
Net investment income (loss).............................. 67,572 (69) (305) (887)
------------ ----------- ------------ -----------
Net realized gain (loss) from share transactions.......... 28,287 1,336 172 16,281
Net realized gain distribution from Fund.................. - 6,648 5,190 12,000
Net unrealized appreciation (depreciation) on investment.. 15,112,035 42,995 26,220 129,839
------------ ----------- ------------ -----------
Net gain (loss) on investments............................ 15,140,322 50,979 31,582 158,120
------------ ----------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations................................................ $ 15,207,894 $ 50,910 $ 31,277 $ 157,233
============ =========== ============ ===========
TEMPLETON
DEVELOPING MUTUAL SHARES WANGER WANGER
MARKETS INVESTMENTS TWENTY FOREIGN FORTY
SUBACCOUNT SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
--------------- ---------------- ---------------- ----------------
Investment income
Distributions...................................... $ 265 $ 156 $ - $ -
Expenses
Mortality, expense risk and administrative charges. 2,573 1,498 2,874 1,627
------------ ----------- ------------ -----------
Net investment income (loss).............................. (2,308) (1,342) (2,874) (1,627)
------------ ----------- ------------ -----------
Net realized gain (loss) from share transactions.......... (584) 382 12,711 7,285
Net realized gain distribution from Fund.................. - - - -
Net unrealized appreciation (depreciation) on investment.. 117,427 9,335 65,825 214,413
------------ ----------- ------------ -----------
Net gain (loss) on investments............................ 116,843 9,717 78,536 221,698
------------ ----------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations................................................ $ 114,535 $ 8,375 $ 75,662 $ 220,071
============ =========== ============ ===========
</TABLE>
(1) From inception February 5, 1999 to December 31, 1999
(2) From inception February 9, 1999 to December 31, 1999
See Notes to Financial Statements
34
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
FEDERATED FEDERATED
EAFE BANKERS U.S. GOV'T HIGH INCOME
EQUITY INDEX TRUST DOW 30 SECURITIES II BOND FUND II
SUBACCOUNT(3) SUBACCOUNT(4) SUBACCOUNT(5) SUBACCOUNT(6)
---------------- --------------- ---------------- ----------------
Investment income
<S> <C> <C> <C> <C>
Distributions.................................... $ 3,673 $ 6 $ - $ -
Expenses
Mortality, expense risk and administrative
charges.......................................... 364 0 144 287
------------ ---------- ------------ -----------
Net investment income (loss)............................ 3,309 6 (144) (287)
------------ ---------- ------------ -----------
Net realized gain (loss) from share transactions........ (2) - (0) (11)
Net realized gain distribution from Fund................ 6,862 - - -
Net unrealized appreciation (depreciation) on investment 18,079 22 214 3,106
------------ ---------- ------------ -----------
Net gain (loss) on investments.......................... 24,939 22 214 3,095
------------ ---------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations.............................................. $ 28,248 $ 28 $ 70 $ 2,808
============ ========== ============ ===========
JANUS JANUS FLEXIBLE MORGAN STANLEY
EQUITY INCOME JANUS GROWTH INCOME FOCUS EQUITY
SUBACCOUNT(7) SUBACCOUNT(8) SUBACCOUNT(9) SUBACCOUNT(10)
---------------- --------------- ---------------- ---------------
Investment income
Distributions.................................... $ - $ - $ 9 $ -
Expenses
Mortality, expense risk and administrative
charges.......................................... 1 16 1 0
------------ ---------- ------------ -----------
Net investment income (loss)............................ (1) (16) 8 -
------------ ---------- ------------ -----------
Net realized gain (loss) from share transactions........ - 0 (0) 1
Net realized gain distribution from Fund................ - - - -
Net unrealized appreciation (depreciation) on investment 209 2,162 (7) 74
------------ ---------- ------------ -----------
Net gain (loss) on investments.......................... 209 2,162 (7) 75
------------ ---------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations.............................................. $ 208 $ 2,146 $ 1 $ 75
============ ========== ============ ===========
</TABLE>
TECHNOLOGY
PORTFOLIO
SUBACCOUNT(11)
----------------
Investment income
Distributions.................................... $ -
Expenses
Mortality, expense risk and administrative
charges.......................................... 12
------------
Net investment income (loss)............................ (12)
------------
Net realized gain (loss) from share transactions........ (0)
Net realized gain distribution from Fund................ -
Net unrealized appreciation (depreciation) on investment 2,402
------------
Net gain (loss) on investments.......................... 2,402
------------
Net increase (decrease) in net assets resulting from
operations.............................................. $ 2,390
============
(3) From inception July 20, 1999 to December 31, 1999
(4) From inception December 23, 1999 to December 31, 1999
(5) From inception August 5, 1999 to December 31, 1999
(6) From inception August 2, 1999 to December 31, 1999
(7) From inception December 23, 1999 to December 31, 1999
(8) From inception December 20, 1999 to December 31, 1999
(9) From inception December 21, 1999 to December 31, 1999
(10) From inception December 21, 1999 to December 31, 1999
(11) From inception December 20, 1999 to December 31, 1999
See Notes to Financial Statements
35
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
GOODWIN
GOODWIN ENGEMANN MULTI-SECTOR
MONEY MARKET CAPITAL GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- ------------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss)........................... $ 1,164,742 $ (2,013,785) $ 1,288,635
Net realized gain (loss)............................... - 33,911,603 1,383
Net unrealized appreciation (depreciation)............. - 67,520,555 (510,719)
--------------- --------------- --------------
Net increase (decrease) resulting from operations...... 1,164,742 99,418,373 779,299
--------------- --------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 45,745,678 55,380,624 3,185,838
Participant transfers.................................. (32,514,036) 2,056,950 10,155
Participant withdrawals................................ (7,462,353) (39,295,629) (1,861,647)
--------------- --------------- --------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 5,769,289 18,141,945 1,334,346
--------------- --------------- --------------
Net increase (decrease) in net assets.................. 6,934,031 117,560,318 2,113,645
NET ASSETS
Beginning of period.................................... 29,216,265 330,876,691 16,329,581
--------------- --------------- --------------
End of period.......................................... $ 36,150,296 $ 448,437,009 $ 18,443,226
=============== =============== ==============
OAKHURST
STRATEGIC ABERDEEN OAKHURST
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 672,947 $ 1,046,070 $ 487,789
Net realized gain (loss)............................... 2,428,632 9,071,400 1,103,384
Net unrealized appreciation (depreciation)............. 1,547,396 6,988,805 1,469,608
--------------- --------------- --------------
Net increase (decrease) resulting from operations...... 4,648,975 17,106,275 3,060,781
--------------- --------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 5,766,295 8,895,302 4,014,520
Participant transfers.................................. 426,167 (2,116,044) 785,289
Participant withdrawals................................ (4,114,288) (6,140,365) (3,398,123)
--------------- --------------- --------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 2,078,174 638,893 1,401,686
--------------- --------------- --------------
Net increase (decrease) in net assets.................. 6,727,149 17,745,168 4,462,467
NET ASSETS
Beginning of period.................................... 42,856,751 59,439,168 27,159,252
--------------- --------------- --------------
End of period.......................................... $ 49,583,900 $ 77,184,336 $ 31,621,719
=============== =============== ==============
DUFF & PHELPS
REAL ESTATE SENECA ABERDEEN
SECURITIES STRATEGIC NEW ASIA
SUBACCOUNT THEME SUBACCOUNT SUBACCOUNT
------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 170,232 $ (114,711) $ 5,054
Net realized gain (loss)............................... (8,551) 2,870,443 4,188
Net unrealized appreciation (depreciation)............. (25,923) 4,256,078 869,485
--------------- --------------- --------------
Net increase (decrease) resulting from operations...... 135,758 7,011,810 878,727
--------------- --------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 1,205,811 3,459,133 500,215
Participant transfers.................................. (767,489) 7,228,439 378,701
Participant withdrawals................................ (441,550) (1,588,498) (180,470)
--------------- --------------- --------------
Net increase (decrease) in net assets resulting
from participant transactions.................. (3,228) 9,099,074 698,446
--------------- --------------- --------------
Net increase (decrease) in net assets.................. 132,530 16,110,884 1,577,173
NET ASSETS
Beginning of period.................................... 3,885,577 8,060,955 1,478,417
--------------- --------------- --------------
End of period.......................................... $ 4,018,107 $ 24,171,839 $ 3,055,590
=============== =============== ==============
</TABLE>
See Notes to Financial Statements
36
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
RESEARCH ENHANCED ENGEMANN SENECA
INDEX NIFTY FIFTY MID-CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- -----------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss)........................... $ 37,542 $ (40,023) $ (13,409)
Net realized gain (loss)............................... 1,404,348 817 79,098
Net unrealized appreciation (depreciation)............. 2,060,618 1,626,903 871,293
-------------- -------------- -------------
Net increase (decrease) resulting from operations...... 3,502,508 1,587,697 936,982
-------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 4,764,435 1,600,829 550,378
Participant transfers.................................. 9,507,736 4,539,540 896,097
Participant withdrawals................................ (2,366,241) (663,615) (177,076)
-------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 11,905,930 5,476,754 1,269,399
-------------- -------------- -------------
Net increase (decrease) in net assets.................. 15,408,438 7,064,451 2,206,381
NET ASSETS
Beginning of period.................................... 12,727,051 1,742,007 949,433
-------------- -------------- -------------
End of period.......................................... $ 28,135,489 $ 8,806,458 $ 3,155,814
============== ============== =============
OAKHURST HOLLISTER SCHAFER
GROWTH AND INCOME VALUE EQUITY MID-CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- -----------------
FROM OPERATIONS
Net investment income (loss)........................... $ (4,745) $ (5,750) $ 10,092
Net realized gain (loss)............................... 118,881 145,934 (25,572)
Net unrealized appreciation (depreciation)............. 1,012,913 291,974 (130,299)
-------------- -------------- -------------
Net increase (decrease) resulting from operations...... 1,127,049 432,158 (145,779)
-------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 2,435,487 547,053 436,822
Participant transfers.................................. 4,170,995 999,772 435,382
Participant withdrawals................................ (964,227) (185,449) (117,678)
-------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 5,642,255 1,361,376 754,526
-------------- -------------- -------------
Net increase (decrease) in net assets.................. 6,769,304 1,793,534 608,747
NET ASSETS
Beginning of period.................................... 3,332,765 816,820 892,317
-------------- -------------- -------------
End of period.......................................... $ 10,102,069 $ 2,610,354 $ 1,501,064
============== ============== =============
WANGER
WANGER U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- -----------------
FROM OPERATIONS
Net investment income (loss)........................... $ (268,787) $ 67,572 $ (69)
Net realized gain (loss)............................... 3,040,574 28,287 7,984
Net unrealized appreciation (depreciation)............. 4,934,358 15,112,035 42,995
-------------- -------------- -------------
Net increase (decrease) resulting from operations...... 7,706,145 15,207,894 50,910
-------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 7,502,489 3,435,101 154,926
Participant transfers.................................. (622,831) 956,598 102,914
Participant withdrawals................................ (4,086,854) (1,563,997) (37,586)
-------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 2,792,804 2,827,702 220,254
-------------- -------------- -------------
Net increase (decrease) in net assets.................. 10,498,949 18,035,596 271,164
NET ASSETS
Beginning of period.................................... 31,236,667 11,211,868 27,392
-------------- -------------- -------------
End of period.......................................... $ 41,735,616 $ 29,247,464 $ 298,556
============== ============== =============
</TABLE>
See Notes to Financial Statements
37
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
TEMPLETON
TEMPLETON ASSET TEMPLETON DEVELOPING
ALLOCATION INTERNATIONAL MARKETS
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------- ------------------- ------------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss)........................... $ (305) $ (887) $ (2,308)
Net realized gain (loss)............................... 5,362 28,281 (584)
Net unrealized appreciation (depreciation)............. 26,220 129,839 117,427
------------- ------------- -------------
Net increase (decrease) resulting from operations...... 31,277 157,233 114,535
------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 59,531 188,339 140,700
Participant transfers.................................. 180,739 950,796 564,459
Participant withdrawals................................ (20,055) (78,924) (65,725)
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 220,215 1,060,211 639,434
------------- ------------- -------------
Net increase (decrease) in net assets.................. 251,492 1,217,444 753,969
NET ASSETS
Beginning of period.................................... 37,559 53,468 10,665
------------- ------------- -------------
End of period.......................................... $ 289,051 $ 1,270,912 $ 764,634
============= ============= =============
MUTUAL SHARES WANGER
INVESTMENTS WANGER TWENTY FOREIGN FORTY
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
-------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ (1,342) $ (2,874) $ (1,627)
Net realized gain (loss)............................... 382 12,711 7,285
Net unrealized appreciation (depreciation)............. 9,335 65,825 214,413
------------- ------------- -------------
Net increase (decrease) resulting from operations...... 8,375 75,662 220,071
------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 131,902 173,164 61,520
Participant transfers.................................. 245,705 492,271 341,129
Participant withdrawals................................ (28,647) (54,736) (20,037)
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 348,960 610,699 382,612
------------- ------------- -------------
Net increase (decrease) in net assets.................. 357,334 686,361 602,683
NET ASSETS
Beginning of period.................................... 53,771 - -
------------- ------------- -------------
End of period.......................................... $ 411,105 $ 686,361 $ 602,683
============= ============= =============
BANKERS FEDERATED
EAFE TRUST U.S. GOV'T
EQUITY INDEX DOW 30 SECURITIES II
SUBACCOUNT(3) SUBACCOUNT(4) SUBACCOUNT(5)
-------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 3,309 $ 6 $ (144)
Net realized gain (loss)............................... 6,860 - (0)
Net unrealized appreciation (depreciation)............. 18,079 22 214
------------- ------------- -------------
Net increase (decrease) resulting from operations...... 28,248 28 70
------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 25,625 - 2,203
Participant transfers.................................. 185,637 5,262 79,165
Participant withdrawals................................ (1,781) (8) (1,778)
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 209,481 5,254 79,590
------------- ------------- -------------
Net increase (decrease) in net assets.................. 237,729 5,282 79,660
NET ASSETS
Beginning of period.................................... - - -
------------- ------------- -------------
End of period.......................................... $ 237,729 $ 5,282 $ 79,660
============= ============= =============
</TABLE>
See Notes to Financial Statements
38
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
FEDERATED
HIGH INCOME JANUS
BOND FUND II EQUITY INCOME JANUS GROWTH
SUBACCOUNT(6) SUBACCOUNT(7) SUBACCOUNT(8)
------------------- ---------------------------------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss).......................... $ (287) $ (1) $ (16)
Net realized gain (loss).............................. (11) - 0
Net unrealized appreciation (depreciation)............ 3,106 209 2,162
------------- ------------- ------------
Net increase (decrease) resulting from operations..... 2,808 208 2,146
------------- ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits.................................. 298 - 2,047
Participant transfers................................. 177,083 13,201 175,407
Participant withdrawals............................... (982) (11) (93)
------------- ------------- ------------
Net increase (decrease) in net assets resulting
from participant transactions................. 176,399 13,190 177,361
------------- ------------- ------------
Net increase (decrease) in net assets................. 179,207 13,398 179,507
NET ASSETS
Beginning of period................................... - - -
------------- ------------- ------------
End of period......................................... $ 179,207 $ 13,398 $ 179,507
============= ============= ============
JANUS MORGAN STANLEY TECHNOLOGY
FLEXIBLE INCOME FOCUS EQUITY PORTFOLIO
SUBACCOUNT(9) SUBACCOUNT(10) SUBACCOUNT(11)
------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 8 $ - $ (12)
Net realized gain (loss)............................... (0) 1 (0)
Net unrealized appreciation (depreciation)............. (7) 74 2,402
------------- ------------- ------------
Net increase (decrease) resulting from operations...... 1 75 2,390
------------- ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... - - 314
Participant transfers.................................. 4,355 2,045 109,577
Participant withdrawals................................ (42) (47) (157)
------------- ------------- ------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 4,313 1,998 109,734
------------- ------------- ------------
Net increase (decrease) in net assets.................. 4,314 2,073 112,124
NET ASSETS
Beginning of period.................................... - - -
------------- ------------- ------------
End of period.......................................... $ 4,314 $ 2,073 $ 112,124
============= ============= ============
</TABLE>
Footnotes for Statement of Changes in Net Assets for the period ended
December 31, 1999
(1) From inception February 5, 1999 to December 31, 1999
(2) From inception February 9, 1999 to December 31, 1999
(3) From inception July 20, 1999 to December 31, 1999
(4) From inception December 23, 1999 to December 31, 1999
(5) From inception August 5, 1999 to December 31, 1999
(6) From inception August 2, 1999 to December 31, 1999
(7) From inception December 23, 1999 to December 31, 1999
(8) From inception December 20, 1999 to December 31, 1999
(9) From inception December 21, 1999 to December 31, 1999
(10) From inception December 21, 1999 to December 31, 1999
(11) From inception December 20, 1999 to December 31, 1999
See Notes to Financial Statements
39
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
GOODWIN
GOODWIN ENGEMANN MULTI-SECTOR
MONEY MARKET CAPITAL GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------- ------------
FROM OPERATIONS
<S> <C> <C> <C>
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
============ ============ ============
OAKHURST
STRATEGIC ABERDEEN OAKHURST
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
============ ============ ============
DUFF & PHELPS
REAL ESTATE SENECA ABERDEEN
SECURITIES 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
40
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
RESEARCH SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
----------- ------------- -------------
FROM OPERATIONS
<S> <C> <C> <C>
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
=========== =========== ===========
OAKHURST GROWTH HOLLISTER VALUE SCHAFER
AND INCOME EQUITY MID-CAP VALUE
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)..................................... $ (196,294) $ 19,117 $ (8)
Net realized gain (loss)......................................... 1,128,070 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
41
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT(3) SUBACCOUNT(4)
------------- -------------
FROM OPERATIONS
<S> <C> <C>
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
42
<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, Flex Edge Success and Phoenix
Individual Edge(SM) for individual variable life insurance and as Joint Edge for
variable first-to-die joint life insurance. The Account was established January
1, 1987 and currently consists of 34 Subaccounts, that invest in a corresponding
series (the "Series") of The Phoenix Edge Series Fund, Wanger Advisors Trust,
the Templeton Variable Products Series Fund, BT Insurance Funds Trust, Federated
Insurance Series, and Morgan Stanley Dean Witter Universal Funds, Inc. (the
"Funds"). As of December 31, 1999, 33 of the available 34 Subaccounts were
invested in a corresponding series.
Each Series has distinct investment objectives. The Phoenix-Goodwin Money
Market Series seeks to provide maximum current income consistent with capital
preservation and liquidity. The Phoenix-Engemann Capital Growth Series seeks to
achieve intermediate and long-term growth of capital, with income as a secondary
consideration. The Phoenix-Goodwin 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 Phoenix-Oakhurst 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 Phoenix-Aberdeen 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
Phoenix-Oakhurst Balanced Series seeks to provide reasonable income, long-term
growth and conservation of capital. The Phoenix-Duff & Phelps Real Estate
Securities 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
Phoenix-Seneca 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 Phoenix-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
Phoenix Research 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 Phoenix-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 Phoenix-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 Phoenix-Oakhurst Growth and Income
Series seeks as its investment objective, dividend growth, current income and
capital appreciation by investing in common stocks. The Phoenix-Hollister 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 Phoenix-Schafer Mid-Cap Value 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 Fund
is a capital growth common stock fund. The Templeton Asset Allocation Fund
invests in stocks and debt obligations of companies and governments and money
market instruments seeking high total return. The Templeton International Fund
invests in stocks and debt obligations of companies and governments outside the
United States. The Templeton Developing Markets Fund seeks long-term capital
appreciation by investing in equity securities of issuers in countries having
developing markets. The Mutual Shares Investments Fund is a capital appreciation
fund with income as a secondary objective. The Wanger Twenty Series invests in
growth common stock of U.S. companies with market capitalizations of $1 billion
to $10 billion, focusing its investments in 20 to 25 U.S. companies. The Wanger
Foreign Forty Series invests in equity securities of foreign companies with
market capitalizations of $1 billion to $10 billion, focusing its investments in
40 to 60 companies in the developed markets. The EAFE(R) Equity Index Fund seeks
to match the performance of the Morgan Stanley Capital International EAFE(R)
Index, by investing in a statistically selected sample of the securities found
in the matching fund. The Phoenix-Bankers Trust Dow 30 Series seeks to track the
total return of the Dow Jones Industrial Average(SM) before fund expenses. The
Federated Fund for U.S. Government Securities II Series seeks high current
income by investing in U.S. government securities, including mortgage-backed
securities issued by U.S. government agencies. The Federated High Income Bond
Fund II Series seeks high current income by investing in a diversified portfolio
of high-yield, lower-rated corporate bonds. The Phoenix-Janus Equity Income
Series seeks current income and long-term capital growth. The Phoenix-Janus
Growth Series seeks long-term capital growth, consistent with the preservation
of capital. The Phoenix-Janus Flexible Income Series seeks to obtain maximum
total return, consistent with the preservation of capital. The Phoenix-Morgan
Stanley Focus Equity Series seeks capital appreciation by investing in equity
securities. The Technology Portfolio seeks long-term capital appreciation by
investing in equity securities involved with technology and technology-related
industries. The Phoenix-Federated U.S. Government Bond Series seeks to maximize
total return by investing in debt obligations of the U.S. Government, its
agencies and instrumentalities. Policyowners also may direct the allocation of
their investments between the Account and the Guaranteed Interest Account of the
general account of Phoenix.
43
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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: Investment transactions are
recorded on the trade date. 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 from the Funds are recorded on the
ex-dividend date.
E. USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
F. RECLASSIFICATION: Certain prior year amounts have been reclassified to
conform with the current year presentation.
G. NEW POLICY: The Phoenix Individual Edge(SM) policy for individual variable
life insurance became available on September 29, 1999.
44
<PAGE>
<TABLE>
<CAPTION>
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, 1999 aggregated the
following:
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
The Phoenix Edge Series Fund:
<S> <C> <C>
Goodwin Money Market............................................. $33,495,067 $26,555,874
Engemann Capital Growth ......................................... 74,033,835 24,111,273
Goodwin Multi-Sector Fixed Income ............................... 5,868,418 3,244,388
Oakhurst Strategic Allocation ................................... 9,076,076 3,897,253
Aberdeen International .......................................... 18,752,892 8,032,462
Oakhurst Balanced ............................................... 6,346,417 3,363,406
Duff & Phelps Real Estate Securities ............................ 1,330,693 1,163,730
Seneca Strategic Theme .......................................... 12,653,974 785,927
Aberdeen New Asia ............................................... 1,134,066 429,531
Research Enhanced Index ......................................... 15,082,056 1,736,738
Engemann Nifty Fifty ............................................ 5,731,136 289,707
Seneca Mid-Cap Growth ........................................... 1,649,525 317,823
Oakhurst Growth and Income ...................................... 6,420,518 659,216
Hollister Value Equity .......................................... 1,748,541 249,747
Schafer Mid-Cap Value ........................................... 1,411,397 646,140
Wanger Advisors Trust:
Wanger U.S. Small Cap ........................................... 10,400,568 4,901,698
Wanger International Small Cap .................................. 4,742,166 1,836,452
Templeton Variable Products Series Fund:
Templeton Stock ................................................. 351,351 124,342
Templeton Asset Allocation ...................................... 271,700 46,422
Templeton International ......................................... 2,054,415 982,343
Templeton Developing Markets .................................... 808,607 171,019
Mutual Shares Investments ....................................... 393,638 45,785
Wanger Advisors Trust:
Wanger Twenty ................................................... 889,150 280,909
Wanger Foreign Forty ............................................ 432,653 51,333
BT Insurance Funds Trust:
EAFE Equity Index ............................................... 222,009 2,217
The Phoenix Edge Series Fund:
Bankers Trust Dow 30............................................. 5,260 -
Federated Insurance Series:
Federated U.S. Gov't Securities II .............................. 80,752 1,255
Federated High Income Bond Fund II .............................. 177,166 935
The Phoenix Edge Series Fund:
Janus Equity Income ............................................. 13,190 -
Janus Growth .................................................... 177,370 9
Janus Flexible Income ........................................... 4,363 41
Morgan Stanley Focus Equity...................................... 2,045 47
Morgan Stanley Dean Witter Universal Funds, Inc.:
Technology Portfolio ............................................ 109,761 27
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 4--PARTICIPANT ACCUMULATION UNIT TRANSACTIONS FOR THE PERIOD ENDED DECEMBER 31, 1999 (IN UNITS)
SUBACCOUNT
-----------------------------------------------------------------------------------------------------------
FLEX EDGE, FLEX EDGE GOODWIN ENGEMANN GOODWIN OAKHURST DUFF & PHELPS SENECA
SUCCESS & PHOENIX MONEY CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN OAKHURST REAL ESTATE STRATEGIC ABERDEEN
INDIVIDUAL EDGE MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED SECURITIES THEME NEW ASIA
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of period 18,764,711 58,070,016 7,146,215 12,360,921 24,601,859 12,394,644 2,939,763 4,370,324 2,170,887
Participant deposits 27,953,338 8,920,090 1,344,384 1,568,311 3,334,503 1,708,170 841,453 1,567,951 584,634
Participant transfers (20,200,183) 312,980 3,872 142,045 (839,990) 466,023 (601,799) 3,457,469 474,138
Participant withdrawals (4,552,133) (6,342,974) (780,831) (1,128,849) (2,330,455)(1,486,306) (272,453) (688,258) (200,630)
---------- ---------- ------------ ---------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 21,965,733 60,960,112 7,713,640 12,942,428 24,765,917 13,082,531 2,906,964 8,707,486 3,029,029
========== ========== ============ =========== ============= ========== ============= ========= =========
GOODWIN ENGEMANN GOODWIN OAKHURST DUFF & PHELPS SENECA
MONEY CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN OAKHURST REAL ESTATE STRATEGIC ABERDEEN
JOINT EDGE MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED SECURITIES THEME NEW ASIA
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 681,030 2,968,505 318,985 493,297 1,259,824 571,300 206,022 459,009 156,871
Participant deposits 1,912,344 775,545 87,126 117,706 293,147 129,765 86,734 172,388 62,272
Participant transfers (1,105,218) 74,557 (6,514) (11,425) (9,104) (84,914) (22,474) 185,351 (6,604)
Participant withdrawals (316,180) (476,097) (53,999) (68,444) (171,042) (60,107) (47,675) (106,493) (29,525)
---------- ---------- ------------ ---------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 1,171,976 3,342,510 345,598 531,134 1,372,825 556,044 222,607 710,255 183,014
========== ========== ============ =========== ============= ========== ============= ========= =========
WANGER
FLEX EDGE, FLEX EDGE RESEARCH ENGEMANN SENECA OAKHURST HOLLISTER SCHAFER INTER-
SUCCESS & PHOENIX ENHANCED NIFTY MID-CAP GROWTH AND VALUE MID-CAP WANGER U.S. NATIONAL TEMPLETON
INDIVIDUAL EDGE INDEX FIFTY GROWTH INCOME EQUITY VALUE SMALL CAP SMALL CAP STOCK
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 8,854,127 1,338,048 739,501 2,624,544 694,612 973,879 20,637,042 9,044,236 27,527
Participant deposits 2,964,456 1,068,340 406,906 1,746,319 433,099 491,001 4,520,028 2,098,693 162,970
Participant transfers 6,184,903 3,105,959 700,507 3,149,035 843,409 456,676 (614,474) 212,261 104,654
Participant withdrawals (1,474,710) (425,892) (122,229) (678,841) (144,810) (125,623) (2,455,459) (935,725) (62,981)
---------- ---------- ------------ ---------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 16,528,776 5,086,455 1,724,685 6,841,057 1,826,310 1,795,933 22,087,137 10,419,465 232,170
========== ========== ============ =========== ============= ========== ============ ========== =========
WANGER
RESEARCH ENGEMANN SENECA OAKHURST HOLLISTER SCHAFER INTER-
ENHANCED NIFTY MID-CAP GROWTH AND VALUE MID-CAP WANGER U.S. NATIONAL TEMPLETON
JOINT EDGE INDEX FIFTY GROWTH INCOME EQUITY VALUE SMALL CAP SMALL CAP STOCK
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 287,730 50,544 62,386 160,364 53,394 39,582 1,090,407 631,151 7
Participant deposits 202,209 73,307 44,243 173,719 45,265 53,636 446,923 212,857 2,773
Participant transfers 219,285 194,347 33,474 173,119 35,912 49,425 (24,997) 71,943 500
Participant withdrawals (95,971) (50,774) (20,051) (76,304) (22,963) (23,116) (203,150) (101,647) (598)
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 613,253 267,424 120,052 430,898 111,608 119,527 1,309,183 814,304 2,682
========== ========== ============ =========== ============= ========== ============= ========= =========
FEDERATED
FLEX EDGE, FLEX EDGE TEMPLETON TEMPLETON TEMPLETON MUTUAL WANGER BANKERS U.S. GOV'T
SUCCESS & PHOENIX ASSET INTER- DEVELOPING SHARES WANGER FOREIGN EAFE EQUITY TRUST SECURITIES
INDIVIDUAL EDGE ALLOCATION NATIONAL MARKETS INVESTMENTS TWENTY FORTY INDEX DOW 30 II
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 37,125 48,772 9,999 54,032 - - - - -
Participant deposits 54,848 159,501 99,633 123,591 135,991 42,695 23,991 - 2,031
Participant transfers 162,049 831,226 389,495 224,829 374,340 287,804 166,371 5,249 76,174
Participant withdrawals (20,462) (65,860) (40,038) (28,918) (33,888) (17,034) (1,552) (8) (1,714)
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 233,560 973,639 459,089 373,534 476,443 313,465 188,810 5,241 76,491
========== ========== ============ =========== ============= ========== ============= ========= =========
FEDERATED
TEMPLETON TEMPLETON TEMPLETON MUTUAL WANGER BANKERS U.S. GOV'T
ASSET INTER- DEVELOPING SHARES WANGER FOREIGN EAFE EQUITY TRUST SECURITIES
JOINT EDGE ALLOCATION NATIONAL MARKETS INVESTMENTS TWENTY FORTY INDEX DOW 30 II
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 104 2,643 75 - - - - - -
Participant deposits 2,163 8,500 1,927 1,233 4,104 166 692 - 135
Participant transfers 476 17,758 21,497 6,716 24,814 4,134 11,598 - 2,188
Participant withdrawals (641) (3,051) (7,712) (509) (9,291) (363) (108) - (37)
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 2,102 25,850 15,787 7,440 19,627 3,937 12,182 - 2,286
========== ========== ============ =========== ============= ========== ============= ========= =========
FEDERATED
HIGH
FLEX EDGE, FLEX EDGE INCOME JANUS JANUS MORGAN
SUCCESS & PHOENIX BOND EQUITY JANUS FLEXIBLE STANLEY TECHNOLOGY
INDIVIDUAL EDGE FUND II INCOME GROWTH INCOME FOCUS EQUITY PORTFOLIO
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding, - - - - - -
beginning of period
Participant deposits 302 - 1,976 - - 300
Participant transfers 180,481 12,460 169,757 4,354 2,046 84,516
Participant withdrawals (995) (11) (130) (42) (46) (124)
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding, end 179,788 12,449 171,603 4,312 2,000 84,692
of period ========== ========== ============ =========== ============= ==========
FEDERATED
HIGH
INCOME JANUS JANUS MORGAN
BOND EQUITY JANUS FLEXIBLE STANLEY TECHNOLOGY
JOINT EDGE FUND II INCOME GROWTH INCOME FOCUS EQUITY PORTFOLIO
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding,
beginning of period - - - - - -
Participant deposits - - - - - -
Participant transfers - 755 - - - 19,693
Participant withdrawals - - 568 - - (25)
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding, end
of period - 755 568 - - 19,668
========== ========== ============ =========== ============= ==========
</TABLE>
46
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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 the policy value
reduced by an amount equal to the surrender charge with interest of [4% due in
policy years 1-10, 3% due in policy years 11-15, 2 1/2% in policy years 16 and
thereafter for Flex Edge Success policies], [4% due in policy years 1-10, 3% due
in policy years 11-15, 2 1/4% in policy years 16 and thereafter for Phoenix
Individual Edge(SM)] and [8% due in policy years 1-10 and 7% in policy years 11
and thereafter for Flex Edge and Joint Edge policies] 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 and Phoenix
Individual Edge(SM) policies, and 6% for Joint Edge and Flex Edge policies. Loan
repayments result in a transfer of collateral back to the Account.
NOTE 6--INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
Phoenix and its indirect, majority owned subsidiary, Phoenix Equity Planning
Corporation ("PEPCO"), 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 $36,655,692 during the year ended December 31, 1999. 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.
PEPCO is the principal underwriter and distributor of the Account. PEPCO 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 and Phoenix Individual Edge(SM), 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.
47
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO] PRICEWATERHOUSECOOPERS
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 statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts:
Goodwin Money Market, Engemann Capital Growth, Goodwin Multi-Sector Fixed
Income, Oakhurst Strategic Allocation, Aberdeen International, Oakhurst
Balanced, Duff & Phelps Real Estate Securities, Seneca Strategic Theme, Aberdeen
New Asia, Research Enhanced Index, Engemann Nifty Fifty, Seneca Mid-Cap Growth,
Oakhurst Growth and Income, Hollister Value Equity, Schafer Mid-Cap Value,
Wanger U.S. Small Cap, Wanger International Small Cap, Templeton Stock,
Templeton Asset Allocation, Templeton International, Templeton Developing
Markets, Mutual Shares Investments, Wanger Twenty, Wanger Foreign Forty, EAFE
Equity Index, Bankers Trust Dow 30, Federated U.S. Government Securities II,
Federated High Income Bond Fund II, Janus Equity Income, Janus Growth, Janus
Flexible Income, Morgan Stanley Focus Equity and Technology Portfolio
(constituting the Phoenix Home Life Variable Universal Life Account, hereafter
referred to as the "Account") at December 31, 1999, 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 accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Account's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at December 31, 1999 by
correspondence with fund custodians or transfer agents, provide a reasonable
basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
March 10, 2000
48
<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
100 Pearl Street
Hartford, Connecticut 06103
- ----------------------------
49
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
50
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants ........................................52
Consolidated Balance Sheet at December 31, 1999 and 1998..................53
Consolidated Statement of Income, Comprehensive Income and Equity
for the Years Ended December 31, 1999, 1998 and 1997 ....................54
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ........................................55
Notes to Consolidated Financial Statements ............................56-92
51
<PAGE>
[LOGO] PRICEWATERHOUSECOOPERS
- --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
100 Pearl Street
Hartford CT 06103-4508
Telephone (860)241 7000
Facsimile (860)241 7590
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
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,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, 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 20, the Company has revised the accounting for venture
capital partnerships.
/S/PricewaterhouseCoopers LLP
February 15, 2000
52
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
ASSETS
Investments:
<S> <C> <C>
Held-to-maturity debt securities, at amortized cost $ 1,990,169 $ 1,725,439
Available-for-sale debt securities, at fair value 5,506,779 5,987,426
Equity securities, at fair value 461,613 301,649
Mortgage loans 716,831 797,343
Real estate 92,027 91,975
Policy loans 2,042,557 2,008,259
Venture capital partnerships 338,122 191,162
Other invested assets 300,474 232,131
Short-term investments 133,367 185,983
------------------- -----------------
Total investments 11,581,939 11,521,367
Cash and cash equivalents 187,610 115,187
Accrued investment income 174,894 164,812
Deferred policy acquisition costs 1,306,728 1,049,934
Premiums, accounts and notes receivable 119,231 61,489
Reinsurance recoverables 18,772 18,908
Property and equipment, net 137,758 142,153
Goodwill and other intangible assets, net 593,267 477,895
Net assets of discontinued operations (Note 11) 187,595 283,793
Other assets 51,434 36,940
Separate account assets 5,923,888 4,798,949
------------------ -----------------
Total assets $ 20,283,116 $ 18,671,427
================== =================
LIABILITIES
Policy liabilities and accruals $ 11,438,032 $ 11,110,280
Notes payable 499,392 386,575
Deferred income taxes 86,262 116,104
Other liabilities 474,179 430,956
Separate account liabilities 5,923,888 4,798,949
------------------- -----------------
Total liabilities 18,421,753 16,842,864
------------------- -----------------
Contingent liabilities (Note 18)
MINORITY INTEREST IN NET ASSETS
OF CONSOLIDATED SUBSIDIARIES 100,112 92,008
------------------- -----------------
EQUITY
Retained earnings 1,731,146 1,642,264
Accumulated other comprehensive income 30,105 94,291
------------------- -----------------
Total equity 1,761,251 1,736,555
------------------- -----------------
Total liabilities and equity $ 20,283,116 $ 18,671,427
=================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
53
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
REVENUES
<S> <C> <C> <C>
Premiums $ 1,134,207 $ 1,154,730 $ 1,076,157
Insurance and investment product fees 591,786 493,415 367,540
Net investment income 950,344 851,603 714,367
Net realized investment gains 35,675 58,202 111,043
-------------- --------------- ------------
Total revenues 2,712,012 2,557,950 2,269,107
-------------- --------------- ------------
BENEFITS AND EXPENSES
Policy benefits and increase in policy liabilities 1,352,419 1,403,166 1,201,929
Policyholder dividends 360,509 351,653 343,611
Amortization of deferred policy acquisition costs 146,603 137,663 102,617
Amortization of goodwill and other intangible assets 37,963 23,126 9,366
Interest expense 32,659 25,911 24,300
Other operating expenses 520,603 428,756 367,016
-------------- --------------- ------------
Total benefits and expenses 2,450,756 2,370,275 2,048,839
-------------- --------------- ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST 261,256 187,675 220,268
Income taxes 107,881 65,046 47,241
-------------- --------------- ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST 153,375 122,629 173,027
Minority interest in net income of consolidated subsidiaries 10,064 10,512 10,623
-------------- --------------- ------------
NET INCOME FROM CONTINUING OPERATIONS 143,311 112,117 162,404
DISCONTINUED OPERATIONS (NOTE 11)
Gain from operations, net of income taxes 17,555 25,012 7,248
Loss on disposal, net of income taxes (71,984)
-------------- --------------- ------------
NET INCOME 88,882 137,129 169,652
-------------- --------------- ------------
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF INCOME TAXES
Unrealized (losses) gains on securities (61,246) (46,967) 98,287
Reclassification adjustment for net realized gains
included in net income (1,452) (12,980) (30,213)
Minimum pension liability adjustment (1,488) (1,526) (2,101)
-------------- --------------- ------------
Total other comprehensive (loss) income (64,186) (61,473) 65,973
-------------- --------------- ------------
COMPREHENSIVE INCOME 24,696 75,656 235,625
-------------- --------------- ------------
EQUITY, BEGINNING OF YEAR - RESTATED (NOTE 20) 1,736,555 1,660,899 1,425,274
-------------- --------------- ------------
EQUITY, END OF YEAR $ 1,761,251 $ 1,736,555 $ 1,660,899
============== ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
54
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
CASH FLOW FROM CONTINUING OPERATIONS ACTIVITIES
<S> <C> <C> <C>
Net income from continuing operations $ 143,311 $ 112,117 $ 162,404
Net (loss) income from discontinued operations (54,429) 25,012 7,248
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY CONTINUING OPERATIONS:
Net realized investment gains (35,675) (58,202) (111,465)
Amortization and depreciation 69,367 51,076 61,876
Equity in undistributed earnings of affiliates and partnerships (138,215) (44,119) (38,588)
Deferred income taxes (benefit) (14,102) 398 25,298
(Increase) in receivables (67,688) (23,846) (46,178)
Increase (decrease) in deferred policy acquisition costs 3,493 (26,945) (44,406)
Increase in policy liabilities and accruals 329,660 368,528 494,462
Increase in other assets/other liabilities, net 53,901 58,795 54,230
Other, net 2,752 1,660 7,752
----------- ------------ ------------
Net cash provided by operating activities of continuing operations 346,804 439,462 565,385
Net cash (used for) provided by operating activities of
discontinued operations (105,537) 104,512 88,907
----------- ------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Proceeds from sales, maturities or repayments
of available-for-sale debt securities 1,702,889 1,322,381 1,082,132
Proceeds from maturities or repayments of held-to-maturity debt
securities 186,710 267,746 200,946
Proceeds from disposals of equity securities 163,530 45,204 51,373
Proceeds from mortgage loan maturities or repayments 124,864 200,419 164,213
Proceeds from sale of real estate and other invested assets 37,952 439,917 213,224
Proceeds from distributions of venture capital partnerships 26,730 18,550 5,650
Proceeds from sale of subsidiaries and affiliates 15,000 16,300
Purchase of available-for-sale debt securities (1,672,705) (2,400,058) (1,547,855)
Purchase of held-to-maturity debt securities (427,472) (585,370) (183,371)
Purchase of equity securities (162,391) (85,002) (88,573)
Purchase of subsidiaries (187,621) (6,647) (246,400)
Purchase of mortgage loans (25,268) (75,974) (140,831)
Purchase of real estate and other invested assets (71,407) (134,224) (50,599)
Purchase of venture capital partnerships (108,461) (67,200) (39,994)
Change in short term investments, net 52,616 855,117 23,135
Increase in policy loans (34,298) (21,532) (59,699)
Capital expenditures (20,505) (25,052) (44,380)
Other investing activities, net 1,697 (6,540 (1,750)
------------- -------------- --------------
Net cash used for investing activities of continuing operations (398,140) (241,965) (662,779)
Net cash provided by (used for) investing activities of
discontinued
operations 157,267 (101,532) (93,239)
------------- -------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (1,908) (11,124) (17,902)
Proceeds from repayment of securities sold
subject to repurchase agreements 28,398 (137,473) 137,473
Proceeds from borrowings 124,500 136 215,359
Repayment of borrowings (11,683) (55,589) (243,293)
Dividends paid to minority shareholders in consolidated (4,240) (4,938) (6,895)
Other financing activities (361) (5,664) (1,250)
------------- -------------- --------------
Net cash provided by (used for) financing activities of continuing
operations 134,706 (214,652) 83,492
Net cash (used for) provided by financing activities of discontinued
operations (62,677) (7,739) 4,489
------------- -------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS 83,370 (17,155) (13,902)
NET CHANGE IN CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS (10,947) (4,759) 157
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 115,187 137,101 150,846
------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 187,610 $ 115,187 $ 137,101
============= ============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 106,372 $ 44,508 $ 76,167
Interest paid on indebtedness $ 34,791 $ 32,834 $ 32,300
</TABLE>
The accompanying notes are an integral part of these statements.
55
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company and its subsidiaries (Phoenix)
market a wide range of insurance and investment products and services
including individual participating life insurance, term, universal and
variable life insurance, annuities, and investment advisory and mutual fund
distribution services. These products and services are distributed among
three reportable segments: Individual, Investment Management and Corporate &
Other. See Note 10 - "Segment Information."
Additionally, in 1999, Phoenix discontinued the operations of four
of its business units: the Reinsurance Operations, the Property and
Casualty Brokerage Operations, the Real Estate Management
Operations and the Group Insurance Operations. See Note 11 -
"Discontinued Operations."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Phoenix and
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 accounting principles generally accepted in the United States (GAAP).
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Significant
estimates used in determining insurance and contractholder liabilities,
related reinsurance recoverables, income taxes, contingencies and valuation
allowances for investment assets are discussed throughout the Notes to
Consolidated Financial Statements. Significant inter-company accounts and
transactions have been eliminated. Amounts for 1998 and 1997 have been
retroactively restated to account for income from venture capital
partnership investments and leveraged lease investments. See Note 20 -
"Prior Period Adjustments" for venture capital investment and leveraged
lease investment information. Certain reclassifications have been made to
the 1998 and 1997 amounts to conform with the 1999 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, mortgage-backed and
asset-backed securities. Phoenix classifies its debt securities as either
held-to-maturity or available-for-sale investments. Debt securities
held-to-maturity consist of private placement bonds reported at amortized
cost, net of impairments, that management intends and has the ability to
hold until maturity. Debt securities available-for-sale are reported at fair
value with unrealized gains or losses included in equity and consist of
public bonds and preferred stocks that management may not hold until
maturity. Debt securities are considered impaired when a decline in value is
considered to be other than temporary.
56
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the mortgage-backed and asset-backed bond portion of the debt security
portfolio, Phoenix recognizes income using a constant effective yield based
on anticipated prepayments and the estimated economic life of the
securities. When actual prepayments differ significantly from anticipated
prepayments, the effective yield is recalculated to reflect actual payments
to date, and anticipated future payments and any resulting adjustment is
included in net investment income.
Equity securities are classified as available-for-sale and are reported at
fair value, based principally on their quoted market prices, with unrealized
gains or losses included in equity. Equity securities are considered
impaired when a decline in value is considered to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances, net
of valuation reserves on impaired mortgages. A mortgage loan is considered
to be impaired if management believes it is probable that Phoenix will be
unable to collect all amounts of contractual interest and principal as
scheduled in the loan agreement. An impaired mortgage loan's fair value is
measured based on the present value of future cash flows discounted at the
loan's observable market price or at the fair value of the collateral. If
the fair value of a mortgage loan is less than the recorded investment in
the loan, the difference is recorded as a valuation reserve.
Real estate, all of which is held for sale, is carried at the lower of cost
or current fair value less costs to sell. Fair value for real estate is
determined taking into consideration one or more of the following factors:
property valuation techniques utilizing discounted cash flows at the time of
stabilization including capital expenditures and stabilization costs; sales
of comparable properties; geographic location of the property and related
market conditions; and disposition costs.
Policy loans are generally carried at their unpaid principal balances and
are collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
fair value.
Venture capital partnership and other partnership interests are carried at
cost adjusted for Phoenix's equity in undistributed earnings or losses since
acquisition, less allowances for other than temporary declines in value.
These earnings or losses are included in investment income. Venture capital
partnerships generally account for the underlying investments held in the
partnerships at fair value. These investments can include public and private
common and preferred stock, notes, warrants and other investments.
Investments that are publicly traded are generally valued at closing market
prices. Investments that are not publicly traded, which are usually subject
to restrictions on resale, are generally valued at cost or at estimated fair
value, as determined in good faith by the general partner after giving
consideration to operating results, financial conditions, recent sales
prices of issuers' securities and other pertinent information. Some general
partners will discount the fair value of private investments held to reflect
these restrictions. These valuations subject the earnings to volatility.
Beginning in 1999, Phoenix includes equity in undistributed unrealized
capital gains and losses on investments held in the venture capital
partnerships in net investment income. Prior to 1999, these amounts were not
recorded. Prior years have been restated to reflect this change. See Note 20
- "Prior Period Adjustments" for additional information on venture capital
partnership investments.
57
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Other invested assets include leveraged lease investments. These investments
represent the net of the estimated residual value of the lease assets,
rental receivables, and unearned and deferred income to be allocated over
the lease term. Investment income is calculated using the interest method
and is recognized only in periods in which the net investment is positive.
Realized investment gains and losses, other than those related to separate
accounts for which Phoenix does not bear the investment risk, are determined
by the specific identification method and reported as a component of
revenue. A realized investment loss is recorded when an investment valuation
reserve is determined. Valuation reserves are netted against the asset
categories to which they apply and changes in the valuation reserves are
included in realized investment gains and losses. Unrealized investment
gains and losses on debt securities and equity securities classified as
available-for-sale are included as a component of equity, net of deferred
income taxes and deferred policy acquisition costs.
FINANCIAL INSTRUMENTS
In the normal course of business, Phoenix enters into transactions involving
various types of financial instruments including debt, investments such as
debt securities, mortgage loans and equity securities, off-balance sheet
financial instruments such as investment and loan commitments, financial
guarantees, interest rate swaps, interest rate caps, interest rate floors
and swaptions. These instruments have credit risk and also may be subject to
risk of loss due to interest rate and market fluctuations.
Phoenix enters into interest rate swap agreements to reduce market risks
from changes in interest rates. Phoenix does not enter into interest rate
swap agreements for trading purposes. Under interest rate swap agreements,
Phoenix exchanges cashflows with another party, at specified intervals, for
a set length of time based on a specified notional principal amount.
Typically, one of the cash flow streams is based on a fixed interest rate
set at the inception of the contract, and the other is a variable rate that
periodically resets. Generally, no premium is paid to enter into the
contract and no payment of principal is made by either party. The amounts to
be received or paid on these swap agreements are accrued and recognized in
net investment income.
Phoenix enters into interest rate floor, interest rate cap and swaption
contracts as a hedge for its assets and liabilities against substantial
changes in interest rates. Phoenix does not enter into interest rate floor,
interest rate cap and swaption contracts for trading purposes. Interest rate
floor and interest rate cap agreements are contracts with a counterparty
which require the payment of a premium and give Phoenix the right to receive
over the maturity of the contract, the difference between the floor or cap
interest rate and a market interest rate on specified future dates based on
an underlying notional principal. Swaption contracts are options to enter
into an interest rate swap transaction on a specified future date and at a
specified price. Upon the exercise of a swaption, Phoenix would either
receive a swap agreement at the pre-specified terms or cash for the market
value of the swap. Phoenix pays the premium for these instruments on a
quarterly basis over the maturity of the contract, and recognizes these
payments in net investment income.
Phoenix enters into foreign currency swap agreements to hedge against
fluctuations in foreign currency exposure. Under these agreements, Phoenix
agrees to exchange with another party, principal and periodic interest
payments denominated in foreign currency for payments denominated in U.S.
dollars. The amounts to be received or paid on these foreign currency swap
agreements is recognized in net investment income. To reduce counterparty
credit risks and
58
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
diversify counterparty exposure, Phoenix only enters into derivative
contracts with highly rated financial institutions.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and money market
instruments.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, underwriting,
distribution and policy issue expenses, all of which vary with and are
primarily related to the production of new business, are deferred. Deferred
policy acquisition costs (DAC) are subject to recoverability testing at the
time of policy issue and loss recognition at the end of each accounting
period. For individual participating life insurance policies, deferred
policy acquisition costs are amortized in proportion to historical and
anticipated gross margins. Deviations from expected experience are reflected
in earnings in the period such deviations occur.
For universal life insurance policies, 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 their estimated lives.
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
59
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
investment earnings on their fund balances, less administrative charges.
Universal life fund balances are also assessed mortality charges.
Liabilities for outstanding claims, losses and loss adjustment expenses are
amounts estimated to cover incurred losses. These liabilities are based on
individual case estimates for reported losses and estimates of unreported
losses based on past experience.
Unearned premiums relate primarily to individual participating life
insurance as well as group life, accident and health insurance premiums. The
premiums are reported as earned on a pro-rata basis over the contract
period. The unexpired portion of these premiums is recorded as unearned
premiums.
PREMIUM AND FEE REVENUE AND RELATED EXPENSES
Life insurance premiums, other than premiums for universal life and certain
annuity contracts, are recorded as premium revenue on a pro-rata basis over
each policy year. Benefits, losses and related expenses are matched with
premiums over the related contract periods. Revenues for investment-related
products consist of net investment income and contract charges assessed
against the fund values. Related benefit expenses primarily consist of net
investment income credited to the fund values after deduction for investment
and risk charges. Revenues for universal life products consist of net
investment income and mortality, administration and surrender charges
assessed against the fund values during the period. Related benefit expenses
include universal life benefit claims in excess of fund values and net
investment income credited to universal life fund values.
POLICYHOLDERS' DIVIDENDS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of Phoenix. The
amount of policyholders' dividends to be paid is determined annually by
Phoenix's board of directors. The aggregate amount of policyholders'
dividends is related to the actual interest, mortality, morbidity and
expense experience for the year and Phoenix's judgment as to the appropriate
level of statutory surplus to be retained. At the end of the reporting
period, Phoenix establishes a dividend liability for the pro-rata portion of
the dividends payable on the next anniversary date of each policy. Phoenix
also establishes a liability for termination dividends.
INCOME TAXES
Phoenix and its eligible affiliated companies have elected to file a
life/nonlife consolidated federal income tax return for 1999 and prior
years. Entities included within the consolidated group are segregated into
either a life insurance or non-life insurance company subgroup. The
consolidation of these subgroups is subject to certain statutory
restrictions in the percentage of eligible non-life tax losses that can be
applied to offset life company taxable income.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities and accruals, policy acquisition expenses, investment impairment
reserves, reserves for postretirement benefits and unrealized gains or
losses on investments.
60
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
As a mutual life insurance company, Phoenix is required to reduce its income
tax deduction for policyholder dividends by the differential earnings
amount, defined as the difference between the earnings rates of stock and
mutual companies applied against an adjusted base of policyholders' surplus.
RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1999, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS
No. 133". Because of the complexities associated with transactions involving
derivative instruments and their prevalent use as hedging instruments and,
because of the difficulties associated with the implementation of Statement
133, the effective date of SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" was delayed until fiscal years beginning
after June 15, 2000. SFAS No. 133, initially issued on June 15, 1998,
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it
is, the type of hedge transaction. For fair-value hedge transactions in
which Phoenix is hedging changes in an asset's, liability's or firm
commitment's fair value, changes in the fair value of the derivative
instrument will generally be offset in the income statement by changes in
the hedged item's fair value. For cash-flow hedge transactions, in which
Phoenix is hedging the variability of cashflows related to a variable-rate
asset, liability, or a forecasted transaction, changes in the fair value of
the derivative instrument will be reported in other comprehensive income.
The gains and losses on the derivative instrument that are reported in other
comprehensive income will be reclassified as earnings in the period in which
earnings are impacted by the variability of the cash flows of the hedged
item. The ineffective portion of all hedges will be recognized in current
period earnings.
Phoenix has not yet determined the impact that the adoption of SFAS 133 will
have on its earnings or statement of financial position.
Phoenix adopted 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 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," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits," and SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other than
Pensions". The new statement revises and standardizes
61
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PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
employers' disclosures about pension and other postretirement benefit plans.
Adoption of this statement did not affect the results of operations or
financial position of Phoenix.
On January 1, 1999, Phoenix adopted Statement of Position (SOP) 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 provides guidance for assessments related to
insurance activities. The adoption of SOP 97-3 did not have a material
impact on Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides
guidance for determining when an entity should capitalize or expense
external and internal costs of computer software developed or obtained for
internal use. The adoption of SOP 98-1 did not have a material impact on
Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires that start-up costs capitalized
prior to January 1, 1999 should be written off and any future start-up costs
be expenses as incurred. The adoption of SOP 98-5 did not have a material
impact on Phoenix's results from operations or financial position.
3. SIGNIFICANT TRANSACTIONS
DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units; the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. Disclosures concerning the financial impact of these
transactions are contained in Note 11 - "Discontinued Operations."
PFG HOLDINGS, INC.
On October 29, 1999, PM Holdings, a wholly-owned subsidiary of Phoenix,
purchased 100% of PFG Holdings, Inc. 8% cumulative preferred stock
convertible into a 67% interest in common stock for $5 million in cash. In
addition Phoenix has an option to purchase all the outstanding common stock
during year six at a value to 80% of the appraised value of the common stock
at that time. As of the statement date this option had not been executed.
Since the investment represents a majority interest Phoenix has consolidated
this entity for GAAP as if the preferred stock had been converted and
established a minority interest for outside shareholders. The transaction
resulted in goodwill of $3.8 million to be amortized over 10 years.
PFG Holdings was formed to purchase three of The Guarantee Life Companies'
operating subsidiaries: AGL Life Assurance Company, PFG Distribution Company
and Philadelphia Financial Group. These subsidiaries develop, market and
underwrite specialized private placement variable life and annuity products.
AGL Life Assurance Company must maintain at least $10 million of capital and
surplus to satisfy certain regulatory minimum capital requirements. PM
Holdings provided financing at the purchase date of $11 million to PFG
Holdings in order for AGL Life Assurance to meet this minimum requirement.
The debt is an 8.34% senior secured note maturing in 2009.
62
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EMPRENDIMIENTO COMPARTIDO, S.A., (EMCO)
At January 1, 1999 PM Holdings held 9.1 million shares of EMCO, representing
a 35% ownership interest the Argentine financial services company that
provides pension management, annuities and life insurance products. On June
23, 1999, PM Holdings became the majority owner of EMCO when it purchased
13.9 million shares of common stock from the Banco del Suquia, S.A. for
$29.5 million, plus $10.0 million for a five year covenant not-to-compete.
Payment for the stock will be made in three installments: $10.0 million, 180
days from closing; $10.0 million, 360 days from closing; and $9.5 million,
540 days from closing, all subject to interest of 7.06%. The covenant was
paid at the time of closing.
In addition, EMCO purchased, for its treasury, 3.0 million shares of its
outstanding common stock held by two banks. This, in combination with the
purchase described above, increased PM Holdings ownership interest from 35%
to 100% of the then outstanding stock.
On November 12, 1999, PM Holdings sold 11.5 million shares (50% interest) of
EMCO common stock for $40.0 million generating a pre-tax gain of $11.3
million. PM Holdings received $15.0 million in cash plus a $9.0 million
two-year 8% interest bearing note, and a $16.0 million five-year 8% interest
bearing note. PM Holdings uses the equity method of accounting to account
for its remaining 50% interest in EMCO.
After the sale, the remaining excess of the purchase price over the fair
value of the acquired net tangible assets totaled $17.0 million. That
consisted of a covenant not-to-compete of $5.0 million which is being
amortized over five years and goodwill of $12.0 million which is being
amortized over ten years.
PHOENIX NEW ENGLAND TRUST
On October 29, 1999, PM Holdings indirectly acquired 100% of the common
stock of New London Trust, a banking subsidiary of Sun Life of Canada, for
$30.0 million in cash. New London Trust, renamed Phoenix New England Trust,
is a New Hampshire based federal savings bank that operates a trust division
with assets under management of approximately $1 billion. Immediately
following this acquisition, on November 1, 1999, PM Holdings sold the New
London Trust's New Hampshire retail banking operations to Lake Sunapee Bank
and Mascoma Savings Bank in New Hampshire and the Connecticut branches to
Westbank Corporation, for a total of $25.2 million in cash. No gain or loss
was recognized on this sale. PM Holdings retained the trust business and
four trust offices of New London Trust, located in New Hampshire and
Vermont.
LOMBARD INTERNATIONAL ASSURANCE, S.A.
On November 5, 1999, PM Holdings purchased 12% of the common stock of
Lombard International Assurance, S.A., a Pan-European financial services
company, for $29.1 million in cash. Lombard provides investment-linked
insurance products to high-net-worth individuals in eight European
countries. This investment is classified as equity securities in the
Consolidated Balance Sheet.
63
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PHOENIX INVESTMENT PARTNERS, LTD.
On March 1, 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 Zweig Group managed approximately $3.3 billion of assets as of
December 31,1999.
On December 3, 1998, Phoenix Investment Partners completed the sale of its
49% interest in Canadian investment firm Beutel, Goodman & Company, Ltd. for
$47.0 million. Phoenix Investment Partners received $37.0 million in cash
and a $10.0 million three-year interest bearing note. The transaction
resulted in a before-tax gain of approximately $17.5 million. Phoenix's
interest represents an after-tax realized gain of approximately $6.8
million.
Phoenix owns approximately 60% of the outstanding Phoenix Investment
Partners' common stock. In addition, Phoenix owns 45% of Phoenix Investment
Partners' convertible subordinated debentures.
ABERDEEN ASSET MANAGEMENT PLC
On February 18, 1999, PM Holdings purchased an additional 15.1 million
shares of the common stock of Aberdeen Asset Management for $29.4 million.
As of December 31, 1999, PM Holdings owned 21% of the outstanding common
stock of Aberdeen Asset Management, a Scottish asset management firm. The
investment is reported on the equity basis and classified as other invested
assets in the Consolidated Balance Sheet.
DIVIDEND SCALE REDUCTION
In consideration of the decline of interest rates in the financial markets,
Phoenix's Board of Directors voted in October of 1998 to adopt a reduced
dividend scale, effective for dividends payable on or after January 1, 1999.
Dividends for individual participating policies were reduced 60 basis points
in most cases, an average reduction of approximately 8%. The effect was a
decrease of approximately $15.7 million in the policyholder dividends
expense in 1998. In October 1999, Phoenix's Board of Directors voted to
maintain the dividend scale for dividends payable on or after January 1,
2000.
REAL ESTATE SALES
On December 15, 1998, Phoenix sold 47 commercial real estate properties with
a carrying value of $269.8 million, and 4 joint venture real estate
partnerships with a carrying value of $10.5 million, for approximately $309
million in cash. This transaction, along with the sale of 18 other
properties and partnerships during 1998, which had a carrying value of $36.7
million, resulted in pre-tax gains of approximately $67.5 million. As of
December 31, 1999, Phoenix had 3 commercial real estate properties remaining
with a carrying value of $42.9 million and 5 joint venture real estate
partnerships with a carrying value of $49.1 million.
64
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
DEBT AND EQUITY SECURITIES
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
DEBT SECURITIES
HELD-TO-MATURITY:
<S> <C> <C> <C> <C>
State and political subdivision bonds $ 27,595 $ 416 $ (1,033) $ 26,978
Foreign government bonds 3,032 (796) 2,236
Corporate securities 1,776,174 12,945 (95,707) 1,693,412
Mortgage-backed and asset-backed
securities 285,387 1,361 (19,166) 267,582
--------------- -------------- -------------- --------------
Total held-to-maturity securities 2,092,188 14,722 (116,702) 1,990,208
Less: held-to-maturity securities of
discontinued operations 102,019 736 (5,835) 96,920
--------------- -------------- -------------- --------------
Total held-to-maturity securities of
continuing operations 1,990,169 13,986 (110,867) 1,893,288
--------------- -------------- -------------- --------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 283,697 1,955 (6,537) 279,115
State and political subdivision bonds 495,860 4,765 (21,751) 478,874
Foreign government bonds 273,868 23,700 (3,990) 293,578
Corporate securities 2,353,228 18,578 (102,773) 2,269,033
Mortgage-backed and asset-backed
securities 2,977,136 17,916 (103,264) 2,891,788
--------------- -------------- -------------- --------------
Total available-for-sale securities 6,383,789 66,914 (238,315) 6,212,388
Less: available-for-sale securities of
discontinued operations 725,077 7,600 (27,068) 705,609
--------------- -------------- -------------- --------------
Total available-for-sale securities of
continuing operations 5,658,712 59,314 (211,247) 5,506,779
--------------- -------------- -------------- --------------
TOTAL DEBT SECURITIES OF CONTINUING
OPERATIONS $ 7,648,881 $ 73,300 $ (322,114) $ 7,400,067
============== ============== ============= =============
EQUITY SECURITIES $ 311,100 $ 176,593 $ (24,211) $ 463,482
Less: equity securities of discontinued
operations 1,869 1,869
--------------- -------------- -------------- --------------
TOTAL EQUITY SECURITIES OF CONTINUING
OPERATIONS $ 309,231 $ 176,593 $ (24,211) $ 461,613
============== ============== ============= =============
</TABLE>
65
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
DEBT SECURITIES
HELD-TO-MATURITY:
<S> <C> <C> <C> <C>
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 and asset-backed
securities 172,300 6,201 (12) 178,489
--------------- -------------- -------------- --------------
Total held-to-maturity securities 1,881,687 105,740 (14,656) 1,972,771
Less: held-to-maturity securities of
discontinued operations 156,248 8,776 (1,216) 163,808
--------------- -------------- -------------- --------------
Total held-to-maturity securities of
continuing operations 1,725,439 96,964 (13,440) 1,808,963
--------------- -------------- -------------- --------------
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 and asset-backed
securities 3,121,690 110,172 (14,618) 3,217,244
--------------- -------------- -------------- --------------
Total available-for-sale securities 6,436,444 327,587 (70,491) 6,693,540
Less: available-for-sale securities of
discontinued operations 678,992 34,558 (7,436) 706,114
--------------- -------------- -------------- --------------
Total available-for-sale securities of
continuing operations 5,757,452 293,029 (63,055) 5,987,426
--------------- -------------- -------------- --------------
TOTAL DEBT SECURITIES OF CONTINUING
OPERATIONS $ 7,482,891 $ 389,993 $ (76,495) $ 7,796,389
============== ============= ============ =============
EQUITY SECURITIES $ 223,915 $ 102,018 $ (21,388) $ 304,545
Less: equity securities of discontinued
operations 2,896 2,896
--------------- -------------- -------------- --------------
TOTAL EQUITY SECURITIES OF CONTINUING
OPERATIONS $ 221,019 $ 102,018 $ (21,388) $ 301,649
============== ============= ============ =============
</TABLE>
66
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The sale of fixed maturities held-to-maturity relate to certain securities,
with amortized cost of $3.9 million, $19.6 million and $59.1 million, for
the years ended December 31, 1999, 1998 and 1997, respectively, which were
sold specifically due to a significant decline in the issuers' credit
quality. The related realized losses, net of the sales, were $0.2 million,
$0.8 million and $10.1 million in 1999, 1998 and 1997, respectively.
The amortized cost and fair value of debt securities, by contractual sinking
fund payment and maturity, as of December 31, 1999 are shown below. Actual
maturity may differ from contractual maturity because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties, or Phoenix may have the right to put or sell the obligations back
to the issuers.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 118,171 $ 116,992 $ 43,180 $ 43,483
Due after one year through five years 583,115 564,215 534,417 532,676
Due after five years through ten years 587,568 566,505 1,146,805 1,104,661
Due after ten years 517,946 474,913 1,682,250 1,639,771
Mortgage-backed and
asset-backed securities 285,388 267,583 2,977,137 2,891,797
--------------- --------------- ---------------- --------------
Total $ 2,092,188 $ 1,990,208 $ 6,383,789 $ 6,212,388
Less: securities of discontinued
operations 102,019 96,920 725,077 705,609
--------------- --------------- ---------------- --------------
Total securities of continuing $ 1,990,169 $ 1,893,288 $ 5,658,712 $ 5,506,779
operations =============== =============== ================ ==============
</TABLE>
Carrying values for investments in mortgage-backed and asset-backed
securities, excluding U.S. government guaranteed investments, were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Planned amortization class $ 168,027 $ 433,668
Asset-backed 956,892 910,594
Mezzanine 194,849 280,162
Commercial 735,238 641,485
Sequential pay 1,039,001 982,576
Pass through 77,154 119,065
Other 6,014 21,994
--------------- ---------------------
Total mortgage-backed and asset-backed securities $ 3,177,175 $ 3,389,544
=============== =====================
</TABLE>
67
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MORTGAGE LOANS AND REAL ESTATE
Phoenix's mortgage loans and real estate are diversified by property type
and location and, for mortgage loans, by borrower. Mortgage loans are
collateralized by the related properties and are generally 75% of the
properties' value at the time the original loan is made.
Mortgage loans and real estate investments comprise the following property
types and geographic regions:
<TABLE>
<CAPTION>
MORTGAGE LOANS REAL ESTATE
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
(IN THOUSANDS) (IN THOUSANDS)
PROPERTY TYPE:
<S> <C> <C> <C> <C>
Office buildings $ 183,912 $ 221,244 $ 30,545 $ 38,343
Retail 208,606 203,927 14,111 36,858
Apartment buildings 252,947 261,894 41,744 21,553
Industrial buildings 82,699 121,789 1,600
Other 2,950 19,089 8,859 32
Valuation allowances (14,283) (30,600) (3,232) (6,411)
------------------ ------------------ ------------------ ------------------
Total $ 716,831 $ 797,343 $ 92,027 $ 91,975
================== ================== ================== =================
GEOGRAPHIC REGION:
Northeast $ 149,336 $ 169,368 $ 59,582 $ 47,709
Southeast 198,604 213,916 32 32
North central 164,150 176,683 744 11,453
South central 105,062 98,956 21,232 22,649
West 113,962 169,020 13,669 16,543
Valuation allowances (14,283) (30,600) (3,232) (6,411)
------------------ ------------------ ------------------ ------------------
Total $ 716,831 $ 797,343 $ 92,027 $ 91,975
================== ================== ================== ==================
</TABLE>
At December 31, 1999, scheduled mortgage loan maturities were as follows:
2000 - $92 million; 2001 - $87 million; 2002 - $32 million; 2003 - $109
million; 2004 - $38 million; 2005 - $35 million, and $338 million
thereafter. Actual maturities will differ from contractual maturities
because borrowers may have the right to prepay obligations with or without
prepayment penalties and loans may be refinanced. Phoenix refinanced $6.7
million and $2.3 million of its mortgage loans during 1999 and 1998,
respectively, based on terms which differed from those granted to new
borrowers.
The carrying value of delinquent and in process of foreclosure mortgage
loans at December 31, 1999 and 1998 is $6.0 million and $17.2 million,
respectively. There are valuation allowances of $5.4 million and $14.7
million, respectively, on these mortgages.
68
<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)
1999
<S> <C> <C> <C> <C>
Mortgage loans $ 30,600 $ 9,697 $ (26,014) $ 14,283
Real estate 6,411 183 (3,362) 3,232
------------------ ------------------ ------------------- -------------------
Total $ 37,011 $ 9,880 $ (29,376) $ 17,515
================== ================== =================== ===================
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
================== ================== =================== ===================
</TABLE>
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $0.0
million and $15.6 million at December 31, 1999 and 1998, respectively. The
net carrying value of non-income producing bonds were $0.0 million and $22.3
at December 31, 1999 and 1998, respectively.
69
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS
Derivative instruments at December 31, are summarized below:
<TABLE>
<CAPTION>
1999 1998
($ IN THOUSANDS )
Swaptions:
<S> <C> <C>
Notional amount $ 1,600,000
Weighted average strike rate 5.02%
Index rate (1) 10 Yr. CMS
Fair value $ (8,200)
Interest rate floors:
Notional amount $ 1,210,000 $ 570,000
Weighted average strike rate 4.57% 4.59%
Index rate (1) 2-10 Yr. CMT/CMS 5-10 Yr. CMT
Fair value $ (7,542) $ 1,423
Interest rate swaps:
Notional amount $ 474,037 $ 424,573
Weighted average received rate 6.33% 6.27%
Weighted average paid rate 6.09% 5.82%
Fair value $ 1,476 $ 10,989
Foreign currency swaps:
Notional amount $ 8,074
Weighted average received rate 12.04%
Weighted average paid rate 10.00%
Fair value $ 213
Interest rate caps:
Notional amount $ 50,000 $ 50,000
Weighted average strike rate 7.95% 7.95%
Index rate (1) 10 Yr. CMT 10 Yr. CMT
Fair value $ 842 $ (96)
</TABLE>
(1) Constant maturity treasury yields (CMT) and constant maturity swap
yields (CMS).
The increase in net investment income related to interest rate swap
contracts was $1.0 million and $2.1 million for the years ended December 31,
1999 and 1998, respectively. The decrease in net investment income related
to interest rate floor, interest rate cap and swaption contracts was $2.3
million and $0.2 million for the years ended December 31, 1999 and 1998,
respectively, representing quarterly premium payments on these instruments
which are being paid over the life of the contracts. The estimated fair
value of these instruments represent what Phoenix would have to pay or
receive if the contracts were terminated.
70
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Phoenix is exposed to credit risk in the event of nonperformance by
counterparties to these financial instruments, but management of the Phoenix
does not expect counterparties to fail to meet their financial obligations,
given their high credit ratings. The credit exposure of these instruments is
the positive fair value at the reporting date.
Management of Phoenix considers the likelihood of any material loss on these
instruments to be remote.
VENTURE CAPITAL PARTNERSHIPS
Phoenix invests in venture capital limited partnerships. These partnerships
focus on early-stage ventures, primarily in the information technology and
life science industries, as well as direct equity investments in leveraged
buyouts and corporate acquisitions.
Phoenix records its equity in the earnings of the partnerships in net
investment income.
The components of net investment income due to venture capital partnerships
for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Operating losses $ (8,921) $ (2,746) $ (2,131)
Realized gains on cash and stock distributions 84,725 23,360 31,336
Unrealized gains on investments held in the partnerships 64,091 19,009 4,531
----------- ------------ -----------
Total venture capital partnership net investment income $ 139,895 $ 39,623 $ 33,736
=========== ============ ===========
</TABLE>
OTHER INVESTED ASSETS
Other invested assets, consisting primarily of partnership interests and
equity in unconsolidated affiliates, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Transportation and equipment leases $ 82,063 $ 80,953
Affordable housing partnerships 22,247 10,854
Investment in Aberdeen Asset Management 99,074 72,257
Investment in EMCO of Argentina 13,423 10,681
Investment in other affiliates 12,389 12,706
Seed money in separate accounts 33,279 26,587
Other partnership interests 41,953 22,697
------------------- -------------------
Total other invested assets $ 304,428 $ 236,735
Less: other invested assets of discontinued operations 3,954 4,604
------------------- -------------------
Total other invested assets of continuing operations $ 300,474 $ 232,131
=================== ===================
</TABLE>
71
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 641,076 $ 598,892 $ 509,702
Equity securities 8,272 6,469 4,277
Mortgage loans 66,285 83,101 85,662
Policy loans 148,998 146,477 122,562
Real estate 9,716 38,338 18,939
Leveraged leases 2,202 2,746 2,692
Venture capital partnerships 139,895 39,623 33,736
Other invested assets 2,544 1,750 2,160
Short-term investments 22,543 23,825 18,768
------------- ------------ -------------
Sub-total 1,041,531 941,221 798,498
Less investment expenses 23,505 23,328 22,621
------------- ------------ -------------
Net investment income $ 1,018,026 $ 917,893 $ 775,877
Less: net investment income of discontinued operations 67,682 66,290 61,510
------------- ------------ -------------
Total net investment income of continuing operations $ 950,344 $ 851,603 $ 714,367
============= ============ =============
</TABLE>
Investment income of $2.7 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1999. Phoenix does not
accrue interest income on impaired mortgage loans and impaired bonds when
the likelihood of collection is doubtful.
The payment terms of mortgage loans may, from time to time, be restructured
or modified. The investment in restructured mortgage loans, based on
amortized cost, amounted to $36.5 million and $40.8 million at December 31,
1999 and 1998, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $4.1 million, $4.9 million and $5.3 million in 1999, 1998
and 1997, respectively. Actual interest income on these loans included in
net investment income was $3.5 million, $4.0 million and $3.8 million in
1999, 1998 and 1997, respectively.
72
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Net unrealized gains and (losses) on securities available-for-sale and
carried at fair value for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (428,497) $ (7,040) $ 112,194
Equity securities 71,752 (91,880) 74,547
Deferred policy acquisition costs 260,287 6,694 (80,603)
Deferred income taxes (33,760) (32,279) 38,064
------------------ ----------------- -----------------
Net unrealized investment (losses) gains
on securities available-for-sale $ (62,698) $ (59,947) $ 68,074
================== ================= =================
</TABLE>
Realized investment gains and losses for the year ended December 31, were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (20,416) $ (4,295) $ 19,315
Equity securities 16,648 11,939 26,290
Mortgage loans 18,534 (6,895) 3,805
Real estate 2,915 67,522 44,668
Other invested assets 18,432 (4,709) 17,387
------------ ------------ ------------
Net realized investment gains 36,113 63,562 111,465
Less realized from discontinued operations 438 5,360 422
------------ ------------ ------------
Net realized investment gains from continuing
operations $ 35,675 $ 58,202 $ 111,043
============ ============ ============
</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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from disposals $ 1,106,929 $ 912,696 $ 821,339
Gross gains on sales $ 21,808 $ 17,442 $ 27,954
Gross losses on sales $ 39,122 $ 33,641 $ 5,309
</TABLE>
73
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Phoenix Investment Partners gross amounts:
<S> <C> <C>
Goodwill $ 384,576 $ 321,793
Investment management contracts 235,976 169,006
Non-compete covenant 5,000 5,000
Other 10,894 472
-------------- --------------
Totals 636,446 496,271
-------------- --------------
Other gross amounts:
Goodwill 32,554 16,631
Intangible asset related to pension plan benefits 11,739 16,229
Other 1,206 693
-------------- --------------
Totals 45,499 33,553
-------------- --------------
Total gross goodwill and other intangible assets 681,945 529,824
Accumulated amortization - Phoenix Investment Partners (79,912) (49,615)
Accumulated amortization - other (8,766) (2,314)
-------------- --------------
Total net goodwill and other intangible assets $ 593,267 $ 477,895
============== ==============
</TABLE>
6. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Short-term debt $ 21,598 $ 1,938
Bank borrowings 260,284 168,278
Notes payable 1,146
Subordinated debentures 41,364 41,359
Surplus notes 175,000 175,000
----------------- -----------------
Total notes payable $ 499,392 $ 386,575
================= ================
</TABLE>
Phoenix has various lines of credit established with major commercial banks.
As of December 31, 1999, Phoenix had outstanding balances totaling $436.7
million. The total unused credit was $369.0 million. Interest rates ranged
from 5.26% to 7.48% in 1999.
Maturities of other indebtedness are as follows: 2000 - $21.6 million; 2001
- $26.0 million; 2002 $200.0 million; 2003 - $0.0 million; 2004 - $35.0
million; 2005 and thereafter - $216.8 million.
Interest expense was $32.7 million, $25.9 million and $24.3 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
74
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. INCOME TAXES
A summary of income taxes (benefits) applicable to income before income
taxes and minority interest for the year ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
Income taxes
<S> <C> <C> <C>
Current $ 121,448 $ 61,889 $ 39,583
Deferred (13,567) 3,157 7,658
------------------ ------------------ ------------------
Total $ 107,881 $ 65,046 $ 47,241
================== ================== ==================
</TABLE>
The income taxes attributable to the consolidated results of operations are
different than the amounts determined by multiplying income before taxes by
the statutory income tax rate. The sources of the difference and the tax
effects of each for the year ended December 31, were as follows (in
thousands, aside from the percentages):
<TABLE>
<CAPTION>
1999 1998 1997
% % %
Income tax expense at statutory
<S> <C> <C> <C> <C> <C> <C>
rate $ 91,440 35 $ 65,685 35 $ 77,095 35
Dividend received deduction and
tax-exempt interest (3,034) (1) (3,273) (2) (1,684) (1)
Other, net 7,922 3 2,634 2 (15,059) (7)
------------- -------- ------------- -------- ------------- ---------
96,328 37 65,046 35 60,352 27
Differential earnings (equity tax) 11,553 4 (13,111) (6)
------------- -------- ------------- -------- ------------- ---------
Income taxes $ 107,881 41 $ 65,046 35 $ 47,241 21
============= ======== ============= ======== ============= =========
</TABLE>
75
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The deferred income tax liability (asset) represents the tax effects of
temporary differences attributable to the consolidated tax return group. The
components were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 282,725 $ 294,917
Unearned premium/deferred revenue (135,124) (139,346)
Impairment reserves (15,556) (23,111)
Pension and other postretirement benefits (68,902) (57,720)
Investments 177,204 122,032
Future policyholder benefits (181,205) (151,168)
Other 4,683 31,595
-------------- --------------
63,825 77,199
Net unrealized investment gains 26,587 42,254
Minimum pension liability (4,150) (3,349)
--------------- --------------
Deferred income tax liability, net $ 86,262 $ 116,104
=============== ==============
</TABLE>
Gross deferred income tax assets totaled $405 million and $375 million at
December 31, 1999 and 1998, respectively. Gross deferred income tax
liabilities totaled $491 million and $491 million at December 31, 1999 and
1998, respectively. It is management's assessment, based on Phoenix's
earnings and projected future taxable income, that it is more likely than
not that deferred income tax assets at December 31, 1999 and 1998 will be
realized.
8. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
Phoenix has a multi-employer, non-contributory, defined benefit pension plan
covering substantially all of its employees. Retirement benefits are a
function of both years of service and level of compensation. Phoenix also
sponsors a non-qualified supplemental defined benefit plan to provide
benefits in excess of amounts allowed pursuant to the Internal Revenue Code.
Phoenix's funding policy is to contribute annually an amount equal to at
least the minimum required contribution in accordance with minimum funding
standards established by the Employee Retirement Income Security Act of
1974. Contributions are intended to provide not only for benefits
attributable to service to date, but also for service expected to be earned
in the future.
Components of net periodic pension cost for the years ended December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
Components of net periodic benefit cost
<S> <C> <C> <C>
Service cost $ 11,887 $ 11,046 $ 10,278
Interest cost 24,716 22,958 22,650
Curtailments 21,604
Expected return on plan assets (28,544) (25,083) (22,055)
Amortization of net transition asset (2,369) (2,369) (2,369)
Amortization of prior service cost 1,795 1,795 1,795
Amortization of net (gain) loss (2,709) (1,247) 25
---------------- --------------- ---------------
Net periodic benefit cost $ 26,380 $ 7,100 $ 10,324
================ =============== ===============
</TABLE>
76
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In 1999, Phoenix offered a special retirement program under which qualified
participants' benefits under the employee pension plan were enhanced by
adding five years to age and five years to pension plan service. Of the 320
eligible employees, 146 accepted the special retirement program. As a result
of the special retirement program, Phoenix recorded an additional pension
expense of $21.6 million for the year ended December 31, 1999.
The aggregate change in projected benefit obligation, change in plan assets,
and funded status of the plan were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Change in projected benefit obligation
<S> <C> <C>
Projected benefit obligation at beginning of year $ 353,462 $ 335,436
Service cost 11,887 11,046
Interest cost 24,716 22,958
Plan amendments 23,871
Curtailments (6,380)
Actuarial loss (4,887) 1,958
Benefit payments (19,841) (17,936)
--------------- ----------------
Benefit obligation at end of year $ 382,828 $ 353,462
--------------- ----------------
Change in plan assets
Fair value of plan assets at beginning of year $ 364,819 $ 321,555
Actual return on plan assets 78,951 58,225
Employer contributions 3,883 2,975
Benefit payments (19,841) (17,936)
--------------- ----------------
Fair value of plan assets at end of year $ 427,812 $ 364,819
--------------- ----------------
Funded status of the plan $ 44,984 $ 11,357
Unrecognized net transition asset (11,847) (14,217)
Unrecognized prior service cost 11,705 16,185
Unrecognized net gain (129,936) (75,921)
--------------- ----------------
Net amount recognized $ (85,094) $ (62,596)
=============== ================
Amounts recognized in the Consolidated Balance Sheet consist of:
Accrued benefit liability $ (108,690) $ (88,391)
Intangible asset 11,739 16,229
Accumulated other comprehensive income 11,857 9,566
--------------- ----------------
$ (85,094) $ (62,596)
=============== ================
</TABLE>
At December 31, 1999 and 1998, the non-qualified plan was not funded and had
projected benefit obligations of $72.3 million and $57.2 million,
respectively. The accumulated benefit obligations as of December 31, 1999
and 1998 related to this plan were $60.1 million and $48.4 million,
respectively, and are included in other liabilities.
Phoenix recorded, as a reduction of equity, an additional minimum pension
liability of $7.7 million and $6.2 million, net of income taxes, at December
31, 1999 and 1998, respectively, representing the excess of accumulated
benefit obligations over the fair value of plan assets and accrued pension
liabilities for the non-qualified plan. Phoenix has also recorded an
intangible asset of $11.7 million and $16.2 million as of December 31, 1999
and 1998 related to the non-qualified plan.
77
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% and 7.0% for 1999 and 1998,
respectively. The discount rate assumption for 1999 was determined based on
a study that matched available high quality investment securities with the
expected timing of pension liability payments. The rate of increase in
future compensation levels used in determining the actuarial present value
of the projected benefit obligation was 4.5% and 4.0% for 1999 and 1998,
respectively. The expected long-term rate of return on retirement plan
assets was 8.0% in 1999 and 1998.
The assets within the pension plan include corporate and government debt
securities, equity securities, real estate, venture capital partnerships,
and shares of mutual funds.
Phoenix also sponsors savings plans for its employees and agents that are
qualified under Internal Revenue Code Section 401(k). Employees and agents
may contribute a portion of their annual salary, subject to certain
limitations, to the plans. Phoenix contributes an additional amount, subject
to limitation, based on the voluntary contribution of the employee or agent.
Company contributions charged to expense with respect to these plans during
the years ended December 31, 1999, 1998 and 1997 were $4.0 million, $4.1
million and $3.8 million, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to Phoenix's pension plans, Phoenix currently provides certain
health care and life insurance benefits to retired employees, spouses and
other eligible dependents through various plans sponsored by Phoenix. A
substantial portion of Phoenix's employees may become eligible for these
benefits upon retirement. The health care plans have varying copayments and
deductibles, depending on the plan. These plans are unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
Components of net periodic benefit cost
<S> <C> <C> <C>
Service cost $ 3,313 $ 3,436 $ 3,136
Interest cost 4,559 4,572 4,441
Curtailments 5,456
Amortization of net gain (1,493) (1,232) (1,527)
-------------- -------------- --------------
Net periodic benefit cost $ 11,835 $ 6,776 $ 6,050
============== ============== ==============
</TABLE>
As a result of the special retirement program, Phoenix recorded an
additional postretirement benefit expense of $5.5 million for the year ended
December 31, 1999.
78
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The plan's change in projected benefit obligation, change in plan assets,
and funded status were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Change in projected postretirement benefit obligation
<S> <C> <C>
Projected benefit obligation at beginning of year $ 70,943 $ 66,618
Service cost 3,313 3,436
Interest cost 4,559 4,572
Plan Amendments 5,785
Curtailments (328)
Actuarial (gain) loss (8,622) 397
Benefit payments (4,459) (4,080)
---------------- ----------------
Projected benefit obligation at end of year 71,191 70,943
---------------- ----------------
Change in plan assets
Employer contributions 4,459 4,080
Benefit payments (4,459) (4,080)
---------------- ----------------
Fair value of plan assets at end of year
---------------- ----------------
Funded status of the plan (71,191) (70,943)
Unrecognized net gain (33,538) (26,408)
---------------- ----------------
Accrued benefit liability $ (104,729) $ (97,351)
================ ================
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 7.0% at December 31, 1999 and 1998, respectively.
For purposes of measuring the accumulated postretirement benefit obligation
the health care costs were assumed to increase 7.5% and 8.5% in 1999 and
1998, respectively, declining thereafter until the ultimate rate of 5.5% is
reached in 2002 and remains at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation by $4.3 million and the annual service and
interest cost by $0.6 million, before income taxes. Decreasing the assumed
health care cost trend rates by one percentage point in each year would
decrease the accumulated postretirement benefit obligation by $4.1 million
and the annual service and interest cost by $0.5 million, before income
taxes. Gains and losses that occur because actual experience differs from
the estimates are amortized over the average future service period of
employees.
OTHER POSTEMPLOYMENT BENEFITS
Phoenix recognizes the costs and obligations of severance, disability and
related life insurance and health care benefits to be paid to inactive or
former employees after employment but before retirement. Other
postemployment benefit expenses were $0.5 million for 1999, ($0.5) million
for 1998 and $0.4 million for 1997.
79
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. COMPREHENSIVE INCOME
The components of, and related income tax effects for, other comprehensive
income for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
<S> <C> <C> <C>
Before-tax amount $ (94,224) $ (72,255) $ 151,210
Income tax (benefit) expense (32,978) (25,288) 52,923
--------------- --------------- ---------------
Totals (61,246) (46,967) 98,287
--------------- --------------- ---------------
RECLASSIFICATION ADJUSTMENT FOR NET GAINS
REALIZED IN NET INCOME:
Before-tax amount (2,234) (19,970) (46,481)
Income tax (benefit) (782) (6,990) (16,268)
--------------- --------------- ---------------
Totals (1,452) (12,980) (30,213)
--------------- --------------- ---------------
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount (96,458) (92,225) 104,729
Income tax (benefit) expense (33,760) (32,278) 36,655
--------------- --------------- ---------------
Totals $ (62,698) $ (59,947) $ 68,074
=============== =============== ===============
MINIMUM PENSION LIABILITY ADJUSTMENT:
Before-tax amount $ (2,289) $ (2,347) $ (3,232)
Income tax (benefit) (801) (821) (1,131)
--------------- --------------- ---------------
Totals $ (1,488) $ (1,526) $ (2,101)
=============== =============== ===============
</TABLE>
The following table summarizes accumulated other comprehensive income for
the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
<S> <C> <C> <C>
Balance, beginning of year $ 100,510 $ 160,457 $ 92,383
Change during period (62,698) (59,947) 68,074
--------------- --------------- ---------------
Balance, end of year 37,812 100,510 160,457
--------------- --------------- ---------------
MINIMUM PENSION LIABILITY ADJUSTMENT:
Balance, beginning of year (6,219) (4,693) (2,592)
Change during period (1,488) (1,526) (2,101)
--------------- --------------- ---------------
Balance, end of year (7,707) (6,219) (4,693)
--------------- --------------- ---------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year 94,291 155,764 89,791
Change during period (64,186) (61,473) 65,973
--------------- --------------- ---------------
Balance, end of year $ 30,105 $ 94,291 $ 155,764
=============== =============== ===============
</TABLE>
80
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix offers a wide range of financial products and services. These
businesses have been grouped into three reportable segments.
The Individual segment includes the individual life insurance and annuity
products including participating whole life, universal life, variable life,
term life and variable annuities.
The Investment Management segment includes retail and institutional mutual
fund management and distribution including open-end funds, closed-end funds
and wrap accounts.
Corporate and Other contains several smaller subsidiaries and investment
activities which do not meet the thresholds of reportable segments as
defined in SFAS No. 131. They include venture capital investments,
international operations, trust operations and other investments.
The majority of Phoenix's revenue is derived in the United States. Revenue
derived from outside the United States is not material and revenue derived
from any single customer does not exceed ten percent of total consolidated
revenues.
The accounting policies of the segments are the same as those described in
Note 2 - "Summary of Significant Accounting Policies." Phoenix evaluates the
performance of each operating segment based on profit or loss from
operations before income taxes and nonrecurring items. Phoenix does not
include certain nonrecurring items to the segments. They are reported as
unallocated items and include expenses associated with various lawsuits and
legal disputes, postretirement medical expenses associated with an early
retirement program and realized gains associated with the sales of
subsidiaries. See Note 8 - " Pension and Other Postretirement and
Postemployment Benefit Plans."
Included in the following tables is certain information with respect to
Phoenix's operating segments as of and for each of the years ended December
31, 1999, 1998 and 1997, as well as amounts not allocated to the segments
which was described previously.
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998 1997
(IN MILLIONS)
TOTAL ASSETS
<S> <C> <C> <C>
Individual $ 17,990.3 $ 16,919.5 $ 15,709.8
Investment Management 747.4 591.9 647.9
Corporate & Other 1,357.8 876.2 1,124.4
Discontinued operations 187.6 283.8 250.9
--------------- --------------- ---------------
Total 20,283.1 18,671.4 17,733.0
=============== =============== ===============
DEFERRED POLICY ACQUISITION COSTS
Individual $ 1,306.7 $ 1,049.9 $ 1,016.3
=============== =============== ===============
</TABLE>
81
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
PREMIUMS, INSURANCE AND INVESTMENT PRODUCT FEES
<S> <C> <C> <C>
Individual $ 1,361.4 $ 1,416.7 $ 1,259.2
Investment Management 293.9 231.0 140.7
Corporate & Other 115.2 41.1 84.1
Less: inter-segment revenues (44.5) (40.7) (40.3)
---------------- ---------------- ---------------
Total 1,726.0 1,648.1 1,443.7
---------------- ---------------- ---------------
INVESTMENT INCOME
Individual 768.2 768.5 640.3
Investment Management 6.0 2.7 3.0
Corporate & Other 176.1 80.4 71.1
---------------- ---------------- ---------------
Total 950.3 851.6 714.4
---------------- ---------------- ---------------
NET REALIZED INVESTMENT GAINS
Individual 15.9 (17.8) 65.7
Corporate & Other 3.9 10.5 45.3
Gains on sale of subsidiaries 16.0 65.5
---------------- ---------------- ---------------
Total 35.8 58.2 111.0
---------------- ---------------- ---------------
POLICY BENEFITS AND DIVIDENDS
Individual 1,611.3 1,718.2 1,499.7
Corporate & Other 101.6 36.6 45.8
---------------- ---------------- ---------------
Total 1,712.9 1,754.8 1,545.5
---------------- ---------------- ---------------
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS
Individual 146.6 137.7 102.6
---------------- ---------------- ---------------
Total 146.6 137.7 102.6
---------------- ---------------- ---------------
AMORTIZATION OF GOODWILL AND INTANGIBLES
Individual 4.2 0.3 0.5
Investment Management 30.3 22.0 9.1
Corporate & Other 3.5 0.8 (0.2)
---------------- ---------------- ---------------
Total 38.0 23.1 9.4
---------------- ---------------- ---------------
INTEREST EXPENSE
Investment Management 18.9 14.7 3.6
Corporate & Other 13.8 11.2 20.7
---------------- ---------------- ---------------
Total 32.7 25.9 24.3
---------------- ---------------- ---------------
OTHER OPERATING EXPENSES
Individual 289.4 268.1 234.6
Investment Management 203.5 156.1 101.9
Corporate & Other 65.0 40.7 69.2
Unallocated amounts 7.2 4.5 1.7
Less: inter segment expenses (44.5) (40.7) (40.4)
---------------- ---------------- ---------------
Total 520.6 428.7 367.0
---------------- ---------------- ---------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST
Individual 94.0 43.2 127.9
Investment Management 47.2 40.8 29.2
Corporate & Other 111.3 42.7 64.9
Unallocated amounts & inter-segment eliminations 8.8 61.0 (1.7)
---------------- ---------------- ---------------
Total $ 261.3 $ 187.7 $ 220.3
================ ================ ===============
</TABLE>
82
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units which in prior years had been reflected as reportable business
segments: the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. The discontinuation of these business units resulted from the
sale of several operations, a signed agreement to sell one of the operations
and the implementation of plans to withdraw from the remaining businesses.
REINSURANCE OPERATIONS
During 1999, Phoenix completed a comprehensive strategic review of its life
reinsurance segment and decided to exit these operations through a
combination of sale, reinsurance and placement of certain components into
run-off. Accordingly, Phoenix estimated sales proceeds, reinsurance premiums
and net claims run-off, resulting in the recognition of a $173 million
pre-tax loss ($113 million after-tax loss) on the disposal of life
reinsurance discontinued operations. The life reinsurance segment consisted
primarily of individual life reinsurance operations as well as group
personal accident and group health reinsurance business. The significant
components of the loss on the disposal of life reinsurance discontinued
operations in 1999 were as follows:
On August 1, 1999, Phoenix sold its individual life reinsurance operations
and certain group health reinsurance business to Employers Reinsurance
Corporation for $130 million. The transaction was structured as a
reinsurance and asset sale transaction, resulting in a pre-tax gain of $113
million. The pre-tax income from operations for the seven months prior to
disposal was $19 million.
On June 30, 1999, PM Holdings sold 100% of the common stock of Financial
Administrative Services, Inc. (FAS), its third-party administration
subsidiary, to CYBERTEK, a wholly-owned subsidiary of Policy Management
Systems Corporation. Proceeds from the sale were $8.0 million for the common
stock plus $1.0 million for a covenant not-to-compete, resulting in an
after-tax gain of $2.0 million.
Phoenix retained ownership of the preferred stock of FAS, which under the
terms of the agreement, CYBERTEK will purchase in six equal annual
installments commencing March 31, 2001 through March 31, 2006. The purchase
price will be determined annually based upon earnings, but in total, will
range from a minimum of $4.0 million to a maximum of $16.0 million.
During 1999, Phoenix placed the remaining group personal accident and group
health reinsurance operations into run-off. Management has adopted a formal
plan to terminate the related treaties as early as contractually permitted
and is not entering into any new contracts. Based upon the most recent
information available, Phoenix reviewed the run-off block and estimated the
amount and timing of future net premiums, claims and expenses. Consequently,
Phoenix increased reserve estimates on the run-off block by $180 million. In
addition, as part of the exit strategy, Phoenix purchased finite aggregate
excess of loss reinsurance to further protect Phoenix from unfavorable
results in the run-off block. The finite reinsurance is subject to an
aggregate retention of $100 million on the run-off block. Phoenix may
commute the agreement at any time after September 30, 2004, subject to
automatic commutation effective September 30, 2019. Phoenix paid an initial
premium of $130 million.
The additional estimated reserves and finite reinsurance coverage are
expected to cover the run-off of the business; however, the nature of the
underlying risks is such that the claims may take years to reach the
reinsurers involved. Therefore, Phoenix expects to pay claims out of
existing estimated reserves over a number of years as the level of business
diminishes.
83
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Additionally, certain group personal accident reinsurance business has
become the subject of disputes concerning the placement of the business with
reinsurers and the recovery of the reinsurance. This business primarily
concerns certain occupational accident reinsurance "facilities" and a
reinsurance pool (the Unicover Pool) underwritten and managed by Unicover
Managers, Inc. (Unicover). Phoenix participated as a reinsurer in the
Unicover Pool. The Unicover Pool and "facilities" were reinsured in large
part by a reinsurance facility underwritten and managed by Centaur
Underwriting Limited (Centaur) in which Phoenix also participated. Phoenix
terminated its participation in the Centaur facility effective October 1,
1998 and in the Unicover Pool effective March 1, 1999. However, claims
arising from business underwritten while Phoenix was a participant continue
to run off. On September 21, 1999, Phoenix initiated arbitration proceedings
seeking to rescind certain contracts arising from its participation in the
Centaur facility with respect to reinsurance of the Unicover business. In
January 2000, Phoenix settled two Unicover-related matters (see Note 21 -
"Subsequent Events"). A substantial portion of the risk associated with the
Unicover Pool and "facilities" and the Centaur program was further
retroceded by Phoenix to other unaffiliated insurance entities, providing
Phoenix with significant security. Certain of these retrocessionaires have
given notice that they challenge their obligations under their contracts and
are in arbitration or litigation with Phoenix.
Additionally, certain group personal accident excess of loss reinsurance
contracts created in the London market during 1994 - 1997 have become the
subject of disputes concerning the placement of the business with reinsurers
and the recovery of reinsurance. Several arbitration proceedings are
currently pending.
Given the uncertainty associated with litigation and other dispute
resolution proceedings, and the expected long term development of net claims
payments, the estimated amount of the loss on disposal of life reinsurance
discontinued operations may differ from actual results. However, it is
management's opinion, after consideration of the provisions made in these
financial statements, as described above, that future developments will not
have a material effect on Phoenix's consolidated financial position.
PROPERTY AND CASUALTY BROKERAGE OPERATIONS
On July 1, 1999, PM Holdings sold its property and casualty brokerage
business to Hilb, Rogal and Hamilton Company (HRH) for $48.1 million
including $0.2 million for a covenant not-to-compete. Total proceeds
consisted of $32.0 million in convertible debentures, $15.9 million for
865,042 shares of HRH common stock, valued at $18.38 per share on the sale
date, and $0.2 million in cash. The pre-tax gain realized on the sale was
$40.1 million. The HRH common stock is classified as common stock and the
convertible debentures are classified as bonds in the Consolidated Balance
Sheet. As of December 31, 1999 Phoenix owns 7% of the outstanding HRH common
stock, 15% on a diluted basis.
REAL ESTATE MANAGEMENT OPERATIONS
On March 31, 1999, Phoenix sold its real estate management subsidiary,
Phoenix Realty Advisors, to Henderson Investors International Holdings, B.V.
for $7.9 million in cash. The pre-tax gain realized on this transaction was
$7.1 million.
84
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GROUP INSURANCE OPERATIONS
On December 9, 1999, Phoenix signed a definitive agreement to sell its Group
Life and Health business, including five companies, Phoenix American Life,
Phoenix Dental Services, Phoenix Group Services, California Benefits and
Clinical Disability Management, to GE Financial Assurance Holdings, Inc.
Proceeds from the sale are estimated to be $285 million, including cash of
$240 million and 3.1% of the common stock of GE Life and Annuity Assurance
Company. Phoenix expects the transaction to be completed in the second
quarter of 2000, subject to regulatory approval.
The assets and liabilities of the discontinued operations have been excluded
from the assets and liabilities of continuing operations and separately
identified on the Consolidated Balance Sheet. Net assets of the discontinued
operations totaled $187.6 million and $283.8 million as of December 31, 1999
and 1998, respectively. Asset and liability balances of the continuing
operation as of December 31, 1998, have been restated to conform with the
current year presentation. Likewise, the Consolidated Statement of Income,
Comprehensive Income and Equity has been restated for 1998 and 1997 to
exclude the operating results of discontinued operations from continuing
operations. The operating results of discontinued operations and the gain or
loss on disposal are presented below.
<TABLE>
<CAPTION>
GAIN (LOSS) FROM OPERATIONS OF YEAR ENDED DECEMBER 31,
DISCONTINUED OPERATIONS 1999 1998 1997
(IN THOUSANDS)
Revenues:
<S> <C> <C> <C>
Reinsurance Operations $ 306,671 $ 163,503
Group Insurance Operations $ 453,813 503,825 483,956
Property and Casualty Brokerage Operations 25,968 72,579 64,093
Real Estate Management 1,189 12,707 15,319
--------------- -------------- ---------------
Total revenues 480,970 895,782 726,871
--------------- -------------- ---------------
Gain (loss) from operations:
Reinsurance Operations 14,081 10,611
Group Insurance Operations 28,672 29,212 31,686
Property and Casualty Brokerage Operations 1,534 2,515 (19,911)
Real Estate Management (2,645) (4,037) (2,616)
--------------- -------------- ---------------
Gain from discountinued operations before income
taxes 27,561 41,771 19,770
Income taxes 10,006 16,759 12,522
--------------- -------------- ---------------
Gain from discontinued operations, net of taxes $ 17,555 $ 25,012 $ 7,248
=============== ============== ===============
</TABLE>
85
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
YEAR ENDED
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS DECEMBER 31, 1999
(IN THOUSANDS)
(Loss) gain on disposal:
Reinsurance Operations $ (173,061)
Property and Casualty Brokerage Operations 40,131
Real Estate Management 5,870
--------------
Loss on disposal of discontinued operations before
income taxes (127,060)
Income taxes (55,076)
--------------
Loss on disposal of discontinued operations, net of
income taxes $ (71,984)
--------------
12. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by Phoenix, are stated at depreciated cost. Real
estate occupied by Phoenix was $101.7 million and $106.7 million at December
31, 1999 and 1998, respectively. Phoenix provides for depreciation using
straight-line and accelerated methods over the estimated useful lives of the
related assets which generally range from five to forty years. Accumulated
depreciation and amortization was $182.3 million and $161.2 million at
December 31, 1999 and 1998, respectively.
Rental expenses for operating leases, principally with respect to buildings,
amounted to $16.3 million, $16.9 million and $16.9 million in 1999, 1998,
and 1997, respectively, for continuing operations. Future minimum rental
payments under non-cancelable operating leases for continuing operations
were approximately $40.2 million as of December 31, 1999, payable as
follows: 2000 - $13.5 million; 2001 - $10.5 million; 2002 - $7.3 million;
2003 - $5.1 million; 2004 - $2.8 million; and $1.0 million thereafter.
13. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix assumes and
cedes reinsurance as a means of diversifying underwriting risk. For direct
issues, the maximum of individual life insurance retained by Phoenix on any
one life is $8 million for single life and joint first-to-die policies and
to $10 million for joint last-to-die policies, with excess amounts ceded to
reinsurers. Phoenix reinsures 80% of the mortality risk on the inforce block
of the Confederation Life business acquired on December 31, 1997, and 90% of
the mortality risk on certain new issues of term and universal life
products. In addition, Phoenix entered into a separate reinsurance agreement
on October 1, 1998 to reinsure 80% of the mortality risk on a substantial
portion of its otherwise retained individual life insurance business. In
1999, Phoenix reinsured the mortality risk on the remaining 20% of this
business. Amounts recoverable from reinsurers are estimated in a manner
consistent with the claim liability associated with the reinsured policy.
86
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,762,359 $ 1,719,393 $ 1,592,800
Reinsurance assumed 416,194 505,262 329,927
Reinsurance ceded (537,847) (371,854) (282,121)
--------------- ---------------- ---------------
Net premiums 1,640,706 1,852,801 1,640,606
Less net premiums of discontinued operations (506,499) (698,071) (564,449)
--------------- ---------------- ---------------
Net premiums of continuing operations $ 1,134,207 $ 1,154,730 $ 1,076,157
=============== ================ ===============
Direct policy and contract claims incurred $ 707,105 $ 728,062 $ 629,112
Reinsurance assumed 563,807 433,242 410,704
Reinsurance ceded (500,282) (407,780) (373,127)
--------------- ---------------- ---------------
Net policy and contract claims incurred 770,630 753,524 666,689
Less net incurred claims of discontinued operations (552,423) (471,688) (422,373)
--------------- ---------------- ---------------
Net policy and contract claims incurred
of continuing operations $ 218,207 $ 281,836 $ 244,316
=============== ================ ==============
Direct life insurance in force $ 131,052,050 $ 121,442,041 $ 120,394,664
Reinsurance assumed 139,649,850 110,632,110 84,806,585
Reinsurance ceded (207,192,046) (135,817,986) (74,764,639)
--------------- ---------------- ---------------
Net insurance in force 63,509,854 96,256,165 120,436,610
Less insurance in force of discontinued operations (1,619,452) (24,330,166) (13,811,408)
--------------- ---------------- ---------------
Net insurance in force of continuing operations $ 61,890,402 $ 71,925,999 $ 116,625,202
=============== ================ ===============
</TABLE>
Irrevocable letters of credit aggregating $36.2 million at December 31, 1999
have been arranged with United States commercial banks in favor of Phoenix
to collateralize the ceded reserves.
14. PARTICIPATING LIFE INSURANCE
Participating life insurance in force was 66.9% and 72.3% of the face value
of total individual life insurance in force at December 31, 1999 and 1998,
respectively. The premiums on participating life insurance policies were
76.8%, 79.4% and 83.5% of total individual life insurance premiums in 1999,
1998, and 1997, respectively.
87
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
15. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 1,049,934 $ 1,016,295 $ 908,616
Acquisition cost deferred 143,110 164,608 288,281
Amortized to expense during the year (146,603) (137,663) (102,617)
Adjustment to net unrealized investment
gains (losses) included in other
comprehensive income 260,287 6,694 (77,985)
------------------ ----------------- ------------------
Balance at end of year $ 1,306,728 $ 1,049,934 $ 1,016,295
================== ================= ==================
</TABLE>
Amortized to expense during the year for 1999 includes a $6.3 million
adjustment due to worse than expected persistency in one of the variable
annuity product lines and a $6.9 million adjustment to traditional life due
to an adjustment to death claims used in determining DAC amortization.
16. MINORITY INTEREST
Phoenix's interests in Phoenix Investment Partners and PFG Holdings, through
its wholly-owned subsidiary PM Holdings, are represented by ownership of
approximately 60% and 67%, respectively, of the outstanding shares of common
stock at December 31, 1999. Earnings and equity attributable to minority
shareholders are included in minority interest in the consolidated financial
statements.
17. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Other than debt securities being held-to-maturity, financial instruments
that are subject to fair value disclosure requirements (insurance contracts
are excluded) are carried in the consolidated financial statements at
amounts that approximate fair value. The fair values presented for certain
financial instruments are estimates which, in many cases, may differ
significantly from the amounts which could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of
fair value are based on discounted cash flow analysis which utilize current
interest rates for similar financial instruments which have comparable terms
and credit quality.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
88
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DEBT SECURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
debt securities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
DERIVATIVE INSTRUMENTS
Phoenix's derivative instruments include interest rate swap, cap and floor
agreements, swaptions and foreign currency swap agreements. Fair values for
these contracts are based on current settlement values. These values are
based on brokerage quotes that utilize pricing models or formulas based upon
current assumptions for the respective agreements.
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values are calculated as the present value of scheduled payments, with
the discount based upon the Treasury rate comparable for the remaining loan
duration, plus a spread of between 130 and 800 basis points, depending on
the internal quality rating of the loan. For loans in foreclosure or
default, values were determined assuming principal recovery was the lower of
the loan balance or the estimated value of the underlying property.
POLICY LOANS
Fair values are estimated as the present value of loan interest and policy
loan repayments discounted at the ten year Treasury rate. Loan repayments
were assumed only to occur as a result of anticipated policy lapses, and it
was assumed that annual policy loan interest payments were made at the
guaranteed loan rate less 17.5 basis points. Discounting was at the ten year
Treasury rate, except for policy loans with a variable policy loan rate.
Variable policy loans have an interest rate that is reset annually based
upon market rates and therefore, book value is a reasonable approximation of
fair value.
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair value of deferred annuities and supplementary contracts without
life contingencies with an interest guarantee of one year or less is valued
at the amount of the policy reserve. In determining the fair value of
deferred annuities and supplementary contracts without life contingencies
with interest guarantees greater than one year, a discount rate equal to the
appropriate Treasury rate, plus 150 basis points, was used to determine the
present value of the projected account value of the policy at the end of the
current guarantee period.
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest guarantees of less 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.
89
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES PAYABLE
The fair value of notes payable is determined based on contractual cash
flows discounted at market rates.
FAIR VALUE SUMMARY
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
Financial assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 187,610 $ 187,610 $ 115,187 $ 115,187
Short-term investments 133,367 133,367 185,983 185,983
Debt securities 7,496,948 7,400,067 7,712,865 7,796,389
Equity securities 461,613 461,613 301,649 301,649
Mortgage loans 716,831 680,569 797,343 831,919
Derivative instruments (13,211) 12,316
Policy loans 2,042,558 2,040,497 2,008,260 2,122,389
----------------- ----------------- ----------------- -----------------
Total financial assets $ 11,038,927 $ 10,890,512 $ 11,121,287 $ 11,365,832
================= ================= ================= =================
Financial liabilities:
Policy liabilities $ 709,696 $ 709,357 $ 783,400 $ 783,400
Notes payable 499,392 490,831 386,575 395,744
----------------- ----------------- ----------------- -----------------
Total financial liabilities $ 1,209,088 $ 1,200,188 $ 1,169,975 $ 1,179,144
================= ================= ================= ================
</TABLE>
18. CONTINGENCIES
LITIGATION
Certain group personal accident reinsurance business has become the subject
of disputes concerning the placement of the business with reinsurers and the
recovery of the reinsurance (see Note 11 - "Discontinued Operations" and
Note 21 - "Subsequent Events").
19. STATUTORY FINANCIAL INFORMATION
The insurance subsidiaries are required to file annual statements with state
regulatory authorities prepared on an accounting basis prescribed or
permitted by such authorities. Except for the accounting policy involving
federal income taxes described next, there were no material practices not
prescribed by the State of New York Insurance Department (the Insurance
Department), as of December 31, 1999, 1998 and 1997. Phoenix's statutory
federal income tax liability is principally based on estimates of federal
income tax due. A deferred income tax liability has also been established
for estimated taxes on unrealized gains for common stock and venture capital
equity partnerships. Current New York law does not allow the recording of
deferred income taxes. Phoenix has received approval from the Insurance
Department for this practice.
90
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 131,286 $ 108,652 $ 66,599
Deferred policy acquisition costs, net (28,099) 18,538 48,821
Future policy benefits (23,686) (53,847) (9,145)
Pension and postretirement expenses (8,638) (17,334) (7,955)
Investment valuation allowances 15,141 107,229 87,920
Interest maintenance reserve (7,232) 1,415 17,544
Deferred income taxes 3,919 (39,983) (36,250)
Other, net 6,191 12,459 2,118
--------------- --------------- ---------------
Net income, as reported $ 88,882 $ 137,129 $ 169,652
=============== =============== ===============
</TABLE>
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to equity as reported
in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $ 1,427,333 $ 1,205,635
Deferred policy acquisition costs, net 1,231,217 1,259,316
Future policy benefits (478,184) (465,268)
Pension and postretirement expenses (193,007) (174,273)
Investment valuation allowances (206,531) 34,873
Interest maintenance reserve 24,767 35,303
Deferred income taxes 65,595 (25,593)
Surplus notes (159,444) (157,500)
Other, net 49,505 24,062
------------------- -------------------
Equity, as reported $ 1,761,251 $ 1,736,555
=================== ===================
</TABLE>
The Insurance Department recognizes only statutory accounting practices for
determining and reporting the financial condition and results of operations
of an insurance company, for determining its solvency under New York
Insurance Law, and for determining whether its financial condition warrants
the payment of a dividend to its policyholders. No consideration is given by
the Insurance Department to financial statements prepared in accordance with
generally accepted accounting principles in making such determinations.
91
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
20. PRIOR PERIOD ADJUSTMENTS
In 1999, Phoenix revised the accounting for venture capital partnerships to
include unrealized capital gains and losses on investments held in the
partnerships. These gains and losses are recorded in investment income.
Opening retained earnings at December 31, 1996 has been increased by $17.6
million. The consolidated balance sheet as of December 31, 1998 was revised
by increasing the following balances: other invested assets by $50.6
million, deferred income taxes by $17.7 million and retained earnings by
$32.9 million. The effect on the Consolidated Statement of Income,
Comprehensive Income and Equity was an increase in net income of $12.4
million and $2.9 million for the years ended 1998 and 1997, respectively.
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.
21. SUBSEQUENT EVENTS
OCCUPATIONAL ACCIDENT REINSURANCE
On January 21, 2000, Phoenix, in connection with its participation in the
Centaur facility, and two other companies completed a settlement agreement
with Reliance Insurance Company (Reliance) with respect to certain
reinsurance contracts covering occupational accident business reinsured by
Reliance as a Unicover-managed "facility." The Reliance business was the
largest portion of occupational accident reinsurance business underwritten
by Unicover. Under the terms of the settlement agreement, Phoenix ended the
contracts for a total payment of $115.0 million.
On January 13, 2000, Phoenix and four other companies, in connection with
their participation in the Unicover Pool, completed a settlement agreement
with EBI Indemnity Company and other affiliates of the Orion Group (EBI)
with respect to certain reinsurance contracts covering occupational accident
business which EBI ceded to the Unicover Pool. These contracts represented
the largest source of premium to the Unicover Pool. Under the terms of the
settlement agreement, the Unicover Pool members ended the contracts for a
total payment of $43.0 million, of which Phoenix's share was approximately
$10.0 million.
Phoenix included the cost of these settlements, net of reinsurance, in its
estimate of the loss on discontinued life reinsurance operations. See Note
11 - "Discontinued Operations."
92
<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, 1999.
Example:
Value of hypothetical pre-existing account with exactly one
unit at the beginning of the period:...................... 1.561075
Value of the same account (excluding capital changes) at the
end of the 7-day period:.................................. 1.562397
Calculation:
Ending account value ..................................... 1.562397
Less beginning value ..................................... 1.561075
Net change in account value .............................. 0.001322
Base period return:
(adjusted change/beginning account value) ................ 0.000847
Current yield = return x (365/7)............................ 4.42%
Effective yield = [(1 + return)](365/7) - 1................. 4.51%
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.
93
<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, 1999(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SERIES INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series........................... 5/1/90 25.92% 17.45% N/A 11.17%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series................................ 9/17/96 47.14% N/A N/A -2.77%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series............................. 12/15/99 N/A N/A N/A 2.31%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series............. 5/1/95 1.79% N/A N/A 8.64%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series.......................... 12/31/82 26.07% 22.84% 18.05% 18.46%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series............................. 3/2/98 28.60% N/A N/A 29.55%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series................... 12/15/99 N/A N/A N/A -1.68%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series............................. 10/8/82 1.85% 3.45% 3.49% 4.83%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 12/31/82 2.46% 7.63% 7.52% 8.36%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series........................... 3/2/98 20.84% N/A N/A 16.53%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 7/14/92 15.59% N/A N/A 20.46%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series.............................. 12/15/99 N/A N/A N/A 5.64%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series............................ 12/15/99 N/A N/A N/A -0.19%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series..................................... 12/15/99 N/A N/A N/A 5.79%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series...................... 12/15/99 N/A N/A N/A 6.10%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series................................ 5/1/92 8.41% 14.65% N/A 10.92%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series....................... 3/2/98 13.77% N/A N/A 18.12%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series.................... 9/17/84 8.11% 14.16% 11.73% 12.14%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series............................ 3/2/98 -13.04% N/A N/A -13.92%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series............................ 3/2/98 41.19% N/A N/A 33.84%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series........................... 1/29/96 50.97% N/A N/A 29.08%
- ---------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund....................................... 8/22/97 24.07% N/A N/A 14.71%
- ---------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II................ 3/28/94 3.47% 3.95% N/A 3.69%
- ---------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II.............................. 3/1/94 -0.60% 8.81% N/A 6.54%
- ---------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio............................................ 11/30/99 N/A N/A N/A 23.54%
- ---------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2)..................... 11/2/98 6.27% N/A N/A 7.70%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2)..................... 11/28/88 19.20% 15.06% 11.29% 11.27%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2(2)...... 9/27/96 49.40% N/A N/A -6.34%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2).................. 11/3/88 25.27% 15.53% 11.77% 11.63%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2(2)........... 5/11/92 19.85% 15.14% N/A 13.49%
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty............................................ 2/1/99 N/A N/A N/A 79.63%
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap.................................. 5/1/95 120.87% N/A N/A 36.87%
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty................................................... 2/1/99 N/A N/A N/A 31.18%
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap........................................... 5/1/95 21.59% N/A N/A 24.85%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Performance data quoted represent the investment return of the appropriate
series adjusted for Flex Edge charges had the Subaccount started on the
inception date of the appropriate series. 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. The investment return and principal value
of the variable contract will fluctuate so that the accumulated value, when
redeemed, may be worth more or less than the original cost.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that
date represents the historical results of Class 1 shares. Performance since
that date reflects Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%. The manager is
limiting fund expenses, which increases total returns.
94
<PAGE>
Advertisements, sales literature and other communications may contain
information about any series' or advisor'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 AverageSM, First Boston High Yield Index and Salomon Brothers
Corporate and Government Bond Indices.
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(SM)
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.
95
<PAGE>
ANNUAL TOTAL RETURN(1)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Series 1983 1984 1985 1986 1987 1988 1989 1990 1991
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A N/A 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-Bankers Trust Dow 30 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 N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 31.71% 9.67% 33.71% 19.39% 5.97% 2.98% 34.43% 3.21% 41.46%
- ------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
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-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index
Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced 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-Oakhurst Strategic Allocation Series N/A N/A 26.20% 14.65% 11.55% 1.42% 18.37% 5.05% 28.14%
- ------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
EAFE(R) 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 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
- ------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A 12.13% -8.95% 26.42%
- ------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities
Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A 13.48% -11.99% 26.22%
- ------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund --
Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
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 U.S. Small Cap N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL TOTAL RETURN(1) (continued)
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
Series 1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series -13.61% 37.33% -0.73% 8.72% 17.71% 11.16% 26.92% 28.48%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A -32.94% -5.21% 49.78%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities N/A N/A N/A N/A 32.10% 21.09% -21.83% 3.95%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 9.30% 18.75% 0.66% 29.85% 11.69% 20.12% 28.98% 28.65%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A 31.12%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 2.65% 2.06% 3.01% 4.86% 4.19% 4.35% 4.26% 3.99%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income
Series 9.12% 14.99% -6.21% 22.56% 11.52% 10.21% -4.91% 4.62%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A 23.35%
- ------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index
Series N/A N/A N/A N/A N/A N/A 30.64% 17.90%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series 8.99% 7.75% -3.61% 22.37% 9.68% 17.00% 18.07% 10.69%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A 16.08%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 9.68% 10.12% -2.19% 17.27% 8.18% 19.78% 19.84% 10.38%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A -11.00%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A 44.49%
- ------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A 16.25% 43.55% 53.77%
- ------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund N/A N/A N/A N/A N/A N/A 20.64% 26.61%
- ------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities N/A N/A N/A 7.90% 3.37% 7.71% 6.80% -1.38%
- ------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A 19.42% 13.40% 12.92% 1.88% 1.50%
- ------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A 8.43%
- ------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2) 6.97% 24.86% -4.00% 21.29% 17.64% 14.37% 5.27% 21.58%
- ------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities
Fund -- Class 2(2) N/A N/A N/A N/A N/A -29.95%-21.69% 52.10%
- ------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2) 6.02% 32.68% -3.25% 23.97% 21.17% 10.75% 0.24% 27.75%
- ------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund --
Class 2(2) N/A 45.85% -3.27% 14.56% 22.77% 12.76% 8.17% 22.27%
- ------------------------------------------------------------------------------------------------------------
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 31.15% -2.24% 15.41% 124.68%
- ------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap N/A N/A N/A N/A 45.64% 28.41% 7.83% 24.08%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
1 Returns are net of mortality and expense risk charges and investment
management fees for the subaccounts. Percent change doesn't include the effect
of the issue expense and monthly administrative charges. Performance data
quoted represent the investment return of the appropriate series adjusted for
Flex Edge charges had the subaccount started on the inception date of the
appropriate series.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that
date represents the historical results of Class 1 shares. Performance since
that date reflects Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%. The manager is
limiting fund expenses, which increases total returns.
These rates of return are not an estimate or guarantee of future performance.
96
<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%
97
<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 .75%
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 .22%. All other Fund expenses, except capital items such as
brokerage commissions, are paid by the Advisor 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, 1999,
average total operating expenses for the Series would have been approximately
.97% 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 -1.76%, 4.19% and 10.15%, 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.
98
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
<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 1,050 610 0 100,000 657 0 100,000 704 0 100,000
2 1,000 2,153 1,353 441 100,000 1,490 577 100,000 1,632 720 100,000
4 1,000 4,526 2,783 1,753 100,000 3,245 2,214 100,000 3,765 2,734 100,000
5 1,000 5,802 3,470 2,439 100,000 4,168 3,138 100,000 4,986 3,956 100,000
6 1,000 7,142 4,137 3,230 100,000 5,123 4,216 100,000 6,325 5,418 100,000
7 1,000 8,549 4,781 3,998 100,000 6,108 5,325 100,000 7,790 7,007 100,000
8 1,000 10,027 5,403 4,808 100,000 7,123 6,528 100,000 9,394 8,798 100,000
9 1,000 11,578 6,001 5,594 100,000 8,169 7,762 100,000 11,150 10,743 100,000
10 1,000 13,207 6,577 6,577 100,000 9,248 9,248 100,000 13,075 13,075 100,000
11 1,000 14,917 7,129 7,129 100,000 10,359 10,359 100,000 15,186 15,186 100,000
12 1,000 16,713 7,651 7,651 100,000 11,499 11,499 100,000 17,479 17,479 100,000
13 1,000 18,599 8,142 8,142 100,000 12,668 12,668 100,000 20,027 20,027 100,000
14 1,000 20,579 8,602 8,602 100,000 13,865 13,865 100,000 22,800 22,800 100,000
15 1,000 22,657 9,027 9,027 100,000 15,089 15,089 100,000 25,840 25,840 100,000
16 1,000 24,840 9,417 9,417 100,000 16,342 16,342 100,000 29,176 29,176 100,000
17 1,000 27,132 9,771 9,771 100,000 17,622 17,622 100,000 32,839 32,839 100,000
18 1,000 29,539 10,085 10,085 100,000 18,930 18,930 100,000 36,865 36,865 100,000
19 1,000 32,066 10,357 10,357 100,000 20,264 20,264 100,000 41,292 41,292 100,000
20 1,000 34,719 10,581 10,581 100,000 21,619 21,619 100,000 46,164 46,164 100,000
@ 62 10,480 10,480 100,000 31,620 31,620 100,000 97,643 97,643 124,984
@ 65 1,000 69,761 9,253 9,253 100,000 36,090 36,090 100,000 132,635 132,635 161,815
</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 1.77%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of .97% 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
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
<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 1,050 527 0 100,000 571 0 100,000 615 0 100,000
2 1,000 2,153 1,186 274 100,000 1,312 400 100,000 1,444 532 100,000
3 1,000 3,310 1,824 821 100,000 2,075 1,071 100,000 2,347 1,344 100,000
4 1,000 4,526 2,440 1,410 100,000 2,859 1,829 100,000 3,332 2,301 100,000
5 1,000 5,802 3,034 2,003 100,000 3,664 2,634 100,000 4,404 3,374 100,000
6 1,000 7,142 3,604 2,697 100,000 4,490 3,583 100,000 5,573 4,666 100,000
7 1,000 8,549 4,148 3,365 100,000 5,335 4,552 100,000 6,846 6,062 100,000
8 1,000 10,027 4,667 4,072 100,000 6,201 5,606 100,000 8,233 7,638 100,000
9 1,000 11,578 5,158 4,751 100,000 7,085 6,678 100,000 9,746 9,339 100,000
10 1,000 13,207 5,623 5,623 100,000 7,989 7,989 100,000 11,397 11,397 100,000
11 1,000 14,917 6,057 6,057 100,000 8,911 8,911 100,000 13,198 13,198 100,000
12 1,000 16,713 6,461 6,461 100,000 9,849 9,849 100,000 15,164 15,164 100,000
13 1,000 18,599 6,832 6,832 100,000 10,804 10,804 100,000 17,312 17,312 100,000
14 1,000 20,579 7,169 7,169 100,000 11,775 11,775 100,000 19,660 19,660 100,000
15 1,000 22,657 7,470 7,470 100,000 12,759 12,759 100,000 22,228 22,228 100,000
16 1,000 24,840 7,733 7,733 100,000 13,757 13,757 100,000 25,040 25,040 100,000
17 1,000 27,132 7,952 7,952 100,000 14,763 14,763 100,000 28,119 28,119 100,000
18 1,000 29,539 8,123 8,123 100,000 15,773 15,773 100,000 31,490 31,490 100,000
19 1,000 32,066 8,240 8,240 100,000 16,782 16,782 100,000 35,186 35,186 100,000
20 1,000 34,719 8,295 8,295 100,000 17,785 17,785 100,000 39,238 39,238 100,000
@ 62 6,443 6,443 100,000 24,174 24,174 100,000 81,927 81,927 104,867
@ 65 1,000 69,761 3,848 3,848 100,000 26,069 26,069 100,000 111,264 111,264 135,743
</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 1.77%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of .97% 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>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
<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 1,050 625 0 100,000 673 0 100,000 720 0 100,000
2 1,000 2,153 1,382 501 100,000 1,521 640 100,000 1,665 784 100,000
3 1,000 3,310 2,120 1,162 100,000 2,398 1,441 100,000 2,700 1,743 100,000
4 1,000 4,526 2,837 1,880 100,000 3,306 2,349 100,000 3,834 2,876 100,000
5 1,000 5,802 3,535 2,578 100,000 4,245 3,287 100,000 5,075 4,118 100,000
6 1,000 7,142 4,213 3,370 100,000 5,215 4,373 100,000 6,436 5,593 100,000
7 1,000 8,549 4,873 4,145 100,000 6,221 5,493 100,000 7,929 7,201 100,000
8 1,000 10,027 5,513 4,960 100,000 7,261 6,708 100,000 9,568 9,015 100,000
9 1,000 11,578 6,137 5,759 100,000 8,341 7,963 100,000 11,370 10,992 100,000
10 1,000 13,207 6,741 6,741 100,000 9,458 9,458 100,000 13,349 13,349 100,000
11 1,000 14,917 7,324 7,324 100,000 10,612 10,612 100,000 15,521 15,521 100,000
12 1,000 16,713 7,882 7,882 100,000 11,802 11,802 100,000 17,904 17,904 100,000
13 1,000 18,599 8,416 8,416 100,000 13,029 13,029 100,000 20,520 20,520 100,000
14 1,000 20,579 8,924 8,924 100,000 14,294 14,294 100,000 23,392 23,392 100,000
15 1,000 22,657 9,406 9,406 100,000 15,598 15,598 100,000 26,549 26,549 100,000
16 1,000 24,840 9,862 9,862 100,000 16,941 16,941 100,000 30,019 30,019 100,000
17 1,000 27,132 10,292 10,292 100,000 18,328 18,328 100,000 33,839 33,839 100,000
18 1,000 29,539 10,698 10,698 100,000 19,760 19,760 100,000 38,047 38,047 100,000
19 1,000 32,066 11,078 11,078 100,000 21,240 21,240 100,000 42,683 42,683 100,000
20 1,000 34,719 11,430 11,430 100,000 22,767 22,767 100,000 47,795 47,795 100,000
@ 62 12,761 12,761 100,000 34,706 34,706 100,000 101,760 101,760 130,253
@ 65 1,000 69,761 12,498 12,498 100,000 40,494 40,494 100,000 138,465 138,465 168,927
</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 1.77%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of .97% 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%.
101
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
<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 1,050 548 0 100,000 593 0 100,000 638 0 100,000
2 1,000 2,153 1,228 347 100,000 1,357 475 100,000 1,491 610 100,000
3 1,000 3,310 1,886 928 100,000 2,142 1,185 100,000 2,421 1,464 100,000
4 1,000 4,526 2,521 1,564 100,000 2,950 1,993 100,000 3,435 2,477 100,000
5 1,000 5,802 3,134 2,176 100,000 3,780 2,823 100,000 4,539 3,581 100,000
6 1,000 7,142 3,722 2,879 100,000 4,632 3,789 100,000 5,743 4,900 100,000
7 1,000 8,549 4,284 3,557 100,000 5,504 4,776 100,000 7,054 6,326 100,000
8 1,000 10,027 4,821 4,268 100,000 6,397 5,844 100,000 8,483 7,930 100,000
9 1,000 11,578 5,333 4,954 100,000 7,313 6,934 100,000 10,045 9,666 100,000
10 1,000 13,207 5,820 5,820 100,000 8,252 8,252 100,000 11,752 11,752 100,000
11 1,000 14,917 6,282 6,282 100,000 9,217 9,217 100,000 13,621 13,621 100,000
12 1,000 16,713 6,719 6,719 100,000 10,206 10,206 100,000 15,668 15,668 100,000
13 1,000 18,599 7,130 7,130 100,000 11,220 11,220 100,000 17,910 17,910 100,000
14 1,000 20,579 7,512 7,512 100,000 12,258 12,258 100,000 20,367 20,367 100,000
15 1,000 22,657 7,867 7,867 100,000 13,322 13,322 100,000 23,064 23,064 100,000
16 1,000 24,840 8,190 8,190 100,000 14,410 14,410 100,000 26,022 26,022 100,000
17 1,000 27,132 8,481 8,481 100,000 15,520 15,520 100,000 29,271 29,271 100,000
18 1,000 29,539 8,737 8,737 100,000 16,653 16,653 100,000 32,840 32,840 100,000
19 1,000 32,066 8,952 8,952 100,000 17,804 17,804 100,000 36,762 36,762 100,000
20 1,000 34,719 9,127 9,127 100,000 18,975 18,975 100,000 41,078 41,078 100,000
@ 62 9,145 9,145 100,000 27,789 27,789 100,000 86,890 86,890 111,219
@ 65 1,000 69,761 8,211 8,211 100,000 31,772 31,772 100,000 118,327 118,327 144,360
</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 1.77%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of .97% 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%.
102
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
<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 1,050 609 0 100,609 655 0 100,656 702 0 100,703
2 1,000 2,153 1,350 437 101,350 1,486 574 101,486 1,628 716 101,629
3 1,000 3,310 2,071 1,067 102,071 2,344 1,341 102,345 2,641 1,638 102,641
4 1,000 4,526 2,772 1,742 102,773 3,231 2,201 103,232 3,749 2,718 103,749
5 1,000 5,802 3,453 2,422 103,453 4,147 3,116 104,147 4,960 3,929 104,960
6 1,000 7,142 4,112 3,205 104,112 5,091 4,184 105,092 6,284 5,377 106,284
7 1,000 8,549 4,748 3,964 104,748 6,063 5,280 106,063 7,730 6,946 107,730
8 1,000 10,027 5,358 4,763 105,359 7,061 6,465 107,061 9,307 8,712 109,308
9 1,000 11,578 5,944 5,536 105,944 8,086 7,678 108,086 11,030 10,622 111,030
10 1,000 13,207 6,504 6,504 106,505 9,138 9,138 109,139 12,911 12,911 112,912
11 1,000 14,917 7,039 7,039 107,039 10,219 10,219 110,219 14,967 14,967 114,967
12 1,000 16,713 7,541 7,541 107,541 11,320 11,320 111,321 17,206 17,206 117,206
13 1,000 18,599 8,009 8,009 108,010 12,442 12,442 112,443 19,645 19,645 119,646
14 1,000 20,579 8,442 8,442 108,442 13,584 13,584 113,584 22,304 22,304 122,305
15 1,000 22,657 8,837 8,837 108,837 14,741 14,741 114,742 25,200 25,200 125,201
16 1,000 24,840 9,192 9,192 109,193 15,914 15,914 115,915 28,355 28,355 128,356
17 1,000 27,132 9,507 9,507 109,508 17,101 17,101 117,101 31,794 31,794 131,795
18 1,000 29,539 9,779 9,779 109,779 18,298 18,298 118,298 35,541 35,541 135,542
19 1,000 32,066 10,001 10,001 110,002 19,500 19,500 119,500 39,622 39,622 139,623
20 1,000 34,719 10,171 10,171 110,171 20,701 20,701 120,701 44,064 44,064 144,065
@ 62 9,504 9,504 109,504 28,596 28,596 128,596 88,319 88,319 188,320
@ 65 1,000 69,761 7,942 7,942 107,943 31,275 31,275 131,275 116,956 116,956 216,956
</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 1.77%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of .97% 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%.
103
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
<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 1,050 526 0 100,526 570 0 100,570 614 0 100,614
2 1,000 2,153 1,182 270 101,183 1,308 396 101,309 1,440 528 101,440
3 1,000 3,310 1,817 813 101,817 2,067 1,063 102,067 2,338 1,334 102,338
4 1,000 4,526 2,428 1,398 102,429 2,845 1,814 102,845 3,314 2,284 103,315
5 1,000 5,802 3,015 1,985 103,016 3,641 2,610 103,641 4,375 3,345 104,376
6 1,000 7,142 3,577 2,670 103,577 4,455 3,548 104,456 5,528 4,621 105,529
7 1,000 8,549 4,111 3,328 104,111 5,285 4,502 105,286 6,779 5,996 106,779
8 1,000 10,027 4,617 4,022 104,618 6,132 5,537 106,132 8,138 7,542 108,138
9 1,000 11,578 5,094 4,687 105,095 6,992 6,585 106,993 9,612 9,205 109,612
10 1,000 13,207 5,542 5,542 105,543 7,868 7,868 107,868 11,214 11,214 111,214
11 1,000 14,917 5,957 5,957 105,958 8,754 8,754 108,754 12,952 12,952 112,952
12 1,000 16,713 6,339 6,339 106,339 9,649 9,649 109,650 14,838 14,838 114,938
13 1,000 18,599 6,684 6,684 106,685 10,553 10,553 110,554 16,884 16,884 116,885
14 1,000 20,579 6,993 6,993 106,994 11,463 11,463 111,464 19,106 19,106 119,106
15 1,000 22,657 7,262 7,262 107,263 12,375 12,375 112,376 21,516 21,516 121,516
16 1,000 24,840 7,489 7,489 107,490 13,288 13,288 113,289 24,132 24,132 124,132
17 1,000 27,132 7,669 7,669 107,670 14,194 14,194 114,195 26,966 26,966 126,967
18 1,000 29,539 7,796 7,796 107,796 15,086 15,086 115,087 30,035 30,035 130,035
19 1,000 32,066 7,863 7,863 107,864 15,957 15,957 115,958 33,355 33,355 133,355
20 1,000 34,719 7,864 7,864 107,865 16,797 16,797 116,798 36,942 36,942 136,942
@ 62 5,494 5,494 105,495 21,009 21,009 121,010 71,425 71,425 171,426
@ 65 1,000 69,761 2,667 2,667 102,668 21,087 21,087 121,088 92,633 92,633 192,633
</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 1.77%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of .97% 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%.
104
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE -- A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
<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 1,050 624 0 100,625 671 0 100,672 719 0 100,719
2 1,000 2,153 1,379 498 101,380 1,518 636 101,518 1,662 780 101,662
3 1,000 3,310 2,113 1,156 102,114 2,391 1,434 102,392 2,692 1,735 102,693
4 1,000 4,526 2,827 1,869 102,827 3,294 2,336 103,294 3,819 2,861 103,819
5 1,000 5,802 3,519 2,562 103,520 4,225 3,267 104,225 5,051 4,093 105,051
6 1,000 7,142 4,190 3,347 104,190 5,185 4,343 105,186 6,398 5,555 106,398
7 1,000 8,549 4,841 4,113 104,841 6,178 5,450 106,179 7,873 7,145 107,873
8 1,000 10,027 5,471 4,918 105,472 7,203 6,650 107,204 9,488 8,935 109,488
9 1,000 11,578 6,085 5,706 106,085 8,265 7,886 108,265 11,260 10,881 111,260
10 1,000 13,207 6,675 6,675 106,676 9,359 9,359 109,359 13,199 13,199 113,200
11 1,000 14,917 7,243 7,243 107,243 10,485 10,485 110,485 15,322 15,322 115,322
12 1,000 16,713 7,784 7,784 107,784 11,624 11,624 111,642 17,643 17,643 117,643
13 1,000 18,599 8,297 8,297 108,298 12,829 12,829 112,829 20,180 20,180 120,180
14 1,000 20,579 8,783 8,783 108,784 14,046 14,046 114,047 22,954 22,954 122,955
15 1,000 22,657 9,240 9,240 109,240 15,293 15,293 115,294 25,988 25,988 125,989
16 1,000 24,840 9,667 9,667 109,667 16,570 16,570 116,570 29,307 29,307 129,307
17 1,000 27,132 10,066 10,066 110,066 17,879 17,879 117,880 32,941 32,941 132,941
18 1,000 29,539 10,437 10,437 110,437 19,222 19,222 119,222 36,921 36,921 136,921
19 1,000 32,066 10,778 10,778 110,779 20,597 20,597 120,598 41,280 41,280 141,281
20 1,000 34,719 11,089 11,089 111,090 22,005 22,005 122,005 46,056 46,056 146,056
@ 62 11,971 11,971 111,972 32,341 32,341 32,341 94,673 94,673 194,673
@ 65 1,000 69,761 11,408 11,408 111,409 36,740 36,740 36,742 126,783 126,783 226,783
</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 1.77%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of .97% 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%.
105
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
THE FLEX EDGE 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 1,050 547 0 100,548 592 0 100,593 637 0 100,638
2 1,000 2,153 1,225 343 101,225 1,353 472 101,354 1,487 606 101,488
3 1,000 3,310 1,879 922 101,880 2,135 1,177 102,135 2,412 1,455 102,413
4 1,000 4,526 2,510 1,553 102,511 2,937 1,980 102,938 3,419 2,461 103,419
5 1,000 5,802 3,116 2,159 103,117 3,759 2,801 103,759 4,512 3,555 104,513
6 1,000 7,142 3,697 2,854 103,698 4,600 3,757 104,600 5,701 4,859 105,702
7 1,000 8,549 4,250 3,522 104,250 5,457 4,729 105,458 6,992 6,264 106,992
8 1,000 10,027 4,775 4,222 104,775 6,332 5,779 106,333 8,394 7,841 108,395
9 1,000 11,578 5,273 4,894 105,273 7,226 6,847 107,226 9,920 9,581 109,920
10 1,000 13,207 5,744 5,744 105,745 8,138 8,138 108,139 11,581 11,581 111,582
11 1,000 14,917 6,189 6,189 106,189 9,070 9,070 109,070 13,391 13,391 113,392
12 1,000 16,713 6,605 6,605 106,606 10,020 10,020 110,020 15,364 15,364 115,364
13 1,000 18,599 6,993 6,993 107,993 10,987 10,987 110,987 17,513 17,513 117,514
14 1,000 20,579 7,350 7,350 107,350 11,970 11,970 111,971 19,856 19,856 119,856
15 1,000 22,657 7,676 7,676 107,676 12,696 12,696 112,970 22,410 22,410 122,410
16 1,000 24,840 7,967 7,967 107,968 13,980 13,980 113,981 25,192 25,192 125,192
17 1,000 27,132 8,223 8,223 108,223 15,002 15,002 115,003 28,224 28,224 128,224
18 1,000 29,539 8,439 8,439 108,440 16,031 16,031 116,032 31,526 31,526 131,527
19 1,000 32,066 8,611 8,611 108,612 17,062 17,062 117,062 35,121 35,121 135,121
20 1,000 34,719 8,739 8,739 108,739 18,092 18,092 118,093 39,035 39,035 139,036
@ 62 8,313 8,313 108,314 25,165 25,165 125,165 78,434 78,434 178,435
@ 65 1,000 69,761 7,126 7,126 107,127 27,736 27,736 127,736 104,118 104,118 204,119
</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 1.77%
(includes mortality and expense risk charge of 0.8% and average fund operating
expenses of .97% 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%.
106
<PAGE>
[VERSION C]
PHOENIX INDIVIDUAL EDGE(SM)
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, 2000
This prospectus describes a flexible premium variable universal life insurance
policy. The policy provides lifetime insurance protection.
THE PHOENIX EDGE SERIES FUND
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Capital Growth Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Balanced Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Oakhurst Strategic Allocation Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Phoenix-Seneca Strategic Theme 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
MANAGED BY PHOENIX VARIABLE ADVISORS, INC.
[diamond] Phoenix-Bankers Trust Dow 30 Series
[diamond] Phoenix-Federated U.S. Government Bond Series
[diamond] Phoenix-J.P. Morgan Research Enhanced Index Series
[diamond] Phoenix-Janus Equity Income Series
[diamond] Phoenix-Janus Flexible Income Series
[diamond] Phoenix-Janus Growth Series
[diamond] Phoenix-Morgan Stanley Focus Equity Series
[diamond] Phoenix-Schafer Mid-Cap Value Series
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE(R) 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
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
[diamond] Technology Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
MANAGED BY TEMPLETON GLOBAL ADVISORS LIMITED
[diamond] Templeton Growth Securities Fund -- Class 2
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Strategy Fund -- Class 2
[diamond] Templeton International Securities Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Securities Fund -- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[diamond] Mutual Shares Securities 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
1
<PAGE>
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 income taxes.
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 provides
important information that a prospective investor ought to know before investing
and should be kept for future reference.
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.
2
<PAGE>
TABLE OF CONTENTS
Heading Page
- -------------------------------------------------------------
SPECIAL TERMS .......................................... 4
SUMMARY ................................................ 6
PERFORMANCE HISTORY..................................... 7
REDUCTION CHARGES....................................... 7
PHOENIX AND THE VUL ACCOUNT............................. 8
Phoenix ............................................. 8
The VUL Account ..................................... 8
The GIA ............................................. 8
THE POLICY ............................................. 8
Introduction ........................................ 8
Eligible Purchasers ................................. 9
Flexible Premiums ................................... 9
Allocation of Issue Premium ......................... 9
Free Look Period .................................... 10
Temporary Insurance Coverage ........................ 10
Transfer of Policy Value ............................ 10
Systematic Transfer Program........................ 10
Nonsystematic Transfers ........................... 10
Determination of Subaccount Values .................. 11
Death Benefit ....................................... 12
Surrenders .......................................... 12
Policy Loans ........................................ 13
Lapse ............................................... 14
Payment of Premiums During Period of Disability ..... 14
Additional Insurance Options ........................ 14
Additional Rider Benefits ........................... 15
INVESTMENTS OF THE VUL ACCOUNT ......................... 16
Participating Investment Funds....................... 16
Investment Advisors.................................. 18
Services of the Advisors ............................ 19
Reinvestment and Redemption ......................... 19
Substitution of Investments ......................... 19
CHARGES AND DEDUCTIONS ................................. 19
General.............................................. 19
Charges Deducted Once ............................... 20
State Premium Tax Charge .......................... 20
Federal Tax Charge................................. 20
Periodic Charges..................................... 20
Conditional Charges.................................. 21
Investment Management Charge......................... 22
Other Taxes ......................................... 22
GENERAL PROVISIONS ..................................... 22
Postponement of Payments ............................ 22
Payment by Check .................................... 22
The Contract ........................................ 22
Suicide ............................................. 22
Incontestability .................................... 22
Change of Owner or Beneficiary ...................... 22
Assignment .......................................... 22
Misstatement of Age or Sex .......................... 22
Surplus.............................................. 22
PAYMENT OF PROCEEDS .................................... 22
Surrender and Death Benefit Proceeds ................ 22
Payment Options ..................................... 23
FEDERAL INCOME TAX CONSIDERATIONS ...................... 24
Introduction ........................................ 24
Phoenix's Income Tax Status ......................... 24
Policy Benefits ..................................... 24
Business-Owned Policies.............................. 25
Modified Endowment Contracts ........................ 25
Limitations on Unreasonable Mortality
and Expense Charges ............................... 26
Qualified Plans ..................................... 26
Diversification Standards ........................... 26
Change of Ownership or Insured or Assignment ........ 26
Other Taxes ......................................... 26
VOTING RIGHTS .......................................... 26
Phoenix.............................................. 27
THE DIRECTORS AND EXECUTIVE OFFICERS
OF PHOENIX........................................... 27
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ................ 28
SALES OF POLICIES ...................................... 28
STATE REGULATION ....................................... 29
REPORTS ................................................ 29
LEGAL PROCEEDINGS ...................................... 29
LEGAL MATTERS .......................................... 29
REGISTRATION STATEMENT ................................. 29
FINANCIAL STATEMENTS ................................... 29
APPENDIX A ............................................. 93
APPENDIX B ............................................. 97
APPENDIX C.............................................. 98
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.
3
<PAGE>
SPECIAL TERMS
- --------------------------------------------------------------------------------
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, Deutsche Asset Management VIT Funds,
Federated Insurance Series, The Universal Institutional Funds, Inc., Franklin
Templeton Variable Insurance Products Trust 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.
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.
4
<PAGE>
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.
5
<PAGE>
SUMMARY
- --------------------------------------------------------------------------------
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 "Conditional
Charges--Surrender Charge."
INSURANCE PROTECTION FEATURES
DEATH BENEFITS
[diamond] Both a fixed and variable benefit is available under the policy.
o The fixed benefit is equal to the policy's face amount (Option 1)
o 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 $25,000.
[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:
o Disability Waiver of Specified Premium
o Accidental Death Benefit
o Death Benefit Protection
o Whole Life Exchange Option
o Purchase Protection Plan
o Living Benefits Option
o Cash Value Accumulation
o Child Term
o Family Term
o Phoenix Individual Edge Term
Availability of these riders depends upon state approval and may involve an
extra cost.
DEDUCTIONS AND CHARGES
FROM PREMIUM PAYMENTS
[diamond] Taxes
o State Premium Tax Charge--2.25%
o Federal Tax Charge--1.50%
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 reimburses 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 Insured.
[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.
[diamond] Transfer Charge--Maximum of $10. See "Nonsystematic Transfers."
6
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FROM THE VUL ACCOUNT
Mortality and Expense Risk Charge:
[diamond] Policy years 1 through 15--.80% annually;
[diamond] Policy years 16 and after--.25% 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 "Free Look Period."
RISK OF LAPSE
During the first 8 policy years the policy will remain in force as long as
the account value is enough to pay the necessary monthly charges. After that,
the policy will stay in force for as long as the cash surrender value is enough
to pay the monthly deduction charged under the policy. When in the first 8
policy years the Account Value is no longer enough to cover the monthly charges,
or in following years, the cash surrender value is no longer enough to cover the
monthly charges, the policy lapses, or ends. We will let you know of an
impending lapse situation and 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 it is
sold. Therefore, the terms of the policy may vary from state to state.
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
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.
REDUCTION IN CHARGES
- --------------------------------------------------------------------------------
The policy is available for purchase by individuals and groups. We may
reduce or eliminate the mortality and expense risk charge, monthly
administrative charge, monthly cost of insurance charges, surrender charges or
other charges normally assessed where it is expected that the size or nature of
such policy or policies will result in savings of sales, underwriting,
administrative or other costs.
Eligibility for the amount of these reductions will be determined by a
number of factors including:
[diamond] the number of insured,
[diamond] the total premium expected to be paid,
[diamond] the total assets under management for the policyowner,
[diamond] the nature of the relationship among individual insureds,
[diamond] the purpose for which the policies are being purchased,
[diamond] whether there is a preexisting relationship with us, such as being an
employee of PHL or its affiliates and their spouses; employees or
agents who retire from PHL or its affiliates; Phoenix Equity Planning
Corporation ("PEPCO"), its affiliates or registered representatives of
the principal underwriter and registered representatives of
broker-dealers with whom PEPCO has selling agreements,
[diamond] internal transfers from other policies or contracts issued by the
Company or an affiliate, or making transfers of amounts held under
qualified plans sponsored by the Company or an affiliate; and
other circumstances which in our opinion are rationally related to the
expected reduction in expenses. Any variations in the charge structure will
be determined in a uniform manner, reflecting differences in costs of
services and not unfairly discriminatory to policyholders.
7
<PAGE>
PHOENIX AND THE VUL ACCOUNT
- --------------------------------------------------------------------------------
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. On April 17, 2000, the Board of
Directors of Phoenix Home Life Mutual Insurance Company authorized management to
develop a plan for conversion from a mutual to a publicly traded stock company.
If such a plan is developed and adopted by the Board, it would be subject to the
approval of the New York Insurance Department and other regulators and submitted
to policyholders for approval. The plan would go into effect only after all
these requirements had been met. There is no assurance that any such plan will
be adopted, and if adopted, there is no guarantee as to the amount or nature of
consideration to eligible policyholders.
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 ("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.
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% (4% in New York and New Jersey). 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 4-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
- --------------------------------------------------------------------------------
INTRODUCTION
The policy is a flexible premium variable universal life insurance policy.
It has a death benefit, cash surrender value and loan privilege as does a
traditional fixed benefit
8
<PAGE>
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 85 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 and 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 2.25% for state premium
tax and by 1.50% for federal tax. 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 first be 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 "Transfer of Policy Value--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 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, you will receive the excess, with interest at
an annual rate of not less than 4%, not later than 60 days after the end of the
policy year in which the limit was exceeded. The policy value will then be
adjusted to reflect the refund. 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 is
also 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
9
<PAGE>
during the Free Look Period) to the Phoenix-Goodwin Money Market Subaccount of
the VUL Account and, at the expiration of the Free Look 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.
FREE LOOK 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 "Free Look 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.
We retain the right to decline to process an application within 7 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 Free Look 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
[diamond] $25 monthly,
[diamond] $75 monthly,
[diamond] $150 semiannually or
[diamond] $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, you 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 values 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 bear the
risk of loss resulting from instructions entered by an unauthorized third party
that
10
<PAGE>
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 2 transfers in a policy
year. Transfers under the Systematic Transfer Program do not count against these
limitations.
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 be less than $500 immediately after
the transfer.
You may make only 1 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 1 or more of the Subaccounts over a consecutive 4-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 adversely affect 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 Free Look Period.
DETERMINATION OF SUBACCOUNT VALUES
We establish the unit value of each Subaccount 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 6 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
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<PAGE>
(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.
There is a monthly charge equal to $0.01 per $1,000 of face amount for
policies issued with a Guaranteed Death Benefit Rider.
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 Free Look Period (see "The
Policy--Free Look 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 "Modified Endowment Contracts--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 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.
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<PAGE>
Upon partial or full surrender, we generally will pay to you the amount
surrendered within 7 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 2% (4% in
New York and New Jersey only), compounded daily and payable in arrears. At the
end of each policy year and at the time of any debt repayment, interest credited
to the loaned portion of the GIA will be transferred to the unloaned portion of
the GIA.
Debt may be repaid at any time during the lifetime of the 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.
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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.
[diamond] In all states except New York and New Jersey, the loan interest rate
in effect following the policy anniversary nearest the Insured's 65th
birthday will be 2.25%. The rates in effect before the Insured reaches
age 65 will be:
o Policy years 1-10: 4%
o Policy years 11-15: 3%
o Policy years 16 and thereafter: 2.25%
[diamond] In New York and New Jersey only, the loan interest rate in effect
following the policy anniversary nearest the Insured's 65th birthday
will be 4.25%. The rates in effect before the Insured reaches age 65
will be:
o Policy years 1-10 6%
o Policy years 11-15: 5%
o Policy years 16 and thereafter: 4.25%
You will pay interest on the loan at the noted effective annual rates,
compounded daily and payable in arrears.
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 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 8 policy years, the
account 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 3 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 3 times the required
monthly deduction.
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 have passed after we 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 Free Look Period as described in "The Policy" section
of this prospectus applies to each increase in face amount.
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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 (if approved in your
state) and additional riders may be available as described in the policy.
[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 6 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 5 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 before the policy anniversary nearest the Insured's 75th
birthday, if:
o the Insured dies from bodily injury that results from an accident;
and
o the Insured dies no later than 90 days after injury.
[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
3 available guarantee periods are:
1 death benefit guaranteed until the later of the policy anniversary
nearest the Insured's 70th birthday or policy year 7;
2 death benefit guaranteed until the later of the policy anniversary
nearest the Insured's 80th birthday or policy year 10;
3 death benefit guaranteed until the later of the policy anniversary
nearest the Insured's 95th birthday.
Death benefit guarantee periods 1 or 2 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, 2 guarantee 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] PHOENIX INDIVIDUAL EDGE TERM RIDER. This rider provides annually
renewable term insurance coverage to age 100 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 4 times the initial face amount of the policy.
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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-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-BANKERS TRUST DOW 30 SERIES: The series seeks to track the total
return of the Dow Jones Industrial Average(SM) (the "DJIA(SM)") before fund
expenses.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES: The investment objective of the
series is to achieve intermediate and long-term growth of capital, with income
as a secondary consideration. The Phoenix-Engemann Capital Growth Series invests
principally in common stocks of corporations believed by management to offer
growth potential.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the series
is to seek long-term capital appreciation by investing in approximately 50
different securities 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-FEDERATED U.S. GOVERNMENT BOND SERIES: The investment objective of
the series is to maximize total return by investing primarily in debt
obligations of the U.S. Government, its agencies and instrumentalities.
PHOENIX-GOODWIN MONEY MARKET SERIES: The investment objective of the series
is to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity Series seeks to
achieve its objective by investing in a diversified portfolio of common stocks
that meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price.
PHOENIX-J.P. MORGAN RESEARCH ENHANCED INDEX SERIES: The investment objective
of the series is to seek high total return by investing in a broadly diversified
portfolio of equity securities of large and medium capitalization companies
within market sectors reflected in the S&P 500. The series invests in a
portfolio of undervalued common stocks and other equity securities which appear
to offer growth potential and an overall volatility of return similar to that of
the S&P 500.
PHOENIX-JANUS EQUITY INCOME SERIES: The investment objective of the series
is to seek current income and long-term growth of capital.
PHOENIX-JANUS FLEXIBLE INCOME SERIES: The investment objective of the series
is to seek to obtain maximum total return, consistent with preservation of
capital.
PHOENIX-JANUS GROWTH SERIES: The investment objective of the series is to
seek long-term growth of capital, in a manner consistent with the preservation
of capital.
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES: The investment objective of the
series is to seek capital appreciation by investing primarily in equity
securities.
PHOENIX-OAKHURST BALANCED SERIES: The investment objective of the series is
to seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Oakhurst Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
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
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selecting securities primarily from equity securities of the 1,000 largest
companies traded in the United States, ranked by market capitalization.
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES: The investment objective of
the series is to realize as high a level of total return over an extended period
of time as is considered consistent with prudent investment risk. The
Phoenix-Oakhurst Strategic Allocation Series invests in stocks, bonds and money
market instruments in accordance with the Investment Advisor's appraisal of
investments most likely to achieve the highest total return.
PHOENIX-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.
PHOENIX-SENECA STRATEGIC THEME SERIES: The investment objective of the
series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Phoenix-Seneca Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
A certain Subaccount invests in a corresponding series of the Deutsche Asset
Management VIT Funds. The following series is currently available:
EAFE(R) EQUITY INDEX FUND: The series seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index ("EAFE(R) Index"), which
emphasizes major market stock performance of companies in Europe, Australia and
the Far East. The series invests in a statistically selected sample of the
securities found in the EAFE(R) 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.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
A certain subaccount invests in a corresponding series of the The Universal
Institutional Funds, Inc. The following series is currently available:
TECHNOLOGY PORTFOLIO: The investment objective of the series is to seek
long-term capital appreciation by investing primarily in equity securities of
companies that the investment advisor expects to benefit from their involvement
in technology and technology-related industries.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Certain Subaccounts invest in Class 2 Shares of a corresponding fund of the
Franklin Templeton Variable Insurance Products Trust. The following funds are
currently available:
MUTUAL SHARES SECURITIES FUND: The primary investment objective of the fund
is capital appreciation with income as a secondary objective. The Mutual Shares
Securities Fund invests primarily in domestic equity securities that the manager
believes are significantly undervalued.
TEMPLETON ASSET STRATEGY FUND: The investment objective of the fund is a
high level of total return. The Templeton Asset Strategy Fund invests in stocks
of companies of any nation, bonds of companies and governments of any nation and
in money market instruments. Changes in the asset mix will be made in an attempt
to capitalize on total return potential produced by changing economic conditions
throughout the world, including emerging market countries.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND: The investment objective of
the fund is long-term capital appreciation. The Templeton Developing Markets
Securities Fund invests primarily in emerging markets equity securities.
TEMPLETON GROWTH SECURITIES FUND: The investment objective of the fund is
long-term capital growth. The Templeton Growth Securities Fund invests primarily
in common stocks issued by companies in various nations throughout the world,
including the U.S. and emerging markets.
TEMPLETON INTERNATIONAL SECURITIES FUND: The investment objective of the
fund is long-term capital growth. The Templeton International Securities Fund
invests primarily in stocks of companies located outside the United States,
including emerging markets.
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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.
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 funds simultaneously. Although neither Phoenix nor the funds'
trustees currently foresee any such disadvantages either to variable life
insurance policyowners or to variable annuity contractowners, the funds'
trustees intend to monitor events in order to identify any material conflicts
between variable life insurance policyowners and variable annuity contractowners
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 funds; or
[diamond] differences in voting instructions between those given by variable
life insurance policyowners and those given by variable annuity
contractowners.
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 ADVISORS
Phoenix Investment Counsel, Inc. ("PIC") is an investment advisor to the
following series in The Phoenix Edge Series Fund:
o Phoenix-Goodwin Money Market Series
o Phoenix-Goodwin Multi-Sector Fixed Income Series
o Phoenix-Hollister Value Equity Series
o Phoenix-Oakhurst Balanced Series
o Phoenix-Oakhurst Growth and Income Series
o Phoenix-Oakhurst Strategic Allocation Series
Based on subadvisory agreements with the fund, PIC as an investment advisor
delegates certain investment decisions and research functions to subadvisors for
the following series:
[diamond] Phoenix-Aberdeen International Advisors, LLC ("PAIA")
o Phoenix-Aberdeen International Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
o Phoenix-Engemann Capital Growth Series
o Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
o Phoenix-Seneca Mid-Cap Growth Series
o Phoenix-Seneca Strategic Theme Series
Phoenix Variable Advisors, Inc. ("PVA") is also an investment advisor to The
Phoenix Edge Series Fund. Based on subadvisory agreements with the fund, PVA
delegates certain investment decisions and research functions to the following
subadvisors for the series listed:
[diamond] Bankers Trust Company
o Phoenix-Bankers Trust Dow 30 Series
[diamond] Federated Investment Management Company
o Phoenix-Federated U.S. Government Bond Series
[diamond] J.P. Morgan Investment Management, Inc.
o Phoenix-J.P. Morgan Research Enhanced Index Series
[diamond] Janus Capital Corporation
o Phoenix-Janus Equity Income Series
o Phoenix-Janus Flexible Income Series
o Phoenix-Janus Growth Series
[diamond] Morgan Stanley Asset Management Inc.
o Phoenix-Morgan Stanley Focus Equity Series
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[diamond] Schafer Capital Management, Inc.
o Phoenix-Schafer Mid-Cap Value Series
The investment advisor to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment advisor to the Phoenix-Aberdeen New Asia Series is 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. PVA is a wholly
owned subsidiary of PM Holdings, Inc.
The other investment advisors and their respective funds are:
[diamond] Bankers Trust Company
o EAFE(R) Equity Index Fund
[diamond] Federated Investment Management Company
o Federated Fund for U.S. Government Securities II
o Federated High Income Bond Fund II
[diamond] Franklin Mutual Advisers, LLC
o Mutual Shares Securities Fund
[diamond] Morgan Stanley Asset Management Inc.
o Technology Portfolio
[diamond] Templeton Asset Management, Ltd.
o Templeton Developing Markets Securities Fund
[diamond] Templeton Global Advisers Limited
o Templeton Growth Securities Fund
[diamond] Templeton Investment Counsel, Inc.
o Templeton Asset Strategy Fund
o Templeton International Securities Fund
[diamond] Wanger Asset Management, L.P.
o Wanger Foreign Forty
o Wanger International Small Cap
o Wanger Twenty
o Wanger U.S. Small Cap
SERVICES OF THE ADVISORS
The advisors continually furnish an investment program for each series and
manage the investment and reinvestment of the assets of each series subject at
all times to the authority and supervision of the trustees. A detailed
discussion of the investment advisors and subadvisors, and the investment
advisory and subadvisory agreements, is contained in the accompanying prospectus
for the funds.
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 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
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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.
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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] STATE 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
0.62% to 4% of premiums paid. Moreover, certain municipalities and
states 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. The issue expense charge is $1.50 per $1,000 of face amount up
to a maximum of $600.
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 are based on the sex, attained age, duration and risk
class of the Insured. 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 insured's risk
classification. Any change in the cost of insurance rates will apply
to all persons of the same sex, insurance age and risk class whose
policies have been in force for the same length of time. 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 on 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 is divided into four categories: smoker
and 3 classes of nonsmokers. 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, 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. 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
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because of inaccuracies in the projecting process and, therefore, the
total amount of death benefits that we pay out will be greater than
what 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 is equal to a
certain premium called the commission target premium multiplied by the
following factors:
2.25 for policy months 1-60
2.25 minus .03 t where t equals policy months 61-96
1.17 minus .0488 t where t equals policy months 97-119
0 for policy month greater than 119
This amount is capped by the maximum allowable surrender charge under
the Standard Nonforfeiture Law of each state.
The following table shows the surrender charges applicable for a male
nonsmoker for a total amount of $100,000:
ISSUE AGE INITIAL SURRENDER
--------- -----------------
25 1,235.25
35 1,923.75
45 3,127.94
55 4,611.17
65 5,850.00
75 5,850.00
85 5,850.00
The following table gives a specific example for the duration of the
surrender charge period for a male age 35 nonsmoker, for a face amount
of $100,000. The surrender charge is equal to:
SURRENDER CHARGE SCHEDULE
-------------------------
POLICY SURRENDER POLICY SURRENDER POLICY SURRENDER
MONTH CHARGE MONTH CHARGE MONTH CHARGE
----- ------ ----- ------ ----- ------
1-12 $1923.75 78 $1462.05 100 $833.45
13-24 1923.75 79 1436.40 101 791.73
25-36 1923.75 80 1410.75 102 750.01
37-48 1923.75 81 1385.10 103 708.28
49-60 1923.75 82 1359.45 104 666.56
61 1898.10 83 1333.80 105 624.83
62 1872.45 84 1308.15 106 583.11
63 1846.80 85 1282.50 107 541.39
64 1821.15 86 1256.85 108 499.66
65 1795.50 87 1231.20 109 457.94
66 1769.85 88 1205.55 110 416.21
67 1744.20 89 1179.90 111 374.49
68 1718.55 90 1154.25 112 332.77
69 1692.90 91 1128.60 113 291.04
70 1667.25 92 1102.95 114 249.32
71 1641.60 93 1077.30 115 207.59
72 1615.95 94 1051.65 116 165.87
73 1590.30 95 1026.00 117 124.15
74 1564.65 96 1000.35 118 82.42
75 1539.00 97 958.63 119 40.70
76 1513.35 98 916.90 120 .00
77 1487.70 99 875.18
The surrender charge 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.
[diamond] PARTIAL SURRENDER FEE. In the case of a partial surrender, 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 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
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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
advisors 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
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 6 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 2 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 2 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 7 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
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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 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.
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] 10 years;
[diamond] 20 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 1 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.
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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 advisor
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 ("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 ("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
"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. However, see 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 advisor 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,
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depending on the circumstances. A policyowner intending to fund premium payments
through borrowing should consult a tax advisor 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 advisor 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 7
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 7 YEARS
If there is a reduction in death benefits during the first 7 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 7
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 2 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 7 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 2 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:
o the cost-of-living determination period does not exceed the
remaining premium payment period under the policy; and
o 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 7 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 1 modified endowment contract in determining the
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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 advisor should be consulted about the tax
consequences of the purchase of more than 1 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 advisor.
DIVERSIFICATION STANDARDS
To comply with the Diversification Regulations under Code Section 817(h),
("Diversification Regulations") each Series 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
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 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
26
<PAGE>
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 Advisor 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.
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 1 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
John C. Bacot Chairman and Chief Executive
Officer, The Bank of New York
New York, New York
Arthur P. Byrne Chairman, President and Chief
Executive Officer, The
Wiremold Company
West Hartford, Connecticut
Richard N. Cooper Professor of International
Economics, Harvard University;
Cambridge, Massachusetts;
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 and
Chief Executive Officer, Phoenix
Home Life Mutual Insurance
Company
Hartford, Connecticut
John E. Haire President of
The Fortune Group
New York, New York
Jerry J. Jasinowski President, National Association
of Manufacturers
Washington, D.C.
John W. Johnstone Chairman, Governance &
Nominating Committees, Arch
Chemicals, Inc., Westport,
Connecticut; formerly
Chairman, President and Chief
Executive Officer, Olin Corporation
Norwalk, Connecticut
Marilyn E. LaMarche Limited Managing Director, Lazard
Freres & Company L.L.C.
New York, New York
27
<PAGE>
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 Retired, formerly Chairman and
Chief Executive Officer, Ecologic
Waste Services, Inc. Miami,
Florida
Dona D. Young President, Phoenix Home Life
Mutual Insurance Company
Hartford, Connecticut
EXECUTIVE OFFICERS PRINCIPAL OCCUPATION
Robert W. Fiondella Chairman of the Board and Chief
Executive Officer
Dona D. Young President
Philip R. McLoughlin Executive Vice President and
Chief Investment Officer
Carl T. Chadburn Executive Vice President
David W. Searfoss Executive Vice President and
Chief Financial Officer
Nathaniel C. Brinn Senior Vice President
Martin J. Gavin Senior Vice President,
Trust Operations
Randall C. Giangiulio Senior Vice President,
Group Life and Health
Michael J. Gilotti Senior Vice President
Edward P. Hourihan Senior Vice President,
Information Systems
Joseph E. Kelleher Senior Vice President,
Underwriting and Operations
Robert G. Lautensack, Jr. Senior Vice President,
Individual Financial
Maura L. Melley Senior Vice President,
Public Affairs
Charles L. Olsen Senior Vice President
Robert E. Primmer Senior Vice President,
Individual Distribution
Tracy L. Rich Senior Vice President
Joel D. Sanders Senior Vice President
Frederick W. Sawyer, III Senior Vice President
Jack F. Solan, Jr. Senior Vice President,
Strategic Development
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 listing reflects the positions held at Phoenix during the last 5
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.
28
<PAGE>
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.
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.
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, 1999.
29
<PAGE>
PHOENIX HOME LIFE VARIABLE
UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1999
30
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ENGEMANN GOODWIN OAKHURST
GOODWIN MONEY CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN
MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
<S> <C> <C> <C> <C> <C>
Investments at cost............... $ 36,172,745 $ 304,559,369 $ 20,646,125 $ 43,191,926 $ 63,645,004
============= ============== ============= ============= =============
Investments at market............. $ 36,172,745 $ 448,728,926 $ 18,455,528 $ 49,617,057 $ 77,234,406
------------- -------------- ------------- ------------- -------------
Total assets............... 36,172,745 448,728,926 18,455,528 49,617,057 77,234,406
LIABILITIES
Accrued expenses to related party. 22,449 291,917 12,302 33,157 50,070
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 36,150,296 $ 448,437,009 $ 18,443,226 $ 49,583,900 $ 77,184,336
============= ============== ============= ============= =============
Accumulation units outstanding.......... 23,137,709 64,302,622 8,059,238 13,473,562 26,138,742
============= ============== ============= ============= =============
Unit value.............................. $ 1.562397 $ 6.973853 $ 2.288458 $ 3.680088 $ 2.952871
============= ============== ============= ============= =============
DUFF & PHELPS SENECA RESEARCH
OAKHURST REAL ESTATE STRATEGIC ABERDEEN ENHANCED
BALANCED SECURITIES THEME NEW ASIA INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
Investments at cost............... $ 26,273,562 $ 4,793,113 $ 18,085,301 $ 2,741,828 $ 24,785,826
============= ============== ============= ============= =============
Investments at market............. $ 31,642,850 $ 4,020,674 $ 24,186,768 $ 3,057,608 $ 28,154,106
------------- -------------- ------------- ------------- -------------
Total assets.............. 31,642,850 4,020,674 24,186,768 3,057,608 28,154,106
LIABILITIES
Accrued expenses to related party. 21,131 2,567 14,929 2,018 18,617
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 31,621,719 $ 4,018,107 $ 24,171,839 $ 3,055,590 $ 28,135,489
============= ============== ============= ============= =============
Accumulation units outstanding.......... 13,638,575 3,129,571 9,417,741 3,212,043 17,142,029
============= ============== ============= ============= =============
Unit value.............................. $ 2.318550 $ 1.283916 $ 2.566628 $ 0.951292 $ 1.641316
============= ============== ============= ============= =============
SENECA OAKHURST
ENGEMANN MID-CAP GROWTH AND HOLLISTER SCHAFER
NIFTY FIFTY GROWTH INCOME VALUE EQUITY MID-CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
Investments at cost............... $ 6,933,141 $ 2,156,212 $ 8,743,326 $ 2,244,858 $ 1,647,078
============= ============== ============= ============= =============
Investments at market............. $ 8,812,180 $ 3,157,717 $ 10,108,660 $ 2,612,019 $ 1,502,253
------------- -------------- ------------- ------------- -------------
Total assets............... 8,812,180 3,157,717 10,108,660 2,612,019 1,502,253
LIABILITIES
Accrued expenses to related party. 5,722 1,903 6,591 1,665 1,189
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 8,806,458 $ 3,155,814 $ 10,102,069 $ 2,610,354 $ 1,501,064
============= ============== ============= ============= =============
Accumulation units outstanding.......... 5,353,879 1,844,737 7,271,955 1,937,918 1,915,460
============= ============== ============= ============= =============
Unit value.............................. $ 1.644874 $ 1.710712 $ 1.389182 $ 1.346989 $ 0.783657
============= ============== ============= ============= =============
WANGER TEMPLETON
WANGER U.S. INTERNATIONAL TEMPLETON ASSET TEMPLETON
SMALL CAP SMALL CAP STOCK ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- ---------------- ---------------- ---------------
ASSETS
Investments at cost............... $ 34,000,619 $ 13,547,992 $ 255,329 $ 262,651 $ 1,140,606
============= ============== ============= ============= =============
Investments at market............. $ 41,762,466 $ 29,265,084 $ 298,740 $ 289,238 $ 1,271,691
------------- -------------- ------------- ------------- -------------
Total assets............... 41,762,466 29,265,084 298,740 289,238 1,271,691
LIABILITIES
Accrued expenses to related party. 26,850 17,620 184 187 779
------------- -------------- ------------- ------------- -------------
NET ASSETS.............................. $ 41,735,616 $ 29,247,464 $ 298,556 $ 289,051 $ 1,270,912
============= ============== ============= ============= =============
Accumulation units outstanding.......... 23,396,320 11,233,769 234,852 235,662 999,489
============= ============== ============= ============= =============
Unit value.............................. $ 1.783854 $ 2.603531 $ 1.271250 $ 1.226552 $ 1.271562
============= ============== ============= ============= =============
</TABLE>
See Notes to Financial Statements
31
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(CONTINUED)
TEMPLETON
DEVELOPING MUTUAL SHARES WANGER WANGER EAFE
MARKETS INVESTMENTS TWENTY FOREIGN FORTY EQUITY INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------- ----------------
ASSETS
<S> <C> <C> <C> <C> <C>
Investments at cost............... $ 647,618 $ 401,439 $ 620,952 $ 388,605 $ 219,790
============ ============ ============ ============= ============
Investments at market............. $ 765,101 $ 411,374 $ 686,777 $ 603,018 $ 237,869
------------ ------------ ------------ ------------- ------------
Total assets............... 765,101 411,374 686,777 603,018 237,869
LIABILITIES
Accrued expenses to related party. 467 269 416 335 140
------------ ------------ ------------ ------------- ------------
NET ASSETS.............................. $ 764,634 $ 411,105 $ 686,361 $ 602,683 $ 237,729
============ ============ ============ ============= ============
Accumulation units outstanding.......... 474,876 380,974 496,070 317,402 200,992
============ ============ ============ ============= ============
Unit value.............................. $ 1.610176 $ 1.079090 $ 1.383596 $ 1.898803 $ 1.182776
============ ============ ============ ============= ============
FEDERATED FEDERATED
BANKERS U.S. GOV'T HIGH INCOME JANUS
TRUST DOW 30 SECURITIES II BOND FUND II EQUITY INCOME JANUS GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------- ----------------
ASSETS
Investments at cost............... $ 5,260 $ 79,497 $ 176,220 $ 13,190 $ 177,361
============ ============ ============ ============= ============
Investments at market............. $ 5,282 $ 79,711 $ 179,326 $ 13,399 $ 179,523
------------ ------------ ------------ ------------- ------------
Total assets............... 5,282 79,711 179,326 13,399 179,523
LIABILITIES
Accrued expenses to related party. 0 51 119 1 16
------------ ------------ ------------ ------------- ------------
NET ASSETS.............................. $ 5,282 $ 79,660 $ 179,207 $ 13,398 $ 179,507
============ ============ ============ ============= ============
Accumulation units outstanding.......... 5,241 78,777 179,788 13,204 172,171
============ ============ ============ ============= ============
Unit value.............................. $ 1.007802 $ 1.011204 $ 0.996767 $ 1.014664 $ 1.042609
============ ============ ============ ============= ============
JANUS
FLEXIBLE MORGAN STANLEY TECHNOLOGY
INCOME FOCUS EQUITY PORTFOLIO
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ----------------
ASSETS
Investments at cost............... $ 4,322 $ 1,999 $ 109,734
============ ============ ============
Investments at market............. $ 4,315 $ 2,073 $ 112,136
------------ ------------ ------------
Total assets............... 4,315 2,073 112,136
LIABILITIES
Accrued expenses to related party. 1 0 12
------------ ------------ ------------
NET ASSETS.............................. $ 4,314 $ 2,073 $ 112,124
============ ============ ============
Accumulation units outstanding.......... 4,312 2,000 104,360
============ ============ ============
Unit value.............................. $ 1.000255 $ 1.036684 $ 1.074396
============ ============ ============
</TABLE>
See Notes to Financial Statements
32
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
GOODWIN OAKHURST
GOODWIN MONEY ENGEMANN MULTI-SECTOR STRATEGIC
MARKET CAPITAL GROWTH FIXED INCOME ALLOCATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ---------------
Investment income
<S> <C> <C> <C> <C>
Distributions........................................ $ 1,401,659 $ 881,082 $ 1,426,094 $ 1,035,758
Expenses
Mortality, expense risk and administrative charges... 236,917 2,894,867 137,459 362,811
------------ ------------ ------------- ------------
Net investment income (loss)............................... 1,164,742 (2,013,785) 1,288,635 672,947
------------ ------------ ------------- ------------
Net realized gain (loss) from share transactions........... - 199,224 1,383 6,462
Net realized gain distribution from Fund................... - 33,712,379 - 2,422,170
Net unrealized appreciation (depreciation) on investment... - 67,520,555 (510,719) 1,547,396
------------ ------------ ------------- ------------
Net gain (loss) on investments............................. - 101,432,158 (509,336) 3,976,028
------------ ------------ ------------- ------------
Net increase (decrease) in net assets resulting from
operations................................................. $ 1,164,742 $ 99,418,373 $ 779,299 $ 4,648,975
============ ============ ============= ============
DUFF & PHELPS SENECA
ABERDEEN OAKHURST REAL ESTATE STRATEGIC
INTERNATIONAL BALANCED SECURITIES THEME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ---------------
Investment income
Distributions........................................ $ 1,559,263 $ 722,804 $ 201,455 $ -
Expenses
Mortality, expense risk and administrative charges... 513,193 235,015 31,223 114,711
------------ ------------ ------------- ------------
Net investment income (loss)................................ 1,046,070 487,789 170,232 (114,711)
------------ ------------ ------------- ------------
Net realized gain (loss) from share transactions............ 47,349 13,373 (8,551) (3,328)
Net realized gain distribution from Fund.................... 9,024,051 1,090,011 - 2,873,771
Net unrealized appreciation (depreciation) on investment.... 6,988,805 1,469,608 (25,923) 4,256,078
------------ ------------ ------------- ------------
Net gain (loss) on investments.............................. 16,060,205 2,572,992 (34,474) 7,126,521
------------ ------------ ------------- ------------
Net increase (decrease) in net assets resulting from
operations.................................................. $ 17,106,275 $ 3,060,781 $ 135,758 $ 7,011,810
============ ============ ============= ============
ABERDEEN RESEARCH ENGEMANN NIFTY SENECA
NEW ASIA ENHANCED INDEX FIFTY MID-CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- ---------------- ---------------- ---------------
Investment income
Distributions........................................ $ 22,625 $ 209,690 $ - $ -
Expenses
Mortality, expense risk and administrative charges... 17,571 172,148 40,023 13,409
------------ ------------ ------------- ------------
Net investment income (loss)................................ 5,054 37,542 (40,023) (13,409)
------------ ------------ ------------- ------------
Net realized gain (loss) from share transactions............ 4,188 9,241 817 4,734
Net realized gain distribution from Fund.................... - 1,395,107 - 74,364
Net unrealized appreciation (depreciation) on investment.... 869,485 2,060,618 1,626,903 871,293
------------ ------------ ------------- ------------
Net gain (loss) on investments.............................. 873,673 3,464,966 1,627,720 950,391
------------ ------------ ------------- ------------
Net increase (decrease) in net assets resulting from
operations.................................................. $ 878,727 $ 3,502,508 $ 1,587,697 $ 936,982
============ ============ ============= ============
</TABLE>
See Notes to Financial Statements
33
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
OAKHURST
GROWTH AND HOLLISTER SCHAFER WANGER U.S.
INCOME VALUE EQUITY MID-CAP VALUE SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------
Investment income
<S> <C> <C> <C> <C>
Distributions...................................... $ 51,165 $ 6,780 $ 20,315 $ -
Expenses
Mortality, expense risk and administrative charges. 55,910 12,530 10,223 268,787
------------ ----------- ------------ -----------
Net investment income (loss).............................. (4,745) (5,750) 10,092 (268,787)
------------ ----------- ------------ -----------
Net realized gain (loss) from share transactions.......... (252) 3,904 (25,572) 72,743
Net realized gain distribution from Fund.................. 119,133 142,030 - 2,967,831
Net unrealized appreciation (depreciation) on investment.. 1,012,913 291,974 (130,299) 4,934,358
------------ ----------- ------------ -----------
Net gain (loss) on investments............................ 1,131,794 437,908 (155,871) 7,974,932
------------ ----------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations................................................ $ 1,127,049 $ 432,158 $ (145,779) $ 7,706,145
============ =========== ============ ===========
WANGER TEMPLETON
INTERNATIONAL TEMPLETON ASSET TEMPLETON
SMALL CAP STOCK ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ---------------- ---------------- ----------------
Investment income
Distributions...................................... $ 190,889 $ 1,255 $ 844 $ 3,225
Expenses
Mortality, expense risk and administrative charges. 123,317 1,324 1,149 4,112
------------ ----------- ------------ -----------
Net investment income (loss).............................. 67,572 (69) (305) (887)
------------ ----------- ------------ -----------
Net realized gain (loss) from share transactions.......... 28,287 1,336 172 16,281
Net realized gain distribution from Fund.................. - 6,648 5,190 12,000
Net unrealized appreciation (depreciation) on investment.. 15,112,035 42,995 26,220 129,839
------------ ----------- ------------ -----------
Net gain (loss) on investments............................ 15,140,322 50,979 31,582 158,120
------------ ----------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations................................................ $ 15,207,894 $ 50,910 $ 31,277 $ 157,233
============ =========== ============ ===========
TEMPLETON
DEVELOPING MUTUAL SHARES WANGER WANGER
MARKETS INVESTMENTS TWENTY FOREIGN FORTY
SUBACCOUNT SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
--------------- ---------------- ---------------- ----------------
Investment income
Distributions...................................... $ 265 $ 156 $ - $ -
Expenses
Mortality, expense risk and administrative charges. 2,573 1,498 2,874 1,627
------------ ----------- ------------ -----------
Net investment income (loss).............................. (2,308) (1,342) (2,874) (1,627)
------------ ----------- ------------ -----------
Net realized gain (loss) from share transactions.......... (584) 382 12,711 7,285
Net realized gain distribution from Fund.................. - - - -
Net unrealized appreciation (depreciation) on investment.. 117,427 9,335 65,825 214,413
------------ ----------- ------------ -----------
Net gain (loss) on investments............................ 116,843 9,717 78,536 221,698
------------ ----------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations................................................ $ 114,535 $ 8,375 $ 75,662 $ 220,071
============ =========== ============ ===========
</TABLE>
(1) From inception February 5, 1999 to December 31, 1999
(2) From inception February 9, 1999 to December 31, 1999
See Notes to Financial Statements
34
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
FEDERATED FEDERATED
EAFE BANKERS U.S. GOV'T HIGH INCOME
EQUITY INDEX TRUST DOW 30 SECURITIES II BOND FUND II
SUBACCOUNT(3) SUBACCOUNT(4) SUBACCOUNT(5) SUBACCOUNT(6)
---------------- --------------- ---------------- ----------------
Investment income
<S> <C> <C> <C> <C>
Distributions.................................... $ 3,673 $ 6 $ - $ -
Expenses
Mortality, expense risk and administrative
charges.......................................... 364 0 144 287
------------ ---------- ------------ -----------
Net investment income (loss)............................ 3,309 6 (144) (287)
------------ ---------- ------------ -----------
Net realized gain (loss) from share transactions........ (2) - (0) (11)
Net realized gain distribution from Fund................ 6,862 - - -
Net unrealized appreciation (depreciation) on investment 18,079 22 214 3,106
------------ ---------- ------------ -----------
Net gain (loss) on investments.......................... 24,939 22 214 3,095
------------ ---------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations.............................................. $ 28,248 $ 28 $ 70 $ 2,808
============ ========== ============ ===========
JANUS JANUS FLEXIBLE MORGAN STANLEY
EQUITY INCOME JANUS GROWTH INCOME FOCUS EQUITY
SUBACCOUNT(7) SUBACCOUNT(8) SUBACCOUNT(9) SUBACCOUNT(10)
---------------- --------------- ---------------- ---------------
Investment income
Distributions.................................... $ - $ - $ 9 $ -
Expenses
Mortality, expense risk and administrative
charges.......................................... 1 16 1 0
------------ ---------- ------------ -----------
Net investment income (loss)............................ (1) (16) 8 -
------------ ---------- ------------ -----------
Net realized gain (loss) from share transactions........ - 0 (0) 1
Net realized gain distribution from Fund................ - - - -
Net unrealized appreciation (depreciation) on investment 209 2,162 (7) 74
------------ ---------- ------------ -----------
Net gain (loss) on investments.......................... 209 2,162 (7) 75
------------ ---------- ------------ -----------
Net increase (decrease) in net assets resulting from
operations.............................................. $ 208 $ 2,146 $ 1 $ 75
============ ========== ============ ===========
</TABLE>
TECHNOLOGY
PORTFOLIO
SUBACCOUNT(11)
----------------
Investment income
Distributions.................................... $ -
Expenses
Mortality, expense risk and administrative
charges.......................................... 12
------------
Net investment income (loss)............................ (12)
------------
Net realized gain (loss) from share transactions........ (0)
Net realized gain distribution from Fund................ -
Net unrealized appreciation (depreciation) on investment 2,402
------------
Net gain (loss) on investments.......................... 2,402
------------
Net increase (decrease) in net assets resulting from
operations.............................................. $ 2,390
============
(3) From inception July 20, 1999 to December 31, 1999
(4) From inception December 23, 1999 to December 31, 1999
(5) From inception August 5, 1999 to December 31, 1999
(6) From inception August 2, 1999 to December 31, 1999
(7) From inception December 23, 1999 to December 31, 1999
(8) From inception December 20, 1999 to December 31, 1999
(9) From inception December 21, 1999 to December 31, 1999
(10) From inception December 21, 1999 to December 31, 1999
(11) From inception December 20, 1999 to December 31, 1999
See Notes to Financial Statements
35
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
GOODWIN
GOODWIN ENGEMANN MULTI-SECTOR
MONEY MARKET CAPITAL GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- ------------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss)........................... $ 1,164,742 $ (2,013,785) $ 1,288,635
Net realized gain (loss)............................... - 33,911,603 1,383
Net unrealized appreciation (depreciation)............. - 67,520,555 (510,719)
--------------- --------------- --------------
Net increase (decrease) resulting from operations...... 1,164,742 99,418,373 779,299
--------------- --------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 45,745,678 55,380,624 3,185,838
Participant transfers.................................. (32,514,036) 2,056,950 10,155
Participant withdrawals................................ (7,462,353) (39,295,629) (1,861,647)
--------------- --------------- --------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 5,769,289 18,141,945 1,334,346
--------------- --------------- --------------
Net increase (decrease) in net assets.................. 6,934,031 117,560,318 2,113,645
NET ASSETS
Beginning of period.................................... 29,216,265 330,876,691 16,329,581
--------------- --------------- --------------
End of period.......................................... $ 36,150,296 $ 448,437,009 $ 18,443,226
=============== =============== ==============
OAKHURST
STRATEGIC ABERDEEN OAKHURST
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 672,947 $ 1,046,070 $ 487,789
Net realized gain (loss)............................... 2,428,632 9,071,400 1,103,384
Net unrealized appreciation (depreciation)............. 1,547,396 6,988,805 1,469,608
--------------- --------------- --------------
Net increase (decrease) resulting from operations...... 4,648,975 17,106,275 3,060,781
--------------- --------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 5,766,295 8,895,302 4,014,520
Participant transfers.................................. 426,167 (2,116,044) 785,289
Participant withdrawals................................ (4,114,288) (6,140,365) (3,398,123)
--------------- --------------- --------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 2,078,174 638,893 1,401,686
--------------- --------------- --------------
Net increase (decrease) in net assets.................. 6,727,149 17,745,168 4,462,467
NET ASSETS
Beginning of period.................................... 42,856,751 59,439,168 27,159,252
--------------- --------------- --------------
End of period.......................................... $ 49,583,900 $ 77,184,336 $ 31,621,719
=============== =============== ==============
DUFF & PHELPS
REAL ESTATE SENECA ABERDEEN
SECURITIES STRATEGIC NEW ASIA
SUBACCOUNT THEME SUBACCOUNT SUBACCOUNT
------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 170,232 $ (114,711) $ 5,054
Net realized gain (loss)............................... (8,551) 2,870,443 4,188
Net unrealized appreciation (depreciation)............. (25,923) 4,256,078 869,485
--------------- --------------- --------------
Net increase (decrease) resulting from operations...... 135,758 7,011,810 878,727
--------------- --------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 1,205,811 3,459,133 500,215
Participant transfers.................................. (767,489) 7,228,439 378,701
Participant withdrawals................................ (441,550) (1,588,498) (180,470)
--------------- --------------- --------------
Net increase (decrease) in net assets resulting
from participant transactions.................. (3,228) 9,099,074 698,446
--------------- --------------- --------------
Net increase (decrease) in net assets.................. 132,530 16,110,884 1,577,173
NET ASSETS
Beginning of period.................................... 3,885,577 8,060,955 1,478,417
--------------- --------------- --------------
End of period.......................................... $ 4,018,107 $ 24,171,839 $ 3,055,590
=============== =============== ==============
</TABLE>
See Notes to Financial Statements
36
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
RESEARCH ENHANCED ENGEMANN SENECA
INDEX NIFTY FIFTY MID-CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- -----------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss)........................... $ 37,542 $ (40,023) $ (13,409)
Net realized gain (loss)............................... 1,404,348 817 79,098
Net unrealized appreciation (depreciation)............. 2,060,618 1,626,903 871,293
-------------- -------------- -------------
Net increase (decrease) resulting from operations...... 3,502,508 1,587,697 936,982
-------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 4,764,435 1,600,829 550,378
Participant transfers.................................. 9,507,736 4,539,540 896,097
Participant withdrawals................................ (2,366,241) (663,615) (177,076)
-------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 11,905,930 5,476,754 1,269,399
-------------- -------------- -------------
Net increase (decrease) in net assets.................. 15,408,438 7,064,451 2,206,381
NET ASSETS
Beginning of period.................................... 12,727,051 1,742,007 949,433
-------------- -------------- -------------
End of period.......................................... $ 28,135,489 $ 8,806,458 $ 3,155,814
============== ============== =============
OAKHURST HOLLISTER SCHAFER
GROWTH AND INCOME VALUE EQUITY MID-CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- -----------------
FROM OPERATIONS
Net investment income (loss)........................... $ (4,745) $ (5,750) $ 10,092
Net realized gain (loss)............................... 118,881 145,934 (25,572)
Net unrealized appreciation (depreciation)............. 1,012,913 291,974 (130,299)
-------------- -------------- -------------
Net increase (decrease) resulting from operations...... 1,127,049 432,158 (145,779)
-------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 2,435,487 547,053 436,822
Participant transfers.................................. 4,170,995 999,772 435,382
Participant withdrawals................................ (964,227) (185,449) (117,678)
-------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 5,642,255 1,361,376 754,526
-------------- -------------- -------------
Net increase (decrease) in net assets.................. 6,769,304 1,793,534 608,747
NET ASSETS
Beginning of period.................................... 3,332,765 816,820 892,317
-------------- -------------- -------------
End of period.......................................... $ 10,102,069 $ 2,610,354 $ 1,501,064
============== ============== =============
WANGER
WANGER U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- -----------------
FROM OPERATIONS
Net investment income (loss)........................... $ (268,787) $ 67,572 $ (69)
Net realized gain (loss)............................... 3,040,574 28,287 7,984
Net unrealized appreciation (depreciation)............. 4,934,358 15,112,035 42,995
-------------- -------------- -------------
Net increase (decrease) resulting from operations...... 7,706,145 15,207,894 50,910
-------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 7,502,489 3,435,101 154,926
Participant transfers.................................. (622,831) 956,598 102,914
Participant withdrawals................................ (4,086,854) (1,563,997) (37,586)
-------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 2,792,804 2,827,702 220,254
-------------- -------------- -------------
Net increase (decrease) in net assets.................. 10,498,949 18,035,596 271,164
NET ASSETS
Beginning of period.................................... 31,236,667 11,211,868 27,392
-------------- -------------- -------------
End of period.......................................... $ 41,735,616 $ 29,247,464 $ 298,556
============== ============== =============
</TABLE>
See Notes to Financial Statements
37
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
TEMPLETON
TEMPLETON ASSET TEMPLETON DEVELOPING
ALLOCATION INTERNATIONAL MARKETS
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------- ------------------- ------------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss)........................... $ (305) $ (887) $ (2,308)
Net realized gain (loss)............................... 5,362 28,281 (584)
Net unrealized appreciation (depreciation)............. 26,220 129,839 117,427
------------- ------------- -------------
Net increase (decrease) resulting from operations...... 31,277 157,233 114,535
------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 59,531 188,339 140,700
Participant transfers.................................. 180,739 950,796 564,459
Participant withdrawals................................ (20,055) (78,924) (65,725)
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 220,215 1,060,211 639,434
------------- ------------- -------------
Net increase (decrease) in net assets.................. 251,492 1,217,444 753,969
NET ASSETS
Beginning of period.................................... 37,559 53,468 10,665
------------- ------------- -------------
End of period.......................................... $ 289,051 $ 1,270,912 $ 764,634
============= ============= =============
MUTUAL SHARES WANGER
INVESTMENTS WANGER TWENTY FOREIGN FORTY
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
-------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ (1,342) $ (2,874) $ (1,627)
Net realized gain (loss)............................... 382 12,711 7,285
Net unrealized appreciation (depreciation)............. 9,335 65,825 214,413
------------- ------------- -------------
Net increase (decrease) resulting from operations...... 8,375 75,662 220,071
------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 131,902 173,164 61,520
Participant transfers.................................. 245,705 492,271 341,129
Participant withdrawals................................ (28,647) (54,736) (20,037)
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 348,960 610,699 382,612
------------- ------------- -------------
Net increase (decrease) in net assets.................. 357,334 686,361 602,683
NET ASSETS
Beginning of period.................................... 53,771 - -
------------- ------------- -------------
End of period.......................................... $ 411,105 $ 686,361 $ 602,683
============= ============= =============
BANKERS FEDERATED
EAFE TRUST U.S. GOV'T
EQUITY INDEX DOW 30 SECURITIES II
SUBACCOUNT(3) SUBACCOUNT(4) SUBACCOUNT(5)
-------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 3,309 $ 6 $ (144)
Net realized gain (loss)............................... 6,860 - (0)
Net unrealized appreciation (depreciation)............. 18,079 22 214
------------- ------------- -------------
Net increase (decrease) resulting from operations...... 28,248 28 70
------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 25,625 - 2,203
Participant transfers.................................. 185,637 5,262 79,165
Participant withdrawals................................ (1,781) (8) (1,778)
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 209,481 5,254 79,590
------------- ------------- -------------
Net increase (decrease) in net assets.................. 237,729 5,282 79,660
NET ASSETS
Beginning of period.................................... - - -
------------- ------------- -------------
End of period.......................................... $ 237,729 $ 5,282 $ 79,660
============= ============= =============
</TABLE>
See Notes to Financial Statements
38
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
FEDERATED
HIGH INCOME JANUS
BOND FUND II EQUITY INCOME JANUS GROWTH
SUBACCOUNT(6) SUBACCOUNT(7) SUBACCOUNT(8)
------------------- ---------------------------------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss).......................... $ (287) $ (1) $ (16)
Net realized gain (loss).............................. (11) - 0
Net unrealized appreciation (depreciation)............ 3,106 209 2,162
------------- ------------- ------------
Net increase (decrease) resulting from operations..... 2,808 208 2,146
------------- ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits.................................. 298 - 2,047
Participant transfers................................. 177,083 13,201 175,407
Participant withdrawals............................... (982) (11) (93)
------------- ------------- ------------
Net increase (decrease) in net assets resulting
from participant transactions................. 176,399 13,190 177,361
------------- ------------- ------------
Net increase (decrease) in net assets................. 179,207 13,398 179,507
NET ASSETS
Beginning of period................................... - - -
------------- ------------- ------------
End of period......................................... $ 179,207 $ 13,398 $ 179,507
============= ============= ============
JANUS MORGAN STANLEY TECHNOLOGY
FLEXIBLE INCOME FOCUS EQUITY PORTFOLIO
SUBACCOUNT(9) SUBACCOUNT(10) SUBACCOUNT(11)
------------------- ------------------- ------------------
FROM OPERATIONS
Net investment income (loss)........................... $ 8 $ - $ (12)
Net realized gain (loss)............................... (0) 1 (0)
Net unrealized appreciation (depreciation)............. (7) 74 2,402
------------- ------------- ------------
Net increase (decrease) resulting from operations...... 1 75 2,390
------------- ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... - - 314
Participant transfers.................................. 4,355 2,045 109,577
Participant withdrawals................................ (42) (47) (157)
------------- ------------- ------------
Net increase (decrease) in net assets resulting
from participant transactions.................. 4,313 1,998 109,734
------------- ------------- ------------
Net increase (decrease) in net assets.................. 4,314 2,073 112,124
NET ASSETS
Beginning of period.................................... - - -
------------- ------------- ------------
End of period.......................................... $ 4,314 $ 2,073 $ 112,124
============= ============= ============
</TABLE>
Footnotes for Statement of Changes in Net Assets for the period ended
December 31, 1999
(1) From inception February 5, 1999 to December 31, 1999
(2) From inception February 9, 1999 to December 31, 1999
(3) From inception July 20, 1999 to December 31, 1999
(4) From inception December 23, 1999 to December 31, 1999
(5) From inception August 5, 1999 to December 31, 1999
(6) From inception August 2, 1999 to December 31, 1999
(7) From inception December 23, 1999 to December 31, 1999
(8) From inception December 20, 1999 to December 31, 1999
(9) From inception December 21, 1999 to December 31, 1999
(10) From inception December 21, 1999 to December 31, 1999
(11) From inception December 20, 1999 to December 31, 1999
See Notes to Financial Statements
39
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
GOODWIN
GOODWIN ENGEMANN MULTI-SECTOR
MONEY MARKET CAPITAL GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------- ------------
FROM OPERATIONS
<S> <C> <C> <C>
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
============ ============ ============
OAKHURST
STRATEGIC ABERDEEN OAKHURST
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
============ ============ ============
DUFF & PHELPS
REAL ESTATE SENECA ABERDEEN
SECURITIES 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
40
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
RESEARCH SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
----------- ------------- -------------
FROM OPERATIONS
<S> <C> <C> <C>
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
=========== =========== ===========
OAKHURST GROWTH HOLLISTER VALUE SCHAFER
AND INCOME EQUITY MID-CAP VALUE
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)..................................... $ (196,294) $ 19,117 $ (8)
Net realized gain (loss)......................................... 1,128,070 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
41
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT(3) SUBACCOUNT(4)
------------- -------------
FROM OPERATIONS
<S> <C> <C>
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
42
<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, Flex Edge Success and Phoenix
Individual Edge(SM) for individual variable life insurance and as Joint Edge for
variable first-to-die joint life insurance. The Account was established January
1, 1987 and currently consists of 34 Subaccounts, that invest in a corresponding
series (the "Series") of The Phoenix Edge Series Fund, Wanger Advisors Trust,
the Templeton Variable Products Series Fund, BT Insurance Funds Trust, Federated
Insurance Series, and Morgan Stanley Dean Witter Universal Funds, Inc. (the
"Funds"). As of December 31, 1999, 33 of the available 34 Subaccounts were
invested in a corresponding series.
Each Series has distinct investment objectives. The Phoenix-Goodwin Money
Market Series seeks to provide maximum current income consistent with capital
preservation and liquidity. The Phoenix-Engemann Capital Growth Series seeks to
achieve intermediate and long-term growth of capital, with income as a secondary
consideration. The Phoenix-Goodwin 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 Phoenix-Oakhurst 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 Phoenix-Aberdeen 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
Phoenix-Oakhurst Balanced Series seeks to provide reasonable income, long-term
growth and conservation of capital. The Phoenix-Duff & Phelps Real Estate
Securities 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
Phoenix-Seneca 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 Phoenix-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
Phoenix Research 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 Phoenix-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 Phoenix-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 Phoenix-Oakhurst Growth and Income
Series seeks as its investment objective, dividend growth, current income and
capital appreciation by investing in common stocks. The Phoenix-Hollister 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 Phoenix-Schafer Mid-Cap Value 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 Fund
is a capital growth common stock fund. The Templeton Asset Allocation Fund
invests in stocks and debt obligations of companies and governments and money
market instruments seeking high total return. The Templeton International Fund
invests in stocks and debt obligations of companies and governments outside the
United States. The Templeton Developing Markets Fund seeks long-term capital
appreciation by investing in equity securities of issuers in countries having
developing markets. The Mutual Shares Investments Fund is a capital appreciation
fund with income as a secondary objective. The Wanger Twenty Series invests in
growth common stock of U.S. companies with market capitalizations of $1 billion
to $10 billion, focusing its investments in 20 to 25 U.S. companies. The Wanger
Foreign Forty Series invests in equity securities of foreign companies with
market capitalizations of $1 billion to $10 billion, focusing its investments in
40 to 60 companies in the developed markets. The EAFE(R) Equity Index Fund seeks
to match the performance of the Morgan Stanley Capital International EAFE(R)
Index, by investing in a statistically selected sample of the securities found
in the matching fund. The Phoenix-Bankers Trust Dow 30 Series seeks to track the
total return of the Dow Jones Industrial Average(SM) before fund expenses. The
Federated Fund for U.S. Government Securities II Series seeks high current
income by investing in U.S. government securities, including mortgage-backed
securities issued by U.S. government agencies. The Federated High Income Bond
Fund II Series seeks high current income by investing in a diversified portfolio
of high-yield, lower-rated corporate bonds. The Phoenix-Janus Equity Income
Series seeks current income and long-term capital growth. The Phoenix-Janus
Growth Series seeks long-term capital growth, consistent with the preservation
of capital. The Phoenix-Janus Flexible Income Series seeks to obtain maximum
total return, consistent with the preservation of capital. The Phoenix-Morgan
Stanley Focus Equity Series seeks capital appreciation by investing in equity
securities. The Technology Portfolio seeks long-term capital appreciation by
investing in equity securities involved with technology and technology-related
industries. The Phoenix-Federated U.S. Government Bond Series seeks to maximize
total return by investing in debt obligations of the U.S. Government, its
agencies and instrumentalities. Policyowners also may direct the allocation of
their investments between the Account and the Guaranteed Interest Account of the
general account of Phoenix.
43
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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: Investment transactions are
recorded on the trade date. 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 from the Funds are recorded on the
ex-dividend date.
E. USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
F. RECLASSIFICATION: Certain prior year amounts have been reclassified to
conform with the current year presentation.
G. NEW POLICY: The Phoenix Individual Edge(SM) policy for individual variable
life insurance became available on September 29, 1999.
44
<PAGE>
<TABLE>
<CAPTION>
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, 1999 aggregated the
following:
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
The Phoenix Edge Series Fund:
<S> <C> <C>
Goodwin Money Market............................................. $33,495,067 $26,555,874
Engemann Capital Growth ......................................... 74,033,835 24,111,273
Goodwin Multi-Sector Fixed Income ............................... 5,868,418 3,244,388
Oakhurst Strategic Allocation ................................... 9,076,076 3,897,253
Aberdeen International .......................................... 18,752,892 8,032,462
Oakhurst Balanced ............................................... 6,346,417 3,363,406
Duff & Phelps Real Estate Securities ............................ 1,330,693 1,163,730
Seneca Strategic Theme .......................................... 12,653,974 785,927
Aberdeen New Asia ............................................... 1,134,066 429,531
Research Enhanced Index ......................................... 15,082,056 1,736,738
Engemann Nifty Fifty ............................................ 5,731,136 289,707
Seneca Mid-Cap Growth ........................................... 1,649,525 317,823
Oakhurst Growth and Income ...................................... 6,420,518 659,216
Hollister Value Equity .......................................... 1,748,541 249,747
Schafer Mid-Cap Value ........................................... 1,411,397 646,140
Wanger Advisors Trust:
Wanger U.S. Small Cap ........................................... 10,400,568 4,901,698
Wanger International Small Cap .................................. 4,742,166 1,836,452
Templeton Variable Products Series Fund:
Templeton Stock ................................................. 351,351 124,342
Templeton Asset Allocation ...................................... 271,700 46,422
Templeton International ......................................... 2,054,415 982,343
Templeton Developing Markets .................................... 808,607 171,019
Mutual Shares Investments ....................................... 393,638 45,785
Wanger Advisors Trust:
Wanger Twenty ................................................... 889,150 280,909
Wanger Foreign Forty ............................................ 432,653 51,333
BT Insurance Funds Trust:
EAFE Equity Index ............................................... 222,009 2,217
The Phoenix Edge Series Fund:
Bankers Trust Dow 30............................................. 5,260 -
Federated Insurance Series:
Federated U.S. Gov't Securities II .............................. 80,752 1,255
Federated High Income Bond Fund II .............................. 177,166 935
The Phoenix Edge Series Fund:
Janus Equity Income ............................................. 13,190 -
Janus Growth .................................................... 177,370 9
Janus Flexible Income ........................................... 4,363 41
Morgan Stanley Focus Equity...................................... 2,045 47
Morgan Stanley Dean Witter Universal Funds, Inc.:
Technology Portfolio ............................................ 109,761 27
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 4--PARTICIPANT ACCUMULATION UNIT TRANSACTIONS FOR THE PERIOD ENDED DECEMBER 31, 1999 (IN UNITS)
SUBACCOUNT
-----------------------------------------------------------------------------------------------------------
FLEX EDGE, FLEX EDGE GOODWIN ENGEMANN GOODWIN OAKHURST DUFF & PHELPS SENECA
SUCCESS & PHOENIX MONEY CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN OAKHURST REAL ESTATE STRATEGIC ABERDEEN
INDIVIDUAL EDGE MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED SECURITIES THEME NEW ASIA
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding,
beginning of period 18,764,711 58,070,016 7,146,215 12,360,921 24,601,859 12,394,644 2,939,763 4,370,324 2,170,887
Participant deposits 27,953,338 8,920,090 1,344,384 1,568,311 3,334,503 1,708,170 841,453 1,567,951 584,634
Participant transfers (20,200,183) 312,980 3,872 142,045 (839,990) 466,023 (601,799) 3,457,469 474,138
Participant withdrawals (4,552,133) (6,342,974) (780,831) (1,128,849) (2,330,455)(1,486,306) (272,453) (688,258) (200,630)
---------- ---------- ------------ ---------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 21,965,733 60,960,112 7,713,640 12,942,428 24,765,917 13,082,531 2,906,964 8,707,486 3,029,029
========== ========== ============ =========== ============= ========== ============= ========= =========
GOODWIN ENGEMANN GOODWIN OAKHURST DUFF & PHELPS SENECA
MONEY CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN OAKHURST REAL ESTATE STRATEGIC ABERDEEN
JOINT EDGE MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED SECURITIES THEME NEW ASIA
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 681,030 2,968,505 318,985 493,297 1,259,824 571,300 206,022 459,009 156,871
Participant deposits 1,912,344 775,545 87,126 117,706 293,147 129,765 86,734 172,388 62,272
Participant transfers (1,105,218) 74,557 (6,514) (11,425) (9,104) (84,914) (22,474) 185,351 (6,604)
Participant withdrawals (316,180) (476,097) (53,999) (68,444) (171,042) (60,107) (47,675) (106,493) (29,525)
---------- ---------- ------------ ---------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 1,171,976 3,342,510 345,598 531,134 1,372,825 556,044 222,607 710,255 183,014
========== ========== ============ =========== ============= ========== ============= ========= =========
WANGER
FLEX EDGE, FLEX EDGE RESEARCH ENGEMANN SENECA OAKHURST HOLLISTER SCHAFER INTER-
SUCCESS & PHOENIX ENHANCED NIFTY MID-CAP GROWTH AND VALUE MID-CAP WANGER U.S. NATIONAL TEMPLETON
INDIVIDUAL EDGE INDEX FIFTY GROWTH INCOME EQUITY VALUE SMALL CAP SMALL CAP STOCK
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 8,854,127 1,338,048 739,501 2,624,544 694,612 973,879 20,637,042 9,044,236 27,527
Participant deposits 2,964,456 1,068,340 406,906 1,746,319 433,099 491,001 4,520,028 2,098,693 162,970
Participant transfers 6,184,903 3,105,959 700,507 3,149,035 843,409 456,676 (614,474) 212,261 104,654
Participant withdrawals (1,474,710) (425,892) (122,229) (678,841) (144,810) (125,623) (2,455,459) (935,725) (62,981)
---------- ---------- ------------ ---------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 16,528,776 5,086,455 1,724,685 6,841,057 1,826,310 1,795,933 22,087,137 10,419,465 232,170
========== ========== ============ =========== ============= ========== ============ ========== =========
WANGER
RESEARCH ENGEMANN SENECA OAKHURST HOLLISTER SCHAFER INTER-
ENHANCED NIFTY MID-CAP GROWTH AND VALUE MID-CAP WANGER U.S. NATIONAL TEMPLETON
JOINT EDGE INDEX FIFTY GROWTH INCOME EQUITY VALUE SMALL CAP SMALL CAP STOCK
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 287,730 50,544 62,386 160,364 53,394 39,582 1,090,407 631,151 7
Participant deposits 202,209 73,307 44,243 173,719 45,265 53,636 446,923 212,857 2,773
Participant transfers 219,285 194,347 33,474 173,119 35,912 49,425 (24,997) 71,943 500
Participant withdrawals (95,971) (50,774) (20,051) (76,304) (22,963) (23,116) (203,150) (101,647) (598)
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 613,253 267,424 120,052 430,898 111,608 119,527 1,309,183 814,304 2,682
========== ========== ============ =========== ============= ========== ============= ========= =========
FEDERATED
FLEX EDGE, FLEX EDGE TEMPLETON TEMPLETON TEMPLETON MUTUAL WANGER BANKERS U.S. GOV'T
SUCCESS & PHOENIX ASSET INTER- DEVELOPING SHARES WANGER FOREIGN EAFE EQUITY TRUST SECURITIES
INDIVIDUAL EDGE ALLOCATION NATIONAL MARKETS INVESTMENTS TWENTY FORTY INDEX DOW 30 II
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 37,125 48,772 9,999 54,032 - - - - -
Participant deposits 54,848 159,501 99,633 123,591 135,991 42,695 23,991 - 2,031
Participant transfers 162,049 831,226 389,495 224,829 374,340 287,804 166,371 5,249 76,174
Participant withdrawals (20,462) (65,860) (40,038) (28,918) (33,888) (17,034) (1,552) (8) (1,714)
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 233,560 973,639 459,089 373,534 476,443 313,465 188,810 5,241 76,491
========== ========== ============ =========== ============= ========== ============= ========= =========
FEDERATED
TEMPLETON TEMPLETON TEMPLETON MUTUAL WANGER BANKERS U.S. GOV'T
ASSET INTER- DEVELOPING SHARES WANGER FOREIGN EAFE EQUITY TRUST SECURITIES
JOINT EDGE ALLOCATION NATIONAL MARKETS INVESTMENTS TWENTY FORTY INDEX DOW 30 II
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding,
beginning of period 104 2,643 75 - - - - - -
Participant deposits 2,163 8,500 1,927 1,233 4,104 166 692 - 135
Participant transfers 476 17,758 21,497 6,716 24,814 4,134 11,598 - 2,188
Participant withdrawals (641) (3,051) (7,712) (509) (9,291) (363) (108) - (37)
---------- ---------- ------------ ----------- ------------- ---------- ------------- --------- ---------
Units outstanding, end
of period 2,102 25,850 15,787 7,440 19,627 3,937 12,182 - 2,286
========== ========== ============ =========== ============= ========== ============= ========= =========
FEDERATED
HIGH
FLEX EDGE, FLEX EDGE INCOME JANUS JANUS MORGAN
SUCCESS & PHOENIX BOND EQUITY JANUS FLEXIBLE STANLEY TECHNOLOGY
INDIVIDUAL EDGE FUND II INCOME GROWTH INCOME FOCUS EQUITY PORTFOLIO
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding, - - - - - -
beginning of period
Participant deposits 302 - 1,976 - - 300
Participant transfers 180,481 12,460 169,757 4,354 2,046 84,516
Participant withdrawals (995) (11) (130) (42) (46) (124)
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding, end 179,788 12,449 171,603 4,312 2,000 84,692
of period ========== ========== ============ =========== ============= ==========
FEDERATED
HIGH
INCOME JANUS JANUS MORGAN
BOND EQUITY JANUS FLEXIBLE STANLEY TECHNOLOGY
JOINT EDGE FUND II INCOME GROWTH INCOME FOCUS EQUITY PORTFOLIO
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding,
beginning of period - - - - - -
Participant deposits - - - - - -
Participant transfers - 755 - - - 19,693
Participant withdrawals - - 568 - - (25)
---------- ---------- ------------ ----------- ------------- ----------
Units outstanding, end
of period - 755 568 - - 19,668
========== ========== ============ =========== ============= ==========
</TABLE>
46
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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 the policy value
reduced by an amount equal to the surrender charge with interest of [4% due in
policy years 1-10, 3% due in policy years 11-15, 2 1/2% in policy years 16 and
thereafter for Flex Edge Success policies], [4% due in policy years 1-10, 3% due
in policy years 11-15, 2 1/4% in policy years 16 and thereafter for Phoenix
Individual Edge(SM)] and [8% due in policy years 1-10 and 7% in policy years 11
and thereafter for Flex Edge and Joint Edge policies] 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 and Phoenix
Individual Edge(SM) policies, and 6% for Joint Edge and Flex Edge policies. Loan
repayments result in a transfer of collateral back to the Account.
NOTE 6--INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
Phoenix and its indirect, majority owned subsidiary, Phoenix Equity Planning
Corporation ("PEPCO"), 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 $36,655,692 during the year ended December 31, 1999. 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.
PEPCO is the principal underwriter and distributor of the Account. PEPCO 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 and Phoenix Individual Edge(SM), 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.
47
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO] PRICEWATERHOUSECOOPERS
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 statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts:
Goodwin Money Market, Engemann Capital Growth, Goodwin Multi-Sector Fixed
Income, Oakhurst Strategic Allocation, Aberdeen International, Oakhurst
Balanced, Duff & Phelps Real Estate Securities, Seneca Strategic Theme, Aberdeen
New Asia, Research Enhanced Index, Engemann Nifty Fifty, Seneca Mid-Cap Growth,
Oakhurst Growth and Income, Hollister Value Equity, Schafer Mid-Cap Value,
Wanger U.S. Small Cap, Wanger International Small Cap, Templeton Stock,
Templeton Asset Allocation, Templeton International, Templeton Developing
Markets, Mutual Shares Investments, Wanger Twenty, Wanger Foreign Forty, EAFE
Equity Index, Bankers Trust Dow 30, Federated U.S. Government Securities II,
Federated High Income Bond Fund II, Janus Equity Income, Janus Growth, Janus
Flexible Income, Morgan Stanley Focus Equity and Technology Portfolio
(constituting the Phoenix Home Life Variable Universal Life Account, hereafter
referred to as the "Account") at December 31, 1999, 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 accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Account's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at December 31, 1999 by
correspondence with fund custodians or transfer agents, provide a reasonable
basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
March 10, 2000
48
<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
100 Pearl Street
Hartford, Connecticut 06103
- ----------------------------
49
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
50
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants ........................................52
Consolidated Balance Sheet at December 31, 1999 and 1998..................53
Consolidated Statement of Income, Comprehensive Income and Equity
for the Years Ended December 31, 1999, 1998 and 1997 ....................54
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ........................................55
Notes to Consolidated Financial Statements ............................56-92
51
<PAGE>
[LOGO] PRICEWATERHOUSECOOPERS
- --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
100 Pearl Street
Hartford CT 06103-4508
Telephone (860)241 7000
Facsimile (860)241 7590
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
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,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, 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 20, the Company has revised the accounting for venture
capital partnerships.
/S/PricewaterhouseCoopers LLP
February 15, 2000
52
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
ASSETS
Investments:
<S> <C> <C>
Held-to-maturity debt securities, at amortized cost $ 1,990,169 $ 1,725,439
Available-for-sale debt securities, at fair value 5,506,779 5,987,426
Equity securities, at fair value 461,613 301,649
Mortgage loans 716,831 797,343
Real estate 92,027 91,975
Policy loans 2,042,557 2,008,259
Venture capital partnerships 338,122 191,162
Other invested assets 300,474 232,131
Short-term investments 133,367 185,983
------------------- -----------------
Total investments 11,581,939 11,521,367
Cash and cash equivalents 187,610 115,187
Accrued investment income 174,894 164,812
Deferred policy acquisition costs 1,306,728 1,049,934
Premiums, accounts and notes receivable 119,231 61,489
Reinsurance recoverables 18,772 18,908
Property and equipment, net 137,758 142,153
Goodwill and other intangible assets, net 593,267 477,895
Net assets of discontinued operations (Note 11) 187,595 283,793
Other assets 51,434 36,940
Separate account assets 5,923,888 4,798,949
------------------ -----------------
Total assets $ 20,283,116 $ 18,671,427
================== =================
LIABILITIES
Policy liabilities and accruals $ 11,438,032 $ 11,110,280
Notes payable 499,392 386,575
Deferred income taxes 86,262 116,104
Other liabilities 474,179 430,956
Separate account liabilities 5,923,888 4,798,949
------------------- -----------------
Total liabilities 18,421,753 16,842,864
------------------- -----------------
Contingent liabilities (Note 18)
MINORITY INTEREST IN NET ASSETS
OF CONSOLIDATED SUBSIDIARIES 100,112 92,008
------------------- -----------------
EQUITY
Retained earnings 1,731,146 1,642,264
Accumulated other comprehensive income 30,105 94,291
------------------- -----------------
Total equity 1,761,251 1,736,555
------------------- -----------------
Total liabilities and equity $ 20,283,116 $ 18,671,427
=================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
53
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
REVENUES
<S> <C> <C> <C>
Premiums $ 1,134,207 $ 1,154,730 $ 1,076,157
Insurance and investment product fees 591,786 493,415 367,540
Net investment income 950,344 851,603 714,367
Net realized investment gains 35,675 58,202 111,043
-------------- --------------- ------------
Total revenues 2,712,012 2,557,950 2,269,107
-------------- --------------- ------------
BENEFITS AND EXPENSES
Policy benefits and increase in policy liabilities 1,352,419 1,403,166 1,201,929
Policyholder dividends 360,509 351,653 343,611
Amortization of deferred policy acquisition costs 146,603 137,663 102,617
Amortization of goodwill and other intangible assets 37,963 23,126 9,366
Interest expense 32,659 25,911 24,300
Other operating expenses 520,603 428,756 367,016
-------------- --------------- ------------
Total benefits and expenses 2,450,756 2,370,275 2,048,839
-------------- --------------- ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST 261,256 187,675 220,268
Income taxes 107,881 65,046 47,241
-------------- --------------- ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST 153,375 122,629 173,027
Minority interest in net income of consolidated subsidiaries 10,064 10,512 10,623
-------------- --------------- ------------
NET INCOME FROM CONTINUING OPERATIONS 143,311 112,117 162,404
DISCONTINUED OPERATIONS (NOTE 11)
Gain from operations, net of income taxes 17,555 25,012 7,248
Loss on disposal, net of income taxes (71,984)
-------------- --------------- ------------
NET INCOME 88,882 137,129 169,652
-------------- --------------- ------------
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF INCOME TAXES
Unrealized (losses) gains on securities (61,246) (46,967) 98,287
Reclassification adjustment for net realized gains
included in net income (1,452) (12,980) (30,213)
Minimum pension liability adjustment (1,488) (1,526) (2,101)
-------------- --------------- ------------
Total other comprehensive (loss) income (64,186) (61,473) 65,973
-------------- --------------- ------------
COMPREHENSIVE INCOME 24,696 75,656 235,625
-------------- --------------- ------------
EQUITY, BEGINNING OF YEAR - RESTATED (NOTE 20) 1,736,555 1,660,899 1,425,274
-------------- --------------- ------------
EQUITY, END OF YEAR $ 1,761,251 $ 1,736,555 $ 1,660,899
============== ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
54
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
CASH FLOW FROM CONTINUING OPERATIONS ACTIVITIES
<S> <C> <C> <C>
Net income from continuing operations $ 143,311 $ 112,117 $ 162,404
Net (loss) income from discontinued operations (54,429) 25,012 7,248
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY CONTINUING OPERATIONS:
Net realized investment gains (35,675) (58,202) (111,465)
Amortization and depreciation 69,367 51,076 61,876
Equity in undistributed earnings of affiliates and partnerships (138,215) (44,119) (38,588)
Deferred income taxes (benefit) (14,102) 398 25,298
(Increase) in receivables (67,688) (23,846) (46,178)
Increase (decrease) in deferred policy acquisition costs 3,493 (26,945) (44,406)
Increase in policy liabilities and accruals 329,660 368,528 494,462
Increase in other assets/other liabilities, net 53,901 58,795 54,230
Other, net 2,752 1,660 7,752
----------- ------------ ------------
Net cash provided by operating activities of continuing operations 346,804 439,462 565,385
Net cash (used for) provided by operating activities of
discontinued operations (105,537) 104,512 88,907
----------- ------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Proceeds from sales, maturities or repayments
of available-for-sale debt securities 1,702,889 1,322,381 1,082,132
Proceeds from maturities or repayments of held-to-maturity debt
securities 186,710 267,746 200,946
Proceeds from disposals of equity securities 163,530 45,204 51,373
Proceeds from mortgage loan maturities or repayments 124,864 200,419 164,213
Proceeds from sale of real estate and other invested assets 37,952 439,917 213,224
Proceeds from distributions of venture capital partnerships 26,730 18,550 5,650
Proceeds from sale of subsidiaries and affiliates 15,000 16,300
Purchase of available-for-sale debt securities (1,672,705) (2,400,058) (1,547,855)
Purchase of held-to-maturity debt securities (427,472) (585,370) (183,371)
Purchase of equity securities (162,391) (85,002) (88,573)
Purchase of subsidiaries (187,621) (6,647) (246,400)
Purchase of mortgage loans (25,268) (75,974) (140,831)
Purchase of real estate and other invested assets (71,407) (134,224) (50,599)
Purchase of venture capital partnerships (108,461) (67,200) (39,994)
Change in short term investments, net 52,616 855,117 23,135
Increase in policy loans (34,298) (21,532) (59,699)
Capital expenditures (20,505) (25,052) (44,380)
Other investing activities, net 1,697 (6,540 (1,750)
------------- -------------- --------------
Net cash used for investing activities of continuing operations (398,140) (241,965) (662,779)
Net cash provided by (used for) investing activities of
discontinued
operations 157,267 (101,532) (93,239)
------------- -------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (1,908) (11,124) (17,902)
Proceeds from repayment of securities sold
subject to repurchase agreements 28,398 (137,473) 137,473
Proceeds from borrowings 124,500 136 215,359
Repayment of borrowings (11,683) (55,589) (243,293)
Dividends paid to minority shareholders in consolidated (4,240) (4,938) (6,895)
Other financing activities (361) (5,664) (1,250)
------------- -------------- --------------
Net cash provided by (used for) financing activities of continuing
operations 134,706 (214,652) 83,492
Net cash (used for) provided by financing activities of discontinued
operations (62,677) (7,739) 4,489
------------- -------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS 83,370 (17,155) (13,902)
NET CHANGE IN CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS (10,947) (4,759) 157
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 115,187 137,101 150,846
------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 187,610 $ 115,187 $ 137,101
============= ============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 106,372 $ 44,508 $ 76,167
Interest paid on indebtedness $ 34,791 $ 32,834 $ 32,300
</TABLE>
The accompanying notes are an integral part of these statements.
55
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company and its subsidiaries (Phoenix)
market a wide range of insurance and investment products and services
including individual participating life insurance, term, universal and
variable life insurance, annuities, and investment advisory and mutual fund
distribution services. These products and services are distributed among
three reportable segments: Individual, Investment Management and Corporate &
Other. See Note 10 - "Segment Information."
Additionally, in 1999, Phoenix discontinued the operations of four
of its business units: the Reinsurance Operations, the Property and
Casualty Brokerage Operations, the Real Estate Management
Operations and the Group Insurance Operations. See Note 11 -
"Discontinued Operations."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Phoenix and
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 accounting principles generally accepted in the United States (GAAP).
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Significant
estimates used in determining insurance and contractholder liabilities,
related reinsurance recoverables, income taxes, contingencies and valuation
allowances for investment assets are discussed throughout the Notes to
Consolidated Financial Statements. Significant inter-company accounts and
transactions have been eliminated. Amounts for 1998 and 1997 have been
retroactively restated to account for income from venture capital
partnership investments and leveraged lease investments. See Note 20 -
"Prior Period Adjustments" for venture capital investment and leveraged
lease investment information. Certain reclassifications have been made to
the 1998 and 1997 amounts to conform with the 1999 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, mortgage-backed and
asset-backed securities. Phoenix classifies its debt securities as either
held-to-maturity or available-for-sale investments. Debt securities
held-to-maturity consist of private placement bonds reported at amortized
cost, net of impairments, that management intends and has the ability to
hold until maturity. Debt securities available-for-sale are reported at fair
value with unrealized gains or losses included in equity and consist of
public bonds and preferred stocks that management may not hold until
maturity. Debt securities are considered impaired when a decline in value is
considered to be other than temporary.
56
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the mortgage-backed and asset-backed bond portion of the debt security
portfolio, Phoenix recognizes income using a constant effective yield based
on anticipated prepayments and the estimated economic life of the
securities. When actual prepayments differ significantly from anticipated
prepayments, the effective yield is recalculated to reflect actual payments
to date, and anticipated future payments and any resulting adjustment is
included in net investment income.
Equity securities are classified as available-for-sale and are reported at
fair value, based principally on their quoted market prices, with unrealized
gains or losses included in equity. Equity securities are considered
impaired when a decline in value is considered to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances, net
of valuation reserves on impaired mortgages. A mortgage loan is considered
to be impaired if management believes it is probable that Phoenix will be
unable to collect all amounts of contractual interest and principal as
scheduled in the loan agreement. An impaired mortgage loan's fair value is
measured based on the present value of future cash flows discounted at the
loan's observable market price or at the fair value of the collateral. If
the fair value of a mortgage loan is less than the recorded investment in
the loan, the difference is recorded as a valuation reserve.
Real estate, all of which is held for sale, is carried at the lower of cost
or current fair value less costs to sell. Fair value for real estate is
determined taking into consideration one or more of the following factors:
property valuation techniques utilizing discounted cash flows at the time of
stabilization including capital expenditures and stabilization costs; sales
of comparable properties; geographic location of the property and related
market conditions; and disposition costs.
Policy loans are generally carried at their unpaid principal balances and
are collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
fair value.
Venture capital partnership and other partnership interests are carried at
cost adjusted for Phoenix's equity in undistributed earnings or losses since
acquisition, less allowances for other than temporary declines in value.
These earnings or losses are included in investment income. Venture capital
partnerships generally account for the underlying investments held in the
partnerships at fair value. These investments can include public and private
common and preferred stock, notes, warrants and other investments.
Investments that are publicly traded are generally valued at closing market
prices. Investments that are not publicly traded, which are usually subject
to restrictions on resale, are generally valued at cost or at estimated fair
value, as determined in good faith by the general partner after giving
consideration to operating results, financial conditions, recent sales
prices of issuers' securities and other pertinent information. Some general
partners will discount the fair value of private investments held to reflect
these restrictions. These valuations subject the earnings to volatility.
Beginning in 1999, Phoenix includes equity in undistributed unrealized
capital gains and losses on investments held in the venture capital
partnerships in net investment income. Prior to 1999, these amounts were not
recorded. Prior years have been restated to reflect this change. See Note 20
- "Prior Period Adjustments" for additional information on venture capital
partnership investments.
57
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Other invested assets include leveraged lease investments. These investments
represent the net of the estimated residual value of the lease assets,
rental receivables, and unearned and deferred income to be allocated over
the lease term. Investment income is calculated using the interest method
and is recognized only in periods in which the net investment is positive.
Realized investment gains and losses, other than those related to separate
accounts for which Phoenix does not bear the investment risk, are determined
by the specific identification method and reported as a component of
revenue. A realized investment loss is recorded when an investment valuation
reserve is determined. Valuation reserves are netted against the asset
categories to which they apply and changes in the valuation reserves are
included in realized investment gains and losses. Unrealized investment
gains and losses on debt securities and equity securities classified as
available-for-sale are included as a component of equity, net of deferred
income taxes and deferred policy acquisition costs.
FINANCIAL INSTRUMENTS
In the normal course of business, Phoenix enters into transactions involving
various types of financial instruments including debt, investments such as
debt securities, mortgage loans and equity securities, off-balance sheet
financial instruments such as investment and loan commitments, financial
guarantees, interest rate swaps, interest rate caps, interest rate floors
and swaptions. These instruments have credit risk and also may be subject to
risk of loss due to interest rate and market fluctuations.
Phoenix enters into interest rate swap agreements to reduce market risks
from changes in interest rates. Phoenix does not enter into interest rate
swap agreements for trading purposes. Under interest rate swap agreements,
Phoenix exchanges cashflows with another party, at specified intervals, for
a set length of time based on a specified notional principal amount.
Typically, one of the cash flow streams is based on a fixed interest rate
set at the inception of the contract, and the other is a variable rate that
periodically resets. Generally, no premium is paid to enter into the
contract and no payment of principal is made by either party. The amounts to
be received or paid on these swap agreements are accrued and recognized in
net investment income.
Phoenix enters into interest rate floor, interest rate cap and swaption
contracts as a hedge for its assets and liabilities against substantial
changes in interest rates. Phoenix does not enter into interest rate floor,
interest rate cap and swaption contracts for trading purposes. Interest rate
floor and interest rate cap agreements are contracts with a counterparty
which require the payment of a premium and give Phoenix the right to receive
over the maturity of the contract, the difference between the floor or cap
interest rate and a market interest rate on specified future dates based on
an underlying notional principal. Swaption contracts are options to enter
into an interest rate swap transaction on a specified future date and at a
specified price. Upon the exercise of a swaption, Phoenix would either
receive a swap agreement at the pre-specified terms or cash for the market
value of the swap. Phoenix pays the premium for these instruments on a
quarterly basis over the maturity of the contract, and recognizes these
payments in net investment income.
Phoenix enters into foreign currency swap agreements to hedge against
fluctuations in foreign currency exposure. Under these agreements, Phoenix
agrees to exchange with another party, principal and periodic interest
payments denominated in foreign currency for payments denominated in U.S.
dollars. The amounts to be received or paid on these foreign currency swap
agreements is recognized in net investment income. To reduce counterparty
credit risks and
58
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
diversify counterparty exposure, Phoenix only enters into derivative
contracts with highly rated financial institutions.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and money market
instruments.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, underwriting,
distribution and policy issue expenses, all of which vary with and are
primarily related to the production of new business, are deferred. Deferred
policy acquisition costs (DAC) are subject to recoverability testing at the
time of policy issue and loss recognition at the end of each accounting
period. For individual participating life insurance policies, deferred
policy acquisition costs are amortized in proportion to historical and
anticipated gross margins. Deviations from expected experience are reflected
in earnings in the period such deviations occur.
For universal life insurance policies, 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 their estimated lives.
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
59
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
investment earnings on their fund balances, less administrative charges.
Universal life fund balances are also assessed mortality charges.
Liabilities for outstanding claims, losses and loss adjustment expenses are
amounts estimated to cover incurred losses. These liabilities are based on
individual case estimates for reported losses and estimates of unreported
losses based on past experience.
Unearned premiums relate primarily to individual participating life
insurance as well as group life, accident and health insurance premiums. The
premiums are reported as earned on a pro-rata basis over the contract
period. The unexpired portion of these premiums is recorded as unearned
premiums.
PREMIUM AND FEE REVENUE AND RELATED EXPENSES
Life insurance premiums, other than premiums for universal life and certain
annuity contracts, are recorded as premium revenue on a pro-rata basis over
each policy year. Benefits, losses and related expenses are matched with
premiums over the related contract periods. Revenues for investment-related
products consist of net investment income and contract charges assessed
against the fund values. Related benefit expenses primarily consist of net
investment income credited to the fund values after deduction for investment
and risk charges. Revenues for universal life products consist of net
investment income and mortality, administration and surrender charges
assessed against the fund values during the period. Related benefit expenses
include universal life benefit claims in excess of fund values and net
investment income credited to universal life fund values.
POLICYHOLDERS' DIVIDENDS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of Phoenix. The
amount of policyholders' dividends to be paid is determined annually by
Phoenix's board of directors. The aggregate amount of policyholders'
dividends is related to the actual interest, mortality, morbidity and
expense experience for the year and Phoenix's judgment as to the appropriate
level of statutory surplus to be retained. At the end of the reporting
period, Phoenix establishes a dividend liability for the pro-rata portion of
the dividends payable on the next anniversary date of each policy. Phoenix
also establishes a liability for termination dividends.
INCOME TAXES
Phoenix and its eligible affiliated companies have elected to file a
life/nonlife consolidated federal income tax return for 1999 and prior
years. Entities included within the consolidated group are segregated into
either a life insurance or non-life insurance company subgroup. The
consolidation of these subgroups is subject to certain statutory
restrictions in the percentage of eligible non-life tax losses that can be
applied to offset life company taxable income.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities and accruals, policy acquisition expenses, investment impairment
reserves, reserves for postretirement benefits and unrealized gains or
losses on investments.
60
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
As a mutual life insurance company, Phoenix is required to reduce its income
tax deduction for policyholder dividends by the differential earnings
amount, defined as the difference between the earnings rates of stock and
mutual companies applied against an adjusted base of policyholders' surplus.
RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1999, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS
No. 133". Because of the complexities associated with transactions involving
derivative instruments and their prevalent use as hedging instruments and,
because of the difficulties associated with the implementation of Statement
133, the effective date of SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" was delayed until fiscal years beginning
after June 15, 2000. SFAS No. 133, initially issued on June 15, 1998,
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it
is, the type of hedge transaction. For fair-value hedge transactions in
which Phoenix is hedging changes in an asset's, liability's or firm
commitment's fair value, changes in the fair value of the derivative
instrument will generally be offset in the income statement by changes in
the hedged item's fair value. For cash-flow hedge transactions, in which
Phoenix is hedging the variability of cashflows related to a variable-rate
asset, liability, or a forecasted transaction, changes in the fair value of
the derivative instrument will be reported in other comprehensive income.
The gains and losses on the derivative instrument that are reported in other
comprehensive income will be reclassified as earnings in the period in which
earnings are impacted by the variability of the cash flows of the hedged
item. The ineffective portion of all hedges will be recognized in current
period earnings.
Phoenix has not yet determined the impact that the adoption of SFAS 133 will
have on its earnings or statement of financial position.
Phoenix adopted 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 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," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits," and SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other than
Pensions". The new statement revises and standardizes
61
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PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
employers' disclosures about pension and other postretirement benefit plans.
Adoption of this statement did not affect the results of operations or
financial position of Phoenix.
On January 1, 1999, Phoenix adopted Statement of Position (SOP) 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 provides guidance for assessments related to
insurance activities. The adoption of SOP 97-3 did not have a material
impact on Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides
guidance for determining when an entity should capitalize or expense
external and internal costs of computer software developed or obtained for
internal use. The adoption of SOP 98-1 did not have a material impact on
Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires that start-up costs capitalized
prior to January 1, 1999 should be written off and any future start-up costs
be expenses as incurred. The adoption of SOP 98-5 did not have a material
impact on Phoenix's results from operations or financial position.
3. SIGNIFICANT TRANSACTIONS
DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units; the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. Disclosures concerning the financial impact of these
transactions are contained in Note 11 - "Discontinued Operations."
PFG HOLDINGS, INC.
On October 29, 1999, PM Holdings, a wholly-owned subsidiary of Phoenix,
purchased 100% of PFG Holdings, Inc. 8% cumulative preferred stock
convertible into a 67% interest in common stock for $5 million in cash. In
addition Phoenix has an option to purchase all the outstanding common stock
during year six at a value to 80% of the appraised value of the common stock
at that time. As of the statement date this option had not been executed.
Since the investment represents a majority interest Phoenix has consolidated
this entity for GAAP as if the preferred stock had been converted and
established a minority interest for outside shareholders. The transaction
resulted in goodwill of $3.8 million to be amortized over 10 years.
PFG Holdings was formed to purchase three of The Guarantee Life Companies'
operating subsidiaries: AGL Life Assurance Company, PFG Distribution Company
and Philadelphia Financial Group. These subsidiaries develop, market and
underwrite specialized private placement variable life and annuity products.
AGL Life Assurance Company must maintain at least $10 million of capital and
surplus to satisfy certain regulatory minimum capital requirements. PM
Holdings provided financing at the purchase date of $11 million to PFG
Holdings in order for AGL Life Assurance to meet this minimum requirement.
The debt is an 8.34% senior secured note maturing in 2009.
62
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EMPRENDIMIENTO COMPARTIDO, S.A., (EMCO)
At January 1, 1999 PM Holdings held 9.1 million shares of EMCO, representing
a 35% ownership interest the Argentine financial services company that
provides pension management, annuities and life insurance products. On June
23, 1999, PM Holdings became the majority owner of EMCO when it purchased
13.9 million shares of common stock from the Banco del Suquia, S.A. for
$29.5 million, plus $10.0 million for a five year covenant not-to-compete.
Payment for the stock will be made in three installments: $10.0 million, 180
days from closing; $10.0 million, 360 days from closing; and $9.5 million,
540 days from closing, all subject to interest of 7.06%. The covenant was
paid at the time of closing.
In addition, EMCO purchased, for its treasury, 3.0 million shares of its
outstanding common stock held by two banks. This, in combination with the
purchase described above, increased PM Holdings ownership interest from 35%
to 100% of the then outstanding stock.
On November 12, 1999, PM Holdings sold 11.5 million shares (50% interest) of
EMCO common stock for $40.0 million generating a pre-tax gain of $11.3
million. PM Holdings received $15.0 million in cash plus a $9.0 million
two-year 8% interest bearing note, and a $16.0 million five-year 8% interest
bearing note. PM Holdings uses the equity method of accounting to account
for its remaining 50% interest in EMCO.
After the sale, the remaining excess of the purchase price over the fair
value of the acquired net tangible assets totaled $17.0 million. That
consisted of a covenant not-to-compete of $5.0 million which is being
amortized over five years and goodwill of $12.0 million which is being
amortized over ten years.
PHOENIX NEW ENGLAND TRUST
On October 29, 1999, PM Holdings indirectly acquired 100% of the common
stock of New London Trust, a banking subsidiary of Sun Life of Canada, for
$30.0 million in cash. New London Trust, renamed Phoenix New England Trust,
is a New Hampshire based federal savings bank that operates a trust division
with assets under management of approximately $1 billion. Immediately
following this acquisition, on November 1, 1999, PM Holdings sold the New
London Trust's New Hampshire retail banking operations to Lake Sunapee Bank
and Mascoma Savings Bank in New Hampshire and the Connecticut branches to
Westbank Corporation, for a total of $25.2 million in cash. No gain or loss
was recognized on this sale. PM Holdings retained the trust business and
four trust offices of New London Trust, located in New Hampshire and
Vermont.
LOMBARD INTERNATIONAL ASSURANCE, S.A.
On November 5, 1999, PM Holdings purchased 12% of the common stock of
Lombard International Assurance, S.A., a Pan-European financial services
company, for $29.1 million in cash. Lombard provides investment-linked
insurance products to high-net-worth individuals in eight European
countries. This investment is classified as equity securities in the
Consolidated Balance Sheet.
63
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PHOENIX INVESTMENT PARTNERS, LTD.
On March 1, 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 Zweig Group managed approximately $3.3 billion of assets as of
December 31,1999.
On December 3, 1998, Phoenix Investment Partners completed the sale of its
49% interest in Canadian investment firm Beutel, Goodman & Company, Ltd. for
$47.0 million. Phoenix Investment Partners received $37.0 million in cash
and a $10.0 million three-year interest bearing note. The transaction
resulted in a before-tax gain of approximately $17.5 million. Phoenix's
interest represents an after-tax realized gain of approximately $6.8
million.
Phoenix owns approximately 60% of the outstanding Phoenix Investment
Partners' common stock. In addition, Phoenix owns 45% of Phoenix Investment
Partners' convertible subordinated debentures.
ABERDEEN ASSET MANAGEMENT PLC
On February 18, 1999, PM Holdings purchased an additional 15.1 million
shares of the common stock of Aberdeen Asset Management for $29.4 million.
As of December 31, 1999, PM Holdings owned 21% of the outstanding common
stock of Aberdeen Asset Management, a Scottish asset management firm. The
investment is reported on the equity basis and classified as other invested
assets in the Consolidated Balance Sheet.
DIVIDEND SCALE REDUCTION
In consideration of the decline of interest rates in the financial markets,
Phoenix's Board of Directors voted in October of 1998 to adopt a reduced
dividend scale, effective for dividends payable on or after January 1, 1999.
Dividends for individual participating policies were reduced 60 basis points
in most cases, an average reduction of approximately 8%. The effect was a
decrease of approximately $15.7 million in the policyholder dividends
expense in 1998. In October 1999, Phoenix's Board of Directors voted to
maintain the dividend scale for dividends payable on or after January 1,
2000.
REAL ESTATE SALES
On December 15, 1998, Phoenix sold 47 commercial real estate properties with
a carrying value of $269.8 million, and 4 joint venture real estate
partnerships with a carrying value of $10.5 million, for approximately $309
million in cash. This transaction, along with the sale of 18 other
properties and partnerships during 1998, which had a carrying value of $36.7
million, resulted in pre-tax gains of approximately $67.5 million. As of
December 31, 1999, Phoenix had 3 commercial real estate properties remaining
with a carrying value of $42.9 million and 5 joint venture real estate
partnerships with a carrying value of $49.1 million.
64
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
DEBT AND EQUITY SECURITIES
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
DEBT SECURITIES
HELD-TO-MATURITY:
<S> <C> <C> <C> <C>
State and political subdivision bonds $ 27,595 $ 416 $ (1,033) $ 26,978
Foreign government bonds 3,032 (796) 2,236
Corporate securities 1,776,174 12,945 (95,707) 1,693,412
Mortgage-backed and asset-backed
securities 285,387 1,361 (19,166) 267,582
--------------- -------------- -------------- --------------
Total held-to-maturity securities 2,092,188 14,722 (116,702) 1,990,208
Less: held-to-maturity securities of
discontinued operations 102,019 736 (5,835) 96,920
--------------- -------------- -------------- --------------
Total held-to-maturity securities of
continuing operations 1,990,169 13,986 (110,867) 1,893,288
--------------- -------------- -------------- --------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 283,697 1,955 (6,537) 279,115
State and political subdivision bonds 495,860 4,765 (21,751) 478,874
Foreign government bonds 273,868 23,700 (3,990) 293,578
Corporate securities 2,353,228 18,578 (102,773) 2,269,033
Mortgage-backed and asset-backed
securities 2,977,136 17,916 (103,264) 2,891,788
--------------- -------------- -------------- --------------
Total available-for-sale securities 6,383,789 66,914 (238,315) 6,212,388
Less: available-for-sale securities of
discontinued operations 725,077 7,600 (27,068) 705,609
--------------- -------------- -------------- --------------
Total available-for-sale securities of
continuing operations 5,658,712 59,314 (211,247) 5,506,779
--------------- -------------- -------------- --------------
TOTAL DEBT SECURITIES OF CONTINUING
OPERATIONS $ 7,648,881 $ 73,300 $ (322,114) $ 7,400,067
============== ============== ============= =============
EQUITY SECURITIES $ 311,100 $ 176,593 $ (24,211) $ 463,482
Less: equity securities of discontinued
operations 1,869 1,869
--------------- -------------- -------------- --------------
TOTAL EQUITY SECURITIES OF CONTINUING
OPERATIONS $ 309,231 $ 176,593 $ (24,211) $ 461,613
============== ============== ============= =============
</TABLE>
65
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
DEBT SECURITIES
HELD-TO-MATURITY:
<S> <C> <C> <C> <C>
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 and asset-backed
securities 172,300 6,201 (12) 178,489
--------------- -------------- -------------- --------------
Total held-to-maturity securities 1,881,687 105,740 (14,656) 1,972,771
Less: held-to-maturity securities of
discontinued operations 156,248 8,776 (1,216) 163,808
--------------- -------------- -------------- --------------
Total held-to-maturity securities of
continuing operations 1,725,439 96,964 (13,440) 1,808,963
--------------- -------------- -------------- --------------
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 and asset-backed
securities 3,121,690 110,172 (14,618) 3,217,244
--------------- -------------- -------------- --------------
Total available-for-sale securities 6,436,444 327,587 (70,491) 6,693,540
Less: available-for-sale securities of
discontinued operations 678,992 34,558 (7,436) 706,114
--------------- -------------- -------------- --------------
Total available-for-sale securities of
continuing operations 5,757,452 293,029 (63,055) 5,987,426
--------------- -------------- -------------- --------------
TOTAL DEBT SECURITIES OF CONTINUING
OPERATIONS $ 7,482,891 $ 389,993 $ (76,495) $ 7,796,389
============== ============= ============ =============
EQUITY SECURITIES $ 223,915 $ 102,018 $ (21,388) $ 304,545
Less: equity securities of discontinued
operations 2,896 2,896
--------------- -------------- -------------- --------------
TOTAL EQUITY SECURITIES OF CONTINUING
OPERATIONS $ 221,019 $ 102,018 $ (21,388) $ 301,649
============== ============= ============ =============
</TABLE>
66
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The sale of fixed maturities held-to-maturity relate to certain securities,
with amortized cost of $3.9 million, $19.6 million and $59.1 million, for
the years ended December 31, 1999, 1998 and 1997, respectively, which were
sold specifically due to a significant decline in the issuers' credit
quality. The related realized losses, net of the sales, were $0.2 million,
$0.8 million and $10.1 million in 1999, 1998 and 1997, respectively.
The amortized cost and fair value of debt securities, by contractual sinking
fund payment and maturity, as of December 31, 1999 are shown below. Actual
maturity may differ from contractual maturity because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties, or Phoenix may have the right to put or sell the obligations back
to the issuers.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 118,171 $ 116,992 $ 43,180 $ 43,483
Due after one year through five years 583,115 564,215 534,417 532,676
Due after five years through ten years 587,568 566,505 1,146,805 1,104,661
Due after ten years 517,946 474,913 1,682,250 1,639,771
Mortgage-backed and
asset-backed securities 285,388 267,583 2,977,137 2,891,797
--------------- --------------- ---------------- --------------
Total $ 2,092,188 $ 1,990,208 $ 6,383,789 $ 6,212,388
Less: securities of discontinued
operations 102,019 96,920 725,077 705,609
--------------- --------------- ---------------- --------------
Total securities of continuing $ 1,990,169 $ 1,893,288 $ 5,658,712 $ 5,506,779
operations =============== =============== ================ ==============
</TABLE>
Carrying values for investments in mortgage-backed and asset-backed
securities, excluding U.S. government guaranteed investments, were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Planned amortization class $ 168,027 $ 433,668
Asset-backed 956,892 910,594
Mezzanine 194,849 280,162
Commercial 735,238 641,485
Sequential pay 1,039,001 982,576
Pass through 77,154 119,065
Other 6,014 21,994
--------------- ---------------------
Total mortgage-backed and asset-backed securities $ 3,177,175 $ 3,389,544
=============== =====================
</TABLE>
67
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MORTGAGE LOANS AND REAL ESTATE
Phoenix's mortgage loans and real estate are diversified by property type
and location and, for mortgage loans, by borrower. Mortgage loans are
collateralized by the related properties and are generally 75% of the
properties' value at the time the original loan is made.
Mortgage loans and real estate investments comprise the following property
types and geographic regions:
<TABLE>
<CAPTION>
MORTGAGE LOANS REAL ESTATE
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
(IN THOUSANDS) (IN THOUSANDS)
PROPERTY TYPE:
<S> <C> <C> <C> <C>
Office buildings $ 183,912 $ 221,244 $ 30,545 $ 38,343
Retail 208,606 203,927 14,111 36,858
Apartment buildings 252,947 261,894 41,744 21,553
Industrial buildings 82,699 121,789 1,600
Other 2,950 19,089 8,859 32
Valuation allowances (14,283) (30,600) (3,232) (6,411)
------------------ ------------------ ------------------ ------------------
Total $ 716,831 $ 797,343 $ 92,027 $ 91,975
================== ================== ================== =================
GEOGRAPHIC REGION:
Northeast $ 149,336 $ 169,368 $ 59,582 $ 47,709
Southeast 198,604 213,916 32 32
North central 164,150 176,683 744 11,453
South central 105,062 98,956 21,232 22,649
West 113,962 169,020 13,669 16,543
Valuation allowances (14,283) (30,600) (3,232) (6,411)
------------------ ------------------ ------------------ ------------------
Total $ 716,831 $ 797,343 $ 92,027 $ 91,975
================== ================== ================== ==================
</TABLE>
At December 31, 1999, scheduled mortgage loan maturities were as follows:
2000 - $92 million; 2001 - $87 million; 2002 - $32 million; 2003 - $109
million; 2004 - $38 million; 2005 - $35 million, and $338 million
thereafter. Actual maturities will differ from contractual maturities
because borrowers may have the right to prepay obligations with or without
prepayment penalties and loans may be refinanced. Phoenix refinanced $6.7
million and $2.3 million of its mortgage loans during 1999 and 1998,
respectively, based on terms which differed from those granted to new
borrowers.
The carrying value of delinquent and in process of foreclosure mortgage
loans at December 31, 1999 and 1998 is $6.0 million and $17.2 million,
respectively. There are valuation allowances of $5.4 million and $14.7
million, respectively, on these mortgages.
68
<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)
1999
<S> <C> <C> <C> <C>
Mortgage loans $ 30,600 $ 9,697 $ (26,014) $ 14,283
Real estate 6,411 183 (3,362) 3,232
------------------ ------------------ ------------------- -------------------
Total $ 37,011 $ 9,880 $ (29,376) $ 17,515
================== ================== =================== ===================
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
================== ================== =================== ===================
</TABLE>
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $0.0
million and $15.6 million at December 31, 1999 and 1998, respectively. The
net carrying value of non-income producing bonds were $0.0 million and $22.3
at December 31, 1999 and 1998, respectively.
69
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS
Derivative instruments at December 31, are summarized below:
<TABLE>
<CAPTION>
1999 1998
($ IN THOUSANDS )
Swaptions:
<S> <C> <C>
Notional amount $ 1,600,000
Weighted average strike rate 5.02%
Index rate (1) 10 Yr. CMS
Fair value $ (8,200)
Interest rate floors:
Notional amount $ 1,210,000 $ 570,000
Weighted average strike rate 4.57% 4.59%
Index rate (1) 2-10 Yr. CMT/CMS 5-10 Yr. CMT
Fair value $ (7,542) $ 1,423
Interest rate swaps:
Notional amount $ 474,037 $ 424,573
Weighted average received rate 6.33% 6.27%
Weighted average paid rate 6.09% 5.82%
Fair value $ 1,476 $ 10,989
Foreign currency swaps:
Notional amount $ 8,074
Weighted average received rate 12.04%
Weighted average paid rate 10.00%
Fair value $ 213
Interest rate caps:
Notional amount $ 50,000 $ 50,000
Weighted average strike rate 7.95% 7.95%
Index rate (1) 10 Yr. CMT 10 Yr. CMT
Fair value $ 842 $ (96)
</TABLE>
(1) Constant maturity treasury yields (CMT) and constant maturity swap
yields (CMS).
The increase in net investment income related to interest rate swap
contracts was $1.0 million and $2.1 million for the years ended December 31,
1999 and 1998, respectively. The decrease in net investment income related
to interest rate floor, interest rate cap and swaption contracts was $2.3
million and $0.2 million for the years ended December 31, 1999 and 1998,
respectively, representing quarterly premium payments on these instruments
which are being paid over the life of the contracts. The estimated fair
value of these instruments represent what Phoenix would have to pay or
receive if the contracts were terminated.
70
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Phoenix is exposed to credit risk in the event of nonperformance by
counterparties to these financial instruments, but management of the Phoenix
does not expect counterparties to fail to meet their financial obligations,
given their high credit ratings. The credit exposure of these instruments is
the positive fair value at the reporting date.
Management of Phoenix considers the likelihood of any material loss on these
instruments to be remote.
VENTURE CAPITAL PARTNERSHIPS
Phoenix invests in venture capital limited partnerships. These partnerships
focus on early-stage ventures, primarily in the information technology and
life science industries, as well as direct equity investments in leveraged
buyouts and corporate acquisitions.
Phoenix records its equity in the earnings of the partnerships in net
investment income.
The components of net investment income due to venture capital partnerships
for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Operating losses $ (8,921) $ (2,746) $ (2,131)
Realized gains on cash and stock distributions 84,725 23,360 31,336
Unrealized gains on investments held in the partnerships 64,091 19,009 4,531
----------- ------------ -----------
Total venture capital partnership net investment income $ 139,895 $ 39,623 $ 33,736
=========== ============ ===========
</TABLE>
OTHER INVESTED ASSETS
Other invested assets, consisting primarily of partnership interests and
equity in unconsolidated affiliates, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Transportation and equipment leases $ 82,063 $ 80,953
Affordable housing partnerships 22,247 10,854
Investment in Aberdeen Asset Management 99,074 72,257
Investment in EMCO of Argentina 13,423 10,681
Investment in other affiliates 12,389 12,706
Seed money in separate accounts 33,279 26,587
Other partnership interests 41,953 22,697
------------------- -------------------
Total other invested assets $ 304,428 $ 236,735
Less: other invested assets of discontinued operations 3,954 4,604
------------------- -------------------
Total other invested assets of continuing operations $ 300,474 $ 232,131
=================== ===================
</TABLE>
71
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 641,076 $ 598,892 $ 509,702
Equity securities 8,272 6,469 4,277
Mortgage loans 66,285 83,101 85,662
Policy loans 148,998 146,477 122,562
Real estate 9,716 38,338 18,939
Leveraged leases 2,202 2,746 2,692
Venture capital partnerships 139,895 39,623 33,736
Other invested assets 2,544 1,750 2,160
Short-term investments 22,543 23,825 18,768
------------- ------------ -------------
Sub-total 1,041,531 941,221 798,498
Less investment expenses 23,505 23,328 22,621
------------- ------------ -------------
Net investment income $ 1,018,026 $ 917,893 $ 775,877
Less: net investment income of discontinued operations 67,682 66,290 61,510
------------- ------------ -------------
Total net investment income of continuing operations $ 950,344 $ 851,603 $ 714,367
============= ============ =============
</TABLE>
Investment income of $2.7 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1999. Phoenix does not
accrue interest income on impaired mortgage loans and impaired bonds when
the likelihood of collection is doubtful.
The payment terms of mortgage loans may, from time to time, be restructured
or modified. The investment in restructured mortgage loans, based on
amortized cost, amounted to $36.5 million and $40.8 million at December 31,
1999 and 1998, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $4.1 million, $4.9 million and $5.3 million in 1999, 1998
and 1997, respectively. Actual interest income on these loans included in
net investment income was $3.5 million, $4.0 million and $3.8 million in
1999, 1998 and 1997, respectively.
72
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Net unrealized gains and (losses) on securities available-for-sale and
carried at fair value for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (428,497) $ (7,040) $ 112,194
Equity securities 71,752 (91,880) 74,547
Deferred policy acquisition costs 260,287 6,694 (80,603)
Deferred income taxes (33,760) (32,279) 38,064
------------------ ----------------- -----------------
Net unrealized investment (losses) gains
on securities available-for-sale $ (62,698) $ (59,947) $ 68,074
================== ================= =================
</TABLE>
Realized investment gains and losses for the year ended December 31, were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (20,416) $ (4,295) $ 19,315
Equity securities 16,648 11,939 26,290
Mortgage loans 18,534 (6,895) 3,805
Real estate 2,915 67,522 44,668
Other invested assets 18,432 (4,709) 17,387
------------ ------------ ------------
Net realized investment gains 36,113 63,562 111,465
Less realized from discontinued operations 438 5,360 422
------------ ------------ ------------
Net realized investment gains from continuing
operations $ 35,675 $ 58,202 $ 111,043
============ ============ ============
</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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from disposals $ 1,106,929 $ 912,696 $ 821,339
Gross gains on sales $ 21,808 $ 17,442 $ 27,954
Gross losses on sales $ 39,122 $ 33,641 $ 5,309
</TABLE>
73
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Phoenix Investment Partners gross amounts:
<S> <C> <C>
Goodwill $ 384,576 $ 321,793
Investment management contracts 235,976 169,006
Non-compete covenant 5,000 5,000
Other 10,894 472
-------------- --------------
Totals 636,446 496,271
-------------- --------------
Other gross amounts:
Goodwill 32,554 16,631
Intangible asset related to pension plan benefits 11,739 16,229
Other 1,206 693
-------------- --------------
Totals 45,499 33,553
-------------- --------------
Total gross goodwill and other intangible assets 681,945 529,824
Accumulated amortization - Phoenix Investment Partners (79,912) (49,615)
Accumulated amortization - other (8,766) (2,314)
-------------- --------------
Total net goodwill and other intangible assets $ 593,267 $ 477,895
============== ==============
</TABLE>
6. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Short-term debt $ 21,598 $ 1,938
Bank borrowings 260,284 168,278
Notes payable 1,146
Subordinated debentures 41,364 41,359
Surplus notes 175,000 175,000
----------------- -----------------
Total notes payable $ 499,392 $ 386,575
================= ================
</TABLE>
Phoenix has various lines of credit established with major commercial banks.
As of December 31, 1999, Phoenix had outstanding balances totaling $436.7
million. The total unused credit was $369.0 million. Interest rates ranged
from 5.26% to 7.48% in 1999.
Maturities of other indebtedness are as follows: 2000 - $21.6 million; 2001
- $26.0 million; 2002 $200.0 million; 2003 - $0.0 million; 2004 - $35.0
million; 2005 and thereafter - $216.8 million.
Interest expense was $32.7 million, $25.9 million and $24.3 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
74
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. INCOME TAXES
A summary of income taxes (benefits) applicable to income before income
taxes and minority interest for the year ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
Income taxes
<S> <C> <C> <C>
Current $ 121,448 $ 61,889 $ 39,583
Deferred (13,567) 3,157 7,658
------------------ ------------------ ------------------
Total $ 107,881 $ 65,046 $ 47,241
================== ================== ==================
</TABLE>
The income taxes attributable to the consolidated results of operations are
different than the amounts determined by multiplying income before taxes by
the statutory income tax rate. The sources of the difference and the tax
effects of each for the year ended December 31, were as follows (in
thousands, aside from the percentages):
<TABLE>
<CAPTION>
1999 1998 1997
% % %
Income tax expense at statutory
<S> <C> <C> <C> <C> <C> <C>
rate $ 91,440 35 $ 65,685 35 $ 77,095 35
Dividend received deduction and
tax-exempt interest (3,034) (1) (3,273) (2) (1,684) (1)
Other, net 7,922 3 2,634 2 (15,059) (7)
------------- -------- ------------- -------- ------------- ---------
96,328 37 65,046 35 60,352 27
Differential earnings (equity tax) 11,553 4 (13,111) (6)
------------- -------- ------------- -------- ------------- ---------
Income taxes $ 107,881 41 $ 65,046 35 $ 47,241 21
============= ======== ============= ======== ============= =========
</TABLE>
75
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The deferred income tax liability (asset) represents the tax effects of
temporary differences attributable to the consolidated tax return group. The
components were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 282,725 $ 294,917
Unearned premium/deferred revenue (135,124) (139,346)
Impairment reserves (15,556) (23,111)
Pension and other postretirement benefits (68,902) (57,720)
Investments 177,204 122,032
Future policyholder benefits (181,205) (151,168)
Other 4,683 31,595
-------------- --------------
63,825 77,199
Net unrealized investment gains 26,587 42,254
Minimum pension liability (4,150) (3,349)
--------------- --------------
Deferred income tax liability, net $ 86,262 $ 116,104
=============== ==============
</TABLE>
Gross deferred income tax assets totaled $405 million and $375 million at
December 31, 1999 and 1998, respectively. Gross deferred income tax
liabilities totaled $491 million and $491 million at December 31, 1999 and
1998, respectively. It is management's assessment, based on Phoenix's
earnings and projected future taxable income, that it is more likely than
not that deferred income tax assets at December 31, 1999 and 1998 will be
realized.
8. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
Phoenix has a multi-employer, non-contributory, defined benefit pension plan
covering substantially all of its employees. Retirement benefits are a
function of both years of service and level of compensation. Phoenix also
sponsors a non-qualified supplemental defined benefit plan to provide
benefits in excess of amounts allowed pursuant to the Internal Revenue Code.
Phoenix's funding policy is to contribute annually an amount equal to at
least the minimum required contribution in accordance with minimum funding
standards established by the Employee Retirement Income Security Act of
1974. Contributions are intended to provide not only for benefits
attributable to service to date, but also for service expected to be earned
in the future.
Components of net periodic pension cost for the years ended December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
Components of net periodic benefit cost
<S> <C> <C> <C>
Service cost $ 11,887 $ 11,046 $ 10,278
Interest cost 24,716 22,958 22,650
Curtailments 21,604
Expected return on plan assets (28,544) (25,083) (22,055)
Amortization of net transition asset (2,369) (2,369) (2,369)
Amortization of prior service cost 1,795 1,795 1,795
Amortization of net (gain) loss (2,709) (1,247) 25
---------------- --------------- ---------------
Net periodic benefit cost $ 26,380 $ 7,100 $ 10,324
================ =============== ===============
</TABLE>
76
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In 1999, Phoenix offered a special retirement program under which qualified
participants' benefits under the employee pension plan were enhanced by
adding five years to age and five years to pension plan service. Of the 320
eligible employees, 146 accepted the special retirement program. As a result
of the special retirement program, Phoenix recorded an additional pension
expense of $21.6 million for the year ended December 31, 1999.
The aggregate change in projected benefit obligation, change in plan assets,
and funded status of the plan were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Change in projected benefit obligation
<S> <C> <C>
Projected benefit obligation at beginning of year $ 353,462 $ 335,436
Service cost 11,887 11,046
Interest cost 24,716 22,958
Plan amendments 23,871
Curtailments (6,380)
Actuarial loss (4,887) 1,958
Benefit payments (19,841) (17,936)
--------------- ----------------
Benefit obligation at end of year $ 382,828 $ 353,462
--------------- ----------------
Change in plan assets
Fair value of plan assets at beginning of year $ 364,819 $ 321,555
Actual return on plan assets 78,951 58,225
Employer contributions 3,883 2,975
Benefit payments (19,841) (17,936)
--------------- ----------------
Fair value of plan assets at end of year $ 427,812 $ 364,819
--------------- ----------------
Funded status of the plan $ 44,984 $ 11,357
Unrecognized net transition asset (11,847) (14,217)
Unrecognized prior service cost 11,705 16,185
Unrecognized net gain (129,936) (75,921)
--------------- ----------------
Net amount recognized $ (85,094) $ (62,596)
=============== ================
Amounts recognized in the Consolidated Balance Sheet consist of:
Accrued benefit liability $ (108,690) $ (88,391)
Intangible asset 11,739 16,229
Accumulated other comprehensive income 11,857 9,566
--------------- ----------------
$ (85,094) $ (62,596)
=============== ================
</TABLE>
At December 31, 1999 and 1998, the non-qualified plan was not funded and had
projected benefit obligations of $72.3 million and $57.2 million,
respectively. The accumulated benefit obligations as of December 31, 1999
and 1998 related to this plan were $60.1 million and $48.4 million,
respectively, and are included in other liabilities.
Phoenix recorded, as a reduction of equity, an additional minimum pension
liability of $7.7 million and $6.2 million, net of income taxes, at December
31, 1999 and 1998, respectively, representing the excess of accumulated
benefit obligations over the fair value of plan assets and accrued pension
liabilities for the non-qualified plan. Phoenix has also recorded an
intangible asset of $11.7 million and $16.2 million as of December 31, 1999
and 1998 related to the non-qualified plan.
77
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% and 7.0% for 1999 and 1998,
respectively. The discount rate assumption for 1999 was determined based on
a study that matched available high quality investment securities with the
expected timing of pension liability payments. The rate of increase in
future compensation levels used in determining the actuarial present value
of the projected benefit obligation was 4.5% and 4.0% for 1999 and 1998,
respectively. The expected long-term rate of return on retirement plan
assets was 8.0% in 1999 and 1998.
The assets within the pension plan include corporate and government debt
securities, equity securities, real estate, venture capital partnerships,
and shares of mutual funds.
Phoenix also sponsors savings plans for its employees and agents that are
qualified under Internal Revenue Code Section 401(k). Employees and agents
may contribute a portion of their annual salary, subject to certain
limitations, to the plans. Phoenix contributes an additional amount, subject
to limitation, based on the voluntary contribution of the employee or agent.
Company contributions charged to expense with respect to these plans during
the years ended December 31, 1999, 1998 and 1997 were $4.0 million, $4.1
million and $3.8 million, respectively.
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to Phoenix's pension plans, Phoenix currently provides certain
health care and life insurance benefits to retired employees, spouses and
other eligible dependents through various plans sponsored by Phoenix. A
substantial portion of Phoenix's employees may become eligible for these
benefits upon retirement. The health care plans have varying copayments and
deductibles, depending on the plan. These plans are unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
Components of net periodic benefit cost
<S> <C> <C> <C>
Service cost $ 3,313 $ 3,436 $ 3,136
Interest cost 4,559 4,572 4,441
Curtailments 5,456
Amortization of net gain (1,493) (1,232) (1,527)
-------------- -------------- --------------
Net periodic benefit cost $ 11,835 $ 6,776 $ 6,050
============== ============== ==============
</TABLE>
As a result of the special retirement program, Phoenix recorded an
additional postretirement benefit expense of $5.5 million for the year ended
December 31, 1999.
78
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The plan's change in projected benefit obligation, change in plan assets,
and funded status were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Change in projected postretirement benefit obligation
<S> <C> <C>
Projected benefit obligation at beginning of year $ 70,943 $ 66,618
Service cost 3,313 3,436
Interest cost 4,559 4,572
Plan Amendments 5,785
Curtailments (328)
Actuarial (gain) loss (8,622) 397
Benefit payments (4,459) (4,080)
---------------- ----------------
Projected benefit obligation at end of year 71,191 70,943
---------------- ----------------
Change in plan assets
Employer contributions 4,459 4,080
Benefit payments (4,459) (4,080)
---------------- ----------------
Fair value of plan assets at end of year
---------------- ----------------
Funded status of the plan (71,191) (70,943)
Unrecognized net gain (33,538) (26,408)
---------------- ----------------
Accrued benefit liability $ (104,729) $ (97,351)
================ ================
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 7.0% at December 31, 1999 and 1998, respectively.
For purposes of measuring the accumulated postretirement benefit obligation
the health care costs were assumed to increase 7.5% and 8.5% in 1999 and
1998, respectively, declining thereafter until the ultimate rate of 5.5% is
reached in 2002 and remains at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation by $4.3 million and the annual service and
interest cost by $0.6 million, before income taxes. Decreasing the assumed
health care cost trend rates by one percentage point in each year would
decrease the accumulated postretirement benefit obligation by $4.1 million
and the annual service and interest cost by $0.5 million, before income
taxes. Gains and losses that occur because actual experience differs from
the estimates are amortized over the average future service period of
employees.
OTHER POSTEMPLOYMENT BENEFITS
Phoenix recognizes the costs and obligations of severance, disability and
related life insurance and health care benefits to be paid to inactive or
former employees after employment but before retirement. Other
postemployment benefit expenses were $0.5 million for 1999, ($0.5) million
for 1998 and $0.4 million for 1997.
79
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. COMPREHENSIVE INCOME
The components of, and related income tax effects for, other comprehensive
income for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
<S> <C> <C> <C>
Before-tax amount $ (94,224) $ (72,255) $ 151,210
Income tax (benefit) expense (32,978) (25,288) 52,923
--------------- --------------- ---------------
Totals (61,246) (46,967) 98,287
--------------- --------------- ---------------
RECLASSIFICATION ADJUSTMENT FOR NET GAINS
REALIZED IN NET INCOME:
Before-tax amount (2,234) (19,970) (46,481)
Income tax (benefit) (782) (6,990) (16,268)
--------------- --------------- ---------------
Totals (1,452) (12,980) (30,213)
--------------- --------------- ---------------
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount (96,458) (92,225) 104,729
Income tax (benefit) expense (33,760) (32,278) 36,655
--------------- --------------- ---------------
Totals $ (62,698) $ (59,947) $ 68,074
=============== =============== ===============
MINIMUM PENSION LIABILITY ADJUSTMENT:
Before-tax amount $ (2,289) $ (2,347) $ (3,232)
Income tax (benefit) (801) (821) (1,131)
--------------- --------------- ---------------
Totals $ (1,488) $ (1,526) $ (2,101)
=============== =============== ===============
</TABLE>
The following table summarizes accumulated other comprehensive income for
the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
<S> <C> <C> <C>
Balance, beginning of year $ 100,510 $ 160,457 $ 92,383
Change during period (62,698) (59,947) 68,074
--------------- --------------- ---------------
Balance, end of year 37,812 100,510 160,457
--------------- --------------- ---------------
MINIMUM PENSION LIABILITY ADJUSTMENT:
Balance, beginning of year (6,219) (4,693) (2,592)
Change during period (1,488) (1,526) (2,101)
--------------- --------------- ---------------
Balance, end of year (7,707) (6,219) (4,693)
--------------- --------------- ---------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year 94,291 155,764 89,791
Change during period (64,186) (61,473) 65,973
--------------- --------------- ---------------
Balance, end of year $ 30,105 $ 94,291 $ 155,764
=============== =============== ===============
</TABLE>
80
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix offers a wide range of financial products and services. These
businesses have been grouped into three reportable segments.
The Individual segment includes the individual life insurance and annuity
products including participating whole life, universal life, variable life,
term life and variable annuities.
The Investment Management segment includes retail and institutional mutual
fund management and distribution including open-end funds, closed-end funds
and wrap accounts.
Corporate and Other contains several smaller subsidiaries and investment
activities which do not meet the thresholds of reportable segments as
defined in SFAS No. 131. They include venture capital investments,
international operations, trust operations and other investments.
The majority of Phoenix's revenue is derived in the United States. Revenue
derived from outside the United States is not material and revenue derived
from any single customer does not exceed ten percent of total consolidated
revenues.
The accounting policies of the segments are the same as those described in
Note 2 - "Summary of Significant Accounting Policies." Phoenix evaluates the
performance of each operating segment based on profit or loss from
operations before income taxes and nonrecurring items. Phoenix does not
include certain nonrecurring items to the segments. They are reported as
unallocated items and include expenses associated with various lawsuits and
legal disputes, postretirement medical expenses associated with an early
retirement program and realized gains associated with the sales of
subsidiaries. See Note 8 - " Pension and Other Postretirement and
Postemployment Benefit Plans."
Included in the following tables is certain information with respect to
Phoenix's operating segments as of and for each of the years ended December
31, 1999, 1998 and 1997, as well as amounts not allocated to the segments
which was described previously.
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998 1997
(IN MILLIONS)
TOTAL ASSETS
<S> <C> <C> <C>
Individual $ 17,990.3 $ 16,919.5 $ 15,709.8
Investment Management 747.4 591.9 647.9
Corporate & Other 1,357.8 876.2 1,124.4
Discontinued operations 187.6 283.8 250.9
--------------- --------------- ---------------
Total 20,283.1 18,671.4 17,733.0
=============== =============== ===============
DEFERRED POLICY ACQUISITION COSTS
Individual $ 1,306.7 $ 1,049.9 $ 1,016.3
=============== =============== ===============
</TABLE>
81
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
PREMIUMS, INSURANCE AND INVESTMENT PRODUCT FEES
<S> <C> <C> <C>
Individual $ 1,361.4 $ 1,416.7 $ 1,259.2
Investment Management 293.9 231.0 140.7
Corporate & Other 115.2 41.1 84.1
Less: inter-segment revenues (44.5) (40.7) (40.3)
---------------- ---------------- ---------------
Total 1,726.0 1,648.1 1,443.7
---------------- ---------------- ---------------
INVESTMENT INCOME
Individual 768.2 768.5 640.3
Investment Management 6.0 2.7 3.0
Corporate & Other 176.1 80.4 71.1
---------------- ---------------- ---------------
Total 950.3 851.6 714.4
---------------- ---------------- ---------------
NET REALIZED INVESTMENT GAINS
Individual 15.9 (17.8) 65.7
Corporate & Other 3.9 10.5 45.3
Gains on sale of subsidiaries 16.0 65.5
---------------- ---------------- ---------------
Total 35.8 58.2 111.0
---------------- ---------------- ---------------
POLICY BENEFITS AND DIVIDENDS
Individual 1,611.3 1,718.2 1,499.7
Corporate & Other 101.6 36.6 45.8
---------------- ---------------- ---------------
Total 1,712.9 1,754.8 1,545.5
---------------- ---------------- ---------------
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS
Individual 146.6 137.7 102.6
---------------- ---------------- ---------------
Total 146.6 137.7 102.6
---------------- ---------------- ---------------
AMORTIZATION OF GOODWILL AND INTANGIBLES
Individual 4.2 0.3 0.5
Investment Management 30.3 22.0 9.1
Corporate & Other 3.5 0.8 (0.2)
---------------- ---------------- ---------------
Total 38.0 23.1 9.4
---------------- ---------------- ---------------
INTEREST EXPENSE
Investment Management 18.9 14.7 3.6
Corporate & Other 13.8 11.2 20.7
---------------- ---------------- ---------------
Total 32.7 25.9 24.3
---------------- ---------------- ---------------
OTHER OPERATING EXPENSES
Individual 289.4 268.1 234.6
Investment Management 203.5 156.1 101.9
Corporate & Other 65.0 40.7 69.2
Unallocated amounts 7.2 4.5 1.7
Less: inter segment expenses (44.5) (40.7) (40.4)
---------------- ---------------- ---------------
Total 520.6 428.7 367.0
---------------- ---------------- ---------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST
Individual 94.0 43.2 127.9
Investment Management 47.2 40.8 29.2
Corporate & Other 111.3 42.7 64.9
Unallocated amounts & inter-segment eliminations 8.8 61.0 (1.7)
---------------- ---------------- ---------------
Total $ 261.3 $ 187.7 $ 220.3
================ ================ ===============
</TABLE>
82
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units which in prior years had been reflected as reportable business
segments: the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. The discontinuation of these business units resulted from the
sale of several operations, a signed agreement to sell one of the operations
and the implementation of plans to withdraw from the remaining businesses.
REINSURANCE OPERATIONS
During 1999, Phoenix completed a comprehensive strategic review of its life
reinsurance segment and decided to exit these operations through a
combination of sale, reinsurance and placement of certain components into
run-off. Accordingly, Phoenix estimated sales proceeds, reinsurance premiums
and net claims run-off, resulting in the recognition of a $173 million
pre-tax loss ($113 million after-tax loss) on the disposal of life
reinsurance discontinued operations. The life reinsurance segment consisted
primarily of individual life reinsurance operations as well as group
personal accident and group health reinsurance business. The significant
components of the loss on the disposal of life reinsurance discontinued
operations in 1999 were as follows:
On August 1, 1999, Phoenix sold its individual life reinsurance operations
and certain group health reinsurance business to Employers Reinsurance
Corporation for $130 million. The transaction was structured as a
reinsurance and asset sale transaction, resulting in a pre-tax gain of $113
million. The pre-tax income from operations for the seven months prior to
disposal was $19 million.
On June 30, 1999, PM Holdings sold 100% of the common stock of Financial
Administrative Services, Inc. (FAS), its third-party administration
subsidiary, to CYBERTEK, a wholly-owned subsidiary of Policy Management
Systems Corporation. Proceeds from the sale were $8.0 million for the common
stock plus $1.0 million for a covenant not-to-compete, resulting in an
after-tax gain of $2.0 million.
Phoenix retained ownership of the preferred stock of FAS, which under the
terms of the agreement, CYBERTEK will purchase in six equal annual
installments commencing March 31, 2001 through March 31, 2006. The purchase
price will be determined annually based upon earnings, but in total, will
range from a minimum of $4.0 million to a maximum of $16.0 million.
During 1999, Phoenix placed the remaining group personal accident and group
health reinsurance operations into run-off. Management has adopted a formal
plan to terminate the related treaties as early as contractually permitted
and is not entering into any new contracts. Based upon the most recent
information available, Phoenix reviewed the run-off block and estimated the
amount and timing of future net premiums, claims and expenses. Consequently,
Phoenix increased reserve estimates on the run-off block by $180 million. In
addition, as part of the exit strategy, Phoenix purchased finite aggregate
excess of loss reinsurance to further protect Phoenix from unfavorable
results in the run-off block. The finite reinsurance is subject to an
aggregate retention of $100 million on the run-off block. Phoenix may
commute the agreement at any time after September 30, 2004, subject to
automatic commutation effective September 30, 2019. Phoenix paid an initial
premium of $130 million.
The additional estimated reserves and finite reinsurance coverage are
expected to cover the run-off of the business; however, the nature of the
underlying risks is such that the claims may take years to reach the
reinsurers involved. Therefore, Phoenix expects to pay claims out of
existing estimated reserves over a number of years as the level of business
diminishes.
83
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Additionally, certain group personal accident reinsurance business has
become the subject of disputes concerning the placement of the business with
reinsurers and the recovery of the reinsurance. This business primarily
concerns certain occupational accident reinsurance "facilities" and a
reinsurance pool (the Unicover Pool) underwritten and managed by Unicover
Managers, Inc. (Unicover). Phoenix participated as a reinsurer in the
Unicover Pool. The Unicover Pool and "facilities" were reinsured in large
part by a reinsurance facility underwritten and managed by Centaur
Underwriting Limited (Centaur) in which Phoenix also participated. Phoenix
terminated its participation in the Centaur facility effective October 1,
1998 and in the Unicover Pool effective March 1, 1999. However, claims
arising from business underwritten while Phoenix was a participant continue
to run off. On September 21, 1999, Phoenix initiated arbitration proceedings
seeking to rescind certain contracts arising from its participation in the
Centaur facility with respect to reinsurance of the Unicover business. In
January 2000, Phoenix settled two Unicover-related matters (see Note 21 -
"Subsequent Events"). A substantial portion of the risk associated with the
Unicover Pool and "facilities" and the Centaur program was further
retroceded by Phoenix to other unaffiliated insurance entities, providing
Phoenix with significant security. Certain of these retrocessionaires have
given notice that they challenge their obligations under their contracts and
are in arbitration or litigation with Phoenix.
Additionally, certain group personal accident excess of loss reinsurance
contracts created in the London market during 1994 - 1997 have become the
subject of disputes concerning the placement of the business with reinsurers
and the recovery of reinsurance. Several arbitration proceedings are
currently pending.
Given the uncertainty associated with litigation and other dispute
resolution proceedings, and the expected long term development of net claims
payments, the estimated amount of the loss on disposal of life reinsurance
discontinued operations may differ from actual results. However, it is
management's opinion, after consideration of the provisions made in these
financial statements, as described above, that future developments will not
have a material effect on Phoenix's consolidated financial position.
PROPERTY AND CASUALTY BROKERAGE OPERATIONS
On July 1, 1999, PM Holdings sold its property and casualty brokerage
business to Hilb, Rogal and Hamilton Company (HRH) for $48.1 million
including $0.2 million for a covenant not-to-compete. Total proceeds
consisted of $32.0 million in convertible debentures, $15.9 million for
865,042 shares of HRH common stock, valued at $18.38 per share on the sale
date, and $0.2 million in cash. The pre-tax gain realized on the sale was
$40.1 million. The HRH common stock is classified as common stock and the
convertible debentures are classified as bonds in the Consolidated Balance
Sheet. As of December 31, 1999 Phoenix owns 7% of the outstanding HRH common
stock, 15% on a diluted basis.
REAL ESTATE MANAGEMENT OPERATIONS
On March 31, 1999, Phoenix sold its real estate management subsidiary,
Phoenix Realty Advisors, to Henderson Investors International Holdings, B.V.
for $7.9 million in cash. The pre-tax gain realized on this transaction was
$7.1 million.
84
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GROUP INSURANCE OPERATIONS
On December 9, 1999, Phoenix signed a definitive agreement to sell its Group
Life and Health business, including five companies, Phoenix American Life,
Phoenix Dental Services, Phoenix Group Services, California Benefits and
Clinical Disability Management, to GE Financial Assurance Holdings, Inc.
Proceeds from the sale are estimated to be $285 million, including cash of
$240 million and 3.1% of the common stock of GE Life and Annuity Assurance
Company. Phoenix expects the transaction to be completed in the second
quarter of 2000, subject to regulatory approval.
The assets and liabilities of the discontinued operations have been excluded
from the assets and liabilities of continuing operations and separately
identified on the Consolidated Balance Sheet. Net assets of the discontinued
operations totaled $187.6 million and $283.8 million as of December 31, 1999
and 1998, respectively. Asset and liability balances of the continuing
operation as of December 31, 1998, have been restated to conform with the
current year presentation. Likewise, the Consolidated Statement of Income,
Comprehensive Income and Equity has been restated for 1998 and 1997 to
exclude the operating results of discontinued operations from continuing
operations. The operating results of discontinued operations and the gain or
loss on disposal are presented below.
<TABLE>
<CAPTION>
GAIN (LOSS) FROM OPERATIONS OF YEAR ENDED DECEMBER 31,
DISCONTINUED OPERATIONS 1999 1998 1997
(IN THOUSANDS)
Revenues:
<S> <C> <C> <C>
Reinsurance Operations $ 306,671 $ 163,503
Group Insurance Operations $ 453,813 503,825 483,956
Property and Casualty Brokerage Operations 25,968 72,579 64,093
Real Estate Management 1,189 12,707 15,319
--------------- -------------- ---------------
Total revenues 480,970 895,782 726,871
--------------- -------------- ---------------
Gain (loss) from operations:
Reinsurance Operations 14,081 10,611
Group Insurance Operations 28,672 29,212 31,686
Property and Casualty Brokerage Operations 1,534 2,515 (19,911)
Real Estate Management (2,645) (4,037) (2,616)
--------------- -------------- ---------------
Gain from discountinued operations before income
taxes 27,561 41,771 19,770
Income taxes 10,006 16,759 12,522
--------------- -------------- ---------------
Gain from discontinued operations, net of taxes $ 17,555 $ 25,012 $ 7,248
=============== ============== ===============
</TABLE>
85
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
YEAR ENDED
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS DECEMBER 31, 1999
(IN THOUSANDS)
(Loss) gain on disposal:
Reinsurance Operations $ (173,061)
Property and Casualty Brokerage Operations 40,131
Real Estate Management 5,870
--------------
Loss on disposal of discontinued operations before
income taxes (127,060)
Income taxes (55,076)
--------------
Loss on disposal of discontinued operations, net of
income taxes $ (71,984)
--------------
12. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by Phoenix, are stated at depreciated cost. Real
estate occupied by Phoenix was $101.7 million and $106.7 million at December
31, 1999 and 1998, respectively. Phoenix provides for depreciation using
straight-line and accelerated methods over the estimated useful lives of the
related assets which generally range from five to forty years. Accumulated
depreciation and amortization was $182.3 million and $161.2 million at
December 31, 1999 and 1998, respectively.
Rental expenses for operating leases, principally with respect to buildings,
amounted to $16.3 million, $16.9 million and $16.9 million in 1999, 1998,
and 1997, respectively, for continuing operations. Future minimum rental
payments under non-cancelable operating leases for continuing operations
were approximately $40.2 million as of December 31, 1999, payable as
follows: 2000 - $13.5 million; 2001 - $10.5 million; 2002 - $7.3 million;
2003 - $5.1 million; 2004 - $2.8 million; and $1.0 million thereafter.
13. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix assumes and
cedes reinsurance as a means of diversifying underwriting risk. For direct
issues, the maximum of individual life insurance retained by Phoenix on any
one life is $8 million for single life and joint first-to-die policies and
to $10 million for joint last-to-die policies, with excess amounts ceded to
reinsurers. Phoenix reinsures 80% of the mortality risk on the inforce block
of the Confederation Life business acquired on December 31, 1997, and 90% of
the mortality risk on certain new issues of term and universal life
products. In addition, Phoenix entered into a separate reinsurance agreement
on October 1, 1998 to reinsure 80% of the mortality risk on a substantial
portion of its otherwise retained individual life insurance business. In
1999, Phoenix reinsured the mortality risk on the remaining 20% of this
business. Amounts recoverable from reinsurers are estimated in a manner
consistent with the claim liability associated with the reinsured policy.
86
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,762,359 $ 1,719,393 $ 1,592,800
Reinsurance assumed 416,194 505,262 329,927
Reinsurance ceded (537,847) (371,854) (282,121)
--------------- ---------------- ---------------
Net premiums 1,640,706 1,852,801 1,640,606
Less net premiums of discontinued operations (506,499) (698,071) (564,449)
--------------- ---------------- ---------------
Net premiums of continuing operations $ 1,134,207 $ 1,154,730 $ 1,076,157
=============== ================ ===============
Direct policy and contract claims incurred $ 707,105 $ 728,062 $ 629,112
Reinsurance assumed 563,807 433,242 410,704
Reinsurance ceded (500,282) (407,780) (373,127)
--------------- ---------------- ---------------
Net policy and contract claims incurred 770,630 753,524 666,689
Less net incurred claims of discontinued operations (552,423) (471,688) (422,373)
--------------- ---------------- ---------------
Net policy and contract claims incurred
of continuing operations $ 218,207 $ 281,836 $ 244,316
=============== ================ ==============
Direct life insurance in force $ 131,052,050 $ 121,442,041 $ 120,394,664
Reinsurance assumed 139,649,850 110,632,110 84,806,585
Reinsurance ceded (207,192,046) (135,817,986) (74,764,639)
--------------- ---------------- ---------------
Net insurance in force 63,509,854 96,256,165 120,436,610
Less insurance in force of discontinued operations (1,619,452) (24,330,166) (13,811,408)
--------------- ---------------- ---------------
Net insurance in force of continuing operations $ 61,890,402 $ 71,925,999 $ 116,625,202
=============== ================ ===============
</TABLE>
Irrevocable letters of credit aggregating $36.2 million at December 31, 1999
have been arranged with United States commercial banks in favor of Phoenix
to collateralize the ceded reserves.
14. PARTICIPATING LIFE INSURANCE
Participating life insurance in force was 66.9% and 72.3% of the face value
of total individual life insurance in force at December 31, 1999 and 1998,
respectively. The premiums on participating life insurance policies were
76.8%, 79.4% and 83.5% of total individual life insurance premiums in 1999,
1998, and 1997, respectively.
87
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
15. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 1,049,934 $ 1,016,295 $ 908,616
Acquisition cost deferred 143,110 164,608 288,281
Amortized to expense during the year (146,603) (137,663) (102,617)
Adjustment to net unrealized investment
gains (losses) included in other
comprehensive income 260,287 6,694 (77,985)
------------------ ----------------- ------------------
Balance at end of year $ 1,306,728 $ 1,049,934 $ 1,016,295
================== ================= ==================
</TABLE>
Amortized to expense during the year for 1999 includes a $6.3 million
adjustment due to worse than expected persistency in one of the variable
annuity product lines and a $6.9 million adjustment to traditional life due
to an adjustment to death claims used in determining DAC amortization.
16. MINORITY INTEREST
Phoenix's interests in Phoenix Investment Partners and PFG Holdings, through
its wholly-owned subsidiary PM Holdings, are represented by ownership of
approximately 60% and 67%, respectively, of the outstanding shares of common
stock at December 31, 1999. Earnings and equity attributable to minority
shareholders are included in minority interest in the consolidated financial
statements.
17. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Other than debt securities being held-to-maturity, financial instruments
that are subject to fair value disclosure requirements (insurance contracts
are excluded) are carried in the consolidated financial statements at
amounts that approximate fair value. The fair values presented for certain
financial instruments are estimates which, in many cases, may differ
significantly from the amounts which could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of
fair value are based on discounted cash flow analysis which utilize current
interest rates for similar financial instruments which have comparable terms
and credit quality.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
88
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DEBT SECURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
debt securities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
DERIVATIVE INSTRUMENTS
Phoenix's derivative instruments include interest rate swap, cap and floor
agreements, swaptions and foreign currency swap agreements. Fair values for
these contracts are based on current settlement values. These values are
based on brokerage quotes that utilize pricing models or formulas based upon
current assumptions for the respective agreements.
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values are calculated as the present value of scheduled payments, with
the discount based upon the Treasury rate comparable for the remaining loan
duration, plus a spread of between 130 and 800 basis points, depending on
the internal quality rating of the loan. For loans in foreclosure or
default, values were determined assuming principal recovery was the lower of
the loan balance or the estimated value of the underlying property.
POLICY LOANS
Fair values are estimated as the present value of loan interest and policy
loan repayments discounted at the ten year Treasury rate. Loan repayments
were assumed only to occur as a result of anticipated policy lapses, and it
was assumed that annual policy loan interest payments were made at the
guaranteed loan rate less 17.5 basis points. Discounting was at the ten year
Treasury rate, except for policy loans with a variable policy loan rate.
Variable policy loans have an interest rate that is reset annually based
upon market rates and therefore, book value is a reasonable approximation of
fair value.
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair value of deferred annuities and supplementary contracts without
life contingencies with an interest guarantee of one year or less is valued
at the amount of the policy reserve. In determining the fair value of
deferred annuities and supplementary contracts without life contingencies
with interest guarantees greater than one year, a discount rate equal to the
appropriate Treasury rate, plus 150 basis points, was used to determine the
present value of the projected account value of the policy at the end of the
current guarantee period.
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest guarantees of less 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.
89
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES PAYABLE
The fair value of notes payable is determined based on contractual cash
flows discounted at market rates.
FAIR VALUE SUMMARY
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
Financial assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 187,610 $ 187,610 $ 115,187 $ 115,187
Short-term investments 133,367 133,367 185,983 185,983
Debt securities 7,496,948 7,400,067 7,712,865 7,796,389
Equity securities 461,613 461,613 301,649 301,649
Mortgage loans 716,831 680,569 797,343 831,919
Derivative instruments (13,211) 12,316
Policy loans 2,042,558 2,040,497 2,008,260 2,122,389
----------------- ----------------- ----------------- -----------------
Total financial assets $ 11,038,927 $ 10,890,512 $ 11,121,287 $ 11,365,832
================= ================= ================= =================
Financial liabilities:
Policy liabilities $ 709,696 $ 709,357 $ 783,400 $ 783,400
Notes payable 499,392 490,831 386,575 395,744
----------------- ----------------- ----------------- -----------------
Total financial liabilities $ 1,209,088 $ 1,200,188 $ 1,169,975 $ 1,179,144
================= ================= ================= ================
</TABLE>
18. CONTINGENCIES
LITIGATION
Certain group personal accident reinsurance business has become the subject
of disputes concerning the placement of the business with reinsurers and the
recovery of the reinsurance (see Note 11 - "Discontinued Operations" and
Note 21 - "Subsequent Events").
19. STATUTORY FINANCIAL INFORMATION
The insurance subsidiaries are required to file annual statements with state
regulatory authorities prepared on an accounting basis prescribed or
permitted by such authorities. Except for the accounting policy involving
federal income taxes described next, there were no material practices not
prescribed by the State of New York Insurance Department (the Insurance
Department), as of December 31, 1999, 1998 and 1997. Phoenix's statutory
federal income tax liability is principally based on estimates of federal
income tax due. A deferred income tax liability has also been established
for estimated taxes on unrealized gains for common stock and venture capital
equity partnerships. Current New York law does not allow the recording of
deferred income taxes. Phoenix has received approval from the Insurance
Department for this practice.
90
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 131,286 $ 108,652 $ 66,599
Deferred policy acquisition costs, net (28,099) 18,538 48,821
Future policy benefits (23,686) (53,847) (9,145)
Pension and postretirement expenses (8,638) (17,334) (7,955)
Investment valuation allowances 15,141 107,229 87,920
Interest maintenance reserve (7,232) 1,415 17,544
Deferred income taxes 3,919 (39,983) (36,250)
Other, net 6,191 12,459 2,118
--------------- --------------- ---------------
Net income, as reported $ 88,882 $ 137,129 $ 169,652
=============== =============== ===============
</TABLE>
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to equity as reported
in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $ 1,427,333 $ 1,205,635
Deferred policy acquisition costs, net 1,231,217 1,259,316
Future policy benefits (478,184) (465,268)
Pension and postretirement expenses (193,007) (174,273)
Investment valuation allowances (206,531) 34,873
Interest maintenance reserve 24,767 35,303
Deferred income taxes 65,595 (25,593)
Surplus notes (159,444) (157,500)
Other, net 49,505 24,062
------------------- -------------------
Equity, as reported $ 1,761,251 $ 1,736,555
=================== ===================
</TABLE>
The Insurance Department recognizes only statutory accounting practices for
determining and reporting the financial condition and results of operations
of an insurance company, for determining its solvency under New York
Insurance Law, and for determining whether its financial condition warrants
the payment of a dividend to its policyholders. No consideration is given by
the Insurance Department to financial statements prepared in accordance with
generally accepted accounting principles in making such determinations.
91
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
20. PRIOR PERIOD ADJUSTMENTS
In 1999, Phoenix revised the accounting for venture capital partnerships to
include unrealized capital gains and losses on investments held in the
partnerships. These gains and losses are recorded in investment income.
Opening retained earnings at December 31, 1996 has been increased by $17.6
million. The consolidated balance sheet as of December 31, 1998 was revised
by increasing the following balances: other invested assets by $50.6
million, deferred income taxes by $17.7 million and retained earnings by
$32.9 million. The effect on the Consolidated Statement of Income,
Comprehensive Income and Equity was an increase in net income of $12.4
million and $2.9 million for the years ended 1998 and 1997, respectively.
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.
21. SUBSEQUENT EVENTS
OCCUPATIONAL ACCIDENT REINSURANCE
On January 21, 2000, Phoenix, in connection with its participation in the
Centaur facility, and two other companies completed a settlement agreement
with Reliance Insurance Company (Reliance) with respect to certain
reinsurance contracts covering occupational accident business reinsured by
Reliance as a Unicover-managed "facility." The Reliance business was the
largest portion of occupational accident reinsurance business underwritten
by Unicover. Under the terms of the settlement agreement, Phoenix ended the
contracts for a total payment of $115.0 million.
On January 13, 2000, Phoenix and four other companies, in connection with
their participation in the Unicover Pool, completed a settlement agreement
with EBI Indemnity Company and other affiliates of the Orion Group (EBI)
with respect to certain reinsurance contracts covering occupational accident
business which EBI ceded to the Unicover Pool. These contracts represented
the largest source of premium to the Unicover Pool. Under the terms of the
settlement agreement, the Unicover Pool members ended the contracts for a
total payment of $43.0 million, of which Phoenix's share was approximately
$10.0 million.
Phoenix included the cost of these settlements, net of reinsurance, in its
estimate of the loss on discontinued life reinsurance operations. See Note
11 - "Discontinued Operations."
92
<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, 1999.
Example:
Value of hypothetical pre-existing account with exactly one
unit at the beginning of the period:...................... 1.561075
Value of the same account (excluding capital changes) at the
end of the 7-day period:.................................. 1.562397
Calculation:
Ending account value ..................................... 1.562397
Less beginning value ..................................... 1.561075
Net change in account value .............................. 0.001322
Base period return:
(adjusted change/beginning account value) ................ 0.000847
Current yield = return x (365/7)............................ 4.42%
Effective yield = [(1 + return)(365/7)] - 1................. 4.51%
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.
93
<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 advisors. 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, 1999(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SERIES INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series.................... 5/1/90 27.57% 17.77% N/A 11.38%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series......................... 9/17/96 48.85% N/A N/A -2.35%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series...................... 12/15/99 N/A N/A N/A 2.42%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series...... 5/1/95 3.18% N/A N/A 8.93%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series................... 12/31/82 27.74% 23.15% 18.26% 18.61%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series...................... 3/2/98 30.23% N/A N/A 30.45%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series............ 12/15/99 N/A N/A N/A -1.57%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series...................... 10/8/82 3.23% 3.73% 3.67% 4.98%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series......... 12/31/82 3.85% 7.90% 7.70% 8.51%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series.................... 3/2/98 22.46% N/A N/A 17.40%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series....... 7/14/92 17.08% N/A N/A 21.08%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series....................... 12/15/99 N/A N/A N/A 5.76%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series..................... 12/15/99 N/A N/A N/A -0.07%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series.............................. 12/15/99 N/A N/A N/A 5.90%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series............... 12/15/99 N/A N/A N/A 6.21%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series......................... 5/1/92 9.88% 14.95% N/A 11.12%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series................ 3/2/98 15.26% N/A N/A 18.94%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series............. 9/17/84 9.57% 14.45% 11.92% 12.30%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series..................... 3/2/98 -11.73% N/A N/A -13.17%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series..................... 3/2/98 43.43% N/A N/A 34.79%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series.................... 1/29/96 52.79% N/A N/A 29.51%
- ---------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund................................ 8/22/97 25.71% N/A N/A 15.37%
- ---------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II......... 3/28/94 -2.13% 4.24% N/A 3.94%
- ---------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II....................... 3/1/94 0.75% 9.08% N/A 6.81%
- ---------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio..................................... 11/30/99 N/A N/A N/A 23.65%
- ---------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2).............. 11/2/98 7.66% N/A N/A 8.89%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2).............. 11/28/88 20.73% 15.36% 11.45% 11.40%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund --
Class 2(2)............................................... 9/27/96 51.15% N/A N/A -5.96%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2)........... 11/3/88 26.87% 15.82% 11.94% 11.77%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2(2).... 5/11/92 21.41% 15.44% N/A 13.71%
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty..................................... 2/1/99 N/A N/A N/A 81.57%
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap........................... 5/1/95 123.36% N/A N/A 37.18%
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty............................................ 2/1/99 N/A N/A N/A 32.60%
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap.................................... 5/1/95 23.20% N/A N/A 25.16%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Performance data quoted represent the investment return of the appropriate
series adjusted for Phoenix Individual Edge charges had the subaccount
started on the inception date of the appropriate series. 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 $15 issue expense charge, $5 monthly administrative charge, investment
management fees and mortality and expense risk charges. The investment return
and principal value of the variable contract will fluctuate so that the
accumulated value, when redeemed, may be worth more or less than the original
cost.
2 Standardized performance for Class 2 shares reflects a "blended" figure,
combining: (a) for periods prior to Class 2's inception on May 1, 1997
(November 16, 1998 for Mutual Shares Securities Fund), historical results of
Class 1 shares; and (b) for periods after May 1, 1997 (November 16, 1998),
Class 2's results reflecting an additional 12b-1 fee expense which also
affects all future performance. Maximum annual plan expenses are 0.25%.
94
<PAGE>
Advertisements, sales literature and other communications may contain
information about any series' or advisor'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(SM), First Boston High Yield Index and Salomon Brothers
Corporate and Government Bond Indices.
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 Advisor 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(SM)
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.
95
<PAGE>
ANNUAL TOTAL RETURN(1)
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
SERIES 1983 1984 1985 1986 1987 1988 1989 1990
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 31.84% 9.79% 33.85% 19.51% 6.08% 3.09% 34.53% 3.32%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
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-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced 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-Oakhurst Strategic Allocation Series N/A N/A 26.33% 14.77% 11.66% 1.53% 18.53% 5.15%
- -------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
EAFE(R) 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 Securities II 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
- -------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Templeton Asset Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A 12.13% -8.95%
- -------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund --
Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A 13.48% -11.99%
- -------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund --
Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
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 U.S. Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL TOTAL RETURN(1) (continued)
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
SERIES 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series 18.79% -13.52% 37.33% -0.73% 8.72% 17.71% 11.16% 26.92% 28/48%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A -32.94 -5.21% 49.78%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 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 N/A N/A N/A N/A N/A 32.10% 21.09% -21.83% 3.95%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 41.60% 9.41% 18.75% 0.66% 29.85% 11.69% 20.12% 28.98% 28.65%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A 31.12%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 5.14% 2.75% 2.06% 3.01% 4.86% 4.19% 4.35% 4.26% 3.99%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 18.66% 9.23% 14.99% -6.21% 22.56% 11.52% 10.21% -4.91% 4.62%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A 23.35%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index N/A N/A N/A N/A N/A N/A N/A 30.64% 17.90%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A 7.75% -3.61% 22.37% 9.68% 17.00% 18.07% 10.69%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A 16.08%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 28.27% 9.79% 10.12% -2.19% 17.27% 8.18% 19.78% 19.84% 10.38%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A -11.00%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A 44.49%
- ---------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A 16.25% 43.55% 53.77%
- ---------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund N/A N/A N/A N/A N/A N/A N/A 20.64% 26.61%
- ---------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A 7.90% 3.37% 7.71% 6.80% -1.38%
- ---------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A 19.42% 13.40% 12.92% 1.88% 1.50%
- ---------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A 8.43%
- ---------------------------------------------------------------------------------------------------------------------
Templeton Asset Securities Fund -- Class 2(2) 26.42% 6.97% 24.86% -4.00% 21.29% 17.64% 14.37% 5.27% 21.58%
- ---------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund --
Class 2(2) N/A N/A N/A N/A N/A N/A -29.95% -21.69% 52.10%
- ---------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2) 26.22% 6.02% 32.68% -3.25% 23.97% 21.17% 10.75% 0.24% 27.75%
- ---------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund --
Class 2(2) N/A N/A 45.85% -3.27% 14.56% 22.77% 12.76% 8.17% 22.27%
- ---------------------------------------------------------------------------------------------------------------------
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 31.15% -2.24% 15.41% 124.68%
- ---------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap N/A N/A N/A N/A 16.01% 45.64% 28.41% 7.83% 24.08%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Returns are net of mortality and expense risk charges and investment
management fees for the subaccounts. Percent change doesn't include the effect
of the issue expense and monthly administrative charges. Performance data
quoted represent the investment return of the appropriate series adjusted for
Phoenix Individual Edge charges had the Subaccount started on the inception
date of the appropriate series.
2 Standardized performance for Class 2 shares reflects a "blended" figure,
combining: (a) for periods prior to Class 2's inception on May 1, 1997
(November 16, 1998 for Mutual Shares Securities Fund), historical results of
Class 1 shares; and (b) for periods after May 1, 1997 (November 16, 1998),
Class 2's results reflecting an additional 12b-1 fee expense which also
affects all future performance. Maximum annual plan expenses are 0.25%.
These rates of return are not an estimate or guarantee of future performance.
96
<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%
(4% in New York and New Jersey). 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%
97
<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. 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%.
4. A federal tax charge of 1.5%.
5. Cost of insurance charge. The tables illustrate cost of insurance at both the
current rates and at the maximum rates guaranteed in the policies. (See
"Charges and Deductions"--Cost of Insurance.)
6. Mortality and expense risk charge, which is a daily charge equivalent to .80%
on an annual basis, (.25% on an annual basis after the 15th Policy Year),
against the VUL Account for mortality and expense risks. (See "Charges and
Deductions"--Mortality and Expense Risk Charge.)
These illustrations also assume an average investment advisory fee of .75%
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 .22%. All other Fund expenses, except capital items such as
brokerage commissions, are paid by the Advisor 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, 1999,
average total operating expenses for the Series would have been approximately
.97% 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 -1.76%, 4.19% and 10.15%, respectively (applicable for
the first 15 Policy Years for Single Life Policies and -1.22%, 4.69% and 10.75%,
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.
98
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
PHOENIX INDIVIDUAL 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 1,050 592 0 100,000 638 0 100,000 684 0 100,000
2 1,000 2,153 1,317 0 100,000 1,451 0 100,000 1,591 0 100,000
3 1,000 3,310 2,021 241 100,000 2,289 510 100,000 2,580 800 100,000
4 1,000 4,526 2,704 924 100,000 3,154 1,374 100,000 3,661 1,881 100,000
5 1,000 5,802 3,364 1,584 100,000 4,044 2,265 100,000 4,842 3,062 100,000
6 1,000 7,142 4,001 2,506 100,000 4,961 3,466 100,000 6,132 4,637 100,000
7 1,000 8,549 4,613 3,403 100,000 5,903 4,693 100,000 7,540 6,330 100,000
8 1,000 10,027 5,201 4,276 100,000 6,872 5,946 100,000 9,079 8,154 100,000
9 1,000 11,578 5,763 5,301 100,000 7,866 7,404 100,000 10,761 10,299 100,000
10 1,000 13,207 6,300 6,300 100,000 8,888 8,888 100,000 12,602 12,602 100,000
11 1,000 14,917 6,813 6,813 100,000 9,939 9,939 100,000 14,619 14,619 100,000
12 1,000 16,713 7,302 7,302 100,000 11,022 11,022 100,000 16,831 16,831 100,000
13 1,000 18,599 7,767 7,767 100,000 12,136 12,136 100,000 19,259 19,259 100,000
14 1,000 20,579 8,207 8,207 100,000 13,285 13,285 100,000 21,927 21,927 100,000
15 1,000 22,657 8,623 8,623 100,000 14,466 14,466 100,000 24,857 24,857 100,000
16 1,000 24,840 9,063 9,063 100,000 15,770 15,770 100,000 28,236 28,236 100,000
17 1,000 27,132 9,477 9,477 100,000 17,120 17,120 100,000 31,974 31,974 100,000
18 1,000 29,539 9,861 9,861 100,000 18,515 18,515 100,000 36,110 36,110 100,000
19 1,000 32,066 10,213 10,213 100,000 19,956 19,956 100,000 40,690 40,690 100,000
20 1,000 34,719 10,529 10,529 100,000 21,444 21,444 100,000 45,765 45,765 100,000
@ 65 1,000 69,761 11,730 11,730 100,000 39,638 39,638 100,000 139,551 139,551 170,252
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
99
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
PHOENIX INDIVIDUAL 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 1,050 512 0 100,000 555 0 100,000 599 0 100,000
2 1,000 2,153 1,157 0 100,000 1,280 0 100,000 1,409 0 100,000
3 1,000 3,310 1,780 1 100,000 2,026 246 100,000 2,292 513 100,000
4 1,000 4,526 2,383 603 100,000 2,792 1,013 100,000 3,255 1,475 100,000
5 1,000 5,802 2,962 1,183 100,000 3,579 1,799 100,000 4,302 2,523 100,000
6 1,000 7,142 3,519 2,024 100,000 4,385 2,890 100,000 5,444 3,949 100,000
7 1,000 8,549 4,049 2,839 100,000 5,210 4,000 100,000 6,687 5,477 100,000
8 1,000 10,027 4,555 3,629 100,000 6,054 5,129 100,000 8,041 7,116 100,000
9 1,000 11,578 5,033 4,571 100,000 6,916 6,454 100,000 9,517 9,055 100,000
10 1,000 13,207 5,485 5,485 100,000 7,797 7,797 100,000 11,128 11,128 100,000
11 1,000 14,917 5,906 5,906 100,000 8,694 8,694 100,000 12,884 12,884 100,000
12 1,000 16,713 6,297 6,297 100,000 9,607 9,607 100,000 14,800 14,800 100,000
13 1,000 18,599 6,655 6,655 100,000 10,535 10,535 100,000 16,893 16,893 100,000
14 1,000 20,579 6,980 6,980 100,000 11,478 11,478 100,000 19,180 19,180 100,000
15 1,000 22,657 7,269 7,269 100,000 12,433 12,433 100,000 21,681 21,681 100,000
16 1,000 24,840 7,563 7,563 100,000 13,475 13,475 100,000 24,554 24,554 100,000
17 1,000 27,132 7,814 7,814 100,000 14,533 14,533 100,000 27,718 27,718 100,000
18 1,000 29,539 8,017 8,017 100,000 15,604 15,604 100,000 31,203 31,203 100,000
19 1,000 32,066 8,167 8,167 100,000 16,683 16,683 100,000 35,045 35,045 100,000
20 1,000 34,719 8,256 8,256 100,000 17,765 17,765 100,000 39,284 39,284 100,000
@ 65 1,000 69,761 4,071 4,071 100,000 27,518 27,518 100,000 117,325 117,325 143,137
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
100
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
PHOENIX INDIVIDUAL 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 1,050 619 0 100,000 665 0 100,000 712 0 100,000
2 1,000 2,153 1,369 0 100,000 1,506 0 100,000 1,648 127 100,000
3 1,000 3,310 2,098 577 100,000 2,373 852 100,000 2,672 1,151 100,000
4 1,000 4,526 2,805 1,284 100,000 3,269 1,748 100,000 3,790 2,269 100,000
5 1,000 5,802 3,491 1,970 100,000 4,192 2,671 100,000 5,012 3,491 100,000
6 1,000 7,142 4,153 2,876 100,000 5,143 3,865 100,000 6,348 5,071 100,000
7 1,000 8,549 4,791 3,757 100,000 6,121 5,087 100,000 7,808 6,774 100,000
8 1,000 10,027 5,405 4,614 100,000 7,129 6,338 100,000 9,405 8,614 100,000
9 1,000 11,578 5,996 5,601 100,000 8,167 7,772 100,000 11,153 10,758 100,000
10 1,000 13,207 6,564 6,564 100,000 9,237 9,237 100,000 13,069 13,069 100,000
11 1,000 14,917 7,112 7,112 100,000 10,343 10,343 100,000 15,173 15,173 100,000
12 1,000 16,713 7,641 7,641 100,000 11,488 11,488 100,000 17,487 17,487 100,000
13 1,000 18,599 8,150 8,150 100,000 12,672 12,672 100,000 20,029 20,029 100,000
14 1,000 20,579 8,639 8,639 100,000 13,896 13,896 100,000 22,826 22,826 100,000
15 1,000 22,657 9,107 9,107 100,000 15,163 15,163 100,000 25,904 25,904 100,000
16 1,000 24,840 9,608 9,608 100,000 16,565 16,565 100,000 29,455 29,455 100,000
17 1,000 27,132 10,089 10,089 100,000 18,024 18,024 100,000 33,388 33,388 100,000
18 1,000 29,539 10,548 10,548 100,000 19,542 19,542 100,000 37,744 37,744 100,000
19 1,000 32,066 10,985 10,985 100,000 21,120 21,120 100,000 42,573 42,573 100,000
20 1,000 34,719 11,398 11,398 100,000 22,761 22,761 100,000 47,928 47,928 100,000
@ 65 1,000 69,761 14,711 14,711 100,000 44,029 44,029 100,000 146,925 146,925 179,249
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
101
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
PHOENIX INDIVIDUAL 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 1,050 534 0 100,000 578 0 100,000 622 0 100,000
2 1,000 2,153 1,199 0 100,000 1,325 0 100,000 1,457 0 100,000
3 1,000 3,310 1,842 321 100,000 2,093 572 100,000 2,366 845 100,000
4 1,000 4,526 2,464 943 100,000 2,884 1,363 100,000 3,357 1,836 100,000
5 1,000 5,802 3,062 1,541 100,000 3,695 2,174 100,000 4,437 2,916 100,000
6 1,000 7,142 3,637 2,359 100,000 4,527 3,249 100,000 5,614 4,336 100,000
7 1,000 8,549 4,186 3,151 100,000 5,378 4,344 100,000 6,895 5,860 100,000
1,000 10,027 4,709 3,918 100,000 6,250 5,459 100,000 8,291 7,500 100,000
9 1,000 11,578 5,208 4,813 100,000 7,144 6,749 100,000 9,816 9,421 100,000
10 1,000 13,207 5,682 5,682 100,000 8,060 8,060 100,000 11,483 11,483 100,000
11 1,000 14,917 6,131 6,131 100,000 9,000 9,000 100,000 13,307 13,307 100,000
12 1,000 16,713 6,556 6,556 100,000 9,964 9,964 100,000 15,304 15,304 100,000
13 1,000 18,599 6,954 6,954 100,000 10,952 10,952 100,000 17,492 17,492 100,000
14 1,000 20,579 7,324 7,324 100,000 11,962 11,962 100,000 19,889 19,889 100,000
15 1,000 22,657 7,667 7,667 100,000 12,997 12,997 100,000 22,518 22,518 100,000
16 1,000 24,840 8,023 8,023 100,000 14,132 14,132 100,000 25,543 25,543 100,000
17 1,000 27,132 8,349 8,349 100,000 15,300 15,300 100,000 28,885 28,885 100,000
18 1,000 29,539 8,640 8,640 100,000 16,499 16,499 100,000 32,577 32,577 100,000
19 1,000 32,066 8,893 8,893 100,000 17,726 17,726 100,000 36,657 36,657 100,000
20 1,000 34,719 9,105 9,105 100,000 18,984 18,984 100,000 41,173 41,173 100,000
@ 65 1,000 69,761 8,564 8,564 100,000 33,436 33,436 100,000 124,835 124,835 152,299
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
102
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
PHOENIX INDIVIDUAL 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 1,050 591 0 100,592 637 0 100,638 683 0 100,684
2 1,000 2,153 1,314 0 101,315 1,447 0 101,448 1,586 0 101,587
3 1,000 3,310 2,014 235 102,015 2,282 502 102,282 2,571 791 102,572
4 1,000 4,526 2,692 912 102,693 3,140 1,360 103,141 3,645 1,865 103,645
5 1,000 5,802 3,346 1,566 103,346 4,022 2,243 104,023 4,815 3,035 104,815
6 1,000 7,142 3,975 2,480 103,976 4,928 3,433 104,929 6,089 4,594 106,090
7 1,000 8,549 4,578 3,368 104,578 5,856 4,646 105,856 7,477 6,266 107,477
8 1,000 10,027 5,154 4,229 105,155 6,806 5,881 106,807 8,988 8,063 108,989
9 1,000 11,578 5,702 5,240 105,703 7,778 7,315 107,778 10,634 10,172 110,634
10 1,000 13,207 6,223 6,223 106,223 8,771 8,771 108,772 12,427 12,427 112,428
11 1,000 14,917 6,717 6,717 106,718 9,789 9,789 109,790 14,384 14,384 114,385
12 1,000 16,713 7,185 7,185 107,186 10,832 10,832 110,832 16,521 16,521 116,522
13 1,000 18,599 7,627 7,627 107,627 11,899 11,899 111,899 18,856 18,856 118,856
14 1,000 20,579 8,041 8,041 108,042 12,991 12,991 112,992 21,407 21,407 121,408
15 1,000 22,657 8,428 8,428 108,428 14,107 14,107 114,108 24,194 24,194 124,195
16 1,000 24,840 8,835 8,835 108,836 15,333 15,333 115,334 27,393 27,393 127,394
17 1,000 27,132 9,212 9,212 109,212 16,591 16,591 116,592 30,909 30,909 130,909
18 1,000 29,539 9,555 9,555 109,555 17,879 17,879 117,879 34,771 34,771 134,771
19 1,000 32,066 9,861 9,861 109,862 19,195 19,195 119,195 39,014 39,014 139,015
20 1,000 34,719 10,127 10,127 110,128 20,536 20,536 120,536 43,675 43,675 143,676
@ 65 1,000 69,761 10,561 10,561 110,561 35,439 35,439 135,439 125,729 125,729 225,730
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
103
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
MALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
PHOENIX INDIVIDUAL 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 1,050 511 0 100,511 554 0 100,554 597 0 100,598
2 1,000 2,153 1,153 0 101,154 1,276 0 101,277 1,405 0 101,406
3 1,000 3,310 1,773 0 101,774 2,018 238 102,018 2,283 503 102,284
4 1,000 4,526 2,371 591 102,371 2,778 998 102,779 3,238 1,458 103,238
5 1,000 5,802 2,944 1,164 102,944 3,556 1,776 103,556 4,274 2,494 104,275
6 1,000 7,142 3,492 1,997 103,493 4,351 2,856 104,352 5,400 3,905 105,401
7 1,000 8,549 4,013 2,803 104,013 5,161 3,951 105,162 6,621 5,411 106,622
8 1,000 10,027 4,507 3,581 104,507 5,987 5,061 105,987 7,948 7,022 107,948
9 1,000 11,578 4,971 4,509 104,971 6,826 6,363 106,826 9,386 8,924 109,387
10 1,000 13,207 5,406 5,406 105,407 7,678 7,678 107,679 10,949 10,949 110,949
11 1,000 14,917 5,809 5,809 105,809 8,541 8,541 108,541 12,643 12,643 112,644
12 1,000 16,713 6,178 6,178 106,178 9,412 9,412 109,413 14,481 14,481 114,482
13 1,000 18,599 6,512 6,512 106,512 10,290 10,290 110,291 16,475 16,475 116,476
14 1,000 20,579 6,809 6,809 106,809 11,173 11,173 111,174 18,639 18,639 118,639
15 1,000 22,657 7,066 7,066 107,067 12,058 12,058 112,058 20,985 20,985 120,985
16 1,000 24,840 7,324 7,324 107,325 13,015 13,015 113,015 23,662 23,662 123,662
17 1,000 27,132 7,535 7,535 107,536 13,972 13,972 113,973 26,580 26,580 126,580
18 1,000 29,539 7,693 7,693 107,694 14,923 14,923 114,923 29,758 29,758 129,759
19 1,000 32,066 7,793 7,793 107,793 15,861 15,861 115,861 33,218 33,218 133,218
20 1,000 34,719 7,825 7,825 107,826 16,775 16,775 116,776 36,980 36,980 136,980
@ 65 1,000 69,761 2,834 2,834 102,834 22,265 22,265 122,265 97,952 97,952 197,952
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
104
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
PHOENIX INDIVIDUAL 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 1,050 618 0 100,618 664 0 100,665 711 0 100,712
2 1,000 2,153 1,366 0 101,366 1,503 0 101,503 1,645 124 101,646
3 1,000 3,310 2,092 571 102,092 2,367 846 102,367 2,664 1,143 102,664
4 1,000 4,526 2,795 1,274 102,796 3,257 1,736 103,257 3,776 2,255 103,776
5 1,000 5,802 3,475 1,954 103,476 4,172 2,651 104,173 4,989 3,468 104,989
6 1,000 7,142 4,131 2,853 104,131 5,114 3,836 105,115 6,311 5,034 106,312
7 1,000 8,549 4,760 3,726 104,761 6,080 5,046 106,080 7,753 6,718 107,753
8 1,000 10,027 5,364 4,573 105,364 7,071 6,280 107,071 9,324 8,533 109,325
9 1,000 11,578 5,942 5,547 105,942 8,089 7,693 108,089 11,040 10,645 111,041
10 1,000 13,207 6,495 6,495 106,496 9,134 9,134 109,134 12,914 12,914 112,915
11 1,000 14,917 7,027 7,027 107,028 10,211 10,211 110,211 14,966 14,966 114,967
12 1,000 16,713 7,538 7,538 107,539 11,320 11,320 111,321 17,213 17,213 117,214
13 1,000 18,599 8,026 8,026 108,027 12,463 12,463 112,463 19,675 19,675 119,675
14 1,000 20,579 8,492 8,492 108,493 13,639 13,639 113,639 22,371 22,371 122,371
15 1,000 22,657 8,936 8,936 108,937 14,850 14,850 114,850 25,326 25,326 125,326
16 1,000 24,840 9,408 9,408 109,409 16,184 16,184 116,185 28,722 28,722 128,722
17 1,000 27,132 9,858 9,858 109,859 17,565 17,565 117,566 32,465 32,465 132,465
18 1,000 29,539 10,283 10,283 110,284 18,993 18,993 118,993 36,591 36,591 136,591
19 1,000 32,066 10,681 10,681 110,682 20,465 20,465 120,466 41,136 41,136 141,137
20 1,000 34,719 11,053 11,053 111,053 21,986 21,986 121,986 46,148 46,148 146,149
@ 65 1,000 69,761 13,801 13,801 113,802 40,866 40,866 140,866 136,649 136,649 236,649
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
105
<PAGE>
<TABLE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
STATUTORY HOME OFFICE: EAST GREENBUSH, NEW YORK
FACE AMOUNT: $100,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $1,000
PHOENIX INDIVIDUAL 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 1,050 533 0 100,533 576 0 100,577 621 0 100,621
2 1,000 2,153 1,195 0 101,196 1,321 0 101,322 1,453 0 101,453
3 1,000 3,310 1,836 315 101,836 2,086 565 102,087 2,358 837 102,358
4 1,000 4,526 2,453 932 102,453 2,871 1,350 102,871 3,342 1,821 103,342
5 1,000 5,802 3,045 1,524 103,046 3,674 2,153 103,674 4,411 2,890 104,412
6 1,000 7,142 3,612 2,335 103,613 4,495 3,218 104,496 5,573 4,296 105,574
7 1,000 8,549 4,152 3,118 104,152 5,333 4,299 105,334 6,834 5,800 106,835
8 1,000 10,027 4,664 3,873 104,664 6,187 5,396 106,188 8,204 7,413 108,205
9 1,000 11,578 5,149 4,754 105,150 7,059 6,664 107,060 9,694 9,299 109,694
10 1,000 13,207 5,608 5,608 105,609 7,949 7,949 107,950 11,316 11,316 111,317
11 1,000 14,917 6,040 6,040 106,040 8,857 8,857 108,857 13,083 13,083 113,083
12 1,000 16,713 6,445 6,445 106,445 9,782 9,782 109,783 15,008 15,008 115,008
13 1,000 18,599 6,820 6,820 106,821 10,724 10,724 110,724 17,104 17,104 117,105
14 1,000 20,579 7,165 7,165 107,166 11,681 11,681 111,681 19,389 19,389 119,389
15 1,000 22,657 7,480 7,480 107,480 12,652 12,652 112,652 21,878 21,878 121,879
16 1,000 24,840 7,804 7,804 107,805 13,711 13,711 113,711 24,728 24,728 124,728
17 1,000 27,132 8,094 8,094 108,094 14,789 14,789 114,789 27,850 27,850 127,851
18 1,000 29,539 8,345 8,345 108,346 15,882 15,882 115,882 31,272 31,272 131,272
19 1,000 32,066 8,553 8,553 108,553 16,985 16,985 116,986 35,018 35,018 135,019
20 1,000 34,719 8,716 8,716 108,717 18,098 18,098 118,099 39,123 39,123 139,123
@ 65 1,000 69,761 7,426 7,426 107,427 29,177 29,177 129,177 110,039 110,039 210,039
</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 1.77% for 15 years, then 1.22% thereafter (includes mortality
and expense risk charge of 0.8% for 15 years, then 0.25% and average fund
operating expenses of .97% 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%.
106
<PAGE>
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
RULE 484 UNDERTAKING
Section 723 of the New York Business Corporation Law, as made applicable to
insurance companies by Section 108 of the New York Insurance Law, provides that
a corporation may indemnify any director or officer of the corporation made, or
threatened to be made, a party to an action or proceeding other than one by or
in the right of the corporation to procure a judgment in its favor, whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, by reason of the fact that he, his testator or
intestate, served such other corporation in any capacity at the request of the
indemnifying corporation.
Article VI Section 6.1 of the By-laws of Phoenix Home Life provides that:
"To the full extent permitted by the laws of the State of New York, the Company
shall indemnify any person made or threatened to be made a party to any action,
proceeding or investigation, whether civil or criminal, by reason of the fact
that such person . . . is or was a Director or Officer of the Company; or . . .
serves or served another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity at the request of the
Company, and also is or was a Director or Officer of the Company . . . The
Company shall also indemnify any [such] person . . . by reason of the fact that
such person or such person's testator or intestate is or was an employee or
agent of the Company . . . ."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATION PURSUANT TO SECTION 26(E)(2)(4)
UNDER THE INVESTMENT COMPANY ACT OF 1940.
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, Phoenix Home Life Mutual Insurance Company represents that the fees and
charges deducted under the Policies, in the aggregate, are reasonable in
relation to the expenses expected to be incurred and the risks to be assumed
thereunder by Phoenix Home Life Mutual Insurance Company.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The Prospectus describing Phoenix Home Life Mutual Insurance Company Policy
Form 2667 and riders thereto (Flex Edge), consisting of 106 pages.
The Prospectus describing Phoenix Home Life Mutual Insurance Company Policy
Forms V601 and V603 and riders thereto (Joint Edge and Flex Edge Success),
consisting of 112 pages.
The Prospectus describing Phoenix Home Life Mutual Insurance Company Policy
Form V603(PIE) and riders thereto (Phoenix Individual Edge), consisting of
106 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representations Description and Undertaking Pursuant to Paragraph
(b)(13)(iii)(F) of Rule 6e-3(T) under the Investment Company Act of 1940.
The signature page.
The Powers of Attorney.
Written consents of the following persons:
(a) Edwin L. Kerr, Esq.
(b) PricewaterhouseCoopers LLP
(c) Paul M. Fischer, FSA, CLU, ChFC
The following exhibits:
1. The following exhibits correspond to those required by paragraph A to
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of the Board of Directors of Phoenix Mutual
establishing the VUL Account filed with registrant's Registration
Statement on July 21, 1988 and filed via Edgar with Post-
Effective Amendment No. 18 on December 17, 1999, is incorporated
herein by reference.
(2) Not Applicable.
(3) Distribution of Policies:
(a) Master Service and Distribution Compliance Agreement between
Depositor and Phoenix Equity Planning Corporation dated
December 31, 1996 filed via Edgar with registrant's
Post-Effective Amendment No. 15 on April 30, 1998 is
incorporated herein by reference.
(b) Form of Broker-Dealer Supervisory Agreement between Phoenix
Equity Planning Corporation and Independent Brokers with
respect to the sale of Policies filed via Edgar with
registrant's Post-Effective Amendment No. 15 on April 30,
1998 is incorporated herein by reference.
(c) Not Applicable.
(4) Not Applicable.
(5) Specimen Policies with optional riders.
(a) Flex Edge--Flexible Premium Variable Universal Life
Insurance Policy Form Number 2667 of Depositor, together
with Amendment Permitting Face Amount Increases VR01, Death
Benefit Protection Rider VR02, Variable Life Policy Exchange
Option Rider VR08, Death Benefit Option - Policy Amendment
VR23, Temporary Money Market Allocation Amendment VR130,
Accidental Death Benefit Rider VR147, Disability Payment of
Specified Annual Premium Amount Rider VR148, Death Benefit
Options - Policy Amendment VR149, Additional Purchase Option
Rider VR150, and Accelerated Living Benefit Rider VR162
filed via Edgar with registrant's Post-Effective Amendment
No. 12 on February 13, 1996, is incorporated herein by
reference.
II-2
<PAGE>
(b) Joint Edge--Flexible Premium Joint Variable Universal Life
Policy Form Number V601 of Depositor, together with
Temporary Money Market Allocation Amendment VR130, Survivor
Insurance Purchase Option Rider VR03, Variable Joint Life
Policy Exchange Option Rider VR04, Disability Benefit to Age
65 Rider VR05, and Term Insurance Rider VR06 filed via Edgar
with registrant's Post-Effective Amendment No. 12 on
February 13, 1996, is incorporated herein by reference.
(c) Flex Edge Success--Flexible Premium Variable Universal Life
Insurance Policy Form Number V603 of Depositor, together
with Temporary Money Market Allocation Amendment VR130,
Accidental Death Benefit Rider VR147, Disability Payment of
Specified Annual Premium Amount Rider VR148, Purchase
Protector Rider VR150, Living Benefit Rider VR162, Whole
Life Exchange Option Rider VR08, Cash Value Accumulation
Test Rider VR11 and Death Benefit Protection Rider VR14
filed via Edgar with registrant's Post-Effective Amendment
No. 12 on February 13, 1996, is incorporated herein by
reference.
(d) Phoenix Individual Edge--Flexible Premium Variable Universal
Life Insurance Policy Form Number V603(PIE) of Depositor,
together with Policy Term Rider VR33, filed via Edgar with
registrant's Post-Effective Amendment No. 17 on July 27,
1999 and is incorporated herein by reference.
(6) (a) Charter of Phoenix Home Life filed via Edgar with
registrant's Post-Effective Amendment No. 12 on February 13,
1996, is incorporated herein by reference.
(b) By-laws of Phoenix Home Life filed via Edgar with
registrant's Post-Effective Amendment No. 12 on February 13,
1996, is incorporated herein by reference.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Forms of Application for each of Flex Edge, Joint Edge
and Flex Edge Success filed via Edgar with registrant's
Post-Effective Amendment No. 13 on April 26, 1996, are
incorporated herein by reference.
(b) Form of Application for Phoenix Individual Edge, filed via
Edgar with registrant's Post-Effective Amendment No. 17 on
July 27, 1999, is incorporated herein by reference.
(11) Memorandum describing transfer and redemption procedures and
method of computing adjustments in payments and cash values upon
conversion to fixed benefit policies filed via Edgar with
Registrant's Post-Effective Amendment No. 15 on April 30, 1998 is
incorporated herein by reference.
2. See Exhibit 1.A(5).
3. Opinion of Edwin L. Kerr, Esq., Counsel of Depositor, as to the
legality of the securities registered filed via Edgar with registrant's
Post-Effective Amendment No. 18 on December 17, 1999 is incorporated
herein by reference.
4. Opinion of Paul M. Fischer, Actuary, as to Illustrations. (See Exhibit
9 below.)
5. Not Applicable. No financial statement will be omitted from the
Prospectus pursuant to Instruction 1(b) or (c) of Part I.
6. Not Applicable.
7. Consent of PricewaterhouseCoopers LLP, filed via Edgar herewith.
8. Consent of Edwin L. Kerr, Esq., filed via Edgar herewith.
9. Opinion and Consent of Paul M. Fischer, FSA, CLU, ChFC, filed via Edgar
herewith.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Phoenix Home Life Variable Universal Life Account certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
No. 18 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Hartford, State of
Connecticut on the 28th day of April, 2000.
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
-------------------------------------------------
(Registrant)
By: PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
------------------------------------------
(Depositor)
By: /s/ Dona D. Young
------------------------------------------
*Dona D. Young, President
ATTEST: /s/ John H. Beers
------------------------------------------
John H. Beers, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on this 28th day of April, 2000.
SIGNATURE TITLE
--------- -----
Director
- ----------------------------------------
*Sal H. Alfiero
Director
- ----------------------------------------
*John C. Bacot
Director
- ----------------------------------------
*Arthur P. Byrne
Director
- ----------------------------------------
*Richard N. Cooper
Director
- ----------------------------------------
*Gordon J. Davis
Director and Chief
- ---------------------------------------- Executive Officer
*Robert W. Fiondella
Director
- ----------------------------------------
*John E. Haire
Director
- ----------------------------------------
*Jerry J. Jasinowski
Director
- ----------------------------------------
*John W. Johnstone
Director
- ----------------------------------------
*Marilyn E. LaMarche
S-1
<PAGE>
SIGNATURE TITLE
--------- -----
Director
- ----------------------------------------
*Philip R. McLoughlin
Director
- ----------------------------------------
*Indra K. Nooyi
Director
- ----------------------------------------
*Robert F. Vizza
Director, President
- ----------------------------------------
Dona D. Young
Director
- ----------------------------------------
*Robert G. Wilson
Executive Vice President and
- ---------------------------------------- Chief Financial Officer
*David W. Searfoss
By: /s/ Dona D. Young
----------------------------
*Dona D. Young as Attorney in Fact pursuant to Powers of Attorney, copies
of which were previously filed.
S-2
EXHIBIT 7
CONSENT OF PRICEWATERHOUSECOOPERS LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Post-Effective Amendment No. 19 to the
registration statement on Form S-6 ("Registration Statement") of our reports
dated March 10, 2000 and February 15, 2000, relating to the financial statements
of Phoenix Home Life Variable Universal Life Account and the consolidated
financial statements of Phoenix Home Life Mutual Insurance Company,
respectively, which appear in such Registration Statement.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
April 21, 2000
EXHIBIT 8
CONSENT OF EDWIN L. KERR, ESQ.
<PAGE>
To Whom It May Concern:
I hereby consent to the reference to my name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 19 to the
Registration Statement on Form S-6 (File No. 33-23251) filed by Phoenix Home
Life Variable Universal Life Account with the Securities and Exchange Commission
under the Securities Act of 1933.
Very truly yours,
Dated: April 28, 2000 /s/ Edwin L. Kerr
---------------------------
Edwin L. Kerr, Counsel
Phoenix Home Life Mutual Insurance Company
EXHIBIT 9
OPINION AND CONSENT OF PAUL M. FISCHER
<PAGE>
April 28, 2000
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Gentlemen:
This opinion is furnished in connection with the registration of flexible
premium variable life insurance policies ("Policies") under the Securities Act
of 1933. The prospectuses included in the Registration Statement on Form S-6
(SEC File No. 33-23251) describes the Policies. The form of Policies were
prepared under my direction, and I am familiar with the Registration Statement
and Exhibits thereto.
In my opinion, the illustrations of death benefits and cash values included
in the section entitled "Illustrations of Death Benefits, Policy Values
("Account Values"), and Cash Surrender Values" in Appendix B of the
prospectuses, based on the assumptions stated in the illustrations, are
consistent with the provisions of the respective forms of the Policies.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Paul M. Fischer
Paul M. Fischer, FSA, CLU, ChFC
Vice President
